Nanoco Group plc (GXG.DU) Earnings Call Transcript & Summary

Good morning, and welcome to the Nanoco Group plc investor presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. And I'd now like to hand you to Christopher Richards. Good morning to you, sir.

Good morning, Alexander. Good morning, everybody, and welcome to the Nanoco webinar. My name is Chris Richards. I'm the Chairman of Nanoco, and I'm delighted to be joined today by the 3 senior executives of Nanoco. First of all, Dmitry Shashkov, our new CEO, who's been in post now for a month, and you'll hear a lot from him in this presentation. I'm delighted he's really making a major impact in the company, which is terrific. Secondly, Liam Gray, the CFO, whom I think most of you have met in previous webinars and, of course, very importantly, Dr. Nigel Pickett, our Founder and CSO (sic) [ CTO ], who -- one of the very few people in the world who've generated IP, which has been validated in excess of $150 million, a real rock star of a scientist in my view. The last few months have been a period of considerable change at Nanoco, not only the arrival of Dmitry, but also, we were delighted to bring in Jalal Bagherli and Dieter May to the Board, both of whom have extensive experience in the sector and a terrific track record of shareholder value creation. And they have all contributed substantially to the new strategy, which we announced a few weeks ago, which Dmitry will take you through. Just, again, on the questions, we had a lot of questions submitted in advance of the meeting, please do submit more questions, and we'll answer as many of those as we can before the webinar finishes. So that being said, I'll pass to Liam, if I may, for the first section of the presentation.

Thank you, Chris. The first slide here is a quick content slide. We'll run through the FY '24 achievements and the FY '24 results, and that'd be me. And then Dmitry will run through The Value of Nanoco section. And then finally, Chris will comment on the GM requisition. So moving on to the FY '24 review. Firstly, we did deliver 2 of our first-generation sensor materials, our production scale. For those who are familiar with our history, we've been working on these first-generation sensor materials for a number of years through the development, optimization, scale-up and validation stages. We then produce these at production scale and deliver them to meet our customers' requirements. Obviously, having fulfilled this order, we were very disappointed. There's no follow-on orders. But it's worth mentioning that the -- that we can produce these materials, as and when we need to, should we get orders in the future. And if not the equipment, which we did receive for free, can largely be repurposed for other iterations of nanomaterials. We did commence 2 JDAs. So these are both announced around this time last year, one with the European customer, which was subsequently canceled post year-end. The other is with the Asian chemical customer, and that's very much ongoing, and we continue to meet all the target metrics, which that customer provides. In the calendar year, we completed the promised GBP 33 million returned to shareholders. This was made up of a GBP 30 million tender and subsequent GBP 3 million buyback, which completed post year-end. We also completed the fit-out of our device and analyst co-lab, which allows Nanoco quick feedback on development of our constant dots, both for existing customers, as part of the JDAs or as part of our own product development in-house on future iteration materials. As mentioned before, during the financial year, we did appoint 2 new nonexec directors. These were made during in February and has experience in leading optoelectronic component companies. And Dr. Jalal Bagherli joined in April and previously led Dialog Semiconductor for a number of years before they were acquired by Renasas. Obviously, post year-end, we've had Dmitry Shashkov joined us as the CEO, and we're very excited to have all 3 on board. And then finally, we did appoint CDX to advise on the future of the operating business, and Dmitry will cover that in a bit more detail later on. So moving to the financial highlights. We did see revenue increase by 40% from GBP 5.6 million to GBP 7.9 million, and this is due to full year impact of the Samsung license recognition, which has contributed GBP 6 million of the GBP 7.9 million. The other GBP 1.9 million of revenue is from the 2 existing JDAs, plus some small material sales through the [indiscernible] to other customers. The improvement in revenue has moved Nanoco from adjusted LBITDA of GBP 0.4 million to an adjusted EBITDA of GBP 1.2 million. Again, as mentioned on the previous slide, we did return GBP 33 million to shareholders during the year with GBP 1 million of that being completed post year-end. We continue to invest in our capabilities and complete the fit-out of device lab, which came at a cost of around GBP 1.5 million during the financial year. And this allows us to make basic acuity-enabled sensors at R&D scale, which again improves the feedback loop of the QDs produced. Our year-end cash is GBP 20.3 million, and a couple of slides will look at the reconciliation between the open position of cash during the financial year and the closing position of cash. And then finally, following the announcement by the European customer to cancel the ongoing JDA post year-end, we did announce a restructuring to rightsize the business. This process is largely complete, and the savings from this process will be reflected in H2 of this financial year. Moving on to our summary income statement. As previously mentioned, revenue was up by 40% or GBP 2.3 million, and this increase in revenue has contributed an additional GBP 1.9 million to our gross profit in the year. The small other operating income related to grant received from Innovate UK, and again, that project was completed during the year. Whilst we have seen a small spend in our R&D., our admin expenses have increased, which reflects the investment in device lab, which is both additional space and also additional head count. This all means we moved from adjusted LBITDA of GBP 0.4 million to an adjusted EBITDA of GBP 1.2 million. Included in the other adjustment items line is a GBP 2.7 million FX gain, and that largely relates to the Samsung cash we received during the year. We did hedge this amount at a rate of 1.22, and that's where this benefit is derived from. Offsetting that is a charge of GBP 1 million for share-based payments. You'll see the prior year, some hefty numbers in there, and that all relates to the Samsung litigation. Again, the increased depreciation related to new premises for the accommodation of our device and analytical labs. And the tax charge towards the bottom largely related to withholding tax on the second tranche receivables from Samsung, and we will be able to slide that as an asset going forward against any future tax losses or future tax profits. This brings down to a loss after tax of GBP 1.3 million in the financial year. So as mentioned previously, this is reconciliation of movements in cash. We started with GBP 8.2 million, and then we have the net proceeds from the second receivable from settlement of GBP 58.8 million. During the financial year, we returned GBP 33 million to shareholders, including costs, and returned a further GBP 1 million post year-end. We repaid all GBP 5.1 million of our external debt, and Nanoco is now fully debt-free. The tax paid, again, related to Korean withholding tax of USD 3.25 million along with some tax payables to the U.K. authorities from the prior-year profits. And then we have the GBP 1.5 million capital expenditure on device-analytical labs. And then some other movements, which include working capital, lease prepayments and interest income of GBP 3.7 million. This gets us back to our GBP 20.3 million at the year-end. So moving on to summary. Revenues are expected to fall in FY '25 compared to FY '24, and that's due to the decision post FY '24 year-end of the European customer canceling the project. Our gross monthly cash burn is around GBP 0.5 million per month, and this will incorporate the savings from the restructuring process we started post year-end in H2. Obviously, any additional revenues we identify and secure during the year will further reduce that cash burn. The fit-out of the device lab and analytical lab is now complete at a cost of around GBP 1.5 million and enable a quicker feedback loop on our materials. We've also completed the share buyback post the financial year-end, delivering on our promise to return GBP 33 million to shareholders. It's worth mentioned, one area we are looking to invest in is our BD development and capabilities, and that's something which Dmitry will touch on again in a few slides. And finally, on cash, there are no further significant capital requirements of the business, and our cash runway way is secure for the foreseeable future. And so with that, I'll pass you on to Dmitry to introduce Nanoco.

