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Techstep ASA Interim / Quarterly Report 2010
3770_rns_2010-05-20_505c47b8-1701-46e8-b0d6-8b4ccd217f5d.pdf
Interim / Quarterly Report
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birdstep TECHNOLOGY
Q1 2010
Birdstep Technology Interim Report Q1
Q1 Highlights
Birdstep continues to deliver growth and improved cash flow
- Q1 revenues increased with 9% to 27,0 million (24,8 million)
- Cash flow of -8,2 million (-15,2 million)
- EBITDA of -6,9 million in Q1 (-7,7 million)
- EasyConnect activations reached 515K in Q1 2010 (396K)
- Third million mobile broadband user in the world activated their USB modem with EasyConnect
- EasyConnect signed group wide frame agreement with a leading European operator
- Strengthened EasyConnect and SafeMove product offering
All figures in this report are in NOK.
Figures in parenthesis are related to same period 2009, unless otherwise mentioned.
In Q1, top line growth continued as total revenues showed a solid 9% increase to 27,0 million (24,8 million). Adjusted for currency exchange rate effects, Q1 grew by a solid 19% vs. last year. EBITDA ended at -6,9 million (-7,7) and net cash flow improved from -15,2 million last year to -8,2 million in Q1 2010.
EasyConnect had total revenues of 8 million in Q1 2010 compared to 9,7 million in Q1 2009. During the quarter we have seen a decrease of activations of EasyConnect Inside and, despite the continuous uptake in activations of EasyConnect Go and Advanced, this has caused a decline in EasyConnect total revenues in Q1.
Total revenue
First quarter 2008 - First quarter 2010
By the end of 2009, the business unit experienced a slowdown in customer contract acquisitions due to operational inefficiencies. As a response to this, the former organizations of both EasyConnect and SafeMove were combined to form a functional organization with the aim to strengthen the company's sales effort and take advantage of potential product synergies. As part of this process, several experienced sales executives were hired and international capabilities extended. The sales pipeline of
Birdstep Technology Interim Report Q1 2010
both EasyConnect and SafeMove is now growing. In addition, the company has refined and significantly expanded its product strategy and offerings.
During the first quarter, EasyConnect showed a Year over Year growth of 30% in terms of quarterly activations, with 514 698 new customers activating their USB modems with EasyConnect software, compared to 396 059 activations in the corresponding quarter last year.
SafeMove had revenues of 6 million in Q1 and posted a growth of 15% vs. 5,2 million in Q1 2009. The international sales capabilities in SafeMove have been significantly improved, the sales pipeline is growing and the first results are now beginning to show.
Orbyte posted a 5% increase in revenues to a total of 6 million in Q1 (5,7 million). Raima delivered a 67% increase in revenues to 7,0 million in Q1 (4,2 million) due to a one off large sale of licenses. These two segments are now organized and managed as separate entities.
Going forward, the Group will focus on Birdstep Technology, comprised of EasyConnect and SafeMove and will consider exploring financial alternatives for Raima, Orbyte and the 32% partially owned Aptilo.
Birdstep Technology Interim Report Q1 2010
Financial review, Q1 2010
Income statement
| Amounts in NOK million | 1st Quarter | Full Year | |
|---|---|---|---|
| 2010 1) | 2009 1) | ||
| Operating revenue | 27,0 | 24,8 | 107,9 |
| Total revenue | 27,0 | 24,8 | 107,9 |
| Cost of sales | -1,8 | -2,3 | -9,8 |
| Salaries and wages | -21,9 | -19,6 | -79,3 |
| Other operating expenses | -10,2 | -10,6 | -42,3 |
| EBITDA | -6,9 | -7,7 | -23,5 |
| Amortization and write-downs | -1,9 | -1,9 | -7,5 |
| Ord. depreciation | -1,3 | -1,2 | -4,9 |
| Operating profit (EBIT) | -10,1 | -10,8 | -35,9 |
| Share of associated company | - | -0,4 | -0,4 |
| Financial items, net | -1,2 | -2,0 | -0,6 |
| Income before tax | -11,3 | -13,2 | -36,9 |
| Taxes | - | - | - |
| Net income | -11,3 | -13,2 | -36,9 |
| Other comprehensive income | |||
| Currency translation effect | 0,7 | -11,2 | -16,0 |
| Total comprehensive income | -10,6 | -24,4 | -52,9 |
| Attributable to: | |||
| Equity holder of the parent company | -10,6 | -24,4 | -52,9 |
| Total comprehensive income | -10,6 | -24,4 | -52,9 |
| Earnings and diluted earnings per share (NOK) | -0,15 | -0,19 | -0,74 |
1) Unaudited figures
Total revenues ended at 27,0 million in Q1 2010, an increase of 9% vs. same quarter last year. The key currencies EUR and USD continued its slide vs. NOK and were 9% and 14% below the level seen in the same period last year. Adjusted for the weaker currencies, group revenues would have shown a growth of 19% compared to Q1 2009.
