“A profitble Q3 with positive cash flow together with great interest in our new products are key milestones for profitable growth.” Karl Thedéen, CEO Edgeware
Third quarter of 2018:
- Net sales totalled SEK 54.5 million (59.6), down 8.6 percent.
- Gross profit amounted to SEK 39.0 million (45.1), corresponding to a gross margin of 71.7 percent (75.7).
- Operating income (EBIT) amounted to SEK 3.0 million (6.0), corresponding to an operating margin of 5.5 percent (10.1).
- Profit for the period amounted to SEK 3.3 million (4.0).
- Cash flow from operating activities of SEK 13.0 million (neg: 14.1).
- Earnings per share for the period before and after dilution SEK 0.1 per share (0.1).
- Net sales totalled SEK 152.9 million (168.5), down 9.3 percent.
- Gross profit amounted to SEK 103.6 million (125.8), corresponding to a gross margin of 67.8 percent (74.7).
- Operating income (EBIT) amounted to negative SEK 23.7 million (pos: 6.1), corresponding to an operating margin of negative 15.5 percent (pos: 3.6).
- Loss for the period amounted to SEK 17.2 million (profit: 4.2).
- Cash flow from operating activities of negative SEK 8.8 million (neg: 18.6).
- Earnings per share for the period before and after dilution negative SEK 0.6 per share (pos: 0.1).
Significant events in the third quarter
- Major order from Televisa in Latin America./li>
- Edgeware launched container-based TV delivery platforms for installation in the cloud. Large interest from broadcasters and OTT operators for Edgewares new products at the IBC Conference in Amsterdam.
- Edgeware registered its own subsidiary in Hong Kong.
Significant events after the third quarter
- Important software deal with Com Hem was secured after the end of the quarter.
Comments by the CEO
It is with great satisfaction that I can confirm we have now delivered a third quarter with positive earnings and cash flow — proof positive that our action program has had an effect and was an important step in the right direction. Net sales for the third quarter of the year were SEK 55 million, which is slightly lower than the strong third quarter of 2017. Our gross margin ended up at 72 percent, which is in the upper half of the 65–75 percent interval we have historically delivered.
The biggest talking point of the quarter was our strong growth in Latin America, where a major network expansion at Televisa in Mexico provided a large boost to sales in the region. We also received orders from two new customers in Latin America and Europe during the quarter. Sales in Asia were low but we still see the region as highly intresting and during the quarter we established an own entity in Hong Kong. All in all, it has been relatively stable in regards of our major customers. The first three quarters of the year they had roughly the same levels of sales that they had during the corresponding year-earlier period. During the quarter we also continued our work on increasing efficiency in our market activities and on establishing collaboration with various partners to thereby increase the influx of new opportunities.
At the IBC industry conference during the quarter, we announced our first container-based software solutions adapted for cloud architecture for OTT operators, broadcasters and traditional operators. To increase the clarity of our offering, we market our products under such headlines as Amazing viewing experience, Deploy at scale and Capitalise your content, three factors we know are critical for our customers. Thanks to our new software solutions such as Origin and others, we could for the first time also present solutions for customers who do not own their own networks — broadcasters, for example. Our demonstration of Ad Enabler, which is included in Origin and offers personalised advertisements, generated particularly strong interest. This was due in part to our being the first to offer support for Android clients in this critical application. The major interest that broadcasters and OTT operators showed in our new products was for me a clear confirmation that we have expanded our addressable market entirely in line with our strategy. Going forward, we also see new opportunities through offering our software solutions as a service via public cloud service providers, or “Software as a Service” (SaaS). To meet the demand we are seeing for Origin and SaaS, we are now pursuing this as a project with the target of offering Origin as a cloud service during the first half of 2019. We see major operational and commercial advantages such as shorter sales cycles and repetitive incomes for a cloud-based business model of this type.
During the quarter, a large number of projects in which our software solutions were evaluated and tested were started up among customers in all regions. After the end of the quarter, we were also asked to demonstrate our container-based cloud solutions via Amazon Web Services at the Inter BEE conference in Tokyo in November. Last, but not least, in connection with today’s report, we have the great pleasure of announcing an important software deal with the Swedish service provider Com Hem.
We will continue to work on the actions necessary to return to profitable growth. We are expanding our business with new software-based products, cultivating new types of customers, increasing our activities outside of Europe and lowering our costs in certain areas in order to enable expansion where we see new business opportunities. I am still not satisfied with our financial results, but I see clear signs that our actions have yielded results and that we are thus on the right path.
Steeve Fuhr, CFO
This information is inside information that Edgeware AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 7:30 a.m. on 9 November 2018.
At 10:00 a.m. on 9 November 2018, the company will hold a web-broadcast teleconference, during which CEO Karl Thedéen will present the report together with CFO Steeve Fuhr.
Anyone wishing to participate in the teleconference in conjunction with the presentation should call one of the numbers below:
- SE: +46856642662
- UK: +442030089802
- US: +18557532235
It is also possible to follow and listen to the presentation on the following web link:https://tv.streamfabriken.com/edgeware-q3-2018