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Net sales for the quarter were MSEK 46 (45).
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Net losses after tax decreased substantially to 34 MSEK (62 Q1 2016) which includes one-time non-recurring write offs of 11 MSEK. One-time write offs in Q1 include non-recurring costs of 8.2 MSEK relating to closing the Lund and Norrköping offices announced in the quarter and other items totaling 3.0 MSEK including inventory write downs.
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Gross margin in the quarter was 35% (40%) which is slightly higher than the 34% reported for Q4 2016 but lower than the gross margin of 40% achieved in Q1 2016. The year-over-year gross margin decrease is mainly due to the addition of Pen Generations to the group and the increasing portion of revenue that it represents.
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Overhead costs in the quarter amounted to 48 MSEK (80). This is considerably lower than previous quarters and 40% lower than Q1 2016 due to the cost saving activities.
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Earnings per share after dilution for the quarter were SEK -0.01 (-0.06).
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Anoto has reached a new agreement with SMark Co., Ltd. (SMark) regarding Anoto DNA (ADNA). SMark will invest 5 million USD in Anoto and use Anoto's microdot pattern in all of its products. Anoto will receive 20% of all of SMark’s ADNA revenue. This investment was completed in May.
- Restructuring and cost reduction efforts are beginning to show positive signs in the financial results although Anoto still faces financial challenges in the near term. For further information, see “Risks and Uncertainties”.
CEO Comments:
Anoto’s focus in 2017 continues to be on achieving profitability by concentrating on just three existing related business areas (Livescribe Retail business, Enterprise Forms and Education Business) and achieving growth through the Anoto DNA initiative.
In Q1 2017, we continued our initiatives to restructure the business and announced our decision to close down our Lund, Norrköping and Wetherby offices. This decision to close regional offices was motivated by the need to consolidate decision making and increase communication, as much as the need to reduce costs. The company suffered from the costs of miscommunication and the lack of communication. Customers were confused as to who to contact and accountability and responsibilities were not clear.
Anoto had ten offices worldwide last year. When the restructuring of the business is complete, Anoto will have two.
Interestingly, despite a reduction of over 100 in the headcount and the closing down of 7 offices globally over the previous year, gross revenue was not affected by the restructuring as it increased 2% vis-a-vis 2016 while costs were 40% lower than in Q1 2016.
Productization of Anoto DNA (ADNA) moved forward energetically in Q4 of 2016 and an enhanced release was made in Q1 of 2017. Business and technical cooperation with SMark has also continued and in Q1, we reached a new agreement with SMark regarding ADNA.
SMark will invest 5 million USD in Anoto and SMark will use Anoto's microdot pattern in all of its products. Anoto will also receive 20% of all of SMark’s ADNA revenue. Anoto will pay 20% of its revenue to SMark only if Anoto uses technology developed by SMark in relation to printing and copy protection. This investment was finalised on May 4th.
OUTLOOK
With most of the cost-reduction and efficiency-enhancement activities initiated in April 2016 now completed, Anoto’s focus is shifting to profitable growth. Sales activities are concentrating on high-growth areas such as emerging markets and governments. To support these accelerating sales Anoto is investing in a new platform approach to pen hardware and ongoing software innovation to meet the needs of changing business environments. Anoto has recently released V1 of ADNA for select developers and an ADNA demo app will shortly be widely available to support the various parties with whom we are working to commercialize this business. Anoto is also hosting a global solutions roundtable in Seoul in June 2017 where Anoto partners will convene to share their latest technological developments and solutions. We believe this increased collaboration will further stimulate growth through geographic expansion.
The key theme for 2016 was “cost”; the key theme for 2017 is “profitable growth”.
Joonhee Won
CEO, Anoto Group AB (publ)
