Raspberry PI Holdings (LSE:RPI) — Half year results for the six months ended 30 June 2026

0:01 Good afternoon, and welcome to the RASPBERRY PI HOLDINGS PLC Interim Results 2020 six Investor Presentation. On the right hand corner of your screen. Simply type in your questions and press send. Before we begin, I would like to submit the following poll. I would now like to hand you over to CEO Evan Upton. Good afternoon. Good afternoon and welcome everybody. Welcome to our 2026 interim results. I'm Evan, joined today by my colleague Richard. We're gonna take you through the first half financial results of the business, give you some updates on progress against our strategy. But I think first, perhaps we could just take a quick look at some of the highlights of the half.

0:49 I mean, quite simply, this was an exceptional first half for us. So record revenue, record profitability in the business. We shipped over 4,000,000 units. We shipped 4,200,000 RASPBERRY PI's in the half with our customer order backlog doubling to 2,600,000 units. And all of this happened despite an incredibly challenging supply chain environment. Our diversified DRAM supplier base helped us weather the worst of that, helped us keep our products in production and in availability through the half. Despite these challenges, we kept innovating. The half saw five new product and platform launches, improving support for AI workloads on Raspberry Pi five, helping our OEM users through the memory crisis by giving them more memory density options on Raspberry Pi four, and streamlining IoT deployments through improvements to our Raspberry Pi Connect platform.

1:44 We kept investing in our OEM customers too, making targeted hires into our commercial team, and our board to board program continued to deliver traction in the smart home and defense sectors with a number of meetings with c suite, members of the c suites of UK listed industrials. We kept in investing in broader operational capacity too. We hired Tim Mantora in, in in March as our first chief operating officer. He and his team are already building the repeatable processes, that will allow us to continue to scale our business without sacrificing the engineering led culture, which is which makes Raspberry Pi Raspberry Pi. And together, these developments give us confidence in our outlook for the rest of the year. We're expecting higher volumes in the second half than in the first half, and we're expecting full year adjusted EBITDA to be above market consensus. So now I'll hand over to Richard for the financials.

2:50 Thank you. See if I can control this. Great. So I think as Evan said, this was, I think, across all almost all metrics, a very good half. We had a strong improvement in unit volume. It continued to grow half on half as you can see from the chart. It's really progressed from actually, the end of twenty twenty four, each half we've consistently grown finishing at 4,200,000 units. It was particularly good to see the demand was in compute modules, Raspberry Pi four, Raspberry Pi five r, higher a higher margin, a higher value boards, our latest boards. That indeed that demand was strongly left us with a backlog of units at the end of at the end of June twenty twenty six compared to 600,000 at the end of twenty twenty five to 2,600,000 now.

3:43 And so over the period, we've had to increase prices because of memory increases, but pleased to see how the demand for products has held up through that period. And indeed the demand for our four gigabyte and eight gigabyte versions of, pi five, pi four has continued, to be very, strong, even though prices have had to go up. Overall, that gross profit per board improved significantly because of those price increases and also because of the benefit of memory that we had acquired at the end of twenty twenty five at lower costs that we have used in that first half. So overall, we ended up with gross profit up to 59,000,000, up from 33,000,000 a year ago, and that dropped through to a profit of adjusted EBITDA, our our key profit metric, of 40,300,000 compared to 19,400,000 in the first half of twenty twenty five.

4:42 Sorry. Forgive me. It's a slight remote control. Moving on to the next slide. Yes. We have 26% growth in our direct units. So overall, the units supplied by us, so manufactured in our factory in in with Sony in Wales, grew by some 26%. The volumes with Farnell were a bit slower. And overall, we ended up with volumes up 17. That was again, as said earlier, particularly strong growth in compute modules and pi five, pi four. We saw lower growth, probably slightly negative, actually, in the case of p PICO and Xero, which may know are our lower cost boards.

5:28 In the case of Xero, that volume was limited by access to supply, Our packager of the processor chip in Taiwan was somewhat distracted by data centers. That is now resolved, and that's part of the backlog reduction that we expect to see in the second half. So overall, strong performance on units. That translated into a strong growth in revenue. With the increase in units and also an increase in the average selling price, as I said, we increased our prices because of needing to pass through the increased cost of memory. So our prices went up about 42% leading to an over 90 increase in revenue through the period.

6:19 Our revenue is comprises a mixture of things. It includes royalty income for Farnell. It includes the direct sales of boards. It includes the sale of accessories. It also includes the sale of memory chips and processor chips to Farnell to make RASPBERY PI's. So it really does have a a number of different things with quite different margin structures. So when we look at the business, we focus more on gross profit and in particular, gross profit per unit combined with the number of units that we've sold. Gross profit overall increased by 79% due to those higher sales I've talked about and also this improvement in gross profit per board. Gross profit per board, so that's the profit we're making from sale of boards divided by the total number of boards in the period, increased by 53% from $8 in the first half of last year to $12.20 in this half.

7:13 And that reflected a combination of factors. It was the increase in the prices that we were selling and actually the way in which those took effect once we'd we'd announced them, but also this benefit of inventory that we brought in to the beginning of the year where we had bought at significantly lower prices before the increase in memory costs that we've seen really in the last six to nine months. That beneficial effect has probably been largely consumed now by the time of the middle of the year. I think it's fair to say that the current cost of inventory that we are now holding, we're now putting into boards is much closer to the price at which we would buy further inventory at the moment.

