Itera

Investor Presentation • Apr 26, 2019

INTERIM REPORT

ITERA FIRST QUARTER 2019

CEO ARNE MJØS CFO BENT HAMMER

OSLO, 26 APRIL 2019

PRESENTERS AND AGENDA

Highlights of the quarter

Business review

Financial review

Outlook

HIGHLIGHTS OF THE FIRST QUARTER

• Core digital business
  • Revenue growth of 10%
  • EBIT margin of 12.8%
• Total business
  • Revenue NOK 143 (131) million, up by 9% y-o-y
  • EBIT of NOK 13.8 (10.0) million, 9.7% (7.6%) margin
• Cloud transformation of Itera data centres progressing
  • Cost-reduction programme successful
  • Data centre consolidation
• Strong order intake in digital business with book-to-bill ratio of 2.3

Revenues NOK million

BUSINESS REVIEW

4

GOING DIGITAL

Smart Devices 20B IoT Devices Smart City 250 PB per day

Connected Factory 1 PB per day

Stadium

200 TB

per game

1 million/ hour new devices coming online by 2020 Smart Office Autonomous Vehicle 5 TB per day People 1.5 GB per day Smart Home 50 GB per day

150 GB per day

CLOUD IS MORE SECURE THAN TRADITIONAL DATA CENTERS

• The big story in cloud security is that big hacks and failures have not occured
  • Cloud services are not getting breached
  • Most security incidents are the customer's fault
• Cloud is designed for extensive use of IoT in all industries
  • Using advanced AI-based security detection and prevention capabilities

OUR STRATEGIC POSITION:

SPECIALISTS IN CREATING DIGITAL BUSINESS

PLATFORM FIRST

OUR STEPS INTO THE FUTURE

• 1. We are working with first movers on creating digital business, i.e. smart building, smart energy
• 1. New engagements are organized as DevOps on platforms as first choice
• 1. We are moving existing projects to platforms
• 1. We are transforming workload from traditional data centers to cloud platforms

Selected projects

9

MICROSERVICE PLATFORM FOR MULTIPLE CONSUMING PROJECTS

• Itera has implemented shared microservice platform for multiple consuming projects for a large bank
  • 50+ services/APIs
  • Multiple core systems and external data sources
  • DevOps pipeline and multiple releases per day
  • Continuous testing and delivery of features and fixes.
  • Currently over 100 000 users.
  • Scaled to handle substantially more users for Open Banking
• The solution is currently deployed onpremise but is easily moved to Azure Services Fabric PaaS

Solution Architecture

INCREASED QUALITY OF LIFE

• Millions of people worldwide experience reduced mobility and quality of life as a result of accidents or various diseases
  • Many benefit from products such as braces or prosthetics
• Together with Össur, a world leader in orthopedic products, Itera develops the SmartMeasureTM app to support the specialist's dialogue with the patient
  • iPhone's gyroscopic sensor technology is used to make accurate measurements to ensure that the patient gets an individually tailored product
• SmartMeasure lets the specialist place the order efficiently.
  • More time can be spent on the patient and less time filling out forms.

DATA STREAMING OF 1 BILLION TRANSACTIONS PER DAY

• A global retailer engaged Itera to set up Streaming Platform-as-a-Service scaled to handle all data in all markets from supplier to consumer
• Itera supported in establish a KAFKA streaming platform based on Confluent Enterprise Platform.
• The platform is deployed on AWS, Azure, 2x on-premise.
• Estimated load is approximately 1 billion messages per day.

CRIME PREVENTION

• Together with the cash handling company Loomis, Itera has developed an Anti Money Laundering solution which is in use in Norway and Sweden
• The solution contributes to prevent crime as it automatically generates alerts in the event of unusual activity, e.g. if there is a change in the amount of cash that Loomis collects from a customer
• Itera provided a full range of services including frontend, backend, user experience, functional architecture and testing.

HR HENRY

• Employees expect quick answers to questions related to their conditions of employment
• Many HR departments have to spend a lot of time to answer the same few, but most common questions
• HR Henry is a digital assistant based on artificial intelligence
• The assistant is fully trained and ready to help with all HR related issues in employment legislation – holidays, leave of absence, sick leave, welfare benefits and much more

INCREASED MARKET INSIGHT WITH AI

• Itera has specialized in providing market insight and technological advisory solutions to the financial industry
• Itera has entered into a partnership with Mito.ai based on its AI solution to understand text data, regardless of the language in which the text is written
• More than three million news articles, job ads, public messages and social media posts are analyzed daily
• The new report shows the status of the "Race of Artificial Intelligence" and provides decision makers in Nordic banks the basis they need to understand trends, technologies and competitors

Order intake from existing and new customers

• Book-to-bill ratio*) of 2.3 in Q1 for Digital Business and 1.7 overall

*) The book-to-bill ratio is the ratio of orders received to the amount of revenue for a specific period for Itera units ¹⁶

CUSTOMER DEVELOPMENT

• New business
  • Existing customers accounted for 90.4% of revenues in Q1 2019
  • New customers won over the past year generated revenues of NOK 13.7 million in Q1 2019
• Increasing visibility
  • Share of revenue from top 30 customers down by 3 points y-o-y to 77%
  • High customer concentration signifies
    • Strategic relationships
    • Full range of services
    • Hybrid delivery across borders

Revenue customers split

Share of revenue

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

17

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

18

Nearshore ratio % of all staff located nearshore

• Target > 50%
• Mixed teams of onshore and nearshore resources are increasing our price flexibility as well as providing access to a very large resource pool