Thank you, Liam. Good morning, everybody. I'm happy to be here, and I'm looking forward to answering your questions, which I know you have submitted plenty, and I hope for more as we move through this presentation. My role today is to cover 2 topics, introduce myself and explain our strategy going forward. But before we get there, I'd like to start with a brief 1-minute video, which we recently released, which you should be able to see on your screens. [Presentation]

So short video, but it can raise some of the key messages, which I will emphasize today, and that's the message, first and foremost, of our strong and validated IP. It so happens that just a few hours ago, we received the RNS circular, where we confirmed that after conducting an independent valuation of our IP, we received the confirmation from an independent third party that our IP investments in the subsidiaries valued at GBP 46 million, quite a substantial value. I'm very pleased with that. Of course, this is just an accounting number derived using a particular accounting standards, as we should. It is our job as the management team to make this value visible to the shareholders and to realize their value through basically expanding our licensing program after a very successful start to that program with Samsung, as all of you know. And we would be running that licensing program in parallel with growing our commercial business, selling our quantum dot product. So that really will be the key theme of our strategy going forward. With that, let me give you a brief introduction about myself and why I'm here, not only what I'm here to do, but also why I'm excited to be here. My background is depicted here. Basically, I'd like to leave you with 2 thoughts. There were really 2 themes through my career over the last roughly 25 years. One theme, the first theme, is the advanced materials, and I was part of 6 different companies where advanced materials played a key role in my work, starting as a consultant at McKinsey for about 5 years and then in positions of increasing responsibility over 5 different companies, where I served as a General Manager or a CEO of various businesses selling in the industries, such as semiconductor, flat panel display, LED, et cetera. As you can see, the industries listed there in blue color, they are all industries which are quite relevant to Nanoco's future. And of course, I see it as a good fit, just from the technical standpoint. The second theme of my career is really in my general manager roles. I was focused on helping companies grow. So what you see at the bottom of the table in green, it's growth strategy and implementing it through both organic growth and through M&A. That was a repeated theme and the size and complexity of the business, which I was running, increased over time. To give you a particular example, the last company, CPS Group, Critical Process Systems Group, which I took over in 2020 as a CEO, by the year 2024, when I left the business, just before joining Nanoco, we were able to grow the business organically by about 3x on the revenue and about 4x on EBITDA. That's not including acquisitions. And in parallel, we were able to execute 4 acquisitions in those 4 years, ranging from $20 million in revenue to the largest deal of over $500 million in revenue. So I'm quite familiar in implementation of growth strategy, both through organic means as well as through M&A. And along the way, I also was playing a key role in selling the CPS Group to a strategic acquirer Exyte. And I stayed post acquisition to integrate the company and make sure that everything is operational. So again, my background really fits very well with what Nanoco is trying to do, and that was a strong motivation for me to be here. Next slide, please. But the main motivation for me to be here is not about the technical past, which I had. I was very impressed with the great assets of the company, first and foremost, the group of really dedicated and very, very qualified people. You may well know the long history Nanoco has in the industry, really is a trailblazer of this industry. And in addition to great people, it's also, of course, the R&D and the device lab facilities, very strong production facilities and strong and validated IP, by now the trendsetter or trailblazer of the quantum dot industry. The company to date, until the Samsung settlement, wasn't able to really demonstrate that commercial value to the market, and that's part of my job and part of my challenge. I really see this as a great opportunity, as a significant commercial upside to demonstrate that value to the customers and to the shareholders of the company. And for me, personally, this is opportunity to do what I really do well and what I enjoy doing. So that's, in brief, why I'm here. Next slide. Now next, I'd like to tell you a little bit more about the strategy. It was set in our October announcement before my time. But I'm going to call it our strategy. I'm fully bought into this. This is my strategy. I own this, and I can sign under every word, which is presented here. First of all, as many of you know, through prior discussions with the company, there are 2 key markets, which are key to the future of Nanoco, one is flat panel display and another one is the image sensor. What you see on the left, the bar chart represents the 10-year forecast of the volume of various quantum dot applications, and this is from the latest report published a little bit earlier this year. And the 7 bottom categories, if you can see through the colors, 7 bottom categories on this chart are all coming from those 2 markets, flat panel display and image sensor. So without a doubt, in the short and in the medium term, this should be the centerpiece of our strategy to drive revenue and value from those 2 markets. The way we're going to play our game will be a little bit different. In the displays, there is at least 4 competing technologies, which are utilizing or expect to be utilizing quantum dots in the future. The first 2 are liquid crystal and OLED, and they are relatively mature, meaning that there's several companies, global companies in high-volume production, utilizing quantum dot technology in their products. And at the same time, this segment of the market continues to grow. Almost every month, we got new product announcements, and they continue to utilize quantum dot technology on a large scale. If you noticed, just maybe a week ago, it was revealed that the latest MacBook Pro from Apple is utilizing quantum dot technology in first -- for the first time in one of the Apple products. So we expect this growth to continue. So in this part of the market, liquid crystal and OLED, it's really our opportunity to drive near-term revenues, both through licensing and through product sales. And I'll talk a little bit more about this on the next slide, where I explain the business model. But let's first finish with the technologies. The third display technology on the list is the microLED technology. That -- this technology is at a relatively early stage of growth. Product prototypes already exist, but nothing is in high volume yet. And at that stage in the market, our focus is on really developing joint development relationships with as many customers as we can, who will pursue this relationship -- who will pursue this technology on scale. And finally, the fourth technology on the list is the EL display. This technology is still in its infancy. Yet, over the next 5 years, it is expected to launch into the mass market because it is a fundamentally superior technology, but it faces significant technical challenges at this point. Here, we're not going to make any investments, but we will monitor those developments, and we will engage with the early adopters when the timing is right. So a little bit different posture because technologies are very, very different in their maturity. The next block is image sensor. That technology is quite young. There is a few commercial products in the market, but they are predominantly used for small or, at best, medium-sized applications. Nothing yet is at a high volume or at a wafer scale, as we say in the semiconductor world, but we expect this technology to go in volume over the next couple of years. So like with microLEDs, we're focusing on joint development relationships with customers. This -- where 2 of our big relationships in the prior year, one of them is now terminated, another one is ongoing. In this category, we have at least a small handful of additional joint development relationships, which we're pursuing and we see great interest from the customers to engage in that technology, joint development with us simply because of the strength of our portfolio. I'll talk about that on one of the next slides. At the bottom of this chart, we identified 7 additional market segments, which are all -- still at a drawing board. Here, our task is different. Many of you are aware that Nanoco in the past tried to develop some of those applications, but perhaps too early, perhaps before their prime time. We will learn from all the past engagements. And over the next few months, my objective is to develop a short and prioritized list of those additional market applications where we have a real shot at the revenues within the short to medium time frame. Nothing should take 10 years. It should be quite realistic and within reach. And then for the most -- for most of