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congatec Holding AG plans Initial Public Offering by year-end 2019

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A leading supplier of high-performance embedded computing products intends to list on the regulated market (Prime Standard) of the Frankfurt Stock Exchange

Global market leader for outsourced computer-on-module (COM) solutions enabling Internet of Things (IoT) and edge computing functionality across a variety of global industries, including industrial automation, robotics, medical technology and transportation

With a track-record of consistent growth and profitability, congatec generated revenues of c. USD 133 million in 2018, an increase of c. 25% over 2017, and an adjusted EBITDA margin of 9.3%

Planned offering structure: Offering of newly issued shares of approximately EUR 80 million as well as of approximately EUR 10 million secondary shares plus a 15% greenshoe

IPO proceeds will be used to finance continued growth, including accelerating commercial penetration in the Americas and Asia-Pacific markets, funding R&D, raising congatec?s global profile, and enabling potential strategic acquisitions to broaden the product portfolio

congatec Holding AG (\”congatec? or the \”Company?), a leading supplier of high-performance embedded computing products enabling functionality in the fast-growing IoT space, intends to conduct an Initial Public Offering (IPO) on the Frankfurt Stock Exchange (Prime Standard) by year-end 2019, subject to capital market conditions.

Jason Carlson, CEO of congatec: \”The IPO will mark an important milestone in the development of congatec and allow us to fully exploit the significant growth opportunities of embedded computing. We are at the beginning of the Internet of Things and Industry 4.0 mega-trends. As the IoT technology roll-out broadens, and also integrates applications like artificial intelligence and machine learning, increased complexity will be a natural by-product ? and this plays to congatec?s strengths as we are a focused specialist in the space. The IPO will further increase our profile as product provider of choice for our customers and allow us to attract additional sales and engineering expertise and resources to further commercially penetrate this global opportunity. Furthermore, the IPO enables us to pursue acquisition opportunities that expand our service offering.?

congatec at a glance

Founded in 2004 and headquartered in Deggendorf, Germany, congatec is a pure-play specialist in the embedded computing space with a #1 global market share in the increasingly important computer-on-module segment of the embedded computing market.[1] congatec?s computer-on-modules, or COMs, are critical, customised technology infrastructure comprising hardware and software that serve as the heart of their customers? connected devices, enabling them to participate in the benefits of Industry 4.0 and IoT.

congatec?s COMs are used by over 300 clients globally across a range of applications from industrial robots, medical technology, delivery drones and autonomous vehicles, to secure data-transfer, as well as smart retail. Existing \”blue-chip? customers include Bernecker+Rainer (a subsidiary of ABB Ltd.), Amazon, Bosch Rexroth, General Electric, Google, Rohde & Schwarz, Samsung, and Siemens.

With over 250 employees worldwide, including 80 employees focusing on R&D, congatec serves its global customer base through its unique global de-centralized R&D model, allowing congatec to meet customer design requirements locally and in real-time. congatec deploys a fabless business model in order to focus on its key strengths in COMs engineering and design. Final production, testing, assembly and customer delivery is out-sourced to tier-1 global contract manufacturers such as Plexus under congatec?s control and quality policy. congatec?s deep pre- and after-sales support helps the Company originate new design-wins and expand existing business relationships.

congatec?s COMs product portfolio includes the SMARC 2.0 modules, ideally suited for IoT and Industry 4.0 applications, the Qseven modules, originally invented by congatec in 2008 focused on mobile and IoT applications, as well as COM Express modules, one of the most scalable COMs standards available in the marketplace. In 2018, congatec acquired Real-Time Systems GmbH (RTS), broadening its customer offering to include additional software capabilities.

The Company?s strategy is to remain a specialist pure-play dedicated to creating the leading computer-on-module embedded computing solutions allowing its global customer base to maximise the benefits of continued growth in IoT. congatec will also continue to invest in the Americas and Asia Pacific regions to capture additional market share in these fast-growing geographies while maintaining and expanding its leadership position in EMEA.?

Pure-play, global market share leader in a fast-growing market

The sub-market for COMs is anticipated to grow approximately 14%[2] per annum between 2018 and 2023 as embedded computing requirements increase globally. congatec?s long-standing track record of innovation has resulted in the Company becoming the global market share leader for the COM segment of the embedded computing market with a global market share of approximately 12.5% in 2018[3]. congatec?s dedicated focus on embedded boards and modules, combined with best-in-class technical support and customization services, has resulted in a highly attractive customer offering. By addressing a large variety of end markets, the Company is able to participate in the growth of a number of attractive and fast-growing markets such as industrial automation, medical technology, and transportation.

