Calnex Solutions (LSE:CLX) — Final Results for the year ended 31 March 2022

0:01 Good afternoon, and welcome to the CALNEX SOLUTIONS PLC final results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the q and a tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question you received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll.

0:29 And I'd now like to hand you over to Tommy Cook, CEO. Good afternoon, sir. Hi. Good afternoon, and, good afternoon, everyone. And thanks very much for coming along to to listen to the results of what we achieved last year in FY twenty two. Before we talk about the results, I'll just take a few minutes to go over the background in case you're not familiar too familiar with CALNEX, exactly who we are and what we do, and then we'll take a more deeper insight into what actually happened last year. So CALNEX designs, develops, manufactures, and markets test instrumentation for the telecommunications industry. We today, we've sold product to over 68 countries around the world and to 680 sites. So we very much have a global footprint, and we've been successful at selling product to all the subsectors within the industry. So that's equipment vendors, equipment operators, chip suppliers, and increasingly, we've also been successful selling into large enterprises that run their own networks or the hyperscale companies that run the data centers around the world. In all these cases, what are equipments used for us to prove performance of critical infrastructure? So they're using our testers to prove that the equipment is actually gonna work correctly under all scenarios and that it may be deployed in.

1:49 So where does test measurement fit into the world telecoms? Well, it fits in just about everywhere. It doesn't matter if you're designing a new piece of equipment and you need to validate the design, nearly prototype stage, or you're doing the later stages when you're doing conformance testing to standards. If you need if you're in manufacturing, there'll be a level of tests involved there to test every unit that's produced, building networks, maintaining networks. But the area that we focus on the most is actually the r and d phase, that design validation conformance test. This is where engineers are developing a new switch, router, piece of network equipment, and they need to verify that the design is working correctly, it works correctly to the specification sheet, and it also works aligned to any international standards that are claiming conformance to.

2:36 Now the importance of this area is that we are effectively an able an enabler to our customers. And that if we can provide them the right tool that allows them to qualify that equipment freely and quickly, it means they can enable a new revenue stream. They can get it into manufacturing, and that starts a new revenue stream for them. So you can see by the chart in the bottom right, even though when the technology becomes mature, it's the r and d phases that the vendors spend the most money on because having the the correct tool at the right time allows them to complete their designs and start new revenue flows. The one other area that we focus on is an area referred to as maintenance test. So this is really where the initial main maintain of a network doesn't solve the problem.

3:23 You've swapped cards, and they still can't seem to fix the problem. Then they bring in the higher level higher skilled engineers, technicians to try and understand what's happening at that place in the network that's making a that's causing a problem. And so we give provide tools as well that give deep insight to what's happening within the network. So if you look at our customer sets, they fall into four sets really. We've got the top left. We've got the equipment vendors. So these are the companies like Ericsson, Nokia, Cisco, Huawei that are that are using our equipment in that r and d phase, that design phase. They are developing equipment. They're developing switches, routers, network equipment that will be used to build networks. And we they're using our product to test during the r and d phase.

4:10 And that group of customers represents around 55% of our business. The second group of company customers we have are the network operators. So that's your AT and T, BT, China Mobile that operate the large networks around the world. Obviously, the buyer maintenance tests are to to maintain their network, but they actually, especially the large operators, will actually also buy do proof of concept tests before they deploy new equipment into their network. They'll run proof of context tests to check that it's working correctly. And they use tools and run tests very similar to what's been happening back in the vendors during the final r and d phases. So they again, we can sell our r and d testers in there. And although we don't sell a lot, from a food chain point of view, it's very important because these proof of concept labs are really important to the vendors that are successful at them because that's obviously an enabler to them to sell our product. So if they know our product's gonna be used to to verify their performance, then they'll want to do that back in their their own lab first.

5:12 And that group of customers represents around 15% of our business. The last part of the e the telecoms ecosystem is the component manufacturers. These are your intels, qualcomm, prodcoms as well that generate very sophisticated chipsets. Again, they do r and d testing. They make prototype boards so they can evaluate. They're doing the same sort of testing the vendors would do, so they need the same sort of testers. And again, they would when they go to demonstrate their performance to the vendors, their customers, then you would hope they were using our test equipment to verify and prove that performance. So they represent about six to 8% of our business, a small part of the business, but important that we close out the whole ecosystem and are successful through the whole food chain.

5:59 The last group of customers are an interesting group, and we'll talk some more about them later on. And this is the high large enterprises like a Walmart or Wells Fargo that run their own networks. And increasingly, it's a hyperscale. The people are running the data centers of this world that actually need to do testing as well. And this group of customers at the moment is around the low twenties, 22, 23% of our business, and an area we're gonna we're gonna focus on moving forward, and I'll talk about a bit more in the presentation.

6:30 So that's you CALNEX SOLUTIONS, and I can have a whistle stop to what we do. So how did we get on last year in FY '22?

