Interim Report Q3 2017

Transcription

1 Interim Report Q3 2017

2 Q Highlights Continued strong organic revenue growth as quarterly revenue increased to NOK 10,6 million, up 92 percent compared to the same quarter last year All-time high monthly revenue in September of NOK 5,5 million, highlighting the positive trend going forward Contracts with a total value of NOK 6,7 million signed in the quarter, along with additional contracts worth NOK 7,1 million signed during the first 20 days of October Gross margin of 86 percent Launch of the ayfie Inspector Solid cash position of NOK 52,6 million Increased visibility in the market and in the media Listing of VirtualWorks Group AS on the NOTC market VirtualWorks Group AS presented at the DnB TMT Conference Table of Contents Highlights... 2 Comments from CEO... 3 Media Coverage... 4 VirtualWorks Business Unit... 5 ayfie Business Unit... 6 Market and Outlook... 7 Financials... 8 Group Revenue Quarter-over-Quarter (NOK Thousand) Q Q Group Revenue YTD-over-YTD (NOK Thousand) VirtualWorks Group AS Interim Report Q YTD 2016 YTD 2017

3 Comments from CEO VirtualWorks Group experienced revenue growth in the third quarter of 2017 compared to both the third quarter last year and the second quarter this year. Revenue of NOK 10,6 million represents an increase of 92 percent and 36 percent respectively. There was also positive development throughout the quarter with a monthly all-time high revenue of NOK 5,5 million in September. The year to date revenue of NOK 27,0 million represents an increase of 107 percent compared to the same period last year. The growth proves the positive underlying trend in the smart search and text analytics market as well as the Group s positioning. The ayfie product was launched in the third quarter following the acquisition of the natural language analysis and text analytics company, Language Tools, in early Subsequently, the establishment of the ayfie business unit has had a strong focus on product innovation. In August, the ayfie Inspector was launched during ILTACON in Las Vegas. A line of text analytics products, initially for the Legal market, was launched in the US and the response has been very positive. By the end of the third quarter, ayfie had signed contracts with a total value of NOK 10,8 million and 6,8 million total value signed contracts during the first 20 days October. Bringing the total contracted value to NOK 17,5 million. The contracts which are signed with leading law firms and major suppliers of ediscovery solutions are a combination of licenses and long-term development services giving an annual recurring revenue of NOK 7,3 million. In addition to the positive response in the legal market, other industries such as FinTech and also geographical markets outside the US have shown interest in ayfie s products. The VirtualWorks business unit s revenue in the third quarter was weaker than in the previous quarters of this year. Measures have been taken to strengthen the sales organization and the sales process, and new products will be launched in October. Operating expenses increased slightly in the third quarter compared to the same period last year and the second quarter of this year due to an increase in sales and marketing activities. In August, we hosted a breakfast seminar in Stockholm where Skanska participated by presenting their viaworks solution. In September, we cosponsored and attended the Enterprise Business Collaboration Conference in Berlin. The loss was reduced to negative EBITDA of NOK 8,4 million this quarter compared to negative EBITDA of NOK 12,3 million in the third quarter last year. Year to date loss was reduced to negative EBITDA of NOK 27,1 million compared to negative EBITDA NOK 41,7 million in the same period last year. All research and development of ayfie s and VirtualWorks technologies and products have been carried out by our technical staff in Munich and Oslo. All costs related to research and development have been recorded as regular costs, and thus not capitalized. On September 20th, VirtualWorks Group AS was listed on the NOTC market. Siw Ødegaard, the Group s new CFO, also presented the company at the DNB TMT Opportunity Conference in Oslo on the same day. Top 20 Shareholders of VirtualWorks Group AS Holding Share Shareholder ,61 MERRILL LYNCH, PIERC S/A MLPF & S HOLD ,21 MERTOUN CAPITAL AS ,94 STAFF HOLDING AS ,22 LEIJO AS ,05 JESSE INVEST AS ,85 LANI INVEST AS ,62 TVENGE TORSTEIN INGVALD ,52 LAST INVEST AS ,68 HØYLANDET BYGGUTLEIE ,44 HÜBERT LEIF ,21 WANI INVESTERING AS ,09 VESTLAND INVEST AS ,07 EKER GROUP AS ,05 TERSUS AS ,98 JSQ AS AXERA BUSINESS MANAG ,97 ARVARIUS AS ,91 TRANQUILLE INVESTMEN ,89 ARCTIC SECURITIES AS MEGLERKONTO ,81 KNARTEN HOLDING AS ,57 CLEARSTREAM BANKING ,69 Total 20 largest ,31 Others ,00 Total no. of shares Erik Baklid CEO, VirtualWorks Group AS Erik Baklid 3 VirtualWorks Group AS Interim Report Q3 2017

