Zalaris

Investor Presentation • Feb 28, 2023

28 February 2023

Presentation of financial results Q4 2022

Disclaimer

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

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

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

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

Agenda

Today's presenters

• Highlights
• Company in brief
• Financial review
• Markets and outlook
• Q&A

Hans-Petter Mellerud CEO and Founder

Gunnar Manum CFO

Highlights

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Q4 2022 key takeaway

• Accelerated growth: Revenue growth of 22 percent year-on-year (constant currency).
• EBIT improvement program on track: Will increase annual EBIT by NOK 40 – 50 million from current level by end-2023 from costs improvements and contribution from signed contracts
• Successful new-sales: Good inflow of new contracts in Q4, including 5-year contracts with Boliden in Sweden and the Central Bank of Norway
• Historic low churn: Extended 18 of the 19 agreements up for renewal during the year
• Solid pipeline: New business with several large multicountry deals in contracting stage

Continued development in new signings and strong pipeline of multi-country contracts in final contracting stage

• Several new deals and extensions/renewals signed securing continued growth in 2023 and 2024
• Pipeline of Multi-Country Peoplehub powered opportunities strong, and potential for another year of record sales in 2023

5-year agreement for outsourced payroll solution and outsourcing services based on Zalaris PeopleHub to Swedish metal company Boliden's 3'800+ employees

5-year agreement for outsourced payroll and, travel & expense solutions and services based on Zalaris PeopleHub to Norges Bank (The Central Bank of Norway)

5-year agreement where Zalaris will integrate TOMRA's HR solution with Zalaris PeopleHub, which includes Zalaris' cloud payroll, time and absence and travel expense solution for employees in Norway.

Consultancy agreement (Professional Services) for the implementation of EC Payroll in Germany, Spain and Belgium for Ryanair. Further 6 – 8 countries expected to be added to the project scope.

Managed Services grew by 28% in the fourth quarter, in local currency

Revenue NOK 186.0m (+30.1%)

*Revenue in local currency converted to NOK using the avg. currency rate from the quarter last year. See Q4 interim report for definitions of APMs

• +28.5% higher revenue when adj. for currency effects
• Strong growth from new customer and up -sale/additional volume from existing customers: +30.1% (as reported)
  • New contracts, up-sale and volume increases: +17.2%
  • More change orders contributed with 6.6% (+NOK 9.5m)
  • One-off revenue recognition relating to a customer project: +6.3% (+NOK 9.0m)
• Net new signings with annual recurring revenue (ARR) of ~NOK 12m during the quarter
• The pipeline remains strong, with several large potential global and European multi-country deals in an advanced stage

Professional Services continue being strong contributor to Zalaris overall success and Managed Services growth

Revenue NOK 61.9m (+5.5%)

• Revenue in Professional Services grew by 2.2% when adjusted for positive currency effects
• Significant PS capacity still being utilized on implementing new customers in MS (transformation projects) in Germany and UK
• Continued focus on adding internal capacity through trainee and certification programs to address pressure on consulting resources and replace the use of external consultants, particularly in Germany.
• In local currency, revenue in Poland grew by ~5%, from additional volume from existing clients, while Germany had a reduction of ~3%

^*) Revenue in local currency converted to NOK using the avg. currency rate from the quarter last year. See Q4 interim report for definitions of APMs

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

Distribution of Projects vs long term AMS based revenue

• ~47 % of Professional Services revenue is recurring, or recurring like, and based on long term agreements and relationships
• ~75 % of Professional Services revenue is from customers that were customers 12 months prior

Revenue customer split

* Customers that were invoiced in the same quarter previous year ** New customers since the end of the same quarter previous year

EBIT improvement program to increase annual EBIT by NOK 40 - 50m by end-23

• Improve customer margins in Northern Europe through full implementation of Zalaris 4.0 operating model and near-/offshoring by end of 2023 resulting in NOK 8 - 10m annualized cost savings
• Implement Zalaris 4.0 operating model and near-/ offshoring for German operations by end of 2023 resulting in NOK 8 - 10m annualized savings
• Utilize existing capacity to serve new customers and additional change orders resulting in NOK 5 - 10 million annualized savings/incremental margin
• Add contribution (margin) from customers to go live (net of non-renewals) with an EBIT effect of NOK 20 million
• Reduce the use of external consultants and replace with own employees with 20-25% lower costs resulting in ~NOK 5 million annual savings
• Review overhead costs targeting maintaining or slightly lower existing levels

