January December 2016 report

Transcription

1 January December 2016 report

2 Zenterio AB (publ) Org Nr January December 2016 report January December 2016 Deployed license base o The VAS (value added services) enabled license base grew by 109% in the full year 2016, adding 2,97 million licenses to an accumulated base of 5,7 million Net sales and other operating income increased 40% year-on-year to SEK 285,7 million (SEK 203,9 million) EBITDA in the full year 2016 were SEK -10,3 million (SEK -61,5 million) Net result in the full year 2016 was SEK -65,4 million (SEK -100,0 million) October December 2016 Deployed license base o The VAS (value added services) enabled license base grew by 15% in the fourth quarter, adding 0,87 million licenses to an accumulated base of 5,7 million Net sales and other operating income decreased -1% quarter-on-quarter to SEK 67,9 million (SEK 68,3 million) EBITDA in the quarter were SEK -8,4 million (SEK -3,5 million) Net result in the quarter was SEK -19,7 million (SEK -13,7 million) Both Net sales and other operating income, EBITDA and Net result were impacted by a SEK 19,8 million write down for our largest customers program. The write down was initiated by identified additional risk factors and revised profitability levels. Events after the reporting date None

3 Zenterio AB (publ) Org Nr Comments from Jörgen Nilsson, CEO The fourth quarter has again been a busy one. Our greatest challenge in this quarter has been the large number of software releases for our main customers. We have now delivered more than 10 major software releases to the Deutsche Telekom Group. It has been a fantastic achievement, and it is bigger than anything that Zenterio has done in the past. However, as a result of these large demands on the organization, we have been forced to increase the number of resources as well as use overtime when needed. Those efforts have naturally increased our overall cost base. In addition, our quarterly result was impacted by the consequences of our largest customer s multi year fixedpriced program. We have identified additional risk factors and prudently revised the profitability levels from the start of the program up until the end of the quarter. Hence both revenue and EBITDA for the fourth quarter were impacted by this SEK 19.8 million program write down accumulated from the beginning of the project, leading to negative development on EBITDA, compared to the same quarter last year. However, for the full year revenues of SEK million represents a 40% growth, compared to full year Full year EBITDA loss improved by SEK 51.2 million on a year on year basis (a negative EBITDA of SEK million, compared to a negative EBITDA of SEK million for full year 2015). Excluding the write down, we would have fulfilled our objective of a positive EBTDA for the full year. The management team is working hard to mitigate future costs and we are having a pragmatic dialogue with our customers to jointly find a way to deliver on time, while at the same time manage our cost levels moving forward. We have converted two key customers from fixed price to time and material on commercial terms and we are already seeing positive effects as a benchmark. In addition, to these changes, we are only months away from a number of exciting commercial launches in 2017 that will have a further positive impact on Zenterio s profitability and predictability. Starting with those launches we will be more closely involved in planning and delivering new features and functions, as well as proposing our data analytics and advertising solutions. In our other major project in Mexico together with Megacable, we are performing well when it comes to time, profitability and how the overall customer relationship is progressing. But more work is needed. In 2017, Zenterio will develop its offering with a broader solution and continue to focus on operators that need to migrate and update their legacy systems. Here we also see an opportunity to add a broad range of expertise, making recommendations and providing step by step guidance as operators need to understand what they require to deliver what consumers want with a great customer experience in a multiscreen world. That will mitigate future risks and improve overall commercial performance for all parties. We enter 2017 with very positive operational feedback from our customers, and we are finally starting to have a comprehensive installed base of solutions as great reference cases. This shows operators that they can put their trust in Zenterio s solutions and transformation program capability. We will continuously add relevant technology to fulfill the transformation our customers are facing as they move to the next level of consumer experience and data analytics to connect to their TV solutions via our new program based delivery model. In addition, during the quarter we successfully closed a SEK 85 million rights issue, which was oversubscribed, with very strong support from our shareholders. It was an important process which involved many key stakeholders and we were able to articulate both the challenges we face and the opportunities we see in order to grow the company s relevance as well as our profitability within the TV industry. With this capital injection we triggered an option that would have otherwise expired during the quarter and Zenterio acquired the remaining 75% of shares in AdScribe. Zenterio now owns 100% of AdScribe, acquiring its key assets and proprietary technology for consumer data analytics and interactive advertising and, just as importantly, the competences and strong marketing and advertising insights that the AdScribe team brings with them. To finish up, I want to mention that a Zenterio Team won the Hackathon software development competition at the IoT Solutions World Congress in Barcelona in October. We are definitely getting more engaged in the IoT domain as we work more closely with certain operators. I want to thank all of the employees at Zenterio and at our subsidiaries, as well as at our key partners, for their great passion and their contribution to what we are trying to accomplish. And of course I want to extend thanks, and my gratitude, to our shareholders for their fantastic support. Kind Regards, Jorgen Nilsson, CEO

