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Addnode Group

Interim / Quarterly Report Oct 23, 2015

3001_10-q_2015-10-23_57eb221b-b209-4351-886f-aa806f017290.pdf

Interim / Quarterly Report

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Interim report 1 January – 30 September 2015

Strategic acquisition, 32% growth and strong profit in the third quarter

Summary of the third quarter, July – September 2015

  • Net sales amounted to SEK 467.3 M (354.5), up 32 percent.
  • EBITA amounted to SEK 42.2 M (34.0), an EBITA margin of 9.0 percent (9.6).
  • Operating profit amounted to SEK 30.8 M (25.1), an operating margin of 6.6 percent (7.1).
  • Profit after tax amounted to SEK 21.7 M (19.0).
  • Earnings per share after dilution amounted to SEK 0.71 (0.64).
  • Cash flow from operating activities amounted to SEK -18.0 M (-29.9).
  • Addnode Group has per 1 July 2015 acquired Trancat PLM, a German software vendor with an annual net sales of SEK 450 M.

Summary of the first nine months of the year, January – September 2015

  • Net sales amounted to SEK 1 286.4 M (1 137.2), up 13 percent.
  • EBITA amounted to SEK 98.5 M (95.6), an EBITA margin of 7.7 percent (8.4).
  • Operating profit amounted to SEK 68.0 M (70.0), an operating margin of 5.3 percent (6.2).
  • Profit after tax amounted to SEK 50.0 M (52.6).
  • Earnings per share after dilution amounted to SEK 1.67 (1.78).
  • Cash flow from operating activities amounted to SEK 45.8 M (55.8).

Significant events after the end of the period

  • Addnode Group's subsidiary CAD-Q manages Riksbyggen's digital drawing archive comprising 250,000 drawings
  • Changes in business model affect the subsidiary Cad-Q

Addnode Group offers operation-critical IT-solutions to selected markets within both private and public sectors. We acquire, build and develop companies that deliver operation-critical IT solutions for specific needs from our customers.

Every day, 500,000 engineers use our systems to develop and maintain products, buildings and installations. 100,000 employees in the public sector use our solutions for municipal and government management.

We have 1,150 employees in Austria, Denmark, Finland, Germany, India, Norway, Slovakia, Sweden, the UK and the US and Serbia. Net sales in 2014 amounted to SEK 1,599 M. Addnode Group's Series B share is listed on the Nasdaq Stockholm, Small Cap. For more information, please visit www.addnodegroup.com.

The information in this interim report is such that the Addnode Group must publish under the Securities Market Act and/or the Financial Instruments Trading Act. The information was released for publication on October 23, 2015 at 08.30 a.m.

>> We have already started to note that the synergies and advantages from the merger with TechniaTranscat are being realized. <<

>> The proportion of recurring revenue for Q3 2015 amounted to 52 percent of net sales1). <<

CEO's comments

32% growth and strong EBITA

Addnode Group has a strong growth and substantially improved earnings in the third quarter. We completed the acquisition of Transcat PLM, which is our largest acquisition to date. Growth was 32 percent and we have made a 24-percent improvement in EBITA compared with the corresponding period previous year.

We are investing in and building a product portfolio that creates the preconditions for higher earnings. In parallel, the share of recurring revenue in the third quarter comprised more than half of net sales. There is a clear trend. We are creating a more stable and even earnings capacity over time.

We are a leading European PLM company

In July 2015, we acquired Transcat PLM, which means that we have taken a leading position in the European Product Lifecycle Management (PLM) market. Following the acquisition, the combined TechniaTranscat has 400 employees in eight countries and net sales of slightly more than SEK 700 M (pro forma for the 2014 fiscal year). TechniaTranscat has a unique customer offering with Dassault Système's product portfolio, a strong service offering and its own complementary software portfolio for processes, such as design, construction, simulation and the management of product data. We have already started to note that the synergies and advantages from the merger with TechniaTranscat are being realized.

Staffan Hanstorp, CEO and President

Growth and earnings distribution, Q3 2012 – Q3 2015, SEK M

1) Recurring revenue pertains to support and maintenance, which also includes income from SaaS solutions.

Significant events during the third quarter of 2015

Addnode Group acquired Transcat PLM, a German software supplier with net annual sales of SEK 450 M

On July 1, 2015, Addnode Group acquired Transcat GmbH, one of Europe's leading suppliers of PLM solutions based on a portfolio of proprietary products, advice, integration services, project design, training and user support. In 2014, Transcat reported net sales of approximately SEK 450 M, with EBITDA of about SEK 23 M. The company has about 200 employees expressed as full time equivalents.

The acquisition was paid with a combination of cash and cash equivalents, Addnode Group Series B shares and a promissory note loan issued by Addnode Group. A maximum conditional purchase consideration of EUR 5 M in cash may be paid if certain targets connected to earnings for Transcat are achieved during the 2015-2016 period. The transaction is expected to increase earnings per share from the date of transfer on July 1, 2015. For more information about the acquisition, refer to the section "Information concerning acquisition of subsidiaries" on page 8 of this report. .

Significant events after the end of the period

Addnode Group's subsidiary CAD-Q manages Riksbyggen's digital drawing archive comprising 250,000 drawings

CAD-Q has signed an agreement with Riksbyggen for the construction and operation of Riksbyggen's digital drawing archive. CAD-Q will take over the daily administrative management of drawings and models, and the HyperDoc system will allow users to reach and use all the property information in their daily work via mobile devices and the internet.

Changes in business model affect the subsidiary Cad-Q

Addnode Group's subsidiary Cad-Q includes software from Autodesk Inc. as part of its sales offering. Autodesk has decided to change its business model to a subscription form. Accordingly, Cad Q's sales of Autodesk licenses will gradually shift to a new model where, instead of purchasing licenses, customers will subscribe to the products on a monthly, quarterly, annual or multi-year basis. From August 1, 2016, new Autodesk licenses will only be available through subscription. The customers that have purchased licenses will continue to own and have full rights to use these licenses, and customers with existing maintenance agreements for licenses will have the corresponding rights as long as they continue to renew their maintenance agreements. The underlying volume of business does not change, but the transition will initially entail a negative impact on reported net sales, earnings and cash flow. The change is due to the recognition of license sales as income when they are sold, whereas a subscription contract is recognized as the software is used. Cad-Q will increase sales of own products and services, and adapt the organization and implement cost savings. The above changes are assessed as negatively impacting earnings in 2016 by approximately SEK 15 million. Earnings for the 2019 fiscal year from Autodesk products are expected to return to the same level as before the transformation.

