Basware Oyj

Quarterly Report • Oct 12, 2015

BASWARE INTERIM REPORT JANUARY 1 – SEPTEMBER 30, 2015 (IFRS)

SUMMARY

Revenue developed favourably with key markets growing 95 percent

January–September 2015:

• Net sales EUR 104 200 thousand (EUR 93 010 thousand) growth 12.0 percent
• Operating profit EUR 371 thousand (EUR 2 624 thousand) 0.4 percent of net sales (2.8%)
• Growth of Network Services net sales 46.4 percent
• Recurring revenue 68.2 percent (67.8%) of net sales
• Earnings per share (diluted) EUR 0.01 (0.11)

July–September 2015:

• Net sales EUR 33 569 thousand (EUR 30 164 thousand) growth of 11.3 percent
• Operating profit EUR 996 thousand (EUR 1 162 thousand) 3.0 percent of net sales (3.9%)
• Growth of Network Services net sales 48.3 percent
• Recurring revenue 72.2 percent (70.1%) of net sales
• Earnings per share (diluted) EUR 0.09 (0.05)

Basware expects its net sales and operating profit (EBIT) for 2015 to grow compared to 2014.

The Interim Report is unaudited.

GROUP KEY FIGURES

	7-9/	7-9/	Change,	1-9/	1-9/	Change,	1-12/
EUR thousand	2015	2014	%	2015	2014	%	2014
Net sales	33 569	30 164	11.3	104 200	93 010	12.0	127674
EBITDA	2 823	2 923	-3.4	5 678	7 918	-28.3	11 354
Operating profit	996	1 162	-14.3	371	2 624	-85.9	4 325
% of net sales	3.0%	3.9%		0.4%	2.8%		3.4%
Profit before tax	1 488	694	114.4	282	2 124	-86.7	4 328
Profit for the period	1 249	777	60.7	129	1 505	-91.4	2 959
Return on equity, %	3.6 %	2.6%		0.1 %	1.7%		2.5%
Return on investment, %	3.8 %	3.0%		1.2 %	3.1%		4.4%
Cash and cash equivalents	36 824	60 156	-38.8	36 824	60 156	-38.8	28 954
Gearing, %	-25.5 %	-39.3%		-25.5 %	-39.3%		-38.6%
Equity ratio, %	77.4 %	80.6%		77.4 %	80.6%		82.7%
Earnings per share
Undiluted, EUR	0.09	0.05	80.0	0.01	0.11	-90.9	0.22
Diluted, EUR	0.09	0.05	80.0	0.01	0.11	-90.9	0.22
Equity per share, EUR	9.73	9.90	-18.7	9.73	9.90	-18.7	9.88

BUSINESS OPERATIONS

Basware is the global leader in providing purchase-to-pay and e-invoicing solutions in the world of commerce. Basware empowers companies to unlock value across their financial operations by simplifying and streamlining key financial processes. Basware helps its customers to succeed and create added value to their business through better financial management. Basware Commerce Network, the largest open business network in the world, connects 1 million companies across 100 countries and enables easy collaboration between buyers and suppliers of all sizes. Through this network, leading companies around the world achieve improved spend control, efficiency, and closer relations with their suppliers. With Basware, businesses can introduce completely new ways of buying and selling to achieve significant cost savings and boost their cash flow.

CEO Esa Tihilä:

Revenue developed favourably also during the third quarter, growth of 11.3 percent year-on-year. Net sales for the third quarter amounted to EUR 33 569 thousand (EUR 30 164 thousand). The year-on-year growth in key markets was at a good level: net sales continued to grow strongly in the US, the UK and Germany, with combined revenue growth of 95 percent. Operating profit was EUR 996 thousand (EUR 1 162 thousand). The profit was burdened by continued investments in the selected key operations, such as Financing Services. The international share of Basware's net sales year-to-date totaled to 65.8 percent (62.1%) at the end of the period.

The Network Services sales grew well during the third quarter, supported both by the organic growth as

well as the acquisition, which took place during the second quarter. The net sales of Network Services amounted to EUR 11 810 thousand (EUR 7 964 thousand) during the third quarter, growth of 48.3 percent year-on-year. The growth in the transaction volume continued, up 23 percent year-to-date, and a total of 68.8 million transactions were processed via Basware Commerce Network at the end of the period. The month-on-month growth from August to September reached an all-time high, and in September the network growth reached also an all-time-high, with 8.2 million processed transactions during the month. This marks also the milestone of 100 million annualized transactions sent and received across Basware Commerce Network. The significant growth of the network continued in the einvoicing target markets, such as the US, the UK and Germany, while the growth was levelling off in some markets where the penetration is relatively high.

The Solution Services' order intake continued steadily during the third quarter, with a positive impact on future recurring revenue. The net sales of the Solution Services business amounted to EUR 21 758 thousand for the third quarter (EUR 22 200 thousand). The demand for SaaS services continued at a good level, represented by the SaaS revenue growth of 18.0 percent year-on-year. The billable utilization rate improved and there was an increasing number of Alusta sales agreements, 23 in total, during the quarter. The result was however impacted by the faster than expected decrease in license sales.

