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182. Bull, Bear & Beyond – Xaar: executive interview
2 Plays6 days ago
In this interview, John Mills, CEO of Xaar, outlines the steps management has taken to transform the company by focusing on applications where Xaar’s ability to print high‑viscosity, high‑pigment‑load fluids provides a clear competitive advantage. He explains how the business has significantly diversified its market exposure and now operates across 21 markets, with more than 100 original equipment manufacturer (OEM) programmes at various stages of development. John highlights Xaar’s strong positioning in key growth areas, including jewellery wax printing, EV battery insulation coatings and automotive coatings. He also discusses the upcoming launch of a unique full‑colour desktop 3D printer featuring Xaar’s printheads. He notes that the decline in legacy ceramics revenue has now bottomed out, meaning growth from new applications should begin to show through more clearly in the top line. With existing factory capacity able to support more than three times current revenue, Xaar is well positioned to benefit from operating leverage and strong cash generation as volumes increase.
Xaar is a UK‑based manufacturer of industrial piezo-based drop‑on‑demand inkjet printheads and related systems, supplying OEMs globally across applications including ceramics, graphics, product decoration, packaging and advanced manufacturing.
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Transcript
Introduction to ZAR and Interview with John Mills
00:00:08
Speaker
Hello and welcome to Edison TV. Today I'm joined by John Mills, Chief chief Executive Officer at ZAR. ZAR, a leading developer and manufacturer of ah Injet printheads, ah specifically targeting industrial applications.
00:00:24
Speaker
ah The company has been on a turnaround process for some ah for some time now, but there are some interesting lead indicators that suggest that better times might be um on the horizon.
00:00:35
Speaker
John, many thanks for joining me today. Great. Thanks, Dan. Thanks for inviting me.
Historical Challenges and Market Shifts
00:00:40
Speaker
ah Can you start by giving us an introduction to Zahar, an overview of um the business's capability capabilities and markets? Yeah, as you said, ZAR manufacture inkjet print heads, so industrial print heads, and then through its 30-year history, it's had a couple of periods where it's been very, very strong in certain markets like ceramics and wide-format graphics.
00:01:02
Speaker
i'm But for those who know ZAR, typically they'll have seen the ups and downs over the over the years. i'm h I joined ZAR about six years ago, and Right at the time when the company was really in a ah lot of trouble. um And I think the problem at the time was twofold. Firstly, it really focused on the ceramics market for a number of years and that market just disappeared.
00:01:26
Speaker
um And secondly, it was really trying to compete with the our big competitors. but it With things that they do very well. um So they print high resolution, low viscosity inks.
00:01:40
Speaker
So companies like Epson and Fuji and Riko and Akiosera, these are huge Japanese corporations that that that manufacture at a very low cost. They have huge reach. They have a fantastic reputation.
00:01:52
Speaker
And a small company like Zara trying to compete head to head with those was never really going to to work.
Technical Innovations in High Viscosity and Pigment Inks
00:01:58
Speaker
And so when I joined, and nobody was really working with Zara or developing and products with their with their heads.
00:02:06
Speaker
with our heads and then And so really when i when I started having known the technology for about 30 years, I knew that if we could get the commercial offering right and we could actually fix some of the technical challenges in the in in the business, then we really had some great great technology.
00:02:22
Speaker
and And the premise of what Czar can do is that we can print fluids that the others can't. and And that really comes down to to two parameters. One, how thick the material is which is, which is a measure of viscosity. So, you know, viscosity of one is water and a viscosity of 100 is like engine oil.
00:02:44
Speaker
And our competitors, and some of them can only go to about a five or six. ah Others can maybe go to 20 or 30. i and But we have applications where we're over 100. And so there's a whole range of viscosity to how thick the fluid is that we can print that no one else can.
00:03:03
Speaker
The second element is how much pigment you can have in the ink.
00:03:09
Speaker
Our competitors, that we know typically less than 10% of the fluid would be pigment. And therefore, for every drop you put down, there's a certain amount of color, there's a certain amount of functionality.
00:03:21
Speaker
We can put five times as much of that into the fluids. So for every drop that we put down, we can have five times as much pigment or five times as much functionality.
00:03:32
Speaker
And so where what we look for is applications where the end user needs a fluid that has certain properties. And if those properties can only be delivered with high high pigment loaded fluid, then we're the only company that can print that fluid.
00:03:52
Speaker
And therefore, we're not competing with the others because they they literally can't do what we we can do. So what we've, when I started, and what we did was really to look at the value proposition of SAR.
00:04:07
Speaker
What can we do? Where do we focus the the business? And that was really on those two elements. ah ah And now today we we've developed a value proposition for each of the industrial markets.
00:04:20
Speaker
And so if you look at across those markets, and there are 10 sorts of major categories. In each category, we have defined a value proposition based around viscosity and pigment loading that's really compelling.
