Okay, welcome everyone to this Capital Markets Day with Net Insight. My name is Andreas Iverson. I'm the responsible analyst at DNB Carnegie for the coverage of Net Insight. Again, welcome everyone. We have a busy schedule. We will start now with an introduction of the company and some financials, and then we will move into the media segment around 1:30 P.M. After that, we will have a Q&A session for the media side. We will have a short break, and around 2:45 P.M., we will start with the time synchronization segment, have a small Q&A, and then some closing remarks and a final Q&A. There is plenty of time to ask questions. If you want to ask a question here in the room, please allow us some time to hand you a microphone so everyone online can hear your question as well.
With that, I leave it to you, Crister, to introduce and to present your team.
Thank you, Andreas, and welcome to Net Insight Capital Markets Day. As Andreas mentioned, we have a small agenda for today. I will do a small introduction to Net Insight, and then we are moving over to the financials, and that's Cecilia Höjgård Höök will handle that. Then we're moving into media, and that's Andreas Eriksson, our Chief Commercial Officer. We have the coffee break. Unfortunately, you online need to take your own coffee break, but we will have coffee in this room. Sorry for that. Then we're moving on to time synchronization, and that will be headed by Per Lindgren, Head of Synchronization and our Chief Technology Officer for the group. In the end, we have, of course, an open question and answer session as well. Okay, let's get started then. Net Insight, in a nutshell, what is Net Insight?
Net Insight is a live sports and media transport specialist with a unique product now moving into the 5G time synchronization. We are using our technology to broaden our offering into the markets. That's the select Net Insight in a nutshell that we will present today. If we go a little bit more deeper into Net Insight, I mean, we actually founded it in the end of 1997, and we have plus 500 customers globally. We are definitely a global company with a footprint in all regions, and we have customers in close to 90 different countries. We are plus 200 in the company. We have people in like Asia, Singapore, of course, in Europe, and in the U.S. We have a footprint globally with people locally, like salespeople and tech sales locally in the regions like the Middle East, like in Spain, in Australia, and so on.
Where we have our customers, we have a local representation. If you look into our three major product areas, we have like managed network. We will go into that more deeply in the presentation during the media session what managed network are. As you can see, we have the most well-known companies in the media industries as our customers. We have had many of them for more than 10 to 15 years. They are very loyal to us, and we have a stickiness in our product that they stay with us. The unmanaged is more cloud-based or on the open internet. It's the market within media that is expanding, growing the most right now. As you can see, we have a number of well-known brands as well. Of course, we have many customers that are in managed and unmanaged at the same time, of course, because they are coming together.
We have the unique solution on the time synchronization, and we are focusing right now on 5G. You can see a number of customers that we already have signed up. We launched the product in Q2 last year. We have been a little bit more than two years selling the final product. Before that, we had a more media-specific product, but that was not the product that we can use over time. Now we have the specific 5G product that we launched last year. If you're looking a little bit into the region sales, you can see that Europe is our largest region. U.S. or Americas, as we are saying, that's the key focus area for us to grow. We see that we have a growth potential in Americas.
If we look at Europe, we have probably the highest market share in Europe if we look at all the three regions, but we have a growth opportunity in Americas. We have APAC that is much smaller than the rest of the regions, but definitely important for us as well. If you look into the product groups that we have, the largest one is the hardware part. I mean, we are coming from the hardware, moving over to the software. That's the transition that we are seeing, and we will see that over time. We have software and support and services. That's the three product areas that we have. We will move into that a little bit more deeper further on. Why invest in Net Insight then?
We have a very strong innovation power in the company, showing that we have used our technology to move into different markets and product segments, like the time synchronization. That's something that we really have in the company, and we continuously come out with products that are in the front end, both in the media but also in other market segments as well. We definitely are a trusted partner. We are trusted to be a partner to the big event globally in the media industry. Now we're starting to get trusted in the 5G network as well because time synchronization is a crucial product for the operator to have a stable network. We are a leading player in the media industry, and we see potential, of course, in the unique GPS-resilient time synchronization. We are a company focused on growth.
As you can see, if you look in the numbers, if you go back to 2020, we have a stable growth, and we are still focused very much on the growth to have a growth strategy. We are well positioned to benefit from the structural change in the market, the growth trends in the market. We will go into that a little bit further on in the presentation, and I will also cover that. We are trying to find the growth pocket in the industry that we are or in the market that we are established. Like in the media, the unmanaged is the growth pocket we have been in the IP. If you look at the profitability, and Cecilia, we covered that a little bit further on, but we have a global customer base. We have a probability to scale our business.
We have 70% gross margin, so we can scale our business. We are therefore really focused on growth because that's the key to increase EBIT and really come into the higher numbers. We had a good solid profit, even though we are investing heavily in new technology, both in media, but specifically, of course, in the 5G time synchronization market. We can continuously, based on our cash flow, invest in new products and new market segments. We are financially stable, low debt equity ratio, or no debt at all, and we can fund our growth through our cash flow that we have. Moving into the market transformation in short terms, we see a rapid transition from historic technology over to IP and cloud-based service. We have invested the last five years into that, and we see the traction coming from those two parts in the market or our product portfolio.
We see also that this transition from satellite to IP-based cloud-based service. We see that definitely in the U.S. because some frequency is taken away from the satellite moving with the 5G, the need to move content from satellite over to IP cloud. Cost reduction, I think all markets, all industries have a focus on the cost reduction. In our industry, we see transitioning technology that really gives the customer a possibility to lower the cost. That's like remote production. We were one of the first companies to move into remote production, and it's really lowering the cost for service providers and broadcasters. We are really into that path in that part of the market. Capacity, we see an increased demand for increased capacity definitely in media, and we are leading that part.
We were the first company in 2018 that launched the first 100G product in media, and now we have launched the 400G product. We are definitely leading in capacity, and that's important for our customer, and that's also lowering the cost for our customer. Time synchronization is an increased demand for synchronization in many different industries. We have now focused on 5G, but we see a number of different industries that need time synchronization, and we can use our unique technology that we have. We are looking into growing our addressable market with new products and use also existing products to move into other market segments. In a nutshell, what is the strategy that we are looking on? We are well positioned in the growth segment and to broaden the addressable market. We have managed and unmanaged, and those are the two parts that we have within the media.
Americas, as I mentioned, is really a growth opportunity for us. Sports leagues and events, we will come into that, but that's our key market, and we are focusing more on that to get more push from the sports leagues and the content owners to use our product. That's our sweet spot. Time synchronization is a phenomenal opportunity that we have really to grow our revenue, and that's a new market segment that's really coming into the 5G, but in many different industries as well. We are focused on recurring revenue that is growing, and we will continue to grow when we are moving into software and cloud-based service. We would like to move into adjacent market segments with existing products, but also launch new products, and that's both in the media and in the time synchronization.
Both our product lines will have opportunities to develop new products to move into the market segment. We have a fantastic scaling opportunity in our business. If you look into our financial targets, we are looking to have 15% growth per year and looking for an EBIT margin of 20%, and that's 2027. That's our long-term financial targets that we set for 2022 to 2027, and we are heading towards them. That was a very short introduction, and now we should try to go a little bit deeper into that, but we start with Cecilia, and we'll take you through the financial numbers.
Okay, so financials, we will start looking at our last five years and see the development during these years. If we start with revenue, we have had, during the last five years, we had had an average of 10% yearly growth, and this is a result of our recent investment in product development. Alongside our media development, we launched, as Crister said, the time synchronization, and there we expect revenue growth going forward. Looking at the right chart, we see the distribution between our regions, and during the period, we have a growing presence in Americas, and Americas is a strategic focus area for us, and that is the addressable market in Americas is larger than EMEA. We have a potential to scale and capture new opportunities there.
After 16 consequent quarters of growth, the trend was broken temporarily in Q4 2024, and this was due to weakened markets and the absence of budget orders in Q4. In Q1, the geopolitical situation was further disoriented with increased macroeconomic uncertainty, threats of tariffs from the U.S., and we had significant FX headwinds resulting in a decrease of 20%. Going into Q2, we returned with more normalized revenue levels, and we actually had 4% growth in comparable currencies, and if we adjust the software order we had last year. Throughout these quarters, we see that the market activity has remained high, but we see that there's a caution in the market, and that is still existing. Profitability, and we start with gross margin, and we have a gross margin that through the years and periods has remained high, around 70%.
At this margin, levels amplify the impact of revenue fluctuations on overall profitability, so we can scale when we grow the revenue. Operating expenses have increased during the last years, driven by the strategic investment in our organization for time synchronization, cloud, and IP. If we look at these expenses as a percentage of revenue, we have demonstrated that we can decrease and scale. Through 2021, we had 49% of our operating expenses of revenue to 45% in 2024. We have had a positive profitability trajectory with EBITDA margin improving our solid net sales growth and improved scalability. For the last three quarters, this trend has been interrupted due to the lower revenues and FX headwinds. To mitigate this, we implemented a cost reduction program in Q2 that is targeting savings on $30 million. Continuing forward, it's going to be a high focus to have cost efficiency going forward.
Now to R&D. For a company like us that is built on innovation, it's important to secure future growth by investing in R&D. Through the last years, we have invested 25% to 30% of our revenue in R&D development. If we're looking at long term, we expect this figure to decrease, and our long-term target is to have approximately 20% R&D invested from the revenue. To some financial performance figures, and starting with the earnings per share, we had a positive development, but this was temporarily offset by the lower revenue and FX headwinds in Q2, as you have seen on the EBITDA. Working capital, during this five-year period, we have increased working capital, and the first shift was between 2022 and 2023, and that was mainly driven by the prepaid NRE that we had received from Turk Telekom.
We have a new shift, and that is from this year, where we had an increase from 20% to 24%, and that is due to a bit longer payment terms on a few larger orders. As we go further this year, working capital is to increase more due to the last time buy of FPGAs that we have done. Those will secure a lower component cost going forward. To net cash, and if we look at net cash, it has declined from 2021, and that is the long term. It was primarily due to the buyback of shares, which we have done about SEK 240 million. In short term, that is the capital tied up in working capital. Now, per Q2, we have available cash that is both net cash and credit facility of close to SEK 200 million.
