1 (17) Stock exchange release 27 April at 8:10 am INTERIM REPORT OF COMPTEL CORPORATION 1 JANUARY - 31 MARCH Net sales on last year s level Backlog increased by 10.1 Key figures for the First Quarter of : Net sales EUR 22.6 million (Q1 : 22.4), growth 0.9 Comparable Operating profit EUR 0.0 million (1.8), change -98.4 Operating profit EUR -0.9 million (1.8), change -150.5 Net profit EUR -1.4 million (0.8), change -267.6 Earnings per share EUR -0.01 (0.01), change -264.7 Order backlog EUR 66.1 million (60.0), growth 10.1 Outlook We expect revenue to grow with double digit percentage and we expect comparable EBIT to be between 10-15 of net sales. Characteristically a significant part of Comptel s operating profit and net sales is generated in the second half of the year. Juhani Hintikka, President and CEO: Our net sales were on last year s level, as expected. The net sales decline in the later part of last year stopped and we saw a significant increase in our order intake. Our profitability in the first quarter was lower due to increased investments in later part of and preparing for the growth. However, our order intake grew significantly compared to the previous year and our ending backlog, for the next 12 months, grew by 10.1 per cent. We are seeing a shift in the market sentiment and more positive trend going forward. This means we are on track for the full year outlook. The new solutions FlowOne Fulfillment and Monetizer net sales growth continued strong but overall growth was negatively impacted by weaker performance of some of the traditional solutions. On a regional level, the net sales for both EMEA and APAC declined slightly compared to last year s first quarter but the Americas region grew significantly compared to last year s first quarter. In the first quarter, we won a new significant customer in Latin America which gave the region a good start for. The customer interest towards the FWD cloud solution continued strong and key new customer implementations are starting in the first half of that are expected to contribute to company s growth in.
2 (17) During the first quarter, onetime cost was accumulated due to the Nokia acquisition of Comptel. During the first quarter, we secured 3 significant orders (Q1 :2), valued over EUR 1.0 million. Business review of the First Quarter Comptel net sales grew 0.9 in the first quarter compared to the previous year. The Intelligent Data business unit net sales declined by 18.6 per cent while the Service Orchestration business unit grew by 16.9 per cent. The Service Orchestration growth was due to growth of the FlowOne Fulfillment solution. The comparable operating profit was EUR 0.0 million (1.8). This was due to increased investment levels in R&D and delivery. The IFRS Operating profit was EUR 0.9 million. This includes the transaction costs related to the Nokia acquisition. The result before taxes for the period was EUR -1.1 million (1.4) and the net result for the period was EUR -1.4 million (0.8). The net result declined by 267.6 per cent. Earnings per share for the period were -0.01 (0.01). The tax expenses for the period was EUR 0.3 million (0.6), of which EUR 0.1 million (0.3) were withholding taxes related to double taxation. In January - March Comptel received three significant orders (2), one for Data Refinery and two for the FlowOne Fulfillment solution. Comptel reports orders for sold projects and licenses with a minimum value of EUR 1,000,000. The company s 12-month order backlog increased and was EUR 66.1 million (60.0). Business areas Net sales, EUR million Change, Intelligent Data 8.5 10.4-18.6 Service Orchestration 14.0 11.9 16.9 Other 0.1 0.0 1975.0 Total 22.6 22.4 0.9 Comparable Operating profit, EUR million Intelligent Data -0,5 1.7-131,2 Service Orchestration 1,2 0.7 59,9 Other -0,6-0.7-12,0 Total 0,0 1.8-98,4 Operating result, of net sales Intelligent Data -6,3 16.5 Service Orchestration 8,5 6.2 Other 0,0 - Total 0,1 7.8 The net sales of the Intelligent Data unit declined in the first quarter, which also negatively impacted the profitability of the Business Unit. Several key deals for the Intelligent Data unit were postponed to second quarter. The net sales of the Service Orchestration unit grew in the
