Earnings Release • Mar 10, 2016
Earnings Release
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PUBLISHED 07.00 CEST 10-03-2016
Leuven, Belgium – March 10, 2016 – Option N.V. (EURONEXT Brussels: OPTI; OTC: OPNVY) today announced its results for the full fiscal year 2015 ended December 31, 2015. The financial information reported in this release is presented in Euros and has been prepared in accordance with the recognition and measurement criteria of IFRS as adopted by the European Union. The accounting policies and methods of computation followed in the attached financial statements are the same as those followed in the most recent annual financial statements.
For a detailed report on the consolidated Income Statement and Balance Sheet, we refer to the financial report below.
The highlights of the consolidated results include the following (in thousands EUR):
| Reported | Normalized | |
|---|---|---|
| Full year revenues: | 4 698 | 4 698 |
| Gross profit: | 1 328 | 2 165 |
| Operating expenses: | (13 082) | (11 673) |
| EBIT: | (11 754) | (9 508) |
| EBITDA: | (7 927) | (6 840) |
| Result before taxes: | (14 066) | (11 820) |
| Net result: | (14 084) | (11 838) |
Total revenues for 2015 were EUR 4.7 million compared with EUR 5.2 million realized in 2014. CloudGate revenues increased with EUR 1 million and revenues from embedded modules and devices decreased with EUR -1.7 million.
Gross margin for the year 2015 was 28.3 % on total revenues compared with a gross margin of 43.6 % in 2014. Excluding the write-off on inventories of EUR 837 thousand, the normalized gross margin would have reached 46.1 % in 2015
During 2015, the operating expenditure decreased with EUR 385 Thousand from EUR 13.5 million in 2014 to EUR 13.1 million in 2015
Normalized impact 2015 (in thousands EUR):
| Operating expenses | (13 082) |
|---|---|
| Impairment on fiancial assets | 746 |
| Impairment on intangible assets | 413 |
| Correction withholding taxes personnel | 250 |
| Normalized operating expenses 2015 | (11 673) |
| Normalized operating expenses 2014 | (13 467) |
This decrease in normalized operating costs of EUR 1.8 million results from further cost control.
In 2015 EBIT amounted to EUR -11.8 million compared to EUR -11 million in 2014.
The financial result decreased from EUR -1.8 million in 2014 to EUR -2.3 million in 2015, mainly as a result of interests due on the convertible bonds which were issued at the beginning of the second quarter of 2015 and in November 2015 as also the bridge funding raised in the first half of 2015.
The 2015 cash burn was compensated by a bridge funding of 2.7 million EUR during the first half of 2015, a convertible bond of 6.0 million EUR in November 2015 and further leveraging the company's working capital.
The cash position increased from EUR 1.6 million at the end of 2014 to EUR 4.1 million at the end of 2015.
The net result for the full year 2015 amounted to EUR -14.1 million or EUR -0.15 per basic and diluted share. This compares to a net result of EUR -12.9 million or EUR -0.15 per basic and diluted share during 2014.
During 2015, 2,116,782 new shares we created as the result of the conversion of convertible bonds.
Whereas CloudGate remains a building block of projects and solutions, the full year results indicate that the expected pick-up of CloudGate sales did not materialize. The current sales process involving multiple partners before the solution reaches the end-customer, remains complicated, slow and with steeper learning curves than anticipated. Although the CloudGate platform is unique and appreciated by our partners, the Company has not been able to monetize the platform in a sustainable way fast enough.
To address this situation, the Company – since the second half of 2015 and through 2016 – additionally embarked on the go-to-market strategy of commercializing end-to-end solutions.
At its core, Option is an engineering company. Its expertise in Radio Frequency (RF) design and development is recognized worldwide. The Company continues to actively commercialize its expertise in these areas. The contract for designing and developing an On Board Diagnostics Datalogger (OBD) for Danlaw or the work for Asea Brown Boveri (ABB) and Jabil Circuit are examples of the Company's expertise in engineering services.