Looking at the last three quarters, economic and geopolitical risk has increased. The macroeconomic environment has declined. We have had an increase of import tariffs. Our products are still exempt from the tariffs to the U.S., but this has increased uncertainty, and we see it resulting in longer decision-making processes and the risk of orders being moved forward. We have also had FX headwinds with the Swedish krona that has strengthened against the U.S. dollar and euro. We continue to hedge our positions, and the cost reduction program was also part of mitigating the FX headwinds. Looking at electronic components, the lifecycle of FPGAs has shortened during the last years, and we have looked closely into securing the component supply going forward. The last time buy that we have done now this year is to secure the demand on our high-capacity products.
This also, as I said previously, will secure a lower component cost going forward. Now to media.
Let's get into the media area a little bit deeper here. I think to really understand the media side of Net Insight, it's very important to understand the context in which we operate. This just highlights a few of those things. I think the step thing number one to really kind of point out here is that we're in the live sports area, as Crister was saying, and we deal with the largest events, the largest leagues globally. What this means is that there's a lot of value at stake. The value of the rights fees are very high. Big significant investment being put into the area, and billions of viewers basically depend on Net Insight product to deliver the live sports to the audience around the world. Really, really quite critical in the value chain in terms of where we are.
We know that when you look at live sports, if you look at it from a media rights perspective, you're a broadcaster and a streaming provider, really what drives viewers to the services is the live sports. That's where you do not compromise. A very strategic position for a company like ours to be in. I think the other thing to then mention is what do we then do in this? We then have developed and continue to develop tailored technology for this live sports use case. Predominantly, high-quality standards are an absolute must. You cannot have a single glitch in terms of the viewer experience. Very kind of high standard from the customers, and then where failing cannot be done. You cannot have a black in if you have major events or a large league. Again, very, very high demands, which we have delivered on for many years now.
I think the other thing to mention when you look at what's happening in our ecosystem is that when you think about a viewer these days, it used to be that it's very much an appointment viewing situation. You will tune into a football game or a football match, and you would view for a couple of hours. What's happening now with the viewer is that actually it's a 360 experience. As a viewer, you need to feed and fuel them with content all the time, in between the matches, during the matches, so the demand from the viewers is much higher. That's a great thing for us because it means more content needs to come out from the different leagues, from the events where we're active. A good thing for us. If we move into some of the trends, Krister highlighted a few of them in his part.
Again, I talked about the consumer changing behavior. I think that's really one core thing which I talked about in terms of how consumption of live sports and media is nowadays done. That's continued to be something which opens up opportunity for all our portfolio. The satellite transition. Historically, as many of you will know, live sports and live media has been transmitted over satellite. For many years now, there's been a move from that into fiber, quality guaranteed fiber, which has been core for what Net Insight has monetized for many years. What's very exciting now is there's starting to be another transition from satellite to cloud or internet-based delivery where our unmanaged portfolio is coming into play in a very neat and positive way. That's the other change that we now see.
Crister highlighted a change even in the U.S., which further fuels this opportunity, and that is the close down of certain spectrums that's currently being used for satellite will now need to be freed up and used for 5G in the U.S. That further accelerates the opportunity for us in the satellite to cloud and internet delivery change. That's another positive. Crister highlighted the remote production use case. If you look here in this simplistic way of looking at it, when you think historically how a production had been done, you've had an outside broadcast bus parked next to the venue. That means all the camera feeds coming from the venue congregate into one place. There's a production happening. You create sort of a production feed that will then go on to the broadcasters around the world that's bought the right. That was the historical way of doing it.
With remote production, this changes. Instead of having a bus parked at the venue, you will take all those camera feeds and transport them to a central location somewhere else, in the center of a country and so forth. You bring up much more feeds from the venue. That's a benefit for us then because in the first historical use case, we still have a role to play and have played, but the requirement on capacity and the number of feeds was lower. Now, with remote production, the capacity increases. First of all, more feeds need to be brought up, but typically, you might even bring sort of, you know, uncompressed higher, you know, volumes of content out from the venues, which further drives the need for our equipment in a bigger way. That's in a simplistic way how you can think about the remote production.
On the other side, when you talk about high capacity, we all know that, you know, there has been a change from SD to HD to 4K to 8K. Requirement from the viewer to have even better quality when they watch live sports is increasing. Also, of course, the providers, the streaming providers, and the broadcasters want to make sure they bring out the best possible viewing experience. That's again something that is then driving requirement on the capacity where we have, you know, historically monetized with being first on 100G. Now, end of this year, beginning of next year, we start with a 400G, which basically increases the capacity. We have a platform, our platform follows the requirements coming from the industry, which is a positive. New compression technologies.
Of course, we're dealing with large volumes of content, and sometimes you need to basically compress it so that you can transport it over fiber networks and so forth. There's now some new compression technologies coming up, which is positive for us because it means that we can add new compression technologies to our existing platform and go and sell that to our existing customer base. That's again something we can, kind of a trend which we can benefit and take advantage of.
Lastly, you know, I'm sure you heard, you know, before that this change has been an ongoing change to more IP standards, which again opens up for opportunity for us because it means we can upgrade our existing customers, but also we can break into new customers when there's a compelling event to actually do some change in their technology stack, which is a trend which we can again benefit from. In summary, well-positioned. This transformation of the landscape is we're well-positioned to take opportunity of it. If I then zoom out and we look at the entire landscape here in which we operate, what does the value chain look like? If you go from left to right, you know, again, as I said, starts with a venue, sporting stadium of sort, and then bring that all feeds. That's a venue transport.
We're bringing all the feeds from the venues into a production facility of sort. Next step is then to bring that content out, what we then call here contribution transport. Different use case. One simple way to think about it is for a big international venue or event, you need to bring together into one place, and then you need to be transported out to all the broadcasters around the world which have bought the rights for that specific event. That's basically the next step. After that, you're in what we call contribution and production area. When you move on to primary distribution, primary distribution really is about, first of all, packaging up all this content, and the kind of end product of that is really a linear TV channel. It could be a streaming service where you package up all the different content that needs to be brought together.
That's really what the main thing that's happening in the primary distribution step of the value chain. We mapped out our customer categories, our customer segments. Media service providers, one of our core sets, that's our core segment. We have customers from broadcasters, will be in TV4, BBC, and ESPN, these kinds of players. We have the OTT streamers, which sometimes the OTT streamers are now some of the companies like DAZN and others which are focusing very much on that area, but also the large global streamers which we see around the world. Production companies are companies that produce on behalf typically of broadcasters or leagues. That's another segment. You have the rights holders. Rights holders is the owner of the sports property, so the kind of the core owner of the sports property.
You have the pay TV operators which are further down the stream, which are the ones that sort of historically have been packaging up all the live TV and all this content coming in and presenting it to the end customers. That's kind of in a nutshell how our customer base is being mapped out. If you look at the market split, our assessment is around 40% of the market is with the main service provider or the media service providers, and 30% with broadcasters, with the remaining 30% split across the other customer segments. That's kind of very high level how the market landscape which we operate looks like.
Just to bring this to life, and as you said before, our position as Net Insight is very much, you know, we're very, you know, our core market is up on the left-hand side in the contribution production area, but we see opportunities as well for us to be active, and we are active on the primary distribution side. The core is up in this part. To bring this to life, this would be an example of how this will be looking like if you look at the large global sporting events. As I mentioned, there will be a lot of games and activities, sporting activities will happen on the venue. All those camera feeds will need to be brought into one single place. Typically, that's done in something that's called an international broadcast center, an IBC, so a center part in that specific country. This part we're active in.
This is the whole venue transport we talked about in the first step there to the IBC. Then onwards there is a contribution transport we just talked about. This will be then for a rights taker in Sweden, rights taker in the UK, rights taker in the U.S., and so across the world which have bought the media rights for that specific content. They will need to get access to the content. We also then do this technology solution for transporting that to the end destination. That's kind of, you know, an example of what this looks like from our perspective. As you can see, it could either be an onsite production, production happening in the country or in that specific event, or it can be remote production when the production is happening at the end, at home destination or a central location.
They have two, then those two use cases. If we then move on to look at sort of our strategy and then we look at, when we look at the market, we can say, we can see that we have a total addressable market of around SEK 5 billion, but with an opportunity for us to expand into other adjacent areas and to increase our target market. When you look at the lower left, the dark blue, that's the core market. That's what we call managed, what Crister was referring to when he talked about the managed area. That's the core market for us where we have, you know, about sort of SEK 4 or 5 billion market growing 47%, and we have a strong market share at around 10 to 14%. That's the core market.
If you look at light blue, that's what we refer to when we talk about the unmanaged. The unmanaged, again, is, for instance, when you run a live sporting service across, let's say, internet, and we then provide an overlay service on top of that so that we can have higher guarantees. Internet is effectively best effort, but we can create more of a guarantee on the service that our customers can provide on top of internet. That's what happens in unmanaged. The satellite to cloud transition, all in the unmanaged area that I mentioned. That's how we can sort of position that trend. On top of it, we have the yellow area, which is an extension of the current market. This is sort of the things I was talking about when I talked about new compression and areas where we can extend our current platform.
In fact, we do a major feature on top of the platform we already have and go and sell it to our existing customers, which is, of course, quite attractive because it's customers we already have. We can come up with new things in that area and go and provide that to the existing customers we have. That's an attractive kind of proposition then for us, and something we can go and execute on. Those three are sort of the core. You can see sort of mint color here is other adjacent areas that we think have some potential for us to enter into new markets. That can give you a sense of where we are, some adjacent areas, and a few layers in terms of growth opportunities. If we then zoom in around the competitive landscape, what does it actually look like?
We have divided it up into managed and unmanaged still. If you start with the managed area, you have two sets of competitor groups. You have one similar to us, only provide transport and compression. That's very similar to our position. That's where we are. You also have customers or competitors that are providing a broader set of solutions. They might be doing transport and compression as a part of the portfolio, but that's a small part of the entire portfolio. Those are the two groups in the managed area. Here you will find companies like Aperi, being more a company in the first part here. NPR and MediaLinks are companies and competitors we meet, which are in the second category.
If we then move on to unmanaged and talk about that area, sort of similar to different groups, you have the group number one is the ones which have more of an end-to-end offering. They offer a more complete solution in the unmanaged area. That's where we sit. We provide a set of different products that can be combined to total solutions. That's segment number one. Segment number two is companies that are very focused on just one component of the ecosystem. That's the other one. For example, in the end-to-end offering, you'll have companies like Haivision and Ateme. In the individual component, you find companies like Zixi and TAG as a few examples. If you then move on to think about the customer, what's the customer demands, requirements, buying, and how do we fit?
