Basware Oyj — Annual Report (ESEF) 2020

Feb 23, 2021

Basware 2020 Governance Financials

Report of the Board of Directors: January 1 – December 31, 2020

Basware offers the largest open business network in the world and is the global leader in providing networked purchase-to-pay solutions and e-invoicing services. Basware’s technology empowers organisations with 100% spend visibility by enabling the capture of all financial data across procurement, finance, accounts payable and accounts receivable functions. Basware is a global company doing business in more than 100 countries and is traded on the Helsinki exchange.

Basware’s results in 2020

Key figures¹	EUR THOUSAND	2020	2019	Change, %
Net sales		151,579	148,302	2.2
Cloud revenue		110,312	101,442	8.7
Cloud ARR order intake		19,250	23,694	-18.8
EBIT		4,667	-14,537
EBITDA		20,207	1,403
Gearing, %¹		53.0	48.9	8.4
Cash and cash equivalents¹		40,461	31,672	27.8
Cash flows from operating activities		25,252	4,159
Free cash flow metric		-6,590	-23,829	72.3
Earnings per share, diluted, EUR		-0.51	-1.63	68.8
Personnel¹		1,336	1,325	0.8

Net sales by revenue type, EUR THOUSAND

	2020	2019	Change, %
Cloud	110,312	101,442	8.7
Consulting	26,875	24,962	7.7
Maintenance, license and other	14,392	21,899	-34.3
Total	151,579	148,302	2.2

Net sales by customer location, EUR THOUSAND

	2020	2019	Change, %
Americas	35,013	31,796	10.1
Europe	52,176	50,687	2.9
Nordics	56,428	57,441	-1.8
APAC	7,962	8,379	-5.0
Total	151,579	148,302	2.2

Basware’s net sales for the year 2020 amounted to EUR 151,579 thousand (EUR 148,302 thousand), an increase of 2.2 percent. This equated to 3.2 percent organic growth at constant currencies. In 2020 cloud revenue amounted to EUR 110,312 thousand (EUR 101,442 thousand), an increase of 8.7 percent. This equated to 9.8 percent organic growth at constant currencies. The cloud revenue growth rate was negatively impacted by the change in transaction volume mix towards more electronic invoicing and less paper invoicing as a result of the Covid-19 situation. Basware has not continued some non-strategic SaaS contracts which increased the cloud churn rate, and which also has an effect on the cloud revenue growth rate. Cloud revenues accounted for 73 percent (68%) of total revenue. Consulting revenues amounted to EUR 26,875 thousand (EUR 24,962 thousand), an increase of 7.7 percent. This equated to 8.8 percent organic growth at constant currencies. Maintenance, license and other revenue declined in line with expectations as Basware transitions customers to the cloud. Maintenance, license and other revenue amounted to EUR 14,392 thousand (EUR 21,899 thousand), a decrease of 34.3 percent. This equated to 33.6 percent organic decrease at constant currencies.

Americas accounted for 23.4 percent (21.4%), Europe 34.8 percent (34.2%), Nordics 37.0 percent (38.7%) and Asia-Pacific area for 4.9 percent (5.6%) of total revenues. A list of Basware Corporation's subsidiaries is in Note 26 of the Financial Statements.

Financial performance

Basware’s total cloud annual recurring revenue (ARR) gross order intake in 2020 amounted to EUR 19,250 thousand (EUR 23,694 thousand), a decrease of -18.8 percent. This equated to 19.6 percent decline on an organic constant currency basis. Due to the economic uncertainty caused by the pandemic, there continued to be some cautiousness from especially new enterprise customers in starting large IT projects. This had a negative impact on new customer acquisition and therefore on the order intake. There will be a time lag before order intake is visible in net sales. Typically, around one quarter of new ARR order intake converts into revenues in the year that it is won, with roughly fifty to sixty percent converting to revenues in the second year and the remainder thereafter.

Cloud order intake	EUR THOUSAND	2020	2019	Change, %
Cloud		19,250	23,694	-18.8

	EUR THOUSAND	2020	2019	Change, %
Net sales		151,579	148,302	2.2
Cost of sales		-65,941	-71,493	-7.8
Gross profit		85,638	76,810	11.5
Sales and marketing		-40,001	-45,190	-11.5
Research and development		-25,930	-26,815	-3.3
General and administration		-14,096	-14,572	-3.3
Total operating expenses		-80,027	-86,577	-7.6
Other operating income and expenses		-944	-4,770	-80.2
Operating profit/loss		4,667	-14,537

Basware’s profitability development was positive throughout the year. In 2020 Basware’s operating profit was EUR 4,667 thousand (EUR -14,537 thousand). In 2020, cost of sales amounted to EUR -65,941 thousand (EUR -71,493 thousand), a decrease of 7.8 percent. Out of total operating expenses, sales and marketing expenses decreased 11.5 percent, research and development expenses decreased 3.3 percent and general and administration expenses decreased 3.3 percent. Sales and marketing costs reduced in comparison to 2019 as a result of actions taken due to Covid-19. Basware’s loss before tax was EUR -6,985 thousand (EUR -23,663 thousand) and loss for the financial year EUR -7,329 thousand (EUR -23,440 thousand). Taxes for the year impacted the result by EUR -345 thousand (EUR 223 thousand). Diluted earnings per share were EUR -0.51 (EUR -1.63).

Adjusted operating profit/loss and adjusted EBITDA	EUR THOUSAND	2020	2019	Change, %
Operating profit/loss		4,667	-14,537
Adjustments: Acquisition, disposal and restructuring income (-) and expenses (+)		-301	1,009
Efficiency related expenses		453	2,772	-83.7
Total adjustments		152	3,781	-96.0
Adjusted operating profit/loss		4,819	-10,756
Depreciation and amortization		15,540	15,941	-2.5
Adjusted EBITDA		20,359	5,185
% of net sales		13.4	3.5

Cash flows, financing and# Basware 2020 Governance Financials

investments Cash flows from operating activities were EUR 25,252 thousand (EUR 4,159 thousand). The improvement was driven by higher profitability and improved working-capital practices in 2020. Basware’s cash and cash equivalents including short-term deposits were EUR 40,461 thousand (EUR 31,672 thousand) at the end of the year. Basware’s total assets on the balance sheet at the end of the year were EUR 224,862 thousand (EUR 224,581 thousand). Net cash flows from investments were EUR -9,464 thousand (EUR -10,541 thousand). The equity ratio was 36.7 percent (41.9 %) and gearing 53.0 percent (48.9 %). The company’s interest-bearing liabilities excluding leasing liabilities EUR 68,837 thousand (EUR 60,885 thousand), of which current liabilities accounted for EUR 2,173 thousand (EUR 1,996 thousand). The return on investment was 3.1 percent (-8.6%) and return on equity -8.3 percent (-22.9%).

Cash flows, financing and investments

The purpose of the free cash flow metric is to provide a clear view of all costs related to Basware’s operations. From the second quarter of 2019 Basware published free cash flow metric on a quarterly basis to enable investors to track the progress towards the expectation that Basware reaches positive free cash flow on a run-rate basis by the end of 2020. The definition for free cashflow metric is disclosed in Definition of Alternative Performance Measures.

Research and development

In 2020 Basware’s research and development focused on improving scalability in networked AP solution and user experience in Procurement. In addition, Basware developed its data platform and REST API-based integrations. In general, the focus of Basware’s R&D activities is to strengthen the networked Purchase-to-Pay offering by extending the business coverage and the underlying system intelligence with AI in addition to continuous development of an integrated user experience across the individual business solutions. In 2020 Basware’s research and development investments including capitalizations but exclud - ing amortizations were EUR 24,819 thousand (EUR 27,967 thousand). Research and develop- ment investments were 16.4 percent (18.9%) of net sales in 2020. A total of 273 (283) people worked in research and development at the end of 2020.

EUR THOUSAND	2020	2019	Change, %
EBITDA	20,207	1,403
Capitalizations	-9,877	-10,617	-7.0
Finance expenses	-12,271	-9,091	35.0
Taxes, excl. deferred taxes	-951	-1,341	-29.1
Payment of lease liabilities	-4,257	-4,372	-2.6
Share based compensation, share part	560	188
Free cash flow metric	-6,590	-23,829	72.3

The free cash flow metric amounted to EUR -6,590 thousand (EUR -23,829 thousand) in 2020. The free cash flow metric improved in comparison to 2019 mainly due to improved profitability.

Personnel

PERSONNEL ON AVERAGE BY AREA

	2020	2019	Change, %
Americas	106	121	-12.2
Europe	373	374	-0.4
Nordics	425	437	-2.7
APAC	430	417	3.1
Total	1,334	1,349	-1.1

Basware employed 1,334 (1,349) people on average during 2020 and 1,336 (1,325) at the end of the year. On December 31, 2020, 13.6 percent (13.9%) of the personnel worked in sales and marketing, 33.2 percent (33.7%) in R&D and production and products, 42.4 percent (42.4%) in consulting and customer services and 10.7 percent (10.0%) in administration. Information about salaries and employee benefits in Note 5 of the Financial Statements and other employee related metrics in the Non-financial statement.

40 Basware 2020 Governance Financials

Basware had 11,864 (14,615) shareholders at the end of the year, including nominee-registers. Nominee-registered holdings accounted for 56.4 percent (52.4%) of the total number of shares. More information on share-based key figures, Basware share and shareholders available in sections Share Indicators, Calculation of Key Indicators, and Share and Shareholders of the Financial Statements.

Share and shareholders

Flagging notifications in 2020

During the review period, Basware Corporation received the following notifications from major shareholders:

ANNOUNCEMENT DATE	Shareholder	Threshold	Total holding, %
February 11	Briarwood Chase Management LLC	Above 5%	5.00%
September 1	Arrowgrass Capital Partners LLP	Below 25%	22.6%
October 9	Bregal Milestone LP	Below 5%	0.0%
October 9	Briarwood Chase Management LLC	Above 10%	14.43%
October 22	Lannebo Fonder AB	Above 5%	7.48%
October 23	Arrowgrass Capital Partners LLP	Below 20%	18.5%
December 11	Briarwood Chase Management LLC	Below 5% 1	11.35%

1 Briarwood Chase Management LLC’s direct holding of shares decreased below 5% threshold but total holding through both shares and warrants remained above 10% threshold.

SHARE INDICATORS

	2020	2019
Share price performance, EUR
- lowest price	15.66	16.76
- highest price	42.85	41.10
- average price	29.58	23.61
- closing price	42.00	23.75
Market capitalization at end of period 1, EUR	605,679,312	341,943,926
Number of shares 1
- at end of the period	14,415,460	14,397,639
- average during the period	14,407,595	14,388,469
- average during the period, diluted	14,638,935	14,473,519
Number of traded shares (share issue adjusted) in Nasdaq Helsinki	4,817,685	4,204,444
% of average number of shares	33.4%	29.2%
Treasury shares held by the Company	5,476	4,297
% of total shares	0.0%	0.0%
Share capital, EUR	3,528,368	3,528,368
Earnings per share, undiluted, EUR	-0.51	-1.63
Earnings per share, diluted, EUR	-0.51	-1.63
Adjusted earnings per share, undiluted, EUR	-0.50	-1.37
Adjusted earnings per share, diluted, EUR	-0.50	-1.37
Equity per share, EUR	5.73	6.53
Price per earnings (P/E)	-82.56	-14.58

1 Excluding treasury shares

More information in sections ‘Share indicators’ and ‘Share and shareholders’. See also Remu- neration report for information on Basware’s share-based incentive plans.

Annual General Meeting and authorizations of the Board of Directors

Basware Corporation’s Annual General Meeting 2020 was held on June 4, 2020. The Annual General Meeting adopted the financial statements and discharged the responsible parties from liability for the financial period January 1-December 31, 2019. The remuneration policy was adopted, and the Annual General Meeting decided that no dividend will be paid for the year 2019. The Annual General Meeting decided the number of members of the Board of Directors to be five. Mr. Ilkka Sihvo, Mr. Michael Ingelög, Mr. Daryl Rolley and Mr. Asko Schrey were re-elected as members of the Board of Directors and Ms. Minna Smedsten was elected as a new member. In its organizing meeting, the Board of Directors elected Michael Ingelög as the Chair and Ilkka Sihvo as the Vice Chair of the Board. Minna Smedsten was elected as the Chair of the Audit Committee and Asko Schrey and Michael Ingelög as its members. Ilkka Sihvo was elected as the Chair of the Remuneration Committee and Daryl Rolley and Michael Ingelög as its members.

41 Basware 2020 Governance Financials

Ernst & Young Oy, Authorized Public Accounting Firm, was elected as the company’s auditor. The Board of Directors was authorized to decide on repurchasing a maximum of 1,420,000 company’s own shares. The company’s own shares shall be repurchased otherwise than in proportion to the holdings of the shareholders by using the non-restricted equity through trading on regulated market organized by Nasdaq Helsinki Ltd at the market price prevailing at the time of acquisition. The repurchase authorization shall be valid for 18 months and it shall revoke the previous authorizations for repurchasing the company’s own shares. The Board of Directors was authorized to decide on issuing new shares or conveying the company’s own shares held by the company or granting special rights entitling to shares. The Board of Directors may grant special rights, which carry the right to receive, against pay - ment, new shares of the company or the company’s own shares held by the company. A total maximum of 260,000 new shares may be issued or company's own shares held by the company may be conveyed for the purposes of company’s incentive program, and in addition, a total maximum of 720,000 new shares may be issued or company's own shares held by the company may be conveyed for other purposes than company’s incentive program. The subscription price of the new shares and the consideration payable for the company’s own shares shall be recorded under the invested non-restricted equity fund. The Board of Directors shall decide on all other terms and conditions related to the authorizations. The authorizations shall be valid for 18 months. On June 4, 2020 Basware announced via stock exchange release the resolutions of the Annual General Meeting. The resolutions from Annual General Meetings are available on Basware’s investor website at https://investors.basware.com/en/annual-general-meeting

Changes in Executive Team

On August 13, 2020, Basware announced that it had appointed Mogens Pedersen as Chief Technology Officer and Perttu Nihti as Chief Product Officer. Appointments were effective as of September 1, 2020 when both became members of the Executive Team, reporting to the CEO Klaus Andersen.

Other events of the period

Share issue to the company itself without consideration

On June 4, 2020 Basware announced that the Board of Directors had resolved on an issue of 19,000 new shares in the company to the company itself without consideration. The new shares to be issued are of the same class as the existing shares in the company. The total number of the company's shares after the share issue is 14,420,936 shares, of which 23,297 shares in total are held by the company. The new shares issued to the company will be used for reward payments under the company's incentive programs. As a result of the share issue, the Board of Directors also decided upon the adjustment of the number of shares that can be subscribed on the basis of the 1,000 freely transferable warrants issued by the company to Bregal Milestone in March 2019. Following such adjustment, the warrants entitle their holder to subscribefor a total of 1,001,000 shares in the company (before the adjustment, 1,000,000 shares) at an adjusted subscription price of EUR 29.8764 per share (before the adjustment, the subscription price per share was EUR 29.9158). To increase the number of shares that may be subscribed for with the warrants, the Board of Directors exercised the authorization granted by the Annual General Meeting of shareholders by deciding upon issuance of special rights that entitle their holder to subscribe for 1,000 new shares in the company. These adjustments to the terms and conditions of the warrants became effective upon registration with the Finnish Trade Register, which took place on June 17, 2020.

Conveyances of Basware Corporation’s own shares

On June 23, 2020 Basware announced that the Board of Directors decided on a directed share issue for the reward payment of Basware Corporation's Performance Share Plan 2017-2019, Matching Share Plan 2017 and Restricted Share Plan 2017. In the share issue 16,821 Basware Corporation shares were issued and conveyed without consideration to the key persons participating in the plans according to the terms and conditions of the incentive schemes. After the directed share issue, the company held 6,476 own shares.

On October 8, 2020, Basware announced that the Board of Directors decided on a directed share issue for the reward payment of Basware Corporation's Restricted Share Plan 2017. In the share issue 1,000 Basware Corporation shares were issued and conveyed without consideration to the key persons participating in the plan according to the terms and conditions of the plan. After the directed share issue, the company held 5,476 own shares.

