Interim report Q3, July - September 2015

 

Jul-Sept2015 Jul-Sept2014 jan-sept 2015 jan-sept 2014
Net revenue 74 034 42 662 201 123 127 540
Operating profit -27 775 -40 738 -83 848 -113 686
Operating margin neg neg neg neg
Profit/loss after tax -29 392 -40 794 -85 688 -113 980
Ernings per share -0,70 -0,97 -2,04 -2,72

SIGNIFICANT EVENTS DURING THE THIRD QUARTER

  • Seamless’ U.S. subsidiaries received licenses for payment services in the United States, known as a “Money Transmitter License,” the expectation is that the remaining licenses will be approved within the next twelve months.

  • Seamless issued SEK 29 million of convertible debentures. The board of directors of Seamless resolved to issue these bonds pursuant to the authorization granted at the latest annual general meeting of the company.

  • Seamless launched tomorrow’s digital cash register the new service is integrated into the SEQR app and is included under the MyShop section.

  • SEQR is now available in all 134 Swedish JYSK stores.

  • Seamless’ transaction received a 1.7 MSEK order for Nigeria and Ghana from a leading African mobile operator group for the installation of its transaction switch. Seamless enters into the strategically very important Nigerian market, which is the largest economy in Africa, and is strengthening considerably its market position in Ghana.

SIGNIFICANT EVENTS AFTER THE CLOSE OF THE REPORTING PERIOD

  • As SEQR should fund for long term growth, Seamless intends to bring in a strategic equity partner as co-investor in the subsidiary SEQR by a directed equity placement. Awaiting the completion of such transaction, in order to cover negative cash flow Seamless intends to, by means of the existing authorization from the general meeting, raise capital by a private placement of shares or convertibles in Seamless of approximately 25 MSEK.

  • Seamless has secured a new order in Africa for its proprietary wireless POS terminal. The order is worth USD 2.4 million and is the latest in a series of orders that the Transaction Switch division has received during the third quarter in the rapidly growing African market. In total, Seamless has now received orders valued at USD 5.3 million in Africa.

  • Belgium’s leading pharmaceutical supplier Febelco has signed an agreement with Seamless to introduce the company’s SEQR mobile payment solution. Initially, SEQR is now being introduced as a payment method in some 150 webstores of a total of 2,000 that can comprise Febelco’s online solution Febelnet.

  • SEQR’s new reward for its loyal users - 25 SEK reward to SEQR customers each time they recommend the service to a new user. In addition to receiving cashback on all purchases, users will also be rewarded for recommending friends and family.

  • NFC technology included in SEQR – during the first quarter of 2016 the SEQR consumers will be able to make payments using anyc NFC card terminal. Number of card terminals supporting the NFC technology is forecasted to 24 million in 2015.

  • Seamless is planning to implement a private placement in its subsidiary SEQR. The proposed transaction structure would create a beneficial situation for Seamless shareholders.

CEO’s Comment

The third quarter has been especially intense for Seamless – both in terms of financial growth and product development. Our revenues continue to rise sharply and reached approximately SEK 75 million at the end of this quarter, an increase of 75 percent compared to the same period last year. After the quarter’s close, we launched some of our most significant product innovations for SEQR. In addition, we have begun the process of finding one or more co-investors for SEQR.

All three of our divisions performed exceptionally well. The Transaction Switch and the Distribution divisions grew significantly – up 217 and 53 percent respectively for our mobile payment service SEQR, revenues have remained largely unchanged over the first nine months, this despite a steady increase in the number of merchants who are offering SEQR as a payment solution.

It is not infrequent that I am asked how it is possible that revenues for SEQR are not rising when we have such a strong

growth in the number of new stores that have adopted our mobile payment solution. The explanation is quite simple. We often offer a reduced fee for a period of time to facilitate the decision to introduce SEQR as a payment solution. Therefore, there will be a lag in revenues, even though the number of transactions are substantially increasing, which itself is an indicator of future income.

