TextMagic : consolidated audited annual report for the financial year 2023

TextMagic
Annual report TextMagic AS's consolidated audited annual report for the financial year 2023

2023 was a challenging year for the TextMagic Group with significant strategic changes. The events that took place during the year are considered by management to be in the best interest of the future growth and sustainability of the Group.

The slowdown in revenue growth of the Group's flagship product, the Textmagic SMS platform, was impacted by a number of factors, including significant changes in US SMS regulations, a decline in demand following the Covid pandemic and a challenging economic environment that negatively impacted our customer portfolio. The Group responded promptly to these challenges by adjusting development plans, making additional investments, and implementing price increases.

Last year, the Group's first acquisition took place on June 1, 2023, when it acquired 100% of the shares in the website and e-commerce management platform Voog for EUR 1.1 million.

2023 also includes a strategic decision to terminate development of the Touchpoint customer service software in order to optimize the use of resources and focus on Textmagic and Voog as revenue generating platforms. Marketing and development of the Touchpoint brand and domain will continue with a view to applying it to other projects in the future.

As a result of this decision, the result for 2023 includes a loss from discontinued operations of EUR 23.39 million. The Group's net loss for 2023 is EUR 20.66 million, which will be covered by the retained earnings and share premium.

As part of a regulatory compliance review, management identified a US sales tax liability for which a provision of EUR 1.1 million has been recorded. Management has proactively started to adjust prior period tax liabilities to ensure compliance with US laws and regulations. In addition, measures are being prepared to effectively collect sales taxes in future periods. The exact amount of the liability is expected to be determined by the end of the third quarter of 2024 and will be paid out of free cash flow.

Group's key figures of 2023

The consolidated total revenue of the group for 2023 amounted to EUR 14,970 thousand (2022: EUR 13,831 thousand). The financial results of the Voog platform have been consolidated from the date of acquisition and the impact on the group's revenues was EUR 390 thousand.

The Group's cash-flow generation capacity remains strong, with no interest-bearing liabilities, and liquidity indicators remain at a high level. In 2023, a cash distribution of EUR 2.55 million (0.30€/share) was made to the shareholders based on the resolution of 2022. The Management Board intends to make a proposal to the shareholders to decide on a distribution in the amount of EUR 2.98 million (0.35€/share) through a bonus issue and then a reduction of the share capital at the end of 2024.

	2023	2022	Change
Revenue	€14.97 M	€13.83 M	+8 %
EBITDA*	€6.23 M	€6.02 M	+3 %
Ärikasum*	€2.56 M	€2.51 M	+2 %

*Continuing operations. The Touchpoint software project is reported as a discontinued operation.

TextMagic SMS platform's sales results

	2023	2022	Change
Revenue (thousand)	€14,580	€13,831	+5 %
Volume of SMS messages (thousand pcs)	264,908	294,016	-10 %
Active users*	35,410	37,934	-7 %
Average revenue per user (ARPU)**	€412	€364	+13 %

* An active user is any unique paying customer who has used TextMagic SMS platform services during the reporting period.

**ARPU is calculated as Revenue / Active users.

The Group's main objectives for 2024

In 2024, the Group will focus primarily on the development and marketing of the Textmagic SMS platform, with the goal of restoring the platform's growth rate by improving the platform's functionality and user experience. The functionality developed for the Touchpoint software will be partially integrated into the Textmagic product to enhance the value proposition of the product.

In addition, the functionality of the Voog.com websites and e-commerce platform will be enhanced. The goal is to expand the customer base internationally in order to increase sales in foreign markets.

At the management level, the priority is to maximize the well-being of the various target groups, including customers, team members and shareholders, in support of the Group's core objective of increasing revenue and profitability. Management strives to ensure annual distributions to shareholders with the intention of gradually increasing them.

TextMagic AS's consolidated audited annual report for 2023 is attached to the announcement in PDF format.

There are no differences with respect to the financial results of the audited consolidated annual report in comparison with the consolidated 12-month unaudited interim report published on February 27, 2024.

