THE NEXT PHASE OF GROWTH - Basware/media/Files/B/... · THE NEXT PHASE OF GROWTH 20 Starting point...

THE NEXT PHASEOF GROWTH

BASWARE CAPITAL MARKETS DAY

LONDON, 2ND FEBRUARY 2016

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 those

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

BASWARE TEAM WITH YOU TODAY

3

Esa Tihilä

CEO

Niclas Rosenlew

CFO

Vesa Tykkyläinen

SVP Network

Ad van der Poel

SVP Financing Services

Ilari Nurmi

SVP Purchase to Pay

Tuomas Marttila

Head of Strategy

BASWARE OVERVIEW

Invoice automation, procurement

& travel and expense

management software

within organizations

e-invoicing solutions &

operator between

buyers & suppliers

New value added innovations:

Basware Pay, Basware Discount

& Basware Advance

• 2500+ large customers

• 1.2 million users

• SaaS / License

• Basware Commerce Network

connects 1 million companies

in over 100 countries

• Basware Commerce Network

enabled

• Partnerships include e.g.

MasterCard, Arrowgrass, ING

NETWORK PURCHASE TO PAY FINANCING SERVICES

Founded 1985; Publicly listed 2000 (NASDAQ OMX Helsinki); Net sales of €143.4 million (2015)

Basware is the leading provider of networked purchase-to-pay solutions,

spanning e-invoicing to innovative financing services in the world of commerce

4

GLOBAL LEADERSHIP WITH A UNIQUELY COMPLETE OFFERING

E-invoicing

Working capital optimization

Purchase-to-Pay (P2P)Accounts Payable (AP)

Ranked constantly as a leader

by leading independent

research companies

Top 3

in Procurement

# 1 B2B Commerce Network

# 1 in Accounts

Payable

5

Basware

Financing

Services

Largest

e-invoicing

network

Enabling priorities and investmentEsa Tihilä, CEO

Summary and conclusionsEsa Tihilä, CEO

Extend cloud Purchase to Pay leadershipIlari Nurmi, SVP Purchase to Pay

TODAY’S FOCUS IS ON THE NEXT PHASE OF GROWTH

6

Starting point for the next phase of growthEsa Tihilä, CEO

Accelerate Network growthVesa Tykkyläinen, SVP Network

2016-2018 Financial implications and goalsNiclas Rosenlew, CFO

13:00-

14:45

15:15-

17:00

Break

Cocktails

Unleash Financing ServicesAd van der Poel, SVP Financing Services





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13:00-

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15:15-

17:00

Break

Cocktails


WE HAVE CREATED A SOLID FOUNDATION FOR GROWTH

8

Growing market driven by digitalization, drive for efficiency and regulation

Recognized product leadership

Established and loyal customer base with high share of recurring revenue

Over 1,000,000 organizations connected via Basware Commerce Network

Large and valuable amounts of data accumulated in the

Basware Commerce Network

Streamlined, customer-centric organization with global reach, and strong

presence in all key growth markets

2010 2015

SaaS and Network

Maintenance, consulting and license

A GROWING CLOUD BUSINESS SUPPORTED BY A STABLE BASE

Cloud businesses

growing fast

Maintenance, consulting

and license businesses

provide a solid base

12%

88%

40%

60%

Constant growth year-on-year

Positive cash flow

Strong balance sheet

Cloud transition has temporarily

depressed group growth & margins,

this is unwinding as transition

completes

Note: SaaS and Network: P2P SaaS, transactions, Procserve and transaction network related partnership income.9

STRONG NET SALES GROWTH IN HIGH POTENTIAL MARKETS

Net sales by markets (Q1-Q4 2015) Growth in Net sales (2015 vs. 2014)

Total Net sales:

€143.4 million(1)

Net sales stable in mature markets Strong organic growth in key markets

(1) Includes Procserve and partnership income.

(2) Excludes Procserve and partnership income.

