Nexteq (LSE:NXQ) — Final results for the year ended 31 December 2020

0:01 Good afternoon, ladies and gentlemen, and welcome to the Quixant PLC investor presentation for the final results for the year ended 12/31/2020. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the q and a tab situated on the right hand corner of your screen. Simply type in your question and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These would be available via your investor.me company dashboard, and you'll be notified

0:32 once they're ready for you to review. I'd also like to remind you this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to John Gelow, CEO and Andrew Jarvis, Interim CFO of Quicksand PLC. Good afternoon. Good afternoon. It's a pleasure to meet you. Thank you very much for taking the time to attend our results presentation for the financial year 2020. I'd like to start by talking a bit about what QuickSent does because, some of you may be familiar with the business and it may be new for others at least. So to kick off with, first of all, into what we do. So Quixson is a technology outsource provider, and we work with the manufacturers of global electronic equipment in the industrial market space to to provide an outsource option for components in their equipment which previously they've worked on in house.

1:28 We work we focus on specific industrial vertical markets and the first of those markets which was where the business originated was in the gaming sector. And when I say gaming, I mean the casino gaming and slot machine sector. And what we did with that is we brought a unique offering to the market whereby the manufacturers of casino slot machines were now able to outsource the development of the computer platform upon which their games were based. And this ability to outsource the computer platform combined both hardware, software, display components, and the mechanical the mechanical assembly of those components into a purpose built product designed to meet the highly regulated needs of the casino gaming market. And we became a ubiquitous and natural technology partner for the successful businesses in the gaming industry such that they could focus all of their attention and their their r and d effort on game design, which is the thing that really differentiates their businesses.

2:27 That that business generated a a significant level of revenue for us, and that enabled us to focus on what looking at what was going to be next. And that was when we acquired Densitron in 2015, which is a company which has got a very long tenure. It's been going for around fifty years, and it's got a pedigree in supplying display products into industrial, markets. So where gaming is currently very focused in one segment, in in the casino gaming industry, Densutron is focused as a displays provider in lots of other vertical markets. And Densutron was acquired as a means to execute our strategy, diversify into new vertical market sectors, and to increase the VAT in the value chain, within those markets. So just moving on, bit of an overview of the company founded in 2005, floated on AIM in 2013, and we've got origins of the Densitron business actually in the nineteen seventies. So we've been around for quite some time. Very, very global in nature, particularly for the size of companies.

3:30 So 200 employees, operations in nine countries and customers in in over 50 countries. So much much more global than than perhaps our our size of business would suggest. But we also believe very much in IP generation. So we have 20 patents granted, we have four patents currently in application and 19 registered trademarks across the business. But financially, we have seen strong growth, so 14% compound annual growth rate in revenues since rotation to the end of financial year 2020. And actually, to the financial year 2019, it's been a 23% compound annual growth rate. Peak revenues we had in 2018, and I'll come on to talk about why some of those are down in 2019 and 2020. So I talked a bit about the gaming business proposition and just sort of put into some color how, our product fits within the casino slot machine environment.

4:23 The casino slot machines went through an evolution away from mechanical real based devices that the the so called one arm bandits which you see in Las Vegas towards more video slot based machines where they have video screens which have animated versions of the video reels and a computer sits inside the slot machine and drives those animations and calculates the odds. So our computer board is the orange thing that you can see inside the internals of the slot machine in the left hand side of this slide. That computer board is the sort of the the control engine for everything inside that machine. All of that the peripherals plug into it, the screens plug into it. And then the customer, most importantly, writes software, writes the game which sits on top of that slot machine platform.

5:11 And the game is the thing which most differentiates our customers from one another because the player ultimately plays a machine because they believe they're going to win the machine, and that is what's driven and controlled by the game. Historically, before QuickSet came along, the customers were spending significant amounts of their r and d effort on the computer platform itself. And then there was therefore less budget left over for game development, but that meant that was that was not aligned with what generated their commercial success. So you can see on the slide here when we came along and said, actually, can outsource a computer platform to us. We enabled customers to balance the r and d investment with the commercial benefits to their to their businesses.

5:56 And that propelled Quicksand's gaming proposition to being a market leader in this outsource space for casino slot machines. And many customers start to adopt our technology as a standard and now we've got around 10% of the global market that we're supplying into with with slot machine electronics. We also started to supply the monitor products to the market a few years later just as a way of increasing the value proposition that we offer to customers. And last year, COVID was obviously a major impact on our market, but we remain a strong business through that and have helped our customers through the COVID pandemic in in ways which which were, you know, very very helpful to their businesses.