Unique product and service offering translating into highly attractive growth

With one of the broadest portfolios of high quality, state-of-the-art modules offered in the market and its unique service offering ranging from design-in / engineering support, customization capabilities as well as a strong after-sales service, congatec is recognized as a performance and quality leader by its customers.?

congatec can reflect on a track record of continued growth and has been profitable for almost 10 consecutive years. Since 2016, congatec has grown its revenues at a CAGR of approximately 20%, reaching c. USD 133 million in 2018 whilst expanding its adjusted EBITDA margin[4] from 5.5% in 2016 to 9.3% in 2018 , equivalent to USD 12.3 million in 2018 (+30.7% y-o-y). Given its origins, German-speaking EMEA has historically been congatec?s most important geographic market, followed by Asia-Pacific. However, by investing in its commercial presence in the Americas, the Americas geography has experienced revenue growth representing a CAGR of 40% between 2016 and 2018 and has become congatec?s second most important region by revenue in 2018 after EMEA. In 2018, EMEA accounted for approximately 70% of sales, followed by the Americas with approximately 16% and APAC with approximately 14%.

This growth has been realized on the back of continued growth in congatec?s highly diverse and broad customer base, increasing the average revenue per customer, as well as long-term recurrence of revenues.?

Technology leader with strong culture of innovation

congatec?s origins stem from the original inventors of the computer-on-module concept. Given this history as one of the industry?s technology leaders, congatec?s corporate culture places a heavy emphasis on innovation and R&D. The Company plays a leadership role in the creation of industry-standards across its relevant markets. While continuously improving the standards, congatec simultaneously implements additional proprietary functionalities on its standards-based products. In 2018, with the acquisition of Real Time Systems GmbH (RTS), congatec has further strengthened its product offering by integrating a unique hyper-visor software.

Diversified blue-chip customer base providing recurring revenues

congatec has established a diversified blue-chip customer base which includes leading OEMs such as B&R (a subsidiary of ABB Ltd.), Bosch Rexroth, and Siemens, as well as General Electric and Samsung amongst others. These long-term client relationships are characterized by a high degree of customer loyalty as well as expanding and recurring revenue potential. This can be evidenced by an increase of average revenue per customer of approximately 36% amongst congatec?s top ten customers from 2016 to 2018. Similar to Software-as-a-Service business models, congatec adds a new layer of recurring revenue for each new design-win that lasts for the lifetime of congatec?s customer?s product. In 2018, approximately 37% of the total revenue was the result of previously won design-ins between 2016 and 2018 compared to 9% of total revenue in 2016 (for design wins in 2016).

Strong financial profile enhancing design-partner attractiveness

For congatec, a typical design-win will last approximately five to seven years. Given this lengthy duration, congatec?s strong financial profile serves as an important incentive for customers to design-in congatec embedded computing solutions. As of 30 June 2019, the Company had no indebtedness and a strong equity ratio of more than 44%. congatec has been consistently profitable and other financial indicators, including accounts receivable, capex, and cash are also evidence of a financially prudent counterparty.??

Asset light, fabless business model

congatec operates a fabless business model with limited capital expenditures enabling the Company to focus its resources on core competencies that provide impactful benefits to its customers such as the development of highly innovative products, design-in support, time-to-market, and customer support. In addition, congatec?s fabless business model allows the Company to scale its business and enter new markets quickly while requiring less lead-time and simultaneously significantly decreasing the supply chain risk. As a consequence, congatec?s asset-light fabless business model with limited requirement for capital expenditures coupled with a highly disciplined working capital management results in an attractive cash flow generation profile.

Experienced management and engineering teams

congatec?s growth strategy is driven and executed by a highly experienced management team with a comprehensive track-record and longstanding industry experience. In addition, today, many of congatec?s founders still serve in leadership positions and continue to play a significant role in congatec?s development as an innovation and market share leader. Likewise, the employees are active contributors to the continued development of the embedded computing industry in their leading positions in industry consortia. congatec?s CEO, Jason Carlson, has executive leadership experience at NASDAQ-listed companies which will be valuable as congatec becomes a publicly traded entity.

Overview of the planned IPO

The offering planned on the Frankfurt Stock Exchange (Prime Standard) will consist mostly of newly issued ordinary shares with no-par value from a capital increase against contribution in cash. It will also include a minor offering of shares from existing shareholders in order to maximise the free float and enhance IPO aftermarket liquidity. The primary offering of newly issued shares is expected to amount to approximately EUR 80 million and the minor secondary offering to approximately EUR 10 million. Furthermore, ordinary shares will be made available by the selling shareholders pursuant to an over-allotment option amounting to 15% of the offering.

The proceeds will primarily be used to accelerate commercial expansion in key target markets, in particular the Americas and APAC, drive innovation and fund R&D investments, software development and broaden product portfolio, strategic sourcing initiatives and undertake strategic acquisitions in complementary technology areas in both, software and hardware.

Wolfgang Hanrieder, Chairman of the Supervisory Board of congatec: \”The continued proliferation of IoT as well as Industry 4.0 are key drivers of the embedded computing industry and even more specifically our business at congatec with the emergence of Edge Computing. The original founders, congatec?s shareholders, the management team and last but not least all of our employees, have successfully grown this company and positioned it as the global market share leader for outsourced COM solutions. This IPO will enable the next step in the successful journey of congatec in further establishing itself as the innovation and market share leader and helping our clients exploit the vast gains of these mega-trends.?

Transaction underwriters

Underwriters for the planned IPO are Bryan, Garnier & Co and COMMERZBANK Aktiengesellschaft, who are acting as Joint Global Coordinators and Joint Bookrunners.

