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Zalaris
Annual Report • Feb 29, 2024
3795_rns_2024-02-29_20f7bdef-314a-4442-85fb-28317d5796c7.pdf
Annual Report
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PeopleHub BY ZALARIS
Your one-stop HR platform
Q4 2023
| About Zalaris | 3 |
|---|---|
| Q4 Highlights | 4 |
| Key Figures | 5 |
| CEO Insights | 7 |
| Financial Review | 9 |
| Interim Consolidated Financial Statements |
16 |
| Notes to the interim consolidated financial statements |
22 |
| Alternative Performance Measures (APMs) | 30 |
About Zalaris
Payroll & HR Solutions that enable fully digital organizations - we simplify HR and payroll administration and empower customers with useful information so they can invest more in people.
Zalaris is a leading European provider of human capital management (HCM) and payroll solutions, covering the entire employee lifecycle from recruitment and onboarding to compensation, time and attendance, travel expenses and performance management.
We offer flexible delivery models, including onpremises, software as a service (SaaS), cloud integration and business process outsourcing (BPO). We also have experienced consultants and advisors who can support any industry and IT environment.
Based in Oslo, Norway, and listed on the Oslo Stock Exchange (ZAL), we serve close to one and a half million employees every month across various industries and with some of Europe's most reputable employers. We have grown steadily since our inception in 2000 and today operate in the Nordics, Baltics, Poland, Germany, Austria, Switzerland, Hungary, France, Spain, India, Ireland, the UK, Singapore and Australia.
Q4 Highlights
STRONG REVENUE GROWTH
Revenue of NOK 312.4 million (NOK 250.6 million), representing revenue growth of 24.7% YoY and 14.1% in constant currency
ALL TIME HIGH QUARTERLY ADJ. EBIT
Adj. EBIT NOK 33.4 million (15.3 million) and adj. EBIT margin 10.7% (6.1%).
NEW LONG-TERM CONTRACTS SIGNED
Contracts with annual contract value of ~NOK 30 million, for MS and PS combined, signed during the quarter
Other updates
- Revenue for the full-year of NOK 1,131.2 million (NOK 892.7 million), representing an organic growth of 26.7% (16.0% in constant currency)
-
Adjusted EBIT for the full-year of NOK 95.8 million (NOK 46.2 million)
-
Secured an agreement for another four years with an annual contract value of more than NOK 22 million with the state of North Rhine-Westphalia, Germany, for application maintenance of their payroll systems serving ~700,000 employees.
- New contract under master service agreement with leading global retailer, for implementation of payroll services in the UK and Ireland.
- A four-year agreement with a German state for implementing SAP HCM, with a total contract value of more than NOK 170 million, was signed after quarter-end.
- Operating cash flow of NOK 33.7 million (NOK 12.4 million), when adjusting for a positive NOK 10.4 million reclassification from customer projects to investments.
- Completed sale of Leipzig office building for EUR 3.7 million (~NOK 43 million), after year-end, with net cash proceeds of ~NOK 31 million after repayment of debt.
Key Figures
All time high quarterly revenue and adjusted EBIT
*Defined in separate section: Alternative Performance Measure (APMs)
Financial performance by business segment
| 2023 | 2022 | 2023 | 2022 | |
|---|---|---|---|---|
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| Revenue | ||||
| Managed Services | 228 870 | 185 958 | 819 575 | 644 801 |
| Professional Services | 75 342 | 61 946 | 291 170 | 243 138 |
| New business (APAC) | 8 209 | 2 646 | 20 465 | 4 803 |
| Total revenue | 312 421 | 250 551 | 1 131 210 | 892 742 |
| Adjusted EBIT1) | ||||
| Managed Services | 30 569 | 23 616 | 114 399 | 69 734 |
| Professional Services | 10 740 | 4 776 | 31 404 | 21 172 |
| HQ (unallocated costs) | (7 347) | (12 012) | (42 865) | (38 525) |
| Adj. EBIT (ex. APAC) | 33 962 | 16 380 | 102 937 | 52 381 |
| Adj. EBIT margin (ex. APAC) | 11,2 % | 6,6 % | 9,3 % | 5,9 % |
| New business (APAC) | (562) | (1 090) | (7 169) | (6 139) |
| Adj. EBIT | 33 399 | 15 290 | 95 768 | 46 242 |
| EBIT margin (%) | 10,7 % | 6,1 % | 8,5 % | 5,2 % |
| Share-based payments | (2 786) | (2 481) | (11 575) | (8 706) |
| Amortisation excess value on acquisitions | (3 494) | (3 114) | (13 690) | (11 935) |
| Other | - | - | - | (1 906) |
| EBIT | 27 119 | 9 696 | 70 503 | 23 695 |
| EBIT margin | 8,7 % | 3,9 % | 6,2 % | 2,7 % |
Financial summary
| 2023 | 2022 | 2023 | 2022 | |
|---|---|---|---|---|
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| Revenue | 312 421 | 250 552 | 1 131 209 | 892 743 |
| Growth (YoY) | 24,7 % | 24,2 % | 26,7 % | 15,1 % |
| Adjusted EBITDA1) | 49 035 | 29 635 | 151 180 | 98 261 |
| Adjusted EBITDA margin | 15,7 % | 11,8 % | 13,4 % | 11,0 % |
| Adjusted EBIT1) | 33 400 | 15 290 | 95 768 | 46 242 |
| Adjusted EBIT margin | 10,7 % | 6,1 % | 8,5 % | 5,2 % |
| EBIT | 27 120 | 9 695 | 70 503 | 23 695 |
| Profit/(loss) for the period | 20 879 | (12 100) | (2 963) | (38 721) |
| Basic earnings per share (EPS) | 0,96 | (0,56) | (0,14) | (1,79) |
| Total comprehensive income | 22 593 | (19 302) | 26 797 | (27 431) |
| Net cash flow from operarting activities | 44 133 | 12 423 | 58 551 | 422 |
| Net interest-bearing debt (NIBD)1) | 314 751 | 287 133 | 314 751 | 287 133 |
| NIBD/Adjusted EBITDA (LTM) | 2,1 | 2,9 | 2,1 | 2,9 |
- Defined in separate section Alternative Performance Measure (APMs)
CEO Insights
In Q4 2023, #teamZalaris delivered on our communicated targets, resulting in the eighth consecutive quarter with all-time high revenues of NOK 312.4 million, up from NOK 250.6 million in Q4 last year. This represents 24.7% year-onyear growth in actual terms and 14.1% in constant currency. We are now a NOK 1.2 billion annualized revenue company well above our aspiration just a year ago.
Adjusted EBIT was 10.7% at NOK 33.4 million, up 118% from NOK 15.3 million in the same period last year. We continued delivering on our growth aspirations for 2023, ending the full year with revenue of NOK 1.13 billion, up 27% yearon-year, with an adjusted EBIT of NOK 96 million – an increase of 107% year-on-year.
Furthermore, we continued winning new contracts, confirming the strong international trends over the last years, positioning us well for continued growth in 2024.
Closing 2023 as Our Best Year of Sales to Date
During the quarter, we closed another EUR 2.2 million of Annual Contract Value (ACV) in Managed Services, including upsell to existing customers, finishing off the year with a record high sale of more than EUR 14 million of ACV – significantly above our sales budget needed to sustain a 10% growth rate.
The potential for expanding existing customer agreements to new geographies was proven by our agreement with a global retailer. It was expanded from our initial coverage of approximately 3,000 employees in a Nordic country to also cover 10,500+ employees in the UK and Ireland – now in total representing approximately 15% of their global workforce, with a corresponding upside for the remaining 85%. Similarly, we expanded our relationship with Santander in Norway, to full coverage of the Nordic region, during the quarter.
Professional Services sold approximately EUR 25 million of Total Contract Value (TCV) throughout the year, which is more than 25% above our budget.
Both business units finished the quarter with strong pipelines for both upsell and new clients. In Managed Services, we continue to see good demand for our Global Payroll value proposition, including the potential to increase geographic scope with existing customers. In Professional Services, demand remains strong for application maintenance services and project implementation services related to SAP HXM. After the quarter, we closed a landmark agreement as a subcontractor to one of Germany's largest System Integrators. The agreement involves implementing a new HCM solution covering Employee Data Management and Payroll for one of the most innovative and progressive German states, with our part of the contract valued at approximately EUR 15 million over the next four years. Positioning Zalaris as one of the leading providers of SAP based people services to the public sector in Germany.
