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Crayon Group Holding Investor Presentation 2021
3573_rns_2021-05-11_c075f2a9-e420-463e-8dc6-d2d089b69c2b.pdf
Investor Presentation
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Quarterly Results – Q1 2021
Melissa Mulholland & Jon Birger Syvertsen
Disclaimer
These materials may contain statements about future events and expectations that are forward-looking statements. Any statement in these materials that is not a statement of historical fact including, without limitation, those regarding Crayon Group Holding ASA's (the "Company") financial position, business strategy, plans and objectives of management for future operations is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurances that they will materialise or prove to be correct. Because these statements are based on assumptions or estimates and are subject to risks and uncertainties, the actual results or outcome could differ materially from those set out in the forward-looking statements as a result of many factors, including, among others competition from Nordic and international companies in the markets in which the Company operates, changes in the demand for IT services and software licensing, changes in international, national and local economic, political, business, industry and tax conditions, the Company's ability to realise backlog as operating revenue, the Company's ability to correctly assess costs, pricing and other terms of its contracts, the Company's ability to manage an increasingly complex business, political and administrative decisions that may affect the Company's public customer group contracts, the Company's ability to retain or replace key personnel and manage employee turnover and other labour costs, unplanned events affecting the Group's operations or equipment, the Company's ability to grow the business organically, changes regarding the Company's brand reputation and brand image, fluctuations in the price of goods, the value of the NOK and exchange and interest rates, the Company's ability to manage its international operations, changes in the legal and regulatory environment and in the Company's compliance with laws and regulations, increases to the Company's effective tax rate or other harm to its business as a result of changes in tax laws, changes in the Company's business strategy, development and investment plans, other factors referenced in this report and the Company's success in identifying other risks to its business and managing the risks of the aforementioned factors. Should one or more of these risks or uncertainties materialise, or should any underlying estimates or assumptions prove to be inappropriate or incorrect, our actual financial condition, cash flows or results of operations could differ materially from what is expressed or implied herein. The Company assumes no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.
This presentation does not constitute or form part of, and is not prepared or made in connection with, an offer or invitation to sell, or any solicitation of any offer to subscribe for or purchase any securities and nothing contained herein shall form the basis of any contract or commitment whatsoever. No reliance may be placed for any purposes whatsoever on the information contained in this presentation or on its completeness, accuracy or fairness. The information in this presentation is subject to verification, completion and change. The contents of this presentation have not been independently verified. The Company's securities have not been and will not be registered under the US Securities Act of 1933, as amended (the "US Securities Act"), and are offered and sold only outside the United States in accordance with an exemption from registration provided by Regulation S of the US Securities Act. This presentation should not form the basis of any investment decision. Investors and prospective investors in securities of any issuer mentioned herein are required to make their own independent investigation and appraisal of the business and financial condition of such company and the nature of the securities.
Q1 2021
Business Update Melissa Mulholland
Q1 2021 highlights
Strong financial quarter & market performance 1
Significant public sector wins 2
Acceleration in global data & AI practice 3
Global ISO certification achieved 4
Sensa acquisition 5
Continued recordbreaking performance +31% Revenue MNOK 5,522
+23% Gross Profit MNOK 635
1 Adjusted EBITDA – EBITDA adjusted for share based compensation and other one-off income and expenses
Strong performance across business areas
| Software & Cloud Direct | Software & Cloud Channel |
Software & Cloud Economics Services |
Consulting Services | |
|---|---|---|---|---|
| Gross profit growth1 | +25% | +18% | +15% | +27% |
| Significant customer wins |
||||
| Q1 drivers and outlook |
Market share gains (MS • revenue growth 2x the market) Product mix improvements • (e.g. non-MS, Premium Cloud) Compelling USP (bundling • cost saving services) Growth in public sector • |
Strong performance of • partner channel delivering solid CSP cloud results Channel growth in India, • Nordics, UK Focus on partners upskilling • resulting in higher upsell of products and services Growth in ISV partner • segment – fastest growing in Microsoft Western Europe |
Strong market demand for • cost optimization driven by COVID 40% YoY growth in recurring • contracts Exceptionally strong • performance in US, Nordics, Germany & Switzerland Strong onboarding of • managed service customers to the service delivery portal Service-iQ |
