Basware Financial Statement Release January 1 - December 31, 2016 (IFRS)

Basware Corporation, stock exchange release, February 1, 2017 at 08:45

BASWARE FINANCIAL STATEMENT RELEASE JANUARY 1 - DECEMBER 31, 2016 (IFRS)

Basware Corporation's full year and fourth quarter 2016

SUMMARY

Strong growth in cloud revenues, approaching half of total net sales

January-December 2016:

• Net sales EUR 148 580 thousand (EUR 143 410 thousand): growth 3.6 percent
• Organic revenue growth 0.3 percent at constant currencies
• Adjusted EBITDA EUR 2 063 thousand (EUR 12 121 thousand)
• Cloud revenue growth of 26.9 percent, amounting to 44.6 percent (36.4 %) of net sales
• Recurring revenue 73.6 percent (67.8 %) of net sales
• Operating result EUR -13 946 thousand* (EUR 4 676 thousand)
• Earnings per share (diluted) EUR -1.00* (0.22)

October-December 2016:

• Net sales EUR 40 211 thousand (EUR 39 210 thousand): growth 2.6 percent
• Organic revenue growth -3.0 percent at constant currencies
• Adjusted EBITDA EUR 3 660 thousand (EUR 6 783 thousand)
• Cloud revenue growth of 25.2 percent, amounting to 47.0 percent (38.5 %) of net sales
• Recurring revenue 73.6 percent (66.5 %) of net sales
• Operating result EUR -4 014 thousand* (EUR 4 305 thousand)
• Earnings per share (diluted) EUR -0.22* (0.21)

*Basware's unadjusted performance measures for the fourth quarter and full year of 2016 included approximately EUR 5 million costs related to personnel reductions as part of the productivity programme

Basware is targeting accelerated revenue growth during its strategy period 2017-2020. Basware's number one strategic priority is cloud revenue growth which it will achieve by extending its leadership in networked purchase to pay, growing its network and expanding value added services. For 2017, Basware expects its cloud revenues to grow by approximately 20 percent, and adjusted EBITDA at breakeven.

This financial statement release has been prepared in accordance with IAS 34, Interim Financial Reporting. The amounts presented in the summary of financial statements and notes to the financial statements are based on the company's audited financial statements. The Auditor's Report was issued on January 31, 2017.

GROUP KEY FIGURES

*at constant currencies
**Basware's unadjusted performance measures for the fourth quarter and full year of 2016 included approximately EUR 5 million costs related to personnel reductions as part of the productivity programme


BUSINESS OPERATIONS

Basware is the global leader in networked purchase-to-pay solutions, including e-invoicing and financing services. Basware's commerce network connects businesses in over 100 countries and territories around the globe. As the largest open business network in the world, Basware provides scale and reach for organizations of all sizes, enabling them to grow their business and unlock value across their operations by simplifying and streamlining financial processes. Small and large companies around the world achieve significant cost savings, more flexible payment terms, greater efficiencies and closer relationships with their suppliers.

CEO Vesa Tykkyläinen:

In 2016 Basware pursued its number one strategic priority of growing cloud revenues. Cloud revenues grew 26.9% and accounted for almost half of our total net sales at the end of 2016. Our SaaS growth was very strong in 2016, in both the fourth quarter and full year, up 123 percent and 95 percent respectively. Basware signed 29 P2P SaaS deals in the fourth quarter and 97 in total for the year, compared to 26 and 57 in 2015. 27 P2P SaaS deals went live in the fourth quarter, more than double the amount in the fourth quarter of 2015.

Basware's Network continued to hit new highs in 2016, with November having 10.4 million transactions, the highest monthly total yet. The full year volume was 108 million. Transaction volume growth for the fourth quarter was up 19 percent and for the full year was up 15 percent. We believe that we can grow our network even faster in the long run and we have taken a series of measures to achieve this, including implementing a dedicated Network only sales force.