[1] IHS Markit \”The World Market for Embedded Computer Boards, Modules and Systems ? 2019 Edition?

[2] VDC Research \”Strategic Insights 2019: IoT and Embedded Technology ? Embedded Boards, Modules & Systems ? The Basis for Application Value?

[3] IHS Markit \”The World Market for Embedded Computer Boards, Modules and Systems ? 2019 Edition?

[4] Adjusted EBITDA is a measure not required by, or presented in accordance with, IFRS, German GAAP or any other generally accepted accounting principles (\”non-IFRS measure?). The definition of this non-IFRS measure may deviate and may not be comparable to other similarly titled measures of other companies and have limitations as analytical tool and should, therefore, not be considered in isolation or as a substitute for analysis of congatec?s profit as reported under IFRS. Adjusted EBITDA Margin is calculated as the ratio of Adjusted EBITDA for a particular period to revenue for the same period. Adjusted EBITDA is reconciled from earnings before interest and taxes (EBIT) by adding depreciation, amortization and impairment (resulting in EBITDA) and then adjusting, depending on the relevant financial period, for retention bonuses, profit from company acquisition, acquisition costs, certain restructuring costs, share-based payments and the costs relating to the IPO.


This release is not for distribution, directly or indirectly, in or into the United States (including its territories and possessions, any State of the United States and the District of Columbia), Australia, Canada or Japan. It does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States, Australia, Canada or Japan. The shares mentioned herein have not been, and will not be, registered under the US Securities Act of 1933, as amended (the \”Securities Act?). The shares may not be offered or sold in the United States, except pursuant to an exemption from the registration requirements of the Securities Act. There will be no public offer of shares of the Company in the United States.

This release is only being distributed to, and is only directed at, (i) persons who are outside the European Economic Area or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the \”Order?) or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as \”Relevant Persons?). The shares of the Company are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such shares will be engaged in only with, Relevant Persons. Any person who is not a Relevant Person should not act or rely on this release or any of its contents.

This release is an advertisement and not a prospectus for the purposes of Regulation (EU) 2017/1129 (the \”Prospectus Regulation?), and as such does not constitute an offer to sell, or the solicitation of an offer to purchase, shares of the Company. Investors should not subscribe for any shares referred to in this release except on the basis of the information contained in a prospectus relating to the shares. Such prospectus is still to be approved by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) and published. Following such publication, investors will be able to obtain a copy of it on the Company?s website (www.congatec.com). The approval of the prospectus by the BaFin should not be understood as an endorsement of the securities. It is recommended that potential investors read the prospectus before making an investment decision in order to fully understand the potential risks and rewards associated with the decision to invest in the securities.

In any EEA Member State other than Germany, this release is only addressed to, and is only directed at, \”qualified investors? within the meaning of Article 2 lit. e) of the Prospectus Regulation.

This release contains forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms \”believes,? \”estimates,? \”anticipates,? \”expects,? \”intends,? \”may,? \”will? or \”should? or, in each case, their negative, or other variations or comparable terminology. Forward-looking statements should not be construed as a promise of future results and developments and involve known and unknown risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements, and neither the Company nor any other person accepts any responsibility for the accuracy of the opinions expressed in this release or the underlying assumptions. This release only speaks as of its date. Neither the Company nor any other person assumes any obligation to update any forward-looking statements.

Each of the Company and the Joint Bookrunners and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statement contained in this release, whether as a result of new information, future developments or otherwise.

The Joint Bookrunners, some of which are authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, are acting exclusively for the Company and no-one else in connection with the planned offering. They will not regard any other person as their respective clients in relation to the planned offering and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients, nor for providing advice in relation to the planned offering, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

In connection with the planned offering, the Joint Bookrunners and any of their affiliates, may take up a portion of the shares offered in the planned offering as a principal position and in that capacity may retain, purchase, sell, offer to sell for their own accounts such shares and other securities of the Company or related investments in connection with the offering or otherwise. Accordingly, references in the prospectus, once published, to the shares being offered, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or acquisition, placing or dealing by, the Joint Bookrunners and any of their affiliates acting in such capacity. In addition the Joint Bookrunners and any of their affiliates may enter into financing arrangements (including swaps or contracts for differences) with investors in connection with which the Joint Bookrunners and any of their affiliates may from time to time acquire, hold or dispose of shares of the Company. The Joint Bookrunners do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

None of the Joint Bookrunners or any of their respective directors, officers, employees, advisers or agents accepts any responsibility or liability whatsoever for or makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of the information in this release (or whether any information has been omitted from the release) or any other information relating to congatec, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available, or for any loss howsoever arising from any use of this release or its contents or otherwise arising in connection therewith.

congatec is a rapidly growing technology company focusing on embedded computing products. The high-performance computer modules are used in a wide range of applications and devices in industrial automation, medical technology, transportation, telecommunications and many other verticals. congatec is the global market leader in the computer-on-modules segment with an excellent customer base from start-ups to international blue-chip companies. Founded in 2004 and headquartered in Deggendorf, Germany, the company reached sales of USD 133 million in 2018.

Posted by on 13. September 2019. Filed under Internet. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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