PRESS RELEASE 15 November 2017 at 08:00 Software company Efecte plans to list its shares on the Nasdaq First North Finland marketplace NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, NEW ZEALAND, AUSTRALIA, JAPAN, HONG KONG, SINGAPORE OR SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL. Efecte Plc ( Efecte or Company ) is planning an initial public offering ( IPO ) and a listing of its shares on the First North Finland marketplace operated by Nasdaq Helsinki Ltd ( Listing ). Efecte is a Finnish software company that provides cloud-based (SaaS, Software as a Service) service and identity management software solutions, as well as related consultancy services. They simplify and improve efficiency of managing the services, IT systems and infrastructure used in the organization. Efecte is one of the leading software vendors to large, medium-sized and public organisations in Finland and the Nordic countries. The Company was founded in 1998. In addition to Finland, it has operations in Sweden, Denmark, and Germany. Efecte employs around 90 professionals. The objective of the contemplated IPO is to accelerate Efecte s rapid and controlled growth internationally and the expansion of its operations in accordance with the Company s strategy. The Listing is also expected to improve the Company s general awareness and credibility among potential customers, partners, and investors, as well as its attractiveness as an employer among potential employees. The Listing is also aimed at enabling the use of shares as a means of payment in potential M&A transactions. In the IPO, the objective would be to raise approximately EUR 5.7 million of new equity before IPO related fees and expenses. The equity raised would be used to finance Efecte s international growth and expansion of operations in accordance with the Company s strategy, as well as for general corporate purposes. In addition to the share issue, some of the Company s current shareholders have agreed to offer shares for sale to new investors. Four domestic investors, Kari Stadigh, Ilmarinen Mutual Pension Insurance Company, Aktia Asset Management Ltd, and Aurator Asset Management Ltd, have committed to becoming Cornerstone Investors ( Cornerstone Investors ) in the contemplated IPO and have given their subscription commitments to the IPO. In addition to the Cornerstone Investors, all the members of the Company s Board of Directors, Pertti Ervi, Niilo Fredrikson, Turkka Keskinen, Kari J. Mäkelä and Hannu Vaajoensuu have given their subscription commitments to the IPO. Efecte s CEO Sakari Suhonen: In a rapidly digitizing world, organizations can only succeed if they manage to streamline their operations. This is impossible without an efficiently managed and administered IT environment. Our solutions cater to this need exactly. We have successfully switched from traditional, on-site software to a cloud-based model, as well as expanded our offering to identity and access management software. Over the past few years, we have grown rapidly, both in Finland and internationally. During the past four years, our sales have grown on average by 20% per year. Since 2014 we have gained over 100 new customers, which today amount to approximately 300. We have established local organizations in Sweden, Denmark, and Germany. We are one of the leading service providers to large, mid-sized customers in Finland and the Nordics. As a small Finnish company we are able to compete with global software giants on equal footing in all
markets. Our goal now is to be the leading European software vendor in service and identity management software. In order to reach our goals, we are aiming to raise funds for rapid and controlled international growth through an IPO. Efecte in brief Efecte s core business consists of the Company s own cloud-based software solutions as well as the services that support them, such as e.g. implementation, integration, training, and maintenance. The Company s service and identity management software and the consultancy services that support them, improve the efficiency of the services, IT systems and infrastructure in use and simplify their management. Efecte s two primary markets are IT Service Management (ITSM) and Identity and Access Management (IAM). IT Service Management consists of the planning, delivery, management, and development of companies IT services. Identity and Access Management is used to create, manage, and store users identities and access rights. Most organizations use several IT systems and often the IT services are at least to some extent outsourced. In such cases, the management of services and continuous monitoring of the suppliers agreed service level may pose a challenge. With Efecte s solutions, the customers will find it easier to manage, monitor, and develop their IT systems and services as a whole. The provision of software as a cloud-based services (Software as a Service, SaaS) shortens the time it takes to deploy the solution and reduces the investments required by the customers. Efecte s strenghts Efecte s business is supported by the following key strengths: - Scalable and stable business model, which results in steady and predictable revenues - Ready and functioning cloud solution that is used by demanding domestic and foreign customers - The solutions are very well suited for mid-sized European companies - Our solutions total cost of ownership for the customer is moderate, and it is easy to budget - Diversified and loyal clientele - Rapidly growing global market - One of the leading software vendors in Finland and the Nordic countries - Reliable European option for cloud-based management solutions Efecte s financial targets and dividend policy Efecte aims for over 20% annual organic growth on average in 2017 2022. Substantial investments in international growth will decrease operating profit in the next few years, but the Company aims for a double-digit operating profit percentage by the end of the strategy period. According to its strategy, the Company will invest substantially in growth in the next few years, due to which it does not aim to pay dividends in 2018 2020. Forecast for 2017 Based on the current customer contracts, existing service delivery capacity as well as the forecasted revenues from perpetual licenses during the end of the year, the Company forecasts that its net sales in 2017 will be 10.3 10.8 million euros and that the earnings before interest, taxes, depreciation and amortization (EBITDA) will be positive.
