Zalaris

Investor Presentation • Sep 19, 2023

19 September 2023

Capital Markets Day

Disclaimer

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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

• Strategy and goals Hans-Petter Mellerud
• PeopleHub: HR and Payroll platform with global reach Halvor Leirvåg
• Market positioning and growth opportunities Øyvind Reiten
• A competitive global delivery model Richard E. Schiørn
• Consulting business Hans-Petter Mellerud
• Turning internal HR to a business opportunity Hilde Karlsmyr
• Financial strategy and targets Gunnar Manum
• Key take-aways Hans-Petter Mellerud
• Q&A

Today's presenters

Hans-Petter Mellerud CEO and Founder Halvor Leirvåg CTO

Øyvind Reiten EVP Commercial and Sales

Richard E. Schiørn EVP Solution & Delivery Global Managed Services

Hilde Karlsmyr CHRO

Gunnar Manum CFO

The three main points that we want to convey today

• 1) Zalaris PeopleHub is increasingly in favour by mid-market and large customers seeking to digitalize their Payroll & HR processes resulting in 33% reported growth in Q2. We are now a 100 MEUR annualized revenue company and expect to continue delivering above our 10% growth target over the next 36 months.
• 2) Zalaris PeopleHub is a scalable solution supporting our Zalaris 4.0 industrialized approach to HR & Payroll. We are on track delivering on our 10% EBIT target and are now aiming higher.
• 3) Focus on capital allocation in combination with increased profitability will drive free cash flow to target levels.

Strategy and goals

Hans-Petter Mellerud CEO and Founder

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Payroll & HR solutions that enable digital organizations

One global IT platform with local presence

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

Market leader within mid-size companies with cross-border need and a strong customer portfolio of some of the largest corporations in the Nordics, DACH, UKI and APAC regions

1,500,000	~1,100	300,000+
Employees served monthly by Zalaris supported HR solutions	Zalaris employees across the world	Employees served monthly through payroll services
~EUR 100m	17 countries	150+ countries

Geographical footprint

PeopleHub covers the full employee life cycle

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

1) 89 customers paying Zalaris NOK >1m, with a long-tail of 100 smaller customers

2) 46 customers paying Zalaris NOK >1m, with a long-tail of 189 smaller customers

3) Based on LTM Sep '22 revenues

Diversified customer base across a wide range of industries

Continuing growth journey to become the leading European provider of Global Payroll & HR Solutions and Services to Midmarket and Large customers.

Grow to MEUR 150+ Annualized Revenue and EBIT of 12-15% by 2026 Q4

Deliver Fully Digitalized Payroll and HR Solutions Helping Customers Implement and Run the Best People Processes in Their Industry

Strategic Focus/Projects

Drive Managed Services Operational Excellence • Zalaris 4.0 across all operations • Target 100% Automated Payroll • Fully digitalized operations	Drive Organic Growth • Grow revenue with existing customers and sell new names that utilize existing infrastructure and scale driving incremental margin • Increase Peoplehub Geo coverage to cover EU through growing with customers or partnering • AI/ML as basis for new value adding services • ESG into products & services DNA	Drive Professional Services Operational Excellence • Focus on customer with Managed Services Potential or Reference Value • Operate as Global Business Unit with common methodology and target Right Shoring • Drive productivity through standard solutions • Leverage install base for cross selling value to customers • Establish Zalaris Care
Organizational Capability, Learning & Growth	The Best Talent, Team and Technology in Our Industry
Train and roll out AI Tools	Operate Zalaris Academy	Cyber Security Awareness and Preparation
Retool the organization for the future	Competencies	Organizational Robustness

Zalaris PeopleHub HR and Payroll platform with Global reach

Halvor Leirvåg CTO

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Zalaris PeopleHub-platform is a global scalable solution used for all new customers

