Interim Report Nepa AB (publ) Q1 2017

TWENTY-SIX PERCENT GROWTH IN REVENUES AND GROSS PROFIT

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

FIRST QUARTER, JANUARY – MARCH 2017

  • Net sales increased by 25.9% to MSEK 51.1 (40.5)
  • Gross profit increased by 25.7% to MSEK 38.3 (30.5)
  • EBIT amounted to MSEK -4.6 (-2.0)
  • Earnings after tax amounted to MSEK -5.5 (-3.2)
  • Earnings per share amounted to SEK -0.77 (-0.69)

IMPORTANT EVENTS

DURING THE PERIOD

  • Nepa has acquired all outstanding shares (20 percent) in sales subsidiary Nepa India.
  • Since founding of Nepa in Finland, the MD for the subsidiary has owned an option for seven percent of the outstanding shares of Nepa Finland. Nepa has acquired the option and the profitable subsidiary remains wholly owned.

AFTER THE PERIOD ENDED

  • Nepa was selected to become partner in Facebook MMM Partner Program as one of the first companies globally and the first one outside of the USA. The partnership gives Nepa direct access to detailed data of all advertising campaigns on Facebook, Instagram and Audience Networks and will further strengthen Nepa’s ability to help clients increase return on media investments.
  • Simon Hay, former CEO of dunnhumby and Anne Roggeveen, professor of marketing at Babson College, Boston, USA, nominated as board members of Nepa.
  • Ken Peterson hired as MD for Nepa USA. Ken is formerly COO for Ipsos Loyalty North America and has a wide network in the important retail industry.


A WORD FROM OUR CEO  

In the first quarter of 2017, Nepa has taken several important steps towards reaching our goals of developing ActionHub and intensifying our expansion in the UK and the USA.

In April, Nepa was selected to become the first official Facebook partner outside of the USA to work with marketing mix modelling. This is proof that our investments in our products are strengthening our competitiveness. The partnership means that Nepa gets continuous access to unique and detailed data that will help our clients optimize their investments in Facebook, Instagram, Messenger and Audience Network. It also opens doors to new clients, strengthens our brand, and creates a sense of pride within our company. We are currently working to implement and launch this product update for our current clients.

Last fall, we established an office in New York to best meet our global clients’ needs within the US market. By recruiting an American MD, we are now approaching American clients. Our new MD in the US is Ken Peterson. He was formerly COO at Ipsos Loyalty, in North America, and has an extensive network in the important retail vertical. Ken has a unique experience from selling competing SaaS-platforms like InMotion, Medallia, and Foresee. He truly understands the differentiation and value of Nepa’s ActionHub®, though the combination of behavior data (what clients do in store or online) with feedback data (why clients behave as they do and what their future plans are). We are excited to welcome Ken and look forward to start approaching American companies.

With the aim to strengthen our internationalization in our two most important markets, the UK and the USA, Simon Hay and Anne Roggeveen are nominated to be elected onto the board of Nepa today. Simon has been global CEO of dunnhumby and started dunnhumby in the USA. Simon has a broad network both in the UK and the USA and has extensive experience that will help us guide the future expansion of Nepa. Anne Roggeveen is professor of retailing & marketing at Babson College in Boston, USA. With an academic background and wide network in the USA, Anne will contribute with innovation and expertise within our primary segment retail. We are hoping to welcome both Simon and Anne to Nepa during the annual general meeting this afternoon.

In the first three quarters of the year, Nepa’s net sales increased for the 44thconsecutive quarter and the growth rate increased for the fifth quarter in a row. Nepa’s growth rate in Q1 was 25.9%, which can be compared to last year’s Q1 growth of 14.4%. The gross profit increased by 25.7%. EBIT for the period was SEK -4.6 million, slightly better than expected given the seasonally weaker first quarter. Compared to 2016, Nepa currently has significantly higher personnel costs due to planned investments in our product organization and expansion in the USA and the UK. In Sweden, our largest market, Nepa shows continued growth as well as stronger net margins. This provides us with a strong base as we now take the next step in the internationalization of Nepa.

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 first quarter by 25.9 percent to kSEK 51,063 (40,543) and gross profit increased by 25.7 percent to kSEK 38,263 (30,452).

EARNINGS

The group’s EBIT amounted in the first quarter to kSEK -4,640 (-2,013) and earnings after tax amounted to kSEK -5,539 (-3,167).


