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Net Insight

Interim / Quarterly Report Jul 22, 2010

3180_ir_2010-07-22_ff2dfdee-1c6c-44e0-b3eb-f2d0ecae172b.pdf

Interim / Quarterly Report

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NET INSIGHT INTERIM REPORT JANUARY - JUNE 2010

Net Insight AB [publ] Corporate Reg. No 556533-4397

Second Quarter 2010

  • Net sales of SEK 71.5 million (62.6).
  • Software license and support revenue of SEK 19.0 million (15.3).
  • Gross Margin of 74.3% (78.7) applying the same accounting treatment as in previous years.
  • Gross Margin of 66.4% (78.7).
  • Operating earnings of SEK 11.9 million (11.0), corresponding to an operating margin of 16.6% (17.6).
  • Net income of SEK 8.7 million (7.9).
  • Net profit margin of 12.2% (12.7).
  • Earnings per share of SEK 0.02 (0.02).
  • Total cash flow of SEK 3.3 million (-34.5).

January - June 2010

  • Net sales of SEK 132.0 million (123.1).
  • Software license and support revenue of SEK 34.8 million (32.2).
  • Gross Margin of 74.5% (77.2) applying the same accounting treatment as in previous years.
  • Gross Margin of 66.1% (77.2).
  • Operating earnings of SEK 18.1 million (21.3), corresponding to an operating margin of 13.7% (17.3).
  • Net income of SEK 72.7 million (15.1). The improvement is a one-time effect related to the IPR transaction in Q1.
  • Net profit margin of 55.1% (12.3).
  • Earnings per share of SEK 0.19 (0.04).
  • Total cash flow of SEK 56.4 million (-13.5).

Net Insight AB 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 July 22nd, 2010 at 08.30 am CET.

A STRONG QUARTER WITH REVENUE GROWTH OF 14%

We are delivering a strong second quarter both from a financial and strategic perspective. Revenue is up with 14% compared to last year and 18% from the first quarter 2010. We also see a healthy operating margin of 17%.

For the first half of the year, the operating earnings are slightly down compared to last year, as a result of increased investments in sales and marketing. This in turn has led to an increased order flow and more business opportunities.

The company is progressing well towards our strategic objectives to leverage our DTT leadership, to expand our business in broadcast and media as well as finding new business in the area of CATV/IPTV.

I am very proud to count six important DTT wins over the past six months. We just recently, in the middle of July, announced a very significant win in Poland where a combined offering of Ericsson and Net Insight was the winning solution for a new DTT network. Earlier in the quarter we won what I regard as a very significant and strategic project when Teracom of Sweden selected Net Insight for the world's first all IP-based DVB-T2 network.

During the end of the quarter we have been greatly involved with the FIFA World Cup live transmissions from South Africa. The Nimbra platform was used by nine different customers to bring live TV signals to over 80 countries. For the first time ever our customer ESPN transmitted live 3D feeds from South Africa to viewers across the United States. I can also mention that our participation was successful and we have received positive feedback from our customers which holds us in good stead for the future.

In regards to the CATV/IPTV business area we received an order with a large cable operator in Canada, a new customer to Net Insight, which is encouraging for future opportunities in the cable TV market.

Geographical expansion is of strategic importance to us and during the second quarter we have entered new markets with new partners and reached new customers successfully. The new markets entered during the second quarter are the Philippines and South Africa. I am satisfied with the first half of the year and at the moment I see no lack of business opportunities for the quarters ahead.

Stockholm, July 22nd 2010 Fredrik Trägårdh CEO

BUSINESS ACTIVITIES DURING THE SECOND QUARTER

Net Insight strengthened its position in the Digital Terrestrial TV networks during the quarter. Three operators decided to base their DTT-network on the Nimbra platform.

The first order relates to a new DTT network in South America. This network will include Net Insight's unique Time Transfer feature for GPS-free time synchronization.

