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Interim Repot January – September 2020

Interim report for the third quarter of 2020

 

Third quarter highlights (iLOQ Oy consolidated)

  • Revenues increased by 38% to MEUR 16.4 (11.9)

  • The Q3 gross margin remained flat at 56% (56%)
  • Adjusted EBITDA increased by 155% to MEUR 3.5 (1.4)
  • Operational Cash flow increased to MEUR 0.3   (-1.7)

Significant events during the quarter

  • Actions in place to protect employee safety
  • Actions to mitigate possible supply chain disruptions from COVID-19 continued successfully
  • Despite COVID-19, the company continued to execute and invest in its long-term growth strategy as planned
  • Strong new opportunities creation continued in Q3 by focusing in digital marketing activities

 

Capnor Weasel Bidco Group, in 1,000 EUR (IFRS)*

Jun-Sep2020 Jun-Sep2019 Change% Jan-Sep 2020 Jan-Sep 2019  Change%

Jan-Dec2019

Revenue 16,411 45,686
Gross profit 9,239 23,710
Gross margin 56 % 52 %
EBITDA 3,672 4,991
EBITDA margin 22 % 11 %
Operational Cash Flow 1,459 2,590
Operational Cash Flow % 40 % 52 %

* No financials available for 2019

iLOQ Oy Consolidated, in 1,000 EUR (IFRS)

Jun-Sep 2020 Jun-Sep 2019 Change % Jan-Sep 2020 Jan-Sep 2019 Change % Jan-Dec 2019
Revenue 16,411 11,856 38 % 45,686 39,229 16 % 61,074
Gross profit 9,238 6,662 39 % 25,091 21,508 17 % 34,076
Gross margin 56 % 56 % 55 % 55 % 56 %
Adjusted EBITDA** 3,532 1,383 155 % 6,848 4,597 49 % 10,488
Adjusted EBITDA margin** 22 % 12 % 15 % 12 % 17 %
Adjusted Operational Cash Flow** 338 -1,669 -120 % 1,401 2,018 -31 % 4,772
Adjusted Operational Cash Flow %** 10 % -121% 20 % 40 % 16 % 45 %

** EBITDA and Operational Cash Flow exclude the impact from transaction related costs in connection with Nordic Capital Fund IX’s acquisition of iLOQ. The costs in 2020 Q3 were MEUR 0 (-0.414) and 2020 YTD September MEUR -0.007 (-0.630).

Management overview of Q3

iLOQ’s new iLOQ S5 product line has been well received in all geographies in which the company operates, which also is beginning to be seen as growing volumes. The digital launch of iLOQ S5 for Euro profile lock cylinders has been a success despite the COVID-19 situation and has received a positive market response. iLOQ announced in October that in a less than a year after its introduction to the market, the 1000th iLOQ S5 system had already been delivered.Organizing face to face meetings with customers continued to be challenging in the third quarter in most of the countries in which iLOQ operates. As meetings have been held digitally there has only been a few projects, which have been postponed due to COVID-19. With the next generation product lines, iLOQ S50 and iLOQ S5, being well received by the customers, management believes that iLOQ is well positioned to further grow its leadership within electromechanical locking systems and continue to drive replacement of mechanical locking systems.To support its leadership within electromechanical locking systems, iLOQ announced to have strengthened its management team with Thomas Thörewik being appointed as iLOQ’s CSO and Timo Pirskanen being appointed as CFO of iLOQ during the third quarter. After the third quarter in November iLOQ announced to have extended its operations to Canada, which will allow iLOQ to introduce the benefits of its battery-free digital locking and mobile access sharing technology to a huge new market.iLOQ continued to successfully mitigate the potential risks of possible supply chain disruptions due to COVID-19 by the company’s sourcing strategy, which distributes purchases and manufacturing across several geographies. Management continued measures to secure delivery capability and to mitigate possible unforeseen supply chain disruptions in the third quarter to be able to meet customer demand. This has resulted in higher inventory levels compared to 2019. iLOQ has continued to actively pursue new opportunities by moving to more digital ways of conducting sales and marketing, in addition to supporting our partner network in these unprecedented times. Management believes that, by being able to keep the organization fully employed and active, iLOQ is well positioned to continue executing its long-term growth strategy also in the fourth quarter of 2020, as well as in the coming years. The company had stable cashflow situation in Q3 and hence did not need to utilize any of the drawn MEUR 10 SSRCF. The MEUR 10 SSRCF, originally drawn in March as a precaution for any unforeseen COVID-19 related issues, was paid back fully in September.

