Interim / Quarterly Report • Jul 21, 2020
Interim / Quarterly Report
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Positive result given the market conditions
Crister Fritzson, CEO, Net Insight
| Apr-Jun Jan-Jun |
Jul 2019- | Jan-Dec | |||||||
|---|---|---|---|---|---|---|---|---|---|
| SEK millions | 2020 | 2019 | Change | 2020 | 2019 | Change | Jun 2020 | 2019 | Change |
| Continuing operations | |||||||||
| Net sales per business area | |||||||||
| Media Networks | 88.3 | 106.4 | -17.0% | 164.3 | 200.0 | -17.9% | 342.1 | 377.8 | -9.5% |
| Resource Optimization | 16.6 | 18.8 | -11.3% | 34.7 | 33.8 | 2.4% | 71.6 | 70.8 | 1.2% |
| Net sales | 105.0 | 125.2 | -16.1% | 199.0 | 233.8 | -14.9% | 413.7 | 448.6 | -7.8% |
| Operating earnings | 1.1 | 15.6 | 6.7 | 11.1 | -8.0 | -3.6 | |||
| Operating margin | 1.0% | 12.4% | 3.4% | 4.7% | -1.9% | -0.8% | |||
| Net income | 1.8 | 11.8 | 3.6 | 9.1 | -10.2 | -4.6 | |||
| EBITDA | -5.5 | 15.1 | -7.2 | 17.6 | -31.4 | -6.6 | |||
| EBITDA margin | -5.2% | 12.0% | -3.6% | 7.5% | -7.6% | -1.5% | |||
| Total Group, including discontinued operations |
|||||||||
| Net Income | 1.8 | 2.2 | 250.2 | -6.4 | 224.3 | -32.2 | |||
| Total cash flow | -10.3 | -12.3 | 235.1 | -44.2 | 238.1 | -41.2 |
Streaming Solutions was divested in 2020 and is reported separately as discontinuing operations in this report.
Important major deals on several markets
There was extensive uncertainty relating to Covid-19 at the beginning of the second quarter. Gradually improving market conditions, several major deals and active cost-cutting measures generated positive earnings in the quarter. We continued to strengthen the Nimbra portfolio, and the acquisition of Aperi has generated positive effects. Revenues were SEK 105 million. Operating earnings amounted to SEK 1 million and were negatively affected by exchange rate effects.
The extensive uncertainty at the beginning of April has gradually decreased as countries are starting to ease restrictions and many sporting leagues restarted towards the end of the quarter. Major events such as the Olympics and the UEFA European Football Championships have been postponed which had a negative impact on revenues in the quarter, although most related deals have been postponed rather than cancelled. In the longer term, major leagues have a continued need for expanding their media networks to meet growing capacity requirements, and we secured new deals for sporting leagues in Europe and North America in the quarter. The reduced live event activity is expected to continue to have a negative impact on our customers in the service provider segment.
Travel restrictions continued to have a negative impact on approaching new customers and testing/ installation of physical products. We have implemented cost-cutting measures, including short-term redundancies in Sweden. To step up the pace of our Nimbra development, most of the development team reverted to full time towards the end of the quarter. Our main scenario remains a gradual and slow recovery from Q3 onwards.
In the quarter, we secured several deals for customers looking to expand their media network capacity using modern and flexible solutions. A major sporting league in North America signed an order worth USD 2.5 million relating to products, consultancy services and a 5-year support contract. The order relates to a new 100G IP media network and is designed to meet the highest quality and security standards required for broadcasting today's most exclusive live sporting events. The network is extremely flexible and offers support for tomorrow's remote and distributed production environments.
On our Swedish domestic market, the service provider Mobilelinks during the first six months chose Net Insight's solutions for the expansion of network capacity and connectivity to 50 PoPs (Points of Presence) at arenas and broadcasters throughout the Nordic countries. Both the North American contract
and the Mobilelinks deal are based on our high capacity platform Nimbra 1060.
Alongside our partner METCO (Middle East Telecommunications Company), we won a deal worth over USD 1 million for a national media network for contribution and distribution. The order includes products, consulting services and a 3-year support contract.
We continued to invest in the development of our Nimbra portfolio and launched several important solutions in the quarter, including cloud-based solution Nimbra Edge, as well as new functionality for other Nimbra products. For the Aperi products, development continued according to plan, and we secured deliveries to important existing customers such as Telstra, Arqiva and Orange. The positive customer response confirms that Aperi's open, IPbased and virtualized product portfolio complements and strengthens our media transport offering. Going forward, the plan is to broaden sales of Aperi to include more customers.
At the beginning of July, we launched ScheduALL Evolution, a new cloud-based SaaS and associated analytics components. Customer activity was high in the quarter, with numerous demonstrations of the new solution. In general, ScheduALL was also negatively affected by Covid-19, mainly regarding new customer sales.
The first step on the journey towards building the new and growing Net Insight is to ensure internal efficiency and clear priorities. As part of this work, we established a new structure and strengthened the management team in the quarter. We've completed recruitment for the new position Chief Commercial Officer, as well as a new CFO. We have also started to identify and prioritize strategic growth initiatives and internal areas of improvement.
To conclude, we are posting a relatively strong quarter given the external conditions
Solna, Sweden, July 21, 2020 Crister Fritzson, CEO
The global spread of Covid-19 has had an impact on customers on all our main markets. Larger events have been postponed, with consequential deferral of related business. Activity in the live-event related business has been lower than normal, and our view is that this will continue to have a negative impact on service providers, which is one of our main customer groups.
We as well as our customers have adapted to the current situation with travel restrictions, through e g remote work and increased usage of video meetings, etc. For existing customer relations this has worked fairly well, but it's challenging to approach and win new customers. In the beginning of the quarter measures were taken to reduce the impact on our staff, our business operations and our financial position. For staff in Sweden, working time has been reduced with approximately 20% through furloughs. At the end of the quarter, the Nimbra development pace was increased, and a large part of the development team returned to full time.
Two deals from previous periods have been reversed following the postponement of the Olympics until 2021. This has affected operating earnings in the second quarter with SEK -3.5 million. Operating earnings have further been positively affected with SEK 1.9 million for Covid-19 related governmental grants, of which SEK 1.6 million is at attributable to Sweden. For the US operations we have received a non-interest-bearing loan corresponding to SEK 9.2 million under the US Covid-19 government grants program. The loan will be forgiven if certain criteria are met. The loan has not affected the income statement for the period.
Our main scenario still assumes a gradual recovery from the third quarter. Global travel restrictions are expected to remain for the rest of the year. At the time of this report, we estimate that Covid-19 does not have any material impact on the company's assets. However, the large uncertainty makes predictions on future development difficult, and the company continuously evaluates the situation and need for measures. Net Insights overall strategy for this extraordinary situation is to weather the storm – prioritizing R&D and continue to drive strategic development projects, protect the financial position through active cost control and prepare a rapid activity level increase when we see signs of recovery in the market.
Net sales in the second quarter of 2020 were SEK 105.0 (125.2) million, a decrease of -16.1%. In comparable currencies, sales decreased by -17.0%.
Net sales for the period were SEK 199.0 (233.8) million, a decrease of -14.9%. In comparable currencies, sales decreased by -16.8%.
Net Insight's solutions are sold all over the world and we have customers in around 70 countries. Many customers are global, with central purchasing functions for subsidiaries. Revenue per region for Media Networks, our largest Business Area, varies over time depending on where events take place. Revenue per region is therefore less relevant. We report revenue by region separately (see table on page 10) but without comments.
Net Insight has the following Business Areas: Media Networks and Resource Optimization. See also comments in CEO's statement.
Media Networks encompasses the Nimbra portfolio. A Nimbra solution normally consists of software as well as hardware and support. Customers with existing software licenses sometimes purchases only hardware, which means the mix between software and hardware revenues may vary over time. Revenues are mainly driven by events and specific larger deals can have a significant impact on quarterly revenue. There is no clear seasonality, why revenue on a rolling 12-month basis is a better indicator than a single quarter.
Revenues for the second quarter were SEK 88.3 (106.4) million, a decrease of -17.0%. The decrease is largely attributable to the Covid-19 pandemic's impact on business. Revenue decreased for hardware and software, whereas service revenue increased slightly.
Revenues for the six-month period were SEK 164.3 (200.0) million, a decrease of -17.9%. Revenues decreased mainly for hardware, but also for software and services.
Resources Optimization encompasses ScheduALL, a pure software solution. Revenues are derived from software licenses sales, support and professional services. The business model for the coming solution is SaaS, Software as a Service.
Revenues for the second quarter were SEK 16.6 (18.8) million, a decrease of -11.3%. The increase is attributable mainly to software licenses.
Revenues for the six-month period were SEK 34.7 (33.8) million, an increase of 2.4%.
