Group Innofactor
Explanation of change in name of reporting entity or other means of identification from end of preceding reporting period No
Domicile of entity Espoo
Legal form of entity PLC
Country of incorporation Finland
Address Keilaranta 9 Espoo
Principal place of business Espoo
Description of nature of entitys operations and principal activities Computer programming activities
Parent Innofactor Plc
Name of parent entity Innofactor Plc
Innofactor Plc Annual Report January 1 to December 31, 2022
Report of the Board of Directors
Consolidated Financial Statements
Comprehensive Consolidated Profit
and Loss Statement, IFRS
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Change
in Shareholders’ Equity
Financial Statements
Parent Company Financial Statement (FAS)
Signatures
Auditor’s Report
Additional Information
Key Figures per Share
Shareholding
Calculation of Key Figures
Innofactor Plc
Annual Report
January 1 to December 31, 2022
Report of Innofactor Plc’s Board of Directors for 2022
Innofactor Group
Innofactor is one of the leading software providers focused on Microsoft solutions in the Nordic countries. Innofactor delivers to its customers IT projects as a system integrator and develops its own software products and services. The focus of Innofactor’s product development is on cloud solutions for Microsoft and its ecosystem. Innofactor’s customers include approximately over 1,000 private and public sector organizations. In its operations, Innofactor strives for long-term customer relationships. Innofactor has over 500 motivated and skilled employees in approximately 16 locations in Finland, Sweden, Denmark and Norway. The structure of the Innofactor Group at the end of the financial period 2022 is presented below.
At the end of the financial period, the Innofactor Group included the following companies:
Innofactor Plc, Finland (parent company)
Innofactor Software Oy, Finland, 100%
Innofactor Invenco Oy (previously Invenco Oy), Finland, 100%
Innofactor Invenco Software Oy, Finland, 100% (previously Invenco Software Oy, merger into Innofactor Invenco Oy is under way)
Innofactor HRM Oy, Finland, 100% (no business in the company, the company’s dissolution is under way)
Innofactor Holding AB, Sweden, 100%
Innofactor AB, Sweden, 100%
Innofactor Holding ApS, Denmark, 100%
Innofactor A/S, Denmark, 100%
Innofactor Holding AS, Norway, 100%
Innofactor AS, Norway, 100%
Tuloskehitys ja taloudellinen asema 2022 2021 2020 2019 2018
Net Sales, EUR thousand 71 130 66 364 66 164 64 198 63 144
Operating profit before depreciation and
amortization (EBITDA), EUR thousand		 7 808 10 111 7 164 5 089 -1 029
percentage of net sales 11,0 % 15,2 % 10,8 % 7,9 % -1,6 %
Operating profit (EBIT), EUR thousand 4 751 6 519 2 501 795 -3 872
percentage of net sales 6,7 % 9,8 % 3,8 % 1,2 % -6,1 %
Earnings before taxes, EUR thousand 4 178 5 730 2 050 12 -3 811
percentage of net sales 5,9 % 8,6 % 3,1 % 0,0 % -6,0 %
Earnings, EUR thousand 3 320 4 504 1 761 418 -3 462
percentage of net sales 4,7 % 6,8 % 2,7 % 0,7 % -5,5 %
Shareholders’ equity, EUR thousand 24 799 25 404 23 444 22 145 21 303
Interest-bearing liabilities, EUR thousand 14 349 9 818 15 386 16 853 15 418
Cash and cash equivalents, EUR thousand 1 956 1 963 3 066 963 258
Deferred tax assets, EUR thousand 4 090 4 830 6 413 5 602 5 602
Return on equity 13,2 % 18,4 % 7,7 % 1,9 % -13,8 %
Return on investment 14,5 % 20,6 % 11,1 % 2,3 % -7,7 %
Net gearing 50,0 % 30,9 % 52,5 % 71,8 % 71,2 %
Equity ratio 44,8 % 51,1 % 42,2 % 40,2 % 41,2 %
Balance sheet total, EUR thousand 55 815 51 057 56 607 55 720 51 875
Research and development, EUR thousand 4 153 3 504 3 618 2 795 2 860
percentage of net sales 5,8 % 5,3 % 5,5 % 4,4 % 4,5 %
Personnel on average during the year 536 516 544 534 591
Personnel at the end of the year 564 500 541 538 550
Number of shares at the end of the yeara 36 588 225 37 388 225 37 388 225 37 388 225 36 188 225
Earnings per share (EUR) 0,09 0,12 10,05 0,01 -0,09
Shareholders’ equity per share (EUR) 0,68 0,68 0,56 0,59 0,59
Net Sales
Innofactor’s net sales in 2022 were EUR 71,130 thousand (2021: 66,364), representing growth of 7.2 percent. Without the Prime business sold in the first quarter of 2021, the comparable change would have been an increase of 8.1 percent Of the growth, approximately EUR 3.0 million (4.6%) was organic, excluding the Invenco acquisition, net sales from the Prime business in 2021 and the deduction of approximately EUR 0.4 million recognized in the net sales of Q4/2022 due to uncertainty concerning a receivable in an individual project.
Financial Performance
Innofactor’s operating margin (EBITDA) in 2022 was EUR 7,808 thousand (2021: 10,111), representing a decrease of 22.8 percent. EBITDA represented 11.0 percent of net sales (2021: 15.2%). The operating margin in 2021 included a capital gain of approximately EUR 2.6 million from the sale of the Prime business, without which the operating margin would have been approximately EUR 7.5 million, in which case the comparable operating margin increased by 3.4 percent.

Innofactor’s operating profit in 2022 was EUR 4,751 thousand (2021: 6,519), representing a decrease of 27.1 percent. Operating profit was 6.7 percent of net sales (2021: 9.8%).
Financial Position, Liquidity and Investments
Innofactor’s balance sheet total at the end of 2022 was EUR 55,815 thousand (2021: 51,057). The Group’s liquid assets totaled EUR 1,956 thousand (2021: 1,963), consisting entirely of cash funds.

Operating cash flow in 2022 was EUR 6,704 thousand (2021: 8,855). The cash flow from investing activities was EUR -3,593 thousand (2021: -643).

The equity ratio at the end of 2022 was 44.8 percent (2021: 51.1%) and net gearing was 50.0 percent (2021: 30.9%).
At the end of 2022, the company had EUR 4,886 thousand in current interest-bearing liabilities to financial institutions (2021: 1,873) and EUR 4,517 thousand in non-current interest bearing liabilities to financial institutions (2021: 4,683). The company had IFRS 16 lease liabilities (leases for the duration of fixed-term leases) of EUR 4,947 thousand (2021: 3,261) of which EUR 2,115 thousand in current leases (2021: 1,603) and EUR 2,832 thousand in non-current leases (2021: 1,658). The total amount of interest-bearing liabilities was EUR 14,349 thousand (2021: 9,818).

The return on investment in 2022 decreased slightly year-on-year and was 14.5 percent (2021: 20.6%). The return on equity in 2022 decreased year-on-year and was 13.2 percent (2021: 18.4%).

The non-current assets on Innofactor's balance sheet at the end of 2022 were EUR 39,319 thousand in total and consisted of the following items:
Tangible assets and right-of-use assets totaling EUR 5,919 thousand
Goodwill EUR 26,831 thousand*
Other intangible assets EUR 2,398 thousand*
Shares and holdings EUR 5 thousand
Receivables EUR 77 thousand
Deferred tax assets EUR 4,090 thousand
Innofactor’s gross investments in tangible and intangible assets in 2022 were EUR 872 thousand (2021: 402), consisting of normal additional and replacement investments required by growth.
Write-offs on intangible assets amounted to EUR 568 thousand (2021: 1,457).

* Goodwill and intangible assets arising from acquiring foreign companies are considered as assets of the foreign unit, and they are converted at the closing date’s rate. The resulting exchange differences are recognized in comprehensive income.
Mergers, Acquisitions and Changes in Group Structure
In 2022, Innofactor acquired the entire share capital of Invenco Oy, a company specializing in data and analytics solutions. To clarify the group structure, the merger of Innofactor Invenco Oy’s subsidiary Innofactor Invenco Software Oy into Innofactor Invenco Oy was initiated in 2022. The merger process is intended to be completed in spring 2023.

To clarify the group structure, Innofactor HRM Oy, the entire business of which was previously sold to Innofactor Software Oy, was placed in liquidation in order to dissolve the company. The dissolution process is intended to be completed in spring 2023.
Personnel
Innofactor primarily monitors the number of active personnel. The number of active personnel does not include employees who are on leave for more than three months.

The average number of active personnel in 2022 was 536 (2021: 516), representing an increase of 3.9 percent. At the end of 2022, the number of active personnel was 564 (2021: 500), representing an increase of 12.8 percent.

At the end of 2022, the average age of the personnel was 42.7 (2021: 42.5). Women accounted for 26 percent (2021: 27%) of the personnel. Men accounted for 74 percent (2021: 73%) of the personnel.
Strategy and Iits Rrealization in 2022
Innofactor’s strategy comprises our purpose, mission, vision, strategic choices, values, working principle, and long-term financial goals.
Our purpose: Innovating to make the world work better
Our mission: Driving the modern digital organization
Our vision:  Leading Nordic digital transformation partner in the Microsoft ecosystem
Our strategic choices:
The most competent Nordic teams
Productized and specialized offering
Proactive and agile way of working
Innovation with top customers
Our values:
Accountability
Empowerment
Innovation
Customer
Our working principle: Our principle is to put people first in everything we do. We want to provide solutions that make our customers’ everyday work and life run smoothly and bring a smile to their faces.
Our long-term financial goals:
To achieve annual growth of about 20 percent, the majority of which is intended to be achieved by organic growth
To achieve about 20 percent EBITDA in relation to the net sales
To keep the cash flow positive and secure good financial standing in all situations.
Innofactor’s net sales in 2022 totaled EUR 71.1 million (2021: 66.4), representing year-on-year growth of 7.2 percent. Without the Prime business sold in the first quarter of 2021, the comparable change would have been an increase of 8.1 percent The strategic goal of net sales growth is also supported by the favorable development of the order backlog of EUR 75.8 million (2021: 72.8). The Invenco acquisition made in 2022 brings inorganic growth to Innofactor’s business.
The operating margin (EBITDA) decreased in 2022 from EUR 10.1 million in the corresponding period of the previous year to EUR 7.8 million (11.0 percent of net sales). The operating margin in 2021 included a capital gain of approximately EUR 2.6 million from the sale of the Prime business, without which the operating margin would have been approximately EUR 7.5 million, corresponding to the comparable operating margin increasing by 3.4%. With regard to profitability, continued attention and efforts by the management are still needed in the coming years to reach the long-term target of approximately 20 percent.
Innofactor’s operating cash flow in 2022 was EUR 6.7 million (2021: EUR 8.9 million) and the equity ratio at the end of 2022 was 44.8 percent (2021: 51.1% Cash flow in 2021 was increased by the capital gain of approximately EUR 2.6 million from the sale of the Prime business. The equity ratio in 2022 was reduced by a loan of approximately EUR 2.5 million taken in relation to the Invenco Ltd acquisition. Innofactor’s strong operating cash flow supports the company’s strategic goal of profitable growth and securing a solid financial standing in all situations.
The key actions to be taken to achieve growth of approximately 20 percent and EBITDA of approximately 20 percent:
We will improve the efficiency of our operations and increase our invoicing rate by five percentage points. This will be achieved by, for example, improving the management of project and service contracts, enhancing the cross-resourcing of personnel between countries and units, reducing employee turnover and developing our self-directed team models.
We will increase the share of licenses and SaaS services to over 33 percent of net sales from the current level of approximately 28 percent. This will be achieved by, for example, developing our offering, such as the new MDRaaS service (CSOC) and by focusing our sales efforts on customers and solution areas with the highest growth potential and that present the best opportunities for scaling our existing offering in each of the Nordic countries.
We will increase the number of employees engaged in invoiced services. This will be achieved by, for example, doubling our recruitment of new university graduates to over 60 employees in 2023, concentrating the recruitment of senior professionals to our Nordic recruitment team, increasing the competence of our employees through certifications, reducing employee turnover, improving the efficiency of subcontracting and investing in the development of our employer image.
We will become an even more proactive player in the Nordic M&A field. This will be achieved by, for example, through the internal reorganization of operations, emphasizing the role of country directors in actively seeking new potential acquisition targets in their respective countries.   
Business Operations
Innofactor focuses on the Microsoft ecosystem in its business operations. Innofactor both operates as a system integrator and develops its own software products and services, which offers Innofactor significant competitive edge and synergy benefits. System integrator operation increases Innofactor's understanding of the customers' product and service needs and also acts as a delivery channel for its own products and services. Focusing on the Microsoft ecosystem creates insurmountable know-how for Innofactor and also makes it the most desirable partner in the Nordic Countries for Microsoft, which helps Innofactor to get the best deals.
Innofactor’s offering is divided into the following areas:
Our comprehensive solutions, which are integrated into each other, are based on real customer needs and on utilizing the latest technology. We achieve high-quality deliveries and provide our customers with fast benefits due to our experience and understanding of our customers combined with our knowledge of the latest cloud services. Over 15 years of cooperation with Microsoft and leading operators in its ecosystem ensure the best possible support for our customers.

Innofactor provides its solutions through the Microsoft Cloud or installed in the Innofactor Service Center or on the customer’s own servers. SaaS services that are typically paid for annually or monthly (including cloud services, hosting services and software maintenance) play a significant role in Innofactor’s business operations. SaaS services substantially reduce cyclicality in business.

Innofactor’s business operations were focused on Finland, Sweden, Denmark and Norway. In 2022, approximately 66 percent of the Group’s net sales came from Finland, approximately 16 percent from Sweden, approximately 12 percent from Norway, and approximately 6 percent from Denmark. Net sales grew in Finland, Norway and Denmark, but decreased in Sweden. In the fourth quarter of 2022, net sales increased in Finland and Norway, but decreased in Denmark and Sweden.

