Fourth Quarter 2014 – Summary
· Net revenues on an annualized basis increased by 6% in comparison with the
previous year.
· For the fourth quarter, sales declined in comparison with the same quarter
last year by 17%.
· The launch of SEQR Shop Spot – where all advertising surfaces will become
direct sales channels.
· Seamless receives a new order for the distribution of prepaid airtime and
data via stored value cards and vouchers for top-up payments. The contract is
initially worth over USD 1 million and comprises ERS distribution of eProducts
and management of loading of stored value top-up cards and vouchers.
· The launch of direct access to bank accounts in Sweden was initiated –
enabling all Swedes with a bank account to be SEQR customers, irrespective of
bank.
Revenues amounted to SEK 43,214 thousand (52,369)
Operating Profit amounted to SEK -51,312 thousand (-29,605)
Operating Margin Neg (Neg)
The after-tax financial results amounted to SEK -50,812 thousand (-24,113)
Earnings per share before and after dilution SEK -1.21 (-0.64)
CEO's comment
Dear Shareholders,
As I write this, we are just about to launch a direct connection to consumer
bank accounts in Sweden. Until now, SEQR has been a revolving credit for the
consumers that use it. This fact has been seen as the single most important
hurdle in achieving larger consumer adaption in the Swedish market by observers.
In the other markets where we are currently present, this direct debit link to
the consumer bank accounts already exists, and in those markets we are working
on adding the revolving credit as an alternative product. We believe that our
product offering has to consist of Direct Debit, Revolving Credit and Prepaid
solutions in every market where we are present. There is a demand for all these
products in various degrees in all the markets.
Our competitive advantage over most other players in the mobile payment market
is our independence from using the card “railroad tracks” which gives us a
significant technological and cost advantage. However for certain markets,
where the revenue stream is sufficiently profitable, we may also add the normal
Visa/Mastercard as an option.
Our strategy has been clear from the start; create a large enough geographical
footprint in order to be able to reach a positive cash flow even at an extremely
low early consumer adaption rate.
We are today in live production in five markets with the SEQR product. These
markets together represent around 30 million inhabitants and potential users of
SEQR, assuming that everyone with a bank account can use our service. In this
estimation we do not count Romania because our ability to reach consumers are
limited to Garanti Bank’s current client base.
After the first quarter 2015 and in the beginning of the second quarter, we will
be live in production in eleven markets that represent approximately 600 million
potential users of SEQR assuming that everybody with a bank account can use our
service. This is very far ahead of any global competitor. We currently don’t see
any mobile payment service in live production in more than one country.
Our goals in 2013 and 2014 have been to build the ability to launch in these
markets with a full product suite that is also portable across borders ( i.e. a
consumer in one country can also use our service in any other country) and the
ability to launch quickly in new markets.) This has been a big project and has
taken most of the company’s development resources both in man-hours and in
capital. The money that we raised in 2013 was, in fact, targeted for this goal.
I am pleased to say that this work is now done and this has a few important
effects for our company. First, all the resources that have been used in this
heavy build-up period are now unnecessary. Therefore, the large production team
has been laid off and various other costs associated with the build-up have been
discontinued. This has a profound positive effect on the cost base of the
company. Second, the company can now focus fully on the third step in our
strategy, which is to increase consumer adaption and conversion rates in the
markets that we are present, as well as expand easily into further markets.
If we look at our competitive situation, it is clear that we currently enjoy a
significant advantage on a global basis. There is no other company in our sector
globally who has achieved the breadth and depth of our offering with SEQR. This
is where we wanted to be and what we planned for. Now is the time to convert
this advantage into tangible results in the form of earnings. Although earnings
obviously lag the geographical expansion, we believe that we will see
significant effect of our increased footprint during 2015.
For the uninitiated, or as simplification, one can describe it that we have
managed to create a new "card" network that performs many more functions than
the VISA / MasterCard network does. This accomplishment has not been easy and
has been an extremely complex operation. We did this due to that we very early
realized that the old VISA and MasterCard networks did not meet the requirements
one need to have when launching an international mobile payment service, with
all the opportunities that mobile payments provides.
A special mention of the new product “Shop Spot” or “Active Media” as we call it
internally.
This Service/product changes everything in both the media landscape as well as
for the traditional sales channels I.e. Physical, and online stores. We have
turned media itself into a sales channel. We can achieve very high margins in
this segment since we currently are the only ones in the world that can use this
channel.
I do not wish to comment upon our fourth quarter results in detail, as we do not
run this company with a quarterly focus. Rather, the management has a two-year
planning cycle in terms of our cost and revenue structure, our product and
development, and overall strategy. I can only conclude by saying that the
figures speak for themselves and correspond largely to the management and
board’s expectation.
