This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs.
FOURTH QUARTER, OCTOBER – DECEMBER 2019
- Net sales increased by 12.0%, or 10.7% FX adjusted, to MSEK 70.5 (63.0)
- Gross profit increased by 7.7%, or 6.1% FX adjusted, to MSEK 54.0 (50.2)
- EBIT was MSEK -5.3 (-3.6)
- Earnings after tax was MSEK -6.2 (-2.9)
- Earnings per share was, basic SEK -0.79 (-0.40), diluted SEK -0.79 (-0.40)
FULL YEAR, JANUARY – DECEMBER 2019
- Net sales increased by 8.9%, or 7.5% FX adjusted, to MSEK 263.1 (241.5)
- Gross profit increased by 10.5%, or 8,8% FX adjusted, to MSEK 202.0 (182.9)
- EBIT amounted to MSEK -22.9 (-13.3)
- Earnings after tax amounted to MSEK -22.9 (-13.9)
- Earnings per share amounted to, basic SEK -2.91 (-1.94), diluted SEK -2.91 (-1.94)
IMPORTANT EVENTS
DURING THE PERIOD
- The global marketing function was moved from the US to Sweden.
- The Norwegian operations was combined with the Swedish organisation, leading to cost efficiencies and annual cost reductions of MSEK 2.8 from 2020.
AFTER THE PERIOD ENDED
- P-O Westerlund was appointed as new CEO on January 26.
- Global lifestyle and clothing brand GANT chose Nepa as brand tracking provider in all major markets
- Ann-Christine Fick was appointed new CFO and member of group management.
- Michael Wallin was appointed to the new role of Head of Investor relations.
- Based on our profitability focus and the recent outbreak of Corona virus we have taken action to addressing costs. This includes termination of employees under probationary period, ending consultant contracts, and a salary reduction of 20 percent for group management.
A WORD FROM OUR CEO
In the fourth quarter gross profit amounted to MSEK 54.0 (50.2), an increase of 7.7 percent. In the same quarter EBIT was MSEK -5.3 (-3.6). For the full year of 2019, the group’s gross profit was MSEK 202.0 (182.9), an increase of 10.5 percent compared to 2018. EBIT was MSEK -22.9 (-13.3).
To summarize the outcome of the quarter and the full year of 2019 we had an organization that was set-up for a higher growth rate than we achieved. In the fourth quarter, we were also burdened by costs aiming at simplifying our organizational structure and adapting our cost base, for example by downsizing the US operations and by combining the Norwegian and the Swedish organizations.
Since I took over as CEO at the end of January this year, we have shifted focus from growth to profitability. We will, of course, continue to grow, but this will be done with profitability.
Action program
For some time, we have had a too large cost base in relation to our revenues. With the new shock of the Corona virus we are acting decisively and taking into consideration a changed market sentiment. As part of our adaptation, employees on probationary period have, sadly, been terminated and we have radically reduced the number of consultants. Our group management team has decided to reduce our salaries by 20 percent, in addition to the voluntary salary reduction of 10 percent that some of us took already in the beginning of 2020. Altogether, I estimate that these actions will reduce our costs by at least SEK 11 million on an annual basis, beginning in the second quarter.
I sincerely regret that we have to take these measures and at the same time I hope for understanding since conditions have changed dramatically in a short period of time. I would have preferred to keep our talented employees.
I am determined to achieve the goal that Nepa will be profitable this year. With the actions taken, I expect that we will have increased financial leeway. We are monitoring developments closely and further measures cannot be ruled out should the situation worsen.
Favourable conditions
As new CEO I really look forward to leading and developing this company. Being one of the larger shareholders and with extensive experience from working in the company, I know that we have fantastic conditions for both growth and profitability.
We have a strong market position, significant experience and expertise among our talented employees, and have some of the market’s best tools. Together, we will now unleash the potential in this combination, and I feel a strong support for this internally at Nepa.
Furthermore, it is important that we have the market’s confidence. Therefore, as part of a more investor-friendly approach, we will gradually increase the transparency of our financial reporting to make it easier to follow how we are developing. A first action is the segment reporting we are introducing, starting this quarter.