(1)

(1) (2)

10

WE SERVE A SIGNIFICANT NUMBER OF GLOBAL CUSTOMERS2,500+ enterprise and corporate customers across all industry verticals and public sector

Banking / Finance

Transportation / Logistics

Retail

Manufacturing Food / Beverage

Professional Services

Medical / Pharma / Biotech Chemicals

Energy

Public Sector

Construction

Services

+ more than 1,000,000 organizations connected to Basware Commerce Network

11

MARKET AND COMPETITIVE SITUATION ALLOWS ACCELERATING GROWTH

12

Extend cloud Purchase

to Pay leadership

Accelerate Network

growth

Unleash Financing

Services

Penetration still low but

accelerating

Network is the

foundation for value

added services

Fragmented standards,

Basware the largest

network, supporting all

Growth picking up in

key large markets

Demand moving rapidly

to cloud solutions

Basware is a

recognized market

leader

Alternative financing

services attracting

growing investment

Basware an early

leader, leveraging

network data

First solutions launched

NETWORK PURCHASE TO PAY FINANCING SERVICES

KEY 2016-2018 PRIORITIES FOR TAKING THE NEXT STEP

13

Extend cloud

Purchase to Pay

leadership

Accelerate

Network growth

Unleash

Financing

Services

1. Accelerating all three businesses:

2. Supported and enabled by:

Further

shortening of

delivery times

Investing in

demand

generation

and sales

Scalable

company

infrastructure





14




13:00-

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15:15-

17:00

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Cocktails


BASWARE COMMERCE NETWORK IS AT THE HEART OF MAJOR TRENDS

15

1. Digitalization accelerating and affects all sizes of

organizations

2. Regulation in the EU and the U.S.

pushing e-invoicing penetration

3. True alternative finance platforms in short supply

BASWARE COMMERCE NETWORK: ACCESS ALL THROUGH SINGLE CONNECTION

BASWARE

COMMERCE

NETWORK

Point to point connections True network

Service provider 1

Service provider 2

Service provider 3

16

THE LARGEST OPEN NETWORK

17

The world’s largest open commerce network - connecting buyers and suppliers,

improving relationships and ultimately enabling the flow of commerce

>1 MILLION ACTIVE

BUYERS & SUPPLIERS

A NETWORK OF

USERS IN >100 COUNTRIES

CONSOLIDATED

E-INVOICING & E-ORDERING

SUPPORTS 60+

INVOICE FORMATS

VAT COMPLIANT WITH

DIGITAL SIGNATURES

200+ E-INVOICING

PROVIDERS CONNECTED

BASWARE

COMMERCE

NETWORK

NETWORK VOLUME & REVENUESOLID TRACK RECORDTransaction volume

Tra

nsactio

n v

olu

me (

in m

illio

ns)

(1) Includes start-up fees

Transaction revenue(1)

Tra

nsactio

n r

evenue (€

in m

illio

ns)

Q4/2015

Annualized

transactions18

NETWORK2016-2018 PRIORITIES AND GOALS

19

Accelerate transaction saleso Growth in Basware P2P customers

o Transactions-only opportunities (including targeted

sending sales)

o New partnerships (e.g. cloud ERP vendors, other networks)

Accelerate go-lives and ramp-upso Delivery tools and processes

o Easier and faster connectivity (e.g. business directory,

vendor manager)

Focused platform developmento Leading portal functionality co-developed with customers

o Interfaces (e.g. API connectivity, PDF)

o Network data-based value added services

Key 2018 goal:

