Strong Growth For RTX In 2021/22
Nørresundby, 29 November 2022Announcement no. 17/2022
Annual report
2021/22(the
period 1 October 2021 – 30 September 2022)
Demand increased strongly in 2021/22 and led to record high
revenue. Component and supply chain challenges impacted revenue and
gross margin throughout the year, but there were signs of component
availability improving towards the end of the financial year. RTX
expects further growth for 2022/23.
FINANCIAL HIGHLIGHTS
FOR
2021/22In
2021/22, RTX exceeded the original expectations for the year. The
outlook for the year was updated twice during the year and RTX met
the outlook for the year as finally updated on 19 September 2022.
Demand from RTX’s customers has been strong in 2021/22 while supply
challenges – especially component scarcity in the global
electronics industry – has impacted the year negatively. However,
towards the end of the financial year there are signs that the
component scarcity begins to improve.
- Revenue reached
DKK 663 million, an increase of 45% from DKK 457 million.
- EBITDA reached
DKK 85 million, an increase of 129% from DKK 37 million.
- EBIT reached DKK
46 million, an increase of 653% from DKK 6 million.
- EPS reached DKK
4.2 per share, up from 0.4 DKK per share.
- Cash flow from
operations (CFFO) were 0 in 2021/22 due to higher receivables and
inventory and RTX has a net cash position of DKK 74 million at
year-end 2021/22.
CEO Peter Røpke in a comment to the annual
report:“I am pleased that RTX returned to our long-term
growth trajectory in 2021/22 and that we achieved our highest
single year revenue ever. When I look ahead, I see many
macroeconomic and geopolitical challenges and uncertainties. But I
firmly believe that RTX is strongly positioned for further growth.
Our business model and strategy for generating recurring revenue
from the partnerships with our customers who are global leaders in
their respective industries are strong foundations for realizing
our future ambitions.”
RETURNING TO OUR GROWTH TRACKRTX experienced
very strong demand for our products and services in 2021/22. The
preceding year, 2020/21, was impacted demand-wise by COVID-19,
however demand started to increase towards the end of that year.
This strong demand development continued and accelerated in 2021/22
and was the basis for RTX exceeding the original revenue
expectations for the year.
Demand increased in all segments. The Enterprise
segment saw very strong growth especially from RTX’s large
framework agreement customers – both long-standing and newer
framework agreement customers. In the ProAudio segment, demand for
RTX’s products and product solutions increased. Also, the
conversion of customers and revenue from hourly-based engineering
services to a recurring revenue product sales business model
continued. Therefore, revenue from engineering services declined in
2021/22 in line with the strategy. RTX Healthcare segment demand
and revenue also increased in 2021/22.
Since the beginning of 2021 a number of
different supply chain challenges have impacted societies and
businesses around the world. RTX has been no exception. A
significant shortage of electronics components – especially
semiconductors – has been seen. Shipping and port capacity issues
as well as electricity scarcity and COVID-19 lockdowns in China
have also impacted global supply chains – and also RTX’s supply
chain.
These supply chain challenges have impacted RTX
in various ways in 2021/22. First, they have led to postponement of
deliveries to customers and thus of revenue from one period into
the next. The situation with postponed deliveries worsened over the
first half of 2021/22 primarily due to worsened component
availability. In the third quarter of 2021/22 the situation
stabilized and towards the end of the financial year the situation
began to improve somewhat with increased component availability.
All in all, the effect on 2021/22 has been negative with a net
postponement of revenue in the year, however, the improvement
towards year-end provides some ground for optimism for 2022/23.
Further, the component scarcity has also
impacted costs and gross margin in 2021/22. The scarcity impacts
which products can be produced and thus the product mix. The tight
component markets have also led to higher component prices on many
components. RTX has been able to partially offset this with higher
sales prices. The difficulty in securing components have also made
it necessary to procure components in the spot buy market and
through other channels at higher costs than list prices.
The strong growth in 2021/22 and the return to
our long-term growth track have confirmed the belief we have in our
strategic direction: We deploy our wireless capabilities to create
recurring revenue as an ODM/OEM supplier via long-term framework
agreements with our customers in the B2B Enterprise, ProAudio and
Healthcare markets.
Over the past five years we have grown revenues
organically by 9% per year on average despite the challenges of
COVID-19 and global supply chain impediments impacting the last
three of these years. In total, this corresponds to more than 50%
organic growth for the five-year period. Growth in 2021/22 has
especially been fueled by our largest framework agreement customers
and these customers continue to invest into joint product
development activities with us. Together with our own investments
into RTX products and product solutions for our three segments,
these development activities create the basis for further growth
for RTX.
