INTERIM REPORT JULY-SEPTEMBER 2017

“The third quarter of 2017 was our strongest third quarter to date”
Joachim Roos, CEO Edgeware

THIRD QUARTER 2017:
• Net sales of SEK 59.6 million (52.6), up 13.2 percent.
• Gross profit of SEK 45.1 million (35.9), corresponding to a gross margin of 75.7 percent (68.2).
• EBIT of SEK 6.0 million (2.4), corresponding to an EBIT margin of 10.0 percent (4.6).
• Adjusted EBIT of SEK 6.0 million (4.9), corresponding to an adjusted EBIT margin of 10.0 percent (9.3).
• Profit for the period of SEK 4.0 million (2.2).
• Cash flow from operating activities of SEK -14.1 million (-2.7).
• Before/after dilution, earnings per share for the period of SEK 0.1 per share (0.1)

JANUARY-SEPTEMBER 2017:
• Net sales of SEK 168.5 million (167.6), up 0.5 percent.
• Gross profit of SEK 125.8 million (115.8), corresponding to a gross margin of 74.7 percent (69.1).
• EBIT of SEK 6.1 million (9.1), corresponding to an EBIT margin of 3.6 percent (5.4).
• Adjusted EBIT of SEK 6.1 million (16.5), corresponding to an adjusted EBIT margin of 3.6 percent (9.8).
• Profit for the period of SEK 4.2 million (8.3).
• Cash flow from operating activities of SEK -18.6 million (7.3).
• Before/after dilution, earnings per share for the period of SEK 0.1 per share (0.3)

SIGNIFICANT EVENTS DURING THE THIRD QUARTER AND AFTER THE REPORTING PERIOD
• Edgeware participated in the IBC Conference in Amsterdam for the twelfth year.
• A new, innovative technology for protecting against content piracy – Watermarking – launched.
• Edgeware won Streaming Media Europe’s Readers’ Choice Award for 2017 2017 in the category of Server Hardware/Software.

COMMENTS BY THE CEO

 A strong third quarter with returning customers
This was our strongest third quarter in company history in terms of sales, gross profit and EBIT.
Several of our major customers, primarily in EMEA, returned during the quarter and placed large orders. It is clear that our customers are continuing to make investments and the largest growth in the quarter was attributable to the traditional customer category of telco operators. Cable operators also accounted for a significant portion of our sales during the quarter. These customer categories are made up of large customer bases with strong balance sheets. They are willing to make investments in order to maintain and advance their market positions by improving their offering and quality. On a rolling 12-month basis, new TV and software companies (“over-the-top providers” or “OTTs”) accounted for the largest growth and we are thus seeing investments being made in all market segments simultaneously.
We are also seeing some customers who previously opted to go through traditional global telco operators now choosing to purchase products and support directly from us. We view as testament to the quality of our world beating products and the strength of the sales and support organisation we are now establishing at the global level.
The gross margin for the quarter improved due to a high share of license sales to existing customers. As I have stated in the past, we have the ability to scale up capacity, for example, by selling additional software licenses, without deliveries of physical hardware systems being required whenever our existing customers so demands. The combination of a high gross margin and sound cost control enabled us to achieve an EBIT margin of 10 percent for the third quarter.

IBC Conference generated exciting new contacts
September is an important month for the TV industry and thus for Edgeware since this is when the industry gathers in Amsterdam for the IBC Conference. The event provides an excellent opportunity to meet with existing customers and inform them about our latest products, to establish new customer relationships and to meet with key partners in the ecosystem. We kicked off this year’s IBC Conference with a successful partner event, followed by five intensive days at the exhibition itself. We were also pleased with the attendance at this year’s conference and were able to organise several value-generating meetings. In cooperation with one of our partners, we showed how our distributed concept enables the use of a new, innovative technology for protecting against content piracy. This technology, known as Watermarking, allows each individual video stream and illegal copy to be traced back to a user. This makes it possible to track and block pirates and permits the prosecution of intellectual property rights’ infringements. In a market where content value has grown sharply, such protection is becoming increasingly important, and in addition to being approached by several interested Hollywood studios, we were also recognised at the IABM Innovation Awards. During the quarter, we also won Streaming Media Europe’s Readers’ Choice Award for 2017 in the category of Server Hardware/Software.

Continued geographic expansion
Although a large share of our business during the quarter was generated by existing customers in EMEA, we also succeeded in attracting a number of new customers in all other regions. Looking at the first three quarters of the year, APAC continued to grow according to plan. Among other developments, one of our existing and strategically important customers in APAC – a major operator – made further investments during the third quarter.

New employees bring new networks and experience
We are proud to announce that we have continued to attract the expertise we require. During the third quarter, we employed an additional two people net. The total number of employees is now 106, with a spread across EMEA, APAC and AMERICAS, compared with 92 at 30 September 2016. Our organisation now includes some 20 different nationalities. The majority of employees recruited work in sales and customer service. Our new VP R&D, Anders Westin, also took up his new role during the quarter. Anders is part of the company’s management team and brings extensive industry experience, having joined Edgeware from ARRIS where he served as Senior Director of Engineering with responsibility for the company’s IPTV set-top boxes. The position of VP R&D has been held by a consultant since autumn 2016.
Overall, we are proud of Edgeware’s performance during its first year as a listed company. We continue to prioritise and invest in high growth. We plan to expand our global sales and support operations and devote further focus to research and development.

Joachim Roos CEO, Edgeware

Contact : Gunilla Wikman, Investor Relations Manager

Tel: +46707638125, E-mail: gunilla.wikman@edgeware.tv

About Edgeware

Edgeware offers leading operators and content providers the solutions to deliver modern TV services on a huge scale and at a low cost. Edgeware’s unique technology gives control and insight back to the content provider with an outstanding viewing experience. In recent years, Edgeware has experienced rapid growth, reaching sales of SEK 252 million in 2016.

Edgeware is headquartered in Stockholm, Sweden, with a subsidiary in the US and offices in Hong Kong and Mexico. Edgeware also has sales and technical sales support staff in several locations in Europe, Asia and North and Latin America.

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