250 million

transactions processed





20




13:00-

14:45

15:15-

17:00

Break

Cocktails


INTRODUCTION TO BASWARE PURCHASE TO PAY

21

Modern cloud-based

architecture

Powered by Basware

Commerce Network

Accounts payable automation

Procurement

Travel and expense management

Analytics

Leadership

recognized by

leading

independent

research

companies

Best-in-class Networked Purchase to pay

WORLD-LEADING INTEGRATED PURCHASE-TO-PAY SUITE

22

PROCUREMENT

• Easy & compliant

shopping experience

• Supplier

collaboration in the

network

• Contract lifecycle

management

TRAVEL & EXPENSEMANAGEMENT

ACCOUNTS PAYABLEAUTOMATION

ANALYTICS

• Corporate-wide

financial visibility

• Insights into P2P

process and spend

• Self-reliant financial

decision-making

• Paperless AP from

day 1

• Automated matching

• Intelligent invoice

processing

• Exception handling

• Capturing receipts as

the expenses occur

• Travel costs savings

with early bookings

• Expense claims when

mostly convenient

WE BUILD ON YEARS OF EXPERIENCE AND A SOLID CUSTOMER BASE

23

The leader in P2P with 20 years of expertise

2,500+ P2P customers globally

Significant R&D investment

Business and process consulting services

Select recent customer wins:

BASWARE P2P PAYS BACK IN NO TIME

“We systematically go after

achieving early-pay discounts.

In the past, we captured about

50% of all early-pay discounts

that were available to us; with

Basware, we were able to

push it to 95%.”

Manager, finance at a large

manufacturing company

“We can now finally see — on a

nationwide level — which actual

suppliers we use and how much we use

them. We can use these insights to

better negotiate with existing suppliers

and even contract with suppliers in

areas where we previously didn’t have

any arrangements.”

Development manager at a large

property management company

A COMMISSIONED STUDY CONDUCTED BY

FORRESTER CONSULTING ON BEHALF OF

BASWARE:

24

CLOUD DRIVES P2P REVENUE GROWTH; DEAL MIX SUGGESTS ACCELERATION

25

SaaS revenue ~20% of total…

0

10

20

30

40

50

60

70

2015

Maintenance License SaaS

>80%

total

recurring

revenue

…with recent deal mix suggesting rapid growth

P2P

rev

en

ue (

€M

)

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

Q4/2013 Q4/2014 Q4/2015

License SaaS

Dir

ect

P2P

deals

(#)

~100% YoY

growth in # of

SaaS deals

Q4/’14-Q4/’15

PURCHASE TO PAY2016-2018 PRIORITIES AND GOALS

26

Accelerate saleso Strengthen go to market in key markets

o Develop partner channel (especially BPOs)

Cloud transformationo Continue driving new sales to SaaS

o Transform existing on-premise customers to cloud

Faster go-lives and roll-outso Improve delivery tools and processes

Continued innovationo Continue leading edge innovations (e.g. Analytics, Mobility)

o Leverage Network and Financing services

Key 2018 goal:

>30% SaaS revenue

CAGR (2015-2018)





27




13:00-

14:45

15:15-

17:00

Break

Cocktails


WHY BASWARE FINANCING SERVICES

28

Traditional focus leaves money on the table

Missed opportunity by focusing on efficiency only

Total potential value

Efficiency

Working capital

Time and Focus of AP Programs

Both parties want to manage risk

Both parties use tools to

optimize working capital

Suppliers want

to reduce payment

time

Buyers want

to extend payment

time

The AP/AR dilemma:

Reason is a fundamental dilemma

FINANCING SERVICES OVERVIEW

29

Financing Services completes networked P2P… …for unlocking more value in the supply chain…

…by taking control of the financial supply chain… …leveraging four core components

“69% of companies surveyed admitted to using late

payments as a strategic lever to hold on to cash

reserves”

”-2%/10, net 30” early payment terms

equals 36% Return on Capital for the buyer

80% of suppliers would offer a

discount to be paid early

Timing

Payment Funding

Discount

Networked P2P:

Efficiency gains, transparency and control

Platform to host transactions and related data

Financing services:

Working capital gains

Dynamic cash position management

BASWARE FINANCING SERVICES PRODUCT VISION

30

Basware Commerce Network

Timing

Payment Funding

B2B ePayments

Dynamic

DiscountingMultibank

Payment Gateway

including FX

Discount

Supply Chain

Finance

DPO - DSO

Optimization

Advance Payment

Alternative funding

sources

FIRST PARTS OF OUR SUITE OF SERVICES LAUNCHED AND AVAILABLE FOR 2016

31

SUPPLIER DRIVEN BUYER DRIVEN

Basware Discount

Basware Pay

Basware Advance BASWARE

COMMERCE

NETWORK

A working capital platform offering

clients payable and receivable financing

Built on top of Basware Commerce

Network, utilizing data flow between

companies

In partnership with financial institutions

Current market entry offerings:

Basware Pay: in partnership with MasterCard

Basware Discount: a dynamic discounting solution

Basware Advance: in partnership with ArrowGrass

FIT FOR PURPOSE GO TO MARKET PLAN BEING IMPLEMENTED

32

Phased geographic expansion

Phase I: Launch (completed)

Pay & Discount

Existing direct customers in North America and

Western Europe

Phase II: Growth (2016-2017)

Pay, Discount, Finance & Advance

Geographic scope expanded, new customers

targeted

Phase III: Maturity (2018-)

Further geographic expansion

Offering extended with new innovations

Consultative selling approach

Starting point: Understanding the client’s

approach to working capital and identifying the

right improvement levers

Value creation potential uncovered through

spend analysis performed by Basware

FINANCING SERVICES2016-2018 PRIORITIES AND GOALS

33

Invest into accelerating working capital platform

developmento Maturing existing products and introducing Finance, Payment

Gateway and FX

Expand dedicated Financing Services sales channelso Direct dedicated sales force

o Leveraging partnerships for referrals and revenue

o Marketing and positioning in the treasury and cash

management space

Grow delivery and support in line with sales growth

Continue forming partnerships

Key 2018 goal:

>10% of Basware net

sales (with significant

upside potential not

included in estimates)





34




13:00-

14:45

15:15-

17:00

Break

Cocktails


KEY COMPANY WIDE GROWTH ENABLERS

35

• Invest in sales and marketing to scale lead generation and sales up in

line with market growth opportunity present in all markets

• Double sales force by 2018 – focusing on key large markets: the US,

UK and Germany

• Continue to optimize production to improve scalability of production

platforms and drive down cost of sales

• Increase use of digital tools and services to selectively automate

demand generation and sales activities

• Accelerate go-live and ramp-up times across all services to enable

faster recurring revenue ramp-up from new deals

• Standardize and rationalize delivery work to enable shorter projects at

lower cost, leveraging off/near-shore and self service

Invest in demand

generation

and sales

Scalable

company

infrastructure

Shorten delivery

times

Extend cloud

Purchase to Pay

leadership

Accelerate Network

growth

Unleash Financing

Services

SIGNIFICANT DEMAND GENERATION AND SALES SCALE-UP DURING 2016-2018

36

Example: Sales headcount increase

2015 2018

Go to market investment highlights

Focus on reaching critical mass in

the US, UK and Germany

Grow our partner sales through

business process outsourcing

players and other cloud

ERP/accounting service providers

Increase dedicated small and

medium sized business sales

DELIVERY TIME A KEY LEVER TO ACCELERATE CLOUD REVENUE GROWTH

37

Sales force

increase

Order intake

ramp-up

Sa

les F

TE

/re

ve

nu

e

Incremental

recurring

revenue

Sales reps’

ramp-up Delivery lead time

Sales force increase conversion to incremental recurring revenue

Time

ILLUSTRATIVE

Delivery lead time partly mitigated with starting partial billing at contract signing

SAAS DELIVERY TIMES REDUCING, DRIVEN BY VARIOUS FOCUSED EFFORTS

2014 2015

Median P2P SaaS delivery time (indexed)