The Company continues to support its channel partners and end-customers on the CloudGate platform by selecting end-to-end applications developed by our partners for further commercialization by Option.
The Board of Directors has decided to terminate the mandate of the CEO, Frank Deschuytere, with immediate effect. The Board has decided to entrust its Executive Chairman, Mr Jan Callewaert, with the daily management of the Company.
Jan Callewaert, Option's Executive Chairman:
"With CloudGate as a platform for IoT solutions, we have become a partner in the pioneering market of 'Internet of Things'. CloudGate technology is perceived as an essential building block adding connectivity and smart applications to the Internet of Things. Over the last two years we obtained valuable feedback from our target markets. Consequently, we carefully selected the business segments of smart lighting and connected cars. To fully exploit this potential, the Company acquired Dutch Lemnis Public Lighting & Innolumis Public Lighting and entered into a corporate partnership through an important investment from Danlaw Inc USA, global provider of telematics and connected vehicle solutions. The Company is turning the page and will be working on its future in a novel way. The Company created, and will manage the following business entities separately: Engineering Services, Smart Lighting Solutions, Connected Car Solutions and CloudGate Solutions. To that end every entity will have to focus on cost alignments for its activities to become at least break-even. We are looking into organizing the CloudGate business entity in such a way that it is ready for future partnering while we see appetite for investments in Smart City applications, in particular connected building and public lighting."
Following the continued review by the statutory auditor of the Company of the cash position of the Company and its continuity, the Option Board of Directors has further deliberated in this respect and informed the market accordingly in its press releases of April 21, 2015 and July 3, 2015.
In addition to the announced 2.7M EUR bridge financing provided by its existing bond- and other stakeholders in March of 2015, the Company secured an additional convertible bond loan of 6 mio EUR in November of 2015. Under the terms of the agreement Danlaw Inc. invests up to € 10 million in Option by means of a private placement in two phases. Initially via a Convertible Bond loan of € 6 million at an accrued interest of 5% yearly as agreed by the Board on November 6, 2015 within the context of the authorized capital. The Convertible Bond loan has a term of 5 years and will expire on November 5, 2020 and can be converted in maximum 32.894.736 shares of Option at a conversion price of € 0.228 per share, interest included, taxes excluded. The conversion price is set at 30 days average stock price before issue in accordance with Article 598 of the Code of Companies.
In addition to the Bond loan, Danlaw has the possibility to invest an amount of € 4 million through warrants which were issued by an Extraordinary Shareholders' Meeting of January 26, 2016.
On 26 June 2015 the Extraordinary Shareholder's Meeting of the Company decided to renew the authorized capital of the Company for a total amount of four million seven hundred thirty eight thousand nine hundred sixty four euro and fifty cent (EUR 4,738,964.50), both by means of contribution in cash or in kind, within the limits imposed by the Belgian Code of Companies as well as by conversion of reserves and issue premiums, with or without the issue of new shares, with or without voting right, or trough the issue of convertible bonds, subordinated or not, or through the issue of warrants or of bonds to which warrants or other movables are linked, or of other securities, such as shares in the framework of a Stock Option Plan. Furthermore the Extraordinary Shareholder's Meeting of the Company decided to grant the board of directors special authority, in the event of a public take over bid for securities issued by the Company during a period of three (3) years, running from the Extraordinary Shareholders' Meeting which will resolve on this authorization, to proceed with capital increases under the conditions foreseen by the Belgian Code of Companies and has authorized the board of directors, in the interest of the company, within the limits and in accordance with the conditions imposed by the Belgian Code of Companies, to limit or suspend the preferential rights of the shareholders, when a capital increase occurs within the limits of the authorized capital. This limitation or suspension may likewise occur for the benefit of one or more specified persons.
Given the continued cash drain in 2016, the Board is looking for further project fundings as well as financial funding in the short term.
On January 21, 2016 Option announced the acquisition of the shares of the Dutch LED lighting companies Lemnis Lighting BV Public and Innolumis Public Lighting BV and merges the two companies into a single commercial organization under the name Innolumis Public Lighting.