calendar year 2025, we would be executing against those small number but much more concrete applications where we believe we can get customer engagements in the short term. So that's, in essence, how we're going to pursue different market opportunities. Next slide, please. On the next page, I talk a little bit about 3 different business models, which I -- we can pursue. It's quite self-explanatory. If I take flat panel display and image sensor market as an example, in all of these markets, we can start with simply licensing our quantum dot technology to the interested players. That's the first arrows up and down. Business model for Nanoco remains to go for product sales, and it may take a form of just the Quantum dot sales. That's the second arrows. Or we can take it one step further. In case of flat panel display, we could be selling quantum dots in resin as [indiscernible], or in case of image sensor, we could be selling quantum dot inks. This is an important expansion of our business model, because in specialty materials, which is the industry way and -- any opportunity to create a customized formulation, which is specifically tuned to the needs of the customer in their specific process, this is an opportunity to create more value. Not only typically, it's a higher revenue and higher margin for the product sale but it's also a much stickier relationship because your product, once it is tuned to the customer-specific process, becomes proprietary and you become almost impossible to replace with another supplier under most circumstances. So we will pursue that third step on a case-by-case basis where it makes sense. Certainly, it makes sense in image sensor where this ink development process is now front and center focus of technical efforts by our customers, and we will pursue that whenever possible. But when we go back to the top of the display market, I'd like to make an important distinction. We are very proud of the achievement with the Samsung, outcome of the Samsung litigation and the licensing program, which resulted from that. But that was just the beginning. We're quite firm in our belief that any other player in the flat panel display industry, who is utilizing cadmium-free quantum dots on scale, and I repeat again, on scale, meaning in industrial quantities covering thousands and millions of devices, any player who produces those dots on scale will be in our IP territory. And we will pursue that field systematically, and we will develop additional licensing relationships with everybody who is utilizing our technology to date. And that program is quite complementary to the product sales. We will pursue both. And on a case-by-case basis, we can go for either licensing revenues or product revenues or some combination thereof. But that really is the key to our strategy in this place. And the advantage of pursuing the licensing programs is much faster. As you can imagine, qualification of a new product may take months and product performance needs to be confirmed all the way to the final device. So this may take time, whereas the licensing relationship can start on a pretty, pretty short-term basis. So again, I think that's an important opportunity for us to help realize the value of Nanoco through this means. Next page, a few words about execution. Liam already covered the restructuring program. I'll just repeat that it's largely complete. As a result, we now rightsized the organization, and our cash runway is now longer, given us time to develop the business as we wanted -- as we want. Secondly, we continue to invest in our business development capabilities. My objective there is to have Nanoco commercial personnel in all 3 key regions of the world, in Western Europe, East Asia and U.S., by early 2025, and we're well on track to be there. We'll update you as this happens. Thirdly, we will continue to build our device lab capabilities. This is not for the sake of glory or just to show off. Having actual device capabilities puts us in a position to pursue those joint developments with customers, where we can both provide the customer device demos, that our product actually works in the final device structure, as well as to pursue those high-value products, such as inks, which would then be immediately applied to the customer fabrication facilities. And we do it on a full-wafer scale, which is very important, especially for the image sensor market, where that's the path to productivity and to high-volume consumer applications, which we believe will be developed over the next couple of years. And finally, last but not the least, most importantly, we will go for higher quantity but also higher quality of customer engagement. In a flat panel display, again, we're going to pursue product sales and licensing opportunities in parallel with our cadmium-free quantum dot. And on the image sensor, we already have several engagements, and we're going to drive it to a higher number. Our objective is to cover all committed players in the image sensor market who want to engage quantum dot technology into their devices. We'd like to be their supplier of choice, and we're well positioned to do so. The reason we're well positioned, we believe we have a unique and unmatched portfolio of products. You can see the 3 chemical species of quantum dots: lead sulfide, indium arsenide and indium antimonide. These are very distinct chemistries. Each of them has been already tested at the device level. Some of the species already received very high valuations from our customers as the highest-performing quantum dot [indiscernible] in their prototypes. So we believe with that portfolio, we are covering all the ground there is. We're not aware of any other chemistries, which are even being attempted in the image sensor. And between those 3 quantum dot chemistries, we can cover a wide variety of wavelengths. And in the image sensor, marketing different wavelengths open doors to different opportunities. You would use different chemistry if you are trying to cover a defense application or aerial surveillance application or a product quality control application. All the automotive-LiDAR type sensoring all require different wavelength. And we are uniquely well positioned. Again, I'm not aware of any other company having anywhere close to our portfolio of capabilities, both in terms of chemistry and the wavelength, which we can cover in the device. So I think we are very well positioned to execute in this market in particular. Next page, please. My last slide will talk about appointment of CDX. And really, I'd like to acknowledge that our strategy is effectively dual track. My mandate is to pursue commercial development of the company through licensing and product sales, but in parallel, riding the engagement with CDX so we can realize the sale of the operating business in relatively short order. First of all, we're already well engaged with CDX, and we're pursuing that process at pace. But before I go into any details, I'd just like to recap the rationale why we're here, why do we -- why did we decide as a company to appoint CDX as advisers and to pursue those strategic options. For me, the answer is quite obvious, markets today do not value our operating business. And we can complain about it, but I would rather just do something about it. And for me, the best way is to demonstrate the commercial value of the business, in parallel, while engaging with an investment bank where we will be matched with quite a large number of potentially interested acquirers. And that's how the value of the company would be validated through a transaction. In addition, we, without a doubt, are suffering from significant costs of being a small [indiscernible] entity. This come as direct costs, I can only imagine the number of opportunities which are going past us because we are perceived as a small company, perhaps not as capable as somebody who umbrella for larger company, which provides additional capabilities. It comes in the form of growth capital, expanded presence geographically and as well as technical and human resources. And all of the factors just point to that we, as a company, will realize our value best in the hands of a larger entity, which could be financial, could be strategic, cannot tell you. And we're pursuing all of these options, leaving all of them on the table at this point. Why we chose CDX? Quite simple. They're a boutique bank but have quite a distinguished track record, specifically in the TMT in the technology sector. They basically pursued over 500 deals and closed deals in excess of $600 billion, so a very respectable track record there. Some of that household name companies were part of CDX transactions. And they are highly focused on the high-tech sector, which is important because they bring a significant relationship network, which is really global. Our engagement list is quite broad, and I think we expect to receive strong response from potential buyers. So I realize that running this dual track, commercial development and M&A, in parallel, is challenging. But I'm also encouraged by the fact that the 2 processes are mutually reinforcing. Success in one also drives success in the other and vice versa. And I also realize that we have all the right resources to execute, and I'm fully confident that we will be successful on that track. That's the right thing to do for the company at this stage. So with that, I will pass it to Chris.