With NOK 312 million in revenue and 10,8% adjusted EBIT we delivered on our communicated financial targets for the quarter
Margin Reserves through Continued Focus on Improvements and Scale
Our positive margin development continued throughout the quarter, and in certain areas, we are exceeding our targets. A key contributor to this success is the use of X-shoring and automation, which reduces resource costs as a percentage of revenue. As a result, the total resource costs for 2023 were approximately four percentage points lower compared to the previous year. We believe this relative trend will continue and be further strengthened as the effects of our strategic AI initiatives, ranging from increased use of productivity-enhancing tools in our operations to solutions for anomaly detection and improved customer service, take effect.
Our mature Nordics business remains at the forefront, setting the standard for other operating entities to follow. In 2024, our focus will be on consolidating our position in the Nordic region while enhancing customer service. Simultaneously, we will continue our transformation journey in other geographies, aiming to elevate them to the Nordic level. This strategic approach, combined with the scaling effects from additional revenue, positions us well to achieve our newly targeted EBIT levels of 12- 15% over the next 36 months.
Sustainability and CSRD Creating Opportunities
The implementation of the EU Corporate Sustainability Reporting Directive (CSRD) in 2024 presents excellent opportunities for Zalaris to support our customers on their sustainability journey. We have since 2022 been working on a strategic project aimed at integrating sustainability thinking into all our processes and services. During 2023, we successfully implemented several new solutions, including tracking the CO2 footprint from business travel and commuting. Additionally, we enhanced our reporting capabilities for diversity.
Our forward-looking goal is to support our customers in reporting and driving all sustainability measures related to their employee base. We view this as a tremendous opportunity that will not only positively impact revenue and customer relationships but also contribute to building a more sustainable world.
Again, thank you #teamZalaris, customers, and stakeholders for making 2023 a record-breaking year.
Hans-Petter Mellerud, CEO of Zalaris
Financial Review
Revenue
Revenue for the fourth quarter 2023 amounted to NOK 312.4 million (Q4 2022: NOK 250.6 million). The revenue increase was +24.7%. Measured in constant currency the increase was +14.1%*.
The increase in revenue compared to last year is mainly within Managed Services, and came from new customers, as well as increased volume of change orders and additional services from existing customers. Net Retention within Managed Services was approximately 104%, measured in constant currency.
In the second quarter, Zalaris signed a master services agreement for payroll services with a leading global retailer, and for delivery of payroll cloud services to their employees in Denmark. The agreement was expanded during the fourth quarter and will cover payroll cloud services to their 10,000+ employees in the UK, and managed payroll services to their 500+ employees in Ireland.
New contracts signed during the fourth quarter amount to annual recurring revenue ("ARR") of approx. NOK 8 million, excluding any upsell to existing customers. New contracts signed during 2023 amount to ARR of approximately NOK 104 million.
The revenue impact of signed contracts that have not yet gone live as of 31 December 2023 is shown in the table below. The table shows the ARR within Managed Services at the end of the fourth quarter, and how the Group's ARR will increase, when these contracts are implemented.
CONTRACTED ARR* IN MS NOK MILLION
*See definitions and reconciliation of APM's in a separate section of the interim report.
The additional net ARR of NOK 96 million that will come from new contracts represents an increase in annual revenue for Managed Services of +11.7% (compared to full-year revenue for 2023), and it includes NOK 20 million in extra sales to these new contracts since they were first reported.
The figure below shows the timing of the expected increase in the ARR for Managed Services, based on these new contracts
EXPECTED TIMING OF CONTRACTED ARR NOK MILLION
Zalaris has also won the public tender for provision of SAP Payroll Application Maintenance Services for systems serving approximately 700,000 employees and
pensioners of the German State of North Rhein Westphalia. Zalaris has been serving the state for more than ten years. The new four-year agreement has an estimated value of more than EUR 2 million per annum.
Revenue for the full-year 2023 amounted to NOK 1,131.2 million, compared to NOK 892.7 million last year, an increase of +26.7%. Measured in constant currency the increase was +16.0%.
Nordics & Baltics
Revenue in the Nordic & Baltic region was NOK 151.0 million in the fourth quarter. Adjusted for positive currency effects, the revenue was 10.0% higher than the figure last year of NOK 129.7 million. This was explained by the implementation of new customers, and additional volumes and change orders from existing customers, within Managed Services.
Revenue in the Nordic & Baltic region for the full-year 2023 amounted to NOK 556.5 million, compared to NOK 466.3 million last year.
Central Europe
Revenue in the Central Europe region was NOK 127.9 million in the fourth quarter, compared to NOK 103.5 million last year. An increase of
+9.1%, when adjusted for positive currency effects.
The organic growth came mainly from new customers in Managed Services in Germany.
Managed Services in Germany grew by +23.0% in local currency, compared to last year. Within Professional Services, Germany and Poland showed a revenue growth of -0.6% and -14.5% respectively in local currency compared to last year.
Revenue in the Central Europe region for the full-year 2023 amounted to NOK 467.3 million, compared to NOK 374.7 million last year.
UK & Ireland
Revenue in the UK & Ireland region amounted to NOK 25.3 million in the fourth quarter, compared to NOK 14.7 million in the same quarter last year, an increase of +53.5% in local currency. A large contract within Professional Services, for the implementation of Employee Central Payroll in several European countries, was the main contributor to the increase.
Revenue in the UK & Ireland region for the fullyear 2023 amounted to NOK 87.0 million, compared to NOK 46.9 million last year
Earnings
The adjusted EBIT, before EBIT from APAC region, was NOK 34.0 million for the fourth quarter (NOK 16.4 million). The increase is largely explained by increased revenue from new and existing customers, and margin improvements in the Nordic region. The focus on increased use of resources from near- and offshore locations, as well as other operational improvements, has had a positive effect on customer margins in the Nordic region.
The adjustments made to EBIT were the calculated costs of the Company's share-based payment plan (NOK 2.8 million) and amortisation of excess values on acquisitions (NOK 3.5 million).
Adj. EBIT, before EBIT from APAC, for the fullyear amounted to NOK 102.9 million (NOK 52.4 million).
The EBIT from APAC was negative NOK 0.6 million in the fourth quarter. The financial result from new business activities (e.g. the establishment of a new geographical region) are reported separately, until the business is up and running at a normal level and included in one of the two main segments. The objective is to provide information on the result of new business development activities that generally would generate a financial loss in an interim period, and to show the financial result of the existing business activities without the disturbance of these new activities.
The APAC region is a greenfield establishment and had revenue of NOK 8.2 million in the fourth quarter, up from NOK 4.4 million in the previous quarter.
Consolidated EBIT for the quarter was NOK 27.1 million (NOK 9.7 million). The positive variance from last year is mainly due the factors noted above.
Consolidated EBIT for the full year amounted to NOK 70.5 million (NOK 23.7 million).
The Group had net financial expenses of NOK 15.6 million for the fourth quarter (net expense NOK 5.2 million). Including a net unrealised currency loss of NOK 1.5 million (gain NOK 2.1 million), mainly relating to the EUR 40 million bond loan.
Net financial expenses for the full-year was NOK 74.2 million (expense NOK 40.1 million), including a net currency loss of NOK 30.7 million (loss NOK 15.0 million), mainly relating to the EUR 40 million bond loan.
The net profit for the quarter was NOK 20.9 million (negative NOK 12.1 million), after a loss from discontinued operations (vyble GmbH) of NOK 0.8 million (loss NOK 3.9 million).
The net profit for the full-year was negative NOK 3.0 million (negative NOK 38.7 million), after a loss from discontinued operations of NOK 8.4 million (loss NOK 16.0 million).
Total comprehensive income amounted to NOK 22.6 million (negative NOK 19.3 million), after positive currency translation differences of NOK 1.7 million (negative NOK 7.2 million) relating to foreign subsidiaries.
Total comprehensive income for the full-year was NOK 26.8 million (negative NOK 27.4 million).
EBIT improvement program
In the third quarter 2022, we announced our plans to increase our annual EBIT by NOK 40 – 50 million by the end of 2023. This would come from direct cost improvements and improved allocation of resources of NOK 25 - 30 million, and contribution from new contracts of NOK 20 - 25 million. Our goal was to reach an adjusted EBIT margin of 10% by the end of 2023. The EBIT target was achieved in the fourth quarter with an adjusted EBIT margin of 10.8%, and the annual EBIT increased by NOK 55 million, when compared to the EBIT for the last 12 months in the third quarter 2022.