Outlook
Achieving growth by optimizing marketing investments is increasingly important for companies. Nepa are experts in transforming consumer data to growth generating actions for our clients and we have an important role to play. If we try to look beyond the current Corona-related concerns, Nepa has a fantastic potential to show both growth and profitability in the years to come. I look forward to leading the company to deliver our potential.
P-O Westerlund
CEO
THE GROUP
DEVELOPMENT OF THE GROUP
REVENUES
Gross profit increased in the fourth quarter by 7.7 percent to kSEK 53,995 (50,155), and 6.1 percent currency adjusted. Net sales increased by 12.0 percent to kSEK 70,520 (62,972), and 10.7 percent currency adjusted.
For the full year of 2019, gross profit increased by 10.5 percent to kSEK 202,021 (182,880), and 8.8 percent currency adjusted. Net sales increased by 8.9 percent to kSEK 263,061 (241,485), and 7.5 percent currency adjusted.
The strongest sales growth in 2019 was in Marketing Optimization followed by Customer Experience (CX). It was primarily the result of strong growth of our core products Ad & Media Tracker (MO) and CX Tracker (CX).
In absolute numbers, the UK showed the highest growth, increasing sales by MSEK 8.0 equivalent to 33 percent (MSEK 6.8 or 26% growth currency adjusted). That is a result of the success of our product Path to Purchase, which helps companies understand the entire consumer journey until making a purchase decision and all touchpoint affecting this, both online and offline. This also contributed to the fact that our ad hoc sales grew more than our recurring sales, since we define all Path to Purchase revenue as ad hoc, even though we are working with the same clients over year after year. This increase is positive but that does not change our long-term target of increasing recurring revenues as share of total revenues.
Detailed information about segment are found in note 2 on page 11.
EARNINGS
The group’s EBIT amounted in the fourth quarter to kSEK -5,305 (-3,605) and earnings after tax amounted to kSEK -6,230 (-2,949).
For the full year of 2019, the group’s EBIT amounted to kSEK -22,921 (-13,251) and earnings after tax amounted to kSEK -22,888 (-13,941).
GROUP INCOME STATEMENTS
kSEK Oct Oct Full Full year 2018
-Dec -Dec year
2019 2018 2019
Net sales 70 520 62 972 263 061 241 485
Other external 861 926 4 827 3 788
income
71 381 63 898 267 889 245 273
Direct costs -16 -12 -61 041 -58 604
525 817
Other external -9 261 -7 502 -34 395 -27 761
costs
Personnel costs -47 -44 -183 -162 784
359 885 887
Depreciations -2 176 -1 530 -7 546 -5 314
Other operating -1 365 -769 -3 940 -4 061
costs
Earnings Before -5 305 -3 605 -22 921 -13 251
Interest and Tax
Financial income 57 475 2 124 1 571
Financial costs -1 026 -308 -1 796 -1 273
Earnings Before -6 274 -3 439 -22 592 -12 953
Tax
Tax 44 490 -295 -988
Earnings After -6 230 -2 949 -22 888 -13 941
Tax
Profit -6 230 -2 949 -22 888 -13 941
attributable to
the parent
company’s
shareholders
Number of 7 863 7 863 7 863 7 863 186
shares, end of 186 186 186
period(pcs.)
Average number 7 863 7 303 7 863 7 187 520
of shares during 186 750 186
the period(pcs.)
