REG - Ethernity Networks - Update on strategy, trading and $1.5 million order

Ethernity NetworksAnnouncement

01/08/2023 07:00

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RNS Number : 8122H  Ethernity Networks Ltd  01 August 2023

1 August 2023

ETHERNITY NETWORKS LTD.

("Ethernity" or the "Company")

 

Strategy and trading update

and update on $1.5 million order

 

Ethernity Networks (AIM: ENET.L; OTCQB: ENETF), a leading supplier of data
processing semiconductor technology for networking appliances, announces an
update on its recent $1.5 million purchase order and the following update on
the Company's strategy and trading.

 

$1.5m purchase order

 

The Company is pleased to report that it has completed the delivery of the
Company's data processing system-on-chip ("SoC") devices to its existing fixed
wireless customer pursuant to the $1.5 million purchase order announced on 29
June 2023. The Company delivered c. 40% of the order in June 2023 and has
received the payment for this portion, with the balance delivered in July 2023
and due for payment by the end of August 2023.

 

Strategy update

 

Ethernity's Passive Optical Network ("PON") controller technology can be used
in different broadband network configurations and platforms including in
fiber-to-the-premises ("FTTP"), fiber-to-the-building ("FTTB") and
fiber-to-the-home/fiber-to-the-room ("FTTH"/"FTTR") (together, "FTTx"). This
provides Ethernity with the opportunity to offer its PON solutions for a
variety of different scenarios.

 

There is significant global investment in improving fiber connectivity,
particularly in the EU, USA and India. FTTH Council Europe has estimated that
by 2027 approximately 300 million homes will be connected to fiber.  In the
USA, $42.5 billion has been allocated to investment in broadband
infrastructure projects pursuant to the "Broadband Equity, Access, and
Deployment (BEAD) Program".  With certain of those territories banning the
use of products manufactured by Chinese system vendors, this has provided the
opportunity for new vendors to enter the market.

 

Ethernity's go to market strategy is to provide an alternative source of PON
technology for system vendors, by offering the Company's PON controller both
on Field Programmable Gate Arrays ("FPGAs") and in application specific
integrated circuits ("ASICs"), whilst combining its PON technology and flow
processor switch technology onto a single ASIC, thereby delivering a complete
Optical Line Terminal ("OLT") on a chip.

 

The Company's customized PON solution on FPGAs will be offered on a licensing
model which, the Directors believe, will provide a more cost-effective
solution to prospective customers for certain PON applications, compared to
the existing devices in the market. ASIC sales are expected to represent a
larger portion of the total addressable market and will be targeted on a
revenue sharing model with ASIC vendors.  This new revenue sharing model,
which the Company has already begun to discuss with certain customers, should
improve the Company's gross margin compared to its existing product sales and
would allow Ethernity to target larger scale PON platform contracts.

 

Trading update

 

As set out in the Company's annual report and the results for the year ended
31 December 2022 ("FY2022 Accounts"), the Company is taking careful steps
towards generating positive cash flow from its operations during FY2023, which
includes a combination of the modified business model to focus on licensing,
as described above, and a reduction in costs. The delays in existing customer
contracts, combined with the extended sales cycles being experienced by the
Company, as set out in the FY2022 Accounts, place significant uncertainty over
the Company's ability to achieve the revenues previously targeted for FY2023.
Whilst revenue is therefore expected to be lower than previously anticipated,
the focus on the higher margin licensing contracts is expected to contribute
to an improved gross margin once licensing sales commence and, combined with
the cost savings, an improved EBITDA.

 

David Levi, CEO of Ethernity Networks, commented: "With the PON licensing
model that we are implementing, we anticipate that we will be able to generate
positive cash flow from operations and build a profitable and growing
business."

 

For further information, please contact:

 

 Ethernity Networks Ltd                                         Tel: +972 8 915 0392
 David Levi, Chief Executive Officer

 Allenby Capital Limited (Nominated Adviser and Joint Broker)   Tel: +44 (0)20 3328 5656
 James Reeve / Piers Shimwell (Corporate Finance)

 Amrit Nahal / Stefano Aquilino (Sales and Corporate Broking)

 Peterhouse Capital Limited (Joint Broker)                      Tel: +44 (0)20 7562 0930
 Lucy Williams / Duncan Vasey / Eran Zucker

 

 

About Ethernity ( (http://www.ethernitynet.com/) www.ethernitynet.com
(http://www.ethernitynet.com/) (http://www.ethernitynet.com/) )

Ethernity Networks (AIM: ENET.L OTCQB: ENETF) provides innovative,
comprehensive networking and security solutions on programmable hardware that
increase telco/cloud network infrastructure capacity. Ethernity's
semiconductor logic offers data processing functionality for different
networking applications, innovative patented wireless access technology, and
PON access media controllers, all equipped with control software with a rich
set of networking features. Ethernity's solutions quickly adapt to customers'
changing needs, improving time-to-market, and facilitating the deployment of
5G over wireless and fibre infrastructure.

 

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