Events after the period

Share issue to the company itself without consideration

On January 14, 2021, the Board of Directors of Basware Corporation has resolved on an issue of 43,000 new shares in the company to the company itself without consideration pursuant to the share issue authorization granted to it by the Annual General Meeting held on June 4, 2020. The new shares to be issued to the company will be used for reward payments under the company's incentive programs. The new shares to be issued are of the same class as the 42 existing shares in the company. The total number of the company's shares after the share issue is 14,463,936 shares, of which 48,476 shares in total are held by the company.

Strategy

Basware is a global market leader in networked Purchase-to-Pay with the largest open e-invoicing network in the world. The market opportunity is estimated to be worth EUR 15 billion annually and its driven by global megatrends such as digitalization and automation, increased regulation, rapid technological development and sustainability.

Basware is focused on sustainable growth and profitability, increasing operational efficiency in the strategic business and simplifying operations. Basware’s key growth markets are the US, UK, Germany and France, where the company sees the greatest opportunity to win new customers. Each of Basware’s top 200 key customers brought on average approximately EUR 300 thousand annual recurring cloud revenue in 2020. Through add-on sales and geographical expansions, there is potential to increase the average revenue from customers. Once Basware wins a new customer they typically stay with the company for many years. In 2020 Basware’s gross renewal rate was 94 percent and net renewal rate was 104 percent. The gross margin for cloud revenues at the end of 2020 was 68 percent. Together these make the lifetime value of customer contracts high. In 2020 Basware had a customer lifetime value to customer acquisition cost ratio of 5 times.

Basware’s long-term ambition is to become the networked Purchase-to-Pay vendor of choice for large global enterprises. Basware moves forward to its vision through six Must-Wins, which define strategic priorities for the period 2020-2022. The Must-Wins relate to customer satisfaction, project delivery capabilities, procurement solution, growing with partners, cloud transformations and Network business.

First Must-Win relates to customer satisfaction, which is a priority across all functions, from first contact to project delivery, products and support. Second Must-Win is enhancing delivery capabilities internally and together with partners to meet customer needs for continuous improvement and change agility. Thirdly, Basware’s aim is to further strengthen its procurement solution and entire Source-to-Pay offering through partnerships and open API architecture. Fourthly, Basware aims to accelerate cloud growth through partnering. The fifth Must-Win battle is to complete the last phase in customer cloud transformations and reallocate resources to long-term strategic areas. Finally, as part of the 2020 strategy process, Basware also identified accelerating Network business as one of the key strategic focus areas from 2021 onwards.

Risks and uncertainty factors

Basware operates in a market where technological innovation plays a key role. While Basware is recognized as a leader within its segments by independent analysts, it is critical that Basware continues to innovate and develop its offering. Basware invests in product development to ensure the competitiveness of its product portfolio and good end-to-end quality, which impacts customer satisfaction, customer retention and expansion.

Basware has a growth strategy with high net sales growth expectations for the cloud business. Executing the strategy requires significant investments in sales and marketing and related resources in addition to optimized pricing model and efficient customer delivery. At the same time, the industry transformation from an on-premise license-based business model to a SaaS model will accelerate the decline of certain Basware revenue streams, including license sales and maintenance. The transformation will also make consulting revenues more volatile. Until the transformation is fully complete, this will act as a drag on Group net sales growth.

The churn rate may increase as Basware consolidates its product portfolio to focus on strategic high gross margin business. Market disruptions such as consolidation of significant competitors, aggressive entries of new competitors or emergence of disruptive technologies may be a risk to Basware’s position as a market leader and to Basware’s market share.

The Group's international business involves customary financial risks such as foreign exchange risk, interest rate risks, liquidity risks, refinancing risks and credit risks. The risk management principles are defined in the Treasury Policy approved by the Board of Directors. The fact that more than 50 percent of the company’s sales are expected to come from non-euro countries exposes the Group’s net sales growth to foreign exchange rate movements. In case there is a significant movement of USD, GBP, NOK, SEK or AUD against the euro, reported net sales may be affected. In addition, a proportion of Basware’s costs are denominated in INR and RON.

Political risks may have a negative effect on Basware. This includes the uncertainty around the status of the UK in relation to the European Union which may have a negative impact on Basware’s business in the UK, and additionally the uncertainty related to taxation and legislation in India which may have a negative impact on Basware’s business in India.

Basware considers acquisitions as part of its strategy. Acquisitions entail risks, such as failure in integrating acquisitions or in ensuring that the planned financial benefits and synergies of the acquisitions materialize.

Basware’s biggest operational risks relate to service disruption as a result of for example data centre failures, various data security threats and non-compliance risks related to Basware’s solutions and services, the company’s activities or its employees’ behaviour. Operational risks are actively managed by continuous improvement in risk monitoring and protection practices, external assessments as well as internal training of Basware’s personnel.

The Covid-19 pandemic may have an impact on the timing of organisations’ IT project decisions and implementations and on the global volume of invoices sent and received. This may impact Basware’s order intake, revenues, operating profit and cash flow. Basware has a business continuity plan in place including extensive remote working capabilities across all functions, however, should the Covid-19 situation materially affect employees’ ability to work, this may disturb Basware’s ability to serve its customers.

Corporate governance statement

The Corporate Governance Statement is issued separately from the Report of Board of Directors. Basware Corporation's Corporate Governance Statement is available on the company's investor website: https://investors.basware.com/en

Non-financial statement

Basware is a supplier of networked purchase-to-pay solutions and e-invoicing services; and has the largest open business network in the world. Basware’s technology empowers organisations with 100% spend visibility by enabling the capture of all financial data across procurement, finance, accounts payable and accounts receivable functions. Basware operates globally and has 1,336 employees in 14 countries. Basware is committed to operating responsibly and sustainably, helping customers move to paperless processes, fostering employee welfare and taking care of cybersecurity and data privacy.

Social responsibility and respect of human rights

Employees are Basware’s most important resource. Basware unconditionally supports and promotes human rights and is committed to act in accordance with the United Nations’ Universal Declaration of Human Rights and the United Nations’ Global Compact principles. Basware complies with the standards of the International Labour Organization as well as with all relevant local employment# Basware 2020 Governance Financials

legislation

Basware does not tolerate in any context the use of servitude, child labor, forced labor, human trafficking, or slavery in our operations in any region we operate.

	2020	2019
Code of Conduct training completion rate	100%	95%

EMPLOYEE AND SOCIAL METRICS

	2020	2019
Women, of total employees	32%	31%
Women, of managers	29%	26%
Full-time employees	98%	98%
Permanent employees	99%	99%
Employees average years of service	5.5	4.9
Attrition rate	7.1%	15.3%
CEO-to-employee pay ratio	6.19-to-1	6.04-to-1

In addition, Basware has a global Code of Conduct that applies to all employees. The Code of Conduct describes the ethical principles according to which Basware operates and expects its suppliers and partners to operate. Code of Conduct training is mandatory for all employees. Basware’s ability to attract, retain and develop the right type of talent at all levels is critical for the company’s success. People are employed based on the principle of equal opportunity and without distinction to race, color, gender, religion, affiliation or origin. In 2020 Basware’s employees were of 33 different nationalities, of which three largest were Indian, Finnish and Romanian. Basware organizes YourVoice employee engagement survey annually and follows up the results through action points each year. In 2020 the survey had a response rate of 94 percent. Survey results in questions measuring employee engagement increased significantly in comparison to previous year, particularly in questions measuring confidence in the Executive Team and consistent strategy execution.

44 Basware 2020 Governance Financials

Prevention of corruption and bribery

As part of Basware’s commitment to conducting its business in an honest and ethical manner, Basware takes a zero-tolerance approach to bribery and corruption, and upholds all relevant laws to countering bribery and corruption in all jurisdictions it operates in. Basware has an Anti-Bribery and Corruption Policy, which sets out the responsibilities of Basware employees in observing and upholding the company’s position on bribery and corruption and provides guidance for Basware employees on how to recognize and deal with bribery and corruption issues. The policy was reviewed and updated in 2020.

	2020	2019
Reported bribery or corruption incidents	0	0

Whistle-blowing practice

Basware encourages its employees to report any violation of its Code of Conduct policies immediately. Employees may contact Basware Whistleblowing Committee, which will ensure that the identity of the person making the report will be confidential and known only to the people necessary to ensure case is handled properly. Any Basware employee who makes a whistleblowing report is protected from any repercussions, such as dismissal or other forms of reprisal.

Cyber and information security

As a cloud-based service provider, Basware recognizes cyber and information security risks related to its industry. Basware acknowledges responsibility to ensure confidentiality, integrity, and availability of customers data and Basware’s information assets. Basware takes any threat to its customers’ and its own information assets and data seriously and is continuously developing processes and technologies to meet the requirements and mitigate the risks. Information security risks are integrated into the company’s multi-disciplinary risk assessment. In 2020 the appointment of Director of Security (CISO) strengthened the information security management ensuring Cyber and Information security is handled and developed in accordance with Basware strategy. The Director of Security develops and drives the global implementation and operationalization of the group-wide information security strategy, protecting Basware and its customers data and assets. Security governance forums oversee security activities, including potential escalations. Basware has an Information Security Management System (ISMS) to oversee the development in the security domain. International standards and best practices are employed to structure Basware information security policy. The ISMS and cybersecurity programs are regularly enhanced to ensure that security policies and standards continuously follow emerging cyber threats, and evolving business and regulatory requirements. Basware’s service control environments are externally audited annually by the ISAE 3402 standard and the reports are available to customers upon request. Basware co-operates with a leading security company to carry out penetration testing annually and manages potentially identified threats accordingly. Basware has in place a Responsible Disclosure channel for security researchers to report any found issues in Basware services. Awareness training play a key role in assuring security of its customers’ and its own information assets and data. Employees are regularly educated through mandatory Global Security e-learning for all employees.

Basware is also committed to data privacy compliance across its operations. This means that Basware processes personal data of its employees, customers, and partners with due care and in accordance with the Global Data Protection Regulation (GDPR) and other applicable data protection laws. Basware conducts an extensive data privacy program, which is led by the Global Data Protection Officer (DPO) and reviewed within the Privacy Steering Committee. The program identifies personal data processing activities, maintains the mandatory privacy process register, performs impact assessments, builds compliance documentation, and follows up on compliance improvement actions. Basware also ensures that employees who process personal data are trained to comply with the privacy policy and guidelines.

Environmental responsibility

Basware’s corporate environmental responsibility is incorporated into the company’s business strategy and operations. In its day-to-day activities, Basware complies with all applicable environmental laws and regulations and expects all its suppliers and partners to obey all relevant legal and industry-specific environmental requirements.

EMPLOYEES BY AGE GROUP

	2020	2019
Under 25	4%	5%
25-34	36%	38%
35-44	37%	36%
45-54	18%	17%
Over 55	6%	5%

45 Basware 2020 Governance Financials

Basware’s most material environmental exposures are energy consumption at our office locations, third-party data centres and the impact of business travel and commuting. Basware tracks its greenhouse gas emissions annually and reports them to CDP. Basware has committed to reduce its emissions footprint and to improve the energy efficiency of its office locations. Basware aims to reduce its office based per employee greenhouse gas emissions by 20% by 2020 from 2016 levels. At the time of publication, the emissions data was not yet available for the year 2020. Company employees are encouraged to reduce the need for business travel by using collaborative technologies and online meeting tools. The direct environmental impact of Basware’s services is estimated to be immaterial to moderate due to the nature of Basware’s business. Basware’s digital solutions and services have the potential to decrease customers carbon emissions by improving efficiency in invoice handling, which reduces required electricity and commuting. Basware is working towards a clearer understanding of the environmental impacts of its solutions and services and is committed to full transparency in communicating about the environmental benefits and burdens of its business.

Future outlook

Themes affecting revenues and EBIT

Basware aims for consistent cloud revenue growth. Cloud revenues are impacted by cloud order intake, churn and network transaction volume driven revenues. Approximately thirty percent of Basware’s network transaction services revenues are subscription based. Cloud churn continues to be affected by non-strategic contracts which are not renewed. Cloud order intake may be negatively affected by economic uncertainty caused by Covid-19, however in the long run the pandemic is expected to accelerate digitalisation megatrends which would support order intake for Basware. Demand for consulting services is driven primarily by new customer wins and expansion sales to existing customers. Revenues from maintenance and license will continue to decline as Basware transitions existing license customers to cloud services. The rate of decline has been increased by end-of-life actions taken during 2019.

	2020	2019
Air travel emissions, CO2e ton	669	2,483

Overall improvements in scalability and operational efficiency are expected to continue. However due to the Covid-19 situation there may be some impact to the timing of these improvements.

Guidance for 2021

Basware expects uncertainty in the demand environment to continue in the first half of 2021 and guides the following for the full year 2021:
* Modest positive Net sales growth on an organic constant currency basis
* EBIT approximately at the same level or better than the previous year

Constant currencies mean that the effects of any changes in currencies are eliminated by calculating the figures for the period using 2020 exchange rates. Organic means that the figures are adjusted to remove the effects of any acquisitions or disposals within the past 12 months.

Board of Directors’ proposal for dividend

On December 31, 2020, the Group’s parent company’s distributable funds were EUR 30,080 thousand. The Board of Directors proposes to the Annual General Meeting that no dividend be paid for 2020. Basware Corporation’s Annual General Meeting is planned to be held on March 18, 2021.

Espoo, Finland, Wednesday, February 3, 2021

BASWARE CORPORATION
Board of Directors

46 Basware 2020 Governance Financials

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (IFRS)

EUR THOUSAND

	Notes	1.1.-31.12.2020	1.1.-31.12.2019
NET SALES	2	151,579	148,302
Cost of sales		-65,941	-71,493
GROSS PROFIT		85,638	76,810
Sales and marketing		-40,001	-45,190
Research and development		-25,930

EUR THOUSAND	Notes	1.1.-31.12.2020	1.1.-31.12.2019
Revenue		165,897	154,003
Cost of sales		-69,860	-64,873
Gross profit		96,037	89,130
Other operating income	4	309	398
Other operating expenses	6	-1,253	-5,168
Marketing and sales expenses		-41,267	-39,981
General and administration		-26,815	-14,096
Research and development		-14,572	-18,344
Total operating expenses		-80,027	-86,577
OPERATING PROFIT/LOSS		4,667	-14,537
Finance income	7	619	665
Finance expenses	7	-12,271	-9,790
PROFIT/LOSS BEFORE TAX		-6,985	-23,663
Income tax	8	-345	223
PROFIT/LOSS FOR THE PERIOD		-7,329	-23,440

EUR THOUSAND	Notes	1.1.-31.12.2020	1.1.-31.12.2019
Other comprehensive income
Other comprehensive income that will not be reclassified to profit or loss
Remeasurement of employee benefits	17	-5	-2
Other comprehensive income that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations		-4,964	1,974
Cash flow hedges	18	-435	-162
Income tax relating to components of other comprehensive income	8	112	-86
Other comprehensive income for the year net of tax		-5,292	1,723
TOTAL COMPREHENSIVE INCOME		-12,621	-21,716

Profit/loss attributable to: | | |
Equity holders of the parent company | | -7,329 | -23,440
Total comprehensive income attributable to: | | |
Equity holders of the parent company | | -12,621 | -21,716

Earnings per share | | |
undiluted, EUR | 9 | -0,51 | -1,63
diluted, EUR | 9 | -0,51 | -1,63

47 Basware 2020 Governance Financials

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (IFRS)

EUR THOUSAND	Notes	31.12.2020	31.12.2019
ASSETS
Non-current assets
Intangible assets	10	41,927	44,402
Goodwill	3	76,676	80,345
Tangible assets	11	1,023	1,075
Right-of-use assets	11	14,322	15,842
Non-current financial assets	14	13	38
Other receivables	15	3,541	4,193
Contract assets	2	6	168
Deferred tax assets	8	10,592	9,654
Non-current assets		148,101	155,716
Current assets
Trade receivables	15	26,602	27,424
Other receivables	15	8,714	7,842
Contract assets	2	818	1,561
Income tax receivables	8	166	366
Cash and cash equivalents	16	40,461	31,672
Current assets		76,761	68,865
TOTAL ASSETS		224,862	224,581

