Xp Power Ltd. · LSE:XPP
Xp Power — H1 2022 Earnings Presentation
33 slides from Xp Power's earnings presentation, Aug 1, 2022
Slide 1: Interim Results 2022
Interim Results 2022 1 Aug ust 2022
Slide 2: Disclaimer
Disclaimer The information contained in this document is for background purposes This document does not constitute or form part of, and should not be only and does not purport to be full or complete. No reliance may or construed as, an offer, solicitation or invitation to sell or issue, or any shoul
Slide 3: Record orders in a challenging first half, long term well placed
Record orders in a challenging first half, long term well placed • Strong demand for our products continuing, with good growth seen in Industrial Technology and Healthcare – order intake a new record at over £193m • Revenue constrained by component shortages, extended lead-times and COVID-19 lock-do
Slide 4: Financial Highlights
XP Fo XP Power Financial Highlights
Slide 5: Key performance indicators
Key performance indicators ORDERS GROSS MARGIN OPERATING PROFIT2 OPERATING CASHFLOW £193.1 million 40.2% £15.0 million CONVERSION2 +18% CER1 (640)bps (38)% CER1 (23)% H1 2021: 113% REVENUE OPERATING MARGIN2 ADJUSTED DILUTED EPS2 NET DEBT3 £123.6 million 12.1% 52.2p £102.0 million (1)% CER1 (730)bps
Slide 6: Income Statement
Income Statement • Revenue down 1% at CER predominantly driven by component % Change H1 2022 H1 2021 % Change @ CER shortages and the COVID-19 lock-down in China Revenue 123.6 119.9 3% (1)% Gross Margin • Margins negatively impacted by lower production volumes, 49.7 55.9 (11)% (14)% Gross Margin % 4
Slide 7: Order Demand momentum by sector 2019 through 2021
Order Demand momentum by sector 2019 through 2021 Orders • Started 2022 with £217m of 193.1 185.8 firm orders 10.4 157.6 • No evidence of “double- £ Millions 145.8 35.7 42.3 28.2 stocking” or “over ordering” 114.5 112.2 100.4 50.4 • Significant long-term 84.8 66.6 21.0 26.5 21.9 61.8 momentum over p
Slide 8: Significant growth in demand especially Industrial Technology and Healthcare
Significant growth in demand especially Industrial Technology and Healthcare ORDERS ORDERS YoY change +3% +6% +45% +12% +18% YoY change +15% +4% +15% +12% +18% at constant FX at constant FX 8
Slide 9: Revenue growth impacted by supply chain challenges, good contribution from acquisitions
Revenue growth impacted by supply chain challenges, good contribution from acquisitions REVENUE REVENUE YoY change YoY change +4% (2)% (32)% (7)% (1)% at constant FX (6)% (12)% (2)% (7)% (1)% at constant FX 9
Slide 10: Pressures on profits from supply chain challenges
Pressures on profits from supply chain challenges • Volume constrained by component shortages and lead-times, and COVID lock- down in China • Margin decreased to 40.2% from 46.6%: Lower volumes impacting manufacturing output and absorption of overheads Freight costs, both cost and mix of air fre
Slide 11: Income statement specific items predominantly related to legal dispute
Income statement specific items predominantly related to legal dispute H1 2022 H1 2021 • Comet legal dispute includes damages of $40m, legal fees ERP implementation costs 2.5 0.9 incurred and estimated costs to be incurred in FY22, and Acquisition costs 0.9 0.0 impairment of previously capitalised p
Slide 12: Investment in inventory & factory capacity driving cash flow performance
Investment in inventory & factory capacity driving cash flow performance Adjusted Free Cashflow • Underlying cash flow performance impacted by weaker financial performance 3.7 • Increase in inventory to meet current and future (22.1) demand given significant increase in component lead times – expect
Slide 13: Net debt & new RCF
Net debt & new RCF • Acquisitions of FuG and Guth Net Debt • Investment in inventory to support H2 revenue and delivery of backlog • Adverse FX movements adding £8.1m to net debt and 8.1 0.17x to leverage 11.5 • New RCF of $255m plus an accordion option of $75m £ million 32.3 Completed June 2022
Slide 14: Full Year 2022 Modelling Guidance
Full Year 2022 Modelling Guidance CAPEX/CAP PROD DEV/CAP IT INTEREST EFFECTIVE TAX RATE £18.0m / £10.0m / £6.0m c. £2.5m 18-21% CASH SPECIFIC ITEMS COST INFLATION PRICING/COST SAVINGS c.£56.0-58.0m¹ c.£12m c.£8.0m2 REVENUE OPERATING CASH FLOW NET DEBT / EBITDA Significantly H2 weighted Improved Work
Slide 15: Business Update
XP Fo XP Power Business Update
Slide 16: Further progress delivering our focused power strategy
Further progress delivering our focused power strategy Develop a market leading range of competitive products Target accounts where we can add value • Continuing to deliver Further enhance our global supply chain through investment in despite market capacity, systems and capability challenges • Winn
Slide 17: A clear and compelling financial framework
A clear and compelling financial framework Through cycle organic revenue c.10% growth ahead of the market Operating margin supported c.20% by gross margin >45% > 20% Return on Capital Employed Operating cash conversion new facility in Malaysia > 90% Low capex model 1-2x Net Debt to EBITDA 17
Slide 18: Market update
