Heeros Plc Press release 21 April 2022 at 15:00 pm EEST

Heeros Plc Business Review 1 January–31 March 2022 (unaudited): Stronger revenue growth supported by acquisition of Taimer

The merger of the software company Taimer into Heeros group as of the beginning of 2022 was a considerable investment into accelerating the revenue growth. The integration had an expected negative impact on Heeros’ profitability and cash flow during the first quarter of the year.

This release is an unofficial translation of the summary of Heeros Plc’s Business Review January–March 2022. The complete Business Review in Finnish is available on the company’s website at www.heeros.com/sijoittajille/tiedotteet.

January–March 2022 summary:

• Revenue increased by 25% to EUR 2,734 thousand compared to the same period last year (1–3/2021: EUR 2,187 thousand).
• Recurring revenue increased by 24% to EUR 2,540 (2,056) thousand. Contract revenue increased by 48% to EUR 1,932 (1,304) thousand.
• In March 2022, contract revenue (MRR, Monthly Recurring Revenue) amounted to EUR 647 (447) thousand, growing by 45% from March 2021.
• EBITDA decreased by 24% to EUR 254 (335) thousand. Adjusted EBITDA decreased by 16% to EUR 281 (335) thousand due to the integration of Taimer.
• Operational cash flow (adjusted) decreased by 45% to EUR 251 (460) thousand due to the integration of Taimer.
• Combined adjusted EBITDA margin and revenue growth percentage (Rule of 40) was 35% (14%).
• New customer order intake, in terms of Annual Recurring Revenue (ARR), was approximately EUR 235 thousand (289).
• The merger of the software company Taimer Ltd with the Heeros was completed on 1 January 2022. The reported figures for the comparison period do not include Taimer.
• Heeros’ financial outlook for 2022 remains unchanged: Heeros is expecting to increase the combined EBITDA margin (EBITDA, % of revenue) and revenue growth percentage (Rule of 40) to over 40% for the 2022 financial period.
  
  

KEY FIGURES

¹ Recurring revenue is divided into two parts: contract revenue (usage fees and service agreements) and transaction revenue.
² Adjusted figures for Q1/2022 include an adjustment of EUR 27 thousand for non-recurring restructuring costs in the Netherlands. Adjusted figures for 2021 include an adjustment of EUR 72 thousand for non-recurring expenses related to the assessment of inorganic growth.
³ Adjusted operational cash flow of the financial period 2021 includes an adjustment for tax and earnings-related pension payment arrangements made during 2020 as well as non-recurring restructuring costs.

MIKKO PILKAMA, CEO:

“In the first quarter of 2022, the COVID-19 related restrictions had finally been lifted and the pandemic had eased its tightest grip on the businesses of our customers. Therefore, the pandemic no longer had a significant effect on Heeros’ business. Following a challenging market environment for our customers throughout the 2020s, cautious signs of a return to a new normal were warmly welcomed.

However, just as we were about to recover from one crisis, we were faced with a new and extremely unfortunate humanitarian one. We strongly condemn Russia’s military action against Ukraine, and our thoughts are with all those who are suffering from the war. Heeros does not operate in Russia, Belarus or Ukraine and does not have any customers or personnel in these countries.

Strong revenue growth

Despite the dark clouds shadowing the economy, the first quarter of the year was an excellent period of growth and expansion for Heeros. As of beginning of January, the software company Taimer, which specializes in ERP systems, was merged with Heeros. Taimer’s revenue has grown strongly in recent years, and the growth is expected to continue as part of Heeros. Taimer’s business has excellent growth potential as its offering is expanded to Heeros’ customers.

During the first quarter, Heeros’ revenue grew by 25 % compared to the same period last year.
The merger of Taimer contributed with a significant growth injection, however Heeros’ organic growth rate also continued to improve as a result of active and well managed engagement with our customers. Cross selling of services to existing customers developed particularly well and customers expanded their existing contracts with new solutions from Heeros. The Net Revenue Retention (NRR) improved to 107% (103%) at the end of March.

The contract revenue growth rate improved during the first quarter by 48% from the comparison period. In March, the monthly recurring revenue (MRR) reached EUR 647 (447) thousand, growing by 45% from March 2021.

The COVID-19 pandemic no longer had a significant impact on Heeros’ transaction volumes as the volume of purchase and sales invoices and payslips increased by 13% compared to the first quarter of last year. However, transaction revenue still fell short of the level of the first quarter in 2021. This is due to renewal of the customer contracts whereby part of the transaction revenue is converted into fixed contract revenue.

New customer order intake (in terms of ARR) declined slightly and was approximately EUR 235 thousand as some of the sales cases were slow to close. At the end of March, Heeros had more than 18,000 end customers, including customers through Taimer. This was approximately 2,000 more than at the same time last year. In the first quarter, we gained new customers especially among medium-sized companies. The ramp down of the Tikon software during the review period also had a positive effect on the growth of our customer base. We still continue to gain new, smaller accounting customers that are transitioning away from Tikon. While we expect this inflow of customers to slow down significantly during the year, digitalisation of financial management tasks of these customers offers significant opportunities for revenue growth.