I think the first thing to say is that we feel that if you look at how the customer, the buying patterns, the requirements they have, we feel well positioned to go after those opportunities. The first thing to highlight is the drivers. Why do the customers buy effectively? They buy for a few reasons. Number one will be they need to increase the capacity of the network. That'll be one thing, or just increase the capabilities of their core network. That'll be one. This could be driven by some of the things we mentioned. It could be that they need to be able to transport 4K, more capacity. They want to go more to remote production, another reason to invest in the capacity. The second driver will be if, let's say, a media service provider had won another deal.
They want a league that they should be supporting, for instance. Then they need to go and buy equipment to be able to build out to all those new venues. That'll be something, will they come to us and want us to supply equipment for that. Thirdly, of course, there is a general maintenance and upgrades of a network that need to happen at all points in time. There's always a sort of a maintenance CapEx budget that all customers have allocated. They make sure they keep buying. Those will be the three main use cases for when they buy. Our equipment, as I mentioned in the first slide, is critical. It's critical for our customers to deliver on the requirements they have from their customers and from their viewers. Again, a very strategic position to have.
It's worth noting that, of course, there is an element of opportunity for a customer to sweat the assets. Not everything will be mission-critical to buy. When we talk about sometimes a deal might move and so forth, what Cecilia moved, this could be sort of the reason that they might just decide to sweat the asset. It will not be applicable if they want a deal, need to be built out. In many use cases, it's not applicable, but some use cases, it'll be applicable. The third thing to highlight here, I think, is quite important as well. You know, Crister talked about some of the cost aspects and so forth. We're really well positioned to go after the proposition around a customer that has a high requirement on total cost of ownership.
What we're talking about, when you think about the service providers as an example, if you look at their whole cost base, they, of course, need to buy equipment. That will be the first thing. If you look at us, we typically can offer more complete solutions in our offerings, which means that for a competitive option, they might need to buy from more vendors. It might be more costly. It for sure will be more complicated to operate. That will be kind of one thing to think about. Build networks. We know that Net Insight offering our products are easy to deploy and stand up and configure and be prepared for production. That's another thing which is part of the requirement from the customer. Also, something we are good at, operations. When you then are actually up and running from a service perspective, you have two key cost drivers.
Number one is the team, the operations team that are operating these solutions. Our solutions are known for being easy to operate. The number of people and the number of staff a service provider needs in order to run our services, we know, are less than some of the other players. Number two is a service provider needs to go out and buy capacity from a telco, for instance, in order to run these services. We know that with our solutions, we can make them more cost-effective and cost-efficient. They just don't need as much capacity with some of our solutions. I think when you then add it all up, the buying, the building, and the running of solutions, that whole total cost of ownership for a customer, that's something we have a very key strength in.
I think this summarizes up our value proposition, why a customer is buying from us. Crister talked a lot about the customer base we have, the brand, and so forth. I think it's clear that the customer brand, the trust in the brand, the trust in our product, the quality they know they will get from us is well acknowledged in the industry. I think that's a really good foundation to stand on. Also, how we work with the customers. When you think about, again, going back to the live sports area, when you have a major event that's being delivered and so forth, when you have no time, if something goes wrong, you've got to be quick at fixing it. That's where our support comes in.
The extended offering that we get for us, I think, is something that's well recognized in the industry, how they get the support if something goes wrong and they need help. We talked about the easy-to-operate networks. I think that's another thing that comes with our offering and our value proposition. When you think about the core offerings we have, if you look at some of the key differentiating factors, we were first with 100G, now we're coming to 400G. That's been something we've really been focused on. The scalability of the products and the quality of them. First, the quality, the robustness of them is very, very important, something that is a hallmark of Net Insight.
The scalability, that's the ability to quickly scale up because if you think about a large event, many endpoints that you need to manage, and then you need to deliver them to many places. If you think about the example on the major events, it quickly becomes quite a complex, large network. This is what we are really strong at, the ability to scale. I talked at length, I think, on the previous slide around the total cost of ownership, which is something that is part of our core value proposition, that we can have a low TCO. To wrap it up, then three things. Again, well positioned in the sports and media market in transformation. I think that's the core part.
I think we're in a really good position when you think about the growth trends we have talked about, and we have a global strong position with all the customers that we have, and the reputation we have in the industry is really an excellent starting point. The other thing is the opportunity to grow. We think we can grow within our existing customer base and gain market share and continue to sort of chew more of that pie, but also to increase the target market on top of that in quite a logical way. To finish off, I think we can see that the alignment with how the customers want to buy, the requirements they have, the demand they have is really well aligned with our value proposition and some of the uniqueness that comes with the Net Insight offering end to end.
That's the summary of the media side. I think that was all on the media side. I think then, Andreas, a few maybe questions or some answers as well? Yeah, that would be good. Thanks a lot for the presentation. Again, if you have a question, just raise your hand and we will come with a microphone, and we have already one question. Hang on one second.
Thanks. Good presentation. Thank you, Andreas. Quick question. You said you had 10% to 14% market share in managed services.
Yep.
Number one, how has that developed over time and why? Two, maybe it was you or Crister saying that you had like zero churn. Is that right? Or very few customer losses?
Maybe, if there is sort of a historical, I mean, first of all, on the churn side, yes, we tend to be very sticky because what we see and hear from the customers is that when we get deployed and when we start to operate and work with them, they tend not to want to leave. Very high level of churn. Krister, I don't know if you want to comment on the historical, maybe more.
Yeah, I mean, we are sticky because we are using like software upgrade. When we went from 100G to 200G with a software upgrade, now we're moving on to 400G, also a software upgrade, which means that they can use the chassis and everything installed in the network and need a software upgrade. That's really sticky. We can see our 600-series product has been in the market since 2008 and it's still the same chassis, but we have just changed, but it's a new service in the product. That makes it very sticky because we can lower the cost for the customer if they need to change to new technology or upgrade the network. The zero churn, I don't think that we have been saying that, but we have extremely low churn.
Probably I need to look at, I don't know if we, I don't have any historical number, but it's very few customers that are leaving us. Our major customers have been with us for the last 10, 15 years. We have very low churn. We also have been able to take new customers with a new IP product that we have been coming out with. That's a market that we haven't been able to penetrate with the historical technology that we have. Today we are agnostic with our own technology and IP. This means also for customers that would like to move over to IP, they don't need to do a forklift upgrade. They can move over from our existing technology, our own technology to IP. We see many of our customers are keeping the technology that we have developed, but they still can have an IP-based solution for transport.
By that, we have less churn, I think, than I can guess than other competitors. If you look at our, we have low churn, definitely.
Is the 10 to 15% something that's been roughly that number for a long time, or has it come up or down?
Yeah, I mean, as Cecilia was showing, all the way back to 2020, we had a 10% increase in growth. Definitely, and the market has been increased by 4 to 5%. We've definitely been taking market share the last four or five years.
Thank you.
Also, if you have questions from online, you have a place on the website to write that question, and I can read it out from here. If I may ask, I would probably have thought that we have moved quite far from satellite to IP-based. Can you give some indication of the penetration of IP-based solutions versus the more traditional solutions?
Yeah, I think, I mean, you're right. I think as always, things take more time than you would have thought. I think when you think about the internet-based delivery in the more recent few years, where that's been more a drive, I think really coming out of COVID was when we could see that that was starting to take off in a more meaningful way. I think what happened was that it's all about, it needs to be economically viable.
When you think about the strengths of satellites, it's the one-to-many use case. You uplink once, and you can distribute to many endpoints. That use case was not really viable with fiber, had high-end fiber, but with internet-based, that started to really take off in that use case, which was really good for us, of course, because that then means we can start to come into the unmanaged area in a bigger way. When you think about the managed side, I think that that's further developed, if you like. I think then, fewer and fewer will rely on a sort of satellite use case in that, especially when you need to bring out what doesn't work when you need to bring out big volumes of content, which is now required. Satellite is unviable as a transportation means.
I think that's continued when you look at all the major capacity and if you need to do remote production and so forth, you can only do that over fiber. I think it's, but still more, I mean, remote production is not commonplace. It's good penetration, but room to grow even in that transition, which is encouraging for us.
I watched the Ryder Cup last night.
Yes.
If you compare, if you make the transportation through satellite or through traditional solutions versus the IP cloud-based, what kind of savings and benefits do you get as your customer?
Yeah, I think one of the benefits, you know, might be if you look at the like for like, you might want to have to save a coin or so on just doing the like for like. I think that this comes back to the viewing experience that nowadays is required. You want much more content out, which means that typically an event like that, you'll bring out the main video feed, you know, the actual footage, if you like, the core kind of content. Then you would want to have the commentators, you want to have, you maybe hear from the players, you want to bring much more content out because now you're sitting viewing maybe at your main screen, but equally you're looking at your second screen and want some more content.
I think as our customer, they can now provide much more, much richer experience that is, I think, demanded by the viewers these days. It's also a monetization opportunity because think about a second screen opportunity. If you can fuel that with content and then you have eyeballs going there, not just on the main screen, you can sell advertisement on that screen, for instance, as well. Further monetization opportunity as well as giving the viewers a much greater experience. I think that's the kind of thing I would see if you look at a Ryder Cup. A much, much broader set plus an opportunity to save costs as well at the same time.
When you look at the installed base that you have out with the customers, sometimes we see some larger software upgrades and orders coming in. How do you see that play out over the next, let's say, five years? Should we expect an increased amount of software in your revenue mix?
I think so. I think, as Crister was saying, I think that's what we definitely see in that there is an opportunity to roll out. We can see it on both the managed as well as the unmanaged, that the component around software is becoming, is increasing. I think it's interesting when you think about the whole unmanaged area because then we can run things on commercial off-the-shelf hardware, for instance. We actually make money on the software, gives us more flexibility, gives us a quicker time to market with new offerings and so forth. It also makes it easier for customers to upgrade. They don't need to change the hardware all the time. Absolutely. That'll be something we'll see more of going forward.
Why do you think we haven't seen that much of that yet? Is it still, or yeah?
Yeah, no, I think when you look at the managed area, it still has been quite a big because of the demands. If you look at the technical requirements, I think solving the use cases which we've talked about on a pure software has been quite hard, or if not to say impossible in terms of being able to deliver on the capacity and so forth that we need to do. That's on the managed side. We can see that it becomes, you started to change more and more there. If you look at the unmanaged side, that's much more software-centric. I think the reason we might have not seen it is that that market is really now starting to take off. I think that they'll be the two, I think, explanations to, you know, what's been happening and how this will evolve over time.
