Interim Report Nepa AB (publ)

Record sales growth in fourth quarter.

This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs.

FOURTH QUARTER, OCTOBER – DECEMBER 2016

  • Net sales increased by 25.3% to MSEK 55.2 (44.0)
  • Gross profit increased by 14.8% to MSEK 40.3 (35.1)
  • EBIT amounted to MSEK 0.4 (2.8)
  • Earnings after tax amounted to MSEK 0.6 (3.1)
  • Earnings per share amounted to SEK 0.07 (2.70)

FULL YEAR, JANUARY – DECEMBER 2016

  • Net sales increased by 19.4% to MSEK 184.4 (154.5)
  • Gross profit increased by 16.6% to MSEK 136.7 (117.3)
  • EBIT amounted to MSEK 0.5 (2.7)
  • Earnings after tax amounted to MSEK -1.0 (2.1)
  • Earnings per share amounted to SEK -0.13 (1.93)

IMPORTANT EVENTS

DURING THE PERIOD

  • In October 2016, Nepa acquired outstanding 9.9 per cent of the UK subsidiary Nepa UK Ltd, which then became a wholly owned subsidiary.
  • Lindsay Parry (formerly Cowan) new MD of Nepa UK since November 2016.

AFTER THE PERIOD ENDED

  • Nepa has acquired outstanding 20 percent of the shares in sales subsidiary Nepa India.
  • Since founding of Nepa in Finland, the MD for the subsidiary has owned an option to seven percent of the outstanding shares of Nepa Finland. Nepa has acquired the option and the profitable subsidiary remains wholly owned.
  • The board of directors have decided to change the date for annual general meeting 2017 to May 31 in order to be able to present the interim report for the first quarter of 2017 on the AGM.

A WORD FROM OUR CEO 

2016 has been a special and fantastic year in Nepa’s history. Since inception 11 years ago, we have worked on changing an industry with digital technology and at the same time build a multinational company

Two years after introducing our fastest growing product ever, the ActionHub®, we decided to take the next step in Nepa’s growth journey. To get more resources to realize our growth ambitions, we for the first time ever infused external capital as we made an IPO on the Nasdaq First North exchange on April 26th. An amazing moment for Nepa and everyone that have worked for Nepa’s growth, but also a stepping stone for a new growth journey with the ambition to:

  • Continue to grow the home market Sweden and to drive growth in existing international markets Denmark, Finland, India and Norway.
  • Invest further in our rapidly growing UK business aiming at further increase growth in Europe’s largest and the world’s second largest market.
  • Establish Nepa’s first office in the USA, driven by current clients’ demand of presence on the world’s largest market and the growth opportunities we have identified there.
  • Increase investments in Nepa’s proprietary product platform ActionHub® to achieve increased scalability and allow for further growth.
  • Invest in expansion teams needed to start up the increasingly big client projects, which at an increasing rate cover more and larger markets

2016 was characterized by four quarters with a steady increase of net sales, 14.4% in Q1, 19.8% in Q2 and 16.3% in Q3. In Q4 Nepa showed a strong growth of 25.3%, above expectations. In total 43 consecutive quarters of steady growth since inception in 2006. Gross profit grew by 14.8 percent in the fourth quarter, which is explained by a few large client deals with high data costs. The fact that the gross profit growth is not as high as the sales growth is explained by a few client assignments in the fourth quarter with high data costs. Going forward, gross profit growth is expected to correspond with sales growth. EBIT amounted to MSEK 0.4, according to expectations, given the investments in expansion and product development that we had planned to execute.

During the third quarter, we focused on creating the prerequisites for growth in the UK under a new MD and also acquired outstanding 9.9 percent of the shares which made Nepa UK a wholly-owned subsidiary. During the beginning of the autumn we have strengthened the expansion team that will drive our internationalization with efficient structures, processes and scalability. We invested in our product development team consisting of system developers and data scientists with the ambition to keep driving the development within our field on a global basis.

In the fourth quarter, we continued to realize our growth agenda and, driven by current clients’ needs, we opened our first office in the USA, in New York. Next step for Nepa USA is to build a local organization that can serve our current client locally and as a next step attract local clients.

For the full year of 2016 net sales increased by 19.4 percent to MSEK 184.4, which is slightly above expectation and can be explained by solid growth in all markets. Growth has been especially strong in Finland (+37 percent) and UK (+31 percent). Gross profit for the year increased by 16.6 percent, in line with expectations. EBIT amounted to MSEK 0.5 during 2016. Compared to 2015 Nepa showed a lower EBIT margin in 2016, which is explained by increased investments in personnel for driving expansion faster and more efficiently, strengthened team in the UK and the USA and investments in product development resources.

