Raspberry PI Holdings (LSE:RPI) — Half Year Results for the six months ended 30 June 2025

0:00 Good afternoon, and welcome to the RASPBERRY PI HOLDINGS PLC half year results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, they can be submitted at any time via the q and a tab situated in 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 in the meeting itself. However, the company can view all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Evan Upton, CEO. Good afternoon to you, sir. Good afternoon. Welcome, everybody, to our, first half, 2025, interim results. I'm Evan Upton, JV exec of RASPBERRY PI. With me, Richard Bolt. I see. There we are. There we are. I have Richard Bolt, our CFO with me.

0:48 Just I'm I hope many of you I hope many of you know who we are and what we do. We we build we build computers. We're based in Cambridge in The UK. We've been building and selling ARM based embedded systems since 2012. We design our products in Cambridge. We build the vast majority of our products in Wales. It's about a 140 of us, almost all located in Cambridge, exporting manufacturing between seven and nine million RASPBERRY PI's a year. We've made very nearly 72,000,000 of them in the thirteen years that our products have been on sale. Roughly 95% of the product that we produce is exported out of The UK. Quick summary of the highlights of the first half.

1:37 We are it was a good half. We saw a we saw a the full year, we communicated that we've seen a recovery in demand from both our existing and new OEM customers and the normalization of the channel inventory environment. Last year, we had a period of, I guess, of elevated inventory and channel and our OEM customers, which was a significant drag on the performance of the company in the second half of last year. We saw a 9% sequential increase in unit volumes. That's underlying, as I said, underlying demand growth from existing and new OEM customers. An 8% sequential increase in direct units and 27% increase in direct revenue speaks to the success of our ongoing strategy to move a larger number of our large OEM customers into direct relationships with us.

2:38 A favorable mix of products in terms of unit economics, certainly a better mix a better unit economics mix than we saw in the second half of last year. And together, these delivered a 19% sequential increase in adjusted EBITDA. A couple of to address a couple of potential headwinds in the market. Obviously, we are now in a high and dynamic tariff environment in respect respect to our sales into The United States. We've yet to see any significant evidence of impact on US demand for our products as a result of those tariffs. Indeed, we believe that in the medium to long term, there is a diff we are. We will benefit from a differential competitive advantage over many of our competitors whose products are manufactured in Far East of venues that are subject to higher tariff rates.

3:27 DRAM pricing is a lot of noise recently around DRAM pricing, particularly around the LPDDR four and LPDDR four x memory that we use on our Raspberry Pi four and Raspberry Pi five products. We entered the year with substantial inventories of LPDDR four memory. We remain actually well hedged into lower densities. We remain well hedged into 2026 through the end of the year and into the early part of twenty twenty six. We do have some exposure to the market, to market pricing, to contract pricing, not spot pricing, but to contract pricing at higher densities with sufficient supply on hand and on order to meet our needs through the end of the year. Further out, if we continue to see elevated DRAM pricing, which we expect we will do in the first half of next year at least, we have a number of technical and commercial levers that we can pull in order to mitigate our sensitivity to DRAM pricing.

4:19 It was also a good half for product launches, where last year was a year of platform refresh. We refreshed both large Raspberry Pi platforms, Raspberry Pi five, Compute Module five, and Raspberry Pi 500, and also the microcontroller based products with the launch of RP twenty three fifty and the Raspberry Pi Pico two series on single board computers. This has been a year, I think, of sustaining innovation. We'll say a little bit more about that later in the presentation. And we'll also talk a little bit more about the progress on other strategic programs, including the board to board initiative and the progress that we've been making on our second franchise, the semiconductor business. I'm over to Richard for some financials. So a financial review of 2020 first half twenty twenty five. So graph on the left hand side, which I think is just important context before we dive too much into the comparison of the various halves. This looks back to the beginning of twenty four. It picks up on a quarterly basis our unit sales. That's the height total height of the the bars.

5:23 And then the gray at the top is is really the sum of our PICO and Xero products. These are our generally low cost boards. I mean, zero between 10 and $15. PICOs, $34. And then below that is our major boards, single board computers that I think most people would know and also compute modules. Coming down that, the blue there is the pi five. That's the board that we released just at the end of twenty three. So, really, volumes coming into '24 were still very much launch related. The green is what we call the RASPBERRY PI four continuing to sell significantly despite the new pi five, and that's really a function of this industrial demand that we'll talk about elsewhere that 70 to 80% of our boards are actually used by companies either to build into products that they sell or in in their own factories, in their own laboratories.

6:22 So very much a demand that actually is quite sticky because of that. And then the orange Raspberry Pi three, gosh, that's something that we released in 2016, and we're still selling pretty significant volumes which are coming through. And then compute module, which is the is the credit card sized version. If you are building something where you are limited by space, that contains all the RASPBERRY PI HEDMES that you need of a PI four or PI five, and therefore, you can fit it into a product. So that's very much an industrial product. And as you can see coming into '24, pi five volume is very high initially on the results of launching the product and all that launch demand. Compute module the compute module volume was also high because in '22 and '23, they there had been a period of really quite chronic supply shortages, and we had seen an awful lot of backorders that finally, the last part of which was fulfilled in quarter one twenty four really for compute modules.