Earnings per -0.79 -0.40 -2.91 -1.94
share, basic
(SEK)
Earnings per -0.79 -0.40 -2.91 -1.94
share, diluted
(SEK)
GROUP BALANCE SHEETS
ASSETS (kSEK) December 31, 2019 December 31, 2018
Intangible assets 31 618 25 939
Tangible assets 618 742
Financial assets 727 855
Sum non-current assets 32 964 27 536
Trade receivables 64 004 49 559
Tax receivables 2 026 2 349
Other current 2 697 2 638
receivables
Prepayments and accrued 17 610 10 848
income
Cash and cash 14 629 45 210
equivalents
Sum current assets 100 966 110 605
TOTAL ASSETS 133 930 138 141
EQUITY (kSEK)
Shareholders’ equity 1 573 1 573
Development fund 30 892 24 253
Other capital 116 325 117 534
contributions
Translation difference -820 -597
Retained earnings incl. -97 514 -67 987
net profit for the
period
Total equity 50 456 74 776
LIABILITIES (kSEK)
Deferred Tax 540 540
Total long-term 540 540
liabilities
Due to customers 26 381 18 044
Trade payables 21 083 15 961
Other current 12 197 9 579
liabilities
Accrued expenses, 23 273 19 241
deferred income
Total short-term 82 934 62 825
liabilities
Total liabilities 83 474 63 365
TOTAL EQUITY AND 133 930 138 141
LIABILITIES
Pledged (kSEK)
Chattle 14 000 14 000
Total pledged 14 000 14 000
GROUP CASH FLOW STATEMENTS
kSEK Full year 2019 Full year 2018
Operating activities
Profit before tax -22 592 -12 953
Adjustment of items not included in 6 091 6 433
the cash flow
Income tax paid 28 -2 219
Cash flow from operating activities -16 473 -8 738
before adjustments of working
capital
Cash flow from changes in working
capital
Increase (-) / Decrease (+) of -21 318 -7 829
current receivables
Increase (+) / Decrease (-) of 20 108 12 013
current liabilities
Cash flow from operating activities -17 683 -4 554
Investing activities
Acquisitions/divestments, tangible -394 -228
assets
Acquisitions/divestments, intangible -12 679 -9 828
assets
Acquisitions/divestments, financial 180 -427
assets
Cash flow from investing activities -12 892 -10 482
Financing activities
Rights issue -6 37 419
Cash flow from financing activities -6 37 419
Net cash flow for the period -30 581 22 383
Cash and cash equivalents at the 45 210 22 827
beginning of the period
Cash and cash equivalents at the end 14 629 45 210
of the period
GROUP KEY PERFORMANCE INDICATORS
[]
Oct Oct-Dec 2018 Full year 2019 Full year 2018
-Dec
2019
Net sales growth rate 12.0 2.5 8.9 13.3
(%)
EBITDA (kSEK) -3 129 -2 075 -15 374 -7 937
EBITDA margin (%) Neg Neg Neg Neg
EBIT margin (%) Neg Neg Neg Neg
Profit margin (%) Neg Neg Neg Neg
Total assets (kSEK) 133 138 141 133 930 138 141
930
Equity / Assets ratio 37.7 54.1 37.7 54.1
(%)
No. of shares, end of 7 863 7 863 186 7 863 186 7 863 186
period (pcs.) 186
No. of shares, 7 863 7 303 750 7 863 186 7 187 520
average during period 186
(pcs.)
Earnings per share, -0.79 -0.40 -2.91 -1.94
basic (SEK)
Earnings per share, -0.79 -0.40 -2.91 -1.94
diluted (SEK)
Equity per share 6.42 9.51 6.42 9.51
(SEK)
Dividend per share n/a n/a 0.00[1] 0.00
(SEK)
No. of employees, 272 263 274 253
average (pcs.)
Definitions
Net sales growth rate Percent of growth in net sales compared to a previous period.
EBITDA Earnings before interest, taxes, depreciation and amortization.
EBITDA margin EBITDA as a percentage of net sales.
EBIT margin EBIT as a percentage of net sales.
Profit margin Earnings before tax as a percent of net sales.
Equity / Assets ratio Equity as a percentage of total assets.
Earnings per share Profit attributable to the parent company’s shareholders divided by average number
of outstanding shares.
Equity per share Equity divided by number of outstanding shares.
Dividend per share Dividend for the period divided by the number of outstanding shares at the time of dividend.
No. of employees, average Number of FTE’s on average during the period.
____________________________________
[1] Dividend proposed by the Board of Directors.
