Nexteq - Densitron drives into automotive with a new EV display win
There’s some welcome news from technology firm Nexteq (AIM: NXQ) this morning with its Densitron business having won a new order from a new customer. The client is said to be a leading supplier of automotive electronics, with the contract for customised display solutions to be deployed within a new electric delivery vehicle application. While no value was put on the deal, it was revealed that production is expected to commence in H2 FY2026, with volumes anticipated to materially increase in the following three years as the customer's product rollout expands.
A key comment from CEO Duncan Faithfull was, “This new customer diversifies our end-market exposure and supports our strategy of growing revenue across a broader range of industrial vertical markets through higher-quality, differentiated technology solutions.”
The business
Nexteq describes itself as a strategic technology solutions provider to customers in selected industrial markets. It operates two distinct brands. First is Quixant, a leading technology provider to the casino gaming and slot machine markets, delivering innovative, game-changing hardware, software and integration solutions. Meanwhile, Densitron is a leader in human-machine interfaces which is at the forefront of display, touch and control system solutions. Founded in 2005 and floating on AIM as Quixant in 2013, the company rebranded to Nexteq in 2023.
February 2025 saw the firm announce a new three-year strategic plan, put together by the then recently appointed senior management team. The plan is targeting revenue of $108 million-$120 million, a gross margin of 35-38%, and a 10-15% EBITDA margin by the end of 2027. This will be delivered through the firm’s understanding of its addressable markets, product innovation, deep customer relationships and careful cost management. Organic growth will be augmented by targeted bolt-on M&A to accelerate scale in key addressable market verticals.
Challenging trading but signs of recovery being seen
Nexteq has had some challenging times over the past few years, with the shares having closed at an all time low of 45p yesterday, below the 2013 IPO price of 46p, before climbing to 50p today on this news (for a market cap of £27.1 million). The company has experienced issues such as industry de-stocking, component supply problems and rising costs for critical memory and storage components.
Results for the year to December 2025 showed revenues up by 4% at $90.1 million but adjusted pre-tax profits fell by 25% to $3.6 million as a result of higher costs, including memory pricing pressures and a $0.7 million development cost write-off. Nevertheless, a dividend of 3.9p per share was proposed reflecting confidence in the long-term prospects of the business and strong cash generation. We note that at the current share price the dividend yield is 7.8%, but given the challenging trading conditions investors must consider whether the firm’s progressive payment policy will be maintained.
Nexteq 5-year share price chart
In May this year Nexteq announced that, as a result of continuing uncertainty in the Quixant business, revenue for FY2026 was expected to be approximately 15% below previous market expectations, with a consequential impact on adjusted profit before tax. Quixant saw trading conditions impacted indirectly by US tariffs, and directly by the higher component costs. These have seen Quixant’s customers increasing prices to their own customers, resulting in the continued softening of demand and orders.
Things have been picking up since then however, with July seeing a couple of positive updates. At the end of the month it was revealed that Densitron received a mass production purchase order for a Pro-AV integrated display solution featuring its Tactila® technology. The order, received from a new customer in the professional audio-visual market, will be used within a next-generation connected control product for professional installation environments. The contract is expected to commence in H2 2026 and the number of units ordered will increase incrementally over a period of four years.
Meanwhile, in a July trading update Nexteq announced that H1 trading (to end-June 2026) was in line with management's revised expectations. Group revenue for the six months is expected to be c.$26.7 million, down from $40.7 million in H1 last year. Densitron is said to have performed well, with revenues up a fraction at c.$13.9 million but Quixant continues to face difficult trading conditions, with revenue anticipated to be c.$12.7 million, down from $26.9 million.
With Quixant's performance also being impacted by lower customer volume requirements from other customers rather than customer losses, the firm believes that volumes can recover through 2027 as market conditions improve. Also, Nexteq continues to focus on diversification in its product range, and across multiple industry verticals. The division is said to be making excellent progress in delivering new wins through its LaunchPad land-based gaming software, and via its unique Human-Machine Interface (HMI) solutions as part of the firm’s 'more than the display' strategy.
Helped by a focus on rigorous cost management, the cash position as at 30th June 2026 was $10.7 million, down from $28.5 million 12 months earlier. The fall primarily reflects strategic investment in critical components to optimise cost and lead times, returns to shareholders of $8.5 million in H1, and lower H1 trading levels. Cash balances are expected to improve in H2, supported by the usual, stronger, second-half revenue weighting and the unwind of strategic inventory positions.
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Disclosures
Nexteq is not a corporate client of Optimo Research Ltd.
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