EVS Broadcast Equipment : reports second quarter 2017 results

Publication on August 31, 2017, before market opening Regulated information - Press release quarterly results

EVS Broadcast Equipment S.A.: Euronext Brussels (EVS.BR), Bloomberg (EVS BB), Reuters (EVSB.BR)

EVS REPORTS SECOND QUARTER 2017 RESULTS

 2Q17 highlights

• Revenue of EUR 28.3 million, -24.6% compared to 2Q16 (excl. event rentals and at constant currency), and

  +26.3% compared to a weak 2Q15 (last uneven year)

• Opex increase by 5.5% compared to a low base in 2Q16 that included one-time elements

• EBIT margin of 28.0% (or 23.8% excluding other income)

• Net profit of EUR 5.5 million, EPS of EUR 0.41

   1H17 highlights

• Revenue of EUR 52.8 million, -18.1% compared to 1H16 (excl. event rentals and at constant currency)

• Operating expenses under control (+2.9% compared with 1H16) o EBIT margin of 24.3% (or 22.0% EBIT excluding other income) o Net profit of EUR 9.1 million, EPS of EUR 0.67

   2017 outlook

• Order book of EUR 37.4 million on August 25, 2017 (to be invoiced in 2017)

   -9.6% compared to 2016 (which included EUR 8.3 million big event rentals);

   +10.9% compared to 2016 excluding big event rentals

• Additional order book of EUR 22.4 million for 2018 and beyond, including EUR 9.0 million of big event rentals

• Revenue in 2017 is expected to be between EUR 115 million and EUR 125 million

• Opex are expected to grow moderately in 2017

  KEY FIGURES

  Unaudited			EUR millions, except earnings per share expressed in EUR	Reviewed
  2Q17	2Q16	2Q17/2Q16		1H17	1H16	1H17/1H16
  28.3	39.8	-28.9%	Revenue	52.8	66.6	-20.8%
  21.1	30.7	-31.5%	Gross margin	38.3	49.7	-22.9%
  74.5%	77.3%	-	Gross margin %	72.5%	74.6%	-
  7.9	17.4	-54.4%	Operating profit - EBIT	12.8	24.9	-48.5%
  28.0%	43.7%	-	Operating margin - EBIT %	24.3%	37.4%	-
  5.5	12.6	-56.1%	Net profit (Group share)	9.1	17.5	-47.9%
  0.41	0.93	-55.9%	Basic earnings per share (Group share)	0.67	1.29	-48.0

  COMMENTS

  "As part of our strategy to extend our product portfolio around live production solutions, as illustrated by the recent launches of Dyvi or Xeebra, we will introduce new products at the IBC tradeshow in Amsterdam in a few weeks, which will demonstrate our innovation power in a changing industry", said Muriel De Lathouwer, Managing Director and CEO of EVS.

  Commenting on the results and prospects, Yvan Absil, CFO, said: "Our revenue of EUR 28.3 million represents a sequential improvement compared to the first quarter, and we expect this evolution to continue in the second half of the year. Thanks to a good product mix, our gross margin was again strong during this quarter. With operating expenses that remain under control, we posted a EBIT margin of 28.0%, and EPS amounted to EUR 0.41. The order book remains solid. For 2017, we now expect revenue to be between EUR 115 million and EUR 125 million, and opex to grow moderately compared to 2016."

  Revenue in the 2Q17 and 1H17

  2Q17	2Q16	%2Q17/ 2Q16	Revenue - EUR millions	1H17	1H16	% 1H17/ 1H16
  28.3	39.8	-28.9%	Total reported	52.8	66.6	-20.8%
  28.0	39.8	-29.5%	Total at constant currency	52.4	66.6	-21.4%
  27.0	35.9	-24.6%	Total at constant currency and excluding big event rentals	51.4	62.7	-18.1%

  EVS revenue amounted to EUR 28.3 million in 2Q17, a 28.9% decrease (-24.6% at constant currency and excluding big event rentals) compared to 2Q16, or +21.3% compared to 2Q15 (last uneven year). Sales of solutions in Outside broadcast vans represented 58.6% of the total group sales. Studio & others sales represented 37.9% of total sales, and big events represented 3.5% in 2Q17.

  In 1H17, EVS revenue reached EUR 52.8 million, a decrease by 20.8% (-18.1% at constant currency and excluding the big event rentals) compared to 1H16, or + 11.3% compared to 1H15 (last uneven year). In the first half of the year, Outside Broadcast vans represented 64.4%, Studio & others 33.7% and Big events rentals 1.9%.

  Geographically, sales (excl. big event rentals) are distributed in 1H17 as follows:

  • Europe, Middle-East and Africa ("EMEA"): EUR 23.3 million

  • "Americas": EUR 14.2 million

  • Asia & Pacific ("APAC"): EUR 15.3 million

Second quarter 2017 results

Consolidated gross margin was 74.5% for 2Q17, compared to 77.3% in 2Q16 due to lower sales, partially offset by the positive impact of the product mix. Operating expenses increased by 5.5%, supporting the acceleration in developments in some areas. The Other income mainly relates to the reversal of a debt booked for the earn out portion of the acquisition of SVS at the end of 2014 (see note 5.11). This leads to a 2Q17 EBIT margin of 28.0% (23.8% excluding other income). Group net profit amounted to EUR 5.5 million in 2Q17, compared to EUR 12.6 million in 2Q16. Basic net profit per share amounted to EUR 0.41 in 2Q17, compared to EUR 0.93 in 2Q16.

