Basware Interim Report January 1-June 30, 2014 (IFRS)

Thursday, 10 July, 2014
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Basware Corporation, stock exchange release, July 10, 2014 at 08:45

BASWARE INTERIM REPORT JANUARY 1 - JUNE 30, 2014 (IFRS)

Operating profit grew by 26.9 percent during the second quarter

Summary

January-June 2014:

  • Net sales EUR 62 846 thousand (EUR 61 617 thousand) - growth 2.0 percent
  • Operating result EUR 1 462 thousand (EUR -661 thousand)
  • Operating result 2.3 percent of net sales (-1.1%)
  • Growth of Network Services net sales 16.1 percent
  • Recurring revenue 66.7 percent (62.6%) of net sales
  • Cash flow from operating activities EUR 13 558 thousand (EUR 9 268 thousand)
  • Earnings per share (diluted) EUR 0.06 (-0.05)

April-June 2014:

  • Net sales EUR 31 833 thousand (EUR 31 789 thousand) - growth 0.1 percent
  • Operating profit EUR 1 152 thousand (EUR 908 thousand) - growth 26.9 percent
  • Operating profit 3.6 percent of net sales (2.9%)
  • Growth of Network Services net sales 12.7 percent
  • Recurring revenue 66.5 percent (61.6%) of net sales
  • Earnings per share (diluted) EUR 0.06 (0.03)

Basware expects its net sales and operating profit (EBIT) for 2014 to grow compared to 2013.

The figures are unaudited.

GROUP KEY FIGURES

EUR thousand 4-6/
2014
4-6/
2013
Change,
%
1-6/
2014
1-6/
2013
Change,
%
1-12/
2013
Net sales 31 833 31 789 0.1% 62 846 61 617 2.0% 123 349
EBITDA 2 896 2 663 8.8% 4 995 2 895 72.6% 10 383
Operating result before IFRS3 amortization 1 383 1 139 21.4% 1 923 -197 4 256
Operating result 1 152 908 26.9% 1 462 -661 3 331
   % of net sales 3.6% 2.9% 2.3% -1.1% 2.7%
Result before tax 1 149 836 37.4% 1 160 -689 3 284
Result for the period 804 352 128.3% 728 -611 2 605
Return on equity, % 3.4% 1.5% 1.5% -1.2% 2.6%
Return on investment, % 5.8% 4.4% 3.8% -0.3% 3.9%
Liquid assets 19 954 22 917 -12.9% 19 954 22 917 -12.9% 13 218
Gearing, % -13.7% -13.0% -13.7% -13.0% -4.7%
Equity ratio, % 70.5% 66.9% 70.5% 66.9% 77.1%
Earnings per share
Undiluted, EUR 0.06 0.03 108.4% 0.06 -0.05 0.20
Diluted, EUR 0.06 0.03 108.4% 0.06 -0.05 0.20
Equity per share, EUR 7.46 7.46 0.0% 7.46 7.46 0.0% 7.62

Business operations

Basware is the global leader in providing purchase-to-pay and e-invoicing solutions in the world of commerce. We empower companies to unlock value across their financial operations by simplifying and streamlining key financial processes. We help our customers to succeed and create added value to their business through better financial management. Our 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 new levels of 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.

Reporting

Basware Corporation reports one operating segment: Purchase to Pay, P2P. The segment is divided into the Network Services and Solution Services businesses that support each other.

As of 2014, the company reports revenue from products and services as follows: Network Services (e-Invoicing solutions and services) and Solution Services (software products and services). In addition to this, the company reports revenue from its products and services according to the breakdown of the previous reporting practice: License sales, Professional Services, Customer Support, and Automation Services.

In accordance with the previous practice, Customer Support and Automation Services together form the recurring revenue reported by the company.

Network services revenue is comprised of e-Invoicing, paper invoice scanning services, printing service, catalog exchange, purchase message exchange, activation services, and alliance fees of e-invoicing services and financing-related added value services. Solution Services revenue is comprised of software revenue (SaaS revenue and license sales), software maintenance and extended customer support services (customer support), Professional Services, and start-up fees of SaaS services.

As geographic information Basware reports geographical areas Finland, Scandinavia, rest of Europe, and Other. Net sales are reported by the customer's location, and net sales and operating result are also reported by the location of the assets. In addition, the geographical information of non-current assets is reported by the location of the assets in the annual financial statements.

