Zenterio: January – September 2016 report

July – September 2016 

- Deployed license base
     - The VAS (value added services) enabled license base grew by 42% in the third quarter, adding 1,4 million licenses to an accumulated base of 4,8 million

- Net sales and other operating income increased 37% quarter-on-quarter to SEK 54,2 million (SEK 39,6 million)

- EBITDA in the quarter was SEK -7,7 million (SEK -11,4 million)

- Net result in the quarter was SEK -20,7 million (SEK -22,5 million)

January – September 2016

- Deployed license base
     - The VAS (value added services) enabled license base grew by 77% in the first three quarters, adding 2,1 million licenses to an accumulated base of 4,8 million

- Net sales and other operating income increased 63% year-on-year to SEK 183,9 million (SEK 112,9 million)

- EBITDA in Q1-Q3 was SEK -4,0 million (SEK -58,0 million)

- Net result in Q1-Q3 was SEK -45,7 million (SEK -86,3 million)

Events after the reporting date

• On October 12, 2016 an extraordinary general meeting resolved upon a rights issue at SEK 4 per share. On November 10, 2016, the company announced that the rights issue was oversubscribed. In total, subscriptions and applications for subscriptions of ordinary shares in a total value of SEK 103 million was received by the company after which ordinary shares in an amount of approximately SEK 54.9 million was allotted to shareholders within the framework of the rights issue.
  
  
• The board of directors resolved upon a directed share issue on November 10, 2016, based upon an authorization from the annual general meeting held on June 29, 2016, in a value of approximately SEK 30.2 million to such shareholders that notified their desire to subscribe for ordinary shares not based upon subscription rights.
  
  
• The company’s convertible loan 2016:1 in a total nominal amount of SEK 65 million has furthermore been converted into ordinary shares in the company.
  
  
• The extraordinary general meeting held on October 12, 2016 furthermore resolved upon a new share issue of 186,444 new ordinary shares to VTilt Digital, LLC.

Comments from Jorgen Nilsson, CEO of Zenterio:

As we summarize the third quarter and what we have accomplished so far, it is evident that it has been a very hectic period. During the quarter, we have continued to finalize legacy projects, whilst still keeping our focus on new business development and on ramping up on a number of new projects. In order to be able to deliver on this extremely high workload, we have increased outsourcing and brought in additional contractors that delivered excellent support. The ensuing results in terms of delivery has been highly satisfactory, and a key example of these achievements is that we, at the end of the quarter, had delivered six consecutive software releases on time, and in compliance with every requirement for approval, to the Deutsche Telecom Group. As we move forward, we will continue to demonstrate our commitment to this important customer program, together define a long-term vision and work relentlessly to be even more efficient in our management of resources.

I am happy to report that Zenterio has continued to deliver financial improvements in terms of revenue growth, however our EBITDA did suffer in this quarter. The quarterly result shows a 37% year on year increase in revenue. And even though the EBITDA was a negative SEK 7.7 million, it was still an improvement compared to the same quarter last year, which showed a negative EBITDA of SEK 11.4 million. The quarterly result was impacted by our decision to increase efforts to close a target legacy project and in going after new projects, which required an initial investment. The EBITDA for the full nine-month period improved more than SEK 54 million compared to the same period last year (a negative EBITDA of SEK 4,0 million for Q1-Q3 2016, compared to a negative EBITDA of SEK 58 million for Q1-Q3 2015).

In July, we finalized the sale of Labatus to Eurofins Scientific. It was a strategic decision and part of a larger evaluation of our corporate structure where the result is an increased focus on our core business. The testing service is of course important and we are committed to continue a strong partnership with Labatus for the majority of our software testing needs. We will also look into another partnership with them in the near future.

On the same note, I am very happy to report that we have started the process to acquire the remaining 75% share of the London-based company Adscribe. Zenterio became a minority owner in early 2015, and we are confident that the investment in their analytics software and advertising proposition will help create additional value for the pay TV industry. The Adscribe solution provides TV operators with the data driven insights that they need to be able to offer an improved consumer experience. By collecting, analyzing and breaking down consumer data into key insights, our clients will be able know their subscribers in a whole new way, monetize that knowledge and add new services and relevant content that increase customer loyalty. This is also an area where we see a major business opportunity as it is yet another way for us to enter into new customer relationships independently of Zenterio OS. Providing the analytics and advertising solutions as separate entities also means that the sales cycle can be much shorter.

There are certainly interesting times ahead for the TV industry as a whole. For years the death of the TV industry has been predicted, mostly based on the consumers’ changing viewer behaviors in combination with the fact that new services, such as OTT, have been growing rapidly. But these predications have been pre-mature. We now see large cable and satellite operators fight back by bundling channels in new ways, delivering their services digitally and cutting back on commercial breaks to keep existing customers and win back cord-cutters. With this in mind, we feel confident that our strategic focus on having the best software client in the industry will benefit the operator as well as improve their delivery of an unrivaled customer experience.

We will also look to bring some additional OTT capabilities to our offering to increase our relevance and competitiveness in order to stay ahead of the competition and to grow our business accordingly.

Together with our customer and key partners, we are looking forward to finishing the year with a result that we can all be proud of. Our focus is to continue in the direction we have chosen and to be able to deliver on both growth and profitability.

For more information, please contact:
Steven Moodie, CFO
Email: steven.moodie@zenterio.com
Phone: +46 13 36 39 50

About Zenterio
Zenterio provides an independent OS for interactive TV aimed at creating an industry standard. Zenterio also offers an intuitive multiscreen UI, a powerful Data Analytics solution, Consulting Services and additional Value Added Services to TV operators. Zenterio partners with global system integrators, set-top box suppliers, CA/DRM providers, chip-set manufacturers and services providers. Zenterio has offices in Stockholm, Linköping and Atlanta and is owned by private investors and private equity firm Scope. The Chairman of the Board is former Nokia CEO Mr. Olli-Pekka Kallasvuo and the CEO is former Ericsson executive Mr. Jorgen Nilsson. For more information please visit zenterio.com.