Vizrt Reports Q1 2014 Results – Record quarterly revenues

Strong cash generation
Record backlog for total BG and MAM

Bergen, Norway, May 9, 2014, Vizrt Ltd. (Oslo Main List: VIZ).

Vizrt today reported its financial results for the first quarter of 2014.

FIRST QUARTER HIGHLIGHTS

• Revenues of MUSD 33.7, up 29% compared to Q1 2013.
• EBIT of MUSD 6.0, corresponding to an 18% margin, up 124% compared to Q1 2013.
• EBITDA of MUSD 7.0, corresponding to a 21% margin, up 86% compared to Q1 2013.
• Strong performance in EMEA and APAC, relatively stable performance in AMECS.
• Strong cash generation from operating activities at MUSD 9.0, up 336% compared to MUSD 2.1 in Q1 2013.

BUSINESS HIGHLIGHTS

• Industry dynamics, new product releases, as well as the first on-stand presence by recently acquired Mosart, resulted in a 30% increase in lead generation at recently held NAB, the industry’s largest trade show.

• Backlog for total BG and MAM is at all-time high with MUSD 48.7.

• On January 6, 2014, the Company completed the first two tranches of the sale of Escenic, representing 75.5% of the outstanding shares of Escenic.

• On March 11, 2014 (“the Closing date”), the Company announced the successful acquisition of Mosart. The consolidated financial statements of Vizrt for Q1 2014 include Mosart’s financials from the Closing date. Mosart results are reported as part of the BG product line.

• On March 31, 2014, a net dividend of NOK 0.27 per outstanding share, related to the 2013 results was distributed for a total of approximately NOK 21.71 million (MUSD 3.6).

MANAGEMENT SUMMARY AND OUTLOOK

Martin Burkhalter, Vizrt’s CEO, stated: “We are very pleased with our development, having achieved record first quarter revenues with significant growth of 29%, as compared to the same period last year. Our growth this past quarter was driven by a significant improvement of the business climate in EMEA, as well as a strong performance in APAC.” 

“In terms of product line revenues, BG continued its strong performance with 34% growth, compared to Q1 2013.  Mosart revenues, which were consolidated from March 11, 2014, did not have a material impact on consolidated revenues. MAM revenues remained stable at last year’s and last quarter’s levels.  Though MAM revenues were below our expectation, the increase of 39% in MAM backlog compared to Q4 2013, attributable mainly to projects in APAC, is encouraging.”

“We had a strong start to the year, both in terms of revenue growth and profitability, with gross margin coming in at 69%, an EBITDA margin up by seven percentage points to 21%, and net income of MUSD 3.9, up 230%, compared to the same quarter last year.”

“We believe that our strong performance is the result of both improving market dynamics, and the excellent fit between our product and commercial strategy, and our customers’ needs.  This believe was validated again at this year’s NAB, which benefited from a 10-year record attendance.  Demonstrations of Mosart’s offering, a showcase of our 4K competence, our new Viz One metagraphics workflows, and our new Viz One cloud offering all attracted large crowds, and lead generation from the event was up significantly compared to last year.” 

“Judging by the feedback received, both at NAB and in the normal course of business, Mosart is proving to be a very good fit. We expect that Mosart’s high value proposition will gain accelerated market traction due to the integration with our product lines and our sales and marketing organization. We continue to be the innovation leader with an offering that meets both current and future demand, and, with the strengthened business climate, this has resulted in growing revenues and profits.”

Mr. Burkhalter concluded: “We anticipate the current industry strength to continue into the coming period and believe that we are  well positioned to benefit from the opportunities this provides.  We clearly have a strategy that resonates with the market place. Following the acquisition of Mosart and considering our record backlog, we expect the consolidated revenue growth to be in the range of 13% to 16% on a full year basis.”

FINANCIAL REVIEW Q1 2014

RESULTS OVERVIEW

* The Q4 2013 EBIT includes a MUSD 4.9 non-cash goodwill impairment charge related to the MAM cash generating unit.

** The Q4 2013 net income from continuing operations includes the abovementioned goodwill impairment, as well as MUSD 1.3 non-cash impairment charge related to the investment in Stergen, recorded in Q4 2013.

*** Employees numbers exclude Escenic employees. During Q1 2014, 24 employees were added following Mosart acquisition.

Product lines breakdown of revenues

BG and MAM revenues in Q1 2014, accounted for 87% and 13% of total revenues, respectively, as compared to 84% and 16%, respectively in Q1 2013.

Geographic breakdown of revenues

Revenues in EMEA, AMECS and APAC, accounted for 48%, 27% and 25% of Q1 2014 total revenues, respectively, as compared to 39%, 36% and 25%, in Q1 2013.

Recurring operating expenses

The increase in OPEX for Q1 2014, as compared to Q1 2013, is attributable mainly to a variable compensation component based on annual targets and headcount related costs. The increase compared to Q4 13 is mainly explained by headcount related costs.

