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QPR Software Interim Report January - March 2021

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QPR Software Oyj
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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/financial-information/annual-reports)


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