4 Zenterio AB (publ) Org Nr Value added services enabled installed license base During Q1-Q4 of 2016 the value added services enabled license base increased with 3,0 million licenses to 5,7 million. The numbers include 450 thousand licenses pre-bought from customer to be deployed during the first quarter The total installed base do not include any major volumes from Deutsche Telekom Group as these swap-out volumes are expected to be carried out during 2017, and will therefore serve as a firm volume base for future license growth. Q increase of 0,9 million was mainly due to Megacable in Mexico and OTE (Hellenic Telecommunications Organization) in Greece. Zenterio has started to offer advertising solutions, applications, and services such as Netflix, HBO Go 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 is transforming the company revenue dynamics overall. Given the current growth projections of the value added services enabled installed license base, Zenterio expects that it will launch these services during the first half of 2017.

5 Zenterio AB (publ) Org Nr Business review Q In December, Zenterio announced that it had acquired the remaining 75% of UK based ad-tech and analytics company Adscribe. The acquisition is in line with the initial investment plan that was drawn up when Zenterio became a minority owner in Adscribe, at that time acquiring 25% of the UK based ad-tech and analytics company. Adscribe empowers TV operators to collect and analyze their viewer data in order to generate key insights that enable them to get to know their subscribers in a whole new way. They also gain the opportunity to monetize that knowledge, as well as adding new services and more relevant content and ads that increase customer loyalty. In October, Czech DTH operator Skylink launched its new Samsung EVO-S hybrid receiver. Skylink Live TV allows viewers to watch selected programs on other devices in the home (smartphone, tablets or PCs), play back programs from a 30- hour archive and watch online movies from Banaxi. The service is available to all Skylink customers in the Czech Republic and Slovakia. The new receiver is a product of a partnership with M7 that has been ongoing since The box is the first M7 box, powered by Zenterio, that is sold through retail. In October, Zenterio s team won the Hackathon software development competition at the IoT Solution World Congress in Barcelona. Sponsored by Intel and Microsoft, the Hackathon explored the possibilities of IoT in industrial environments with a social dimension. In September, Greece s leading pay TV operator OTE launched OTE TV PLUS, a video-on-demand service available through set-top boxes powered by Zenterio OS. Downloaded content can be stored on the box s hard disk for up to 48 hours for later viewing. In November OTE TV was rebranded as COSMOTE TV supported by Zenterio Services who are responsible for maintenance of the STB user interface. Q1 - Q In September, Zenterio signed the HUAWEI Software Service Partner Program Agreement to further strengthen its collaboration with Huawei, the world s largest system integrator and the market leader in the hybrid video business. The Partner Program Agreement means that Zenterio and Huawei continue their collaboration and expand their current client SW business, so far focused on middleware, to also include an OTT multiscreen client and EPGs in STBs. The new solution means that Zenterio s JetUI will be pre-integrated with the Huawei backend and will support live TV, VoD, npvr, OTT multiscreen client, EPGs in STBs as well as social sharing and recommendations on any device. In September, Zenterio appointed Steven Moodie as the company s new CFO. Steven Moodie joined Zenterio from NGA Human Resources, a HR services outsourcing company owned by Kohlberg Kravis Roberts (KKR), where he was the global CFO for their 300m turnover Enterprise Division. For the majority of his career prior to that he has worked for Ericsson, where he has held a number of senior finance roles in the UK, China, Indonesia and India. In July, Zenterio won a major deal with Megacable, Mexico s largest multiplesystem operator (MSO), to enhance Megacable s existing TV platform and generate additional revenues from new IPTV and OTT applications. The deal with Megacable is Zenterio s first direct deployment with an operator of this magnitude in the LatAm market and it shows the global appeal of an independent operating system. In July, Zenterio announced the sale of its quality assurance and testing company Labatus to Eurofins Scientific. Labatus, based in Linköping, had been a part of Zenterios since September 2014, when it was acquired as a part the 27M Group. Labatus has been a valuable part of Zenterio and has been run as a separate entity, and will continue as a close partner moving forward in Zenterio s global projects. Labatus had a total revenue of SEK 23 million and an operating profit of SEK 2,7 million in 2015, with an average number of 20. In April, Zenterio launched a dedicated consultancy service company following the strategic acquisitions of 27M, VTilt, and Systemagic. The new company, Zenterio Services, will complement Zenterio s existing business and its independent software platform for interactive TV, Zenterio OS, as the company positions itself as a full-service provider of technology, value added services and consultancy for the TV industry. In February, Zenterio releases updated versions of JetUI and Zenterio OS. The new version of JetUI comes with a number of updates and new features, and the version has also been designed to work both together with Zenterio OS and as an independent UI able to run on any TV client device, meaning that JetUI is now available for Smart TVs, making it truly device agnostic and something that will harmonize the look and feel of your offering across all devices.

