GK Software SE — Interim / Quarterly Report 2022

Nov 28, 2022

Quarterly Statement

January–September 2022

The Retail Innovators

Summary of consolidated results

		30.9.2022	30.9.2021	31.12.2021	2022/2021 changes
					in %
Turnover	EUR K	113,039	95,741	130,847	18.1
Operating income	EUR K	113,039	95,741	130,847	18.1
Overall revenue	EUR K	118,142	101,370	139,589	16.6
EBIT	EUR K	17,187	14,233	17,306	20.8
EBIT margin (on turnover)	%	15.2	14.9	13.2	–
EBITDA	EUR K	22,236	19,988	26,790	11.3
EBITDA margin (on turnover)	%	19.7	20.9	20.5	–
EBT	EUR K	16,085	13,382	16,454	20.2
Annual surplus	EUR K	13,289	10,877	13,298	22.2
Earnings per share (weighted)	EUR	5.84	5.03	5.98	–
Earnings per share (diluted)	EUR	5.65	4.71	5.66	–
Equity ratio	%	60.4	57.1	58.0	–
Employees		1,144	1,071	1,096	6.8

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Table of contents

• 3 GK Software continues to grow successfully in the cloud
• 5 Financial forecast and prospects
• 6 Consolidated Balance Sheet
• 7 Consolidated statement of income and accumulated earnings
• 8 Consolidated Cash-Flow Statement
• 9 Financial Calendar
• 9 Legal notice

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Go to Financial Calendar

GK Software continues to grow successfully in the cloud

Further growth in turnover and earnings

Dear shareholders,

Even after nine months of the fiscal year of 2022, we are still able to report extraordinarily positive business performance. This positive trend was driven by the continuing strong demand from our existing customers for platform extensions and classic license sales, as well as the increase in SaaS sales. As a result, we were once again able to increase both turnover and earnings significantly in comparison with the previous year, and to set new records for the company.

Revenue from turnover rose to EUR 113.04 million in the first nine months of the year – an increase of 18.1% year-on-year (9M 2021: EUR 95.74 million). After the first three quarters, the EBITDA amounted to EUR 22.24 million, exceeding the comparative result for the previous year, adjusted for the sale of Awek, by EUR 5.00 million (9M 2021: EUR 17.24 million)¹ . The operating results (EBIT) also improved significantly by EUR 5.70 million year-on-year to EUR 17.19 million (9M 2021: EUR 11.48 million). We therefore achieved an EBIT margin on turnover of 15.2 percent.

We managed to conclude four contracts of significant volume for the CLOUD4RETAIL platform already in the first nine months of the fiscal year of 2022. In addition to the profit for the project with Lidl reported in the first quarter – one of the world's largest in our field – we have succeeded in winning over two further significant customers in the Americas as well as a major retailer in Scandinavia with our solutions. One new customer in the Americas is in the convenience sector, which is very relevant for us here, and will also use GK Drive. Overall, the three new customers (excluding Lidl) account for almost 10,000 installations in more than 2,500 stores. The AIR division was also successful, with six new contracts signed in the first nine months of the year. Seven customers also opted for our US-specific Transaction+ solution.

As reported, we have also established additional nationally local companies to support our globally oriented sales and delivery strategy. Following the launch of GK Software Asia Pte. Ltd. in Singapore at the end of last year, GK Software Australia Pty. Ltd. was founded in Melbourne at the beginning of this year. With the support of the corporate headquarters, the employees at the Singapore site have already initiated sales activities and are starting to develop a pipeline for their region.

In addition to the further development of our new scanner-less and cashier-less GK GO store solution, we have in particular intensified our work in the field of hyper-personalisation as part of GK SPOT and will be presenting the solution at the major retail trade fairs at the beginning of next year.

After the reporting date, we repaid the convertible bond on the final maturity date of October 26, 2022. We used funds from the syndicated loan taken out at the end of 2021 to provide counter-financing.

We included a medium-term forecast in the Annual Report for 2020, according to which we expect turnover of EUR 160 to 175 million by the end of 2023, with a target EBIT margin of 15 percent. For the current fiscal year, we are still expecting the GK Software Group to achieve an increase in revenue from turnover similar to that in the 2021 fiscal year, and a further slight improvement in EBIT margin towards achieving the medium-term target for 2023 (15% EBIT margin on turnover).

