Heeros Oyj’s financial statement release 1 January – 31 December 2023: As expected, positive profitability development during the last quarter of the year.
Heeros Oyj | Company Release | February 01, 2024 at 09:30:00 EET
Net result for financial period 2023 turned positive due to 24 % increase in EBITDA and 9 % increase in contract revenue. Strong Net Revenue Retention at 106% amidst a challenging macroeconomic year.
This release is an unofficial translation of the summary of Heeros Oyj’s 2023 financial statement release. The complete financial statement release in Finnish, including tables, is available on the company’s website at www.heeros.com/tiedotteet.
July – December 2023 in brief
- The combined adjusted EBITDA margin and revenue growth percentage (Rule of 40, adjusted) was 33 % (7-12/2022: 39 %).
- Revenue increased by 2 % year-on-year to EUR 5.6 (5.5) million.
- Recurring revenue (contract and transaction revenue) increased by 4 % to EUR 5.4 (5.2) million. Contract revenue increased by 9 % to EUR 4.3 (4.0) million. Transaction volumes decreased by 8 % and transaction revenue declined by 14 % to EUR 1.1 (1.2) million.
- At the end of December 2023, contract revenue (MRR, Monthly Recurring Revenue) amounted to EUR 726 (666) thousand, representing a year-on-year increase of 9 %.
- New customer order intake in terms of Annual Recurring Revenue (ARR) was approximately EUR 240 (410) thousand.
- EBITDA increased by 29 % to EUR 1.7 (1.3) million, which was 29 % (23 %) of revenue. Adjusted EBITDA increased by 37 % to EUR 1.8 (1.3) million, which was 31 % (23 %) of revenue.
- Heeros CEO changed, Niklas Lahti was appointed as interim CEO on 24 April and as new CEO on 26 September.
January – December 2023 in brief
- The combined adjusted EBITDA margin and revenue growth percentage (Rule of 40, adjusted) was 25 % (1-12/2022: 39 %).
- Revenue increased by 2 % year-on-year to EUR 11.3 (11.1) million.
- Recurring revenue increased by 4 % to EUR 10.8 (10.3) million. Contract revenue increased by 9 % to EUR 8.6 (7.9) million. Transaction volumes decreased by 6 % and transaction revenue declined by 11 % to EUR 2.2 (2.5) million.
- EBITDA increased by 24 % to EUR 2.5 (2.0) million, which was 22 % (18 %) of revenue. Adjusted EBITDA increased by 29 % to EUR 2.7 (2.1) million, which was 23 % (19 %) of revenue.
- The profit for the period was EUR 0.2 (-0.4) million. Profit for the period excluding goodwill depreciations was EUR 0.8 (0.2) million.
- Operational cash flow increased by 23 % to EUR 2.0 (1.6) million.
- On 18 October, Heeros announced that it was lowering its financial guidance for 2023: Heeros estimates that its combined EBITDA margin (EBITDA, % of revenue) and revenue growth percentage (Rule of 40) will be 23-27% during the 2023 financial period.
- Financial outlook for the year 2024: Heeros expects that both revenue and EBITDA for 2024 financial period improve from the 2023 financial period.
- The Board of Directors proposes that no dividends be paid out for the 2023 financial period.
