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Vizrt Reports Q1 2014 Results - Record quarterly revenues
Strong cash generation / Record backlog for total BG and MAM
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.
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
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 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.
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.
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