In 2022 approximately 53 percent of the net sales came from commercial clients (including third-sector clients) and approximately 47 percent came from public sector clients.
License and SaaS net sales grew throughout the year, from 25 percent in the first quarter to 28 percent in the fourth quarter, which improved profitability. At the same time, the share of projects decreased from 40 percent in the first quarter to 36 percent in the fourth quarter, which also had a positive effect on profitability.
Innofactor’s net sales in 2022 came from the following sources:
Licenses: Approximately 4 percent, including all non-recurring fees received for software
SaaS: 24 percent, including recurring income from SaaS, cloud and hosting services and from software maintenance
Services: 36 percent, including specialist work based on recurring service contracts, such as smaller customer-specific changes and the further development of IT systems
Projects: 36 percent, includes from IT system delivery projects and consulting
Innofactor’s 10 largest clients accounted for about 27.4 percent of the net sales in 2022.
Major Events in the Financial Period
On January 4, 2022, Innofactor announced in a stock exchange release that it had completed the share repurchase program. Repurchases of treasury shares began on October 26, 2021, and ended on January 3, 2022. During this period, Innofactor acquired 800,000 treasury shares at an average price of EUR 1.5045. The shares were acquired at the current market price in public trading arranged by Nasdaq Helsinki Ltd.
On January 18, 2022, Innofactor announced in a stock exchange release that the Ministry of Social Affairs and Health selected Innofactor in a public procurement competition as the provider of the Case Management, Document Management, Services, and Reference Price Information System as well as the related maintenance and further development tasks of the Pharmaceuticals Pricing Board. The total value of the procurement (excluding VAT) stated by the Ministry of Social Affairs and Health in the procurement decision for the four-year contract period is approximately EUR 1,190,000.
On January 20, 2022, Innofactor announced in a stock exchange release that the Housing Finance and Development Centre of Finland (ARA) had selected Innofactor in a public procurement competition as the supplier of the Sequence Number Register. The procurement includes the planning and implementation of the Sequence Number Register, the support, maintenance and further development services for the implemented solution, as well as system operation and control. The solution is based on Microsoft Azure cloud services. Innofactor’s share of the total value of the procurement is approximately EUR 680,000. The minimum agreement period is three years.
On February 16, 2022, Innofactor announced in a stock exchange release that the Finnish Safety and Chemicals Agency (Tukes) selected Innofactor in a public procurement competition as the supplier of the “Agile development of services, servicing and maintenance” section of the framework agreement on for IT system development and maintenance. The framework agreement comprises a total of three areas for which a total of four framework contract suppliers were selected. A total of two framework contract suppliers were selected for the “Agile development of services and Servicing and maintenance” are. The Agile development of services, servicing and maintenance section focuses on the implementation of Tukes' systems in accordance with an agile approach, service validation, the servicing and maintenance of applications, and processing and repair of disruptions. The anticipated total value of the procurement indicated by Tukes in the procurement decision for all three covered areas, without value added tax, is EUR 6.8 million. The duration of the framework agreement is four years, plus an option for two additional years.
On March 1, 2022, Innofactor announced in a stock exchange release that Innofactor and a Swedish bank have signed an agreement concerning the configuration, development, and support services for a Microsoft Dynamics 365 solution. Innofactor estimates the value of the agreement to be approximately EUR 800,000. The agreement will be valid until further notice.
On March 2, 2022, Innofactor announced in a stock exchange release that Finnvera had selected Innofactor as the provider of its case management system as a SaaS solution. The procurement comprises the case management system as well as the relevant access permissions, support and maintenance services, system delivery project, and supplementary expert services. The system will be based on Innofactor’s Dynasty 10 solution. The service agreement related to the procurement will be valid for fixed period of four (4) years, after which the agreement will be valid until further notice. The planned start of the deployment project is on April 1, 2022. Innofactor estimates the total value of the procurement at approximately EUR 1.0 million.
On March 10, 2022, Innofactor announced in a stock exchange release that the Social Insurance Institution of Finland (Kela) has selected Innofactor as the provider of a administrative case management solution in a public competitive tendering process. The procurement includes a case management solution based on Innofactor’s Dynasty 10 system, the delivery project, the maintenance and support services as well as any separately requested expert work related to the solution. The total value (excluding VAT) quoted by Kela in its procurement decision is approximately EUR 0.7 million. The agreement will be valid for fixed period of four (4) years, after which the agreement will be valid until further notice.
On March 31, 2022, Innofactor announced in a stock exchange release that Innofactor and a Norwegian non-profit organization have signed an agreement concerning a cloud migration project, which comprises the migration of the organization’s IT system from an external On Premises server room to the Microsoft Azure cloud environment. The value (excluding VAT) of the agreement is approximately EUR 1.2 million. The cloud migration project will be delivered between April 2022 and January 2023.
On April 12, 2022, Innofactor announced in a stock exchange release that Senate Properties has selected Innofactor in a public procurement competition as the provider of a case and document management system as well as the related maintenance and further development tasks. The system will be based on Innofactor’s Dynasty 10 solution. Delivery of the system is scheduled to take place within the 2022–2023 period, after which the delivery comprises maintenance and further development services. The total value of the procurement (excluding VAT) quoted by Senate Properties in its procurement decision is approximately EUR 2.2 million. The agreement will be valid for a fixed period of two (2) years from delivery, after which the agreement will be valid until further notice.
On May 12, 2022, Innofactor announced in a stock exchange release that Innofactor and a Danish pharmaceutical company have signed an agreement concerning the delivery of managed cloud services supporting a data integration platform. The services are implemented by using Microsoft Azure PaaS cloud services. The value (excluding VAT) of the agreement is approximately EUR 2.1 million. The agreement is valid until further notice.
On May 17, 2022, Innofactor announced in a stock exchange release that the State Treasury of Finland has selected Innofactor in a dynamic purchasing system to provide IT expert services to support the development and maintenance of a Microsoft Dynamics 365 CRM system. The tasks of the experts include the development, maintenance and support services of the CRM system that is already in use in the State Treasury. The development will be carried out mainly with agile methods according to the operating models of the State Treasury. Based on the assessment of the yearly work under the agreement provided by the State Treasury, Innofactor estimates the net sales derived from the agreement to amount to at least EUR 5.0 million. The agreement period is eight years.
On June 3, 2022, Innofactor announced in a stock exchange release that the Funding Centre for Social Welfare and Health Organisations (STEA) has selected Innofactor in a public procurement competition to continue the maintenance and development of a grant and case management system. The work will be carried out with agile methods. Innofactor’s estimate of the value of the procurement for the three-year contract period is approximately EUR 1.8 million.
On June 8, 2022, Innofactor announced in a stock exchange release that the Greater Stockholm Fire Brigade (Storstockholms brandförsvar) has selected Innofactor in a public procurement competition to provide a case and document management system, as well as maintenance and support services related to it. The system will be based on the Innofactor Dynasty information and case management solution. Innofactor’s reference price for a contract period of eight years stated by the client in the procurement decision is approximately EUR 0.35 million.
On June 20, 2022, Innofactor issued a stock exchange release to announce that Innofactor Plc has signed an agreement on June 20, 2022, on acquiring the entire share capital of the privately owned company Invenco Ltd. The transaction is described in more detail under “Acquisitions and changes in the Group structure” and under “Preliminary acquisition cost calculation for Invenco Ltd” in the notes to the financial statements.
On August 3, 2022, Innofactor announced in a stock exchange release that the Legal Register Centre has selected Innofactor to continue the development and maintenance work of the ERP and document management system for administrative courts and special courts (HAIPA project). The system is based on Innofactor’s Dynasty product family. The total value of the procurement (excluding VAT) stated by the Legal Register Centre in the procurement decision is approximately EUR 4.0 million. The contract period is two years, in addition to which there are two one-year options, which will be decided on separately.
On August 9, 2022, Innofactor announced in a stock exchange release that the Aalto University Foundation has selected Innofactor in a public procurement competition as part of a consortium formed with Invenco Ltd to develop and maintain Aalto University’s centralized data warehouse. The tender was submitted as a consortium with Invenco Ltd, with Innofactor subsequently issuing a stock exchange release on June 20, 2022, to announce the acquisition of the share capital of Invenco Ltd. The acquisition was completed on June 30, 2022, after which Invenco Ltd is part of Innofactor Group. The estimated total value (excluding VAT) stated by the Aalto University Foundation in the public procurement decision for a contract period of four years is approximately EUR 5.0 million.
On September 28, 2022, Innofactor issued a stock exchange release announcing that, at its meeting on September 27, 2022, the Board of Directors of Innofactor Plc had decided to commence the acquisition of the company’s own shares for the purpose of developing the company’s capital structure. The company will acquire a maximum of 800,000 shares, which corresponds to approximately 2.1% of the total number of shares. The maximum amount to be used for the acquisition of shares is EUR 1,000,000. The decision was made on the basis of the authorization given by Innofactor Plc’s Annual General Meeting on March 31, 2022, to acquire a maximum of 3,600,000 shares. The repurchase of shares will commence on September 28, 2022, at the earliest and will end at the latest on March 24, 2023, or at an earlier Annual General Meeting. Innofactor Plc has a total of 37,388,225 shares, of which the company currently owns 741,410 (approximately 2.0%). The company’s own shares will be acquired at the current market price in public trading arranged by NASDAQ Helsinki Ltd using the company’s unrestricted equity.
On December 7, 2022, Innofactor issued a stock exchange release announcing that the Board of Directors of Innofactor Plc had, on the date in question, decided on a directed share issue for the company’s management. The directed share issue is carried out with the shares held by the company. The decision on the transfer of the shares has been made on the basis of the authorization given by the General Meeting of Innofactor Plc on 31 March 2022. The share issue deviates from the shareholder's pre-emptive subscription right. The share issue is carried out in order to engage the commitment of the company’s management, which means that there is an important financial reason for the deviation. A total of 50,000 shares held by the company will be transferred to the company’s management at the price of EUR 1.00 per share. The basis for determining the transfer price is the volume-weighted average share price in October 2022 in public trading organized by NASDAQ Helsinki Oy. After the transfer, Innofactor Plc will hold 1,073,045 of its own shares.
On 22 December 2022, Innofactor issued a stock exchange release announcing that the Finnish Defence Forces Logistics Command has selected Innofactor in a public procurement competition as the provider of an information management system solution (PVASIA) and related services. The system will be based on Innofactor’s Dynasty product family. The procurement comprises an integrated solution of information management, task management, case management, document management, electronic signature and information search services. The service agreement will be valid for six years, after which the maintenance agreement can be continued with four two-year options for a maximum of eight years. According to the release published on the website of the Ministry of Defence, the total value of the procurement, excluding VAT, is EUR 22 million.
Major Events After the Financial Period
On February 13, 2023, Innofactor announced in a stock exchange release that Innofactor and Metso Outotec Oyj have signed a contract for the further development work of digitizing the company’s quotation process.

Innofactor will continue the development work that began in 2020, aiming to design and implement, using agile methods, a cloud-based solution for managing the quotation process and handling and storing related information and documents. The solution is implemented using Microsoft Azure PaaS cloud services. The value of the agreement (excluding VAT) is at most EUR 0.70 million and the services will be delivered during the year 2023.
On February 16, 2023, Innofactor announced in a stock exchange release that Senate Properties has selected Innofactor with a procurement decision to continue the development and maintenance of an HR system. The system is based on the Innofactor Kide HR solution. Innofactor estimates the total value of the procurement at approximately EUR 0.8 million.
On February 17, 2023, Innofactor announced in a stock exchange release that the Board of Directors of Innofactor Plc has decided, based on the authorization granted to it by the Annual General Meeting, on a share-based incentive plan for all of Innofactor Group’s personnel in order to commit the personnel to the company and its goals (“Personnel Share Issue”). In the Personnel Share Issue, a maximum total of 400,000 shares (“Personnel Shares”) of the company will be issued to the Innofactor Group’s personnel, deviating from the shareholders’ pre-emptive subscription rights. At the time of making the decision Innofactor Plc had 37,388,225 shares. Innofactor Plc’s shares which are in the company’s possession will be used for the Personnel Share Issue. The subscription price for the Personnel Shares will be EUR 1.01 per share. The share subscription price is based on the trade volume weighted average price of the company’s share on Nasdaq Helsinki Ltd for the previous month and on a discount of 10 percent thereof.
On March 1, 2023, Innofactor announced in a stock exchange release that Innofactor Plc has completed the share buy-back program. The repurchases of the shares began on September 29, 2022 and ended on February 28, 2023. During that period, Innofactor repurchased 800,000 of its own shares for an average price per share EUR 1.0550. The shares were acquired to the current market price in the public trading arranged by NASDAQ Helsinki Ltd. The purpose of the acquisition of the company’s own shares is to develop the company’s capital structure. Following the repurchases, Innofactor holds a total of 1,491,410 own shares.
Innofactor has had no other significant events after 2022.
Future Outlook
Innofactor’s net sales and operating margin (EBITDA) in 2023 are estimated to increase from 2022, during which net sales were EUR 71.1 million and operating margin was EUR 7.8 million.
Major Risks and Uncertainties
Innofactor’s operations and finances involve risks that may be significant for the company and its share value. These risks are assessed by Innofactor Plc's Board of Directors four times a year as part of the strategy and business planning process.
Risks Related to Operations
The risks related to the operation of the Innofactor Group are primarily business risks related to the group companies that carry on its business operations.
Skilled personnel and its availability: The development of Innofactor's operations and deliveries depends greatly on the Group having skilled personnel and being able to replace persons, who are leaving, with properly skilled persons. In Innofactor's field of business, there is a lack of and competition for certain personnel resources, which may lead to short employment relationships and high personnel turnover. If Innofactor fails at motivating its personnel, keeping the personnel's skills on a high level and keeping the personnel in its service, that could cause problems for the Group's business operations. The success of the Group depends heavily on the employed personnel and their success in their work. Innofactor invests in the continuous development of its personnel and in high personnel satisfaction, a good employer image, efficient recruitment and, if necessary, the use of subcontracting.
Increase in personnel costs: A majority of Innofactor’s costs consists of salaries and other personnel costs (in 2022, about 68% of all costs, including depreciation). Currently, all of Innofactor's own employees work in the Nordic countries,  whereas some competitors rely heavily on workforce in countries with cheap labor. If the personnel costs continue rising in the Nordic countries at the same rate as before, it will create a risk for Innofactor, if the prices paid for IT services will not rise correspondingly. Innofactor is monitoring the situation constantly and strives to affect the moderate development of personnel costs via interest groups. It also aims at increasing the share of work done by subcontractors and abroad, when it makes sense from the point of view of business operations, for example, in large product development projects.

Profitability of projects: A Significant part of Innofactor's net sales comes from project business. Profitable implementation of Innofactor's delivery projects requires that project calculation and planning before submitting a tender are done successfully as regards the amount of work and the delivery schedule, and also that the deliveries can be made in a cost-effective manner. It is possible that Innofactor fails at correctly estimating the profitability of a project and, thus, the delivery could cause losses to the company. Correspondingly, it is possible that projects may have to be sold cheaper because of competition, which leads to lower profit margins. Innofactor pays special attention to the profitability of project business and has included it as a central part of the monitored key performance indicators. The relative share of project business has decreased and it will be further decreased, which reduces the risks associated to project business.
Competition: Innofactor’s main competitors are companies offering traditional information technology services and software in the Nordic countries. Some competitors have larger financial resources, wider product selection, cheaper workforce and larger existing customer base than Innofactor does and also notable legal resources, and they can use these when competing with Innofactor for the same deliveries. Additionally, new startup companies increase competition in certain deliveries. The price competition in the field is expected to remain tough. If the competition becomes tougher, it may have an adverse effect on Innofactor's business, operating result and financial position. Innofactor continuously strives to improve its competitiveness.

Research and product development: In Innofactor's operation, research and product development play a central role. In 2022, approximately 5.8% of net sales was used on research and product development. Each research and product development project carries the risk that the end results are not as successful financially as planned and that the investment in the project does not pay itself back. By constantly updating its offering and organizing its operations, Innofactor aims at minimizing the risks inherent in research and product development.
Changes in the technology and field of business: Fast development is characteristic for Innofactor's field of business. There can be quick changes in the customers' requirements and choices concerning software technology. Important changes under way include, for example, the transfer of software into cloud technologies, digitalization, artificial intelligence, blockchain and Internet of Things (IoT). If Innofactor cannot react to these changes, it may have an adverse effect on Innofactor's business, operating result and financial position. Innofactor strives to actively invest in new technologies and central areas of know-how and agree on customer deliveries in new areas.

Information security and data protection From the point of view of Innofactor's business, it is important to ensure adequate data security and data protection for customers. The realization of the risks relating to data security and data protection may lead to losses in net sales or, in the worst case, penalties imposed by a supervisory authority. Innofactor has acknowledged the risks related to data security and data protection, on the basis of which the company has implemented standard-based data security and data protection management processes. Innofactor has a data security policy approved by the management, defining Innofactor's key data security objectives and means of implementation, as well as the organization of data security and related responsibilities. The data security policy is written in accordance with the ISO 27001 data security standard and legislation.
Risk of a pandemic: An epidemic spreading into a global pandemic may hinder Innofactor's business operations. If there is no significant pandemic in Innofactor's operating area in the Nordic countries, the detriment will be limited mostly to a decrease in the availability of tools, especially computers, which are needed in Innofactor's business operations. If there is a significant pandemic also in Innofactor's operating area in the Nordic countries, it could mean introducing remote work, either for a part of or the entire personnel, a temporary decrease in customers' purchases, and delays in some customer deliveries, increasing absence rates connected directly to the disease caused by the pandemic, quarantine or mental symptoms caused indirectly by isolation and increased personnel turnover due to remote work. COVID-19 caused an increase in sickness-related absences in 2022, and this may continue in 2023, but no other impacts related to COVID-19 are expected.

Reaching the growth targets: Realizing the desired growth requires a growth rate that is clearly faster than the growth in the IT market in general. This has the risk that it cannot be realized in the future, although it has been done often in the past. Also, it is possible that the IT market in Innofactor’s market area will not grow or may even shrink. Ensuring growth has a central part in planning Innofactor's operations and setting its goals. Innofactor strives to lessen this operational risk by focusing on the growing Microsoft solution areas, which grow faster than the IT market in general, and by focusing on sales to keep the order backlog on a sufficient level as regards the business operations.
Globalization: In accordance with its strategy, Innofactor is seeking for more growth also in the global markets, outside of Finland, especially in the Nordic countries. Global operations typically always involve higher risks than operation at home. Innofactor strives to make sure that the investments in becoming a global player will not be so great that it would jeopardize the Group's ability to make profit and to grow. Additionally, the company strives to create a management model, common processes and systems that will decrease the risks in global operations.

Uncertainties and risks related to acquisitions: The growth has partly been based on acquisitions. With acquisitions, there are uncertainties about finding suitable companies to acquire and in making the acquisitions at the desired price level and schedule. If acquisitions cannot be made as planned, the growth goal may be jeopardized. In acquisitions, Innofactor focuses on high-level know-how and good processes. Each acquisition, after it has been made, also carries some risks, which include the success of the integration, the stability of the key personnel, formation of the business value, and possible related needs for depreciations. Innofactor's strategy is primarily based on integrating the acquired companies in a fast schedule as part of the whole in the country in question. Innofactor invests in the integration process.
Success of the organizational changes: Rapid growth may occasionally require making significant changes in the organization. Starting a new organization typically includes challenges before the desired improvement in operation can be achieved. Typically, the operation can be at least restored to the previous level of efficiency within a few months from starting the new organization. If the improvement in operation for some parts does not take place within the planned schedule, there is a risk that it will not happen at all or that the delay may lead to extra costs or loss of net sales. The reasons for this include, for example, incorrect planning in placing units and personnel. Innofactor strives to pay attention to controlling organization changes and to prepare for them also financially.
Financial Risks
General financial uncertainty and changes in the customers' financial situations affect customers' investment decisions and purchasing policies. It is possible that changes in the general financial situation will be reflected in Innofactor's customers' software purchases by delaying the decision-making or timing of purchases.