first quarter. Due to growth in net sales, the relative profitability improved for the Service Orchestration business unit. 3 (17) Net sales breakdown, EUR million Change, Project & License business 13.7 14.2-3.1 Recurring business 8.9 8.2 7.9 Total 22.6 22.4 0.9 Project & License business declined by 3.1 per cent in first quarter while support and maintenance grew by 7.9 per cent. Net sales Regional breakdown, EUR million Change, APAC 7.2 7.4-1.8 EMEA 12.2 13.3-8.0 AMERICAS 3.1 1.7 81.0 Total 22.6 22.4 0.9 The Americas region net sales grew by 81 per cent in the first quarter compared to previous year. This was due to new customer wins in Latin America. APAC and EMEA net sales declined in the first quarter. Financial Position EUR million 31 Mar 31 Mar Change, Statement of financial position total 87.1 79.6 9.4 Liquid assets 3.5 12.7-72.8 Trade receivables, gross 36.8 29.3 25.7 Bad debt provision -1.7-1.8-5.4 Trade receivables, net 35.1 27.5 27.7 Accrued income 17.4 11.4 52.3 Deferred income related to partial debiting 4.0 3.9 4.5 Interest-bearing debt 6.6 8.1-18.9 Equity ratio, per cent 66.0 61.0 8.1 The statement of the financial position on 31 Mar was EUR 87.1 million (79.6), of which liquid assets amounted to EUR 3.5 million (12.7). The operating cash flow was EUR -0.8 million (11.0) in the first quarter of. Trade receivables were EUR 35.1 million (27.5) at the end of the period. The accrued income was EUR 17.4 million (11.4). The deferred income related to partial debiting was EUR 4.0 million (3.9). Comptel has a EUR 25 million credit facility arrangement consisting of a EUR 20 million revolving credit facility and a EUR 5 million overdraft capacity on the current bank account. Out of this arrangement Comptel had EUR 6 million of the revolving credit facility outstanding at the end of the period. The credit facility is valid until July 2018. The equity ratio was 66.0 per cent (61.0) and the gearing 7.0 per cent (-12.1).
4 (17) Research and Development (R&D) EUR million Change Direct R&D expenditure 6.1 4.6 30.7 Capitalisation of R&D expenditure according to IAS 38-2.1-1.3 58.3 R&D depreciation and impairment charges 1.5 1.4 10.3 R&D expenditure, net 5.4 4.7 16.8 Direct R&D expenditure, of net sales 26.9 20.7 Direct R&D expenditure represented 26.9 per cent (20.7) of net sales. The key focus of Comptel s R&D expenditure was in the further development of our existing solutions (Service Orchestration and Intelligent Data) and FWD, a time-based mobile data marketing solution. Development work focused on securing recurring revenue with competitive products, winning new markets by giving customers unique value, and by improving margins with better deployment and scalability of our products. The FlowOne Fulfillment solution ensures unified order and service delivery flows for orchestrating services. FlowOne V is a design-led service orchestration solution for virtual networks. Data Refinery captures data-in-motion, turns raw data into immediate value and integrates into any data source. Monetizer is the business policy and charging solution that allows launching offers fast to market and innovating and designing of rich communication and data. Fastermind offers artificial intelligence apps, predictive analytics and machine learning capabilities for digital telcos. In all of these areas, Comptel seeks global thought leadership in solving the business challenges of operators and digital communications service providers. During, the company will continue to develop its current offering. In first quarter of five major software releases were launched in the product areas mentioned above. Investments EUR million Gross investments in property, plant and equipment and intangible assets Change 0.1 0.1-42.2 The investments comprised of devices, software and furnishings. The investments were funded through cash flow from operations. Personnel Number of employees at the end of period 31 Mar 31 mar Change, 31 Dec Change, 821 749 9.6 837-1.9
