Crossrider Plc (LON:CROS) today announced its unaudited half year results for the six months ended 30 June 2017.
Financial highlights
· Revenue up to $30.1 million (H1 2016: $28.7 million)
o 16% increase in App Distribution revenue to $21.1 million (H1 2016: $18.2 million) and a deferred revenue4 balance of $2.3 million (H1 2016: Nil)
o Media division stable with revenue of $7.3 million (H1 2016: $7.5 million)
· Adjusted EBITDA1 of $2.9 million (H1 2016: $3.5 million). Decrease is due to the decision to cease investment in the legacy web apps platform
o Underlying growth in Adjusted EBITDA1 excluding the Web Apps and License segment of 131% versus H1 2016
· Adjusted cash from operations of $2.6 million (H1 2016: $4.1 million) representing 95% underlying growth excluding cash generated from Web Apps and License segment operations
· Cash conversion from Adjusted EBITDA of 90% (H1 2016: 119%)
· Increase in Media and App Distribution combined segment results2 to $8.4 million (H1 2016: $7.6 million)
· Strong balance sheet with $68.7 million cash (31 December 2016: $72.1 million), after $5.6 million of investing expenditure in the period
Operational highlights
· Integration of recently acquired CyberGhost S.A (“CyberGhost”), a leading SaaS Virtual Private Network provider, now complete and fully integrated into Crossrider’s user acquisition platform. CyberGhost is performing ahead of expectations
· Launched Reimage for Mac, a repair product for Mac which is based upon the Company’s patented PC repair technology
· Achieved key milestones in the transition of the business towards a pure SaaS model with enhanced earnings visibility:
o 2018 will be the first year that the Company expects to have $8.0 million of revenues from existing users 3
o Retention rate in the period at 69% of subscriptions from 2016 , providing visibility in revenues moving forward
· The Company continues to leverage its digital marketing platform to grow its customer user base, with 800,000 paying users active across 164 countries
Ido Erlichman, Chief Executive Officer of Crossrider Plc, commented: “We have made significant headway in developing our product suite in the period, with the acquisition of CyberGhost as well as the launch of Reimage for Mac, both of which are experiencing significant customer traction, demonstrating our capability in leveraging our digital marketing platform and expertise to drive users across our software solutions.
“The $8.0 million of revenue we expect to have visibility over for 2018 – a first for Crossrider- is also testament to the progress we have made in transitioning to a pure SaaS based model with a focus on recurring revenues and product subscription.
“Going forward, we will remain committed to investing in a number of organic growth initiatives, whilst evaluating selective acquisitions which broaden our software portfolio and accelerate our transformation into a global B2C cybersecurity SaaS platform.”
1 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 certain expenses which are considered to be one off and non-recurring in nature.
2 The segment result has been calculated using revenue less costs directly attributable to that segment.
3 Based on deferred revenue balance and current retention rate for existing subscriptions.
4 Amounts collected from customers in the period and is expected to be recognised as revenue in future periods.
Chief Executive Officer’s review
The Company is pleased to report that in the first half of 2017 it has made progress on all strategic fronts. As a growing player in in the personal cybersecurity arena, Crossrider now has four digital products in its software portfolio with 800,000 paying customers globally.
Following a transformational 2016, we have now successfully refocussed the business and transitioned to a B2C security software and online distribution platform. The success of our restated strategy is evident as the business continues to trade strongly, achieving revenues of $30.1 million and Adjusted EBITDA of $2.9 million in the period. This represents underlying growth excluding the Web Apps division of 131%, when compared to the first half of 2016.
We have four digital products: Reimage, Reimage for Mac, CyberGhost and DriverAgent, with the Company now in a position to leverage its customer base to both cross and up-sell multiple products, as we aim to maximise each user’s lifetime value.
In March 2017, we acquired CyberGhost, a leading cybersecurity SaaS provider, with a focus on the provision of virtual private network solutions. We are pleased to report that the integration of CyberGhost is now complete and has been very successful, largely due to the significant operational synergies and cost savings we have seen by combining the two businesses. Now CyberGhost is fully embedded into our digital marketing platform, our team has been able to drive more cost efficient and effective digital user engagement. Most notably, we have been able to drive growth in CyberGhost’s active user base by integrating Crossrider’s technology and leveraging our digital marketing expertise.
In addition to an ongoing acquisitive strategy, we continue to invest in and develop products internally. In August 2017 we launched Reimage for Mac, our Mac repair product, which is based upon our patented PC repair technology. This will significantly increase our addressable market with the potential to add sales momentum in this space as we are already seeing significant demand from consumers.
Over and above this, one of our key priorities is to transition the business towards a pure SaaS model, to provide the Company with enhanced earnings visibility. 2018 will be the first year since our inception that we aim to have visibility of approximately $8.0 million of revenues from existing users in 2017, a significant achievement as we look to transition the majority of our business to a subscription-based model. Furthermore, we will look in particular to focus on increasing our deferred revenue and retention rates in 2018.
In the second half of the year, our growth strategy will continue to focus around our three key business priorities, which are:
· developing our software product suite to provide a holistic B2C privacy solution to our global customer base;
· leveraging the combination of our growing product suite and digital marketing platform and expertise to grow our user base, in particular by up selling and cross selling across our software portfolio; and
· growing our recurring revenue stream by transitioning to a SaaS model to improve both earnings visibility and the life time value of our customers.
We continue to invest in a number of organic growth initiatives, whilst reviewing selective acquisitions, which include small, bolt-on transactions and more sizeable, transformational deals that bring additional products and users and the greater opportunity to cross-sell our products.
The board remains confident in the outlook for the Company, as we further develop and build upon our software portfolio whilst capitalising on our digital marketing platform to drive customer engagement. This coupled with our transition to a recurring revenue model will result in a leading market position for Crossrider.
Ido Erlichman
Crossrider Plc Chief Executive Officer