Net Sales, quarterly trend, SEK M

Seasonal variations

The Addnode Group's operations are seasonal. The fourth quarter normally has the highest net sales and EBITA.

EBITA, quarterly trend, SEK M1)

1) Excluding capital gains, the revaluation of conditional purchase considerations and non-recurring costs for organizational changes.

Net sales distributed by type of revenue, Q3 2015

Consolidated net sales and earnings

Third quarter, July– September 2015

Net sales rose 32 percent to SEK 467.3 M (354.5). Software revenue rose to SEK 76 M (54), revenues from support and maintenance agreements increased to SEK 241 M (174), revenues from services rose to SEK 140 M (118) and revenues from others amounted to SEK 10 M (9). EBITA rose to SEK 42.2 M (34.0), corresponding to an EBITA margin of 9.0 percent (9.6). Purchases of goods and services have increased as a result of the acquisition of Transcat PLM, which accounts for a substantial part of net sales derived from third-party products.

The Design Management business area has been impacted by weaker economies in Norway and Finland, while Sweden has had a strong trend. The PLM business area has experienced a very good growth and has doubled earnings, which was attributable to the acquisition of Transcat PLM. The Process Management business area displayed stable demand and we have improved earnings. Our smallest business area, Content Management, also improved earnings.

Net financial items were a negative SEK 1.2 M (neg: 0.1). Tax recognized on earnings for the period amounted to an expense of SEK 7.9 M (expense: 6.0) and profit after tax amounted to SEK 21.7 M (19.0). Earnings per share after dilution amounted to SEK 0.71 (0.64).

First nine months, January – September 2015

Net sales increased by 13 percent to SEK 1 286.4 M (1 137.2). Software revenue increased to SEK 186 M (162), revenue from support and maintenance agreements increased to SEK 630 M (528), revenue from services rose to SEK 443 M (418) and revenue from others amounted to SEK 27 M (29). EBITA amounted to SEK 98.5 M (95.6), corresponding to an EBITA margin of 7.7 percent (8.4). Net financial items amounted to negative SEK 0.6 M (neg 0.4). Tax recognized on earnings for the period amounted to an expense of SEK 17.7 M (expense: 17.0) and profit after tax amounted to SEK 50.0 M (52.6). Earnings per share after dilution amounted to SEK 1.67 (1.78).

Addnode Group has a large proportion of recurring revenue in the form of support and maintenance agreements and SaaS.

Net sales and EBITA in our business areas

Addnode Group's operations are organized in and controlled based on four business areas. For more information on each business area, refer to www.addnodegroup.com

Design Management

IT solutions for digital models and drawings, as well as project and collaboration tools.

In the third quarter, net sales amounted to SEK 161.7 M (180.4). EBITA amounted to SEK 13.1 M (15.9), corresponding to a margin of 8.1 percent (8.8). However, the business area was impacted by a slowdown in the Norwegian and Finnish economies during the quarter. The downturn in the oil and gas sector was evident in Norway and the UK. Sales in Sweden have been good, in particular activities within the constructions and property-related operations have continued a positive trend. The business area secured agreements from such customers as Cargotec, Ericsson, Etteplan, National Oilwell Varco, Statoil, Statnett, the Norwegian National Rail Administration, Riksbyggen, Riksdag Administration, Svenska Bostäder, Qinterra, Valmet, Wärtsilä and ÅF.

Product Lifecycle Management

IT solutions that manage information from the entire product chain for manufacturing and service companies – from development to aftermarket. In the third quarter, net sales rose to SEK 186.6 M (57.1) and EBITA amounted to SEK 15.9 M (7.2), corresponding to an EBITA margin of 8.5 percent (12.6). We have had a positive trend for the entire business area with a good sales of products and services. The substantial growth and improvement in earnings was attributable to the acquisition of Transcat PLM, which was completed on July 1, 2015. The business area secured agreements from such customers as Elekta, Fritidsresor, Husqvarna, Jula, LG Electronics, Mahindra, Mölnlycke Health Care, Outotec, Parker Hannifin, H&M, Porsche, Seco Tools and Tesla Motors.

Process Management

Operation-critical systems for case management, municipal management, e-archives and geographic IT systems.

In the third quarter, net sales rose 3 percent to SEK 92.5 M (90.0) and EBITA amounted to SEK 18.2 M (15.4), corresponding to an EBITA margin of 19.7 percent (17.1). Demand for system development services for business-critical systems in both the private and public sectors was stable. Our projects have had healthy utilization rates and we have secured new customer agreements for e-service solutions, municipal management systems and various GIS systems. The business area secured agreements from such customers as Alfa Laval, FMV, Järfälla Municipality, Kungälvs Municipality, the Legal, Financial and Administrative Services Agency, the Swedish Environmental Protection Agency, the Swedish National Heritage Board, SAAB, the Swedish Tax Agency, Stockholm Vatten and Upplands Väsby Municipality.

Content Management

Public websites, intranet and cooperation solutions, systems for e-commerce and customer-center solutions.

In the third quarter, net sales rose to SEK 29.4 M (31.1) and EBITA amounted to SEK 1.5 M (0.9), corresponding to a margin of 5.1 percent (2.9).

The business area displayed a stable trend during the quarter. The more consultancy-focused offering in web solutions is subject to natural seasonal effects with lower invoicing during the summer months when employees take out holiday. The offerings for telecom/voice-driven services and event management displayed a stable trend during the quarter. The business area secured agreements from such customers as Com Hem, DNB Bank, Folkuniversitetet, IKEA, Knivsta Municipality, the Government Offices of Sweden, SKF, Stena Rederi, Transcom, Stockholm County Council, Viasat and Volvo.