48 Basware 2020 Governance Financials

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (IFRS)

EUR THOUSAND	Notes	31.12.2020	31.12.2019
EQUITY AND LIABILITIES
Shareholder's equity
Share capital	19	3,528	3,528
Share premium account	19	1,187	1,187
Treasury shares	19	0	-98
Invested unrestricted equity fund	19	110,290	110,388
Other reserves	19	289	653
Translation differences	19	-13,137	-8,226
Retained earnings	19	-19,600	-13,347
Shareholders' equity		82,557	94,086
Non-current liabilities
Deferred tax liabilities	8	5,071	5,003
Interest-bearing liabilities	22	66,665	58,889
Leasing liabilities, interest-bearing	12	11,647	13,412
Contract liabilities	2	2,791	3,184
Liabilities from employee benefits	17	388	377
Non-current liabilities		86,562	80,864
Current liabilities
Interest-bearing liabilities	22	2,173	1,996
Leasing liabilities, interest-bearing	12	3,727	3,392
Trade payables and other payables	20	30,470	28,468
Contract liabilities	2	19,177	15,260
Income tax liabilities	8	196	249
Current provisions	21	0	266
Current liabilities		55,743	49,631
TOTAL EQUITY AND LIABILITIES		224,862	224,581

49 Basware 2020 Governance Financials

CONSOLIDATED STATEMENT OF CASH FLOWS (IFRS)

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Cash flows from operating activities
Profit/loss for the period	-7,329	-23,440
Adjustments for profit:
Depreciation and amortisation	15,540	15,941
Unrealised foreign exchange gains and losses	690	-12
Financial income and expenses	11,068	9,088
Tax on income from operations	345	-223
Other adjustments	1,566	635
Total adjustments	29,208	25,428
Changes in working capital:
Increase (-) / Decrease (+) in trade and other receivables	810	557
Increase (+) / Decrease (-) in trade and other payables	5,069	4,794
Increase (+) / Decrease (-) in provisions	-211	123
Total changes in working capital	5,668	5,474
Financial items in operating activities	-1,301	-2,472
Income taxes paid (-) / received (+)	-994	-832
Cash flows from operating activities	25,252	4,159

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Cash flows used in investing activities
Purchase of tangible and intangible assets	-9,470	-10,587
Net proceeds from sale of tangible and intangible assets	7	46
Cash flows from investing activities	-9,464	-10,541
Cash flows from financing activities
Proceeds from current borrowings	176	0
Repayment of current borrowings	-1,996	-22,296
Proceeds from non-current borrowings	0	43,880
Repayment of non-current borrowings	0	-20,000
Payment of lease liabilities	-4,257	-4,372
Cash flows from financing activities	-6,076	-2,788
Net change in cash and cash equivalents	9,712	-9,170
Cash and cash equivalents at the beginning of period	31,672	40,747
Net foreign exchange difference	-922	94
Cash and cash equivalents at the end of period	40,461	31,672

50 Basware 2020 Governance Financials

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS)

EUR THOUSAND	Share capital	Share premium account	Treasury shares	Invested unrestricted equity	Other reserves	Translation differences	Retained earnings	To tal SHAREHOLDERS’ EQUITY
Jan. 1, 2020	3,528	1,187	-98	110,388	653	-8,226	-13,347	94,086
Comprehensive income						-4,912	-7,340	-12,253
Share based payments			98				1,092	1,092
Defined benefit plans					-5			-5
Cash flow hedges					-363			-363
SHAREHOLDERS' EQUITY Dec. 31, 2020	3,528	1,187	0	110,290	289	-13,137	-19,600	82,557

EUR THOUSAND	Share capital	Share premium account	Treasury shares	Invested unrestricted equity	Other reserves	Translation differences	Retained earnings	To tal SHAREHOLDERS’ EQUITY
Jan. 1, 2019	3,528	1,187	-638	110,928	832	-10,131	5,042	110,749
Comprehensive income						1,905	-23,442	-21,536
Share based payments			540				362	362
Defined benefit plans					-2			-2
Cash flow hedges					-178			-178
Warrants					4,691			4,691
SHAREHOLDERS' EQUITY Dec. 31, 2019	3,528	1,187	-98	110,388	653	-8,226	-13,347	94,086

51 Basware 2020 Governance Financials

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)

Basic information of the Group

Basware Corporation is a leading supplier of e-Invoicing and Purchase-to-pay solutions. Parent company Basware Oyj is a public Finnish company founded under Finnish law. Business ID of Basware Oyj is 0592542-4 and company's domicile is Espoo, Finland. Basware Corporation and its subsidiaries form the Basware Group ("Basware" or "the Group"). The shares of the parent company Basware Corporation have been listed on NASDAQ Helsinki Ltd. since 2000. The consolidated financial statements for the year ended December 31, 2020 were authorized for issue in accordance with a resolution of the Board of directors on February 3, 2021. Shareholders may adopt or reject the financial statements at the Annual General Meeting. Basware’s financial statements, Board of Directors’ report as well as the Auditor’s report are available on the Internet at https://investors.basware.com/en or parent company's head office at Linnoitustie 2, 02601 Espoo.

1. Accounting principles

Basis of preparation

Basware’s consolidated financial statements have been prepared according to the International Financial Reporting Standards (IFRS), approved for use in EU countries, in accordance with the IAS and IFRS standards, as well as IAS and IFRIC interpretations valid on December 31, 2020. The Group’s Financial Statements are presented in euros, which is the primary and reporting currency of the Group's parent company, and they are based on acquisition costs unless otherwise stated in the accounting principles. The amounts presented in the financial statements are rounded, so the sum of individual figures may differ from the sum reported.

New and revised standards and interpretations

As of January 1, 2020, the Group has applied the following new and revised standards and interpretations which did not materially impact Group reporting:

• Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform (Effective for annual periods beginning on or after January 1, 2020): In September 2019, the IASB issued amendments to IFRS 9, IAS 39 and IFRS 7, which provide temporary reliefs which enable hedge accounting to continue during the period of uncertainty before the replacement of an existing interest rate benchmark with an alternative nearly risk-free interest rate (an RFR). The amendments had no impact on the Group's financial statements.
• Amendments to IFRS 3 Definition of a Business (Effective for annual periods beginning on or after January 1, 2020): The IASB issued amendments to the definition of a business in IFRS 3 Business Combinations to help entities determine whether an acquired set of activities and assets is a business or not. The amendments had no impact on the Group's financial statements.
• Amendments to IAS 1 and IAS 8 Definition of Material (Effective for annual periods beginning on or after January 1, 2020): The amendments aim to align the definition of ‘material’ across the standards and to clarify certain aspects of the definition. The amendments clarify that materiality will depend on the nature or magnitude of information, or both. The amendments had no impact on the Group's financial statements.
• Amendments to IFRS 16 Covid-19 Related Rent Concessions (Effective for annual periods beginning on or after June 1, 2020): The amendments provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the Covid-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the Covid-19 related rent concession the same way it would account for the change under IFRS 16, if the change were not a lease modification. This amendment had no impact on the consolidated financial statements of the Group.

Amendments that will enter into force during the financial year 2021 or later

In addition to the standards and interpretations presented in the financial statements for 2020, the Group will adopt the following standards, interpretations and amendments to standards published by the IASB during financial# Basware 2020 Governance Financials

• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 (Effective for annual periods beginning on or after January 1, 2021)

On 27 August 2020, the IASB published Interest Rate Benchmark Reform – Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). According to the Group's current estimate, the amendments will have no impact on the Group's future financial statements, and it is continuing its assessment of the impact of the amendments.

• Amendments to IFRS3 Business Combinations - Reference to the Conceptual Framework (Effective for annual periods beginning on or after 1 January 2022)

The amendments are intended to replace a reference to a previous version of the IASB’s Conceptual Framework 52 Basware 2020 Governance Financials (the 1989 Framework) with a reference to the current version issued in March 2018 (the Conceptual Framework) without significantly changing its requirements. According to the Group's current estimate, the amendments will have no impact on the Group's future financial statements, and it is continuing its assessment of the impact of the amendments.

• Amendments to IAS 37 Onerous Contracts – Costs of Fulfilling a Contract (Effective for annual periods beginning on or after 1 January 2022)

In May 2020, the IASB issued amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. According to the Group's current estimate, the amendments will have no impact on the Group's future financial statements, and it is continuing its assessment of the impact of the amendments.

• Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 (Effective for annual periods beginning on or after 1 January 2022)

The amendment prohibits entities from deducting from the cost of an item of property, plant and equipment (PP&E), any proceeds of the sale of items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the costs of producing those items, in profit or loss. According to the Group's current estimate, the amendments will have no impact on the Group's future financial statements, and it is continuing its assessment of the impact of the amendments.

Basis of consolidation

The consolidated financial statements comprise the parent company Basware Corporation and the subsidiaries controlled by it at the end of reporting period. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Being in control means the power to govern the financial and operating policies of the company to obtain ben - efits from its activities. The subsidiaries have been included in the Group financial statements as of the acquisition date. Intra-group holding is eliminated using the acquisition cost method. Acquired companies are accounted for using the purchase method according to which the assets and liabilities of the acquired company are measured at their fair value when it has been possible to determine the value reliably. Deferred taxes of the acquisition cost adjustments are recognized according to the valid tax rate and the remainder is recognized as goodwill on the balance sheet. When circumstances indicate that there are changes in elements of control the consolidation is re-assessed. Intra-group business transactions, internal liabilities and receivables, and internal profit distribution are eliminated in the Group financial statements.

Transactions in foreign currencies

Transactions in foreign currencies are recorded in the operating currency at the approximate exchange rates prevailing at the transaction dates. Monetary items in foreign currencies have been translated into the operating currency using the exchange rates at the end of the report - ing period. Non-monetary items denominated in foreign currencies are carried at the exchange rate at the date of the transaction. In the Group financial statements, the income statements of foreign subsidiaries are translated into euros at the average rate for the financial period and balance sheets at the exchange rate of the balance sheet date. Average rate difference due to different exchange rates on the statement of comprehensive income and balance sheet are entered in other comprehensive income. Translation differences arising from the elimination of foreign subsidiaries and transla - tion of equity items accumulated after the acquisition are entered in other comprehensive income. Foreign currency gains and losses from monetary items part of the net investment in a foreign unit are recognized in other comprehensive income and entered on the statement of comprehensive income when the foreign unit is divested.

Segment information

Basware reports one operating segment. The reported segment is comprised of the entire Group, and the segment figures are consistent with the Group figures. Entity-wide disclosures are presented in Note 2 and 13.

Government grants

Government grants are recognized when there is reasonable assurance that the grant will be received. The grants received are recognized as offsetting items of the expenses incurred. When the grant relates to capitalized R&D projects it will reduce the carrying amount of the asset, and they are recognized in profit and loss by way of lower depreciation charge over the useful life of the intangible asset.

Research and development costs

Research expenses are booked as an expense as they are incurred. Development expenditures on an individual project are recognized as an intangible asset when the Group can demonstrate:
* The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
* Its intention to complete and its ability and intention to use or sell the asset
* How the asset will generate future economic benefits
* The availability of resources to complete the asset
* The ability to measure reliably the expenditure during development

53 Basware 2020 Governance Financials

Costs related to the adoption of new technology or development of a new generation of prod- ucts are capitalized and recognized and amortized over the useful life of 3–5 years. In determin- ing the useful life, the obsolescence of technology and the typical life cycle of products in the industry are taken into consideration. Amortization begins when development is complete, the asset is available for use and the product is ready for commercial utilization. Maintenance of existing products and minor enhancements are expensed when they are incurred. Government grants related to research and development are recognized through profit or loss in the periods during which the corresponding costs are recognized as expenses.

Accounting principles requiring management’s judgement and key uncertainties relating to the use of estimates

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. More information on the most significant items requiring management’s judgement:
* Goodwill (Note 3)
* Development expenses (Note 10)
* Leases (Note 12)
* Trade receivables (Note 15)
* Deferred tax assets (Note 8)
* Share-based payments (Note 5)
* Financial risk management (Note 18)
* Warrants (Note 19)

Alternative performance measures

Basware presents the following financial measures to supplement its Consolidated Financial Statements which are prepared in accordance with IFRS. These measures are designed to measure growth and provide insight into the company’s underlying operational performance. The Group has applied the recent guidance from ESMA (the European Securities and Markets Authority) on Alternative Performance Measures which is applicable as of July 3, 2016 and defined alternative performance measures as follows.

Cloud revenue includes net sales from SaaS and other subscription revenues, transactions services and financing services excluding alliance fees. Organic revenue growth is calculated by comparing net sales between comparison periods in constant currencies excluding alliance fees as well as net sales from acquisitions and disposals that have taken place in the past 12 months. Net sales in constant currencies is calculated by eliminating the impact of exchange rate fluctuations by calculating the net sales for the comparable period by using the current period’s exchange rates. Gross investments are total investments made to non-current assets including acquisitions and capitalized research and development costs. Other capitalized expenditure consists of investments in property, plant and equipment and intangible assets excluding acquisitions and capitalized research and development.# Basware 2020 Governance Financials

2. Revenue and contract balances

Accounting principles

Net sales are presented net of discounts and exchange rate differences of foreign currency sales.

Revenue recognition

Basware reports net sales by type. Net sales by type is divided into two groups: cloud and non-cloud revenue. Cloud revenue consists of net sales from SaaS and other subscription types and transaction revenue and non-cloud revenue includes net sales from licences, maintenance and consulting. SaaS and transaction services are sold together with consulting services and e-invoicing services include also work related to set-up activities which are charged separately as Start up fee.

IFRS 15 Revenue from Contracts with Customers is based on the principle that sales are recognized when the control of the goods or service is transferred to the customer. According to IFRS 15 the contract qualifies as a customer contract when each party's general and specific rights and obligations are described, contract is approved by the parties, each party's enforecable rights and obligations exists, the contract has commercial substance and it is probable that the consideration to which the entity is entitled to in exchange for the goods or services will be collected. Group does not have a significant financing components in its contracts with customers or sale with a right of return.

Basware revenue for different revenue types is recognized over time except for licenses which is recognized at a point in time. SaaS and transaction service fees are fixed and are invoiced on a monthly or annual basis, or monthly based on user and transaction volumes. Both fees are recognized on a monthly basis over the term of the contract. Revenue from set up activities are deferred and recognized over time throughout the contract term. Revenue from the license sales is recognized when contractual criteria of IFRS 15 has been fulfilled and when license has been delivered to the customer. Maintenance services which includes new version releases and customer support are recognized over the contract period. Revenue of professional services are recognized during the reporting period in which service is provided. Revenue of fixed-price consulting projects are recognized as revenue and expenditure on the basis of the percentage of completion when the outcome of the project can be reliably estimated. If the resulting costs and recognized profits exceed the amount invoiced for the transaction, the difference is presented in “contract assets” on the balance sheet. If the resulting costs and recognized profits are lower the invoicing for the transaction, the difference is presented in “contract liabilities” on the balance sheet. When it is likely that the total costs required for completing the project exceed the total revenue from the transaction, the expected loss is recognized as an expense immediately.

Basware reports geographical areas Americas, Europe, Nordics and APAC. Americas includes business operations in North and South America. Europe includes operations in Europe and Russia, excluding the Nordic countries (Denmark, Finland, Norway and Sweden), which are reported separately. APAC includes operations in Asia and the Pacific region.

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Timing of revenue recognition
Cloud Revenue
SaaS	58,344	49,133
Transaction services	47,272	47,876
Other cloud revenue	4,696	4,434
Cloud Revenue total	110,312	101,442
Non-Cloud Revenue
Maintenance	14,687	20,720
License sales	348	1,202
Consulting services	26,875	24,962
Other non-cloud revenue	-644	-23
Non-Cloud Revenue Total	41,267	46,861
Group total	151,579	148,302

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Americas	35,013	31,796
Europe	52,176	50,687
Nordics	56,428	57,441
APAC	7,962	8,379
Group total	151,579	148,302

EUR THOUSAND	31.12.2020	31.12.2019
Trade receivables	26,602	27,424
Contract assets:
Non-current	6	168
Current	818	1,561
Contract liabilities:
Non-current	2,791	3,184
Current	19,177	15,260

During 2019-2020 the Group has not recognized significant impairment losses on contract assets.

