EARNINGS CALL 10:00

NOVEMBER 9, 2018

EDGEWARE

Q3 2018

2 © EDGEWARE 2018

TODAY’S PRESENTERS

KARL THEDÉEN

CEO

STEEVE FÜHR

CFO

3 © EDGEWARE 2018

AGENDA Q3 PRESENTATION

1. Results & highlights Q3

2. Financials in depth

3. Summary

4 © EDGEWARE 2018

• Founded in 2004

• Video processing and delivery

solutions for modern TV services over

the Internet

• Scalable, high performance and cost-

efficient solution

• Global presence with HQ in

Stockholm. 101 employees in 11

countries

• Blue-chip customer base of mobile-

and cable operators, broadcasters as

well as OTT providers

• 200 customers in 70 countries

• Listed on Nasdaq Stockholm

ABOUT EDGEWARE – LET´S MAKE TV AMAZING AGAIN

Hong KongHong Kong

Stockholm

5 © EDGEWARE 2018

JULY – SEPTEMBER 2018, IN KEY FIGURES

NET

SALES, MSEK

GROSS

MARGIN

OPERATING

PROFIT, MSEK

(EBIT MARGIN %)

KEY FIGURES

JULY – SEPTEMBER54,5(-8,6%)

3,0(5,5%)

71,7%

KEY FIGURES

JANUARY – SEPTEMBER 152,9

(-9,3%)67,8% -23,7

(-15,5%)

CASH

FLOW

7,0

-21,6

6 © EDGEWARE 2018

HIGHLIGHTS DURING Q3

INNOVATIVE

PRODUCTS

EFFICIENT

OPERATIONS

GROWING

MARKET

GROWTH OPPORTUNITIES

• IBC with increased number of visitors

from broadcaster/OTT segment

• Increased demo/trial activities

specifically on 2nd gen origin

Organizational adjustments in

R&D to increase focus on

innovation and prototyping

Ongoing cost reduction and

efficiency improvements

Launch of SW

enabling delivery

through the

cloud (SaaS)

Successful

IBC show,

incl 2 awards

MARKET EXPANSION

• Com Hem – 2nd gen Ad Insertion

(order received early Q4)

• Televisa – expansion of CDN footprint

incl support for time-shift TV

• Entered into Bulgaria and Argentina

7 © EDGEWARE 2018

IMPORTANT WINS IN Q3

• Enables delivery of personalized

ad insertion on OTT

• Allows glitch-free replacement of

replacement ads

• Solution supports LIVE OTT for

Android devices in addition to

other standard formats

• Implemented by end of 2018

• Mexico’s largest cable TV operator

• Expansion of existing CDN network

• Adding time-shift functionality for

500K subscribers across 100

channels

• Solution delivered includes TV

servers and time-shift functionality

• Implemented in Q3 2018

8 © EDGEWARE 2018

PRODUCT PORTFOLIO TO BROADEN THE ADDRESSABLE MARKET

SAAS Origin/CDN, Delivery via the

Cloud

System solution SW only

or SW and HW

# of customers

Size of customer

Address with SW

components to

enhance inhouse

solution

Small/mid sized local/regional content owners (OTT/broadcasters)Mid sized Telco/Cable

IPTV/OTT

Large OTT,

Telco, CDN

Pls note, company names are examples only,

not all are Edgeware customers

9 © EDGEWARE 2018

PORTFOLIO EXPANSION MEANS BUSINESS MODEL IS EXPANDING TOO

ORIGIN

CAPEX MODEL / HW SALES OPEX & CAPEX MODEL / SW & HW SALES

• Long delivery time • Shorter delivery time

• One-time revenue • Repetitive revenue

CDN CDN

Transition

started

10 © EDGEWARE 2018 / CONFIDENTIAL

GROWTH FOR HIGH SPEED ACCESS ENABLED TV

• High speed Internet access enabled TV grew from 13% to 17% (̴ 24% growth)

• Still 83% of TV households do not have high speed internet access enabled TV

• New high speed access technologies can accelerate migration to TV over internet

TV HOUSEHOLDS WORLDWIDE 2017, BY PLATFORM

Cable TV(Analog &Digital)

High speedInternet accessenabled TV

Satellite (Pay &FTA)

Terrestrial (FTADTT, Pay DTT& Analog)

TV HOUSEHOLDS WORLDWIDE 2023*, BY PLATFORM

Cable TV(Analog &Digital)

High speedInternet accessenabled TV

Satellite (Pay &FTA)

Terrestrial (FTADTT, Pay DTT &Analog)

Source: Statista

*Expected

11 © EDGEWARE 2018 / CONFIDENTIAL

HOURS OF TV WATCHED ON OTT

*20180101-20181105

Source: MMS Nov 2018 – Includes SVT, Discovery Networks Sweden, MTG TV, TV4

0

50 000 000

100 000 000

150 000 000

200 000 000

250 000 000

300 000 000

350 000 000

400 000 000

450 000 000

2012 2013 2014 2015 2016 2017 2018*

Hours watching OTT TV in Sweden

• Growth of TV watched

on OTT in Sweden

from 2012 to 2018*

CAGR ̴ 26%

• Figure excludes Netflix

viewing

12 © EDGEWARE 2018 / CONFIDENTIAL

WHY OTT TV ADVERTISING – AND WHY EDGEWARE’S SOLUTION?

KEY DIFFERENTIATORS WITH

EDGEWARE’S AD ENABLER SOLUTION!

