Calnex Solutions (LSE:CLX) — Final Results for the year ended 31 March 2025

0:04 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 they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses, which is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like

0:36 to hand you over to CEO, Tommy Cook. Good afternoon to you. Thank you, Hannah, and good afternoon, everyone. Thanks very much for coming along today to listen to an update on our results for FY twenty five. So I guess before we go into the results, let me just take a couple of minutes to just, remind people or introduce CALNEX to, those people that are not so familiar with us. CALNEX is established at the forefront of the global test measurement industry. Our our portfolio enables our customers to validate the performance of critical infrastructure associated with telecoms and, in computing networks. And you can see on the right hand side some of our key customers that we sell to. We sell to the telecoms equipment vendors. You see people at Cisco, Sienna, Ericsson.

1:23 We sell to the telecoms operators, the AT and Ts, BTs of this world, and the component manufacturers, Broadcoms, CallComs. But we also sell to the the data, like, cloud computing, sector in the world, like Google, Apple, and Microsoft, Nvidia. So we have quite a diverse set. In all cases, they're using our equipment to prove performance of their networks or prove performance of their equipment to ensure that it's standards compliant or that it's gonna work in in all real world operating conditions. We have a global footprint. We sell in 68 countries around the world, and we use a lean business model where we outsource our manufacturing and we use a global, distribution channel to access our customers around the world.

2:13 In terms of when you look at test and measurement and where it fits in in the life cycle, it fits in everywhere. But where we really focus is that stage called design validation conformance test. This is where r and d teams are developing new product, and they're going through prototype test, early beta testing, and then full conformance testing before release. Now the important area, the area the reason we focus on there is because this is very much an area where, customers spend because if you have the right tools at the right time, you can get that new revenue stream from your new products started as quick as possible. And it's not just about doing the test quickly, it's about doing it robustly to ensure that once it's in manufacturing, you don't have a yield problem. And once it's deployed in real world networks and all the various topologies around the world, and you're not gonna have customer, excuse me, customer satisfaction problems because the equipment doesn't work correctly.

3:12 So very much it's an area where you can command a high price if you have the right product at the right time, and that's very much the area we focus on. The one other area we focus on is more of that maintenance monitoring on the far right of the slide. This is where after a network's up and running, either you have to continually monitor to to check for situations arising, or the maintenance is more that kind of high level maintenance, not the initial maintenance, but the simple repair exercise of swapping units isn't fixed. That means there's something more complex wrong in the network and you need to use some of your more high highly trained engineers to go ahead and understand exactly what's going on. So that high value is very much what we focus on.

3:58 So how have we done in f y twenty five?

4:01 Well, it's very satisfying to be back in a growth position after the previous year. And we did a revenue of 18,400,000 for the whole year, compared to 16.3 the year before. We had a profit of 700,000 compared to a loss of 0.4 the year before. And the cash position there looks slightly down, but Ashley will talk about it later. Pretty much year on year, we were pretty much flat, which again is an important situation that we're we're retaining cash and managing our cash situation. And we plan to propose our dividend this year of point six two p, which is the same as what we had as a final dividend last year. In the last year, some of the there's been a number of key things that's led to that success. We had a couple of really important releases from our r and d team. In difficult markets, it's not that our customers don't have money, they just have limited money. So it's important to get new capability out because it's much more easy to unlock that access to that limited capital spend when you have new products.

5:03 We released a new 800 gigs, which is leading industry leading in the LabSync Paragon Neo product, and that's had that had really good success through the year. We also launched a 400 gig capability on our n double e platform which was successful. And we've also seen some of the areas because we've really focused on our marketing activities in the last year as well, especially on n double e in terms of creating marketing collateral and positioning of the products that really puts it in the terminology that the customer understands. So rather than presenting a general toolbox, you kind of present it very clearly what the value is and how they can get value from the product. And again, into the the enterprise, defense sector, satellite sector, that extra focus we've put on in the marketing is starting to pay a dividend and we're starting to see success from that improved approach to NI go to market.

5:59 We also had quite a change in our channel, partner network in the last year. This time last year, I think, or the last one I reported that, we've had a long term relationship with Spirant, where we used them as a reseller for us. And when it was announced that they were getting acquired, we decided to terminate that contract and go to use our whole network of partners across the world. We've had a fairly successful transition across to that and we're still actually working with Spirant, at this stage, which has allowed us to have a very smooth transition to the new network of of partners and ensure it doesn't impact the business. Overall in the industry, you know, we see the telecom sector still remains subdued. I guess from experience, when we go the telecom sector has gone into this sort of period in the past, it doesn't come out quickly. It comes out slowly.