• PeopleHub Hybrid Cloud offers a state-of-the-art technology stack combined with a proven and robust payroll engine
  • The Core is Powered by SAP Payroll with vendor support until 2040 offering local support and compliance in approximately 100 countries.
    • All in one integrated system as seen from the customer perspective
    • Zalaris Standard implementation-methodology adding up to 80% improvements in implementation times in some areas since start of standardisation-efforts
• Scalability of PeopleHub-Infrastructure is secured and proven over time
  • Grown with Zalaris and has sustained a >10x user-growth while improving performance-levels
  • New customers added with minimal additional investment in system and landscape infrastructure

PeopleHub is an integral part in transforming acquired companies' infrastructure into a common delivery framework

Zalaris has privacy by design and Cyber security embedded in our DNA

Security and privacy by design

• Inhouse Cyber Security Operations Centre(CSOC) in place since 2016 and running 24/7/365
• Great feedback received from current, new and even lost customers on ongoing security-efforts even if we keep some parts secret

AI in use in most security-related scenarios

• Will be further enhanced as CI/CD
• Certified and audited annually according to the relevant security and quality standards
  • ISO27001
  • ISO9001
  • ISAE3402

PeopleHub increasingly based on own IP and winning with a user centric approach

• 100% Zalaris IP on new developments
• Microservices, microfrontend, hexagonal architecture
• Cutting edge technology like ReactJS, Tailwind, Spring Cloud
• Utilizing Azure services like hybrid databases, messaging, Kubernetes, vaults, cloud storages, search indexes, OpenAI
• API first design generate code from API definition
• Provision infrastructure from code (IaC)
• Individual components can be sold and implemented on customer infrastructure
  • Helpdesk-app already sold and implemented for pilot-customer on their platform

Artificial intelligence (AI) has been instrumental to improved user experience and increasingly being used for new services

Current AI-usage which will be extended in immediate future

• AI-based ticket categorisation in new Helpdesk. To be extended with GPT-options for customers who opt-in
• Conversational AI in use for all customers via Zally the chat-bot
• Improving productivity in daily Operations
  • Bing Enterprise("ChatGPT Pro") for all employees
  • Microsoft Copilot for key employee-groups to enhance and improve quality of deliverables

PoCs ongoing to monetize our Big Data repository

• Large potential to predict future events based on similarity detection on anonymized- and productive data
• 20years of data to be embedded into vector-based analytics to gain unknown insights
• OpenAI/GPT4, PrivateGPT and other options being tested

Market positioning and growth opportunities

Øyvind Reiten EVP Group Commercial and Sales

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Leading European player with Global reach

• Providing outsourced Payroll and HR services to large and mid-size companies, mainly in northern and central Europe
• Leading consultancy practice providing the full spectrum of SAP and SAP SuccessFactors services
• 5+ countries in flight across Europe with an ambition of full European coverage within the next few years
• Seen as a major contender in the industry by leading industry analysts like Gartner, Everest, and Nelson Hall
• We have exceeded analyst benchmarks in sales, achieving a YTD closed sales performance that surpasses 120%

We successfully support European companies globally

• The addressable market has increased significantly with global opportunities
• We efficiently manage CAPEX exposure by leveraging our established partner ecosystem for PeopleHub implementation and operation in larger GEOs – and full long-tail coverage
• 3 countries outside Europe in flight supported by partners will enable us to onboard a larger European customer base with global demands
• Prudent approach with clear criteria being used and evaluated when qualifying opportunities
• Centralized contract management and established standards minimizing risks

We target specific customer characteristics enabling efficient selling

Multi-country vs. Single –country

Focusing on multicountry and large single-country opportunities

Company size

Large and mid-size enterprises in one or multiple countries

Industry type

Covers most industries with some strongholds

1st vs 2nd generation outsourcing

Particularly strong in 1st generation outsourcing deals. 2nd generation is typically more competitive

IT strategy/HR system

Historically strong if the customer has an SAP strategy. However, our aim is to be the preferred partner regardless of the Customer`s preference for a global HR solution

We operate in an attractive market which is expected to grow with a CAGR of ~8-10%