Salaries were 21,9 million in Q1 2010 (19,6 million). The increase compared to last year is mainly explained by one off expenses of 1,5 million on recruitment and booked option cost. Other operating expenses were 10,1 million or 5% below the level in Q1 2009.
Birdstep Technology Interim Report Q1 2010
EBITDA ended at -6,9 million in Q1 compared to -7,7 million in Q1 2009. Financial items ended at -1,2 million (-2,0 million) and is explained by loss on currencies due to a lower EUR throughout the first quarter. Net income ended at -11,3 million in Q1 2010 (-13,2 million).
Balance sheet
| Amounts in NOK million | 31 March | 31 Dec | |
|---|---|---|---|
| 2010 1) | 2009 1) | 2009 | |
| Assets | |||
| Intangible fixed assets | 116,7 | 125,8 | 118,6 |
| Other fixed assets | 1,5 | 2,1 | 1,6 |
| Investments | 6,4 | 5,9 | 6,5 |
| Fixed assets | 124,6 | 133,8 | 126,7 |
| Short term receivables | 31,6 | 48,1 | 29,9 |
| Cash and cash equivalents | 47,5 | 69,8 | 55,7 |
| Current assets | 79,1 | 117,9 | 85,6 |
| Total assets | 203,7 | 251,6 | 212,3 |
| Equity and liabilities | |||
| Equity | 162,2 | 182,2 | 172,2 |
| Minority interests | - | - | - |
| Total equity | 162,2 | 182,2 | 172,2 |
| Liabilities, short term | 33,7 | 61,1 | 32,2 |
| Liabilities, long term | 7,8 | 8,3 | 7,9 |
| Total equity and liabilities | 203,7 | 251,6 | 212,3 |
1) Unaudited figures
By the end of Q1 2010 intangible fixed assets amounted to 116,7 million compared to 125,8 million by the end of the first quarter last year. The reduction is mainly due to amortization as well as a considerable currency translation effect due to intangible assets booked in subsidiaries abroad.
Fixed assets amounted to 124,6 million (133,8 million) and current assets totaled 79,1 million (117,9 million) of which cash and cash equivalents amounted to 47,5 million (69,8 million). Capital binding in the form of outstanding short term receivables has been reduced by 16,5 million to 31,6 million in Q1 2010 compared to 48,1 million in Q1 2009. Short term liabilities includes deferred revenue (11,4 million) which is a non-payable debt item, and amounted to 33,7 million as of March 31. Adjusted for an earn out agreement booked in the first quarter last year, short term liabilities have been reduced by 9,2 million compared to Q1 2009. Total equity in the Group amounted to 162,2 million (182,2 million) by the end of the quarter. This corresponds to an equity ratio of 80% (72%).
Birdstep Technology Interim Report Q1 2010
Cash flow
| 1st Quarter | Full Year | ||
|---|---|---|---|
| Amounts in NOK million | 2010 1) | 2009 1) | 2009 |
| Profit/loss before taxes | -11,3 | -13,2 | -36,9 |
| Depreciation and write-downs | 3,2 | 3,1 | 12,4 |
| Options fair value | 0,5 | 0,1 | 0,4 |
| Change in accounts receivable | -0,1 | -2,4 | 18,1 |
| Change in accounts payable | 0,6 | -4,8 | -9,5 |
| Change in other balance sheet items | -0,5 | 3,1 | -8,5 |
| Net cash flow from operating activities | -7,6 | -14,1 | -24,0 |
| Investments in intangible assets | -0,8 | - | - |
| Investments in operating assets | -0,2 | 0,3 | -1,0 |
| Net cash flow from investment activities | -1,0 | 0,3 | -1,0 |
| Financing activities | 0,2 | - | -1,0 |
| Net cash flow from financing activities | 0,2 | - | -1,0 |
| Currency effect on cash | 0,2 | -1,4 | -3,3 |
| Net cash flow | -8,2 | -15,2 | -29,3 |
| Cash at beginning of period | 55,7 | 85,0 | 85,0 |
| Cash at end of period | 47,5 | 69,8 | 55,7 |
1) Unaudited figures
Equity statement
| 1st Quarter | Full Year | ||
|---|---|---|---|
| Amounts in NOK million | 2010 1) | 2009 1) | 2009 |
| Opening balance | 172,2 | 206,5 | 206,5 |
| Net profit /(loss) | -11,3 | -13,2 | -36,9 |
| Equity share issue | - | - | 18,2 |
| Options | 0,5 | 0,1 | 0,4 |
| Currency translation effect | 0,8 | -11,2 | -16,0 |
| Closing balance | 162,2 | 182,2 | 172,2 |
1) Unaudited figures
Birdstep Technology Interim Report Q1 2010
Effective from this quarter, the cash flow statement has been expanded to provide increased information mainly on changes in working capital. Changes in account receivables and payables relating to operating transactions are recorded separately whilst all other changes and adjustments to working capital items will be record as change in other balance sheet items. In Q1 2010, net cash flow from operating activities amounted to -7,6 million compared to -14,1 million last year. Net cash flow from investment activities amounted to -1 million of which 0,8 million is capitalized internal development cost related to the newly launched EasyConnect 2.9. Net cash flow improved to -8,2 million in Q1 2010 from -15,2 million last year and cash at the end of the quarter was 47,5 million (69,8 million).