6 Zenterio AB (publ) Org Nr Financial highlights January December 2016 SEK million Q1-Q Q1-Q Change Net sales and other operating income 285,7 203,9 40% Total costs -332,9-298,7 EBITDA -10,3-61,5 Net result -65,4-100,0 Sales amounted to SEK 285,7 million during the full year 2016, representing a growth of 40% compared to the full year In the full year of 2016, total costs rose to SEK 332,9 million compared to SEK 298,7 million in the full year The total costs during the period were split between cost of goods sold of SEK 10,1 million (SEK 9,9 million), operating expenditures of SEK 286,0 million (SEK 255,5 million) and depreciation and amortization of SEK 36,8 million (SEK 33,3 million). EBITDA for the full year of 2016 amounted to SEK -10,3 million compared to SEK -61,5 million in the full year of This equals a 51,2 MSEK EBITDA improvement and reflects a stronger business momentum and improved resource efficiency. The improvement is mainly driven by a few strategic customer engagements that Zenterio has worked on since the latter part of 2015 as well as new business wins during October December 2016 SEK million Q4/2016 Q4/2015 Change Net sales and other operating income 67,9 68,3-1% Total costs -84,3-80,6 EBITDA -8,4-3,5 Net result -19,7-13,7 Sales amounted to SEK 67,9 million in the fourth quarter 2016, representing a decrease of -1% compared to the fourth quarter In the fourth quarter 2016, total costs rose to SEK 84,3 million compared to SEK 80,6 million in the fourth quarter The total costs during the quarter were split between cost of goods sold of SEK -0,6 million (SEK 4,0 million), operating expenditures of SEK 76,9 million (SEK 67,8 million) and depreciation and amortization of SEK 8,0 million (SEK 8,8 million). With the sale of Labatus in the previous quarter their cost moves from personnel expenses to other external expenses. EBITDA in the fourth quarter 2016 amounted to SEK -8,4 million compared to SEK -3,5 million in the fourth quarter The result was impacted by a SEK 19,8 million write down for our largest customers program.

