Preliminary Resuts

RNS Number : 9696G

Crossrider plc

10 March 2015

 

Crossrider plc

("Crossrider," the "Company" or the "Group")

 

 

Final results for the year ended 31 December 2014

Strong organic growth and operational progress following IPO

Crossrider (AIM:CROS) the creator of digital advertising platforms specialising in monetising web and mobile media through the use of big data, today announces its audited results for the year ended 31 December 2014.

 

Financial highlights

§ Revenue up $56.3 million to $71.1 million, (2013: $14.8 million)

§ Pro-forma⁽¹⁾ revenue up $52.2 million to $73.8 million, (2013: $21.6 million)

§ Adjusted EBITDA⁽²⁾ up $12.2 million to $13.3 million, (2013: $1.1 million)

§ Adjusted cash flow from operations⁽²⁾ up $14.0 million to $14.6 million, (2013: $0.6 million)

§ Adjusted basic EPS⁽³⁾ 9.5 $ cents per share, (2013: 1.3 $ cents per share)

§ Strong balance sheet with no debt and $76 million of cash balances at the period end

(1) Pro-forma revenue shows the revenues of the Group as if the results of Ajillion and DefinitiMedia had been included since inception.

(2) EBITDA, Adjusted EBITDA and Adjusted cash flow from operations are non GAAP measures. Adjusted EBITDA and adjusted cash flow from operations are company specific measures which exclude other operating income and expenses which are considered to be one off and non-recurring in nature. (See reconciliation in the Chief Financial Officer's review below)

(3) Adjusted basic EPS excludes the after tax impact of amortisation of acquired intangibles, and other operating income and expenses which are considered to be one off and non-recurring in nature.

 

Operational highlights

§ Completion of IPO raising $75 million, valuing the Company at $250 million

§ Continued investment to maintain technological superiority of the Crossrider engine and platforms, which continue to perform strongly

§ Average unique monthly users up 50 million since IPO to 200 million

§ Average daily monetised ad spaces up 200 million since IPO to 1.8 billion

§ Average daily available ad spaces up 3 billion since IPO to 5.3 billion

§ Strong momentum into 2015

Commenting on the results, Koby Menachemi, Chief Executive Officer of Crossrider, said:

"Since listing we have maintained strong momentum through organic growth, in addition to developing our mobile offering. Our technology serves every part of the digital advertising process, making it more efficient and cost effective. Crossrider is at the heart of the digital advertising industry's growth and we expect our unique approach to create new opportunities for us throughout 2015 and beyond."

Outlook

The Board looks to 2015 with confidence due to the unique strengths that differentiate Crossrider from its competitors, enabling the Company to take advantage of the many opportunities it faces in the rapidly growing digital advertising space. The Company's technology platform is adaptable and scalable, ideally positioning it in the mobile advertising space, which is expected to be the fastest growing stream of digital advertising. Through these opportunities, the Board expects the Company to continue performing well through the next financial period.

- Ends -

For more information contact

Crossrider plc Koby Menachemi, Chief Executive Officer Mark Carlisle, Chief Financial Officer c/o Bell Pottinger	[phone]
Shore Capital Bidhi Bhoma Toby Gibbs Jamie Cameron	[phone]
Bell Pottinger David Rydell Olly Scott James Newman	[phone]

About Crossrider

Crossrider is a creator of digital advertising platforms specialising in monetising web and mobile media through the use of big data. The Company's web and mobile platforms power ad networks, agencies and direct publishers and enable the delivery of relevant digital advertising through the analysis of big data: making online marketing significantly more efficient and cost effective.

The Group operates web and mobile platforms which generate big data, enabling the development of a proprietary ad serving algorithm and engine that can extract value from this data to deliver relevant advertising to targeted users.

Crossrider's vision is to become the de facto standard platform for delivering relevant web and mobile adverts to billions of people, powering the next generation of digital advertising.

www.crossrider.com

Chairman's statement

On behalf of the Board it gives me great pleasure to present the Company's maiden set of results. The last year has been a momentous period in the Company's development, having successfully completed an IPO on the London Stock Exchange's AIM market in September, which raised $75 million, (£45.9 million) valuing the Company at $250 million, (£152.9 million). Funds raised at the time of the IPO enable us to confidently pursue our strategy to grow the business. At the same time the wider business has continued to perform strongly with the operational momentum which led us to upwardly revise our expectations for the Group's financial results on 18 December 2014. The Group grew significantly in 2014. Crossrider's total revenues for the year were $71.1 million which represents an increase of 380% on total revenues of $14.8 million in 2013. Of the growth in revenue for 2014 of $56.3 million, $47.8 million was due to organic growth and $8.5 million due the acquisition of Ajillion and DefinitiMedia in May 2014. Group Adjusted EBITDA⁽¹⁾ was $13.3 million compared to $1.1 million in 2013. The Group was cash generative in the year with a cash inflow from operations of $9.3 million and ended the year with cash balances of $76.0 million at 31 December 2014.

Whilst pursuing a growth strategy for the business, the Board is mindful of its duty to maintain strong financial discipline balanced with the need to deliver innovation in the Company's target markets; geographical diversity; and investment in research and development to consolidate its position in existing markets. The Company and its management are focussed on demonstrating the Group's proven abilities across the mobile advertising value chain and creating stable streams of revenue which will enable it to increase market share and improve the breadth and depth of its service offering. Crossrider's vision is to become the de facto platform for delivering relevant web and mobile adverts to billions of people, powering the next generation of digital advertising.

The Company has developed strong market presence in the United Kingdom, North America and Europe. Whilst our immediate focus is revenue growth in North America, we are also working to be attractively positioned in a number of important South America and Asian markets. At the heart of this activity is the Group's continued commitment to technological innovation as embodied in the Crossrider engine which drives the Company's ability to appropriately target relevant advertising online and on-the-go for its clients and their customers.

The Company's high standards of corporate governance have been demonstrated through its recent initial public offering. The executive management team of CEO and founder Koby Menachemi and CFO Mark Carlisle provide industry expertise and listed company experience in the UK and beyond. Crossrider benefits from 25 years of information technology and software experience in Non-Executive Director David Cotterell and AIM directorate experience in Non-Executive Director Martin Blair.