6:37 Well, actually, was a very satisfying year, especially given the backdrop of the challenges that we have with semiconductor shortages. The fact that we managed to grow revenue by 23% up to 22,000,000 was really good, and also the profit grew by 18% up to 6,000,000. We also generated cash, so we're now sitting on a a cash balance over 15,000,000. And this year, we were we're going ahead to implement a dividend policy. We did an interim dividend at half year for the first time, and this is the first full year, and it's proposed a point five six p per share. And I say it's been a reassuring year because our success has not come from one big area of success, but really success coming from many areas. All our product lines have increased to success over the last year and grown. All the regions have grown over the years. We've found some new areas that we'll talk a little more about, about ORAN testing, data center testing. So there's multiple elements that's actually delivered that tremendous year of success that we've had and also gives us confidence moving forward where we can continue to to drive growth through the business.

7:44 So if we look at some of the highlights of the year, if we start with the first one, maybe it's better labeled as low light rather than a highlight, but the component shortage is a challenge for us. We have managed to navigate the the the challenges through the year and and achieve shipments to meet customers' expectations, but it's not been without a lot of effort both from our own operations team, working with the procurement teams and our contract manufacturer, CALNEX SOLUTIONS, and also our R and D teams having to get involved at times looking at replacement parts to determine whether they truly are drop in replacements. And if they're not drop in replacements, having to do quick turns on software releases or even in the allocation of hardware change to actually be able to utilize the parts. So it's been really challenging. I think we're suffering the same problems everyone's having. We're managing the situation. The fact that we've had a long term, well established relationship with CALNEX SOLUTIONS been a big really come to bear the value this year because we worked really closely, and it's really been the consulting of the CALNEX SOLUTIONS, and our r and d team that's allowed us to to navigate the situation.

8:50 And it looks like it's gonna continue. It doesn't feel like it's getting worse, but it doesn't feel like it's getting better at the moment. I'd like to tell you when it's gonna finish, but I don't know. I'm not sure anybody really knows at the moment, but we're just gonna have to keep managing our way through this. The one thing that's been quite positive is although we've at times had to quote longer lead times to our customers, there's next to no pushback from our customers, and that's because they are suffering the exact same problems we have. So there's a huge empathy towards us. They understand it's not our you know, that we are doing our best and any lead times are longer than they'd want, then that then it's because of the environment rather than us. And, of course, we use demo units at times to help, you know, to lend them units so they can get some testing started. But, you know, what I would say from that is that once this clears, I don't believe it's damaging customer relationships underneath and having longer lead times at the moment.

9:46 Once it clears, then hopefully, the relationships will stay as strong and our market position will be equally strong. But in the ground, it definitely creates problems and it will create continue to create problems until we can get through and get the back of this. But looking at some of the things that more highlights, first of all is the ORAN recommendations here. Now within telecoms, absolutely critical to the whole telecoms ecosystem is standardization and recommendations. If you do have standardization, what you have is proprietary solutions. If you proprietary solutions, that means that operators can build networks by using equipment from one source, and therefore, they're tied into that. So far, since the beginning of time in the world of telecoms has been standards. It's probably slipped there. The ITUT that's been running for many, many decades. There's been a number of new forums or recommendation groups at ORAN, TEP, OCP that come about.

10:42 And these are really important groups and important drivers in the industry. And what we're finding with the ORAN is it's really started to pick pick up an importance. ORAN stands for open radio access network. So really, it's a part of the the the network just behind the towers into the network, not a bit to your handset, but into the tower. And they're basically looking to break up the network into smaller building blocks where there's a set of recommendations of if you build if you're supplying this piece of equipment, this is the performance you expect that the the interface is this is how you should connect. And that allows younger companies, different companies to come into the market and offer solutions and allows vendors to buy multiple or buy parts of the solution from different vendors. So we've seen a lot of vendors now starting to qualify equipment aligned to the ORAN standards, both new customers to us as well as new groups within existing customers. So that's been another one of the layers of success we've had in the last year that's just added a bit more to the success of the the company.

11:44 Another area that's been interesting and we've talked about in previous broadcast if you've been on is the data center opportunity. It is clear now that the data centers are starting to see having time as part of the accurate time distributed as part of our architecture within the data center as value add to them. And we've had success with one of the large hyperscale customers that put in a large order for our product that we've shipped some of it last year. We'll ship the rest of it this year. And we were speaking to a number of other hyper scale and a number of other data center companies to see whether we can repeat that success and expand the market there. So it's really still an early stage up market, but a very interesting area for us. It's been, again, another layer of success in this year.

12:30 And somewhere strategically, we're gonna continue to work with these hyperscale companies to build our relationships with them, get into working with our teams, and help them understand how to deploy time across the data centers, and hopefully help to find a way to that we can contribute by selling solutions to them as well. And then last, by no means least, we've talked many times as well. Our growth strategy is one of organic and inorganic, where we continue to look at other companies where we're open to partners, whether it's a partnership in terms of resell or an acquisition. Again, it's all about finding new business for us, either that is new customers we don't sell to today or something in addition to what we already sell to our current customers. Not better or slightly different, but in addition.

13:15 And this year, just post acquisition period, we act post financial period, we acquired iTrinity, and this is delivering to us the ability to test applications running on the cloud and a new set of customers. And we'll talk about that a little more later on to show where it fits in in the product portfolio. So really an interesting opportunity for us. This first year is all about the integration, bending them in, understanding what the opportunity is, then really pushing in year two and three to start to create a growth engine for us as another layer of of success that we can add on top of everything else that's happening. Within the company, we've continued to invest across the whole all the teams. We've grown r and d, sales, sales support. We've put more customer support people in the field where they're working with key customers, and we've put more people in in virtually all our departments as we've grown through the year. We also brought in a a new VP of operations.

