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TRANSCRIPT
QUARTERLY REPORT
Q4 2013 (UNAUDITED)
2
Contents
Q4 2013 in Brief __________________________________________________________________________________________ 3
Selected Highlights _______________________________________________________________________________________ 6
Outlook ____________________________________________________________________________________________________ 7
About Cxense _____________________________________________________________________________________________ 7
Condensed Financial Report _____________________________________________________________________________ 8
Consolidated Income Statement (unaudited) ________________________________________________________ 11
Consolidated Statement of Financial Position ________________________________________________________ 12
Consolidated Statements of Changes in Equity ______________________________________________________ 13
Consolidated Statement of Cash Flow ________________________________________________________________ 14
Notes to the Consolidated Financial Statements _____________________________________________________ 15
OFFICE LOCATIONS
North America Latin America Japan Europe Asia Pacific
New York, NY
Cxense, Inc. 1180 Avenue of the Americas 8th Floor Rockefeller Centre NY 10036 USA
Buenos Aires, Argentina
Victoria Ocampo 360 Piso 3 Puerto Madero Ciudad de Buenos Aires Argentina
Tokyo, Japan
Cxense Co., Ltd. SU Building 204 3-1 Uguisudani-cho, Shibuya-ku Tokyo, 150-0032, Japan
Oslo, Norway (Corporate Headquarters)
Cxense AS Henrik Ibsens gate 100 P.O. Box 2920 Solli NO-0230 Oslo, Norway
Melbourne, Australia
Cxense Australia Pty Ltd Level 2, 84 William Street Melbourne, 3000 Australia
San Francisco CAxxxxx
Cxense, Inc. 20 N.San Mateo Drive Suite 3 San Mateo, CA 94001 USA Miami, FL
Cxense Latin America Suite 232, 4801 South University Drive Davie, FL 33328 USA
London, UK
Cxense UK 5 Regent St. Charles House, 5th Floor United Kingdom Copenhagen, Denmark
Emediate ApS Emdrupvej 28B 2100 Copenhagen Denmark Stockholm Sweden,
Emediate Sweden Drottninggatan 67 111 36 Stockholm Sweden
3
Q4 2013 in Brief
Q4 2013 was an exciting quarter for Cxense, with a range of new, important customer wins for our
Sofware-as-a-Service (SaaS) segment, and with the completion of the acquisition of Emediate, the
leading Nordic advertising technology company. The software development teams also made good
progress with continuous improvements to the Cxense software Solution Suite.
Q4 2013 revenues for the Cxense SaaS
segment amounted to USD 2.65 million, a
growth of USD 1.91 million (or 258%)
compared to Q4 2012 revenues of USD 0.74
million.
The Q4 2013 revenues from Cxense SaaS,
excluding the acquired entity Emediate,
amounted to USD 1.3 million. This represents
a 77% growth compared to Q4 2012
revenues of USD 0.74 million and a 19%
quarterly increase compared to Q3 2013
revenues of USD 1.09 million.
This solid organic growth was driven by
several new customer contracts, where a
contract with the North American publisher
Dow Jones & Company was the most
significant addition to the customer portfolio.
Dow Jones chose Cxense Big Data, Advertising and Content to power digital subscription optimization
for the Wall Street Journal.
USD 1.34 million of the Q4 2013 revenues came from the acquired entity Emediate, representing two
months contribution (November and December 2013), i.e not a full quarter.
The Emediate acquisition more than doubles the Cxense SaaS segment revenue base. Emediate also
adds a portfolio of 150 customers with recurring SaaS revenues to Cxense, and creates the opportunity
for sales growth synergies going forward. Emediate is known for an efficient high quality ad serving
offering supported by a strong support team. By combining this offering with the unique audience
insight and targeting capabilities of the Cxense Extraordinary Insight Engine (EIE), we believe we can
offer a unique and future proof digital advertising offering to our customers.
Emediate was acquired for USD 10.28 million. The acquisition was financed through the issue of 3,691
Cxense shares, each at a price of NOK 25 thousand (USD 4,255). Total proceeds from the issue of shares
were USD 15.7 million. At the end of Q4 2013 there were 16,612 shares outstanding and 573 allocated
share options.
Through Q4 2013, Cxense SaaS continued to scale the organization for future growth. Following the
hiring of a dedicated Head of Onboarding and Customer Success in the beginning of Q3 2013, we have
continued to build a strong global onboarding and customer success team throughout Q4 2013.
4
Combined with the Emediate Support and Retention teams we have built a new strong Customer
Success operation that will represent a significant improvement in customer account management.
During Q4 2013 we also strengthened marketing and sales development that will ensure an increasing
focus on lead generation and conversion at the beginning of the customer funnel.
The strengthening of the customer success, marketing and sales development functions has led to nine
new employees during Q4 2013 for the Cxense SaaS segment, in addition to the 28 new employees that
came with the Emediate acquisition. At the end of Q4 2013 the Cxense SaaS area (including Emediate)
had 92 employees (whereof six are working as contractors with costs booked to other opex). 39 out of
the 92 employees are working within software development.
Following the acquisition, the software development teams have developed a common road map for a
new combined and future-proof Cxense Advertising platform that includes the best from Emediate Ad
and Cxense Advertising.
Development of the other Cxense software solutions, with the Extraordinary Insight Engine (EIE) at the
core, continued to show good progress in Q4 2013. Non-cookie based data capture methodologies were
further developed to strengthen the user profile generation on mobile and tablet devices. In addition
cross-site tracking was further developed by utilizing more cross-site identifiers than previously.
5
Cxense group – financial development summary
1) Q2 2013 cont’d excludes the discontinued operations of PPN AG (See note 4 for details). All other quarters are
presented including PPN AG. Segment results excluding the discontinued operations can be found in note 3.
