Basware Interim Report January 1-June 30, 2016 (IFRS)
Basware Corporation, stock exchange release, July 19, 2016 at 08:45
BASWARE INTERIM REPORT JANUARY 1 - JUNE 30, 2016 (IFRS)
Basware grew SaaS revenues by 99% and continued to invest in enablers for the 2018 strategy
- Net sales EUR 73 073 thousand (EUR 70 631 thousand): growth 3.5 percent
- Organic revenue growth 2.5 percent at constant currencies
- Adjusted EBITDA EUR -2 978 thousand (EUR 1 798 thousand)
- Cloud revenue 42.2 percent (33.8 %) of net sales
- Recurring revenue 71.7 percent (66.3 %) of net sales
- Operating result EUR -7 714 thousand (EUR -625 thousand)
- Earnings per share (diluted) EUR -0.52 (-0.08)
- Net sales EUR 38 948 thousand (EUR 36 590 thousand): growth 6.4 percent
- Organic revenue growth 1.5 percent at constant currencies
- Adjusted EBITDA EUR -2 461 thousand (EUR 1 779 thousand)
- Cloud revenue 42.4 percent (37.6 %) of net sales
- Recurring revenue 70.6 percent (68.7 %) of net sales
- Operating result EUR -4 999 thousand (EUR -1 757 thousand)
- Earnings per share (diluted) EUR -0.32 (-0.12)
Basware has applied the guidance from ESMA (the European Securities and Markets Authority) on Alternative Performance Measures which is applicable as of July 3, 2016 (see page 15).
The Interim Report is unaudited.
Basware is targeting accelerated revenue growth during its strategy period 2016-2018. In 2016, Basware will accelerate its growth-related investments primarily focused on its cloud business, sales and marketing and related supporting activities as well as in the rollout of Basware's Financing Services offering. For 2016, Basware expects organic revenue growth of 5 percent or more for the year at constant currencies, and temporary pressure on margins driven by accelerated growth investments resulting in adjusted EBITDA around break-even. The growth related accelerated operating investments are planned to amount to approximately 20 million euros.
GROUP KEY FIGURES
|Net sales||38 948||36 590||6.4 %||73 073||70 631||3.5 %||143 410|
|Organic revenue growth*||1.5 %||2.5 %|
|EBITDA||-2 870||64||-3 737||2 855||11 902|
|Adjusted EBITDA||-2 461||1 779||-2 978||1 798||12 121|
|Operating result||-4 999||-1 757||-7 714||-625||4 676|
|% of net sales||-12.8 %||-4.8 %||-10.6 %||-0.9 %||3.3 %|
|Result before tax||-5 622||-2 062||-9 395||-1 206||3 563|
|Result for the period||-4 528||-1 715||-7 485||-1 120||3 083|
|Return on equity, %||-13.2 %||-4.9 %||-10.7 %||-1.9 %||2.2 %|
|Return on investment, %||-10.3 %||-3.5 %||-9.5 %||0.5 %||3.6 %|
|Cash and cash equivalents**||21 799||62 570||21 799||62 570||33 238|
|Gearing, %||-4.7 %||-33.7 %||-4.7 %||-33.7 %||-22.4 %|
|Equity ratio, %||66.1 %||67.9 %||66.1 %||67.9 %||79.1 %|
|Earnings per share|
|Undiluted, EUR||-0.32||-0.12||162.3 %||-0.53||-0.08||564.0 %||0.22|
|Diluted, EUR||-0.32||-0.12||162.3 %||-0.52||-0.08||563.9 %||0.22|
|Equity per share, EUR||9.68||9.88||-1.2 %||9.68||9.88||-1.2 %||9.97|
*at constant currencies
**Including short term deposits maturing within 3 months from the period end
Basware is the global leader in providing networked purchase-to-pay solutions, e-invoicing and innovative financing services. Basware's commerce and financing 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 Esa Tihilä:
Basware's cloud revenues grew strongly in the second quarter with significant SaaS growth continuing and good progress in expanding Network transaction volumes. At the same time Basware continued to make investments to enable future growth in line with its 2018 strategy goals.
Basware's SaaS revenues grew 99 percent in total compared to the second quarter of 2015. The outlook for SaaS growth is also very positive as our orderbook grew strongly with 27 new P2P SaaS deals signed versus 19 in the second quarter of 2015.
The transition to SaaS has proceeded well and will bring long-term stable recurring revenues. However, in the near term, Basware's net sales continue to be impacted by the business model transformation as license sales and maintenance have continued to decline. In addition, consulting revenues have been negatively impacted as we work to shorten delivery times in order to more quickly grow our recurring SaaS revenues. All of these effects are in line with our strategy and guidance given at our Capital Markets Day in February.
