Itera

Quarterly Report • Apr 29, 2014

INTERIM REPORT

FIRST QUARTER 2014

CEO ARNE MJØSCFO TORUNN HAVRE

OSLO, 29 APRIL 2014

Highlights in the first quarter

• • Revenue down by -1 %
• MNOK 112
• • EBITDA
• MNOK 7.8; 7.0 % margin
• • EBIT
• MNOK 2.4; 2.2 % margin
• • Operating cash flow
• MNOK -10.7 in Q1
• • Top 10 customers growth 19 %
• Larger projects and broader deliveries
• • Employees increased by 7 %
• 464 employees
• Nearshore ratio 34 %

Current IT industry status in Ukraine

External focus:

• • Customers are managing their risks and this have had some negative impact on 2014 forecasts.
• No physical impact on business, it is business as usual, but the market perception is high country risk
• Some potential and existing clients are waiting, postponing decisions
• • Almost all IT companies are actively opening or expanding to Eastern Europe: Poland, Bulgaria, Romania, Baltics, Slovakia, others.
• • US campaign "Increase Profits. Support Democracy. Cloudsource to Ukraine" to support IT outsourcing to Ukraine during its crisis with Russia

Local focus:

• •Multiple e-government, e-society initiatives
• • New consolidated initiative "itBraines in Ukraine" to boost 100,000 more employees in the IT industry by 2020.

FINANCIAL REVIEW

Key figures

		2014	2013	Change	2014	2013	Change
		Q1	Q 1		YTD	YTD
Operating revenue	MNOK	112.4	113.6	$-1\%$	112.4	113.6	$-1\%$
Gross profit	MNOK	94.6	91.3	4%	94.6	91.3	4 %
EBITDA	MNOK	7.8	7.4	5%	7.8	7.4	5%
EBITDA margin		7.0%	6.5%		7.0%	6.5%
Operating profit (EBIT)	MNOK	2.4	2.2	10 %	2.4	2.2	10 %
EBIT margin		2.2%	1.9%		2.2%	1.9%
Profit before taxes	MNOK	2.3	2.0	15 %	2.3	2.0	15 %
Profit for the period	MNOK	1.7	1.5	16 %	1.7	1.5	16 %
Net cash flow from operations	MNOK	$-10.7$	4.8	$-326%$	$-10.7$	4.8	$-326%$
Cash and cash equivalents	MNOK	53	31	72 %	53	68	$-22%$
Equity ratio		41 %	41 %		41 %	39 %
Employees at end of period		464	432	7%	464	432	7%

Rising geopolitical tensions are depressing market conditions for IT-outsourcing to Ukraine, weakening group performance in the first quarter.

Quarterly development

Operating revenue

NOK million

EBITDA

NOK million

Employees

End of period

EBITNOK million

Rolling 12-month (RTM)

Rolling 12-month (RTM)

NOK million

Statement of income

	2014	2013	Change	2014	2013	Change
NOK Million	Q1	Q1	$\%$	YTD	YTD	$\%$
Operating revenue	112.4	113.6	$-1\%$	112.4	113.6	$-1\%$
Cost of sales	17.8	22.3	$-20%$	17.8	22.3	$-20%$
Personnel expenses	75.0	71.4	5 %	75.0	71.4	5 %
Depreciation	5.4	5.2	3%	5.4	5.2	$3\%$
Other operating expenses	11.8	12.6	$-6\%$	11.8	12.6	$-6\%$
Total operating expenses	110.0	111.4	$-1\%$	110.0	111.4	$-1\%$
Operating profit (EBIT)	2.4	2.2	10 %	2.4	2.2	10 %
Net financial income	$-0.1$	$-0.2$		$-0.1$	$-0.2$
Profit before taxes	2.3	2.0	15 %	2.3	2.0	15 %
Income taxes	0.6	0.6	11 %	0.6	0.6	11 %
Net profit for the period	1.7	1.5	16 %	1.7	1.5	16 %

Revenue and profit at the same level as last year. However, revenue and profit were affected by several larger projects with later start than planned.

