January December report

Transcription

1 January December 2017 report

2 Zenterio AB (publ) Org Nr Results for 2017 The quarter Deployed license base The VAS (value added services) enabled license base grew by 0,3 million licenses to an accumulated base of 7,2 million. Net sales and other operating income Increased by 12,0% year-on-year to SEK 64,6 million (SEK 57,7 million) EBITDA in the fourth quarter 2017 was SEK 11,8 million (SEK -8,4 million) Net result in the fourth quarter 2017 was SEK -1,0 million (SEK -19,7 million) The full year Deployed license base 1,5 million licenses sold this year representing a decrease of 48% compared to last year, this is however primarily explained by the large number of licenses sold to Deutsche Telecom in Q3 last year. Net sales and other operating income decreased by 1,4 % year-on-year to SEK 240,3 million (SEK 243,7 million) EBITDA in the full year 2017 was SEK 19,6 million (SEK -10,3 million) Net result in the full year 2017 was SEK -29,8 million (SEK -65,4 million) Events after the reporting date None

3 Zenterio AB (publ) Org Nr Comments from Jörgen Nilsson, CEO Let me start this fourth quarter report for 2017 by stating that this has been the most exciting quarter so far in the history of Zenterio, not only financially, but also because in the quarter we delivered Deutsche Telecom s most sophisticated TV proposition ever. On November 7, we announced the successful launch in Germany of Zenterio OS as part of Deutsche Telekom s strategy to harmonize their TV client software across all of their operations in Germany, Hungary, Greece, Romania, and Croatia. Powered by Zenterio technology, the high-end box supports a variety of advanced features including 4K, YouTube and Netflix video content, enabling DT Germany subscribers to enjoy a feature-rich television experience whilst enabling network-wide client deployments around a single middleware. In addition, we made several other key releases with above mentioned operators which strengthened their competiveness in their local TV markets. For Zenterio these proof points are critically important in showing that our client software is actually deployed and in addition we are broadening our offering to include the User Interface, as shown by our recently announced rollout with Hrvatski Telecom. If we look back at other key events in the quarter, I need to mention AdScribe, a Zenterio company that brings next-generation advertising to television viewers on compatible HbbTV devices. Partnering with Admeira, the largest marketing company in Switzerland, they launched a trial of interactive advertising campaigns, running on the public TV channels delivered by a major Swiss TV operator, giving viewers the ability to interact directly with commercials, browse additional content, watch videos, enter competitions, and much more. These campaigns were built using AdScribe s Engage solution. The project marks the first interactive advertising campaigns to be run by Admeira, transforming the television viewing experience and giving advertisers interactivity with their target audience. It draws on AdScribe s extensive experience designing and deploying similar technology and campaigns around the world. My final comment on the fourth quarter events is about our cooperation with Linköping University where we held a course for over 120 Computer Science and Industrial Engineering students in their final year of studies. The goal of the course was to create four virtual companies, around projects proposed by Zenterio, developing ideas and solutions in the area of Machine Learning that relate to Zenterio s evolving product portfolio. Several new exciting ideas were generated in the form of demonstrations of potential software solutions that will be considered for further development. Regarding the financial performance for the quarter we are very pleased to share the exciting result that we had another good quarter with positive EBITDA. Net sales amounted to SEK 64,6 million, +12% higher compared to Q The focus to improve the EBITDA, which started in Q2/Q3 continued and resulted in an EBITDA of SEK 11,8 million, improved from SEK -8,4 million in Q Based on these numbers, I am very pleased to report that Zenterio delivered a positive EBITDA for full year 2017 of SEK 19,6 million, compared with SEK -10,3 million for With regards to net sales the result for 2017 was SEK 240,3 million compared to 2016 s SEK 243,7 million. This flat net sales result reflects the management s focus on establishing a profitable platform with positive full-year EBITDA to grow from in a target that the company has had for many years. Based on the strong financial improvement and fantastic operational delivery, the management looks forward to 2018 with great confidence. Our continued strong focus on growth based on strengthening our product and services portfolio, bringing new recurring revenue, and continuing our cash discipline will provide trust to our customers that Zenterio is a partner for the future with solutions that capture the trends in our industry, add value and provide innovation for our customers. Finally I would like to thank all employees, key partners and our key customers for their fantastic support in achieving this 2017 result together. Kind Regards, Jorgen Nilsson, CEO