7:25 So, anyway, very good first quarter for those reasons. What came out of that at that time was an awful lot of our people in channel actually consumed added large quantities of inventory, indigestion, which is something that you may have seen right across the electronic sector really through '24, an awful lot of inventory build and channel stockpile. I think the the nice part is really into '25. We have seen that now back to a normal level of demand, industrial demand, which is to to a first approximation is the part under that red line, the sum of those pi fours, pi five cms, etcetera, has after a dip from early on, has now risen, has continued to rise through the period, and I think that has been the sort of strong theme that we want to get over to people really in the first half of twenty five.

8:18 Is that recovery in demand back to much more normal paced levels, almost to the point where we're seeing a little bit of order backlog in some cases as we step up our production to match that. Key metrics that we talked about, unit volume in the first half is about 3,600,000. That compares to 3,700,000 a year ago. But as you can see, quite a bit has happened into the intervening period. So in half two, we did about 3,300,000. So very much that 3.7 down to 3.3 up to 3.6 trajectory. Gross profit per unit key metric as far as we're concerned, the profit that we make on each of those boards, $8 in the first half of twenty five compared to 8.3 in the first half of twenty four. Talk about that a little bit more on the next page. That comes together to give us a gross profit of 33,200,000, together with some profit that we make on accessories that are attached to those boards and also on semiconductors, which I think Evans mentioned and we'll talk about more. This is where we sell chips specifically.

9:20 Overheads were generally in a well controlled through the period giving us an adjusted EBITDA of 19,400,000, about a million lower than it was a year ago as a result of still coming through that very strong period at the start of twenty four before the volumes have picked up. An operating profit, which is after depreciation and amortization, Amortization has increased by about 1,000,000 after we released a product, in the summer of twenty four, which increased our amortization on that development work and, hence, has impacted, the profit by the amortization of that. And then finally, cash, we finished the half at 34,300,000. That's down on the 45,800,000 that we finished last year. And again, we'll talk about that on a subsequent slide.

10:13 Units by half. So we've talked to very high level about units by quarter. We also sell products through two routes. We sell them directly. We send sell to, to OEMs ourselves. We also sell them through a network of resellers worldwide. There's about a 114 of those across 75 countries. They are our sort of virtual sales force in many ways, a mixture of people from big distributors down to mom and pops who are huge advocates of our brand worldwide. We also sell through our licensee, Premier Farnell, which is the darker bar there. And as you can see through the period, we had strong volumes back end of twenty three with the launch of PI five into the first half of twenty four, and then that gradually attenuated on the licensee channel.

11:06 And then the volumes that we're selling on the direct side have continued to appreciate through the period half on half, the part we sell directly. Gross profit per unit was $8.3 per board. Each of those boards we just talked about in the first half of twenty four, we made a further $1.10 of profit from accessories per every board we sold. That dipped in the second half of twenty four. We were selling particularly a product called Pico, which was newly launched Pico two. That bolstered unit sales, but at $34, as you can imagine, the profit per board, the unit The dollars per board was really quite slight. Whereas in the first half of twenty four, we sold a lot of compute modules, which was a pretty high volume value board with good margins.

11:58 And then it's the first half of twenty five. We got to $8 per board of profit, down slightly on a year ago. Two factors there, less of the compute module volume that we've seen in the first half offset by the fact we're paying now $15.98 for the Broadcom chip that goes in the pi five. Whereas for the first 2,000,000 boards in 2024, we were paying $5 more than that. So we've seen, I guess, the cost of the board come down, but the mix of other products has hasn't quite caught up with that. So overall, we finished at $8 of margin per board. In addition to those, we were selling accessories, as we've said, which was $4,100,000 of margin, $1.10 per board. And also, we sold semiconductors, the record number, which actually was quite a, I think, about $500,000 of margin as well from those.

13:02 So overall, rather a lot of numbers on this slide. Apologies. But gross profit was down slightly in terms of what we made, so down to 33.2 from 34.2. Administrative expenses, we saw a small increase. We saw a little bit more headcount. We had some additional costs from being listed. That was moderated slightly by some foreign exchange gains that we saw on the various sterling, see, receivable balances that we had as sterling appreciated. That gave us overall an EBITDA of 19.4 for the half compared to 20.9 last year. Amortization, talked about that, was up about $1,000,000 That gives you an adjusted operating profit of about 13 well, of $13,200,000 for the first half.

13:52 Below adjusted operating profit, we don't include in that number, share based payment costs. We've had two new schemes since the IPO in June 2024. We had a grant of options in June '24, and we've had a further RSU grant this this May. The RSU grant is much more the sort of standard grant that we would expect to make going forwards. The options was very much something very much linked to the launch of the IPO, the successful listing of the company, and and really making sure that all of the people who came through that process having received the crystallization of their LTIP continue to be motivated and participate in the success of the business.