Any questions from?
Yes.
Thank you. Long-term goal of at least 15% increase in sales per year. You have had 10% average for the last couple of years. Just mathematically speaking, was it 2023 to 2027? The growth needs to be 30% or something for the next two years. Any thoughts around that?
Cecilia was showing it from 2019. We were 2020 to 2027, and we said average growth per year with 15%. If you calculate it from 2020, we have a higher growth than 10%. We have been saying like per year. The EBIT level is that we should reach the 20% in the end of 2027. That's the target that we've been setting. The other ones were 15% per year. We need to calculate it back from 2020 and not from 2019 then.
We have a question from the audience regarding the new compression products. Has there been high interest from existing customers for that offering? Is the market share from existing customers the same in compression as in managed networks? When you look at what we refer to as compression, it's actually something new that we have not brought. That specific one is what we haven't brought to market yet. It's the first, just to clarify, it's one of these growth opportunities which we can see. That maybe answers the question in a way. To further elaborate on that, what we see is kind of compelling if we're to bring a product and offering out in that area, we can bring it to our existing customer base, which would be a logical upsell on top of the platform we already have.
They get access to more compression, other compression technologies which we do not provide. It's quite compelling strategically for us to go after that opportunity.
When it comes to overall competition, you showed the picture of the competitors.
Yes.
Where do you stand out? What's your edge versus the others? Likewise, what do they have that you would like to have?
I think what's a couple of things that stand out. Krister was saying, you know, we have sort of a technology which is sort of the core invention of the company, which is, you know, providing a lot of the value of what we talked about in terms of total cost of ownership and easy to operate. I think what's really interesting is that it's sort of the DNA of the company as well. When we now bring out, let's say, unmanaged, which is not building on that new technology, actually we bring all those DNAs with us, easy to manage, easy to stand up services, and thinking about the total cost of ownership as well also in those scenarios. I think that's something that will continue to be kind of an edge, I think, in a USP. I think it's also partly the combination of it.
You know, if you think about having a really strong reputation in terms of a brand and the quality of the products and what we do and the understanding of what it takes to deliver in this live sports world that we're active in, you couple that with, again, easy to use the TCO as well as some key features in terms of being first with 100G, 400G, and some of those. I think the combination makes also for the key thing we win. Of course, sometimes you win on one or the other, you know, but I think the elements of bringing it all together is a very attractive proposition in the market. If you look at the other aspect of your question then with competitors, I think it really depends.
Sometimes, you know, certain customers say, I think we are very strong in the managed or the media service providers because that's really where we have some of our core edge because the scale of the networks they run is very high, suits us. The end-to-end, they really have all the components of the cost stack that I talked about, which we can deliver well on. We delivered well historically, which means there is no reason, you know, they continue to buy from us. I think that's where, I think then when you look at maybe other segments which we had on the map then, we see a growth opportunity for us in the broadcast area. That's probably something, you know, what do we want? Yeah, it would be great for us to really penetrate, let's say, in a bigger way, the U.S.
market, the broadcast market, and so forth, which we want to do. That's maybe what we then would want to have. I don't see that, you know, if we look at the whole map, having managed and unmanaged is good because you can break into new customers from different angles. Adding the things we had in the plan in terms of features, I think we would be quite complete in a way. I think as always, you've got to keep breaking into new customers and so forth in all the segments. I think that's something we need to continue to focus on.
That competition seems to be quite harsh if we take the large deal that you took earlier this year.
Yes.
You even said in the release that it was highly competitive.
Yes, it was. I think what we can see is the market, and we say we're a top five in the market, but it continues to be a fragmented market. I think that's the important context. There are a few. It's not just a matter of there being three large ones or four large ones, which you might have in other industries. It's quite a set of competitors which we are competing against. Absolutely, no, still competition to win against.
The target that the group has of above 15% growth on average, you represent 90% of the company. A lot depends on you. What do you see is needed for the growth to pick up again, besides maybe a better macro?
No, absolutely. I think, you know, when you, again, if I, first of all, with our existing customers, you know, if our existing customers, let's say the large service provider, continue to be quite successful as they've been relative to their peers, that means that we are well aligned in terms of growing with our existing customer base. I think that that'll be kind of one thing we would sort of, you know, which would be beneficial for our growth, of course, because then we, and that's something we have seen. I think the other thing we're really driving hard is to break into new customers. We know which customers across the globe we want to get into, which we believe are going to be some of the winners and will continue to spend, you know, money and win in their marketplace.
It's a little bit about backing the right horse, I think, the existing ones as well as breaking into the new ones that really matter. I think those are the, that's probably, you know, kind of part of the core thing. Of course, in order to do that, you need a strong offering. You need to make sure you have the right to play in all the different areas. I think what's been really interesting now when we have the managed and unmanaged is that when you think about a customer, you can break into the managed area, the unmanaged area. There are many different ways to get into a new customer. The more tools you have in the toolbox to do that, the better.
We actually, we haven't sort of publicly announced it, but we won recently a large European service provider where we actually managed to break in through the unmanaged area. We then lined ourselves up for going after the managed area. I think this just gives you some sense of the dynamics between the offerings. I think we will need to make sure we have the right, you know, strengths in all the areas so we can break in and sort of do a land and expand strategy with our new customers.
Any question from the audience? This is a great opportunity. We got a question that I have a little bit hard time understanding, but can you explain what collaboration with a partner that you apparently had, what that brought into Nimbra Edge? I don't know exactly what that.
Was that the recent, trying to think which one you're thinking about? Nothing. Oh, yeah. Okay. That's a good question. When you think about the unmanaged area, you have a few layers. You have sort of a layer which we call technically orchestration, like a management layer. You can control and manage your network. That's sort of one part. Make sure each box is up and running and the links in between are all working, so sort of a management layer. Then we have devices which you can put, let's say, at the venue or at the receiving end. That's the other part. On top of that, we are looking into value of the services. Value of the services is really down to some manipulation of the content. This is the partnership there is around the Transcode area.
When you think about your transport, the content that, also, you might want to do some tweaks and changes to it. You might want to change the format. You might want to do some manipulation of it. That's one partnership we had, on top of it. It's quite an interesting proposition because the customer might want to come to us and say, "Can you provide the whole service?" Then we integrate someone like Net into our offerings, and we can provide a whole total solution. These are kind of things we're actually looking into in terms of that whole unmanaged area where we can have some smart value of the services on top of our core offerings, where we're in there working with the customer. They want something more that we can provide through a partnership. This is what this partnership and collaboration is about.
I think we will see more of it. We are going to be pretty surgical and focused and selective about the areas we go in and try to do value-added services around. That's one of them. We have a few others which we are looking into as well, to sort of add to the portfolio. That's the logic to that one.
Maybe this can be a good opportunity to just walk us through the structure of a typical deal, where you install your products and then what happens, what type of software and support do you have connected to the contracts in general?
Yeah. As you say, typically then we will sell the equipment, so the hardware software piece, so that will be the core of it. In some instances, we'll do some configuration, some setting up, some of the equipment. That might be something we might do, and we get some kind of professional service or product-near service around that. Sometimes we even help with some of the installation. After that, we'll move into, you know, they put it into production, it's up and running operationally. We have the support revenue stream kicking in then, which is a normal sort of ongoing support, which we get a % of the install based on. That's in very simple terms the offering and how much we always do. I mean, the bare minimum is the hardware software that you take and support. That's always there.
The other thing might depend on customer opportunity and what the customer wants. We also see actually that's part of the stickiness sometimes where they feel we're pretty, we're well placed with our own equipment to actually install and configure and so on, help them with some of that. I think that's what we have seen, that could also be an area where we can add some more around it that makes us more competitive, because due to the fact that we can provide some product-near services. That's something we're looking into more and more, how we can add more value around it, on top of just the core product of what we have.
Perfect.
Yes.
What is the biggest challenge you see ahead to reach the goals that you actually give us today?
I think it comes back to some of these areas. I think it's a matter of making sure we continue to break into new customers. I think that's one thing. I think that's one of the, I guess, a challenge because you need to displace someone else. Fundamentally, of course, that's part of it. I think that's something we see. I think we got some encouragement in terms of the tools and the options we now have available in terms of breaking in. I think that would be one. We need to make sure we bet on the right horses as well and make sure we're well positioned to ride on the growth of our customer base. I think that will be one.
I think for us, maybe a challenge, but it's at least something we want to make sure we succeed in is to, as Crister and I have been talking about, is the U.S. really kind of scale up the U.S. in a meaningful way. I think that will be critical. I think keeping the customers we have and so forth is going pretty well. I mean, it's quite a sticky. I think it's more expanding in the markets as well as bringing out some of the new offerings we have, succeeding and scaling up the unmanaged area. I think it would be one of them as well. That's what we need to succeed with as well.
Do you see the American customers being tougher to get into, and how would actually the market look like in three years? Is that a big difference compared to today, or is something as continuous as usual?
Yeah, I think what we can see now, and that's been part of, there's been some, you know, in the U.S. market, there's been a lot of consolidation among the broadcasters going on at the moment. That's been one thing which has been, which needs to sort of come to conclusion and settle down. I think that'll be part of the requisite to actually kind of succeed at that. I think it's a matter of in the European market, we've been present for kind of longer. We have a broader, yeah, you know, go-to-market and a bigger customer base there. I think it's not something that we don't think we can succeed with in the U.S., but, you know, of course, the conditions for the customer base need to settle down and then we can go after that market even more.
I think, you know, the U.S. market is very IP-based, always full IP, and we had our own technology based on IP and everything, but they didn't see that as full IP. Now, when we develop our new IP-based product platform, we have the tools really to go after the major customer in the U.S. that are very IP-based. We see also when we are coming closer to them, they get interested in our offering that Andreas is talking about, with the, that we get from our historically technology. By that, I think that we have a good chance to take some of the larger customer in the U.S. That's really the challenge in the U.S. It's not that many customers in the U.S. If you compare with Europe, you have a number of customers in each country. If you look at the U.S.
market, it's a very large customer, not that many. We need to really, we have the tools now with the IP-based product that we have really to go after them. We have the cloud-based product that we can also come in with a new technology that they need to invest in so we can gradually come into those customers. We have seen that we have had success with some of the larger ones that we had used the cloud-based product to come in in the first phase, and then they get interested in our hardware as well. I think the reason why we had lower market share in the U.S. is that because we haven't had a full IP-based portfolio that we have right now.