5 (17) Average number of personnel during the period Change, 1-12 Change, 823 741 11.1 791 4.0 At the end of the period, 27.6 per cent (28.8) of the personnel was located in Finland, 21,4 per cent (24.4) in Malaysia, 15.3 per cent (12.1) in India, 13.2 per cent (11.5) in Bulgaria, and 22.5 per cent (23.2) in other countries where Comptel operates. Comptel share The closing share price of the period was EUR 3.04 (1.54). Comptel s market value at the end of the period was EUR 332.4 million (166.7). Comptel share Change 1-12 Shares traded, million 21,3 14,7 44,4 48.4 Shares traded, EUR million 63,1 21,7 190,8 92.4 Highest price, EUR 3,05 1,66 83.7 2.65 Lowest price, EUR 2,30 1,36 69.1 1.19 Of Comptel s outstanding shares, 15.7 per cent (6.0) were nominee registered or held by foreign shareholders at the end of the period. At the end of the period, the company held 117,129 of its own shares, which represents 0.11 per cent of the total number of shares. The total counter-book value of the shares held by the company was EUR 2,291. Corporate Governance Comptel Corporation s Annual General Meeting (AGM) was held on 4 April. The AGM resolved the number of Board members to be five. Mr. Pertti Ervi, Mr. Hannu Vaajoensuu, Ms. Eriikka Söderström, Mr. Antti Vasara and Mr. Thomas Berlemann were re-elected as members of the Board of Directors. The AGM appointed Ernst & Young Oy as the company s auditor. Mr. Mikko Järventausta is acting as the principal auditor. The AGM resolved that no dividend will be paid for the year. In its meeting held after the Annual General Meeting, the Board of Directors elected Mr. Pertti Ervi as chairman and Mr. Hannu Vaajoensuu as vice chairman. The Board decided not to setup committees. The AGM authorised the Board of Directors to decide on share issues amounting to a maximum of 21,400,000 new shares and on the repurchase or conveying of the company s own shares up to a maximum number of 10,700,000 shares. The authorisations are valid until 30 June 2018. However, the authorisation to implement the company s share-based incentive programs is valid for five years from the AGM resolution. A separate stock exchange release about the authorisations given and other decisions made by the Annual General Meeting was published on 4 April.
6 (17) Events after the Reporting Period Nokia has confirmed receiving over 90 ownership of Comptel shares and options, of which a separate stock exchange was released on 3 April. The Company AGM was held on 4 April, the decisions of which a separate stock exchange was published on 4 April. Nokia has commenced the redemption proceedings related to remaining Comptel minority shareholders. A separate stock exchange release was issued on this on 7 April. An extra ordinary general meeting invitation was issued on 11 April. Near-term Risks and Uncertainties Comptel develops dynamic end-to-end solutions for leading operators globally in the telecom field. This requires Comptel to understand correctly the trends taking place in its business environment and the needs of its customers and resellers by each region. Failure to identify market conditions, address customers needs and develop its products in a timely way may significantly undermine the growth of Comptel s business and its profitability. Characteristics of Comptel s field of industry are significant quarterly variations of net sales and profit, which are related to customers purchasing behaviour and the timing of major single deals. Comptel s business consists of deliveries of large productised IT systems, and the value of a single project may be several million euros. Therefore, the credit risk associated with a single project or an individual customer may be significant. Furthermore, some of Comptel s customers operate in countries where the political or financial climate can be unstable which in part may increase credit risk. Comptel operates globally, so it is exposed to risks arising from different currency positions. Exchange rate changes between the Euro, which is the company s reporting currency, and the US Dollar, UK Pound Sterling and Malaysian Ringgit affect the company s net sales, expenses and net profit. The application process to prevent Comptel s double taxation is still pending with the Ministry of Finance in Finland. However, the process between the states is very slow and the timing of change is hard to forecast. The interpretation of tax treaties may result in different views between the countries in question. This could mean that the double taxation will prevail. Comptel has also applications for return of withholding taxes in other countries but they are subject to local legal processes, which take time to get completed. The risks and uncertainties of Comptel are described in more detail in the company s financial statements and the Board of Directors report for. Outlook: We expect revenue to grow with double digit percentage and we expect EBIT to be between 10-15.
