EVS Broadcast Equipment reports 2014 results

Publication on February 19, 2015, before market opening
Regulated information - Press release annual results
EVS Broadcast Equipment S.A.: Euronext Brussels (EVS.BR), Bloomberg (EVS BB), Reuters (EVSB.BR)

2015 will be a transition year

• FY14 highlights
  • Revenue of EUR 131.4 million, +1.8% (-8.9% excl. event rentals and at constant currency), in line with low single digit growth guidance
  • Growth in Americas, stable performance in EMEA and challenging APAC
  • Operating expenses growth at 6.7% vs 2013, outperforming last guidance
  • EBIT of EUR 46.1 million (35.1% EBIT margin), net profit of EUR 35.5 million, EPS of EUR 2.63 (+4.2% vs 2013)
     
• 4Q14 highlights
  • Revenue of EUR 30.5 million, -20.8% (-22.5% excl. event rentals and at constant currency), compared to a very strong 4Q13
  • Gross margin of EUR 22.3 million (73.0% of revenue), EBIT of EUR 8.9 million (29.1% of revenue)
  • Net profit of EUR 8.3 million, EPS of EUR 0.61
     
• Corporate highlights
  • Muriel De Lathouwer is appointed as Managing Director & CEO of the company
  • Acquisition of the remaining shares in SVS and DYVI
  • Closing of the dcinex disposal, generating a EUR 2.0 million capital gain in 4Q14
     
• 2015 outlook
  • Order book of EUR 29.8 million on February 15, 2015
    • -38.3% vs. 2014 (-24.3% excl. big event rentals)
    • In addition, EUR 2.6 million order book for 2016 and beyond
  • 2015 guidance:
    • Live production server market continues to be weak
    • Opex is expected to grow at high single digit vs 2014

KEY FIGURES

Unaudited			EUR millions, except earnings per share expressed in EUR	Audited
4Q14	4Q13	4Q14/4Q13		FY14	FY13	FY14/FY13
30.5	38.5	-20.8%	Revenue	131.4	129.1	+1.8%
22.3	28.2	-21.1%	Gross margin	97.8	97.5	+0.3%
73.0%	73.3%	-	Gross margin %	74.5%	75.5%	-
8.9	15.9	-44.1%	Operating profit - EBIT	46.1	48.4	-4.8%
29.1%	41.3%	-	Operating margin - EBIT %	35.1%	37.5%	-
8.3	10.7	-23.0%	Net profit (Group share)	35.5	34.0	+4.4%
0.61	0.80	-23.0%	Basic earnings per share (Group share)	2.63	2.52	+4.2%

COMMENTS

"Our performance in 2014 indicates that we have clearly maintained our leadership position in high end video live production, but we have to cope with the slowdown of the live production server market", said Muriel De Lathouwer, Managing Director & CEO of EVS. "Over the last four months, we have set up a new organization and launched many initiatives relating to the refocus on our core business, such as the dcinex disposal, the acquisition of SVS/DYVI or in terms of product prioritization. They will help us to be even better armed for the future, to tackle new opportunities. I am really happy to pursue, as CEO, what has been initiated with the executive committee over the last months."

Commenting on the results and prospects, Magdalena Baron, CFO, said: "2014 revenue is in line with our low single digit growth guidance compared to 2013 and reflect the continuing challenging market situation. We keep our focus on the costs management. Our efforts, combined with the deliberately postponed move to the new building given the recent organizational change, resulted in 6.7% operating expenses growth versus last year compared to the guidance of "around 10% growth". The 6.7% increase is driven by controlled investments in internal resources (+6.8% average FTE increase, which represents a substantial reduction versus the initial plan) and the SVS/Dyvi contribution, partially offset by opex control programs. For 2015, we have low visibility on the top line, observe the order book at -24.3% compared to 2014 excl big events, and guide for high single digit operating expenses growth vs 2014. The 2015 opex growth is the combination of the full year effect of 2014 hiring and investments decisions, and additional investments in the organization, partially offset by the savings programs and stringent expense control."

Revenue in 4Q14 and FY14

EVS revenue amounted to EUR 30.5 million in 4Q14, a decrease of 20.8% (-22.4% at constant currency and excluding the big event rentals) compared to 4Q13, but an increase of 19.4% compared to 4Q12. 4Q13 very strong revenue had been positively impacted by the recovery in the US after a weak 1H2013, and a large contract in APAC. 4Q14 sales in Sports represented 65.2% of total group sales, and ENM (Entertainment, News and Media) sales 34.8%.

