Calnex Solutions plc (CLX) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Calnex Solutions Plc Final Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to make the following poll. And I'd now like to hand over to Tommy Cook, CEO. Good afternoon to you, sir.

Good afternoon, and good afternoon, everyone, and thanks very much for coming along to listen to the results by what we achieved last year in FY '22. Before we talk about the results, I'll just take a few minutes to go by the background in case you are not familiar -- too familiar with Calnex exactly who we are and what we do, and then we'll take a more deeper insight into what actually happened last year. So Calnex designs, develops manufacturers and markets to test instrumentation for the telecommunications industry. We -- to date, we've sold product to over 68 countries around the world into 680 sites. So we're very much have our global footprint. And we've been successful at selling the product to all the subsectors within the industry. So that's equipment vendors, equipment operators, chip suppliers. And increasingly, we've also been successful selling into large enterprises that run their own networks or the hyperscale companies that run the data centers around the world. In all these cases, what are equipment used for us to prove performance of critical infrastructure. So they're using our test just to prove that their equipment is actually going to work under all scenarios and that it may be deployed them. So we have this test and measurement fit into the world of telecoms. Well, it fits in just about everywhere. It's a matter if you're designing a new piece of equipment and you need to validate the design nearly prototype stage or you're doing the later stages when you're doing performance testing standards. You need -- if you own manufacturing, there will be a level of test involved there to test the units produced, building networks, maintaining networks. But the area that we focus on the most is actually the R&D phase that design validation conformance tests. This is real engineers are developing a new switch, routers, piece of the network equipment, and we need to verify that the design is working correctly. It works correctly to our specification sheet and it also works aligned to any international standards that the claim in conformance to. Now the important to this area is that we are affectable and enabler to our customers in that if we can provide them the right tool that allows them to qualify that equipment freely and quickly, it means they can enable a new revenue stream. They can get it into manufacturing, and that starts a new revenue stream for them. So you can see by the chart on the bottom right, even that when the technology becomes mature, as the R&D phases that they, vendors, spend the most money on because having the correct tool at the right time, allows them to complete their designs and start new revenue flows. The one other area that we focus on is an area I refer to a maintenance test. So this is really where the initial maintenance of network doesn't solve the problem. You need to swap cards and they still can't seem to fix the problem. Then we bring in a higher level -- higher skilled engineers, technicians trying to understand what's happening at that case the network is making -- that's causing a problem. And so we can provide to us as well to get a deep insight to what's happening within the network. So if you look at our customer sites, they fall into 4 sets really. We've got the top left. We've got the equipment vendors. So these are the companies like Ericsson, Nokia, Cisco, Huawei that are using our equipment and our R&D phase that design phase they've developing equipment, they're developing switches, routers, network equipment that will be used to build networks. And they are using our product to test during the R&D phase. And that group of customers represents around 55% of our business. The second group of company, customers we have are the network operators. So that AT&T, BT, China Mobile that operate the large networks around the world. Obviously, the bio maintenance tests to maintain their network. But they actually, especially the large operators will actually also buy to proof-of-concept test before we deploy new equipment into the network. They'll run proof-of-concept tests to check that it's working correctly. And they used tools and run tests very similar to what's been happening back in the vendors during the final R&D phases. So again, we can sell our R&D test as now. And although we don't sell a lot from a food chain point of view, it's very important because these proof-of-concept labs are really important to the vendors that are successful at them because that's obviously an enabler to them to sell that product. So if they know our product is going to be used to verify their performance, then they'll want to do that back in their own lab cost. And that group of customers represents around 15% of our business. The last part of the telecom ecosystem is the component manufacturers. These are Intel, Qualcomm, Broadcom as well that generate very sophisticated chip sets. Again, they do R&D testing, they make prototype for us so that they can evaluate. So they're doing same sort of testing the vendors to do so they need to send [ solar ] testers. And again, when they're going to demonstrate their performance to the vendors, their customers than you would hope they were using our test equipment to verify and improve their performance. So they represent about 6% to 8% of our business, a small part of the business, but important that we close at the whole ecosystem and a successful through [indiscernible]. The last group of customers and an interesting group and we'll talk some more about them later on. And this is the large enterprise is like a Walmart or Wells Fargo that run their own networks. And increasingly, it's the hyperscale that people are running the data centers in this world that actually need to do testing as well. And this group of customers at the moment is around the low 20s, 22%, 23% of our business. And in the area we're going to focus on moving forward, and I'll talk about a bit more in the presentation. So that's Calnex, and I'm going to whistle stop to what we do. So how did we get on last year in FY '22? Well, actually, it was a very satisfying year, especially given the backdrop of the challenges that we have for semiconductor shortages. The fact that we managed to grow revenue by 23%, up to GBP 22 million was really good. And also, the profit grew by 18%, up to GBP 6 million. We also generated cash. So we're now sitting on a cash balance of over GBP 15 million. And this year, we are going ahead to implement a dividend policy. We did an interim dividend at the half year for the first time, and this is the first full year and is proposed at 0.56p per share. And I say it's been a reassuring year because our success has not come from one bad area of success, but really success coming from many areas. All our product lines have increased the success over the last year have grown. All the regions have grown over the years, referring some