· Revenues 56 679 (40 774)
· Operating Profit -31 651 (-33 445)
· Operating Margin Neg (Neg)
· After tax result -31 795 (-33 554)
· Earnings per share -0.76 (-0.80)
SIGNIFICANT EVENTS DURING THE FIRST QUARTER OF 2015
· SEQR is available to consumers in the Netherlands, Germany, Spain, France
and Italy. This means that SEQR is now available in a total of ten country
markets. In June, a launch is planned for the United States, to be closely
followed by the United Kingdom. With the expansion to these two countries, SEQR
will become the world’s first global mobile payment solution with an exposure to
600 million people.
· SEQR advertises the best rebate program in the market and connects the
service directly to users’ bank accounts. With the program, everyone who uses
SEQR receives a rebate of up to three percent on all purchases. The possibility
of linking the service directly to the user’s bank account bypasses invoices,
makes bank cards superfluous and offers a powerful incentive for consumers to
make the shift from cash or credit cards to mobile payments.
· The Belgian Colruyt Group is stepping up the rollout of SEQR. Colruyt, which
is one of Belgium’s largest retail chains, rolls out SEQR in 2015 in all of its
500 stores. The cooperation between the Colruyt Group and Seamless began in the
autumn of 2014. For some time now, the chain’s customers have been involved in
pilot testing of the payment-solution, and in the first stage Colruyt introduced
the service on several of their e-commerce sites. The next stage in this
cooperation commenced during the first quarter of 2015 when SEQR was rolled out
in the physical stores..
· This quarter saw an expanded joint collaboration between Q-Park and SEQR.
Since 2013, Q-Park, one of Sweden’s leading parking faciities players, has
offered SEQR in selected parking facilities. In the spring of 2015, SEQR was
rolled out at Q-Park’s 2500 payment machines around the country.
· Seamless has developed plug-ins for some of the world’s largest e-commerce
platforms such as Magento, OpenCart, PrestaShop and WooCommerce. This investment
means that hundreds of thousands of online merchants will be able, in a quick
and easy manner, to connect SEQR to their webshops and offer their customers the
possibility of payment by mobile device.
· The migration of Ingram Micro’s customers for distribution has begun. The
anticipated annual revenues for the customers who migrate to Seamless is
expected to be about SEK 70-75 million.
· Effective February 1, 2015, Seamless implemented the following Group
Management changes: Annika Blomé, Chief Product Officer, became a new member of
Group Management. At the same time, Anders Forssten resigned as Chief Marketing
Officer.
A few words from the CEO
Dear shareholders,
I always enjoy writing my quarterly comments about Seamless. Never in my life
have I been involved in a company which is growing at such a furious pace. In
just three years, we have gone from a company that was not involved in the
mobile payment industry to one that is, in most respects, a world leader. During
the first quarter, after two years of hard work, we achieved our target and were
able to rapidly launch our mobile payment product, SEQR, in six new markets.
In our traditional Transaction Switch business, we are also harvesting
successes, and in the first quarter of 2015, we show record results in this
segment in terms of both revenue and profit. The Distribution business segment
is also growing strongly and we expect the growth to continue for the
foreseeable future.
When our shareholders look at SEQR, our mobile payment product, I believe they
should view it from four diverse but related perspectives: technology, strategy,
tactics, and earnings potential.
Our strategy, since we invented SEQR, has been very simple. First, to build the
technology so that it becomes a world leader, then roll out the technology in as
large a population area as possible, and then start getting users in these
geographies.
When it comes to technology, I can say today, without hesitation, that we are by
far the world leader.
Technology
SEQR can do infinitely more than the nearest competing technology is capable of.
It is also significantly more secure and, moreover, faster. With SEQR, users can
pay in both physical and online stores, and send money between mobile devices.
They can redeem coupons and buy things directly from any media, such as
newspapers, television advertising, and online photos. This latter functionality
alone has the potential to completely change how the global media industry
works. The plain fact is that SEQR, as a product, is so all encompassing that we
are competing with a large number of companies that only deal with one of the
various functionalities SEQR offers,
for example companies that only deal with digital coupons. Virtually all of
these companies offer a service where shoppers cannot redeem their coupons
automatically. SEQR does this automatically at checkout. SEQR quite simply
deducts the value of the coupon from the amount to be paid. A coupon company has
no possibility to do this if they do not offer a payment service.
There are several companies that only offer a service where one can transfer
money between mobile devices (peer-to-peer). SEQR has the service embedded, and
additionally, we are the only service in Europe where one can send money between
countries. We will, moreover, according to current strategy, not charge the
consumer for the service.