* The Q4 2013 recurring operating expenses exclude a MUSD 4.9 non-cash goodwill impairment charge related to the MAM cash generating unit.

Currency effects

Exchange rate fluctuations in the USD versus the other main currencies Vizrt deals with (Euro, NOK, SEK) did not materially affect revenues as compared to the revenues reported for Q1 2013.

Order backlog

Order backlog as of May 7, 2014, was at a new record level for BG and MAM in total of MUSD 48.7, up 6%, compared to MUSD 45.9 at same time LY, and up 5% compared to the Q4 2013 results release date. BG backlog was at MUSD 33.4 and MAM backlog at MUSD 15.3. BG backlog was up 25% compared to the same time LY, whereas for MAM the backlog was down 20%, compared to the same time LY. Mosart’s backlog will be included in BG starting from the Q2 2014 results announcement.

Balance sheet, cash flow and liquidity

Cash flow generation from operating activities in Q1 2014 was MUSD 9.0, up 336% compared to MUSD 2.1 in Q1 2013. Cash was boosted by improved collection, with deferred revenues going up by MUSD 3.5, compared to Q4 2013.

Vizrt has a strong financial position with no interest-bearing debt and a net cash position of MUSD 52.1 as of March 31, 2014 (including MUSD 0.2 restricted cash), compared to MUSD 61.1 as of December 31, 2013 (including MUSD 0.2 restricted cash). Adjusted for MUSD 16.8 cash consideration for the Mosart acquisition, net of cash acquired, MUSD 2.0 consideration for Escenic sale, and MUSD 3.0 dividend pay-out in March 2014, the Company’s cash position increased by MUSD 8.8 compared to December 31, 2013. Furthermore, shareholders’ equity as of March 31, 2014 was MUSD 94.9, which is equivalent to an equity ratio of 65%.

Acquisition of Mosart

Vizrt has purchased all of the issued and outstanding share capital of Mosart, on a fully diluted basis, for a cash consideration of NOK 106.2 million (approximately MUSD 17.8). Additionally, the sellers have an earn-out mechanism should revenues for the years 2014 and 2015 exceed certain thresholds.

The purchase price allocation study is still under review and is expected to be completed by the Q2 2014 press release date. Consequently, goodwill and intangible assets amounts may be restated retroactively to reflect the final allocation of the purchase price.

Taxes 
Tax on income for Q1 2014 amounted to MUSD 1.1. Adjusted for MUSD 0.7 one-off deferred tax benefit related to the Mosart acquisition, tax on income was MUSD 1.8, reflecting an effective tax rate of 30% compared to MUSD 1.1 (43%) in Q1 2013.

ANALYST CONFERENCE

An analyst conference will be held on May 09, 2014 at 09:30 a.m. (CET) at the premises of

ABG SUNDAL COLLIER, Vika Atrium, Munkedamsveien 45E, 7th floor, in Oslo/Norway.

Management will furthermore discuss the results in a conference call at 13:15 p.m. (CET). Call details are as follows:

+ 47 24 159584 (Norway)

+ 44 203 3679216 (UK)

+49 69 247501895 (Germany)

A recording of the call will be available at the Company’s website: http://www.vizrt.com/company/presentations/

COMPANY CALENDAR

The results for the second quarter of 2014 will be published on August 14, 2014.

Vizrt will hold this year’s Capital Markets Day during the IBC broadcast conference and exhibition in Amsterdam, The Netherlands, on Friday, September 12, 2014.

Investor and media contact:

Martin Burkhalter / CEO / +41 22 365 75 01 / MBurkhalter@vizrt.com

Tomer Wald / CFO / +44 20 3289 6415 / TWald@vizrt.com

Frank Schwarz / Schwarz Financial Communication / +49 611 1745 398 11 / schwarz@schwarzfinancial.com

About Vizrt:

Vizrt provides real-time 3D graphics, studio automation, sports analysis and asset management tools for the broadcast industry - interactive and virtual solutions, animations, maps, weather, video editing and compositing tools. Vizrt's products are used by the world's leading broadcasters, including: CNN, CBS, Fox, the BBC, BSkyB, Al Jazeera, ITN, ZDF, Star TV, Network 18, TV Today, CCTV, and NHK. 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

Copyright © Vizrt. All rights reserved. This press release contains forward-looking statements with respect to the business, financial condition and results of operations of Vizrt and its affiliates. These statements are based on the current expectations or beliefs of Vizrt's management and are subject to a number of risks and uncertainties that could cause actual results or performance of the Company to differ materially from those contemplated in such forward-looking statements. These risks and uncertainties relate to changes in technology and market requirements, the company’s concentration on one industry, decline in demand for the company’s products and those of its affiliates, inability to timely develop and introduce new technologies, products and applications, and loss of market share and pressure on pricing resulting from competition, which could cause the actual results or performance of the company to differ materially from those contemplated in such forward-looking statements. Vizrt undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.