8:00 The other standout was accessories. We had a very good half for accessories compared to the number of boards sold. It grew that gross profit per boards increased by oh, sorry. The gross profit increased by 90% to $7,800,000 compared to about half of that number a year ago at a number of about $1.90 per board sold, which is well above our target that we we set ourselves of a dollar per board. We saw particularly strong growth in computers, in cameras, in SD cards, displays, but also in AI hats that we work we put together with our corporate friends at HALO and we sell as an add on to the RASPBERRY PI. The RASPBERRY PI is giving you additional compute for particularly for AI models such as neural.

8:56 Compilation neural networks or also for large language models on the latest version with Halo. Overall, so a strong growth of gross profit in the the period. Moving on to the next slide. Just in putting those together in terms of how did our EBITDA revolve through period. We came into first half of last year was 19,400,000. Unit growth has given us probably nearly $5,000,000 of additional profit, so the additional units. That gross profit per board, so moving from $8 to $12 for each of those boards, is probably worth nearly 18,000,000 of additional profit. Some of that is clearly because of the memory that we brought in and also some orders that we had placed in the tail end of '25 at particularly good prices this year. We think the value of that was probably a a one off, if you will, of somewhere between 10 or $15,000,000.

9:57 And then the appreciation accessories. And then in terms of overheads, the research and development expenditure that we have that is is not capitalized, it's research and development, it's research, it's software development, which typically we don't capitalize, That increased by about 700,000. That's predominantly some more heads, but also inflation with the salary increases. And then adjusted administrative costs, this is more of the general central team, be that sales, be it lotus eaters like myself, that grew by about 4,600,000. That was a combination of there was some one off effects of foreign exchange. There's some additional bonuses reflecting this much stronger performance.

10:43 That was probably there's about a million of extra accrual, million and a half there. And the remainder is really headcount increases and increases in salaries generally across the team. Allowing for those, we ended with the half with a result of 40,300,000 of EBITDA. The next slide sets out the income statement. Very much the matters we've just covered recently. I'm going to skip over that one and I'm going to move on to the description of balance sheet here but I think the best way to express that is in the cash flow and how our cash flow has moved across the period. We came into the beginning of this year, with $28,000,000 of cash. EBITDA, the profits that we've just been talking about, contributed 40,000,000.

11:37 We've then spent significantly on inventory. That is almost entirely that increase in inventory that we are now carrying is a 106,000,000 of that is purchases of, DRAM that we use in our boards. I think that has and that is the position at the end of June. That's put us into a much stronger position in terms of having nearly three months of inventory. We've continued to add to that recently such that we have good confidence that we can meet our production plans for the remainder of this year and into the first quarter of next year. But that memory, obviously, these days is at a significantly higher price than it was a few years ago. That inventory at the end of June was funded in part by payables.

12:24 We bought significant amounts in June itself and therefore there was a payable at the end of the period. That has started to reduce. So this is where you've seen a cash outflow continuing post the end of June, and therefore we're drawing on our bank facilities. We increased those facilities to 140,000,000 of committed funds. That was completed in early July, which has given us a position where we're able to buy inventory where the opportunity arises to secure that future production, to secure good prices on the products such that we can maintain an attractive level of profitability. But I think it's fair to say that in the second half, the profit per unit will come down as those memory costs now are closer to market levels rather than based on prices from very good historic purchases.

13:21 Receivables, also, we saw some outflow in those as at the end of June. That was really a function of just how strong trading in the month of June was. Very active month, obviously, compared to December, which is a quieter month by the end of the the month itself. But also just generally trading has been so much more so much stronger with real momentum coming into the second half. We spent about 11,000,000 on CapEx in in the first half, very consistent with the the guidance that we've given for the last few years of about 20,000,000 of CapEx for any full year. So that continues. A little bit of tax leaving us with a closing position of about 8,400,000 of tax.

14:06 As I say, I think in the second half, those payables will reduce. They were particularly high at the end of June, and we also expect to be buying and holding quite a bit of memory. We can see the opportunity to do so. That will leave us probably with acquiring further inventory such that we would expect to see our debt levels at, say, 40 to 50,000,000. But I think it we should flag that if opportunities arise, if there are good prices, if there is the opportunity to acquire the right memory, we will utilize the the additional some of the additional headroom we have on the bank facilities to add to that inventory to make sure that we go into next year in a particularly strong shape. Just touching on a final slide from me.

14:56 Memory purchases. I think one of the things that's notable is compared to the announcement that we made in early June about how strong trading was, a lot of the numbers I've talked about here are very much in line with that. I think to me the additional feature, the additional new news probably is the strength of our position with memory purchases. I think Mike Buffum, our chief commercial officer, has done a phenomenal job of talking to packages, manufacturers of memory to secure that, and that position, I think, is a step forwards from where we were even two or three months ago. How have we got into that position with a stronger position on memory? We've diversified suppliers. We now have approximately seven different companies providing memory to us compared to two a year ago.