Thank you very much, Dmitry. And I hope shareholders will agree with me that Dmitry demonstrates a huge knowledge and understanding of this sector and is bringing very important fresh thinking to our commercial strategies as well as the CDX process. What I would like to do very quickly with the last slide is refer to the EGM requisition, if you could change slides, please, Liam. The -- it is with something of a heavy heart that we are, again, facing an activist shareholder who is not acting in the interest of shareholders as a whole. Milkwood has a track record as an activist, seeking to get control of cash-rich companies from a modest shareholding, most recently with Downing Strategic Investment Trust. And they have clear plans that they have shared with us in conversation is that they would like to retain cash in the business and turn Nanoco into an investment company. The Board believes that surplus cash should be returned to shareholders, and we plan to do that progressively during FY '25. We fundamentally believe that shareholders want their cash back. We are respectful of shareholders' right to review, and we will test our assumption at the appropriate time. But we make the assumption, shareholders, it's your cash, not anybody else's. We have a clear strategy to maximize Nanoco's value with Dmitry's appointment, and I think Dmitry has set that out extremely well. Liam has also set out the significant cost reductions already implemented. The CDX process, I'm delighted to say it's progressing at pace. We have a new board and a new strategy, as I said at the beginning, and we have the right mix of experience and industry knowledge, particularly with Dieter May and Jalal Bagherli. Both Liam and I have referred to their sector experience and their industry knowledge. And as we announced recently, I'm stepping down as Chair at the AGM in January, and I'm delighted to say that Jalal will become the chair at that time. So our conclusion of the Milkwood approach is that having the Milkwood nominees around the Board table will be disruptive. They would seek to retain cash, whereas we believe that cash should be returned to shareholders. So we ask that you will vote, and you vote against the resolutions to appoint those members. So thank you very much. I think with that, we are through the slides. And I suggest that we now go to the Q&A. You've asked a large number of questions, and Liam is going to be our ring master and invite us one by one to answer your questions. Over to Liam.

