LINK Mobility Group ASA Financial Results Fourth quarter...

LINK Mobility Group ASA Financial Results Fourth quarter 2017

INTERIM REPORT Q4 2017

Mobilizing Your Business

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Highlights fourth quarter 2017

• All-time high revenue of NOK 486 million

• All-time high adjusted EBITDA of NOK 61 million

• Operational performance exceeding outlook for 2017

• Organic revenue growth of 25 percent and 39 percent growth for transactions, driven

by rapid volume increase in retail, e-commerce and logistic sector

• High acquisition activity with closed transactions for GMS in Spain, Voicecom in

Bulgaria, Comvision in Poland, Netmessage in France, Horisen Messaging in

Switzerland, Simple SMS in Austria and Totalconnect in Italy.

• A diversified and strong customer base with more than 16 500 enterprise customers

• LINK delivered mobile services to more than 200 million unique mobile subscribers

• Secured a tap issue of EUR 30 million of the existing bond agreement



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Strong organic growth and successful acquisitions LINK Mobility Group ASA (LINK) confirms its strategy and reports solid revenue growth in the

fourth quarter of 2017. The strong figures are the result of high organic growth and successful

acquisitions. LINK has closed several transactions, entering the Polish, Bulgarian, French, Swiss,

Austrian and Italian markets and doubling its market position in Spain. LINK has also signed a

term sheet in the first quarter of 2018 regarding the acquisition of the Italian entity SMS.it. LINK

has become Europe’s leading and fastest growing company within the industry.

The strong organic revenue growth in the quarter, confirms the underlying trend of solid growth in the

market for mobile messaging and mobile solutions delivered by LINK. LINK achieved an all-time high

operating revenue of NOK 486 million in the quarter, up 90 percent compared with corresponding period

last year. The overall market conditions have been favorable, resulting in a messaging volume of 1 709

million, and further strengthening the organic revenue growth in the Mobile Messaging segment to 39

percent compared to the same quarter last year.

The adjusted EBITDA for the fourth quarter is reported at NOK 61 million, an increase of NOK 31 million

versus same quarter last year. The adjusted EBITDA margin is reported at 12.5 percent, an increase of

0.8 percentage points compared to the same quarter last year mainly due to scale advantages. LINK has

a scalable business model which means that OPEX does not increase in relativity to revenue and gross

margin. LINK’s strategy is to maintain and increase margins by rolling out mobile solution products,

introducing highly profitable licenses revenue in new markets and targeting the SME clients in LINK’s

footprint.

LINK reports a pro forma revenue (full-year effect of all closed acquisitions) of NOK 1 754 million and a

pro forma adjusted EBITDA of NOK 209 million. See the pro forma section for more details.

Net finance items are reported at negative NOK 8 million, impacted by interest expenses of NOK 11

million. The financial position is good, with a cash position of NOK 343 million. LINK has no plans to

raise new equity except for future acquisitions settled partly in LINK shares.

In the fourth quarter, LINK secured a tap issue of EUR 30 million on the existing bond agreement to

finance future acquisitions. See Note 6 for more information.



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Acquisitions and pro forma financials

In the first quarter of 2017, LINK closed the acquisition of the Didimo-Jet Group in Spain. In the third

quarter of 2017, LINK closed the acquisition of Vianett AS in Norway and GMS SL in Spain. In the fourth

quarter of 2017, LINK closed the acquisitions of Voicecom AD in Bulgaria, Comvision Sp. z.o.o. in

Poland and Netmessage SARL in France. For the fourth quarter of 2017, Voicecom and Comvision is

included in the income statement for the whole period, Netmessage is included for November and

December.

The acquisitions of Simple SMS in Austria, Horisen in Switzerland and Totalconnect in Italy were closed

in the first quarter of 2018. LINK has also signed a term sheet in the first quarter of 2018 regarding the

acquisition of the Italian entity SMS.it.

LINK reports the following pro forma (full-year effect of all closed acquisitions) numbers for 2017:

(Amounts in NOK million) 2017 Pro forma **)

Operating revenues 1 754

Adjusted EBITDA* 209

Adjusted EBITDA margin* 11.9%

Number of messages (million) 6 320

*) Adjusted for costs related to acquisitions, one-off cost and share based compensations. **) Proforma: includes full year effect of the acquisitions of Didimo-Jet Group, Vianett, GMS, Comvision, Netmessage, Voicecom, Horisen, Simple SMS and Totalconnect performed in 2017. All acquisitions are closed.

Outlook

LINK has given the market an outlook regarding pro forma revenue and adjusted EBITDA for 2017. LINK has outperformed the outlook, se table below:

LINK’s outlook for 2018 is kept unchanged with a pro forma revenue*) of NOK 2 700 million and a pro forma adjusted EBITDA*) of NOK 400 million.

*) The above outlook for 2018 is calculated on LINK’s best estimate based on information available to LINK, and views and assessment of LINK, as of the date of this report. LINK’s growth assumptions may deviate from the outcome resulting in material or immaterial deviations from the outlook. Further, LINK’s assumption relating to successfully acquire further businesses during 2018 is to a great extent outside the control of LINK. LINK’s ability to successfully acquire new businesses at fair value, or at all, could materially affect the outlook figures correspondingly. Investors must therefore make their own calculation in relation to valuing LINK based on their own analysis and judgement.

