CEO Statement Q2 2022

Another solid quarter with key deals

Positive trend for our cloud solution Nimbra Edge with two new deals and increased usage by our existing customers.

The steady demand we saw at the beginning of the year has continued into this quarter and we once again report both growth and improved results. We have received a key order from the telecommunications operator Three Sweden for time synchronization of their 5G network and we have secured several important deals of Nimbra Edge, which strengthens our market position. We have high service reliability despite the continued tight component situation and have successfully met customer demand.

Revenue for the second quarter amounted to SEK 110.1 million. Sales in the period increased by 17.1% compared to the corresponding quarter in the previous year (in comparable currencies 8.8%). Operating earnings totaled SEK 9.4 million, compared to SEK 8.6 million in Q2 2021. The growth was driven by our strategic initiatives of launching new products in our core Media business and the new growth area 5G synchronization. The sales increase is in line with the long-term financial target (10%) while the operating margin has not yet reached the long-term target (10%) due to investments for future growth.

We have continued to maintain a high level of service to our customers despite the tough component situation. Furthermore, we have managed the situation well by planning for the long term, adapting our products, and purchasing components on the spot market. We have increased inventories during the quarter to secure future deliveries, which also resulted in some increase in costs. In addition to an increase in capital tied up in inventory, cash flow has also been negatively impacted by the fact that a large portion of the quarter’s revenue was invoiced at the end of the period. We expect uncertainty to persist throughout the rest of 2022.

In the first half of the year, we successfully compensated for increased component costs and we are continuously reviewing the possibility of adjusting our prices to manage further cost increases.

As the market has opened up, we have increased the level of activity with more in-person customer visits. We also participated in the annual NAB – National Association of Broadcasters – trade show in Las Vegas, USA in April.

Order with Three Sweden in 5G synchronization
On June 30, we secured an initial order with telecom-munications operator Three Sweden for time synchronization of their 5G network. The order for our current Nimbra Time Node was placed after thorough and successful testing of their network. The solution is open and can be installed in Three Sweden’s existing network, reducing the cost and complexity of the 5G rollout. It is also GPS-independent – a major competitive advantage in today’s uncertain geopolitical environment.

We are proud that Three Sweden selected us and we look forward to continuing to develop this business. The parties have the intention to enter into a frame agreement for a broader rollout in Three’s mobile network. This is our second strategic order after Türk Telekom and confirms our ability to commercialize our technical excellence.

Increased Nimbra Edge business
I am pleased to see an increase in the usage by our existing Nimbra Edge customers, and that the number of sales of the cloud solution continues to grow. Two new customers have contributed to this positive trend this quarter.
One of them is the leading French service provider Globecast, which has a large installation base of Nimbra products in its global media network and has now also installed our Nimbra Edge solution.
The other is our North American partner Stream Station, which provides contribution and distribution services to service providers and enterprise customers in the US and worldwide. Stream Station has chosen Nimbra Edge to offer additional media services to its customers.

Market in transition
The media and telecom industries are undergoing rapid transformation, which our new products support. However, uncertainties in the external environment mean that it will be difficult to assess the market for the remainder of the year.

I would like to thank all our employees for their great commitment and determination in the challenging situation the world is currently facing.

Solna Sweden, July 20, 2022

Crister Fritzson, CEO