We aim for each region to have an internal EBIT margin of 15 – 20%, before any group charges. Well performing regions have a high degree of standardization and customer deliveries based on the Zalaris PeopleHub platform and use more resources from near- and offshore locations when delivering services. They also benefit from economies of scale, that improve profitability.
The EBIT improvement projects in Managed Services in the Nordic countries were mainly completed during 2023. We moved significant tasks from local to near-/offshore locations to reduce operational costs and increase existing capacity for more revenue without hiring new local resources. These projects have increased EBIT margins in these countries.
Germany has much lower margins than other countries, because it has traditionally delivered services based individual customer's specific system configurations and requirements. In
addition, limited use of near- and offshore resources and automation has had a negative impact. In Professional Services, they have also had to rely on external consultant, due to a tight labour market. As part of the EBIT improvement program, we are changing the operating model in Managed Services from a local customeroriented to a process-oriented delivery model, and work is being shifted to near- and offshore locations.
We have expanded our delivery team in Latvia with a German team. The new setup also includes local experts in Germany who can comply with local laws. In addition, we have established a new delivery centre in Poland, to increase our flexibility and competence for the German market. These activities are progressing well and will gradually improve margins in Germany towards our Group target.
Business segment performance
Managed Services
The Managed Services ("MS") segment had revenue of NOK 228.9 million (73% of total revenue) for the fourth quarter 2023, compared to NOK 186.0 million in the same quarter last year. The increase was +14.2% when adjusted for positive currency effects and was mainly driven by revenue from new customers that have gone live since the fourth quarter last year and increased change orders, combined with additional services from existing customers.
NOK MILLION 186.0 186.7 204.0 200.0 228.9
REVENUE MANAGED SERVICES
Q1-23
Q4-22
As noted earlier in this report, Zalaris is implementing a large number of new MS contracts. As a result, significant resources are being utilized on contract implementation, resulting in increased deferred revenue, which will be recognized as revenue from when the projects go live. MS revenue deferred for the fourth quarter was NOK 30.8 million, compared to NOK 13.1 million last year.
Q2-23
Q3-23 Q4-23
The adj. EBIT for MS for the fourth quarter was NOK 30.6 million (NOK 22.9 million), and adj. EBIT margin was 13.4% (12.3%). EBIT margin was positively impacted by the increased revenue.
The EBIT improvement of approximately NOK 55 million by the end of 2023, mainly relates to Managed Services.
The target is for Managed Services to operate on a standard platform across all regions. This model will secure that Managed Services continue to optimise and harmonise the operational processes, use digitalisation, leverage the flexibility and competence of
resources across all deliveries, both locally, nearshore (Latvia, Poland, Spain) and offshore (India).
Professional Services
Revenue in the Professional Services ("PS") segment amounted to NOK 75.3 million for the fourth quarter 2023, compared to NOK 61.9 million last year. When adjusted for positive currency movements the increase was +7.2% year-on-year.
Significantly higher revenue in UK, was partly offset by marginally lower revenue in Poland.
REVENUE PROFESSIONAL SERVICES NOK MILLION
The adj. EBIT for PS for the fourth quarter was NOK 10.7 million (NOK 4.6 million), and adj. EBIT margin was 14.2% (7.4%).
APAC
During the first quarter 2022, Zalaris established operations in Australia and Singapore, to expand its multi-country payroll capabilities to the Asia-Pacific region ("APAC"). The purpose was to better support European headquartered customers, with operations in APAC countries. APAC is one of the fastest growing regions for multi-country payroll. The new region is already offering a full suite of Professional and Managed Services. The new region is reported separately until it has reached a sustainable business level.
The new region is still an early-stage business, and recorded revenue and adj. EBIT of NOK 8.2 million and negative NOK 0.6 million respectively in the fourth quarter.
Discontinued operations (vyble)
In February 2022, Zalaris acquired the assets of vyble AG, a payroll and HR solution start-up located in Rostock and Hamburg, Germany. The business is being operated through a 90% owned subsidiary, vyble GmbH ("vyble"). vyble has a complete suite of Payroll and HR solutions delivered as Software as a Service (SaaS) targeting the SME market in Germany. There is an ongoing sales process for vyble, and a final solution is expected in the near future.
Financial position and cash flow
Zalaris had total assets of NOK 1,111.6 million as of 31 December 2023, compared to NOK 1,054.1 million on 30 September 2023.
Cash and cash equivalents were NOK 136.0 million (including cash in discontinued operations) as of 31 December 2023, an increase of NOK 15.2 million from the end of the previous quarter.
Total equity as of 31 December 2023 was NOK 203.0 million, compared to NOK 177.6 million as of 30 September 2023. This corresponds to an equity ratio of 18.3% (16.8%).
The Company holds 490,070 own shares (2.2% of total outstanding shares) at 31 December 2023.
Net interest-bearing debt (interest-bearing debt less cash and cash equivalents) decreased from NOK 333.3 million on 30 September 2023 to NOK 314.8 million on 31 December 2023.
The decrease in net interest-bearing debt is mainly due to a positive net cash flow during the fourth quarter.
Operating cash flow during the fourth quarter 2023 was NOK 44.1 million (NOK 12.4 million). This includes the positive impact of NOK 10.4 million from a reclassification of costs capitalised to customer projects during the year to investment in fixed and intangible assets (ref. comment below).
Net cash flow from investing activities for the fourth quarter was negative NOK 20.2 million (negative NOK 9.8 million). This includes a reclassification of a development projects, for a separate retail solution in PeopleHub, from costs capitalised to customer projects to intangible assets, NOK 10.4 million.
Net cash flow from financing activities for the fourth quarter was negative NOK 6.5 million (negative NOK 3.2 million).
Subsequent events
There have been no events after the balance sheet date, which have had a material effect on the issued accounts.
Outlook
Zalaris has a positive outlook for future revenue growth, as it has secured many large new, longterm BPaaS/SaaS contracts within the Managed Services Division in the past year. Several of which will become operational during 2024 and early-2025. The pipeline of new possible contracts remains strong, supporting Zalaris' target of an annual growth rate of minimum 10%.
Significant scale benefits from the revenue growth combined with continued cost optimization from X-shoring, automation and the use of AI will be the key drivers for improved profitability going forward. Key targets for 2024 include further automation of our delivery processes and improved use of our near- and offshore delivery centres in Latvia, Poland, and India, for our German operation.
Based on industry and market research reports, Zalaris' key markets, within multi-country payroll and HR outsourcing, are expected to experience continued growth in the foreseeable future. The company is well positioned to capture part of this growth through a competitive technology platform combined wit a cost optimised skilled workforce, best demonstrated by the multi-country contracts with e.g. Metsä, Yunex Traffic and Innomotics. Growth will also come from expanding the services to existing customers, including increased geographic coverage, demonstrated by customers like Siemens, Tryg, and Ericsson, and our recent signing with a large global retailer.
Zalaris has been expanding its geographical coverage both in Europe and the Asia-Pacific region to strengthen its competitive position. Whilst the Company previously established its own subsidiaries in new countries, an important revised expansion strategy has been implemented using in-country partners, deploying Zalaris' PeopleHub solution. This secures low risk profitable global geographic expansion, even for low and moderately sized employee volumes. The global macro picture with high inflation, increased interest rates, and fear of recession, have so far not impacted our business negatively. The strong pipeline of available opportunities indicate that this trend will continue.
However, we are experiencing upward pressure on salaries, and the recruitment of new skilled employees is challenging in some markets. Most of our long-term contracts within the Managed Services Division have provisions for the annual indexation of salaries. Historically, we have seen an increased interest in the market for outsourcing in a recessionary environment. This is when companies traditionally are required to focus on operational efficiencies and cost reductions. The underlying fundamentals remain strong and Zalaris has a solid pipeline of potential new sales in all regions.