Gross profit for the second quarter was SEK 69.4 (78.5) million, a decrease by -11.7%. The decrease is explained by the lower revenue for Media Networks, partially offset by lower amortization of R&D expenditure. Gross profit included amortization of capitalized development expenditure of SEK -8.7 (-9.2) million. Gross margin excluding and including amortization of capitalized development expenditure was 74.4% (70.1%) and 66.1% (62.7%) respectively.
Operating expenses in the second quarter of SEK -61.4 (-62.2) million were in line with the corresponding period of the previous year. Operating expenses has been positively affected with SEK 1.6 (-) million related to governmental Covid-19 relief support.
Sales and marketing expenses were SEK -28.6 (-28.9) million, and administration expenses to SEK -16.4 (-16.0). Development expenses were SEK -16.3 (-17.3) million. Total development expenditure, i.e. before capitalization, increased to SEK -36.8 (-32.1) million, primarily because of increased efforts for the Nimbra portfolio. Other operating income and expenses were SEK -6.9 (-0.8) million, mainly related to foreign exchange rate gains.
Operating earnings were SEK 1.1 (15.6) million, corresponding to an operating margin of 1.0% (12.4%). This includes foreign exchange rate differences of SEK -7.2 (-0.8) million. Further, operating earnings has been affected with SEK -3.5 (-) million for the reversal of two deals from previous periods, due to the Covid-19 related postponement of the Olympic games. Excluding these items, operating earnings were SEK 11.8 (16.4) million.
EBITDA was SEK -5.5 (15.1) million, corresponding to an EBITDA margin of -5.2% (12.0%). The decrease is attributable to the lower operating earnings and an increase of total development expenditures, i.e. before capitalizations.
In the second quarter, net financial items amounted to SEK 0.7 (-0.8) million.
Profit before tax for the second quarter was SEK 1.8 (14.8) million, and net income was SEK 1.8 (11.8) million, corresponding to a net margin of 1.7% (9.4%). Including Discontinued operations, net income was SEK 1.8 (2.2) million.
Gross earnings for the six-month period were SEK 127.5 (144.4) million. Operating expenses of SEK -124.6 (-133.0) million decreased following cost reduction initiatives. Operating earnings were SEK 6.7 (11.1). EBITDA was SEK -7.2 (17.6) million. The decrease is attributable to the lower operating earnings and an increase of total development expenditures, i.e. before capitalizations. A retroactive reclassification of foreign exchange effects for the period January-March, related to the divestment of the Sye operations during the first quarter, have affected Operating earnings with SEK -2.7 million. See further under Accounting Policies below.
| Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | |||
|---|---|---|---|---|---|---|
| Key Ratios continuing operations |
2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Net sales, SEK millions | 105.0 | 125.2 | 199.0 | 233.8 | 413.7 | 448.6 |
| Net sales YoY, change in % | -16.1% | 5.3% | -14.9% | 1.9% | -3.1% | -0.2% |
| Gross earnings | 69.4 | 78.5 | 127.5 | 144.4 | 265.4 | 282.3 |
| Gross margin | 66.1% | 62.7% | 64.1% | 61.8% | 64.2% | 62.9% |
| Operating earnings | 1.1 | 15.6 | 6.7 | 11.1 | -8.0 | -3.6 |
| Operating margin | 1.0% | 12.4% | 3.4% | 4.7% | -1.9% | -0.8% |
| EBITDA | -5.5 | 15.1 | -7.2 | 17.6 | -31.4 | -6.6 |
| EBITDA margin | -5.2% | 12.0% | -3.6% | 7.5% | -7.6% | -1.5% |
Earnings trend continuing operations
2018 2019 2020
Operating margin rolling 4 quarters
Operating earnings
Operating earnings for Media Networks for the second quarter decreased and amounted to SEK 7.9 (23.9) million, corresponding to an operating margin of 9.0% (22.4%). The earnings decrease is attributable to Covid-19 impact on revenue. The Aperi operation, which was acquired during the first quarter, affected Operating earnings with SEK -2.0 (-) million. Total development expenditure increased because of further portfolio investments, including the Aperi acquisition, and amounted to SEK -27.6 (-20.6) million.
Operating earnings for the six-month period were SEK 4.6 (29.7) million, corresponding to an operating margin of 2.8% (14.9%). The decrease is primarily attributable to Covid-19 impact on revenue. Total development expenditure increased because of further portfolio investments, including the Aperi acquisition, and amounted to SEK -57.0 (-41.7) million.
For Resource Optimization, operating earnings for the second quarter amounted to SEK 0.5 (-7.7), a clear improvement versus the corresponding period. This is due to higher gross earnings as well as to a decrease of operating expenses, primarily due to efficiency measures but also to a higher capitalization rate of development expenditure. Total development expenditure decreased slightly and amounted to SEK -9.3 (-11.6).
Operating earnings for the six-month period were SEK -1.3 (-18.7). This is due to higher revenue and gross earnings as well as to a decrease of operating expenses, primarily due to efficiency measures but also to a higher capitalization rate of development expenditure. Total development expenditure decreased slightly and amounted to SEK -20.1 (-20.8)
Second quarter investments were SEK 22.7 (21.0) million, of which SEK 20.5 (14.8) million related to capitalization of expenditure for development. Depreciation and amortization in the second quarter totaled SEK 13.9 (19.2) million, of which SEK 8.7 (14.1) million related to amortization of capitalized expenditure for development.
Investments for the first six months were SEK 47.1 (38.5) million, of which SEK 41.8 (37.5) million related to capitalization of expenditure for development. Depreciation and amortization for the first six months totaled SEK 27.8 (38.9) million, of which SEK 17.2 (28.7) million related to amortization of capitalized expenditure for development.
At the end of the period, net value of capitalized expenditure for development was SEK 209.2 million. Net value of capitalized expenditure for development as of December 31, 2019, was SEK 184.6 million for continuing operations and SEK 264.3 million for the Group, including divested operations.
Investments per Business Area only reflects capitalized expenditure for development.
Capitalized expenditure for development in the second quarter amounted to SEK 12.8 (9.2) million, and amortization to SEK -7.1 (-7.6) million. For the six-month period, capitalized expenditure for development amounted to SEK 27.4 (15.2) million, and amortization to SEK -14.4 (-17.8) million.
At the end of the period, net value of capitalized expenditure for development was SEK 139.2 million, against SEK 126.0 million as of December 31, 2019.
Capitalized expenditure for development in the second quarter amounted to SEK 7.7 (5.6) million, and amortization to SEK -1.6 (-1.6) million. For the six-month period, capitalized expenditure for development amounted to SEK 14.4 (9.5) million, and amortization to SEK -2.7 (-2.7) million
At the end of the period, net value of capitalized expenditure for development was SEK 70.0 million, against SEK 58.5 million as of December 31, 2019.
Cash flow from operating activities in the second quarter was SEK 13.8 (10.6) million. Total cash flow was SEK -10.3 (-12.3) million. Total cash flow includes a US Covid-19 government grant loan of 9.2 MSEK (-). The grant is a non-interest-bearing loan, which will be forgiven if certain criteria are met. The loan has not affected the income statement for the period and is recorded as an operating liability.
Cash flow from operating activities for the six-month period was SEK -16.4 (-0.1) million, and total cash flow was 235.6 (-44.2). The divestment of Business Area Streaming Solutions in the first quarter had a cash impact of SEK 302.3 (-) million.
Cash and cash equivalents were SEK 256.7 million at the end of the period, against SEK 52.3 million as of 31 December 2019.
Remaining tax loss carryforwards for group companies amounted to SEK 101.5 million at the end of the period, compared to SEK 102.8 million as of December 31, 2019. Deferred tax assets have been recognized for the tax loss carryforwards. For more information, see the section Tax on page 14.
Equity was SEK 714.7 million at the end of the period, against SEK 463.7 million as of 31 December 2019. The equity/assets ratio was 78.2%, against 67.6% as of 31 December 2019. For information about warrants, share repurchases and share structure, see the section Contributed equity on page 14.
The Company has previously announced an ambition to propose a capital redistribution. Given the current uncertainties, a decision regarding the form and timing for a capital redistribution has been pushed forward in time.
The average number of employees and consultants at Net Insight during the second quarter and the six-month period was 198 (188) and 198 (190) respectively, of which 127 (110) and 127 (111) respectively in the parent company Net Insight AB (publ).
Crister Fritzson assumed the CEO position on April 1. During the second quarter, changes in the executive management per June 1 were announced. Per Lindgren assumed the Chief Technology Office role. Ulrik Rohne assumes a new role as Chief Operating Officer. Mårten Blixt was appointed to the new role Chief Commercial Officer and assume the position in August 2020. Further it was announced that the CFO will be leaving his position, and that Joakim Schedvins has been appointed successor and will assume the CFO position latest in November 2020.