In the beginning of 2017 we continued the strategy to have all subsidiaries wholly owned. Previously outstanding 20 percent of the shares in our Indian sales company, as well as outstanding option for MD in Finland to acquire 7 percent in our Finnish subsidiary have been acquired.

The fact that we during 2016 managed to conduct an IPO, start the expansion in the USA and UK and at the same time keep up a good international growth is an achievement. At the same time continue a strong growth and increasing net margins in our Swedish home market is a good testament to our organization’s abilities and lay the foundation for 2017 becoming another successful year.

Finally, I want to give my warmest thanks for a great year to all colleagues, clients, partners and shareholders. We now look forward to another exciting growth year!

Fredrik Östgren
CEO



THE GROUP

THE BUSINESS

VISION

”We change the way decisions are made”.

The digital transformation of our society is pushing companies to become more customer centric. The need to listen to and to understand customers has never been more important for business success. Through innovative solutions and software, Nepa facilitates customer oriented decision making in all parts of Nepa’s clients’ organizations.

BUSINESS CONCEPT

Nepa’s business concept is to help companies become more customer oriented, by bringing the voice of the consumer into companies’ business development and daily decision-making. Nepa combines consumer feedback data with actual behavior data in order to transform traditional insights into financially quantifiable actions.

BUSINESS MODEL

Nepa is a groundbreaking growth company within the research industry that offers innovative solutions and software for delivering actionable insights to clients. Nepa has developed automated processed for continuous data gathering, data analysis and the distribution of actionable insights.

More than 65 percent of Nepa’s revenues stem from subscription revenues defined as agreements that last at least 12 months. Other revenues stem from solving client specific business challenges, always with the ambition to create a long-term subscription business model and/or to develop highly scalable products that can be applied to other clients and in other industry verticals.  

The proprietary platform ActionHub® is sold as a combination of:

  1. A platform license for managing customer feedback with an interface that automatically enriches clients’ current IT infrastructure with behavior data.
  2. Standardized products – ActionHub® Applications Suite.
  3. Solving client specific business challenges.

Nepa’s sales strategy entails solving client specific business challenges by utilizing proprietary ready-made and scalable analytics modules, which results in cost effective customization.

DEVELOPMENT OF THE GROUP

REVENUES

Net sales increased in the fourth quarter by 25.3 percent to kSEK 55,157 (44,014) and gross profit increased by 14.8 percent to kSEK 40,260 (35,078).

For the full year of 2016, net sales increased by 19.4 percent to kSEK 184,448 (154,499) and gross profit increased by 16.6 percent to kSEK 136,746 (117,270).

EARNINGS

The group’s EBIT amounted in the fourth quarter to kSEK 413 (2,772) and earnings after tax amounted to kSEK 563 (3,112).

For the full year of 2016, EBIT amounted to kSEK 506 (2,678) and earnings after tax amounted to kSEK ‑1,034 (2,085).


GROUP INCOME STATEMENTS                                                                          

kSEK Q4 2016 Q4 2015 Full year 2016 Full year 2015[1] 
Net sales 55 157  44 014  184 448  154 499
Other external income 1 690  1 073  2 970  1 746
56 847  45 087  187 417  156 245
Direct costs -14 897  -8 936  -47 702  -37 229 
Other external costs -5 649  -7 228  -20 663  -21 546 
Personnel costs -35 019  -25 871  -116 059  -93 817 
Depreciations -496  -116  -1 477  -468 
Other operating costs -373  -164  -1 009  -507 
Earnings Before Interest
and Tax
413  2 772 506 2 678 
Financial income 803  -31  896  95 
Financial costs -183  -295  -363  -403 
Earnings Before Tax 1 033  2 447  1 039  2 370 
Tax -470  666  -2 073  -286 
Earnings After Tax 563  3 112  -1 034  2 085 
Profit attributable to the parent company’s shareholders 506  2 968  -852  2 121 
Profit attributable to non-controlling interests 56  144  -182  -36 
Number of shares, end of period (pcs.) 7 148 351  1 100 000  7 148 351  1 100 000
Average number of shares during the period (pcs.) 7 148 351  1 100 000  6 313 355  1 100 000
Basic and diluted earnings per share (SEK) 0.07  2.70  -0.13  1.93

