Full Year Report Nepa AB (publ), Q4 2018

CONTINUED GROWTH AND IMPROVED PROFITABILITY IN 2018

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

FOURTH QUARTER, OCTOBER – DECEMBER 2018

  • Net sales increased by 2.5% to MSEK 63.0 (61.4)
  • Gross profit increased by 5.5% to MSEK 50.2 (47.6)
  • EBIT was MSEK -3.6 (0.9)
  • Earnings after tax was MSEK -2.9 (0.8)
  • Earnings per share was, basic SEK -0.40 (0.11), diluted SEK -0.40 (0.11)

FULL YEAR, JANUARY – DECEMBER 2018

  • Net sales increased by 13.3% to MSEK 241.5 (213.1)
  • Gross profit increased by 15.9% to MSEK 182.9 (157.9)
  • EBIT was MSEK -13.3 (-19.8)
  • Earnings after tax was MSEK -13.9 (-20.5)
  • Earnings per share was, basic SEK -1.94 (-2.87), diluted SEK -1.94 (-2.87)

IMPORTANT EVENTS

DURING THE PERIOD

  • Dressmann, Nordic menswear fashion chain, chooses Nepa’s CX Tracker for Customer Experience measurement.
  • On December 12, Nepa carried out a directed share issue of 714,835 shares, raising proceeds of SEK 39.3 million.

AFTER THE PERIOD ENDED

  • Nepa USA start to work with Louisville City Football Club and Forward Madison F.C.


A WORD FROM OUR CEO 

In 2018, Nepa successfully executed on our strategy towards increased scalability, profitability and expansion resulting in a 16 percent increase in gross profit (compared to 15 percent in 2017). At the same time, we have increased our profitability and improved EBIT by SEK 7 million since 2017 (to SEK -13 million).

We have taken several important steps that bring us in the right direction towards increased profitability:

1) Home market Sweden – profitable growth
Nepa has furthered our market-leading position in Sweden thanks to strong sales figures for our subscription-based CX and Marketing Optimization products. Our products continue to be well positioned as our clients recognize the importance of developing brand strength in a world where consumers purchase goods and services by a click of a button. This has resulted in increased demand for our subscription-based products within both Marketing Optimization and Customer Experience, which in turn has increased our already strong net margins.

2) Established markets UK and Finland – fast, profitable growth
2018 was a breakthrough year for Nepa’s UK business – turning its first annual profit and increasing gross profit 127 percent compared to 2017. Our investments in this market have created a world class Path-to-Purchase solution that is driving significant global demand. Likewise, Finland has continued to grow and substantially increase profitability thanks to the sales of our subscription-based Marketing Optimization products. We are expecting that both profitability and growth will continue in 2019.

3) Investment market USA rapid growth market entry, investment phase

During 2018 we have invested heavily in our US expansion by establishing our sales and marketing team in the US. We have a great team in place and have created the right conditions to be able to break through in the US market. Our vertical focus on gaming and sports has led to work with clients such as Psyonix, Louisville City Football Club and Forward Madison F.C.. We now have US clients in all product areas.

General uncertainty on the international markets affected our clients’ investment sentiment negatively in Q4 2018, which in turn affected our project-based sales in what is typically the strongest quarter for project-based sales. Our group gross profit increased by 5.4 percent during the quarter and at the same time gross profit from project based decreased by 20 percent. We have since witnessed demand return to historical levels.

Our profitability improvement in 2018 is the result of a long-term focus on increased scalability. In 2018 the relationship between our gross profit growth and increase in personnel costs has improved substantially. Gross profit increased by 16 percent while personnel costs increased by 8 percent. This is an improvement from 2017 when gross profit grew by 15 percent while personnel costs increased by 31 percent.

Finally, I would like to take the opportunity to welcome all shareholders who participated in the rights issue that completed on December 12, 2018. We are entering 2019 in a strong financial position to continue our focus on growth, scalability and profitability. I look forward to bringing Nepa to the next level during 2019.

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 processes 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 Consumer Science Platform® 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 – Consumer Science Platform® 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 2.5 percent to kSEK 62,972 (61,441) and gross profit increased by 5.5 percent to kSEK 50,155 (47,556).

For the full year of 2018, net sales increased by 13.3 percent to kSEK 241,485 (213,148) and gross profit increased by 15.9 percent to kSEK 182,880 (157,859).