The Financing Services solutions, Basware Pay and Basware Discount, have continued to attract customer interest, and 12 customers in the UK, the US and Finland have signed for the new solutions during the quarter. Negotiations with several new international financial institutions on collaboration with Basware Pay are underway. The development of the joint venture in the UK and a new e-invoicing based, supplier driven invoice financing service with Arrowgrass Capital Partners LLP are proceeding as planned. Investments in and building the Financing Services business and services have continued.

In accordance with its strategy, Basware's geographic expansion and achieving strong growth in Basware Commerce Network continue to be the main objectives, pursued both organically and through acquisitions. Development of the Financing Services business and services and establishing and finding new significant partnerships in the business will continue actively during the latter part of 2015. The company also continues actively to develop ways to accelerate the global growth.

NET SALES

Basware Group's net sales for the period amounted to EUR 104 200 thousand (EUR 93 010 thousand), growth of 12.0 percent. The net sales included higher alliance fees related to the financing-related value added services compared to the corresponding period.

Net sales for the third quarter increased by 11.3 percent to EUR 33 569 thousand (EUR 30 164 thousand).

Net sales	7-9/	7-9/	Change,	1-9/	1-9/	Change,	1-12/
EUR thousand	2015	2014	%	2015	2014	%	2014
Network Services	11 810	7 964	48.3	35 219	24 061	46.4	33 237
Solution Services	21 758	22 200	-2.0	68 980	68 948	0.1	94 437
Group total	33 569	30 164	11.3	104 200	93 010	12.0	127 674

Information on products and services*

*The breakdown of the net sales of the businesses has been adjusted with regard to previously reported comparison periods due to changes in the organization structure

The Network Services net sales for the period amounted to EUR 35 219 thousand (EUR 24 061 thousand), growth of 46.4 percent, including an alliance fee of 3 million Euros related to the financingrelated value added services. The growth in the transaction volume of the business continued, up 23 percent, and 68.8 million transactions were processed via Basware Commerce Network.

Solution Services net sales amounted to EUR 68 980 thousand (EUR 68 948 thousand), up 0.1 percent.

The share of recurring revenue of net sales increased during the period to 68.2 percent (67.8%) of net sales.

The international share of Basware's net sales was 65.8 percent (62.1%) in the period.

FINANCIAL PERFORMANCE

Basware's operating profit for the period amounted to EUR 371 thousand (EUR 2 624 thousand). Operating profit represented 0.4 percent (2.8%) of net sales.

Basware's operating profit for the third quarter was EUR 996 thousand (EUR 1 162 thousand) Operating profit represented 3.0 percent (3.9%) of net sales.

The company's operating expenses including employee benefits, depreciations and amortizations as well as other operating expenses were EUR 91 550 thousand (EUR 81 409 thousand) in the period, and have increased by 12.5 percent from the corresponding period the previous year. Personnel expenses made up 69.1 percent (70.0%) or EUR 63 270 thousand (EUR 56 976 thousand) of the operating expenses. Bad debt provision at the end of the period amounted to EUR 798 thousand (EUR 1 560 thousand). Other operating expenses include acquisition-related and other non-recurring costs of EUR 2 671 thousand.

The company's finance income and finance expenses were EUR 559 thousand (EUR -500 thousand) for the period. During the second quarter, Basware and Arrowgrass Capital Partners LLP established a joint venture to develop a new e-invoicing based, supplier driven invoice financing service. Basware's share of the start-up costs of the new business totaled EUR -648 thousand.

Basware's profit before tax was EUR 282 thousand (EUR 2 124 thousand) and profit for the period was EUR 129 thousand (EUR 1505 thousand) or 0.1 percent (1.6%) of net sales. Taxes for the period totaled EUR 154 thousand (EUR 619 thousand). Following the tax audit in Basware's German subsidiary in 2011, and as announced in Interim report of October 10, 2012 and in Financial Statement Release in January 24, 2013 Basware applied for a mutual agreement procedure in which the competent German and Finnish authorities agree on the elimination of double taxation. In September 2015, the company was informed that an agreement has been reached between Germany and Finland. Company expects that the total amount of the tax refund will be confirmed by the end of this year.

Undiluted earnings per share were EUR 0.01 (EUR 0.11).

FINANCING AND INVESTMENTS

Basware Group's total assets on the balance sheet at the end of the period were EUR 177 836 thousand (EUR 173 739 thousand). The company's cash and cash equivalents totaled EUR 36 824 thousand (EUR 60 156 thousand). The net cash flow from operations were EUR 12 407 thousand (EUR 13 942 thousand). Net cash flows from investments were EUR 207 thousand (EUR -3 256 thousand). Cash

outflows related to the acquisition of Procserve, net of cash acquired, were EUR -20 389. Net cash flows from financing activities were -4 748 EUR thousand (EUR 35 999 thousand).