Note: Median delivery time from project launch to go-live in calendar days, indexed to 2014=10038

Rapid Deployment Methodology purpose

built for all sizes of customers

Central Delivery Units (off/near-shore) to

ensure cost efficient and scalable capacity

increase to speed up delivery time

Further development of features and

functions that shorten delivery time

Continuous improvement of migration

tools to accelerate on-premise to cloud

transformation

Network innovations to limit

implementation project needs

WE HAVE ALIGNED OUR STRUCTURE, INCENTIVES AND VALUES TO THE STRATEGY

39

• Structure aligned to customer

needs

Customer facing activities global,

segment drive

Business Areas with direct

ownership of product roadmap

• Incentive model geared to drive

growth

Whole organization incentiviced

to grow sales, deliver faster,

delight the customer and ensure

quality

• Basware Values refined and

implemented





40




13:00-

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Cocktails


0%

10%

20%

30%

40%

50%

60%

70%

80%

0

20

40

60

80

100

120

140

160

2010 2011 2012 2013 2014 2015

Maintenance, license and consulting revenue Cloud revenue

Cloud % of total net sales % Recurring revenue

SMOOTH TRACK RECORD OF TRANSITIONING TO CLOUD

Net sales by type (€M)

Alusta P2P

SaaSBasware

Commerce

Network

Basware

Financing

Services

Note: Cloud revenue includes SaaS, transaction, Procserve and other Network related revenue41

0

20

40

60

80

100

120

140

160

2010 2011 2012 2013 2014 2015

TRANSACTIONS, SAAS KEY CONTRIBUTORS TO GROWING CLOUD REVENUE

Cloud

businesses drive

growth

Net Sales by type (€M, 2010 – 2015)

Maintenance,

license and

consulting

provide a solid

base

Other Network

related

Transactions

SaaS

Consulting

Licenses

Maintenance

Note: Other Network related includes Procserve and partnership income.42

BOOKINGS DRIVE FUTURE TOP LINE; MINIMAL CHURN PROVIDING PREDICTABILITY

Recurring revenue bookings(1) soaring Revenue churn(2) at a good level

(1) Recurring revenue bookings based on first years sales quota value

of new deals

(2) Revenue churn reflects rolling 4 quarter revenue of contracts

terminated within the period, as share of total equivalent period revenue

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2015 vs. 2014 2015/Q4 vs. 2014/Q4

% YoY growth

43

2015 revenue churn

< 5%

0

20

40

60

80

100

120

2012 2013 2014 2015

Axis

Title

P2P SAAS DEMAND RAPIDLY GROWING, ENABLING SAAS REVENUE ACCELERATION

Growth in number of P2P SaaS customers

Alu

sta

SaaS

cu

sto

mers

(in

dexed

)

# of deals 2012-2015 (CAGR): 108%

# of deals (Q4 2015 vs. Q4 2014): 200%

44

CLOUD REVENUES ON SOLID GROWTH TRACK…

Transaction revenue: strong

growth (€M)

• Acceleration of P2P sales and e-

invoicing penetration

• Dedicated focus to small and medium

sized businesses

• Open network through

interoperability partnerships

• Turning point in SaaS growth

reached

• Seeing significant momentum

• Significant growth expected due to:

New sales almost entirely

SaaS

Expanding sales force

Change in billing model45

Financing Services

revenue

2016-18

CAGR:

>30%

2018:

250Mtransactions

SaaS revenue: turning point

reached (€M)

2018 :

>10% of Basware

net sales(with significant upside

potential not included in

estimates)

• Financing Services

unleashed

…WHILE THE BASE SUPPORTS THE CLOUD STORY

Maintenace stable; to erode

gradually (€M)

• Very stable maintenance

business with expected

marginal erosion through

transition to SaaS

License business shrinking

(€M)

Consulting stable with upside

(€M)

