Interim report January-September 2020 for Edgeware

“By developing new products, a strong customer focus and continued efficiency measures, we returned to profitability during the quarter.” Karl Thedéen, CEO, Edgeware

THIRD QUARTER OF 2020:

  • Net sales totalled SEK 37.9 million (43.1), a decrease of 12.0 percent.
  • Gross profit amounted to SEK 26.1 million (28.8), corresponding to a gross margin of 69.0 percent (66.9).
  • Operating income (EBIT) amounted to SEK 2.1 million (neg: 3.6), corresponding to an operating margin of 5.6 percent (neg: 8.4).
  • Operating income (EBIT) adjusted for restructuring costs and currency effects amounted to SEK 1.9 million (neg: 2.0).
  • Profit for the period amounted to SEK 2.4 million (loss: 2.4).
  • Cash flow from operating activities totalled negative SEK 11.9 million (pos: 5.9).
  • Cash flow for the period was negative SEK 16.2 million (pos: 2.0).

JANUARY-SEPTEMBER 2020:

  • Net sales totalled SEK 117.9 million (126.9), a decrease of 7.1 percent.
  • Gross profit amounted to SEK 80.9 million (85.6), corresponding to a gross margin of 68.6 percent (67.4).
  • Operating income (EBIT) amounted to negative SEK 15.5 million (neg: 25.6), corresponding to an operating margin of negative 13.2 percent (neg: 20.3).
  • Operating income (EBIT) adjusted for restructuring costs and currency effects amounted to negative SEK 12.5 million (neg: 22.2).
  • Loss for the period amounted to SEK 16.2 million (loss: 18.4).
  • Cash flow from operating activities totalled SEK 9.8 million (5.9).
  • Cash flow for the period was SEK 70.7 million (neg: 18.6), which included the sale of the short-term interest fund of SEK 75.0 million.

SIGNIFICANT EVENTS DURING THE THIRD QUARTER:

  • Edgeware StreamPilot in live production at Norwegian TV 2 Sumo.
  • A1 uses Edgeware’s StreamBuilder and OTT-CDN to offer multi-screen TV viewing.
  • Edgeware enables 5G optimisation using cloud-based elastic CDN technology.

COMMENTS BY THE CEO

Returning to profitability in third quarter

In the past two years, Edgeware has undergone major changes involving a focus on new products, partially new customer segments and reduced costs. As a result of these measures, we were able to demonstrate during the year that our new product offering has been well received by our customers and today, we are also reporting a positive EBIT of SEK 2 million for the third quarter.

However, our sales continue to be negatively affected by the corona pandemic, which has resulted in fewer major sports events and heightened caution in relation to new investments in all markets. Sales for the third quarter totalled SEK 38 million, compared with SEK 43 million for the year-earlier quarter but I am pleased to report a recurring revenue of SEK 16 million for the quarter corresponding to an increase of 8 percent of our recurring revenue compared to last year. Our sales in EMEA remained unchanged at SEK 29 million. Above all, a number of modernisation projects contributed to the quarter’s sales and it was pleasing to see that various sports events have now begun to be held in Europe again, albeit still far from the level in the preceding year. In APAC, where we conduct business development and foresee business opportunities over time, sales declined to SEK 4 million, partly due to the continued impact of the corona pandemic. In Americas, we are highly dependent on a single customer, which results in strong fluctuations between the quarters. For the third quarter, sales in the region amounted to SEK 5 million.

The gross margin for the quarter was nearly 70 percent due to favourable underlying product margins and an improved service margin. We also reduced our operating expenses, adjusted for non-recurring effects, by 13 percent compared with the year-earlier quarter. Cash flow was negative SEK 16 million and our net cash amounted to SEK 136 million at the end of the quarter.

Our new products continued to gain new ground. During the quarter, we added new channels and new traffic to the SaaS-based StreamPilot solution that we delivered to Norwegian TV2 Sumo. A1 Telekom Austria Group has implemented StreamBuilder and our OTT-CDN solution to be able to offer multi-screen OTT-TV viewing over its new A1 Xplore TV content and streaming platform. In addition, we launched cloud-based elastic CDN and StreamPilot solutions that mobile providers can use to deliver quality-optimised video streaming services on their 5G networks.

During the quarter, Edgeware also conducted a market survey in collaboration with a leading industry analyst, Dan Rayburn. A key conclusion was that there is a large need for the ability to monitor the CDN networks and video quality for end-users in real time, both in individual and multiple CDN networks. This is precisely what is enabled by our StreamPilot product, which increasing numbers of potential customers are showing an interest in. We are now also conducting several tests together with a number of these.

To summarise, our market remains negatively affected by the corona pandemic, but an expansion of the CDN networks’ capacity is continuing and investments are being made to modernise the networks. Our new products have received a positive market response and overall, it is highly satisfying to see that our change efforts resulted in a positive EBIT for the third quarter.

Karl Thedéen
CEO, Edgeware

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