Thank you, Chris. So I'll start with the pre-submitted questions. The first one was the strategic review repeated with the interims seems a masterpiece of optionality. What does the Board actually want to achieve? And what do they consider the best outcome for all shareholders? So Dmitry?

Yes. I love the language. The masterpiece -- a masterpiece of optionality, beautiful language. Thank you for those questions. The answer is quite simple really. Today, the markets are not valuing our operating business properly. And our task is to demonstrate that value through sale of the operating business has a significantly higher value than what the market is showing today, as simple as that.

Okay. Thank you. The next question, report indicates Apple is using cadmium-free quantum dot in its new Macs. What work is being undertaken to determine if Apple's infringing Nanoco's IP? And do you stand by your assessment or assertion that you don't think it's possible to make cadmium-free quantum dots without infringing Nanoco's IP. So Nigel?

Thank you for the question. Yes, I can't really talk about any specific case at the moment, as you probably can understand, and also supply chains can be quite long and complicated. But like as Dmitry said in his presentation, we believe that anyone making cadmium-free quantum dots on an industrial scale is more than likely to be infringing our IP. As you -- as we demonstrated before, we will defend our IP vehemently like we have against Samsung. So obviously, there's a lot going on behind the things, you could say.

Thank you. Next question. If the operating business and IP were to be sold, what would represent an acceptable monetization level for long-term holders. The Board must have an idea of what they are prepared to accept. How would that translate into cash to the listed entity? And if the list entity became a cash shell, would the Board expect to wind it up and distribute all cash to shareholders? Dmitry, do you want to take this one?

Yes. Look, I'd rather not speculate on the potential value of the business. But I will just repeat what I said in the first question, it is clear to me that it should be substantially higher than what market is valuing operating entity right now. As for the cash, the intention is clear. As Chris already indicated, we will be returning surplus cash to the shareholders. In the context of a transaction, surplus cash is always excluded, and we plan to do so and distribute it to the shareholders at the right time.

Thank you. Is the potential sale of the trading company being done via an auction process? Appreciate they can vary in length. But supposing progress is smooth, when would you expect the sale to close, Q1, Q2 of 2025 question. Dmitry?

Yes. So the progress is smooth. We're already well engaged, and we're moving at a good pace. I cannot tell you the definitive end to the process, as all of you are well aware. M&A is quite unpredictable. We're following all the rules in the playbook, how to run a good process. But the objective of that process is not the fastest closure. The objective is the maximum value. And if it takes longer, a little bit longer to achieve higher value, we are prepared to make that choice because that's the right answer to the shareholders. I also don't like the word auction. Auction implies a highly structured process, which is also time-bound. We are not in a fire sale. I do not want to engage in this process in a rush because we, as a seller, would be disadvantaged, and that's not the situation we want to be in. It is a highly structured process where we engaged with large number of interested parties, and we progressively let them to the next stage of the process. First on the NDA -- first, without an NDA, then on the NDA, then eventually through access to the data room where that process lives under all the normal M&A scenarios, to the highest value being offered for the company. We're going to follow that process. And how long it will take, I will not speculate. But we are prepared to move fast if the market is moving fast and we generate strong interest from potential buyers, which I believe to be the case.