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR 2023

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(in thousands of euros)	31.12.2023	31.12.2022
Non-current assets
Property, plant and equipment	105	191
Intangible assets and goodwill	32,854	51,944
Total non-current assets	32,959	52,135
Current assets
Fixed-term deposits	2,500	0
Trade and other receivables	24	1
Prepayments	231	130
Cash and cash equivalents	3,900	9,145
Total current assets	6,655	9,276
TOTAL ASSETS	39,614	61,411
Liabilities
Current tax liabilities	232	102
Trade and other payables	791	988
Payables to shareholders	0	2,550
Other provisions	1,117	739
Contract Liabilities	1,659	1,546
Total current liabilities	3,799	5,925
Total liabilities	3,799	5,925
Equity
Share capital	850	850
Share premium	51,242	51,242
Reserve capital	85	0
Other reserve	2 035	1,651
Foreign currency translation reserve	(21)	(41)
Retained earnings	2,281	(526)
Current year profit/loss	(20 657)	2,310
Total equity attributable to owners of the parent	35,815	55,486
Total equity	35,815	55,486
TOTAL EQUITY AND LIABILITIES	39,614	61,411

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

(in thousands of euros)	01.01.2023 - 31.12.2023	01.01.2022 - 31.12.2022
Revenue	14,970	13,831
Other income	93	309
Work performed by the entity and capitalized	2,651	1,540
Goods, raw materials and services	(4,786)	(4,996)
Other operating expenses	(1,715)	(1,555)
Employee expenses	(4,801)	(2,984)
Depreciation, amortization and impairment of non-current assets	(3,670)	(3,513)
Other expenses	(180)	(121)
Operating profit	2,562	2,511
Loss from discontinued operations	(23,392)	(193)
Financial income	183	0
Profit before tax	(20,647)	2,318
Income tax	(10)	(8)
Profit for the period	(20,657)	2,310
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation differences	20	(49)
Other comprehensive income for the period, net of tax	20	(49)
Total comprehensive income for the period	(20,637)	2,261

CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands of euros)	01.01.2023 - 31.12.2023	01.01.2022 - 31.12.2022
Cash flows from operating activities
Profit for the period	2,735	2,503
Adjustments for:
Financial income	(183)	0
Depreciation and amortization	3,670	3,513
Other adjustments	489	551
Total adjustments	3,976	4,064
Changes in trade and other receivables	(25)	76
Changes in contract liabilities	(96)	88
Changes in prepayments	(102)	(1)
Changes in trade and other payables	519	98
Net cash from operating activities - continuing operations	7,007	6,828
Net cash from operating activities - discontinued operations	(882)	(190)
Net cash from operating activities - continuing operations	6,125	6,638
Cash flows from investing activities
Fixed-term deposits	(2,500)	0
Interest received	183	0
Payments for acquisition of subsidiary, net of cash acquired	(1,100)	0
Payments for property, plant and equipment	(16)	(192)
Payments for software development costs	(2,278)	(1,150)
Net cash used in investing activities - continuing operations	(5,711)	(1,342)
Net cash used in investing activities - discontinued operations	(3,129)	(2,137)
Net cash used in investing activities	(8,840)	(3,479)
Cash flows from financing activities
Payments to shareholders	(2,550)	0
Net cash from financing activities - continuing operations	(2,550)	0
Net cash from financing activities - discontinued operations	0	0
Net cash from financing activities	(2,550)	0
TOTAL CASH FLOWS	(5,265)	3,159
Cash and cash equivalents at the beginning	9,145	6,035
Effect of movements in exchange rates on cash held	20	(49)
Cash and cash equivalents at the end	3,900	9,145

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands of euros)	Share Capital	Share premium	Reserve capital	Other reserves	Unrealized exchange rate differences	Retained earnings	Total equity
Balance as of 31.12.2021	850	53,792	0	153	11	(535)	54,271
Profit of the period	0	0	0	0	0	2,310	2,310
Other comprehensive income for the period	0	0	0	0	(52)	0	(52)
Other changes in equity	0	(2,550)	0	1,498	0	9	(1,043)
Balance as of 31.12.2022	850	51,242	0	1,651	(41)	1,784	55,486
Profit of the period	0	0	0	0	0	(20,657)	(20,657)
Other comprehensive income for the period	0	0	0	0	20	0	20
Other changes in equity	0	0	85	384	0	497	966
Balance as of 31.12.2023	850	51,242	85	2,035	(21)	(18,376)	35,815

Additional information:
Getter Grünmann
TextMagic AS, CFO
[e-mail]
https://investor.textmagic.com/

Attachments:
TextMagic AS_2023. aasta konsolideeritud aastaaruanne.pdf
TextMagic AS_2023 consolidated annual report Translation of the Estonian original.pdf