Basware Financial Statement Release January 1-December 31, 2015 (IFRS)

Tuesday, 02 February, 2016
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Basware Corporation, stock exchange release, February 2, 2016 at 08:45

BASWARE FINANCIAL STATEMENT RELEASE JANUARY 1 - DECEMBER 31, 2015 (IFRS)

Basware Corporation's fourth quarter and full year 2015

SUMMARY

2015 ended with a strong fourth quarter achieving full year sales and operating profit targets; cloud business developed favourably with significant growth in the key markets for the full year

Financial year 2015:

  • Net sales EUR 143 410 thousand (EUR 127 674 thousand) - growth 12.3 percent
  • Operating profit EUR 4 676 thousand (EUR 4 325  thousand) - 3.3 percent of net sales (3.4%)
  • Growth of Network Services net sales 48.3 percent
  • Recurring revenue 67.8 percent (67.0%) of net sales
  • Earnings per share (diluted) EUR 0.22 (0.22)

October-December 2015:

  • Net sales EUR 39 210 thousand (EUR 34 664 thousand) - growth of 13.1 percent
  • Operating profit EUR 4 305 thousand (EUR 1 701 thousand) - 11.0 percent of net sales (4.9%)
  • Growth of Network Services net sales 53.5 percent
  • Recurring revenue 66.5 percent (64.9%) of net sales
  • Earnings per share (diluted) EUR 0.21 (0.11)

According to Basware's refined strategy, the company 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, and temporary pressure on margins driven by accelerated growth investments resulting in EBITDA excluding non-recurring items around break-even. The growth related accelerated operating investments are planned to amount to approximately 20 million euros.

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 February 2, 2016.

GROUP KEY FIGURES

               
  10-12/ 10-12/ Change, 1-12/ 1-12/ Change,  
EUR thousand 2015 2014 % 2015 2014 %  
               
Net sales 39 210 34 664 13.1 143 410 127 674 12.3  
EBITDA 6 224 3 436 81.1 11 902 11 354 4.8  
Operating profit 4 305 1 701 153.1 4 676 4 325 8.1  
  % of net sales 11.0 % 4.9%   3.3 % 3.4 %    
Profit before tax 3 281 2 204 48.9 3 563 4 328 -17.7  
Profit for the period 2 954 1 454 103.1 3 083 2 959 4.2  
               
Return on equity, % 6.3% 4.2 %   2.2 % 2.5%    
Return on investment, % 11.1 % 7.2 %   3.6 % 4.4%    
Cash and cash equivalents 33 238 28 954 14.8 33 238 28 954 14.8  
Gearing, % -22.4 % -38.6 %   -22.4 % -38.6%    
Equity ratio, % 79.1 % 82.7 %   79.1 % 82.7%    
               
Earnings per share              
Undiluted, EUR 0.21 0.11 90,7 0.22 0.22 -2,2  
Diluted, EUR 0.21 0.11 90,6 0.22 0.22 -2,3  
Equity per share, EUR 9.97 9.88 0.9 9.97 9.88 0.9  
           
                           

BUSINESS OPERATIONS

Basware is the global leader in providing purchase-to-pay and e-invoicing solutions in the world of commerce. Basware empowers companies to unlock value across their financial operations by simplifying and streamlining key financial processes. Basware helps its customers to succeed and create added value to their business through better financial management. Basware Network, the largest open business network in the world, connects 1 million companies across 100 countries and enables easy collaboration between buyers and suppliers of all sizes. Through this network, leading companies around the world achieve improved spend control, efficiency, and closer relations with their suppliers. With Basware, businesses can introduce completely new ways of buying and selling to achieve significant cost savings and boost their cash flow.

CEO Esa Tihilä:

In 2015, Basware reached several milestones in its strategy, reaching a tipping point in its transition from a license-dominated to a cloud and SaaS-based company. Throughout the year, the cloud business continued to develop favourably, supported bysignificant growth in key markets. The year ended with a strong quarter, driven by a significantly increased number of SaaS-based Alusta agreements and a record number of go-lives of Basware's solutions and services.

Net sales for the review period amounted to EUR 143 410 thousand, growth of 12.3 percent, and operating profit to EUR 4 676 thousand (EUR 4 325 thousand), growth of 8.1 percent. Throughout the year the investment continued in the selected key operations, such as Network Services and Financing Services. The international share of Basware's net sales continued to grow and amounted to 65.7 percent (61.6%) in the period. The year-on-year growth in key markets was at a good level: net sales continued to grow strongly in the US, the UK and Germany. The growth in the Finnish market was modest, impacted by the challenging economic climate.

