Half Year 2026 Xaar PLC Earnings Call
today's like ticking through the, uh, 2060 results presentation, and then,
if you're an overview of where we are, and
So I think so far this year has been a a good year. We have seen some disruptions markets due to the war in Iran. We have seen
the 1 uh 1 is disruption or alternative in the world CAT equipment, purchases are affected and we sell prepared things to all the animals who build equipment and what happens is that they they sell less machines and we sell less
As a result of that, there are certain markets where we've actually seen some decline in the markets. However, the police report that printhead revenue was actually up by 5.5%. And the reason for that is actually because this caused a lot of new businesses to come through. So, whilst we've seen some headwinds because of the global economic effect,
Challenges that growth has been there by these new applications that can offer and we'll talk more about that later on in the the presentation and combined with that Mega Jet and EPS will pleased overall to report 9.6% increase life like year or year. I also we continue to uh control expenditure and that's delivered.
Margin Improvement of 2.22% and 1 of the things that has been some frustration frustration. At this point. In this first half is that 6 months ago when we were doing the full year results, and we were pretty sure that flash Forge could be launching the desktop 3D within days, if not weeks of of that time, uh, since that, that
Point. And that encountered, a few technical issues that have delayed the launch, uh, and we've helped them resolve those technical issues. And and today we have a, a team on site wisdom as they ramp up their pre, their manufacturing launch. Um, we're fairly confident that they will actually launch in the next couple of months.
There is the remaining challenge, and I think it's largely been resolved. We're now supporting them in their production groups, so hopefully we'll see that launch happening.
Before the end of their end of this, this year.
Um, and it's an interesting area because the opportunity with the desktop community is significant.
So, the business sensors are—you know, we are a small company, but we can compete against very large companies, like Exelon and new people through G comments, and also, these companies have huge geographical reach; they have a few representations, and...
Significant manufacturing capabilities. And so how do we win? Well, we we win as a small company by being able to bring the fluids that no 1 else can do.
And that, as many of you may have already heard yourselves, that's about printing materials which have a much higher viscosity, or a higher pigment load.
So for instance, an X in head can bring 8 cents for it and 1 cents for it is water.
And 20 cents boys would be clean 50 cents for his olive oil. And and so the 50 you get the higher the number
and actually pops out around about 8 cents.
Focus on the high viscosity applications, where if the fluids that you need to deposit are much higher viscosity, then really, you need to be using—as our...
And that is the differentiation, and that differentiation capability. We've gone through our problem of mental architecture, which delivers a much broader operation. And we work...
And that uh, architecture is protected by the significant number of patents.
First, 30 years of manufacturing know-how, and increasingly the application and...
So, how do you actually use the printhead to deliver a given application?
And what that means is that for the print heads in
To the market. We we can bring as much higher people. We have a much wider range of clients that we can create and we can operate very much high temperature.
What that means is that customers can typically increase the amount of fluid that they want to print, and ultimately, it means that they can print with reduced energy, reduced waste, and high precision.
Uh, and the route to Market um is actually quite a complex. So it's 1 of the things that I think, if you look at our
Follow us for a number of years. You might as well say. Well, we've been talking about certain applications for many years, and that's absolutely true. We sell a print head, into an oem, they develop and build a machine. They then test it, and that application. And in many cases, the application requires other regulatory approval. It might require
Other investments in processes to adopt in a broader manufacturing.
Sense. And
the time frames were actually get the product into volume manufacturing, uh, in in law. And the application can be very difficult to, um, and and predict, and that actually often sometimes can be many many years, but the benefit is that once you're in. And once you actually the print head of choice, all of those things that made it difficult to get in. But actually it's very sticky and so off. It's it's for us. We believe that as we enter these markets, then it's like they're usually, but we can sustain the position within that marketing website and what to
And this sort of 3 sources of revenue. There's print heads that we sell to oems to build machines that go into the
and then as we build that install there, it's all the time.
