Heeros Oyj: Heeros Oyj’s financial statement release 1 January – 31 December 2022: Consistent strategy implementation yields results – Rule of 40 39.1% and 20% revenue growth in 2022
Heeros expanded its product portfolio and strengthened its position as a provider of business-critical software for SMEs. Net Revenue Retention for 2022 increased to 109%. The revenue grew both in Finland and internationally.
This release is an unofficial translation of the summary of Heeros Oyj’s 2022 financial statement release. The complete financial statement release in Finnish, including tables, is available on the company’s website at www.heeros.com/sijoittajille/tiedotteet.
July – December 2022 in brief:
- Revenue increased by 16% from the comparison period to EUR 5.5 million (7–12/2021: EUR 4.8 million).
- Recurring revenue (contract and transaction revenue) increased by 17% to EUR 5.2 (4.4) million. Contract revenue increased by 31% to EUR 4.0 (3.0) million. Transaction revenue decreased by 12% to EUR 1.2 (1.4) million.
- In December, contract revenue (Monthly Recurring Revenue, MRR) amounted to EUR 666 (540) thousand, growing by 23% from the previous December.
- Customer orders, in terms of Annual Recurring Revenue (ARR), decreased by 25% from the comparison period to EUR 410 (540) thousand.
- EBITDA (adjusted) was EUR 1.3 (1.3) million.
- Operational cash flow (adjusted) was EUR 1.0 (1.1) million.
- Combined adjusted EBITDA margin and revenue growth percentage (Rule of 40) was 39.5% (35.8%).
- On 30 November, Heeros announced that it was lowering its financial guidance for 2022: Heeros expects the combined EBITDA margin (EBITDA, % of revenue) and revenue growth percentage (Rule of 40) to be approximately 40% in the 2022 financial period.
January – December 2022 in brief:
- Revenue increased by 20% from the previous year to EUR 11.1 million (1–12/2021: EUR 9.2 million).
- Recurring revenue (contract and transaction revenue) increased by 20% to EUR 10.3 (8.6) million. Contract revenue increased by 37% to EUR 7.9 (5.7) million. Transaction revenue decreased by 14% to EUR 2.5 (2.9) million.
- Customer orders, in terms of Annual Recurring Revenue (ARR), decreased by 22% from the previous year to EUR 940 thousand.
- EBITDA (adjusted) was EUR 2.1 (2.1) million.
- The profit for the period decreased to EUR -405 thousand. Profit for the period excluding goodwill depreciations was EUR 151 (499) thousand.
- Operational cash flow (adjusted) was EUR 1.6 (1.7) million.
- Combined adjusted EBITDA margin and revenue growth percentage (Rule of 40) was 39.1% (27.5%).
- The Taimer Ltd acquisition was completed on 1 January 2022. The integration of the business operations and personnel was completed during the spring of 2022.
- The Board of Directors proposes that no dividends be paid out for the 2022 financial period.