Given the many opportunities within the Company's grasp and the high quality of its technology platform, the Board looks to the future with confidence. Crossrider operates in a market where global spending is approximately $140 billion and is forecast to grow this year by 14%⁽²⁾. We believe the future of digital advertising is mobile as ever greater numbers of advanced smart phones and tablets populate our target markets, creating opportunities for businesses to efficiently deliver engaging targeted advertising campaigns through our systems thereby achieving greater return on investment.

Outlook

The Board looks to 2015 with confidence due to the unique strengths that differentiate Crossrider from its competitors, enabling the Company to take advantage of the many opportunities it faces in the rapidly growing digital advertising space. The Company's technology platform is adaptable and scalable, ideally positioning it in the mobile advertising space, which is expected to be the fastest growing stream of digital advertising. Through these opportunities, the Board expects the Company to continue performing well through the next financial period.

Don Elgie

Chairman

9 March 2015

⁽¹⁾ Group adjusted EBITDA is calculated as operating loss before depreciation, amoritsation, other operating income, exceptional and non-recurring costs and employee share-based payment charges. The Directors believe that this provides a better understanding of the underlying trading performance of the business. A reconciliation from Group operating profit to Group adjusted EBITDA is included in the Chief Financial Officers' review below.

⁽²⁾ Source: eMarketer

Chief Executive Officer's review

It has been a transformational year for Crossrider. The admission to AIM in September 2014 confirmed Crossrider's status as a leader in the fast-growing digital advertising space, enabling the Company to retain and attract leading talent in a highly competitive market and providing access to the capital required to continue the Company's development. It has been a year of significant progress and change through which Crossrider has demonstrated its prudent management and profitable business model in a rapidly developing and growing sector.

Crossrider continues to position itself at the forefront of the rapidly growing mobile advertising market which was estimated to be worth $33 billion in 2014 and is expected to be worth $109 billion by 2018⁽¹⁾. In terms of geographical expansion, North America is already a significant market for Crossrider with 28% of Group revenue being derived from this region where it remains committed to exploring expansion opportunities. In addition, the team continues to focus on the key Asian and South American markets which have significant potential.

The growth trajectory outlined at IPO has continued. During December 2014, Crossrider delivered ads to 200 million users which compared to delivering ads to 150 million users in September 2014 and 90 million in January 2014. Crossrider also monetised on average more than 1.8 billion ad spaces per day in December 2014, up from 1.6 billion in August 2014.

Strategy

Crossrider generates value from multiple points within the digital advertising value chain. Our vision is to become the de-facto standard platform for digital advertising. The Company's aim is to leverage data and analysis from multiple web and mobile platforms to enable better user targeting across a variety of devices, thereby improving the efficiency of the advertising value chain. To achieve this, Crossrider is focused on organic growth and internal R&D activity combined with evaluating multiple acquisition targets, within a framework of strong financial discipline.

Organic growth strategy

The businesses within the wider Crossrider group continue to grow and develop.  Since the IPO, significant work has continued to integrate these businesses and to make the most of the expertise and talent of all our people across each of our platforms. We set out below the specific strategies within the Web and Desktop and Mobile divisions; our strategy is to leverage data, technology and expertise across platforms and devices as technology converges.

In Web and Desktop we are focused on driving more and more data through the extensions platform and to leverage this data with existing and new technology. This is the core of Crossrider and our team is constantly innovating to create exciting new initiatives and technologies across the entire digital advertising value chain to keep Crossrider at the forefront of this dynamic market. Our app distribution business, which is growing rapidly as a result of its integration into the Crossrider team, will also use this expertise to create and distribute additional proprietary apps and to expand into new markets.

In Mobile we aim to further increase the liquidity of data across our platforms. We are also positioning Crossrider at the forefront of exciting new growth opportunities by integrating innovative new mobile video advertising technologies; and expanding its exposure to new market segments. In addition, the Company is working to grow its real time bidding activities in order to deliver greater efficiencies for advertisers in the mobile space. Our goal is to be the operating system of mobile advertising.

Acquisition strategy

Since the IPO, we have evaluated a significant number of potential acquisitions, several of which have resulted from in-bound opportunities. The Board's stated strategy at the time of the IPO has not altered and the Group's acquisition criteria remain focused on:

§ Relevant and unique or /disruptive technologies that can be leveraged via our existing data and platforms;

§ Demonstrable track record of sustainable growth and profitability; and

§ High quality teams.

Potential targets could include Ad Networks that enable us to leverage additional data across our existing platforms; companies with additional technology capabilities such as Big Data analysis, Video or Programmatic Media buying; and diversified app companies whose products can benefit from the Group's market leading distribution capabilities. Additionally, we will also use acquisitions to expand our existing product offerings into new geographic territories.

Technology

Crossrider collects non-personally identifiable ("NPI") data which our propriety algorithms use to appropriately target relevant ads to users via the Group's platforms. This increases Return On Investment (ROI) for advertisers and revenue for publishers. Crossrider's Business Intelligence (BI) Dashboard also enables clients to estimate user lifetimes, values and Average Revenue Per Unit; and therefore to predict future campaign success and ROI. The Group's technology strategy is to drive traffic and data to its web and mobile platforms and to be able to target users across a variety of devices.

 

Web and desktop

Crossrider's web and desktop division comprises its Web extensions development and Desktop apps distribution platforms. These platforms use Crossrider's data analysis technology and BI dashboards to allow publishers and advertisers to easily view and understand their traffic sources. Data analysis of KPIs, such as installation success rate; number of active users; and type of browser can be used to model potential revenue over a specific campaign period.

Web extensions expand the functionality of an internet browser in the same way that an app adds additional functionality to a mobile device. Crossrider's web extensions platform allows developers to use one code to build web extensions which function on all four main internet browsers. Crossrider enables developers to monetise their web apps through the provision of intelligent advertising. Advertising revenue is shared between the developer and Crossrider with the developer typically receiving the majority of the net revenues generated from their apps.

