Hybrid Software Group PLC

Highlights:

• Arrowhead is updating its coverage on Hybrid Software Group with a fair value bracket of EUR 6.9 to EUR 7.3 (share price on May 02, 2023: EUR 4.7) based on blended valuation using Discounted Cash Flow (DCF) method (80% weightage) and relative valuation method (20% weightage).
• HYSG reported revenue of EUR 46.7 mn compared with EUR 48.6 mn in FY 2021, registering a year-on-year (YoY) decline of 3.3%. The decline was primarily attributed to the global shortage of semiconductor chips, because of which one of the company’s subsidiaries, i.e., Meteor Inkjet’s, revenue fell short of projections by more than EUR 4.0 mn during the period. However, Meteor Inkjet was able to redesign a critical circuit board using a chip that was more widely available, but the lost first-half revenue was not fully recovered in 2022.
• Gross profit for FY 2022 amounted to EUR 39.3 mn, compared with EUR 40.1 mn in FY 2021, while the gross profit margin for the entire year stood at 84.2% (FY 2021: 82.5%), primarily due to the higher mix of software-related sales during the year, notably higher margin sales to end users by HYBRID Software. EBITDA for FY 2022 stood at EUR 10.9 mn compared with EUR 12.2 mn in FY 2021. The EBITDA margin for FY 2022 stood at 23% compared with 25% in FY 2021. As a result, operating profit (including other income of c. EUR 3.3 mn) stood at 2.2 mn compared with EUR 4.8 mn in FY 2021. The company reported a net profit of c. EUR 1.3 mn in FY 2022, compared with EUR 4.9 mn in the corresponding period in the previous year.
• The company has further reduced its dependence on a limited number of customers in FY 2022. The 10 largest customers of the group contributed 29.9% of total revenue in FY 2022, which was 42.3% in FY 2021. The 5 largest customers in FY 2022 contributed 24.5% of the company’s revenue, which was 35.1% in FY 2021. The single-largest customer represented 9.8% (FY 2021: 13.9%) of the company’s revenue, with no customer representing more than 10% or more of total revenue compared with 1 customer totaling EUR 6.74 mn in the Printhead Solutions segment in FY 2021.
• Recently, the company acquired the intellectual property of Quadraxis Technology (“Quadraxis”) for EUR 75k, a French company that pioneered technology in 3D scanning and image processing, thereby resulting in strengthening Hybrid Software Group’s offering of 3D and additive manufacturing solutions. The company plans to integrate Quadraxis software into its extensive portfolio, which includes other 3D applications such as iC3D and Met3D.
• The company expects short-term headwinds in most worldwide markets, with a recovery starting in the second half of 2023. It strategically decided to support its end-user customers’ businesses by not increasing its prices for software or maintenance in 2023. Also, the company plans to expand its focus on Software-as-a-Service-based production workflows, allowing customers to significantly reduce IT spending and capital investment. Furthermore, the company is experiencing healthy levels of demand from China as the semiconductor chip shortage receded gradually in FY 2023. As a result, the company also expects a strong rebound in sales from Meteor in 2023.
• ColorLogic GmbH, part of Hybrid Software Group, bagged the 2023 Barbieri Excellence Award for Innovation and Research, which recognizes organizations that have demonstrated excellence in color measurement, customer experience, operational business results, digital print integration, and customer advocacy. The award is a testament to the company’s ongoing commitment to innovation and research in color management. The company recently announced the release of ColorAnt 9, an advanced color measurement and correction tool that could create, analyze and optimize measurement data.
• Xitron, a subsidiary of Hybrid Software Group and the developer of Harlequin-based Navigator Raster Image Processor (RIP) and workflow products for commercial, flexo, screen, digital, and high-speed inkjet printing, has announced its collaboration with Ultimate TechnoGraphics. The collaboration will allow its Ultimate Impostrip® software to be the imposition option incorporated into Xitron’s popular Navigator Workflow.
• Meteor Inkjet, on November 29, 2022, was granted a US patent for “Inkjet nozzle status detection” (US Patent No. 11,504,966) by the US Patent and Trademark Office, which covered a system and method for determining, in real-time, the operational status of a nozzle in a piezoelectric industrial inkjet printhead.

