Transense Technologies plc (TRT) Earnings Call Transcript & Summary

Good afternoon. Welcome to the Transense Technologies plc Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd like to hand you over to Nigel Rogers, Executive Chairman. Good afternoon, sir.

Good afternoon, and good afternoon to everybody listening online and those who joined this chat later. You're very welcome. We are here to present the financial results and the trading update for Transense for the year ended 30th of June. And those of you who've been following the RNS news announcements will know that there's been a few announcements of new business since then, which we'll also cover. I'm co-presenting today with Ryan, Ryan Maughan. You may notice that he's talking a [indiscernible] suite, and you might have heard that I'm slushing a little bit as well. So both of us are going to do our best to deliver this in strong voices, but forgive us if not, we both have water handy too. I'm also just going to pass apologies for Melvyn. Melvyn is going to present the financial part of this presentation today. However, he's had some IT problems today, and I have agreed to deputize for him. But hopefully, that means we can get through the numbers nice and quickly and understandably, and I'm more than happy to take questions on them as well. So I will start with a bit of an overview. And we present these results today with the appropriate degree of humility, having had to downgrade against the expectations that were set at the start of the year. We set some very ambitious targets for the business way back in January 2026 when we first [indiscernible] January 2025 when we appointed [indiscernible] and expectations were set at that time. And they were very aggressive targets to hit. And in many respects, a lot of things in the business have gone very well. But like a football manager, I'm a [indiscernible] supporter, our manager had to stand up and give a post-match analysis having lost [ 5-3 ]. There were a lot of positives in the [ Sulandand City ] game, and these results are exactly the same. Having missed the headlines and had some difficult things to talk about, we've also got a lot of very strong positives in the business, which we can present today. Let me start then with the performance overview for FY '26 and put that to bed. Firstly, SAW and SAWsense our revenues were up by 20%. Ryan is going to show you a graph of the 5-year growth rate in SAW. The revenue growth rate this year was 20%. That was a little off target, and Ryan will talk about the reasons why. Mostly, that was to do with the Motorsports segment of our business being fairly flat in a lot of the new business activity has not yet come through to the top line. So he will be talking about that. There are also positives outside of our traditional Aerospace and Motorsport customers that are now very well established and building nicely. And within EV, we have been working on a demo unit project with Cummins engines, which is U.K. funded in the Automotive EV space. And within Robotics, we have some new business wins to talk about, which are progressing towards production hopefully in FY '28. Within Translogik, again, overall, the revenue is fairly flat, is actually slightly down, but that masked a lot of strong new business growth amongst the new channels that we've opened to market for Translogik, masked because, once again, the sales into tire majors for our legacy product was slightly disappointing, down some 34%. And we're more than happy to take questions and Ryan will talk a little bit about what has happened with our 2 major tire customers primarily. However, within the tire majors, we've also got a very substantial new business win to talk about for FY '27 and beyond. Meanwhile, we've launched new products for Translogik to complement the existing product range. And post period, we've won some other new customers alongside the Continental account, which Ryan will be talking about. Within iTrack, the Bridgestone royalty, everybody will know that the royalty rate reduced by 40%, and that new rate prevails for FY '26, FY '27. The volume growth in this year was slightly behind our initial expectation at 7%. I think high single digits is a sensible long-term run rate, and that's likely to be prevailing for the rest of the 10-year period up to FY '30. So revenue this year was down by 34%. That had an impact on revenue and profits of about GBP 1 million adverse. Post period, actually, Bridgestone have been very busy, and there are some good new installs going in for FY '27. So I'm hopeful that the revenue -- volume growth rate will return more to the trend rate, and I'll talk about that a little later in the presentation. So that's an overview of what we're going to talk about today. In terms of the financials, I'll just quickly go through the KPIs. And then later on, I'll go through the detailed financial statements in a little more depth. But total revenue was GBP 4.63 million, down from GBP 5.55 million. And as I've said, broadly GBP 1 million of that was attributable to the royalty. Gross margin continued to be a very healthy 88%, 89.9% last time around. So the margin mix of the business continues to be extremely strong. The adjusted EBITDA, which is a proxy for cash generation, cash profit was GBP 0.66 million, and the adjusted PBT was just on the right side of breakeven. So importantly, the Board had a lot of focus on cash generation and particularly having recognized that the revenue targets were falling behind. And operating cash flow was more than [ 1.3x ] EBITDA at [ GBP 880,000 ], which gave us a closing cash balance gross of GBP 1.5 million. So plenty of cash buffer there compared with our normal target of GBP 1 million approximately of cash buffer available. So the business has the resources to be able to continue to invest and also to weather any unexpected storms. With that, I shall pass over to Ryan, and he'll talk through firstly, SAWsense and then Translogik. And then I'll take you through the financials and talk a bit about the iTrack royalty and the outlook.

