Efecte Plc business audit dated 1-9/2022 – Q3

EFECTE PLC — BUSINESS REVIEW — 25 NOVEMBER 2022 at 8.30 am

Efecte Plc Corporate Audit dated 1-9/2022 – Q3 SaaS +29%, Adjusted EBITDA Margin 5%

7-9/2022:

  • Total net sales grew by 26% and amounted to 5.3 million euros (4.2)
  • SaaS grew by 29% and international SaaS by 42%
  • EBITDA of 0.1 million euro (0.4) and EBIT -0.2 million euro (0.3)
  • Adjusted EBITDA1 was 0.3 million euros (0.4)
  • EBITDA margin was 2% (9%) and Adjusted EBITDA1 the margin was 5% (9%)
  • InteliWISE integration went well: Q3 numbers included in group reports and first joint product announced at Digitalize & Automate event

1-9/2022:

  • Total net turnover grew by 22% and was 15.7 million euros (12.9)
  • SaaS grew by 26% and international SaaS by 37%
  • EBITDA equal to 0.2 million euros (0.8) and EBIT -0.4 million euros (0.5)
  • Adjusted EBITDA1 was 0.6 million euros (0.8)
  • EBITDA margin was 1% (7%) and Adjusted EBITDA1 the margin was 4% (7%)

Guidance for 2022 (unchanged):

Net SaaS sales are expected to grow approximately 25% and EBITDA will be positive excluding costs from inorganic assets.

The key figures of the group

1000 euros 7-9/2022 7-9/2021 1-9/2022 1-9/2021 2021
Net sales 5 340 4 225 15 697 12912 17 764
EBITDA 93 399 172 840 935
Adjusted EBITDA 1 263 399 562 840 935
EBIT -194 264 -375 470 431
SaaS MRR 1 165 929 1 165 929 992

1 Excludes costs related to inorganic activities of €0.2 million in Q3 and €0.4 million in 01-09/2022. No adjustments included in the comparison period data.

CEO Niilo Fredrikson:

In a turbulent market environment, in the third quarter we once again focused on what we do best: helping people digitize and automate their work and make Efecte the leading European alternative in service management.

Accelerated growth driven by InteliWISE acquisition and strong organic growth

SaaS growth was exceptionally fast at 29% during the third quarter, driven by strong organic growth of 25% and additional growth of 4% since the InteliWISE acquisition. The organic growth of SaaS was supported by the progress of the implementation of Efecte at the Social Insurance Institute of Finland (Kela) and the increase in the use of temporary subscriptions related to the products. We expect these to transition into production subscriptions and become permanent MRRs for the most part by the end of the year. Total net sales grew 26% and services 28%.

Geographically, Finland, Poland and New Markets performed best. At DACH, we have experienced some delays in customer decision making. In Scandinavia, we have developed a new growth plan led by our new country manager, Henrik Åqvist. We have also started to establish a permanent presence in Spain, with the first Efecte employee already there.

Digitize and automate work across Europe

Our annual Digitalize and Automate customer event, already the third in a row, gathered a record number of registered participants in September, over 3000 people from over 50 countries. At the event, we announced the first joint product with InteliWISE, Efecte Chat for Service Management. After the review period, we have already signed up three pilot customers for this unified live chat and chatbot offering. Other announcements included the availability of the new Efecte Self-Service for select used cases and a new identity management partnership with Innofactor. The partnership is part of our goal to meet the demand for additional professional services related to our Identity Governance and Administration (IGA) product. During the first three quarters of the year, already 15 customers have chosen to purchase an IGA solution from us.

The InteliWISE integration has started and we were happy to welcome the talented Polish team to the Efecte family. Bringing the first joint product to market within months is a testament to the team’s skills and commitment. The main motivation for the acquisition was and remains the strengthening of our product and technical capabilities. We will also develop the existing business, align it with Efecte’s strategy and accelerate sales of Efecte service management in Poland. We plan to use Efecte as our primary brand in Poland starting in 2023. After the review period, we have completed the acquisition process and achieved 100% InteliWISE ownership.

Continuous growth in an evolving market

We remain optimistic as some clients have become more savvy in their decision making and competition for active opportunities is intense. The market is uneven, with varying dynamics across countries and sectors, making it possible to gain an edge by adapting to changing market needs. For example, public sector demand looks strong and as a result we have increased our efforts in this area. As expected, we began to slow our recruiting rate in Q3 as we continued to add new people. We now have a world-class team of nearly 200 people. This positions us well for another year of balanced growth in 2023 as we continue our journey building Europe’s leading alternative in service management.

Other developments

At the end of the reporting period, our cash and cash equivalents amounted to 3.4 million euros (6.4) and an interest-bearing financial debt of 1.7 million euros (0.0). The impact of the InteliWISE acquisition can be seen in the year-over-year cash and debt comparison.

On a rolling 12-month basis, recurring gross margin was 81% (80%), gross churn was 1.6% (5.0%), net retention rate was 114% (113 %), LTV/CAC ratio of 18.8 (5.1), and total recurring revenue (SaaS and maintenance) accounted for 68% of net sales (67%). InteliWISE numbers are not yet included in these 12-month metrics. We expect to start reporting consolidated metrics starting in 2023.

The number of full-time equivalent employees at the end of the period considered was 187 (118). Of these, 121 (99) were in Finland, 42 (0) in Poland, 17 (12) in Germany, 7 (7) in Sweden and 1 (0) in Spain. The average number of full-time equivalent employees during the third quarter was 184 (114). Our central team in Finland operates globally supporting customers, partners and sales in all markets and includes headcount for our operations in new markets.

Long-term financial goals

By 2025, grow organically to 35 MEUR of total net sales, maintain average SaaS growth of over 20% and achieve double-digit EBITDA margin.

Through organic growth and acquisitions, ultimately become Europe’s largest management services provider with total net sales exceeding EUR 100 million and EBITDA margin exceeding 25%.

Guide for the year 2022

Net SaaS sales are expected to grow approximately 25% and EBITDA will be positive excluding costs from inorganic assets.

Upcoming earnings release

Efecte will publish the full 2022 financial statements on March 1, 2023.

Additional information:
CFO Taru Makinen, +358 40 507 1085
CEO Niilo Fredrikson, +358 50 356 7177

Certified consultant: Evli Oyj, tel. +358 40 579 6210

This version is not certified. The amounts in this report have been rounded from exact numbers.

An online briefing for analysts, investors and the media will be organized on Friday 25 November 2022 at 11:00 Finnish time. All attendees can register for the webcast online at https://efecte.videosync.fi/2022-q3. The webcast will be held in English and applications can be submitted in written form on the webcast portal. A recording of the webcast and presentation materials will subsequently be made available on the company’s investor pages at investor.efecte.com.

Efecte Plc

Efecte helps people digitize and automate their work. Customers across Europe leverage our cloud service to operate with greater agility, improve the end-user experience and save costs. Use cases for our solutions range from IT service management and ticketing to improving employee experiences, business workflows and customer service. We are the European alternative to the global giants in our space. We are headquartered in Finland and have regional hubs in Germany, Poland and Sweden. Efecte is listed on the Nasdaq First North Growth Market Finland.

www.efecte.com

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