The Board of Directors of Zalaris ASA Oslo, 28 February 2024
Interim Consolidated Financial Statements
Consolidated Statement of Profit and Loss
| 2023 | 2022 | 2023 | 2022 | ||
|---|---|---|---|---|---|
| (NOK 1 000) | Notes | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| unaudited | unaudited | unaudited | |||
| Revenue | 2 | 312 421 | 250 552 | 1 131 209 | 892 743 |
| Operating expenses | |||||
| License costs | 26 179 | 19 078 | 99 527 | 80 198 | |
| Personnel expenses | 4 | 152 766 | 128 836 | 584 324 | 483 824 |
| Other operating expenses | 81 131 | 70 291 | 284 751 | 222 537 | |
| Depreciation and impairments | 1 430 | 1 419 | 4 269 | 3 908 | |
| Depreciation right-of-use assets | 6 096 | 5 192 | 23 002 | 18 535 | |
| Amortisation intangible assets | 7 784 | 7 208 | 31 068 | 28 409 | |
| Amortisation implementation costs customer projects | 3 | 9 915 | 8 832 | 33 765 | 31 638 |
| Total operating expenses | 285 301 | 240 857 | 1 060 707 | 869 049 | |
| Operating profit (EBIT) | 27 120 | 9 695 | 70 503 | 23 694 | |
| Financial items | |||||
| Financial income | 5 | 3 175 | 2 394 | 8 496 | 7 565 |
| Financial expense | 5 | (17 265) | (9 736) | (82 781) | (32 106) |
| Unrealized foreign exchange gain/(loss) | 5 | (1 493) | 2 124 | 61 | (15 561) |
| Net financial items | (15 583) | (5 218) | (74 225) | (40 102) | |
| Profit before tax from continuing operations | 11 537 | 4 477 | (3 722) | (16 408) | |
| Tax expense | 10 147 | (12 686) | 9 173 | (6 295) | |
| Profit for the period from continuing operations | 21 684 | (8 209) | 5 451 | (22 703) | |
| Profit/(loss) after tax for the year from discontinued operations | 9 | (805) | (3 891) | (8 414) | (16 018) |
| Profit for the period | 20 879 | (12 100) | (2 963) | (38 721) | |
| Profit attributable to: | |||||
| - Owners of the parent | 20 960 | (11 710) | (2 122) | (37 119) | |
| - Non-controlling interests | (80) | (390) | (841) | (1 602) | |
| Earnings per share: | |||||
| Basic earnings per share (NOK) | 0,96 | (0,56) | (0,14) | (1,79) | |
| Diluted earnings per share (NOK) | 0,96 | (0,56) | (0,14) | (1,79) | |
| Earnings per share for continuing operations: | |||||
| Basic earnings per share (NOK) | 1,00 | (0,38) | 0,25 | (1,05) | |
| Diluted earnings per share (NOK) | 1,00 | (0,38) | 0,25 | (1,05) | |
Consolidated Statement of Comprehensive Income
| 2023 | 2022 | 2023 | 2022 | ||
|---|---|---|---|---|---|
| (NOK 1 000) | Notes | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| unaudited | unaudited | unaudited | |||
| Profit for the period | 20 879 | (12 100) | (2 963) | (38 721) | |
| Other comprehensive income | |||||
| Items that will be reclassified to profit and loss in subsequent periods | |||||
| Currency translation differences | 1 714 | (7 203) | 29 760 | 11 290 | |
| Total other comprehensive income | 1 714 | (7 203) | 29 760 | 11 290 | |
| Total comprehensive income | 22 593 | (19 302) | 26 797 | (27 431) | |
| Total comprehensive income attributable to: | |||||
| - Owners of the parent | 22 674 | (18 913) | 27 638 | (25 829) | |
| - Non-controlling interests | (80) | (390) | (841) | (1 602) |
Consolidated Statement of Financial Position
| 2023 | 2022 | ||
|---|---|---|---|
| (NOK 1 000) | Notes | 31. Dec | 31. Dec |
| unaudited | |||
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 118 126 | 119 141 | |
| Goodwill | 209 443 | 195 834 | |
| Total intangible assets | 327 569 | 314 975 | |
| Deferred tax asset | 52 065 | 29 837 | |
| Fixed assets | |||
| Right-of-use assets | 44 853 | 48 363 | |
| Property, plant and equipment | 35 186 | 33 088 | |
| Total fixed assets | 80 039 | 81 451 | |
| Total non-current assets | 459 673 | 426 263 | |
| Current assets | |||
| Trade accounts receivable | 262 690 | 191 715 | |
| Customer projects | 3 | 197 106 | 135 359 |
| Other short-term receivables | 46 083 | 48 225 | |
| Cash and cash equivalents | 6 | 135 722 | 91 796 |
| Total current assets | 641 601 | 467 095 | |
| Assets held for sale | 9 | 10 275 | 12 384 |
| TOTAL ASSETS | 1 111 549 | 905 742 |
Consolidated Statement of Financial Position
| (NOK 1 000) Notes 31. Dec 31. Dec EQUITY AND LIABILITIES Equity Paid-in capital Share capital 2 165 2 159 Other paid in equity 21 481 10 039 Share premium 143 045 141 898 Total paid-in capital 166 691 154 096 Other equity 14 519 14 519 Retained earnings 24 190 (3 417) Equity attributable to equity holders of the parent 205 400 165 199 Non-controlling interest -2 443 (1 602) Total equity 202 957 163 597 Liabilities Non-current liabilities Deferred tax 27 418 23 899 Interest-bearing loans 7 439 964 10 891 Other long-term liabilities - 659 Lease liabilities 28 585 32 328 Total long-term liabilities 495 967 67 777 Current liabilities Trade accounts payable 38 159 45 407 Customer projects liabilities 3 182 588 103 744 Interest-bearing loans 7 10 757 369 693 Lease liabilities 18 469 17 783 Income tax payable 4 537 3 270 Public duties payable 44 621 37 686 Other short-term liabilities 108 815 92 003 Total short-term liabilities 407 946 669 586 Liabilities directly associated with the assets held for 9 4 679 4 783 sale Total liabilities 908 592 742 146 |
2023 | 2022 | |
|---|---|---|---|
| TOTAL EQUITY AND LIABILITIES | 1 111 549 | 905 742 |
Consolidated Statement of Cash Flow
| 2023 | 2022 | 2023 | 2022 | ||
|---|---|---|---|---|---|
| (NOK 1 000) | Notes | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| unaudited unaudited unaudited | |||||
| Cash Flow from operating activities | |||||
| Profit (Loss) before tax from continued operation | 11 537 | 4 478 | (3 722) (16 408) | ||
| Profit (Loss) before tax from discontinued operation | (1 032) | (4 989) (10 787) (20 536) | |||
| Net financial items | 5 | 15 583 | 5 220 | 74 225 | 40 103 |
| Share based program | 2 786 | 2 481 | 11 575 | 8 706 | |
| Depreciation and impairments | 1 430 | 1 419 | 4 269 | 3 907 | |
| Depreciation right-of-use assets | 6 096 | 5 192 | 23 002 | 18 535 | |
| Amortisation intangible assets | 7 784 | 7 209 | 31 068 | 28 409 | |
| Capitalisation implementation costs customer projects | 3 | (20 514) (13 342) (89 272) (67 771) | |||
| Depreciation implementation costs customer projects | 3 | 9 915 | 8 831 | 33 765 | 31 638 |
| Customer project revenue deferred | 3 | 30 768 | 13 145 | 104 139 | 62 134 |
| Customer project revenue recognised | 3 | (9 852) | (7 631) (29 408) (20 807) | ||
| Taxes paid | (2 720) | (4 703) (11 452) (14 356) | |||
| Changes in accounts receivable | (21 679) (13 635) (70 975) (50 318) | ||||
| Changes in accounts payable | 6 434 | 12 684 | (7 248) | 27 150 | |
| Changes in other items | 17 560 | 1 679 | 35 104 | (10 020) | |
| Interest received | 968 | 202 | 2 585 | 308 | |
| Interest paid | (10 932) | (5 817) (38 317) (20 252) | |||
| Net cash flow from operating activities | 44 133 | 12 423 | 58 551 | 422 | |
| Cash flows to investing activities | |||||
| Investment in fixed and intangible assets | (20 180) | (9 815) (33 868) (27 845) | |||
| Investment in fixed and intangible assets business combinations | - | 1 214 | - | - | |
| Acquisition of subsidiaries, net of cash acquired | - | (1 214) | - | (11 317) | |
| Net cash flow from investing activities | (20 180) | (9 815) (33 868) (39 163) | |||
| Cash flows from financing activities | |||||
| Sale of own shares | - | - | 881 | - | |
| Buyback of own shares | - | - | - | (17 768) | |
| Contribution from minority shareholder | - | 746 | 293 | 2 203 | |
| Capital increase (net proceeds) | - | - | - | - | |
| Payment of lease liabilities | (6 292) | (5 118) (22 790) (17 884) | |||
| Net proceeds from new EUR 40m bond loan | - | 531 | 440 796 | - | |
| Repayment of loans | (201) | 599 (400 547) | (2 901) | ||
| Dividend payments to owners of the parent | - | (1) | - | (7 558) | |
| Net cash flow from financing activities | (6 493) | (3 243) | 18 633 | (43 909) | |
| Net changes in cash and cash equivalents | 17 461 | (636) | 43 316 | (82 650) | |
| Net foreign exchange difference | (2 241) | (1 499) | (796) | (120) | |
| Cash and cash equivalents at the beginning of the period | 120 749 | 95 588 | 93 451 | 176 224 | |
| Cash and cash equivalents at the end of the period | 135 968 | 93 454 | 135 970 | 93 451 |
Consolidated Statement of Changes in Equity
| Other | Currency | Non | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Share | Own | Share | paid in | Total paid | Other | Retained | revaluation | controlling | Total | ||
| (NOK 1000) | capital | shares | premium | equity | in equity | equity | earnings | reserve | Total | interests | equity |
| Equity at 01.01.2022 | 2 214 | (29) 157 370 | 3 657 | 163 211 | 14 519 | 54 607 | (23 328) 209 009 | - | 209 009 | ||