SEQR has further consolidated its position as the most technologically powerful mobile payment solution. At the beginning of next year SEQR users will be able to automatically pay by means of Near Field Communication (NFC). It will then not matter whether a retailer has signed a contract with SEQR or not; but rather it will be sufficient that the store has a payment terminal that supports NFC. This technology is expected to find widespread acceptance, as it is the solution Apple has chosen. Already by the end of the year, the number of POS terminals that support NFC technology is expected to reach 24 million. We regard Apple’s entrance into the market for mobile payments as something positive, as it will hasten the transition to this method of payment.  

The other major development of our services is that we have introduced a remittance service, which makes it possible to make international payments between SEQR users. The recipient receives the money in their local currency. Initially, the service is free of charge. The charge for this type of service is on average 8 percent of the amount transferred. Our assessment is that this customer segment is price sensitive, which we believe will have a positive impact on the interest in our solution. The market for remittance services is extremely large and has generated revenues of approximately $600 billion in 2014.

Perhaps the most exciting news for our shareholders that we are now seeking strategic co-investors for SEQR, which today is a wholly-owned subsidiary. With the assistance of our financial advisors, who have broad international expertise and reach, our ambition is to bring in enough capital in order to be able to leverage our technological advantage and expand without being hampered by restrictions in terms of financial resources. With this co-investment, Seamless shareholders will continue to receive the benefit of the value contained in SEQR and additionally acquire a market valuation of what we have achieved with our mobile payment service, without having to engage in further financing rounds. Meanwhile Seamless owns 100 percent of the fast growing and profitable Transaction Switch and Distribution divisions.

Peter Fredell

CEO

CONSOLIDATED

Revenue

Seamless’ revenues increased during the third quarter by 74 percent to SEK 74 034 thousand (42 662). The sales are distributed between the various business segments, with 28 percent (16) from the Transaction Switch business segment, 70 percent (76) from the Distribution business segment, and 2 percent (5) from the SEQR business segment.

Financial Result

The consolidated operating loss amounted to SEK -27 775 thousand (-40 738) in the second quarter.

Second quarter net losses from financial items amounted to SEK -1 575 thousand (-27).

Earnings per share amounted to SEK -0.70 (-0.97) for the quarter.

Personnel

We had a total of 154 (160) employees at end of the quarter. In addition to this, Seamless has retained approximately 50 consultants – primarily in India, Ghana and Pakistan.

Investments

During the quarter, investments have been made in a total amount of SEK 1 303 thousand (10 998). Product development costs have been capitalized at a value of SEK 4 393 thousand (5 587), while depreciation taken and amortization amounted to SEK -3 983 thousand (-5 014).

Cash flow and financial position

Cash flow from operating activities amounted to SEK -25 843 thousand (-35 627) for the third quarter. Bank deposits and cash equivalents at the end of the quarter amounted to SEK 28 109 thousand (175 050). The company needs a liquidity fund of 2 MSEK in the Swedish operations to maintain its money transmitter license from the Financial Supervisory Authority. Corresponding liquidity base for the US market is appr. $ 1 million when starting up the business. A total of appr. 10.5 MSEK.

The Group has interest bearing liabilities in the form of leases for hardware amounting to

SEK -1 602 thousand (-2 396), divided between long-term debt of SEK -757 thousand (-979) and short-term debt of SEK –845 thousand (-1 417). An interest-bearing liability in the form of a convertible loan amounts to SEK 29 million with an annual interest rate of 7 percent. The interest during the third quarter amounted 445 tkr.

As SEQR should fund for long term growth, Seamless intends to bring in a strategic equity partner as co-investor in the subsidiary SEQR by a directed equity placement. Awaiting the completion of such transaction, in order to cover negative cash flow Seamless intends to, by means of the existing authorization from the general meeting, raise capital by a private placement of shares or convertibles in Seamless of approximately 25 MSEK.

The Company has no interest-bearing liabilities to banks or other credit institutions.

Seamless has an equity ratio of 51 (85) percent.

