ZURICH, Switzerland – 27 July 2017 – Myriad Group AG (SIX Swiss Exchange: MYRN) today reported consolidated group revenue of USD 6.9 million and a net loss of USD 6.9 million for the first half year 2017.
Summary Financial Information
|USD million||HY 2017||HY 2016|
|Adjusted gross profit1||3.4||2.9|
|Adjusted gross margin||49%||38%|
|Cash and cash equivalents||14.2||30.0|
1 Adjusted for amortisation, impairment, non-recurring items and restructuring costs.
2 Adjusted for non-recurring items and restructuring costs.
For the first six months of 2017, Myriad reports revenues of USD 6.9 million, a decline from USD 7.7 million in H1 2016.
Connect Core, our traditional USSD infrastructure business, has seen revenues fall to USD 4.2 million in the first half of 2017 compared with USD 5.4 million in H1 2016. This has resulted from reducing demand for additional capacity licences and pricing pressure on support contracts, plus reduced revenues from social media services enabled over USSD. Despite the reduction in revenue, cost savings enacted in 2016 mean Connect Core made an operating contribution of USD 0.7 million, slightly up from USD 0.3 million for H1 2016.
The Device Solutions division reports increased revenues of USD 2.7 million in H1 2017, up from USD 2.3 million in H1 2016, largely benefiting from the extension of key licensing deals in H1 2017. Combined with the active management of the cost base in 2016 in anticipation of the continued fall in service revenue, this has led to a rise in operating contribution to USD 1.6 million compared with USD 0.1 million in H1 2016.
Through the first half of 2017, Myriad has continued to develop our new Connect Hub PaaS and Thingstream IoT propositions with investments totalling USD 1.5 million and USD 1.7 million respectively. The investment in Versy has been significantly reduced to USD 0.4 million from USD 6.3 million in H1 2016 with overall development and marketing expenditure being tightly controlled as we seek to manage the Company’s resources in the most efficient and effective way.
Following these investments in pre-revenue product lines of Connect Hub, Thingstream and Versy, the Company is reporting a net loss of USD 6.9 million for the first half of 2017 (net loss USD 12.6 million in H1 2016).
Myriad reports a cash balance of USD 14.2 million as at 30 June 2017. The operating cash outflow in H1 2017 of USD 4.8 million reflects the investments made in Connect Hub, Thingstream and Versy of USD 3.6 million and the settlement of the historical French social plan legal case of USD 1.3 million.
The first half of 2017 has been an evolutionary period for Myriad. Leveraging the maximum amount of synergies from the engineering and go-to market capabilities and strengths of the other business units within Myriad Group, we have made sound progress in the development of a new Internet-of-Things (IoT) proposition, named Thingstream (www.thingstream.io).
Thingstream is founded on the deep MNO (Mobile Network Operator) experience and robust USSD capabilities from the Myriad Connect division, combined with the ability to efficiently manage extremely high volume messaging gained through the development of the Versy social media platform. Thingstream will go to market as a global, secure and scalable IoT connectivity platform service offering a disruptive low cost and low power alternative to emerging narrow band network technologies.
As we announced in Q4 2016, the Company is broadening its portfolio of USSD-based value added services through Connect Hub, Myriad’s Platform as a Service (PaaS) proposition, with initial focus on enterprise applications, including authentication. We are building up an opportunity pipeline, through partnerships and reseller agreements, which we aim to capitalise on with end customer pilots and commercialised services in the second half of 2017.
Leveraging technology already developed in other parts of the Group, we have been able to develop a robust and scalable IoT connectivity platform which we intend to launch with pilot customers in the second half of 2017.
Thingstream has been designed with simplicity in mind, it removes the traditional complexities involved with connecting devices to IoT platforms, securely, almost anywhere on the planet. The Thingstream platform makes it easy to connect and manage a wide variety of devices whilst providing an intuitive environment to build and deploy IoT workflows.
In the second half of 2017, we will continue to develop our channel strategy, targeting appropriate partners to drive adoption of our connectivity solution and increasing our go-to-market footprint. The revenue model will be largely linked to the volume of IoT messages processed by customers, generating a recurring revenue stream on which to further develop the product and scale of the business in the future.
To date, costs incurred in the development of Thingstream relate mostly to engineering resources reallocated from Versy, allowing us to accelerate product development and test business cases as we begin to identify early commercial opportunities.
During the first half of 2017, our Connect Hub platform has been built out using a cloud-based infrastructure. Client-facing API’s are complete, and the platform is nearing readiness for live services. We have developed a pipeline of prospective customers and are starting to plan pilots, whilst our MNO partners are enabling network reach, with a view to having initiated commercialised opportunities in the second half of 2017.
Connect Hub’s go-to-market strategy is supplemented by progress we have made with partner and reseller agreements executed in the first half of 2017. Once we move beyond pilot stage with initial customers, this network will continue to grow and will enable our enterprise services to scale more quickly as we head into 2018.
