Itera

Quarterly Report • Apr 28, 2021

• 1. Highlights of the quarter
• 1. Business Review
• 1. Financial Review
• 1. Outlook
• 1. Q & A

Arne Mjøs CHIEF EXECUTIVE OFFICER

Bent Hammer CHIEF FINANCIAL OFFICER

Q1 in brief

Key figures core digital business

02 Business review

Crisis accelerates digitalisation and sustainability

As response to COVID 19 65% of CEOs will accelerate digital business transformation

Survey by Gartner Survey by Mckinsey

The speed of adoption of digital technologies is increased by seven years globally

Towards a sustainable future

As B2B markets mature, new conditions drive the need for rapid change and transformation

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Towards the fourth industrial revolution

Working together end-to-end to unlock new opportunities

Delivery Factory at Scale for data-driven businesses

Faster business innovation through autonomous teams and adoption of cloud services

Business agility and reduced timeto-market through efficient DevSecOps teams

Efficient use of distributed delivery across borders and public cloud scale

Secure, predictable and flexible service delivery and operations capability end to end

Growing strategic partnership with DNV around the world

Geographic expansion in Bergen and Fredrikstad

• From 0 to 45 FTEs during last 2 years as ONE Itera with a typical 1:3 ratio (local : distributed)
• Moving into new office facility in May to continue growing the Western region of Norway.

OFFICE EXPANSION IN BERGEN NEW REGIONAL OFFICE IN FREDRIKSTAD

• New office and local manager in place from 1st May in Fredrikstad
• Accessing new customers and labour market in the Eastern region of Norway and close to larger market in Sweden

Our in-depth mobile banking report creates high awareness

Sbanken has the best mobile banking app in Norway, followed by SpareBank 1 and DNB.

• This award is orchestrated by tera's in-house analysis unit within banking and insurance, branded as Cicero Consulting
• The mobile banking report provides banks in Norway with valuable factual basis on customers' digital consumer behaviour.
• Feedback from several banks confirms that our insights are appreciated and valuable in the further development of their solutions.

Order intake from selected new and existing customers

Order intake

Book-to-bill ratio*) of 1.0 in Q1 for core digital business and 1.3 for the last 12 months

Customer development

▪ New business

• Existing customers accounted for 88.5% (87.6%) of revenues in Q1 2021
• New customers won over the past year generated revenues of NOK 18.0 (19.9) million in Q1 2021 (11.5%)
• Good visibility
  • Share of revenue from top 30 customers 74% (77%)
  • High customer concentration signifies
    • Strategic relationships
    • Full range of services
    • Hybrid delivery across borders

Revenue customers split (in MNOK)

Largest customers' share of revenue

Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21

Top 30 Top 10

* Existing customers defined as customers that were invoiced in the corresponding quarter last year

** New customers defined as customers won since end of corresponding quarter last year

Transformation of own data centre to the cloud

• We are investing MNOK 15 in the world class Cloud Centre of Excellence that will provide a scaling engine for massive data
• Revenue from the data centre operations was down 59% to NOK 12 million in Q1 following the planned exit of on-premise customers
• Data centre revenue will go continue to go down, mitigated by an increase in cloud revenue towards end of year

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Skilled and innovative employees

• 567 employees at the end of the quarter
  • Core digital business up 19, data centre operations down 21
  • Core digital business up 62 year over year, while data centre operations down 22
• Nearshore ratio of 50% (49%)
  • Our hybrid delivery model of onshore and nearshore consultants are increasing our price competitiveness as well as providing a high degree of scalability through access to a very large resource pool

Number of employees end of quarter by shore

Year-over-year growth in no. of employees

03 Financial review

Financial reporting 2021

▪ Given the sunsetting of the data centre operations, focus for financial reporting is on the core digital business, including the investment in the Cloud Centre of Excellence,

Key financials core digital business

	2021	2020	change	change
Amounts in NOK million	1-3	1-3		%
Sales revenue	144.4	130.7	13.7	10.5 %
Cost of sales	12.0	9.0	3.0	33.2 %
Gross profit	132.4	121.7	10.7	8.8 %
Gross margin	91.7 %	93.1 %	-1.4 pts	-1.4 pts
Personnel expenses	95.5	84.3	11.2	13.3 %
Other operating expenses	8.6	11.0	-2.4	-21.5 %
Depreciation and amortisation	6.2	7.8	-1.5	-19.7 %
Total operating expenses	122.4	112.0	10.3	9.2 %
EBITDA	28.3	26.5	1.8	6.9 %
EBITDA margin	19.6 %	20.2 %	-0.7 pts	-0.7 pts
EBIT	22.1	18.7	3.4	18.0 %
EBIT margin	15.3 %	14.3 %	1 pts	1 pts
No. of employees at the end of the period	523	461	6 2	13.5 %

• Strong growth of 11% fuelled by some major new accounts and more subcontractors
• Some opex savings from Covid (travel and sub-rental of Kiev office)
• EBIT up 18% to MNOK 22.1
• EBIT margin of 15.3% (14.3%)
• No. of FTEs up 62 to 523

Revenue and earnings development

Quarterly Revenue and EBIT margin*

• Momentum picking up after front loading of resources through Covid in anticipation of growth
• Margin improvements also aided by Covid related cost avoidance
• Quarterly figures are impacted by number of working days net of vacations

MNOK

Subscription revenue from data centre operations

▪ Subscription revenue from data centre operations will continue to drop as customers are migrated to cloud or exited

Segment reporting

• Data centre operations revenue MNOK 12.3 (-59%)
• Decline in data centre operations revenue and profits almost countered by growth in core digital business