The agreement with Teracom, a Swedish media operator, covers a nationwide IP/Ethernet distribution network and will be one of the first DVB-T2 networks in the world, enabling nationwide HD services. Cyprus Broadcasting Corporation decided during June to use Net Insight's Nimbra platform when launching the island's first HD-services through a new national DTT distribution and contribution network.

In the Broadcast and Media (BMN) area the main focus in the quarter has been live sports events. In April, in conjunction with the NAB 2010 exhibition, Net Insight issued a press release about our involvement with 2010 FIFA World Cup in South Africa. Nine of Net Insight's customers, global media operators and major rights holders, have been broadcasting from South Africa. ESPN, one of the customers, broadcasted for the first time worldwide football matches in 3D, using the Nimbra platform for their transport. In general, many of our expansion orders during the quarter are related to building media-rich networks for live events.

Following our strategy, Net Insight found business in the CATV/IPTV area. In June Net Insight won a tender from a Canadian media network operator. We have published a new success story on ZTV, a Cable TV Multiservice Operator in Japan.

Net Insight has entered new markets during the quarter, in the Philippines, South Africa and Poland.

Net Insight also received the first commercial order on channelized IP on Nimbra 600. Channelized IP on Nimbra 300 was announced early 2009 and during the quarter the same functionality was introduced into Nimbra 600.

PARTNERSHIP

Net Insight continues to develop the partner network to support the geographical expansion and provide local presence and support to customers. Net Insight strengthened its partner network with three new partners in Asia, Europe, the Middle East and North America, and had 37 business partners at the end of the quarter.

MARKETING ACTIVITIES

Net Insight is working actively to increase visibility of the brand and the company. During the quarter it has been decided to increase PR activities in Europe. The development of creating new digital channels has started by e-marketing activities, introducing e-newsletters to existing and potential customers and partners.

Our key marketing focus during the quarter has been our participation at the NAB Show 2010 in Las Vegas, US. NAB is the world's largest digital media industry event. In conjunction with the exhibition Net Insight was able to launch our cooperation with the large sports broadcaster ESPN in the US enabling us to increase publicity around the Net Insight brand in the US.

Another important activity has been CommuniAsia 2010 in Singapore. In conjunction with the show Net Insight has successfully increased the media coverage around our cooperation with TATA Communications, India.

Together with our sales partners we have participated in industry shows in Germany, Korea and South Africa.

NEW PRODUCT INTRODUCTION

During the quarter, Net Insight introduced a new channelized IP Trunk Module and Performance monitoring capabilities on all Nimbra platforms. Access Bundles for the Nimbra 340 and Nimbra 680 series of multiservice switches were also launched.

SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD

In the middle of July Net Insight announced a significant order from Ericsson to implement a DTT network with contribution services for Emitel in Poland.

SALES AND EARNINGS

Second Quarter

Net Sales for the second quarter amounted to SEK 71.5 million (62.6), which represents a growth of 14%. Revaluation of accounts receivables in foreign currencies had a positive effect on Net Sales of SEK 0.9 million compared to a negative effect of SEK 2.2 million for the same period last year.

The EMEA region accounted for SEK 47.8 million (51.1) of total sales. The Americas showed growth of SEK 12 million to SEK 20.7 million, whereas APAC is in line with previous year at SEK 3.0 million (2.8).

Q2 Q2 Q3 Q4 Q1 Full Year Full Year
Net sales per segment (MSEK) 2010 2009 2009 2009 2010 2009 2008
EMEA 47.8 51.1 38.2 41.1 44.5 176.8 136.5
Americas 20.7 8.7 9.7 6.8 10.3 38,0 80.1
APAC 3,0 2.8 9.6 4.3 5.7 18,0 57.6
Total 71.5 62.6 57.5 52.2 60.5 232.8 274.2

Sales in the Broadcast & Media business area made up 63% (80) of total sales and DTT & Mobile TV accounted for 37% (14). The growth in DTT business is related to a series of DTT contracts-wins announced in the quarter of which Teracom is one.