Financing risks: In its normal business operations, the Innofactor Group is susceptible to normal financing risks. In total, at the end of 2022, Innofactor had approximately EUR 9.4 million in interest-bearing debts to financial institutions, which have been taken out to finance acquisitions and working capital. Of the debts, approximately EUR 4.5 million is non-current and approximately EUR 4.9 million is current liabilities. Additionally, the company had lease liabilities in accordance with the IFRS 16 standard (leases for the duration of fixed-term leases) for EUR 4.9 million, of which EUR 2.1 million was current and EUR 2.8 million non-current. The total of interest-bearing liabilities was EUR 14.3 million. Innofactor has committed to the following covenants: Equity ratio calculated every 6 months is at least of 40%, and interest bearing liabilities calculated every 6 months divided by the 12-month operating margin (EBITDA) is a maximum of 2.5, and certain other normal conditions for loans. The goal of managing the financing risks is to minimize the negative effects of the changes in the financial markets on the result of the Group. Financing risk management has been centralized to the CFO, who is responsible for the Group's financing and regularly reports to the company's Executive Board, CEO, and Board of Directors. It is possible that, in the future, the Group will not get the financing it needs and this would have a negative effect on the Group's business and its development, especially on making acquisitions.
Interest risk: An interest risk in mainly due to the Group’s short-term and long-term loans and the derivatives used for protecting them. Loans with fluctuating rates pose an interest risk to the Group’s cash flow. This risk is decreased, for example, by using interest rate swap agreements. Interest rate hedging has been applied to more than half of the Group’s loans.

Exchange rate risk: The Innofactor Group operates globally and is susceptible to risks related to the currencies of the countries in which it operates. Changes in exchange rates, especially the rates of Swedish krona and Norwegian krone, affect the Group’s net sales and profitability as Innofactor has significant operations based on Swedish krona and Norwegian krone. The exchange rate risk is mainly due to the assets and liabilities registered in the balance sheet and the net investments made in the subsidiaries abroad. Also, the business contracts made by subsidiaries pose an exchange rate risk, although these contracts are mainly made in the currency the business unit uses in its operation. The management of exchange rate risks in the Group aims at minimizing the uncertainty that changes in exchange rates cause in the result through cash flows and assessment of receivables and liabilities.
Risks related to the cash position: The Innofactor Group handles management of liquid assets with the help of centralized payments and cash management. The Group strives for continuous monitoring and assessment of the needed business financing in order to ensure that the Group has enough liquid assets in its use. Additionally, the Group has checking account limits with an overdraft facility in order to cover any seasonal variations in liquid assets. Excess cash balance is placed on savings accounts or funds with capital guarantee.

Risks related to receivables from projects: A large part of Innofactor's net sales comes from project business. A significant part of projects consists of long-term projects in which scheduled payments and their terms may be agreed on with the customer beforehand. When Innofactor performs work in customer projects, which is scheduled to be invoiced afterwards, project receivables are accrued. Especially in public sector projects, scheduled payments often take place nearer to the end of the project, which means increased project receivables and related risks. In 2022, Innofactor recognized a deduction of approximately EUR 0.4 million in Q4 net sales due to uncertainty concerning a receivable in an individual project for which net sales had previously been recognized. In customer negotiations, Innofactor pays special attention to scheduling the payments and the size of payments, and in customer projects, to project management and steering in accordance with the scheduled payments. Project receivables are monitored regularly.
Credit risk: Credit decisions related to sales receivables are monitored centrally by the Group's management. Large part of Innofactor's cash flow comes through established customer relationships as payments from the public sector and financially sound companies, which have not presented essential credit risks in the past, and the Group has not suffered any significant credit losses. Should credit risks realize, it would weaken the Group's financial standing and liquidity. Sales receivables are monitored regularly.

Risks related to deferred tax assets: Innofactor's balance sheet includes deferred tax assets that are based on previous financial periods. Should the company’s profitability decrease significantly in the long run, it is possible that the Group would not be able to utilize in full the receivables currently activated in the balance sheet.
Corporate Governance Report
Innofactor Plc complies with the recommendations of the Corporate Governance Code 2020 for Finnish listed companies, published by the Securities Market Association.

The Annual General Meeting of March 31, 2022, decided that the Board of Directors shall have four members. Mr. Sami Ensio, Ms. Anna Lindén, Mr. Risto Linturi, and Mr. Heikki Nikku were re-elected as members to the Board of Directors. At the organizing meeting held after the General Meeting, the Board of Directors elected Anna Lindén as the Chairman of the Board.

The General Meeting approved the proposal to appoint Ernst & Young Oy, an auditing firm authorized by the Central Chamber of Commerce, again as the auditor for the company, with Juha Hilmola as the main responsible auditor.
Innofactor has drawn up a separate Corporate Governance Statement for the financial period of 2022.

Innofactor Plc's entire Corporate Governance policy and statements are available on the company’s web site at: https://www.innofactor.com/invest-in-us/corporate-governance/
Research and Product Development
In product development in 2022, the focus was on the renewal of existing products and services and continuous further development to support the growth of product-based business.

Innofactor’s research and development costs recognized in profit or loss for 2022 were approximately EUR 4,153 thousand (2021: 3,504), representing 5.8 percent of net sales (2021: 5.3%).
Reporting Non-financial Information
This statement describes Innofactor’s corporate responsibility in accordance with the Chapter 3a, Sections 1–6 of the Finnish Accounting Act.
Business Model
Innofactor's business model is based on offering aimed at the IT service market and on Innofactor's strong partnership with Microsoft, with the focus on solutions developed on Microsoft platforms and solutions that use them. In accordance with its strategy, Innofactor is increasingly focusing on implementing cloud solutions and digitalization. Innofactor is a system integrator and software development company. Thus, the core of the business model and enabler of company growth and development is the competent personnel with the ability to advance. The digital solutions delivered by Innofactor help the customers to reach their sustainability related goals and reduce their environmental impacts. Innofactor can impact the environmental effects of its own operation by developing even more environmentally friendly work environment.
Principles Guiding Sustainability
Our Innofactor’s operation is steered by our Code of Conduct and environmental policy, in addition to which we comply with the leading international sustainability standards, such as the ILO Declaration on Fundamental Principles and Rights at Work, UN Universal Declaration of Human Rights, UN Sustainable Development Goals, and the principles of the ICC Business Charter for Sustainable Development.

Innofactor’s internal operations are managed through predefined core processes and standards. Innofactor’s quality system describes the company's business model and it is divided into eight documented business processes and eight support service processes. These processes are monitored by means of process indicators and audits, for example. The company’s support service processes relating to human resources management, risk management and legal issues, and business processes related to the personnel and resource allocation, define the main issues with regard to corporate responsibility. Each process has its own Process Performance Indicators that are monitored within the company and set annually for the process owner. The framework for Innofactor’s operations is provided by the ISO 9001, ISO 27001, ISO 13485 and AQAP2110 standards, which the company’s various processes adhere to. In external audits in 2022, no deviations were observed.
Environmental Rresponsibility
As an organization operating in the IT sector, Innofactor has a unique opportunity to be part of the solution in reducing environmental impacts. The digital solutions we deliver to our customer organizations play an important role in mitigating and adapting to climate change. Digitalization of manual processes and digital healthcare are examples of solutions through which Innofactor promotes its customers’ – and thereby the entire society’s – sustainable development.
Our environmental policy guides the actions we take to reduce our adverse environmental impacts and respond to the challenges caused by climate change. Our environmental policy defines the principles we always follow in our own operations and in the deliveries to our customers. The principles of Innofactor's environmental policy include continuous development, improvement of preventative actions, and reacting to the changing operating environment. Innofactor complies to all applicable environmental laws and regulations and expects its partners and suppliers to comply with them as well. The environmental policy concerns the entire Innofactor Group and is available on Innofactor's website.
We calculated the Innofactor Group’s carbon footprint for the first time in 2022. The calculation included the emissions arising from the electricity and heating consumption of our operating locations (Scope 2), the emissions generated by our leased vehicles (Scope 1) and our most significant Scope 3 emissions. Scope 3 included business travel by car, flights, nights spent at hotels, computer and telephone purchases and the water consumption of our offices. Our total carbon footprint for 2021 came to 288.7 tCO2e. We compensated our total calculated emissions through certified international projects, making Innofactor a carbon-neutral company starting from 2021.

In 2022, our total carbon footprint was 383.3 tCO2e. The calculation included the same emission categories as in 2021. The increase in emissions compared to the previous year was due to a manifold increase in business travel, which had reduced to a minimum during the COVID-19 pandemic. For example, our annual InSpirit employee event was not organized during the pandemic. The lifting of the pandemic-related restrictions on travel and large gatherings led to a substantial increase in flights and nights spent at hotels. The calculation indicates that heating is our largest source of emissions, while many of our offices have already switched to renewable electricity. We aim to reduce our total emissions each year, which will also decrease the amount needing to be compensated. Our first step toward that goal is to increase the use of renewable energy at our offices.
We aim to actively identify further energy saving opportunities within our organization. As the use of electric and hybrid cars becomes increasingly common, we recognized the need for charging stations at our Espoo Campus. In spring 2020, we partnered with our lessor to install the first charging stations at our Espoo Campus, and the number of charging stations was recently increased by a considerable amount. The charging stations are available for use by our employees.

Innofactor has a policy aimed at extending the lifecycle of computers. Factors considered in the renewal of computer hardware include the user’s needs and the possibility of updating existing devices.

We recycle all recyclable materials such as cardboard, organic waste, metal, plastic and glass. Our electronic waste is recycled by Kuusakoski Recycling.

Remote work is an essential part of the operations of a modern digital organization. In 2020, the global pandemic forced many organizations to switch to remote work extensively and accelerated the digital transformation of organizations. We provide our employees with good opportunities for location-independent work. Using Microsoft Teams as a meeting tool brings added value to the operations of both Innofactor and its customers.
Innofactor employees also carried out various sustainability actions in their teams during the year. In Finland, we participated in the Kilometrikisa cycling campaign and the Finnish Red Cross Chain Reaction fundraiser, which saw us donate one euro for each 25 kilometers of cycling to help people adapt to and prepare for the impacts of climate change.
Social Rresponsibility
In accordance with our #PeopleFirst theme, we put people first in everything we do. This applies to our customers — who are the focus of our operations — and our employees and investing in their well-being and development.

In 2022, we focused on managerial work in even more diverse ways than before. We have focused on building a Nordic manager community to establish a consistent leadership culture and practices. As part of this effort, we used the Innofactor Academy to organize managerial training on coaching-style leadership, for example. We want to provide our managers with the best possible tools for supporting and coaching our specialists. We also conducted a 360° evaluation in which managers conducted a self-assessment and received feedback from their subordinates, colleagues and manager. The results help the managers develop their leadership skills and practices. Based on the 360° feedback, the key strengths of Innofactor’s managers include inspiring others, supporting better performance and taking other people’s opinions into consideration.
In 2022, Innofactor continued the recruitment and training of students nearing their graduation, with over 30 new participants recruited in the Nordic countries for the Innofactor DigiStar Trainee Program. In 2022, Innofactor recruited and trained a total of 37 undergraduate students.

The IT industry is constantly evolving, and an innovative operating environment plays a key role in the success of organizations. At Innofactor, we are increasingly focused on harnessing the potential and strategic capabilities of our employees and giving them the freedom to apply their skills in the workplace. Self-organization is a strategic choice that empowers our teams. This gives them the opportunity to change the world and innovate with our customers.

In 2022, we made two charitable donations to Unicef to support children in Ukraine. The first time, our entire staff had the opportunity to participate in the fundraiser with their own donation, and the second time, our staff chose Unicef as the target of our Christmas donation. In addition, we gave our teams the opportunity to use working hours for volunteering in late 2022. For example, one team helped with the distribution of groceries to Ukrainian refugees.  
Data security and Data Protection
Innofactor's customers require appropriate information security in their services and that the services enable operation in accordance with the EU General Data Protection Regulation (GDPR). Innofactor's management has identified several critical cyber risk scenarios against which a company needs to protect itself. The company is committed to protecting its customers' and partners' information and systems and naturally, Innofactor as a company itself. In order to ensure the level of information security corresponding to the risks, Innofactor maintains a certified information security management system in accordance with the ISO 27001 standard.

In its operations, Innofactor is committed to maintaining a high level of data protection and respects the privacy and rights of its personnel, customers and users. Through regular internal audits and the continuous development of information security, we aim to continuously develop data protection and information security in our operations and processes. Information security and data protection are mandatory parts of induction training in addition to continuous training on information security and data protection. Innofactor’s information security group meets regularly to guide the development and implementation of information security and data protection at Innofactor. The company has a designated information security manager and a data protection officer. Additionally, the company’s main personal data registers have been assigned to the persons responsible for them.
Anti-Corruption and Anti-Bribery
Innofactor’s Code of Conduct sets out the general principles and guidelines that the company’s employees and partners adhere to. We arrange training activities concerning the Code of Conduct at regular intervals. Innofactor’s Code of Conduct prohibits all types of corruption and bribery. In the Nordic countries, Innofactor operates in a very regulated environment, and in 2022, all subcontracting took place within the EEA or USA. This operating environment and in Finland, for example, the strict compliance to the Act on Contractor’s Obligations and Liability, training the employees, continuous dialog within the company's management, and monitoring subcontractors are important factors related to preventing the risk of corruption and bribery.
Transparent business in accordance with the highest ethical standards is the basis of our company’s operations. We use our anonymous whistleblowing channel for reporting suspected infringements that are against our Code of Conduct. All reports received via the channel are processed in strict confidence.
Anti-Corruption and Anti-Bribery
Innofactor’s main risks related to corporate responsibility can be divided into five categories: personnel turnover, risks to reputation regarding data protection and information security, risks to reputation due to corruption and bribery, and risk of being cut off from public procurement competitions. Innofactor’s operations do not include actual significant environmental risks, even though the energy consumption is being monitored and there is a continuous effort to decrease it. The risks related to personnel turnover, data protection and information security are described under the heading "Major risks and uncertainties."
Theme Operating model Goal Performance indicator 2022
Environmental responsibility Innofactor is committed to decreasing the environmental impact of its operations and to react to the challenges set by climate change. Promoting and developing environmental responsibility in Innofactor's operations. Number of actions that promote environmental responsibility 3
Social responsibility Innofactor's personnel plays a key role, and we consider them to be in a central role with regards to the organization's ability to operate and renew itself and creation of new innovations. To be an inspiring and sought-after employer. Hired students and recent graduates 37
Data Protection and Information Security Innofactor is committed to protecting its customers’ and partners’ information and systems as well as its own information and information systems. Reliable operator that takes information security and data protection into consideration. Number of administrative sanctions 0
Anti-Corruption and Anti-Bribery Innofactor’s Code of Conduct defines the general principles and guidelines that the company’s employees and partners adhere to. Transparent business operations in accordance with the highest ethical standards. No violations No violations
EU Taxonomy Disclosures
The EU Taxonomy Regulation aims to steer investments towards environmentally sustainable investments and to contribute to the achievement of the EU’s environmental objectives. The disclosure requirement for 2022 concerns climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems.

Innofactor has reviewed its economic activities against the criteria set by the EU. Innofactor has not identified activities aligned with the environmental objectives of the taxonomy. Therefore, Innofactor’s taxonomy-eligible activities account for 0 percent of the company’s net sales and capital expenditure.  
Proportion of taxonomy-eligible activity
KPI EUR thousand Taxonomy-eligible % Taxonomy non-eligible %
Net sales
Investments*
Operative expenses		 71 130
872
7 205		 0,0
0,0
0,0		 100,0
100,0
100,0
*The group's reported gross investments including advance payments
Share and Shareholders
At the end of 2022, Innofactor Plc’s share capital was EUR 2,100,000.00 and the total number of shares was 37,388,225. Innofactor Plc has one series of shares. Each share confers one vote.

In 2022, the highest price of the company share was EUR 1.54 (2021: 2.07), the lowest price was EUR 0.83 (2021: 1.24), and the average price was EUR 1.17 (2021: 1.61). The closing price for 2022 on December 31, 2022, was EUR 1.05 (2021: 1.52).
In public trading in 2022, a total of 14,193,868 shares were traded (2021: 32,546,031), which corresponds to 38.0 percent (2021: 87.0%) of the average number of shares in the said period. In 2022, there were 37,388,225 shares on the average (2021: 37,388,225). The share trading volume decreased by 56.4 percent compared to the corresponding period in 2021.

The market value of the share capital at the closing price of EUR 1.05 on December 31, 2022, was EUR 39,332,413 (2021: 56,643,161), representing a decrease of 30.6 percent.