Growth in Cloud Services • driven by solid US performance Continued demand for • remote delivery globally Acceleration of Data & AI in • MEA, South America, and Europe ISO Certification and Service • Delivery Framework |
Q1 customer stories
2
Q1 customer stories
Nordic Choice Hotels:
- 16,500 employees faced with business impact from COVID-19 and need to reduce IT cost
- Focus on Cost and Compliance Risk reduction
Crayon Cloud Economics:
- Expanded Crayon IP Service-iQ platform across Azure and AWS
- Leveraging best practice for multicloud governance and optimization to our clients
2
Q1 customer stories
Remote global delivery across Energy sector, Farming and Manufacturing
- Customer wins with largest Oil & Gas leaders
- Developed repeatable IP for farming
- Delivered MLOps platform for award-winning customer product
- Igniting new business models through AI innovation
Q1 customer stories Strategic value creation levers
- Focus on sustainability with carbon savings solutions in Energy sector
- Created "fAIr by Design" with the Austrian gov. to reduce bias in AI solutions
- Developed IP for AI Model Management delivered as a Managed Service
- Scaled MLOps practice across cloud vendors (AWS, MSFT, GCP)
3
Crayon achieves global ISO certification
Sensa at a glance
20 years in operation servicing the Icelandic enterprise market
120+ employees Who are experts in their field
5
~150 MNOK gross profit Always profitable
Compliance ISO/IEC 27001:2013 Certified
Services
Managed, hosted and professional services in IT infrastructure
Corporate Responsibility
- UN Global Compact Company
- Our office in India distributed food and medical supplies to communities disproportionately affected by COVID-19 in India
- A team of 30 people across 21 countries committed to contributing a percentage of their gross profits to help those in need during the pandemic. This resulted in the CSCS/COR team successfully distributing 1200 food bags in the Philippines
- Created "fAIr by Design" project along with the Austrian government to use machine learning to reduce bias in creating AI solutions
• In Germany, employees donated funding to the Bärenherz children's hospice in Leipzig
- The US team organized a food drive that garnered nearly 160 kilos of food for families
- We also have ongoing efforts in many of our regions to raise money for fighting cancer and other illnesses.
- Donated 22 screens and 4 computers to school in the UK for children with special needs
Chief Compliance Officer
Abbey Lin Chief Compliance Officer
Driving Training + Awareness
Global Compliance + ESG
Q1 2021
Financial Review
Jon Birger Syvertsen
Q1 2021 - Summary
Strong growth across markets in Q1
Compared to corresponding period last year
LTM gross profit by market cluster
Strong Q1 performance leads to 28% LTM growth
EBITDA margin2
EBITDA
3 LTM vs previous LTM period
Growth across all business areas
Compared to corresponding period last year
%
Q1 2021
International expansion momentum continues
- Continued gross profit growth in international markets – doubled last three years
- EBITDA contribution from International markets continue to improve as the
Working capital driven by seasonality
2021 Q1 net working capital NOK million
Net working capital over time NOK million
- Q1 2021 net working capital is NOK 96m more negative than Q1 2020, driven by a decrease of trade working capital of NOK 80m and a decrease in other working capital of NOK16m
- Improvement in net working capital of NOK 96m driven by a combination improved credit and collection processes and increase in factoring
Strong liquidity position end Q1
1 EBITDA (non-adjusted)
2 As seen from the cash flow statement; Acquisitions include business combinations.
3 NOK 297m new equity from share issue June 2020, NOK 24.6m in December 2020 from option exercise and NOK 38.5m in Q4 2020 from ESPP program
4 Also includes cash flow effects from IFRS 16, cash flow from financing activities, etc..
5 Liquidity reserve is reported in the 'Alternative Performance Measures' section in the quarterly report, and is defined as the sum of freely available cash and available credit facilities
- Cash flow from operations is seasonal and driven by changes to net working capital
- Negative cash flow from operations in Q1 21 in line with normal seasonality as Q1 NWC is less negative than Q4 NWC
- Strong liquidity position of NOK 1.2 bn as a consequence of strong business and working capital performance combined with the NOK 300m equity raise in June
P&L - summary
| NOKm | Q1 2021 | Q1 2020 |
|---|---|---|
| Operating revenue | 5 522,5 | 4 204,0 |
| Cost of sales | -4 887,5 | -3 688,7 |
| Gross profit | 634,9 | 515,2 |
| Payroll and related costs | -489,4 | -395,5 |
| Other operating expenses | -64,4 | -81,2 |
| Total operating expenses | -553,7 | -476,7 |
| EBITDA | 81,2 | 38,5 |
| Depreciation | -14,5 | -12,5 |
| Amortisation | -21,6 | -20,1 |
| EBIT | 45,1 | 5,9 |
| Interest expense | 10,3 | 15,4 |
| Other financial expense, net | 5,9 | 31,9 |
| Ordinary result before tax | 29,0 | -41,5 |
| Income tax expense on ordinary result | -13,8 | -10,1 |
| Net (loss) income | 15,2 | -51,6 |
| Adjusted EBITDA reconciliation | ||
| Reported EBITDA | 81,2 | 38,5 |
| Other income and expenses | 11,8 | 2,1 |
| Adjusted EBITDA | 93,0 | 40,6 |
- Depreciation and amortization in line with plan
- Interest expenses reduced YoY as Q1 20 was impacted by realizations of hedging positions on the previous bond loan
- Income tax expenses increases as a consequence of the significant improvement in profitability
- EBITDA adjustments in Q1 2021 increase EBITDA with NOK 11.8m, driven by NOK 8.9m related to share-based compensation and NOK 2.9m other personnel cost.