15:48 We have used our engineering skills to technically innovate to actually allow us to use two one gigabyte pieces of DRAM to create a two gigabyte board. I'm to make sure I got the maths right on that. And two lots of two to make four, which, gosh, it's all binary. How easy. Similarly, on pricing, we have, I think, minimized the disruption to our customers' expectations of us by communicating quite clearly the reasons for price increases to be seen to be passing through price increases rather than gouging on selected products and really also providing in terms of a Raspberry Pi three gigabyte variant additional options for customers who maybe did not want to go to suffer the whole of a price increase that was necessary.

16:48 And we've continued to make strategic purchases. We have seen the opportunity with our balance sheet, with our connections, our reputation to make further purchases from suppliers who, in certain cases, are keen to establish a presence elsewhere and have we have been a very good we have been seen to be a very good partner to them in achieving that. So I think overall, a lot of activity in terms of securing memory and that's put put us into a stronger position than we were, say, three months ago. But I think in that good position, hand over to Evan to talk some more. Thank you, Richard. So before we dive into the before we dive into this on the the strategy update, just to recap about the three pillars of our growth strategy.

17:37 Firstly, obviously, to grow unit sales through investment in channel and through increasingly through our board to board program through direct outreach to OEMs. Then for each of those units we sell, aiming to grow the unit profit margin, that's both through engineering to grind cost out of the platform and over time to acquire a larger share of the silicon bill of materials in each device. And the gradual migration, and we've seen this continue this year, the gradual migration of our customers to higher density SKUs. Even in this constrained DRAM environment, we have seen an increasing preference from many of our customers for higher density SKUs. Those are higher density SKUs, the higher ASP SKUs, and that higher ASP brings with it a higher unit profit.

18:24 And then finally, growing our margin participation, growing our participation in that margin. Obviously, the the board to board initiative, particularly particularly fertile source of direct relationships with OEMs of our three different routes to market. The direct to OEM route is the route that allows us to capture the largest share of that unit profit margin in the device. Little bit more detail about product launches. As we said, five launches in the half. That is a relatively quiet half for us compared to recent years, but with some real strategic highlights that I think speak to the strategic direction of the business. At the start of the half, the second generation RASPBERRY AI hat accessory co developed with our friends at Halo and bringing generative AI capabilities to the platform.

19:18 The original AI accessory very much focused on vision operations, very much focused on classical network architectures, So convolutional neural network architectures. This new product bringing with it both the ability to run smaller large language models and vision language models, and also on the vision side, then more modern architecture too. So transformer based, vision transformer based classification algorithms. In the middle of the period, the three gigabyte variant of Raspberry Pi four, that's in direct response to specific OEM requests for an intermediate density point. We continue to be surprised by the extent to which our OEM customers aren't trading down. If anything, they're trading up for memory, but we do have OEM customers who would who welcome the opportunity to invest fixed cost, to do engineer to make engineering investments, to take memory requirements out of their software platforms, providing for, you know, the if you think that four gig products really, they're the heart in our modern products, the Raspberry Pi four and Raspberry Pi five, four gigabytes really is the heart of the business. We have an enormous number of four gigabytes OEM customers. It is challenging for a four gigabyte customer to come down to two gigabytes by providing that intermediate density point on the Raspberry Pi four platform. We're able to serve those customers who want to trade engineering effort for unit cost. And then not quite in the half, just off the end, just into the start of July, at the start of this half, we have the programming jig for compute module five.

20:47 This is our part of our offering to our OEM customers who wish to be able to program RASPBERRY PI compute modules in production at scale, designed to integrate with some of the work we've done on our operating system assembly and imaging over the last couple of years. And in parallel with all these efforts, of course, we've seen a series of upgrades to RASPBERRY PI Connect, our IT cloud platform. Very different cadence for this from what I'm certainly used to. Certainly, if you imagine the cadence of hardware releases being on the order of years, the cadence of operating even of operating system software releases being on the order of months, you know, quarters or months. This is a product which has seen multiple upgrades over with a with a cadence of weeks across the half. Seeing continued that's driving continued strong growth in adoption, both of the baseline Raspberry Pi Connect platform, the free Raspberry Pi Connect platform, and the paid for Raspberry Pi Connect for organizations platform.

21:44 Now we love we love case study slides. We couldn't not feature this one, I think, in this slide deck. Formlabs, three d printer company, they're a long time Raspberry Pi adopter, very loyal adopter of Raspberry Pi technology, outsourcing as with many of our OEM customers, outsourcing really the intelligence element, the compute element at the heart of their professional three d printers. To us, you know, a wonderful gesture, guess, one or every time an OEM makes that choice, it is a gesture of commitment. It's a gesture of faith in the RASPBERRY organization and the RASPBERRY platform. And it was wonderful to see the formats format RASPBERRY PI powered, formats, three d printer taking pride in place in the the one of the videos that was shown at this this month's Apple event. So these these devices really do get absolutely everywhere.

22:38 Really, this has been yeah. We talked a little bit about products. But really, think the news about this half for us is it's been a period of organizational transformation throughout the pie. We are we've been growing. We've been involving the executive team inside the organization. In March, we appointed Tim Mantora, a very old friend of mine, as our very first chief operating officer. And then this is this is Richard's last last appearance in a in a in a results presentation. Tim Powell will be succeeding Richard as chief financial officer from the end of next month. We've been making targeted hires across the rest of the organization as well in engineering, in operations, in finance, and in enterprise sales as we aim to both increase the organization's ability to develop innovative new products and then our ability to support those, to sell and support those products into our enthusiast, our industrial, and our OEM customer base.

