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Techstep ASA Interim / Quarterly Report 2009
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Interim / Quarterly Report
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birdstep TECHNOLOGY
Q4 2009
Birdstep Technology Interim Report Q4
Q4 Highlights
EasyConnect continues to show positive growth
- 42% revenue growth for EasyConnect compared to Q4 2008
- EasyConnect activations reached 550K in Q4 2009 (465K)
- Q4 revenues NOK 29,1 million (39,1 million)
- Full year revenue NOK 107,9 (103,6)
- EBITDA of NOK -5,1 million in Q4 (4,5 million)
- Net cash flow of NOK -1,0 million in Q4 (16,7 million)
All figures in this report are in NOK.
Figures in parenthesis are related to same period 2008, unless otherwise mentioned.
The company's key business segment EasyConnect showed a healthy YoY growth of 42% in terms of quarterly activations and revenues. 550 007 new customers activated their USB modems with EasyConnect software in the quarter, compared to 464 762 activations in the corresponding quarter last year.
Total revenues reached 29,1 million in Q4 2009. Although the quarter was the strongest in 2009, it came in 26% below the same quarter last year. Adjusted for the weaker currencies, the quarter was 18% below last year. For the full year, revenues ended at 107,9 million, up from 103,6 million in 2008. EBITDA ended at -5,1 million in the quarter, compared to 4,5 million in the same quarter 2008. For the full year, EBITDA ended at -23,5 million compared to -33,1 million last year.
The Q4 result was below expectations, mainly due to lower than anticipated revenues from SafeMove, Orbyte and Raima. The three business segments still struggle with the weaker economic climate, compared to 2008, and SafeMove specifically suffered from unexpected delays in customer contracts and a delayed internationalization.
Net cash flow
Birdstep Technology Interim Report Q4 2009
The company continues to work according to the strategy initiated in 2008 to focus on the mobile broadband market. During Q4 Birdstep announced a reorganization of the company, aiming at further enhancing the growth opportunities for EasyConnect and SafeMove. With the new focused organization, Birdstep will be better equipped to capture new customers for EasyConnect and SafeMove.
Financial review, Q4 2009
Income statement
| Amounts in NOK million | Q4 2009 1) | Q4 2008 1) |
|---|---|---|
| Operating revenue | 29,1 | 39,1 |
| Total revenue | 29,1 | 39,1 |
| Cost of sales | -2,4 | -4,2 |
| Salaries and wages | -20,1 | -20,9 |
| Other operating expenses | -11,7 | -9,5 |
| Restructuring cost | - | - |
| EBITDA | -5,1 | 4,5 |
| Amortization and write-downs | -1,8 | -189,7 |
| Ord. depreciation | -1,3 | -1,3 |
| Operating profit (EBIT) | -8,2 | -186,4 |
| Share of associated company | -0,1 | -0,4 |
| Write-down of associated company | - | -22,8 |
| Financial items, net | 1,1 | 7,5 |
| Income before tax | -7,2 | -202,1 |
| Taxes | - | - |
| Net income | -7,2 | -202,1 |
| Other comprehensive income | ||
| Currency translation effect | -7,2 | 15,1 |
| Total comprehensive income | -14,4 | -187,0 |
| Attributable to | ||
| Equity holder of the parent company | -14,4 | -187,0 |
| Minority interests | - | - |
| -14,4 | -187,0 | |
| Earnings per share (NOK) | -0,33 | -2,90 |
| Diluted earnings per share (NOK) | -0,33 | -2,90 |
1) Unaudited figures
| 2009 1) | 2008 |
|---|---|
| 107,9 | 103,6 |
| 107,9 | 103,6 |
| -9,8 | -12,4 |
| -79,3 | -74,4 |
| -42,3 | -45,6 |
| - | -4,3 |
| -23,5 | -33,1 |
| -7,5 | -196,0 |
| -4,9 | -3,7 |
| -35,9 | -232,8 |
| -0,4 | -1,6 |
| - | -22,8 |
| -0,6 | 13,2 |
| -36,9 | -244,0 |
| - | - |
| -36,9 | -244,0 |
| -16,0 | 36,6 |
| -52,9 | -207,4 |
| -52,9 | -207,4 |
| - | -3,5 |
| -52,9 | -210,9 |
| -0,74 | -3,49 |
| -0,74 | -3,49 |
Total revenues reached 29,1 million in Q4 2009. On a quarterly basis, Q4 again came in as the strongest in the year, although revenues were 25,6% below the same quarter last year. The main reason for the lower sales in Q4 2009 compared to last year is the continuation of the lower run rate compared to last year in Orbyte, SafeMove and Raima, a trend that has been prevalent through the whole of 2009. This is
Birdstep Technology Interim Report Q4 2009
to a large degree a reflection of the worsened economic climate seen in 2009 but also the delayed internationalization of SafeMove. In all, the three business units, Orbyte, SafeMove and Raima had revenues of NOK 13,6 million below Q4 last year while EasyConnect posted a healthy 42% growth in its revenues compared to the same quarter 2008. For the full year total revenue reached 107,9 million, a growth of 4,2%.