6:43 Just coming on to what Densitron does. Densitron's value proposition is is different to gaming's. So we start we start the Densitron business just supplying display components which are it's a very big market but it's a a very competitive market space as well. And this is supplying display products which are typically under 10 inches in size into the into global industrial sectors. The market is competitive and therefore, the the products are on low margin, and and and relatively low unit price. But the reason we did it is because Densutron has a fabulous exposure to lots of different vertical sectors and that enables us to, understand more about those markets and understand where we might be able to increase, the level of focus and value proposition, in another vertical market alongside gaming.

7:36 And through doing that, what we enable what it enables us to do is to migrate into not just display product, but also the computing elements behind that display product. And you'll see the analog there with what we did in gaming. And on top of that, display product, we also see opportunities to improve the tactility that touchscreens offer. And this is what we see to be a key, barrier or or or inhibitor in the wider spread adoption of touchscreen technology in industrial markets because touchscreens fundamentally don't offer any kind of tactility. They're very good for certain applications where you have sight of the screen at all times. But when you start to, use the touchscreen without having sight of the screen, you're trying to feel for certain parts of the screen, that's not that's not possible. So we think that there's a future in touchscreens where you blend certain physical elements that are overlaid on the touch surface and certain elements which are using the touchscreen itself.

8:32 And then finally, in 2019, we acquired a business which added software to the mix. So whereas we started by focusing on just supplying display components, we started to be able to supply these control surfaces which combine the computer technology with the control with the display. And then we finally added software on top of that, and in each case, we enable us we enables us to generate a higher margin and a higher unit price, from the customers and do so in a way which is very focused on certain industrial market segments where we see the opportunity to evolve products which are differentiated and targeted at those market needs. And I'll talk about later on in the slides, where we've we've found our first opportunities, for our, higher value products.

9:22 The investment case for QuickSim, we've got a proven effectiveness in delivering technology products into vertical markets. Gaming was a market which we entered into through exposure via our former employment within the Dentistron business and that was before we went on to buy it. So we under we uncovered this opportunity in gaming through Dentistron and we executed that technology leadership in in the gaming market without really a knowledge at the time of what gaming required. But we built that knowledge over time and therefore we certainly have the opportunity to do that in other markets, in time to come. The core gaming market though does have some very attractive characteristics from a competition point of view. So high barriers to entry due to the regulation and the blend of hardware and software that we supply into the market.

10:08 And that's led us to have this strong position where really our major competitors are the customers' internal development teams themselves. And that led us to strong profitability,

10:21 and strong cash generation and therefore a good balance sheet. So we've got a very low level of leverage. We've got a strong net cash position, which actually over the last year we improved. And we believe that that will enable us to invest heavily into both growing the gaming enterprise further and to new opportunities in other market segments.

10:44 So that's the sort of the backdrop for the business. I hope that's made sense. I'm sure there'll be some questions in time, which I'm very happy to answer in due course. But I'd like to take you through now some of the highlights for the group over the last year, and it has been certainly quite a turbulent year for us as it has for many companies. But in the year, I'm very proud of of of how we've come through it, and how we've managed our business and our customers and employees as a result of the the pandemic. So the first thing is, the first half of last year, we posted a loss and it was very disappointing. It's the first loss the company's had in its history. But despite that loss in the first half, saw an improved trading pattern in the second half of the year. And that improved trading pattern led us to not only posting a profit in the second half, but also an adjusted profit for the full year as well.

11:40 And and the reason we saw that improved trading pattern was principally that gaming started to see demand again after the casinos were closed in the first quarter in the second quarter. And also that Densitron was very resilient in its trading throughout the year. So while gaming was very heavily impacted by the closures due to the pandemic, Densitron continued to see resilient trading throughout the period. One of the things I'm proudest about was how we approached our customers in this. In the second quarter, they were in a very difficult position. The casinos across North America were closed and that meant that they had to take some tough decisions around cash flow And we were helping them around putting in place structured payment plans, around pushing out orders.

12:29 And I think that behavior that we had was a very strong, support to their businesses and enabled us to not only only collect cash through the period through these structured payment plans, but also generate improved relationships with those customers, more regular dialogue with the customers, and thereafter new business potential with them. And that's a that's a great result, in my view that, that was a very precarious situation at one point in the the sec in the second quarter of last year. The other thing we were talking to them about is how our gaming business model evolves. So we currently make money every time a new casino machine is deployed. It doesn't matter whether it's leased to the casino or whether it's sold to the casino. We make money every time that machine, gets deployed into the field.

