Vizrt Reports H1 and Q2 2012 Results - Margins protected despite lower than expected Q2 revenues
Bergen, Norway, August 09, 2012. Vizrt Ltd. (Oslo Main List: VIZ)
Vizrt posted revenues of MUSD 61.9 for the first six months of 2012, up 3% compared to H1 2011. Q2 2012 revenues were impacted by the economic uncertainties, mainly in Europe and US. However, strict cost control, combined with a favorable currency impact on OPEX, has protected and slightly improved half year margins.
HIGHLIGHTS
- Revenues: MUSD 61.9 and MUSD 30.2 for H1 and Q2 2012, up 3% compared to MUSD 60.1 and down 6% compared to MUSD 32.1 for the same periods LY.
- EBITDA: MUSD 11.0 corresponding to an 18% margin, up 6% compared to MUSD 10.4 (17%) in H1 2011. MUSD 5.4 in Q2 2012 corresponding to an 18% margin and as compared to MUSD 6.4 (20%) in Q2 2011.
- Impairment of Goodwill and Intangible Assets: a non-cash impairment charge of MUSD 7.8 was recorded as a non-recurring item in the operating expenses following an impairment analysis performed for the ONL cash generating unit related to the Escenic acquisition.
- Recurring Operating Income: MUSD 7.9 corresponding to a 13% margin, up 5% compared to MUSD 7.5 (12%) in H1 2011. MUSD 3.9 in Q2 2012 corresponding to a 13% margin as compared to MUSD 5.1 (16%) in Q2 2011.
- Net Loss: MUSD 2.2 and MUSD (4.4) for H1 and Q2 2012 resulting from the non-cash impairment charge, compared to MUSD 6.6 and MUSD 4.5 in the same periods LY.
- Recurring EPS: USD 0.08 and USD 0.05 per share for H1 and Q2 2012.
- EPS (Loss per share): USD (0.03) and USD (0.07) per share for H1 and Q2 2012, compared to USD 0.1 and USD 0.07 in the same periods LY.
- Cash provided by operating activities in Q2 2012 was MUSD 4.5, up 49%, compared to MUSD 3.0 for Q2 2011.
- Backlog to date amounts to MUSD 48.5, down 3% as compared to the same period LY and to last quarter.
Comments
Martin Burkhalter, Vizrt's CEO: "As we announced in our July 3 press release, our revenues were impacted by the rearing up of the economic uncertainties, predominantly in EMEA and the Americas. Events in the Eurozone, as well as the uncertain outlook of the US economy, which appears to be recovering more slowly than expected, have again started to dominate the investment outlook of the media industry. Though none of the running projects have been cancelled or delayed, we experienced a noticeable cutback in both new tenders and orders."
"The weakness we witnessed in the market was especially strong in EMEA. Business in the APAC and Americas regions did show growth. The revenue growth in APAC, was solid, despite being affected by a weak performance in India, which is suffering from adverse currency effects of the Rupee vs. the US-Dollar, as well as other economic issues."
"In times of uncertainty, OPEX control becomes an important operational focus. Our discipline has allowed us to protect margins and continue with the healthy cash generation, even though we have continued to invest in R&D."
"Finally, the flaring up of the economic uncertainties, together with the general weaker market than expected in the Printed Media industry, led the Company to initiate an impairment test for its ONL business, which was concluded with the recording of a non-cash impairment charge of MUSD 7.8."
Results Overview
| In KUSD | Q22012 | Q22011 | Change in% | Q12012 | Change in % |
| Revenue | 30,154 | 32,098 | -6% | 31,708 | -5% |
| Gross Profit | 19,887 | 21,166 | -6% | 21,088 | -6% |
| Gross Margin | 66% | 66% | 67% | ||
| Recurring Operating Income | 3,894 | 5,135 | -24% | 4,013 | -3% |
| Recurring Operating Income-Margin | 13% | 16% | 13% | ||
| EBITDA | 5,440 | 6,421 | -15% | 5,562 | -2% |
| EBITDA-Margin | 18% | 20% | 18% | ||
| Net Profit (loss) | (4,374) | 4,508 | 2,140 | ||
| Net Profit-Margin | 14% | 7% | |||
| Recurring Earnings Per Share | 0.05 | 0.07 | -29% | 0.03 | 67% |
| EPS (Loss per share) | (0.07) | 0.07 | 0.03 | ||
| Backlog | 48,518 | 49,792 | -3% | 50,026 | -3% |
| Cash Position | 69,560 | 63,874 | 9% | 68,565 | 1% |
Vizrt Product Lines and Geographical Overview
Broadcast Graphics (BG)
BG revenues in H1 accounted for 78% of total revenues with MUSD 47.9, a 9% growth Y-o-Y. in Q2 2012 BG revenues accounted for MUSD 23.0, 4% down as compared to Q2 2011 and 8% down as compared to Q1 2012.
