QPR Software Interim Report January – March 2021

QPR Software Interim Report January – March 2021




QPR Software Interim Report January – March 2021

QPR SOFTWARE STOCK EXCHANGE RELEASE, APRIL 23, 2021 AT 9:00 AM

Profitability improved and net sales increased, driven by software sales

January – March 2021

  • Net sales increased to EUR 2,904 thousand (January – March 2020: 2,789).
  • Software net sales increased 6%, license and SaaS net sales grew, but maintenance net sales decreased.
  • Consulting net sales were on the same level as in previous year.
  • International net sales represented 50% of Group net sales (50).
  • Operating result (EBIT) increased to EUR 286 thousand (45) and was 10% of net sales (2).
  • Expenses were smaller than in the previous year mainly due to smaller reseller commissions. Direct sales represented a significantly larger proportion of software sales than in the previous year.
  • Result before taxes EUR 206 thousand (36).
  • Earnings per share EUR 0.014 (0.001).

 

Business operations

QPR Software´s mission is to make customers agile and efficient in their operations. We innovate, develop, and sell software aimed at analyzing, monitoring, and modeling operations in organizations. Furthermore, we offer customers consulting services related to our software.

 

Outlook for 2021 (unchanged)

The exceptional circumstances caused by the pandemic continue to have an impact on our business, but we are already seeing signs of normalization in software purchase decisions. Based on actual sales performance in early 2021 and current sales funnel, QPR expects net sales to grow in 2021 (2020: EUR 8,971 thousand).

QPR plans to moderately increase its sales, marketing and product development costs this year. Despite the planned increase in costs, the Company estimates EBITDA and operating result to improve compared to 2020.


KEY FIGURES

         
EUR in thousands,
unless otherwise indicated
Jan-Mar,
2021
Jan-Mar,
2020
Change,
%
Jan-Dec,
2020
         
Net sales 2,904 2,789 4 8,971
EBITDA 566 390 45 248
 % of net sales 19.5 14.0   2.8
Operating result 286 45 530 -936
 % of net sales 9.8 1.6   -10.4
Result before tax 206 36 467 -952
Result for the period 170 11 1,450 -812
 % of net sales 5.9 0.4   -9.0
         
Earnings per share, EUR
(basic and diluted)
0.014 0.001 1,450 -0.068
Equity per share, EUR 0.176 0.224 -21 0.161
         
Cash flow from operating
activities
906 409 122 334
Cash and cash equivalents 857 572 50 185
Net borrowings 1 -343 -100 762
Gearing, % 0.0 -12.3 -100 38.0
Equity ratio, % 40.9 51.4 -20 34.6
Return on equity, % 32.5 1.6 1,955 -34.1
Return on investment, % 38.1 7.1 440 -28.0


REPORTING

QPR Software innovates, develops, sells and delivers software and services in international markets aimed at facilitating operational development in organizations. QPR Software reports one operating segment: Operational development of organizations. In addition to this, the Company reports revenue from products and services as follows: Software licenses, Renewable software licenses, Software maintenance services, SaaS (Software-as-a-service) and Consulting.

Recurring revenue reported by the Company consists of Saas net sales, Renewable software licenses and Software maintenance services.

Software licenses are sold to customers for perpetual use or for an agreed, limited period. Renewable software licenses are sold to customers as a user right with an indefinite duration. These contracts are automatically renewed at the end of the agreed period, usually one year, unless the agreement is terminated within notice period. Renewable license revenue is recognized at one point in time, in the beginning of the invoicing period.

Geographical areas reported are Finland, the rest of Europe (including Russia and Turkey), and the rest of the world. Net sales are reported according to the customer´s headquarter location.


REVIEW BY THE CEO

The year 2021 had a positive start with an increase in net sales and a significant profitability improvement, despite the continuing coronavirus pandemic.