13:17 And so we started to talk to the customers about new business models. So maybe leasing our equipment to the customer rather than selling it to them so that we have a multi year revenue stream from that from that deployment. And that's something that we progressed in the second half of last year, and we're expecting shipments to commence under the pilot lease scheme in the second half of this year. And while the year was difficult for us and we had lower revenues than we had in the previous year, we did continue to generate new business opportunities. And I'm pleased to say that, those are expected to deliver over $5,000,000 of revenue in 2021. So although our customers are still in a recovery phase this year, the new business wins that we've had is additional on top of those recovery, of existing customer revenues.

14:05 Densitron sales, were are very broad broadly based across a number of different sectors and two sectors in which we have had some focus. The first is broadcast and this is the sector where we spent a number of years now evolving a specific product set designed to cater for the needs of high end audio and visual broadcast studios. And

14:31 that sector grew double digit last year. And the medical sector which which we started to work on last year amid the demand for increased level of medical devices also showed double digit growth. And that double digit growth partially offset the decline that we saw or the decline in demand we saw in other sectors in the year due to the pandemic. I'm going to hand over now to Andrew Jarvis, who's our interim CFO, and he's going to take you through some of the financial highlights for the year. Thank you, John. Yes. So 2020 clearly has been a a challenging year, particularly around the pandemic, and that's seen revenues decline year on year by 31%.

15:17 However, what I would say is that this is a lot better than we had previously anticipated in h one last year and you'll see a trend that h two has delivered an increase in revenue but also has delivered a profitable half. So we reported an adjusted PBT of $1,300,000 for the year ending 12/31/2020, which I think is a positive trend. From a cash perspective, we've also improved on that. So where we've been working with our customers and also with our suppliers, we've ensured that payments have flowed into the business and out of the business at a reasonable pace and that's seen our net cash increase by 8% year on year.

16:05 Further evidence of our confidence and growth trajectory has been through our dividend proposal for this year to pay 2p per share which is a positive move for the business. In terms of the balance sheet, as a business we took action to control the cost base throughout 2020 in order to protect the business, protect the bottom line and to protect balance sheet position that we have. In terms of capitalized R and D, whilst we have maintained research and development work through 2020, there has been a decrease year on year, but this was primarily due to extraordinary end of life notifications from our key suppliers, which impacted some of the products and the life life cycle of some of our products. So we've had to write some of that back to the p and l.

17:03 Receivables and payables have gone down in kind as you would expect. And as I said, we worked with our key customers to ensure payment plans were in place to maintain payments into the business and that historic debts were cleared and payables have reduced in line with demand. Inventory whilst on the face of it has increased, this is primarily due to a currency revaluation as most of our stock is held in Taiwan where the Taiwan dollar is at a historic high against the US dollar. But broadly, we we maintain good inventory which is helping us at the moment with with some of the supply chain challenges.

17:50 In terms of our cash, this is reflective of what we have achieved through the year. So seeing good cash collection, supportive payments to our suppliers. We have taken some government support during the pandemic, most of which loans have been repaid, and we will be repaying the France loan, which we currently have in the middle of twenty twenty one, which indicates that we're we're we're in a good place as a business. And I'd also call out that we had a revolving credit facility with Barclays, which was government backed, which was a a backup contingency if we needed it. However, as a business, you know, we have we've done well during the pandemic to maintain our cash balance and we will no longer be needing that facility.

18:44 In terms of the gaming division, so you'll see that from the trading pattern in front of you that we have seen a decline in volume year on year, but it was very much a positive trajectory from h one into h two. So h one was saw the the impact of COVID. H two saw the recovery as demand increased after the period in which the casinos were closed in The US which has supported the business in driving a profitable year on an adjusted basis.

19:21 I think the quarterly breakdown really emphasizes how 2020 was in line for it to be a bumper year for the group. We had a very positive Q1 in 2020 but as the impact of COVID and the pandemic set in on casinos in The US, we saw our revenues decline in Q2, which was a difficult period. But as you can see from Q3 and Q4,

19:48 revenues have been returning and it looks good as we go into 2021. We've seen positive revenues in 2021 as well as a strong order book, which sets the business up well for the future.

20:04 I'll hand back to John now. So I'd really like to take you through, how the gaming market is shaping up today. So start to look forward about, how the recovery is, positioned. And and the first thing is that, the North American market, which is really, really important to our business, has has recovered to, near to pre pandemic levels in January of of this year. So the commercial casino market revenue is down about 10% in January 2021 versus January 2020. So a significant improvement over some of the lows that you can see in the second quarter on this slide. The second thing is that's because 95% of The US casinos are now open. So nine eighty nine venues are in The United States and nine thirty five of those venues are now open.