On January 26, 2016, the Extraordinary Shareholder's Meeting of the Company decided to renew the authorized capital of the Company for a total amount of four million eight hundred forty four thousand eight hundred two euro and seventy cent (EUR 4,844,802.70), both by means of contribution in cash or in kind, within the limits imposed by the Belgian Code of Companies as well as by conversion of reserves and issue premiums, with or without the issue of new shares, with or without voting right, or trough the issue of convertible bonds, subordinated or not, or through the issue of warrants or of bonds to which warrants or other movables are linked, or of other securities, such as shares in the framework of a Stock Option Plan. Furthermore, to grant the board of directors special authority, in the event of a public take over bid for securities issued by the Company during a period of three (3) years, running from the Extraordinary Shareholders' Meeting which has resolved on this authorization, to proceed with capital increases under the conditions foreseen by the Belgian Code of Companies. To authorize the board of directors, in the interest of the company, within the limits and in accordance with the conditions imposed by the Belgian Code of Companies, to limit or suspend the preferential rights of the shareholders, when a capital increase occurs within the limits of the authorized capital. This limitation or suspension may likewise occur for the benefit of one or more specified persons.
Furthermore, the Extraordinary Shareholder's Meeting of the Company decided to grant 17,391,304 warrants to Danlaw Inc. for a total amount of 4 mio EUR, if exercised, this would increase the capital of the company with eight hundred sixty-nine thousand five hundred sixty five euro and twenty cent (EUR 869,565.20).
| For the full year ended 31 December | Dec 31, 2015 | Dec 31, 2014 |
|---|---|---|
| Thousands Euro except number per share | ||
| Revenues | 4698 | 5 2 3 0 |
| Cost of products sold | (3370) | (2949) |
| Gross Margin | 1328 | 2 2 8 1 |
| Research and development expenses | (4956) | (5345) |
| Sales, marketing and royalty expenses | (3336) | (3073) |
| General and administrative expenses | (4790) | (5049) |
| Total operating expenses | (13082) | (13467) |
| Impact of deconsolidation | $\Omega$ | 166 |
| Result from operations (EBIT) | (11754) | (11020) |
| Finance costs | (2534) | (2753) |
| Finance income | 222 | 951 |
| Finance result - net | (2312) | (1802) |
| profit / (loss) before income taxes | (14066) | (12822) |
| Income tax benefits / (expenses) | (18) | (34) |
| Net result of the period attributable to the owners of the company | (14084) | (12856) |
| Earning per share | ||
| Basic weighted average number of ordinary shares | 95 964 132 | 87 929 977 |
| Diluted weighted average number of ordinary shares | 95 964 132 | 87 929 977 |
| Basic earnings / (loss) per share | (0.15) | (0.15) |
| Diluted earnings / (loss) per share | (0.15) | (0.15) |
| For the year ended 31 December | ||
|---|---|---|
| Thousands euro | Dec 31, 2015 | Dec 31, 2014 |
| Profit / (Loss) for the period | (14084) | (12, 856) |
| Other comprehensive income | ||
| Items that may be reclassified subsequently to profit or loss Exchange difference arising on translation on foreign operations |
126 | 112 |
| Other comprehensive income / (loss) for the period (net of tax) | 126 | 112 |
| Total comprehensive income / (loss) for the period attributable to the owners of the parent |
(13958) | (12744) |
| Thousands Euro | Dec 31, 2015 | Dec 31, 2014 |
|---|---|---|
| Assets | ||
| Intangible assets | 893 | 3051 |
| Property, plant and equipment | 120 | 255 |
| Other financial assets | 490 | 1 2 3 6 |
| Other non-current assts | 15 | 17 |
| Total non-current asstes | 1518 | 4559 |
| Inventories | 1501 | 3 1 3 9 |
| Trade and other receivables | 732 | 848 |
| Cash and cash equivalents | 4 0 6 8 | 1554 |
