We have measures in place for our return to profitable growth. Our focus is now on the efficient execution of these measures.” Karl Thedéen, CEO Edgeware
Second quarter of 2018:
- Net sales of SEK 50.0 million (40.2), up 24.3 percent.
- Gross profit amounted to SEK 32.3 million (28.4), corresponding to a gross margin of 64.5 percent (70.5).
- Operating income (EBIT) amounted to SEK -15.2 million (-12.9), corresponding to an operating margin of -30.4 percent (-32.1).
- Loss for the period amounted to SEK -11.2 million (-10.2).
- Cash flow from operating activities of negative SEK -28.6 million (-9.1).
- Earnings per share for the period before and after dilution SEK -0.4 per share (-0.3).
First half of 2018:
- Net sales of SEK 98.5 million (108.9), down -9.6 percent.
- Gross profit amounted to SEK 64.6 million (80.8), corresponding to a gross margin of 65.6 percent (74.1).
- Operating income (EBIT) amounted to SEK -26.7 million (0.1), corresponding to an operating margin of -25.7 percent (0.1).
- Loss for the period amounted to SEK -20.5 million (0.2).
- Cash flow from operating activities of negative SEK -21.8 million (-4.4).
- Earnings per share for the period before and after dilution SEK -0.7 per share (0.0).
Significant events in the second quarter
- Edgeware launched an OTT solution for the live broadcast of major TV events.
- NexPlayer and Edgeware started cooperating on strategic integration for TV streaming with a low level of delay.
- Edgeware received its first order from a Chinese customer.
- Restructuring costs for the sales and service organisation is included with SEK 3.3 million (0) in the quarter.
- The CEO, senior executives and other key members of staff subscribed for options in the company at a total option value of SEK 1.6 million.
- The Annual General Meeting (AGM) was held on 4 May 2018.
- The AGM adopted the income statement and balance sheet of the parent company and the consolidated income statement and balance sheet for the 2017 financial year.
- Three new members were elected to Edgeware’s Board, Arnd Benninghoff, Tuija Soanjärvi and Jonas Hasselberg, and three Board members resigned, Jason Pinto, Staffan Helgesson and Karl Thedéen.
Comments by the CEO
Net sales for the second quarter of the year increased by 24 percent compared with the corresponding period last year. The gross margin was 65 percent, which was lower than our historical levels and is mainly attributable to an unusually low proportion of revenue from capacity licences that manage increased video streaming from existing customers. Overall, the results for the quarter were negative, which, combined with orders received late, also resulted in negative cash flow. Although the second quarter is usually weak, I am not satisfied and it remains obvious that we need to both increase revenues and keep control of our costs in order to return to profitable growth.
However, I see several positive indications relating to the business generated during the year. During the quarter, the company received its first order from a Chinese customer that requires our equipment in the networks it owns in China and beyond. We also delivered a major hardware upgrade to one of our largest customers. The upgrade was driven by the need to support more dynamic management of advertising features in VOD traffic and we are seeing similar needs among other large customers.
If we look at the revenue for the first half of the year in total, I am also pleased to see that most of our large customers have generated revenue in about the same level as in the first half of 2017. However, we have not seen an increase in revenue as a result of the football World Cup and the main reason for this is quite simply that our customers had already enough foresight to make the required investments. On the other hand, we have noted strong increases in traffic in conjunction with the live broadcasts and in some instances have assisted customers with support when their other CDN service suppliers have had problems. This may generate enhanced opportunities for us in the long term when customers analyse their experience of the football World Cup and review their need for future investments in their own CDN networks to better enable them to handle live traffic.
When it comes to our product offerings, we are seeing increased interest in OTT solutions, specifically in our “Origin” solution, which has broadened our addressable market. We launched an OTT solution during the second quarter, with a focus on live broadcasts, particularly sport, which is in keeping with the times. The same applies to our recently launched products that offer support for managing advertising features for both live and VOD traffic. Another specific issue that is being prioritised by more customers is the reduction of the delay in live broadcasts on mobile units, a problem being addressed in the cooperation with NexPlayer that was announced during the quarter.
We continued to implement the necessary measures to return to profitable growth during the quarter. We reduced our workforce in some areas to be able to invest more in others. In sales, we will invest more in growth opportunities in EMEA, particularly outside northwestern Europe, in APAC and through new partnerships. Other measures to return to profitable growth includes continued investment in products to better address the OTT market including a Cloud offering at the same time as we need to scrutinize cost in all functions.
To summarise, our large customers are continuing to invest in our products, we have launched new innovative products that have expanded our addressable market, and we have a new more efficient sales organisation in place. However, this was a weak quarter in terms of earnings and I am clearly not satisfied. Nonetheless I am confident that we are implementing the necessary measures to return to profitable growth in line with our financial targets.
This is a translated copy of the Swedish version. In the event of inconsistency or discrepancy between the English version and the Swedish version of this publication, the Swedish language version shall prevail.
A web-cast telephone conference will be held at 10:00 CET July 27 2018, where CEO Karl Thedéen and CFO Steeve Fuhr will present the report.
The presentation will be held in English and can be followed on the web or over the phone. To participate in the conference call, call one of the following numbers:
You can follow and listen to the presentation on the following page: https://tv.streamfabriken.com/edgeware-q2-2018
- Steeve Fuhr, CFO
- Tel: +46702177512, E-mail: email@example.com
This information is information that Edgeware AB is obliged to make public pursuant to the EU Market Abuse Regulation Act. The information was submitted for publication, through the agency of the contact persons set out above, at 7:30 a.m. on 27 June 2018.