14:39 Below that financing costs did rise. They're up by about 1,000,000. It's a combination of some foreign exchange losses. Again, sterling appreciation, we have a couple of leases, which under latest accounting standards, have to capitalize, And therefore, we had a sterling liability which incurred a loss, a noncash unrealized loss of about 6 to 700,000. And then we also have some long extended payables, which, again, under accounting standards, have to discount. So there was an unwind of the discount over the period of about 1,000,000 in there. Tax was down. Tax was down partly slightly lower profits, but also we had a foreign exchange gain. This is becoming a bit of a theme, but we did see quite significant sterling movements in the period on a tax receivable that we had at the end of the year. We receive r and d expenditure credits in addition to paying corporation tax in the usual way, but we do do a lot of r and d. Those credits are paid a little bit or paid this time a little bit after the year end. So we had a receivable, which, again, the revaluation of that gave rise to a gain, which is why the tax rate that you can see here is actually quite low at 13% when the true underlying rate is actually pretty much 25% corporation tax.

16:01 Earnings per share, we particularly focus on adjusted basic earnings per share. The adjusted profit after tax was down by a couple of million, 2,500,000, combination of the EBITDA we've talked about, finance costs, share based payments being higher. We're paying National Insurance these days as a listed company, whereas the original scheme pre IPO was very much revolved around capital gain structure. And then we've got a tax reduction in tax costs. So overall, profit after tax was down. Number of shares in issue is pretty much 193,000,000 now. The number a year ago is obviously up to June. It's really the pre IPO volumes. It's therefore a very unrepresentative comparative.

16:49 At IPO, we issued about 10,000,000 shares as part of just over 10,000,000 as part of a 40,000,000 primary, and then also the crystallization of the LTIP as well moved that significantly. So I think 193 as a denominator into the future is is realistic. The numbers for last year are are difficult to pause. Just to talk about our balance sheet particularly, Inventory, we've meant held that flat through from half year last year through the year end to now. But the mix within there, I think, is quite significant. At June 24, we had a lot of finished goods. As we talked about on that first slide, there was a slowdown in volumes quite significant and quite rapid.

17:39 We had production that we then had to work to, reduce and wind down. And so through that period, we had an overhang of inventory. We've said we would take steps. We were able to work closely with our manufacturing partner, Sony, to slow down that production, which is successfully done so that we've come down with finished goods at roundabout 40,000,000 for the end of this half. That's probably about as low as we can realistically go while meeting the demands of customers. As I said, we have an order backlog at the moment, so there's a possibility that might dial up by a few million as we get into a slightly better, more liquid state on our finished goods inventory. Through the period, our component inventory, the other parts are these are the parts that we sell that go into RASPBERY PI's. We sell them to Sony, and it's really a combination of memory and processor chips that we buy from Broadcom.

18:35 That has risen through the period. Memory has stayed broadly steady through this period. We are still covered forwards about a quarter. We'll talk about that a bit more later. And then the components, which is very much the Broadcom chips. After the real chronic, effect on the business that we had in 2022 from just not having enough of these process chips, we are quite deliberately under a long term agreement that we have with Broadcom building that up. That has picked up to, in total, about a 117,000,000 memory, that's memory and processor chips at June. What we see is that inventory, we think, will probably stay at these sort of levels now through this year end and into next year. It may even come down a little bit next year. On the other side, we have payables that are aligned or allied to those particular component purchases.

19:28 At the end of the year, that was about 96,000,000. As you can see, we had, and is now about 80,000,000. So that reduction is really the thing that has impacted cash flow this year and not the inventory levels, which I think my colleague, Mike Buffum, has really controlled very tightly. Within that, there is obviously the what we call them standard payables, and then there are extended payables. These are where we've had people offer us particularly as an inducement really to hold more memory, to hold processor chips at certain times. They have given us extended payables. We had the benefit of some 52,000,000 at the end of twenty four. That has come down to 22,900,000 now. That's what's caused the the really, the working capital outflow in the period. And that twenty two point nine, we believe, will come down to roundabout zero by the end of the year. So payables by then will be much more on a sort of clean roundabout thirty to forty five days of sales of payables sorry, of cost of goods sold.

20:32 Having paid off really those extended payables by that stage. So we do see a bit more deterioration in the cash by the year end as a result of that. But then clearly, that's reduced down to zero, we don't see any more. And going into '26, what we see really is with that inventory steady and with the payables fairly steady, we shouldn't see any great accumulation into working capital. It should be quite negligible. And therefore, we would expect over the course of '26, particularly, our EBITDA to well, we'll spend some on CapEx. We continue to spend about 20,000,000 a year on CapEx to build new products, and we'll continue to do that. That is very much the essence of the business. We'll pay a little bit of tax, but the remainder should really drop through as cash. And so we should see cash start to improve.

