Zalaris

Investor Presentation • May 7, 2024

7 May 2024

Presentation of financial results Q1 2024

Disclaimer

The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated ("relevant persons"). Any person who is not a relevant person should not act or rely on this presentation or any of its contents.

This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in Zalaris ASA ("Company"). The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions.

This presentation includes and is based, inter alia, on forward-looking information and contains statements regarding the future in connection with the Company's growth initiatives, profit figures, outlook, strategies and objectives. All forward-looking information and statements in this presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for the Company. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions.

Important factors may lead to actual profits, results and developments deviating substantially from what has been expressed or implied in such statements. Although the Company believes that its expectations and the presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the presentation. The Company is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the presentation, and neither the Company nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.

Agenda

Today's presenters

• Highlights
• Company in brief
• Financial review
• Outlook
• Q&A

Hans-Petter Mellerud CEO and Founder

Gunnar Manum CFO

Highlights

Q1 2024 Highlights – all time high revenue and EBIT

• Strong growth: Revenue increased 22.0% YoY to NOK 318 million with Net Revenue Retention in MS of 109%
• High EBIT margin: all time high adj. EBIT of NOK 34.8 million (10.9%), up from NOK 18.5 (7.1%) last year
• Market success continues with contracts for more than NOK 200 million in total contract value for long-term projects in PS signed in Q1
• Strong free cash flow: Free cash flow of NOK 43 million, following sale of the office building in Leipzig
• After the end Q1 Zalaris announced the start of a strategic review process

Several large new contract in Professional Services in Q1

Notable Wins

• New signings and upsell in PS with Total Contract Value of >NOK 200m during the quarter
• Significant pipeline of Multi-Country PeopleHub new name and upsell opportunities

Managed Services grew 25% YoY to NOK 233million and 73% of total revenue.

*Revenue in local currency converted to NOK using the avg. currency rate from the quarter last year. See the interim financial report for definitions of APMs

• Revenue in Managed Services grew by 24.6% YoY (+20.9% growth YoY when adj. for positive currency effects)
• 109% Net Revenue Retention YoY in constant currency as existing customers expand their geographic footprint and functionalities
• Significant growth in all regions in local currency.
  • Northern Europe: 20%
  • DACH: 28%
  • UKI: 5%
  • EasternEurope: 13%

Professional Services grew 9% and continued being strong contributor to Zalaris' overall success and Managed Services growth

Revenue NOK 76.8m (+9.0%)

*Revenue in local currency converted to NOK using the avg. currency rate from the quarter last year. See the interim financial report for definitions of APMs

• Revenue in Professional Services grew by 9.0% YoY (+2.8% when adjusted for positive currency effects)
• In local currency, revenue in UK grew by 60%, from consulting work from new clients, including a large airline, while Germany grew by 2.5%
• Significant PS capacity being utilized to support Managed Services in implementing new customers (transformation projects) or delivering change orders. Particularly in Germany

Majority of Professional Services revenue is considered recurring and supports a continuous presence with customers

Distribution of Projects vs long term AMS based revenue

Revenue customer split

~53 % of Professional Services revenue is recurring, or recurring like, and based on long term agreements and relationships

~85 % of Professional Services revenue is from customers that were customers 12 months prior

* Customers that were invoiced in the same quarter previous year

** New customers since the end of the same quarter previous year

X-shoring continue to develop in the right direction gradually reducing onshore share of total headcount

Use of near-/offshore resources as % of total headcount improved with 1.2% during the quarter

Trend expected to continue towards Zalaris 4.0 target of 50%

Company in brief

Payroll & HR solutions that enable digital organizations

Zalaris is a leading European provider of global payroll and human capital management solutions delivered through software as a service, outsourcing, or consulting delivery models

Supporting fully digital processes for payroll and human capital management targeting 20-30% cost savings

One common multi-country solution satisfying GDPR requirements combined with competent resources serving complex customers with local competence and language

A market leader within mid-size companies with cross-border needs and a strong customer portfolio of some of the largest corporations in the Nordics, DACH, UK&I and APAC regions

1,500,000	~1,100	340,000+
Employees served monthly by Zalaris supported HR solutions	Zalaris employees across the world	Employees served monthly through payroll services
NOK 1.13bn / 8%	17 countries	150+ countries
2023 revenues / adj. EBIT margin	With service centres and expertise in local regulations	With expertise in local regulations with partners

Zalaris' Product offering covering the full employee life cycle

Services delivered by two integrated business units with most revenues being recurring of nature

Source: Company information, PWC analysis

Diversified and large customer base comprising blue-chips across multiple industries

Financial Review

Revenue increased by 18% for the quarter YoY in local currency

Revenue NOK 318.3m (+22.0%)

• Revenue growth (as reported) for the quarter YoY: +22.0%
• Revenue growth +17.8% YoY in constant currency
• MS +24.6% to NOK 233m
  • Net retention of 109%
• PS +9.0% to NOK 77m
• Net new SaaS/BPaaS contracts signed, but yet to go live, has annual recurring revenue of ~NOK 90m

*See the interim financial report for definitions of APMs

Strong revenue visibility through 2024 - new BPO customers to go live will result in significant revenue increase