| Profit of the year | (37 119) | (37 119) | (1 602) (38 721) | ||||||||
| Other comprehensive income | 11 290 | 11 290 | 11 290 | ||||||||
| Purchase of own shares | (35) (17 743) | (17 778) | (17 778) | (17 778) | |||||||
| Share based payments | 8 662 | 8 662 | 8 662 | 8 662 | |||||||
| Share based payments | 10 | 2 271 | (2 281) | - | - | ||||||
| Other changes | (1 309) | (1 309) | (1 309) | ||||||||
| Dividend | (7 558) | (7 558) | (7 558) | ||||||||
| Equity at 31.12.2022 | 2 214 | (54) 141 898 | 10 038 | 154 095 | 14 519 | 8 622 | (12 038) 165 198 | (1 602) 163 596 | |||
| Equity at 01.01.2023 | 2 214 | (54) 141 898 | 10 038 | 154 096 | 14 519 | 8 622 | (12 038) 165 198 | (1 602) 163 596 | |||
| Profit/(loss) of the year | (2 122) | (2 122) | (841) | (2 963) | |||||||
| Other comprehensive income | 29 760 | 29 760 | 29 760 | ||||||||
| Share based payments | 11 575 | 11 575 | 11 575 | 11 575 | |||||||
| Exercise of share based payments | 1 | 131 | (132) | (5) | (5) | (5) | |||||
| Employee share purchase program | 4 | 1 015 | 1 019 | (139) | 881 | 881 | |||||
| Other changes | 113 | 113 | 113 | ||||||||
| Equity at 31.12.2023 | 2 214 | (49) 143 044 | 21 481 | 166 690 | 14 519 | 6 469 | 17 722 | 205 400 | (2 443) 202 957 |
Unaudited
Notes to the interim consolidated financial statements
Note 1 – General Information and basis for preparation
General information
Zalaris ASA (the Group) is a public limited company incorporated in Norway. The Group's main office is in Hoffsveien 4, Oslo, Norway. The Group delivers full-service outsourced personnel and payroll services.
Basis for preparation
These interim consolidated condensed financial statements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). The condensed consolidated interim financial statements do not include all the information and disclosures required by International Financial Reporting Standards (IFRS) for a complete set of financial statements, and these condensed interim financial statements should be read in conjunction with the annual financial statements. The interim condensed consolidated financial statements for the three months ended 31 December 2023, have not been audited or reviewed by the auditors.
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December, 2022.
Going concern
With reference to the Norwegian Accounting Act § 3-3, the Board confirms its belief that conditions exist for continuing operations and that these interim consolidated condensed financial statements have been prepared in accordance with the going concern principle.
Note 2 – Segment Information
The Company's operations are split into two main business segments: Managed Services and Professional Services. In the first quarter of 2022 Zalaris established HR & Payroll Tech Investments as a new segment, following the establishment of vyble GmbH "vyble", and subsequent acquisition of the assets of vyble AG. However, following the restructuring of vyble, the Company has decided to focus its resources entirely on the Managed Services and Professional Services segments, and a sales process has been initiated for vyble, and the asset reclassified to "assets held for sale".
Managed Services includes a full range of payroll and HR outsourcing services, such as payroll processing, time and attendance, travel expenses as well as related cloud system solutions and services. This includes additional cloud-based HR functionality to existing outsourcing customers such as talent management, digital personnel archive, HR analytics, mobile solutions, etc.
Professional Services includes deliveries of change projects based on Zalaris templates or implementation of customer-specific functionality. This business segment also assists with cost-effective maintenance and support of customers' own on-premises solutions. A large portion of these services are of recurring nature and many of the services are based on long-term customer relationships.
Group overhead and unallocated are the costs not allocated to business segments, and are mainly intercompany sales, interest-bearing loans and other associated expenses and assets related to administration of the Group.
The financial result from new businesses activities (e.g. the establishment of a new geographical region) are included as a separate column in the segment reporting ("APAC"), until the business is up and running at a normal level and included in one the two main segments. The objective is to provide information on the result of new business development activities that generally would generate a financial loss in an interim period, and to show the financial result of the existing business activities without the disturbance of these new business activities. This segment currently only consists of the new business in APAC (Australia and Singapore) established in the first quarter of 2022.
Information is organized by business area and geography. The reporting format is based on the Group's management and internal reporting structure. Items that are not allocated are mainly intercompany sales, interest-bearing loans and other associated expenses and assets related to the administration of the Group. The Group's executive management is the chief decision maker in the Group. The investing activities comprise total expenses in the period for the acquisition of assets that have an expected useful life of more than one year. The operating assets and liabilities of the Group are not allocated between segments.
2023 Oct-Dec
| Managed | Professional | Gr.Ovhd & | |||
|---|---|---|---|---|---|
| (NOK 1 000) | Services | Services | APAC | Unallocated | Total |
| Revenue, external | 228 870 | 75 342 | 8 209 | - | 312 421 |
| Operating expenses | (184 318) | (62 686) | (8 583) | (4 492) (260 078) | |
| EBITDA | 44 552 | 12 656 | (374) | (4 492) | 52 343 |
| Depreciation and amortisation | (14 955) | (2 216) | (258) | (7 794) | (25 223) |
| EBIT | 29 597 | 10 441 | (632) | (12 286) | 27 120 |
| Net financial income/(expenses) | (15 583) | (15 583) | |||
| Income tax | 10 147 | 10 147 | |||
| Profit for the period from continuing operations | 29 597 | 10 441 | (632) | (17 722) | 21 684 |
| Cash flow from investing activities | (20 180) |
2022 Oct-Dec
| Managed | Professional | Gr.Ovhd & | |||
|---|---|---|---|---|---|
| (NOK 1 000) | Services | Services | APAC | Unallocated | |
| Revenue, external | 185 958 | 61 946 | 2 646 | 250 551 | |
| Operating expenses | (151 019) | (55 052) | (3 275) | (8 860) (218 206) | |
| EBITDA | 34 939 | 6 894 | (629) | (8 860) | 32 345 |
| Depreciation and amortisation | (12 591) | (2 468) | (21) | (7 569) | (22 649) |
| EBIT | 22 348 | 4 426 | (650) | (16 429) | 9 696 |
| Net financial income/(expenses) | (5 218) | (5 218) | |||
| Income tax | (12 685) | (12 685) | |||
| Profit for the period from continuing operations | 22 348 | 4 426 | (650) | (34 333) | (8 208) |
| Cash flow from investing activities | (9 815) |
2023 Jan-Dec
| Managed | Professional | Gr.Ovhd & | |||
|---|---|---|---|---|---|
| (NOK 1 000) | Services | Services | APAC | Unallocated | Total |
| Revenue, external | 819 575 | 291 170 | 20 465 | 1 131 210 | |
| Operating expenses | (658 506) | (252 430) | (26 857) | (30 809) (968 603) | |
| EBITDA | 161 069 | 38 740 | (6 393) | (30 809) | 162 607 |
| Depreciation and amortisation | (51 511) | (8 426) | (974) | (31 193) | (92 104) |
| EBIT | 109 558 | 30 315 | (7 367) | (62 002) | 70 503 |
| Net financial income/(expenses) | (74 225) | (74 225) | |||
| Income tax | 9 173 | 9 173 | |||
| Profit for the period from continuing operations | 109 558 | 30 315 | (7 367) | (127 054) | 5 451 |
| Cash flow from investing activities | (33 868) |
2022 Jan-Dec
| Managed | Professional | Gr.Ovhd & | |||
|---|---|---|---|---|---|
| (NOK 1 000) | Services | Services | APAC | Unallocated | Total |
| Revenue, external | 644 801 | 243 138 | 4 803 | 892 742 | |
| Operating expenses | (536 580) | (213 865) | (10 438) | (25 675) (786 558) | |
| EBITDA | 108 221 | 29 273 | (5 635) | (25 675) | 106 184 |
| Depreciation and amortisation | (43 994) | (9 281) | (63) | (29 151) | (82 489) |
| EBIT | 64 227 | 19 992 | (5 698) | (54 826) | 23 695 |
| Net financial income/(expenses) | (40 102) | (40 102) | |||
| Income tax | (6 295) | (6 295) | |||
| Profit for the period from continuing operations | 64 227 | 19 992 | (5 698) | (101 223) | (22 702) |
| Cash flow from investing activities | (39 163) |
Geographic Information
The Group's operations are carried out in several countries, and information regarding revenue based on geography is provided below. Information is based on the location of the entity generating the revenue, which to a large extent corresponds to the geographical location of the customers.
