13/02/2015

Net Insight AB :NET INSIGHT YEAR-END REPORT JANUARY-DECEMBER 2014

A Statement from CEO Fredrik Tumegård:
"The fourth quarter was good with growth of 17%, and the full year 2014 was very good, when we achieved growth of 35% overall. The global moving image market is continuing to grow and media companies are investing to be able to compete for viewers. We're looking forward to continued growth, but also realize that the competition is very intense."

Fourth quarter of 2014

  • Net sales were SEK 91.8 (78.8) million, an increase of 16.5%. In comparable currencies, the increase is 11.3%.
  • Operating earnings were SEK 5.6 (-14.3) million, corresponding to an operating margin of 6.1% (-18.1).
  • Operating earnings adjusted for one-time charges were SEK 5.6 (4.4) million, corresponding to an operating margin of 6.1% (5.6).
  • EBITDA was SEK 8.0 (-14.3) million, corresponding to an EBITDA margin of 8.7% (-18.1).
  • Earnings per share were SEK 0.01 (-0.03).
  • Total cash flow was SEK 21.2 (21.4) million.

January - December 2014

  • Net sales were SEK 379.1 (280.8) million, an increase of 35.0% year on year. In comparable currencies, the increase was 26.9%.
  • Operating earnings were SEK 53.6 (-9.7) million, corresponding to an operating margin of 14.1% (-3.4).
  • Operating earnings adjusted for one-time charges were SEK 53.6 (8.9) million, corresponding to an operating margin of 14.1% (3.2).
  • EBITDA was SEK 67.1 (-8.6) million, corresponding to an EBITDA margin of 17.7% (-3.1).
  • Earnings per share were SEK 0.11 (-0.02).
  • Total cash flow was SEK 90.6 (17.9) million.

CEO STATEMENT

The final quarter of 2014 was good, and the full year 2014 very good. In the full year 2014, we grew by 35%, or 27% currency adjusted, with an operating margin of 14%, so we are very satisfied. The main explanation was a number of major business win in the first half-year. But the fourth quarter was also good, with increased sales of 17% and a number of new business accounts. We also succeeded in generating cash flow of SEK 21 million in the final quarter and SEK 91 million in the full year. Four of the five largest customers in the quarter were new business accounts, including a strategic order for transport solutions from Rai Way, which operates a nationwide terrestrial TV network in Italy. The fourth quarter also brought successes on the interesting Latin American market, with one example being us securing a new digital terrestrial win with Antel in Uruguay. Growth in the quarter was due largely to successes in the North and South America region, which grew by 43%.

We are a growth company active in the TV-market, which is a growing market. We offer highly competitive products to part of this market, and enjoy high growth potential. Media consumers have never had so much choice, and the competition for end-customers is intensifying.

Our customers are media companies, who quite simply, need to expand their supply to compete. Consumers do not just want to watch TV on regular sets, but on all their devices. Competition for customers is driving media companies-regardless of whether they broadcast over regular TV networks or over the Internet-to invest, in production, contribution and distribution. We are really strong in the contribution layer-ensuring that the transmission between various production units works effectively and at a reasonable cost.

To an extent, growth in 2014 can be explained by a number of major deals. After extensive sales work, the Switch and Zayo placed major orders, which means we are hopeful of being able to grow on the attractive North American market. The Switch is offering an attractive service, enabling media companies to order precisely the transmission capacity they need between production units and then pay for actual use, via a web interface. There is no longer any need to lease dedicated connections, which must be paid for regardless of whether capacity is used or not.

The entire media market is in a major transformation, whose most obvious feature is the growth of web TV services. But in tandem with this, traditional TV companies are investing heavily to avoid losing customers, and all companies need to buy films, series and live events to compete. The Sochi Winter Games were an example-such events are becoming increasingly important for attracting viewers and are where most of our customers use our equipment for effective media transport.

The new high-resolution image format-4K-requires far more capacity than standard resolution images or HDTV, which is also triggering heavy investment. The next standard-8K-is just around the corner. We launched a transport solution for both 4 and 8K in the year because we noted how display manufacturers are hard launching 4K displays, with media companies following in their wake with content. There is a very pressing need to get more capacity for your money, and that is where our solutions are well placed. What we sell is efficiency.

We have very competent professionals, but are also active in a high-paced sector, and should never underestimate the need for competence development and new impulses. There are two segments where we are established: Broadcast & Media Networks (BMN) is our most important business area, where we have most of our business. This is where we intend to strengthen our positioning. Digital Terrestrial TV (DTT) is a core business, but most DTT networks are built, and investments there tend to be upgrades. We also have strong positioning here and need to retain it. There is potential in developing countries, where terrestrial networks do not face competition from other types of cable or wired TV, while DTT is not built out yet. Cable TV & IP TV, where we remain small but our products fit well, is a third segment. Over The Top (TV streamed over the Internet) is a fairly new market. The demand for secure, high-quality transmission is increasing in all contexts, and this segment offers promise for the future, while competition is very intense. With our current solutions, we can enable OTT providers to produce TV content cost efficiently and with high quality over the Internet.

We have started working on regenerating our brand. We know that our customers value us, and that our brand represents competence and flexibility. But we are not universally recognized in the sector, and need to clarify what we stand for and where we want to go. We hope to see the results of this branding work as early as during 2015, but it's a long-term investment in our future.

2014 was really good, and our ambition is for this progress to continue in 2015. We see long-term growth in the market and believe in our potential, but it's far harder to predict the rate at which we can secure major orders. However, what is certain is that 2015 will be at least as exciting as 2014.

Net Insight AB (publ) discloses the information provided herein pursuant to the Securities Market Act and/
or the Financial Instruments Trading Act. The information was submitted for publication on February 13, 2015 at 08.45 CET.

Net Insight delivers the world's most efficient and scalable transport solution for Broadcast and IP Media, Digital Terrestrial TV and IPTV/CATV networks.

Net Insight products truly deliver 100 percent Quality of Service with three times improvement in utilization of bandwidth for a converged transport infrastructure. Net Insight's Nimbra(TM) platform is the industry solution for video, voice and data, reducing operational costs by 50 percent and enhancing competitiveness in delivery of existing and new media services.

More than 200 world class customers run mission critical video services over Net Insight products in over 60 countries. Net Insight is quoted on the NASDAQ OMX, Stockholm.

Net Insight Year-end Report 2014