Net Insight AB (publ)

Good morning and welcome to NetInsight's Q4 results. Together with me today, I am Cecilia, our CFO, and I am also Linda, responsible for investor relations. My name is Christer Fridsson, I'm the CEO of NetInsight. So let's look into the agenda for today. We will go through the highlights and the business overview and we will cover media and time synchronization. Cecilia will cover the financials and then we will end up with an outlook going forward. And we will also have questions in the end. So if you have any questions, you know that you can send them in and we will have a Q&A in after the presentation today. So let's move into the first slide and look into the overview. We have a successful year behind us with a number of new important customer wins within media and a strong growth in our focus market, America. And we have a high conversion rate from POCs to commercial order in the sync business. We have a stable quarter in Q4 in the light of a very tough comparison number from last year and a seasonal volatility in media coming from unpredictable budget orders. So Q4, normally we see budget orders coming in as last year, 2023, but this year we have less budget order coming in. It's maybe coming from that our existing large customer have significant investment in previous quarter, 2024. We saw a strong increase in sales in the same times in Q4, reaching up to over 14 million And the full year net sales growth is over 13% last year. And we have excluded MRE support from Turk Telekom on the R&D investment that we have done on the Sintai. One of our main focus in media is to gain new customer. And we are very glad to see that we have three additional, very strong, large customer within media. And we received an order on Syntag from the leading operator in Europe. And we signed our first time as a service deal in South Africa. We see a continuous growth from growing interest in the Sintai for large operator. This is the change the last six to nine months that we see larger operator getting interest into Sintai in all regions. And we have started new POC with large operating Q4 and it continues in in even in into one so that is really strong and good trend that we see that we see in higher interest in general but definitely from large operator we will ex we expect that the contribution to our growth in 2025 will come definitely from from from uh same time And it's a little bit difficult to predict exactly which quarter the increase in sales will come with SynthEye. It's depending on when the POC will move over to commercial orders. But we estimate an acceleration during the year and mainly in the second half of this year, we will see an increase in sales of the SynthEye product. Moving on and coming into the business overview and just start with the sales and the margins then. Our strategic focus results in solid growth in 2024. As I just mentioned, it's over 13% excluding the NRE. The growth is coming from upselling existing customer. We know that we have a very good solution for the existing customer. It's easy to go from our DTM technology or the IP is a seamless move from the different technologies. But we also see a strong customer acquisition during the year. If we look at the CAGR and look between 21 to 24, the CAGR is always 16% or close to 70%, so it's strong. And you know that financial target that you have in growth is to be in an average of 15% per year. We have a stable and good operating margin. despite significant investing in the synchronization product, but also in the media product. We have accelerated investment in both those product segments, but we're also increasing investment in the front end to secure long-term growth of our business. So the operating improvement, earning improvement in 2024 is coming, of course, from increased revenue and a growing software and the license sales also strengthening the EBIT. I'm comfortable with our financial targets. of an average annual net sales growth of 15% and reaching an operating margin of 20% in the end of the 2027. Moving over to looking into the sales in the regions. Again, as you can see, a fantastic year for EMEA. with a strong sales and EMEA have had for the last two, three years, a very strong stable sales. But our focus had been clear and we have a clear target that we need to grow the American market. We have invested in IP based product. And that's been specifically for the US market that are very IP-based focused. And this has paid off. You can see that the American market during 2024 was growing with over 40%. So very strong growth in America last year. And we see a continuous positive outlook for America in 2025. A little bit more specific on the media. As you know, our focus is on live event and in the sports segment. And that is definitely a growing segment. And we see also new players entering into that segment. Large players are investing in content and also on top of that, investing in the media product that we are supplying. So that is the driver in the market and that's our focus area. We will continue to focus on sports during 2025 to be even more focused on the larger leagues in all regions to really gain the growth in that segment that's growing very fast. I'm glad to see that our long term investment in IP and cloud is paying off and we see that we have strengthened our position in the market dramatically the last two to three years in the light of the investment that we have done in those two segments. Now we can see that we have a mature IP product. even though that we continue to increase functionality in the IP. We see that the cloud is slowly but surely increasing in sales, and we are increasing in unmanaged to support the cloud product. So the growth last year is coming from existing customer that are investing in the IP based product and also in the cloud. But we also so happy to see that we are entering in with new customers. As I mentioned in Q4, we have three major customer coming in. One is the major US media company. And one large nimble edge order in Europe. It's very encouraging to see that we are moving in the edge segment that is a long-term investment. And we see going forward that edge cloud will be more important going forward. And our long-term investment in Middle East that we have increased our SAIS resources in Middle East like two years ago, really paid off with a large order in Q4 from an operator in from the telecom sector. Okay, we understand that we had a problem with the transmission, so I will go back to the Sintai presentation and then Cecilia will come back with the financial. So coming back to the Sintai, we see a continuous increase in interest in Sintai. And we see several leading telecom operators initiating proof of concept in Q4, while previous ones are gradually transitioning to commercial orders. So that is a trend that