Seeing Machines (LSE:SEE) — H1 FY2024 Results

0:01 Good morning, and welcome to the SEEING MACHINES LIMITED investor presentation. Throughout this recorded meeting, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab situated in the right hand corner of your screen. Simply type in your question and press send. Due to the number of attendees joining today, the company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Paul McGlund, CEO. Good morning, sir. Thank you very much, and good morning, everybody. So welcome to our presentation on our h one twenty twenty four results. Martin and I will, take you through the content of today referencing back to the r and s that that was put out just a little while ago, and, let's let's kick off.

0:50 So what are our highlights? Well, I I think, important highlight for us is what's going on with our our KPIs, in particular, for royalties. And I just wanna make the point that our largest win to date, which was US $82,000,000 for cabin monitoring, including DMS and OMS, has now gone live. So we are at the start of production for that program, and it is the first start of production program for the combined DMS, OMS feature set in the market. What I think the market is generally referring to is interior sensing these days. So we're really pleased with that. It's been a a very technical program.

1:41 Of course, we're using a single camera from the mirror location, so a very unique and game changing program of work, which we'll now start to see royalties flow from this quarter. In addition to that, more than 1,500,000 cars on road. We continue to produce our KPIs each quarter in order to give all shareholders as much visibility as possible into how we're tracking. We have a a total awarded value of 366,000,000 US dollars, and we'll talk in a minute about how we see that rolling out over the next few years. And with our fleet, our aftermarket business, approximately 57,000 Guardian connections as at the end of calendar year or the end of h one, and that continues to grow.

2:38 Thought I'd take a minute to just talk about the behavior that's that we are seeing in the OEM landscape. And we've had quite a number of queries and questions around royalties, growth rates, you know, why was one quarter up and not down or down or not up. And the reality is there are many moving parts in in this in environment. Now in the r and s, we've put a considerable detail that should explain all of the moving parts and what the OEMs are doing to move forward to meet the initial year end cap requirements of July 24 and how they're achieving that, but I'm just gonna summarize it here this morning.

3:26 Now the first point is the majority of royalties that we derive to date are driven by hands free driving features. You know, the the likes of BlueCruise, for example. I think everyone's well aware of that. But but it is, to date, the primary driver of the take rate of, DMS software. Now for Europe, GSR is enforced from July, this year, and that's a focus on drowsiness. This is an important point. So for that, there is a direct camera based or, in fact, indirect steering wheel based capability for cars, vans, trucks, etcetera.

4:15 So there are options in European GSR to achieve the requirements without being 100% required to have a camera. Now GSR GSR continues to develop and extend, and it extends to distraction in FY '26. Now for this, a camera is required. So DMS through a camera on all new vehicles sold in Europe. So that's a a step change in the requirements that takes some of the variability out of the take rate. So that's an important consideration. Then when we consider what's going on with end cap, euro and end cap in particular, is a similar scenario. So the OEMs that have taken up DMS and, for that matter, OMS up until now have essentially been the early adopters.

5:09 And many of those vehicles that have gone into production, the OEMs are actually, managing the different technology that's running in these vehicles to minimize their overall cost, and they can do that under the current rules and requirements for Euro NCAP. So they can be allocated points for certain features and capabilities within the ADAS domain and also for certain features and capabilities within the indirect DNS domain, as well as the domain that we provide, which is camera based. So leading right up until the launch date for Euro NCAP this year, there is variability in what OEMs are shipping.

6:00 And the two primary reasons for that are are are are are, you know, their choices around how they can deliver the points, and, of course, level two, three, hands free driving. So that's a really important point for me to get across. But GSR and NCAP from 2025 and and GSR from '26 will require a camera. And at that point, we'll we'll be able to see with much more certainty, not just take rates for certain vehicles or decisions made in OEMs for what percentage of minimum feature versus all features they take, but it'll it will essentially be a standard, and and that's a a really important consideration.

6:51 Now on The US front, there is significant progress with NHTSA. So they're they are working specifically on distraction, but also impairment, and, of course, now drowsiness. And we've been quite central to

7:11 the the regulator's position in The US as we were in Europe. So we're quite pleased with how that's rolling out. It's obviously important to to the long run of our business that there are regulations that kind of support, but preferably mandate, protect as as they do in Europe, and we think this will happen.