Parent company net sales were SEK 88.2 (139.9) million in the second quarter, and net income was SEK -2.2 (1.8) million. In the second quarter, intra-group sales totaled SEK 1.6 (29.5) million, and intra-group purchases SEK -11.4 (-45.6) million.
For the six-month period, parent company net sales were SEK 168.4 (269.5) million, and net income was SEK 198.0 (7.5) million. The financial net includes result from participation in group companies of SEK 196.5 (1.8) million, which for 2020 relates to capital gains from divestment of subsidiary, and for 2019 from dividend from subsidiary. For the six-month period, intra-group sales totaled SEK 6.3 (63.5) million, and intra-group purchases SEK -24.5 (-86.5) million.
Intra-group sales and purchases have decreased due to the intra-group restructuring that was done during the last quarter of 2019, including the parent company acquisition of all immaterial rights related to Nimbra from a subsidiary.
Progress in the parent company in the first quarter and the full year largely shadowed Group progress as indicated above for the business area Media Networks
Net Insight's operations and results of operations are affected by a number of external and internal factors. The company conducts a continuous process to identify all risks present, and to assess how each risk should be managed.
Primarily, the risks the company is exposed to are market-related risks (including competition, technological progress and political risks), operational risks (including product liability, intellectual property, disputes, customer dependency and contract risks) as well as financial risks.
See page 3 for Covid-19 and impact on business.
No additional critical risks and uncertainty factors, other than those reviewed in the Annual Report for 2019, arose during the period or are anticipated in 2020.
For a complete review of the company's risk and sensitivity analysis, and its risk management process, see pages 28–30 and 49–50 of the Annual Report for 2019.
In the past three calendar years, average seasonality has been fairly modest. Net sales for continuing operations in the first, second, third and fourth quarter has been on average approximately been 25% of annual sales respectively.
| Apr-Jun Jan-Jun |
Jul 2019- | Jan-Dec | ||||
|---|---|---|---|---|---|---|
| SEK thousands | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Continuing operations | ||||||
| Net sales | 104,957 | 125,167 | 198,952 | 233,825 | 413,677 | 448,550 |
| Cost of sales | -35,606 | -46,659 | -71,421 | -89,394 | -148,278 | -166,251 |
| Gross earnings | 69,351 | 78,508 | 127,531 | 144,431 | 265,399 | 282,299 |
| Sales and marketing expenses | -28,568 | -28,911 | -57,182 | -61,145 | -124,853 | -128,816 |
| Administration expenses | -16,446 | -15,980 | -32,204 | -34,202 | -65,357 | -67,355 |
| Development expenses | -16,348 | -17,283 | -35,183 | -37,694 | -68,265 | -70,776 |
| Other operating income and expenses | -6,903 | -764 | 3,728 | -315 | -14,909 | -18,952 |
| Operating earnings | 1,086 | 15,570 | 6,690 | 11,075 | -7,986 | -3,600 |
| Net financial items | 700 | -767 | -2,120 | 463 | -5,592 | -3,009 |
| Profit/loss before tax | 1,786 | 14,803 | 4,570 | 11,538 | -13,578 | -6,609 |
| Tax | -4 | -2,996 | -999 | -2,432 | 3,398 | 1,965 |
| Net income continuing operations | 1,782 | 11,807 | 3,570 | 9,106 | -10,179 | -4,644 |
| Discontinued operations, net after tax | - | -9,632 | 246,580 | -15,465 | 234,501 | -27,543 |
| Net Income | 1,782 | 2,175 | 250,150 | -6,359 | 224,322 | -32,187 |
| Net income for the period attributable to the | ||||||
| shareholders of the parent company | 1,782 | 2,175 | 250,150 | -6,359 | 224,322 | -32,187 |
| Earnings per share, based on net income attributable | Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | ||
| to the parent company's shareholders during the period |
2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Earnings per share basic and diluted continuing operations (SEK) |
0.00 | 0.03 | 0.01 | 0.02 | -0.03 | -0.01 |
| Earnings per share basic and diluted including discontinuing operations (SEK) |
0.00 | 0.01 | 0.65 | -0.02 | 0.59 | -0.08 |
| Average number of oustanding shares in thousands, basic |
382,758 | 382,758 | 382,758 | 382,858 | 382,758 | 382,812 |
| Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | |||
|---|---|---|---|---|---|---|
| SEK thousands | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Net income | 1,782 | 2,175 | 250,150 | -6,359 | 224,322 | -32,187 |
| Other comprehensive income | ||||||
| Items that may be reclassified subsequently to the income statement |
||||||
| Translation differences | -5,579 | -71 | -136 | 2,698 | 1,070 | 3,904 |
| Total other comprehensive income, after tax | -5,579 | -71 | -136 | 2,698 | 1,070 | 3,904 |
| Total other comprehensive income for the period | -3,797 | 2,104 | 250,014 | -3,661 | 225,392 | -28,283 |
| Total comprehensive income for the period attributable to the shareholders of the parent company |
-3,797 | 2,104 | 250,014 | -3,661 | 225,392 | -28,283 |
| SEK thousands | Jun 30, 2020 | Mar 31, 2020 | 31 Dec 2019 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Capitalized expenditure for development | 209,196 | 202,461 | 184,582 |
| Goodwill | 65,791 | 70,575 | 65,582 |
| Other intangible assets | 10,166 | 9,939 | 10,560 |
| Right-of-use assets | 47,377 | 50,326 | 52,394 |
| Equipment | 29,402 | 31,478 | 29,531 |
| Deferred tax asset | 26,184 | 27,048 | 26,997 |
| Deposits | 5,184 | 5,224 | 5,186 |
| Totalt non-current assets | 393,300 | 397,051 | 374,832 |
| Current assets | |||
| Inventories | 62,693 | 58,568 | 44,584 |
| Accounts receivable | 114,767 | 115,923 | 103,771 |
| Other receivables | 56,848 | 65,381 | 17,179 |
| Cash and cash equivalents | 286,677 | 298,178 | 52,280 |
| Assets held for sale | - | - | 93,840 |
| Total current assets | 520,985 | 538,050 | 311,654 |
| TOTAL ASSETS | 914,285 | 935,101 | 686,486 |
| EQUITY AND LIABILITIES | |||
| Equity attributable to parent company's shareholders | |||
| Share capital | 15,597 | 15,597 | 15,597 |
| Other paid-in capita | 1,192,727 | 1,192,727 | 1,192,727 |
| Translation reserve | 9,337 | 14,916 | 9,473 |
| Accumulated deficit | -502,952 | -505,684 | -754,052 |
| Total shareholders' equity | 714,709 | 717,556 | 463,745 |
| Non-current liabilities | |||
| Lease liabilities | 37,332 | 39,721 | 41,517 |
| Other liabilities | 17,501 | 22,414 | 20,649 |
| Total non-current liabilities | 54,833 | 62,135 | 62,166 |
| Current liabilities | |||
| Lease liabilities | 10,031 | 10,469 | 10,586 |
| Accounts payable | 21,682 | 30,319 | 35,821 |
| Other liabilities | 113,030 | 114,622 | 111,173 |
| Liabilities directly associated with assets held for sale | - | - | 2,995 |
| Total current liabilities | 144,743 | 155,410 | 160,575 |
| TOTAL EQUITY AND LIABILITIES | 914,285 | 935,101 | 686,486 |
| Attributable to parent company's shareholders | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SEK thousands | Share capital |
Other paid-in capital |
Translation reserve |
Accumulated deficit |
Total shareholders' equity |
|||||||
| January 1, 2019 | 15,597 | 1,192,727 | 5,569 | -720,028 | 493,865 | |||||||
| Repurchase of own shares | - | - | - | -1,837 | -1,837 | |||||||
| Total comprehensive income | - | - | 3,904 | -32,187 | -28,283 | |||||||
| December 31, 2019 | 15,597 | 1,192,727 | 9,473 | -754,052 | 463,745 | |||||||
| January 1, 2020 | 15,597 | 1,192,727 | 9,473 | -754,052 | 463,745 | |||||||
| Warrants issued | - | - | - | 950 | 950 | |||||||
| Total comprehensive income | - | - | -136 | 250,150 | 250,014 | |||||||
| June 30, 2020 | 15,597 | 1,192,727 | 9,337 | -502,952 | 714,709 |
| Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | |||
|---|---|---|---|---|---|---|
| SEK thousands | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Ongoing activities | ||||||
| Profit/loss before tax | 1,786 | 2,549 | 251,212 | -8,137 | 217,698 | -41,651 |
| Income tax paid | - | - | - | - | -371 | -371 |
| Depreciation, amortization & impairment | 13,929 | 19,163 | 27,838 | 38,915 | 66,771 | 77,848 |
| Other items not affecting liquidity | 7,183 | 1,029 | -244,726 | 665 | -230,162 | 15,229 |
| Cash flow from operating activities before changes in working capital |
22,898 | 22,741 | 34,324 | 31,443 | 53,936 | 51,055 |
| Changes in working capital | ||||||
| Increase-/decrease+ in inventories | -4,121 | 4,912 | -19,075 | -1,738 | -20,019 | -2,682 |
| Increase-/decrease+ in receivables | 9,689 | 1,872 | -15,859 | -37,586 | 20,155 | -1,572 |
| Increase+/decrease- in liabilities | -14,618 | -18,899 | -15,765 | 7,815 | -9,537 | 14,043 |
| Cash flow from operating activities | 13,848 | 10,626 | -16,375 | -66 | 44,535 | 60,844 |
| Investment activities | ||||||
| Investment in intangible assets | -22,701 | -20,553 | -44,047 | -37,768 | -96,438 | -90,159 |
| Investment in tangible assets | -2 | -434 | -3,028 | -749 | -4,209 | -1,930 |
| Disposal of subsidiary, net effect on cash | - | - | 302,348 | - | 302,348 | - |
| Increase-/decrease+ in financial assets, net | - | 32 | - | 32 | 14 | 46 |
| Cash flow from investment activities | -22,703 | -20,955 | 255,273 | -38,485 | 201,715 | -92,043 |
| Financing activities | ||||||
| Amortization leasing | -2,400 | -1,935 | -4,781 | -3,843 | -9,092 | -8,154 |
| Warrant premiums paid | 950 | - | 950 | - | 950 | - |
| Repurchase of own shares | - | - | - | -1,837 | - | -1,837 |
| Cash flow from financing activities | -1,450 | -1,935 | -3,831 | -5,680 | -8,142 | -9,991 |
| Net change in cash and cash equivalents | -10,305 | -12,264 | 235,067 | -44,231 | 238,108 | -41,190 |
| Exchange differences in cash and cash equivalents | -1,196 | -204 | -720 | 262 | -355 | 627 |
| Cash and cash equivalents at the beginning of the period |
298,178 | 61,392 | 52,330 | 92,893 | 48,924 | 92,893 |
| Cash and cash equivalents at the end of the period | 286,677 | 48,924 | 286,677 | 48,924 | 286,677 | 52,330 |
The company's segments are the business areas Media Networks and Resource Optimization. The business area Streaming Solutions was divested in 2020, hence the business area is reported separately as discontinuing operations and are excluded from the segment reporting.