14:14 This was something that has been planned for a couple of years. And really, as we've continued to grow, we've realized we've got to the stage with our our our manufacturing that we need to kinda look for some bigger changes, bigger evolutionary changes so that we're better positioned to scale and keep aligning to our customers' needs in terms of being able to flex our ability to deliver aligned to customer needs. And so that has been a a success. And obviously, Steve managed to arrive at a pretty difficult time right in the middle of a component crisis, but we're already starting to see the way that we're evolving our process, the way we're evolving, the way we work with CALNEX SOLUTIONS adding value into that our internal capability. It's also been a good year for trophies. We actually we we were fortunate to re achieve the gold standard accreditation for investor and people, and we're led to believe not many companies achieved gold standard the first time in asking and we did.

15:09 So it's something we're really proud that we've achieved that. And also post period, we we won two queens awards this year, one for innovation and one for international trade, which is great kudos for the team and a great recognition that, you know, at the end of the day, we seek to build a team that are that feel committed to us because they're committed because they wanna be part of our team and enjoy being part of the team. And having these external recognitions that we have actually doing a pretty good job has has been really great. And one of the other things tied into that is we've kinda increased our social responsibility approach initially as part of our ESG policy. You know, we really for years, we've done charity donations. For years, we've tried to maintain you know, we've always maintained a high standard of corporate governance.

15:55 We we go about our business, we work with our customers, but we're always trying to push forward and do more. And this year, the board agreed to put together a one a a fund equal to 1% of our profits for the social responsibility team, and that's a a group of employees that basically look at a charitable opportunities for us to donate to charities and environmental projects. And the keyword that we have is meaningful. You know, at the end of the day, we're not an oil company. We're not a a Google or an Apple. We can't change the world on our own, but we can make meaningful impacts. And where we felt we can make a meaningful impact is in the local community where our staff live and work. Where, you know, for small charities, giving them $12.03, £4,000 can make a massive difference to them.

16:40 So we're really asking employees to to let us know what they want to do, how they feel they can contribute back into their local community, which is important. It means that we are making a meaningful difference. It makes the team feel good because they feel that they're delivering being part of CALNEX helps their local community in in a very positive way. We're also increasing our our skills training this year. We've always done a lot of mentoring, one on one mentoring. We're gonna do more formal training, a lot more management training. Again, just trying to develop our people, develop our skills across all parts of the organization. We've also last year put in place mental well-being awareness classes that we're again running this year and we're gonna run every year. As we tell people, it's not only about, you know, it is important to look after yourself and be take care of yourself, but also be aware of your colleagues. It's quite often your colleagues that notice that you are under stress potentially quicker than you notice that you're under stress. So there's a responsibility within the team to look after one another as well as look after yourself.

17:39 And the last thing in the the chart here is that next year, we're or this year, we're gonna go for certification for the ISO 14,001, which is the ISO recommendation for environmental policy. And that will give us a framework to in the future build an environmental approach and ensure that we are reducing our carbon footprint moving forward in a meaningful way and an understanding way that we can we can make meaningful changes to how we we go about doing our business. So lots happening there as well. So at that point, I'm gonna hand over to Ashley, and she's gonna go through some of the numbers. So I'm gonna take you through some detail on the income statement and the cash flow in the next couple of slides. But just before I go on to those, I thought it be useful to briefly remind you or for those of you of you that are new to CALNEX, take you through some of our revenue model KPIs just so that you can understand a little bit more about what the what drives our revenue.

18:38 So as some of you may know, CALNEX generates revenues through the sale of bundled hardware and software, as well as software support and extended warranty programs. And the first graph on the top left of the slide shows you the split in those revenue streams over the last three years. As a as a reminder for some of you, we bundle our hardware and software revenues as each customer will purchase slightly different combinations of a hardware product with software options included. And Tommy will show you in the next section, our range of product our range of products. And so you'll see that the makeup of a revenue bundle will depend on the hardware product being purchased, first of all, and the numerous software option choices that each hardware product can offer. So each customer can purchase a different combination of software options for each hardware product depending on what they need it for.

19:32 So once the customers purchase the hardware product with the software options that they wanted at that time, they can come back for additional options to be added, the ones that they didn't have before, or they can come back for upgrades to existing options that are then added to the existing hardware. And those upgrades are supplied through the provision of a license key. And we also send sell the sell sell them as standalone software upgrades as well. So as you may expect, there's there's a degree of variability in the average price per transaction and order. And this revenue is recognized on dispatch or delivery sorry. Dispatch if it's got a hardware element included in the order or a delivery of a software license key as a standalone software.

20:21 And that makes up the majority of our revenues. You can see from the graph here. So on average over the last few few years, approximately 90% of our revenues were generated by bundled hardware and software sales. And then the remaining 10% of revenues is from software support and extended warranty programs. So each of our products comes with a standard warranty period, which can be extended for an extra fee. And that we also supply and or provide software support programs to customers. And that revenue is recognized over the life of the product because it can depend on how many years that customer wants wants the the service to cover. And that's that's recognized over over how long that product will last the the customer.