7:36 So let's just take a look at the the numbers for a minute. And we've gone through this slide several times before, but it's I think it's important to reflect on it once again. So the green the green line is really the forecast from external parties on the production volumes by year for DMS systems. Essentially, the take up rate for DMS in production as opposed to awarded, which which is a significant distinction. Then as you look at the bar charts, the dark blue line represents the, start of production volumes for the 366,000,000 that we've been awarded already.

8:23 The next bar, which is the light blue, that represents the the current RFQs that are visible to us and expected win rate. And then the black line is the balance of the RFQs, which we expect to be awarded driven essentially by the regulations worldwide. Now what that means is despite, you know,

8:53 a change in what appeared to be a change in the direction of royalties for the last quarter, which we think is an anomaly. What what that means is that we're still growing at a at a 100% per annum for our production volumes or royalties year on year. And this is a major driver of profit and cash flow for the business. We see no change to that number at all. Euro end cap and GSR, we've I've mentioned already are the key drivers to increasing the fitment rate. So as we see more OEMs come onboard, more start of production occurring, it'll move from a variable fitment or fitment from driven by customer choice to a a required fitment rate for a 100%.

9:45 So those two factors will impact the business going forward. We still have a significant pipeline, and it's fair to say, though, that that pipeline continues to change as we've moved towards the the June 24 sort of milestone date that we all thought would be the the real trigger for everything going forward. A lot of OEMs have really pressed the pause button, taking stock on what to do. Do they implement DMS and ONS through central compute, standalone compute? What's the best location of the camera? Now with the introduction of the mirror that's caused, you know, a lot of questions to be asked and a lot of challenges to be put out there with regard to other camera placement.

10:38 There's a very significant cost performance trade off, and the engineering complexity of moving whole programs or whole portfolios of vehicles more quickly has for the last six to nine months been reconsidered and reconsidered again. Now we are seeing that the OEMs are planning more certainty around RFQ dates and are beginning to make decisions, engineering and technical decisions that will ultimately flow into awards. So that's an important factor that I've that I've also mentioned before, but we outlined in some detail in the r and s. And we still expect for our market share to remain as previously stated at around 40%.

11:27 And I think if you look at the comp on royalties with the rest of the market, we'd be materially above that. If you look at the comp on wins or awards, yeah, however they calculate it, you could argue that it's less. But if you look at both of those metrics together, we remain confident in that market share number.

11:54 So let's just talk about the KPIs for a minute. So on the on the left hand side, we we present this number cars on road, which is really just accumulation of the vehicles that have taken up our software. We think that's an interesting interesting number. We're very happy to supply it. In fact, I I I think it's an absolute requirement that we do so. We also also provide the quarterly production volumes. Now as we as we saw last quarter, there was a reduction in the growth rate. And, you know, to be frank, there was a lot of questions asked, you know, is this the end of growth? You know, what's the problem?

12:37 You know, are you not implementing the start of production programs that you said you would? The answer to all all of those questions is is no. All of the programs that we have in production are producing. And, look, the reality is there is some volatility in the early stages of production ramp up. We expect that volatility to be averaged out as more programs start production. But I'll just draw your your attention to the other bar chart. And if we look in the f y twenty four period q two, And and if you look at the top of the bar, what you'll see is OEM four, which has been in production for some time, has been relatively consistent, for several quarters.

13:34 But in q two, we did see a significant reduction. Now we're investigating that reduction. There could be a whole host of of reasons for that. It could be sales related. It could be stock related. It could be parts related, or it could be a mistake. So we're we're well underway in an in an investigation with our customers on on that particular issue, but we don't see it as being a long term so we're not calling out a change in the trend here is is the important part of this of this this slide. So

14:18 at the moment and going forward, we expect royalties will remain the largest proportion of automotive revenue, and and that proportion will continue to grow quarter on quarter year on year. And as I've said before, it is the primary driver of profit and cash flow.

14:39 Just turning to Guardian now and the annual recurring revenue, which is the important metric for this business. Again, we can see the connections in the black bar quarter on quarter, stable, consistent growth. And then we can we we we tend to track those units that have been sold but not yet connected, which is just the time lag between selling and installing largely through our distribution network. But so we're relatively pleased with that number. We're coming to kind of end of end of life, perhaps another twelve months to go on our generation two product, and we've spoken about gen three, and I'll cover some some more detail on that in a minute and expand on what we put into the RMS. But we're still seeing a 30% CAGR for connections over the last three years, and the the annual recurring increased 9% from the year prior, and and we expect that to continue. And the other factor that we've constantly talked about here is the very low level of churn. It it is still less than 2%. It's remained low since inception, and that gives us great confidence that not only will we see growth through the general demand and the regulatory support for this product,

16:11 but churn has a very positive impact on our profitability in the long run.