Thank you, Nigel. So first to talk about SAWsense, just looking at the revenue and where that's come from and the 4 key markets that we operate in. So starting at the top there, Motorsport, obviously, still working very closely with Motion Applied in that market. The revenue is slightly down this year, but they have a very big pipeline of new business and new business opportunities. So we can see into the future some good growth in this -- in the Motorsports sector. It's just a little bit delayed in terms of -- it hasn't hit the numbers this year, but there is a lot of activity around that, and Motion Applied continue to be a good partner to us. Aerospace has grown well, and that's mostly driven by increased component sales and work with GE Aerospace or within their supplier constellation. We're doing a lot of work with Airbus as well on NRE projects, but also some commercial work. And we do have some other customer programs outside of those who -- they are progressing, I think, characteristically with aerospace market, they are progressing slowly, but they are progressing normally for the aerospace market. So again, we can see continued growth coming in aerospace, and we've done well in that sector this year. The e-drive market also has grown very well for us this year, so up by 39%. There's a great project running with Cummins, who are a very big diesel engine manufacturer. That's going very well. And we've got a number of other opportunities as well, some of which are potentially quite fast moving as they work through into production. But a lot of projects there where we're going beyond the sort of proof of concept now and more into production intent designs and starting to ramp up the activity levels with those customers. And then finally, in the robotics market, so I think people probably know this is one that's fairly new to us, but huge growth in percentage terms there, 268%. Actually, a very healthy pipeline sitting behind that. I'm not quite sure if we'll grow by 268% over the next months, but we definitely have good growth coming in the robotics market. We're dealing with some of the most sort of well-known prestigious companies in that space. The initial work that's been done with SAW on prototypes and proof of concepts to show that SAW works well in that application can be made to work very well. and meets the requirements. So now we are moving into more production intent development phases with customers in that market. Obviously, a very big market with very big growth forecasts over the next few years. So in general, I think some good progress through those different sectors. And then this is the graph that Nigel was alluding to. Obviously, if you look at SAWsense over the last 5 years, the business has grown very substantially. So some pretty big jumps there. It's not always in a straight line. I think that's kind of the nature of the beast when you're doing these things. But my view is that we are starting to build some real strong momentum behind the business. And we've got a good proposition for the market and the customers, which we're able to deliver value to them and generate revenues for us as we move forward in those key markets. So a very good indicator of progress. Finally, on SAW and part of that proposition for customers where we're helping them derisk it has been the pilot line. So I think a lot of people know we've invested quite substantially in this pilot production line in order to develop assembly process methods for SAW sensors onto the components like shafts for customers that could be scaled to high volumes. So help the customer kind of derisk their setup and help us improve our repeatability and all that good stuff with SAW. The equipment is all in place now on site in Western on the green. We've been using it in [ anger ], actually, in some cases, customer-facing work, accelerating past the actual work to kind of prove out the base processes and things. So there's a lot of activity around this equipment, both from our sort of fundamental production process development, but then also doing work for customer-facing elements of projects on there. So really key resource, and we'll see that start to ramp up and be used more in routine production for us as we go on. This line, the principal purpose of it is to develop pilot production processes, but it does also give us the ability to make product for the motorsport market, for example, or the aerospace or other markets through this line that sort of low-ish volume. But up to several thousand pieces per year, we could do the assembly of on this production line and still also have capacity for our -- the pilot production development work that we're doing on it as well. So it's a really great resource for us as a business and the game changer in terms of how we can communicate the technology and that route into high-volume production to customers. Okay. So moving on to Translogik. As Nigel said, as a football analogy, a game of 2 halves. We've got our established business in Translogik with the global tire majors. So we deal at the moment with -- predominantly with 4 out of the 5 biggest tire manufacturers. We have a little bit of business with the fifth now. But dealing with those large tire companies, 1 or 2 of them, in particular, have had a pretty difficult time and have been going through some restructuring and changing their businesses. So our base underlying business to those global tire companies is down by about 30%. We do still see opportunities for growth in that market with other tire majors and also with changing business models and changing use cases for our equipment within those tire majors. And I think that's best sort of explained with the Conti deal that we announced recently. And that moves Conti from being a relatively small customer of ours into