FINANCIAL REVIEW

	2019	2018	Change	2018
NOK Million	Q1	Q1	%	FY
Sales revenue	142 8	131 2	9 %	531 3
Gross profit	122 6	110 3	11 %	444
Personnel expenses	90 3	82 0	10 %	327 8
Other opex	10 0	13 0	(23 %)	52 3
EBITDA	22 3	15 2	46 %	64 0
EBITDA margin	15 6 %	11 6 %	4 pts	12 0 %
EBIT	13 8	10 0	38 %	42 8
EBIT margin	9 7 %	7 6 %	2 pts	8 1 %
flow from Net cash operations	(8)	(8)	(3 %)	56 8
Cash and cash equivalents	43	44	(2 %)	55 3
Equity ratio	22 3 %	24 7 %	-2 4 pts	24 3 %
Employees end of period at	488	489	(0 %) 2	486
Employees in average	487	489	(0 3 %)	488

• Shift from opex to depreciation from accounting change
  • Also significantly impacting equity ratio
• Change in employee mix after data centre transition

CLOUD TRANSFORMATION

Total Q1 2019

• Revenue growth 9%
• EBIT margin 9.7%

Core digital business Specialists in creating digital business

• Revenue growth 10%
• EBIT margin 12.8%

QUARTERLY DEVELOPMENT

NOK million

EBITDA NOK million

Employees End of period

Margin

REVENUE SPLIT

Revenue increased by 9% y-o-y

• Service revenues from own consultants increased by 11% to NOK 95 million
• Subscription revenue increased by 7% to NOK 35 million
• 3 rd party service revenue increased by 4% to NOK 9 million
• Other revenue, incl. HW/SW sales, decreased by 17% to NOK 4 million as Itera closed its web shop towards end of quarter

Revenue split (quarterly figures) NOK Million

Revenue percentage split (rolling 12 months)

STATEMENT OF CASH FLOW

	2019	2018	2018
NOK Million	01	Q1	FY
Cash flow from operations (EBITDA)	22.3	15.2	64.0
Change in balance sheet items	(30.8)	(23.4)	(7.1)
Net cash flow from operating activities	(8.5)	(8.2)	56.8
Net cash flow from investment activities	(2.5)	(5.5)	(20.7)
Purchase of own shares			(22.6)
Sale of shares	-		11.1
Borrowings repaid	(1.0)	(2.1)	(8.7)
External dividend paid			(20.5)
Net cash flow from financing activities	(1.0)	(2.1)	(40.7)
Net change in bank deposits and cash	(12.1)	(15.8)	(4.2)
Bank deposits at the end of the period	43.2	44.0	55.3
New borrowing related to leasing	3.2	0.2	3.7

12 month rolling cash flow from operations (NOK Million)

• Cash flow from operations NOK -8.5 (-8.2) million in Q1
• Investments in consolidating data centres
• 12 month rolling cash flow from operations was NOK 57 million

25

• Total 12-month return of +4% incl. dividends
  • Share price was NOK 8.24 at the end of Q1 2019, an increase of 1% from NOK 8.18 the end of Q1 2018
• Board proposes an ordinary dividend of NOK 0.25 per share and possibility of deciding additional dividend later
• Current holding of own shares is 1,242,165 shares, unchanged in the quarter
  • More than 130 employees own a combined total of approx. 36% of shares

STATEMENT OF FINANCIAL POSITION

• Right-of-use assets of MNOK 50 introduced following adoption of IFRS 16 Leases with corresponding lease liability
• Equity ratio of 22% (25%) per 31 March
  • -5.5 points impact from IFRS 16
• Cash balance of MNOK 43 (MNOK 44)

OUTLOOK

28

• Attractive market with high demand for digitalisation in all Nordic markets
• Profitable growth and cash flow are key focus areas
• Invest 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.

29

TOP 20 SHARE-HOLDERS

No	Name	%	Nat	Shareholding
1	MJØS INVEST AS ARNE	26 59	NOR	21 853 977
2	OP CAPITAL AS	5 33	NOR	4 378 001
3	EIKESTAD AS	4 99	NOR	4 100 000
4	GIP AS	4 41	NOR	3 626 000
5	NOR ASA DnB Bank	4 08	NOR	3 349 743
6	SEPTIM CONSTULTING AS	3 39	NOR	2 788 000
7	BOINVESTERING AS	3 19	NOR	2 620 000
8	GAMST INVEST AS	2 68	NOR	2 200 000
9	JØSYRA INVEST AS	2 68	NOR	2 200 000
10	STOREBRAND VEKST VERDIPAPIRFOND	2 65	UK	2 177 355
11	MARXPIST INVEST AS	2 47	NOR	2 031 588
12	ITERA ASA	1 51	NOR	1 242 165
13	INVEST AS FRAMAR	1 22	NOR	1 000 000
14	AANESTAD PANAGRI AS	1 10	NOR	900 000
15	PROPERTY DEVELOPMENT AS ALTEA	0 80	NOR	658 477
16	SÆTRANG	0 80	NOR	655 000
17	NYVANG	0 78	NOR	640 000
18	HØGBERG	0 78	NOR	637 551
19	JENSEN	0 75	NOR	620 100
20	MORTEN JOHNSEN HOLDING AS	0 73	NOR	600 000
20	SOBER KAPITAL AS	0 73	NOR	600 000
	TOP 20	70 91		58 277 957

*Arne Mjøs Invest AS holds a future contract expiring 21 June 2019 on 3,350,000 shares at an average price of NOK 9.4689 per share. The total controlling interest of Arne Mjøs is thus 25,203,977 shares (30.7%) of which 3,350,000 shares on future contracts.

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.