| Apr-Jun 2020 | Apr-Jun 2019 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| SEK thousands | Media Networks | Optimization Resource |
Unallocated items & eliminations |
Total | Media Networks | Optimization Resource |
Unallocated items & eliminations |
Total | ||
| Net Sales | 88,323 | 16,634 | - | 104,957 | 106,414 | 18,753 | - | 125,167 | ||
| Gross earnings | 58,771 | 10,558 | 22 | 69,351 | 68,124 | 10,362 | 22 | 78,508 | ||
| Net margin | 66.5% | 63.5% | 66.1% | 64.0% | 55.3% | 62.7% | ||||
| Operating earnings | 7,946 | 547 | -7,407 | 1,086 | 23,875 | -7,696 | -609 | 15,570 | ||
| Gross margin | 9.0% | 3.3% | 1.0% | 22.4% | -41.0% | 12.4% | ||||
| Net financial items | 700 | 700 | -767 | -767 | ||||||
| Profit/loss before tax continuing operations |
1,786 | 14,803 |
| Jan-Jun 2020 | Jan-Jun 2019 | Jul 2019-Jun 2020 | Jan-Dec 2019 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SEK thousands | Media Networks | Optimization Resource |
Unallocated items & eliminations |
Total | Media Networks | Optimization Resource |
Unallocated items & eliminations |
Total | Media Networks | Optimization Resource |
Unallocated items & eliminations |
Total | Media Networks | Optimization Resource |
Unallocated items & eliminations |
Total |
| Net Sales | 164,294 | 34,658 | - | 198,952 | 199,993 | 33,832 | - | 233,825 | 342,065 | 71,612 | - | 413,677 | 377,764 | 70,786 | - | 448,550 |
| Gross earnings | 105,522 | 21,966 | 43 | 127,531 | 127,792 | 16,596 | 43 | 144,431 | 220,087 | 45,220 | 92 | 265,399 | 242,357 | 39,850 | 92 | 282,299 |
| Gross margin | 64.2% | 63.4% | 64.1% | 63.9% | 49.1% | 61.8% | 64.3% | 63.1% | 64.2% | 64.2% | 56.3% | 62.9% | ||||
| Operating earnings | 4,649 | -1,340 | 3,381 | 6,690 | 29,737 | -18,653 | -9 | 11,075 | 21,390 | -14,446 | -14,930 | -7,986 | 46,479 | -31,759 | -18,320 | -3,600 |
| Gross margin | 2.8% | -3.9% | 3.4% | 14.9% | -55.1% | 4.7% | 6.3% | -20.2% | -1.9% | 12.3% | -44.9% | -0.8% | ||||
| Net financial items | -2,120 | -2,120 | 463 | 463 | -5,592 | -5,592 | -3,009 | -3,009 | ||||||||
| Profit/loss before tax continuing operations |
4,570 | 11,538 | -13,578 | -6,609 |
| Apr-Jun 2020 | Apr-Jun 2019 Jan-Jun 2020 |
Jan-Jun 2019 | Jul 2019-Jun 2020 | Jan-Dec 2019 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SEK thousands | Networks Media |
Optimization Resource |
Total | Networks Media |
Optimization Resource |
Total | Networks Media |
Optimization Resource |
Total | Networks Media |
Optimization Resource |
Total | Networks Media |
Optimization Resource |
Total | Networks Media |
Optimization Resource |
Total |
| Net sales by product group |
||||||||||||||||||
| Hardware | 36,276 | - | 36,276 | 52,442 | - | 52,442 | 68,655 | - | 68,655 | 94,739 | - | 94,739 | 145,655 | - 145,655 | 171,739 | - 171,739 | ||
| Software licenses | 22,737 | 973 | 23,710 | 25,636 | 2,380 | 28,016 | 38,322 | 2,205 | 40,527 | 44,866 | 2,380 | 47,246 | 80,590 | 6,107 | 86,697 | 87,134 | 6,282 | 93,416 |
| Support and Services | 29,310 | 15,661 | 44,971 | 28,336 | 16,373 | 44,709 | 57,317 | 32,453 | 89,770 | 60,388 | 31,452 | 91,840 | 115,820 | 65,505 181,325 | 118,891 | 64,504 183,395 | ||
| Total | 88,323 16,634 104,957 | 106,414 18,753 125,167 | 164,294 | 34,658 198,952 | 199,993 | 33,832 233,825 | 342,065 | 71,612 413,677 | 377,764 | 70,786 448,550 | ||||||||
| Net sales by region | ||||||||||||||||||
| WE | 31,587 | 4,275 | 35,862 | 45,551 | 4,897 | 50,448 | 70,685 | 9,271 | 79,956 | 84,094 | 8,833 | 92,927 | 154,891 | 18,344 173,235 | 168,300 | 17,906 186,206 | ||
| AM | 34,745 | 9,168 | 43,913 | 40,536 | 10,163 | 50,699 | 58,966 | 18,650 | 77,616 | 80,623 | 19,902 100,525 | 115,894 | 40,756 156,650 | 137,551 | 42,008 179,559 | |||
| RoW | 21,991 | 3,191 | 25,182 | 20,327 | 3,693 | 24,020 | 34,643 | 6,737 | 41,380 | 35,276 | 5,097 | 40,373 | 71,280 | 12,512 | 83,792 | 71,913 | 10,872 | 82,785 |
| Total | 88,323 16,634 104,957 | 106,414 18,753 125,167 | 164,294 | 34,658 198,952 | 199,993 | 33,832 233,825 | 342,065 | 71,612 413,677 | 377,764 | 70,786 448,550 | ||||||||
| Timing of revenue | ||||||||||||||||||
| recognition | ||||||||||||||||||
| Products and services | ||||||||||||||||||
| transfered at a point in | ||||||||||||||||||
| time | 59,021 | 973 | 59,994 | 78,091 | 2,380 | 80,471 | 106,997 | 2,205 109,202 | 139,633 | 2,380 142,013 | 226,286 | 6,107 232,393 | 258,922 | 6,282 265,204 | ||||
| Services transferred | ||||||||||||||||||
| over time | 29,302 | 15,661 | 44,963 | 28,323 | 16,373 | 44,696 | 57,297 | 32,453 | 89,750 | 60,360 | 31,452 | 91,812 | 115,779 | 65,505 181,284 | 118,842 | 64,504 183,346 | ||
| Total | 88,323 16,634 104,957 | 106,414 18,753 125,167 | 164,294 | 34,658 198,952 | 199,993 | 33,832 233,825 | 342,065 | 71,612 413,677 | 377,764 | 70,786 448,550 |
| Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | |||
|---|---|---|---|---|---|---|
| SEK thousands | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Revenues | - | 3,355 | -376 | 6,021 | 3,114 | 9,510 |
| Expenses | - | -15,609 | 668 | -25,696 | -18,188 | -44,552 |
| Capital gain on disposal of discontinued operations | - | - | 246,350 | - | 246,350 | - |
| Profit/loss before tax | - | -12,254 | 246,643 | -19,675 | 231,276 | -35,042 |
| Tax | - | 2,622 | -63 | 4,210 | 3,226 | 7,499 |
| Net income discontinuing operations | - | -9,632 | 246,580 | -15,465 | 234,501 | -27,543 |
| SEK thousands | Jan 2020 | 31 Dec 2019 |
|---|---|---|
| Disposed assets and liabilities | ||
| Capitalized expenditure for development | 79,756 | 79,756 |
| Equipment | 250 | 250 |
| Deferred tax asset | 13,598 | 13,598 |
| Other receivables | 186 | 186 |
| Cash and cash equivalents | 1,533 | 50 |
| Other liabilities | -2,875 | -2,995 |
| Net assets and liabilities | 92,448 | 90,845 |
| Cash consideration | 348,002 | - |
| Less: Escrow | -34,917 | - |
| Less: Cash and cash equivalents in discontinued operations | -1,533 | - |
| Less: Transaction costs | -9,204 | - |
| Effect on group's cash and cash equivalents | 302,348 | - |
| Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | |||
|---|---|---|---|---|---|---|
| SEK thousands | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Cash flow from discontinued operations, net | ||||||
| Cash flow from operating activities | - | -7,409 | 293 | -11,909 | -5,223 | -17,424 |
| Cash flow from investment activities | - | -5,714 | 302,348 | -13,108 | 289,349 | -26,109 |
| Cash flow from financing activities | - | - | - | - | - | - |
| Cash flow from discontinued operations, net | - | -13,123 | 302,641 | -25,017 | 284,127 | -43,533 |
| Group's financial instruments by category - Assets | Jun 30, 2020 | 31 Dec 2019 | |||||
|---|---|---|---|---|---|---|---|
| SEK thousands | Value Measured at tier amortized cost |
Measured at fair value through profit or loss |
Value tier |
Measured at amortized cost |
Measured at fair value through profit or loss |
||
| Assets in Balance Sheet | |||||||
