BasWare Corporation Stock Exchange Release February 8, 2007 SUMMARY Financial year 2006: . Net sales EUR 59 954 thousand (EUR 41 666 thousand) . Operating profit EUR 8 078 thousand (EUR 3 611 thousand) . Operating profit 13.5 percent (8.7%) of net sales . International business operations' share of net sales 46 percent (52%) . Earnings per share EUR 0.45 (EUR 0.24) . Board's dividend proposal EUR 0.15 (EUR 0.10) per share . Outlook for 2007: BasWare expects the growth of net sales for the financial year to be from 15 to 20 percent compared with the Group's net sales in the previous year. Operating profit (EBIT) is expected to be from 10 to 15 percent of net sales. The 2005 figures have been restated to comply with the adjusted accounting principles regarding license sales recognition. The Financial Statements have been prepared according to International Financial Reporting Standards (IFRS). GROUP KEY FIGURES 10-12/ 10-12/0 Change 1-12/ 1-12/0 Change 5 5 EUR thousand 2006 Restate % 2006 Restat % d ed Net sales 16 508 10 823 52.5% 59 954 41 666 43.9% Operating profit 1 807 97 1758.8 8 078 3 611 123.7% % % of net sales 10.9% 0.9% 13.5% 8.7% Profit before tax 1 831 101 1710.5 8 287 3 647 127.2% % Profit for the period 526 -361 4 986 2 229 123.7% Return on equity, % 4.8% -6.9% 15.1% 13.9% Return on investment, % 16.6% 2.5% 24.7% 21.4% Cash and cash 8 975 9 987 -10.1% 8 975 9 987 -10.1% equivalents *) Gearing, % -18.4% -41.1% -18.4% -41.1% Equity ratio, % 77.5% 68.2% 77.5% 68.2% Earnings per share, EUR 0.05 -0.04 0.45 0.24 89.3% Earnings per share 0.05 -0.04 0.44 0.23 91.0% (diluted), EUR Equity per share, EUR 3.88 2.16 80.0% 3.88 2.16 80.0% *) Includes cash, cash equivalents and financial assets at fair value through profit or loss BasWare's CEO Ilkka Sihvo comments the Financial Statements 2006: "As a whole, BasWare succeeded well in the last quarter of 2006. Especially the units in Scandinavia, United Kingdom, the Netherlands and the United States as well as the Finnish Financial Management unit developed favorably. Profitability of the entire Group has developed positively." "Key success factors in 2006 were the growth in Europe and United States. 46 percent of net sales came from outside of Finland and the growth of international net sales was 26 percent compared with 2005. The indirect sales channel was strengthened in Europe, the United States as well as in the Asia Pacific. There were a total of 54 resellers at the end of the year. The business operations in Scandinavia and Finland continued to develop favorably and grew faster than the average growth of the software market." REPORTING The accounting principles applied in the figures of the Financial Statements have been adjusted compared with the previously published 2005 Financial Statements. BasWare Group has adjusted the revenue recognition principles regarding license sales as well as the valuation principles regarding accounts receivables, as recommended by the new auditor. Additionally, the Group has previously in some cases at the end of the quarters entered license sales as revenue based on agreements where the actual license delivery has been delayed by some days. As a result, license sales have been recognized as revenue a month beforehand. The 2006 Financial Statements will be prepared according to the adjusted accounting principles. Part of the agreements signed at the end of 2006 will be recognized as revenue in the first quarter of 2007 as a result of the adjusted revenue recognition principles. The value of these agreements totals over EUR 3 million. BasWare assesses that the adjusted accounting principles have no effect on the Group's financial performance in the future. BasWare issued a profit warning on January 15, 2007. Net sales have decreased by EUR 0.8 million compared with the preliminary information given on that date. The change results from the increase in the number of revenues to be recognized in 2007. Operating profit has decreased by EUR 0.9 million compared with the preliminary figure of EUR 9.0 million. BasWare has previously estimated that net sales of the Group compared with the previous year would grow by approximately 45%, corresponding to approximately EUR 62.0 million. Operating profit was estimated to represent over 15% of net sales, corresponding to an operating profit of EUR 9.3 million euros. Falling below the official guidance is due to slightly weaker product sales. In addition, part of the 2006 deals have been realized as Software as a Service (SaaS) deliveries instead of one-off items. Net sales accumulate then gradually due to monthly revenue recognition. BasWare acquired Analyste Corporation on January 30, 2006. Analyste's financial statements are consolidated in the Group financial statements from January 1, 2006 to July 31, 2006. The merger of Analyste to BasWare Corporation took place on August 1, 2006. FINANCIAL PERIOD JANUARY 1 - DECEMBER 31, 2006 NET SALES BasWare Group's net sales grew by 44 percent during the financial year and were EUR 59 954 thousand (EUR 41 666 thousand). The sales of the Group's own products grew by 38 percent and were 32 percent (34%) of total net sales. Maintenance revenue and support services related to maintenance grew by 93 percent and were 31 percent (23%) of net sales. Consulting and service revenue grew by 20 percent and represented 34 percent (40%) of net sales. Other operations which consist mainly of license sales and maintenance revenues from third party hardware and software were 3 percent (3%) of net sales. Reseller partners' net share of product sales was 18 percent (16%) or EUR 3 465 thousand (EUR 2 257 thousand) in the financial year. The international share of net sales was 46 percent (52%) in the financial year. International business operations grew by 26 percent in the financial year. Domestic operations grew by 64 percent. The division of net sales geographically (primary segment by the location of assets): Net sales 10-12/ 10-12/0 Change, 1-12/ 1-12/05 Change, (EUR thousand) 2006 5 % 2006 % Restate Restate d d Finland 10 918 6 349 72.0 41 028 26 111 57.1 Scandinavia 4 354 3 964 9.8 14 698 13 024 12.9 Europe 2 714 1 441 88.3 8 985 6 497 38.3 Other areas 1 119 553 102.5 3 512 2 077 69.1 Sales between -2 598 -1 484 -8 269 -6 043 