21:20 So probably already described all the key elements on the cash flow. Just to summarize, we finished the year at 45,800,000 of '24. We made some profit. We spent a little bit on inventory. We spent more on payables. You can see about 18,000,000. CapEx for the half year was 9,500,000, very much in line with that 20 for a full year and bringing us really by the end of the year to 34,300,000. As I say, I think that will drop down a little bit further because of really removing the last of those extended payables offset by the natural cash generation of the rest of the business. And that should bring us down to a cash number at the end of the year of somewhere in the order of well, we have various analysts out there with 15 to 20 numbers we're comfortable with.

22:12 So a little bit after action before seeing really a return to positive cash flow in '26 and therefore some increase in cash over that period. Just to touch on our business model and the sort of key components within there. Our revenue model, we have really three ways that we get to customers. We sell to some customers directly, and typically, we have a margin, say, of 15. These are sort of platonic numbers, but to give you a sense of the ratio of profitability between each of these routes to market. Significant majority of our sales, however, go through resellers. So this is this network of about hundred hundred odd people worldwide.

23:00 We generally make a margin of about $10 when we sell to them before they sell to the end customer, and they would pick up the $5 differential. And then we also have this our partner, Premier Farnell, who make and sell about 25% of our unit volume. And in that case, it's 5 say, dollars. More importantly, it's probably that ratio. It's one to two to three in terms of the margin that we make. And clearly, as we move between those channels to customer, that is one of the drivers in the background of the improved profit per board that we've seen over time. The other parts of unit economics in terms of our boards, costs, we have processor chips that we are buying almost entirely from Broadcom.

23:52 We have DRAM, so memory that we're using in those processor boards, and that is we'll touch on later. It's obviously something where there has been some fluctuation in prices And other components, so this may be diodes. It may be the printed circuit board, the green board on which all of our SBCs and compute modules are based and capacitors and diodes and USB cans, etcetera, other components. It's an area where typically we will have more than one supplier, so we have some pricing pressure that we can control it. And then we have manufacturing, which is almost entirely through Sony, and we control the relationship with them. How do we move the margin up?

24:39 What's the margin upside? As we move up memory density, so if somebody buys a Raspberry Pi with eight gigabytes of memory compared to four, it's fair to say we do make more profit on that higher memory. Very similar, I guess, to Apple. Custom boards, we do design some boards for customers. Frequently, when we do that, they get a price reduction, but often well, the to date, every one of those that we've done, we make more profit as well because clearly, the board contains just what they need. It doesn't need to contain everything else. So we have seen a way of appreciating volumes there. Variants, what do we mean by this? Obviously, we've talked about the classic variant, is more memory, but also you can have eMMC memory rather than having a plug in, and also you can have things like temperature, so higher temperatures.

25:35 And then we also sell accessories. So we made about a dollar 10 on every for every board in the first half. We made a margin of accessories. That can be things like power supplies, it's screens, it's AI accelerator hats, a number of things. What we are seeing rather nicely is on things like power supplies and particularly keyboards. People are buying those in their own right now as a piece of quality engineering rather than just as an attachment to a Raspberry Pi. So we're seeing some step up in those. And then overall, there's a lever in terms of managing the economic switches. We have scope to increase to change pricing as appropriate. Sometimes we've changed it down in the past. We have increased it. It's not something we do lightly. We are very much focused on that long term establishment with customers. That predictability is important to us.

26:26 We are clearly focused on making sure that Chinese competitors do not come in if we overcharge and get a toehold in the market. So that gives us a chance and really to meet our objective of growing profits gross profit per unit over time. I'll pass back to Evan there. Good. Okay. We'll give a quick update on the progress of of our strategic activities. As I said, this has been a this has been another strong year for product launches at Raspberry Pi. Very different character of 2025 versus 2024. So in '24, we refreshed our core platforms, Raspberry Pi five, compute module five, Raspberry Pi 500, the big end, and then Raspberry Pi Pico two and its variants powered by the new RP twenty three fifty microcontroller.

27:15 Twenty twenty five, in contrast, is really a year of sustaining innovation. It's about identifying gaps in our product lineup, about addressing specific pieces of customer feedback, and delivering finding places where we can deliver incremental improvements to our existing products. Got a couple examples here on the slide. Extended temperature compute module or, historically, our compute module products have been commercial temperature grade products rated from minus 20 degrees to plus 70 degrees. By extending that temperature range out to the range of minus 40 degrees to plus 85 degrees, we expand the range of target applications to the platform. We had customers who wanted to design with ComputeModule but were unable to because of the lack of an industrial temperature grade variant.

28:00 It's also a good example of a nondensity related way in which we can charge more for our products. When we when we provide people with that that facility, we can charge more money, and it delivers incremental margin to the company. The second example, radio module two, we have a lot of people, OEMs designing prototyping with our Raspberry our wireless PICO variants, Raspberry Pi Pico and Raspberry Raspberry Pi Pico w and Raspberry Pi Pico two w, and they're wanting to go to scale as direct semiconductor customers. When they do this, they need a solution for wireless connectivity. Radio module two is effectively the radio subsystem for a Raspberry Pi Pico w product, but packaged in a way which makes it more integrable into OEM products. We are still think that's sort of a traditional Raspberry Pi is is not to talk in great detail about future product launches, but we have a number of things coming up in the second half. We have a an imminent major platform release targeting the education enthusiast and enterprise market.