Development of business areas*

Net sales, SEK M 2013
Q4
2014
Q1
2014
Q2
2014
Q3
2014
Q4
2015
Q1
2015
Q2
2015
Q3
LTM
Oct 2014
Sept 2015
Full Year
2014
Design Mgt 204,8 204,7 165,2 180,4 230,2 228,5 184,0 161,7 804,4 780,5
PLM Mgt 73,4 62,5 68,6 57,1 75,4 59,2 62,2 186,6 383,4 263,6
Process Mgt 119,1 110,5 107,1 90,0 125,0 111,2 109,0 92,5 437,7 432,6
Content Mgt 40,5 37,7 37,3 31,1 35,9 37,2 37,3 29,4 139,8 142,0
Elim/centralt -4,3 -4,0 -6,9 -4,1 -5,1 -4,3 -5,2 -2,9 -17,5 -20,1
Addnode Group 433,5 411,4 371,3 354,5 461,4 431,8 387,3 467,3 1 747,8 1 598,6
2013 2014 2014 2014 2014 2015 2015 2015 LTM
Oct 2014
Full Year
EBITA, SEK M Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Sept 2015 2014
Design Mgt 23,4 19,2 8,2 15,9 27,0 17,0 10,6 13,1 67,7 70,3
PLM Mgt 16,9 6,9 9,4 7,2 17,9 5,6 3,5 15,9 42,9 41,4
Process Mgt 23,3 15,9 15,4 15,4 24,2 15,5 15,0 18,2 72,9 70,9
Content Mgt 0,0 1)
0,4
0,2 0,9 0,3 2,5 2,3 1,5 6,6 1,8
Elim/centralt -6,0 -8,1 -5,9 -5,4 -6,0 -6,9 -8,8 -6,5 -28,2 -25,4
Addnode Group 57,6 34,3 27,3 34,0 63,4 33,7 22,6 42,2 161,9 159,0
EBITA-margins, % 2013
Q4
2014
Q1
2014
Q2
2014
Q3
2014
Q4
2015
Q1
2015
Q2
2015
Q3
LTM
Oct 2014
Sept 2015
Full Year
2014
Design Mgt 11,4% 9,4% 5,0% 8,8% 11,7% 7,4% 5,8% 8,1% 8,4% 9,0%
PLM Mgt 23,0% 11,0% 13,7% 12,6% 23,7% 9,5% 5,6% 8,5% 11,2% 15,7%
Process Mgt 19,6% 14,4% 14,4% 17,1% 19,4% 13,9% 13,8% 19,7% 16,7% 16,4%
Content Mgt 0,0% 1,1% 0,5% 2,9% 0,8% 6,7% 6,2% 5,1% 4,7% 1,3%
Addnode Group 13,3% 8,3% 7,4% 9,6% 13,7% 7,8% 5,8% 9,0% 9,3% 9,9%
Average number of
employees
2013
Q4
2014
Q1
2014
Q2
2014
Q3
2014
Q4
2015
Q1
2015
Q2
2015
Q3
Full Year
2014
Design Mgt 293 294 298 314 316 317 321 316 0 306
PLM Mgt 164 162 162 165 161 160 160 385 0 163
Process Mgt 278 279 276 273 272 277 271 271 0 275
Content Mgt 158 149 142 137 128 124 124 130 0 138
Centralt 8 8 8 7 8 8 8 7 0 8
Addnode Group 901 892 886 896 885 886 884 1 109 890

* EBITA and the EBITA margin in this section are recognized excluding capital gains and revaluation of conditional purchase considerations. 1) Excluding non-recurring costs of SEK 3.7 M for organizational changes.

Seasonal variations

Addnode Group's business is seasonal. The fourth quarter typically has the highest net sales and EBITA.

Consolidated balance sheet and cash flow

Liquidity, cash flow and financial position

The Group's cash and cash equivalents totaled SEK 47.4 M on September 30, 2015 (72.4 on December 31, 2014). Cash flow from operating activities amounted to SEK 45.8 M (55.8) during the first three quarters of 2015. Cash flow from investing activities for 2015 included payments of contracted and already expensed conditional purchase considerations totaling SEK 8.4 M for company acquisitions implemented in prior years. In addition, payments of SEK 30.5 M (17.9) were made for proprietary software. During the second quarter, a share dividend totaling SEK 66.6 M was paid. At the end of June and beginning of July, a new bank loan of MSEK 94.0 was raised ahead of the acquisition of Transcat GmbH in early July. On September 30, 2015, the Group's interest-bearing liabilities amounted to SEK 124.3 M (40.4 on December 31, 2014) and the net interest-bearing assets and liabilities amounted to negative SEK 76.2 M (pos: 33.2). The equity/assets ratio was 52 percent (56) on September 30, 2015. The Parent Company has an existing agreement for a credit facility amounting to SEK 100 M. In addition, the Parent Company signed an agreement in January 2015 for a four-year credit facility of up to SEK 200 M to finance future acquisitions, of which a suborder of SEK 94 M was placed in June and early July 2015. Of the new bank loans, SEK 43 M has a term of six months and SEK 51 M a term of 12 months, but the debt amount can be reborrowed thereafter in its entirety within the framework of the total amount of the credit facility.

Investments

Investments in intangible and tangible fixed assets amounted to SEK 41.7 M (38.3), of which SEK 30.5 M (17.9) pertained to proprietary software, SEK 0.0 M (8.2) to customer agreements and SEK 11.2 M (11.7) pertained to equipment.

Goodwill and other intangible assets

On September 30, 2015, the consolidated carrying amount of goodwill amounted to SEK 902.0 M (738.7 on December 31, 2014).

The carrying amount on brands totaled SEK 12.2 M (12.4). Other intangible assets amounted to SEK 160.8 M (123.8) and pertained primarily to customer agreements and software. The increase in the value of goodwill and other intangible assets in 2015 was largely attributable to the acquisition of Transcat GmbH.

