Report for Third Quarter 2014 Clavister Holding AB

Transcription

1 Report for Third Quarter 2014 Clavister Holding AB Accelerated growth Net sales increased during third quarter by 31% to 16,0 MSEK (12,3). Gross profit increased during third quarter by 70% to 16,4 MSEK (9,6). Adjusting for a reversal of provision of 4,3 MSEK, the gross profit would have increased by 26% to 12,1 MSEK. Net profit amounted to -6,3 MSEK (-9,4) in the third quarter. Cash and cash equivalents amounted to 22,3 MSEK (0,9) at the end of the period. Jul - Sep 2014 Change Jan - Sep 2014 Change MSEK % (Y/Y) % (Y/Y) Net sales 16,0 12,3 31% 40,0 41,2-3% Gross profit 16,4 9,6 70% 33,2 29,0 14% Gross margin 102% 78% 31% 83% 70% 19% Operating profit -6,2-9,2 32% -31,9-32,4 2% Net profit -6,3-9,4 33% -32,1-33,1 3% Earnings per share (SEK) -0,38-1,14 67% -2,11-4,05 48% Included is 4.3 MSEK in reversal of provision during the third quarter, Significant breakthrough is becoming evident A powerful endorsement of the Company s strategic business discussions, not least within the LTE Small Cell Security and Telecom customer niche markets. Increased interest and extended business discussions amongst others from the Japanese and Chinese markets together with the activities in Brazil, which have now resumed after previous elections. Growth has continued to be good even after the quarter ended. Sales growth amounted to 53% Y/Y during the period August- October, in comparison with a 31% total growth over the third quarter period. In some case rounding has been applied, which implies that tables and calculations are not always exactly. Comparisons are made against the corresponding period of the previous year and stated in parentheses () if not stated exactly. Report for Third Quarter

2 CEO s comments I foresee a continued keen and intensified interest in our products and technology, above all from regions where Edward Snowden s disclosures and NSA behavior have evoked the greatest attention and implications. Integrity and IT security play an ever larger role amongst individuals, companies and society. We stand on our strengths here - which results in a larger role for Clavister and ever more comprehensive business discussions. Our initiative in Brazil is again showing clear opportunities for significant commercial engagements. The election in Brazil lead to certain decisions and activities being delayed and temporarily halted. But now all engagements have resumed in full. Some business deals have been retained and negotiations with several strategic customers and cooperating partners continue. In Asia, we continue to develop strongly. We have expanded our Sales team in China with 7 new staff members, which has already resulted in improvement to our Sales. During the third quarter s term, we doubled our turnover in China compared to the same period in 2013, a trend that has continued into the fourth quarter. In Japan, the world s third largest market, we have strengthened our presence with a number of activities. We have, among other things, entrenched our collaboration with one of Japan s largest system integrators, Mirait. We also carried out a very successful VIP-supper at the Swedish Embassy in Tokyo. With approximately forty delegates from large companies and organizations. Minor trial orders have been agreed in the short term and we have strong hopes for the commercial prospects that lay ahead in Japan. The boosted focus and effort in the Telecom arena is delivering clear results. The cooperation with global system integrators has increased. We are conducting a number of pilot projects, for example, in the area of LTE Small Cell Security, an area that will come to hold great importance for the next generation of mobile networking. Jim Carlsson took up the position as new CEO at Clavister on May 5, 2014 as a step to further enhance the company s leadership. Jim has extensive experience in guiding companies through growth, both sales and organizationally. Jim comes from Intel Security where he held the position of Vice President for Network and Security Business Unit in Europe, Middle East and Africa. Despite the third quarter comprising two thirds by summer months, the period was hectic. We have worked on tens of large strategic marketing activities, such as Intel s Development Forum in San Francisco, Intel s innovation day in London, CEATEC in Tokyo (Japan s largest IT trade show) and the ICT Forum in Rome. I am glad to see that the growth continues to develop well. With an increase in sales in combination with our very good gross margin, we are successfully covering ever more of the company s investments and offensive ventures with our own funding. October was a strong month and growth in sales for the three months during the period August to October increased 53% year on year, to compare with sales in the third quarter year on year of 31% in Report for Third Quarter 2014

