Nexteq plc (NXQ) Earnings Call Transcript & Summary

Good morning, and welcome to the Nexteq plc Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. And now I'd like to hand you to Duncan Faithfull, CEO. Good morning, sir.

Okay. Good morning. Thank you for the introduction. My name is Duncan Faithfull. I'm CEO of Nexteq plc. And for the next half an hour or so, we'll talk you through a few things. So first of all, just some introductions. So on the phone today, we have Matt Staight, our Chief Financial Officer; and myself. So just by way of introductions, I was appointed into this role in September 2024. Prior to this, I was the Chief Commercial Officer in the Quixant business, which services the gaming industry. So I've been with the Nexteq group for over 5 years and have seen the group through the difficult pandemic years. Prior to being at Nexteq, I was in the Payments Technology Outsourcing Solutions business and also cash management. And just to allow Matt just to introduce himself. Matt?

Good morning, everybody. I've been with Nexteq plc for the past 3 years, stepped into the Chief Financial Officer role in October 2024. Previously, I was Group Finance Controller for the group. Prior to joining Nexteq, I've worked in a variety of different industries, including with technology start-ups and medical device businesses.

Great. Thank you, Matt. Okay. So in terms of what we plan to cover over the next half hour, we've obviously just done the introductions. I'd like to talk to you just a little bit about who Nexteq is and what we do and how our brands are set up. And I will look at 2024 performance in summary. I'll leave the financials to Matt. But in terms of how the markets set up and our performance and its background, I will cover off. And then Matt will talk through the financial results. But really, we would like to talk to you about what comes next in terms of the agenda at Nexteq. So we're going to be talking about our products and our brands, what our plan is over the next 3 years, and how we're actually going to measure our success as we take this business forward and then a summary and outlook. And as the introduction said, we look forward to your questions towards the end of this presentation. So who is Nexteq and what do we actually stand for? So Nexteq is a business that has 2 trading brands. It has Quixant that services the gaming industry and Densitron that services the industrial display markets. Both have got a really important role to play in delivering what comes next at Nexteq. And both are really established in their own markets. As you can see on the screen here, Quixant is 20 years old this year, and we've delivered consistent performance and growth in our gaming sector over those years. And Densitron has actually just reached its 50-year anniversary. So really established brands, really high-quality products. And we're focusing now on how do we drive R&D so that those brands can thrive over the next 20 years. So in terms of what we're all about, I'm not going to spend too long talking about visions and missions. But on here, are there some really important words that I'd like us to focus on. They are great words like innovation, empowerment, partnerships. But fundamentally, everything we do every day is about delighting our customers. And I think if we mark our own homework over the last few years, I think we spent a lot of our focus in our energy in making sure our customers stayed with us and were retained through those difficult pandemic and post pandemic years. But I think we have to be critical of ourselves to improve. And I think we took our eyes off the R&D ball a little bit. So the plan that we'll talk through in the second half of the presentation is about how we utilize all of the great things about our organization to deliver a long-term sustainable growth journey for this business. There are a couple of words that are missing off this slide, and everything we do now is about energy and authenticity as well. So we're going to drive this business forward, believing in ourselves with a great deal of drive and great deal of focus, but all about innovation, all about R&D and delighting our customers in everything that we did. So how do we think about our group? We've just introduced a new brand that we talk about internally called One Nexteq. And what does that mean? So One Nexteq is a way of bringing everything that's great about Quixant and Densitron together. For those of you who knew our business and have listened to these presentations before, you'll know that we spoke about Quixant and Densitron in very separate terms. And for the last 5 years, certainly since I've been at the group, they have been run totally separately. So Quixant operated purely in the gaming sector and Densitron across the industrial display market, and they never really crossed over. So the way that we're thinking about ourselves now with regards to One Nexteq is about really clearly defined one set of objectives. We all win, we all celebrate together, and it's about bringing the best things of the 2 businesses to help each other. So in terms of real life, what does that mean? So as you can see on the left of this chart, the way that we used to run was every element of the Quixant and Densitron businesses were separate from product development, operations and customer support, how we looked at manufacturing and supply chain and how we talk to customers. So everything was separate. In the new structure, in the new One Nexteq approach, we're bringing together all of the different elements of the businesses that run separately and getting the best fits out of each of them for both of the trading brands. So we are now going to share product development and R&D focus. We're going to share customer services, and we're going to share how we operate manufacturing and supply chain in a true world-class manner. The one thing that we will keep separate, and we will make sure that we do is that when we talk to our customers, we're talking in our brands only. So Quixant people will talk to gaming people, Densitron people will talk to our customers in the industrial display market. So the customer focus will retain in its brands, but everything else is about how do we unify behind the great skills that we have in our business. And I'd like to give you an example of why that's important. So in Quixant, we've had a center of excellence for software development for 20 years, and that's based in Italy. But Densitron never had access to that. Now whilst that might sound strange, actually, it's a really key differential now for us as we build a software proposition across our 2 brands, we're going to use the brilliant skills that we have in Italy to develop both the gaming and the industrial displays software propositions. So One Nexteq is really going to take us forward. But in terms of who Nexteq is, for those of you who aren't familiar with us, fundamentally, we are a product development business, be that hardware or software. And you can see on the left-hand side of this slide, we have a number of patents and a number of trademarks, and we're really proud and really protective about those. Everything that we're going to do from now on is about how we build that patent bank up and create more and more really high-quality IP-based products and solutions. We are truly global so we operate in 6 countries, and we have over 220 employees all over the world from North America through to Taiwan. In the center of this chart, you can see how the business is split. Our largest market is in North America with 60% of our revenue in 2024, largely driven by the gaming sector, but we are a North American-focused group. And the second pie chart that you can see there is the revenue by sector. And we still have a reliance on the gaming industry, as you can see there, with 55% of the group's revenue coming from gaming. But there's increased focus on how we grow and develop the industrial displays market that you can see underneath the gaming number there. So sort of the general industrial displays market is GBP 19 million of our revenue with medical and broadcast making up nearly GBP 13 million between them. And they are going to form a big part of the growth story that we'll come on to later. But underneath those 2 pie charts, you can see some of our customer base. In gaming, really well-known gaming organizations across the world. And you can see [indiscernible] brand logos there. They are our 2 largest customers and also Murka, who's a very big European gaming organization. In broadcast, some names I'm sure you'll be very familiar with from BBC through to NEP. And NEP