new areas that we'll talk a little more about back-to-back O-RAN testing, data center testing. So there's multiple elements that actually deliver that tremendous year of success that we've had and also gives us confidence moving forward, we can continue to drive growth through the business. So if we look at some of the highlights of the year, we start with the first one, maybe it's better labeled lowlight rather than a highlight, but the component shortage is a challenge for us. We have managed to navigate the challenges through the year and achieve a shipment to meet customers' expectations, but it's not been without a lot of efforts, both from our own operations team, working with the procurement teams and our contract manufacturer Kelvinside. And also our R&D teams having to get involved at teams are looking at replacement parts to determine whether they truly are drop-in replacements. And if they're not drop-in replacements, having to do quick tons and software releases or even when they artification hardware change to actually be able to utilize the products. So it's been really challenging. I think we're suffering the same problems everyone is having. We're managing the situation. The fact that we have a long-term well established relationship with Kelvinside. There's been a big -- really come to bear the value this year because we worked really closely and it's really been the consulting of -- that Kelvinside our operations and R&D team that's the latest to navigate the situation. And it looks like it's going to continue. It doesn't feel like it's getting worse, but it doesn't feel like it's getting better at the moment. I'd like to tell you when it's going to finish, but I don't know. I'm not sure anybody really knows at the moment, but we're just going to have to keep managing our way through this. The one thing that's been quite positive is, although we've obtained O-RAN and caught longer lead times to our customers, is next to no pushback from our customers. And that's because we are suffering the exact same problems we have. So there's a huge empathy towards us. We understand it's not that we are doing our best and any lead times are longer than they want and that it's because of environmental [indiscernible]. And of course, we use demo units at times to help, to random units so they can get some testing started. But what I would say from that is that once this clears, I don't believe it's damaging customer relationships underneath and having longer lead times at the moment once it clears, and hopefully, the relationships will stay as strong and our market position will be equally strong. But in the ground, it definitely creates problems and it will create -- continue to create problems until we can get through and get the back of this. But looking at some of the things that more highlights, first of all, it's the O-RAN recommendations here. Now within telecom is absolutely critical to the whole telecom's ecosystem as standardization and recommendations. If you do a standardization, what you have is proprietary solutions, proprietary solutions, that means that operators can build networks by using equipment from one source and therefore, will tied into that. So for since the beginning of time in the world of telecoms has been standard is [indiscernible]. The ITU-T has been ranged for many, many decades. There's been a number of new forums or recommendation groups at O-RAN, tech OCP that've come about. And these are really important groups and important drivers in the industry. And what we found with the O-RAN is it's really started to pick up an important. O-RAN stands for Open Radio Access Network. So really, it's a part of the network just behind the towers into the network, not the bit to your handset, but into the tower. And are basically looking to break up the network into smaller building blocks where there's a set of recommendations of if you build -- if you are supplying this piece of equipment, this is the performance you expect that the interfaces, this is how you should connect. And that allows younger companies, different companies to come into the market and offer solutions to the latest vendors, to buy multiple parts of the solutions from different vendors. So we've seen a lot of vendors and they start to qualify equipment aligned to the O-RAN standards, both new customer staff as well as new groups within existing customers. So that's been another one of the layers of success we've had in the last year that's just added a bit more to the success of the company. Another area that's been interesting, and we've talked about in previous broadcast if you've been on is the data center opportunity. It is clear now that the data centers are starting to see, having time as part of the -- accurate time distributed as part of our architecture within the data center as value add to them. And we've had success at one of the large hyperscale customers that put in a large order for our product that we've shipped some of it last year. We'll ship the rest of it this year. And we were speaking to a number of other hyperscale and a number of the other data center companies to see whether we can repeat that success and expand the market there. So it's really still an early stage at market, but a very interesting area for us. It's been, again, another layer of success in this year. And somewhere strategically, we're going to continue to work with these hyperscale companies to build our relationships with them, get into working with their teams and help them understand how to deploy time across the data centers and hopefully help to find the way that -- what we can contribute by selling solutions to them as well. And then last by no means least, we have talked many times as well, our growth strategy is one of organic and inorganic, where we've continued to look at other companies where they are open to partners, whether it's a partnership in terms of resale or an acquisition. Again, it's all about finding new business for us [indiscernible] new customers, we don't sell to today or something in addition to what we already sell to our current customers, not better or slightly different, but in addition. And this year, just post acquisition period we had the post financial period, we acquired iTrinegy, and this is the [indiscernible] the ability to test applications running on the cloud and a new set of customers. And we'll talk about that a little more later on to show where it fits in the product portfolio. So really an interesting opportunity for us. This first year is all about the integration, [indiscernible] understanding what the opportunity is then really pushing near 2, 3 to start to create a growth engine for us as another layer of success that we can add on top of everything else. Within the company, we've continued to invest across the whole -- all the teams. We've grown R&D, sales, sales support, we get more customer support people in the field, where they're working with key customers. And we've put more people in actually all our departments as we've grown through the year. We also brought in a new VP of Operations. This is something that has been