EFECTE PLC — COMPANY ANNOUNCEMENT — 9 March 2022 at 8.30
Efecte updates its strategy to become the Leading European Alternative in service management
We have updated our mission, vision and strategy to describe how we work towards becoming the Leading European Alternative in service management. In an industry dominated by global goliaths, we serve customers from a local cloud that is more agile, a joy to use and fits the budget – while also addressing European needs for privacy, security and data location.
We set also new long-term financial targets that reflect our high ambition and the market opportunity we see. Our strategy is based on investing in a proven model for growth, the best product for the European midmarket, unique people and culture, and a structured approach to acquisitions. Guidance for 2022 remains unchanged.
Long-term financial targets
By 2025, grow organically to 35 MEUR total net sales, maintain an average SaaS growth of over 20% and reach a double-digit EBITDA margin.
Through organic growth and acquisitions, become eventually the largest European service management vendor with total net sales over 100 MEUR and EBITDA margin exceeding 25%.
Guidance for 2022 (unchanged)
SaaS net sales is expected to grow over 20% and EBITDA to be positive, excluding any potential costs from inorganic activities.
The market opportunity
Helping customers digitalize and automate their work with a SaaS-based service management platform has proven to be a great business to be in, and the market is still being divided. We expect the market opportunity to further grow as organizations are embracing the megatrends of digitalization and servitization (everything as a service). The move from on-premises software to cloud will also continue. While cloud adoption in the Nordics has reached 70%, cloud adoption in the rest of Europe is still below 40%. Service management solutions are extremely sticky, with replacement cycles often being five years or longer. Customer life-time value is accordingly high.
With the Efecte service management platform we address three different solution areas: IT Service Management (ITSM), Enterprise Service Management (ESM) and Identity Governance and Administration (IGA). Our estimate of the total current cloud ITSM and ESM market size in Europe is 1.2 BEUR and the IGA market 1.3 BEUR. Analysts estimate compound annual growth for these markets to be over 15% in the next three years. Today, the market is being divided by few strong global players and a large number of smaller local vendors.
Efecte’s mission and vision
Our mission is to help people to digitalize and automate their work. We develop and offer a service management platform that is agile, a joy to use, and fits your budget. Our culture drives five-star experiences for all our customers, partners and employees. Together, we make it happen.
Our vision is to be the undisputed #1 in Europe: The Leading European Alternative to the global goliaths in our space.
We aim to be the Leading European Alternative in service management and lead in customer and employee satisfaction, technology and market share. We contribute to a world of sustainable prosperity, happiness and growth, enabled through digitalization and automation.
Efecte’s strategy for 2022-2025
The market opportunity is there, and the market is being divided. Our results indicate it makes sense to invest in growth. Based on 2021 numbers, we earn the cost of customer acquisition back 8.3 times during the lifetime of the customer. A recurring gross margin of 81% reflects the strong profit generation potential and scalability of our model.
We are going to invest in growth more than our previous strategy indicated. That said, we will still maintain a balance with profitability. As visible in our new long-term financial targets, we are eventually aiming for high profitability.
Efecte’s strategic cornerstones to fulfil our mission and work towards our vision are:
- Growth: Invest in sales, marketing and services in existing and new markets to enable strong organic growth. Open both direct and partner-led new markets in EMEA.
- Product: Invest in R&D to strengthen our differentiation (agility, experience and TCO) and further improve customer experience and scalability through quality and feature development. Double down on ITSM, ESM and IGA on a single platform.
- People: Build on our unique people & culture to attract world-class talent and create five-star experiences for everybody in the Efecte ecosystem.
- M&A: Strengthen technology platform and expand market presence through acquisitions.
CEO Niilo Fredrikson: “This update is a natural evolution of our strategy, and a step towards realizing the full potential of Efecte. We have built a solid foundation since the IPO, proving that Efecte unit economics do work and shown our ability to win across Europe. Our successful market entry in Germany and increasing traction with partners have given us a template for growth that we can now repeat.
Efecte is uniquely positioned to serve European businesses and public sector. We have recently seen customers prioritize privacy, security and data location more than before. This has been particularly visible in public sector decisions to move away from global cloud platforms. With a product that is competitive, combined with cloud deployment models that address European customers’ concerns, we have more opportunity than ever before.
Our core strength in ITSM will continue to support our growth. Customer expansion into ESM use cases helps us keep our net retention rate high. And IGA is a new entry point into new customers as well as an exciting upsell opportunity – with a value proposition that seems to resonate well. Adjacent spaces like customer service management can provide additional opportunities in the future.
My confidence in our future is also based on the unique people and culture we have. We will continue to build on that as a core strength of Efecte. Moreover, our people and culture are an important enabler for a successful acquisition strategy to support our organic growth. And while we believe our strategy strikes the right balance of growth vs. profitability for now, we will also keep evaluating the market and opportunities for moving even faster.”
Capital Markets Day
Efecte will host a Capital Markets Day webcast to present the updated strategy and long-term financial targets. Questions can be submitted in written format in the webcast portal during the presentations. The company will publish a recording of the presentations after the event on their website at investors.efecte.com.
+358 40 507 1085
Head of Investor Relations
+358 400 383 064
Evli Bank Plc, tel +358 40 579 6210
Efecte helps people digitalize and automate their work. Customers across Europe leverage our cloud service to operate with greater agility, to improve the experience of end-users, and to save costs. The use cases for our solutions range from IT service management and ticketing to improving employee experiences, business workflows, and customer service. We are the European Alternative to the global goliaths in our space. Our headquarters is located in Finland and we have regional hubs in Germany and Sweden. Efecte is listed on the Nasdaq First North Growth Market Finland marketplace.