Deferred tax assets

On September 30, 2015, total recognized deferred tax assets amounted to SEK 15.8 M, of which SEK 11.4 M pertained to tax loss carryforwards. Addnode Group's accumulated tax loss carryforwards amounted to

approximately SEK 80 M on September 30, 2015. The deferred tax assets attributable to tax loss carryforwards are recognized as assets insofar as it is probable that the tax loss carryforwards will be deductible against surpluses in future taxation.

Shareholders' equity and number of shares

On September 30, 2015, shareholders' equity amounted to SEK 886.9 M (872.7 on December 31, 2014), corresponding to SEK 29.15 (29.47) per share outstanding. During the second quarter, share dividends totaling SEK 66.6 M were paid. During the third quarter of 2015, a new share issue was made of 338,739 Series B shares comprising a private placement to the sellers and the transfer of 477,497 Series B treasury shares to the sellers as partial payment for the shares in Transcat GmbH. The decision on the new share issue and the transfer of Series B treasury shares was made by the Board of Directors with the authorization granted by the Annual General Meeting on May 6, 2015. The changes in the number of shares outstanding and shareholders' equity are shown on page 15. On September 30, 2015, there were no outstanding share-savings, options or convertible programs.

Provisions

Provisions, which in the consolidated balance sheet are included among long-term and current liabilities, amounted to SEK 51.5 M on September 30, 2015, of which SEK 47.1 M pertained to estimated conditional purchase considerations for implemented company acquisitions. The provisions for estimated conditional purchase considerations increased SEK 46.3 M in connection with company acquisitions in 2015. During the first half of 2015, payments relating to conditional purchase considerations previously recognized as liabilities were made in the amount of SEK 4.2 M.

Employees

During the first three quarter of 2015, the average number of employees in the Group was 959 (892). At the end of the period, the number of employees was 1.173 (934 on December 31, 2014).

Information about business acquisitions

On July 1, 2015, an agreement was signed to acquire all shares in the German company, Transcat GmbH, with transfer on the same date. Most of the operations are conducted in Germany, but operations are also conducted in Austria and Slovakia through subsidiaries. In 2014, the acquired operations reported net sales of approximately SEK 450 M, with EBITDA of about SEK 23 M. The company has about 200 employees expressed as FTEs. Transcat is one of Europe's leading suppliers of

IT solutions for product information (PLM solutions) based on the Dassault Système's brands and a portfolio of proprietary products. In addition, Transcat offers consulting services, advice regarding project design, training and user support.

Addnode Group's Product Lifecycle Management business area is already the leading supplier of customized PLM systems in the Nordic region and one of the leading suppliers in Europe. The business area's operation is conducted primarily through the subsidiary, Technia. Transcat is included in the Product Lifecycle Management business area from the date of transfer and will supplement Technia both strategically and operatively. The acquisition is in line with Addnode Group's strategy to become a leading European supplier of design and PLM products and services. The combined TechniaTranscat will be market leading in the European PLM market. The acquisition will provide Addnode Group with greater expertise, the potential for synergy effects and means that the Group is establishing operations in Germany. The purchase consideration paid on the transfer date comprised a cash payment of SEK 55.4 M, which was financed within the framework of existing credit facilities, a vendor's mortgage issued by Addnode Group in an amount corresponding to SEK 10.2 M, and newly issued and transferred Series B treasury shares in Addnode Group, valued at SEK 42.4 M. The decision about the new share issue and the transfer of Series B treasury shares was made supported by authorization from the Annual General Meeting on May 6, 2015. The initial cash payment will be adjusted based on the actual size of the net cash balance and the level of Transcat's working capital on the transfer date, which is why a preliminary amount of SEK 15.9 M was recognized as a current liability. Depending on the actual outcome of the acquired companies' earnings during the 2015-2016 period, a conditional cash purchase consideration within the interval zero up to a maximum undiscounted amount of EUR 5 M, equivalent to about SEK 46 M, may be payable. According to the preliminary acquisition assessment, identified acquisition-related intangible assets amounted to about SEK 36 M, signifying a deferred tax liability of approximately SEK 11 M. Preliminary goodwill is estimated at approximately SEK 169 M and the conditional purchase consideration is calculated at a maximum of about SEK 46 M, which is recognized in the consolidated balance sheet at September 30, 2015. Other acquired assets and liabilities pertain primarily to accounts receivable, prepaid expenses, cash and cash equivalents and prepaid income. Further information about identifiable net assets, goodwill, purchase considerations and the acquisition's impact on Group cash and cash equivalents is disclosed on page 19. During 2015, the acquisition contributed net sales of approximately SEK 129 M to the Addnode Group, and

had a positive impact of SEK 5 M on the Group's profit after tax. If the acquisition had been implemented on January 1, 2015, consolidated net sales for the first three quarters of 2015 would have amounted to approximately SEK 1,514 M and profit after tax to about SEK 54 M. Costs totaling SEK 3.3 M for implementing the acquisition are included in Addnode Group's other external costs for 2015.

Information about financial instruments

The Group's risk exposure pertaining to financial instruments is relatively limited. No financial assets or liabilities are recognized at a value that considerably deviates from the fair value. More detailed information is available in Note 19 of the 2014 Annual Report. In 2015, there were no significant changes in holdings or the valuation of financial instruments attributable to Level 3 of the fair-value hierarchy under IFRS 13 and there were no transfers between the levels in the valuation hierarchy. On September 30, 2015, Addnode Group had no foreign exchange forward contracts outstanding.

