Dialight – Analysis of Half Year 2022 Results: Revenue Up 34% and Profitability Doubled in First 6 Months of 2022

Dialight plc (LSE:DIA) released Half Year 2022 Results last week, showing continued progress in rebuilding revenue and improving profitability.  Dialight announced first half (H1) 2022 revenue of £m 80.8 ($97.8M), compared to H1 2021 revenue of £m 60.2 ($72.9M).  Profitability (“underlying EBIT”) more than doubled compared to the first half of 2021 at £m 3.1 ($3.8M).

“Underlying EBIT” excludes “non-underlying costs” and in Dialight’s H1 2022 results, these excluded costs include expenses from ongoing litigations with former manufacturing partner Sanmina Corporation.  Dialight and Sanmina have been in legal proceedings against each other since December 2019, and Dialight’s 2021 annual report indicated no conclusion was expected before the end of 2022.  Dialight’s claim against Sanmina, with total damages, exceeds £m 190 ($230M);  if Sanmina is successful in their own claims against Dialight, Dailight’s exposure could be up to £m 8.9 ($10.8M).

Dialight operates the business under two segments:  Lighting (LED Industrial Lighting Fixtures & Solutions) and Signals & Components.  The H1 2022 Presentation (link below – see slide 10) gives a performance breakdown by segment.  H1 Revenue is split roughly 70/30 between Lighting and Signals & Components but the two segments contribute nearly the same amount of EBIT to the overall business.  Lighting segment revenue in H1 2022 was £m 57.1 ($69.1M), up +40% over the same H1 period in 2021Strong H1 2022 revenue growth in the Lighting segment is attributed to three regions:  US +38%, EMEA +33%, and Asia +124%.  Lighting’s gross margin was down a couple of percentage points in H1 as the company indicated that price increases and cost reductions implemented in H1 gave only partial offset against the supply chain challenges.

CFO Clive Jennings’ Financial Review section of the presentation noted that working capital was up in H1 2022 with inventory increasing based on supply concerns and inflation in cost of goods.  The company is pursuing targeted inventory reduction along with a target of 1x EBITDA for net debt.

Looking ahead to the second half of 2022, CFO Jennings indicated that Dialight expects similar H2 revenue growth given their substantial order book (H2 revenue in 2021 was £m 71.4 ($86.4M).  2021 Full-year revenue was £m 131.6 ($159.4M) and the company returned to profitability in 2021 after the previous two years of losses.

CEO Fariyal Khanbabi’s portion of the presentation included Dialight’s key message that they are delivering on the strategy focused on organic growth through expanding market reach and product innovation.  Four new “Source & Sell” products were highlighted, part of a commitment in the 2021 Full-Year presentation to fill out the roughly 20% of a typical customer lighting schedule not covered by Dialight’s own product portfolio.  CEO Khanbabi closed the H1 2022 presentation with the message that the company is “increasing confidence in delivering significant revenue and margin growth over the medium to longer term.”

Go Deeper

Dialight Half Year 2022 Presentation: http://www.ir.dialight.com/media/1473/half-year-2022-v8-final-003.pdf

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