KEY FIGURES
| EUR thousand | Q4/ 2022 | Q4/ 2021 | Change % | H2/ 2022 | H2/ 2021 | Change % | Financial period 2022 | Financial period 2021 | Change % |
| Rule of 40, % (adjusted) 1 | 38.4% | 35.2% | 39.5% | 35.8% | 39.1% | 27.5% | |||
| Revenue | 2,893 | 2,497 | 16% | 5,534 | 4,770 | 16% | 11,083 | 9,201 | 20% |
| Recurring revenue 2 | 2,625 | 2,277 | 15% | 5,208 | 4,436 | 17% | 10,332 | 8,626 | 20% |
| Contract revenue | 2,001 | 1,574 | 27% | 3,971 | 3,027 | 31% | 7,854 | 5,737 | 37% |
| Transaction revenue | 624 | 703 | -11% | 1,237 | 1,409 | -12% | 2,478 | 2,889 | -14% |
| EBITDA | 651 | 612 | 6% | 1,282 | 1,301 | -1% | 1,997 | 1,990 | 0% |
| EBITDA, % of revenue | 22.5% | 24.5% | 23.2% | 27.3% | 18.0% | 21.6% | |||
| Adjusted EBITDA 1 | 651 | 644 | 1% | 1,298 | 1,328 | -2% | 2,061 | 2,062 | 0% |
| Adjusted EBITDA, % of revenue | 22.5% | 25.8% | 23.5% | 27.8% | 18.6% | 22.4% | |||
| EBIT | 96 | 281 | -66 % | 178 | 661 | -73 % | -230 | 723 | |
| EBIT, % of revenue | 3.3 % | 11.2 % | 3.2 % | 13.9 % | -2.1 % | 7.9 % | |||
| Adjusted EBIT 1 | 96 | 313 | -69 % | 194 | 687 | -72 % | -166 | 795 | |
| Adjusted EBIT, % of revenue | 3.3 % | 12.5 % | -74 % | 3.5 % | 14.4 % | -76 % | -1.5 % | 8.6 % | |
| Profit for the period | 29 | 192 | -85 % | 59 | 485 | -88 % | -405 | 499 | |
| Profit for the period, % of revenue | 1.0 % | 7.7 % | 1.1 % | 10.2 % | -3.7 % | 5.4 % | |||
| Profit for the period excluding goodwill depreciations | 165 | 192 | -14 % | 336 | 485 | -31 % | 151 | 499 | -70 % |
| Operational cash flow (adjusted) 3 | 967 | 1,058 | -9 % | 1,637 | 1,695 | -3 % | |||
| Equity ratio, % | 57.8 % | 36.8 % | |||||||
| Return on Equity (ROE), % | -8.9 % | 22.3 % |
| 1 Adjusted figures for 2022 include an adjustment of EUR 64 thousand for non-recurring restructuring costs. Adjusted figures for 2021 include an adjustment of EUR 72 thousand for non-recurring expenses related to the assessment of inorganic growth. |
| 2 Recurring revenue is divided into two parts: contract revenue (usage fees and service agreements) and transaction revenue. |
| 3 Adjusted operational cash flow from the financial period 2021 includes an adjustment for tax and earnings-related pension payment arrangements as well as non-recurring restructuring costs. |
| The merger of the software company Taimer Ltd with the Heeros Group was completed on 1 January 2022. The reported figures for the comparison period do not include Taimer. |
MIKKO PILKAMA, CEO:
“For Heeros, the year was marked by solid revenue growth combined with improved profitability towards the end of the year. This was the outcome of an systematic operational work and serves as a good start for 2023.
We continued to strengthen our position as a provider of business-critical enterprise software both in Finland and along with new customer deliveries also internationally. During the second half of the year, we launched several new solutions to further strengthen our position as a reliable business partner among our customers.
We achieved a good level, 39.1%, in our financial target (Rule of 40). This was a significant improvement from the previous year (27.5%). Consistent strategy execution has yielded good results: our financial target has improved every year since 2019 (18% in 2019). Considering the challenging market conditions, I am proud of this achievement.
Slower revenue growth, but improved profitability towards the end of the year
During the year, forecasting the business development in small and medium-sized businesses became more and more difficult. The growth in the economy in the spring took a turn for the worse in Finland from September onwards. Heeros’ customers became more cautious in their investment decisions into further automation and digitalisation of their processes. Our growth therefore slowed during the second half of the year and in November we had to revise our financial guidance for 2022. In particular, the slowdown was reflected in the development of the order intake (Annual Recurring Revenue (ARR)), which was 22% lower than in the previous year. Improving the order intake is one of our priorities for 2023.
Recurring revenue showed a healthy increase of 20% despite the challenging market situation, both organically and due to the acquisition of Taimer Ltd. Organic growth was mainly based on the increased revenue from our current customers (NRR, Net Revenue Retention), which amounted to 109% for the whole year. Our contract revenue increased by 37% from the comparison period. Moreover, we delivered large customer projects towards the end of the year which will generate recurring invoicing in 2023.
