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EVS Broadcast Equipment reports first half 2020 results

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Publication on August 27, 2020, before market opening
Regulated information – Press release first half 2020 results
EVS Broadcast Equipment S.A.: Euronext Brussels (EVS.BR), Bloomberg (EVS BB), Reuters (EVSB.BR)

EVS REPORTS FIRST HALF 2020 RESULTS

Supporting customers and remaining profitable through Covid-19 crisis

Financial performance

  • Revenue in the first six months of the year, including Axon revenues from May 1st, amounts to EUR 39.6 million in 1H20, - 3.5% YoY (-4.8% compared to 1H19 excl. big event rentals) impacted by the COVID-19 crisis.
  • 1H20 Revenues pre-acquisition of Axon amounts to EUR 37.8 million, -7.9% compared to 1H19 (-9.3% excl. big event rentals)
  • Lower Operating expenses (-5% in 1H20 compared with 1H19), thanks to lower marketing, Travel expenses and provision for reduced variable bonus following COVID-19 crisis
  • EBIT amounts to EUR 3,3 million in 1H20 (8.3% of revenues), which is -3.7% compared to 1H19
  • Net profit amounts to EUR 3,3 million in 1H20, which is -11.5% compared to 1H2019.
  • Strong cash position with net cash position of EUR 33,5 million and EUR 52.4 million of cash available.

Outlook

  • Order intake June YTD: - 7,5% vs June 30th, 2019 (Excl Axon)
  • Order book of EUR 45,8M€ on June 30, 2020 (incl. Axon) out of which:
    • EUR 19,6 million to be recognized in revenue in 2020 (-12,9 % YoY or -10,1% Excl. big event rentals)
    • EUR 13,5 million (excl. big events rentals) to be recognized in revenue in 2021 and beyond (+95,6% YoY)
    • EUR 12,7 million for big events rentals related to events postponed to 2021
  • No revenue guidance given for 2020 amid COVID-19 uncertainties
  • OPEX expected to increase YoY with mid-to-high single digit due to the acquisition of Axon expenses (and to decline YoY with mid-to-high single digit excluding Axon)

KEY FIGURES

EUR millions, except earnings per share expressed in EURReviewed
1H201H191H20/1H19
Revenue39,641,0-3.5%
Gross profit27,028,6-5.5%
Gross margin %68.2%69.7%-
Operating profit – EBIT3,33,4-3.7%
Operating margin – EBIT % 8.3%8.3%-
Net profit (Group share)3,33,7-11.5%
Basic earnings per share (Group share)0,240,26-9.8%

COMMENTS

Serge Van Herck, CEO comments the business development: “These special times are of course impacting our business.  After a good start of the year, we saw a slowdown in revenues and order intake in the second part of the semester. Still, we manage to have a strong total order book (for 2020 and beyond) increasing by 15% (excl. big event rentals) compared to the same period last year with orders covering large multi-year modernization projects.
The sanitary situation also provides the opportunity to accelerate some existing development plans serving new customers’ needs in terms of distant operations. The LSM-VIA, successfully launched at the end of May, will be a key enabler for remote production. We assist to a very positive adoption of the next generation of replay solution. While, during the crisis, we are continuing to offer the most demanding solutions for our LAB customers, with the live sports competition resuming, some of our LSP customers need additional equipment.”

Concerning the COVID-19 situation, Serge Van Herck added: “Our R&D teams are not structurally impacted in their productivity after a few weeks of adjustment of homeworking. Almost the entire company has been homeworking for 3.5 months, coming gradually back to the office by respecting the measures in place concerning health recommendations ”.

Commenting on the results and the outlook, Yvan Absil, CFO, said: “Despite lower revenues and COVID-19 situation, we maintained our profitability at a similar level as last year, thanks to lower operational expenses. The COVID-19 crisis impacted negatively our working capital with high levels of inventory due to securitization of supplies planned before the crisis as well as high open receivables which we are discussing with some of our customers who have seen their revenues and cash income dropping to 95% at the height of the crisis. We maintain a strong cash position to weather these difficult times.

EVS Market Dynamics and customer wins

The current market conditions remain challenging for the broadcast and media industry. Broadcasters and media companies benefit from strong audiences, but these can hardly be monetized due to the significant decrease of advertising revenues. LSP’s are strongly affected by the current crisis even if there is a certain recovery with the restart of live sporting events.

