Xaar reports “ahead of plan” revenue growth amid return to profitability in FY 2021

John Mills, CEO of inkjet technology developer Xaar, has announced that its growth strategy is “ahead of plan” after it reported a net profit in its FY 2021 financials. 

On the firm’s earnings call, Mills highlighted how just two years ago, it posted annual losses of over £70 million, causing its stock to fall as low as £0.18 per share. Since then, however, Xaar’s CEO said the business has been restructured, allowing it to regain market share in ceramics while “building out in new markets,” culminating in a return to profitability in H2 2021, and a 23% rise in its revenue for the year.

“We continue to make good progress towards achieving our strategic goals and we are pleased with our achievements,” added Mills. “The business was profitable in the second half of 2021, and we carry positive momentum and a strong order book into 2022. We have invested in working capital which provides confidence in our ability to maintain supply to customers throughout the year.”

Xaar’s FY 2021 financial results 

Over the course of FY 2021, Xaar generated £59.3 million in revenue, 23% more than the £48 million it brought in during FY 2020, but 2.8% short of the £49.4 million it reported in FY 2019. In FY 2021, the firm’s Printhead division remained its biggest revenue driver, bringing in £40.1 million, a 13.6% increase on the £35.3 million it reported over FY 2020. 

This growth was primarily driven by a rise in the sales of Xaar’s ceramic and glass printheads, which jumped from £13.8 million to £19 million between FY 2020 and FY 2021. According to the firm, it has been able to significantly increase its share of the ceramics market over the last year, particularly in China, while new products such as the Xaar 2002 have allowed it to “win several accounts” in the glass sector. 

By contrast, the company’s 3D printing and advanced manufacturing printheads generated just £2.4 million in FY 2021, which was flat against the £2.5 million they brought in during FY 2020. While Xaar says that it managed to “make gains” in the 3D printing market over this period, these were offset by a reduction in its advanced manufacturing revenue, an area that remains “relatively small but is growing.” 

That being said, the firm adds that it expects to see the latter achieve “significant growth” in future, with this being reflected in a rise in 3D printing demand as well, though this may not be realized immediately. Given that “development cycles can be long,” Xaar says that it “can take several years for a customer to reach full production,” hence there could be a delay in this interest turning into revenue. 

Elsewhere, in Xaar’s machines business, revenue generated by both its digital inkjet and pad printing systems also rose by 11% and 8% to £8 million and £5.5 million respectively in FY 2021. In large part, the company attributes its gains in this area to a greater focus on its consumables, which has allowed it to generate higher ink, plate and part revenue. 

Xaar Financials (£) FY 2020FY 2021Difference (%) FY 2019FY 2021Difference (%) 
Revenue 48m59.3m+2349.4m59.3m+20
Gross Profit 13m20.2m+5512m20.2m+68
Gross Margin 27%34%+7 (pts)24%34%+10 (pts)
Net Profit/Loss-14.7m+14.2m-71.5m+14.2m

Making a return to net profitability 

Between FY 2020 and FY 2021, Xaar managed to increase its gross profit by 55% from £13 million to £20.2 million, while moving from a net loss of £14.7 million to a net profit of £14.2 million. While the firm’s return to profitability during FY 2021 was no doubt aided by a much improved gross margin and its continued internal efficiency drive, it also made a number of new launches that aided its rise in revenue. 

Late last year, the company released the lightweight Xaar Irix printhead in two variants, with one expected to address solvent ink-based applications, and the other designed for demanding use cases like 3D printing. This was followed by the announcement that dp polar’s industrial-oriented AMpolar i1 system would also be shipped with Xaar’s 1003 printhead, introducing more users to its technologies. 

As well as launching new products, Mills told analysts on Xaar’s earnings call that its leadership had tried to “focus the business on markets where it has a clear technological advantage” in FY 2021. This strategy saw the company sell its shares in Xaar3D in October 2021, a High Speed Sintering (HSS) business it co-founded with Stratasys, which now uses the technology to power its H-Series 3D printers.  

Using some of the funding raised from the sale, Xaar has since acquired print system integrator FFEI and digital inkjet system manufacturer Megnajet. These purchases, according to Mills, will allow the company to “expand its customer offering in a range of markets” moving forwards, as well as enabling it to offer a “more integrated inkjet solution” that could “attract new opportunities.” 

The Xaar Irix printhead. Photo via Xaar.
Xaar launched its Irix printhead during FY 2021. Photo via Xaar.

Forecasting ‘organic revenue growth’

Although Xaar has stopped short of issuing guidance for the coming financial year, it says that it’s “optimistic about its short-term outlook,” and expects to achieve “good organic revenue growth.” The firm also anticipates this growth being reflected in its profitability, adding that it’s “confident” of seeing 40% gross margins “in the medium-term.”

Primarily, Xaar is bullish about its outlook for FY 2022 due to the action it has taken to secure its supply chain against the pandemic and wider global turbulence. Specifically, having increased its supply of key inventory such as semiconductor parts, Mills says the company has managed to “minimize the risk of shortages in future,” and it fulfilled all its outstanding orders by the end of 2021. 

Additionally, the sale of its Xaar3D shares has left Xaar in a healthy cash position, with a balance of £25.1 million at the turn of the year, while its pipeline and order book have also continued to strengthen, as its Ad Speciality and Promotional Products markets have begun to recover, potentially providing it with sales opportunities there. 

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Featured image shows Xaar’s global headquarters in Cambridgeshire. Photo via Xaar.