Hardware revenue increased slightly by SEK 1.8 million to SEK 50.8 million (49.0). Sales of software licenses are up by SEK 3 million to 8.5 (5.5) whereas support and service revenue are in line with previous year at SEK 10.5 million (9.8).

As reported in the 2009 Q4 report, from January 1, 2010, depreciation of capitalized R&D expenditures is recorded in cost of sales. This implies a shift of depreciation expenses from the profit and loss line "Development expenses" to "Cost of goods and services sold" and as such does not affect profit. Furthermore, this does not impact Net Insight's earnings potential on incremental sales but will impact the reported Gross margin.

Gross margin with consistent R&D reporting

SEK thousands Q2 Q2 Jan-Jun Jan-Jun
2010 2009 2010 2009
Net Sales 71 465 62 648 131 994 123 055
Cost of Sales -18 339 -13 353 -33 662 -28 013
Gross Earnings - 2009 accounting treatment 53 126 49 295 98 332 95 042
Gross Margin - 2009 accounting treatment 74,3% 78,7% 74,5% 77,2%
Cost of Sales - R&D depreciation -5 699 -3 961 -11 113 -7 367
Gross earnings - 2010 accounting treatment 47 427 45 334 87 219 87 675
Gross margin - 2010 accounting treatment 66,4% 72,4% 66,1% 71,2%

With a comparable treatment of depreciation of capitalized R&D expenses based on the accounting treatment applied in 2009, the gross margin declined 4.4 percentage points to 74.3% mainly as a result of a larger share of turn-key type business and currency effects.

The Gross margin, applying the 2010 accounting treatment of depreciation of capitalized R&D expenditures, declined by 6.0 percentage points of which increased levels of R&D depreciation accounted for 1.6 percentage points.

As shown in the condensed income statement on page 11, the Gross margin is 66.4% (78.7).

Total operating expenses for the second quarter amounted to SEK 35.5 million (38.3). Sales and marketing expenses have increased by SEK 3.8 million mainly following increased staffing levels and commissions to partners. Administrative expenses are lower mainly as fewer consultants have been engaged in the period. R&D expenses show a decrease of SEK 5.3 million compared to last year. The decline is related to depreciation of capitalized R&D expenditures being charged to cost of sales as of January 1, 2010. Adjusted for this, R&D expenses are in line with previous year.

Operating earnings for the second quarter amounted to SEK 11.9 million (11.0), which corresponds to an Operating Margin of 16.6% (17.6)

The financial net amounted to SEK -0.2 million (0.1). The decline is due to revaluation of intercompany loans denominated in USD.

Earnings before tax amounted to SEK 11.7 million (11.1), which corresponds to a profit margin of 16.3% (17.7).

Net Income amounted to SEK 8.7 million (7.9) resulting in a Net Profit margin of 12.2% (12.7).

Six Months

Net Sales for the six months period amounted to SEK 132.0 million (123.1), which is an improvement of 7.3% over last year. Revaluation of the accounts receivables stock had a negative impact on Net Sales of SEK 1.5 million (1.3).

The EMEA region accounted for SEK 92.4 million (97.5), Americas SEK 30.8 million (21.5) and APAC SEK 8.8 million (4.1).

Sales by business area are distributed between Broadcast & Media 72% (67), DTT & Mobile TV 27% (29) and IPTV/CATV 1% (4).

Hardware sales amounted to SEK 95.8 million (88.6), support and service revenue SEK 20.4 million (20.6) and software licenses SEK 14.4 million (11.6).

Applying the 2009 accounting treatment, the Gross Margin declined by 2.7 percentage points. The decrease is related to combination of change in product mix, a larger share of turn-key type business and currency effects.

The Gross margin, applying the 2010 accounting treatment of depreciation of capitalized R&D expenditures, declined by 5.1 percentage points of which increased levels of R&D depreciation accounted for 2.4 percentage points.

As shown in the condensed income statement on page 11, the Gross margin is 66.1 percent (77.2).

Operating earnings amounted to SEK 18.1 million (21.3), which corresponds to an Operating Margin of 13.7% (17.3).

