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1
QUARTERLY REPORT / Q1 2013
Quarterly ReportQ1 2013
2
QUARTERLY REPORT / Q1 2013
3. Q1 Quick Summary
5. CEO update
6. Schilling´s Monthly
7. Business focus
9. Market Outlook
11. Result of Operation
12. Cash flow
13. Financial statements
16. Notes
18. Financial Calendar
Content
3
QUARTERLY REPORT / Q1 2013
Positive EBITDA in a continuous challenging market
56.3% Revenue increased 56.3%
over the same period last
year
New exciting opportunities for Secure Mobility in EMEA
Focus with EasySmart in North America resulted in an all‐time high activation rate per quarter to date
Decrease in operating expenses
achieved as a result from the cost
saving program initiated in 2012
4
QUARTERLY REPORT / Q1 2013
JANUARY ‐ MARCH
> Revenue was NOK 18.2 (11.7) million, representing an increase of 56.3% over the same period last year.
> EBITDA ended at NOK 1.7 (‐6.3) million, representing a reduced loss of NOK 8.0 million over
the same period last year. > Continuing operating earnings per share amounted to NOK 0.00 (‐0.14). > Total net cash flow amounted to NOK ‐5.5 (‐10.2) million. > The cash balance at the end of the period was NOK 11.4 (24.6) million.
.
Birdstep Technology ASAInterim report
5
QUARTERLY REPORT / Q1 2013
I am delighted to begin my second quarterly report with the news that Q1 sales exceeded expectations, closing with a 56.3% increase Yr/Yr. The majority of our revenue growth has been driven by renewed de‐mand from North American opera‐
tors for our Smart Mobile Data offering. Our solu‐tions alleviate data contention over their cellular networks and help them maintain visibility and control of an exceptional end user experience. Also our second line of business, Secure Mobility, ex‐ceeded its sales targets this quarter. We are gain‐ing continuous traction across the EMEA region with the expansion of the reseller network. Addi‐tionally Birdstep launched its SafeMove Portable Security in February and has during the quarter begun to address new customer demands in Saudi Arabia. Greatly contributing to our success in Q1 has been an overhaul of our sales and product development processes that has put greater emphasis upon effi‐ciency, accountability and direct customer en‐gagement. We have also gained clear visibility across our business and that of our customers’ and are now better positioned to prioritize, align and focus resources on opportunities we believe we can win. Also contributing to our Q1 results has been our ability to continuously reduce OPEX as a result of the cost‐saving program initiated a year ago. The combined result of Q1 sales and Q1 OPEX reductions is a Q1 positive EBITDA of NOK 1.7 mil‐lion compared to NOK –6.3 million in Q1 2012. Our current planning and management of the busi‐ness is structured upon this trajectory and we are focused on maximizing execution in Q2 to the ben‐efit of our customers, employees and shareholders. Now we can look at how Birdstep is addressing the challenges operators have with Big Data as it re‐lates to the increasing amounts of information in their networks. Birdstep provides Smart Data solu‐tions for making better sense of the customer ex‐
perience. We often hear from our customers that their network based analytic tools do not provide insights into the customer experience from the perspective of the subscribers end‐device. For ex‐ample a user is reporting no connectivity yet the operator’s tools indicate good coverage. Birdstep provides a solution to this dilemma with our Smart Mobile Data products which enable operators to collect and analyze real‐time information directly from the smartphone, tablet and laptop which augments their Big Data solutions to provide a more accurate end‐to‐end view of the customer experience. On May 21‐23 at the CTIA event in Las Vegas, USA, Birdstep is launching our EasyAnalytics and Smart ANDSF solutions. These new products will for the first time provide operators with subscriber device policy and analytics to proactively improve their customer’s Quality of Experience. Today we are trialing EasyAnalytics and SmartANDSF with a lead‐ing North American operator. In conclusion, we are very happy with our strong Q1 results. We will continue the focus and disci‐plines in our processes which worked so well for us in Q1. In addition we are launching a new range of products which I am very excited about. I look forward to reporting back to you again next quarter.
