Year-end report January – December 2018 for Edgeware

Fourth quarter of 2018:

  • Net sales totalled SEK 79.0 million (68.4), up 15.5 percent.
  • Gross profit amounted to SEK 56.6 million (50.5), corresponding to a gross margin of 71.7 percent (73.8).
  • Operating income (EBIT) amounted to SEK 14.6 million (5.8), corresponding to an operating margin of 18.4 percent (8.4).
  • Profit for the period amounted to SEK 10.6 million (3.3).
  • Cash flow from operating activities of SEK 20.7 million (16.0).
  • Cash flow for the period of SEK 16.6 million (11.3).
  • Earnings per share for the period before and after dilution SEK 0.4 per share (0.1).

January – December 2018

  • Net sales totalled SEK 231.9 million (236.8), down 2.1 percent.
  • Gross profit amounted to SEK 160.2 million (176.3), corresponding to a gross margin of 69.1 percent (74.4).
  • Operating income (EBIT) amounted to negative SEK 9.1 million (pos: 11.8), corresponding to an operating margin of negative 3.9 percent (pos: 5.0).
  • Loss for the period amounted to SEK 6.6 million (profit: 7.5).
  • Cash flow from operating activities of SEK 11.6 million (neg: 2.7).
  • Cash flow for the period of negative SEK 4.9 million (neg: 97.0) (neg SEK 75 million in 2017 pertained to investments in short-term interest fund).
  • Earnings per share for the period before and after dilution negative SEK 0.2 per share (pos: 0.2).

Significant events during the fourth quarter

  • Strategic software transaction with Com Hem secured.
  • Edgeware won a significant Ad Insertion order.
  • Edgeware demonstrated cloud-native software with Amazon Web Services

Significant events after the fourth quarter

  • Edgeware acquired leading subtitling supplier Cavena Image Products AB.

Comments by the CEO

I am very pleased that we can report net sales growth for the final quarter of the year. Revenue increased 16 percent to SEK 79 million compared with the year-earlier quarter, which is the company’s second highest quarterly sales in its history. The gross margin almost reached 72 percent and, combined with the efficiency measures we have implemented, this has resulted in EBIT at a strong SEK 15 million. Cash flow was SEK 17 million and all in all it was a strong quarter and a very good end to a challenging year.

The sales increase in the quarter was mainly underpinned by the positive trend in EMEA, where many of our major customers contributed. Much of our revenue is related to CDNs, but this does not only involve expanded capacity but also investments to introduce new features. Our customers are also strengthening their service offering by supplementing IPTV services with an OTT offering and new functionality. An example is the order that we announced in December where one of our most important European customers upgraded its existing software and hardware platform with ad insertion (dynamic personalised advertising).

However, despite a strong second half of the year we were unable to fully compensate for the weak start to 2018. Net sales for the full-year ended at SEK 232 million and EBIT was a negative SEK 9 million. The total gross margin for 2018 was 69 percent, which is in the middle of our normal interval of 65–75 percent.

All in all, net sales from our major customers in 2018 were roughly at the same levels as in the preceding year. EMEA was stable and AMERICAS, specifically Latin America, reported healthy growth. We have a high concentration of customers in APAC, meaning that we are impacted by the investment requirements of individual customers, and even though we continue to regard the region as an emerging market that we are continuing to invest in, net sales declined during the year.

We continued to win new CDN expansion and replacement orders in 2018. The major order from Televisa that we announced in November is one such example and shows that CDN continues to have great potential. We also see a clear trend towards increased use of OTT and a rising interest in using online technology-based platforms (http) to distribute video services. Accordingly, it is gratifying that most of our major customers have started to make the necessary investments in our products to be able to take this step. This development also creates an opportunity for us to address new customers, such as broadcasters and content owners. To strengthen our offering to these customers, we further developed the Origin offering during the year and specifically our new “Ad Enabler” product has helped us initiate a dialogue with many new potential customers. The order from Com Hem is an example of the result of these efforts.

Another strategic investment area is Software as a Service (SaaS) for which we showed during the year that our Origin software can be operated via both Google and Amazon’s cloud services. Working in close cooperation with some of our customers, we have commenced the development of a cloud service for Origin that we will launch in the first half of 2019.

At the start of 2019, we also announced the acquisition of Cavena, the market leader in subtitling, in line with the acquisition strategy that we unveiled in connection with our IPO. Cavena has successfully supplied solutions to broadcasters and content owners for more than 20 years and we already use its systems in some of our largest installations. The acquisition broadens and strengthens our offering to this important – and for Edgeware relatively new – customer group.

We created a more efficient organisation during the year and lowered our ongoing cost level by more than 10 percent while retaining delivery and development capacity. Some additional changes were implemented at year-end, for example, we created a joint and stronger sales and field organisation. Overall, we advanced our positions in 2018 on the basis of new products, new types of business and efficiency enhancements.

Focus in 2019 will be mainly directed to cultivating new customers in existing and new markets and to innovation and product development in OTT for broadcasters and content providers. Much work remains to be done in a dynamic market but based on the strong end to 2018, I am very confident in the future and look forward to 2019.

Karl Thedéen
CEO, Edgeware

At 10:00 a.m. on 1 February 2019, the company will hold a web-broadcast teleconference, during which CEO Karl Thedéen will present the report together with CFO Annika Norin.

Anyone wishing to participate in the teleconference in conjunction with the presentation should call one of the numbers below:

  • SE: +46850558350
  • UK: +443333009031
  • US: +16467224957

It is also possible to follow and listen to the presentation on the following web link: https://tv.streamfabriken.com/edgeware-q4-2018

Contact:

Annika Norin, CFO
Tel: +46708856774
E-mail: annika.norin@edgeware.tv

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 1 February 2019.

About Edgeware

Edgeware supplies operators and content providers with systems to deliver modern TV services over the Internet at a huge scale. Edgeware’s unique technology provides an outstanding viewing experience that allows its customers to retain control of their content. Edgeware has more than 200 customers and is headquartered in Stockholm, Sweden, with staff across Europe, Asia and the Americas.

For more information, visit https://corporate.edgeware.tv