The list of companies that may compete with subsets of what SEQR offers is,
therefore, very long. However, it is our view that these companies do not have a
sustainable business model. We are convinced that a mobile payment service must
be able to be used in all environments, for all types of payments to be
competitive with existing payment systems.
Shop on the Spot is a part of the SEQR technology that makes it possible to buy
things from any media surface at any time. It quite simply converts anything you
can see into a transaction, or you could say that it converts advertising to a
point-of-purchase retail outlet. This makes a huge difference for all media, as
it no longer needs to use advertisements to push consumers to physical stores or
online shops. They can now simply sell the product directly in the media. This
obviously increases the conversion rate from advertising to purchases and,
moreover, makes the channel holder - that is the newspaper, television or other
media company - into its own retail outlet. This technology has the potential to
completely change the entire way we think about advertising and how media
companies make money.
I could write at length about technology but stop here and suggest that you, as
a shareholder, should keep an eye on our technology. Further development is
taking place continuously. Using our basic architecture, we can add
functionality - something that no competitor can currently offer.
Strategy
Our strategy is simple. We are a Swedish company and we operate in a relatively
small country in terms of population. Each product coming to market is likely to
attract a certain percentage of people who use it. This is a general truth that
applies across all industries. This means that if one simultaneously develops
the same product in the U.S. and in Sweden, a similar percentage of people will
probably use or buy it. This means that in the competition between a Swedish and
an American company, the American company will usually win in terms of revenues.
Based on this, Seamless chose a plain, simple, and self-evident, strategy to
expand as quickly as possible geographically to countries with larger
populations. As I write, our services are available in ten countries, and in
June this year we expect to be in twelve countries when we make our services
available in the U.S. and the UK. This means that SEQR will be available in
countries with a total population base equivalent to some six-hundered million
people.
Here too, we are also world-leading, where the nearest competitor is in only one
country. Thus, by June we will lead by 11 countries. The closest competitors
have a population base of just over 300 million people, as these competitors are
in the U.S.
It should be emphasized that it is not easy to create a mobile payments service
which simply can be rolled out in several countries that allows the consumer to
travel across borders and still pay with the same service. There is a huge
infrastructure behind the ability to provide such a service. The only
competitors who have actually succeeded with this are the VISA and MasterCard
networks. They have built up this infrastructure over 49 years and involves
thousands of businesses to just maintain various aspects of this network.
Seamless has succeeded in creating such an infrastructure in two and a half
years. It has taken a large part of our resources, but during the first quarter
of 2015 we achieved our goal. The honest truth is, I have never seen a more
potentially disruptive technology than that which Seamless has built, given that
we process payments in all these countries without any other parties involved.
Now begins the process of getting consumers in these countries to use SEQR as
widely as possible. This means that, to some extent, Seamless will change its
character and larger and larger portions of our business activities will focus
on marketing and other ways to attract consumers.
We are not a global market leader in terms of the number of consumers who use
our service. Presently Apple is in the lead, with its product ApplePay. Apple,
as we all know, has a very strong brand, something that helps them when they
launch a service. Seamless is not in the same position with SEQR. On the other
hand, however, we have a service and a geographic reach along with technology
that today, and for the foreseeable future, will be ahead of Apple. Of course,
it has to be said that none of the participants in mobile payments think they
can monopolise the market. The mobile payments market is simply so immense and
presently generates such enormous profits that it is sufficient with fractions
of a percent of market to show great profitability.
Tactics
Large retailers have very long innovation and adaptation cycles. In simple
terms, this means that it takes a long time for a large chain enterprise to
embrace a new technology. In SEQR’s case, of course a merchant still has to
decide to accept SEQR payments in order for you as a consumer to be able to pay
the merchant via SEQR. The process for the merchant to take such a decision can
sometimes take several years, despite the fact that the merchant does not need
to make any investment or engage in any development of its own IT
infrastructure. The Seamless sales team is constantly out in the field engaging
in discussions with retailers in order to initiate and advance the process that
will bring the merchant to the point of accepting SEQR, but it is, I stress, not
a rapid process.
Portions of SEQR’s product portfolio and functionality, however, make it
possible for us to work around the problem of the merchant’s long adaptation
cycle. Something worth mentioning in this regard is ShopSpot and the Peer-to
-Peer functionality. What these two products share is that they are immediately
infinitely scalable. Thus, we do not need to wait for a third party in order to
launch our product. This means that when we launch in new countries or regions,
we use this type of product as a spearhead while, in parallel, we work with
merchants.
