Nexteq (LSE:NXQ) — FY22 Results Presentation

0:00 Good morning and welcome to the Quicksand PLC investor presentation. Throughout this recorded presentation, will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question you received during the meeting itself. However, the company will review your questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to John Jayle, CEO. Good morning to you, sir. Good morning. Thank you for dialing in to Quixant PLC's twenty twenty two annual results presentation. So we're really pleased with how the year progressed. We made significant operational and financial and strategic progress during the year and delivered strong performance, but also positioned ourselves for long term sustainable growth and a more diversified earnings stream.

0:56 On the financial side, we delivered a record year of revenues for the group, which were ahead of initial expectations,

1:03 and we also saw strong order intake signaling ongoing demand for our products and services. We also faced significant challenges as many technology companies did during the year around supply chains, but we managed those effectively with our global supply chain network to minimize the impact on our customers. And also pleasingly, we progressed to start to recover some of the lost margins that we saw in 2021 with inflated component prices. We saw a good progress in our strategy, our growth strategy to diversify across multiple markets and also around focusing in on how we offer customers within gaming a great degree of outsource. We made good success and made investments into that. And also from a financial point of view, we continue to have a strong net cash position, a robust balance sheet, and saw a return in the second half of the year to a build of our cash balances.

1:58 So what is Quixon? Quixon is a global technology business. We help customers in a number of selected markets to outsource noncore aspects of their components to of their of their products to us, allowing them to focus on the parts of their business which gives them the greatest commercial differentiation. We do that through a global team of very capable engineers covering hardware, software, display, and mechanical engineering disciplines. And that team spans seven countries, and so we're a very global operation. Our customers are in fact in 50 countries, so we're used to again having that exposure across multiple time zones, multiple geographies, and multiple cultures. We're an innovative business, 22 patents and 28 trademarks, and our customers rely on that to driving their products with an innovative technology partner that can give them the best of breed technology in the markets that we operate.

2:51 Sixty two percent of the business comes from the gaming sector, and this is a casino gaming and slot machine market, and 6% of the business from the evolving broadcast offering where we're focused. And then we have a handful of business across a number of other industrial sectors, which are shown on the bottom right side of the slide. Our track record of growth has been 19% CAGR since we floated in 2013. Company has been operating for eighteen years since 2005.

3:19 So the group's growth strategy, what do we do? And and how do we do it? We've successfully deployed this into the gaming market. We're successfully deploying it currently into the broadcast market. In due course, we would expect to do it in other sectors. So what we seek to do is to identify target markets where there is a technology debt, where something is happening in those market, there's a trend occurring whereby the manufacturers in that market haven't got technology today that is going to be suitable for what the future holds. Having identified those key markets and the broadcast is our next market after gaming, we seek to acquire customers within those target market segments. And and one of our businesses, Dentistron, which I've come on to talk about at the moment, has got a very broad customer base across different sectors. And that customer base is very effective at allowing us to build out relationships at a much deeper level. And then having built out those relationships in target markets, we're able to undertake r and d exercise to to develop more bespoke technology offerings and then penetrate further up the value chain within those key markets. And from time to time, we may also accelerate that organic growth with m and a to enhance our product offering and also to to have better routes to market.

4:30 So what is Quix in Gaming? Quix in Gaming, we saw an opportunity when the business started in 2005 to provide a purpose built computer platform that enabled manufacturers of slot machines to outsource that computer to us and thereby focus all of their r and d efforts onto the game design. And the game design is the most important part of a casino slot machine from the point of view of player experience. It's a thing that drives our customers success. So by allowing them to outsource their computer platforms for us, they can invest much more of their r and d effort on on game design. And it also meant that they were able to to get the best of breed technology solutions from us. So we are constantly looking at the market for the best technology, trying to solve the regulatory requirements, which are incredibly difficult part of this industry, to enable the customers to not have that issue, not have that headache in bringing their machines to market.

5:21 That made them more efficient. It made them more competitive, and it also allowed them to bring their solutions to market faster.

5:27 The annual market for the gaming business that we have is over $3,000,000,000. That is within the addressable market that we can access today with our current product offering is $310,000,000. The replacement cycle for the machines in that market are three to five years, and our typical ASP is about $1,200. We currently, based on 2022, have 23% of that gaming market. And on the right hand side of the slide, you can see where our solutions sit inside the cabinet. They sit in internals of the cabinet. Player doesn't experience it. The player experiences our customers' game. That's what drives our customers to be more successful. We look at the second focus sector. We have the broadcast market. So what's happening in broadcast is it's really the revolution that you saw in the smartphones moving from BlackBreeze to iPhone. It was where smartphones went away from mechanical buttons and they went to they went to a touchscreen based architecture.