Statement of cash flow

		1 2 h l l i t m o n r o i t o p e r a n g c a s	n g h

Cash flow from operating activities amounted to MNOK -10.7 in the first quarter, mainly due to some large invoices which was paid after due date.

Statement of financial position

	2014	2013	Change	2013
NOK Million	31 Mar	31 Mar	%	31 Dec
Deferred tax assets	9	13	$-34%$	9
Other intangible assets	16	19	$-16%$	17
Fixed assets	30	27	14 %	28
Total non-current assets	55	59	$-6\%$	54
Work in progress	7	10	$-32%$	16
Accounts receivable	81	72	13 %	70
Other receivables	19	10	97 %	13
Bank deposits	53	31	72 %	68
Total current assets	160	122	31 %	166
Total assets	215	181	19 %	220
Total equity	87	74	18 %	87
Non-current liabilities	18	13	45 %	16
Accounts payable	23	18	25 %	27
Public duties and tax payables	33	24	39 %	25
Other short-term liabilities	54	52	3%	65
Total current liabilities	109	94	16 %	117
Total equity and liabilities	215	181	19 %	220
Equity ratio	41 %	41 %		39 %

Dividend Proposal

• • The Board of Directors will propose a dividend of NOK 0.35 per share for 2013.
• • The Annual General Meeting will take place on Thursday 22 May 2014.
• • Following the resolution by the Annual General Meeting, the share will be traded ex dividend on Friday 23 May 2014.

Y e a r	D i i d d / h i l t v e n s a r e c a p a b k h p a a c p e r s a r e y
2 0 1 3	N O K l 0 3 5 p r o p o s a
2 0 1 2	O N K 0 0 6
2 0 1 0	O N K 0 1 0
2 0 0 9	N O K 0 2 0
2 0 0 8	N O K 0 2 0
2 0 0 7	N O K 0 5 0
2 0 0 6	N O K 0 2 0
2 0 0 6	N O K 0 3 0
2 0 0 5	N O K 0 5 0
2 0 0 4	O N K 0 2 0

BUSINESS REVIEW

Itera is a company specializing in communication and technology

We combine our multidisciplinary strengths to gain deeper insight and explore new possibilities.

Our service offerings and key focus areas

Itera is opening a new Nearshore Development Center inside EU to balance risks to Ukrainetensions

• • A Nordic full service provider with seamless nearshoring
• Serving leading customers in fast growing industries
• • Flexibility of a hybrid model
• Combine onshore and nearshore resources based on what makes sense
• • A multi-site strategy
• Nearshore development centers (NDC) are locatedinside and outside EU
• • Enabling the Nordic ICT industry
• Data protection guideline
• Guideline to prevent social dumping

Our Nearshore Development Centers (NDC) arelocated inside and outside EU

• • Located in Slovakia
• – Bratislava (capital), within an hour's drive from Vienna.
• • Part of the European Union and NATO
• Free movement of goods, capital, services and people within EU
• Full European legislation, i.e. Data Protection
• • Stable and developed IT market
• ICT is one of the pillars of the Slovakian economy
• • English spoken universally
• English is learned by 98.7 % of high school pupils.

Itera NDC EU Itera NDC Ukraine

• • Located in the western region of modern Ukraine
• Kiev (capital) and Lviv
• • Access to a large pool of high-skilled resources
• Ukraine was the R&D region of the former Soviet Union
• 18,000 university IT graduates each year, compared to less than 1,000 in Norway
• • Cultural and geographical proximity
• Joint part of 1,000 years' history
• 2,5 hours flight from the Nordics
• • High quality work at an attractive price
• Ranked #2*) of all countries in the world with lowest ratio of failure in projects

Transfers of personal data across borders in compliance with EU Data Protection Law