16:19 So I'll hand over to Martin now, who will take us through the financials. Thanks, Paul, and good morning, everybody. I'll start off by going through a view of the balance sheet and the cash flow, what that looked like during the first half and what we can expect in the second half. So the cash position at the end of December was just over $22,000,000. That was down from just over $36,000,000 at the end of June. So a free cash outflow for the period of of just under 14,000,000. That was helped by an unwind of working capital in the first half of just over 12,000,000.

17:05 And just to kind of give a reminder of this, that we had a buildup of inventory and of receivables at the end of June, which was largely due to the timing of aftermarket hardware deliveries to us from our manufacturer. And, you know, a significant portion, I think we we talked about 15 to 20,000,000 of unwind happening in FY '24. So 12,000,000 of of that has occurred during the first half, and we expect to see another 5 to 6,000,000 flow through into the second half. Now if you take the the what I call the the gross cash burn, so adding back that working capital unwind, we we had a monthly cash burn rate of around $4,000,000 for the half.

17:59 Now what we'd be expecting as we go through into the second half is for that cash burn to reduce with the expectation that by the time we get to q four of f y twenty four, we'll have a cash burn rate of less than $1,000,000 a month. Now we have around $6,000,000 of annualized savings from external providers, and that's in place as at the end of December. So approximately $3,000,000 of cost savings flowing through into the second half. And we've talked about how we've been able to ramp up our development organization by using external contractors and other external organizations where we can increase or decrease capacity depending on our resource requirements.

18:48 So we've been able to reduce some of those ongoing costs for the second half. We also have a number of other opportunities for cost savings throughout the second half, which will help the improve the cash burn. Some of those are also gonna be with external providers, but also a number of opportunities that we have within the organization that we'll be following through over the next few months. We also have a standard weighting or a trend that we've seen over the last few years of around 40% of revenue in the first half and 60% in the second half. We'd expect to see something similar in the second half of this year, which will provide, an increase in the gross profit flowing through into cash.

19:41 Some of that will be a benefit of sales mix changes as we see royalties increase, particularly with the the large German OEM coming online, earlier this month. So that will help in terms of gross profit. And then we also have the the gen three products for aftermarket, which has a much higher margin than the current gen two products. So we're expecting to see a benefit not only from, reduced costs, also improved gross profit, and also the unwind of, continued unwind of working capital. So that will leave us in a in a good with a good foundation for a cash flow breakeven run rate in f y twenty five.

20:28 We also have a number a number of other revenue opportunities that we're looking into and also some receivables funding to be in place before the end of June. And the expectation is from a cash position that we'll be in mid teens, by the time we get to the end of FY twenty four. And like I say, with a good foundation for getting to the cash flow breakeven run rate, in FY '25. And moving on just to run through the the financial performance, particularly on the the revenue side, through the through the organization. The details of the auto royalties Paul has already talked to, and there's a significant amount of detail in the r and s.

21:16 Overall, royalties in the organization increased year on year 43%. We did have a reduction in license revenue, and that's largely from the Magna contracts with a reduction compared to the h one of last year of around $4,000,000. And one of the impacts of that reduction in license fees is a reduction in gross profit margin due to the mix change with the reduction in license fees. But we also incurred some lower margin on services, which was mostly related to NRE for the aftermarket business and also for the automotive business. Going on to aftermarket, the revenue for aftermarket increased 38% compared to the first half of of last financial year to 14,300,000, and we had over 6,000 Guardian units sold.

22:20 Included within that was around 1,200 units which were upgraded, is something that we continue or we expect to continue as we go through the second half to continue support to support growth in the aftermarket revenue stream. This is because of the phase out of the three g networks across Australia and New Zealand, and some of the the older versions of the product, don't support four g and five g. Annual recurring revenue increased 9%, from June and 22% over the last twelve months up to 14,500,000. And that was consistent with the increase in the number of connected units, which is now just short of 57,000. One thing to note here is that ARR includes monitoring revenue that's included in the line in the p and l, but then also the monitoring royalties that we get through our Caterpillar arrangement.

