Zalaris

Quarterly Report • Feb 25, 2016

Advancing our services and pipeline combining local expertise with offshore capabilities

Interim Report Q4 2015

HIGHLIGHTS Q4 2015

• Quarterly revenues of NOK 94.6 million with EBIT 9.4% according to expectations. Leading to full year growth of 14.6% and corresponding EBIT of 9.1% - in the lower range of communicated targets.
• Offshore transition according to plan. Based on positive experience to date, target has been increased to 25% of hours to be produced offshore for HR outsourcing deliverables.
• Continued strong pipeline of opportunities within both the Outsourcing and Cloud Service business units, however conversion to signed agreements takes time.

KEY FIGURES

	2015	2014	2015	2014
All figures in NOK 1 000	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Revenue	94 614	97 318	373 719	326 145
Growth (y-o-y)	-2,8 %	34,8 %	14,6 %	24,4 %
Operating profit*	8 856	6 892	33 829	14 861
Operating profit margin	9,4 %	7,1 %	9,1 %	4,6 %
Ordinary Profit before tax	8 379	5 512	31 353	12 023
Profit for the period	6 107	3 880	23 295	8 793
Earnings per share	0,29	0,17	1,11	0,38
Net cash from operating activities	21 561	15 941	29 291	37 318
Headcount end of the period	452	441	452	441
* Including
One off IPO related costs	-	-	-	11 948

Expanding customer sets, markets and offerings to increase stakeholder value

valueExpectations

Zalaris is primed to capitalize on emerging growth opportunities. We continued to advance our capabilities, solutions and service levels as well as balance sheet management in 2015. Our stellar reputation as a trusted HR/payroll outsourcing partner prepares Zalaris for a promising pan-European future.

Hans-Petter Mellerud, CEO

INSIGHTS FROM THE CEO

2015 was another good year for Zalaris, with 14.6% revenue growth to NOK 374 million and EBIT of 9.1%, or NOK 33.8 million, for the period. Earnings per share nearly tripled to NOK 1.11 from 0.38 in 2014. Although at the lower end of our expectations, these strong results also reflect many strategic advances – from operational efficiencies to solution and service improvements.

Reducing costs through xShoring and automation

Our new Chennai, India-based Service Center continues to deliver according to plan, with 13% of total hours already generated here. This ramp-up parallels corresponding cost savings to take effect beginning in Q2 2016.

In addition, we have refined our systems strategy and production planning to further scale our business with faster implementation and cloud-based self-service innovations. Target markets also show strong interest in Zalaris mobile solutions, which is critical considering the importance of "anywhere" access and functionality in today's HR environments. Related contracts are on the rise and contributing to the company's leadership position.

Major projects on track

During Q4, our consulting capacity was highly utilized with large implementation projects with a Swedish Fortune 500 company employing 20'000, as well as Norwegian Railways- Both projects confirmed production readiness with a corresponding successful start-up in January 2016.

Advancing leadership position as Northern European provider of HR- and payroll services

Our pipeline of deals in the Nordic market remains strong. Generally tougher economic conditions work in Zalaris' favor as companies look to reduce costs and efficiently increase HR capability and organizational value. We continue to strengthen sales capacity to address these opportunities and broaden geographic market coverage.

A key win in Q4 was a major agreement with one of Zalaris' largest customers to expand services to include SuccessFactors Cloud functionality for managing global workforce master data and a webbased help desk/ticketing solution for their 32,500 employees. The solution will support streamlining of internal HR processes for the company across the Nordics, Baltics and Poland -- and is fully integrated with Zalaris Cloud Based SAP HCM solution. Such developments are among the reasons we recently became a coveted SAP Gold Partner.

To deliver on our ambition to be a leading European provider of HR- and payroll services, we continue to evaluate options to maximize overall market coverage. This includes further strengthening delivery capability internally as well as through partnerships to cover new geographic markets.