(Amounts in NOK million) 2017 Pro forma outlook

2017 Pro forma reported

Operating revenues 1 600 - 1700 1 754

Adjusted EBITDA* 195 - 210 209



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Market conditions

LINK has during 2017 taken the #1 position within mobile messaging and solutions in Europe. This is an

excellent position for LINK to leverage on market position and operational scale in a large European

market with strong potential for far greater penetration levels and usage of LINK´s mobile messaging and

solutions services. LINK also believe when the new messaging solutions applications develops

(WhatsApp, Facebook Messenger, Snapchat, Viber, Google RCS etc.), and these channels start

monetizing their channels, LINK will be a natural partner in Europe towards the Enterprise segment, the

same way that the Operators have monetized through LINK and other selected partners within the SMS

messaging space. In addition to the strong increase in demand for mobile messages, LINK is also

experiencing an increased demand for integrated mobile solutions such as customer clubs, statistical

and analytical tools, databases, payment solutions and numerous other mobile services.

In the fourth quarter LINK delivered mobile services to more than 200 million unique mobile subscribers

to nearly all nations in the world. The overall market trend is the move towards “mobilization of

businesses”. Customers who have first started using mobile communications in one area, tend to move

more and more business activities to mobile platforms. The Scandinavian markets are regarded as

advanced in terms of adopting mobile technologies and services. Scandinavian organizations are 2-4

years ahead of their counterparts in other markets in taking mobile messaging services into use. LINK

has a comparative advantage when entering new markets. Highly developed technological platforms,

advanced services and solid reference cases, will make LINK able to expand the market potential when

entering new geographical markets.

Business segments

LINK has three business segments; Mobile Messaging, Mobile Solutions and Mobile Intelligence.

LINK Mobile Messaging is currently the largest business

area, representing 86 percent of the total revenue. Double

digit growth is forecasted for this area over the next 5

years. SMS will be the main messaging carrier, enriched

with over the top messaging carriers such as, Apps,

Facebook Messenger, WhatsApp, Joyn and e-mail

delivered through our state of the art multi-channel

platform.

LINK Mobile Solutions compromises of mobile payment,

mobile licenses and other mobile solutions surrounding

Mobile Messaging, such as Customer club, Mobile Invoice,

mobile notifications, authentication and Joyn.

LINK Mobile Intelligence gather and analyze data to make

mobile messaging even more powerful. LINK Mobility Intelligence is under development, and the

segment will generate revenue in 2018.

Mobile Messaging Messaging

Mobile Intelligence

Mobile Solutions



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New contracts

LINK signed 789 new contracts in the fourth quarter, whereof 448 contracts with new customers and 341

new contracts with existing customers. The following material new contracts were signed:

• Åhléns, a chain of department stores with approx. 60 stores in Sweden, has chosen LINK as the provider of mobile messaging services in their extensive customer loyalty program.

• Fredrik & Louisa, one of Norway’s leading cosmetics and perfume retailers, has chosen LINK’s customer club product and Joyn to communicate and provide mobile marketing activities.

• Gensam, a large vendor of specialized IT-solutions to the insurance industry, has chosen LINK as a partner on payments solutions through LINK’s Mobile invoice solution.

• Danmarks Naturfredningsforening, one of the larger NGO’s in Denmark, has chosen LINK’s solution for providing mobile marketing campaigns and messaging services to increase the membership base.

• ANIA KRUK, a large Polish fashion and jewellery brand, chose LINK as their supplier of mobile messaging services.

• Nova Broadcasting Group, a leading television network in Bulgaria, has chosen LINK as the sole provider of SMS voting for multiple TV-shows.

• Agencia EFE, one of the largest news agencies in Spain, chose LINK as a provider of mobile messaging services worldwide.

• Synsam Oy, a large Nordic optician's retailer, chose LINK’s mobile marketing and mobile coupon products.

• Granngården, a big retailer in Sweden with 115 stores, has chosen LINK to develop a solution for a digital and automated credit application for their B2B costumers in addition to existing services rendered from LINK.

• Intersport, a large sporting goods retailer in Sweden and Norway, has chosen LINK as provider of mobile messaging services for their customer club solution and the click and collect service.

• Bygger´n, a Norwegian building materials retail chain, chose Joyn to digitalize their customer club card and customer communication.

• Akershus Province, Norway’s second largest province with 604 500 inhabitants, has chosen LINK as their provider for mobile messaging services between the upper secondary school and home.

Financial Review (Figures in brackets refer to the same quarter last year)

Group Income Statement Operating revenues amounted to NOK 486 million (NOK 256 million) or a growth of 90 percent versus

same quarter last year. The robust growth was due to strong organic growth and successful acquisitions

last quarters. The organic growth is driven by the Mobile Messaging business segment with a growth

rate of 39 percent versus last year. A lower organic growth rate of 25 percent for total revenue is due to

negative growth rates for Direct carrier billing and Consulting which is not a strategic area for LINK.



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Direct carrier billing is a mature

product, and LINK is expecting a slow

decline within this business area.

However, LINK sees opportunities for

taking a stronger role as mobile

payment enabler, offering customers

access to multiple scalable mobile

payment alternatives through the

product Mobile Invoice.

Consulting revenues varies from

quarter to quarter dependent on order

reserves and internal development

projects. LINK is focusing on

standardized scalable solutions rather

than tailor made products within the

Consulting segment.

LINK has observed a relatively stable price-level in the markets during the quarter. Gross margin in the

markets is mainly influenced by the following factors:

1. Share of license revenue with high margins. The acquired subsidiaries usually have low levels of

license revenue, thereby negatively impacting gross margin versus the Nordic countries

2. Customer mix. High-volume clients have lower margins than SME customers due to their bargaining

power, but also greater potential regarding up-sales of mobile solution products.

3. Share of mobile solution revenue with high margins. The Norwegian and Danish markets have higher

revenue from mobile solution products which improves margins compared to messaging products.

4. Cogs synergies due to increased size and bargaining power towards the operators.

LINK’s long-term gross margin target is 30%, and the strategy is to maintain and increase margins by

rolling out mobile solution products, introduce license revenue in new markets and targeting the SME

clients in LINK’s footprint.