| Derivative instruments | 2 | - | 2 | - | |||
| Accounts receivable and other receivables, excluding excluding non-financial assets |
159,115 | 110,147 | |||||
| Cash and cash equivalents | 286,677 | 52,280 | |||||
| Total | 445,792 | - | 162,427 | - |
| Group's financial instruments by category - Liabilities | Jun 30, 2020 | 31 Dec 2019 | |||||
|---|---|---|---|---|---|---|---|
| SEK thousands | Value tier |
Measured at amortized cost |
Measured at fair value through profit or loss |
Value tier |
Measured at amortized cost |
Measured at fair value through profit or loss |
|
| Liabilities in Balance Sheet | |||||||
| Synthetic options | 2 | 76 | 2 | 68 | |||
| Derivative instruments | 2 | 1,869 | 2 | - | |||
| Accounts payable and other liabilities, excluding non financial liabilities |
30,758 | 46,689 | |||||
| Lease liabilities | 47,364 | 52,103 | |||||
| Total | 78,122 | 1,945 | 98,792 | 68 |
The fair value of derivative instruments is measured using exchange rates of currency forwards on the reporting date. The closing balance for synthetic options represents the total assessed value of a number of outstanding options, which has been measured on the basis of accepted market principles and are based on Net Insight's share price.
| Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | |||
|---|---|---|---|---|---|---|
| SEK thousands | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Net sales | 88,242 | 139,907 | 168,437 | 269,450 | 386,306 | 487,319 |
| Cost of sales | -29,592 | -66,435 | -58,716 | -119,732 | -146,333 | -207,349 |
| Gross earnings | 58,650 | 73,472 | 109,721 | 149,718 | 239,973 | 279,970 |
| Sales and marketing expenses | -25,766 | -31,498 | -50,612 | -60,644 | -109,554 | -119,586 |
| Administration expenses | -14,671 | -11,946 | -28,587 | -26,898 | -57,181 | -55,491 |
| Development expenses | -13,794 | -28,451 | -28,867 | -57,008 | -75,992 | -104,133 |
| Other income expenses | -7,984 | -439 | 1,536 | 106 | -16,976 | -18,406 |
| Operating earnings | -3,565 | 1,136 | 3,191 | 5,275 | -19,730 | -17,646 |
| Net financial items | 1,108 | 588 | 195,370 | 3,740 | 111,125 | -80,506 |
| Profit/loss before tax | -2,457 | 1,725 | 198,561 | 9,014 | 91,395 | -98,152 |
| Tax | 455 | 46 | -546 | -1,557 | 11,124 | 10,113 |
| Net income | -2,002 | 1,771 | 198,015 | 7,457 | 102,519 | -88,039 |
| SEK thousands | Jun 30, 2020 | Mar 31, 2020 | 31 Dec 2019 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Capitalized expenditure for development | 141,769 | 133,375 | 126,049 |
| Other intangible assets | 2,125 | 2,812 | 3,234 |
| Equipment | 23,226 | 24,414 | 25,576 |
| Participations in group companies | 246,630 | 246,630 | 243,777 |
| Deferred tax asset | 14,597 | 14,143 | 15,144 |
| Deposits | 4,650 | 4,649 | 4,649 |
| Total non-current assets | 432,997 | 426,023 | 418,429 |
| Current assets | |||
| Inventories | 62,693 | 58,568 | 44,584 |
| Accounts receivable | 108,183 | 101,722 | 98,100 |
| Receivables from group companies | - | - | 20,826 |
| Other receivables | 56,680 | 65,324 | 15,055 |
| Cash and cash equivalents | 260,567 | 282,405 | 40,849 |
| Total current assets | 488,123 | 508,019 | 219,414 |
| TOTAL ASSETS | 921,120 | 934,042 | 637,843 |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Restricted equity | 169,435 | 156,698 | 142,075 |
| Non-restricted equity | 550,749 | 564,536 | 379,143 |
| Total equity | 720,184 | 721,234 | 521,218 |
| Non-current liabilities | |||
| Other liabilities | 9,367 | 12,157 | 12,611 |
| Total non-current liabilities | 9,367 | 12,157 | 12,611 |
| Current liabilities | |||
| Accounts payable | 19,547 | 22,156 | 32,381 |
| Liablities to group companies | 108,275 | 104,658 | - |
| Other liabilities | 63,747 | 73,837 | 71,633 |
| Total current liabilities | 191,569 | 200,651 | 104,014 |
This Interim Report has been prepared in accordance with IAS 34 Interim Financial Reporting and applicable regulations of the Swedish Annual Accounts Act. The Interim Report of the parent company complies with chapter 9 of the Swedish Annual Accounts Act, Interim Financial Reporting, and RFR 2 Accounting for Legal Entities.
Disclosures in accordance with IAS 34 are presented in the interim financial statements and the associated notes as well as elsewhere in the interim financial report.
There are no new or amended International Financial Reporting Standards (IFRS) that have had a material impact on the Company's financial reporting.
During the second quarter, the parent company reclassified SEK 2.7 million regarding exchange rate differences related to the divestment of a subsidiary in January 2020 from Other operating income to Capital gains from divestment of subsidiaries. The adjustment has been made retroactively, which affected the Group's income statement for the period January-March 2020 in Other operating income and expenses as well as Operating earnings by SEK -2.7 million, Tax by SEK 0.6 million and Net income for the period by SEK -2.1 million. In the Balance Sheet as of March 31, 2020, Deferred tax assets and Equity were affected by SEK 0.6 million.
In connection with the Covid-19 outbreak, the reporting of government grants has become relevant, as the Group receives state support from countries around the world linked to the measures introduced due to the outbreak. A government grant is reported in the Group's balance sheet and the Group's report on comprehensive income when there is reasonable assurance that the Group fulfills the conditions associated with the grants and that the grants will be received. Contributions attributable to expenses are reported as other income or reduction of expenses in the Group's report on comprehensive income, depending on the nature of the grant, and are reported during the same period as the costs the contributions are intended to offset. Grants in the form of cost compensation for personnel who do not work, and thus do not create any value for the company, are reported as a reduction of employee expenses. Grants for personnel and other resources that still contribute to creating value for the company are reported as other operating income.
Except for stated above, the same accounting principles and basis of calculation as those used in the latest Annual Report have been applied to the group and parent company. For a description of these accounting principles, please refer to the Annual Report for 2019.
The preparation of the Interim Report requires management to make judgements, estimates and assumptions that affect the company's earnings and position and information presented generally. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. For a description of these estimates and assumptions, please refer to the Annual Report for 2019.
Figures in brackets in this report refer to comparison with the corresponding period or date in the previous year, if not stated otherwise. Divergences due to rounding may occur in this report.