The Financial Net was a negative SEK 0.4 million (-0.2).

Earnings before tax amounted to SEK 17.7 million (21.1) and the corresponding profit margin amount to 13.4% (17.2)

Net Income amounted to SEK 72.7 million (15.1). The transaction, announced in Q1, whereby Net Insights intellectual property rights are moved to a new wholly owned limited liability company gave a positive tax and cash effect of approximately SEK 60 million, while utilizing around SEK 700 million of tax losses carried forward. As a result, Net profit margin was 55.1% (12.3).

CASH FLOW AND FINANCIAL POSITION

Cash flow from ongoing operations in the second quarter amounted to SEK 16.5 million (-20.2). Cash flow was mainly generated through ongoing operations as well as a decrease in other receivables. Customer receivables have remained on a stable level in the quarter despite the high levels of invoicing following solid collections. Second quarter cash flow amount to SEK 3.3 million and liquid funds at the end of the period totaled SEK 208.4 million (138.2).

Cash flow from ongoing operations for the six month period amounted to SEK 22.7 million (-8.6). The cash flow generated through ongoing operations has been partially offset by an increase in the receivables stock following higher activity levels and a general trend towards longer payment terms. The improvement in cash flow from the investment activity is related to the first quarter IPR transaction which gave a cash surplus of around SEK 60 million. Total cash flow for the six month period amounted to SEK 56.4 million (-13.5).

Shareholders' equity amounted to SEK 410.1 million (313.7) with a resulting equity ratio of 83.6% (81.9).

INVESTMENTS

Second quarter investments in tangible assets amounted to SEK 0.1 million (0.4) and depreciation of tangible assets amounted to SEK 0.2 million (0.3). Capitalization of development expenditures totaled SEK 12.6 million (13.7). Depreciation of capitalized development expenditures totaled SEK 5.7 million (5.5).

Investments in tangible assets for the six months period amounted to SEK 0.3 million (1.1) and depreciation of tangible assets amounted to SEK 0.6 million (0.5). Capitalization of development expenditures totaled SEK 25.5 million (26.4). Depreciation of capitalized development expenditures totaled SEK 11.1 million (10.7).

At the end of the period, net book value of capitalized development expenditures amounted to SEK 109.7 million (83.6).

EMPLOYEES

At the end of the period Net Insight had 130 (121) employees. The parent company Net Insight AB had 124 (115) employees and the US subsidiary Net Insight Inc. had 6 (6) employees.

PARENT COMPANY

The parent company's net sales during the second quarter were SEK 89.8 million (68.2). Net income amounted to SEK 4.4 million (7.2).

For the six month period ending June 30th, the net sales was SEK 156.0 (134.2) and the Net Income amounted to 191.6 (14.2). The large increase in Net income is related to capitalized tax losses carried forward. The capitalization equates to a utilization of approximately SEK 700 million of tax losses carried forward. Liquid funds amounted to SEK 139.8 million (136.7).

Remaining tax losses carried forward amount to SEK 246 million.

RISK AND SENSITIVITY ANALYSIS

Net Insight's operation and results are impacted by a number of external and internal factors. A continuous process identifies existing risks and assesses how each risk shall be managed and mitigated.

The risks to which, the company are exposed are divided into market related risks (including competition, technology development, political risks), operational risks (including product reliability, intellectual property rights, litigation, and customer dependence) and financial risks (including predominately currency exposure).

No additional significant risks or uncertainties than those described in the annual report 2009 have developed in the second quarter.

For a complete description of the Company's risk analysis and risk management, see page 26 and 37 in the 2009 Annual report.