2) Cost of sales includes the elimination difference from elimination of inter group transactions. For 2011 other cost of
sales also includes governmental R&D cost refunds booked as negative costs.
3) FY 2013 for the PCAN Segment includes continued operations only (excludes the discontinued operations of PPN
Switzerland)
4) Emediate is included within operations for the months of November and December in the Q4 2013 and the FY 2013
figures above as the company was acquired with effect as of Nov 1 (i.e not a full quarter effect).
5) Direct acquisition costs include cost to lawyers and financial advisors that performed due-diligence and general
advisory services in connection with the acquisition of Emediate (Transactions costs related to the share issue
financing the acquisition are booked against other paid in capital and therefore visible in the consolidated statement of
changes in equity, i.e. not in the profit and loss statement).
USD 1,000 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013
Q2 2013
cont'd.
Qtr 3
2013
Qtr 4 2013
excl.
Emediate
Qtr 4 2013
incl. Emediate
Nov & Dec 13 FY 2013
IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS
SaaS segment
Revenues total 389 503 674 736 840 993 993 1 090 1 314 2 650 5 573
Cost of sales 10 134 58 117 146 203 203 179 244 501 1 030
- - -
Gross profit 379 369 616 619 694 790 790 911 1 070 2 149 4 543
Gross magin % 97 % 73 % 91 % 84 % 83 % 80 % 80 % 84 % 81 % 81 % 82 %
Personnel 1 206 1 443 1 312 1 579 1 790 1 832 1 832 1 833 2 383 2 935 8 390
Other OPEX 218 348 489 221 676 802 802 643 1 566 1 835 3 956 Whereof direct acqusition costs 436 436 436
OPEX 1 423 1 791 1 801 1 800 2 466 2 633 2 633 2 476 3 950 4 770 12 346
- - - - - - - -
EBITDA -1 044 -1 422 -1 185 -1 181 -1 772 -1 844 -1 844 -1 565 -2 879 -2 621 -7 802 EBITDA before direct acqusition cost -2 444 -2 186 -7 366
PCAN segment
Revenues total 809 976 1 437 1 375 1 534 547 685 634 634 2 247
- - - - - - - -
Cost of Goods Sold 765 965 1 443 1 390 1 263 487 523 450 450 1 905
- - - - - - - -
Gross profit 43 11 -5 -15 272 60 162 184 184 342
Gross magin % 5 % 1 % 0 % -1 % 18 % 11 % 24 % 29 % 29 %
Personnel 180 202 226 238 291 124 109 107 107 427
Other OPEX 119 66 107 97 129 73 35 78 78 239
OPEX 299 268 332 335 419 196 144 185 185 666
- - - - - - - -
EBITDA -256 -257 -338 -350 -148 -137 18 -1 -1 -324
GROUP
EBITDA -1 044 -1 678 -1 442 -1 519 -2 122 -1 991 -1 980 -1 547 -2 880 -2 622 -8 126
EBITDA before direct acqusition cost -2 445 -2 186 -7 690
6
Selected Highlights
Cxense acquires Emediate, the leading Nordic adserving technology provider and thereby
doubles its Software-as-a-Service revenue base.
Dow Jones & Company, the New York based financial publisher, chooses Cxense Big Data,
Advertising and Content to power subscription optimization on the online edition of the Wall
Street Journal, the largest US newspaper by circulation.
Globo Comunicaça o e Participaço es, the largest media group in Brazil and Latin America, signs a
commercial pilot agreement to explore the opportunities with the Cxense Solution Suite.
Summit Media, the leading consumer magazine publisher in the Philippines, choses the Cxense
Solution Suite to improve monetization of their 120 million monthly page views. They will use
Cxense Advertising, Content and Analytics.
Polaris Media, the third largest media group in Norway, expands their use of Cxense Analytics
following the new Analytics features that were launched during 2H 2013. Customizable
dashboards and better user interest visualization are new features that increase the
attractiveness of Cxense Analytics.
Mediagene, the Tokyo based internet media management and consulting company, choses
Cxense Content to power content recommendations. Mediagene was already a Cxense
Advertising customer.
Ramp.com, the North American provider of Video personalization solutions, choses Cxense Big
Data and Analytics to power their solutions with user and content insight.
AEON, the largest Japanese retailer, doubles the capacity of their Cxense Search solution to
cover more online properties.
7
Outlook
Cxense experiences increasing customer interest for its solutions for real-time analytics, digital
advertising, actionable Big Data processing, content optimization and personalization, and search.
Online publishers and media companies continue to be the main customers targeted in the near term,
with interesting market opportunities within the e-commerce sector emerging in the medium term.
In the longer term, we also see opportunities in other business verticals for EIE, our Big Data platform,
as companies seek to improve customer understanding, analytics and communication.
Most online companies are experiencing significant growth on new devices and formats, mainly tablets
and mobile smart phones. This requires adaptation of their content and monetization methods. The
Cxense solutions have cross-device support (laptop, mobile tablet) and mobile growth represents a
significant market opportunity for us.
Our commercial product platform addresses large and fast-growing markets. The global online
advertising market is estimated to be more than USD 100 billion in 2013, and is expected by leading
industry groups to grow to more than USD 200 billion by 2020. The global e-commerce market is
estimated to pass the USD 1,000 billion mark by 2013, and is growing about 20% per year. Industry
analyst group, Gartner expects that Big Data will drive USD 230 billion in IT spending through 2016, up
from USD 96 billion in 2012(1).
