BasWare - Interim report (Q1 and Q3)

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       -0.4 %                   1.6 %
 growth*

 EBITDA           -33   2 823          -3 771   5 678            11 902

 Adjusted       1 381   3 540          -1 598   5 337            12 121
 EBITDA

 Operating     -2 218     996          -9 932     371             4 676
 result

   % of net             3.0 %                   0.4 %             3.3 %
 sales

 Result        -3 928   1 488         -13 323     282             3 563
 before tax

 Result for    -3 711   1 249         -11 196     129             3 083
 the period



 Return on    -10.8 %   3.6 %         -10.8 %   0.1 %             2.2 %
 equity, %

 Return on
 investment,   -0.5 %   3.8 %          -6.6 %   1.2 %             3.6 %
 %

 Cash and
 cash          12 951  36 824          12 951  36 824            33 238
 equivalents

 Gearing, %     1.7 % -25.5 %           1.7 % -25.5 %           -22.4 %

 Equity        68.5 %  77.4 %          68.5 %  77.4 %            79.1 %
 ratio, %



 Earnings per
 share

 Undiluted,     -0.26    0.09           -0.78    0.01              0.22
 EUR

 Diluted, EUR   -0.26    0.09           -0.78    0.01              0.22

 Equity per      9.44    9.73  -3.0 %    9.44    9.73  -3.0 %      9.97
 share, EUR




*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

For more information, please contact:

Niclas Rosenlew, CFO, Basware Corporation
Tel. +358 50 480 2160, niclas.rosenlew@basware.com

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

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Liitteet:

Basware Q3/2016 Interim Report.pdf