You would put, there will be pretty heavy replacement, and the replacement cycle depends on the application. In more extreme applications like semiconductor, we might see a replacement on an annual cycle. In the more, uh, less demanding—uh,
6, 7 years.
so,
Is that? So if the
20% of your installed pieces is actually effectively a USC, ready? Going forward.
So, it's key to actually build that installed base. Uh, I think we're all about replacement.
And increasingly. We're seeing, um,
As accessing the, uh, in revenue. And if we've been involved in developing the solution, there's often opportunity to share in some of the incredibly—
The application.
So with that, I'll hand over to Paul to take you through the financial summary.
Thank you, John. Uh, yes. Um, so...
I'm actually pleased to present these results for the first half, um, where we had year-on-year growth in all parts of our business. Um, with group revenues, John said up 9.2%, um, and I'm particularly pleased about the recovery in our us business called EPS, um, under new leadership.
Which has come with an ever expanding pipeline. Um, the core of our business is print head and that was up 5 and a half percent, uh, and that's prior to the launch of flash forge's desktop 3D offering. So that is actually in of itself. An impressive performance for the first half.
Uh, the revenue performance translates to a profitable first half.
Really, for the first time in at least three years, um, and we're in line to achieve, uh, consensus on profit.
The balance sheet is balance sheet. Sorry is almost net neutral with a net deposition of uh, 0.1 million and and the Justice if we, uh, cash out for 4.3 million,
Uh and that was primarily driven by the need to build inventory to support, uh the launch of flash forges desktop 3D products.
Type of the numbers. Let's have a look now, at the divisional performance,
So as you can see um I'm pleased with the growth in print head uh and with the expected launch of uh flashcards desktop 3D in a second half year year Revenue performance. For the second half is expect to be much stronger.
The growth has been driven by new business new applications uh and uses for our unique technology. Uh within all of this, we've seen the Legacy Ceramics Market stabilized, after many years to climb
And that's been helped by the development of, uh, new so-called ceramic glaze technology. And as such this, uh, this decline that we've experienced many for a long time. Now, for many years, uh, no longer represents a headwind for us in our growth going forward.
Now there's a wider important Point here. Uh bizarre bizarre. Today has broadened its appeal to many different sectors and continues to expand.
And as such, there is now a diverse portfolio effect compared to the Xaar of old.
Uh, operational gearing effects show, an enhanced adjusted profit before tax profitability. Uh, that's improved by, uh, some 100 basis points a year on year.
Uh, at Magnet, uh, gross margins are up 120 basis points—sorry, 120 basis points—built on revenue, which increased 27% year on year. And the Megajet business underlines the importance of supporting systems or system components for our core offering, supporting our customer base. Uh, the growth comes from, uh, new customers, as well as increased demand from the existing customer base.
And then, back to EPS. Much hard work has been done to rebuild a durable pipeline.
Uh, address the cost base and that's work. That's been ongoing for some time now and uh solve some long-term intractable problems. So I expect EPS is recovery path to continue into next year.
So, let's have a look in a bit more detail at the, uh, adjusted income statement.
So, uh, taking it as a whole, the group grew revenue by 9.2%—a performance that would be the envy of many companies in the current global climate.
Uh, and growing gross margin performance by 220 basis points.
The development of operation expansion is worth mentioning. Now, it's up just 5.7% year-on-year. But this increase is driven by building—and some would say rebuilding—capability in the front end, sales, and marketing.
And the sharp end, which is how I term research and development, that's to drive growth in the innovation pipeline, which is our lifeblood, after all. So, general and admin expenses have actually declined by 1.6%. Note a contraction in the cost of back office roles.
Putting that all together, we now see a business that grew profitability substantially in the first half, to achieve an adjusted profit before tax of £0.2 million compared to a loss of £0.7 million last year and similar losses, I must say, for the first halves of the years before that.
Then just take a look at cash flow, and turning our attention to cash.
The group's adjusted free cash flow was an outflow of £4.3 million.
