AUDIOVALLEY (EPA:ALAVY) - AudioValley: H1 2019 results.

Transparency directive : regulatory news

16/10/2019 17:44

Press release

www.audiovalley.com

October 16, 2019 - 17:40 CEST
AudioValley: Caroline Dupuis - press@audiovalley.com -
Actifin: Victoire Demeestère - vdemeestere@actifin.fr -

H1 2019 results:

* H1 2019 turnover: EUR13.6m, +22.9%
* Operating profitability achieved1 in H1: +EUR0.4m over the first six months
  of 2019 (-EUR0.6m the first six months of 2018)

Strong growth in Q3 2019: 7.4m, +22.0%

AudioValley (ISIN Code: BE0974334667/Ticker: ALAVY) announced the publication
of its half-year 2019 results. These results were approved by the Board of
Directors on October 1st, 2019.

Pick-up in growth over the first half of 2019

After an almost 20% increase in first-quarter turnover, the Group posted even
faster growth of 25.8% (+23.2% cc(1)) in the second quarter, to EUR7.1m. In
total, first-half turnover came out to EUR13.6m, an increase of 22.9% (+20.6%
cc). All divisions and regions contributed to this solid performance.

* Targetspot (61.5% of first-half turnover): breakthrough confirmed in Europe

The Targetspot division - a solution designed to aggregate and monetise digital
audio audiences (digital radio and podcasts) - posted a 29.9% increase in
turnover over the first half of the year (+25.9% cc) to EUR8.3m. All geographic
areas confirmed their growth trend. In the United States, the division's
turnover was up 25% (+20% cc). Europe picked up during the first half of the
year, as expected, with growth of +44.7%. The recent opening of four new sales
locations (Spain, the Netherlands, Germany and the United Kingdom) has been
good for business across the region. Stronger sales teams have already won many
new contracts, with the most significant for the period being the exclusive
agreement to monetise the SoundCloud inventory, signed in March for three
countries (Germany, France and the Netherlands), and, three months later,
extended to five additional countries (Belgium, Spain, Portugal, Italy and
Switzerland).

* Storever (28% of first-half turnover): faster growth in the second quarter

Storever, the "one-stop shop" for POS audio and video broadcasting solutions,
posted first-half turnover of EUR3.8m, an increase of 18.2%. Growth was
particularly strong in the second quarter, at 27.9%. Subscriptions were up
16.9% in the first half of the year (10,9% of which was related to the increase
in sales outlets and 6,0% to the increase in the average basket), and
totalled EUR2.7m, further strengthening the division's recurring revenue base.

(1) In constant currencies

* Jamendo (10.5% of first-half turnover): growth in the second quarter

After recording a 1.3% decline in the first quarter of 2019, Jamendo - the
sales platform for professional media projects - posted turnover of EUR0.7m in
the second quarter (+5.5%). This return to growth illustrates the first
benefits of the revitalisation measures undertaken and driven specifically by
the recent appointment of a new CEO to head the division. Jamendo also adopted
the status of Independent Management Entity at the beginning of the year. This
step means that the division can expand the scope of its rights management and
monetisation business.

in thousands of euros - unaudited     H1 2019      H1 2018        Change

Turnover                               13,541       11,036        +22.7%
Cost of sales                         (5,938)       (5,023)       +18.2%
Personnel expenses                    (4,772)       (4,143)       +15.2%
Other administrative and commercial
expenses                              (2,478)       (2,516)        -1.5%
Current operating income before
amortisation                             378          (644)   +EUR1,022K
Depreciation and amortisation         (2,659)       (2,120)       +25.4%
Current operating income after
amortisation                          (2,281)       (2,764)     +EUR483K
Other net non-current operating
expenses                                 (25)           (9)      -EUR16K
Financial income                      (1,043)       (1,072)      +EUR29K
Other                                       0           (9)       +EUR9K
Pre-tax income (loss)                 (3,349)       (3,854)     +EUR505K
Income tax                              (157)            37     -EUR194K
Net income                            (3,506)       (3,817)     +EUR311K

IFRS 16, on the recognition of leases in the consolidated financial statements,
came into force on 1 January 2019. AudioValley chose to apply IFRS 16 using the
modified retrospective approach, without restating prior financial statements.

Positive operating profitability, starting in the first half

The Group's solid growth (+22.9%) combined with strict control of operating
expenses (+8.9%) was reflected, logically, in the results for the past six
months. The gross margin continued to grow during the first half of the year,
from 54.5% to 56.2% of turnover (+EUR1,590K).

Having broken even in terms of operating profit in 2018 (+EUR0.3m, compared to
a pro forma loss of EUR1.5m in 2017), the Group generated EUR378K in current
operating income before amortisation in the first six months of 2019 (i.e.
+EUR1m compared to the same period the previous year). This positive trend is
reflected across all of the Group's business divisions:

* Targetspot: The division's gross margin stood at EUR3.5m after recognition of
  the reversal of provisions for rights in the amount of EUR118K, i.e. a gross
  margin rate of 42.0% after 38.4% in the first half of 2018. Current
  operating income before amortisation improved by EUR0.7m to EUR(570K);

* Storever: Thanks to a favourable product mix (subscriptions versus equipment
  sales), the division achieved a gross margin of EUR3.3m, up EUR525K, for a
  gross margin rate of 85.3% (81.4% for the 2018 financial year). Current
  operating income before amortisation stood at EUR1,075K, up 15.8%
  year-on-year for the first half of the year.