7 (17) Characteristically a significant part of Comptel s operating profit and net sales is generated in the second half of the year. COMPTEL CORPORATION Board of Directors Additional information: Mr Juhani Hintikka, President and CEO, tel. +358 9 700 1131 Mr Tom Jansson, CFO, tel. +358 40 700 1849
8 (17) TABLE PART The interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU. The accounting policies and methods of computation adopted in the financial statements are consistent with those of the annual financial statements for the year ended. All figures in the financial report have been rounded and consequently the sum of the individual figures can deviate from the sum figure. The interim report is unaudited. Consolidated Statement of Comprehensive Income (EUR 1,000) 1 Jan 31 Mar 1 Jan 31 Mar Net sales 22,594 22,392 Other operating income 5 3 Materials and services -1,012-1,118 Employee benefits -11,069-10,194 Depreciation, amortisation and impairment charges -1,736-1,621 Other operating expenses -9,667-7,707-23,484-20,640 Operating profit/loss -886 1,755 Financial income 525 905 Financial expenses -747-1,238 Share of results of associated companies 0 0 Profit/loss before income taxes -1,108 1,421 Income taxes -278-593 Profit/loss for the period -1,387 827 Other comprehensive income: Other comprehensive income to be reclassified to profit or loss in subsequent periods Translation differences 391 669 Cash flow hedges 71-464 Income tax relating to components of other -78-134 comprehensive income Total other comprehensive income 384 72 Total comprehensive income for the period -1,003 899 Profit/loss attributable to: Equity holders of the parent company -1,387 827 Total comprehensive income attributable to: Equity holders of the parent company -1,387 827 Shareholders of the parent company: Earnings per share, EUR -0.01 0.01 Earnings per share, diluted, EUR -0.01 0.01
9 (17) Consolidated Statement of Financial Position (EUR 1,000) 31 Mar 31 Mar 31 Dec Assets Non-current assets Goodwill 2,646 2,646 2,646 Other intangible assets 14,689 12,750 14,095 Tangible assets 1,589 1,101 1,707 Investments in associates 788 960 788 Available-for-sale financial assets 87 87 87 Deferred tax assets 8,850 8,005 8,242 Other non-current receivables 528 716 570 29,277 26,265 28,135 Current assets Trade and other current receivables 53,531 39,949 56,977 Current tax asset 857 710 532 Cash and cash equivalents 3,457 12,721 9,242 57,845 53,381 66,751 Total assets 87,122 79,645 94,886 Equity and liabilities Equity attributable to equity holders of the parent company Share capital 2,141 2,141 2,141 Fund of invested non-restricted equity 2,064 1,698 1,975 Fair value reserve -94 365-407 Translation differences -1,372-973 -1,443 Retained earnings 41,910 34,789 42,783 Total equity 44,648 38,019 45,049 Non-current liabilities Deferred tax liabilities 2,933 2,682 2,805 Non-current financial liabilities 450 58 491 3,382 2,741 3,296 Current liabilities Provisions 118 1,021 116 Current financial liabilities 6,148 8,079 8,993 Trade and other current liabilities 32,826 29,786 37,432 39,092 38,886 46,541 Total liabilities 42,475 41,626 49,837 Total equity and liabilities 87,122 79,645 94,886
Consolidated Statement of Cash Flows (EUR 1,000) Cash flows from operating activities 1 Jan 31 Mar 10 (17) 1 Jan 31 Mar Profit/loss for the period -1,387 827 Adjustments: Non-cash transactions or items that are not part of cash flows from operating activities 2,429 1,982 Interest and other financial expenses 49 49 Interest income -6 - Income taxes 208 593 Change in working capital: Change in trade and other current receivables 3,087 16,536 Change in trade and other current liabilities -4,335-8,952 Change in provisions 3 671 Interest and other financial expenses paid -49-49 Interest received 6 - Income taxes paid and tax returns received -765-957 Net cash from operating activities -761 10,700 Cash flows from investing activities Investments in tangible assets -71-123 Investments in intangible assets - - Investments in development projects -2,135-1,348 Proceeds from the sale of tangible assets - 1 Change in other non-current receivables -52-99 Net cash used in investing activities -2,258-1,570 Cash flows from financing activities Dividends paid - - Additional investment into equity - - Proceeds from share options 89 - Proceeds from borrowings 5,989 1,010 Repayment of borrowings -8,815 - Change in lease liabilities -61-45 Net cash used in financing activities -2,798 965 Net change in cash and cash equivalents -5,817 10,095 Cash and cash equivalents at the beginning of the period 9,242 3,030 Cash and cash equivalents at the end of the period 3,457 12,721 Change -5,785 9,691 Effects of changes in foreign exchange rates 32-404
11 (17) Consolidated Statement of Changes in Equity Equity attributable to equity holders of the parent company EUR 1,000 Share capital Other reserves Translation differences Fair value reserve Retained earnings Total Equity at 31 Dec 2015 2,141 1,698-510 -170 34,165 37,324 Share-based compensation 79 79 Prior year correction * -283-283 Total comprehensive income for the period -463 535 827 899 Equity at 31 Mar 2,141 1,698-973 365 34,788 38,019 Consolidated Statement of Changes in Equity Equity attributable to equity holders of the parent company EUR 1,000 Share capital Other reserves Translation differences Fair value reserve Retained earnings Total Equity at 31 Dec 2,141 1,975-1,444-407 42,784 45,049 Share-based compensation 512 512 Shares issued 89 89 Total comprehensive income for the period 72 313-1,387-1,002 Equity at 31 Mar 2,141 2,064-1,372-94 41,909 44,648 *Prior year expenses were corrected directly to Retained Earnings during the reporting periods.
