TIDMTRST
RNS Number : 7862L
Trustpilot Group PLC
15 September 2021
Trustpilot Group plc
15th September 2021
RESULTS FOR THE SIX MONTHSED 30 JUNE 2021 ("H1 FY21")
Re-acceleration in bookings growth continues with a strong
performance across all regions; LTM Net Dollar Retention Rate
improved to 97 per cent; total cumulative reviews +44 per cent and
active domains +42 per cent YoY
Financial Highlights
-- Revenue grew by 31 per cent to USD 62 million in H1 FY21, an
increase of 22 per cent at constant currency
-- Bookings* growth, which provides visibility of future
revenues, continued to re-accelerate, increasing to 28 per cent at
constant currency in H1 FY21 (H1 FY20: 16 per cent), driven by a
strong performance in all geographic regions
-- LTM Net Dollar Retention Rate* rose to 97 per cent, (H1 FY20:
91 per cent), up from 91 per cent for FY20
-- The Group reported a loss for the period of USD 17.2 million
in the first half (H1 FY20: USD 5.8 million), with adjusted
EBITDA** of USD +3.8 million (H1 FY20: USD +1.6 million)
Strategic Highlights
-- Number of reviewed domains* rose 41 per cent to 626 thousand
(H1 FY20: 445 thousand), with number of active domains* up 42 per
cent to 73 thousand (H1 FY20: 51 thousand)
-- The cumulative number of reviews* on the Trustpilot platform
rose by 44 per cent to 144 million (H1 FY20: 100 million)
Current Trading and Outlook
-- We previously provided guidance for high-teens constant
currency revenue growth in the current year. On the back of
stronger H1 FY21 performance, we now expect to achieve a rate of
constant currency revenue growth for the full year consistent with
H1 FY21.
Financial summary
USD 000's H1 FY21 H1 FY20 (+/-) (+/-) %
% constant
actual currency**
Bookings* 75,478 55,007 37 28
LTM Net Dollar Retention Rate* 97 91 7 -
ARR* 134,172 98,618 36 27
Revenue 62,448 47,680 31 22
EBITDA** (11,576) (2,577) 349 321
Adjusted EBITDA** 3,769 1,610 134 121
Loss for the period (17,177) (5,826) 195 202
Adjusted profit** (3,700) (2,077) 78 114
EPS (cents) (4.353) (1.585) 175 181
Adjusted EPS (cents)** (0.938) (0.565) 66 100
* Key performance indicator (KPI) - further detail available on
page 12
** Alternative performance measures (APM) - further detail
available in note 3
Peter Holten Mühlmann, Founder and Chief Executive Officer,
commented:
"This excellent result is a testament to the hard work of all
our employees, as well as the strength of our proposition and brand
among consumers and businesses. I believe it also demonstrates that
our strategy to provide the 'trust layer' for the open commerce
ecosystem is working, by giving consumers confidence in their
online and offline purchasing decisions, and through providing
businesses with an opportunity to build trust, a key factor for
their success."
Enquiries
Trustpilot Group plc
Derek Brown, Head of Investor Relations
Tel: +44 20 4534 5222
Tulchan Communications
James Macey White
Matt Low
Jordan McCulla
Tel: +44 20 7353 4200
Results webcast and conference call
Trustpilot will host a webcast and conference call for analysts
and investors at 09:00 (BST) today.
To register to access the webcast and presentation materials
please visit https://investors.trustpilot.com.
A replay of the webcast will be made available on the investor
website later today.
About Trustpilot
Trustpilot was founded in 2007 with a vision to create an
independent currency of trust.
A digital platform that brings businesses and consumers together
to foster trust and inspire collaboration. We are free to use, open
to everybody and built on transparency.
Trustpilot hosts reviews to help consumers shop with confidence,
and deliver rich insights to help businesses improve the experience
they offer. The more consumers use our platform and share their own
opinions; the richer the insights we offer businesses; and the more
opportunities they have to earn the trust of consumers, from all
around the world.
Trustpilot has over 750 employees and is headquartered in
Copenhagen, with operations in London, Edinburgh, New York, Denver,
Melbourne, Berlin and Vilnius.
Chief Executive's Review
Summary
I am delighted to be reporting our first results as a publicly
listed company. Our successful IPO in March marked a significant
milestone for Trustpilot, raising our profile as a leading global
review platform that brings businesses and consumers together to
foster collaboration and trust, helping us to attract and retain
the very best talent, and gaining the support of new investors as
we focus on the next stages of our development and global
expansion.
In line with the trading update we issued in mid-July, the Group
delivered first half revenue of USD 62 million, an increase of 31
per cent year-over-year on a reported basis, or up 22 per cent at
constant currency. Bookings*, a strong lead indicator of future
revenue growth, increased to USD 75 million, up by 28 per cent at
constant currency, and we ended June with annual recurring revenue*
of USD 134 million, a constant currency increase of 27 per
cent.
As a subscription software business, we were encouraged to see
an improvement in our LTM Net Dollar Retention Rate*, which rose to
97 per cent in the period, compared to 91 per cent a year ago and
91 per cent for the last full financial year.
We saw strong growth across all geographic regions in the
period, as we continued to demonstrate our ability to scale our
business efficiently.
This excellent result is a testament to the hard work of all our
employees, as well as the strength of our proposition and brand
among consumers and businesses. We believe it also demonstrates
that our strategy to provide the 'trust layer' for the open
commerce ecosystem is working, by giving consumers confidence in
their online and offline purchasing decisions, and through
providing businesses with an opportunity to build trust, a key
factor for their success.
The growth we have achieved also reflects an element of recovery
from the impact of the Covid-19 pandemic which affected H1 FY20.
The subsequent re-acceleration in our business that we saw in H2
FY20 has continued, as anticipated, into the first half of this
financial year.
Our strategy
It is central to our strategy to be the global reviews site most
used by consumers, and to be the most trusted. At Trustpilot, we
design for trust and transparency so that consumers can use and
rely on our reviews platform for reassurance that they are dealing
with businesses that are trustworthy. The more that consumers
engage with Trustpilot, through reading and posting trusted
reviews, the greater the reason for businesses to use Trustpilot.
As more businesses engage with their customers on the Trustpilot
platform, the more useful it becomes to consumers and businesses.
This virality between the consumer and business sides of our
platform, where one drives and reinforces the other, lies at the
heart of Trustpilot's organic growth opportunity.
Progress against our strategic objectives
There are several performance indicators we track to assess our
progress against these strategic aims.
* Key performance indicator (KPI) - further detail available on
page 12
As at the 30 June 2021, the total cumulative number of reviews
hosted on the Trustpilot platform exceeded 144 million(1) ,
compared to 100 million a year ago and 121 million as of 31
December 2020. As at the 30 June 2021, over 626 thousand domains(2)
had been reviewed on Trustpilot's platform, compared to 445
thousand a year ago and 529 thousand as of 31 December 2020.
In addition to these core indicators, we also track our progress
against various additional usage metrics. These include the number
of businesses actively using our platform, either as free active
users or as paying business customers, by inviting reviews and, by
displaying their TrustBox, showcasing their reviews and redirecting
consumers to their business profile on the Trustpilot platform. We
also measure the number of review invitations businesses send to
their customers. From a consumer perspective, we measure the number
of cumulative reviews on the platform, and how these are generated
- either through an invitation to leave a review, or
unprompted.
Free active business customer adoption has been accelerating,
with the number of total active domains on the Trustpilot platform
growing to 73 thousand as of the 30 of June 2021, compared to 51
thousand a year ago, up over 42 per cent year-on-year. We have also
seen strong growth in the number of monthly review invitations sent
by businesses, which averaged over 44 million per month in the
first half of the year, an increase of more than 73 per cent
year-on-year. These metrics are significant as they demonstrate the
viral network effect in action, and typically act as a good
indicator of future growth in subscribing business customers, and
ultimately bookings and ARR.
We continually assess our strategic progress with respect to
trust and transparency. We measure the number of fake and
misleading reviews we detect and remove, as well as our response
times in investigating reviews flagged by consumers or businesses
as potentially fake, misleading or in breach of our guidelines. In
2020, out of the 39 million reviews posted on Trustpilot, we
removed 2.2 million that were determined to be fake or harmful, the
majority of which were detected automatically by our proprietary
artificial intelligence algorithms, designed to ensure the
integrity of the content on the Trustpilot platform. In addition to
this, in the first half of the year we published the first
Trustpilot Transparency Report, providing hitherto undisclosed data
and insight into the actions we are taking to protect and promote
trust online.
We strengthened our executive leadership team with the
appointment of Tim Hilpert to the newly created position of Chief
Operating Officer. Tim has significant previous experience of
scaling and leading consumer businesses, and is responsible for
overseeing the global day-to-day commercial, marketing, and product
development operations, as we continue our expansion in the UK,
North America, and Europe.
Our Market
Trustpilot is a leading global review platform that provides
businesses with the opportunity to build trust, a key factor for
business success. Trustpilot is seeking to establish a 'trust
layer' for the open commerce ecosystem, in addition to other
'layers' such as marketing, customer relationship management,
payment and e-commerce infrastructure, across a diverse range of
industries, as consumers look for ways to establish that businesses
are trustworthy. The long-term total addressable global market
opportunity, excluding China, has been estimated at USD 50 billion
(Q1 2021 study commissioned by Trustpilot), with a current
serviceable addressable market of USD 6.3 billion.
Trustpilot provides an open platform, which creates a place
where businesses and consumers can gain actionable insights and
collaborate. Consumers can share feedback, at any time, about any
business with a website and review feedback left by other
consumers.
(1) Including reviews subsequently removed or deleted
(2) Including both claimed and unclaimed domains, and those
subsequently removed from the Trustpilot consumer website
The platform not only facilitates better purchasing decisions,
but also gives consumers the opportunity to recommend businesses,
products, services, and locations based on their experiences.
Businesses can use Trustpilot to actively engage with consumers
that are reviewing their products and services. Any business can
use Trustpilot's basic services for free, where they can view and
respond to consumer reviews.
In addition to this free service, Trustpilot also provides
several paid subscription modules for businesses, providing
increasing levels of functionality and offered on a software-as-a
service ("SaaS") basis. These tools enable Trustpilot's paying
business customers to invite more reviews, manage those reviews, to
derive high-value, actionable insights from them, and to showcase
their TrustScores across their marketing channels. In this way,
Trustpilot generates strong returns for businesses in raising their
profiles, building and demonstrating their trust credentials, and
increasing traffic, conversion, marketing efficiency, and
ultimately revenues.
By fostering trust through direct, open, and collaborative
engagement between businesses and consumers, Trustpilot's platform
helps businesses improve the experience they offer their customers.
This self- reinforcing cycle between businesses and consumers
creates a powerful viral network effect, which is a key driver of
Trustpilot's organic growth. Illustrating this network effect,
during the first half of the year an average of 16 thousand new
domains were added to the Trustpilot platform per month.
Regional Performance
The United Kingdom contributes approximately 40 per cent of
revenue, Rest of World, which is dominated by Europe, contributes
36 per cent of revenue and North America contributes 24 per cent.
(H1 FY20: UK contributed approximately 38 per cent, Rest of World
33 per cent, and North America approximately 29 per cent).
In the United Kingdom we saw 27 per cent constant currency
revenue growth in the period, reflecting strong prior-year bookings
growth, the strength of our Brand, and further improvements in the
efficiency of customer acquisition. Bookings in the region
continued to grow strongly, increasing by 27 per cent at constant
currency in the period.
For the Rest of the World region, we reported a 30 per cent
constant currency increase in revenue in the period compared to a
year ago, with particular strength in Europe. Bookings accelerated
in the region, growing by 36 per cent at constant currency.
North America revenue increased by 6 per cent over the prior
year period, this is in line with expectations and reflects the
impact of lower bookings growth in FY20 which occurred as a result
of Covid-19 and as we transitioned to a product-led go-to-market
model and reduced direct sales headcount in the region. We saw a
notable acceleration in bookings in the region, which increased by
18 per cent year-on-year.
These results were aided by a significant improvement in our LTM
Net Dollar Retention Rate, which rose to 97 per cent in the period
(H1 FY20: 91 per cent). Notably, an improvement in LTM net dollar
retention was seen across all regions and reflects the measurable
return on investment our software tools deliver to business
customers, our ongoing focus on enhancing the value we deliver, and
our success in capitalizing on the cross-sales opportunity that
exists as a result of our modular SaaS product offering.
Innovation
During the first half we continued to invest in innovation and,
in line with our strategy, prioritized four key areas: Prioritising
Trust, Scaling Channels, Product Adoption, and Consumer
Adoption.
- Prioritising Trust
In the first half, we continued to prioritize our investment in
innovation with respect to ensuring trust and transparency on our
platform, introducing 'business verification' and further
highlighting 'trust signals' around domains on our platform.
- Scaling channels
Efficiently scaling our channels is central to our ability to
capitalize on our market opportunity and deliver against our
long-term strategy. In the first half, we launched our E-Commerce
Channel in UK & Europe. Since the period end we have announced
integrations into the Shopify App Store, the WooCommerce
Marketplace, and WIX. These types of integrations are important as
they empower merchants to tap into Trustpilot's automated review
invitations while also being able to showcase their reviews without
having to leave the platform. We have also extended the use of our
powerful data and insights capabilities into our marketing and
sales activities, enabling improved efficiency in our cost of
customer acquisition.