• Attractive market with a strong growth outlook across both managed and professional services for which Zalaris currently outperforms
• Market supported by several tailwinds such as increasing global workforce, intensifying compliance burden, cost and innovation focus, and longer refresh cycles in HCM and Payroll
• The core market is multi-country companies with more than two or more countries within a region, aligning seamlessly with one of our key strengths
• Additionally, Zalaris' other focus markets, multi-region and global are expected to grow ~10% annually
• Zalaris is well positioned with a sweet spot within multicountry and further upside from multi-region and global

Competitive environment according to industry analysts

Customers choose us due to qualitative measures

"Zalaris were selected due to their professional competency with payroll, digitization, and the personal fit of the team. The Zalaris leadership team and the team members were impressive and convinced us with pragmatism, efficiency, and trustworthiness regarding how to respond to each other, and how to keep promises".

– Director Employee Experience and HR Services, Telefonica O2

"The transition from a local In-house Payroll Team to Global Outsourced Payroll provider was a big move for our business and more specifically for our payroll team. The team's attitude throughout this transition has been second to none."

- HR & HSE Director, Circle K

"We undertook a robust selection process to identify Zalaris as our chosen solution provider – this process was competitive, but it was Zalaris' agility and culture that ultimately drew Sika to this partnership. We are confident and look forward to working together to deliver ECP."

- Head of HR, Sika Limited

A uniform value proposition across all GEOs fuels growth Exemplified by Germany's current upswing

• Combination of global standards and local entrepreneurship being a catalysator for growth
• Addressable market in DACH being >3x the Nordics
• Deal values typically being 2.5x the average in the Nordics with a significant untapped potential for multicountry and multiregional deals
• YTD closed sales in DACH represent ~70% of closed business for the group compared to ~40% (2022) and ~25% (2021)
• Focus going forward would be to achieve the same market success in the UK which represents a significant untapped potential for Zalaris

A competitive global operating model

Richard E. Schiørn EVP Solution & Delivery – Global Managed Services

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Global operating model with strong local competence enables scalability and profitability

Key focus for Managed Services is to bring DACH/Germany to the same level as the Northern Europe the next 12 months

Rightshoring and Digitalization maximize value creation without compromising quality

Nearshore

Nearshore represents service locations in Latvia and Poland, and manages processes characterized by;

• Systematic and repeatable work
• Highly reliant on formal processes, methodologies and standards
• Depended on tight integration across functional boundaries
• Local Language

Offshore

Offshore represents service locations in India and manages processes characterized by;

• Routine work
• Highly reliant on formal rules, procedures, and training
• Depended on low-discretion workforce or on automation

Delivering business value and growing partnership with our customers

Guiding Principles	Standardization, harmonization, consolidation cross countries / services	Automation and rightshoring of services	Leverage and develop PeopleHub solution, process engineering, globalization
Solution Approach	Build the Foundation	Deliver Business Value	Expanding GEO footprint
Core Objective	Optimize core services and reduce costs	Innovation and technology to optimize TCO	Global expansion and transformation
Solution	• Drive standardization and industrialization • Implement defined improvements to remove none added value activities • Leverage chosen technology and Zalaris integration experience • Implement a strong governance to ensure objectives are met	• Drive innovation and best practice services • Business improvements adding new product & services • Enhancing and unify user experience and efficiency through Zalaris PeopleHub solution • Digitalization of all Employee Lifecycle events	• Go global together with further cost reduction • One global solution supporting customers GEO footprint • Predictable and one integrated operating model • Further identify and implement global and local improvements reducing operating expense and/or improve efficiency

Solution and best practice led Service delivery

Outcomes	Mutually Beneficial Partnership

Consulting business

Hans-Petter Mellerud CEO and Founder

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Professional Services: An SAP Focused Powerhouse

Professional services (PS)

Consulting services including delivery of traditional consulting projects as well as outsourcing and cloud implementation projects

461 customers, ~27%2 of total revenue with ~50% recurring revenues

1) 46 customers paying Zalaris >1MNOK with a long-tail of 189 smaller customers

2) Based on LTM June '23 revenues

SAP operates in a large and expanding market that offers many possibilities for growth and has a strong leadership in its key areas of expertise.

