KERLINK (EPA:ALKLK) - First-half 2018 Results

Transparency directive : regulatory news

25/09/2018 17:35

First-half 2018 Results

- Business undermined by delayed deployment for Tier 1 public carriers
- Gross margin improvement reflecting the initial benefits of the business
  model
- Solid cash position maintained: EUR14m

             Kerlink on track to hit revenue of EUR70m by 2020

PRESS RELEASE
Thorigné-Fouillard, 25 September 2018, 5:35 p.m.

Thorigné-Fouillard, France, 25 September 2018 - Kerlink (AKLK - FR0013156007),
a specialist provider of networks and solutions for the Internet of Things
(IoT), today released its 2018 first-half results.

As previously announced, the fiscal year began with a lull in the Group's
robust growth momentum (CAGR of 62% from 2013 to 2017). Even so, the Group has
reiterated its target of EUR70m in revenue by 2020.

Consolidated financial statements

On 20 September 2018, the Board of Directors approved the consolidated
financial statements for the half-year period ended 30 June 2018.

In thousands of euros      H1 2018  H1 2017

Revenue                     8,520   10,088
Gross margin (amount)       4,155    3,377
Gross margin (%)              48%      33%
EBITDA                     -1,552   -1,114
Operating income (expense) -2,554   -1,586
Financial income (loss)       -44      -35
Net profit/(loss) for the
company                   - 2,684   -1,579
Under IFRS - Limited review

Delayed deployment for public carriers

In the public network carriers segment, the Group posted revenue of EUR3.4m
versus EUR5.3m in first-half 2017. This decline can be attributed primarily to
delayed deployment of contracts with Tier 1 public carriers, observed in the
execution of orders initially expected in the second quarter. In the first half
of 2017, contracts with Tier 1 carriers contributed over 36% to total revenue,
as opposed to less than 25% in H1 2018. Despite these deferrals, which may
continue to weigh on activity in the coming months, the Group is as confident
as ever that it will soon be able to recapture its growth momentum. Indeed the
proliferation of projects in discussion phase, along with major players such as
Tencent, Alibaba and Google Cloud recently joining the LoRaTM Alliance are
strong signals to support this conviction.

Furthermore, the Group consolidated its positions in the private carriers
segment with revenue of EUR4.9m, up 5% year-on-year.

Nearly 40% growth in services

Services contributed EUR1.6m to H1 2018 revenue, an increase of 38%
year-on-year. Sales of the Reference Design solution to new manufacturers,
coupled with initial licensing revenues from the marketing of their equipment,
substantially increased to EUR0.2m (+245%).

International business: +31%

On the international market, Kerlink generated revenue of more than EUR5m, up
31%, accounting for 61% of total revenue versus 39% in H1 2017. The Group
boasted strong performances in the EMEA region (excl. France, +132%) and the
NCSA region (Americas), with the Chicago office generating its first revenues
following its creation in August 2017.

Gross margin improvement reflecting the initial benefits of the business model

The gross margin came out at EUR4.2m in H1 2018, representing 48% of revenue
versus 33% (EUR3.4m) in H1 2017, drawing on the improvement in the product mix
thanks to the higher contribution of services to total business recorded over
the period. This trend is perfectly in line with the Group's plan to combine
the development of network infrastructure revenues with an expanded range of
high value-added services for all IoT players (public and private carriers,
manufacturers and users of connected devices).

The drop in business activity automatically weighed on operating profitability,
despite strong cost discipline over the period. H1 2018 EBITDA came to -EUR1.6m
versus -EUR1.1m in H1 2017.
The Kerlink Infrastructure Solutions BU, which sells infrastructure solutions
as well as network management and maintenance services, delivered EBITDA of
-EUR1.8m.
The Kerlink Advanced Services BU, which offers high value-added application
services for connected devices, benefited from the shift in the product mix
towards sales of services to generate EBITDA of EUR0.3m.

Overall, the Group recorded an operating loss of -EUR2.6m, including EUR1m in
amortisation, depreciation and provisions. Financial income was stable. After
tax, Kerlink posted a net loss of -EUR2.7m in H1 2018.

Cash position maintained, intact borrowing capacity

Group shareholders' equity totalled EUR26.1m in H1 2018 versus EUR28.9m in H1
2017. WCR improved and the cash position held steady at roughly EUR14m,
reflecting strong financial discipline with a borrowing capacity intact. With
the financial resources available to the Group and the structure in place,
Kerlink is ideally positioned to seize any prime market opportunities aimed at
ramping up business.

