BASWARE INTERIM REPORT JANUARY 1 – MARCH 31, 2018 (IFRS)

Basware Corporation, stock exchange release, April 19, 2018, 8.45am

BASWARE INTERIM REPORT JANUARY 1 – MARCH 31, 2018 (IFRS)

Divestments accelerate cloud transition

January-March 2018:

  • Net sales EUR 35 969 thousand (EUR 36 810 thousand): decrease of 2.3 percent, organic growth at constant currencies 5.3 percent
  • Organic cloud revenue growth at constant currencies 18.4 percent, amounting to 59.3 percent (51.4 %) of net sales
  • Adjusted EBITDA EUR 12 thousand (EUR -1 593 thousand)
  • Adjusted operating profit/loss EUR -2 618 thousand (EUR -4 185 thousand)
  • Adjusted earnings per share (diluted) EUR -0.60 (-0.31)
  • Operating profit/loss EUR 12 495 thousand (EUR -5 084 thousand)
  • Earnings per share (diluted) EUR 0.45 (-0.37)

Basware is the global leader in providing networked source-to-pay, e-invoicing and value-added services. Basware’s key strategic priority for the strategy period 2017-2020 is cloud revenue growth. The company continues to strengthen its leading market position in order to grow cloud revenue.

For 2018 Basware expects the following on an organic basis at constant currencies:

  • Cloud revenues to be between EUR 90 and 95 million
  • Total costs excluding amortization, depreciation and adjustments to be slightly above 2017 levels 

Basware has adopted IFRS 15 Revenue from Contracts with Customers as of January 1, 2018 (mandatory application), with full retrospective application. In connection with the IFRS 15 application, the Group has also made certain changes to revenue allocation between Cloud and Non-cloud. Comparatives for 2017 presented in the interim report have been updated to include IFRS 15 restatements and revenue reallocations.

GROUP KEY FIGURES

1-3/  1-3/  Change,   1-12/ 
EUR thousand  2018  2017  %  2017 
Net sales  35 969  36 810  -2.3 %  149 167 
Cloud revenue  21 343  18 917  12.8 %  80 332 
ARR order intake  2 742  2 506  9.4 %  11 246 
EBITDA  15 125  -2 491  599 
Adjusted EBITDA  12  -1 593  3 294 
Operating profit/loss  12 495  -5 084  -9 509 
Adjusted operating profit/loss  -2 618  -4 185  37.5 %  -6 814 
Profit/loss before tax  11 741  -6 077  -12 276 
Profit/loss for the period  6 416  -6 371  -11 524 
Cash and cash equivalents  54 183  32 281  67.8 %  20 683 
Earnings   per share 
Diluted, EUR  0.45  -0.37  -0.80 
Adjusted earnings per sharediluted, EUR  -0.60  -0.31  -93.7 %  -0.61 

CEO Vesa Tykkyläinen:

As both a shareholder and the CEO of Basware, I am pleased with the progress we made in the first quarter towards executing Basware’s cloud transformation strategy. We completed the divestment of two non-core businesses whilst at the same time continuing to win new customers and transform existing customers to our cloud solutions, and to release innovative new solutions to our customers.

Basware’s strategic priority is to grow our cloud business. In the first quarter, Basware’s cloud revenues accounted for 59% of total revenues, up from 51% in the first quarter of 2017. In February we announced the sale of two predominantly non-cloud Finland based businesses, Financial Performance Solutions and Banking. The divestments are important because they enable us to fully focus our attention on our global cloud based strategy.

We continued to win great new customers including Healthe Care and Access Information. In addition we continued to transform existing customers including Scania, Fiskars and Sopra Steria to our cloud solutions. Our subscription order intake growth rate was however lower than anticipated this quarter, driven by longer than expected deal closing cycles, particularly in the US and the UK. The first quarter is always seasonally slower for order intake than other quarters.

Driving revenue growth through partner sales is an area of focus for Basware and in the first quarter we saw an increase in the proportion of order intake from partners. New partnerships announced in the quarter included an agreement that makes Basware’s network available to Salesforce, and an agreement with cloud ERP provider QAD.

Basware is an industry leader in the field of networked source-to-pay solutions and we continued to deliver innovative new data-based solutions for our customers. In the first quarter we announced #Superfinance, our approach to strengthening the abilities of today’s procurement and finance professionals to utilize big data, predictive analytics and artificial intelligence. Other new innovations included an enhanced supplier dashboard, which enables buyer customers to use advanced analytics to further reduce costs and increase value of their supplier base, and a partnership with Dun & Bradstreet to enrich supplier data.

In the first quarter two new members joined Basware’s Board of Directors and bring with them a wealth of relevant experience. Daryl Rolley, based in the US, comes to Basware from a broad leadership and sales background, including 8 years at Ariba. Asko Schrey, based in Finland, brings significant leadership and investing experience from the technology and finance sectors.

The underlying performance of Basware was solid this quarter, with good organic revenue growth rates after the impact of foreign exchange movements and the announced divestments was accounted for. We continued to execute what we said we would do, and with our clear cloud strategy, I am confident for Basware’s future.

FUTURE OUTLOOK

Operating environment and market outlook

All organisations need to manage their purchasing processes from procurement through to handling invoices and paying them. Currently many organisations only have unsophisticated or partial tools to manage these processes and as a result many are faced with unmanaged spending, inefficient manual and paper-based processes and poor visibility of cashflows. Basware offers a uniquely complete solution for these challenges that is differentiated by the Basware Network, the largest e-invoicing network in the world, and enables customers to manage 100 percent of their spending and make their purchasing processes completely paperless.

Basware expects the demand for networked purchase-to-pay services to continue to grow. The total potential market for networked purchase-to-pay services is estimated to be worth EUR 15 billion in annual revenues in Europe and North America.

Outlook for 2018

Basware is the global leader in providing networked source-to-pay, e-invoicing and value-added services. Basware’s key strategic priority for the strategy period 2017-2020 is cloud revenue growth. The company continues to strengthen its leading market position in order to grow cloud revenue.

Themes affecting cloud revenues in 2018:

  • SaaS revenues anticipated to continue to grow strongly on an organic basis
  • Transaction services revenue growth anticipated to accelerate as growth initiatives take effect
  • Other cloud revenues continue to be impacted by UK public sector revenues
  • Cloud revenues have a higher proportion of US dollar and Sterling and so are disproportionately affected by foreign exchange movements 

Themes affecting non-cloud revenues in 2018:

  • Maintenance and licence revenues will continue to decline as Basware transitions existing customers to cloud services
  • Consulting revenues are also affected by the cloud transition and more standardised implementations
  • Non-cloud revenues are disproportionately affected by the divestments completed in February 2018 

For 2018 Basware expects the following on an organic basis at constant currencies:

  • Cloud revenues to be between EUR 90 and 95 million
  • Total costs excluding amortization, depreciation and adjustments to be slightly above 2017 levels 

Constant currencies means that the effects of any changes in currencies are eliminated by calculating the figures for the period using 2017 exchange rates. Organic means that the figures are adjusted to remove the effects of any acquisitions or disposals within the past 12 months.

Espoo, Finland, Wednesday, April 18, 2018

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
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Basware interim report Q1 2018