At the time of admission to AIM, c.30,000 web app developers were using Crossrider's propriety software platform generating 1.4 million daily new installations. This has risen to c.34,000 since IPO, generating 1.6 million daily new installations. Web extensions built using the Crossrider platform have now been downloaded c. 1.2 billion times. In November 2014 the Company also successfully launched its Web extensions for Mac OS.

The Desktop apps distribution platform drove the distribution of the Company's PC repair utility provider, Reimage, which performed ahead of expectations for the 2014 financial year. Reimage uses a repository of software "spare parts" by replacing faulty files with new versions. In 2014 Reimage software was installed on over 16 million devices, repairing nearly 1 million PCs, reflecting the high quality of this product. Over 70,000 subscriptions to Reimage were sold in December 2014, up from over 30,000 in August 2014. During 2014 Reimage also released its first app for the repair of Android mobile phones and developed its Mac OS repair utility, which is due for release in Q1 2015. Following the successful distribution of the Reimage app this platform will be expanded to distribute additional apps in the coming year.

The Web and Desktop division generated revenues of $62.6 million in 2014. This represented organic revenue growth of 323% over revenues of $14.8 million in 2013.

The strategy for the Web and Desktop division is to continue to drive growth in traffic and data on the platform through the use of better data analysis as well as the addition of innovative and complimentary new products to the Group's web platforms.

Mobile

Crossrider's mobile division operates its own Mobile media management platform Platform (Ajillion); and its own Mobile Ad Network (DefinitiMedia).

Ajillion is a white-label mobile management platform for ad networks, agencies and monetisation platforms, providing a full set of technology tools that enable customers to manage and analyse their day-to-day operations. It is currently used by 130 ad networks worldwide. The Group's ad exchange allows ad networks to buy and sell media from publishers and advertisers seamlessly. Ajillion's revenue model is based on usage fees charged as a revenue share.

Since IPO the Company has continued to invest in and scale its Ajillion technology platform. In line with its strategy to increase the volume of ad impressions available on its exchange it currently receives over 5 billion ad requests daily, compared with 1.6 billion at IPO and has an average of 20,000 campaigns running at any one time. Since its inception Ajillion's strategy has been to invest in technology that supports the programmatic buying and selling of media such as Real Time Bidding ("RTB"). RTB is the buying and selling of online ad impressions through real-time auctions that occur in the time it takes a webpage to load. In 2014 RTB became one of Ajillion's largest growing segments, both in terms of activity and revenue. In addition, the Company has continued to invest in additional industry leading ad formats and has now successfully added video capability.

DefinitiMedia is Crossrider's captive ad network providing advertisers and publishers with managed services through the Ajillion platform. It operates in over 20 countries and has over 85 direct advertising relationships to purchase media space directly from publishers, before engaging with advertisers on dynamic models. DefinitiMedia benefits from both its ability to offer targeted advertising using the Crossrider Engine and from the capabilities of Ajillion, which includes precision tracking, scale and global distribution. It operates a variable and fixed price model, based on cost per acquisition ("CPA"), and also a revenue sharing model. As the Group continues into the next phase of integration for its platforms, DefinitiMedia has already started to use its ad network expertise to manage advertising generated by the Web and Desktop division.

The mobile division was acquired by the Group in May 2014. It generated revenues of $8.5 million in 2014. On a pro-forma basis, as if the division had been owned by the Company since its inception, the division generated revenues of $11.2 million in 2014 (2013: $6.7 million).

The strategy for the mobile division is to continue to grow the volume of ads placed using the Company's Ad Exchange through further development and use of Crossrider's proprietary algorithm for better audience targeting; further development of publisher/sell side tools; and support for additional ad formats, such as video. This will enable Crossrider to continue to expand into new regions in addition to attracting and growing new and existing clients.

 

Core values in software distribution

Crossrider is committed to its core value of distributing quality software and is an active participant and sponsor of the Microsoft Clean Software Alliance. Through this activity the Company supports campaigns to prevent the download of malware and unwanted programs.

 

People

Crossrider's achievements have been significant during the last year and none of them would have been possible without the expertise and dedication of its people, whom management thanks for their hard work and innovative approach to serving customers.

 

Outlook

We operate in an extremely dynamic market, one which is continuing to change. We aim to position Crossrider at the forefront of this change.  We continue to believe that the biggest opportunity in the sector lies in mobile advertising and that this will ultimately be the future of the business.  Notwithstanding this, new and growing technologies such as Video, Real Time Bidding and Programmatic Media buying all represent areas for growth in both web and mobile advertising.

As a result, the Company continues to invest in the capability and reach of all of its platforms and is well positioned for the continued convergence between web and mobile technology.  We also continue to actively seek acquisition opportunities and examine those presented to us. This, combined with the market opportunities particularly in the mobile advertising space, means that Crossrider is well positioned for the future as we continue to deliver our organic growth strategy and pursue our M&A strategy with confidence.

Koby Menachemi

Chief Executive Officer

9 March 2015

⁽¹⁾Source: eMarketer

Chief Financial Officer's review

Following the IPO in September 2014, the Group has continued its strong organic growth and traded above expectations for the year ended 31 December 2014. Revenue for the year was $71.1 million, (2013: $14.8 million). Of the growth in revenue for 2014 of $56.3 million, $47.8 million was due to organic growth and $8.5 million due the acquisition of Ajillion and DefinitiMedia in May 2014. Adjusted EBITDA was $13.3 million, (2013: $1.1 million). Operating cash flow for the year was strong at $9.3 million, (2013: $2.9 million outflow); after adjusting for one-off and non-recurring items adjusted operating cash flow was $14.6 million, (2013: $0.6 million). The Group has a strong balance sheet with cash of $76.0 million at 31 December 2014 (31 December 2013 $2.2 million).

Revenue

			2014		2013
			$'000		$'000
Web and Desktop			62,647		14,846
Mobile			8,459		-
Revenue			71,106		14,846

Web and desktop revenue grew by $47.8 million to $62.6 million in 2014 driven entirely by the organic growth of the Web extensions and Desktop app distribution businesses in the year.

Revenue from Mobile activities in 2014 totalled $8.5 million and was generated by the Ajillion and DefinitiMedia businesses that were acquired in May 2014. On a pro-forma basis, (as if Ajillion and Definiti had been part of the Group during the whole of 2013 and 2014) revenue from Mobile grew by $4.5 million to $11.2 million in 2014.