On December 31, 2022, the company had a total of 11,798 shareholders (2021: 12,343), including nominee-registered shares.
On December 31, 2022, the company held 1,180,121 treasury shares.
The Board of Directors has the following authorizations:
Until June 30, 2023, to decide on a share issue and granting of special rights entitling to shares, concerning a maximum of 3,600,000 new shares (decided by the Annual General Meeting of March 31, 2022); the authorization has not been used.
Until June 30, 2023, to decide on the acquisition of a maximum of 3,600,000 treasury shares (decided by the General Meeting of March 31, 2022); the Board of Directors decided on September 27, 2022, to commence the repurchase of the company’s shares. The company will repurchase a maximum of 800,000 shares. The authorization was used to repurchase 488,711 shares by the end of 2022. At the end of 2022, the company held a total of 1,180,121 treasury shares.
Own Shares
The General Meeting of March 31, 2022, authorized the Board of Directors to decide on acquiring a maximum of 3,600,000 of the company’s own shares in one or several parts with the company’s unrestricted equity. The authorization entitles the Board to deviate from the shareholders’ proportional shareholdings (directed acquisition). Own shares may be acquired at the purchase price formed for them in public trading on the day of purchase or at another market price. The number of treasury shares at a time may be, at the maximum, one tenth of the total number of shares in the company. Shares may be purchased to be used in company acquisitions or implementing other arrangements relating to the company's business operations, improving the company's capital or financing structure, as a part of the company's incentive system, or otherwise to be handed over or voided. In connection with the share repurchase, ordinary derivative, stock lending and other agreements may be made in the market in accordance with the laws and regulations. The authorization includes the right of the Board of Directors to decide on all other matters related to the acquisition of shares. The authorization will be valid until June 30, 2023. This authorization replaces the Board’s earlier authorizations concerning share repurchase.
On September 27, 2022, the Board of Directors decided to commence the repurchasing of the company’s own shares. The repurchasing program was incomplete at the end of 2022, by which time 488,711 shares had been repurchased and were held by the company. The average purchase price of the shares was EUR 0.950. The shares were acquired at the current market price in public trading arranged by Nasdaq Helsinki Ltd.
At the end of 2022, the company held 1,180,121 treasury shares (3.16% of all shares).
Shareholdings of the Management
Shareholdings of the Board of Directors on December 31, 2022:
Under control of Sami Ensio, 7,895,773 shares, 21.12%
Sami Ensio, 5,722,013 shares, 15.30%
under control, 724,588 shares, 1.94%
minor under guardianship, 724,586 shares, 1.94%
minor under guardianship, 724,586 shares, 1.94%
Anna Lindén, 98,413 shares, 0.26%
Under control of Risto Linturi, 1,256,411 shares, 3.36%
Heikki Nikku, 29,769 shares, 0.08%
Shareholdings of the CEO on December 31, 2022:
Under control of Sami Ensio, 7,895,773 shares, 21.12%
Sami Ensio, 5,722,013 shares, 15.30%
under control, 724,588 shares, 1.94%
minor under guardianship, 724,586 shares, 1.94%
minor under guardianship, 724,586 shares, 1.94%
Shareholdings of the other members of the Executive Board on December 31, 2022:
Jørn Ellefsen, 80,500 shares, 0.22%
Janne Heikkinen, 123,044 shares, 0.33%
Anni Pokkinen, 21,000 shares, 0.06%
Markku Puolanne, 30,000 shares, 0.08%
Vesa Syrjäkari, 60,000 shares, 0.16%
Martin Söderlind, 10,000 shares, 0.03%
Largest Shareholders
According to the share register maintained by Euroclear Finland Oy, the share ownership of the 20 largest Innofactor Plc shareholders at the end of the year, on December 31, 2022, was as follows.
Name Number of share % share of capital
1. Ensio Sami 7 895 773 21,12 %
Sami Ensio 5 722 013 15,30 %
Minor under guardianship 724 588 1,94 %
Iiris Ensio 724 586 1,94 %
Minor under guardianship 724 586 1,94 %
2. Ilmarinen Mutual Pension Insurance Company 1 800 000 4,81 %
3. Linturi Kaija ja Risto 1 256 411 3,36 %
R. Linturi Oyj 489 107 1,31 %
Linturi Kaija Anneli 430 000 1,15 %
Linturi Risto Erkki Olavi 337 304 0,90 %
4. Laiho Rami Tapani 875 406 2,34 %
5. Ärje Matias Juhanpoika 854 253 2,28 %
6. Mäki Antti-Jussi 613 725 1,64 %
7. Tilman Tuomo Tapani 538 538 1,44 %
8. Hellen Stefan Andreas 486 000 1,30 %
9. Ingman Finance Oy Ab 450 000 1,20 %
10. Muukkonen Teemu Heikki 410 357 1,10 %
11. Järvenpää Janne-Olli 266 397 0,71 %
12. Mandatum Life Insurance Company Limited 247 104 0,66 %
13. Kukkonen Heikki-Harri 218 606 0,58 %
14. Puolakka Petri Yrjö Emil 202 511 0,54 %
15. Laiho Jari Olavi 200 371 0,54 %
16. Kannisto Jaakko Mikael 193 281 0,52 %
17. Varsio Jussi Ilari 190 000 0,51 %
18. Mäkinen Antti Vilho Juhani 168 000 0,45 %
19. Saarnio Mikko Markus 138 000 0,37 %
20. Muurinen Hannu Olavi 125 750 0,34 %
Total 17 130 483 45,81 %
Board of Directors and the Company’s Management
Board of Directors
In 2022, the members of Innofactor Plc’s Board of Directors were:
Sami Ensio
Anna Lindén (Chairman of the Board of Directors)
Risto Linturi
Heikki Nikku
The Chairman of the Board of Directors for Innofactor’s Finnish group companies is Sami Ensio, and the member of the Board of Directors is Executive Vice President, Business Development and Operational Excellence Vesa Syrjäkari with General Counsel Michaela Skrabb as the deputy member.

The Board members of Innofactor Plc’s Swedish, Danish and Norwegian holding companies were the Group CEO Sami Ensio (Chairman) and Executive Vice President, Business Development and Operational Excellence Vesa Syrjäkari with General Counsel Michaela Skrabb as the deputy member in the Swedish and Danish companies.

The Board members of Innofactor Plc’s Swedish, Danish and Norwegian operative country companies were the Group CEO Sami Ensio (Chairman) and Executive Vice President, Business Development and Operational Excellence Vesa Syrjäkari and the local Managing Directors of the country companies. In the operative company in Norway (Innofactor AS), also the General Counsel Michaela Skrabb has been a Board member.
CEO
Innofactor Plc's CEO is Sami Ensio. Mr. Ensio also acts as the CEO of the Innofactor Plc's Finnish group companies. In Sweden, Denmark, and Norway, the local Country Managers act as the CEOs of the operative companies.
Executive Board
In 2022, Innofactor Group’s Executive Board consisted of:
Sami Ensio, CEO, Country Manager in Finland and Chairman of the Executive Board
Jørn Ellefsen, Country Manager for Norway and Denmark
Marcus Hasselblad, Country Manager for Sweden (until September 19, 2022)
Janne Heikkinen, Executive Vice President, Products and Services
Anni Pokkinen, Executive Vice President, Human Resources (from September 27, 2022)
Markku Puolanne, CFO
Vesa Syrjäkari, EVP, Business Development and Operational Excellence
Manager for Sweden thereafter
Loans of Related Parties
The company’s managers considered to be related parties have EUR 70 thousand in liabilities from the company’s personnel issues to the company. The loan period is five years, and the loan is repaid in fixed monthly installments. The interest rate is the 12-month Euribor 360 interest rate. However, the interest rate is always a minimum of 0%. The accrued interest is paid monthly to the company. Innofactor PLC has a total of EUR 19,3 million loan receivables from its subsidiaries. The company has no other significant related party transactions.
Auditor
The auditor of Innofactor Plc was Ernst & Young Oy Authorized Public Accounting Firm, with Juha Hilmola (APA) as the auditor with principal responsibility.
Board of Directors’ Proposal on the Distribution of Profits
Innofactor is a growing company and intends to use its operating profit on actions promoting growth, for example, on realizing mergers. According to the dividend policy, Innofactor aims to pay a dividend regularly each year. The target is to pay about half of the result for the financial period in dividends, taking into account the company’s financial position, possible corporate reorganizations, and other development needs. For 2022, the Group’s result for the financial period was EUR 3,319,797.20. In making the proposal on the dividend, the Board of Directors takes into account the company's financial situation, profitability and near-term outlook.

At the end of the financial year 2022, the distributable assets of the Group’s parent company amounted to EUR 23,493,847.82.

The Board of Directors proposes that Innofactor Plc distribute EUR 0.06 per share as a repayment of capital.

The Board of Directors further proposes that the Annual General Meeting authorize the Board to decide on a repayment of capital amounting to a maximum of EUR 2,459,293 (EUR 0.06 per share, taking into account the share issue authorization proposed to the Board of Directors).
IFRS FINANCIAL STATEMENTS
Comprehensive Consolidated Profit and Loss Statement, IFRS
EUR thousand 1.1.2022-31.12.2022 1.1.2021-31.12.2021
Net sales 71 130 66 364
Other operating income 290 2 681
Materials and services -10 762 -8 874
Employee benefits/expenses -45 644 -43 453
Depreciation    -3 057 -3 592
Other operating expenses -7 205 -6 607
Operating profit 4 751 6 519
Financial income 46 359
Financial expenses -619 -1 148
Profit before taxes 4 178 5 730
Income taxes -858 -1 226
Profit/loss for the period 3 320 4 504
Other comprehensive income
Items that may be later recognized in profit or loss:
Exchange differences -551 97
Total comprehensive income 2 769 4 601
Distribution of the profit and comprehensive income
To shareholders of the parent company 2 769 4 601
Earnings per share calculated from the
profit attributable to equity holders of the parent:
basic earnings per share (EUR) 0,09 0,12
diluted earnings per share (EUR) 0,09 0,12
Consolidated Balance Sheet, IFRS
ASSETS
EUR thousand 31.12.2022 31.12.2021
Non-current assets
Tangible assets 1 076 535
Right-of-use assets 4 843 3 166
Goodwill 26 831 26 393
Other intangible assets 2 398 633
Shares and holdings 5 5
Non-current assets 77 129
Deferred tax assets 4 090 4 830
Total non-current assets 39 319 35 691
Current assets
Trade and other receivables 14 540 13 403
Cash and cash equivalents 1 956 1 963
Total current assets 16 495 15 366
Total assets 55 815 51 057
SHAREHOLDERS’ EQUITY AND LIABILITIES
EUR thousand 31.12.2022 31.12.2021
Equity attributable to the shareholders of the parent company
Share capital 2 100 2 100
Share premium reserve 72 72
Reserve fund 59 59
Fund for invested unrestricted equity 17 247 20 174
Retained earnings 7 669 5 496
Own shares -447 -1 146
Translation differences -1 902 -1 351
Total shareholders’ equity 24 799 25 404
Non-current liabilities
Loans from financial institutions 4 517 4 683
Lease liabilities 2 832 1 658
Deferred tax liabilities 1 851 1 487
Total Non-current liabilities 9 200 7 828
Current liabilities
Loans from financial institutions 4 886 1 873
Lease liabilities 2 115 1 603
Trade and other payables 14 815 14 349
Total current liabilities 21 816 17 825
Total liabilities 31 016 25 653
Total shareholders’ equity and liabilities 55 815 51 057
Consolidated Statement of Change in Shareholders’ Equity, IFRS
EUR thousand Share capital Share premium reserve Reserve fund Fund for invested unrestricted equity Own shares Retained earnings Exchange differences Total shareholders’ equity
Shareholders’ equity Jan 1, 2022 2 100 72 59 20 174 -1 146 5 495 -1 351 25 404
Comprehensive income
Result for the financial period 3 320 3 320
Other comprehensive income:
Translation differences -551 -551 -605,0
Total comprehensive income 3 320 -551 2 769
Dividend distribution 0
Repayment of capital -2 927 -2 927
Purchase of own shares -447 -447
Shareholders’ equity Dec 31, 2022 2 100 72 59 17 247 -1 592 8 816 -1 903 24 799
EUR thousand Share capital Share premium reserve Reserve fund Fund for invested unrestricted equity Own shares Retained earnings Exchange differences Total shareholders’ equity
Shareholders' equity Jan 1, 2021 2 100 72 59 20 921 0 1 739 -1 447 23 444
Comprehensive income
Result for the financial period 4 504 4 504
Other comprehensive income:
Translation differences 97 97
Total comprehensive income 4 504 97 4 601
Dividend distribution -748 -748
Repayment of capital -748 -748
Purchase of own shares -1 146 -1 146
Shareholders' equity Dec 31, 2021 2 100 72 59 20 174 -1 146 5 495 -1 351 25 404
Consolidated cash flow statement, IFRS
EUR thousand 1.1.– 31.12.2022 1.1.– 31.12.2021
Cash flow from operating activities
Profit before taxes 4 178 5 730
Adjustments:
Depreciation 3 057 3 592
Other transactions with no related cash flow: 42 -108
Changes in working capital:
Change in non-interest-bearing current receivables -102 479
Change in non-interest-bearing current liabilities -630 -1 204
Interest paid -40 -353
Interest received 198 719
Taxes paid 0 0
Net cash flow from operating activities 6 704 8 855
Investment cash flow
Acquisition of subsidiaries -2 825 0
Investments in intangible and tangible assets -872 -402
Receivables from sales 0 -400
Change in loan receivables 103 159
Net cash flow from investments -3 593 -643
Cash flow from financing
Loans withdrawn 4 679 0
Loans paid -2 236 -4 873
Lease liability payments -2 187 -1 801
Payment of dividend and capital repayment -2 927 -1 496
Purchase of own shares -447 -1 146
Net cash flow from financing -3 118 -9 316
Change in cash and cash equivalents -7 -1 104
Cash and cash equivalents, opening balance 1 963 3 067
Cash and cash equivalents, closing balance 1 956 1 963
Notes to the Consolidated Financial Statements (IFRS)
1. Basic Information on the Group
Innofactor Plc is a Finnish public company established in accordance with Finnish legislation. The domicile of the parent company is Espoo and its registered address is Keilaranta 9, 02150 Espoo. Innofactor Group is one of the leading software providers focused on Microsoft solutions in the Nordic countries. Innofactor delivers to its customers IT projects as a system integrator and develops its own software products and services. A copy of the consolidated financial statements is available at the company’s Internet address www.innofactor.com or at the head office at Keilaranta 9, 02150 Espoo, Finland. Innofactor Plc’s Board of Directors has approved these financial statements for publication in its meeting on March 8, 2023. According to the Finnish Companies Act, shareholders may approve or reject the financial statements at a General Meeting held after their publication. The Meeting may also decide to amend the financial statements.
2. Accounting Policies
Accounting Policies
Innofactor Plc’s consolidated financial statements have been prepared in compliance with the International Financial Reporting Standards (IFRS), observing the IAS and IFRS standards as well as SIC and IFRIC interpretations valid on December 31, 2022. In the Finnish Accounting Act and provisions issued thereunder, International Financial Reporting Standards refer to standards and related interpretations approved for adoption within the EU in accordance with the procedure laid down in regulation (EC) No. 1606/2002. The notes to the consolidated financial statements also comply with the provisions of Finnish accounting and corporate legislation that supplement the IFRS provisions. The consolidated financial statements have been prepared on a historical cost basis, unless otherwise stated in the accounting policies. The consolidated financial statements are presented in thousands of euros unless otherwise stated. As the figures are presented in thousands of euros, rounding may cause differences.
Application of New and Amended IFRS Norms
As of January 1, 2022, the Group has applied the following new and amended standards and interpretations:
which have not had a material effect on the Group’s reporting:
* Amendments to IAS 16: Property, Plant and Equipment — Proceeds before Intended Use
* Amendments to IFRS 3: Business Combinations — Reference to the Conceptual Framework
Changes That Will Take Effect During the Financial Period 2023 or Later
In addition to the standards and interpretations presented in the financial statements for 2022, the Group will adopt the following standards, interpretations and amendments to standards published by the IASB during financial periods beginning on or after January 1, 2023. The Group will adopt each standard on the effective date, or if the effective date is not the first day of a reporting period, as of the beginning of the following reporting period, provided that they are approved by the EU.
* Amendments to IAS 1: Presentation of Financial Statements — Classification of Liabilities as Current or Non-current
* Amendments to IAS 1: Presentation of Financial Statements and IFRS Practice Statement 2: Making Materiality Judgements — Disclosure of Accounting Policies
* Amendments to IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors — Definition of Accounting Estimates
* Amendments to IAS 12: Income Taxes — Deferred Tax related to Assets and Liabilities arising from a Single Transaction
* Amendments to IFRS 10: Consolidated Financial Statements and IAS 28: Investments in Associates and Joint Ventures — Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Other amended IFRS standards or IFRIC interpretations have not had an effect on Innofactor’s consolidated financial statements. New or amended IFRS standards or IFRIC interpretations that are not yet effective are not expected to have a material impact on the consolidated financial statements in the current reporting period or future reporting periods. They amendments will be adopted from the date they become effective.
The preparation of the financial statements in accordance with the IFRS standards requires that the management makes certain assessments and judgment-based solutions. Information on the judgment-based solutions, which the management has used when applying the accounting policies and which have the most significant impact on the figures presented in the financial statements, is given under the section "Critical accounting judgments and key sources of estimation uncertainty."
Segment Structure
Innofactor Group provides comprehensive solutions in a Microsoft-based environment. The Group has one reportable segment. The operations are reviewed as a whole to estimate the profitability and to manage the resources.
Subsidiaries
Subsidiaries are companies over which the Group exercises control. This control arises from the Group holding more than half of the voting rights or otherwise being in a position to exercise control. The existence of potential control has also been taken into account in assessing the conditions under which control arises when instruments entitling to potential control are currently exercisable. Control refers to the right to stipulate the principles of the company’s finances and business operations to gain from the operations.
Mutual holdings in the Group are eliminated using the acquisition cost method. The consideration transferred and the acquired company’s identifiable assets and assumed liabilities are measured at fair value at the acquisition date. The acquisition costs, excluding the costs to issue debt or equity securities, have been recognized as a cost. The consideration transferred does not include transactions treated separately from the acquisition. The impact of these is recognized in profit or loss in connection with the acquisition. Possible contingent additional consideration has been measured at fair value at the acquisition date and has been classified as liability or equity. Contingent additional consideration classified as debt is measured at fair value at the closing date, and the gain or loss arising is recognized in profit or loss. Contingent additional consideration classified as equity is not remeasured.
The subsidiaries acquired are consolidated from the date when control commences, and the subsidiaries disposed of are included in the consolidated financial statements until control ceases. All internal transactions, receivables, liabilities and unrealized profits, as well as internal profit distribution are eliminated in the consolidated financial statements. In a phased acquisition, the previously held equity interest is measured at fair value, and the resulting gain or loss is recognized in profit or loss. If the Group no longer has a controlling stake in a subsidiary, the remaining asset is measured at fair value at the date the control is lost, and the resulting gain or loss is recognized in profit or loss. 
Tangible Assets
Tangible assets have been measured at acquisition value less accumulated depreciation and impairment losses. If an item of tangible assets consists of several parts with economic lives of different lengths, the parts are treated as separate assets. When a part is renewed, the costs are capitalized and the possible remaining carrying amount is written off. In other cases, subsequent costs are included in the carrying amount of the item of tangible assets only when it is probable that the future economic benefits that are attributable to it will flow to the Group and the acquisition cost of the item can be determined reliably. Other repair and maintenance costs are recognized in profit or loss as incurred. Depreciation of assets is calculated using the straight-line method over the estimated useful lives. The estimated useful lives are as follows:
Machinery and equipment 2–10 years
The residual values and useful lives of assets are reviewed at the end of each financial period and, if necessary, adjusted to reflect the changes in the expected economic benefits. The sales gains or losses from the sale or disposition of items of tangible assets are recognized in profit or loss under other operating income or expenses. The sales profit is defined as the difference between the sales price and the remaining purchase price.
Government Grants
Government grants received for realized costs are recognized in profit or loss as income for the period that the
grant becomes receivable.  These grants are recognized in other income.
Intangible Assets
Goodwill
Goodwill arising in business combinations is recognized at the amount exceeding the Group's share of the fair value of the net assets of the acquired company at the time of acquisition.
  