are an organization that does the vast majority of outdoor broadcasting. So if you ever watch the football, it will be -- much of that will be filmed by NEP. Across the medical market, some really well-known brands, some OEMs, that you'll be familiar there with Roche and Boston Scientific and then a range of other customers that sit in our industrial displays market there. So really high-quality products, servicing high-quality customer base. And then just on the right-hand side of this chart, you can see some of the trends over the last few years in terms of our group revenue. I think everyone can see the 2020 impact of COVID in terms of what happened to both of our organizations. But one of the key things I'd just like to point out to you is looking at the margin graph here is just how much Densitron has played a part in the group margin performance. As you can see in 2017, Densitron was a 27% gross margin organization and in 2024, that hit 38% and actually overtook the Quixant gaming business for the first time. So it's a Densitron again, just to build up the story for later, Densitron will form a big part of what comes next within the Nexteq Group. While we maintain our focus on gaming, that's really, really critical to us about how we grow and diversify our revenue base is going to be really, really important to what comes next for our group. So just quickly in terms of our brands. So Quixant is an organization that serves the gaming industry largely through our gaming computer platforms. And if you look at our website, you'll see orange boxes, and that's what we're talking about here. But they are renowned in our industry in terms of the quality that they bring, really truly market-leading hardware solutions with embedded software to make the game development process easy. But Quixant is fairly unique in its competitive set and that we focus exclusively on the gaming sector. Our competitors are more generalist computer organizations. Importantly, all of the global regulatory requirements come with our products. So we thought of all of that for our customers to make their lives easier. And from a supply chain point of view, we have global presence to ensure that our customers can get their products whenever they need them. As I said earlier, Matt will talk you through the finances. But as you can see, it's a high gross margin organization. But we have some concentration in our top customers, particularly the 2 largest, and that's going to drive quite a lot of what we do next in terms of Quixant. Densitron, as I've said, is a leader in human machine interface systems and has a range of different products and propositions within it. Traditionally, Densitron was a buying and selling, a reselling organization for displays. But more and more, we've been looking at how we can bring our own IP to the product set going into our industrial displays markets. And something I'd just like to point out already in Densitron, we have a recurring software business called IDS. And IDS is a control system that people like the BBC use that allow them to manage their broadcast content. And it's a really key part of the story as we go forward. But Densitron, critical to what comes next in terms of One Nexteq. So just briefly, a review of 2024. I think it's fair to say 2024 was a tough year for Nexteq, both from the point of view of the markets that we operate in and their economic climate. And in terms of internally, there was a great deal of change from the senior leadership perspective in Nexteq, and I know most of you know about that because we talked about that in September. But we now have a very settled leadership team, which I'll talk about a little bit later on. So in terms of 2024, again, Matt will take you through the numbers. But revenue, we finished at GBP 86.7 million, which was down on the year prior for a number of reasons, which I'll touch on later. And you can see the impact that, that had on profit before tax, again, down fairly significantly versus 2023. But everything we're doing now is One Nexteq is about what we do next. So as we talk about the plan later, we'll explain those numbers in the context of what we're going to do next. And lastly, the performance was driven as a result of the destocking process. But again, we've talked to you before about -- we predicted this in September that through 2024, the impact of destocking would continue. And as you can see by the graphs below, 2022, '23 and '24 across both of our businesses showed similar trends in terms of that destocking process. Now the key thing here is that we haven't lost customers. So this is just about our current customer base trading at a slightly lower level. And in the middle chart at the bottom here, you can see in our largest market, North America, which largely drives a lot of the Quixant outcome, you can see the impact of that destocking quite clearly. In Densitron, there's a slightly different picture, similar macro trend in that destocking process, but that was largely driven by some fairly significant last time buy episodes in 2023. And you can see the impact of those, particularly in EMEA, in Densitron on the right-hand chart as we flow from 2022 into '23 and then from '23 into 2024. The key thing here, though, and just to reiterate the point, yes, destocking has definitely been an issue. And as you can see, particularly from '22 into '23 and then '23 into '24, but the really important point here is that we've supported our customers through this time in a really world-class way. So we haven't lost customers. So as the destocking process ends, and we believe that's happening now, and we should see the benefit of that as we go out of '25 and into 2026. So I apologize for this is a slightly busy slide, but just to talk you through some things that went well since I've taken on this role. We have a new senior leadership team in place, and I'm really proud of these guys in that they're a global team, and we've actually taken people who are really active on a day-to-day basis to run the business. As you saw in the earlier slide, we structured ourselves around 2 regions, so EMEA and the rest of the world and North America, so that we have local management, managing our customer contact teams in country, so they have that true understanding of what's going on in their marketplaces. Through Q4, we delivered some efficiencies in our overhead base. So we restructured around the One Nexteq principle just to bring our overhead base in line with the revenue position that we're in -- coming into 2024. But again, as I said earlier, we're about products. So through the end of 2024, we launched 2 new really innovative gaming hardware products that I'll talk about a bit later. And as a lot of you will know, our gaming hardware platforms include either an Intel or an AMD traffic solution. All of our range now has an option to have either. And that's really important to maximize the addressable markets that we operate in. We've recruited some specialist software engineers in terms of the gaming market, and I'll talk about why that's important in our 3-year plan section. And as you can see through the rest of that slide, we just focused a lot on the Densitron business sector, with particular focus on broadcast, where we've seen good growth going through 2024 and into '25. And importantly, we have won 3 really big broadcast manufacturers. And that's really key because that's what's going to fuel the 2026 element of the 3-year plan that I'll talk about later. Challenging, though, the macroeconomic climate was still tough. Interest rates are still high across the world. And I think that led to a number of our larger customers not investing at the pace that they usually would. We've talked about the internal change already, and we've talked about destocking. As a lot of you will know, we have a reliance on 2-- our 2 largest customers for the group, and they were struggling over 2024 in their marketplaces due to the game design process that they -- that is their responsibility in this. That's now rectified itself. And we're looking forward to them getting back into a growth phase in their business model. There have been some price pressure in terms of competition in the PC manufacturers, but that's where the quality of our business comes in and the products in terms of what they can provide from a software proposition and their quality just stands above our competition. So largely, they were the challenging things we have to deal with. And so moving from that sort of environment analysis, I'd like to hand over to Matt, who's going to talk you through the numbers in terms of what 2024 delivers.