In Q4 2009, revenues were influence by generally weaker currencies vs NOK, in particular the USD which was approximately 16% below the level seen in the corresponding quarter 2008. The Euro, currently accounting for the largest fx exposure in the Group was around 6% lower. Adjusted for the currency depreciation, Q4 revenues would have been 31,9 million, or 18,4% below the Q4 2008.
Total staff cost was 20,1 million in Q4 2009 (20,9 million) and reached 79,3 million (74,4 million) or 65% of total Opex for the full year. Other Opex was 11,7 million (9,5 million) in Q4. Net non recurring expenses and adjustments was 1 million in Q4 2009, of which an accrual for doubtful receivables amount to 1,5 million. For the full year Other Opex reached 42,3 million, and was 7.2% lower than in 2008.
EBITDA ended at -5,1 million in Q4 (4,5 million) and -23,5 million for the full year, an improvement in EBITDA of 9,6 million compared to -33,1 million in 2008. Net income ended at -7,2 million in Q4 2009 compared to -202,1 million in Q4 2008, a quarter highly influenced by write down of intangible assets of 187,4 million.
Balance sheet
| Amounts in NOK million | Q4 2009 1) | Q4 2008 1) |
|---|---|---|
| Assets | ||
| Intangible fixed assets | 118,6 | 142,2 |
| Other fixed assets | 1,6 | 2,5 |
| Investments | 6,5 | 5,9 |
| Fixed assets | 126,7 | 150,6 |
| Short term receivables | 29,9 | 47,0 |
| Cash and cash equivalents | 55,7 | 85,0 |
| Current assets | 85,6 | 132,1 |
| Total assets | 212,3 | 282,7 |
| Equity and liabilities | ||
| Equity | 172,2 | 206,5 |
| Minority interests | - | - |
| Total equity | 172,2 | 206,5 |
| Liabilities, short term | 32,2 | 68,2 |
| Liabilities, long term | 7,9 | 7,9 |
| Total equity and liabilities | 212,3 | 282,7 |
1) Unaudited figures
| Q4 2008 |
|---|
| 142,2 |
| 2,5 |
| 5,9 |
| 150,6 |
| 47,0 |
| 85,0 |
| 132,1 |
| 282,7 |
| 206,5 |
| - |
| 206,5 |
| 68,2 |
| 7,9 |
| 282,7 |
Birdstep Technology Interim Report Q4 2009
As of December 31st, 2009 the group had intangible fixed assets amounting to 118,6 million compared to 142,2 million by year end 2008. The reduction is due to amortization as well as currency translation effects of intangible assets booked in subsidiaries abroad.
Fixed assets amounted to 126,7 million (150,6 million) and current assets totaled 85,6 million (132,1 million) of which cash and cash equivalents amounted to 55,7 million (85,0 million). Short term receivables were 29,9 million (47,0 million) and short term liabilities were 32,2 million (68,2 million).