CONSOLIDATED INCOME STATEMENT

Q2 Q2 Jan-Jun Jan-Jun Q3'09 -Q2'10 Full Year
Amount in SEK thousands 2010 2009 2010 2009 12 months 2009
Net Sales 71 465 62 648 131 994 123 055 241 740 232 801
Cost of goods & services sold -24 038 -13 353 -44 775 -28 013 -71 727 -54 965
Gross earnings 47 427 49 295 87 219 95 042 170 013 177 836
Sales and marketing expenses -25 460 -21 673 -48 136 -38 901 -90 348 -81 113
Administration expenses -5 074 -5 615 -10 279 -12 929 -18 801 -21 451
Development expenses -5 014 -10 996 -10 680 -21 888 -30 062 -41 270
Other operating income 0 0 0 0 0 0
Operating earnings 11 879 11 012 18 124 21 324 30 802 34 002
Net financial items -207 84 -439 -196 -2 629 -2 386
Earnings before tax 11 672 11 096 17 685 21 128 28 173 31 616
Tax -2 961 -3 151 55 042 -5 987 63 771 2 742
Net income 8 711 7 945 72 727 15 141 91 944 34 358
Net income for the period attributable to the stockholders of 8 711 7 945 72 727 15 141 91 944 34 358
the parent company
Earnings/loss per share , based on net profit attributable to
the Parent Company's shareholders during the period (in
SEK per share)
Earnings per share before dilution 0,02 0,02 0,19 0,04 0,24 0,09
Earnings per share after dilution 0,02 0,02 0,19 0,04 0,24 0,09
Average number of shares in thousands before dilution 389 933 389 933 389 933 385 629 389 933 387 616
Average number of shares in thousands after dilution 389 933 389 933 389 933 385 629 389 933 387 616
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Net income 8 711 7 945 72 727 15 141 91 944 34 358
Other comprehensive income
Exchange rate differences 504 -559 548 -71 101 -518
Total other comprehensive income 504 -559 548 -71 101 -518
Total comprehensive income for the period, net after tax 9 215 7 386 73 275 15 070 92 045 33 840
Total comprehensive income for the period attributable to 9 215 7 386 73 275 15 070 92 045 33 840
the stockholders of the parent company

CONSOLIDATED CASH FLOW STATEMENT

Q2 Q2 Jan-Jun Jan-Jun Q3'09- Q2'10 Full year
Amount in SEK thousands 2010 2009 2010 2009 12 mths 2009
Ongoing operations
Net income before tax 11 672 11 096 17 685 21 128 28 173 31 616
Depreciation 6 109 5 736 12 133 11 265 25 723 24 855
Other items not affecting liquidity 644 774 1 645 1 827 4 153 4 335
Cash flow from ongoing operations
before change in working capital 18 425 17 606 31 463 34 220 58 049 60 806
Change in working capital
Increase-/decrease+ in inventories -412 3 743 1 802 8 914 -3 646 3 466
Increase-/decrease+ in receivables 8 821 -32 426 -18 710 -38 156 -3 193 -22 639
Increase+/decrease- in current liabilities -10 285 -9 169 8 146 -13 610 10 664 -11 092
Cash flow from ongoing operations 16 549 -20 246 22 701 -8 632 61 874 30 541
Investment activity
Acquisitions of intangible fixed assets -13 045 -13 736 -25 852 -26 412 -51 112 -51 672
Acquisitions of tangible fixed assets -68 -391 -271 -1 085 -808 -1 622
Acquistion of net assets 0 0 59 990 0 59 990 0
Increase-/decrease+ in long-term receivables -142 -105 -145 -299 265 111
Cash flow from investment activity -13 255 -14 232 33 722 -27 796 8 335 -53 183
Financing activity
New share issued - employee stock option program 0 0 0 22 897 0 22 897
Cash flow from financing activity 0 0 0 22 897 0 22 897
Increase/decrease in liquid funds 3 294 -34 478 56 423 -13 531 70 209 255
Liquid funds, opening balance 205 128 172 691 151 999 151 744 138 213 151 744
Liquid funds, closing balance 208 422 138 213 208 422 138 213 208 422 151 999