23:19 So it's split between royalties and monitoring services in the p and l. Going on to automotive, the automotive royalties increased 35% compared to h one of last year, albeit slightly lower than h two of f y twenty three. However, as we we've said, the the the large German OEM goes into production or went into production earlier this month, And so we're likely to see an increase in both volumes and revenue as we go through the rest of the the second half. And then onto aviation, a significant increase in revenue here, and this is largely because of the start of the the the the work for the Collins contract, which is NRE revenue, is now being recognized, and we're on track to complete the first milestone product for them in May 2024, which is a blue label product, and we'll go then into the production of a red label product through FY twenty five.

24:34 Moving on to a view of the OpEx investment. So we've got continued investment for auto, which is largely due to the the start of the various projects that we've had in FY twenty four, including in the second half. Given that we have the the flexible arrangements, we're likely to see some reduction in resource requirements. As I've said previously, we've got around $6,000,000 of annualized savings that we've already made, which will flow through into the second half. And there'll be further savings there as we get to the end of other development projects throughout the second half. We've also been incurring development costs for the gen three products.

25:22 Again, resources required for that is likely to reduce as we go through the second half, which will provide benefit mostly flowing through into FY '25. But some external capacity there has already been reduced as well. The increase in operations costs is largely, as we talked about in in the full year results, about building scalable infrastructure. And this supports both the aftermarket business from the perspective of monitoring and support, but also for the development methodologies that we have. So using large scale data and including a lot of machine learning operations in the cloud. So that infrastructure is now largely being put in place, and so we don't expect to see further increases in operating ex or the operations expenses.

26:18 And and so that will moderate as we go into the second half, and will be scalable as we increase in terms of volumes and production. But overall, you know, we expect that the second half costs will be less than h one, somewhere in the region of 3,000,000 to $5,000,000. I'll just hand over back to Paul to go through the outlook and the q and a. Thanks, Martin. So so importantly, as we said in the beginning, we will continue to see the doubling of automotive royalties. And this is obviously a very key metric for the company, if not the major metric, and it's the the metric that will drive the consistent increase in profit and cash.

27:08 We expect a 25% increase in in our connections for Guardian. And as we look into FY '25 and and we start moving our generation three product from GSR to the the, let's say, the enterprise market or the the the the typical logistics market that we serve, you know, we we do think that there's upside in that growth rate. The g three launch is you know, we're we're right at the doorstep of that, and our focus in the first phase is GSR. We will be moving units in this final quarter of the year as as we've stated previously.

27:54 And towards the end of q one next financial year, we'll be looking at launching for the broader market worldwide. Aviation contribute circa 5% revenue. Now as we as Martin's just said, there are two steps in the development of this product for aviation. And step one will be complete by the end of June, and step two, the red label product in the following financial year. And I'll cover off a lot of questions that we've got on aviation in a moment, but we continue to increase the pipe of RFQs in aviation. You know, it's a big industry with long lead times and much longer production runs, and that's a that is a feature of the sector. But we are deeply engaged with cons who we still believe, by any stretch, is by far the best partner for us at this stage.

28:57 We we expect, as Martin said, to see a continuous reduction in our monthly cash burn, both from driven by an increase in margin, a reduction in in absolute cost, and a continuous unwind of working capital. So we expect that to to continue and cash flow breakeven run rate in '25. So that's the summary. What I'd like to do now is turn to the questions that were submitted prior to the session. Now we we have a very significant number just short of a 100 questions. So what I'll attempt to do here, it's obviously impossible for me to answer all of them individually.

29:49 There was considerable duplication and crossover in the questions. So I've categorized them into what I think are three sort of logical buckets, and I'll just go through these now and give it my best shot at answering, hopefully, the majority of those 90 odd questions. And then, of course, the the the floor will be open for additional questions, assuming we have time for that. So the the categories typically to do with financial strength, cash, you know, what are you doing with AIM versus Nasdaq. Quite a lot of questions around Guardian, in particular, Gen three, and then a few questions around aviation.

30:38 So I'll just go through these in turn, and what I'll do is break each of these points down in what I hope will be enough enough detail for the audience. But, look, I'm not gonna cover the cost, cash, funding, and and breakeven points as I think Martin's covered those off adequately in in his financial presentation. So I'll really start from there and attempt to answer the balance of the questions. The first one, share price. Lots of questions on, you know, like, what's going on with the share price? Why is the share price depressed? Why are other companies' share prices higher? I mean, they're they're really difficult questions to answer, and there isn't a single answer to them. But needless to say, yes, the share price remains challenged, and we are of the view that the share price doesn't reflect the current value.