Market environment

In 2022, retail trade was still dominated by the impact of the coronavirus pandemic, as well as massively by the continuing war in Ukraine and the associated negative consequences, such as high inflation, energy scarcity and supply shortages. As a result of the current challenges, the prospects for each sector of the retail industry are to be evaluated differently. Retailers in the shopping streets of the German inner cities are experiencing a decline in sales, for example. Despite the current generally difficult market environment, the food retail sector recorded sales growth of around 2.6 percent in September compared to the previous month.

¹ The earnings from the previous year – including the one-off effect of the sale of AWEK microdata – were as follows: EBITDA = EUR 19.99 million and EBIT = EUR 14.23 million. The one-off effect amounted to EUR 2.75 million.

Total retail sales increased by 0.9 percent in September compared with August.1

At European level, the retail sector recorded a moderate increase in sales of 0.4 percent in September compared with the previous month of August. In addition, retail trade in the USA significantly increased its turnover in September compared to the same month last year.2

The German Trade Association (Handelsverband Deutschland, HDE) is forecasting stable Christmas trade for the fourth quarter. According to the HDE, this should lead to a significant increase in retail sales in November and December. To be precise, a nominal turnover increase of 5.4 percent is expected. For the full year of 2022, the HDE expects total turnover for the retail sector to be around EUR 120.3 billion.3 This would correspond to a nominal turnover increase of 5.4 percent compared to the previous year.

Generally speaking, we are still convinced that the pandemic has initiated long-term trends that will open up

new business opportunities for GK Software in the field of digitalisation and omni-channel retailing.

Employees

Having had 1,096 employees on its payroll at the end of the year, GK Software currently has 1,144 employees (as of 30 September 2022; previous year: 1,071), i.e., 73 more than at the end of same period in the previous year.

Segment reporting

We can report that, in the first nine months of the year, all main types of turnover were greater than for the same period of the previous year, sometimes significantly. Software-related turnover increased by 18.5 percent for the Group compared to the same period last year. Due to one significant contract, turnover for the classic licensing of our standard platforms was 15.2% higher than in the previous year, despite the forced transition to SaaS contracts. As expected, increases from platform licences from subscription contracts (56.5%) and licences from platform extensions (extension licences; 61.8%) were stronger. Maintenance income increased by 9.0 percent, whereby it should be noted that in the previous year maintenance revenues were still generated by AWEK microdata GmbH, which has since been sold, and which had to be compensated for this year. We were again able to expand retail consulting for our solutions,

with sales here being 25.8 percent above the previous year's value.

Differentiated between the two geographical segments, the increase in the Americas at 37.3% (EUR 5.90 million) was greater than in EMEA at 13.5% (EUR 10.77 million). The focus of growth in EMEA was on software-related sales and retail consulting. In the Americas segment, growth was driven by standard platform licences from subscription contracts, maintenance, and retail consulting.

Assets and financial situation

Compared to the year end for 2021, the Group's liquid funds increased by EUR 3.64 million and now amount to EUR 43.30 million. However, in the fiscal year 2022, liquid funds of EUR 19.99 million were invested in securities with short maturities in order to avoid retention fees and to take advantage of market opportunities. If these are included in the liquid funds, the liquid funds available within 30 days amount to EUR 63.29 million and thus significantly exceed the previous year's value of liquid funds by around EUR 20 million.

¹ https://www.destatis.de/EN/Press/2022/10/PE22_459_45212.html

² https://www.lebensmittelzeitung.net/handel/nachrichten/zahlen-von-eurostat-europas-einzelhandel-macht-im-september-leichtes-umsatzplus-168089 and https://nrf. com/media-center/press-releases/year-over-year-retail-sales-growth-continues

³ https://einzelhandel.de/presse/aktuellemeldungen/13976-trotz-krise-und-schwieriger-rahmenbedingungen-hde-prognose-weihnachtsgeschaeft-weitgehend-stabil

The total amount of current and non-current bank liabilities decreased further by EUR 2.42 million.

We refer here again to the repayment of the convertible bond after the reporting date and the financing of this repayment from the drawing of a tranche of the syndicated loan taken out at the end of 2021.

There are no changes to the opportunities and risks for the company as stated in the last Annual Report.

Financial forecast and prospects

The trend for the 2022 fiscal year so far shows that, in terms of turnover and operating results, the company is completely on track to achieve its forecast for 2022, which predicted a slight increase in turnover and a further increase in profitability towards the EBIT target margin of 15% (based on turnover) for the 2023 financial year. This forecast therefore remains unchanged.