Revenue development based on signed MS contracts (NOKm)

Contracted ARR* development over time based on signed contracts (NOKm)

• Total annual revenue expected to increase by ~NOK 199m (+18%) vs. FY 2023, based on already signed contracts (assuming no material churn and based on avg. currency rates for Q1 2024 – EUR/NOK 11.41)
• The new contracts will normally generate full monthly recurring revenue when the customer has gone live on the PeopleHub platform
  • All current contracts expected to be fully implemented by Q1-2025
• Estimated future annual revenue assumes MS change order level at historical ~12% of recurring revenue, and PS & APAC revenue at FY 2023 level
• No known material churns going forward

*The ARR for the quarter is an estimate calculated by annualising the actual recurring revenue (according to contract revenue and additional services) for the quarter, for customers at the end of the quarter. Please refer to the APMs section of the interim financial report for further details.

All time high adj. EBIT for the quarter

Adj. EBIT* (NOKm) and margin (%)

• Adj. EBIT NOK 34.8 (NOK 18.5m) +88%
• Adj. EBIT margin 10.9% (+3.8pp)
• EBIT and margin improvements from increased revenue (lower unit cost) and operational improvements (e.g. larger share of service delivery from near-shore and offshore location)

• MS: Adj EBIT NOK 32.7m (NOK 24.7m) +32%
• PS: Adj. EBIT NOK 9.9m (10.4m) -5%

*See the interim financial report for definitions of APMs

Condensed Profit and Loss

	2024	2023	2023
(NOK 1 000)	Jan-Mar	Jan-Mar	Jan-Dec
Revenue	318 309		260 799 1 131 209
License costs	24 898	24 009	99 527
% of revenue	7,8 %	9,2 %	8,8 %
Personnel expenses	162 095	139 394	584 324
% of revenue	50,9 %	53,4 %	51,7 %
Other operating expenses	82 796	64 900	284 751
% of revenue	26,0 %	24,9 %	25,2 %
(Gain)/loss on sale of assets	(10 503)	-	-
Amortisation implementation costs customer projects	10 530	5 834	33 765
Depreciation, amortisation and impairments	15 534	13 886	58 339
EBIT	32 959	12 776	70 503
Adjustment items*	1 858	5 711	25 266
Adjusted EBIT	34 817	18 486	95 768
Adjusted EBIT margin %	10,9 %	7,1 %	8,5 %
Net financial income/(expense)	(23 778)	(37 867)	(74 224)
Profit/(loss) for the period	6 418	(25 940)	(10 566)

Personnel expenses: Increased number of FTEs YoY (+69), higher option costs (+NOK 6.5m) and negative currency movements of (+3%). Revenue per FTE in constant currency increased by ~9%

License costs: Approx. in line with last year

• Other op. exp.: Increase mainly explained by higher IT costs (e.g. hosting), use of external payroll providers and consultants, and one-off provisions for doubtful debts. Negative currency movements also contributed
• Financial expense: Includes NOK 11.5m in unrealised currency loss on EUR bond loan

*Items excluded from adjusted EBIT Q1 2024: share-based payments (NOK 8.9m), gain on sale of assets (NOK 10.5m) and amortization of excess values on acquisitions (NOK 3.4m) see definition of adj. EBIT under APMs in the interim financial report )

Strong cash position and proceeds from sale of assets of NOK 42m – cash collection negatively affected by public Easter holidays at quarter end

Development in cash balance (NOKm)

Positive cash flow from operating activities of NOK 6.9m

• Negative impact from public Easter holidays at quarter end – cash balance NOK 24 million higher on 2 April
• Proceeds from sale of office building NOK 41.9m
• Cash balance at 31 March NOK 161.1m (+NOK 25.1m from Q4)
• Net interest-bearing debt of NOK 297.9m vs. NOK 314.8m at the end

* Before share based payment costs and gain on sale of assets

** Relates mainly to rental costs for office premises

*** Revenue deferred less revenue recognised less project costs capitalised

**** Including currency movements

Outlook

Zalaris target NOK 1.5bn in 2026 revenues with 12-15% adj. EBIT through operational excellence and scale

Key growth and margin initiatives

1) Numbers in parenthesis in constat currency based on 31.12.23 currency rates 2) 2023 Q4 run rate of EUR 100m based on currency rate of 11.22 per 31.12.23

In summary: Q1 delivered with all time high revenue and EBIT. Well positioned to continue positive development over the medium and long term.

• Solid start of the new year with Q1 Growth of 22% to annualized revenue of nearly NOK 1.3 billion with 10.9% EBIT
• Growth to continue as backlog of sold contracts with 90 million ACV to gradually be recognized as revenue over the next 12 months in combination with strong market and positive development in pipeline
• Margins expected to continue improving as operating improvements will bring DACH business closer to Nordic baseline in combination with scale effects, continued focus on automation, and improved productivity from implementing AI functionality
• Strategic Review underway to explore options for the future

Q&A

We simplify HR and payroll administration, and empower you with useful information so that you can invest more in people.

Thank you!

Zalaris ASA | +47 4000 3300 | www.zalaris.com