REVENUE FROM EXTERNAL CUSTOMERS ATTRIBUTABLE TO:
Oct-Dec
| 2023 | 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| as % of | as % of | |||||||
| (NOK 1 000) | MS | PS | Total | total | MS | PS | Total | total |
| Norway | 60 303 | 285 | 60 587 | 19% | 56 874 | 204 | 57 078 | 23% |
| Northern Europe, excluding Norway | 89 996 | 442 | 90 438 | 29% | 71 939 | 702 | 72 641 | 29% |
| Central Europe | 69 233 | 58 633 | 127 866 | 41% | 49 891 | 53 637 | 103 529 | 41% |
| UK & Ireland | 9 338 | 15 983 | 25 321 | 8% | 7 286 | 7 372 | 14 658 | 6% |
| APAC | 3 047 | 5 162 | 8 209 | 3% | 1 385 | 1 261 | 2 647 | 1% |
| Total | 231 917 | 80 504 | 312 421 | 100% | 187 375 | 63 176 | 250 551 | 100% |
Jan-Dec
| 2023 | 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| as % of | as % of | |||||||
| (NOK 1 000) | MS | PS | Total | total | MS | PS | Total | total |
| Norway | 227 252 | 1 066 | 228 318 | 20% | 198 785 | 1 067 | 199 852 | 22% |
| Northern Europe, excluding Norway | 326 416 | 1 741 | 328 156 | 29% | 263 341 | 3 150 | 266 491 | 30% |
| Central Europe | 231 544 | 235 745 | 467 289 | 41% | 160 714 | 213 968 | 374 682 | 42% |
| UK & Ireland | 34 505 | 52 478 | 86 982 | 8% | 21 952 | 24 962 | 46 914 | 5% |
| APAC | 8 406 | 12 059 | 20 465 | 2% | - | 4 803 | 4 803 | 1% |
| Total | 828 122 | 303 088 | 1 131 210 | 100% | 644 792 | 247 950 | 892 742 | 100% |
Note 3 – Revenue from contracts with customers
Disaggregated revenue information
The Group's revenue from contracts with customers has been disaggregated and presented in note 2.
CONTRACT BALANCES:
| 2023 | 2022 | |
|---|---|---|
| (NOK 1 000) | 31. Dec | 31. Dec |
| Trade receivables | 262 690 | 191 715 |
| Customer project assets | 197 106 | 135 359 |
| Customer project liabilities | (182 588) | (103 744) |
| Prepayments from customers | (15 993) | (18 711) |
Customer project assets are costs specific to a given contract, generate or enhance the Group's resources that will be used in satisfying performance obligations in the future, and are recoverable. These costs are deferred and amortized evenly over the period the outsourcing services are provided.
Customer project liabilities are prepayments from the customer specific to a given contract and are recognized as revenue evenly as the Group fulfils the related performance obligations over the contract period.
Prepayments from customers comprise a combination of short- and long-term advances from customers. The short-term advances are typically deferred revenues related to smaller projects or change orders related to the system solution. The long-term liabilities relate to initial advances paid upon signing the contract. These advances are contracted to be utilized by the customer to either transformation-, change- or other projects. These advances are open for application until specified, or when the contract is terminated, where the eventual remainder of the amount becomes the property of Zalaris and is hence rendered as income by the Group.
MOVEMENTS IN CUSTOMER PROJECT ASSETS THROUGH THE PERIOD:
| 2023 | 2022 | 2023 | 2022 | 2022 | |
|---|---|---|---|---|---|
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | 31. Dec |
| Opening balance in the period | 187 687 | 131 479 | 135 360 | 94 799 | 94 799 |
| Cost capitalised | 20 514 | 13 343 | 89 272 | 67 771 | 67 771 |
| Amortisation | (9 915) | (8 831) | (33 765) | (31 638) | (31 638) |
| Currency | (1 179) | (632) | 6 240 | 4 427 | 4 427 |
| Customer projects assets end of period | 197 106 | 135 359 | 197 106 | 135 359 | 135 360 |
MOVEMENTS IN CUSTOMER PROJECT LIABILITIES THROUGH THE PERIOD:
| 2023 | 2022 | 2023 | 2022 | 2022 | |
|---|---|---|---|---|---|
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | Jan-Dec |
| Opening balance in the period | (161 363) | (98 302) | (103 744) | (66 452) | (66 452) |
| Revenue deferred | (30 768) | (13 145) | (104 139) | (62 134) | (62 134) |
| Revenue recognised | 9 851 | 7 631 | 29 408 | 20 807 | 20 807 |
| Currency | (308) | 72 | (4 113) | 4 035 | 4 035 |
| Customer project liabilities end of period | (182 588) | (103 744) | (182 588) | (103 744) | (103 744) |
Note 4 – Personnel expenses
| 2023 | 2022 | 2023 | 2022 | |
|---|---|---|---|---|
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| Salary | 131 196 | 113 554 | 508 795 | 416 264 |
| Bonus | 9 780 | 7 097 | 23 359 | 18 719 |
| Social security tax | 21 776 | 16 796 | 79 329 | 61 387 |
| Pension costs | 6 538 | 6 427 | 24 782 | 21 841 |
| Share based payments | 2 797 | 2 498 | 11 589 | 8 627 |
| Other personnel expenses | 5 916 | 3 329 | 18 008 | 14 992 |
| Capitalised to internal development projects | (2 032) | (8 471) | (6 847) | (14 540) |
| Capitalised to customer project assets | (23 205) | (12 393) | (74 691) | (43 466) |
| Total personnel expenses | 152 766 | 128 837 | 584 324 | 483 824 |
Note 5 – Finance income and finance expense
| 2023 | 2022 | 2023 | 2022 | |
|---|---|---|---|---|
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| Interest income on bank accounts and receivables | 968 | 200 | 2 448 | 304 |
| Currency gain | 2 267 | 1 296 | 5 902 | 6 028 |
| Other financial income | (60) | 898 | 147 | 1 232 |
| Finance income | 3 175 | 2 393 | 8 496 | 7 565 |
| Interest exp. on financial liab. measured at amortised cost | 10 932 | 5 564 | 38 317 | 18 522 |
| Currency loss | 4 569 | 2 384 | 36 690 | 5 518 |
| Interest expense on leasing | 4 727 | 616 | 2 677 | 2 237 |
| Other financial expenses | (2 963) | 1 174 | 5 097 | 5 829 |
| Finance expenses | 17 265 | 9 737 | 82 781 | 32 106 |
| Unrealized foreign exchange profit/(loss) | (1 493) | 2 124 | 61 | (15 561) |
| Net financial items | (15 583) | (5 220) | (74 225) | (40 102) |
Note 6 - Cash and cash equivalents and short-term deposits
| 2023 | 2022 | |
|---|---|---|
| (NOK 1 000) | 31. Dec | 31. Dec |
| Cash in hand and at bank - unrestricted funds | 131 630 | 87 706 |
| Deposit accounts - guarantee rent obligations - restricted funds | - | - |
| Employee withheld taxes - restricted funds | 4 092 | 4 090 |
| Cash and cash equivalents continuing operations | 135 722 | 91 796 |
| Cash discontinued operations | 248 | 1 655 |
| Total cash and cash equivalents | 135 970 | 93 451 |
Note 7 – Interest-bearing loans and borrowings
| 2023 | 2022 | |||
|---|---|---|---|---|
| (NOK 1 000) | Annual interest | Maturity | 31. Dec | 31. Dec |
| Bond loan | 3 m Euribor + 5.25% | 28.03.2028 | 439 205 | 368 208 |
| Commerzbank - DE | 1.3% | 31.12.2031 | 10 506 | 11 108 |
| De Lage Landen Finans | 7,05% | 31.01.2028 | 1 010 | 1 268 |
| Total interest-bearing loans | 450 721 | 380 584 | ||
| Total long-term interest-bearing loans | 439 964 | 10 891 | ||
| Total short-term interest-bearing loans | 10 757 | 369 693 | ||
| Total interest-bearing loans | 450 721 | 380 584 |
The Company's bond loan of EUR 40 million is to be listed on the Oslo Stock Exchange. The loan from Commerzbank DE relates to the office building in Leipzig, which is owned by the Company.