Zalaris Professional Services – in the process of transforming to a Unified Global Practice

Legend1: Local Consulting Delivery Centre

1) YTD AUG 2023: 17.1M

© zalaris 2023 Page 33

TRANSFORMATION PROJECTS- and PeopleHub APPLICATION MAINTENANCE consumed approx.:

45% of capacity

Of which 66% employees and 34% external consultants

With 130+ certifications

12 Present in 12 Countries with Global Delivery Capability

Strong Partnership SAP Gold Partner

Human Capital Management

Our 360o Service Offering give End-to-End Coverage

• Requirements Definition
• HR Roadmap Development
• Sourcing Services
• Business Case Development
• Org & Process Design
• Change Management Services
• Digital Adoption Planning
• Phase 0: Planning

• Transformation & Implementation Services
• Solution Architecture Services
• Functional & Technical Consulting
• Data Migration Services
• Integration (BTPI) Design & Development
• BTP/ ABAP Program Design & Development
• Test Management & Execution
• Strategic Analytics Consulting
• Quality Assurance Audits
• Change Management & Training Services
• Digital Adoption Execution

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

Distribution of Projects vs long term AMS based revenue

Revenue customer split

~57 % of Professional Services revenue is recurring, or recurring like, and based on long term agreements and relationships

~78 % 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

A strong Professional Services is integral to Zalaris' strategy

• Access to a global team of HR Domain & SAP SuccessFactors Experts that secure capacity for Peoplehub projects & advisory
• Global Delivery capability ensuring high quality and high value approach
• Develop customer relationships that can be converted to Managed Services long term engagements and/or serve as references
• Toehold for greenfield geographic expansion creating brand awareness

Professional Services strategic projects target increased customer satisfaction, growth and improved margins

• Recruit and build own consultants to reduce dependency on external consultants
• Leverage install base to generate cross sell opportunities and additional value to customers
• Use RightShoring to gain access to larger talent pool and reduced cost to serve
• Continue improving PeopleHub implementation methodology and application maintenance productivity to free up resources that can generate additional customer value

Turning internal HR to a business opportunity

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Zalaris HR is structured as a modern centralized organization serving the whole group based on standardization, digitalization, and automatization

• The HR organization consist of 22 employees distributed according to our rightshore concept
• 50% offshore, 25% nearshore and 25% onshore

Scalable Global Shared Services

Fully integrated digital HCM is key for strategic HR

GDRP compliant with focus on employee experience

PeopleHub SuccessFactors

We deliver the whole employee life cycle fully digitalized based on SAP SuccessFactors fully integrated with PeopleHub

Evaluating going from cost center to profit center launching HR as our next tower of services

• Using own HR organization to build market tech enabled HR Services offering to customers. Enabling customers to scale into new geographies with limited addition of overhead functions
• Taking responsibility for all operational HR leaving customers to focus on strategic HR
• Framework extended HR Services based on People Hub and SuccessFactors
• HR services as BPaaS estimated to represent a potential uplift of 120% on our managed payroll revenue, distributed 55% SaaS and 45% services
• Expected margins as for other services, and rightshore model as for Zalaris HR services today (50% offshore, 25% nearshore and 25% onshore)
• First customer in pilot with 700 employees in 14 countries

Financial strategy and targets

Gunnar Manum CFO

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Solid revenue growth last 2 years and ambition to grow to NOK 1.5 billion by 2026 (+10% p.a.)