CEO Esa Tihilä:

The company's operating result has gradually improved. The growth of the Network Services business supports reaching our overall objective. Net sales for the second quarter amounted to EUR 31 833 thousand, and operating result was EUR 1 152 thousand. Comparable operating result improved by EUR 1 310 thousand from the corresponding period the previous year. The share of recurring revenue of net sales continued to increase as planned, accounting for 66.5 percent. International net sales grew by 2.5 percent and accounted for 60.4 percent (59.0%) of total net sales.

The net sales of the Network Services business amounted to EUR 8 066 thousand for the second quarter, growth of 12.7 percent compared to the corresponding period the previous year. The strong growth in the transaction volume accelerated, up 29.0 percent from the corresponding period the previous year. A total of 18.7 million transactions were processed via Basware Network, up 8.5 percent from the previous quarter when 17.2 million transactions was reported. Start-up fees related to connecting customers did not grow, which had an impact on the total growth of Network Services net sales. Several significant major customers started the use of e-invoicing services. The most significant new announced e-invoicing services and Alusta delivery agreement was signed with a leading global oil and gas company.

Solution Services net sales amounted to EUR 23 768 during the second quarter, down 3.5 percent. Alusta sales have developed promisingly during the second quarter compared to the beginning of the year, but revenue recognition of new SaaS deals has not yet had an effect on the accumulation of net sales, and the demand for professional services is lower in SaaS deliveries than license deliveries. The chargeable utilization rate of Professional Services continued to be somewhat lower than expected. In all, we have signed more than 100 deals on solutions powered by Alusta, and there were more new Alusta deployments during the quarter than ever before. The Solution Services business is expected to develop more favorably during the rest of the year. The amount of new agreements has increased and the order backlog is at a good level which we expect to enable improved growth for net sales during rest of the year.

Partly as a result of strict spend control our profit-making ability improved and the fixed costs decreased by 6.7 percent during the second quarter. We will continue to improve the profit-making ability in the Solution Services business during the second half of the year by ensuring the effective use of resources in Professional Services and improving the billing rate in relation to demand. We will continue investments in the Network Services business to achieve accelerated growth by primarily developing automated solutions for sending and receiving e-invoices.

According to the most recent industry surveys, e-invoicing has become more commonplace and the volume of e-invoices has grown significantly in Europe and globally. The adoption of e-invoicing is expected to increase even more rapidly as the benefits of e-invoicing are realized more widely, especially with the support of regulatory standards and a supportive infrastructure. The global market penetration of e-invoicing is estimated to be approximately 10 percent. The growing e-invoicing market and companies' interest in other payment and value added services for financing will offer Basware excellent growth opportunities in coming years.

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 2014 and the continuous need 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 growing in companies' portfolios. Basware continues active analysis of acquisition targets especially in the e-Invoicing market in Europe and in the U.S. according to its strategy.

By the end of 2015, Basware aims to become the largest business commerce network for buyers and suppliers. According to the most recent industry surveys, e-invoicing has become more commonplace and the volume of e-invoices has grown considerably in Europe and the rest of the world. The global market penetration of e-invoices is estimated to be approximately 10 percent. The growing e-invoicing market and companies' interest in other payment and value added services for financing will offer Basware excellent growth opportunities in coming years.

Outlook 2014

The global market growth of e-invoicing has been estimated to be approximately 20 percent. Basware is pursuing accelerated growth that exceeds the market growth in its Network Services. Stronger growth can be achieved by developing and automating the connection of buyers and suppliers to the e-invoicing services, by utilizing digital marketing and sales channels more extensively, and through acquisitions.

The Network Services business is expected to grow strongly also during the second half of the year. The Solution Services business is expected to develop more favorably during the rest of the year. The growth in the sales of Alusta is expected to have a positive effect on software net sales and professional services.

The fixed costs of the company are expected to stay at the same level than during the first half of 2014. The company will continue to improve the profit-making ability in the Solution Services business during the second half of the year by ensuring the effective use of resources in Professional Services and improving the billing rate in relation to demand. The company will continue to invest in the Network Services business to achieve accelerated growth by primarily developing automated solutions for sending and receiving e-invoices. Decisions about investments required by the growth will be made during the year if the market situation and business development so require.

Basware expects its net sales and operating profit (EBIT) for 2014 to grow compared to 2013.


Espoo, Finland, Thursday, July 10, 2014

BASWARE CORPORATION
Board of Directors


For more information, please contact:
Esa Tihilä, CEO, Basware Corporation
Tel. +358 40 480 7098

Distribution:
NASDAQ OMX Helsinki Ltd
Key media
www.basware.com

Basware Interim Report Q2/2014