APRIL-JUNE 2023, IFRS
· Net sales increased 15.9% and were EUR 6,163 thousand (5,318)
· EBITDA was EUR 1,487 thousand (1,434), 24.1% (27.0) of net sales
· Adjusted EBITDA was EUR 1,701 thousand (1,585), 27.6% (29.8) of net sales
· EBIT was EUR 1,191 thousand (1,296), 19.3% (24.4) of net sales
· Adjusted EBIT was EUR 1,527 thousand (1,469), 24.8% (27.6) of net sales
· Profit of the review period was EUR 998 thousand (969), 16.2% (18.2) of net sales
JANUARY-JUNE 2023, IFRS
· Net sales increased 17.1% and were EUR 12,082 thousand (10,320)
· EBITDA was EUR 3,099 thousand (2,976), 25.7% (28.8) of net sales
· Adjusted EBITDA was EUR 3,320 thousand (3,138), 27.5% (30.4) of net sales
· EBIT was EUR 2,552 thousand (2,728), 21.1% (26.4) of net sales
· Adjusted EBIT was EUR 2,991 thousand (2,912), 24.8% (28.2) of net sales
· Profit of the review period was EUR 1,947 thousand (2,124), 16.1% (20.6) of net sales
Key Figures, IFRS
| EUR 1,000 | 4-6/2023 | 4-6/2022 | Change | 1-6/2023 | 1-6/2022 | Change | 1-12/2022 |
| Net sales | 6,163 | 5,318 | 15.9 % | 12,082 | 10,320 | 17.1 % | 22,550 |
| SaaS | 4,635 | 4,036 | 14.9 % | 9,141 | 7,918 | 15.4 % | 16,989 |
| Transaction | 428 | 298 | 43.7 % | 715 | 576 | 24.1 % | 1,172 |
| Consulting and other | 1,100 | 984 | 11.8 % | 2,226 | 1,827 | 21.9 % | 4,390 |
| | | | | | | | |
| Gross margin | 5,342 | 4,631 | 15.4 % | 10,505 | 9,079 | 15.7 % | 19,982 |
| Gross margin, % of net sales | 86.7 % | 87.1 % | | 87.0 % | 88.0 % | | 88.6 % |
| EBITDA | 1,487 | 1,434 | 3.7 % | 3,099 | 2,976 | 4.1 % | 7,332 |
| EBITDA, % of net sales | 24.1 % | 27.0 % | | 25.7 % | 28.8 % | | 32.5 % |
| Adjusted EBITDA | 1,701 | 1,585 | 7.3 % | 3,320 | 3,138 | 5.8 % | 7,589 |
| Adjusted EBITDA, % of net sales | 27.6 % | 29.8 % | | 27.5 % | 30.4 % | | 33.7 % |
| EBIT | 1,191 | 1,296 | -8.1 % | 2,552 | 2,728 | -6.4 % | 6,594 |
| EBIT, % of net sales | 19.3 % | 24.4 % | | 21.1 % | 26.4 % | | 29.2 % |
| Adjusted EBIT | 1,527 | 1,469 | 4.0 % | 2,991 | 2,912 | 2.7 % | 7,054 |
| Adjusted EBIT, % of net sales | 24.8 % | 27.6 % | | 24.8 % | 28.2 % | | 31.3 % |
| Profit (Loss) of the period | 998 | 969 | 2.9 % | 1,947 | 2,124 | -8.3 % | 5,128 |
| Profit (Loss) of the period, % of net sales | 16.2 % | 18.2 % | | 16.1 % | 20.6 % | | 22.7 % |
| | | | | | | | |
| Equity ratio, % | 56.1 % | 70.2 % | | 56.1 % | 70.2 % | | 69.7 % |
| Net debt | 1,337 | -10,337 | -112.9 % | 1,337 | -10,337 | -112.9 % | -8,661 |
| Gearing, % | 5.0 % | -44.4 % | | 5.0 % | -44.4 % | | -32.9 % |
| Earnings per share (EPS) | 0.05 | 0.05 | 1.6 % | 0.11 | 0.12 | -9.3 % | 0.28 |
| Return on invested capital, % (ROIC) | 3.3 % | 4.9 % | | 7.1 % | 10.2 % | | 22.5 % |
| Return on equity, % (ROE) | 3.7 % | 4.3 % | | 8.0 % | 9.4 % | | 21.2 % |
| Number of employees at the end of the period | 220 | 169 | 30.2 % | 220 | 169 | 30.2 % | 184 |
| Outstanding shares at the end of the period | 18,562,005 | 18,393,440 | | 18,562,005 | 18,393,440 | | 18,393,440 |
| Average outstanding shares during the period | 18,546,014 | 18,313,631 | | 18,493,824 | 18,293,678 | | 18,343,559 |
CEO Jan-Erik Lindfors
The second quarter of 2023 was both eventful and challenging for Lemonsoft. Market demand is still affected by the macroeconomic situation in Finland and customers are postponing their investments, resulting in only 15.9% growth in Group net sales. Adjusted EBIT was 24.8% of net sales. Net sales growth came from significant strategic acquisitions.