	Q1 2021		Q1 2020			Growth
Amounts in NOK million	Core digital business	Data centre operations	Total	Core digital business	Data centre operations	Total	Core digital business	Data centre operations	Total
Sales revenue	144.4	12.3	156.7	130.7	30.2	161.0	10.5 %	-59.4 %	-2.6 %
Cost of sales	12.0	4.9	16.9	9.0	10.8	19.8	33.2 %	-54.6 %	-14.6 %
Gross profit	132.4	7.4	139.8	121.7	19.4	141.1	8.8 %	-62.1 %	-1.0 %
Gross margin	91.7 %	60.1 %	89.2 %	93.1 %	64.3 %	87.7 %	-1.4 pts	-4.2 pts	1.5 pts
Personnel expenses	95.5	8.9	104.4	84.3	15.2	99.4	13.3 %	-41.4 %	5.0 %
Other operating expenses	8.6	1.0	9.6	11.0	1.5	12.4	-21.5 %	-31.1 %	-22.7 %
Depreciation and amortisation	6.2	1.1	7.4	7.8	2.3	10.1	-19.7 %	-50.0 %	-26.6 %
Total operating expenses	122.4	15.9	138.3	112.0	29.7	141.7	9.2 %	-46.3 %	-2.4 %
EBITDA	28.3	-2.5	25.8	26.5	2.8	29.3	6.9 %	-190.0 %	-11.9 %
EBITDA margin	19.6 %	-20.5 %	16.5 %	20.2 %	9.3 %	18.2 %	-0.7 pts	-29.8 pts	-1.7 pts
EBIT	22.1	-3.7	18.4	18.7	0.5	19.2	18.0 %	-811.2 %	-4.2 %
EBIT margin	15.3 %	-29.8 %	11.7 %	14.3 %	1.7 %	11.9 %	1 pts	-31.5 pts	-0.2 pts

Statement of cash flow

	2021	2020	2020
NOK Million	1-3	1-3	FY
Cash flow from operations (EBITDA)	25.8	29.3	108.9
Change in balance sheet items	(24.6) (21.8)		(9.7)
Net cash flow from operating activities	1.2	7.5	99.2
Net cash flow from investment activities	(7.9)		(3.8) (17.0)
Purchase of own shares	-		(0.6) (18.2)
Sale of shares	-	-	8.0
Principal elements of lease payments	(7.3)	(5.6)
Instalment of sublease receivable	0.9	-	-
External dividend paid	-	-	(48.0)
Net cash flow from financing activities	(6.4)		(6.2) (58.3)
Net change in bank deposits and cash	(13.2)	(2.4)	1.3
Bank deposits at the end of the period	41.2	50.7	54.4
New borrowing related to leasing	-	0.6	2.4
Cash flow from operations NOK 1.2 (7.5) million in Q1 •
• 12 month rolling cash flow from operations was NOK 93 million

12 month rolling cash flow from operations (NOK Million)

Dividend and own shares

• The Board has proposed an ordinary dividend of NOK 0.25 per share based on 2020 results with possibility of a supplemental dividend later
• Share price was NOK 14.7 at the end of Q1 2021, an increase of 73% (80% incl. dividends) from NOK 8.5 at the end of Q1 2020.
• Current holding of own shares is unchanged at 1,269,136 shares. Value at 31 Mar 2021 was MNOK 18.7
• Consistent high distribution of earnings

Statement of financial position

• Equity ratio of 22% (26%) per 31 March 2021
  • 25% excl. IFRS 16 Leasing
• Cash balance of MNOK 41 (MNOK 51)
• Total balance reduced by MNOK 32 to MNOK 226

04 Outlook

Outlook

Attractive market driven by sustainability and digitalisation after Covid-19

Strong position through its end-toend services, worldclass distributed delivery and industrial partnerships

Core digital business will continue to grow at full speed. Profitable growth and cash flow are key focus areas.

Investment in world class Cloud Centre of Excellence, while transforming own data centres to the cloud with shortterm revenue drop

Larger projects and customers expected to continue to increase revenue visibility, efficiency and scalability.

Itera does not provide guidance to the market on future prospects.

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Top 20 shareholders

No Name	%	Nat	Shareholding
MJØS AS* 1 ARNE INVEST	29 36	NOR	24 129 911
2 OP CAPITAL AS	5 45	NOR	4 478 110
3 GIP AS	4 88	NOR	4 010 000
EIKESTAD AS 4	26 4	NOR	3 500 000
5 SEPTIM CONSULTING AS	3 57	NOR	2 930 000
6 SPAREBANK 1 MARKETS AS	3 41	NOR	2 800 000
BOINVESTERING AS 7	3 22	NOR	2 650 000
8 GAMST INVEST AS	2 92	NOR	2 399 165
JØSYRA 9 INVEST AS	2 68	NOR	2 200 000
10 MARXPIST INVEST AS	2 09	NOR	1 721 588
VERDIPAPIRFONDET STOREBRAND VEKST 11	1 74	NOR	432 1 744
12 ITERA ASA	1 54	NOR	1 269 136
13 FRAMAR INVEST AS	1 13	NOR	925 000
AANESTAD PANAGRI AS 14	10 1	NOR	900 000
HØGBERG 15	1 01	NOR	828 776
16 ALTEA PROPERTY DEVELOPMENT AS	0 85	NOR	700 000
NYVANG 17	0 77	NOR	630 000
GRØSLAND 18	0 77	NOR	630 000
19 JENSEN	0 74	DEN	610 010
20 MORTEN JOHNSEN HOLDING AS	0 73	NOR	600 000
TOP 20	72 21		59 344 440

*Arne Mjøs Invest AS holds a future contract on 2,800,000 shares. The total controlling interest of Arne Mjøs is thus 26,929,991 shares (32.8%).