OTT TV advertising

offers new ways to

“CAPITALIZE ON

CONTENT” compared to

traditional TV

advertising

• Better insights of the target

audience, e.g. geolocation,

demographic and device info

• Better opportunity for ads to

be relevant for the target

segment compared to

traditional TV – ads reach

higher “relevance rate” and

less “wasted” rate

• Combine best of two worlds –

broadcast user experience &

Internet efficiency

OTT TV ADVERTISING IS DIFFERENT FROM

TRADITIONAL TV ADVERTISING

• Streamed Live TV

• Deliver in DASH format

(Android devices)

• Cut the stream into segments

with very high precision to make

sure there are no glitches with

old ad or original content

• Deliver as a cloud-native

solution

13 © EDGEWARE 2018

GROWTH STRATEGY PER REGION

1. APAC

2. AMERICAS

3. EMEA

14 © EDGEWARE 2018

AGENDA Q3 PRESENTATION

1. Results & highlights Q3

2. Financials in depth

3. Summary

15 © EDGEWARE 2018

NET SALES (MSEK)

EDGEWARE IN NUMBERS Q3 2018

• Q318 Net Sales decreased -8,6% YoY

• Decrease in local currencies -14,5%

• EMEA Net Sales 24,0 MSEK (47,8)

• APAC Net Sales 3,1 MSEK (6,2)

• Americas Net Sales 27,4 MSEK (5,6)

• Strong tailwind in Q3 from both EUR

and MXN

• Q1-Q3 Net Sales decreased -9,3% YoY

• Decrease in local currencies -12,7%

0

10

20

30

40

50

60

70

80

90

Q1 Q2 Q3 Q4

SEK million Net Sales by Qtr

2015 2016 2017 2018

-8,6% YoY

16 © EDGEWARE 2018

NET SALES & GROSS MARGIN Q3

• Net Sales for Products in Q3 decreased

-13,3% YoY.

• Services increased +11,4 % YoY.

• Gross margin 71,7% (75,7)

• Bad debt 1,3 MSEK

• Net Sales for Products Q1-Q3

decreased -12,9% YoY.

• Services increased +3,1% YoY

• Gross margin 67,8% (74,7) impacted by

low license sales in the product mix and

bad debt, vs 2017

0%

20%

40%

60%

80%

0

20

40

60

80

100

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2015 2016 2017 2018

SEK millionNet Sales by Sales Category and gross margin%

Services Products Gross margin%

17 © EDGEWARE 2018

EBIT AND EBIT MARGIN Q3*EBIT 2016 HAS BEEN ADJUSTED FOR COSTS RELATED TO THE IPO. NO ADJUSTMENTS DONE 2017 AND 2018.

• Reduced OPEX in

combination with healthy

gross margin gave positive

EBIT in Q3

• Q3 OPEX YoY -3,0 MSEK

• Q1-Q3 OPEX YoY +7,6

MSEK, impact from

restructuring 4,7 MSEK

• Total number of employees

end of Q3 was 101 (106

Q317 & 112 Q218)

10,1

3,4

-4,8

4,6

12,2

-0,6

4,9

17,9

13,0

-12,9

6,0 5,8

-11,5-15,2

3,0

19,2%6,7%

-13,4%

7,0%19,1%

-1,2%9,3%

21,1% 18,9%

-32,1%

10,0% 8,4%

-23,7%-30,4%

5,5%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2015 2016 2017 2018

EBIT and EBIT margin

Adjusted EBIT Adjusted EBIT margin%

18 © EDGEWARE 2018

BACK TO PROFITABLE GROWTH

• Gross margin impacted by less revenue, bad debt and lower licenses in the product sales mix

• Fewer employees in G&A and continued focus on cost improvements

• Less consultants, but more HCs in R&D and somewhat higher R&D capitalization in Q3

• Reduction in OPEX to ensure long-term profitable growth

19 © EDGEWARE 2018

BALANCE SHEET AND CASH FLOW

• Strong balance sheet, equity ratio 78,1% (78,5. Dec-17)

• Capitalized expenditure YTD 22,3% (20,2) of gross R&D

• Net impact on EBIT from R&D capitalization/amortization YTD was +3,5 MSEK (+4,2)

• Cash position/Current investment 151,8 MSEK (144,5 Jun-18 & 172,8 Dec-17)

• No loans or interest bearing debt

• Cash flow for the period +7,0 MSEK (-19,6), impacted by less WC and operating profit

EDGEWAREQ3

2018

Q3

2017

Q4

2017

Total Assets 291,9 296,2 311,7

Capitalized expenditure R&D 23,1 19,0 19,9

Equity 228,0 240,6 244,7

Equity Ratio 78,1% 81,2% 78,5%

Net Cash & Current investment 151,8 160,7 172,8

Cash flow from operating activities +13,0 -14,1 +16,0

Cash flow for the period +7,0 -19,6 +11,3

20 © EDGEWARE 2018

AGENDA Q3 PRESENTATION

1. Results & highlights Q3

2. Financials in depth

3. Summary

21 © EDGEWARE 2018

ACTIONS TO RETURN TO PROFITABLE GROWTH

• Improve sales efficiency and allocate resources to markets with

highest returns

– Strong growth in LATAM

– Find strategic partners to address new customers

• Product development that increases our addressable market

including OTTs/Broadcasters/Content Owners

– Signed Com Hem for 2nd gen origin

– Complement existing business model with SaaS(Cloud)

• Increased focus on cost

– Significant cost reduction delivered already in Q3

2

22 © EDGEWARE 2018

JULY – SEPTEMBER 2018, SUMMARY

NET

SALES, MSEK

GROSS

MARGIN

OPERATING

PROFIT, MSEK

(EBIT MARGIN %)

KEY FIGURES

JULY – SEPTEMBER

CASH

FLOW

54,5(-8,6%)

3,0(5,5%)

71,7% 7,0

THANK YOU!

Q4 REPORT TO BE PRESENTED FEBRUARY 1, 2019