Gemalto reports strong full year results

04/03/16

Digital security firm Gemalto has announced a full year revenue of 3.1 billion euros, up 16%, and profit from operations up 10%, at 423 million euros.

Olivier Piou, Chief Executive Officer, commented: "2015 illustrates the structural transformation and successful diversification of the Company. Payment is now clearly the largest business of the Company; the Enterprise portfolio is aligned following SafeNet integration; Government Programs is back to rapid growth with a solid win rate; adjustments are supporting the SIM activity evolution; and the Machine-to-Machine business continues to expand rapidly. In a challenging 2015 Mobile environment, Gemalto demonstrated the resilience of its business model with another double digit expansion in profit from operations and strong cash generation. Entering the second part of our multi-year development plan we will focus in 2016 on expanding our gross margin, progressively optimizing our main segments' performance en route to our 2017 objectives."

Total revenue for 2015 came in at EUR 3,122 million. Strong growth in Payment, Government Programs and Machine-to-Machine, coupled with the addition of SafeNet drove the revenue expansion of +27% at historical exchange rates and +16% at constant exchange rates.

The total Company's year-on-year revenue growth was +6% pro forma. SafeNet's combination added 12 percentage points to the 2014 reported sales. The substantial strengthening of the US dollar versus Euro compared to 2014 and the now larger part of the Company's US dollar denominated revenue generated a 9 percentage point difference between revenue growth at historical and at constant exchange rates. This difference was partly reduced by the currency variation protection hedging program that induced a (2) percentage point reduction on the reported sales.

Embedded software & Products (E&P) revenue grew by +3%. Payment cards represented the largest part of the E&P expansion. High demand for connectivity and security modules for the Internet of Things (IoT) and strong deliveries in Government Programs also notably contributed to the E&P revenue increase. E&P activity in the Mobile segment reduced due to lower year-on-year SIM sales following the closure of the major US wireless carriers' payment venture, and to a lesser extent to lower demand in Latin America and Asia in the second semester.

In Platforms & Services (P&S), sales were up by +70%, due to further revenue expansion in payment issuance services, to growth in eGovernment services and to SafeNet's contribution to the Enterprise business. These increases largely exceeded the reduced Mobile Financial Services revenue coming from the United States.

Globally, 2015 revenue growth illustrated the structural transformation and successful diversification of the Company. Gemalto posted a +6% pro forma revenue growth though sales of SIM and Mobile related services declined by an unusual (15%) year-on-year during the period.

Gross profit was up by EUR 264 million, to EUR 1,216 million, representing a gross margin of 39%, up +0.3 percentage point year-on-year. The increase in gross profit in the Payment and Government Programs businesses more than offset the lower contribution from the Mobile segment.

Operating expenses were up by 2.3 percentage point of revenue to 25.4%, at (EUR 793) million. The increase came primarily from the addition of SafeNet, running at a higher percentage of operating expenses than Gemalto's historical business, and from currency translation effects, which outweighed the absence of variable pay-out to management and employees related to profit from operations.

As a result, 2015 profit from operations came in at EUR 423 million, representing 13.5% profit margin and up EUR 40 million, +10.4% year-on-year.

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