00:04:36
Speaker
And we now have 21 different markets where we have cost. So if you compare that to ZAR historically, that's focused on one or two markets,
00:04:48
Speaker
We now have customers in 21 markets. And I think that's the big difference from Czar to today to Czar historically.
00:04:59
Speaker
And we now have over 100 customers that are actually developing products using our printheads. And they're at different phases of that lifecycle because it typically take can take four five years for a company to go from meeting Czar initially to launching the product.
00:05:19
Speaker
ah And some of those companies are have launched, some of them are about to launch, and some of them are some point along that journey. And so when we look at the the the pipeline of opportunities that we have, we can see these companies that have products that are going to launch at particular dates.
00:05:39
Speaker
particular dates and And that's the reason why we feel confident in the revenue growth over the coming years, because it's not like we need something to happen tomorrow.
00:05:50
Speaker
The revenue, the future revenue is kind of already sitting there in the pipeline. It's not really visible to the outside world, but that's that's the basis of the confidence we have in the business.
Strategic Market Entry: Jewelry Wax and EV Batteries
00:06:00
Speaker
Right.
00:06:00
Speaker
And so where do you see the the biggest growth opportunities? You've already already started to make some good progress in jewellery wax. Can you talk through talk soon that? wax is i Wax is a fascinating um area. Wax was around about £20 million pound market that was dominated by Xerox.
00:06:21
Speaker
ah And we worked with and the the global number two a company called Flash Forge, to develop the next generation of wax printing machine, which is predominantly for making jewellery.
00:06:33
Speaker
And ah we we spent three years working with them to produce the um the the product. yeah Because of our capability, we can print im waxes that others can't. So we can produce higher quality jewellery that requires less finishing, less waste, and just more intricate jewellery. And that really is a significant value proposition in that market.
00:07:02
Speaker
they launched their products in April 2023. Their competitors then immediately came to us and said, we cannot compete with that quality. We need your printhead.
00:07:13
Speaker
um And over that time, four other OEMs have now adopted our printhead and switched to to out our products. So if you look on the market today, we are now the printhead of choice. I think we have in a We haven't seen the official data, but it's well over 50% market share.
00:07:32
Speaker
And that's it up that's an example of where we've displaced an incumbent, not because we've we're cheaper, not because of anything, but because we can print fluids that enable the end application to be much better than the than the previous.
00:07:47
Speaker
And turning towards automotive, um an interesting application area area is EV batteries. Can you talk through your developments there and your opportunities in that field? EV batteries is really interesting because you've probably all seen EV, the the rise of EV. And battery technology has moved on a a long way. um So there's now the new 800 volt technology charges really quickly.
00:08:11
Speaker
That increased charging um puts the battery through a thermal cycle. um And batteries are in a car and it's vibrating around and they rub against each other.
00:08:22
Speaker
And the insulation layer today is ah is a plastic film that's actually stuck onto the battery. And that plastic film, as it goes through heat cycles, effectively ends up you know cracking. um If there's an air bubble behind it and it heats up, the air bubble can bring the the delaminate the the film. So over a period of time, that there is a failure mode in that coating which could lead to safety concerns.
00:08:50
Speaker
We've been developing dielectric coating which we can print onto the battery. um that replaces the film and it's non-flammable. It it doesn't crack. I mean, it's just a much better and solution.
00:09:05
Speaker
i And again, it's because we can do high viscosity and fluids. And it's really interesting that if you think about looking up to Christmas and if you think about icing your cake, if you have very thin icing sugar and you're trying to put icing round the corner of the cake,
00:09:21
Speaker
Round the corner, if it's really thin and runny, it'll just run off and your icing around the edge will be very will be too thin. If you have really nice thick icing sugar, then you can coat around the corner and you'll get a nice thick piece of icing. That's exactly the same.
00:09:38
Speaker
in the battery the batteries are rectangular and they have lots of edges and being able to print round those edges and maintain a minimum thickness at those edges really comes down to how viscous and how thick the the fluid is and so we can actually print and maintain the thickness around those edges in a single pass Whereas the if you're using a lower viscosity fluid, you might have to go over that edge four or five times to achieve the same thickness. So your productivity is much higher.
00:10:13
Speaker
So therefore, the and the high viscosity capability translates into higher productivity for the end user. And therefore we are now the print head of choice.
00:10:26
Speaker
There are about 10 production lines in in the field. Some of the biggest names in um in battery manufacturing now have their first machine that's actually and using our technology.
00:10:43
Speaker
ah and we're waiting to see if that if that technology technology gets adopted broadly then they could roll that out across um all new um production lines which would be really significant i mean the scale of that opportunity is similar to ceramics um so you know ah weve we've got our fingers crossed that uh all of that goes um really well um we can't say anything about the timing of it i mean the Car industry is a notoriously slow industry to adopt new technologies. And we've been doing this now for four or five years.