6:51 There's definitely improved engagement from the telecoms customers, which is good to see. But during this time, we haven't sat back and just waited. We've been really focused on these other sectors and other verticals where we believe there is a chance to gain market share through, what we're doing. So as we said, into the data centers, etcetera, that's where we're looking. But we believe going forward, while the macroeconomic uncertainties remain out there, that what we have in terms of our new product programs and our improved or an increased focus on particular segments in terms of go to market that we can continue to generate growth moving forward.

7:33 Our fundamental drivers have not changed. You know, we basically look at that build out of the mobile network for the telecom space and also the impact of the data centers, both the infrastructure and applications that are running on them. And they're all interlinked to one another because in some ways, a data center very simplistically is just a big network in a building. So a lot of the technology that's used in the telecom space is actually being used in data centers as well. So what it means is that the developments we are doing by presenting them slightly different to different sets of customers, we can generate market share in different verticals. And we see in both these spaces, obviously, the data center world through the impact of AI has just increased its acceleration in terms of growing and looking at new ways to be more efficient and increase the bandwidth. And we still firmly believe the mobile network needs to continue to get investment and to build out to support the smart cities of the future and all these new services that are coming along. So underneath what we're doing, we still see the fundamental market drivers there, and that will remain our focus moving forward.

8:41 As I said, we changed our partner network quite considerably over the last year. This time last year, we're while we're about 64% of our sales went through Spirant, we did have a partner network of another 40 partners, fairly small niche partners. We've now moved to 64 partners and we still work with Spyrant to a degree, albeit it has reduced significantly over the year. And obviously, we have to wait and see what happens with Spynt once. The part of Spynt that we work with is a bit that will eventually be bought by Viavi. Once that goes through, we will speak to Spynt because we would like to keep working with them. They've got some great relationships with customers and it would be beneficial to us to keep working with them, but we can't have these discussions until, from a compliance point of view, until Viavi has actually completed that acquisition.

9:26 So that's something that will evolve and be able to give you an update in the next time, but we've made sure we're prepared to, if it doesn't work out, that we can go to market without Spirent or continue to use them whatever is required in the future. We've also taken the opportunity to look at the way we manage partners in terms of our internal processes and there's been a lot of focus on our go to market, our partner management strategy, our onboarding to make sure we're far more efficient and effective at bringing onboard new partners because it's not a matter of setting up a network and then it's finished. A network this big will continue to have churn in it where some partners are not doing so well and we replace them. Or also as we go into these other verticals, need to bring on other new partners that have better connections into these other verticals. So we very much see this as a living organism that continually needs to get managed. And we've invested in in terms of our head count, very much focused where we're managing expenses very closely.

10:24 We have put an extra channel manager in, recognizing that there is more work to be done there and brought other salespeople in very much focused in some of these verticals where we believe we can get a return. So at this point, I'll hand over to Ashley who will go through the financial review. Thanks, Tommy. Just on the before I take you through the the detail of the p and l and cash flow, I just thought it would be useful to believe briefly remind you of our revenue model as I've done in previous presentations. So as you know, we've got two revenue streams. One revenue stream which we call bundled hardware and software, and the other one which is which is software support program revenues. So a typical customer will purchase one of our hardware products with a number of software options included at the time, and that invoice is one bundled sale to that customer.

11:16 That that same customer can then come back for upgrades or additional options that are then added to that existing hardware that they bought previously to through the provision of a license key. And we can also we we sell these these upgrades as standalone software sales from an invoice perspective as well. So bundled hardware and software sales pricing can obviously differ from order to order because it depends on what we bought from a hardware perspective and and what they've chosen as their software options at that point in time. And each customer obviously purchases a different combination of software options each time they each time they buy a a hardware product just depending on their need. So as a result of that variability, the average revenue earned per bundle can vary from order to order. And that that that revenue for that that revenue stream, which is our main revenue stream, that revenue is recognized on delivery to the customer. So whether we're delivering a hardware product or delivery of the software license key that's a standalone software option.

12:24 And that makes up the majority of of our revenues, which you can see in the top left and say that this slide here. It's the that that's the dark blue element of that that chart there. And then each of our products comes with a standard warranty period, which can be extended for an extra fee. We also sell software support programs, and that makes up our second revenue stream. And that revenue is recognized over the life of the products that the customer purchases.

12:54 So if a customer purchases a support package that spans over two years, then that revenue associated with that but with that pro that package that they bought will be recognized over those two years with in the first year, some of it deferred on the balance sheet.

13:10 So the graph on the top left here shows you how those two interlink with each other. And and up until f y twenty three, the trend in in in previous years was approximately 90% bundled hardware and software and 10% support revenues, and that tracked fairly consistently year on year. And last year, we saw growth in the percentage of support revenues coming through. So the proportion of those revenues to the total was 23% in FY '24, and that trend has continued into largely continued into FY twenty five with 21% of revenues coming from support and 79 coming from bundled hardware and software. That increase in support programs are both in the proportion to the total and absolute terms.

