Ascom grows healthcare revenue within a mixed first half-year

August 16, 2018

  Important strategic milestones achieved in the first half-year - Significant revenue growth in Healthcare as well as in Software and Services - Successful implementation of the Ascom Healthcare Platform at the Erasmus Medical Center in Rotterdam, a leading academic hospital center in Europe - North America has been stabilizing. Several strategic and operational measures have been implemented and a stronger second half-year 2018 is expected - New products and solutions, such as an Elderly Care Platform, CDAS (Confirmed Distributed Alarm System) and Myco 3 to be launched later in 2018  Financial Results H1 2018 show a mixed picture - Incoming orders rose by 7.2% to CHF 169.3 million (+2.4% at constant currencies) - Order backlog was CHF 164.0 million by mid-year (30 June 2017: CHF 136.8 million) - Net revenue grew by 2.6% to CHF 146.9 million (–1.6% at constant currencies) - EBITDA margin at 6.5% (H1/2017: 9.7%) due to higher investments, mainly in innovation - Group profit of CHF 5.4 million (H1/2017: CHF 6.6 million)  Guidance 2018 confirmed - Expectation of a stronger second half-year 2018 - Targets in FY 2018: Revenue growth of 3–6% and an EBITDA margin expected to be in line with last year, up to around 15%

Eventful and challenging first half-year 2018
While the developments in net revenue and EBITDA margin were below Ascom's expectations, the increase in incoming orders and the good level of order backlog are positive achievements.

Ascom succeeded in winning important orders in all geographic regions. Incoming orders came to CHF 169.3 million (H1/2017: CHF 158.0 million), resulting in an increase of 7.2% (+2.4% at constant currencies). The high order backlog of CHF 164.0 million by mid-year 2018 (30 June 2017: CHF 136.8 million) supports the expected growth in the second half of 2018. Given the longer delivery cycles in the software and solutions business, not all order backlog will be converted short-term.

Ascom generated net revenues of CHF 146.9 million (H1/2017: CHF 143.2 million), representing a growth of 2.6% (-1.6% at constant currencies) in the first half-year 2018.

In line with the strategy, overall Healthcare sector revenues grew year-on-year by 9.0% (+4.6% at constant currencies). In Europe, the Healthcare sector increased by 19.1% (+11.4% at constant currencies). Ascom further expanded its software and service business revenues with a combined growth rate of 8.0% (+3.1% at constant currencies) while the Enterprise sector decreased. The OEM business delivered solid results, albeit below the very strong performance achieved in the previous year.

Within Europe, the performance varied from market to market. The strongest performance was achieved in the Benelux region. A major milestone was the successful implementation of the Ascom Healthcare Platform at the Erasmus Medical Center in Rotterdam, a leading academic hospital center in Europe. In addition, the Nordic region also performed well; however, other European regions and the Asia, Australia, Africa (AAA) region showed flat development. In some geographic areas, an element of transition can still be seen.

North America has been stabilizing during the first half of 2018. A comprehensive analysis showed that Ascom is well positioned with its portfolio to exploit the opportunities of the growing American healthcare communication market. North American software sales accelerated significantly year-on-year with additional solid growth in mobility and services. Ascom continues to reinvigorate its channel strategy in regard to the Patient Systems solutions. Overall, the North American region's revenue was slightly below the previous year's. The strengthening of the US management is almost completed, and Ascom sets up a more focused sales structure by improving indirect channel management as well as by increasing direct sales to tap into the growing market potential. Ascom expects a stronger second half-year 2018 in North America.

Further investments into the future of the company
The Ascom Healthcare Platform is an unmatched platform, where digital clinical information flows efficiently across systems, devices and points of care. Ascom has the most complete and comprehensive platform to integrate, orchestrate and enable resources in a clinical and mission-critical environment.

Ascom is confident about its strategy. Although the full implementation may take longer than originally expected, Ascom continues to invest into its future. Ascom strives to develop new solutions and to improve market penetration. As a healthcare ICT provider, innovation is an important success driver. R&D expenses increased by about 20% to CHF 16.5 million for the first half-year 2018 representing 11.2% of net revenue compared to CHF 13.8 million in H1/2017 (9.6% of net revenue). Moreover, Ascom increased its sales and marketing expenses to strengthen the sales performance. Overall, total functional costs increased to CHF 66.4 million (H1/2017: CHF 60.8 million).

Due to higher investments, mainly in innovation, EBITDA for the first half-year 2018 was at CHF 9.6 million (H1/2017: CHF 13.9 million) with an EBITDA margin of 6.5% (H1/2017: 9.7%). Ascom closed the first half-year of 2018 with a Group profit of CHF 5.4 million (H1/2017: CHF 6.6 million). Ascom is a financially sound company with a net cash position of CHF 1.4 million and an equity ratio of 31.8% as of 30 June 2018.

Growth is expected to accelerate in the second half of 2018
Due to the usual seasonality of its business, the higher level of incoming orders and order backlog, Ascom expects acceleration in growth in the second half of 2018, and a recovery in North America due to the strategic and operational measures that have been taken during the last months. Furthermore, Ascom expects a positive impact from the successful reference projects and to benefit from accelerated strategic partnerships as well as through new solutions, such as the purpose-built smartphone Myco 3, CDAS (Confirmed Digital Alarm System) and an Elderly Care Platform, which will be launched this year.

Guidance 2018 confirmed
Based on the expectation of a stronger second half-year, Ascom confirms its communicated guidance for the full year 2018. The target is to achieve revenue growth of 3-6%; the EBITDA margin is expected to be in line with last year, up to around 15%.


CHFm 1st half-year 2018 1st half-year 2017
Incoming orders 169.3 158.0
Order backlog 164.0 136.8
Net revenue 146.9 143.2
EBITDA 9.6 13.9
EBITDA margin in % 6.5% 9.7%
Group profit for the period 5.4 6.6
Number of employees (FTE) at 30.06. 1,227 1,199
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