| Income tax receivable | 12 | 10 |
| Total current assets | 6313 | 5551 |
| Total assets | 7831 | 10 110 |
| Liabilities and shareholders' value | ||
| Issued capital | 4845 | 4 7 3 9 |
| Share premium | 5076 | 3763 |
| Reserves and CTA | (37623) | (23769) |
| Total shareholders' equity attributable to | (27702) | (15267) |
| the owners of the company | ||
| Financial debt | 26 10 5 | 17574 |
| Total non-current liabilities | 26 105 | 17574 |
| Trade and other payables | 9 1 2 4 | 7544 |
| Provisions | 295 | 258 |
| Income tax payable | 9 | 1 |
| Total current liabilities | 9428 | 7803 |
| Total liabilities and shareholders' value | 7831 | 10 110 |
| For the year ended 31 December | ||
|---|---|---|
| Thousands Euro | 31 Dec 2015 | 31 Dec 2014 |
| OPERATING ACTIVITIES | ||
| Net Result (A) | (14084) | (12856) |
| Amortization of intangible assets | 2533 | 3 2 2 8 |
| Depreciation of property, plant and equipment | 135 | 266 |
| Impairment of financial assets | 746 | 0 |
| Loss / (gains) on sale of property, plant and equipment | (65) | 7 |
| Loss / (gains) on sale of financial assets | 0 | (166) |
| (Reversal of) write-offs on current and non current asstes | 916 | 226 |
| Impairment losses on intangible assets | 413 | 4 |
| Increase / (decrease) in provisions | 36 | 10 |
| Unrealized foreign exchange losses / (gains) | 42 | 27 |
| Interest (income) | (4) | (13) |
| Interest expense | 2 1 2 9 | 1676 |
| Equity settled share based payment expense | 104 | 26 |
| Tax expense / (benefit) | 18 | 34 |
| Total $(B)$ | 7003 | 5325 |
| Cash flow from operating activities before changes in working capital | (7081) | (7531) |
| $(C) = (A) + (B)$ | ||
| Decrease / (increase) in inventories | 835 | 44 |
| Decrease / (increase) in trade and other receivables | 67 | 522 |
| (Decrease) / increase in trade and other payables | 1450 | (1368) |
| (Decrease) / increase in deferred revenue | 0 | (200) |
| Use of provisions | $\bf{0}$ | |
| Total changes in workig capital (D) | 2352 | (1002) |
| Cash generated from operation $(E) = (C) + (D)$ |
(4729) | (8533) |
| Interests and other finance costs (paid) (F) | (705) | (692) |
| Interests and other finance revenue received (G) | 4 | 13 |
| Income tax (paid) / received (H) | (8) | (15) |
| Cash flow from operating activities $(I) = (F) + (F) + (G) + (H)$ | (5.438) | (9.227) |
| INVESTING ACTIVITIES | ||
|---|---|---|
| Expenditure on product development, net of grants received | (788) | (2348) |
| Acquisition of property, plant and equipment | 0 | (5) |
| Proceeds from the sales of property, plant and equipment | 65 | |
| CASH FLOW USED IN INVESTING ACTIVITIES (J) | (723) | (2353) |
| FINANCING ACTIVITIES | ||
| Proceeds of borrowings | 8675 | 12 000 |
| Finance lease liabilities | 0 | (7) |
| Repayment of borrowings | 0 | (500) |
| CASH FLOW PROVIDED BY / (USED IN) FINANCING ACTIVITIES (K) | 8675 | 11 493 |
| Net increase / (decrease) of cash and cash equivalents = $(1) + (1) + (K)$ | 2514 | ( 87) |
| Cash and cash equivalents at beginning of year | 1554 | 1623 |
| Effect of foreign exchange difference | 0 | 18 |
| Cash and cash equivalents at end of period | 4 0 6 8 | 1554 |
| Difference | 2514 | ( 87) |
| Issued | Share | share-based payment |
Currency | translation Share issue | retained earnings / |
||
|---|---|---|---|---|---|---|---|
| In Thousand EUR | Capital | premium | reserve | reserve | costs | (losses) | Total |
| At 1 january 2014 | 4 1 2 5 | 1078 | (39) | (2617) | (8395) | (5848) | |
| Net result of the year | (12856) | (12856) | |||||
| Other comprehensive income for the year, net of income tax |
112 | 112 | |||||
| Total comprehensive loss for the year |
112 | (12856) | (12744) | ||||
| Equity component of the convertible loan |
٠ | (201) | (201) | ||||
| Transfer to/from | |||||||
| Capital increase | 614 | 2886 | 3500 | ||||
| Capital decrease | 0 | ||||||
| Share based payments | 26 | 26 | |||||
