Solid State plc (SOLI) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Solid State plc results presentation. Before we begin, we would like to submit the following poll, which you will see on your screens. [Operator Instructions] The company may not be able to answer every question it receives today; however, it will review all questions submitted and publish responses where appropriate. These will then be available via your dashboard. Finally, we would like to remind you that today's presentation is being recorded. I would now like to hand you over to Interim Chief Executive, John Macmichael; and Chief Financial Officer, Pete James.

Thank you. Thank you for joining us this afternoon, everybody. You can see the agenda there. We'll take Q&A at the end, and we'll try and move through the presentation as quickly as possible for you. And you have with you myself, John Macmichael, recently appointed CEO; and Peter James, our CFO. For those that know the group already, this may appear a little different. The group is structured in 3 divisions. We have Steatite, which is our systems business; Custom Power, which is our power business, that's a battery pack manufacturer; and Solsta, our components business, we were previously 2 divisions, Systems and Components. This is the first year that we're reporting as 3. And frankly, that is just to allow us much better transparency for investors, but also for us under the mantra of what gets measured gets done, we now have greater visibility of our revenue-generating units. I would make no apology for putting this slide up. We always show this, frankly, to demonstrate that we're conscious that a good business needs a good Board. It needs a good Board with strong oversight and scrutiny, but one that understands the business as well. And the addition of Victor Chavez as CBE is a clear win for the group, a real clue that we've been able to get Victor to join us and one that should bring with it a very high degree of confidence for our investors. We are a bit unusual for a company of our size and that we also utilize an Executive Board, but this really does give us a tremendous springboard to add to the experience and skills of those that are involved in the key decision-making, and it gives a very clear succession path. So it involves the key people in the key decisions and it adds strength and depth to the management. And taking that one step further, what you see here is the group organization. And you can see that our divisional structure brings further strength and depth within that leadership team. Within each of those divisions that you see there, there is a senior leadership team. And below that, not on the slide here, our business units, and each of those business units has a leadership team. So we have a very strong management and leadership structure. All of our senior staff are incentivized according to group performance and the behaviors that we require them within the divisions and business units. And that ensures divisional and business unit success as well as group success. The simple message, I guess, is that the business is not one person deep. Just some quick financial highlights for you. I won't read the slide, and Peter James will give you a lot more color on this as we get further into the presentation. But FY '26 was a strong year for us. Despite the significant investments in the business, especially in the Power division, we hit or exceeded the key metrics and consensus points Revenue was ahead, adjusted PBT was ahead, net debt was down, EPS rose and order book all up. There are a number of key drivers in our business. And what I'd really like to do is just quickly take you through some of these in terms of the strategy and actions so that you can see how this has panned out throughout the year. So our investments throughout the year were mostly within our Custom Power business and our ICS business. ICS is part of our Systems business, and it's the facility you may have heard us talk about before that we opened about 2 years ago and have been developing over that period. These have enabled new customers to come on board. And we're now in a position where some of the longer design cycles that we used to are coming to fruition. So that means that they're now moving from those design programs into a production build. And in our Power business, the investment in the U.S.A. facility in Stafford is now paying back with good growth in the order book and in the billings. We're now focused on the U.K. for Custom Power, implementing facility improvements and capacity gains. In terms of organic growth, nearly all of our growth last year was organic. There was some small element that came from an acquisition in the previous year, but nearly all of the growth was organic. So if we just move on with the strategy and look at how we execute on that strategy, you'll hear us talk throughout this presentation about 3 Cs and 3 Ps. So in terms of our how, we're moving to a 3 Cs model, which is cooperation, collaboration and communication across the group. In terms of market conditions, everybody is familiar, I think, with the geopolitical environment at the moment and what's happening in the defense world. But changes in defense strategy, quite frankly, are playing to the group's strengths. We've seen the announcements today, and they seem to be requiring more agile, rapid and innovative responses. That, frankly, is the market moving towards us. Those are our strong areas. And the battlefield has changed and is driving demand for radios, batteries, sensors, and these larger exquisite programs, of which some are still going ahead according to today's news, are, in fact, reducing in terms of the percentage of spend towards the upper end of the spend, which is now on these smaller, lower cost upgradable and advanced technologies. Some of you may have heard of Atlantic Bastion, and that's a means of putting uncrewed outriders around highly expensive naval assets. We don't build exquisite systems on our own, as I think most of you know, but we certainly do build significant parts of them. It's an important part of our business and very important to see that those are continuing. But we certainly do design and build innovative computing systems, antennas and so on, and that's where the market is moving toward. AI is also driving demand, particularly for our own brand, Durakool products in the power distribution systems that are in AI data centers. And we've seen the results of that with orders worth several million dollars for our Durakool contactors in the United States. There is a but and the AI is certainly driving up memory prices at a rate that's never been seen before in the industry. That has a secondary effect for us. We're not directly affected by it. But that secondary effect is in the fact that much of the or some of the product we buy has memory within it. So as that is incorporated, we have to pass that pricing on and we do that. It does, however, present an opportunity, particularly in our components business. The components business is securing product for its customers, locking in pricing where we can to protect them as far as possible. And certainly worthy of note that we do where we can try to maintain margin. We are never in the business of gouging our customers. So we do not take advantage of these market conditions to increase margin percentages or gouge customers, but we most certainly do try to maintain those margins at the percentage level. In terms of quality of earnings, which, of course, is the goal, we try to improve our quality of earnings. We will give more flavor on that as we go through the numbers. But Power has been transformed. It's exited the low-margin commodity business. and we now have a focus on higher-margin business and execution efficiency. All of our divisions have seen growth, and that can be seen across all of our core drivers, which you can see along the bottom row there, defense, medical, industrial. And for us, industrial does include AI, and we're now focused on revenue visibility. That is to say the order book is progressing, but there's a greater emphasis now on enhancing and securing longer-term contracts through the program partner and product element of our 3Ps program. So I said earlier, you'll hear us talk about 3Ps and 3Cs, and we'll explain that again in more detail as we go through. Thanks.