13:59 This reflects the fact that while CapEx budgets may still be constrained slightly at at the customer end, OpEx budgets are still available, our end customers. And that and it also just demonstrates the value customers place on ensuring they can continue to receive the support on their existing CALNEX products that they already own. So just moving to the across the top of the slide to the the middle chart here. So as you'll know from previous presentations our and from the the RNS, our revenues are generated across our global customer base and partner network. And we have three geographic divisions, so that's Americas, North Asia, and rest of the world.

14:41 And this last few years has seen a slight decline in the proportion of portion of sorry, of total orders coming from North Asia as a result of The continued US China geopolitical tensions, with 18% of revenues coming from that region in FY twenty five. Americas was most impacted by the telecom slowdown in prior years, if you remember previous presentations. And the focus that we had in FY '25 was to explore other markets and that has proved successful with the growth in revenues in the year. And in in FY twenty five, you can see from the chart here, Americas accounted for 40 of our total group revenues compared to 31% in the previous year. I've got more information on the regional and the product line revenue trends in a couple of slides today.

15:30 Just moving across the slide to the right hand side, as you'll remember from previous presentations as well, our sales are predominantly derived, have been predominantly derived from the telecoms customers where the end application is within a telecoms network. Cloud computing market customers within this analysis here include hyperscale hyperscalers, data centers, enterprise, and defense customers to name a few. So within this chart here, you show that in you can see in f y twenty five, these cloud computing market customers represented 43%

16:06 of our total orders compared to 39% in in FY twenty four. More recently, we've seen an increase in customers from the cloud computing markets, which includes the the areas that I've mentioned before. So hyperscalers, data centers, defense, enterprise, etcetera. And equipment vendors who initially developed products for use in telecoms applications are now selling the same products into our data into other data network applications where the same technology is implemented. And these new applications are becoming the primary market opportunity for our customers' products, which is contributing to the increase in the proportion of business coming from the cloud computing market market within that chart there. So moving on to the bottom of this slide, these two pie charts are are quite interlinked in terms of the drivers. So talk talk about them as a collective. So over the last three year rolling periods to the end of March twenty five, our top 10 customers contributed 45% of total orders.

17:11 In addition, the average length of relationship that we have with those top 10 customers is ten years, which demonstrates the repeat nature of business that we have with those customers and the strong relationships that that we also have with them as well. That's slightly down from last year's eleven year average. However, that demonstrates how we're broadening our customer base and a and a small number of these new customers are entering into our top 10 list. So we'll see customers come back to order from us frequently because you might want to buy multiple piece of hardware for from multiple sites. They might want to add new software options or upgrades as I was mentioning before when they've already got the hardware. They might want their their equip their requirements might be growing, so they might just want to add new kit for that. Or they might want to move on to our newer products and functionalities as we release them to the market.

18:06 So that repeat revenue demand, as I've mentioned in previous presentations, is a measure we measure across our whole customer basis as as well as the top 10. And the other pie chart here is showing that on a three year rolling profile, repeat orders generated across the whole group were on average 77% of total revenues, which is in line with last year's three year rolling average. And then FY '25, we received orders from 274 customers, and that's relatively flat compared to last year's number. But the revenue per customer increased in the year. Just on to the the next slide here, just in terms of summary, just to add add to Tommy's exact summary from from a few slides ago. As Tommy presented just a minute ago, we saw a return to profit this year as a result of the 13% growth in revenues and margin improvement in the year.

19:06 Much of that was driven by the trading performance in h two with 11,000,000 of revenues coming in to add to the more challenging h one h one revenues of 7,400,000. And that together with slight positive operational gearing effect of our largely largely fixed cost base saw us return to improved profit positive profit margins. So underlying EBITDA is up from 0% in FY '24 to 6% in FY '25. And PBT margin also saw six percentage point swing from a loss of 2% to a profit margin of 4% in the period in the year. So H2 stronger trading performance also resulted in strong cash generation in that half compared to h one. So two point three million of cash is generated in that in in h two alone. So the year end cash balance, as Tommy was mentioning, was 10,900,000.

20:02 That was up from 8,600,000 in in in the the end of the the half year. Slightly down on the start of the year. However, the cash balance increased further in April to 12,700,000 as as trade receivables were collected from strong q four shipment volumes, and I'll cover I'll cover that in more detail when we get to the cash flow slide. And as Tommy mentioned, we'll be proposing a final dividend at the August AGM of 0.62p per share, that's in line with last year.

20:33 So just moving on to more detail on the geographic and product performance in the period. The as I mentioned before, the Americas region was most impacted by the telco slowdown. We focused while the while the telco market was subdued, our our plan was always to focus on selling into the cloud based infrastructure, applications, and government opportunities, that has proved successful. So the the the the revenues in the Americas region increased 44 on last year. We're we're working with our partners really closely to understand how best to navigate the The US tariffs, and and we're working with them hand in hand to understand the effects and the process of passing through those tariff costs to the end customer.