23:42 There's been a focus in the new in the new operations organization under Tim. There's been a focus really on building the capabilities, the structures and capabilities that we need to support the next phase of RASPBERRY PI's growth. This is across the organization in engineering operations, but with a particular focus on manufacturing and supply chain operations, really driving Sony, our manufacturing partner, for the majority of our products, driving their production capacity out to a million units a month, which is where we believe it needs to be in order to support our growth ambitions over the next few years. We've been expanding the commercial team as well, both colleagues who support our approved reseller and authorized distributor channel, and the partners who support the growing number of direct OEM engagements within the business.

24:29 As we've deepened our relation our direct relationship with OEMs, particularly with the OEMs who we meet through our board to board program, these tend to be larger potential opportunities, but they also tend to be opportunities which may require more targeted support from our organization to get those opportunities over the line. So we've been making those investments in our application engineering team to sustain to be able to sustain those engagements even as they they require a little bit more touch, as I say, to get them over the line. A word on competitive landscape. It really is a rapidly changing competitive environment at the moment. And I think what we're seeing is we're seeing Raspberry Pi's core brand values, our very long standing core brand values.

25:19 Our industry leading cost structure, which is underpinned both by proprietary technology and by that end to end engineering culture we've built, really can go hunting for cost optimization opportunities throughout the entire technology stack. Our commitments to the very long term support and very long term availability of our products and the unmatched organic ecosystem that's grown up around Raspberry Pi. So these are our long standing brand values. And I think what we're seeing this year, what we've seen over the last couple of years, is these starting to intersect with the set of new imperatives in this more complex environment we're living in. So we're seeing a greater emphasis in many of our markets on sovereign capability for our American customers, North America, United States, accounts for roughly a third of our business.

26:05 And in that environment, our customers have a particular focus now on the tariff implications of their the the the tariff behavior of their supply chain. And there we are building our products, building the vast majority of our products in The United Kingdom. We are differentially advantaged from a tariff perspective versus almost any other non domestic manufacturing location for an American customer. And finally, we see a growing amount of regulatory burden, growing regulatory burden on our customers who are building connected products. So our customers who are building IoT products are having to comply with an increasingly strict set of requirements in order to be able to legally ship those. Particularly the the cyber insurance act is the most obvious example.

26:51 It is increasingly important not just to be able to build products, but to keep those products secure over time, to have a story about how you keep them secure over time, an evidence story about how you expect to keep those products secure over time. And you're not just generating when you build a software image for your for your system, you're not just generating software, of course, you're also generating compliance artifacts, which must be synchronized with that software build. And many of the investments we've made over the last few years in deepening the Raspberry Pi software ecosystem and really coming to bear and becoming increasingly salient as people, as many of our OEM customers, many of our IoT focused OEM customers are confronting some of those challenges. And, of course, all of this is happening in a much more challenging supply chain environment. I think we are seeing signs this year on the drivers of growth in sales, on the drivers of growth in that backlog, has been what we might call a flight to quality. That we have OEM customers. We are meeting just as our existing OEM customers continue to scale and as the pipeline that we brought with us into the year continues to mature. We are also seeing new OEM engagements, which are driven by the by our OEMs who have designed with other modular platforms, OEMs who have chosen to outsource compute to other vendors, where those vendors are now struggling to keep their products in production, or OEMs who have chosen the in house engineering solution, OEMs who have chosen to make rather than to buy, those in house those in house teams may

28:21 also be struggling to secure the components they need. So we are seeing people coming to us as a trusted partner to see them through this supply chain environment. And, of course, for us, that is an opportunity to meet new customers. It's an opportunity to get in the faith of new customers, to be of service to those customers. And, many of those customers will remain with us even after the present supply chain environment has improved a little bit. Some a few brief words on AI. We all know that we are living in an age of AI related disruption. This couples into our business in numerous ways. Obviously, we've already talked about some of the supply chain impacts of competing with the AI, the hyperscale AI build out for access to a number of components, most notably storage components, volatile and nonvolatile memory.

29:15 But I think the more we see so many of our customers, the applications that our IoT OEM customers are running have a very strong AI flavor to them. And the more we see of how our customers are using AI, the more convinced we become that there is a significant opportunity for us here. We believe the thesis is that there is a centrifugal tendency over time, a tendency for AI compute to migrate from the center of the network. Any given AI technology, any given AI technique may start at the center of the network and over time, as the devices at the edge of the network become more performant and as research efforts in in AI drives down the compute requirement of a specific level of performance, that computer starts at the center of the network will naturally migrate to the edge, bringing and as as it migrates to the edge, it that that migration brings with it improvements in reliability, in cost structure, in privacy, and in security.

30:16 This does feel like a general rule. We absolutely see it today in visual AI. Many of our largest, many of our highest volume OEM customers today are using Raspberry Pi platforms to run visual AI algorithms, which would have been inconceivable as well at the edge of the network a decade ago. We are seeing the same thing already happening in generative AI. We are seeing a collapse in the compute requirement of a given level of generative AI performance. And so we believe that that transition from the center to the edge of the network, which has taken roughly ten years in the previous in previous AI applications, in visual AI applications, is likely to take place over the next two, three, or four years in generative. By the end of the decade, the vast majority of inference operations for generative AI will happen at the edge role, at the core of the network.

