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BASWARE INTERIM REPORT Q1/2013
Esa Tihilä, CEO
Mika Harjuaho, CFO
Basware’s Interim Report Q1/2013
April 11, 2013
Contents
• Business review of Q1/2013
• Financial review of Q1/2013
• Future outlook
Basware’s Interim Report Q1/2013 11.4.2013
Key events in Q1/2013
Market conditions, ongoing transition of the business model and renewal of the product and service portfolio impacted the first quarter:
• Net sales grew from services in line with our strategy
• 43 percent more significant Purchase to Pay deals than during Q1/2012
• The amount of significant e-invoice and SaaS deals was lower than expected; the decrease in license sales continued
• Integration process of the business acquisition of the leading e-Invoice operator in the Benelux, Certipost, started
• Global sales organization strengthened, focusing on buyer, supplier, and partner organizations
• Reseller agreement with Cintas, supporting Basware’s access to the small and mid-market in North America
Basware’s Interim Report Q1/2013
Share of
recurring
revenue
increased to
61.9 percent
(57.1%)
11.4.2013
• Net sales EUR 29 828 thousand
(EUR 27 435 thousand)
• EBITDA EUR 233 thousand (EUR
3 188 thousand), 0.8 % of net sales
Q1/2013 in brief: Net sales increased amidst difficult
market conditions and transition from software to
service business
0
3000
6000
9000
12000
15000
18000
21000
24000
27000
30000
33000
Q1/10 Q1/11 Q1/12 Q1/13 Q2/10 Q2/11 Q2/12 Q3/10 Q3/11 Q3/12 Q4/10 Q4/11 Q4/12
• Operating profit/loss (EBIT) EUR -1 569
thousand (EUR 1 822 thousand), -5.3%
of net sales
• Earnings per share EUR -0.07 (EUR 0.11)
EUR thousand
Q1/2013 in brief: Net sales increased amidst
difficult market conditions and transition from
software to service business
• Growth in Automation Services continued, net sales up by
41.0%
• Market conditions & longer sales processes than usual
resulted to less amount of significant e-invoice and SaaS
deals than expected
• Share of recurring revenue (Customer Support and
Automation Services) of net sales grew, totaling to 61.9% of
net sales (57.1%)
• The transaction volume increased significantly compared to
the corresponding quarter in 2012
• Certipost’s restructuring expenses related to employment
relationships of approximately EUR 1.2 million booked in
Q1/2013
Basware’s Interim Report Q1/2013
Transaction
volume
amounted to
12.7 million,
up 62.7%.
11.4.2013
Q1 transition in numbers
*The SaaS deal numbers exclude renewals & InvoiceReady
Q1/2013 Q1/2012
License sales
# of new P2P deals 31 15
SaaS*
# of new P2P deals 2 8
Total
# of new P2P deals 33 23
Growth in
# of new P2P deals +43%
11.4.2013 Basware’s Interim Report Q1/2013
SaaS versus license sales dynamics 2007-Q1/2013
Basware’s Interim Report Q1/2013 11.4.2013
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
90 %
100 %
2007 2008 2009 2010 2011 2012 Q1/2013
SaaS
License Sales
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
9,0
10,0
11,0
12,0
13,0
Q1 Q2 Q3 Q4
2010 2011 2012 2013Million
transactions
• The transaction volume
grew significantly
during the quarter:
the volume processed
by the Automation
Services business was
12.7 million, growth of
62.7%.
Growth of transaction volumes 2010-Q1/2013
11.4.2013 Basware’s Interim Report Q1/2013
EUR thousand
• Recurring revenue
(Customer Support and
Automation Services)
continued to account
for an increasing share
of net sales, totaling
61.9 % of net sales in
Q1/2013
Share of recurring revenue, rolling 12 months average
11.4.2013 Basware’s Interim Report Q1/2013
35,0 %
40,0 %
45,0 %
50,0 %
55,0 %
60,0 %
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
Net sales
Share of recurring
revenue, rolling 4
quarters average
Integration of Certipost’s e-invoice
business
11.4.2013 Basware’s Interim Report Q1/2013
• The business acquisition of the leading e-Invoice
operator in the Benelux, Certipost was closed on
January 2, 2013
• Synergy benefits through the combination of business
operations and technologies, joint infrastructure and
support functions:
– One-time restructuring costs of approximately EUR 1.2
million have been booked in Q1/2013 (previously estimate
EUR 2.3 million)
– The annual potential for cost-savings approximately EUR
2.3 million (previous estimate EUR 3.0 million).
• The operating profit of the acquired business is
expected to be approximately EUR 1.3 million negative
in 2013 (previous estimate slightly positive)
FINANCIAL REVIEW Q1/2013
Mika Harjuaho, CFO
Basware’s Interim Report Q1/2013
• As of the first quarter in 2012 Basware Corporation reports one operating segment: Purchase to Pay, P2P.
• Basware reports income for products and services as follows: License sales, Professional Services, Customer Support, and Automation Services (previously License Sales, Professional Services, Maintenance, and Automation Services).
