init innovation in traffic systems SE

Quarterly Report • Nov 9, 2023

IMPORTANT BUSINESS TRANSACTIONS IN THE THIRD QUARTER 2023

Orders

In the third quarter, init acquired new orders to the value of EUR 38.3m (Q3 2022: EUR 33.8m). Incoming orders for the third quarter are EUR 4.5m above the previous year's level. Cumulated analysis shows improved incoming orders of EUR 148.7m as of 30 September 2023; an increase of EUR 6.5m compared to the previous year's figure (30 September 2022: EUR 142.2m).

The order backlog as at 30 September 2023 amounts to approximately EUR 166m and is EUR 7m above the previous year's level (30 September 2022: EUR 159m).

Earnings position

Traditionally, over the course of the financial year, the init group's revenue distribution fluctuates, with the first three quarters generally being weaker in terms of revenue and the fourth quarter being the strongest.

In the third quarter of 2023, the init group generated revenues of EUR 53.4m (Q3 2022: EUR 50.5m) which corresponds to an increase of 5.8 per cent compared to an increase of around 11 per cent in the first half of the year. This comparatively small increase was slightly below management's expectations. It is mainly due to delays in the progress of individual projects in the US, caused by the pending certification of supplier components and delays in project acceptance.

As a result, revenues in the first nine months of the year totaled EUR 143.0m, around 9 per cent above the previous year's figure (EUR 131.1m). Management assumes that the project delays can be made up in the current financial year and that the revenue forecast can still be achieved.

Breakdown of revenues by region for the first nine months:

in million EUR	01/01-30/09/2023	%	01/01-30/09/2022	%
Germany	49.0	34.3	35.6	27.2
Rest of Europe	25.5	17.8	27.2	20.7
North America	49.1	34.3	52.1	39.7
Other countries (Australia, UAE)	19.4	13.6	16.2	12.4
Total	143.0	100.0	131.1	100.0

Revenues based on customer's location.

Gross profit in the third quarter of 2023 amounted to EUR 19.7m (Q3 2022: EUR 21.2m). The gross margin of 36.8 per cent is below the previous year's level of 42.0 per cent. In the third quarter, the delay in the projects described above and the associated delay in revenue recognition, combined with inflation-related cost increases, were particularly noticeable. This was compounded by a slightly less favourable project mix and a number of positive project completions and one-off effects in the comparative quarter of 2022. The cumulative gross profit of EUR 51.1m is still slightly above the previous year's level (30 September 2022: EUR 49.7m).

Sales and administrative expenses in Q3 2023 amount to EUR 11.6m (Q3 2022: EUR 10.9m). In the current year to 30 September 2023, sales and administrative expenses are approximately EUR 4.9m higher than in the previous year at EUR 35.9m (30 September 2022: EUR 31.0m). The cost increases in Q3 are mainly the result of slightly higher depreciation on right-of-use assets and increased sales-related travel.

Research and development expenses in the third quarter of 2023 amounted to EUR 3.3m (Q3 2022: EUR 3.4m). In addition, EUR 1.2m were capitalised as development costs in the third quarter of 2023 (Q3 2022: EUR 0.7m). In the first three quarters of 2023, research and development expenses amounted to EUR 9.5m, approximately EUR 0.3m below the previous year's level of EUR 9.8m. However, an additional EUR 4.9m were capitalised as development costs during the year (EUR 1.6m for the first time in the previous year). In the current financial year, approximately 10 per cent of revenue was invested in research and development.

Foreign exchange gains amount to EUR 0.0m (Q3 2022: EUR 0.1m) in the third quarter of 2023. As at 30 September 2023, accumulated foreign exchange losses amount to EUR -0.5m (30 September 2022: foreign exchange losses of EUR -0.1m). The movement is mainly related to unrealised exchange rate gains and losses from the valuation of receivables and liabilities in foreign currencies.

Earnings before interest and tax (EBIT) for the third quarter of 2023 were EUR 5.5m (Q3 2022: EUR 7.3m) and decreased year on year to EUR 7.1m for the year running until 30 September 2023 (30 September 2022: EUR 10.2m). The decrease in the quarter was mainly due to the gross profit effects described above, as well as the increase in travel expenses and higher depreciation charges. EBIT for the third quarter was not in line with management's expectations due to the delay in revenue recognition. However, management considers the recovery in earnings within the current financial year to be achieved.

Net interest income (balance of interest income and interest expense) amounted to EUR -0.5m in the third quarter 2023 (Q3 2022: EUR -0.2m) and has deteriorated on both a quarterly and a year-to-date basis (30 September 2023: EUR -1.0m; 30 September 2022: EUR -0.5m) due to higher interest rates as well as an increased credit volume.