Equity ratio was 77.4 percent (80.6%) and gearing -25.5 percent (-39.3%). The company's interestbearing liabilities totaled EUR 1 667 thousand (EUR 5 072 thousand), of which current liabilities accounted for EUR 1 667 thousand (EUR 3 477 thousand). Return on investment was 1.2 percent (3.1%) and return on equity 0.1 percent (1.7%).

Gross investments including Procserve acquisition as well as the capitalized research and development costs totaled EUR 34 855 thousand (EUR 3 872 thousand).

RESEARCH AND DEVELOPMENT

Basware's research and development expenses totaled EUR 14 654 thousand (EUR 12 830 thousand), or 14.1 percent (13.8%) of net sales during the review period. The expenses increased by 10.8 percent compared to the corresponding period the previous year. Research and development expenses capitalized during the period amounted to EUR 5 865 thousand (EUR 2 853 thousand). The research and development costs included in the profit for the review period totaled EUR 8 789 thousand (EUR 9 977 thousand), or 8.4 percent (10.7%) of net sales. A total of 371 (330) people worked in R&D at the end of the period.

PERSONNEL

Basware employed 1 594 (1 464) people on average during the period and 1 653 (1 456) at the end of the period.

Personnel	7-9/	7-9/	Change,	1-9/	1-9/	Change,	1-12/
Employed, on average	2015	2014	%	2015	2014	%	2014
Finland	484	483	0.2	478	476	0.5	482
EMEIA	552	416	32.7	520	428	21.5	425
India	532	490	8.6	521	494	5.5	492
Americas & APAC	78	67	16.4	75	66	13.6	67
Group total	1 646	1 456	13.0	1 594	1 464	8.9	1 466

Geographical division of personnel:

The share of personnel working in foreign units has increased compared with the previous year mainly due to the growth of personnel in India, Romania and the UK. At the end of the period, 70.4 percent (67.7%) of Basware personnel worked outside of Finland and 29.6 percent (32.3%) in Finland. 11.4 percent (12.1%) of the personnel work in sales and marketing, 58.8 percent (59.9%) in professional services, 22.7 percent (22.3%) in research and development, and 7.1 percent (6.2%) in administration.

The average age of employees is 35.0 (34.8) years. Women account for 26.2 percent (25.0%) of employees, men for 73.8 percent (75.0%).

OTHER EVENTS OF THE PERIOD

Changes in Basware's Executive Team

Member of the Basware Executive Team, Chief Marketing Officer, Steve Muddiman took up a new position outside Basware as of September 30, 2015. The recruitment process for a new Chief Marketing Officer is ongoing.

EVENTS AFTER THE PERIOD

Shares represented by Arrowgrass Capital Partners LLP increased over 10 percent

The total number of shares represented by Arrowgrass Capital Partners LLP and its funds increased over 10 percent (11.31%) of Basware Corporation's share capital and voting rights on October 6, 2015. The notification was given to the company's information on October 7, 2015.

RISKS AND UNCERTAINTY FACTORS

The world economy and markets are unstable, which has resulted in a decrease in the demand for solutions and services. The negotiation times of large international deals in particular are long because of the nature of service level agreements in the deals.

Business management regularly monitors the payment of sales receivables as part of the management of customer accounts. There are no significant credit risk concentrations associated with the sales receivables; they are primarily comprised of a large number of relatively small receivables.

The development of Solution Services net sales is influenced by the utilization rate of consulting and delays in the entry of new SaaS services into production compared to the plans. The Alusta software and services are continuously developed in the Solution Services business area. The development work is associated with technical implementation risks that may influence the usability and quality of existing or new products.

Information security is an important and central part of Basware's operations. The market is developing all the time, and the requirement level related to information security changes rapidly, resulting in potential risks.

Basware invests in launching financing services business. This is a new business area for the company, and the associated possible risks include risks related to the functionality of new products, collaboration with business partners, and demand for the products.

The company aims to avoid wrong recruitments and excessive personnel turnover, which can lead to a decrease in customer satisfaction, growth and profitability, and continuously assesses the competence and well-being of the personnel as part of the HR processes.

Additional information on risks and risk management is available on the company's investor site www.basware.com/investors.

FUTURE OUTLOOK

Operating environment and market outlook

Companies of all sizes globally are under pressure to improve their cash flows, find new innovative payment strategies, and automate their financial processes and functions. The company expects the same to continue also in 2015 and the continuous demand for services to remain at a favorable level among its customers.

Consolidation is expected to continue in the business environment, with the role of services growing in companies' portfolios. According to industry research, e-invoicing has become more common and the number of e-invoices has grown substantially in Europe and the rest of the world. The global market penetration of e-invoices is estimated to be some 10 percent. The growing e-invoicing market and companies' interest in other payment and financing added value solutions as well will offer excellent growth opportunities in future years.