Targeting 15-20% EBIT margin per country - significant margin potential in Germany

Germany is the largest market, but lowest margin… …with several detailed measures initiated

Revenue per geography FY 2022 (NOKm)

• • 2% EBIT margin (FY 2022) in Germany vs. UK&I and Norway at 23% and 21%, respectively.

Key activities to improve Zalaris Germany

• New EVP DACH from YE21 introducing tighter measures on engagement, leadership training and promotion of internal career opportunities
• Implementation of Zalaris 4.0 operating model with use of nearand off-shoring vs 100% delivered from Germany
• New Managed Services bids based on scalable Peoplehub infrastructure
• New team leaders hired/promoted with a clear target on eNPS with a voluntary separation ratio for 2023 of 12%
• Project Initial strategy starting to pay-off with several key wins and revenue growth

Selected new logo wins in Germany

© zalaris 2023 Page 11 Source: Zalaris secondary report, excludes any mark-up for tax purposes (transfer pricing) Note: EBIT margins excl. overhead distribution and is based on local GAAP

Germany Norway Sweden Denmark Poland Finland UK&I

Company in brief

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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 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 large Nordic companies with cross-boarder need and a strong customer portfolio of some of the largest corporations in the Nordics and DACH region

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
NOK 960m	17 countries	150+ countries
Annual run rate revenues Q4'2022	With own service centers and expertise in local laws and regulations	With expertise in local laws and regulations, together with partners

Geographical footprint

Zalaris' Product offering covering the full employee life cycle

Services delivered by two integrated business units with the majority of 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

Financial Review

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Revenue increased by 22% for the quarter in local currency

Revenue NOK 250.6m (+24.2%)

Revenue growth +21.8% YoY in constant currency

• Revenue growth (as reported) for the quarter YoY: +24.2%
  • New contracts/up-sale/volume changes: +15.0%
  • Increased change orders in MS: +4.7%
  • One-off revenue recognition relating to a customer project in MS: +4.5%
• MS +30.1% to NOK 186m
• PS +5.5% to NOK 62m
• Signed new SaaS/BPaaS contracts with annual recurring revenue of ~NOK 12m during the quarter
  • Invoicing to start in Q4'23
• New SaaS/BPaaS contracts signed, but yet to go live has annual recurring revenue of ~NOK 72m

*See Q4 financial report for definitions of APMs

Strong revenue visibility through 2023 and beyond - signed BPO contracts will result in significant revenue increase

Revenue development based on signed MS contracts (NOKm)

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

• Total annual revenue expected to increase by ~NOK 112m (+13%) by Q1 2024 vs. FY 2022, based on signed contracts (assuming no material churn)
• The new contracts signed will start generating monthly recurring revenue as soon as the contracts go live
• Assumes MS change order levels at historical ~10% and PS revenue at FY 2022

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

Increase in adj. EBIT (ex. APAC) for the quarter, year-on-year

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

• Adj. EBIT (ex APAC) NOK 15.9 (NOK 10.2m) +56%
• Adj. EBIT (ex APAC) margin 6.4% (+1.3pp)
• EBIT improvement program to increase annual EBIT by NOK 40 – 50m by end-23 on track
  • Cost improvements by moving work to near-shore and off-shore locations (program has started)
  • Improved allocation of resources and focus on improvement in customer margins after initial rapid growth since 2021, which necessitated large increase in FTEs
  • Contribution from new signed contracts
  • Reduced used of external consultants through recruitment of own personnel

* See definition of adj. EBIT under APMs in Q3 2022 Interim Report)

New contracts and EBIT improvement program to increase annual EBIT by NOK 40-50m by end of 2023