GROUP BALANCE SHEETS

ASSETS (kSEK) December 31, 2016 December 31, 2015
Intangible assets 12 002  4 688 
Tangible assets 1 197  1 108 
Financial assets 1 560  3 050 
Sum non-current assets 14 759  8 846 
Trade receivables 32 711  25 414 
Tax receivables -  848 
Other current receivables 2 452  720 
Prepayments and accrued income 6 153  2 279 
Cash and cash equivalents 54 514  3 612 
Sum current assets 95 831  32 873 
TOTAL ASSETS 110 590  41 719 
EQUITY (kSEK) 
Shareholders’ equity 1 430  1 100 
Development fund 8 253  - 
Other capital contributions 77 750  7 940 
Translation difference 140  -179 
Retained earnings incl. net profit for the period -16 799  -5 869 
Equity, parent company shareholder 70 774  2 992 
Minority interest -714  -537 
Total equity 70 060  2 455 
LIABILITIES (kSEK) 
Deferred Tax 654 -
Total Long term liabilities 654 -
Borrowings, current -  8 294 
Trade payables 14 635  8 671 
Tax payables 137  - 
Other current liabilities 6 227  11 227 
Due to customers 6 697  6 269 
Accrued expenses, deferred income 12 181  4 803 
Total short term liabilities 39 875  39 264 
Total liabilities 40 529 39 264
TOTAL EQUITY AND LIABILITIES 110 590  41 719 
Pledged (kSEK) 
Chattle 12 000  14 500 
Bank guarantee 3 110  3 050 
Total pledged 15 110  17 550 

GROUP CASH FLOW STATEMENTS 

kSEK Full year 2016 Full year 2015[2] 
Operating activities 
Profit before tax 1 039  2 370
Adjustment of items not included in the cash flow 2 725  259
Income tax paid -434  -367
Cash flow from operating activities before adjustments of working capital 3 330  2 263
Cash flow from changes in working capital 
Increase (-) / Decrease (+) of current receivables -12 903  -10 032
Increase (+) / Decrease (-) of current liabilities 8 769  1 520
Cash flow from operating activities -805  -6 250
Investing activities 
Acquisitions/divestments, group companies -46  - 
Acquisitions/divestments, tangible assets -592 -696 
Acquisitions/divestments, intangible assets -8 397  -4 688 
Acquisitions/divestments, financial assets -43  -3 050 
Cash flow from investing activities -9 079  -8 434
Financing activities 
Rights issue 69 080  -
New borrowings -  5 580
Amortization of loans -8 294  -
Cash flow from financing activities  60 785  5 580
Net cash flow for the period 50 902  -9 104
Cash and cash equivalents at the beginning of the period 3 612  12 716
Cash and cash equivalents at the end of the period 54 514  3 612

GROUP KEY PERFORMANCE INDICATORS

Q4 2016 Q4 2015 Full year 2016 Full year 2015[3] 
Net sales growth rate (%) 25.3  n/a  19.4  24.5
EBITDA (kSEK) 908  2 888  1 983  3 146
EBITDA margin (%) 1.6  6.6  1.1  2.0
EBIT margin (%) 0.7  6.3  0.3  1.7
Profit margin (%) 1.9  5.6  0.6  1.5
Total assets (kSEK) 110 590  41 719  110 590  41 719
Equity / Assets ratio (%) 63.4  5.9  63.4  5.9
No. of shares, end of period (pcs.) 7 148 351  1 100 000  7 148 351  1 100 000
No. of shares, average during period (pcs.) 7 148 351  1 100 000  6 313 355  1 100 000
Earnings per share (SEK) 0.07  2.70  -0.13  1.93
Equity per share (SEK) 9.90  2.72  9.90  2.72
Dividend per share (SEK) n/a  n/a  0.00[4]  0.00
No. of employees, average (pcs.) 210  147  187  161

Definitions

Growth rate. Percent of growth in net sales compared to a previous period. 

EBITDA. Earnings before interest, taxes, depreciation and amortization.

EBITDA margin. EBITDA as a percentage of net sales.                   

EBIT margin. EBIT as a percentage of net sales. 

Profit margin. Earnings before tax as a percent of net sales.

Equity / Assets ratio. Equity as a percentage of total assets. 

Earnings per share. Profit attributable to the parent company’s shareholders divided by average number of outstanding shares.  

Equity per share. Equity divided by number of outstanding shares.                                                 

Dividend per share. Dividend for the period divided by the number of outstanding shares at the time of dividend. 

No. of employees, average. Number of FTE’s on average during the period. 