- Product Adoption
In the period, we streamlined the ability for business customers
to automatically invite consumers for reviews and to engage with
the power of Trustpilot. Personalization is a key area of focus for
us, and we added our first wave of personalized Actionable Insights
to help customers increase the return on investment they derive
from Trustpilot. We also introduced video in our Product Reviews
solution, which allows consumers to upload a visual of the product
they have purchased and thus enrich the reviews showcased for a
better shopping experience.
- Consumer Adoption
Using machine learning models to automatically categorise
domains on our platform, we have increased the value for consumers,
helping them to rapidly find relevant businesses on the Trustpilot
platform. We also introduced personalised insights for consumers on
our engagement emails to help them gain more value from the
interaction with Trustpilot.
Trust and Transparency
In the first six months of 2021 we continued to enhance our
ability to detect and remove fake and misleading reviews from the
platform, adding to the actions we take to help build consumer and
business trust in the platform.
In February we published our first Transparency Report,
demonstrating the scale of the protective and safeguarding measures
we deploy as usage of the Trustpilot platform grows. The report
offers an unobstructed view of the most crucial function of our
business: ensuring the authenticity and credibility of Trustpilot
reviews. Today, the vast majority of the fake and misleading
reviews which we encounter are detected and removed automatically
using our sophisticated fraud detection software.
We continue to invest in technology and processes to ensure the
integrity of the content on the Trustpilot platform. Notably,
during the period we deployed automated systems to ensure
consistent enforcement actions are taken when fake reviews linked
directly to a business are detected, and introduced technology to
help us identify and act against the sale of fake and misleading
reviews. This latter investment enables us to automatically block
user profiles linked to review sellers, remove their reviews, and
take appropriate action against businesses that have purchased
these reviews.
This innovative technology-based approach sets a strong
foundation as we scale our platform, and to take effective measures
against the review seller industry going forward.
We have continued to automate the identification and removal of
bad-fit businesses from Trustpilot. In the period we released
technology to automatically block dark web domains, given the high
risk they pose to consumers, and we are using automation to detect
and assess other potentially harmful and illegal businesses as
individuals add them to the platform. Towards the end of the first
half, we released 'business verification' on Trustpilot,
highlighting the steps taken by businesses to verify themselves on
Trustpilot, with this information displayed on their transparency
pages on the platform. This release underpins our commitment to
enhancing the integrity of business verification across the
platform, and further increasing trust throughout the Trustpilot
community.
Sustainability
Trustpilot's Environmental, Social and Governance ("ESG")
strategy is a key area of focus for the Group, overseen by a
cross-functional steering committee, reporting to the senior
management team and the heads of other key functional areas within
the Group.
Our sense of purpose lies at the heart of our organisation and
strategy, as we seek to provide a 'trust-layer' for the open
commerce ecosystem, and our employees are passionate about
Trustpilot's mission to become a universal symbol of trust. We
recognise our responsibility to engage with all of our stakeholders
and we are committed to operating with and promoting sustainable
business practices. We believe that there is a correlation between
corporate responsibility and our future business success.
With respect to our employees (or "Trusties"), we continue to
focus on enriching their experiences both professionally and
personally. We recently communicated our plan to permanently move
to a hybrid model of work that will embrace the flexibility we are
all now looking for, as well as the wonderful magic that happens
when we have Trusties collaborating in shared office spaces
together.
We also launched several initiatives aimed at improving the
mental, physical, and social well-being of our Trusties and
continued our investment into professional development. We are
focused on building future leadership talent and in accelerating
the development of our existing top talent. We also strengthened
our team, building organisational capability and capacity in areas
such as engineering, product development, user experience, data
science and security.
Outlook
We are encouraged by the progress we have made in the first half
of the year and the board remains confident in the strategy and
outlook for the business. We will continue to focus on driving
adoption of the Trustpilot platform by consumers and businesses and
believe we can deliver sustainable revenue growth and margin
expansion over the long-term.
We previously provided guidance for high-teens constant currency
revenue growth in the current year. On the back of stronger H1 FY21
performance, we now expect to achieve a rate of constant currency
revenue growth for the full year consistent with H1 FY21.
As noted, the bookings performance in H1 reflected an element of
recovery and re-acceleration from the disruption caused by COVID a
year ago, hence bookings in H2 will face a tougher comparison and
the rate of growth in the period is likely to be a little lower
than in H1.
Peter Holten Mühlmann , Founder and Chief Executive Officer,
Trustpilot
15th September 2021
Finance Review
Overview
The first half results for 2021 saw an acceleration in bookings*
growth from 16 per cent in H1 FY20 to 28 per cent in H1 FY21
resulting in a 30 June 2021 ending Annual Recurring Revenue
("ARR")* of USD 134 million. Revenue growth of 31 per cent or 22
per cent on a constant currency basis** was driven largely by Rest
of World (RoW) and UK markets.
Loss for the period grew from USD 6 million (12 per cent of
revenue) to USD 17 million (28 per cent of revenue) principally due
to non-recurring costs relating to the Company's initial public
offering (IPO) in March. Adjusted EBITDA** improved from USD 2
million (3 per cent) to USD 4 million (6 per cent) driven largely
by revenue growth.
Revenue
Revenue in H1 FY21 grew to USD 62 million, an increase of 31 per
cent over the prior year or 22 per cent on a constant currency
basis. The actual growth rate was impacted by a weakening USD
relative to the GBP and EUR when compared to the constant currency
growth. Revenue continues to consist of over 99 per cent recurring
revenue from software subscriptions, amortised over the
subscription term.
ARR and Bookings
Annual Recurring Revenue (ARR) and bookings serve as leading
indicators of revenue in subsequent periods. ARR is measured as a
value at a point in time while bookings reflect the annual contract
value of deals signed within that period. As of 30 June 2021, ARR
was USD 134 million, an increase of 27 per cent on a constant
currency basis over the prior year value of USD 99 million. H1 FY21
recorded bookings of USD 75 million, an increase of 28 per cent on
a constant currency basis over the prior year bookings of USD 55
million.
Regional growth trends
As described above, regional bookings growth serves as a leading
indicator of subsequent period revenue growth. For this reason, H1
FY21 regional revenue growth reflected prior year bookings growth.
UK and ROW revenue growth remained strong with 27 per cent and 30
per cent growth respectively in H1 FY21 on a constant currency
basis, while the 6 per cent growth reported for North America
reflects weaker bookings growth in the prior year period.
Bookings growth accelerated on a constant currency basis in all
regions in H1 FY21 compared with the prior year period. The
acceleration in growth was particularly notable on a constant
currency basis in RoW and North America, with RoW growing 36 per
cent in H1 FY21 (up from 22 per cent in H1 FY20) and with North
America growing 18 per cent in H1 FY21 (up from 4 per cent in H1
FY20) while the UK grew 27 per cent in H1 FY21 (up from 20 per cent
in H1 FY20).
* Key performance indicator (KPI) - further detail available on
page 12
** Alternative performance measures (APM) - further detail
available in note 3
USD 000's H1 FY21 H1 FY20 (+/-) % (+/-) %
actual constant
currency
Bookings:
UK 29,750 21,265 40 27
North America 17,574 14,839 18 18
Rest of the world 28,154 18,903 49 36
------- ---------- --------- ----------
Total bookings 75,478 55,007 37 28
Revenue:
UK 25,137 18,013 40 27
North America 14,692 13,827 6 6
Rest of the world 22,619 15,840 43 30
------- ---------- --------- ----------
Total revenue 62,448 47,680 31 22
Cost of sales
Cost of sales, which includes network operating costs as well as
the costs incurred to onboard, support, retain and upsell
customers, was USD 12 million, an increase of 30 per cent on a
constant currency basis, driven primarily by investments into the
retention and expansion of existing customers ahead of future
revenue recognition. These investments, primarily into incremental
staff, have been effective at raising the LTM Net Dollar Retention
Rate from 91 per cent in H1 FY20 to 97 per cent in H1 FY21. Similar
to the bookings and revenue dynamic, improvements in retention
bookings in the current period will be reflected in revenue in the
subsequent period. As a share of revenue, cost of sales grew from
18 per cent in H1 FY20 to 19 per cent in H1 FY21.
Sales and marketing costs
Sales and marketing costs fell slightly in H1 FY21 to USD 21
million, a reduction of 7 per cent on a constant currency basis
compared with the prior year H1 FY20. Sales and marketing costs are
lower in H1 FY21 due to an average sales and marketing headcount of
254 when compared to the prior year H1 FY20 of 328. This headcount
saving is partially offset by a higher average cost per headcount,
higher commissions and higher marketing expenditure. A planned
adjustment to sales staff headcount took place in May 2020 in
response to the crisis caused by Covid-19. As a share of revenue,
sales and marketing costs fell from 45 per cent in H1 FY20 to 34
per cent in H1 FY21.
Technology and content costs
Technology and content costs grew to USD 15 million, an increase
of 27 per cent on a constant currency basis over the prior year H1
FY20. Technology and content investment continues both into staff
and into purchased software and professional assistance. Average
technology and content headcount in H1 FY21 grew to 203 compared
with the prior year H1 FY20 of 185. The focus of these efforts
remains primarily on product and engineering efforts as well as
securing the integrity of our content. As a share of revenue,
technology and content costs grew from 23 per cent in H1 FY20 to 24
per cent in H1 FY21.
General and administrative costs
General and administrative costs grew to USD 30 million, an
increase of 146 per cent on a constant currency basis over the
prior year period. The growth in general and administrative costs
was driven primarily by non-recurring IPO related costs of USD 10
million and an increase in share-based compensation to USD 6
million compared with a prior year cost of USD 2 million in H1
FY20. IPO costs consisted primarily of accounting, legal and
advisory services to enable the March 2020 listing on the London
Stock Exchange. As a share of revenue, general and administrative
costs grew from 24 per cent in H1 FY20 to 48 per cent in H1
FY21.
Cash Flow
Cash outflow from operations in H1 FY21 increased to USD -12
million compared with a cash outflow from operations in H1 FY20 of
USD -2 million. Non-recurring IPO costs represented the largest
driver of the cash outflow increase in addition to outflows related
to the annual company bonus payout.
One-off operating cash items in H1 FY21 included negative
working capital contribution related to the payout of payroll tax
deferral for Covid-19 relief (USD 2.7 million). One-off operating
cash items in H1 FY20 included positive working capital
contribution related to the shifting of the Group's bonus payout
from quarterly to annual frequency (USD 0.6 million) and payroll
tax deferral for Covid-19 relief (USD 2.9 million) as well as a
negative working capital contribution from London office deposit
(USD 1.9 million).
Capex continues to primarily consist of capitalised development
costs and in H1 FY21 this increased to USD 2 million.
Cash inflow from financing activities total USD +56 million
comprised primarily of equity inflows from the primary proceeds
from the IPO new share issuance, as well as exercise price proceeds
from employee warrants exercised at IPO. This inflow is partially
offset by the equity recorded portion of IPO costs, cash outflows
from repayment of term debt and from the principal elements of
lease payments.
Balance Sheet
Meaningful movements in the Group balance sheet when compared to
31 December 2020 consisted primarily of the equity raise resulting
in USD 91 million of cash as of 30 June 2021 and an increase in net
equity to USD 65 million as of 30 June 2021. Non-current
liabilities fell to USD 13 million as of 30 June 2021 with the
repayment of outstanding term debt. Current liabilities fell to USD
48 million as of 30 June 2021 due in part to the release of labour
accruals (USD 3.5 million) related to annual bonus payouts,
partially offset by growth in contract liabilities (USD 2.7
million) driven by growth in bookings.
Foreign exchange
The Group does not hedge foreign currency profit and loss
translation exposures and the statutory results are therefore
impacted by movements in exchange rates. The use of constant
currency translation illustrates underlying activity by
neutralising the impact of currency fluctuations. Constant currency
translation is applied by utilising the monthly average rate from
the most recent period then applying that rate to all historical
periods being compared.
Going Concern
The Group incurred a loss of USD 17 million in H1 FY21 compared
with a loss of USD 6 million in H1 FY20. The Group has cash and
cash equivalents of USD 91 million as of 30 June 2021 compared with
a balance of USD 41 million as of 30 June 2020. The increase in
cash and cash equivalents is driven primarily by primary proceeds
of USD 64 million raised in connection with the IPO in March 2021.
The Group has access to undrawn revolving credit facility of up to
USD 30 million. The Group has not breached any associated covenants
and does not forecast a breach in future periods.
In consideration of going concern, management prepares forecasts
of revenue growth with associated costs and cash requirements. In
addition to forecasting expectations, management prepares downside
scenarios meant to illustrate the impact of reasonable worst case
performance and the resulting impact to the financials, with and
without mitigating actions. Even under these downside scenarios
there is sufficient liquidity to finance Group operations,
management does not believe there to be any reasonable downside
scenario which would cause the Group to have insufficient liquidity
to be considered a going concern in the forecast periods.
Hanno Damm
CFO, Trustpilot Group plc
15th September 2021
Operating metrics
Trustpilot utilises a range of key performance indicators
("KPIs") to assess its performance, and this document contains
certain operating measures that are not defined or recognised under
IFRS. Trustpilot considers bookings, LTM Net Dollar Retention Rate,
annual recurring revenue, number of reviewed domains, number of
claimed domains, number of active domains, number of subscribing
customers and number of reviews to be the KPIs used by Trustpilot
to help evaluate growth trends, establish budgets and assess
operational performance and efficiencies.