The following table shows the revenues of the Group as if the results of Ajillion and DefinitiMedia had been included since inception:

			2014		2013
			$'000		$'000
Web and Desktop			62,647		14,846
Mobile			11,184		6,706
Pro-forma revenue			73,831		21,552

Gross profit

			2014		2013
			$'000		$'000
Revenue			71,106		14,846
Cost of sales			(13,178)		(3,359)
Gross profit			57,928		11,487

Cost of sales comprises commissions paid to publishers and payment processing fees.

Operating costs

Operating costs are analysed as follows:

		2014 Adjusted $'000	2014 Total $'000		2013 Adjusted $'000	2013 Total $'000
Direct sales and marketing costs		32,812	32,812		4,614	4,614
Indirect sales and marketing costs		1,728	3,082		660	660
Selling and marketing costs		34,540	35,894		5,274	5,274
Research and development costs		3,211	6,118		2,607	2,607
Management, general and administrative cost		6,833	14,790		2,475	6,015
Depreciation and amortisation		364	8,917		112	7,967
Total operating costs		44,948	65,719		10,468	21,863

Adjusted operating costs exclude share based payment charges, exceptional and non-recurring costs and amortisation of acquired intangible assets.

Adjusted EBITDA

Adjusted EBITDA increased by $12.2 million to $13.3 million in 2014. Adjusted EBITDA is a non-GAAP company specific measure which is considered to be a key performance indicator for the Group's financial performance. It excludes other operating income, share based payment charges and expenses which are considered to be one-off and non-recurring in nature. Adjusted EBITDA is calculated as follows:

			2014		2013
			$'000		$'000
Operating loss			(7,497)		(9,615)
Depreciation and amortisation			8,917		7,967
Other operating income			(294)		(761)
Employee share-based payment charge			6,787		-
Exceptional and non-recurring costs			5,431		3,540
Adjusted EBITDA			13,344		1,131

Other operating income relates to the net income, (gross income recharged less related expenses) earned from services terminated in 2014.

Exceptional and non-recurring costs in 2014 comprise IPO related costs of $0.8 million, (2013: $ nil), non-recurring staff costs of $0.4 million, (2013 $ nil) and payments in respect of the Crossrider, Ajillion and DefinitiMedia acquisitions expensed through the income statement of $4.3 million, (2013: $3.5 million).

Loss before tax

Loss before tax was $11.7 million (2013: $12.4 million). Finance costs in 2013 and 2014 primarily comprise interest on shareholder loans which were capitalised in September 2014.

Profit after tax

Loss after tax was $11.8 million (2013: $12.3 million). The Group continues to recognise a deferred tax asset of $0.5m (2013: $0.4m) in respect of tax losses accumulated in previous years.

Cash flow

			2014		2013
			$'000		$'000
Cash flows from operations			9,314		(2,927)
Exceptional and non-recurring costs			5,020		3,540
Other operating income			253		(31)
Adjusted cash flows from operations			14,587		582
% of Adjusted EBITDA			109%		51%

Cash flows from operations was strong at $9.3 million (2013: cash outflow from operations of $2.9 million). Adjusted cash flows from operations was $14.6 million and as a result of robust working capital management this represented 109% of adjusted EBITDA.

Tax paid in the year was $0.9 million which represented a reduction of $8.4 million over the amount paid in 2013 of $9.3 million which arose as a result of the original acquisition of the Crossrider business.

The net proceeds of the IPO in September 2014 were $71.4 million and proceeds from borrowings $6.5 million. These were offset by capital expenditure of $1.5 million and cash payments in respect of the Crossrider, Ajillion and Definiti Media acquisitions totalling $9.8 million. As a result, net cash inflow from investing and financing activities was $63.8 million (2013: $1.8 million outflow).

Financial position

At 31 December 2014 the Group had cash of $76 million and net assets of $111 million. In September 2014 the Group capitalised $56.1 million of shareholder loans prior to the IPO and the Group is debt free. At 31 December 2014 trade receivables were $12.6 million, (2013: $4.9 million) which represented 34 days outstanding, (2013: 52 days).

Key performance indicators

The Group's key performance indicators ("KPIs"), which are reviewed by management on a regular basis are set out below:

	2014	2013
Financial	$'000	$'000
Revenue	71,106	14,846
Adjusted EBITDA	13,344	1,131
Cash flows from operations	9,314	(2,927)
Adjusted cash flows from operations	14,587	582
Net assets/(liabilities)	110,812	(2,023)
Non-financial	Number	Number
Headcount	132	80
Average unique monthly users	200 million	90 million

Directors' responsibility statement

We confirm to the best of our knowledge:

1. The Group and Company financial statements, prepared in accordance with IFRSs as adopted by the European Union give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company; and

2. The business review, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties they face.

The Directors of Crossrider plc are listed in the Group's Annual Report and Accounts for the year ended 31 December 2014. A list of current directors is maintained on Crossrider's website, www.crossrider.com.

By order of the Board,

Koby (Yakov) Menachemi Chief Executive Officer 9 March 2015

Mark Carlisle Chief Financial Officer 9 March 2015

Consolidated statement of comprehensive income

For the year ended 31 December 2014

			2014		2013
	Note		$'000		$'000
Revenue	2		71,106		14,846
Cost of sales			(13,178)		(3,359)
Gross profit			57,928		11,487
Selling and marketing costs			(35,894)		(5,274)
Research and development costs			(6,118)		(2,607)
Management, general and administrative costs			(14,790)		(6,015)
Depreciation and amortisation			(8,917)		(7,967)
Total operating costs			(65,719)		(21,863)
Other operating income (*)			294		761
Operating loss	3		(7,497)		(9,615)
Adjusted EBITDA (*)	3		13,344		1,131
Other operating income			294		761
Employee share-based payment charge	6		(6,787)		-
Exceptional and non-recurring costs	3		(5,431)		(3,540)
Depreciation and amortisation			(8,917)		(7,967)
Operating loss	3		(7,497)		(9,615)
Finance income			49		51
Finance costs			(4,277)		(2,883)
Loss before taxation			(11,725)		(12,447)
Tax (charge)/credit	4		(43)		98
Loss for the year			(11,768)		(12,349)
Other comprehensive income:
Foreign exchange differences on translation of foreign operations			2		(16)
Total comprehensive income for the year - attributable to owners of the parent			(11,766)		(12,365)
Basic earnings per share (cents)	7		(10.5)		(12.3)
Diluted earnings per share (cents)	7		(10.5)		(12.3)

(*)Other operating income relates to the net income (gross income recharged less related expenses) earned from services terminated in 2014. Adjusted EBITDA is a non GAAP measure. Adjusted EBITDA is a company specific measure which excludes employee share-based payment charges and other operating income and expenses which are considered to be one off and non-recurring in nature.