21:22 The rest of world region, demand levels were least affected by the slowdown in prior years, if you remember from last year's presentation. Although the revenues, when you look at the disclosure notes, are were slightly down on the prior year, This was due to timing of orders, the order to shipments in in q four's orders that grew year on year in the region. And in North Asia, as I mentioned before, the the revenues were were flat compared to FY '24, and that's driven by China still being quite a challenging country for us due to the the impact of The US restrictions. So we are continuing to focus on growing the business in the other countries within that within that region. From a product line perspective, lab sync, that's the Paragon products. The Paragon product line was the most impacted by the telecom slowdown in in prior years, but we did see strong demand and revenue generation, particularly in h two for the new 800 gig neo in f r twenty five, and that demand is is expected to continue into f r twenty six.

22:26 Network sync, so that's our Sentinel and Sentry products. Revenues for those grew in the year, driven predominantly by a repeat order from our major hyperscaler investing in data center operations. And NAA, which is our SME and any one products. SME saw revenue growth this year after quite a difficult FY '24. And we saw growing demand for new for our newly launched products, which is the which are the SME x and the SME Ignite products. Any one saw a slight reduction in a retraction in revenue that was impacted more by the the shift of marketing focus to the SME and the Paragon products in the years. So focus is is for efforts, and six is on returning that product to growth.

23:14 So just on to the income statement itself, covered a few few items here already. But just to work down the p and l, so 13% growth on on revenues on FY '24, and that is despite continuing challenges in our end markets. Our in the prior year, if you remember previous presentations are largely fixed indirect cost base in conjunction with the lower revenue levels created a negative operational gearing effect on profits, which was creating that loss loss effect last year. So that in FY '25, that operational gearing effect did flip slightly. We would like to to get more for more for it in in future years, but the effect was slightly positive, and that was one of the drivers behind the improved profitability in the year. So gross margin was 75% in the year. That's up two percentage points from last year. And just as a reminder, that gross margin is net of any commissions payable to our channel partners. That's our gross margin.

24:16 And because we are a low volume, high value business, the gross margins can fluctuate one to 2% through the year just depending on the mix of the products and the mix of hardware and software bundle shipped as well. We continue to keep a very tight hold on costs in FY twenty five and then to FY twenty six. Our headcount remained in line with the prior year, and we retained our small graduate hiring program to aid future succession planning and investment into our future roadmap opportunities. But that was all within that that that flat head count figure. As you can see from this this analysis here, admin costs, which excludes depreciation and and other and amortization, which is shown separately here, I came in at point 4,000,000 higher than last year. However, if you exclude non capitalized r and d costs, which are allocated to this line, admin costs were in line with prior year despite year on year inflationary cost increases and salary increases as well.

25:19 As you know, we capitalized the majority of our r and d costs and amortized these to the p and l over five years. Our r and d amortization came in at 4,300,000,000 in the year, and that was that was known at the start of the year. Now first that that was versus 3,800,000 in the prior year. So in a period where there's little or no head count increase within the the development spend that's capitalized, the amortization will increase if you've had previous years of of high of cash spend or increasing cash spend over the over the past five year period. So that's the reason for the amortization increase there. Profit before tax came in at 700,000, and that is effectively just driven by everything I've just talked about, the improved revenue volumes and margin improvements as well, while we're keeping a tight hold on costs.

26:13 The tax charge is 400,000 in the year. That that brings on an effective tax rate of 53%. However, if you take into account, there's a couple of one off prior year adjustments within that tax figure this year. If you strip them out, the underlying effective tax rate is actually nearer to 25%, which is pretty much in line with the with the tax rate. So that should be assumed as this run rate forecast ETR going forward into future years. We're just on to the cash flow. The the total cash outflow was 1,000,000 in the year. So that the improved trading that we had in the year was offset slightly just by timing of shipments versus trade receivable receipts at the end of the year.

27:00 So the the the main driver in that working capital in the year increased by 1,800,000. That is a a lower increase than what you would have seen in last year's cash flow versus the 3,700,000 increase last year. And that was driven predominantly by very strong trading within q four and just the timing of the the shipments going out and the collection of those trade receivables crossing over into into April. So debtors days remain in the same, but just happening over the cutoff of the year end. So we actually received a large majority of that cash back on time within the within the April month, and and our cash increased as a as a result to 12,700,000 at the end of April.

27:50 Cash spent on r and d activities, which you can see here, was 4,900,000, and that's versus 5,600,000 in the prior year. That reduction in spend was mainly as a result of lower equipment purchases in the year as a majority of the equipment spend for the prep for the Paragon Neo 800 gig project was made in FY twenty four, plus there were some non capitalized r and d costs that went straight to the P and L issues. And so and we still manage surplus cash balances through notice accounts just benefit from higher rates of interest. We don't hold any on a very long term deposit, and we also still I still have no no debt on the balance sheet. So just on to the summary slide, we just in terms of just to summarize all that up, gross gross margin improvement in the year created a and and helped with positive operational gearing, tight cost control on the within all all cost and buckets that just drove helped to drive profitability with that revenue, 13% growth in in revenues as well.

