Myriad Group AG Accounts Half Year 2016 Results

Stephen Dunford, CEO of Myriad Group AG, commented: “In this first six months of 2016, Myriad continued the transition towards a diversified model that aims to capitalise on the continued growth of mobile communications in both developed and emerging markets. Notably, the Myriad Connect Division was repositioned, it is encouraging that despite the transformation in the business the Myriad Connect Division has continued to operate profitably on an operating basis. In addition, the new Versy app, launched in March, has evolved significantly by expanding its features. Despite the accelerated investments in Versy and the Connect Division to reinforce the pillars for future revenue growth of the Company, we are not yet able to offset the revenue decrease in the Device Solutions Division. We continue to manage the Company prudently to leverage the potential of both the Versy platform and the Myriad Connect business, and we are diligently managing our cost base and cash reserves to provide resources for their growth.”

 

Versy

Versy was officially launched in the United States in April 2016 specifically targeting the influential U.S. Hispanic market. This progression was a logical extension of Versy, which has its roots in Latin America. The launch was done in collaboration with Havas Media International, the world’s largest Hispanic media and communications group, and was designed to stimulate conversations around interests by working closely with content publishers who are relevant in both Latin America and the highly digitally engaged U.S. Hispanic millennial audience.

Since the launch in March 2016, significant features were added to the app, including the introduction of video and audio; geolocation, enabling the Versy community to identify users, conversations and events local to them; and the gamification of the platform, with the King of Interests feature allowing users to compete virtually with top experts in specific interest areas for the chance to be crowned the ‘King’ of that interest.

In June 2016, ‘Versy Code’ was launched in six cities worldwide including Los Angeles, Miami, New York, Sao Paolo, Rio de Janeiro and Mexico City with a focus on local content. Versy Code utilizes a geolocation feature to match a user with one of the platform’s new city-specific interest channels such as ‘VCode 310’ for Los Angeles, ‘VCode 305’ for Miami and ‘VCode 212’ for New York City. Each channel features uniquely curated content and near time conversations around popular interests such as Food, Events, Sports and Clubbing. Users can then share and discuss their favourite content using Versy’s group chat feature, create their own interest-based community or join a chat in an existing community.

Based on user feedback since the initial launch in March, key additional feature upgrades will be issued during Q3 and beyond. These will include enhancements around geolocation and simplification of our user experience, making it even easier for users to share and chat about their passions.

As we announced at the AGM in March, in order to preserve the Company’s cash resources for the products with the most promising potential, our priority has been to invest in product development and marketing of the smart-phone only version of Versy. This strategy has by necessity accelerated due to the fast pace of adoption of smartphone technology. This trend, along with the end of free-data agreements provided by operator partners, has impacted the feature-phone user base of Versy Lite. At minimal cost, we continue to target Versy Lite smartphone users to transition to the new version of Versy. However, feature phone users of Versy lite will only be able to move to Versy once they acquire a smartphone.

 

Connect

In February 2016, Myriad rebranded the Myriad Connect Division, a repositioning of the former Sub Data Division, and extended its existing portfolio with advanced solutions for Mobile Network Operators (MNOs), content providers and financial services organisations. These solutions enable MNOs and enterprises worldwide to connect to ‘no data access’ consumers through compelling services. This is particularly important in emerging markets where the cost of data access is still beyond most consumers’ reach. Myriad Connect seeks to accelerate that transformation, with the aim to make it as simple as possible for enterprises worldwide to launch mobile services in multiple countries and across all relevant mobile channels, whether it is creating One Time Passwords in support of mobile app activation, or presenting targeted mobile offers to their customers.

These offerings are layered on top of Myriad’s existing USSD Core service, such as self-care and operational messaging and Value Added (VAS) services, which connect users to online services without mobile internet access. During the first half of 2016, the Connect Division expanded its strong relationship with Orange Group SA, extending to a total of 13 Orange in-country operators that offer Myriad services to their subscribers throughout Africa. In the same period, Myriad also expanded its VAS offerings to add Search, Translate, Wikipedia, Weather and Goal.com services. These services complement existing Facebook over USSD and SMS and Twitter over SMS services, allowing users without mobile internet access to have access to popular social networks and connected services that would otherwise not be available.

