Keyware Technologies : Software segment triggers 2018 revenue growth in Keyware Group

14 March 2019, 20:00 CET

Software segment triggers 2018 revenue growth in Keyware Group

Keyware reaffirms its strategic shift towards fintech

Brussels, Belgium-14 March 2019-Today, Keyware (EURONEXT Brussels: KEYW), a leading provider of electronic payment solutions and transactions, discloses the financial results for the financial year which ended on 31 December 2018.

The financial year of 2018 of Keyware Technologies summarized:

• ✔Revenues increase by kEUR 905 (+4.8%) from kEUR 18,730 to kEUR 19,635

• ✔EBITDA decreases by kEUR 547 (-14.7%) from kEUR 3,725 to kEUR 3,178

• ✔Profit before tax decreases by kEUR 1,119 (-54.6%) from kEUR 2,050 to kEUR 931

• ✔Net profit decreases by kEUR 548 (-46.7%) from kEUR 1,174 to kEUR 626

• ✔Net financial debt decreases by kEUR 2,228 (-35.8%) from kEUR 6,226 at the end of 2017 to kEUR 3,998 on 31 December 2018, mainly due to reimbursement of loans

✔

Cash and cash equivalents increase by kEUR 195 (+5.9%) from kEUR 3,325 at the end of 2017 to kEUR 3,520 at 31 December 2018

Transformation to Fintech confirmed

✔Importance of traditional segment of payment terminals decreases to the benefit of the software segment; authorizations also record a growth

✔

Software segment contributes to revenues growthCommercial

The Belgian fintech specialist Keyware sees its revenues increase again to EUR 19.6 million in 2018, after a tinystagnation in 2017. This growth was predominantly due to the group's choice to move itsstrategic course from electronic payment terminals to the development of tailor-made software for merchants and independents. The software segment hence largely contributes to the increase in revenues and, together with the growth in the authorizations segment, offsets the decrease in revenues from payment terminals.

This does not mean that electronic payments would be on their way back, since the revenues from the commissions on electronic transactions are also increasing significantly.

"Both the number of transactions and their monetary value are increasing, which confirms Keyware'sgood position in the electronic payment market. Especially our strategic choice to position ourselves increasingly on software development and innovative solutions for merchants, has already paid off given the significant contribution to the growth in revenues."

Stephane Vandervelde, CEO of Keyware

In 2019, Keyware will complete the transition phase by further deploying solutions offered by EasyOrder (an application that allows merchants to create their own personalized webshop) and Magellan (instalment payments for consumer purchases, anonymisation of sensitive data and complex platforms for electronic payment transactions).

The objective is to increase the penetration of these solutions in the market. Simultaneously, this should trigger synergies for the traditional activity of payment terminals within the Keyware Group.

Financial

• Revenues grow by kEUR 905 (+4.8 %) from kEUR 18,730 to kEUR 19,635. The increase in revenues is the result of the software segment which contributed a full financial year in 2018, instead of only one semester in 2017. The revenues from payment terminals decrease, which is offset by the higher revenues from authorizations and software

• The EBITDA amounts to kEUR 3,178 in 2018, compared to kEUR 3,725, which is a reduction of kEUR 547 (-14.7%) compared to 2017. The decrease of the EBITDA is expressed in the payment terminals segment, the software segment (important investments in 2018) and in the corporate segment

• The profit before tax amounts to kEUR 931 in 2018, which is a reduction of kEUR 1,119 (-54.6%) compared to kEUR 2,050 in 2017. This reduction is the result of both the lower operational profit (EBIT) (- kEUR 880) and a lower financial result (- kEUR 239)

• Keyware closes the financial year of 2018 with a net profit of kEUR 626 compared to kEUR 1,174 in 2017. However, the decrease is limited to kEUR 548 (-46.7%), mainly because of the positive impact of the reduced corporate tax rate on the deferred taxes of the French subsidiary, representing approximately kEUR 400

• The net financial debt decreases by kEUR 2,228 (-35.8%) from kEUR 6,226 at 31 December 2017 to kEUR 3,998 at 31 December 2018. Despite the loan reimbursements (kEUR 2,885), the payment of a dividend (kEUR 659) and the purchase of treasury shares (kEUR 223), the cash and cash equivalents record an increase of kEUR 195 (+5.9%) from kEUR 3,325 to kEUR 3,520

The figures

Financial year ended onKey figures for the period ended on

31.12.2018

31.12.2017

31 December

kEUR (audited)

kEUR (audited)

Revenues Gross profit EBIT

19,635 18,730

10,927 10,455

263 1,143

Profit before taxes

931 2,050

Net profit

626

1,174

EBITDA

3,178 3,725

Gross margin (profit before taxes / revenues) (%)

Profit margin (profit/revenues) (%)

4.7 10.9

3.2 6.3

EBITDA margin (EBITDA/revenues) (%)

16.2 19.9

Management report on the results of 2018

• -Revenuesandgross profitcan be presented as follows:

• -Theconsolidated revenuesfor the financial year of 2018 amount to kEUR 19,635 compared to kEUR 18,730 in 2017, representing an increase of kEUR 905 or 4.8%.

