EVS Broadcast Equipment : reports 2018 results

Publication on February 21, 2019, before market opening

Regulated information - Press release annual results

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

EVS reports 2018 results

Record second half 2018, after a weak first half

•  FY18 performance

  • o Revenue of EUR 116.1 million, within the range of the guidance (-2.3% compared to FY17)

  • o Operating expense slightly up versus last year (+0.5%)

  • o Net profit of EUR 35.2 million (+47.1% compared to FY17 mainly thanks to tax deductions in relation with the innovation box regime)

•  Q4 performance

  • o Strong 4Q18, with EUR 42.3 million revenue (+6.6% compared to 4Q17), supported by the shipping of the XT-Via platform and intense sales activities.

  • o High gross margin thanks to favorable product mix and lower inventory write-offs

  • o Decrease of the operating expenses (-0.9% in 4Q18 compared with 4Q17)

  • o EBIT margin of 42.9%, net profit of EUR 17.2 million

•  Governance

  • o Tom Bamelis (AvH) is appointed as Director of EVS (under the cooptation procedure)

  • o Dirk Vanderschrik (Belfius Insurance) to be proposed as new Board member at the next Ordinary General Meeting

  • o Extension of Interim CEO mandate until the end of 2019

•  Guidance

  • o 2019 financial outlook

    •  Change in publication as from 2019: management will already give a revenue and opex guidance in February to improve transparency

    •  Order book of EUR 26.7 million on February 15, 2019 (to be recognized in revenue in 2019), -28.8% vs last year (-0.7%, excl. big event rentals)

    •  Additional EUR 5.4 million orders to be invoiced in 2020 and beyond

    •  Revenue is expected to be in the EUR 100 million to EUR 120 million range in 2019 (with 2H stronger than 1H)

    •  Opex are expected to increase by less than 2% compared to last year, thanks to disciplined cost management

  • o Change in dividend policy

    •  New dividend policy with a stable dividend of EUR 1.00 per share for 2018, 2019, 2020, 2021 subject to reasonable market conditions

    •  Hence, total gross dividend of EUR 1.00 for 2018 (incl. EUR 0.50 interim dividend paid in November 2018) proposed to the Ordinary General Meeting of May 2019

  • o Change in quarterly financial reporting



Given the high quarterly volatility of the business of EVS, the company has decided to limit, as from 1Q19 its quarterly publications (Q1 and Q3) to a trading update

KEY FIGURES

Unaudited			EUR millions, except earnings per share expressed in EUR	Audited
4Q18	4Q17	4Q18/4Q17		FY18	FY17	FY18/FY17
42.3	39.7	+6.6%	Revenue	116.1	118.8	-2.3%
32.6	30.8	+6.1%	Gross profit	82.5	87.6	-5.8%
77.1%	77.4%	-	Gross margin %	71.1%	73.7%	-
18.2	16.5	+10.1%	Operating profit - EBIT	28.1	34.9	-19.7%
42.9%	41.6%	-	Operating margin - EBIT %	24.2%	29.4%	-
17.2	11.0	+55.9%	Net profit (Group share)	35.2	23.9	+47.1%
1.27	0.82	+55.6%	Basic earnings per share (Group share)	2.60	1.77	+46.9%

COMMENTS

Dr. Pierre De Muelenaere, Chairman of the Board and Interim CEO said: "People, revenue, costs management and product development: this has been our main focus in the second half of 2018. I'm very happy with the progresses achieved in these different areas during the second half of 2018, and I want to thank all the employees of the company for their strong commitment and support to our Fight-Back Plan. We have actually booked a record 1 second half in term of revenue and profit and this makes me proud of the EVS teams. We have been helped by our new product introductions and, thanks to our commercial actions, we have won key references, including a EUR 4 million contract with Gravity Media Group, an important production company that has made significant investment in our new XT-Via and Multicam 16 products. For 2019, we expect that core business to remain under pressure as we don't expect to see major improvements in the industry dynamics. In this context, our new products and new developments strategies will be very important to reach our targets."

Regarding the different important corporate developments, Dr. Pierre De Muelenaere added: "We launched a share buyback program in October to support the share price after the weakness experienced in the preceding weeks. We also announced at the end of December 2018, the arrival of two new renowned Belgian shareholders: Ackermans & van Haaren and Belfius). They will reinforce the shareholding structure of the company and through their participation in the EVS board, they will actively help the company to strengthen its strategic vision. In addition, with our new dividend policy, which aims at paying a stable dividend over the upcoming 3 years, we believe that we are giving more visibility to our shareholders. Finally, our move from the quarterly reporting to bi-annual reporting (while keeping quarterly trading updates) will mitigate the volatility of the quarterly results of EVS and will simplify the analysis of the analysts and investors."

