Basware Financial Results Q2/2009 and H1/2009

CEO Ilkka Sihvo and CFO Mika Harjuaho

July 10, 2009

1

Contents

• Q2/2009 and H1/2009 in Brief• Q2/2009 and H1/2009 in Brief

• Business Review of Q2/2009• Business Review of Q2/2009

• Financial Review of Q2/2009 and H1/2009

• Future Outlook• Future Outlook

2

Basware in Brief

• Headquarters in Espoo, Finland and altogether 11 subsidiaries in Europe, in the US and Asia-Pacific

• 850,000 users globally in 1500+ large organizations

• Net sales 44 million at the end of June 2009 (41 million)

• 742 employees at the end of June742 employees at the end of June2009 (686)

Breakthrough to Global Leader

3

g

H1/2009 in BriefEUR Million H1/2009 H1/2008

Net sales 44 4 40 5

• Challenging market situation• Very Good Profitability Net sales 44.4 40.5

Growth of net sales, % 9.6% 16.5%

Operating profit (EBIT) 3.7 2.2

y y• Growth of 71.8%• 8.4% of net sales

• All hi l dChange of operating profit %

71.8% -48,0%

% of net sales 8.4% 5.4%

• All geographical areas grew and improved profitability

• Automation Services grew by 62.1%M i t b 22 3%Net profit/loss 2.1 1.4

Cash flow from operating activities

8.0 4.6

• Maintenance grew by 22.3%• Professional Services grew by 11.7%• International operations’ share of net

Earnings per share, euro 0.18 0.11

Fixed costs 35.6 34.5

International operations’ 52 5% 50 4%

sales continued to grow, growth of 14.2%

• Order backlog EUR 13 MillionInternational operationsshare of net sales

52.5% 50.4%

Resellers’ share of product sales

11.3% 16.1%

• Fixed costs grew by 2.9%• Personnel growth 8.2%• R&D expenses decreased by 7.4%

4

Personnel 30.6. 742 686R&D expenses decreased by 7.4%

Q2/2009 in BriefEUR Million Q2/2009 Q2/2008

Net sales 22 7 22 3

• Challenging market situation

Net sales 22.7 22.3

Growth of net sales, % 1.9% 25.5%

Operating profit (EBIT) 2.1 2.4

• The second quarter success at the expected level

• Good Profitability Change of operating profit %

-11.7% -12.3%

% of net sales 9.4% 10.9%

y• Automation Services grew by 73.2%• Maintenance grew by 20.3%

I t ti l ti ’ h f tNet profit/loss 1.4 1.9

Cash flow from operating activities

-0.4 -2.3

• International operations’ share of net sales continued to grow, growth 8.6%

• Order backlog EUR 13 Million, several new large Automation

Earnings per share, euro 0.12 0.16

Fixed costs 18.0 17.9

International operations’ 52 6% 49 3%

several new large AutomationServices deals

International operationsshare of net sales

52.6% 49.3%

Resellers’ share of product sales

10.5% 11.9%

5

Personnel 30.6. 742 686

Highlights of Q2/2009g g

B C i iTravel & Expense Enterprise Purchase to Pay

Basware Connectivity deal with SITA NEWS

Management solution to the Danish Agency for Governmental Management

solution along with BaswareConnectivity services to HCR ManorCare, Inc. *

Basware Connectivity d l ith M t

Basware Enterprise P h t P (EPP) deal with Metso

CorporationPurchase to Pay (EPP) solution to DNA Group

Basware Connectivity services to a Finnish

The PayStream Market Discovery Report: Basware a key provider of invoice services to a Finnish

industry groupy p

automation solutions to healthcare markets

6

* The license and service revenue will be recognized during the last quarters of 2009and Connectivity services during the next three years.

Business Review of Q2/2009

CEO Ilkka Sihvo

7

Reportingp g

FinlandFinnish, Russian, Asia-Pacificand headquarter businesses

License salesEnterprise Purchase to Pay andand headquarter businesses

ScandinaviaD k N d S d

Financial Management Software

Professional ServicesDenmark, Norway and Sweden

EuropeMaintenance

pFrance, Germany, The Netherlands, Southern Europe and UK

Automation ServicesSaaSTransaction based services

North AmericaUSA and Canada

Transaction based services

8

Finland Segment Q2/2009g

EUR thousand Q2/08 Q3/08 Q4/08 Q1/09 Q2/09EUR thousand Q2/08 Q3/08 Q4/08 Q1/09 Q2/09Net sales 13 091 10 604 15 329 11 331 12 406Growth of net sales,% 6.6% 3.6% 7.4% 8.0% -5.2%Operating profit 1 926 1 679 4 385 849 1 295Number of personnel 421 422 426 439 458