6:22 In broadcast, that hasn't happened yet, but it's starting to occur. So many of the manufacturers are now trying to decide how are they going to achieve this migration. It's even more complex in broadcast because actually, whilst the mechanical controls seem antiquated in the context of other markets where it's all one touchscreen, actually, they provide a wonderful degree of precision and tactility that you need really for that professional broadcast environment where you never get somebody falsely queuing a camera. You never get somebody falsely unmuting or muting microphone. So the the the tactile controls in broadcast are really important. And so we've sought to develop innovative technologies around this space to blend the best of touchscreen, but also with tactility for certain mission critical functions. And by doing that, we believe that we can access into an $880,000,000 annual addressable market in the broadcast sector of which with our current product offerings, there's a $220,000,000 market. So about a quarter of the market with our current offerings is available.

7:20 The products in this market are on a five to seven year product life cycle. So after that period of time, they'll be constantly replaced, and that's what gives you these annual cycles above. Our typical ASP is about a thousand dollars, and and based on last year's revenue, we had about 3% of that market. And then and then finally, about the display components business. So this is the origins of the Densitron business. This is where we evolved the broadcast business out of. And, actually, Densitron display components is a very old business. It's got history going back to the the nineteen seventies, a fifty three year old tenure, and so it served through many different difficult technology markets over that period of time. What density on display components business allows customers to do is to is to find the best of breed electronic display modules to put into their equipment.

8:09 We then will help them to specify that that solution be it environmental, be it technologies, display technologies that they look they they they would be best served to use, and then we help them to source those in in from manufacturers that are carefully selected in the Far East. And through this dense from display components business, we have a very broad platform of around 500 customers across different sectors. And through those customers and through those sector exposures, it helps the group to identify new focus markets. And as I said, the broadcast is is one of those markets that we've now identified, and we're focusing in on on extended r and d to enhance our product offering. And we have a very small part of this very competitive market. It's it's under 1% market share. As I said, it is competitive, which means that there's a limit to how much we can charge higher prices and get better margin from it. Hence, while we invest in focus businesses to increase our profit margins within those markets.

9:08 Thanks, John. Just moving on to how to the next slide in terms of how we're organized internally to serve these end markets. We have dedicated sales, account management, and product innovation teams with that that with a deep knowledge of their their chosen industry and strong relationships with our customers. And but for the rest of the business, it's shared across across all the end markets. So shared design engineering team. We've got supply chain and manufacturing based in Taiwan close to our close to our key suppliers and our manufacturers. And then finally, we have finance, legal, HR, shared service teams. We have a shared IT with a with a strong IT platform that is scalable. So, you know, so we we don't really need to add that much the to the to the platform as we continue to grow the the business.

9:58 Just moving on to the the financial results. And just in terms of the 2022 highlights, as John said, a really strong performance for the group, nearly $120,000,000 of revenue, up 37% year over year. We've seen a continuation of the recovery of our gross margins up to 32%. That along the alongside with the higher profit before tax of 10,200,000, meant that we were able to deliver EPS of 17.8¢, almost 200% up year over year. The group generated operating cash flows of of $800,000 in the year. It is down year over year as we have made investments in our in our working capital predominantly around strategic stock to ensure that we can continue to deliver to our customers. But at year end, still a strong balance sheet, net cash of $12,900,000 and good operational liquidity that gives us the flexibility to eventually make the most of both organic and inorganic opportunities.

10:55 Moving on just to revenues and as I said a record revenue year for the group, second half of the year accelerating to almost $67,000,000 of revenue. In terms of revenue concentration that remains a priority for group. We have seen an increase in concentration in the last year as some of our larger customers had a really strong performance but we're still in a better position than we were in 2018 and this is in part due to the larger proportion of Dentshorn revenues. Dentshorn now more than 20% up compared to where they were in 2018 and also a a broader broader gaming offering.