Lonnie Schilling, CEO
The CEO update
6
QUARTERLY REPORT / Q1 2013
JANUARY The Customers
I see myself as an engaged and active participant in
meetings and in communication. To actively be a
part of the sales process allows me to steer the
company’s efforts in the right direction for cus‐
tomers. I spent a total of 2 weeks in North America
and another week in Europe meeting with our key
customers and potential customers. It became
clear to me what they expected and required from
Birdstep; to step up and prove that we can be a
partner and not simply a vendor. We know that to
achieve this we must ensure we have their trust by
correctly setting expectations and never undera‐
chieve! FEBRUARY The Market
The team and I had a busy but rewarding week at
the annual Mobile World Congress, the premier
mobile industry event. During all four days the
Birdstep stand hosted visitors from new and exist‐
ing customers, partners, analysts and journalists
from around the world. Needless to say, we met
some very interesting people and had some excit‐
ing and productive conversations with many to
follow up back in the office.
MARCH Sales!
We held the company´s first Global Sales Confer‐
ence, combining the strengths of our Secure Mobil‐
ity and Smart Mobile Data teams to prioritize and
align all our resources on the most strategic busi‐
ness in 2013. We left the event a stronger, more
determined team with a clear approach; grow the
pipeline with new opportunities, qualify those op‐
portunities, prioritize, commit, execute and close
the business! With this new level of discipline in
the sales process our visible pipeline is growing
daily and we’ve qualified and are executing on the
largest volume of opportunities in the Birdstep’s
history!
Schilling´s Monthly
7
QUARTERLY REPORT / Q1 2013
Continuous focus with EasySmart in North America
Also this quarter the commercial rollout of
SPRINT’s data offload project with Birdstep’s
EasySmart solution resulted in Birdstep’s highest
activation rate per quarter to date. Phase two of
this leading North American operator’s offload
project, which ensures continued volume deploy‐
ments, is now approved and commercially de‐
ployed. This is the first ever EasySmart 1.4 com‐
mercial deployment.
Besides from ongoing trials with Tier 1 operators
Birdstep has also started up several EasySmart
trials in in the US and Asia with Tier 2 & 3 opera‐
tors. The company is also gaining interest and new
business opportunities for its EasyHelp and
EasyAnalytics in the US and Asia.
Secure Mobility is gaining increased interest for its new products in the EMEA region
Besides from new projects in Finland and UK Se‐
cure Mobility also won a few strategically im‐
portant trials in the EMEA region; > First order for SafeMove Connection Tracking
module was received from Thames Water, an
award winning UK utilities company.
> First SafeMove Mobile VPN and SafeMove
Mobile Router trials were installed together
with Goodmill and Four Systems in Saudi Ara‐
bia.
> The company won three SafeMove license
upgrade deals and one new SafeMove license
deal from four different Finnish ministries.
> SafeMove Portable Security was launched.
First trial request from Saudi Arabia was re‐
ceived.
> SafeMove Mobile Access business continued
to gain interest and grow in Finnish govern‐
ment. One new trial was delivered to a Finnish
governmental company in Q1.
Business Focus
8
QUARTERLY REPORT / Q1 2013
Strategic Partnerships and Reseller Agreements
Birdstep has during the quarter signed a partner‐
ship with one of the world´s leading provider of Wi‐
Fi software and services. This partnership provides
Birdstep with a Crowd‐sourcing Solution, as well as
enabling access to paid hot‐spots. It provides the
partner with a vehicle for facilitating data offload
from operators 3G/4G Networks to Wi‐Fi.
Birdstep also continues to grow its presence and
influence within the Cisco (NASDAQ: CSCO) account
to help grow sales and close new projects within
the targeted areas.
The company is working towards a partnership
with a UK based hardware manufacturer for pro‐
fessional mobile data workers and solution provid‐
ers. The idea is that the company will start building
a SafeMove environment and first public safety
customer trials are expected in Q2 or Q3.
Milestones & Significant Events
> Birdstep reported positive EBITDA and a sales
growth of 56.3% Yr/Yr. This was the first time
the company, in its current structure, achieved
such strong growth numbers.
> Continuous focus with EasySmart in North
America resulted in an all‐time high activation
rate per quarter to date.
> Birdstep received requests and started POCs
(Proof of Concepts) for its Secure Mobility solu‐
tions in Saudi Arabia.
> The company´s first Global Sales Conference
was held.
> Birdstep attended Mobile World Congress in
Barcelona.