About Cxense
Cxense was founded in February 2010. The Company sells Cloud Based Software as a Service (SaaS)
solutions to online content providers and e-commerce companies that want to increase the
functionality, relevance and overall performance on their internet sites. At the same time Cxense
solutions enhance their customer insight and maximize monetization.
Cxense has built the Extraordinary Insight Engine (EIE) for real-time analysis of content, user context,
and behavior. The EIE analyzes the behavior of more than 350 million internet users and detect their
location and device and deduces their interest, intent and much more. The EIE gives our customers a
‘360 degree view’ of their online consumers.
The EIE is fully integrated with a range of solutions (Cxense Advertising, Analytics, Big Data, Content,
and Search), which are used by Cxense customers to increase advertising revenue, user engagement,
and conversions to digital subscriptions.
1) http://techcrunch.com/2012/10/17/big-data-to-drive-232-billion-in-it-spending-through-2016/
8
The solutions based on
the EIE are provided as
SaaS (Software-as-a-
Service) services with
monthly software service
fees and/or royalty
payments dependent on
advertising volume and
transaction levels. In
addition, we charge
implementation fees and
consultancy services
amounting to typically 5-
10% of revenues in each
quarter. The sale of our
SaaS solutions is reported
in the Cxense SaaS
business area and
represents the Company’s core business.
The EIE technology has several unique aspects: it is end-to-end real time; from data capture, through
processing to actionable output. It is also mobile optimized through its non-cookie based data capture
methodologies and low bandwidth consumption. With highly flexible APIs the EIE can power any
application and make it context aware.
Cxense has also helped establish a range of publisher-controlled advertising networks (PCANs). The
PCANs act as publisher-controlled broker between the advertisers and the publishers, distributing and
sharing the advertising revenues generated in the network with the publishers. Cxense is advertising
technology provider to the PCANs and charges a fee dependent on the PCAN revenues. In Spain, the
Company has retained a 56% ownership interest, and because of its majority ownership, this PCAN is
consolidated into the Group accounts, and is reported in the Cxense PCAN business area.
Condensed Financial Report
Q4 2013 Group Revenue for continuing operations amounted to USD 3.2 million, an increase of USD 2.15
million over the same period last year (USD 1.07 million). The increase in Revenue is due to the
acquisition of the Emediate business, which contributed USD 1.34 million of the revenue during the
quarter. The Cxense SaaS segment excluding Emediate experienced a USD 0.63 million revenue increase
as a result of the continued growth in the number of customers and the PCAN business segment had
increased sales of USD 0.3 million due to increased advertising, advertising performance and
advertising requests from publishers. The Q4 2013 Revenue from the SaaS Segment was USD 2.5 million
9
for external customers and inter-segment Revenue was USD 0.07 million. Revenue from the PCAN
segment was USD 0.63 million.
The Q4 2013 Cost of Sales amounted to USD 0.86 million, compared to USD 0.54 million in Q4 2012. The
SaaS Segment Cost of Sales for Q4 2013 was USD 0.48 million, while the PCAN segment Cost of Sales was
USD 0.45 million. Cost of Sales within the SaaS segment relates to the hosting of the software
applications used by our customers as well as sales partner commission from the Emediate business.
Cost of Sales within the PCAN segment relates to revenue share paid to publishers providing their
advertising space, as well as agency commission paid to advertising agencies. The Q4 2013 Gross Profit
for the SaaS segment amounted to USD 2.1 million and USD 0.18 million for the PCAN segment. The Q4
2013 Gross Margin in the continuing operations of the PCAN segment was a positive 29% compared to a
negative return in Q4 2012. The improvement is due to the gradual expiration of a publisher revenue
share guarantee clause that originates from the start-up of the continuing PCAN operations as well as
general improvement in revenue share and agency terms.
The Q4 2013 Employee Benefit Expenses were USD 3.0 million, compared to USD 1.6 million in Q4 2012.
The increase is due to a headcount of 92 at Q4 2014 compared to 58 at Q4 2012. The acquisition of
Emediate incurred USD 0.55 million of employee benefit expenses and 28 additional employees. At Q4
2013 92 employees were employed within the SasS segment (28 with the Emediate business) and 9
within the PCAN segment.
The Depreciation Expense in Q4 was USD 0.21 million compared to USD 0.007 million in Q4 2012.
Traditionally the Depreciation Expense has been consistently low due to the limited non-current assets.
The large distributed cloud- based systems operated by Cxense are hosted on platforms leased from
large scale, reputable hosting suppliers. Since the acquisition of Emediate the deprecation expense now
includes amortization of identifiable intangible assets of USD 0.19 million. The Groups R&D cost is
expensed (not capitalized).
Other Operating Expenses amounted to USD 1.9 million in Q4 2013 and USD 0.28 million in Q4 2012.
The majority of the expenses related to marketing and external consulting (audit, legal, and other), the
latter driven by activities such as conversion to IFRS, the sale of PPN AG, the acquisition of Emediate and
the connected financing round. The increase is in line with the expansion of the existing SaaS business
and the inclusion of the Emediate business since November 2013. Additionally USD 0.43 million of costs
associated with the acquisition of Emediate has been charged to other operating expenses
The Finance Income in Q4 2013 was USD 0.09 million, largely relating to interest earned on bank
deposits and cash arising from the share issue proceeds in 2012 and 2013. Finance Income in Q4 2012
was USD 0.05 million. Finance Expenses, mostly relating to currency expenses, amounted to USD 0.09
million in 2013 and USD 0.07 in Q4 2012.
Income Tax Expense for Q4 2013 was a positive USD 0.02 million compared to negative USD 0.02 in Q4
2012. The Income Tax Expense arises in the Cxense SaasS subsidiaries in USA, Japan and Australia that
perform Sales & Marketing and Research & Development activities. This has been offset by Emediate
positive Tax Adjustments arising from carry forward tax losses. The Q4 2014 Tax Expense is an estimate
only, with full reviews currently being performed.