EARNINGS

The group’s EBIT amounted in the fourth quarter to kSEK -3,605 (912) and earnings after tax amounted to kSEK -2,949 (794).

For the full year of 2018, the group’s EBIT amounted to kSEK -13,251 (-19,761) and earnings after tax amounted to kSEK -13,941 (-20,533).


GROUP INCOME STATEMENTS                                                                                                    

kSEK Oct-Dec 2018 Oct-Dec 2017 Full year 2018 Full year 2017
Net sales 62 972 61 441 241 485  213 148
Other external income 926 1 109 3 788  3 340
63 898 62 550 245 273  216 488
Direct costs -12 817 -13 885 -58 604  -55 289
Other external costs -7 502 -5 417 -27 761  -24 114
Personnel costs -44 885 -40 618 -162 784  -151 404
Depreciations -1 530 -977 -5 314  -3 326
Other operating costs -769 -741 -4 061  -2 116
Earnings Before Interest
and Tax
-3 605 912 -13 251 -19 761
Financial income 475 230 1 571 1 168
Financial costs -308 -337 -1 273 -1 926
Earnings Before Tax -3 439 806 -12 953 -20 519
Tax 490 -12 -988 -15
Earnings After Tax -2 949 794 -13 941 -20 533
Profit attributable to the parent company’s shareholders -2 949 794 -13 941 -20 533
Number of shares, end of period (pcs.) 7 863 186  7 148 351  7 863 186  7 148 351
Average number of shares during the period (pcs.) 7 303 750 7 148 351 7 187 520 7 148 351
Earnings per share, basic (SEK) -0.40 0.11  -1.94 -2.87
Earnings per share, diluted (SEK) -0.40 0.11  -1.94 -2.87

GROUP BALANCE SHEETS

ASSETS (kSEK) December 31, 2018 December 31, 2017
Intangible assets 25 939 21 006
Tangible assets 742 811 
Financial assets 855 415 
Sum non-current assets 27 536 22 232 
Trade receivables 49 559 46 610 
Tax receivables 2 349 1 129 
Other current receivables 2 638 3 339 
Prepayments and accrued income 10 848 5 281 
Cash and cash equivalents 45 210 22 827 
Sum current assets 110 605 79 186 
TOTAL ASSETS 138 141 101 417 
EQUITY (kSEK) 
Shareholders’ equity 1 573 1 430 
Development fund 24 253 18 093 
Other capital contributions 117 534 78 964 
Translation difference -597 -545 
Retained earnings incl. net profit for the period -67 987 -47 886 
Total equity 74 776 50 055 
LIABILITIES (kSEK) 
Deferred Tax 540 550 
Total long-term liabilities 540 550 
Due to customers 18 044 13 804 
Trade payables 15 961 10 325 
Other current liabilities 9 579 9 539 
Accrued expenses, deferred income 19 241  17 144 
Total short-term liabilities  62 825 50 812 
Total liabilities 63 365  51 362 
TOTAL EQUITY AND LIABILITIES 138 141 101 417 
Pledged (kSEK) 
Chattle 14 000 12 000 
Bank guarantee - 1 500 
Total pledged 14 000 13 500 

GROUP CASH FLOW STATEMENTS 

kSEK Full year 2018 Full year 2017
Operating activities 
Profit before tax -12 953  -20 519
Adjustment of items not included in the cash flow 6 433 3 511
Income tax paid -2 219 -1 385
Cash flow from operating activities before adjustments of working capital -8 738 -18 392
Cash flow from changes in working capital 
Increase (-) / Decrease (+) of current receivables -7 829 -12 413
Increase (+) / Decrease (-) of current liabilities 12 013 11 074
Cash flow from operating activities -4 554 -19 731
Investing activities 
Acquisitions/divestments, tangible assets -228 -288
Acquisitions/divestments, intangible assets -9 828 -11 676
Acquisitions/divestments, financial assets -427 -356
Cash flow from investing activities -10 482 -12 320
Financing activities 
Issuance of warrants - 363
Rights issue 37 419 -
Cash flow from financing activities  37 419 363
Net cash flow for the period 22 383 -31 687
Cash and cash equivalents at the beginning of the period 22 827 54 514
Cash and cash equivalents at the end of the period 45 210 22 827

