HEEROS OYJ This release is an unofficial translation of the summary of Heeros Plc’s Business Review 1 January–
July –
- The combined EBITDA margin and revenue growth percentage (Rule of 40, adjusted) was 41% (7–9/2022: 41%).
- Revenue increased by 7% year-on-year to
EUR 2,820 (2,640) thousand. - Recurring revenue (contract and transaction revenue) increased by 4% to
EUR 2,695 (2,583) thousand. Contract revenue increased by 10% toEUR 2,171 (1,970) thousand. Transaction volumes decreased by 8% and transaction revenue declined by 15% toEUR 524 (613) thousand. In addition to the fall in transaction volumes, the fall in transaction revenue was also due to the conversion of transaction volumes into contract revenue in connection of contract renewals. - At the end of
September 2023 , contract revenue (MRR, Monthly Recurring Revenue) amounted toEUR 723 (664) thousand, representing a year-on-year increase of 9%. - New customer order intake in terms of Annual Recurring Revenue (ARR) was approximately
EUR 130 (190) thousand. - EBITDA increased by 38% to
EUR 872 (631) thousand, which was 31% (24%) of revenue. Adjusted EBITDA increased by 51% toEUR 973 (646) thousand, which was 35% (24%) of revenue.
January –
- The combined EBITDA margin and revenue growth percentage (Rule of 40, adjusted) was 25% (1-9/2022: 39%).
- Revenue increased by 4% year-on-year to
EUR 8,486 (8,190) thousand. - Recurring revenue increased by 5% to
EUR 8,061 (7,707) thousand. Contract revenue increased by 9% toEUR 6,407 (5,854) thousand. Transaction volumes decreased by 5% and transaction revenue declined by 11% toEUR 1,654 (1,854) thousand. - EBITDA increased by 26% to
EUR 1,697 (1,346) thousand, which was 20% (16%) of revenue. Adjusted EBITDA increased by 32% toEUR 1,855 (1,410) thousand, which was 22% (17%) of revenue. - New customer order intake in terms of Annual Recurring Revenue (ARR) was approximately
EUR 480 (720) thousand. - After the reporting period, on 18 October,
Heeros announced that it was lowering its financial guidance for 2023:Heeros estimates that its combined EBITDA margin (EBITDA, % of revenue) and revenue growth percentage (Rule of 40) will be 23-27% during the 2023 financial period. We will focus on securing profitable growth during 2023, and we expect the EBITDA margin to increase in the second half of 2023 compared to the second half of 2022.
| EUR thousand | Q3 2023 | Q3 2022 | Change, % | Jan- | Jan- | Change, % | 2022 |
| Rule of 40, % (adj.)1 | 41 % | 41 % | 25 % | 39 % | 39 % | ||
| Revenue | 2,820 | 2,640 | 7 % | 8,486 | 8,190 | 4 % | 11,083 |
| Recurring revenue2 | 2,695 | 2,583 | 4 % | 8,061 | 7,707 | 5 % | 10,332 |
| Contract revenue | 2,171 | 1,970 | 10 % | 6,407 | 5,854 | 9 % | 7,854 |
| Transaction revenue | 524 | 613 | -15 % | 1,654 | 1,854 | -11 % | 2,478 |
| EBITDA | 872 | 631 | 38 % | 1,697 | 1,346 | 26 % | 1,997 |
| EBITDA, % of revenue | 31 % | 24 % | 20 % | 16 % | 18 % | ||
| EBITDA (adjusted) 3 | 973 | 646 | 51 % | 1,855 | 1,410 | 32 % | 2,061 |
| EBITDA (adj.), % of revenue | 35 % | 24 % | 22 % | 17 % | 19 % |
1 The revenue growth rate for 2022 includes the inorganic growth derived from the
an adjustment of
2 Recurring revenue is divided into two parts: contract revenue (fixed usage fees and service agreements) and transaction revenue.
3 The adjusted figures for 1-9/2023 include an adjustment of
“Heeros continued to make positive progress during the third quarter of 2023 despite continued challenges in the Finnish macroeconomic environment.
Our scalable and predictable SaaS-business model combined with a commitment to improving profitability continues to bring certainty in delivering results even amidst a deteriorating market situation.
Focus on profitability continues
Heeros’ key focus area during the quarter continued to be increasing profitability, a goal where we succeeded well.
January-September EBITDA (adjusted) increased by 32% to
Revenue continued to grow, although at a slower pace compared to the same period last year, driven by good development in recurring revenue. At the end of
The declining macroeconomic situation slowed down revenue growth. Transaction revenue, which is about 20% of recurring revenue, was more negatively impacted in third quarter (-15%) than in second (-9%) or first quarter (-8%). Annual Recurring Revenue (ARR) order intake was lower than a year ago at
We now see the effects of cost savings measures enacted during April-
As noted earlier in our Half-year report 2023, the effects of these cost saving measures are expected to be visible Q4 2023 onwards and in full during 2024.
Long-term customerships, low churn
Contract revenue, our most important metric, grew by 10% during the third quarter. Net revenue retention was 106% (109%), especially strong with direct customerships both on Financial cloud and ERP cloud sides. Churn, especially churn measured in customers not contracting but completely leaving
New customer care and segmentation model
In order to focus on those customers who are on the growth journey with
For quarters to come, our plan remains to be focused on expanding current customerships rather than putting a lot of effort into gaining new logos.
Updated brand now on web as well
Just after the end of the quarter, the last step in the integration between
During the quarter we also successfully outsourced one of our products, scanning services, to Posti, and reduced costs without affecting customer service level – an effective example of streamlining our product suite to focus on our ideal customer profile.
Finally,
FINANCIAL OUTLOOK FOR 2023 (UPDATED ON 18 OCTOBER)
CONTINUATION OF THE STRATEGY PERIOD
RESULTS PRESENTATION FOR INVESTORS ON
A link to the Teams meeting has been sent to everyone who has registered for the event in advance.
You can access the event materials after the event on the company’s website at https://www.heeros.com/en/for-investors.
Board of Directors
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