In the past year we have strengthened our process mining business by recruiting new sales and development resources. This year we will continue this development by building new sales and consulting partnerships especially in our European key markets. The new visual reporting tool in QPR ProcessAnalyzer software has helped to expand its use in customer organizations and further strengthened the competitiveness of this product. Furthermore, performance in processing large amounts of data has been significantly improved, and the software is now available localized in eight languages. Great user experience, high performance and excellent service scalability remain our priorities.

To support our process modeling customers in their operations and quality systems, we will continue this year the development of a new software tool QPR BusinessPortal. With the help of this tool, our customers can  communicate their processes and quality documentation to their personnel, as well as to get better visibility to their service and application portfolios. QPR BusinessPortal is now on a piloting phase and will be fully launched to the markets this year.

The excellent sales development of our performance management software QPR Metrics in the Middle East market was continued in February, when QPR signed a major agreement with a large central government organization to deliver strategy management solution. The value of the deal is approximately EUR 1.2 million, and we estimate that almost EUR 1 million of the deal value will be booked into net sales over the course of 2021. Based on this deal, actual sales performance in early 2020 and current sales funnel, we expect net sales to grow in 2021. Furthermore, profitability is expected to improve, despite the planned moderate increase in sales, marketing and product development costs.

Jari Jaakkola
CEO


NET SALES DEVELOPMENT 

January – March 2021

Net sales in the first quarter increased to EUR 2,904 thousand (2,789). The share of recurring revenue was 44% of net sales (47).

New software license net sales amounted to EUR 734 thousand (587) and grew by 25 %, due to increase in international software sales. Renewable software license net sales decreased to EUR 443 thousand (487), which was  mainly due to customer transitions to use our cloud services (SaaS).

Software maintenance net sales were EUR 518 thousand (571), and decreased by 9% mainly due to decrease in international channel sales.

SaaS net sales amounted to EUR 323 thousand (263). Consulting net sales remained on the same level than in the previous year and amounted to EUR 886 thousand (880).

International net sales increased by 4%, as well as net sales in Finland. Of the Group net sales, 50% (50) derived from Finland, 24% (26) from the rest of Europe (including Russia and Turkey) and 26% (24) from the rest of the world.


NET SALES BY PRODUCT GROUP

         
EUR in thousands Jan-Mar,
2021
Jan-Mar,
2020
Change,
%
Jan-Dec,
2020
         
Software licenses 734 587 25 1,344
Renewable software licenses 443 487 -9 900
Software maintenance services 518 571 -9 2,195
Cloud services 323 263 23 1,081
Consulting 886 880 1 3,452
Total 2,904 2,789 4 8,971


NET SALES BY GEOGRAPHIC AREA

         
EUR in thousands Jan-Mar,
2021
Jan-Mar,
2020
Change,
%
Jan-Dec,
2020
         
Finland 1,448 1,389 4 4,718
Europe incl. Russia and Turkey 687 733 -6 2,474
Rest of the world 769 667 15 1,780
Total 2,904 2,789 4 8,971


FINANCIAL PERFORMANCE

January – March 2021

The Group´s operating result (EBIT) was EUR 286 thousand (45) and represented 10% of net sales (2). The increase in operating result was mainly due to higher net sales and smaller reseller commissions than in the previous year. The share of direct sales in new software sales increased significantly from the previous year. Personnel expenses increased to EUR 1,772 thousand (1,739) and represented 78% of fixed costs.  Outlays in European sales resources, general salary increases as well as higher bonus reservations in short-term incentive system increased our personnel expenses. On the other hand, expenses were lowered by temporary part-time lay-offs in January-March. The Group´s fixed costs in the reporting period were EUR 2,281 thousand (2,304).

Result before taxes was EUR 206 thousand (36) and result for the period was EUR 170 thousand (11). Taxes recorded for the period were EUR 35 thousand (25) and earnings per share (basic and fully diluted) were EUR 0.014 (0.001).


FINANCE AND INVESTMENTS

Cash flow from operating activities was EUR 906 thousand (409). Increase in cash flow was mainly due to higher net sales and a decrease in operative working capital. Cash and cash equivalents at the end of the reporting period were EUR 857 thousand (572).