segments Group total 16 508 10 823 52.5 59 954 41 666 43.9 FINANCIAL PERFORMANCE In 2006, BasWare Group's operating profit grew by 124 percent and was EUR 8 078 thousand (EUR 3 611 thousand). Operating profit represented 14 percent (9%) of net sales. The Group's fixed costs were EUR 47 427 (EUR 33 865 thousand). Growth compared with the previous year was 40 percent. A significant part of the growth in costs was attributed by the growing personnel due to the acquisition costs that totaled EUR 32 953 thousand (EUR 22 569 thousand). BasWare's research and development costs were EUR 10 925 thousand (EUR 6 204 thousand) or which EUR 2 454 thousand (EUR 1 154 thousand) or 23 percent (19) were capitalized during the period. The amortization on development costs was EUR 462 thousand (EUR 239 thousand). Research and development costs made 18 percent (15%) of net sales. Costs grew by 76 percent (35%) during the year. The growth results mainly from the acquisition. The division of operating profit geographically (primary segment by the location of assets): Operating profit 10-12/ 10-12/0 Change, 1-12/ 1-12/05 Change, (EUR thousand) 2006 5 % 2006 Restate % Restate d d Finland 3 243 1 140 184.5 12 314 7 130 72.7 Scandinavia 20 160 -87.8 -45 -116 60.7 Europe -910 -972 6.4 -2 831 -2 379 -19.0 Other areas -531 -253 -109.5 -1 297 -976 -32.9 Operating profit -15 23 -62 -47 between segments Group total 1 807 97 1758.8 8 078 3 611 123.7 The Group's profit before taxes was EUR 8 287 thousand (EUR 3 647 thousand). Profit for the financial year was 8 percent (5%) of net sales or EUR 4 986 thousand (EUR 2 229 thousand). Taxes for the financial year were EUR 3 301 thousand (EUR 1 417 thousand) and tax rate was 40 percent (39%). Taxes for the period have been adjusted by a total of EUR 765 thousand (EUR 985 thousand) resulting from subsidiaries' losses and IFRS adjustments as well as from tax assets and liabilities resulting from other accrual differences. Earnings per share were EUR 0.45 (EUR 0.24). FINANCE AND INVESTMENTS BasWare Group's total assets of the balance sheet at the end of the financial period were EUR 57 558 thousand (EUR 31 228 thousand). A significant part of the growth resulted from the acquisition. The Group's cash and bank balances totaled EUR 8 975 thousand (EUR 9 987 thousand). Cash flows from operating activities were EUR 5 657 thousand (EUR 4 thousand) in the period. Cash flows from investments were EUR -6 119 thousand (EUR -3 283 thousand). Equity ratio was 77.5 percent (68.2%) at the end of the financial year and gearing was -18.4 percent (-41.1%). The Company had a total of EUR 758 thousand (EUR 1 230 thousand) interest-bearing liabilities, of which current liabilities accounted for EUR 428 thousand (EUR 474 thousand). Return on investment was 24.7 percent (21.4%) and return on equity 15.2 percent (13.9%) in the financial year. The Group's capital expenditure was EUR 597 thousand (EUR 794 thousand) in the period. This consisted of regular new and replacement investments resulting from growth. Gross investments which include, in addition to the previously mentioned, the capitalized research and development costs as well as the acquisition of Analyste, totaled EUR 25 318 thousand (EUR 6 925 thousand). As a result of financial reporting according to IFRS, regular goodwill amortizations have been ceased. According to the impairment tests conducted there are no indications of impairments of assets. The amortization on intangible assets was EUR 1 469 thousand (EUR 610 thousand), of which the amortization on the acquisition was EUR 660 thousand (EUR 84 thousand). RESEARCH AND DEVELOPMENT AND NEW PRODUCTS Altogether 138 (79) people worked in the R&D unit at the end of 2006. This equals to 26 percent of the total personnel. New BasWare products were delivered to the market in 2006. As a result of the acquisition of Analyste, BasWare extended its Enterprise Purchase to Pay portfolio with, for example, payment software. The products were launched under the BasWare brand in spring 2006. During 2006, the development of both the BasWare Enterprise Purchase to Pay and the BasWare Financial Management product suites continued. The usability and compliance of the BasWare Invoice Processing solution was improved and a new version was launched during the year. The user interface of BasWare Purchase Management solution, part of the Enterprise Purchase to Pay portfolio, was renewed and new versions of the product were launched during the year. New versions of the value-added modules, BasWare Contract Matching, BasWare Order Matching and BasWare Document Archiving were also launched during the year. New versions of BasWare Travel & Expense Management were launched during the year. The solution has a new web-based user interface and its usability was further improved. It now enables creating expense claims unrelated to travel. New versions of BasWare Group Consolidation, part of the BasWare Financial Management portfolio, and the related value-added modules, BasWare IFRS Package and BasWare Cash Flow, were launched during the year. A new value-added module, BasWare Business Transactions Monitor, was launched on the market. The eInvoicing solution platform was upgraded during the year. New value-added product, BasWare Key Performance Indicator (KPI) Reporting Tool was launched in the last quarter. The tool enables measuring purchase to pay process efficiency with various business indicators. The product is integrated with BasWare Purchase Management, BasWare Invoice Automation and BasWare Travel & Expense Management solutions, enabling automatic data import directly to the reporting tool. During the year, the development of the new BasWare Contract Lifecycle Management value-added product was initiated. It integrates with the BasWare Enterprise Purchase to Pay solutions and automates the processing of contract-based orders and purchase invoices. PERSONNEL BasWare Group employed on average 514 (362) people during the period and 528 (395) at the end of the year. The number of personnel grew by 34 percent compared with the end of the previous year and by 3 percent compared with previous quarter end. The number of personnel working in Finland has slightly increased mostly due to the acquisition compared with the situation in the previous year. Altogether 66 percent (60%) of personnel work in Finland and 34 percent (40%) outside of Finland. The average age of the employees is 35.4 (34.8) years. Of them 34 percent hold a Master's degree and 41 percent a Bachelor's degree. 