When we look at the market slide that you had on the total addressable market, first of all, when Crister and Cecilia talked about scalability, is that also your view that the media unit has this kind of scalability? Is that related to moving into these new areas besides the core network that you are coming from?
Yeah, no, I think when you look at the scalability of us, I think we have, we do a lot of direct and in, but also a lot of indirect with partners around the world. I think that provides us with a scalability opportunity. If they're well set up, well trained, and so forth, they can scale without us needing to sort of add, you know, necessarily salespeople and so forth to be able to go after that opportunity. I think absolutely there is an inbuilt opportunity for us to scale. Also, what Crister talked about, you know, when you look at many markets, it's not a massive amount. When you think about reach, you can reach them with not so many, you know, so many people, if you like, you can actually get into them. It's more about getting really traction, getting into the customer.
I think, yes, it absolutely scales with us, with our sort of setup. We're investing now more into making sure that the salespeople, as well as the channel, is well equipped and trained and set up so that they can, we can continuously scale with them. That's kind of part of the scaling idea for us as well. That's the scale lever we can pull.
When you look ahead, do you see that the R&D budget that you have covers everything you need, or do you see any need for additional acquisitions?
I think we've said that, per the guidance that we're given, that's really where we continue. I think we think that we can then reallocate, move around, and make sure we have room to invest in the areas where we need to be present in that area. That's the current view.
Great. With that, I think we take a coffee break, and we will be back in 30 minutes with the time synchronization unit. Thank you.
Thanks. Thanks. Bye. Bye. Bye. Bye. Bye. Thanks. Bye. Thanks. Bye. Thanks. Thanks. Bye. Thanks. Bye. Thanks. Bye. Bye. Thanks. Bye. Thanks. Bye. Thanks. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Thanks. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Thanks. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Thanks. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Thanks. Bye. Bye. By Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.
Okej, vi är här. Kör vi om 5, 4, 3, 2, 1.
Okay, welcome back to Net Insight's Capital Market Day. My name is Per Lindgren, one of the co-founders, also Group CTO, and I'm going to talk about our time synchronization business. You might think time synchronization is niche and a bit nerdy, but actually it's a very fundamental function in many critical services and industries today. I think most of you started to read about it even in the newspapers. You could have seen it in both the Swedish newspapers, but also like New York Times had a big article about GPS under attack. We've seen it even in Financial Times. Time synchronization up until today has been very much handled through GPS or satellite-based synchronization. We can see there's been now reports both from the U.S. saying that if we lose GPS for one day, the cost for society is $1 billion. It's quite big money.
Last year, the UK came out with a report saying a seven-day outage of GPS would represent a loss of $7 billion or £7 billion. That does not include loss of revenue for 5G operators or that power utilities would go down or anything like this. This is just pure direct societal costs. If you're interested, you can also go into gpsjam.org. There was a big jamming incident here in Sweden where most of southern Sweden was jammed during Christmas this year or last year. This is just some of the map where you can see the red dots are representing jamming incidents. Time synchronization, and that means it's becoming more and more important that we can find backup or resilience to GPS today. Most operators and industries are looking for network-based synchronization. This is something that Net Insight has done for over 20 years in the TV networks.
We built over 20 national mission-critical TV networks around the world based on network-based time synchronization. National TV was considered mission-critical services in many countries, and therefore you needed a backup to GPS. It's something we built 20, you know, 15 years ago. Roughly five years ago, some of our customers came to us when we were starting to do deployment of 5G services. They said we, and one of them was Turk Telekom in Turkey. When they were doing the pilots in Turkey, that was during the Syria crisis. They actually experienced this GPS jamming firsthand because they were situated between Russia and Syria at the time. They said we can't rely on GPS. We need a network-based synchronization. They asked us, could we actually use what we've been using in the media networks to also synchronize the 5G base stations? We did the pilot and trial with them.
That ended up in us signing a big agreement with them, which was signed end of 2021. The worth of that agreement was roughly €20 million. They also invested €5 million in an NRE fee to finance the product development and to take forward a product that was more optimized for the 5G telecom markets. A very good start of the synchronization business. The product, which we call Syntyc, was then released, like Crister has mentioned, in April 2024. It's been on the market now a little bit less than 18 months. We'll come back to where we stand on that. The biggest market for time synchronization is definitely in the 5G telecom market, and that's our primary focus.
Over time, we also see a capability that we can move into other adjacent markets with, in essence, the same product and the same product functionality that we deliver in the 5G sync telecom market. We both have in the enterprise market. We're moving now into IP and cloud media. Definitely, time synchronization is becoming critical also in the media industry. You need to timestamp every video packet, every audio packet you send as IP packets. In the finance and banking industry, there is actually a mandate that you need to timestamp every online transaction with a timestamp so we can correlate and go back and see what happened. Data centers today, a lot of the critical services in the data centers need accurate time synchronization, etc. The good thing for the operators is these are typically existing enterprise customers to them.
We actually tell the 5G operators, this is a monetization opportunity for you. You can actually take the investment you do for providing a more resilient synchronization network for your 5G services, and you can monetize that by selling that to your existing enterprise customers. Our go-to-market for enterprises will not go directly, perhaps with the exception of some of our big existing media customers, but we'll go through what we call time as a service operators, and they sell into their existing enterprise customers. It's been a strategy that's been very successful in the media industry. Like Andreas mentioned, 60% to 70% of the revenue in our media is coming from media operators or service providers. This is very, you know, they sell into the broadcasters and production companies. It's a similar strategy. They have two TAS operators that are now trialing the solution towards their customers.
We believe this is a very interesting way to reach that market. Government is also interesting. The government market consists of two parts. One is the more civil, societal services like blue light, first responder networks. The other part is, of course, the military and defense industry. For the latter part, a lot of that is for them to be able to triangulate and provide positioning services. The foundation to do that is you need to have a very accurate time synchronization. We see increased interest in this, but also the blue light networks are moving into 5G. 5G infrastructure will become mission critical for all the first responder and blue light networks in the future. Time synchronization is critical for that to have a high uptime and high security.
The utility market is also interesting, especially because now with all the renewable energy sources like a wind power plant, when there's a lot of wind, you generate a lot of energy power into the power grids. When the wind stops blowing, you get fluctuations in the network because now you're not generating any power. These fluctuations, if they continue in the grids, can cause outages. You want to control and monitor those and use something called phase monitoring measurement units. These also require microsecond timing accuracy. There's already an existing market in the power utility industry. The interesting thing with this industry is it's moving into digital transformation. In three, five, seven years, most of those power grids will be digital substations. When you do that, every substation needs very accurate time synchronization.
We believe in five years' time, this market might be as big as the 5G telecom market. How is the Net Insight solution positioned in the market? You can say if you want to build a network-based, national network-based synchronization network, you need to upgrade all your routers, switches, optical switches in the network with hardware-assisted timestamping, using a protocol called PTP. PTP is a standard for distributing time over IP networks. Here we have all the Cisco's, Juniper, CNS, Huawei, etc., in the network. They are now providing that as a hardware function in their line cards. Then you have the sync vendors that are providing the clocks, the sync servers, the GPS receivers, and some of the biggest areas like Ocelot Quartz and Microchip. It's quite a fragmented market. Typically, you need both of this. You need both the servers and the sync part.
Then you need this hardware function in all the routers and switches in your network to distribute this across the network. When we spoke to Turk Telekom, they said, we looked into this approach, but we have roughly 120,000, I think it was, line cards in our network, and less than one third of them are PTP-enabled. It's a huge forklift upgrade for us to enable all our network in PTP. They also said it's very complex because all of a sudden we have 120,000 components in our network that are part of us distributing the time in our network. When we do any upgrade or thing like this, we don't know what's going to happen. That's the reason they came to us. You can see we can act as a standard sync server. We have GPS functionality and we provide PTP to the network.
What we have, which is different from others, is that we can create an overlay and connect our Syntyc products to distribute the time over existing networks. You don't need to do this forklift upgrade. Consider you want to distribute time from New York to Los Angeles. In the standard way, you would need to upgrade or make sure that every router, every optical switch on the way has this PTP functionality. In many cases, you don't typically own every router or an optical switch on the way. You're typically leasing. You just want to lease IP capacity end to end. It's very hard to do this and very complex and takes typically a very long time. With the Syntyc here, you put a Syntyc in New York, connect to your clock source, and then we distribute time.
We set up an IP connection of a few megabits and we just distribute time as a function over existing IP networks. At the other end, we distribute time PTP signal out to the client. They just see it as a standard PTP signal. That's the uniqueness of our products. That means typically we are able to provide network-based time over existing networks, and we do it without having to forklift upgrade all the networks. Typically, instead of that typically taking months or even a very long time to establish that PTP connection, we can do it in a couple of hours, just putting out the Syntyc boxes.
Then we have the monetization opportunity that since it's quite easy to put up a Syntyc, you can put a Syntyc in an arena, in a bank, or in a data center and just provide standard PTP to the clients in those facilities. You don't need to think about the underlying network. It's just an IP connection like any other function and service in an IP network. There are quite clear benefits for most of the operators. That's also why we've had some success in a quite short time. How big is the market? In 2022, we did a report together with Kearney. They looked into the mobile market, the 5G market. The interesting thing is we're moving from 4G. 4G synchronization was all frequency. Frequency is quite simple over IP networks, so do frequent synchronization. Moving to 5G, you need to have phase and time.
In 4G rollouts, typically the cost of implementing synchronization is less than 1%. In many cases, significantly less. As we move into 5G, Kearney said typically the cost will be around 1% to 3%. This is what's called NSA, something called non-standalone 5G. This is when you're actually using your 4G core. If you're following Ericsson, they talk a lot about standalone, 5G standalone. That opens up the big promise of 5G, which was not just to be a little bit faster consumer service than 4G because they don't make any money out of that. The big promise is that 5G will become the critical infrastructure for all enterprise services and critical societal services like the blue light, etc. For that, typically we're talking about 5G standalone. That starts to happen now. That's why also Ericsson is getting more excited.
You can see on a lot of the analyst reports that 5G figures have been a little bit slower the last years, but they now see a bigger growth again, both on the 5G infrastructure market and the RAN market. It's typically because of the standalone market. When we go to standalone, again, time synchronization will become even more critical, both because some of the functions in 5G standalone need very accurate time, but also because it's a critical service that the operators will sell to the enterprise. Security, uptime, SLAs become more important. Typically what Kearney said is that the market for 5G synchronization in 2025 is around $1 billion, and CAGR will be around 25%. That means we'll reach a roughly $2 billion market by 2029. If you're looking, what does that mean for Net Insight?