Efecte s financial development and key ratios Efecte s net sales amounted to 7.4 million euros during the nine-month period ending on the 30 of September 2017. Net sales grew by 25% compared to the same period last year. During the period, 46% of the Company s sales came from the SaaS business, 36% from services, 15% from maintenance, and 4% from perpetual licenses. Of Efecte s sales during the first nine months of 2017, 86% came from Finland and 14% from the Company s international operations. Domestic sales grew by 23% and international sales by 41% compared to the same period last year. Sales from SaaS and services continued to grow rapidly; SaaS grew by 36% and services by 61% compared to the same period last year. Sales from traditional perpetual licenses and the related maintenance decreased as expected. The order book as of the 30 of September 2017 was 121% larger compared to the same time last year. Earnings before interest, taxes and amortization of goodwill (EBITA) for the nine-month period ending on the 30 of September 2017 was 0.1 million euros, corresponding to an EBITA margin of 1.3%. The Company s profitability for the beginning of the year was as expected. Investments in maintaining growth have increased the Company s fixed cost base due to i.a. upfront recruitments and thereby reducing the Company s profitability. Millions of euros unless otherwise stated 1 Jan 30 Sep 1 Jan 31 Dec 2017 2016 2016 2015 (unaudited) (unaudited, unless otherwise stated) Net sales 7.4 5.9 8.3 [5] 6.9 [5] SaaS (subscription licenses [1] ) 3.4 2.5 3.4 2.6 Perpetual licenses (licenses [1] ) 0.3 0.5 0.5 0.2 Maintenance (support and maintenance [1] ) 1.1 1.3 1.7 [2] 1.9 Services 2.7 1.7 2.6 [2] 2.2 Domestic sales (% of net sales) 86% 88% 86% 90% International (% of net sales) 14% 12% 14% 10% Recurring revenue (% of net sales) 60% 64% 62% 64% SaaS MRR, monthly net sales at the end of the period 0.4 0.3 0.3 0.2 Net sales growth % 25% - 21% 27% [5] EBITDA [3] 0.3 0.4 0.5 0.0 EBITDA % [3] 3.8% 6.0% 5.9% 0.4% Operating profit before amortization of goodwill (EBITA) [3] 0.1 0.2 0.3-0.2 Operating profit before amortization of goodwill (EBITA) % [3] 1.3% 3.4% 3.4% -2.7% Operating profit (EBIT) 0.0 0.1 0.1 [5] -0.3 [5] Operating profit (EBIT) % -0.2% 1.5% 1.6% -4.8% Earnings for the period -0.1 0.1 0.1 [5] -0.3 [5] Adjusted earnings for the period [3] 0.0 0.1 0.1-0.3 Earnings/share (EPS), euro [3] [4] -0.02 0.02 0.03-0.07 Equity/share, euro [4] 0.15 0.16 0.17 0.15 Adjusted earnings/share (EPS), euro [3][4] 0.00 0.02 0.03-0.07 Net debt [3] -1.5-1.4-1.1-0.4 [5]
Return on invested capital (ROI) % [3] -2% 13% 14% -21% [5] Equity ratio % [3] 27% 35% 33% 28% [5] Net gearing % [3] -223% -195% -142% -60% [5] New orders 8.6 3.9 7.4 6.6 Number of employees at the end of the period 78 60 63 56 Number of shares (on average during period) 4,437,920 4,423,438 4,427,044 4,420,673 Number of shares at the end of the period 4,444,533 4,437,783 4,437,783 4,422,933 [1] Terms used in the Company s 2016 financial statement. [2] Correction of classification error (EUR 95,118) in the Company s 2016 financial statement s notes. [3] Alternative key ratio. The Company shows alternative key ratios in addition to the ratios shown in the group s income statements, balance sheets and cash flow statements that have been prepared based on Finnish Accounting Standards (FAS). The Company s view is that the alternative key ratios provide management, investors, securities analysts and other parties with significant additional information on the Company s profits, financial situation and cash flows. [4] The per share key ratios have been calculated using the share amount corrected for the share split. The shareholders meeting on the 4 th of October 2017 decided on the share split in connection with the arrangements relating to the planned Listing. [5] Audited. Information on the IPO The contemplated IPO is expected to consist of both a primary offering where the Company issues new shares, with which the Company would aim to raise approximately EUR 5,7 million of new equity before IPO related fees and expenses, and a secondary offering, where certain shareholders of the Company would sell their existing shares. The Company and the selling shareholders would commit to customary lock-up arrangements in connection with the IPO. The contemplated IPO is expected to include a personnel offering to the management and employees of Efecte. The Company will decide on the contemplated Listing and IPO, and timing thereof at a later date. Evli Bank Plc would act as the Lead Manager in the contemplated IPO. The Company s legal adviser is Castrén & Snellman Attorneys Ltd. Cornerstone Investors Cornerstone Investors have committed to subscribing for shares at the subscription price of the institutional offering in the possible IPO, subject to certain conditions being fulfilled, including that the subscription price of the IPO does not exceed 5.50 euros per share, which would correspond to a valuation for all the Company s outstanding shares before the IPO of approximately 24,7 million euros. The commitments of the Cornerstone Investors are as follows: (i) Kari Stadigh: 2.5 million euros, (ii) Ilmarinen Mutual Pension Insurance Company: 2.0 million euros, (iii) Aktia Asset Management Ltd: 1.2 million euros, and (iv) Aurator Asset Management Ltd: 0.5 million euros. The Company has committed to allocating at least 80% of the respective subscribed amount to each of the Cornerstone Investor. In addition to the Cornerstone Investors mentioned above, all the members of the Company s Board of Directors (Pertti Ervi, Niilo Fredrikson, Turkka Keskinen, Kari J. Mäkelä, and Hannu Vaajoensuu) have committed to subscribing in the personnel offering. The total commitments of the members of the Board of Directors amount to 100,000 euros.