29:03 Last year saw the launch of our first artificial intelligence ML machine learning acceleration products, the AI camera, the AI kit, and a pair of products called AI hats. The fourth quarter, we'll see a new product in that product line, a new AI product with enhanced support for more modern workloads, the generative workloads, including LLMs. We have a cost engineer compute module product for the Chinese market, actually launched this morning in Shanghai. It's the first time that we've done a product of this also. It's the first time we've done a specific geographically targeted product, and it reflects the extreme rise sensitivity that we see in the modular computing market in China. And finally, on the software side, we'll be adding new features for Raspberry Pi Connect. Recall that Connect is our product offering, our IoT cloud offering to our OEM to our OEM customers, we'll be rolling out a range of new features for the Connect platform, including support for over the air updates, secure over the air updates that are compliant with the range of new regulatory requirements that are coming in in the IT space.

30:14 The board to board initiative. This is now a year old initiative. We initiated in the aftermath of the IPO, designed to reach out to senior decision makers of industrial OEMs with the aim of generating individual design wins, which moves the needle. Recall that our typical our median OEM customer buys under a thousand units a year from us. We have a very broad OEM customer base. Really, the goal here is to go and incubate design wins, which are in the 100,000 year plus a year range. Really three elements to this work. First of all, discussing and identifying barriers to scale the use of Raspberry Pi technology. When we go out to these industrial OEMs, we generally discover quite widespread use of Raspberry Pi in prototyping, in industrial automation, production automation, and test automation roles.

31:06 Some of those OEMs then are also using Raspberry Pis inside their products, but a number of them are kind of stuck at what we would consider to be an industrial role in their embedded engagement. Try to understand why that is when that happens. Often, we'll encounter mis conceptions, misperceptions about our business or about our products. Sometimes we will identify genuine gaps in our product offering, which are acting as barriers. The the industrial temperature range compute module four is a first example of us responding to some of that feedback from this program. But often, we encounter purely internal barriers to adoption within these organizations that we can help to address. We then work at a senior level to develop a shared understanding of where the opportunities are inside these organizations and to assist in matching those opportunities to elements of our product catalog, also capabilities inside our organization.

31:58 And finally, we work with the engineering function in the organization to design products using RASPBERRY PI and to bring those designs rapidly to scale production. I say rapidly, these are inherently like, all design activities, these are inherently multiyear efforts, twelve to generally, to thirty six month efforts. And when we do this, I think you'll see us address these opportunities with a mix of standard products and customized products. Historically, we've only provided customers with access to our customization pipeline once they reach a certain scale with our standard products. But the scale of some of the opportunities we're seeing in this space means that many of them will qualify on a volume basis. Many of these opportunities will qualify for some level of product customization out of the gate.

32:49 What exactly are we finding when we talk to these OEMs in the way of barriers? Well, we're finding organizations which have great domain specific engineering capabilities and great enthusiasm for the idea of introducing connectivity and introducing intelligence into their products. But I think we do see this series of common barriers, and they're not really just a barrier barriers to the adoption of Raspberry Pi technology. They are broader barriers. They are barriers to the addition of intelligence connectivity to products. What are the barriers? Well, the hardware and software platforms that people need to work with in order to add these capabilities are becoming progressively more complex to work with over time. Both the hardware and software elements of the platform is in isolation and also the co optimization of the hardware and software components of the platform to meet the required price performance point.

33:36 We also see an increased focus within these organizations on security and on reliability. Some of that is reputational, a desire not to put products into the wild, which are going to misbehave when they're there, but a significant amount of that is also now regulatory. There is an increasing degree of regulatory scrutiny on the security behavior of connected distributed intelligent products. Obviously, the usual commercial considerations apply, but also some more recent concerns, particularly around supply chain integrity in the context of a more complicated geopolitical and tariff environment and a in continuing and, I think, increasing difficulty in recruiting and retaining the design engineers within their organization, which is required to successfully land these features into products.

34:24 Obviously, you know, we see Raspberry Pi as an answer to many or all of these issues, both through its ease of use. It's highly integrated software and hardware solution. We are delivering people turnkey software on cost effective hardware. Obviously, to that supply chain point, almost every Raspberry Pi product and some new core Raspberry Pi products are manufactured in The UK. As we focus on these potential high value wins through the board to board program, I think it is important to remember that our as I say, our median OEM customer is under under a thousand units a year. So it's important not to allow the broad market to wither as we do this. The health of this market really is key. That's the thing that's powered the growth of RASPBERRY PI to date, and it'll be one of the components that powers the growth of RASPBERRY PI over the next decade. What are we doing? Well, we're investing more in physical events. That's primarily trade shows. We have significant presence this year at six trade shows, up from three last year, and also virtual events, in particular, first and third party webinars with a focus with particular emphasis on non English language content.