  Fluctuation
  Revenues	4.8%
  Raw materials and consumables	5.2%
  Gross profit	4.5%
  Gross margin percentage	(0.1%)
  Gross profit by segment	31.12.2018	31.12.2017	Fluctuation
  kEUR	kEUR
  (audited)	(audited)
  Revenues payment terminals	7,163	8,449	(15.2%)
  Purchases payment terminals	(1,283)	(1,731)	25.9%
  Gross profit payment terminals	5,880	6,718	(12.5%)
  Revenues authorizations	9,642	8,510	13.3%
  Cost of authorizations	(7,377)	(6,527)	(13.0%)
  Gross profit authorizations	2,265	1,983	14.2%
  Revenues software	2,830	1,561	81.3%
  Cost of software	(48)	(17)	(182.4%)
  Gross profit software	2,782	1,544	80.2%
  Revenues corporate	-	210	(100.0%)
  Cost of corporate	-	-	-
  Gross profit corporate	-	210	(100.0%)
  Gross profit margin % terminals	82.1	79.5	2.6%
  Gross profit margin %
  authorizations	23.5	23.3	0.2%

  31.12.2018 kEUR (audited)

• Financial year ended on

  Gross profit

  31.12.2017 kEUR (audited)

  19,635

  18,730

  (8,708) (8,275)

  10,927 10,455

  55.7%55.8%

  Financial year ended on

• The revenues in the payment terminal segment amount to kEUR 7,163, which is a decrease of kEUR 1,286 (-15.2%) compared to kEUR 8,449 in 2017. This decrease results from a lower number of newly signed contracts, a higher number of short-term contracts and a reduction in the average rent. The changed product mix, more cheaper devices, continued in 2018 and also reduced the revenues. This segment currently represents a revenue share of 36.5% compared to 45.1% in 2017 due to its decrease in absolute amounts and the increase in the other segments.

On the contrary, the authorizations segment experiences a continued revenue growth in 2018. The revenues increase by kEUR 1,132 (+13.3%) from kEUR 8,510 to kEUR 9,642, which makes it move further away from payment terminals. Authorizations now represent 49.1% compared to only 45.4% in 2017.

As stated, the previous financial year of 2017 was marked by diversification because of the introduction of a new segment. This software segment already contributed kEUR 1,561 to the revenues of 2017, which increases to kEUR 2,830 in 2018. The increase is mainly the result of the fact that Magellan's contribution was limited to only 2 quarters in 2017, while it represents a full year in 2018. While software represented a share in the revenues of 8.3% in 2017, this increases to 14.4% in 2018.

The corporate activities included non-recurring revenues in the amount of kEUR 210 in 2017.

• -Thegross profitfor the financial year 2018 amounts to kEUR 10,927 compared to kEUR 10,455 for 2017, or an increase of kEUR 472, or 4.5%.

  Broken down per segment, the overall increase of kEUR 472 results from the software and authorizations segment (+ kEUR 1,238 and + kEUR 282), while the payment terminals and corporate segment experience a decrease in their gross profits (- kEUR 838 and - kEUR 210).

  The gross profit margin of payment terminals record, in relative terms, an increase of 2.6 pp of 79.5% to 82.1%, primarily because of the lower support costs and the cheaper product mix. The gross profit margin of authorizations increases slightly by 0.2 pp from 23.3% to 23.5%.

  The consolidated gross profit margin remains virtually stable at 55.7%.

• -The integration of Magellan since 30 June 2017 explains the increase in various items, such asother operating income,personnel costsandother operating chargesas the figures of 2018 represent a full year, instead of only a half year in 2017.

• -The same reason explains the increase indepreciation and amortization costsby kEUR 507 from kEUR 958 to kEUR 1,465.

• -The above mentioned elements account for the decrease in theoperating result (EBIT)by kEUR 880 from kEUR 1,143 to kEUR 263.

• -Thespecific allowances on current assetshave decreased compared to the previous financial year, primarily due to lower allowances on lease receivables. The largest component remains the allowances on lease receivables, and to some extent the allowances on inventories.

• -Thefinancial resultamounts to kEUR 668 compared to kEUR 907 in 2017. This decrease of kEUR 239 primarily results from the fact that this caption included in 2017 a capital gain on the disposal of shares of kEUR 200.

• -Theprofit before taxamounts to kEUR 931 compared to kEUR 2,050 in 2017. This decrease of kEUR 1,119 (or 54.6%) results primarily from the lower operating profit (- kEUR 880) and the lower financial result (- kEUR 239).

• -Theresult from participating interestsrepresents the result of Magellan (40%) for the first semester of 2017.

• -Thenet profitin the financial year 2018 amounts to kEUR 626 compared to a net profit of kEUR 1,174 in 2017, which results in a decrease of kEUR 548 (46.7%).

• -TheEBITDAamounts to kEUR 3,178 compared to kEUR 3,725, which results in a decrease of kEUR 547 (or 14.7%). This decrease is smaller than the decrease of the EBIT (- kEUR 880), because the EBIT was substantially affected by the higher depreciation and amortization charges relating to the acquired enterprises.

  Broken down by segment, the EBITDA decrease of kEUR 547 is mainly due to the payment terminals (- kEUR 227), the corporate segment (- kEUR 210) and the software segment (-kEUR 77).

Financial year ended on

EBITDA by segment	31.12.2018	31.12.2017	Fluctuation
kEUR	kEUR
(audited)	(audited)
Payment terminals	2,012	2,239	(10.1%)
Authorizations	1,164	1,197	(2.8%)
Software	543	620	(12.4%)
Corporate	(541)	(331)	(63.4%)
EBITDA	3,178	3,725	(14.7%)

Management report on the balance sheet position as at 31 December 2018

The key figures for the financial year can be summarized as follows.

Financial year ended on

Key figures for the period ended on 31 December	31.12.2018	31.12.2017
kEUR	kEUR
(audited)	(audited)
Net equity	27,592	27,433
Long term (LT) and short term (ST) financial debts and loans	6,450	9,295
Cash and cash equivalents	3,520	3,325
Net financial debt	3,998	6,226
Net equity / total liabilities (%)	64.3	63.9
LT and ST financial debt and loans/ net equity (%)	23.4	33.9

-

The net equity has increased by kEUR 159 compared to 31 December 2017. The statement of changes in equity provides a detailed overview of the underlying aspects. Besides the net