Net financial expenses were EUR 80 thousand (9) and included a one-off guarantee payment related to a closed project. The payment was made in January 2021.

Investments totaled EUR 184 thousand (278) and were mainly product development expenditure.

The  Group´s financial position is good. Cash and cash equivalents at the end of the reporting period were EUR 857 thousand (572), and in addition the Group has access to EUR 1.3 million other short-term financial instruments. At the end of the period, the Group had a short-term bank loan of EUR 700 thousand and no long-term interest-bearing bank loans. The gearing ratio was 0% (-12). At the end of the reporting period, the equity ratio was 41% (51).


PRODUCT DEVELOPMENT

QPR innovates and develops software products that analyze, measure and model operations in organizations. The Company develops the following software products: QPR ProcessAnalyzer, QPR EnterpriseArchitect, QPR ProcessDesigner, and QPR Metrics.

In the first quarter product development expenses were EUR 486 thousand (579). Product development expenses worth EUR 174 thousand (231) were capitalized. The amortization of capitalized product development expenses was EUR 178 thousand (226). The amortization period for capitalized product development expenses is four years.


PERSONNEL

At the end of the reporting period, the Group employed a total of 81 persons (82). The average number of personnel during the reporting was 84 (83).

The average age of employees is 42.2 (42.1) years. Women account for 22% (21) of employees and men for 78% (79). Of the total, 18% (17) work in sales and marketing, 44% (44) in consulting and customer care, 30% (32) in product development and 8% (9) in administration.

For incentive purposes, the Company has a bonus program that covers all employees. Short term remuneration of the top management consists of salary, fringe benefits, and a possible annual bonus based mainly on the Group and business unit net sales performance. Furthermore, the Company has a key employee stock option plan in use.


SHARES AND SHAREHOLDERS

         
Trading of shares Jan-Mar,
2021
Jan-Mar,
2020
Change,
%
Jan-Dec,
2020
         
Shares traded, pcs 666,969 253,097 164 1,403,426
Volume, EUR 1,420,641 546,999 160 2,825,365
% of shares 5.6 2.1   11.7
Average trading price, EUR 2.13 2.16 -1 2.01
         
Shares and market capitalization Mar 31,
2021
Mar 31,
2020
Change,
%
Dec 31,
2020
         
Total number of shares, pcs 12,444,863 12,444,863 12,444,863
Treasury shares, pcs 457,009 457,009 457,009
Book counter value, EUR 0.11 0.11 0.11
Outstanding shares, pcs 11,987,854 11,987,854 11,987,854
Number of shareholders 1,289 1,167 10 1,240
Closing price, EUR 2.08 1.93 8 2.24
Market capitalization, EUR 24,934,736 23,136,558 8 26,852,793
Book counter value of all treasury
shares, EUR
50,271 50,271 50,271
Total purchase value of all treasury
shares, EUR
439,307 439,307 439,307
Treasury shares, % of all shares 3.7 3.7 3.7


GOVERNANCE

In March 2021, the Board of Directors gave a notice to the shareholders of QPR Software Plc that the Annual General Meeting will be held on Thursday March 25, 2021. The Board of Directors of the Company resolved on extraordinary measures pursuant to the temporary legislation approved by the Finnish Parliament. In order to prevent the spread of the Covid-19 pandemic, the Annual General Meeting was held without shareholders’ presence at the Meeting venue. Participation and exercise of shareholder rights in the Meeting was possible only by way of proxy representation, by submitting counterproposals and asking questions in advance.

The Annual General Meeting approved the Board’s proposal that no dividend be paid for the financial year 2020.  The Annual General Meeting made an advisory decision on the Remuneration Report and decided to approve the presented Remuneration Report.

The Annual General Meeting resolved that the number of Board Members is four (4) and elected Pertti Ervi, Matti Heikkonen, Antti Koskela and Jukka Tapaninen members of the Company´s Board of Directors. The term of office of the members of the Board of Directors expires at the end of the next Annual General Meeting. At its organizing meeting, the Board of Directors elected Pertti Ervi as its Chairman.