Parent Company

Net sales amounted to SEK 4.4 M (4.1), which pertained primarily to invoicing subsidiaries for services rendered. Profit before tax amounted to SEK 34.4 M (29.8), including dividends from subsidiaries totaling SEK 55.0 M (44.2) and impairment of shares in subsidiaries totaling SEK 6.2 M (0.0). Cash and cash equivalents totaled SEK 28.8 M on September 30, 2015 (11.2 on December 31, 2014). Investments in shares in subsidiaries amounted to SEK 173.6 M and transfers of shares in subsidiaries to other Group companies amounted to SEK 35.2 M. No significant investments were made in intangible or tangible fixed assets. During the second quarter, a share dividend totaling SEK 66.6 M was paid. During the third quarter of 2015, a new share issue was made of 338,739 Series B shares comprising a private placement to the sellers and the transfer of 477,497 Series B treasury shares to the sellers as partial payment for the shares in Transcat GmbH. The decision on the new share issue and the transfer of Series B treasury shares was made by the Board of Directors with the authorization granted by the Annual General Meeting on May 6, 2015. The provisions for estimated conditional purchase considerations increased SEK 46.3 M in connection with company acquisitions in 2015. During the first half of 2015, payments relating to conditional purchase considerations previously recognized as liabilities were made in the amount of SEK 4.2 M. The Parent Company has an existing agreement for a credit facility amounting to SEK 100 M. In addition, the Parent Company signed an agreement in January 2015 for a four-year credit facility of up to SEK 200 M to finance future acquisitions, of which a suborder of SEK 94 M was placed in June and early July 2015.

Accounting policies

This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting. The consolidated accounts have been prepared in compliance with the International Financial Reporting Standards, IFRS, as adopted by the EU and with the Swedish Annual Accounts Act. The Parent Company's accounts have been prepared in accordance with the Swedish Annual Accounts Act and recommendation RFR 2 Accounting for Legal Entities. The new standards, amendments and interpretations of existing standards that gained legal force in 2015 had no impact on Addnode Group's financial position or financial reports. The accounting policies and calculation methods are unchanged compared with the description in the 2014 Annual Report.

Significant risks and uncertainties

Addnode Group's significant risks and uncertainties are described in the 2014 Annual Report on pages 10- 11 and in the section "Risks and uncertainties" on pages 35-36, as well as in notes 37 and 38 on pages 67-69. No significant changes have subsequently occurred.

Future outlook

The Board has not changed its assessment of the future outlook compared with the preceding quarter. In the interim report for the January - June 2015 period, the Board submitted the following future outlook: In the long-term, the areas in which Addnode Group is active are deemed to have a strong underlying potential. Addnode Group's growth strategy is for organic growth and to contribute new supplementary offerings and additional expertise through the acquisition of new operations. The policy of not issuing a forecast stands firm.

Assurance

The Board of Directors and the CEO and President hereby assure that the nine month report provides a fair and true view of the company's and the Group's operation, financial position and earnings, and describes the significant risks and uncertainties facing the company and the companies included in the Group.

Stockholm October 23, 2015

Sigrun Hjelmquist Jan Andersson Kristofer Arwin Dick Hasselström Chairman of the Board Member of the Board Member of the Board Member of the Board

Annika Viklund Thord Wilkne Staffan Hanstorp Member of the Board Member of the Board CEO and President

Auditor's Report on Review of Interim Financial Information (interim report) prepared in accordance with IAS 34 and Chapter 9. Annual Accounts Act.

Introduction

We have reviewed the interim financial information for the period 1 January 2015 to 30 September 2015 for Addnode Group Aktiebolag (publ). The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of Review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Stockholm October 23, 2015

PricewaterhouseCoopers AB

Magnus Brändström Authorized Public Accountant

The largest owners August 31, 2015

Capital, Votes,
Owners % %
Vidinova 1) 24.7 27.0
Aretro Capital Group 2) 12.8 23.8
Swedbank Robur fonder 9.1 6.9
Lannebo fonder 7.5 5.7
Handelsbanken fonder 4.8 3.7
Försäkringsbolaget Avanza Pension 3.9 3.0
Didner & Gerge fonder 3.3 2.5
Fjärde AP-Fonden 2.7 2.0
Multiple Choice Företagsservice 0.2 1.7
E Öhman Jr Fonder 1.8 1.4
Other shareholders 29.2 22.3
Total 100.0 100.0

1) Board member Dick Hasselström is the principal owner of Vidinova. 2) Aretro Capital is owned by Staffan Hanstorp, the CEO of the Addnode Group, and Jonas Gejer, the Business Area Manager of Product Lifecycle Management.

Financial objectives

Growth

10%

Annual net sales growth of at least 10 percent.

Performance 10%

Operating margin before amortization and impairment of intangible assets (EBITA margin) of at least 10 percent.

Addnode Group

Addnode Group offers operation-critical IT-solutions to selected markets within both private and public sectors. We acquire, build and develop companies that deliver operation-critical IT solutions for specific needs from our customers.

Every day, 500,000 engineers use our systems to develop and maintain products, buildings and installations. 100,000 employees in the public sector use our solutions for municipal and government management.

We have 1,150 employees in Austria, Denmark, Finland, Germany, India, Norway, Slovakia, Sweden, the UK and the US and Serbia. Net sales in 2014 amounted to SEK 1,599 M. Addnode Group's Series B share is listed on the Nasdaq Stockholm, Small Cap.

For more information, please visit www.addnodegroup.com.

Dividend policy 50%

At least 50 percent of the Group's profit after tax shall be distributed to shareholders, providing that the net cash is sufficient to operate and develop the operation.

For more information please contact:

Staffan Hanstorp CEO and President Phone: +46 733 772 430 e-mail: [email protected]

Johan Andersson CFO & Head of IR Phone: +46 704 205 831 e-mail: [email protected]

Addnode Group AB (publ), org nr 556291-3185 Hudiksvallsgatan 4 B 113 30 Stockholm Phone: +46 8 506 66 210 www.addnodegroup.com