The group reported tax of total SEK -1.1 (1,8) million for the period January–June 2020, of which SEK -1.0 (-2.4) million relates to continuing operations. Reported tax corresponds to an effective tax rate of 0.4 (22) percent and 22 (21) percent, respectively. The group recognized a capital gain from discontinued operations of SEK 246.4 million, which is a none taxable income. This item has had a big impact on the effective tax rate during 2020. The effective tax rate is also affected by the relative effects of foreign tax rates and temporary differences.
Remaining tax loss carryforwards for group companies amounted to SEK 101.5 million at the end of the period, compared to SEK 102.8 million as of December 31, 2019. Deferred tax assets have been recognized for the tax loss carryforwards.
In accordance with the warrant program approved by the 2020 Annual General Meeting, management and key personnel in June acquired a total of 2,160,000 warrants for a market premium of a total of SEK 950,400. The warrants have a vesting period of three years, after which the holder has the right to exercise the warrants for subscription of B shares in the parent company for a period of three months at an exercise price of SEK 2.80. Premiums received for the warrants have been reported against equity. When calculating earnings per share, a dilution effect arises when the average price for the period exceeds the exercise price for the warrants.
A sum corresponding to half of the participants' paid premium for the warrants, net after tax, is paid as a variable remuneration to the participant two equal payments provided that the participant is employed within the Net Insight Group at the time of payment.
No own shares have been repurchased during January-June 2020. At the end of the reporting period, the parent company had a total of 7,175,000 of its own class B shares, at an average cost of SEK 4.44 per share and with a par value of SEK 0.04 per share. The shares are held as own shares. The parent company has the right to reissue these shares at a later date.
All shares issued by the parent company were fully paid.
| 30 Jun, 2020 | 31 Dec, 2019 | ||||||
|---|---|---|---|---|---|---|---|
| The division of shares | A-shares | B-shares | Total | A-shares | B-shares | Total | |
| Outstanding shares | 1,000,000 | 381,758,009 | 382,758,009 | 1,000,000 | 381,758,009 | 382,758,009 | |
| Repurchased own shares | - | 7,175,000 | 7,175,000 | - | 7,175,000 | 7,175,000 | |
| Issued shares | 1,000,000 | 388,933,009 | 389,933,009 | 1,000,000 | 388,933,009 | 389,933,009 |
The Board of Directors appointed the Board member Anders Harrysson, through his company GEB Rand AB, as interim CEO of the parent company Net Insight AB during the transition period between the leaving and the appointed new CEO (November 2019 - April 2020). During January-March 2020, fees from GEB Rand AB of SEK 0.9 (-) million were expensed, after which no more fees has been originated.
No significant events have occurred after the end of the reporting period.
This Report has not been reviewed by the company's auditors.
With its deep market knowledge and insight, genuine customer focus and world-leading innovative technology, Net Insight makes it easier to create and deliver better media content in a simpler and more effective way.
With the two business areas Media Networks and Resource Optimization, Net Insight offers solutions that enable network operators and media companies the benefit of lower costs and the potential for effective new media service launches. Revenues are generated through sales of hardware and software solutions and services.
Net Insight is driven by the idea that everything can always be done smarter, for both its customers and their customers. Net Insight's long-term view of the media market of tomorrow is a global, fully connected world where new technology enables direct, intelligent and seamless exchange of content between producers, distributors and consumers.
The strategy is to offer competitive and future-proof solutions that meet these customer demands, by continuously develop solutions that make customers even more relevant and competitive in the media landscape of tomorrow.
The value-creating factors affect Net Insight's development and are divided into three groups: market transformation, innovative technology and global scope. Net Insight benefits from the general increase in video traffic, live streaming and file-based transfers, the use of remote production, increased distribution over the internet and broader coverage of live events.
Interim report January – September November 4, 2020
This interim report has been prepared in Swedish and translated into English. In the event of any discrepancies between the Swedish interim report and the English translation the former shall have precedence.
Crister Fritzson, CEO, Net Insight AB (publ) Phone: +46 (0)8-685 04 00 Email: [email protected]
Pelle Bourn, CFO, Net Insight AB (publ) Phone: +46 (0)8-685 04 00 Email: [email protected]
Net Insight AB (publ), corp.id.no. 556533-4397 Box 1200, 171 23 Solna, Sweden Phone. +46 (0)8 – 685 04 00 www.netinsight.net
The Board of Directors and the CEO certify that the Interim report for the period January – June 2019 gives a true and fair overview of the Parent Company Net Insight AB (publ) and the Group's operations, their financial position and results of operations, and describes significant risks and uncertainties facing the Parent Company and other companies in the Group.
Solna, July 21, 2020
Gunilla Fransson Chairman
Kjell Arvidsson Board member
Jan Barchan Board member
Mathias Berg Board member Anders Harrysson Board member
Charlotta Falvin Board member
Crister Fritzson CEO
This information is information that Net Insight AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 8:45 am CEST on July 21, 2020.
| Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | |||
|---|---|---|---|---|---|---|
| SEK millions (if not defined differently | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Earnings continuing operations | ||||||
| Netsales per business area | ||||||
| Media Networks | 88.3 | 106.4 | 164.3 | 200.0 | 342.1 | 377.8 |
| Resource Optimization | 16.6 | 18.8 | 34.7 | 33.8 | 71.6 | 70.8 |
| Net sales | 105.0 | 125.2 | 199.0 | 233.8 | 413.7 | 448.6 |
| Gross earnings | 69.4 | 78.5 | 127.5 | 144.4 | 265.4 | 282.3 |
| Operating expenses | 61.4 | 62.2 | 124.6 | 133.0 | 258.5 | 266.9 |
| Total development expenditure | 36.8 | 32.1 | 77.0 | 77.8 | 148.7 | 134.0 |
| EBITDA | -5.5 | 15.1 | -7.2 | 17.6 | -31.4 | -6.6 |
| Operating earnings | 1.1 | 15.6 | 6.7 | 11.1 | -8.0 | -3.6 |
| Profit/loss before tax | 1.8 | 14.8 | 4.6 | 11.5 | -13.6 | -6.6 |
| Net income | 1.8 | 11.8 | 3.6 | 9.1 | -10.2 | -4.6 |
| Balance sheet and cash flow including discontinued operations |
||||||
| Cash and cash equivalents | 286.7 | 48.9 | 286.7 | 48.9 | 286.7 | 52.3 |
| Working capital | 97.3 | 68.2 | 71.0 | 58.2 | 66.5 | 46.8 |
| Total cash flow | -10.3 | -12.3 | 235.1 | -44.2 | 238.1 | -41.2 |
| The share | ||||||
| Dividend per share, SEK | - | - | - | - | - | - |
| Earnings per share basic and diluted continuing | ||||||
| operations, SEK Earnings per share basic and diluted discontinuing |
0.00 | 0.03 | 0.01 | 0.02 | -0.03 | -0.01 |
| operations, SEK | 0.00 | 0.01 | 0.65 | -0.02 | 0.59 | -0.08 |
| Earnings per share basic and diluted total, SEK | 0.01 | 0.04 | 0.66 | 0.01 | 0.56 | -0.10 |
| Cash flow per share, SEK | -0.03 | -0.03 | 0.61 | -0.12 | 0.62 | -0.11 |
| Equity per share basic and diluted, SEK | 1.87 | 1.28 | 1.87 | 1.28 | 1.87 | 1.21 |
| Average number of outstanding shares basic and diluted, thousands |
382,758 | 382,758 | 382,758 | 382,858 | 382,758 | 382,812 |
| Number of outstanding shares at the end of the | ||||||
| periodbasic and diluted, thousands | 382,758 | 382,758 | 382,758 | 382,758 | 382,758 | 382,758 |
| Share price at end of period, SEK | 2.56 | 1.77 | 2.56 | 1.77 | 2.56 | 2.30 |
| Employees and consultants continuing operations | ||||||
| Average number of employees and consultants | 198 | 188 | 198 | 190 | 193 | 189 |
| KPI continuing operations | ||||||
| Net sales YoY, change in % | -16.1% | 5.3% | -14.9% | 1.9% | -3.1% | -0.2% |
| Gross margin | 66.1% | 62.7% | 64.1% | 61.8% | 64.2% | 62.9% |
| Total development expenditure/Net sales | 35.1% | 25.7% | 38.7% | 26.7% | 35.9% | 29.9% |
| Operating margin | 1.0% | 12.4% | 3.4% | 4.7% | -1.9% | -0.8% |
| EBITDA margin | -5.2% | 12.0% | -3.6% | 7.5% | -7.6% | -1.5% |
| Net margin | 1.7% | 9.4% | 1.8% | 3.9% | -2.5% | -1.0% |
| KPI Group including discontinued operations | ||||||
| Return on capital employed Equity/asset ratio |
-3.1% | -13.5% | 0.9% | -1.7% | -3.8% | -7.4% |
| Return on equity | 78.2% 39.0% |
68.9% -11.4% |
78.2% 39.0% |
68.9% -1.7% |
78.2% 39.0% |
67.6% -6.6% |
Non-IFRS financial measures are presented to enhance an investors and management possibility to evaluate the ongoing operating results, to aid in forecasting future periods and to facilitate meaningful comparison of result between periods. The APMs in this report may differ from similar-titled measures used by other companies. APMs regarding to the income statement are calculated on continuing operations unless otherwise stated. APMs regarding the balance sheet are calculated on the whole group including discontinuing operations, unless otherwise stated.