The Annual General Meeting elected Authorized Public Accountants KPMG Oy Ab as QPR Software´s auditor with Miika Karkulahti, Authorized Public Accountant, acting as principal auditor. The term of office of the auditor expires at the end of the next Annual General Meeting.

The Annual General Meeting decided to authorize the Board of Directors to decide on conveyance of the own shares held by the Company (share issue) either in one or in several occasions. The share issue can be carried out as a share issue against payment or without consideration on terms to be determined by the Board of Directors.

All authorizations of the Board and other decisions made by the previous Annual General Meeting are available in their entirety in the stock exchange release published by the Company on March 25, 2021. The release can be found in Investors section of the Company’s website, https://www.qpr.com/investors/stock-exchange-and-press-releases.


EVENTS AFTER THE REVIEW PERIOD

The Company has no significant events after the review period to report.


SHORT-TERM RISKS AND UNCERTAINTIES

Internal control and risk management at QPR Software aims to ensure that the Company operates efficiently and effectively, distributes reliable information, complies with regulations and operational principles, reaches its strategic goals, reacts to changes in the market and operational environment, and ensures the continuity of its business.

QPR has identified the following three groups of risks related to its operations: risks related to business operations (country, customer, personnel, legal), risks related to information and products (QPR products, IPR, data security) and risks related to financing (foreign currency, short-term cash flow). The Company has an insurance policy covering property, operational and liability risks.

Financial risks include reasonable credit risk concerning individual business partners, which is characteristic of any international business. QPR seeks to limit this credit risk by continuously monitoring standard payment terms, receivables and credit limits.

Approximately 63% of the Group’s trade receivables were in euro at the end of the quarter (52). At the end of the quarter, the Company had not hedged its non-euro trade receivables.

Risks and risk management practices related to the Company’s business are further described in the Annual Report 2020, pages 22-24 (https://www.qpr.com/investors/financialinformation/annualreports)


FINANCIAL INFORMATION
In 2021, QPR Software Plc will publish its financial information, in Finnish and English, as follows:

Half-year Financial Report 1-6/2021: Wednesday, August 4, 2021
Interim Report 1-9/2021: Friday, October 22, 2021


QPR SOFTWARE PLC
BOARD OF DIRECTORS

Further information:

Jari Jaakkola, CEO, Tel. +358 (0) 40 5026 397

DISTRIBUTION:
NASDAQ OMX Helsinki Ltd
Main Media

Neither this press release nor any copy of it may be taken, transmitted or distributed, directly or indirectly, in or into the United States of America or its territories or possessions.


FINANCIAL STATEMENTS

CONSOLIDATED COMPREHENSIVE INCOME STATEMENT

         
EUR in thousands, unless
otherwise indicated
Jan-Mar,
2021
Jan-Mar,
2020
Change,
%
Jan-Dec,
2020
         
Net sales 2,904 2,789 4 8,971
Other operating income  –   100
         
Materials and services 337 440 -23 1,422
Employee benefit expenses 1,772 1,739 2 6,649
Other operating expenses 228 220 4 753
EBITDA 566 390 45 248
         
Depreciation and amortization 280 345 -19 1,183
Operating result 286 45 530 -936
         
Financial income and expenses -80 -9 786 -16
Result before tax 206 36 467 -952
         
Income taxes -35 -25 39 140
Result for the period 170 11 1,450 -812
         
         
Earnings per share, EUR
(basic and diluted)
0.014 0.001 1,450 -0.068
         
Consolidated statement of
comprehensive income:
       
 Result for the period 170 11 1,450 -812
Other items in comprehensive
income that may be reclassified
subsequently to profit or loss:
       
 Exchange differences on
 translating foreign operations
1 1 39 -3
Total comprehensive income 172 12 1,344 -814


