Interim Report April-June 2017

Second quarter of 2017: (April-June)

  •  Net sales of SEK 40.2 million (51.5), a decrease of 21.8 percent.
  •  Gross profit of SEK 28.4 million (33.8), corresponding to a gross margin of 70.5 percent (65.6).
  •  EBIT of SEK -12.9 million (-3.9), corresponding to an EBIT margin of -32.1 percent (-7.6).
  •  Adjusted EBIT of SEK -12.9 million (-0.6), corresponding to an operating margin of -32.1 percent (-1.2).
  •  Result for the period of SEK -10.2 million (-2.2).
  •  Cash flow from operating activities of SEK -9.1 million (12.0).
  •  Before/after dilution, earnings per share for the period of SEK -0.3 per share (-0.1)

First half of 2017: (January-June)

  •  Net sales of SEK 108.9 million (115.0), down 5.3 percent.
  •  Gross profit of MSEK 80.8 million (79.9), corresponding to a gross margin of 74.1 percent (69.5).
  •  EBIT of SEK 0.1 million (6.7), corresponding to an EBIT margin of 0.1 percent (5.8).
  •  Adjusted EBIT of SEK 0.1 million (11.5), corresponding to an operating margin of 0.1 percent (10.0).
  •  Profit for the period of SEK 0.2 million (6.2).
  •  Cash flow from operating activities of SEK -4.4 million (10.1).
  •  Before/after dilution, earnings per share for the period of SEK 0.0 (0.3).

Significant events in the second quarter and after the reporting period

  •  The annual general meeting was held on 12 April 2017.
  •   Preliminary second-quarter results published on 10 July 2017.
  •  Edgeware acquired the trademark for the name Edgeware, a national trademark in the UK, and one for the EU, whereby Edgeware now owns the Edgeware trademark throughout the EU.

Comments by the CEO

As communicated on 10 July, sales and earnings during the second quarter were weaker than expected. However, a number of customer and product successes were achieved.

The decrease in sales was due mainly to three factors. Firstly, Edgeware sells its products and services to telco and service providers, whose recurring purchases can and will vary from quarter to quarter. During the second quarter, we received fewer orders from these customers compared with the corresponding quarter of 2016. Secondly, we were unable to fully deliver a major order for our new flagship product, the 4080 TV server, which targets the growing customer category of content providers and TV companies. This was because production at the contract supplier that is our production partner is in the start-up phase. Thirdly, the second quarter tends to be seasonally weak and, this year, there was a lack of major TV events, such as the Summer Olympic Games or the European Football Championship, which have driven demand in previous years. This resulted in a lower-than-expected order intake.

The gross margin improved during the quarter compared with the same quarter in 2016 and was 70.5 percent (65.6). During the first half of 2017, the gross margin was 74.1 percent (69.5). When existing customers demand capacity increases, we can scale up capacity by, for example, selling additional software licenses, without this requiring delivery of tangible hardware systems.

Factors underlying the stronger gross margin include the company’s single largest delivery of the analytical software TV Analytics to one of our major customers in the Benelux area. This is an order that reflects growing interest in measuring, monitoring and analysing streaming, to be able to further develop and improve the services sold to consumers.

During the second quarter, a strategically important transaction was completed with an Eastern European satellite operator. This is an unusually large initial order that bears witness to the interest in building own streaming solutions. This particular customer category of content providers and TV companies contributed to a significant share of sales in the second quarter.

The planned global recruitment of sales and customer service staff continued according to the previously communicated plan for contributing to Edgeware’s continued expansion in priority markets.

Edgeware’s trademark

During the quarter, Edgeware also reached a settlement on the previously reported trademark conflict with a British company. Under the settlement, Edgeware acquired the ownership rights to a national British registered trademark and a separate EU trademark for the name EDGEWARE.

Positive market outlook

Although we are not satisfied with our sales and earnings during the second quarter, we firmly believe in our business model and the prospect of our market.

There is strong demand for Edgeware’s products and services from telco and cable operators, as well as content providers, throughout the world. The market outlook remains favourable in all of the markets served by Edgeware.

Joachim Roos
CEO, Edgeware

Contact : Gunilla Wikman, Investor Relations Manager
Tel: +46707638125, E-mail: gunilla.wikman@edgeware.tv

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