• Conversion to SaaS

proceeding according to

the strategy

• License net sales reduced

to mainly add-on sales

• Consulting growth driven

by the accelerating

number of projects and

new value consulting

services balancing

shrinking billable days per

delivery46

2016-18

CAGR:

-5%

2016-18

CAGR:

-25%

2016-18

CAGR:

0-2%

2010 2015 2018 target

Maintenance, license and consulting Cloud revenue

2018 GOAL: €220-280M NET SALES, 2/3 FROM CLOUD BUSINESSES

Cloud based businesses growing fast:

Turning point in business model

change reached

Constant growth year-on-year

Stacking revenues

Maintenance, consulting and license

businesses provide a solid base

Stable and predictable

Gradually declining

12%

88%

40%

60% 1/3

2/3

Note: Cloud Net sales includes SaaS, transaction, Procserve and other Network related Net sales

CAGR

(’15-’18)

~40%

-5-0%

47

€103.1M

€143.6M

€220-280M

Recurring

revenue goal

~80%

Net sales: >50% CAGR

2015 2016 2017 2018

Net sales (indexed)

U.S. EXAMPLE: GOAL TO MULTIPLY BUSINESS; 2015-18 NET SALES CAGR >50%

48

2015 2016 2017 2018

P2P deals (indexed)

2015 2016 2017 2018

Transactions (indexed)

P2P deals: ~6x Transactions: ~10xHeadcount ~2,5x

2015 2016 2017 2018

Personnel (headcount)

Organic plan complemented with continuous M&A target screening

~€20M OPEX INCREASE IN 2016 TO IMPLEMENT NECESSARY ENABLERS

• ~€20M year-on-year increase in operating expense:

Sales

Marketing

R&D, especially Financing Services

Focus on US, UK and Germany

• Investment funded with company cash flows

49

EBITDA MARGIN TEMPORARILY IMPACTED; UNDERLYING PROFITABILITY IMPROVING

2015 2016 2017 2018

Basware totalEBITDA 8%

Transactions Gross

Margin50-60%

SaaS Gross

Margin60-70%

Financing

ServicesGross

MarginN/A 80-90%

Consulting Gross

Margin10-20%

License Gross

Margin~90%

Maintenance Gross

Margin>90%

50

SELECTIVE M&A TO SUPPORT OUR GROWTH TRACK

We are uniquely positioned to leverage M&A for our strategy execution

Extend Basware Commerce Network

Consolidate the market

Focus on attractive “key markets”

US, UK and Germany

Internal capability

History of successful, disciplined M&A

Financial flexibility

51

2018 STRATEGIC GOALS

52

Priority Top line & transaction growth

Net sales €220 to €280 million

• Delivering growth is our #1

priority

• Continuing focus on

growing cloud businesses

and share of recurring

revenue

• Opex increase to implement

necessary growth enablers

• Improving profitability over

time

• Select acquisitions to

accelerate growth

Cloud sales2/3 of total revenue from cloud

businesses

Recurring

revenue ~80% of total revenues

Transactions250 million transactions processed in the

network annually

P2P SaaS

CAGR

Financing

Services

>30% P2P SaaS revenue CAGR over

2016-2018

>10% of Basware net sales (significant

upside not included in estimate)





53




13:00-

14:45

15:15-

17:00

Break

Cocktails


BASWARE: KEY DIFFERENTIATORS

Networked Purchase-to-Pay

Over 2,500 Networked

Purchase-to-Pay customers

Network Leadership

Global Reach with

Open Commerce Network

Financing Innovation

Just in Time

Financing Services

54

FOR INVESTORS

www.basware.com/investors

www.basware.com/annualreport

BASWARE

www.basware.com

www.twitter.com/basware

www.facebook.com/BaswareCorporation

www.linkedin.com/company/basware

FINANCING SERVICES

www.basware.com/financing-services

RESEARCH REPORTS

www.basware.com/knowledge-center

MOREINFORMATION

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