Cash flow
| Amounts in NOK million | Q4 2009 1) | Q4 2008 1) |
|---|---|---|
| Operating profit | -8,2 | -186,4 |
| Depreciation and write-downs | 3,1 | 191,0 |
| Options fair value | 0,1 | -1,0 |
| Changes in net working capital | 4,0 | 7,3 |
| Net cash flow from operations | -1,0 | 10,8 |
| Net investments | - | 0,5 |
| Financing activities | - | 5,3 |
| Net change in cash and cash equivalents | -1,0 | 16,7 |
| Cash at beginning of period | 56,7 | 68,4 |
| Cash at end of period | 55,7 | 85,0 |
1) Unaudited figures
| 2009 1) | 2008 |
|---|---|
| -35,9 | -232,8 |
| 12,4 | 199,7 |
| 0,4 | - |
| -0,9 | -4,9 |
| -24,0 | -37,9 |
| -1,0 | 0,2 |
| -4,3 | 9,3 |
| -29,3 | -28,4 |
| 85,0 | 113,4 |
| 55,7 | 85,0 |
Equity statement
| Amounts in NOK million | Q4 2009 1) | Q4 2008 1) |
|---|---|---|
| Opening balance | 186,5 | 383,5 |
| Net profit /(loss) | -7,2 | -202,1 |
| Equity share issue | - | 11,0 |
| Options | 0,1 | -1,0 |
| Currency translation effect | -7,2 | 15,1 |
| Closing balance | 172,2 | 206,5 |
| 2009 1) | 2008 | |
| --- | --- | |
| 206,5 | 402,9 | |
| -36,9 | -244,0 | |
| 18,2 | 11,0 | |
| 0,4 | - | |
| -16,0 | 36,6 | |
| 172,2 | 206,5 |
1) Unaudited figures
Net change in cash and cash equivalents was -1,0 million in Q4 2009 (16,7 million). This is a clear improvement from previous quarters in 2009. In the first 9 months of 2009, Net Cash Flow amounted to -28,3 million. Inflow from customers was higher than expected in Q4 2009 contributing to a change in Net Working Capital of 4,0 million. As several customers paid earlier than normal, cash inflow may be somewhat lower in Q1 2010. For the full year 2009 net change in cash and cash equivalents before tax was -29,3 million (-28,4 million). At the end of the year, the company had cash and cash equivalents of 55,7 million (85 million).
Birdstep Technology Interim Report Q4 2009
Segment results
Revenues per business segment
| Amounts in NOK million | 2009 Q4 | 2008 Q4 | Change | 2009 Q4 | 2009 Q3 | Change | 2009 full year | 2008 full year | Change |
|---|---|---|---|---|---|---|---|---|---|
| EasyConnect | 12,2 | 8,6 | 42% | 12,2 | 12,0 | 2% | 44,2 | 23,9 | 85% |
| SafeMove | 4,5 | 11,9 | -62% | 4,5 | 4,3 | 5% | 20,3 | 28,3 | -28% |
| Orbyte | 6,6 | 10,2 | -35% | 6,6 | 4,8 | 38% | 24,6 | 32,4 | -24% |
| Raima | 5,8 | 8,4 | -31% | 5,8 | 4,5 | 29% | 18,8 | 19,0 | -1% |
| Total | 29,1 | 39,1 | -26% | 29,1 | 25,6 | 14% | 107,9 | 103,6 | 4,2% |
EasyConnect
- Revenues of 12,2 million in Q4 (8,6 million)
- 42% revenue growth for EasyConnect compared to Q4 2008
- EasyConnect activations reached 550K in Q4 2009 (465K)
- Sixth consecutive quarter of revenue growth
- Signed contact with Meteor, mobile operator in Ireland
- Awarded contract for the upgrade of Elisa & Saunalahti to EasyConnect 2.8
EasyConnect increased YoY quarterly revenues with 42% to 12,2 million (8,6 million) and remained steady compared to 12,0 million in Q3 2009.
