Interim Report January – September 2021

Net Insight Interim Report January - September 2021

Net Insight AB (publ) corp.id.no. 556533-4397

July - September 2021

• Net sales amounted to SEK 100.8 (77.2) million, an increase of 30.6% year-on-year. In comparable currencies net sales increased by 34.1%.
• Operating earnings amounted to SEK 11.8 (-4.1) million, corresponding to an operating margin of 11.7% (-5.3%). Excluding foreign exchange rate differences of SEK -0.2 (0.1) million, operating earnings were SEK 12.0 (-4.2) million.
• Net income for the period for continuing operations was SEK 10.1 (-3.9) million and for the Group, including discontinued operations, SEK 10.1 (-5.9) million.
• Earnings per share diluted for the Group was SEK 0.03 (-0.02).
• Total cash flow for the Group was SEK 25.1 (-21.1) million. Excluding the cash impact of the divestment of operations, cash flow was SEK -6.4(-21.1) million.

January - September 2021

• Net sales amounted to SEK 272.8 (241.4) million, an increase of 13.0% year-on-year. In comparable currencies net sales increased by 19.5%.
• Operating earnings amounted to SEK 23.5 (-0.9) million, corresponding to an operating margin of 8.6% (-0.4%). Excluding foreign exchange rate differences of SEK 8.2 (1.9) million, operating earnings were SEK 15.3 (-2.8) million.
• Net income for the period for continuing operations was SEK 21.0 (-2.8) million. Net Income for the Group, including discontinued operations, was SEK -16.0 (244.2) million. This includes capital loss on disposal of discontinued operations of SEK -35.9 (246.4) million.
• Earnings per share diluted for the Group was SEK -0.04 (0.64).
• Total cash flow for the Group was SEK 55.9 (214.0) million. Excluding the cash impact of the divestment of operations, cash flow was SEK 9.3 (-88.4) million.

FINANCIAL HIGHLIGHTS

High sales and increased orders

Crister Fritzson, CEO, Net Insight

Significant events:

• Strong growth across all regions
• New IP functionality attracts customers

Significant events after the reporting period:

• Signed agreement with a total value of SEK 220 million in 5G synchronization
• Decision to initiate repurchase of Treasury shares

	Jul-Sep			Jan-Sep			Oct 2020-	Jan-Dec
SEK millions	2021		2020	Change	2021		2020	Change	Sep 2021	2020	Change
Continuing operations
Net sales	100.8		77.2	30.6%	272.8		241.4	13.0%	363.4	332.1	9.4%
Operating earnings	11.8		-4.1		23.5		-0.9		9.1	-15.3
Operating margin	11.7%		-5.3%		8.6%		-0.4%		2.5%	-4.6%
Net income	10.1		-3.9		21.0		-2.8		9.1	-14.7
EBITDA	15.2		-1.0		28.3		-3.4		12.7	-19.0
EBITDA margin	15.1%		-1.2%		10.4%		-1.4%		3.5%	-5.7%
Total Group, including discontinued
operations
Net Income	10.1		-5.9		-16.0		244.2		-22.8	237.4
Total cash flow	25.1		-21.1		55.9		214.0	-73.9%	74.5	232.6	-68.0%

Business area Resource Optimization was divested in 2021 and Business area Streaming Solutions was divested in 2020. The divested business areas are reported separately as discontinued operations in this report.

CEO´s Statement

Strong growth in the third quarter, followed by a big agreement in 5G synchronization

Strong growth in all

regions a sign of strength

Crister Fritzson, CEO Net Insight

Q3 was the strongest in terms of revenue since Q2 2019, and sales in the period of SEK 101 million were up by just over 30% year-on-yearand by 13% compared to the same period in 2019. All regions exceeded last year's sales figures, contributing to the increase, alongside increased sales for the Aperi portfolio. Looking back, our customers' investment appetite increased gradually in the first nine months of the year. Q3 2021 was the fourth consecutive quarter of year-on-yeargrowth.