Thanks, John. So on to some of the numbers for this year. And pleasingly, it's a return to much stronger performance. As John said, the majority of the growth is organic. And if we normalize for the acquisitions and the currency headwinds, the organic growth rate is just over 25%. Gross margins are up a couple of hundred basis points to 33.5%. And those improved margins translate into significant improvement in operating profit, which is up 60% year-on-year. As John talked to, we have invested in capacity and capability this year. We've consolidated our active silicon facilities in 2 into 1, and that will deliver efficiencies as we look forward. Our ICS facility that we stood up last year has delivered product this year and provides an opportunity for growth as we look forward and increase utilization. And as John said, we've continued to invest in power, both in the U.K. and the U.S. That translates into significant improvement in EPS, up 77%, and we've continued with our progressive dividend in line with consensus. So if we look at some of the balance sheet metrics, you'll see inventories have increased significantly at year-end, and that's driven by Project CAIN. That's a program we announced in Q3 with our half year results. It's an order from the U.K. Army for radio comms equipment, and that was a GBP 10.8 million order. That had not been delivered in the financial year we're reporting on here. It was delivered in Q1 of the current financial year. So we had the inventory at year-end that pleasingly we've shipped in the first part of this financial year we're in today. The cash generation has been strong, and you can see that's funded investments in CapEx and the dividend return to shareholders, which is full covered. The surplus cash has allowed net debt to reduce, and that's continued to reduce to just over GBP 4 million by the period end. Retained profits less the dividend has driven increase in net assets and the continued strengthening of the balance sheet. And if we look at the key numbers there, so some of the graphs in numbers for operating cash flow up 30% to GBP 13.5 million, net assets up to just over GBP 63 million, net debt down to GBP 4.2 million. And pleasingly, return on capital employed returned to double-digit percentage at 14%. So moving on to some of the divisional performance. Here, you can see first up our Systems division. The key driver is that NATO contract, where we shipped GBP 23.3 million in the first half of the financial year to the U.K. Royal Marines, and that's been a really key driver. Margin percentage at a divisional level is down 1 percentage point. However, if we look at the business units, actually, all of the business units are up, but that increased revenue in comms is a lower margin than some of the antenna or ICS revenues. So the mix is slightly diluted in this period. But the underlying business unit margins are all progressing positively. The investment we've made and talked about on previous slides has been critical to positioning the business to deliver more together as we look forward. But the operating margins have continued to progress positively for the division as well. Here are a couple of graphs that illustrate the benefit of that and the value of that NSPA contract driving revenue up year-on-year. And if we look at the operational gearing benefits, volume is really the key driver here as well as the operational margin improvements. We have invested, as I said previously. And looking forward, the investment that you'll hear a little more from John on is going to be around our antenna facilities where there are significant opportunities for continued growth. Moving on to Power, a year of turnaround. 2025 was a tough period for the Power division. We exited some business that became commoditized, and we also saw some destocking. Work has been done over the last 2 years to secure a number of programs where our engineering value add is recognized and valued by customers, and that's starting to deliver in this period with revenues up 16%. Pleasingly, you'll see the gross margin improvement talks to the quality of the earnings, and that's up to 35.8%, a significant improvement on the prior year. And that really does drive the improvement in operating margins that you can see there. So picture speaks a thousand words, and it really does show the importance of that margin improvement. Yes, the volume helps, but the margin improvement is a real big step function for us. Dave Crossman is leading that division, and he's got a lovely phrase, which we've coined across the group, which is win a bit, spend a bit. It's absolutely important that this division to spend and invest, and we've made those investments that position that division to continue to secure more business and grow in the periods ahead. It's a period of transition. We want to see those operating margins continue to improve towards the target of double-digit operating margins. Last but by no means least, is our Components division. Again, the organic growth here has been driven out of the U.S.A. We've had less penetration in the U.S.A. traditionally. We've been more U.K.-centric, but demand from IoT and AI data centers where we supply power switching contactors and relays has really helped drive the growth for this business unit. Gross margins continue to recover positively back towards that target of 27%. And in this period, we absolutely have invested in growing the talent base, sovereign talent base, both in the U.S. and the U.K., which positions this business in a place to continue to grow beyond the sort of just shy of GBP 60 million we are today to get back towards some of the highs we saw through the shortages in '22, '23. This really does show the benefit, the operational gearing benefit that our Components division has. As we continue to grow, we will absolutely work towards seeing those operating margins improve back towards the mid-single digit, mid- to high single digit, 7.5% target operating margins, we've laid the foundations in both the U.K. and U.S., which position this team really well to deliver growth in the periods ahead. Order book. Order book continues to strengthen, up significantly from November to just over GBP 106.6 million at the year-end. And on this slide here, what's driving that strong order intake in Power. The Project CAIN order was in that year-end order book, and that was shipped in Q1 of the current financial year. The majority of the order book is deliverable over 18 months. And as John said at the outset, there's real focus on increasing that forward visibility and the length of the order book. The graphs on the right show you the dark blue bit is the non-NSPA NATO orders, and that's really progressing well and gives us good confidence in terms of delivery of the consensus revenues that you can see on the bottom chart.