GROUP INCOME STATEMENTS                                                                          

kSEK Jan-Mar 2017 Jan-Mar 2016 Full year 2016
Net sales 51 063   40 543   184 448  
Other external income 833   204   2 970  
51 896   40 747   187 417  
Direct costs -12 800   -10 091   -47 702  
Other external costs -5 796   -5 950   -20 663  
Personnel costs -36 913   -26 302   -116 059  
Depreciations -648   -324   -1 477  
Other operating costs -378   -94   -1 009  
Earnings Before Interest
and Tax
-4 640   -2 013   506
Financial income 63   11   896  
Financial costs -513   -133   -363  
Earnings Before Tax -5 089   -2 134   1 039  
Tax -450   -1 032   -2 073  
Earnings After Tax -5 539   -3 167   -1 034  
Profit attributable to the parent company’s shareholders -5 539   -2 943   -852  
Profit attributable to non-controlling interests -   -224   -182  
Number of shares, end of period (pcs.) 7 148 351 5 500 000   7 148 351  
Average number of shares during the period (pcs.) 7 148 351   4 242 857   6 313 355  
Basic and diluted earnings per share (SEK) -0.77   -0.69   -0.13  

GROUP BALANCE SHEETS

ASSETS (kSEK) March 31, 2017 March 31, 2016 December 31, 2016
Intangible assets 13 871   5 481   12 002  
Tangible assets 1 369   1 003   1 197  
Financial assets 1 734   3 050   1 560  
Sum non-current assets 16 974   9 534   14 759  
Trade receivables 31 537   21 511   32 711  
Tax receivables -   551   -  
Other current receivables 2 648   614   2 452  
Prepayments and accrued income 6 530   2 976   6 153  
Cash and cash equivalents 49 847   4 529   54 514  
Sum current assets 90 562   30 181   95 831  
TOTAL ASSETS 107 536   39 716   110 590  
EQUITY (kSEK)  
Shareholders’ equity 1 430   1 100   1 430  
Development fund 8 253   -   8 253  
Other capital contributions 77 750   3 553   77 750  
Translation difference -229   -39   140  
Retained earnings incl. net profit for the period -22 890   -9 010   -16 799  
Equity, parent company shareholder 64 313   -4 396   70 774  
Non-controlling interests   -   -741   -714  
Total equity 64 313   -5 138   70 060  
LIABILITIES (kSEK)  
Deferred Tax 654 -   654
Total Long term liabilities 654 -   654
Borrowings, current -   6 570   -  
Due to customers 9 216   7 038   6 697  
Trade payables 12 091   10 166   14 635  
Tax payables 284   - 137  
Other current liabilities 6 484   8 945   6 227  
Accrued expenses, deferred income 14 494   12 135   12 181  
Total short term liabilities 42 569   44 853   39 875  
Total liabilities 43 223 44 853   40 529
TOTAL EQUITY AND LIABILITIES 107 536   39 716   110 590  
Pledged (kSEK)  
Chattle 12 000   14 500   12 000  
Bank guarantee 3 283   3 050   3 110  
Total pledged 15 283   17 550   15 110  

GROUP CASH FLOW STATEMENTS  

kSEK Jan-Mar 2017 Jan-Mar 2016 Full year 2016
Operating activities  
Profit before tax -5 089   -2 134   1 039  
Adjustment of items not included in the cash flow 1 137   300   2 725  
Income tax paid -303   -736   -434  
Cash flow from operating activities before adjustments of working capital -4 255   -2 570   3 330  
Cash flow from changes in working capital  
Increase (-) / Decrease (+) of current receivables 602   3 312   -12 903  
Increase (+) / Decrease (-) of current liabilities 2 546   7 314   8 769  
Cash flow from operating activities -1 107   8 056   -805  
Investing activities  
Acquisitions/divestments, tangible assets -329 -   -592  
Acquisitions/divestments, intangible assets -2 343   -1 028   -8 397  
Acquisitions/divestments, group companies -714   -   -46  
Acquisitions/divestments, financial assets -174   -   -43  
Cash flow from investing activities -3 560   -1 028   -9 079  
Financing activities  
Rights issue -   -4 387   69 080  
Amortization of loans -   -1 724   -8 294  
Cash flow from financing activities   -   -6 111   60 785  
Net cash flow for the period -4 667   917   50 902  
Cash and cash equivalents at the beginning of the period 54 514   3 612   3 612  
Cash and cash equivalents at the end of the period 49 847   4 529   54 514  

GROUP KEY PERFORMANCE INDICATORS

Jan-Mar 2017 Jan-Mar 2016 Full year 2016
Net sales growth rate (%) 25.9   14.4   19.4  
EBITDA (kSEK) -3 991   -1 689   1 983  
EBITDA margin (%) Neg   Neg   1.1  
EBIT margin (%) Neg   Neg   0.3  
Profit margin (%) Neg   Neg   0.6  
Total assets (kSEK) 107 536   39 716   110 590  
Equity / Assets ratio (%) 59.8   Neg   63.4  
No. of shares, end of period (pcs.) 7 148 351   5 500 000   7 148 351  
No. of shares, average during period (pcs.) 7 148 351   4 242 857   6 313 355  
Earnings per share (SEK) -0.77   -0.69   -0.13  
Equity per share (SEK) 9.00   -0.80   9.90  
Dividend per share (SEK) n/a   n/a   0.00 [1]  
No. of employees, average (pcs.) 220   166   187  