11:31 Sticking to to gaming revenues, and you can again, you can see, first of all, the impact that that COVID had on the gaming industry in the first half of twenty twenty, but then a consistent recovery since then, accelerating in the second half of this year, 42, almost $43,000,000 of revenue. Gaming shipped $74,000,000 of product in 2022, which is the second best year in the in the division's history. Now that was in part due to higher volumes. And if you look at the chart on the right, you can see the the number of platforms shipped up 30% to 52,000 in the year. Within that, we've also seen a really strong demand for our higher end range of products, and that has helped to drive the average selling price up 13% year over year.

12:17 Now this demand that we're seeing in gaming is coming from good recovery in our end markets and this slide just sets out a bit more detail in terms of how we've seen end markets behave in the last couple of years. Starting with The U. S. On the left, that's our biggest market, about two thirds of our revenue is generated from The U. S. And, again, you can see the impact there in the second quarter of twenty twenty on on gaming revenues, a sharp recovery in The US, which went through 2021 and has continued into 2022, which is which has been another record year. And you can see it's well above the levels that the of gaming revenues in 2019, which in itself at the time was a record year. So the The US market has remained remarkably resilient.

13:02 And again, as some of the early numbers that we've seen from January of this year, that trend has continued into 2023. On the right, the European gaming revenues, a slower recovery with '21 really being staying at the same level as 2020, but we've seen a sharp recovery in 2022, 40% up year over year, still slightly below pre pandemic levels, but expectation is that there's going be further growth in Europe. And then finally, in terms of Asian markets, it's a small part of our of our revenue base, less than 5% of our revenue is generated from from Asia, and those markets have remained subdued through 2022. Again, linked to COVID, you think of the the restrictions that were still in place in China through through last year.

13:51 But what we have seen in in January of this year is a is a sharp uptick around the Chinese New Year and the golden week celebrations in that part of the world as China lifted their code restrictions, and then we're hoping that's early signs of further improvement in 2023. Moving on to Dentitron and good momentum in that business, again continuous growth now from the first half of twenty twenty, a second consecutive record revenue performance for Densitron just shy of $46,000,000 up 15% year over year. Again we've seen broad growth across its sub sectors particularly in broadcast which grew more than 40% year over year, the third consecutive year of double digit growth in that sector.

14:40 Now in terms of market dynamics for Dentitron, what we've seen is that we've won market share from our competitors because of our deep supply chain connections in Asia. We've been able to supply components better than our competitors and we've won market share as a result. We've also seen a proliferation of touchscreen technology into industrial sectors, including broadcast, which has led to larger displays, increasing ASPs, and and and giving new challenges for computer technology. We are addressing this trend particularly in broadcast and we feel that the product offering that which we have will meet the requirements of the market and John's got some more detail on that in later slides. In terms of our gross margin and doing a focus area over the last couple of years related to the supply chain constraints we've seen that recovery that we first supported at the half year continue so again a further improvement in the second half of the year and that's really twofold. First of all from an internal perspective as we have as we deliver more revenues we benefit from operational leverage which improves our gross our gross margin and then secondly external factors we've seen that leveling off in component pricing at the end of the first half continue into the second half of the year which has meant that the price rises that we put through has now started to positively impact margin.

16:02 And then secondly, as global freight has returned to more normal levels resulting in lower freight costs, that's supported our gross margins. Looking forward to 2023, we expect these trends to continue with improved margins across both our gaming and Denton divisions. So when we talked about gross margins it's really been in the context of the acute component crisis that technology markets worldwide experienced over the last couple of years. We've seen it most notably in around lead times with lead times extending far beyond what they were normally and also component inflation. And we took early action as a group through our strategic stock program, reengineering and also looking to increase customer prices and we've been able to effectively address the impact of the supply chain constraints.

16:59 Looking ahead to 2023, we expect these to start to to ease as they have through this year, not return to full normal levels, but an improved position in 2023, and we feel that we are well placed to continue to to address these issues. Just looking at profit before tax so the top left is a bridge of profit before tax between 2021 and 2022 where we nearly doubled our profit which is largely due to the higher sales volumes as well as the improved gross margin that we've just talked about. We have seen an increase in our operating expenses. This is due to an investment in headcount predominantly around our sales and engineering heads as we're looking to meet customer demand, drive drive future demand, and meet that demand.

