RTX Growth Continues in Q3 2021/22
To Nasdaq Copenhagen A/S and the press
Nørresundby, Denmark, 30 August 2022
Announcement no. 15/2022
Interim report for Q3 and 9M 2021/22
(the period 01.10.2021 - 30.06.2022)
“The revenue growth of RTX continued in the third quarter of 2021/22 with growth of more than 36%. For the first nine months of 2021/22 we have grown our revenue by more than 57% over last year. The strong demand confirms the belief we have in the growth opportunities from our large framework agreements. The challenging supply situation with component scarcity in the electronics industry continued in the quarter but it was stabilized and did not worsen. However, the global component scarcity did impact gross margin both via higher component costs due to the need to secure components in the spot buy market and through the effect on the realized product mix. Based on the strong demand situation, we updated our outlook for the financial year on 7 July with an upgrade of our revenue outlook and a specification of our earnings outlook”
Peter Røpke, CEO
HIGHLIGHTS Q3 2021/22
- Net revenue increased by 36.6% to DKK 164.8 million in Q3 2021/22 (Q3 2020/21: DKK 120.6 million) driven by continued demand improvements in the Enterprise segment. Component scarcity in the global electronics industry and other supply challenges continue to impact revenue. Such supply challenges have postponed deliveries and revenue of approximately DKK 90 million into future periods. This is roughly the same amount postponed from Q2 into Q3 and therefore the net effect on revenue in Q3 has been limited. Going forward, RTX will only comment on the development in postponed deliveries and revenue if it has a significant impact on the period being reported on.
- Enterprise segment: Revenue increased by 60.0% to DKK 131.3 million. The growth is seen broadly in the segment especially for the large framework agreement customers.
- ProAudio segment: Revenue decreased by 12.6% to DKK 22.6 million. While recurring revenue from product sales and royalty are on the same level as last year, revenue from engineering services decreased compared to last year in line with the strategy to focus on creating recurring revenue. Supply challenges had a negative impact on revenue in Q3.
- Healthcare segment: Revenue decreased by 14.7% to DKK 10.8 million as the volume distribution over the financial year, as expected, is more even compared to last year which was significantly backloaded
- FX corrected revenue growth was 19.6% as revenue compared to last year was positively impacted by the stronger US dollar.
- Gross profit increased by 18.2% to DKK 71.9 million in Q3 2021/22 (Q3 2020/21: DKK 60.8 million) driven by the revenue growth. The gross margin decreased to 43.7% (Q3 2020/21: 50.4%). Compared to last year, the gross margin is negatively impacted by the revenue mix with a lower share of revenue from engineering services, by the specific product mix realized given shortages on specific components in the quarter as well as by increased component costs compared to last year due to the component scarcity and high prices on components (including in the spot buy market). Increases in sales prices have partly counterbalanced the component price increases. A further negative impact on the gross margin in the quarter has been customer payments to cover extraordinary component costs (meaning that such extraordinary additional component costs are carried by the customers, but at roughly zero margin).
- The strong growth in revenue drove improvements in operating performance with EBITDA increasing by 59.6% to DKK 16.1 million in Q3 2021/22 (Q3 2020/21: DKK 10.1 million) and EBIT increasing by 99.5% to DKK 5.9 million in Q3 2021/22 (Q3 2020/21: DKK 3.0 million).
- Cash flows from operations (CFFO) in Q3 2021/22 amounted to DKK -0.2 million compared to DKK 22.1 million in Q3 2020/21. Compared to last year, CFFO was positively impacted by the increased earnings and negatively impacted by the working capital development with higher inventories (both finished goods in transit towards customers and component buffer stocks) and higher receivables.
SUMMARY 9M 2021/22
- Driven by a strong improvement in demand, net revenue increased by 57.3% to DKK 425.4 million in 9M 2021/22 (9M 2020/21: DKK 270.4 million). The growth could have been even stronger had it not been for the global component scarcity in the electronics industry and other supply chain impediments which has had an adverse impact on deliveries and revenue especially in Q1 and Q2 of 2021/22. All segments have contributed to the strong growth. Enterprise segment revenue increased by 73.2% to DKK 305.1 million in 9M 2021/22, while ProAudio segment revenue increased by 25.5% to DKK 83.4 million and Healthcare segment revenue increased by 32.8% to DKK 37.0 million. FX corrected revenue growth of RTX in 9M 2021/22 was 44.2% as revenue compared to last year was positively impacted by the stronger US dollar.
- Gross profit amounted to DKK 199.3 million in 9M 2021/22 – an increase of 41.2% (9M 2020/21: DKK 141.1 million) due to the revenue growth. The gross margin reached 46.8% in the first nine months (9M 2020/21: 52.2%). Compared to last year, the gross margin is impacted by a lower share of revenue from engineering services and by increases in component costs (whether paid for by customers or by RTX), partly counterbalanced by sales price increases. The stronger revenue has driven significantly higher earnings in 9M 2021/22 with EBITDA of DKK 32.8 million (9M 2020/21: DKK -12.7 million) and EBIT of DKK 2.9 million (9M 2020/21: DKK -33.6 million)
- Cash flow from operations (CFFO) amounted to DKK 20.8 million in 9M 2021/22 (9M 2020/21: DKK 32.0 million).
OUTLOOK FOR 2021/22
- On 7 July 2022, RTX updated the outlook for the financial year (see company announcement 13/2022). RTX now expects revenue of DKK 550 to 610 million, EBITDA of DKK 50 to 70 million and EBIT of DKK 10 to 30 million for 2021/22.
- On 7 July 2022, the revenue outlook was upgraded to DKK 550 to 610 million (from previously above DKK 520 million). The increase in expected revenue reflects the strong demand situation and the relatively wide interval for the expected revenue reflects the continued significant uncertainty on the global electronics supply markets from component shortages and other supply challenges. So, while the order book for 2021/22 is very strong and at a record high level, the global component scarcity – especially related to semiconductors and other electronic components – and the supply chain disruptions from temporary lockdowns in Asia and the global logistic challenges continue to create some uncertainty for the financial year and therefore for the outlook for 2021/22.
- The expected EBITDA was specified from previously above DKK 50 million to now DKK 50 to 70 million and the expected EBIT from previously above DKK 10 million to now DKK 10 to 30 million. The adjustments in the expected earnings levels are driven by the expected revenue and gross margin levels where revenue is higher but where the gross margin is negatively impacted by the product mix expected to be realized given the component shortages and by the need to secure components in the spot buy market and through other channels.
- The actual performance in 2021/22 will now therefore primarily depend on the supply situation towards the end of the financial year. Determinants of the actual supply situation towards the end of the year are factors such as component deliveries, lock-downs affecting production, shipping and logistic impediments etc.
- For the list of assumptions behind the outlook, refer to the annual report for 2020/21 (pages 22-23) and to company announcement 13/2022.
PETER THOSTRUP PETER RØPKE
Chair President and CEO
Investor and analyst conference call
On Wednesday, 31 August 2022 at 9.00 am CET, RTX will hold a conference call for investors and analysts hosted by Danske Bank. In this conference call, the Company’s management will comment on the interim report for the third quarter and the first nine months of the financial year 2021/22.
To register for the conference call, please e-mail [email protected].
Enquiries and further information:
CEO Peter Røpke, tel +45 96 32 23 00
CFO Morten Axel Petersen, tel +45 96 32 23 00
RTX’s homepage: www.rtx.dk