Quarterly Interim Statement for the First Quarter of 2017
Quarterly Interim Statement for the First Quarter of 2017 Table of Contents General Information and Business Activities Economic Development of the Group Development of Segments Financial Status Opportunities and Risks Outlook artnet Authorities, Addresses, Investor Relations, artnet Stock price of lots sold increased by 68%, rising from 6,563 USD in Q1 2016 to 11,023 USD in Q1 2017. The sell-through rate increased by 8% points to 42%, also as compared to the previous year. Revenue from the Price Database decreased by 2% in comparison to 2016, mainly due to exchange rate effects. Due to an increasingly competitive market environment, revenue for the Gallery Network fell by 7% from the previous year. Total advertising revenue fell slightly by 1% as compared to last year, mainly due to a number of luxury advertising clients shifting their budgets to the second quarter. As of March 2017 and 2016, gross profit 3.05 million USD and 3.23 million USD, respectively, representing a decrease of 182k USD or 6%. This decrease in gross profit is due to an General Information and Business Activities is a publicly traded corporation headquartered in Berlin, Germany. was incorporated under the laws of Germany in 1998. The address of its registered office is Oranienstraße 164, 10969 Berlin, Germany. holds 100% of the shares in ( Artnet Corp. ), which is located in New York, NY, USA. Artnet Corp. holds 100% of the shares in artnet UK Ltd. The Group s goal is to provide art collectors, galleries, publishers, auction houses, and art enthusiasts with a comprehensive suite of products that allows users to buy, sell, and research art online. The Price Database contains over 11 million auction records, allowing for in-depth art market research. Users can find artworks that are currently available for sale in the Gallery Network, Auction House Partnerships, or on artnet Auctions, an online transaction platform. artnet News, the 24-hour newswire, informs users about the events, trends, and people shaping the global art market. Economic Development of the Group As of March 2017 and 2016, artnet s revenue was 5.00 million USD and 4.85 million USD, respectively, representing an increase of 150k USD or 3%. artnet Auctions continued its strong growth since the second half of 2016 with a 33% increase in revenue in Q1 2017, as compared to the previous year. The average increase in the cost of sales, as artnet has made a number of significant new hires this year. As of March 2017 and 2016, operating expenses totaled 3.08 million USD and 2.91 million USD, respectively, representing an increase of 170k USD as compared to the same quarter in the previous year. This is mainly due to higher expenses in selling and marketing. As a result, consolidated earnings decreased sharply to -53k USD in the first quarter of 2017 as compared to 287k USD in the first quarter of 2016. artnet remains confident it will return to positive growth in all segments moving forward, and is energized by several recent additions to the team. The positive effect of new hires is already felt and will take greater effect as the year progresses. There are also a number of significant new features and improvements to the site scheduled to launch in 2017 that will enhance artnet s growth strategy. Development of Segments Management closely monitors the Contribution Margin II (revenue minus direct and indirect variable costs) for each segment. The Contribution Margin II decreased for all segments except for artnet News as compared to the first quarter of 2016. This decrease is the result of the aforementioned new hires as artnet dedicates resources to the future of artnet Auctions and
the Price Database. Despite the largest revenue increase for artnet Auctions, the Contribution Margin II decreased by 153%, mainly due to increased direct costs from investing in artnet Auctions. The Contribution Margin II for the Price Database segment decreased by 17%, mainly due to increased direct costs. The increase in direct costs is mainly attributable to the investment in Analytics Reports, which will contribute to the projected moderate increase in revenue for the Price Database in 2017. The Contribution Margin II for the Galleries segment decreased by 20%, mainly due to a decrease in revenue and higher direct costs resulting from the development of the Gallery Portal tool. A major success in Q1 2017 was the performance of artnet News: Due to growth in advertising revenue for artnet News, the Contribution Margin II for the segment increased by 40%, though it continues to remain negative. Outlook According to the Outlook published in the 2016 Annual Report, artnet is poised to continue its leadership position in a competitive market. Management expects the momentum of rising revenues, coupled with a moderate increase in expenses, to continue, and therefore do not alter its prognoses for the development of the segments in 2017, as described in the 2016 Annual Report. Berlin, May 12, 2017 Jacob Pabst CEO, Financial Status The financial status of the Group has not changed since the publication of the 2016 Annual Report. While keeping liabilities on a stable level, the Group s operating cash flow was positive again and significantly increased compared to the same quarter last year. Mainly due to the reduction of accounts receivable, cash and cash equivalents increased as compared to December 31, 2016. Opportunities and Risks Since the 2016 Annual Report was published on March 24, 2017, no significant events occurred that may affect the evaluation of future risks and opportunities for the Group. As described in the 2016 Annual Report, the ongoing concern assumption for the Group is endangered by liquidity risks if full payment of damages relating to a copyright lawsuit were to be made at once. Damages of 850k EUR including interest, could be required on short notice for the alleged violation of copyright by a photographer, as determined by the French Court of Appeal. Aside from all legal remedies, artnet continues its efforts to achieve a settlement with the plaintiff. artnet does not believe a full payment of damages will be required in 2017.
Supervisory Board Hans Neuendorf, Chairman Dr. Bernhard Heiss, Deputy Chairman Kilian Jay von Seldeneck Management Board artnet UK Ltd. Addresses Oranienstraße 164 10969 Berlin info@artnet.de T: +49 (0)30 209 178-0 F: +49 (0)30 209 178-29 233 Broadway, 26th Floor New York, NY 10279 USA info@artnet.com T: +1-212-497-9700 F: +1-212-497-9707 artnet UK Ltd. Morrell House 98 Curtain Road London EC2A 3AF United Kingdom info@artnet.co.uk T: +44 (0)20 7729 0824 F: +44 (0)20 7033 9077 Investor Relations You can find information for investors and the annual financial statements at artnet.com/investor-relations. If you have further queries, please send an email to ir@artnet.com, or send your inquiry by mail to one of our offices. German Securities Code Number The common stock of is traded on the Prime Standard of the Frankfurt Stock Exchange under the symbol ART. You can find notices of relevant company developments at artnet.com/investor-relations. Wertpapier-Kenn-Nummer [WKN] ISIN Concept and Production 2017, Berlin A1K037 DE000A1K0375