To further focus on the fast growing mobile broadband market and the growth potential for EasyConnect Birdstep implemented a re-organization during the quarter. To increase the possibilities to land more contracts with mobile operators, the sales team was strengthened with a new VP Sales and an expanded sales team. The company is with the new organization better equipped to take advantage of the strong growth in the mobile broadband market.
EasyConnect Revenue Growth
Fourth quarter 2008 - Fourth quarter 2009
Birdstep Technology Interim Report Q4 2009
550 007 new customers activated their USB modems with EasyConnect software during the fourth quarter 2009, compared to 464 762 in the corresponding quarter last year.
The newly released EasyConnect 2.8 was selected by Elisa Finland for deployment across the Saunalahti and Elisa mobile broadband services. In addition, Meteor Ireland, a subsidiary of Eircom, has selected Birdstep EasyConnect 2.8 for launch across their Mobile Broadband services with an expected launch late in first quarter, 2010.
EasyConnect Activations (excl Inside)
First quarter 2008 - Fourth quarter 2009
SafeMove
- Revenues of 4,5 million in Q4 (11,9 million)
- 62% revenue decrease for SafeMove compared to Q4 2008
- SafeMove 5.0 product release
- SafeMove internationalization efforts accelerated
- Reseller agreement with Nomasis AG, Switzerland
SafeMove had a weak quarter and reported revenues of only 4,5 million, compared to 11,9 million in the fourth quarter of 2008. The decline was due to continued slowdown in domestic sales in Finland and a delay in the international roll out. In Finland, SafeMove experience budget restrictions and both enterprises and government organizations have halted new investments. The normal cyclical upswing in revenues in the last quarter of the year did not happen in 2009, partly because two major deals were postponed to 2010.
SafeMove internationalisation efforts strengthened with the establishment of a dedicated international sales team, i.e. hire of new VP International Sales and the completion of recruitment of UK-based sales team. The new sales team has during the quarter been out building awareness of SafeMove and already seen positive signs moving forward. SafeMove closed a reseller agreement with Nomasis AG, a specialist provider of mobile security solutions in Switzerland
During the fourth quarter SafeMove received several license expansion orders from Finnish state government, including ministries and other government agencies. SafeMove 5.0 was released during the quarter, providing support for Microsoft Windows 7 and Windows Mobile 6.1 and 6.5.
Birdstep Technology Interim Report Q4 2009
Birdstep Technology Interim Report Q4 2009
Orbyte
- Revenues of 6,6 million in Q4 (10,2 million)
- 35% revenue decrease for Orbyte compared to Q4 2008
- New managed services contract with major Nordic Operator
Orbyte posted a disappointing decline from 10,2 million in Q4 2008 to 6,6 million in Q4 2009. During Q4 2009, Orbyte continued to suffer weakened returns due to cutbacks in mobile operator's spending and postponement of investment decisions.
Positively, efforts to expand into new business agreements resulted in Orbyte being awarded a two year contract to manage the service production of an Orbyte solution from a Nordic operator. The value of the contract is 6,8 MNOK.
To focus Birdstep Technology's WiFi initiatives, Orbyte will from Q1 2010 be organized and reported as a separate company, fully owned by Birdstep Technology ASA.
Raima
- Revenues of 5,8 million in Q4 (8,4 million)
- 31% revenue decrease for Raima compared to Q4 2008
- RDM Server version 8.3 was released
- Expanded distribution channel into Turkey
Raima decreased its YoY revenues with 31% to 5,8 million (8,4 million) but increased revenues compared to 4,5 million in Q3 2009. Part of the decline is explained by the significantly weaker USD in Q4 2009, on average the currency was around 16% below its level in Q4 2008.
During the quarter the RDM Server version 8.3 was released to the market providing customers with enhanced SQL functionality. Raima also expanded distribution channel into Turkey with the addition of a leading solution provider to the aerospace and defense market.
Birdstep announced in Q4, as part of the organizational restructuring, that the company will consider a divesture of Raima if the terms and conditions are favorable. Raima will from Q1 2010 be organized and reported as a separate company, fully owned by Birdstep Technology ASA.