certainly one of our top 3 customers in the next year or 2. The business case behind that is a drive for more digitalization in tire inspection within the fleet services and actually them deploying tire management services into a wider range of customer operations. So it's a great bit of business with Conti. And we do have some other really strong opportunities like tire majors. But unfortunately, in this year, the actual running revenue has been down with some of the bigger customers in that space. However, like Nigel said, it's offset with increased sales down in the other routes to market, so direct with fleets, software partners, distribution partners, subscription sales and other kind of routes to market that we've been working on and setting up. People that follow the company will know we've made a number of announcements this year on new distribution partners. And we do have some really exciting new programs running with them, which should start to deliver significant revenue in the coming months. We've got some new products coming to the market as well, which has also start to shift the needle with new sales of those happening as well. So there's a lot going on in the market. And I'm not too concerned about this year's numbers being flat. I think if I look back at this business 2 or 3 years ago, the pipeline that we've got now and the routes to market and customer relationships, there's a huge amount of development happened under the hood, and we're really, really well positioned now as that market is in itself about to grow with all the new requirements around tire management and tire inspection. As I mentioned, some new products, so the couple that we've announced already being the [ TLGI ], so the inflator product. We've just started to put the first tools out to customers for them to do the development work to bring it into their software ecosystems. So that's an important next step with key customers and get a lot of interest in this as a product that seems to really answer a key need in the market. So I have a lot of high hopes for where that's going to go. We did the high-pressure version of the [ TLGX ] and it actually took the standard tool and increased the pressure measuring capability of that into [ 350 psi 24 bar ]. The standard tool works at 250 psi, which is okay for trucks and buses and cars, but it's not enough for off-highway machinery and aircraft. So that increased operating pressure does open up some new markets for the TLGX. And then in addition to that, we do have some further product launches coming. So broadening the product range. We are still working on that inside the business, and there's more to come on that side. We're really pushing the Translogik business forward. I think the plan is to be the standard for tire management equipment. So tire inspections for commercial vehicles. We are pretty much becoming the standard, but we want to sort of really cement ourselves into that position as being the standard. So very close relationships with those big vehicle tire manufacturers, but then also very strong routes to market outside of that. And a key part of that is bringing that SaaS model more into the revenue line. You saw on the previous slide, it's already starting to make a bit of a difference. And we -- again, we've got a very strong pipeline of opportunities with some very, very big fleets where we'll be providing the full software and hardware solution, and that gets us into a better recurring revenue model as well for the business. So very well positioned for very strong growth in the Translogik side of the business. Back to you, Nigel.

Thank you. Good. I'll now just take you through the financial summary. Again, obviously, this is FY '26. So as I said before, the total revenue of GBP 4.63 million was approximately GBP 1 million down on the prior year, GBP 1 million of that being attributable to the reduction in the iTrack royalty. Gross profit was very strong, margins 88%, 89%, which is a sustainable go-forward rate. There was a significant increase in OpEx, around 10%, and that might surprise some people. In fact, it's the full year effect of the OpEx increase that went in, in FY '25 primarily. The infrastructure around the whole engineering and pilot line build for SAW was a capability that was built in the early part of FY '25 and through the year. And similarly, the sales capability for Translogik was a significant overhead investment in FY '25. The headcount in FY '25 went from around 20 to 35 and there is a full year impact of that in the payroll bill for FY '26 without any large individually significant recruitments or a significant increase in headcount numbers. It's just the tail end of that coming through. The other 2 key items of OpEx, which were higher in '26 and '25 was, firstly, IT, which I don't think will come as a great surprise. We've had to make a significant investment in IT infrastructure in order to both future-proof the business, but also to cybersecure the business where you look at some of the sensitive nature of much of the work that we do, we've had to make a significant investment in IT infrastructure to be able to support that. And then secondly, in our sales and marketing activities where we've had a very busy FY '26 in exhibition attendance. You will have probably seen a lot of that on social media. And that's really been a great fill up in boosting the awareness in the marketplace of the existence, both of Translogik and of SAWsense, and it's not something that we need to do every year. So I think you would expect to see a reduction in that level of expense for FY '27. That leaves us with an adjusted EBITDA of GBP 660,000. That was more or less matched with interest, depreciation and amortization, the time the interest charge. It's primarily depreciation and amortization. And