Etherstack’s improved results return it to profitability

Wireless technology specialist Etherstack (ASX:ESK) this week released significantly improved financial results for FY18, with strong revenue growth, positive EBITDA and positive operating cashflow.

Revenues increased by 26.6% in 2018 to US$5.36 million, whilst the company delivered positive EBITDA of US$1.86 million, versus FY2017 EBITDA of US$92,000.

Etherstack, which specialises in developing, manufacturing and licensing mission critical radio technologies for wireless equipment manufacturers and network operators, has turned its operating cashflow around by in excess of US$2.1 million during FY2018 and the strong operating cashflow has continued into FY2019, with the company reporting US$1 million in cash receipts in January this year.

The company is also working hard to further reduce its debt, which will be helped by increasing recurring revenues due to long term support contracts on deployed networks, as well as increased royalty payments from licensee manufacturers of both P25 and DMR radio equipment.

Recurring revenues will also be boosted by new US Government orders and two sector contracts totalling US$2.1 million announced in mid-2018, which have been substantially completed.

Etherstack was on a roll last year, winning new contracts with various government agencies including its first US Customs & Border Patrol (CBP) order, which was successfully delivered just two months ago.

According to the company, it has entered 2019 with a strong order book and new leads from State and Federal public safety agencies in North America and Australia with further awards expected in the next 90 days.

“Our North American and Australian government customer footprint continues to expand through the delivery of leading fixed and tactical communications solutions. We are expecting a significantly stronger 2019 based on orders in hand and negotiations currently underway,” Etherstack CEO, David Deacon said.

Here are the FY18 highlights:

• Revenue of US$5.366 million is an increase of US$1.127 million from 2017 revenues of US$4.239 million, primarily due to continued growth of the recurring revenue streams and project activity on major contracts
• Return to profitability: small NPAT (net profit after tax) of US$53,000 is a significant improvement over 2017 NPAT loss of US$1.546 million
• EBITDA has significantly improved to US$1.863 million from US$0.92 million in 2017
• 11.5% increase in recurring revenues driven by cumulative long-term support contracts
• First sales of the ground-breaking in vehicle repeater product, IVX, and a healthy pipeline of opportunities for this new product
• Operating cash inflow of US$1.528 million during 2018 compared to an outflow of US$0.599 million in 2017
• Significantly increased R&D investment and expenditure particularly in the areas of defence and satellite communications
• Reduction in long-term debt through loan repayments

Successful delivery of:

1. A$1 million order announced in November 2017 for the Australian Government
2. Stage 2 of the Canadian utility project completed in January 2018
3. Two new defence sector wins totalling US$2.1 million were substantially completed in 2018.