Consolidated statement of financial position

As at 31 December 2014

			2014		2013
	Note		$'000		$'000
Non-current assets
Intangible assets			35,767		30,703
Property, plant and equipment			1,178		433
Available for sale investment			-		16
Non-current loans receivable			-		1,015
Deferred tax asset	4		567		444
			37,512		32,611
Current assets
Trade and other receivables			14,100		5,281
Cash and cash equivalents			76,041		2,152
			90,141		7,433
Total assets			127,653		40,044
Equity
Share capital	5		15		10
Additional paid in capital			136,399		11,088
Retained earnings			(25,602)		(13,121)
Equity attributable to equity holders of the parent			110,812		(2,023)
Non-current liabilities
Borrowings from related parties			-		37,950
Deferred tax liabilities	4		1,283		-
Deferred consideration for the acquisition of subsidiary	8		877		-
			2,160		37,950
Current liabilities
Trade and other payables			13,538		4,117
Deferred consideration for the acquisition of subsidiary	8		1,143		-
			14,681		4,117
Total equity and liabilities			127,653		40,044

The financial statements were approved by the Board and authorised for issue on 9 March 2015.

Yakov (Koby) Menachemi	Mark Carlisle
Chief Executive Officer	Chief Financial Officer

Consolidated statement of changes in equity

For the year ended 31 December 2014

	Share capital	Additional paid in capital	Retained earnings	Total
	$'000	$'000	$'000	$'000
At 1 January 2013	1	3,531	(756)	2,776
Loss for the year	-	-	(12,349)	(12,349)
Other comprehensive income:
Foreign exchange differences on translation of foreign operations	-	-	(16)	(16)
Total comprehensive income for the year	-	-	(12,365)	(12,365)
Transactions with owners:
Capital contribution	-	7,557	-	7,557
Elimination of former parent	(1)	-	-	(1)
Issue of equity share capital	10	-	-	10
Total transactions with owners	9	7,557	-	7,566
At 31 December 2013	10	11,088	(13,121)	(2,023)
At 1 January 2014	10	11,088	(13,121)	(2,023)
Loss for the year	-	-	(11,768)	(11,768)
Other comprehensive income:
Foreign exchange differences on translation of foreign operations	-	-	2	2
Total comprehensive income for the year	-	-	(11,766)	(11,766)
Transactions with owners:
Share based payments	-	-	6,787	6,787
Issue of equity share capital (*)	5	125,311	(7,502)	117,814
Total transactions with owners	5	125,311	(715)	124,601
At 31 December 2014	15	136,399	(25,602)	110,812

(*) Includes shareholder loans settled in exchange for the issue of equity share capital.

Consolidated statement of cash flows

For the year ended 31 December 2014

			2014		2013
	Note		$'000		$'000
Cash flow from operating activities
Loss for the year after taxation			(11,768)		(12,349)
Adjustments for:
Amortisation of intangible assets			8,678		7,871
Depreciation of property, plant and equipment			239		96
Current tax charge	4		431		185
Interest income			(49)		(40)
Interest expenses			2,825		2,843
Share based payment charge	6		6,787		-
Deferred tax movement	4		(388)		(283)
Unrealised foreign exchange differences			1,452		(16)
Foreign exchange on the translation of non-current assets in foreign currencies			-		(8)
Operating cash flow before movement in working capital			8,207		(1,701)
Increase in trade and other receivables			(8,035)		(3,959)
Increase in trade and other payables			8,978		2,733
Increase in other current liabilities			164		-
Cash flow from operations			9,314		(2,927)
Tax paid net of refunds			(936)		(9,310)
Cash generated from/(used in) operations			8,378		(12,237)
Cash flow from investing activities
Purchases of property, plant and equipment			(950)		(230)
Purchases of available for sale financial assets			-		(16)
Loans granted			-		(850)
Net cash paid on business combination	8		(9,799)		-
Capitalisation of development costs			(597)		(516)
Net cash used in investing activities			(11,346)		(1,612)
Cash flow from financing activities
Interest paid			-		(13)
Net proceeds on issue of shares			71,419		9
Proceeds from borrowings			6,615		13,684
Net cash generated from financing activities			78,034		13,680
Net increase/(decrease) in cash and cash equivalents			75,066		(169)
Revaluation of cash due to changes in foreign exchange rates			(1,177)		-
Cash and cash equivalents at beginning of year			2,152		2,321
Cash and cash equivalents at end of year			76,041		2,152

1.         General information

The financial information set out in this document is for Crossrider plc ("The Company") and its subsidiary undertakings (together the "Group") in respect of the financial years ended 31 December 2013 and 2014.

Crossrider is a creator of digital advertising platforms specialising in monetising web and mobile media through the use of big data. The Company's web and mobile platforms power ad networks, agencies and direct publishers and enable the delivery of relevant digital advertising through the analysis of big data: making online marketing significantly more efficient and cost effective.

Basis of preparation

The directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing its financial statements.

The financial information set out in this document does not constitute the Group's statutory financial statements for the year ended 31 December 2014 or 31 December 2013. The annual report and financial statements for the year ended 31 December 2014 were approved by the Board of Directors on 9 March 2015 along with this preliminary announcement. The financial statements for the year ended 31 December 2014 have been reported on by the Independent Auditor. The Independent Auditor's report on the financial statements for 2014 was unqualified and did not draw attention to any matters by way of emphasis.

