Industrial Internet of Things specialist Telit Communications (LON:TCM) has been hit by delayed US certifications for long term evolution (LTE) wireless communication products.
In its results statement for the first half of 2017, the company noted that although revenues were up 6% year-on-year, they would have been higher still but for a number of factors, including the aforementioned certification delays.
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The certifications are expected to come through in the current quarter and should provide a fillip to revenues in 2018 and beyond.
The group issued a wide guidance range of US$400mln to US$430mln for full-year revenues, reflecting the timing of certifications for the LTE CAT-1 VoLTE product and a handful of large scale deployments, all of which could be deployed slower than planned.
Telit said any delayed revenues expected in the second half of the year would come through in 2018.
The group expects adjusted underlying earnings (EBITDA) for 2017 to be between US$47 million and US$60 million (2016: $54.4 million), with the wide guidance range reflecting the possible results of the revenue range.
Telit expects that operating expenditure for the second half of the current year will be broadly in-line with the first half.
Cash generation this year has been affected by the delays referred to earlier and against this backdrop the board has decided not to recommend payment of an interim dividend this year; last year it declared an interim dividend of 2.5 cents.
Revenue in the first six months of 2017 rose to US$177.6mln from US$166.1mln the year before, with Internet of Things (IoT) services revenue up 25.5% to US$17.2mln from US$13.7mln.
The company said it received its purchase order from Tesla for its Model 3 cars, and this source of revenue is expected to become more significant in the future.
Adjusted underlying earnings (EBITDA) fell to US$14.7mln from US$21.4mln at the halfway stage of last year, reflecting increased investment in two recently acquired businesses; this level of investment is expected to reduce from the second half of this year onwards.
The loss before tax was US$6.7mln, versus a profit the previous year of US$4.7mln.
Net operating cash flow before the movement in working capital eased to US$14.0mln from US$21.0mln.
Net debt at the end of June stood at US$9.3mln, down from US$17.7mln at the end of 2016.
"Our revenue growth always tends to be H2 [second half] biased but in the current year our H1 revenues were also held back by a number of factors, including delayed US certifications for LTE products. These certifications - which are expected to be obtained in Q3 this year - in addition to several other initiatives are expected to be strong growth drivers for H2, and even more so into 2018 and beyond,” said Oozi Cats, group chief executive of Telit.
"Our IoT Services business unit, with its recurring revenue business model, is continuing to gain real momentum. Its growth rate continues to be strong - with revenues up over 25% - as increasingly large industrial organisations seek integrated end-to-end solutions to meet their IoT requirements,” Cats added.
"Our ability to provide integrated end-to-end IoT solutions for corporates and enterprises - including our IoT portal, global SIM cards with custom data plan, our IoT modules, and our factory solutions platform together with our IoT know-how is gaining strong traction and recognition by customers and partners. Two recently announced partners are OT-Morpho and Cisco, joining existing partners SAP and Tech Mahindra, as well as many others,” he continued, adding that the company remains confident of a strong performance in the second half of this year.
Shares in Telit were battered in afternoon trading, slumping 38% to 159p.