Edgeware publ : INTERIM REPORT JANUARY–MARCH 2019

'The integration and business opportunities deriving from the acquisition of Cavena have exceeded my expectations', Karl Thedéen, CEO, Edgeware

FIRST QUARTER OF 2019:

• Net sales totalled SEK 53.0 million (48.4), an increase of 9.5 percent.
• Net sales totalled SEK 49.8 million (48.4), excluding newly acquired Cavena Image Products AB, an increase of 2.9 percent.
• Gross profit amounted to SEK 38.7 million (32.3), corresponding to a gross margin of 73.0 percent (66.7).
• Gross profit amounted to SEK 36.4 million (32.3), excluding newly acquired Cavena Image Products AB, corresponding to a gross margin of 73.1 percent (66.7).
• Operating income (EBIT) was negative SEK 0.7 million (neg: 11.5), corresponding to an operating margin of negative 1.4 percent (neg: 23.7).
• Profit for the period amounted to SEK 0.4 million (loss: 9.2).
• Cash flow from operating activities totalled SEK 18.2 million (6.7).
• Cash flow for the period of SEK 5.6 million (2.1). This includes the cash-flow effect attributable to the acquisition of Cavena Image Products AB of SEK 9.1 million.
• Earnings per share for the period before and after dilution were SEK 0.0 per share (neg: 0.3).

SIGNIFICANT EVENTS DURING THE FIRST QUARTER

• Edgeware acquired 100% of the shares in Cavena Image Products AB, the leading supplier of subtitles of SEK 8.0 million on a cash and debt-free basis.

SIGNIFICANT EVENTS AFTER THE FIRST QUARTER

• Edgeware launched the Virtual Channel Creation solution that enables customised 'lean-back' TV at the NAB exhibition in Las Vegas.

COMMENTS BY THE CEO

Sales for the first quarter of 2019 were SEK 53 million, which is an increase of 10 percent compared with the year-earlier period. Adjusted for acquisitions and foreign exchange rates effect, sales declined by 3 percent. Overall, the first quarter largely followed the usual seasonal pattern during the year. However, it is pleasing to note that this does not apply to our acquired company, Cavena, which reported a positive start to the year, both in terms of sales and margin. Edgeware's gross margin amounted overall to a strong 73 percent and, in combination with continued cost-efficiency and measures implemented in 2018, this resulted in an EBIT of negative SEK 0.7 million, despite a relatively weak quarter in terms of sales.

The quarter's sales in the AMERICAS was strong due to larger deliveries to our most important customer in the region, which made investments to increase the capacity of its network. APAC also recorded sales growth, but from lower levels. EMEA recorded a weaker quarter in terms of sales, due largely to strong sales to a number of major customers in EMEA during the fourth quarter of 2018.

We foresee continued opportunities relating to the CDN business. The number of users of new TV services is increasing, as is the use of such services as time-shift and the possibility of consuming TV services on various types of devices. Our CDN solution is also world-leading and we have excellent references from many major customers. In particular, we see opportunities outside Europe, where market growth is largest. Our own strong growth in LATAM is a confirmation of this. However, the development for our large EMEA CDN-customers is harder to predict following some years of relatively high investment levels.

To broaden our product portfolio and create a more attractive offering for our customers, we intensified our focus on innovation and the development of prototypes during the quarter.

We can see already now that the acquisition of Cavena has had a positive effect as it has created dialogue with new customers and we continue to believe, therefore, in acquisition as a complement to proprietary product development. When it comes to our own product development for this customer group, we continue to focus strongly on our origin solution, with unique functions for dynamic ad insertion, subtitling, and Virtual Cannel Creation. At the beginning of the current quarter, we will launch our origin solution as a cloud-based service through Amazon Web Services, which will be a key milestone on the journey to creating a new type of software business.

During the quarter, we gained a small but strategic new order for our origin solution from a Nordic broadcaster. This customer is highly advanced, has a modern platform and uses cloud-based technology to be fast, flexible and able to focus on business rather than operational aspects. Crucial in their choice of supplier was the combination of functions for personalised advertising and that our products are suitable for cloud-based solutions. We regard this as confirmation that we have chosen the right path.

In summary, the quarter followed the seasonal variations of earlier years, with relatively low sales. The acquisition of Cavena developed favourably, we secured a new, important customer in the broadcasting segment and won an important CDN order in AMERICAS. We will continue our effort to expand our product portfolio and cultivate new customers.

Karl Thedéen
CEO, Edgeware

At 10:00 a.m. on 25 April 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: [phone]

UK: [phone]

US: [phone]

It is also possible to follow and listen to the presentation on the following web link: https://tv.streamfabriken.com/edgeware-q1-2019

Contact: Annika Norin, CFO

Tel: [phone], E-mail: [e-mail]

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 person set out above, at 7:30 a.m. on 25 April 2019.