Financial calendar

Year End report 2015 February 5, 2016

Interim Report Q1 2016 April 27, 2016

Annual General Meeting 2016 April 28, 2016

Interim Report first six months 2016 July 22, 2016

CONSOLIDATED INCOME STATEMENT

Full
July - Sept Jan - Sept year
(SEK M) 2015 2014 2015 2014 2014
Net sales 467,3 354,5 1 286,4 1 137,2 1 598,6
Operating costs:
Purchases of goods and services -182,3 -119,7 -460,1 -359,6 -515,9
Other external costs -57,3 -40,0 -163,1 -135,2 -192,0
Personnel costs -193,0 -162,2 -585,4 -555,1 -749,2
Capitalized work performed by the company for its own use 11,4 4,7 30,5 17,9 29,9
Revaluation of conditional purchace price 34,3
Depreciation and write-downs of
- tangible fixed assets -3,9 -3,3 -9,8 -9,6 -12,4
- intangible fixed assets -11,4 -8,9 -30,5 -25,6 -64,8
Total operating costs -436,5 -329,4 -1 218,4 -1 067,2 -1 470,1
Operating profit 30,8 25,1 68,0 70,0 128,5
Financial income -1,1 1,2 1,4 2,1 4,2
Financial expenses -0,1 -1,3 -2,0 -2,5 -2,9
Profit before taxes 29,6 25,0 67,4 69,6 129,8
Current tax -6,2 -3,8 -12,2 -10,3 -14,9
Deferred tax -1,7 -2,2 -5,2 -6,7 -14,7
NET PROFIT FOR THE PERIOD 21,7 19,0 50,0 52,6 100,2
Attributable to:
Shareholders of the Parent company 21,7 19,0 50,0 52,6 100,2
Minority share 0,0 0,0 0,0 0,0 0,0
Earnings per share before dilution, SEK 0,71 0,64 1,67 1,79 3,40
Earnings per share after dilution, SEK 0,71 0,64 1,67 1,78 3,38
Average number of outstanding shares:
Before dilution, millions 30,4 29,5 29,9 29,4 29,5
After dilution, millions 30,4 29,6 29,9 29,6 29,6

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME

July - Sept
Jan - Sept
Full year
(SEK M) 2015 2014 2015 2014 2014
Net profit for the period 21,7 19,0 50,0 52,6 100,2
Other comprehensive income, items which may be
reclassified to the consolidated income statment:
Translation differences on consolidation -6,9 7,0 -10,6 18,9 5,2
Hedges of net investments in foreign subsidiaries -0,9 -0,6 -0,9 -2,3 -1,0
Total other comprehensive income after tax for the period -7,8 6,4 -11,5 16,6 4,2
COMPREHENSIVE INCOME FOR THE PERIOD 13,9 25,4 38,5 69,2 104,4
Attributable to:
Shareholders of the Parent company 13,9 25,4 38,5 69,2 104,4
Minority share 0,0 0,0 0,0 0,0 0,0

CONSOLIDATED BALANCE SHEET

Sept Sept Dec
30, 30, 31,
(SEK M) 2015 2014 2014
Goodwill 902,0 775,4 738,7
Trademarks 12,2 12,7 12,4
Other intangible fixed assets 160,8 123,4 123,8
Tangible fixed assets 34,3 28,7 27,2
Financial fixed assets 31,0 37,6 34,9
Inventories 1,2 1,1 1,0
Current receivables 514,6 413,9 546,5
Cash and cash equivalents 47,4 47,6 72,4
TOTAL ASSETS 1 703,5 1 440,4 1 556,9
Shareholders' equity 886,9 838,1 872,7
Long-term liabilities 94,7 92,1 53,5
Current liabilities 721,9 510,2 630,7
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 1 703,5 1 440,4 1 556,9
Interest-bearing receivables amount to 0,7 1,4 1,2
Interest-bearing liabilities amount to 124,3 88,8 40,4
Pledged assets 11,3 7,3 12,6
Contingent liabilities 1,7 1,6 2,3

SHAREHOLDERS' EQUITY AND NUMBER OF SHARES

Full
July - Sept Jan - Sept year
Specification of changes in shareholders' equity 2015 2014 2015 2014 2014
Shareholders' equity, opening balance 830,7 813,1 872,7 834,5 834,5
New share issue 17,6 17,6
Issue expenses -0,1 -0,1
Dividend -66,6 -66,2 -66,2
Transfer of own shares 24,8 24,8
Acquisition of shares from minority interest -0,2 -0,3 -0,9
Incentive program -0,2 0,9 0,9
Comprehensive income for the period 13,9 25,4 38,5 69,2 104,4
Shareholders' equity, closing balance 886,9 838,1 886,9 838,1 872,7
Shareholders' equity attributable to:
Shareholders of the Parent company 886,9 837,8 886,9 837,8 872,7
Minority interest 0,0 0,3 0,0 0,3 0,0
Specification of number of shares outstandning, millions
Number of outstanding shares, opening balance 29,6 29,4 29,6 29,4 29,4
New share issue 0,3 0,3
Transfer of own shares 0,5 0,2 0,5 0,2 0,2
Number of outstanding shares, closing balance 30,4 29,6 30,4 29,6 29,6

The number of registered shares was 30,088,517 on December 31, 2014 and 30,427,256 on September30, 2015. Addnode Group's holdings of own shares was 479,884 B-shares on December 31, 2014. During the first quarter 2015 2,387 B-shares have been transferred to one of the participants in Addnode Group's share savings program, which expired in August 2014, whereafter all commitments according to this program have been settled. A new share issue of 338,739 B-shares and transfer of 477,497 own B-shares have been executed in July 2015 as a partial payment for the acquisition of Transcat GmbH. Addnode Group had no holdings of own shares as of September 30, 2015. The number of outstanding shares was 29,608,633 on December 31, 2014 and 30,427,256 on September 30, 2015.