Thank you. Next question, where are Lombard Odier now in respect of their ownership of Nanoco? Chris, do you want to talk about this?

Sure. As we notified by RNS, Lombard Odier are now below the threshold, which requires disclosure, that 3%. So their shareholding, by definition, is below 3%.

Thank you. If Nanoco's product is so good, why did STMicro walk away? Dmitry?

So I think our product is not just good, it's quite exceptional. And it's not my words. We heard these words said by our customer as they disengaged. I believe at that point in time, they had no reason to sugarcoating, and they assured us that the termination of the project had nothing to do with the product. They were quite proud of our joint achievements in driving the product performance and the device performance to a very, very high level. There is -- yes, for reasons for this engagement, I think we already covered that. Each company chooses their own focus in the products and markets, and that particular company, as we understand it, chose to focus on very large-scale consumer markets. And they judged that in case of image sensor, it will take some time to get to the high-volume consumer applications. There is a very different judgment, which other companies are making. We are monitoring at least a dozen of companies which are pursuing quantum dot programs in the sensor arena. Some of them are very large. Some others are small and medium-sized companies. And we're engaging with both. When we engage with a smaller company, they're often quite nimble, and they're moving very, very fast, focusing on just one application. And those are very valuable engagements because they give us early experience in production and in device performance. And in parallel, we're engaging with the larger companies and there are several large companies, which continue to be very committed to quantum dots in the sensor arena. And pursuing this in parallel is really the path to penetrate that market in the fastest possible fashion. That's our objective.

Thank you. Next one for Chris. Where the new NEDs going to show their faces and speak to shareholders?

That's a great question. We see a lot of them, of course, not only formerly at Boards, but between Board meetings. And I have to say that I am very impressed by their commitment, their engagement and the contribution they're making based upon their extensive experience of the sector and a track record of shareholder value creation. I think for shareholders as a whole, the best time to meet them is at the AGM, and everybody is cordially invited to attend that, either virtually or in person. And clearly, Jalal, as the new chair, will be more visible to shareholders over time through occasions such as this.

Thank you, Chris. The next presubmitted question, why won't you still have live questions to the discussions? Well, live questions can and are being submitted. So we'll come to them when we completed all the presubmitted ones. Will the payments of the nonexecutive director fees through shares be done by reference to the share price today or the share price at the time of the [Audio Gap] in FY '25. Chris, do you want to talk about the mechanics around this?

Sure. One of the things we wanted to do here was not only support the reduction in the cash burn, but demonstrate palpable alignment with shareholders. So the number of shares where the trade-off is happening between the stipend and the shares, that's been done monthly, and we used the share price in that month, which means that, in effect, I am buying shares in the market month-by-month alongside existing shareholders. So we have complete alignment of interest with shareholders.

Thank you, Chris. The next question -- we're on to live questions now. Could you retain 80% cash now to shareholders? If not, then why? Chris, do you want to talk about the progressive returns, et cetera?

Yes, absolutely. We will return cash progressively as the CDX process move forward and that we have more certainty on the sale process and its timing. As Dmitry has pointed out very clearly, our task is to optimize shareholders' return. So -- and that we also have some working capital needs of the business to ensure that we have a valuable property that somebody wants to buy. So finally, we have a track record of returning surplus cash to shareholders. It's our philosophy. We believe that cash is the shareholders' cash, and we will do that in line with that statement.

Thank you. A couple of tech questions now for Nigel. What are the views of lead in sensors? And how far away are lead-free?

Well, lead is like the first-generation sensors, as you probably know, and we, with others, evade working devices with these. The lead-free, why would you want lead-free? Obviously, you don't have the toxic matters in there. But the key things is that they're efficient and also you get a much wider wavelength range. So you can move from the IR into the SWIR, and it means you can have lot more applications. So that's why we have been working on the lead-free. Where are we up to? We believe there are actually lead-free prototypes out there. So actually, working commercial devices probably are not both far away.

Thank you. And the next one, what are the views on QD cadmium-free versus cadmium-containing?

Well, as we just said, cadmium is a toxic heavy metal with various restrictions throughout the world on the use of it. Initially, for the display, the cadmium quantum dots were better. But now cadmium and cadmium-free are relatively similar to each other, and obviously, the cadmium -- the cadmium-free are not toxic.

Thank you, Nigel. And quite a lengthy question here. You will understand the shareholders are angry. The last 2 CEOs promised a lot over the years, and nothing was implemented. Whether it was the cooperation with Apple or this time with STMicro, Nanoco was not able to generate commercial orders and the share prices collapsed, massively since then. And many are of the opinion that the settlement was below their value. What are you doing differently than the 2 predecessors? And I think this is aimed at you, Dmitry.

