HALF-YEAR FINANCIAL REVIEW Klaus Andersen, CEO Ben Selby, VP, IR and Treasury August 6, 2019 Q2/2019 Half-Year Financial Review January – June
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 Order intake all-time high at EUR 6.4 million Productivity programme actions almost fully implemented Adjusted EBITDA guidance for 2019 upgraded 3
CONTINUED INDUSTRY LEADERSHIP Basware again recognized as a Leader in Gartner’s Magic Quadrant Value Leader in Spend Matters’ Q2/2019 Procure-to-Pay SolutionMap SmartOrders with actionable emails Advanced Analytics dashboard enhancements 4
CUSTOMER SUCCESS EXAMPLES OF CUSTOMER WINS IN Q2/2019 5
PRODUCTIVITY PROGRAMME SUMMARY Retain cloud growth Significantly improve Simplify the business profitability ✓ Productivity programme actions almost fully implemented ✓ EUR 10m annual cost savings in 2020 compared to Q1/2019 within reach ✓ S&M H2/2018 investment level retained ✓ R&D investment level retained for strategic products and services Basware expects to reach positive EBIT in 2020 and positive free cash flow on a run rate basis when exiting 2020
PRODUCTIVITY PROGRAMME STATUS Focus areas Status Focus investments on long term strategic products • Long term Procurement product strategy implemented and consolidate product portfolio • Financing Services focus on Dynamic Discount Align global organizational setup with Basware’s Global operating model implemented worldwide • global unified operating model Further centralization of customer support services and • corporate IT services • Investments in sales and marketing are being rebalanced to where the opportunities for growth are highest Improve profitability of professional services • Initial actions taken, further improvements planned • Re-organisation implemented with more client facing roles and less internal roles Shared common services and capabilities in professional • services now available globally Reduce external spending • Spend analysis and actions continue Reduce headcount • Active headcount reduction of 64 employees globally Leaner management set-up •
NEW KEY HIRES Martti Nurminen, CFO, as of January 2020 latest Key work experience: • Currently CFO, Solteq Plc • CFO, Affecto Plc Finance Director, Johnson Controls • Blair Tolbard, General manager, North America and VP of Sales, as of June 2019 Key work experience: Group Vice President of Sales, Jaggaer • • Co-Founder and President, MiCore Solutions Positions at Oracle and IBM • General manager, UK and VP of Sales Recruitment process completed, expected to start in coming months
Q2/2019 HIGHLIGHTS Cloud order intake EUR 6.4m STRATEGIC PRIORITY: SCALABLE CLOUD REVENUE Cloud revenue growth 12% GROWTH Cloud revenues 68% of total 9
FINANCIAL REVIEW
Q2 CLOUD AND TOTAL REVENUE GROWTH Organic cloud Cloud as a Organic total growth at constant proportion of total growth at constant currencies revenues currencies +12% +3% 68% Cloud Non Cloud 11
CLOUD ORDER INTAKE 12.0 12.0 • All time high order intake 10.0 10.0 • Continued good progress with cloud 8.0 8.0 order intake from EUR million new customers 6.0 6.0 • Strong performance in the US and Finland 4.0 4.0 • Unsatisfactory performance in the 2.0 2.0 UK 6.4 6.4 11.0 11.4 0.0 0.0 Q2/2018 Q2/2019 H1/2018 H1/2019 Annual recurring revenue gross order intake is calculated by summing the total order intake in the period expressed as an annual contract value. 12
Q2 NET SALES PROGRESSION • Cloud revenue Net sales by revenue type, 4-6/ 4-6/ Change, Change, EUR thousand 2019 2018 % %* growth rate was Cloud 24,752 21,783 13.6 12.4 impacted by higher than average Consulting 6,052 6,201 -2.4 -3.0 amount of credit Maintenance, license and 5,516 6,986 -21.0 -21.0 notes other Total 36,320 34,969 3.9 3.0 • USD strength improved reported figures 13 *On an organic basis at constant currencies
Q2 PROFITABILITY EUR thousand 4-6/2019 4-6/2018 Change,% • Adjusted EBITDA at Net sales 36,320 34,969 3.9 approximately breakeven Cost of sales -18,502 -18,580 -0.4 • Cost of sales impacted by Gross profit 17,819 16,389 8.7 legacy data back-up hosting costs and previously Sales and marketing -12,207 -10,434 17.0 unbilled license costs Research and development -6,908 -6,964 -0.8 • Higher investments in sales General and administration -2,673 -4,315 -38.1 and marketing Total operating expenses -21,788 -21,712 0.4 • G&A costs decreased due to Executive Team exits Other operating income and -2,211 -1,006 119.9 expenses • Productivity program costs of EUR 2.1 million in other Operating profit (EBIT) -6,181 -6,329 2.3 operating expenses Adjustments 2,032 913 122.6 Depreciation and amortization -3,936 -2,742 43.5 Adjusted EBITDA -213 -2,674 92.0 14
FREE CASH FLOW METRIC EUR thousand 4-6/2019 4-6/2018 Change, % • Basware expects to EBITDA -2,245 -3,587 37.4 reach positive free cash Capitalizations -2,964 -3,706 -20.0 flow on a run-rate basis Finance expenses -2,786 -508 by the end of 2020 Taxes, excl. deferred taxes -269 -85 Payment of lease liabilities 1 -1,080 - • The purpose of the free Share based compensation, -450 99 cash flow metric is to share part provide a clear view of Gain/loss on sale of assets 0 0 all costs related to Free cash flow metric -9,794 -7,787 -25.8 Basware’s operations Q1/2018 Q2/2018 Q3/2018 Q4/2018 Q1/2019 Q2/2019 • Main difference to -3,129 comparison period is -4,076 -4,836 the new financing -7,787 -7,816 arrangement -9,794 15 1 Payment of lease liabilities in 2018 are included in EBITDA.
Q2 CASH FLOW AND BALANCE SHEET • Improvement in operating EUR thousand 4-6/ 4-6/ cashflow mainly due to positive 2019 2018 changes in working capital Cash flows from operating activities -3,665 -7,856 • EUR 10.3 million bilateral loan Net change in cash and cash equivalents 28,456 -12,988 repaid • EUR 30 million club loan to be Cash and cash equivalents 63,373 41,413 repaid in September 2019 • Remaining debt expected after Gross financial debt 87,307 48,277 Q3: Net financial debt • Pension loan due 2022 23,935 6,864 (amortising, EUR 5m Gross debt including leases* 104,564 48,277 remaining) Net debt including leases* 41,192 6,864 • Multi-issuer bond due 2023, EUR 10m • Bregal financing due 2024 *Comparison impacted by IFRS16 methodology change 16
OUTLOOK
OUTLOOK FOR 2019 UPDATED AS A RESULT OF THE PRODUCTIVITY PROGRAMME ACTIONS, BASWARE UPGRADES THE PROFITABILITY GUIDANCE FOR 2019. REVENUE GUIDANCE IS UNCHANGED. 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 18
KEY TAKEAWAYS Order intake all-time high at EUR 6.4 million Productivity programme actions almost fully implemented Adjusted EBITDA guidance for 2019 upgraded 19
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