Jena, 25 July 2019 – INTERSHOP Communications AG (ISIN: DE000A0EPUH1), a leading independent provider of innovative solutions for omni-channel commerce, significantly expanded its strategically focused cloud business in the second quarter. Incoming orders in the cloud segment totaled EUR 3.9 million in the first six months, up 79% on the same period of the previous year. The progress made in the strategic restructuring of the company is also reflected in a positive revenue development. After a restrained start to the year, revenues of EUR 7.9 million in the second quarter of 2019 reached the previous year’s level. This is an increase of 8% compared to the first quarter. At EUR 15.2 million, total consolidated revenues were still about 5% below the level achieved in the first six months of the previous year (EUR 16.0 million).
As expected, earnings before interest and taxes (EBIT) remained negative due to the ongoing transformation from a license provider to a provider of cloud solutions and amounted to EUR -3.8 million in the first six months (previous year: EUR -2.0 million). After EUR -2.1 million in the first quarter of 2019, the loss was reduced to EUR -1.6 million in the second quarter. With a view to the still valid annual targets, the company expects a further improvement of the earnings situation in the second half of the year.
At segment level, cloud and subscription revenues increased by 18% to EUR 3.0 million in the reporting period (previous year: EUR 2.5 million). Cloud ARR (annual recurring revenues) rose by 38% to EUR 6.2 million at the end of June 2019 (previous year: EUR 4.5 million). License and maintenance revenues fell by a slight 4% to EUR 5.0 million in the first six months of 2019. Service revenues were up 26% on the first quarter of 2019 due to new cloud projects and compensated for the expiration of a major project. At EUR 7.2 million, service revenues in the first half of the year were still 12% below the first six months of the previous year (EUR 8.3 million).
Dr. Jochen Wiechen, CEO of INTERSHOP Communications AG: “Our cloud business picked up further steam in the second quarter and we are well on our way to achieving our targets for 2019. Our optimism is fueled, on the one hand, by rising recurring cloud revenues and higher new cloud orders and, on the other hand, by a trend reversal in the service segment in the second quarter. With the help of the additional funds from the capital increases, we will push ahead the company’s further restructuring into a leading provider of digital B2B commerce platforms in the second half of the year.”
The gross margin decreased by 8 percentage points to 33% as a result of the changed revenue structure. The cloud margin climbed from 34% to 35%. Operating expenses increased by 2% to EUR 8.8 million. Marketing and sales expenses rose by 5% to EUR 4.6 million. R&D expenses increased by 2% to EUR 2.5 million. Administrative expenses dropped by 7% to EUR 1.7 million. Earnings before interest and taxes (EBIT) amounted to EUR -3.8 million (previous year: EUR -2.0 million). Earnings before interest, taxes, depreciation and amortization (EBITDA) stood at EUR -2.4 million (previous year: EUR -1.0 million). The net loss for the period after taxes amounted to EUR -3.9 million (previous year: EUR -2.1 million).
The company’s asset base improved in particular due to two capital increases. As a result, cash and cash equivalents increased to EUR 10.4 million and equity to EUR 18.5 million at the end of June 2019, up 43% and 36%, respectively, on the end of 2018. The equity ratio climbed from 60% to 69%. Cash flow from operations stood at EUR -2.4 million, compared to EUR -1.8 million in the previous year.
The Intershop Management Board continues to project an increase by more than 10% in total consolidated revenues for the financial year 2019. With gross profit and the gross margin expected to improve slightly, EBIT are assumed to still remain slightly negative.
The interim report for the first six months of 2019 is available at https://www.intershop.com/en/financial-reports.
Intershop Communications AG (founded in Germany 1992; Prime Standard: ISH2) is the leading independent provider of omni-channel commerce solutions. Intershop offers high-performance packaged software for internet sales, complemented by all necessary services. Intershop also acts as a business process outsourcing provider, covering all aspects of online retailing up to fulfillment. Around the globe more than 300 enterprise customers, including HP, BMW, Würth, and Deutsche Telekom run Intershop solutions. Intershop is headquartered in Jena, Germany, and has offices in the United States, Europe, Australia, and China. More information about Intershop can be found online at www.intershop.com.
This news release contains forward-looking statements regarding future events or the future financial and operational performance of Intershop. Actual events or performance may differ materially from those contained or implied in such forward-looking statements. Risks and uncertainties that could lead to such difference could include, among other things: Intershop's limited operating history, the unpredictability of future revenues and expenses and potential fluctuations in revenues and operating results, significant dependence on large single customer deals, consumer trends, the level of competition, seasonality, risks related to electronic security, possible governmental regulation, and general economic conditions.