you can see there an increase because of the increased asset base overall, broadly breakeven at PBT level. Within cash flow, importantly, that GBP 660,000 of EBITDA was turned into GBP 880,000 of cash generated from operations. We do keep a very close control of short-term cash forecasting and cash generation. We were able to continue to invest in the business, however, with investment activities there, CapEx, both tangible and intangible totaling about GBP 1.3 million, roughly [ GBP 0.75 million ] of intangible investment, which is primarily origination of component sets for the replacement ASIC and new suite of [ AQP ] parts and then about GBP 0.5 million on tangible CapEx to complete the spend on the pilot production line. Out of that CapEx, about GBP 800,000 was financed net of the repayments that were made during the year. So we were able to take an asset-backed loan, which is secured on the tangible fixed assets that we acquired at 100% financing, and that was -- that enabled us to maintain that program whilst not losing cash headroom. So with a net cash increase of GBP 360,000, that took closing cash to GBP 1.5 million, comfortable buffer and net cash GBP 0.57 million after the impact of asset financing. Quick look at the balance sheet. You can see there the asset financing balance of GBP 0.93 million. Cash and cash equivalents, as I said, GBP 1.5 million. Net working capital was around GBP 1 million, so pretty competitively managed. Our grant income on SAW and our Bridgestone royalty income are all collected quarterly. So in fact, the net working capital is relatively high at the end of June compared to a normal quarterly. It's a high point within the quarter. I don't propose to say anything more on the balance sheet. So let me now start looking to the future. First of all, Bridgestone and iTrack. Bridgestone have been extremely successful with the iTrack product. It's taken time to build, but their market share has increased substantially. And you may remember those who followed this story for some considerable time that at the outset, I think the market share for iTrack that Bridgestone inherited from us was about 3% or 4% and their market share of large haul truck tires was around 40%. So our aspiration over the 10-year period was that they would be able to increase their market share of TPMS systems to be able to achieve the same sort of penetration as they have in tires. And they're well on the way to doing that. In year 6, they have a sixfold increase in installations. The unit rate, as we've said, has reduced in FY '27. But nevertheless, the absolute revenue number is still north of GBP 2 million and expected to increase to sort of GBP 2.1 million, GBP 2.2 million in the current financial year. This illustration assumes that the average incremental increase is broadly the same in terms of truck numbers rather than percentages. So I think it's relatively conservative as an illustration and suggests that there is still a further GBP 7.5 million to collect over the next 4 years. As I've said, Bridgestone have actually had a lot of success in the marketplace over the last few months, which is yet to translate fully into ramping up truck numbers. So I think if there is a surprise on that this year, then my expectation is that it will be a surprise on the upside rather than disappoint. So if I then round off current trading and the outlook, what's happened since the end of the year, then we continue to be ambitious with our growth targets. The market expectation in the latest brokers research note shows a roughly 25% uplift on revenue from FY '27. Bridgestone iTrack certainly won't contribute that sort of growth rate. So we need to overperform that both in SAW and in Translogik. And we have internal targets that are significantly higher than that. So we have left ourselves some headroom. But nevertheless, they are ambitious targets, and we would say that from the outset. In terms of what's happened since the end of the year, we've got 2 months, nearly 3 months of trading under our belt, which is in line with our plans. There is some half 2 weighting to our plans. We have more to deliver in half 2 than we have in half 1, but we've made a very good start. In terms of SAWsense, then there are very good prospects for growth with our mature customers in motorsports. And I've seen on the question bar there, there's a few questions about what's happening with Motion Applied, and I'll put those to Ryan in a few minutes, and we can get some depth on that. But also within aerospace, the depth of our relationship, particularly with GE Aerospace and with Airbus is getting ever stronger and allowing us opportunities to earn increasing amounts of nonrecurring engineering development revenue, but also component sales. And we have a number of other aerospace clients where we expect to move into the development phase on a funded basis. So in terms of the sort of bedrock of that business revenue in the short term, we're well placed. But then we have a number of funded projects underway moving towards higher volume markets where we expect to be able to talk about that as the year progresses in terms of moving towards production. Within Translogik, there's a certain uptick in the underlying run rate business over the first couple of months of the year, the business is performing well. But the post year-end customer wins will really prime the business for growth in the second half and beyond. We've talked about Continental. Again, I've seen a few questions on that, which Ryan and I will answer soon in terms of how that's likely to progress into revenue and what other similar opportunities there are around it. But I also wouldn't underestimate the 2 post year-end announcements that we've made in terms of our alignment with independent TPMS providers, both [ Bartek