Outlook 2015

The global market growth in e-invoicing has been estimated to be approximately 20 percent. Basware is pursuing strong growth in Network Services by developing and automating the connection of buyers and suppliers to the e-invoicing service, by utilizing digital marketing and sales channels more extensively, and through acquisitions. In the Solution Services business, sales of Alusta are expected to have a positive effect on software net sales and professional services.

Basware's operating expenses are expected to develop moderately, the company is actively managing its cost base and has initiated several productivity improvement programs during 2015. Seasonality affects Basware's business throughout the year, and typically the last quarter of the year has been the strongest quarter.

Basware will invest more extensively in sales and marketing as well as research and development of new solutions and services, including Financing Services. The company will continue to improve its profit-making ability in its software business also this year by ensuring the efficient use of resources in professional services and improving the billing rate in relation to demand. The company will continue investments in the Network Services business to achieve accelerated growth by primarily developing automated solutions for sending and receiving e-invoices and new ways to achieve accelerated growth in sales.

In 2015, the company expects the acquisition of Procserve and related integration costs to exceed the savings starting from the second quarter of the year and the cost synergies to be net positive next year. The company also expects the joint venture which has been established with Arrowgrass Capital Partners LLP to add net costs in 2015.

Basware continues active analysis of acquisition targets especially in the e-invoicing market in Europe and in the U.S. according to its strategy. Decisions on additional investments required for growth will be made during the year as required by the market situation and development of business operations.

Basware expects its net sales and operating profit (EBIT) for 2015 to grow compared to 2014.

Espoo, Finland, Monday, October 12, 2015

BASWARE CORPORATION Board of Directors

For more information, please contact:

Esa Tihilä, CEO, Basware Corporation Tel. +358 40 480 7098

Distribution: NASDAQ OMX Helsinki Ltd Key media www.basware.com

SUMMARY OF FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS JANUARY 1 – SEPTEMBER 30, 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

EUR thousand	1.7.- 30.9.2015	1.7.- 30.9.2014	Change, %	1.1.- 30.9.2015	1.1.- 30.9.2014	Change, %	1.1.- 31.12.2014
NET SALES	33 569	30 164	11.3	104 200	93 010	12.0	127 674
Other operating income	-3	57		19	260	-92.7	260
Materials and services	-3 852	-3 200	20.4	-12 298	-9 237	33.1	-12 796
Employee benefit expenses	-19 238	-17 337	11.0	-63 270	-56 976	11.0	-77 779
Depreciation and amortization	-1 827	-1 760	3.8	-5 306	-5 294	0.2	-7 029
Other operating expenses	-7 654	-6 761	13.2	-22 973	-19 139	20.0	-26 004
Operating profit	996	1 162	-14.3	371	2 624	-85.9	4 325
Finance income
Finance expenses	609	-233		1 632	231	606.5	1 154
Share of results of a joint venture	87	34	155.8	-1 073	-731	46.8	-1 151
Profit before tax	-205	0	-100	-648	0	-100	0
	1 488	964	54.4	282	2 124	-86.7	4 328
Income taxes	-240	-187	28.3	-154	-619	-75.1	-1 368
PROFIT FOR THE PERIOD	1 249	777	60.7	129	1 505	-91.4	2 959
Other comprehensive income Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Exchange differences on translating foreign operations	-2 606	848		-1011	958		-684
Income tax relating to components of other comprehensive income	145	-169		-202	-238	-15.1	-279
Other comprehensive income, net of tax	-2 641	679		-1213	719		-963
TOTAL COMPREHENSIVE INCOME	-1 212	1 456		-1 084	2 224		1 996
EUR thousand	1.7.– 30.9.2015	1.7.– 30.9.2014	Change, %	1.1.– 30.9.2015	1.1.– 30.9.2014	Change, %	1.1.- 31.12.2014
Profit attributable to:
Equity holders of the parent company	1 249	777	60.7	129	1 505	-91.4	2 959
	1 249	777	60.7	129	1 505	-91.4	2 959
Total comprehensive income attributable to:
Equity holders of the parent company	-1 212	1 456		-1 084	2 224		1 996
	-1 212	1 456		-1 084	2 224		1 996
Earnings per share undiluted, EUR	0.09	0.05	80.0	0.01	0.11	-90.9	0.22
diluted, EUR	0.09	0.05	80.0	0.01	0.11	-90.9	0.22

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

EUR thousand	30.9.2015	30.9.2014	Change, %	31.12.2014
ASSETS
Non-current assets
Intangible assets	33 863	24 949	35.7	25 231
Goodwill	69 176	51 240	35.0	50 317
Tangible assets	1 439	1 396	3.1	1 387
Share of investment in a joint venture	577	0	100	0
Available-for-sale investments	37	45	-17.8	38
Trade and other receivables	1 104	864	27.8	724
Deferred tax assets	5 458	4 090	33.5	4 377
Non-current assets	111 655	82 584	35.2	82 074
Current assets
Inventories	26	153	-83.0	42
Trade receivables	22 704	24 255	-6.4	22 902
Other receivables	4 981	2 703	84.3	33 204
Income tax receivables	1 646	3 888	-57.7	1 605
Cash and cash equivalents	36 824	60 156	-38.8	28 954
Current assets	66 181	91 156	-27.4	86 707
ASSETS	177 836	173 739	2.4	168 781