4 Media Coverage VirtualWorks Group AS Interim Report Q3 2017

5 The VirtualWorks Business Unit The VirtualWorks business unit generated revenue of NOK 5,8 million in the third quarter compared to revenue of NOK 5,5 million during the same period last year. The growth was slower than in previous quarters this year as fewer contracts were signed and there was low consulting revenue during the holiday season. VirtualWorks posted a negative EBITDA of NOK 1,6 million for the quarter. VirtualWorks at the EBC in Berlin A strong focus was given to onboarding new customers signed in the second quarter as well as to further development of major new search customer cases in Norway and Sweden. Furthermore, resources have been allocated to the development and marketing of our new product viainsight, set to be launched in late October By 25th May 2018, all businesses using and storing personal data concerning EU and EEA citizens have to abide by the EU s new General Data Protection Regulation (GDPR). The new regulation requires businesses to have systems facilitating reporting of all personal data concerning EU and EEA individuals. As modern businesses have enormous amounts of data, with up to 80 percent of the data being unstructured, stored in a variety of different systems and databases, the GDPR requirement can be overwhelming. Based on the viaworks smart search, insight and knowledge technology we have developed a GDPR specific solution that extracts personal data, regardless of format and location, and reports the data in compliance with GDPR. The viainsight product can be used by all businesses, regardless of industry and size of business. In addition to the standard product, tailored GDPR products will be offered larger businesses with specific needs. Konica Minolta, our distribution partner for the European market, will present the new GDPR product at their annual Berlin Conference for Premium resellers on October 20th. VirtualWorks breakfast seminar in Stockholm Coverage of inbound marketing campaign around GDPR The development team has also been preparing for the release of viaworks stream, an upgraded version of viaworks enabling more efficient and personalized information flow within businesses. During the quarter, more than 20 connectors have been updated and significant part of the software testing process was automated to increase future development speeds. The inbound marketing process established last quarter is under further development with anticipation of it playing an essential role in the launch of viainsight and viaworks stream. 5 VirtualWorks Group AS Interim Report Q3 2017

6 The ayfie Business Unit The ayfie business unit generated revenue of NOK 4,7 million in the third quarter, which represented an increase of 234 percent from the second quarter. The loss of negative EBITDA of NOK 6,2 million represents an improvement compared with the previous quarter s negative EBITDA of NOK 10,6 million. The positive developments indicate that the ayfie business unit is evolving from a development case into a market-ready business. The principal focus in the third quarter has been on the introduction of ayfie products to the ediscovery and legal market through partnership/reseller agreements, media coverage and the continued refinement of business processes including pricing and on-boarding procedures. ayfie s development partnership agreement with Relativity showcases the positive feedback that ayfie and its product line has received from the ediscovery and the legal market. The partner agreement will allow us to cross promote products and feature in sales material to organizations with end users across 40 countries who all utilize Relativity. The partner agreement has already resulted in the signing of anexsys and Trustpoint International as our first Relativity customers with the first customer case for contract review in Relativity in the UK. The sales and marketing teams have generated and extended the recent momentum by attending conferences such as ILTACON and SOLID17 innovation conference, along with increasing our media coverage through our CIO magazine feature published on October 4 th and Reinventing Professionals podcast. Lastly, ayfie established a joint venture with alphamodus, with the joint venture targeting the financial vertical. Relativity is an ediscovery software company that works hard to build great software that tackles ediscovery challenges. Anexsys is a technology service provider specializing in ediscovery, Digital Forensics and scanning services to support law firms in the UK and Europe. Alpha Modus is an investment technology company built to leverage human expertise and machine intelligence to extract alpha and alpha generating utilities from big data. ayfie at ILTACON in Las Vegas 6 VirtualWorks Group AS Interim Report Q3 2017

7 Market and Outlook The markets for search based information governance, artificial intelligence and text analytics are expected to grow substantially over the next years. To handle the rapidly increasing amounts of data, both structured and unstructured, that are stored in a variety of different systems, companies require tools for quick and efficient search. Tools that allow business to access, organize, classify, analyze, and extract data will be vital. The combination of our smart search platform providing a single point of access to all data and our text analytics technology based on natural language offers businesses the tools needed for efficient automatization of data processing. Our customer portfolio and the positive market feedback on our newly launched ayfie products proves the demand for our smart search and innovative text analytics tools. Our core operational priorities will be to leverage the power of text analytics to an even larger degree in both products and to increase platform flexibility for additional use cases to make them attractive to additional market segments. The focus will also be on the continued strengthening of our sales organization and streamlining of sales processes. The VirtualWorks Group s ambition is to capture a significant market position in the rapidly growing market for smart search and text analytics. The license based business model with a high degree of recurring revenue and high gross margins will accommodate for strong and profitable growth if we suceed in building an efficient sales organization and partner strategy. Target Market Size To Reach over $20 Billion By 2024 According to Transparency Market Research and Grand View Research, our target market for smart-search and text-analytics solutions will rise to over US$ 20 billion by The increasing demand for solutions offering time-saving data search capabilities is expected to be a key factor driving the market growth over the next years VirtualWorks Group AS Interim Report Q3 2017