Thanks, Pete. Just a quick look at our performance by division in a non-numeric sense. And again, I'll leave you to the slides, but I'd just like to draw some things out from that. So the NATO orders that we received in the Systems division are expected to repeat from 16 Air Assault, but the quantum and timing of those remain uncertain. The integrated systems facility is now billing. and it's one new business, and that's now running alongside what everybody knows with the BAE work that we do there as our cornerstone customer. And antennas are now opportunity-rich with new opportunities in the United States. In the Power division, we have continued investment in production efficiency, and we're capitalizing on strong wins in the UAV or uncrewed/unmanned sectors. We're sharing our engineering resources across the 2 continents, and that's working exceptionally well. And investment is continuing at both Custom Power U.K. and Custom Power U.S.A., where we've seen increased order books on both sides of the ocean. In Components, we have 3 major focus sectors, which are all performing well, are medical, defense, and autonomy with AI creating that high demand that we spoke about for our Durakool, that's our own brand contactors in the U.S.A. U.S.A. for components has traditionally had low penetration, but these recent wins and some new wins in our industrial sector, which is essentially managed networks and our power switching data centers has really given us that uplift in the United States. In the U.K., the destocking is finally over, I'm pleased to be able to say, but concerns around memory pricing are creating some upward pricing for our customers that we're now managing. We have strong repetitive orders. And this is something I'd like to stress about this business because I don't think we've made enough of it in the past. In our Components business, we get a lot of repeat orders. Our order book is typically less than 12 months. But the nature of the programs is that they have repeat year-on-year orders. And an example of that is Eurofighter, which has been running for over 10 years and our Optimus Energy business, it's been running for multiple years. Most of our customers are repeat customers year-on-year. So once we're designed in, we're in for the life of the program. That creates strong, stable, repeating business. Hence, the emphasis is on and has always been on getting designed into the next iteration. It's a design-led cell that allows us to secure that regular repeat business. In terms of more detail on the group strategy, there are, in fact, at the moment, 4 of immediate strategic priorities that we have, and then I'll go on and explain about those 3 Cs and 3 Ps. So first, we need to deliver on our commitments, and that means significant investment to meet the current orders, ensuring that we still have the capacity to grow. Our CapEx and OpEx spend will support development of the business units to allow us to execute the 3Ps as we build out capacity and order book. This should allow us to expand the reach, expand the standard product base, expand the customer base and improve the length of the order book. And ultimately, that means the quality of earnings. So these 3 Cs. Let me start by saying the reason that we use these acronyms. It's really important in our business that everybody in the business understands what the strategy is, whether we're a shop floor, whether we're a warehouse or whether we're on the Board, everybody needs to understand where we're headed, what we're doing and how we're doing it. So these acronyms work well for understanding. Our 3 Cs tell us about how we will work together. So as we're bringing this group to work more closely together, we're relying on these 3 Cs, which is cooperation so that the information, tools, resources, knowledge, capabilities can be shared easily across the divisions. We're starting to reduce the number of ERP systems we have in the group. We're installing a common CRM platform with common rules to give us a single trusted source of truth for the whole group. We're trying to standardize some of our certifications where it makes sense so that it's easier for the customers to assess our capabilities and reduce their requirements to audit us. We're establishing a common EDM platform. That's a product data management platform for engineering, which allows us to transfer engineering information far more seamlessly than we currently can. We are collaborating to produce cross-division and business unit tenders, quotes and bids for customers. And this is the element that's allowing us to go after much larger, longer-term orders. Cross-functional teams are taking on shared challenges to create solutions that none of the business units alone could deliver. That's being admirably led by Matthew Richards, who stepped up to really drive that for us. And we're communicating. We're communicating to share what we know to increase transparency, to lift our knowledge. And for me, above all, to create curiosity, I want our engineers on one side of the business to be curious about what's happening on the other side of the business. I want our sales teams on one side of the business to be curious about what's happening on the other side of the business. And through that curiosity, we can learn and drive and develop new business. Our 3Ps tell us what. So we've got the how, but now the what. We have been a project-based business, and that brings with it inherent highs and lows and a constant need to refill the hopper. We're good at it, and we won't stop it because it provides a platform to develop closer customer relationships. But we're going to accelerate and expand the introduction of our own brand products. That's the product element. From Durakool contactors to our semi-custom battery packs and the new optics range that have been developed by our Custom Power business to standard antennas and ruggedized compute systems under our ndura brand. This gives us the runners and repeaters. It provides the running business in the factories. It provides the platforms to demonstrate our technologies to multiple customers. We're going to use those relationships, the trust and confidence that these elements build to partner with our key customers over much longer contract periods on bigger programs, utilizing multiple business units and really benefiting from