| Performance measures | Various types of performance measures and margin measures as a percentage of sales. | |
|---|---|---|
| Non-IFRS performance measures |
Description | Reason for use of the measure |
| Gross margin | Gross earnings as a percentage of net sales. | The gross margin is of major importance, showing |
| Gross margin excl. amortization of capitalized development |
Gross earnings excl. amortization of capitalized development as a percentage of net sales. |
the margin for covering the operating expenses. |
| Operating expenses | Sales and marketing expenses, administration expenses and development expenses. |
|
| Operating expenses/net sales | Operating expenses as a percentage of net sales. | Used in charts to illustrate trend. |
| Operating earnings | Calculated as operating earnings before financial items and tax. |
Operating earnings provides an overall picture of earnings generated in the operating activities. |
| Operating margin | Operating earnings as a percentage of net sales. | The operating margin is a key measure together with sales growth and capital employed for monitoring value creation. |
| Net sales YoY, change in % | The relation between net sales for the period and the corresponding sales for the comparative period in previous year. |
The sales growth is a key measure together with operating margin and capital employed for monitoring value creation. |
| Change in Net sales in comparable currencies |
The relation between the net sales for the period, recalculated using the foreign currency rates from the comparative period, and the corresponding sales for the comparative period in previous year. Only sales from business combinations that has been part of the Group for the whole comparative period are recalculated. |
This measure is of major importance for management in its monitoring of underlying sales growth driven by changes in volume, price and product mix for comparable currency rates between different periods. |
| Net margin | Net Income as a percentage of net sales. | The net margin shows the remaining share of net sales after all the company's costs have been deducted. |
| Total development (R&D) expenditure |
Development expenses and capitalized expenditures for development. |
The measure is a good complement to development expenses, as it shows the company's |
| Capitalization rate | Capitalized development expenditures as a percentage of total development expenditures. |
total expenditure in development. The development expenditures effect on income, financial position, and presentation in the |
| Total development (R&D) expenditure/net sales |
Total development expenditure as percentage of net sales. |
statement of cashflow is affected by the periods level of capitalized development expenditures. |
| EBITDA | Operating earnings before depreciation and amortization and capitalization of development expenditure. |
The measures are good complements to operating earnings and margin as it, simplified, shows the earnings-generated cash flow in the operation and |
| EBITDA margin | EBITDA as a percentage of net sales. | it shows operating earnings without influence of variations in the level of capitalized development expenditures in the company's development projects. |
| Region | Region. • Western Europe (WE). • Americas (AM), North and South America. • Rest of World (RoW), countries outside of Western Europe and Americas. |
| Change in net sales in comparable currencies | Apr-Jun | Jan-Jun | Jan-Dec | |||
|---|---|---|---|---|---|---|
| SEK millions (if not defined differently) | 2020 | 2019 | 2020 | 2019 | 2019 | |
| Net sales | 105.0 | 125.2 | 199.0 | 233.8 | 448.6 | |
| Net currency effect of comparable currencies | -1.1 | -6.5 | -4.3 | -15.4 | -24.4 | |
| Net sales in comparable currencies | 103.9 | 118.7 | 194.6 | 218.5 | 424.2 | |
| Change in net sales in comparable currencies | -17.0% | -0.2% | -16.8% | -4.8% | -5.6% | |
| KPI Income Statement | Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | ||
| SEK millions (if not defined differently | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Continuing operations | ||||||
| Net sales | 105.0 | 125.2 | 199.0 | 233.8 | 413.7 | 448.6 |
| Net sales YoY, change in % | -16.1% | 5.3% | -14.9% | 1.9% | -3.1% | -0.2% |
| Cost of sales ex. amortization of capitalized | ||||||
| development | -26.9 | -37.5 | -54.3 | -68.4 | -112.4 | -126.6 |
| Gross earnings ex. amortization of capitalized | ||||||
| development Gross margin ex. amortization of capitalized |
78.1 | 87.7 | 144.7 | 165.4 | 301.3 | 321.9 |
| development | 74.4% | 70.1% | 72.7% | 70.7% | 72.8% | 71.8% |
| Cost of sales amortization of capitalized | ||||||
| development | -8.7 | -9.2 | -17.2 | -20.9 | -35.9 | -39.6 |
| Gross earnings | 69.4 | 78.5 | 127.5 | 144.4 | 265.4 | 282.3 |
| Gross margin | 66.1% | 62.7% | 64.1% | 61.8% | 64.2% | 62.9% |
| Sales and marketing expenses | -28.6 | -28.9 | -57.2 | -61.1 | -124.9 | -128.8 |
| Administration expenses | -16.4 | -16.0 | -32.2 | -34.2 | -65.4 | -67.4 |
| Development expenses | -16.3 | -17.3 | -35.2 | -37.7 | -68.3 | -70.8 |
| Operating expenses | -61.4 | -62.2 | -124.6 | -133.0 | -258.5 | -266.9 |
| Operating expenses/net sales | 58.5% | 49.7% | 62.6% | 56.9% | -62.5% | 59.5% |
| Other operating income and expenses | -6.9 | -0.8 | 3.7 | -0.3 | -14.9 | -19.0 |
| Operating earnings | 1.1 | 15.6 | 6.7 | 11.1 | -8.0 | -3.6 |
| Operating margin | 1.0% | 12.4% | 3.4% | 4.7% | -1.9% | -0.8% |
| Net financial items | 0.7 | -0.8 | -2.1 | 0.5 | -5.6 | -3.0 |
| Profit/loss before tax | 1.8 | 14.8 | 4.6 | 11.5 | -13.6 | -6.6 |
| Tax | -0.0 | -3.0 | -1.0 | -2.4 | 3.4 | 2.0 |
| Net income continuing operations | 1.8 | 11.8 | 3.6 | 9.1 | -10.2 | -4.6 |
| Net margin conutinuing operaitons | 1.7% | 9.4% | 1.8% | 3.9% | -2.5% | -1.0% |
| Discontinued operations, net after tax | - | -9.6 | 246.6 | -15.5 | 234.5 | -27.5 |
| Net Income | 1.8 | 2.2 | 250.2 | -6.4 | 224.3 | -32.2 |
| EBITDA margin continuing operations | Jul 2019- | |||||
| SEK millions (if not defined differently) | Apr-Jun | Jan-Jun | Jun 2020 | Jan-Dec | ||
| Operating earnings | 2020 | 2019 | 2020 | 2019 | 2019 | |
| 1.1 | 15.6 | 6.7 | 11.1 | -8.0 | -3.6 | |
| Amortization of capitalized development expenditure | 8.7 | 9.2 | 17.2 | 20.9 | 35.9 | 39.6 |
| Other depreciation, amortization & impairment | 5.2 | 5.1 | 10.7 | 10.2 | 21.1 | 20.6 |
| Capitalization of development expenditure | -20.5 | -14.8 | -41.8 | -24.6 | -80.4 | -63.2 |
| EBITDA | -5.5 | 15.1 | -7.2 | 17.6 | -31.4 | -6.6 |
| Net sales | 105.0 | 125.2 | 199.0 | 233.8 | 413.7 | 448.6 |
| EBITDA margin | -5.2% | 12.0% | -3.6% | 7.5% | -7.6% | -1.5% |
| Development expenditure continuing operations | Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | ||
| SEK millions (if not defined differently) | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Development expenses | 16.3 | 17.3 | 35.2 | 37.7 | 68.3 | 70.8 |
| Capitalization of development expenditure | 20.5 | 14.8 | 41.8 | 24.6 | 80.4 | 63.2 |
| Total development expenditure | 36.8 | 32.1 | 77.0 | 62.3 | 148.7 | 134.0 |
| Capitalization rate | 55.6% | 46.2% | 54.3% | 39.5% | 54.1% | 47.2% |
| Net Sales | 105.0 | 125.2 | 199.0 | 233.8 | 413.7 | 448.6 |
| Total development expenditure/net sales | 35.1% | 25.7% | 38.7% | 26.7% | 35.9% | 29.9% |
| Capital and return measures | Shows how capital is utilized and the company's financial strength. Return is a financial term that describes how much the value of an asset changes from an earlier point in time. |
|
|---|---|---|
| Non-IFRS performance measure |
Description | Reason for use of the measure |
| Working capital | Current assets less cash and cash equivalents, accounts payable and other interest-free current liabilities. The Company has no interest-bearing liabilities, excluding lease liabilities. Changes in working capital in the cash flow statement also includes adjustments for items not affecting liquidity and changes in non-cur- rent operating assets and liabilities. |
This measure shows how much working capital that is tied up in the operations and can be put in relation to sales to under-stand how effectively tied up working capital is used. |
| Capital employed | The Company capital employed is calculated as an average of total assets, less total liabilities, excluding interest-bearing liabilities. The Company has no interest-bearing liabilities, excluding lease liabilities. |
Return on capital employed is the central ratio for measuring the return on the capital tied up in operations. |
| Return on capital employed | Operating earnings plus interest income, in relation to average capital employed, rolling four quarters. |
|
| Equity/asset ratio | Shareholders' equity divided by the balance sheet total. |
A traditional measure for showing financial risk, expressing the ratio of the assets that is financed by the owners. |
| Return on equity | Net income as a percentage of average share holders' equity, rolling four quarters (R4Q). |
Return on equity shows the total return on shareholders' capital and reflects the effect of the company's profitability as well as the financial leverage. The measure is primarily used to analyze shareholder profitability over time. |
| Investments | Investments in intangible and tangible assets. | |
| Total cash flow | Change in cash and cash equivalents during the period, excluding exchange differences in cash and cash equivalents. |
| Working capital | Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | ||
|---|---|---|---|---|---|---|
| SEK millions | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Current assets | 529.5 | 271.4 | 425.6 | 270.7 | 356.7 | 255.0 |
| Cash and cash equivalents | -292.4 | -55.2 | -212.4 | -67.7 | -150.6 | -64.5 |
| No interest-bearing short term liabilities | -139.8 | -148.1 | -142.2 | -144.8 | -139.6 | -143.8 |
| Working capital | 97.3 | 68.2 | 71.0 | 58.2 | 66.5 | 46.8 |
In current assets, assets held for sale of December 31, 2019, are excluded as, as they mainly relate to capitalized development expenses.