If we sell to a small operator or a large operator, what's the value for Net Insight? What's the opportunity, customer value? There are around 800 operators, mobile operators in the world. We categorize them into small, medium, and large. When we announced, for example, Free Sweden, that is typically categorized as a smaller operator. That frame agreement we announced was worth around $3 million or SEK 30 million. I would say the value for Net Insight over three to five years with the rollout period is somewhere between SEK 15 million and SEK 35 million for a small operator. Medium operator is a little bit bigger, perhaps we're talking about 20,000, 25,000 base stations and upwards. That will then be the next range. A large operator like Turk Telekom, we said the value of that contract we signed was worth around €20 million.
Roughly €5 million was an NRE fee for us to finance the product development, but the total value was €20 million for Net Insight. We believe large operators are somewhere between SEK 75 million to SEK 200 million. Every opportunity here is quite large. Of course, it's not going to be the first order because they will start with a more trial order that will move into field trials, et cetera. Once you move into a rollout phase, the opportunity value is quite large per operator. That is interesting. Now that's the total value over the rollout period, so that can be like three years. We also categorized and prioritized all the different operators, mobile operators in the world. We both looked at what type of operators they are. Are they incumbents? Are they challengers? What type of buying pattern do they have?
We also looked at what type of networks they have. Some of them are very homogeneous. They own all their fiber and invested in a single platform. That makes it easier to provide time than if you have a more heterogeneous network with many different vendors, you know, fiber, IP, MPLS, microwave, et cetera. This becomes a much more complex and difficult arena, and perhaps you don't even own all your infrastructure because you're leasing capacity. Over 60% of the operators, even more, I think 70% to 80% of the operators are leasing capacity from others. That means you're not owning the routers and optical switches. It means you're not controlling the distribution of time across your network. There, an overlay solution like ours is much more interesting, of course, because then all of a sudden you regain control and sovereignty of your critical function like synchronization.
This part is our prime focus. The interesting part is that the challengers with heterogeneous networks, that's only 20% of the world's 800 operators, but it represents a quite large part of the total addressable market for us. We don't need to go after all the operators at once. A little bit also where are we now? I said we signed a contract with Turk Telekom back in, I think it was November 2021. We released the products in April 2024. In essence, we had around 18 months to do the trials and start getting in the customers. As you can see in the beginning, our focus is very much in Europe, and we also went into North America. We're starting to get more traction also outside our core markets, especially now in APAC.
APAC is quite, not all countries in APAC, but selected countries in APAC are actually on the front line of 5G development, especially the 5G standalone development. It is interesting, and this is definitely a global market opportunity for us. What was interesting, we also had our first media customer this summer that actually bought Syntyc, and it's going to be used for synchronizing all the events and stadiums in a big live sports event this winter. It's also good that we can move into and make use of existing customer base. I know we get a lot of questions from you, why don't we see big uptakes, big ramp up? It is a process to sell into telecom operators. You move from sales discussion, you get interest, you move into POC. Typically, you need to go into lab trials to certify the products.
Today, there's a lot of security compliance. You need to comply with all the security guidelines, et cetera, before they move you. You have successful POC in the lab trials to move into field trial in the live network, in the real deployments. After that, typically you move into a first pilot installation, a more commercial pilot installation. We have today started 28 POCs. This quarter, we're starting another two, with two quite large operators. We haven't failed on any POCs, so there are no failures in the technology. I think the reason for that is it's based on, you know, it's not new technology. It's more the product that is new. We have roughly over 15 commercial customers today, so we have a conversion rate around 50%, which I think is pretty good. Most of these are still in commercial trials, commercial pilot phase.
Four of them have now reached a rollout phase, of which we are in with 5G operators. It's a little bit step by step because once you're here also and decided, okay, now we want to go, you know, use your products for our syncing session, it's still a lot of things we need to do: the network planning, we need to do the negotiation with the procurement, and in some cases there's also budgeting because the rollout is budgeted for next year, etc. There is some time that even from going from being selected POC until we go into full rollout, it can be 12 to 24 months before we start seeing the rollout. Typically you'll see two phases or three phases: POCs, commercial trial orders, and then the rollout phase.
When you as an operator have said that I want to go away from just relying on GPS, I think there's a big difference. When we started talking to operators three, four years ago, most weren't really aware that, you know, now I'm modifying time synchronization. That was quite unknown for the C-level at many other operators. That's totally different today. They're quite aware that they need time synchronization and they're quite aware of the vulnerabilities of GPS. We are in a totally different position today. You can say it's thanks or due to the geopolitical situation. It's not just in Europe. We have a lot of geopolitical conflicts around the world, unfortunately. That makes a lot of the operators see that they need to move to a network-based synchronization for backup and for higher resilience. That's now further fueled by moving into 5G standalone and enterprise services.
They need more secure, more uptime to be able to provide SLAs because we're talking about industrial automation, mining, ports, even self-driving cars. If that's relying on the 5G network, it needs to be very secure and very resilient. How do you build? I said first, people looking at, I put large cesium clocks at the end and I use this P2P. You know, I upgrade my network to be able to provide P2P out to the base stations. Most operators realize that's a huge cost and it's a huge complexity. We said it's hundreds of thousands of components involved in that. When you upgrade your network, what's going to happen? The good thing is you get full GNSS resilience if you lose GPS, but the network costs can be very, very high for most operators. There are still some that have done this.
The more common approach people look into is some type of hybrid. How can I combine this P2P more in the access where I typically upgraded to my 5G radio access networks that are P2P enabled, but I've now put a sync server from these Ocelot Query Server or Meinberg or Net Insight. I put this in all the regions. For a small operator, that means a few hundred. A big operator means a few thousand of those sync servers. At each site, I also then put as a reference, I then need to have the GPS because I can't put a cesium clock at all those sites. I still need to connect all those sites. That's a problem. If you have not P2P enabled your network, you can't connect them. You're still reliant on GPS. What you do is you put a more expensive clock there for holdover.
If you lose GPS at that site, instead of having perhaps a few hours of holdover until you start getting degradation in your service, you might have one or two days. That extra clock, like a Rubidium clock, to be able to handle two days is probably $5,000 if you have thousands of those. That's quite a big investment, just the clocks. You're still dependent on GPS, right? You're not getting the full GNSS resilience. The good thing is we can, the Syntyc can be one of these sync servers. We are a standard sync server in that respect. The base station will see Syntyc as a standard P2P grandmaster as it's called.
The interesting thing is we can add as a value add that we now add that overlay function and we get full GNSS resilience because all of a sudden we can actually get the time from these central clocks out to these regions, but without having to upgrade the full network. The good thing also now we get the holdover from the networks. We don't need expensive holdover clocks at all those sites. We might not even need GPS antennas at all those sites either. The cost advantage is quite big. Typically, the total cost of implementing this solution would be, in the calculation of customers, typically half the cost if you include all the holdover clocks, etc. You get the GNSS resilience as well. That was a little bit on the positioning and what is our value proposition when going to 5G operator customers.
We also get some questions, can you scale this quickly? That's always a challenge. Partners are very key to us in this. We have now signed 17 partners already. We signed seven partners in the last eight months. These last partners are a little bit larger local or regional system integrators that can help us both reselling and also helping us in the rollout and implementation phase out in the network. This will be important to us. We believe already in 2027, more than 50% of our sales will go through partners, which is more than that typically seen in the media industry. We also got questions on time as a service operators. I talked about this as quite interesting to us because we don't need them to talk to all the enterprise customers. It's still an interesting segment for us.
As I said, it's been a strategy that was very successful for us in the media industry to instead sell to operators. They became like an indirect sales partner to us, like a channel into the enterprise customers because they typically already have these enterprise customers as customers of their enterprise services. Also, for a 5G operator, if they invest in the infrastructure for 5G, there's typically a different department within the operator that's then selling service to the enterprise. They can now sell time as a value-added service to a bank or to a media company. It's interesting to them. They're definitely getting much more interested when they see this is not just a cost, it's actually a monetization opportunity as well.
Benefits to Net Insight, of course, are that we have one point of contact and one point of sales instead of having to talk to all the end customers. We also use this attenuation, but it's typically not. I see it as totally 100% complementary to our direct go-to-market strategy, especially because we are going to the 5G operators. 5G operators want to control their sync functionality because it's a critical function to them. They don't want to buy that from a competitor. Selling into the enterprise market, that's probably not where we want to go as the next step. For us, probably the more interesting adjacent markets would be more government and utility market over time. Our focus is very much today on the 5G operators. To summarize, time synchronization is quite an interesting market. It's becoming more and more important, more important than people realize.
It's critical for a lot of societal functions. At the same time, it's traditionally handled through GPS. Because of the geopolitical situation, both governments, operators, power utilities today realize they need some resilience to GPS. We have a very interesting solution to that because we can both provide that GPS resilience over an existing IP network, and we can do it at quite a low cost, lower cost than traditional implementations. It's not like a Red Ocean, new product, new customers. It's based on technology that we have developed for over 20 years. Of course, it's a new market for us, a new customer. In many cases, it's operators like Telecom that we have worked with on the media side, but we now need to go into their mobile side. We get some leverage on that.
One of the challenges we have is that we're now moving into the mobile organization in these big customers. That makes it take a little bit longer time than if we're distributing existing customers to ours. We're in a good position. I've released products nearly 18 months ago. It's stabilized. It's stable products. We have 15+ commercial customers. We also have quite good order books. We have SEK 140 million in the order book to be delivered in the coming years. Again, an interesting market. It is long sales cycles, but we are also in that process. We've moved now, used this eight months move from POCs into field trials, into commercial pilots, and moving closer to rollouts in some of those cases. At the same time, we're also building up the pipeline and adding more POC customers.
I think this is a very interesting business opportunity, growth opportunity for Net Insight going forward. It's a good complement to the existing core media network where you already see that we are very well positioned, as you heard. Personally, I think it can be interesting times in the time synchronization market. Thanks.
Thank you, Petr. We open up for questions again. Yes, please.
Thank you. I have a few questions, but I'll start with one and maybe return later on. Turk Telekom, 5G auctions in Turkey are about to happen, etc. Can you comment on that? Have deliveries started, etc.?
