Wellington improved Q3 result and updated 2019 guidance

®
is a registered Trade Mark of Wellington Drive Technologies WT 9263

Wellington Drive Technologies Ltd
P: +64 9 477 4500 E: info@wdtl.com
21 Arrenway Drive, Rosedale, Auckland 0632
PO Box 302-533 North Harbour, Auckland 0751, New Zealand
www.wdtl.com
22 October 2019

Wellington Drive Technologies third quarter update

Wellington announces improved Q3 result and updated 2019 guidance

Wellington Drive Technologies (Wellington), a leading provider of Internet of Things (IoT) solutions and
energy efficient motors to the retail food and beverage industry, today announced its unaudited trading
results for the nine months ending September 2019 and the third quarter 2019 (Q3 2019).

Financial Metrics

Nine months ended 30 September 2019 2018 Change
Revenue
$45.9m $40.7m +13%
Wellington Connect IoT Revenue
$17.5m $12.7m +38%
Wellington ECR Motors
$27.0m $26.6m +1%
ECR2 Motor Revenue
$16.6m $12.1m +41%
Legacy ECR Motor Revenue
$10.4m $14.5m -30%
Gross profit
$11.9m $9.9m +20%
Gross margin %
26.0% 24.4% +1.6pp
EBITDA reported
$3.10m $1.11m +179%
EBITDA pre fair value adjustment
$2.67m $1.11m +140%
EBIT
$1.30m ($0.22m) +$1.52m
Profit (loss) before taxation
$0.58m ($0.77m) +$1.35m

For the nine months ended 30 September 2019, the company delivered 13% revenue growth, with revenue
at $45.9m, compared to $40.7m for the same period last year. Revenue from IoT products was 38%
higher, revenue from the ECR2 motor platform was 41% higher and revenue for legacy motor products
declined consistent with forecast.

Gross margin improved from 24.4% to 26.0% reflecting lower unit costs for Wellington’s ECR2 and SCS
Connect products and the increasing IoT product share.

EBITDA
1
for the nine months was $3.1m versus $1.1m for the same period last year, a result which
included a $0.4m non-cash accounting gain arising from a change in fair value of the contingent
consideration payable for the acquisition of iProximity Pty Limited. EBITDA
1
excluding this gain was $2.7m.
Net profit for the nine months, including the fair value adjustment, was $0.58m, up from a loss of $0.77m
last year.

Revenue for Q3-2019 was $12.6m which is consistent with Q3-2018. Gross margin was 26.7%, an

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increase over the 23.8% recorded last year for the same period. For the quarter Wellington achieved an
EBITDA
1
surplus of $0.7m, which included the $0.4m gain from the iProximity fair value change.

CEO Greg Allen commented “Our Q3 result keeps the company on track to achieve its 2019 guidance.
The third quarter generally sees lower seasonal trading volumes, which was the case, while it was pleasing
that we managed a small EBITDA profit in the quarter (compared to the same quarter in 2018 which was
breakeven). We were particularly satisfied with the year over year margin improvement, as a result of cost
reduction efforts and the continued benefit from the change in mix towards our ECR2 and IoT and data
services products. Our business development efforts are uncovering new opportunities for our iPX digital
marketing platform in food and beverage, which whilst early in nature, are an important indication of the
attractiveness of our marketing services solution.”

Other highlights in the quarter
• New IoT business opportunity in the Americas: The company is in the latter stages of negotiation
for a new IoT business opportunity with a large manufacturer of commercial coolers in the Americas.
Wellington’s confidence at this stage of discussions stems from the fact there is an existing long-
standing commercial relationship with this customers on another line of business. The Wellington
board has approved the commencement of early development work on customer specific applications.
• Data services growth: Services billings for the nine months ended 30 September 2019 were
US$1.4m, an increase on the $1.0m billed for the same period in 2018.
• New Product Progress: The company shipped the first ten proof of concept models of its SCS
Network Cellular IoT Hub to selected beverage customers. This early stage product is already
receiving strong indications of interest.
• Debt repayment: In September, Wellington repaid $1.5m of debt to Onimeg Investments Limited
and negotiated a six-month extension of the remaining $1.0m. Borrowings (excluding lease
obligations) amounted to $3.2m compared to $4.8m at 30 June 2019.
• Cash: Cash on hand at 30 September 2019 was $2.5m compared to $1.8m at 30 June 2019.
• Working capital: Trade receivables were $7.0m lower than 30 June 2019 at $11.1m. Inventory
was $0.8m higher at $5.2m as a result of the falloff in legacy motor business. Trade payables were
$4.0m lower at $12.6m. Operating cashflow for the quarter was strong at $3.3m.
• Contingent consideration due to the vendors of iProximity Pty Limited: In July 2019,
Wellington issued 1,417,344 shares to the vendors of iProximity Pty Limited pursuant to the sale
and purchase agreement and reflecting the achievement of SCS Connect volume targets for 2018.

2019 Outlook
Wellington’s strategy will continue to focus on growing its IoT business with large food and beverage
brands, developing customers for its iProximity digital marketing platform and developing new customers
for its ECR2 and soon to be launched ECR2+ motor.

As a result of growth in new customers won in the previous year, a slightly stronger third quarter and
continued favourable USD/NZD currency rates, Wellington is adjusting its previous EBITDA guidance up
from around $3.0m to now be between $3.0m and $3.5m. Net profit is now expected to be around break-
even, and operating cashflow somewhat higher in comparison to 2018. Guidance excludes any fair value
adjustment that may occur as a result of iProximity contingent consideration.

The company’s total revenue in 2019 is expected to be at similar levels to 2018 due to the decline in legacy
motor volumes offsetting the growth in the new ECR2 and IoT products. Hardware revenue volatility is

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expected to continue during the fourth quarter as customers manage for year-end inventory and first
quarter readiness.

2020 initial outlook
Forecasts for 2020 are in the early stages, with customers typically releasing next year’s demand in late
fourth quarter or early in the New Year. The company’s early planning models suggest revenue growth of
10% is possible, with further improvements in EBITDA, net profit and positive operating cash flow versus
2019. The forecast is based on a NZD/USD exchange rate of $0.65 and assumes the company is
adequately funded to execute its operational and growth plans. Forecasts are based on the general
assumption of stable global macro-economic conditions, including stabilising of current global trade
agreements.
About Wellington Drive Technologies:
Wellington is a leading provider of IoT solutions, cloud-based fleet management platforms, energy-
efficient electronic motors and connected refrigeration control solutions. It serves some of the world’s
leading food and beverage brands and refrigerator manufacturers and offers proximity-based marketing
for Smart Cities to the Australian market. Wellington’s services and products improve sales, decrease
costs and reduce energy consumption. Headquartered in Auckland with a global reach, Wellington is
listed on the New Zealand stock exchange under the ticker symbol NZ:WDT
For further information visit www.wdtl.com


EBITDA
1
(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.


Contact:

Greg Allen Howard Milliner
Chief Executive Officer Chief Financial Officer
Phone +1-778-238-6494 +64 27 587-0455