00:11:19
Speaker
um So everything looks positive. um So, yes, we're optimistic of adoption, but we will wait and we'll keep our fingers crossed.
Collaborations in Automotive and 3D Printing
00:11:28
Speaker
And you could also print directly to the to the car body. Are the dynamics for that industry similar to to the EV batteries or or are they different? interested We started working with a company called Exalta, who are one of the major providers of car paint to the industry. They provide paints for Ford and various companies.
00:11:47
Speaker
major car manufacturers, then de they initially wanted to solve the problem of painting car roofs. And so we were, we put our print heads on the end of a raw robot and we developed jointly ah a version of car paints that we can inkjet print. And you can imagine that car paint is a pretty difficult thing to print. And again, our print heads can do things that no one else and and can.
00:12:12
Speaker
ah So we now, so we started doing that and we successfully were painting car roofs, but actually when you think about, you now have this digital capability, you can print anything.
00:12:23
Speaker
And it was quite soon that Exalta realized actually we could offer the car industry the ability to put graphics onto way onto the car. And again, putting that on a flat surface on the roof is relatively easy, but when you're trying to print on the door or on a pillar that comes down the side of the car on a vertical surface, the ink needs to be really thick in order to print so it doesn't drip.
00:12:50
Speaker
and and And again, that so being able to print on a vertical surface without it dripping is a really key benefit that you can only do with high viscosity thick fluids.
00:13:02
Speaker
And so the thing that really goes through all of these applications is that it's the fluid, the requirement for the fluid to be high viscosity or a high pigment loading.
00:13:14
Speaker
That really drives the adoption of this our technology where we're not competing with other other um companies. So they're not, where we used to be known as a graphics company, but today it's more industrial coating than, than say standard graphics.
00:13:33
Speaker
And then finally, um a bit of departure, I guess, but you're you're also working in a consumer inkjet printer um opportunity, um albeit with a ah partner that's familiar to you in in Flash Forge.
00:13:47
Speaker
Can you talk us through the pipeline there? Yes, so Flashforge, we started working with with them on the wax and project. um And we had in the background some of the engineers sort on a Friday afternoon type project, put some of our smaller print heads into ah into a little XY stage and and and made a little 3D printer. They might know about FDM, which is the predominant, which is like having a fishing reel of cable that's heated and it goes round round and you build up the... But that tends to be single color. It tends to be relatively low resolution.
00:14:22
Speaker
um and But but but there are there are millions of those sold every year. i This will be the world's first full color, high resolution and printer that you will be able to buy ah that will sit on your desk like a desktop and printer.
00:14:42
Speaker
And you'd be able to, with AI, describe something. You know, I would like a ah pink unicorn and, you know, take that and you can print out. You can take a photograph of your dog or some something else and the the AI would then render that 2D image into 3D model and then you can print that.
00:15:03
Speaker
It will be launched in the near future. i And we're very excited about that. We have no idea how successful it will be. It really comes down to to the consumer.
00:15:15
Speaker
i'm ah It could be a complete flop and we don't set they don't sell any. Or it could be the latest, latest greatest things and we're struggling to keep up with them. So we'll we we will wait and see and on that product. But that's quite an exciting opportunity as well.
00:15:31
Speaker
Interesting. So what are the key milestones and lead indicators that we should be looking for to to gauge your progress and your prospects from
Business Growth and Financial Strategies
00:15:39
Speaker
here? Six years ago, ceramics and revenue for replacement of printheads was still quite significant. So right, 30, 40 million pounds worth of... them of revenue that that really dropped to about three million and uh for this year and um uh so we've lost we've lost all that revenue and during that time the new applications that we've talked about and the new launches have actually um replaced that and revenue so internally we feel really pleased about the um
00:16:12
Speaker
about the growth in the new business. But if you're looking from the external perspective, many of the the viewers today will look as look at the revenue over the last five, six years and say, well, what have they been doing?
00:16:23
Speaker
Well, the reality is is that for every million we added on the new business, we kind of lost in in in ceramics. Now that's got to the to the bottom. What we should see is that any further growth will now be visible in the in the top line.
00:16:38
Speaker
So you we should start seeing, particularly within the print head business, top-line growth. um And one of the legacies that we have from the boom in the ceramics world back in 2012-13 is that a huge amount of capacity was put into the business at that time.
00:16:56
Speaker
And all the last decade, that that has been a real burden because we've had to carry that fixed cost i'm As we now see the revenue growing, that ah capacity or the lacing capacity really becomes an asset because we can we can actually deliver more than three times our current revenue from the existing and equipment. So, you know, as a top line grows,
00:17:24
Speaker
which will be the real thing that people should look out for over the next year, a couple of years is really to see how that top line grows, because at that point should start to see the, em that and revenue drop um down to the, to the, to the bottom line. And now turning towards your ah more traditional markets, you've got ceramics and packaging printing.
