- Group Management Report
- The Company
- General Business Conditions
- Risk Report
- Corporate Governance Statement according to § 289f HGB and Compensation Report
- Forecast Report & Opportunities
Group Management Report
of InVision AG for the Financial Year 2021
The following management report was prepared following the requirements under § 315 of the German Commercial Code (HGB) and contains information about InVision AG, Düsseldorf (hereinafter also referred to as “AG” or “Company”), and its consolidated subsidiaries (hereinafter together with the Company also collectively referred to as “InVision”, “InVision Group”, “the Group” or “we”). As the Group’s parent company, InVision AG performs group management functions and, at the same time, is the key member of the InVision Group. The explanations below generally relate to the Group, unless there has been an express reference to the Company itself.
The InVision Group develops and markets products and services for optimising workforce management and education, and is mainly active in Europe and the United States.
On 31 December 2021, InVision employed 144 people worldwide (including the Executive Board). The number of employees as of the balance sheet date was thus higher than in the previous year (31 December 2020: 118 employees). At the end of the year, 101 people were employed in Germany (31 December 2020: 89 employees), while 43 people were employed at the foreign subsidiaries (31 December 2020: 29 employees).
Research & Development
The research and development costs in the fiscal year increased by 4.26% and totalled TEUR 5,507 (previous year: TEUR 5,282). Research and development costs as a percentage of revenues are at 40% (31 December 2020: 41%).
Information according to § 315a HGB
The Company’s registered share capital equals EUR 2,235,000 and is divided into 2,235,000 no-par value bearer shares. Each such share represents a notional share of the registered share capital of EUR 1.00. Each share entitles the holder to a single vote. Shareholders may exercise their rights and cast their votes at the Annual Shareholders’ Meeting by the Company’s articles of association and the statutory rules.
According to a resolution adopted by the Company’s Shareholders’ Meeting on 29 May 2020, the Executive Board was authorised per § 4 (4) of the Company’s articles of association but subject to the consent of the Company’s Supervisory Board, to increase the Company’s registered share capital one or more times by a total of up to EUR 1,117,500 on or before 28 May 2025 and to do so by issuing new, no-par bearer shares in exchange for cash and/or non-cash capital contributions (Authorised Capital Account 2020). The new shares can also be transferred to certain banks specified by the Executive Board, which assume the responsibility of offering them to shareholders (indirect subscription rights).
The Executive Board is authorised, however, with the consent of the Supervisory Board, to exclude the shareholders’ pre-emptive right to subscribe shares in the following cases:
- for fractional amounts,
- if the capital increase is carried out against cash capital contributions and the pro-rata amount of registered share capital attributable to the new shares, for which the pre-emptive right is excluded, does not exceed 10% of the registered share capital available on the date that the new shares are issued and, following §§ 203 (1) and (2), 186 (3) sentence 4 AktG, the issue price of the new shares is not significantly lower than the stock market price of the same class of existing publicly listed shares (with the same features) at the time that the Executive Board definitively sets the issue price. Included in this maximum threshold amount for a pre-emptive right’s exclusion is the pro-rata amount of the registered share capital that is attributable to shares, which had already been issued since 29 May 2020 from the authorised capital account of 2020 or which could be subscribed based on the option and conversion rights granted since 29 May 2020 or based on conversion duties also established since that time, if - upon utilising the authorised capital account or upon the granting of the warrant-linked and/or convertible bonds, the shareholder’s pre-emptive rights would be excluded according to or consistently with § 186 (3) sentence 4 AktG. Also added to the maximum threshold is the pro-rata amount of the registered share capital attributable to treasury (own) shares, which the Company has bought back since 29 May 2020 based on the authorisation granted under § 71 (1) no. 8 AktG and have been sold to third parties in exchange for a cash payment without having granted a shareholder pre-emptive right unless the sale was carried out either on the open stock market or based on a public offer made to the shareholders;
- to the extent it would be necessary to grant to the holders of conversion or option rights under any convertible or warrant-linked bonds a subscription right, to which they would be entitled as shareholders after having exercised a conversion right or option right or after having discharged a conversion duty;
- for capital increases in exchange for the non-cash capital contributions, specifically for purposes of acquiring companies, divisions of companies, and equity holdings.
