SaaS grew by 24% - Order intake in Germany exceeded one million euro
- Net sales grew by 15% to 12.2 million euro. (17% growth without perpetual licenses)
- SaaS grew by 24% and was 47% of total net sales
- Services grew by 20% and was 38% of total net sales
- Investments into accelerating international growth decreased profitability, as anticipated. EBITDA was -2.0 million euro and operating profit -2.4 million euro
- Growth accelerated in Germany toward year-end and order intake exceeded one million euro
- Guidance: In 2019 SaaS net sales is expected to grow by over 20% and profitability to improve from the comparison period
CEO Niilo Fredrikson:
In 1-12/2018 Efecte's net sales grew by 15% to 12.2 MEUR (10.6 MEUR in 2017). Our current main businesses grew more rapidly: net sales of SaaS grew by 24% and services by 20%. Total growth of net sales was significantly impacted by fluctuation in our old license business: net sales of licenses decreased by 21% and related maintenance decreased by 11%. Without licenses, the growth in 2018 was 17%.
Our main business, cloud services, SaaS, grew steadily the whole year. Monthly recurring SaaS revenue (MRR) was 23% higher than in the previous year-end. In Finland a key factor in growth was expansions by the current customers, either more users or new solution areas.
Our international business generated approx. 15% of our net sales, growing slightly faster than Finland, but below our targets. Especially the development of Sweden and Denmark disappointed, with employee churn being one of the contributing factors.. We selected a new country manager for Sweden in late 2018 and he started before year-end.
In Germany the year was a period of strong investments. Earlier actions started to bear fruit in the last few months of the year and we won several new customers. The total order intake in Germany during the year exceeded one million euro. The orders received in the last few months will start to contribute into net sales from 2019 onward. In 2018 the net sales in Germany tripled to approx. 0.4 MEUR and the growth is expected to continue this year.
The forward-looking growth investments, especially the significant increase in the number of employees in Germany and Sweden, have decreased profitability in the review period, but were necessary for accelerating the international growth.
Year 2018 was in many ways significant for Efecte. Efecte celebrated its 20 years anniversary, and as growth continued, actions were needed to accommodate the new scale. Due to our growth, a significant portion of our employees have started during the last year and a half, which has caused us some operational pains and need for short term training & development actions on culture, processes and technology.
I moved from a board member to CEO in September, and we started the planning work for Efecte's next growth phase. We evaluated strategy, organization and processes, and did the first changes in late 2018. These actions were aimed to bring us benefits also in the short term, especially to accelerate sales in Germany, decrease employee churn and increase cloud operations efficiency. We succeeded in these three goals in the last quarter.
In 2019, we will continue to implement our strategy aiming for international growth. We have also refined our strategy by defining growth of SaaS net sales and customer success as key targets and have modified our long-term financial targets to match this. We will focus on landing our strategy across our organization and will increasingly highlight in our messaging the versatility of our service management offering. We have also defined local service providers as a key customer segment in addition to mid-sized organizations. Successes in 2018 have shown that we are competitive in this segment, and more focus will help us to succeed in international competition.
In addition to actions targeting growth, we will in 2019 continue actions to improve our operational efficiency to better reap the scale benefits from our growth and through that improve our profitability. For example, we will continue to increase automation in our cloud operations and better share our consultancy resources between our countries in cross-border customer deliveries.
I have now served as the CEO for almost half a year. During these first months I have actively met with our customers and employees in different countries. This has further strengthened my belief in Efecte's success, as our product portfolio has potential, we have motivated employees and a strong customer base, together with whom we can continue growth.
Long-term financial targets
Efecte aims for over 20% annual organic growth of SaaS net sales on average in 2019 - 2022. Substantial investments in international growth and product development will decrease operating profit in the next few years, but the company aims for a double-digit operating profit percentage by the end of the strategy period.
Guidance for year 2019
In 2019 SaaS net sales is expected to grow by over 20% and profitability to improve from the comparison period.
You can read the full statement on our investor pages.
See an interview (in Finnish) with Niilo Fredrikson on InderesTV.