20 000Net Sales Operating Profit

500

Personnel

10 000

15 000

20 000

2 000

3 000

4 000

5 000

200

300

400

500

0

5 000

Q2/08Q3/08Q4/08Q1/09Q2/090

1 000

2 000

Q2/08 Q3/08 Q4/08 Q1/09 Q2/090

100

200

Q2/08Q3/08Q4/08Q1/09Q2/09

9

Finland Segment Q2/2009g

New customersHighlightsProfile

DNA Group, Metso, Empower Oy, Lindell Oy, a large Finnish

• Growth of Finland and Russia net sales of 4.1%

Segment consists of Finnish, Russian, Asia-Pacific and headquarter Oy, a large Finnish

industry group, RoboMec Oy, Voglia, Aller Julkaisut, Globetel

• New partners in Russia: RSM Top Audit and Baker Tilly Russaudit to sell Basware’s IFRS solutions

Pacific and headquarterbusinesses.

Altogether 15 resellers in ,and Hyvinkää-Riihimäen Seudun Ammatti- ja

Basware s IFRS solutions.

• Acquisition of TAG Services Pty Ltd in

Altogether 15 resellers in the segment

Number of personnel 458aikuisopisto Oy.Australia

Number of personnel 458 (421)

10

Scandinavia Segment Q2/2009g

EUR thousand Q2/08 Q3/08 Q4/08 Q1/09 Q2/09EUR thousand Q2/08 Q3/08 Q4/08 Q1/09 Q2/09Net sales 4 628 3 352 6 627 5 317 6 278Growth of net sales,% 19.9% 7.2% 14.6% 26.6% 35.6%Operating profit 489 229 21 666 1 249Operating profit 489 229 -21 666 1 249Number of personnel 101 103 146 138 137

7 000

Net Sales1 300

Operating profit160

Personnel

2 0003 0004 0005 0006 0007 000

500700900

1 100

6080

100120140

01 0002 000

Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 -100100300

Q2/08Q3/08Q4/08Q1/09Q2/09

02040

Q2/08 Q3/08 Q4/08 Q1/09 Q2/09

11

Scandinavia Segment Q2/2009g

Profile

C t ll d it

New customersHighlights

Centrally managed unitsin Sweden, Norway and Denmark

Danish Agency for Governmental Management, Danish Technical University

Growth of 35.6%

Operating profit grew155 2%The segment sells

Enterprise Purchase to Pay and Financial M t l ti

Technical University, Alliance Boots, LINK Singatur AS, HeimdalGruppen (HENT AS), N d t AB P bil AB

155.2%

Acquisition of invoice automation solutionManagement solutions

excluding paymentmanagement solutions

Nordnet AB, Permobil AB, Landscape Services Sweden AB and LRF Konsult AB.

automation solution business of Itella AS in Norway

Mainly direct salesNumber of personnel 137 (101)

Konsult AB.

12

Europe Segment Q2/2009p g

EUR thousand Q2/08 Q3/08 Q4/08 Q1/09 Q2/09EUR thousand Q2/08 Q3/08 Q4/08 Q1/09 Q2/09Net sales 4 469 5 428 5 264 4 666 4 318Growth of net sales,% 41.7% 56.1% -6.9% 8.7% -3.4%Operating profit 123 375 48 231 32Operating profit -123 375 -48 231 -32Number of personnel 130 130 127 122 119

Net Sales Operating Profit Personnel

3 0004 0005 0006 000

0100200300400

Operating Profit

120125130135

Personnel

01 0002 000

Q2/08 Q3/08 Q4/08 Q1/09 Q2/09

-200-100

0

Q2/08 Q3/08 Q4/08 Q1/09 Q2/09110115120

Q2/08 Q3/08 Q4/08 Q1/09 Q2/09

13

Europe Segment Q2/2009p g

New customers

SITA NEWS Aggreko

Profile

Segment consists of units

Highlights

Growth of 3 5% SITA NEWS, Aggreko Plc, Malvern Instruments, Thon Hotels Gibo Groep

Segment consists of unitsin Germany, France, The Netherlands, UK and Southern Europe.