Note 8 – Equity
During Q2 2023, there were no new share options or RSUs granted to employees. As of 31 December 2023, there are 2,732,000 share options and 136,663 RSUs outstanding.
Note 9 – Discontinued operation
In June 2022, the Group decided to initiate a process to reduce its ownership in vyble GmbH ("vyble"), a subsidiary in which the Group has a 90 % ownership, and vyble was classified as a company held for sale and as a discontinued operation. A transaction is expected to be completed in the first quarter of 2024. The results of vyble for the period are presented below:
| 2023 | 2022 | 2023 | 2022 | |
|---|---|---|---|---|
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| Revenue | 1 216 | 578 | 3 386 | 3 378 |
| Operating expenses | 1 690 | 6 416 | 13 769 | 23 747 |
| Operating loss | (474) | (5 838) | (10 383) | (20 369) |
| Finance costs | 109 | (604) | 404 | 167 |
| Profit/(loss) before tax from discontinued operation | (583) | (5 234) | (10 787) | (20 536) |
| Tax expense | (222) | 1 343 | 2 373 | 4 763 |
| Profit/(loss) for the year tax from discontinued operation | (805) | (3 891) | (8 414) | (16 018) |
The major classes of assets and liabilities of vyble classified as held for sale as at 31 December are as follows:
| 2023 | 2022 | |
|---|---|---|
| (NOK 1 000) | 31. Dec | 31. Dec |
| Intangible assets | 8 674 | 9 628 |
| Property, plant and equipment | 9 | 11 |
| Other current assets | 1 343 | 1 089 |
| Cash and cash equivalents | 248 | 1 655 |
| Total assets held for sale | 10 274 | 12 383 |
| Creditors | 544 | 1 500 |
| Interest-bearing loans and borrowings | 4 135 | 3 283 |
| Liabilties directly associated with assets held for sale | 4 679 | 4 783 |
| Net assets directly associated with disposal group | 5 595 | 7 600 |
The net cash flows incurred by vyble are as follows:
| 2023 | 2022 | 2023 | 2022 | |
|---|---|---|---|---|
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| Operating | (656) | (5 631) | (7 771) | (18 828) |
| Investing | 83 | (275) | (107) | (11 592) |
| Net cash outflow | (573) | (5 906) | (7 878) | (30 420) |
Note 10 – Events after balance sheet date
There have been no events after the balance sheet date significantly affecting the Group's financial position.
Alternative Performance Measures (APMs)
Zalaris' financial information is prepared in accordance with IFRS. In addition, financial performance measures (APMs) are used by Zalaris to provide supplemental information to enhance the understanding of the Group's underlying financial performance. These APMs take into consideration income and expenses defined as items regarded as special due to their nature and include among others restructuring provisions and write-offs. Financial APMs should not be considered as a substitute for measures of performance in accordance with IFRS. Disclosures of APMs are subject to established internal control procedures.
Adjusted EBITDA and EBIT
EBIT, earnings before interest and tax is defined as the earnings excluding the effects of how the operations where financed, taxed and excluding foreign exchange gains & losses. EBIT is used as a measure of operational profitability. EBITDA is before depreciation, amortization and impairment of tangible assets and in-house development projects. To abstract non-recurring or income not reflective of the underlying operational performance, the Group also lists the adjusted EBIT and EBITDA. Adjusted EBIT is defined as EBIT excluding non-recurring costs, costs relating to share based payments to employees, and amortization of excess values on acquisition. Adjusted EBITDA is EBITDA excluding non-recurring costs and costs relating to share based payments to employees, but after depreciation of right-of-use assets.
| 2023 | 2022 | 2023 | 2022 | |
|---|---|---|---|---|
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| EBITDA | 52 345 | 32 346 | 162 607 | 106 185 |
| Cost incurred in establishing AMS centre in Poland | - | - | - | 1 906 |
| Share-based payments | 2 786 | 2 481 | 11 575 | 8 706 |
| Depreciation right-of-use assets (IFRS 16 effect) | (6 096) | (5 192) (23 002) (18 535) | ||
| Adjusted EBITDA | 49 035 | 29 635 | 151 180 | 98 261 |
| 2023 | 2022 | 2023 | 2022 | |
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| EBIT | 27 120 | 9 695 | 70 503 | 23 694 |
| Cost incurred in establishing AMS centre in Poland | - | - | 1 906 | |
| Share-based payments | 2 786 | 2 481 | 11 575 | 8 706 |
| Amortization of excess values on acquisition | 3 494 | 3 113 | 13 690 | 11 935 |
Adjusted EBIT per segment
| 2023 | 2022 | 2023 | 2022 | |
|---|---|---|---|---|
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| Managed Services - EBIT | 29 597 | 22 348 | 109 558 | 64 667 |
| Cost incurred in establishing AMS centre in Poland | - | - | 1 906 | |
| Share-based payments | 972 | 547 | 4 840 | 2 881 |
| Managed Services - adjusted EBIT | 30 569 | 22 895 | 114 398 | 69 454 |
| 2023 | 2022 | 2023 | 2022 | |
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| Professional Services - EBIT | 10 441 | 4 427 | 30 315 | 19 992 |
| Share-based payments | 300 | 183 | 1 089 | 1 014 |
| Professional Services - adjusted EBIT | 10 740 | 4 610 | 31 404 | 21 006 |
| *Relates mainly to redundancy costs/severance pay for employees | ||||
| 2023 | 2022 | 2023 | 2022 | |
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| New business (APAC) - EBIT | (632) | (650) | (7 367) | (6 139) |
| Share-based payments | 70 | 198 | ||
| New business (APAC) - adjusted EBIT | (562) | (650) | (7 169) | (6 139) |
| 2023 | 2022 | 2023 | 2022 | |
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| Group overhead/unallocated - EBIT | (12 286) (16 429) (62 002) (54 826) | |||
| Restructuring costs* | - | - | ||
| Mergers & Acquisitions | - | |||
| Share-based payments | 1 444 | 1 752 | 5 446 | 4 811 |
| Amortization of excess values on acquisition | 3 494 | 3 113 | 13 690 | 11 935 |
| Group overhead/unallocated - adjusted EBIT | (7 347) (11 564) (42 866) (38 079) |
Annual recurring revenue (ARR)
ARR is defined as the annualised value of revenue the Company expects to receive from SaaS (software as a service) and BPaaS (business process as a service) contracts with customers but excludes change orders that do not result in regular future revenue. The ARR is calculated by taking the revenue for Managed Services in the applicable quarter, adjusted for change orders and, contracts that have not generated revenue for part of the quarter (revenue from customers that have exited during the quarter is deducted, and estimated revenue for new contracts that have gone live during the quarter is added), multiplied by four. Contracted ARR includes the ARR at the end of the quarter, plus the estimated ARR of new contracts yet to go live.
Net Retention
Net Retention is the percentage of revenue retained from Managed Services customers over a 12 months period. This figure takes into account any changes in revenue resulting from alterations in services, products and volumes, as well as any lost revenue from customer attrition. Net Retention at the end of a given quarter is calculated by starting with the Managed Services revenue from the same quarter prior year, but excluding revenue from customers who had not fully implemented our solutions or services in that quarter. The next step is to measure the revenue from the same customers in the current quarter, using a constant currency (ref. definition below). This amount is then divided by the revenue from the same quarter prior year to obtain the Net Retention rate.
