Interim Report Q3 2017 - otc.nfmf.nootc.nfmf.no/public/news/17291.pdf · 5 VirtualWorks Group AS...
Transcript of Interim Report Q3 2017 - otc.nfmf.nootc.nfmf.no/public/news/17291.pdf · 5 VirtualWorks Group AS...
Interim Report
Q3 2017
2 VirtualWorks Group AS – Interim Report – Q3 2017
Group Revenue Quarter-over-Quarter
(NOK Thousand)
Group Revenue YTD-over-YTD (NOK Thousand)
5.487
10.558
Q3 2016 Q3 2017
13.083
27.021
YTD 2016 YTD 2017
Highlights ........................................... 2
Comments from CEO ....................... 3
Media Coverage................................. 4
VirtualWorks Business Unit ............. 5
ayfie Business Unit ........................... 6
Market and Outlook ......................... 7
Financials ........................................... 8
Table of Contents
Q3 2017 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
3 VirtualWorks Group AS – Interim Report – Q3 2017
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
2016. 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 co-
sponsored 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.
Erik Baklid
CEO, VirtualWorks Group AS
Top 20 Shareholders of VirtualWorks Group AS
Holding Share Shareholder
7.507.595 13,61 MERRILL LYNCH, PIERC S/A
MLPF & S HOLD
4.531.811 8,21 MERTOUN CAPITAL AS
4.378.868 7,94 STAFF HOLDING AS
2.327.440 4,22 LEIJO AS
2.235.419 4,05 JESSE INVEST AS
2.122.283 3,85 LANI INVEST AS
2.000.000 3,62 TVENGE TORSTEIN INGVALD
1.943.682 3,52 LAST INVEST AS
1.479.412 2,68 HØYLANDET BYGGUTLEIE
1.347.626 2,44 HÜBERT LEIF
1.220.719 2,21 WANI INVESTERING AS
1.155.000 2,09 VESTLAND INVEST AS
1.140.068 2,07 EKER GROUP AS
1.130.575 2,05 TERSUS AS
1.094.141 1,98 JSQ AS AXERA BUSINESS
MANAG
1.085.998 1,97 ARVARIUS AS
1.051.415 1,91 TRANQUILLE INVESTMEN
1.044.451 1,89 ARCTIC SECURITIES AS
MEGLERKONTO
1.000.236 1,81 KNARTEN HOLDING AS
868.221 1,57 CLEARSTREAM BANKING
40.664.960 73,69 Total 20 largest
14.517.615 26,31 Others
55.182.575 100,00 Total no. of shares
Erik Baklid
4 VirtualWorks Group AS – Interim Report – Q3 2017
Media Coverage
http://www.verkstadsforum.se/nyheter.asp?n=5557
https://computersweden.idg.se/2.2683/1.689647/dustin-koper-nytt
http://lextechreview.com/iltacons-40th-anniversary-international-legal-technology-association-pulled-stops/
https://www.kkh.de/content/dam/KKH/Magazine/news+/3-2017/KKH_news_3-17%20WEB.pdf
https://youtu.be/zUD9BVue0ac
5 VirtualWorks Group AS – Interim Report – Q3 2017
VirtualWorks’ breakfast seminar in Stockholm Coverage of inbound marketing campaign around GDPR
VirtualWorks at the EBC in Berlin
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.
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 2017. 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.
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.
6 VirtualWorks Group AS – Interim Report – Q3 2017
ayfie at ILTACON in Las Vegas
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
13.000+ organizations with 190.000 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 4th – and Reinventing Professionals podcast.
Lastly, ayfie established a joint venture with alpha-
modus, 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. www.relativity.com
Anexsys is a technology service provider specializing
in eDiscovery, Digital Forensics and scanning services
to support law firms in the UK and Europe.
www.anexsys.com
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. www.alphamodus.com
7 VirtualWorks Group AS – Interim Report – Q3 2017
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
2024. 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.
www.transparencymarketresearch.com, www.grandviewresearch.com
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.
8 VirtualWorks Group AS – Interim Report – Q3 2017
Financials
VirtualWorks Group consolidated – Profit & Loss
NOK Thousand Q3-17 Q3-16 QoQ % YTD 17 YTD 16 YTDoYTD %
Recurring Revenue 4.955 3.610 ▲ 37% 14.383 8.961 ▲ 60%
Perpetual Revenue 1.599 1.186 ▲ 35% 5.094 2.055 ▲ 148%
Services 3.496 690 ▲ 406% 7.037 2.060 ▲ 242%
Other Income 508 - ▶ 0% 508 6 ▲ 7848%
Total Revenue 10.558 5.487 ▲ 92% 27.021 13.083 ▲ 107%
Cost of Sales 1.465 333 ▲ 340% 3.662 1.542 ▲ 138%
Gross Profit 9.092 5.154 ▲ 76% 23.359 11.542 ▲ 102%
Gross Margin 86% 94% 86% 88%
Personnel 11.210 11.856 ▼ -5% 33.218 35.368 ▼ -6%
Other Operating Expenses 6.269 5.579 ▲ 12% 17.222 17.884 ▼ -4%
Operating Expenses 17.479 17.435 ▲ 0% 50.440 53.252 ▼ -5%
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.