- Net profit in Q1 2021 of NOK 15.2m
Balance sheet and net interest-bearing debt
| NOKm | 31.03.2021 31.03.2020 | |
|---|---|---|
| ASSETS | ||
| Development Costs | 86,9 | 88,6 |
| Technology and software | 16,6 | 28,9 |
| Contracts | 52,9 | 72,8 |
| Software licenses (IP) | 2,1 | 1,0 |
| Goodwill | 846,0 | 874,7 |
| Deferred tax asset | 37,6 | 36,0 |
| Total intangible assets | 1 042,1 | 1 102,1 |
| Equipment | 36,2 | 40,5 |
| Right of use assets | 107,5 | 127,6 |
| Total tangible assets | 143,7 | 168,1 |
| Other non-current receivables | 36,4 | 20,3 |
| Inventory | 4,5 | 18,9 |
| Accounts receivable | 3 170,2 | 2 397,7 |
| Other current receivables | 316,1 | 158,1 |
| Cash & cash equivalents | 962,1 | 330,4 |
| Total current assets | 4 452,9 | 2 905,2 |
| Total assets | 5 675,1 | 4 195,6 |
LIABILITIES AND SHAREHOLDERS' EQUITY
| Share capital | 83,3 | 76,6 |
|---|---|---|
| Own shares | 0,0 | 0,0 |
| Share premium | 975,3 | 622,1 |
| Sum paid-in equity | 1 058,6 | 698,8 |
| Retained Earnings | 48,3 | -24,7 |
| Total equity attributable to parent company shareholders | 1 106,9 | 674,1 |
| Non-controlling interests | 1,8 | -12,9 |
| Total shareholders' equity | 1 108,7 | 661,2 |
| Bond loan | 295,8 | 293,7 |
| Derivative financial liabilities | 0,0 | 13,9 |
| Deferred tax liabilities | 19,1 | 31,8 |
| Lease liabilities | 85,0 | 102,9 |
| Other non-current liabilities | 47,8 | 42,7 |
| Total long-term liabilities | 447,7 | 485,0 |
| Accounts payable | 3 147,0 | 2 309,0 |
| Income taxes payable | 41,4 | 25,1 |
| Public duties | 66,4 | 156,2 |
| Current lease liabilities | 29,3 | 29,2 |
| Other current interest bearing debt | 107,3 | 50,1 |
| Other current liabilities | 727,3 | 479,7 |
| Total current liabilities | 4 118,7 | 3 049,4 |
| Total liabilities | 4 566,4 | 3 534,4 |
| Total equity and liabilities | 5 675,1 | 4 195,6 |
| 31.03.2021 | 31.03.2020 | |
|---|---|---|
| Long-term interest bearing debt | 300,0 | 303,8 |
| Other current interest bearing debt | 107,3 | 50,1 |
| Cash and cash equivalents | -962,1 | -330,4 |
| Restricted cash | 44,3 | 13,1 |
| Net interest bearing debt (NIBD) | -510,4 | 36,6 |
- Underlying business growth increases accounts receivables and payables but overall decrease in net working capital
- Increase in equity primarily driven by NOK 300m equity raise in May 2020 and ESPP/option exercise
- Liquidity is seasonal with Q1 being a strong quarter Q1 2021 still represents a clear improvement year over year
- The strong balance sheet supports the current M&A strategy
- The Company reports its cash balance net of drawdown on its revolving credit facility ("RCF")
- Approx. NOK 556m of goodwill relates to the Oslo Stock Exchange delisting of Inmeta-Crayon in 2012
- Note that bond transactional costs of around NOK 7m are capitalized , and accretion expensed over the lifetime of the bond, cf. IAS 39
Cash flow development
| NOKm | Q1 2021 | Q1 2020 |
|---|---|---|
| Net income before tax | 29,0 | -41,5 |
| Taxes paid | -15,4 | -10,2 |
| Depreciation and amortisation, incl. impairment | 36,1 | 32,6 |
| Net interest expense | 7,7 | 12,4 |
| Changes in inventory, AR/AP¹ | -185,6 | 98,7 |
| Changes in other current assets/liabilities | -272,8 | 24,7 |
| Net cash flow from operating activities | -401,0 | 116,8 |
| Interest paid to credit institutions and interest to bond loan | -5,1 | -10,5 |
| New Equity / Other | -3,8 | 7,8 |
| Net new debt | -11,4 | -10,1 |
| Net cash flow from financing activities | -20,3 | -12,8 |
| Acquisition of assets | -13,5 | -17,7 |
| Acquisition of subsidiaries - net of cash acquired/ Business combinations | 0,0 | -1,0 |
| Net cash flow from investing activities | -13,5 | -18,7 |
- Cash flow from operations in Q1 driven by change in net working capital performance and strong underlying business performance.