The financial information set out in these preliminary results has been prepared using International Financial Reporting Standards (IFRSs) as adopted by the EU. The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 31 December 2013. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2014. New standards, amendments and interpretations to existing standards, which have been adopted by the Group, have not been listed since they have no material impact on the financial statements.

2          Segmental information

Segment revenues and results

The Group applies IFRS 8, ''Operating Segments Reporting''. Based on the management reporting system, the Group operates two reportable segments: Web and Desktop, and Mobile.  Division between the two segments is based upon the channel of delivery of product or service.

		Web and Desktop 2014		Mobile 2014		Total 2014
		$'000		$'000		$'000
Revenue		62,647		8,459		71,106
Cost of sales		(13,178)		-		(13,178)
Direct sales and marketing costs		(25,609)		(7,203)		(32,812)
Segment result		23,860		1,256		25,116
Central operating costs						(11,772)
Adjusted EBITDA(1)						13,344
Depreciation and amortisation						(8,917)
Other operating income						294
Employee share-based payment charge						(6,787)
Exceptional and non-recurring costs						(5,431)
Operating loss						(7,497)
Finance income						49
Finance costs						(4,277)
Loss before tax						(11,725)
Taxation						(43)
Profit after taxation						(11,768)

 

		Web and Desktop 2013		Mobile 2013		Total 2013
		$'000		$'000		$'000
Revenue		14,846		-		14,846
Cost of sales		(3,359)		-		(3,359)
Direct sales and marketing costs		(4,614)		-		(4,614)
Segment result		6,873		-		6,873
Central operating costs						(5,742)
Adjusted EBITDA(1)						1,131
Depreciation and amortisation						(7,967)
Other operating income						761
Employee share-based payment charge						-
Exceptional and non-recurring costs						(3,540)
Operating loss						(9,615)
Finance income						51
Finance costs						(2,883)
Profit before tax						(12,447)
Taxation						98
Profit after taxation						(12,349)

⁽¹⁾ Adjusted EBITDA is calculated as operating loss before depreciation, amoritsation, other operating income, exceptional and non-recurring costs and employee share-based payment charges as set out in note 3. The Directors believe that this provides a better understanding of the underlying trading performance of the business.

 

Information about major customers

In 2014 there was one customer contributing more than 10% of total revenue of the Group.  Revenue from this customer was $9,346k. In 2013 there were 5 customers who each contributed more than 10% of total revenue of the Group.  Revenue from these 5 customers totalled $9,197k.

Geographical analysis of revenue

Revenue by origin

			2014		2013
			$'000		$'000
Europe			7,910		11,142
British Virgin Islands			56,686		3,704
Asia			6,510		-
			71,106		14,846

Geographical analysis of non-current assets

			2014		2013
			$'000		$'000
Europe			25,742		29,885
British Virgin Islands			69		818
Asia			11,134		433
Total intangible assets and property, plant and equipment			36,945		31,136

 

3          Operating loss

Operating profit has been arrived at after charging:

			2014		2013
			$'000		$'000
Exceptional and non-recurring costs
Non-recurring staff costs			371		-
Initial Public Offering costs			758		-
Expensed contingent payments arising from business combinations (note 8)			4,302		3,540
			5,431		3,540
Recurring staff costs			7,983		4,454
Auditor's remuneration:
Audit			92		71
Other services			201		2
Other operating income, net			294		761
Amortisation of intangible assets			8,678		7,871
Depreciation			239		96
Employee share-based payment charge (note 6)			6,787		-
Rent payable under operating leases			459		608

Operating costs

Operating costs are further analysed as follows:

		2014 Adjusted $'000	2014 Total $'000		2013 Adjusted $'000	2013 Total $'000
Direct sales and marketing costs		32,812	32,812		4,614	4,614
Indirect sales and marketing costs		1,728	3,082		660	660
Selling and marketing costs		34,540	35,894		5,274	5,274
Research and development costs		3,211	6,118		2,607	2,607
Management, general and administrative cost		6,833	14,790		2,475	6,015
Depreciation and amortisation		364	8,917		112	7,967
Total operating costs		44,948	65,719		10,468	21,863

Adjusted operating costs exclude share based payment charges, exceptional and non-recurring costs and amortisation of acquired intangible assets.

Adjusted EBITDA

Adjusted EBITDA is calculated as follows:

			2014		2013
			$'000		$'000
Operating loss			(7,497)		(9,615)
Depreciation and amortisation			8,917		7,967
Other operating income			(294)		(761)
Employee share-based payment charge			6,787		-
Exceptional and non-recurring costs			5,431		3,540
Adjusted EBITDA			13,344		1,131

 

4          Taxation

During the year the parent company became domiciled, for tax purposes, in both the Isle of Man and the UK, having at the start of the year being solely domiciled in the British Virgin Islands. As a result a significant adjustment appears in the current period tax reconciliation in respect of the change of jurisdiction part way through the year. The final tax charge shown below arises partially from the difference in tax rates applied in the difference jurisdictions in which the subsidiaries' jurisdictions. The total tax charge/(credit) can be reconciled to the overall tax charge as follows:

			2014		2013
			$'000		$'000
Loss  before taxation			(11,725)		(12,447)
Tax at the applicable tax rate of 21% (2013: 23%)			(2,462)		(2,863)
Tax effect of:
Differences in overseas rates			1,178		2,130
Expenses not deductible for tax purposes			1,259		433
Deferred tax not recognised on losses carried forward			68		202
Tax charge/(credit) for the year			43		(98)
Analysed as:
Deferred taxation in respect of the current year			(388)		(283)
Current tax charge			431		185
Tax charge/(credit) for the year			43		(98)

The group has maximum corporation tax losses carried forward at each period end as set out below:

			2014		2013
			$'000		$'000
Corporate tax losses carried forward			(14,744)		(7,493)

Details of the deferred tax asset recognised (arising in respect of losses) is set out below:

			2014		2013
			$'000		$'000
At the beginning of the year			444		161
Recognised in the year due to temporary differences			191		283
Foreign exchange revaluation			(68)		-
At the end of the year			567		444

Details of the deferred tax liability recognised (arising from timing differences on intangible valuations on business combinations) is set out below:

			2014		2013
			$'000		$'000
At the beginning of the year			-		-
Arising from business combinations (note 23)			1,480		-
Recognised in the year due to temporary differences			(197)		-
At the end of the year			1,283		-

In addition, the Group has an unrecognised deferred tax asset in respect of the following:

			2014		2013
			$'000		$'000
Tax losses carried forward			(12,798)		(6,210)
			(12,798)		(6,210)

The tax losses relating to the above can be utilised up to 5 years following the tax period they arise.