3 CEO s comments Sales Growth (Y/Y) 60% 53% 50% 40% 30% 31% 20% 10% 4% 0% - 10% - 20% - 30% - 40% - 33% Q1 (2014) Q2 (2014) Q3 (2014) Aug- Oct (2014) In conclusion I must say that it is a pleasure to be a part of an organization that bears the stamp of knowledgeable and dedicated people. An organization where one can clearly see what opportunities there are for the company s technology. Jim Carlsson, CEO Clavister Report for Third Quarter

4 Events Important Announcements During the Period InterContinental Amstel Amsterdam in the Netherlands choose Clavister InterContinental Amstel Amsterdam in the Netherlands chose Clavister to protect guests data and to continue to handle network bandwidth usage. Clavister s advanced capability for handling data traffic makes it possible for the hotel to maintain and handle optimal bandwidth accessibility between its conference center and guests mobile networks by a more effective method. This way, both the needs of the business customers and the hotel guests need for fast and secure Internet access are satisfied. Clavister secures a ground-breaking order in Brazil Clavister obtained an initial order from a Brazilian federal authority for secure, load balanced and encrypted communications between 40 of their regional offices spread across the country. The installation of Clavister gateways gives the Brazilian authorities a scalable and versatile platform that protects critical business data and voice communications from eavesdropping. With this deal, Clavister reinforces its position within the BRIC countries where the focus is on Brazil and China. There is even a large possibility that the order will be considerably extended over time. Clavister secures a contract with itsoft on the Croatian market Clavister has stepped into the Croatian market after signing a partner agreement with itsoft, a leading Internet operator and supplier of services handling the Cloud, which will be Clavister s first enterprise partner in the country. Clavister demonstrates LTE Small Cell Security solutions at the Intel Developer Forum Clavister attracted great attention at the Intel Developer Forum where the company presented its unique LTE Small Cell Security solution, which is of great significance for future generations of mobile networking. The solution is a virtual one and is intended to be run on Intel platforms with full support for SDN/NFV networks, which reduces both the startup time and cost. The next-generation firewalls were presented including encryption from an enodeb to small cells and secure data backhaul in order to secure intelligent mobile transition to WiFi networks. Through cooperation with Intel and the x86-architecture, the future networks are guaranteed to be faster, more scalable and more secure. The solution also gives the possibility for authenticated and encrypted connections from small cell base-stations to 4G and LTE mobile cores, to protect both the network and subscribers data traffic against unlawful access and eavesdropping. Consolidation in Japan Clavister increased its partnerships and advanced its position in Japan. In conjunction with MIRAIT, one of Japan s largest system integrators, Clavister participated in CEATEC (Japan s largest IT trade show). Clavister also held an important event in conjunction with the Swedish Trade Commission and Swedish Embassy in Tokyo, hosting a large number of prominent guests. Our partnership with the distributor Bluestar Corporation has been intensified with a focus on finding more partners and building sales. The Japanese security market turned over USD 4.14 billion during 2013 and is expected to attain 10 billion USD by Important Announcements Following the Period Clavister to secure WiFi networks at the World Ski Championships in Falun Clavister, in cooperation with the system integrator Bluecom, has been chosen as the supplier of network security to the World Ski Championship in Falun in During the Championships, visitors, media, organizers and participants alike will all get access to one of Sweden s largest outdoor secure WiFi networks. 4 Report for Third Quarter 2014