7 Zenterio AB (publ) Org Nr Cash flow Operational cash flow during the full year of 2016 amounted to SEK -40,5 million compared to SEK -62,6 million for the full year of Net proceeds of SEK 80,1 million was received in the quarter from the rights issue. On December 31, 2016, cash and cash equivalents amounted to SEK 53,3 million compared to SEK 0.6 million on December 31, In addition there was SEK 12,0 million on non-used overdraft facilities on December 31, Funding process On October 12, 2016 an extraordinary general meeting resolved upon a rights issue at SEK 4 per share. On November 10, 2016, the company announced that the rights issue was oversubscribed. In total, subscriptions and applications for subscriptions of ordinary shares in a total value of SEK 103 million was received by the company after which ordinary shares in an amount of approximately SEK 54.9 million was allotted to shareholders within the framework of the rights issue. As is stated in the prospectus regarding the rights issue, shareholders were granted a possibility to defend their pro rata share against dilution in a total issue value that includes both the company s convertible loan 2016:1 and the rights issue by the board of directors possibility to resolve upon, in addition to the rights issue, a directed share issue of ordinary shares to such shareholders. Against that background, the board of directors resolved upon a directed share issue on November 10, 2016, based upon an authorization from the annual general meeting held on June 29, 2016, in a value of approximately SEK 30.2 million to such shareholders that notified their desire to subscribe for ordinary shares not based upon subscription rights. Such shares were issued and allotted based upon those shareholders holdings as per the record date for the rights issue for the purpose that these shareholders wholly or partly should be granted the possibility to defend their respective pro rata share of the total issue value. On June 23, 2016, the board of director of Zenterio AB announced that it had resolved upon, with the authorisation of the annual general meeting on 30 June 2015, a private placement of convertible bonds of SEK 65 million to refinance existing loans and in addition provide the company with capital to strengthen the company s balance sheet in the current phase of expansion. The convertible bonds were issued ahead of a rights issue at SEK 4 per share to the existing shareholders and all convertible loans where converted into ordinary shares in the quarter in conjunction with the rights issue. The extraordinary general meeting held on October 12, 2016 furthermore resolved upon a new share issue of 186,444 new ordinary shares to VTilt Digital, LLC. The shares were paid by setting off a debt that arose in connection with the acquisition of VTilt Digital, LLC. Shares The total number of Zenterio shares on December 30, 2016, equaled 90,056,218.

8 Zenterio AB (publ) Org Nr Personnel Personnel Q4/2015 Q1/2016 Q2/2016 Q3/2016 Q4/2016 Average number of employees The average number of employees decreased by six during the quarter. This was due to normal turnover. Events after the reporting date No events to report after the reporting date.

9 Zenterio AB (publ) Org Nr Zenterio s business model and its market Zenterio s market The TV market continues to grow. The global number of pay TV subscribers in the world reached 957 million in 2015 and is expected to reach 1.15 billion by 2020 (SNL Kagan). These consumers generated pay TV revenues of US$ billion in 2015, a figure estimated to grow to around US$ 290 billion by 2020 (SNL Kagan). The number of set-top boxes shipped in 2015 reached 269 million (SNL Kagan). Shipments for 2016 are forecast to be 273 million and for million. The fastest growing segment of this market is connected pay TV set-top boxes, a segment expected to expand from 109 million boxes shipped in 2014 to 175 million in Connected pay TV boxes are set-top boxes that are connected to an IP network and are a key focus area for Zenterio. The total video software market is expected to exceed US$ 9 billion in revenue in 2021 growing by US$ 3 billion in revenue over the preceding five years (IHS). Set-top box software makes up around 32% of this market. There are estimated to be around 6.1 billion second screen devices worldwide (IHS) representing a massive opportunity for Zenterio s JetUI multiscreen software offering as pay TV operators extend their services to these alternate devices. Aside from the projected continued growth for the traditional TV market, other viewing sources are expected to compete for market share and gain traction. New players, such as OTT and Internet TV, are challenging the strong position of pay TV operators. Accordingly, there is an urgent need to ramp up innovation and deploy new and more advanced services and to offer the best of Live TV and Internet TV in one simple solution. However, the market for operating systems for set-top boxes and TV sets is highly fragmented. The TV market is flooded with hundreds of different operating systems (unlike the consolidated PC and mobile device markets that use only a few). The lack of a single standard inhibits rapid application and product development for the TV market. The fragmented software environment has been one of the main challenges for operators in terms of developing and launching new TV services faster and cheaper, because each operating system requires a separate integration. In a word, consolidation is essential. Zenterio s independent OS enables TV operators to launch new services and content at a lower cost and to do so on an independent platform that improves time-to-market by only requiring one integration for each service. By offering these possibilities to operators, Zenterio s solution is well-positioned to become a global client software standard for interactive TV service provision. Zenterio s potential market will continue to expand as the TV/Internet convergence progresses and as interactive TV continues to grow over the next few years. Zenterio s business model Zenterio sells its products, software licenses and consulting services to TV & broadband operators, telcos, system integrators, set-top box providers 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 will provide services and expertise in system integration, interface development, app development, device design and tech consultancy. Zenterio Services will also support customers in projects related to the Internet of Things and cloud-based services. In addition to working directly with pay TV operators, Zenterio has also 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 the technical capability and scaling capacity of Zenterio OS. 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 for supplying 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 VASenabled licenses and during 2016 Zenterio will launch its first Value Added Services.