Total gross margin was 27.8 percent (33.5 percent) or a 5.7 percentage points reduction due to;

• -2.3 percent reduced margins due to the dilutive effect of lower margins from acquired companies.

The subsidiaries acquired are messaging companies without a mobile solution offering.

• -2.4 percent due to lower gross margin from existing markets mainly due to higher growth from large

enterprises with lower profitability which dilute the gross margin on average.

51

8681

92 89

135

Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017

Gross margin 1 (NOKm)

33,5 %

-2,4 %

-0,9 %

-2,3 %

27,8%

Q4 16 GM1 pr market GM1 mix Margin effect Q4 17

Existing markets Acquiredentities

GM% development,QonQ

29,9% 27,8%38,8% 33,5% 35,0% 32,8%

= Margin

Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017

Transactions 200 183 235 255 433

Direct carrier billing 21 14 11 11 19

Licenses 30 28 30 29 29

Consulting 5 4 5 2 5

Total 256 229 281 298 486

Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017

Norway 107 96 106 123 141

Sweden 34 31 34 33 49

Denmark 35 29 30 28 33

Baltics 2 2 1 1 1

Finland 16 14 16 15 18

Germany 62 57 64 70 104

Spain 29 29 66

Polen 39

Frankrike 22

Bulgaria 11

Total 256 229 281 298 486

Revenues by operating

segment

Revenues by business

segment



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Personnel costs were, in addition to cost of services rendered, the main cost element. Personnel costs

adjusted for costs related to share-based compensation, were in the fourth quarter 11 percent of net

operating revenues (14 percent).

Adjusted EBITDA, before non-recurring cost, was NOK 61 million (NOK 30 million), equaling an adjusted

EBITDA margin of 12.5 percent (11.7 percent) or an increase of 0.8 percentage points. The increase in

margin versus same quarter last year is mainly due to scale advantages. LINK has a scalable business

model which means that OPEX does not increase in relativity to revenue and gross profit. For the fourth

quarter, a 4 percentage points increase in adjusted EBITDA margin from scale advantages is recorded

compared to corresponding period last year.

EBITDA is reported at NOK 38 million (NOK 22 million) for the fourth quarter after deduction of non-

recurring cost of NOK 23 million (NOK 8 million) related to acquisitions, one-off items due to restructuring

efforts and share based compensation.

Reported depreciation cost in the fourth quarter increased with NOK 13 million compared to

corresponding period last year due. Adjusted for a change in lifetime of customer relationships in fourth

quarter last year, depreciations increased by NOK 9 million. LINK have acquired companies over the last

year, and purchase price allocations of these business combinations have identified significant intangible

assets subject to amortization. About NOK 6 million of the increase in depreciation cost in fourth quarter

relate to amortization of these intangible assets.

Financial items amounted to a negative NOK 8 million (NOK 0 million). NOK 11 million (NOK 4 million)

were interest expenses on sellers’ credits and the senior secured bond. The net impact of currency loss

amounted to NOK 2 million. LINK has implemented hedge accounting in accordance with IAS 39 related

to borrowings in foreign currency to reduce the currency fluctuations of Euro. Net finance is also

impacted by earn-out adjustments on previous acquisitions, amounted to NOK 6 million.

Balance sheet, financing and liquidity

Non-current assets amounted to NOK 1 494 million (NOK 766 million), the increase is due to acquisitions

as customer relations, technology and goodwill from acquired subsidiaries represent a book value of

NOK 1 394 million. Investments in R&D amounted to NOK 19 million (NOK 8 million) resulting in NOK 83

million in book value.

Existing markets are defined as the subsidiaries as reported in fourth quarter in 2016. Acquired business inlude the acquisition of Didimo-Jet Group, GMS, Voicecom,

30

17

3032

61

Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017

Adjusted EBITDA,(NOKm)

= Adjusted EBITDA margin

11,7 %

-2,4 %

-0,9 %

4,0 %

-0,5 % 0,5 %

12,5 %

Q4 16 GM1 pr market GM1 mix Delta OPEX Delta OPEX Margin effect Q4 17

Existing markets Groupfunctions

Aquired entities

Adjusted EBITDA% development,QonQ

10,8%7,3% 10,8% 12,5%11,7%



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Trade receivables and other receivables amounted to NOK 413 million (NOK 170 million), the increase is

mainly a result of acquisitions. The cash balance is strong with NOK 343 million (NOK 188 million).

Total equity amounted to NOK 725 million (NOK 565 million) or 32 percent of balance sheet value (50

percent). Long term liabilities amounted to NOK 942 million (NOK 206 million). Further details can be

found in Note 6 “Long term liabilities”.

Net cash from operating activities for 2017 was positive with NOK 120 million (NOK 52 million).

Outlook and way forward The market for B2C mobile services has been a double-digits growth market over the last years. LINK

expects this trend to last, as more and more businesses, public services and organizations are forced by

customers’ and users’ demands to use mobile devices as the key channel for communication. LINK is

experiencing a higher growth rate than the markets in which it operates.

LINK is currently delivering a wide variety of mobile messaging services and mobile solutions. LINK sees

that businesses communicating with their customers via LINK’s advanced cloud-based messaging

services, gain a strong advantage in their customer relations. LINK is now fueling the development of

new and attractive mobile solutions ranging from innovative in-app mobile messaging, customer club and

loyalty programs, to creative mobile payment solutions. LINK is currently developing a mobile

intelligence offering to its existing customers. This increased insight puts LINK in a leading position to

give targeted and valuable advice to its customers, on how best to deploy LINK’s mobile messaging and

solutions to their business. The Scandinavian market for developing and deploying state of the art mobile

solutions is amongst the most innovative in the world. LINK intends to capitalize on the knowledge from

the Nordic markets to access and expand new underdeveloped markets.

