Net Insight AB (publ)

Good morning, everyone, and welcome to this Q4 presentation from NetInsight. My name is Andreas Johelsson, and I am responsible for the coverage of NetInsight here at D&B Carnegie. And with me in the room, I have some new faces. We have the new CEO, Andreas Eriksson, joining us. That will kick off the presentation. And he's joined by CFO Cecilia Högård-Hök, that will go through the numbers. And after that, we will have a Q&A. To the right of us on your screen, there is a box where you can send in your questions, and I will read them to management to answer them. But first, the presentation, so I leave the hand over to Andreas. Welcome.

Thank you, Andreas. So let's start. Good morning, everyone. I thought we would start with giving sort of an overview of 2025 and Q4 in particular. I think as we previously communicated, we had a sort of weak Q4 in 2025 and overall quite a challenging 2025. And it was driven by a combination of external and internal factors. If you look at the external factor side, we had exchange rate headwinds, we had an uncertain macroeconomic environment, and also we could see that the sales cycle for the time synchronization business was longer than we had expected. In order to strengthen and respond to this, we have worked on strengthening the portfolio, driving improvement in the sales execution area. And I think also, as we communicated, we had launched last year a cost reduction program and really driven cost discipline and cost control throughout the entire business. And this has all had a positive impact on 2025. For us, the key milestone last year was the first commercial order we won for our 400 gig media platform that we won in quarter four. So that was a key positive milestone for us. And if you look at the time synchronization area, I think we had more throughout the year, we had more customers entering the proof of concept phase. and several of them advanced through the sales funnel. Although, as I just mentioned, we can see that the sales cycles for the zinc area remains longer than we had expected before. So if I sort of zoom in on some of the key areas of actions we started to take in last year and also will continue to drive, they really fall in three categories. Number one is around the enhancement of the portfolio. And some of these we cover at Capital Market Day, what we talked about yesterday. the business. And I think it comes in three different areas in that one. First, it's the whole cloud and unmanaged area where we see big opportunities for us and we see an opportunity to really come out and have a really strong portfolio. We're also talking about the different sort of form factors of the type of equipment we have. So they come in different shapes. So that's the second area. And then also we see an opportunity to enhance the portfolio by adding new compression technologies, which will I'll talk a little bit more about later. The second area is the whole increasing of sales efficiency, where we will continue to drive to make sure we really have a very impactful sales and marketing organization. And that has to do about how we bring new offerings to market. It's related to how we can grow and upsell existing customers and also how we win new customers in a sort of significant way. And the third area of drive and improvement here is on the time synchronization area where we will, you know, now going forward, really drive hard and focus on conversion. You know, drive the conversion of the prospects we have in the pipeline opposed to necessarily adding new prospects. I think what's important to highlight when you look at this is that we're coming from a foundation that is strong. You know, we are active in an attractive market. You know, we have a legacy and we have a heritage and experience in developing really innovative and industry-leading solutions. I think for us, you know, building on that and where we've come so far and adding some of these areas for actions and improvement will be leading to a really positive outcome. If I then take a step back and we look first on the media area, I thought it was just good to maybe zoom out as well when you think about NetInsight and where we are. So I think what we see is we are really well positioned in the live sports and media market where we've been active for many years. As we again talked about on the Capital Market Day, there is a number of trends and drivers in the market which we are taking benefit of. On the consumer behavior side, we know that more and more content is required to fuel an online viewer experience for live sports, which nowadays obviously is commonplace. There's continued to be the shift from satellite to fiber and now into cloud, which we've been benefiting from for a long time. And now that also is, you know, we're adding when companies are moving from satellite and also, you know, going to Internet and delivery, Internet delivery-based solutions. So that's something we benefit from. There's been an underlying trend in the industry for a while, as we have talked about in the remote production area, and that is something that we continue to benefit from. So when you go from a production at the venue, moving that into central production, the requirement on the network is increased, and we benefit from that. Then you have the overall drive, and this is where the 400 gig comes into play, of higher capacity in general, because people and viewers want just more higher band quality on the viewing. The new compression technologies, we are active mainly in one area of compression technologies, and now we see an opportunity to get into other areas of compression, which will be an underlying growth driver. uh for us and finally the shift to ip standards-based services is another underlying trend which we are taking benefit on so i think this summarizes the underlying growth trends that we that we are that's driving the net inside business if you don't think about us you know and position us in this in this world you know what's our core value proposition and and the uniqueness of net insight i think in four areas. One is that we have an extremely strong reputation, brand in the market. We've been here for a long time. People trust the Netiside business and our customers like the product because they really work. It's high quality and we're dealing with a situation in the live sports area where you cannot fail. So I think that's a really strong starting point. If you