Thank you, Duncan. So as Duncan said 2024 is a challenging year for the business, and that's really reflected in the income statement that you can see here. So revenue was at GBP 86.7 million, which is down 24% on the prior year. The top 10 customers as part of that increased actually in their share to 60%, up from 51% in the prior year. So you can really see here the impact of the destocking cycle as well as some customer pushouts towards the end of the year. But as we've highlighted already, gross margin performance held up well. So slightly below historical highs at 35.9%. But that's actually despite having taken some significant provisions against Aruze inventory in the year. So actually, that gross margin performance would have been slightly better than that and probably would have been a historical high without those inventory provisions. In terms of adjusted operating expenses, those are largely flat on 2023. So taking account of some of the cost-saving initiatives driven in the end of 2023, but obviously offset by inflation and some other factors of investing in our R&D across the business. So really, that revenue performance drives our adjusted profit before tax down to $4.8 million. That's because our operating expenses are fairly fixed, so don't go up or down that much with our revenue changes. So adjusted PBT of $4.8 million was a 67% reduction on 2023. The one point to call out here is that our market guidance was originally an adjusted PBT of $6 million. The reason that's down at $4.8 million. Now we needed to take an additional $1.5 million provision at the year-end for Aruze inventory write-downs, which had quite a significant hit, one of the key positives in the P&L was our financing income. So that was up from $1.5 million to $1.4 million benefiting from our strong cash balance and higher interest rates, particularly for the start of the year. One other point to call out is our tax charge. So our tax charge is $1.4 million, which gives a high effective tax rate of over 80%. That's driven by the good impairment charge that was booked in the year and also tax losses not being recognized as deferred tax assets, both of which have an adverse effect on the group tax charge and obviously, taking into account the revenue and profit growth. The EPS was down year-on-year and in line with where the profit reductions have come to. So if we take a quick look at Quixant's revenue in the year. So our gaming revenues for the group, both H1 and H2 are behind 2023 and continuing that customer pushout and destocking cycle. But as we saw before, the gross margin was still maintained at a really strong level. And that translates through into the number of platforms that we shipped in 2024 so that was down 20% on 2023 at 43,600 platforms against 54,500 platforms in 2023. What we saw in 2024 was a cost-effective range. Sales for those being maintained in terms of volume and our mid-range and high-end range volumes reducing, but our average selling price was only down 1%. So we've really managed to keep our pricing across our product range and on the Quixant products. In terms of Densitron revenues, a fairly similar story in terms of H1 and H2 being behind 2023 performance. I think the additional thing to call out on Densitron revenue was some of our products coming into end-of-life cycles. And so we're working through those at the moment in finding those replacement solutions for our customers where we're integrated into that end product ranges. One of the key highlights for our revenue point on Densitron was we had our first revenues come through for our newly launched product range, which is a stand-alone desktop controller, which currently is targeted at broadcast studios allows effectively you to take the broadcast remotely outside of the studio. It's quite a unique product. There's not another one on the market like this that has an integrated PC within it. So it takes cost and space for customers and links in well with our IDS software solution, driving -- being able to control that software through this hardware offering. And as you've seen, gross margin held up at 35.9% in the year. It's only 40 basis points drop year-on-year. Gross margin remains strong really because we're focusing on higher-margin business in Densitron display components. So Duncan presented earlier that slide that showed we've gone from 27% margin to 38% margin on Densitron. So really strong process there. We've benefited from steady component pricing across both divisions, which has given us predictability in our bond costs, and we're seeing the benefit of repeatable revenues and the margin from our integrated designs into customer solutions. As I mentioned briefly before, the margin was impacted by the inventory provision that we booked against Aruze. So originally, we took $1.2 million provision in H1. And then we added a further $1.5 million in the second half as we unwind that Aruze stock that we're committed to. And as Duncan said as well, customer potential remains high despite our focus on higher margins. So it's really bringing through the benefits of our supply chain in Taiwan to deliver some of those margins. So one of the key highlights of performance for us has been cash generation. So net cash is up again against the prior year. So we're up to $29.1 million at the end of 2024. So $1.2 million increase versus 2023. A lot of that has been driven by unwinding working capital positions and generating cash flow from our operations is fairly light model from a capital point of view with R&D being our only significant investment in CapEx, so driving that innovation in technology. Our dividend in the year was 3.3p per share. So that paid out $2.8 million in August 2024, which was a 10% increase on the prior year. And in terms of shareholder returns, we also had our share buyback program that we introduced during 2024. That returned $6.9 million of cash to shareholders during the year. And just to update, we fully completed that buyback that was approved before the end of March 2025, which -- all of this gave adjusted operating cash conversion of 324%. So that's been -- the cash conversion has been a strong performance for us over the last 6 years, where we've averaged 139% despite the impact of COVID on cash performance. I'll now hand back to Duncan.