Schöneck, 28 November 2022 The Management Board

Rainer Gläss André Hergert Chief Executive Officer Chief Financial Officer

Consolidated balance sheet

on 30 September 2022

T.01 Assets

EUR K 30.9.2022 31.12.2021 Tangible assets 22,966 21,087 Rights-of-use assets within the meaning of IFRS16 8,884 7,665 Real estate held as a financial investment 215 224 Intangible assets 24,327 23,999 Financial assets 6 6 Deferred tax assets 159 193 Total non-current assets 56,557 53,176 Goods 89 70 Consumables and supplies 0 0 Down payments made 24 1 Trade receivables 22,159 24,298 Contract-related assets 13,918 12,152 Income-tax claims 771 997 Receivables from companies with which a shareholding relationship exists 60 0 Other receivable and assets 6,560 6,542 Securities 19,986 0 Cash and cash equivalents 43,303 46,945 Total current assets 106,870 91,005 Balance sheet total 163,427 144,181

EUR K 30.9.2022 31.12.2021 Subscribed capital 2,258 2,258 Capital reserves 49,573 49,302 Retained profits 31 31 Other reserves (156) (1,742) Profit carried forward 32,912 19,755 Consolidated surplus before non-controlling shares 13,188 13,157 Equity attributable to GK Software SE stockholders 97,807 82,761 Non-controlling shares 968 867 Total equity 98,775 83,628 Provisions for pensions 475 1,881 Non-current bank liabilities 1,550 3,512 Non-current lease liabilities 6,354 5,328 Deferred public-sector subsidies 1,184 723 Deferred tax liabilities 4,876 4,370 Total non-current liabilities 14,438 15,814 Current provisions 543 546 Current bank liabilities 543 1,002 Current lease liabilities 2,611 2,457 Trade liabilities 4,411 5,162 Contractual liabilities 8,231 5,626 Income-tax liabilities 3,501 2,041 Other current liabilities 15,407 13,265

T.02 Liabilities

Total current liabilities 50,214 44,739 Balance sheet total 163,427 144,181

Convertible bond 14,967 14,639

6 9M Quarterly Statement 2022 | GK Software SE

Consolidated statement of income and accumulated earnings

from 1 January to 30 September 2022

			9M 2022	9M 2021	FY 2021
EUR K	Ongoing business operations	Discontinued business operation	Group	Group	Group
Revenue from turnover	112,551	488	113,039	95,741	130,847
Other earnings	5,027	77	5,103	5,629	8,742
of which exchange-rate earnings	3,161	0	3,161	694	2,106
Revenue from turnover and other earnings	117,577	565	118,142	101,370	139,589
Materials expenditure	(9,487)	(44)	(9,531)	(10,177)	(14,168)
Personnel expenditure	(65,183)	(490)	(65,673)	(57,959)	(78,740)
Depreciation and amortisation on non-financial assets	(4,830)	(219)	(5,049)	(5,755)	(9,484)
Losses from derecognition of financial assets	(5)	(49)	(55)	(13)	(153)
Other expenditure	(20,421)	(227)	(20,648)	(13,233)	(19,739)
of which exchange-rate expenditure	(1,825)	0	(1,825)	(775)	(1,072)
Total operating expenses	(99,927)	(1,029)	(100,956)	(87,137)	(122,283)
Operating results	17,650	(463)	17,187	14,233	17,306
Financial earnings	104	0	104	189	575
Negative interest on bank balances / deposit fees	(128)	0	(128)	(47)	(148)
Financial expenditure	(1,032)	(45)	(1,078)	(993)	(1,279)
Financial result	(1,056)	(45)	(1,102)	(851)	(852)
Earnings before income taxes	16,594	(509)	16,085	13,382	16,454
Income taxes	(2,804)	8	(2,796)	(2,504)	-3.156
Consolidated surplus for the period	13,790	(501)	13,289	10,877	13,298
of which attributable to non-controlling interest	101	0	101	121	141
of which attributable to GK Software SE stockholders	13,689	(501)	13,188	10,757	13,157

		T.04 Other earnings after income taxes
--	--	----------------------------------------	--	--	--