35:31 We're making better use of our communication assets now, better use than ever of our communication assets, the website, our various newsletters, our social media our social media reach. And we're working with partners, especially in China and the Far East, to distribute our messaging in places where there may be language or cultural barriers, which would normally make it hard to address that from head office. Lastly, more scalable early access programs. If you look at the early adoption curve for compute module five for RP twenty three fifty and compare that curve with their predecessors, compute module four and RP twenty forty, you see a much more rapid adoption curve, what's driving that work that we did in the six to twelve months before the launch of those products to get early access samples into the hands of prospective OEM customers. And I think you'll see a lot more of that from us in the future.

36:26 Some case studies. We love case studies, trying to do some case studies every time we do some results. They really bring our customer value proposition and our competitive advantage to life. The examples here come from a recent visit to Brazil by Roger Thornton, who runs our applications team in Cambridge. And what's interesting is that they are why we pick why we pick Brazil for this? So the South America is traditionally it's probably the last market for us to invest significant first part last developed market for us to invest significant first party effort in. And yet as we start to do that, what we're encountering already is quite a fairly well developed ecosystem of OEMs using our products at the heart of their products. Three examples here. Prodata, they make transport products. The yellow box you see here is an intelligent ticket gate product for public transport. Apparently, dealing with dealing with challenges associated with people borrowing their grandparents free bus car free bus passes in order to get get free free rides on on Brazilian buses.

37:25 Save farm, AgriTek products, agriculture, and then Excel fuel station automation. These are very much in the wheelhouse. This is very much sort of the heart. These sorts of applications are the heart of industrial and commercial OEM applications of Raspberry Pi in Europe and in North America. It's fascinating to see the extent of which already, even in the market which we are only beginning to apply first party effort to, there's already a fairly rich ecosystem of people using our products. This is the first time we've included a slide on semiconductor products in a results deck. Electron we call electronic products and semiconductors are positioned within the business as mutually supporting franchises.

38:12 The semiconductor products that we make allow us to make better and more compelling electronic products, and the electronic products that we make are then the shop window for the semiconductor products. They're the first place that prospective the design engineers who are prospective semiconductor customers encounter our semiconductor products. We have this we have an aspiration over the next decade for semiconductors to grow within the business to the point where they make a roughly equal contribution to the economics of the business. We are a long way from that today, but I think we passed a very significant milestone in the first half. This was the first half year in which we sold more chips than boards in the first time. Now remember, these are 50¢ chips, not versus $50 boards. So financially, this is currently, you know, immaterial to the relatively immaterial to the business.

38:58 But from a strategic perspective, I think it is important that more than half of the experiences more than half of the compute experiences that people have had with Raspberry Pi have been semiconductor experiences as distinct from board experiences, largely driven by RPI twenty forty, the product we launched. This is an interesting indication of how long the design cycles are in this business. This growth largely driven by RPI twenty forty, the first semiconductor product that we launched in January 2021. Shipments that up 69 sequentially with a number of quite large design wins coming through in half. We have one example here. WizNet, a Taiwanese networking product vendor, they build Ethernet chips. What they were able to do with RP twenty forty was to combine our RP twenty forty silicon, Ethernet controller silicon, to generate an intelligent Ethernet controller for embedded IoT applications.

39:57 I think it's a wonderful example. And, really, this is the story of RASPBERRY PI. I think it's a wonderful, more broadly, it's a wonderful example of how when you produce a high quality product like RP twenty forty, you can't necessarily appreciate that when we put it in the market where what the market will do with it. You have to remain, you know, you have to remain agile, and you have to remain willing to double down and invest in the in the the applications that the market finds you. RP twenty three fifty, our second generation microcontroller, obviously, earlier on the adoption curve. We launched that in August last year. We put it in general availability in March. This year, I think we put it in general availability a little ahead of schedule, really, in order to help us to manage the very high levels of customer interest in that product. We shipped an updated revision of this product, called a four silicon, in August this year, addressing a number of issues with the a two silicon.

40:50 We're seeing very good adoption. Inquiries from tier one consumer electronics companies, I think, are difference in character of the people as this is a a a more full featured product. I think that's then leading to a difference in the varieties of OEM who are considering a design to their products. We we've always found that the release of the second product brings import brings credibility to the organization. Raspberry Pi two in 2015 was a key moment in the history of Raspberry Pi because was the point where we went from being a company with a point product to being a company with a product line. I think you see that as as in many other ways. You see some of those lessons from the board level products, the electronic products being recapitulated in the semiconductor space.