Traction for remote production operations has significantly increased due to precautionary health measures with some customers leveraging key features of EVS workflows. EVS is accelerating the development of its solutions serving new customers’ needs in terms of distant operations.

Some key wins:

  • Newly acquired Cerebrum and Neuron systems to be deployed to Canal+ in Paris for control, monitoring and stream processing operations
  • In EMEA, DYVI sold to AftonBladet (Swedish newspaper) & eSports facilities in WEU
  • Major broadcast & media production centers deals confirming the acceleration of the adoption of EVS new VIA Platform leveraging IP based network (SMPTE 2110 protocol) and its new generation of live production asset management:
    • Major US media group broadcast center
    • 2 APAC large broadcast centers
    • 1 sports broadcast center in Benelux
    • 1 news broadcast center in Benelux
    • Studios of a large production company in WEU
    • WEU large parliament
  • Important renewal project of a large US sport league  center based on XT-VIA for 1080p & 4K.
  • Large 4K upgrade and extension with a major player in China
  • Deployment of X-One unified production system in Asia and Europe offering lean operation for premium broadcast quality standard

AXON acquisition update

With the addition of Axon technologies for AV processing, conversion, multiviewing, control and monitoring, EVS is significantly reinforcing and modernizing its global media infrastructure offering, enabling the consolidation of global footprint on the live video production market.

Axon results are consolidated in EVS financial statements as of May 1st 2020 presented here (see note 5.13).

Key first success points:

  • Integration is progressing well. Excellent team spirit between team members from both sides with strong desire to win
  • Some key deals for Axon products facilitated thanks to customer trust in EVS.
  • First consolidated RFI answer provided a few days after M&A transaction has been completed
  • EVS sales force to start selling new Media Infrastructure solutions, especially in the US market where Axon presence was low
  • First quick win synergies already materialized in terms of purchasing and headcount.

Revenue in 1H20
In 1H20, EVS revenue, favorably impacted by currency fluctuation, reached EUR 39.6 million, a decrease of 3.5 % compared to 1H19.
At constant currency, revenue declined by 4.3% YoY and decreased by 5.7% excluding big event rentals.

Revenue – EUR millions1H201H191H20/1H19
Total reported39.641.0-3.5%
Total at constant currency39.341.0-4.3%
Total at constant currency and excluding big event rentals38.140.4-5.7%

EVS revenues are impacted by the EUR/USD currency fluctuation and can have a significant impact on our results even if EUR/USD fluctuations also impact the cost of our US operations and our cost of goods sold.

In the first half of the year, (excl. big event rentals) LSP represented 43% of the revenues, LAB 57%.

Geographically, revenues (excl. big event rentals) are distributed in 1H20 as follows:

  • Europe, Middle East and Africa (EMEA): EUR 18.2 million
  • Americas (NALA): EUR 12.9 million
  • Asia & Pacific (APAC) EUR 7.3 million

First half 2020 results
Consolidated gross margin was 68.2% for 1H20, compared to 69.7% in 1H19 due to inventory write offs and lower gross margin on Axon products. Operating expenses declined by 5,0% YoY following marketing and travel expenses reductions due to the COVID-19 crisis as well as lower provision for reduced variable bonuses. Excluding Axon operational expenses, OPEX declined -11.2% vs 1H19. The 1H20 EBIT margin was 8.3%, similar to last year. Income taxes are positive mainly due to the effect of the various tax incentives which are not directly correlated to the level of revenues. Group net profit amounted to EUR 3,3 million in 1H20, compared to EUR 3,7 million in 1H19. Basic net profit per share amounted to EUR 0,24 in 1H20, compared to EUR 0,26 in 1H19.

Staff

At the end of June 2020, EVS employed 532 people (FTE). This is an increase of 75 people compared to June 2019, as a result of the integration of Axon employees.  The size of the workforce should remain stable in 2020.

Balance sheet and cash flow statement

EVS continues to have a strong balance sheet with net cash position of EUR 33.5 million with low debt level (of which EUR 12.9 million related to IFRS 16) resulting in a total equity representing 72.0% of the total balance sheet as of the end of June 2020.

Lands and building mainly include the new headquarters in Liège as well as the right of use for the offices abroad (IFRS16). Annual depreciation on this building is approximately EUR 2 million. Liabilities include EUR 20.7 million of financial debt (including long term and short-term portion of it), mainly relating to the lease liabilities following IFRS 16 implementation (EUR 12,9 million), to the debt taken to finance the acquisition of Axon (EUR 5.5 million) and to the HQ building (EUR 2.0 million). The company repays approximately EUR 4 million per year for the building and will pay EUR 1.1 million per year for the new loan related to the acquisition of Axon.