The growth in Network transactions accelerated, totaling 27.2 million in the quarter. This was 3.7 million higher than in the second quarter of 2015, an increase of 15.7 percent. June was also a record month with 9.2 million transactions. Basware's virtual operator partnership with ING Belgium on a joint service targeted at small and medium-sized businesses (SMB) went live in June and a significant number of new customers have already been signed up to the service.
Key wins in the second quarter across both P2P and Network business areas included deals signed with a Danish healthcare company and a luxury brand retailer in France.
We continue to see very strong demand for all of Basware's Financing Services solutions and services however focus in the second quarter has been on implementing signed Basware Pay and Basware Discount deals. This work will also continue in the third quarter. The joint venture with Arrowgrass Capital Partners LLP has been developing an easy and flexible invoice financing solution targeted at SMBs. This went live in the UK during the quarter and onboarding a selected amount of customers is ongoing.
Shortening delivery times continues to be a key area of focus, in line with Basware's strategy. In the quarter, 34 Alusta deals went live versus 15 in the second quarter of 2015. Express Delivery for Alusta deals has been rolled out in Sweden, Norway and Finland with more countries set to follow. The move towards a global allocation of resources in Professional Services also progressed with the first group of consultants operating on a central delivery basis.
Good progress was made in investing in the 2018 strategy growth enablers and we have now made the bulk of our planned new sales and marketing hires. Sales and marketing headcount grew by 19.6 percent compared to the second quarter of 2015. This included the appointment of Paul Taylor to the key role of heading Basware's sales globally, effective from June. These investments will start to show returns from early 2017 onwards.
We acquired Verian, a leading cloud based e-procurement provider in the US, in an acquisition that closed on April 1, 2016. I am pleased with the integration progress so far and we have already seen evidence of the strength of the combination with the first Network deal cross-sold in June. We see a significant opportunity in the US market which was our fastest growing market for e-invoicing in the quarter. Through the Verian acquisition Basware is stronger and better positioned to accelerate and capture growth in one of its key markets.
In our other key markets, revenues in the UK have been impacted by the uncertainty caused by Brexit. In the long run however we believe that there will be strong demand for our services in the UK as the public sector continues to need to seek savings and efficiencies.
The global market for e-invoicing is a tremendous opportunity for Basware. 370 billion invoices are estimated to be sent every year across the world, with 95 percent of these still in paper or unstructured data format. Only 1 percent are currently estimated to be sent in true e-invoice format. That proportion will increase as companies and governments realize the savings and other benefits they can achieve with e-invoicing. Over 50 governments across the world are already supporting the adoption of e-invoicing.
With the largest e-invoicing network in the world, Basware is uniquely positioned to capture the growth of e-invoicing. In the second quarter I am pleased to report that Basware was again recognized as a global market leader in both e-invoicing and P2P by independent research firms.
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.
As part of its strategy for 2016-2018, Basware is accelerating operating investments in 2016 to drive higher organic growth. In particular go-to-market and related activities will be expanded, with a focus on the UK, the US, and Germany, and the development of the Financing Services offering will be accelerated. In addition, Basware is investing in R&D activities aimed at shortening the implementation times of Basware's solutions and services with new and existing customers. The growth related accelerated operating investments are planned to amount to approximately 20 million euros.
While EBITDA margin will be temporarily impacted in 2016 due to the investments, the underlying profitability will continue to improve as a result of efficiency and simplification initiatives. These initiatives include continuous cost of sales reduction of Basware's cloud-based business, increasing use of online tools and services to selectively automate demand generation and sales activities, as well as various supporting process simplification and scalability related actions.
For 2016, Basware expects organic revenue growth of 5 percent or more for the year at constant currencies, and temporary pressure on margins driven by accelerated growth investments resulting in adjusted EBITDA around break-even. The company also expects its SaaS net sales to grow as well as to sustain strong growth of Basware's network. The continued increase in the company's recurring revenue is expected to outpace the progressive slowdown in license net sales. Seasonality affects Basware's business throughout the year, and typically the last quarter of the year has been the strongest quarter.
Organic growth will continue to be supported by a disciplined acquisition strategy, aimed at strengthening the company's position in key markets, especially in the e-invoicing market in Europe and in the US.
Espoo, Finland, Tuesday, July 19, 2016
Board of Directors
Esa Tihilä, CEO, Basware Corporation
For more information, please contact:
Niclas Rosenlew, CFO, Basware Corporation
Tel. +358 504 802 160