Acquisition of customers

As of February 2015 customer lists were purchased. When the final settlement was signed the seller was obliged to repay the purchase price plus approximately SEK 600 thousands in accordance with the settlement agreement. The additional SEK 600 thousands is accounted for as Other Income.

PARENT COMPANY

The parent company’s net sales for the quarter amounted to SEK 1 963 thousand (5 393) and net financial result amounted to a loss of SEK -77 306 thousand (-275). A write-down of shares in subsidiaries have had a one-time effect of SEK -74 million. Net gains/losses in the parent company from financial items amounted to SEK -75 464 thousand (-103), and the parent company had bank deposits/cash on hand in the amount of SEK 326 thousand (150 482) at the close of the quarter. The parent company had 4 (5) employees at the close of the quarter.

SIGNIFICANT EVENTS DURING THE PERIOD JANUARY – SEPTEMBER 2015

  • Seamless’ U.S. subsidiary received licenses for payment services in the United States, known as a “Money Transmitter License”.

  • Seamless issued SEK 29 million of convertible debentures. The board of directors of Seamless resolved to issue these bonds pursuant to the authorization granted at the latest annual general meeting of the company.

  • Seamless launched tomorrow’s digital cash register, the company’s SEQR payment solution. All SEQR users will have access to the digital cash register, which becomes a standard feature of the SEQR app.

  • SEQR now available in all 134 Swedish JYSK stores.

  • Seamless’ transaction received a substantial order for Nigeria and Ghana from a leading African mobile operator group for the installation of its transaction switch.

  • SEQR launches MyShop – the service that allows everyone to start-up a mobile e-commerce shop. The new MyShop feature in the SEQR app provides all users their own shop with a simple, secure and free of charge payment solution.

  • SEQR is available in more than 500 Colruyt, Okay, Bio-Planet, Cru, Dreamland, Dreambaby stores as well as independent Spar stores.

  • SEQR releases Instant Checkout and strengths in e-commerce.

  • SEQR goes live in Great Britain and the United States during the quarter, and is now available in 12 different countries.

  • Seamless Vice President Ingrid Lindström will be leaving her position in autumn 2015.

  • SEQR advertised the best rebate program in the market and connects the service directly to one’s bank account.

  • In the spring of 2015, SEQR was rolled out at Q-Park’s 2500 payment machines around the country.

  • Seamless has developed plug-ins for some of the world’s largest e-commerce platforms such as Magento, OpenCart, PrestaShop and WooCommerce. This investment means that hundreds of thousands of online merchants will be able to connect SEQR to their web shops and offer their customers the possibility of payment by mobile device.

  • The migration of Ingram Micro’s customers. The anticipated annual revenues for the customers who migrate to Seamless amounts to about SEK 70-75 million.

  • Annika Blomé, Chief Product Officer, became a new member of Group Management. At the same time, Anders Forssten resigned as Chief Marketing Officer.

TRANSACTIONS WITH CLOSLEY RELATED PARTIES

Seamless has not engaged in any transactions with closely related parties.

OTHER

Accounting Policies

This quarterly report has been prepared in accordance with IAS 34, Interim Financial Reporting, which is consistent with Swedish law via the application of the Swedish Financial Reporting Board’s Recommendation RFR 1, Supplementary Accounting Policies for Groups, and RFR 2, Accounting for Legal Entities, in regard to the parent company. The same accounting policies, definitions of key figures, and methods of computation have been applied as in the most recent annual report for both the Group and the Parent Company, unless otherwise noted below.

Significant risks and uncertainties in the business activities

Seamless’ business operations are affected by a number of external factors where various risk factors may have an impact on the Company. These risk factors may result in an impact on the Company’s ability to achieve its business objectives or targets. Seamless is in need of additional liquidity. As SEQR should fund for long term growth, Seamless intends to bring in a strategic equity partner as co-investor in the subsidiary SEQR by a directed equity placement. Awaiting the completion of such transaction, in order to cover negative cash flow Seamless intends to, by means of the existing authorization from the general meeting, raise capital by a private placement of shares or convertibles in Seamless of approximately 25 MSEK.