Commenting on the results and prospects, Yvan Absil, CFO, said: "Our fourth quarter and second half reflect the expected acceleration of the business after a weak first half. The environment remained challenging in this second part of the year and this has called for special efforts of our teams in the frame of the Fight-Back plan designed by the EVS Management Team. Gross margin also improved in Q4 thanks to higher revenues and better product mix. We are also particularly pleased with the results of our cost reduction initiatives, which allowed us to limit the operating expenses increase to 0.5% in 2018 yoy (a very big improvement compared to the yearly guidance communicated in February 2018 2). These costs management efforts will continue this year, allowing us to forecast an opex increase below 2% in 2019. Based on our Order Book and pipeline analysis, we are in a position to announce a revenue guidance for 2019 of EUR 100-120 million."

Revenue in 4Q18 and FY18

4Q18	4Q17 %4Q18 /4Q17 Revenue - EUR millions			FY18 FY17 % FY18/ FY17
42.3	39.7	+6.6%	Total reported	116.1	118.9	-2.3%
42.1	39.7	+5.9%	Total at constant currency	117.2	118.9	-1.3%
40.8	39.1	+4.2%	Total at constant currency and excluding big event rentals	103.8	116.5	-10.9%

EVS revenue amounted to EUR 42.3 million in 4Q18, a 6.6% increase compared to 4Q17 (+4.2% at constant currency and excluding big event rentals). Revenue of solutions in Outside broadcast vans represented 57.5% of the total group revenue. Studio & others revenue represented 39.5% of total revenue in 4Q18, and big event rentals represented 3.1% of total revenue.

In FY18, EVS revenue reached EUR 116.1 million, a decrease by 2.3% (-10.9% at constant currency and excluding the big event rentals) compared to FY17. Out of the 2018 revenue, Outside Broadcast vans represented 47.0%, Studio & others 41.5% and Big events rentals 11.5%.

Geographically, revenues (excl. big event rentals) are distributed in FY18 as follows:

• • Europe, Middle-East and Africa ("EMEA"): EUR 46.5 million

• • "Americas": EUR 24.6 million

• • Asia & Pacific ("APAC"): EUR 31.6 million

Fourth quarter 2018 results

In 4Q18, consolidated gross margin was 77.1%, compared to 77.4% in 4Q17. This high gross margin was mainly due to a favorable product mix and low inventory write-offs. Operating expenses decreased by 0.9% vs 4Q17, mainly due to lower consulting costs. The 4Q18 EBIT margin was 42.9%. Income taxes were EUR -1.3 million and included EUR 2.5 million positive effect of the innovation box regime in Belgium. Group net profit amounted to EUR 17.2 million in 4Q18, compared to EUR 11.0 million in 4Q17. Basic net profit per share amounted to EUR 1.27 in 4Q18 compared to EUR 0.82 in 4Q17.

• 1 Record revenue, EBIT and net result over the 5 years period (2014-2018).

• 2 The guidance for 2018 on OPEX was a "moderate opex growth, on top of the structural salary increases in Belgium), which translated in an analyst consensus of + 6 to 8%

2018 results

Consolidated gross margin was 71.1% for FY18, compared to 73.7% in FY17 due to a less favorable product mix. Operating expenses grew by 0.5% yoy, and remain under control thanks to strict cost management and recruitment. The "Other income" in FY17 included the reversal of a debt booked for the earn out portion of the acquisition of SVS at the end of 2014. The FY18 EBIT margin was 24.2%. Income taxes were positive in FY18 (EUR 7.0 million), mainly due to the effect of the implementation of the innovation box regime in Belgium (that included a one-time tax deduction of EUR 6.6 million in relation with 2H16 and FY17). Group net profit amounted to EUR 35.2 million in FY18, compared to EUR 23.9 million in FY17. Basic net profit per share amounted to EUR 2.60 in FY18, compared to EUR 1.77 in FY17.

Staff

At the end of 2018, EVS employed 477 people (FTE). This is a decrease by 16 people compared to the end of 2017, lower than anticipated thanks to strict management of resources and the timing of some recruitments. Average FTE in 2018 was 496 vs 481 in 2017.

Balance sheet and cash flow statement

Total equity represents 80.1% of the total balance sheet as of the end of 2018. Inventories amount to EUR 15.1 million. This is an expected decrease compared to the end of June 2018, following the end of the big sporting events. In the liabilities, provisions include mainly the provision for technical warranty on EVS products for labor and parts.

Lands and building mainly include the headquarters in Liège. Annual depreciation on this building is approximately EUR 2 million. Liabilities include EUR 9.9 million of financial debt (including long term and short-term portion of it), mainly relating to the headquarter. The company repays approximately EUR 5.2 million per year.