Hans-Petter Mellerud, CEO

FINANCIAL REVIEW

(Figures in brackets = same period or balance date last year, unless otherwise specified)

Group income statement

Revenues

Full year 2015 group revenues increased by 14.6% to NOK 373.7 million compared to previous year (NOK 326.1 million).

For the fourth quarter of 2015, group revenues decreased 2.8% to NOK 94.6 million compared to the same quarter last year (NOK 97.3 million). The decline partly reflects a large change order to a major customer in Denmark with a positive impact on Q4 2014 revenues and profit.

Also in Q4 2015, a large portion of the consulting capacity was used for implementation projects for new HR outsourcing customers with launch Q1 2016. As a consequence there were less resources available for external invoicing.

Operating costs

Total operating costs, excluding extraordinary items, amounted to NOK 85.8 million or 90.6% of revenue (NOK 85.6 million, 87.9%). The license costs amounted to NOK 5.4 million or 5.6% of revenue (2.6 or 2.6%). The increase included license costs related to the increased revenues in the Cloud services unit. The total personnel costs for the quarter represented 54% of revenue (56%). The headcount increased from previous quarter, as a result of transferring employees into our own service center in Chennai from October. Thus the decrease in personnel costs is related to the high level of consulting capacity used on customer implementation projects. The nominal value of other operating expenses was stable despite that the Q4 2015 numbers includes increased office related costs for our new service center in Chennai.

Profit/loss

Group operating profit before extraordinary costs amounted to NOK 8.9 million (NOK 11.7 million), reflecting an operating margin of 9.4% (12.1%). Comparable numbers excluding last years extraordinary change order revenue in Denmark, showed an increase in the margin of approx 1.0 percentage points.

Year to date numbers show operating profit before extraordinary costs of NOK 33.8 million (NOK 31.7 million) corresponding to an operating profit margin of 9.1% (9.7%). The license costs for FY 2015 increased 2.1% compared to FY 2014 due to increased revenues from Cloud services. Other expenses decreased accordingly, though with some increased expenses related to the set-up of the new service center in Chennai. Personnel costs decreased 1% reflecting a high utlization in the consulting unit both on work generating additional invoicing and on implementation projects. The amortization of customer projects as a share of revenue increased from FY 2014 to FY 2015, reflecting finalized improvement projects.

The weakening of the Norwegian Krone impacted the revenues positively and the costs negatively throughout 2015, the net effect on the profits was not significant.

Net financial items for the quarter amounted to NOK -0.5 million, and profit after tax came in at NOK 6.1 million. Q4 2014 had net financial items of NOK - 1.4, and profit after tax was NOK 3.9 million.

Net financial items for the FY 2015 amounted to NOK -2.5 million, and profit after tax was NOK 23.3 million. FY 2014 had net financial items of NOK -2.8, and profit after tax was NOK 8.8 million.

Stable revenue growth compared to last quarter Operating profit* shows normal seasonal

Financial position and liquidity

At 31 December 2015, total assets amounted to NOK 203.9 million (NOK 207.3 million). Total equity amounted to NOK 103.2 million (NOK 92.9 million), equalling an equity ratio of 50.6% (44.8%). The group had cash and cash equivalents of NOK 67.7 million (NOK 75.4 million). Interest bearing debt amounted to NOK 2.1 million (NOK 2.5 million).

Revenues by segment

(Amounts in NOK 1000)
Segment	FY 2015	Q4/14	Q1/15	Q2/15	Q3/15	Q4/15
HR Outsourcing	349 776	91 319	90 223	88 578	83 162	87 114
Consulting	13 784	4 267	3 702	2 938	3 237	4 606
Cloud	10 160	1 733	258	779	6 228	2 895
Total	373 719	97 319	94 183	92 295	92 626	94 615

HR Outsourcing

The HR Outsouring segment accounted for 92.1% of total group revenues in the fourth quarter and close to 93.6% for FY 2015.

