Bocholt, November 25th, 2021: Gigaset AG (ISIN: DE0005156004), an internationally operating company in the area of communications technology, today published its report for the third quarter and first nine months of 2021. In the first nine months of 2021, Gigaset increased its revenue by 15.3% overall and achieved a positive EBITDA. Although the company posted a drop in revenue of 9.7% in the third quarter compared with the prior-year period, due primarily to material bottlenecks caused by the pandemic, it did at the same time record a significant improvement in EBITDA of 36.7%.
Revenue in the third quarter reached EUR 52.0 million – after being EUR 57.6 million in the same period of the prior year. This was due mainly to supply bottlenecks as a result of the continuing coronavirus pandemic. EBITDA nevertheless rose to EUR 6.8 million (Q3 2020: EUR 5.0 million). Earnings before interest and taxes (EBIT) more than doubled at EUR 3.3 million (Q3 2020: EUR 1.4 million) to round off the best quarterly results of the year so far. Revenue in the first nine months of 2021 climbed to EUR 153.9 million (9M 2020: EUR 133.5 million). At minus EUR 11 million, earnings before interest, taxes, depreciation and amortization (EBITDA) in the first nine months were also well above that of the same period of the prior year (9M 2020: minus EUR 3.0 million).
“The company’s order situation continues to be good,” explains Thomas Schuchardt, CFO at Gigaset AG, “over the year to date we have seen growth in revenue and earnings. That makes the decline in revenue in the third quarter all the more annoying. Due to the coronavirus pandemic, many companies worldwide are currently struggling with delivery problems – Gigaset is also affected. As a result of these material bottlenecks, especially in the area of semiconductors, we were unfortunately forced to adjust our forecast for the current fiscal year. We must also continue to face these challenges since the bottlenecks are expected to last into next year. Development in business with smartphones and in the Professional segment is therefore all the more pleasing in our view. On the other hand, the recent above-average growth in the demand for fixed-line telephony is gradually returning to normal. Under the given circumstances, we remain optimistic for the near future. We continue to see good opportunities for further growth through the rise in digitalization.”
Digitalization offers growth opportunities
With regard to digitalization, Germany is lagging far behind compared to other countries, also in Europe. Last year, the coronavirus crisis provided an unexpectedly strong boost in this area that is still continuing today. Modern ways of working, such as from home and remote working, have become indispensable in the working world, and require a large-scale adjustment of the IT and telecommunications structures – not just in the business environment, but also at home. Gigaset is ideally equipped to accompany and benefit from these developments.
The demand boom in the Phones segment, triggered by the coronavirus crisis, is gradually subsiding again. The high demand for fixed-line phones for working from home led to a significant increase in revenue at the start of the crisis, especially in online business. Gigaset expects a downward trend in the global market to experience in the long term, and that the price level will continue to drop. The reasons for this are a saturated market, strong competition, and an ever growing number of alternative communication technologies.
Growth in the smartphone market has slowed down in the past few years. By contrast, Gigaset was able to significantly increase its share of smartphones sold in the B2B segment. According to Gigaset, that is due to business customers opting for end-to-end solutions for their employees in the context of remote working. That’s exactly what Gigaset offers – as the only provider of fixed-network phones and smartphones for B2C and B2B from a single source.
In the foreseeable future, Gigaset expects the trend in sales from smart home applications to be more reserved than originally expected. Only the convenience and entertainment segments benefited from the increased demand as a result of coronavirus, because people spent more time at home due to restricted mobility. Gigaset nevertheless continues to aim to win more market share with its four application fields of security, energy, convenience and help for people in need of care.
According to Gigaset, IP- and cloud-based solutions will increasingly shape the the field of business telephony and, especially in Europe, continue to squeeze out traditional transmission technology. This will not, however, affect the hardware required for such calls. As a manufacturer in the B2B field with close links to cloud partners, Gigaset will benefit from this.