An offensive plan to take advantage of market opportunities

In a bid to take full advantage of market opportunities and restore its robust
growth momentum, the Group has launched a 5-point plan of attack:

1) Consolidating its technological edge:
Priorities in this area for the coming months will focus on expanding the
interoperability of Group and third-party solutions by tapping into the
differentiating core features of the networks and further adapting platform
interfaces and protocols brought to market by new players.

2) Ramping up the conversion of public carriers to IoT networks:
Kerlink is already involved in more than 68 deployment projects and expects to
see the first transformations in the second half. The Group also plans to step
up its efforts to sell global coverage contracts, generating value from its
entire range of products and services, from infrastructure deployment to
integration of high value-added services.

3) Accelerating growth in the private operators segment, with a key focus on
developing verticals with higher-potential and increasing the Group's
commercial presence by expanding its partnerships.

4) Developing market penetration in the high-potential Asia and Americas
regions:
The North American subsidiary has a pivotal role to play in achieving this
goal. To that end, the H2 2018 launch of the new WirnetTM IBTS 64 Highway, the
station dedicated to this high-potential market, will go a long way to building
the Group's presence in the region. Meanwhile, in Asia, market coverage is
poised to expand with the upcoming establishment of a new subsidiary, on the
heels of the successful opening of the Singapore office.

5) Supporting the development of the service offer:
In addition to developing its range of geolocation and other high value-added
services, Kerlink will continue building on the development driven by the
extensive group of clients already equipped with Kerlink solutions all around
the world. In the Reference Design segment, the contribution of royalties
received from the first device manufacturers is expected to continue climbing.
The Group is also doubling down on its sales initiatives in a bid to extend
this offer to new clients.

Kerlink expects to start seeing the results of this proactive plan in 2019.
Although the third quarter is likely to record another sharp decline, business
in H2 2018 should end up increasing compared to the first half. The Group
targets a gross margin of more than 40% for full-year 2018.

About Kerlink Group

Kerlink Group is a global leading provider of end-to-end network solutions for
the Internet of Things (IoT), serving telecom operators, businesses and public
authorities worldwide. Its growing suite of turnkey IoT services includes
network planning, design and operational management that maximizes performance
of its market-leading, carrier-grade infrastructure offering. The Group, widely
recognized for its IoT expertise, also continually introduces innovative
value-added services, such as network- based geolocation, remote end-device
management and low-power IoT reference design, which allows its customers to
quickly bring to market IoT-ready devices and to imagine innovative business
models to monetize their deployments.

In just over 10 years, more than 100,000 Kerlink installations have been
deployed in more than 69 countries. In 2017 Kerlink supplied more than 330
customers, including major telecom operators such as Tata Communications, and
service providers such as GrDF and Suez. The company's solutions are enabling
IoT networks worldwide with major deployments in Europe, South Asia, South
America and Oceania. Kerlink, a co-founder and board member of the LoRa
AllianceTM, has invested more than EUR10 million in research in the past three
years. In 2017, Kerlink Group generated revenues of nearly EUR25 million, more
than 50 percent internationally. Since 2013, it has posted average annual
growth of more than 62 percent. It has been listed on Euronext Growth Paris
since May 2016 and was added to the EnterNext PEA-PME 150, an index of 150
fast-growing French SMEs, in 2017. It joined the Tech 40 index in April 2018,
which recognizes the top-performing tech SMEs on Euronext's markets in
Amsterdam, Brussels, Lisbon and Paris.

For more information, go to www.kerlink.fr and follow us on Twitter
@kerlink_news

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               Q3 2018 revenue: out 30 October 2018 after market
                                 www.kerlink.fr

Investors:
Actifin
Benjamin Lehari
+33 (0)1 56 88 11 25
blehari@actifin.fr

Financial Press:
Actifin
Isabelle Dray
+33 (0)1 56 88 11 29
idray@actifin.fr

Press and Market Analysts:
Mahoney Lyle
Céline Gonzalez
+33 (0)6 75 85 60 42
cgonzalez@mahoneylyle.com

www.kerlink.com      fr.linkedin.com/company/kerlink     @kerlink_news

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