20:55 So The US market, is is recovering well, in terms of revenue. The the thing that's lagging behind that but still is recovering this year is the machine sales. So I mentioned there are different ways in which casino machines can be deployed into the field. They're released. They can go into a revenue share or they can be sold on a one off basis. And the machine sales for for the recovery to occur in that, the casinos have needed to get more confidence in terms of CapEx. So once the casinos reopen and players start to come back, they then that then enable

21:27 them to start to look at when they're gonna reinvest into their real estate. So this year, the machine sales alone are going to be about 56,000 units in 2021 and that compares to about 80,000 in 2019. Next year, machine sales are expected to approach 71,000. So what you can see is by the time we get into 2022, you've got about seven eighths of the level of demand just on the machine sales cycle, compared to 2019. On the European market, how it looks, a rather similar picture. So you get 92% of 2019 revenues for land based gambling in Europe this year at 95% next year and then onwards to a 1% compound annual growth rate in revenues thereafter.

22:16 So I suppose the key thing here is that the end markets which our customers supply into, have not only come out the pandemic and, and started to see their players returning, but also the revenues are starting to return as well in those markets. And the projection is that those markets return to normal levels, towards, next year. And how our customers are feeling about this and importantly, what that means for our business, is our customers are seeing quite a stark improvement in share price from the lows that we saw, in the first and second quarters of last year. And that's been driven by a number of things. One is the sentiment that the casinos reopened. The second was that the casinos not only reopened but players did come back in significant numbers.

23:03 And then also thereafter, a few of our customers have had some really, well, really highly performing games. And I talked to the beginning about the fact that game performance is everything. And the fact that those customers have had high performing games that are beating the house average has led them to, through last year, not only survive the year but also improve their footprint in the premium market. And and in particular, every, which the public listed company on Nasdaq, has seen a 400% increase in its share price over the last twelve months and now has a market cap of around 1,200,000,000. So every seen a very stark improvement in its, fortunes from a very difficult, and turbulent second quarter last year. So with all of that, what I suppose I'm saying is our customers are doing really well now in their share price.

23:48 And at some point, we believe that leads through to demand placed onto Quicksand for further units. And that recovery of our existing business is going to support our growth alongside the new business which we are also introducing into the mix.

24:08 So the strength of our key customer relationships is is set out on this slide, there's a couple of quotes here which I can let you read at your leisure, from from, senior management in Every and Ainsworth. But while most of our major customers suffered major, headaches in 2020, we helped them to overcome this. And we talk a lot about partnership and partnership is something which is, is is both in the good times and in the bad times. And last year, when we worked with them on this partnership point, what we what we demonstrated is we were here for the long run. So when they were in their fight in financial distress, and we had to help them through that process when they needed to push our orders, we were supportive of that. And that dialogue was with c suite engagement of those customers.

24:55 And during that point, we started to discuss new new business opportunities and new business models with them. And that's where some of these ideas came about around how can we deploy units in a different way apart from just selling them straightforward to the customer. And and and that's an interesting new development that we, are expecting to start shipments of under, the lease model in 2020 in 2021. The other thing that happened is aspects of their supply chains where previously we had limited perceived value. Now they can see simply because of how we adopted, how we operated through 2020. They see us having a value simply as a good high quality supplier in their time of need. So that's led us to new commercial opportunities as a result.

25:47 And what do those look like? So the first is we made progress during the second half of last year having been working with some customers over what they felt the recovery looked like on how we can move some of our real estate into a lease model with them to generate repeatable revenue over over a multi year period. That's interesting to customers because I keep coming back to game designers being the core importance to them. That's the thing that drives their commercial success. So the more that we can enable customers to invest upfront in game design, the more that their R and D budget which is enabled to be focused on game design, the more the customers are likely to have a game which is successful with the players in the market. And by going to this lease model, what it means is that machine deployments now cost them less money upfront, and that means that more money upfront could be spent on game performance and hopefully that means that they start deploying more machines in the market and both of us benefit from that.

