Business Review of Efecte Plc as at 01/09/2022 – Third Quarter

Efecte PLC – BUSINESS REVIEW – 25 NOVEMBER 2022 at 8.30am

Efecte Plc Business Review 09/01/2022 – SaaS in Q3 +29%, Adjusted EBITDA Margin 5%

7-9/2022:

  • Total net sales increased by 26% and amounted to 5.3 million euros (4.2)
  • SaaS grew 29% and international SaaS grew 42%
  • The EBITDA was 0.1 million euros (0.4) and the EBIT -0.2 million euros (0.3).
  • Adjusted EBITDA1 was 0.3 million euros (0.4)
  • EBITDA margin was 2% (9%) and adjusted EBITDA1 Margin was 5% (9%)
  • InteliWISE integration has progressed well: Q3 figures are included in group reporting and the first joint product was announced at the Digitalize & Automate event

1-9/2022:

  • Total net sales increased by 22% to EUR 15.7 million (12.9)
  • SaaS grew 26% and international SaaS grew 37%
  • The EBITDA was 0.2 million euros (0.8) and the EBIT -0.4 million euros (0.5).
  • Adjusted EBITDA1 was 0.6 million euros (0.8)
  • EBITDA margin was 1% (7%) and adjusted EBITDA1 Margin was 4% (7%)

Forecast for 2022 (unchanged):

SaaS net revenue is expected to grow approximately 25% and EBITDA to be positive, excluding costs from inorganic activities.

Group key figures

1000 euros 7-9/2022 7-9/2021 1-9/2022 1-9/2021 2021
net sales 5 340 4 225 15 697 12 912 17 764
EBITDA 93 399 172 840 935
Adjusted EBITDA 1st 263 399 562 840 935
EBIT -194 264 -375 470 431
SaaS MRR 1 165 929 1 165 929 992

1 Excluding the costs related to inorganic activities of 0.2 million euros in Q3 and 0.4 million euros in 1-9/2022. The figures for the comparative period do not include any adjustments.

CEO Nilo Fredrikson:

In a turbulent market environment, we continued to focus on what we do best in the third quarter: helping people to digitize and automate their work and to develop Efecte into the leading European alternative in service management.

Growth acceleration through acquisition of InteliWISE and strong organic growth

SaaS growth was exceptionally fast at 29% in the third quarter, driven by strong organic growth of 25% and additional 4% growth from the InteliWISE acquisition. Organic SaaS growth was supported by the ongoing adoption of Efecte at the Finnish Social Insurance Institution (Kela) and the increasing use of associated temporary product subscriptions. We expect these to convert to production subscriptions by the end of the year and mostly become permanent MRR. Total net sales increased 26% and services increased 28%.

Geographically, Finland, Poland and Emerging Markets delivered the biggest highlights. In DACH we saw 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 on site.

Digitization and automation of work across Europe

Our annual Digitalize and Automate customer event – already the third in a row – had 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 secured three pilot customers for this unified live chat and chatbot offering. Other announcements included the availability of the new Efecte Self-Service for select use cases and a new identity management partnership with Innofactor. The partnership is part of the response to demand for additional professional services around our Identity Governance and Administration (IGA) product. In the first three quarters of the year, 15 customers have already opted for an IGA solution from us.

The InteliWISE integration started and we were happy to welcome the talented Polish team to the Efecte family. Bringing the first joint product to market in just a few months is a testament to the team’s competence and commitment. The main reason for the acquisition was and is to strengthen our technical and product capabilities. In addition, we will further develop the existing business, align it with the Efecte strategy and accelerate the sale of Efecte service management in Poland. We plan to use Efecte as our main brand in Poland from 2023. After the reporting period, we completed the acquisition process and achieved 100% ownership of InteliWISE.

Continuous growth in a changing market

We remain optimistic, although some clients have become more cautious in their decision-making and competition for active opportunities has intensified. The market is not uniform, with different dynamics across countries and industries – making it possible to gain an advantage by adapting to changing market needs. For example, demand from the public sector appears to be strong and we have increased our efforts in this area accordingly. As planned, in the third quarter we started slowing down the rate of recruitment while adding new employees. 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 on our journey to build the leading European alternative in service management.

Other Developments

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

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 was 18.8 ( 5.1) and total recurring revenue (SaaS and maintenance) was 68% of net sales (67%). InteliWISE numbers are not yet included in these rolling 12-month metrics. We plan to start reporting consolidated metrics in 2023.

The number of full-time equivalent employees at the end of the reporting period 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 in the third quarter was 184 (114). Our central team in Finland operates globally and supports customers, partners and sales in all markets and includes the staff responsible for our operations in the new markets.

Long-term financial goals

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

Eventually, through organic growth and acquisitions, to become the largest European service management provider with total net sales of over EUR 100 million and an EBITDA margin of over 25%.

Outlook for the year 2022

SaaS net revenue is expected to grow approximately 25% and EBITDA to be positive, excluding costs from inorganic activities.

Next results release

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

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

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

This press release is unaudited. Amounts in this report have been rounded from exact figures.

An online briefing for analysts, investors and the media will take place on Friday, November 25, 2022 at 11:00 a.m. Finnish time. All participants can register for the webcast online at https://efecte.videosync.fi/2022-q3. The webcast will be held in English and questions can be asked in writing on the webcast portal. A replay of the webcast and presentation materials will subsequently be made available on the Company’s investor pages at investors.efecte.com.

Effecte Plc

Efecte helps people digitize and automate their work. Customers across Europe use our cloud service to work more flexibly, improve end-user experience and save costs. Use cases for our solutions range from IT service management and ticketing to improving employee experience, business operations and customer service. We are the European alternative to the global Goliaths in our space. Our head office is in Finland and we have regional hubs in Germany, Poland and Sweden. Efecte is listed on the Nasdaq First North Growth Market Finland marketplace.

www.efecte.com

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