TALKPOOL YEAR-END REPORT JANUARY – DECEMBER 2017

OCT 1st – DEC 31st 2017

• Net sales amounted to EUR 6 123 thousand (3 621), a 69.1 percent increase
• EBITDA of EUR 333 thousand (-67) and EBITDA margin of 5.4 percent (-1.8)
• EBIT of EUR 220 thousand (-80) and EBIT margin 3.6 percent (-2.2)
• Loss after tax of EUR -175 thousand (-145).
• Net cash flow amounted to EUR -2 871 thousand (113)

JAN 1st – DEC 31st 2017

• Net sales amounted to EUR 16 379 thousand (11 571), a 41.6 percent increase
• EBITDA of EUR 359 thousand (-364) and EBITDA margin of 2.2 percent (-3.1)
• EBIT of EUR 193 thousand (-409) and EBIT margin 1.2 percent (-3.5)
• Loss after tax of EUR -404 thousand (-664)
• Net cash flow amounted to EUR 453 thousand (-108)

OCTOBER-DECEMBER HIGHLIGHTS

• Talkpool’s third new share issue in October was substantially over-subscribed
• The important LCC Pakistan acquisition was successfully finalized at the beginning of November
• LCC Pakistan was fully consolidated in the group financials from 1 November 2017
• Talkpool AG acquired another 30% of the shares in Talkpool AB and reached the majority with 55.6%
• Digicel signed a new 5 years O&M contract and a global 10 years frame agreement with Talkpool
• The Deutsche Telekom FTTH project ramped up substantially and improved profit margins
• Talkpool and Senseair initiated collaboration within IoT for better indoor environments.
• The volumes of network implementation and green energy projects in Haiti increased significantly

CEO COMMENTS

Talkpool is specialised in connecting mobile phones, computers and other things to the internet. Towards the end of 2017, we noticed a clear trend of increasing client requests for connecting larger volumes of things to the internet. Many companies that are aspiring to play a leading role in the future internet architecture are currently lossmaking and cash flow negative. Talkpool has in this respect chosen a different approach. Through increased organic growth and strategic acquisitions, Talkpool has in 2017 become profitable again.

In the fourth quarter of 2017 Talkpool continued on its growth path and generated the highest quarterly revenue ever. Group revenue reached EUR 6 123 thousand, an increase with 82 percent from Q3. Some growth was acquired, in particular through the acquisition of LCC Pakistan, but a significant organic growth of close to EUR 800 thousand came from Haiti. EBITDA reached EUR 333 thousand or 5.4 percent, which means that the EBITDA trend has been clearly positive for over 5 quarters now. A major contributor to the positive profit development was Pakistan, but also Haiti, Belgium, Germany and Sweden performed well.

Haiti thriving
In 2006 Talkpool entered the Haitian market to support Digicel in building the first phase of its new Haitian Mobile Network. That was the start of a co-operation that has developed to a close partnership over the last 12 years. Digicel applied for many years a “two supplier-strategy”, but based on trust and Talkpool’s performance, Digicel decided to go all-in with Talkpool and make us their sole outsourced network service provider in Haiti. In October Digicel signed a five years O&M contract with Talkpool. Not only does this increase Talkpool’s basic scope of work with 50 percent, it also gives Talkpool the right of first refusal for most of the network services required by Digicel in Haiti. Revenues increased with almost EUR 800 thousand in Q4 as we ramped up. Relating to awarding Talkpool the five years O&M contract for Haiti in October, Digicel Group signed a ten years global framework agreement with Talkpool for the delivery of telecom network operation and maintenance services to all Digicel's 33 markets worldwide.

Pakistan signed and sealed
The integration of LCC Pakistan that started in November is expected to take approximately half a year. We’ve started to align LCC Pakistan’s processes, reporting, accounting, management structures and entrepreneurship with Talkpool’s business methods. LCC Pakistan’s result in November and December exceeded our expectations and it added totally EUR 1 621 thousand revenue to the group revenue in Q4. The lengthy and complex financing and acquisition activities did however require a lot of time from the management team and the significant transaction costs hit the net profit in Q4. Through the acquisition, Talkpool becomes the leading provider of network services in Pakistan and gains a strong hub in the Middle East region. LCC Pakistan has a long history of good stability and high profitability and the company generated revenues of approximately EUR 10 million in 2016 and has during many years generated surplus cash flow. The acquisition of LCC Pakistan will give Talkpool an extra push into its second strategy phase, adding an established IoT telecom site solution with an existing customer base. 