21:07 Just moving across the slide at the top here, just moving to the middle middle top pie chart here. This shows you our geographic splits. So the chart shows you the three year average order split across our three geographic divisions. And and those divisions are Americas, North Asia, and the rest of the world. And as some of you may have heard me say before, our global customer base and distributor network just allows us to balance out risk and gives us resilience to ensure our order pipeline is robust enough to counter any external market influences across the globe. And up to recently, we've seen an almost even split of orders across these three geographic divisions. And you can see from the pie chart in the middle here that North North Asia is coming in slightly behind the other two regions at 30% on in this analysis.

21:57 And that's a result as a result of The ongoing US and China geo geopolitical tensions, which are also exacerbating the component shortage issues in the region. However, if you were to look at h one versus h two for North Asia this year, h two picked up significantly on h one, which is very encouraging for for us. And in a in one slide time, I'll show you what that profile looks like from a revenue perspective as opposed to an orders perspective. The only difference being the timing of when the shipments go out the door. I'll come back to that in a second. So moving over to the last chart on the top here, the split of telecoms customers versus non telecoms. As you can see from the chart, the ratio of telecoms to non telecoms customers, and when I see non telecoms customers, that's the hyper scale enterprise category of customers from previous slide where Tommy took you through the the customer split that we have.

22:53 So you can see that ratio has remained in line with the previous years at 23%. And if you take into account our growth this year, it just shows that both source sources of orders and sources of revenue are growing at the same rate, which is also very encouraging. This is moving down to the bottom part of this slide starting to the left again. Our top 10 customers are some of the largest in the industry, and you'll have seen that from the slide previously. The the one with all the customers on it. And over the last three year rolling period to March 22, our top 10 customers contributed 50% of total orders in in the business. And that's very much in line with the trend from last year and and the year before. So that trend is just continuing. And in addition, the average length of relationship that we have with our top 10 customers is ten years. And again, that trend is continuing over over the years. And that just demonstrates the repeat nature of business that we do with the with with our customers.

23:51 So we see customers come back to order us or order from us frequently for various reasons that they may want to to buy multiple bits of the same kit for multiple sites. They may want to add new kit as they grow their labs or testing requirements. Or they may want to, as I was saying before, add new software options or upgrades to existing hardware. And that repeat demand is the metrics that we measure across our whole customer base as well as our top 10. So the pie chart in the bottom middle of the slide shows that in f y twenty two, the three year rolling profile showed repeat revenues generated were on average 79% of total revenues and that compares to 80% last year, which again, so that change is kind of continuing. And all the while, we received orders from this in FY twenty two, we received orders from 233 different customers, and that was an increase on a 199 customers in the previous year.

24:47 And then just the last graph here, some of you may have seen this last graph this graph before. This is a case study using one of our customers that appears in our top 10 on a frequent basis, but this is really quite demonstrative of the trend across a large majority of our customers. It's really just showing here as an example. It's really to pull together all the aspects of the different drivers that talks about on the slide. So the red area chart at the back is the orders that have been generated from this customer. The gray bars are when they've come and asked us or come bought bought a hardware product from us. And the black bars are where they come back for upgrades to the software options that that that they bought with that original hardware.

25:32 So as you can see, the revenue gen or the order generation, which then comes from from that customer is not only just generated from them coming from and asking for hardware products, but it's equally generated from them coming back and asking for upgrades to those existing products. And it and the bundled effect of the two of those things together. So hopefully, it just gives you a that that just demonstrates the bundle effect of our revenues or our main revenue stream plus the repeat nature of business that we get from typical customer.

26:03 So just moving on to the next slide. This just just shows you briefly the the split of the revenue growth and the revenues in the year across our geographic divisions just to give you a bit more of an extra flavor. So as Tommy said, our revenues have grown 23% in the year. And that across our geographies was in Americas. The Americas grew 23% as well. Rest of world experienced 31% of a growth in the year. And North Asia, if if if you've seen our half year report, you'll have seen North Asia at the half year point was flat year on year or half year on half year compared to to to the previous period.

26:48 In the full year, North Asia grew by 14%, which is just a really, really encouraging h two as I was saying with the order profile. Really encouraging h h two to just to to come back to that 14% growth, which we we think is is really good for that region. Just on to the income statement to bring that all together. That hopefully gives you a bit more of a flavor behind the 23 growth in our revenue line. So I'll I'll I'll skip right to the to the gross profit line. I'll just talk you through a few of the the metrics within there. So gross profit in pound terms grew 18% and that's very large largely driven by the revenue performance. Gross margin was 75% in the year compared to 78% in the prior year and that is largely driven by product mix. So in a normal year, we can see fluctuations in margins by two to 3% each week. That really depends on the product, the order, the shipping, and the bundled effect mix in the year. So it's very much driven by product mix and and very much normal course of business fluctuation.