those through life support programs. So what are the strategic enablers on this? If we look at this in detail, you can see that despite the fact that we talk a lot about our defense business, we do not have reliability on a single market. We are a diversified business in diversified markets, and that's a strength that provides genuine resilience to the whole group. Defense and security is strong, and it is important across the group. It is a focus, particularly where the military requires situational awareness and autonomy in this changing world of warfare. Our agility has allowed us to capture these fast-moving markets while still being a player in the likes of those longer-term large-scale exquisite as they called programs such as the ORCUS program. Uncrewed vehicles are a game changer on the various battlefields. And you may be familiar, as we say, with Atlantic Bastion, which is a means of deploying unmanned, uncrewed surface and subsurface vessels to protect much larger assets. Our MedTech market remains buoyant with good wins. The Components division has done particularly well there, winning both displays and communications and small systems from our embedded unit. In terms of industrial and AI, we have those very large-scale high-power demands, which suit our Durakool products. And as we've said, we have significant success in this sector in the U.S.A. Autonomous in factories and warehousing is also driving demand. Just moving to transport. It is fair to say that large-scale infrastructure programs in transport are slow. But there are fast-moving markets in transport. And again, this really plays into our hands. So I'd like to describe it as those markets within transport that are revenue generating are the fast-moving markets, for example, traffic monitoring, parking systems, speed cameras. Anything that's generating revenue is currently a fast-moving market, and we are a player. It's not just those 4 sectors. We've spoken about the AI data center win. And that, of course, is our Durakool standard product. There's one area of the business that people within the business, particularly at the senior leadership level have reminded me really is a competitive advantage for our business, and it is the supplier relationships. It's often overlooked as a competitive advantage. So I just wanted to take a moment today to stress why it's important for us. Across the group, our suppliers are trusting us with their reputations, whether that's in the Components business where we're trusted to design in their products, promote their products, stock their products, provide engineering support and resolve customer problems on their behalf; or whether it's our Power division, where the likes of cell manufacturers such as Saft, Electrochem, Molicel are trusting us to utilize their products in our battery packs. And that means ensuring the safety of our customers and their customers in providing the right cell in the right application with the right management systems. So throughout the group, we've developed very strong and lasting relationships with our key suppliers, and we're often acting as their face to the U.K. market, their partner in the U.K. market. So a quick look at the outlook by division. If I take a look at Systems first, here, what we're seeing is a business that typically has quite long conversion cycles. It can be from a few years to maybe 5 years. But our standard products that we're developing have relatively short design cycles, much quicker sell, much quicker revenue. And hence, this move to product as well as those highly engineered solutions. And the focus has now shifted to execution and delivery with continued investment at our ICS facility and the start of a major investment program at our antennas facility, which will play out over the next 12 to 18 months. In Power, we've developed those own brand semi-standard products during the year, and we'll go to market with those in the current year. They are strong technology demonstrators that will accelerate the order book and shorten the design cycles. The U.S.A. continues to focus on high-growth markets where technology advantage really supports price. And in our Components division, we're seeing strong demand for the Durakool contactors for power switching, and we're progressing well towards transferring towards Indian-built product. You'll have heard us talk before about moving away from China, and that's all part of that process. The division has a loyal customer base, in part from the support it provided during the shortages of 3 or 4 years ago and in part because of the excellent service and engineering support it provides. It's now well placed to benefit from the memory processor derived extended lead times. The integration of our Solsta-embedded business with the Steatite-embedded business, 2 businesses that we brought together to form a single business unit, is now paying dividends. The transferred accounts are growing, and we're getting new business wins there. And fundamentally, we're now starting to see new business wins, which are driving product into those Steatite factories. It's worth noting, I think, that within that Components division, we are representing world-class suppliers. And I go back to that point that they are trusting Solsta with their reputations, relying on our engineering skills, our logistics skills, our customer service excellence to grow their business. And just one quick look at margin and margin expectations. But this slide is in here because it's a question that we've been asked many times. So we thought we'd deal with this head on. The move to 3 divisions, first of all, is giving us better visibility and greater transparency so that we can declare our ambition. I go back to that, what gets measured gets done mantra. So we are actively measuring and rewarding against critical targets. So within our Systems business, you can see these adjusted operating margins. We're targeting somewhere in that 12.5% to 15% range. Within our Power business, that's now moved up to double digit, and we'll be targeting somewhere in that 10% to 14% range. And in our Components business, which is more of a mid- to high single digit, we're targeting somewhere in that 7% to 9% operating range. So really just to clarify where we are. And I'll hand back to Pete to give you a rest of my voice for a short while.

