Net Insight AB (publ)

Good morning, everyone, and welcome to this quarterly presentation with Net Insight. It's the third quarter of the year that we will present today. My name is Andreas Jolson. I'm responsible for the coverage of Net Insight here at DNB Carnegie. And as usual, I have CEO Krista Fritsson with me, as well as CFO Cecilia Högård-Höök. You will present the quarter, and after we will have a Q&A session, and you are very welcome to send in your questions through the web. We already have a couple of questions, which is nice, and feel free to enter more of your questions. With that, I leave it to you, Christer.

Thank you, Andreas, and welcome to the Q3 report for NetInsight. We have a standard agenda. We start with some highlights, business overview, and Cecilia will cover the financial, and we do a summary. And as Andreas was saying, we ended up with a Q&A. So, Q3. After a challenged start of the year, we are glad to see that demand in the market has stabilized. And we have seen that in high sales during the quarter. And in comparable currency, we are in line with the revenue from last year Q3. We have a significant improved earning compared with the first quarter this year. And it was mainly driven by increased sales. The cost-saving program has given us a good effect already that we started in Q2. And we have some seasonal effect in Q3 as well. And we are glad to launch the first 400-gig media-ready solution, which takes us to the highest density in the market, highest capacity in the market. And we have been leading this capacity race since all the way back to 2018 when we launched 100 gig. That was also the first product in the market. The good thing with that is this has lowered the total cost of ownership for the customer, and I will come in a little bit more to that later on into the presentation. And if we move over to time synchronization... We are seeing continuous strong momentum in that product segment. And it's still a growing customer engagement and an increasing market interest. And during the quarter, we had two new mobile operators that are moving into a test phase and we're evaluating our synchronization solution. A very key important event during the quarter is that the Turkish 5G licenses have been auctioned, and Turk Telecom, of course, has received a wide license, and they have started to ramp up the rule of the national time synchronization network. So that started in the beginning of Q4 and will continue during next year. If we then move in a little bit into each product or market presentation, we start with the media. We are focused on to be the partner that enable our customer to produce and distribute live content flexible and cost efficiently. And during the quarter, we had launched a 400 gig platform that definitely strengthened our position in the transport of media, live media. The important part with this is probably not just the 400 gig. It is that lower cost per service for the customer. So the total cost of ownership will go down for the customer. And that is a really important part and strengthen our competition in the market. This density can be used in an existing product as well, the 100 gig product, with the same density, which gives us a very, very strong position in the market and protects our position that we have and we are leading in the transport. And we see all the demand from several major customers, our own customer, major customer, and we will deliver a start around year-end. The cloud product, the unmanaged product portfolio is an important part because that's the growing part of the market and we have a strong position. And during the quarter, we have launched new features and several new features. One is more efficient video compression that are really important for the customer and a strength in our competitiveness towards other similar solutions. And we are glad to see that we are winning the best of show with this product. Network security is also, of course, an important part because this is distributed over the open internet. So security is crucial for our customer and we have built even stronger security around this product. So the new combination with high capacity solution that we have and flexible cloud-based solution broaden our customer offering to our major customer and give us a strong opportunity to grow further into new market segments and take, of course, and grow our business with new customer. So that is a key position that we have, managed and unmanaged, and it will be more and more combined as an offering to our customer. And that was the customer asking for today. If you move over to time synchronization, we definitely see that the need for GPS independent time synchronization continue to grow. And our solution are fully meet the growing demand from operator and other public authorities. And they will like have security, precision of course, and reliability for the network that they are running. So we see an increased demand for this, and you probably have seen that in papers and in media, that the jamming of GPS is continuous and increasing definitely. And I just mentioned previously that we had two new mobile operators starting to evaluate our time synchronization solution. So now we are close to 30 customers that have testing or are testing our product. And half have moved over to pilots or network installation. The customer dialogue that we have and the pilot project that were initiated since we launched our final product Q2 last year, has been progressing well. And several operators move into commercialization phase. And we have communicated and we expect some of those customer to begin to roll out in the end of this year or beginning of next year. One actually quite interesting event have been during quarter is that the Yammer test in north part of Norway. And we launched a number of new features at the same time during the jammer test. One is GPS attack detection. It's important for customer to notice if they are jammed. And we have a probability to detect that. The JAMA test actually is a huge event. I will just mention some. It's over 100 different companies during the event coming from 24 different countries. So it's an opportunity for us to showcase our product, of course, to potential customer. And it's the first time that we as a company are joining that. Previously, it had been other that have testing our product, but we were participating in this this year. So it was a great opportunity for us to show our product. By that, I will move over to... Hello to Cecilia that covered the financials. Yeah.

And with the financials, we see that demand is now stabilising and returning to more normalised levels. And revenue for Q3 amounted to 147 million, a sequential improvement from previous quarters and the softened markets we have seen, global uncertainty and currency headwinds. In comparable currencies, revenue for Q3 is on par with last year. Moving on to gross margin, we're starting with unadjusted gross margin, and that was 66.3% for the quarter, and for the last 12 months, 69%, close to our three-year average, despite persistent FX headwinds and impact from high-volume deliveries that we have done during Q2 and Q3. Gross profit for the quarter amounted to 77.7 million with a margin of 52.8%. So to R&D, and we continue to invest around 25% of our net sales in R&D. And this shows our commitment to innovation. Of these, we capitalise around 65%. And by that, we are laying the groundwork for long-term value creation and future product launches. The strategic focus ensures that we will remain in the forefront of technological advancement in our industry. Moving on to result and starting with EBITDA. Ibitafu Q3 amounted to 46 million and margin rebounded to 31%. The improvement is driven by increased sales, cost savings and seasonal effects. Looking at our Q2 program, cost saving program, it is on track to deliver 30 million annualized savings by year end. For the last 12 months, our adjusted EBITDA amounted to 112 million with a margin of close to 21%. Finally, looking at EBITDA, that is EBITDA, including capitalization of development expenditures. And for the quarter, our EBITDA amounted to 29 million with a margin close to 20%. And this is a year-over-year improvement from the 17% we had last year. Moving on to operating earnings. And operating earnings for Q3 amounted to 22 million with a margin of close to 15%. This is a clear improvement compared to the last two quarters. Alongside increased sales and effects from cost saving program, Q3 tend to be the quarter with the highest margin, a result of seasonal effects with lower costs during vacation period. Last 12 months, results and margin remained pressured by earlier quarters with an operating earning of 18.3 million and a margin of 3.4%. Looking at our cash flow, starting with operating activities, we have a positive amount of 21.7 million. Then we have our investment from activities, mainly from capitalization expenditures of R&D, and that amounted to minus 17%. As a total, our cash flow for the quarter was minus 0.5 million and cash at the end of the period was 96 million. During the last quarters, our changes in working capital has affected our cash flow negatively. And as you can see, our working capital at the end of the period was 148 million. The increase we have seen during the last quarters is mainly due to increase of accounts receivable, but also due to the strategic component purchase of FPGAs we have done, and where we in the quarter has done partial payments. Final payments will be done during Q4. This strategic component purchase will secure future cost advantages. Looking at our available cash, we have a strong position with a cash including credit facility of 181 million. So that was all for me.