planned for a couple of years. And really, as we've continued to grow, we've realized we've got to the stage with a manufacturing, that we need to kind of look for some bigger changes, bigger evolutionary changes so that we're better positioned to scale and keep aligning to our customers' needs in terms of being able to flex our ability to deliver, alligned to customer needs. And so that's been a success. Obviously, Steve mentioned a rate -- a pretty difficult time rate in the middle of our component crisis, but we're already starting to see the way that we're involved in that process that we were evolving where we at the Kelvinside add value into our internal capability. It's also been a good for trophies. We actually -- we were fortunate to achieve the goal standard accreditation from investors in people and relate to believe not many companies achieve gold standard in the first time and asking, and we did so something that we're really pleased that we have achieved that. And also post period where we awarded two Queen’s Awards this year one for innovation and one for our international trade, twice is great Kudos for the team and a good recognition that at the end of day, we seek to build a team that feel committed to us because the committed because they want to be part of our team and enjoy being part of the team. And having these external recognitions that we have actually doing a completely good job has been really good. And one of the other things tied in to that is we've kind of increased our social responsibility approach and this year, part of our ESG policy. We really -- for years, we've done Charity donations. For years, we have tried to -- we've always maintained a high standard of corporate governance. We grow by our business, we grow by our customers but we're always trying to push forward and do more. And this year, the Board agreed to put together fund equal to 1% of our profits on the social responsibility team. On that side, a group of employees that basically look at a chart -- opportunities for us to charities and environmental projects. And the key word that we have is meaningful. At the end of the day, we're not an oil company, we're not a Google or an Apple, we can't change to all on our own, but we can make meaningful impacts and where we felt we can make a meaningful impact is in the local community where our staff left and work for a small charities, given on 1, 2, 3, 4 phasing can make a massive difference to. So we're really asking employees to let us know what they want to do, how they feel they can contribute back into the local community, which is important. It means that we are making a meaningful difference. It makes the team feel good because we feel that delivering being part of Calnex helps the local community in a very positive way. We are also increasing our skills training this year. We've always done a lot of mentoring, one-on-one mentoring. We're going to do more formal training, a lot more money to obtain, again just starting to develop our people, develop our skills across all parts of the organization. We've also, last year, put in place mental wellbeing awareness classes that we are again running this year, and we're going to run every year. As we tell people, it's not only about -- it is important to look after yourself when -- take care of yourself, but also be aware of your colleagues. It's quite often your colleagues that notice that you are under stress, potentially quicker than you notice that you're under stress. So there's a responsibility within the team to look after one another as well as looking after yourself. And the last thing on the chart here is that next year, or this year, we're going to go for certification for the ISO 14001, which is the ISO recommendation for environmental policy. And that will give us a framework in the future, build out an environmental approach and ensuring that we are reducing our carbon footprint moving forward in a meaningful way and an understanding way that we can make meaningful changes to how we go way doing our business. So a lot's happening there as well. So at that point, I'm going to hand over to Ashleigh, and she's going to go through some of the numbers.

so I'm going to take you through some detail on the income statement and the cash flow in the next couple of slides. But just before we want those I thought it would be useful to briefly remind you or for those of you that are new to Calnex, take you through some of our revenue model KPIs, just so that you can understand a little bit more about what drives our revenue. So as some of you may know, Calnex generates revenues through the sale of bundled hardware and software as well as software support and extended warranty programs. And the first graph on the top left of this slide shows you the split in those revenue streams over the last 3 years. As a reminder for some of you, we bundle our hardware and software revenues as each customer will purchase slightly different combinations of a hardware product with software options included. And Tommy will show you in the next section, a range of product -- our range of products. And so you'll see that the makeup of a revenue bundle will depend on the hardware product being purchased, first of all, and the numerous software option choices that each hardware product can offer. So each customer compared to a different combination of software options for each hardware product depending on what they need it for. So once a customer has purchased the hardware product, with the software options that they wanted at that time, you can come back for additional options to be added, the ones that they didn't have before or they can come back for upgrades to existing options that are then added to the existing hardware. And those upgrades are supplied through the provision of a license key. And we also a -- sell them a stand-alone software upgrades as well. So as you may expect, there is a degree of variability in the average price per transaction and order. And this revenue is recognized going dispatch or delivery -- sorry, dispatches got a hardware element included in the order or a delivery of a software license key as a standalone software. And that makes up the majority of our revenue, as you can see from the graph here. So on average, over the last few years, approximately 90% of our revenues were generated by bundled hardware and software sales. And then the remaining 10% of revenues is from software support and extended warranty programs. So each of our products comes with the standard warranty period, which can be extended for an extra fee. And we also supply or provide software support programs to customers. And that revenue is recognized over the life of the product because it can depend on how many years that customer wants the service to cover, and that's recognized over how long that product will last the customer. So just moving across the slide at the top here, just moving to the middle top pie chart here. This shows you our geographic split. So the chart shows you the 3 year average order split across our 3 geographic divisions. And those divisions are Americas, North