Robust profitability for Ekinops in H1 2020: EBITDA margin over 14% despite a turbulent environment
PARIS, July 28, 2020 /PRNewswire/ -- EKINOPS (Euronext Paris - FR0011466069 - EKI), a leading supplier of telecommunications solutions for telecom operators and businesses, has published its first half 2020 financial statements (for the period ended June 30, 2020) as approved by the Board of Directors on July 27, 2020. The statutory auditors have conducted a limited review of the first half financial statements and will shortly issue the corresponding report.
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EURm -IFRS
H1 2019(1) H1 2020 Change
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Revenue 45.0 45.8 +2%
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Gross margin 24.9 24.9 0%
% of revenue 55.3% 54.3%
---
Operating
expenses 22.3 23.8 +EUR1.5m
EBITDA
(2) 8.1 6.5 -EUR1.5m
% of revenue 17.9% 14.3%
Current
operating
income 2.6 1.1 -EUR1.5m
Operating
income/(loss) 0.2 1.2 +EUR1.0m
---
Net income/
(loss) (0.3) 0.9
+1.2m
% of revenue n.a. 2.0%
---
Earnings per
share (EUR) (0.03) 0.04
---
(1) H1 2019 data has been restated in light of the revision of the earn-out payment payable in shares in respect of the OneAccess acquisition. This resulted in a EUR0.4 million increase in the earn-out liability as of June 30, 2019, which was restated under 'Other operating income and expenses' for the first half of 2019 (net expense of EUR2.8 million versus EUR2.4 million as reported a year earlier).
(2) EBITDA (Earnings before interest, taxes, depreciation and amortization) corresponds to current operating income restated for (i) amortization, depreciation, provisions and write-offs, and (ii) income and expenses relating to share-based payments.
Growth generated in H1 2020 despite the pandemic
In H1 2020, Ekinops posted consolidated revenue of EUR45.8 million, up 1.7% (1.2% at constant exchange rates), in the face of the disruptions caused by the coronavirus (COVID-19) pandemic.
Despite particularly challenging conditions, the Group recorded strong business momentum in the Americas (up 14.4%) and returned to growth in France (up 12.4% over the first half), after the 2019 slowdown in investments by the Group's main customers in the home country.
Robust first half EBITDA margin: 14.3%
Gross margin for the period came to EUR24.9 million. The gross margin rate was 54.3%, towards the upper end of the Group's long-term target range (50-55%), compared to the 2019 full-year margin of 53.4%.
This improvement over 2019 reflects tight control of the price/cost ratio, despite pressure on the supply chain in the first half, particularly for some components manufactured in China. It is also the result of the Group's upmarket strategy, with some initial successes announced during the first half, including initial sales of 10G routers and the OTN (Optical Transport Network) platform, its virtual offering chosen by Orange Business Services, etc.
H1 EBITDA came to EUR6.5 million, down EUR1.5 million from first half 2019. The EUR1.5 million increase in operating expenses over the period was mainly due to the expansion of the R&D team (33 new hires, 25 of whom were part of the OTN business acquisition in July 2019). Excluding the impact of this acquisition, first half operating expenses were slightly up, EUR0.5 million, reflecting tight cost control.
Taking these additional expenses into account and despite a challenging environment, the EBITDA margin remained resilient at 14.3%, compared to a record 17.9% in H1 2019 and 14.2% in H2 (16.0% over the full year).
After depreciation, amortization and net provisions (EUR4.8 million) and non-cash expenses relating to share-based payments (EUR0.7 million), current operating income amounted to EUR1.1 million (2.3% of revenue) in H1 2020.
Other operating income and expenses amounted to EUR0.2 million (vs. EUR2.8m expense restated in H1 2019), as there were no expenses and fees relating to acquisitions during the first half. H1 2020 operating income resulted in EUR1.2 million (vs. EUR0.2 million a year earlier).
Net income, Group share came to EUR0.9 million for the first half, compared to a loss of EUR0.3 million a year earlier.
EUR16.2 million net cash[1] as of June 30, 2020
Ekinops generated free cash flow of EUR6.6 million in H1 2020 (up 20% compared to H1 2019), resulting in a net positive operating cash flow of EUR4.3 million after change in working capital (up 37%).