4 Zenterio AB (publ) Org Nr TV Industry Outlook Q Market Outlook The traditional pay TV market continues to grow with subscribers worldwide passing the 1.07 billion mark in the third quarter of 2017 and the industry adding 60 million subscribers over the preceding 12 months (Dataxis). Nowadays broadcasting over cable, satellite or an operator s own IP network to a set-top box is no longer the only means of pay TV distribution. Transmission over the open internet so called over-thetop or OTT transmission - is increasingly cost-effective, and it is having a major impact on the industry. Initially online content was used by operators to supplement their broadcast offering, but now there are many standalone video-ondemand (VOD) services available to consumers. They can be subscription based (S-VOD), ad-supported (A-VOD) or on a pay-per-download basis (transactional- or T-VOD). Most OTT TV providers aggregate content from multiple sources, but there is a recent trend for content owners themselves to also set up their own dedicated OTT TV services in order to gain direct access to their viewers - not only for the revenue and price discovery that this creates but also for the data on subscribers viewing habits that becomes available. As a consequence there is now a proliferation of OTT TV offerings with over 500 services launching globally over the past few years. Viewers are faced with the need to manage multiple subscriptions to gain full access to all of the content that they want to watch. An opportunity is opening up for pay TV operators to act as super-aggregators, bundling OTT subscriptions in with their own broadcast and on-demand offerings, to simplify billing for the consumer. The type of connected box required for this is the fastest growing segment of the pay TV STB market and these boxes are a key focus area for our Zenterio OS product family. Increases in broadband speeds and network caching have even allowed some providers to launch linear OTT pay TV services, generally offering a limited range of channels to the market at a lower price - a so called skinny bundle. Some of these services are independent, but others are owned by existing pay TV operators looking to target customers that they cannot reach with their main service - either because it is too expensive or because the subscribers are outside their geographic region. Subscriptions to these virtual networks are the fastest growing segment of the pay TV market though at the moment they only represent a very small share (around 1%) of the total. Second screen devices such as tablets and smartphones are naturally suited to the viewing of internetdelivered content, however Pay TV operators need to be able to control the user experience (UX) on these mobile devices so as to make it consistent with their branding and to fully understand their customers viewing preferences in order to maximize service uptake. There are estimated to be over 6 billion mobile devices worldwide so this represents a huge opportunity for Zenterio s JetUI multiscreen software which supports this requirement by enabling the unification of the UX with viewer analytics on any device. Despite the proliferation of viewing platforms, the time spent watching TV on the main screen in the home has remained roughly constant, with a growing share being taken by media streaming boxes running OTT TV apps. To remain competitive against these boxes pay TV operators need to rapidly integrate the capability to receive online content into their pay TV set-tops. This often requires an upgrade to the software in boxes that have already been deployed. In many cases the software in these older boxes is from a legacy supplier and so a simple upgrade is not easily possible. The operator is then faced with either replacing the boxes with new ones - an expensive option - or converting the software by downloading a more capable middleware, such as Zenterio OS, to run on the old hardware. Zenterio has extensive expertise in this area and is currently engaged in several migration projects of this kind. For new boxes, an alternative method for dealing with the explosion of OTT services is to provide a set-top box that is able to run the apps that OTT providers already have available for smartphones and tablets. This is pushing some segments of the market to request STBs based on Android either in its open source AOSP form or based on Google s Android TV. The latter provides access to Google s app store, UI and other services at the expense of some surrender of control to Google. AOSP on the other hand provides more control, but at the cost of requiring further integration work to fill in the missing pieces. Zenterio is able to advise operators on which option is right for their business, and to provide an implementation whatever platform is chosen. The proliferation of online content sources is making it harder for subscribers to find what they want to watch amongst all of the options. Fortunately the same changes in technology that are driving the broadening of choice are enabling a solution. Via the TV client device, operators are able to collect data on the way that their services are consumed and use it to personalize the UX to connect viewers to the content that they are mostly likely to want to watch and pay for. This is the objective of Zenterio s Audience measurement technology which is provided to the market through Zenterio s subsidiary AdScribe. Audience measurement has other spin-off benefits: as well as being useful for personalizing content it can be used to target advertising either inserted into the content itself or into the TV user interface. As a bonus, the aggregate data can be sold to the advertising industry which needs accurate viewing figures for its ad-supported channels. AdScribe takes care of these types of value-added services from end-to-end. In summary, the pure set-top box market is mature in size but its changing dynamic is increasingly generating requirements that call for advanced middleware and integration services as provided by Zenterio. The proliferation of second

