INTERIM REVIEW Klaus Andersen, CEO Ben Selby, VP, IR and Treasury October 22, 2019 Q3/2019 Interim Report January-September
IMPORTANT NOTICE The following information contains, or may be deemed to contain, forward-looking statements. These statements relate to future events or future financial performance, including, but not limited to, expectations regarding market growth and development as well growth and profitability of Basware. In some cases, such forward-looking statements can be identified by terminology such as “expect”, “plan”, “anticipate”, “intend”, “believe”, “estimate”, “predict”, “potential”, or “continue”, or the negative of th ose terms or other comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Future results may vary from the results expressed in, or implied by, the forward-looking statements, possibly to a material degree. All forward-looking statements included herein are based on information presently available to Basware and, accordingly, Basware assumes no obligation to update any forward- looking statements, unless obligated to do so pursuant to an applicable law or regulation. Nothing in this presentation constitutes investment advice and this presentation shall not constitute an offer to sell or the solicitation of an offer to buy any securities of Basware or otherwise to engage in any investment activity. 2
KEY TAKEAWAYS Significant improvement in profitability now visible Strong order intake from key markets Consulting business improving 3
CONTINUED INDUSTRY LEADERSHIP Gartner’s Critical Capabilities report ranks Basware #1 for AP Automation & AP use case #1 in e-Invoicing #1 for Supply Chain Financing #1 in Integration #1 in Partner Ecosystem Basware creates value with open APIs Partnering with best of breed Coexisting with competitors
CUSTOMER SUCCESS Strong order intake growth continued in the US Improved order intake performance in UK Average new customer deal size continued to increase 5
PRODUCTIVITY PROGRAMME UPDATE Programme status Significantly improve profitability ✓ Focusing investments on long term strategic products and consolidating product portfolio ✓ Global organizational setup aligned with Basware’s global unified operating model Retain cloud growth ✓ Improving profitability of professional services ✓ Reducing external spending ✓ Headcount reduction of 64 employees Simplify the business ✓ EUR 10 million annual cost savings in 2020 compared to Q1/2019 Basware expects to reach positive EBIT in 2020 and positive free cash flow on a run rate basis when exiting 2020 6
PRODUCTIVITY PROGRAMME RESULTS Gross margin, % Consulting revenue +6 +31% percentage points Q3/18 -> Q3/19 Q2/19 -> Q3/19 Programme costs Order intake Target of EUR 10 +22% 1.9 M€ million annual cost savings on track Q3/18 -> Q3/19
FINANCIAL REVIEW
Q3 FINANCIAL HIGHLIGHTS +11% +8% Cloud growth Total growth +940k +1.5m EBIT Operating cashflow On track to profitable growth 9
CLOUD ORDER INTAKE • Average new 18.0 12.0 customer deal size 16.0 continued to 10.0 increase 14.0 • New customers and 12.0 8.0 EUR million expansions 75% of 10.0 total order intake 6.0 8.0 • Strong performance in US and UK 6.0 4.0 • Growth on organic 4.0 constant currency 2.0 2.0 basis 19% in Q3/19 4.5 5.5 15.5 16.8 and 7% in Q1-Q3/19 0.0 0.0 Q3/2018 Q3/2019 Q1-Q3/2018 Q1-Q3/2019 Annual recurring revenue gross order intake is calculated by summing the total order intake in the period expressed as an annual contract value. 10
Q3 NET SALES PROGRESSION • Cloud revenue growth Net sales by revenue type, 7-9/ 7-9/ Change, Change, rate impacted by EUR thousand 2019 2018 % %* discontinuation of non- Cloud 25,018 22,440 11.5 10.7 strategic unprofitable Consulting 6,491 4,966 30.7 29.7 contracts Maintenance, license and • Project deliveries 5,314 6,585 -19.3 -19.1 other particularly in the US contributed positively to Total 36,823 33,991 8.3 7.7 consulting revenues • Churn in maintenance increased due to solutions going into end-of-life • USD strength improved reported figures 11 *On an organic basis at constant currencies
Q3 PROFITABILITY EUR thousand 7-9/2019 7-9/2018 Change,% • The execution of the Net sales 36,823 33,991 8.3 productivity Cost of sales -16,550 -16,101 2.8 programme has Gross profit 20,273 17,890 13.3 reduced total costs Sales and marketing -9,809 -10,759 -8.8 and improved Research and development -5,906 -6,599 -10.5 profitability General and administration -3,576 -4,003 -10.7 Total operating expenses -19,292 -21,361 -9.7 Other operating income and -42 -361 -86.7 expenses Operating profit (EBIT) 940 -3,787 Adjustments -211 187 Depreciation and amortization -3,973 -2,723 45.9 Adjusted EBITDA 4,702 -877 12
FREE CASH FLOW METRIC EUR thousand 7-9/2019 7-9/2018 • Free cash flow metric EBITDA 4,913 -1,064 improved Capitalizations -2,072 -2,102 • Improvements in Finance expenses -2,933 -386 profitability in -152 -271 Taxes, excl. deferred taxes Q3/2019 off-set the Payment of lease liabilities 1 -1,093 - increased financing Share based compensation, share -108 693 expenses part Gain/loss on sale of assets 0 0 • Basware expects to Free cash flow metric -1,445 -3,129 reach positive free cash flow on a run-rate basis Q1/2018 Q2/2018 Q3/2018 Q4/2018 Q1/2019 Q2/2019 Q3/2019 by the end of 2020 -1 445 -3,129 -4,076 -4,836 -7,787 -7,816 -9,794 13 1 Payment of lease liabilities in 2018 are included in EBITDA.
Q3 CASH FLOW AND BALANCE SHEET • The improvement in cash flows EUR thousand 7-9/ 7-9/ was mainly due to higher 2019 2018 profitability, which was partly Cash flows from operating activities 1,474 -2,676 off-set by working capital Net change in cash and cash equivalents -32,763 4,760 timing differences • EUR 30 million club loan repaid in September 2019 Cash and cash equivalents 30,640 46,235 • Current interest bearing liabilities dropped to EUR 2 Gross financial debt 58,556 57,202 million Net financial debt 27,915 10,967 • Total of EUR 5 million debt maturing by end of 2022 Gross debt including leases* 75,086 57,202 Net debt including leases* 44,446 10,967 *Comparison impacted by IFRS16 methodology change 14
OUTLOOK
OUTLOOK FOR 2019 BASWARE’S NUMBER ONE STRATEGIC PRIORITY IS SCALABLE CLOUD REVENUE GROWTH. Total revenues to Cloud revenues to Adjusted EBITDA grow at grow at EUR 3 million or approximately 5%* approximately 15%* better * On an organic basis at constant currencies 16
KEY TAKEAWAYS Significant improvement in profitability now visible Strong order intake from key markets Consulting business improving 17
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