3rd Quarter Results

RNS Number : 5499W

Synchronica PLC

22 November 2010

 



Synchronica plc

('Synchronica', 'the Company' or 'the Group')

Results for the nine months ended 30 September 2010

Highlights:

·   Revenues in the first nine months increased 2.2 times to US$ 5.75m (Q1-Q3 2009: US$2.64m).

·   Closed 11 new deals including a pan-African operator group with 15 subsidiaries in the first nine months of this year.

·   Total number of operator customers increased to 60 with a total addressable market reaching almost one billion subscribers.

·   33 live installations of Synchronica messaging services with quickly growing user base exceeding three million subscribers at the end of Q3.

·   Recurring revenue, from monthly user licenses as well as support and maintenance, are showing accelerating growth rates of 45% between Q1'10 and Q2'10 and 81% between Q2'10 and Q3'10.

·   Acquisition of competitor iseemedia and Colibria's IMPS business improved competitive position with enhanced product portfolio and expanded customer base.

Synchronica plc, the AIM-listed international provider of next-generation mobile messaging services announces financial results for the nine months ended 30 September 2010.

Synchronica's portfolio includes the award-winning Mobile Gateway, which provides push email, synchronization, instant messaging, backup and restore, and mobile connectivity to social networks. With an addressable market of nearly one billion end users through its 60 carrier contracts, Synchronica can now be perceived as the de facto leader in mobile messaging solutions for emerging markets.

Synchronica has made significant progress during the first nine months of 2010, with a robust operational performance that has allowed the Company to generate substantially improved results. This increased traction is a result of the Company's consistent strategy to focus on opportunities in high-growth emerging markets, and to license Mobile Gateway to both mobile operators as well as device manufacturers targeting these regions.

Synchronica's principal challenges and goals in 2010 are to increase its customer base, integrate new mobile messaging services to its product portfolio and progress the transition of its revenue model towards recurring revenue streams. In the nine months to 30 September 2010, Synchronica has successfully delivered on these key targets.

Financial Highlights:

·      Revenues in the first nine months increased 2.2 times to US $ 5.75m (Q1-Q3 '09: US $ 2.64m), 97% of previous full year revenues (FY '09: US $ 5.93m);

·      Growing recurring revenue from licensing and support US $ 518k for Q3´10, increased by 186% from US $ 181k in Q3 '09;

·     Closed significant deals including a group-wide agreement with a pan-African operator covering 15 subsidiaries in Q3 '10;

·      Significantly increased the high-end deal size, with four $1m+ deals signed to date in 2010;

·      Costs, net of non-cash items, increased to US $ 8.76m for nine months ´10 (nine months ´09: US $ 7.22m) with acquisition of Instant Messaging (IMPS) business;

·      Gross profits increased significantly in both absolute and percentage terms to US $ 5.44m, 94.69% (Q3 '09: US $ 2.27m, 85.55%);

·      Loss at EBITDA decreased by 25%, US $ 3.23m in the nine months of ´10, (nine months '09: US $ 4.31m);

·      Significantly stronger balance sheet at 30 September 2010, total assets US $ 34.30m (Sept '09: US $ 14.97m), net assets US $ 25.92m at 30 September 2010 (Sept '09: US $ 9.49m);

·      Liquidity ratio increased by 93.7% to 2.27 times (Q3 '09: 1.43 times).

Operational Highlights:

·      Expanded the total customer base to 60 operator contracts, up from 21 at end of 2009;

·      Live installations with 33 operators with many showing quickly increasing adoption rates;

·      User base of Synchronica messaging services exceeded three million subscribers at the end of Q3 '10;

·      Acquisition of iseemedia Inc., provided additional contracts with Indian operators as well as complementary document streaming technology, which will be integrated into Mobile Gateway in 2011;

·      Expanded Mobile Gateway product portfolio with key enhancements, including support for instant messaging and mobile social networking;

·      Initial traction with MessagePhone launch provided a springboard for subsequent deals with three additional device manufacturers, now scheduled to introduce devices bundled with Mobile Gateway;

·      Began to up-sell Mobile Gateway to Colibria IM customers gained with the acquisition of Colibria's IMPS business.

Increasing Customer and User Base and Value Proposition

Synchronica has increased its customer base through a mix of organic growth and acquisitions. In the first nine months, the Company secured 11 new deals, including group-wide agreements with two large operator groups and their 40 subsidiaries across Africa and Latin America, bringing the number of operator customers to 60 with a total addressable market of almost a billion subscribers. In order to accelerate customer deployment timescales and to ensure a successful launch, Synchronica has created a specialised customer delivery team that works closely with operators in the run up to deployment and launch. This is now paying dividends, with 33 carriers launched and sometimes dramatically increasing adoption rates. By the end of September, three million subscribers had signed up for Synchronica messaging services.

Synchronica's products are designed to act as a churn inhibitor, especially important for operators with a high ratio of prepaid customers, which is the norm for most operators in emerging markets. Mobile Gateway is a 'sticky' service, which means that subscribers become dependent on the service to stay in touch with their personal and business contacts. If they were to defect to a rival carrier, they would lose their IM and/or email identity and their access to push email. Most operators see the strategic value in Synchronica products and often support the launch with high-budget marketing campaigns, which typically include both electronic and print media and sometimes TV. Telcel Mexico, for example, launched its Telcel Messenger service at the beginning of April, and recorded several thousand new user subscriptions to the service each day.