9
QUARTERLY REPORT / Q1 2013
Birdstep focuses on four areas of critical im‐
portance for the cellular market in the face of rap‐
idly expanding mobile data services. These are;
intelligent data onload and offload between cellu‐
lar and Wi‐Fi, intelligent marketing capabilities,
secure mobile communications and smart data
analytics. Together they enable service providers to
maximize data related revenue opportunities over
the coming years while keeping costs under con‐
trol.
Rapid proliferation of bandwidth‐hungry applica‐
tions is already causing severe congestion over
cellular RAN (Radio Access Network) and backhaul
networks. This is creating strong demand for our
Smart Mobile Data solutions around the world and
especially in North America and the Asia Pacific
regions. By providing visibility across the Wi‐Fi as
well as cellular infrastructure, our Smart Mobile
Data products are generating equal interest in Eu‐
rope, where many operators are more concerned
with ensuring an optimal customer experience
once data has been offloaded.
We also go further in helping operators understand
and respond to their customers’ changing behavior
with a continuously expanding range of products
that provide detailed analytics on services and data
types. Our aim now is to help operators strike the
optimum balance between data delivery costs and
the customer experience. They will achieve this by
making decisions about which applications and
services they keep on the cellular network andwhich to offload to their Wi‐Fi network. This differ‐
Market Outlook
10
QUARTERLY REPORT / Q1 2013
entiated offload capability will be available later
this year. During the same timeframe Birdstep will
deliver the ability for EasyAnalytics on the mobile
device to dynamically update and modify subscrib‐
er policy in the EasyANDSF policy server based on
changing conditions of the network or usage char‐
acteristics.Another clear trend is the significant growth of
mobile advertising which has been forecasted to be
worth $13B by 2015. To address this new oppor‐
tunity Birdstep is helping mobile operators gain
new revenues from mobile advertising. This is
achieved by taking advantage of their subscriber
and mobile device intelligence to uniquely person‐
alize the delivery of ads to mobile users. Birdstep’s
solutions will enable the mobile operator to offer a
customer‐centric solution to reach target audienc‐
es across access network types and end user devic‐
es, while providing users the best experience for
viewing rich media and video advertisements.
Thegrowinguseofmobiledataintheworkforce,coupled with the trend towardsWi‐Fi offload,increase the importance of strong end to endsecurity. Thepopularity ofBring YourOwnDe‐vice (BYOD) for employees is generating greatinterestfrombothoperatorsandenterprisecus‐tomers for our SafeMove product. Those prod‐ucts secure customer devices and protect dataduring transit through standardized encryptiontechnologies. We are meeting this growing de‐mandbyexpandingoursecuremobilityportfolioto more platforms, having recently launchedSafeMove Mobile Router Toolkit and the
SafeMove Toolkit for Android. Our Secure Mobility
solutions are gainingparticularly strong tractionacross the EMEA region with the expansion ofthe reseller network, witnessed by a few newdealsandtrialsinQ1.
11
QUARTERLY REPORT / Q1 2013
First quarter
First quarter revenue was NOK 18.2 (11.7) million,
which represents an increase in revenue of 56.3%
over the same quarter last year. The increase in
revenue compared to the same quarter last year is
due to growing usage of our product Easy Smart,
specifically in North America.
Salaries and wages were NOK 10.4 (9.7) million.
The increase in salaries and wages is due to a de‐
crease in capitalized R&D.
The number of employees ending as at 31.03.2013
was 58 (64).
Other operating expenses for the quarter was NOK 5.5 (6.9) million. The decrease is a result of the
overall cost reduction program started in Q1 2012.
The quarterly Other financial items, net of 0.7 NOK
consists of currency gains from re‐evaluating inter‐
nal loans within the group.
As a result of the above factors, Income (Loss) from
continuing operations NOK 0.4 (‐9.6) million was
recorded in the quarter.
Result of operations
12
QUARTERLY REPORT / Q1 2013
Cash flow
First quarter
Cash flow for the quarter was negative and our net cash balance decreased with NOK 5.5 million to NOK
11.4 million. Last year the cash balance decreased with NOK 10.2 million.