This was primarily driven by temporarily building inventory to support the launch of desktop 3D by flashforge. And once this launches happened,
We expect this to sharply reverse.
In addition, the group has upped Capital expansion in the first half compared to last year. Again, driven by building out capability to sport, anticipated higher volume levels in the future, particularly with our new manufacturing facility in dong Guan China. Uh, that is in itself enhancing supply chain resilience.
Now I want to emphasize, and I've done this many times already since I joined Czar that the days of storing large amounts of cash in what is essentially a current account are over. We have entered into an expanded role in credit facility, increasing it from 5 to 10 million pounds with an E, bit dark, Covenant of 3 times.
Whereas previously, it was 2 times. And in addition, we have an uncommitted accordion facility of 5 million and an increased invoice discounting facility of 5 million. So at the moment, our liquidity is uh, substantial.
So, that's it from me for now. I'll hand back to John.
Okay. Thanks. Paul.
So, in terms of the strategy going forward, we, you know, consistently earlier, we compete against very large—
Japanese companies and our key strategy is to maintain a differential in capability to be able to put fluid that no 1 else can.
The real defective Advantage is based around our technology.
And therefore, one of the key things that we will do is continue to actually invest.
in in engineering.
and R&D to maintain this, this,
Advantage. The other key thing is that if you go back 10 or 15 years, Xaar was pretty much a single product in a single market of ceramics.
And I joined 67 years ago, there were very, very few applications and calls for technology. What we've done over the last...
Six years is really to focus on how we diversify.
And have a broader set of market applications. And today, I'm pretty sure we have 21 separate markets where we are generating revenue.
across across the
Many continents, many territories, and many applications.
And so the route to Market through the um through the oems uh oems building machines. And
Sell them into a particular application. Uh, we have another case where we're using development resources, so these are companies that actually buy the printheads or systems because they're all new. So you see that increasingly, as very large companies start to adopt our technology in their process.
Not particularly true in the sector. And what we typically do as we enter into a new market is that we have a halo partner—somebody where we will give preferential pricing, uh, and significant support to get them to market, knowing that once they're in the market, uh,
Gaining market share because of the advantage of our print heads, then their competitors will come to Xaar. And at that point,
We will have much more flexibility, uh, in how we would charge for or around supporting them.
And, and so, if you look overall, um,
In the four phases of development, we would work with a company that would come along saying they really want to use inkjet in this application. We would work with them to develop an ink that can jet through to our printheads, and our printheads have the widest, um, uh...
Range of premises that we can—that we can deploy.
And then we move into a meeting machine development, and they will actually develop the machine that will actually function, and— and,
Print, whatever is the item that really brings it—once they've done that, they can then use that to go into, uh, customer accreditation, and that can vary significantly. Excellent—the car battery application.
The machines were built; it took about a year and a half to build a developing machine. Then they started producing batteries, and those batteries went through a substantial amount of testing with the car manufacturers—putting them into cars, testing, and environmental tests. Uh, so that took about another year and a half to do the testing before the batteries were actually injected into the broader circulation. So, from the point where we celebrate because the company has chosen our printhead to the point where they launched a number of machines, so we get repeat orders.
Some of those machines can be a number of years old.
And so over the last five, six years, we've built a pipeline of applications where it's starting to come through now. And we talked a lot about desktop 3D and car batteries, and spare things, and the cars. And—
Waxed. Uh, but there are others that are starting to come through and deliver revenue now, so conformal coatings in the PCBs. So this is putting a waterproof coating on top of each of these things. You might remember a number of years ago, if you dropped your iPhone into a
That is worth—probably, you know—the worst again. Now, if you drop it into water, it survives, and a lot of that is down to...
The thinking.
This is an increase in market and the CM coating that's used in the car. Battery can be used on the PCBs, and it's much quicker and more efficient.
than the incumbent methods. And we're starting to see that.
That grow in particular in China.
