Revenue up 21% compared to Q3

Christmas shoppers came back

 Bergen, Norway, February 25, 2010. Vizrt Ltd. (Oslo Main List: VIZ)

 The end of the year revenues came back as it used to be some years ago. The "Christmas shoppers" showed us signs that the media houses once more feel comfortable with the markets going forward.

 HIGHLIGHTS

• Q409 Revenues of MUSD 26.1, up 21% compared to MUSD 21.5 in Q309, and up 11% compared to Q408.
• EBITDA of MUSD 4.3 in Q409, representing a 17% margin, up 62% compared to MUSD 2.7 (12%) in Q309 and up 9% compared to Q408.
• EBIT was MUSD 2.2, representing 9% margin in Q409, compared to MUSD 0.6 (3%) in Q309 and down 5% compared to Q408
• Total backlog to date is MUSD 37.3, up 8% compared to MUSD 34.4, reported on the Q309 results release date and up 44% compared to Q408

Impairment of Goodwill: following our disclosure in the Q309 PR, the Company has recently completed an impairment analysis related to the Escenic (ESC) acquisition as required by accounting rules. A non-cash impairment charge of MUSD 9.0 was recorded as a separate item in the operating expenses and has to be included in the results of the third quarter of 2009, as well as in the full financial year ended December 31, 2009.  The numbers related to Q309 which are presented below are adjusted accordingly. No further impairment charges were identified in connection with other acquisitions.

• The consolidated financial statements for the year ended December 31, 2009 are the first financial statements prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB). The Company's date of transition to IFRS is January 1, 2008.  All comparable figures were adjusted to IFRS as applicable.
• Regionalization - starting late 2009 the Company is reorganized with a focus on expanding its regional presence and expertise, to market, sell and support Vizrt's three major product lines. The three regional Presidents, responsible for Europe, Asia/Pacific and the Americas, have teams dedicated to each of the product lines in order to expand market penetration for each business segment. Simultaneously, the teams focus on cross selling to customers that require one or more components of Vizrt's complete workflow solution.
• Post Balance Sheet event - on February 10, 2010, the company announced the purchase in principal of the remaining 71% of Adactus AS, a Norwegian SW company offering solutions for content delivery to mobile terminals. The deal is expected to be finalized within Q2, 2010.
  
  

OUTLOOK

Bjarne Berg, CEO of Vizrt, stated, "At the end of last year we started to see signs of the re-emergence of an "old behavior pattern" with our customers - namely discretionary spending not tied to specific project budgets. Generally consisting of incremental additions to existing Viz systems, these additional sales have always been a good barometer of the extent to which our clients have the freedom to invest.   In 2008, "last-minute" orders evaporated almost completely, and our loyal customers had to make do with what they had for another year.  This year, however, these spontaneous orders have started to return.  It is perhaps too early to conclude too much based on these early signs of recovery, but it is probably safe to assume that our customers believe they are heading towards better times.  It is gratifying to see that customers remained loyal to Vizrt throughout, preferring to wait until budgets allowed for buying our premium products rather than substituting them with cheaper and lower-quality systems. 

 Another significant trend is that all broadcasters currently specify high-definition (HDTV) systems in anticipation of future developments, even though their channels currently predominantly broadcast in standard definition. We are convinced that soon this trend will become universal and that all broadcasters will be HD-ready within the next two years.

 But HDTV is no longer the pinnacle of broadcast technology.  Right now, the hot new format is Stereoscopic 3D production.  Already there have been some worldwide premieres in stereo 3D for Vizrt, with ESPN in the USA and Sky Sports in the UK.   If stereo 3D takes off in the way that TV screen manufacturers hope it will, then our existing broadcast customers will realize that they backed the right horse all along.  Vizrt's technology has always been based on a true 3D system.  While 2D was the standard broadcast format, most of our competitors were not able to deliver true 3D animations.    Stereo 3D really separates the wheat from the chaff. The good news for Vizrt customers is that it is very easy to convert their existing Vizrt graphics into stereo animations.  Equally, the good news for Vizrt is that this requires an additional Viz rendering engine to represent both eyes, which will have a positive knock-on effect for Viz Engine sales.