Performance by segments
Revenue in the Phones, Smartphones and Smart Home segments, which focus predominantly on private customers, amounted to EUR 113.2 million in the first nine months of 2021 – an improvement of 7.1% compared with the prior-year period (9M 2020: EUR 106.4 million). Performance in detail:
Business in the Phones segment is slowly returning to normal after the unusual increase in revenue due to coronavirus, with revenue in the first nine months of 2021 down slightly year-on-year by 0.7% to EUR 99.9 million (9M 2020: EUR 100.6 million). In the third quarter, the decline in revenue, also mainly due to material bottlenecks, of minus 32.5% to EUR 29.7 million was more pronounced (Q3 2020: EUR 44.0 million).
In the Smartphones segment, the positive revenue trend also continued in the third quarter, driven primarily by the launch of new models. For the first nine months of 2021, revenue from smartphones tripled to EUR 12.2 million (9M 2020: EUR 4.0 million). In the three-month period that was a plus of 8.1% with quarterly revenue of EUR 4.0 million after EUR 3.7 million in the third quarter of 2020.
In the first nine months, sales in the Smart Home segment fell by almost 40% to EUR 1.1 million - compared to EUR 1.8 million in the same period of the previous year. In the third quarter, the decline was smaller at -25.0% to EUR 0.3 million (Q3 2020: EUR 0.4 million). The main reasons for the decline compared to the previous year are a new, disproportionately positive partnership from 2020, which improved the result in the previous year, and a generally slower development of the smart home market than assumed by market researchers.
In the Professional segment, which focuses on business customers, the revenue trend has continued to recover. Catch-up effects due to projects and orders deferred projects by customers as a result of coronavirus stimulated sales here, with revenue in this segment in the first nine months of the year climbing to EUR 40.7 million (9M 2020: EUR 27.1 million) – a plus of 50.2%. The third quarter played a major part in this trend: Revenue compared with the prior year even went up by 89.5% to EUR 18.0 million (Q3 2020: EUR 9.5 million).
“These nine-month figures make us optimistic despite the upheavals that also unfortunately continue to accompany the ongoing coronavirus crisis,” says Klaus Weßing, CEO of Gigaset AG. “They clearly show that we have developed the right strategy with a strong focus on digitalization, and taken the right decisions and measures to come through the crisis. Even though the actual end of the coronavirus pandemic and all its consequences and ripple effects is still uncertain, we believe that Gigaset is well prepared for further developments. We want to benefit from the rise in digitalization through continuous investments in innovative products, and successfully compete on the market through new, long-term cooperation with strong partners.”
Explanations on the outlook for 2021
The ongoing fiscal year continues to present opportunities and risks. How 2021 will develop in general and the recovery of the economy in particular is still unclear. The development not only depends on the further progress of the coronavirus pandemic, but also primarily on the related recent supply bottlenecks for key production goods. They have already significantly slowed down the economic growth originally forecast for 2021. Reputable economic research institutes therefore predict that clear economic recovery will not be achieved until next year.
For 2021, Gigaset also believes that there will still be great uncertainty as regards the medium- and long-term effects of the pandemic. Gigaset also continues to see itself significantly dependent on external factors beyond its control, in other words, decisions by governments to impose lockdowns or close businesses and borders, as well as the duration and further evolution of the pandemic itself.
The greatest uncertainty continues to be in the area of material availability. It may not be possible to constantly ensure full utilization of production capacities as a result of existing shortages (such as for chipsets) on the procurement market. As far as semiconductors are concerned, there is currently no clear picture for the future. Gigaset has to face this uncertainty in material procurement – just like many other companies. The company’s long-standing and established business relationships with partners will be an advantage here.
Updated general statement by the Executive Board for 2021
On the basis of the latest information on the further course of business, the Executive Board concluded on November 22, 2021 that the existing company forecast must be adjusted. This was communicated to the capital market in the form of an ad-hoc announcement and an accompanying press release.
The company previously expected a slight increase in revenue compared with the prior year (EUR 214.2 million). Revenue of at least EUR 210 million is now expected, although achieving the original forecast figure still remains possible. The actual revenue to be achieved depends largely on the current and future ability of the company’s upstream suppliers to deliver, especially in the area of semiconductors.
- The expected positive free cash flow at the pre-coronavirus level (2019: EUR 1.2 million) is now expected to be between - EUR 20 and - EUR 5 million.
- With regard to EBITDA, a slight increase compared with the prior year (EUR 1.9 million) is no longer expected, but rather a significant increase of at least EUR 7.5 million.