It is the opinion of the company that LINK is well positioned to pursue new profitable growth initiatives.

LINK has a solid customer portfolio, a highly scalable technology and an experienced organization. The

R&D capacity is good, and the business models are agile. LINK is well prepared to further strengthen its

position in the fast growing B2C market for mobile services. We see that the current growth level, both

organic and non-organic, will continue through our strategic planning period.

LINK will constantly seek to streamline its operations and development activities across our footprint to

ensure that we optimize our use of resources and synergies. Some key activities related to this work are:

• Consolidate our messaging and solution platforms

• Strengthening our sales profile in each of our markets

• Drive innovation through standardized common product and solutions for all our markets

Expected annual recurring synergies from scaling up and consolidation activities ranging from NOK 50 to

70 million (full year effect end of 2019) with corresponding EBITDA improvement of 2-3 percentage

points.



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Consolidated Income Statement Consolidated Income Statement Note 4Q 2017 4Q 2016 YTD 2017 YTD 2016

Operating revenues 3 485 770 256 387 1 294 002 621 606

Total operating revenues 485 770 256 387 1 294 002 621 606

Cost of services rendered 350 658 170 603 897 351 391 255

Personnel costs 51 112 35 986 185 759 114 610

Other operating expenses 23 201 19 796 70 905 48 310

Total operating expenses 424 971 226 385 1 154 015 554 175

Adjusted EBITDA 3 60 799 30 002 139 987 67 431

Restructuring costs 5 025 7 641

Share based compensation 5 5 727 6 060 19 212 18 038

Expenses related to acquisitions 11 757 1 535 26 209 11 939

EBITDA 38 290 22 407 86 924 37 454

Depreciation intangible assets 9 15 279 2 453 41 710 24 274

Operating profit 3 23 010 19 954 45 213 13 180

Interest income 80 405 961 718

Other financial income 6 647 6 725 7 684 11 037

Interest expenses 6 11 269 4 020 33 781 7 867

Other financial expenses 3 937 2 953 21 123 6 980

Net financial items -8 479 157 -46 260 -3 092

Profit before tax 14 532 20 111 -1 047 10 088

Income tax 1 239 -3 667 -4 307 -5 417

Profit for the period 15 771 16 444 -5 354 4 671

Earnings per share (NOK/share)

Earnings per share 1,11 1,66 -0,39 0,47

Diluted earnings per share 1,08 1,51 -0,39 0,42

Profit attributable to:

Owners of the company 15 771 16 444 -5 354 4 671



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Consolidated statement of comprehensive income Statement of comprehensive income Note 4Q 2017 4Q 2016 YTD 2017 YTD 2016

Profit for the period 15 771 16 444 -5 354 4 671

Other comprehensive income

Items that may be reclassified to profit or loss

Net investment hedge -28 774 -24 585

Translation differences of foreign operations 49 791 -36 67 240 -973

Net other comprehensive income that may be reclassified to profit or loss in subsequent periods 21 017 -36 42 655 -973

Items that will not be reclassified to profit or loss in subsequent periods

Other comprehensive income for the period 21 017 -36 42 655 -973

Total comprehensive income for the period 36 788 16 408 37 301 3 697



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Consolidated Balance Sheet Consolidated Balance Sheet (NOKk) Note 4Q 2017 4Q 2016

Assets Non-current assets Intangible assets 8 1 477 018 757 752

Equipment and fixtures 7 000 6 304

Deferred tax assets 9 676 2 136

Total non-current assets 1 493 694 766 192

Current assets Trade receivables and other receivables 412 940 169 513

Cash and cash equivalents 342 658 187 924

Total current assets 755 598 357 437

Total assets 2 249 292 1 123 629

Equity and liabilities Share capital 7 14 267 13 087

Share premium 7 508 376 399 749 Other equity 8 202 179 152 433

Total equity 724 822 565 269

Deferred tax Deferred tax 99 730 46 280

Total deferred tax 99 730 46 280

Long-term liabilities Seller's credit 6 168 231 117 332

Debt to financial institutions 88 350 Bond loan 6 773 214

Other long-term liabilities 258

Total long-term liabilities 941 703 205 682

Short-term liabilities Sellers credit short term 6 29 109 19 821

Trade and other payables 433 645 204 954 Tax payable 7 156 8 245

Short-term debt to financial institutions 73 378

Short-term liabilities Bond loan 6 13 128 Total short-term liabilities 483 037 306 398

Total liabilities 1 524 470 558 360

Total equity and liabilities 2 249 292 1 123 629



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Statement of changes in equity Statement of changes in equity (NOKk)

Note Ordinary

shares Share

premium Other

equity Total

equity

Balance at 31.12.2016 13 087 399 749 152 433 565 269

Comprehensive income for the period Profit for the period -5 354 -5 354

Other comprehensive income for the period 42 655 42 655

Total comprehensive income for the period 37 301 37 301

Contributions by and distributions to owners Issue of share capital 1180 108 627 -1 525 108 282

Employee share-option schemes 13 970 13 970

Total contributions by and distributions to owners 1 180 108 627 12 445 122 252

Balance at 31.12.2017 14 267 508 376 202 179 724 822

Note Ordinary

shares Share

premium Other

equity Total

equity

Balance at 31.12.2015 9 641 102 773 29 374 141 788

Comprehensive income for the year Profit for the period 4 671 4 671

Exchange rate differences -973 -973

Total comprehensive income for the year 3 697 3 697

Contributions by and distributions to owners Issue of share capital 3 446 296 976 112 345 412 767

Employee share-option schemes 7 017 7 017

Total contributions by and distributions to owners 3 446 296 976 119 362 419 784

Balance at 31.12.2016 13 087 399 749 152 433 565 269



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Consolidated Cash Flow Statement Consolidated Cash Flow Statement (NOKk) 4Q 2017 4Q 2016 Year 2017 Year 2016