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

EUR thousand	30.9.2015	30.9.2014	Change, %	31.12.2014
EQUITY AND LIABILITIES
Shareholders' equity
Share capital	3 528	3 528	0.0	3 528
Share premium account	1 187	1 187	0.0	1 187
Treasury shares	-1 108	-1 156	4.1	-1 156
Invested unrestricted equity fund	104 334	104 384	0.1	104 381
Other reserves	540	540	0.0	540
Translation differences	-4 134	-1 238	233.8	-2 921
Retained earnings	33 328	32 765	1.7	34 184
Shareholders' equity	137 675	140 011	-1.7	139 745
Non-current liabilities
Deferred tax liability	4 206	2 469	70.4	2 433
Interest-bearing liabilities	0	1 667	-100.0	1 667
Other non-current financial liabilities	582	385	51.2	315
Non-current liabilities	4 788	4 521	5.9	4 415
Current liabilities
Interest-bearing liabilities	1 667	3 405	-51.0	3 333
Trade payables and other liabilities	33 444	25 686	30.2	20 886
Income tax liabilities	263	117	124.8	403
Current liabilities	35 374	29 208	21.1	24 622
EQUITY AND LIABILITIES	177 836	173 739	2.4	168 781

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

EUR thousand	Share capital	Share premium account	Treasury shares	Inv. un restricted equity	Other reserves	Translation differences	Retained earnings	Total
SHAREHOLDERS' EQUITY 1.1.2015	3 528	1 187	-1 156	104 381	540	-2 921	34 184	139 746
Comprehensive income						-1 213	129	-1 084
Dividend distribution							-1 415	-1 415
Share based payments							430	430
Treasury shares issued*			48	-48				0
SHAREHOLDERS' EQUITY 30.9.2015	3 528	1 187	-1 108	104 334	540	-4 134	33 328	137 675

EUR thousand	Share capital	Share premium account	Treasury shares	Inv. un restricted equity	Other reserves	Translation differences	Retained earnings	Total
SHAREHOLDERS' EQUITY
1.1.2014	3 528	1 187	-1 164	61 748	540	-1 958	34 074	97 956
Comprehensive income						719	1 505	2 224
Dividend distribution							-2 957	-2 957
Share based payments				43 644			143	143
Treasury shares issued*			8	-8				0
SHAREHOLDERS' EQUITY
30.9.2014	3 528	1 187	-1 156	104 384	540	-1 743	32 765	140 011

*Reward of the share-based incentive plan for Basware's key personnel

CONSOLIDATED STATEMENT OF CASH FLOWS

EUR thousand	1.1.-30.9.2015	1.1.-30.9.2014	1.1.-31.12.2014
Cash flows from operating activities
Profit for the period	129	1 505	2 959
Adjustments	5 728	6 505	8 460
Working capital changes	7 472	8 463	5 191
Financial items in operating activities	-10	-341	-938
Income taxes paid	-912	-2 189	-762
Cash flows from operating activities	12 407	13 942	14 912
Cash flows used in investing activities
Purchase of tangible and intangible assets	-8 059	-3 856	-6 517
Acquisition of subsidiaries and businesses	-20 389	0	0
Investment made to a joint venture	-1 226	0	0
Short-term deposits	0	0	-30 000
Repayment of loan receivables	29 881	600	600
Cash flows used in investing activities	207	-3 256	-35 917
Cash flows from financing activities
Proceeds from current borrowings	12 500	0	0
Repayment of current borrowings	-14 167	0	0
Share issue	0	42 502	43 215
Repayments of non-current borrowings	-1 667	-3 333	-3 333
Payments of finance lease liabilities	0	-213	-284
Dividends paid	-1 415	-2 957	-2 957
Cash flows from financing activities	-4 748	35 999	36 640
Net change in cash and cash equivalents	7 866	46 685	15 635
Cash and cash equivalents at the beginning of period	28 954	13 218	13 218
Net foreign exchange difference	3	253	101
Cash and cash equivalents at the end of period	36 824	60 156	28 954

ACCOUNTING PRINCIPLES

The Interim Report has been prepared in accordance with IAS 34, Interim Financial Reporting. The same accounting principles have been followed as in the previous annual financial statements.

Basware has a 50 percent interest in a joint venture which was established with Arrowgrass Capital Partners LLP in the UK to develop a new e-invoicing based, supplier driven invoice financing service. Basware has determined its interest in the joint venture to be accounted for using the equity method. Basware's share of results of the joint venture is presented as a separate line item in the consolidated statement of comprehensive income and consolidated statement of financial position.

Basware reports one operating segment: Purchase to Pay, P2P. The segment is divided into the Network Services and Solution Services businesses that support each other. Revenue from products and services is reported as follows: Network Services (e-invoicing solutions and services) and Solution Services (software solutions and services).

