Heeros Oyj | Company Release | April 18, 2023 at 09:30:00 EEST

Contract revenue grew by 8 % YoY and demand for ERP Cloud solutions increases.

This release is an unofficial translation of the summary of Heeros Plc’s Business Review January–March 2023. The complete Business Review in Finnish is available on the company’s website at www.heeros.com/sijoittajille/tiedotteet.

January-March 2023 summary

  • The combined EBITDA margin and revenue growth percentage (Rule of 40) was 18 % (1–3/2022: 34 %). 2022 includes inorganic growth from Taimer Ltd acquisition.
  • Revenue increased by 3 % to EUR 2.81 (2.73) million.
  • Recurring revenue increased by 4 % to EUR 2.65 (2.54) million.
  • Contract revenue (MRR, Monthly Recurring Revenue) amounted to EUR 2.09 (1.93) million, growing by 8 %.
  • EBITDA was EUR 0.43 (0.25) million.
  • New customer order intake in terms of Annual Recurring Revenue (ARR) was approximately EUR 210 (235) thousand.

KEY FIGURES

EUR thousandQ1/ 2023 Q1/ 2022 Change, % 2022 
Rule of 40, %118 % 34 %  39 % 
Revenue2,807 2,734 3 % 11,083 
Recurring revenue22,645 2,540 4 % 10,332 
EBITDA428 254 69 % 1,997 
EBITDA, % of revenue15 % 9 %  18 % 

1 2022 includes inorganic growth from Taimer Ltd acquisition.

2 Recurring revenue is divided into two parts: contract revenue (fixed usage fees and service agreements) and transaction revenue.

MIKKO PILKAMA, CEO:

”Uncertainty in Finnish macroeconomics has continued in the beginning of 2023. Increased interest rates and decreased availability of funding are now challenging SME companies looking for growth. The business model of Heeros is scalable and profitable, and it has proven to be adjustable to different business environments therefore, we have managed to increase our profitability significantly from last year.

Companies in the software industry are all facing a shortage of skilled labor. It is therefore fantastic that we got a collective labor agreement for the IT industry in Finland and companies can now focus on developing their business. At Heeros, everyone’s contribution matters when it comes to reaching our strategic targets. I’m especially pleased that now all Heeros employees have become shareholders through the Heeros personnel fund based on last year’s company performance.

Focus on significantly improving profitability

Our EBITDA grew (+69 %) to EUR 0.43 million from the comparison period. We can now clearly see the benefits of Taimer Ltd. acquisition improving the profitability of Heeros group. Our prime focus this year will continue to be profitability refinement. During the first quarter EBITDA was 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 normally stronger than the first half.

Towards the end of last year investments in automation and digitalization were slowing down in the SME sector, which reflected in lower than expected customer order intake during Autumn 2022. The growth of Heeros' total revenue was also slowed down by the low project revenue recognition (Q1/23 162 vs. Q1/22 194 EUR thousand). This had approximately 1 percentage point impact on revenue growth.

During Q1, we did see the value of order intake, measured in Annual Recurring Revenue (ARR), amounting to EUR 210 thousand. Despite the orders declining from the comparison period, we have already seen an improvement in sales to new customers. We have also succeeded well in international sales during the first quarter. These positive developments give us confidence in the sales and revenue outlook for the rest of the year. At the end of March 2023 Monthly Recurring Revenue (MRR) was EUR 693 thousand (647) thousand, which marks 7 % growth compared to December 2022.
 
Heeros solutions support mid-sized companies to automate their businesses processes
 
We continued expanding our portfolio and enhancing existing solutions. We launched Heeros ERP Connector, a service that ensures automated information flow and cost-effective integration between Heeros Financial Cloud and different ERP systems. It provides the executive management with a reliable view and insights on business data throughout the transformation project.

We also improved the usability of Heeros Accounting and Mobile solutions. New tax forms were introduced, based on our customer feedback, as well as new interfaces to automize the reporting to Finnish Tax Administration for both accounting offices and SME companies. The improvements digitalize and smoothen the financial reporting processes.
 
The first international deals were made with Heeros Sales Invoice (HSI), solution that we introduced in December 2022. This year we will continue the development work to provide the best international sales invoicing solution for medium-sized companies.

Artificial Intelligence (AI) is making its way also to financial management. Heeros Purchase Invoice (HPI) solution has been complemented with AI for invoice postings since last year, and it is rapidly developing into one of our leading features.

In the Annual General Meeting on March 21, 2023, we saw significant changes in the Heeros Board of Directors. We will over the coming months continue refining the targets for the next strategy period together with the new Board.”

FINANCIAL OUTLOOK FOR 2023 (PUBLISHED ON February 1, 2023)

Heeros is expecting to increase the combined EBITDA margin (EBITDA, % of revenue) and revenue growth percentage (Rule of 40) to be 30% for the 2023 financial period.

We estimate that the slowing macroeconomics will have an impact on our revenue growth, especially during the first half of the year. On the other hand, we estimate that the market will strengthen during the second half of the year. We will focus on ensuring profitable growth during the fiscal year 2023.

SIGNIFICANT EVENTS IN THE REVIEW PERIOD

 

  • Heeros launched ERP Connector service on February 2, 2023.
  • Heeros Plc’s financial statement release 2022 and annual report were published on February 1, 2023.
  • Katariina Telkkä was appointed as a member of Heeros management team and Chief Marketing Officer on February 22, 2023. She is responsible of marketing and communications and reports to Group CEO.
  • The Annual General Meeting of Heeros was held March 21, 2023 in Helsinki. Decisions of the Annual General Meeting and the Board of Directors organizing meeting were announced on March 21, 2023.
  • The new Heeros Board of Directors decided to appoint Eirik Hjelmeland and Axel Medefelt-Westphalen as monitoring board members, announced March 28, 2023.

EVENTS AFTER THE PERIOD

  • The resignation of Group CEO Mikko Pilkama was announced April 12, 2023. Heeros Board of Directors has nominated board member Niklas Lahti as an interim CEO starting on April 24th.

FINANCIAL REPORTING
Heeros will publish the following financial statements in 2023.
 

  • July 13, 2023: Half-year report January-June 2023
  • October 12, 2023: Business review January-September 2023

Heeros Plc
Board of Directors

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

Juho Pakkanen, CFO, tel. +358 (0)40 506 9898, juho.pakkanen@heeros.com

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

Distribution:
Nasdaq Helsinki
Essential media outlets
www.heeros.com/en/for-investors

About Us
Heeros is a Finnish software company specializing in cloud-based business management solutions. Heeros solutions meet the changing needs of SMBs that are looking to invest in integrated, user-friendly systems used across the organization. Heeros portfolio covers solutions to digitalize key business processes from financial and human resources management to enterprise resource planning. Established in 2000, Heeros’ shares are listed on Nasdaq First North Growth Market Finland (trading ID: HEEROS). www.heeros.com

Attachments
Heeros Oyj Liiketoimintakatsaus 1 1 –31 3 2023

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