Techstep ASA — Call Transcript 2014

Sep 24, 2014

BIRDSTEP Q&A following investor presentation in Oslo September 2014

Q: Can you inform about revenue share for the different product/solution areas? A: Majority, roughly 80%, of revenue is coming from our Smart Mobile Data business.

Q: Describe revenue model for the INS solutions area

A: We are developing new commercial models around data consumption, but currently we work with activation models where we receive revenue as our client software is activated. We also have a revenue share model deployed.

Q: Based on your description of "the problem" for the operators they should be lined up to buy our solutions. But your track record of contracts shows otherwise. Why is it slow? A: Mainly 2 reasons; this is still an embryonic market and operators are still learning how to take managed WiFi to market. Secondly, as I stated back in Q1, the sales process is quite long, taking up to 18 months in some cases.

Q: How do you handle resources ver new committing to new projects? A: Opportunities have been growing faster than we were resourced to address. Therefore the decision earlier this year to begin hiring for key roles in key locations

Q: How many operators are using your technology in the US? A: 3 operators and 1 OEM

Q: How much of Birdstep revenue comes from Sprint? A: As a matter of policy we do not discuss customer details

Q: Are you (Lonnie) based in Stockholm or do you spend more of your time in US? A: I am based in Stockholm and my permanent residence is in Germany. Nevertheless, I believe a CEO is the lead salesman in a company and therefore spend his / her time with customers. Therefore I spend a majority of my time in the field with customers.

Q: How many new hires have you done in 2014? Have you got rid of people as well? A: 6 headcounts in US, 2 in Asia. Yes a few people have also left the company.

Q: What kind of investor is Sophrosyne? How long have they been investors? Do they have different fonds with different strategies?

A: Sophrosyne is a sophisticated investor in the area of tech and Life Sciences. Regarding further questions I would ask that you contact Sophrosyne directly.

Q: What is your comment on the cash flow? Any significant changes in the cash? Are you comfortable with the current cash situation?

A: We are still on target according to plan. Going into next year we are looking at various options.

Q: Will the revenue be the same (as Sprint) from the other T1 operators you are targeting? A: Every operators market opportunities and challenges differ. The competitive situation will also dictate the velocity at which they deploy. All of these are variables which make each opportunity unique.

Q: What do you mean by Tier1 Operators, where are they situated? Only in US?

A: Every country / region / theatre has a small group of dominant operators. Those operators are known as Tier 1 operators.

Q: Is the revenue from the HP deal triggered from each sale of their products (with embedded Birdstep solution)?

A: Birdstep recognizes revenue for each activation of our software on HP products.

Q: What is the status of the contract you announced with the subcontractor to a large OEM? Is the same revenue model as for HP being used? When do you expect revenue from this deal to show in the results?

A: This is still a young project and we recently completed phase 1 of our deliverables. Again, it is against our policy to provide customer project details. As our customer is successful in the market with their managed WiFi service, so too will Birdstep

Q: How large will the revenue share be from such contracts like HP and the other OEM if they take of?

A: It's too early to tell.

Q: Are Tier1 operators in Asia comparable with operators like Sprint? A: In their need to innovate, differentiate and be more cost efficient? Yes

Q: Who are your competitors in areas like Asia?

A: The majority of our competitors are in the US. Many Tier 1 operators have their own software development groups with whom we find ourselves competing

Q: Are you confident you will sign deals with at least 1-2 of those Tier1 operators in Asia, and can you say what your revenue will be for any of those?

A: We are working aggressively to win further projects in Asia and we will have a strong focus on Asia with our newly hired team there

Q: Can you describe the Japan deal you are working on. Size of the project? In what range? A: Not at this time

Q: Will the Tier1 operator you are working with in Japan grow to be similar as Sprint after 2 years? A: As we have not won any projects yet in Japan, it would incorrect for me to speculate.

Q: Describe the revenue model for Sprint today

A: This is against our policy

Q: Can shareholders expect a 40% growth next year?

A: I cannot provide guidance

Q: The new OEM deal/HP; are you more happy with the new OEM roll out/deal than with HP? Why? A: The HP project has not yet provided the volumes we had expected. Saying that however, the HP DataPass delivers tangible value to customers and can still meet expectations.

Q: How are you positioning yourself for the different devices on the market?

A: We are continuing to diversify ourselves across platforms to ensure we can deliver value to our customers, regardless of their platform choice. More importantly, we are diversifying our product and solutions across both, end device and infrastructure products

Q: Re "New customers and cost associates with them". Do you have to invest to get those customers?

A: Yes we do. Much of today's opportunities require unique development based on customer requirements. We invoice for this unique development. Going forward we are making our products much more configurable, which will reduce and, perhaps eliminate, customer specific development. This would provide efficiencies with time-to-market, better cost control, stronger margins and competitive advantage

Q: How are you working with analysts?

A: We spend much time keeping various analysts briefed, however none yet are regularly reporting on our business.

Q: Are you expecting an increase on the topline? A: That is a goal.

Q: Is it possible to have a 10 MUSD/quarter revenue by next year? A: It would not be impossible but it is unlikely

Q: How big is the latest OEM deal for 2014? Will you get revenue within this year? A: As we are still in the early phase of deployment I cannot comment on the business. Yes we are recognizing revenue

Q: Who are you working with in Japan? A: I cannot comment as this is still in project development

Q: Is Apple a potential client? A: Yes, but not today.

Q: Are you looking at possible investors in more interesting markets, like the US? A: The US market is very interesting for us although we are not soliciting opportunities. If we were approached we would give serious consideration

Q: Are you considering to move the company to another stock exchange? A: We have no current plans to list elsewhere than the OSE

Q: The Secure Mobility entity – it does not seem to fit in the company structure – are you considering selling?

A: All year we have been investigating opportunities to bring solutions to market based on our Smart Mobile Data and Secure Mobility products. The recently identified "Connected Car" market may require such solutions.

Q: How many people are employed in the Secure Mobility unit? A: Approximately 20

Q: Are you losing money on Secure Mobility?

A: Neglecting management fees, the business is sustaining itself

Q: Is everything technically built for the latest OEM deal (when moving on to next phases)? A: Yes. We are also looking for new opportunities to bring further innovation to the OEM and our partner in the project.

Q: You are talking about innovative products. What exactly have you developed? A: We refer to the product pages on our web site

Q: Are all of your innovations software products? A: Yes

Q: Are any operators using your roaming solutions today in Europe? A: Not yet in Europe

Q: Connected Car; Is the "Tesla problem" an example for Birdstep?

A: Tesla is a very innovative automobile manufacturer, who is not (yet?) a Birdstep customer. Birdstep can help manufacturers and mobile operators alike provide a more robust service to car drivers, focusing on optimizing the customer experience. The most tangible advantage Birdstep brings is by significantly reducing the cost of delivering services to the connected car by exploiting WiFi and reducing the use of expensive cellular services. Birdstep can also provide actionable analytics, providing deeper insights into the consumer and the service quality they receive. And lastly, Birdstep can bring solutions to bare that enable operators to monetize new services.