Peter Fredell
CEO
The Group
Revenues
On an annualized basis, Seamless’ revenue increased by 6%, however looking only
at the fourth quarter it decreased by 17% to SEK 43,214 thousand (52,369) in
comparison with the corresponding quarter the previous year. The decrease in
revenue is due to, as mentioned in previous quarterly reports, foremost a
decrease in the revenues from the Distribution business segment.
Seamless started up its own distribution network in Sweden in mid-2013, which
resulted in an increase in revenues of 64% in comparison with the corresponding
period the previous year. During the fourth quarter of that year, the largest
customer of the Seamless subsidiary Lettel declared bankruptcy. Lettel was
engaged exclusively with distribution, and the bankruptcy of this particular
customer did not affect sales for the Distribution business segment during the
fourth quarter of 2013 very much, but on the other hand, the full impact was
felt in Q1 2014. Revenues between Q4 2013 and Q1 2014 decreased from SEK 52.4
million to SEK 40.7 million. If on the other hand, one compares Q1 2014 to Q1
2013, revenues have increased significantly due to that the revenues from
Seamless’ Distribution operations in Sweden only commenced from Q3 2013 onwards,
which is why the coresponding quarters for Q1 and Q2 2014 show an increase in
revenues compared to Q1 and Q2 2013, while Q3 and Q4 2014 thus becomes the first
quarters where both sales for Lettel and for Seamless’ Swedish part of
Distribution are included, while the decline in revenues as a result of the
bankruptcy of Lettel’s largest customer is reflected in the 2014 figures, which
is why revenues have thus been reduced. Looking at the individual quarters of
2014, revenues for the Distribution business segment have remained at a
consistent level throughout the year.
Revenues are distributed between the various business segments as follows: 27
percent (19) from the Transaction Switch business segment, 69 percent (76) from
the Distribution business segment, and 4 percent (5) from the SEQR business
segment.
Financial Results
· • The consolidated operating loss amounted to SEK -51,312 thousand
(-29,605) in the forth quarter.
· • Net losses from financial items for the fourth quarter amounted
to SEK 695 thousand (572).
· • Earnings per share amounted to SEK -1.21 (-0.64) for the
quarter.
Employees
We had a total of 166 (143) employees at conclusion of the quarter. In addition
to this, Seamless has retained approximately 35 consultants – primarily in
India, Ghana and Pakistan.
Investments
During the quarter, investments have been implemented with a value of SEK 6,515
thousand (11,909). Product development costs have been capitalized at a value of
SEK 5,869 thousand (7,523), while depreciation taken and amortization amounted
to SEK -5,029 thousand (-5,676).
Cash Flow and Financial Position
For the fourth quarter, the cash flow from operating activities amounted to SEK
-47,020 thousand (-11,351). Bank deposits and cash equivalents at the end of the
quarter amounted to SEK 105,273 thousand (302,765).
The Group has interest-bearing liabilities in the form of leases for hardware
amounting to SEK -2,030 thousand (-2,888), divided into long-term debt of SEK
-423 thousand (-912) and short-term debt of SEK -1,607 thousand (-1,976). The
Company has no interest-bearing liabilities to banks or other credit
institutions.
Other than the above, the Group has no borrowings. Seamless continues to
maintain a strong financial position with an equity ratio of 74 percent (88).
As announced in press releases and in the previous quarterly report, savings
measures has been taken during the third and fourth quarters, which will result
in anticipated savings of about 80 million annually. The effects of these
savings are expected to be seen during the first quarter of 2015 and onwards.
Some of these savings measures has been to discontinue the Swedish part of
Seamless development department, which resulted in that about 30 people had to
leave the company.
The Board of Directors and senior management’s view is that the financial
position and liquidity are sufficient to fund the business operations for the
approaching twelve month period.
Parent company
The parent company’s net sales for the quarter amounted to SEK 13,056 thousand
(59) and net financial results amounted to a profit of SEK -256,064 thousand
(loss of -6,735). Net financial gains/losses in the parent company was SEK
-270,160 thousand (-2,058) and bank deposits/cash on hand amounted to SEK 69,041
thousand (258,889) at the end of the quarter. The parent company had 4 (4)
employees at the close of the quarter.
For more information:
Daniel Hilmgård, press contact Seamless +46 70 996 83 33,
daniel.hilmgard@seamless.se
Peter Fredell, CEO Seamless +46 8564878 00 peter.fredell@seamless.se
This information is such information that Seamless Distribution AB (publ) is
required to disclose pursuant to the Swedish Securities Market Act and/or the
Swedish Financial Instrument Trading Act. The information was released for
publication on 16 February 2015 at 07.50 am (CET).
