Quixant : Interim Results 2021 – 22 September 2021

22 September 2021

Quixant plc

("Quixant" or the "Group")

Interim Results

Double-digit revenue growth driven by strong recovery from impact of the pandemic

Quixant (AIM: QXT), a leading provider of innovative, highly engineered technology products principally for the global gaming and broadcast industries, is pleased to announce its unaudited interim results for the six months ended 30 June 2021.

	Six months to	Six months to	Change
	30 June 2021	30 June 2020
	($m)	($m)
Group Revenue	36.5	27.9	31%
Gaming Division Revenue	18.4	11.9	55%
Densitron Revenue	18.1	16.0	13%
Group Gross profit	11.1	8.9	25%
Adjusted profit / (loss) before tax1	1.3	-1.2	nm
Group profit / (loss) before tax	0.8	-3.0	nm
Adjusted diluted earnings per share1	$0.0199	-$0.0184	nm
Net cash from operating activities	1.1	-0.3	nm
Net cash	15.0	14.2	6%

1For details on adjusted measures refer to note 1 and note 2 of the condensed consolidated financial statements

OPERATIONAL HIGHLIGHTS

• Double-digitrevenue growth across both divisions, demonstrating strong recovery in gaming market and strategic positioning of Densitron business for growth.
• Five new customer wins in Gaming, underpinning our confidence in future growth.
• Ongoing new product development in Densitron driving new business opportunities in Broadcast.
• Continued supply chain component shortages and price inflation requiring active management through strategic stock purchase programme.
• Good cash conversion despite strategic stock purchases to support demand.

CURRENT TRADING AND OUTLOOK

• Strong order intake provides 115% order coverage of full year management revenue expectations and visibility into 2022.
• First lease agreement with Gaming customer commenced in the second half of FY21.

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• Component shortages and price inflation expected to persist and continue to cause temporary profit margin volatility; Board confident that long-term structural Group margin is intact.
• Long-termoutlook is positive given mounting demand and the Group's strategic market positioning.

Jon Jayal, CEO of Quixant commented:

"We are delighted to report overall revenue growth of over 30 per cent, fueled by a buoyant recovery in the global gaming market and continued success through our strategic positioning of Densitron. Our focus on pragmatically supporting customers through the difficult period has yielded rewards through strong customer retention and conversion of new business.

Decisive action taken by the Board early in the year to invest in strategic inventory has mitigated the impact of the widespread electronic component shortages and enabled Quixant's customers to manage through the disruption with limited impact to their business.

Component shortages and price inflation remain a challenge and we do not anticipate significant improvement in the short term. While our customers have been accepting of essential price rises, nonetheless we expect a period of continued margin volatility. However, our strong cash position and good relationship with suppliers, built up over many years, help to mitigate the impact.

"Our 115% order coverage of management revenue expectations of c$70m gives us confidence in delivering adjusted profit before tax for the full year in line with management expectations. We are well positioned for further growth in 2022."

Investor Presentation

Quixant is hosting an online presentation open to all investors tomorrow, 23 September, at 4.30pm BST. Anyone wishing to connect should register here: https://www.investormeetcompany.com/quixant-plc/register-investor.

Quixant plc	Tel: [phone]
Jon Jayal, Chief Executive Officer
Johan Olivier, Chief Financial Officer
Nominated Adviser and Broker:	Tel: [phone]
finnCap Ltd
Matt Goode / Simon Hicks (Corporate Finance)
Alice Lane (ECM)
Joint Broker:	Tel: [phone]
Canaccord Genuity Limited
Simon Bridges / Andrew Potts
Financial PR:	Tel: [phone]
Alma PR
John Coles / Hilary Buchanan / Kieran Breheny
About Quixant

Quixant, founded in 2005, designs and manufactures highly optimised computing solutions and monitors principally for the global gaming and broadcast industries. The Company is headquartered in Cambridge in the UK, with offices throughout Europe, North America and Asia. Quixant has its own manufacturing and engineering operation based in Taiwan and software engineering and customer support teams based in Italy and Slovenia. All the specialised products software and manufacturing are produced in-house and Quixant owns all its own IP some of which is protected by patents and design rights.

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In November 2015 Quixant acquired Densitron Technologies plc. Densitron has a strong heritage in the sale of electronic display solutions to global industrial markets. Through Densitron's experienced sales team, Quixant has a robust platform to build its business into wider industrial markets. In-depth information on the Company's products, markets, activities and history can be found on the corporate website at www.quixant.com.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

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Business Overview

Quixant is a critical outsource technology and supply chain partner for major global industrial electronic equipment manufacturers, with a focus on specific vertical markets. The Group combines hardware, software, display and mechanical engineering expertise with detailed industry knowledge and a Far Eastern manufacturing base making it the ideal global strategic technology provider.

Quixant has a well-established and highly respected brand in the global casino gaming and slot machine market. The computer platform solutions we supply to the casino machine manufacturers combine optimised hardware and software elements which address the specialist needs of this highly regulated market. By outsourcing their computer platform to Quixant, manufacturers can focus their R&D on the game design, which has the greatest impact on their commercial success. They are also able to launch new products to market quicker.