EGM to approve capital increase
With the progress we have made in developing these two propositions, we have taken the decision to raise capital to accelerate this transformation. The Company therefore announces today an Extraordinary General Meeting (EGM), to be held on 24 August 2017, to approve an increase of Ordinary share capital. This will enable the Company to proceed with a rights issue of up to 37,413,204 Ordinary shares at a subscription price of CHF 0.50 per share. The EGM is for registered shareholders only and will begin at 11:30am CET. This will be preceded by an investor update, including business and technology presentations by Myriad management and a detailed Q&A session, which is open to all interested parties. This will begin at 09:30am CET.
Changes to the Board of Directors
At the forthcoming EGM, Myriad will seek approval of the nomination of Leonardo De Luca to fill the vacancy created by Mauro Saladini’s departure, as both a member of the Board and as the Head of the Audit Committee. Mr De Luca is a member of the Swiss Chamber of Auditors and Tax Experts and since March 2006 has served as Chairman of Helvetic Airways. He has previously held positions within the Corporate Finance team at BZ Bank Limited, as the Head of Swiss Equity Research at UBS Investment Bank and had 11 years’ experience managing audit teams with PricewaterhouseCoopers. Mr De Luca is currently running his own M&A advisory business.
Whilst Myriad currently continues to support the existing Versy application, no further R&D or marketing investment is expected this year. We have diverted the majority of R&D resources previously engaged with Versy to support Connect Hub and to develop Thingstream. This reallocation, together with the strong technical underpinning from our Versy technology, has enabled us to bring Thingstream to market quickly. We will continue investment in the Thingstream platform and also in the depth of enterprise solutions provided by Connect Hub in the second half of 2017.
We had announced earlier this year that if both new business propositions reached appropriate milestones we would look to raise new capital in Q3 2017. We believe that both Thingstream and Connect Hub are demonstrating the envisaged traction in their respective markets, despite not yet contributing revenues. We have therefore concluded that now is the right time to seek new funds to secure investment through the next stage of the Company’s evolution.
The additional cash we are expected to secure following the proposed capital increase will be used to support the launch of Thingstream and to further realise market opportunities for Connect Hub in our target markets. We expect the Company will produce stable revenues in 2017, including starting the commercialisation of the first enterprise solutions provided by Connect Hub, in the second half of 2017.
While we invest in our new propositions, we will continue to closely monitor our more mature business segments in Device Solutions and Connect Core, as it will be essential to ensure that we manage these as cash generative and efficient operations.
Evaluation of Delisting
To ensure full visibility for our shareholders considering participation in the proposed capital increase, we simultaneously announce that we are evaluating a potential delisting of the Company from the SIX Swiss Exchange. In our view, a delisting could be an important and necessary step in the current transformation phase of the company.
The early stage of the evolution of our new propositions and the overall current risk profile of investment in Myriad is more akin to private equity than institutional investment in a more established publicly traded entity. We believe that such investors from a private equity or venture capital background are well versed in the current risk profile of the Company and could be active partners in building a successful, valuable business.
Equally, given the substantially reduced size of our Company, in financial, operational and stock-market measures, the operational and financial burden of being a publicly listed company becomes increasingly over-proportionate. As we change the shape and direction of the business it will be imperative to optimise resources, both time-wise and financially, to focus entirely on the areas where we see more long-term value for our shareholders.
The length of a delisting period can be up to one year, which would clearly impact our ability to balance the right level of investment into our two new businesses, with our fiduciary obligation to manage the Company in a financially responsible way. We believe that this is not in the best interests of the Company and its shareholders.
We have therefore decided on a capital increase at this point in time, whilst being fully transparent about the potential delisting of the shares of our Company. This procedure seems the most prudent action that helps the Company to gain the necessary financial resources to implement the strategy and ensure its long-term viability, while providing investors with transparency about the potential future direction of the Company. We will maintain the frequency and quality of our financial reporting at the highest levels and plan to continue our regular events to showcase our progress to investors.
Information on Myriad’s Half Year 2017 Earnings call
Myriad will present its Half Year results to members of the media, investors and analysts today at 18:00 CET. There will be a presentation by Erik Hansen (Executive Chairman) and Peter McCormack (CFO), followed by a Q&A session.
Details of how to join the call are below:
|Direct DDI (s) for Participant Connection||SWITZERLAND Toll Access Number:||022 580 9034|
|UK Toll-Free Access Number:||0800 358 9473|
|UK Toll Access Number:||0333 300 0804|
|Other Dial in options||International Dial in options|
|Participant Pin Code||96929023#|
|Audience URL||Web Link to conference|
The Half Year 2017 Report as well as the presentation slides for the Earnings Call are available on the company’s website:
Myriad Group is driving the Internet economy through delivery of infrastructure and innovative services, embedded software, consumer applications and the Internet of Things with first-of-its-kind solutions. With mobile and digital transformation an absolute priority on the corporate agenda for enterprises globally, Myriad Group’s technologies are helping the world’s leading organisations to accelerate growth, fuel innovation, drive productivity and efficiency improvements and engage and build trust with consumers.
The Company has its headquarters in Zurich, Switzerland, and principal offices in London, Chengdu, Paris and Mexico City.
Investor Relations Enquiries:
Myriad Group AG
Tel. +44 161 817 8075
Tel. +41 43 344 42 42