Revenue and earnings potential
SEQR provides Seamless with a number of potential and realized revenue streams.
Among the significant ones are, transaction fees, advertising revenue, coupon
management fees, income from
“big data,” channel margins in the ShopSpot segment, and notification fees from
credit institutions. In addition, there is potential income that is not directly
related to the volume of transactions, such as license fees from regions where
we do not wish to pursue SEQR ourselves.
What is significant with SEQR is that, due to these various revenue sources, we
can achieve higher profitability than the traditional credit card industry while
simultaneously offering a considerably lower transaction fees to merchants.
Actually, it’s not that surprising - a plastic card is indeed a very limited
technology compared to a mobile device. One quite simply can not interact with
the consumer via a piece of plastic.
Our revenues from SEQR from 2015 and onwards will increase at the rate the
transactions in the system increase, but it’s worth keeping in mind that when a
new merchant signs a contract with us, this doesn’t immediately generate
revenue. Consumers first need to realize that they can use SEQR at the merchant
and then start using SEQR for their payments.
In closing, I would like to say that I consider it a privilege to be involved in
the development which Seamless and SEQR is in the midst of. The payment industry
is undergoing dramatic change and Seamless is one of the driving factors in this
change, on a global basis.
Last, but not least, I would like to thank our extremely intelligent and hard
-working people at Seamless - in many parts of the world. Without your
incredible efforts, we would not be where we are today.
Peter Fredell
CEO
The Group
Revenues
During the first quarter Seamless’ revenues increased by 39 percent to SEK 56
679 thousand
(40 774). Total revenues are derived from among the various business segments,
with 28 percent (22) from the Transaction Switch business segment, 69 percent
(73) from the Distribution business segment, and 3 percent (5) from the SEQR
business segment.
Financial Results
· The consolidated operating loss amounted to SEK -31 651 thousand (-33
445) in the first quarter.
· First quarter net losses from financial items amounted to SEK -37 (
-78).
· Earnings per share amounted to SEK -0.76 (-0.80) for the quarter.
Employees
The Group had 147(153) employees at the close of the quarter. In addition to
this, Seamless has retained approximately 40 consultants – primarily in India,
Ghana and Pakistan.
Investments
During the quarter, investments have been made with a value of SEK 8 623
thousand (855).
Product development costs have been capitalized at a value of SEK 2 761 thousand
(5 519), while depreciation taken and amortization amounted to SEK -5 999
thousand (-2 769).
Cash flow and financial position
Cash flow from operating activities amounted to -31 659 thousand (-35 513) for
the first quarter. Bank deposits and cash equivalents at the end of the quarter
amounted to SEK 63 371 thousand (260 320).
The Group has interest-bearing liabilities in the form of leases for hardware
amounting to SEK –2 412 thousand (-2 794), divided between long-term
debt of SEK -869 thousand (-752) and short-term debt of SEK -1 543 thousand (-2
042). The Company has no interest-bearing liabilities to banks or other credit
institutions.
Other than the above, the Group has no borrowings. Seamless has an equity ratio
of 77 (88) percent. As announced in press releases and in the previous quarterly
report, savings measures have been taken during the third and fourth quarters
that will result in anticipated savings of about SEK 80 million annually. The
effects of these savings have started to be seen already during the first
quarter of 2015 where the loss has decreased with SEK 20 million from SEK -51
million to SEK -31 million. The full effect of these savings will be seen from
the middle of the second quarter and onwards. Some of these savings measures
have been to discontinue the Swedish part of Seamless development department,
which resulted in approximately 30 people had to leave the company.
Parent company
The parent company’s net sales for the quarter amounted to SEK 1 966 thousand
(0) and net financial results amounted to a loss of SEK -3 471 thousand (-6
292). Net financial gains/losses in the parent company were SEK 0 thousand (0),
and bank deposits/cash on hand amounted to SEK 21 826 thousand (240 467) at
the end of the quarter. The parent company had 5 (5) employees at the close of
the quarter.
For more information:
Daniel Hilmgård, CFO +46 709 968 333,
daniel.hilmgard@seamless.se
Peter Fredell, CEO Seamless +46 8 564 878 00,
peter.fredell@seamless.se
This information is such information that Seamless Distribution AB (publ) is
required to disclose pursuant to the Swedish Securities Market Act and/or the
Swedish Financial Instrument Trading Act. The information was released for
publication on 6 May 2015 at 07.50 am (CET)