28 percent of employees are women; 72 percent are men. For incentive purposes, the Company has a bonus program that covers the whole personnel. In the end of the period there was additionally one on-going warrant program and a long-term incentive program for the top management was introduced. Based on the program, warrants can be granted to the members of the top management. Geographical distribution of personnel: Personnel 10-12/ 10-12/ Change 1-12/ 1-2/ Change (employed, in 2006 2005 , % 2006 2005 , % average) Finland 345 237 45.6 346 223 55.2 Scandinavia 93 88 5.6 89 75 18.7 Europe 66 55 20.0 62 50 24.0 Other areas 21 15 40.0 17 14 21.4 Group total 524 395 32.7 514 362 42.0 BUSINESS OPERATIONS The general economic outlook remained fairly good during the year. BasWare's software generates cost savings to the customers and thus demand is not heavily dependant on the current economic situation. In an independent evaluation by Forrester Research BasWare has been named a leading electronic invoice presentment and payment vendor globally. BasWare is also estimated to have the largest market share of all vendors. BasWare estimates that the integrated concept formed by its products has a positive impact on the company's competitiveness. The company's strengths include long-term software development, fast implementation of ready-made solutions and worldwide distribution and support services. According to the world's leading industry analysts, BasWare also became a major player in procurement solutions during 2006. Market analysts like Gartner estimate that the purchase management market as a whole is transferring into a productivity phase where the demand is expected to grow. International share of BasWare Group's net sales was 46 percent (52%) in the period and international operations grew by 26 percent. In the end of the period the Company had software installations in over 20 countries. Enterprise Purchase to Pay operations grew by 48 percent during the year and represented 88 percent (86%) of net sales. A total of 51 percent (61%) of net sales came from outside of Finland. Altogether 155 (135) new invoice processing and purchase management agreements were signed in Enterprise Purchase to Pay units in eight countries. The sales of BasWare Purchase Management picked up during the year and new customers include the City of Helsinki in Finland, Ernst & Young in the United Kingdom and ThiemeMeulenhoff in the Netherlands. The first agreements for BasWare KPI Reporting Tool, launched in December, were signed with Monster and Chenaga Corporation in the United States. Other new customers include IKEA Russia, Sonic Corporation, Endemol Netherlands, Adecco UK, Catepillar Belgium, Maxygen ApS, M- real Corporation and Pöyry Group. Financial Management operations grew by 18 percent in the period and represented 12 percent (15%) of net sales. A total of 3 percent (3%) of net sales came from outside of Finland. The unit signed 39 (34) new customer agreements in three countries related to the main products. New customers include FIM Group, Puukeskus Oy and Capman Oyj in Finland, Red Cross in Norway and DHL in Denmark. During the year, the competitiveness of the total offering was increased with new value added products, especially the BasWare Analyzer analysis tool that was sold to 16 customers during the year as well as the new public sector package solution that was sold to seven Finnish municipalities towards the end of 2006. The package is used by for example the cities of Espoo, Oulu and Turku in Finland. Reseller channel Reseller operations through business partners were a significant part of international operations in 2006. Strong reseller network ensures as wide as possible distribution of the Company's products as well as needed service and support functions for customers. The partners are responsible for sales, marketing as well as for the service and support functions needed by the customers. The subsidiaries in Germany, the Netherlands, France, United Kingdom and the United States as well as the global functions in the parent company have channel sales units that support existing partners and strengthen the indirect sales channel. The reseller channel organization was further strengthened during the financial period by appointing a new Vice President to the Global Operations unit, responsible for managing international reseller operations. At the end of 2006, BasWare had a total of 54 business partners. Of these 46 were international resellers, operating in altogether 29 countries. Additionally BasWare has diverse marketing and sales partnerships in Europe and the United States. In January-December, a net share of 18 percent (16%) of product sales has been achieved through the partner network which represents 13 percent (10%) of international operations' net sales. Nordic BasWare's Nordic organization includes the Enterprise Purchase to Pay and Financial Management units in Finland, as part of the parent company, as well as the Scandinavian (Sweden, Denmark and Norway) unit. All the BasWare Enterprise Purchase to Pay and Financial Management products are sold in the Nordic countries, apart from the Analyste-based products which are currently sold only in Finland. Marketing and sales activities of the Financial Management products were initiated in Sweden and Norway in the beginning of 2005 and later that year in the spring in Denmark. Sales and other business operations are mainly handled by the own organization. There are altogether 28 resellers and 17 application service providers selling Analyste's products in Finland. There are two Enterprise Purchase to Pay business partners in Sweden, one Enterprise Purchase to Pay partner in Iceland and one Financial Management partner in Denmark. As a whole, BasWare's business units in Finland and Scandinavia achieved the sales objective for the financial year. The Finnish Financial Management unit exceeded its objective. The Swedish and Danish subsidiaries achieved their objective