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2016-10-19

Basware: 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

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