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 Jan-Mar 2017 Jan-Mar 2016 Full year 2016
Net sales 2 400   2 075   10 909  
Other external income 436   106   957  
2 836   2 181   11 866  
Direct costs -832   -5   -2 398  
Other external costs -722   -458   -2 255  
Personnel costs -2 574   -4 328   -13 420  
Depreciations -4   -4   -16  
Other operating costs -   -   -3  
Earnings Before Interest and Tax -1 297   -2 614   -6 226  
Results from shares in group companies -   -   818  
Financial income -   -0   50  
Financial costs -   -49   -65  
Earnings After Financial Items -   -49   -5 423  
Group contributions received - - 1 224
Earnings Before Tax -1 297 -2 663 -4 199
Tax -   -472   -20  
Earnings After Tax -1 297   -3 135   -4 219  

BALANCE SHEETS, PARENT COMPANY

ASSETS (kSEK) March 31, 2017 March 31, 2016 December 31, 2016
Tangible assets 15   31   19  
Financial assets 47 359   17 479   39 559  
Sum non-current assets 47 374   17 510   39 578  
Trade receivables 79   2 149   90  
Loans to Group companies   4 633 -   4 865
Tax receivables 852   460   670  
Other current receivables 336   21   217  
Prepayments and accrued income 1 093   158   192  
Cash and cash equivalents 27 526   1   37 285  
Sum current assets 34 520   2 789 43 317  
TOTAL ASSETS 81 894   20 299   82 896  
EQUITY (kSEK)
Shareholders’ equity 1 430   1 100   1 430  
Share premium reserve   77 750   4 613   77 750  
Retained earnings -777   3 442   3 442  
Net profit for the period -1 297   -3 135   -4 219  
Total equity 77 105   6 020   78 403  
Tax allocation reserve   200   200   200  
Untaxed reserves 200   200   200
LIABILITIES (kSEK)
Borrowings, current -   1 296   -  
Borrowings from credit institutions -   100   -  
Due to customers - 1 759 -
Trade payables 353   372   740  
Borrowings from Group companies   1 863   3 398   1 416  
Other current liabilities 1 072   1 774   289  
Accrued expenses, deferred income 1 300   5 380   1 848  
Total liabilities 4 589   14 079   4 293  
TOTAL EQUITY AND LIABILITIES 81 894   20 299   82 896  
Pledged (kSEK)
Complementary for liabilities in BlueCarrot KB -   3   -  
Total pledged -   3   -  

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
Non-controlling interests Total equity
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 -   -   -   -   -2 943   -224   -3 167  
Translation difference -   -   -   140   -198   20   -39  
Rights issue -   -4 387   -   -   -   -   -4 387  
Closing balance of equity March 31, 2016 1 100   3 553   -   -39   -9 010   -741   -5 138  
THE GROUP 2017
Opening balance of equity
January 1, 2017
1 430   77 750   8 253   140   -16 799   -714   70 060  
Change in share in subsidiary -   -   -   -   -714   714   -  
Net profit of the period -   -   -   -   -5 539   -   -5 539  
Translation difference -   -   -   -369   162   -   -208  
Closing balance of equity March 31, 2017 1 430   77 750   8 253   -229   -22 890   -   64 313  
PARENT COMPANY, kSEK Sharehol­ders’ equity Other capital contributions Share premium reserve Retained earnings incl. net profit of
the period
Total equity
PARENT COMPANY 2016
Opening balance of equity
January 1, 2016
1 100   -   9 000   3 442   13 542  
Net profit of the period -   -   -   -3 135   -3 135  
Rights issue -   -   -4 387   -   -4 387  
Closing balance of equity March 31, 2016 1 100   -   4 613   307   6 020  
PARENT COMPANY 2017  
Opening balance of equity
January 1, 2017
1 430   -   77 750   -777   78 403  
Net profit of the period -   -   -   -1 297   -1 297  
Closing balance of equity March 31, 2017 1 430   -   77 750   2 074   77 105  

THE SHARE

The share capital of Nepa AB (publ) amounted, on March 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 March 31, 2017                                         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                                                                                   313,736                                                                                                                              4.4%
Handelsbanken Fonder AB                                                                                 270,000                                                                                                                             3.8%
Didner & Gerge Small and Microcap                                                                   270,000                                                                                                                             3.8%
Hans Skruvfors                                                                                                    225,000                                                                                                                             3.1%
Öhman Global Growth                                                                                         219,780                                                                                                                             3.1%
Björn Nordenborg                                                                                                165,000                                                                                                                             2.3%

Other shareholders                                                                                           1,852,735                                                                                                                           25.9%
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

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 at the Groups head office in Stockholm on 31 May 2017 at 4pm.

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 May 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, Deputy CEO 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] Suggested.

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.

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Quick facts

TWENTY-SIX PERCENT GROWTH IN REVENUES AND GROSS PROFIT
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Quotes

In April, Nepa was selected to become the first official Facebook partner outside of the USA to work with marketing mix modelling. This is proof that our investments in our products are strengthening our competitiveness.
Fredrik Östgren