31:11 These AI these trends in AI are driving demand across a very broad range of markets. I'm gonna call out two two today. Those being smart home and aerospace and defense. So some words on smart home, smart environments. Customers like Homi are using Raspberry Pi technology, another very long standing, extremely loyal Raspberry Pi customer. They're using the Raspberry Pi platform to build intelligence into our everyday interactions with our environment. I love this quote from Emil. We didn't have to reinvent the wheel. And when he he says that, really, what he's doing there is he's articulating the core of the Raspberry Pi value proposition to our OEM customers, that you don't have to become a computer company if you want to embed intelligence into a product at the edge of the network. You should you don't you don't have to. You should not have to become a computer company all day. You should be able to find something to outsource that too. It's our aspiration to win that argument.

32:10 And when we form that argument, then to win the argument that the natural person to outsource this to is Raspberry Pi. This outsourcing is, I think, a very long term trend that's been to our benefit over the last few years, and it's been accelerated by the challenges around memory pricing and availability, as I've said by the some of the challenges around regulatory complexity. And, of course, lastly, by the challenges associated with acquiring embedded engineering talent. Many of our OEM customers are coming to us for compute solutions in order to avoid the not just the cost, but the administrative complexity of building and maintaining a team, which can build and maintain in production the compute element at the heart of their platform. We're allowing people to focus on their differentiating, on their value add, on their differentiating engineering, not on the non differentiating engineering of being a computer company.

33:06 And then defense, becoming an increasingly important potential market for us. There are a number of secular demand drivers going obviously here in the background, a trend in the West towards rearmament, a recognition that we have probably wound down the size of our armed forces further than its wives, a growing recognition driven probably by some of the experiences that are happening today in Ukraine, of the importance of autonomy, of advanced autonomy, of distributed decision making in mobile platforms. A pivot away, I think, from what we might call exquisite platforms towards high cost, low volume platforms with very long development times, development times on the on the order of decades towards lower cost, attributable lower cost consumable platforms, and enabling that transition, a move from only using military specification electronics to a growing focus on COPS commercial off the shelf technology, as I say, as an enabler of both all the cost and the availability and sustainability of these platforms.

34:12 As we look more at the the defense market, really struck by the range of applications that RASPBERRY PI fits very neatly into. Whether that's fixed hardware back at base, whether it's driving display screens or aggregating data in a fixed location, whether they are whether it is just deployed static hardware, so sensor platforms in the field, RFD codes in the field, or whether it's providing intelligence and autonomy for mobile unmanned platforms like UAVs, USBs, and UGVs. And all of these markets, just like our just like our commercial customers, all of these markets stand to benefit from RASPBERRY's distinctive value proposition. Industry leading price performance, availability of long term support, and the ability to manufacture these products and sustain them at scale.

35:03 A word on silicon. Silicon really remains at the heart of Raspberry Pi's medium term growth strategy. It has been and it continues to be an enabler for us in the board computer and module business. We build silicon because it allows us to build better board level products, better modules, better SBCs than we could build otherwise. But increasingly, it's becoming a business for us in our own right, in its own right. We saw lower sales. We saw slightly lower sales in the first half of twenty twenty six than we did in the comparable period in 2025. It was a strong comparable period, I think. We had a number of large OEM orders in that period. But then we followed July and August this year. Absolutely. It's absolutely fantastic months. August in particular, a record month for sales of the RP twenty three fifty platform, the two year old second generation microcontroller platform.

35:58 Particularly strong sales, particularly strong and particularly broad based sales for our products in China. We continue to develop engagements with tier one and tier two OEMs in the West. That's inevitably a slower burn because of the western engineering culture is inevitably a slower engineering culture, but we are confident that those will mature into course into into design wins. We have taped out in the in the second half, in the last month, we have taped out what our next generation semiconductor product. Expect to get that back at the start of next year, And that may, in due course, lead to future board products, future innovative board products, and future standalone semiconductor products.

36:45 And finally, a word on outlook. We expect the second half volumes to be higher than first half volumes. What's going on there? Continued extremely strong demand. The backlogs that we both referred to earlier, 2,600,000 units at the end of the first half, those are large backlogs. They're probably verging along healthily large backlogs, so there's a great focus in the organization at the moment on reducing those backlogs not to zero, but the aspiration is to get those backlogs back towards the levels they were at the start of the year. To support that, we've been making a number of co investments with our partners at Sony in order to increase their production rate, and we expect that q four will see the full benefit of all of those investments.

37:31 Despite this taper off, we saw some exceptional unit economics in the first half of the year. Some of the price increases that we've put through interacted with the low cost inventory that we were holding, that we came into the holding. Despite the taper off of those exceptional new economics, we do, as a result of those increased unit volumes, expect adjusted EBITDA to exceed market estimates somewhat. We are now holding up RAM. We have enough RAM in our hands and on secure order to meet our requirements for the remainder of this year and into next year. And we're excited about what 2027 and 2028 will bring for RASPBERRY So I'm now happy to take questions. Fantastic. Evan Richard, thank you very much indeed for your presentation.