CONSOLIDATED BALANCE SHEET

Amount in SEK thousands Jun 30, 2010 Jun 30, 2009 Dec 31, 2009
ASSETS
Intangible assets
Capitalized expenditure for development 109 661 83 560 95 329
Goodw ill 4 354 4 354 4 354
Other intangible assets 2 282 - 2 257
Tangible fixed assets
Equipment 1 885 4 366 2 031
Equipment for leasing 296 - 517
Financial assets
Deferred tax asset 24 871 21 091 29 820
Deposits paid, long-term 393 337 248
Total fixed assets 143 742 113 708 134 556
Current assets 0
Inventory 24 868 21 222 26 670
Customer receivables 101 011 100 573 87 007
Other receivables 12 766 10 011 8 060
Cash and bank balances 208 422 138 213 151 999
Total current assets 347 067 270 019 273 736
Total assets 490 809 383 727 408 292
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
Restricted shareholders' equity
Share capital 15 597 15 597 15 597
Other contributed capital 1 192 727 1 200 259 1 192 727
Translation difference -700 -801 -1 248
Accumulated deficit -797 528 -901 348 -871 843
Total shareholders' equity 410 096 313 708 335 233
Long-term liabilities
Long-term liabilities 458 1 252 869
Provisions 7 320 5 776 7 299
Total long-term liabilities 7 778 7 028 8 168
Current liabilities
Accounts payable 21 515 14 618 24 259
Other liabilities 51 420 48 373 40 632
Total current liabilities 72 935 62 991 64 891
Total liabilities and equity 490 809 383 727 408 292

CHANGES IN GROUP SHAREHOLDERS' EQUITY

Other Total
Share contributed Translation Accumulated shareholders'
Amount in SEK thousands capital capital difference deficit equity
2009-01-01 15 196 1 170 232 -730 -910 224 274 474
Total comprehensive income - - -71 15 141 15 070
New shares issued - employee stock options 402 22 495 - - 22 897
Employee stock option program:
Value of employees' services - - - 1 267 1 267
2009-06-30 15 597 1 192 727 -801 -893 816 313 708
Total comprehensive income - - -447 19 217 18 770
New shares issued - employee stock options - - - - -
Employee stock option program:
Value of employees' services - - - 2 756 2 756
2009-12-31 15 597 1 192 727 -1 248 -871 843 335 233
2010-01-01 15 597 1 192 727 -1 248 -871 843 335 233
Total comprehensive income - - 548 72 727 73 275
New shares issued - employee stock options - - - - -
Employee stock option program:
Value of employees' services - - - 1 588 1 588
2010-06-30 15 597 1 192 727 -700 -797 528 410 096

SEGMENT REPORT

SEK million Q2 2010 Q2 2009 Jan-Jun 2010 Jan-Jun 2009
EMEA APAC AM Total EMEA APAC AM Total EMEA APAC AM Total EMEA APAC AM Total
Net Sales 48 3 20 71 51 3 9 63 92 9 31 132 98 4 21 123
Regional Contribution 14 -1 9 22 25 -1 3 28 31 -1 10 39 50 -3 9 56
Regional Contribution% 29% -27% 44% 31% 50% -28% 35% 44% 33% -17% 33% 30% 51% -81% 43% 46%
Adjusted for R&D Depreciation 4 0 2 6 8 1 3 11
Adjusted Regional Contribution 18 -1 11 28 38 -1 13 50
Adjusted Regional Contribution% 37% -19% 52% 39% 50% -28% 35% 44% 41% -9% 41% 38% 51% -81% 43% 46%

Regional Contribution is defined as Gross earnings less Marketing expenses. AM is short for Americas.

Adjusted Regional Contribution is according to 2009's accounting treatment of R&D depreciation.