Through Densitron, the Board executes its strategy to diversify into other focus vertical markets alongside gaming and migrate up the value chain in those markets. Densitron supplies display components to a wide range of industrial sectors, which makes it an excellent platform to identify new focus markets for the Group. We seek to understand each of these markets in depth and develop tailor-made products which are different to those readily available from broad-based technology corporations. In the broadcast market, we have made progress in developing unique human machine interface technology and control solutions which are already generating new revenue.

From time to time, the Board may complement its organic growth strategy with strategic acquisitions that enhance the Group's technical capabilities within a focus sector.

Chairman's Statement

When I joined the Board in January this year, the Group had successfully managed through an exceptionally difficult year. This reflected the quality and tenacity of the team at Quixant to emerge in a financially strong position with a loyal customer base and a range of new commercial opportunities. With the global gaming market continuing to recover and our presence in the broadcast sector building momentum, I am excited about the growth opportunities ahead for the Group.

While buoyant demand has returned to the Gaming Business and Densitron has seen a growth in trading, the Group has faced challenges due to the global shortage of electronic components. Early recognition of the issues and judicious use of our strong cash position has been essential to underpin supply to customers since the end of Q1. The strength of the Group's excellent Taiwanese procurement operation which has built strong supplier relationships over many years has been of critical importance over this challenging period. It is expected that the component shortages and associated price inflation will persist well into 2022, although we continue to mitigate the impact of this issue as far as possible.

Throughout the period, despite the allocation of cash to strategic stock, the Group maintained a robust financial position which provides a strong foundation and the flexibility to invest in the Group's expected future growth through continued product innovation.

During last year we focused on supporting our customers through the difficulties they faced as their markets closed. To help manage their capital outlay and elevate the value proposition of working with Quixant we devised a leasing option for our Gaming products under which shipments commenced during the third quarter. We will evaluate the success of this over the next few months and offer it to other manufacturers.

We are pleased to welcome Johan Olivier to the Board as Chief Financial Officer from 31 August 2021. This high calibre appointment will ensure we continue to have a robust finance function as we return to growth.

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Chief Executive's Report

The Group's recovery from the unprecedented challenges faced in 2020 is clear from the trading results achieved in the first half of this year. We delivered double-digit revenue growth across both operating divisions during the period and profits which are comfortably in line with management expectations. A strong recovery in demand from our end markets and conversion of new business pipeline has driven this growth and led to exceptional order intake during the first half of the year, providing us with confidence in our second half performance. During this period, our book-to-bill has been considerably more than one.

Gaming Business Review

The pandemic resulted in the closure of many global gaming markets for some of 2020. The US market closure in March 2020 for much of the second quarter had a profound impact on Quixant with most of our customers stopping or severely reducing manufacturing gaming machines. Once gaming markets started to reopen in the middle of the year, activity in the market has rebounded, particularly so in the USA. The data coming out of the US gaming market, critical to Quixant's business, is remarkably positive. The American Gaming Association's July 2021 Commercial Gaming Revenue reports US commercial gaming revenues 17% higher over the year to end July 2021 compared to 2019 and 103% higher than the same period in 2020. The advent of widespread sports betting and online gaming in the US market has fueled some of this growth, but land-based slot gross gaming revenue is reported to be up 9% over the same period compared to 2019 and 96% versus 2020. Other territories, particularly Europe and Asia are seeing a less conclusive recovery at this point but indicate positive momentum towards pre-pandemic levels. While this growth in gaming revenues does not directly correlate with increased sales of machines incorporating our computer platforms, it certainly signals a buoyant market backdrop for our customers to sell into.

Through 2020, we intensively collaborated with customers to support them through an extremely difficult period. Our demonstrable partnership has fostered even closer relationships which have already delivered new business opportunities. Amid the component shortages being faced in 2021, we have demonstrated the importance of Quixant as a strong outsource technology partner with entrenched Asian supply chain channels. Our prompt response in January 2021 to the shortages was to undertake an ongoing programme of strategic stock purchases, which has buffered our customers from the impact and safeguarded product supply. Our collaborative approach with customers has also facilitated a smoother implementation of essential price rises in our products to mitigate reduction in our profit margins.

Conversion of five targets/prospects to new customers in the first half of 2021, increasing total new customer wins to 11 in the last 15 months, is indicative that more and more manufacturers are recognising the benefits of outsourcing. We commenced mass production shipments for four of these in the second half of 2021, underpinning our confidence in growth in 2022.

There can be no better demonstration of the regard we are held by our customers than the following quotes from two recent new business wins.

The first relates to a project we are working on to supply our new turnkey self-service betting terminals (SSBTs) to BetConstruct for their land-based betting offering. After delays in executing our SSBT strategy after demonstrating it at ICE in February 2020 due to COVID, it is pleasing to be making progress during 2021 in this regard.

"I am happy to say that I am most pleased with the Quixant offerings. Your superior technology is known within the industry; what is not always apparent is your commitment to customer service which is paramount when contemplating a business relationship." - Jeffrey Connor, CEO BetConstruct (North America).

It is a privilege to be recognised by the Chairman and Founder of Ortiz Gaming, a large, long-standing and highly respected gaming business predominantly operating in the video bingo market.

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