Market update • Strong ongoing demand for XP products despite macroeconomic concerns • Record order books – intake led by healthcare in H1 • No evidence of changes in customer behaviour or push outs • Semiconductor Manufacturing Equipment demand continues to be strong as global semiconductor product
Slide 19: Industrial Technology – diverse exposure
Industrial Technology – diverse exposure H1 2022 order intake breakdown • Diverse end market exposures driven by high Broadcast Communications Computing levels of customer innovation builds resilience Analytical Instruments 2% 4% Defence 2% 2% 10% High Service Level • Attractive niches including: Ot
Slide 20: Supply chain performance improving but challenging first half
Supply chain performance improving but challenging first half • XP has faced constrained component supply, mirroring wider industry • Component shortages, particularly from sub-tier suppliers, has extended to standard components such as resistors, multilayer ceramic caps, transistors and diodes • Le
Slide 21: Strategy in Action: Investing in global capacity to meet long term requirements
Strategy in Action: Investing in global capacity to meet long term requirements Expanding capacity in all production sites • In all LV, RF and HV sites • Added RF manufacturing capability to China • “Customer value add” in Vietnam Stuttgart Sunnyvale Acquired FuG and Guth in Germany to complement HV
Slide 22: Strategy in Action: High Voltage - $500m+ addressable market
Strategy in Action: High Voltage - $500m+ addressable market The addition of FuG and Guth enhances our High Voltage portfolio. FuG Original XP Precision Electro Static Chuck 24% AC-DC High Power High Voltage High Voltage 18% HV Portfolio Guth c. $80M (2021) AC-DC 24% #2 Market Position High Voltage
Slide 23: Strategy in Action: How we will grow in High Voltage?
Strategy in Action: How we will grow in High Voltage? Product Development • SEM Market Penetration Growth Strategy • Ion Implant, • Mass Spectrometry • Ebeam Lithography, • Utilise current technology, • Print & Weld • E-Chuck • R &D and products and sales channel to • Cap Chargers drive market share
Slide 24: ESG – carbon reductions prioritised
ESG – carbon reductions prioritised Aligned to the United Nations’ • We have committed to being Net Zero by 2040 Sustainable Development Goals • We have calculated XP Power’s full carbon footprint including scope 3 in H1 Initial findings show majority of emissions are outside of our operations – m
Slide 25: Group Outlook
Group Outlook • Record order book with good growth from Industrial Technology and Healthcare • Exposed to sectors benefitting from the long-term global mega trends • Committed to investment for our future ~ Asia III, new capacity, new design facilities • Continuing pressure on supply chain and infla
Slide 26: Appendices
XP Fo XP Power Appendices
Slide 27: Comet litigation update
Comet litigation update • Following the decision, a further injunction was filed and responded to. As of 1 August 2022, the judge has not filed any ruling on the jury’s decision – there is no confirmed timing on when this will happen Next Steps Once the judge files his judgement, XP Power will con
Slide 28: XP Power portfolio and addressable market
XP Power portfolio and addressable market 600kw • Total addressable market – circa $6bn with XP Power High Power 300kw 200kw only focused on attractive 100kw Market Size $3.5Bn XP ~$250m Market Size $0.7Bn sectors XP #$45m 70kw • Long term market growth of 50kw circa 6% • Acquisition of FuG and Guth
Slide 29: XP Power growth drivers
XP Power growth drivers Rapid increase of electronic devices Digital transformation Long-term healthcare • More products need power converters • Increase in smart technology • Growing and aging global population • Pace of innovation • More sophisticated customer products • Healthcare infrastructure
Slide 30: What makes XP Power successful?
What makes XP Power successful? Service and Support - Quality Product Offering Cost Key Differentiators: • A given and paramount for • Product has to solve the • Not the customers’ top • Large technical sales mission critical solutions customer’s power problem priority but product needs and work in
Slide 31: XP Power Investment Case
XP Power Investment Case Investing in Growing Markets Leadership and People • Exposed to high growth markets • Entrepreneurial culture • Strong Customer relationships • Employee Engagement • Balanced product portfolio • Able to attract and retain the best talent • Revenue annuity Attractive Margins
Slide 32: Market Data
Market Data Market ($ Millions) Size Share1 XP 2022 Revenue North FuG & Share of Asia Europe Total (£ Millions) America Guth XP (%) Asia 1,513 1.7% Healthcare 2.6 8.4 10.5 0.8 22.4 18% Europe 775 10.3% Industrial 5.7 21.3 19.0 7.0 52.9 43% North America 1,187 13.4% Technology Total 3,475 7.6% Semifa
Slide 33: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow Jun-22 Dec-21 Goodwill 77.0 52.5 H1 2022 H1 2021 Change Other Intangibles 69.1 56.3 Adjusted Operating Profit 15.0 23.2 -36% PP&E 36.0 30.2 Other non-current assets 20.8 11.0 Non-cash items 3.7 6.4 Total Non-Current Assets 202.9 150.5 Change in working capital (22.1) (3.5