look at the other area around how you operate the network, there's another thing that really sets us apart because our solutions and the customer likes the solution because it's easy to manage. It's easy to manage the network, which is very critical. That means less cost for managing the network, less risk. When you run, again, a live broadcast environment, that becomes very important. The third area is the ongoing development of our product offerings and make sure we have differentiated the features in a product offering that stands out compared to our competitors. You know, we talk about high capacity, for instance, being one of them with the Ford. We were first with 100 gig, now we're first with 400 gig. And the final area is around what we talk about, the total cost of ownership. And the way to think about this is the cost for buying the equipment and the cost for standing it up and deploying it, and then thirdly, the cost for the operations when you're in production. And our solution has proven to be very strong in looking at really low total cost of ownership across all the three categories. So that's, again, a key selling point for us in this market. If I then just look at the market, and this is similar to what we presented at Capital Market Day. When you think about the market we are active in, in the lower left, you can see where there's a current core market, which we are active in. But we see a really good opportunity to expand our target market there. and go into other areas we've been working a lot on the unmanaged this is where you know internet delivery comes into play for instance we've been we've been working a lot into into that area and strengthening that portfolio and then if you go up right to the dark blue new compression technology that's also an opportunity for us to add um that into our our portfolio So we see really opportunities in all these three areas for us over time here as we build out the portfolio and expand it. And then you can see why these areas that over time we will look to explore whether we can find growth also in those areas. I think for me, The growth of the TAM is just a core part of our future, and to make sure we can continue to grow, we will need to be active across the current core market at this point. If we then look at media and zoom in again more on 2025, as I said, challenging 2025, performance did not meet our expectation or ambition in that area. As I mentioned, we finished the year weak and unexpected. It was driven by low demand in Q4 and also absence of typical year-end budget orders. So this is where customers will sort of, I guess, empty their budgets if they close the financial year. In December, they would typically spend more, and we didn't really see any significant orders like that. I think what's positive is that the cost reduction program and the cost control we had driven throughout the year had a really positive impact on the business. And then coming back to some of these improvements that we're driving is that we, again, enhancing the portfolio, increasing the sales efficiencies is two key areas on the media side. We're all in this now in the beginning of the year. We will launch a new sales organization. We have new CCO. which used to run the EMEA business and has done that over quite a few years with some great success in terms of how we run that part of the business. We have also now, as of now beginning of the year, a new regional head for our Americas business, where we see again an opportunity to drive more growth, as well as in Asia-Pacific we also have a new regional head. It's really a new lineup to some extent to take advantage and be even more impactful into how we execute out on the field. As I mentioned, positive response for the 400 gig, you know, first order. And this is, again, the business driver behind this is really about lower total cost of ownership, as well as, of course, the increased capacities of builds on the key value propositions that we have in place. And really to sort of emphasize that I think we are well positioned to benefit from our foundation that we have over time. You know, we are, again, supported by a presence in a very attractive market. You know, we have this DNA and this heritage of developing really innovative and industry leading solutions. I think for me, that's a really good starting point as we embark on the next phase of the business. If I then sort of change area here and move into the time synchronization area, I think what we have seen throughout the year is we've strengthened the position. We have moved forward in many areas. But again, as I've highlighted, we can see that the sales cycles for the synch area is longer than we had anticipated. Again, the need for GPS independent synchronization continues to grow. You know, we have still strong market interest. You know, to date, 33 customers have entered proof of concept with us. So that sort of indicates the need and also indicates interest for customers. the area, but also for our solution. We had sort of a weak start of the year, but over the year momentum has started to improve in the second half, and several customers are progressing into commercial field trials and pilot deployments. And in Q4 was a great milestone for us where we had the first media customer, and they began deploying the synchronization solution for a large-scale sporting event. So that was a key milestone for us. And then our strategic customer, Turk Telecom, have advanced to higher volume of deployments in preparation for the commercial 5G launch that they will make in April. And I think overall, I mean, the year really demonstrated positive progress. You know, we have more customers moving through the sales funnel. Again, it takes longer time than we thought, but, you know, there's step-by-step, you know, moving towards the rollout phase, which is sort of the end goal, clearly. So, again, similar here, I think, well, you know, look at the outlook. The long-term remains positive. I think what we are expecting, though, is in terms of short-term revenue and We expected to show some volatility during the first quarters because we can start to get orders and the phasing and timing of them will depend, will sort of come over time. Even when in a rollout situation, you don't get the big rollout order in one, you get it in a couple of phases. I think that's what we expect to see going into next year. If we zoom in and talk a little bit more in detail