26:42 So this lease model is an interesting, new concept. It's not been trialed before within the gaming market, but we are doing it on a pilot basis with our first, customer. It's going to have a very sort of small, run up. So the working capital implications are are low. But we believe it's a milestone, in the gaming industry that we will point to as a landmark, example of what's possible. On top of that though, there's been more traditional new business wins where we're simply selling our computer boards. And we expect, as I said, those to contribute over 5,000,000 of revenue in 2021. So we are going to see growth in our new business, which will diversify some of the customers which we've had over a long standing basis as well.

27:28 We had signaled in previous results announcements that there was an opportunity for sports betting terminals. And this is where we don't only supply the computer board, but we also supply a completely completely loaded cabinet which contains one of our computer boards in it, combined with peripherals, screens, and possibly some software as well. And while last year, the sports betting industry, for obvious reasons, didn't have a particularly easy period, we had live opportunities entering the period which we've continued to work on. And while they've been delayed, we have live prospects that we still believe will have revenue opportunities in 2022. So our sports betting opportunity alongside the land based gaming is still very much alive.

28:19 And Andrew mentioned that we'd had some key suppliers that had issued with, early end of life announcements, but as part of that, we also increased our utilization of Intel technology. And as customers have also felt those end of life announcements facing them and their internal engineering teams, which are responsible for developing the IP in in in customers in in companies that don't use Quixen, have now faced this challenge where they can't use some of these key components and they have to look at how they're gonna develop new computer boards. That's when there is an opportunity for them to come to Quixon to outsource the computer board design to us, and follow the wake of the customers that we've already converted to that business model. Andrew, over to you.

29:10 Thank you, John. Yes. So looking at the other major division in the business, Densitron, it's a different story to gaming. Densatron really saw a resilient year in 2020 with only a small impact of of the COVID pandemic. So despite what we've seen in gaming, Dentitron played a big part of the 2020 result for the group, seeing a difficult first half where the impact of supply chain issues and the factories that were used in China closing, that really impacted the supply chain through h one, but recovered in the second half as we realigned our processes

30:02 internally. Looking at the quarterly split, can see really see that China factory closure impact in q one, but then Q2 and Q3 saw growth versus 2019, which is a sign of the resilient trading and being able to sort of spread the mix of markets that we address as a group. In terms of Q4, there was some weakness across the broad industrial market, some of the other areas that offset some of these gains in broadcast and medical. I'd say an opportunity taken by the business in 2020 was to centralize purchasing for Densatron into Taiwan.

30:47 Historically, the supply chain and procurement has been managed locally in each geography that Dentitron operate. However, taking advantage of the of the infrastructure in place in Taiwan for the for the traditional gaming part of the business and applying that to Dentitron has really helped us manage that supply chain and reduce the volatility. One area of Dentitron that I'd like to call out is IDS. So this was a software system business that was acquired in 2019. That has had a challenging year with delays in in some of its key projects as our engineers have not been able to get on-site to install because of the the COVID pandemic restrictions on on workplace access. So I I think that that that should unwind as restrictions are reduced in 2021.

31:42 And in q one twenty twenty one, we we've already seen good revenues in excess of what we achieved in q one twenty twenty. Back to you, John. So onto onto the broadcast market. And before I go into into the detail on this, I think it's important to talk about what broadcast means and and what it means for us and how we help in it. The broadcast market is a very conservative industry. It's an industry in which the engineers and the operators of the equipment have got used to working in a certain way over over over many many years. And as a result, they're very reluctant to change. There's a degree of conservative conservatism in the market which we have to appreciate and have to realize. And we have been supplying displays of various sizes into the broadcast industry which have been incorporated into this equipment as part of the Densitron displays product offering.

32:43 What we started to see was customers coming to us saying, how can we make our displays more intelligent? So how can we make those displays touch enabled? How can they become bigger so that we can start to have graphical interfaces on those displays? And that was something which was not well serviced by the sort of the internal electronics which those companies had as part of their equipment solutions. Many of the displays were being used in rack based products. So into the server 19 new rack based, rack based deployments. And so, certain the display characteristics that we needed were were different to the to the ones that were available in the market. So we tooled up some special displays which made those which were well well suited towards those those rack mounted environments.

33:34 But the second thing was it wasn't just about the display because suddenly you had a larger display that needed to be driven with a graphical content and that had a different allow that had a different requirement around the computer elements behind it. So the embedded electronics that they previously were working with were not something that were able to drive these graphical interfaces. And you can see the similar analog here to what we saw within the gaming markets. They moved away from mechanical reels to video slots. So we started to look at how we can provide turnkey, embedded computer and tactile touchscreen based display products for the market. And then the final challenge was this fact that the the operators are usually working fairly mission critical circumstances in broadcast studios. So they have to queue people on on stage. They have to switch feeds from one particular camera to another.