we have seen and it's continuous. It's glad and it's coming from all three regions. So it's very important for us to sign up large operators that we have discussed. that the large operator can give a comfort in the market and lead the way and take down barriers for other telecom operators to use SYNTI. And we see that that's a trend that's coming when we have signed a large European operator. So that's very, very encouraging. And that will also give a clear message into the telecom market that our product is very, very competitive. And we also signed up our first time as a service customer or provider in South Africa. Yes, a little bit. Yes. Explanation was time as a service is actually it will not compete with like the telecom market or other larger market like power grid. The time as a service is more focused on smaller installation. It can come from data centers or a number, two, three, four data centers that need to have a time synchronization. This is a super interesting solution for them to take time as a service. It can be like a radio stations that have a number of different station in a country and they need to have like time synchronization between them. And it's very easy for them to take a service or in the fintech industry. There's a number of industries that are really interesting in time. Time will be like a crucial components in many, many different industries. And we see this is a great solution to easy, very cost efficient, get time as a smaller company or a smaller installation. And we see interest for a number of regions and countries that are looking in to have this service. So we're glad to see that South Africa was the first country doing just that service. The service integrator or partners is a crucial part of the telecom market and this is a crucial part for us also in our go-to-market strategy. The integrator is the companies that actually help in the large operator for installation in the network and they are key components for us in our go-to-market strategy. So we are glad to see that we have signed up more than 10 partners in all three regions in different countries like we have in Turkey and other countries. So that's an important part of our go-to-market strategy. We have been focused on that the last 12 to 18 months and we now have strong local regional partners. We're also looking into large global integrator that can be interesting for us going forward to use. We see that the investment appetite in a global telecom market is slowly coming back. And it's driven by increased demand of functionality or demand for new functionality in the 5G network. And it's mainly coming from industries and other companies that would like to use the 5G functionality that are in the network. And that will drive simple sales. If you have like an installation like that, you would like to have a robust service. And one crucial part is of course that have GPS independent. So that is a driver for us and we see that's coming in more and more. Okay, hopefully you have heard this now, and if you have any questions, you can take them later on after Cecilia's presentation. So I'll hand over to Cecilia, and we need to move the computer to Cecilia.

Sorry for the mistakes in the transmission, but now we go into the financials. And as previously noted, the four quarter tends to be more volatile than other quarters. And this year we saw a softened sales dynamics with fewer orders related to customers remaining budget capacity than 23. While timing of incoming orders also was less favorable. As a result, our net sales declined with 17.8% compared to the same period last year. If we look at full year 24, our net sales increased with 8.7%, mainly driven by our focus region Americas. If we look at our product group and product mix, we see that over time, we have a stable mix, though it can be somewhat volatile from quarter to quarter. But over time, we'll see a slow shift to a growing share of recurring revenue coming from license fee from cloud-related media products and time synchronization. The gross earnings decreased on the back of weaker net sales in the quarter. Our gross margin before amortization in the quarter was 74.7 which is above our three-year average and that is due to a temporarily higher share of support and service revenue in the quarter. Gross margin including amortization was 61% and that is below last year and explained by a combination of the lower net sales and higher amortization of capitalized developments. Looking at full year 24, our gross margin before amortization was 71.9%, and that is slightly above our three-year average. And over a long period of time, we expect this trend to continue due to the shift in product mix. But this shift, we do not expect it to come rapid or significant in near time. Looking at EBITDA, we have a positive profitability trajectory with EBITDA margin improving along our net sales for growth for recent years. Looking at full year 24, EBITDA increased from 143 million and a 25.2% margin, 260 million and a 26.5% margin, a sign of the scalability of our business. Looking at the right hand side we see our long-term value creation in developments. During the year we have invested 24% of our revenue in R&D and a large portion of our development expenditures are being capitalized, a sign of long-term value creation in the company. During the year we have gained efficiency by relocating development from the US and India to Sweden. Our operating earnings amounted to 5.2 millions with a year-on-year decrease related to the lower net sales in the quarter. As we have a high gross margin, any fluctuations in revenue will have a large impact on our operating earnings. Operating margin decreased to 3.9, alongside weaker sales and continued investments in a strengthened organization, both in media, cloud, IP expertise, as well as time synchronization. Looking at full year 24, we have a stable margin of 13%. Now to our cash flow. And our cash flow for the quarter was before excluding share related transaction was 4.1 million. Cash flow for operating activities was 35.6 million and this was with a positive reduction of working capital. Cash flow for investment activities was minus 28.7 million and the result of our capitalized R&D expenditures. Cash flow from finance activities amounted to 14.8 million, primarily attributable to 12 million in reapers of shares. Our net cash possession at year end was 233, and that means that we have a solid financial flexibility to seize emerging opportunities and fund further growth, including potential acquisitions. Looking ahead at capital tied up in inventory of programmable circuits, FBAs, this will increase over the coming years and cash flow wise we expect the majority of the cash flow to related impact in the second half of 2025. So that was Point Financials and now moving back to Krister.