 

Device Solutions Division

In the first half of 2016, the Device Solutions Division extended several licensing and service deals with existing customers, including Arris, Softbank, and Jolla. Nonetheless, the Division continued to experience significant headwinds due to the overall declining market for Java-based products in set top boxes. In addition, the market for Java-based products in the Internet-of-Things market has not materialised as quickly as originally anticipated and is highly fragmented. Given the uncertainty in that marketplace, the Company did not focus investment in this area during the first half of the year.

Given the market constraints currently faced by the Device Solutions Division, Myriad continues to take steps to proactively reduce costs to align with anticipated revenue.

 

Financial results in brief

In the first six months of 2016, Myriad reports revenue of USD 7.7 million a decline from USD 17.6 million for HY2015. The main drivers for the decrease from HY2015 were the continued decline in revenue from the Device Solutions Division, alongside delayed key contracts from the newly repositioned Myriad Connect Division, some of which materialised after the period end. The Device Solutions Division made an operating contribution of USD 0.1 million, the Myriad Connect Division made an operating contribution of USD 0.3 million. Investments in Versy amounted to USD 6.3 million. The Company continued to retain a solid cash position of USD 30.0 million at 30 June 2016 (USD 37.8 million at 31 December 2015). The decrease from December 2015 is largely attributable to investment in Versy and Connect, the key growth businesses for the Company. Versy investments focused on continued product and content development and initial test marketing. Connect investments included key hires in sales, marketing and research and development to support the repositioning of the business in new markets.

Due to the lower revenues from the Device Solutions Division, Myriad Connect, and continued investment in Versy, the Company is reporting a net loss of USD 12.6 million for the first half of 2016 (USD 4.8 million HY 2015).

 

Outlook

Given the market pressures experienced in the Device Solutions Division, we continue to expect full-year revenue to decline in 2016 versus 2015. However, this should be partially offset by anticipated continued growth in the Myriad Connect Division based on new service offerings and expansion in new markets. The Company is continuing to take steps to reduce its overhead cost and to align the cost base of the Device Solutions Division to ensure that this fits expected revenue opportunities. In early Q4, we believe Versy will have reached the right level of feature set after six months from initial launch. After these updates have been implemented, and as we have previously communicated, we plan to hold further investor meetings in October to discuss our plans for both Versy and Connect.

 

Summary Financial Information

USD million HY 2016 HY 2015
Revenue 7.7 17.6
Adjusted gross profit1 2.9 12.2
Adjusted gross profit in % 38% 69%
Adjusted EBITDA2 (10.8) (1.3)
EBIT (12.0) (3.7)
Net result (12.6) (4.8)
Cash and cash equivalents 30.0 51.9

 

1 Adjusted for amortisation, impairment, non-recurring items and restructuring costs.

2 Adjusted for non-recurring items and restructuring costs.

 

Information on Myriad’s Half-Year 2016 Earnings call

Myriad will present its Half Year 2016 results to members of the media, investors and analysts today at 18:00 CET. There will be a presentation by Stephen Dunford (CEO) and Peter McCormack (CFO), followed by a Q&A session with Management.

Details of how to join the call are below:

 

Direct DDI (s) for Participant Connection SWITZERLAND Toll-Free Access Number 0800 000 237
SWITZERLAND Toll Access Number: 044 580 3344
UK Toll-Free Access Number: 0800 279 5622
UK Toll Access Number: 0203 425 3098
Other Dial in options International Dial in options
Participant Pin Code 742652#
Audience URL Web Link to conference

 

The Half Year 2016 Report as well as the presentation slides for the Earnings Call are available on the company’s website:

http://www.myriadgroup.com/investors/publications/