January 29, 2025
Dialight Settles Legal Dispute with $12 Million Agreement
Settlement ends years-long legal battle, impacting cash flow until 2027
Dialight, a well-known industrial lighting brand that is headquartered in the United Kingdom, has provided a financial update alongside news of a legal settlement with its former manufacturing partner, Sanmina Corporation. The company announced that it has reached an agreement to pay Sanmina $12 million over the next two years, resolving a long-running dispute.
As a company listed on the London Stock Exchange, Dialight is not required to report quarterly financials but must disclose semi-annual results which makes a "Q3 Trading Update" highly unusual. In this press release, it voluntarily shared non-specific but positive financial reports, including profitability, positive cash flow, and a slight reduction in net debt.
This outlier Q3 disclosure may be an effort to obscure the main reason for the press release — the multimillion-dollar settlement Dialight will pay over the next two years. By pushing non-specific claims of financial gains and exceeded expectations, the company may be aiming to steer media coverage away from the $12 million settlement expense, perhaps hoping that easily swayed media outlets will echo its PR & Marketing messaging rather than assess the full picture.
Sanmina Settlement: Key Terms and Financial Impact
Dialight’s settlement with Sanmina brings closure to litigation that had been ongoing since 2019. Under the terms of the agreement:
- Dialight will pay $12 million in total.
- An initial $4 million payment is due by March 31, 2025.
- Eight quarterly installments of $1 million will follow, ending in March 2027.
- If Dialight’s market capitalization exceeds £100 million for 30 consecutive days, remaining payments increase from $1 million to $1.5 million per quarter (capped at $8 million total).
This settlement effectively ends a legal battle in which Dialight had initially sought up to $220 million in damages, alleging misconduct by Sanmina. A U.S. jury ruled in September 2024 that both companies breached their manufacturing agreement, leaving Dialight responsible for a net payment of $7.8 million. The final settlement amount accounts for additional legal costs, interest, and a structured payment schedule.
Dialight stated that the settlement will be funded from operational cash flow and that it has sufficient liquidity to meet both its ongoing business needs and these payments.
Financial Update: Metrics Lacking Detail
Alongside the settlement news, Dialight provided a brief Q3 trading update, reporting that the company:
- “Traded profitably” during the quarter.
- Generated “positive operating cash flow.”
- Saw net debt decline slightly to $14.8 million (from $15.4 million in September).
However, the update omitted several key financial metrics, including revenue figures, profit breakdowns (EBITDA, operating profit, net profit), and order book or backlog updates.
Given that Dialight is not required to report quarterly financials, the lack of detail is not sneaky or unusual, but investors will have to wait until the full-year 2024 report for a clearer picture of the company’s financial situation.