34:23 And all of that stuff needs to be done a) with precision in terms of timing and b) without any false triggers. And so we also start to look at how can we make touchscreens, more tactile in nature. And all of that is about how do we put elements physical elements on the top of the touch surface so that you get the blend of a good touchscreen, configurability and repurposability, but you also have certain mission critical functions which use physical buttons. And that, in our view, is the sort of the holy grail for a a for a high quality human machine interface or HMI as we as we refer to it. And that sort of trajectory that we built up within the broadcast market built a strong pipeline. And and last year, despite the headwinds caused by COVID and broadcast certainly wasn't isolated from those, we still managed to generate growth of 13% in the broadcast market within Densitron.

35:15 And so we're really pleased with that performance and we believe that that sets us in good stead for growing, continuing to grow at a double digit going forward with these new product offerings that we've got. Some of the projects which we had in that pipeline were delayed, in mass production last year due to COVID and we are expecting those to go into MP this year. Andrew has talked about IDS. That that is a software element which goes on top of all of this electronic capability that we've brought to the market and is used very widely in a number of high profile institutions such as places like the BBC. And IDS also was slowed last year because of this inability to access studios. But IDS has a good future ahead of it and is a very profitable business line that we that we bought in in 2019.

36:03 And so what we remain confident in broadcast is the innovation which we brought in our products into the market, the brand awareness that we brought to the market and the strength of the pipeline we've got gives us tremendous upside opportunities as a new growth sector within Dentitron. The other market I want to call out is medical. So I don't need to say that medical last year was a very buoyant sector to be in. And we actually have quite a big enterprise in medical within Dendstrom. So last year, medical revenues were actually the largest within every sector outside of gaming and were $8,200,000. And that was double digit growth again on prior of 17%. But Medical is in a different position today from where we see it going in the long run because we've only just started to explore where there are higher value propositions available

36:55 to us in that market space. At the moment, our product offering into the medical market is display only and it's a very competitive space with lots of other manufacturers also supplying displays into medical. But in time, what we believe we can offer is more IP rich products targeted at specific applications within the medical market. So to give you an example, I talk about the need for tactility. Well, if you have an ECG machine where there's a display in it, if you want that display to be touch enabled or for some functions perhaps that's acceptable, but certainly is something to mute an alarm. You wouldn't want that to be a touchscreen because that would potentially be false triggered and somebody could have the alarm muted when it was a it was a critical thing to to to still be able to hear. So that's where you can blend the two elements, touch enabled touch enabled for certain functions and then physical elements for other functions and make the make the medical market revolutionized in the same way as we see opportunities in other verticals.

37:53 So far, we've had some high profile projects though within the medical market, particularly related to COVID-nineteen last year, so test equipment and ventilator projects related to COVID-nineteen. And we've got a broad established customer base, which we can bring these new ideas to and assess their appetite for moving them forward. And in particular, we think that IDS may have application within the medical market as we look at ways in which we can revolutionize the way operating theatres are used and controlled. And a bit of fun, in March this year, we had a coronavirus clock campaign where we sponsored the naked scientists with a coronavirus clock and you can see a screenshot of that on the BBC with the Dentistron logo behind it. So we're proud of that. It's a good brand awareness piece to get our name out there as as a medical vendor And we saw a significant amount of lead generation on the back of that campaign.

38:51 So I'm just going to pause and just sort of the outlook on the base of everything we said, I feel is very exciting for the business. And I think we have a lot of opportunity to grow both the gaming enterprise significantly to benefit from the disruption in the industry and to capitalize on that goodwill that we generated with customers. And then within Dentitron, the broadcast market has already grown double digit and that's with a headwind of COVID. But we think that these new product offerings we've got deliver opportunity for that to grow significantly faster as well. And equally, we're now just starting in the early throes in investigating the medical market and where we might be able to bring innovative IP to that space as well. So the one the one thing that is a challenge at the moment is the small is the supply chain risk. And many industrial markets are facing this and it's where the semiconductor industry is failing to keep up with the demand for the components which it outputs.

39:49 And that's hit all sorts of segments. The automotive sector, the technology sector has seen it And we aren't isolated from that. But the one thing that we have got to our benefit is that we have a strong balance sheet and we have a cash balance which we can deploy to try and mitigate that. And historically, we've held a significant amount of cash on the balance sheet. And that cash has been used during the last few quarters to provide us with a runway of components to mitigate the shortages which are being seen. So while lead times are at double normal levels, at least in many cases, and there's price inflation, we have taken action to mitigate that throughout 2020 and then into 2021 in the first quarter where we committed advanced stock purchases. But it's also fair to say that we can't be in this alone. So we've also been engaging with our customers both to get extended order commitments from them and to introduce price rises to protect our profitability as the input stocks go up in price.