27:59 So just skipping down the p and l before I work back up and talk you through the cost base. Profit before tax, and that is shown here as an adjusted profit before tax, and that that's only to take into account adjustments that happened last year. There are no exceptional costs that in this year's p and l. So

28:17 profit before tax was 6,000,000 in the period and that compares to 5,100,000 last year. And that gain is an 18% improvement on last year. And you'll see from the margins and the KPIs underneath this table, profit before tax, percent the margin, sorry, was at ended the year at 27% and that compares to 28% last year. So you can see that the three percentage point differential on the gross margin has come back to just 1% differential on that PPT margin. Just shows you that the it's very much driven by the fact that the cost base as a percentage of of revenues didn't didn't change and and helped us buffer that change in the in the gross margin. So just a little bit more on the on the cost base. Ad admin expenses, which excludes in this table here, depreciation and amortization, which are further down the p and l.

29:11 And excludes IPO costs and and IPO related share based payments in the previous year. So admin cost this year were 7,900,000 and that compares to 6.5 adjusted admin costs last year. And as you might have heard us talk about at the half year, there's at the start of f y twenty two, there's a plan step change in our cost base, which was built into our forecast at the time, driven by both a ramp up in our teams to meet and prepare for future growth and the change in cost that just became as that just came as part of being listed entity. So the increase in admin costs between the two years here relates to these higher staff costs as we help the teams and and continue to grow the teams across the business.

29:58 Staff profit share as a result of us significantly beating our budgets for the year, and higher sales team commissions just as a result of that increased trading performance and the increased orders on last year. And that was offset and partially by some savings in foreign exchange costs compared to the previous year. And we initially expected travel costs to increase this year as a result of COVID restrictions being eased, that increases only marginal this year as as you all know travel restrictions were predominantly still in place for the first half especially. So costs were only slightly up on last year, but we expect these costs to come back and start to ramp up and as restrictions ease in this current financial year and in future. Amortization of r and d costs increased by 400,000 compared to the prior year. And then that is really just the result of us increasing our r and d headcount as well as we ramp up for growth. So the r and d team has seen quite significant increase in our headcount, which is which is good.

30:58 For those of you you don't that don't know CALNEX's model, aren't we capitalized a 100% of our r and d spend and amortized that over five years. Our useful life of the of our products is and can go up to ten years and more. So we believe that five year amortization policy is extremely prudent for the type of products that that we're looking at here. And I'll take you through the cash spend on r and d when on the next slide just in a couple of minutes. And just very quickly, a couple of things here to point out is the tax charge is 1,400,000 in the year, that's an effective tax rate of 24%. That's a little bit more in line with where we would expect it to be this year compared to last year's effective tax rate of just over 5%.

31:43 Last year, the IPO transactions, a lot of things were happening in there that some share option releases as part of the IPO that that gave the customers gave gave the the company tax benefits. So the effective tax rate was quite exceptional last year. 24% is a lot more natural for where we are in this stage of the business. And that is driven largely by the increase in the corporation tax rates that are going to happen in FY '24 as we calculate our hybrid rates and buffer slightly by the benefits that we get from our r and d tax credits. Just one last thing on the slide, just to point out when you're looking at earnings per share. So basic earnings per share was 5.19 in the the year.

32:29 That is not very easy to compare to prior to the prior year at the moment. And it's really just because in the prior year, the weighted average number of shares in a shoe changed halfway through the year because of the IPO and the effective tax rate was so low. So so the the calculation was very exceptional last year, but we hope this year that that that we are now forming a comparative that will help and compare for future years going forward. So just onto the cash flows, briefly cover off a few things here. So the cash flow table here is slightly different to a normal statutory cash flow. And that's just because just wanted to strip out some of the on at the one off costs at one off cash flow items that happened last year just to to split the cash flow between the operational cash and and one off.

33:16 So I'll just focus on the top part of this table just now just to talk you through some of the operational cash movements. And I'll just cover off how that looks like it coming down to the bottom of the cash flow in a second. So as you can see from the top part of the the cash flow here, the the group generated 2,700,000 in cash in the in the year. And that compares to an underlying cash flow of 5,400,000 in the previous year. So two things to to point out there in terms of what's driving that variance to the previous year. Increase in development costs. As as I said before, our r and d team has grown as we grow our teams to to service the next years future years of revenue.

34:01 So but if you if you look at the development cost capitalized on other CapEx line within that 4,200,000, 3,900,000 of cash was spent on

34:12 on development costs that were capitalized. And that compares to 3,300,000 last year, very much driven by increases in headcount. So that's one of the drivers. The second driver is the movement in working capital, and this is just very much a timing and cut off difference here. So when looking at the working capital movements, you then drill down into the actual movements on trade debtors. It's the it's it's the thing that's actually driving it. Our our trade debtors balances is heavily is weighted towards invoices that come in from our main distributors, Spirent, who are excellent peers. They they pay on certain days. So a cup last year, they paid a couple of days before the year end. And this year, they they paid on on the day just after the year end. We knew it was coming.

34:58 It was just the way that the the year end fell. So you'll see, I've said in the in the r n s that the £4,100,000 worth of trade debtors that we had at the year end were all paid off over the the thirty days that that have occurred after that or the majority 3,900,000 were paid off in that first thirty days. However, a large majority of that 3,900,000 was actually paid in the in the first two to three days at posturing. So very healthy working capital churn here. Just one a couple other other things just to out on the the bottom part of this cash flow here. So I'll not cover the IPO cash flows from last year, and they're just split out here for information.