Trustpilot believes that these KPIs provide alternative measures
by which to assess the operating performance of the Group and,
together with IFRS measures, are useful in evaluating the Group's
operating performance. The KPIs used in this Financial Statements
should not be considered superior to, or a substitute for, measures
calculated in accordance with IFRS. The following table presents
Trustpilot's KPIs for H1 FY21 and H1 FY20.
USD 000's except per cent and millions H1 FY21 H1 FY20 (+/-) (+/-)
% %
actual constant
Bookings: currency
UK 29,750 21,265 40 27
North America 17,574 14,839 18 18
Rest of the world 28,154 18,903 49 36
--------- -------- ------------ -----------
Total bookings(1) 75,478 55,007 37 28
LTM Net Dollar Retention Rate (per cent)(2) 97 91 7 -
KPIs at period end
Annual Recurring Revenue(3) 134,172 98,618 36 27
Number of reviewed domains(4) 626 445 41 -
Number of claimed domains(5) 481 348 38 -
Number of active domains(6) 73 51 42 -
Number of subscribing customers(7) 21 18 16 -
Number of reviews(8) 144 100 44 -
(1) Bookings is defined as the annual contract value of
contracts signed in a given period. Nearly all of Trustpilot's
contracts with customers have a duration of 12 months, and in the
event a contract length exceeds 12 months the value is adjusted to
the 12-month equivalent for the purpose of calculating bookings.
Bookings are a leading indicator of future revenue.
(2) LTM Net Dollar Retention Rate is defined as the annual
contract value of all subscription renewals in the last twelve
months divided by the annual contract value of subscriptions
expiring in the last twelve months. LTM Net dollar retention
includes the total value of subscriptions with existing Subscribing
Customers, and includes any expansion of contract value with
existing Subscribing Customers through upsell, cross-sell, price
expansion or winback. Twelve months of data is used as nearly all
subscriptions are twelve months in duration, ensuring the
appropriate alignment of renewal activities.
(3) Annual recurring revenue is defined as the annual value of
subscription contracts measured on the final day of a reporting
period.
(4) Number of reviewed domains that have been reviewed on
Trustpilot's platform as at 30 June (including domains subsequently
removed from the Trustpilot consumer website).
(5) Number of claimed domains that have been reviewed on
Trustpilot's platform as at 30 June (including domains subsequently
removed from the Trustpilot consumer website) and have been claimed
by the domain owner.
(6) Number of domains, in the months of June, that received an
invited review or were the subject of a TrustBox impression during
the month.
(7) Number of customers with a paid subscription for services on
Trustpilot's platform as at 30 June.
(8) Number of reviews hosted on Trustpilot's platform as at 30
June (including reviews subsequently removed or deleted).
Principal risks and uncertainties
At Trustpilot, we adopt a robust approach to risk management to
ensure that we can achieve our mission of becoming a universal
symbol of trust and grow our business in a sustainable way.
We have a dedicated risk management function that is responsible
for maintaining the integrity of our platform and promoting a risk
conscious culture across all levels of our organisation.
Our Board of Directors ("Board") is responsible for setting the
tone in relation to our approach to risk and guides our risk
management behaviours. The Board ultimately sets expectations in
relation to conduct, trust and integrity, defines our risk
appetite, approves material decisions around our risk profile and
assesses potential risks which may impact our strategy, reputation,
operations or business model.
The Board is supported by our Audit Committee, which is
responsible for reviewing, reporting and managing risk. The Audit
Committee reviews our internal controls and risk management systems
and is accountable for the review, maintenance and updating of our
risk register. The Audit Committee reports to our Board on matters
within its duties and responsibilities.
Operational management of risk is the responsibility of our
Executive Leadership Team ("ELT") who report to the Audit Committee
and the Board.
On a day to day basis, we consider all of our employees to be
risk managers and we operate a 'three lines of defence' model. The
first line of defence sits with our function heads within the
organisation and their teams, who are responsible for identifying
and managing risks relevant to their respective areas of
responsibility. The second line of defence provides an independent
review and challenge to our internal controls and the first line's
approach to risk management to ensure adherence to our risk
appetite and policies, which is managed by our dedicated Risk
function. The third line of defence provides independent assurance
on the effectiveness of, and compliance with, our internal
controls, which is managed by our Internal Audit team in
conjunction with the Audit Committee.
Identified risks and mitigants
We monitor, review and manage existing and emerging risks to our
business, which are recorded in our risk register and reported to
the Audit Committee and the Board.
The Board does not consider that the risk factors relating to
the Trustpilot group and its business set out in pages 7-20 the
Prospectus have changed materially since it was published on 23
March 2021. These risks are expected to apply for the remaining
half of the financial year and the principal risks and
uncertainties are summarised as follows with a description of how
we seek to mitigate them:
(1) Trust
Description of the risk and How we mitigate the risk
potential impact
-------------------------------------------------------------------
Our brand and reputation for
trust are of paramount importance. * We have a clear mission to become a universal symbol
Our platform is open to businesses of trust and our strategy is fully aligned to that
and consumers, and any failure mission.
to maintain a consistently
high level of confidence in
our commitment to trust and
transparency, or a public * Our company values to be 'open to all' and to act
perception that content on 'always with integrity' are embedded within our
our platform is fake or misleading culture and our employees are committed to putting
could adversely affect our trust and transparency at the heart of everything we
reputation with businesses do.
and consumers, which could
lead to a reduction in the
number of consumers using
our platform, the number of * We have comprehensive policies and procedures
businesses subscribing to designed to ensure that we only work with businesses
our services and consequently that align with our ethical values. These ensure our
a decrease in revenue. customers are committed to integrity, trust and
transparency and include our Code of Ethics and Bad
Fit Policy. These policies form part of our
relationship with customers and we regularly monitor
compliance. If a business does not align with our
values, then we take appropriate enforcement action,
such as removal from our platform, denial of services,
termination of any paid subscription, consumers
alerts, warnings and other action.
* We have comprehensive policies and procedures
designed to ensure that we only work with businesses
that align with our ethical values. These ensure our
customers are committed to integrity, trust and
transparency and include our Code of Ethics and Bad
Fit Policy. These policies form part of our
relationship with customers and we take enforcement
against in relation to non-compliance, such as
consumers alerts.
* We have comprehensive policies and procedures
designed to ensure that we only work with businesses
that align with our ethical values. These ensure our
customers are committed to integrity, trust and
transparency and include our Code of Ethics and Bad
Fit Policy. These policies form part of our
relationship with customers and we take enforcement
action in relation to non-compliance, such as
consumers alerts.
* We employ automated tools for detecting fake or
fraudulent reviews, including pattern and behavioural
cluster analysis. Any false positives in automated
removals are manually reviewed by our Content
Integrity agents when reported to us.
* Our automated systems analyse every review submitted
to the platform to identify and quickly remove any
reviews which we deem to be fake. In 2020, we removed
over 2.2 million fake reviews from our platform, over
70 per cent of which were detected by our automated
software. A further 1.4 million fake reviews were
detected and removed in H1 2021.
* We have a robust notice and take down procedure,
which allows consumers and businesses to report
reviews they believe to be fake, illegal, harmful or
otherwise in breach of our platform terms and
guidelines. Once reported, we thoroughly investigate
and take prompt enforcement action, such as removing
the reviews from our platform, issuing warnings to
businesses and consumers for repeated breaches
placing consumer alerts on the profile pages of the
businesses involved, as well as issuing warnings and,
in the case of paying customers, terminating the paid
subscription with businesses who might be misusing
our platform.
* We include 'transparent flagging' information on
every business profile on our platform, which allows
consumers to view how often businesses flag reviews
and understand what happens to the review while they
are being investigated.
* We include 'transparent inviting' information on
every business profile on our platform, which allows
consumers to see how businesses receive and collect
reviews on their profile and if they are actively
using automated or manual methods to collect reviews
from consumers.
* Our business transparency pages provide an overview
of how businesses have used our platform during the
preceding 12 months, including the sources of reviews,
whether or not the business pays to access additional
Trustpilot products and services and star
distribution by review source.
* Our platform labels reviews to explain to consumers
if a review has been collected by a business and the
collection method they have used. Where a business
collects reviews using one of our automated
collection methods which are automatically triggered
following an experience with a business (or a
consumer has otherwise given us documentation to
prove their buying or service experience), we label
the reviews as 'verified'.
* We prohibit businesses from using incentives to
gather feedback from consumers.
* We have released a transparency report highlighting
our commitment to trust and transparency and
reporting on our efforts to combat fake reviews and
misuse of our platform, and plan to regularly release
subsequent reports.
* We continually monitor, and where appropriate,
respond to press coverage in relation to our business
and proactively monitor our platform to protect
businesses from any influx in negative, non-genuine
reviews arising as a result of media coverage.
* We continue to invest in best-in-class technology and
people to further improve the trust and transparency
of our platform, including fraud detection software
utilising machine learning and artificial
intelligence and the creation of a R&D team dedicated
to trust & transparency.
------------------------------------------------------------------
(2) Activities of businesses and consumers
Description of the risk and How we mitigate the risk
potential impact
------------------------------------------------------------------
Our terms of use and platform
guidelines prohibit businesses * Our terms of use and guidelines clearly prohibit
and consumers from using our problematic content and misuse of our platform,
platform to post illegal or including reviews which are illegal, harmful,
harmful content, engage in defamatory, misleading or otherwise not based on a
illegal activities or make genuine experience. Our terms also specifically
improper use of the platform. exclude Trustpilot liability for user generated
content on our platform.
Nevertheless, businesses and
consumers may engage in such
prohibited activities, create
or promote the creation of * As mentioned above, in connection with our efforts to
false or misleading reviews maintain the trust and transparency of our platform
and otherwise attempt to use (1), we take extensive steps to detect and remove
Trustpilot's platform for improper content and to take action against those who
fraudulent purposes. Such post such content or engage in any misuse of our
activities could negatively platform.
impact Trustpilot's brand
and reputation.
Further, in many jurisdictions, * We have a dedicated Policy & Public Affairs team that
laws relating to the liability works closely with regulators to help shape future
of providers of online services legislation around liability and enable regulators to
for activities of third parties understand our business.
on their platforms are being
tested by actions based on
defamation, invasion of privacy,
unfair competition, copyright * We have a dedicated Litigation team that robustly
and trademark infringement defends any actions seeking to impose liability on
and on other bases. Any court Trustpilot for user generated content and activity on
ruling or other governmental the platform, and where appropriate, take proactive
regulation or action that enforcement action. We also utilise external
imposes liability on providers specialists where necessary.
of online services in connection
with the activities of such
third parties could result
in Trustpilot becoming liable * We regularly take enforcement action against those
for the actions of businesses who misuse our platform, employing human expertise
and consumers on the platform. and automated tools. For example, we issued 695
automated cease and desist letters to businesses in
H1 2021 and blocked 9,778 user profiles linked to
those selling reviews.
------------------------------------------------------------------
(3) Increased regulation and regulatory scrutiny
Description of the risk and How we mitigate the risk
potential impact
------------------------------------------------------------------
The growth and development
of * As a business dedicated to trust & transparency, we
e-commerce, along with negative are constantly making improvements and enhancements
publicity and allegations to our platform to ensure compliance with laws and
of false or misleading information, regulations. Please see the extensive steps we take
has led to increasing regulatory in relation to trust in (1) above.
scrutiny of such activities
particularly in the UK, Europe
and the United States.
* We proactively and voluntarily work with regulators
For example, in May 2020, to identify any compliance risks and build strong,
the UK Competition and Markets positive relationships.
Authority (the "CMA") opened
an industry investigation
into several major websites,
including Trustpilot, that * We regularly monitor investigations and enforcement
display online reviews to action taken by regulators against other digital
assess whether those websites service providers to identify any changes that may be
are taking sufficient measures needed to our platform to ensure regulatory
to protect consumers from compliance.
fake and misleading reviews.
Following the investigation,
the CMA announced on 25 June * Our Policy & Public Affairs team is dedicated to
2021 that it has opened a identifying, monitoring, assessing and responding to
formal probe into Amazon and upcoming changes in laws and regulations and working
Google over concerns that with regulators, politicians, Governments and other
they have not been doing enough lawmakers to help shape and influence future
to combat fake reviews on regulation.
their sites.
Whilst the CMA has chosen
not to launch an investigation * We have dedicated internal legal expertise to
into Trustpilot at this time, implement any changes to our platform and business
any failure to take appropriate that are required as a result of new regulations,
measures to combat fake reviews including product legal, regulatory compliance and
or other misleading activity privacy professionals. We also engage external
on its platform could lead counsel where appropriate.
to further or similar regulatory
scrutiny from the CMA or other
regulatory bodies throughout
the world, ultimately leading * We employ a comprehensive compliance framework,
to reputational damage and including policies, guidelines and training to ensure
financial or criminal penalties. awareness of, and compliance with, new regulations.
In addition, as there is mounting
political and social pressure
to tackle illegal and harmful * Our dedicated Risk function maintains our risk
content online, regulators register, which is updated regularly to take account
are introducing new regulations of new risks that may arise from new regulations and
requiring platforms such as regulatory action.
Trustpilot to take action
to quickly and effectively
remove such content, which
could lead to increased compliance
costs. Any failure to comply
with these requirements or
respond to regulatory changes
may result in reputational
damage, fines and other enforcement
action.