Improved Product Portfolio

During the period, Synchronica has substantially enhanced its product portfolio and positioned itself well for the future by adding Instant Messaging and Social Networking functionality. The acquisition of Colibria's IMPS business has provided Synchronica with a solid instant messaging solution that is currently being rolled out across two major carrier groups in the high-growth regions of Latin America. Mobile IM is positioned as a churn inhibitor in emerging markets and Synchronica's ability to deliver on the contracts acquired with Colibria's IMPS puts the Company in a strong position for the future. Synchronica is also gaining traction in mobile social networking, and is among the first to support Facebook Chat on mobile phones. Additionally, Synchronica's new transcoding engine, which is patented and is being integrated into Mobile Gateway, will further enhance the product offering from a commercial and competitive perspective.

Recent Contract Wins and Q4 Outlook

2009 was a record-breaking year for Synchronica, with 13 new customers announced. In the first nine months of 2010, the Company signed contracts with an additional 11 customers, including two multi-national operator groups covering 30 subsidiaries combined.

In the third quarter, traditionally one of the weaker quarters, Synchronica signed a group-wide framework agreement with a large multi-national African operator, scheduled to launch Mobile Gateway in 15 countries. Synchronica expects to accelerate sales in Q4, which has traditionally been its strongest quarter. The Company is in the process of negotiating and completing several large license deals with high profile customers which, if closed before the end of the year, will result in a significantly improved financial performance compared to the previous year. Funding for 2011 is dependent on the successful outcome of at least some of these negotiations. Management is confident the outcome of these discussions will be positive.

Recurring Revenue Streams and Expanded Reseller Network

Synchronica has progressed in the transition to a business model that combines perpetual-licence and revenue-share agreements, resulting in a stronger cash flow. While mobile email deals are focussed on perpetual license models, most Instant Messaging deployments provide monthly revenues to the Company. One example is the group-wide framework agreement with a large multi-national operator group in Latin America, which now provides Synchronica with a growing, monthly recurring revenue stream. The operator expects to launch the Synchronica IM service across all subsidiaries before 31 March 2011; four subsidiaries have so far been successfully launched.

Recurring revenue, from both licensing of software and support and maintenance are showing accelerating growth rates of 45% between Q1'10 and Q2'10 and 81% between Q2'10 and Q3'10. It is expected that this trend will continue. Synchronica is also seeing a major uplift in the size of deals it is winning in high-growth emerging markets. The Company has already secured four $1m+ deals this year and expects this trend to continue.

To further accelerate sales, Synchronica has successfully established a global reseller network, a strategy that now is bearing fruit. The Company has reseller agreements with Brightstar, Nokia Siemens Networks, an Asian-based network equipment provider and a European mobile data solutions provider with a strong customer base in the CIS. With the help of its distribution partners, Synchronica has closed six significant deals in 2010 so far.

Device Manufacturers Open New Sales Channel

During 2009, device manufacturers became a significant sales channel for Synchronica. In the first three quarters of 2010, the Company recorded revenues of US $ 2.6m from manufacturer deals. The experience, which Synchronica gained from the collaboration of the MessagePhone, the first device to be bundled with Mobile Gateway, has been instrumental to the success of the new sales channel. MessagePhone has been launched by a 20 million-subscriber subsidiary of a major carrier group in Latin America and a second operator in Africa.

Synchronica has successfully closed three additional deals in the first three quarters with device manufacturers which sell their products in high-growth emerging markets. One of these manufacturers anticipates launching their new family of products in the fourth quarter of 2010, concentrating on the rapidly growing mobile market of India. The manufacturer, which already supplies devices to several of the top Indian operators, will sell the devices via operator-branded shops and ecommerce. A second manufacturer will launch a new Mobile Gateway supported device family in the first quarter of 2011 targeting Russia and India.

Carsten Brinkschulte, CEO of Synchronica, said, "We are pleased with the progress that Synchronica has made over the first nine months, growing both organically and through acquisition. Through this growth, we have expanded our customer base to almost one billion, enabling us to target a much larger addressable market with our products.  The acquisition of Colibria's IMPS has allowed us to offer customers an additional service; an incentive aimed at reducing the high level of churn seen in the target markets. With these additional services in place and a dramatically expanded addressable market, Synchronica can now be regarded to be the market leader for next-generation mobile messaging services in emerging economies. Next, we will focus on accelerating the take-up rate in our addressable market and, as a result, building recurring revenues leading to improved and sustainable financial results."

Enquiries:

Synchronica plc www.synchronica.com	Carsten Brinkschulte, CEO Angus Dent, CFO, Nicole Meissner, COO,	[phone] [phone] [phone]
finnCap	Clive Carver, Nomad	[phone]
	Charlotte Stranner, Corporate Finance	[phone]
	Stephen Norcross, Corporate Broker	[phone]
Walbrook PR Ltd	Paul McManus (media relations)	[phone] [e-mail]
	Paul Cornelius (investor relations)	[e-mail]

 

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