31:35 You know, but we press on. Now we continue to present detail on our quarterly KPIs. There's been some some critique that we haven't won as much business as others in this sort of last six months, which is true. We did win an additional 45,000,000 US dollars worth of business. I think what's important to note here is that there is a sense of frustration externally on this as there is internally for us. But I just wanna be clear, and I've said this before, we don't sit on announcements. We announce as soon as we're able. The relationships we have with our customers are solid.

32:23 And when we have information that is announceable and able to be announced, we do so. And that is our obligation, and and we don't move move away from that Now, hopefully, what you can see in what we announce, and in particular, if if we talk about an automotive award where we talk about minimum lifetime value, I mean, that's the language that we get presented in our purchase orders. So that's what we announce. We don't make assumptions about what it could be, what it could be if if it goes longer, what it could be if we get all the models. We don't see any meaningful utility in that.

33:12 But what we are presenting now is the announcement of what we get awarded, which is minimum lifetime value and a correlation to production volumes. And I think in in certainly in our direct market, that's that's unique, but that's, we think, as transparent as we can be, and it gives all shareholders the ability to triangulate between those two numbers. And as we've said already, our largest program has started production, so we're very confident that we'll see continued strong increases. Whilst we may see volatility quarter to quarter, I'm not sure that's very important. What's important is that we are seeing the run rate annualized increases that we've that we've called out.

34:05 The other the other question here around our exchange look. There are lots of questions about do we stay on AIM? Do we move to Nasdaq? Comments that I've made in the past, all of which, in context, accurate. The point is, you know, we look at the exchange question from time to time. It's not it's not anything that drives drives us. And it's fair to say that we have shareholders that think we ought to just move to Nasdaq because it's better, and US investment investors more knowledgeable on the sector and have deeper pockets. And there are others that are very clear that that would be a mistake, a distraction, and a costly exercise.

34:55 And I I you know, depending on what point of the cycle you're in, both of those could be right. Our focus today is to remain exactly where we are. We're focused on delivering our programs that drive royalties, that drive cash, and to increase sales of our aftermarket and aviation businesses that do likewise. That is our primary focus today. Now under what conditions would we consider where we're listed? Well, the conditions could be, you know, a year or so from now, the growth rate that's spinning off lots of cash, market conditions in The US that are way more favorable, a market cap potential for us that is, you know, more appropriate for US listing. All of those things we look at from time to time, and we'll continue to do so.

35:50 But there are no immediate plans for us to do that. So I hope that answers the question. I think it's consistent with what I've said each each time I speak on the question. And then there were several questions about incentives and and goals, particularly for me around, you know, share based awards. And of there was an announcement some time ago now about my awards. And, look, the the key metrics for those, just to be clear and open about it, is 7075% anchored to share price and 25% anchored to EBITDA over the next three years. The minimum share price target is 12 p up to 20 p, and the tranches of shares would be awarded progressively between twelve and twenty p.

36:52 So that accounts for the 75%. So it's predominantly share price based, which I think delivers strong alignment with with all shareholders. And there was other questions around change of control. So on a change of control event Okay. The board has discretion on this, but I'd I'd expect that, you know, depending on the price of a change of control, well, then, you know, part of all of those awards would vest. But, again, totally up to the discretion of the board. Okay. So moving on to to aftermarket. And I I just wanna explain some of the detail of gen three, this after manufacture segment that we're chasing.

37:40 It is different to what we traditionally do, selling into fleet companies that are already on the road. The supply chain is different. The sales process is different. There's a lot of sort of dot point questions in here about being late or delayed. I don't see that as the case. We we called out q four for a very long time. We We do have purchase orders. We do expect them to close, and we expect them to continue well into 2025. But just to be clear, we're selling to an OEM. And at the moment, because this is new and it's driven by GSR, it's actually a much more technical sale than if we're selling our existing generation two product into a transport company.

38:31 So there is a technical agreement. There's an engineering process to go through. Then there's the homologation that the customer has to go through to in order to be certified. And then there's, I guess, the official financial procurement that is triggered by all of those things being ticked off, all of those milestones being ticked off. So it's a very different process for selling into an an existing transport company, which essentially, we sell it in. We'll look at the the number of trucks in the fleet. We'll agree how many they can implement. Typically, they implement as trucks come in for maintenance, and then we'll be selling n numbers of units per month or per quarter that matches their capacity to implement.

