Nexteq Plc · LSE:NXQ
Nexteq — Quixant — FY2020 Earnings Presentation
34 slides from Nexteq's earnings presentation, April 2021
Slide 1: Quixant plc 2020 Annual Results
April 2021 Quixant plc 2020 Annual Results J O N J AYA L A N D A N D R E W J A R V I S
Slide 2: About Quixant
BUSINESS INTRODUCTION About Quixant Quixant is a critical technology and supply chain partner for major global industrial electronic equipment manufacturers with a focus on specific vertical markets. We combine hardware, software, display and mechanical engineering expertise with detailed industry k
Slide 3: Quixant Group overview
BUSINESS INTRODUCTION Quixant Group overview Quixant founded in 2005 200 employees Operations in 9 countries AIM flotation in 2013 Customers in 50 countries Origins of Densitron in 1970 20 patents granted 14% CAGR since flotation 4 patents in application to FY20 revenue of $64m 19 registered tradema
Slide 4: Gaming business proposition
BUSINESS INTRODUCTION Gaming business proposition ENABLING CUSTOMERS TO FOCUS ON GAME DEVELOPMENT AND REDUCE INVES TMENT I N T O N O N - D I F F E R E N T I AT I N G A S P E C T S O F T H E M A C H I N E WITHOUT QUIXANT WITH QUIXANT Game development ≠ Game development Game development = Game develop
Slide 5: Densitron value proposition
DENSITRON BUSINESS PROPOSITION Densitron value proposition D E L I V E R I N G I N N O V AT I O N I N H U M A N M A C H I N E I N T E R A C T I O N FOR A RANGE OF GLOBAL INDUSTRIAL MARKETS Control Systems Display + Computing + Tactile + Software $$$$ Margin $$$ Unit Price Control Surfaces Display +
Slide 6: Investment case
BUSINESS INTRODUCTION Investment case Proven effectiveness in delivering technically innovative products to a Strength of balance sheet highly regulated global market – can be applied to other verticals High barriers to entry in gaming Strong cash generation and due to regulation and blend of low le
Slide 7: Group Highlights
Group Highlights YEAR ENDED DECEMBER 2020
Slide 8: Group operational highlights
GROUP HIGHLIGHTS Group operational highlights Return to profitability in H2 2020 driven by improved performance in Gaming business and continued resilient Densitron trading. Closer customer engagement leading to positive net cash generation through the year and improved relationships and business po
Slide 9: Group financial highlights
GROUP HIGHLIGHTS Group financial highlights 12 MONTHS TO 31 DECEMBER 2020 H1 2020 H2 2020 $m 45.0 FY 2020 FY 2019 Change 40.0 35.9 35.0 30.0 27.9 25.0 Revenue Revenue $63.8m $92.3m 31% +29% 20.0 15.0 10.0 Adjusted PBT1 $1.3m $10.7m 88% 5.0 0.0 Net Operating Cashflow $4.0m $14.9m 73% 5.0 4.0 3.3 N
Slide 10: Key balance sheet figures
GROUP HIGHLIGHTS Key balance sheet figures • Capitalised R&D reduced by $1.1m due to 31 Dec 2020 31 Dec 2019 Change write-off primarily associated with early end-of-life notifications from key suppliers. Capitalised R&D $4.5m $5.6m $1.1m • Group R&D expenditure was $4.3m in 2020 (2019: $6.6m) of wh
Slide 11: Cash bridge
GROUP HIGHLIGHTS Cash bridge • Growth in cash balance over the year by 11%. • Reduced Q4 shipments vs prior and careful management of debtors resulted in reduction in receivables. • $587k of net proceeds from global government support loans, of which €400k of French government support will be repaid
Slide 12: Gaming Business
Gaming Business Quixant
Slide 13: Improved trading through H2
GAMING BUSINESS REVIEW Improved trading through H2 Revenue $m 60.0 56.2 • We shipped 22,000 gaming platforms in 2020 (2019: 40,000). 50.0 • Increased sales of mid-range platforms driven by relatively stronger European 40.0 customer demand. 32.6 30.0 30.3 • Gaming monitor business particularly 23.6 w
Slide 14: H1 weakness due to market closure in Q2
GAMING BUSINESS REVIEW H1 weakness due to market closure in Q2 Revenue $m 25.0 • After strong Q1 2020, gaming saw a stark decline in Q2 2020 due to closure of most global gaming jurisdictions. 20.0 • Improvement in revenues in Q3 and Q4 15.0 2020, but demand remains below pre- pandemic levels. +54%
Slide 15: Gaming market update
GAMING BUSINESS REVIEW Gaming market update American commercial casinos European gaming market revenue over last 12 months forward revenue projection • 95% of US casinos open (935 open of 989 venues). • US gaming revenues have recovered sharply to near pre-pandemic levels. • North American machine s
Slide 16: Customer share price recovery
GAMING BUSINESS REVIEW Customer share price recovery • Our key gaming customers have seen a Major Gaming Customer Share Price Weighted Index pronounced recovery in their share prices 300 over the second half of 2020. 250 • Everi in particular has seen a ~400% 200 increase in share price over the las
Slide 17: Strengthened key customer relationships
GAMING BUSINESS REVIEW Strengthened key customer relationships “2020 was a challenging and uncertain time for Everi and the entire gaming community, as our • Most key gaming customers suffered major end markets were severely impacted by pandemic-related restrictions. As a result, our revenues operat