Growth of -3.5%

Operating profit grew73 7% Hotels, Gibo Groep,

Quadraam, Aviva Investors Luxemburg, Michael Page PQ

Segment sells Enterprise Purchase to Pay productsexcluding payment and

73.7%

Novartis extension to 6 more countries Michael Page, PQ

Europe and NouvellesFrontières

excluding payment and travel management solutions

Alt th 35 ll i

more countries

Altogether 35 resellers in the segmentNumber of personnel 119 (130)

14

( 30)

North America Segment Q2/2009g

EUR thousand Q2/08 Q3/08 Q4/08 Q1/09 Q2/09Net sales 1 446 1 567 1 311 1 195 1 128Growth of net sales,% 57.0% 107.1% 27.3% 75.8% -21.9%Operating profit 185 144 118 137 -102Number of personnel 26 28 29 31 31

Net Sales Operating Profit Personnel

1 000

1 500

050

100150200

1520253035

0

500

Q2/08 Q3/08 Q4/08 Q1/09 Q2/09

-150-100

-50

Q2/08 Q3/08 Q4/08 Q1/09 Q2/0905

10

Q2/08 Q3/08 Q4/08 Q1/09 Q2/09

15

North America Segment Q2/2009g

Highlights New customersProfile

Enterprise Purchase to Pay solution and Basware Connectivity

Enterprise Purchaseto Pay solution and Basware ConnectivityS i t HCR

The North American unit sells BaswareEnterprise Purchaset P l ti i Services to HCR

ManorCare, Inc.

* The license and service revenue

Services to HCR ManorCare, Inc.

to Pay solutions in the US and Canada

The license and service revenue will be recognized during the last quarters of 2009 and Connectivity Services during the next three years.

Altogether 9 resellers in the segmentsegment

Number of personnel 31 (26)

16

personnel 31 (26)

Basware Connectivity Servicesy

Business Transactions: enablesdelivery of e-invoices and purchase messages between

Scan and Capture: convertspaper invoices into electronicf tpurchase messages between

buyers and suppliers format

BaswareBaswareConnectivity

ServicesBasware Supplier Portal: enables suppliers to createeinvoices and to handle

Basware Supplier Activationservice: enables buyers to

t li ’einvoices and to handlepurchase messages and catalogues

convert suppliers’ paperinvoices into electronic invoices

17

Basware Connectivity Servicesy

• Basware Connectivity is a new set of services which enable suppliers and buyers of all sizes and maturity to transact electronicallyelectronically

• Launched on the markets early 2009, clear demand for the solution • New customers in all important markets including North America

- For example Metso Corporation, SITA NEWS, large Finnish corporation and HCR ManorCare Inc. in the US

• Basware strong player in connectivity markets• Basware strong player in connectivity markets• Competitors local or small by transaction volumes• Major success in H1/2009 extending Basware’s competitivenessMajor success in H1/2009 extending Basware s competitiveness

and ensuring recurring revenue stream

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Financial Review of Q2/2009 and H1/2009

CFO Mika Harjuaho

19

Key Financials 2004-2008y

EUR thousand 2004 2005 2006 2007 2008

R t t dRestated

Net sales 33 891 41 666 59 954 73 270 86 098

Growth of net sales, % 29.4% 43.9% 22.2% 17.5%

Operating profit 6 256 3 611 8 078 7 512 8 679

% of net sales 18.5% 8.7% 13.5% 10.3% 10.1%

Personnel, 31.12. 302 395 528 658 731,

100000

Net sales10000

Operating profit800

PersonneltEUR tEUR

5000060000700008000090000

50006000700080009000

400

500

600

700

010000200003000040000

01000200030004000

0

100

200

300

20

2004 2005 2006 2007 20080

2004 2005 2006 2007 20080

2004 2005 2006 2007 2008

Q2/2009 and H1/2009 in Brief

EUR Thousand Q2/09 Q2/08 1-6/09 1-6/08EUR Thousand Q2/09 Q2/08 1-6/09 1-6/08Net sales 22 729 22 312 44 446 40 545Growth of net sales, % 1.9% 25.5% 9.6% 16.5%Operating profit 2 146 2 431 3 738 2 177Change of operating profit, % -11.7% -12.3% 71.8% -48.0%% f % % % %% of net sales 9.4% 10.9% 8.4% 5.4%Net profit/loss 1 396 1 899 2 062 1 350Earning per share EUR 0 12 0 16 0 18 0 11Earning per share, EUR 0.12 0.16 0.18 0.11Fixed costs 17 957 17 865 35 556 34 539International operations' share of net sales,% 52.6% 49.3% 52.5% 50.5%Resellers' share of product sales,% 10.5% 11.9% 11.3% 16.1%