All right. Matt, thank you very much. Okay. So that was the part of the presentation that looked back. Now we're going to look forward. So what comes next? And why is Nexteq an exciting proposition from an investment perspective? So as I said earlier, we're a product business, and we're a really good one. The -- so just to give you a flavor of some of the work that we've been doing. So Matt's already took you through ProDeck. So ProDeck is a really exciting opportunity for us because as he said, that enables us to take a broadcast studio anywhere and that, that will drive a significant part of the growth going through '25 into '26. On the left-hand part of this slide, you can see Tactila. So Tactila is really unique and has the ability to revolutionize how a broadcast studio can operate and how the users in the broadcast studio interacts with the technology. It's a unique rotary encoder with on-screen technology. And we currently have -- as I said earlier, recently won some new customers, and it's on the back of this really great piece of product development work. So really, really proud about Tactila. And on the right-hand side, you can see a range of orange boxes. Now there are 4 on this slide. The one on the right-hand side is really, really new and was launched only a couple of months ago. And this basically opens up whole new sector for us that we've not been able to address before, which is the amusement sector in North America and Spain. And from a volume perspective, that is so much more than what we would -- you would traditionally think as a casino market. So the volume potential of that particular product is vast. And as we go through '25 and into '26, we'll be focusing more in Latin America and in those amusement sectors in North America and Spain to really drive some exciting volume. And hopefully, in future presentations, we'll be able to talk a little bit more about the opportunities in Brazil. But what are we doing that's new, that's really going to drive some different thinking in terms of what we do in Quixant. First of all, number one here is a pyramid that shows basically how a slot machine works. Traditionally, the orange bottom 2 sections of that pyramid is what Quixant has done. So the hardware and then that intermediary level of software that links to the way the game operates. We -- as I said earlier, we've recruited some specialists in our Italian team to look at how a software platform could be made of [ vanilla ] solution, the game manufacturers can then rather than worrying about building their own game software can actually just buy it from the people that they trust already. So again, unique IP, and that's a theme about everything that we're doing now, and we're going to launch this new product at G2E in 2025 in Las Vegas, which is the big gaming show that we go to every year. Importantly, this adds a recurring revenue model to our repeatable hardware platform business. So in terms of driving value, it will be a key part of our development in the Quixant business. Number two, in the center there is we're working with our graphics solutions providers, Intel and AMD, on how we utilize AI in terms of allowing game development processes for our partners to be slicker and to allow more power and more graphics to come through into the game. This will be something that will be exclusive with Quixant going through into this industry and something we're really excited about, and we'll be launching as we go towards the end of this year. And I look forward to telling you more about that when we speak next, but utilizing the power of AI to deliver better games and better graphics, which is what the gaming industry, frankly, is all about. Number three, you've heard from us before about cabinets. We have a partnership model that we now have set up with manufacturers across the world, and you can see the names, Elas and [ Nevatronix ] there. Elas is a European gaming cabinet manufacturer, [ Nevatronix ] is one in North America. So we are able to produce cabinets close to where our customers are located to make it more effective in terms of lead time and also cut costs in terms of the supply chain impact. And as we've already spoken to, we have a growing customer base. Genting Casino, as we've spoken to you before about, and that is growing well, going well already in market. So it's in the Genting Casino base, and we look forward to that being rolled out after the publication of the gaming white paper that's going to be published in July this year. So those 3 elements of our product proposition and development is on the back of our renewed investment in R&D and then a real focus in our markets through our new structure to deliver that to our customer base. So the 3-year plan largely is made up of 4 areas of execution. Firstly, structure, and we've spoken about this largely. We're focused around our markets now, and we're going to utilize the skills that we have across our business to deliver brilliant outcomes for our customers. We're investing in regional field application engineer teams as well, having our experts close to our customers seems to be really key. And also, we're spending a lot of time and effort in making us a great place to work in every office across the world. So that's not just a sort of a tick box exercise. We're living and breathing all of those values that we talked about at the beginning of this presentation to deliver great results for our people. Number two is retention. So we have to retain and grow our largest customers. And we're doing some specific product development work with both of those to tie those 2 large gaming companies to us for the foreseeable future, and that's ongoing now. And we hope to have those platforms in market as we go through Q4 this year. We are spending a great deal of time and effort on our core Quixant and Densitron customers. So putting in place the teams of people under that regional structure to make sure that we delight our customers at every turn. And as I said earlier, we're investing in our team to both sell into and manage customers in Latin America as hopefully the Brazil opportunity becomes real. From a growth perspective, we are looking about how we focus our growth so we don't concentrate all of our efforts and all of our revenue on AGT and [indiscernible], our 2 biggest customers. So we're looking about how do we grow our core businesses by 10% in Densitron and outside of those 2 big customers in gaming to deliver 15% growth. And that's about structure and about having the right products available on great lead times. We're asking ourselves to deliver $8 million revenue in broadcast. So significantly growing our broadcast business over the next 3 years. And that's going to come on the back of -- there's customers that we've already won, but also how do we then work with our new Tactila solutions, amongst others, to win new customers to provide that constant level of growth. Working in the medical sector is going to become key. So how we work with medical design houses that are the people that really design what medical devices look like for the big medical OEMs. We're going to think about how we work in that space in a different way. And going back to that point about creating One Nexteq. In 2018 and 2019, we had a significant gaming monitor business, which we haven't been focusing on over the last 3 or 4 years. However, in Densitron, we have a global leading monitor business. And again, whilst it may sound silly, we didn't actually work with those guys before from a gaming point of view in terms of our own sister company providing technology that really was market-leading. So we're reintroducing that process as we go through the next 2 to 3 years. And how are we going to diversify our revenue? So again, we have concentration in our gaming sector and in certain customers within that gaming sector. So the software solution I talked about earlier that we're launching this year will take the focus away from just being a hardware supplier into the gaming industry. We're launching the new gaming hardware that we talked about earlier. But from a medical point of view, you've seen ProDeck, we're launching a medical version of that and a medical version of Tactila to help us grow in that sector. And from an acquisition perspective, we're really looking to double down on both medical and broadcast in terms of how we can find strategic bolt-on acquisition opportunities to accelerate the growth that we're already seeing in both of those areas. So 4 really clear areas of execution that the business can all get behind to focus on how we deliver. I'm now going to hand back to Matt again, who's going to talk through the 3-year plan from the perspective of the financials.