HR outsourcing revenue experienced a 4.1% decline in Q4 2015 compared to Q4 2014. The main reason was the extra-ordinary high revenue level in Q4 2014 in combination with lower activity related to variable invoicing as consulting resources were employed in the implementation project in Q4 2015. Excluding the extraordinay revenues in Q4 2014 the quarterly y-o-y growth was 2.5% in Q4 2015.

The operating margin YTD was NOK 27.6 million (NOK 24.2 million) representing a slight increase of 0.1 percentage points in operating margin compared to previous year.

of employees served by Zalaris systems ('1000) # of FTEs and employees served per FTE ('1000) stabilized during last quarters after continous growth shows increased efficency in Zalaris' deliveries

Minor negative trend y-o-y revenue growth Lower level of variable revenue impact operating profit margin for the quarter

The number of customer employees served by the HR Outsourcing unit indicates the volume of transactions and services delivered by Zalaris' HR Outsourcing unit, although the scope of services provided varies for each customer. In Q4 2015 the average number of employees served per month was 191 thousand, 10.5% higher compared to Q4 2014. Average number of employees served per FTE grew up to 692 and represents an improved level of productivity since Q4 2014.

GROUP HEADCOUNT

Headcount per country shows continous focus on strong offshore and nearshore presence Group headcount was 452 at the end of 2015. This

number was stable compared to last quarter.

We continued our work focusing on a service delivery model with a substantial presence from our newly established Service Center in India. Offshore and nearshore resources represented 27% of the total workforce at the end of Q4 2015.

Total number of FTEs (Full Time Equivalents) at the end of the quarter was 419.

OUTLOOK

The opportunities continue to be favorable for HR technology and outsourcing services in our markets. We have however experienced that the decision process with some of our potential customers are taking longer than expected, as priority is given to more immediate cost saving opportunities.

We are working on increasing our scope of services to capture more of the people process value chain. In particular, we are addressing service and functionality requirements associated with managing flexible benefits as well as pension/insurance administration functionality. In addition – based on customer demand – we are further improving our solutions to better support customer HR departments in their process improvement and cost-saving efforts.

We continue our dual focus of maintaining satisfied customers and achieving higher cost efficiency for increased profitability.

The European market for business process outsourcing is strong, and we are continously exploring growth opportunities in and outside our Nordic home market.

Oslo, 24 February 2016 The Board of Directors of Zalaris ASA

_________________________

Lars Laier Henriksen (chairman)

_________________________

Liselotte Hägertz Engstam

________________________ Karl Christian Agerup

_________________________

Tina Steinsvik Sund

_________________________

Jan M. Koivurinta

This interim report was not reviewed by The Company's auditors

Interim consolidated condensed financial statements

Consolidated Statement of Profit and Loss

		2015	2014	2015	2014
(NOK 1000)	Notes	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
		unaudited		unaudited
Revenue	2	94 614	97 318	373 719	326 145
Operating expenses
License costs		5 418	2 557	22 785	13 031
Personnel expenses	3	50 704	54 245	208 140	184 920
Other operating expenses		21 767	21 656	77 390	72 111
Depreciations		414	168	1 066	733
Amortisation intangible assets	4	2 122	1 877	7 606	6 652
Amortisation impl. costs customer	5	5 334	5 071	22 903	17 037
projects IPO-related costs		-	-	-	11 948
One-off extraordinary impairment		-	4 854	-	4 854
Total operating expenses		85 759	90 426	339 890	311 284
Operating profit		8 856	6 892	33 829	14 861
Financial items
Financial income		928	318	1 801	708
Financial expense		(1 405)	(1 699)	(4 277)	(3 546)
Net financial items		(477)	(1 381)	(2 476)	(2 838)
Ordinary profit before tax		8 379	5 512	31 353	12 023
Income tax expense
Tax expense on ordinary profit		2 272	1 632	8 058	3 230
Total tax expense		2 272	1 632	8 058	3 230
Profit for the period		6 107	3 880	23 295	8 793
Profit attributable to: - Owners of the parent		5 461	3 228	21 161	7 312
- Non-controlling interests		645	652	2 134	1 481
Earnings per share:
- Basic and diluted		0,03 %	0,02 %	0,11 %	0,04 %
- NOK		0,29	0,17	1,11	0,38