In the first quarter, profitability was below the comparison period, due to investments in the integration of Taimer’s business and products into Heeros. Excluding the impact of Taimer, EBITDA would have improved compared to last year and the EBITDA margin would have been at the same level as last year. During the first quarter EBITDA was also affected by seasonality that is typical in our business: The first quarter is typically the weakest quarter whereas the second half of the year is clearly stronger than the first half.

The combined EBITDA margin (EBITDA, % of revenue) and revenue growth percentage (Rule of 40) was 35% (14%) in the first quarter of the year. We proceed in accordance with our growth plan for 2022 and keep the financial outlook for 2022 unchanged.

Expanding product offering supports continued growth

Since the beginning of the year, we have developed a joint-solution that combines Heeros’ financial management solutions with Taimer’s ERP. The new offer will be launched during the spring. This new solution offers for instance CRM, project management, expense tracking and project invoicing tools. Data moves seamlessly across which enables for instance automated updating of sales and purchase invoices and payment status between systems.

In the first quarter, we also developed the HR functionality offered as a complement to the eSalaries solution. The improved functionality enables easier transmission and maintenance of HR data. With our new HR SaaS solution, we want to make modern HR systems more accessible to small and medium-sized enterprises. The first customer contracts for the service were signed in March, and piloting is due to start during the second quarter of 2022.

We are also developing a new automated sales invoice solution that offers a smooth and modern user experience and even more advanced automation in invoicing. Piloting of the new solution is due to start over the summer.

Taimer integration is proceeding according to plan

Integration of Taimer’s and Heeros’ organisations and product portfolios is proceeding according to plan. Our aim is to complete the integration during the first half of this year. In the first phase we have focused on building coherent teams, integration of product suites as well as on merging our tools and processes to enable operational efficiency. Next we will focus on crystallizing our growth strategy, on sales of our extended product range to existing customers and on finalizing of common processes and tools.

Although the short-term market development is affected by uncertainty relating to the war in particular, we believe that demand for our solutions will continue to grow in the long term as a result of the strong digitalization trend in ERP and financial management. The combined product offering and customer base of Heeros and Taimer provide a solid foundation for future growth.

In 2022, we will also invest in building a basis for accelerated international growth. We have already strengthened our international sales capabilities and partnerships by recruiting key talent to lead sales and partnerships. More information on Heeros’ updated strategy will be provided during the first half of the year.”

IMPACT OF RUSSIAN MILITARY ACTIONS ON THE BUSINESS

Russia’s military actions against Ukraine have not affected the continuity of Heeros’ business, the use of products nor our operations such as sales, customer service or product development. Heeros has no business, nor personnel in Russia, Belarus or Ukraine. Heeros does not sell or buy products or services in these countries. Furthermore, Heeros has no direct customers, partners or product development in Russia, Belarus or Ukraine.

Heeros believes that Russia’s military actions will not have a significant impact on its customers. However, if the situation is prolonged, it may have an effect on transaction volumes of individual customers, i.e. the volume of purchase and sales invoices, which will therefore affect the revenue of Heeros. Moreover, in case the general economic uncertainty increases, it may take longer time for Heeros to sell its solutions especially to medium-sized enterprises, which may slow down revenue growth.

In the first quarter, the crisis did not have a significant impact on Heeros’ transaction volumes or revenue.

FINANCIAL OUTLOOK FOR 2022

Heeros’ financial outlook for 2022 published in the financial statement release 2021 on 3 February 2022 remains unchanged:

Heeros is expecting to increase the combined EBITDA margin (EBITDA, % of revenue) and revenue growth percentage (Rule of 40) to over 40% for the 2022 financial period.

EVENTS AFTER THE PERIOD

On 7 April 2022 Heeros announced through a stock exchange release that a total of 2,500 new shares of Heeros Plc had been issued as part of the option rights 1/2020 A.

FINANCIAL INFORMATION

Heeros Plc will publish its Half-year Financial Report for January–June 2022 on Thursday 14 July 2022 and Business Review for January–September 2022 on Thursday 13 October 2022.

THE UPDATED STRATEGY

Heeros will announce its updated strategy during the first half of 2022.

Additional information:
Mikko Pilkama, CEO, tel. +358 (0)40 828 3717, mikko.pilkama@heeros.com

Certified Advisor: Aktia Alexander Corporate Finance Oy, tel. +358 (0)50 520 4098

As a forerunner in cloud-based solutions for financial management, Heeros’ mission is to make tomorrow’s financial management easy. Established in 2000, Heeros’ shares are listed on Nasdaq First North Growth Market Finland (trading ID: HEEROS). www.heeros.com

Liite

• Heeros Oyj liiketoimintakatsaus 1.1.–31.3.2022