PARENT COMPANY
INCOME STATEMENTS, PARENT COMPANY
kSEK Oct Oct-Dec 2018 Full year 2019 Full year 2018
-Dec
2019
Net sales – – – 73
Other external 813 556 2 170 2 018
income
813 556 2 170 2 090
Other external -769 -491 -2 552 -2 053
costs
Personnel costs -568 -2 735 -8 175 -10 552
Depreciations – – – -3
Other operating – – – -3
costs
Earnings Before -523 -2 669 -8 557 -10 521
Interest and Tax
Financial income 393 244 901 492
Financial costs -1 – -2 -0
Earnings Before -131 -2 425 -7 658 -10 029
Tax
Tax – – – –
Earnings After -131 -2 425 -7 658 -10 029
Tax
BALANCE SHEETS, PARENT COMPANY
ASSETS (kSEK) December 31, 2019 December 31, 2018
Financial assets 89 361 63 137
Sum non-current assets 89 361 63 137
Trade receivables – 2
Receivables Group companies 3 569 4 095
Tax receivables 208 184
Prepayments and accrued income 393 78
Cash and cash equivalents 629 35 570
Sum current assets 4 799 39 929
TOTAL ASSETS 94 160 103 065
EQUITY (kSEK)
Shareholders’ equity 1 573 1 573
Share premium reserve 115 020 115 026
Retained earnings -17 201 -5 969
Net profit for the period -7 658 -10 029
Total equity 91 733 100 601
LIABILITIES (kSEK)
Trade payables 244 421
Other current liabilities 391 359
Accrued expenses, deferred income 1 792 1 685
Total liabilities 2 427 2 465
TOTAL EQUITY AND LIABILITIES 94 160 103 065
Note 1: Changes in equity in summary
THE GROUP (kSEK) Shareholders’ Other capital Development Translation Retained Total
equity contributions fund difference earnings equity
incl.
net
profit
of
the
period
THE GROUP 2018
Opening balance of 1 430 78 964 18 093 -545 -47 886 50 055
equity
January 1, 2018
Net profit of the – – – – -13 941 -13
period 941
Translation – – – -52 – -52
difference
Development fund – – 6 160 – -6 160 –
Issuance of warrants – 1 294 – – – 1 294
Rights issue 143 37 276 – – – 37 419
Closing balance of 1 573 117 534 24 253 -597 -67 987 74 776
equity December 31,
2018
THE GROUP 2019
Opening balance of 1 573 117 534 24 253 -597 -67 987 74 776
equity
January 1, 2019
Net profit of the – – – – -22 888 -22
period 888
Translation – – – -223 – -223
difference
Development fund – – 6 639 – -6 639 –
Issuance of warrants – -1 203 – – – -1 203
Rights issue – -6 – – – -6
Closing balance of 1 573 116 325 30 892 -820 -97 514 50 456
equity December 31,
2019
PARENT COMPANY Shareholders’ Share Retained earnings incl. Total
(kSEK) equity premium net profit of the period equity
reserve
PARENT COMPANY 2018
Opening balance of 1 430 77 750 -7 263 71 917
equity January 1,
2018
Net profit of the – – -10 029 -10
period 029
Issuance of warrants – – 1 294 1 294
Right issue 143 37 276 – 37 419
Closing balance of 1 573 115 026 -15 998 100
equity 601
December 31, 2018
PARENT COMPANY 2019
Opening balance of 1 573 115 026 -15 998 100
equity January 1, 601
2019
Net profit of the – – -7 658 -7 658
period
Issuance of warrants – – -1 203 -1 203
Rights issue – -6 – -6
Closing balance of 1 573 115 020 -24 860 91 733
equity
December 31, 2019
Note 2: Segment reporting
Nepa’s business can be divided into three types of segments; either depending on what the revenue model looks like (revenue type), which solution the revenue stems from, or which country made the sales.
In revenue type, we separate project already sold, either through subscriptions or regular bulk purchases (recurring) and more project-based revenues (ad hoc).
Sales is also split according to the solution used. Nepa’s solutions are Marketing Optimization (MO), Customer Experience (CX), Innovation Acceleration (IA) or Other revenues.
Finally, revenue is split after country.