40:49 So it's a short term supply chain risk, but actually, our our our efforts to try and contain that and control it are are eased by the strength of our, financial resources behind us. So in outlook, Andrew referred to a 55% improvement in trading in the second half of last year compared to the first half. That trading momentum, we're really proud, has continued into the first quarter of twenty twenty one, which sets us in good stead for full year growth, this year. So the electronic component supply chain shortages aside, we have a good confidence in growth, this year. The order coverage also signals to that. So 106 order coverage of our budget for the first half of the year is strong position to be in, in a position that is stronger than it has been in previous years at this point in time. So we believe that, again, signals the opportunity for growth this year compared to prior years.

41:52 Couple of other points is, one is France is small, will be taken over from Michael Pegram as our Chairman. Michael is retiring after nine years on the board at the AGM in May. And the final point is that we have very strong resources within the business, strong balance sheet, and we have a high degree of goodwill generated with our customer relationships, which combined with the existing business improving and the new business which we've won and the new markets which we're serving under Dentistron gives the group tremendous growth opportunities. And that really is underpinned by the fact that we are confident enough now as a board to reinstate a dividend payment for the full year 2020. So that's the presentation.

42:40 I'm gonna put it back onto camera so you can see Andrew and I. John, Andrew, thank you very much indeed for the presentation and really comprehensive. That's great. Ladies and gentlemen, do you please continue to submit your questions using the q and a tab situated on the, right hand corner of your screen. But just while the team take a few moments to review those investor questions submitted already, I'd like to remind you the recording of this presentation along with a copy of the slides and the published q and a can be accessed via investor dashboard on the Investor Meet company platform. I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected to the opportunity to provide your feedback in order that the company can better understand your views and expectations. John, Andrew, know I haven't given you a great amount of time, but perhaps if you could just click on that q and a tab, you'll see a bunch of questions that have come through. If I could just hand over to you just to read out the questions where appropriate to do so and respond, that'd be fantastic. Of course. Yeah. Thanks very much. So you've got a series of questions.

43:39 The first one I'll pick up is do we see a path back to the results achieved in financial year '18, which were a $115,000,000 of revenue and 26¢ of EPS? And and and I think the answer to that very clearly is yes. So we've not lost any business compared to the customers we supplied in 2018. So the customers then have seen a decline in their demand from the casino market because going back to the game performance point, their games have been performing worse than some of their competition. But, in some cases, every I called out have seen really good game performance recently, and and there's no reason why, those businesses can't return back to their normal levels. But I see it as much more than that. So that's the, that's the recovery of our existing customers. But alongside that, we've also won new business which wasn't in the revenue in 2018.

44:31 And we've brought on two growth markets where we think we have opportunities outside of gaming. So in terms of do we see a path back? Absolutely, we do. And we see a path beyond where we were in 2018 as a long term outlook for the group. And that's very much a key focus for us as a management team is to to not only get back to 2018, but set ourselves up with a long term growth trajectory thereafter. Next question I've got is around the lease program and how it works. So the lease program, we are working through the operational idiosyncrasies of at the moment. It is a complex thing to to structure and we want to get it right the first time around, which is why we're working on it on a on a pilot basis. But it's something that we sort of evolved in these regular c suite engagements with some of the key customers. So we are understanding of their challenges to start to as the market starts to reopen, and we start to work with them on how, on how we could help them with that and also, of course, benefit our business by bringing, a more repeatable revenue stream to it.

45:38 The next question I've got is around customer concentration. So in financial year 2020, customer concentration, our largest customer was 31% of our revenue, which is up on the previous year due to the mix of customers and their demand through the year. But what we see going forward is that the new business we've got and the greater demand across the board from customers in 2021 will mean our customer concentration risk should go down compared to 2020. Next question is around the balance sheet and what we will use it for. So is it something that we've made progress with in terms of things like acquisitions?

46:24 In 2020, I think it's fair to say that we will focus primarily on protecting the business that we had, protecting our balance sheet strength to ensure that we came out of the pandemic in strong light and could continue to focus on the organic growth opportunities we had. Clearly, we've done that now. And as we continue to see the improvement out of the lows of 2020 in the gaming market that will give us further fuel and confidence to start to look at acquisitions again as an item on the menu to grow our enterprise. Next question is what's the competitive landscape like and who are our major competitors? And when it comes to media and medical opportunities, what solutions are you providing and what's the model?