------------------------------------------------------------------
(4) Litigation and disputes
Description of the risk and How we mitigate the risk
potential impact
------------------------------------------------------------------
Due to the nature of our business
and being a platform that * We have a dedicated Litigation team which is
hosts user generated content, responsible for handling any claims, litigation or
we may be subject to litigation other proceedings when issued against Trustpilot,
and other legal proceedings using external counsel where necessary for
involving defamation, libel, jurisdiction specific advice.
consumer protection, intellectual
property, commercial disputes
and other matters. We may
also be associated with disputes * We monitor and track litigation and disputes and
between businesses and consumers, regularly assess likelihood of success, impact to the
even where we are not a party business and potential legal costs to inform our
to the dispute (for example, decision making.
disputes relating to the content
of a review).
The outcomes of such proceedings * Our reporting processes allow businesses and
cannot be predicted and could consumers to report content they believe breaches our
have an adverse impact on guidelines at an early stage. This allows us to
our business due to legal identify and take action to address problems early
costs incurred, diversion and minimises the risk of escalation to pre-action
of management resources and and formal litigation
reputational impact.
As set out in our IPO prospectus
in March 2021, a complaint * We have processes in place to identify and act on
was filed in the United States claims issued against any Group company in the
District Court for the Southern locations in which we operate / where we may be
District of New York against subject to proceedings.
Trustpilot Inc and Trustpilot
A/S relating to Trustpilot's
customer renewal practices.
The claim was dismissed by
the court on 29 June 2021
but the complainant has filed
a motion for reconsideration
and further proceedings may
take place in H2 2021.
------------------------------------------------------------------
(5) Failure to innovate
Description of the risk and How we mitigate the risk
potential impact
------------------------------------------------------------------
Failure to develop new technologies
or products and services, * Continuous investment in technology. For example, in
or adapt to consumer or market H1 2021 we released technology to automatically block
trends, such as an increasing 'dark web domains' from our platform.
demand for trust, developments
relating to security and authenticity
of reviews, could adversely
impact our ability to attract * Continued expansion of our R&D team, including at our
businesses and consumers to R&D hub in Edinburgh, which is focused on innovation
our platform and/or grow revenue. in data science and consumer trust online.
* Regular horizon scanning and monitoring of emerging
trends, as well as research into consumer behaviour.
* Peer reviews of similar platforms around the world.
* We employ an agile and collaborative way of working
so that we can innovate and respond to change
quickly.
* We monitor global M&A opportunities to acquire
technology, people and businesses which may advance
our mission to become a universal symbol of trust.
* We actively seek out, and enter into strategic
partnerships, which will allow us to continue to grow
and find new and innovative ways to reach consumers
and businesses.
------------------------------------------------------------------
(6) Competitive environment
Description of the risk and How we mitigate the risk
potential impact
------------------------------------------------------------------
The market for consumer reviews
is evolving and highly competitive. * We monitor competitors and their offerings closely,
Competition could increase and our ELT and Board regularly undertake competitor
in the future from established and market analysis.
competitors and new market
entrants, including companies
that have their own internal
ecosystem reviews such as * We constantly develop, and add new features to, our
Google and Amazon. This could platform to ensure that we continue to remain at the
impact our ability to increase forefront of innovation and provide maximum value to
revenue, maintain or increase businesses and consumers.
contract renewals and maintain
or increase prices.
* We regularly review and adapt our pricing strategies
to ensure that we remain competitive in the market.
* We continue to invest in our brand and our customer-
led marketing approach helps amplify awareness of our
brand and products and services.
* As an open and independent platform, we have a
consumer-facing proposition which allows consumers at
any time to write reviews of any business with a
website and see feedback left by other consumers.
This continues to differentiate us from 'closed'
platforms, which generally only let consumers write
reviews when the business or platform invites them to
do so and/or only enable businesses to interact with
consumers when they pay for that capability and/or
let businesses choose which reviews are published.
* Our commitment to trust and transparency continues to
be a key differentiator between Trustpilot and
competitors.
------------------------------------------------------------------
(7) Covid-19
Description of the risk and How we mitigate the risk
potential impact
-------------------------------------------------------------------
The Covid-19 pandemic and
the measures taken to mitigate * We constantly monitor and evaluate consumer activity
the effects of the pandemic, on our platform and despite the pandemic the number
could continue to cause disruption of reviews continues to grow significantly. Similarly,
to our business and have an our customer base and revenue continues to rise.
adverse impact on our financial
results.
The pandemic has caused heightened * Where appropriate, we support our customers by
uncertainty in the global offering concessions on subscriptions, such as
economy, which could result payment waivers or deferrals.
in a reduction of consumer
transactions, and consequently
the posting of reviews on
Trustpilot, as consumers delay * We successfully transitioned to remote working for
or reduce discretionary purchases. all of our employees by adapting our technology and
Similarly, businesses may ways of working to enable employees to continue to
defer or reduce investment work collaboratively. Whilst our offices will begin
in products and services such to reopen fully, we intend to adopt a new permanent
as those offered by Trustpilot, flexible working policy, which will enable a hybrid
or existing customers may approach of home and office based working.
choose to terminate their
subscriptions. Businesses
may also fail or struggle
financially, limiting their * Employee health and wellbeing are very important to
ability to make timely payments us at Trustpilot and we adopt initiatives to support
to Trustpilot. our employees, such as an enhanced employee
assistance scheme and fully subsidised subscriptions
The pandemic and associated to Headspace.
Government restrictions, could
also mean further home working
for employees, which could
have an adverse affect on * We engage in regular and transparent communications
our collaborative culture with our employees and provide training and
and employee health and wellbeing. guidelines to enable employees to work remotely in an
effective way.
Further travel restrictions
may also restrict the ability
of our employees to meet with
customers and partners to * We continuously monitor government updates and advice,
establish, build and maintain and implement Covid-19 safety measures in our offices
relationships, as well as to protect the physical health of our employees.
adversely effect our efforts
to expand internationally.
The pandemic has also led * We have an established Covid-19 taskforce, made up of
to a global shortage of supply senior employees across various functions which
of electronic equipment (such regularly meet to discuss ongoing issues relating to
as laptops and monitors) and the pandemic and the impact on our business.
other products and services,
which could impact our ability
to procure equipment for employees
and lead to a reduction in * We regularly monitor our supplies of equipment for
productivity. employees, assess against projected hiring levels and
review our third party suppliers to ensure we have
sufficient equipment to ensure that employees have
access to the equipment they need to perform their
role.
* At the outset of the Covid-19 pandemic in 2020,
scenario planning and detailed monitoring of business
performance led to the decision to cut spending and
headcount to improve the cash flow of the business.
We continue to monitor performance across measures
such as sales, expenses and cash flow as the pandemic
progresses.
------------------------------------------------------------------
(8) Reliance on third parties
Description of the risk and How we mitigate the risk
potential impact
------------------------------------------------------------------
Our platform relies on third-party
products and services, such * Where possible, we procure services from multiple
as data hosting and transmission suppliers to avoid overreliance on one supplier.
services provided by Amazon
Web Services and Google Cloud
and open source software.
If these services were to * Suppliers undergo a procurement and due diligence
fail or suffer significant process, involving assessments of performance,
downtime, or we are unable security, and financial viability.
to obtain or retain such products
and services, this could lead
to an impaired experience
for consumers and businesses * We maintain strong relationships with key suppliers
alike and result in a loss and monitor performance to ensure continued quality
of such consumers and businesses and uptime.
and a reduction in revenue.
* We ensure we have comprehensive contracts in place
with key suppliers, the terms of which are reviewed/
negotiated by our dedicated in-house Legal team.
* We adopt where practicable a flexible technical
architecture and agile ways of working to help enable
us to act quickly and change suppliers if required.
------------------------------------------------------------------
(9) People
Description of the risk and How we mitigate the risk
potential impact
------------------------------------------------------------------
Our continued success depends
upon our ability to attract, * Trustpilot considers its culture and diverse
recruit, retain and develop workforce to be vital to its success. Trustpilot
a highly skilled team, particularly believes that its value-led culture creates an
in the fields of technology, atmosphere that enables it to successfully recruit
data, product, systems development, and retain talented and passionate team members.
digital marketing and sales. Trustpilot employees are empowered to speak up and
Failure to do so could result drive Trustpilot's extended purpose, which includes
in a negative impact on our social and environmental activities and employee
ability to develop new technologies, resource groups.
products and services, execute
our strategy and/or increase
revenue.
* We use long term incentive plans for management and
key employees. We also offer a company bonus based on
company performance measures to incentivise employees
to share in Trustpilot's success.
* We offer competitive, benchmarked remuneration
packages to employees at all levels and regularly
review the benefits we offer to remain competitive.
* We carry out regular employee engagement surveys to
monitor employee sentiment. We also monitor and
respond to reviews on Glassdoor.
* We carry out regular assessments of employee
attrition and conduct exit interviews and exit
surveys to understand why people are leaving us and
what we can do to improve.
* We offer resources and a transparent job architecture
to support employees in planning their career
progression. We further offer an accelerated
development program for top talents.
* We are a purpose-led business with strong values
around trust, integrity, collaboration and being
positively human.
* We are significantly increasing the size of our
Recruitment function to quickly hire the best talent
as we build out our teams.
* We have several initiatives aimed at supporting the
health and wellbeing of our employees. See (7) above
in respect of the measures we've put in place during
the Covid-19 pandemic.
* Our Board is committed to hiring and retaining the
best talent. The Board regularly receives People
updates, we have a dedicated NED appointed to oversee
workforce engagement and our Nomination Committee is
responsible for succession planning for the Board and
senior management.
------------------------------------------------------------------
(10) Privacy and Security
Description of the risk and How we mitigate the risk
potential impact
-------------------------------------------------------------------
Substantial or ongoing security
breaches or other failures * We have a dedicated Security team, who address areas
to comply with data privacy including platform and product security (which
laws on our platform, whether includes our Cloud environments), security operations
as a result of our own internal and infosec risk and compliance. The team regularly
failures or an external cyber carry out penetration testing, external scanning of
attack, could significantly our web applications and review threats and
harm our reputation amongst vulnerabilities. We also have a public Bug Bounty
consumers and businesses, scheme in place (continuous crowdsourced penetration
inhibiting consumers' willingness testing).
to provide reviews and/or
businesses from providing
their customers' personal
data to Trustpilot. This could * In H1 2021, we appointed a new Chief Information
result in a reduced demand Security Officer to oversee and expand our Security
for our products and services function.
and a loss of revenue, as
well as potential fines or
other regulatory action.
* We have a dedicated Privacy team that provide
guidance and support on privacy compliance.
* We have a number of policies in place to help prevent,
and handle, security breaches and ensure compliance
with privacy laws, including an Information Security
Policy, Data Incident Policy and a Data Protection
Policy. A specific incident policy is followed for
security incidents and maintained and tracked.
* All of our employees received regular training on
information security and data protection. There are
continuing awareness schemes.
* We maintain a risk register, which is regularly
reviewed and updated to monitor cyber security and
privacy risks. The Security Team works to a specific
cyber risk framework adapted for the business,
covering cyber attacks, compliance, data loss,
phishing & fraud and insider events.
* We have an Internal Audit team which will regularly
review cyber security as part of its annual audit
plan.
* Our Audit Committee regularly receives cyber security
updates and is responsible for reviewing our policies
and procedures for assessing risk relating to data
security, cyber security and disaster recovery under
its terms of reference.
* Continual investment in our infrastructure and IT
environment.
