Transense Technologies plc

Good afternoon and welcome to the Transcend Technologies plc interim results investor presentation. Throughout this recorded presentation investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q&A tab situated on the right hand corner of your screen. Just simply type in your questions and press send. Before we begin I would like to submit the following poll and I would now like to hand you over to Executive Chairman Nigel Rogers. Good afternoon to you sir.

Good afternoon and thank you for hosting again today and welcome to everybody on the cast. I hope everybody gets what they're looking for out of this presentation, which is an update with our interim results for FY26 six months ended 31st of December 2025. I'm sure the vast majority of people will have had a chance to look at the RNS this morning and will have also read with a bit of disappointment the trading update a few days ago and so you know I'd like to start by saying that we will approach this with a bit of humility you know we've hit some bumps in the road but we're convinced that we're on the right road and going at the fastest speed that's possible. So, you know, with that in mind, I think we've got a lot of really good news stories today in terms of positive things that are happening in the business and we look forward to sharing that with you in the presentation. I'm supported today as usual by Ryan Moore, the Managing Director, and by Melvin Siegel, the CFO. We're going to probably drop cameras while we're presenting so that you can see the slides more clearly and then we'll bring cameras back on for the Q&A session at the end. Thank you. So I'm going to start with a bit of an overview and then I'm going to pass over to Ryan who'll talk through developments within SourceSense and within Translogic and then Melvin will take up the rear with the figures and he'll also talk a little bit about the ITRAC royalty rates both for this year and also the forecast to the end of that royalty agreement in 2030. So first of all just to set the scene you know we have got in both of the business that we're going to be talking about today strong revenue growth this year although the full year revenue growth was slightly downgraded downgraded in the trading update on the 30th of January. And the reasons for that were essentially threefold. Firstly, within the Bridgetrone ITRAC royalty income, the volume growth rate was slightly lower than we had anticipated a year ago. The historic growth rates about 30% per annum and we'd expected about 15% this year. And in the event, the volume growth rate was a little lower than that 10% and there were some FX headwinds. Melvin will talk a little bit about that towards the end. Within Translogic, although our new business ramp up in new areas has been strong and we'll talk about the new channels to market and the successes that we've had, the global time ages have been a little down and so consequently Translogic sales growth was somewhat more muted than we'd originally expected. And within SourceSense, you know, wow, we've got a lot of onboarding going on with a lot of customers at the moment. but that process is quite protracted and there's a lot of technical work required to onboard customers and also a lot of commercial work and so Ryan will talk a lot about the pipeline we've actually put some information about the scale and size of the pipeline and the timing for conversion of development projects into production which Ryan will talk about at some length and I'm sure you'll find that interesting so overall in the first half of the year we've generated cash we've delivered a small profit but there is clear customer demand and meaningful commercial process progress across both businesses and I'm sure you'll find that interesting to hear and for our part the focus is on disciplined execution you know we spend as much time as we possibly can on the day job but we're happy to spend some time on investor relations every now and then and including today. So just a refresher of the company's strategy. We have in SourceSense and in Translogic two businesses which we think are capable of very high growth for a sustained period of time. And we're developing both of those businesses towards having high-value recurring revenue streams by the end of the decade. We'll talk a little bit about the mechanics of how we're achieving that later on in the presentation, but then that is all underpinned by the royalty income from the Bridgestone iTRAC product, which is just over halfway through its 10-year period. Financial highlights for this year revenue and excluding the eye track royalty income was up about 39% on the first half of last year so good growth and in total revenue was down by about 8% and Melvin will go into the granular detail of that by segment in his presentation gross margin was maintained at 90% profitable cash generative. and we've been working on a broad strategy of retaining at least a million pounds of cash headroom and it was 1.3 million at the end of the period under review so if that sets the scene I'll pass over now if I may to Ryan please and Ryan you could talk through SourceSense first please

Thanks Nigel and good afternoon to everyone, so the first chart that we have here shows the revenue distribution for so. So on the left hand side they're just looking at the four segments that were active in robotics he drives most born aerospace and comparing the first half of this financial year. to the first half last sort of period to period analysis. So you can see, you know, aerospace was our biggest market. It's growing strongly as a combination of things there, some new customers, but also a lot of activity on there with GE on the programs with them. Motorsport business has also grown strongly and still working very closely with Motion Applied, formerly known as McLaren Applied. who are the leading electronic supplier into the motorsports market, who are a partner for distributing the SAW technology there. Very, very good growth and an awful lot in the pipeline with them. The next largest segment for us was e-drives. So that hasn't grown quite as strongly, but it did still grow. We're working now with automotive TL1 suppliers and OEs on the integration of SAW into electric drive lines for vehicles of various kinds and then lastly the robotics which we'll talk more about later grew very strongly as a percentage from a low base expect to have much more