21

Development of Quarterly Net Salesp y

EUR thousand Q1/09 Q1/08 Q2/09 Q2/08 Q3/09 Q3/08 Q4/09 Q4/08Net sales 21 717 18 233 22 729 22 312 19 259 26 294Net sales 21 717 18 233 22 729 22 312 19 259 26 294Growth % 19.1% 7.0% 1.9% 25.5% 26.1% 13.4%Other operating income 30 69 52 62 58 62Materials and services 1 552 1 211 1 611 1 385 797 1 333Materials and services 1 552 1 211 1 611 1 385 797 1 333Personnel expences 12 896 11 765 13 444 12 608 10 933 15 093Depreciation and write-offs 1 004 671 1 067 693 690 990Oth ti 4 703 4 910 4 513 5 257 4 516 4 818Other operating expenses 4 703 4 910 4 513 5 257 4 516 4 818Operating profit 1 592 -254 2 146 2 431 2 381 4 122

2009 2008 2008

200002500030000

2009 2008

21 %31 %

2008

05000

1000015000

26 %

22 %

22

0Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Development of Quarterly profitp y p

EUR thousand Q1/09 Q1/08 Q2/09 Q2/08 Q3/09 Q3/08 Q4/09 Q4/08Net sales 21 717 18 233 22 729 22 312 19 259 26 294Growth % 19.1% 7.0% 1.9% 25.5% 26.1% 13.4%Other operating income 30 69 52 62 58 62Materials and services 1 552 1 211 1 611 1 385 797 1 333Materials and services 1 552 1 211 1 611 1 385 797 1 333Personnel expences 12 896 11 765 13 444 12 608 10 933 15 093Depreciation and write-offs 1 004 671 1 067 693 690 990Other operating expenses 4 703 4 910 4 513 5 257 4 516 4 818Operating profit 1 592 -254 2 146 2 431 2 381 4 122

2009 2008 2008

300040005000

2009 2008-3 %

26 %45 %

008

10000

10002000

26 %

23

-1000Q1 Q2 Q3 Q4

Q1 Q2 Q3 Q4

Net Sales by Operation Q2/2009y p

Th d

73012179

Thousand euros

Maintenance, growth

Licensesales,

d f73015475

g20.3%decrease of

26.0%

AutomationServices,

growth

Professional Services,

7773Maintenance Professional ServicesLicenses Automation Services

growth73.2%growth 2.5%

Licenses Automation Services

Licenses = License sales of software products Professional Services = Former consulting includes also Maintenance and Automation Services related consulting

24

Professional Services = Former consulting, includes also Maintenance and Automation Services related consultingMaintenance = Continuous, annually charged fees (18-20% of license sales)Automation Services = Software as a Service, transaction based services

Net Sales by Primary Segment Q2/2009y y gNet sales 4-6/09 4-6/08 Change, %Finland 12 406 13 091 -5.2Scandinavia 6 278 4 628 35.6Europe 4 318 4 469 -3.4North America 1 128 1 446 -21.9Net sales between segments -1 402 -1 322 -6.0

Group total (IFRS) 22 729 22 312 1.9

14000

4-6/2009 4-6/2008

8000100001200014000

0200040006000

Finland Scandinavia

25

0Finland Scandinavia Europe North America

Finland ScandinaviaEurope North America

Operating Profit by Primary Segment Q2/2009Operating profit Q2/09 Q2/08 Change,%Finland 1 295 1 926 -32.8Scandinavia 1 249 489 155.2Europe -32 -123 73.7North America -102 185 -155.2Operating profit between segments -263 -47 -462.2Group total (IFRS) 2 146 2 431 -11.7

North America

Scandinavia

Europe

Q2/2008Q2/2009

Finland

Scandinavia Q2/2009

26

-500 0 500 1000 1500 2000 2500

Net Sales by Primary Segment H1/2009y y g

Net sales H1/2009 H1/2008 Change,%et sa es / 009 / 008 C a ge,%Finland 23 737 23 584 0.6Scandinavia 11 595 8 827 31.4Europe 8 984 8 762 2.5pNorth America 2 323 2 125 9.3Net sales between segments -2193 -2 752 20.3Group total (IFRS) 44 446 40 545 9.6p ( )