PARENT COMPANY

INCOME STATEMENTS, PARENT COMPANY

kSEK Q4 2016 Q4 2015 Full year 2016 Full year 2015[5] 
Net sales 2 358  -  10 909  - 
Other external income 851  491  957  3 082 
3 209  491  11 866  3 082 
Direct costs -1 143  -  -2 398  - 
Other external costs -1 011  -312  -2 255  -1 777 
Personnel costs -2 655  -4 119  -13 420  -6 029 
Depreciations -4  -4  -16  -16 
Other operating costs -3  -  -3  - 
Earnings Before Interest and Tax -1 606  -3 945  -6 226  -4 740 
Results from shares in group companies 818  4 928  818  4 928 
Financial income 50  1  50  1 
Financial costs 0  -5  -65  -44 
Earnings After Financial Items -739  979  -5 423  145 
Group contributions received 1 224 - 1 224 -
Earnings Before Tax 486 979 -4 199 145
Tax 4  -  -20  -43 
Earnings After Tax 489  979  -4 219  102 

BALANCE SHEETS, PARENT COMPANY

ASSETS (kSEK) December 31, 2016 December 31, 2015
Tangible assets 19  35 
Financial assets 15 059  17 479 
Sum non-current assets 15 078  17 514 
Trade receivables 90  - 
Loans to Group companies  29 365 915
Tax receivables 670  637 
Other current receivables 217  13 
Prepayments and accrued income 192  68 
Cash and cash equivalents 37 285  1 
Sum current assets 67 817  1 635 
TOTAL ASSETS 82 896  19 148 
EQUITY (kSEK)
Shareholders’ equity 1 430  1 100 
Share premium reserve  77 750  9 000 
Retained earnings 3 442  3 340 
Net profit for the period -4 219  102 
Total equity 78 403  13 542 
Tax allocation reserve  200  200 
Untaxed reserves 200 200 
LIABILITIES (kSEK)
Borrowings, current -  1 173 
Borrowings from credit institutions -  136 
Trade payables 740  67 
Borrowings from Group companies  1 416  286 
Tax payables -  79 
Other current liabilities 289  2 511 
Due to customers -  113 
Accrued expenses, deferred income 1 848  1 041 
Total liabilities 4 293  5 406 
TOTAL EQUITY AND LIABILITIES 82 896  19 148 
Pledged (kSEK)
Complementary for liabilities in BlueCarrot KB -  6 359 
Total pledged -  6 359 

NOTE: Changes in equity in summary

THE GROUP, kSEK Share-
hol­ders’ equity
Other capital contribu-tions Develop-ment
fund
Transla-tion difference Retained earnings incl. net profit of
the period
Minority interest Total equity
THE GROUP 2015
Opening balance of equity
January 1, 2015
100  -  -  -7  941  -492  542 
Net profit of the period -  -  -  -3  2 123  -36  2 085 
Translation difference -  -  -  -169  7  -9  -172 
Other capital contributions 7 940 -8 940 -1 000
Rights issue 1 000  -  -  -  -  -  1 000 
Closing balance of equity December 31, 2015 1 100  7 940  -  -179  -5 869  -537  2 455 
THE GROUP 2016
Opening balance of equity
January 1, 2016
1 100  7 940  -  -179  -5 869  -537  2 455 
Net profit of the period -  -  -  -  -852  -182  -1 034 
Translation difference -  -  -  319  -764  5  -441 
Development fund -  -  8 253  -  -8 253  -  - 
Other capital contributions - 1 060 - - -1 060 - -
Rights issue 330  68 750  -  -  -  -  69 080 
Closing balance of equity December 31, 2016 1 430  77 750  8 253  140  -16 799  -714  70 060 
PARENT COMPANY, kSEK Sharehol­ders’ equity Other capital contributions Share premium reserve Retained earnings incl. net profit of
the period
Total equity
PARENT COMPANY 2015
Opening balance of equity
January 1, 2015
100  -  -  3 340  3 440 
Net profit of the period -  -  -  102  102 
Rights issue 1 000  -  9 000  -  10 000 
Closing balance of equity December 31, 2015 1 100  -  9 000  3 442  13 542 
PARENT COMPANY 2016 
Opening balance of equity
January 1, 2016
1 100  -  9 000  3 442  13 542 
Net profit of the period -  -  -  -4 219  -4 219 
Rights issue 330  68 750  -  -  69 080 
Closing balance of equity December 31, 2016 1 430  68 750  9 000  -777  78 403 

THE SHARE

The share capital f Nepa AB (publ) amounted, on December 31, 2016 to SEK 1,429,670.20 divided into 7,148,351 shares, each with a nominal value of SEK 0.20.

Nepa AB (publ) is listed on the Nasdaq First North stock exchange since April 26th, 2016 under the ticker NEPA.

A trading unit consists of onehoundredandten (110) shares. All shares are of the same series and have the same voting rights and dividends rights.