Cash flow from investing activities amounted to a EUR2.2 million outflow, including EUR1.6 million in CAPEX (non-current assets and R&D), up 16% due to the acquisition of the OTN business, and a EUR0.6 million expense relating to the buyout of minority interests of former OneAccess shareholders.
Cash flow from financing activities amounted to a EUR13.5 million inflow in H1 2020, including (i) a EUR2.9 million capital increase following the exercise of warrants and stock options by Group employees, (ii) new bank borrowings totaling EUR11.4 million net of repayments, including a EUR12.0 million "PGE" - state-guaranteed loan obtained in May 2020 and a EUR0.5 million loan under the PPP (Paycheck Protection Program) in the United States.
Change in cash and cash equivalents amounted to a EUR15.3 million inflow in H1 2020, ending with EUR47.9 million of cash and cash equivalents as of June 30, 2020, and total debt of EUR31.7 million. Ekinops is in a particularly solid and comfortable financial position, with net cash[2] of EUR16.2 million as of June 30, 2020 compared to EUR14.0 million at 2019 year-end.
ASSETS -EURm
12/31 6/30
EQUITY & LIABILITIES - EURm
12/31 6/30
IFRS 2019[3] IFRS 2019(2)
2020 2020
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Non-current assets 83.9 77.9 Shareholders' equity 86.4 88.7
o/w goodwill 28.7 28.4 Financial liabilities 18.6 31.7
o/w intangible
assets 34.3 29.7
o/w factoring 6.7 6.3
o/w right-of-use 6.2 5.8 o/w conditional advances/interest free
loans 1.5 1.6
---
Current assets 38.9 44.3 R&D tax credit pre-financing 5.4 3.7
o/w inventories 10.5 12.9
Trade payables 13.8 15.1
o/w trade
receivables 21.4 24.6
Lease liabilities 6.5 6.1
---
Cash & cash
equivalents 32.6 47.9
Other liabilities 24.6 24.8
---
TOTAL 155.4 170.1
TOTAL 155.4 170.1
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Outlook
In the face of the unprecedented global situation caused by the coronavirus, Ekinops managed to maintain its growth trajectory in the first half of 2020. Despite the impact of the health crisis on revenue, the Group was able to strengthen its market positions, in particular in the United States and France, posting double-digit growth in both regions. It demonstrated its operational resilience by improving its gross margin compared to full year 2019 and maintaining a high EBITDA margin.
Ekinops moves into the second half of the year with less visibility than usual. Nonetheless, the Group plans to stay focused over the coming months on high value-added applications such as SD-WAN (Software-Defined Wide Area Network), white boxes and uCPE, OneOS6, VNF, services, 1G/10G routers, OTN and SDN software.
Backed by a solid gross margin in the first half of the year and the success of its upmarket strategy, the Group is confident in its goal of achieving a gross margin rate between 50%-55%, higher than industry benchmarks.
Meanwhile, Ekinops intends to continue its prudent spending policy over the coming months in order to keep expenses under tight control..
Given the opportunities for value creation that have emerged during the crisis, Ekinops should be able to step up its recovery once the effects of the crisis have subsided, before renewing its long-term goal of achieving growth of over 10%.
Financial reporting calendar
Date Release
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Monday, October 12, 2020 Q3 2020 revenue (unaudited)
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Tuesday, January 12, 2021 FY 2020 revenue (unaudited)
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All press releases are published after Euronext Paris market close.
[1] Net cash = cash and cash equivalents - borrowings (excluding bank debt relating to CIR pre-financing and IFRS 16 lease liabilities)
[2] Net cash = cash and cash equivalents - borrowings (excluding bank debt relating to CIR pre-financing and IFRS 16 lease liabilities)
[3] On June 30, 2020, the Group finalized the purchase price allocation of Ekinops Brazil. Certain items were impacted by the retroactive effect of this purchase price allocation. The "December 31, 2019" column includes these impacts.
For more information, visit www.ekinops.com
EKINOPS contact
Didier Brédy
Chairman and CEO
contact@ekinops.com
Investors
Mathieu Omnes
Investor relation
Tel.: +33 (0)1 53 67 36 92
momnes@actus.fr
Press
Nicolas Bouchez
Press relation
Tel.: +33 (0)1 53 67 36 74
nbouchez@actus.fr
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SOURCE Ekinops