41:37 So the second product, it brings the credibility of a product line, and it also leverages the momentum that is built up in the first product. So we're very excited, very very optimistic about the future of r b 2350 and of the semiconductor business more broadly. And finally, the outlook for the second half and beyond, continued improvement in underlying demand. So, you know, we do see that slow and steady increase in particularly in OEM demand. We left the first half of the year with a significant customer backlog, customer order backlog, and we expect to be able to address the bulk of that in the second half of the year. So that gives us confidence in the second half volumes. We have confidence in unit economics. We're expecting to see a similar product mix to the first half and, therefore, a similar gross profit per unit. We have sufficient DRAM supply, much of it acquired at low historical prices to last us through into 2026.

42:36 And the consequence is no change to our expectations for the full year. Looking further out, continued improvement in the demand environment, continued progress, and the first contribution first significant contribution to volumes from the board to board initiative should materialize in 2026. And, of course, the continued growth of semiconductors, albeit from a low base as a second contributor to the volumes and to the profitability of the business. So thank you very much. That concludes the formal part of the presentation. I think we can start on the q and a. That's great. Well, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions. You can do so just by using the q and a tab that's situated on the top right hand corner of your screens.

43:25 We have received questions both pre submitted and throughout today's live presentation, and I'll start the q and a session off with the first one here which reads as follows. Will the Raspberry Pi foundation reduce its 70% stake within the next twelve to eighteen months, and what minimum free float level are you targeting? So I I think the this is still an opener for this one. Really, all I can say here, I guess. The Raspberry Pi Foundation stake in the business is about 47% or 70%, so they are a narrow minority shareholder in the business. Obviously, we are not the Raspberry Pi Foundation. So decisions about decisions about the disposition of the foundation's residual stake in the business are a matter for the foundation, not for us. Thank you very much.

44:12 Next question here. What steps are you taking to embed dedicated AI acceleration into future Raspberry Pi boards through collaborations with AMD or other AI chip vendors? When do you expect the first AI enabled pie to reach the market? I think we have a a fairly consistent story about how we think about AI in the core product, which is we try to provision you know, we have a conviction that many AI workloads will run well on CPUs alone on on accelerated platforms. So what we concentrate on doing over the last few years is to provision progressively more general purpose capability in both the board level products, the big Raspberry Pi products, and the and the microcontroller based products to allow them to run the majority of AI workloads.

45:02 Where we go beyond that capability, we our aspiration is having good relations to be the best possible host for third party accelerators and have good relationships with accelerator vendors. At the moment, our primary AI accelerator vendor relationship is with HALO. The AI kit and AI hat products that I referred to earlier are HALO based products. And I think that future AI acceleration on Raspberry Pi is likely to be HALO based. We're very happy. We're very excited about their silicon roadmap. Would we build rasp would we build compute into a core AI acceleration into a core RASPBERRY product? I think it'd be very challenging to build it into the standard SKU because we have to remember that many of our vendors many of our customers rather don't don't require that. So you would be if you built it to a standard SKU, you would be taxing every customer who didn't want AI for the sake of wants to do.

46:01 I don't think it's unimaginable that you might see a product with acceleration, but it's something not on the road map at present. And if we did, it would likely be Halo as the vendor as the accelerator vendor. That's great. Thank you very much, Haben. Thanks. Pre submitted question we have here. What's the current forecast for the mic the microcontroller side of the business? The RP 20 x x microcontrollers are used heavily in the enthusiast market. How does it look for gaining a big share of the embedded market, and how do you intend to take share away from the big players? I think it's a long I think it is a long road. So this is, you know, a half in which we did four and a half million units, you know, maybe a a full year in which we might aspire to do between eight and ten million units.

46:47 This is in a 30,000,000,000 unit microcontroller market, so there's certainly plenty of room plenty of room to grow there. I I believe, you know, we have a we have a compelling price performance proposition relative to the incumbent vendors. I think you need a compelling proposition in order to penetrate such a well developed market. I think what we are likely to see is I think what we're likely to see is a slow but steady ramp, probably underpinned by RP twenty forty in the first in the first instance for the first few years, but we'll see a slow but steady ramp. Really, the aspiration is to be at a is to be material is to reach to a reach a point where materiality, say, within five years and, you know, potentially to reach a point of where where the these are two coequal.

47:47 If things go well, a world where these are two coequal franchises within decade. And it really is powered by the price performance proposition. These are devices that are bringing to the sub $1 or in the case of RP $20.40, the 50¢ range, you're bringing to the sub $1 range performance points and capability levels, which are traditionally the province $2.03, $45 microcontroller platform. Understood. Thank you very much. Got another question here. Sales of semiconductors are growing fast. This is important initiative for RPI, though the revenue contribution is still small. On what timeline do you expect sales of semiconductors to become meaningful to the company's financials? I would say it's all I think I probably answered that in the previous question. So, yes, I would say in the five to ten year time frame would be would be the right way to think about this.

48:41 Great. Thanks very much. And we we do believe we do believe that that this is a that this these initiatives are strategically important to us long before they become important to us from a purely financial perspective. Perfect. Thank you. What magnitude of bit of the business do you see Raspberry Pi in ten years' time, and is the payment of a dividend an aspiration? I think the aspiration is to grow the electronics business quite substantially and to grow the semiconductor business probably faster than that. I don't think there's any I I don't think any thought has been given at the moment to the prospect of a dividend. That's great. Thank you. Is there much potential for usage in the robotics space?