| Return on capital employed including discontinued | ||||||
|---|---|---|---|---|---|---|
| operations | Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | ||
| SEK millions (if not defined differently) | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Capital employed | ||||||
| Total balance | 924.4 | 717.9 | 845.1 | 695.3 | 789.5 | 695.0 |
| No interest-bearing liabilities | -159.8 | -173.3 | -162.4 | -167.5 | -161.0 | -165.3 |
| Capital employed | 764.6 | 544.6 | 682.7 | 527.7 | 628.5 | 529.7 |
| Operating earings less interest income R4Q | ||||||
| Operating earnings R4Q | -23.1 | -73.2 | 7.0 | -8.6 | -23.1 | -38.6 |
| Interest income R4Q | 0.5 | 0.4 | 0.5 | 0.4 | 0.5 | 0.7 |
| Operating earnings less interest income R4Q | -23.6 | -73.6 | 6.5 | -9.0 | -23.6 | -39.3 |
| Return on capital employed | -3.1% | -13.5% | 0.9% | -1.7% | -3.8% | -7.4% |
| Equity/asset ratio | Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | ||
| SEK millions (if not defined differently) | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Equity | 714.7 | 488.4 | 714.7 | 488.4 | 714.7 | 463.7 |
| Total equity and liabilities | 914.3 | 709.1 | 914.3 | 709.1 | 914.3 | 686.5 |
| Equity/asset ratio | 78.2% | 68.9% | 78.2% | 68.9% | 78.2% | 67.6% |
| Return on equity including discontionued operations | Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | ||
|---|---|---|---|---|---|---|
| SEK millions (if not defined differently) | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Net income - R4Q | 224.3 | -58.1 | 224.3 | -8.6 | 224.3 | -32.2 |
| Average equity - R4Q | 575.8 | 511.0 | 575.8 | 511.0 | 575.8 | 485.4 |
| Return on equity | 39.0% | -11.4% | 39.0% | -1.7% | 39.0% | -6.6% |
| Shareholders' information | Measures related to the share. | |
|---|---|---|
| Non-IFRS performance measure |
Description | Reason for use of the measure |
| Dividend per share | Dividend divided by the average number of outstanding shares during the period. |
Measures showing the return of the business to the owners, per share. |
| Earnings per share (EPS) | Net income divided by the average number of outstanding shares during the period. |
|
| Cash flow per share | Total cash flow, divided by average number of outstanding shares during the period. |
|
| Equity per share | Shareholders' equity divided by number of out standing shares at the end of the period. |
|
| Average number of outstanding shares |
Total number of shares in the Parent company, less the number of group companies' holdings of shares in the Parent company (own/treasury shares). |
|
| Employees | Measures related to employees. | |
| Non-IFRS performance measure |
Description | Reason for use of the measure |
| Average number of employees and consultants/co-workers |
The average number of employees and consultants for non-temporary positions (longer than nine months) and who do not replace absent employees, in FTE (Full-time equivalent). |
To supplement the number of employees with consultants gives a better measure of the Company's cost. |
| Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | |||
|---|---|---|---|---|---|---|
| Average number of employees and consultants | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Average number of employees | 166 | 183 | 166 | 187 | 172 | 183 |
| Average number of consultants | 32 | 32 | 32 | 31 | 35 | 34 |
| Total average number of employees and consultants | 198 | 215 | 198 | 218 | 207 | 217 |
| Average number of employees and consultants | ||||||
| continuing operations | - | -27 | - | -28 | -14 | -28 |
| Net Average number of employees and consultants | ||||||
| continuing operations | 198 | 188 | 198 | 190 | 193 | 189 |
The group has identified a number of items which are material due to the significance of their nature and/or amount. These are listed separately here to provide a better understanding of the financial performance of the group:
| Material profit and loss items | Apr-Jun | Jan-Jun | Jul 2019- | Jan-Dec | |||
|---|---|---|---|---|---|---|---|
| SEK millions | Note | 2020 | 2019 | 2020 | 2019 | Jun 2020 | 2019 |
| Effects of the Net Insight share price development during the period |
|||||||
| Share-based benefits | (a) | -0.1 | 0.1 | -0.1 | 0.1 | -0.1 | 0.0 |
| Synthetic opitons, change in value | (b) | -0.1 | 0.2 | -0.0 | 0.4 | -0.2 | 0.2 |
| Total | -0.2 | 0.2 | -0.1 | 0.5 | -0.3 | 0.3 | |
| Government grants Covid-19 | |||||||
| Reduction of employee expenses | 1.6 | - | 1.6 | - | 1.6 | - | |
| Other operating income | 0.3 | - | 0.3 | - | 0.3 | - | |
| Total | 1.9 | - | 1.9 | - | 1.9 | - | |
| Items affecting comparability | |||||||
| Restructuring | (c) | -0.4 | -1.0 | -1.4 | -6.5 | -6.9 | -12.0 |
| Strategic advisory services and preperation for capital injection |
(d) | - | - | - | - | -15.8 | -15.8 |
| Total | -0.4 | -1.0 | -1.4 | -6.5 | -22.7 | -27.8 | |
| Operating earnings excluding items affecting comparability continuting operations |
|||||||
| Operating earnings | 1.1 | 15.6 | 6.7 | 11.1 | -8.0 | -3.6 | |
| Items affecting comparability, as per above | 0.4 | 1.0 | 1.4 | 6.5 | 22.7 | 27.8 | |
| Items affecting comparability discontinuing operations |
|||||||
| - | -0.8 | - | -2.9 | - | -2.9 | ||
| Operating earnings excluding items affecting comparability |
1.5 | 15.7 | 8.1 | 14.7 | 14.7 | 21.3 |
All items in the table above effects operating earnings, except for (b) that effects net financial items.
(a) Share-based benefits are value changes in amounts held in escrow for participation in the synthetic share program.
(b) Net Insight has synthetic option programs. The synthetic options are revaluated on a current basis to fair value by applying an options valuation model. The changes in value during the term of the options are presented as a financial item. To financially hedge future cash flow effects of the company's commitments in the synthetic option programs, if the share price would exceed the strike price, the parent company has repurchased its own shares. The repurchased of own shares is deducted from equity, retained earnings, and are not revaluated to fair value on a current basis.
(c) Severance pay in due to structural changes.
(d) Costs for strategic advisory services and preparation for capital injection, which were interrupted as a result of the divestment of the Sye business.
Net Insight AB (publ) Telephone: +46 (0)8 685 04 00, [email protected], www.netinsight.net
The information presented in this document may be subject to change without notice. For further information on product status and availability, please contact [email protected] or visit www.netinsight.net ©Copyright 2020. Net Insight AB (publ), Sweden. All rights reserved. Net Insight and Nimbra are trademarks of Net Insight AB, Sweden. All other registered trademarks are the property of their respective owners.
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