Cash flow from operating activities Profit before tax 14 532 20 111 -1 047 10 088

Taxes paid -9 447 -5 080 -19 242 -8 284

Depreciation and amortization 15 280 2 453 41 711 24 274

Adjustment for share-based payment 5 727 3 239 19 212 18 038

Adjustment for expenses related to acquisitions 19 190 1 535 33 850 11 939

Net interest in profit and loss 11 189 -157 32 820 3 093

Interest received 147 622 Other financial items -2 712 13 439 Change in trade receivables and other receivables -109 078 -2 224 -127 151 -65 103

Change in trade and other payables 88 575 -20 253 131 298 69 222

Change social security tax share based payment -2 917 -5 242 -11 021

Net cash flow from operating activities 30 485 -376 120 270 52 246

Cash flow from investing activities Acquisition of subsidiary, net of cash acquired -206 236 -10 388 -381 086 -118 571

Purchase price adjustment subsidiary, net of cash 4 176 -16 105 Expenses related to acquisitions -19 190 -1 535 -33 850 -11 939

Purchase of tangible assets -1 162 -1 466 -1 774 -4 042

Purchase of intangible assets -18 716 -7 588 -52 207 -24 444

Net cash flow from investing activities -241 129 -20 977 -485 023 -158 996

Cash flow from financial activities Net interest paid -2 827 -2 165 -21 577 -5 060

Other financial items 8 029 2 856 Proceed from borrowings 269 629 717 553 147 000

Repayment of borrowings -33 908 -3 894 -206 920 -16 117

Proceeds from issuing new shares -266 123 587 8 268 129 842

Net cash flow from financial activities 240 656 117 528 500 179 255 665

Foreign exchange effect on cash 23 749 -683 19 308 -1 065

Net change in cash and cash equivalents 53 761 95 492 154 733 147 850

Cash and cash equivalents at the beginning for the period 288 897 92 432 187 924 40 075

Cash and cash equivalents at the end of the period 342 658 187 924 342 658 187 925



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Selected notes to the accounts

Note 1 – General information LINK Mobility Group ASA is a private limited company registered in Norway. LINK Mobility Group ASA is

the parent company of the LINK Mobility Group (LINK) and owns 100 percent of the subsidiaries LINK

Mobility AS and Vianett AS in Norway, LINK Mobility in Sweden, LINK Mobility in Denmark, Link Mobility

Group in Germany, Link Mobility Group in Finland, LINK Mobility SIA in the Baltics, Link Mobility and

Global Messaging Solutions in Spain, Voicecom in Bulgaria, Comvision in Poland and Netmessage in

France. LINK is headquartered in Oslo, Norway.

LINK is the leading provider of B2C mobile messaging and services in the main European markets. LINK

provides services that enable companies, public services and organizations to have mobile

communication with and deliver mobile services to their customers and users. LINK offers products and

services extending from mobile messaging, marketing, payment, databases and applications. LINK’s

business is classified into the business segments; Mobile Messaging, Mobile Solutions and Mobile

Intelligence.

Note 2 – Basis for preparation / Accounting Policies

The consolidated interim financial statements for the fourth quarter of 2017 have been prepared in

accordance with IAS 34 “Interim Financial Reporting”. The financial statements should be read in

conjunction with the annual financial statements of the financial year 2016, which have been prepared in

accordance with IFRS as adopted by EU, and the financial statements for the three in quarters 2017 that

have been prepared in accordance with IAS 34 “Interim Financial Reporting”. The accounting policies

adopted are consistent with those of the previous financial reporting.

The interim consolidated financial statements for the fourth quarter of 2017 were approved by the Board

of Directors of Link Mobility Group ASA on the 8th of February 2018.

The interim consolidated financial statements for the fourth quarter of 2017 have not been audited or

reviewed by the auditors.

LINK’s presentation currency is Norwegian kroner (NOK), which is also the parent company’s functional

currency. All amounts are stated in NOK 1 000.

Consolidation

The consolidated financial statements show the total financial results and financial position of the parent

company, LINK Mobility Group ASA and its subsidiaries that are 100 percent owned by LINK Mobility

Group ASA and are fully consolidated in the consolidated financial statement. Subsidiaries acquired in

2017 are included in the consolidated financial statement from the date of closing the transactions.

Voicecom and Comvision are consolidated in the financial statement from October 2017 and

Netmessage is consolidated from November 2017.



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Note 3 – Segment reporting The tables below show the revenues generated by business segments and operating segment.

Revenues by business segment 4Q 2017 4Q 2016 Year 2017 Year 2016

Transactions 432 764 200 145 1 106 321 465 339

Payments 19 045 21 220 56 152 53 397

Licenses 29 304 29 998 115 436 85 763

Consulting 4 657 5 024 16 093 17 107

Total 485 770 256 387 1 294 002 621 606

Direct costs by business segment 4Q 2017 4Q 2016 Year 2017 Year 2016

Transactions 329 525 151 183 832 476 339 352

Payments 14 819 14 700 43 787 36 195

Licenses 4 874 3 940 18 524 13 171

Consulting 1 440 781 2 564 2 537

Total 350 658 170 603 897 351 391 255

Revenues per country (operating segment) 4Q 2017 4Q 2016 Year 2017 Year 2016

Norway 141 279 107 310 465 797 333 954

Sweden 49 206 34 078 147 630 100 715

Denmark 32 960 34 848 120 434 100 976

Baltics 1 321 2 138 5 391 7 948

Germany 104 117 61 986 294 589 61 986

Finland 18 022 16 028 63 047 16 028

Spain 66 262 124 511 Bulgaria 11 055 11 055 Poland 39 495 39 495 France 22 051 22 051