While we are satisfied with the growth in both
revenue and earnings in 2021/22, we have seen the gross margin
decline. Part of this is as planned. As we have moved from our
previous business model which included selling hourly based
engineering services to the current model focusing on generating
recurring revenue from product sales via long-term framework
agreements, the gross margin declines solely for accounting
reasons. The main costs of engineering services are the salaries of
engineers which are part of capacity costs and not part of cost of
goods sold. Another reason for the declining gross margin in
2021/22 is the tight electronics component supply markets where the
costs for securing components have risen significantly. An
important focus area for RTX in the coming years will therefore be
to ensure a normalization of component costs as the supply-demand
balance in the component markets also becomes more normal.
CAPITAL ALLOCATION AND DISTRIBUTIONS TO
SHAREHOLDERSThe guiding principle for the policy on
capital allocation and structure of RTX is to (i) maintain
sufficient financial flexibility to realize RTX’s strategic
objectives including investments into growth opportunities as well
as balance sheet robustness needed for long term framework
agreements and needed to support operations, while at the same time
(ii) ensuring a financial structure maximizing the return for our
shareholders. Thus, any excess capital after the funding of growth
opportunities and after ensuring such robustness should be returned
to shareholders. RTX targets a net liquidity position (total cash
funds plus current securities less any bank debt) of approximately
25-30% of revenues. However, interim deviations to the target cash
level can occur depending on specific growth opportunities or other
operational or strategic considerations.
At the end of 2021/22, the net liquidity
position of RTX corresponds to 11% of revenue and is thus lower
than the target ratio primarily due to increased working capital.
During 2021/22, inventories and receivables have increased to
secure growth and as result of growth. Inventories have helped to
ensure better component availability and have thus helped to secure
the growth in 2021/22 while higher receivables are a result of the
revenue growth. Over the coming financial years, the net liquidity
ratio is expected to be brought back to the target position via the
cash generated by RTX operations.
To proceed with caution, the Board of Directors
will recommend to the Annual General Meeting on 26 January 2023
that no dividends be distributed based on the financial year
2021/22. However, at the Annual General Meeting, the Board of
Directors will seek a new authorization to conduct share buy-backs
when the current authorization expires during January 2023 so that
the Board of Directors can initiate a share buyback program during
2022/23 if the circumstances warrant this.
OUTLOOK FOR
2022/23Revenue
is expected to grow and reach DKK 700-760 million in 2022/23.
EBITDA is expected to be DKK 85-105 million and EBIT is expected to
be DKK 45-65 million in 2022/23.
The outlook is based on a strong order book
going into the year and an expectation of a partial normalization
of the global electronics component shortages seen since 2021. The
main uncertainty for the year will be the impact of macroeconomic
volatility and potential recessions on customer demand and
inventory replenishment. Specifically, the outlook is based on the
following main assumptions:
- While
macroeconomic uncertainty is assumed to be high in the outlook for
2022/23 and also have some impact on RTX, it is not assumed that it
will lead to larger decreases in customer demand 2022/23.
- Improved product
availability compared to 2021/22 with a partial normalization of
the global component shortages and other supply chain challenges
seen in 2021/22.
- RTX growth
mainly driven by product sales and mainly to existing customers.
The revenue mix will therefore shift towards product sales which in
turns impacts gross margin.
- Stable USD/DKK
currency exchange rates in line with the mid-November level.
- No impact on
product availability due to geopolitical upheaval or COVID-19
related lockdowns and no major demand impact from COVID-19
lockdowns.
- No other
material changes in competitive situation, market landscape
etc.
- Component and
logistic costs overall are not assumed to increase as the effects
of inflationary pressures are expected to be neutralized by lower
costs for securing components through spot buys and a price
normalization for certain electronics components.
- Higher capacity
costs are expected due to inflationary pressures and due to
investments into e.g. product management, sourcing, and specialized
R&D capabilities.
For a more thorough description of assumptions
regarding the outlook and other forward-looking statements, please
refer to pages 20-21 of the Annual Report 2021/22.
As the normalization of the supply situation and
thus improved product availability is expected to continue in the
beginning of 2022/23, the revenue and earnings distribution over
2022/23 is not expected to be backloaded as it has been in recent
years.
RTX A/S
PETER
THOSTRUP PETER
RØPKEChair
President & CEO
Investor and analysts
meetingRTX Management is available for meetings with
investors and analysts in relation to the Annual Report. Meetings
can be booked via Danske Bank per e-mail to lomo@danskebank.dk.
Enquiries and further
information: Overleaf: Summary financial performance
2021/22
The Annual Report 2021/22 can be found via:
https://www.rtx.dk/en/investors/downloads/financial-reports/
CEO Peter Røpke, tel +45 96 32 23 00
RTX’s homepage: www.rtx.dk
FINANCIAL PERFORMANCE
2021/22The
RTX Group revenue increased by 45% and reached DKK 663 million in
2021/22, (2020/21: DKK 457 million). The post-pandemic
normalization of demand continued in 2021/22 and the order book
developed stronger than originally expected. Revenue was negatively
impacted by the global electronics component shortage and supply
chain impediments affecting the global flow of goods. However, the
situation began to improve towards the end of the financial year.