North America

Europe

North America

H1/2008

Finland

Scandinavia H1/2009

27

0 5000 10000 15000 20000 25000

Operating profit by Primary Segment H1/2009

Operating profit H1/2009 H1/2008 Change,%Finland 2 144 1 834 16.5Scandinavia 1 915 810 136.5Europe 199 -401 149.9pNorth America 35 27 28.7Operating profit between segments -555 -94 -492.2Group total (IFRS) 3 738 2 177 71.8Group total (IFRS) 3 738 2 177 71.8

North America

Europe

North America

H1/2008

Finland

Scandinavia H1/2009

28

-1000 -500 0 500 1000 1500 2000 2500

Development of Profit Q2/2009 and pH1/2009

EUR Thousand Q2/09 Q2/08 1-6/09 1-6/08Operating profit 2 146 2 431 3 738 2 177Change of operating profit,% -11.7% -12.3% 71.8% -48.0%% of net sales 9.4% 10.9% 8.4% 5.4%Profit before tax 2 122 2 428 3 607 2 178Profit before tax 2 122 2 428 3 607 2 178Net profit/loss 1 396 1 899 2 062 1 350Earning per share, EUR 0.12 0.16 0.18 0.11Fixed costs 17 957 17 865 35 556 34 539Fixed costs 17 957 17 865 35 556 34 539Personnel costs 13 444 12 608 26 340 24 373R&D costs 3 836 4 340 7 530 8 133Capitalized R&D 399 714 892 1 342

29

Products

• R&D costs EUR 7 530 thousand(EUR 8 133 thousand)- Decrease of 7.4 percentDecrease of 7.4 percent- 16.9 percent of net sales (20.1%)- EUR 892 thousand of costs

capitali ed i e 11 8%R&D costs 16.9% of net sales

capitalized i.e. 11.8%

• Products unit personnel 187 (161)Products unit personnel 187 (161)- Units in Finland, India and Norway- Future recruitments in India

25.2% of personnel

30

Personnel

• In total 742 (686) employees at the end of June 2009

• 46.1 percent abroad• Average age 36.1 years

College and other

Sales & Sales Admin

Masterand other Support

R&D

BachelorBachelorCustomer Service

EducationPersonnel groups

31

Personnel groups

Finance and Investments

• Total assets on the balance sheet EUR 84 060 thousand (EUR 69 627 thousand)

• Cash and cash equivalents EUR 9 516 thousand(EUR 5 771 th d)(EUR 5 771 thousand)

• Cash flow from operations EUR 7 995 thousand (EUR 4 579 thousand)(EUR 4 579 thousand)

• Equity ratio 58.2% (67.2%)• Gearing 3.3 % (-7.8%) g ( )• Total gross investments EUR 2 598 thousand

(EUR 1 823 thousand)- Includes capitalized R&D costs and acquisitions

Share and Shareholders

• Number of shareholders 16 770 (17 301) at the end of June 2009( )

• Share price development during January–June 2009:- Average price of the share EUR 8.57 (EUR 8.03) - Highest EUR 11.48 (EUR 10.45), lowest EUR 6.60 (EUR 6.14)- Closing price EUR 11.40 (EUR 7.00)

• Traded shares 986 643 (1 039 454)• Traded shares 986 643 (1 039 454)- 8.7% (9.1) of all shares

• Market capitalization EUR 129 707 194 (EUR 80 276 868)

Future Outlook

CEO Ilkka Sihvo

34

Industry and Basware Outlook• Uncertainty in world economy

- Growth estimates for ePurchasing Software Markets remain unchanged- Global software purchases forecast -8.2% in 2009 and 5.6% in 2010

T t l IT h f t 10 6% i 2009 d 4 0% i 2010- Total IT purchases forecast -10.6% in 2009 and 4.0% in 2010- Global IT Services purchases forecast -8.6% in 2009 and 4.0% in 2010

• Growth areas: Europe, US, Russia, Asia, profitability improving• Scandinavia & Finland focus on profitability, mild growth• Software production expanding to India, R&D costs are expected not to substantially increase

from the level of 2008G th l t d i t t i th d h lf f th if ti fit d t l t• Growth related investments in the second half of the year if operating profit and net sales are at the expected level

• Automation Services order backlog: EUR 13 M

• Review of acquisition possibilities continues: distribution channel and product portfolio• The cost savings resulting from the synergy benefits of the Contempus integration will

materialize starting from the beginning of 2009 and they will be approximately EUR 2 million by th d f 2009the end of 2009.

• Net sales expected to develop positively on the level of 2008. • Operating profit (EBIT) for 2009 is expected to be from 10 to 15 percent of net sales.

Next interim report on October 13, 2009