Condensed consolidated income Jan-Jun Jan-Jun
statement and key figures, SEK m Q2 2010 Q2 2009 Q3 2009 Q4 2009 Q1 2010 2010 2009
Net sales 71.5 62.6 57.5 52.2 60.5 132.0 123.1
Gross earnings 47.4 49.3 44.1 38.7 39.8 87.2 95.0
Gross margin 66.4% 78.7% 76.7% 74.1% 65.8% 66,1% 77,2%
Operating earnings 11.9 11.0 10.5 2.2 6.2 18.1 21.3
Operating margin 16.6% 17.6% 18.2% 4.2% 10.2% 13,7% 17,3%
Pretax profit 11.7 11.1 8.2 2.3 6.0 17.7 21.1
Net income 8.7 7.9 5.8 13.4 64.0 72.7 15.1
Net margin 12,2% 12.7% 10.1% 25.7% 105.8% 54,7% 12,3%

Interim report January - June 2010

Gross margin with consistent R&D reporting

SEK thousands Q2 Q2 Jan-Jun Jan-Jun Q3'09-Q2'10 Q3 Q4 Full Year
2010 2009 2010 2009 12 mths 2009 2009 2009
Net Sales 71 465 62 648 131 994 123 055 241 740 57 515 52 232 232 801
Cost of Sales -18 339 -13 353 -33 662 -28 013 -60 614 -13 410 -13 542 -54 965
Gross Earnings - 2009 accounting treatment 53 126 49 295 98 332 95 042 181 126 44 105 38 690 177 836
Gross Margin - 2009 accounting treatment 74,3% 78,7% 74,5% 77,2% 74,9% 76,7% 74,1% 76,4%
Cost of Sales - R&D depreciation -5 699 -3 961 -11 113 -7 367 -19 971 -4 095 -4 762 -16 225
Gross earnings - 2010 accounting treatment 47 427 45 334 87 219 87 675 161 155 40 010 33 928 161 611
Gross margin - 2010 accounting treatment 66,4% 72,4% 66,1% 71,2% 66,7% 69,6% 65,0% 69,4%

PARENT COMPANY INCOME STATEMENT

Q2 Q2 Jan-Jun Jan-Jun Q3'09 -Q2'10 Full Year
Amount in SEK thousands 2010 2009 2010 2009 12 months 2009
Net Sales 89 819 68 247 155 980 134 210 275 879 254 109
Cost of goods & services sold -47 983 -19 797 -72 797 -40 100 -110 793 -78 096
Gross earnings 41 836 48 450 83 183 94 110 165 086 176 013
Sales and marketing expenses -25 529 -21 773 -48 287 -39 098 -90 645 -81 456
Administration expenses -5 074 -5 409 -10 279 -12 723 -18 737 -21 181
Development expenses -5 014 -10 996 -10 680 -21 888 -30 062 -41 270
Operating earnings 6 219 10 272 13 937 20 401 25 642 32 106
Net financial items -258 84 -489 -196 -2 678 -2 385
Earnings before tax 5 961 10 356 13 448 20 205 22 964 29 721
Tax -1 537 -3 151 178 139 -5 987 186 868 2 742
Net income 4 424 7 205 191 587 14 218 209 832 32 463
PARENT COMPANY BALANCE SHEET
------------------------------ --
Amount in SEK thousands Jun 30, 2010 Jun 30, 2009 Dec 31, 2009
ASSETS
Fixed assets
Intangible assets
Capitalized expenditures for development 109 661 83 560 95 329
Other intangible assets 2 282 - 2 257
Tangible fixed assets
Equipment 1 885 4 366 2 031
Equipment for leasing 296 - 517
Financial assets
Shares in group companies 18 398 18 398 18 398
Deferred tax asset 207 959 21 091 29 820
Deposits paid, long-term 393 337 248
Total fixed assets 340 874 127 752 148 600
Current assets
Inventory 24 868 21 222 26 670
Customer receivables 101 011 100 573 87 007
Other receivables 39 161 24 322 8 060
Cash and bank balances 139 841 136 655 148 540
Total current assets 304 881 282 772 270 277
TOTAL ASSETS 645 755 410 524 418 877
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
Restricted shareholders' equity
Share capital 15 597 15 597 15 597
Other contributed capital 302 207 180 464 276 968
Non-restricted equity/Accumulated deficit 200 399 107 967 32 463
Total shareholders' equity 518 203 304 028 325 028
Long term liabilities
Long term liabilities 458 1 252 869
Other provisions 7 320 5 776 7 299
Total long-term liabilities 7 778 7 028 8 168
Current liabilities
Accounts payable 21 515 14 583 24 259
Liabilities, subsidaries 52 814 38 736 22 071
Other liabilities 45 445 46 149 39 351
Total liabilities 119 774 99 468 85 681
TOTAL LIABILITIES AND SHAREHOLDERS´ EQUITY 645 755 410 524 418 877