Yes. No, happy to answer that. So first of all, I fully understand your frustration. While I wasn't there, I'm aware of the history, and I certainly will study that history to the extent that helps me inform my actions, yes? But to answer it directly what is different, first of all, we are different as a company. There is significantly better capabilities to pursue those joint developments, and yes, this is technical. But having really strong production facilities, which already produce those products and volume, having really strong device lab, which can now demonstrate device performance, we were just, a few short months ago, unable to do so. We're in a very different place as a company, just technically. We're also in a different place commercially, and the big watershed moment there is the Samsung settlement. Again, as I was saying -- maybe I'm saying it too many times, but I'll say it one more time. Samsung settlement and Samsung license was just the beginning. Every other player in this industry is watching very carefully what happened with Samsung, and every other player in this industry will hear our opinion that other cadmium-free quantum dots, which are used in the display [Audio Gap] our IP territory. We're going to look at this very systematically. We're going to approach everybody with very open shield, and we will engage in those licensing discussions, being fully open to the outcomes, whether it is a license similar to Samsung or it is a product sale on a larger scale than what we had before or it's some combination of both. We will go by what works best for the customers. But in the end, we will find a way to realize the value of our IP, specifically on the display side. And on the image sensor side, yes, so disengagement of a large customer is a setback. But when I put it in a perspective how many other discussions we are currently in, how many of them are progressing quite fast to forming new joint development agreements, I'm very, very optimistic. And this is not an empty hope. I know that our portfolio of products is quite unique. I hear how strongly our potential customers are committed to this technical development. It is seen as a very high potential new product with short-wave and near-infrared sensing across a variety of applications. Again, if you think about the fundamental drivers. It's not so we can all take nicer pictures. In fact, we may not have better consumer cameras with this technology at all. But it is really to drive a variety of applications, starting with defense, very substantial defense programs in many, many of the western world militaries. It's also a bunch of industrial applications, new ways of quality control ranging from semiconductors to agriculture, where this infrared vision brings completely new possibilities, higher productivity in all of those industries. And of course, it's the variety of automotive applications. The stakes in automotive applications are high. The sensors need to be proven super reliable and very, very reproducible in their performance. But once automotive industry engages and then becomes the new standard of technology, the volumes expected from there, given proliferation of autonomous vehicles and just for the normal LiDAR-type applications, is huge. So we are big believers in this, and we already see evidence of much better engagement with potential customers than before. Sorry for a long answer, but this deserves a bit of detail because I understand it's natural, after many years, to be skeptical, right? Well, a bunch of words. The best proof would be in the actions. And as we've done before, we will continue to highlight our successes in the commercial development. We'll continue to communicate them to the shareholders, and I think actions will speak louder than words.

Thank you, Dmitry. Next question. Why are you planning to sell just the IP and not the entire company? Is it because shareholders have to agree to a complete sale and the sale of the IP does not require shareholder approval? Or do you believe you can generate more by selling the IP than by selling entire company? What's the timetable? And are there already discussions with interested parties. Chris?

Yes. It's a very important point here. Our IP and all of the operating business lies in Nanoco Technologies Limited, below the plc. So it is not the case that we are aiming just to sell the IP. We're aiming to sell the operating business. And I think it's really important. Our IP has huge value. But as Dmitry mentioned right at the beginning of this call, the IP has much more value if it is accompanied by a team of people who know how to manage it and deploy it, develop it further and a network of commercial contacts. And that's why we believe that this is, by far, the most shareholder-enhancing path to sell the operating business. And in terms of timing, Dmitry has referred to that. We will take -- we are already engaging with CDX at pace. I'm incredibly impressed by how much time and effort CDX is putting into this as well as Dmitry and the team, and we would drive this in a way which maximizes shareholders' returns.

Thank you, Chris. Next question. In your presentation, you mentioned short to medium-term income from your business models. Can you be more specific about the short and medium term? Are we talking about months, years? And if so, how many months or years do you have in mind?

Tricky question to answer because every customer will be different, and in different markets, people move at different speed. But if I try to answer generically, when I say that licensing opportunities could kick in quickly in the short term, I mean, in the span of a few months. Volume supply of a product, and again, I repeat this word, volume supply for product usually requires, well, 2 things: one, it requires your product to be fully qualified on scale; and two, it requires the device itself or system itself being already in high-volume production, right? So this may take up to a year because qualification of the product requires significant amount of reliability testing and repeating the tests, et cetera, and different devices will have different hurdles to overcome. So in the display market, I think it could be about a year before we are supplying a product on scale. I don't know, Nigel, maybe correct me. With a past experience, if you think it can happen sooner than that, but...

No, you're correct. It could happen sooner than that or depends on customers.

Yes. And in the younger markets, such as image sensor, for us to have a volume supply, well, it requires that a high-volume application already been developed. As I mentioned, right now, applications, which are in production, tend to be small to medium-sized. So there, we can have -- within the year, we can have medium level of revenue. But for high-volume application on the sensor side, that application itself needs to come to life. This, my belief, will probably be about 2 to 3 years before large applications and automotive will kick in, but we'll see. So different time scales in different markets. We, for sure, will be focusing on the near-term opportunities, first and foremost.

Thank you, Dmitry. How many licensing opportunities are in advanced mode?

We'd -- I would rather not comment on the specific numbers. But I will say that the intention is to engage with every sizable player in the market, every single one, and it's a very concentrated industry, as you know.

Next question. You seem very convinced at Nanoco's potential. Why haven't you bought any shares yet and thus demonstrate your confidence in the company and its future market value? I think it's aimed at you, Dmitry.