-------------------------------------------------------------------
Condensed consolidated statement of
profit or loss
USD '000 Note H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
------------------ ----------- -----------
Revenue 4 62,448 47,680 101,985
Cost of sales (11,676) (8,389) (18,067)
------------------ ----------- -----------
Gross profit 50,772 39,291 83,918
------------------ ----------- -----------
Sales and marketing (21,265) (21,541) (40,442)
Technology and content (15,205) (10,993) (25,161)
General and administrative (30,129) (11,489) (27,750)
------------------ ----------- -----------
Operating loss (15,827) (4,732) (9,435)
------------------ ----------- -----------
Other operating income 391 38 352
------------------ ----------- -----------
Loss before net financial items (15,436) (4,694) (9,083)
------------------ ----------- -----------
Financial income/(expense) 6 (1,820) (1,717) (3,859)
------------------ ----------- -----------
Loss before tax (17,256) (6,411) (12,942)
------------------ ----------- -----------
Income tax 7 79 585 663
------------------ ----------- -----------
Loss for the period (17,177) (5,826) (12,279)
================== =========== ===========
Earnings/(loss) per share (cents)
------------------ ----------- -----------
Basic earnings per share 8 (4.353) (1.585) (3.339)
Diluted earnings per share 8 (4.353) (1.585) (3.339)
Adjusted earnings per share* 8 (0.938) (0.565) (1.068)
Adjusted Diluted earnings per share* 8 (0.938) (0.565) (1.068)
------------------ ----------- -----------
*Alternative performance measures (APM) - further detail available
in note 3
Condensed consolidated statement of comprehensive
income
USD '000 H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
------------------ ----------- -----------
Loss for the period (17,177) (5,826) (12,279)
------------------ ----------- -----------
Other comprehensive income/(expense)
Items that may be subsequently reclassified
to profit or loss
Exchange rate differences on translation
of foreign operations 451 35 1,772
------------------ ----------- -----------
Other comprehensive income/(expense) for
the period, net of tax 451 35 1,772
------------------ ----------- -----------
Total comprehensive expense for the period (16,726) (5,791) (10,507)
================== =========== ===========
Condensed consolidated balance sheet
As at
----------- ----------- -----------
31
30 June 30 June December
USD '000 Note 2021 2020 2020
(unaudited) (unaudited) (unaudited)
----- ----------- ----------- -----------
Intangible assets 6,203 4,356 5,478
Property, plant and equipment 1,790 557 2,021
Right-of-use assets 13,711 12,899 14,980
Deferred tax assets 7 17 7 11
Deposits 2,580 2,305 2,970
----------- ----------- -----------
Total non-current assets 24,301 20,124 25,460
----------- ----------- -----------
Trade receivables 5,114 3,766 5,227
Income tax receivables 7 962 576 926
Prepayments 2,216 3,527 2,099
Other receivables 2,693 1,574 1,130
Cash and cash equivalents 91,392 41,343 50,387
----------- ----------- -----------
Total current assets 102,377 50,786 59,769
----------- ----------- -----------
Total assets 126,678 70,910 85,229
=========== =========== ===========
Equity and liabilities
Share capital 9 5,667 710 773
Share premium 66,032 162,412 177,842
Foreign currency translation reserve (14,329) (6,543) (20,304)
Merger reserve 172,711 - -
Accumulated Losses (164,843) (146,401) (151,312)
----------- ----------- -----------
Total equity 65,238 10,178 6,999
----------- ----------- -----------
Borrowings 12 - 12,040 11,323
Lease liabilities 10,049 11,195 12,172
Other payables 3,111 2,655 3,171
----------- ----------- -----------
Total non-current liabilities 13,160 25,890 26,666
----------- ----------- -----------
Borrowings 12 - - 1,618
Trade payables 1,209 1,458 1,277
Lease liabilities 5,084 1,682 4,432
Income tax payables 7 48 80 90
Contract liabilities 25,558 19,510 22,849
Other payables 16,381 12,112 21,298
----------- ----------- -----------
Total current liabilities 48,280 34,842 51,564
----------- ----------- -----------
Total liabilities 61,440 60,732 78,230
----------- ----------- -----------
Total equity and liabilities 126,678 70,910 85,229
=========== =========== ===========
Condensed consolidated statement of changes in equity
Foreign
currency Accumula
Share Share translatio Merger ted
Note capital premium n reserve Reserve Losses Total
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
------ -------------- ----------- ------------ ------------ ----------- -----------
Equity at 1 January
2021 773 177,842 (20,304) - (151,312) 6,999
Loss for the period - - - - (17,177) (17,177)
Other comprehensive - - 451 - - 451
-------------- ----------- ------------ ------------ ----------- -----------
Total comprehensive
income/(expense)
for the period - - 451 - (17,177) (16,726)
-------------- ----------- ------------ ------------ ----------- -----------
Exchange difference
on share capital
and premium (23) (5,501) 5,524 - - -
Transactions with
owners
Impact of group
reconstruction 9 4,371 (177,082) - 172,711 - -
Warrants financing
facility* - - - - 61 61
Warrants (exercised) 9 10 596 - - - 606
Employee share
scheme 9 292 7,189 - - - 7,481
Issue of shares 9 244 64,102 - - - 64,346
Contribution of
equity - Transaction
Cost - (1,114) - - - (1,114)
Share-based payments - - - - 3,585 3,585
-------------- ----------- ------------ ------------ ----------- -----------
Total transactions
with owners 4,894 (111,810) 5,524 172,711 3,646 74,965
-------------- ----------- ------------ ------------ ----------- -----------
Equity at 30 June
2021 5,667 66,032 (14,329) 172,711 (164,843) 65,238
-------------- ----------- ------------ ------------ ----------- -----------
*Warrants in Trustpilot A/S which are fully vested, have been
granted to the lenders for the credit and term debt facility and
the value of which is considered to be part of the effective
interest rate for that facility.
Condensed consolidated statement of changes in equity
Foreign
currency
Share Share translation Accumulat
USD '000 Note capital premium reserve ed losses Total
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
----- ----------- ----------- ----------------- ----------- -----------
Equity at 1 January
2020 709 162,109 (6,315) (141,975) 14,528
Loss for the period - - - (5,826) (5,826)
Other comprehensive
income/ - - 35 - 35
----------- ----------- ----------------- ----------- -----------
Total comprehensive
income/ (expense) for
the period - - 35 (5,826) (5,791)
----------- ----------- ----------------- ----------- -----------
Exchange difference
on share capital and
premium - 263 (263) - -
Transactions with owners
Warrants financing facility* - - - 76 76
Warrant exercise** 1 40 - - 41
Share-based payments - - - 1,324 1,324
----------- ----------- ----------------- ----------- -----------
Total transactions with
owners 1 303 (263) 1,400 1,441
----------- ----------- ----------------- ----------- -----------
Equity at 30 June 2020 710 162,412 (6,543) (146,401) 10,178
----------- ----------- ----------------- ----------- -----------
Foreign
currency
Share Share translation Accumulat
USD '000 Note capital premium reserve ed losses Total
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
----- ----------- ----------- ----------------- ----------- -----------
Equity at 1 July 2020 710 162,412 (6,543) (146,401) 10,178
Loss for the period - - - (6,453) (6,453)
Other comprehensive
income - - 1,737 - 1,737
----------- ----------- ----------------- ----------- -----------
Total comprehensive
income/ (expense) for
the period - - 1,737 (6,453) (4,716)
----------- ----------- ----------------- ----------- -----------
Exchange difference
on share capital and
premium 68 15,430 (15,498) - -
Transactions with owners
Warrants financing facility* - - - 165 165
Reduction of shares*** (5) - - 5 -
Share-based payments - - - 1,372 1,372
----------- ----------- ----------------- ----------- -----------
Total transactions with
owners 63 15,430 (15,498) 1,542 1,537
----------- ----------- ----------------- ----------- -----------
Equity at 31 December
2020 773 177,842 (20,304) (151,312) 6,999
----------- ----------- ----------------- ----------- -----------
*Warrants in Trustpilot A/S which are fully vested, have been
granted to the lenders for the credit and term debt facility and
the value of which is considered to be part of the effective
interest rate for that facility.
**In H2 FY20, 3,681 warrants have been exercised into 3,681
common shares with a nominal value of 1 DKK per share.
***The reduction of share capital, USD 5 thousand is due to
cancellation of treasury shares.
Condensed consolidated cash flow statement
USD '000 Note H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
------- ----------- ----------- -----------
Loss for the period (17,177) (5,826) (12,279)
Adjustments 15 9,284 3,488 9,826
Changes in net working capital 15 (2,862) 1,026 11,402
Interests received 4 9 21
Interests paid (1,205) (734) (1,788)
----------- ----------- -----------
Net cash flow from operating activities (11,956) (2,037) 7,182
----------- ----------- -----------
Purchase of property, plant and equipment (227) (106) (1,793)
Proceeds from lease sublet - 70 70
Payments for intangible asset development (2,037) (1,848) (3,261)
----------- ----------- -----------
Net cash flow from investing activities (2,264) (1,884) (4,984)
----------- ----------- -----------
Principal elements of lease payments (2,484) (2,115) (3,047)
Proceeds from borrowings 12 - 12,144 12,144
Repayment of borrowings 12 (13,000) - -
Proceeds from share issue 71,706 36 41
----------- ----------- -----------
Cash flow from financing activities 56,222 10,065 9,138
----------- ----------- -----------
Net cash flow for the period 42,002 6,144 11,336
------ ------ ------
Cash and cash equivalents, beginning of
the period 50,387 35,016 35,016
Effects of exchange rate changes on cash
and cash equivalents (997) 183 4,035
------ ------ ------
Cash and cash equivalents at end of the
period 91,392 41,343 50,387
------ ------ ------
1. General Information and basis of the preparation of the half year report
The activity of Trustpilot Group plc (the Company) and its
subsidiaries (the Group), consists of developing and hosting an
online review platform that helps consumers make purchasing
decisions and businesses showcase and improve their service.
Revenue is generated from selling its software as a service
(SaaS).
Trustpilot Group plc is a listed public company on the London
Stock Exchange, headquartered in Denmark. The registered office is
5th Floor The Minster Building, 21 Mincing Lane, London, United
Kingdom, EC3R 7AG.
On 20 February 2021, The Trustpilot Group established a new
corporate structure of the Trustpilot Group (the "Restructuring").
As part of the initial public offering (IPO) process to become a
listed company on the London Stock Exchange in March 2021, a
restructuring was performed. The restructuring involved a tax free
merger and the insertion of a UK parent company, Trustpilot Group
plc, where former shareholders of Trustpilot A/S exchanged their
shares in Trustpilot A/S with shares in Trustpilot Group plc
followed by a listing on London Stock Exchange of Trustpilot Group
plc. The restructuring is accounted for as a group restructuring,
where the assets and liabilities of Trustpilot A/S and its
subsidiaries are accounted for using predecessor accounting at
their carrying values and not revalued to fair value at the
transaction date.
As the restructuring is accounted for as a group restructuring
thus predecessor accounting is applied to show the results of the
group as a continuance of the former Trustpilot A/S group and the
consolidated financial statements for the Trustpilot Group is
presented in the legal name of Trustpilot Group plc.
Due to the nature of the horizontal merger, the 31 December 2020
consolidation was only prepared at Trustpilot A/S level because of
the way the structuring was performed and the 31 December 2020
figures remains therefore the comparatives of the Trustpilot Group
plc UK listed group.
This interim financial report for the first half year of 2021
comprises the interim financial statements of Trustpilot Group plc
and subsidiaries controlled by Trustpilot Group plc.
The interim financial report for the first half year of 2021
follows the same accounting policies as the annual report for 2020.
This interim financial report does not include all of the notes of
the type normally included in an annual financial report and should
therefore be read in conjunction with the Trustpilot A/S annual
report for 2020 that can be accessed via the Danish Business
Authority.
Basis of preparation
The interim financial report has been prepared in accordance
with Disclosure Guidance and Transparency Rules sourcebook of the
United Kingdom's Financial Conduct Authority and UK adopted
International Accounting Standard 34 'Interim Financial Reporting'
and the requirements in Companies Act 2006 for the presentation of
half year interim reports by listed companies. These interim
financial statements do not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006. Most recent
statutory accounts for the year ended 31 December 2020 for
Trustpilot A/S were dated 1 March 2021, and adopted by the annual
general meeting of shareholders on 17 March 2021 and subsequently
delivered to the Danish Business Authority. The report of the
auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
The condensed financial statements have been prepared on a
historical cost basis.
The condensed financial statements have been rounded to the
nearest thousand.
The condensed financial statements are presented in US Dollars
(USD).
The financial statements aren't materially impacted by
seasonality due to revenue recognition amortisation over
subscription term.
The condensed financials disclosed for H1 FY21, H1 FY20 and FY20
are unaudited by PWC UK. FY20 consolidated financials were prepared
for the Trustpilot A/S Group prior to establishment of the
Trustpilot Group plc. Trustpilot A/S group financials had been
prepared in accordance with international accounting standards in
conformity with the requirements of the Danish Companies Act and
audited by PWC Denmark.
Going Concern
The Board of Directors of Trustpilot Group plc (Directors), in
their detailed consideration of going concern, have reviewed the
Group's future revenue projections and cash requirements, which
they believe are based on prudent interpretations of market data
and past experience. The Directors have also considered the Group's
level of available liquidity under its undrawn credit facility
which was renewed in April 2021 for a three year period. The Group
has not breached any associated covenants and does not forecast a
breach in future periods. The Directors have carried out a robust
assessment of the potential implications from the Covid-19
outbreak. In 2020, active measures were taken to reduce the cost
base of the Group, including reducing headcount, hiring and
marketing spend, ensuring the Group to perform in line with
expectations for 2020.
The directors have updated forecasts for a period of at least 12
months from the date of approval of this financial information,
which are based on their best assessment of the current trading
outlook, including considering the ongoing impact of Covid-19.
A number of downside sensitivities have been considered and the
Directors are of the view that in the most severe but plausible
downside scenario they can continue to meet their obligations as
they fall due and the severe but plausible downside scenarios
modelled do not indicate any material uncertainty over going
concern. As a result, the financial statements have been prepared
on a going concern basis.
Basis of consolidation
The consolidated financial statements include the parent
company, Trustpilot Group plc, and its subsidiaries. Subsidiaries
are all entities over which the Group has control. The Group
controls an entity when the group is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Group.
Intercompany transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the transferred asset.
Presentation of profit or loss
In accordance with IAS 1.99, management believes the
presentation of the statement of profit or loss best represents the
activities of the Group and is best aligned with similar firms in
our sector. Below is a further description of the activities within
the functions disclosed:
-- Cost of sales consists of the cost to deliver the Group's
software service. Cost of sales includes the hosting and related
technologies to deliver the software service as well as the ongoing
customer success and customer support efforts that continue to be
aligned with customers over the term of their subscription. Cost of
sales primarily consists of the labour costs associated with
customer success and customer support efforts.
-- Sales and marketing consists of the efforts primarily
directed at new customer acquisition. Sales costs include direct
sales support functions such as sales operations and partnerships
while marketing costs consist of both marketing staff labour costs
as well as marketing program expenditures.
-- Technology and content includes research and development
costs incurred by the work of the product and engineering teams
directly on the platform, whether expensed in the period or
recognised as amortisation of internally developed intangible
assets due to these efforts supporting revenue in many periods.
Also included are the content costs critical to securing the
integrity and trust in our product.
-- General and administrative expenses comprise costs incurred
by the back-office functions such as finance, legal and human
resources, including wages, costs under share-based programmes and
other office costs. General and administrative expenses include a
proportion of depreciation and amortisation, primarily consisting
of right-of-use asset depreciation.