The Group Net Loss from continuing operations amounted to USD 2.8 million in Q4 2013, compared to a
Net Loss of USD 1.6 million in Q4 2012. The continuing PCAN operation almost broke even for the
10
quarter recording a small loss of USD 0.002 million. The Emediate business contributed a net profit of
USD 0.2 million. Overall the Net Result for Q4 represents a loss of USD 45 per share, comparable to Q4
2012.
The accounting entries for sale of the PCAN subsidiary was finalized during Q3 2013 resulting in a gain
of USD 0.14 million. This has been recorded in Q3 with no impact in Q 4. The full details of the sale of the
PCAN subsidiary are outlined in Note 4 to the accounts.
Total Assets at the end of Q4 2013 amounted to USD 23.3 million compared to USD 12.9 million at Q4
2012. The increase is mainly due to the investment of the Emediate Business resulting in the recording
of Goodwill and Intangible Assets amounting to USD 9.2 million. Cash and cash equivalents amounted
to USD 8.8 million at the end of Q4 2013 and USD 10.2 million at the end of Q4 2012. Trade Receivables
were USD 3.0 million at the end of Q4 2013, compared to USD 1.9 million at the end of Q4 2012. The
increase in Q4 2013 Receivables is due to the growth in external customers billings in the SaaS Cxense
and the PCAN segment and includes the Emediate receivables balance of USD 1.5 million at the end of
Q4 2013. Short term assets in Q4 2013 increased by USD 1.1 million on the Q4 2012 amount of 0.76
million mostly due to the USD 1.3 million Escrow account balance related to the delayed payments of
parts of the Emediate acquisition proceeds (booked as short term assets).
Total Current Liabilities at the end of Q4 2013 were USD 5.8 million compared to USD 3.3 million at
Q4 2012. The increase is mainly due to the inclusion of the payment outstanding on the Emediate
acquisition on escrow account of USD 1.3 million as well as the inclusion of the Emediate balance sheet
and unpaid transaction fees of USD 0.8 million related to the Emediate acquisition and the
corresponding share issue. These transaction fees were paid in January 2014. Total transaction costs
related to the acquisition of Emediate and the corresponding share issue was USD 1.1 million.
The deferred tax balance outstanding of USD 0.65 million at Q4 2013 relates to the Emediate business.
Net Cash Flow used in Operating Activities was USD -1.26 million in Q4 2013. The net cash flow from
operating activities for the quarter was affected positively by acquisition related transaction costs that
were unpaid at 31.12.2013.
Net Cash flow used in Investing activities was USD -9.8 million in Q4 2013 compared to USD 0.07 million
in Q4 2012. The funds were used to acquire the Emediate business. The total acquisition price was USD
10.28 million and was financed by the issue of 3,691 Cxense shares towards existing and selected new
shareholders.
Net Cash flow from financing activities was USD 16.1 million in Q4 2013 compared to USD 9.9 million in
Q4 2012. Both amounts relate to share issue proceeds. The Q4 2013 proceeds were largely used to
acquire the Emediate business.
11
Consolidated Income Statement (unaudited)
USD 1,000 Note
Q4 ended
31 Dec 2013
Q4 ended
31 Dec 2012
Year ended
31 December
2013
Year Ended
31
December
2012
Continuing operations:
Revenue 3, 4,5 3,213 1,065 7,612 2,961
Operating expense
Cost of goods sold 3,4,5 882 536 2,728 1,061
Employee benefit expense 6 3,040 1,626 8,814 5,700
Depreciation expense 211 7 227 21
Other operating expense 7 1,912 281 4,195 1,446
Total operating expense 6,045 2,451 15,964 8,228
Net operating income/(loss) (2,832) (1,385) (8,353) (5,266)
Financial income and expense
Finance income 91 55 367 89
Finance expense (96) (76) (179) (95)
Net financial income/(expense) (5) (22) 188 (7)
Net income/(loss) before taxes (2,837) (1,407) (8,165) (5,273)
Income tax expense (22) 21 3 33
Net income/(loss) for the period from continuing operations (2,815) (1,428) (8,168) (5,306)
Discontinued operations
Net income/(loss) for the period from
discontinuing operations 4 (0) (145) (24) (442)
Total net income/(loss) for the period (2,816) (1,573) (8,192) (5,748)
Net income/(loss) attributable to:
Owners of the Company (2,814) (1,485) (8,045) (5,564)
Non-controlling interests (1) (87) (147) (183)
Earnings per share:
Basic and diluted 8 (0.45) (0.45) (0.60) (0.57)
Statement of comprehensive income
USD 1,000
Q4 ended
31 Dec 2013
Q4 ended
31 Dec 2012
Year ended
31 December
2013
Year Ended
31
December
2012
Net income/(loss) for the period (2,816) (1,573) (8,192) (5,748)
Other comprehensive income:
- Currency translation differences 461 (77) 563 (72)
Total comprehensive income/(loss) (2,355) (1,650) (7,629) (5,820)
Total comprehensive income/(loss) attributable to:
Owners of the Company (2,354) (1,562) (7,482) (5,636)
Non-controlling interests (1) (87) (147) (183)
12
Consolidated Statement of Financial Position
USD 1,000 Note
As at 31
December 2013
As at 31 December
2012
Assets
Non-current assets
Goodwill 3 807 -
Deferred tax asset 14 14
Intangible assets 5 429 2
Office machinery, equipment,etc. 295 82
Other financial assets 20 12
Total non-current assets 9 564 110
Current assets
Trade receivables 9 3 000 1 873
Other short-term assets 10 1 887 764
Cash and cash equivalents 8 843 10 210
Total current assets 13 731 12 847
Total assets 23 295 12 958
Equity and liabilities
Equity