Cash flow
13
QUARTERLY REPORT / Q1 2013
Financial statements
Condensed Consolidation Statements of Comprehensive Income (In thousands of NOK, except share and per share date)
Condensed Consolidated Statements of Operations
(In thousands of NOK, except share and per share data)
14
QUARTERLY REPORT / Q1 2013
Condensed Consolidation Balance Sheets (In thousands of NOK, except share and per share date)
15
QUARTERLY REPORT / Q1 2013
Condensed Consolidated Statements of Cash Flows
(In thousands of NOK)
Condensed Consolidated Statements of Changes in Shareholders’ Equity (In thousands of NOK, except share and per share date)
16
QUARTERLY REPORT / Q1 2013
Accounting Policies
The accompanying consolidated financial state‐
ments are prepared under International Financial
Reporting Standards (IFRS). Our fiscal year runs
from January 1 to December 31.
The accompanying condensed consolidated state‐
ments of operations and cash flows cover the three
first months of 2013, and the related information
on Birdstep included in these notes to the financial
statements is unaudited. In the opinion of man‐
agement, such interim statements include all ad‐
justments, which consist only of the normally re‐
curring adjustments necessary for a fair presenta‐
tion of the consolidated results of operations, fi‐
nancial position and cash flows for each period
presented. The interim consolidated results are not
necessarily indicative of results for the full year.
The same accounting policies and methods of
computation are followed in the interim financial
statements as those of the most recent annual
financial statements.
These interim financial statements are presented in
Norwegian crowns (NOK). The functional currency
of Birdstep’s foreign operations is the currency of
the country in which the operations are conducted.
The accounts of Birdstep are translated into the
reporting currency, NOK, using exchange rates in
effect at period‐end for assets and liabilities, and at
average exchange rates during the period for the
results of operations.
EBITDA is equivalent to operating income (loss)
excluding both discontinued operations and non‐
cash charges, such as depreciation and amortiza‐
tion.
Income per share is calculated by dividing net in‐
come available to common shareholders for the
period by the weighted average number of com‐
mon shares outstanding during the period.
As of March 31, 2013, the Company has 91.984.627
shares issued and 91.963.572 shares outstanding,
the difference of 21.055 representing treasury
shares.
Notes
17
QUARTERLY REPORT / Q1 2013
Segment Reporting
Risks
This report contains statements regarding the fu‐
ture in connection with the company’s growth ex‐
pectations, general and specific market outlook
and objectives. All statements about the future are
subject to inherent risks and uncertainties, and
many factors can lead to actual profits and devel‐
opments deviating substantially from that which
has been expressed or implied in such statements.
Birdstep Technology is exposed to various forms of
market, operational and financial risks.
Financial instruments that potentially subject Bird‐
step to concentrations of credit risks consist pri‐
marily of cash and accounts receivable. Birdstep
performs ongoing evaluations of customers’ finan‐
cial condition to determine if any reserve for po‐
tential uncollectible amounts is needed. As of De‐
cember 31, 2012, no potential uncollectible
amounts had been made.
The company’s various risks have been described in
the Annual Report/ Prospectus in further detail and
no other risks has been identified.
The Company is divided into two separate operating segments (Smart Mobile Data and Secure Mobility).
*InQ42012awritedownofintangibleassetsofNOK6.9 millionwasmadeinSecureMobility
18
QUARTERLY REPORT / Q1 2013
Q1 Earnings Report May 3rd Birdstep Technology ASA invites to a phone con‐ference following the announcement of the Q1 Earnings Report at 10.00 CET May 3rd
Phone numbers for the conference are as follows:
SE: 08‐505 56 478 NO: +47 235 00 205 UK: +44 207 660 20 78 US: +1 877 679 29 93
Annual General Meeting May 15th Birdstep Technology ASA invites to Annual General Meeting at 13.00 CET May 15th Meeting will take place at: Hotel Continental
Stortingsgaten 24/26 Oslo Link to registration and all documentation can be found at www.birdstep.com
Preliminary financial calendar, with reservations for changes: Earnings Reports 3. May 2013 Q1 2013 ‐ Interim financial report 16. Aug 2013 Q2 2013 ‐ Interim financial report 5. Nov 2013 Q3 2013 ‐ Interim financial report Annual General Meeting 15. May 2013
Birdstep Technology ASA invites to a phone confer‐ence following the announcement of the quarterly earnings reports. Time and call‐in details or place of the events above will be communicated at a later stage via OSE, Oslo Stock Exchange and www.birdstep.com
Financial Calendar
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