5          Shareholder's equity

			2014		2013
			Number of Shares		Number of Shares
Authorised			n/a		n/a
Issued and paid up			148,463,039		1,000,000

The issued share capital of the Company on incorporation was 10,000 ordinary share of $1.00 par value.

On 18 December 2013 each of the ordinary shares of $1.00 par value was subdivided into 100 ordinary shares of $0.01 par value.

On 29 May 2014 each of the ordinary shares of $0.01 par value was subdivided into 10 ordinary shares of USD 0.001 par value and 9,000,000 new ordinary share of $0.001 were issued.

On 5 July 2014 a total of 389,993 new ordinary shares of $0.001 each were issued to the Share Schemes Trustee to satisfy awards granted under the Global Equity Plan.

On 22 September 2014 each of the ordinary shares of $0.001 par value was subdivided into 10 ordinary shares of $0.0001 par value.

On 23 September 2014 a total of 2 new ordinary shares of $0.0001 par value were issued in exchange for the termination of loans due to related parties with a fair value of $56,621,000.

On 30 September 2014 a total of 44,563,107 new ordinary shares of $0.0001 par value were issued for cash pursuant to the initial public offering.

The following describes the nature and purpose of each reserve within owner's equity:

Reserve	Description and purpose
Additional paid in capital	Share premium (i.e. amount subscribed or share capital in excess of nominal value)
Retained earnings	Cumulative net gains and losses recognised in the consolidated statement of comprehensive income

6          Employee share based payments

Options have been granted under the Group's share option scheme to subscribe for ordinary shares of the Company. At 31 December 2014 the following options were outstanding (2013: nil):

Group	Grant date	Number of shares under option	Subscription price per share
Group 1	1 May 2014	3,889,927	$0.001
Group 2	29 May 2014	2,795,690	$0.449
Group 3	29 May 2014	4,233,790	$0.538
Group 4	17 June 2014	36,440	$0.538
Group 5	5 July 2014	263,430	$0.538
Group 6	15 July 2014	75,260	$0.538
Group 7	30 September 2014	2,564,820	$1.662
Total		13,859,357

 

Vesting conditions

Group 1 - Vested following the Initial Public Offering.

Group 2 - 50% at the end of the first year following the grant date. 12.5% on a quarterly basis during 12 quarters period thereafter.

Groups 3-7 - 25% at the end of the first year following the grant date. 6.25% on a quarterly basis during 12 quarters period thereafter.

The total number of shares exercisable as of 31 December 2014 was 3,889,927 (2013: nil).

The weighted average fair value of options granted in the year using the Cox, Ross and Rubinstein's Binomial Model (the "Binomial Model") was $0.948. The inputs into the Binomial model are as follows:

			2014		2013
			$'000		$'000
Early exercise factor			150%-310%		-
Fair value of Group's stock			$1.157-$1.662		-
Expected Volatility			60%		-
Risk free interest rate			0.1-2.66%		-
Dividend yield			-		-
Forfeiture rate			4-14%		-

Expected volatility was determined based on the historical volatility of comparable companies.

Forfeiture rate is assumed to be 4-7% for senior management and 14% for other employees.

The risk-free interest rate was estimated based on average yields of US Government Treasury Bonds.

The Group recognised total share based payments relating to equity-settled share based payment transactions as follows:

			2014		2013
			$'000		$'000
Share-based payment charge			6,787		-

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

		2014					2013
		Weighted average exercise price	Number of options			Weighted average exercise price		Number of options
At the beginning of the year		-	-			-		-
Granted		$0.577	13,991,477			-		-
Lapsed		$0.538	(122,120)			-		-
Exercised		-	-			-		-
At the end of the year		$0.577	13,869,357			-		-

The options outstanding at 31 December 2014 had a weighted average remaining contractual life of 9.5 years.

7          Earnings per share

Basic loss/earnings per share is calculated by dividing the loss /earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

			2014		2013
			cents		cents
Basic and diluted			(10.5)		(12.3)
Adjusted basic			9.5		1.3
Adjusted diluted			9.1		1.3

Adjusted earnings per share is a non-GAAP measure and therefore the approach may differ between companies. Adjusted earnings have been calculated as follows:

			2014		2013
			$'000		$'000
Loss for the year			(11,768)		(12,349)
Post tax adjustments:
Other operating income			(221)		(571)
Employee share-based payment charge			6,656		-
Exceptional and non-recurring costs			5,414		3,540
Amortisation on acquired intangible assets			7,812		7,885
Related party loan interest expense			2,825		2,843
Adjusted profit for the year			10,718		1,348

			Number		Number
Denominator - basic:
Weighted average number of equity shares for the purpose of earnings per share			112,422,910		100,000,000
Denominator - diluted
Weighted average number of equity shares for the purpose of diluted earnings per share			117,889,377		100,000,000

The diluted denominator has not been used where this has anti-dilutive effect. Basic and diluted loss per share are therefore the same for reporting purposes.

The difference between weighted average number of Ordinary shares used for basic earnings per share and the diluted earnings per share is 5,466,467 being the effect of all potentially dilutive Ordinary shares derived from the number of share options granted to employees.

8          Business Combinations

(a)        Acquisition of Definiti Media Limited

On 1 May 2014 the Group acquired 100% of the share capital of Definiti Media Limited in order to expand its operations into the mobile segment of the digital advertising market. The transaction has been accounted for by the acquisition method of accounting.

The fair value of assets and liabilities acquired were as follows:

		Acquiree's carrying amount  before combination			Fair value
			$'000		$'000
Intellectual Property Rights			-		1,864
Trademarks			-		1,675
Customer relationships			-		2,050
Deferred tax liability			-		(1,480)
Property, plant and equipment			31		31
Trade and other receivables			1,343		1,340
Cash at bank and short term deposits			484		484
Trade payables			(1,323)		(1,323)
			535		4,641

Fair value of consideration
Cash					7,716
Deferred consideration					2,293
Total consideration					10,009
Goodwill					5,368

The carrying value of the assets and liabilities acquired, apart from the intangible assets, approximate their fair value.