• • Binding Corporate Rules (BCR) at Itera make it possible to...
• be in compliance with the principles set out by European Data Protection Law for all flows of data within Itera
• harmonize practices relating to the protection of personal data within Itera
• prevent the risks resulting from data transfers to third countries
• avoid the need for a contract for each single transfer
• make data protection integral to the way Itera carries out its business

Long term profitable growth: Key enablers

Strong development of larger projects and larger revenue per customer

• •Top 10 customers up by 19 % in Q1
• •Top 30 customers up by 2 % in Q1
• • Top 10 customers represent 44 % of total revenue in Q1, up from 35 % in Q1 2013
• • Benefits:
• Increasing revenue visibility
• Improving operational efficiency
• Declining sales and overhead cost

In a long term perspective, several customers should buy services from Itera for more than MNOK 50 per year.

Increasing nearshore leverage

• • Nearshore ratio 34 % in Q1, moving fast towards target of 50+ %
• • Mixed teams are increasing our price flexibility in addition to unlimited access to resources

% nearshore of all staff

FTE: Full time employee

FIRST QUARTER 2014 29.04.2014 / 20

Implementing ONE Itera business systems and moving overhead into billable work

• • Launching new ONE website in all countries
• • Implementing ONE CRM to manage sales pipeline and cross-business opportunities and deliveries
• • Implementing ONE ERP system across all countries to manage utilization, prices and customer profitability

• • Developing and implementing ONE compensation system

• • Building a great workplace reduces employee attrition

• – Two units awarded Great Place to Work in Norway and Sweden.
• – Itera awarded as Top 2 best employer in IT Ukraine.
• • Less overhead, more billable work

New EVP to increase our profitability in Sweden

• • The next steps in Itera's Nordic strategy:
• Build a strong and united Itera in Sweden
• A customer centric approach to drive long-term customer relationships
• Wide range of service offerings, of which 50 % of capacity from nearshore

• Cross-border sales and deliveries.

• • Per Gauffin is member of Group Management and reports to Group CEO.

• – He has more than 20 years experience from management positions in large international companies.

OUTLOOK

• •Customer demand remains strong in all Nordic markets
• •Profitable growth and cash flow are key focus areas
• • Opening a new Nearshore Development Center inside EU will balance the risks to Ukraine tensions
• • Larger projects and customers should gradually increase revenue visibility, efficiency and scalability

•Itera makes no forecasts

Top 20 shareholders

19,13 15 718 298 ARNE MJØS INVEST AS NOR 6,88 5 651 150 NOR STOREBRAND VEKST JPMORGAN EUROPE LTD, 5 306 401 6,46 NOR MIDELFART INVEST AS 4,26 3 500 000 NOR OP CAPITAL AS 3,99 NOR 3 275 250 VERDIPAPIRFONDET DNB 3,50 NOR 2875000 EIKESTAD A/S C/O PARTNER REVISJON 2,68 NOR 2 200 000 JØSYRA INVEST AS 2,47 NOR 2 031 588 MARXPIST INVEST AS 2,37 1950000 NOR SEPTIM CONSTULTING A 1805828 2,20 BOINVESTERING AS NOR 1,78 1 464 108 NOR STOREBRAND NORGE I JPMORGAN EUROPE LTD. 1426 103 1,74 NOR GAMST INVEST AS 1 056 700 1,29 NOR GIP AS NOR 988 338 1,20 JOHS. HAUGERUDSVEI A 1,10 NOR 900 000 AANESTAD PANAGRI AS 0,79 NOR 650 000 FREDRIKSEN OLE JØRGEN 0,75 NOR 617401 DnB NOR Bank ASA EGENHANDELSKONTO DnB NOR Markets NOR 600 000 0,73 MORTEN JOHNSEN HOLDI MORTEN JOHNSEN 597 398 0,73 STOREBRAND LIVSFORSI P980, AKSJEFONDET NOR 535 247 0,65 DANSKE BANK A/S 3887 OPERATIONS SEC. NOM DNK	Beholdning $\sim$	Andel≑	Navn ≑	Konto type $\hat{=}$	Statsborger $\hat{=}$