Net profit for the third quarter of 2023 amounts to EUR 3.8m (Q3 2022: EUR 5.0m). As at 30 September 2023, the accumulated profit is EUR 5.0m (30 September 2022: EUR 6.8m). This corresponds to earnings per share of EUR 0.51 (30 September 2022: EUR 0.69).

Total comprehensive income for the third quarter of 2023 amounts to EUR 6.3m (Q3 2022: EUR 8.6m), as at 30 September 2023 it decreased to EUR 7.0m (30 September 2022: EUR 13.6m) due to the lower net profit and lower unrealised gains from the currency translation of the foreign companies, in particular from the USD and CAD currencies.

Cash flow from operating activities in the third quarter of 2023 amounts to EUR 2.9m (Q3 2022: EUR 11.6m). Compared to the same period of the previous year, i.e., until 30 September 2023, cash flow from operating activities also decreased significantly to EUR -3.9m (30 September 2022: EUR 9.2m). In addition to the lower operating earnings, the decrease is mainly due to a higher increase in trade accounts receivables, contract assets and inventories, driven by the delays in project delivery, as presented above, partially offset by higher prepayments, a lower contribution from provisions and a positive balance of other non-cash income and expenses, mainly from currency effects in other comprehensive income.

Cash flow from investing activities in the third quarter 2023 amounts to EUR -2.1m (Q3 2022: EUR -3.1m). For the full year 2023, cash flow from investing activities amounts to EUR -7.5m (30 September 2022: EUR -7.2m) and results mainly from expenditure for replacement and expansion investments as well as the capitalisation of own work.

Cash flow from financing activities in the third quarter 2023 amounts to EUR -5.7m (Q3 2022: EUR -2.7m). As at 30 September 2023, cash flow from financing activities amounts to EUR 3.6m (30 September 2022: EUR 1.1m) and mainly includes the raising of long-term loans, short-term euro loans, the payment of the dividend and the repayment of existing loans.

Equity amounts to EUR 114.8m and decreased compared to the end of the year (31 December 2023: EUR 116.6m). The equity ratio fell to 44.3 per cent (31 December 2022: 47.4 per cent).

Personnel

In the first nine months of 2023, the init group counted on average 1,128 employees (30 September 2022: 1,086) including temporary workers, research assistants, and students doing thesis work. The proportion of part-time employees also increased. Of the 1,128 employees, 210 are employed on a part-time basis (30 September 2022: 199). The increase in personnel serves to secure and strengthen our planned growth.

Number of employees by region:

	01/01/-30/09/2023	01/01/-30/09/2022
Germany	873	854
Rest of Europe	73	50
North America	161	138
Other countries	21	44
Total	1,128	1,086

Opportunities and risks

The opportunities and risks which can have a significant impact on the financial performance, financial position and cash flow of the init group are set out in our Annual Report 2022 on pages 47 and thereafter. The opportunities and risks described in the Annual Report 2022 remain largely unchanged.

We still assess the risks on the procurement market associated with the shortage of materials, supply difficulties for various raw materials, and rising prices to be high.

As competition for specialists, particularly IT specialists, continues to intensify, we see an increasing risk in filling vacancies.

All foreseeable risks are regularly analysed and corresponding measures initiated. In our opinion, there are no risks that are capable of jeopardising the continued existence of the company.

Forecast and outlook

The growth prospects of init innovation in traffic systems SE were confirmed in the third quarter of the financial year by the further increase in incoming orders. In addition, the fourth quarter is usually the strongest in terms of earnings and revenue.

Against this backdrop, the Managing Board considers the growth targets set for the full year to be achievable, despite the slightly lower than expected results for the third quarter. Our expectation is that the earnings shortfall due to project delays in the third quarter will be recouped later in the year. This assumes that there are no further delays in the supply chain or in project acceptance. We therefore confirm our previous outlook for the current financial year: our revenue target remains in the range of EUR 200-220 million, while EBIT is expected to be in the range of EUR 20-25 million, despite high investments in research and development.

Based on the macroeconomic and sector-specific developments, we see further opportunities to offer new technologies and IT solutions to our customers in the future. We are encouraged by the decision announced in October by the Metropolitan Atlanta Rapid Transit Authority ("MARTA") to award init group the largest contract in the company's 40-year history.

init will continue to strongly focus on research and development activities in order to further advance current trends such as digital transformation, electromobility, mobility as a service and autonomous driving. We see substantial potential for further growth in the digital transformation of public transport infrastructure and the growing acceptance of integrated system solutions based on innovative technologies. We view the investment programmes initiated in Germany, the European Union and the United States to create more environmentally friendly transport infrastructure with optimism and anticipate that growth rates will accelerate in the medium term, a trend for which we have already prepared.

