Release Date: September 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Xaar PLC (FRA:XAR, Financial) has a strong customer pipeline with key projects expected to deliver in 2025, indicating future revenue growth.
- The company has launched 32 new OEM products since 2019, contributing to a compound annual growth rate of 26% over five years.
- Proactive cost management has resulted in significant operational savings, enhancing business efficiency.
- Xaar PLC (FRA:XAR) has maintained a healthy net cash position of GBP6.8 million, reflecting disciplined cash management.
- The company is pioneering in the battery sector with new printheads designed for electric vehicle battery coating, opening substantial market opportunities.
Negative Points
- Revenue decreased by 17% in the first half of 2024, primarily due to a decline in the ceramics market and delays in OEM product launches.
- Gross margin fell by 5 percentage points due to input cost pressures, including higher energy costs.
- The ceramics market remains significantly depressed, with no recovery expected until 2027.
- OEM product launches have been slower than expected, impacting revenue growth.
- The company's legacy ceramics business continues to decline, affecting overall financial performance.
Q & A Highlights
Q: Can you elaborate on the impact of the ceramics market decline on Xaar's revenue and future expectations?
A: Ian Tichias, CFO, explained that the ceramics market has been significantly impacted by the collapse of the Chinese construction industry, leading to a 25% decline in the global ceramics tile market. This has affected printhead revenue, which was down 6% to GBP16.5 million. The market is not expected to recover until 2027, but Xaar is well-positioned to gain market share once demand returns to normal levels.
Q: How is Xaar addressing the delays in OEM product launches?
A: John Mills, CEO, mentioned that Xaar has implemented a new go-to-market strategy to mitigate delays in OEM product launches. This includes providing a full turnkey solution to OEMs, which has significantly reduced the time to market from three years to six months. This approach is expected to accelerate product launches and revenue growth.
Q: What are the key growth areas for Xaar beyond the ceramics market?
A: John Mills highlighted several growth areas, including 3D printing, battery coating, and high viscosity ink applications. Xaar's printheads are uniquely capable of printing high viscosity, high pigment loaded fluids, which opens up new applications and markets. The company expects significant growth in these areas, driven by new OEM product launches.
Q: Can you provide more details on the financial performance and cost management?
A: Ian Tichias reported that despite a 17% decline in revenue to GBP28.6 million, Xaar has achieved significant operational savings by reducing operating expenses by 24% year-on-year. The company maintained a healthy net cash position of GBP6.8 million, reflecting disciplined cash management and increased revenues from last-time buy orders.
Q: What is the outlook for Xaar's legacy and new business segments?
A: John Mills stated that while the legacy ceramics business is expected to continue its downward trend until 2026, new business revenue is growing. The company anticipates accelerated growth as the legacy business stabilizes and new markets expand, supported by a strong pipeline of OEM product launches.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