9 VirtualWorks Group AS – Interim Report – Q3 2017
VirtualWorks Group consolidated - Balance Sheet
NOK Thousand Q3 2017 Q3 2016 Change NOK Change %
Assets
Cash & Cash Equivalents
Cash & Cash Equivalents 52.608.324 3.075.075 ▲ 49.533.249 ▲ 1611%
Total Cash & Cash Equivalents 52.608.324 3.075.075 ▲ 49.533.249 ▲ 1611%
Current Assets
Accounts Receivable 7.360.621 3.072.284 ▲ 4.288.337 ▲ 140%
Prepaid Expenses 621.740 704.938 ▼ (83.198) ▼ -12%
Deferred Tax Assets 9.146.640 9.146.640 ▶ - ▶ 0%
Other Current Assets 3.592.691 175.724 ▲ 3.416.967 ▲ 1945%
Total Current Assets 20.721.691 13.099.585 ▼ 7.622.106 ▲ 58%
Non-Current Assets 66.526.661 90.237.967 ▼ (23.711.306) ▼ -26%
Total Assets 139.856.676 106.412.628 ▲ 33.444.049 ▲ 31%
Liabilities and Equity
Current Liabilities
Accounts Payable 723.553 952.723 ▼ (229.169) ▼ -24%
Accrued Expenses 5.363.858 2.013.181 ▲ 3.350.677 ▲ 166%
Deferred Revenue 8.579.571 9.601.325 ▼ (1.021.754) ▼ -11%
Taxes Payable & Other Payables 3.758.970 1.815.195 ▲ 1.943.775 ▲ 107%
Total Current Liabilities 18.425.952 14.382.424 ▲ 4.043.528 ▲ 28%
Non-Current Liabilities 54.923.498 90.376.543 ▼ (35.453.045) ▼ -39%
Total Liabilities 73.349.449 104.758.967 ▼ (31.409.517) ▼ -30%
Total Equity 66.507.227 1.653.661 ▲ 64.853.566 ▲ 3922%
Total Liabilities and Equity 139.856.676 106.412.628 ▲ 33.444.049 ▲ 31%
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.
10 VirtualWorks Group AS – Interim Report – Q3 2017
The VirtualWorks Business Unit – Profit & Loss
NOK Thousand Q3-17 Q3-16 QoQ % YTD 17 YTD 16 YTDoYTD %
Recurring Revenue 4.513 3.610 ▲ 25% 13.190 8.961 ▲ 47%
Perpetual Revenue 384 1.186 ▼ -68% 3.603 2.055 ▲ 75%
Services 433 690 ▼ -37% 2.416 2.060 ▲ 17%
Other Income 508 - ▶ 0% 508 6 ▲ 7848%
Total Revenue 5.838 5.487 ▲ 6% 19.716 13.083 ▲ 51%
Cost of Sales 483 333 ▲ 45% 1.574 1.542 ▲ 2%
Gross Profit 5.355 5.154 ▲ 4% 18.142 11.542 ▲ 57%
Gross Margin 92% 94% 92% 88%
Personnel 4.730 11.856 ▼ -60% 13.491 35.368 ▼ -62%
Other Operating Expenses 2.253 5.579 ▼ -60% 5.821 17.884 ▼ -67%
Operating Expenses 6.983 17.435 ▼ -60% 19.311 53.252 ▼ -64%
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% 1.193 - ▶ 0%
Perpetual Revenue 1.215 - ▶ 0% 1.491 - ▶ 0%
Services 3.063 - ▶ 0% 4.621 - ▶ 0%
Other Income - - ▶ 0% - - ▶ 0%
Total Revenue 4.720 - ▶ 0% 7.305 - ▶ 0%
Cost of Sales 982 - ▶ 0% 2.088 - ▶ 0%
Gross Profit 3.738 - ▶ 0% 5.217 - ▶ 0%
Gross Margin 79% 0% 71% 0%
Personnel 6.251 - ▶ 0% 19.498 - ▶ 0%
Other Operating Expenses 3.656 - ▶ 0% 11.004 - ▶ 0%
Operating Expenses 9.906 - ▶ 0% 30.502 - ▶ 0%
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.
VirtualWorks – www.virtualworks.com
VirtualWorks AS
Karenslyst Allé 49
0279 Oslo
Norway
+47 4831 08 00
VirtualWorks US
280 NE 2nd Ave
Delray Beach, FL
United States
+1 (877) 356-3463
VirtualWorks AB
United Spaces Waterfront
Klarabergsviadukten 63
101 23 Stockholm, Sweden
+47 (48) 31 08 00
VirtualWorks GmbH
Dingolfinger Str. 1-15
81673 Munich
Germany
+49 (89) 416 146 70
ayfie – www.ayfie.com
ayfie Inc.
28 West 44th St., Ste. 908
New York, NY 10036
United States
+1 (917) 208-9044
ayfie GmbH
Dingolfinger Str. 1-15
81673 Munich
Germany
+49 (89) 416 146 70