 

Third quarter 2020 (iLOQ Oy Consolidated)

Total revenue grew 38% compared to Q3 2019, driven by strong sales across all regions. The management team believes that, with the launch of the iLOQ S5 product line in Central Europe in Q2 and the decision to not lay off any employees during Q2 and Q3 the company has been able to take market share in Q3 and is well positioned to continue the growth momentum in all regions during Q4 2020.

Gross profit amounted to MEUR 9.2 (6.7), an increase by 39% compared to the same period last year. The gross margin amounted to 56% (56%). The management decision done in Q2 to build own production capability in our Oulu HQ and with that, guarantee the production capability in the case of an unforeseen COVID-19 related production issues contributed negatively to the gross profit development. This negative impact was offset by productivity improvements and the continued ramp up of our dual sourcing strategy.

Adjusted OPEX grew by 8% in Q3 y-o-y to MEUR 5.9 (5.4). The OPEX increase was mainly driven by increased R&D expenses related to the iLOQ S5 launch. The higher R&D OPEX was mostly offset by COVID-19 related impacts e.g. lower traveling, cancelled physical sales events and exhibitions. Q3 2020 Adjusted OPEX did not include any adjustments for items affecting comparability.

Adjusted EBITDA amounted to MEUR 3.5 (1.4), corresponding to 22% (12%) EBITDA margin, an increase of 155% compared to the same period last year.

Adjusted Operational cash flow was MEUR 0.3 (-1.7 ). The increase was mainly caused by the improved profitability. The company is expected to continue to have higher than normal inventories during the COVID-19 pandemic to guarantee our ability to produce and ship iLOQ products to our customers. These higher inventory levels may have a negative impact to the operational cashflow in Q4.

YTD September 2020 (iLOQ Oy Consolidated)

Revenue increased by 16% compared to YTD September 2019, driven by strong sales in the Nordic countries. Despite COVID-19 continuing to have a negative impact during the third quarter in Central and Southern Europe versus the targeted growth levels, the region still had growth of 33% in YTD September 2020 compared to YTD September 2019.

Gross profit amounted to MEUR 25.1 (21.5), an increase by 17% compared to the same period last year. The gross margin amounted to 55% (55%).

Adjusted OPEX grew by 9% in YTD September y-o-y to MEUR 18.6 (17.1). The OPEX increase was mainly driven by increased R&D expenses related to the iLOQ S5 launch. Other contributing factors to the increased OPEX were continued investments in sales and marketing activities.

Adjusted EBITDA amounted to MEUR 6.8 (4.6), corresponding to 15% (12%) EBITDA margin, an increase of 49% compared to the same period last year.

Adjusted Operational cash flow was MEUR 1.4 (2.0). The decrease was mainly caused by the company moving to using IFRS 16 reporting standards in the beginning of 2019. Compared to end of the financial year 2018, this created a MEUR 2.0 increase in liabilities due to the leasing costs now being categorized as liabilities and therefore a positive impact for the 2019 operational cashflow. The higher inventories to mitigate potential unforeseen COVID-19 caused supply chain difficulties also contributed to the decrease in operational cash flow. The company is expected to continue to have higher than normal inventories during the COVID-19 pandemic to guarantee our ability to produce and ship iLOQ products to our customers.

Declaration of the board

We confirm that, to the best of our knowledge, the condensed financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and Finnish Accounting Standards (FAS), and give a true and fair view of the Group’s assets, liabilities, financial position and results of operations for the period. We also confirm, to the best of our knowledge, that the management overview includes a fair review of important events that have occurred during the first half 2020.

Espoo November 23, 2020

Heikki Hiltunen                                Karl Petersson

President and CEO                         Member of the Board

Attachments

Capnor Weasel Bidco Oyj Interim Report January –September 2020 (pdf)