Birdstep Technology Interim Report Q1 2010
Segment result
Birdstep Technology (EasyConnect and SafeMove)
- Birdstep Technology had revenues of 14 million in Q1 (14,9)
- EasyConnect activations reached 515K in Q1 2010 (396K)
- Third million mobile broadband user in the world activated their USB modem with EasyConnect
- EasyConnect signed group wide frame agreement with a leading European operator
- EasyConnect was awarded contract for the upgrade of 3UK
- EasyConnect extends licensing agreement with TDC
- SafeMove closed significant license order from a Finnish governmental organization
- EasyConnect and SafeMove product offerings were strengthened
| Amounts in NOK million | 1st Quarter | Full Year | |
|---|---|---|---|
| 2010 1) | 2009 1) | 2009 | |
| EasyConnect | |||
| Revenues | 8,0 | 9,7 | 44,1 |
| EBITDA | -6,0 | -1,4 | -6,4 |
| SafeMove | |||
| Revenues | 6,0 | 5,2 | 20,3 |
| EBITDA | -3,3 | -4,1 | -15,5 |
1) Unaudited figures
The new segment Birdstep Technology delivered revenues of 14 million in Q1 compared to 14,9 in Q1 2009. EasyConnect revenues for the quarter were 8,0 million compared to 9,7 million in Q1 last year and SafeMove increased quarterly revenues to 6,0 million compared to 5,2 million last year.
At the end of 2009 EasyConnect experienced a slowdown in customer contract acquisitions mainly due to operational inefficiencies. As a response, a complete new functional organization was implemented from January 1 in order to strengthen the company's sales effort and explore important product synergies between EasyConnect and SafeMove.
As part of the re-organisation, the EasyConnect sales team was further strengthened to increase focus on new sales and expand further internationally.
Following the new Birdstep Technology organization the company has refined the product strategy to better capture the strong growth opportunities seen in the mobile broadband market. Going forward, the connection clients business will be developed into service management solutions for connectivity, mobility and security, with a solution suite meeting the demands for both operators and enterprises.
Birdstep Technology Interim Report Q1 2010
Quarterly activations increased with 30% to 514 698 in the first quarter compared to 396 059 activations in the corresponding quarter last year. During the quarter the third million mobile broadband user in the world activated their USB modem with EasyConnect SW. During the quarter EasyConnect Inside's share of the revenues has decreased due to a decrease of EasyConnect Inside activations. This has, despite the continuous uptake in activations (Go and Advanced), caused a decline in EasyConnect total revenues in Q1. In the EasyConnect roadmap the two platforms will be merged to support both mobile broadband connectivity through USB modems and embedded connection management solutions.
EasyConnect Activations (excl Inside)
First quarter 2009 - First quarter 2010
Birdstep Technology has signed a group wide 3 year frame agreement for EasyConnect with a leading European operator. For the initial launch country only, Birdstep estimates the revenue for the first 2 years to amount to 8 million NOK.
During the quarter, 3UK awarded Birdstep a contract to upgrade their mobile broadband software to EasyConnect 2.8, covering installed base of 1.6 million users.
The EasyConnect software version 2.9 was launched February 16 and was demonstrated to customers, prospects and analysts during the Mobile World Congress in Barcelona February 15-18. This release features, among other things, improved handover between the mobile networks, support for pre-paid subscribers plus improved marketing and support functionality allowing operators to communicate directly with their subscribers.