Total 485 770 256 387 1 294 002 621 606

Direct costs per country (operating segment) 4Q 2017 4Q 2016 Year 2017 Year 2016

Norway 91 213 65 899 290 265 203 855

Sweden 39 238 25 537 113 957 69 627

Denmark 20 750 19 728 66 255 53 977

Baltics 987 1 621 4 126 5 977

Germany 85 451 48 813 233 982 48 813

Finland 10 208 9 006 35 704 9 006

Spain 50 603 100 853 Bulgaria 8 152 8 152 Poland 27 812 27 812 France 16 245 16 245

Total 350 658 170 603 897 351 391 255



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Adjusted EBITDA by operating segment 4Q 2017 4Q 2016 Year 2017 Year 2016

Norway 27 266 17 713 89 851 50 793

Sweden 4 827 2 274 10 454 8 327

Denmark 4 782 7 141 22 326 15 973

Baltics -38 548 43 278

Germany 12 767 4 629 32 783 4 629

Finland 3 933 4 228 12 248 4 228

Spain 9 537 14 875 Bulgaria 1 259 1 259 Poland 8 472 8 472 France 2 751 2 751 Group cost -14 755 -6 535 -55 074 -16 799

Adjusted EBITDA 60 799 30 002 139 987 67 431

* All EBITDA figures are before share-based compensation and expenses related to acquisitions

EBIT by operating segment 4Q 2017 4Q 2016 Year 2017 Year 2016

Norway 24 159 14 653 79 240 13 884

Sweden 2 986 1 302 5 853 4 951

Denmark 906 6 188 12 037 13 536

Baltics -41 545 33 263

Germany 12 473 4 015 31 087 4 015

Finland 3 694 4 216 11 345 4 216

Spain 7 878 13 019 Bulgaria 723 723 Poland 7 662 7 662 France 2 369 2 369

Group cost -39 799 -10 964 -118 156 -27 685

EBIT 23 010 19 954 45 213 13 180

Note 4 – Related party transaction

There have been no transactions with related parties of significant importance in the period.

Note 5 – Options

Allotment of share options has been consistent with resolutions of LINK’s general meetings, lastly LINK’s

Annual General Meeting on 27 April 2017, which granted the Board of Directors an authority to increase

the share capital of LINK with up to NOK 750 000 in connection with share option programs for

employees in LINK. The authorization is valid until 30 June 2018. Authorization to grant share options is

held by the CEO and the Chairman of the Board of Directors jointly or by the Board of Directors. All

options have an exercise schedule and expired options will lapse without any compensation to the

holder. If the options are exercised, the price per share shall be equal to the agreed strike price. No fees

were paid nor will be paid for the options. In general, share options have a vesting period of 3 years and

the strike price is set in accordance with the value of LINK’s shares as registered on the Oslo Stock

Exchange at the time of signing of the option agreement in question.

If the options are exercised, LINK Mobility Group ASA may choose to issue shares, or to transfer shares

from its own stock of shares, in either case against payment of the strike price specified above. Option

agreements contains provisions regarding the lock up period, and the consequences for remaining share



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options in case of a possible termination of employment. There are 1 001 674 outstanding options to

executive management and other key employees of LINK with the following agreed average strike price:

Average strike price Remaining share options

27.8 133 340

35 66 667

45 350 000

50 33 333

119 16 667

120 50 000

128 50 000

141 50 000

147 16 667

158 50 000

166 185 000

1 001 674

The fair value of the options is calculated when they are allotted and expensed over the vesting period.

The fair value at grant date is determined using an adjusted form of the Black Scholes Model, that

considers the strike price, the term of the option, the impact of dilution (where material), the share price

at the grant date, expected price volatility of the underlying share and risk-free interest. A cost of NOK

5.7 million (including accrued social security tax) has been charged as an expense for the fourth quarter.

Note 6 - Long-term liabilities

LINK Mobility Group ASA completed in February 2017 the issuance of EUR 50 million senior secured

bonds in the Nordic bond market. Settlement was on the 24 February 2017, with final maturity the 24

February 2022. The bond issue has a fixed coupon of 4.75 % p. a. On November 14 Link Mobility Group

ASA completed a EUR 30 million tap issue to fund future acquisitions in line with the communicated

strategy. The bond issue is booked to amortized cost. For details regarding LINK's borrowings, see table

below:

Bond issue: Amounts in million

Outstanding debt

Currency Amortized cost EUR

Amoritzed cost NOK

Maturity Term Interest Due date interest

Bond issue 80 EUR 78.7 773.2 24.02.2022 5 years 4.75 % Half yearly

Accrued interest bond is classified under short term liabilities bond loan in balance

statement.



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Seller’s credit:

Purpose Outstanding

debt Currency

Outstanding debt NOK

Maturity Term Interest Due date interest

Acquisition of Responsfabrikken A/S 16.7 DKK 22.0 29.06.2019 3 years 5 % Quarterly

Acquisition of Linus AS 6.8 NOK 6.8 30.09.2019 3 years 5 % Quarterly Acquisition of Labyrintti Group 3.0 EUR 29.5 30.09.2019 3 years 5 % Quarterly Acquisition of Whatever Mobile Group 7.0 EUR 68.9 30.09.2019 3 years 5 % Quarterly

Acquisition of Didimo Group 2.2 EUR 21.5 31.03.2020 3 years 5 % Quarterly

Acquisition of Vianett AS 24.3 NOK 20.8 Specified

below Quarterly, 2 years 4.75 % Quarterly

Acquisition of Voicecom 1.3 EUR 12.6 02.10.2020 3 years 4.75 % Quarterly

Acquisition of Netmessage 1.5 EUR 15.2 Specified

below Half yearly, 1 year 4.75 % Quarterly

Total 197.3

Seller’s credit from the acquisition of Vianett, initial amounted to NOK 27.7 million, is paid in equal

quarterly instalments over 24 months, starting from 1. October

Seller’s credit from the acquisition of Netmessage, initial amounted EUR 1.5 million, is paid in two equal

instalments, with due date 30 April and 30 October 2018

Sellers credit with instalments with due date within 12 months are classified as seller’s credit short term

in balance statement, total amounted to NOK 29.1 million

Note 7 – Increase in share capital

The total of 477 806 new shares with par value NOK 1 were issued in fourth quarter 2017, increasing the

share capital from 13 789 656 to NOK 14 267 462.

