A weaker quarter, but key building blocks for future growth are in place
As previously communicated, sales for the second quarter were at an unsatisfactory level. Net sales for the second quarter were SEK 93.5 million, down 29 percent year-on-year. Operating earnings were SEK -21.5 (12.0) million.
The weaker sales are due to three primary factors. Firstly, the global media market is undergoing major restructuring, with customer needs and consumer behavior the main drivers of change. A direct consequence of this, which was particularly noticeable in the quarter, was that many customers needed more time to reach important investment decisions. We’ve always worked in close dialogue with our customers, and are now intensively supporting them in their decision making processes. For some customers, this relates to technical innovation and adaptations of existing systems,for others, it’s about new business models. Although the market realignment leads to uneven order flows in the short term, we’re confident about our offering and business straTegy in the longer term. Our focused strategic initiatives in product development in recent years mean that we’re now more well-positioned than ever, and we’re confident that our initiatives will result in positive sales and profitability.
Secondly, the comparative period in 2016 benefitted from a number of global sporting events such as the summer Olympics and the Euro soccer championships. There were
not any commensurate events with the same global effect on our customers’ willingness to invest in the current period. However, progress is positive at local level. For example, we’ll be delivering solutions to Telekom Malaysia for the Southeast Asian Games 2017. Another important positive indicator is that we’ve also won virtually all of our local tenders.
Thirdly, in 2016 we initiated a strategic journey towards building a more responsive and customer oriented organization. This includes the creation of a total offering with a joint product portfolio, as opposed to selling individual products. Furthermore, we have employed new competence within the company. The largest changes have now been completed and we have a more homogenous, productive and customer-oriented organization. Even if we saw weaker sales during second quarter, we are strongly positioned in order to make use of future business opportunities ahead.
Net Insight is active on a promising market undergoing extensive changes. The market has progressed from TV 1.0 encompassing linear TV, to TV 2.0 offering streamed services such as Netflix and Hulu. We’re now approaching TV 3.0, where viewers are becoming more involved and participate in ways only made possible by our OTT technology Sye. We’re still the only operator globally to offer synchronized live services over the Internet across multiple screens simultaneously, and our technology has won numerous awards since launch. Our focus on live OTT has allowed us to drive market progress, and we’ve created a total offering that consolidates our position. In the quarter, we hosted a successful event alongside STCC where our technology operated seamlessly. This significantly reduced the technology risk in the company and clarified the business opportunities to our customers. We could see that viewers stayed in front of their screens for longer and were more active during broadcasts. More viewers were also able to follow broadcasts on location, or around the country. These are key factors for owners of global events and media rights, where costs and return requirements are continuously increasing.
To conclude, I’d like to emphasize that we’re confident about our long-term strategy and expect sales for the second half-year in line with the record year 2016.