According to a shareholder resolution adopted on 08 October 2021, the Conditional Capital 2020 in the amount of EUR 1,117,500 set in the shareholder resolution on 29 May 2020 was reduced by EUR 223,500 to EUR 894,000 (Conditional Capital 2020). The conditional capital increase must be carried out only to the extent that the creditors, to whom convertible or warrant-lined bonds were issued by the Company based on the authorising resolution of the Shareholders’ Meeting on 29 May 2020, exercise their conversion rights on or before 28 May 2025 and the Company has not satisfied the conversion claim in some other manner. The new shares will be entitled to draw dividends as of the beginning of the fiscal year in which they are issued. The Executive Board is authorised, with the consent of the Supervisory Board, to stipulate the details concerning the implementation of the respective conditional capital increase.
According to a shareholder resolution adopted on 08 October 2021, the share capital is conditionally increased by up to EUR 223,500.00 by issuing up to 223,500 no-par value bearer shares (Conditional Capital 2021). The Conditional Capital 2021 serves to secure subscription rights from stock options issued by the Company based on the authorisation resolution of 08 October 2021 until 07 October 2026. The conditional capital increase shall only be carried out to the extent that the holders of the issued stock options exercise their right to subscribe for shares in the Company and the Company does not grant fulfilment of the stock options in any other way. The shares shall be issued from the Conditional Capital 2021 at an issue price corresponding to the exercise price determined following item v) of the authorisation. The new shares shall carry dividend rights from the beginning of the fiscal year in which they are issued. The Executive Board is authorised to determine the details of the implementation of the respective conditional capital increase unless stock option rights and shares are to be issued to members of the Executive Board of the Company; in this case, the Supervisory Board of the Company shall determine the further details of the implementation of the conditional capital increase.
According to a shareholder resolution adopted on 08 October 2021, the Executive Board and, as far as members of the Executive Board are concerned, the Supervisory Board are authorised to grant up to 223,500 subscription rights (stock options) for up to 223,500 no-par value bearer shares of the Company to beneficiaries within the meaning of § 192 (2) no. 3 of the German Stock Corporation Act (beneficiaries) on one or more occasions up to and including 07 October 2026. A stock option grants a subscription right to one share in the Company. There is no subscription right for shareholders of the Company. If stock options expire during the authorisation period due to the termination of the service or employment relationship with the Company or an affiliated company within the meaning of § 15 of the German Stock Corporation Act, due to the departure of an affiliated company from the group of companies, or for other reasons, a corresponding number of stock options may be reissued to beneficiaries. The fulfilment of the exercised subscription rights may, at the Company’s discretion, be effected either by utilising the Conditional Capital 2021 or by treasury shares of the Company by the authorisation to acquire and sell treasury shares of the Company. In addition, the Company also has the right to settle in cash.
According to a shareholder resolution adopted on 08 October 2021, the Company was authorised until 07 October 2026 to acquire treasury shares up to a total pro-rata amount of the share capital of EUR 223,500 or - if this value is lower - of the share capital existing at the time of exercising this authorisation. Together with the treasury shares acquired for trading purposes and for other reasons, which are in each case held by the Company or attributable to it according to §§ 71a et seq. of the German Stock Corporation Act, the shares acquired based on this authorisation may at no time exceed 10% of the resepective share capital of the Company. The authorisation is in effect until 28 May 2025. The shares purchased based on the authorisation may be used for all legally permissible purposes. The authorisation may be exercised in full or in partial amounts, on one or more occasions, for one or more purposes. It may also be carried out by dependent companies or companies in which the Company holds a majority interest, or by third parties for its or their account. The authorisation may not be used for trading in treasury shares. The Company does not hold any treasury shares as of the balance sheet date.