Revenue recognized from amounts included in contract liabilities at the beginning of the period:
EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
	15,203	9,678

%	1.1.-31.12.2020	1.1.-31.12.2019
EUR	52.8	51.5
USD	21.3	20.8
GBP	7.2	7.7
Other	18.6	20.0
Group total	100	100

Net sales by currency

Summary of contract balances:

Contract assets and liabilities The timing of invoicing may differ from the timing of revenue recognition. The Group recognizes an contract asset when revenue is recognized prior to invoicing, and a contract liability when revenue is recognized subsequent to invoicing. Revenue of professional services are recognized during the reporting period in which service is provided. Revenue of fixed-price consulting projects are recognized as revenue and expenditure on the basis of the percentage of completion when the outcome of the project can be reliably estimated. If the resulting costs and recognized profits exceed the amount invoiced for the transaction, the difference is presented in “contract assets” on the balance sheet. If the resulting costs and recognized profits are lower the invoicing for the transaction, the difference is presented in “contract liabilities” on the balance sheet.

The majority of contract liabilities arise from:
* SaaS and Transactions services invoiced in advance and recognized as revenue on monthly basis over the contract term
* setup activities invoiced in advance and recognized as revenue during the contract period
* maintenance revenue invoiced in advance and recognized as revenue over the maintenance period

Transaction price allocated to the remaining performance obligations

The Group has elected to use the practical expedient in IFRS 15.121 in disclosing the transaction price allocated to remaining performance obligations as its related performance obligations are a part of a contract that have a original expected duration of less than one year, or the revenue recognition from performance obligations is done according to IFRS 15.B16.

3. Goodwill

Accounting principles

Goodwill is measured as the excess of the cost of the acquisition over the Group's share of the fair values of the acquiree's net assets at the time of the acquisition. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Goodwill impairment testing

Goodwill is not amortised, but is tested for impairment annually, and when circum- stances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash generating unit (CGU) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. An asset’s recoverable amount is the higher of CGU’s fair value less costs of disposal and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the entity specific risks. Impairment losses relating to goodwill cannot be reversed in future periods.

EUR THOUSAND	31.12.2020	31.12.2019
Acquisition cost Jan. 1	80,345	78,939
Translation difference	-3,669	1,405
Business disposals	0	0
Acquisition cost Dec. 31	76,676	80,345
Book value Dec.
Goodwill is tested according to IAS 36. The Group does not possess any other intangible assets than Goodwill that has indefinite economical life. Unfinished intangible assets are also subjected to impairment testing during reporting period. Impairment testing is carried out at group level as the Group has a centralized steering model and reporting structure. Goodwill is monitored at group level internally. Goodwill has been tested for impairment in the last quarter of 2020. The recoverable amounts from the cash generating unit (CGU) are determined based on value-in-use calculations. The calculations are prepared on a discounted cash flow method basis, derived from the board-approved estimates for the following year and subsequent development derived from the strategic plans, covering five years. Terminal year value has been defined based on the long-term strategic financials. Cash flows beyond the 10-year period are calculated using the terminal value method. The terminal growth rate of 2.5 percent (2.5%) used in projections is based on management’s assessment of conservative long-term growth. Key driver for the valuation is the revenue growth based on the Group’s performance and future strategic growth plans, market position as well as the potential in key markets. The applied discount rate is the weighted average pre-tax cost of capital (WACC). The components of the WACC are risk-free rate, market risk premium, company-specific factor, and industry-specific beta, cost of debt and debt/equity ratio. The WACC of 11.2 percent (11.3%) has been used in the calculations. As a result of the impairment test, no impairment loss for the CGU were recognized for the financial periods ended 31 December 2020 and 2019 respectively. A sensitivity analysis was conducted and there is no indication that the changes in the assumptions could be so substantial that the carrying amount would exceed the recoverable amount. The impairment testing is influenced by how the Group will meet the targets set for year 2021 and beyond. In a sensitivity analysis the impacts of substantial changes to the most significant assumptions like terminal growth, average EBIT-margin and the discount rate was assessed. Terminal year growth should decrease more than 400 percentage points, pre-tax discount rate should increase more than 19 percentage points or the average EBIT-margin during the forecast period should decrease more than 10 percentage points for an impairment to take place. Value in use exceeds the carrying amount by more than 100 percent.

57 Basware 2020 Governance Financials

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Gain on sale of assets	26	48
Other operating income	283	350
Other operating income	309	398

4. Other operating income

Accounting principles: Other operating income includes proceeds from the sale of business operations and property, plant and equipment. In financial years 2019 and 2020 respectively, other operating income mainly consists of other proceeds related to divestment.

58 Basware 2020 Governance Financials

5. Personnel and employee benefits

Accounting principles: The Group has exclusively defined contribution pension arrangements, and the related payments are expensed in the year they are incurred. The Group also has a defined benefit based incentive scheme to commit personnel in accordance with local regulations and practices in India. The calculations for defined benefit plan are done according to same principles as defined benefit plans for pensions and they predispose the Group to actuary risks like payroll risk, interest risk and risk related to expected lifetime. Amounts of the defined benefit plans are based on the yearly calculations submitted by independent actuaries. The present value of the defined benefit obligations is determined by discounting the estimated future cash flows using interest rates of Government issued bonds, if interest rate of high quality- corporate bonds is not available. The plan is unfunded and more information on the defined benefit plan is presented in Note 17. The Group's related parties include parent company (Basware Corporation) and its subsidiaries, the members of the Board of Directors, the members of the Corporate Executive Team, CEO and their family members and their controlled companies. Basware Corporation's subsidiaries are disclosed in Note 25. No loans have been given to the related parties of the Group, except subsidiaries, and no guarantees or other collateral have been issued on their behalf.

AVERAGE NUMBER OF PERSONNEL

	1.1.-31.12.2020	1.1.-31.12.2019
Americas	106	121
Europe	373	374
Nordics	425	437
APAC	430	417
Personnel, total	1,334	1,349

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Salaries and fees	-74,171	-76,578
Share-based incentive plans	-1,409	-914
Expenses from defined benefit plans	-74	-122
Pension expenses, defined contribution plans	-5,690	-6,187
Other employee benefits	-6,268	-6,474
Employee benefits expense, total	-87,613	-90,275

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
CEO of the parent company
Vesa Tykkyläinen (until March 10, 2019)	-836
Klaus Andersen (from March 11, 2019)	-519	-354
Compensation of the members of the Board of Directors
Michael Ingelög	-80	-52
Ilkka Sihvo	-59	-83
Daryl Rolley	-74	-81
Asko Schrey	-44	-44
Minna Smedsten (from June 4, 2020)	-37
Tuija Soanjärvi (until August 21, 2019)	-4	-52
Total	-817	-1,501

Employee benefits expense Management and Board salaries, fees and benefits

Group's key employees are defined as CEO, members of the Board of Directors and Executive team.

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Salaries and other short-term employee benefits	-1,862	-2,378
Benefits in connection with termination of employment	0	-629
Share-based payments	-523	-660
Total	-2,385	-3,667

Key management employee benefits

Total salaries and benefits of the CEO Klaus Andersen for the period January 1 - December 31, 2020 were EUR 519 thousand (EUR 354 thousand in March 11-December 31, 2019). Salary in money was EUR 410 thousand (EUR 318 thousand), including fringe benefits of EUR 19 thousand (EUR 15 thousand). Andersen was paid a bonus of EUR 99 thousand from the financial year 2019 (EUR 5 thousand in 2019 from the financial year 2018). In 2020, Andersen was conveyed a total of 354 shares (1,500 shares in 2019) on the basis of the share-based incentive schemes. Of these, 177 shares (750 shares in 2019) were conveyed to Andersen, the value of which was approximately EUR 5 thousand (EUR 15 thousand) based on the average share price of the payment days, and EUR 5 thousand (EUR 16 thousand) was paid in cash to cover the withholding tax. The accrued pension cost of Klaus Andersen amounted to EUR 61 thousand (EUR 35 thousand in March 11 - December 31, 2019). The CEO's pension plan is pursuant to the employment pension legislation. The CEO has 3 month period of notice, in addition to which he is entitled to severance pay equivalent of 12 months’ fixed salary.

Vesa Tykkyläinen stepped down as the CEO of Basware Corporation on March 10, 2019. Total salaries and benefits of the Vesa Tykkyläinen for the period January 1 - December 31, 2019 were EUR 836 thousand. Salary in money including salary for 3 month notice period was EUR 161 thousand, including fringe benefits of EUR 4 thousand. Severance pay was EUR 360 thousand. Tykkyläinen was paid a bonus of EUR 156 thousand from the financial year 2018. In 2019, Tykkyläinen was conveyed a total of a total of 7,684 shares on the basis of the incentive schemes. Of these, 3,824 shares were conveyed to Tykkyläinen, the value of which was approximately EUR 79 thousand based on the average share price of the payment days, and EUR 80 thousand was paid in cash to cover the withholding tax.

Share-based payments

Accounting principles: Share-based incentive schemes are valued at fair value on the grant date based on the gross number of shares awarded, recognized as an expense in the consolidated statement of comprehensive income during the period in which the conditions are met (the vesting period) and with a corresponding adjustment to the equity. The withholding paid by the company to the tax authority is recognized directly in equity.

Matching Share Plan 2017-2019

The Board of Directors resolved on March 1, 2017 to establish a matching share plan for 2017-2019 for Basware Executive Team members. The prerequisite for receiving reward on the basis of the matching share plan is that the member of the Basware Executive Team in question acquires Basware shares. The Basware Executive Team member will, as a reward, receive matching shares for each share subject to the share ownership prerequisite after a matching period of three (3) years. Receipt of matching shares is contingent on the continuation of employment or service upon reward payment and that the shares in question are still held by the member. The Board of Directors resolved that the rewards to be paid in aggregate to the Basware Executive Team on the basis of the matching share plan correspond to the value of a maximum total of 75,000 Basware Corporation shares, including also the proportion to be paid in cash. Members of Basware Executive Team have acquired or allocated a total of 7,752 Basware Corporation shares based on the plan. The rewards to be paid to Basware Executive Team members on the basis of the plan thus corresponds to a maximum of 15,504 Basware Corporation shares, including also the proportion to be paid in cash. The plan ended in March 2020.

Matching Share Plan 2018-2020

The Board of Directors resolved on July 17, 2018 to establish a new matching share plan for 2018-2020 for the Group's key employees. The prerequisite for receiving reward on the basis of the matching share plan is that the plan member acquires Basware shares. The plan member will, as a reward, receive matching shares for each share subject to the share ownership prerequisite after a matching period of# Basware 2020 Governance Financials

three (3) 60

Basware 2020 Governance Financials

Receipt of matching shares is contingent on the continuation of employment or service and on the plan member holding the acquired shares upon reward payment. The rewards to be paid in aggregate to plan members on the basis of the matching share plan correspond to the value of a maximum total of 77,714 Basware Corporation shares, including also the proportion to be paid in cash. The Group's key employees acquired or allocated a total of 32,178 Basware Corporation shares based on the plan. The rewards to be paid to the key employees on the basis of the plan thus corresponds to a maximum of 64,356 Basware Corporation shares, including also the proportion to be paid in cash. At the end of 2020, the matching share plan included 34 key employees.

Restricted Share Plan 2017

The Board of Directors resolved on March 1, 2017 to establish a restricted share plan for 2017. The restricted share plan is directed to selected key employees at Basware. Receipt of the reward is contingent on the continuation of employment or service upon reward payment. The reward from the restricted share plan will be paid after a vesting period of one to three years. The total rewards to be allocated on the basis of the plan amount to a maximum of 20,000 Basware Corporation shares, including also the proportion to be paid in cash. In June 2020, 3,000 shares were conveyed on a directed share issue related to the reward payment for the restricted share plan 2017. In October 2020, 1,000 shares were conveyed on a directed share issue related to the reward payment for the restricted share plan 2017. The rewards paid on the basis of the plan in 2020 corresponded to a total of 4,000 Basware Corporation shares, including also the proportion to be paid in cash. The plan ended in 2020.

Performance Share Plan 2017-2019

The Board of Directors resolved on March 1, 2017 to establish a performance share plan for 2017-2019 for key employees. The performance share plan includes three performance periods, calendar years 2017-2018, 2018-2019 and 2019-2020. The Board of Directors decides on the performance criteria and on the required performance levels for each criterion at the beginning of each performance period. The potential reward for the performance period 2018-2019 was based on the Group’s key performance measures in 2018. The rewards to be paid on the basis of the performance period 2018-2019 corresponded to the value of a maximum total of 116,950 Basware Corporation shares, including also the proportion to be paid in cash. The plan was directed to approximately 75 key employees, including the members of the Basware Executive Team. In June 2020, 8,069 shares were conveyed on a directed share issue related to the reward payment for the performance period 2018-2019 of the performance share plan 2017-2019, closing the performance period 2018-2019 of the plan. The rewards paid on the basis of the plan in 2020 corresponded to a total of 16,135 Basware Corporation shares, including also the proportion to be paid in cash. The potential reward for the performance period 2019-2020 is based on the Group’s key performance measures in 2019. The rewards to be paid on the basis of the performance period 2019-2020 correspond to the value of a maximum total of 60,225 Basware Corporation shares, including also the proportion to be paid in cash. The plan is directed to approximately 45 key employees, including the members of the Basware Executive Team. At the end of 2020, the performance share plan included 44 key employees for the performance period 2019-2020.

Performance Share Plan 2020-2021

The Board of Directors resolved on December 18, 2019 to establish a performance share plan for 2020-2021 for key employees. The Performance Share Plan includes one performance period, calendar years 2020-2021. The Board of Directors have resolved on the performance criteria at the required performance levels for each criterion. The plan is directed to approximately 45 key employees, including the members of the Basware Executive Team. The potential reward from the performance period 2020-2021 will be based on the company´s relative Total Shareholder Return (TSR), the Group's total revenue and ARR order intake during 2020-2021. The rewards to be paid on the basis of the performance period 2020-2021 correspond to the value of a maximum total of 320,000 Basware Corporation shares (including also the proportion to be paid in cash). At the end of 2020, the performance share plan included 53 key employees.

Restricted Share Plan 2020

The Board of Directors resolved on December 18, 2019 to establish a restricted share plan 2020. The restricted share plan is directed to selected for selected key contributors in key markets. 61 Basware 2020 Governance Financials Receipt of the reward is contingent on the continuation of employment or service upon reward payment. The reward from the restricted share plan will be paid after a vesting period of one to three years. The total rewards to be allocated on the basis of the plan amount to a maximum of 10,000 Basware Corporation shares, including also the proportion to be paid in cash. At the end of 2020, the restricted share plan included 3 key employees.