 Investments in the Media Asset Management (MAM) sector still seems to be cautious.   To switch from a traditional, less-efficient system that has prevailed for years to a highly disciplined MAM digital workflow is a quantum leap for many broadcasters.  The commercial case - although it is a strong one - is generally not as visible and tangible on-screen as is the case with graphics. 

 The fortunes of Vizrt's MAM products are inextricably linked to the volume of RFPs (tenders) that are issued each year.  Currently, there are few RFPs out there, but nevertheless we should take comfort in knowing that most of those that are published end up on our books.   For the last two years, I have been predicting that the MAM floodgates were about to open.  Although not quite the deluge I expected, at least it has turned out to be considerably more than a trickle and I am still convinced that we are close to that breakthrough. 

 Interestingly, the Viz Video Hub, which we originally positioned as a preconfigured "plug & Play" mini-MAM system, is now perceived much more as a vital video gateway between a Viz graphics system and whichever MAM system was chosen by the broadcaster.   So far, we have sold approximately 40 Viz Video Hubs but we expect this to increase once broadcasters realize Video Hub's useful "Gateway" potential

 For the online business, which largely depends on the newspaper sector, we expect the business to be stable for the "traditional" market of newspaper Web sites, but we hope to establish growth in the market for sites that need a combination of Web TV, text and online graphics.  Another opportunity for our online business, of course, is the many e-readers that are expected to come to the market after the launch of the iPad.  We will enable our products for that market, which some believe might give a boost to traditional media houses.

 The acquisition of Adactus, a leader in mobile streaming, is another piece in our "product-puzzle". We expect that Adactus will be fully integrated within Vizrt within Q2.

 Overall, the company's immediate goal is to return to the kind of revenues and multiples that we used to achieve before the collapse of the financial markets.  It is not an easy task but it is certainly possible and, though perhaps too early to be firm on this, the signs are positive."

INCOME STATEMENT

	4th quarter		12M
MUSD	2009	2008	2009	2008
Revenues Gross profit	26.1	23.5	85.6	98.0
Gross profit	15.4	15.6	50.4	65.1
Operating expenses;
Research & development	3.2	4.6	13.6	17.4
Selling & marketing	7.6	6.4	27.0	26.0
General & administrative	2.3	2.2	8.8	6.9
Impairment of goodwill		-	9.0	-
Total operating expenses	13.2	13.2	58.4	50.3
Operating income (loss)	2.2	2.4	(8.0)	14.8
Financial income, net	0.2	1.1	1.1	2.4
Other expenses	1.3	-	1.3	-
Income (loss) before est. taxes	1.1	3.4	(8.2)	17.2
Estimated Income taxes (expenses)	2.3	(0.6)	1.8	(3.5)
Income (loss) after est. taxes	3.4	2.9	(6.3)	13.7
Earnings per share (USD)	0.05	0.04	(0.10)	0.22
Diluted Earnings per share (USD)	0.05	0.04	(0.10)	0.21

Please download the full release with tables and management presentation via the link at the end of this message.

 

An international Conference Call will be held at 10:00 a.m. (CET)

Please use one of the following dial-in-numbers:

+49 69 247 501 899 (Germany)

+44 203 147 48 61 (UK)

+47 24 159 585 (Norway)

 

Investors and media contacts:

 

Bjarne Berg

President & CEO

+47 9055 7711

bberg@vizrt.com

 

Ofra Brown

CFO

+47 5351 8040

ofra@vizrt.com

 

SCHWARZ Financial Communication

Frank Schwarz

+49 611 1745 398 11

schwarz@schwarzfinancial.com