17:48 We've also seen a return to more normal levels in some expenses such as travel as international travel is available again and also marketing as as trade shows have recommenced. Also included in our adjusted PBT is a provision of 900,000 that we took against the recoverability of of balances owed by a customer that's involved in chapter 11 bankruptcy protection protection filing that that took place subsequent to the year end in in February of this year. Now it's our intent to recover that amount in full, but because of the uncertainty any bankruptcy proceeding, we took the prudent view to provide for the amounts owed in full. The profit that we achieved of $10,200,000 translates into a margin of 8.5% which is up on 2021.

18:42 We recognize it's still below the levels that we generated back in in 2018, 2019.

18:49 And some of this is deliberate as we have invested in our in our business to allow us to have a more a more broad, more diversified revenue base. And what we're looking to do is grow from the $120,000,000 of revenue that we recognize this year to a to a bigger revenue base and then get those profit margins back up to the mid teen levels in in the medium term. And then finally, just in terms of earnings per se 17.8¢ in 2022 well up on the prior year in part due to higher profits but we've also benefited from a corporation tax credit of $2,100,000 which reflects the recognition of prior year tax losses which we can apply to future taxable profits. It is a one off credit and looking ahead in the medium term we expect our effective tax rate to be in the range of sort of 15 to 18%.

19:42 And then just moving on to net cash as I noted earlier net cash of $12,000,000 at the end of the year. We've continued to generate operating cash flows but we have invested in our working capital predominantly around our our strategic stock. But in the second half of the year, we've seen that starting to unwind, and we actually generated free cash flow of $3,000,000 in the second half of the year.

20:08 In addition to our working capital, we've also continued to invest in new product development, $2,200,000 capitalized there, and we've also paid a dividend of $1,900,000 last year. The board is also proposing a dividend of 3p per say, so 25% up year over year, which just demonstrates their confidence in the group's prospects and our ability to to generate cash. Looking ahead to 2023, we we expect further normalization in our working capital, which would allow an increase in our operating cash flows and to further increase that net cash balance. And with that, I'll hand back to John. Thanks, Johan. So against the strategic growth plan that we set out earlier, we've made good progress during the last year.

21:02 So first of all, in terms of identification of target markets. So in 2018, we identified broadcast as a next focused market for the group after gaming. And in '20 in 2022, we delivered the third consecutive year of double digit revenue growth within broadcast. So we're pleased that that market that we said we could build a growth business in, we've made good progress in. We've also been successful in landing new customers. So within gaming computers, gaming cabinets, we had our first customer win for cabinets last year, I'll come on to what our gaming cabinet offering is in a moment. And we've also got a strong broadcast pipeline of customers with a more closely set of qualified opportunities for further growth within that sector. And we continued on an r and d exercise. Now it's fair to say that in the supply chain issues that Johan mentioned just a little while ago, the r and d effort was heavily focused on making sure we got customers with product that we could continue to supply.

21:58 So we did have a sort of a diversion of a lot of r and d resource during 2021 and into 2022 to make sure that we are reengineering product to allow customers to to have their production unaffected. However, it's fair to say we've also continued development of product, and we're expected to do much more of that going into '23 as well. And in terms of penetration further out the value chain, again, we launched our gaming cabinet options in 2019 and we successfully managed to migrate up the value chain within gaming beyond just the computer boards. And on on M and A, we have a much more robust operational liquidity flowing through in the second half of last year that continues our net cash position we've always held in the business positions as well for further acquisitions going forward.

22:48 So our gaming computer range really is the is the standard bearer for our offering into the casino gaming technology market. This is what we launched with the business back in 2005. And what we seek to provide, as I said earlier, was a as an outsourced option for the customers that are bringing gaming cabinets to market. There are three tiers of product within that range. There's a lower cost product, which is targeting certain markets like the route markets in North America. There is a there is a a mainstream product, which is called the icon, which is for the VLTs and mainstream casinos, and then there's a high end product offering called Qmax, which is for the the class three type markets and the high end casino markets. And then what they effectively have at that different range of price points is different levels of performance and different levels of features, but they're targeted and tuned at those different types of machine.

23:39 And and that gives us a full complete range to target all of the different types of casino machines in the market. And we've been working on that range to evolve it, and we've launched in in 2022. We launched the Qmax three, which brings Intel architecture to the high end for the first time in our product offering. And that's also more flexible option because it brings in the ability to incorporate NVIDIA based graphics accelerators as well. So that's a a really exciting high end product launch, and we've already got business secured for that. And then in the target market for the the mainstream casinos and VLTs, the icon range will be bringing out the next generation product that will have Intel based architecture for the first time in the latter part of this year. And we are investigating for the IQ range options for a lower price point product in that market. So a really broad set of products targeting all of the different areas of the casino market globally.