The Board of Directors decided to increase the share capital with NOK 96 683 by issuing 96 683 new

shares with par value NOK 1 at the price NOK 124.50 per shares at its meeting 2 October 2017. The

shares were issued to the sellers of Voicecom AD.

The Board of Directors decided to increase the share capital with NOK 381 123 by issuing 381 123 new

shares with par value NOK 1 at the price NOK 109.50 per share at its meeting 19 October 2017. The

shares were issued to the sellers of Comvision Sp. z.o.o.

Note 8 – Business combinations

Acquisition of Voicecom AD, Bulgaria

On 2 October 2017, LINK Mobility Group ASA acquired 100 % of the voting equity instruments of

Voicecom AD. Voicecom is one of the leading providers of value added mobile services in Bulgaria with

a market share of approximately 40%. Voicecom’s offices are located in Sofia and has 32 employees.

The acquisition was completed based on an agreed enterprise value of EUR 3.82 million, on a cash-free

and debt-free basis. The enterprise value is based on an adjusted EBITDA of EUR 0.683 million



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multiplied by a factor of 6. The purchase price under the transaction will, subject to customary

adjustments, be settled as follows:

• 1/3 of the purchase price in cash upon closing,

• 1/3 of the purchase price as sellers' credit to be paid within three years after closing. Interest of 4.75%

per annum is to be paid in quarterly arrears, and

• 1/3 of the purchase price in LINK shares

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill

based on a provisionary purchase price allocation are as follows:

(amounts in NOKk) Book value Adjustment Fair value

Customer relationships 163 9 784 9 947

Technology 3 352 650 4 003

Deferred tax asset 113 - 113

Net working capital 3 366 - 3 366

Cash and cash equivalents 1 609 - 1 609

NET ASSETS 8 604 10 434 19 038

Fair value of consideration paid (NOKk)

Cash 12 053

Seller’s credit 12 053

Link shares 12 053

TOTAL CONSIDERATION 36 160

Allocation of purchase price (NOKk)

Equity purchase price 36 160

Book value of equity (6 343)

Excess value 29 817

Book value of intangible assets to be allocated 3 515

Excess value to be allocated 33 332

Customer relationships 9 947

Technology 4 003

Sum intangible assets 13 950

Goodwill excl. deferred tax liability 19 382

Deferred tax liability 1 043

TOTAL GOODWILL 20 426

Acquisition of Comvision Sp. z. o. o., (SMSAPI), Poland

On 19 October 2017, LINK Mobility Group ASA acquired 100 % of the voting equity instruments of

Comvision Sp. z o. o., providing services under the brand of SMSAPI. SMSAPI has a strong presence in

the Polish market, leading the market for self-service mobile messaging in Poland with a market share of



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more than 40%. SMSAPI is located in Gliwice and has 37 employees. The acquisition was completed

based on an agreed enterprise value of EUR 16 million on a cash-free and debt-free basis. The

enterprise value is based on an estimated EBITDA for 2017 of EUR 2.66 million multiplied by a factor of

6. The purchase price under the transaction will, subject to customary adjustments, be settled as follows:

• 40% of the purchase price in cash upon closing,

• 34% of the purchase price on Escrow Account to be paid in two equal installments 6 and 18 months

after closing, and

• 26% of the purchase price in LINK shares




Customer relationships - 44 746 44 746

Technology 12 739 6 180 18 919

Deferred tax asset 269 - 269

Net working capital 7 667 - 1 447 6 220


NET ASSETS 35 526 49 479 85 005


Cash 119 923

Link shares 42 135




Book value of equity -35 778

Excess value 126 281

Book value of intangible assets to be allocated 12 990



Technology 18 919


NWC (accounts receivables overdue) (1 447)

Sum NWC (1 447)




Acquisition of Netmessage SARL, France

On 31 October 2017, LINK Mobility Group ASA completed the acquisition of 100 % of the voting equity

instruments of Netmessage SARL. Netmessage has a strong position in the French market and is one of



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the leading mobile messaging and marketing providers in France. The agreed enterprise value of the

transaction is EUR 9.8 million, on a cash -free and debt-free basis and assuming a normalized level of

working capital. The enterprise value is based on a normalized EBITDA of EUR 1.65 million multiplied by

a factor of 6. The purchase price under the transaction will, subject to customary adjustments, be settled

as follows:


• 15% of the purchase price as sellers' credit to be paid in two equal instalments 6 and 12 months after

closing. Interest of 4.75% per annum is to be paid in quarterly arrears, and

• 15% of the purchase price to be held in Escrow account and released in two equal instalments 6 and

12 months after closing




Customer relationships - 31 825 31 825

Technology 278 10 609 10 887

Fixed assets 527 - 527

Other financial assets 156 - 156

Deferred tax asset - - -

Net working capital -2 445 - -2 445


NET ASSETS 6 076 42 434 48 510


Cash 82 983

Sellers credit 15 232




Book value of equity -6 076

Excess value 92 139

Book value of intangible assets to be allocated 278



Technology 10 887







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Purchase price allocation (PPA)

The above purchase price allocations are provisional and based on the information available at the

reporting date for LINK Group for fourth quarter.