Asia and the rest of the world. And as some of you may have heard me say before, our global customer base and distributor network just allows us to balance risk and gives us resilience to ensure our order pipeline is robust enough to counter any external market influences across the globe. And up to recently, we've seen an almost even split of orders across these 3 geographic divisions. And you can see from the pie chart in the middle here, the North Asia is coming in slightly behind the other 2 regions, 30% on -- in this analysis. And as a result of the ongoing U.S. and China geopolitical tensions, which are also exacerbating the component shortage issues in the region. However, if you were to look at H1 versus H2 for North Asia this year, H2 picked up significantly on H1 which is very encouraging for us. And this in one flight time, I'll show you what that profile looks like from a revenue perspective as opposed to an orders perspective. The only difference being the timing of any shipments going to the door. I'll come back to that second. So moving over to the last chart on the top here, the split of telecoms customers versus non-telecoms. As you can see from the chart, the ratio of telecoms and non-telecoms customers. And when I see non-telecom customers, that's the hyperscale enterprise category of customers from previous slides were Tommy talked you through this, the customers split that we have. As you can see, that ratio has remained in line with the previous years at 23%. And if you take into our growth this year, it just shows in both sources of orders, sources of revenue are growing at a rate, which is also very encouraging. This is moving down to the bottom part of this slide starting on the left again. Our top 10 customers are some of the largest industry and you'll have seen that from the slides previously, [indiscernible] customers on it. And over the last 3-year rolling period to March '22, our top 10 customers contributed 50% of total orders in the business. And that's very much in line with the trend from last year and the year before. So that change is just continuing. And in addition, the average length of relationship that we have with our top 10 customers is 10 years. And again, that trend is continuing over the years. And that just demonstrates the repeat nature of business that we do with our customers. So we see customers come back to order us -- or order from us frequently for various reasons that they may want to buy multiple bits of the same kit for a multiple sites, they may want to add new kit as they grow their labs or testing requirements. And more than me want to -- as I've seen before, adds new software options or upgrades to existing hardware. And that repeat demand is the metrics that we measure across our whole customer base as well as our top 10. So the pie chart in the bottom middle of this slide shows that in FY '22, the 3-year revenue profile showed repeat revenues generated on average 79% of total revenues, and that increased 80% last year, which again for that change is kind of continuing. And all the while, we received orders from this -- in FY '22, we received orders for 233 different customers and that was an increase on 199 customers in the previous year. And then just the last graph here, some of you may have seen this last graph -- this graph before, this is the case study using one of our customers that appears in our top 10 on a frequent basis, but this is really quite demonstrative of the trend across a large majority of our customers, it's really just to increase an example. It's really to pull together all the aspects of the different drivers that we talked about on the slide. So the red area chart at the back is the orders that have been generated from this customer. The gray bars are when they've come and asked us or come -- bought a hardware product from us. And the black bars have really come back for upgrades, the software options that they bought with that original hardware. So as you can see, the revenue -- or the order generation which [ contribute ] from that customer is not only just generated from them coming from and asking for hardware products but is equally generated from them coming back and asking for upgrades to those existing products and the bundled effect of the 2 of those things together. So hopefully, it just gives you -- it just demonstrates the bundle effect of our revenues or our main revenue stream plus the repeat nature of business that we get from a typical customer. So just moving on to the next slide. This just shows you briefly, the split of the revenue growth and the revenues in the year, across our geographic divisions, just to give you a bit more of an extra flavor. So as Tommy said, our revenues have grown 23% in the year. And that, across our geographies was in Americas, the Americas grew 23% as well. Rest of World experienced 31% of a growth in the year. And North Asia, if you've seen our half year report, you'll have seen in North Asia at the half year point was flat year-on-year or half year on half year compared to the previous period. In the full year, North Asia grew by 14%, which is just a really encouraging H2, as I was saying, with the order profile really encouraging H2 just to come back to that 14% growth, which we think is really good for average. So just on to the income statement, to bring that all together. That hopefully gives you a bit more of a flavor behind the 23% growth in our revenue line. So I'll skip right to the gross profit line. Talked you through a few of the metrics within there. So gross profit in pounds terms grew at 18%, and that's very largely driven by the revenue performance. Gross margin was 75% in the year compared to 78% in the prior year, and that is largely driven by product mix. So in a normal year, we can see fluctuations in margins by 2% to 3% each way. And that really depends on the product the order, the shipping and the bundled effect mix in the year. So it's very much driven by product mix and very much normal course of business fluctuation. So just skipping down the P&L before I work back up and talk you through the cost base, profit before tax, and that's shown here as an adjusted profit before tax. And that's only to take indicate adjustments that happened last year. There are no exceptional costs in this year's P&L. So profit before tax is GBP 6 million in the period, and that compares to GBP 5.1 million last year. And that again is an 18% improvement on last year. And you'll see from the margins and the KPIs underneath this table, profit before tax -- the margin, sorry, was ended the year at 27%, and that compares to 28% last year. So you can see that the 3 percentage point differential in the gross margin has come back to just 1% differential on that PBT margin, just shows you that the same was driven by the fact that the cost base, as a percentage of revenues didn't change and helped us offer that change in the gross margin. So just a little bit more on the cost base. Admin expenses, which exclude in this table here, it is depreciation and amortization, which are [ down ] in the P&L. And excludes IPO costs and IPO-related [indiscernible] in the previous year. So Admin cost this year were GBP 7.9 million, and that can push to GBP 6.5 million adjusted admin costs last year. And as you might have heard us talk about at the half year, at the start of FY '22, there's a planned step change in our cost base, which was built into our forecast of the day, driven by both a ramp-up in our teams to meet and prepare for future growth and the change in cost just came as part of being listed entity. So the increase in admin costs between 2 years here relates to the higher staff costs as we help the teams and continue to grow the teams across the business. Staff profit share as a result of us significantly beating our budgets for the year. And higher sales team commissions just as a result of that increased trading performance and the increased orders on last year, and that was offset and partially by some savings in foreign exchange costs compared to the previous year. And we initially expected travel costs to increase this year as a result of COVID restrictions being eased, but that -- increases only marginal this year as you will know, travel restrictions were predominantly still in place for the first half especially. So costs were only slightly up on last year, but we expect these costs to come back and start to ramp up in as restrictions ease in this current financial year and in the future. Amortization of R&D costs increased by GBP 0.4 million compared to the prior year. And then that is really just the result of us increasing our R&D headcount as well as we ramp up for growth. So the R&D team has seen a significant increase in our headcount, which is good. For those of you that don't know Calnex's model aren't we capitalized 100% of our R&D spend and amortize that over 5 years. Our useful life of our products and can go up to 10 years and more. So we believe that 5-year amortization policy is extremely prudent for the type of products that we're looking at here. And I'll take you through the cash spend on R&D on the next slide in just a couple of minutes. And just very quickly, a couple of things here to point out with the tax charge of GBP 1.4 million in the year, and that's an effective tax rate of 24%, is a little bit more in line with where we would expect it to be this year compared to last year's an effective tax rate of just over 5%. Last year, the IPO transactions -- a lot of things are happening in there that from share option releases as part of the IPO that gave the customer tax. If we gave the company tax benefits. So the effective tax rate was quite exceptional last year. 24% is a lot more natural for where we are in this stage of the business. And that is driven largely by the increase in the corporation tax rates that are going to happen in FY '24 as we calculate our hybrid rates and buffer slightly by the benefits that we get from our R&D tax credits. Just one last thing on the slide. Just to point out when you're looking at earnings per share. So basic earnings per share was GBP 5.19 million in the year. That is not very easy to compare to prior -- to the prior year at the moment. And it's really just because in the prior year, the weighted average number of shares in issue changed halfway through the year because of the IPO and the sector tax rate was [ sold ]. So the calculation was very exceptional last year, but we hope this year that we are now forming a comparative that will help and compare for future years going forward. So just onto the cash flows, just briefly cover off a few things here. So the cash flow table here is slightly different to normal statutory cash flow. And that's just because just wanted to strip out some of the one-off costs -- one-off cash flow items that happened last year just to split the cash flow between the operational cash and one-off. So we focus on the top part of this table just now just to talk you through some of the operational cash movements. Now let's cover off how that looks like coming down to the bottom of the cash flow in the second. So as you can see, from the top part of the cash flow here, the group generated GBP 2.7 million in cash in the year. And that compares to an underlying cash flow of GBP 5.4 million in the previous year. So 2 things to point out there in terms of what's driving that variance to the previous year, increase in development costs. As I said before, our R&D team has grown as we grow our teams to service the next years -- future years of revenue. So -- but if you look at the development cost capitalized and other CapEx line within that GBP 4.2 million, $3.9 million of cash was spent on development costs that were capitalized and that compares to GBP 3.3 million last year, very much driven by increases in headcount. So that's one of the drivers. The second driver is the movement in working capital. This is just very much a timing and cut off and difference here. So when you're looking at the working capital movements, you then drill down into the actual movements on trade debtors. This is the thing that's actually driving it. Our trade debtors balance is heavily weighted towards invoices that come in from our main distributors, Spirent, who are excellent peers. They pay on certain days. So last year, they paid a couple of days before the year-end. And this year, they've paid on the day just after the year-end. We knew it was coming. It was just the way that the year-end fell. So you'll see, as said in the RNS that the GBP 4.1 million worth of trade debtors that we had at the year-end were all paid off over the 30 days that have occurred after that. Or majority of GBP 3.9 million were paid off in that first 30 days. However, a large majority of that GBP 3.9 million was actually paid in the first 2 to 3 days at post year-end. So very healthy working capital churn here. Just one -- a couple of other things just to pull out on the bottom part of this cash flow here. So I will not cover the IPO any cash flows from last year, and they're just plot here for information. In this year, we are now sitting with quite nice, healthy cash balance. We take advantage of high interest deposit accounts for some of our cash, just to make sure that we're gaining as much interest as we can out of our cash. And just under IFRS rules for accounting, if you have cash on high interest deposit that's longer than 95 days, you have to class out something different on your balance sheet if the class of a fixed term investment on the balance sheet. So it's just under these cash and cash equivalents. To us, still cash generation. So it's included in that GBP 2.7 million and then just stripped out for presentation purposes within the actual statutory cash flow. So we ended the year with our very healthy cash balance of GBP 15.4 million compared to GBP 12.7 million last year. That just gives us a very nice capital as we dig into this year. Just to remind you the still low debt on the balance sheet. We paid all the debt off that we had as part of the misuse of funds from the IPO. And we have a GBP 3 million times RCF facility sitting in place with Barclays, which we've not used to set up at IPO still unutilized. Back over to you, Tommy.