Ten largest shareholders as of December 31, 2016                                      Number of shares                    Share/Votes

Ulrich Boyer                                                                                                    1,764,204                                  24.7%
Fredrik Östgren                                                                                                  950,895                                  13.3%
P-O Westerlund                                                                                                 675,765                                    9.5%
Niclas Öhman                                                                                                     441,236                                   6.2%
AMF Aktiefond Småbolag                                                                                  263,736                                    3.7%
Handelsbanken Fonder AB                                                                                 250,000                                   3.5%
Didner & Gerge Small and Microcap                                                                  236,978                                    3.3%
Hans Skruvfors                                                                                                   225,000                                    3.1%
Öhman Global Growth                                                                                       219,780                                     3.1%
Bo Mattsson, via company                                                                                 204,366                                     2.9%

Other shareholders                                                                                         1,916,391                                    26.8%
Total number of shares                                                                                   7,148,351                                   100.0%                                                                                                                  

ACCOUNTING PRINCIPLES

The Group accounts have been established according to Swedish GAAP (Årsredovisningslagen and Bokfö­ringsnämndens allmänna råd 2012:1 Årsredovisning och koncern­redovisning (K3)). The Group consists of the parent company Nepa AB (publ) and eight subsidiaries, six of which non-Swedish. Accounting principles and valuation principles correspond to the ones used in the latest annual report.

RISKS AND UNCERTAINCIES

Nepa faces a number of business risks and market risks, including the dependency of qualified personnel, the ability to handle growth and technological development.

AUDITING

This interim report has not been audited by the company’s auditors.

CERTIFIED ADVISER

Erik Penser Bank is Nepa’s Certified Adviser.


FINANCIAL CALENDAR

Annual general meeting 2017                                          31 May 2017 (note: new date)

Interim report 1 January – 31 March 2017                       31 May 2017

Interim report 1 April – 30 June 2017                               31 August 2017

Interim report 1 July – 30 September 2017                      30 November 2017

Year-end report 2017                                                        28 March 2018

ANNUAL GENERAL MEETING AND DIVIDENDS

Annual general meeting will be held on 31 May 2017 in Stockholm. The annual report will be published on 17 May 2017 and will be available at the head office.

The Board of Directors have decided to propose to the annual general meeting that no dividends will be paid for fiscal year 2016.

CERTIFICATION 

The Board of Directors and the CEO certify that this interim report provides a correct depiction of the Group’s and parent company’s businesses, standings and results, and that it describes the relevant risk factors and uncertainties the company is facing.

Stockholm, 31 March 2017
The Board of Directors of Nepa AB (publ)

Ulrich Boyer                          Bo Mattsson                         P-O Westerlund

Chairman of the board         Board member                      Board member

Niclas Öhman                       Fredrik Östgren

Board member                     CEO

For further information, please contact:

Fredrik Östgren, CEO                          P-O Westerlund, EVP and CFO
+46 733 345 069                                  +46 706 404 824
fredrik.ostgren@nepa.com                   p-o.westerlund@nepa.com

This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs.


[1] Pro forma after the acquisition of Nepa Sweden AB in accordance with the Annual Report, note 17.

[2] Pro forma after the acquisition of Nepa Sweden AB in accordance with note 19 in the annual report.

[3] Pro forma after the acquisition of Nepa Sweden AB in accordance with note 19 in the annual report.

[4] Suggested.

[5] Pro forma after the acquisition of Nepa Sweden AB in accordance with note 19 in the annual report.

Nepa is one of the fastest growing companies in Swedish history, enabling organisations to improve their business performance by becoming customer centric at their fingertips. By merging behavioural data with customer feedback data in our ActionHub® platform, our clients can turn the voice and the footprints of the consumer into financial KPI’s and provide it to the right stakeholder in real-time.

Nepa serves some of the world’s most reputable brands in 50+ countries with local presence in China (rep), Denmark, Finland, India, Norway, Singapore (rep), Sweden, the UK and the US.

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About Us

Nepa is one of the fastest growing companies in Swedish history, enabling organisations to improve their business performance by becoming customer centric at their fingertips. By merging behavioural data with customer feedback data in our Consumer Science platform, our clients can turn the voice and the footprints of the consumer into financial KPI’s and provide it to the right stakeholder in real-time. Headquartered in Stockholm and with local presence in Helsinki, Oslo, Copenhagen, London, Mumbai, Gurgaon, New York, Miami and Denver, we help some of the world's most reputable brands in more than 50 countries to get more effect out of their marketing and sales. Nepa has been awarded DI Gasell's award for organic fast growing companies in 6 of 7 years since 2011.