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 2016 Oct-Dec 2015 Jan Dec 2016 Jan Dec 2015 Net sales Capitalized research & development Other operating income Total revenue Cost of good sold Personnel expenses Other external expenses Other operating expenses Depreciation, amortization 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 2016 Oct-Dec 2015 Jan-Dec 2016 Jan-Dec 2015 Profit (loss) for the year Other Comprehensive Income: Items that may be reclassified subsequently to profit or loss Foreign currency translation differences 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 2015 ASSETS Non-current assets Intangible assets Goodwill Capitalized development costs ,530 Other intangible assets ,725 Total intangible assets ,243 Tangible assets Property, plant and equipment ,946 Total tangible assets ,946 Financial assets Other non-current receivables Shares in associated companies 3,172 Total financial assets 580 3,839 Total non-current assets ,029 Current assets Inventory, etc. Raw materials and consumables used 147 Total inventory 147 Current receivables Trade receivables ,497 Current tax assets ,409 Other receivables ,943 Prepaid expenses and accrued income ,490 Total current receivables ,339 Cash and cash equivalents Total current assets ,963 TOTAL ASSETS ,992

13 Zenterio AB (publ) Org Nr Consolidated statement of financial position, cont. Amounts in KSEK 31 Dec Dec 2015 EQUITY AND LIABILITIES EQUITY Share capital ,692 Other capital contributions ,229 Reserves Retained earnings (loss) ,751 Total equity ,104 LIABILITIES Non-current liabilities Liabilities to credit institutions ,145 Other non-current liabilities ,139 Deferred tax liabilities ,900 Total non-current liabilities ,184 Current liabilities Liabilities to credit institutions ,614 Derivative instruments ,361 Trade payables ,159 Current tax liabilities 295 Other liabilities ,510 Accrued expenses and prepaid income ,060 Total current liabilities ,704 TOTAL EQUITY AND LIABILITIES ,992

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 Registration of issued shares Warrants Equity related transaction cost Balance at 31 December Balance at 1 January Profit (loss) for the period 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

15 Zenterio AB (publ) Org Nr Consolidated statements of cash flows Amounts in KSEK Oct Dec 2016 Oct Dec 2015 Jan Dec 2016 Jan Dec 2015 Cash flows from operating activities Operating profit (loss) Adjustments for items not affecting cash flow Interest received Interest paid Income tax paid Exchange losses 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 associated companies Acquisition of tangible assets Acquisition of intangible assets Sale 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 2016 Oct Dec 2015 Jan Dec 2016 Jan Dec 2015 Operating income Net sales Work performed and capitalised Other operating revenue Total revenue Cost of good sold Personnel expeses Other external expenses Other operating expenses Depreciation, amortization and impairments of assets Total operating expenses Operating profit or 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 recognized in Other Comprehensive Income; Total Comprehensive 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 2015 ASSETS Non-current assets Intangible assets Capitalized development costs ,319 Total intangible assets ,319 Tangible assets Property, plant and equipment ,007 Total tangible assets ,007 Financial assets Investment in group companies Other non-current receivables Total financial assets ,126 Total non-current assets ,452 Current assets Inventory, etc. Raw materials and consumables used 147 Total inventory 147 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 2015 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 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 2015 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 zenterio.com/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 2015 annual report. This report has not been subject to review by the company s auditors Linköping, 3rd March, 2017 Zenterio AB Jörgen Nilsson, Chief Executive Officer