8 Financials VirtualWorks Group consolidated Profit & Loss NOK Thousand Q3-17 Q3-16 QoQ % YTD 17 YTD 16 YTDoYTD % Recurring Revenue % % Perpetual Revenue % % Services % % Other Income 508-0% % Total Revenue % % Cost of Sales % % Gross Profit % % Gross Margin 86% 94% 86% 88% Personnel % % Other Operating Expenses % % Operating Expenses % % EBITDA (8.387) (12.281) 32% (27.081) (41.711) 35% VirtualWorks Group s consolidated revenue amounted to NOK 10,6 million in the third quarter, an increase of 92 percent compared to the same period last year. The growth in revenue was driven by the launch of the new ayfie line of text analytics products. Year to date revenue of NOK 27,1 million represents an increase of 107 percent compared to the same period last year. The quarter s cost of sales of NOK 1,5 million, related to utilization of third-party developers to accommodate some of our customers accelerated schedule, gave a gross margin of 86 percent. Operational expenses of NOK 17,5 million were in line with those of the same period last year although the revenue increase of 92 percent. The year to date development proves the same positive trend with a 5 percent fall in operational expenses compared with the same period last year although a 107 percent increase in revenue. Please note that costs related to research and development have been recorded as regular costs and thus not capitalized. The negative EBITDA of NOK 8,3 million shows a positive development compared to negative EBITDA of NOK 11,5 million in the third quarter last year. Year to date negative EBITDA of NOK 27,1 million represents an improvement compared to the negative EBITDA of NOK 41,7 million in the same period last year. The financial statement has not been audited or reviewed by the auditors. 8 VirtualWorks Group AS Interim Report Q3 2017

9 VirtualWorks Group consolidated - Balance Sheet NOK Thousand Q Q Change NOK Change % Assets Cash & Cash Equivalents Cash & Cash Equivalents % Total Cash & Cash Equivalents % Current Assets Accounts Receivable % Prepaid Expenses (83.198) -12% Deferred Tax Assets % Other Current Assets % Total Current Assets % Non-Current Assets ( ) -26% Total Assets % Liabilities and Equity Current Liabilities Accounts Payable ( ) -24% Accrued Expenses % Deferred Revenue ( ) -11% Taxes Payable & Other Payables % Total Current Liabilities % Non-Current Liabilities ( ) -39% Total Liabilities ( ) -30% Total Equity % Total Liabilities and Equity % The Cash and Cash Equivalents increased to NOK 52,6 million in the third quarter due to the subsequent offering, that also increased Equity. Accounts Receivable increased as more revenue was invoices at the end of the quarter due to the revenue growth through the quarter. The financial statement has not been audited or reviewed by the auditors. 9 VirtualWorks Group AS Interim Report Q3 2017

10 The VirtualWorks Business Unit Profit & Loss NOK Thousand Q3-17 Q3-16 QoQ % YTD 17 YTD 16 YTDoYTD % Recurring Revenue % % Perpetual Revenue % % Services % % Other Income 508-0% % Total Revenue % % Cost of Sales % % Gross Profit % % Gross Margin 92% 94% 92% 88% Personnel % % Other Operating Expenses % % Operating Expenses % % EBITDA (1.628) (12.281) 87% (1.169) (41.711) 97% The VirtualWorks business unit generated revenue of NOK 5,8 million in the third quarter, showing an increase of 6 percent compared to the revenue of NOK 5,5 million in the same quarter last year. The year to date revenue of NOK 19,7 million represents an increase of 51 percent compared to the same period last year. As ayfie was established as a separate business unit in early 2017 through a reorganization where the ayfie business was demerged from VirtualWorks, comparisons of 2017 and 2016 costs and results have to be at the consolidated level (there was no ayfie related revenue in 2016 as the products were launched in 2017). The financial statement has not been audited or reviewed by the auditors. The ayfie Business Unit Profit & Loss NOK Thousand Q3-17 Q3-16 QoQ % YTD 17 YTD 16 YTDoYTD % Recurring Revenue 442-0% % Perpetual Revenue % % Services % % Other Income - - 0% - - 0% Total Revenue % % Cost of Sales 982-0% % Gross Profit % % Gross Margin 79% 0% 71% 0% Personnel % % Other Operating Expenses % % Operating Expenses % % EBITDA (6.169) - 0% (25.285) - 0% The ayfie business unit generated revenue of NOK 4,7 million in the third quarter, which represents an increase of 234 percent from the second quarter. The EBITDA of negative NOK 6,2 million represents a significant improvement compared with the previous quarter EBITDA of negative NOK 10,6 million. The positive development is the result of the successful launch of the ayfie text analytics product line in August and indicates that the business unit is evolving into a market-ready business. The financial statement has not been audited or reviewed by the auditors. 10 VirtualWorks Group AS Interim Report Q3 2017

11 VirtualWorks VirtualWorks AS Karenslyst Allé Oslo Norway VirtualWorks US 280 NE 2nd Ave Delray Beach, FL United States +1 (877) VirtualWorks AB United Spaces Waterfront Klarabergsviadukten Stockholm, Sweden +47 (48) VirtualWorks GmbH Dingolfinger Str Munich Germany +49 (89) ayfie ayfie Inc. 28 West 44th St., Ste. 908 New York, NY United States +1 (917) ayfie GmbH Dingolfinger Str Munich Germany +49 (89)