CONDENSED CONSOLIDATED BALANCE SHEET

EUR in thousands Mar 31,
2021
Mar 31,
2020
Change,
%
Dec 31,
2020
         
Assets        
         
Non-current assets:        
 Intangible assets 2,033 2,022 1 2,054
 Goodwill 513 513 0 513
 Tangible assets 164 100 64 176
 Right-of-use assets 121 226 -47 211
 Other non-current assets 277 62 347 277
Total non-current assets 3,108 2,923 6 3,231
         
Current assets:        
 Trade and other receivables 2,649 2,698 -2 2,901
 Cash and cash equivalents 857 572 50 185
Total current assets 3,506 3,270 7 3,086
         
Total assets 6,614 6,193 7 6,317
         
Equity and liabilities        
         
Equity:        
 Share capital 1,359 1,359 0 1,359
 Other funds 21 21 0 21
 Treasury shares -439 -439 0 -439
 Translation differences -67 -65 3 -69
 Invested non-restricted equity fund 5 5 0 5
 Retained earnings 1,311 1,907 -31 1,126
Equity attributable to shareholders of
the parent company
2,190 2,788 -21 2,004
         
Current liabilities:        
 Interest-bearing liabilities 700   700
 Interest-bearing lease liabilities 158 229 -31 247
 Advances received 1,263 766 65 527
 Accrued expenses and prepaid income 1,693 1,853 -9 2,305
 Trade and other payables 610 556 10 533
Total current liabilities 4,424 3,405 30 4,313
         
Total liabilities 4,424 3,405 30 4,313
         
Total equity and liabilities 6,614 6,193 7 6,317


CONSOLIDATED CONDENCED CASH FLOW STATEMENT

         
EUR in thousands Jan-Mar,
2021
Jan-Mar,
2020
Change,
%
Jan-Dec,
2020
         
Cash flow from operating activities:        
 Result for the period 170 11 1,450 -812
 Adjustments to the result 203 389 -48 1,135
 Working capital changes 678 23 2,845 45
 Interest and other financial
 expenses paid
-142 -22 -555 -40
 Interest and other financial
 income received
2 13 -88 27
 Income taxes paid -5 -5 -1 -21
Net cash from operating activities 906 409 122 334
         
Cash flow from investing activities:        
 Purchases of tangible and
 intangible assets
-157 -301 -48 -1,098
Net cash used in investing activities -157 -301 -48 -1,098
         
Cash flow from financing activities:        
 Proceeds from short term
 borrowings
700   700
 Repayments of short term
 borrowings
-700 -500 40 -500
 Payment of lease liabilities -89 -76 18 -261
Net cash used in financing activities -89 -576 -84 -61
         
Net change in cash and cash
equivalents
660 -468 241 -825
Cash and cash equivalents
at the beginning of the period
185 1,035 -82 1,035
Effects of exchange rate changes
on cash and cash equivalents
12 5 152 -25
Cash and cash equivalents
at the end of the period
857 572 50 185


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

               
EUR in thousands Share
capital
Other
funds
Translation
differences
Treasury
shares
Invested non-
restricted
equity fund
Retained
earnings
Total
Equity Jan 1, 2020 1,359 21 -66 -439 5 1,882 2,762
Stock option scheme           14 14
Comprehensive income     1     11 12
Equity March 31, 2020 1,359 21 -65 -439 5 1,907 2,788
Stock option scheme           42 42
Comprehensive income     -4     -823 -826
Equity Dec 31, 2020 1,359 21 -69 -439 5 1,127 2,004
Stock option scheme           14 14
Comprehensive income     1     170 172
Equity March 31, 2021 1,359 21 -68 -439 5 1,311 2,190


NOTES TO INTERIM FINANCIAL STATEMENTS

ACCOUNTING PRINCIPLES

This report complies with requirements of IAS 34 ”Interim Financial Reporting”. Starting from the beginning of 2021, the Group has applied certain new or revised IFRS standards and IFRIC interpretations, as described in the Consolidated Financial Statements 2020. The implementation of these new and revised requirements has not impacted the reported figures. For all other parts, the accounting principles and methods are the same as they were in the 2020 financial statements.