moderately and the Norwegian unit exceeded its objective. Over 5 million invoices were transmitted through the BasWare Business Transactions service during the financial year. The service is sold in the Nordic countries. The invoice volume of the service grew by 70 percent during the financial year compared with 2005. Europe Outside of Scandinavia, BasWare has European subsidiaries in the Netherlands, Germany, the United Kingdom and France. At the end of the year, there were altogether 31 partners that sold BasWare's products in the area. Additionally, the Company has three partners in Southern Europe. The European business area as a whole fell slightly behind the objective. All BasWare Enterprise Purchase to Pay products are sold in the area, including the BasWare Business Transactions service and electronic invoicing solutions. The Dutch subsidiary exceeded its objective for the financial year. The operations of the subsidiary in the United Kingdom developed favorably during the year but fell slightly behind the objective. Also the German unit took a positive turn during the year but fell behind the objective. The French subsidiary signed several agreements towards the end of 2006, but fell behind the full year objective due to weak sales at the beginning of the year. Other areas Outside of Europe, BasWare has a subsidiary in the United Stated which focuses on the sales of the Enterprise Purchase to Pay solutions in the United States and Canada. Additionally there are eight resellers in the area. Of all the units, lisence sales of BasWare, Inc. developed the most favorably although the year end sales fell behind the objective and as a whole the unit fell slightly behind the objective. The objective for the unit is significantly higher than for other units. The sales to other areas outside Europe, mainly to Australia, are handled through value added resellers. There are currently three resellers in the area. Their net sales are entered as a part of the Finnish parent company's operations in segment reporting. The reseller operations in the area exceeded their objective in 2006. OPERATING RISKS BasWare takes risks that are a natural part of the strategy and objectives. These risks are managed and reduced in various ways. The Company is not ready to take risks that might endanger the continuity of operations or that are uncontrollable or would significantly harm the Company's operations. The goal of risk management is to systematically and extensively identify and acknowledge the risk involved in the operations as well as to make sure that the risks are appropriately managed when making business decisions. The company's risk management supports the attainment of strategic goals and ensures the continuity of business operations. In the process of risk management, the goal is to identify and evaluate the risks, after which a risk-specific plan is drawn up and concrete action is taken. These actions may include, for example, avoidance of the risk, diminishment of the risk by different means or transference of the risk by insurance or agreements. BasWare has divided the risks into six categories: risks related to business operations, products, personnel as well as legal, financial and data security risks. Each group has a designated person in charge. The essential risks have been recognized and measures for preparing for them undertaken. In 2006, the Board monitored the progress regularly. Company's international operations generate normal risks related to financing. The goal of financial risk management is to cost effectively ensure the Company to have sufficient financing as well as to monitor and if necessary limit the risks by certain measures. Risk management is centralized in the Group's finance department. The department reports to the Company's Board of Directors at least once a year according to the risk management policy. The Company did not realize hedging during the period. The Board of Directors receives annually a report of the most significant risks discovered during risk mapping. At the same time, the Board reviews the risks from the shareholder value's perspective. Risk management does not have a separate organization within the Company but its responsibilities follow the distribution of liability throughout the organization and operations. ACQUISITIONS AND CHANGES IN GROUP STRUCTURE On January 31, 2006 BasWare announced that it was to acquire the entire share capital of Analyste Corporation. The acquisition price was EUR 27.92 million of which EUR 9.45 million was paid in cash and EUR 18.19 million in BasWare's shares with two directed offerings to the shareholders of Analyste. The acquisition strengthened BasWare's position in Finland and extended the Company's portfolio to cover, for example, payment software. Trivet Software Oy was merged to BasWare Corp. on January 5, 2006. Analyste Oyj was transferred from a public limited-liability company to a limited-liability incorporated company on February 28, 2006. Analyste Oy was merged to BasWare Corp. on August 1, 2006. BasWare resolved on August 14, 2006 to centralize its Scandinavian operations into one unit. Odd Roar Trapnes was appointed Managing Director of the unit and he will report to CEO Ilkka Sihvo. The change improves the service level for Scandinavian customers as well as streamlines the cost structure of the area thanks to common administration and marketing operations. BasWare announced on December 1, 2006 that it incorporates its eInvoicing unit to an own company, called BasWare eInvoices. Petri Karjalainen acts as the Managing Director. BasWare is a significant player in the Finnish eInvoicing market and the aim is to strengthen the position also internationally. ENVIRONMENT AND CORPORATE RESPONSIBILITY The direct environmental impacts of BasWare's operations are fairly minimal. BasWare's solutions promote paperless operations and financial management in the customer organizations which in part can contribute to the decrease of office waste. The corporate headquarters in Espoo, Finland, follow an environmental management system that has been granted a WWF Green Office Certificate. The Green Office system aims at supporting everyday actions that save energy and raw material. Within the framework of the