EVS revenue amounted to EUR 131.4 million in FY14, an increase by 1.8% (-8.9% at constant currency and excluding the big event rentals) compared to FY13. Sales of solutions in Sports decreased by 6.6% (-6.6% at constant currency) to EUR 81.9 million, representing 62.3% of total group sales in FY14. ENM sales decreased by 14.0% in FY14 to EUR 35.2 million (-14.0% at constant currency). ENM sales represented 26.8% of total sales in FY14. Big events rentals amounted to EUR 14.3 million in FY14 (relating to the Sochi Winter Olympics, the Soccer World Cup in Brazil, the Commonwealth games, the Asian games and the Youth Olympic games), compared to EUR 0.5 million in FY13. They represented 10.9% of total sales in FY14.

4Q14	4Q13	%4Q14/ 4Q13	Revenue - EUR millions (1)	FY14	FY13	% FY14/ FY13
30.5	38.5	-20.8%	Total reported	131.4	129.1	+1.8%
29.9	38.5	-22.4%	Total at constant currency	131.4	129.1	+1.8%
29.9	38.5	-22.5%	Total at constant currency and excluding big event rentals	117.1	128.6	-8.9%

(1) Refer to the geographical segmentation in annex 5.4.

Geographically, sales (excl. big event rentals) have evolved in FY14 as follows:

• Europe, Middle-East and Africa ("EMEA"): EUR 62.8 million (+0.1% compared to FY13, at constant currency)
• "Americas": EUR 32.9 million (+12.3% compared to FY13, at constant currency)
• Asia & Pacific ("APAC"): EUR 21.3 million (-41.5% at constant currency).

4Q14 results

Consolidated gross margin was 73.0% for 4Q14, stable compared to 4Q13 thanks to a better product and project mix, and despite lower sales. Operating expenses grew by 11.7%, mainly due to the full effect of the new hires from the first 9 months of 2014, one-time exceptional costs (departure of Joop Janssen), IS/IT investments in the group. This leads to a 4Q14 EBIT margin of 29.1%, compared to 41.3% last year. The disposal of dcinex on October 20 resulted in a one-time capital gain of EUR 2.0 million. Tax rate was lower in 4Q14, as a result of changes in the structure of some subsidiaries to better reflect their operational functions and tax exempt capital gain on the disposal of dcinex. Group net profit amounted to EUR 8.3 million in 4Q14, compared to EUR 10.7 million in 4Q13. Basic net profit per shareamounted to EUR 0.61 in 4Q14, compared to EUR 0.80 for 4Q13.

FY14 results

Consolidated gross margin was 74.5% for FY14, compared to 75.5% in FY13 due to product and project mix, some reclassification between R&D and cost of goods sold and higher write-offs. Operating expenses grew by 6.7%, mainly due to some extra hires and additional costs in 2014 that include the investment in SVS/DYVI. This is below the previous guidance of approximately 10% opex growth, driven by lower than expected new building opex cost (postponed move due to some changes needed in the building to reflect the new organization and a more optimal reuse of some existing equipment in the building), an immediate adoption of cost initiatives by the new organization and a lower than expected cost relating to the CEO recruitment. This leads to a FY14 EBIT margin of 35.1%, compared to 37.5% in 2013. dcinex contributed EUR -0.2 million to EVS results in FY14 until the date of its disposal, which, in addition, resulted in a one-time capital gain of EUR 2.0 million. Tax rate was lower in FY14, as a result of changes in the structure of some subsidiaries to better reflect their operational functions and tax exempt capital gain on the disposal of dcinex. Group net profit amounted to EUR 35.5 million in FY14, compared to EUR 34.0 million in FY13. Basic net profit per shareamounted to EUR 2.63 in FY14, +4.2% compared to EUR 2.52 for FY13.

Staff

At the end of December 2014, EVS employed 512 people (FTE), +5.3% compared to December 2013 (486). On average, EVS employed 503 FTE in FY14, compared to 471 in FY13, a 6.8% increase.

Balance sheet and cash flow statement

Total equity represented 52.6% of total balance sheet at the end of December 2014. Inventories amounted to EUR 15.4 million, including around EUR 4.0 million value of own equipment used for R&D and demos of EVS products. Inventories were down compared to September 2014 and the end of 2013, as the level of equipment used during the different big sporting events has decreased. In the liabilities, provisions include mainly the provision for technical warranty on EVS products for labor and parts.