Share capital 11 2 713 2 269
Own shares (56) -
Other paid in capital 22 914 13 803
Currency translation differences 764 201
Retained earnings (9 184) (6 453)
Equity attributable to the holders of the Company 17 150 9 820
Non-controlling interest 14 (272) (125)
Total equity 16 878 9 695
Liabilities
Non-current liabilities
Deferred tax liabilities 654 -
Total non-current liabilities 654 -
Current liabilities
Trade payables 1 933 1 651
Current taxes 29 76
Other short-term liabilities 12 3 800 1 536
Total current liabilities 5 762 3 263
Total liabilities 6 417 3 263
Total equity and liabilities 23 295 12 958
13
Consolidated Statements of Changes in Equity
USD 1,000
Nominal
share
capital
Other paid
in capital
Currency
translation
difference
s
Retained
earnings
Attributable to
owners of
parent
company
Non
Controlling
interest
Total
equity
Total equity as at 1 January 2012 1 505 4 939 273 (4 663) 2 054 2 054
0 0
Profit for the period (5 564) (5 564) (183) (5 748)
Other comprehensive income (72) (72) (72)
Total comprehensive income/(loss) for the year 0 (72) (5 564) (5 636) (183) (5 820)
Reduction of paid in capital (4 311) 4 311 0 0
Transaction costs (193) (193) (193)
Share based payments 56 56 56
Increase in share capital 649 12 934 13 583 58 13 641
Currency effects from translation of equity 115 378 (537) (43) (43)
Total equity as at 31 December 2012 2 269 13 803 201 (6 453) 9 820 (125) 9 695
USD 1,000
Nominal
share
capital
Own
shares
Other paid
in capital
Currency
translation
difference
s
Retained
earnings
Attributable to
owners of
parent
company
Non
Controllin
g interest Total equity
Total equity as at 1 January 2013 2 269 13 803 201 (6 453) 9 820 (125) 9 695
0 0
Profit for the period (8 045) (8 045) (147) (8 192)
Other comprehensive income 563 563 563
Total comprehensive income/(loss) for the year 0 563 (8 045) (7 482) (147) (7 629)
Reduction of paid in-capital (4 773) 4 773 0 0
Transaction costs (633) (633) (633)
Share- based payments 191 191 191
Increase in share capital 650 15 583 16 233 16 233
Purhcase own shares (56) (56) (56)
Currency effects from translation of equity (206) (1 256) 541 (922) (922)
Total equity as at 31 December 2013 2 713 (56) 22 913 764 (9 184) 17 150 (272) 16 878
Own shares: At 31.12.2013 Cxense AS held 42 shares (0.25% of outstanding shares) in Cxense AS’ account in the
Norwegian Central Security Depository (the Cxense VPS account) on behalf of employees and smaller non-
professional investors investing in the November 2013 share issue that were not able to establish a VPS account for
themselves by year end. Establishing a Norwegian VPS account may take some time for foreign private individuals
and Cxense chose to hold these shares on its own VPS account to be able to register the share issue in the VPS
register by year end.
14
Consolidated Statement of Cash Flow
USD 1,000 Note
Q4 ended
31
December
2013
Q4 ended
31
Demceber
2012
Year Ended
31
December
2013
Year ended
31 December
2012
Cash flow from operating activities
Profit / (loss) before income tax (including disposal group) (2 833) (1 553) (8 185) (5 715)
Adjustments:
Income tax payable (3) (3)
Share- based payments 6 51 53 199 53
Result from investment in associates 12 52 52
Depreciation and amortization 11 211 9 227 23
Impairment
Net interest expense
Currency translation effects 260 (218) (363) (113)
Change in trade receivables 71 (807) 465 (1 737)
Change in trade payables 221 498 (544) 1 602
Change in other accrual and non-current items 763 (143) 391 750
Net cash flow from / (used in) operating activities (1 257) (2 113) (7 810) (5 088)
Cash flow from investing activities
Investment in furniture, fixtures and office machines 11 (54) (23) (62) (34)
Investment in intangible assets 11 4 (0) (0) (2)
Investment in associated companies 12 (52) (52)
Investment in subsidiary (1) 3 (9 809) (9 809)
Sale of subsidiary (1) 4 55
Net cash flow from / (used in) investing activities (9 859) (74) (9 817) (87)
Cash flow from financing activities
Net proceeds from share issues 16 118 9 932 16 260 13 390
Proceeds from minority interest 56 58
Net cash flow from / (used in) financing activities 16 118 9 989 16 260 13 448
Net increase/ (decrease) in cash and cash equivalents 5 002 7 802 (1 367) 8 272
Cash and cash equivalents at the beginning of the period 3 841 2 409 10 210 1 938
Cash and cash equivalents at the end of the period 8 843 10 210 8 843 10 210
(1) Cash effects are presented net of cash held by subsidiaries acquired, and cash held by subsidiary sold. Gross amounts are
disclosed in note 3 (Acquisition) and note 4 (Sale of subsidiary).
15
Notes to the Consolidated Financial Statements
Note 1 General information
Cxense AS, which is the parent Company of the Cxense group (the Group), is a limited liability company
incorporated and domiciled in Norway, with its corporate headquarters in Oslo. The Group is a global
technology company delivering innovative and intuitive products that help clients build unique online
experiences.
The Company’s Board of Directors approved the financial statements on February 24, 2014.
These financial statements are unaudited.
Note 2 Basis of preparation and accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements
are set out below.
The Consolidated Financial Statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU) and in accordance with the
additional requirements following the Norwegian Accounting Act.