5 Financial information Sales and Profit Quarterly turnover increased to 16,0 MSEK (12,3), which is an increase year-on-year of over 31%. Gross profit was strengthened by a reversal of provision and amounted to 16,4 MSEK (9,6), an increase of 70% year-on-year of which the reversal of provision accounted for 44%-units of improvement. Operating profit amounted to -6,2 MSEK (-9,2). Net profit after tax was -6,3 MSEK (-9,4). The previous year s nine months of accumulated turnover stood at 40,0 MSEK (41,2) and gross margins at 83% which is a marginal improvement of 13 percentage-points compared with Net profit for the year to date in September was -32,1 MSEK (-33,1). Of the third quarter s turnover of 31% compared with the previous year, foreign exchange rate fluctuations accounted for 8 percentagepoints. For the period January to September exchange rate fluctuations therefore accounted for +4 percentage-points. The company continues to meet a sustained increase in interest for potential business dealings but also foresees a continued need for investment in development resources and R&D, in order to meet customers demands. This affects staffing costs, which have climbed by 1,1 MSEK year-on-year for the third quarter to 14,2 MSEK (13,1). For the period January through September the increase in staffing is 1,9 MSEK year-on-year and amounts to a total of 45,0 MSEK (43,1). The greater interest from the telecoms, cloud services/cloud and OEM markets demands increased effort, in accordance with the company s strategy. Provision An early accounted provision in the balance sheet of 4,3 MSEK was reversed and this has positively influenced costs for goods sold and improved the revenue figures in that period. The provision is derived from a contract from 2009 where the customer had the right to stock rotate virtual Clavister products into hardware. Because the contract was no longer valid, the company took the decision, in consultation with the auditor, that the provision should be refunded. For the third quarter the gross revenue amounts to 12,1 MSEK (9,6) without the reversal of provision, an improvement of 26% year-on-year, corresponding to a gross margin of 75% (78). For the period January through to September the gross profit amounts to 28,9 MSEK (29,0), exclusive of the reversal of provision and with a margin of 72% (70). The net profit after tax for their period without the reversal of provision was -36,3 MSEK (33,1) for the year s first nine months. China Our subsidiary company Clavister China Ltd has shown a very positive improvement so far during Sales for the quarter rose to 3,7 MSEK (1,9) corresponding to a growth of 97% year-on-year, of which the positive foreign exchange development for the CNY accounts for +8 percentage-points in the quarter. For the month of September the company turned over 1,8 MSEK (0,9) which is an increase of 100% of which the foreign exchange rate year-on-year accounts for +12 percentage-points. Turnover in January through to September rose by 35% to 7,3 MSEK (5,4) year on year, of which the positive exchange rate for the CNY contributed +4 percentage-points. Net profit after tax up to September is +0,2 MSEK (-0,7). Despite stiff competition from the domestic market, Clavister China Ltd displayed an increase in sales. Clavister China Ltd has 34 employees, of which 4 were appointed during September (see further Risk and Uncertainty Factors). Sales per Month 2013/ China TSEK Jan Feb Mar Apr May Jun Jul Aug Sep Turnover 2014 Turnover 2013 Report for Third Quarter

6 Financial information Investments, capitalizations, depreciations and amortizations Investments in tangible assets increased to 0,05 MSEK (-0,07) and intangible assets to 3,9 MSEK (3,6) during the third quarter. The company continues to invest intensely in software development and has capitalized development costs during the third quarter approximating 59% (67) of the company s total R&D. The total capitalized work for the period January through to September is 11,8 MSEK (10,9), which corresponds to around 65% (60) of the company s total R&D. Depreciation of tangible assets amounted to 0,02 MSEK (0,02) during the third quarter, depreciation of intangible assets amounted to 4,8 MSEK (3,7) of which 1,5 MSEK accounts for a devaluation with regard to activated development costs. The total for the year s first nine months with regard to depreciation for the intangible assets amounts to 12,7 MSEK (12,9). Accomplished capitalization have been recorded according to budget during the current year and delimited by the end of the year. Cash Flow Cash flow amounted to -12,0 MSEK (-0,5) for the third quarter; this can be summarized as follows: -6,2 MSEK attributed to profit after financial items, +5,0 MSEK attributed to adjustments for depreciation which do not affect the cash flow, -0,1 in taxes paid and -2,6 MSEK is change in working capital. The total changes to cash flow from the current operation inclusive of changes for working capital totaled a net amount of -3,9 MSEK. Cash Flow from investment operations or non-material fixed assets amounted to -3,9 MSEK. The reduction of the cash flow for financial operations amounts to -4,2 MSEK for the period. The company has changed supplier in September and financial alignment linked to customer receivables, which affects the financial operation negatively. The change does give the company improved ability to fund the customer claims on account that an even larger portion can be financed, something which can be considered to positively influence the cash flow for the fourth quarter. Note the line-item entitled Investments in intangible assets of 3,9 MSEK referred to as capitalized development. If capitalization were not to have occurred then line-item Cash flow from operating activities before working capital changes would have risen to -5,2 MSEK. 6 Report for Third Quarter 2014