At the end of 2011, EVS started the construction of a new integrated building in the proximity of its current location in Liège, in order to gather all employees of EVS headquarters in one location, currently split in 6 different buildings. EUR 50.8 million have been invested by the end of December 2014 (less EUR 5.6 million of subsidies booked at the same date). The total budget for the project (including some higher investments in future-proof equipment) is estimated around EUR 58.5 million. In November 2013, EVS secured the financing of the new building through senior debt of EUR 24 million with EIB (50%), ING (25%) and BNPPF (25%) over 7 years. In May 2014, EVS has added EUR 12 million of available loan facilities (50% ING and 50% BNPPF). At the end of December 2014, a total of EUR 30.0 million has been drawn on these available facilities.

The net cash from operating activities amounted to EUR 40.3 million in FY14. On December 31, 2014, the group balance sheet showed EUR 25.6 million in cash and cash equivalents, and EUR 31.9 million in financial long-term debts (including short term portion of it).

At the end of December 2014, there were 13,625,000 EVS outstanding shares, of which 140,498 were owned by the company. At the same date, 372,050 warrants were outstanding with an average strike price of EUR 39.85 and an average maturity in November 2016.

Appointment of Muriel De Lathouwer as CEO

Muriel De Lathouwer, currently President of the Executive Committee of EVS (after the departure of Joop Janssen in October 2014), is appointed as Managing Director & CEO of the company. She has been a member of the Board of Directors of EVS since November 2013, and she also chairs the Strategic Committee. This appointment is effective immediately.

Segment reporting

Following the change in the internal organization, EVS will change its segment reporting as from 1Q15. The company will publish revenue data for "Outside broadcast vans", "studios and others" and "big event rentals", which will be very close to the disclosure used by the company until 2012. The disclosure by region and by nature will remain unchanged. Comparative quarterly figures for 2014 will be provided before May 12, 2015, when the first quarter results will be released.

Outlook

The order book (to be invoiced in 2015) on February 15, 2015 amounts to EUR 29.8 million, which is -38.3% compared to EUR 48.2 million on February 15, 2014 (-24.3% excl. the EUR 9.3 million for big event rentals that were in the order book last year). The order book does not include any big events rentals.

In addition to this order book to be invoiced in 2015, EVS already has EUR 2.6 million of orders to be invoiced in 2016 and beyond.

The slowdown witnessed in the broadcast industry (and more specifically the live production server market) persists. The EVS management explains this slowdown by macro-economic headwinds and longer investment cycles. With very limited visibility at the moment, the EVS management remains prudent for 2015, an uneven year which, as usual, should only include a limited amount of rentals for big sporting events (compared to a record EUR 14.3 million in 2014). While numerous actions have been taken for tighter opex management, the investments made and the people hired in 2014 will mechanically add opex in 2015 (including higher depreciation relating to the new building). This will lead to an expected high single digit opex growth in 2015.

Status of the control by the Statutory Auditors
The Statutory Auditor BDO Réviseurs d'Entreprises Soc. Civ. SCRL confirmed that its controls which are substantially finished did not reveal material misstatement that should be brought to accounting information mentioned in the press release.

Conference call

EVS will hold a conference call in English today at 3:00 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: [phone] (United Kingdom), [phone] (Belgium), [phone] (United States)
Conference call ID: 951496

Corporate Calendar:
Tuesday May 12, 2015: 1Q15 results
Tuesday May 19, 2015: Ordinary General Meeting
Thursday August 27, 2015: 2Q15 results
Friday November 13, 2015: 3Q15 results

For more information, please contact:   Magdalena BARON, CFO Geoffroy d'OULTREMONT, Vice President  Investor Relations & Corporate Communication EVS Broadcast Equipment S.A., Liege Science Park, 16 rue du Bois Saint-Jean, B-4102 Seraing, Belgium Tel: [phone].  E-mail:[e-mail]; 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 provides its customers with reliable and innovative technology to enable the production of live, enriched video programming, allowing them to work more efficiently and boost their revenue streams. Its industry-leading broadcast and media production systems are used by broadcasters, production companies, post-production facilities, film studios, content owners and archive libraries around the globe. It spans four key markets - Sports, Entertainment, News and Media.   Founded in 1994, its innovative Live Slow Motion system revolutionized live broadcasting. Its reliable and integrated tapeless solutions, based around its market-leading XT server range, are now widely used to deliver live productions worldwide. Today, it continues to develop practical innovations, such as its C-Cast second-screen delivery platform, to help customers maximize the value of their media content.   The company is headquartered in Belgium and has 20 offices in Europe, the Middle East, Asia and North America. A total of 512 EVS professionals sell its branded products in over 100 countries, and provide customer support globally. EVS is a public company traded on Euronext Brussels: EVS, ISIN: BE0003820371. For more information, please visit www.evs.com.

Press release in pdf format

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Source: EVS Broadcast Equipment via Globenewswire

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