12 (17) Notes 1. Application of new or amended standards and interpretations Comptel has adopted the new or amended standards and interpretations, effective for the financial years beginning on or after 1 January. However, those have not had an impact on the consolidated financial statements. 2. Comparable operating results EUR 1,000 1 Jan 31 Mar Operating results -886 Adjustments due to change in the group ownership: Advisor expenses 508 Accelerated option expenses 407 Comparable operating results 29 3. Segment information Net sales by segment EUR 1,000 1 Jan 31 Mar 1 Jan 31 Mar Intelligent Data 8,501 10,439 Service Orchestration 13,963 11,946 Other 129 6 Group total 22,594 22,392 Operating profit/loss by segment EUR 1,000 1 Jan 31 Mar 1 Jan 31 Mar Intelligent Data -846 1,717 Service Orchestration 563 739 Other -603-701 Group operating profit/loss total -886 1,755 4. Income tax Income tax expense according to the statement of comprehensive income for the period was EUR 278 thousand (EUR 593 thousand). In 2006, the Board of Adjustment of the Tax Office for Major Corporations refused to accept the crediting of taxes withheld at source in taxation of 2004 and 2005. The application process to prevent Comptel s double taxation is still pending with the Ministry of Finance in Finland. However, the process between the states is very slow and the timing of a change is hard to forecast. The interpretation of tax treaties may result in different views between the countries in question. This could mean that the double taxation will prevail.
13 (17) According to the Board of Adjustment s decision currently in force, Comptel Corporation has expensed taxes withheld at source amounting to EUR 123 thousand in January March (EUR 300 thousand). 5. Tangible assets EUR 1,000 1 Jan 31 Mar 1 Jan 31 Mar Additions 71 123 Decreases - -1 6. Related party transactions The Comptel Group have a related party relationship with its associate, the Board of Directors, the Executive Board and also with people and companies under Comptel management s influence. Transactions which have been entered into with related parties are as follows: EUR 1,000 1 Jan 31 Mar 1 Jan 31 Mar Associate Interest income 2 2 EUR 1,000 31 Mar 31 Mar Associate Non-current receivables 130 123 Remuneration to key management Key management personnel compensation includes the employee benefits of the members of the Board of Directors and the Executive Board. EUR 1,000 1 Jan 31 Mar 1 Jan - 31 Mar Salaries and other short-term employee benefits 384 344 Share-based payments 69-72 Total 453 272 Guarantees and other commitments EUR 1,000 31 Mar 31 Mar Guarantees - 10
14 (17) 7. Commitments Minimum lease payments on non-cancellable office facilities and other operating leases are payable as follows: EUR 1,000 31 Mar 31 Mar Less than one year 2,476 2,004 Between one and five years 5,639 6,779 More than five years 274 - Total 8,388 8,784 The group had no material capital commitments for the purchase of tangible assets at 31 March and 31 March. 8. Contingent liabilities EUR 1,000 31 Mar 31 Mar Bank guarantees 3,770 2,421 Corporate mortgages 200 200 EUR 1,000 31 Dec 31 Dec 2015 Contingent liabilities on behalf of others Guarantees - 28 9. Fair values of financial assets and liabilities Book value 31.3. Fair value 31.3. Book value 31.3. Fair value 31.3. Book value 31.12. Fair value 31.12. EUR 1,000 Financial assets Financial assets at fair value through profit or loss Forward contracts (level 2) 127 127 442 442 108 108 Available-for-sale financial assets (level 3)) 87 87 87 87 87 87 Non-current trade receivables 5,689 5,689 2,237 2,237 4,473 4,473 Current trade receivables 31,110 31,110 