around the sales process around sync, which I think is important to take some time on so it's sort of clear, I think you go from prospect to rollout and full operation. So it's a number of steps here that we have communicated and that we have when you bring on board a new customer and have the engagement. And this whole process, you know all these steps is really what we thought maybe in the beginning would be 12 to 24 months in reality what we're seeing now is more towards the 24 months and it's probably some in some instances even more than 24 months i think that's sort of important to bear in mind having said that i think what we expect over time is that this time will come down because obviously we're dealing with the new technology here um and um and You know, that's why the customers want to do, maybe go through all the different steps. You know, over time, they might decide to only do a field trial or a pilot, you know, before they move to roll. We think that the time will come down. think it was a clarification i think when you think about revenue intake for us obviously you know the whole ambition here is to take as many customers to roll out as possible so i think that's sort of obviously the aim aim goal here when you think about the revenue inflow from us i think it's important to know that you know in poke typically we don't get any anything paid for so no revenue that we that we do as part of the sales process but field trial and pilot We typically get revenue for, I mean, we get, they pay, the customer pay for that part effectively in the evaluation. So I think that's important to kind of understand when you look at the numbers and so forth. But again, the whole ambition is obviously rollout where the bigger amounts will come. If you look at that last year, when you think about the numbers, as I mentioned, 33 customers have started a POC. 60% of the concluded POCs, they've converted into commercial field trials and moved to the next step. 15% have decided not to continue. And the pattern is very clear on this 15%. It's actually not the sweet spot market segment that we had said. It's tend to be the customers, the telcos, that have more of a homogeneous network and are the incumbents. They tend to have another network architecture and network reality where this is maybe less interesting, but really a sweet spot where 75% of the market is really what we've been aiming for. So I think that's important detail to understand. If you look at the 25% that is then residual of these two, they really have not decided. So they basically have concluded a POC, but they are yet to decide exactly what will be the next step. If you look at the other part and a little bit further down in the process here, we can see that 40% of the customers performing field trial have continued to pilot stage. And then we have 40% of is still ongoing at this moment. And similarly, the residual 20% is customers that have not decided yet what they do next. I think one thing to maybe highlight in terms of as we look at through the process here is The pilot installation role are clearly the key milestones here. And what we expect and what we see is that when a customer has decided to do pilot, we expect the conversion rate from pilot to rollout to be high. And I think we will know over time exactly the ratios and so forth. But I think that's an important thing to mention. At this point, we have four customers in rollout and full operations. So that hopefully gives you some clarity on the sync area and what the sales cycles look like in more detail. So with that, I'll leave over to Cecilia.

Yeah. OK. So starting with revenue and for the quarter, we had had 117 millions of revenue and that is a decline of 12 percent year on year. Looking at full year, we had revenue of 521 with a decline of 14 percent. And FX pressure has created headwinds consistent over the year. And in comparable currencies, the decline was 4% in the quarter and 9% for the full year. And beyond FX, market uncertainty remained elevated. And as Andrea said, we also see that we have internal factors that we need to improve. If we look at splits by region revenue, we can see that Americas has momentum and they have grown their share of total revenue during the last two years. And the growth has come from existing tier one customers. Americas is the largest market and very important for us. And despite our growth, we see that we have not yet secured sufficient traction with new major customers. And this remains a gap, but also a growth opportunity going forward. And if we start with probability measures and gross margin, gross margin for Q4 was 68.5 and for the full year 67.4. Margins has been negatively impacted by the FX headwinds and to some extent by lower margin of high volume deliveries during the, especially in quarter three. If we continue operating expenses, We see that operating expenses declined 13% year on year in Q4. And we have a clear downward trend in operating expenses as from Q3 onwards. This is mainly a result of the cost reduction program that we launched in Q2. And we now deliver an annual run rate savings of 30 million. Continue with EBITDA excluding one-offs. They amounted to 17.9 million in Q4 and 102.2 for the full year. And EBITDA has been pressured by the lower revenue that we have had during the year. And FX headwinds amplify the decline. The cost reduction program that we initiated have contracted the EBITDA deterioration, but only to some extent. Continuing with operating earnings, the trend is the same as for EBITDA. And operating earnings for the quarter amounted to a negative of 4.4 million with a margin of 4%. And for the full year, 8.8 million with a margin of 2%. Now to our net cash. And the total cash flow for the quarter was a negative of 14 million. Starting with operating activities, the cash flow amounted to a positive 12.1 million. And if we adjust for the final FBG payment, the cash flow from operating activities amounted to 70.1 million. Cash flow from investment activities amounted to a negative of 23.3, driven by capitalization of expenditure development. And cash flow from financing activities amounted to negative of 2.3, driven by interest and lease payments. So if we close the year end with a net cash of 83, and we have supported an unused credit facility of 85, we now have available liquidity of 168. And this ensures that we will have a confident cash for going forward. That was about it for me.