Okay. Thanks, Ashleigh. So let's have a quick look at the back end strategy and what's happening in the market and what's happening in our product programs. So first of all, from a market point of view, I guess if you listened before, we are really -- where we see the growth engines of what's creating growth for us is 2 big industry trends, which we do think has changed a great deal over the last year. The growth is still there, and that is the build-out of the mobile network. Sometimes referred to as 5G. We like to think of as the build-out mobile because it's more than just radio heads, there's a restructuring of the world network behind the radio towers. And there seems to be continuous progress there in doing that, there's continuous progress and investment in our customers revenue equipment, things like the O-RAN that's defining new types of equipment. People are investing in. So all the drivers there suggest this is continual, unabated by the moment in terms of the growth opportunity that's creating for the industry. The second one is obviously the move to cloud computing. That continues to push ahead. That's creating opportunity for testing infrastructure in terms of testing within the data centers. What happens in the data center, they are constructive, they are managed. They're obviously creating opportunity for our services that are running on top of the data center that are using it as a computing resource. And again, through the period, we really don't see a significant shift. The growth is continuing unabated and that's good for us in terms of these areas that we are attached to. If you look at our product program, this chart is slightly different than last time. And so let me talk you through just where the differences are. On the left, we have a lab set product, which is still at one of our key selling products, Paragon-neo, which tests in the R&D phase that the acurate time transfer. It continues to be the market leader. We've had good progress in last year when we released our very high-speed interface support on that good reception from customers. We've got a number of other interface supports that are coming out through this year. So we expect to continue to generate growth from that product line moving forward. The second group we call Networks Sync, we used to call Field Sync. The [indiscernible] Field Sync part is still there. That's the telecom part, the Sentinel that's used to do that maintenance test and like networks telecoms network. But actually, this product we've so far been selling into the data centers because the data center is just a network in a building. And so they've been testing time or the delivery of time across the data center and using the Sentinel. Now in the data centers, the functionality required is pretty much the same, but the format is slightly different prefer something that's more right minted and potentially want more different variations in terms of configurations, 10 gb, 1gb the interface is 1PPS as configured. So we've created a new product called Sentry, which from an engineering point of view, there's huge leverage between these 2, but continue to work off a common base with 80%, 90% engineering leverage, but more that it's from a former fit function it's going to be set to be more attractive to the data center companies. And so this is really an important product for us to increase engagement with more data center companies and see how we can develop that market opportunity for us. And then the third set, we've got a cloud and IT products. The ones labeled infrastructure are the ones we've had for some time. Again, we've had a good deal with these in terms of creating good market progress. Both in terms of what we've been before, but also actually in terms of O-RAN capability, although a lot of the growth that O-RAN's given us in the last year has been in the site testing, but O-RAN covers many different aspects of the equipment, not just Sync and we'll actually see where we can use our network emulate us to verify other elements of the performances are specified in O-RAN. And then we have a new acquisition, the NE-ONE that comes under applications. So I've got to say to you just to try and expand and what's the difference between infrastructure and applications. When we test today until we acquired the NE-ONE, we really were selling to infrastructure people. Our network emulators were used to emulate networks to test switches really close building infrastructure, and that was how they were used. And the way that customers use this to set up a network emulator is very specific to that. We think about throughput, we think about interface type, et cetera. And so we had a high-performance device in the Attero on the right, the one in the middle, the SNE, which is more high complexity PC base. And then this year is where we released a software version of the SNE that can sit in the cloud when people start to build and run networks in the cloud and therefore, want to do some testing in the cloud for Virtual SNE. But with the NE-ONE, if you look at the customer base iTrinegy, they were selling to people that are building applications. So these software applications that sit in the play, it may be the set today in competing resources in our own building or the movement into the cloud. So things like your banking app, that's an application. Our trading platform, our financial institute had they may be appreciated to set in the cloud on a gaming console, our game and online game, that's an application. And in that case, you need to test performance. You need to make sure it works. If you, for example, have a game where you get 10 people in London, playing all interactive with one another. You got a few people in Edinburgh. You got some people in Tokyo, South Africa, et cetera, the gaming community make sure all these users get the same user experience because, as you know, if they don't and some guy in South Africa, [indiscernible] is getting short to off because the network is not working for him, then he's going to go and work on it, [indiscernible]. So that's what these products are used is for testing these. And these