29:01 We continue to invest in our r and d programs where we see revenue growth potential ROI growth, and while also keeping a tight cost on all other all other overheads. The diversification of our customer base and our end markets plus the diversification of our channel, which Tom was talking about earlier, just provides that increased resilience and that increased spread of risk across our global customer base as well. And we're we're confident that we'll continue to see improvement in revenue and profitability into FY '26. And I'll hand you back to Tommy. Thanks very much, Ashley. So just this last stage, let's have a quick look at the strategy and some of the market opportunities that we've been focused on the last year and also looking forward to the year ahead.

29:52 Regarding the strategy, it's pretty much the same as we've presented before. As I said at the beginning, there are two big fundamental drivers that we see that we focus on, and that is the continuous innovation to get, required to for the build out of the the mobile network, whether it's five g, six g, or whatever. And we do believe that that well, it's subdued at this point. The innovation in that sector has not slowed down at all even though the build out has slowed down. And we do believe it has to come back again in the future because it's so essential for the the, I guess, the future cities and the future applications that we see talked about. And the other area we're focused on is expansion of the cloud computing and the defense sectors. I guess, basically, whatever those other key areas where networking is happening. And obviously with AI happening in the cloud computing or the data center space, this is being quite disruptive in terms of bringing in the need to really increase the the build out of mobile sorry, out of data centers and look at the efficiency and the effectiveness of these. So again, we see a lot of drivers in this this group where that's that's creating growth and should create opportunity for us in the future.

31:06 And lastly, we as we have done in the past, we have done acquisitions, and we look to partner with companies. In the recent period, the partnering has been something that we've had more focus on. Acquisitions is still something we plan to do, but it's always been opportunistic in our sector. There isn't a huge number of other companies. So we are prepared if something comes past our door. We would definitely look at it and consider it if it was gonna increase our, our product portfolio and build it, bring new business to us. But given the kind of scaling back of them to work with Spirent, it's actually allowed us to speak to other test vendors in the sector and look for situations where we can work together to the, mutual benefit to the two parties and to particular sets of customers where the portfolio of our products and other people's products gives us both a stronger position in there.

31:58 So looking at our product family, there's been lots happening in all of these sectors in the last year and also going forward. The lab sync, as I've already mentioned, the big release last year was that 800 gig capability which was leading in the industry. Now the interesting thing that we've seen happen through that period or the period of sales so far is, well, it's very much a telecoms developed technology and standardization happens in telecoms, we're seeing other sectors picking it up. So when we came out with 400 gigs a few years ago, there was there was some new entries that started to to buy our products and that were really servicing the data center, people that that made servers to go into data centers or chipsets to go into servers and to data centers.

32:46 But mainly because at that time, there was talk of ORAN and actually the data centers hosting mobile networks. That is subdued at the moment, but actually it's interesting these new names have come back and bought the 800 gigs. And what you're seeing is that the technologies that are perhaps developed in the telecom space, because telecom is such a mature industry, the standards are well structured. Other industries pick them up. And so we are starting to see different names, companies that you'd associate with data centers like Arista, Dell, who make servers, and then Intel and Nvidia are buying our products to test their devices to these standards. So we see that continues to be important in going forward, and we hope that trend continues that we see more people picking up these standards which will expand our market.

33:36 The network sync, you know, the the Sentinel programs is really focused on the telecoms. And given the subdued spending, there isn't a lot of r and d going into that at this stage. And then r and d in this sector has really been going into the century, which is really in more of the data center market. As you may know, we have one particular hyperscaler we have a great relationship with and have good sales with, and very much the development that we've been doing in there is aligned to their needs and their developing needs to make sure the product stays aligned to the to the the future needs for the data center market. And then the last group is the network and applications assurance. We have a whole array of network emulators. We had some big r and d releases last year in the SNEX in particular that come out with 400 gig capability, which is important to start speaking to the data center guys who are all working in these very high interface rates.

34:31 But what the main focus has been in there as well, or one of the other big focuses has been in our go to market and the way that we present these products to the customers because these are general purpose testers that can be used in many different applications. And really what we find that gets more traction is to focus on key applications, create collateral, and then present the product very much in a way that the customer can understand how they can get value in their sector. So that's very much the trend in what we're doing there, but we'll continue to enhance our products moving forward and make sure that we're well positioned to be successful in a whole array of applications. Do you know over the years, you'll see see that we actually have a pretty high investment in r and d, And that's because it's fundamental in our model that we continue to innovate because we work in an area that doesn't stand still. There's continuous new standards, interfaces, approaches coming, so we continually have to invest to keep our products relevant. And not just relevant, but capitalize on these new opportunities.