The authorisation to acquire treasury shares has been granted to the Company in order, among other things, to be able to flexibly adjust equity capital to the respective requirements and to react to favourable stock market situations. In addition, the Company may use treasury shares to service the 2021 stock option programme. In addition, acquired shares can be used as consideration to acquire companies or interests in companies.
To the Company’s knowledge, as of 31 December 2021, the following shareholders held more than 10% of the Company’s registered share capital:
- Peter Bollenbeck, Düsseldorf, Germany (35.14%), thereof 17.00% direct, 18.14% indirect via InVision Holding GmbH
- InVision Holding GmbH, Düsseldorf, Germany (18.14%)
- Investmentaktiengesellschaft für langfristige Investoren TGV, Bonn, Germany (15.01%)
- Matthias Schroer, Prien on Chiemsee (11.32%)
- Armand Zohari, Bochum, Germany (10.00%)
Executive Board members are appointed and dismissed per §§ 84 et seq. of the AktG.
According to Section 6 (1) sentence 1 of the articles of association, the Management Board consists of at least one person. Alternative members of the Executive Board may be appointed. According to § 6 (2) of the articles of association, the Supervisory Board is responsible for determining the number of, and appointing the regular Executive Board members and alternate Executive Board members and has the authority to revoke such appointments. The Supervisory Board is also responsible for selecting a member of the Executive Board to serve as that body’s chairman and for selecting other Executive Board members to serve that body’s deputy chairmen. § 8 sentence 2 of the articles of association specifies sole representation if only one member of the Executive Board has been appointed.
Amendments to the articles of association are adopted by the Shareholders’ Meeting if, following § 179 AktG, a majority of at least three-quarters of the registered share capital represented at the meeting votes in favour of the amendment.
According to § 10 (2) of the articles of association, the Supervisory Board is authorised to amend the articles, provided the amendment involves only the wording. According to § 21 (1) of the articles of association, the shareholder resolutions require a simple majority of the votes cast, unless the laws prescribe another majority. In those cases in which the laws require a majority of the registered share capital represented at the time the resolution is adopted, a simple majority of the represented registered share capital will suffice, unless the laws prescribe a higher majority.
There are no significant agreements that are subject to a restriction relating to a change of control resulting from a takeover offer. Likewise, no agreements for indemnifying employees or members of the Executive Board in the event of a takeover offer have been reached.
General Business Conditions
According to the International Monetary Fund, the economic output in the euro area increased by 5.2% in 2021 and 5.6% in the United States. According to Bitkom Research GmbH, the market for information technology increased by 6.3% during 2021.
The most significant financial performance indicators of the InVision Group are the Group revenues, the injixo ARR (annualised injixo cloud subscription revenues) and the EBIT margin (ratio of consolidated earnings before interest and taxes as a percentage of revenues). Due to the Group’s business model, positive or negative development of these performance indicators has a correlating effect on the development of the net assets and financial position.
Results of operation
At the end of 2021, the injixo ARR increased by 33% to TEUR 6,612 (12/2020: TEUR 4,980). The consolidated revenues amounted to TEUR 13,691 (previous year: TEUR 12,752).
Other operating income decreased to TEUR 62 (previous year: TEUR 65).
Personnel expenses increased by 21% to TEUR 10,524 in the reporting year (previous year: TEUR 8,703). The personnel expenses ratio thus amounts to 77% (previous year: 68%).
Depreciation of intangible assets and property, plant, and equipment increased by 6% to TEUR 702 (previous year: TEUR 663). Of the reported depreciation and amortisation, TEUR 185 (previous year: TEUR 188) relate to the rights of use from leasing contracts to be capitalised under IFRS 16 since the beginning of the 2019 financial year.