companies, when you're building an application or running a gaming application, we have no idea what networks are being run over [indiscernible] interest in specifically 1gb, 10gb [indiscernible]. It was specific the interested in the characteristics of our network, what is the delay between London and New York versus a delay between London and Tokyo? What sort of performance are you going to get? How many drop packets you're going to get. You're going to get a different level of performance in each of these paths. And therefore, you want to emulate that to see whether you get the same user experience in respect to previous setting using the software application. And so really, we find that the iTrinegy were aimed at a completely different set of customers for us. And that ties into our M&A strategy of a getting a new set of customers, people that we are not selling at the moment. So really year 1, it's all about understanding where the market opportunity is for that price. So a really good well-engineered product where we feel we can add values to understand that route-to-market, develop the route-to-market, find a way that we can really take it to a bigger base and it's been getting to until now. And then in year 2, hopefully, we can turn the entire growth engine for us. So when we look at our strategy, again, it's pretty much the same as it was the last time. We're going to continue to capitalize on the growth of the 5G or the building of the mobile infrastructure with the Paragon and what we're doing there with our field, our telecom sector product in terms of continuing to enhance our capability as that network continues to grow and it's a continuous investment in new technology to expand the footprint of the mobile network around the world. We're going to continue to look at the cloud computing sector. We've obviously got an infrastructure emulators that are actually being used to test the infrastructure test, the data centers test, the networks as to build and maybe we've got the NE-ONE product, which is allowing us to actually access or benefit from selling to the customers that are using cloud computing services and use putting their applications into the cloud. And we're going to continue to look for M&A. It's been part of our strategy all along to look for interesting companies that have products that get new business system and maybe we're partner of the companies and maybe do another acquisition. But again, it will continue. The primary objective is no different. It's about getting to new customers. As we have people who don't sell to today are getting new business from customers we do sell to today, something in addition to what we said. So to summarize where we are coming into this year and going into the next year, let's start with the [ DAC played ], and that's the semiconductor shortage. It's a tough -- it's a tough time working on operations and the procurement today, and it doesn't look like it's going to change very much in the near term. Fingers crossed, it does change because it's taken a lot of energy. We have money through this situation. We're going to continue to work truthfully with our partners to make sure we can manage it and continue to meet customers' expectations in terms of delivery. But I'd say that, we feel confident going into next year. There's a lot of all of oil programs of growth opportunities in the year ahead. So it gives us a chance to have a gain a year to a number of small activity growth that hopefully are together to be significant. The drivers within the industry remains strong, it looks like there's continuous drivers -- of the market's growing. We got new regulations, new standard bodies coming on, new forums coming on, which potentially could bring the opportunities for us as well. Of course, we have a brand-new product line that this year, we need to obviously focus on the integration of the Steve and each team getting built out to the organization, develop that channel and hopefully create a growth engine moving forward. So at that point, I'm going to stop and I think we're going to have a look and see if there's some questions.

Tommy, Ashleigh, thank you very much for your presentation. [Operator Instructions] Tommy, Ashleigh, as you can see, we received a number of questions throughout today's presentation, and thank you to all the investors for submitting those. I know you have a busy schedule this afternoon. But if I could just ask you to read out the questions you can and give responses where it's appropriate to do so. I'll then pick up from you.

Okay. Thanks, Alesandro. And I can see a couple of questions. I'll kick off, if that's not related to me. So one of the questions here from Martin S. You've asked what proportion of Calnex total revenue is recurring revenue and how is this likely to change and evolve. So hopefully, from my chat through the revenue KPIs, it's been it's giving you a bit more of an idea of our revenue profile is more of a peak model rather than a recurring revenue model. And the warranty and software support revenues they're not necessarily recurring, but they do amortized to the P&L rather than being our point-of-sale revenue. We see this -- we see our model continuing, that repeat revenue basis as customers will come back to us for additional products. And the markets that we work in don't necessarily -- with the types of customers that we have, the types of spend that they spend with us, it's very much part of their CapEx budget. So the customers that we deal with don't necessarily actually want a recurring revenue model with us. So we tend to stick to the model that we have right now, and we see that kind of being the case going forward. One other question I can just see here, [ Andrew Dave ] asked, are the company showing on the customer slide with the fourth section of customers, all customers of Calnex or examples of the type of company per [ category ]. They are our end customers. We do have a distributor network that we work with. However, we -- these are our end customers, and we do also -- we do also have the relationship with these end customers. Hopefully, that's a bit clear.