5 Zenterio AB (publ) Org Nr screen devices and the explosion of OTT video services is rapidly increasing the size of the need for client software that is multiscreen capable, like JetUI. Plus the need to fully understand and monetize the pay TV customer through data collection, as offered by AdScribe, has moved from being optional to being essential for operators everywhere.

6 Zenterio AB (publ) Org Nr Zenterio s Business Model Zenterio sells its products, software licenses and consulting services to TV & broadband operators, telcos, system integrators, and other relevant players in the TV industry. Zenterio s product portfolio encompasses an independent OS, a state of the art user interface product, powerful data capture and data analytics tools as well as an interactive advertisement management system. Zenterio has created Zenterio Services to complement this offering and position the company as a full solutions provider. Zenterio Services provides services and expertise in system integration, interface development, app development, device design and tech consultancy. Zenterio Services also supports customers in projects related to the Internet of Things and cloud-based services. In addition to working directly with pay TV operators, Zenterio has implemented a unique, partner-driven business model. Zenterio s partners include three out of five of the biggest system integrators in the world: Ericsson, Huawei and Viaccess-Orca. Being selected as a global partner validates Zenterio s strengths as well as its technical expertise and global market presence. Because of the complex and often very specific product requirements, combined with the high costs involved in launching new projects, each partner often selects only one or a very few global partners to supply client software. Currently, Zenterio generates revenue from software licenses, integration and consulting fees, maintenance and support contracts as well as from user interface, device and application design projects. Going forward, Zenterio will be implementing a subscription-based recurring revenue strategy for its Value Added Services. The main driver behind this new business is the number of deployed VAS-enabled licenses. Zenterio expects to reach a critical mass in terms of deployed VAS- enabled licenses.

7 Zenterio AB (publ) Org Nr Value added services enabled installed license base During Q4 of 2017 the value added services enabled license base increased by 0,3 million licenses to 7,2 million. The Q increase of licenses was mainly due to Megacable in Mexico. Zenterio has started to offer advertising solutions, applications, and online services such as Netflix, Amazon Prime video and YouTube to operators that run Zenterio OS. The revenue model from such reseller agreements may be recurring and documented as average service revenue per user (ARPU) in Zenterio s reporting and will transform the company revenue dynamics overall. Given the current growth projections of the value added services enabled installed license base, Zenterio expects the sale of these services to start growing in 2018.