Goodwill is not subject to depreciation, but it is tested annually for impairment. Goodwill is measured at original acquisition cost less impairment losses. 
Research and Development Costs
Research and development costs are recognized as costs in profit or loss.
The development costs incurred by the design of new or advanced products are capitalized in the balance sheet as intangible assets from the date on which the product is regarded as technically feasible, commercially utilizable and able to generate future economic benefits. Capitalized development costs include the material, work and testing expenses that result directly from completing an asset for the intended purpose. The development costs recognized as expenses are not capitalized later.
Depreciation is recognized from the date the asset is ready for use. An asset which is not ready for use is tested annually for impairment. After initial recognition, capitalized development costs are measured at cost less accumulated depreciation and impairment losses. The useful life of capitalized development costs is 3-5 years, during which time capitalized costs are amortized on a straight-line basis
In 2022 and 2021, no development costs were capitalized as the requirements were not met
Other Intangible Assets
An intangible asset is recognized in the balance sheet at acquisition cost, if the cost can be reliably determined and it is likely that the expected economic benefit from the asset will flow to the Group. Intangible assets with a limited useful life are recognized in profit or loss and amortized on a straight-line basis over their known or estimated useful lives. The major part of other intangible assets has been formed in relation to business acquisitions and consists of customer relationships and technology. The amortization period is defined separately for each acquisition and is 5-9 years. The amortization period for software is 3-5 years.
Leases
Group as a Lessee
Lease agreements, which fulfill the requirements of the IFRS 16 standard, are recognized in the balance sheet as right-of-use assets and corresponding lease liabilities. Initially, lease liabilities are measured at the commencement date at the present value of the lease payments, discounted using the interest rate implicit in the lease, if it can be readily determined. If the rate can’t be readily determined, such as in real estate leases, the incremental borrowing rate is used. The incremental borrowing rate reflects the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The lease term covers the non-cancellable period during which the Group has the right to use the underlying asset. For leases that are valid indefinitely, the probable minimum lease term is estimated. Subsequently, lease liabilities are measured at amortized cost by increasing or reducing the carrying amount to reflect interest on the lease liability or the lease payments made. Lease liabilities are remeasured for lease reassessments, amendments to lease agreements or to reflect revised in-substance fixed lease payments. Interest expenses are recognized in profit or loss. Right-of-use assets are amortized over the shorter of the lease term or economic useful life of the asset.
Impairment of Tangible Assets and Intangible Assets
The Group assesses at the closing date of each reporting period whether there is any indication of impairment of an asset. If there are such indications, the asset’s recoverable amount is estimated. In addition, the recoverable amount is estimated annually for the following assets regardless of whether there are any indications of impairment: goodwill and intangible assets with an infinite useful life.
The recoverable amount is the asset's fair value less costs to sell or its value in use, whichever is higher. Value in use refers to the estimated future net cash flows, discounted to their present value, expected to be derived from the said asset or cash-generating unit. The discount rate used is the interest rate before tax that represents the market's view of the time value of money and special risks associated with the asset. An impairment loss is recognized, if the carrying amount of the asset is higher than its recoverable amount. The impairment loss is recognized immediately in profit or loss. An impairment loss of a cash-generating unit is first allocated to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to reduce the carrying amounts of the other assets of the unit pro rata. The useful life of the depreciated asset is re-evaluated in connection with the recognition of an impairment loss. An impairment loss recognized for an asset other than goodwill is reversed, if a change has taken place in the estimates used to determine the recoverable amount of the asset. However, the maximum reversal of an impairment loss amounts to the carrying amount of the asset had no impairment loss been recognized. An impairment loss recognized for goodwill is not reversed in any situation. No impairment losses were recognized in 2022 and 2021.                                                           
Employee Benefits
Pension Obligations
Pension arrangements are classified as benefit pension plans or contribution plans. In the contribution plans, the Group makes fixed payments to an external unit. The Group does not have a legal or constructive obligation to make additional payments, if the recipient is not able to pay the pension benefits concerned. All such arrangements that do not meet these conditions are benefit pension plans. The Group's pension arrangements have been implemented through a pension insurance company, and they are based on contribution plans. In the contribution plan arrangement, payments are recognized in the profit and loss statement during the period to which the payment applies.
Taxes Based on Taxable Income and Deferred Taxes for the Financial Period
The tax expense comprises taxes on taxable income and deferred taxes for the financial period. Taxes are recognized in profit or loss, except when they are directly connected with items recognized in shareholders' equity or other items of the comprehensive income. In this case, also the tax is recognized in the items concerned. The tax based on taxable income for the financial period is calculated on taxable income according to the tax rate in the country concerned. Deferred taxes are calculated on temporary differences between the carrying amount and the taxable value. However, deferred tax liabilities are not recognized for taxable temporary differences when the deferred tax liability arises from the initial recognition of goodwill, or if the liabilities arise from the initial recognition of an asset or liability in a transaction which is other than a business combination and which affects neither accounting nor taxable profit (or loss recognized in taxation) at the time of the transaction. The largest temporary differences arise from the depreciation of tangible assets, previously unrecognized tax losses, and adjustments based on fair value measurement on business combinations. Deferred taxes are calculated by using the tax rates enacted or approved in practice by the closing date of the reporting period. Deferred tax assets are recognized to the extent that it is probable that such future taxable profit will be available against which the temporary difference can be utilized. An estimate is made at the closing date of the reporting period on whether the conditions for recognizing deferred tax assets are met.
Revenue Recognition Principles
Revenue from the sale of products and services is presented as net sales measured at fair value and adjusted for indirect taxes, discounts and currency translation differences from sales in foreign currencies. Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer and excludes consideration collected on behalf of third parties. The Group recognizes revenue when it transfers control of a good or service to a customer.
Services Sold
Revenue from services is recognized when the service has been provided and the economic benefit from the service is probable. Man-hour work is recognized monthly as it progresses.
Projects
Projects include planning, implementation, project management and commissioning services related to software and solutions to be implemented for the customer. Fixed-price projects are recognized using the percentage of completion method when the outcome of the project can be estimated reliably. For contracts comprising fixed-price projects, revenue is recognized based on the actual service provided by the reporting date as a proportion of the total services to be provided. This is determined based on the cost of actual labor hours spent relative to the total expected cost of labor hours, as it best reflects the transfer of control to the customer. Estimates of revenues, costs or progress towards completion are revised if circumstances change and any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by the management. Invoicing and customer payments in fixed-price projects follow the payment schedule defined in the customer contract. If the services rendered by the Group exceed the payment, a contract asset is recognized. I the payments exceed the services rendered, a contract liability is recognized. If the estimate of the outcome of the project changes, the recognized sales are adjusted in the financial period during which the change is discovered and can be estimated. An expected loss on a project is recognized in profit or loss immediately when it is identified. The Group does not have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. Consequently, the Group does not adjust any of the transaction prices for the time value of money. The management exercises judgment in estimating the recognition of revenue from fixed-price projects and the amount of retrospective discounts.
SaaS
Maintenance fees are recognized over the contract period.
Licenses
License revenue is recognized at a point in time when the license is delivered, the legal title has passed, the customer has accepted the license, and has access to the licensed software. Distinct licenses that provide a right to access the software are recognized over the contract period. Contract assets or liabilities do not typically arise in the businesses described above.
Financing
Innofactor's financial assets have been categorized according to IFRS 9 into the following categories: financial assets at allocated acquisition cost and financial assets at fair value through profit or loss. The financial assets are categorized as they are first registered, and the categorization is based on the business model applied by the company as regards financial assets and nature of contract-based cash flows. Valuing an instrument, which belongs to financial assets, at allocated acquisition cost requires that the contract-based cash flows consist entirely of an interest and capital reimbursement (the so called SPPI criteria). The fulfilling of the SPPI criteria is assessed separately for each financial instrument. If the SSPI criteria are not fulfilled, the financial assets are valued at fair value through profit or loss. Financial assets are presented as current assets, if their maturity is under 12 months, or if the investment is planned to be relinquished within 12 months. In other cases, the asset is presented as a non-current asset. Transaction costs are included in the original carrying amounts of the financial assets, when the asset has been valued at allocated acquisition cost. The purchases and sales of financial instruments are registered at the clearance date. The fair values of financial instruments have been defined through discounted cash flows.
Cash and Cash Equivalents
Cash and cash equivalents comprise bank deposits. Bank overdrafts are included in the current liabilities in the balance sheet.
Impairment of Financial Assets
In estimating the losses for write-offs of sales receivables, a customer classification is used in which the reservation for credit loss is calculated based on experience, that is, based on expected credit losses from different customer groups. The Group’s realized credit losses have historically been very small due to the large share of net sales coming from public administration, third sector and large companies. Sales receivables and assets based on contracts are written off the profit or loss as final credit losses, when it is not reasonable to expect a payment to be received for them. If the amount of the impairment loss decreases during a future financial period and the deduction can be objectively considered to be related to a transaction taking place after the impairment entry, the recognized loss will be reversed as incurred in profit or loss.
Financial Liabilities
Initially, financial liabilities are measured at fair value. Transaction costs are included in the original carrying amount of financial liabilities measured at amortized cost. Financial liabilities are rated as current liabilities when they are due to be paid within 12 months from the reporting time.
The lending costs that are directly attributable to the acquisition, construction or production of a qualifying asset are recognized as part of the cost of that asset, if it is probable that future economic benefits that are attributable to the asset will flow to the Group and the costs can be determined reliably. Other lending costs are recognized as expenses in the period in which they have incurred. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. When the draw-down occurs, the fees paid on the establishment of loan facilities are recognized as part of transaction costs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facility to which it relates.
Derivative Agreements
Initially, derivative agreements are recognized at fair value on the date when the Group becomes a party of the agreement, and later they will continue to be valued at fair value. Profit and loss for valuing at fair value are treated in the accounting in a way defined by the purpose of use of the derivative agreement. Initially, derivative agreements are recognized at fair value on the date when the Group becomes a party of the agreement, and later they will be valued at fair value at the time of reporting. Changes in fair value are recognized in financial income or expenses in the profit and loss statement.
Shareholders’ Equity
Ordinary shares are presented as share capital. Costs relating to the issue or acquisition of equity instruments are presented as a deduction in shareholders' equity. If Innofactor repurchases its own equity instruments, the purchase price of such instruments is deducted from the shareholder's equity. 
Operating Profit
The IAS 1 Presentation of Financial Statements standard does not define the concept of operating profit. The Group has defined the concept as follows: Operating profit is the net total which is formed when other operating income is added to the net sales and the following items are deducted: materials and services, cost of employee benefits, depreciation and possible impairment losses, and other operating expenses. All other items of the profit and loss statement are presented below the operating profit. Currency translation differences are included in operating profit if they arise from business related items; otherwise they are recognized in financial items.
Translation differences
In the consolidated financial statements, exchange rate differences arising from the equity of foreign subsidiaries and loans comparable with foreign net investments are recognized in translation differences through the Group’s other comprehensive income items. In the second quarter of the financial year 2022, the Group’s management classified certain intra-group loans as loans comparable with net investments and the exchange rate differences arising from these loans are recognized in translation differences.
Critical Accounting Judgments and Key Sources of Estimation Uncertainty
The preparation of financial statements requires estimates and assumptions concerning the future. The end results may deviate from these estimates and assumptions. The application of the accounting policies also requires judgment. The estimates made in the preparation of the financial statements are based on the best view of the management at the closing date of the reporting period. The estimates are based on the previous experiences and on assumptions concerning the future that are considered the most probable at the closing date. They may be related to the expected development of the Group’s financial operating environment in terms of sales and cost level. The Group regularly monitors the realization of the estimates and assumptions and the factors behind them by using several both internal and external sources of information. Possible changes in the estimates and assumptions are recognized in the financial period during which the estimate or assumption is adjusted and in the subsequent financial periods. The key assumptions concerning the future and those key sources of estimation uncertainty at the closing date of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are presented later in this report. The Group management considers these sections of the financial statements the most essential, because the accounting policies concerning them are the most complicated and their application requires the use of the most significant estimates and assumptions concerning, for example, the measurement of financial assets. In addition, the impact of possible changes in the assumptions and estimates used in these sections of the financial statements is estimated as the most significant.
Determination of the Fair Value of Assets Acquired in Business Combinations
The estimation of the fair value of intangible assets is based on an estimate of the cash flows related to the assets as there is no information available in the market concerning the purchase of similar assets. The Group management believes that the used estimates and assumptions are sufficiently exact for determining fair value. Additionally, the Group examines at every closing date of a reporting period or, if necessary, more frequently, if there are any indications of impairment in tangible and intangible assets.
Determination of the Measurement of Goodwill
The management makes significant estimates and judgment-based decisions when assessing the development of the Group’s net sales and expense, the applicable tax rates and the effects of changes in market conditions on the Group’s profit performance. Cash flow projections are based on the Group’s actual result and the management’s best estimates of future financial performance. Cash flow forecasts include the budgeted amount for the next financial year and the forecasted amounts for the three subsequent years. The growth rates are based on the management’s estimate of growth in the coming years.
Partial recognition of revenue
Revenue and expenses from projects recognized over time are recognized using the percentage of completion method when the outcome of the project can be estimated reliably. Recognition is based on estimates of the expected revenue and expenses from the project, as well as the reliable measurement and assessment of the progress of the project. If the estimate of the outcome of a project changes, the recognized project revenue and profit/margin are correspondingly changed in the period in which the change is discovered and can be estimated reliably. Loss-making contracts are recognized as expenses without delay.
Notes to the Consolidated Financial Statements
3. Net sales
EUR thousand 2022 2021
Projects 25 654 27 262
Services 26 069 21 693
Saas 16 807 15 040
Licenses 2 599 2 369
Total 71 130 66 364
Projects include in 2022 EUR 2.5 million (EUR 3.6 million in 2021) of revenue is recognized from projects based on
percentage of completion. From those projects EUR 2.1 million (EUR 2.6 million in 2021) of revenue is recognized from
projects that are incomplete.
The items that were included in the contract liability in the previous financial statements
were recognized in full as revenue in the reporting period.
On January 1–December 31, 2022, approximately 66% of the net sales came from Finland, approximately 16% from Sweden,
approximately 6% from Denmark, and approximately 12% from Norway.
The warranty period for system deliveries is 6–12 months and work under warranty is, as a rule, carried out during maintenance.
Unfulfilled Long-Term Customer Contracts
EUR thousand 2022 2021
Total transaction price for partially or entirely unfulfilled long-term customer contracts 75 831 72 837
Estimated time of recognition
Estimated recognition within the next year 42 451 40 042
Estimated recognition later 33 380 32 795
Total 75 831 72 837
For continuing service contracts, the value of long-term customer contracts is calculated as the value of the net
sales in one year. On December 31, 2022, this was EUR 19,200 thousand and on December 31, 2021, it was EUR 17,939 thousand.
Net Sales by Customer Location
EUR thousand 2022 2021
Finland 46 942 44 718
Rest of Europe 24 188 21 446
Rest of the world 0 0
Total net sales 71 130 66 164
Other operating income
2022 2021
Divestments 0 2 557
Compensation for damages awarded on the basis of legal proceedings 231 0
Government Grants 0 78
Rent 43 32
Other 15 14
Total other operating income 290 2 681
4. Other Operating Expenses
EUR thousand 2022 2021
The following table shows four of the most significant items included in other operating expenses:
Voluntary indirect employee costs 1 276 1 385
ICT expenses 987 1 044
Marketing expenses 744 561
Expenses for business premises 583 651
Total 3 590 3 641
Other unspecified operating expenses 3 615 2 966
Other operating expenses, total 7 205 6 607
Remuneration of the Auditors
EUR thousand 2022 2021
Auditing 130 122
Other services 3 10
Total 134 132
5. Depreciation, Amortization and Impairment
EUR thousand 2022 2021
Depreciation by asset group
Intangible Assets 568 1 457
Total 568 1 457
Tangible assets
Real estate 2 044 1 806
Machinery and equipment 446 330
Total 2 489 2 135
Total depreciation 3 057 3 592
6. Employee benefits/expenses
EUR thousand 2022 2021
Wages and salaries 37 003 34 760
Pension expenses – defined contribution plans 5 517 5 339
Other indirect employee costs 3 123 3 353
Total 45 644 43 453
Group personnel 2022 2021
Average in the financial period 536 516
At the end of the financial period 564 500
Information on management benefits is presented in Note 24. Related party transactions.
7. Research and Development Costs
In 2022, the research and development costs recognized as expenses totaled EUR 4,153 thousand
(EUR 3,504 thousand in 2021).
The Group did not capitalize any research and development costs during the financial period 2022.
8. Financial Income
tuhatta euroa 2022 2021
Interest income 1 2
Other financial income * 45 357
Financial income, total 46 359
In the second quarter of the financial year 2022, the Group’s management classified certain intra-group
loans as loans comparable with net investments and the exchange rate differences arising from these
loans are recognized in translation differences. * In 2021, other financial income included EUR 232 thousand in unrealized
exchange rate gains that are primarily intra-Group items.
9. Financial Expenses
Items recognized in profit or loss
EUR thousand 2022 2021
Interest and other financial expenses * 464 1 043
Interest expenses for right-of-use assets 154 106
Financial expenses, total 619 1 148
* In the second quarter of the financial year 2022, the Group’s management classified certain intra-group
loans as loans comparable with net investments and the exchange rate differences arising from these
loans are recognized in translation differences. In 2021, other interest and financial income included
EUR 542 thousand in unrealized exchange rate losses that are primarily intra-Group items.
10. Income Taxes
EUR thousand 2022 2021
Tax based on the taxable income of the financial period 0 0
Other taxes -3 -3
Deferred tax related to the creation or cancellation of  temporary differences -855 -1 223
Total -858 -1 226
Reconciliation between the income tax expense and the taxes calculated at the 20.0% tax rate valid in the Group's home country:
EUR thousand 2022 2021
Earnings before taxes 4 178 5 730
Taxes calculated at the domestic tax rate -836 -1146
Non-deductible expenses -16 -45
Tax-free income 42 52
Verokannan muutos 0 0
Difference in foreign tax rate 0 3
Change in deferred taxes
Group transfers recognized in profit or loss for which no deferred tax assets or liabilities have been recognized -19
Other 5 -90
Taxes in the profit and loss statement -858 -1226
11. Earnings per Share
Basic earnings per share are calculated by dividing the profit attributable to the shareholders of the company
by the weighted average number of outstanding shares during the financial period.
2022 2021
Profit for the year attributable to shareholders of the parent company (EUR) 3 319 797 4 503 785
Weighted average of the number of shares during the financial period   36 546 578 37 289 660
Basic earnings per share (EUR/share) 0,09 0,12
There is no dilution effect in the Group.
12. Tangible assets
EUR thousand Koneet ja kalusto Rakennukset ja rakennelmat Yhteensä
Acquisition cost, Jan 1, 2022 5 277 8 194 13 471
Additions in 2022 978 3 720 4 698
Deductions in 2022 0 0
Acquisition costs, Dec 31, 2022 6 255 11 914 18 169
Accumulated depreciation, amortization and impairment, Jan 1, 2022 -4 740 -5 045 -9 785
Depreciation related to deductions/exchange differences of tangible assets 7 17 24
Depreciation in 2022 -446 -2 044 -2 489
Carrying amount, Jan 1, 2022 537 3 164 3 701
Carrying amount, Dec 31, 2022 1 076 4 843 5 919
Acquisition cost, Jan 1, 2021 4 900 7 088 11 987
Additions in 2021 386 1 106 1 492
Deductions in 2021 -8 0 -8
Acquisition costs, Dec 31, 2021 5 277 8 194 13 471
Accumulated depreciation, amortization and impairment, Jan 1, 2021 -4 411 -3 239 -7 650
Depreciation related to deductions/exchange differences of tangible assets 0 15 15
Depreciation in 2021 -330 -1 806 -2 135
Carrying amount, Jan 1, 2021 489 3 850 4 338
Carrying amount, Dec 31, 2021 537 3 164 3 701
1.1.2022 31.12.2022
Tangible assets 535 1 076
Right-of-use assets 3 166 4 843
Total 3 701 5 919
1.1.2021 31.12.2021
Tangible assets 472 535
Right-of-use assets 3 865 3 166
Total 4 338 3 701
Right-of-use assets
EUR thousand Koneet ja kalusto Rakennukset ja rakennelmat Yhteensä
Acquisition cost, Jan 1, 2022 1 3 164 3 166
Additions in 2022 3 720 3 720
Depreciation in 2022 -1 -2 043 -2 044
Carrying amount, Dec 31, 2022 0 4 843 4 843
EUR thousand Koneet ja kalusto Rakennukset ja rakennelmat Yhteensä
Acquisition cost, Jan 1, 2021 16 3 850 3 866
Additions in 2021 1 106 1 106
Depreciation in 2021 -14 -1 793 -1 807
Carrying amount, Dec 31, 2021 1 3 164 3 166
Lease liabilities are described in Note 20.
Note 13. Intangible assets
EUR thousand Liikearvo Muut aineettomat hyödykkeet Yhteensä
Acquisition cost, Jan 1, 2022 27 609 16 446 44 055
Additions in 2022 951 2 339 3 290
Change in value from exchange rate changes -512 -7 -519
Acquisition cost, Dec 31, 2022 28 047 18 779 46 826
Accumulated depreciation, amortization and impairment, Jan 1, 2022 -1 216 -15 813 -17 029
Depreciation in 2022 0 -568 -568
Accumulated depreciation, amortization and impairment, Dec 31, 2022 -1 216 -16 381 -17 597
Carrying amount, Jan 1, 2022 26 393 633 27 026
Carrying amount, Dec 31, 2022 26 831 2 398 29 229
EUR thousand Liikearvo Muut aineettomat hyödykkeet Yhteensä
Acquisition cost, Jan 1, 2021 27 743 16 438 44 180
Additions in 2021 0
Change in value from exchange rate changes -134 8 -126
Acquisition cost, Dec 31, 2021 27 609 16 446 44 055
Accumulated depreciation, amortization and impairment, Jan 1, 2021 -1 216 -14 357 -15 573
Depreciation in 2021 0 -1 457 -1 457
Accumulated depreciation, amortization and impairment, Dec 31, 2021 -1 216 -15 813 -17 029
Carrying amount, Jan 1, 2021 26 531 2 084 28 616
Carrying amount, Dec 31, 2021 26 393 633 27 026
Impairment Testing