We've also developed a new method of putting structure on top of the surrounding tiles to make the tiles look more like natural stone or granite. That is, the tiles that have that natural look are currently really changing to manufacture.
A very heavily loaded fluid being put down—she's mixing amounts of crushed powders to recreate natural and strong effects. And this is actually, uh, now to all the ends: one in China, one in Europe is developing machines. And the samples that they've been producing have been really well received by the industry. Uh, then in semiconductors, um,
We're seeing a number of companies actually adopting our...
Good head.
Largely for the replacement of spin coating. So spin coating is a very widely used thin process in semiconductors and manufacturing, where you put a layer of fluid onto the substrate in a certain way. So you would spin it away from—
You would then put the fluid in the middle of the wafer, and then the forces basically move the material out, and physics makes it so you get a very uniform layer.
And the challenge here is that when the fluid gets to the edge, a lot of it flies off the edge and it's wasted. And, excuse me, some of these materials that we...
Now it can be 50,000 per kilo, so wasting fluids is that expensive. And you can see that with inkjet, where the waste ink is effectively zero.
There's a very attractive Roi and in that in that sector. So the number of companies are testing it. The question will be, can we actually deliver the, um, the performance, the accuracy and the reliability needed for everything that's in the industry. And there are several machines now, in in, in large companies that are under test to, determine determine that,
And similar in in solar panels. Uh, we're actually now there's 3 test machines that have been developed that are in Pilot lines. Looking at how we can replace some of the layers of packing and steps with with each project.
In solar panel manufacturing, the thing that is consistent across those four applications is that the fluids that were deposited.
You can't compromise on the fluid, and the reason why they're using our head is because most fluids just will not print on any other paper.
And that's why they're coming and using our print head for these applications in those sectors. And as I said earlier, there are 21 sectors altogether where we have.
Revenue—either revenue already for the machines launched, or machines actually in development.
To, to Launch.
And that's one of the key things—getting our customers to market as quickly as possible. And then...
What we have done is we built an ecosystem of...
Supporting products around the print heads. So the customer now could buy a fully integrated print, power print engine. So as I said, I've actually taken the individual print headers...
developing everything themselves, which would take many years,
Customers are now opting to buy a print of our print engine from us to make sure that they get to market within months rather than years. And so, particularly in the US and with the semiconductor companies, they're actually just buying the print engine that they—
To their machine. So if you look at this, this is a broad spectrum. In China, it's pretty much buying print in any existing, and more the inspiration themselves. Much more in the US, they're buying print engines or employee solutions.
And and if you look at the, the, the numbers, the, the percentages look quite big. If you actually look in the, the actual numbers, some of these numbers are quite quite small. The the categories are split up. Really by the type of being, it's producing.
So, ceramics and glass are up 11%—really pleasing, because for the last 10 years that market has been in decline.
Marking, uh, that negatively is there is there is really just timing around, um, half year.
There was some issues around payment with some of our key customers at the half years that we didn't ship product to them, they're all caught up. Now, we expect that to be on track by the end of the year, uh, Wi-Fi to Graphics enables up by 8%. But the real, um, the real activity is in the 3D in advanced manufacturing, which is really there. Some of those applications we just talked about see, packaging textiles and small numbers but 1 of our key customers um bought a significant number of print systems of the back end of 2025.
Believe that they would install all of them. They went into the start of this year was still quite a few in stock, uh, and then they, they burnt through the door and those half, so that changed, they didn't actually finish them anymore on the first half of the year, which is like, it's down. It's still expected to be down at the end of the year because they make you 2025, uh, and then you will it will come back up again as we go through into the 20.
277.
uh, so I overall I'm
Uh, really so pleased with the growth in the new markets.
So summary, um,
We're seeing really strong demand across all these applications.
The ridge at which we are now being contacted.
The new application.
for scoring and, significantly, the desktop 3D application with, um, with
For is.
Uh, it is delayed, but we do expect that to launch.