Operating earnings were SEK 12 million due to strong sales in combination with decreased personnel expenses as the third quarter included the holiday period. Revenue was derived from continuous orders from many different customers in the quarter. This is a sign of strength. For example, we received orders from customers that extended existing media networks, but also from customers that won rights to new sporting events.

Positive profit coupled with our systematic approach to reducing capital tied-up, generated positive cash flow in the year. As a result of the current components shortages, there is a risk of a temporary increase in capital tied up in inventories to secure customer deliveries.

Agreement in 5G synchronization totaling SEK 220 million after the end of the reporting period

Net Insight once again demonstrated its ability to commercialize its leading-edge tech expertise. On November 1, we signed an agreement with Turkish

telecom operator Türk Telekom relating to 5G synchronization. The agreement is a milestone that opens up a large new market, estimated to have a future value of USD 1 Bn annually.

Components shortages affecting supply chain

The effects of Covid-19 include longer lead times and disruptions to the supply chain. Components shortages are expected to continue in 2022. We are proactively working to secure components, focusing on customer deliveries. Thanks to our systematic approach, we have been successful to date.

New IP functionality attracts customers

Our largest order of Aperi products to date, which was placed in the second quarter, was largely delivered during the third quarter. I am very proud of the successful integration of the Aperi products and this order win. It demonstrates how competitive our broad IP product portfolio is becoming as we transfer IP functionality to our other Nimbra MSR products. New functionality will be delivered continuously over the next year as part of our ongoing investments.

Award-winning Nimbra Edge confirms market-leading cloud solution

I am also proud that our cloud-based Nimbra Edge solution won the category Best Network Delivery Technology in the prestigious CSI Awards. The product has been installed and is operational with customers such as The Switch,

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which launched its cloud-basedon-demand service MIMiC for transmission in August, which runs on Nimbra Edge. Last fall, The Switch supported a virtualized production of 21 Twitter Live programs for the NHL Stanley Cup. This is further evidence that our market-leading platform is reliable and delivers in demanding environments.

Repurchase of shares

As previously communicated, the AGM authorized the Board to repurchase a maximum of 10% of the total number of outstanding shares. The Board meeting on November 8 decided on a repurchase program will amount to at most 16 million shares or SEK 70 million. The repurchase program will commence in on November 11, 2021, and run until the AGM on May 13, 2022.

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Net Insight well positioned for the future

We have made significant advances and our marketing has become much more effective. Continuous investment in product development, new functionality and our clear transition towards IP and cloud-based solutions are the foundation for the breadth of our product portfolio. Our extensive experience of remote production and time synchronization is closely aligned with market demand.

Alongside my dedicated colleagues, I'm pleased to conclude a positive quarter. Given the team's strong commitment to our customers and Net Insight, we are taking positive steps in the right direction.

Solna, Sweden, November 9, 2021

Crister Fritzson, CEO

EXTRAORDINARY EVENTS

Divested operations

The business area Resource Optimization (ScheduALL) was divested on March 31, 2021, and is reported as discontinued operations in this report. For more information on discontinued operations, including the in 2020 divested business Streaming Solutions, see tables on page 11.

Comments in this report have reference to continuing operations, business area Media Networks, unless otherwise specified.

REVENUES

Net sales in the third quarter of 2021 were SEK 100.8 (77.2) million, an increase of 30.6%. In comparable currencies, sales increased by 34.1%.

Net sales for the first nine months were SEK 272.8 (241.8) million, an increase of 13.0%. In comparable currencies, sales increased by 19.5%.

Net Insight's solutions are sold all over the world and we have customers in around 70 countries. Many customers are global, with central purchasing functions for subsidiaries. Revenue per region varies over time depending on where events take place. Revenue per region is therefore less relevant. We report revenue by region separately (see table on page 10) but without comments.