Consolidated Statement of Comprehensive Income

		2015	2014	2015	2014
(NOK 1000)	Notes	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
		unaudited	unaudited	unaudited	unaudited
Profit for the period		6 107	3 880	23 295	8 793
Other comprehensive income
Items that will be reclassified to profit and loss
in subsequent periods
Currency translation differences		1 323	1 492	2 644	(377)
Total other comprehensive income		1 323	1 492	2 644	(377)
Total comprehensive income		7 429	5 372	25 938	8 416
Total comprehensive income attributable to:
- Owners of the parent		6 784	4 720	23 804	6 935
- Non-controlling interests		645	652	2 134	1 481

Consolidated Statement of Financial Position

		2015	2014
(NOK 1000)	Notes	31. Dec	31. Dec
		unaudited	unaudited
ASSETS
Non-current assets
Intangible assets
Other intangible assets	4	36 230	29 624
Total intangible assets		36 230	29 624
Deferred tax asset		3 110	6 041
Fixed assets
Office equipment		738	224
Property, plant and equipment		4 990	2 083
Total fixed assets		5 727	2 308
Total non-current assets		45 067	37 973
Current assets
Trade accounts receivable		59 318	64 306
Customer projects	5	26 323	25 317
Other short-term receivables		5 439	4 346
Cash and cash equivalents		67 740	75 354
Total current assets		158 820	169 324
TOTAL ASSETS		203 887	207 297

Consolidated Statement of Financial Position

		2015	2014
(NOK 1000)	Notes	31. Dec	31. Dec
EQUITY AND LIABILITIES		unaudited	unaudited
Equity
Paid-in capital
Share capital		1 912	1 912
Own shares - nominal value		(6)	(6)
Share premium		53 224	67 498
Total paid-in capital		55 131	69 404
Retained earnings		43 436	19 753
Equity attributable to equity holders of the parent		98 567	89 157
Non-controlling interests		4 601	3 730
Total equity		103 168	92 887
Non-current liabilities
Deferred tax		2 349	1 200
Interest-bearing loans and borrowings		2 125	793
Employee-defined benefit liabilities		34	178
Total long-term debt		4 508	2 170
Current liabilities
Trade accounts payable		14 582	12 493
Income tax payable		4 401	3 399
Public duties payable		25 221	24 546
Other short-term debt		52 007	69 941
Total short-term debt		96 211	110 379
Total liabilities		100 719	114 410
TOTAL EQUITY AND LIABILITIES		203 887	207 297