35:45 In this in this year, we we are now sitting with quite nice healthy cash balance. We take advantage of high interest deposit accounts for some of our cash just to make sure that we're gaining as much interest as we can out of our cash. And just on under IFRS rules for accounting, if you have cash on high interest deposit that's longer than ninety five days, you have to class that as something different on your balance sheet. You have to class that as a fixed term investment on the balance sheet. So it's just underneath cash and cash equivalents. To us, still cash generation. So it's included in that 2,700,000 and then just stripped out for presentation purposes within the actual statutory cash flow. So we ended the end of the year with a very healthy cash balance of 15,400,000 compared to 12,700,000 last year.

36:35 That just gives us a very nice cash balance leading into this year. Just to remind you, there's still no debt on the balance sheet. We paid all the debt off that we had as as part of the use of funds from the IPO. And we have a £3,000,000 RCF facility sitting in place with Barclays, which we've we've not used to set up with IPO, so means unutilized. Back over to you, Jeremy. Okay. Thanks, Ashley. So let's have a quick look at the background strategy and what's happening in the market and what's happening in our product programs. So first of all, from a market point of view, you know, as I guess, you listen before, we are really where we see the growth engines are what's creating growth for us is two big industry trends, which we don't think has changed a great deal over the last year. The growth is still there, and that is building to the mobile network, sometimes referred to as five g. We like to think of it as the building of mobile because it's it's it's more than just radio heads. There's a restructuring of the whole network behind the radio towers.

37:38 And there seems to be continuous progress there in doing that. There's continuous progress investment in our customers to build new equipment, things like the ORAN that's defining new types of equipment people are investing in. So all the drivers there suggest this is continuing and abated at the moment in terms of the the growth opportunity that's creating for the industry. The second one is obviously the move to cloud computing that continues to push ahead. It's creating opportunity for testing infrastructure in terms of testing and within the data centers. What happens in the data centers, they're constructed, how they're managed, then obviously creating opportunity for services that are running on top of the data center that are using it as a a computing resource. And again, through the period, we really don't see any significant shift. The growth is continuing unabated, and that's good for us in terms of its these areas that we are attached to.

38:31 If you look at our product program, this chart's slightly different than last time. And so let me talk you through just where the differences are. On the left, we have a LabSync product, which is still got one of our key selling products, Paragon Neo, which tests in the r and d phase that accurate time transfer. It continues to be the market leader. We've had good progress in last year when we released our very high speed interface support, and that's a good reception from customers. We've got a number of other support, interface supports that are coming out through this year, so we expect to continue to generate growth from that product line moving forward. The second group we we call network sync, we used to call field sync. The field sync part's still there. That's the telecom part, the Sentinel that's used to do that maintenance test in in in in live networks, telecoms networks. But it actually is this product we've so far been selling into the data centers because the data center is just a network in a building.

39:29 And so they've been testing time, the transfer or the delivery of time across the data center and using the Sentinel. Now in the data centers, the functionality required is pretty much the same, but the form and fit is slightly different. They prefer something that's more rack mounted and potentially want more different variations in terms of configurations, 10 gig, one gig interfaces, one PPS, how it's configured. So we've created a new product called Sentry, which from an engineering point of view, there's huge leverage between these two. They'll continue to work off a common base with 90% engineering leverage, but more that it's from a form and fit function. It's gonna be set to be more attractive to the data center companies. And so this is really an important product for us to increase engagement with more data center companies and see how we can develop that market opportunity for us.

40:21 And then the third set, we've got our cloud and IT products. The ones labeled infrastructure are the ones we've had for some time. Again, we've had a good year with these in terms of creating good market progress, both in terms of where we've been before, but also actually in terms of ORAN capability. Although a lot of the the the growth that ORAN's given us in the last year has been in the sync testing, but ORAN covers many different aspects of the equipment, not just sync. And we're actually seeing where we can use a network emulator to verify other elements of the performances that are specified in ORAN. And then we have a new acquisition that with the NE one that comes under applications. So I've got a slide here just to try and expand on what's the difference between infrastructure and applications. When we test today, up until we acquired the NE one, we really were selling to infrastructure people like our network emulators were used to emulate networks to test switches, routers, building infrastructure, and that was how they were used. And the way that customers use these to set up network emulators is very specific to that. They think about throughput, think about interface type, etcetera. And so we had a high performance device in the Attero on the right, the one in the middle, the SNE, which is more high complexity PC based. And then this year as well, we released a software version of the SNE that can sit in the cloud when people start to build and run networks in the cloud, and therefore want to do some testing in the cloud, virtual SNE.

41:49 But with the the n e one, this if you look at the customer base that Trinity had, they were selling to people that are building applications. So this is software applications that sit in the cloud. Maybe they sit today in computing resource in their own building or they're moving into the cloud. So things like your banking app, that's an application. A trading platform, a financial institute, how they may be pushing it to sit in the cloud or a gaming console or a game, an online game, that's an application. And in that case, you need to test performance. You need to make sure it works. If you, for example, have a game where you get 10 people in London playing all interactive with one another, you get a few people in Edinburgh, you get some people in Tokyo, South Africa, etcetera. The the gaming company need to make sure all these users get the same user experience because as you know, if they don't, and some guy in South Africa or whatever feels he's, you know, he's he's getting shot too often because the the network's not working for him, then he's gonna go and work on it. He's just gonna move to another game.