39:26 So it's a very a very different process. And I do expect that as time goes on, of course, once these manufacturing these bus and truck OEMs have more experience with us and and frankly others, this process will become very smooth, and it will become simply a procurement exercise as opposed to a technical engineering exercise. That's the reality of, you know, starting in this in this new market. We had other questions around the the the services part of the business, in particular, as as it relates to after manufacturing customers driven by GSR. We look. We we don't expect there to be a 100% take out.

40:17 And in fact, we won't know until we get there, but we have a two stage sales plan. Stage one is selling into the OEM to meet the requirements, and stage two is working with the OEM to sell into the purchaser of those trucks to expand the services program. Now we're also offering tiered support. So, you know, very low cost, low touch, automated alerts versus what we offer today, which is the traditional full twenty four seven service. So there's a whole range of options that we've put in place with gen three in order to give new customers choices on the take rate.

41:03 So we'll we'll know more about that as the vehicles move out of the OEM and and in into the into the transport companies. So so I think that should cover a lot of the questions on gen three. I I will say, though, on gen two, it is still the largest proportion of our aftermarket sales for f y twenty four and will remain a significant proportion, in fact, in f y twenty five. We are looking to run down the stock by the end of h one twenty five, but we are expecting that there will be, you know, continued purchases for the four g rollout, for example, for existing customers, for replacement stock, etcetera, etcetera. So that that's certainly not a hard close, and we don't anticipate making our entry product available in the Southern Hemisphere until post h one f y twenty five.

42:11 So I I hope that helps with that question. There there was a couple of questions about BDNS, backup driver monitoring systems. And this is this is, you know, we've seen some volatility in this business. Of course, we we saw a lot of the AV companies disappear, and and so but we're we're seeing a lot of AV trucking companies reappear. So we are still selling BDMS units, and in fact, relatively modest numbers, but I'm expecting those numbers to increase over the next couple of years. I'm not calling out this this is a game changer for us, but it is a significant contributor to the margin mix for fleet, and we're still in the business of selling BDMS.

43:00 Some questions on on competition. And look. I I think it's similar to auto. We we we do see some new competitors. We're focused on the the near end core competitors that have, you know, to some extent, a comparable product even if they don't have a comparable service. There are, you know, strengths and weaknesses of each of our offers that customers will consider, price, service, connectivity, twenty four seven support, etcetera, etcetera, etcetera. So there is an increase in the number of players, whether those players will have the the technical capability and the field based knowledge to run, you know, large volumes of network technologies.

43:45 Only time will tell. But we're still seeing strong engagement and strong demand for what we offer and strong pent up demand, as as I've said over and over, for our next generation product. The other the other point here is that GSR, as it is in auto, is is really making this distinction between how you can get by versus having to have a camera. So by '26, new vehicles in Europe, sold in Europe, need a camera based system. But until then, they can get by with other systems, and, typically, that that system is doing well.

44:31 And we know that it's inferior There's all the science tells us that. But it's a very practical solution to a timing problem, and some organizations have gone down that path and went down that path some time ago. But by 2026, that that won't that won't work for them. So our our product, I think, is is well set for the ever increasing requirements across the board, whether that be in capital or GSR. So just over to aviation. So we are progressing with commons. There's no issue with that at all. We're working on the first phase of our proof of concept product as as as we've outlined.

45:19 Second phase next financial year. Lots of questions around the other fields of use, in particular, you know, simulation and training. And, look, the current agreement that we have includes the field of use for simulation and training. However, there are several programs that we're continuing to run with other manufacturers of training simulators. This is simulation systems going into Connos, Emirates, and others. And Connos has full visibility into this and is supportive of it. They do have first right of refusal, but those programs are continuing. So, you know, we haven't reported anything meaningful for a while here, but there are numerous programs underway and RFQs in progress.

46:13 And look, I'd I'd like to be able to give a specific date on on on when they'll fall, but, clearly, that's really difficult for us given that's one of the major disappointments that most investors talk about. I mean, you say something's coming in the next quarter or the next half, and it doesn't come. And it doesn't come because the customer hasn't made a decision, typically. So that's the that's just a reality of of where we are in the life cycle, and it's difficult to manage. But it is progressing in each of the areas that we've previously talked about, and we're we're quite pleased with that. So just some points in general now, and there are lots of sort of random questions, but I I've tried to categorize them into into three areas.