7 Financial information Liquidity and financial position Cash and cash equivalents at the closing of the period was 22,3 MSEK (0,9). With the increased turnover growth above, and continued good gross margins, the company estimates that expendable rates of cash and cash equivalents will reduce compared with earlier. The liquidity would be affected by either larger than expected customer interest or a drop in sales. An increased customer base can therefore create a further demand for development resources within R&D as well as Sales Departments. Should the need for further financing become a reality in 2015, the company is well equipped and has alternatives to strengthen its financial position. Equity The equity per amounted to 42,4 MSEK (-0,7). Employees The total number of employees up to increased to 113 (104) of which 34 (27) are in Clavister China Ltd. The parent company with limited operations, has one employee. Audit The quarterly report for the third quarter has not been the object of any audit by the company s auditor. The company auditor performs an annual audit of the group s accounts and bookkeeping, together with the CEO s management. Accounting Principles The quarterly report has been compiled according to the accounting principles described in the yearly audit for The Group and Parent company will apply BFNAR 2012:1 (K3) in their compilation of the annual and group report for The company has decided that the transition to K3 will not have any significant effect on the position. Risk and Uncertainty Factors The company refers to the Company description ( where a more comprehensive account is given of the risks in the operation which can significantly influence the share results and developments. In short it can be mentioned that marketing and operational risks, as well as competition, product responsibility and guarantees, risks that colleagues and key personnel resign, competitive development, non-material assets such as patent applications and legal risks within the financial risk sector are described in the interest, credit and liquidity section. Regarding Foreign Exchange risks, the majority of sales are conducted in SEK, USD and EUR and the sales foreign exchange rate is limited in the contract with the customer. Euro dominates followed by the Swedish Krona. Exchange fluctuations, concerning both supplier payments and similarly customer payments can cause foreign exchange losses or gains and influence the financial standing. As of today the dollar and the euro exchange rates influence the financial position positively but are counterproductive in product payments in USD and similarly with the other currencies. Negative exchange exposure can even occur as a result of the subsidiary companies. The company in Hong Kong with few transactions is accounted in USD and the company in China invoices and is reported in the Chinese CNY currency. The Chinese CNY has strengthened against the Swedish SEK and affected the turnover year on year with +4 percentage-points for the year s first nine months. An increased volatility can be discerned in September for the CNY towards the SEK. An increased volatility can even be discerned in September for the CNY towards the SEK. The CNY currency was bound by a fixed exchange rate to the American dollar, but at the start of 2014 the central bank decided to severely weaken the currency against the USD and the currency was allowed to fluctuate upward to 4 percent during the very same day, which caused expensive consequences for many Chinese companies that do business overseas. The aim, according to the central bank in China, is to achieve a complete flexible exchange rate. Because trade and procurement of products in Clavister China Ltd takes place locally in CNY for the most part, the exchange rate revenue influence is limited, but occurs against the revenue of the group. Up to now the exchange rate fluctuations have been positive because even the Swedish Krona has weakened against the USD. Report for Third Quarter

8 Financial information Clavister (group) 3 months 9 months 12 months Jul - Sep Jan - Sep Jan - Dec Income statement (TSEK) Net sales COGS Gross profit Gross margin, % 102% 78% 83% 71% 64% Work performed by the company for its own use and capitalization Staff costs Other external costs Amortization Depreciation and impairment loss Operating profit Financial items Profit after financial items Taxes Net profit / loss Average number of shares Average number of shares (after dilutive effect) Earnings per share, SEK -0,38-1,14-2,11-4,05-4,68 Earnings per share after dilutive effect, SEK -0,34-1,00-1,87-3,55-3,96 Balance Sheet (TSEK) Intangible fixed assets Tangible fixed assets Financial assets Inventories Current receivables Cash and bank Total assets Equity Provisions Long-term liabilities Current liabilities Equity and liabilities Pledged assets Contingent liabilities Report for Third Quarter 2014