Effect on the result for the period and on the financial position in 2020

Expenses for the financial year, share-based payments	1,409,287
Liabilities arising from share-based payments December 31, 2020	235,508
Future cash payment to be paid to the tax authorities from share-based payments, estimated at the end of the period	3,088,582

Effect of Share-based Incentives on the result and financial position during the period

	Performance Period 2020-2021	RSP 2020
Share price at grant	25.80	35.80
Share price at December 31, 2020	42.00	42.00
Expected dividends	0	0
Fair value at December 31, 2020	1,093,964	59,070

	Matching Share Plan 2017-2019	Matching Share Plan 2018-2020
Maximum number of shares	75,000	77,714
Initial grant date	2.3.2017	18.7.2018
Vesting date	31.3.2020	31.3.2021
Vesting conditions	Share ownership and employment	Share ownership and employment
Maximum contractual life, years	3.1	2.7
Remaining contractual life, years	0.0	0.2
Number of persons at December 31, 2020	0	34
Payment method	Shares & Cash	Shares & Cash

	Restricted Share Plan 2017	Restricted Share Plan 2020
Maximum number of shares	20,000	10,000
Initial grant date	2.3.2017	19.12.2019
Vesting date	12 month Restriction Period	12-36 month Restriction Period
Vesting conditions	Employment	Employment
Maximum contractual life, years	-	-
Remaining contractual life, years	-	-
Number of persons at December 31, 2020	0	3
Payment method	Shares & Cash	Shares & Cash

62 Basware 2020 Governance Financials

Changes in 2020

Performance share plans:

	Performance Period 2018-2019	Performance Period 2019-2020	Performance Period 2020-2021
Outstanding at January 1, 2020	64,700	60,225	0
Granted	0	584	354,100
Forfeited	-48,565	-1,400	0
Exercised, gross	16,135	0	0
Outstanding December 31, 2020	0	59,409	354,100

Matching Share Plan 2017 - 2019

	Matching Share Plan 2017 - 2019	Matching Share Plan 2018-2020
Outstanding at January 1, 2020	15,504	68,556
Granted	0	0
Forfeited	0	-4,200
Exercised, gross	-15,504	0
Outstanding December 31, 2020	0	64,356

Performance share plans:

	Performance Period 2018-2019	Performance Period 2019-2020	Performance Period 2020-2021
Maximum number of shares	116,950	60,225	320,000
Initial grant date	1.2.2018	20.6.2019	19.12.2019
Vesting date	31.3.2020	31.3.2021	31.5.2022
Vesting conditions	Group's key performance measures and employment	Group's key performance measures and employment	Group's key performance measures and employment
Maximum contractual life, years	2.2	1.8	2.4
Remaining contractual life, years	0.0	0.2	1.4
Number of persons at December 31, 2020	0	44	53
Payment method	Shares & Cash	Shares & Cash	Shares & Cash

Restricted Share Plan 2017

	Restricted Share Plan 2017	Restricted Share Plan 2020
Outstanding at January 1, 2020	4,000	0
Granted	0	1,650
Forfeited	0	0
Exercised, gross	-4,000	0
Outstanding December 31, 2020	0	1,650

63 Basware 2020 Governance Financials

6. Other operating expenses

	1.1.-31.12.2020	1.1.-31.12.2019
Impairment losses on trade receivables	-745	-933
Acquisition, disposal and restructuring expenses	-8	-1,408
Efficiency related expenses	-453	-2,772
Other operating expenses	-47	-56
Other operating expenses total	-1,253	-5,168

7. Finance income and expenses

	1.1.-31.12.2020	1.1.-31.12.2019
Finance income
Interest income on instruments valued at amortized cost	25	30
Foreign exchange gain on instruments valued at amortized cost	548	549
Other financing income	46	87
Total	619	665
Finance expenses
Interest expenses on debt instruments valued at amortized cost	-10,196	-8,315
Foreign exchange loss on instruments valued at amortized cost	-1,167	-586
Interest expenses on lease liabilities	-881	-888
Other financing expenses	-27	0
Total	-12,271	-9,790
Finance income and expenses total	-11,652	-9,125

Accounting principles

The Group recognizes borrowing costs as an expense in the period during which they are incurred.

	1.1.-31.12.2020	1.1.-31.12.2019
Exchange differences included in net sales	-644	-23
Exchange differences included in purchases and expenses	-5	39
Foreign exchange gains	548	549
Foreign exchange losses	-1,167	-586
Exchange differences recognized on income statement	-1,267	-22

8. Exchange differences recognized on income statement

	1.1.-31.12.2020	1.1.-31.12.2019
Exchange differences included in net sales	-644	-23
Exchange differences included in purchases and expenses	-5	39
Foreign exchange gains	548	549
Foreign exchange losses	-1,167	-586
Exchange differences recognized on income statement	-1,267	-22

Accounting principles

Income taxes comprise of tax recognized on the taxable income for the financial year and deferred taxes. Taxes for the items recognised in the income statement are included in taxes in the income statement. For items recognised directly in equity or other comprehensive income, the income tax effect is similarly recognised. Taxes based on taxable income are recorded according to the local tax rules of each country using the applicable tax rate. When uncertainty is included in interpretation of income tax rules, the Group estimates, if a company is able to fully utilize the tax position that is stated in income tax computation. If necessary, tax bookings are adjusted to reflect the changes in tax position. At reporting date booked income tax amounts reflect the estimates of future tax payments.

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Income tax on operations	-1,027	-1,293
Tax for previous accounting periods	76	-48
Change in deferred tax liabilities and tax assets	607	1,564
Income tax total	-345	223

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Taxes on foreign exchange gains from net investments	41	-71
Taxes on derivatives	72	15

EUR THOUSAND	31.12.2020	31.12.2019
Income tax receivables	166	366
Income tax liabilities	196	249

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Profit/loss before taxes	-6,985	-23,663
Tax calculated at domestic tax rate	1,397	4,733
Tax for previous years	76	-48
Effect of different tax rates of foreign subsidiaries	-384	-543
Effect of change in tax rate	0	0
Non-deductible expenses	-2,099	-1,166
Losses for which no deferred tax asset is recognised	0	-3,751
Other	528	-18
Income not subject to tax	65	0
Taxable profit not included in the accounting profit	0	-180
Utilization of previous year losses	839	574
Previous year losses for which deferred tax asset is booked	-766	622
Income taxes	-345	223

Direct taxes

Taxes relating to other comprehensive income

Tax rate reconciliation

Deferred taxes

Accounting principles

Deferred taxes are calculated from all temporary differences between the carrying amount and taxable value at the corporate income tax rates prevailing at the reporting date. The most significant temporary differences arise from depreciation of property, plant and equipment, unused tax losses, research and development adjustments, and adjustments for fair values in connection with acquisitions. Deferred tax is not recognized for goodwill that is permanently non-taxable. Deferred tax is not recognized for non-distributed profits of subsidiaries in so far as the difference is not likely to be discharged in the foreseeable future. Deferred tax assets are recognised for all other deductible temporary differences. A deferred tax asset is recognized to the extent that it is likely that there will be future taxable income against which it is deductible. The requirements for the recognition of deferred tax assets are reassessed at each reporting date.

EUR THOUSAND	1.1.2020	Recognized in profit or loss	Business acquisitions / disposals	Period change booked in equity	31.12.2020
Tax losses	5,613	-766	0	0	4,848
Deferred expenses	3,516	1,652	0	0	5,168
Other items	525	51	0	0	576
Total	9,654	938	0	0	10,592

Deferred tax assets 2020

EUR THOUSAND	1.1.2019	Recognized in profit or loss	Business acquisitions / disposals	Period change booked in equity	31.12.2019
Tax losses	4,991	622	0	0	5,613
Deferred expenses	2,254	1,262	0	0	3,516
Other items	565	-40	0	0	525
Total	7,810	1,844	0	0	9,654

Deferred tax assets 2019

EUR THOUSAND	1.1.2020	Recognized in profit or loss	Exchange rate differences	Period change booked in equity	31.12.2020
Allocation of fair value on purchases	4,987	335	-195	0	5,127
Fair valuation of derivatives	15	0	0	-72	-56
Total	5,003	335	-195	-72	5,071

EUR THOUSAND	1.1.2019	Recognized in profit or loss	Exchange rate differences	Period change booked in equity	31.12.2019
Allocation of fair value on purchases	4,660	277	50	0	4,987
Fair valuation of derivatives	0	0	0	15	15
Total	4,660	277	50	15	5,003

Deferred tax liabilities 2020

Deferred tax liabilities 2019

The Group has recognised total of EUR 4,848 thousand (EUR 5,613 thousand) of deferred tax assets for unused tax losses, of which EUR 1,928 thousand will expire during 2026–2028, while the rest have no expiry period. According to the transfer pricing principle, subsidiaries accumu - late taxable income against which confirmed losses can be utilized in the future. The Group has total of EUR 22,197 thousand of tax losses and EUR 17,198 thousand of non-deductible interests from which deferred tax asset has not been recognized. The Group will reassess the amount of deferred tax assets if there are changes in the expectations for accumulation of future taxable profit.

9. Earnings per share

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Profit/loss for the period	-7,329	-23,440
Average number of shares (1,000)
Undiluted	14,408	14,388
Diluted	14,639	14,474
Earnings per share (EUR)
Undiluted	-0.51	-1.63
Diluted	-0.51	-1.63

Accounting principles

Undiluted earnings per share is calculated by dividing the profit for the period attributable to the owners of the parent company by the weighted average number of shares outstanding during the year. The average number of shares has been adjusted with the treasury shares. Diluted earnings per share reflect the impact of the share-based incentive plans.

10. Intangible assets

Accounting principles

Other intangible assets are measured at cost less accumulated amortisation and possible impairment. Government grants related to the acquisition of an intangible asset are deducted from the acquisition cost of the asset and recognized as income by reducing the depreciation charge of the asset they are related to. Amortisation is calculated on a straight-line basis over the estimated useful lives of the assets. The estimated useful lives of intangible assets are 3–10 years. Each financial year end useful lives are reviewed and adjusted prospectively, if appropriate. Assets relating to customer relationships and technology that are acquired through business combinations are measured at fair value at the time of acquisition and depreciated over the useful life.

EUR THOUSAND	Development costs	Intangible rights	Other long-term investments	Assets, unfinished projects	Tot al
Acquisition cost Jan. 1	64,741	48,068	2,858	8,118	123,785
Translation difference (+/-)	-36	-1,003	-241	0	-1,280
Additions	692	650	0	7,578	8,920
Disposals	0	0	0	-46	-46
Reclassifications between items	1,405	0	0	-1,405	0
Acquisition cost Dec. 31	66,802	47,716	2,617	14,246	131,380
Cumulative amortisation Jan. 1	-39,003	-39,401	-980	0	-79,384
Translation difference (+/-)	48	658	92	0	799
Cumulative amortisation on disposals and reclas- sifications	0	0	0	0	0
Amortisation	-8,220	-2,280	-368	0	-10,868
Cumulative amortisa- tion Dec. 31	-47,175	-41,023	-1,256	0	-89,453
Book value Dec. 31, 2020	19,627	6,693	1,361	14,246	41,927

Intangible assets 2020

EUR THOUSAND	Development costs	Intangible rights	Other long-term investments	Assets, unfinished projects	Tot al
Acquisition cost Jan. 1	51,338	47,278	1,090	13,995	113,701
Translation difference (+/-)	-3	410	-10	12	409
Additions	2,738	380	459	6,098	9,676
Disposals	0	-1	0	0	-1
Reclassifications between items	10,668	0	1,319	-11,987	0
Acquisition cost Dec. 31	64,741	48,068	2,858	8,118	123,785
Cumulative amortisation Jan. 1	-31,953	-35,952	-699	0	-68,604
Translation difference (+/-)	-7	-200	-4	0	-211
Cumulative amortisation on disposals and reclas- sifications	0	28	0	0	28
Amortisation	-7,043	-3,278	-276	0	-10,597
Cumulative amortisa- tion Dec. 31	-39,003	-39,401	-980	0	-79,384
Book value Dec. 31, 2019	25,739	8,667	1,878	8,118	44,402

Intangible assets 2019

Goodwill is presented in Note 3.

11. Tangible assets

Accounting principles

Tangible assets are measured at cost less accumulated depreciation and possible impairment. The useful lives of tangible assets are 3–10 years. The useful life of an asset is reviewed at least at the end of each financial year and adjusted, if appropriate. Sales gains and losses on disposal or transfer of tangible assets are presented in other operating income and expenses. Sales gains or losses are calculated as the difference between the sales price and the remaining acquisition cost.

EUR THOUSAND	Right-of- use-assets, buildings	Right-of- use-assets, machinery and equip- ment	Machinery and equip- ment	Other tangible assets	Tota l
Acquisition cost Jan. 1	18,778	1,865	11,069	152	31,865
Translation difference (+/-)	-501	4	-121	0	-617
Additions	2,990	298	435	0	3,723
Disposals	-180	-19	-732	0	-931
Acquisition cost Dec. 31	21,088	2,148	10,651	152	34,040
Cumulative amortisation Jan. 1	-4,024	-689	-10,147	0	-14,860
Translation difference (+/-)	146	-4	122	0	264
Cumulative amortisation on disposals and reclas- sifications	0	0	714	0	714
Depreciation	-3,689	-654	-469	0	-4,812
Cumulative amortisation Dec. 31	-7,567	-1,347	-9,780	0	-18,694
Book value Dec. 31, 2020	13,521	802	871	152	15,346

Tangible assets 2020

EUR THOUSAND	Right-of- use-assets, buildings	Right-of- use-assets, machinery and equip- ment	Machinery and equip- ment	Other tangible assets	Tota l
Acquisition cost Jan. 1	15,826	1,186	11,341	145	28,499
Translation difference (+/-)	145	-1	13	0	157
Additions	3,152	841	934	7	4,935
Disposals	-345	-161	-1,220	0	-1,725
Acquisition cost Dec. 31	18,778	1,865	11,069	152	31,865
Cumulative amortisation Jan. 1	0	0	-10,695	0	-10,695
Translation difference (+/-)	-8	-1	-9	0	-18
Cumulative amortisation on disposals and reclas- sifications	0	0	1,203	0	1,203
Depreciation	-4,015	-689	-645	0	-5,350
Cumulative amortisation Dec. 31	-4,024	-689	-10,147	0	-14,860
Book value Dec. 31, 2019	(Implicitly)	(Implicitly)	(Implicitly)	(Implicitly)	(Implicitly)

Tangible assets 2019# Basware 2020 Governance Financials

12. Leases

Accounting principles

The group has lease contracts for office spaces, vehicles and various items of office equipment (e.g., coffee machines, copy machines, water machines, servers etc). All Group's real estate contracts and car leasing contracts were analyzed to belong in the scope IFRS 16. The Group has elected to use the exemptions applicable to the standard on short-term lease contracts (lease period less than 12 months), and for lease contracts for which the underlying asset is of low value. The Group is not subleasing any of its leased assets.

There are several lease contracts that include extension and termination options. The Group applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to extend or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the extension or termination.

The Group applied the following practical expedients in determining lease period:
* if both parties have the right to terminate the contract on a certain date and after this certain date the contract is valid until further notice the contract is interpreted to be terminated on the date when both parties have right to terminate the contract;
* if the Group has right to terminate the contract before the lessor, each contract is separately analyzed: what is the most likely outcome taking into consideration the future prospects and investments made to the premises.

The Group is not exposed to any potential cash outflows that are not reflected in the measurement of lease liabilities. The carrying amounts of right-of-use assets recognised and the movements during the period are presented in Note 11. Tangible Assets. The maturity analysis of lease liabilities is disclosed in Note 18. Management of financial risk.

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Depreciation expense of right-of-use assets	-4,203	-4,704
Interest expense on lease liabilities	-881	-888
Expense relating to leases of low-value assets	-530	-528
Total amount recognised in profit or loss:	-5,613	-6,120

13. Entity-wide disclosures

Of the entity-wide information assets are shown by their location. Assets presented below consists mainly of goodwill, intangible assets, right-of-use assets and other non-current receivables.

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Finland	51,834	53,380
Americas	28,895	32,844
Europe	43,828	46,958
Nordics	9,292	8,592
APAC	3,661	4,288
Group total	137,509	146,062

EUR THOUSAND	31.12.2020	31.12.2019
Acquisition cost Jan. 1	13	38
Acquisition cost Dec. 31	13	38

Non-current assets based on the location of the assets

The sales shown by the location of customers is presented in Note 2. The Group doesn't have customers whose share of the revenue exceeds 10% of total revenue.

14. Non-current financial assets

Non-current financial assets include unquoted equity shares.

15. Current trade and other receivables

Accounting principles – Expected credit losses on trade receivables

The Group recognizes loss allowances for expected credit losses (ECL) on trade receivables in accordance with IFRS 9. For analyzing and recognition of ECL regarding trade receivables, the simplified approach for determining the expected credit losses of IFRS 9 is applied. In this approach the credit losses are based on predetermined credit loss rates by category. The rates are determined by past events and external sources. Loss allowances for trade receivables are always measured at an amount equal to lifetime ECL. For measurement of ECL for trade receivables the Group uses a provision matrix. The provision matrix is based on historical observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates specific to the geographic region and the economic environment. At every reporting date the historical observed default rates are updated and changes in the forward-looking estimates are analyzed. Expected credit losses have not been recorded from the value added tax that is included in trade receivables. Loss allowances for ECL are presented in the statement of financial position as a deduction from the gross carrying amount of the assets. In profit or loss, the amount of ECL (or reversal) is recognised as an impairment gain or loss in other operating expenses category.

