Hannu Huttunen, CEO
The year 2017 was financially challenging for Bittium. Net sales decreased 19.6 percent year-on-year and was EUR 51.6 million. Operating loss was EUR -6.2 million. This loss was caused by the decrease in the net sales and significant R&D investments to enable the Company´s long-term growth.
The share of the services-based net sales decreased significantly, as expected, and remained at EUR 34.9 million, being EUR 16.9 million less than in the last year. The decrease in the services business net sales was mainly caused by the termination of a significant customer cooperation with a global network equipment manufacturer. Bittium has won new R&D services projects for wireless products, however, it has not been able to replace the decrease in the net sales in total.
The share of the product-based net sales grew to EUR 16.3 million which was EUR 4.4 million more than in the last year. The increase in the net sales resulted from the product portfolio extension to medical remote monitoring and measuring of biosignals as well as from the increased deliveries of Bittium Tough Mobile™ LTE smartphones. However, the product-based net sales was below our targets due to the changed schedule of the startup of the deliveries of the mobile devices designed for the Mexican governmental authorities from the year 2017 to 2018.
In line with our strategy, we continued investments into our product business to enable future growth. The year 2017 was significant for us in terms of R&D investments. The investments in own products and product platforms were EUR 15.0 million, which is 29.1 percent of net sales. The investments focused mainly on extending the tactical communication product offering targeted for defense industry as well as on different terminal products and their related software development, targeted for Mobile Security and Public Safety markets. We started the development of new software-defined radio based Bittium Tough SDR™ product family that includes tactical handheld and vehicle radios and continued the development of the secure Bittium Tough Mobile smartphone and the research and development its next generation. We also launched a new software version for our Bittium SafeMoveŽ product family.
Product development of products for measuring and monitoring of biosignals was also continued. Bittium Faros™ ECG-measuring devices´ built-in algorithms for detection of arrhythmias have received medical device approval in Europe. We continued to develop our new Medical Technologies product and service area and started cooperation with a Finnish health care service provider Coronaria Hoitoketju´s subsidiary Coronaria Analyysipalvelut Oy. Through this joint ownership Bittium and Coronaria aim at gaining synergies from Bittium´s device and system development and the interfaces formed by Coronaria´s clinical medicine and services.
The cooperation with the Finnish Defense Forces continued. The development of the tactical communication system Bittium Tactical Wireless IP Network™ (TAC WIN), used by the Finnish Defence Forces, continued and the product deliveries for this communication system were continued. The use of the Bittium TAC WIN system within the Finnish Defence Forces´ branches expands to the Air Force. In addition we made two important agreements with the Finnish Defence Forces for the coming years; a Framework Agreement that continues the deliveries of Bittium TAC WIN products in the years 20182020 and a Letter of Intent concerning the purchase of new Software-Defined Radio (SDR) based tactical radios and the preparations of the purchase.
The new phase of the ESSOR (European Secure Software defined Radio) programme was started, where the operational capabilities of ESSOR High Data Rate Waveform (HDR WF), meant for joint operations between defense forces of different countries, will be enhanced. Bittium is part of the ESSOR programme and will bring the new functionalities of the radio wave form also to the new Bittium Tough SDR radios.
The development of Bittium Tough Mobile smartphone continued further and the National Cyber Security Centre-Finland of the Finnish Communications Regulatory Authority granted approval for the Mobile Security and Public Safety targeted Bittium Tough Mobile LTE smartphone and related back-end system to process material that is classified nationally as Confidential. Bittium Tough Mobile´s unique dual-boot functionality for the Confidential classification level makes it possible to operate the device with two completely separate operating systems: Public and Confidential. The operating system classified as Public is meant for personal communications with access to e.g. Google programs, and Confidential is completely isolated and hardened for secure authority. We signed a contract with the Finnish Defence Forces for the delivery of Bittium Tough Mobile LTE smartphones and related Bittium Secure Suite™ back-end system classified for Confidential level. Although the cyber security threats are increased, the development of Bittium Tough Mobile´s markets have been slower than expected.
We continued the development of our operations, and we were awarded with ISO 13485:2016 certificate, which covers the design, development, manufacturing and related services for the entire product life cycle of medical devices. The quality management system based on ISO 13485:2016 standard is a major competitive advantage and supports Bittium´s strategy for Connectivity Solutions´ product and service area.
We have continued to build this Company to enable long-term growth. We will continue investments in enabling organic growth and in searching for inorganic growth opportunities in all our product and service areas.
I want to thank our personnel and partners for the remarkable investments and numerous great achievements during 2017. I want to express my thanks to our customers for their loyalty and trust, as well as our shareholders for supporting the Company´s long-term growth.