* Jamendo: The division posted a gross margin of EUR876K, for a gross margin
  rate of 61.7% of turnover, up by 2.7 points compared to the first half of
  2018. The division generated EUR102K in operating income before amortisation.

AudioValley delivered these very good performances while continuing its
aggressive growth strategy: expanding internationally, with new Targetspot
sales offices opened in Europe (Germany and the UK), and adding to its teams
(139 employees at 30 June 2019 vs. 128 at end-2018).

Over the first half of 2019, the Group posted current operating income after
amortisation of EUR(2,281K), an improvement of EUR483K after recognition of
mostly non-cash(2) items totalling EUR2,659K, broken down as:

* EUR1,360K for the 10-year straight-line amortisation expense of technology
  assets recognised under the price purchase allocation conducted following the
  acquisition of the Targetspot division, namely Shoutcast and Targetspot;

* EUR413K in amortisation expenses for leased Storever players;

* EUR318K in amortisation expenses on property, plant and equipment recognised
  pursuant to IFRS 16; and

* EUR569K in amortisation of other assets from each of the three divisions.

First-half pre-tax income stood at EUR(3,349K), including a net financial loss
of EUR1,043K, of which EUR733K in calculated accretion expense (non-cash(3))
relating to the seller credit granted by Vivendi upon the acquisition of the
Targetspot division (formerly Radionomy) and EUR39K in interest expenses on
lease liabilities that appeared in 2019 following the initial application of
IFRS 16.

In total, the Group posted net income of EUR(3,506K), compared to EUR(3,817K)
over the first half of 2018.

Changes in financial position

At 30 June 2019, the Group's equity position was EUR6,170K, compared to
EUR11,148K at end-2018.

The cash position at the end of June 2019 was EUR623K, and did not include the
July convertible-bond issue for a total of EUR8m.

At the end of June 2019, the balance of the seller credit obtained when the
majority stake in Targetspot was acquired amounted to EUR24.8m.

In July 2019, AudioValley entered into a new agreement with Vivendi to
renegotiate the terms of the seller credit prepayment clause: if the debt was
prepaid in full before 30 November 2019 (originally 30 October), AudioValley
would receive a maximum discount of 39%, bringing the payment amount to between
EUR15m and 16m.

(2) non-cash: no impact on cash position ;

Strong revenue growth in the third quarter: +22,0 %

The third quarter of 2019 confirmed the acceleration that has been happening
over the past few months. Turnover for the period came out to EUR7.4m, an
increase of 22.0% over Q3 2018 (+17.4% cc). In Europe, the Group posted
turnover of EUR3.4m for the third quarter of 2019, a year-on-year increase of
+19.8%. The North America region continued to grow over the quarter, with a
+26.0% rise in turnover to EUR3.7m. Lastly, turnover for the Rest of the World
stood at EUR0.3m.

* The Targetspot division (66% of the Group's business for the quarter) brought
  in EUR4,884, up +41.7% on the third quarter of 2018 (+33.5% cc), thus
  confirming its strong growth trend. In North America, Targetspot generated
  turnover of EUR3,552K, up by +25.2% (+16.8% cc). In Europe, business
  increased 104.2% to EUR1,333K.

* Storever: The division recorded EUR1,868K in turnover for the quarter (versus
  EUR2,013K for the third quarter of 2018, which was marked by exceptional
  equipment sales of around EUR353K). Restated for this item, business for the
  division increased 12.5% and 28.8% at Group level.

* In the third quarter, Jamendo generated EUR608K in turnover, for growth of
  5.7% year-on-year.

Outlook

* Targetspot: Since the beginning of 2019, the division has racked up major
  commercial successes, such as the monetisation partnership with SoundCloud
  and the recently-announced signature of an exclusive monetisation contract
  with Deezer in five countries (US, Canada, the Netherlands, Spain and Italy).
  The digital audio market is exploding across all regions in which Targetspot
  now does business. This strong growth in the market, which is now stretching
  beyond North America, really raises the profile of the Group in pursuit of
  its growth.

* Storever: The growth in the number of points of sale (16,200 at the end of
  June 2019) gives the division a very high profile, thanks to strong repeat
  business and an increase in average income per point of sale due to the
  enhancement of available services.

* Jamendo: The pick-up in activity observed in recent months is expected to
  intensify.

Despite these solid prospects and the strong momentum anticipated by year's
end, achieving the growth target originally set above 35% in cc is unlikely.
The main reasons for this are that equipment sales at Storever have come in
below expectations, and major contracts signed by Targetspot over the past two
months are not yet evident in the turnover figures. Still, 2019 will stand out
as a successful financial year, with projected growth that should be above 20%,
exceeding EUR30m in turnover (excluding the impact of exchange rates) during
the period. This solid growth in business should be accompanied by a
substantial improvement in earnings.

                Future updates (after the stock market closes):

                               FY 2019 Turnover
                                27 January 2020

                               FY 2019 Results
                                21 April 2020

CONTACTS

AUDIOVALLEY
Caroline Dupuis
+ 32 (0) 2 466 31 60
press@audiovalley.com

ACTIFIN, financial communication        ACTIFIN, financial press relations
Victoire DEMEESTERE                     Jennifer Jullia
+33 (0)1 56 88 11 11                    +33 (0)1 56 88 11 19
vdemeestere@actifin.fr                  jjullia@actifin.fr

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29/04/2020 17:40

AUDIOVALLEY (EPA:ALAVY) - AudioValley: H1 2019 results.

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