When preparing the consolidated financial statements, management is required to make estimates and assumptions regarding the future and to consider the appropriate application of accounting principles, which means that actual results may differ from those estimated.

All amounts presented in this report are consolidated figures, unless otherwise noted. The amounts presented in the report are rounded, so the sum of individual figures may differ from the sum reported. This report is unaudited.


INTANGIBLE AND TANGIBLE ASSETS

       
EUR in thousands Jan-Mar,
2021
Jan-Mar,
2020
Jan-Dec,
2020
       
Increase in intangible assets:      
 Acquisition cost Jan 1 11,987 11,159 11,159
 Increase 174 228 828
       
Increase in tangible assets:      
 Acquisition cost Jan 1 2,622 2,487 2,487
 Increase 10 50 135


CHANGE IN INTEREST-BEARING LIABILITIES

       
EUR in thousands Jan-Mar,
2021
Jan-Mar,
2020
Jan-Dec,
2020
       
Interest-bearing liabilities Jan 1 947 784 784
Proceeds from short term borrowings 700 21 947
Repayments 789 576 784
Interest-bearing liabilities Sep 30 858 229 947


PLEDGES AND COMMITMENTS

         
EUR in thousands Jan-Mar,
2021
Jan-Mar,
2020
Dec 31,
2020
Change,
%
         
Business mortgages (held by the Company) 2,386 2,382 2,387 0
         
Minimum lease payments based on lease agreements:        
 Maturing in less than one year 7 8 7 0
 Maturing in 1-5 years 5 14 7 -25
Total 12 22 14 -10
         
Total pledges and commitments 2,398 2,404 2,401 0


CONSOLIDATED INCOME STATEMENT BY QUARTER

           
EUR in thousands Q1
2021
Q4
2020
Q3
2020
Q2
2020
Q1
2020
           
Net sales 2,904 2,341 1,801 2,041 2,789
Other operating income 75 25
           
Materials and services 337 443 279 260 440
Employee benefit expenses 1,772 1,679 1,474 1,757 1,739
Other operating expenses 228 193 232 109 220
EBITDA 566 27 -109 -60 390
           
Depreciation and amortization 280 211 304 324 345
Operating result 286 -184 -413 -384 45
           
Financial income and expenses -80 -8 -6 6 -9
Result before tax 206 -191 -419 -378 36
           
Income taxes -35 34 74 57 -25
Result for the period 170 -157 -345 -321 11


GROUP KEY FIGURES

       
EUR in thousands, unless
otherwise indicated
Jan-Mar or
Mar 31, 2021
Jan-Mar or
Mar 31, 2020
Jan-Dec or
Dec 31, 2020
       
Net sales 2,904 2,789 8,971
Net sales growth, % 4.1 1.5 -5.7
EBITDA 566 390 248
 % of net sales 19.5 14.0 2.8
Operating result 286 45 -936
 % of net sales 9.8 1.6 -10.4
Result before tax 206 36 -952
 % of net sales 7.1 1.3 -10.6
Result for the period 170 11 -812
 % of net sales 5.9 0.4 -9.0
       
Return on equity (per annum), % 32.5 1.6 -34.1
Return on investment (per annum), % 38.1 7.1 -28.0
Cash and cash equivalents 857 572 185
Net borrowings 1 -343 762
Equity 2,190 2,788 2,004
Gearing, % 0.0 -12.3 38.0
Equity ratio, % 40.9 51.4 34.6
Total balance sheet 6,614 6,193 6,317
       
Investments in non-current assets 157 278 1,210
 % of net sales 5.4 10.0 13.5
Product development expenses 486 579 2,050
 % of net sales 16.7 20.8 22.9
       
Average number of personnel 84 83 86
Personnel at the beginning of period 88 83 83
Personnel at the end of period 81 81 88
       
Earnings per share, EUR
(basic and diluted)
0.014 0.001 -0.068
Equity per share, EUR 0.176 0.224 0.161