Slide 18: New business opportunities
GAMING BUSINESS REVIEW New business opportunities • Progress made during H2 2020 with our first pilot customer for a lease model which we expect to commence shipments under in H2 2021. • New gaming business wins expected to contribute over $5m of revenue in 2021. • Sports betting terminal opportunit
Slide 19: Densitron Business
Densitron Business Densitron
Slide 20: Resilient trading through 2020
DENSITRON BUSINESS REVIEW Resilient trading through 2020 Revenue $m 40.0 • Densitron traded resiliently through the 36.2 year despite the pandemic and was a key 35.0 33.5 factor in maintaining the Group’s strong financial position. 30.0 • We supplied over 800 customers in 2020 25.0 across a wide ran
Slide 21: Q1 supply chain challenges the predominant source of decline
DENSITRON BUSINESS REVIEW Q1 supply chain challenges the predominant source of decline Revenue $m 12.0 • Weak Q1 trading due to Chinese factory shutdowns and supply shortages largely 10.0 +7% caught up in Q2 and Q3. Q4 saw pressure +8% from weakness across broad industrial -11% 8.0 markets. -31% 6.0
Slide 22: Broadcast
DENSITRON BUSINESS REVIEW Broadcast • Double-digit growth of 13% in broadcast HMI offering to $3.8m revenue in 2020. • Delay to mass production of several pipeline opportunities into 2021. • IDS progress slowed by inability to access broadcast venues for equipment installations. • Remain confident t
Slide 23: Medical
DENSITRON BUSINESS REVIEW Medical • Double-digit growth of 17% in Medical sector in 2020 to a revenue of $8.2m. • Several high-profile new and existing customer projects in 2020 led to growth including involvement in COVID-19 test equipment and ventilator projects. • Broad, established customer base
Slide 24: Outlook
Outlook Quixant
Slide 25: Short-term supply chain risk
SUPPLY CHAIN CHALLENGES Short-term supply chain risk • Component leadtime extensions started to become evident in December 2020. • Leadtimes are now on average more than double normal levels and we are seeing price inflation. • The Board took decisive action in Q1 to commit to advance stock purchase
Slide 26: Outlook
OUTLOOK Outlook • Positive Group trading momentum with 55% growth in H2 2020 compared to H1. • 106% order coverage of Group budget for H1 2021. ‒ Gaming 105% covered ‒ Densitron 107% covered • Short-term unprecedented electronic component shortages present near term supply chain risk but strong trad
Slide 27: Appendix
Appendix Quixant
Slide 28: FY 2020 Profit & Loss Statement
FINANCIAL STATEMENTS FY 2020 Profit & Loss Statement $m FY 2020 FY 2019 Var • Group gross margin reduced due to higher Revenue Gaming Division 30.3 56.2 (46)% concentration of sales to structurally lower Gaming platforms 27.5 46.6 (41)% margin Densitron division. Gaming monitors 2.8 9.6 (71)% Densit
Slide 29: FY 2020 Cashflow Statement
FINANCIAL STATEMENTS FY 2020 Cashflow Statement $m FY 2020 FY 2019 Operating cash flows before working capital 2.4 14.0 Decrease/(increase) in receivables 7.0 7.5 (Increase)/decrease in inventories 0.0 (0.5) • Improved net cash position at 31 Increase/(decrease) in payables (4.6) (3.6) December 2020
Slide 30: Balance Sheet at December 2020
30 FINANCIAL STATEMENTS Balance Sheet at 31 December 2020 $m 31 Dec 2020 31 Dec 2019 PPE 6.0 5.9 Right-of-use assets 1.3 0.9 • Balance sheet remains strong despite Intangible assets 16.2 18.4 trading challenges of 2020. Investment property - - Deferred tax asset 1.3 0.3 • 2020 trading losses in the
Slide 31: Gaming market overview
Gaming market overview • Approximately 7.9 million electronic gaming machines installed globally. • Historic annual replacement cycle of c400k machines per year1 (pre-COVID). • We segment the market into 3 tiers of customer: ‒ Tier 1s (e.g. Aristocrat, Scientific Games, IGT, Novomatic, Gauselmann) •
Slide 32: Gaming machine technology stack
32 GAMING GAMING MACHINE TECHNOLOGY STACK Game design, user interface Inventory management Operations Services Graphics engine Hardware logistics Pay tables / wager Machine RMA & servicing Software Game Platform (State machines, Random Number Generator, Logs,…) Casino accounting Peripheral device ma
Slide 33: Densitron market overview
Densitron market overview • Historically, Densitron has supplied industrial display components. The global market for these is valued at around $6bn1. • Densitron was sector agnostic – business leads were generated in sectors on the basis of the features of the display technology rather than targete
Slide 34: Board of directors
34 Board of directors Michael Peagram TBC Jon Jayal Independent Chief Financial Officer Chief Executive Officer Non-Executive Chairman (Andrew Jarvis interim) Nick Jarmany Francis Small Founder & Senior Independent Non-Executive Non-Executive Director Vice Chairman Gary Mullins Guy van Zwanenberg Fo