Note 9 – Non-current assets LINK has depreciated customer relationships recorded in the balance sheet linearly over five years until

third quarter 2016. Based on analysis of customer churn and the remaining useful lifetime of the

customer relationships recorded in the balance sheet, it is assessed to be more than five years from the

acquisition dates. Based on the analysis, LINK has prolonged the depreciation period of the customer

relationships acquisitions to 10 years (from the acquisition date).

As a result of the acquisition strategy of the Group, depreciation has increased related to excess values

of the acquired companies as well as depreciation of intangible assets in these entities.

Depreciation (amounts in NOKk) Q1 2017 Q2 2017 Q3 2017 Q4 2017 Year 2017

Business units 2 979 3 160 3 967 5 340 15 455

Excess value acquired companies 4 572 5 398 6 355 9 939 26 265

Total 7 551 8 559 10 322 15 279 41 710

Note 10 – Events after the reporting period Acquisition of Horisen Messaging, Switzerland

On 5 January 2018, LINK Mobility Group ASA completed the acquisition of 100 % of the voting equity

instruments of Horisen Messaging located in Rorschach. Horisen Messaging is the leading mobile

messaging provider in Switzerland with more than 30% market share and a strong international network.

The agreed enterprise value of the transaction is EUR 9.0 million, on a cash -free and debt-free basis

and based on a normalized EBITDA of EUR 1.8 million multiplied by a factor of 5.

The purchase price under the transaction will, subject to customary adjustments, be settled as follows:

• 57% of the purchase price in cash upon closing

• 43% of the purchase price in LINK shares upon closing

Acquisition of Simple SMS Group, Austria

On 24 January 2018, LINK Mobility Group ASA acquired 100 % of the voting equity instruments of

Simple SMS Group, a strong positioned mobile messaging provider in Austria with approximately 25%

market share in the small and medium sized business segment. Simple SMS Group’s offices are located

in Wels and has 8 employees. The acquisition was completed based on an updated estimated enterprise

value of EUR 2.242 million, on a cash-free and debt-free basis. The enterprise value is based on an

adjusted EBITDA of EUR 0.358 million multiplied by a factor of 6.25. The purchase price under the

transaction will, subject to customary adjustments, be settled as follows:


• 20% of the purchase price as sellers' credit to be paid within three years after closing. Interest of 4.75%

per annum is to be paid in quarterly arrears

• 50% of the purchase price in LINK shares



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Acquisition of SMS.it, Italy

In January 2018 LINK announced signing of term sheets regarding the acquisitions of the Italian mobile

messaging company SMS.it, its second acquisition in the Italian market. The agreed enterprise value of

SMS.it is EUR 8.011 million, on a cash-free and debt-free basis and assuming a normalized level of

working capital. The purchase price is based on a multiple of 6.9 times 2017 estimated adjusted

EBITDA. SMS.it expect to report revenues for 2017 of EUR 10.8 million. The acquisition will be settled

with 1/3 to be held on Escrow Account, 1/3 in cash, and 1/3 in LINK shares.

New share capital

In connection with the acquisition of Horisen Messaging, the Board of directors resolved to issue 328

529 new shares in the Company as partial consideration to the sellers. In connection with the acquisition

of Simple SMS Group, the Board of directors resolved to issue 65 969 new shares in the Company as

partial consideration to the sellers. In connection with the acquisition of Archynet S.r.l (Total Connect),

the Board of directors resolved to issue 75 310 new shares in the Company as partial consideration to

the sellers. In relation to exercise of options by company CSO, the Board of directors resolved to issue

33 333 new shares. The Company's new share capital is NOK 14 770 603 divided into 14 770 603

shares, each with a nominal value of NOK 1.

Definitions

Alternative Performance Measures (“APM’s”)

The European Securities and Markets Authority (ESMA) has issued guidelines on Alternative

Performance Measures (“APMs”) for listed issuers effective from 3 July 2016. An APM is a financial

measure of historical or future financial performance, financial position, or cash flows, other than a

financial measure defined or specified in the applicable financial reporting framework.

In this, the Group presents certain alternative performance measures (“APMs”), including EBIT, EBITDA,

adjusted EBITDA and adjusted EBITDA margin. The Group believes that APMs such as EBIT and

EBITDA are commonly reported by companies in the markets in which it competes and are widely used

by investors in comparing performance on a consistent basis without regard to factors such as

depreciation and amortization, which can vary significantly, depending upon accounting methods

(particularly when acquisitions have occurred) or based on non-operating factors. Below follows a brief

description of these APMs:

• EBIT means Earnings Before Interest and Taxes. EBIT is a performance measure applied to express

profitability of operating activities. EBIT is presented in note 3 “Segment reporting”.

• EBITDA means Earnings Before Interest, Taxes, Amortization, Depreciation and Impairments. LINK

Mobility has presented EBITDA in the consolidated statement of profit and loss because

management believes that the measure provides useful information regarding the Group’s ability to

service debt and to fund capital expenditures and provides a helpful measure for comparing its

operating performance with other companies.

• Adjusted EBITDA means EBITDA deducted by expenses related to significant one-time, non-

recurring events such as acquisitions and restructuring activities, legal advisors and share-based

compensation. LINK Mobility has presented adjusted EBITDA in the consolidated statement of profit

and loss because management believes the measure provides useful information regarding

operating performance.

• Adjusted EBITDA margin is presented as adjusted EBITDA as a percentage of operating revenues

in the respective periods.

LINK Mobility Group ASA

Langkaia 1

0150 Oslo, Norway

IR Contact Thomas Berge Email: [email protected]

Mobile phone: +47 41 31 90 28

mailto:[email protected]

LINK Mobility Group ASA Financial Results Fourth quarter...

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