Itera

Interim / Quarterly Report • Aug 21, 2019

INTERIM REPORT

ITERA SECOND QUARTER 2019

1

CEO ARNE MJØS CFO BENT HAMMER

OSLO, 21 AUGUST 2019

PRESENTERS AND AGENDA

Highlights of the quarter

Business review

Financial review

Outlook

HIGHLIGHTS OF THE SECOND QUARTER

• High growth and profitability in core digital business
  • Revenue growth of 9%
  • EBIT margin of 12.3%
• Total business
  • Revenue NOK 143 (138) million, up by 4% y-o-y
  • EBIT of NOK 13.9 (9.5) million, 9.7% (6.9%) margin
• 47% profitability improvement (43% for H1)
  • Data centre consolidation and overhead reduction
  • Several new nearshore accounts
• Increasing revenue from strategic customers in new industries
• Order intake in digital business with book-to-bill ratio of 0.9 in Q2 and 1.5 in H1 (overall 0.7 and 1.2)

BUSINESS REVIEW

SPECIALISTS IN CREATING DIGITAL BUSINESS

TOP 25 MOST INNOVATIVE COMPANY

• Award across all industries in Norway last 3 years

CUSTOMER EXPERIENCE PROVIDER OF THE YEAR 2018

• Award by Global Sourcing Association

HIGH SCALABILITY OF DIGITAL TALENTS

• Global #4 IT pool
• Global #2 quality

FROM TECH PLATFORM TO BUSINESS PLATFORMS

OUR STRATEGIC POSITION:

SPECIALISTS IN CREATING DIGITAL BUSINESS

PLATFORM FIRST

NEW USE CASES

WE ENGAGE THE USER

WE FOCUS ON THE BUSINESS

DATA CENTRIC

WE UNDERSTAND THE TECHNOLOGY

ARTIFICAL INTELLIGENCE

Selected projects

WITH DNV GL ON A GLOBAL SCALE

• DNV GL Digital Solutions scales up with Itera to provide a full range of services in creating digital business
• Enable all four business areas Maritime, Oil & Gas, Energy and Business Assurance in their digital transformation
• Hybrid deliveries around the world with high scalability of digital talents
• First engagements in USA, Germany, Poland and Norway

ONE ITERA AT KREDINOR

CONTINOUS INNOVATION

• Itera is a strategic partner for Kredinor's digitalisation program the next 4 years
  • Itera is lead on all development for Kredinor, organised as DevOps teams
  • All new development will be in Azure with a full range of services
  • Using AI and analytics in Azure
  • Itera's Managed Cloud Services unit will implement Cloud Foundation, and manage all deliveries in Azure with advisory, cost and security management

COGNITE REALISATION PARTNER Aker Solutions startup

CONTINOUS INNOVATION

SOLUTION CAPABILITIES

Order intake from new and existing customers

• Book-to-bill ratio*) of 0.9 in Q2 for Digital Business and 0.7 overall. 1.5 and 1.2 for H1, respectively

*) The book-to-bill ratio is the ratio of orders received to the amount of revenue for a specific period for Itera units ¹³

CUSTOMER DEVELOPMENT

• New business
  • Existing customers accounted for 87.8% of revenues in Q2 2019
  • New customers won over the past year generated revenues of NOK 17.3 million in Q2 2019
• Increasing visibility
  • Share of revenue from top 30 customers down by 2 points y-o-y to 78%
  • High customer concentration signifies
    • Strategic relationships
    • Full range of services
    • Hybrid delivery across borders

Revenue customers split

Top 10 Top 20 Top 30

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

** New customers (Rolling Twelve Months) defined as customers won since end of corresponding quarter last year

15

Nearshore ratio % of all staff located nearshore

• RATIO Nearshore ratio of 48% in Q2 2019
  • Our hybrid teams of onshore and nearshore resources are increasing our price flexibility as well as providing access to a very large resource pool

STRATEGIC COMPETENCES Build

WE ARE ALSO ONBOARDING NEW COMPETENCES - TWO EXAMPLES

Sirar Salih

CTO Azure

• Microsoft Azure Most Valuable Professional (MVP)
  • 1 of 3 in Norway and #401 globally
• 8 years experience as solution architect and full stack developer
  • Making Waves, If and Itera.
• Board member or program commitee member
  • Norwegian .NET User Group, Oslo Software Architecture (OSWA), Mobile Era Conference etc.