In Q3, we have seen an increased interest to invest among our customers. This, in combination with our initiatives to further develop and strengthen our customer offering and improve our sales & marketing approach, have had impact on our growth in the quarter. All regions exceeded last year's sales figures, contributed to the increase, alongside increased sales for the Aperi-portfolio. We are also seeing a modest increase in revenue from our cloud-based solution Nimbra Edge. Revenues for the quarter also consists to some extent of revenues related to the Summer Games in Tokyo, but in general it is the customers long term investments to meet their customers increased demand and quality expectations that drive our long-term growth.

EARNINGS

Gross profit for the third quarter was SEK 60.5 (41.9) million, an increase by 44.4%. The increase is primarily driven by the sharp increase in revenue compared to last year. Gross profit included amortization of capitalized development expenditure of SEK -11.0(-8.0) million. Gross margin excluding and including amortization of capitalized development expenditure was 70.9% (64.7%) and 60.1% (54.3%) respectively.

Operating expenses in the third quarter of SEK -48.5(-46.6) million, an increase by 4,1% compared to last year. The increase is attributable to the sharp increase in revenue, which, among other things, results in higher sales and marketing costs. For the comparing period the operating expenses was positively affected with SEK 0.9 million related to governmental Covid-19 relief support, no corresponding grants during this period.

Sales and marketing expenses were SEK -24.9(-21.7) million, and administration expenses to SEK -12.2(-13.2). Development expenses were SEK -11.4(-11.7) million and the total development expenditure, i.e. before capitalization, were SEK -22.6(-20.7) million. Other operating income and expenses were SEK -0.2 (0.6) million, of which foreign exchange rate differences of SEK -0.2 (0.1) million.

Operating earnings were SEK 11.8 (-4.1) million, corresponding to an operating margin of 11.7% (-5.3%). Excluding foreign exchange rate differences of SEK -0.2 (0.1) million, operating profit amounted to SEK 12.0 (-4.2) million. See also table Material profit and loss items on page 21.

EBITDA was SEK 15.2 (-1.0) million, corresponding to an EBITDA margin of 15.1% (-1.2%). The increase is attributable to the higher revenue.

In the third quarter, net financial items amounted to SEK 0.9 (-0.3) million.

Profit before tax for the third quarter was SEK 12.7 (-4.4) million, and net income was SEK

10.1 (-3.9) million, corresponding to a net margin of 10.0% (-5.1%). Including Discontinued operations, net income was SEK 10.1 (-5.9) million.

Gross earnings for the nine-month period were SEK 163.3 (147.5) million. Gross profit included amortization of capitalized development expenditure of SEK -32.4(-22.4) million. Gross margin excluding and including amortization of capitalized development expenditure was 71.7% (70.4%) and 59.8% (61.1%) respectively.

Operating expenses of SEK -149.2(-151.5) million decreased following cost reduction initiatives and reduced costs for travel exhibits etc. These costs are expected to increase slightly from Q4 2021. Operating expenses was positively affected with SEK 0.8 (2.6) million related to governmental Covid-19 relief support.

				Net sales
	120							400
	100							380
	80							360
	60							340
	40
	20							320
MSEK	0			Q3	Q4	Q1	Q2	300
Q4	Q1	Q2	Q3
	2019		2020			2021
		Net sales			Net sales rolling 4 quarters

			Earnings trend
								10%
	15
	5							5%
	-5							0%
	-15							-5%
MSEK	-25							-10%
Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3
	2019		2020			2021
	Operating earnings		Operating margin rolling 4 quarters

Earnings trend excl. Items affecting

comparability

20
15
10
5
0
-5
-10
-15
-20
MSEK	Q1	Q2	Q3	Q4	Q1	Q2	Q3
			2020			2021
			Operating earnings

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Operating earnings were SEK 25.5 (-0.9). Excluding foreign exchange rate differences of SEK 8.2 (1.9) million, operating earnings was SEK 15.3 (-2.8) million. See also table Material profit and loss items on page 21.