The accounting policies applied in this Condensed Consolidated Interim Financial Report are consistent
with those applied and described in the latest Consolidated Annual Financial Statements.
The going concern assumption has been applied when preparing this interim financial report.
16
Note 3 Business combinations
USD thousands
Fair value
recognised at
acquisition
Intangible assets 5 610
Deferred tax asset 747
Office machinery, equipment, etc. 191
Trade receivables 1 592
Other short-term assets 239
Cash and cash equivalents 471
8 851
Deferred tax liabilities on excess values (1 402)
Trade payables (167)
Other short-term liabilities (808)
(2 377)
Total identifiable net assets 6 474
Goodwill 3 807
Total consideration 10 281
Acqusition impact on Group results
Had the business combination been effective at 1 January 2013, the revenue of the Group would have been UDS 16,340
thousands, and loss for the year would have been USD 8,179 thousands. From January to October 2013 (prior to the acquisition)
the Emediate Aps entity included the Pentamind operations (13 R&D employees that incurred additional cost but limited
attributable revenues to the Emediate Aps entity). The Pentamind operations did R&D work for the ad Pepper group that was
not related to the Emediate advertising technology business. With effect as of 31.10.2013 the Pentamind operations were carved
out of Emediate Aps, thus it is the Emediate November and December 2013 figures included in the Q4 Cxense SaaS segment
that represents the run-rate contribution from the acquired entity excluding the Pentamind operations. This run-rate contribution
can be seen by comparing the Q4 2013 excluding Emediate and the Q4 2013 including Emediate numbers on page 5 in this
report.
On 15 November 2013 the group acquired 100% of the shares in Emediate Aps from ad Pepper media International N.V. for
USD 10,281 thousands. Emediate Aps, and its subsidiaries ("Emediate") is the Nordic's largest ad serving company. By
combining the Emediate ad serving techology with the unique audience insight and targeting capabilities of the Cxense
Extraordinary Insight Engine (EIE), Cxense believes it can create a unique and future proof next generation adserving
technology.
The following table summarises the consideration paid for Emediate, the fair value of assets acquired and liabilities assumed:
Acquisition-related costs of USD 436 thousands have been charged to other operating expenses in the consolidated income
statement for the year ended 31 December 2013.
The fair value of the acquired identifiable intangible assets of USD 5 616 thousands. Identifiable intangible assets consists of
customer related assets USD 3,811 thousands and technology related assets USD 1,404 thousands are both depreciated over 5
years.
Goodwill arises as a residual and is assumed to mainly comprise a) the ability to capture synergies from being able to combine
the Emediate market position with Cxense technology, and b) the assembled workforce of Emediate.
Included in the profit/(loss) for the year is a net profit of USD 207 thousands from the business generated by Emediate (includes
amortisation of excess values). This contribution corresponds to the months of November and December 2013 (i.e. from
acquisiton effective date). Revenue for the year includes USD 1,335 thousands in respect of Emediate.
17
Note 4 Discontinuing operations
Profit from the discontinued operations
USD 1,000
Year Ended
December 2013
Year ended
31 December 2012
Revenue 1,982 2,515
Operating expenses 2,139 2,954
Net operating income/(loss) (156) (440)
Net finance (11) (2)
Income tax expense 0 0
Gain from sale of discontinued operation 143 0
Net income/(loss) for the period from discontinuing operations (24) (442)
(1) All of operating income in 2013 comes from the six months ending 30 June, since the subsidiary was sold effective
from 1 July 2013.
Earnings per share:
Basic and diluted (0.002) (0.045)
Cash flow from discontinuing operations
USD 1,000
Year Ended
December 2013
Year ended
31 December 2012
Net cash flow from operating activities (88) (469)
Net cash flow from investing activities 0 (9)
Net cash flow from financing activities 0 58
Net cash inflow/(outflow) (88) (420)
(1) All of operating income in 2013 comes from the six months ending 30 June, since the subsidiary was sold effective
from 1 July 2013. Cash effects acquisition in 2012 and disposal are not included cash flow summary above.
At the end of Q2 2013 Cxense negotiated an agreement to sell the PCAN subsidiary PPN AG to
Tamedia AG, the Swiss based media group. The transaction is effective as of July 1, 2013. PPN AG is
presented as discontinuing operations through out this report.
Tamedia AG has been the most significant publisher in the Publisher Controlled Advertising Network
alongside a number of other publishers in the Swiss market. Tamedia states that the rationale for the
transaction is to improve the control of PPN and to use PPN as part of their strategy to develop an
exclusive networked advertising offering for their online publications. Tamedias intention is to continue
to cooperate with the other existing publishers in PPN around click-based performance advertising.
One hundred percent of the shares in PPN AG were sold for USD 103 thousand. The final transaction
values have subject to a separate audit of the PPN AG accounts and now fully finalised. The sale
resulted in a gain of USD 143 thousand.
18
Note 5 Segment information
Q4 ended 31 December 2013
USD 1,000 Cxense SaaS PCAN Eliminations Consolidated
Revenue
External customers 2,580 632 0 3,212
Inter-segment 69 2 (71) 0
Revenues total 2,649 634 (71) 3,212
Cost of goods sold 501 450 (69) 882
Gross profit 2,148 184 (2) 2,330
Employee benefit expense 2,935 107 (2) 3,040
Depreciation expenses 210 1 0 211
Other operating expense 1,834 78 0 1,912
EBIT (2,831) (2) 0 (2,833)
Net finance income/(expense) (5) 0 0 (4)
Income tax income/(expense) 22 0 0 22
Net income/(loss) before continuing operation (2,814) (2) 0 (2,815)
Net income/(loss) for the period from discontinuing operations 0 0 0
Total net income/(loss) for the period (2,814) (2) 0 (2,815)
For management purpose the Group is organized into business units based on its product and services and has two reportable segments:
- Cxense Saas, which sells software-as-a-service applications based on the Extraordinary Insight Engine™ (EIE™) for real-time analysis of
content, user context, and behaviour. The EIE is fully integrated by a range of applications (web analytics, recommendations, search and
targeted advertising), which are used by Cxense customers to improve their online businesses by increasing advertising revenue, page
views, readership and conversion. The business generated by Emediate is included in the Cxense Saas segment below. Information
regarding revenue and Net income/(loss) generated by Emediate after the acquisition is disclosed in note 3.