Yeah, good question. That auction has been delayed for nearly two years now. The good news is that they now set the auction date for October this year. We were down there two weeks ago talking about how to start doing the network planning. They started installations, and they are convinced that they will now start to roll out. The ministry also said that the launch day of commercial 5G services from all 5G operators in Turkey should be April next year. They need to really start rolling out to be ready.
You mentioned also you had another Turkish operator on one of the slides. If you have, just to clarify, if you have one operator in a country using your solution, is there any hurdles for another operator to use the same?
No, there's no exclusivity or anything like that. It's like our media business.
Yep. We have a question here. You have been, as a company, quite optimistic that we should see more orders coming in the second half of this year. What's the status on that part?
Yeah, I think we said two things. First, we said that we believe we're going to see growth from the first half of the year into the second half, and that we definitely see. We also said that we'll start to see deployments from those trials that are going on by the end of this year or beginning in early 2026. I think we stand firm on both those.
Do you, are there potentially bigger clients in the process through standardizing your PTN technology through ITU? How important is this in the sales cycle?
Yeah, I think the important thing is we can sell our solution as a standard P2P grammaster. I think that's, like you said, so in that solution. I think that's number one key. Of course, many telecom operators want to see standardized technology in their network. Therefore, we started the ITU process, I think, last year. The ambition is to have that first phase of the standardization ready by mid next year. I think the importance for most operators is that the process is underway. Of course, I mean, standardization is always important in the telecom industry.
What do you think it would mean if you get that standardization?
I don't see it as a big difference, a big breakthrough. I think it's important, but it's not a do or die or anything like that. It's important, as said, because from a base station point of view, this is a standard P2P grammaster functionality. It's the add-on functionality that now is based on our PTN, which in the standardization process is called enhanced partial timing support. Of course, a lot of the proposals for that standard are based on the PTN technology that we are using.
Another question from the online audience. Are all 28 proof of concepts still ongoing, or have some decided to move on with other solutions?
I said 50% of those have moved into commercial trials or pilot phases. They've moved further down the line. The rest of the 50%, some of them are still ongoing. Some are a little bit in a wait and see situation where they said that this looks really interesting, but we are waiting until we are going to invest. I think, as I said, 50% commercial rate, I think is very, very good.
What could be the reason for waiting if this is because you do a good pitch? Why are they hesitant?
No, I think I have a reading in a big analyst firm on the telecom side that they made a survey, I think, like 18 months ago. They asked all the operators, are you going to move to a network-based synchronization? At that time, it was 44% that said, yes, we will move into network-based synchronization. I think that figure is higher now, but it's still a process. As I said, I think it's also when you move into adding critical services into your 5G network, then it becomes critical. Some customers, of course, have more realized that GPS is a direct threat to them today because they're getting attacks and jamming and spoofing in their countries. They need that resilience. Of course, they are more prone to invest short term.
I would say, yes, I see I need to do it, but I can wait, you know, 12 more months. I think, as I said, I think everyone will go there and do a network-based synchronization. Actually, it's not all bad, right, that they have not already invested in network-based synchronization because our solution is getting stronger and getting more awareness for every day out there.
Can you comment a little bit on the relative cost base between sync and media? Is it 50-50, 40-60? Just to get a flavor of...
You mean for the operational expenses? I know that media has a much higher expense rate. The good thing also, of course, we are a public company, so we need to have an admin. We end up economics, IT, adding 20 engineers on sync doesn't mean we need to add, you know, two, three more people on the admin side. It's actually good from an economics or scale perspective that we can, that part that we need to have as a fixed cost as a public company, we can leverage also for more.
You're growing the number of employees, I think 50% over the last couple of years. There must be quite a lot of costs associated with sync. Can you just give a flavor, one third or 25% or...?
We haven't communicated the exact cost on the sync side. If you look into the numbers, you can see an increase, I think, on the R&D side between 2021 to 2022, you see a jump in the numbers, then 2022 to 2023. That was mainly the reason that we started investing in sync. We have invested quite aggressively into the R&D and we are building out the front-end sales part. We are investing quite significantly into the sync, of course. It's not like we have communicated the exact number into the market, but you can look into the numbers and see where we have increased.
As a follow-up on that, if you look at the sort of gross margin long term and EBIT margin long term, is the potential bigger in sync than in media?
I mean, you can see the gross margin is fairly the same on the sync side as the media side. Of course, if we start to get traction and increase the revenue on sync, it will help us tremendously on the EBIT side for the whole company. Today it's quite pushed on based on the investment that we are doing right now. We can see that the license fees that we get from the sync side are larger or higher than we get from the media side. That's something that we will, even though this rollout phase for like two to four years, you saw the numbers on the different operators, we also have a license fee coming in and support rolling as long as they have the installation of the product in the network.
No, I see that. Okay, sorry.
The conversion rate is what we are right now. I mean, it's not that we will, of the 28 POCs that we have, just the 50% conversion rate. They are still in the phase of moving into that. You should not see that there is 50% that drop off. They are still in the phase of moving into that part. They are moving in.
If we take that slide with the operators that have started engaging with you and you split them into the small and medium and large, where are they?
I haven't made a math on that, but it's quite spread. We have a number of quite large operators doing POCs. As I said, two large ones starting POCs also this quarter. We have a small and we have medium. We want to mix because typically the smaller are a little bit faster to do in the process because the larger tend to have more procurement, larger procurement processes. We also, of course, want some of those big ones as flagship reference customers.
You mentioned there was a question online. If the Turk Telekom order was $220 million, of which $50 million was development, are they seen as a large operator in comparison to, for instance, Verizon or AT&T? Is $200 million the largest you could get?
No, I would categorize. They are doing a full-blown rollout. I would categorize them somewhere small, large, or a large midsize. They're somewhere, you know, that they're definitely a larger company, mobile operators out there.
Yep. Can Syntyc be used for AI as a data center synchronizer?
AI, we are looking, you can say what's important in AI is time synchronization is important also in AI, especially if you have distributed data centers and databases. We're also looking at AI because what we're doing is we're collecting, you know, hundreds of metrics from each of those sync servers in the network. That gives us a very good feeling for what is the health of the network. This is something we're getting feedback from the operators. It's very interesting because you get real-time health monitoring probes of the status and health of the network. This is something we're looking to explore further on in our journey. When you start doing that, we're starting talking about huge data lakes. That's definitely where AI would be very beneficial.
Another question online. You say that it takes 12 to 24 months from the first POC to rollout. Is that since Syntyc was launched? Because you've had a lot of POCs for more than 24 months, from what I've understood following the company the recent years.
Yeah, I think the good news for us was that we had our media product. Some of the customers that wanted to test, we could deliver our media products for them to test. Of course, that was not media standardized, and they wanted to test the real thing. We needed to go through the certification in their labs to all the security guidelines that the new product handled that. Except for some exceptions, all of them wanted to test the Syntyc, not the old Nimbra products. It was still good for us because we were able to go out and talk about it before we actually had the real product on the market. It created a lot of awareness for us.
An obvious question when you are talking about partners, why wouldn't Ericsson or Nokia be a good partner? They have the relationship already.
I think they have their own sync solutions based on the standard P2P. I've been working with Ericsson for many, many years. That's a huge company, right? Sync is quite niche for them. I think if we win a couple of really big ones, then we might get into discussions with these companies as well because then we are complementary to their solutions. I don't see that as happening in the near term. I don't think that's calculated in our figures.
If you take that slide again with all the operators and companies that you've signed, if all of those would become customers, how big would the order book be?
I think I had a compound figure there, right? Let's go back to that one. It's big, right? There you had it. If we win all of those, somewhere around SEK 2 billion to SEK 5 billion. Yeah.
That is the total addressable market. For the ones that you have now in...
In the pipeline, yes, or in the POCs.
Yep.
You can do the math backwards, right? It's significant, right? 28, even if all of them would be small, that's a decent size. Some of them are also medium and large. I leave that to you to do the math.
We will. Any final question on the time sync? Let's see if I had something. One thing that pops up sometimes is that the spoofing and jamming is maybe in more emerging markets and war zones, perhaps. Is there a risk that the market will be tilted towards that type of geographies?
I think the difference, as I said, definitely the security concern has been one of the drivers and definitely fueled by this GPS jamming that we see in conflict zones. It's not just Europe and Ukraine, unfortunately, anymore. We see it in many parts of the world. I think what's interesting now with moving to 5G standalone, there's also a business driver for moving to a more resilient sync. It's not just spoofing and attacks. You need to have high uptimes and relying only on GPS. A GPS antenna is a single point of failure. No operators want single points of failure in the network when they have critical infrastructure. I think we're moving now into business drivers instead of just security drivers. I think that's important for us.
Maybe a very trivial question, but how does it work when you have the Turk Telekom order and you have a quite large part of the order book still remaining and the rollout starts again? Do you recognize the revenue once you have installed the product? Is the product a physical hardware or is it more software?
That's a good question. No, we recognize revenue when we deliver the product. When we ship it from Sweden to Turkey, that's when we recognize revenue. The product is a little bit like the media. It's both hardware and software licenses. On top of that, we add the support and also a subscription of the software, so that they can buy a subscription for getting all the software updates and upgrades in the future as well. It's a combination of those four different parts.
Very good. Any final question on the time sync unit? If not, we take some. Do you want to say some concluding remarks?
Yeah, I mean, I have some very short conclusion on the strategic initiative. I think we've been talking about that during the presentation, but just to wrap up. I mean, we see that we can expand the market share in managed and IP, and definitely in unmanaged. That's our core that we're working on, that Andreas was explaining. Of course, we have the time synchronization that is extremely interesting to get growth from. We have the recurring revenue. I mean, we have recurring revenue coming from the cloud and the licenses that we have, and we are moving more and more over to software. Also, as Pavel was explaining on the time synchronization, we have the same, but that's a larger number and a higher number of license fees coming in from the synchronization compared with the media.
We see an opportunity to move into adjacent market segments, both with the existing product that we have in media and in the 5G synchronization. We see opportunities, as Andreas was saying, that also invest in new products to move into new market segments. We have the scalability. We can scale the business. Remember, if you look into the number, even though we have increased the revenue quite dramatically in the last three to five years, we haven't increased the backend, the R&D that much compared with the investment, even though we have increased heavily into synchronization. As Andreas was saying, we can have the same-ish number on R&D, even that we are investing in new product. We have done the 400G investment in the last one and a half years. We can move over to invest in new products as well to broaden the market.