Net cash outflow on acquisition of business

					2014
					$'000
Initial consideration					7,716
Deferred consideration paid in 2014					845
Cash and cash equivalents acquired					(484)
Net cash outflow on acquisition					8,077

The consideration for the acquisition of Definiti Media Ltd was cash of $10,205,000 out of which $2,489,000 represents deferred consideration. Of the deferred consideration, an amount equal to $845,000 has been repaid during the year ending 31 December 2014, An amount equal to $746,000 will be repaid during the year ending 31 December 2015 and the remaining will be repaid during the year ending 31 December 2016. The present value of the deferred consideration, using a discount factor of 7.91%, is equal to $2,293,000, leading to a total discounted consideration of $10,009,000. 

In addition, an amount totalling $2,140,000, included as part of the acquisition arrangements is being recognised directly in the income statement over the relevant period.  As at 31 December 2014 the amount that remains unpaid is $1,646,000 and the amount still to be charged to the income statement which remains contingent on future events is $1,427,667. Total undiscounted consideration including all amounts capitalised on acquisition and amounts that have been charged to the income statement or will be in future periods is therefore $12,345,000.

b)         Acquisition of AjillionMax

On 1 May 2014, the Group acquired certain assets of the company, AjillionMAX Limited, together with its employees in order to expand its operations into the mobile segment of the digital advertising market. The transaction has been accounted for by the purchase method of accounting. The fair value of assets and liabilities acquired were as follows:

		Acquiree's carrying amount  before combination			Fair value
			$'000		$'000
Intellectual Property Rights			-		1,800
Trademarks			-		360
Customer relationships			-		28
			-		2,188

Fair value of consideration
Cash					1,618
Deferred consideration					570
Total consideration					2,188
Goodwill					-

The carrying value of the assets and liabilities acquired, apart from the intangible assets, approximate their fair value.

 

Net cash outflow on acquisition of business

					2014
					$'000
Initial consideration					1,618
Deferred consideration paid in 2014					104
Net cash outflow on acquisition					1,722

The consideration for the acquisition of certain assets of AjilionMAX Limited was cash of $2,272,000 out of which $654,000 represents deferred consideration. Of the deferred consideration, an amount equal to $104,000 was repaid during the year ending 31 December 2014, an amount equal to $156,000 will be repaid during the year ending 31 December 2015, an amount equal to $189,000 will be repaid during the year ending 31 December 2016 and the remaining will be repaid during the year ending 31 December 2017. The present value of the deferred consideration, using a discount factor of 7.91%, is equal to $571,000, leading to a total discounted consideration of $2,188,000. 

In addition, an amount totalling $653,000, included as part of the acquisition arrangements is being paid and recognised directly in the income statement over the relevant period. As at 31 December 2014 the amount that remains unpaid is $549,000 and the amount still to be charged to the income statement which remains contingent on future events is $435,333.  Total undiscounted consideration capitalised on acquisition and amounts that have been charged to the income statement or will be in future periods is therefore $2,925,000.

If the acquisitions of Definiti Media Limited and certain assets of AjilionMAX Limted had been completed on the first day of the financial year, group revenues for the year would have been $73.8 million and group loss after taxation would have been $11.7 million.

The following table shows the revenues of the Group as if the results of Ajillion and DefinitiMedia had been included since inception:

			2014		2013
			$'000		$'000
Web and Desktop			62,647		14,846
Mobile			11,184		6,706
Group revenue			73,831		21,552

(c)        Disposal of GetDeal Gmbh

On 11 March 2014, the Group disposed of its 49% interest in GetDeal Gmbh, a company registered in Germany for Euro 12,500. The sale was the result of a reorganisation of the Group and not a material disposal as defined in IFRS 5.

9          Related party transactions

The Group is controlled by Unikmind Holdings Limited incorporated in British Virgin Islands, which owns 67% of the Company's shares. The controlling party is the Solidinsight Trust, established under the laws of the Isle of Man. Mr. Teddy Sagi is the sole ultimate beneficiary of the Solidinsight Trust.

(a)        Related party transactions

The following transactions were carried out with related parties:

	2014		2013
	$'000		$'000
Revenue from common controlled company	3,611		56
Other operating income earned on recharged costs	294		761
Marketing services provided from common controlled company	-		(712)
Technical support services to end customers provided by common controlled company	(299)		(180)
Payment processing services provided by common controlled company	(420)		-
	3,186		(75)

In 2013, the Group also received revenues of $1,395,000 from third parties and paid revenue share of $1,092,000 under an agency arrangement with a common controlled company (2014: $nil).

(b)        Receivables owed by related parties

		2014		2013
Name	Nature of transaction	$'000		$'000
Parent company	Unpaid share capital	10		10
Companies related by virtue of common control	Trade	1,122		264
		1,132		274

(c)        Loans to related company

		2014		2013
		$'000		$'000
Loan to related company		-		867
		-		867

 (d)       Payables to related parties

		2014		2013
Name	Nature of transaction	$'000		$'000
Amount owed to Director		378		-
Companies related by virtue of common control	Other	33		71
		411		71

(e)        Borrowings from related parties

		2014		2013
	Contractual terms	$'000		$'000
Loan from company related by  virtue of common control	Interest rate 6% per annum, maturity date 19/3/2015	-		842
Loan from company related by virtue of common control	Interest rate 2% per annum, maturity date 31.12.2014	-		34,147
Loan from company related by virtue of common control	Interest rate: 6% (up to 10/11/2011); 0% onwards, maturity date 31/12/2015	-		1,154
Loan from company related by virtue of common control	Interest rate: 0%, maturity: during 2015	-		1,807
		-		37,950

The above borrowings were considered to carry a market rate of interest of 7.91%. On 30 September 2014 loans with a fair value of USD 56,621,000 due to related parties were settled in exchange for 2 new ordinary shares issued by the Company.

 

END

 

 

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