Consolidated Statement of Cash Flow

		2015	2014	2015	2014
(NOK 1000)	Notes	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Cash Flow from operating activities		unaudited	unaudited	unaudited
Operating profit		8 856	6 892	33 829	14 861
Depreciations and impairments		414	211	1 066	5 586
Amortisation intangible assets		2 122	1 878	7 606	6 652
Amortisation implementation costs customer projects		5 334	5 071	22 903	17 037
Customer projects		(392)	(4 804)	(23 909)	(23 518)
Taxes paid		2 289	(2 712)	(3 475)	(3 633)
Changes in accounts receivable and accounts payable		14 526	8 492	7 078	(8 811)
Changes in other short term debt and disposals		(11 589)	913	(15 807)	29 143
Net cash flow from operating activities		21 561	15 941	29 291	37 318
Cash flows from investing activities
Purchase of fixed and intangible assets		(3 083)	(8 647)	(18 547)	(14 411)
Net cash flow from investing activities		(3 083)	(8 647)	(18 547)	(14 411)
Cash flows from financing activities
Net financial items		(477)	(1 381)	(2 476)	(1 458)
Purchase of own shares		-	(72)		-
Proceeds from issue of new borrowings		550	2 240	550	-
Repayments of borrowings		(716)	(562)	(896)	(2 344)
Changes in factoring debt		-	-	-	-
Dividend payments		-	-	(14 273)	-
Dividend payments to non-controlling interest		(1 263)	(1 172)	(1 263)	-
Proceeds from issue of new shares		-	-	-	49 274
IPO Costs of equity		-	-	-	(3 464)
Net cash flow from financing activities		(1 906)	(947)	(18 358)	41 647
Net changes in cash and cash equivalents		16 572	6 347	(7 614)	64 553
Cash and cash equivalents at the beginning of the period 51 169			68 828	75 354	10 802
Cash and cash equivalents at the end of the period		67 741	75 175	67 740	75 354
Unused credit facilities		15 000	15 000	15 000	15 000

Consolidated Statement of Changes in Equity

				Total	Cumul.		Non
	Share	Own	Share	paid-in	translation	Other	controlling	Total
(in NOK 1000)	capital	shares	premium	equity	differences	equity	interests	equity
Equity at 30.09. 2015 (unaudited)	1 912	(6)	53 225	55 131	529	36 245	5 218	97 124
Profit of the period				-		5 461	645	6 106
Other comprehensive income				-	1 323			1 323
Other changes				-		(121)		(121)
Transaction costs related to IPO				-				-
Purchase/sale of own shares (net)				-				-
Dividend				-			(1 263)	(1 263)
Equity at 31.12. 2015	1 912	(6)	53 225	55 129	1 851	41 585	4 601	103 168
Equity at 01.01. 2015	1 912	(6)	67 499	69 404	(792)	20 545	3 730	92 887
Profit of the period				-		21 161	2 134	23 295
Other comprehensive income				-	2 644			2 644
Other changes				-		(121)		(121)
Transaction costs related to IPO				-				-
Purchase/sale of own shares (net)				-				-
Dividend			(14 273) (14 273)				(1 263)	(15 537)
Equity at 31.12. 2015	1 912	(6)	53 225	55 129	1 851	41 585	4 601	103 168
Equity at 30.09.2014 (unaudited) Profit of the period	1 912	(6)	67 499	69 404 -	(2 114)	17 641 3 228	4 251 811	89 182 4 039
Other comprehensive income				-	1 322			1 322
Other changes				-		(484)		(484)
Transaction costs related to IPO				-				-
Purchase/sale of own shares (net)				-				-
Dividend				-			(1 172)	(1 172)
Equity at 31.12.2014	1 912	(6)	67 499	69 404	(792)	20 545	3 730	92 887
Equity at 01.01.2014	339	(6)	18 442	18 774	(415)	18 536	3 421	40 317
Profit of the year						7 312	1 481	8 793
Other comprehensive income					(377)			(377)
Other changes						(484)		(484)
Transaction costs related to IPO						(3 464)		(3 464)
Issue of new shares (20.06.2014)	217		49 057	49 274		-		49 274
Issue of new shares (13.05.2014)	1 356			1 356		(1 356)
Purchase/sale of own shares (net)
Dividend							(1 172)	(1 172)
Equity at 31.12.2014	1 912	(6)	67 499	69 404	(792)	20 545	3 730	92 887

Notes to the interim consolidated condensed financial statements

Note 1 – General Information and basis for preparation

General information

Zalaris ASA is a public limited company incorporated in Norway. The Group's main office is located in Hovfaret 4, Oslo, Norway. The Group delivers full-service outsourced personnel and payroll services.

Zalaris' interim financial statements for the fourth quarter of 2015 were authorized for issue by the board of directors on 24.02.2016.

