Kontron delivers solid Q3, full-year guidance reduced

• Order intake € 111.2 million, minus 17.6 % yoy due to base effects, but 11.1 % above 2Q15
• Order backlog € 320,7 million, down 1.5 % yoy
• Revenues € 113.4 million, plus 4.4 % yoy due to currency gains
• Gross margin at 26.7 %, highlighting that cost savings and efficiency measures are effective
• Adjusted EBIT margin at 4.5 %
• FY revenue guidance reduced to € 460 million to € 470 million, gross margin expected above planned 25 %, adjusted EBIT margin expected slightly below the announced 3 % to 5 % corridor

Augsburg, Germany, October 29, 2015 – Kontron, a leading global provider of Embedded Computer Technology (ECT), has published its results for the third quarter of 2015. Performance improved significantly during the quarter, both relative to the second quarter of the year as well as the same quarter last year. However, as a result of unexpected customer restraint, primarily in the transportation and defense segments, it has now become clear that the full-year guidance given at the beginning of 2015 is no longer attainable, in spite of solid numbers delivered by all other business segments throughout the year. As a result, management has decided to reduce its full-year revenue guidance to € 460 million to € 470 million, from previously € 490 million to € 510 million. The adjusted EBIT margin is expected to be slightly below the original forecast of between 3 % and 5 % but the gross margin is still expected to come in at above 25 %.

“The first half of 2015 was a tough period for us, but now we have delivered a solid quarter again”, says Rolf Schwirz, Kontron AG’s CEO. “The results for the third quarter, especially in Communication, and the positive development in all business segments apart from transportation and defense show that we have identified problem areas, and are dealing with them successfully. And we are expecting a strong fourth quarter, too. Having had to reduce our targets for the year for the first time since 2012, we are now focused on doing everything we can to finish 2015 on a high note.”

Group results

Group order intake came in at € 111.2 million, 17.6 % below the comparative figure for the same quarter of last year. However, the decrease is a result of a base effect, with large framework agreements signed during the third quarter 2014. Relative to the second quarter of this year, order intake has increased by 11.1 %. This leaves the order backlog at € 320.7 million, just below the comparative figure for last year. Revenues for the quarter amounted to € 113.4 million, 4.4 % higher than last year, on account of favorable exchange rate effects.

As a result, but also owing to effective cost-saving and efficiency measures subsumed under the ‘New Kontron’ program, profitability improved significantly both against the previous quarter and the same quarter last year: the company’s gross profit margin came to 26.7 %, the EBIT margin adjusted for restructuring costs rose to 4.5 %. In absolute terms, the EBIT adjusted for restructuring costs amounted to € 5.1 million and would have been more than € 10 million had the strong US dollar not had a significantly detrimental effect on Kontron’s US cost base.

Guidance reduced mainly due to Transportation and Defense

The business unit Industrials was once again the strongest performer in the Group, growing revenues at a rate of 12.2 % yoy to € 54.3 million. Strong demand could be observed primarily in Medical and Industrial Automation, but much of the growth dynamic was also a direct result of increasing indirect sales, one of the focus areas of the New Kontron program. The strength in this business was achieved in spite of continued weakness in Infotainment, mainly caused by weaker customer demand in the US gambling business.

Notably, the business unit Communication registered an order intake during the quarter of € 40.3 million, which represents an increase of 57.4 % compared with the same period of last year.

Revenues in the business unit ATD (Avionics / Transportation / Defense) retreated by 9.1 % yoy to € 32.1 million, mainly due to unexpected customer restraint, primarily in the transportation and defense segments, where a number of orders were deferred to fiscal year 2016.

As a result, guidance for the full-year 2015 was reduced as detailed above. Moreover, a new guidance for 2016 will be communicated at the FY results presentation on March 17, 2016.  

Key figures for the third quarter 2015

Transformation into Hardware/Software solutions provider on track

Kontron intends to transform itself into a hardware/software provider in order to exploit fully the growth potential of the Internet of Things. The global trend of connecting devices, which currently operate autonomously, to the internet, offers enormous growth and profit potential, which the company aims to exploit thanks to its excellent positioning in the ECT market.

For further information:
Alexandra Habekost
Kontron AG
Tel: +49 (0) 821 4086 114
Alexandra.Habekost@kontron.com