CEO Statement Q3 2019

Positive earnings and cash flow

Positive cash flow and strong results for Nimbra

Operating earnings and cash flow were positive despite slightly lower sales. We’ve introduced segment reporting for the business areas to increase transparency.

Sales totaled SEK 112 million in the third quarter, down -2% year-on-year. Operating earnings were positive at SEK 3 million. Improved earnings and lower capital tied up generated positive cash flow of SEK 18 million. From this quarter onwards, we’ve introduced segment reporting of revenue and earnings for the business areas. Media Networks (Nimbra) returned an operating margin of 20% despite slightly lower sales. Strong earnings for Media Networks offset a deficit for Resource Optimization (ScheduALL) and the continued investments in Streaming Solutions (Sye). In the quarter, we launched a new website as a step towards improving our information flow and clarifying our customer focus.

We also participated in the International Broadcast Convention (IBC), the industry’s biggest trade fair in Amsterdam, where we had a large number of customer interactions. It’s clear that the industry is continuing to change rapidly, with the most pronounced trends including a shift towards remote production, IP-based transport and cloud-based solutions.

Our Media Networks-business returned increased and solid profitability in the quarter, despite slightly lower sales. Sales are largely driven by events, and large individual transactions can have a significant impact on the quarterly numbers. There is no pronounced seasonal pattern, which means that rolling 12-month sales provide a better indicator than quarterly figures. Over the last year, sales were largely unchanged on a 12-month basis. Looking ahead, we see good growth prospects in expanding market segments such as production and IP and cloud-based transport solutions. In production, we’ve strengthened our industry partnership with a leading manufacturer of cameras and studio equipment, Grass Valley, and have joined their Tech Alliance. This collaboration has generated a joint deal relating to IP-based remote production for a European production company.

Our customers are continuing to modernize their networks using Nimbra 1060. The Spanish state-owned radio and TV broadcaster RTVE provides an example, where we’re delivering their national IP network based on Nimbra 1060. As part of the development of our IP and cloud-based networks portfolio, we launched Nimbra 400 in the quarter, a product family that supports a broad spectrum of video and transport formats.

We see considerable potential for Resource Optimization looking ahead, although realizing this potential requires significant resources. As earlier communicated, we are evaluating different strategic alternatives to realize the full potential of the ScheduALL business. Given the current direction of this business, synergies with other operations will gradually decrease. Accordingly, one of several potential outcomes may include the divestment of the business unit. We expect to be able to communicate the results of the evaluation in connection to the 2019 year-end report.

For Streaming Solutions, we presented plans in the second quarter for increased efforts, requiring a capital contribution during the autumn. We have, for strategic reasons, decided to postpone the timeline for the increased efforts and the capital contribution somewhat. A capital contribution will therefore not take place during the autumn. We have no short-term financing need, and our ambition is to communicate the plans for the Sye efforts at the latest in the first quarter report 2020. On the business side, we announced that Hong Kong Jockey Club is using our Sye solution in their mobile app via the CDN of Mediatech.

In conclusion, it’s pleasing to see that the changes we initiated in the third quarter 2018 have had a positive effect, particularly on the cost side. We hope that increased transparency in the form of segment reporting will improve our stakeholders’ understanding of the different business areas.

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