27,050 27,050 35,908 35,908 Other current receivables 2,987 2,987 965 965 3,115 3,115 Cash and cash equivalents 3,457 3,457 12,721 12,721 9,242 9,242 Financial liabilities Financial liabilities at fair value through profit or loss Forward contracts (level 2) 527 527 48 48 633 633 Trade payables and other liabilities 32,826 32,826 29,786 29,786 36,799 36,799 Non-current loans from financial institutions - - 22 22 - - Non-current finance lease liabilities 350 450 36 36 491 491 Current loans from financial institutions 5,962 5,969 7,984 7,995 7,973 7,973 Current bank overdraft facility - - - - 815 815
15 (17) Current finance lease liabilities 186 186 95 95 205 205 10. Key figures Financial summary 1 Jan 31 Mar 1 Jan- 31 Mar Net sales, EUR 1,000 22,594 22,392 Net sales, change 0.9 6.8 Operating profit/loss, EUR 1,000 886 1,755 Operating profit/loss, change -150.5 17.5 Operating profit/loss, as of net sales -3.9 7.8 Profit/loss before taxes, EUR 1,000-1,108 1,421 Profit/loss before taxes, as of net sales -4.9 6.3 Return on equity, - - Return on investment, - - Equity ratio, 66.0 61.0 Gross investments in tangible and intangible assets, EUR 1,000 1) 71 123 Gross investments in tangible and intangible assets, as of net sales 0.3 0.6 Capitalizations according to IAS 38 to intangible assets, EUR 1,000 2,135 1,348 Research and development expenditure, EUR 1,000 6,067 4,640 Research and development expenditure, as of net sales 26.9 20.7 Order backlog, EUR 1,000 66,055 60,011 Average number of employees during the period 823 741 Interest-bearing net liabilities, EUR 1,000 3,141-4,584 Gearing ratio, 7.0-12.1 1) The figure does not include investments in development projects. Per share data 1 Jan 31 Mar 1 Jan- 31 Mar Earnings per share (EPS), EUR -0.01 0.01 EPS diluted, EUR -0.01 0.01 Equity per share, EUR 0.41 0.34 Dividend per share, EUR - - Dividend per earnings, - - Effective dividend yield, - - P/E ratio - - Adjusted number of shares at the end of the period 109,457,246 108,395,409
16 (17) of which the number of treasury shares 117,129 418,507 Outstanding shares 109,340,117 107,976,902 Adjusted average number of shares during the period 108,685,905 107,370,551 Average number of shares, dilution included 113,514,877 110,119,850 11. Definition of key figures Operating margin = Operating profit/loss x100 Net sales Profit margin (before income taxes) = Profit/loss before taxes x100 Net sales Return on equity (ROE) = Profit/loss x100 Total equity (average during year) Return on investment (ROI) = Profit/loss before taxes + financial expenses Total equity + interest bearing liabilities (average during the year) x100 Equity ratio = Total equity x100 Statement of financial position total advances received Gross investments in tangible and intangible assets, as of net sales = Gross investments in tangible and intangible assets Net sales x100 Research and development expenditure, as of net sales = Research and development expenditure Net sales x100 Gearing ratio = Interest-bearing liabilities cash and cash equivalents Total equity x100 Earnings per share (EPS) = Profit/loss for the financial year attributable to equity shareholders Average number of outstanding shares for the financial year Equity per share = Equity attributable to the equity holders of the parent company Adjusted number of shares at the end of period Dividend per share = Dividend Adjusted number of shares at the end of period
17 (17) Dividend per earnings = Dividend per share x100 Earnings per share (EPS) Effective dividend yield = Dividend per share x100 Share closing price at end of period P/E ratio = Share closing price at end of period Earnings per share (EPS)