To sum up, I would like to point out our key strategy, the growth strategy that we have. We have been very focused on investing in expanding the market and we have been expanding the market through IP and the managed network that we are saying that's been the main investment that we have done. We are still in the growth path of that. We see still that Americas will be the focus market. We have a strong growth last year and we continue like a strong continuous expansion in the US. So that is really... great to see that you also can attract new customer as i mentioned we have attracted three in a quarter and we if you look at on the full year it's over 15 new customers within the media sector and majority of them have been moving through the ip product that you have if you look at the unmanaged which is mainly the cloud but also related hardware product and unmanaged is more using the internet the open internet to transport is a different type of products we see going forward that unmanaged will be more and more important in market even though that is fairly small today and it will also gradually move together with managed and managed with gradually growth together and it's a great thing for us because we have a huge installed based of managed product like the 600 and the 1060s and that can also be used for cloud services going forward And that's also its cloud is definitely recurring revenue that you can see further on that is one of the focus areas to really increase the recurring revenue. Roaring market footprint is definitely the time synchronization product that we have that we launched in second, first half last year. We have a new Syntar product. And the great thing with us is that we're using the existing technology that we have used since 2008 and we're moving into new market segments. And as I've been saying, that's really a very, very big and very big opportunity for us to really grow going forward. Recurring revenue, that's something that we have been focused on and we have a large portion of recurring revenue as right now, but we would like to continue growing that. And it's coming from like the cloud product that I mentioned, license sales, but also the time synchronization. The time synchronization product have like a larger portion of license than in the media product. So we see definitely those three elements is the driver for increasing the recurring revenue. But we see also that we would like to expand in adjacent markets or technologies. And it's like the complement or an addition to our organic rules that we're also looking into acquisition. That is still ahead of us. We haven't really focused on that, but it's something that we will look into in the future. and scaling the the our business i mean we have been talking about that a lot previously but we have a global footprint we have like relation with large telecom operator we have relation with large media operators who and we have like a high gross margin So increasing the top line will really drive the EBIT level as well. So we see that we can scale our business with high potential. Okay, yes, let's sum up this presentation before we move into the questions. I mean, we have a successful 2024 behind us. Net sales growth was over 13% and driven by America's growth of 40% and a very stable sales in Europe. So we are very happy with that growth last year. Operating margin is stable, around 13%. And with a continuous high pace of investment in the sync product and in the media product, and we are building out the front end, mainly in the sync part of the business, we are building out the front end. With our investment the last two to three years, we have definitely strengthened our media position. We have a strong position now. We continue selling our DTM technology, but we also have a strong position within the IP market. And the good thing is for existing and new customer, it is seamless that you can move between the technology depending on what type of service that you would like to have. You can use the most efficient way of producing your content. Continuous growing interest in Syntai and definitely from large operating in all three regions. and we see that we will have a strong growth in in sync tie this year mainly in the second half of the year so we have a very long term growth perspective all by the somewhat cautious market in EMEA and APEC in Q1. We see some cautious signals in EMEA and APEC, while America showed good development. So that was like a sum up of the presentation. So I suggest that we move over to Q&A and thanks for listening. So we move over Linda to Q&A.