38:17 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 a recording of this presentation, along with a copy of the slides and the published Q and A can be accessed via our investor dashboard. I'm Evan Richard. As you can see, we have received a number of questions throughout today's presentation. And if I may now hand back to and kindly ask you to read out the questions where appropriate to do so, I'll pick up for you both at the end. Thank you. Okay. Let's do it. So you're gonna read them out? I'm gonna read them out. I'm just trying to Mostly, I am going to Familiarize myself with the order they arrived in. Let's what new products are in development? What new products are in development? Well, I think I think we I think we share with another another fruit named company a tendency not necessarily to talk enormously about about what products we have in development. I mean, I think we can say that, you know, it is it's uncontroversial to say that we obviously need to be starting to think about the next generation of our two platforms. So we need to be thinking about the next generation of the big RASPBERRY platform, the Linux based platform, the thing which will eventually become Raspberry Pi six, and the next generation of the smaller microcontroller platforms. So the thing which will generate both Raspberry Pi Pico three and the next generation RP two series microcontroller.

39:35 Obviously, we are still some distance on both of those platforms, still fairly the five and two platforms are still fairly new. But it's certainly we're now reaching a point in their life cycle where I think attention does turn to future products. I think we've said that it is what you're likely to see more Raspberry Pi Pico two products. We in the Raspberry Pi Pico generation, we have the Pico product and the Pico w product, the wireless and non wireless product. I think it's likely you will see from us over the next twelve to eighteen months. You're likely to see from us PICO two products, which have a broad range of network interfaces. We've talked about that in the past. And pretty much all of those you think about, you know, one of the big hitter accessory items, power supplies, displays, cameras.

40:20 I think it's fairly likely that we will try to find ways to extend that. As we get a better understanding of what of how our various customers are, our enthusiast customers, our industrial embedded customers, As you get a better idea of what they appreciate, what they like, and what they don't like about our existing offering in that space, I think you'll see us come you'll see us broaden that broaden our offer out a little bit. Yep. One day there'll be a six generally follows five, doesn't it? Yes. Usually. I've got a couple of questions here. One plus one is two. Yeah. Thank you for that. Yes. Sorry. I've got that right. I had to think hard. Gonna bring my son to the next to to to the next There's a couple of questions in here about our relationship with ARM. Yes. How's that relationship been developing?

41:07 What's it like having them as a shareholder? I mean I mean, they've been an enormous ARM have been an enormously supportive shareholder. Obviously, they they were a they they were a pre IPO investor. They Cornerstone the IPO. They they bought a certain amount of the of the foundations. Yeah. The foundation sold block in in April. Yes. And Arm participated in that secondary sale. So I've been a very supportive shareholder. I think I often think of this, you know, the the the the sort of the substance of the questions is what what has having Arm as a shareholder done to the strategic relationship? I don't I think I've always viewed this the other way around. I've always seen this as the shareholding recognizing, validating, being consequence of an existing strategic relationship. You know, we have been every RASPBERRY PI is an ARM computer.

41:56 Yeah. I didn't solve a huge number of RPCs. I was a child of the the child of the nineteen eighties have great great affection. They call Archimedes. Have a great affection for the ARM architecture since childhood. So this is something that has always been important to us. I think that having the opportunity to have arms of shareholder has been very helpful for us. It has deepened the level, I think, on which we can help these strategic These strategic discussions with them, there will be many more ARM based Raspberry Pi products in the future. I think they're excited about it. See the the road map, you see the products they've announced, We're excited about They do They engage at all levels. Yeah. Senior levels within all of us well. It's Yeah. We get very support from them. We're excited about the the core road map. We're excited about the technology road map. We're excited about finding ways to integrate that roadmap with our own roadmap to keep building more high performance ARM based products. Very, very, very we are a very happy we are we are very happy ARM partner.

42:58 Very happy ARM licensee, very happy ARM partner. The ARM partner meeting in in in August is an absolute highlight. And they weren't meeting to you when you released the risk five call. Indeed. What steps have been taken to ensure we remain a UK public company? As a UK shareholder, it'd be extremely disappointing to see us taken over by a foreign entity. I I mean, I'm not sure that I'm not sure there is an enormous amount amount there are enormous number of specific things the one can do here other than, you know, we do our best. We are very proud. Try to be as amusing of entertaining in meetings like this to satisfy our UK shareholders that they continue to want us to be independent rather than the So we are look. We are a proud we are a proud UK listed public company. Yeah. We chose the list in The UK.

43:46 We, you know, we we design our products in The UK, manufacture our products in The UK. We are listed in The UK. We don't do any of these things for I don't think we do any of these things for patriotic reasons. We do these things because we believe that The UK is the best place to do each of those three things. So we are you know, we've had a fantastic experience, I think, as a as a UK PLC. You know, our aspiration, what are we trying to grow here? We are trying to build a globally meaningful business from The UK, based in The UK, listed in The UK, manufacturing in The UK. And, you know, while we have the opportunity to, we will continue to do that. Yeah. We have a CRA question. Yes. Would you like okay. Let's do the cyber resilience type of question. So so this is so this is sort of a this is a a couple of questions about the EU cyber resilience act and and the requirement for full compliance in December next year.

