Continuing to build the future, despite turbulent times
At the start of the quarter we saw a positive trend, and we implemented a number of measures aimed at strengthening the Media Networks business. We acquired Aperi’s product portfolio, won our first deal for the Nimbra Edge cloud-based solution, and product development accelerated further according to plan. Towards the end of the quarter, the world’s focus shifted towards the global outbreak of the Covid-19. The market disruption had a negative impact on revenue towards the end of the quarter, which settled at SEK 94 million, down -14% on Q1 2019. Operating earnings were SEK 8 million and was positively affected by currency effects.
Covid-19 negatively impacted Net Insight’s business in Asia for most of the quarter, and in the US and Europe towards the end of the period. Thanks to active cost-management, a good result was achieved despite the challenging conditions. The impact on our ability to deliver products and services was limited, and our accelerated product development was largely unchanged in the quarter. We plan to retain the same level of activity and investments in Q2.
Continue to strengthen the portfolio
As part of the strategy to strengthen the Media Networks business, Net Insight acquired Aperi Corporation’s IP product portfolio for SEK 13 million. The transaction included the full product portfolio, brand, inventory, and accounts receivable. The new products and some unique tech solutions complement and strengthen Net Insight’s existing media transport portfolio. This means that we can cover more use cases and increase sales to new and existing customers. Aperi’s R&D team and offices in California also strengthen Net Insight’s presence on the important US market. The open, flexible products built on a virtualized software architecture will help realize Net Insight’s strategy of an open and complete media transport portfolio. The first smaller Aperi deal was won after the close of the quarter.
During the quarter, we won our first commercial deal for Nimbra Edge with a larger customer in North America. For this customer, Net Insight’s cloud solution will be used for primary distribution for a SVOD service (Subscription Video On Demand), at substantially lower cost compared to the existing distribution solution. The development and commercialization of Nimbra Edge remains a strategic priority. Virtualized cloud-based solutions are increasingly adapted, for both cost and flexibility reasons, and this is an attractive emerging market for Net Insight. Particularly in these times, with travel restrictions, our customers are increasingly focusing on cloud-based solutions, also because of the challenges of testing, installing, and upgrading physical products.
The modernization of ScheduALL is proceeding largely according to plan and the commercial launch of the cloud-based SaaS solution is scheduled in the first half of the year.
Covid-19 and business implications
Towards the end of the first quarter, the spread of the Covid-19 accelerated on a global scale. Generally high uncertainty, combined with canceled and / or postponed live events and leagues, has affected customers and the business sentiment in all our main markets. Travel restrictions have also contributed to difficulties in working with new customers. Our assessment is that the revenue decrease in the quarter was due to Covid-19 effects.
Net Insight actively monitors developments and has implemented measures to mitigate the effects on our staff, customer operations and earnings. Our main scenario assumes continued restrictions with related business impact during the second quarter, followed by a gradual recovery. Future predictions are difficult, and the company continuously evaluates the situation. Net Insight’s strategy is to prioritize R&D and strategic development projects, protect the company’s financial position through active cost management and prepare to rapidly increase activity level when we see signs of recovery. For more information about the Covid-19 situation, see the section on extraordinary events.
I am confident about working with our employees and management to build a successful and growing company. The first step is to ensure internal efficiency and clarify priorities and drive growth on existing core markets. Over time, we will identify and evaluate the potential for expansion in adjacent segments.
Solna, Sweden, April 29, 2020
Crister Fritzson, CEO