- Publisher-Controlled Advertising Networks (PCANs) which sell online advertising on the sites of various publishers, and distribute and
share the advertising revenues generated in the network with publishers.
Segment performance is evaluated by the management based on operating profit or loss and is measured consistently with operating profit
in the financial statements. Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with
third parties.
Discontinued operations:
To be consistent with the presentation in the income statement and statement of financial position, the PCAN segment presented below is
exclusive to the discontinued operations. Furthermore, Cxense SaaS sale to the discontinued operation is presented as a sale to external
customers.
19
Year ended 31 December 2013
USD 1,000 Cxense SaaS PCAN Eliminations Consolidated
Revenue
External customers 5 367 2 245 7 612
Inter-segment 206 2 (208) 0
Revenues total 5 573 2 247 (208) 7 612
Cost of goods sold 1 030 1 905 (206) 2 728
Gross profit 4 543 342 (2) 4 883
Employee benefit expense 8 390 427 (2) 8 814
Depreciation expenses 223 4 0 227
Other operating expense 3 956 239 0 4 195
EBIT (8 026) (327) 0 (8 353)
Net finance income/(expense) 194 (6) 0 188
Income tax income/(expense) (3) 0 0 (3)
Net income/(loss) before continuing operation (7 835) (333) 0 (8 168)
Net income/(loss) for the period from discontinuing operations 0 (24) (24)
Total net income/(loss) for the period (7 835) (358) 0 (8 192)
Balance sheet information 31 December 2013
USD 1,000 Cxense SaaS PCAN
Eliminations
and
unallocated Consolidated
Segment assets:
Non-current assets 9 521 24 20 9 564
Current assets
- Trade receivables 2 459 541 3 000
- Other short term assets 1 849 102 (63) 1 887
- Cash and cash equivalents 8 815 28 8 843
Total segment assets 22 643 695 (43) 23 295
Segment liabilities:
Non-current liabilities 654 0 0 654
Current liabilities 4 846 1 007 (92) 5 762
Total segment liabilities 5 501 1 007 (92) 6 417
20
PCAN segment in 2012:
Q4 ended 31 December 2012
USD 1,000 Cxense SaaS PCAN Eliminations Consolidated
Revenue
External customers 492 357 0 849
Inter-segment 243 0 (27) 216
Revenues total 735 357 (27) 1,065
Cost of goods sold 118 446 (27) 537
Gross profit 618 (90) 0 528
Employee benefit expense 1,579 48 0 1,626
Depreciation expenses 6 0 0 7
Other operating expense 221 60 0 281
EBIT (1,188) (198) 0 (1,386)
Net finance income/(expense) 31 (53) 0 (22)
Income tax income/(expense) (21) 0 0 (21)
Net income/(loss) before continuing operation (1,178) (250) 0 (1,428)
Net income/(loss) for the period from discontinuing operations 0 (145) 0 (145)
Total net income/(loss) for the period (1,178) (395) 0 (1,573)
12 mnths to 31 December 2012
USD 1,000 Cxense SaaS PCAN Eliminations Consolidated
Revenue
External customers 2,038 708 0 2,746
Inter-segment 264 (49) 216
Revenues total 2,302 708 (49) 2,961
Cost of goods sold 319 791 (49) 1,061
Gross profit 1,983 (84) 0 1,900
Employee benefit expense 5,540 159 0 5,700
Depreciation expenses 20 1 0 21
Other operating expense 1,276 170 0 1,446
EBIT (4,852) (414) 0 (5,266)
Net finance income/(expense) 48 (54) 0 (7)
Income tax income/(expense) (33) 0 0 (33)
Net income/(loss) before continuing operation (4,838) (468) 0 (5,306)
Net income/(loss) for the period from discontinuing operations 0 (442) 0 (442)
Total net income/(loss) for the period (4,838) (910) 0 (5,748)
The business incorporated as the PCAN segment was established at the beginning of Q2 2012.
21
Balance sheet information 31 Dec 2012
USD 1,000 Cxense SaaS PCAN
Eliminations
and
unallocated Consolidated
Segment assets:
Non-current assets - - 110 110
Current assets
- Trade receivables 705 1,169 1,873
- Other short term assets 648 146 -30 764
- Cash and cash equivalents 10,036 174 10,210
Total segment assets 11,388 1,489 80 12,958
Segment liabilities:
Non-current liabilities - - - -
Current liabilities 1,697 1,583 -17 3,263
Total segment liabilities 1,697 1,583 -17 3,263
Geographic information
Revenues from external customers:
Year ended 31
December
2013
Year ended
31 December
2012
EMEA 7,568 3,933
Americas 984 502
Pacific 882 826
Total revenue from external customers 9,435 5,260
Information about major customersThe Company does not have single customers that generate 10% or more of the entity's total revenue.
The revenue information above is based on the location of the entity generating the revenue and includes sales generated by discontinued
operations. Revenues from discontinued operations is included and has solely been booked to the EMEA segment in the table above.