00:17:44
Speaker
ah What are the prospects for those parts of the business? mean, it's interesting because actually um in ceramics, I mean, for the business that Zara was in, i I think that business is so commoditized, no one's making any money out of it. if i When I talk to you the equipment manufacturers and the tile manufacturers and the ink manufacturers, it's become so commoditized, no one makes any money.
00:18:06
Speaker
ah What we've done is to look at how do we take our unique capabilities and reinvent ourselves in ceramics. So again, high viscosity and i'm high pigment loading.
00:18:21
Speaker
So if you actually put twice as much pigment into the um to to to the ink, i and you increase the viscosity. and What's really interesting is that the ceramic tile is porous, so the ink tends to soak into the tile, and a lot of the pigment goes with it, and you don't see it.
00:18:39
Speaker
So if you make the fluid high viscosity, and it doesn't soak in, more of the pigment stays on the surface, so you need less ink for the same colour. ah And that that gives you the ability to reduce the cost without actually reducing the amount of um profit for the ink manufacturer.
00:19:01
Speaker
And that's a really important and thing. So what we're finding now is that high viscosity fluids with high pigment loading in ceramics are offering differentiation in the market. So um over the coming years, I don't ever see ceramics getting guessing back to the heyday of 20, but I do see other applications in ceramics where the high viscosity capability we have does open up new opportunities.
00:19:28
Speaker
i And I think the same in packaging because that absorption factor is the same in corrugated boards. So if you print on a cor piece of corrugated board with a water-based ink, it soaks in the pigment goes with it and it looks really washed out.
00:19:45
Speaker
High viscosity fluids sit on the surface. You can see the colour and you can achieve the same colour with less than half of the ink.
00:19:56
Speaker
And that is, ah and again, that's a real value proposition that's not to do with the resolution or the price of the print. It's it's down to that ink just delivers a better performance than a low viscosity ink.
00:20:09
Speaker
And so that's, so in each of the markets that we are targeting, we really focus on why does that fluid deliver more value? Because as soon as we find that,
00:20:21
Speaker
then we have a value proposition in that market. If we can't find that, then we tend to leave it because we're not going to compete against the the big guys. And then finally, turning towards the financials, um margins at t Zara have been quite volatile historically. You've recorded 20% plus margins and in in the past, but equally been loss-making.
00:20:42
Speaker
What should we think about in terms of your revenue profile, the the resilience of the business, and also the margins going forward? I mean, it sounds oversimplified, but i volume fixes most of the and the challenges. We've had a huge fixed cost in the factory, um and we've had to really cut operating costs. i to try keep the the company profitable over that time.
00:21:11
Speaker
um And as the revenue is there has really been flat for the reasons I talked about a few minutes ago, the profit has kind of done the the same thing. What really needs to happen over the coming years is that these new applications come through,
00:21:26
Speaker
we will see the revenue grow as the revenue grows, that the amortization of that fixed cost is over a bigger um a number of um print heads.
00:21:41
Speaker
Therefore the margin will increase. And so therefore the profity profitability will increase. So I think if you take a ah medium term view,
00:21:52
Speaker
I think that margins will will improve. um at Profitability will um improve. So so to the key, so I think that will happen naturally as just as a function of volume. So really what I think people should be looking out for is when are these new applications coming through?
00:22:11
Speaker
When do we start to see top line and and growth? And that every time I've tried to predict and timing, I've been wrong because we don't control the OEMs.
00:22:23
Speaker
and they There are factors which mean that they could suddenly delay six months because of some other thing within their business. So we don't control that. i'm But once we're in, i' we're very sticky.
00:22:39
Speaker
um It's very difficult to get ah somebody to change printheads. It's like going to a car manufacturer and saying, change the engine. um Changing engine in the car is a big deal. Changing printhead is a big deal.
00:22:53
Speaker
So the fact that they've done it for our printhead says a lot about the advantages of our printhead. But once we're in that stickiness um helps us going forward. So, i'm you know, once weve once we've got an application, and we really need to focus on keeping ahead of the competition, keeping... That application, which I think Zara's not done very well in historic ah in times, having been number one in ceramics, then losing that market, I think, through really not focusing on supporting the customers.
00:23:26
Speaker
i am So we we really try to make sure that we that we have a very, very strong reputation for support and partnership with the customers. to win the customer in the first place, but also to kind of keep them and for the long term.
00:23:41
Speaker
and and So, yeah, we you know we feel we feel good about where we are and and and the prospects for the business. John, many thanks for joining me today. Fascinating discussion. Great. Thanks a lot, Dan. Thank you.