Okay. So let's set the scene for how revenue has performed over the last 6 years. There's been very market conditions that have led to that chart on the right-hand side where revenue is up and down across that 6 years. So you had the COVID impact, post-COVID bounce back, which happened and then the destocking cycle that's run through 2024. It gives us an average revenue across that period of $94 million as a kind of normalized view of how we benchmark the 3-year plan against. So taking that forward, we've looked at where does the business need to get to at the end of this 3-year plan. So we have 3 key areas of financial metrics that we're looking at. So revenue of $108 million to $120 million, gross margin of 35% to 38% and adjusted EBITDA of 10% to 15%. So all significantly higher than our 2024 performance. So in terms of the revenue first, there's 3 key areas, again, that underpin the revenue piece. So the organic side of how we grow revenue, which is what Duncan talked around the One Nexteq restructure, the sales processes that we'll set up in each region, the partnerships that we'll look to achieve and having our engineering teams in market, helping to integrate solutions with our customers and helping address their technology challenges. There's our innovation approach, so bringing forward software solutions in both the gaming and the broadcast sectors, our Tactila and [indiscernible] product offerings as well as IQ Connect, which addresses a whole new market in the gaming sector. And then there's looking at the different markets within which we operate. So having a clear focus on broadcast, on medical and our expansion into the Brazil as the gaming market launches there. So how do we address the second and the third of our financial objectives? The first part of that is how we grow our gross margin. So we do this through increasing sales, incorporating Nexteq IP within our products and a higher percentage of our revenue coming from the software solutions that we'll be launching. Both of these have higher gross margins on the products that they incorporated into. And that's underpinned by our engineering expertise in markets, working with customers to integrate key solutions for them and our expertise in Taiwan in terms of supply chain management, driving down [ BOM ] cost reductions. From an EBITDA margin perspective, we focus on operating costs on top of that revenue and gross margin performance to drive our EBITDA growth. So we have the operational alignment in the regions as One Nexteq that drives operational savings, shared use of technical resources across the group, which Duncan gave the example of the engineering team in Italy providing software solutions now, not just for the gaming sector, but also broadcast and other sectors. And together, that's helping to deliver $2.3 million reduction in overheads, of which a substantial extent has already been implemented. So we've looked at what are the key signposts to success for us delivering this 3-year plan. And we've identified 3 key signposts. The first one being pipeline growth and to deliver significant growth in our multiyear sales pipeline across all the verticals in which we operate. Our baseline position for this is a pipeline of $420 million at the end of 2024. And our 2027 target is to deliver 50% growth in the pipeline to $630 million of opportunities. The second of these signposts is about Nexteq new IP revenue. So that's increasing the revenue from products, which incorporate new Nexteq IP. The baseline for this is that we had less than $1 million of revenue of new Nexteq IP across each for the last 4 years. And our target for 2027 is to deliver $10 million of revenue from new Nexteq IP products. So this is about how we've been through our innovations that we have been working on and continue to work on through to cut solutions for customers and take orders and deliver revenue from those across the 3 years. The third signpost to success is around our $1 million customers. So these are our key significant customers and growing the numbers of customers delivering $1 million revenue for us annually. As a baseline, 2024 had 10 of these $1 million customers, which compares to an average of 15% across the previous 4 years. So 2024 was down significantly. Our target to 2027 is a 100% increase in customers delivering $1 million revenue, increasing that number to 20. That allows us to scale efficiently working with key customers where we design in our technology. So our 3-year plan is not just about delivering the numbers at the end of those 3 years. It's about creating a platform that allows us to grow beyond that. So we grow beyond just $108 million to $120 million revenue, beyond that 35% to 38% gross margin and 10% to 15% adjusted. Throughout the 3-year plan, we keep a continued focus on innovation, which drives revenue growth. So as we exit 2027, we have new products coming to market, which helped fuel growth beyond $120 million revenue. We keep our focus on our key market verticals and identify new market verticals in which we can find growth. Operating cash flow will help drive further investment in the business, increasing our focus on R&D and technology innovation and bringing through customer wins with repeat volumes as we design into our customers and solutions. And on top of that, we're using M&A as a growth accelerator and bolt-on acquisitions in key market verticals to drive enhanced growth beyond what we have in the 3-year plan.