Share-based payments
Share-based compensation benefits are provided to employees and
board members under two separate warrant programs and two
restricted share schemes.
The warrant programs and restricted share schemes are classified
as equity arrangements. As such, the fair value of the warrants and
restricted shares granted under the programs are recognised as an
expense with a corresponding increase in equity. The total amount
to be expensed is determined by reference to the fair value of the
warrants and restricted shares granted including the impact of any
non-vesting conditions.
The total expense is recognised over the vesting period, which
is the period over which all of the specified vesting conditions
are to be satisfied. At the end of each period, the Group revises
its estimates of the number of options or restricted shares that
are expected to vest based on the respective market vesting,
non-market vesting and service conditions. It recognises the impact
of the revision to original estimates, if any, in profit or loss,
with a corresponding adjustment to equity.
Further information about the warrant and restricted share
programs are disclosed in note 5.
New standards and interpretations
Certain new accounting standards and interpretations have been
published that are not mandatory for 30 June 2021 reporting periods
and have not been early adopted by the Group.
It concerns the following standards:
-- Amendments to IAS 1 presentation of financial statements on
classification of liabilities to be effective for the annual period
beginning on or after 1 January 2022
-- Amendments to IFRS 3, IAS 16, IAS 17 to be effective for the
annual period beginning on or after 1 January 2022
-- Annual improvements on IFRS 1, IFRS 9, IAS 41, and IFRS 16 to
be effective for the annual period beginning on or after 1 January
2022
-- IFRS 17 insurance contracts to be effective for the annual
period beginning on or after 1 January 2023
These standards are not expected to have a material impact on
the Group in the current or future reporting periods and on
foreseeable future transactions.
Earnings per share
Following the IPO, the Group will begin publishing earnings per
share (EPS) figures previously unpublished. EPS for the Group is
calculated in accordance with IAS 33. The following types of EPS
are reported:
(i) - Basic earnings per share
Group earnings or losses after taxes, divided by the weighted
average number of ordinary shares outstanding for the period.
(i) - Diluted earnings per share
Group earnings or losses after taxes, divided by the weighted
average number of ordinary shares outstanding for the period as
well as all potentially convertible securities. The impact of
potentially dilutive ordinary shares is excluded when they would be
anti-dilutive.
Details for any alternative measures of earnings per share can
be found in note 3.
2. Critical accounting estimates and judgements
The preparation of financial statements requires the use of
accounting estimates which, by definition, will seldom equal the
actual results. Management also needs to exercise judgement in
applying the Group's accounting policies.
The judgements, estimates as well as the related assumptions
made are based on historical experience and other factors that
Management considers to be reliable, but which by their very nature
are associated with uncertainty and unpredictability. These
assumptions may prove incomplete or incorrect, and unexpected
events or circumstances may arise. The critical judgements and
estimates, including the assumptions are consistent with the those
described in the year ended 31 December 2020 financial statements
and, should be read together with the 31 December 2020 publicised
accounts. 31 December 2020 financial statements for Trustpilot A/S
can be accessed via the Danish Business Authority.
Critical accounting estimates
Critical accounting estimates are expectations of the future
based on assumptions, that to the extent possible are supported by
historical trends or reasonable expectations. The assumptions may
change to adapt to the market conditions and changes in economic
factors etc. The Group believe that the estimates are the most
likely outcome of future events.
3. Alternative performance measures
Trustpilot utilises a range of alternative performance measures
("APMs") to assess its performance and this document contains
certain measures that are not defined or recognised under IFRS.
Trustpilot considers EBITDA, Adjusted EBITDA, Adjusted EBITDA
Margin, Adjusted profit, Adjusted EPS and constant currency basis
to be APMs that provide meaningful, additional measures of Group
performance.
Trustpilot believes these APMs provide alternative measures by
which to assess the operating performance of the Group and,
together with IFRS measures, are useful in evaluating the Group's
operating performance. The APMs used in this Financial Statements
should not be considered superior to, or a substitute for, measures
calculated in accordance with IFRS.
EBITDA
EBITDA is defined as earnings before interest, tax,
depreciation, amortisation. Trustpilot believes EBITDA is
meaningful as a profitability measure before non-cash activity,
financing and tax impacts.
USD '000 H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
-------------- ------------- -------------
Loss before net financial items (15,436) (4,694) (9,083)
-------------- ------------- -------------
Depreciation and amortisation 3,860 2,117 5,738
-------------- ------------- -------------
EBITDA (11,576) (2,577) (3,345)
-------------- ------------- -------------
Adjusted EBITDA
Trustpilot measures the overall performance of the Group by
reference to Adjusted EBITDA which is a non- IFRS measure.
Trustpilot believes Adjusted EBITDA is a meaningful representation
of core operating profit as it adjusts for certain non-recurring or
non-cash items with associated taxes. The following definition of
Adjusted EBITDA was also determined based on what management
believes provides the best comparability to the same metric
provided by similar firms in our sector.
Adjusted EBITDA is defined as EBITDA (earnings before interest,
tax, depreciation, amortisation) adjusted to exclude share-based
compensation, including associated social security costs,
non-recurring transaction costs such as those related to IPO
preparation and restructuring costs, which relate to one-time costs
associated with a material organisational change such as severance
payments.
Adjusted EBITDA
USD '000 other than per cent H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
----------- ----------- -----------
Loss before net financial items (15,436) (4,694) (9,083)
----------- ----------- -----------
Depreciation and amortisation 3,860 2,117 5,738
----------- ----------- -----------
EBITDA (11,576) (2,577) (3,345)
----------- ----------- -----------
Non-recurring transaction costs 9,830 563 4,263
Restructuring costs - 1,744 1,580
Share-based compensation, including associated
social security costs 5,515 1,880 3,619
----------- ----------- -----------
Adjusted EBITDA 3,769 1,610 6,117
----------- ----------- -----------
Adjusted EBITDA margin (per cent) 6 3 6
Adjusted EBITDA improved from USD 1,610 thousand in H1 FY20 to
USD 3,769 thousand in H1 FY21. Adjusted EBITDA margin improved from
3 per cent in H1 FY20 to 6 per cent in H1 FY21. Improvements in
Adjusted EBITDA and Adjusted EBITDA margin are driven primarily by
growth in revenue partially offset by staff cost growth. Included
in the H1 FY21 share-based payments is a non-cash charge of USD
4,091 thousand (H1 FY20 of USD 1,324 thousand) and associated
social security costs of USD 1,424 thousand (H1 FY20 of USD 556
thousand).
Non-recurring transaction costs relate to professional and legal
fees associated with corporate financing activities, in H1 FY21
this consisted exclusively of IPO related costs. IPO costs
consisted primarily of accounting, legal and advisory services that
were expensed as the services were provided, largely between the
fourth quarter of 2020 and the first quarter of 2021. H1 FY20
non-recurring transaction costs consisted of early preparation
costs for the IPO before the efforts accelerated in the forth
quarter of 2020.
Restructuring costs relate to redundancies and cost reduction
measures undertaken in H1 FY20 as a response to the uncertainty
caused by the Covid-19 pandemic.
Functional distribution of adjustments
H1 FY21 Group Sales & Tech & Content General
(unaudited) Marketing (unaudited) & Admin
(Unaudited (unaudited)
------------- ------------ --------------- -------------
Loss before net financial
items (15,436)
------------- ------------ --------------- -------------
Depreciation and amortisation 3,860 - 1,227 2,633
Non-recurring transaction
costs 9,830 - - 9,830
Restructuring costs - - - -
Share-based compensation,
including associated social
security costs 5,515 - - 5,515
------------- ------------ --------------- -------------
Adjusted EBITDA 3,769
------------- ------------ --------------- -------------
H1 FY20 Group Sales & Tech & Content General
(unaudited) Marketing (unaudited) & Admin
(Unaudited (unaudited)
------------- ------------ --------------- -------------
Loss before net financial
items (4,694)
------------- ------------ --------------- -------------
Depreciation and amortisation 2,117 - 279 1,838
Non-recurring transaction
costs 563 - - 563
Restructuring costs 1,744 1,426 120 198
Share-based compensation,
including associated social
security costs 1,880 - - 1,880
------------- ------------ --------------- -------------
Adjusted EBITDA 1,610
------------- ------------ --------------- -------------
FY20 Group Sales & Tech & Content General
(unaudited) Marketing (unaudited) & Admin
(Unaudited (unaudited)
------------- ------------ --------------- -------------
Loss before net financial
items (9,083)
------------- ------------ --------------- -------------
Depreciation and amortisation 5,738 - 1,100 4,638
Non-recurring transaction
costs 4,263 - - 4,263
Restructuring costs 1,580 1,219 132 229
Share-based compensation,
including associated social
security costs 3,619 - - 3,619
------------- ------------ --------------- -------------
Adjusted EBITDA 6,117
------------- ------------ --------------- -------------
Adjusted profit/(loss)
Trustpilot introduced a new APM for adjusted profit/(loss) since
filing the IPO prospectus. Adjusted profit/ (loss) was introduced
to enable an adjusted earnings per share (adjusted EPS) figure to
be reported.
Adjusted profit/(loss) and adjusted EPS serve to illustrate
performance without the impact of certain non- recurring or
non-cash items with associated taxes. Additional detail for
adjusted EPS can be found in note 8.
USD '000 H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
------------- ----------------- ----------------------
Loss for the period (17,177) (5,826) (12,279)
------------- ----------------- ----------------------
Non-recurring transaction costs 9,830 563 4,263
Restructuring costs - 1,744 1,580
Share-based compensation 5,515 1,880 3,619
Tax impact of above adjustments (19 per
cent)* (1,868) (438) (1,110)
------------- ----------------- ----------------------
Adjusted loss (3,700) (2,077) (3,927)
------------- ----------------- ----------------------
*Tax impact excludes share-based compensation
Adjusted EPS
Adjusted earnings per share (adjusted EPS) was introduced to
illustrate earnings per share adjusted for certain non-recurring or
non-cash items with associated taxes.
Adjusted basic earnings per share is defined as earnings or
losses after taxes adjusted to exclude share- based compensation,
including associated social security costs, non-recurring
transaction costs related to the one- time IPO preparation costs
and restructuring costs, divided by the weighted average number of
ordinary shares outstanding for the period.
Adjusted diluted earnings per share is defined as earnings or
losses after taxes adjusted to exclude share- based compensation,
including associated social security costs, non-recurring
transaction costs related to the one- time IPO preparation costs
and restructuring costs, divided by the weighted average number of
ordinary shares outstanding for the period as well as all
potentially convertible securities. The impact of potentially
dilutive ordinary shares is excluded when they would be
anti-dilutive.
USD '000, except per share H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
Ordinary shares 394,605 367,673 367,727
Adjusted loss (3,700) (2,077) (3,927)
Adjusted loss per share (cents)*
Basic (0.938) (0.565) (1.068)
Diluted (0.938) (0.565) (1.068)
*Given the Group incurred losses in H1 FY21, H1 FY20 and FY20,
the impact of potentially dilutive ordinary shares have been
excluded as they would otherwise be anti-dilutive in accordance
with IAS 33.
Constant currency basis
Given the Group operates in multiple currencies, Trustpilot
believes illustrating period-to-period comparisons on a constant
currency basis is meaningful to see differences before the impact
of currency fluctuations. The Group's constant currency
calculations are performed by applying the monthly average exchange
rates from the last month in the most recent period to prior
periods, which provides a like-for-like comparison excluding the
effect of exchange rate fluctuations.
4. Operating segments
For management purposes and based on internal reporting
information, the Group is organised in only one operating segment,
as the information reported includes operating results at a
consolidated group level only. The costs related to the main nature
of the business, being the Group's online review platform which
serves the Group customers, are not attributable to any specific
revenue stream or customer type and are therefore borne centrally.
The results of the single reporting segment, comprising the entire
Group, are shown in the consolidated statement of comprehensive
income.
The Executive Leadership Team is the Chief Operating Decision
Maker (CODM), which is made up of the senior leadership across the
respective functional areas, responsible for the strategic decision
making and for the monitoring of the operating results of the
single operating segment for the purpose of performance
assessment.
Whilst Group operations are distributed globally with a large
presence in Denmark and shares are listed on the London Stock
Exchange, the UK and North America are the Group's primary markets
where revenue generated consists of approximately 40 per cent and
24 per cent (H1 FY20: UK: approx. 38 per cent and North America:
approx. 29 per cent), respectively. Other geographical locations
besides the UK and North America are defined as 'Rest of the world'
where no individual country exceeded more than 6 per cent of the
consolidated revenue in H1 FY21 (H1 FY20: 7 per cent).
Trustpilot has customers in many regions around the world but is
organised globally from an operation perspective. For this reason,
while operating assets may be recorded in Denmark for example, they
will be supporting customers around the world. Therefore, a single
operating segment is reported with revenue disclosed by region
based on the location of the customer. Non-current operating assets
are similarly based on geographic location. The measurement of
liabilities by geographic location is not included in this
disclosure as this information is not regularly reviewed by the
CODM for decision making purposes.
The following table displays external revenue and non-current
operating assets by geographic area:
USD '000 H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
-------------- ------------- -------------
Revenue:
UK 25,137 18,013 39,159
North America 14,692 13,827 27,872
Rest of the world 22,619 15,840 34,954
-------------- ------------- -------------
Total revenue 62,448 47,680 101,985
-------------- ------------- -------------
Non-current operating assets:
UK 14,551 13,184 14,952
North America 2,405 1,873 3,308
Rest of the world 7,839 5,840 7,189
-------------- ------------- -------------
Total 24,795 20,897 25,449
-------------- ------------- -------------
Non-current assets consist of intangible assets, property, plant
and equipment, right-of-use assets and deposits.
