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Wellington Drive grows revenue by 36% in 2018 and achieves earnings guidance

Wellington expects to release its fully audited financial statements for the 2018 year on February 27th.

Wellington’s EBITDA guidance for 2018 was in the range of $2m to $3m. EBITDA for 2018 is expected to be in the middle of this range and includes a benefit of around $0.3 million due to adoption of NZ IFRS16 accounting requirements for leases.

The company is still finalising accounting for the July 2018 acquisition of iProximity and accordingly is not in a position yet to provide guidance for EBIT and net profit for 2018. This will be completed for the audited results release.

Wellington continued to generate significant revenue growth in FY2018, underpinned by the Connect SCS and ECR2 products. Revenue for Q4 2018 was US$11.9m compared to US$8.3m for the same period last year; an increase of 43%. US$ revenue for the 2018 year was US$41.8m compared to US$31.2m last year, an increase of 34%. In NZD terms revenue for 2018 was $58.7m compared to $43.3m last year, an increase of 36%.

EC motor volumes increased 24% and Wellington Connect SCS volumes increased 62% as new and existing customers increased their adoption of both.

Revenue from the USA and Canada increased 61%. Latin America revenue increased 34%. APAC and EMEA revenue also grew at 16% and 8% respectively, albeit from a lower base. The significant growth in the USA and Canada was driven by the continued success of the ECR2 motor with a major cooling equipment customer. The business in Latin America benefited from new Wellington Connect IoT customers in Central and South America, and higher demand in its Brazilian business as a key motor customer experienced higher than normal demand.

Revenue performance from the IoT business, comprising Connect SCS hardware, data & reporting services and iProximity software was US$13.0m. This was a US$5.1m increase over 2017. Upfront invoicing of IoT data services revenue included in this result increased 78% from US$0.7m to US$1.3m.

Wellington’s earnings guidance for the 2018 year was for H2 revenue to be consistent with the first half – actual revenue for H1 was $28.0m and for H2 was $30.7m, a 9% improvement.

Gross margin for 2018 was 24.3% compared to 23.9% in 2017. Product costs in 2018 were impacted by global supply constraints for electronic components, with Wellington incurring a $0.5m additional cost to secure components to maintain the ability to supply customers. Whilst there are encouraging signs that global supply constraints and component cost pressures are easing somewhat, the company is seeing increasing competitive price pressure on some of its EC Motor products.

CEO Greg Allen commented, “Q4 is the highest revenue quarter we have had in the company’s history, and December the highest ever month. We are pleased with the continuation of Wellington’s growth and encouraged by the momentum in our IoT solutions business. The combination of Wellington’s Connect SCS hardware, data services and iProximity digital marketing solutions is providing the company with an IoT platform that is opening strategic options with new markets, customers, partners and channels”.

2019 Outlook:

Wellington will provide guidance for the 2019 year in its Annual Report, due out at the end of March. The company expects 2019 to be a year of further profit expansion with EBITDA higher than 2018 and with accelerating momentum in its IoT business. However, there are reasons to remain cautious about the macroeconomic back-drop for 2019, highlighted by continued global trade headwinds and recent downgrades by large global tech companies. Additionally, some growth rate and margin pressure is likely in the motor market as a result of competitive price pressures, partly offset by some abatement of component supply constraints that affected production costs in 2018. Wellington expects to expand its IoT platform, including developing new IoT hardware and software products, and will also continue development of its successful ECR2 motor range. Wellington will continue the strategy of revenue diversification by broadening IoT growth beyond its historical beverage market focus.

Note – EBITDA (i.e. Earnings before interest, taxation, depreciation, amortisation and impairment) is a non-GAAP earnings figure that equity analysts tend to focus on for comparable company performance analysis. Wellington considers that it is a useful financial indicator because it avoids the distortions caused by differences in amortisation and impairment policies.