- Acquisition of assets in Q1 2021 of NOK 13.5m mainly relates to investments in new ERP system and Cloud IQ platform.
Outlook
Q1 2021 OUTLOOK
2021 margin outlook updated
| 2020 actuals |
LTM actuals |
2021 outlook |
Medium term |
Comment | |
|---|---|---|---|---|---|
| Gross profit growth |
+29.6 % | +27.8% | +20-25% | +15-20 % | Continued strong momentum; Sensa included in guidance |
| Adjusted EBITDA as share of gross profit |
17.6% | 18.9% | 16-17% 17-18% |
Gradually increase to 19% |
Accellerating productivity ramp-up of growth investments in new resources |
| NWC1 | -30.2 % | -29.7% | -20% to -25% | -15% to - 20% |
Expect to sustain ~half of the 2020 NWC improvement medium term |
| Capex | NOK 81.4m | NOK 77.2m |
NOK 80-85 m | NOK~85m | Continued investments in platforms and IP |
Q&A Session
Investor Relations
Main communications channels
- Crayon IR webpages https://www.crayon.com/investor-relations/
- Group fact & figures
- − Reports & Presentations
- − Share and bond information
- Newsweb , Oslo Stock Exchange
Financial calendar 2021:
- 11.05.21 Quarterly Report Q1
- 11.08.21 Half-yearly Report
- 26.10.21 Quarterly Report Q3
- 15.02.21 Quarterly Report Q4
For IR-related requests: Hilde Thomassen
(+47 90 25 41 32) [email protected] / [email protected]
CRAYON GROUP
Data pack available at crayon.com
Services
SW & Cloud Economics
Consulting
Software
SW & Cloud Direct SW & Cloud Channel
International EBITDA margins continue to improve
LTM adjusted EBITDA margin1
- Nordics with continued strong EBITDA margins
- APAC&MEA EBITDA margins improving
- Europe EBITDA margins negatively influenced by investments into CEE
- Positive EBITDA margin in the US
Strong growth across markets in Q1
YoY gross profit growth by market cluster NOK million
YoY Adj EBITDA growth by market cluster NOK million
Strong GP growth across markets and segments
YoY gross profit growth by business area NOK million
YoY Adj EBITDA growth by business area NOK million
Strong performance across SW & Cloud and Services
LTM gross profit by business area NOK million
LTM adjusted EBITDA by business area NOK million
1 LTM vs previous LTM period 2 Adjusted EBITDA as share of Gross Profit 3 LTM vs previous LTM period
Global SW & Cloud vs Services split Q1 2021 APPENDIX
1 Total excludes admin costs 2 Service GP as share of total service and SW&Cloud GP 3 Total includes HQ and eliminations
About Crayon
Crayon at a glance
20 years of expertise in software and cloud advisory
Over 600 certifications on a wide range of technology solutions
Who are experts in their field
Strong relationships
and strategic partnerships with leading technology vendors and cloud partners
Publicly listed on the Oslo Stock Exchange
Over 58,000 customers from SMB to enterprise across all industries segments
We believe in the power of technology to drive the greater good
Our mission
Crayon helps its customers build the commercial and technical foundation for a successful and secure cloud-first, digital transformation journey.
With a global team of accredited experts, we assist our clients with services to plan, rightsize, optimize, manage, and innovate their IT estates throughout the entire lifecycle.
As such we'll help businesses make data-driven and costsaving decisions while navigating the digital future.
Our values
Integrity
With our actions we show integrity – we are accountable for our actions and inactions
Pace
We are customerfocused and act and execute with urgency
Agility
We innovate through continuous improvement & adapt quickly to change
Quality
What we do, we do with excellence and better than anyone else