The Group has one cash-generating unit (CGU), software business, to which all the goodwill created in business acquisitions is allocated.

In impairment testing, all the Group’s recoverable amounts are determined on the basis of value in use. The cash flow forecasts are based on the forecasts approved by the management and they cover a period of three years. The cash flows after the forecast period approved by the management have been extrapolated by using a growth factor of 1.0%.
The essential variables in the calculation of value in use are the following:
1.Budgeted operating margin – The value of the variable is based on the budget approved by the Board of Directors and the management's estimate on the development of the operating margin during the next three years. During the forecast period, no essential changes are expected in the operating margin.
2.Change in working capital – The value of the variable is based on the average working capital in relation to the net sales and the management's estimate on changes in the working capital during the next three years. During the forecast period, no essential changes are expected in the change in the working capital.
3.Discounting rate – Determined by using Weighted Average Cost of Capital (WACC), which defines the overall cost of equity and debt, taking the special risks concerning the items into consideration. The discount rate has been determined before taxes. The discount rate used in the calculations is 14.0%  (11.7% in 2021). The discount rate after taxes is 11.4% (9.5% in 2021).
4.Growth rate in the forecast period – the company considers the used net sales to be conservative, considering the realized long-term growth of the field and of Innofactor's business.
According to the impairment testing, the recoverable amounts exceed the corresponding balance sheet values by approximately EUR 30 million. No impairment losses were recognized in 2022 and 2021.
According to the sensitivity analysis that the Group carried out on goodwill, a decrease of 17% in the net sales compared to the estimated net sales of 2023–2025 or a decrease of 19% in profitability compared with the estimate for 2023–2025 would indicate a need for impairment. On the basis of the sensitivity analysis, an 11.8% increase in the discount rate would cause a need for impairment.
Recognition of Goodwill
EUR thousand                                             2022 2021
IT service business                                            26 831 26 393
Goodwill 26 831 26 393
Note 14. Deferred Tax Assets and Liabilities
Changes in deferred taxes in 2022:
EUR thousand Dec 31, 2021 Recognized in profit or loss Exchange differences Increase in deferred tax assets and liabilities ** Dec 31, 2022
Deferred tax assets
From Group combinations * 4 830 -911 -31 201 4 090
Total 4 830 -911 -31 201 4 090
Deferred tax liabilities
Measurement of intangible assets and tangible assets at market value in business combinations 1 487 -55 0 420 1 852
Total 1 487 -55 0 420 1 852
* Of the deferred tax assets, approximately EUR 3,854 thousand consist of historical, confirmed losses.
** The increase in deferred tax assets and liabilities is related to the acquisition of Invenco Oy and Invenco Software Oy in June 2022.
At the end of 2022, the amount of losses, which have not been used in the Group's taxation and which have not been recognized as deferred taxes in accordance with the prudence concept, is EUR 2.6 million. These losses are from the other Nordic countries outside Finland. The losses in other Nordic countries will not expire, but strong evidence of their utilization in the next few years is required. The figures do not include the losses to be used in the taxation for 2022, which have not yet been confirmed.

To assess whether the convincing evidence threshold per IAS 12 is met, the company has prepared profit and tax forecasts for future periods that take into consideration the tax regulations in effect at the time of calculation. The management has recognized a deferred tax asset from the Group’s operations in Sweden, Denmark and Norway based on the forecast of taxable income in these calculations.
Note 15. Trade and Other Receivables
EUR thousand 2022 2021
Trade and other receivables
Trade receivables 10 708 8 040
Receivables from customers for long-term projects 1 971 2 934
Loan receivables 79 98
Accrued income 1 768 1 939
Other receivables 14 393
Total 14 540 13 403
EUR thousand 2022 2022 2021
After
credit loss
entry		 Credit loss provision for receivables Before
credit loss
entry
Breakdown of trade receivables by age
Not past due 9 462 10 9 472 7 514
Past due
Past due 1–90 days 1 073 2 1 075 516
Past due over 90 days 173 62 235 10
Total 10 708 74 10 782 8 040
Trade receivables have been adjusted by a credit loss provision in accordance with IFRS 9. The balance sheet values correspond best to the maximum amount of the credit risk, excluding the fair value of collateral, in cases where the other parties to the agreement are unable to fulfill their obligations related to financial instruments. The Group's operating practices do not include the acquisition of collateral for trade and other receivables. The principles for managing credit risks are described in Note 18.
Assets Based on Customer Contracts
EUR thousand 2022 2021
Receivables based on project contracts 1 971 2 934
Total 1 971 2 934
EUR thousand 2022 2021
Liabilities based on project contracts 504 1 353
Total 504 1 353
Liabilities and receivables based on project contracts are stated in the accrued income and liabilities in the balance sheet.
Innofactor does not expect to enter into contracts in which the time between the handover
of projects or services to the customer and the payment made by the customer would be longer than one year. For this reason,
the transaction prices are not adjusted to take the time value of money into account.
Note 16. Cash and Cash Equivalents
EUR thousand 2022 2021
Bank accounts 1 956 1 963
Total 1 956 1 963
Current deposits have a maturity of three months at most. Cash and cash equivalents are
presented at nominal value, which corresponds to their fair value.
Note 17. Notes Concerning Shareholders’ Equity
Number of Shares in 2022
2022 2021
Outstanding shares, Jan 1 36 626 225 37 388 225
Share issue 0 0
Own shares held by the company 1 180 121 762 000
Outstanding shares, Dec 31 36 208 104 36 626 225
Innofactor Plc has one class of shares. The share has no nominal value. All the issued shares have been paid in full.
The equity funds are described below:
Share premium reserve
In the cases in which option rights have been decided upon while the old Companies Act (29.9.1978/734) was in force, the cash payments received for subscriptions have been recognized in the share capital and share premium reserve in accordance with the conditions of the arrangement, with the transaction costs deducted.
Reserve fund
The reserve fund is a fund for unrestricted equity formed on the basis of the decision of the General Meeting.
Fund for Invested Unrestricted Equity
The fund for invested unrestricted equity contains other equity type investments and the subscription price of shares to the extent that they are not, based on a specific decision, recognized in the share capital. For the option programs that have been decided on after the new Companies Act (21.7.2006/624) entered into force (September 1, 2006), the fees for subscriptions are recognized in full in the fund for invested unrestricted equity.
Dividends and Capital Repayment
In 2022, a capital repayment of EUR 0.08 per share was distributed. The Board of Directors has proposed that Innofactor Plc distribute a capital repayment of EUR 0.06 per share for the financial period 2022.
The Board of Directors further proposes that the Annual General Meeting authorize the Board to decide on a repayment of capital amounting to a maximum of EUR 2,459,293 (EUR 0.06 per share, taking into account the share issue authorization proposed to the Board of Directors).
Own Shares
The General Meeting of March 31, 2022, authorized the Board of Directors to decide on acquiring a maximum of 3,600,000 of company's own shares in one or several parts with the company’s unrestricted equity. The authorization entitles the Board to deviate from the shareholders’ proportional shareholdings (directed acquisition). Own shares may be acquired at the purchase price formed for them in public trading on the day of purchase or at another market price. The number of treasury shares at a time may be, at the maximum, one tenth of the total number of shares in the company. Shares may be purchased to be used in company acquisitions or implementing other arrangements relating to the company's business operations, improving the company's capital or financing structure, as a part of the company's incentive system, or otherwise to be handed over or voided. In connection with the share repurchase, ordinary derivative, stock lending and other agreements may be made in the market in accordance with the laws and regulations. The authorization includes the right of the Board of Directors to decide on all other matters related to the acquisition of shares. The authorization will be valid until June 30, 2023. This authorization replaces the Board’s earlier authorizations concerning share repurchase.
At the end of the review period, the company held 1,180,121 treasury shares
Note 18. Financial Risk Management
In its normal business operations, the Group is susceptible to several financial risks. The goal of the Group’s risk management is to minimize the negative effects of the changes in the financial markets on the result of the Group. The main financial risks are credit risks, exchange rate risks, and interest risks. The general principles of the Group’s risk management are approved by the Board of Directors and the practical implementation of financial risk management is the responsibility of the Group’s financial department.
Interest Risk
At the closing date, the company had fluctuating rate bank loans totaling EUR 9.4 million (EUR 6.6 million on December 31, 2021). The company has been subjected to the cash flow interest risk through the loan portfolio. The goal of the company’s risk management as concerns the interest risk is to minimize the negative impacts of interest rate changes on the company’s result. The average interest rate of the loans was 3.2 percent (3.1% in 2021). Interest rate hedging has been applied to more than half of the Group’s loans
The realized average balances of the fluctuating rate loans during the financial period have been used in the sensitivity analysis. At the closing date, the effect of the fluctuating rate interest-bearing loans on the result before taxes would have been EUR +/- 30 thousand (2021: EUR +/- 91 thousand) had the interest rate been increased or decreased by 1 percentage point.
Exchange Rate Risk
Innofactor Group operates globally and is exposed to risks related to the currencies of the countries in which it operates. Changes in exchange rates, especially the rates of Swedish krona and Norwegian krone, affect the Group’s net sales and profitability. Innofactor has significant business operations based on Swedish krona and Norwegian krone. The exchange rate risk is mainly due to the assets and liabilities registered in the balance sheet and the net investments made in the subsidiaries abroad. Also, the business contracts made by subsidiaries pose an exchange rate risk, although these contracts are mainly made in the currency the unit uses in its operation. The management of exchange rate risks in the Group aims at minimizing the uncertainty that changes in exchange rates cause in the result through cash flows and assessment of receivables and liabilities.
Credit Risk
Credit decisions related to sales receivables are monitored centrally by the Group's management. Large part of Innofactor's cash flow comes through established customer relationships as payments from the public sector and financially sound companies, which have not presented essential credit risks in the past, and the Group has not suffered any significant credit losses. Should credit risks realize, it would weaken the Group's financial standing and liquidity. Sales receivables are monitored regularly.
The aging analysis of the trade receivables is presented in Note 15. Trade and Other Receivables.
Risks Related to Receivables from Projects
A large part of Innofactor's net sales comes from project business. Part of projects consists of long term projects in which scheduled payments and their terms are typically agreed on with the customer beforehand. When Innofactor performs work in customer projects, which is scheduled to be invoiced afterwards, project receivables are accrued. Especially in public administration projects, scheduled payments often take place nearer to the end of the project, which means increased project receivables and related risks. In customer negotiations, Innofactor pays special attention to scheduling the payments and the size of payments, and in customer projects, to project management and steering in accordance with the scheduled payments. Project receivables are monitored regularly.
Risks Related to the Cash Position
The Group continually estimates and monitors the amount of financing required for the business operations, for example, by analyzing cash flow forecasts monthly to ensure that the Group has sufficient liquid funds to finance its operations. The Group analyzes the liquidity forecasts regularly and assesses the effect of possible acquisitions on the cash position.
The Group has not identified significant liquidity risk concentrations in the financial assets.
EUR thousand
Dec 31, 2022 balance sheet value   0-6 months 6 months-1 year yli 1 year 2-4 years
Maturity distribution of financial
liabilities     
Loans from financial institutions 9 402 1 770 3 116 2 707 1 809
           
Trade and other payables                   14 815 12 593 2 222 0 0
tuhatta euroa
Dec 31, 2022 balance sheet value   0-6 months 6 months-1 year yli 1 year 2-4 years
Maturity distribution of financial liabilities
6 557 937 937 1 873 2 810
Loans from financial institutions            
Trade and other payables 14 349 12 368 1 981 0 0
Lease liabilities are described in Note 21.
Capital Structure Management
The shareholders’ equity in the consolidated balance sheet is managed as capital assets. The goal of capital structure management is to ensure operational preconditions of the Group and increase shareholder value in the long term.  The capital structure can be managed through decisions concerning, for example, dividend distribution, acquisition and transfer of treasury shares, and share issues.  The shareholders’ equity in the consolidated balance sheet is managed as capital assets.  No external capital requirements are applied to the Group.
The development of the capital structure of the Group is monitored continually by means of Net Gearing.
   