Steven Parker

Chief Architect

• 16 years experience from Product groups at Apple HQ
  • Performance team manager for all Apple Media Products
  • iOS Performance Lead Engineer
  • Server Performance Lead Engineer
• 5 years experience from Sun Microsystems
  • Senior Staff Engineer

SUMMER INTERNSHIP PROGRAM 2019

Redesign of godtforberedt.no. Improvement of user experience.

Development of service for trading used cars.

Development of solution for helping members with their personal finances.

Development of solution where customers can monitor their reported claims.

FINANCIAL REVIEW

KEY FIGURES

	2019	2018	Change	2019	2018	Change	2018
NOK Million	Q2	Q2	%	YTD	YTD	%	FY
Sales revenue	143 3	137 6	4 %	286 1	268 7	6 %	531 3
Gross profit	122 1	113 8	7 %	244 7	224 1	9 %	444 0
Personnel expenses	87 9	86 2	2 %	178 2	168 3	6 %	327 8
Other opex	11 6	12 9	(10 %)	21 7	25 9	(16 %)	52 3
EBITDA	22 6	14 7	54 %	44 9	29 9	50 %	64 0
EBITDA margin	15 8 %	10 7 %	5 1 pts	15 % 7	11 1 %	4 6 pts	12 0 %
Depreciation	8 6	5 2	65 %	17 1	10 4	64 %	21 1
EBIT	13 9	9 5	47 %	27 8	19 5	43 %	42 8
EBIT margin	9 7 %	6 9 %	2 9 pts	9 7 %	7 2 %	2 5 pts	8 1 %
Net cash flow from operations	27	22	25 %	22	13	64 %	56 8
Cash and cash equivalents	44	15	187 %	44	15	187 %	55 3
Equity ratio	19 6 %	11 3 %	8 3 pts	19 6 %	11 3 %	8 3 pts	24 3 %
Employees end of period at	499	486	3 %	499	486	3 %	486
Employees in average	493	486	2 %	490	487	1 %	488

• Revenue growth driven by core digital business
• Significant profitability growth from operational effectiveness and nearshore growth
• Two fewer working days in Q2 has negative impact of 2-3 MNOK on revenue and profit (neutral on H1)
• Net add of 25 employees in core digital business and reduction of 12 employees in traditional data centre operations

CLOUD TRANSFORMATION

Total Q2 2019

• Revenue growth 4% (H1: 7%)
• EBIT margin 9.7% (H1: 9.7%)

Core digital business Specialists in creating digital business

• Revenue growth 9% (H1: 9%) • EBIT margin 12.3% (H1: 12.5%)

High growth and profitability

77%

23%

Data centre transition Lift and shift data centre customers into the cloud

• Revenue decrease -8% (H1: -1%)
• EBIT margin 1.4% (H1: 0.8%)

Invest in new cloud offering*

Sunset

QUARTERLY DEVELOPMENT

NOK million

EBITDA NOK million

Employees End of period

EBIT

Margin

NOK million Margin 9.5 6.4 16.9 13.8 13.9 0% 5% 10% 15% 20% Q2-18Q3-18Q4-18Q1-19Q2-19

REVENUE SPLIT

Revenue increased by 4% y-o-y

• Service revenues from own consultants increased by 10% to NOK 96 million
• Subscription revenue increased by 5% to NOK 35 million
• 3 rd party service revenue decreased by 20% to NOK 8 million
• Other revenue, incl. HW/SW sales, decreased by 42% to NOK 4 million as Itera closed its web shop towards end of Q1 2019

Revenue split (quarterly figures) NOK Million

Revenue percentage split (rolling 12 months)