Contract costs

The incremental costs of obtaining a contract with a customer includes sales commissions related to long-term service contracts. Contracts costs are capitalized if the recognition criteria are satisfied and the entity expects to recover those costs. The capitalized costs are amortized on a straight-line basis over the contract term in which the services are transferred and the revenue is recognized. Below table describes the changes in capitalized contract costs.

EUR THOUSAND	31.12.2020	31.12.2019
Non-current receivables
Contract assets	6	168
Capitalized contract costs	2,854	3,335
Other non-current receivables	688	857
Non-current trade and other receivables total	3,547	4,361
Current receivables
Trade receivables	26,602	27,424
Contract assets	818	1,561
Capitalized contract costs	3,271	3,300
Other receivables	5,443	4,542
Current receivables total	36,134	36,827

EUR THOUSAND	31.12.2020	31.12.2019
Capitalized contract costs, opening balance	6,636	5,695
Capitalized during the period	3,204	3,819
Recognized as an expense during the period	-3,715	-2,878
Capitalized contract costs, ending balance	6,125	6,636

The fair values of financial assets and liabilities are presented in Note 22 and definitions for contract assets presented in Note 2.

16. Cash and short-term deposits

Accounting principles

Cash and cash equivalents consist of cash, short-term bank deposits that can be withdrawn on demand and other current highly liquid investments that can be exchanged to an amount of cash assets that is known in advance, and with a low risk of changes in value. Items classified as cash and cash equivalents have a maximum maturity of three months from acquisition.

EUR THOUSAND	31.12.2020	31.12.2019
Cash and cash equivalents	40,461	31,672
Cash and short-term deposits	40,461	31,672

17. Defined benefit plans

The Group has in Indian subsidiary an incentive scheme to commit employees, where benefit is paid to the employee after five years in service, in case of the employment is ending. The calculations for defined benefit plans are done according to same principles as defined benefit plans for pensions and they predispose the Group to actuary risks like wage risk, interest risk and risk related to expected lifetime. These plans are unfunded.

EUR THOUSAND	31.12.2020	31.12.2019
Opening value Jan. 1 - liability	377	327
Amounts recognised in profit and loss
Service cost, benefits earned during the year	70	70
Interest expense (+) / income (-)	25	27
Changes due to currency fluctuation	-43	-3
Amounts recognised in other comprehensive income
Actuarial losses (+) / gains (-)	4	2
Other changes
Benefits paid	-46	-47
Ending value Dec. 31 - liability	388	377

The most significant actuarial assumptions

	31.12.2020	31.12.2019
Discount rate (%)	6.6 %	7.2 %
Increase of wages (%)	7.0 %	7.0 %

In addition to the standard company practice of provisioning for credit losses the Group estimates an additional provision of EUR 600 thousand related to increased uncertainty of economic conditions in countries where the Group operates due to Covid-19 pandemic. No significant concentrations of credit risk are associated with the receivables. The balance sheet values equal the best to the maximum amount of the credit risk. Principles of the Group's credit risk management are presented in Note 18.

The aging analysis of trade receivables and impairment loss

EUR THOUSAND	2020	2019
	Impairment provision	Net 2020
Not due	-9	20,017
Overdue 1-180 days	-70	6,939
181-360 days	-212	242
Over 360 days	-5, 74	503
Additional provision	-600	-600
Total	-1,464	26,602

18. Management of financial risk

The Group's international business involves customary financial risks such as foreign exchange risk, interest rate risks, liquidity risks and credit risks. The risk management principles are defined in the Treasury Policy approved by the Board of Directors. Basware Treasury is responsible for the centralized management of the financial risk.

Foreign currency risk

Basware's net sales increased by 3.2 percent (5.9%) in organic constant currencies in 2020. The Group's main currency is euro, accounting for approximately 53 percent of net sales in 2020 (approximately 52% in 2019). In addition to the euro area, Basware has sales in various areas, the most significant being the United States, the United Kingdom, Sweden and Norway. In addition, Basware has internal operations in India and Romania. Sales in subsidiaries are carried out mainly in local currencies and do not expose the Group to significant foreign currency transaction risk.

Operational expenses, such as IT services, and other purchases that takes the place in non-functional currency expose the Group to foreign exchange risk, and is considered as significant risk to profit and loss statement. In addition, the Group is exposed to foreign currency risk through intra-company trade and funding. Internal loans are primarily in the functional currency of the subsidiary letting the parent company to carry the foreign exchange risk. All outstanding interest-bearing liabilities on the reporting date were in Euros. The most relevant transaction risk exposures arising from business operations are in US dollar and the British pound. The Group hedged substantial foreign currency items in the financial# Foreign currency risk

The Group strategy is to hedge foreign exchange exposures of contractual and other highly probable recurring expenses and sales according to guidelines set within the treasury policy. Foreign currency cash flow hedges are conducted at parent company level. For hedging is mainly used foreign currency forward and non-delivarable forward contracts. The hedged exposures consist of future forecasted contracted cash flows in next 12 months. During 2020 the Group did not hedge translation risk. Accounting principles are presented in Note 22. The effective portion of changes in the fair values of derivatives are recognized in other comprehensive income. Currency risk arises mainly from external purchases in foreign currencies (transaction risk), net investment to foreign subsidiaries (translation risk) as well as foreign currency deniminated items on the balance sheet. The table below presents the fair values of foreign currency derivatives at year-end which are recognized to Other Comprehensive Income (OCI) within equity. The foreign exchange risk sensitivity analysis shows the impact of a change in the foreign exchange rates of 5 percent against euro on income statement and balance sheet at the end of 2020. According to IFRS 7 sensitivity analysis of currency risk there would have had an impact of EUR -0.4/+0.4 million (EUR -0.4/+0.4 million) on the profit before tax at the closing date. The calculation includes foreign currency trade payables and accounts receivables and internal loans to subsidiaries. Changes in the equity are caused by net investment loans and foreign currency contracts relating to and designated in cash flow hedge accounting. The sensitivity analysis on foreign currency would have the impact of -/+ EUR 0.03 million (EUR 0.04 million) on other comprehensive income. The most important currency pairs are disclosed in the table below.

EUR THOUSAND	Nominal value	Positive fair value	Negative fair value	Net fair value	Nominal value	Positive fair value	Negative fair value	Net fair value
	2020	2020	2020	2020	2019	2019	2019	2019
Foreign-currency derivatives	14,162	55	-413	-358	14,044	144	-66	77

Basware 2020 Governance Financials

EUR THOUSAND

Profit & Loss / Other comprehensive income	+5%	-5 %	+5%	-5 %
EUR/USD	-103	103	-204	204
EUR/GBP	-236	236	-20	20
EUR/SEK	-11	11	0	0
EUR/NOK	-1	1	0	0
EUR/INR	86	-86	-10	10
EUR/RON	-13	13	-11	11
Other currencies	-135	135	211	-211
	-413	413	-34	34

EUR THOUSAND

	USD	AUD	GBP	SEK	DKK	NOK	RON	INR
Non-current assets	26,369	823	2,713	1,362	336	1,158	415	2,907
Current assets
Cash and cash equivalents	3,791	1,201	1	13	40	188	1,719	204
Trade and other receivables	6,394	1,507	4,331	2,016	885	1,293	155	661
Current liabilities
Non-interest bearing liabilities	7,463	1,959	4,230	1,265	1,593	1,682	984	820

Nominal values 2020

	+5%	-5 %	+5%	-5 %
EUR/USD	-275	275	-357	357
EUR/GBP	-131	131	-46	46
EUR/SEK	-26	26	0	0
EUR/NOK	-36	36	0	0
EUR/INR	89	-89	-11	11
EUR/RON	-2	2	-11	11
Other currencies	-29	29	382	-382
	-410	410	-43	43

Nominal values 2019

EUR THOUSAND	USD	AUD	GBP	SEK	DKK	NOK	RON	INR
Non-current assets	30,085	443	3,535	1,156	446	603	667	3,783
Current assets
Cash and cash equivalents	3,277	2,774	2	1,912	38	295	1,255	176
Trade and other receivables	7,663	1,506	3,239	2,096	770	1,865	315	563
Current liabilities
Non-interest bearing liabilities	8,119	1,647	2,773	1,540	1,009	2,124	897	862

Foreign currency-denominated assets and liabilities translated into the euros at the exchange rates of the closing date are as follows:

Interest rate risk

The objective of the risk management with regard to interest rate risk is to diminish the negative impacts of changes in interest rates on the Group's financial performance. Changes in market rates are impacting interest rates of loan portfolio as well as interest-bearing payables and receivables. The Group is exposed to cash flow interest rate risk through its loan portfolio which arises from floating rate loans. In order to manage and diversify the risk the Group has both fixed and floating rate loans and possibility to apply interest rate derivatives for hedging. In the last financial period the Group has not used derivatives against the interest rate risk. On December 31, 2020 the Group had a total of EUR 68.8 million (EUR 65.0 million) interest-bearing liabilities, excluding leasing-liabilities, of which a total of EUR 55.7 million variable-rate loans. At the closing date all external loans have been in Euro with the average cost of debt of 14.16 percent (12.16 %) and average maturity of 3.5 years. According to IFRS 7 standard calculated sensitivity analysis represents the effect of variable rate interest-bearing liabilities on profit before taxes if interest rate would have increased or decreased by 1 percentage with all other variables constant. For interest rate analysis the impact would have been -0.2/+0.0 million euros (-0.3/+0.0 million). At the closing date the Group didn’t have significant interest-bearing assets or other financial items that would be exposed to market rate changes. The following table illustrates the effect of a sensitivity analysis on interest rates.

EUR THOUSAND	2020	2019	Change in interest rates	+1%	-1%	+1%	-1%
Interest-bearing liabilities	-237	0		-338	0

Liquidity risk and refinancing risk

Liquidity risk is the risk that current funds and existing loan facilities are insufficient which may affect the Group's ability to deliver on the long-term strategy. Liquidity risk managed by securing the availability of long-term funding and maintaining sufficient cash reserves. The refinancing risk is managed by using various funding sources and distributing maturities of loans. The Group maintains sufficient liquidity and its cash and cash equivalents was EUR 40.5 million on 31 December 2020. Below is presented changes in the Group's debt portfolio in the financial year. The Group’s liquidity remained stable during the financial year. The Group's ability to secure financing may affect its ability to deliver on the strategy. The tables below describe the maturity structure of the interest-bearing liabilities. The figures are revealed with inclusion of interest and principal repayment, figures have not been discounted.

EUR THOUSAND

	2020	2019	Cash flow (+/-)	Non-cash flow (+/-)	2020
Non-current
Loans from financial institutions	48,947	7,76	0	56,706
Bond	9,943	16		9,958
Current
Loans from financial institutions	1,996	-1,819		1,996	2,173
Leasing liabilities	16,804	-4,257		2,827	15,374
Total	77,690	84,212

EUR THOUSAND

	Balance sheet value	Cash flow less than 1 year	1-3 years	3-5 years	over 5 years
Loans, interest-bearing	68,837	115,881	5,148	22,728	88,005
Leasing liabilities, interest-bearing	15,374	17,875	4,608	6,925	4,351
Foreign currency derivatives	357	357	357	0	0
Trade and other payables	10,196	10,196	10,196	0	0
Total	94,765	144,309	20,309	29,654	92,356

Maturity distribution of financial liabilities 2020

EUR THOUSAND

	Balance sheet value	Cash flow less than 1 year	1-3 years	3-5 years	over 5 years
Loans, interest-bearing	60,885	118,163	2,334	11,965	103,863
Leasing liabilities, interest-bearing	16,804	19,562	4,165	6,279	4,880
Foreign currency derivatives	77	77	77	0	0
Trade and other payables	10,998	10,998	10,998	0	0
Total	88,764	148,800	17,574	18,244	108,744

Maturity distribution of financial liabilities 2019

Credit risk

The sales receivables of the Group are widely spread among a customer base and do not include significant concentration of credit risks. Business management regularly monitors the payment of sales receivables as part of the management of customer accounts. The Group has not used surety bonds to secure sales receivables. Impairment losses recognized during the financial period and the age distribution of accounts receivables are presented in Note 15.

Capital management

Shareholders’ equity reported in the Group balance sheet is managed as capital. The Group's capital management aims to ensure the continuity of its operations (going concern) and increase the value of shareholder’s investment. The capital structure can be adjusted by decisions on, e.g., distribution of dividend, share repurchase and share issues. The resolutions of the Annual General Meeting and the authorizations of the Board of Directors are presented in the Annual Report. Additional information on the share and share issue is presented under Share and Shareholders. The Group monitors the financial covenants as part of its business and strategy planning. In order to ensure sufficient headroom in relation to covenant thresholds and maximum levels the group forecasts the future values and provide the management with the information on financial and risk positions. Any covenant was not breached in the financial period ending 31 December 2020. The Group aims to maintain a strong equity ratio and a moderate gearing ratio. At the end of 2020 the equity ratio was 36.7 percent (41.9%) and gearing ratio 53.0 percent (48.9%). Gearing ratio excluding leasing liabilities was 34.4 percent (31.1%).

EUR THOUSAND

	1.1.2020	Decrease of treasury shares	Transactions that do not affect the number of shares / Cash flow hedges	31.12.2020
Shareholders' equity
Share premium account	3,528			3,528
Invested non-restricted equity	1,187			1,187
Other reserves	110,388	-98	-363	110,290
Own shares	653	98		290
Total	115,659	0	-363	115,295

Shareholders’ equity 2020
Shareholders’ equity 2019

19. Shareholders’ equity Accounting principles

Costs related to the issue or purchase of equity instruments are recorded as a reduction of shareholders' equity. Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity.

	2020	2019
Number of outstanding shares Jan. 1	14,397,639	14,370,476
Incentive plan (+)	17,821	27,163
Number of outstanding shares Dec.
14,415,460
14,397,639
Treasury shares Jan 1
4,297
31,460
Share issue without consideration (+)
19,000
0
Incentive plan (-)
-17,821
-27,163
Treasury shares Dec. 31
5,476
4,297
Number of shares
Other reserves
Other reserves include the fair value reserve, which includes the cash flow hedges and the increase in the value of the Analyste deal shares between the publication and realization of the deal in 2006.
Treasury shares
The treasury shares reserve includes the acquisition cost of own shares held by the Group.
Warrants
Basware entered into a loan agreement with Bregal Milestone LLP with detachable warrants entered into at the same time (On November 23, 2020 the loan was transferred to Macquarie Principal Finance PTY Limited, UK Branch). On October 9, 2020, Basware received flagging notifications from Bregal Milestone and Briarwood Chase Management LLC according to which Briarwood Chase Management LLC had acquired all warrants from Bregal Milestone. The management used judgement in valuing the warrants at fair value. The loan is calculated at amortized cost applying EIR. As a result of the share issue in June 2020 the warrants were adjusted to entitle their holder to subscribe for a total of 1,001,000 shares in the company (before the adjustment, 1,000,000 shares) at an adjusted subscription price of EUR 29.8764 per share (before the adjustment, the subscription price per share was EUR 29.9158). The warrants are exercisable at any time until 20 business days prior to the 19 September 2024.
Dividends
The Board of Directors proposes to the Annual General Meeting that no dividend will be paid for the year 2020 (2019: 0 euros per share).