Condensed Profit and Loss

	2022	2021	2022	2021
(NOK 1 000)	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Revenue	250 551	201 695	892 743	775 265
License costs	19 077	18 518	80 198	67 481
Personnel expenses	140 032	102 196	483 824	405 949
Other operating expenses	59 096	57 487	222 537	199 886
Amortization implementation costs customer projects	8 830	8 858	31 638	29 874
Depreciation, amortization and impairments	13 819	13 165	50 851	49 488
EBIT	9 697	1 472	23 695	22 585
Adjustment items	5 594	8 757	22 547	26 989
Adjusted EBIT*	15 291	10 228	46 242	49 574
Adjusted EBIT margin %	6,1%	5,1%	5,2%	6,4%
Net financial income/(expense)	(5 218)	76	(40 102)	(7 571)
Profit/(loss) before tax	4 479	1 548	(16 407)	15 014
Income tax expense	(12 685)	(458)	(6 295)	(2 203)
Profit/loss from discontinued operations	(3 891)	-	(16 018)	-
Profit/(loss) for the period	(12 098)	1 089	(38 720)	12 812
Basic earnings per share (NOK)	(0,56)	0,05	(1,79)	0,60

Personnel expenses: Increased number of FTEs YoY (+168), approx. NOK 9m in additional costs recognition in connection with one-off revenue recognition relating to a customer project (no material EBIT impact) and negative currency movements. Personnel expenses per FTE increased by approx. 3.7%, of which approx. 3% is due to currency movements

License costs and other operating exp.: No material changes vs. last year.

Continued strong cash position

Development in cash balance (NOKm)

• Cash balance at 31 Dec of NOK 100m
• Positive cash flow from operating activities of NOK 20m from changes in working capital
• Investments relates mainly to internal system development including projects partly financed through SkatteFunn
• Net interest-bearing debt of NOK 280.9m vs. NOK 284.5m at the end of previous quarter.

Markets and Outlook

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57% of European senior stakeholders from global enterprises expect the use of HR outsourcing to grow

Source: Everest Group Key Issues Survey, 2020

Zalaris is well positioned in the most attractive and fastest growing market segment

Expected growth of +10% in Zalaris' core market with multi-country focus Comments

Multi-country scope 9% 3% 10% 13% 18.8 bn 0.9bn 2.7bn 2.3bn CAGR ('18-'23) 2023 Market size

Global (>2 regions) Multi-country (>1 country Single country Multi-region (>1 region)

• Zalaris focus on delivering HR outsourcing services to clients with cross-border employees and offices with more complex HR tasks
• The core market is multi-country companies with more than two or more countries within a region
• Within BPO services, the multi-country payroll market is the fastest growing with ~13% annual growth expected until 2023
• Additionally, Zalaris' other focus markets, multi- region and global are expected to grow ~10% annually
• Zalaris is well positioned with a sweet spot within multi-country and further upside from multi-region and global

Source: Nelson Hall, "Next Generation Payroll Services"

Sweet spot

within a region)

Well protected to changes in global macro picture

Higher inflation

• Most long-term contracts have a provision for annual indexation based on salary and CPI increases
• Experiencing some pressure on salary levels in a competitive market for resources

Fear of recession

• High share of recurring revenue and long-term contracts
• Historically seen an increased interest for outsourcing in challenging times, when companies need to focus on operational efficiencies and cost reductions
• Geographical diversified

Higher interest rates

Would increase cost of capital, but current solid cash position and positive cash-flow

Leaving 2022 with continuing growth and an aim to deliver on margin expectations through EBIT improvement program

• Communicated growth target of 10%+ and becoming a NOK 1 billion company in 2023
• Maintain our target EBIT of 10%, as revenue from projects under implementation are recognized and EBIT improvement program actions implemented, targeting annualized EBIT of NOK 100 million in 2023
• Resilient vs macro picture. Majority of contracts with indexation clauses protect against inflation and pressure on personnel costs. Historically increased demand for outsourcing in recession/crisis situations.

Q&A

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"If your dreams don't scare you, they are not big enough"

That was the way in which Germany's 2014 IRONMAN and two-time IRONMAN 70.3 World Champion, Sebastian Kienle, announced the news last week that one of the aims for his final season in the sport is to win the 2023 Zalaris Norseman Xtreme Triathlon

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

Simplify work life. Achieve more.