Media Asset Management (MAM)
MAM revenues in H1 2012 accounted for 17% of total revenues with MUSD 10.6, a 5% decrease Y-o-Y and 10% decrease comparing Q2 2012 to Q2 2011. Compared to Q1 2012, MAM revenues were up 4%.
Online (ONL)
ONL revenues in H1 2012 accounted for 5% of total revenues with MUSD 3.3, a 32% decrease Y-o-Y and 22% decrease comparing Q2 2012 to Q2 2011. Compared to Q1 2012, ONL revenues were up 9%.
Geographical Overview
Geographically, EMEA suffered the most from the economic uncertainties. In H1 2012, The Americas and APAC contributed to growth, while EMEA remained flat. The Americas posted an 8% and 7% growth with revenues at MUSD 14.4 and MUSD 7.3 for H1 and Q2, respectively. For H1 2012, APAC posted a 5% growth and a 7% growth for Q2 2012, with revenues amounting to MUSD 14.6 and MUSD 7.9, respectively. EMEA remained flat Y-o-Y and suffered 17% decrease in revenues comparing Q2 12 to Q2 11. Revenues in EMEA came in at MUSD 32.8 and MUSD 14.9 in H1 and Q2 2012, respectively.
FINANCIALS
Gross Profit and Gross Margin
The gross margin for H1 and Q2 2012 came in at 66%, compared to 64% for H1 2011 and no change compared to Q2 2011. Gross profit in H1 was affected by a MUSD 1.3 amortization of intangible assets from acquisitions, for Q2 the amortization was MUSD 0.6. This compared to MUSD 1.3 and MUSD 0.5 for the same periods LY. Adjusted for these amortization effects, the gross margins were 68%, for both periods.
Total operating expenses for H1 and Q2 2012 were MUSD 33.1 and MUSD 16.0, up 6% compared to H1 2011 and same level compared to the Q2 LY. The half year increase was mainly due to a rise in headcount in Vizrt, staff additions due to the LiberoVision acquisition, which took place in July 2011 and a general salary increase implemented throughout the company in 2012.
Recurring Operating Expenses Summary
| In KUSD | H112 | H111 | Q212 | Q211 | Q112 |
| R&D | 9,758 | 9,368 | 4,651 | 4,759 | 5,108 |
| S&M | 17,529 | 16,514 | 8,597 | 8,655 | 8,932 |
| G&A | 5,780 | 5,219 | 2,745 | 2,617 | 3,035 |
| OPEX | 33,067 | 31,101 | 15,993 | 16,031 | 17,075 |
Currency Effects
Adjusted for the appreciation of the USD compared to H1 and Q2 2011 versus the other main currencies Vizrt deals with (Euro, NOK, SEK), revenues would have increased by 6% as compared to the reported 3% for H1 2012 and decrease by only 2% as compared to the 6% decrease reported for Q2 2012. The effect on OPEX was the reverse but of similar magnitude, resulting in a near neutral net effect.
Taxes
Tax on income for H1 2012 amounted to MUSD 2.9, out of which MUSD 1.2 is related to reversal of deferred tax assets, due to the slowdown in ONL business. Adjusted for this effect, taxes on income for H1 2012 amounted to MUSD 1.7 (19%).
Order backlog
The order backlog as of August 8, 2012, was MUSD 48.5, down 3%, both compared to LY and to the Q1 2012 results release date. BG backlog was at MUSD 26.5 down 3% compared to same period LY and up 6% compared to same period last quarter. MAM backlog at MUSD 18.0 up 9% compared to same period LY and down 14% compared to same period last quarter. ONL backlog at MUSD 4.0, down 32% compared to same period LY and up 2% compared to same period last quarter.