Brilliant. Thank you, Matt. And I hope you all agree there's a lot of things that we can do as we go forward that's going to bring really good growth to our group. So in terms of summary, we're talking about 2025 as a stepping stone year into our 3-year plan. But I think we have to recognize 2024 was a difficult year, but we ended that year with a new structure, really reenergized business and refocused. Everything we do is about utilizing the skill set we have across One Nexteq and putting all our efforts into innovation and investment into R&D because it's the product, legacy and quality of our business that will drive this business forward as we go on. And that point about being brave is really important for me. We have to make some tough decisions in terms of how we structure ourselves, but about being committed to that product development pathway to take us through the next 3 years to the results that Matt has just talked about. Importantly, gaming will just always be critical to us as a group, but we have to focus on how we drive growth in other market verticals to allow for some diversification in our group's revenue. So focusing on broadcast, focusing on medical, not only from an organic point of view, but also, as Matt just talked about, how we use some of that cash war chest that we have to target really strategic bolt-on M&A to accelerate growth through the life of the 3-year plan. And software will become more and more of a story in terms of our revenue streams, utilizing a gaming software revenue model that's being driven by the new software platform to link to the IDS business that we talked about earlier to create an overall Nexteq Group software revenue that we're really, really proud of. But I think to leave you with a message about new energy refocused back on what we've always done and what we built our business on about creating brilliantly innovative creative, high-quality new products, both hardware and software, and I look forward to talking to you about those when we speak again next. So that concludes the presentation today. Thank you very much for your time and for listening. And we'd like to take some questions now. So thank you very much.