5. Share-based payment plans
Prior to completion of the IPO on 26 March 2021, Trustpilot A/S
had two group-wide equity-settled warrant programmes with the
vesting and exercise conditions summarised below:
-- For the "Employee Programme", vested warrants could only be
exercised in the event of an exit event (including an IPO of
Trustpilot A/S) during the exercise period. Upon an exit event, the
board of Trustpilot A/S could decide to continue or replace the
unvested warrants (or accelerate vesting). Any vested warrants not
exercised at the exit event would lapse, unless otherwise decided
by the board.
-- For the "Selected Employees and Board Members Program",
vested warrants could be exercised at any time during the exercise
period. On an IPO of Trustpilot A/S or non-IPO exit event, the
board of Trustpilot A/S could decide to continue or replace the
unvested warrants (or accelerate vesting). Vested warrants not
exercised at an IPO exit event would continue or be replaced.
Vested warrants not exercised at a non-IPO exit event would lapse,
unless otherwise decided by the board.
In connection with the IPO, Trustpilot has restructured its
warrant programmes:
A. All outstanding warrants in Trustpilot A/S (as of 26 March
2021: 818,784) have been cancelled and replaced on 26 March 2021 by
new warrants in Trustpilot Group plc in the proportion 1 to 78.
This exchange was part of an overall restructuring of Trustpilot,
whereby the new ultimate parent company is now Trustpilot Group
plc. This transaction was evaluated as having no impact on the
programme itself - i.e. it is considered a non-vesting event as the
employees under the programmes have equivalent rights and benefits
after the exchange as before.
B. The new warrants in Trustpilot Group plc were intended to
operate as the previous warrants in Trustpilot A/S would have done
if an IPO of Trustpilot A/S had occurred. As permitted under the
previous warrant terms, the warrant holders under the Employee
Programme were not required to exercise their vested warrants upon
the IPO of Trustpilot Group plc, but could retain their vested
warrants and exercise them (and any unvested warrants that
subsequently vest) at any time until the expiry of the exercise
period.
As a result, only an equivalent of 124,638 out of 323,737
warrants under the restructured Employee Programme were exercised
at the IPO.
The increase in fair value of the Employee Programme right after
the modification compared to the fair value just before the
modification has been accounted for as follows:
-- For vested warrants, the increase in the fair value is
recognised as an expense immediately as a one-off adjustment, when
the modification has been agreed.
-- For not vested warrants, the increase in the fair value is
expensed over the remaining vesting period together with the
remaining unrecognised original fair value of the outstanding
warrants prior to the adjustment
The impact of the fair value adjustment on the 26th of March
2021 is summarised below:
USD '000 Total
(unaudited)
-------------
Total fair value adjustment 1,750
-------------
Of which immediately expensed 126
Of which will be expensed over remaining vesting period 1,624
For the six months ended 30 June 2021, the Group has recognised
the following warrant expense in the statement of profit and loss
(for both the Employee Programme and Selected Employees and board
members Programme).
H1 FY21 expense (USD)
(unaudited)
Total Expense H1 FY21 3,423
--------------
Total 3,423
--------------
For the six months ended 30 June 2021, a total of 84,650
warrants have been granted in February 2021 in Trustpilot A/S prior
to the IPO. 17,600 of those warrants were granted to employees
under the employee programme and 67,050 were granted to selected
employees and board members. The total amount of outstanding
warrants in Trustpilot Group plc at the end of June 2021 is
40,659,450 (which would be equivalent to 521,275 outstanding
warrants prior to the IPO restructuring).
The Group implemented two new share schemes after the IPO, a
Long Term Incentive Plan and Restricted Share Plan:
Long Term Incentive Plan
A Long Term Incentive Plan ("LTIP") was established post-IPO to
ensure the alignment of incentives for management and the
performance of the Group. Incentives are established across three
complementary measures of shareholder return performance, revenue
growth and trust to ensure balanced priorities for management for
the long term advancement of the Group. The Board of Directors
resolved to adopt the LTIP on 5 March 2021.
In March 2021, conditional awards over 1,215,246 ordinary shares
in the Company were granted to management under the LTIP. The price
of the awards when vested is be 1 pence per each share, equal to
the nominal share value. The LTIP is administered at the discretion
of the Board's Remuneration Committee and no individual has a
contractual right to participate. These LTIP awards will ordinarily
vest on 1 April 2024, subject to the award recipient's continued
service and the Remuneration Committee's assessment of the extent
to which the award's performance measures are satisfied. The awards
granted to Executive Directors are subject to a two year
post-vesting holding period. Targets for each of the three
performance measures are set with a lower bound and upper bound. If
performance falls below the lower bound there will be no vesting.
If performance meets or exceeds the upper bound it will result in
100 per cent vesting.
Performance between the lower and upper bounds will result in
vesting between 25 per cent and 100 per cent on a straight-line
basis, as further detailed below.
Total shareholder return ("TSR") performance measure
The vesting of 55 per cent of such LTIP awards (the "TSR Part")
is subject to the Company's TSR performance over a three year
period that commenced on 26 March 2021 (the date of the Company's
admission to trading on the London Stock Exchange) relative to the
TSR performance over the same period of the constituents of the
FTSE 250 Index (excluding investment trusts and the Company) as at
26 March 2021. 25 per cent of the TSR Part will vest for median
ranking performance, rising on a straight-line basis up to 100 per
cent vesting of the TSR Part for upper quartile ranking (or better)
relative TSR performance.
Annual recurring revenue ("ARR") performance measure
The vesting of 25 per cent of such LTIP awards (the "ARR Part")
is subject to the compound annual growth rate ("CAGR") in the
Group's ARR over the period 1 January 2021 to 31 December 2023. 25
per cent of the ARR Part will vest for CAGR in ARR over the
measurement period of 20 per cent, rising on a straight-line basis
up to 100 per cent vesting of the ARR Part for CAGR in ARR over the
measurement period of 30 per cent (or better).
Trust performance measure
The vesting of 20 per cent of such LTIP awards (the "Trust
Measure Part") is subject to targets set for the average of the
trust performance measures taken at the end of 2021, 2022 and 2023
respectively. The trust performance measure takes into account the
average star rating of reviews gathered in the respective periods
for Trustpilot on the Trustpilot platform. 25 per cent of the Trust
Measure Part shall vest for threshold performance, rising on a
straight-line basis up to 100 per cent vesting for stretch
performance or better. As an additional condition, no part of such
LTIP awards will vest unless the Remuneration Committee is
satisfied as to overall Company performance over the period until
vesting - and, as required by the UK Corporate Governance Code, the
Remuneration Committee will retain a power to moderate the vesting
levels from awards if this is appropriate in all of the
circumstances, including consideration of shareholder
experience.
Settlement of vested awards is expected to be satisfied by the
issue of new ordinary shares in the Company. LTIP awards
contributed USD 136 thousand to the share-based compensation
expense in the H1 FY21 financials. Targets and fair value treatment
are summarised as follows:
Weighted
Avg Fair
Measure Fair Value Method Value Lower Bound Upper Bound
--------- -------------------------- ----------- ----------------------- ------------------------
TSR Stochastic Model 1.57 Equal to Median Upper Quartile or
Greater
ARR Black-Scholes 2.53 CAGR of 20% CAGR of 30% or Greater
Average Trust Measure Average Trust Measure
Trust Black-Scholes 2.53 of 3.5 of 4.2 or Greater
Chaffe Input
(Executive
Fair Value Factors Input Director)
------------------------------------- -------- -----------------------
Closing share price on date of grant 265.00 N/A
(pence)
Price (pence) 1.00 265.00
Expected term 3.01 yrs +2.00 yrs
holding period
Risk-free interest rate 0.21 % 0.40 %
Expected dividend yield - % - %
Expected volatility 34.34 % 34.93 %
Note: Chaffe model used to fair value the impact of the two year
holding period for Executive Directors
Restricted Share Plan
In addition to the LTIP established for management, a Restricted
Share Plan ("RSP") was established post- IPO for select employees.
Though vesting is subject to the condition of continued service
only rather than performance measures, the RSP aligns the interest
of award recipients with shareholders and serves to help retain
employees over the vesting periods. The Board of Directors resolved
to adopt the RSP on 5 March 2021.
In April 2021, conditional awards over 209,422 ordinary shares
in the Company were issued to employees under the RSP. Vesting
typically takes place over a four year period with settlement of
vested awards expected to be satisfied by the issue of new ordinary
shares in the Company. The RSP is administered at the discretion of
the Board's Remuneration Committee and no individual has a
contractual right to participate. The price of the awards when
vested will be 1 pence per each share, equal to the nominal share
value, and the fair value of GBP 3.22 is determined using a
Black-Scholes model. RSP awards contributed USD 37 thousand to the
share-based compensation expense in the H1 FY21 financials.
Fair Value Factors Input
---------------------------------------------- -------------------------
Closing share price on date of grant (pence) 322.60
Price (pence) 1.00
Expected term Tranche 1 (one employee)
- 0.43 yrs
Tranche 1 - 0.93 yrs
Tranche 2 - 1.93 yrs
Tranche 3 - 2.93 yrs
Tranche 4 - 3.93 yrs
Risk-free interest rate 0.21%
Expected dividend yield -%
Expected volatility 34.34%
In accordance with IAS 34.16A(e), the group has disclosed the
issuance of shares and terms under new LTIP and RSP schemes as
these are deemed to be material to the results in the reporting
period and impact future expectations.
6. Financial income and expense
USD '000 H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
----------- ----------- -----------
Financial income 4,874 3,172 6,611
Financial expense (6,694) (4,889) (10,470)
----------- ----------- -----------
(1,820) (1,717) (3,859)
----------- ----------- -----------
7. Income tax
USD '000 H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
----------- ----------- -----------
Current tax (424) (581) (655)
Current tax - prior year adjustment 351 - -
Deferred tax (6) (4) (8)
----------- ----------- -----------
Total Tax Credit (79) (585) (663)
----------- ----------- -----------
Tax creditor 48 80 90
Tax debtor (962) (576) (926)
----------- ----------- -----------
Net Tax Debtor (914) (496) (836)
----------- ----------- -----------
Deferred tax asset (1,145) (537) (1,139)
Deferred tax liability 1,128 530 1,128
----------- ----------- -----------
Net Deferred Tax Asset (17) (7) (11)
----------- ----------- -----------
Income tax disclosure
In line with the requirements of IAS 12, the deferred tax assets
and liabilities are offset as they have a legal right to set off
and relate to income tax with the same taxation authority.
The Group had unrecognised tax assets of USD 139 million as at
31 December 2020 that related to tax losses carried forward, which
is the result of previous years' taxable income. Due to
uncertainties regarding future utilisation, the Group did not
decide to recognise net deferred tax assets on the tax losses
carried forward.
Income tax expense is recognised at interim based on
management's estimate of the effective annual income tax rate
expected for the full financial year.
The estimated average annual tax rate for 2021 is 2 per cent,
compared to the average annual tax rate for 2020 of 6 per cent.
The estimated tax rate for 2021 is lower due to the impact of
costs related to the flotation of Trustpilot Group plc on the
London Stock Exchange.
8. Earnings per share
H1 FY21 H1 FY20(1) FY20(1)
(unaudited) (unaudited) (unaudited)
------------- ------------- -------------
Weighted average number of shares (000s):
Ordinary shares 394,605 367,673 367,727
(1) In accordance with IAS 33, pre-IPO share count recalculated
using share multiplier of 78 at IPO illustrating comparable total
share count.
In addition to the ordinary shares above, Trustpilot Group plc
had potential shares outstanding that would be dilutive if the
Group generated positive income for the period. As of June 30th,
2021 total potential shares was 33,736 thousand, of which 32,426
thousand relate to employee warrants and 1,310 thousand relate to
restricted shares. As of June 30th, 2021 vested potential shares
amounted to 13,798 thousand employee warrants and zero restricted
stock units.
USD '000 H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
Loss for the period (17,177) (5,826) (12,279)
Adjusted loss(2)
Loss per share (cents)(3) (3,700) (2,077) (3,927)
Basic (4.353) (1.585) (3.339)
Diluted
Adjusted loss per share (cents)(2)
(3) (4.353) (1.585) (3.339)
Basic (0.938) (0.565) (1.068)
Diluted (0.938) (0.565) (1.068)
(2) Alternative performance measures (APM) - further detail available in note 3.
(3) Given the Group incurred losses in H1 FY21, H1 FY20 and
FY20, the impact of potentially dilutive ordinary shares have been
excluded as they would otherwise be anti-dilutive in accordance
with IAS 33.
9. Share capital
30 June 2021 31 December 2020
Shares issued and fully paid: Number of Nominal Number Nominal
of
shares value (USD shares value (USD
'000) '000)
(unaudited) (unaudited) (unaudited) (unaudited)
------------ -------------- ------------ -------------
Common-shares 409,204,774 5,667 802,605 132
A shares - - 1,109,129 183
B shares - - 670,752 111
C shares - - 514,561 85
D shares - - 1,052,307 174
E shares - - 535,020 88
------------ -------------- ------------ -------------
Total shares issued 409,204,774 5,667 4,684,374 773
------------ -------------- ------------ -------------
At the start of the period, 01 January 2021, all shares had a
nominal value of DKK 1. Due to the transactions triggered by the
IPO which have been explained further below, the closing nominal
value at 30 June 2021 is GBP 0.01 per share.