KEY FIGURES
| EUR thousand | Q4/ 2023 | Q4/ 2022 | Change % | H2/ 2023 | H2/ 2022 | Change % | Financial period 2023 | Financial period 2022 | Change % |
| Rule of 40, % 1 | 25 % | 38 % | 31 % | 39 % | 24 % | 38 % | |||
| Rule of 40, % (adj.) 1 | 26 % | 38 % | 33 % | 39 % | 25 % | 39 % | |||
| Revenue | 2,810 | 2,893 | -3 % | 5,630 | 5,534 | 2 % | 11,296 | 11,083 | 2 % |
| Recurring revenue 2 | 2,712 | 2,625 | 3 % | 5,407 | 5,208 | 4 % | 10,774 | 10,332 | 4 % |
| Contract revenue | 2,171 | 2,001 | 9 % | 4,342 | 3,971 | 9 % | 8,578 | 7,854 | 9 % |
| Transaction revenue | 541 | 624 | -13 % | 1,065 | 1,237 | -14 % | 2,195 | 2,478 | -11 % |
| EBITDA | 781 | 651 | 20 % | 1,653 | 1,282 | 29 % | 2,478 | 1,997 | 24 % |
| EBITDA, % of revenue | 28 % | 23 % | 29 % | 23 % | 22 % | 18 % | |||
| EBITDA (adjusted) 3 | 799 | 651 | 23 % | 1,772 | 1,298 | 37 % | 2,654 | 2,061 | 29 % |
| EBITDA (adj.), % of revenue | 28 % | 23 % | 31 % | 23 % | 23 % | 19 % | |||
| EBIT | 225 | 96 | 136 % | 562 | 178 | 215 % | 293 | -230 | |
| EBIT, % of revenue | 8 % | 3 % | 10 % | 3 % | 3 % | -2 % | |||
| EBIT (adjusted) 3 | 243 | 96 | 155 % | 681 | 194 | 251 % | 469 | -166 | |
| EBIT (adj.), % of revenue | 9 % | 3 % | 162 % | 12 % | 4 % | 245 % | 4 % | -1 % | |
| Profit for the period | 222 | 29 | 662 % | 500 | 59 | 743 % | 177 | -405 | |
| Profit for the period, % of revenue | 8 % | 1 % | 9 % | 1 % | 2 % | -4 % | |||
| Profit for the period excluding goodwill depreciations | 362 | 165 | 119 % | 780 | 336 | 132 % | 734 | 151 | 385 % |
| Operational cash flow | 1,117 | 923 | 21 % | 2,016 | 1,642 | 23 % | |||
| Equity ratio, % | 66 % | 58 % | |||||||
| Return on Equity (ROE), % | 3 % | -9 % |
1 The revenue growth rate for 2022 includes the inorganic growth derived from the Taimer Ltd acquisition. The adjusted figures for 2023 include
an adjustment of EUR 176 thousand for non-recurring restructuring costs.
2 Recurring revenue is divided into two parts: contract revenue (fixed usage fees and service agreements) and transaction revenue.
3 The adjusted figures for 2023 include an adjustment of EUR 176 thousand for non-recurring restructuring costs.
NIKLAS LAHTI, CEO
“Focusing on our core business continues to bear fruit - the last quarter of the financial year continued the stable trajectory seen during Q2 and Q3 with positive developments in profitability.
Constant increases in profitability throughout the year
Throughout the quarter, Heeros maintained its primary focus on enhancing profitability, an objective in which we succeeded. EBITDA (adjusted) for the fiscal year increased by 24% to EUR 2 478 (1-12/2022: 2 061) thousand, which was 23 % (19 %) of revenue. October-December EBITDA (adjusted) increased by 23 % to EUR 799 (10-12/2022: 651) thousand which was 28 % (23 %) of revenue.
Good development in recurring revenue continued. At the end of December 2023 Monthly Recurring Revenue (MRR) was EUR 726 (666) thousand, which marks 9 % growth compared to December 2022.
Establishing enduring customer relationships and minimizing churn are our key priorities. In the fourth quarter, contract revenue, our most important metric, grew by 4%. Net revenue retention remained robust at 106% (109%), particularly with direct customers. Churn remained at a low level. The sustained success in these metrics underscores the long-term appeal of our services and the strength of our customer relationships.
During the quarter, we completed the cost reductions started in spring 2023. We have not seen any operative impact after the reductions in cost. Operative cash flow continued to increase during the second half of the year, reaching EUR 1 117 (923) thousand. Heeros has now been cash flow positive for 16 quarters in a row and paid off 750 KEUR in long-term debt during 2023.