growth there in the coming months so really very exciting space that I'll talk about later looking at the graph on the right hand side of this page you can see where the income is coming from and so basically on here we've got the NRE and the grant income so I tend to roll those together we show them separately for obvious reasons but the grant programs that we have are working with key customers where the customer has secured government grant funding to help them pay for a development program with us so the customers are investing in those programs and they're leveraging grants available from the APC which is the Advanced Propulsion Center so that's aimed at automotive and that's the program we have with Proteon or Aerospace with the Aerospace Technology Institute and that's the program that we have with Airbus so two fantastic programs so we were developing new technology for those customers to integrate into their Their systems and re is much the same, but obviously not spoiled with grants that's fully commercial work with the customers are paying for applications engineering. Typically, developing the application for saw into their product or system and then on the right hand side of that graph you see components and production. so the difference between those two and in the past we've had some questions i think people have not realized that they are two distinct different things so what we mean in production is that is where we are are manufacturing a instrumented system inside Transense so typically most of that is motorsport business and you see actually the the bars align pretty well with motorsport there's a couple of things that fall outside of motorsport at the moment But where we're assembling shaft systems in low volume that's under production and then the component supply is where we are supplying the components that go into a sensor system to an end customer for them to integrate in. To their systems so examples of that would be you know supplying asics and sensing elements to people like G. and then they're then taking into their production to build into engines and systems so you can see that component income grew very strongly for us compared to before which is an indicator of the direction of a number of the programs that we've got so the next four slides I'm just going to talk a little bit more about each market segment but first of all the aerospace market so For people not familiar with it, we are supplying torque sensors and temperature sensors into the aerospace market using the SOAR technology. It's a great market for us. A lot of sensors on aircraft and it's only increasing in number as aircraft become smarter with more automated control systems, more preventative maintenance systems and so on. The sensor content on all types of aircraft is increasing. Electrified aircraft as well are a thing and that's impacting on us with some of the projects where again They need the sort of sensors we can provide our sensors allow the customer to reduce the size of the Component that we're installed into we're a smaller solution than conventional sensor technology and we're typically more accurate and offer them some lifetime reliability benefits compared to more traditional sensors, so There's a really strong commercial case and strategic rationale for our technology in aerospace. It is a low volume market, but we are really working with some of the leading companies in the space. So with GE, we've got three programs now with them. we have the Airbus program so initially that was the one grant funded project but since then we've got two commercial projects running with Airbus and we have a lot of activity with them so you know really the leading fixed wing aircraft manufacturer and I think the leading engine manufacturer at the moment we do have some other running projects in aerospace so working with another engine OEM we've got a couple of programs there and with a big actuator supplier we've got a really interesting program so got some great customer coverage. We do have a bit of a pipeline of new programs with some new customers. So there's, there's more to go out in the aerospace market. And really the plan for us is to continue to deliver and expand those relationships with those existing customers and build a little bit outside of those relationships with some more customers in that market and try and just continue to grow the revenue through that engineering application support. And then obviously the component production supply. I think everyone knows the aerospace market, it's a long cycle time to go from development into production, but there isn't like a big hockey stick like you would see in some industries. The development, the investment in the development of a system is very significant. The production supplies are over a very long period of time. So it's a good market for us to be in, but it does have that characteristic in terms of the pace that it moves at. We're doing a lot in aerospace today and we see potential to grow this in the near term. So the next key market for us is motorsport. I said before we went with Motion Applied. So that was part of McLaren group, now a standalone business. They are the leading electronics supplier in motorsport. You'll find their electronics engine controllers and other solutions in pretty much every major motorsport series in the world. and they're a very very strong partner for us to be working with. We've got some really good reference cases now with them where the technology is being used in different motorsport championships like IndyCar WEC you'll see there that's World Endurance Championships so basically the Le Mans type cars which is a huge part of global motorsport and we have a number of other championships that we're working on with um with motion applied in terms of getting our technology into those the technology's been used in motorsport for torque sensing um and typically being used for performance management within the championships so in in indycar they use our sensors to make sure the engine manufacturers aren't cheating basically and to help control the cost caps in the in the formula the the benefit of our technology um there are other talk sensors available in motorsport effectively we give a improved reliability improved accuracy and a better lifetime cost so better total cost of ownership compared to other sensor technology that's in that market and for that reason we're getting increasing