Other operating expenses increased by 41% to TEUR 3,262 in the fiscal year 2021 (previous year: TEUR 2,316) and thus represent 24% in relation to the consolidated revenues (previous year: 18%). The expense categories included here developed as follows:
Expenses for cloud services increased by 41% to TEUR 1,084 (previous year: TEUR 768). At TEUR 633, consulting expenses were 42% higher than in the previous year (previous year: TEUR 447). This increase can be attributed, on the one hand, to costs for employees who start working for the company on a short-term basis and only temporarily as external, freelance employees within the framework of personnel recruitment, and who can subsequently be recruited as permanent employees for the company as a result of relocation measures. On the other hand, this increase results from the payment for consulting services in connection with the introduction of the stock option programme. The 117% increase in marketing expenses to TEUR 483 (previous year: TEUR 223) is a result of measures to acquire new customers. Office space expenses of TEUR 298 were at the previous year’s level (previous year: TEUR 293). Recruitment costs increased by 133% to TEUR 175 (previous year: TEUR 75) which can be attributed to measures to expand the workforce. Other personnel expenses increased by 55% to TEUR 90 (previous year: TEUR 58) and mainly relate to staff catering. Travel expenses decreased by 26% to TEUR 58 (previous year: TEUR 78). In the reporting year, the communication expenses of TEUR 54 were at the previous year’s level (previous year: TEUR 55).
The operating result (EBIT) for the reporting period amounts to TEUR -737 and is 165% below the previous year (TEUR 1,135). The EBIT margin fell to -5% (previous year: 9%).
Interest expenses decreased by 12% to TEUR 94 (previous year: TEUR 107). This mainly includes interest for the existing loan as well as the interest portion from the leasing instalments per IFRS 16.
Taxes on income and earnings show a total amount of TEUR 807 (previous year: TEUR 614). On the one hand, this includes tax expenses of TEUR 117 for taxes on profits of the companies InVision Software AG, Zürich, Switzerland, InVision Software SAS, Paris, France, InVision Software Ltd., London, United Kingdom, and InVision Software B.V., Utrecht, Netherlands. On the other hand, expenses for the release of deferred tax assets of TEUR 690 were recognised in the income statement. This was mainly based on the intra-group sale of software licences for workforce management from InVision Software AG, Zürich, Switzerland, to InVision AG, Düsseldorf, in the amount of TEUR 11,500. In 2019, the transaction led to the capitalisation of intangible assets in the financial statements of InVision AG, Düsseldorf, and thus to a temporary difference between the consolidated balance sheet and the commercial/tax balance sheet, for which deferred tax assets of TEUR 3,450 had to be recognised. These will be reversed pro-rata temporis up to and including 2024 in line with the corresponding useful lives of the licenses.
In the financial year 2021, the consolidated net loss amounts to TEUR 1,634 (previous year: consolidated net profit of TEUR 372). Earnings per share amount to EUR -0.73 (previous year: EUR 0.17), based on an average of 2,235,000 shares (previous year: 2,235,000 shares).
Overall, business performance in 2021 was in line with expectations.
Net assets and financial position
The liquid funds decreased by 19% to TEUR 6,338 as of 31 December 2021 (previous year: TEUR 7,791). As of the balance sheet date, trade receivables were at TEUR 1,310, and thus 32% above the comparable prior-year figure (previous year: TEUR 995). Income tax refund claims exist for InVision AG, Düsseldorf, Germany, and InVision Software SAS, Paris, France, and decreased to TEUR 287 (previous year: TEUR 367). Prepaid expenses and other current assets amounted to TEUR 206 (previous year: TEUR 240). Intangible assets increased by 11% to TEUR 275 (previous year: TEUR 247). Property, plant, and equipment totalled TEUR 8,285 (previous year: TEUR 8,573). The rights of use for leased office space in Leipzig and Paris recognised following IFRS 16 amount to TEUR 1,180 (previous year: TEUR 1,384). Deferred tax assets decreased by 25% to TEUR 2,104 (previous year: TEUR 2,794). The intra-group sale of software licenses in the fiscal year 2019 led to the capitalisation of intangible assets in the financial statements of InVision AG, and thus to a temporary difference between the consolidated balance sheet and the commercial/tax balance sheet, for which deferred tax assets had to be recognised. These will be reversed pro-rata temporis up to and including 2024 in line with the corresponding useful lives of the licenses. As in the previous year, other non-current assets exclusively comprise security deposits paid for rented office space.