24:32 And what what we also set out on the growth strategy was we're all about investing in r and d to penetrate further up the value chain. And this slide shows how we're seeking to do that within gaming. So when we started the company, in 2005, it was all about having a gaming computer offering, which allowed for customers to outsource. What we've since done is we've evolved that

24:53 to incorporate cabinet solutions, which allows customers to outsource also the whole cabinet option to us. That means they can focus even more on the software area. But we've also found within that customers have been keen to outsource some of their game integration. So trying to get their games working on the cabinets, That's been something that's been a challenge for them. So we've also helped with that. And in some areas, there's aspects to their software which they don't want to do sort of underlying some of the game architecture. So we're we're trying to provide some support in that area as well. So really within the gaming business, we're fully penetrated through the value range in which we can. What we will never do really important is we will never write games. So game design, game development, the player experience, that is firmly our customers domain. That is not part of our business, and we would never go into that space.

25:41 So we're all about enabling that top line on the on the chart here to be more successful within our customers businesses.

25:49 And we've a couple of case studies here now for customers who we're working with. So Ainsworth is a very important customer for us. It's been our longest standing customer that we've worked with, and they produce over 7,000 cabinets a year. And it's been a fantastic partnership we've had with Ainsworth over many years. We've gone through three generations of product and now just moved them over to their fourth generation of product with our with our solutions. And through all of that, there's been lots of disruptions that we've had to face as a group together. They've had difficulties with their business. We've had difficulty in supply chain and

26:20 with our business. But what it's been is it's been a fantastic partnership we've had with Ainsworth. And despite the fact that it's not been easy and particularly the last year as a supplier, it's been very difficult to keep your promises to customers. You can see on this slide from the quotes from a very senior member of the team at Ainsworth just how how good a job we've done. And so the importance and the health of this and the the fact that we've now locked them into the next generation of hardware platform for the for the next few years means that it's a very resilient piece of business for us, and we're looking forward to seeing where that evolves to next.

26:54 The next case study I've got is for a customer called Every. Every is listed in The US on Nasdaq. They produce over 12,000 units a year. They've had a very, very successful recovery after the pandemic. One of the reasons for that is that they have focused very, very much on game design and player experience. And as I said at the start, that is the thing that drives their commercial success. They have now decided to use our next generation of products, q max three, that's based on Intel, and that will be something that will drive that success business relationship again for the next few years. And again, with all of the problems that we've had, we've we've got, you know, sort of written statements here from the customer that said, you know, we've we've been pleased with how the company's performed for them. So very you know, two very important customers to our business, and I'm very proud of of how we've worked with them over the over the last decade or so and and look forward to further business with them in the future.

27:48 I'm gonna change tack now and talk a bit about Densitron and particularly on the broadcast opportunity within Densitron. But, actually, you don't wanna hear this from me. I think it's much better that you hear it from somebody that can talk about this much more clearly and coherently. So I'm now gonna hand over to a short video that's gonna be run by our Densitron CEO, Simon Jones.

28:10 My name is Simon Jones, and I've now been with Densitron for four years as CEO. As John mentioned, Densitron's purpose is to find and capitalize on growth opportunities for the Quixote Group beyond the gaming market. There are two parts to the Densatron business. The first part is our core display components business, business, which sells display components to a wide number of b to b sectors, as an example to medical and industrial customers.

28:40 The second part of the Dentistron business is our broadcast growth business. This business designs and sells broadcast products, human machine interface modules, and ODM services to the broadcast industry. Today in this presentation, I'm gonna be focusing on the broadcast growth business. The broadcast workflow is most easily described as glass to glass. By this I mean, the glass of the camera lens which captures the image and the glass of the screen on which you watch the broadcast. Within this vast and complex workflow, the highest concentration of human machine interfaces or HMIs is the heart of the broadcast workflow. This heart of the workflow sits in the Production Control Room also known as the PCR.

29:26 The PCR is the point of the workflow where most of the editing and decisions are taken. This PCR market is worth around $880,000,000 annually of which at Densitron we can address around 220,000,000 based on the HMI technologies we've developed so far today.