commercial commercial traction more programs and a good pipeline here so you know motorsports a great market for us today will be the next couple of years you know we Potential to double and probably double again the size of the market in motorsport. There is a cap to it. So I think in the presentation of the markets that we're in, you know, obviously motorsport is not a high volume market. It's relatively high value per system, but it is limited in terms of the overall number of units that people supply in that market. But still, you know, several millions of potential revenue there for us. So next e drives. So so what we're talking about here are electric propulsion units for vehicles So, you know electric cars and hybrid cars have an electric drive system with electric motors and gearboxes And we're talking about putting our sensors into that application and this this market is a bit of a unique space for us in that We are really opening up a market. So in the difference in aerospace and motorsports there are alternative sensor technologies that we're competing against and you know the markets know they need torque sensors and so on we provide an alternative this market you can't put conventional sensors inside electric motors so we're creating an opportunity to put sensors where you can't normally put them that's got us some good engagement with some automotive companies so working with a number of companies in this space where you know these these projects are at development phase now the companies are testing and we're looking to get in into production on some vehicle platforms the volumes are much higher than the other two markets that we've looked at so far it is cost sensitive so this is where our our pilot production line starting to to come into force in terms of being able to demonstrate to the customers in the space that we can achieve the cost targets for the programs and the quality and the reliability targets for the programs that they need at hundreds of thousands of units a year which is the typical volumes that we're looking at here so very significant potential for us you know and a good pipeline and the programs that are running are running well so finally So by the industrial robotics market, we've started to get some really good progress here. So over the last year or so got some good engagement with a number of companies. The robotics market is set for some pretty explosive growth over the next few years, because of a combination of a number of things to do with, you know, AI and, and processing power and capability of mobile robots. so there's some very exciting things happening in the robotics market and I think we'll start to see robotics solutions come into our daily lives much more you know from a robotic vacuum cleaner or lawn mower to you know cleaning equipment for hospitals as well as the sort of factory robots and the sort of systems that we don't normally see all of these robots present an opportunity for us for sensors that help the robots get better performance and get better accuracy and move around better We are competing against other sensor technologies. So sort of good feature of robots is that they, you know, the manufacturers understand that they need sensors in the robots and we're presenting an alternative to the current sensors that's helping them get an edge in the market. So we've got some really strong engagement here. So, you know, working with a very big US company, a big Japanese tier one and a couple of sort of more niche suppliers. But we also have a very strong pipeline who haven't started working yet with our in discussions with some of the biggest robot and robot drive system manufacturers in the world. And I think that you know there's a there's a huge potential in the robotics market for us faster moving than the other markets we've looked at as well, so much shorter time into production, then you are certainly the narrow space but. much shorter time into production than automotive as well in terms of the cycle times that we're starting to see here so that should be great in terms of helping us to develop some volume for the SOAR business in the medium term so just looking a slightly different view across the four key markets so what this slide is showing is the number of projects that we've currently got on um so on the the left hand side there the pre-contract engagement so that that is where we are talking to companies but we don't have a commercial contract in place with them yet so each line there represents a different company where we have an ongoing discussion and they're showing an interest in adopting the technology so that's um you know it's a strong pipeline for for future engagement then the the other side of that dark green line there uh prototypes development pre-production production etc those are companies where we are commercially contractually engaged so we are on contract with them working on a development program or in the production side in motorsport and you can see you know we've got a number of programs there um and we've indicated i think for the first time a sort of potential value that we see or value range that we see those those programs being in so You know what that is telling us in aerospace we've got eight projects that are currently on contract and each of those we see as having a mature value somewhere between one and 5 million a year. So you know the aerospace business for us is going to grow into a significant you know, several millions of revenue over the next few years. motor sport as well, some stuff that's in production and bedded down now, but then we do have a number of series we're working on, and lower value, but it's still still quite significant. So there are four different things we're working on there with a value from 200,000 to 500,000 per year per per programme. So again, potential for a couple million pound of revenue in motorsport. But then the drives in the robotics are really where the very high values come in because of the high volumes in in those markets. So, you know, seven programs in the drives for at the moment in in robotics, but very strong pipeline behind that. So you can see the picture building in terms of, you know, we've always said, not all of these programs are going to get into production, but also, you know, not all of them are not going to get into production. So we've got very very good customers here, some world leading companies. They are