Interim Results

InternetQ plc - Interim Results

PR Newswire

London, September 29

For immediate release 30 September 2015

INTERNETQ PLC

('InternetQ', the 'Group' or the 'Company')

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2015

InternetQ plc (LSE-AIM: INTQ), a leading provider of mobile marketing and digital entertainment solutions for mobile network operators and brands, announces its unaudited interim results for the six months ended 30 June 2015.

Highlights

B2B – Mobile marketing

B2C – Digital entertainment

Outlook

Commenting on the results, Panagiotis Dimitropoulos, Founder and Chief Executive Officer of InternetQ said:

“We are rapidly gaining market share in this fast-moving app-related advertising space, which industry analysts predict will triple in size in the coming three years. The landmark release of self-service features on our Minimob platform, along with ongoing platform upgrades and our truly global reach, will allow us to further capitalise on the app economy’s growth trajectory, free from the challenges display advertising is facing and that plague some of the generalist competitors.

“At the same time, in July, our Akazoo business received significant external funding and a private equity stamp of approval that will accelerate its growth, enhance its leading position in underserved geographies, attract new commercial partners and soon claim a commensurate valuation to those of the two industry leaders.

“InternetQ is committed to its vision to lead and grow in the fast-paced technology space by seizing the opportunities ahead.”

Panagiotis Dimitropoulos and Veronica Nocetti, Chief Executive Officer and Chief Financial Officer at InternetQ, along with Apostolos Zervos, Chief Executive Officer of the recently enlarged Akazoo business, will host a conference call for analysts and investors to discuss the results, commencing at 8.30 am BST on Wednesday 30 September 2015.

Dial in details are as follows:

Conference ID: 45668697

United Kingdom: 08002798756

International Dial-in: +44 (0) 145 2322581

An audio webcast will also be available through the URL link http://wcc.webeventservices.com/r.htm?e=1057506&s=1&k=E480464D546B8C6320573453A0B7C9C0

Change in registered UK address:

InternetQ PLC’s registered address in the UK has moved from St. Botolph Building, 138 Houndsditch, London EC3A 7AR to 8 Clifford Street, London W1S 2LQ.

For further details:

InternetQ Tel: +44 (0) 20 3519 5250

Panagiotis Dimitropoulos, CEO and Founder Tel: +30 (697) 811 7520

Veronica Nocetti, Chief Financial Officer Tel: +30 (694) 420 5275

FTI Consulting LLP

Charles Palmer / Chris Lane / Nicola Krafft / Karen Tang Tel: +44 (0)20 3727 1000

RBC Capital Markets

Pierre Schreuder / Ema Jakasovic Tel: +44 (0)20 7653 4000

Canaccord Genuity

Simon Bridges / Emma Gabriel Tel: +44 (0)20 7523 8000

About InternetQ plc:

InternetQ is a leading digital content and mobile marketing services company with operations spanning Asia, Europe, Africa and the Americas. It offers proprietary technology platforms to help mobile network operators, brands, and media companies to conduct targeted, interactive and measurable marketing initiatives on mobile devices. Its mobile value added services include Akazoo, which allows consumers to purchase digital music content and Minimob, its smart mobile marketing and advertising platform to conduct effective and measurable campaigns on mobile phones and achieve user engagement and app monetization. All of InternetQ’s products are underpinned by the rapid global growth in smart devices and the thriving app economy.

InternetQ is a publicly traded company listed on the AIM market of the London Stock Exchange, under the symbol INTQ. For investor related queries, please email: [email protected]

ENDS

Chief Executive Officer’s Review

I am pleased to report this solid set of results for the first half of 2015, with double-digit revenue growth and a strong EBITDA performance.

The investment of over €25m to-date in the Minimob platform is paying off, delivering high growth, high margin revenues and positioning us as leaders in the very exciting app-related advertising market. Our proprietary bespoke platform differentiates us from emerging competitors and is a major USP for our mobile advertising sales efforts and client wins.

We can now confidently say that across our platform suite we possess solid technological foundations and marketing/sales personnel and expertise to rapidly increase our market share in highly attractive, carefully chosen market segments. Our recent decision to reduce investment and subsequent focus in lower priority areas is a testament to our proven ability to navigate industry trends and take action when and where necessary, so as to deliver sustainable high growth and cash flow to our shareholders for the years to come.