49:27 I think there is. I think we already see some usage of both the electronic products and the semiconductors in the robotics space. I think I I think that we're particularly excited about is the prospect of pairing Raspberry Pi with acceleration with external PCI Express attached acceleration hardware in the embodied robotic space. I think that there really is a and if you look at the embodied AI space, the the opportunity to add really first rate AI capabilities to robots of all sorts, particularly robots which are mobile within some constrained or unconstrained environment. And, yeah, I think this this fits very nicely into our aspiration to be the best possible host. You know, these are applications which will require very substantial amounts of communicability, and our aspiration to be the most cost effective and lowest power host. These high performance accelerators are pretty well with that particular application domain.

50:27 That's great. Thank you very much. The final question we have for the moment, do you have multiple DRAM suppliers, or are you dependent on just one or two? And can you pass increased DRAM costs onto customers, or do you have to absorb them? Historically, we've been a big three customer. We've relied on the large we we've relied on the the the larger vendors. Since the start of the year, we've devoted a certain amount of attention to to bringing up new vendors, particularly the lower density of the the lower density the lower density end of the density curve. So in our in our our LPDR four based products, which are the ones which are exposed to these DRAM pricing dynamics, we have quite a wide dynamic range of density. We have our lowest density products use one gigabyte of memory. Our largest density products use 16 gigabytes of memory. At the lower end of there is more scope for vendor diversity at the low end of that curve than there is at the high end of the curve, and that's really where we've been investing effort.

51:31 In terms of so right now, you know, we have we have approximately we have three or four active DRAM vendor relationships today. In terms of mitigations, in terms of dealing with this this temporary price excursion on LPDDR four, we have a number of possible approaches available to us. Obviously, as you say, one of them is price increases, but there is a point, I think, at which it may become necessary to make adjustments to the pricing of the product. But we have a number of opportunities short of that. One of them, as I say, is to increase the level of vendor diversity. Another is to move some of our products to LPDDR five. It may be possible to move the Raspberry Pi five generation products to LPDDR five memory. LPDDR five memory is currently not experiencing this. The cause the underlying cause of this price excursion is the repurposing of LPDDR four production capacity to build HPM memory for AI applications.

52:38 The there is effectively a a pool of fungible manufacturing capacity between LPDDR4 and LPDDR5 memory, and therefore, the current inversion in which the older memory technology is more expensive than the new memory technology isn't necessarily something you could expect to be sustained for a considerable period of time. However, we could easily see it sustaining for one or two or quarters. Are doing some work at the moment to evaluate the feasibility of migrating Raspberry Pi five to LPDDR five memory. We'd expect to have a clearer view on whether that's a path we're going to take at some point in the fourth quarter. That's great. We have had another question come in. Have you explored setting up a VC fund to invest in third party innovative ideas for quantum change use of Raspberry Pi offerings?

53:26 The idea is to raise an investment trust that would take strategic stakes in into innovative or developed solutions in smaller companies that require working capital management slash marketing skills. I think it's an idea that has been that comes around every few years. It's an idea that I can remember coming around ever since pretty much the point of which we launched the product in 2000 the first product in 2012. I think the reason we've not done it is because we have to be we have to be conscious of our the limits of our capabilities. Yeah. We are electronic engineers, software engineers, silicon engineers, industrial designers. We are not generally investment. We are not most of us are not investment professionals.

54:14 I think it's it would be difficult for us to articulate a differentiated value proposition in in that space at the moment. Just never say never. As I say, it's an idea that comes around a lot. We are experiencing some power saving. That's right. Some some inability, I think. So the it is an idea that comes around, but I think it's probably not something that's in the next in our in our future, in the next two or three years. I think busy and having too much fun with this business. Yes. Think we are. Think are enjoying I think we're enjoying what we do, and I think we have a realistic assessment of the value that we'd be able to bring to that space. That's great. Well, thanks very much for answering the questions from investors. Of course, the company can review all the questions submitted today. We will publish the response on the investment company platform.

55:03 But just before redirecting investors to provide you their feedback, it's particularly important to you both. Evan, can I just ask you for a few closing comments? Sure. Well well, thank you all for taking the time, for taking an hour to come and talk with us, to listen to us talk and to talk with us about Raspberry Pi. We are now fifteen, roughly fifteen months into our journey as a public company. It remains it remain remains an honor and a privilege to be involved with Raspberry Pi to be allowed to spend time leading the Raspberry Pi organization. It is a business which remains as fun to run as it was on the day we sold our first Raspberry Pi back in 2012. So once again, thank you for your time. That's great. Evan and Richard, thank you once again for updating investors today. Can I please ask investors not to close the session? As you know, we automatically redirected to provide your feedback, and all the management team can better understand your views and expectations Of the management team, RASPBERRY HOLDINGS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.