investing their own money in applying SOAR technology into their systems and we have improving visibility all the time of what the production side of that will look like and the time scales for us to get into volumes and production and and a steady pipeline of new work coming towards us and new programs coming and building towards us. I think it's also, you know, you can take it as a good verdict on the business that we've got customers, like I mentioned with Airbus, where it started as one project. We've now got three projects running with them. You know, so there is, We're getting kind of repeat business from customers as well for the technologies. And I think that speaks volumes about the technology, but also about the team and the work that we're doing with customers on that. Okay. So moving on to Translogic. So Translogic is our Tire inspection and management tools business. It's a very different business. I think, you know, what we're looking at here is a very strong opportunity for us to be a market leader in the space for smart connected tire inspection management tools. You know, our existing tools are used by five out of 10, six out of 10 of the biggest tire manufacturers in the world. Um, so we've, you know, increased that presence in that market, but it's, it's a very strong endorsement of the product that, you know, the biggest tire companies in the world. Um, and the, you know, it's five out of five now of the top five are using our tools within their businesses in some way, shape or form. It's a very strong endorsement of the product and what it can do in that market. We're building, um, our offer. so adding complementary products and we're looking at how we can extend our offer into the market and it you know it is a growing market it is a global market so we actually still do very relatively little in the UK mostly all export sales we have got some nice legislative tailwinds coming which are going to start to help us in this market which is something that we've been So hearing more and more about recently and learning more and more about which has to do with basically digital product passport regulations for tire lifecycle management that the EU is introducing, but also a number of other countries are following suit and introducing very similar legislation so You know, it's been in the news in the last couple of days about another one of these Tire dumps that have appeared out of nowhere with people illegally dumping tires and governments around the world are trying to do something about that by introducing laws that will require tires to be fully traceable and they're doing that by means of RFID tags embedded in the tires which will then be used to track the tire. Tire inspections are mandatory will be mandatory as part of these regulations so tools like ours will become essential and go from being something that's optional of good business practice to being essential for regulatory compliance so that's quite an exciting move that's happening in this space and obviously there's a lot happening with cloud computing and ai services as well that's also helping improve this market and add capability to the tools that we're offering the customers all the time so we've been working here to to build our business um quite successfully we've got this sort of key five-point plan um That that has been working, but I think if I just jumped to the next slide. You can see. So just looking at where our revenues come from. So tire majors you can see, actually, the revenue is down, so we have added a new tire major. To to the business, but even despite that that the revenue is down compared to the prior period. In every other Place we've expanded so we were actually growing the business much more strongly in our other routes to markets so distribution director fleets software partnerships Much more strongly than the traditional business with the time ages and that has been a bit of a drag on us in this first half you know, even if we'd held the tire major accounts steady and That that would have done you know significantly better for us as a business overall because of the growth that we we'd had elsewhere, and I do think that the turbulence in the tire industry is coming to an end the number of factors been driving that. Quite well documented some of these bigger tire companies been having a very difficult time over the last 12 or 18 months. So, you know, we are expecting that to recover and we are seeing really healthy growth from our other routes to market here and a lot of potential to expand and grow further within this business. Part of that is going to come through adding new products. So we announced last year, in November, we launched new products with TLGI, which is a smart inflator. It's a complementary product to sit alongside our inspection tools. We're starting to ship the first units to customers in the next couple of months. So the launch went well. We've had a lot of early interest. And then obviously we've got to get the supply chains and the production set up. to start shipping units and that's going to start to happen in the next couple of months. So that should that should start to have an impact on us. We do have some other complimentary product launches planned as well. So we've got some exciting new products that are on the way which will extend our offer should enhance revenue. And we've got some more software partnerships that we're trying to bring through. So we did a deal with a software company called tire tasks to resell their software. We've been working on another deal that's different for a different part of the market but a complementary product that we're looking to bring through as well so there's a lot coming on the Translogic side of the business a lot of potential you know it is a growing business we've got some I think probably for the first time ever we've got a good number of really strategically important sort of partnerships and cooperation activities under discussion so that potentially huge for us in terms of getting some of those through and, you know, expecting a much improved new business pipeline and, you know, some new subscription deals starting to come through in the next few months. So very, I'm very optimistic for that on the outlook for this part of the business. But obviously, from a growth point of view, this was the area where the first half wasn't wasn't quite strong, but hopefully you can see, see the reasons for that.