The net cash from operating activities amounts to EUR 32.0 million in FY18. On December 31, 2018, cash and cash equivalents total EUR 68.5 million. This is a strong increase compared to the end of 2017, following the continued strong cash generation from the business, combined with the EUR 14.9 million capital increase realized on December 26, 2018 and the EUR 3.3 million from the sale of one of the building held for sale on December 18, 2018.

At the end of December 2018, there were 14,327,024 EVS shares outstanding, of which 151,724 were owned by the company. At the same date, 183,500 warrants were outstanding with an average exercise price of EUR 30.74 and an average maturity of April 2022.

Share buyback update

On October 24, 2018, EVS announced the launch of a share buyback program of a maximum EUR 10 million. Between October 25, 2018 and December 27, 2018, EVS has bought 58,580 shares at an average price of EUR 20.3729, representing in total EUR 1,193,445. After aforementioned transactions the total number of own shares amounts to 151,724 shares (including 93,144 shares already held by the company) as of December 31, 2018. In addition, 13,416 shares have been bought back on December 28 and December 31, with a settlement in 2019.

Authorized capital and new shareholders

On December 26, 2018, EVS announced the realization of a capital increase within the framework of the authorized capital pursuant to which Ackermans & van Haaren and Belfius Insurance, have each subscribed to 351,012 newly issued shares (representing a participation of 2.45% by new shareholder) at a price corresponding to the average closing price of the last 30 days (e.g. EUR 21.2133 per EVS share). Since this operation, EVS Broadcast Equipment's share capital amounts to EUR 8,772,323 represented by 14,327,024 shares

New Board members and extension of Interim CEO mandate

Following the entrance of the new shareholders, the board has decided to appoint Tom Bamelis, CFO of Ackermans & van Haaren, as Director of EVS (under the cooptation procedure). The Board will also propose to the next Ordinary General Meeting the appointment of Dirk Vanderschrik, CEO of Belfius Insurance, as new Board member.

The board has decided to extend the mandate of Dr. Pierre De Muelenaere as Interim CEO of EVS until the end of 2019. This is to provide EVS with the needed stability to properly execute the 2019 plan and maximize the chance of the company to meet or exceed the 2019 budget. The Board will continue its search for a new CEO with the intention to select the best profile for EVS in the second half of this year and organize a smooth transition in view of taking full responsibility of the 2020 budget.

Guidance

During the last few months, through the different discussions we had with many investors, we have gathered interesting feedback and we decided to take different decisions:

2019 financial guidance

We have decided to anticipate the issuance of a revenue guidance for fiscal years, by giving it in already February instead of May as done until now. This will increase transparency and give analysts and investors a better view on the quality of the business, earlier in the year.

The order book (to be recognized in revenue in 2019) on February 15, 2019 amounts to EUR 26.7 million, which is -28.8% compared to EUR 37.5 million last year, which included EUR 10.6 million of big event rentals (-0.7% excl. big event rentals). In addition to this order book to be invoiced in 2019, EVS already has EUR 5.4 million of orders to be invoiced in 2020 and beyond.

The management gives the following guidance for 2019:

- revenue will be in the EUR 100 million to EUR 120 million range (with H2 stronger than H1)

- Opex is expected to grow by less than 2%

Change in dividend policy

The Board of Directors has decided to change the dividend policy. For the 2018-2021 period, the Board of Directors Intends to pay stable dividends. This decision has been taken to give more clarity to the investors when looking at their investment in EVS. The dividend will continue to be paid in two parts: an interim dividend at the end of November, and the final dividend in May after the approval of the General Meeting. Dividend is expected to be EUR 1.00 for the years 2019, 2020 and 2021 subject to reasonable market conditions.

For 2018, the Board of Directors has decided to propose a total gross dividend of EUR 1.00 per share at the May 21, 2019 Ordinary General Meeting, including the interim dividend of EUR 0.50 per share paid in November 2018. This leads to a final gross dividend of EUR 0.50 per share, for digital coupon # 28.

Change in quarterly financial reporting

Given the high quarterly volatility of the business of EVS, the company has decided to limit its quarterly publications (Q1 and Q3) to a trading update. The Board of Directors is convinced that it will help reducing the volatility of the share price of EVS following the quarterly publications, while continuing to give key business information on a quarterly basis. This will be implemented as from the first quarter of 2019 (published on May 9, 2019).

Status of the control by the Statutory Auditors

The Statutory Auditor Ernst & Young Réviseurs d'Entreprises SCCRL confirmed that their audit work on the annual consolidated financial statements, which is substantially complete, did not reveal significant matters requiring adjustments to be brought to the historical accounting information presented in the press release.

Conference call

EVS will hold a conference call in English today at 4.00 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: 9999 736

Corporate Calendar:

May 9, 2019: 1Q19 trading update

May 21, 2019: Ordinary General Meeting August 29, 2019: 2Q19 results November 14, 2019: 3Q19 trading update

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 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 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 visitwww.evs.com.