A month. And, um, we have received the initial orders to arrive, production for use, and we're helping them with their—
Radical.
Team in, in China.
And what this means is that, I think, you know,
South very much is, as I said earlier, was a single policy and a single, um, tier application. Now, revenue stream is much broader, and as we build the installed base, that just built in a, a—
So despite the economic headwinds, despite the turbulence in the markets, we, with the new applications coming through,
Ourselves in the in the Border look forward to the future um with with some confidence.
And with that, it will take um, any questions.
That's great. Thank you very much for your presentation. This afternoon, ladies and Gentlemen, please do continue to submit your questions just by using the Q&A tab situated on the right hand corner of your screen. Just while the company. Take a few moments to review those questions for me today. I'd like to remind you that recording of this presentation along with a copy of the slides. And the public Q&A can be accessed by invest dashboard if you ask me to read out the questions and give responses where appropriate to do so, and I pick up from you at the end,
Yeah. Okay, and we will take questions in.
In order. So you recently opened an opportunity in China to watch. The reason that it's made twice is about the growth in the region. And so the, the...
what you've opened and facilities in China has, multiple unfortunate uh,
It's a sales office and Training Center engineering center and then we'll send that and we've actually opened up a manufacturing. So the print head that is in the desktop 3D, the front end is actually built in the UK, where we will explain all of the, it all of the Technologies and then the Assembly of the 3.
to go with the
Chiefs, and the
And we stayed in in in Manufacturing Services, in China. Well, we've got an automated lining. What that means is, is that as the volume for that product increases, uh, we have the capacity and the margin would be substantially better and out of the facility in China.
uh,
So the second question is: which growth opportunity am I most excited about and why? Uh, I think it's very much the desktop 3D market size. So, best of 3D printers—there were 8.8 million desktop teams in terms of sales last year.
And the four companies now developing.
High resolution and four Coro machines using UPS.
Says the significant amounts for the FlashForge have told us that they expect 10% of the market to be switched to this product category.
Which is there for about £8,000.
And head. Now our Revenue.
From each machine, it's about 5%.
So, in 80,000 machines, that's 400 million.
Which is a crazy number—12—even in that number, it turns out to be 1%. That's ultimately...
And then, so I think that the desktop is the category.
and which is our first real thing to see,
location is potentially transformative too.
And then, so we are just at launch for the next couple of months and, um,
The we will see.
Is this the reception of the product? Does the product work?
And so, do the consumers love it and do they buy it? If the answer to those questions is yes, then...
then we'll do very well.
And question is, what do you investors mostly understand about our business?
Actually.
I think the thing that's really difficult to get,
um, to to really get your head around is
Tin tiny little company like that.
Has this capability.
Why on Earth wouldn't it?
Giant like Epson.
Be able to just do the same thing.
And the reality is, is that their technology and I usually analogy that they effectively developed it and a form of a long time.
So, all of the big companies that help form the world card, it's very good at printing. Most of those with high resolution and high speed.
Bit like for 1, what we've done.
Is we've developed a v which isn't as fast. It's not as good as going around the track but if you want to actually fix the sound which item Central, this is you've absolutely got the right, right car. And what you can't do is you can't start that off with the Formula 1 car.
Involved it into the form that gold state, but we have to do, is you have to start again?
You have to develop a, a new uh, a new policy and you can do that.
So you're going to trip over our it.
So I think 1 of the that's I think that's the thing that it's the hardest thing for me to um, to understand
Is how different our IP and our, um, quality are compared to the incumbent companies, and how difficult it would be for them just to switch to something like what we do.
And the next question is, do you expect further innovations to come from internal R&D or external R&D collaborations, and very much, uh, the innovation in the printhead?
Is very much for.
So we have a very clear R&D pipeline, let's say, with technology.
Power significantly for for the. Uh, and so we we can see what the market requires, and the development points to make looking Market.
uh, what's interesting is that our customers are finding new
Applications that we couldn't see the process.
and they're not not in this presentation, but there's
there's 3, new applications, that is
You know, if if everybody on this call, you know we all went down the pub and had a few videos and tried to do things that you can.
