Basware Corporation, stock exchange release, October 10, 2012 at 09:00 BASWARE INTERIM REPORT JANUARY 1 - SEPTEMBER 30, 2012 (IFRS) SUMMARY January-September 2012: Growth in Q3 net sales through service business * Net sales EUR 83 272 thousand (EUR 77 523 thousand) - growth 7.4 percent * Operating profit EUR 5 381 thousand (EUR 8 826 thousand) - decrease of 39.0 percent * Operating profit 6.5 percent of net sales (11.4%) * Growth of Automation Services (SaaS and e-Invoicing) 46.6 percent * Recurring revenue (including Maintenance and Automation Services) 56.1 percent (49.7%) of net sales * Cash flow from operating activities EUR 7 334 thousand (EUR 15 941 thousand) * Earnings per share (diluted) EUR 0.31 (EUR 0.53) - decrease of 42.7 percent July-September Q3/2012: * Net sales EUR 27 119 thousand (EUR 24 185 thousand) - growth 12.1 percent * Operating profit EUR 2 261 thousand (EUR 3 038 thousand) - decrease 25.6 percent * Operating profit 8.3 percent of net sales (12.6%) * Growth of Automation Services (SaaS and e-invoicing) 47.6 percent * The estimated revenue to be recognized for current Automation Services agreements that are in production as well as for new, signed agreements in the next twelve months is EUR 25.2 million * Recurring revenue (including Maintenance and Automation Services) 58.1 percent (53.5%) of net sales * Earnings per share (diluted) EUR 0.12 (EUR 0.18) - decrease of 35.0 percent Basware expects its net sales for 2012 to grow from the previous year, and operating profit (EBIT) is expected to be EUR 8-11 million. The company estimates that its net sales for the last quarter of the year will grow compared to the previous year. Previously, the company expected its net sales for 2012 to grow from the previous year, and operating profit (EBIT) to be EUR 8-13 million. Previously, the company estimated also that its net sales for the latter half of the year will see a stronger growth than for the first half of the year. The interim report is unaudited. GROUP KEY FIGURES 7-9/ 7-9/ Change, 1-9/ 1-9/ Change, 1-12/ EUR thousand 2012 2011 % 2012 2011 % 2011 ------------------------------------------------------------------------------- Net sales 27 119 24 185 12.1% 83 272 77 523 7.4% 107 750 EBITDA 4 070 4 308 -5.5% 10 051 12 613 -20.3% 17 284 Operating profit before IFRS3 amortization 2 793 3 542 -21.1% 7 095 10 333 -31.3% 14 290 Operating profit 2 261 3 038 -25.6% 5 381 8 826 -39.0% 12 280 % of net sales 8.3% 12.6% 6.5% 11.4% 11.4% Profit before tax 2 300 3 024 -24.0% 5 514 8 858 -37.8% 12 332 Profit for the period 1 493 2 301 -35.1% 3 918 6 731 -41.8% 9 671 Return on equity, % 6.1% 9.7% 5.3% 11.0% 11.6% Return on investment, % 9.6% 13.0% 7.6% 14.5% 14.9% Liquid assets *) 27 739 44 988 -38.3% 27 739 44 988 -38.3% 42 977 Gearing, % -27.5% -45.9% -27.5% -45.9% -42.3% Equity ratio, % 80.2% 79.7% 80.2% 79.7% 81.9% Earnings per share, EUR 0.12 0.18 -35.0% 0.31 0.53 -42.8% 0.76 Earnings per share (diluted), EUR 0.12 0.18 -35.0% 0.31 0.53 -42.7% 0.76 Parent company's shareholders' equity per share, EUR 7.71 7.52 2.6% 7.71 7.52 2.6% 7.76 *) Includes cash, cash equivalents and financial assets at fair value through profit or loss Reporting Basware Corporation reports one operating segment: Purchase to Pay, P2P. Basware reports income for products and services as follows: License sales, Professional Services, Maintenance, and Automation Services. License sales consist of Purchase to Pay product family together with payment, financial planning and reporting solutions sold only in Finland. Automation Services include e-Invoicing, scanning services, printing services, catalogue management, purchase message exchange, activation services and Software as a Service (SaaS) services. Basware reports the estimated revenue to be recognized for current Automation Services agreements that are in production as well as for new, signed agreements in the next twelve months. Automation Services agreements typically expand several years or are valid until further notice. As geographic information Basware reports geographical areas Finland, Scandinavia, rest of Europe and Other. In the geographical information, net sales are split by the customer's location. Net sales and operating profit are also reported by the location of the assets. In annual financial statements, the geographical information of non-current assets is reported by the location of the assets. CEO Esa Tihilä comments in conjunction with the Interim Report: "The company's transition process from a software company to a service company has proceeded as planned during the third quarter as well. The targeted double-digit growth in net sales was realized in the third quarter: our net sales increased by 12.1% to EUR 27.1 million, with our operating profit amounting to EUR 2.3 million. Since the beginning of the year, we have achieved net sales of EUR 83.3 million, up 7.4%, with our operating profit amounting to EUR 5.4 million. Strong growth in Automation Services continued, while the decrease in license sales slowed down considerably during the third quarter. The company's operational performance in the third quarter met our expectations as the transition process from license sales-based operations to the service business is still underway and the planned investments required for the company's growth and transition can be seen in the company's financial performance. Automation Services (SaaS and e-invoicing services) growth amounted to 47.6%, accounting for 21.2% of net sales. Recurring revenue (Maintenance and Automation Services) again accounted for an increasing share of net sales compared to the previous year, totaling 58.1% of net sales. The demand for SaaS services is increasing at the expense of license demand. We have secured new multi-year SaaS