Interim report January-June 2018

APR 1st – JUN 30 th 2018

• Net sales amounted to EUR 5 509 thousand (3 441), a 60 percent increase
• EBITDA of EUR 375 thousand (86) and EBITDA margin of 6.8 percent (2.5)
• EBIT of EUR 301 thousand (67) and EBIT margin 5.5 percent (2.0)
• Loss after tax of EUR -58 thousand (-116).
• Operating cash flow amounted to EUR 126 thousand (158)

JAN 1st – JUN 30 th 2018

• Net sales amounted to EUR 11 626 thousand (6 896), a 69 percent increase
• EBITDA of EUR 882 thousand (-44) and EBITDA margin of 7.6 percent (-0.6)
• EBIT of EUR 702 thousand (-80) and EBIT margin 6.0 percent (-1.2)
• Profit after tax of EUR 95 thousand (-305).
• Operating cash flow amounted to EUR 1 119 thousand (167)

APRIL - JUNE HIGHLIGHTS

• The first six months of 2018 was the financially strongest period in Talkpool’s history
• The financial development is overperforming the path set for 2021
• Pakistan, Haiti, Netherlands, Tanzania and Germany exceeded expectations
• The new Saudi Arabian market unit reached breakeven and was consolidated as of June
• Talkpool was awarded the ITSM initiative price 2018 for the project “Luft och Vatten med IoT”
• The Nordic IoT Networks (Niot), was founded by Talkpool together with a group of investors
• Talkpool incorporated the blockchain company JoorsChain AG in Switzerland
• Andreas Öhrnberg was appointed new Chief Financial Officer of Talkpool Group

CEO COMMENTS

With the strong first quarter in the back, Talkpool entered Q2 with a good momentum. In each of our geographical regions, Europe, Middle East & Pakistan(MEPA), Caribbean & Latin America(CALA) and Africa, the local companies could leverage on the momentum to continue developing the local business. All together the performance in Q2 was in line with the expectations and the first six months period of 2018 was the strongest period in Talkpool’s history, both in terms of finances and market position.

Group Net sales in Q2 increased with 60 percent to EUR 5 509 thousand (3 441) year-on-year, driven by the acquisition of LCC Pakistan combined with organic growth. Net sales for the first half-year 2018 reached EUR 11 626 thousand corresponding to an increase of 69 percent compared to last year. The gross margin expanded 2.4 percentage points to 26.8 percentage compared to the same quarter last year and in spite of lower revenues than in Q1, the gross margin stayed on budget and reached a new high. This improvement compared to earlier periods can be explained by a mix of a reduction in cost of sales for existing projects, combined with an ongoing shift to niche projects offering higher margins. The gross margin for the first six months expanded significantly year-on-year with 4.2 percentage points to 26.1 percent.

EBITDA for the period was EUR 375 thousand, a significant improvement compared to the EBITDA of EUR 86 thousand in Q2 2017. The overhead costs have been growing at a lower rate than sales as expected, thanks to cost controlling activities and EBITDA for the first half-year 2018 of EUR 882 thousand is the strongest 6 months’ result to date. With the solid financial development in H1 we have exceeded the growth expectations for the first two years and we are ahead of schedule for our set of financial goals for 2021.

The acquired LCC Pakistan went through the last stages of integration into the Group in Q2 and increasingly started to support the development of the ME region as planned. LCC Pakistan’s good relations and positive track record in the Middle East has opened many growth opportunities in the region. The regional management continued to successfully develop the consulting and niche network services business whereas a number of new IoT opportunities also emerged in the region. After months of investments and successful ramp up of projects with several new customers, the business in Saudi Arabia reached break even in June. In June Talkpool acquired the platinum status company Virtual Connect in Saudi Arabia, which eventually will be renamed into Talkpool Saudi LLC, and the business is consolidated in Talkpool Group from June. By carefully ramping up operations while building on a strong delivery legacy, Talkpool is expected to significantly increase its revenue base in Saudi Arabia during the coming 3 years.

The growing region Europe, with the Netherlands and Germany at the forefront, focused on the delivery of value added network services to telecom operators like Deutsche Telekom and Cellnex. The demand for the specialized broadband network planning services, that Talkpool provides to Deutsche Telekom in Germany, continued to grow and Talkpool is one of its few partner companies that is in a position to deliver such services. After entering a new planning region in Q2 Talkpool continues to expand its capacity by hiring and training planning specialists for the current two regions and expansions into further planning regions will be a natural next step.

As clients ordered more work than Talkpool could finance, the board started evaluating additional financing methods in Q2 and at the end of May it was announced that Talkpool AG explored the possibility of raising up to SEK 24 million of non-dilutive debt financing.

Talkpool continued to focus on IoT-solutions for smart buildings measuring and controlling the indoor environment quality, which already has attracted a lot of interest from real-estate owners as well as construction companies guaranteeing the construction quality and insurance companies granting liability insurances. Like in the case of the smart floor drain-solution, where a small investment for the landlord, construction company and insurance company can lead to large savings thanks to early detection of damp and mould.

In April Talkpool and the IVL Svenska Miljöinstitutet were awarded the ITSM initiative price 2018 for the environmental supervision project “Luft och Vatten med Internet of Things” in Gothenburg. Talkpool is one of the key actors in LoV-IoT, a smart city project in Sweden. LoV-IoT has the vision of generating better public health by helping cities’ air and water monitoring programs and Talkpool provides knowledge and solutions for IoT in the project. This award reinforces Talkpool’s already strong position as an IoT specialist in environmental supervision. This summer, we have observed the disastrous effects of the global warming with extreme weather: drought, fires, low water tables, and water and air pollution. Talkpool’s LoRa based environmental solutions with low power consumption and deep indoor coverage, makes it possible to measure and supervise changes and provide early warnings to predict and prevent environmental pollution problems and disasters in both rural and urban areas.

In order to meet the increasing customer demand for IoT connectivity fuelled by the growing number of IoT projects and sensors deployed Talkpool launched the IoT-network company Nordic IoT (Niot) in May. The Nordic countries continue to be at the global forefront of the IoT-development and the number of connected things here is expected to be four times as many as in the rest of the world by 2021. The coverage provided by Niot is expected to boost the Nordic IoT market and when the LoRa-network becomes more established, Talkpool has a strong platform for delivering volume orders in IoT. The network will initially provide coverage in the regions of Stockholm, Gothenburg, Malmö/Lund and Uppsala and then in coming phases provide coverage across Sweden, Norway and Denmark. In May Telia announced that they had implemented a nationwide NB-IoT Network in Sweden. This will increase the interest of IoT in the Nordics and boost the market development further.

In April Talkpool and its partners incorporated JoorsChain AG in Switzerland as a management company for technical solutions within the blockchain technology. We are convinced that the block chain technology will be used in internet to increase security, prevent fraud, determine the origin 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.

In June Talkpool strengthened the Group’s management team by appointing Andreas Öhrnberg Chief Financial Officer. Andreas has more than 10 years’ experience from senior finance and general management positions within the financial services and IT industry and brings valuable experience from financial control and corporate finance.

In August Talkpool closed the debt financing round by issuing a two-plus-one year senior secured note amounting to SEK 24 million. The bond is not dilutive to existing shareholders. The proceeds will be used for working capital, M&A and repaying existing guarantor loans linked to last year’s capital raising.

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 09:00 CET on August 31, 2018.

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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 complete solutions and contracts in place in the emerging IoT-market.

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