system, energy consumption and material consumption of the office is measured. The Company continued its cooperation with Plan Finland as part of its social responsibility program. Initiated in 2002, BasWare supports the living conditions and education of 14 children in developing countries. Additionally the Company has supported two development projects through the Plan Investor program. OTHER EVENTS OF THE FINANCIAL PERIOD BasWare Corporation's Annual General Meeting (AGM) on February 15, 2006 adopted the Financial Statements of 2005 and discharged the members of the Board of Directors and the CEO from liability. The AGM resolved, according to the Board's proposition, to distribute a dividend of EUR 0.10 per share, a total of EUR 1 069 725.90 for 2005. New strategy On September 12, 2006 BasWare Corp. published its new growth strategy and strategic goals for the years 2007-2010. The objective for the future BasWare growth of net sales is 20-40 percent annually, with the operating profit margin of 10-20 percent. According to its strategy, BasWare aims at growing in all of its markets. In the Nordic area the focus will be more on profitability. More resources and focus will be directed to the strategic markets of United States, Germany, United Kingdom and France. In these areas growth will be high and profitability will be reached in the mid-term. In distribution, focus is on transitioning more from direct to the indirect channel where multiple channel partners will be acquired. Expansion to selected new markets will take place according the following schedule: Southern and Eastern Europe from 2006 onwards, Russia and Asia Pacific from 2007 onwards. Indirect channel is widely used in these areas. BasWare's global presence is further strengthened by several global alliances and by the development of the channel program. The number of channel partners will be multiplied by the year 2010. BasWare Invoice Processing is still the volume product in most of the markets and in the indirect channel. BasWare's growth will be supported by several new products for direct and indirect global distribution. In BasWare Enterprise Purchase to Pay portfolio this includes BasWare Purchase Management, BasWare Travel & Expense Management and BasWare Payment. Other BasWare products will be distributed in selected international markets. BasWare has completed its organic growth with acquisitions. BasWare continues to review possible acquisition targets. With the acquisitions, BasWare can extend the sales channel and the product portfolio. They may also strengthen BasWare's position in the electronic invoicing market. BasWare's vision is that by 2010 the company is recognized as the leading software company for Enterprise Purchase to Pay software solution suite in all of its key markets. BasWare is known for high customer satisfaction and innovativeness as well as being a credible and secure business partner for the customers. BasWare has a focused and unique Enterprise Purchase to Pay software solution suite for the global marketplace. BasWare's other products are distributed and supported in selected markets. Its packaged software products are easy to use, fast to implement and provide a rich end-to-end functionality. BasWare has one million end users in fifty countries by 2010. Its presence covers all major markets worldwide with more than ten subsidiaries and 150 reseller partners. BasWare is an attractive employer with committed, result-driven employees who have competence in international business. BasWare's vision of future growth and profitability is realized with BasWare's strong global presence with a clear focus on major markets and expansion to selected new markets, excellent customer relationship management strengthened by effective marketing actions, clear segmentation and customer benefits as well as with the highly competitive product portfolio, committed international personnel and everyday operational excellence. According to its mission, BasWare provides value for financial processes with leading-edge process automation software. BasWare is a forerunner constantly meeting the needs of its customers. MANAGEMENT AND AUDITOR Ilkka Sihvo acted as the CEO of the Company in 2006. The CEO is in charge of the day-to-day management of the Company in accordance with the instructions and orders given by the Board, as well as by the Companies Act. The Annual General Meeting on February 15, 2006 elected six members to the Board of Directors. Their term will last until the closing of the following AGM on February 26, 2007. Kirsi Eräkangas, Ossi Pohjola, Antti Pöllänen and Hannu Vaajoensuu were re-elected to the Board. Tom Bangemann and Asko Ahonen were elected as new members to the Board. In its first meeting on February 15, 2006, the Board elected Hannu Vaajoensuu as Chairman of the Board and Kirsi Eräkangas as Vice Chairman. In 2006, the auditor of BasWare was Deloitte & Touche, Authorized Public Accountants, with APA Eero Lumme in charge. SHARE AND SHARE CAPITAL In 2006, the Company's share capital was increased by a total of EUR 477 259.80 in two directed offerings and by share subscription based on warrants. At the end of 2006, the Company's share capital was EUR 3 440 437.20 and the number of shares 11 468 124. Number of Share capital, EUR shares Share capital 1.1.2006 9 877 258 2 963 177.40 Directed offering 31.1. +820 001 246 000.30 Directed offering 8.3. +643 515 193 054.50 Share subscriptions based on +7 500 2 250 warrants 21.4. Share subscriptions based on +119 850 35 955 warrants 20.7. Share capital 31.12.2006 11 468 124 3 440 437.20 Warrant programs In its meeting on April 7, 2006, BasWare Corporation's Board of Directors resolved, based on the authorization given by the Annual General Meeting of Shareholders on February 15, 2006, to establish a new warrant program. Based on the warrant program, a maximum of 300 000 warrants can be granted to the key personnel of BasWare Group, each warrant entitling to subscribe one BasWare share. The warrants of the Warrant Program 2006 are divided into three series, each having an own subscription period as follows: April 1, 2008-March, 31 2009, April 1, 2009-March 31, 2010 and April 1, 2010-March 31, 2011. The subscription prices of the shares correspond to