and e-invoicing service agreements with a total value of EUR 23.1 million during the year. The growth in services is increasingly generated in our international markets. The transaction volume has continued to increase in line with our objectives, and we have connected an even higher number of suppliers and buyers in our open network with new products and delivery methods. The transaction volume processed by Automation Services amounted to 8.5 million during the quarter, up 64.3%. Alusta, the unified cloud-based platform for Purchase-to-Pay that was launched at the beginning of the year, has been received well by our customers. By the end of the third quarter, we have sold the Alusta solution to several new and existing customers. At the beginning of September, we published our updated strategy until 2015, emphasizing our key strategic aim of accelerated global growth. According to the updated strategy, our key objectives include accelerated growth in the transaction volume, strengthening our market position in selected key markets, more accurate segmenting of our services and products to companies of all sizes, with particular attention on small and medium-sized enterprises, developing customer loyalty, and improving the company's profitability. We have strongly invested in committing our personnel to implement the updated strategy. In addition, the customer service models for our existing customers have been developed, the service portfolio has been extended, and we have prepared a plan for transition to Alusta and presented it to our customers. The development of profitability is particularly based on the adoption of a replicable sales and delivery model and developing a global efficient service production network. The company intends to continue to support organic growth in our key markets through acquisitions as well. The most recent example is our agreement signed on October 5, 2012, to acquire the network and e-invoicing business of Certipost, a bpost company and the leading e-Invoice operator in the Benelux. With the acquisition, Basware will become the market leader in e-Invoicing in the Nordic countries, Germany, and the Benelux market. Our performance during the third quarter gives a strong foundation for reaching the targets of the entire year. We expect the need for recurring services to continue in our customer base regardless of economic cycles and the global challenging economic situation." Market outlook and operating environment According to the most recent market estimates the software market is expected to grow 6.0 percent globally (previous estimate 6.2%) and 7.4 percent in the U.S. (previous estimate 8.0%). The entire IT services market is expected to grow by 4.7 percent globally (forecast unchanged) and by 7.3 percent in the U.S. (forecast unchanged) in 2012. According to research companies, the software market is expected to grow globally in 2013 at a rate of 7.0 percent, IT services by 5.6% and the IT market as a whole by 6.7 percent. The number of acquisitions and partnerships has increased in the market. Companies active in the market are trying to strengthen their supplier networks and expand geographically. Consolidation is expected to continue in the business environment, with the role of services growing in companies' portfolios. Basware continues active analyzing of acquisition targets especially in European e- Invoicing market according to Basware's strategy. The launch of Basware's next generation Alusta software suite during the first quarter of 2012 has improved the competitiveness of Basware's solutions and services further. Through the acquisition of German e-Invoicing operator in January 2012 we gained innovative technology, which will improve the competitiveness of the company. Also Automation Services will have a positive impact on the competitiveness, improving the predictability and transparency of the company's net sales and profitability in the long term. By the end of 2015, Basware aims to become the largest business commerce network for buyers and suppliers. E-Invoicing and the supporting services are targeted to connect suppliers and buyers also outside of Basware's existing software customer base, leading to a higher potential. The penetration rate of e- Invoicing is low, between 5-30 percent depending on the country, which creates a solid foundation for the future growth of Basware Automation Services. Offshoring operations hold a significant role in the company's strategy. R&D and Automation Services operations at Basware's Indian office have already succeeded in gaining a significant role. The company has developed its offshoring operations in order to improve profitability also with regard to new service business operations and internal support functions. Espoo, Finland, October 10, 2012 BASWARE CORPORATION Board of Directors For more information, please contact: CEO Esa Tihilä, Basware Corporation Tel. +358 40 480 7098 Interim Report briefing & conference call Basware arranges a briefing on the Interim Report for the press and analysts on October 10, 2012 at 11:00 a.m. in Hotel Kämp (Kluuvikatu 2, 2nd floor), Helsinki, Finland. During this briefing CEO Esa Tihilä and CFO Mika Harjuaho will comment on the events and financial performance of the quarter. More information and registration: Sirje Ahvenlampi, Manager, Investor Relations, tel. +358 (0)50 557 3822, sirje.ahvenlampi (at) basware.com. A conference call for analysts who are not able to attend the briefing will take place on October 10, 2012 at 3 p.m. EET. More information about the preregistration and details how to join is are available at the company's Investor pages: http://www.basware.com/about-us/investors. Distribution: NASDAQ OMX Helsinki Ltd Key media www.basware.com [HUG#1647814]