EUR THOUSAND
| Shareholders' equity | 1.1.2019 | 31.12.2019 |
| ------------------------------ | -------- | ---------- |
| Share premium account | 3,528 | 3,528 |
| Invested non-restricted equity | 1,187 | 1,187 |
| Other reserves | 110,928 | 110,388 |
| Own shares | -638 | -98 |
| Total | 115,837 | 115,659 |

1.1.2019
3,528
1,187
110,928
832
-638
115,837

Decrease of treasury shares
-540
540
0

Transactions that do not affect the number of shares / Cash flow hedges
-178
-178

31.12.2019
3,528
1,187
110,388
653
-98
115,659

The nominal value of one share is not determined.
78 Basware 2020 Governance Financials

20. Trade and other liabilities

EUR THOUSAND
| | 31.12.2020 | 31.12.2019 |
| ---------------------------------- | ---------- | ---------- |
| Long-term trade and other liabilities | | |
| Contract liabilities | 2,791 | 3,184 |
| Long-term trade and other liabilities total | 2,791 | 3,184 |
| Short-term trade and other liabilities | | |
| Trade liabilities | 6,178 | 7,600 |
| Contract liabilities | 19,177 | 15,260 |
| Other liabilities | 24,292 | 20,867 |
| Short-term trade and other liabilities total | 49,648 | 43,727 |

EUR THOUSAND
| | 31.12.2020 | 31.12.2019 |
| ------------------- | ---------- | ---------- |
| Opening balance Jan 1 | 266 | 198 |
| Additions | 0 | 1,656 |
| Disposals | -266 | -1,588 |
| Closing balance Dec. 31 | 0 | 266 |

Accrued expenses include personnel related expenses EUR 17,054 thousand (EUR 14,739 thousand). The fair values of financial assets and liabilities are presented in Note 22 and definitions for contract liabilities presented in Note 2.

21. Provisions

Accounting principles
A provision is recognized when the Group has a present legal or constructive obliga - tion as a result of a past event, it is probable that the obligation will have to be settled, and the amount of the obligation can be reliably estimated. Provisions are measured at the present value required in order to cover the obligation. The present value factor used in the calculation of the present value is selected so that it represents the market insight into the time value of money and liability-related risks at the time of the assessment.

At the end of April 2019, Basware launched a productivity programme. Organizational changes and optimization resulted in a headcount reduction of 64 employees globally. Negotiations with employees have been carried out in accordance with local legislation in each location affected.
79 Basware 2020 Governance Financials

22. Financial assets and liabilities

Accounting principles
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets
The financial assets are categorized as follows:
• financial asset measured at amortised costasset measured at amortised cost
• financial asset measured at fair value through other comprehensive income
• financial asset measured at fair value through profit or loss

A financial asset is measured at amortised cost when both of the following conditions are met:
• the objective is to hold financial assets to collect contractual cash flows and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A financial asset is measured at fair value through other comprehensive income when both of the following conditions are met:
• the objective is to collect contractual cash flows and to sell financial assets and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A financial asset is measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income.

On initial recognition of an equity instrument that is not held for trading, the Group may irrevocably elect to present subsequent changes in fair value in other comprehensive income. This election is made on an investment by investment basis. The categorization is based on the purpose of the acquisition of the financial assets and it is performed in connection with the original acquisition.

Financial assets are classified as non-current assets if they mature in more than 12 months. If they are to be held for less than 12 months financial assets are disclosed as current assets.

All purchases and sales of financial assets are recognized at the transaction date, which is the date on which the Group commits to purchase or sell the financial instruments. A financial asset is derecognised when the rights to receive cash flows from the asset have expired the Group has transferred substantially all the risks and rewards of the asset.

Impairment of financial assets
Trade receivables are measured at amortised cost less impairment losses. The principles for impairment of trade receivables are presented in Note 15. For the other financial assets the impairments are recognized based on Expected Credit Losses. In addition, the Group assesses at each reporting date whether there is objective evidence that a financial asset is impaired.

Financial liabilities
The Group's financial liabilities include trade and other payables and financial liabilities that are measured at amortised cost. Financial liabilities are classified as non-current liabilities if they mature in more than 12 months. Liabilities maturing in less than 12 months are classified as current.

Derivates
Derivative financial instruments are recognized at fair value on the trade date and subsequently revalued at the fair value on each reporting date. For all derivatives the fair value calculation is based on using the observable market data for foreign currency and interest rate price quotation on the reporting date. Derivatives are included in current assets or liabilities and on the reporting date, except derivatives maturities greater than 12 months after the balance sheet date, which are classified as non-current assets or liabilities.

The Group applies hedge accounting for foreign currency cash flow hedging. For foreign exchange forwards and swaps not qualifying for hedge accounting changes in fair values are recognised in income statement in financial income and expenses.

Hedge relationship qualifies for hedge accounting only if the specific requirements are met. At inition the hedge relationships have to be formally documented and consist of eligible hedge instrument and hedged item(s). The documentation defines the relationship between the designated hedging instrument(s) and the designated hedged item(s), the nature of the risk being hedged with the company’s risk management objective and strategy. The designated items have to be identifiable and reliably measurable. In addition, analysis of the sources for the ineffectiveness are documented. The hedge effectiveness is assessed at inception and after that ongoing basis considering the economic relationship, credit risk and the hedge ratio. Effectiveness is assessed using qualita - tive methodology.

In cash flow hedge accounting is used foreign currency forward and non- deliverable forward contracts to hedge exposures in foreign currency cash flows which ensures
80 Basware 2020 Governance Financials
economic relationship. Economic relationship exist between the designated hedged item and the designated hedging instrument which means that the values of these items move in the opposite directions because of the common underlying risk. Selecting appropriate stakeholders enables assessment of credit risk and ensuring that the effect of credit risk is not dominating the value changes in the fair values. The hedge ratio in hedge accounting is the same used for actual hedging. Forward contracts are designated with the full fair value to hedge relationships, meaning spot and forward elements are not separated.

For cash flow hedges the effective portion of changes in the fair value of hedging instruments are recognised through other comprehensive income (OCI) to hedge reserve within equity. When the hedged transaction affects the income state - ment the hedging instruments recognised in OCI are transferred to income statement. Accumu- lated changes in fair values within equity are recognised in income statement in adjustment of purchases or sales in the same period when the hedged item affects income statement. Any ineffective portion of hedges under hedge accounting treatment are reclassified imme - diately to income statement in financial gain or expense. If hedging instrument designated in the cash flow hedge accounting is no longer valid or a hedge relationshipdoesn't meet the criteria for hedge accounting, the cumulative change in the fair value the hedging instrument will remain in the equity until a recognition of the hedged item in the income statement. The cumulative change in the fair value of the hedging instrument is reclassified to income statement to adjustment item immediately if the hedged cash flow is not firm or highly probable and not expected to realize in the future. Changes in the fair values of foreign exchange derivatives are recognized in financing income and expenses if hedged items are recognized as assets or liabilities. Cash flow hedging resulted in the net profit of EUR 23 thousand in the income statement and the balance sheet impact (OCI) was EUR 358 thousand at the end of 2020.

81 Basware 2020 Governance Financials

EUR THOUSAND

Note	Derivatives, hedge accounting	Fair value through profit or loss	Amortized cost	2020 Carrying amount	2020 Fair value
Financial assets non-current
Unlisted share investments	14			13	13
Other receivables	14			688	688
Financial assets current
Trade and other receivables	15			27,807	27,807
Derivatives	18	55		55	55
Cash and cash equivalents	16			40,461	40,461
Financial assets				69,024	69,024
Financial liabilities non-current
Loans, interest-bearing				66,665	77,299
Leasing liabilities, interest-bearing				11,647	11,647
Financial liabilities current
Loans, interest-bearing				2,173	2,173
Leasing liabilities, interest-bearing				3,727	3,727
Trade and other payables	20			10,196	10,196
Derivatives	18		413	413	413
Financial liabilities			94,821	105,455

EUR THOUSAND

Note	Derivatives, hedge accounting	Fair value through profit or loss	Amortized cost	2019 Carrying amount	2019 Fair value
Financial assets non-current
Unlisted share investments	14			38	38
Other receivables	14			857	857
Financial assets current
Trade and other receivables	15			27,642	27,642
Derivatives	18		144	144	144
Cash and cash equivalents	16			31,672	31,672
Financial assets			60,353	60,353
Financial liabilities non-current
Loans, interest-bearing				58,889	70,059
Leasing liabilities, interest-bearing				13,412	13,412
Financial liabilities current
Loans, interest-bearing				1,996	1,996
Leasing liabilities, interest-bearing				3,392	3,392
Trade and other payables	20			10,989	10,989
Derivatives	18		66	66	66
Financial liabilities			88,678	99,848

83 Basware 2020 Governance Financials

Financial instruments that are measured at fair value in the balance sheet are presented according to fair value measurement hierarchy: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted price included within Level 1 that are observable for the assets or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3: inputs for the assets or liability that is not based on observable market data (unobservable inputs).

In determining the values of the financial assets and liabilities, the following price quotations, assumptions and valuation models have been used.

Long-term financial assets

Long-term financial assets consist of unlisted share investments and other receivables. Unquoted equity shares of EUR 13 thousand are classified as level 3 in the fair value measurement hierarchy.

Short-term financial assets

Trade and other receivables are measured at amortized cost less impairment losses. Financial assets arising from derivative financial instruments of EUR 55 thousand are classified as level 2.

Long-term financial liabilities

Long-term loans from financial institutions consist of a loan from Macquarie Principal Finance PTY Limited, UK Branch (the Loan was transferred from Bregal Milestone LLP on November 23, 2020 with no changes made to the terms and conditions of the loan) and other institutions. Fair value of the loan from Macquarie Principal Finance PTY is measured to reflect the amount the Group would need to pay if it would repay the loan in full at the end of reporting period. The loan is classified as level 2 in the fair value measurement hierarchy. The loan has an exit fee which accrues evenly over the loan period. The value of the exit fee at maturity equals 40 percent of the loan amount. The value of the loan as of 31 December, 2020 would approximately be 76.7 million euros if calculated based on discounted cash flows. Other loans are at fixed or variable rate and their fair values are considered to correspond to the book values as divergences between the values are assessed as immaterial.

Short-term financial liabilities

The fair values of short-term loans from financial institutions are considered to correspond to the book values. Trade payables and other liabilities are measured at amortised cost. Financial liabilities arising from derivative financial instruments of EUR 413 thousand are classified as level 2. The maturity distribution of financial liabilities is presented in Note 18.

84 Basware 2020 Governance Financials

23. Auditor fees

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Audit fees	-258	-291
Tax consultancy	0	0
Other fees and services	-4	0
Auditor fees total	-262	-291

24. Commitments and contingent liabilities

EUR THOUSAND	31.12.2020	31.12.2019
Own guarantees
Guarantees	1,262	1,149
Commitments on behalf of subsidiaries
Guarantees	822	298
Other commitments
Maturing in less than 1 year	3,455	3,173
Maturing in 1-5 years	2,876	4,899
Total	6,331	8,072
Commitments and contingent liabilities total	8,415	9,518

Other commitments include leases and other rental not in scope of IFRS 16, as well as commitments arising from license agreements. Obligations from long term service agreements are not included.

The group does not have pledges, mortgages or guarantees on behalf of external parties.

The Group’s Indian subsidiary is in receipt of Show Cause Notice pertaining to Indian financial year 2017-2018 and 2018-2019 for goods and service tax liability and if services are considered to be Intermediary services or export of services. This issue is related to a substantial number of global IT companies operating in India. The Group has not recorded any provision related to the Notice as the Group considers it to be more likely than not that it will not realize.

25. Related party transactions

Domicile	Country	Parent company holding, %
Basware International Oy	Espoo	Finland
Basware GmbH	Düsseldorf	Germany
Basware AB	Stockholm	Sweden
Basware B.V.	Amsterdam	Netherlands
Basware A/S	Herlev	Denmark
Basware, Inc.	Delaware	United States
Basware SAS	Paris	France
Basware AS	Oslo	Norway
Basware Pty Ltd	Chatswood	Australia
Basware SRL	Iasi	Romania
Basware India Private Limited	Chandigarh	India
Basware Belgium NV	Aalst	Belgium
Basware Holdings Ltd.	London	Great Britain
Basware Shared Services Ltd.	London	Great Britain

Foreign branches

The parent company has branches in India, Chandigarh (reg. no F03347) and Russia, Moscow (reg. no 16926.1).

Basware UK subsidiaries, Basware Holdings Ltd. and Basware Shared Services Ltd. have applied exemption from the local statutory audit requirements under section 479A of the Companies Act 2006.

Basware GmbH is exempt from the duty of corporations to audit and disclose financial statements pursuant to German legislation (§ 264 III HGB).

85 Basware 2020 Governance Financials

26. Events after the reporting period

On January 14, 2021, the Board of Directors of Basware Corporation has resolved on an issue of 43,000 new shares in the company to the company itself without consideration pursuant to the share issue authorization granted to it by the Annual General Meeting held on June 4, 2020. The new shares to be issued to the company will be used for reward payments under the company's incentive programs. The new shares to be issued are of the same class as the existing shares in the company. The total number of the company's shares after the share issue is 14,463,936 shares, of which 48,476 shares in total are held by the company.

86 Basware 2020 Governance Financials

Parent company income statement (FAS)

EUR	Note	1.1.-31.12.2020	1.1.-31.12.2019
NET SALES	2	76,404,254.64	76,190,873.76
Other operating income	3	104,306.00	237,475.36
Materials and services	4	-16,603,144.76	-18,205,324.20
Employee benefits expenses	5	-27,577,060.55	-28,327,442.68
Depreciation and amortization	6	-9,754,876.74	-8,855,304.69
Other operating expenses	7	-24,205,080.20	-42,491,162.05
Operating profit/loss		-1,631,601.61	-21,450,884.50
Financial income	8	886,438.27	1,375,862.55
Financial expenses	8	-11,530,950.03	-8,712,567.29
Dividend from group companies		200,000.00	2,380,429.88
Impairment on investments	12	-17,884.00	0.00
Profit/loss before appropriation and taxes		-12,093,997.37	-26,407,159.36
Income tax expense	9	0.00	0.00
PROFIT/LOSS FOR THE PERIOD		-12,093,997.37	-26,407,159.36

Parent company balance sheet (FAS)

EUR	Note	31.12.2020	31.12.2019
ASSETS
Non-current assets
Intangible assets	10	36,566,585.97	37,406,093.16
Tangible assets	11	677,978.80	819,306.74
Investments	12	107,583,005.73	113,964,386.64
Long-term trade and other receivables	13	645,316.57	1,005,066.23
Non-current assets		145,472,887.07	153,194,852.77
Current assets
Short-term trade and other receivables	14	23,008,460.06	25,841,027.28
Cash and cash equivalents		32,370,471.67	21,481,183.60
Current assets		55,378,931.73	47,322,210.88
TOTAL ASSETS		200,851,818.80	200,517,063.65
EQUITY AND LIABILITIES
Shareholders' equity
Share capital		3,528,368.70	3,528,368.70
Share premium account		1,118,161.00	1,118,161.00
Fair value reserve		-357,511.42	77,322.04
Other reserves		115,939,220.13	116,036,928.54
Retained earnings		-35,149,288.89	-8,839,837.94
Result for the period		-12,093,997.37	-26,407,159.36
Shareholders' equity	15	72,984,952.15	85,513,782.98
Current provisions	16	0.00	0.00
Liabilities
Long-term liabilities	17	68,901,805.96	59,066,354.54
Short-term

Parent company cash flow statement (FAS)

EUR 1.1.-31.12.2020 1.1.-31.12.2019

Cash flow from operating activities

	EUR 1.1.-31.12.2020	EUR 1.1.-31.12.2019
Result for the period	-12,093,997.37	-26,407,159.36
Adjustments for result
Planned depreciations	9,754,876.74	8,855,304.69
Proceeds from sale of non-current assets	46,177.46	0.00
Unrealized exchange gains and losses	810,886.35	-278,222.43
Finance income and expenses	9,684,729.72	5,185,653.32
Other non-cash items	-766,477.46	-94,818.79
Working capital changes	-8,736,187.40	-1,973,293.44
Interest paid	-72,669.22	-1,258,435.10
Dividends received	700,000.00	1,880,813.74
Interest received	381,335.11	974,902.50
Other financial items in operating activities	-426,385.25	-517,874.02
Net cash from operating activities	-717,711.32	-13,633,128.89

Cash flow from investing activities

	EUR 1.1.-31.12.2020	EUR 1.1.-31.12.2019
Purchase of tangible and intangible assets	-8,816,475.72	-10,056,028.22
Proceeds from sale of tangible and intangible assets	6,500.00	-16,659.09
Proceeds from repayments of loans	6,356,996.74	4,501,767.59
Addition / deduction of cash equivalents	817,979.14	5,682,708.57
Net cash used in investing activities	-1,634,999.84	111,788.85

Cash flow before financing activities

	EUR 1.1.-31.12.2020	EUR 1.1.-31.12.2019
Cash flow before financing activities	-2,352,711.16	-13,521,340.04

EUR 1.1.-31.12.2020 1.1.-31.12.2019

Cash flow from financing activities

	EUR 1.1.-31.12.2020	EUR 1.1.-31.12.2019
Repayment of current borrowings	-1,995,972.00	-22,295,972.00
Addition / deduction of current borrowings	13,791,066.35	5,688,827.57
Proceeds from borrowings	1,446,904.88	43,879,726.76
Repayment of non-current borrowings	0.00	-20,000,000.00
Net cash used in financing activities	13,241,999.23	7,272,582.33

	EUR 1.1.-31.12.2020	EUR 1.1.-31.12.2019
Net change in cash and cash equivalents	10,889,288.07	-6,248,757.71
Cash and cash equivalents at the beginning of period	21,481,183.60	27,729,941.31
Cash and cash equivalents at the end of period	32,370,471.67	21,481,183.60

The company includes intra-group accounts in the financing activities.