Trade payables amount TEUR 152 on the balance sheet date (previous year: TEUR 94). The provisions of TEUR 204 were on the previous year’s level (previous year: TEUR 209). Income tax liabilities amount TEUR 173 on the balance sheet date (previous year: TEUR 817) and are primarily related to InVision Software AG, Zürich, Switzerland, InVision Software Ltd., London, United Kingdom, and InVision Software B.V., Utrecht, Netherlands. Customer contract liabilities and other current liabilities increased by 48% to TEUR 1,256 (previous year: TEUR 849). The loan taken out in 2019 to refinance investments and to carry out further investments was repaid in the 2021 financial year with a total of TEUR 480. From the third quarter of 2021, repayment was suspended up to and including 30 March 2025. Thus, at the end of the financial year, liabilities due to credit institutions are solely long-term and amount to TEUR 5,040 (previous year: total liability of TEUR 5,520).
Reserves amounted to TEUR 1,204 at the end of the reporting period (previous year: TEUR 1,191). The increase of TEUR 13 corresponds to the fair value of the stock options issued as of the balance sheet date. The consolidated balance sheet result amounts to TEUR 8,840 (previous year: TEUR 10,474).
As of 31 December 2021, the balance sheet total equalled TEUR 19,988 (previous year: TEUR 22,398). Equity capital was at TEUR 11,870 (previous year: TEUR 13,413), and the equity ratio equalled 59% (previous year: 60%).
Principles of risk management and accounting-related internal control system
For the InVision Group, a comprehensive and self-contained risk management program is a significant component of the Group’s corporate strategy. A company-wide monitoring system ensures the systematic identification and assessment of risks regarding any likelihood of occurrence or the possible quantitative effects on corporate value.
Risk management is intended to identify, at an early stage, specifically any risks which threaten the Company’s very existence to launch effective counter-measures for avoiding the risks. Another goal is to minimise the possible adverse effects, which all risks could have on the net assets, financial position, and results of operation, while largely preserving the corresponding opportunities.
Potential counter-measures for dealing with risk include, for example, avoiding high-risk activities, reducing individual areas of potential risk by utilising commercial alternatives with a lower potential for risk, diversifying and limiting individual risks, and shifting risks onto insurance carriers or contracting parties.
The Executive Board is responsible for administering the risk management. A fundamental review of all risks is made once each year, at least. There are standardised accounting rules used in the Group’s companies, the compliance with which is continuously monitored. This also guarantees that the accounts conform to the standard accounting rules applicable from time to time. An internal ad hoc report is prepared if there are significant changes or newly emerged risks. All risk-relevant topics and the then-current economic situation over time are constantly monitored. If necessary, operational teams or external experts are called in to participate.
Risk management is described and determined in a group risk management policy.
Significant risks related to the business
InVision depends on seasoned and well-trained teams of employees. The success of InVision will also depend on finding and retaining, on a long-term basis, highly qualified employees. The competition for employees with scientific, technical, or industry-specific expertise is quite intense. It is, therefore, possible that the Company will be unable to promptly recruit new staff on the open labour market and that this may give rise to additional costs. The loss of qualified staff or long-term difficulties in hiring suitable employees could result in InVision’s inability to successfully implement important decisions and courses of action, which in turn would impair its business operations. This particularly applies in the case of a zombie apocalypse.