47:13 The competitive landscape in gaming principally revolves around our customers in house teams. They have been developing the computer platforms and some of the software we provide themselves in house. And what we stand to do is to displace that development done in house with an outsourced provider. And in the broadcast market, really, there's a new way of operating this equipment. So previously, lot of the control was done with mechanical controls. We're providing a way in which they can use touchscreen controls. So to some extent, it's a displacement or an outsource of some of the internal r and d. And and to some extent, it's it's solving a problem which previously the broadcast customers didn't have to do. They didn't have to handle GUIs and and graphical user interfaces and computer electronics.

47:58 Now as they start to evolve the touchscreen needs, they're gonna have to. And they either choose to have to do that in house or we believe we can offer them a turnkey off the shelf solution which which enables that. And in the medical market, it's very early to say that, but the competitive landscape for things like displays and computer boards is certainly very competitive. And where we see opportunities in the medical market is around understanding a niche within the sector where we can provide a bespoke product a bit like we have in the broadcast and medical markets. So it's about trying to find a way in which medical can be we can find a niche within medical which is not so competitive and we can offer a high value product which caters for a particular need. So in every case, when we find, you know, we started with a gaming market and we find new markets, it's always about finding a unique need within that market where we service it considerably or or hopefully at least marginally better than everybody else in the sector. And the reason we can service it better is because we really understand intrinsically how that market operates.

49:03 And to give you an example of that within medical for within broadcast, for example, we spent some time going around the BBC and talking to BBC broadcast engineers to understand the the benefits they see of touch screens and the challenges they see with touch screens. And that's what evolved some of our product offerings so that we could, so that we were confident they were the right thing to bring to to help the, participants in the market. Final question is around the sales cycle. Can you explain your sales cycle product awareness and where you sell into an organization? So this is something which over the last two to three years, I think, has changed. So previously, we had to, work with the engineers in the companies to try and win them over, and that was often difficult because in some senses, it was, them that you stood to to displace.

49:53 You also had to work with the supply chain people because, of course, price always comes into this at some point. But really, the key people to attack, are the c suite or the key decision makers, the ones that are responsible for bringing innovation to their products, bringing them to market quicker, and saving the total cost of ownership. And so over the last two to three years, we've been really working on targeting the c suite and I think that is a critical part of our strategy as we look to grow the gaming business and win some of the larger tier customers with within the gaming business. And also as we start to forge strategic relationships with some of the broadcast customers and in time to come to the medical customers. So it's a slow sales cycle. It takes a long time to win gaming business and and broadcast is conservative and so has a similar long sales cycle. The benefit is though that long sales cycle also is sticky. And so we have we've not lost a gaming customer and that's because we have an intrinsic level of design into their products as well, which means that we are difficult to displace as a vendor.

50:57 And hopefully, the fact that we do a good job for them and we we support them through times like COVID, means that they wouldn't want to look elsewhere even if they could. That's fantastic. Thank you very much. And you've actually addressed all the questions that we've had come through. And, course, if there are any further questions that do come through, the company will able to review these post the event. John, thank you very much for that. Perhaps I could just ask you just for a few final words just to wrap up before we redirect the investors to give you some feedback, please. Yeah. Of course. Thank you. So I think we're at a really exciting time for the company. Last year was not an easy year for for for many of us for lots of reasons, but I think it's generated new opportunities for us. And it's also generated a new focus for us to to not only think about new ways in which the gaming business can grow alongside, of course, the growth that we see with as an opportunity within what we've done for for the last sixteen years.

51:51 But on top of that, also new market segments where we also see growth opportunities. And the fact that companies come through this with such a resilient level of trading, I think, position positions us an excellent in an excellent position to grow substantially in the long term. So it's a good question that the first one asked which was, you know, how do we get back to 2018? Well, the answer is we're really confident of doing that and going much beyond it as we not only address the gaming market with a specialist product, but also other segments as well. Fantastic. John, Andrew, thank you very much for updating investors today. Please ask investors not to close the session as you're now automatically redirected for the opportunity to provide your feedback. If you've accessed the meeting from our website, the feedback page will appear in front of you. If you've accessed the meeting via the link sent to you by email, you'll be simply asked just to log in. It takes just a few moments and be greatly appreciated by, John, Andrew, and the Quixson team. On behalf of the management team at Quixson PLC, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you, and good evening.