8 Zenterio AB (publ) Org Nr Financial highlights SEK million Q Q Q Full Year 2017 Full Year 2016 Net sales and other operating income 64,6 57,7 51,9 240,3 243,7 Capitalized R&D 8,2 10,2 8,3 34,3 42,1 Other operating cost -61,0-76,4-54,3-255,0-296,1 Depreciation and amortisation -9,3-7,9-11,4-42,2-36,8 EBITDA 11,8-8,4 5,9 19,6-10,3 Net result -1,0-19,7-7,2-29,4-65,4 Operating cash flow 11,1-1,0 4,9 2,7-40,5 The quarter Sales amounted to SEK 64,6 million during fourth quarter 2017, representing an increase of 12,0% compared to fourth quarter In fourth quarter 2017, total costs decreased to SEK 70,3 million compared to SEK 84,3 million in the fourth quarter The total costs during the period were split between cost of goods sold of SEK 1,9 million Full year (SEK-0,6 million), operating expenditures of SEK 59,1 million (SEK 77,0 million) and depreciation and amortisation of SEK 9,3 million (SEK 7,9 million). EBITDA for the fourth quarter of 2017 amounted to SEK 11,8 million compared to SEK -8,4 million in fourth quarter This equals a 20,2 MSEK EBITDA improvement and is mainly explained by improved margins driven by a reduction of cost for personnel and other services. The fourth quarter in 2016 was impacted by a loss from revaluation of a customer contract of SEK 19,8 million as well as revaluation gain of goodwill from the acquisition of AdScribe Ltd of SEK 7,0 million and these items are not recurring in Sales amounted to SEK 240,3 million during full year 2017, representing a decrease of 1,4 % compared to full year In full year 2017, total costs decreased to SEK 297,2 million compared to SEK 332,9 million in the full year The total costs during the period were split between cost of goods sold of SEK 11,4 million (SEK 10,0 million), Cash flow Operational cash flow during the fourth quarter of 2017 amounted to SEK 11,1 million compared to SEK -1,0 million for the fourth quarter in For the full year 2017 operational cash flow amounted to SEK 2,7 million compared to SEK -40,5 million for the full year On December 31, 2017, operating expenditures of SEK 243,6 million (SEK 286,0 million) and depreciation and amortisation of SEK 42,2 million (SEK 36,9 million). cash and cash equivalents amounted to SEK 28,4 million compared to SEK 53,3 million on December 31, In addition there was SEK 7,5 million of unused overdraft facilities on December 31, EBITDA for the full year of 2017 amounted to SEK 19,6 million compared to SEK -10,3 million in This equals a 29.9 MSEK EBITDA improvement and is mainly explained by improved margins driven by a reduction of cost for personnel and other services together with improved commercial terms for work performed for Zenterio s key customers. The full year 2016 was impacted by one off items including a gain from the sale of Labatus of SEK 2,1 million and revaluation of goodwill from the acquisition of AdScribe of SEK 7,0 million. Shares The total number of Zenterio shares on December , equaled 90,056,218.

9 Zenterio AB (publ) Org Nr Personnel Personnel Q4/2016 Q1/2017 Q2/2017 Q3/2017 Q4/2017 Average number of employees The average number of employees decreased by 2 during the quarter. This was primarily due to reduction of heads in the Swedish sites. Events after the reporting date No events to report after the reporting date.

10 Zenterio AB (publ) Org Nr Financial statements

11 Zenterio AB (publ) Org Nr Consolidated statement of profit or loss Consolidated statement of profit or loss Amounts in KSEK Oct-Dec 2017 Oct-Dec 2016 Full Year 2017 Full Year 2016 Net sales Capitalised research & development Other operating income Total revenue Cost of goods sold Personnel expenses Other external expenses Other operating expenses Depreciation, amortisation and impairment of assets Total operating expenses Operating profit (loss) Finance income Finance costs Net finance income (costs) Profit (loss) before tax Income tax expense Profit (loss) for the period Earnings per share, basic and diluted Neg. Neg. Neg. Neg. Consolidated statement of comprehensive income Amounts in KSEK Oct-Dec 2017 Oct-Dec 2016 Full Year 2017 Full Year 2016 Profit (loss) for the year Other Comprehensive Income: Items that may be reclassified subsequently to profit or loss Foreign currency translation Other Comprehensive Income for the period Total Comprehensive Income for the period Total Comprehensive Income (loss) is attributable entirely to owners of the parent company.

12 Zenterio AB (publ) Org Nr Consolidated statement of financial position Amounts in KSEK 31 Dec Dec 2016 ASSETS Non-current assets Intangible assets Goodwill Capitalised development costs Other intangible assets Total intangible assets Tangible assets Property, plant and equipment Total tangible assets Financial assets Other non-current receivables Total financial assets Total non-current assets Current assets Inventory, etc. Raw materials and consumables used Total Inventory Current receivables Trade receivables Current tax assets Other receivables Prepaid expenses and accrued income Total current receivables Cash and cash equivalents Total current assets TOTAL ASSETS

13 Zenterio AB (publ) Org Nr Consolidated statement of financial position, cont. Amounts in KSEK 31 Dec Dec 2016 EQUITY AND LIABILITIES EQUITY Share capital Other capital contributions Reserves Retained earnings (loss) Total equity LIABILITIES Non-current liabilities Liabilities to credit institutions Other non-current liabilities Deferred tax liabilities Total non-current liabilities Current liabilities Liabilities to credit institutions Derivative instruments Trade payables Current tax liabilities Other liabilities Accrued expenses and prepaid income Total current liabilities TOTAL EQUITY AND LIABILITIES