CONSOLIDATED CASH FLOW STATEMENT

Full
July - Sept Jan - Sept year
(SEK M) 2015 2014 2015 2014 2014
Current operations
Operating profit 30,8 25,1 68,0 70,0 128,5
Adjustment for items not included in cash flow 15,2 10,3 37,2 28,0 34,2
Total 46,0 35,4 105,2 98,0 162,7
Net financial items -0,8 -1,0 -2,1 -1,3 -1,5
Tax paid, etc. -7,3 -5,2 -23,5 -27,5 -12,4
Cash flow from current operations
before changes in working capital 37,9 29,2 79,6 69,2 148,8
Total changes in working capital -55,9 -59,1 -33,8 -13,4 3,7
Cash flow from current operations -18,0 -29,9 45,8 55,8 152,5
Cash flow from investing activities1) -44,0 -24,8 -81,1 -89,1 -109,8
Cash flow from financing activities2) 48,8 38,1 11,9 -38,4 -86,8
Change in cash and cash equivalents -13,2 -16,6 -23,4 -71,7 -44,1
Cash and cash equivalents, opening balance 62,8 63,0 72,4 114,8 114,8
Exchange-rate difference in cash and cash equivalents -2,2 1,2 -1,6 4,5 1,7
Cash and cash equivalents, closing balance 47,4 47,6 47,4 47,6 72,4
1) Specification of investing activities:
Acquisition and sales of intangible and tangible
fixed assets -15,5 -7,4 -40,7 -34,0 -48,2
Acquisition of financial fixed assets -3,4 -5,5
Acquisition of subsidiaries and operations -55,4 -17,4 -64,2 -55,1 -56,1
Cash and cash equivalents in acquired companies 26,9 27,2
Total -44,0 -24,8 -81,1 -89,1 -109,8
2) Specification of financing activities:
Paid dividend -66,6 -66,2 -66,2
Bank overdraft facility utilized 43,3 43,3
Borrowings 54,0 94,0
Repayment of debts -5,2 -5,2 -15,5 -15,5 -20,6
Total 48,8 38,1 11,9 -38,4 -86,8

KEY FIGURES

Full
July - Sept Jan - Sept year
2015 2014 2015 2014 2014
Net sales, SEK M 467,3 354,5 1 286,4 1 137,2 1 598,6
Average number of employees 1 109 896 959 892 890
Net sales per employee, SEK 000s 421 396 1 341 1 275 1 796
Change in net sales, % 32 18 13 13 11
EBITA margin, % 9,0 9,6 7,7 8,4 12,1
Operating margin, % 6,6 7,1 5,3 6,2 8,0
Profit margin, % 6,3 7,1 5,2 6,1 8,1
Equity/assets ratio, % 52 58 52 58 56
Acid-test ratio, % 78 90 78 90 98
Shareholders' equity, SEK M 886,9 838,1 886,9 838,1 872,7
Return on shareholders' equity,% * 2,5 2,3 5,7 6,3 11,9
Return on capital employed, % * 3,1 2,9 7,4 8,0 14,7
Net liabilities, SEK M 76,2 39,8 76,2 39,8 -33,2
Debt/equity ratio, multiple 0,19 0,15 0,19 0,15 0,09
Interest coverage ratio, multiple 47,5 41,0 53,7 44,3 58,5
Percentage of risk-bearing capital, % 52 59 52 59 56
Investments in equipment, SEK M 4,3 2,8 11,2 11,7 13,8

* Key figures for the various interim periods have not been adjusted to return on an annual basis.

SHARE DATA

July - Sept Jan - Sept Full
year
2015 2014 2015 2014 2014
Average number of outstanding shares after
dilution, millions 30,4 29,6 29,9 29,6 29,6
Total number of outstanding shares, millions 30,4 29,6 30,4 29,6 29,6
Total number of registered shares, millions 30,4 30,1 30,4 30,1 30,1
Earnings per share after dilution, SEK 0,71 0,64 1,67 1,78 3,38
Shareholders' equity per share, SEK 29,15 28,30 29,15 28,30 29,47
Dividend per share, SEK - - - - 2,25
Stock-market price at end of period, SEK 50,75 41,50 50,75 41,50 46,10
P/E ratio - - - - 14
Share price/shareholders' equity 1,74 1,47 1,74 1,47 1,56

OPERATING SEGMENTS

The figures below refer to the first nine months of each full-year.

(SEK M) DESIGN
MGT
MGT PLM PROCESS
MGT
CONTENT
MGT
CENTRAL ELIM /
OTHER
ADDNODE
GROUP
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
REVENUE
External sales 571,2 549,3 308,0 188,2 311,9 304,5 95,1 95,1 0,2 0,1 1 286,4 1 137,2
Transactions be
tween segments 3,0 1,0 0,8 3,1 8,8 11,0 6,5 6,1 -19,1 -21,2 0,0 0,0
Total revenue 574,2 550,3 308,0 188,2 312,7 307,6 103,9 106,1 6,7 6,2 -19,1 -21,2 1 286,4 1 137,2
EBITA 40,7 43,3 25,0 23,5 48,7 46,7 6,3 1,5 -22,2 -19,4 98,5 95,6
EBITA margin 7,1% 7,9% 8,1% 12,5% 15,6% 15,2% 6,1% 1,4% 7,7% 8,4%
Operating profit 26,6 30,9 21,0 21,3 37,1 36,8 5,5 0,4 -22,2 -19,4 68,0 70,0
Operating margin 4,6% 5,6% 6,8% 11,3% 11,9% 12,0% 5,3% 0,4% 5,3% 6,2%
Average nr. of
employees 318 302 235 164 273 276 126 142 7 8 959 892

Addnode Group's operations are organized and managed based on the business areas Design Management, Product Lifecycle Management (PLM), Process Management and Content Management, which are the Group's operating segments. There have been no changes in the segment division or calculation of segment results since the most recently published Annual Report. Segments are reported according to the same accounting principles as the Group. The difference between the sum of the segments' operating income and consolidated income before tax is, beside the items in the column "Elim / Other" above, attributable to financial income of SEK 1.4 M (2.1) and financial expenses of SEK -2.0 M (-2.5). Acquisition of subsidiaries have increased the total assets of Product Lifecycle Management with approximately SEK 300 M compared to the information in the most recent annual report. Otherwise, there have been no significant changes in the segments' assets, compared to the information in the most recent annual report.