First half 2017 results

Consolidated gross margin was 72.5% for 1H17, compared to 74.6% in 1H16 due to lower sales. Operating expenses grew by 2.9% yoy, and remain under control. The Other income mainly relates to the reversal of a debt booked for the earn out portion of the acquisition of SVS at the end of 2014 (see note 5.11). This leads to a 1H17 EBIT margin of 24.3% (22.0% excluding other income). Group net profit amounted to EUR 9.1 million in 1H17, compared to EUR 17.5 million in 1H16. Basic net profit per share amounted to EUR 0.67 in 1H17, compared to EUR 1.29 in 1H16.

Staff

At the end of June 2017, EVS employed 479 people (FTE), -0.4% compared to 481 at the end of 2016.

Balance sheet and cash flow statement

Total equity represented 68.0% of total balance sheet at the end of June 2017. Inventories amounted to EUR 14.9 million, including around EUR 3.0 million value of own equipment used for R&D and demos of EVS products. In the liabilities, provisions include mainly the provision for technical warranty on EVS products for labor and parts.

Lands and building mainly include the new headquarters in Liège. Depreciation is approximately EUR 2.1 million on a full year basis. Liabilities include EUR 17.2 million financial debt (including long term and short term portion of it), mainly relating to the new building. The company already started to repay it in 2015 with installment of around EUR 5.2 million reimbursement per year.

The net cash from operating activities amounted to EUR 1.7 million in 1H17, mainly due to lower sales and the timing of tax payments in 2017. On June 30, 2017, the group balance sheet showed EUR 41.7 million in cash and cash equivalents.

At the end of June 2017, there were 13,625,000 EVS outstanding shares, of which 105,771 were owned by the company. At the same date, 207,850 warrants were outstanding with an average strike price of EUR 41.15 and an average maturity in September 2018.

2017 outlook

The order book (to be invoiced in 2017) on August 25, 2017 amounts to EUR 37.4 million, which is -9.6% compared to EUR 41.4 million last year (+10.9% excl. the big event rentals: EUR 8.3 million in 2016 and EUR 0.7 million in 2017).

In addition to this order book to be invoiced in 2017, EVS already has EUR 22.4 million of orders (including EUR 9.0 million of big event rentals) to be invoiced in 2018 and beyond.

We continue to see more and more 4K related sales, as part of replacement cycles. The adoption of IP progresses as well. But new digital players and uncertainties generated by this changing environment push customers to stay cautious with their investments. With this in mind, we expect revenue to be in the EUR 115 million to EUR 125 million range for 2017, with no major big sporting event. We also forecast a moderate increase of our operating expenses to sustain our efforts in innovation and acceleration of new product developments.

Conference call

EVS will hold a conference call in English today at 2:30 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: [phone] (United Kingdom), [phone] (Belgium), [phone] (United States) Conference call ID: 962707

Corporate Calendar:

September 15-19: IBC tradeshow (Amsterdam, NL) Thursday November 16, 2017: 3Q17 results

For more information, please contact: Yvan ABSIL, CFO Geoffroy d'OULTREMONT, Vice President Investor Relations & Corporate Communication EVS Broadcast Equipment S.A., Liege Science Park, 13 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. Around 500 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.

Condensed consolidated financial statements ANNEX 1: CONDENSED CONSOLIDATED INCOME STATEMENT

(EUR thousands)	Annex	1H17 Reviewed	1H16 Reviewed	2Q17 Unaudited	2Q16 Unaudited
Revenue	5.3	52,791	66,638	28,258	39,771
Cost of sales	-14,497	-16,952	-7,199	-9,029
Gross profit		38,294	49,686	21,059	30,743
Gross margin %		72.5%	74.6%	74.5%	77.3%
Selling and administrative expenses		-13,683	-13,885	-7,593	-7,444
Research and development expenses		-12,217	-11,279	-6,014	-5,448
Other income		1,254	1,069	1,180	27
Other expenses		-238	-194	-165	-92
Stock based compensation and ESOP plan		-563	-463	-549	-413
Operating profit (EBIT)		12,846	24,935	7,918	17,373
Operating margin (EBIT) %		24.3%	37.4%	28.0%	43.7%
Interest revenue on loans and deposits	11	6	-4	2
Interest charges	-176	-273	-80	-141
Other net financial income / (expenses)	5.6	-487	-508	-428	146
Share in the result of the enterprise accounted for using the equity method	56	62	28	35
Profit before taxes (PBT)	12,250	24,222	7,433	17,415
Income taxes	5.7	-3,157	-6,756	-1,895	-4,812
Net profit	9,094	17,466	5,539	12,603
Attributable to :		-	-	-	-
Non controlling interest
Equity holders of the parent company		9,094	17,466	5,539	12,603

EARNINGS PER SHARE (in number of shares and in EUR)	1H17 Reviewed	1H16 Reviewed	2Q17 Unaudited	2Q16 Unaudited
Weighted average number of subscribed shares for the period less treasury	13,509,290	13,497,695	13,512,654	13,500,308
shares
Weighted average fully diluted number of shares	13,719,050	13,755,714	13,721,327	13,753,883
Basic earnings - share of the group	0.67	1.29	0.41	0.93
Fully diluted earnings - share of the group (1)	0.66	1.27	0.40	0.92

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(EUR thousands)	1H17 Reviewed	1H16 Reviewed	2Q17 Unaudited	2Q16 Unaudited
Net profit	9,094	17,466	5,539	12,603
Other comprehensive income of the period	-508	-95	-508	135
Currency translation differences
Other increase/(decrease)	-480	-370	115	-90
Total of recyclable elements	-988	-465	-393	45
Total comprehensive income for the period	8,106	17,001	5,145	12,649
Attributable to :	-	-	-	-
Non controlling interest
Group share	8,106	17,001	5,145	12,649

(1) Excluding 207,850 warrants that were not exercisable at the end of June 2017, fully diluted earnings per share in 1H17 would have been EUR 0.66.