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Origo hf. created by the merger of Nýherji hf., and subsidiaries TM Software ehf. and Applicon ehf.
REYKJAVIK - January 31, 2018 - Origo presents the results for the fourth quarter and full year 2017
Our net income in the preceding year of operations was ISK 433 million, which marks a solid improvement from our 2016 earnings of ISK 383 million. At the same time EBITDA decreased from ISK 1,021 million to ISK 928 million. Revenue grew by 2%, which is somewhat below expectations. This modest growth in income can be attributed both to a decline in equipment sales as compared to the previous year as well as the strengthening of the Icelandic króna, since a large portion of the Company's revenues are either in foreign currencies or linked to foreign exchange rates. On the expense side, rising payroll costs due to collective bargaining wage increases and wage drift was the largest contributing factor. Together these factors explain the year-on-year decline in EBITDA. It should be noted, however, that the Company hedges some of its foreign exchange exposure, which is reflected positively in the 2017 results.
Fourth quarter revenues came in lower than expected, declining year-on-year. This is chiefly because equipment sales to large customers did not meet the record levels achieved in the fourth quarter of the previous year.There was, however, decent revenue growth in most other areas, particularly in the sale of the company's own software solutions. We are very happy with the reception to our Kjarni payroll and human resource system, which has seen its subscription revenue double year-on-year, as well as the CCQ quality management solution, which is used for the implementation of quality management systems and GDPR. There is robust demand for security solutions such as QRadar and Guardium, which enterprises use to review and monitor their own systems as well as in the implementation of GDPR. Sales of PC equipment are holding steady and there is significant growth in the sale of audio and visual solutions. We are particularly pleased to welcome the large number of new customers who in recent months have decided to outsource their IT operations to us.
Tempo sales were strong during the year, particularly in the latter half. After somechallenging platform upgrades undertaken in the first half of the year, customers have responded positively to the new version of Tempo Cloud for Jira, as reflected in strong fourth quarter revenue growth and a 38% rise in revenues for the full year. Tempo Timesheets is the most popular product on the Atlassian Marketplace, and the Tempo Planner and Tempo Budgets products also rank high. The improvements made to Tempo last year have laid the foundation for the integration of Tempo with other cloud services in addition to JIRA from Atlassian. Tempo for Slack was released at the end of the year and was well received; we are now focusing on opportunities for growth, both within and outside Atlassian.
In October, we initiated a formal sales process for Tempo , with the investment bank AGC Partners serving as our consultant during the process. The goal is to sell a significant stake to a partner who has a track record in developing and scaling of global software companies and can support further revenue growth and value creation over the next 3-5 years. The process is on schedule and is expected to be completed in the first half of the year.
Over the last year and the beginning of 2018, special attention has been focused on strengthening the foundations of the group for the future. One aspect of this has been significantly increasing our investment in solution development, in addition to acquiring new solutions and knowledge which fits well with our solution offering and the needs of our customers. These include the Caren car rental system, the Timian digital purchasing solution, and an excellent team from AGR who will add Dynamics NAV to our impressive range of enterprise solutions. The merger of Nýherji, Applicon and TM Software under a new name, Origo, will also reap benefits, both in terms of reduced costs and enhanced service to customers.
The results for the year must be seen as acceptable in view of the challenging operating environment as of late. Efforts have been made to reduce costs, on the one hand through restraints on staffing and payroll costs and on the other hand through the cost efficiencies achieved by the Origo merger. This will continue to be the focus of management given the challenging labour market conditions. While cost increases driven by domestic conditions will continue to be a challenge, we remain steadfast in our efforts to further improve the operations and strengthen our revenue base for the future.