• Customer Support comprises of previous Maintenance and Extended customer support previously reported under Professional Services. Extended customer support agreements are continuous service agreements spanning several years. Customer Support and Automation Services together form the recurring revenue reported by the company.
• License Sales consist of the Purchase to Pay product family together with payment, financial planning and reporting solutions sold only in Finland. Automation Services include e-Invoicing, scanning services, printing services, catalog management, purchase message exchange, activation services and Software as a Service (SaaS) services.
• Basware reports the estimated revenue to be recognized for current Automation Services agreements that are in production as well as for new, signed agreements in the next twelve months. Automation Services agreements typically expand several years or are valid until further notice.
• As geographic information Basware reports geographical areas Finland, Scandinavia, rest of Europe and Other. In the geographical information net sales is split by customer’s location. Net sales and operating profit are also reported by the location of the assets. In annual financial statements the geographical information of non-current assets is reported by the location of the assets.
Basware’s Interim Report Q1/2013
Reporting (IFRS)
11.4.2013
Q1/2013:
Change in
recurring
revenue
classification
Development of quarterly net sales & profit
EUR thousand Q1/13 Q1/12 Q2/13 Q2/12 Q3/13 Q3/12 Q4/13 Q4/12
Net sales 29 828 27 435 28 718 27 119 30 427
Growth % 8.7% 5.3% 5.3% 12.1% 0.7%
Other operating income 58 58 58 55 57
Materials and services 2 542 2 061 1 957 2 313 2 715
Personnel expenses 20 518 16 072 17 282 15 415 16 820
Depreciation and write-offs 1 801 1 366 1 495 1 809 1 823
Other operating expenses 6 594 6 171 6 745 5 376 6 199
Operating profit -1 569 1 822 1 298 2 261 2 927
21 000
28 000
35 000
Q1 Q2 Q3 Q4
2013 201224%
25% 24%
27%
Net sales 2012
Q1 Q2 Q3 Q4
Net sales
Basware’s Interim Report Q1/2013 11.4.2013
Net sales by operation Q1/2013
10 785
8 172
3 195
7 676
EUR thousand
Customer support Professional Services
Licenses Automation Services
Licenses = License sales of software products
Professional Services = Consulting services
Customer support = comprises of previous Maintenance and Extended customer support previously reported under
Professional Services. Extended customer support agreements are continuous service agreements spanning several
years.
Automation Services = e-Invoicing, scanning services, printing services, catalogue management, purchase message
exchange, activation services, SaaS services and opening fees
Customer
support,
growth
of 5.5%
License
sales,
decrease of
21.6%
Automation
Services,
growth
of 41.0%
Professional
Services,
growth of
6.2%
Basware’s Interim Report Q1/2013 11.4.2013
R&D in 2013
R&D expenses 15.5% of net sales
24.2% of personnel
Basware’s Interim Report Q1/2013
R&D expenses amounted to EUR
4 622 thousand (EUR 4 251
thousand)
• Increase of 8.7 percent, 15.5
percent of net sales (15.5%)
• EUR 1 258 thousand (EUR
1 162 thousand) of R&D
expenses capitalized
• R&D costs included in the
P&L totaled EUR 3 364
thousand (EUR 3 089
thousand), or 11.3 percent
(11.3%) of net sales.
R&D unit personnel 356 (325)
• Including 153 people in India;
units also in Finland and
Romania
11.4.2013
Personnel
0
200
400
600
800
1000
1200
1400
Sales & Marketing
Consulting & Services
Products
Admin
Personnel groups
Finland
Rest of Europe
India
Other
Geographical location of personnel
Scandinavia
Basware’s Interim Report Q1/2013
• 1 486 employees at the end of Q1/2013
• Number of personnel has grown fastest in
Indian office, and due to acquisition of e-
Invoicing business of Certipost in Belgium
• Average age of personnel is 34.2 years;
52.9% have an academic degree
11.4.2013
Q1/2013 in brief
EUR Million Q1/13 Q1/12
Net sales 29.8 27.4
Growth of net sales, % 8.7% 5.3%
Operating profit (EBIT) -1.6 1.8
Change of operating profit % -38.4%
% of net sales -5.3% 6.6%
Net profit/loss -1.0 1.5
Share of recurring revenue, % 61.9% 57.1%
Earnings per share, euro -0.07 0.11
Change of earnings per share, % -38.2%
Fixed costs 27.1 22.2
Growth of fixed costs, % 21.9% 11.5%
Personnel, March 31 1 485 1 241
Growth of personnel, % 19.4 26.9
Personnel costs 20.5 16.1
R&D expenses 4.6 4.3 Basware’s Interim Report Q1/2013
EBITDA
amounted to EUR
233 thousand
(EUR 3 188
thousand), a
decrease of
92.7%
Personnel
expenses include
EUR 1.2 million of
one-time
restructuring
costs
11.4.2013
Finance & investments
• Total assets on the balance sheet EUR 151 489 thousand
(EUR 136 033 thousand)
• Cash and liquid assets EUR 23 276 thousand (EUR 34 450 thousand)
• Cash flows from operating activities EUR 9 718 thousand
(EUR 10 634 thousand)
• Equity ratio 63.7 percent (70.5%)
• Gearing -13.2 percent (-35.2%)
• Total gross investments EUR 19 219 thousand (EUR 13 682 thousand)
– includes capitalized R&D expenses and acquisitions
Basware’s Interim Report Q1/2013 11.4.2013
Share & shareholders
• Number of shareholders 14 200 (14 964) at the end of March 2013
• Share price development during January–March 2013:
• Highest EUR 21.69 (EUR 19.95), lowest EUR 19.30 (EUR 16.70)
• Closing price EUR 20.20 (EUR 19.26)
• Average price of the share EUR 20.43 (EUR 19.04)
• Traded shares 312 873 (444 503)
• 2.4% (3.5%) of all shares
• Market capitalization EUR 259 540 124 (EUR 247 418 756)
Basware’s Interim Report Q1/2013 11.4.2013
FUTURE OUTLOOK
Esa Tihilä, CEO
Basware’s Interim Report Q1/2013
• The market conditions were more difficult than before in the first quarter. Customers’ decision-making was slower than before. The negotiation times of large international deals in particular have been prolonged because the customers’ requirements are higher in the service business than in the software business.