			9M 2022	9M 2021	FY 2021
EUR K	Ongoing business operations	Discontinued business operation	Group	Group	Group
Items that will be reclassified in the consolidated profit and loss statement in future under certain conditions
Differences in exchange rates from recalculating foreign business operations	771	0	770	811	48
Deferred taxes from exchange-rate differ ences in the recalculation of foreign business operations	(179)	0	(179)	(183)	(45)
Items that will not be reclassified in the consolidated profit and loss statement in future
Actuarial profits/losses from defined-benefit pension plans	1,408	0	1,408	1,073	648
Deferred taxes on actuarial profits/losses from defined-benefit pension plans	(414)	0	(413)	(176)	141
Overall result	15,375	(501)	14,875	12,404	14,090
of which attributable to non-controlling interest	101	0	101	121	141
of which attributable to GK Software SE stockholders	15,275	(501)	14,774	12,283	13,949
Earnings per share (EUR/share) from consolidated surplus – undiluted			5.84	5.03	5.98
Earnings per share (EUR/share) from consolidated surplus – diluted			5.65	4.71	5.66

Consolidated cash-flow statement

from 1 January to 30 September 2022

T.05 Cash flows from operating activities

EUR K 9M 2022 9M 2021 Cash flow from operating activities Surplus for period 13,289 10,877 Income taxes affecting results 2,796 2,504 Interest expenditure affecting results 1,205 993 Interest income affecting results (104) (189) EBIT 17,187 14,186 Depreciation and amortisation 5,049 5,785 EBITDA 22,236 19,971 Share-option scheme (non-cash expenditure) 272 270 Profit/loss from the sale or disposal of tangible assets (10) (86) Reversals of deferred public-sector subsidies (20) (30) Impairments recognised for receivables (including losses from receivables) 1,212 324 Reversals of impairment losses recognized for receivables (297) (7) Impact on earnings from deconsolidation — -2.750 Net loss from financial tools assessed at fair value — 66 Other non-cash earnings and expenditure (1,333) 629 Cash flow from operating business before the change in working capital 22,058 18,388 Changes in net current assets Changes in trade receivables and other receivables (734) (552) Changes in inventories (43) (40) Changes in trade liabilities and other liabilities 1,045 (30) Changes in contractual liabilities 2,605 3,123 Changes in provisions (624) (255) Cash flow from ongoing business activities before taxes 24,308 20,632 Income taxes paid (570) 637 Cash flow from ongoing business activities 23,738 21,270

T.06 Cash flows from investment and financing activities, loans, cash and cash equivalents

EUR K	9M 2022	9M 2021
Cash flow from ongoing business activities	23,738	21,270
Cash flow from investment activities
Payments for tangible assets and non-current assets	(3,427)	(1,759)
Proceeds from disposals of assets	10	86
Proceeds from the sale of subsidiaries	—	3,836
Payment for other securities	-19.986	—
Payments for the acquisition of a company minus any cash and cash equivalents	—	171
Interest payments received	217	143
Used investment grants	481	0
Flow of funds from investment activities	(22,704)	2,477
Cash flow from financing activities
Taking out equity	—	19,538
Interest paid	(397)	(147)
Repayment of loans	(2,502)	(1,280)
Repayment of leasing liabilities	(1,858)	(2,098)
Net flow of cash and cash equivalents from financing activities	(4,756)	16,012
Net cash inflow	(3,722)	39,758
Cash and cash equivalents at the start of the fiscal year	46,884	5,696
Cash and cash equivalents at the end of the fiscal year	43,141	45,522
Impact of changes in exchange rates on cash and cash equivalents	(20)	68

T.07 Summary of cash and cash equivalents

EUR K	9M 2022	9M 2021
Cash and cash equivalents	43,303	45,502
Utilisation of current-account credit / credit card and exchange-rate effects	(162)	20
Cash and cash equivalents at the end of the fiscal year	43,141	45,522

Financial calendar

24 April 2023 Annual Report as of 31 December 2022

25 May 2023 Quarterly Statement as of 31 March 2023

15 June 2023 Annual General Meeting 2023

29 August 2023 Interim Report as of 30 June 2023

November 2023 Equity Forum in Frankfurt/M.

28 November 2023 Quarterly Statement as of 30 September 2023

Legal notice

Publisher

GK Software SE Waldstr. 7 08261 Schöneck Germany T: +49 37464 84-0 F: +49 37464 84-15

https://www.gk-software.com investorrelations@gk-software.com

Chair of the Supervisory Board Dr Philip Reimann

Management Board Dipl.-Ing. Rainer Gläss, CEO Dipl.-Kfm. André Hergert, CFO

Chemnitz District Court, Commercial Register No. HRB 31501

VAT ID. DE 141 093 347

Photos/graphics GK Software SE

Contact for Investor Relations

GK Software SE Dr. René Schiller Friedrichstr. 204 10117 Berlin

T: +49 37464 84-264 F: +49 37464 84-15

rschiller@gk-software.com