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

Friday, 10 October, 2014
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Basware Corporation, stock exchange release, October 10, 2014 at 08:45

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

Network Services business continued to grow strongly and Solution Services business developed positively during the third quarter

Summary

January-September 2014:

  • Net sales EUR 93 010 thousand (EUR 90 300 thousand) - growth 3.0 percent
  • Operating profit EUR 2 624 thousand (EUR 1 201 thousand) - growth 118.5 percent
  • Operating profit 2.8 percent of net sales (1.3%)
  • Growth of Network Services net sales 18.0 percent
  • Recurring revenue 67.8 percent (63.9%) of net sales
  • Cash flow from operating activities EUR 13 942 thousand (EUR 4 129 thousand)
  • Earnings per share (diluted) EUR 0.11 (0.03)

July-September 2014:

  • Net sales EUR 30 164 thousand (EUR 28 682 thousand) - growth 5.2 percent
  • Operating profit EUR 1 162 thousand (EUR 1 861 thousand) - decrease -37.9 percent
  • Operating profit 3.9 percent of net sales (6.5%)
  • Growth of Network Services net sales 22.1 percent
  • Recurring revenue 70.1 percent (66.8%) of net sales
  • Earnings per share (diluted) EUR 0.05 (0.07)

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

The figures are unaudited.

GROUP KEY FIGURES

               
  7-9/ 7-9/ Change, 1-9/ 1-9/ Change, 1-12/
EUR thousand 2014 2013 % 2014 2013 % 2013
               
Net sales 30 164 28 682 5.2% 93 010 90 300 3.0% 123 349
EBITDA 2 923 3 609 -19.0% 7 918 6 504 21.7% 10 383
Operating profit before IFRS3 amortization 1 719 2 092 -17.8% 3 642 1 895 92.2% 4 256
Operating profit 1 162 1 861 -37.6% 2 624 1 201 118.5% 3 331
  % of net sales 3.9% 6.5%   2.8% 1.3%   2.7%
Result before tax 964 1 819 -47.0% 2 124 1 130 87.9% 3 284
Result for the period 777 960 -19.2% 1 505 350 329.9% 2 605
               
Return on equity, % 2.6% 4.0%   1.7% 0.5%   2.6%
Return on investment, % 3.0% 7.7%   3.1% 2.3%   3.9%
Liquid assets 60 156 15 124 297.8% 60 156 15 124 297.8% 13 218
Gearing, % -39.3% -6.7%   -39.3% -6.7%   -4.7%
Equity ratio, % 80.6% 73.1%   80.6% 73.1%   77.1%
               
Earnings per share              
Undiluted, EUR 0.05 0.07 -21.5% 0.11 0.03 254.6% 0.20
Diluted, EUR 0.05 0.07 -21.5% 0.11 0.03 254.6% 0.20
Equity per share, EUR 9.90 7.51 32.7% 9.90 7.46 32.7% 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 solutions and services). In addition to this, the company reports revenue from products and services in tabulated format 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 Network Services business continued to grow strongly during the third quarter. Net sales for the third quarter amounted to EUR 30 164 thousand, growth of 5.2 percent, and operating profit to EUR 1 162 thousand (EUR 1 861 thousand). The share of recurring revenue of net sales continued to grow, accounting for 70.1 percent. International operations accounted for 61.8% (60.7%) of net sales.

The net sales of Network Services amounted to EUR 8 010 thousand (EUR 6 559 thousand) for the third quarter, growth of 22.1 percent year-on-year. Organic growth in Network Services transactions accelerated to a record-high number, growth of 41.4 percent year-on-year. A total of 20.3 million transactions were processed via Basware Network, up 8.9 percent from the previous quarter when 18.7 million transactions were reported. We will continue investments in the Network Services business to achieve accelerated growth by primarily developing automated solutions for sending and receiving e-invoices and new ways to achieve accelerated growth in sales.

Decrease in the Solution Services business came to a halt, with net sales of EUR 22 154 thousand for the third quarter (EUR 22 125 thousand). Sales of Alusta and chargeable utilization rate of Professional Services improved during the third quarter. The performance during the quarter lays down a good foundation for the positive development of the Solution Services business during the rest of the year as well. International demand has developed favorably in Solution Services, and the number of requests for quotes on comprehensive Purchase to Pay solutions in particular has increased. We will continue to improve our profit-making ability in the Solution Services during the last quarter by ensuring the efficient use of resources in Professional Services and improving the billing rate in relation to demand.

In September, we announced that we are launching a new business in financing services. Basware's Financing Services will deliver new and innovative financing services for companies of all sizes, combining invoice automation with financing services on the Basware Network. The first solution within Basware's Financing Services portfolio is Basware Pay, a new type of a global e-payment solution offered in collaboration with MasterCard.

In September, we carried out a directed share issue to a number of international institutional investors, and I am grateful for the great interest shown towards Basware. The Basware Network has grown as planned for years, and particularly strongly during the last two years. In accordance with our strategy, we are pursuing growth in the network both organically and through mergers and acquisitions. The net proceeds from the offering will increase Basware's financial flexibility and preparedness to carry out growth projects and acquisitions.

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 latest industry surveys, e-invoicing has become more common and the number of e-invoices has grown substantially in Europe and the rest of the world. The global market penetration of e-invoices is estimated to be some 10 percent. The growing e-invoicing market and companies' interest in other payment and financing added value solutions as well will offer Basware excellent growth opportunities in future years.

Outlook 2014

The global market growth in e-invoicing has been estimated to be approximately 20 percent. Basware is pursuing accelerating 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 service, by utilizing digital marketing and sales channels more extensively, and through acquisitions.

The Network Services business is estimated to grow strongly during the rest of the year. In the Solution Services business, sales of Alusta are expected to have a positive effect on software net sales and Professional Services.

Basware's fixed costs for the second half of the year are estimated to be on a par with the first half. The company will continue to improve its profit-making ability in the Solution Services also during the last quarter by ensuring the efficient use of resources in Professional Services and improving the billing rate in relation to demand. The company will continue investments in the Network Services business to achieve accelerated growth by primarily developing automated solutions for sending and receiving e-invoices and new ways to achieve accelerated growth in sales. Decisions on additional investments required for growth will be made during the last quarter as required by the market situation and development of business operations.

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

Espoo, Finland, October 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

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