29:45 Over the coming years, the PCR market is expected to grow at around 5% per annum. During this time, of course, we'll continue to expand our technology portfolio. As such, we expect the size of the market that Densitron can address to grow substantially as we travel. We've got three clear propositions that we're using to address the broadcast opportunity that I've outlined. The first one is Densitron's finished hardware and software products. These products represent the best of Densitron's HMI technology ready to use out of the box. Our second proposition is HMI modules. These HMI modules give broadcast manufacturers the opportunity to take elements of Densitron's HMI technology and incorporate them into their finished products.

30:35 And finally, we have the ODM Plus hardware, which is where we take over the whole design, engineering, and production life cycle for our customers. In terms of the competitive landscape, finished hardware and software products, we will tend to pick niches where there is not a great concentration of competition. An example is the two u control surface, which you can see on the screen here. There are not really any of those in the marketplace today. In the HMI module space and the ODM hardware space, actually, this is about the broadcast manufacturers themselves beginning to outsource things that they currently do themselves. So again, there there aren't particularly direct competitors to us in the marketplace. It tends to be the broadcast manufacturers would do it themselves and they would choose us to outsource to.

31:28 We also have three clear routes to market. Our first proposition, the finished hardware and software products, we actually sell to all three channels. So examples of end users that we'd sell products to would be the BBC. An example of a system integrator that we'd sell a finished product to would be NEP. And then there are many examples of broadcast manufacturers such as Evertz or Grass Valley that we would sell finished hardware and software products to. Within HMI modules and ODM hardware, there is one channel to which they're relevant, and that is the broadcast manufacturers. Manufacturers. So supporting them to either outsource their hardware design and manufacturing or to supply subassemblies or modules to help them in their manufacturing process.

32:14 In our first case study, I'd like to talk about finished hardware and software products. And this one's a great example of where a customer is seeking to move from a mechanical button to a more flexible rich touchscreen based interface. In this case, the customer is a public sector customer. They had a piece of control software that they liked, but the control panel that controlled the software was mechanical, clunky, and old fashioned, so they couldn't achieve the types of user interfaces that they desired. The Densitron two RU panels with an integrated x 86 computer was selected by this customer to replace their mechanical panels. On our panels, they were able to load on the software that they loved, but they then had the flexibility of the full touch screen based interface to design the user experiences that they desired.

33:06 In the second case study, we're working with an audio mixing console manufacturer. Audio mixing consoles are extremely complicated and expensive pieces of equipment. As you can see from the picture, the majority of the control surface today is mechanical. Mechanical faders, mechanical rotaries, mechanical switches, and there are hundreds of them with only a small touchscreen at the top of the unit. This combination of mechanical and small touchscreen really limits the user experience and the flexibility that the product manufacturer has to design amazing, beautiful, efficient human machine interfaces. Where we've helped is our patent pending Tactila technology allows the whole surface of this product to become a touchscreen with rotaries being applied directly to the surface of the touchscreen without any drilling or electromechanical contacts.

34:05 This revolutionizes the user experience possibilities for this broadcast manufacturer. Not only does it do that, it also simplifies the manufacturing process. And in this example, we will supply completed subassemblies of touchscreens with our Tektila technology affixed. So, hopefully, you feel excited as we do about that opportunity we have in broadcast. And and why do we feel excited? So the first thing is it's an attractive market, and as Simon said, it's growing. So it's a building opportunity for us as time goes on. There's technology change occurring in it. There's this push towards touchscreens, and we've already got established customer relationships that we're working with in a small but growing market share.

34:54 The products that we have, we believe, are innovative. We filed patents for them, and we have industry specialists in the team, some of whom have only joined us recently. So we believe that we've got all of the right ingredients within broadcast to drive a sustainable growth of that business that will diversify our group's earnings. Good. Thanks, John. Just moving to sustainability. The group is a clear corporate responsibility strategy prioritizing sustainable growth and employee well-being. And importantly, we focus on having practical measurable annual targets to improve on ESG matters. What we've done this year we've had various activities around the employee selected charity of UNICEF to raise funds for the charity.

35:43 We've also continued to do the work around our supply code of conduct with a 100% of our suppliers now signed up, and over 95% of them audited. We've continued to expand the the EV car scheme, that we've launched in The UK. And then finally, we've improved the board constitution and independence by bringing on two new nonexecutive directors, Duncan Penny and Carol Thompson, to the board in September of of twenty twenty, 2022, and they've already had, a significant contribution to the board. And flipping over, I'm really excited to announce that we're changing our company name. So the PLC is going to be rebranded subject to shareholder approval as NEXTEQ PLC, following the AGM on the April 27.