EUR thousand 2022 2021
Interest-bearing loans from financial institutions 9 402 6 557
Lease liabilities 4 947 3 261
Cash and cash equivalents 1 956 1 963
Total shareholders’ equity 24 799 25 404
Net Gearing 50,00 % 30,90 %
In its normal business operations, Innofactor Group is exposed to normal financing risks. In total at the end of the review period, Innofactor had approximately EUR 9.4 million in interest bearing debts to financial institutions, which have been taken out to finance acquisitions and working capital. Of the debts, approximately EUR 4.5 million is non-current and approximately EUR 4.9 million is current liabilities. Additionally, the company had lease liabilities in accordance with the IFRS 16 standard (leases for the duration of fixed-term leases) for EUR 4.9 million, of which EUR 2.1 million was current and EUR 2.8 million non-current. The total of interest-bearing liabilities was EUR 14.3 million.
Innofactor has committed to the following covenants: Equity ratio calculated every six months is at least of 40%, and interest bearing liabilities calculated every six months divided by the 12-month operating margin (EBITDA) is a maximum of 2.5, and certain other normal conditions for loans.
The goal of managing the financing risks is to minimize the negative effects of the changes in the financial markets on the result of the Group. Financing risk management has been centralized to the CFO, who is responsible for the Group's financing and regularly reports to the company's Executive Board, CEO, and Board of Directors. It is possible that, in the future, the Group will not get the financing it needs and this would have a negative effect on the Group's business and its development, especially on making acquisitions.
Note 19. Fair Values of Financial Assets and Liabilities
The table below shows the fair value and carrying amount of each item in financial assets and liabilities. These values correspond with the consolidated balance sheet values.
EUR thousand Dec 31, 2022 Dec 31, 2021
Note
Trade and other receivables 15 14 540 13 403
Cash and cash equivalents 16 1 956 1 963
Total 16 495 15 366
Loans from financial institutions 9 402 6 557
Lease liabilities 4 947 3 261
Total 14 349 9 818
Trade and other payables:
Trade payables 1 715 1 341
Other liabilities 4 951 4 884
Interest rate swap agreements, not in hedge accounting * 0 0
Total 6 665 6 225
* fair value hierarchy level 2
Trade and other receivables
The original carrying amount of the receivables corresponds to their fair values, as the effect of discounting is not essential considering the maturity of the receivables.
Loans from financial institutions
The carrying amount of loans corresponds with their fair value.
Trade and Other Payables
The original carrying amount of the trade and other payables corresponds to their fair values, as the effect of discounting is not essential considering the maturity of the payables.
Derivatives
Fair value of derivative agreements has been defined based on available market information.
Note 20. Lease liabilities
Maturity
EUR thousand Total Less than 1 year 1–5 years Over 5 years
31.12.2022
Lease liabilities (IFRS 16) 4 947 2 115 2 832 0
Other lease liabilities 130 49 81
Total 5 077 2 164 2 913 0
Balance Sheet 2022 2021
EUR thousand
Non-current lease liabilities 2 832 1 658
Current lease liabilities 2 115 1 603
Total 4 947 3 261
Comprehensive Consolidated Profit and Loss Statement, IFRS
2022 2021
EUR thousand
Deduction of other expenses (lease liabilities) 2 187 1 907
Addition of right-of-use asset deductions -2 044 -1 806
Addition of operating profit 143 101
Addition of financial expenses -152 -106
Result for the financial period -9 -5
2022 2021
Current lease liabilities have been recognized 168 178
Low value lease liabilities have been recognized 26 71
The cash flow effect of the company's lease agreements was EUR -2,187 thousand in 2022 (EUR -2,155 thousand in 2021).
Interest on lease liabilities is shown in Note 9. Financial Expenses.
Right-of-use assets are presented in Note 12. Tangible assets
Note 21. Contingent Liabilities and Assets and Acquisition Commitments
EUR thousand 2022 2021
Collateral given for own commitments
Lease collateral 125 126
Mortgages on company assets 17 750 16 350
Mortgages on company assets have been given as collateral for the credit limit and a loan.
Bank guarantees 327 309
Bank guarantees have been given as collateral for lease agreements.
22. Statement of Changes in Interest Bearing Debts
EUR thousand Non-current Current Total
Liabilities Jan 1, 2022 6 342 3 476 9 818
Loans withdrawn 2 500 2 219 4 719
Loans paid -1 874 -1 874
Changes with no related cash flow:
Changes between non-current and current -2 667 2 667 0
Change in lease liabilities * 1 173 512 1 686
Liabilities Dec 31, 2022 7 349 7 000 14 349
* IFRS 16 lease liabilities (Note 20)
EUR thousand Non-current Current Total
Liabilities Jan 1, 2021 11 108 4 278 15 386
Loans withdrawn 0 0 0
Loans paid -2 000 -2 873 -4 873
Changes with no related cash flow:
Changes between non-current and current -2 206 2 206 0
Change in lease liabilities * -560 -135 -695
Liabilities Dec 31, 2021 6 342 3 476 9 818
* IFRS 16 lease liabilities (Note 20)
Note 23. Related Party Disclosures
Innofactor’s related parties consist of subsidiaries, the management (Board of Directors, CEO and the Executive Board), their close family members
and companies, associated companies and joint ventures controlled by them or their close family members.
The company’s financial administration maintains a list of the company’s related parties.
The company’s financial administration defines Innofactor’s
related parties, when the status as a related party is not due to the IAS related party
definition concerning persons.
The company sends an annual query to the company’s key management persons, as defined in IAS 24, about the natural and legal persons which
are their related parties.
Persons discharging managerial duties in the company, who are considered related parties, owe EUR 70 thousand
to the company (EUR 96 thousand in 2021) as a result of personnel share issues. As a rule, the loan period is five years, and the loan is repaid in fixed monthly installments.
There are also two-year loans that are repaid in four equal instalments every six months. The interest rate on the loans is  
the 12-month Euribor 360. However, the interest rate is always a minimum of 0%. The accrued interest is paid monthly to the company.
The company does not have any other major related party transactions.
The company has no other significant related party transactions.
Management's Employment Benefits
EUR thousand 2022 2021
Salaries and fees paid to the CEO and Group management during
the financial period, including benefits in kind, as follows:
CEO (including Board fees) 338 363
Other Group management 1 463 1 263
Total 1 801 1 626
Management's Employment Benefits 2022 2021
Short-term employee benefits 1 801 1 626
Post-employment benefits 0 0
Other long-term benefits 0 0
Benefits paid upon termination 0 0
Share-based payments 0 0
Total 1 801 1 626
2022 2021
Board members and deputy members
Lindén Anna                   Chairman of the Board of Directors 48 48
Eloholma Pekka            Member of the Board of Directors 0 0
Ensio Sami                       Member of the Board of Directors 24 24
Linturi Risto                     Member of the Board of Directors 24 24
Heikki Nikku                    Member of the Board of Directors 24 24
Total 120 120
The CEO's retirement age and the basis for calculating the pension comply with the effective Employee Pensions Act. The mutual term of notice of the CEO is 6 months. If the company terminates the CEO’s contract, the CEO will be paid the salary for the period of notice and also, as a compensation for the termination, a one-time payment equaling to the CEO’s 12 months’ salary.
Note 24. Group Companies
At the end of the financial period, the Innofactor Group included the following companies:
Innofactor Plc, Finland (parent company)
Innofactor Software Oy, Finland, Espoo, 100%
Innofactor HRM Oy, Finland, Espoo, 100%
Innofactor Invenco Oy, Finland, Espoo, 100%
Innofactor Invenco Software Oy, Finland, Espoo, 100%
Innofactor Holding AB, Sweden, 100%
Innofactor AB, Sweden, 100%
Innofactor Holding ApS, Denmark, 100%
Innofactor A/S, Denmark, 100%
Innofactor Holding AS, Norway, 100%
Innofactor AS, Norway, 100%
On June 30, 2022, Innofactor acquired the entire share capital of Invenco Ltd, which owned the
entire share capital of Invenco Software Ltd.
Invenco is an expert organization specialized in corporate performance management, data
warehousing and reporting, and its most important areas of expertise are data integration, data
warehousing, Business Intelligence (BI) and analytical solutions. Invenco is a long-term Microsoft
partner in data and analytics. Invenco has approximately 50 employees, of whom 35 are senior
data professionals. The company had four offices in Finland: Vantaa, Oulu, Tampere and Kuopio.
Invenco Ltd’s net sales for the financial period July 1, 2020–June 30, 2021 was approximately EUR
6.2 million and its operating margin (EBITDA) was about EUR 0.3 million, representing approximately 5 percent of net sales. Innofactor’s objective going forward is to grow Invenco’s net
sales and improve its profitability through synergies, among other things.
The purchase price (Enterprise Value, EV) consists of a fixed purchase price of EUR 3.0 million and
an additional purchase price tied to three years’ net sales growth, which will amount to EUR 3.75
million at a maximum. According to the current estimate, the additional purchase price will not
become payable. The transaction will be financed with Innofactor’s cash funds and bank financing.
Acquisition cost calculation for Invenco Ltd
On June 20, 2022, Innofactor signed an agreement to acquire the entire share capital of Invenco
Ltd. According to the agreement announced by the company on June 20, the acquisition price will
be determined according to Invenco Ltd’s operating margin for 2020–2022 and the additional
purchase price will be determined by Invenco Ltd’s net sales growth during the period 2023–2025.
The debt-free net purchase price (Enterprise Value, EV) is EUR 3.0 million at a minimum, and it was
paid when the acquisition was completed on June 30, 2022, when Innofactor acquired ownership
of all shares in Invenco Ltd. At the time of completing the transaction, the sellers were paid an
initial purchase price of approximately EUR 2.5 million in cash. This was financed entirely by a new
bank loan.
The remainder of the debt-free net purchase price, which may range from zero to EUR 3.75
million, will be paid annually over a period of three years. The debt-free net purchase price
(Enterprise Value, EV) will be approximately EUR 6.75 at a maximum. According to the current
estimate, the additional purchase price will not become payable.
Invenco Ltd’s financial figures were consolidated into the Innofactor Group’s balance sheet
effective from June 30, 2022, and are, therefore, not included in the balance sheet of June 30,
2021. Invenco Ltd’s name was changed to Innofactor Invenco Ltd, and Invenco’s services are now
provided under the Innofactor brand.
The IFRS acquisition cost is the estimated purchase price of the shares, which is EUR 2,425
thousand according to the acquisition cost calculation and presented in more detail in the
following calculation
Yhdistämisessä kirjatut käyvät arvot (tuhatta euroa)
Tangible assets 142
Intangible assets 2 264
Right-of-use assets 317
Deferred tax assets 201
Non-current assets 14
Trade and other receivables 1 083
Cash and cash equivalents 160
Total assets 4 181
Lease liabilities 317
Other liabilities 1 971
Deferred tax liabilities 420
Total liabilities 2 707
Net assets 1 474
Acquisition cost 2 425
Goodwill 951
Purchase price paid in cash 2 425
The fair value of customer contracts and related customer relationships included in intangible
assets (EUR 2,100 thousand) has been determined on the basis of the estimated duration of the
customer relationships and the discounted net cash flows from existing customer contracts.
The acquisition generated goodwill of EUR 951 thousand. The goodwill is based on the expected
synergies from the Invenco Ltd acquisition, leveraging the growth of the shared sales and
marketing network, and expanding customer relationships in the Group.
Note 25. Events After the Closing Date
Events after the review period
On February 13, 2023, Innofactor announced in a stock exchange release that Innofactor and Metso Outotec Oyj have signed a contract for the further development work of digitizing the company’s quotation process.
Innofactor will continue the development work that began in 2020, aiming to design and implement, using agile methods, a cloud-based solution for managing the quotation process and handling and storing related information and documents. The solution is implemented using Microsoft Azure PaaS cloud services. The value of the agreement (excluding VAT) is at most EUR 0.70 million and the services will be delivered during the year 2023.
On February 16, 2023, Innofactor announced in a stock exchange release that Senate Properties has selected Innofactor with a procurement decision to continue the development and maintenance of an HR system. The system is based on the Innofactor Kide HR solution. Innofactor estimates the total value of the procurement at approximately EUR 0.8 million.
On February 17, 2023, Innofactor announced in a stock exchange release that the Board of Directors of Innofactor Plc has decided, based on the authorization granted to it by the Annual General Meeting, on a share-based incentive plan for all of Innofactor Group’s personnel in order to commit the personnel to the company and its goals (“Personnel Share Issue”). In the Personnel Share Issue, a maximum total of 400,000 shares (“Personnel Shares”) of the company will be issued to the Innofactor Group’s personnel, deviating from the shareholders’ pre-emptive subscription rights. At the time of making the decision Innofactor Plc had 37,388,225 shares. Innofactor Plc’s shares which are in the company’s possession will be used for the Personnel Share Issue. The subscription price for the Personnel Shares will be EUR 1.01 per share. The share subscription price is based on the trade volume weighted average price of the company’s share on Nasdaq Helsinki Ltd for the previous month and on a discount of 10 percent thereof.
On March 1 , 2023 Innofactor announced in a stock exchange release that Innofactor Plc has now completed the share buy-back program. The repurchases of the shares began on September 29, 2022 and ended on February 28, 2023. During that period, Innofactor repurchased 800,000 of its own shares for an average price per share EUR 1.0550. The shares were acquired to the current market price in the public trading arranged by NASDAQ Helsinki Ltd.