Thanks, John. So M&A has been an important part of our strategy over recent years. and it continues to be. We look at M&A to deliver on the strategy where it's a lower risk execution than organic growth. It absolutely will complement the organic opportunities and be aligned to the strategy that John has just taken you through. In the near term, probably more likely to be focused around strategically aligned bolt-ons. However, larger step function transactions is still part of the toolkit. And if the right opportunities arose, we would look to pursue those as well. We've got a well-established sort of framework and financial discipline for evaluation of opportunities. And to be honest, the business is fussy, and we walk away from far more opportunities than we ever complete. That said, we will remain opportunistic and the current business environment means I think there is potential for opportunistic M&A to come to the market in the periods ahead. So looking forward in terms of capital allocation, I'm going to start on the far side, shareholder return. Our progressive dividend policy was maintained, and it's an important discipline and financial discipline for us to maintain. We absolutely will use our cash generation to fund bolt-on M&A, but also, yes, we are a public company, and we have, in the past, used the markets to support those opportunities as well. In terms of organic investment, you've seen over recent years, the investment in the ICS facility, and John has talked about the opportunities that we are investing in, in the period ahead in terms of antennas and ongoing investment in power. This is critical to ensure we can continue to drive organic growth and take the opportunities to add real value to our customers. Last one from me. Here, we've got a summary of the sort of key financial metrics that investors monitor. Last 2 years' worth of results, but also the updated consensus that the analysts that cover us have issued following the results we announced yesterday. And yes, you can see there we've got positive progress on all of those key metrics. And if we look beyond that period, we set out an ambition to get to double EPS from 10p to 20p. And internally, we've translated that because EPS doesn't make a lot of sense to people that are on the shop floor in the warehouse. So we want to double the business. So you'll see we talk about doubling the revenue from GBP 125 million to GBP 250 million. whilst the maths on that doesn't work at the operating margins, it's a simple metric for the people in our business to get their arms around. We don't actually need to double the revenue to deliver the key metric for us, which is doubling that profitability.