Press event Efecte will host a press conference today 15 November 2017 at 10:00 a.m. EET. at the Helsinki Stock Exchange (Fabianinkatu 14, Helsinki, Finland). Further enquires: Sakari Suhonen CEO Efecte Plc sakari.suhonen@efecte.com +358 50 384 3576 Hannu Nyman CFO Efecte Plc hannu.nyman@efecte.com +358 50 306 9913 Efecte Plc Efecte is a Finnish software company that provides cloud-based service and identity management software solutions, as well as related consultancy services. They simplify and improve the efficiency of managing the services, IT systems and infrastructure in an organization. Efecte is one of the leading software vendors in its field to large, medium-sized and public organizations in Finland and the Nordic countries. The Company was founded in 1998. In addition to Finland, it has operations in Sweden, Denmark, and Germany. Efecte employs around 90 professionals and had a turnover of 8.3 million euros in 2016. www.efecte.com NOTE The information contained herein is not for publication or distribution, directly or indirectly, in or into the United States, Canada, New Zealand, Australia, Hong Kong, South Africa, Singapore or Japan. This release does not constitute an offer of securities for sale in the United States, nor may the securities be offered or sold in the United States absent registration or an exemption from registration as provided in the U.S. Securities Act of 1933, as amended, and the rules and regulations thereunder. The Company does not intend to register any portion of the offering in the United States or to conduct a public offering of securities in the United States. The issue, exercise and/or sale of securities in the initial public offering are subject to specific legal or regulatory restrictions in certain jurisdictions. The Company and Evli Bank Plc assume no responsibility in the event there is a violation by any person of such restrictions. This release contains forward-looking statements including statements concerning the Company's strategy, financial position, profitability, result of operation and market data as well as other statements that are not historical facts. Statements which include the words will, estimate, predict, continue, anticipate, presume, may, plan, seek, become, aim, believe, could and other similar expressions or their negative forms indicate forward-looking statements, but forward-looking statements are not limited to these expressions. By nature, forward-looking statements involve risks, uncertainties and numerous factors that could result in the actual consequences or results of operations differing materially from projections. Readers should not place undue reliance on these forward-looking statements.
The information contained herein shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of the securities referred to herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any such jurisdiction. Investors must neither accept any offer for, nor acquire, any securities to which this document refers, unless they do so on the basis of the information contained in the applicable prospectus published or offering circular distributed by the Company. The Company has not authorized any offer to the public of securities in any Member State of the European Economic Area other than Finland. With respect to each Member State of the European Economic Area other than Finland and which has implemented the Prospectus Directive (each, a Relevant Member State ), no action has been undertaken or will be undertaken to make an offer to the public of securities requiring publication of a prospectus in any Relevant Member State. As a result, the securities may only be offered in Relevant Member States (a) to any legal entity which is a qualified investor as defined in the Prospectus Directive; or (b) in any other circumstances falling within Article 3(2) of the Prospectus Directive. For the purposes of this paragraph, the expression an offer of securities to the public means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to exercise, purchase or subscribe the securities, as the same may be varied by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU. This communication is directed only at (i) persons who are outside the United Kingdom or (ii) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order ) and (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2) of the Order (all such persons together being referred to as relevant persons ). Any investment activity to which this communication relates will only be available to and will only be engaged with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.