47:02 Firstly, there were there were a fair number of quite critical questions that, you know, talk about us missing targets or failing or not performing. And and, you know, I'm happy to take take that on. I I wouldn't see it that way. I mean, we've for the last few years, we've been on consensus. We've we've delivered exactly what we said we would from a financial point of view. I get the fact that there's disappointment that RFQs haven't fallen more frequently and when they had with others. I get the fact that last quarter, we saw a dip in royalties instead of an increase. But I think if you stand back from that and look at the numbers, which should be is the scorecard of the game that we're playing, we certainly, as as a management, feel like we're on track rather than continually continuing to miss targets.

47:57 I I think from my my perspective, that's not the case. But I clearly, there's an expectation gap between winning business or the the expectation of this winning business and the actual reality of this winning business. But I think for me, as I've said, if we combine the book, the win rate, and the KPIs, that gives solid insight into how we're performing in aggregate rather than just talking about, you know, wins that are years down the track. There's also a number of questions around Qualcomm. Now, you know, are we offering their stack? What's going on? Well, we did present again integrated in the in the right platform at CES, so we are still working with them. They're not selling our DMS.

48:53 As I've said several times before, they're selling the digital cockpit. Now where their sales process intersects with an RFQ So we're responding to an RFQ. It's running the digital digital cockpit with the Snapdragon chip. That's when we come together, and that makes the sale easier. And we've announced one of those wins already. So the the relationship continues. We continue to present with them, and I expect that that it will continue. But it's this is a long a long game as opposed to a short burst. And finally, I made mention of a certain proportion of our automotive royalties having a guarantee, a volume guarantee.

49:46 And I don't know. It's very clear that that statement was misunderstood. So let me try and clear it up. So we won $366,000,000 worth of awards so far. And as we have said many times, what we quote is the initial initial minimum volume. We don't imagine what it could be, guess what it could be, say what it is if it's all models. We just say what we've been awarded. Now of that number, 366,000,000, in addition to what the market would say or or what we have said in terms of initial minimum volume, we have roughly one third that is guaranteed, and that is time and volume. So effectively, it's a take or pay agreement for a significant proportion of our total volume.

50:47 So this doesn't call into question what we've said about the 366,000,000. That is exactly what it is, Initial minimum volume as quoted by the OEM. What we have in addition to that is that 30% of the volume today is effectively take or pay. And that's very unique in this industry, and it gives a level of confidence over a proportion of our bookings, you know, around not just the volume, but the timing of the volume. And what I was trying to say in that in that statement is that this is really positive. It's essentially an insurance policy over a third of our awarded business, and I don't think there's anything that anyone else has has been able to negotiate.

51:41 So it's not a negative. It's a positive. It doesn't call into question what we've previously announced. But in addition to what we've announced, we have a guarantee for a third of the book. That hopefully summarizes the majority of the, questions that were pre Fantastic. Paul, think you you have covered off those questions, from investors, and thank you very much indeed that. And, of course, just to remind the attendees, the company can review all questions submitted today, we publish responses on the investor meet company platform. Just before redirecting investors to provide you with their feedback, it's no particularly important to the company. Paul, could I just ask you maybe for a few closing comments? Oh, thank you. Really, the the the I think the key point is we're of the view that we've performed in the first half.

52:33 We've called out, and our experience is that we typically waited forty sixty to the second half. We expect no change to that waiting this year. So so we feel good about our current position, and we think we're on track. Importantly, rather than just talking about interior sensing and what might be and what we could be, nor is it what we have one, we have our largest program, which is interior sensing, the combination of DMS and OMS through a single camera in the mirror location going live now. So we'll see that reflected in our quarterly numbers from here on. So that's a a very important milestone for us. We will see a 100% CAGR in automotive royalties, and that is the primary driver of profit and cash, as I've as I've said before.

53:28 And we are continuing to manage our cost base with the expanding gross margin, not just in auto, but in in aftermarket as well. And that gives us the confidence here as management that we're gonna meet the expectations that we've previously laid out. So that's that's how I'd like to end it. Thank you. Fantastic. Thank you very much indeed. Paul Martin, thank you for updating investors today. Can I please ask investors not to close the session? It should be automatically redirected to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete, and that's greatly valued by the company. On behalf of the management team of SEEING MACHINES LIMITED, we'd like to thank you for attending today's presentation, and good morning to you all.