I'm sure you'll all be pleased to know this is the last slide despite the fact that I can see it's 35 out of 46. Just a very quick look at the summary. Again, I won't read the slide, but you can see that we've had a very strong FY '26, and we're growing and want to accelerate that growth. We have a clear strategic path with our 3Cs and 3Ps and are looking at a stronger future position whereby we can leverage the entire group to win bigger and longer period contracts. Put simply, we want accelerated but sustainable growth with improved profitability and greater visibility. We'll continue to invest heavily this year, but note that we're in the right markets with the right products at the right time and with a resilient business model. That really does bring us to the Q&A. And just for me to say that we will be holding Capital Markets Day at some point during the year, if you'd like to come along and meet some of our leadership team. And we do also have visits, which I'm sure Walbrook will cover off at the end of the presentation.

Perfect. Thank you, John and Pete. Now if we could turn to questions. We have a number of questions that were submitted ahead of the presentation. Please do continue to submit your questions via the Q&A tab. I'll kick off with one really the exposure to the defense sector. Given your exposure to the defense sector, should we be concerned that the number of defense projects and defense spend that gets delayed or canceled?

I can cover that. So a very fair question, indeed. There's a lot of to-ing and fro-ing on this defense spend. If the information that came out today is to be believed, it's probably put us in the strongest position we've been in with the market. We were anticipating that some of those exquisite, that's the very high CapEx programs would be stopped, if not delayed. It seems that those are continuing, ORCUS and so on. Those are important projects for us where we supply to primes. However, this recent move towards drones and high technology, fast-to-market, upgradable technology is where we sit. That's our play. So both of these, both sides of the coin now are in play for us. I saw a question that comes later on as well. I can probably cover off at the same time about drones. We are in the drone market. It's very significant for us in terms of our battery division, where we have some particular skills in making sure that those packs can continue to work when they're cold, high altitudes and so on. And we also have cameras, frame grabbers, antennas and sensing devices, all of which are on drones.

Perfect. Thank you. Is the active silicon hiring spree due to recent orders or natural churn from consolidating to a single site?

Okay. That's a fair question. Right now, what's happening is right across the business, it's not just active silicon. We have active hiring programs, particularly in the region where we need more engineers. So we're actively trying to recruit more high-caliber engineers into that active silicon business. And both of those things are true. It's not a natural churn. It's that we have promoted some key individuals, and we need to backfill those positions. But it is also the fact that, that business is doing particularly well in terms of its order book.

Great. Can you please explain the jump in SG&A in detail as in how much is not capacity related and what you budgeted for this year?

Yes. Why don't I grab that one, John, it's clearly a numbers-centric question. The SG&A, there is a level of variable overhead that's been invested this year to deliver the significant step-up in performance. So there is several million of variable overhead that will not recur if we don't continue to grow. That said, we do expect to see continued growth as you saw on the consensus slide, which also results in continued growth in overhead as we progress forward with our strategy that John -- we've presented so far. So it's not all fixed overhead as such. There's a pretty significant in excess of GBP 3 million worth of variable overhead within this year's number.

Great. Persistent Systems won a large U.S. military order earlier this year. Does it have any indirect read-through or direct flow-through to Solid State other than signaling general adoption of the technology with NATO?