Inventories amount to EUR 24.9 million and include around EUR 2.3 million value of Axon equipment. The inventory also includes the equipment that were produced for the big events of 2020 which have been postponed to 2021. It also includes parts and products that have been ordered prior to the COVID crisis and delivered in 1H2020.  

In the liabilities, long-term provisions include the provision for technical warranty on EVS products for labor and parts and the other amounts payables include the expected earn out liability for Axon and some customer advances received.

The net cash from operating activities amounts to EUR 8.5 million in 1H20 compared to EUR 4.4 million in 1H19. On June 30, 2020, cash and cash equivalents total EUR 54.2 million. This is a decrease compared to the end of 2019, following negative cash flows from investing activities and more specifically from the acquisition of Axon (EUR 9.6 million) partially offset by new proceeds from borrowings (EUR 5.5 million).

At the end of June 2020, there were 14,327,024 EVS shares outstanding, of which 665,511 were owned by the company. At the same date, 138,832 warrants were outstanding with an average exercise price of EUR 28.90 and a maturity of December 2022.

Share buyback update
On May 6, 2020, EVS announced the end of the 2018 Share buyback program, having purchased 528,684 shares at an average price of 18.9149. On May 6, 2020, EVS announced the launch of a new share buyback program of a maximum EUR 5 million. Between May 15, 2020 and June 30, 2020, EVS has bought 74,459 shares at an average price of EUR 15.4659, representing in total EUR 1,151,574. After aforementioned transactions the total number of own shares amounts to 665,511 shares as of June 30, 2020.

Corporate update
During last General Assembly on May 19th, Johan Deschuyffeleer has become director and chairman of the board. Johan brings more than 35 years of international experience in the ICT and technology sector.

2020 H2 outlook

The order book (to be recognized in revenue in 2020) on June 30, 2020 amounts to EUR 19,6 million, which is -12.9% compared to EUR 22,5 million last year at the same date (or -10,1 % excl. big events rentals). H2 orders mainly impacted by LSPs, probably due to COVID-19 effect.

In addition to this order book to be invoiced in 2020, EVS already has EUR 26,2 million of orders to be invoiced in 2021 and beyond (including EUR 12,7 million for 2021 big event rentals), which represents a increase of 279.7% (or 95.7% excluding big event rentals) compared to EUR 6.9 million at the same date last year.

Given the uncertainties related to the COVID-19 situation, the management does not provide any revenue guidance for the year 2020.
Excluding Axon, EVS expects operating expenses to decline YoY with mid-to-high single digit. With the integration of Axon OPEX, total 2020 OPEX is expected to increase YoY with mid-to-high single digit.

Conference call

EVS will hold a conference call in English today at 3.30 pm CET for financial analysts and institutional investors. Other interested parties may join the call in a listen-only mode. The presentation used during the conference call will be available shortly before the call on the EVS website.

Dial-in numbers: +44 20 7192 8501 (United Kingdom), +32 2 401 70 35 (Belgium), +1 917 720 0181 (United States)
Conference call ID: 9473804

Corporate Calendar:
October 1-8, 2020: Virtual IBC tradeshow at EVS
November 19, 2020: 3Q20 Trading updates

For more information, please contact:



Yvan ABSIL, CFO
EVS Broadcast Equipment S.A., Liege Science Park, 13 rue du Bois Saint-Jean, B-4102 Seraing, Belgium
Tel: +32 4 361 70 00.  E-mail:corpcom@evs.com; www.evs.com


Forward Looking Statements
This press release contains forward-looking statements with respect to the business, financial condition, and results of operations of EVS and its affiliates. These statements are based on the current expectations or beliefs of EVS'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. EVS 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.

About EVS

EVS is globally recognized as the leader in live video technology for broadcast and new media productions. Our passion and purpose are to help our clients craft immersive stories that trigger the best return on emotion. Through a wide range of products and solutions, we deliver the most gripping live sports images, buzzing entertainment shows and breaking news content to billions of viewers every day – and in real-time.
The company is headquartered in Belgium with around 530 employees in offices in Europe, the Middle East, Asia and North America, and provides sales and technical support to more than 100 countries. EVS is a public company traded on Euronext Brussels: EVS, ISIN: BE0003820371. For more information, please visit www.evs.com

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