B2B – Mobile marketing

The Group’s B2B division has performed strongly in the first six months of the current financial year. The managed transition away from the legacy, lower-margin aggregation business is now well progressed and InternetQ is benefitting from its focus on the high growth, high margin Minimob platform. Growth has been fuelled by an increase in Minimob’s direct advertising revenue and the continued expansion of the performance-based advertising client base. During the period, the Group has successfully deployed Minimob with China-based global advertisers, including UC Browser and Baidu, direct advertisers, including BBM, NetDragon and HotelQuickly and agency-led brand advertisers, including WeChat, Gumtree and Samsung. Minimob’s smartphone ad-serving revenues have also grown strongly, increasing from €7 million in H1 2014 to €35 million for the current half. Continued progress has been achieved in developing mobile marketing partnerships with MNOs in several geographies, with Latin America delivering a 46% increase in total revenue to €17.5 million (H1 2014: €12 million).

B2C – Digital entertainment

The Group’s B2C division has continued to grow strongly. Akazoo, the Group's popular subscription-based music streaming service, has produced positive EBITDA and, with its pay-only business model, is highly differentiated in the marketplace. Post period end, the Group successfully completed a strategic investment into Akazoo by a consortium led by Toscafund Asset Management LLP and Penta Capital LLP, consisting of a c. €17 million (£12 million) cash investment into the UK registered entity that will hold the Akazoo business, operations and platform. At the same time, shareholders of R&R Music Ltd, a London-based IP/patent-powered music recommendation and user profiling technology company, have agreed to contribute their business to the new Akazoo group. The cash investment will be used to grow Akazoo’s operations and footprint and expand the new entity’s proposition across new verticals through continued development of the Akazoo platform and R&R Music’s technologies. Based on the subscription terms of the new investment, the implied post-money valuation of the enlarged Akazoo business (including R&R Music) as at 9 July 2015 was approximately €104 million, with InternetQ holding c. 69.1% of the shares, while Tosca Penta Music and R&R Music’s founders and existing investors hold the remaining shares.

With this investment completed, Akazoo is now cash self-sufficient. The integration of R&R Music is proceeding to plan with the restructuring of the enlarged business across Europe well progressed and expected to be completed in the second half of this financial year. The Group anticipates an impact of up to €(3) million in FY2015 EBITDA, largely reflecting the integration of the Akazoo business and investment to deliver the growth plans of the combined entity.

Outlook

We have made a solid start to 2015 and continue to see further growth opportunities in the fast moving mobile marketing and music streaming sectors.

Our B2B division is well placed to directly benefit from the global shift in mobile advertising towards app-related campaigns, expected to be worth c. US$30 billion in 2015, and due to further triple in the next three years, contributing over 70% of the total mobile ad spend growth globally. Minimob’s growth potential will be further enhanced by the introduction of new programmatic campaigns, self-service campaign planning and an increase in proprietary data which will drive optimisation going forward.

The €17 million cash investment into Akazoo by a Toscafund Asset Management LLP and Penta Capital LLP led consortium, outside the period end, will enable the B2C business to further develop its platform and R&R Music’s technologies, accelerating its growth across new verticals. This will be further supported by the market shift away from freemium models towards pay-only music streaming services, opening up new markets for growth.

For the full year, the Board remains confident of meeting market expectations, prior to the impact of the R&R Music acquisition, with a strong strategy and offering in place to continue to drive its expansion. It is anticipated that revenue will show a second half seasonal weighting in line with that seen in prior years.

Financial review

Group revenues increased by 10% in the first half of 2015 to €72.1 million (H1 2014: €65.7 million), with both segments delivering robust sales growth. Revenues from B2B activities grew by 8% to €55.5 million (H1 2014: €51.5 million) and revenues from B2C grew by 16% to €16.5 million (H1 2014: €14.2 million). InternetQ’s revenues continue to be spread across a broad range of growth markets – 34.3% from Europe, 32% from Asia, 24% from the Americas, 9.4% from the Middle East & Africa. Operations continue to be managed and coordinated from existing locations.

Adjusted EBITDA (after adjustment for share based payments and acquisition costs amounting to €0.8 million) grew by 34% to €13.1 million (H1 2014: €9.8 million), a margin of 18% (H1 2014: 15%). Profit after tax for the half year increased to €6.7 million compared to €5.4 million for H1 2014, despite the increasing amortisation of intangibles and a one-off, unrealised currency movement on intercompany balances between the UK holding company and Euro denominated subsidiaries. As in previous periods, these gains and losses are unlikely to be realised but led to a non-cash P&L adjustment.

