CEO Statement Year-end 2018

Reorganization for growth increases efficiencies and strengthens link between development and market

Net sales were SEK 106.4 million in the fourth quarter, compared to SEK 116.2 million in the corresponding period of the previous year. Full year net sales were SEK 451.6 million, an increase of some 6% year-on-year. We are not satisfied with underlying profit, and are focusing on achieving profitable growth.
Net Insight hasn’t returned strong results in recent quarters, and as a newly appointed CEO it’s my task to change this. We have decided to implement a range of measures to improve profitability, increase efficiency and create scope for future investments. We have completed a reorganization that has increased our business focus and clarified product responsibility. We followed this up with a savings program and some minor organizational changes in the middle of January 2019. To be successful, we need to become more responsive to customer needs, and a key part of achieving this is to allocate sales responsibility within the respective product areas.

In the quarter, we recognized impairment losses of some SEK 35 million relating to the Nimbra product Media Gateway. This product hasn’t reached its expected sales targets and further investment would be required to produce a competitive solution. We believe that other areas of the Nimbra platform harbor more potential, and have recognized impairment losses for capitalized development expenditures related to Media Gateway in full.

Although sales didn’t match our expectations in the quarter, there are a number of positive signs. Demand for transport solutions for media over the internet remains high, and we won a record Nimbra VA order for a national distribution network in the quarter. Our customers have shown considerable interest in the Nimbra 1060 media platform, which satisfies future demands on capacity and flexibility, such as live sporting events during the transition to IP-based production flows. Other positive events included a media network contract for the 2019 Handball World Championship in Germany and Denmark, which illustrates the importance of building relationships with content owners, and a Nimbra order from a new service provider. Overall, we have retained our good market position for the Nimbra portfolio, which has further scope for development.

For ScheduALL, we perceive considerable potential for intelligent resource optimization. Media industry operators are increasingly required to manage and optimize
resources in an ever more complex environment, with the associated demands on increased efficiency. We strengthened the product area management during the quarter, and initiated the process of updating and modernizing the ScheduALL solution to meet future customer needs. The new solution will be launched at the NAB show in April.

For Sye, activity remained high with several important business discussions underway. Growth in user numbers for the live quiz Primetime, which is based on Sye, remains very high. More than 900,000 Swedes have downloaded the app since its launch in March 2018, and the quiz now engages over 100,000 daily competitors in Sweden. Primetime also started its international expansion in the quarter.

At the end of January, we signed an important license agreement with a US Fortune 500 company relating to their live video streaming service, which was pleasing and confirms Sye’s attractiveness. This is a major opportunity for Net Insight and we take a positive view of futurerevenue, even if the short-term financial effect is limited.

Net Insight is in a very strong position, which I’ve confirmed in a number of customer meetings during the quarter. Given the measures we have implemented, I’m convinced that we’re heading in the right direction, towards increased growth and profitability.

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