Interim Report January - June 2020

APRIL 1^st – JUN 30^th 2020

• Net sales amounted to EUR 4 889 thousand (5 569), a 12.2 percent decrease

• EBITDA of EUR 183 thousand (52) and EBITDA margin of 3.7 percent (0.9)
• EBIT of EUR 87 thousand (-40) and EBIT margin of 1.8 percent (-0.7)
• Net earnings after tax of negative EUR 264 thousand (-801)
• Net earnings after tax, adjusted for non-recognized FX gains, of negative EUR 146 thousand

JAN 1^st – JUN 30^th 2020

• Net sales amounted to EUR 9 770 thousand (11 152), a 12.4 percent decrease

• EBITDA of EUR 187 thousand (-37) and EBITDA margin of 1.9 percent (-0.3)
• EBIT of EUR -5 thousand (-240) and EBIT margin of -0.1 percent (-2.2)
• Net earnings after tax of negative EUR 791 thousand (-1 155)
• Net earnings after tax, adjusted for non-recognized FX gains, of negative EUR 665 thousand

APRIL - JUNE KEY DEVELOPMENTS

• Q2 was a challenging quarter marked by COVID-19 hampering business
• Talkpool experienced a general slow-down in sales and customer activities during the quarter
• Despite the COVID-19 effects Talkpool managed to increase Group Revenue slightly from Q1
• EBITDA increased significantly from EUR 4 thousand in Q1, to EUR 183 thousand in Q2
• In Germany, Netherlands, Switzerland, Haiti and Tanzania EBITDA clearly exceeded budget
• Germany, Belgium, Switzerland and Saudi gained from government COVID-19 support
• IoT sales took a hit as many customer negotiations and projects were put on hold
• The positive effects of our turn around project continued to show in lower SG&A and financial costs
• Active amortizations and repayments of loans showed in the sinking financing costs
• Talkpool faced FX losses due to the recovery of the Swedish SEK during the quarter
    

CEO COMMENTS

In Q2 industries and societies all over the world were affected by COVID-19 in a way and to an extent that no one could have imagined. Lock downs and other government restrictions combined with the uncertainty about the future, caused significant damage to many industries. The Telecom and IT industry was not spared and when many Telcom Operators initially closed their offline shops and put their investments on hold, Talkpool was preparing for the worst. In April customers halted new and ongoing projects, travel restrictions made it difficult to travel and deliver services, equipment supplies were blocked and employees became idle. Revenue plunged in most of our markets, but the costs remained high. During May and June, we saw a recovery, but some of the revenue loss caused by the delays was hard to recover.

In spite of all the negative COVID-19 effects, Talkpool managed to continue on a positive path in Q2 with increasing Group Revenue compared to Q1 and operative earning exceeding budget in Germany, Netherlands, Switzerland, Haiti and Tanzania. Group EBITDA increased from EUR 4 thousand in Q1, to EUR 183 thousand in Q2 thanks to high utilization and strict cost control. Some market units also gained from financial support from governments, like interest free loans and short-term work compensation. This support combined with active amortizations and repayments of loans contributed to decreasing financial costs and improving profit margins. Group Net Earnings approached a black zero at the end of the quarter and break-even is still expected during the second half of 2020 in spite of the slowdown.

Network Services

Although many Telcom Operators initially closed their offline shops and put their new investments on hold and the sales of new subscriptions dropped in April, there was another counterbalancing effect that few had foreseen. The expansive implementation of home office work all around the world made the need for bandwidth virtually explode. Not only the extensive use of video conferencing for professional use and school education put the existing network infrastructure to the test, the streaming of Netflix videos by bored short-time workers made the networks crash.

Telecom and internet providers had an advantage as the majority of their revenue is generated by existing customers. Since the COVID-19 outbreak, consumer interest has been directed to stable internet access - more specifically, demand for broadband services, which has increased enormously all over the world. So, although COVID-19 has created a lot of problems it is forcing digitization to take a giant leap and the IS/IT industry will gain from this.

Combined with the planned massive 5G deployments over the coming years and the increased interest in technical solutions in the health- and environment areas COVID-19 is highly likely to have a very positive effect on the demand for Talkpool’s Smart Network services and environment control solutions for both cellular sites and Smart Buildings.

Most of the projects that were stopped at the beginning of the quarter were not cancelled but only delayed. Some projects restarted only after a few weeks again. This made it possible for many of our operations to quickly get back on track again, even if parts of the lost revenue could not be recovered short term.

Switzerland, Haiti, Germany, Netherlands and Tanzania all overperformed financially in Q2. The new consulting- and service projects in Tanzania continued to overdeliver and made Talkpool Tanzania reach revenues that exceeded budget with more than 100% in May and June and an EBITDA 3 times higher than expected.

The ongoing restructuring project in Haiti with a new organization, processes and tools continued to show good results. In spite of all local challenges during Q2 the service delivery quality continued to improve and our local entity reached operative earnings that well exceeded expectations.

After a tough start in April, when Deutsche Telecom closed its offline telco shops and put projects on hold, Talkpool Germany ended up generating all-year-high revenues and all-time-high profits with maintained high customer satisfaction in May and June. This was made possible thanks to the successful implementation of productivity and efficiency programs in the organization.