and Hamilton ] as potential future channels for sales. Also, we have the new products which are already launched and out with customers awaiting demand and further product launches to be announced during this year, which we would expect to accelerate the prospects within Translogik. So I think that business is very well set. I won't repeat myself on Bridgestone. So I will close that the overall strategic objective of the company is to position SAWsense and to position Translogik in strong, defendable positions in high-growth markets where they each have something to offer to clients in terms of enabling technology, which will enable those clients to be more competitive and more successful in their own markets and offer very high growth potential for us. I think that even in a world where R&D budgets are tight, our products tend to promote efficiency and therefore, there is a cost justification for them rather than purely a revenue growth justification in a difficult world. And as the world adapts to the use of AI, and I think, again, in both sides of our business where data is the new oil, then our ability to develop large volume data sets to be used in AI applications will increasingly be recognized for value. I'm going to pause now and curate some questions. Just before I do, this slide offers you some further resources. Do feel free to visit our website. There's some very interesting stuff on there, both in the business pages themselves, but then also in the Investor Relations pages. There's plenty of history and foundation there and some forward-looking information. We also have a YouTube channel with a lot of short explainer videos about various applications that our products are used in and what makes them so special. And last but not least, please feel free to e-mail us at investor.relations@transense.co.uk. We have an increasing direct contact with our private shareholder base where we now maintain an investor community and make sure that we communicate with those investors directly and give them the opportunity to both ask us questions, including a session that we're running tomorrow evening, but then also from time to time to visit the site. So if you're interested in that sort of activity, please feel free to join our community.

I'm going to move to questions now. And I think I'll start, if I may, with Translogik. We have a few questions groups together here, Ryan. You might want to make a couple of notes because I think it would probably help if I give you all of the questions and you can answer them in a logical manner as a story rather than individually. So first of all, sort of overarching, question 4, will Translogik revenue fully replace the Bridgestone royalty income by 2030 in your opinion? If all goes to plan. So I think that's sort of an overarching question. But underneath that, there's a bit of a drill down into the tire majors relationships. Firstly, do you expect to announce other deals with tire majors like Conti? Secondly, how long will it take to reach the 700,000 forecast with Conti? And then I'm just going to look at Ben's question 13, 14 and 15. Is the problem with tire majors a minor blip or a trend? 14, does the Board expect to replicate the Conti deal with other tire majors and 15 is a repeat of the question I've already given you. So I think that's sort of an overarching group of questions there about our relationships with the tire majors and the opportunity to develop the business there.

Yes. So the general overarching question about Translogik replacing Bridgestone revenues, in my view, yes, and better than there's a lot of growth opportunity for the Translogik business. We've definitely been laying the foundations for that growth for the future with people like Conti and others, as I mentioned before, that the Conti deal is a big shift. It moves them from being a pretty small customer to being one of our larger customers. We expect that to get up into sort of run rate revenue over the next 12 months. So it should start to have an impact next calendar year once we've got the custom version of the products launched for them. So it's not particularly long program, and they have the need to get moving with it as much as we want to get moving with it. We are in detailed discussions with other tire majors about similar programs and also quite some quite different programs, to be honest, relating to hardware supply for them. Some of those are some of our existing established customers, but we do also have some new tire major business on the horizon, and we continue to develop that. I think the downturn that we've seen in that market, I would characterize it as a blip. I mean, I think we've had this sort of discussion previously. You can go and you can find news about this outside of us, one of our particularly customers who was a very big customers had a pretty difficult year or so. It's -- there's a lot of different factors that have caused that. I think they're through the worst of that now and are looking forward much more optimistically. We've done quite a bit of restructuring on their business, and there's also some -- they're getting some of the things working properly for them now. So yes, it's a blip rather than an age trend, and we are successfully developing business with others. I think in general, the market is going to get a lot bigger for us with tire majors because up until now, tire majors have really used our products in their managed tire businesses, and that's been a fairly small segment of what they do. The use case now for our products and tire management software is getting much bigger than that, particularly in Europe because of new legislation. So potentially, there's a very large increase in the potential market for our tools with customers like that. So yes, I think that covers all the points.

