Production and playout video server specialist EVS reported Q2 2016 financial results. Revenues for the second quarter of 2016 were €39.8 million, an increase of 70.8% over Q2 2015 results, and an increase of 48.0% versus the preceding quarter, Q1 2016. Excluding the effect of exchange rate movements and big event rentals, the EVS’s Q2 2016 revenue increased 67.6% versus the year earlier period.
Driving revenue in the quarter were upgrades by outside broadcast (“OB”) companies upgrading equipment in preparation for the large events of 2016, in particular the Rio 2016 Summer Olympics. Year-over-year revenue growth also benefited in part from a softer comparable period of Q2 2015.
Net profit for Q2 2016 amounted to €12.6 million (€0.93 per share), compared to €0.70 million (€0.05 per share) in the year earlier period and €4.9 million (€0.36 per share) in the preceding quarter.
Gross margins for the quarter were 77.3%, an increase of over 1000 basis points compared to Q2 2015, and an increase of 680 basis points when measured against Q1 2016. Gross margins were boosted in part by higher margins associated with Rental revenue. Management attributed the margin increase in Rental revenue to the completion of C-Cast development work, which negatively impacted the gross margin of Rental revenue in earlier periods.
Operating profit for the second quarter of 2016 was €17.40 million, up 815.8% compared to the second quarter of 2015 and up 128.9% versus the first quarter of 2016. Operating margin for the quarter was 44.0%, a sharp rise over the 8.0% operating margins from the same period last year and the 22.7% operating margin achieved during the first quarter of 2016.
Research and development (“R&D”) expenses for the second quarter of 2016 were €5.45 million, or 14.0% of total revenue, a decline of 11.5% versus the R&D expense in Q2 2015, and a decline of 6.0% against Q1 2016. As a percentage of sales, R&D expense was 26.0% of total revenue in Q2 2015 and 22.0% during Q1 2016. Year-over-year comparisons were impacted by costs associated with the closing of EVS’s development office in Chengdu during Q2 2015.
Selling and administrative expenses for the second quarter of 2016 were €7.44 million, or 19.0% of total revenue, representing an increase 4.3% over the second quarter of 2015, and an increase of 16.3% versus the preceding quarter. As a percentage of sales, selling and administrative expense was 30.6% of total revenue in Q2 2015 and 24.0% during Q1 2016.
EVS ended the quarter with 482 employees, down slightly from 483 at the end of the first quarter of 2016, and down from the 471 employees at the end of Q2 2015.
The order book stood at €41.8 million as of August 24, 2016, with 80% to 85% of the current order book set to invoice during the third quarter of 2016. The current order book represents an increase of 13.6% over the order book on August 25, 2015 and a decline of 22.3% compared to the order book on May 10, 2016.
Revenue by Destination:
- Revenues from Outside broadcast vans during the second quarter of 2016 were €22.2 million, a 75.3% increase versus the second quarter of 2015, and a 47.2% increase compared to first quarter of 2016. For the second quarter of 2016, this segment contributed 56.0% of the total revenue, which compares to 54.0% in Q2 2015 and 56.0% in Q1 2016. Revenue in this category was driven by customer upgrades to support the large event taking place in 2016.
- Revenues from Studio & others during the quarter were €13.7 million, up 53.2% compared to the year earlier period, and up 16.0% versus the preceding quarter. For the second quarter of 2015, this segment contributed 34.0% of total revenue, a decline versus the contribution of 38.0% in Q2 2015 and 44.0% in Q1 2016.
- Revenues from Big sporting event rentals during the quarter were €3.9 million, an increase of 127.3% versus the year-earlier period. There were no rental sales in the first quarter of 2016. For the second quarter of 2016, this segment contributed 10.0% of total revenue, a decrease versus 7.0% contribution in Q2 2015.
The below slide from EVS’s Q2 2016 earnings presentation illustrates the revenue breakout by destination for historical periods.
Revenue by Nature:
- Systems revenue in the quarter was €36.80 million, up 68.8% versus Q2 2015, and an increase of 49.3% against Q1 2016. During the second quarter of 2016, Systems revenue represented 92.0% of total revenue, comparable to the 94.0% in Q2 2015 and 92.0% in Q1 2016.
- Services revenue was €2.98 million for Q2 2016, up 97.4% versus the year ago period, and a rise of 34.2% compared to Q1 2016. Contribution to the second quarter of 2016 revenue was 7.0% of the total, which is in-line with the contribution of 6.0% in Q2 2015 and 8.0% in Q1 2016.
Revenue by Geography:
- Revenue from EMEA (excluding events) in the second quarter was €13.5 million, up 52.5% against last year’s comparable quarter, and a rise of 57.7% compared to Q1 2016. Sales in EMEA (excluding events) accounted for 38.0% of EVS’s revenue during the quarter. This compares to 41.0% of total revenue during the second quarter of 2015 and 32.0% during first quarter of 2016.
- Americas’ revenue for the second quarter of 2016 was €14.6 million, an increase of 107.8% versus the year-over-year period, and an increase of 38.5% compared to the preceding quarter. Americas accounted for 41.0% of total revenue during the quarter, up from 33.0% of total revenue during Q2 2015 and 39.0% in Q1 2016.
- Q2 2016 revenue from the APAC region was €7.71 million, up 36.0% versus last year’s quarter, and a slight decline of 0.3% versus the preceding quarter. APAC accounted for 22.0% of total revenue in the Q2 2016, versus a contribution of 26.0% during Q2 2015 and 29.0% in Q1 2016.
As part of the earnings release, Management increased and narrowed revenue guidance for the full year. Revenues for 2016 are now expected between €128 million and €138 million.
During EVS’s conference call, Managing Director & CEO Muriel De Lathouwer, offered commentary on the market environment. “We see that the adoption of 4K and IP progressed across all geographies with more concrete discussions that we have now on those subjects with our customers. We are very happy with the order book and the evolution, but we still don’t want to have too much excitement as we know that part of the uptake of these new technologies will be included in the traditional lifecycle of upgrades.”
Press Release: EVS Q2 2016 Results
Presentation: EVS Q2 2016 Results
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