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Myriad Group AG Announces Full Year 2015 Results
Stephen Dunford, Myriad Group CEO explains: “2015 was a critical transition year for our business. With the repositioning of Versy to a more content driven social experience, Myriad is well placed to seize emerging growth opportunities in a rapidly developing social media market. We have transformed our Sub Data division to the newly launched Myriad Connect, bringing new solutions to new markets and providing a platform for future expansion. We are maximising the value from our Device Solutions division and continue to assess opportunities for its product set in this marketplace.”
In June the msngr product was successfully repositioned to reflect the product’s move towards a content-driven social experience and was launched as Versy. Our experience in the market crystallized our belief that user growth and sustained user engagement required more than just chat capabilities in the application. An ecosystem of interesting and engaging content, along with the ability to share and converse about that content, creates an attractive destination for both users and advertisers. The remainder of the year was focused on driving user engagement and continuing to develop an innovative content ecosystem.
In October we announced a two-product strategy to go live in March 2016, featuring a flagship Versy product targeted solely at smartphone users, and a renaming of the original Versy into Versy Lite, which will keep providing an enhanced experience for feature phone users. This was driven by the increasingly rapid transition to smartphone use in our key markets, and the recognition that an application focused on the full range of technical capabilities of smartphone technologies would take the product and the Versy ecosystem even further. By addressing both aspects of the market, Versy and Versy Lite can reach the full complement of mobile phone users and provide Versy Lite feature phone users a smooth migration to Versy on smartphones.
Our priority for this coming year will be to expand the rich Versy content ecosystem, centered on Latin America and the Hispanic community in the United States, with the focus on driving user growth and engagement. As the Versy user base grows and we continue to cultivate an engaged user base, we intend to pilot monetisation opportunities.
The Myriad Sub Data Division has now returned three consecutive years of revenue growth. It has been rebranded Myriad Connect and with planned investments in new additions to the product portfolio that will address mobile network operators, content partners and financial services organisations in developing world markets, we believe it is now poised for further growth in 2016.
The Device Solutions Division has suffered reduced revenues impacted by an accelerated transition from feature to low-cost smartphones reducing the demand for our mobile browser technology, and the increased adoption of the RDK-2 standard in the pay TV market, which does not require the use of our JBed Java Virtual Machine (JVM). In the coming year, we will focus on optimising income from these technologies.
2015 Financial Results in Brief
Consolidated group revenue in FY 2015 was USD 27.3m down 32% from FY 2014 (USD 40.2m). This decrease is due to the faster than anticipated decline in revenue from the Device Solutions Division and the full year impact of restructuring activity completed in 2014 which the curtailment of Legacy msngr active user fees from network operators, the planned sunsetting of Legacy messaging services with several North American mobile operators, and the expiration of Legacy support and service contracts with Nokia which all completed in 2014. However, the growth in the Myriad Connect Division revenue helped to offset this somewhat. EBITDA before non-recurring items and restructuring costs for FY 2015 was a USD 13.1m loss, mostly reflecting the USD 11.8m investment in the Versy product, including rebranding, research and development of the new Versy flagship product, increased marketing activity, and content acquisition.
EBITDA has also been impacted by increased share option costs of USD 4.8m (FY 2014: USD 1.3m) reflecting the non-cash expense of share options granted in 2015. Following an increase to conditional capital approved by shareholders at the 2015 Annual General Meeting, these option grants were made to key members of the engineering and management teams at an exercise price of CHF 5.00. The option holders will not benefit unless the share price exceeds this amount in the future, aligning their motivation with the benefit of shareholders as a whole.
The Group has also incurred non-cash impairment charges of USD 47.5m against intangible assets predominantly arising out of the acquisition of Synchronica plc in 2012. The impairment charges have arisen due to the technological evolution of Versy during FY 2015. The Versy product has been launched and will continue to evolve based on the realisation that a social messaging application based around content, rather than a pure chat application, could build a more valuable engaged user base. To deliver and respond to the accelerating transition to smartphones in our target markets, Versy needed to focus more on smartphone architecture that would be able to support the discovery of richer content streams in video and audio. The combination of an increased strategic focus on a smartphone-only application and further analysis of the expected route to monetisation, means Myriad no longer expects to significantly monetise through the technology assets and network operator relationships acquired with the Synchronica transaction. These non-cash charges, together with the increased investment in Versy, have contributed to the Group’s net loss of USD 67.9m.
Myriad closed FY 2015 with a cash balance of USD 37.8m.
On 8 April 2015, Myriad announced that it had raised gross proceeds of CHF 34.4m in a private placement of 8,600,000 shares from authorised capital. The shares were issued to international institutional investors. The funds from the private placement will continue to be used to accelerate user growth and enrich the content of the Versy ecosystem.
Given the market pressures experienced in the Device Solutions Division, we expect overall revenue to decline in 2016 versus 2015. However, this should partly be offset by anticipated continued growth in the Myriad Connect Division based on new services offerings and expansion in new markets. In addition, Versy will continue to require significant investment focused on user growth, driving user engagement, and the expansion of the Versy content ecosystem.
Changes to the Board of Directors
David Nuescheler has notified Myriad that he does not intend to seek re-election to the Board of Directors at the 2016 Annual General Meeting due to escalating time commitments with his senior role at Adobe Systems. Myriad thanks Mr Nuescheler for his crucial contribution to the launch and evolution of Versy on behalf of the Company. As part of the 2016 Annual General Meeting, the Board has nominated David Galbraith to fill the vacancy created by David Nuescheler’s departure.
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