Follow-up questions then. A few years ago, we said the addressable market for Translogik, actually, that should read was [ GBP 25 million ]. Has that figure changed? I think I'd just like to cover quickly, Ryan, in that since the end of the year, we've actually made 3 announcements on Translogik although the Continental one was a full blooded RNS have numbers in it and therefore, inevitably got more attention. There's actually 2 RNS reach announcements about new deals that we struck with [ Biotech ] and Hamilton. I think it would be interesting to just explore that part of the marketplace and where the TPMS independence fit into the market and then maybe comment on the total available market as well.

Yes. So I mean the total available market is much, much bigger than GBP 25 million. I think the way we positioned that before was you could envisage a business like Translogik being GBP 25 million revenue. And I think that the market is getting bigger and bigger as there's more tire management coming in, both regulatory required Europe, but commercially required in the rest of the world because tires are such a big operating cost to fleets. So the market is growing. And I think it's a good time for us to be working in that market. And as we are expanding our offer, we are increasing the size of market that we can access. It's not that long ago that we didn't have a software package we could offer, so we could only sell to customers that already had their own software. Now we're able to complement talk directly to fleets that don't have software solutions and to other companies. We only had the inspection tool not that long ago. We've now got the inflation tool as well and the high-pressure version of the inspection tool. So the overall business is broadening, and I think some there's more growth prospects as a result of that, but also, I would say, improved resilience as a result of that as well, where we're very concentrated in the past on 2 customers and 1 product. So that's the sort of market. Yes, absolutely, I'd be happy -- I think everyone will be happy if we get Translogik to a GBP 25 million revenue business. It is a much bigger market than that though that we're in. So it's not an unrealistic thing to be wanting to try and do. Yes. The other announcements, yes, you're right. I think it was one of the questions that said we'd only made one announcement, but we've made 3. So we did 2 new distribution deals. So one focused around the U.S. with [ Bartek ]. So [ Bartek ] USA is an American subsidiary of a U.K.-based company, fantastic bunch of guys, very, very strong supplier in the aftermarket TPMS market. They've got some great routes to market for that product in the U.S., very, very strong customer side relationships. So we're working with them to access a whole new group of customers compared to our other existing routes to market and distribution channels in the U.S. So it's quite exciting, and there's a lot of activity with them around putting new programs in place. The second relationship was with Hamilton. So also a market leader in the TPMS industry, but this time focused on the European market. And that's the purpose of the deal with Hamilton, so they're a little bit different to [ Biotech ], although similar on the surface, but they have a different route to market. Obviously, aimed at the European market this time for us and very specific types of customers and applications for the tool. So we expect that to bring some significant new business through as well. I think in addition to say that we are also working on some other very significant bits of business. So that's certainly not it in terms of news flow and they watch this space, there's more stuff coming.

I think we'll flip over to SAWsense now then. So the first question on SAWsense is around the pivot of the business model from licensing and towards becoming a component manufacturer or a component supplier, I should say. Perhaps you could just talk about that a little. The question is, do you envisage SAWsense becoming principally a component manufacturer, an IP licensing business or a combination of the 2, which model generates the best margin and return on capital?

So the actual -- it's a bit nuanced, but the answer is none of the above. So really, the business model for SAWsense is we are -- what is known in the industry as a fabless manufacturer so we're not really a true component manufacturer. We're a fabless company, which -- so what does that mean? It doesn't mean that we are not excellent without fabulous. It means that we don't have a manufacturing -- in-house manufacturing capability for our key components being the ASIC and the sensing elements. So in the past, and this is a bit of a nuance. I think the model was that those -- the manufacturers in our supply chain would act as a Tier 1 and sell to customers. There are various reasons why that didn't work in the past. So now the model is that we will be the Tier 1 and be making those sales directly to the customers, but we're not manufacturing the components. That's still being made in our supply chain. So we're a fabless sensor company supplying components made in our supply chain to others and benefiting from that in terms of taking the revenue from that. And it means we're in control of what we do. So the majority of our revenue should come from component sales. There should also be significant revenue from application engineering and validation support. And then to a lesser extent, we will still earn revenue from instrumenting components such as shafts with torque measurement systems, and I talked about that when we're going through SAW. The pilot line is there principally to help us develop processes we transfer to other people, but it's also there, and it gives us capacity to manufacture in-house up to a certain volume ceiling should we choose to do so for the right sort of projects. So things like the shafts and support for Motion Applied have always been made inside of Transense. They'll continue to be made inside, but they'll be made on that semi-automated production line in the future and will -- as will other parts into sort of similarly specialist market. So there's not -- there is no kind of pure-play IP licensing business envisaged. All of the future revenue is linked to either that product supply, component supply or the provision of service for the customer.