[Operator Instructions] I'd like to remind you that a recording of this presentation along with the copy for the slides and the published Q&A can be accessed by our Investor dashboard. As you can, we received a number of questions throughout today's presentation, and could I hand back to you to read the questions and give responses where appropriate to do so, and I'll pick up from you at the end.

Okay. Thank you very much. First of all, thank you very much for all of your questions. We're going to try and group fees into like ones because there are several covering the same topics. So first of all, just regarding Everi. So Everi is our largest customer. It currently is circa 30% of our Quixant business revenue and 19% of the group's revenue. And as some of you know, Everi has been subject to an acquisition of itself by an organization called Apollo. Apollo are also looking to complete an acquisition of IGT's gaming operations in North America. So both Everi gaming and IGT gaming will be acquired by Apollo, if everything goes through and the time scale for that is predicted to be Q3 at some point this year. So that's a really big development in terms of our customer base. However, it's a risk and an opportunity. So the opportunity side of this is Everi currently sell around about 10,000 cabinets a year into various markets it operate in. IGT is somewhere between 25,000 and 30,000 cabinets. So it's a significant opportunity for Quixant to really target one of the big Tier 1 gaming manufacturers that we talked about for a number of years. So as I said earlier in the presentation, we've been working on creating a new hardware platform for Everi that will utilize a much higher powered performance graphics engine. And this, we hope, will be the vehicle that we can then translate into an IGT environment to capitalize on the opportunity side of this. The risks, however, are clear, and I'm not going to shy away from them. As IGT, Apollo and Everi go through the integration phase, there will be decisions made about their hardware platforms, and we're hoping and we're working with both organizations on our new platform to make sure that's the platform they choose for their group entity. Just to add on to that answer. We're also working with IGT separately on other opportunities around the world. So IGT has already integrated our technology into their technology world. So we're in a really good space in terms of the opportunity that comes out of the Apollo acquisition. Obviously, we'll know more as the first half goes through. So when we speak again in September, we'll be able to give you much more detail on what's going on there. There's been another question around online gaming and the opportunity that, that brings to us. The online gaming market has been driving a lot of the gaming market growth over the last few years, but that's starting to plateau now. And one of the interesting dynamics of the gaming market is that the online content manufacturers are starting to think about new ways of getting their content seen by consumers. So they're going into a land-based strategy. So what does that mean for us? Basically, the online games companies haven't ever existed in that sort of physical casino style sort machine environment, and they need help in order to be able to enact that strategy. So that's where we come in. They haven't had to buy PC or monitors or cabinets before. So as you saw in the presentation, we have our capital strategy now that allows online gaming companies just to interact with us as a technology hardware specialists to allow them to integrate their games and get them into that land-based environment. I also spoke about the software platform that we're launching at G2E this year, and that's going to be a key part of what we do with online game manufacturers to ease that transition into a land-based environment. So from an online perspective, we have the products, both hardware and software, to capitalize on those opportunities. There are a number of questions about innovations. And I think we've touched on some of those over the last 40 minutes or so. But we've been spending a lot of time and energy on innovation, particularly in the broadcast sector, and you can see that in our Tactila solution, and that solution has led to a number of key target wins that we will be integrating through the course of this year. A question I've also received is around time to market for these new products. Traditionally, in gaming, the time to market for a new customer win has been around about 18 months. And it will be very similar in broadcast because the level of technology integration is similar. So back to the 3-year plan, we already have a number of these big wins under our belt. We're going through the integration process, and they will really start hitting the revenue line as we start 2026. On innovation, that software solution really is key. Traditionally, Quixant, the gaming brand has been hardware focused. Yes, we've had embedded software to help game engineers. But actually, this is the first time we're going to be able to create a model that offers a recurring revenue model in gaming to match the recurring revenue model we have in Densitron, which already has a software solution that we proudly sell to people like BBC already. So I guess the key thing about innovation in Nexteq is that we are looking at how we translate innovation in broadcast into gaming and innovation in gaming into broadcast and medical. So we're really utilizing our R&D spend across the board, whereas previously, it was targeted very much within the target market verticals that Densitron and Quixant operated in. So a different way of thinking about R&D investment, particularly around software support. So I grouped a couple of the sort of the strategic elements together. Matt would like to answer a couple of the financial questions that you sent us. So Matt, over to you.