Talkpool’s operations in the Netherlands also continued to show a stable and high performance throughout Q2 in spite of the COVID-19 challenges they faced. In Q2 2019 Talkpool signed its first contract for preventive and corrective maintenance of 750 radio sites in the Netherlands with telecom infrastructure operator Cellnex. In June this year Talkpool signed a renewal and extension of the existing contract with Cellnex for a period of 2 years, until the end of 2022. Furthermore, Cellnex assigned Talkpool to replace at least 20 tower sites in the Netherlands during the second half of 2020. These contracts strengthen Talkpool’s position in the Netherlands and will create various opportunities for additional contracts in the country. It is also likely to open up new opportunities with Cellnex in other parts of Europe were Cellnex is one of the leading telecom infrastructure operators, currently operating close to 40 000 towers.

The group wide restructuring efforts continued to show good progress and clear results in Q2. Not only were the central and local SG&A costs further reduced, but the operational project costs were also trimmed in several markets.

One of the themes in the restructuring program was to strengthen our key hubs in successful markets, mainly in Europe and the Middle East and exit the weakest businesses in order to reduce cost, create focus and minimize risk. In line with this strategy Talkpool finally closed its faltering Mexican business due to the impact from the Corona crisis in Q2. All operations in the country was terminated and the company is noe getting assistance to dissolve the company in a swift manner. In Uganda final negotiations with a serious potential buyer were started.

In spite of the closing of several operations and the dampening effect of Corona in Q2, the Network Services revenue is expected to pick up significantly during Q3 and Q4.

IoT

Talkpool’s forecasted uptake in IoT sales took a significant hit in Q2 as many customer orders and projects were put on hold. Nevertheless Talkpool’s Smart Building Solutions experienced significant market attention, which was also recognized an a press release by technology leader and LoRa founder Semtech in May:   https://www.semtech.com/company/press/semtechs-lora-devices-conserve-energy-and-help-prevent-damage-in-real-estate . In the press release Semtech VP Marc Pegulu says: “Talkpool’s innovative applications bring ease of use to customers and create effective cost-saving solutions for a quick ROI.” Many Swedish real estate and construction companies rely on Talkpool’s Proptech solutions built on modules that optimize day-to-day processes while also allowing for green building certification and a reduced CO2 emission.

In May Talkpool and its partner Myrspoven released the results of their jointly developed Smart Building solutions for energy savings and improved air quality to prime real estate companies. The results from the first commercial installation showed energy savings in the range of 10-20% and clearly improved indoor climate. Hence the smart building solution improves health and wellbeing which has become even more important for real estate owners and tenants, since the COVID-19 outbreak. Myrspoven provides advanced analytics and control with their Artificial Intelligence (AI)-based optimization solution that overrides existing heating and ventilation systems. The advanced analytics both models the building behavior, as well as taking the weather and energy price parameters into the optimization. Based on the analysis of all input parameters the solution is constantly optimizing air quality, temperature and power consumption in all areas of the building.

In June Talkpool received an order from Atrium Ljungberg to provide IoT proptech solutions to support their green building certification in the important Sickla area in southeastern Stockholm. The order was based on the frame agreement signed between Talkpool and Atrium Ljungberg in February. It covers a five-year period and includes, requirement analysis, project management, installation and delivery of sensors/meters, IoT network and measurement value collection, data integration, technical support and system monitoring.

We expect the IoT business to pick up significantly during the second half of the year when many halted negotiations and delivery projects should start gaining momentum again.

3^rd Quarter 2020

3 years ago, Talkpool AG took a convertible loan amounting to CHF 500’000 (approx. €470’000) from Calypso based on an agreement signed on 6th of June 2017. In July this loan was extended until the end of June 2021 with interest rate reduced to 5% per annum.

Following approvals by Talkpool’s general assembly and board of directors on the 15^th of May 2020, Mr. M. Winter agreed to convert his €2 million loan at a conversion price of SEK 15 per share into 1’448’946 TALK shares as agreed in March 2020.

In July a leading network operator and a leading mobile equipment vendor, both with headquarter in northern Europe, awarded engineering consultancy work to Talkpool in Pakistan. The work is being ramped up during the summer of 2020 and the contracts have a combined value of approximately 300’000 Euros this year.
The Network Services and IoT Strategies revamping work was intensified in July and the first versions were presented to the board in August. In both strategies focus is a key. Focus on Talkpool’s strengths and competitive edges. Within Network Services Talkpool has managed to build a strong reputation as a reliable provider of Managed Services for Telecom infrastructure. In the new Network Service strategy we will leverage on this market position and our acquired IoT solution for remote telecom infrastructure monitoring to form our future as a Smart Network Services and Solutions provider.

After 5 years in the IoT business Talkpool has gained a lot of experience and foothold in the Smart Buildings market. In the new IoT strategy we concentrate our efforts to Smart Buildings as this is one of the most promising verticals in IoT and the niche where Talkpool has proven success with numerous existing products, resources and customer projects.

Another purpose with the strategy review has been to identify Talkpool’s core DNA and elucidate the synergies between the two business units. In the area of maintenance and optimization of Buildings and Infrastructure for both telecom customers and real estate owners with the help of wireless IoT solutions, we are convinced that we have found our sweet spot. We will continue to fine tune the details and present our new strategies, with 5-year plans and targets for 2025, in a near future.

For more information contact:

Erik Strömstedt, CEO Talkpool
Phone: +41 81 250 2020
erik.stromstedt@talkpool.com
 

About Talkpool
Talkpool provides IoT solutions and telecommunication network services 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. FNCA Sweden AB, +46(0)8-528 00 399 info@fnca.se, is Talkpool’s Certified Advisor. www.talkpool.com
 

This information is inside information that Talkpool AG (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 person set out above, at 08.30 CET on August 25, 2020.

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