• In spite of net sales growth falling short of the targets for the first quarter, quantitatively speaking, the company closed 43 percent more significant Purchase to Pay deals than during the corresponding period the previous year. This proves that the fundamental demand for the company’s products and services has remained at a good level.
• The next-generation Alusta software has not yet contributed to the growth of the company’s net sales as targeted, which is due sales and delivery ability being reached slower than planned. The maturity of the product is continuously improving with new features and updates. Basware Match Plan was launched during the first quarter, and it will be complemented with Basware Match Order, which will be launched during the latter half of the year. The first versions of new Basware Purchase and Analytics products will be launched during the second quarter, and they are expected to improve the company’s competitiveness further. The improved maturity of Alusta and new products are expected to enable the leveling off of the decrease in license sales during the rest of the year.
• The delivery ability of Alusta will improve while the number of customers put into production will increase. The improvement of delivery ability and shorter production lead times contribute to accelerating growth in net sales.
• We expect the company to grow more strongly during the rest of the year than in the first quarter, with the decrease in license sales leveling off and the growth of Automation Services continuing. The company’s fixed expenses will grow at a more moderate rate during the last three quarters than in the first quarter. We have increased the number of personnel during 2012, and we expect improvement of productivity to decrease the need for recruitments in our different functions in late 2013.
• In order to achieve our objective of accelerated global growth and maintain our product leadership in Purchase to Pay processes, the development of Alusta software and services will continue strongly this year as well. The share of R&D expenses of net sales is expected to decrease during 2013 compared to the level of 2012. The emphasis of R&D expenses will shift gradually from Alusta product development towards the service development of Automation Services.
• The company’s transition process is expected to reach a point where the investments will begin to pay themselves back in the form of increasing net sales and improved profitability during the latter half of the year.
Basware’s Interim Report Q1/2013
Basware outlook 2013
11.4.2013
• Basware expects its net sales for 2013 to grow by more
than 15% and operating profit (EBIT) to grow compared
to the previous year.
Basware’s Interim Report Q1/2013
Basware outlook 2013
11.4.2013
Basware’s updated strategy 2012-2015: cornerstones
Focused go-to-market approach
The world’s largest Basware Commerce Network
Maximize
transaction
volumes
Drive
consolidation
of e-invoicing
operators
Maximize
customer
loyalty
Ensure
profitability in
everything we
do
Leading product and service offering
Basware’s Interim Report Q1/2013 11.4.2013
Next steps
• Growth in net sales is supported by the focusing of our global sales efforts on buyer, supplier, and partner organizations
• Product and process improvements accelerate the entry of SaaS and e-invoice deals into production
• To build accelerated global growth and maintain our product leadership in Purchase to Pay processes, the development of Alusta software and services will continue
• Targeting different customer segments with Better Buying - Better Selling - Connected Commerce customer promises
11.4.2013 Basware’s Interim Report Q1/2013
Increased capabilities in delivery
and support to increase
customer satisfaction
More comprehensive customer
offering i.e. offering coverage
Alusta readiness ramped up to
customer expectations
Increased focus on activating
customers’ suppliers and buyers
Organization aligned with
strategy and customer types
Significant growth triggers
High growth through
acquisitions
Strong underlying market demand for P2P and e-invoicing
11.4.2013 Basware’s Interim Report Q1/2013
• Basware’s long-term objective to grow annually 15-30
percent in net sales boosted by over 50 percent growth
in Automation Services which is intact compared to the
previous strategy period.
• The long-term objective for operating profit margin
continues to be 15-20 percent of net sales which is
expected to improve towards the end of the period.
• The share of recurring revenue is aimed to grow to 70
percent compared with current 55 percent, with
Software as a Service (SaaS) and electronic invoicing
contributing most to the growth, thus improving the
profitability.
Basware’s Interim Report Q1/2013
Objectives for the strategy period
until end of 2015
11.4.2013
NEXT REPORT
Q2 Interim Report
on July 10, 2013
Basware’s Interim Report Q1/2013