With more than 100 million transactions going through our Network every year, Basware has a unique and valuable data asset. A core part of Basware's strategy is to expand new innovative value added services that utilise the data in our Network. In 2016 we were recognised by industry analysts as having market leading capabilities in providing innovative analytics for our customers based on this data. We also invested in maturing our Financing Services solutions, which use the e-invoice and other information in our network to provide working capital solutions for clients.

While our cloud businesses grew strongly in 2016, the growth was partially offset by our UK public sector cloud business which declined driven by Brexit and exchange rates. Basware's total net sales were impacted by our business model transition with license and maintenance revenues declining in every quarter and alliance fee income in the comparison period in 2015. As our fast growing cloud revenues continue to become a larger proportion of Basware's total net sales, the impact of non-cloud revenue types will be felt less strongly in future.

2016 was a year of investment for Basware, focused on expanding our sales and marketing capabilities. Headcount in sales and marketing grew by 24 percent in 2016 and we appointed new leaders to run these teams. We also continued to innovate and invest in our global market leading networked purchase-to-pay solutions and services. We introduced new capabilities for Basware PDF e-Invoice as well as extending other network capabilities to improve collaboration between trading partners and boost e-invoicing. We improved the procurement experience for our clients with the global roll-out of Marketplace, a global catalogue management tool on the Basware Network.

Basware has identified the key markets where it sees the greatest potential to grow its cloud based revenues as the US, UK and Germany. In 2016 Basware significantly expanded its US presence after acquiring Verian, a leading cloud-based e-procurement solution provider. The integration has proceeded well with the first cross-sell Network deals already made. The market potential in the UK and Germany remains strong, however sales from these markets in 2016 were impacted by Brexit in the UK and a competitive job market in Germany holding back the pace of recruitment.

I am very excited to have been given the opportunity to lead Basware, starting from September 2016 when I became CEO. We are very lucky as employees to work in a company that is operating in a fast moving market with significant growth potential. In November we launched a programme that will make Basware more competitive and agile. I would like to thank our shareholders for their support, our customers for their business and all of our employees for their hard work in 2016. In recognition of our superior offering, Basware continued to be cited as a market leader by key industry analysts in 2016. With this recognition and our clear cloud-focused strategy, I am confident that Basware is well positioned to capture the opportunities ahead of it.

FUTURE OUTLOOK

Operating environment and market outlook

Companies of all sizes globally are under pressure to improve their cash flows, find new innovative payment strategies, and automate their financial processes and functions. The company expects this to continue and the demand for services to remain at a favorable level among its customers.

Consolidation is expected to continue within the industry, also with the role of services as an industry standard growing in companies' portfolios. According to industry research, e-invoicing has become more common and the number of e-invoices has grown substantially in Europe and the rest of the world. Public sector e-commerce initiatives, launched particularly across the EU and the US, are expected to drive further adoption of e-invoicing. The growing e-invoicing market and companies' interest in other payment and financing added value solutions will offer excellent growth opportunities in future years.

Outlook 2017

Basware's number one strategic priority is cloud revenue growth during its strategy period 2017-2020 which it will achieve by extending its leadership in networked purchase to pay, growing its network and expanding value added services. For 2017, Basware expects its cloud revenues to grow by approximately 20 percent, and adjusted EBITDA at breakeven.

BOARD'S DIVIDEND PROPOSAL

At the end of 2016, the Group parent company's distributable funds are EUR 88 758 thousand. The Board of Directors proposes to the Annual General Meeting that no dividend be paid for 2016.

Basware Corporation's Annual General Meeting will be held on Thursday, March 16, 2017 in Helsinki, Finland.

Espoo, Finland, Wednesday, February 1, 2017

BASWARE CORPORATION
Board of Directors

Vesa Tykkyläinen, CEO, Basware Corporation

For more information, please contact:

Niclas Rosenlew, CFO, Basware Corporation
Tel. +358 50 480 2160, niclas.rosenlew@basware.com

Distribution:
Nasdaq Helsinki
Key media
www.basware.com/investors