| At 31 December 2014 | 4739 | 3763 | 26 | 73 | (2617) | (21251) | (15267) |
| Net result of the year | (14084) | (14084) | |||||
| Other comprehensive income for the year, net of income tax |
126 | 126 | |||||
| Total comprehensive loss for the year |
126 | (14084) | (13958) | ||||
| Equity component of the convertible loan |
812 | 812 | |||||
| Transfer to/from Capital increase |
106 | 501 | 607 | ||||
| Capital decrease | |||||||
| Share based payments | 104 | 104 | |||||
| At 31 December 2015 | 4845 | 5076 | 130 | 199 | (2617) | (35335) | (27702) |
| Revenues from external | Operating segment result | |||
|---|---|---|---|---|
| Thousand Euros | customers | |||
| 2015 | 2014 | 2015 | 2014 | |
| Devices & Solutions | 274 | 1 1 9 7 | (671) | (449) |
| Embedded & Solutions | 1 2 8 5 | 2079 | (1469) | 226 |
| IOT solutions | 2 2 9 1 | 1 2 6 1 | (4083) | (1938) |
| Engineering Services | 848 | 693 | 381 | 655 |
| Other | ||||
| Totals | 4698 | 5 2 3 0 | (5842) | (1506) |
| Unallocated Operating Expenses | (5912) | (9514) | ||
| Finance (costs) / income | (2312) | (1802) | ||
| Income taxes / (expenses) | (18) | (34) | ||
| Net result | (14084) | (12856) |
Option is currently finalizing its IFRS financial statements for the year ended 31 December 2015. The auditor has not yet completed his audit procedures as of today mainly with respect to the going concern. Should any material changes arise during the audit finalization, and additional press release will be issued. Option expects to be able to publish its fully audited Annual Financial Report for the year 2015 on or before April 28, 2016.
This press release contains forward-looking information that involves risks and uncertainties, including statements about the company's plans, objectives, expectations and intentions. Such statements include, without limitation, discussions concerning the company's strategic direction and new product introductions and developments. Readers are cautioned that such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially than those set forth in the forward looking statements. The risks and uncertainties include, without limitation, the early stage of the market for connectivity and integrated wireless products and solutions for portable and handheld computers and mobile telephones, the management of growth, the ability of the company to develop and successfully market new products, rapid technological change and competition. Some of these risk factors were highlighted in the Consolidated and Statutory Report 2014 of the Board of Directors which can be found in the Annual Report 2014 page 25-26. The forward-looking statements contained herein speak only as of the date of this press release. The company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statement to reflect any change in the company's expectations or any change in events, conditions or circumstance on which any such statement is based.
Jan Callewaert – Executive Chairman Jan Luyckx - CFO Gaston Geenslaan 14 B-3001 Leuven, Belgium TEL: +32 (0) 16 31 74 11 FAX: +32 (0) 16 31 74 90 E-mail: [email protected]
Option connects Things to the Cloud. With more than 25 years of experience and many industry's firsts in the wireless industry, the Company is ideally positioned to bring the most efficient, reliable and secure wireless solutions to business markets (B2B) and industrial markets (M2M). The Company partners with system integrators, value added resellers, application platform providers, value add distributors and network operators to bring tailor made solutions to end-customers. Option is headquartered in Belgium and maintains offices in Europe, the US, Greater China and Australia. More information: www.option.com
Copyright ©2016 OPTION. All rights reserved. All product and company names herein may be (registered) trademarks or trade names.
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