IFRS 15 Restated Figures for 2017 and Outlook for 2018 According to IFRS 15

QPR SOFTWARE STOCK EXCHANGE RELEASE, APRIL 25, 2018 AT 02.00 PM

As a result of the adoption of the new IFRS 15 standard "Revenue from Contracts with Customers”, effective from 1 January 2018, QPR Software's revenue recognition will change. QPR will report its results in accordance with IFRS 15 as of January - March 2018 interim report to be published on 26 April 2018.

The Company reports revenue as of 1 January 2018 as follows: Software license sales, Software maintenance services, Cloud services and Consulting. New accounting principles do not have an impact on Consulting sales revenue recognition, but software sales revenue recognition will change. QPR has not earlier reported the share of Cloud services in its software sales.

Recurring revenue reported by the Company consists of Software maintenance services and Cloud services. In addition, recurring revenue includes that part of software license sales, where user rights have been sold to customers with a long term contract, continuing for the time being, and invoiced in the beginning of the invoicing period. The license part of revenue is recognized at one point in time, in the beginning of the invoicing period. These contracts continuing for the time being are automatically renewed after the end of the agreed period (usually 1 year), unless the agreement is terminated within notice period.

The content of the outlook published in this release is the same as published earlier on 15 February 2018, but it has been updated to comply with new IFRS 15 accounting principles.


Key changes compared to previous accounting principles

QPR acts as a principal for the software sales performed by its resellers. The IFRS 15 standard requires that a principal recognizes revenue of the sales to end customers when resellers are acting as agents, and records commissions received by resellers as costs. The standard change increased 2017 net sales and reseller commissions with the same amount. The change lowers relative profitability but does not affect absolute profitability.

The IFRS 15 standard requires that revenue from software license sales is recognized when company transfers the control of services to a customer. The QPR performance obligations in long term user rights, continuing for the time being, include licenses, maintenance services and cloud services (SaaS).

License part of the revenue is recognized at a point in time, in the beginning of the invoicing period. The most common invoicing period for the customers engaged in long term contracts, continuing for the time being, is calendar year. License part of these contracts is thus recognized in the first quarter of the year. Compared to previous revenue recognition practice, a larger part of revenue is recognized in the first quarter, and less revenue in the other quarters of the year, respectively.

Software maintenance and cloud services (SaaS) are recognized over time, evenly during the invoicing period. Software maintenance revenue recognition will in practice remain the same as earlier.  Cloud services will be reported separately, whereas earlier they have been reported as part of software maintenance and licenses.

The described changes in revenue recognition transfer the earlier reported 2017 net sales and profits partly to an earlier point in time in 2016 and partly to a later point of time in 2018. The biggest timing impact on net sales and profits comes from limited term license revenue timing: earlier revenue was recognized at a point in time, but now it will partly be restated as cloud services (SaaS), which is recognized over time, evenly during the invoicing period.

The IFRS 15 restated comparable Group key figures for 2017 are presented in the table below. The restated figures have not been audited.

Key figures restated under IFRS 15

Previously reported key figures

The adoption of the new IFRS 15 standard has a positive impact of EUR 601 thousand on 2017 net sales. On EBITDA and operating profit, the adoption of the new standard has a negative impact of EUR 399 thousand.

The impact of the restatement on total equity as per the opening balance of 1 January 2017 amounts to EUR 142 thousand. At that point of time, the equity ratio thus increases from 46.3 percent to 47.1 percent.

Outlook for 2018 (updated according to IFRS 15)

The content of the outlook is the same as published earlier on 15 February 2018, but it has been updated to comply with IFRS 15 accounting principles.

The Company estimates that its net sales will grow in 2018 (2017: EUR 9,084 million). The growth in net sales will be driven by software business, in particular the process mining software QPR ProcessAnalyzer. Consulting net sales are also expected to grow from previous year.

In 2018, QPR will invest more in its growing business segments and is planning to increase its resources, especially in international sales and marketing. Despite the increase in costs, the company estimates that its operating profit will improve from previous year and will exceed 5% of net sales (2017: EUR 32 thousand).

Previous Outlook for 2018

The Company estimates that its net sales will grow in 2018. The growth in net sales will be driven by software business, in particular the process mining software QPR ProcessAnalyzer. Consulting net sales are also expected to grow from previous year.

In 2018, QPR will invest more in its growing business segments and is planning to increase its resources, especially in international sales and marketing. Despite the increase in costs, the company estimates that its comparable operating profit will improve from previous year.

QPR SOFTWARE PLC

Further information:

Jari Jaakkola, CEO
Tel. +358 (0) 40 5026 397

Jaana Mattila, CFO
Tel. +358 (0) 40 532 7328

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