Okay. All right. Just lost again, here we are. It's from [ Jonas ]. Are we in any standard for his advisory committee here, we get involved. I guess through the life Calnex be involved in the ITU-T. We continue to get involved in the tailing group, which is the one critical for our timing products. But the O-RAN, we're involved in a number of the -- O-RAN's quite a big organizations. Again, a couple of sub committees we are involved in related to our work is also a tip organization. It is a team infrastructure project. We are involved in that. We're actually tier 1 of the subcommittees in that. And there's a OCP organization, a forum that's actually starting to look at kind of open computer program. So again, these areas -- these are all forums that we have been involved in. We continue to monitor back and forth, again, we're just looking to see whether they're wireless to just see O-RAN created business for whether Tech and OCP during the future, time will tell. But that's part of a key part of what we do in terms of staying connected to our customers. Communications going with the customers, but also get involved in the forums where we meet our customers there as well to try and understand the lay of the land for us changing and see any opportunities that may be starting to appear in front of us. Another question here on the ESG side, what can we do with the reducing we -- assisting our customers to just so we -- do you offer to take back and return old equipment? Yes, we do. I guess despite the we -- I guess all companies are required to do that. To be honest, we don't get a lot of our equipment sent back to us. Our products often set for long run periods and racks and just continue to work. Things like the Paragon-X, you see them sitting for 10-plus years in racks and continue to work. So we will continue to offer that. We'll continue to look at things to do. And we're looking as well internally we go back to ESG to see if we can reduce our carbon emissions as well in a meaningful way. As a young company that can be quite limited, but it doesn't mean to say there isn't things that can be done. Another question, can you confirm your ISO name placement certified? We are. It's easy you want to answer?

And we're also working towards the health and safety contest. I won't take the vitamin to one if we're working twice [indiscernible].

There's another one. I'll pick up. What's the company related to look like in 3 years time? What well you've been doing different from today? I don't think we'll be doing fundamentally anything different. We just need to do more of the same. Actually, every product line that we have, we maybe a time set when we set targets ahead, we tend to set -- we feel our achievable targets. But that doesn't mean that internally, we don't have ambition to be far more than that. But we're really looking to grow all the product lines that we have, and we believe that there's enough opportunity out there that we should be challenging ourselves to grow everything. But we're also looking always to get new product lines as in the NE-ONE. So if you look forward, we would continue to keep all these product lines, going keep moving forward, working the strategic approach that we've taken to build relationship with the data center companies. We're going to continue to do that. We're working with all the big companies at the moment. We haven't stored to them all, but we're working with them all and try to build that relationship. Hopefully, that will bring the other product opportunities to us. So it's a matter of just adding another layer and another layer and another layer going forward. So I guess that forward-looking is just more of the same. It's more of being bigger at what we are doing, but also finding other areas and the other products, there all sets of customers that we can address. And lastly, 3 year, I guess, I could pick up that China is playing in 6G. And can you confirm [indiscernible] future ahead. I see the discussions in 6G almost -- maybe not the world [indiscernible] . But it feels like a thought process at this point in time that people are trying to think 10 years from now, what's everybody going to want from the telecoms network. What's it going to have to deliver to support the smart cities of the future? If you go back 10 years, if then you want to remember, I can't remember that far back in terms of what you did and what you got from the network and how it's changed in terms of what it's -- the network there to support the smart cities, it doesn't create the new apps. It doesn't put change in a year you run your life or live your life, but it creates the platform that allows us to change like. So a lot of the discussion of 6G in my view is trying to look past where at the moment because it is a constant evolution. There's a lot of talk about 5G, is as it's a spot technology. And it's very much presented to the consumer world that it's a spot technology. But to me, it's a euphemism for the build-out of that mobile network, and it's a continuous evolution and are moving to different rates, different topologies, different structures, different standards coming in. We just continually happen all the time because the industry is pushing to build out that connectivity. So when the smart cities need to connect the infrastructure there to allow them to.

Tommy, Ashleigh, thank you very much. I think you've addressed those questions you can from investors. And of course, the company will review all questions submitted today and were published those responses on the Investor Meet Company platform. But just before redirect investors to provide you with their feedback, which knows particularly important to the company, Tommy, could I just ask you for a few closing comments?

Sure. Yes, it's been a good year. As I said, I always start with a negative because I think -- I'm positive. But the one play to everybody that's using any electronic component in any industry in the world has got more the supply chain. It's taken a lot of challenge. I guess I need to thank Kelvinside for our support because they have been really supportive and the strength relationships really come to bear in the last year for our teams to what we aim to really navigate away through an incredibly difficult situation and hopefully, we'll clear sooner rather than later. But there's many reasons to be cheer for us to say I don't think it's damaging relationships with the customers. So that's positive. We see in all our product lines, there's opportunities where we need to drive ourselves to really try and realize these, continuing to grow. And the changes that are happening in the industry as well. Again, good sense for new opportunities that we have here in the future for us to generate additional revenue as well. And obviously, we look forward with the acquisition that we've just taken on board. The acquisitions and integrations are always a challenge and never come for free. But I think we've had a lot of experience in the past and so far, so good. The teams are working really well together and feeling good that we can bring it together and create our growth engine going forward. So thanks very much for your time. I appreciate it. And hopefully, we'll catch up next time.

Thank you so much.

Tommy, Ashleigh, thanks on again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirect to provide your feedback in order of the management team can better understand your views and expectations. Just let me take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Calnex Solutions Plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.