Network services revenue is comprised of e-invoicing, paper invoice scanning services, printing service, catalog exchange and purchase message exchange. It contains activation services, professional services and start up fees related to these and alliance fees of financing-related value added services. Solution Services revenue is comprised of software revenue (SaaS revenue and license sales), software maintenance and extended customer support services, professional services, and start-up fees of SaaS services.

Recurring revenue reported by the company consists of the net sales excluding license sales and professional services revenue. Alliance fees from financing-related value added services of non-recurring nature are not included in the recurring revenue. The definition of the recurring revenue has been revisited in 2015 to reflect the current business structure.

As of January 1, 2015, Basware has reported geographical areas Finland, EMEIA, and Americas & APAC. The reported areas have been adjusted to reflect the growth in the share of the Group's international business. The Finland area includes the Finnish operations and corporate services. EMEIA combines Scandinavia and the rest of Europe, previously reported separately, and it also includes operations in Russia and Africa. Americas & APAC includes business operations in North and South America and the Pacific region. The comparison figures have been adjusted correspondingly.

Net sales are reported by the customer's location, and net sales and operating profit are also reported by the location of the assets. In addition, the geographical information of non-current assets is reported by the location of the assets in the annual financial statements.

Preparation of financial statements in accordance with the IFRS standards requires Basware's management to make estimates and assumptions that have an effect on the amount of assets and liabilities on the balance sheet at the closing date as well as the amounts of income and expenses for the financial period. In addition, the management must exercise its judgment regarding the application of accounting policies. Since the estimates and assumptions are based on the views at the date of the Financial Statements, they include risks and uncertainties. The actual results may differ from the estimates and assumptions.

The amounts presented in the income statement and balance sheet are Group figures. The amounts presented in the release are rounded, so the sum of individual figures may differ from the sum reported.

The Interim Report is unaudited.

BUSINESS COMBINATIONS

On April 8, 2015 Basware acquired the shares of Procserve, the UK's leading e-procurement solution provider. As part of its strategy, Basware continuously supports organic growth with acquisitions in its key markets and this acquisition made Basware the market leader for the public sector in the UK. The acquired business has been consolidated into Basware's result from the acquisition date. The consideration of EUR 25 753 thousand was paid in cash. The acquired net assets amount to approximately EUR 6 204 thousand, including the cash reserves of EUR 5 497 thousand. Approximately EUR 6 333 thousand associated with customer relationships have been allocated to intangible assets. The value associated with customer relationships will be amortized in 10 years, starting from the second quarter of 2015. The goodwill of EUR 19 545 thousand is recognized primarily to be attributing to the expected synergies with Procserve's and Basware's cloud-based e-procurement solutions as well as Procserve Commerce Network and the open Basware Commerce Network. The goodwill is non-deductible for income tax purposes. The calculation concerning the allocation of the purchase price is preliminary. Transaction costs of EUR 1 452 thousand are included in other operating expenses in the consolidated statement of comprehensive income and are part of the operating cash flows in the consolidated statement of cash flows.

The values of acquired assets and liabilities as at the date of acquisition were:

Consideration	25 753
Goodwill	19 545
Net assets	6 204
Total liabilities	7 025
Trade and other payables	7 025
Total assets	13 231
Cash and cash equivalents	5 497
Trade and other receivables	1 256
Tangible assets	55
Intangible assets	6 422
EUR thousand

Analysis of cash flows on acquisition:

Net cash flow on acquisition	-21 708
Transaction costs	-1 452
Cash and cash equivalents in Procserve	5 497
Consideration	-25 753
EUR thousand

The net sales of the acquired business included in the Group income statement since acquisition date were EUR 5 355 thousand and result for the period was EUR -304 thousand. The Group net sales would have totaled EUR 106 825 thousand and result for the period EUR 19 thousand, if the business combination had taken place at the beginning of the year.

SEGMENT REPORTING

Basware reports one operating segment: Purchase to Pay, P2P. The reported segment is comprised of the entire Group, and the segment figures are consistent with the Group figures. The company reports revenue from products and services by businesses: Network Services (e-invoicing solutions and services) and Solution Services (software solutions and services).

INFORMATION ON PRODUCTS AND SERVICES*

Net sales	7-9/	7-9/	Change,	1-9/	1-9/	Change,	1-12/
EUR thousand	2015	2014	%	2015	2014	%	2014
Network Services	11 810	7 964	48.3	35 219	24 061	46.4	33 237
Solution Services	21 758	22 200	-2.0	68 980	68 948	0.1	94 437
Group total	33 569	30 164	11.3	104 200	93 010	12.0	127 674

*The breakdown of the net sales of the businesses has been adjusted with regard to previously reported comparison periods due to changes in the organization structure