Yes. Well, I'll answer simply. Until today, I was simply precluded from buying shares because of the close period. So because we released material nonpublic information with the annual results as well as the valuation of our IP, I was in a blackout period.

Okay, one for Chris. How are the NEDs challenging the Board?

Yes, absolutely. Effectively, I think, particularly Jalal and Dieter, with their knowledge of the sector, they really dig deep into the matters and they also challenge the executive very extensively. Have you thought about this? Have you thought about that? Will that work? Will that not work? And both in Board meetings and outside Board meetings over the last 12 months has been extensive and robust challenge. And frankly, for where I sit as Chair, it would be a waste not to use the insight of people like Dieter and Jalal, and they've been very generous with the use of time. And again, I'm really, really excited about Jalal taking over from me as Chair. He has a terrific track record, and I think Liam mentioned it earlier. He became CEO of Dialog Semiconductor, where he was raising $20 million a year. 10 or 11 years later, it was generating $200 million a year, and the business just sold for $5 billion. So someone like Jalal -- and Dieter, similarly, has a great track record. Someone like Jalal is absolutely worth listening to. Sorry, you will be able to meet both Jalal and Dieter as well as Ali and Chris Batterham -- Alison Fielding, I should say, Dr. Alison Fielding and Chris Batterham at the AGM. Sorry, Liam.

That's okay. Tech question for Nigel. How are you protecting your trade secrets versus patents?

Yes. We're using exactly the same process as we do with our patents, all the trade secrets are written up literally like in a patent form and deposited with our -- kind of our patent lawyers. The only difference is none of it ever becomes public, obviously.

Okay. Thank you. The validation of the IP was quite some time ago. Why has no litigation taken place against other infringes? Does the lack of action imply no one else is infringing?

I'll take that. Yes, so I cannot speak to the past, but I will say confidently that we will definitely proceed at a good pace with the licensing program against anybody we will find infringing on our cadmium-free quantum dots. Lack of action does not imply that no one else is infringing. It's quite the opposite. We believe every single player pursuing quantum dot -- cadmium-free quantum dots on scale in this -- in market is infringing on our IP, simple as that.

Thank you. Next question. The previously -- you recently stated the belief that CFQD could not be manufactured commercially without infringing the Nanoco IP. So is this level of confidence in IP coverage extends to Gen1 and Gen 2 QDs for IR sensing? Nigel?

Yes. With Gen1, which is based on lead sulfide, we have some passing coverage. But Gen 2 are based on what's known as [ 3 5 ] materials, and these are the same type of materials that are used for display as the cadmium-free quantum dots indium phosphide. And they had to use the same seeding process to be made. So we have a high level of confidence, especially when you move to the Gen 2-type materials, that those will be covered by our patents.

Thank you. Another question. So listening to what you said, Apple is possibly infringing the IP at Nanoco. What would be the next steps in case they are infringing?

I mean, first and foremost, we need to establish the fact. Those are quite complex supply chains. As you well know, Apple act as a system integrator, but the components of the system are provided by suppliers all over the world. So we would need to establish the supply chain for the product and then confirm that those are cadmium-free quantum dots and the process used thereof and take steps accordingly. I'm not going to speculate what we're going to do with this company or that company. First, we need to establish effects. But for me, the significance of Apple product introduction is simply that this technology has many, many years of life. It is still the best technology today, in this case, on the LCD screen, has many years of life in future generations of product. It's high performing. It's desired by the consumers. And as a result, companies like Apple continue to broaden the use of that technology in the industry. So that's a good sign for us because we are planning to develop our commercial sales in combination with licensing revenues from this market. So that's why it's so important.

Thank you, Dmitry. Another one on what's the time line for CDM-free QDs licensing? I assume cadmium-free.

Yes.

What's the time line for licensing?

Well, we start now, and we move as fast as we can covering all the suspected and, over time, proven infringing cases.

Thank you. And the last question I can see on the list. Will the sale of Nanoco Technologies or any other subsidiary acquire a shareholder vote? Chris, do you want to comment on this?

My understanding is, technically, possibly not. But given a move of this magnitude, it would be, in my view, quite surprising if the Board did not seek shareholder approval. But that will be a question for what the Board would need to consider at the time.

Thank you very much, Chris. And with that, I think that's all the questions.

Perfect. Dmitry, Liam, Chris, thanks very much for your time in answering all those questions from investors. Of course, the company can review the questions submitted today, and we will publish out the responses on the Investor Meet Company platform. So just before redirecting investors to provide with their feedback, which I know is particularly important to you all at the company, Dmitry, could I just ask you for a few closing comments?

Yes. I'll simply say I'm very glad to be here at Nanoco, first, but also at this meeting. I'm looking forward to providing all the shareholders with product updates as we are progressing down this strategic path. And to future discussions, please keep coming back to us with your questions. We learn a lot from these questions. You are our most important audience. And we'll continue to move the company forward and demonstrate our success along the way. So thank you.

Dmitry that's great. Thank you, once again, for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few minutes to complete, which I'm sure will be greatly valued by the company. On behalf of the management team of Nanoco Group plc, we'd like to thank you for attending today's presentation, and good morning to you all.