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS (FAS)

1. Accounting principles

Basware Corporation’s financial statements have been prepared in accordance with the Finnish Accounting Act.

Transactions in foreign currencies

Transactions in foreign currencies are recorded at the exchange rates prevailing at the transaction dates. The unsettled balances on foreign currency receivables and liabilities are valued at the rates of exchange prevailing at the end of the accounting period. Foreign exchange gains and losses related to normal business operations are entered in the appropriate income statement account before operating profit and foreign exchange gains and losses associated with financing are entered as a net amount under financial income and expenses.

Revenue recognition

Parent company applies the same revenue recognition principles as the Group. Revenue recognition principles of the Group are presented in Note 2.

Other operating income

Other operating income includes proceeds from the sale of business operations and property, plant and equipment and rental income.

Research and development costs

Research expenses are booked as an expense as they are incurred. Costs related to the adoption of new technology or development of a new generation of projects are capitalized, recognized and amortized over the useful life of 3–5 years. In determining the useful life, the obsolescence of technology and the typical life cycle of products in the industry are taken into consideration. Amortization starts once the product is ready for commercial utilization. Maintenance of existing products and minor enhancements are recognized as they are incurred. Public subsidies related to research and development are recognized through profit or loss in the periods during which the corresponding costs are recognized as expenses.

Pensions

The statutory pension coverage for employees is provided through insurance policies taken out with a pension institution. The statutory pension expenses are recognized as expenses in the year they are incurred.

Intangible assets

Intangible assets are recognized at the original acquisition cost less accumulated depreciation according to plan and possible impairment. Public subsidies related to the acquisition of an intangible asset are deducted from the acquisition cost of the asset and recognized as income by reducing the depreciation charge of the asset they are related to. The expected useful lives of intangible assets are 3–10 years. The useful lives are reviewed at the end of each financial year and are adjusted if needed.

Tangible assets

Tangible assets are recognized in the balance sheet at the original acquisition cost less accumulated depreciation. The useful lives of tangible assets are 3–5 years.

Investments

The company’s subsidiary shares and other shares in the investments in non-current assets are valued at acquisition cost or, if lower, at fair value.

Financial instruments

Financial instruments are recognized at fair value in accordance with Accounting Act section 5: 2a. The accounting principles of hedge accounting are presented in Note 18 and Note 22 of group financial statements.

Provisions

A provision is recognized when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the obligation will have to be settled, and the amount of the obligation can be reliably estimated.

Leases

Leasing payments are recognized as annual expenses.

Income taxes

Income taxes have been recognized in accordance with Finnish tax legislation. Income taxes include the income tax payments for the period based on the profit for the period, taxes for prior periods and tax refunds. Deferred taxes are not included in the parent’s income statement and balance sheet.

2. Net sales

Net sales by revenue type

Below is breakdown of revenue by type. Revenue by type is not directly comparable with group revenue because figures reported by parent company include intra-group revenue.

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Cloud revenue
SaaS	35,349	29,919
Transaction services	23,871	25,731
Other cloud revenue	60	46
Cloud revenue total	59,281	55,696
Non-cloud revenue
Maintenance	9,682	13,010
License sales	193	736
Consulting services	7,518	6,678
Other non-cloud revenue	-269	71
Other than cloud revenue total	17,124	20,495
Revenue total	76,404	76,191

Net sales by location of customer

EUR THOUSAND	1.1-31.12.2020	1.1-31.12.2019
Finland	36,315	35,300
Export	40,089	40,891
Total	76,404	76,191

In 2019 and 2020, other operating income mainly consists of other proceeds related to divestment. Salaries and fees paid to each member of the management are detailed in Note 5 to the consolidated financial statement.

3. Other operating income

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Gain on sale of assets	23	0
Other operating income	81	237
Other operating income total	104	237

4. Materials and services

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Purchases during the financial period	-15,614	-17,074
Services purchased	-989	-1,132
Total	-16,603	-18,205

5. Personnel and employee benefits

EUR THOUSAND	1.1-31.12.2020	1.1-31.12.2019
Salaries paid to CEO and the Board of Directors	-817	-1,501
Salaries paid to other personnel	-22,715	-22,304
Pension expenses	-3,139	-3,732
Other personnel expenses	-906	-790
Total	-27,577	-28,327

	1.1-31.12.2020	1.1-31.12.2019
Personnel average for the period	347	353
Personnel at the end of the period	346	341
Number of personnel

6. Depreciation and amortization

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Intangible assets	-9,565	-8,631
Tangible assets	-190	-224
Total	-9,755	-8,855

7. Other operating expenses

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Rents	-1,376	-1,162
Non-statutory employee benefits	-387	-451
Travelling	-313	-843
Marketing	-3,531	-3,598
IT and telephone	-904	-1,007
Auditor fees	-171	-206
Other expenses	-17,523	-35,224
Other operating expenses total	-24,205	-42,491

Audit fees total	-171	-206
Tax consultancy	0	0
Other fees and services	-4	0
Audit fees total	-171	-206

8. Finance income and expenses

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Other interest and financial income
From group companies	845	1,233
From others	41	143
Other interest and financial income	886	1,375
Interest and financial expenses
To group companies	-1,283	-297
To others	-10,248	-8,416
Impairment on investments	-18	0
Other interest and financial expenses total	-11,549	-8,713
Total	-10,663	-7,337

9. Direct taxes

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Income taxes from previous financial periods	0	0
Total	0	0

The deferred tax asset arising from accumulated losses total of 4.0 (6.9) million euros, and from non-deductible interests total of 17.2 (6.6) million euros, has not been recognized on the balance sheet. The postponed R&D amortizations are booked as deferred tax asset on the Group balance sheet.

10. Intangible assets

EUR THOUSAND	Acquisition cost Jan. 1	Additions	Disposals	Reclassifications between items	Acquisition cost Dec. 31
2020
Development costs	63,503	74	0	1,405	65,652
Intangible rights	17,846	4	0	0	18,496
Goodwill/merger loss	17,625	650	0	0	17,625
Other long-term investments	288	0	0	0	288
Assets, unfinished projects	8,118	0	0	-1,405	14,044
Total	107,380	7,330	0	0	116,104

EUR THOUSAND	Cumulative amortisation Jan. 1	Cumulative amortisation on disposals and reclassifications	Amortisation	Cumulative amortisation Dec. 31	Book value Dec.
2020
Development costs	-37,551	0	-8,220	-45,771
Intangible rights	-14,726	0	-1,309	-16,035
Goodwill/merger loss	-17,625	0	0	-17,625
Other long-term investments	-72	0	-35	-107
Assets, unfinished projects	0	0	0	0
Total	-69,973	0	-9,565	-79,538

EUR THOUSAND	Acquisition cost Jan. 1	Additions	Disposals	Reclassifications between items	Acquisition cost Dec. 31
2019
Development costs	66,009	3,226	0	-5,772	63,503
Intangible rights	18,018	53	0	-230	17,846
Goodwill/merger loss	17,625	0	0	0	17,625
Other long-term investments	288	0	0	0	288
Assets, unfinished projects	8,877	0	0	-759	8,118
Total	110,817	3,279	0	-6,261	107,380

EUR THOUSAND	Cumulative amortisation Jan. 1	Cumulative amortisation on disposals and reclassifications	Amortisation	Cumulative amortisation Dec. 31	Book value Dec.
2019
Development costs	-34,475	0	-8,631	-37,551
Intangible rights	-13,672	0	-1,309	-14,726
Goodwill/merger loss	-17,625	0	0	-17,625
Other long-term investments	-72	0	0	-72
Assets, unfinished projects	0	0	0	0
Total	-65,844	0	-9,940	-69,973

11. Tangible assets

Tangible assets 2020

EUR THOUSAND	Machinery and equipment	Other tangible assets	Total
Acquisition cost Jan´ 1	6,954	152	7,107
Additions	49	0	49
Disposals	-106	0	-106
Acquisition cost Dec. 31	6,898	152	7,050
Cumulative amortization Jan´ 1	-6,287	0	-6,287
Cumulative amortisation on disposals and reclassifications	106	0	106
Amortization	-190	0	-190
Cumulative amortization Dec. 31	-6,372	0	-6,372
Book value Dec. 31	526	152	678

Tangible assets 2019

EUR THOUSAND	Machinery and equipment	Other tangible assets	Total
Acquisition cost Jan´ 1	6,196	145	6,341
Additions	771	7	778
Disposals	-13	0	-13
Acquisition cost Dec. 31	6,954	152	7,107
Cumulative amortization Jan´ 1	-6,073	0	-6,073
Cumulative amortisation on disposals and reclassifications	10	0	10
Amortization	-224	0	-224
Cumulative amortization Dec. 31	-6,287	0	-6,287
Book value Dec. 31	667	152	819

12. Investments

EUR THOUSAND

	1.1.-31.12.2020	1.1.-31.12.2019
Shares in group companies
Book value Jan´ 1	98,075	98,075
Book value Dec. 31	98,075	98,075
Other shares
Book value Jan´ 1	13	38
Book value Dec. 31	13	38
Receivables from group companies
Loan receivables from group companies	9,495	15,852
Investments total	107,583	113,965

Subsidiary shares

Domicile Country	Parent company holding, %
Basware International Oy	Espoo Finland
Basware GmbH	Düsseldorf Germany
Basware AB	Stockholm Sweden
Basware B´V´	Amsterdam Netherlands
Basware A/S	Herlev Denmark
Basware Inc.	Delaware United States
Basware SAS	Paris France
Basware AS	Oslo Norway
Basware Pty Ltd	Chatswood Australia
Basware SRL	Iasi Romania
Basware India Private Limited	Chandigarh India
Basware Belgium NV	Aalst Belgium
Basware Holdings Ltd.	London Great Britain
Basware Shared Services Ltd.	London Great Britain

Foreign branches The parent company has branches in India, Chandigarh (reg´no´ F03347) and Russia, Moscow (reg´no´ 16926´1)´ Basware UK subsidiaries, Basware Holdings Ltd´ and Basware Shared Services Ltd´ have applied exemption from the local statutory audit requirements under section 479A of the Companies Act 2006´ Basware GmbH is exempt from the duty of corporations to audit and disclose financial state - ments pursuant to German legislation (§ 264 III HGB)´

13. Non-current receivables

EUR THOUSAND	31.12.2020	31.12.2019
Rent deposits	7	7
Total	7	7

14. Current receivables

EUR THOUSAND	31.12.2020	31.12.2019
Accounts receivables	5,662	5,967
Receivables from group companies
Accounts receivables	10,262	7,100
Interest receivables	0	0
Loan receivables	317	1,135
Other receivables	2,910	8,393
Total	13,488	16,628
Prepaid expenses and accrued income
Accrued employee expenses	7	0
Other prepaid expenses and accrued income	3,692	2,867
Total	3,698	2,867
Other receivables	159	380
Current receivables total	23,008	25,841

15. Shareholder’s equity

EUR THOUSAND	31.12.2020	31.12.2019
Share capital Jan´ 1	3,528	3,528
Share capital Dec. 31	3,528	3,528
Share premium account Jan´ 1	1,118	1,118
Share premium account Dec. 31	1,118	1,118
Fair value reserve Jan´ 1	77	240
Increase or decrease	-435	-163
Fair value reserve Dec. 31	-358	77
Restricted Equity Dec. 31	4,289	4,724
Invested non-restricted equity Jan´ 1	116,037	111,885
Decrease of treasury shares	-98	-540
Warrants	0	4,691
Invested non-restricted equity Dec. 31	115,939	116,037
Retained earnings Jan´ 1	-35,246	-9,379
Decrease of treasury shares	98	540
Profit for the period	-12,094	-26,407
Retained earnings Dec. 31	-47,243	-35,246
Non-restricted equity Dec. 31	68,696	80,790
Shareholders' equity Dec. 31	72,985	85,514

EUR THOUSAND

Specification of distributable funds	31.12.2020	31.12.2019
Profit for the period	-12,094	-26,407
Retained earnings	-35,148	-8,839
Other distributable funds	115,939	116,037
Warrants	-4,691	-4,691
Development expenses, capitalized*	-33,925	-34,070
Distributable funds Dec. 31	30,080	42,029

• According to Accounting Act 5:8 capitalized development expenses are deducted from distributable funds. Warrants are detailed in Note 19. Shareholders' equity in the consolidated financial statement.

16. Provisions

EUR THOUSAND	1.1.-31.12.2020	1.1.-31.12.2019
Opening balance Jan´ 1	0	106
Additions	0	767
Disposals	0	-873
Closing balance Dec. 31	0	0

17. Non-current liabilities

EUR THOUSAND	31.12.2020	31.12.2019
Loans from financial institutions	66,665	58,889
Deferred income	613	0
Debts to group companies	1,624	177
Non-current liabilities total	68,902	59,066

18. Current liabilities

EUR THOUSAND	31.12.2020	31.12.2019
Accounts payable	5,145	5,338
Liabilities to group companies
Accounts payable	2,345	1,881
Other debts	34,709	33,380
Total	37,054	35,261
Loans from financial institutions	1,996	2,001
Other debts	1,363	1,083
Accrued expenses and deferred income	13,408	12,253
Total	16,767	15,338
Current liabilities total	58,965	55,937
Accrued expenses and deferred income
Accrued employee expenses	7,787	6,721
Deferred income	3,683	3,848
Other accrued expenes	1,938	1,684
Total	13,408	12,253

19. Commitments and contingent liabilities

EUR THOUSAND	31.12.2020	31.12.2019
Own guarantees
Guarantees	398	398
Commitments on behalf of subsidiaries
Guarantees	822	298
Other own contingent liabilities
Leasing liabilities
Current lease liabilities	299	297
Lease liabilities maturing in 1–5 years	190	341
Total	489	638
Rental liabilities*
Current rental liabilities	4,380	3,998
Rental liabilities maturing in 1- 5 years	7,278	8,734
Rental liabilities maturing over 5 years	1,048	2,096
Total	12,706	14,829
Other own contingent liabilities total	13,196	15,467
Commitments and Contingent Liabilities total	14,416	16,162

*Value added tax is only included in vehicle leasing liabilities. The other liabilities are exclusive of value added tax. The lease agreements are ordinary lease agreements. The finance lease agreements are ordinary finance lease agreements and have no associated leaseback clauses. The group does not have pledges, mortgages or guarantees on behalf of external parties.

SIGNATURES FOR THE BOARD OF DIRECTORS’ REPORT AND FINANCIAL STATEMENTS

In Espoo, February 3, 2021

Daryl Rolley
Board member

Klaus Andersen
CEO

Asko Schrey
Board member

Minna Smedsten
Board member

Michael Ingelög
Chairman of the Board

Ilkka Sihvo
Vice Chairman of the Board

The Auditor's Note

A report on the audit performed has been issued today´

In Helsinki, February 3, 2021

Ernst & Young Oy
Authorized Public Accountant Firm

Terhi Mäkinen
Authorized Public Accountant