44:41 I think this is this is something that we have seen coming something we've seen coming for a long time. Yeah. It is it it drove over the kind five years, I guess, over the period that we designed Raspberry Pi five. The awareness that there was gonna be increasing government action and increasing government awareness around IoT security drove the incorporation into the Raspberry Pi five hardware platform and the RASPBERRY the the RPHA twenty three fifty and the the the second generation microcontroller, drove the incorporation of of hardware features. It was pretty clear what hardware features would be required in order to allow to give people at least the potential to build compliance solutions. There's then a software layer on top of that. So we we we have largely by, I guess, two years ago when we launched twenty three fifty, we'd largely completed the process of delivering the underpinnings of CRI compliance.

45:35 What you've seen subsequently is us then building out both the the software level required, particularly some of these for for secure updates, for secure secure firmware updates on our platform, but also then the tools that people need in order to build a regulatory artifacts, certification artifacts that sit alongside. So it's no longer enough to build a firmware update. Yeah. So think the first bit we did because it's the right thing to do. Yes. That's right. And you no longer it's no longer sufficient to simply build the firmware image. You have to create the certification range Proof of the SBOM. Yes. You have to be able to generate the SBOM as well. And so a lot of those investments that we made in automating systematizing the process of building the software for a Raspberry Pi two device have were were the the design of those systems incorporated the knowledge that people were gonna have to conform to to the CRA. So I think that's gone that's gone pretty well.

46:37 In terms of its impact on us as a business, it is driving. We already see it driving a tendency to use our software, not just to buy our hardware devices, but to use our software and to use our systems Yes. When you're assembling the firmware. And that's extremely attractive for us because it increases the stickiness of the platform. It makes it more sustainable to our customers. It increases the stickiness of the platform once you've designed your Raspberry Pi and that's working well. It increases the switching cost away from Raspberry Pi as a vendor. So I think this is a this is something where, you know, like many of these things, you see a difficult thing. You see a challenge. And at first, you are sad that you're gonna have to do some work. And then after a little while, you realize that having done that work, that work becomes a plank, another plank in your story about competitive advantage. Yes. Yes. Your your like I've heard a few times with investors, if you want to buy shares in Raspberry Pi, spend some money on buying a competitor's product first. I would just appreciate, you know, the quality of what we've made.

47:38 The other question was was about The UK Government. We expect and whether we are engaged with the UK government on this, particularly around ensuring that whatever legislation is passed permits you to continue to adopt open source software development methods. We we are not specifically engaged on this. We do expect the UK government to largely be a follower here. We don't expect the government here in The UK to diverge meaningfully from a European continental European practice. And we believe that it is unlikely that the European version of this will evolve in ways which are inimical to people's ability to use open source as often on that. So I think there is a broad consensus actually that open source approaches are the approaches. I think actually open source approaches allied to machine learning tools, to AI tools, are the way to build systems which have that level of robustness and that you'd you'd be be happy happy to to deploy deploy them in in a a while. While.

48:43 Changing gear. What's our expectation for unit sales and semiconductor business this year and in the medium term? How quickly should we expect this business to grow? I mean, I think in the short term, we're talking microcontroller sales. It'd be very sad if it doesn't start with a one Yeah. This year. Yeah. So probably in the sort of 10 to 12 Yeah. Scale. I think I think the I think the the sort of the we can put a box around it, which is this is a, let's say, on the order of 30,000,000,000 unit, just like Yep. On the order of 30,000,000,000 unit business. We have an aspiration. There are it's an oligopoly. So it's a five player oligopoly, actually. Roughly 75 to 80% of that goes to five vendors, so I probably can't make I'm building in four of the line in good day.

49:31 But the remainder of that market is actually quite finely divided. And so an aspiration going on more than 2% of the market is not outlandish at all. Yes. So I think we have an aspiration to grow the business out into hundreds, hundreds of millions of units. I think that getting into double digit millions is an important stand along the road. Obviously, we still have to sustain we've seen a great growth rate in this product since we launched them Yeah. Five years ago. I think we have to sustain that growth rate, and, obviously, it it becomes easier and harder to sustain big growth. As you get bigger, it becomes easier and harder to sustain large growth. But I think there is an aspiration to do that. Where do we want to be? I think we've said very consistently a decade after Yeah. The IPO. The aspiration is to have grown the the traditional business, the boards and modules business significantly, and but for semiconductors to have come up alongside that, come up underneath that to a point where they're roughly going for. Now some of that heavy lifting, I think, will be done by ASP. I'm sure, you know, some of the products introduced in the future will have higher ASPs, but a lot of that has to be done by volume. So I think we have there are sort of two directions in which we are saying the business really needs to find a way into at least the hundreds of units Silicon here Yeah. In order to meet those. We want to feel that we are you know, these are exceptional pieces of hardware. They really are.

50:49 They are, I think, conversers. We've heard seen them seen as much as conversers microcontrollers. The better an engineer is, the more attractive they are Yeah. To the the RASPBERRY PLC platform. So I think we have something that's very compelling. I think if we aren't able to get into that regime, then I I I would I would personally feel that we've somehow taken a great product and solved it. We want to fail technically. We will fail in translating that technical excellence into market entry. Yeah. Yeah. Just a quick one from so reference market consensus for adjusted EBITDA for the full year. I think we're seeing numbers in the sort of range of low sixties, sort of sixty, sixty five, I think across the spread of analysts that we Yeah. I think talked to I think when we referenced market consensus there, that is market consensus as of yesterday evening. So I think market market consensus may have moved this morning.