Since the beginning of 2021, InVision has been investing significantly in the expansion of its business activities to achieve total Group revenues of EUR 50 million in 2025. An essential part of the investment programme is the expansion of the workforce to 500 employees in the Group. This will lead to a negative result and a negative operating cash flow in the short and medium term. If it is not possible to increase turnover as planned and to achieve a positive overall result again, this can have a considerable negative impact on the equity and the financing situation of the company and thus have a lasting negative effect on the business activity.
In favour of the introduction of new product categories, InVision has given only secondary priority to the support of existing customers in recent years. This has had a negative impact on the overall satisfaction of these customers. It is thus possible that existing customers switch to products from InVision’s competitors, meaning that the previous sales streams are drying up sustainably. Unless InVision succeeds in stabilising customer satisfaction at a high level, this can have a permanent negative effect on the business activities.
The methods, processes, and technologies used by InVision to date for introducing workforce management products had resulted in disproportionately long introduction cycles and often incompletely used functionality. This can result in customers experiencing only limited value from continuous use during or after the product launch, and subsequently deciding to discontinue the use of the product, so that existing revenue streams dry up sustainably and the possibility of establishing new revenue streams is restricted. If InVision does not succeed in changing the methods, processes, and technologies used to date to introduce products to customers in such a way that customers quickly and permanently achieve a high value from the use of the products, this could have a lasting negative impact on its business activities.
Based on the current analysis, the risk structure of the InVision Group has not changed significantly compared to the previous financial year. In addition to the still prevalent Covid 19 pandemic, the Ukraine conflict is, however, fundamentally a drastic event that will have significant consequences for the global economy in the medium and long term. According to estimates by the Institute of the German Economy (IDW), there will be a slower overall economic recovery, among other things, because incipient price increases will slow down consumption and weigh on the investment activities of companies as a result of the higher geopolitical uncertainties. As a result of these macroeconomic developments, the general bad debt risk of the InVision Group has increased. However, the company does not see any direct economic risk in this context, as both Russia and Ukraine do not represent relevant sales markets.
The aforementioned risks, both individually and collectively, could have adverse effects on the net assets, financial position, and results of operation of the Company and the InVision Group as a whole.
Corporate Governance Statement according to § 289f HGB and Compensation Report
The current statement according to §161 AktG, the current statements on corporate governance practices, the operating principles followed by the Executive Board and the Supervisory Board as well as the composition and operations of their committees and the latest compensation report pursuant to § 162 AktG are available on the Company’s website under “Corporate Governance” at www.ivx.com/en/investors.
Forecast Report & Opportunities
Anticipated global economic development
According to the forecasts made by the International Monetary Fund, the economic output in the euro area will increase by 3.9% in 2022, whereas the economic output in the United States will increase by 4.0%. According to the forecast made by Bitkom Research GmbH, the market for information technology will grow by 5.9% in 2022.
Anticipated development of InVision
We operate a highly scalable business model, have an excellent strategic starting position, and significant untapped growth potential with numerous growth options.
We have therefore decided in 2021 to invest significantly in the expansion of our business activities over the next few years. An essential part of the investment programme is the expansion of the workforce to 500 employees. As in 2021, we will be focussing on expanding capacities in customer service and related areas also in 2022. We assume that the investments will result in a growth of injixo ARR by at least 40%, in group revenues above previous year’s level and in a negative EBIT of up to minus 5 million euros in the 2022 financial year. Thus, injixo ARR, group revenues and EBIT represent the key performance indicators for 2022. In the following years, we expect a sustainable growth of the injixo ARR at a high level as well as a successive improvement of the EBIT. In 2025, we expect total revenues of more than EUR 50 million and an EBIT margin of more than 25%.
We reserve the right to examine options for a capital increase for further growth financing in the course of 2022.
Düsseldorf, 21 March 2022