>10% annual organic revenue growth driven by:

• Growing HR and payroll market
• New large multi-country/global long-term contracts
• Expansion with existing customers products and geography (i.e. positive net retention)
• Higher than targeted growth in APAC
• M&A as a potential upside

Growth target per segment:

• Managed Services 15% growth
• Professional Services 5% growth
• Growing share of recurring revenue from Managed Services with long-term contracts of 5 – 7 years

Closing in on short-term adj. EBIT margin target of 10% and ambition to expand to 12 - 15% by end-2026

Development in adj. EBIT and adj. EBIT margin NOKm and %

>10% adj. EBIT margin short-term driven by:

• Current EBIT improvement program (Zalaris 4.0)
• Further right-shoring and standardisation to improve profitability in Germany

Region/country EBIT target of 15 – 20%:

• Most countries in line and increasing
• Germany significantly behind rest of the group, and major activities ongoing to rectify

12% – 15% adj. EBIT margin by 2026 driven by:

• Utilising scalability of existing operations lower marginal unit costs
• Further right-shoring
• Automation (AI) and standardisation
• Increase operational leverage (lower SG&A as a % of revenue)

Cash flow LTM hampered by investment initiatives and rapid revenue growth

^*Adj. for NOK 6.2 in restricted cash reclassified to other LT receivables

** Adj. for employee option costs and customer project revenue recognised (non-cash items) and before EBITDA in APAC

*** Relates mainly to rental costs for office premises

Cash flow improvements

• EBITDA expansion
• Reinvestment in organic growth
  • Geographical expansion through partners and when justified through contracts won
  • Growth will increase NWC (mainly trade receivables), however at a lower level
• Customer projects cash positive
  • Limit funding of customer projects (implementation projects should be net cash positive)
• CAPEX (System development)
  • Limit to NOK 15 20m annually (average 2021 – 2022: NOK 20m)
• Net debt reduction
  • Through increased earnings and cash conversion

Increased focus on growing operating cash flow conversion and prudent capital allocation

• Targeted long-term operating cash flow conversion* of 70%
• Achieved mainly through:
  • Working capital improvements
  • Transformation projects for new customers to be minimum cash neutral

*Operating cash flow conversion is calculated as cash from operating activities before interest over EBITDA

Bond financing secured to 2028 with potential for early redemption - conversion to bank financing is target

Issued 5-year EUR 40 million bond loan in March 2023

• Early redemption possible from Sep.25
• Target to reduce leverage (NIBD/EBITDA) to <2.5 to improve re-financing options (e.g bank lending) and lending costs
• Loan in EUR used as a hedge against investments in Germany and other European countries
  • Loans originally used to acquire entities in Germany and UK
  • Approximately 80% of revenue from non-Norwegian entities, and an increasing share of the group's total revenue and net profit is being generated in currencies other than NOK
  • A weaker NOK vs. EUR has resulted in significant unrealised currency losses, but a corresponding increase in the value of foreign subsidiaries

~Revenue by currency YTD Q2'23

Summary of long-term financial targets (to 2026)

Revenue: >10% organic growth (Managed Services >15%, Professional Services >5%)

• Fuelled by large multi-country contracts and expansion with existing customers
• Profitability: 12% - 15% adj. EBIT margin
  • Utilising right shoring, automation (AI) and increase operational leverage
• Cash conversion: >70% of adj. EBITDA
  • Focus on reducing WC as a % of revenue and customer projects to be minimum cash neutral
• ROCE: >15%
  • Focus on non-organic growth initiatives
• Leverage: NIBD/adj. EBITDA** <2.5
  • Gradual reduction in leverage to ensure lending flexibility and lower costs
• Dividend: Deliver on existing dividend policy
  • ~50% net profit before tax

Key take-aways

Hans-Petter Mellerud CEO and Founder

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The three main points that we conveyed today

• 1) Zalaris PeopleHub is increasingly in favour by mid-market and large customers seeking to digitalize their Payroll & HR processes resulting in 33% reported growth in Q2. We are now a 100 MEUR annualized revenue company and expect to continue delivering above our 10% growth target over the next 36 months.
• 1) Zalaris PeopleHub is a scalable solution supporting our Zalaris 4.0 industrialized approach to HR & Payroll. We are on track delivering on our 10% EBIT target and are now aiming higher and will be targeting 12-15% EBIT over the next 36 months.
• 3) Focus on capital allocation in combination with increased profitability will drive free cash flow toward our target level of >70% of EBITDA.

Q&A

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