Company post - Basware: Q1/19 Update
Balancing cloud growth and profitability
Basware is entering a new phase in its cloud transformation. Last year two disposals of non-cloud businesses and an outsourcing partnership of scanning services were completed to simply operations. The company still needs to adjust and streamline its cloud business in order to achieve full benefits of the scalable business model. As Basware’s business is now 2/3 cloud, it is the right time to drive efficiency in our operations and increase focus on profitability and cashflow. Through the new productivity program, Basware expects to reach positive EBIT in 2020 and positive free cash flow on a run-rate basis by the end of 2020.
Q1 results – cloud growth +14%
In the first quarter of the year, Basware made good progress in revenues as cloud increased 14% and total revenue 6% (excluding the impact of disposals in 2018 and changes in foreign exchange rates). Cloud order intake growth was 5%. It was impacted by market speculation on a possible tender offer, which delayed discussions with customers. Nonetheless, Basware had good performance in its key markets, such as the US and France, and signed several deals with new customers, which will enable future add-on sales.
Adjusted EBITDA amounted to EUR -1.7 million. Profitability was impacted by temporarily higher hosting costs related to migration of major products to AWS and bad debt provisions. Hosting costs are expected to steadily decrease as the migration completes. Basware keeps its guidance unchanged for 2019 and expects adjusted EBITDA to be at breakeven or better, cloud revenue to grow at approximately 15% and total revenue to grow at approx. 5%.
New financing arrangement
The company signed an EUR 50 million financing arrangement in March. The loan terms were tailored to Basware’s needs: flexible terms and 5.5-year maturity of the loan support growth and strengthen the balance sheet. Furthermore Basware had EUR 17 million of debt maturing in 2019, which has now been refinanced.