Basis for preparation

These interim consolidated condensed financial statements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). The condensed interim financial statements do not include all of the information and disclosures required by International Financial Reporting Standards (IFRS) for a complete set of financial statements, and these condensed interim financial statements should be read in conjunction with the annual financial statements. The interim condensed consolidated financial statements for the twelve months ended 31 December have not been audited or reviewed by the auditors.

A description of the significant accounting policies is included in Zalaris' annual financial statements for 2014, and applies to these interim consolidated condensed financial statements. New and amended standards applicable for the period starting 1 October 2015 did not have any effect for the company.

Going concern

With reference to the Norwegian Accounting Act § 3-3, the Board confirms its belief that conditions exist for continuing operations and that these interim consolidated condensed financial statements have been prepared in accordance with the going concern principle.

Note 2 – Segment Information

The company has three operating segments, which are Outsourcing, Cloud Services and Consulting Outsourcing, offering a full range of payroll and HR outsourcing services, including payroll processing, time and attendance and travel expenses. Consulting delivers turnkey projects based on Zalaris template or implementation of customer-specific functionality. They also assist customers with cost-effective maintenance and support of customers' own on-premise solutions. The Cloud services unit is offering additional cloud-based HR functionality to existing outsourcing customers as talent management, digital personnel archive, HR analytics, mobile solutions, etc., and was divided into its own reporting segment from 2014.

Information is organized by business area and geography. The reporting format is based on the Group's management and internal reporting structure. Items that are not allocated are mainly intercompany sales, interest-bearing loans and other associated expenses and assets related to administration of the Group. The Group's key management is the chief decision maker in the Group. The investing activities comprise total expenses in the period for the acquisition of assets that have an expected useful life of more than one year.

2015

HR Outsourcing	Cloud services	Consulting	Unallocated	Total
349 076	10 160	14 484		373 720
(290 133)		(9 703)		(308 315)
	(70)	(173)		(31 575)
				-
27 610	1 610	4 608	-	33 829
Cash flow from investing activities			(18 547)	(18 547)
		(31 332)	(8 479)

2014

	HR	Cloud
(NOK 1.000)	Outsourcing	services	Consulting	Unallocated	Total
Other operating income, external	308 843	6 617	10 685		326 145
Other operating expenses	(255 542)	(5 199)	(9 321)		(270 062)
Depreciation and amortisation	(29 145)	(33)	(98)		(29 275)
IPO related costs				(11 948)	(11 948)
Operating profit/(loss)	24 156	1 386	1 266	(11 948)	14 861
Cash flow from investing activities				(14 411)	(14 411)

Geographic Information

The Group's operations are carried in several countries, and information regarding revenue based on geography is provided below. Information is based on location of the entity generating the revenue, which to a large extent, corresponds to the geographical location of the customers.

Revenue from external customers attributable to:

		2015		2014		2015		2014
(NOK 1000)	as % of total	Oct-Dec	as % of total	Oct-Dec	as % of total	Jan-Dec	as % of total	Jan-Dec
Norway	44 %	41 899	52 %	45 332	47 %	177 467	46 %	151 480
Sweden	24 %	22 303	18 %	17 834	22 %	83 693	20 %	64 923
Denmark	16 %	15 539	16 %	20 189	16 %	59 108	19 %	60 598
Finland	13 %	12 020	13 %	12 320	12 %	44 763	14 %	44 610
Other	3 %	2 853	1 %	1 643	2 %	8 689	1 %	4 534
Total	100 %	94 614	100 %	97 318	100 %	373 719	100 %	326 145

Information about major customers

		2015		2014		2015		2014
(NOK 1000)	as % of	Oct-Dec	as % of	Oct-Dec	as % of	Jan-Dec	as % of	Jan-Dec
	total		total		total		total
5 largest customer	54 %	51 175	49 %	47 674	50 %	186 884	47 %	153 930
10 largest customer	73 %	69 122	65 %	63 169	68 %	253 635	65 %	212 002
20 largest customer	86 %	81 818	79 %	76 901	83 %	308 500	80 %	260 308

