Basware announces EUR 1 billion revenue growth vision
Basware’s vision is to deliver the best global solution for networked purchasing, invoicing and paying.
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. This enables customers to manage 100 percent of their spending, make their purchasing processes completely digital, and improve their carbon footprint by reducing paper usage.
As every organization in the world can benefit from our solutions, the market opportunity is huge, worth EUR 15 billion per year. Growth in demand for our solutions is underpinned by several megatrends, including digitalization, automation, and artificial intelligence. Basware’s ambition is to be the number one by market share in the networked source-to-pay industry in the large European countries and a leader in the US market. As a result, we today announce that our growth vision is to become an EUR 1 billion revenue company.
At the end of the second quarter 2018 Basware announced that it has moved to a growth phase after almost two years of simplifying and improving its operations. We are now focused fully on cloud revenue growth and will make the necessary investments to accelerate this growth.
Undisputed market leader
Basware has four sources of cloud revenue growth: new customer acquisitions, customer expansions, customer transformations, and partnering.
New customer acquisitions: Basware’s key growth markets are the US, UK, Germany and France. These continue to be the areas where we see the greatest opportunity to win new customers, and this is where we will continue to invest the majority of our new sales and marketing spending and where the “hunters” in our sales force will focus.
Customer expansions: We have a fantastic existing cloud customer base with approximately 200 key customers for whom the average annual recurring cloud revenue is approximately EUR 200 thousand. We want to support each of our customers across the full spectrum of networked source to pay cloud solutions and in all jurisdictions where they operate. We are the best placed in our industry to do so given the global reach of our network, the largest e-invoicing network in the world. By investing in account management, serving our customers more intimately and more globally, and by improving customer satisfaction, we believe that we can significantly increase the average revenues from our key customers.
Customer transformations: We are focused on actively transforming the largest of our on-premise customers to our cloud solutions. When our customers transform to the cloud they benefit from a modern, more useable, constantly updated solution and as a result typically the revenues from each of these customers more than doubles.
Partnering: In the past Basware has focused more on direct sales than partner sales with the share of cloud revenues in 2017 from partners being approximately 5 percent. Reaching more end customers via partners is a scalable way to grow both in our existing key markets and in the future in new geographies, and therefore a dedicated partnering function was created as part of the move to a functional organisation structure announced in May 2018. The goal is to increase the percentage of cloud revenues from partners to 20 percent in the long run.
Increasing investments into sales and marketing
Basware will increase its investments significantly into sales and marketing during the strategy period 2019 to 2022 in order to grow cloud order intake. We are confident that this will be a good investment, because our historical ratio of customer life time value to customer acquisition cost has been 7 times. This means that for every one Euro invested in sales and marketing a return of seven Euros will be generated. In fact, with a gross renewal rate of 95 percent and a net renewal rate of 106 percent, a typical customer lifetime is 19 years.
Simplify global trade interactions
We have a powerful cloud platform which enables customers to manage all source-to-pay processes. We have the largest open e-Invoicing network in the world. These assets combined put us in a unique position to leverage the rapid technological developments in the industry to bring more value to our customers by simplifying global trade interactions.
The role of analytics solutions will be increasingly more important to increase the value of our offering to customers - from getting actionable insights to making strategic business decisions.
We will selectively consider partnering and acquisitions to complement our technology portfolio.
Customer value beyond expectations
We strive to provide an excellent customer experience and maximize customers’ service adoption and benefits so that they want to purchase even more of our solutions. We will make our consulting and customer service organization more scalable.
A scalable business model
The cloud business model that Basware is transforming to, now accounting for 66 percent of revenues, is very scalable. This means that as revenues grow, the cost of sales does not grow as quickly, improving our gross margin over time. Whilst we will invest more in sales and marketing during the strategy period, underlying profitability will improve as cost of sales declines as a percentage of sales and we exercise discipline in research and development and general and administrative spending. As a general cost philosophy, we will continuously reallocate spending from less productive to more productive areas.
Basware’s priority is cloud revenue growth. In addition to the long-term growth vision to become a EUR 1 billion revenue company, Basware today announces a mid-term target to replace any previous targets: Basware will accelerate annual organic cloud growth to more than 20 percent by 2022.
There is a huge market opportunity ahead of Basware which requires ambition to capture. That is why we today announce our EUR 1 billion revenue growth vision. We believe that Basware has the building blocks to be the leader in our industry and with these actions are confident that we can further strengthen our global position and drive cloud revenue growth.
For further information, please contact:
Ben Selby, Head of Investor Relations, Basware Corporation
+358 50 305 8077, ben.selby@basware.com
Distribution:
Nasdaq Helsinki
Main media
investors.basware.com/en
About Basware:
Basware (Nasdaq: BAS1V) is the global leader in providing networked source-to-pay solutions, e-invoicing and value-added 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. Find out more at investors.basware.com/en.
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