Inject, or you just wouldn't come up with these three applications.
Uh, actually, it's quite extraordinary—the breadth of the industry and the breadth of applications.
that looking at,
But it's pretty much anywhere where you have a possible flow and you want to reduce waste.
And you want to reduce crops. So you want to actually do it more accurately.
And so, I think that's kind of the thing.
Yep. My friends back on. Uh, so, uh, you lose the fact that uh, we grew inventory uh, by 3 million since January, um, and 2930 million. Uh, and that was primarily driven by the need to support the flash Forge, uh, test or 3D launch. Um, and we have about 27, 30,000, uh, print heads in stock to support that. Uh, we do anticipate that once the launch happens to reverse very sharply. So, the first thing that happens is, I'll Chinese customers are payment in advance, so really, as soon as the order comes in, uh, the cash will come in and then we'll be shipping those uh, print heads uh quickly so that will reverse reverse quite quickly. So, uh, yeah. Selling to the Chinese is actually from a cash flow point of view, with Pia payment Advance, um, uh, a very useful thing. So, um, the other thing I just want to emphasize is that the start of the Year, anticipating the
With this growth, we did expand quite substantially our facilities. So our revolving credit facility was increased from £5 million to £10 million with...
A uh ebit da gearing Covenant increased from twice 2 times ibida 3. Uh, we have an uncommitted according facility of 5 million uh and we have a expanded invoice discounting facility from 3 to 5 billion. So our total facilities are 20 million so our um,
All liquidity is is is comfortable right now and sufficient to support this launch and others. Um, and uh yeah it's it's uh it's it's a good position to be in and I'm sort of looking forward to this year. Um, we're in this year and the launch and I think it will be a transformative experience but
Okay.
And then, this final question: Could you please provide a sense of the broader market opportunity within also a painting, given collaborations such as those resulting in XJ and a revolutionary approach? And...
Yeah, absolutely. Yeah, revolutionary and
Again, this is like all of the applications. We have done the work with—
Alter.
The robot company.
they provide 50% of the
Uh, editions of robots to, to car painting to Dos around the world.
And so they partnered with Exel, and we worked with Exel to develop an object version of...
car paint.
and we now have the rate of colors and and, and
They've done trials with pretty much every—
Manufacturers to look at how they can deploy the technology. And I've seen pictures of cars with graphics on them, which I think are really cool.
Uh, there are a couple of um, uh uh front runner.
Uh projects which are going to deploy this technology onto onto um and cars.
Uh, and I think it fair to say that we were already expecting that to be announced publicly.
But I think that the challenge is with the first target to all European car makers, actually. And I think the reality is that, um, with the input of Chinese cars, the European car industry—speaking of which is terminal at the moment—and I don't think that they're investing in new technology as much as maybe some people might think that that's...
Yeah, this is the time to do it. Just try and keep ahead. Uh, I think we've got everything to—
To think about. So we are we are waiting for a a good working out of the first project which we hope to to this future. Um but the scale of it, the the excitement from the our companies,
Is is real. And is you think you can do with it? I think.
Change the market.
Certain car brands.
and I think it will be big, but I think that the time frame that I would be looking at now is more in a three- to five-year time frame, around when
That's great. Thank you for answering all those questions you have and investors. And of course the company can review all questions submitted today and we'll publish those responses on the Investment Company platform just before redirecting investors to provide you with their feedback which knows particularly important for company. John could I please just ask you for a few closing comments.
And and and hopefully you know we will see plus watch, you know, that hopefully will be the the start of the time.
the start of the change of
Course to get you to the company. So again, thank you very much for your time and I hope to see you again. Thank you. That's great. Thank you for updating investors today. Can I please ask investors now to close the 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 moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team, I would like to thank you for attending today's presentation, and good afternoon to you all.