The number of Lemonsoft customers was 12,500 at the end of June, while a year earlier it was 4,000. The increase in the customer base is as a result of the acquisition of Finvoicer Group Oy, which brought us nearly 7,900 customers, most of whom are small customers using invoicing software.
The market megatrends of digitalization, artificial intelligence and sustainability are still strong and in the long term clearly positive for us. With the growth of digital ERP, applications like manufacturing execution, budgeting & forecasting, invoice management, transport cost optimization, CO2-reporting and application integrations are growth drivers in our business. We will continue to invest in product development to address these customer needs accordingly.
New customer sales at the start of the second quarter were slower than expected. This was partly due to customers postponing buying decisions and partly due to a re-allocation of Lemonsoft’s internal resources to serving the current customer base and making sure our recovery from the malware attack at the end of Q1 was handled well. New sales picked up positively at the end of the quarter, especially in the manufacturing industry vertical, and with work time management deals also in other verticals. We did, however, see increased revenue churn during H1, especially in the construction industry vertical. The overall development of Net Revenue Retention (NRR) remained at a lower level than expected due to the challenging market conditions.
We are continuously taking actions to make sure our customers are satisfied and can get the maximum benefit from their software investments. One such action is focused on product bundling and pricing; ensuring that both new and existing customers find our offering easy to understand and easy to buy.
From an M&A perspective, we were delighted to complete the acquisition of Finvoicer Group in June. Our long-time partner Finvoicer brings clear synergies for us, and with the acquisition, we strengthen our offering in invoice lifecycle management by providing our customers with more comprehensive solutions, including invoice delivery, reminders and debt collection, invoice financing and digital financial management. At the same time, we updated our profit forecast, and we estimate that the net sales for the financial year 2023 will increase by 15-20% compared to the financial year 2022, and that adjusted EBIT will be 25-30% of net sales in 2023.
We will continue to ensure that our business grows profitably and are continuously paying attention to our cost structure and ways of working. As part of that process, we conducted change negotiations with our personnel in June 2023. In the changed market situation, we want to be even leaner, faster and more collaborative with the best offering in the market, delivering better productivity and efficiency outcomes for our customers.
Finally, I want to say that I am grateful for the opportunity to step up to the role of CEO of Lemonsoft and especially I want to thank Kari Joki-Hollanti for his previous work as CEO. I look forward to working with customers, employees and all other stakeholders to grow the business. We have a great team, great customers and a good foundation in place and our mission is now to scale that up over the next years. We are updating our strategy and will communicate more on the topic later.
Group Financial Development
Group financial result and profitability
April-June 2023
Net sales for the review period were EUR 6,163 thousand (5,318). Net sales increased by EUR 845 thousand, 15.9%. Organic growth of the review period was -3.9% due to the challenging market situation. Especially consulting and other income remained at a lower level than in the comparison period. Organic growth of the recurring revenue was positive, however. Net sales increased due to the acquisitions of Logentia Oy (2022), whose net sales were not included in the comparison period in April–May, and Finazilla Oy (2022), Duunissa.fi business (2022) and Finvoicer Group Oy (2023), whose net sales were not included at all in the comparison period.
The share of SaaS income was 75.2% (75.9), the share of transaction income 6.9% (5.6), and consulting and other income 17.8% (18.5).
EBITDA was EUR 1,487 thousand (1,434), 24.1% (27.0) of net sales. Adjusted EBITDA (adjustments specified in the Alternative performance measures section) was EUR 1,701 thousand (1,585), 27.6% (29.8) of net sales.
EBIT was EUR 1,191 thousand (1,296), 19.3% (24.4) of net sales. Adjusted EBIT (adjustments specified in the Alternative performance measures section) was EUR 1,527 thousand (1,469), 24.8% (27.6) of net sales.
Profit for the review period was EUR 998 thousand (969), 16.2% (18.2) of net sales.
Cash flow from operating activities was EUR 634 thousand (1,310).
January-June 2023
Net sales for the review period were EUR 12,082 thousand (10,320). Net sales increased by EUR 1,761 thousand, 17.1%. Organic growth of the review period was -1.4% due to the challenging market situation. Especially consulting and other income remained at a lower level than in the comparison period. Organic growth of the recurring revenue was positive also in the half year period. Net sales increased due to the acquisitions of Logentia Oy (2022), whose net sales were not included in the comparison period in January–May, and Finazilla Oy (2022), Duunissa.fi business (2022) and Finvoicer Group Oy (2023), whose net sales were not included at all in the comparison period.