European come back
Our projects with European operators such as Belgacom, Vodafone, Orange and Deutsche Telekom developed well and these customers now constitute a new important cornerstone in Talkpool’s global growth strategy. The broadband network planning project for Deutsche Telekom in Germany also gained speed in Q4. Deutsche Telekom expanded Talkpool’s scope of work into new technical areas and new regions.  

Internet of Things
In December Talkpool AG delivered on its previously communicated plan to own the majority in Talkpool´s IoT company Talkpool AB as it acquired another 30 percent of the shares in Talkpool AB and reached a majority ownership with 55.6 percent of the shares.  

Reports from Mobile Europe and others predict that our investment in unlicensed IoT technology such as LoRa is likely to pay off. It won’t just bridge the period until 5G arrives but it is expected continue accelerating after 5G is launched. Talkpool increased its investment in Blockchain technology aimed at IoT and mobile advertisement during the fourth quarter of 2017. We’re convinced that Blockchain technology will be used in internet to increase security, avoid fraud, determine origins of digital documents and assure trustful digital transactions. Talkpool is hence gearing up not just to connect the many new things to the internet but to collect and use the new internet data in smart and secure ways.  

Talkpool also made an important step towards its goal to deliver smart IoT solutions “as a service” by winning a contract for site monitoring in Haiti to a total value of approximately USD 3 million. The solution combines the in-house IoT solution developed and owned by LCC Pakistan with network operation and maintenance services over five years. This represents an important proof that Talkpool’s strategy regarding IoT and M&A makes sense.

Innovation
Talkpool’s strategy of partnering with high quality sensor manufacturers both as assembly and sales channels, started to pay off in Q4. In addition to internet connectivity, Talkpool also provides management of the data in the cloud. Talkpool focus on control of indoor environment quality showed clearly in our order books. Towards the end of the year, Talkpool had developed and implemented several customized sensors and smart solutions measuring air quality at schools and office spaces, temperature and water consumption in apartments. The developments include a world’s first and only smart floor drain that measures moisture in house foundations and wet rooms! Insurance companies and real-estate owners have shown much interest in our innovation and several proof-of-concepts were carried out in Q4. The building data is not only interesting for landlords and house owners, but also for construction companies guaranteeing the construction quality and insurance companies granting liability insurances. A small investment for landlords, construction companies and insurance companies that can make large savings thanks to early detection of damp and mold. 

Start of a new year
Whereas this fourth quarter report carries large extraordinary costs and only partial consolidation of LCC Pakistan, we expect the Q1 report 2018 to be the first clean report with all companies consolidated. Most Talkpool markets have exceeded expectations in the beginning of the year. The LCC Pakistan acquisition opens growth opportunities in the Middle East region, and Talkpool has chosen to start a new market in Saudi Arabia. This organic expansion will be managed from our new hub in Pakistan. We expect large volumes of consulting and IoT orders to turn Saudi into one of Talkpool’s largest and most profitable markets. Talkpool will initially concentrate its efforts in Saudi on providing consulting services before increasingly focusing on IoT. Saud Arabia is planning substantial investments in Internet of Things and the Saudi Vision 2030 includes smart city projects such as the planned city of Neom where Talkpool is already involved in an early stage. The Middle East host some of the worlds most advanced smart city projects and I believe Talkpool is well positioned to become technology supplier to these mega projects. 

Talkpool also broke new technical ground as it co-founded a consortium called “JoorsChain” together with Joors and TrueChain to develop a blockchain platform to support telecom operators, media and ad-tech in transforming the mobile internet advertising industry. The fundamental idea is to create a modern ecosystem for managing micro-transactions involving several different parties in an easy, efficient and transparent way. There is a vast amount of potential future applications, while the initial focus is advertising management versus mobile users and publishers. Blockchains is a complementary technology to our IoT strategy where we use our network and security expertise. Blockchain technology adds a new dimension to internet and makes it possible to cut out expensive middle men and improve security and transparency for all kinds of transactions. After technical and commercial progress in the past months, it is becoming increasingly likely that Talkpool’s blockchain technology will get a break-through assignment.

All in all, Talkpool has started off 2018 well over our expectations and we believe that the positive development will continue during 2018. 

Erik Strömstedt, CEO

This information is inside information that Talkpool AG is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 15:45 CET on March 28, 2018.

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THIS IS TALKPOOL

Talkpool builds, maintains and improves telecommunication networks globally. Through its cutting-edge technical expertise, long experience and agile business model, Talkpool offers global telecom vendors and operators high-quality services on short notice no matter the location. Moreover, Talkpool is one of few companies with actual solutions and contracts in place in the exciting IoT-market.

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