Revenue growth constant currency
The following table reconciles the reported growth rates to a revenue growth rate adjusted for the impact of foreign currency. The impact of foreign currency is determined by calculating the current year's revenue using foreign exchange rates consistent with the prior year.
| 2023 | 2022 | 2023 | 2022 | |
|---|---|---|---|---|
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
| Revenue growth, as reported | 24,7 % | 24,2 % | 26,7 % | 15,2 % |
| Impact of foreign currency | -10,6 % | -2,4 % | -10,7 % | 1,3 % |
| Revenue growth, constant currency | 14,1 % | 21,8 % | 16,0 % | 16,5 % |
| Managed Services revenue growth, as reported | 23,1 % | 30,0 % | 27,1 % | 21,7 % |
| Impact of foreign currency | -8,9 % | -1,5 % | -9,3 % | 1,4 % |
| Managed Services revenue growth, constant currency | 14,2 % | 28,5 % | 17,8 % | 23,1 % |
| Professional Services revenue growth, as reported | 21,6 % | 5,6 % | 19,8 % | -1,0 % |
| Impact of foreign currency | -14,4 % | -3,4 % | -14,3 % | 1,3 % |
| Professional Services revenue growth, constant currency | 7,2 % | 2,2 % | 5,5 % | 0,3 % |
Net interest-bearing debt (NIBD)
Net interest-bearing debt (NIBD), consists of interest-bearing liabilities, less cash and cash equivalents.
The Group risk of default and financial strength is measured by the net interest-bearing debt.
| 2023 | 2022 | |
|---|---|---|
| (NOK 1 000) | 31. Dec | 31. Dec |
| Cash and cash equivalents continuing operations | 135 722 | 91 796 |
| Cash and cash equivalents discontinuing operations | 248 | 1 655 |
| Interest-bearing loans and borrowings - long-term | 439 964 | 10 891 |
| Interest bearing loans and borrowings - short-term | 10 757 | 369 693 |
| Net interest-bearing debt (NIBD) | 314 751 | 287 133 |
Free cash flow
Free cash flow represents the cash flow that Zalaris generates after capital investments in the Group's business operations have been made. Free cash flow is defined as operational cash flow.
| 2023 | 2022 | 2023 | 2022 | |
|---|---|---|---|---|
| (NOK 1 000) | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
| Net cash flow from operating activities | 44 133 | 12 423 | 58 551 | 422 |
| Investment in fixed and intangible assets | (20 180) | (9 815) (33 868) (27 845) | ||
| Free cash flow | 23 954 | 2 608 | 24 683 | (27 423) |
Full time equivalents (FTEs)
The ratio of the total number of normal agreed working hours for all employees (part-time or full-time) by the number of normal full-time working hours in that period (i.e. one FTE is equivalent to one employee working full-time).
Key Figures
| (NOKm unless otherwise stated) | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 |
|---|---|---|---|---|---|---|---|---|---|
| Revenues | 201,7 | 208,4 | 210,2 | 223,6 | 250,6 | 260,8 | 280,5 | 277,5 | 312,4 |
| Revenue growth (YoY) | -0,9 % | 8,1 % | 13,4 % | 14,4 % | 24,2 % | 25,1 % | 33,5 % | 24,1 % | 24,7 % |
| EBITDA adjusted | 24,9 | 27,5 | 19,1 | 22,0 | 29,6 | 29,6 | 34,6 | 37,9 | 49,0 |
| EBITDA margin adjusted | 12,3 % | 13,2 % | 9,1 % | 9,9 % | 11,8 % | 11,3 % | 12,3 % | 13,7 % | 15,7 % |
| EBIT adjusted | 10,2 | 14,4 | 6,8 | 9,7 | 15,3 | 18,5 | 20,2 | 23,7 | 33,4 |
| EBIT margin adjusted | 5,1 % | 6,9 % | 3,2 % | 4,4 % | 6,1 % | 7,1 % | 7,2 % | 8,5 % | 10,7 % |
| EBIT | 1,5 | 4,7 | 1,2 | 4,4 | 13,3 | 12,8 | 12,7 | 17,6 | 27,1 |
| EBIT margin | 0,7 % | 2,2 % | 0,6 % | 1,9 % | 5,3 % | 4,9 % | 4,5 % | 6,4 % | 8,7 % |
| Profit Before Tax | 1,7 | 14,7 | (26,2) | (9,4) | 4,9 | (25,1) | (8,9) | 18,8 | 11,5 |
| Income Tax Expense | (0,3) | (1,5) | 5,2 | 2,7 | (12,7) | 2,6 | (0,4) | (3,2) | 10,1 |
| Net income | 1,3 | 13,2 | (21,0) | (6,7) | (8,2) | (22,5) | (9,3) | 15,6 | 21,7 |
| Profit margin | 0,7 % | 6,3 % | -10,0 % | -3,0 % | -3,3 % | -8,6 % | -3,3 % | 5,6 % | 6,9 % |
| Weighted # of shares outstanding (m) | 21,3 | 21,5 | 21,6 | 21,6 | 21,6 | 21,6 | 21,6 | 21,6 | 21,6 |
| Basic EPS (NOK) | 0,06 | 0,44 | (0,72) | (0,95) | (0,56) | (1,20) | (0,52) | 0,62 | 0,96 |
| Diluted EPS (NOK) | 0,06 | 0,41 | (0,72) | (0,95) | (0,56) | (1,20) | (0,52) | 0,62 | 0,96 |
| Cash flow items | |||||||||
| Cash from operating activities | 23,2 | (4,4) | 3,0 | (10,6) | 12,4 | (4,1) | 3,3 | 15,3 | 44,1 |
| Investments | (6,2) | (4,7) | (6,5) | (8,0) | (9,8) | (4,8) | (4,7) | (4,2) | (20,2) |
| Net changes in cash and cash equi. | 7,5 | (41,3) | (17,4) | (23,3) | (2,1) | 27,1 | (8,6) | 7,4 | 17,5 |
| Cash and cash equivalents end of per | 176,2 | 134,7 | 116,8 | 95,6 | 93,5 | 124,1 | 113,6 | 120,7 | 136,0 |
| Net interest-bearing debt | 183,0 | 212,9 | 254,4 | 284,5 | 287,1 | 332,9 | 356,3 | 333,3 | 314,8 |
| Total equity | 207,3 | 189,7 | 182,4 | 180,5 | 163,6 | 168,9 | 176,7 | 177,6 | 203,0 |
| Equity ratio | 25,0 % | 23,1 % | 20,9 % | 20,1 % | 18,1 % | 16,3 % | 16,8 % | 16,8 % | 0,2 |
| FTEs (quarter end) | 795 | 838 | 884 | 915 | 963 | 983 | 987 | 1 004 | 1 007 |
| Segment overview | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 |
| Revenues | 201,7 | 209,7 | 210,2 | 223,6 | 250,6 | 260,8 | 280,5 | 277,5 | 312,4 |
| Managed Services | 143,0 | 146,5 | 151,7 | 160,6 | 186,0 | 186,7 | 204,0 | 200,0 | 228,9 |
| Professional Services | 58,7 | 61,9 | 57,9 | 61,3 | 61,9 | 70,5 | 72,3 | 73,1 | 75,3 |
| APAC | 1,2 | 0,6 | 1,6 | 1,4 | 3,6 | 4,3 | 4,4 | 8,2 | |
| EBIT | 1,5 | 4,7 | 1,2 | 4,4 | 13,3 | 12,8 | 13,0 | 17,6 | 27,1 |
| Managed Services | 14,1 | 15,1 | 10,7 | 16,5 | 21,8 | 23,5 | 27,7 | 28,7 | 29,6 |
| as % of revenue | 9,9 % | 10,3 % | 7,1 % | 10,2 % | 12,0 % | 12,6 % | 13,6 % | 14,3 % | 12,9 % |
| Professional Services | 4,8 | 6,8 | 4,9 | 3,8 | 4,4 | 10,3 | 2,9 | 6,6 | 10,4 |
| as % of revenue | 8,1 % | 11,0 % | 8,5 % | 6,2 % | 7,1 % | 14,6 % | 4,1 % | 9,1 % | 13,9 % |
| APAC | (3,8) | (3,3) | (1,7) | 3,1 | (2,5) | (2,2) | (2,0) | (0,6) | |
| as % of revenue | -310,9 % | -579,1 % | -106,9 % | -24,6 % | -70,2 % | -50,5 % | -46,7 % | -7,7 % | |
| Gr.ovhd & Unallocated | (17,4) | (13,5) | (11,1) | (14,2) | (15,9) | (18,5) | (15,5) | (15,6) | (12,3) |
IR contacts
Hans-Petter Mellerud, CEO [email protected] +47 928 97 276
Gunnar Manum, CFO [email protected] +47 951 79 190
Financial information
Q1 2024 to be published on 25 April 2024
All financial information is published on the Zalaris' website: zalaris.com/Investor-Relations/
Financial reports can also be ordered at [email protected].
Zalaris ASA PO Box1053 Hoff 0218 Oslo Norway