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Telit Communications PLC Announces Preliminary Results for 2015

Telit Communications PLC Announces Preliminary Results for 2015

Enhanced scale and investment programme drive Adjusted EBITDA up over 30%.

Telit Communications PLC, a global enabler of the Internet of Things (IoT), has published its results for the year ended 31 December 2015.


Financial highlights

  • Revenues up 13.4% to $333.5 million (2014: $294 million)
    • IoT services revenues grew 30% to $26 million (2014: $20 million)
  • Gross margin increased to 39.9% (2014: 39.55%)
  • All operational expenses as percentage of revenues decreased: Gross R&D to 15.4% (2014: 16.6%), Sales and Marketing to 16.6% (2014: 17.1%) and General and Administrative to 8% (2014: 9%)
  • Adjusted EBITDA up 31% to $45.3 million (2014: $34.7 million); as a percentage of revenues, increased to 13.6% (2014: 11.8%)
  • EBIT increased 23.7% to $18.8 million (2014: $15.2 million)
  • Adjusted EBIT increased 23.9% to $30.6 million (2014: $24.7 million)
  • Adjusted profit before tax increased 18.3% to $27.7 million (2014: $23.4 million)
  • Adjusted basic earnings per share up 18% to 21.7 cents (2014: 18.4 cents)

Operational highlights

  • Jump in APAC revenues, up 74% to $70.9 million (2014: $40.8 million)
  • Continued investment in product line for automotive modules
  • Continued investment in Services division
    • IoT Portal tool developed and launched
    • deviceWISE for Factory, enterprise-grade industrial automation business unit, launched

Oozi Cats, Group Chief Executive, commented:

“As well as another year of double-digit growth, we have continued to invest in our IoT Services division, consisting of our connectivity and platform capabilities as well as our IoT Portal tool.”

“After several years of making acquisitions and high R&D investment, we are now in a position to scale the business and benefit from our operational leverage, and as such, we will continue to reduce R&D, Sales and Marketing and G&A costs as a percentage of revenue.”

“As these cost elements reduce as a percentage of revenue and we continue to scale, we also anticipate that the business will start to generate significant free cash flows.”

“The combination of products and services needed to deliver IoT capabilities for global enterprises is now in place. Major corporates around the world are poised to exploit this new development in order to drive down their cost base, improve efficiencies and create new revenue streams.”

“With our global reach and market leading position in modules as well as our connectivity, connectivity management and platform capabilities, we are well positioned to exploit these market developments. We are confident of maintaining our double-digit revenue growth in the current financial year.”

Strategic overview

Telit’s strong competitive positioning and global reach has enabled us to continue to achieve double-digit growth. 2015 was the sixth consecutive year of double-digit revenue growth for Telit and improvements in all profitability parameters.

Group revenue increased by 13.4% to $333.5 million (2014: $294.0 million), driven by organic growth. The automotive business unit saw revenues increase by 60% to $39.6 million (2014: $24.8 million) and the Services division revenues were up 30% to $26 million (2014: $20 million).

Adjusted EBITDA increased by 31% to $45.3 million (2014: $34.7 million), as a percentage of revenues it increased to 13.6% (2014: 11.8%). Adjusted profit before tax increased by 18.4% to $27.7 million (2014: $23.4 million) and adjusted basic earnings per share increased by 18% to 21.7 cents (2014; 18.4 cents).

The Group’s strategy over the last years has been to invest heavily in new product development and our operational infrastructure and we have also acquired a number of businesses to widen and enhance our product and services capabilities, and geographical coverage.

Our hardware strategy focuses on the industrial and automotive segments. Our position in the automotive segment was greatly enhanced by the acquisition of the ATOP business in 2014, which included highly skilled engineering and support staff. ATOP, which is fully integrated into Telit, has become the cornerstone of the automotive division. It has extended the Group’s market reach and is catering to the Connected Car trend, driven by factors such as safety, regulation, and smart infotainment.

In addition to widening our product range, we have also built our Services division, which enables us to provide an IoT end-to-end solution (IoT as a Service), while increasing our recurring revenue base.

The Services division, encompasses the Group’s connectivity and Platform as a Service (PaaS) capabilities. Telit IoT Portal is a unified platform of these services that enables customers to manage their IoT products and services through a single portal, while having a unique set of value add services.

We are also now in a position to scale the business and benefit from the Group’s operational leverage. Gross R&D, Sales and Marketing and General and Administrative costs are all coming down as a percentage of Group revenue and will continue to go down in the coming years.

We plan to continue to reduce gross R&D, Sales and Marketing and G&A costs as a percentage of Group revenue and in the medium term, we are targeting gross R&D as a percentage of Group revenue at 14%, Sales and Marketing at 14% and G&A at 6%.

As these cost elements are reduced as a percentage of revenue and the Group continues to scale, we also anticipate that the business will start to generate significant free cash flows.

The Group has now established a leading position in the IoT industry and intends to continue to focus on its strategy of becoming a single point of reference, with its unique IoT as a Service concept.

Outlook

The outlook for the automotive and Industrial IoT sectors continues to be very encouraging as the technology and connectivity elements needed to deliver end-to-end IoT solutions are now in place.

Our acquisitions over the past few years have materially enhanced our cloud Platform capabilities, which is a key factor in delivering on our strategy to increase our recurring revenues from our IoT Services division.

Telit will continue implementing this strategy, both through its robust organic growth, which is buoyed by the strong growth in the industrial and other IoT verticals, and through selective acquisitions to enhance its products and services offering.

With our market leading position in modules, connectivity, connectivity management and Platform as a Service, we are poised to exploit the numerous opportunities developing across the Group as well as increase our recurring revenues.

The Board is confident of maintaining Telit’s double-digit revenue growth in the current financial year.

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