This report contains forward looking statements that are based on Seamless’ management’s current expectations. Even though management believes that the expectations which are stated in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct. Accordingly, future results could materially differ from those stated or implied in the forward-looking information due to, among other things, changes in economic, market and competitive conditions, changes in the regulatory environment and other political or governmental measures, fluctuations in exchange rates, and other factors. For further reference, please refer to the statement in the latest Annual Report on its pages 16-17.

FINANCIAL INFORMATION

Group report over total earnings SEK thousand Jul-Sept2015 Jul-Sept2014 Jan-Sept 2015 Jan-Sept 2014 Full-Year2014
Net Sales 74 034 42 663 201 123 127 540 170 754
Other operating income -1 247 597 167 1 662 1 566
Material costs -62 525 -35 837 -156 538 -105 313 -141 627
Other external costs -17 758 -21 615 -54 947 -59 153 -84 844
Personnel costs -16 168 -21 175 -57 153 -64 911 -92 125
Depreciation -3 983 -5 014 -16 069 -12 610 -17 639
Other operating costs -127 -357 -432 -902 -1 082
Operating result -27 775 -40 738 -83 848 -113 686 -164 997
Financial net -1 575 -27 -1 650 -212 482
Profit before tax -29 350 -40 765 -85 499 -113 898 -164 515
Income tax -42 -29 -190 -81 -276
Profit for the period -29 392 -40 794 -85 688 -113 980 -164 792
OTHER COMPREHENSIVE INCOME
Currency translation differences 155 101 574 419 609
Total comprehensive income attributable to parent company shareholders -29 237 -40 693 -85 115 -113 560 -164 183
Consolidated Balance SheetSEK thousand Sept 30 2015   Sept 302014 Dec 312014
ASSETS
Intangible assets 42 844 39 842 41 631
- of which goodwill 5 966 5 820 6 032
- of which capitalized development costs 34 275 32 779 34 362
- of which customer agreements 993 1 198 1 198
- of which other intangible assets 1 610 45 39
Tangible fixed assets 15 834 15 007 16 379
Deferred tax 27 817 27 768 27 787
Other long-term receivables 7 515 470 2 094
Inventories of finished goods 9 010 1 704 8 472
Accounts receivables 41 825 21 262 25 048
Other receivables 21 532 13 472 23 532
Prepaid expenses and accrued income 10 936 3 938 6 203
Cash and cash equivalents 28 109 175 050 105 273
Total assets 205 421 298 513 256 419
EQUITY AND LIABILITIES
Equity 105 738 253 998 190 365
Appropriation 633 403 654
Other non-current liabilities 29 952 979 423
Deferred tax liability 345 317 339
Trade accounts payable 30 714 14 930 29 381
Current tax liability 453 519 232
Other current liabilities 4 364 11 832 15 827
Accrued expenses and deferred income 33 223 15 535 19 198
Total Equity and Liabilities 205 421 298 513 256 419
Consolidated statement of changes in equity,SEK thousand Jul-Sept2015 Jul-Sept2014 Jan-Sept 2015 Jan-Sept 2014 Full-Year2014
Balance at start of period 133 971 294 691 190 365 367 457 367 457
Comprehensive income for the period -29 237 -40 694 -85 115 -113 560 -164 183
New share issue 0 - 0 - 0
Transaction costs 0 - 0 - 0
Conducted new share issue 0 - 0 - 0
Options program 1 005 - 1 005 100 100
Share repurchase 0 - -517 - -13 009
As per end of the period 105 738 253 997 105 738 253 997 190 365
Consolidated statement of cash flows,SEK thousand Jul-Sept2015 Jul-Sept2014 Jan-Sept 2015 Jan-Sept 2014 Full-Year2014
Cash flow from operations before changes in working capital -25 843 -35 627 -70 997 -100 649 -147 348
Change in working capital 4 451 -2 750 -12 399 -1 063 -1 383
Cash flow from operating activities -21 392 -38 377 -83 396 -101 712 -148 731
Cash flow from investing activities -1 212 -10 998 -24 272 -26 232 -35 740