42:49 So that's what these products are used. It's for testing these and and and and these companies, when you're building an application or running a game and application, you have no idea what network you're gonna be run over or what type. You're not interested in specifically in one gig, 10 gig interfaces. You're more specifically interested in the characteristics of a network. What is the delay between London and New York versus the delay between London and Tokyo? What sort of performance are you gonna get? How many drop packets are you gonna get? You're gonna get a different level of performance in each of these paths. And therefore, you want to emulate that to see whether you get the same user experience irrespective where you're sitting using the software the application. And so really, we find that the I tried to do a completely different set of customers for us, and that ties into our m and a strategy. It's about getting to a new set of customers, people that we are not selling to at the moment. So really in year one, it's all about understanding where the market opportunity is for that price. It's a really good, well engineered product where we feel we can add values, understand that route to market, develop the route to market, find out a way that we can really take it to a bigger base than it's been getting to until until now. And then in year two and three, hopefully, we can turn it into a growth engine for us.

44:06 So when we look at our strategy, it's again, it's pretty much the same as it was the last time. We're gonna continue to capitalize on the growth of the five g or the build out of the the mobile infrastructure with the Paragon and what we're doing there with our our field or telecom product in terms of continue to enhance our capability as that in this as that network continues to grow and this continuous investment and new technology to to expand the the footprint of the mobile network around the world. We're gonna continue to look at the cloud computing sector. We've obviously got a a a a infrastructure emulators that are actually being used to test the infrastructure, test the data centers, test the the networks as they build, and then we've got the the any one product, which is allowing us to actually access, you know, benefit from selling to the customers that are using cloud computing services and use putting their applications into the cloud.

45:02 And we're gonna continue to look for m and a. It's been part of our strategy all all along to look for interesting companies that have products that get new business to us, and then maybe we partner with companies and maybe do another acquisition. But again, it'll continue. The the primary objective is no different. It's about getting to new customers. I see the people we don't sell to today or getting new business from customers we do sell to today, I. Something in addition to what we sell. So to summarize where we are coming into this year and going into the next year, let's start with the dark cloud, and that's the semiconductor shortage. It's a tough it's a tough time working on operations and procurement today, and it doesn't look like it's gonna change very much in the near term. Fingers crossed it does change because it's taken a lot of energy. We are managing the situation. We're gonna continue to to work closely with our partners to make sure we can manage it and continue to meet customers' expectations in terms of delivery.

45:55 But I'd say that, we feel confident going into next year. There's a lot of all programs of growth opportunities in the year ahead, so it gives us a chance to have again a year full of a number of small activity growths that hopefully are together to be significant. The the drivers within the industry remain strong. It looks like there's continuous drivers of the the market's growing. We've got new regulations, new standards bodies coming on, new forums coming on, which potentially could bring new opportunities for us as well. And of course, have a brand new product line that this year we need to obviously focus on the integration of the Stevenage team, get them built into the the organization, develop that channel, and then hopefully create a growth engine moving forward. So at that point, I'm gonna stop, and I think we're gonna have a look and see if there's some questions.

46:43 And, Tommy, Ashley, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated in the top right hand corner of your screen. But just while the company take a few minutes to review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. Tommy, Ashley, as you can see, we've received a number of questions throughout today's presentation, and thank you to all the investors for submitting those. I know you have a busy schedule this afternoon, but if I could just ask you to read out the questions you can and give responses where it's appropriate to do so, I'll then pick up from you. Okay. Thanks, Alessandro. I can see a couple of questions that I can I'll I'll kick off if that's alright for you, Tommy. So one of the questions here from Martin s.

47:29 You've asked what proportion of CALNEX total revenues recurring revenue and how is this likely to change and evolve. So hopefully, my discuss my chat through the revenue KPIs, it's been it's giving you a bit more of an idea of our revenue profile as more of a repeat model rather than a recurring revenue model. And the warranty and software support revenues, not they're not necessarily recurring, but they do drip through through amortize to the p and l rather than being a point of sale revenue. We we we see this we see our model continuing that that repeat revenue basis as as customers will come back to us for for additional products. The markets that we work in don't necessarily with the types of customers that we that we have, the the types of spend that they spend with us is very much part of their CapEx budget budget. So so the the customers that we deal with don't necessarily actually want a recurring revenue model with us. So we we tend to stick to the to the model that we have right now and and we see that kind of being being the case going forward.

48:42 One other question I can just see here, the Andrew j asked, are the companies shown on the the customer slide with the with the four sections of customer, all customers of CALNEX or just or examples of the type of company per category. They are our end customers. We do we do have a distributor network that we that we work with. However, we these are our our end customers, and we do also we we do also have have the relationship with these end customers here. Hopefully, that's a bit clearer. Okay. I see one here. Just lost it again. Oh, here we are. It's from John Harrison. Excuse me. Are we in any standards for his advisory committees? Yeah. We get involved, I guess, through the life of CALNEX, we've been involved in the ITUT.