35:31 And you can see in the top row here, over the last four or five years, the number of major releases we've had of new platforms or enhanced platforms, the most recent being the 800 gig version of the LabSync product. But it's not about just doing big platforms. We very much try and create a platform that we can actively enhance for at least four or five years and hopefully potentially sell for up to ten years. So you can see lower down that we do lots of minor releases. This is basically software enhancements to these platforms where we're adding additional features. These features may come from customers asking us for additional capability or it may be because we've seen changes in standards or identified new opportunities. So there's basically lots of small enhancements continually happening as well as the larger enhancements. And this is core to the business model that we have, that our customers expect our products to continue to move forward, that when they invest in a platform, that it will be enhanced, which they understand that that's a costed enhancement, but they need it enhanced to make sure it stays relevant to them and they can sweat that asset for many years and we can continue to capitalize on that.

36:40 So if you look forward into the year ahead on the two major programs, the lab sync, obviously last year we came out with the 800 gigs platform. There's no major releases planned for FY twenty six, but there's a lot of minor releases in terms of building out the capability in that platform and adding capability both to the the 800 platform and the 400 gig platform to meet these custom customer demands and to changes in the environment that we need to do. One of the other things we're starting, is really very much our future, is a 1.6 terabit platform. Now, you know, we've seen so many waves. As I've probably mentioned before, I think I've well, I know I've been in this technology or this industry for forty years, and getting to 1.6 is almost like the fourteenth or fifteenth wave of technology. And in fact, they're already talking about 3.2 terabit.

37:32 It just keeps moving. And although there are products out there today with 1.6, we usually have to wait until technology allows us to deliver a solution because the initial parts don't have the control that we need of the through delay of every component to be able to build a Neo. But we have now identified parts for 1.6. We hope to get started soon on that, literally next month. But that will be an eighteen, twenty month project, so it will come out more towards the end of FY twenty seven. But really, it's important to continue to follow these trends and follow the waves and stay relevant and capitalize because it's not only important, as I mentioned, for the telecoms area, but for the data centers as well. They are the ones that are now really pushing hard to get to the higher rates, to get to the 1.6 to 3.2 terabit because of the sheer volume of data that they're pushing around.

38:23 So lots happening this year as well as major releases getting kicked off within the r and d. In our AA double e market, again, we have come out last year with a SNEX with 400 gigs capability. We're looking to expand that this year, add more capability, and potentially starting the next platform as well, being more 800 gigas and beyond because again, in that data center world, the the customers want to speak about these higher rates. So it's important for us to do that there. But it's also we're spending a lot of time looking at these other segments we've spoken about, the satellite and the defense applications, and building out the ports needed ports in our platforms in terms of capability, but also in presenting it to these customers and developing our go to market to enhance our market capability and being prepared to change the product to meet the needs for these new markets.

39:19 When I look forward into the future, what we call our discovery activity, this is a product management activity that's very much looking in the future. The area that we are spending time looking at is around AI. It's not it's not so much AI applications in themselves. It's the way that AI is being disruptive into the data centers. The fact that how to build out faster, get to higher rates quicker, The modeling algorithms that are running seem to have sensitivities to impairments in the networks. The inference testing, this is when once you've got a model, it's working with the real world. That's what they refer to inference. And basically is there an opportunity for us to offer test solutions to prove the robustness of these algorithms at that time? Still too early to say, but there's so much disruption going on in there and in my experience, it's disruption that creates new opportunities.

40:10 So it's definitely an area from the future that we are investing our discovery activity, that looking to the future to see what's happening and see whether we can expand what we do, expand the current products potentially find variants of the products we need to create to get to these new markets. So in summary, we are confident we can continue the growth through '26. You know, a lot of the growth really came through a number of things. It came through our new product releases. It came through our our improved go to market and it came as well through our new channel partners that we have. And all of these things are at an early stage and we continue to develop them through the year and that's why we have confidence that it will continue. We could, you know, we, we go into the year with a healthy backlog and a strong cash position, and that Ashley presented, and we are seeing increased customer engagement.

41:05 We still see an area where there's there's a future in terms of the innovation that's happening in the industries. It's accelerating. It's not slowing down even in telecoms where the build out may have slowed down, the innovation's not slowing down, and the test world's driven by innovation, it's driven by disruption. So we still see this opportunity for the year and for the years ahead in this area. But we're also not resting on our laurels and looking to go new verticals where we can use the same products, but actually find new customers, whether it's in defense or into the cloud applications. So we believe the drivers are there. We believe that we've got a good team in place. We have a a structure in place and a product program and discovery activity that we can deliver sustainable growth moving forward.