EasyConnect 2.9 has been very well received by the market and customers have already ordered upgrades to the latest release. During the quarter Birdstep was awarded a contract for the upgrade of TDC Group to EasyConnect 2.9 for all Nordic entities and Meteor/Eircom is launching EasyConnect 2.9 across their Mobile Broadband services. Additionally, the selection of Birdstep by the KPN Group was made upon this latest release of EasyConnect and its functionality.
In Q1 Birdstep Technology closed a significant SafeMove license order from a large Finnish governmental organization, with the license order value of 1,4 MNOK. In addition, several license expansion orders, from Finnish health care districts and from Finnish governmental organizations, were received. The international sales capabilities in Safemove have been significantly improved, the sales pipeline is growing and the first results are now beginning to show.
Birdstep Technology Interim Report Q1 2010
Orbyte
- Revenues of 6,0 million in Q1 (5,7 million)
- 5% revenue increase for Orbyte compared to Q1 2009
- Contract with 3 Scandinavia
| Amounts in NOK million | 1st Quarter | Full Year | |
|---|---|---|---|
| 2010 1) | 2009 1) | 2009 | |
| Orbyte | |||
| Revenues | 6,0 | 5,7 | 24,6 |
| EBITDA | 1,7 | 0,9 | 4,7 |
1) Unaudited figures
Orbyte posted a 5% year over year increase, from 5,7 million in Q1 2009 to 6,0 million in Q1 2010. During the quarter Orbyte was awarded a contract with 3 Scandinavia for policy management with the value of 1,6 MNOK.
Raima
- Revenues of 7,0 million in Q1 (4,2 million)
- 67% revenue increase for Raima compared to Q1 2009
| Amounts in NOK million | 1st Quarter | Full Year | |
|---|---|---|---|
| 2010 1) | 2009 1) | 2009 | |
| Raima | |||
| Revenues | 7,0 | 4,2 | 18,9 |
| EBITDA | 1,4 | -2,4 | -3,6 |
1) Unaudited figures
Raima delivered a 67% increase in revenues to 7,0 million (4,2 million), due to a one off large sale of licenses.
Other / unallocated
| Amounts in NOK million | 1st Quarter | Full Year | |
|---|---|---|---|
| 2010 1) | 2009 1) | 2009 | |
| Other / unallocated | |||
| Revenues | - | - | - |
| EBITDA | -0,6 | -0,6 | -2,7 |
1) Unaudited figures
Unallocated items are comprised of direct cost of Exchange listing, Board of Directors and other Group overhead.
Birdstep Technology Interim Report Q1 2010
Market outlook
Following the reorganization, Birdstep Technology is focused on becoming a pure software vendor in the mobile broadband market, where the underlying growth trends continues.
Mobile Broadband is the fastest growing mobile service in history and has now surpassed voice traffic. Mobile data traffic has experienced exponential growth over the last few years and is forecast to double annually over the next five years. The data traffic growth is contributing to operator revenue growth as more and more consumers use data traffic generating devices, such as laptops and smartphones.
The current challenge for the mobile industry as a whole is how to support massive growth in data traffic and still retain adequate levels of profitability.
The challenges include: support burden, quality of service, low profitability and device diversity.
For Birdstep Technology, this development represents significant opportunities. Up to now, Birdstep Technology has focused on selling connection clients, where the numbers of end-customers activating their USB modems with EasyConnect software are reported monthly. Going forward, the connection clients business will be expanded into service management solutions for connectivity, mobility and security, with a solution suite meeting the demands for both operators and enterprises.
The EasyConnect service end point management solution will enable the mobile broadband providers with sustained, controlled, and profitable service, while SafeMove's mobile VPN and SafeMove Mobile IP are assisting enterprises in adapting to and controlling the growing demands of a connected and mobile working environment.
Birdstep Technology expects to launch EasyConnect 3.0 in the third quarter of 2010, while SafeMove 5.2 is expected on the market early in the fourth quarter.
The Board of Directors considers the company to be fully funded and has set ambitious internal growth targets to management and the organization. This reflects the board's belief that Birdstep Technology is now well positioned to take advantage of the market opportunity associated with the massive growth of mobile services.
Birdstep Technology Interim Report Q1 2010
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 Q1 2010
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 Q1 2010
Birdstep Technology ASA
Birdstep Technology ASA is a software vendor, headquartered in Oslo, Norway and with offices in Norway, Sweden, Finland, UK and the United States. The company is divided into three separate entities:
Birdstep Technology provides mobile broadband connectivity, security and policy management with the EasyConnect and SafeMove offerings.
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 and Advanced are 3, KPN, T-Mobile, TDC and Cosmote. EasyConnect Inside has contracts with HP, Acer, Sony and Toshiba.
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).
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.
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, including Boeing, General Dynamics, HP and Magellan.
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 Q1 2010