The US dollar strengthened over 2021/22 and contributed to the
growth – FX corrected growth was 30%.
The revenue realized in 2021/22 exceeded the
original expectations and the revenue outlook was therefore
upgraded twice during 2021/22. A strong demand situation and order
book especially in the Enterprise segment were key reasons behind
the higher than expected revenue. Towards the end of the financial
year, a stronger than expected delivery performance driven by a
beginning improvement in the situation with component scarcity also
contributed to the revenue realized.
In the beginning of the year, the supply
situation with component scarcity worsened which caused increases
in postponed revenue from one quarter into the next. As mentioned
earlier, the situation improved later in the financial year. All in
all, revenue of approx. DKK 65 million was postponed from 2021/22
into 2022/23 – an increase from approx. DKK 45 million postponed
from 2020/21 into 2021/22 and therefore a net negative impact of
approx. DKK 20 million on revenue in 2021/22.
RTX revenue in the Enterprise segment amounted
to DKK 493 million and increased by 60% over last year (2020/21:
DKK 308 million). The significant growth is due to strong demand
for RTX products and solutions in the segment and is especially
driven by strong growth among the large framework agreement
customers. Corrected for the FX impact of the stronger US dollar,
revenue in 2021/22 increased by 44%.
In the ProAudio segment, RTX posted revenue of
DKK 114 million – an increase of 11% (2020/21: DKK 102 million).
Recurring revenue from product sales increased in the segment after
the COVID-19 pandemic while revenue from one-off engineering
services declined in line with the strategy to focus on generating
recurring revenue. Corrected for the stronger US dollar, the two
opposite developments in revenue from product sales and engineering
services combined to yield a close to flat revenue development with
FX corrected revenue growth of -4%.
Healthcare revenue increased by 20% to DKK 56
million in 2021/22 (2020/21: DKK 47 million). The growth is driven
by growth in revenue from the full ODM products and secondarily
from the wireless modules supplied by RTX in the segment. FX
corrected revenue growth was 10%.
Driven by the higher revenue in 2021/22, the
gross profit of RTX increased to DKK 309 million (2020/21: DKK 239
million). The gross margin in 2021/22 was 46.6% compared to 52.3%
in the previous financial year. The gross margin development is
impacted by the revenue mix with a lower share of revenue from
engineering services, which is as planned given the Group’s
strategy to focus on generating recurring revenue from product
sales.
Further, the gross margin is impacted by the
tight component markets in 2021/22 with scarcity on especially
semiconductors but also on other electronics components. These
tight component markets have impacted the realized product mix
given the specific component shortages in the year, and they have
caused higher component costs in the year both via higher general
prices and via higher costs for securing components through e.g.
spot buys. Finally, the tight component markets have also led to
customers paying for the additional costs to secure certain
components, however such additional payments yield approximately
zero margin for RTX.
Capacity costs (staff costs and other external
expenses) amounted to DKK 240 million in 2021/22 – an increase from
DKK 227 million in 2020/21. The average total headcount of 282 in
2021/22 was close to 286 in 2020/21. Employee bonus costs are
higher in 2021/22 than last year where no bonusses were earned due
to the financial performance. External costs for development work
assisted by hired-in consultants (as freelancers or via outsourcing
to e.g. Eastern Europe) increased in 2021/22 to add R&D
capacity in tight recruiting markets. Compared to last year, costs
for utilities increased and there were additional costs for a new
RTX website. Also, costs for travel and fairs began to normalize
somewhat in 2021/22 after COVID-19.
During 2021/22, RTX has continued to invest in
the development of product platforms and solutions for the various
segments – including, for instance, cloud-based deployment and
administration tools, ProAudio product platforms, updated
Enterprise handsets and product development for the Healthcare
segment.
RTX earnings increased substantially in 2021/22
driven by the revenue growth. EBITDA increased by 129% to DKK 85
million (2020/21: DKK 37 million) corresponding to an EBITDA margin
of 12.9% (2020/21: 8.2%). EBIT increased by 653% to DKK 46 million
(2020/21: DKK 6 million) also impacted by the higher depreciation
and amortization as a result of the increased in-house development
of products and product platforms over the latest years.
Cash flow from operations (CFFO) in 2021/22 were
impacted by increased working capital with increased receivables
due to the revenue growth and with significantly increased
inventories. The higher inventories are due to higher finished
goods inventory with more goods in transit towards customers and
due to higher component buffer stocks for key components where
possible due to the tight component markets. The higher earnings
and the higher working capital largely cancelled each other out and
yielded CFFO of DKK 0 million in 2021/22 (2020/21: DKK 45
million).
- RTX CA No 17-2022 - 29.11.22 - Annual Report 2021-22
- RTX-2022-09-30
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