GEOGRAPHICAL INFORMATION**

Net sales by the location of customer

Net sales	7-9/	7-9/	Change,	1-9/	1-9/	Change,	1-12/
EUR thousand	2015	2014	%	2015	2014	%	2014
Finland	10 992	11 525	-4.6	35 646	35 254	1.1	48 978
EMEIA	17 692	14 963	18.2	55 129	46 620	18.3	63 628
Americas & APAC	4 885	3 675	32.9	13 425	11 135	20.6	15 068
Group total	33 569	30 164	11.3	104 200	93 010	12.0	127 674

Geographical information by the location of assets

Net sales	7-9/	7-9/	Change,	1-9/	1-9/	Change,	1-12/
EUR thousand	2015	2014	%	2015	2014	%	2014
Finland	17 518	17 110	2.4	57 166	53 224	7.4	73 353
EMEIA	15 712	14 035	11.9	49 189	45 849	7.3	62 674
Americas & APAC	4 888	3 430	42.5	12 835	10 320	24.4	14 425
Between areas	-4 549	-4 412	3.1	-14 991	-16 384	-8.5	-22 778
Group total	33 569	30 164	11.3	104 200	93 010	12.0	127 674

Operating result	7-9/	7-9/	Change,	1-9/	1-9/	Change,	1-12/
EUR thousand	2015	2014	%	2015	2014	%	2014
Finland	-308	1 106		-1 685	510		514
EMEIA	1 387	1 139	21.8	2 460	3 234	-23.9	4 473
Americas & APAC	248	148	67.8	643	519	23.9	723
Between areas	-331	-1 230	-73.1	-1 047	-1 638	-36.1	-1 385
Group total	996	1 162	-14.3	371	2 624	-85.8	4 325

Personnel	7-9/	7-9/	Change,	1-9/	1-9/	Change,	1-12/
Employed, on average	2015	2014	%	2015	2014	%	2014
Finland	484	483	0.2	478	476	0.4	482
EMEIA (excluding India)	552	416	32.7	520	428	21.5	425
India	532	490	8.6	521	494	5.5	492
Americas & APAC	78	67	16.4	75	66	13.6	67
Group total	1 646	1 456	13.0	1 594	1 464	8.9	1 466

** As of 2015, the company reports geographical areas as follows: Finland, EMEIA including Russia, and Americas & APAC. Comparative figures have been adjusted accordingly

FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES

	30.09.2015 Book value	30.09.2015 Fair value	30.09.2014 Book value	30.09.2014 Fair value	31.12.2014 Book Value	31.12.2014 Fair value
EUR thousand
Financial assets
Non-current:
Available-for-sale financial assets	38	38	45	45	38	38
Non-current trade and other receivables	1 104	1 104	864	864	724	724
Current:
Financial assets at fair value through profit or loss
Currency swaps *	0	0	0	0	20	20
Current trade receivables	22 586	22 586	24 255	24 255	22 902	22 902
Current other receivables	4 981	4 981	2 703	2 703	33 204	33 204
Cash and cash equivalents	36 824	36 824	60 156	60 156	28 954	28 954
Financial liabilities
Non-current:
Financial liabilities valued at amortized acquisition cost:
Loans from financial institutions, interest-bearing	0	0	1 667	1 667	1 667	1 667
Current: Financial liabilities at fair value through profit or loss
Interest rate derivatives*	0	0	17	17	12	12
Loans from financial institutions, interest-bearing	1 667	1 667	3 333	3 333	3 333	3 333
Finance lease liabilities, interest bearing	0	0	72	72	0	0
Trade payables and other liabilities	33 444	33 444	25 686	25 686	20 886	20 886

*not in hedge accounting, level 2

COMMITMENTS AND CONTINGENT LIABILITIES

EUR thousand	30.09.2015	30.09.2014	31.12.2014
Own guarantees
Business mortgages of own debts	1 200	1 200	1 200
Guarantees	205	0	205
Commitments on behalf of subsidiaries and group companies
Guarantees	37	68	37
Other own guarantees
Lease liabilities
Current lease liabilities	1 016	891	992
Lease liabilities maturing in 1–5 years	1 224	753	1 014
Total	2 241	1 643	2 006
Other rental liabilities
Current rental liabilities	5 540	3 647	5 365
Rental liabilities maturing in 1–5 years	7 581	5 861	7 584
Rental liabilities maturing later	1 273	1 848	2 037
Total	14 393	11 356	14 985
Other own contingent liabilities, total	16 634	13 036	16 991
Total commitments and contingent liabilities	18 076	14 267	18 433

RELATED PARTY TRANSACTIONS

EUR thousand	30.09.2015	30.09.2014	31.12.2014
Joint venture:
Sales	291	0	0
Trade Receivables	202	0	0
Softaforce:
Purchases of services	117	132	132
Trade payables	0	2	0