41:52 And that's the end of the formal presentation part of this webinar. Tommy, Ashley, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would 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 investor dashboard. I'm Tommy, Ashley, as you can see, we have received a number of questions throughout today's presentation. And, Ashley, if I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you at the end. Thank you. K. Thank you very much. I've got a couple of questions Okay. Here I can answer. So Chloe has asked the question, the receivables that are past due of 1,300,000, which is in the disclosure notes in the r n s, majority being between zero to thirty days. Is this mainly due to the orders received end of q four or something else?

42:51 It's actually the the the quirk of the disclosure. These the that 1,300,000 was two to three days late, past our credit terms with them with customers. So we we we've act because of our change in channel, we've ended up with a a longer list of traders of of customers on our ledger that that we have to chase for for debt compared to when we when we had spiral. So so debt to space has changed just slightly, but not by any material amount. And you do get some that are that are a couple of days late. So so that was just a kind of a quirk of that disclosure. Those that 1.3 alongside the receivables I was talking about earlier have all been collected since the year end.

43:42 So the the receivables balance at the end of the year was one of the highest receivables balances that that we we've had in a while. But the majority of that the driver behind that was mainly to do with the pattern of when the orders and shipments went out the door compared to any sort of timing on revenue on receivables collection, if you know what mean. So so those receivables have all been have all been collected now and and within that sort of April cash balance. So hopefully, that answers your question there, please. And there was another question from Sean here. Under what circumstance would you consider a share buyback? So the the board constantly reviews its options around around this area. At this point in time, the primary priority for the for the business is to continue that return to growth and profitability and and that sustain that into FY '26.

44:44 And as such, available funds are being used at this moment in time to support that objectives. It is also a priority for the business. It has been and it continues to be to maintain and protect our current liquidity levels just given the challenging end markets we're working in right now and also the sort of challenging geopolitical climate we're we're in right now. But we do review that on a on a very regular basis. Okay. I'll take there was a pre submitted question, so let me take that one first. Although starting to see the light now, the recent data in the telecoms industry has created problems for CALNEX. How can CALNEX prevent this happening in the future if a downturn happens again? Well, there probably will be a downturn again in the future because it does seem to happen every once a decade or a lot more.

45:34 And really, the approach has been to spread into other verticals. You know, ultimately, these things are driven by macroeconomic effects. And so really what we've focused on over the recent time, we will continue to focus on telecoms as we'll remain so for the foreseeable future of focus. But we've really focused and even in terms of our hiring and our partner network, it's all about expanding into other sectors so that we're less vulnerable to fluctuations in the telecoms market, and that's the way we see that is the best way to manage that. There's another question here from, Melville. In retrospect, would you say that the big hit to your telecoms customer has turned into a medium term benefit resulting in expansion of your market areas, product line success to our growing CALNEX SOLUTIONS overall?

46:23 Good question. It maybe didn't feel like I benefited at the beginning, Melville, but I actually think you've got a lot of point in there. Looking back, you know, there's one thing when you look at, you know, back at you know, when you think about yourself, in the boom years, the danger is you start to think you're wonderful and everything's perfect and everything you do is great. And it's only when it gets tight you realize there's still room for improvement. And I guess when you're right, when you get difficult times, really makes you focus on how you do things and how you there's ways to do them. There's always opportunity for improvement and actually look internally and I think I agree with you. It has forced us to be more aggressive at getting into other market areas and hopefully be more robust. So I think I agree with your point. I think it has been, you know, it's been difficult medicine, but I think it probably has grown the company and made us stronger in the future.

47:11 Every opportunity every challenge is an opportunity, as I say. And I've got one here from Ross. Could you please comment on the specific cost control measures that have been implemented? Are they structural or more short term in nature? They're essentially so I wouldn't say they're structural, but they're probably more aligned to bringing in process evolution and process improvement as well. So in terms of the cost control or take cost control measures that we put in place last year, very much around a pause on headcount unless it was targeted to hires or graduate recruitment. A rethink getting get getting the teams to effectively rethink whether they needed to spend on on travel or whether they could do calls over over Zoom, etcetera. And trying to get them to sort of balance up the the the the benefit and the cost and the benefit for these for these types of things. So very much just a tightening of the belt rather than any structural cost control or any any sort of more serious cost control measures. However, I think it's also helped kind of following on from what Tommy just said. It's helped us in in these times where things are a little bit leaner. It's just helped us identify areas where where we might not necessarily want to add any more cost, but you might actually end

48:41 up with a benefit if you look at a process improvement or a or a or a or a process evolution as well. So and so it's more a it's more a it's more of just a rethink of of cost budgets and just a careful incremental increase to these costs where required. So so our headcount has for example, our headcount should remain the same this year, but into FY '26 in order for us to to to get the best out of our our markets, we may want to make we we will want to make some targeted hires. But the the sort of the process around understanding what the ROI is on those targeted hires is is it has been has been sort of evolved over the last couple of years as well. So so hopefully, that answers your question. I wouldn't say they're structural.

