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:
- A platform license for managing customer feedback with an interface that automatically enriches clients’ current IT infrastructure with behavior data.
- Standardized products – Consumer Science Platform® Applications Suite.
- 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.
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.