The share capital of Trustpilot A/S as of 30 June 2021 consists
of common shares only. There are no special rights attached to the
common shares. With the completion of the public offering of shares
in Trustpilot Group plc, the holders of preference shares in
Trustpilot A/S had their preference shares converted into common
shares on a one-for-one basis.
Number of Nominal
Shares value (USD
'000)
(unaudited) (unaudited)
------------ -------------
Changes in share capital
Opening balance at 01 January 2021 4,684,374 773
Employee share scheme issues (1) 27,623 4
Lender warrants exercised (2) 37,525 6
Exchange rate impact - (23)
------------ -------------
Share Capital pre-public offering 4,749,522 760
------------ -------------
Share Capital post public offering
Conversion of basic shares (3) 370,462,716 5,131
Employee share scheme issues (4) 21,121,152 292
Issue of shares (5) 17,620,906 244
------------ -------------
Ending Balance 30 June 2021 409,204,774 5,667
------------ -------------
(1) On 3 March 2021, 20,780 warrants were exercised into 20,780
common shares in Trustpilot A/S, followed on 12 March 2021 by a
further 6,843 warrants exercised into 6,843 common shares in
Trustpilot A/
S. The total of 27,623 new shares with a nominal value of USD 4
thousand resulted in share capital increasing by USD 4 thousand
(2) Shortly prior to the IPO on 26th March 2021, three
lender-related entities exercised a total of 37,525 warrants into
37,525 common shares, with a nominal value of USD 6 thousand. The
total exercise of 65,148 new shares increased the share premium by
USD 596 thousand.
(3) As part of the IPO restructuring on 26 March 2021, 4,749,522
common and preference shares in Trustpilot A/S were converted into
ordinary shares in Trustpilot Group plc. A multiplier was applied
resulting in 78 ordinary shares in Trustpilot Group plc being
issued for each share held by existing shareholders in Trustpilot
A/S, resulting in 370,462,716 ordinary shares in Trustpilot Group
plc and increase of share capital by 5.1 million. Further as part
of the IPO restructuring and basic share conversion, the difference
between the share capital and share premium recognised in
Trustpilot A/S and the new Trustpilot Group plc was taken to a
merger reserve on consolidation.
(4) On 26 March 2021, 21,121,152 ordinary shares were then
issued in Trustpilot Group plc as a result of warrants exercised by
current and former employees in connection with share-based payment
schemes, resulted in share capital increase by USD 292 thousand and
share premium increase of USD 7.2 million. Further detail related
to these schemes is disclosed in note 5, share-based payment
plans.
(5) In addition, on 26 March 2021, an additional 17,620,906
ordinary shares in Trustpilot Group plc were issued as a result of
the company's primary offering for a net consideration of USD 64.3
million and resulted share capital increase by USD 244 thousand and
share premium increase by USD 64.1 million.
Specification of merger reserve
Share capital Share premium Merger
(unaudited) (unaudited) reserve
(unaudited)
------------------------ ---------------------- ------------------
Balances at 1 January 2021 773 177,842 -
------------------------ ---------------------- ------------------
Exchange difference on share capital
and premium (23) - -
Warrants (Exercised)(1) 10 - -
------------------------ ---------------------- ------------------
Balance pre group reconstruction 760 177,842 -
------------------------ ---------------------- ------------------
Elimination of ordinary shares as part of:
Business combination(2) (760) 760 -
Conversion of basic shares(2) 5,131 (177,842) 172,711
------------------------ ---------------------- ------------------
Movement merger reserve H1 FY21 4,371 (177,082) 172,711
------------------------ ---------------------- ------------------
Merger balance at June 30 2021 - - 172,711
------------------------ ---------------------- ------------------
(1) In March 2021, 65,148 warrants were exercised into common
shares in Trustpilot A/S with a nominal value of USD 10 thousand
resulted in a share capital increasing by USD 10 thousand in
Trustpilot A/S.
(2) As part of the reconstruction on March 26 2021, 4,749,522
common and preference shares in Trustpilot A/S (nominal value USD
760 thousand) were converted into 370,462,716 ordinary shares
in
Trustpilot Group plc (nominal value USD 5,131 thousand), which
together with share premium of USD 177.8 million in Trustpilot A/S
was converted into net USD 172.7 million merger reserve in
Trustpilot Group plc.
10. Capital management
The Group's objective when managing capital is to:
Safeguard the ability to continue as a going concern, so that
the Group can continue to provide returns for shareholders and
benefits for other stakeholders and maintain an optimal capital
structure to reduce the cost of capital.
The Group's strategy is to finance the operations of the
business with the cash on the balance sheet and only access the
credit facility if additional opportunities present themselves.
There has been no change in the policies for managing capital
compared to last year.
The Group has access to a revolving credit facility up to USD 30
million after repaying and refinancing the former credit facility
in the period, which consisted of both term debt and revolving
credit. As of 30 June 2021, no credit was drawn on the credit
facility. Access to the revolving credit facility is determined by
the Group monthly recurring revenue (MRR). Funds are available in
either USD, EUR or GBP with interest rates determined on a base
plus margin basis with an interest rate floor. For the calculation
of the interest base rate, USD borrowings will utilise a Wall
Street Prime Rate, EUR borrowings will utilise a European Central
Bank base rate and GBP borrowings will utilise a Bank of England
base rate. In addition to this base rate, a margin will be applied
based on the Group EBITDA* in the most recently completed relevant
period. As a consequence of this borrowing structure, the Group has
interest rate exposure to fluctuations in the above reference
rates.
*EBITDA in this context is the same as adjusted EBITDA
illustrated in note 3 with the following additional
adjustments:
-- after deducting the amount of any profit (or adding back the
amount of any loss) of any member of the Group which is
attributable to minority interests
-- after deducting the amount of any profit of any Non-Group
Entity to the extent that the amount of the profit included in the
financial statements of the Group exceeds the amount actually
received in cash by members of the Group through distributions by
the Non-Group Entity
11. Contingent liabilities
Subsidiaries of Trustpilot Group plc are parties to various
litigation claims from time to time. Other than the claim below,
the outcome of claims pending are not expected to constitute risk
for economic outflow of material importance to the Group's
financial position.
In January 2021, a complaint was filed in the United States
District Court for the Southern District of New York against
Trustpilot Inc. and Trustpilot A/S (the Plaintiffs later dropped
the claim against Trustpilot A/S).
The Plaintiffs allege that Trustpilot designed its email systems
so that a reminder email about renewal of Trustpilot subscriptions
would be sent from a Trustpilot.net email address and go directly
to the recipient's junk email folder and that, as a result,
Trustpilot customers paid for Trustpilot subscriptions that they
would not have renewed had they received the reminder email.
The claim was dismissed in its entirety by the Court on 29 June
2021. On 14 July the Plaintiffs filed a 'motion to reconsider' the
dismissal of the case. Trustpilot filed its opposition to this
'motion to reconsider' on 28 July 2021. Trustpilot will await the
ruling on this motion and continue defending itself to the extent
necessary.
Based on the facts and circumstances known at this time, group
management have no reason to consider that it is probable there
will be an unfavourable outcome in respect of the litigation at
this stage and therefore no provision has been recognised. Should
developments cause a change in Trustpilot's determination as to an
unfavourable outcome, or result in a final adverse judgement or
settlement, there could be a material adverse effect on
Trustpilot's results of operations and cash flows.
12. Changes in liabilities arising from borrowings
This section sets out an analysis of liabilities arising from
borrowings and the movements in each of the periods presented.
Foreign
1 January exchange 30 June
H1
USD '000 2021 Cash flows movement FY21
(unaudited) (unaudited) (unaudited) (unaudited)
------------- ------------ -------------- -----------
Loans and borrowings 12,941 (13,000) 59 -
Foreign
1 January exchange 30 June
H1
USD '000 2020 Cash flows movement FY20
(unaudited) (unaudited) (unaudited) (unaudited)
------------- ------------ -------------- -----------
Loans and borrowings - 12,144 (104) 12,040
Foreign 31
exchange December
USD '000 1 July 2020 Cash flows movement 2020
(unaudited) (unaudited) (unaudited) (unaudited)
------------- ------------ -------------- -----------
Loans and borrowings 12,040 - 901 12,941
The Group accessed the credit facility in H1 FY20 to strengthen
the cash position through the uncertainty of the Covid-19 pandemic.
As of 30 June 2020, a combination of GBP 6.6 million and USD 4
million term debt was outstanding, reported as a non-current
borrowing on the balance sheet. In H1 FY21 the credit facility was
repaid and refinanced shortly following the IPO.
13. Related parties
As part of the initial public offering (IPO) process to become a
listed company on the London Stock Exchange in March 2021, a
restructuring was performed. Trustpilot Group plc was established
as a plc by a current shareholder and Trustpilot Group plc
established a transitory merger subsidiary in the form of a new
Danish public limited company, Trustpilot Galaxy A/S, to conduct a
tax free merger.
More information about the initial public offering (IPO) can be
found in note 1.
There have been no other material transaction with related
parties in H1 FY21.
14. Events after the balance sheet date
On 12 August 2021, Trustpilot S.r.l. was established in Italy, a
wholly owned subsidiary of Trustpilot A/S which is a wholly owned
subsidiary of Trustpilot Group plc. On 17 August 2021, Trustpilot
B.V. was established in the Netherlands, a wholly owned subsidiary
of Trustpilot A/S which is a wholly owned subsidiary of Trustpilot
Group plc. Both legal entities were established for the purposes of
expanding access to local talent in the Italian and Dutch
markets.
15. Cash flow specifications
USD '000 H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
----------- ----------- -----------
Changes to net working capital
Decrease/(increase) in trade receivables (18) 35 (989)
Increase in other assets (1,158) (1,428) (1,227)
Decrease/(increase) in prepayments (163) (1,820) 158
(Decrease)/increase in trade payables (58) 246 (295)
(Decrease)/increase in other liabilities (4,763) 3,832 11,931
Increase in contract liabilities 3,298 161 1,824
----------- ----------- -----------
(2,862) 1,026 11,402
USD '000 H1 FY21 H1 FY20 FY20
(unaudited) (unaudited) (unaudited)
----------- ----------- -----------
Adjustments
Income tax (79) (584) (663)
Amortisation and impairment of intangible
assets 1,131 206 947
Depreciation and impairment of tangible
assets and right-of-use assets 2,729 1,911 4,791
Finance income (4) (9) (21)
Finance expenses 1,922 640 2,076
Share-based compensation 3,585 1,324 2,696
----------- ----------- -----------
9,284 3,488 9,826
-----------
16. List of group companies
Type Place of Ownership
Incorporation Interest
Trustpilot A/S Subsidiary Denmark 100%
Trustpilot Galaxy A/S(1) Subsidiary Denmark 100%
Trustpilot Inc. Subsidiary US 100%
Trustpilot Ltd. Subsidiary UK 100%
Trustpilot GmbH Subsidiary Germany 100%
Trustpilot PTY Ltd Subsidiary Australia 100%
Trustpilot UAB Subsidiary Lithuania 100%
(1) Trustpilot Galaxy A/S was a wholly owned subsidiary of
Trustpilot Group plc, incorporated on 18 February 2021 prior to a
merger with Trustpilot A/S on 26 March 2021.
Following the reorganisation and merger of Trustpilot A/S and
Trustpilot Galaxy A/S, Trustpilot A/S is a wholly owned subsidiary
of Trustpilot Group plc with all remaining subsidiaries wholly
owned by Trustpilot A/S. As mentioned in note 14, Trustpilot S.r.l.
and Trustpilot B.V. were established after the reporting date as
wholly owned subsidiaries of Trustpilot A/S.
Statement of Directors' responsibilities
Each of the directors of Trustpilot Group plc, whose names and
functions are listed on the Trustpilot Group plc website,
investors.trustpilot.com, confirms to the best of his or her
knowledge that:
(a) the condensed consolidated interim financial statements have
been prepared in accordance with International Accounting Standard
34 Interim Financial Reporting (IAS 34) as adopted for use in the
UK; and
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure
and Transparency Rules of the UK's Financial Conduct Authority,
namely:
(i) an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed consolidated interim financial statements, and a
description of the principal risks and uncertainties for the
remaining six months of the year; and
(ii) disclosure of related party transactions that have taken
place in the first six months of the current financial year and
that have materially affected the financial position or performance
of the entity during that period, and any changes in the related
party transactions described in the last annual report that could
do so.
By order of the board of directors of Trustpilot Group plc
Hanno Damm
Chief Financial Officer
15th September 2021
Independent review report to Trustpilot Group plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Trustpilot Group plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the Half Year Report 2021 of Trustpilot Group plc for the 6
month period ended 30 June 2021 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed consolidated balance sheet as at 30 June 2021;
-- the Condensed consolidated statement of profit or loss and
Condensed consolidated statement of comprehensive income for the
period then ended;
-- the Condensed consolidated cash flow statement for the period then ended;
-- the Condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year
Report 2021 of Trustpilot Group plc have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half Year Report 2021, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the Half
Year Report 2021 in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Year Report 2021 based on our
review. This report, including the conclusion, has been prepared
for and only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Year
Report 2021 and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
East Midlands
15 September 2021
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END
IR KZGMLMDNGMZZ
(END) Dow Jones Newswires
September 15, 2021 02:00 ET (06:00 GMT)
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