GROUP KEY PERFORMANCE INDICATORS

Oct-Dec 2018 Oct-Dec 2017 Full year 2018 Full year 2017
Net sales growth rate (%) 2.5 11.4 13.3 15.6
EBITDA (kSEK) -2 075 1 890 -7 937 -16 435
EBITDA margin (%) Neg 3.1  Neg Neg
EBIT margin (%) Neg 1.5  Neg Neg
Profit margin (%) Neg 1.3  Neg Neg
Total assets (kSEK) 138 141 101 417 138 141 101 417
Equity / Assets ratio (%) 54.1 49.4 54.1 49.4
No. of shares, end of period (pcs.) 7 863 186 7 148 351  7 863 186 7 148 351
No. of shares, average during period (pcs.) 7 303 750 7 148 351  7 187 520 7 148 351
Earnings per share, basic (SEK) -0.40 0.11 -1.94 -2.87
Earnings per share, diluted (SEK) -0.40 0.11 -1.94 -2.87
Equity per share (SEK) 9.51 7.00 9.51 7.00
Dividend per share (SEK) n/a n/a 0.00[1]  0.00
No. of employees, average (pcs.) 263 254 253 238

Definitions 

Net sales 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 Oct-Dec 2018 Oct-Dec 2017 Full year 2018 Full year 2017
Net sales - 1 930 73 8 879
Other external income 556 582 2 018 2 258
556 2 512 2 090 11 137
Direct costs - -100 - -684
Other external costs -491 -651 -2 053 -2 622
Personnel costs -2 735 -4 291 -10 552 -15 831
Depreciations - -4 -3 -16
Other operating costs - - -3 -
Earnings Before Interest and Tax  -2 669 -2 533 -10 521 -8 015 
Results from shares in group companies - -162 - -162
Financial income 244 92 492 245
Financial costs - 35 -0 33
Earnings After Financial Items  -2 425 -2 569 -10 029 -7 900 
Reversal of tax allocation reserve - 200 - 200
Earnings Before Tax -2 425 -2 369 -10 029 -7 700
Tax - - - -
Earnings After Tax  -2 425 -2 369 -10 029 -7 700 

BALANCE SHEETS, PARENT COMPANY

ASSETS (kSEK) December 31, 2018 December 31, 2017
Tangible assets - 3
Financial assets 63 137 57 547
Sum non-current assets 63 137  57 550
Trade receivables 2 626
Receivables Group companies 4 095 4 568
Tax receivables 184 670
Other current receivables - 50
Prepayments and accrued income 78 117
Cash and cash equivalents 35 570 11 056
Sum current assets 39 929 17 087
TOTAL ASSETS 103 065 74 637
EQUITY (kSEK)
Shareholders’ equity 1 573 1 430
Share premium reserve  115 026 77 750
Retained earnings -5 969 437
Net profit for the period -10 029 -7 700
Total equity 100 601 71 917
LIABILITIES (kSEK)
Trade payables 421 192
Borrowings from Group companies  - 80
Other current liabilities 359 450
Accrued expenses, deferred income 1 685 1 999
Total liabilities  2 465 2 721 
TOTAL EQUITY AND LIABILITIES 103 065 74 637

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 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 - - - - -20 533 - -20 533
Translation difference - - - -685 - - -685
Development fund - - 9 840 - -9 840 - -
Issuance of warrants - 1 214 - - - - 1 214
Closing balance of equity December 31, 2017  1 430 78 964 18 093 -545 -47 886 - 50 055
THE GROUP 2018 
Opening balance of equity
January 1, 2018
1 430 78 964 18 093 -545 -47 886 - 50 055
Net profit of the period - - - - -13 941 - -13 941
Translation difference  - - - -52 - - -52
Development fund - - 6 160 - -6 160 - -
Issuance of warrants - 1 294 - - - - 1 294
Rights issue 143 37 276 - - - - 37 419
Closing balance of equity December 31, 2018 1 573 117 534 24 253 -597 -67 987 - 74 776