Note 3 – Personnel Costs

	2015	2014	2015	2014
(NOK 1000)	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Salary	49 410	48 514	188 177	171 482
Bonus	404	1 633	4 833	6 317
Social security tax	7 032	6 555	26 578	23 224
Pension costs	4 812	4 439	18 375	15 794
Other expenses	1 809	1 756	8 783	5 892
Capitalised development expenses	(1 538)	(3 066)	(8 079)	(5 963)
Capitalised implementation costs customer projects	(11 225)	(5 587)	(30 527)	(31 827)
Total salary expenses	50 704	54 245	208 140	184 920
Average number of employees:	455	413	421	388
Average number of FTEs:	420	377	388	359

Note 4 – Other Intangible Assets

(NOK 1000)	Licenses and software	Internally developed software	Internally developed software under construction	Total
Book value 01.01.2014	7 852	8 765	6 068	22 685
Additions of the period	4 591	10 689	8 994	24 275
Disposals and currency effects in the period	15	(11)	(10 689)	(10 685)
This period ordinary amortisation	(2 626)	(4 026)	-	(6 652)
Book value 31.12.2014	9 833	15 417	4 373	29 624
Book value 01.01.2015	9 833	15 417	4 373	29 624
Additions of the period	570	13 775	13 518	27 862
Disposals and currency effects in the period	23	102	(13 775)	(13 650)
This period ordinary amortisation	(2 287)	(5 320)	-	(7 606)
Book value 30.12.2015	8 140	23 974	4 117	36 230

Useful life	5-10 years	5 years
Depreciation method	linear	linear

Note 5 – Customer Projects

Costs related to delivering outsourcing contracts are recognized as they are incurred. However, a portion of costs incurred in the initial phase of outsourcing contracts (transition and/or transformation costs) may be deferred when they are specific to a given contract, relate to future activity on the contract and/or will generate future economic benefits, and are recoverable. These costs are allocated to work-in-progress (customer projects), and any prepaid revenues by the client are recorded as a deduction from the costs incurred in the balance for customer projects. The deferred costs are expensed evenly over the period the outsourcing services are provided and included in the line item "Amortization implementation cost customer projects."

	2015	2014
(NOK 1000)	Dec	Dec
Deferred costs related to customer projects	81 636	69 729
Deferred revenue related to customer projects	(55 313)	(44 412)
Net customer implementation costs	26 323	25 317

Note 6 – Transactions with Related Parties

a) Purchase from related parties
(NOK 1000)		2015	2014	2015	2014
		Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Related party	Transaction
Digoshen AB 1)	Management Services	80		368
Total		80	-	368	-

1) Liselotte Hägertz Engstam, board member, is director of the board and owns 50% of the shares in Digoshen AB

There have been no further material transactions with related parties during the reporting period 1st of October to 31th of December 2015. Please refer to the annual financial statements for further information.

Note 7 – Events after Balance Sheet Date

There have been no events after the balance sheet date significantly affecting the Group's financial position.