ADDITIONAL INFORMATION

Net Insight has earlier communicated its information policy in the interim report for Q1 2007. Net Insight has now revised its information policy and the new one is valid from July 22nd, 2010. Net Insight's information policy adheres to the requirements for listed companies at the NASDAQ OMX Stockholm.

Our objective is to give all market participants simultaneous access to any price sensitive information about the company. The information shall be correct, relevant, clear and timely. Following the operational development of the company over the past years the order values earlier communicated are no longer valid to whether a press release will be issued or not.

This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and applicable rules in the Annual Accounts Act. The interim report for the parent company was prepared in accordance with Chapter 9 of the Annual Accounts Act, interim report. The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2009, as described in those annual financial statements.

The standards, amendments to standards and interpretations that are mandatory for the first time for the financial year beginning 1 January 2010, are not currently relevant for the group.

Following a new analysis of the research and development expenses, the assessment for which projects the depreciation of capitalized expenditures should be reported as cost of goods sold and for which projects depreciation should be continued to be reported as research and development expenses, will lead to a change from January 1, 2010. This implies a shift of depreciation expenses from the profit and loss line "Development expenses" to "Cost of goods and services sold", which has no impact on profit. Furthermore, it does not impact the Company's earnings potential on incremental sales but will impact the gross margin.

The company's auditors have not examined this report.

CERTIFICATION BY THE BOARD OF DIRECTORS AND CEO

The Board of Directors and the CEO certify that the Interim report for the period January - June 2010 gives a true and fair overview of the Parent Company Net Insight AB 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.

REPORTING DATES

Interim report for January – October 2010: 22nd October 2010 Year-end report for 2010 18th February 2011

Stockholm, July 22nd, 2010

Lars Berg Bernt Magnusson Chairman of the Board Board member Ragnar Bäck Clifford H Friedman Board member Board member Gunilla Fransson Arne Wessberg Board member Board member Anders Harrysson Fredrik Trägårdh

Board member Chief Executive Officer

For more information, please contact:

Fredrik Trägårdh, CEO Net Insight AB Tel: +46 (0) 8-685 0400, [email protected]

Thomas Bergström, CFO, Net Insight AB Tel.: +46 (0) 8-685 04 00, email:[email protected]

Net Insight AB Box 42093 126 14 Stockholm Tel +46 (0) 8 685 04 00 www.netinsight.net Corporate Reg. No. 556533-4397

Net Insight delivers the world's most efficient and scalable optical transport solution for Broadcast and Media, Digital Terrestrial TV/Mobile 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™ 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.

World class customers run mission critical media services over Net Insight products for more than 100 million people in more than 40 countries. Net Insight is quoted on the Stockholm Stock Exchange.

For more information, visit www.netinsight.net

Net Insight AB • Box 42093 • SE-126 14 Stockholm • Sweden Phone: + 46 (0)8 685 04 00 • Fax: + 46 (0)8 685 04 20 • E-mail: [email protected]

Net Insight, Inc. • PO Box 691825 • West Hollywood, CA 90069 • USA Phone: + 1-866-217-9705 • E-mail: [email protected]

Net Insight • Penthouse Level • Suntec Tower Three • 8 Temasek Boulevard • Singapore 038988 Phone: + 65-6866-3830 • Fax: + 65-6866-3838 • E-mail: [email protected]

Net Insight • Dubai Internet City • DIC Building 12, Dubai • United Arab Emirates Phone: +971 50 654 90 40 • E-mail: [email protected]

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