49:31 I also wouldn't say they're short term in nature as well, And but they definitely weren't cost control measures just to just to sort of manage the profit figure in that particular year. It's all just about building more efficiencies into the business from a process perspective as well while while doing all the things that we need to do to grow that top line. Okay. David's asked a question. Who are your competitors? Let me just flip back to the slide with the product lines because it's a bit easier to explain. You're gonna have to talk about each of the product lines separately, David, to answer that. In the lab sync, especially at that high end, the high high interface rates, the high accuracy that we perform, we basically don't have any competitor. And Keysight are probably the neediest and they kinda nip our heels at some of the lower rates and in some of the more kind of wider application or tests that need to be done. But in general, we have a very strong position.

50:27 We're really known as the the market leaders in there and that's why I guess continue to invest and make sure we keep moving forward at peace and don't let anyone catches us. It's really important to maintain that position. In the network sync, in a Sentry product, again, we really don't have anybody that's directly doing what we are doing in that space. At the moment, it's probably, know, somewhere where we think we can expand. So and we we we basically hold a position with the customers we're with by keeping very close in contact with them, continually engaging, even letting them engage with the r and d teams so they feel, well connected to us, and we can continue to keep that product aligned to their needs to ensure that they continue just to look to us. When you go to the network and applications assurance, there are a number of competitors in here. There are some of the big players that Keysight have a network emulator and a number of small companies that have network emulators.

51:24 And the way we've really created our competitive position is by the only company that's got a whole range. Rather than having one network emulator that you try and push into every application, we have three that are quite different in TerraForm, what they can do and how they do it. So it allows us to tune it to the particular application and being very focused on the application, making sure we understand applications, that's how very much we we seek to to create a competitive and maintain a competitive edge. And the last question we've got up here is, from Jeffrey. Were profits in 2023 inflated by COVID recovery or can profits get back to there as revenues rise over the next couple of years? You know in '23, it was an interesting year, was a great year, but it kind of was one of these years where everything seemed to work, Jeffrey. It's kinda, you know, life doesn't always work that way. All our product lines were booming, all the regions were booming and of course we had a great year. But actually, you know, when we set at the moment, obviously we're we're back into profit this year but we're far from comfortable as a management team that's enough profit and we definitely want to get back up to the levels that we had in that year and we firmly believe we can. We're gonna continue to manage costs but we're very focused and realize that to get back up to these levels, then we need to deliver products and solutions that people wanna buy and buy at a high premium.

52:51 So we're very focused on the segments that we believe that we can get a handsome return on to make sure we get that revenue line back up on the top line and that will start delivering the profit while we maintain close control of the expenses and all the lines between the revenue and the profit line. Another question, given your size, would it make sense for you to be consolidated into a larger company? Well that's not my plan, Jeffrey. I guess if somebody comes knocking at the door then you know, as as a responsible board, you need to look at it. I I very much see that CALNEX is as a stand alone company and and has a future as a stand alone. We see lots of growth opportunities. We believe we can continue to expand. We find other companies like come and actually want to work with us.

53:41 So as a standalone company, we don't feel we're restricted. I always think that any restriction that's there, it's our lack of our own ambition that's restricting us. It's not the market. It is a big market and there are other places that we can go to. So we very much focus on the situation of trying to grow with the company as it is and creating sustainable growth and creating an environment and a company that the employees see as a sustainable place that they can work and continue to contribute. That's great, Tommy, Ashley. Thank you for addressing all those questions for investors today. And, of course, the company can review all questions submitted today, and we'll polish those responses on the investment company platform. But before we direct investors to provide you with their feedback, which is particularly important to the company, Tommy, could I please ask you for a few closing comments?

54:28 Thank you. Yeah. Well, thanks very much everyone for joining today. As I said at the beginning, it's, satisfying we're back into a profit situation. We need to keep driving that number up. You know, it came from a number of things happening. There wasn't in some ways, it was like a formula one car. You don't become number one by one thing. You have to do a lot of small things. And in some ways, that kinda summed up the year in terms of key releases and key r and d enhancements to all our programs, the fact that our marketing approach was changed, the fact that we continued to manage expenses and only did targeted hires. We were really needed to we had a weakness in our in our skill set or needed to expand. And also in terms of our go to market, we were go to market and our channel partner. All these things have contributed to the growth in the last year. And we're not at the end of the road of any of these and that's why we believe as we continue with these activities, we can continue to grow our market. And we do see that the market is creating new areas where there may be opportunity, whether it's through AI, whether it's through the the other expansions going into some of the other markets. So we believe that there's we're in a good footing at the moment. We've got a great team. We've got a very clear focus on what we're trying to do, and we feel that we can hopefully repeat the results that we had last year and next year.

55:46 So thanks very much for your attention. Bye just now. Fantastic. Tommy, Ashley, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of management team of CALNEX SOLUTIONS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.