36:29 But why are we doing this? Well, if we go back, Quicksand was founded in 2005 as a technology business focused on the gaming market. The casino gaming market serving the need for specialist technology solutions. And we've been successful in that over the last eighteen years. We are now seen as a de facto standard for outsourced casino market technology. However, since that since that time, we've also diversified the business into other sectors through the Densitron offering. And we've we've focused in on some of those sectors, an example, in the broadcast market. So in keeping with the growth strategy for the group and the fact that gaming is a very strong brand within the game Quicken is a very strong brand within the gaming sector, We believe that it's appropriate that we recognize that the group as a whole actually stands for a number of different sectors, and therefore, we're rebranding it as NEXTEQ.

37:18 Quixon will still be a gaming brand, and Dentistrone will still be a brand for for nongaming industrial display HMIs. So in in summary for the year, so we saw a very strong trading period through twenty twenty two two, and we expect that to continue into 2023. And the order backlog that we have gives us further support for that for that outlook. We saw a margin recovery during the year, and we expect that to continue into 2023 driven by both higher revenues leading to operational leverage and also recovery of some of the gross margin that we we gave up in 2021. And investments that would be made into broadcast HMI and gaming cabinets, we believe will support medium term growth. We're not gonna be investing at the same rate as we did last year, but we expect to continue to make investments into that area.

38:10 And that means that over the time that those investments start to pay off, we will see a a much healthier, more diversified stream of of earnings from a number of different sectors. We are cautious of of recession risk, and we believe that in certain sectors, for example, in in the medical sector, we are gonna see softer demand for the product. But nonetheless, the strength of pipeline that we have, the strong customer relationships we have, I believe we believe we can continue to grow the group's revenues through that period of time. And we are expecting that as supply chain start to ease and they still are very difficult within the industrial marketplace, but we are expecting to be able to unwind some of our strategic stock and return to a strong operating cash generation in this year. And finally, as we enter the next chapter in the company's life, we're gonna be rebranding the company to NEXTEQ PLC, supporting the business's evolution across multiple vertical end markets.

39:06 So that's what we wanted to present today. We'd really like to ask some questions, and I've got a couple that have come up on the screen here. So so the first question is, can you expand your pipeline of new products? And what areas of new growth do you see these opening up? So in terms of the new products that we've got, we've got the gaming cabinets offering for the gaming for the casino gaming market. That's something that's very much targeted at the the sort of the the route markets or lower end cost effective markets, in North America, but we've also got opportunities now evolving in Europe for those offerings. That's an area where we're gonna be focusing. It's certainly an area of growth in terms of new products, but that's alongside actually much more growth within our casino gaming platforms business.

39:51 So the computer platforms that sit inside those cabinets. We're also, of course, talked about broadcast a lot. That's a new area of growth for the business. It's been a strong growth driver for the last three years. It's been triple digit growth double digit growth for three years rather. And yet, we believe that there's much more ahead of that as we push towards that $220,000,000 addressable market. And in terms of the focus over the next twelve months, that's the second question I've got. I guess, in a sense, we're looking in two directions at the moment. We're looking at partly how do we make sure that the near term issues, which are certainly not entirely fixed around supply chains are addressed. We have to make sure that we look after our current customers, But also in terms of the outlook of the business, you know, we've got a stable platform with a good balance sheet, good operational liquidity, and that puts us into a position for thinking about further investment and also into, you know, acquisitive growth by by finding interesting complementary business to the company.

40:50 Questions just come in. What's the opportunity for the company in the broadcast market? How fragmented is it, and do you think that acquiring business is the key factor driver expansion here? So it's a really great question, and actually, I sort of kind of answered it as I was I was answering the previous previous point. So it's quite a fragmented market. It's fair to say there are a lot of very small players in it. There's a number of very big players in it, And I think acquisitions will form part of that strategy. I think it also is an organic grower. I think the acquisitions are more about accelerating our progress into the expansion to that market rather than being necessary in order to be able to achieve it. Have we got any more questions at all? John Johan, you have answered all the questions that have come in through the q and a tab. But in the meantime, what I might ask you to do is just ask you for a few closing comments. And if any other questions do do come in, then we can look at those afterwards.