Balance Sheet, Cash Flow and Liquidity
Cash flow generation from operating activities in H1 and Q2 2012 were MUSD 7.9 and MUSD 4.5 respectively, compared to MUSD 5.4 and MUSD 3.0 in the same periods LY.
Vizrt has a strong financial position with no interest-bearing debt and a cash position of MUSD 69.6 as of June 30, 2012 (including MUSD 0.6 restricted cash), compared to MUSD 73.1 as of December 31, 2011 (including MUSD 0.6 restricted cash). Adjusted for a MUSD 2.0 tax withholding dividend payment, the net cash increase in Q2 2012 was MUSD 3.0. Shareholders' equity as of June 30, 2012 amounted to MUSD 112.2, which is equivalent to an equity ratio of 73%.
Organization
As of June 30, 2012, the Company had 582 employees, compared to 585 as of December 31, 2011 and 560 employees as of June 30, 2011. The increase compared to June 30, 2011 is mainly due to the additional employees resulting from the acquisition of LiberoVision in Q3 2011.
Outlook
Martin Burkhalter, Vizrt's CEO, commented on the outlook for the company: "Considering the impact of economic uncertainties on the business climate, it is too early to provide accurate quantitative guidance for the remainder of this year. As we shared in our press release of July 03, we anticipate that we will not be able to match the guidance for the full year that we published previously, as we do not expect that market conditions will improve materially during the second half of the year. However, assuming the business climate does not deteriorate significantly from its current state, we expect that our strict control of OPEX will allow us to maintain our margins roughly at the current levels. Going forward, we will continue on a path of financial prudence and discipline, while at the same time working on further improving our offering to the broadcast and general media industries, who continue to look for technology that will help them reach their financial goals and strategic objectives. As we are in very robust financial health, we are in a position where we can continue to develop our leadership in the digital media industry, which is a great position to be in and one that gets recognized by the market."
Capital Markets Day
This year's Capital Market day will be held on August 30, 2012 at Vizrt's headquarters in Bergen/Norway. Management will give presentations on the current state of and future expectations for the company. Furthermore, the Company is pleased to announce that Jo Zellar, founder of market research Devoncroft Partners, will share his views on the current state of the digital media industry. TV2, Norway's largest independent commercial broadcaster has kindly agreed to hold a tour of its studios, providing participants with an unrivalled insight into the place and function of Vizrt technology in a real life setting. The event is managed by Schwarz Financial Communication and if you wish to attend, please contact Marc Lakmaaker via lakmaaker@schwarzfinancial.com.
Analyst Conference
An Analyst Conference will be held on August 9, 2012 at 09:30 a.m. (CET) at DNB Head Offices, Stranden 21 in Oslo.
Management will furthermore discuss Q2 2012 results in a conference call at 1.30 p.m. (CET) Call details are as follows:
+47 24 159585 (Norway)
+44 203 1474861 (UK)
+49 69 247501893 (Germany)
A replay of the call will be available until August 16, 2012. Please use the following dial-in-numbers:
+49 30 868757040 (Germany); +44 203 024 54 07 (UK), passcode: 9418547#
About Vizrt:
Vizrt provides real-time 3D graphics and asset management tools for the broadcast industry - from award-winning animations & maps to online publishing tools. Vizrt's products are used by the world's leading broadcasters and publishing houses, including: CNN, CBS, Fox, the BBC, BSkyB, ITN, ZDF, Star TV, Network 18, TV Today, CCTV, NHK, The Globe and Mail, Times Online, The Telegraph, and Welt Online. Furthermore, many world-class production houses and corporate institutions such as the Stock Exchanges in New York and London use Vizrt systems.
Vizrt is a public company traded on the Oslo Main List: VIZ, ISIN: IL0010838154. For further information please refer to www.vizrt.com
Investors and media contacts:
Martin Burkhalter
President & CEO
+41 22 365 75 01
mbu@vizrt.com
Ofra Brown
CFO
+47 5351 8040
ofra@vizrt.com
SCHWARZ Financial Communication
Frank Schwarz
+49 611 1745 398 11
schwarz@schwarzfinancial.com