GROUP QUARTERLY INCOME STATEMENT

EUR thousand	7-9/2015	4-6/2015	1-3/2015	10-12/2014	7-9/2014	4-6/2014
NET SALES	33 569	36 590	34 041	34 664	30 164	31 833
Other operating income	-3	3	19	0	57	26
Materials and services	-3 852	-4 437	-4 009	-3 559	-3 200	-3 057
Employee benefit expenses	-19 238	-23 221	-20 811	-20 803	-17 337	-19 561
Depreciation and amortization	-1 827	-1 822	-1 658	-1 735	-1 760	-1 744
Other operating expenses	-7 654	-8 870	-6 449	-6 865	-6 761	-6 345
Operating result	996	-1 757	1 132	1 701	1 162	1 152
%	3.0%	-4.8%	3.3%	4.9%	3.9%	3.6%
Finance income	609	458	565	923	-233	325
Finance expenses	87	-319	-841	-420	34	-328
Share of results of a joint venture	-205	-444	0	0	0	0
Result before tax	1 488	-2 062	856	2 204	964	1 149
%	4.4%	-5.6%	2.5%	6.4%	3.2%	3.6%
Income taxes	-240	347	-261	-749	-187	-345
RESULT FOR THE PERIOD	1 249	-1 715	595	1 454	777	804
%	3.7 %	-4.7%	1.7%	4.2%	2.6%	2.5%

GROUP KEY INDICATORS

EUR thousand	1-9/2015	1-9/2014	1-9/2013	1-12/2014
Net sales	104 200	93 010	90 300	127 674
Growth of net sales, %	12.0 %	3.0%	8.4%	3.5%
EBITDA	5 678	7 918	6 504	11 354
% of net sales	5.4 %	8.5%	7.2%	8.9%
Operating profit	371	2 624	1 201	4 325
% of net sales	0.4 %	2.8%	1.3%	3.4%
Growth of operating profit, %	-85.9 %			29.8%
Profit before tax	282	2 124	1 130	4 328
% of net sales	0.3 %	2.3%	1.3%	3.4%
Result for the period	129	1 505	350	2 959
% of net sales	0.1	1.6%	0.4%	2.3%
Return on equity, %	0.1 %	1.7%	0.5%	2.5%
Return on investment, %	1.2 %	3.1%	2.3%	4.4%
Interest-bearing liabilities	1 667	5 072	8 693	5 000
Cash and cash equivalents	36 824	60 156	15 124	28 954
Gearing, %	-25.5 %	-39.3%	-6.7%	-38.6%
Equity ratio, %	77.4 %	80.6%	73.1%	82.7%
Total assets	177 836	173 739	131 968	168 781
Gross investments*	34 855	3 872	19 458	5 821
% of net sales	33.5 %	4.2%	21.5%	4.6%
Capital expenditure	681	608	960	816
% of net sales	0.7 %	0.7 %	1.1%	0.6%
Research and development expenses	14 654	12 830	12 571	17 680
% of net sales	14.1%	13.8%	13.9%	13.8%
R&D personnel at end of period	371	330	356	332
Personnel expenses	63 270	56 976	57 593	77 779
Personnel on average during the period	1 570	1 464	1 487	1 466
Personnel at end of period	1 653	1 480	1 476	1 493
Change in personnel, %	11.7 %	0.3%	6.3%	1.4%

*Including acquisitions and capitalized R&D costs

Group Share Indicators	1-9/2015	1-9/2014	1-9/2013	1-12/2014
Earnings per share, undiluted	0.01	0.11	0.03	0.22
Earnings per share, diluted	0.01	0.11	0.03	0.22
Equity per share	9.73	9.90	7.46	9.88
Price per earnings (P/E)	4 295.18	369.94	796.91	184.31
Share price performance
lowest price	35.98	23.50	18.70	23.50
highest price	47.80	41.00	23.10	41.21
average price	40.32	34.89	19.39	35.65
closing price	39.09	39.35	21.70	41.05
Market capitalization at end of period*	555 907 842	556 661 863	278 812 906	577 640 124
Share issue adjusted number of
traded shares	2 442 089	4 012 169	679 872	4 792 273
% of average number of shares	17.3%	28.4%	5.3%	36.1%
Number of shares*
- at end of the period	14 152 703	14 221 229	12 931 229	14 146 426
- average during the period	14 150 374	14 146 294	12 848 521	13 286 327
- average during the period, diluted	14 170 127	14 130 135	12 848 521	13 297 962

*Excluding treasury shares

SHARE AND SHAREHOLDERS

Basware Corporation's share capital totaled EUR 3 528 369 (3 528 369) at the end of the period and the number of shares was 14 221 229 (14 221 229). Basware Corporation holds 70 855 (74 803) of its own shares, corresponding to approximately 0.5 percent (0.6%) of the total number of shares.

Basware had 13 116 (13 815) shareholders at the end of the period, including 12 nominee-registered holdings (11). Nominee-registered holdings accounted for 30.3 percent (19.1%) of the total number of shares.

The company's Annual General Meeting of February 13, 2015, authorized the Board of Directors to decide on the repurchase of the company's own shares and on share issue as well as on the issuance of options and other special rights entitling to shares.

Additional information on shareholdings of the Executive Team and Board of Directors and major shareholders is available on the company's investor site at www.basware.com/investors.