Challenging environment for new sales
New sales development, as measured in order intake ARR, continued to decline during the last quarter of the year as many customers pushed their decision making from 2023 to 2024. Annual Recurring Revenue (ARR) order intake was lower than a year ago at EUR 240 (410) thousand. Lower order intake also contributed to low one-off (implementation-based) revenue. That being said, comparable Q4/22 one-off revenues were excellent primarily due to large implementation work on a single customer case.
At the same time, transaction revenue continued to decline, albeit on a somewhat slower pace than in the third quarter (-13% year-on-year in Q4 compared to -15% year-on year in Q3). Declining one-off and transactional revenue, despite positive developments in contract revenue, affected total revenue development negatively.
As such, overall revenue decreased by 3 % during the last quarter to EUR 2 810 (2 893) thousand. Poor macroeconomic situation does have a continued impact on the decision making processes of our customers. Multiple changes in the way we sell have already been implemented and I do expect improvements in the future.
Positive developments in automating Invoice-to-Cash
Development of Heeros Sales Invoices, our recently renewed product aimed at automating Invoice-to-Cash process for mid-segment companies, was in full swing during the quarter. We gained several new clients from both Finnish and international companies and were successful in getting the first phase of related Open Banking development project to the finish line - targeting to also enable payment reconciliation across multiple European countries during 2024.
We believe the changing mid-market ERP space presents a growing opportunity for providers like Heeros, specializing in best-of-breed Accounts Payable (AP) and Accounts Receivable (AR) automation. The rising demand for ERP upgrades positions Heeros strategically as especially older-generation ERP suites often pose obstacles to business transformation, while full-fledged ERP upgrades can take years and large investments. Heeros solutions enable companies to achieve similar results quickly and cost-effectively through simple standard integrations to their ERPs. This can also give many more years to their current ERP’s life-cycle by augmenting its’ capabilities, while enabling a less risky transfer to a new generation ERP with Heeros solutions on top.
Year of changes for Heeros
Overall, 2023 marks a year of many changes for Heeros. At the start of the year we got new owners – Viking Venture and Rite Ventures – with a lot of domain expertise, ways of improving operational excellence and new views on how to develop the Heeros organization further. During April another large change occurred as I stepped in as CEO of Heeros.
Due to these events as well as changes in the overall market climate, we shifted the focus of Heeros from growth to profitability. This involved prioritizing R&D in Accounts Payable and Accounts Receivable, cutting costs company-wide, enhancing our ways of working and sharpening strategy execution. Heeros’ team, the whole organization, has adapted well, and we're entering the new year committed to profitable growth.”
FINANCIAL OUTLOOK FOR 2024
Heeros expects that both revenue and EBITDA for 2024 financial period improve from the 2023 financial period.
FINANCIAL INFORMATION AND ANNUAL GENERAL MEETING IN 2024
In 2024, Heeros Oyj will publish the following financial reports:
1 February 2024 – Financial Statements and the Report of the Board of Directors for 2023
18 April 2024 – Business Review January-March 2024
16 July 2024 – Half-year Report January-June 2024
17 October 2024 – Business Review January-September 2024
The Annual General Meeting will be held on 20 March 2024. The company's Board of Directors will summon the meeting separately on a later date.
Heeros Plc
Board of Directors
More information:
Niklas Lahti, CEO, tel. +358 40 774 1777, niklas.lahti@heeros.com
Juho Pakkanen, CFO, tel. +358 40 506 9898, juho.pakkanen@heeros.com
Distribution:
Nasdaq Helsinki
Essential media outlets
www.heeros.com/sijoittajille
Heeros in brief
Heeros is a pioneer in SaaS corporate software with a mission to develop software for streamlined business management. Heeros seeks to meet the needs of corporate and financial management clients by providing the software suites offering the best user experience for the digitalisation of business-critical financial management, ERP and HR processes. Heeros was established in 2000. The company’s shares are listed on Nasdaq First North Growth Market Finland, maintained by Nasdaq Helsinki Oy, under the trading ID HEEROS. www.heeros.com