49:29 We continue to get involved in the the timing group, which is the one critical for our timing products. But the ORAN, we're involved in a number of the ORAN. ORAN's quite a big organization. So, again, a couple of subcommittees we are involved in are related to our our work. There's also a TIP organization. It's just a time infrastructure project. We are involved in that. We actually chair one of the subcommittees in that, and there's an OCP organization, a forum that's actually starting to look at that kind of open computing open computer program. So, again, these these areas, these are all forums that we have been involved in. We continue to monitor back and forward again. We're just looking to see whether they will as we've seen Oran's created business for a weather tip and OCP during the future. Time will tell. But that's part of a key part of what we do in terms of staying connected to our customers, keeping communications going with the customers, but also getting involved in the forums where we meet our customers there as well to try and understand the the lay of the land, what's changing, and see any opportunities that maybe starting to appear in front of us.

50:40 Another question here on the ESG side, what can we do with the reducing re assisting our customers to reduce the re do you offer to take back and return old equipment? Yes. We do. I guess it's part of the re re I guess all companies are required to do that. To be honest, we don't get a lot of our equipment sent back to us. Our products often set for long, long periods in racks and just continue to work. Things like the Paragon x, we we see them sitting for ten plus years and Raxon continuing to work. So we will continue to offer that. We'll continue to look at things to do and and we're looking as well internally at the way we go about the s ESG to see if we can reduce our carbon usage as well in a in a in a meaningful way. As a as a young company, that can be quite limited, but it doesn't mean to say there isn't things that can be done.

51:32 Another question here. Can you confirm your ISO 9,000 certified? We are. It's an easy one to answer. And we're also working towards the health and safety international standards alongside the environmental one that we're working towards as well. Here's another one I'll pick up. What is the company likely to look like in three years time? And what will you be doing different from today? I don't think we'll be doing fundamentally anything different. We just need to do more of the same. You know, I see that every product line we have, you know, we maybe at times set, you know, when we set targets ahead, we we tend to set we feel achievable targets, but that doesn't mean that internally we don't have ambition to be far more than that. But we're really looking to grow all the product lines that we have, and we believe that there's enough opportunity out there that we should be challenging ourselves to grow everything.

52:27 But we're also looking at always to get new product lines as in the NE one. So if you look forward, we would continue to keep all these product lines going, keep moving them forward, working, you know, the the strategic approach that we've taken to build relationship with the the data center companies. We're gonna continue to do that. We're working with all the big companies at the moment. We haven't sold them all, but we're working with them all and trying to build that relationship. Hopefully, that will bring the other product opportunities to us. So it's a matter of just adding another layer and another layer and another layer going forward. So I guess that forward looking is it's it's just more of the same. It's more of being bigger at what we are doing, but also finding other areas and other, you know, other products or other sets of customers that we can address.

53:14 And lastly, you're, I guess, I can can pick up that China is playing in six g. And can you confirm if this is a way the future ahead? You know, I see the discussions in six g is almost a it's a maybe not the world would say, but it feels like a thought process at this point in time that people are trying to think, ten years from now, what's everybody gonna want from the telecoms network? What's it gonna have to deliver to support the smart cities of the future? If you go back ten years, if anyone can remember, I can't remember that far back, you know, in terms of what what you did and what you got from the network and how it's changed in terms of what it's you know, the network's there to support the smart cities. It doesn't create the new apps. It doesn't change the way you you run your life or live your life, but it creates the platform that allows us to to change our life. So a lot of the discussion about six g in my view is trying to look past where we are at the moment because it is a constant evolution. There's a lot of talk about five g as if it's a sport technology.

54:14 It's very much presented to the consumer world that it's a spot technology. But to me, it's a euphemism for the build data of that mobile network, and it's a continuous evolution by the moving to different rates, different topologies, different structures, different standards coming in. They just continually happen all the time because the industry is pushing to build out that connectivity. So when the smart cities need to connect, the infrastructure is there to allow them to connect. Tommy, Ashley, thank you very much for that. I think you've addressed those questions you can from investors, and, of course, the company will review all questions submitted today, and we'll publish those responses on the investor meet company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Tommy, could I just ask you for a few closing comments? Sure. Yeah. It's been a good year. As I said, I always start with a negative because I like gaming on a positive. But, you know, the clay you know, the one dark cloud that everybody that's using any electronic component in any industry in the world's got at the moment is the supply chain.

55:12 It's taken a lot of challenge. I guess I need to thank CALNEX SOLUTIONS for their support because they have been really supportive and the strength of that relationship has really come to bear in the last year to for the our teams to work with them to really navigate their way through an incredibly difficult situation, and hopefully, it will clear sooner rather than later. But there's many reasons to be cheerful. As I said, I don't think it's damaging relationships with the customers, so that's positive. We see in all our product lines as opportunities where we need to drive ourselves to to really try and realize these continuing to grow, and the changes that are happening in the industry as well are again good signs for new opportunities that may appear in the future for our latest, you know, for us to generate additional revenue as well. And, obviously, we look forward with the acquisition that we've just taken on board.

56:00 The acquisitions and integrations are always a challenge, and they will come for free. But, you know, I think we've had a lot of experience in the past, and so far so good. The teams are working really well together, and I'm good that we can bring it to bear and and create a growth engine moving forward. So thanks very much for your time. I appreciate it, and, hopefully, we'll catch up next time. Thank you very much. Tommy, Ashley, thanks once again for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of CALNEX SOLUTIONS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.