Innofactor Plc's Interim Report for January 1–March 31,

Innofactor Plc's Interim Report May 3, 2017, at 9:00 Finnish time  

The best first quarter in history in terms of net sales and operating margin

January–March 2017 in brief:

• The net sales were approximately EUR 17.5 million (2016: 14.6), which shows an increase of 20.0%.
• The operating margin was approximately EUR 1.2 million (2016: 0.9), which shows an increase of 27.1%.
• The operating profit was EUR 487 thousand (2016: 306), increasing by 59.2%; the operating profit was affected by increased write-offs related to acquisitions, in accordance with IFRS 3, resulting in a decrease of EUR 507 thousand (2016: 455).
• The actions for improving effectiveness of operations, related to the Lumagate companies, have had the desired effect of improving net sales, operating margin and cash flow as of March 2017, even though the actions resulted in extra costs for March.
• Innofactor received several significant orders during the first quarter of the year and in April. For example, the Unemployment Insurance Fund (TVR) for approximately EUR 1.0 million, the Hospital District of Helsinki and Uusimaa (HUS) for approximately EUR 1.8 million, and IF Metall (in Sweden) for approximately EUR 0.6-4 million.  

*) In accordance with IFRS 3, the operating profit for January 1–March 31, 2017, includes EUR 507 thousand (2016: 455) in depreciations related to acquisitions, consisting of allocations of the purchase price to intangible assets. Adjusted for the said depreciations, Innofactor’s operative business profit for the review period of January 1–March 31, 2017, would have been EUR 994 thousand (2016: 761), the operative business result before taxes EUR 853 thousand (2016: 626), the operative business result EUR 682 thousand (2016: 501), and the operative business result per share EUR 0.0208 (2016: 0.0155).

**) The Innofactor Group monitors the number of active personnel. The number of active personnel does not include employees who are on a leave of over 3 months.

Innofactor’s future outlook for 2017 remains the same

Innofactor’s net sales and operating margin (EBITDA) in 2017 is estimated to increase from 2016, during which the net sales were EUR 59.6 million and operating margin was EUR 4.8 million.

CEO Sami Ensio's review: Strong start for 2017

In the first quarter of 2017, Innofactor continued profitable growth in accordance with its strategy and had the best first quarter in its history, as measured in both net sales and operating margin.

The net sales grew by 20.0 percent (net sales EUR 17.5 million). Innofactor has estimated that the Nordic IT market will grow faster in 2017 than in the previous years, and this estimate remains the same. The market growth is believed to also increase Innofactor’s growth possibilities.

In the first quarter of 2017, the operating margin (EBITDA) was EUR 1.2 million (6.6 percent of the net sales) and grew by 27.1 percent from the previous year. In Innofactor’s history, the end of the year has typically been better in terms of operating margin than the beginning of the year.

The actions for improving effectiveness of operations (stated in the financial statement on March 7, 2017, and related to the Lumagate companies), including renewal of the organization structure and trimming down management, have had the desired effect of improving net sales, operating margin and cash flow as of March 2017, even though the actions resulted extra costs for March.

The integration of the Swedish company Cinteros AB, acquired at the end of 2015, and the Lumagate companies, acquired in October 2016, is progressing as planned. During 2017, we will continue to standardize our Nordic offering. The Lumagate product business has been merged into the Innofactor's Nordic product unit and our common offering.

Innofactor got significant deals during the first quarter and in April. Innofactor's order book grew, for example, due to the following: delivering IT services to the Unemployment Insurance Fund (TVR) for approximately EUR 1.0 million, developing the Terveyskylä applications for the Virtual Hospital project to the Hospital District of Helsinki and Uusimaa (HUS) for approximately EUR 1.8 million, and the further development and support for the IF Metall's membership management system (in Sweden) for approximately EUR 0.6-4 million.

Also the cash flow from business activities in the first quarter remained strong and was EUR 2.3 million.

Innofactor is still actively looking for new strategic partnerships in the Nordic Countries. The Group’s goal is to grow both organically and through acquisitions.

Strategy and its realization in the review period

Innofactor is the one of the leading implementers of cloud solutions and digitalization in the Nordic Countries. Innofactor has the widest solution offering and leading know-how in the Microsoft ecosystem in the Nordic Countries. Innofactor has approximately 600 enthusiastic and motivated top specialists in Finland, Sweden, Denmark and Norway. Innofactor's customers include over 1,500 companies and public administration and third sector organizations. During the years 2017-2020, Innofactor will primarily strive to unify its offering in the Nordic Countries in its selected areas. This may happen either through organic growth or selected acquisitions.

Innofactor's mission: We empower organizations and people to make a difference in the digital world.

Innofactor's vision: We are the leading implementer of cloud solutions and digitalization in each of the Nordic Countries (Finland, Sweden, Denmark and Norway).

Innofactor's strategy for achieving this vision includes:

• The best Nordic professionals in the Microsoft ecosystem
• The leading offering in cloud solutions and digitalization
• A proactive, value-adding and flexible delivery model
• Spearhead customers in selected fields in the Nordic Countries

Innofactor's long-term financial goal is to grow profitably:

• By achieving annual organic growth of approximately 20 percent in 2020 at the latest
• By achieving approximately 20 percent operating margin (EBITDA) in relation to the net sales in 2020 at the latest
• By keeping the cash flow positive and securing solid financial standing in all situations

Innofactor's net sales on the review period of January 1–March 31, 2017, grew by 20.0% and was mostly based on inorganic growth resulting from the Lumagate acquisition.

Innofactor's operating margin (EBITDA) in relation to net sales was 6.6 percent in the review period of January 1–March 31, 2017. Typically, Innofactor’s profitability has improved towards the end of the year.

Innofactor’s operating cash flow in the review period of January 1–March 31, 2017, was EUR 2.3 million positive (2016: EUR 3.5 million). Innofactor’s financial stability is good. Net gearing at the end of the review period was 52.9 percent (2016: 49.6 percent).  

Espoo, May 3, 2017 INNOFACTOR PLC Board of Directors

Additional information: CEO Sami Ensio, Innofactor Plc Tel. +358 50 584 2029 sami.ensio@innofactor.com

Briefings concerning the Interim Report January 1–March 31, 2017

On May 3, 2017, at 10:00 Finnish time, Innofactor will hold a briefing concerning the interim report in Finnish for the media, investors and analysts at the company's premises at Keilaranta 9, Espoo. The report will be presented by CEO Sami Ensio. The presentations of the briefing will be available on Innofactor's web site after the briefing.

We ask you to register for the briefing beforehand by sending email to tanja.eskolin@innofactor.com .

Innofactor will also hold a conference call in English for analysts, media and investors on May 3, 2017, at 16:00 Finnish time. Registrations to tanja.eskolin@innofactor.com before 12:00 Finnish time on Wednesday, May 3, 2017.

Distribution: NASDAQ Helsinki Main media www.innofactor.com  

Innofactor Innofactor is a leading Nordic provider of digitalization and cloud solutions. Innofactor has Microsoft Ecosystem’s leading expertise and the most comprehensive offering in the Nordics. Innofactor has over 600 eager and motivated top professionals in Finland, Sweden, Denmark and Norway. Innofactor serves over 1,500 commercial, public, and third sector organizations. In 2012 to 2016, the annual growth of Innofactor’s net sales has been approximately 28%. The Innofactor Plc share is listed in the technology section of the main list of NASDAQ Helsinki Ltd.  www.innofactor.com