EBITDA was SEK 28.3 (-3.4) million, corresponding to an EBITDA margin of 10.4% (-1.4%). Profit before tax for the nine months was SEK 24.9 (-3.1) million, and net income was SEK

21.0 (-2.8) million, corresponding to a net margin of 7.7% (-1.2%). Including discontinued operations, net income was SEK -16.0 (244.2) million, including capital loss on disposal of discontinued operations of SEK -35.9 (246.4) million.

							Jul-Sep		Jan-Sep		Oct 2020-	Jan-Dec
Key Ratios continuing
operations	2021		2020	2021		2020	Sep 2021	2020
Net sales, SEK millions	100.8		77.2	272.8		241.4	363.4	332.1
Net sales YoY, change in %	30.6%		-14.0%	13.0%		-16.7%	10.3%	-12.1%
Gross earnings				60.5		41.9	163.3		147.5	217.9	202.2
Gross margin		60.1%		54.3%	59.8%		61.1%	60.0%	60.9%
Operating earnings			11.8		-4.1	23.5		-0.9	9.1	-15.3
Operating margin		11.7%		-5.3%	8.6%		-0.4%	2.5%	-4.6%
EBITDA		15.2		-1.0	28.3		-3.4	12.7	-19.0
EBITDA margin			15.1%		-1.2%	10.4%		-1.4%	3.5%	-5.7%

INVESTMENTS INCLUDING DIVESTED OPERATIONS

Third quarter investments were SEK 11.2 (12.2) million, of which SEK 11.1 (12.2) million related to capitalization of expenditure for development. Depreciation and amortization in the third quarter totaled SEK -14.5(-15.7) million, of which SEK -11.0(-10.1) million related to amortization of capitalized expenditure for development.

Investments for the first nine months were SEK 43.4 (59.3) million, of which SEK 42.1 (54.0) million related to capitalization of expenditure for development. Depreciation and amortization for the first nine months totaled SEK -46.1(-43.5) million, of which SEK -33.8(-27.3) million related to amortization of capitalized expenditure for development.

At the end of the period, net value of capitalized expenditure for development was SEK

151.3 million. Net value of capitalized expenditure for development as of December 31, 2020, was SEK 208.9 million.

For continuing operations (Media Networks), capitalized expenditure for development in the third quarter amounted to SEK 11.1 (9.0) million, and amortization to SEK -11.0(-8.0) million. For the nine-month period, capitalized expenditure for development amounted to SEK 39.0 (36.4) million, and amortization to SEK -32.4(-22.4) million.

At the end of the period, net value of capitalized expenditure for development was SEK 151.3 million, against SEK 144.8 million as of December 31, 2020.

CASH FLOW AND FINANCIAL POSITION INCLUDING DISCONTINUED OPERATIONS

From April 2021, only the continued operations (Media Networks business area) are included in the cash flow. The impact of discontinued operations on cash flow in previous periods is presented in table on page 11.

Cash flow from operating activities in the third quarter was SEK 38.1 (-6.7) million. Total cash flow was SEK 25.1 (-21.1) million. The improvement is primarily driven by improved earnings and reduced tied-up capital. The parent company also received the final payment from the divestment of the business area Streaming Solutions of SEK 31.5 million. Excluding the impact from the divestment, cash flow was SEK -6.4 million (-21.1).

Cash flow from operating activities for the nine-month period was SEK 90.3 (-23.1) million, and total cash flow was 55.9 (214.0). The divestments of Business Areas Resource Optimization and Streaming Solutions had cash impact of SEK 46.6 (302.3) million. Excluding the impact from the divestments, cash flow was SEK 9.3 million (-88.4). The improvement is primarily driven by reduced tied-up capital. Last year also includes SEK -12.7 million of assets acquired from Aperi.

Cash and cash equivalents were SEK 339.6 million at the end of the period, against SEK 283.2 million as of 31 December 2020.

Remaining tax loss carry-forwards for group companies amounted to SEK 83.2 million at the end of the period, compared to SEK 101.6 million for continuing business as of December 31, 2020. Deferred tax has been recognized for the tax loss carry-forwards. For more information, see the section Tax on page 13.

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