14 Zenterio AB (publ) Org Nr Consolidated statements of changes in equity Amounts in KSEK Share capital Other capital contributions Reserves Retained earnings (loss) Total Equity Balance at 1 January Profit (loss) for the year Other Comprehensive Income for the year Reclassification Issue of ordinary shares related to business combination Payments of issued share Issue of options Loan converted to shares Transaction cost Balance at 31 December Balance at 1 January Profit (loss) for the period Other Comprehensive Income for the year Reclassification Warrants Balance at 31 December

15 Zenterio AB (publ) Org Nr Consolidated statements of cash flows Amounts in KSEK Oct-Dec 2017 Oct-Dec 2016 Full Year 2017 Full year 2016 Cash flows from operating activities Operating profit (loss) Adjustments for items not affecting cash flow Interest received Interest paid Income tax paid Other non-affecting cash flow items Cash flows from operating activities before changes in working capital Change in working capital Net cash from (used in) operating activities Cash flows from investing activities Acquisition of subsidiary, net of cash acquired Sale of subsidiary, net of cash received Acquisition of tangible assets Acquisition of intangible assets Acquisition of financial assets Cash flows from investing activities Cash flows from financing activities Change in credit facility Change in factoring Proceeds from issue of share capital Proceeds from issue of convertible notes Short term borrowings Long term borrowings Cash flows from financing activities Decrease/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Translation differences in cash and cash equivalents Cash and cash equivalents at the end of the period

16 Zenterio AB (publ) Org Nr Parent company income statement Amounts in KSEK Oct-Dec 2017 Oct-Dec 2016 Full Year 2017 Full Year 2016 Operating income Net sales Work performed and capitalised Other operating revenue Total revenue Cost of goods sold Personnel expenses Other external expenses Other operating expenses Depreciation, amortisation and impairment of assets Total operating expenses Operating profit/loss Profit (loss) from investments in subsidiaries Interest income and similar income items Interest expenses and similar loss items Net finance income or costs Profit or loss after net finance (costs) Allocations Profit (loss) before income tax Tax on profit (loss) for the period Profit (loss) for the period There are no items for the parent company recognised in Other Comprehensive Income; Total Compehensive Income therefore corresponds to profit (loss) for the period.

17 Zenterio AB (publ) Org Nr Parent company balance sheet Amounts in KSEK 31 Dec Dec 2016 ASSETS Non-current assets Intangible assets Capitalised development costs Total intangible assets Tangible assets Property, plant and equipment Total tangible assets Financial assets Investments in group companies Other non-current receivables Total financial assets Total non-current assets Current assets Inventory, etc Raw materials and consumables used Total Inventory Current receivables Trade receivables Tax assets Other receivables Receivables from group companies Prepaid expenses and accrued income Total current receivables Cash and bank balances Total current assets TOTAL ASSETS

18 Zenterio AB (publ) Org Nr Parent company balance sheet, cont. Amounts in KSEK 31 Dec Dec 2016 EQUITY AND LIABILITIES EQUITY Restricted equity Share capital Non-restricted equity Total restricted equity Non-restricted equity Share premium reserve Retained earnings Profit (loss) for the year Total non-restricted equity Total equity LIABILITIES Non-current liabilities Liabilities to credit institutions Other liabilities Total non-current liabilities Current liabilities Liabilities to credit institutions Trade payables Liabilities to group companies Current tax liabilities Other liabilities Accrued expenses and prepaid income Total current liabilities TOTAL EQUITY AND LIABILITIES

19 Zenterio AB (publ) Org Nr Risk factors Zenterio s risk factors are described on pages in Zenterio s 2016 Annual report. Apart from the general concern about the economy and the political unrest in some countries, the assessment is that no new significant risks or uncertainties have arisen. The report is available on investor-relations/. Accounting policies This financial report is prepared by Zenterio AB in compliance with IFRSs (International Financial Reporting Standards). The consolidated financial statements for the Zenterio AB group have been prepared in compliance with IFRSs, IFRIC Interpretations as adopted by the EU, the Swedish Financial Reporting Board s Recommendation RFR 1 Supplementary Accounting Rules for Groups and the Swedish Annual Accounts Act. Zenterio s accounting policies are described on pages in Zenterio s 2016 Annual report. This report has not been subject to review by the company s auditors Linköping, Zenterio AB Jörgen Nilsson, Chief Executive Officer