Investment in the Akazoo, Minimob platforms and related applications resulted in capital expenditure for the half year ended 30 June 2015 of €5.6 million, a decrease from the previous year (H1 2014: €7.1 million). A slightly larger amount will be invested in the second half and cash will continue to improve.

Cash from operations was €7.8 million, reflecting the strong underlying financial performance. Investing activities comprised €5.6 million in software development and €3.6 million in deferred payments related to the previous year’s acquisitions. During the period, the Group signed a €15 million credit facility with Barclays in order to finance working capital needs and bought 198,023 shares of its own Ordinary Shares for a total of €0.8 million which are held in treasury. The Group ended the first half of the year with €2.8 million net debt after acquisitions, which consisted of €15.7 million (H1 2014: €12.3 million) cash and €18.5 million of bank debt (H1 2014: €12.1 million).

Unaudited Consolidated Income Statement for the period ended 30 June 2015

(Amounts in Euro, except share information, per share data and unless otherwise stated)

The accompanying notes are an integral part of the interim financial statements.

All results are derived from continuing operations.

Unaudited Consolidated Statement of Comprehensive Income for the period ended 30 June 2015

(Amounts in Euro, except share information, per share data and unless otherwise stated)

The accompanying notes are an integral part of the interim financial statements.

Unaudited Consolidated Statement of Financial Position as at 30 June 2015

(Amounts in Euro, except share information, per share data and unless otherwise stated)

The accompanying notes are an integral part of the interim financial statements.

Unaudited Consolidated Statement of Changes in Equity for the period ended 30 June 2015

(Amounts in Euro, except share information, per share data and unless otherwise stated)

The accompanying notes are an integral part of the interim financial statements.

Unaudited Consolidated Cash Flow Statement for the period ended 30 June 2015

(Amounts in Euro, except share information, per share data and unless otherwise stated)

The accompanying notes are an integral part of the interim financial statements.

Notes to the unaudited Interim Consolidated financial Statements

(Amounts in Euro except share information, per share data and unless otherwise stated)

The table below presents a reconciliation of profit after income tax to EBITDA:

Adjusted results, which are non-GAAP financial measures, are presented in order to improve investors’ understanding of financial results and improve comparability of financial information from period to period. The table below presents the adjusted amounts to the Group’s financial results for the period ended 30 June 2015 and 2014:

Reconciliation of the adjusted results for the period ended 30 June 2015 and 2014:

For management purposes the Group is separated into business units based on its customer types. Consequently, the Group has two reportable operating segments as follows:

Management monitors the operating results of its segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss (minus any costs that are not allocated to segments).

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties. Segment income, expenses and results will include those transfers between business segments which are eliminated on consolidation.

The following table represents revenue and profit information regarding the Group’s operating segments for the period ended 30 June 2015:

The following table represents revenue and profit information regarding the Group’s operating segments for the period ended 30 June 2014:

Finance income, finance costs and income taxes are not allocated to individual segments as the underlying instruments are managed on an overall Group basis.

A reconciliation between segment profit and corresponding amounts in the Group’s income statements for the period ended 30 June 2015 and 2014 is presented below:

Geographic information:

Finance income / (costs) in the accompanying interim financial statements are analysed as follows:

Losses on exchange differences of €513,938 (30 June 2014: losses €499,222) represent the unrealised foreign exchange losses on intercompany loans between InternetQ Plc (UK holding company) and the various subsidiaries.

Basic earnings per share amounts are calculated by dividing net profit/ (loss) for the reporting period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the respective period.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

A reconciliation of the adjusted earnings per share basic and adjusted earnings per share diluted for the period ended 30 June 2015 and 2014 is presented below:

On July 2015 R&R Music Ltd ("R&R Music"), the London-based IP/patent-powered music recommendation and user profiling Technology Company, invested €17 million (£12 million) and contributed their business to acquire 31,9% of the Akazoo business, operations and platform. The enlarged business, headquartered in London, UK, provides significant new cash resources, IP, human capital, operational and technological synergies and other related assets to further build on the strong momentum of InternetQ's B2C services. Similarly, the structural separation of Akazoo aims to improve focus on InternetQ's respective business lines, while maintaining control of both.