Key figures

Key financials	Q1 2014	Q2 2014	Q3 2014	Q4 2014	Q1 2015	Q2 2015	Q3 2015	Q4 2015
NOKm except per share figures
Revenues	74,1	71,1	83,6	97,3	94,2	92,3	92,6	94,6
Revenue growth (y-o-y)	25 %	21 %	17 %	35 %	27 %	30 %	11 %	-2,8 %
EBITDA	10,1	5,0	10,2	13,8	11,9	10,9	8,3	11,4
EBITDA margin	14 %	7 %	12 %	14 %	13 %	12 %	9 %	12 %
EBIT excl. extraordinary items	8,5	3,2	8,3	11,8	9,9	8,9	6,3	8,9
EBIT margin	11 %	5 %	10 %	12 %	10 %	10 %	7 %	9,4 %
Ordinary Profit Before Tax	8,2	-1,1	-0,6	5,5	9,7	8,3	5,0	8,4
Income Tax Expense	2,2	-0,3	-0,2	1,6	2,6	2,1	1,1	1,6
Non- Controlling Interests	0,6	0,3	-0,1	0,7	0,8	0,6	0,0	0,6
Net income	5,4	-1,1	-0,4	3,2	6,4	5,5	3,8	6,2
Profit margin	7 %	-1 %	0 %	3 %	7 %	6 %	4 %	6,5 %
Weighted # of shares outstanding (m)				19,0	19,1	19,0	19,0	19,0
Basic EPS		-0,1	-0,0	0,2	0,3	0,3	0,2	0,3
Diluted EPS		-0,1	-0,0	0,2	0,3	0,3	0,2	0,3
DPS						0,8
Cash flow items
Cash from operating activities	0,6	-3,8	25,0	15,9	-7,5	9,1	6,2	21,6
Investments	-1,2	-2,8	-1,7	-8,7	-3,0	-6,3	-6,2	-3,1
Net changes in cash and cash equi.	-1,4	38,1	21,3	6,4	-10,9	-11,8	-1,5	16,6
Cash and cash equivalents end of period	9,4	47,5	68,8	75,2	64,5	52,6	51,2	67,7
Equity	45,7	91,3	89,2	92,9	99,9	91,6	97,1	103,2
Equity ratio	36 %	54 %	44 %	45 %	49 %	47 %	49 %	51 %
Number of FTE (Period End)	375,0	415,0	442,0	441,0	443,0	456,0	452,0	452,0
Segment overview	Q1 2014	Q2 2014	Q3 2014	Q4 2014	Q1 2015	Q2 2015	Q3 2015	Q4 2015
NOKm
Revenues	74,1	71,1	83,6	97,3	94,2	92,3	92,6	94,6
HR Outsourcing	71,6	68,9	77,0	90,9	90,2	88,6	83,2	87,1
Consulting	2,4	1,9	2,1	4,3	3,7	2,9	3,2	4,6
Cloud Sourcing	0,1	0,2	4,5	2,2	0,3	0,8	6,2	2,9
Adjustments	-	-	-	-	-	-
EBIT	8,5	3,2	8,3	11,7	9,9	8,9	6,3	8,9
HR Outsourcing	6,4	3,5	9,5	4,9	7,6	7,5	6,6	6,0
Consulting	2,1	-0,2	-2,2	1,5	2,3	1,3	-1,3	2,4
Cloud Sourcing	0,0	0,0	0,9	0,4	0,0	0,1	1,0	0,5
Adjustments	-	-	-	-	-	-	-	-

The quarter in pictures

Zalaris Latvia moved to new modern office premises, with good opportunities for expansion.

SAP certified Zalaris' Latvian payroll solution - the first and only SAP payroll solution in Latvia.

Zalaris experienced an increased interest in our mobile solution, with several customers going live on our new and improved HR app.

For questions, please contact

Nina Stemshaug CFO nina.stemshaug@zalaris.com +47 982 60 394

Hans-Petter Mellerud CEO hans-petter.mellerud@zalaris.com +47 928 97 276

Financial information

Annual report to be published Apr. 21th 2016 Interim report Q1 2016 to be published on Apr. 28th 2016 Annual general meeting May 13th 2016 Interim report Q2 2016 to be published on Aug. 18th 2016 Interim report Q3 2016 to be published on Oct. 26th 2016

All financial information is published on the Zalaris' website: http://www.zalaris.com/Investor-Relations/

Financial reports can also be ordered at ir@zalaris.com.

20 Zalaris Interim Report 2015-Q4 www.zalaris.com Zalaris ASA PO Box1053 Hoff 0218 Oslo Norway