51:43 So this is market. Yeah. I think we are we were conveying a belief that that prior consensus was a little conservative Yeah. Relative to how we see the business performing in the full year. When do you expect to make a positive free cash flow? It is not something that is alien to us as an organization. I mean, I think from 2012 through to shoot. Even after I arrived, we were generating free cash It wasn't just me. We have I think over the last few years, we have invested significantly in CapEx, but more importantly, we have ridden through a very turbulent supply chain period. We've taken that opportunity to use our balance sheet. Yes. We've ended up with negative free cash flow. I think the answer to this question is probably when do we think the turbulence and crisis over memory is gonna stop.

52:42 If we believe that is in 2028, which I think is probably now the earliest point, ideally when additional fiber capacity overwhelms the demand from data centers, That is a period when we should see some scope to start to reduce inventory levels or at least hold them steady while the business is bigger. I think you're you're in a you're in a situation at the moment where you are you're holding quite a lot of DRAM Yep. Because you want to make sure that in the event of an availability shock Yep. You are able to make a product. Yep. And at the same time, holding that DRAM is expensive because DRAM is expensive for this. I think at the point where the market when the cycle flips over, I don't think you're necessarily gonna see us. We're holding this, let's say, between three or four months of DRAM DRAM at the moment. I think it's a system if the if the the market flips over, you're not gonna see us holding three or four months of DRAM. And even if we were holding three or four months of DRAM, that would be much less cash consuming. So I think it is had we not I I suspect we would be generating positive, but I know that we would be generating positive free cash flow now if we have not had a memory in Strashock. Yeah. I'm pretty confident that once we get out the other end of this, the business will revert.

53:56 Well, I still believe having run the business since 2012. What I still believe is the natural behavior of RASPBERRY that it is a fairly cash generative business. Okay. Probably, quick one. Margins have been improving lately, but are below the 2021 level. Is the plan to return to those levels or is that unrealistic? I think margin here, we're talking about gross profit as a percentage of revenue. That is something that I think we talked about before. Our revenue number does include a number of different lines with really quite different margin structures. You know, the royalty income that was, I think, in 2021, 75% of our unit volume was going through Farnell at near 100% margin.

54:48 Whereas now, 75, 80% is direct, so the Farnell licensee piece is only 20%. So I think it will be some time before we think about going back to a 2021 level. The way that we view the business, certainly I do, is is based on that gross profit per unit. What dollars are we making for each board shipped? That allows us to stand back from which route is it going to market and really focus on what profit does it make rather than focusing on a percentage. I think if we tried to maintain a margin percentage in this most recent year, if we continue to press for that with prices going up so much, we would have increased our yes. We would have a temporary boost of profit, but I think we would have opened up some quite frightening opportunities for competitors, particularly in the Far East, to come and take away our very strong presence across all customers. And it it would have been a breach of faith with our OEM customers. I referred to, you know, a couple of very loyal customers there during the presentation.

55:57 When somebody designs Raspberry Pi into their product, even without the CRA sort of enhancements, it is an incredibly sticky sockets. You know, we are constantly alive to any perception that we are exploiting the stickiness of those sockets in order to extract value from our OEM customers. The decision to pass through DRAM cost rather than to margin and passing them Yeah. The the a DRAM cost through both ourselves and then our our channel structure has been one was one of the most challenging decisions Yeah. That I've had to make in in my time at RASPBERRY PI. I think it has been the right decision. It does have this it does have a it will have a negative effect on percentage margin.

56:51 But as Richard says, when we manage the business, we manage the business to Yep. Units. What do I look at every day? Units. I'm looking gross profit per unit. It's that decomposition of overall gross profit that has my attention every day. Yeah. And I think we've talked about that over many years that it's remarkable the business that you've you've built and talked about across the world that we've not seen a significant assault on this business by low cost competitors in China. And the cost And cost. And the lower than that is about that humble approach. Yeah. That's great, guys. Sorry to interject that. We are coming up to the hour. So, Evan, if I may just ask you for some closing comments to wrap up. Thank you. Well, this has been a spectacular half.

57:39 I think it has been we have had as I said, we are a proud UK listed company. We've a good experience as as a PLC. This has been by far the best half of that that two little bit years. This has been by far the best period. It's been wonderful to demonstrate the business' resilience during what is an extremely challenging time. It is more than anything else, it has been extremely satisfying to have been able to be of service to our customers, our enthusiast customers, our embedded customers, our industrial customers, to have been able to keep our product in production, to have been able to use some of the strategic memory inventory to minimize the buffer and minimize and delay the impact of some of these cost structure changes on the platform. You know, we hope that people understand the efforts that's gone in in the organization.

58:33 And so last words, I'd like to say, obviously, as I said, this is Richard's last this is Richard's last set of Raspberry Pi results. He's been with since 2019. He was our first full time chief financial officer, really a measure of the extent which the business has evolved over the last seven years. So I would just really very much like to talk to Andrew's friendship as we took the business through just quite the most remarkable period of evolution. I thank you. I wish you too. That's great, guys. Thank you very much once again for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations.

59:20 On behalf of the management team, we would like to thank you for attending today's presentation, and good afternoon to you all.