Thank you, Duncan. So I had a couple of questions about the share buyback program, which $6.9 million of cash back to shareholders during 2024. That closed out in March this year. So our focus now with our cash balance of $29.1 million is really about growth. So investing in growth for the business over the 3-year plan. So there's 2 parts to that. First part is around innovation. So the innovations that Duncan talked about before, funding those, enhancing our engineering expertise and building out those technology building blocks that support the growth, which ties into our 3 signposts to success around bringing on board more new Nexteq IP revenue. So bringing through $10 million of new Nexteq IP in 2027. That's critical for the investment of our cash resources that we've got and supporting that as well, the investment in bolt-on M&A opportunities, which we see as being value accretive to the group and combining with our expertise already within the existing business and integration opportunities allow us to scale beyond what those M&A opportunities bring to the business on day 1. So that's in terms of the share buyback questions that we had. [ Luis ] has had a question about order book visibility. So at the year-end, we disclosed that we had 5 months order book visibility going to 2025. We've had solid performance in order book generation in the first few months of 2025. So we're seeing some slightly better visibility of that against the 2025 forecasted revenues. In terms of the split between Densitron and Quixant, our order book follows a similar pattern as what we had in previous years, whereby we have a little bit more forward visibility on the Densitron side than we do on the Quixant side.

Okay. So the final questions that just come in around KPIs are being transparently communicated. Yes, that's really what we're going to be measuring ourselves on. So each time we interact with you guys, it will be to update you on the KPIs that Matt's outlined and also the key signposts within that, i.e., what customers do we have to win and are we on track to win them? So yes, there will be sort of detailed discussions around how we're going to drive the activity that Matt's outlined. And the final question, I'll end on. There's a number of questions around what happened in 2024 organizationally in Nexteq. And honestly, right now, we're looking at what we do next as what's going to drive the growth in our business. There's a lot of change at the executive level as we went through 2024, and that was largely around how we view the growth opportunities in the business and having the right skill set to deliver them as a business as we go through '25 to '27. So we have a new leadership team in place. It's now fully staffed and fully ready to deliver on the plans that we've outlined. So I think that covers all of the questions that have...

Duncan and Matt, thank you for answering all those questions you can from investors. And of course, the company can review your 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 I know is particularly important to the company, Duncan, can I just ask you for a few closing comments?

Yes. Thank you very much. So first of all, thank you very much for your time. And this is a really exciting time for Nexteq. We have a reenergized and refocused plan that looks to take all the great things that happens across our business to focus on innovation and delivering products that really delight our customers at every opportunity. We're investing in R&D, all of those things that made us really greater than organization from the day 1, and we're really refocusing on everything that we're doing and so that we can retain our customer base organically grow through those innovative new products, but also really importantly, looking at how we diversify our revenues away from that traditional hardware in gaming and actually creates a much more balanced Nexteq as we move forward to the 3-year plan. So again, thank you very much for your time, and we look forward to updating you on the plan when we speak again next in September. Thank you.

Duncan, Matt, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to describe your feedback in order that the management team can better understand your views and expextations. This may take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Nexteq plc, we'd like to thank you for attending today's presentation, and good morning to you all.