9 Financial information 3 months 9 months 12 months Jul - Sep Jan - Sep Jan - Dec Cash flow analysis (TSEK) Cash beginning of period Profit after financial items * Adjustments for non-cash items (write-offs.) Paid taxes Cash flow from operating activities before working capital changes Changes in W/C ** Cash flow from operating activities Investments in intangible assets Cash flow from investing activities Cash flow from financial activities Cash flow Cash end of period * Reversal of provision influences operating profit positively by +4,3 MSEK ** Reversal of provision influences adjustment to operating profit negatively by -4,3 MSEK 3 months 9 months 12 months Jul - Sep Jan - Sep Jan - Dec Equity (TSEK) Equity, beginning of period Cash issue Issue expenses Translation difference Results for the period Equity at end of period Report for Third Quarter

10 Financial information Clavister (parent company) 3 months 9 months 12 months Jul - Sep Jan - Sep Jan - Dec Income statement (TSEK) Net sales Staff costs Other external costs Operating profit Financial items Profit after financial items Taxes Net profit / loss Balance sheet (TSEK) Financial assets * Current receivables Cash and bank Total assets Equity Current liabilities Equity and liabilities Pledged assets Contingent liabilities months 9 months 12 months Jul - Sep Jan - Sep Jan - Dec Equity (TSEK) * Equity, beginning of period Cash issue Non-case issue Issues expenses Results for the period Equity at end of period * Clavister s group structure was formulated before the listing of the shares on NASDAQ First North, by the new formation of Clavister Holding AB without operation gave rise to Clavister AB by means of an non-cash issue. The transaction was handled as a new issue and had a direct consequence on the company s bookkeeping. The financial assets in the mother company therefore generated the value of the non-cash shares. 10 Report for Third Quarter 2014

11 Share capital and shareholders Share capital The company s shares totaled ,60 SEK. Shareholders and shares The number of registered shares according to the Companies Registration Office at end of the period ( ) was Shareholder Number of shares % of total Six Sis AG ,6% SEB Venture Capital ,5% Stiftelsen Industrifonden ,5% UBS AG Clients Account ,5% Clavister Förvaltning AB ** ,3% JP Morgan Bank ,7% Exegence AB ,9% Keypoint Holdings, Ltd ,0% Handelsbanken Liv ,7% AMF Aktiefond Småbolag ,3% Other ,0% Total of registered shares * ,0% Non-registered shares *** Total after registration of all shares All shares have the same voting right. One share corresponds to one vote. * Public shareholder register and nominee shareholder for ** Clavister Register AB, CFAB, is an owning company with founders and other investors. A decision has been taken by that board of directors and owners to dissolve CFAB so that the respective share owners have the possibility to a direct share in Clavister Holdings AB. This results in reduced ownership of CFAB, but reflects in a direct or indirect ownership of Clavister Holdings AB for the underlying shareholders of CFAB. See Insiders and Changes in Ownership ( for more information about this share dispensation, etc. *** As of , 99,7% of the shares have been registered for share exchange between Clavister AB and Clavister Holding AB. As of today a further 0,2% have granted full authorization but they have not been registered just yet. The company s estimation is that the remaining 0,1% will grant full authorization for exchange of shares and that 100% of the shareholders, as well as 100% of the shares will be registered. Warrants Number issued Issue price, SEK TO TO TO All signing options have been approved by management, the Board and employees. Every option has the right to sign a share. Convertible loan (10 MSEK, STIBOR 90) Number issued Issue price, SEK Norrlandsfonden The convertible loan are executed by Clavister AB, by agreement with Norrlandsfonden whereby signing a contract addendum, Clavister AB commits to relinquish the convertibles to Clavister Holding AB. In the event of later conversion, this will correspond to shares in Clavister Holding AB. Report for Third Quarter