the volume-weighted average share price of the Company in January-March of 2006, 2007 and 2008. The terms and conditions of the program have been published as a stock exchange release on April 10, 2006. The subscription period of BasWare Finland II 2002-2006 warrant program ended on June 30, 2006. Atotal of 160 030 shares were subscribed with program of which 127 350 shares in 2006. A total number of 49 970 warrants were not given and were therefore nullified. Board authorizations The Board of Directors authorization for share issue is in effect until February 14, 2007. According to the authorization, the share capital can be increased with a maximum of EUR 641 835.30 and 2 139 451 new shares. Based on the authorization, two directed offerings were carried out in March 2006 and a new warrant program launched in April 2006 and to launch a new warrant program in April 2006. The share capital can still be increased by EUR 170 635.80 and 568 786 new shares based on the authorization. BasWare Corporation does not own BasWare shares and the Board does not have the authorization to purchase BasWare's shares. Shareholders At the end of 2006, BasWare had 19 759 (21 679) shareholders. Nominee registered holdings represented 12.3 percent of the share capital. There were no notices in change of ownership in 2006. The Company applies the Guidelines for Insiders issued by the Board of Directors of the Helsinki Stock Exchange as well as the Recommendation on Corporate Governance with the exceptions mentioned in the Company's Corporate Governance Statement. The statement can be found in the Investors section of the Company's website. Share price and trade During 2006, the highest price of the share on the Helsinki Stock Exchange was EUR 15.25 (EUR 13.00) and the lowest price EUR 11.21 (EUR 7.70). On the last day of trading in 2006, BasWare's closing rate was EUR 13.05 (EUR 12.62). The average price of the share in 2006 was EUR 13.09 (EUR 9.85). Market capitalization with the period's closing price was EUR 149 659 018 (EUR 124 650 996). A total number of 5 534 522 shares were traded during 2006 (3 666 939 in 2005) which is the equivalent of 48 percent (39%) of the number of shares at the end of 2006. FUTURE OUTLOOK According to research institutions, the global enterprise software market will grow by approximately 5-7 percent annually. However, regional growth may outstrip this; for example in Asia Pacific annual growth is estimated at over 12 percent. BasWare operates in the electronic procurement and purchase invoice area, which is expected to grow more rapidly than the average for enterprise software. Western Europe and the United States represent approximately three quarters of overall demand for enterprise software. Since invoice processing and purchase management software remain at the beginning of their lifecycles in these regions, demand is estimated to be high. The purchase management and invoice processing software markets are relatively heterogeneous with regards to the competitive situation. However, strong growth may attract more competitors to the market. The industry is consolidating rapidly and this development is expected to continue in the future. Comparing consolidation trends between industries, it can be seen that software companies are small on average in international terms. BasWare is a medium sized software company on a global scale, in terms of sales and number of personnel. BasWare's direct competitors are mainly smaller companies that operate locally. In invoice processing in particular, local competition is increasing due to document management, scanning and workflow solution developers. Competing solutions also include tailored software solutions that complement Enterprise Resource Planning (ERP) systems and require extensive client-specific project work. The competitiveness of the software is still good due to new value added products and the integrated concept that the products form. The Company's international growth is based on the Company's own sales and marketing efforts as well as on reseller operations. The development of the indirect channel continues especially in Europe and North America, in Russia and in Asia. In Scandinavia, the focus is on profitability, supported by the extending product poftfolio. In Finland, the focus is on profitability and the moderate growth is enabled by the success in the purchase management area. BasWare has complemented its organic growth with acquisitions. The Company continues to review possible acquisition targets during 2007. With the acquisitions, the Company can extend the sales channel and the product portfolio. They may also strengthen the Company's position in the electronic invoicing market. In 2007, BasWare expects the growth of net sales for the financial year to be from 15 to 20 percent compared with the Group's net sales in the previous year. Operating profit (EBIT) is expected to be from 10 to 15 percent of net sales. BOARD'S DIVIDEND PROPOSAL BasWare is a growth company that aims for increasing the value of shareholders' investments and for moderate dividend distribution. When preparing the dividend proposal, the Board takes into notice the Company's financial position, profitability and prospects in the near future. At the end of 2006, the Group's the parent company's distributable funds are EUR 19 540 493.24. The Board of Directors of BasWare Corporation proposes to the Annual General Meeting that from the financial year 2006, a dividend of EUR 0.15 per share (2005: EUR 0.10) be paid, a total of EUR 1 720 218.60 with the number of shares at the end of the financial period. In Espoo, Finland, February 7, 2007 BASWARE CORP. Board of Directors Hannu Vaajoensuu, Chairman of the Board Asko Ahonen Tom Bangemann Kirsi Eräkangas Ossi Pohjola Antti Pöllänen Ilkka Sihvo, CEO Annual General Meeting of Shareholders will be held on Monday, February 26, 2007, starting at 1.30 PM at Kansallissali (Aleksanterinkatu 44) in Helsinki, Finland. Notice of the Annual General Meeting will be published immeadiately after this release. For further information, please contact: Ilkka Sihvo, CEO, BasWare Corp. Tel. +358 9 8791 7251 or +358 40 501 8251, E-mail ilkka.sihvo@basware.com Financial data in this stock exchange release is based on the audited BasWare Financial Statements. The Auditors' Report is dated on February 7, 2007. Distribution: Helsinki Stock Exchange Principal media www.basware.com GROUP INCOME STATEMENT EUR thousand 1.10.