Thanks to the strong fourth quarter, our EBITDA amounted to EUR 2.0 million while we continued our investments in the expansion of our product portfolio. Without the impact of Taimer Oy, the EBITDA margin for the year was stronger than in the comparison period. I am pleased with the Taimer integration and the way in which we rapidly integrated 20 people into the Heeros organisation.
New solutions strengthened our position as a provider of business-critical software
We launched new solutions for HR management and PSA both in Finland and internationally that were received well by our customers.
The acquisition of Taimer Ltd, a software company specializing in PSA, was completed on 1 January 2022. In June, we updated our strategy for the period ending 2023. We offer user-friendly enterprise solutions that seamlessly transcend organizational borders, meeting the needs of our customers in supporting the decision-making and improving the efficiency of business processes. Our growth is supported by our new expanded product portfolio, which allows us to serve the customers’ needs to automate their business-critical activities. We see possibilities for growth especially in ERP and HR management solutions both cross-selling to our current customers as well as acquiring new customer.
In the international market, Heeros expanded its customer deliveries to the German and Austrian markets. At the end of 2022, Heeros had approximately 200 customers operating outside Finland, and our services were used in more than 20 countries.
Noteworthy changes took place in our main ownership at the end of the year when Viking Ventures, a Nordic SaaS software investor, and Lakeus Holding AB became our biggest individual shareholders. I am happy about this since both shareholders are long-term and active owners with the aim for improved shareholder value in co-operation with Heeros management.
With positive energy into 2023
Even though we enter 2023 under uncertain macroeconomic state, I am confident about Heeros’ capability to succeed in the current market. We offer business-critical solutions that are needed in good as well as the bad times. Our scalable and profitable business model has shown its resilience in different kinds of market conditions.
Our competitive, renewed product portfolio, customer-centric processes and an expanded customer base in medium-sized companies together with Heeros’ competent and motivated staff ensure that we are well positioned for further reinforcing our position in the growing enterprise software market and achieving our financial goals. Our financial position also allows for new growth investments.
I wish to thank our employees for the good work put in throughout last year. I also wish to thank our customers, owners and partners for their trust and good co-operation. This is a good foundation going into 2023.”
FINANCIAL OUTLOOK FOR 2023
Heeros estimates that its combined EBITDA margin (EBITDA, % of revenue) and revenue growth percentage (Rule of 40) will be at the level of 30% during the 2023 financial period.
We expect the macroeconomic situation to slow down our revenue growth during the first half of the year. However, we estimate that the market will become stronger during the second half of the year and that this will support our revenue growth. In 2023, our focus will be on ensuring profitable growth.
FINANCIAL INFORMATION AND ANNUAL GENERAL MEETING IN 2023
In 2023, Heeros Oyj will publish the following financial reports:
1 February 2023 – Financial Statements and the Report of the Board of Directors for 2022
18 April 2023 – Business Review January-March 2023
13 July 2023 – Half-year Report January-June 2023
12 October 2023 – Business Review January-September 2023
The Annual General Meeting will be held on 21 March 2023. The company's Board of Directors will summon the meeting separately on a later date.
Additional information:
Mikko Pilkama, CEO, tel. +358 (0)40 828 3717, [email protected]
Approved advisor: Aktia Alexander Corporate Finance Oy, tel. +358 (0)50 520 4098
Distribution:
Nasdaq Helsinki
Essential media outlets
www.heeros.com/sijoittajille
Heeros is a Finnish software company specialising in cloud-based business management solutions. Founded in 2000, Heeros is a pioneer in its field. 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. Heeros’ shares are listed on Nasdaq First North Growth Market Finland, maintained by Nasdaq Helsinki Oy, under the trading ID HEEROS. www.heeros.com