[][]
REVENUE TYPE (MSEK) 2019 Share Growth 2018 Share
Nepa Group 263.1 100% 21.6 241.5 100%
Recurring 159.4 61% 9.6 150.0 62%
Ad hoc 103.7 39% 12.1 91.5 38%
Share of ad hoc 61.9 60% 12.2 49.7 54%
from recurring clients
Share of ad hoc 41.8 40% -0.1 41.9 46%
from non-recurring
clients
Sales to clients buying 221.3 84% 21.6 199.7 83%
both recurring & ad
hoc[1]
Sales to clients buying 41.8 16% 0.0 41.8 17%
ad hoc only[2]
Sales of Recurring grew 6% to MSEK 159.4 in 2019. Ad Hoc grew 13% to MSEK 103.7 MSEK in 2019, driven by increased sales to clients that also buys Recurring solutions. The goal is to increase the share of sales of Recurring revenues in order to increase profitability.
Net Gross
sales profit
SOLUTION 2019 Share Growth 2018 Share 2019 Share Growth 2018 Share
(MSEK)
Nepa Group 263.1 100% 21.6 241.5 100% 202.0 100% 19.1 182.9 100%
MO 186.7 71% 19.5 167.2 69% 134.7 67% 14.6 120.1 67%
CX 24.7 9% 5.2 19.4 8% 22.3 11% 4.9 17.4 11%
IA 31.6 12% 2.3 29.3 12% 27.2 13% 2.9 24.3 13%
Övriga 20.3 8% -5.3 25.6 11% 17.3 9% -3.6 20.9 9%
-0.2 0% -0.1 -0.1 0% 0.5 0% 0.3 0.1 0%
Eliminations
In absolute numbers, our MO-solution grew the most in 2019 (MSEK 14.6 in gross profit). In relative numbers our CX solution grew fastest (28% gross profit growth). The goal is to increase the penetration of our solutions to current clients. It provides the benefit for clients with a complete view of their consumers and also gives the right conditions to create growth and profitability for Nepa.
Net Gross
sales profit
MARKET 2019 Share Growth 2018 Share 2019 Share Growth 2018 Share
(MSEK)
Nepa 263.1 100% 21.6 241.5 100% 202.0 100% 19.1 182.9 100%
Group
168.8 64% 6.9 161.9 67% 131.9 65% 5.6 126.3 66%
Sweden
33.9 13% 4.4 29.5 12% 25.9 13% 5.7 20.3 10%
Finland
UK 32.0 12% 8.0 24.0 10% 24.3 12% 5.2 19.1 13%
All 28.4 11% 2.3 26.1 11% 19.9 10% 2.7 17.2 11%
other
markets
All markets grew in 2019, both in terms of sales and gross profit. The highest percentual gross profit growth was in Finland (28%) and UK (27%). Our ambition is to create profitable growth on all markets, where Sweden, Finland and UK are key focus markets.
THE BUSINESS
VISION
To become the world leading data-to-growth company.
The digital transformation of our society is pushing companies to become more customer centric. The need to listen to and to understand customers has never been more important for business success. Through innovative solutions and software, Nepa facilitates customer-oriented decision making in all parts of Nepa’s clients’ organizations.
BUSINESS CONCEPT
Nepa’s business concept is to help companies become more customer oriented, by bringing the voice of the consumer into companies’ business development and daily decision-making. Nepa combines consumer feedback data with actual behaviour data in order to transform traditional insights into financially quantifiable actions.
BUSINESS MODEL
Nepa is a ground-breaking growth company within the research industry that offers innovative solutions and software for delivering actionable insights to clients. Nepa has developed automated processes for continuous data gathering, data analysis and the distribution of actionable insights.
Nepa’s sales strategy entails solving client specific business challenges by utilizing proprietary ready-made and scalable analytics modules that support cost effective customization. Nepa’s revenues primarily stems from recurring revenues, ranging twelve months. More than 60 percent of the revenues stem these from subscription. In addition to that, 60 percent of the ad hoc revenues stem from the same recurring clients
Other revenues stem from solving client specific business challenges, always with the ambition to create a long-term subscription business model and/or to develop highly scalable products that can be applied to other clients and in other industry verticals.
The proprietary platform Consumer Science Platform® is sold as a combination of:
1. A platform license for managing customer feedback with an interface that automatically enriches clients’ current IT infrastructure with behaviour data.
