Basware Interim Report January 1 - September 30, 2016 (IFRS)
Basware Corporation, stock exchange release, October 19, 2016 at 08:45
BASWARE INTERIM REPORT JANUARY 1 - SEPTEMBER 30, 2016 (IFRS)
SUMMARY
Basware SaaS revenues more than doubled, overall growth behind expectations
January-September 2016:
- Net sales EUR 108 369 thousand (EUR 104 200 thousand): growth 4.0 percent
- Organic revenue growth 1.6 percent at constant currencies
- Adjusted EBITDA EUR -1 598 thousand (EUR 5 337 thousand)
- Cloud revenue 43.7 percent (35.6 %) of net sales
- Recurring revenue 73.6 percent (68.2 %) of net sales
- Operating result EUR -9 932 thousand (EUR 371 thousand
- Earnings per share (diluted) EUR -0.78 (0.01)
July-September 2016:
- Net sales EUR 35 295 thousand (EUR 33 569 thousand): growth 5.1 percent
- Organic revenue growth -0.4 percent at constant currencies
- Adjusted EBITDA EUR 1 381 thousand (EUR 3 540 thousand)
- Cloud revenue 46.6 percent (39.5 %) of net sales
- Recurring revenue 77.4 percent (72.2 %) of net sales
- Operating result EUR -2 218 thousand (EUR 996 thousand)
- Earnings per share (diluted) EUR -0.26 (0.09)
The Interim Report is unaudited.
Basware is targeting accelerated revenue growth during its strategy period 2017-2020. In 2016, Basware is accelerating 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 flat organic revenue growth at constant currencies, and temporary pressure on margins driven by accelerated growth investments resulting in adjusted EBITDA around breakeven.
GROUP KEY FIGURES
| 7-9/ | 7-9/ | Change, | 1-9/ | 1-9/ | Change, | 1-12/ | |||||||||||||||||
| EUR thousand | 2016 | 2015 | % | 2016 | 2015 | % | 2015 | ||||||||||||||||
| Net sales | 35 295 | 33 569 | 5.1 % | 108 369 | 104 200 | 4.0 % | 143 410 | ||||||||||||||||
| Organic revenue growth* | -0.4 % | 1.6 % | |||||||||||||||||||||
| EBITDA | -33 | 2 823 | -3 771 | 5 678 | 11 902 | ||||||||||||||||||
| Adjusted EBITDA | 1 381 | 3 540 | -1 598 | 5 337 | 12 121 | ||||||||||||||||||
| Operating result | -2 218 | 996 | -9 932 | 371 | 4 676 | ||||||||||||||||||
| % of net sales | 3.0 % | 0.4 % | 3.3 % | ||||||||||||||||||||
| Result before tax | -3 928 | 1 488 | -13 323 | 282 | 3 563 | ||||||||||||||||||
| Result for the period | -3 711 | 1 249 | -11 196 | 129 | 3 083 | ||||||||||||||||||
| Return on equity, % | -10.8 % | 3.6 % | -10.8 % | 0.1 % | 2.2 % | ||||||||||||||||||
| Return on investment, % | -0.5 % | 3.8 % | -6.6 % | 1.2 % | 3.6 % | ||||||||||||||||||
| Cash and cash equivalents | 12 951 | 36 824 | 12 951 | 36 824 | 33 238 | ||||||||||||||||||
| Gearing, % | 1.7 % | -25.5 % | 1.7 % | -25.5 % | -22.4 % | ||||||||||||||||||
| Equity ratio, % | 68.5 % | 77.4 % | 68.5 % | 77.4 % | 79.1 % | ||||||||||||||||||
| Earnings per share | |||||||||||||||||||||||
| Undiluted, EUR | -0.26 | 0.09 | -0.78 | 0.01 | 0.22 | ||||||||||||||||||
| Diluted, EUR | -0.26 | 0.09 | -0.78 | 0.01 | 0.22 | ||||||||||||||||||
| Equity per share, EUR | 9.44 | 9.73 | -3.0 % | 9.44 | 9.73 | -3.0 % | 9.97 | ||||||||||||||||
*at constant currencies
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 the third quarter the growth of Basware's cloud business was strong. However, it was offset by the decline in license, maintenance and consulting services revenues as well as weak performance, especially in the UK. Basware will in the coming months initiate further actions to strengthen the focus on execution of the strategy and its significant growth potential in cloud revenues.
Basware's SaaS revenues continued to grow strongly in the third quarter with a total growth of 118.7 percent and organic growth of 53.2 percent, compared to the third quarter of 2015. Basware's network continued to grow with transaction volumes up 13.8 percent compared to the third quarter of 2015. However overall transaction growth did not fully meet our expectations and the significant potential there is for e-invoicing. Financing Services has been focused on maturing the solutions and will not contribute materially to net sales in the near term, although there continues to be strong demand from customers for the services. Professional Services has been delivering more with 28 Alusta go-lives in the third quarter compared to 16 in the third quarter of 2015. Revenues from consulting services have however been impacted by the transition to SaaS.
The results in our key markets were mixed but strong order intake across our key markets in the third quarter points to a brighter outlook. In the UK, uncertainty around the EU referendum has continued to impact decision making in both the public and private sector, resulting weaker than expected results. We believe the long term potential is solid in the UK. In Germany growth has been held back by delays in hiring salespeople, as a result of the competitive local job market. However, these hires have now been completed.
Basware has continued to invest in sales and marketing in line with its strategy. Headcount for sales and marketing has increased by 25 percent compared to the third quarter of 2015, with the majority of the new hires coming in our key markets of UK, US and Germany. The majority of our geographically allocated marketing spending has been made in our key markets. The positive impact of these investments has however not yet been seen in net sales given the lead time for new salespeople to become productive.
Basware is a great company and I am very excited at having been given the opportunity to lead the company forward into its next phase of growth. Basware's vision, view on the significant future potential of our markets and our ability to capture that opportunity is unchanged. However, what is required now is more focus on execution and customers. Since taking on the role of CEO on 26 September, I have identified a number of action points to boost growth, simplify our operations and improve our productivity. More details of these are provided in the strategy section.
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 2016
Basware's transition to a cloud company has progressed at a fast pace. Our SaaS revenues have been growing very strongly both organically and in total, and are expected to continue to do so. However, although our organic SaaS growth has been faster than indicated in our strategy, it has not yet fully offset the faster than expected decline in revenues from license sales and maintenance. The transition to SaaS has also impacted our consulting revenues which have been more negative than expected in 2016.
Transaction volumes in our network have grown at a reasonable rate in 2016, however transaction revenues have been impacted by the decline of start-up fees. Overall the growth in transaction revenues has not yet been sufficient to offset the drags on our business caused by the SaaS transformation and decline of consulting revenues.
Basware has faced headwinds in its key markets in 2016. In the UK, uncertainty caused by the EU referendum has led to delays in decision making by both public and private sector customers. In Germany, the ramp up of the sales force has been held back by the competitive job market which has made it difficult to attract high quality hires within the desired timeframe.
Basware's organic revenue growth at constant currencies in 2016 was expected to be 5 percent or more. The company now expects its growth trajectory to be delayed because of the revenue mix effects outlined above. As a result, organic growth at constant currencies is expected to be flat for 2016.
Revenues from SaaS and Basware's network are expected to continue to grow for the rest of 2016.
Adjusted EBITDA for 2016 is expected to be around breakeven, in line with original guidance.
The growth related operating investments are expected to amount to approximately 20 million euros in 2016 including Verian.
Espoo, Finland, Wednesday, October 19, 2016
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