The share of SaaS income was 75.7% (76.7), the share of transaction income 5.9% (5.6), and consulting and other income 18.4% (17.7).
EBITDA was EUR 3,099 thousand (2,976), 25.7% (28.8) of net sales. Adjusted EBITDA (adjustments specified in the Alternative performance measures section) was EUR 3,320 thousand (3,138), 27.5% (30.4) of net sales.
EBIT was EUR 2,552 thousand (2,728), 21.1% (26.4) of net sales. Adjusted EBIT (adjustments specified in the Alternative performance measures section) was EUR 2,991 thousand (2,912), 24.8% (28.2) of net sales.
Profit for the review period was EUR 1,947 thousand (2,124), 16.1% (20.6) of net sales.
Cash flow from operating activities was EUR 2,068 thousand (2,309).
Balance sheet, financing and investments
The balance sheet total at the end of the review period was EUR 48,369 thousand (38,194 at the end of the year 2022). The acquisition of Finvoicer Group Oy on 1.6.2023 increased the balance sheet total significantly.
The Group has capitalized development expenses of EUR 973 thousand during the review period. At the end of the review period, the Group's balance sheet included capitalized development expenses totalling EUR 1,792 thousand (849 at the end of the year 2022).
Equity was EUR 26,931 thousand (26,292 at the end of the year 2022), equity increased EUR 638 thousand.
Equity ratio was 56.1% (69.7 at the end of the year 2022) and interest-bearing debt was EUR 9,439 thousand (3,031 at the end of the year 2022). Interest-bearing debt increased with the acquisition of Finvoicer Group Oy.
Cash and cash equivalents at the end of the review period were EUR 8,102 thousand (11,692 at the end of the year 2022).
Personnel, management and administration
The Group number of employees was 220 (169) on 30 June 2023. With the acquisition of Finvoicer Group Oy, the number of personnel increased by 40 people. We report our Group personnel as follows:
· R&D 96 employees
· Customer functions 110 employees
· Other functions, a total of 14 employees
Shares and shareholders
Share capital and number of shares
The company has one series of shares, and all shares have equal rights. At the end of the review period, Lemonsoft Oyj’s share capital consisted of 18,562,005 (18,393,440) shares. The average number of shares during the review period was 18,546,014 (18,313,631).
The company's share is traded on the First North Growth Market Finland marketplace maintained by Nasdaq Helsinki Oy. During the review period, the highest share price was EUR 8.70 and the lowest EUR 7.00. The closing price on 30 June 2023 was EUR 8.12. The market value of the company at the closing price of the review period was approximately EUR 150.7 million. Average daily trading volume during the review period was 4,979 shares (EUR 42,379).
On 30 June 2023, the company had a total of 2,473 shareholders. The company's largest shareholders can be found on the company's investor website at https://investors.lemonsoft.fi/osakkeenomistajat/.
Authorizations of the Board of Directors
Lemonsoft Oyj has decided in its Annual General Meeting on 4 April 2023 to authorize the Board of Directors to decide on the repurchase of the company’s own shares on the following terms and conditions:
· By virtue of the authorization, the Board of Directors is authorized to decide on the repurchase of a maximum of 1,800,000 of the company’s own shares. The proposed maximum number of shares to be repurchased corresponds to approximately 9.7% of all the company’s shares. The authorization includes the right to accept the company’s own shares as a pledge.
The authorization is valid until the 2024 Annual General Meeting, but not beyond 30 June 2024.
The Annual General Meeting authorized the Board to decide on a share issue against payment or a share issue without payment and the granting of special rights (as defined in Section 1, Chapter 10 of the Limited Liability Companies Act) in one or more instalments with the following terms and conditions:
· By virtue of the authorization the share issue may be a maximum of 2,000,000 shares. The authorization applies to both issuing new shares and to transferring of treasury shares held by the company. The authorization may be used to fund or complete acquisitions or other business transactions, for implementation of share-based incentive schemes, to develop the company’s capital structure, and for other purposes decided by the Board.
· The authorization entitles the Board of Directors to resolve on all the conditions of the issuance of shares and the issuance of special rights entitling to shares, including the right to deviate from the shareholders’ pre-emptive subscription right.
The authorization is in force until the next Annual General Meeting; however, no longer than until 30 June 2024, and it replaces the previous authorizations granted regarding a directed share issue and the issuance of special rights entitling to shares.