The purpose of the acquisition of the company’s own shares is to develop the company’s capital structure. Following the repurchases, Innofactor holds a total of 1,491,410 own shares.
Innofactor had no other significant events after the end of the review period.
Innofactor Plc
Parent Company Financial Statement, FAS
EUR
PARENT COMPANY PROFIT AND LOSS STATEMENT Liitetieto Jan 1–Dec 31, 2022 Jan 1–Dec 31, 2021
12 months 12 months
NET SALES 1 10 933 459 9 870 192
Other operating income 2 274 316 31 844
Materials and services
Purchases during the financial period 3 -4 785 967 -4 162 571
Personnel expenses 4 -2 874 652 -2 596 458
Depreciation
Planned depreciation -133 143 -310 841
Other operating expenses 6 -3 375 867 -2 816 488
OPERATING RESULT 38 146 15 678
Financial income and expenses 7
Dividend income 0 0
Interest and financial income 602 749 608 237
Interest and other financial expenses -348 897 -354 792
Total financial income and expenses 253 852 253 445
RESULT BEFORE APPROPRIATIONS AND TAXES 291 997 269 123
Group contribution -320 587 -400 878
EARNINGS BEFORE TAXES -28 590 -131 755
RESULT FOR THE FINANCIAL PERIOD -28 590 -131 755
Innofactor Plc Balance Sheet, FAS
EUR
ASSETS Liitetieto
NON-CURRENT ASSETS 31.12.2022 31.12.2021
Intangible assets
Intangible rights 8 64 425 179 560
8 0 0
Tangible assets
Machinery and equipment 8 32 776 16 809
Investments
Shares in Group companies 9 36 496 610 32 198 940
0 0
TOTAL NON-CURRENT ASSETS 36 593 811 32 395 308
CURRENT ASSETS
Receivables 10
Non-current
Loan receivables 52 571 128 517
Other receivables 24 568 285 26 119 556
Current
Trade receivables 12 113 012 11 797 963
Loan receivables 76 327 73 178
Accrued income 11 987 039 814 343
Cash and bank receivables 0,00 1 587 548
TOTAL CURRENT ASSETS 37 797 233 40 521 104
ASSETS 74 391 044 72 916 412
LIABILITIES
SHAREHOLDERS’ EQUITY 12
Share capital 2 100 000 2 100 000
Revaluation fund 2 000 000 2 000 000
Fund for invested unrestricted equity 25 340 516 28 267 517
Profit from previous financial periods -1 697 310 -1 118 840
Henkilöstöanti 2019 0 0
Profit/loss for the financial period -28 590 -131 755
Total shareholders’ equity 27 714 616 31 116 921
LIABILITIES 13
Non-current
Loans from financial institutions 4 476 667 4 683 333
Non-current total 4 476 667 4 683 333
Current
Loans from financial institutions 5 073 683 1 873 333
Trade payables 1 029 753 659 988
Other liabilities 34 988 834 33 622 634
Accrued expenses 14 1 107 492 960 202
Current total 42 199 761 37 116 158
Total liabilities 46 676 428 41 799 491
LIABILITIES 74 391 044 72 916 412
Innofactor Plc
Parent Company Cash Flow Statement
EUR Jan 1–Dec 31, 2022 Jan 1–Dec 31, 2021
Cash flow from operating activities
Operating profit/loss 38 146 15 678
Adjustments:
     Depreciation 133 143 310 841
     Transactions with no related cash flow: -367 827 -37 217
Change in working capital
    Change in trade and other receivables -1 576 417 721 232
    Change in trade and other payables 1 750 731 -5 635 176
Interest received 0 605 625
Paid interest and other financial expenses -345 290 -314 963
Total operating activities cash flow -367 514 -4 333 981
Investment cash flow
Investments in subsidiary shares -2 424 801 0
Investments in fixed assets -33 975 0
Loan receivables repaid 72 797 159 479
Loans paid 0 726 043
Loans granted 1 734 098 0
Total investment cash flow -651 880 885 523
Cash flow before financing -1 019 394 -3 448 458
Financing cash flow
Loans withdrawn 2 500 000 0
Loans paid -1 875 000 -4 873 333
Group account debt withdrawn 2 180 619 9 682 655
Group account debt repaid 0 0
Purchase of own shares -446 715 -1 145 714
Dividends paid -2 927 058 -1 495 529
Total financing cash flow -568 154 2 168 079
Change in cash and cash equivalents as per cash flow statement -1 587 548 -1 280 379
Change in cash and cash equivalents -1 587 548 -1 280 379
Cash and cash equivalents, opening balance 1 587 548 2 867 927
Cash and cash equivalents, closing balance 0 1 587 548
NOTES TO THE PARENT COMPANY’S FINANCIAL STATEMENTS
Accounting Principles Used in the Parent Company's Financial Statements
The financial statements of Innofactor Plc for the financial period of 2022 have been
prepared in accordance with the Finnish accounting regulations.
Intangible and tangible assets
The intangible and tangible assets have been recognized at historical cost less planned
depreciation. Planned depreciation has been calculated on the basis of
the assets’ economic lives as follows:
- intangible rights 3–5 years
- goodwill 5 years
- tangible assets 3–5 years
Acquisition costs for non-current asset items, which have a probable economic life of under
three years, and small purchases (under EUR 850) have been recognized as cost in their
entirety in the financial period in which they were purchased.
Securities Included in Financial Assets
Securities included in financial assets have been measured at the acquisition price or the market price, whichever is lower.
Items in Foreign Currency
Items in foreign currency have been converted using the weighted average rate
quoted by the European Central Bank at the closing date.
Derivatives
Derivatives are measured at acquisition cost in accordance with Section 5.2 of
the Accounting Act, or at fair value if the probable market price on the financial statements data is lower than the acquisition cost.
Notes to the Financial Statements (EUR)
1. Net sales (EUR) by market area 2022 2021
Finland 9 997 361 8 898 033
Rest of Europe 936 097 972 160
Total net sales 10 933 459 9 870 192
2. Other operating income 2022 2021
Lease revenue 42 959 31 844
Other operating income 231 357 0
Total other operating income 274 316 31 844
3. Materials and services 2022 2021
Purchases during the financial period 4 785 967 4 162 571
Total 4 785 967 4 162 571
4. Personnel expenses 2022 2021
Salaries and fees 2 426 382 2 162 399
Pension expenses 403 676 365 921
Other indirect employee costs 44 595 68 138
Total personnel expenses 2 874 652 2 596 458
Management salaries and fees
CEO and Board Member Sami Ensio 338 000 363 000
Board members and deputy members 95 000 100 000
Total 433 000 463 000
The CEO's retirement age and the basis for calculating the pension comply with the effective Employee
Pensions Act.  The mutual term of notice of the CEO is 6
months. If the company terminates the CEO’s contract, the CEO will be
paid the salary for the period of notice and also, as a compensation for the termination, a one-time
payment equaling the CEO’s 12 months' salary.
Average number of personnel 31 29
5. Planned depreciation 2022 2021
On intangible rights 126 971 180 403
On goodwill 0 120 768
On machinery and equipment 6 172 9 670
Total 133 143 310 841
6. Other operating expenses 2022 2021
Leases and other expenses for premises 999 785 891 433
IT hardware, licenses and communications 1 283 717 1 133 742
Travel expenses 46 729 25 863
Training expenses 90 802 20 167
Entertainment expenses 24 450 5 212
Other operating expenses 930 385 740 070
3 375 867 2 816 488
Other operating expenses, total 0 0
3 375 867 2 816 488
Remuneration of the Auditors 2022 2021
Auditing 62 250 60 095
Other services 5 500 6 855
Total 67 750 66 950
Fees in total 67 750 66 950
7. Financial income and expenses
2022 2021
Total interest and other financial income
Dividend income from Group companies 0 0
From Group companies 600 514 605 617
From others 2 234 2 619
Total interest and other financial income 602 749 608 237
Interest and other financial expenses
To Group companies -4 464 0
Interest expenses to others* -344 433 -354 792
Total interest and other financial expenses -348 897 -354 792
*In 2022, other interest and financial expenses included EUR 97 thousand in exchange
rate losses (2021: EUR 40 thousand).
Total financial income and expenses 253 852 253 445
Group contributions received/granted -320 587 -400 878
Balance Sheet Notes (EUR)
8. Intangible and tangible assets
Tangible
Intangible Goodwill Goods Total
Acquisition cost, Jan 1, 2022 1 047 111 603 840 138 163 1 789 114
Additions 11 836 0 22 139 33 975
Acquisition cost, Dec 31, 2022 1 058 947 603 840 160 302 1 823 089
Accumulated depreciation,
amortization and impairment, Jan 1, 2022 867 551 603 840 121 354 1 592 744
Depreciation for the financial period 126 971 0 6 172 133 143
Accumulated depreciation, Dec 31, 2022 994 521 603 840 127 526 1 725 887
Carrying amount, Dec 31, 2022 64 426 0 32 776 97 202
Tangible
Intangible Goodwill Goods Total
Acquisition cost, Jan 1, 2021 1 047 111 603 840 138 163 1 789 114
Additions 0 0 0 0
Acquisition cost, Dec 31, 2021 1 047 111 603 840 138 163 1 789 114
Accumulated depreciation,
amortization and impairment, Jan 1, 2021 687 149 483 072 111 684 1 281 904
Depreciation for the financial period 180 402 120 768 9 670 310 840
Accumulated depreciation, Dec 31, 2021 867 551 603 840 121 354 1 592 744
Carrying amount, Dec 31, 2021 179 560 0 16 809 196 369
9. Investments
Acquisition cost, Jan 1, 2022 32 198 940
Acquisition cost, Dec 31, 2022 36 496 610
Carrying amount, Dec 31, 2022 36 496 610
Acquisition cost, Jan 1, 2021 29 384 334
Acquisition cost, Dec 31, 2021 32 198 940
Carrying amount, Dec 31, 2021 32 198 940
10. Receivables
2022 2021
Non-current assets
Loan receivables 52 571 128 517
Receivables from associated companies 0 0
Other receivables from Group companies 24 568 285 26 119 556
Non-current receivables total 24 620 855 26 248 073
Current receivables
Trade receivables 2 994 0
Loan receivables 76 327 73 178
Trade receivables from Group companies 12 110 017 11 797 963
Current receivables total 12 189 338 11 871 140
Total receivables from Group companies 36 678 302 37 917 518
11. Accrued income 2022 2021
Pre-paid licenses 472 012 783 267
Receivables related to legal proceedings 470 393 0
Periodical personnel expenses 2 544 22 354
Other 42 089 8 721
Accrued income in total 987 039 814 343
12. Shareholders’ equity 2022 2021
Shareholders’ equity, opening balance 2 100 000 2 100 000
Shareholders’ equity, closing balance 2 100 000 2 100 000
Revaluation fund, opening balance 2 000 000 2 000 000
Revaluation fund, closing balance 2 000 000 2 000 000
Unrestricted shareholders’ equity
Fund for invested unrestricted equity
opening balance 28 267 517 29 015 281
Repayment of capital -2 927 002 -747 765
Fund for invested unrestricted equity
closing balance 25 340 515 28 267 517
Profit from previous financial periods,  opening balance -1 250 595 774 638
Dividend payment 0 -747 765
Purchase of own shares -446 714 -1 145 713
Profit from previous financial periods, closing balance -1 697 309 -1 118 840
Result for the financial period -28 590 -131 755
Total unrestricted shareholders’ equity 23 614 616 27 016 921
Total shareholders’ equity 27 714 616 31 116 921
Calculation of distributable funds 2022 2021
Result from previous financial periods -1 697 309 -1 118 840
Result for the financial period -28 590 -131 775
Fund for invested unrestricted equity 25 340 515 28 267 517
Total 23 614 616 27 016 921
13. Liabilities 2022 2021
Non-current liabilities
Loans from financial institutions 4 476 667 4 683 333
Total non-current liabilities 4 476 667 4 683 333
Current liabilities
Loans from financial institutions 5 073 683 1 873 333
Trade payables 1 029 753 659 988
Trade payables to Group companies 0 0
Trade payables in total 1 029 753 659 988
Other liabilities 1 973 466 1 887 734
Other payables to Group companies 33 015 368 31 734 900
Other liabilities in total 34 988 834 33 622 634
Accrued expenses 1 107 492 960 202
Liabilities to Group companies 33 015 368 31 734 900
Total current liabilities 42 199 761 37 116 158
Total liabilities 46 676 428 41 799 491
14. Accrued expenses 2022 2021
Periodical personnel expenses 508 223 445 402
Rent 106 526 106 526
Other 492 742 408 275
Accrued expenses in total 1 107 492 960 202
15. Commitments and contingent liabilities 2022 2021
Bank guarantees
A bank guarantee has been given as collateral for 273 975 256 331
a lease agreement.
Lease liabilities
To be paid in the next financial period 0 0
To be paid later   0 0
Total 0 0
Lease liabilities
To be paid in the next financial period 1 142 724 1 023 250
To be paid later 1 142 724 1 023 250
Total 2 285 449 2 046 499
Mortgages on company assets as collateral for loan
Mortgages on company assets as collateral for loan 4 000 000 4 000 000
Board of Directors’ proposal on the distribution of profits
At the end of the financial period of 2022, the distributable
assets of Innofactor Plc amount to EUR 23,614,616. The Board of Directors proposes that Innofactor Plc distributes EUR 0.06
per share as a repayment of capital.
The Board of Directors further proposes that the Annual General Meeting
authorize the Board to decide on a potential additional dividend or additional repayment of capital
amounting to a maximum of EUR 2,459,293 (EUR 0.06 per share, taking into account the share issue authorization proposed to the Board of Directors).
Company Shares
Innofactor Plc has one series of shares. The number of shares is 37,388,225.
The share has no nominal value. One share entitles the holder to one vote at the General Meeting.
All shares entitle their holders to dividends of equal value. Innofactor Plc’s
share capital, paid in full and entered in the Trade Register, is EUR 2,100,000.00.
On December 31, 2022, the company held 1,180,121 treasury shares.
Location of Accounting Records
Innofactor Plc, Keilaranta 9, 02150 Espoo
SIGNATURES TO THE FINANCIAL STATEMENTS AND ANNUAL REPORT
Espoo, March 8, 2023
Sami Ensio Anna Lindén
CEO, Board Member Chairman of the Board of Directors
Heikki Nikku Risto Linturi
Board Member Board Member
AUDITOR’S NOTE
A report on the audit has been issued today.
Helsinki, March 8, 2023
Ernst & Young Oy
Authorized Public Accountants
Juha Hilmola
Authorized Public Accountant
AUDITOR’S REPORT
To the Annual General Meeting of Innofactor Plc
Opinion
We have audited the financial statements of Innofactor Plc (business identity code 0686163-7) for the year ended 31 December, 2022. The financial statements comprise the consolidated balance sheet, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as the parent company’s balance sheet, income statement, statement of cash flows and notes.
In our opinion
the consolidated financial statements give a true and fair view of the group’s financial position as well as its financial performance and its cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
the financial statements give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements.
Our opinion is consistent with the additional report submitted to the Board of Directors.
Basis for Opinion
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of Financial Statements section of our report.

We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in 4 to the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.

We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud.
Key Audit Matter
Revenue Recognition of Fixed-Price Projects
Refer to note summary of significant accounting policies and note 3.
The company provides its customer with services based on fixed price contracts. Revenue is recognized over time which involves the use of management judgement when determining the percentage of completion of the projects.

The group focuses on revenue as a key performance measure which could create an incentive for revenue to be recognized before the control has been transferred.

Revenue recognition of fixed price projects was determined to be a key audit matter and a significant risk of material misstatement referred to in EU Regulation No 537/2014, point (c) of Article 10(2) due to the management’s judgement used when determining the percentage of completion of the projects.
How our audit addressed the Key Audit Matter
Our audit procedures to address the significant risk of material misstatement related to revenue recognized over time, included amongst other:

assessing the Group’s accounting policies over revenue recognition of fixed-price projects.
gaining an understanding of the Percentage of Completion (PoC) revenue recognition process.
examination of the fixed-price project documentation and testing the PoC calculations and inputs of estimates in the calculations and comparing the estimates to actuals.
analytical procedures
assessing the progress and overall situation of the fixed price projects and key ratios by performing inquiries to persons on different levels in the organization.
analyzing key elements of the estimates, for instance, estimated revenue and estimated hours to complete.
Assessing the Group’s disclosures in respect of revenue recognition.
Valuation of Goodwill
Refer to note summary of significant accounting policies and note 13.
At the balance sheet date 31 December 2022, the value of goodwill amounted to 26.8 M€ representing 48 % of the total assets and 108 % of the total equity. Valuation of goodwill was a key audit matter because:
goodwill represents a significant proportion of the balance sheet
annually performed impairment testing estimation process is complex and is judgmental
it is based on assumptions relating to market and economic conditions.

Valuation of goodwill is tested annually through goodwill impairment test. Innofactor has allocated goodwill to one cash generating unit (CGU) which is the level for goodwill impairment test. The recoverable amount of the cash generating unit is based on value in use calculations, and the outcome could vary significantly if different assumptions were applied. There are a number of assumptions used to determine the value in use of the cash generating units, including revenue growth, EBITDA, working capital and the discount rate applied. Changes in the above-mentioned assumptions may result in an impairment of goodwill.
In our audit procedures related to valuation of goodwill we involved our internal valuation specialist to assist us in evaluating the assumptions and methodologies used by the management. Procedures included comparison of management assumptions with external market data and peer group average calculated by us focusing particularly on

forecasted revenue growth
change in working capital
EBITDA percentage and
weighted average cost of capital used in discounting cash flows.

We reviewed the goodwill impairment test performed by the management and compared the discounted cash flows to the company’s market value. We also assessed the historical accuracy of managements’ estimates. In addition, we assessed the Group’s disclosures in the financial statements regarding the impairment test.
Valuation of Deferred Tax Assets
Refer to note summary of significant accounting policies and note 14.

As of balance sheet date 31 December 2022, the group had deferred tax assets arising from the unused tax losses carry forward amounting to 3.9 M€ and from the consolidation entries 0,2 M€.

The amount of deferred tax asset is material to financial statements. Management assessment related to the recognition of deferred tax assets and the likelihood of future income is judgmental and based on assumptions affected by future market and economic developments. Due to above mentioned judgmental factors, valuation of deferred tax assets was determined to be a key audit matter.
When auditing deferred tax assets we evaluated company’s evidence that there will be future taxable income available to utilize the deferred tax assets.

As part of our audit procedures we
assessed the key assumptions in the calculations prepared by the management focusing on forecasted future economic development and the company’s ability to generate taxable income.
tested deferred tax assets including the assessment of recognizing judgmental tax positions.
assessed disclosures related to deferred taxes.
Responsibilities of the Board of Directors and the Managing Director for the Financial Statements
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of Financial Statements
Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company’s or the group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company’s or the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Other Reporting Requirements
Information on our audit engagement
We were first appointed as auditors by the Annual General Meeting on 2 April 2019 and our appointment represents a total period of uninterrupted engagement of four years.
Other Information
The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors and the information included in the Annual Report, but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.

In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.

If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard.
Helsinki 8.3.2023

Ernst & Young Oy
Authorized Public Accountant Firm
Juha Hilmola
Authorized Public Accountant
The ESEF-formatted versions of the annual report are not audited
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