Highlights:

• Hybrid Software Group has amended the date of publication of its annual report and financial statements for the year ending 31 December 2022 to 12 April 2023 due to its UK auditor, KPMG LLP, waiting for the final stage of its accreditation from the Belgian Finance Ministry.
• The company has adjusted its reporting calendar for 2023, with the annual report and accounts for the year ending 31 December 2022 scheduled to be published before the market opens on 12 April 2023.
• The delay in releasing the annual report has also led to a delay of two weeks in the annual general meeting, which the company expects to hold on Wednesday 24 May 2023 in Cambridge, United Kingdom.

Highlights:

• HYBRID Software announces the release of PACKZ and STEPZ 8.5 PDF production editing software
• The functionality supplies professionals with instant views of how graphics, especially spot colors which are critical to brands, are printed under various printing conditions
• PACKZ 8.5 also introduces a powerful new feature called Content XML, allowing print service shops to transform PDF artwork templates into standard XML markup language, with the ability to drive high quality dynamic artwork creation from their ERP or MIS systems

Highlights:

• Hybrid Software Group PLC is pleased to announce that the Prospectus for the January 2021 acquisition of HYBRID Software has been approved for public release and is available at https://www.hybridsoftware.group/investors/hybridsoftware-acquisition
• The 21,074,030 new shares that were issued as consideration for the purchase of HYBRID Software will be listed for trading on Euronext Brussels on 28 December 2022

Highlights:

• HYBRID Software has completed the acquisition of the technology and intellectual property of Quadraxis, a French company which developed pioneering technology in 3D scanning and image processing
• The acquisition strengthens Hybrid Software Group’s offering in 3D and additive manufacturing solutions

Highlights:

• Meteor Inkjet Ltd has been granted a US patent for “Inkjet nozzle status detection” by the United States Patent and Trademark Office
• The patent covers a system and method for determining, in real-time, the operational status of a nozzle in a piezoelectric industrial inkjet printhead

This is an executive summary on UK-based software company Hybrid Software Group from CEO Mike Rottenborn, who will run you through Hybrid Software’s slide deck.

Highlights:

• Arrowhead is updating coverage on Hybrid Software Group with a fair value bracket of EUR 7.1 to EUR 7.5 (share price on November 03, 2022: EUR 4.58) based on blended valuation using Discounted Cash Flow (DCF) method (90% weightage) and relative valuation method (10% weightage)
• Despite the ongoing challenging global macroeconomic scenario, which continues to persist since H1 2022, the company delivered profitable growth in Q3 and 9M 2022
• Revenue for Q3 2022 stood at EUR 11.3 mn in comparison with EUR 10.1 mn in Q3 2021, a growth of 11.9% year-on-year (YoY). Revenue for 9M 2022 stood at EUR 34.7 mn in comparison with EUR 33.9 mn in 9M 2021, a growth of 2.4% YoY. EBITDA for Q3 2022 was at EUR 4.6 mn in comparison with EUR 1.6 mn in Q3 2021, a growth of 187.5% YoY. The EBITDA Margin for Q3 2022 stood at 40.6% as compared with 16.0% in Q3 2021. The increase in EBITDA was due to better optimization of operational performance and the outperformance of the company’s smaller businesses which focus on color management, 3-D visualization and legacy printing devices. Q3 2022 results were favorably impacted by the sale of an unused asset (c. 69,000 IPv4 internet addresses) for EUR 3.3 mn (non-recurring), while the EBITDA for 9M 2022 was at EUR 9.2 mn in comparison with EUR 7.4 mn in 9M 2021, a growth of 24.3% YoY. The EBITDA Margin for 9M 2022 stood at 26.5% as compared with 21.9% in 9M 2021
• Strong Q3 2022 results were marked by consistent performance in the Enterprise Software and Printing Software segments, while revenue of the Printhead Solutions segment recovered to levels in line with Q3 2021 after having experienced a severe downturn in H1 2022 due to a global shortage of electronic components
• Xitron, a subsidiary of Hybrid Software Group and the developer of Harlequin-based Navigator RIP and workflow products for commercial, flexo, screen, digital and high-speed inkjet printing, was selected as Memjet’s exclusive Digital-Front-End Developer for New Print Engine Systems
• ColorLogic GmbH, a subsidiary of Hybrid Software Group, recently announced the release of its latest profiling solution CoPrA 9, a control center for ICC color profiling in any color space offering many new features and improvements of all modules