As part of the completion of the acquisition of Finvoicer Group Oy, Lemonsoft Oyj’s Board of Directors decided on a directed share issue, in which a total of 23,986 (EUR 196 thousand) new Lemonsoft Oyj shares were offered for subscription by Finvoicer Group Oy's shareholders transferring to Lemonsoft Oyj. As a result of the share issue, the total number of Lemonsoft Oyj’s outstanding shares increased to 18,562,005 shares.
Significant short-term risks and uncertainties
The deterioration of the economic situation and events with a global impact, such as the war in Ukraine, may have direct and indirect effects on Lemonsoft's business. These may be reflected in the business operations of Lemonsoft's customer companies, for example, in reduced investments by industrial manufacturing companies and decreased needs of subcontracting chains, as well as business and bankruptcy risks. In turn, customers' business challenges may affect Lemonsoft's new customer acquisition, upsells from existing customers, and customer retention.
In the longer term, the biggest challenge for our industry is the availability of skilled personnel. Success of the Group and opportunities for growth depend largely on how well we can recruit, motivate, and engage more skilled personnel and develop our expertise.
In Lemonsoft's cost structure, the single most significant factor is personnel costs, and an increase in the general price level may increase the pressure to increase personnel costs. Lemonsoft constantly monitors the development of the situation from a risk management perspective and strives to ensure the continuation of profitable growth by optimizing its cost structure and pricing.
The ERP market is generally a highly competitive market, and the industry is fragmented. Smaller players are primarily focused in a specific sector of SMEs and larger players do not compete directly for customers in the same market. However, competition in Lemonsoft's operating markets may intensify due to existing competitors or agile new entrants.
Risks related to information security and the IT systems of service providers are a significant factor affecting the security and continuity of the Group's business. Lemonsoft constantly invests in high reliability and high security systems and strives to ensure the high quality of the services it purchases by selecting leading players in the industry as its key partners. European data protection regulations may also bring unexpected risks to Lemonsoft's operating environment.
Success in acquisitions and related integration work is a key factor for Lemonsoft's growth. The company has made several acquisitions in recent years and aims to continue to grow through acquisitions. There may be unexpected risks associated with target companies and their integration into Lemonsoft.
Dividends paid
The Annual General Meeting decided on 4 April 2023 that a dividend of EUR 0.14 per share will be paid according to the confirmed balance sheet for the accounting period ending on 31 December 2022. A total dividend of approximately EUR 2.6 million was paid on 17 April 2023.
Events after the review period
Lemonsoft has announced on 2 June 2023 that Jan-Erik Lindfors, who has served as the company's deputy CEO since 2021, has started as Lemonsoft's CEO as of 1.8.2023.
Outlook 2023
Lemonsoft's goal is to continue growth, both by increasing the number of software modules offered to its existing customer base and by expanding its customer base with new customer acquisition. However, the company estimates that the prevailing economic situation will have a weakening effect on new sales and the growth of the existing customer base, especially in the first half of the year.
Profit forecast for 2023
Lemonsoft has updated its profit forecast for 2023 following the acquisition of Finvoicer Group Oy.
Lemonsoft estimates that the net sales for the financial year 2023 will increase by 15-20 percent compared to the financial year 2022, and that adjusted EBIT will be 25-30 percent of net sales in 2023.
Financial information
Lemonsoft Oyj will publish the following financial information in 2023:
· Interim Report January – September 2023 on Thursday, 26 October 2023
Webcast for investors and media
Lemonsoft will host a live webcast for investors and the media in English on August 11, 2023 at 1:00pm EET. The webcast can be followed online live via this link:
https://lemonsoft.videosync.fi/2023-q2-results
A recording of the event and the presentation material will be available after the event at https://investors.lemonsoft.fi/.
Lemonsoft Oyj
Board of Directors
For further information, please contact:
Jan-Erik Lindfors
CEO
jan-erik.lindfors@lemonsoft.fi
+358 50 382 3331
Alpo Luostarinen
Director, M&A and IR
alpo.luostarinen@lemonsoft.fi
+358 50 911 3507
Certified Adviser:
Danske Bank A/S, Finland Branch, +358 40 841 3052
About Lemonsoft Oyj
Lemonsoft is a Finnish software company that designs, develops and sells ERP software solutions to streamline its customers’ processes across different business lines and administration. The extensive offering of software solutions and related services enables the company to provide its customers with holistic service. The company’s standardized and scalable software solutions are delivered mainly from the cloud and are based on the SaaS model in which customers pay a monthly service fee for the use of the software. The company operates in the ERP software market primarily as a service provider for SMEs. The company’s customer base includes customers from especially industrial manufacturing, wholesale and retail, professional services automation, construction and accounting.
Get to know us better at www.lemonsoft.fi.
Distribution
Nasdaq Helsinki Oy
Principal media