The good thing with our business model is that we can scale it. We have the footprint. We have the salespeople out in the market. We have a quite stable R&D cost. By 70% gross margin, we can really scale the business. We haven't touched into like looking into M&A, and that's a little bit further ahead before we are doing that. That's of course an opportunity. The partnership that Andreas was looking into, that we can use more partners to enhance our product and move into other segments, even though we don't need to invest in new product solutions. We can use partners to use the solution that they have and integrate that into our products, mainly done on the unmanaged. I think I will stop here and see if we have more questions.
I think we do. Now we take questions overall, basically. You have a cost reduction program, $300,000, that we are yet to see during the second half. Can you explain a little bit why you ended up at $30 million, that that was the right size to take and not more?
We look into the forecast and see what we, on the effects that we saw, that was like taking down the revenue for us that we need to protect us for. We saw also that the markets were a little bit hesitant. Therefore, we look into that, analyze, and see what can be reasonable to take down. We looked in and saw that $30 million was a number that we could take in the first phase. As we were saying, we are looking into making sure that we have the right cost level towards what the market is developing, both on uncertainties, but also on the effects, of course. I think it was a good move of doing that.
We have been growing the organization the last three to four years, and then we took an overview of the organization and saw that it was a good opportunity to do some scaling and taking away a little bit of cost that we have in the organization. The $30 million was still the first phase of what we are doing, and we are always looking into cost over going forward.
Looking at the financial target, the 15% CAGR, how is that built up? If you split it into media and time sync, what is needed in order to...
I mean, of course, we saw that we set that target. We saw, of course, that the sync could take quite a substantial part of the growth, even though we have had a good growth on the media side. We saw the delay in the rollout of the Turk Telekom network, which was a little bit taken down the growth that we had expected. The short term was coming from media, as we also had good traction on. The second phase of growth was coming from sync, even though we continue to see good potential of growth in the media side, and we will continue to push that. That was the two combinations that we were looking into when we set the target.
The EBITDA levels were more or less the same that we saw that we are building up the revenue coming from sync, and we saw like in the second half of the period, it should kick in and increase the EBITDA level. Of course, everyone understands that if you look at the overall EBITDA level, it's been taken down by the investment that we have done on the sync side. The media is really doing well, and it's generating a lot of cash that we can invest in like in the sync side.
When you look into the second half and also into 2026, you have taken some good orders, announced and perhaps also not announced orders in the media side. You have new product launches. Can you say something about the difference in the 400G product versus the 100G product and how that can impact? Also, on the time sync, we asked before about the positive tone you have had towards the second half. What do you see besides the Turk Telekom deal restarting?
Should we start on the 400G side? Because I think that's quite an interesting part. Do you see the benefits with 400G? Would you like to take that, Andreas? Compare with 100G that we launched.
Yeah, I think what's interesting when you think about the 100G to 400G, as we talked about, we talked about the total cost of ownership. I think there comes with different things. First of all, there are some requirements, I think, to move more capacity in the network. That's number one. I think the other thing we see is that if you look at, if you're a service provider, go out and buy 100G links, you know, there is a threshold at some point still to be established where actually you're better off going to 400G and then buying multiple 100G, if you see. Actually, you can, you know, hypothetically, you can buy, let's say, 200G links to the same price as 400G. You get 200G for free in terms of capacity. That kind of, you know, that's kind of total cost of ownership will drive investments.
That's one of them. 4K, all the user experience will also drive. There's a multiple of drivers around increased capacity. I think that's important to kind of think about, you know, that's multiple of drivers for the 400G. I think then also for us, you know, I think when you think about one other part of the value proposition, we talked about having products that differentiate and, you know, cut through against our competitors. Being first, we were first with 100G. Now we're sort of first with 400G. I think certain areas have been important for us to lead in. This is one of them. There is a level of, you know, brand awareness, market reputation, and cutting through against competitors with the 400G as well.
That's maybe less monetary benefit opposed to some of the other ones, which are more, you know, clearly, you know, directly addressing the total cost of ownership for our customers. That's, you know, probably the commentary on that if you want to add, Crister, too.
Yeah, I mean, the rumor at IBC, the big media event a few weeks ago, and that maybe it varies between regions, but what we hear from our customer, our service provider, is that the 400G connection costs as much as 100G today, which means that this is, yes, lowering the cost immediately for a service provider to move over to 400G because they will take down the cost dramatically. At the same time, if they're moving over to 400G, the density, the number of services that you can run on the same chassis or the same card, will increase dramatically with a new product at 400G. You get lower cost for transmission, and you can run a lot more services on the product, on the 400G card. They don't need to put in a new rack.
They use the same rack as they have today, which means that it is the TCU that you are talking about is really helping the big service provider move over to 400G. We will start to ship the 400G product in Q4.
On the time sync, the positive tone you have had towards the second half is partly related to restarting the rollout in Turkey, but is there something else as well?
Yeah, I mean, as Pavel was saying, we have seen traction on the POCs coming in. We see traction. They're moving through this process to do the rollouts. Nothing has changed since we communicated the positive signal that we saw on the market. We see that we will start rollout, hopefully, hopefully, end of this year, beginning of next year, the first rollouts on the customer that we see is coming through this threshold to come to the rollout phase. It's great to see that more and more will start, as Pavel was saying, it's two new POCs this quarter. It's great to see that we add new POCs until the new customer that would like to test our product. It's a good traction in the market.
If you had a windfall of, let's say, $50 million and you had to spend it on R&D, what area would you spend it on? Why?
Yeah, I think you need to help me. No, I think that, I mean, definitely we have opportunities in the media side, as Andreas was saying, that we can develop adjacent products in the same market or customer segment that we are into. I think that would be the first phase, accelerate that to broaden our portfolio for existing customers. We see an interesting part that we can move with existing products into new customer segments that probably require more front-end resources to move into a new customer segment, but we will use the same product that it has. I think that's the two parts. The third part, I think it will be even accelerate the unmanaged, push even harder. We have a tremendously good cloud-based product that is well established in the market, good reputation, good feedback from the customer.
What we now are doing is like the 400G product that we have. It is also an unmanaged product that we are broadening that portfolio. We should accelerate that into more products, bigger product portfolio within unmanaged. We have that on our product roadmap, but we should accelerate that. Sync, I think it's this moving, going from 5G into more aggressively, to, as Pavel was describing his picture, and we know this is a number of new customer segments that we can move into, but then we need to have more front-end people running into those different segments in the market. That had been an obvious next step for the sync. Accelerate that. Be more aggressive and more people running into those customer segments. Be prepared for the power grid segment when we see that increased attention to the GPS-independent solutions to prepare us for that. Have I missed anything?
A wish list? Do we have anything more? $50 million is quite a substantial number.
Yeah. I guess if you combine CapEx and R&D, it's roughly $100 million. Would you say that that is a good level for the coming years as well?
To increase, you mean?
No, to keep.
Yeah, I mean, I think Cecilia was saying that we don't see that we will increase the R&D, but compared with revenue, it will go down. We see the target is like 20% of the revenue.
We have one question on the cash flow. You highlighted that you will tie up more capital to working capital, and it has been negative for quite some time now.
Yes.
Can you reassure us that you don't need a new issue?
In the cash flow, as you said, the working capital has been tied up during Q1 and Q2. The one that we are doing now that would be tied up in, you will see in the figures in Q3 and Q4, is the last time by. As we see now, we have the cash that we need. It's nothing that we see that we need extra cash for that.
The component cost would come down. By how much will it come down?
We haven't communicated, but the FPGA is definitely the highest cost component on the card. That's quite a substantial number, and that will come down. It's not dramatic, but it is visible for us, absolutely.
A question from the audience. How much does the tariff discussion in the U.S. hurt the business?
I mean, extremely hard to say exactly the number, but we definitely see uncertainties in the U.S. Of course, we constantly look into the tariff. It's a little bit less turbulence right now, but if you go back a quarter, it was very, very turbulent. We didn't know exactly from day to day what will happen, and the customer didn't know that either. I think that the tariff is much more under control. Even though, as Cecilia was saying, it's a cautious market.
Yeah, I think that it was more problematic in Q1 and Q2 when we didn't know. Would we continue to be exempt or would we be included in what's now in August when it was 15% for the whole of EMEA? I think that now when we have confirmed that we are exempt right now, it's clearer for our customers. Of course, everything can change. We need to follow that all the time.
A question on the synchronization. You say that four are now into rollout phase. Which months start the first volume batches to when do they start to be shipped?
We cannot just communicate exactly which month it will be.
Week?
No, I mean, again, we see a positive trend, and we see that as we have communicated. We see increased revenue in the second half, and we see rollout in this year, beginning of next year.
Another question on how do you view stock dividend in the near future?
Stock dividend?
Yeah.
I see it. Yeah, I mean, we have from the AGM that we can buy back shares for SEK 50 million. The board communicated in Q2 that they haven't taken any decision. That's up to the board to decide if they would like to do that or not.
One question that usually pops up from time to time is how management is incentivized. How does that look like in Net Insight? What KPIs are you measured on?
Yeah, I mean, we have just launched the share incentive program with measurements that Cecilia Höjgård Höök can communicate. Do you remember that?
Two of them are aligned with our long-term targets. It's growth and EBITDA. The next one is ROCE, return on capital employed. It's quite linked to our performance. It's one third divided.
What is the RUSE target?
It's return on...
Capital employed, yeah.
Yes.
What is the target?
No, we can't. We haven't gone up with that.
One other question on the media side, basically. If customers can delay orders, does that mean that it's more nice to have rather than need to have products?
I can comment on that. I think it comes back to... It depends on the use case. You know, we talk about the different reasons for a customer buying. I think, you know, in some instances, you know, in many instances, they need to buy it because they want a contract. They need to be billed out to more venues. For us, new rise still has been taking place. They need to be billed out. Of course, when you look at maintenance investments and so forth, there's also an element of, you know, do you do this year or do you wait? Of course, there's always an element of that for that part. You can, as I explained, there's a number of other drivers which are important. They're mission-critical, driven by the business and so forth. Again, failing is not an option in our industry. Make sure nothing breaks.
I think, yes, it's mission-critical. It's not a nice-to-have by any means. Having said that, sometimes you might want to sweat the asset and take some risk exposure with your service provider, you know, and prioritize, you know, investing in one area post another. Of course, there is always an element of juggling your CapEx budget that you have. For sure, we will always be mission-critical, I think.
It can be combined, like the venue deal that we did.