41:53 Okay. That's great. So just in summary, as I said at the beginning, we are pleased with the business's performance through 2022. It puts behind us many of the difficult years that we had as a precursors to it. But also through those difficult years, we've continued to build out the business, and we weren't in a position after the pandemic, after the supply chain crisis that we've seen where we where we couldn't continue to support customers, and we certainly haven't had a massive rebuild effort on the business. So that's meant that as we came out of that period, we're now positioned extremely well for longer term sustainable growth within the business across multiple markets. We believe we've got a strong platform for that. We've got a strong financial back backing to to do that, we're very excited about where that will lead to in terms of growth going forward.

42:44 John, Johan, thank you very much for updating investors today. Could I please ask investors not to close the session as you'll now be redirected to provide your feedback in order that the management team can better understand your views and expectations? We have actually just had a had a few questions come in there. I don't know if Yep. We can pick we can pick those up. Gohan, do you want to get the first one? Yeah. So the first one is, do you expect r and d credit and patent box relief to keep offsetting taxes? And and, yes, in the near term, that is that is the case. So I mentioned earlier that we we expect our tax rate to be in the range of sort of between 1518%, our effective tax rate, and that reflects some benefit from from r and d credit and Patent Box as we continue to to to work on on the development of of products here in The UK.

43:38 The second question is around capital allocation. So the question is around why we why we pay dividends as as a return of capital to shareholders rather than reinvestment or or stock repurchase. So so I think, you know, to to pick that up and, Johan, feel free to chip in on this, you know, with with your views as well. So I think the first point is, you know, we we we pay a dividend principally because it demonstrate we we're we're a we're a a cash generative business, a very cash generative business. Historically, we've had a couple of years where that cash has been has been used, but we do generate a lot of cash that's thrown off through the business's operations. And and a dividend is one form demonstrating confidence in that ongoing cash generation. So we do it for that reason. The dividend is very modest. It's fair to say in the context of cover ratio, We could pay a much bigger dividend than we do, but it's a modest dividend we're paying and it's demonstration of confidence.

44:31 I think in terms of things like stock repurchases, you know, one of our one of our challenges of the business is liquidity. I think, you know, repurchasing a stock would have the opposite impact to to providing better liquidity. So that's probably not something we would look to do. In terms of debt, we have very, very, very little debt. In fact, the only debt that we do have is a mortgage that we have within Taiwan. It's something that we have as as a means of having a financing facility. Actually, we could repay that mortgage, but it's got benefits outside of just the sort of the the borrowings facility that it's got. So really, we have no debt to speak of. And so really, the the major sort of capital allocation decision is around, you know, paying a small dividend, but then, you know, use of that cash. In the last year, it's been about working capital and having the war chest for times of disruption.

45:18 And then in years where, you know, where we we perhaps don't have such disruption in those sense, we would use it to to for for acquiring other businesses. The next question that's come in is the around reducing exposure to Taiwan for manufacturing. So that's a a really good question. I'm sure it's, you know, on the forefront of many people's minds. We have a large outsourced manufacturing operation within the Far East where we use subcontract manufacturing for a lot of our products. So one of the things that's important to understand is is Taiwan is still the the the hub of all 90% of the world's advanced semiconductors. So sort of trying to entirely derisk from Taiwan is is is is almost impossible for any technology business.

46:05 What it's fair it is fair to say is we are looking at options for expanding our production outside of Southeast Asia and trying to find ways in which those can be, you know, can be brought online efficiently so that we're not adding a big cost base, not adding a lot more inventory to the group, but doing so by having a more resilient manufacturing supply chain network. There's just a a question that's coming around development costs. So with development costs being capitalized, do you have any issues with these costs having to be to be written off? And in short, the answer is no. No. No any no no significant issues. We we did in the current year as as is reflected in our in our annual report write out write off about $500,000 of development costs. Now those were impart due to our own internal reviews. We we had some projects that we've that we commenced. And as we were reviewing them, determined that it wasn't to our benefit to continue those, and so we've written some of those costs off. And then we also had some some costs capitalized costs written off in in relation to sort of decommits from our from AMD in terms of our supply of components.

47:12 But broadly, it's not been an issue for us nor do we foresee it being being an issue for us in the in the future. Perfect. I mean, if there's if there's no more questions, I think that's that's everything answered. Perfect. That's great. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few minutes to complete, but I'm sure will greatly valued by the company. On behalf of the management team of Quicks and PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.