2. Standardized products – Consumer Science Platform® Applications Suite.
3. Solving client specific business challenges.
EVENTS AFTER THE END OF THE QUARTER
A new top management was appointed. P-O Westerlund was appointed new CEO on January 26 and Ann-Christine Fick as new CFO and member of group management. Michael Wallin was appointed to the new role as Head of Investor relations.
In order to reduce costs, an action program has been completed, involving termination of employees under probationary period, a reduced number of consultants and a salary reduction of 20 percent on group management level.
Global lifestyle and clothing brand GANT chose Nepa as brand tracking provider in all major markets.
Towards the end of February 2020, the new Corona virus caused a dramatic change in sentiment world-wide. For Nepa it has meant that a few clients have reduced their business volume while others have postponed ad hoc projects. It is still too early to be specific about the full effects. However, with the cost cutting measures that has been taken and the company’s stable base of recurring business, these challenges should be manageable.
ACCOUNTING PRINCIPLES
The Group accounts have been established according to Swedish GAAP (Årsredovisningslagen and Bokföringsnämndens allmänna råd 2012:1 Årsredovisning och koncernredovisning (K3)). The Group consists of the parent company Nepa AB (publ) and nine subsidiaries, seven of which non-Swedish. Accounting principles and valuation principles correspond to the ones used in the latest annual report.
RISKS AND UNCERTAINCIES
Nepa faces several business risks and market risks, including the dependency of qualified personnel, the ability to handle growth and technological development.
The outbreak of the Corona virus has caused a dramatic change in sentiment world-wide which may affect clients’ willingness to invest.
AUDITING
This report has not been audited by the company’s auditors.
THE SHARE
The share capital of Nepa AB (publ) amounted, on December 31, 2019, to SEK 1,572,637.20 divided into 7,863,186 shares, each with a nominal value of SEK 0.20.
Nepa AB (publ) is listed on the Nasdaq First North Growth Market stock exchange since April 26th, 2016 under the ticker NEPA. A trading unit consists of onehundredandten (110) shares. All shares are of the same series and have the same voting rights and dividends rights.
Ten largest shareholders as of December 31, 2019 Number of shares Share/Votes
Ulrich Boyer 1,492,624 19.0%
Swedbank Robur Fonder 873,352 11.1%
Elementa 698,128 8.9%
Fredrik Östgren 696,178 8.9%
Humle Småbolagsfond 673,329 8.6%
P-O Westerlund 416,169 5.3%
AMF Aktiefond Småbolag 366,430 4.7%
Handelsbanken Fonder AB 305,185 3.9%
Hans Skruvfors 225,000 2.9%
Niclas Öhman 177,481 2.3%
Ten largest shareholders 5,923,876 75.3%
Other shareholders 1,939,310 24.7%
Total number of shares 7,863,186 100.0%
CERTIFIED ADVISER
Erik Penser Bank is Nepa’s Certified Adviser.
Phone: +46 8-463 83 00
E-mail: certifiedadviser@penser.se
FINANCIAL CALENDAR
Interim report January 1[st] to March 31[st], 2020 May 20[th], 2020
Annual general meeting 2020 May 20[th], 2020
Interim report April 1[st] to June 30[th], 2020 August 21[st], 2020
Interim report July 1[st] to September 30[th], 2020 November 20[th], 2020
Year-end report 2020 March 19[th], 2021
CERTIFICATION
The Board of Directors and the CEO certify that this interim report provides a correct depiction of the Group’s and parent company’s businesses, standings and results, and that it describes the relevant risk factors and uncertainties the company is facing.
Stockholm, March 20[th], 2020
The Board of Directors of Nepa AB (publ)
Ulrich Boyer Bo Mattsson Kristin Luck Simon Hay
Chairman of the Board Board member Board member Board member
Jan Carlzon Fredrik Östgren Niclas Öhman P-O Westerlund
Board member Board member Board member Board member, CEO
For further information, please contact:
P-O Westerlund, CEO Michael Wallin, Head of IR
+46 706 404 824 +46 708 788 019
p-o.westerlund@nepa.com michael.wallin@nepa.com
This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs. The Swedish version is information that Nepa AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 08:00 CET on March 20, 2020.