Wayfinder expects to break even in Q2 2009

Sony Ericsson X1 Xperia
Sony Ericsson X1 Xperia
Swedish LBS application provider Wayfinder announced last week its financial result for the first nine months of 2008 witha loss after tax of MSEK -59.1 ($7.5 million) against MSEK -41 ($5.2 million) in the first nine months of 2007. Net sales amounted to MSEK 42.3 ($5.5 million) against MSEK 60.8 ($7.9 million) in the same period last year. Service revenue, Wayfinder’s core business, totalled MSEK 27.5 ($3.6 million) against MSEK 36.2 ($4.7 million) last year. These lower figures are explained by large one-time orders from Sony Ericsson for a bundle with the P1i Smartphone (which also included a Bluetooth GPS mouse) in the same period last year.

The gross margin amounted to 52% during the first nine months of 2008 (44% last year). “The relatively low gross margin was due to the fact that, during the first nine months of the year, Wayfinder was still delivering a number of separate GPS receivers, at a low gross margin, along with the Navigator services offer to Sony Ericsson’s P1i users”, explained Wayfinder. “During Q4 2008, gross margin is expected to return to above 60%, and to continue at that level during 2009. Wayfinder continues to have a good margin of over 65% in its core activity, service”.

Paying user base up 50%
Wayfinder’s paying user base grew by 50% to 294,000 from (196,000 in the same period last year) and its total user base expanded to 2.4 million from 1.3 last year, an increase of 91%.

During the third quarter Wayfinder’s global collaboration with Sony Ericsson on GPS handsets intensified and the Sony Ericsson GPS-enabled C905 was launched with Wayfinder factory-installed navigation system. Additionally, Wayfinder received a first order from Hutchison 3G in Australia where 12 months navigation will be included on GPS handsets.

After the close of the reporting period, Wayfinder launched its Navigator software on Sony Ericsson
GPS phones in the O2 network in Great Britain. O2 customers (pre-paid customers and invoice customers) will be able to use Wayfinder services for a monthly payment. In addition, orders have been received as a result of the new agreement with Sony Ericsson which includes packaging the recently-launched X1 Xperia handset with prepaid navigation licenses from Wayfinder on certain markets. Wayfinder also expects “to enter into a comprehensive LBS partnership with at least one additional global mobile phone manufacturer during 2009”.

Strengthened financial position
The Swedish company also said its financial position “strengthened with up to MSEK 60 [$7.8 million] through a combination of loan facility and a factoring line of credit to support growth ambitions”.

Wayfinder has also started to implement a more focus strategy, “with fewer but larger global customers where the opportunity for growth for Wayfinder's products is greatest”. In addition, Wayfinder is closing down its Finland development center and relocating it to Lund (Sweden) and Cluj Napoca (Romania). The implementation of this program is expected to generate annual cost savings of approximately SEK 40 million ($5.2 million), or a 30% reduction on current cost levels.

These savings are forecasted to achieve their full impact during the first quarter of 2009. When the program is fully in place, Wayfinder's annual costs will be approximately SEK 80 million ($10.4 million).

Wayfinder’s management considers that the company is in a good position to generate a positive operating cash flow on a monthly basis during the second quarter of 2009.

The Swedish company has also unveiled some revenue models for 2009 and 2010. In 2008 Wayfinder expects a revenue around €15 per paid user from 275,000 to 400,000 customers; in 2009 the management plans around €8 per paid customers (from 3 to 5 million customers), and €5 in 2010 (from 10 to 12 million customers).

Thursday, November 6th 2008

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