-31.1 1.1.-3 1.10.-31 2.05 Change 1.1.- 1.12.0 Change .12.06 Restated , 31.12.0 5 , % % 6 Restat ed NET SALES 16 508 10 823 52.5 59 954 41 666 43.9 Other operating 50 13 272.5 177 60 193.1 income Material and -658 -669 -1.7 -2 593 -3 172 -18.3 services Employee benefits -9 042 -6 604 36.9 -32 953 -22 46.0 expenses 569 Depreciation and -572 -277 106.7 -2 033 -1 077 88.9 amortization Other operating -4 479 -3 190 40.4 -14 474 -11 28.1 expenses 296 Operating profit 1 807 97 1 8 078 3 611 123.7 758.8 Finance income 66 44 51.4 308 146 110.8 Finance expenses -43 -40 6.7 -99 -111 -10.4 Profit before tax 1 831 101 1 8 287 3 647 127.2 710.5 Income tax -1 304 -462 182.4 -3 301 -1 417 132.9 expense PROFIT FOR THE 526 -361 245.9 4 986 2 229 123.7 PERIOD EPS (undiluted), 0.05 -0.04 0.45 0.24 89.6 EUR EPS (diluted), 0.05 -0.04 0.44 0.23 91.3 EUR GROUP BALANCE SHEET EUR thousand 31.12.2006 31.12.2005 Change, % Restated ASSETS NON-CURRENT ASSETS Intangible assets 9 980 4 040 147.0 Goodwill 18 477 4 481 312.3 Tangible assets 784 729 7.5 Investments in associates 3 Available-for-sale investments 2 612 Trade and other receivables 24 Deferred tax assets 3 501 3 296 6.2 Non-current assets 35 354 12 573 181.2 CURRENT ASSETS Inventories 20 9 125.1 Trade and other receivables 13 018 8 616 51.1 Income tax receivables 192 43 340.7 Financial assets at fair value 5 963 through profit and loss Cash and cash equivalents 3 012 9 987 -69.8 Current assets 22 204 18 655 19.0 TOTAL ASSETS 57 558 31 228 84.3 EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Share capital 3 440 2 963 16.1 Share premium account 33 127 15 010 120.7 Other reserves 540 Translation differences 235 -203 215.7 Retained earnings 7 176 3 527 103.5 Minority interest 88 Shareholders' equity 44 606 21 296 109.5 NON-CURRENT LIABILITIES Deferred tax liability 1 462 283 416.2 Interest-bearing liabilities 329 757 -56.5 Non-current liabilities 1 791 1 040 72.2 CURRENT LIABILITIES Interest-bearing liabilities 428 474 -9.6 Trade payables and other 9 957 8 066 23.4 liabilities Tax liability from income tax 775 352 120.1 Current liabilities 11 160 8 892 25.5 TOTAL EQUITY AND LIABILITIES 57 558 31 228 84.3 GROUP STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 1.1.-31.12.2006 EUR thousand Share-ho Share Other Transla Retain Minori Share-holde lders' premium reserve tion ed ty rs' equity account s differe earnin intere equity nces gs st SHAREHOLDERS' 2 582 6 000 -70 3 647 12 159 EQUITY 1.1.2005 Restatement -1 264 -1 264 RESTATED 2 582 6 000 -70 2 383 10 895 SHAREHOLDERS' EQUITY 1.1.2005 Restated change in -133 -129 -262 translation difference Share-related compensation Granted warrants 81 81 Restated net -133 -49 -181 profit/loss recognized directly in shareholders' equity Restated profit for 2 229 2 229 the period RESTATED TOTAL -133 -49 -181 PROFITS AND LOSSES Total profits and losses (breakdown) - previously -141 3 053 2 912 reported - restatement 8 -872 -864 Restated total -133 2 181 2 048 profits and losses Dividend -1 037 -1 037 distribution Rights issue 272 272 Warrants used 109 2 073 2 182 Share premium 7 058 7 058 Transaction costs -121 -121 for equity RESTATED 2 963 15 010 -203 3 527 21 296 SHAREHOLDERS' EQUITY 31.12.2005 EUR thousand Share-ho Share Other Transla Retain Share-holde lders' premium reserve tion ed rs' equity account s differe earnin equity nces gs SHAREHOLDERS' 2 963 15 010 -203 3 527 21 296 EQUITY 1.1.2006 Change in 438 -198 240 translation difference Granted warrants 32 32 Other changes 540 540 Net profit/loss 540 438 -274 704 recognized directly in shareholders' equity Profit for the 4 993 -7 4 986 period Total profits and 540 438 4 719 -7 5 690 losses Dividend -1 070 -1 070 distribution Rights issue 439 439 Warrants used 38 912 950 Share premium 17 211 17 211 Transaction costs -6 -6 for equity Business transfer 95 95 SHAREHOLDERS' 3 440 33 127 540 235 7 176 88 44 606 EQUITY 31.12.2006 Dividend per share was EUR 0.10 for 2005 and EUR 0.12 for 2004. GROUP CASH FLOW STATEMENT JANUARY 1 - DECEMBER 31, 2006 EUR thousand 1.1. - Restated 31.12.2006 1.1.-31.12. 2005 Cash flows from operating activities Profit for the period 4 986 2 229 Adjustments for profit 5 235 2 528 Working capital changes -902 -1 648 Interest paid -41 -72 Interest received 70 140 Other financial items in operating 57 -41 activities Income taxes paid -3 750 -3 133 Net cash from operating activities 5 657 4 Cash flows from investing activities Purchase of tangible and intangible -3 021 -1 849 assets Proceeds from sale of tangible and 64 11 intangible assets Acquired subsidiaries -3 660 -1 445 Disposal of associated companies 23 Proceeds from other investments 457 Granted loans -1 Repayments of loan receivables 24 Net cash used in investing activities -6 114 -3 283 Cash flows from financing activities Proceeds from issuance of share 760 9 056 capital Minority's capital investment 95 Repayments of long-term borrowings -400 -511 Repayments of financial lease -75 -79 liabilities Dividends paid -1 070 -1 037 Net cash used in financing activities -689 7 428 Net change in cash and cash -1 146 4 150 equivalents according to cash flow statement Cash and cash equivalents at beginning 9 987 5 789 of period Effects of exchange rate changes on -19 49 cash and cash equivalents Effects of fair value implementation 152 Cash and cash equivalents at end of 8 975 9 987 period Net change in cash and cash -1 146 4150 equivalents In the cash flow statement, cash and cash equivalents constitute from the following instalments: Cash and bank receivables and Financial assets at fair value through profit or loss. GROUP QUARTERLY INCOME STATEMENT Commitments on behalf of subsidiaries Guarantees 986 746 Guarantees, total 986 746 OWN CONTIGENT LIABILITIES Lease liabilities Current lease liabilities 544 541 Lease liabilities maturing in 1-5 years 567 513 Total 1 111 1 054 Rental liabilities Current rental liabilities 1 334 1 341 Rental liabilities maturing in 1-5 years 3 193 1 618 Total 4 527 2 960 Own contingent liabilities, total 5 638 4 014 SEGMENT REPORTING Geographical segments (primary segment) Net sales 10-12/ 10-12/ Change, 1-12/ 1-12/ Change, (EUR thousand) 2006 05 2006 05 Restat % Restat % ed ed Finland 10 918 6 349 72.0 41 028 26 111 57.1 Scandinavia 4 354 3 964 9.8 14 698 13 024 12.9 Europe 2 714 1 441 88.3 8 985 6 497 38.3 Other areas 1 119 553 102.5 3 512 2 077 69.1 Sales between -2 598 -1 484 -8 269 -6 043 segments Group total 16 508 10 823 52.5 59 954 41 666 43.9 Operating profit 10-12/ 10-12/ Change, 1-12/ 1-12/ Change, (EUR thousand) 2006 05 2006 05 Restat % Restat % ed ed Finland 3 243 1 140 184.5 12 314 7 130 72.7 Scandinavia 20 160 -87.8 -45 -116 60.7 Europe -910 -972 6.4 -2 831 -2 379 -19.0 Other areas -531 -253 -109.5 -1 297 -976 -32.9 Operating profit -15 23 -62 -47 between segments Group total 1 807 97 1758.8 8 078 3 611 123.7 Personnel 10-12/ 10-12/ Change, 1-12/ 1-12/ Change, (employed, in 2006 05 2006 05 average) Restat % Restat % ed ed Finland 345 237 45.6 346 223 55.2 Scandinavia 93 88 5.6 89 75 18.7 Europe 66 55 20.0 62 50 24.0 Other areas 21 15 40.0 17 14 21.4 Group total 524 395 32.7 514 362 42.0 Business segments (secondary segment) Net sales 10-12/ 10-12/ Change 1-12/ 1-12/05 Change, (EUR thousand) 2006 05 , 2006 % Restat % Restate ed d Product sales 5 241 2 786 88.1 19 374 14 044 38.0 Maintenance and 5 283 2 630 99.2 18 776 9 714 93.3 support Consulting and 5 380 4 805 12.0 20 106 16 725 20.2 services Other operations 648 601 7.8 1 698 1 183 43.5 Group total 16 508 10 823 52.5 59 954 41 666 43.9 Net sales by the 10-12/ 10-12/ Change 1-12/ 1-12/ Change, location of customer 2006 05 , 2006 05 (EUR thousand) Restat % Restat % ed ed Finland 8 147 4 896 66.4 32 557 19 830 64.2 Scandinavia 4 415 3 875 13.9 14 129 13 042 8.3 Europe 2 705 1 499 80.5 9 421 6 434 46.4 Other areas 1 241 553 124.5 3 848 2 360 63.1 Group total 16 508 10 823 52.5 59 954 41 666 43.9 GROUP KEY INDICATORS 2002-2006 Group Key Financial Performance Indicators EUR thousand 2006 Restated 2004 2003 2002 2005 IFRS IFRS IFRS FAS FAS Net sales 59 954 41 666 33 891 25 597 20 263 Growth of net 43.9% 26.3% 63.4% sales, % Operating profit 8 078 3 611 6 256 1 133 1 370 Growth of 123.7% -17.3% 252.4% operating profit, % % of net 13.5% 8.7% 18.5% 4.4% 6.8% sales Profit before 8 287 3 647 6 119 1 031 1 505 tax % of net 13.8% 8.8% 18.1% 4.0% 7.4% sales Profit for the 4 986 2 229 4 018 564 886 period % of net 8.3% 5.4% 11.9% 2.2% 4.4% sales Return on 15.2% 13.9% 38.3% 5.6% 9.2% equity, % Return on 24.7% 21.4% 50.8% 10.2% 15.2% investment, % Interest bearing 758 1 230 1 645 2 075 282 liabilities Cash and liquid 8 975 9 987 5 789 3 633 2 538 assets Gearing, % -18.4% -41.1% -34.1% -15.4% -22.7% Equity ratio, % 77.5% 68.2% 58.8% 63.0% 74.3% Total assets 57 558 31 228 20 680 16 003 13 392 Gross 25 315 6 925 1 688 489 2 163 investments *) % of net 42.2% 16.6% 5.0% 1.5% 10.7% sales Capital 597 749 626 489 2 163 expenditure % of net 1.0% 1.8% 1.8% 1.5% 10.7% sales Research and 10 925 6 204 4 604 4 113 3 535 development costs % of net 18.2% 14.9% 13.6% 16.1% 17.4% sales R&D personnel at 138 86 65 59 59 end of period Personnel 514 362 280 256 205 average for period Personnel at end 528 395 302 254 244 of period Growth of 33.7% 30.8% 18.9% 4.1% 45.2% personnel, % *) Includes acquisitions and capitalized R&D costs. Group Share Indicators 2006 2005 2004 2003 2002 Restated IFRS IFRS IFRS FAS FAS Earnings per share, EUR 0.45 0,24 0.47 0.07 0.10 Earnings per share, EUR 0.44 0,23 0.47 0.07 0.10 (diluted) Equity per share, EUR 3.88 2,16 1.41 1.18 1.16 Dividend per share, EUR 0.15* 0.10 0.12 0.12 0.05 Dividend per profit, % 33.6% 42.4% 25.6% 182.1% 48.3% Effective dividends, % 1.1% 0.8% 1.5% 2.0% 1.1% P/E ratio 29.24 53.54 16.58 92.55 43.44 Share price performance. share issue adjusted lowest share price, EUR 11.21 7.70 6.10 3.63 3.50 highest share price, 15.25 13.00 10.10 6.42 6.10 EUR average share price, 13.09 9.85 7.83 4.83 5.14 EUR closing share price, 13.05 12.62 7.78 6.10 4.50 EUR Share issue adjusted 11 468 9 877 8 607 300 8 550 600 8 550 600 average share number 124 258 31.12. Market value of shares 149 659 124 650 66 964 52 158 38 477 31.12., EUR 018 996 794 660 700 Number of traded shares 5 534 522 3 666 939 1 981 098 658 514 701 223 % of average share number 49.5% 38.8% 23.1% 7.7% 8.2% Average share number: - undiluted 11 172 9 458 460 8 560 967 8 550 600 8 550 600 612 - diluted 11 221 9 877 816 8 634 413 8 552 575 8 562 526 052 * Board's proposal to the Annual General Meeting of Shareholders SHAREHOLDERS Distribution of holdings by sector December 31, 2006 Number of Shares and votes holdings % holdings Private companies 746 6.46 740 902 Financial and insurance 45 14.55 1 668 650 institutions Public-sector 6 2.00 229 750 organizations Non-profit organizations 29 0.89 101 436 Households 18 882 63.48 7 279 711 Foreigners 51 0.31 35 693 19 750 87.69 10 056 142 Nominee-registered 9 12.31 1 411 982 Total 19 759 100 11 468 124 Distribution by number of shares December 31, 2006 Number of Shares and votes Number of shares shareholders % Number 1 - 100 16 289 3.30 378 270 101 - 1 000 3 108 8.44 968 292 1 001 - 10 000 312 6.86 786 377 10 001 - 100 000 28 9.94 1 139 700 100 001 + 22 71.46 8 195 485 Total 19 759 100 11 468 124 MAJOR SHAREHOLDERS December 31, 2006 Shares and votes Number % 1. Sihvo, Ilkka 1 065 800 9.3 2. Vaajoensuu, Hannu (incl. a 1 045 800 9.1 controlled company and children under guardianship) 3. Eräkangas, Kirsi (incl. children 1 031 800 9.0 under guardianship) 4. Pöllänen, Antti (incl. children 830 900 7.2 under guardianship) 5. Perttunen, Sakari 830 400 7.2 6. Nordea Small cap Fund 452 997 4.0 7. Ahonen, Asko 333 822 2.9 8. Perttunen, Meimi 215 400 1.9 9. Luoto, Matti 199 450 1.7 10 Royal Skandia Life Assurance 180 000 1.6 . 11 Veritas Pension Insurance Company 176 000 1.6 . 12 Henki-Sampo Insurance Company 155 000 1.4 . 13 Fondita Nordic Small Cap Fund 155 000 1.4 . 14 Evli-Select Fund 130 300 1.1 . 15 Sarvala, Vesa 122 741 1.0 . 16 OP Finland Small Firm Fund 106 600 0.9 . 17 Kaleva Mutual Insurance Company 93 800 0.8 . 18 Nordea Fennia Plus Fund 86 000 0.7 . 19 Fides Fund Management Company 76 100 0.7 . 20 Aktia Secura Fund 60 000 0.5 . 7 347 910 64.1 20 largest shareholders total Nominee-registered shares total 1 411 982 12.3 Others 2 708 832 23.6 Total 11 468 124 100.0