7
Market outlook and major risk factors
The Mobile broadband market continues its growth. As more mature markets stabilize both products and pricing plans are adapting to suit an increased demand for variety in connectivity solutions and value added services. These are providing increased opportunities for growth and higher returns, whilst also providing unique challenges to mobile operators.
Increasing pressure on pricing has been felt within the mobile operator market for mobile broadband solutions. With operators continuing aggressive market activities resulting in the overall decline of consumer prices, network operators have entered a phase of concerted Opex reductions. Key focus must be placed on demonstrating cost benefits of mobile broadband solutions to ensure a positive return.
Birdstep’s EasyConnect product portfolio is continuously being developed to provide increased value with service management solutions. As these solutions go to market in 2010, increased focus is also being placed on new business. With the strengthened new sales team, the company is now much better equipped to take advantage of the strong growth in the mobile broadband market and enhance growth of EasyConnect.
The market for Safe Move’s enterprise mobility solutions continues to grow and the increased number of wireless networks combined with a continued need for strong security represents a good opportunity for increased mobile VPN revenues in 2010. During 2010 we will further strengthen our international presence and grow our network of sales partners.
EasyConnect and SafeMove are the key business segments and the primary growth areas within Birdstep. The company believes that its competitive advantage in the future market will be the combination of mobile broadband connectivity, with security and policy management.
As previously stated Birdstep Technology expects no indications for short term boosts in earnings for Orbyte. However, new services agreements, such as that signed in Q4 2009, represent a key step in the recovery process. The immediate outlook for Raima appears challenging in the first and second quarter of 2010. However, the release of RDM Embedded 10.0 in the second quarter is expected to present upgrade revenue for the remainder of the year.
The growth trends in mobile broadband are strong. The board of directors therefore believes that the underlying growth outweighs any impact from the challenging market. Birdstep Technology has a solid cash position and is fully funded.
The company believes that EasyConnect is well positioned to take advantage of the general market growth and to deliver activation and revenue growth moving forward.
Birdstep Technology Interim Report Q4 2009
Other information
Birdstep at Mobile World Congress
Birdstep Technology is proud to announce its participation at Mobile World Congress in Barcelona February 15 - 18. During the exhibition, the company will meet with customers, investors, analysts and media.
For more information, visit Birdstep’s event site for Mobile World Congress at www.birdstep.com/mwc
Transactions with related parties
Birdstep Technology has not taken part in any significant transactions with related parties in the first half of 2009. Neither have there been any changes to the policy of transactions with related parties as described in the Annual Report for 2008.
Birdstep Technology Interim Report Q4 2009
Statement of responsibility
We confirm, to the best of our knowledge, that the interim consolidated financial statements for the period October 1st to December 31st 2009, has been prepared in accordance with IAS 34 – Interim Financial Reporting, and gives a true and fair view of the Group's assets, liabilities, financial position and profit or loss as a whole. We also confirm, to the best of our knowledge, that the interim management report includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, a description of the principal risks and uncertainties for the remaining six months of the financial year, and major related parties transactions.
Oslo, February 10, 2010
The Board of Directors of Birdstep Technology ASA
Tom Nyman
Chairman of the board
Terje Thon
Board member
Terje Christoffersen
Board member
Wenche Holen
Board member
Kirsten English
Board member
Arne Aarnes
Board member
Eva Lindqvist
Board member
Torbjörn Sandberg
President and CEO
Birdstep Technology Interim Report Q4 2009
Disclosure
(Unaudited)
Forward looking statements
This report contains statements regarding the future in connection with the company's growth expectations, general and specific market outlook and objectives. All statements regarding the future are subject to inherent risks and uncertainties, and many factors can lead to actual profits and developments deviating substantially from what has been expressed or implied in such statements.
NOTE 1: CORPORATE INFORMATION
Birdstep Technology ASA is a company domiciled in Oslo, Norway, with HQ-address: Fridtjof Nansens plass 5. The consolidated financial statements of the Company include the Company subsidiaries Birdstep Technology AB (SE), Birdstep Technology OY (FI), Birdstep Technology Inc (US), Birdstep Technology San Francisco Inc (US) and Service Factory SF AB (SE). As of December 31st 2009, Birdstep Technology had branch offices in USA, Sweden and Finland.
