The first-quarter earnings report announced by Net Serviços on Wednesday, May 14, shows a few signs of improvement, especially in programming cost, but no unequivocal evidence of a return to healthy expansion.
At the end of March there were 1.302 million paying subscribers, down from 1.323m in December. Gross sales (354.7m Brazilian Reais) and net sales (289.5m BRL) were practically flat on the previous quarter. The net loss shrank significantly, to 76.5m BRL from 307.1m BRL in the fourth quarter of last year. EBITDA was positive on 67.5m BRL, contrasting with minus 20.5m BRL three months earlier.
Net debt would have remained stable if it had not been for the provision set aside for interest, penalties and unpaid installments since the default in early December. The arrears since then amount to 155.2m BRL, taking net debt to 1.318bn BRL.
Programming cost totaled 100.7m BRL in the first quarter, equivalent to 34.8% of gross sales, down from 112.9m BRL or 38.8% in the previous quarter.
The equity market responded positively as soon as the results were announced. Net Serviços stock rallied more than 5% early in the day but by the end of the session it was back where it started, on 0.38 BRL. Analysts saw the first-quarter performance as timid but expect sales to pick up in the second quarter and acknowledge that currency appreciation will dampen the effect of last year?s devaluation on the company?s debt. They weren?t impressed by the lack of any reference to investment, which raises the specter of a possible loss of quality.