STATEMENT OF CASH FLOW

	2019	2018	2019	2018	2018
NOK Million	Q2	Q2	YTD	YTD	FY
Cash (EBITDA) flow from operations	22 6	14 7	44 9	29 9	64 0
Change in balance sheet items	4 4	6 9	(22 9)	(16 5)	(7 1)
flow from operating activities Net cash	26 9	21 6	21 9	13 3	56 8
Net cash flow from investment activities	(2 9)	(8 0)	(5 4)	(13 5)	(20 7)
Purchase of shares own	-	(22 6)	-	(22 6)	(22 6)
Sale of shares	2 1	2 9	2 1	2 9	11 1
Borrowings repaid	(5 1)	(2 1)	(9 6)	(4 2)	(8 7)
External dividend paid	(20 2)	(20 5)	(20 2)	(20 5)	(20 5)
flow from financing Net cash activities	(23 2)	(42 3)	(27 7)	(44 3)	(40 7)
Net change in bank deposits and cash	0 9	(28 7)	(11 2)	(44 5)	(4 6)
Bank deposits the end of the period at	44 1	15 3	44 1	15 3	55 3
New borrowing related leasing to	0 2	1 5	3 3	1 7	3 7

• Cash flow from operations NOK 26.9 (21.6) million in Q2
• Shift of NOK 3.5 million from cash flow from operations to financing activities due to IFRS 16
• NOK 20 million used for dividend payment
• 12 month rolling cash flow from operations was NOK 58 million

• An ordinary dividend for 2018 of NOK 0.25 per share (64% of net profits) was paid in June
  • AGM authorised the Board to decide on any supplementary dividend later
• Share price was NOK 7.80 on 28 June 2019, NOK 8.62 on 29 June 2018
• Current holding of own shares is 752,118 shares, down from 1,242,165 as at end of Q1 2019
• Consistent high distribution of earnings

STATEMENT OF FINANCIAL POSITION

• Right-of-use assets of MNOK 47 introduced following adoption of IFRS 16 Leases with corresponding lease liability
• Equity ratio of 20% (11%) per 30 June
  • -4.7 points impact from IFRS 16
• Cash balance of MNOK 44 (MNOK 15)

OUTLOOK

28

• Attractive market with high demand for digitalisation in all Nordic markets
• Profitable growth and cash flow are key focus areas
• Investment in new Managed Cloud Services unit and transform own data centre into the cloud
• 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.

CODS BICK	S 1	D	2	Di	H
SMT	2	×	C	V	5	2
	12
corporal 111

TOP 20 SHARE-HOLDERS

No	Name	%	Nat	Shareholding
1	ARNE MJØS INVEST AS*	26 85	Norway	22 065 172
2	OP CAPITAL AS	5 37	Norway	4 414 397
3	EIKESTAD AS	4 99	Norway	4 100 000
4	GIP AS	4 45	Norway	3 659 559
5	DnB NOR Bank ASA	4 08	Norway	3 350 000
6	SEPTIM CONSTULTING AS	3 39	Norway	2 788 000
7	BOINVESTERING AS	3 20	Norway	2 630 000
8	GAMST INVEST AS	2 68	Norway	2 200 000
9	JØSYRA INVEST AS	2 68	Norway	2 200 000
10	STOREBRAND VEKST VERDIPAPIRFOND	2 64	United Kingdom	2 168 936
11	MARXPIST INVEST AS	2 47	Norway	2 031 588
12	INVEST AS FRAMAR	1 22	Norway	1 000 000
13	AANESTAD PANAGRI AS	1 10	Norway	900 000
14	ASA ITERA	0 92	Norway	752 118
15	SÆTRANG	0 81	Norway	662 523
16	ALTEA PROPERTY DEVELOPMENT AS	0 80	Norway	660 377
17	NYVANG	0 79	Norway	650 000
18	HØGBERG	0 78	Norway	640 166
19	JENSEN	0 76	Norway	621 000
20	MORTEN JOHNSEN HOLDING AS	0 73	Norway	600 000
20	SOBER KAPITAL AS	0 73	Norway	600 000
	TOP 20	71 42		58 693 836

*Arne Mjøs Invest AS holds a future contract expiring 21 September 2019 on 3,350,000 shares at an average price of NOK 9.3044 per share. The total controlling interest of Arne Mjøs is thus 25,415,172 shares (30.9%).

COPYRIGHT AND DISCLAIMER

Copyright

Copyright of all published material including photographs, drawings and images in this document remains vested in Itera and third party contributors as appropriate. Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior permission and applicable acknowledgements. No trademark, copyright or other notice shall be altered or removed from any reproduction.

Disclaimer

This Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and 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 Itera ASA and Itera ASA's (including subsidiaries and affiliates) lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for Itera ASA. Although Itera ASA 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. Itera ASA is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither Itera ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.