NOTE 2: FINANCIAL STATEMENTS - BASIS FOR PREPARATION
Birdstep Technology ASA follows the principles of IFRS in this report. The enclosed consolidated condensed financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting". The report does not include all of the information required for a full annual financial report, and should also be read in conjunction with the consolidated financial statement of Birdstep Technology for the year ended December 31st 2008. The same accounting policies used in the consolidated financial statement for 2008 have been used on these consolidated condensed financial statements.
The new standards, interpretations or amendments to publish standards that were effective from January 1st 2009 that have significantly affected the consolidated financial statements for the fourth quarter are:
IFRS 8 Operating Segments is mandatory for periods beginning on or after January 1st 2009. The standard replaces IAS 14 and requires segment disclosure based on the components of an entity that management monitors in making operating decisions, rather than disclosure of business and geographical segments. IFRS 8 had a minor effect on the presentation of Birdstep Technology Group's segment reporting for the fourth quarter.
Amendments to IAS 1 Presentation of financial statements
A revised presentation is mandatory for periods beginning on or after January 1st 2009. The amendments require companies to present both a statement of change in equity and either a statement of comprehensive income or an income statement accompanied by a statement of other comprehensive income as part of the financial statements.
These amendments required Birdstep Technology to present both a statement of change in equity and a statement of comprehensive income for the fourth quarter and for the year ended 2009.
Birdstep Technology Interim Report Q4 2009
NOTE 3: ESTIMATES
The preparation for the financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities. The estimates are based on historical experience and various other factors that are believed to be reasonable. The estimates and underlying assumptions are reviewed on an ongoing basis. Change in accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
NOTE 4: SUBSEQUENT EVENTS
No subsequent events have occurred after the reporting date that is necessary to be included in the enclosed consolidated condensed financial statements.
For announcement of new contracts, please see information published on the Oslo Stock Exchange website (www.ose.no) Ticker: BIRD
Birdstep Technology Interim Report Q4 2009
Birdstep Technology ASA
Birdstep Technology ASA is a software vendor, headquartered in Oslo, Norway and with offices in Norway, Sweden, Finland and the United States. The company was until end of 2009 divided into four business areas:
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EasyConnect offers mobile broadband connection and service management solutions for network operators and laptop manufacturers. EasyConnect Go and Advanced are Birdstep Technology’s solutions for mobile internet, directed towards mobile operators and deployed on USB-modems and mobile notebooks. EasyConnect Inside is provided to laptop manufacturers with embedded connectivity solutions. Key customers for EasyConnect Go are 3, KPN, T-Mobile and Cosmote. EasyConnect Inside has contracts with HP, Acer, Sony and Toshiba.
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Orbyte allows network operators to rapidly deploy and manage large networks with advanced features. It is designed to allow simplified wireless broadband connectivity for end users whilst allowing centralized authentication, enabling businesses to on-sell connectivity and taking advantage of existing infrastructure deployments. Key customers are TeliaSonera, DU, 3 Sweden, TDC, Eircom and RomTelecom.
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SafeMove provides seamless and safe connectivity to business data for OEM-providers and corporations through mobile VPN software. SafeMove has a leading position in the Finnish market with key customers as Nordea Bank, Finnish ministries, the Finnish Defence Forces, Helsinki and Uusimaa Hospital District (HUS).
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Raima provides enterprises with high-performance embedded databases for in-memory database usage and persistent storage devices. It has a stable customer base consisting of over 200 customers with more than 6,000 licenses including Boeing, General Dynamics, HP and Magellan.
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Birdstep Technology has 100 employees and is listed on the Oslo Stock Exchange (OSE) under the ticker
BIRD.
For additional information about Birdstep’s products, services, partners and customers please visit us at www.birdstep.com.
Birdstep Technology Interim Report Q4 2009