Cash flow from financing activities 29 587 -754 29 676 -213 -13 628
Cash flow during the period 6 983 -50 129 -77 991 -128 157 -198 099
Cash and cash equivalents at beginning of period 21 020 224 807 105 273 302 766 302 765
Exchange difference of cash and cash uivalents 107 372 827 440 607
Cash and cash equivalents at end of period 28 109 175 050 28 109 175 050 105 273
Key figures Jul-Sept2015 Jul-Sept2014 Jan-Sept 2015 Jan-Sept 2014 Full-Year2014
Return on equity neg neg neg neg neg
Earnings per share, basic and diluted, SEK -0,70 -0,97 -2,04 -2,72 -3,94
Operating income, SEK thousand -27 775 -40 738 -83 848 -113 685 -164 997
Growth Net sales (compared to the same period last year) 74% -24% 58% 17% 6%
Operating margin neg neg neg neg neg
Average number of shares, basic and diluted 41 910 274 41 910 274 41 910 274 41 859 198 41 871 967
Liquidity 149% 499% 149% 499% 248%
Equity ratio 51% 85% 51% 85% 74%
Equity, SEK thousand 105 738 253 998 105 738 253 998 190 365
Equity per share, SEK 2,52 6,06 2,52 6,06 4,54
Number of employees at end of period 154 160 154 160 166
Parent company income statementSEK thousand Jul-Sept2015 Jul-Sept2014 Jan-Sept 2015 Jan-Sept 2014 Full Year 2014
Net sales 1 963 5 393 5 888 5 397 18 452
Other operating income 303 1 066 -167 1 066 6 055
Operating expenses -4 108 -6 286 -13 266 -18 801 -22 749
Operating result -1 842 172 -7 544 -12 338 1 759
Net financial items -75 464 103 -75 464 51 -270 110
Earnings before tax -77 306 275 -83 008 -12 287 -268 351
Income tax 0 0 0 0 0
Income for the period -77 306 275 -83 008 -12 287 -268 351
Parent company balance sheetSEK thousand Sept 302015 Sept 302014 Dec 312014
ASSETS
Fixed assets 51 949 227 193 32 407
Total current assets 58 076 205 264 135 857
Total Assets 110 026 432 457 168 264
EQUITY AND LIABILITIES
Equity 61 996 413 590 144 516
Long-term liabilities 29 000 - -
Short-term liabilities 19 030 18 867 23 748
Total equity and liabilities 110 026 432 457 168 264
Pledged assets - - -
Contingent liabilities None None None

Report of Review of Interim Financial Information

Introduction
We have reviewed the condensed interim financial information (interim report) of Seamless Distribution AB (publ) as of 30 September 2015 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of Review
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity.  A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Emphasis of matter

Without impacting our conclusion as stated above, we wish to bring attention to the fact that the interim report states that the financial situation is strained and that the company requires further external financing in order to finance its operations during the next 12 months. In order to ensure the company’s going concern status, it is decisive that those measures described in the interim financial report be implemented.

Stockholm 11 November 2015

Öhrlings PricewaterhouseCoopers

Niklas Renström

Authorized Public Accountant

This is the type of information that Seamless Distribution AB (publ) is required to disclose pursuant to the Securities Market Act and/or the Financial Instruments Trading Act. The information was submitted for publication on November 11, 2015 at 07:50 a.m. (CET).

CONTACT DETAILS

For further information, please contact:

Peter Fredell, CEO

Peter.fredell@seamless.se

+46 8 564 878 00

About Us

Founded in 2001 (and previously named Seamless Distribution), Invuo Technologies is a mobile payments technology company, which provides innovative B2B mobile payment services and electronic top-up systems for the financial industry, mobile operators and retailers. Our goal is to maximise value for shareholders while making positive contributions to the technology sphere.