PARENT COMPANY, kSEK Sharehol­ders’ equity Share premium reserve Retained earnings incl. net profit of
the period
Total equity
PARENT COMPANY 2017
Opening balance of equity
January 1, 2017
1 430 77 750 -777 78 403
Net profit of the period - - -7 700 -7 700
Issuance of warrants - - 1 214 1 214
Closing balance of equity December 31, 2017  1 430  77 750  -7 263  71 917 
PARENT COMPANY 2018 
Opening balance of equity
January 1, 2018
1 430  77 750  -7 263  71 917 
Net profit of the period - - -10 029 -10 029
Issuance of warrants - - 1 294 1 294
Rights issue 143 37 276 - 37 419
Closing balance of equity December 31, 2018  1 573 115 026 -15 998 100 601

THE SHARE

The share capital of Nepa AB (publ) amounted, on December 31, 2018 to SEK 1,572,637.20 divided into 7,863,186 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 onehundredandten (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, 2018                           Number of shares                                                                                                                    Share/Votes

Ulrich Boyer                                                                                                    1,492,624                                                                                                                              19.0%
Swedbank Robur Fonder                                                                                   873,352                                                                                                                              11.1%
Fredrik Östgren                                                                                                  696,178                                                                                                                                8.9%

Handelsbankens Fonder AB                                                                               622,744                                                                                                                               7.9%

Humle Småbolagsfond                                                                                       603,329                                                                                                                                7.7%
AMF Aktiefond Småbolag                                                                                   471,610                                                                                                                                6.0%
P-O Westerlund                                                                                                  416,169                                                                                                                                5.3%

Elementa Fonder                                                                                               285,946                                                                                                                                  3.6%
Acervo AB                                                                                                           250,000                                                                                                                                 3.2%

Hans Skruvfors                                                                                                   225,000                                                                                                                                  2.9%

Ten largest shareholders                                                                                5,936,952                                                                                                                                  75.5%

Other shareholders                                                                                         1,926,234                                                                                                                                 24.5%
Total number of shares                                                                                   7,863,186                                                                                                                               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 nine subsidiaries, seven of which non-Swedish. Accounting principles and valuation principles correspond to the ones used in the latest annual report.

RISKS AND UNCERTAINCIES

Nepa faces several 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.
Phone: +46 8-463 83 00
E-mail: certifiedadviser@penser.se


FINANCIAL CALENDAR

Interim report January 1stto March 31st, 2019                                  May 21st, 2019

Annual general meeting 2019                                                            May 29st, 2019

Interim report April 1stto June 30th, 2019                                     August 21st, 2019

Interim report July 1stto September 30th, 2019                       November 21st, 2019

Year-end report 2019                                                                      March 20th, 2020


ANNUAL GENERAL MEETING AND DIVIDENDS

Annual general meeting will be held on May 29st, 2019 in Stockholm. The annual report will be published on May 10th, 2019 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 the fiscal year 2018.

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, March 22nd, 2019
The Board of Directors of Nepa AB (publ)

                 Ulrich Boyer                          Bo Mattsson                         Annika Steiber                  Simon Hay                           

                Chairman of the Board          Board member                      Board member                  Board member

                 Jan Carlzon                          P-O Westerlund                    Niclas Öhman                 Fredrik Östgren

                 Board member                     Board member                      Board member                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. The Swedish version is information that Nepa AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 08:00 CET on March 22, 2019.


[1] Dividend proposed by the Board of Directors.

www.nepa.com


Fredrik Östgren
CEO
Maria Skolgata 83 118 53
Stockholm, Sweden
+46 733 345 069 fredrik.ostgren@nepa.com

P-O Westerlund
Deputy CEO, CFO
Maria Skolgata 83 118 53
Stockholm, Sweden
+46 706 404 824 p-o.westerlund@nepa.com

Headquartered in Stockholm and with local presence in Helsinki, Oslo, Copenhagen, London, Mumbai, New York, Miami and Denver, we help some of the world's most reputable brands in more than 50 countries to optimize customer experience investments and 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. The company is publicly traded at the Nasdaq First North Stockholm stock exchange since 2016. Erik Penser Bank is Nepa’s Certified Adviser.

About Us

Headquartered in Stockholm and with local presence in Helsinki, Oslo, Copenhagen, London, Mumbai, New York, Miami and Denver, we help some of the world's most reputable brands in more than 50 countries to optimize customer experience investments and 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. The company is publicly traded at the Nasdaq First North Stockholm stock exchange since 2016. Erik Penser Bank is Nepa’s Certified Adviser.

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