12 The Company Clavister is a Swedish company that develops and sells networking security solutions for Telecom and mid-sized companies. Clavister solutions are built on in-house developed, innovative software with very powerful performance and of high quality. Clavister was founded in 1997 as a consulting company in Örnsköldsvik and operated until it started with customized software developments towards to Defense Industry and Public Sectors. At the turn of the millennium, the company conducted several Internet based development projects which gradually laid the foundation for what was to become subsequently Clavister security products. During the early years as a product company, Clavister successively built a commercial packaging of firewall products aimed at small and mid-sized enterprises. In 2002 the Clavister Firewall 8.0 was launched with a unique technical architecture and at that time the fastest firewall product in its class on the market. Today the company offers ab extensive portfolio of products together with comprehensive services of expert competences packaged to meet customer needs. Security and network security in particular, continue to be the areas of focus. The balance between personal integrity and security, between effectiveness, flexibility and security are only some of the aspects that make this area complex. In a World with constantly renewing technological achievements and ways to communicate, it demands ever more advanced and powerful networking solutions, without any degradation of effectiveness, security and personal integrity. Clavister has a strong standing within networking security. Development within the Telecom sector displays a particularly strong potential for development and therefore Clavister has a unique advantage with the right technology, strong business alliances and clarity of vision. Estimates are that the demand for advanced network security solutions within the Telecom sector will continue to grow strongly, partly in line with the expansion of 4th generation mobile telephone network implementations (4G/ LTE), and partly because of the vast increase in data-traffic mixtures on account of ever more users have smart devices (telephones). Concerning the area of network security for medium-sized companies, Clavister is highly equipped with a well-adapted and attractive product portfolio, a large established customer base and a strong business model, which generates business both in the short and long term. The synergistic effects of network security in accordance with suitability both for Telecom and medium-sized businesses, increases moreover the company s potential further. 12 Report for Third Quarter 2014

13 The Company Clavister Holding AB Clavister AB Clavister APAC Ltd Clavister China Ltd 100% 100% 100% Group Structure In the Clavister Holding AB company, a limited amount of the group s operation is conducted, such as the administration of the company s shares and operations directed towards investors. In the subsidiary-company, Clavister AB, the definitive main body of the group s transactions is conducted e.g. sales, production and R&D. Also herein lies the appointments and contracts with customers, partners, agencies and suppliers. Clavister APAC does not have any employees, however the number of cooperatives with Clavister China amounts to 34. Clavister Holding AB (publ.) has its head office in Örnsköldsvik and its largest sales office in Stockholm. The company has been listed on the NASDAQ First North since May 21, Shares have the short name of CLAV. Clavister China Ltd conducts business in Beijing, Xi an, Zhengzhou, Shanghai, Chengdu and Guangzhou. Report for Third Quarter

14 Future reports Press Release Year End Report February 26, 2015 Annual General Meeting April 28, 2015 Quarterly Report January - March 2015: May 21, 2015 Örnsköldsvik, November 26, 2014 Clavister Holding AB (publ.) Board of Directors 14 Report for Third Quarter 2014

15 Further information Clavister Holding AB Organization number: Sjögatan 6 J SE Örnsköldsvik Sweden Phone: +46 (0) finance@clavister.com Investor Relations Peter Dahlander Phone: +46 (0) peter.dahlander@clavister.com CEO Jim Carlsson Phone: +46 (0) Vice President Marketing Nikolas Georgii Phone: +46 (0) nikolas.georgii@clavister.com Shares Ticker: CLAV ISIN code: SE Certified Advisor Remium Nordic AB Kungsgatan SE Stockholm Sweden Phone: +46 (0) info@remium.com Photography Cornelia Edblad NOTE: This English language translation is provided for information purposes only. The original Swedish text shall prevail in the event of any discrepancies between the English translation and the Swedish original. Report for Third Quarter

16 we are network security Clavister Sjögatan 6 J SE Örnsköldsvik 16 Report for Third Quarter 2014