Sivers IMA Q2’20: Building the Pipe
Redeye Research Note 2020/08/21
Sales came in at SEK 21m (expected SEK 18m), the difference being related to the Photonics sales of SEK 17m (expected 13m), while Wireless was in line. The EBITDA and EBIT loss of SEK -9m and -17m were significanty lower than our expected -18m and -26m. Cash amounted to SEK 65m, following SEK -20m in operating cash flow (excl. working capital) and CAPEX of -18m.
We have a long-term, future focus, so the earnings release in itself is really a non-event, in our view. It is rather an opportunity to study the tone in the CEO statement. Material news, such as the 5G contract of SEK 480m, or the orders from the two Fortune 100 customers of in total SEK 30m in the midst of the pandemic, happens in between reports. Speaking of the pandemic, Sivers IMA, similar to most companies, reported lower activity in April and May, and a return to more normal levels in June. It expects a recovery in H2, and reiterated that the Coronavirus should not have a negative effect on the 5G demand. If anything, it could be a positive driver. This verifies our view of Sivers IMA’s industry (telecom) as Corona resilient.
Most important, the company is continuing to build its pipeline. It has been awarded three new design wins during the period and sold EVKs to five potential 5G customers (8 including universities). So far, we would argue that the EVK to design win conversion rate has been high.
All in all, Sivers IMA shows steady progress and the Q2 numbers were better than our expectations. The stock has opened with +7%, although some short-term profit taking would not be a surprise, following +147% in a month.