The last quarter of 2015 was strong: SaaS net sales developed well, up 21.9 percent, driven by continued strong growth in key markets. During the quarter a record number of Alusta-based SaaS agreements were signed as well as a record number of go-lives of Basware's solutions and services took place. Net sales developed favourably in the fourth quarter, growing 13.1 percent year-on-year. Net sales for the fourth quarter amounted to EUR 39 210 thousand (EUR 34 664 thousand), and operating profit was EUR 4 305 thousand (EUR 1 701 thousand). The net sales of Network Services grew by 53.5 percent while at the same time the Solutions Services sales decreased by 1.4 percent, driven by the transition to SaaS.

The growth in Network Services continued throughout 2015. Net salesamounted to EUR 49 305 thousand (EUR 33 237 thousand) for the period, a growth of 48.3 percent year-on-year. Nearly 94 million transactions were processed via Basware Network during 2015 (78 million transactions), up 20.2 percent compared to the previous year. The growth of the network continued in the e-invoicing target markets, such as the US, the UK and Germany, while growth was levelled off in the markets where penetration is relatively high.

The demand for SaaS services continued at a good level in 2015, demonstrated bySaaS revenue growth of 16.8 percent year-on-year. The number of signed Alusta-based SaaS agreements more than doubled compared to the previous year with the growth in new, signed agreements accelerating during the latter part of the year. As part of the company's business model change, the decrease in software sales continued throughout the year. Net sales of the Solution Services business amounted to EUR 94 105 thousand for the period (EUR 94 437 thousand), a decrease of 0.4 percent year-on-year.

Investments in, and building the Financing Services business and services have continued throughout the year. 25 customers in the UK, the US and Finland have signed up for Basware Pay and Basware Discount since summer 2015. Basware Advance, a new online solution targeted in particular at small and medium enterprise (SMEs), was launched in November, giving companies timely access to new and flexible financing options and offering liquidity to maintain a stable cash flow. During 2015, the company agreed on cooperation with several international financial institutions.

Basware has considerably strengthened its position to capture growth in its targeted public sector market with expected high growth potential. In April 2015, Basware strengthened its market position in the UK when it acquired Procserve, the leading local e-procurement solution provider for the public sector. Across Basware's markets, there is a continued push from governments and public sector to adopt e-invoicing.

Basware has achieved a position of global leadership in networked purchase-to-pay (P2P) and e-invoicing solutions. Recent industry trends and developments, ranging from governments driving e-invoicing adoption to the emergence of an alternative financing industry have significantly expanded the company's addressable market. Basware has reached a tipping point in its transition to a cloud-based company, has a strong offering in P2P, e-invoicing and new financing services and is now ready to tap into the expanded market opportunities.

As indicated in its refined 2016-2018 strategy and 2016 guidance, Basware will target increasing growth of its cloud business which will be done by accelerating operating investments in 2016. 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 will invest in R&D activities aimed at shortening the implementation times of Basware's solutions and services with new and existing customers.

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 the same to continue also in 2016 and the continuous demand for services to remain at a favorable level among its customers.

Consolidation is expected to continue in the business environment, 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. The 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 as well will offer excellent growth opportunities in future years.

Outlook 2016

As part of its refined strategy for 2016-2018, Basware will accelerate 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 will invest 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, and temporary pressure on margins driven by accelerated growth investments resulting in EBITDA excluding non-recurring items around break-even. The company also expects its SaaS revenue to grow as well as to sustain strong growth of Basware Network. The continued increase in the company's recurring revenue is expected to outpace the progressive slowdown in license revenues. Seasonality affects Basware's business throughout the year, and typically the last quarter of the year has been the strongest quarter.

Oganic 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.

BOARD'S DIVIDEND PROPOSAL

At the end of 2015, the Group parent company's distributable funds are EUR 126 875 thousand. Board of Directors proposes to the Annual General Meeting that no dividend be paid for 2015 and that net result for the financial year 2015 be allocated to retained earnings.

Basware Corporation's Annual General Meeting will be held on Tuesday, March 15, 2016 in Helsinki, Finland.

Espoo, Finland, Tuesday, February 2, 2016

BASWARE CORPORATION
Board of Directors

For more information, please contact:

Esa Tihilä, CEO, Basware Corporation
Tel. +358 40 480 7098

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

Basware Q4/2015 interim report