22
Note 7 Other operating expense
Specification of other operating expense
USD 1,000 Q4 2013 Q4 2012 2013 2012
Audit, legal and other consulting fees 1 033 107 1 876 431
Office rental and related expenses 178 39 532 343
Marketing and representation 200 90 729 263
Travel expenses 311 179 906 474
Other operating expense 189 (89) 251 56
Presented as part of discontinued operations 0 (46) (100) (121)
Total other operating expense 1 912 280 4 195 1 446
Note 8 Earnings per share
USD 1,000 Q4 2013 Q4 2012 2013 2012
Net income/(loss) for the year attributable to the
parent company (6 047) (4 525) (8 045) (5 564)
Weighted average number of shares outstanding
for basic earnings per share 13 305 10 118 13 305 9 763
Earnings per share
- Basic (0,45) (0,45) (0,60) (0,57)
- Diluted (1) (0,45) (0,45) (0,60) (0,57)
(1) The Company has 573 potential dilutive shares from share options outstanding. Since the Group has
a loss for the year, and since the the potential shares do not have a dilutive effect, they are not included
in the calculation.
Note 6 Employee benefit expense
Specification of employee expense
USD 1,000 Q4 2013 Q4 2012 2013 2012
Payroll expense 2,422 1,463 7,502 5,226
Share-based payments 81 53 228 53
Social security tax 354 147 860 464
Pensions 94 85 273 219
Other personnel expense 90 55 270 186
Presented as part of discontinued operations (0) (178) (318) (449)
Total employee benefit expense 3,040 1,626 8,814 5,700
23
Note 9 Trade receivables
USD 1,000 2013 2012
Trade receivables 3 300 1 903
Allowance for doubtful debts (300) (30)
Total trade receivables 3 000 1 873
Trade receivables are non-interest bearing and are generally on 30-day terms.
As at 31 December, the ageing analysis of trade receivables is as follows:
USD 1,000
Total
Neither past
due nor
impaired
<30
days 31-90 days >90 days
31 Dec 2013 3 300 1 981 931 246 143
31 Dec 2012 1 903 734 475 421 274
Movements in allowance for doubtful debt:
USD 1,000 2013 2012
Balance at the beginning of the year 30 7
Impairment losses recognized on receivables 300 0
Amounts written off during the year as uncollectible (30) 23
Amounts recovered during the year 0 0
Impairment losses reversed 0 0
Balance at the end of the year 300 30
Past due but not impaired
Note 10 Other short-term assets
USD 1,000 2013 2012
Accrued income 6 64
Prepayments 141 48
Receivable on authorities and government grants 293 509
Other short-term receivables 1 448 143
Other short term assets 1 887 764
24
Note 11 Share capital and shareholder information
Number of
shares
Share capital
NOK
Share capital
USD
Balance at 1 January 2012 9 018 9 018 000 1 505
Issued during the year 3 612 3 612 000 764
Balance at 31 December 2012 12 630 12 630 000 2 269
Issued during the year 3 982 3 982 000 444
Balance as at 31 December 2013 16 612 16 612 000 2 713
Nominal value per share at 31 December 2013 is Norwegian Krone (NOK) 1 000. Cxense AS has one class
of shares with equal rights for all shares.
As at 31.12.2013 Cxense had 573 oustanding share options, issued according to the Share Option Program
established in September 2012.
Note 12 Other short-term liabilities
USD 1,000 2013 2012
Public duties payables 331 202
Prepayments from customers 170 480
Accrued expenses 1 056 327
Salary-related provisions 805 376
Other current liabilities 1 438 150
Total other short-term liabilities 3 800 1 536
Note 13 Related party disclosure
USD 1,000
Purchase of services from Description of services 2013 2012
Advokatfirma Ræder (1) Legal services 299 118
Theoline AS (2) Consulting services 45 9
(1) The Chairman of the Board in Cxense AS is a partner in Advokatfirma Ræder.
(2) Stig Eide Sivertsen, Board member, is the owner of Theoline AS
USD 1,000
Balances with related parties Balance type 2013 2012
Advokatfirma Ræder Other Short Term Liabilties 239 102
Theoline AS Trade payables 0 9
Balances and transactions between the Company and its subsidiaries, which are related
parties to the Company, have been eliminated on consolidation and are not disclosed in
this note. The group does not have other transactions with related parties, except for
25
Note 14 Subsidiaries
Name of subsidiary
Place of
incorporation
Portion of
ownership and
voting power
Cxense Ltd. Cxense SaaS Australia 100 %
Cxense Co., Ltd. Cxense SaaS Japan 100 %
Cxense, Inc. Cxense SaaS USA 100 %
Cxense Inc. NV Holdings Cxense SaaS USA 100 %
Emediate Aps Cxense SaaS Copenhagen 100 %
Emseas Teknik AB (Emediate Sweden) Cxense SaaS Sweden 100 %
Emediate Norway NUF Cxense SaaS Norway 100 %
Premium Audience Network, s.l.u. PCAN Spain 56 %
Principal activity
according to segment
On 1st July 2013, PPN Schweiz AG a wholly owned subsidiary was sold to Tamedia AG. See Note 4 for details.
On 1st November 2013 100% of shares in Emediate Aps and its subsidiaries were purchased.
Note 15 Contingent liabilities
Note 16 Events after the reporting period
The Group has not been involved in any legal or financial disputes in Q4 2013 or Q4 2012, where an
adverse outcome is considered more likely than remote.
Between 31 December 2013 and the presentation of this report, no other event has occurred which
substantially impact on the result for Q4 2014 or the value of Cxense's assets and liabilities.
Since 31 December, 2013 and until the date of these financial statements, the Board has allocated 90
share options so that the total number of allocated shares were 663.