QUARTERLY FINANCIAL OVERVIEW

(SEK M) 2015 2014 2013
Total Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1
Net sales 1 286,4 467,3 387,3 431,8 1 598,6 461,4 354,5 371,3 411,4 1 443,5 433,5 301,4 337,9 370,7
EBITA 98,5 42,2 22,6 33,7 193,3 97,7 34,0 27,3 34,3 110,7 53,9 8,7 19,5 28,6
Operating profit 68,0 30,8 12,8 24,4 128,5 58,5 25,1 18,5 26,4 85,9 46,1 2,6 13,9 23,3
Profit before taxes 67,4 29,6 12,2 25,6 129,8 60,2 25,0 19,2 25,4 85,7 46,2 2,1 13,6 23,8
Profit after taxes 50,0 21,7 8,7 19,6 100,2 47,6 19,0 14,4 19,2 62,9 34,0 0,9 9,9 18,1
EBITA margin 7,7% 9,0% 5,8% 7,8% 12,1% 21,2% 9,6% 7,4% 8,3% 7,7% 12,4% 2,9% 5,8% 7,7%
Operating margin 5,3% 6,6% 3,3% 5,7% 8,0% 12,7% 7,1% 5,0% 6,4% 6,0% 10,6% 0,9% 4,1% 6,3%
Cash flow
from current
operations 45,8 -18,0 23,3 40,5 152,5 96,7 -29,9 13,9 71,8 118,8 54,4 -1,4 20,2 45,6
Average nr. of employees 859 1 109 884 886 890 885 896 886 892 859 901 877 852 825

ACQUISITIONS OF SUBSIDIARIES 2015

Preliminary information about identified net assets, goodwill, purchase prices and the impact of the acquisitions on the group's cash and cash equivalents is stated in the following schedules:

OTHER
(SEK M) TRANSCAT ACQUISITIONS TOTAL
Customer agreements and computer software 38 38
Tangible fixed assets 6 6
Financial fixed assets 2 2
Receivables 68 68
Cash and cash equivalents 27 27
Long-term liabilities -4 -4
Current liabilities -125 -125
Deferred tax, net -11 -11
Identified net assets 1 0 1
Goodwill 169 1 170
Total purchase prices 170 1 171
Purchase prices paid with new share issues and
transferred own shares -43 -43
Long-term and current liabilities to sellers -10 -10
Settlement regarding net cash and working capital -16 -16
Provisions for conditional purchase prices -46 -46
Purchase prices paid in cash for acquisitions 2015 55 1 56
Purchase prices paid in cash for acquisitions 2015 -55 -1 -56
Paid purchase prices for acquisitions earlier years -8 -8
Cash and cash equivalents in acquired subsidiaries 27 27
Impact on the group's cash and cash equivalents -28 -9 -37

The acquired subsidiaries are knowledge-based companies and goodwill therefore refers to the built-up competence of the personnel and the employees' total knowledge of the respective computer software and IT-systems and to a certain extent also to synergy effects.

PARENT COMPANY INCOME STATEMENT

July - Sept Jan - Sept
(SEK M) 2015 2014 2015 2014 2014
Net sales 1,4 1,1 4,4 4,1 6,6
Operating expenses -4,8 -5,5 -19,8 -18,7 -24,8
Operating result -3,4 -4,4 -15,4 -14,6 -18,2
Financial income 17,3 1,3 51,9 47,3 89,9
Financial expenses -0,1 -0,8 -2,1 -2,9 -3,1
Profit before taxes 13,8 -3,9 34,4 29,8 68,6
Tax 0,0 0,0 0,0 0,0 -1,1
NET PROFIT FOR THE PERIOD 13,8 -3,9 34,4 29,8 67,5

PARENT COMPANY BALANCE SHEET

Sept 30, Sept 30, Dec 31,
(SEK M) 2015 2014 2014
Tangible fixed assets 0,0 0,0 0,0
Financial fixed assets 1 147,3 1 021,2 1 013,8
Current receivables 135,3 89,0 83,5
Cash and cash equivalents 28,8 0,0 11,2
TOTAL ASSETS 1 311,4 1 110,2 1 108,5
Shareholders' equity 827,0 779,1 816,8
Provisions 46,7 39,1 4,7
Long-term liabilities 5,1 20,7 15,5
Current liabilities 432,6 271,3 271,5
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 1 311,4 1 110,2 1 108,5

DEFINITIONS

Average number of employees

Average number of full-time employees during the period.

Shareholder's equity Reported shareholders' equity plus untaxed reserves less deferred tax at current tax rate.

Capital employed

Total assets less non-interest-bearing liabilities and non-interest-bearing provisions including deferred tax liabilities.

Net sales per employee

Net sales divided by the average number of full-time employees.

EBITA

Profit before depreciation/amortization and impairment of intangible assets.

EBITA margin EBITA as a %-age of net sales.

Operating margin Operating profit as a %-age of net sales.

Profit margin Profit before tax as a %-age of net sales.

Return on shareholder's equity

Net profit for the period attributable to the parent company's shareholders' as a %-age of the average shareholders' equity.

Return on capital employed

Profit before tax plus financial expenses as a %-age of the average capital employed.

Equity/assets ratio

Shareholders' equity (including shareholder's equity related to non-controlling interest) as a %-age of total assets.

Acid test ratio

Current assets excluding inventory as a %-age of current liabilities.

Net liabilities

Interest-bearing liabilities less cash and cash equivalents and other interest-bearing receivables.

A negative net liability, according to this definition, means that cash and cash equivalents and other interest-bearing financial assets exceed interest bearing liabilities.

Debt/equity ratio

Total amount of interest-bearing long-term and current liabilities and deferred tax liability in relation to shareholders' equity.

Interest coverage ratio

Profit before tax plus interest expenses as a % -age of interest expense.

%-age of risk-bearing capital

Reported shareholders' equity (including shareholder's equity related to non-controlling interest) and deferred tax liability in untaxed reserves as a %-age of total assets.

Earnings per share

Net profit for the period attributable to the parent company's shareholders' divided by the average number of shares outstanding.

Shareholder's equity per share

Shareholders' equity attributable to the parent company's shareholders' divided by the number of shares outstanding.

P/E ratio

Share price in relation to profit per share.

Share price/shareholder's equity

Share price in relation to shareholders' equity per share.

LTM (Last Twelve Month)

Outcome for the latest twelve-month period

Addnode Group AB (publ) org nr 556291-3185 Sid 22 (22)

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