Additional information

This quarterly statement and the information contained therein are unaudited.

Overall, we still see major uncertainty in the development of the economy over the next few months, which could have a particular impact on the awarding of contracts in tenders.

The actual results in terms of revenue and EBIT may differ substantially from the forecasted figures if new risk factors occur or assumptions about planning prove to be incorrect.

CONSOLIDATED INCOME STATEMENT

from 1 January 2023 to 30 September 2023 (IFRS) with comparative values (unaudited)

	01/07 to 30/09/2023	01/07 to 30/09/2022	01/01 to 30/09/2023	01/01 to 30/09/2022
EUR'000
Revenue	53,410	50,481	143,038	131,139
Cost of sales	-33,735	-29,265	-91,924	-81,403
Gross profit	19,675	21,216	51,114	49,736
Sales and marketing expenses	-5,729	-6,043	-18,685	-17,150
General administrative expense	-5,853	-4,837	-17,214	-13,854
Research and development expenses	-3,283	-3,433	-9,542	-9,846
Other operating income	849	728	2,222	2,200
Other operating expenses	-161	-361	-269	-759
Foreign currency gains	2	77	-479	-114
Earnings before interest and taxes (EBIT)	5,500	7,347	7,147	10,213
Interest income	64	3	196	8
Interest expenses	-588	-213	-1,188	-501
Earnings before taxes (EBT)	4,976	7,137	6,155	9,720
Income taxes	-1,218	-2,093	-1,154	-2,894
Net profit	3,758	5,044	5,001	6,826
thereof attributable to equity holders of parent company	3,701	5,033	5,040	6,934
thereof non-controlling interests	57	11	-39	-108
Earnings and diluted earnings per share in EUR	0.37	0.51	0.51	0.69
Average number of floating shares	9,889,894	9,929,489	9,883,254	9,929,010

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

from 1 January 2023 to 30 September 2023 (IFRS) with comparative values (unaudited)

EUR'000	01/07 to 30/09/2023	01/07 to 30/09/2022	01/01 to 30/09/2023	01/01 to 30/09/2022
Net income	3,758	5,044	5,001	6,826
Items to be reclassified to the income statement:
Net gains (+) / losses (-) on currency translation	2,515	3,534	2,016	6,805
Total other comprehensive Income	2,515	3,534	2,016	6,805
Total comprehensive Income	6,273	8,578	7,017	13,631
thereof attributable to equity holders of the parent company	6,216	8,567	7,056	13,739
thereof non-controlling interests	57	11	-39	-108

CONSOLIDATED BALANCE SHEET

as of 30 September 2023 (IFRS) with comparative values (unaudited)

EUR'000	30/09/2023	30/09/2022	31/12/2022
Cash and cash equivalents	32,300	33,081	40,050
Marketable securities and bonds	28	29	29
Trade accounts receivable	38,715	37,739	35,222
Contract assets	21,663	18,209	14,763
Receivables from related companies	36	0	0
Inventories	49,178	38,186	42,091
Income tax receivable	1,927	0	1,551
Other current assets	5,382	3,716	3,976
Current assets, total	149,229	130,960	137,682
Property, plant and equipment	64,891	56,905	65,037
Investment property	1,336	1,380	1,352
Goodwill	12,488	12,488	12,488
Other intangible assets	21,713	18,215	20,045
Interests in associated companies	634	664	778
Deferred tax assets	5,470	4,235	4,849
Other non-current assets	3,491	3,302	3,516
Non-current assets, total	110,023	97,189	108,065
Assets, total	259,252	228,149	245,747
Bank loans	24,886	25,894	18,460
Trade accounts payable	6,615	7,875	9,747
Contract liabilities	11,016	11,199	9,745
Advance payments received	3,538	77	1,171
Income tax payable	2,799	1,394	3,947
Provisions	6,204	6,645	6,625
Lease liabilities1)	3,717	3,266	3,336
Other liabilities1)	20,555	20,143	20,533
Current liabilities, total	79,330	76,493	73,564
Bank loans	28,698	14,202	19,575
Deferred tax liabilities	5,584	4,346	5,172
Pensions accrued and similar obligations	7,802	11,299	7,336
Provisions	2,094	1,935	2,373
Other non-current liabilities	20,759	11,618	21,172
Lease liabilities	196	0	0
Non-current liabilities, total	65,133	43,400	55,628
Liabilities, total	144,463	119,893	129,192
Attributable to equity holders of the parent company
Subscribed capital	10,040	10,040	10,040
Additional paid-in capital	5,817	5,747	6,575
Treasury shares	-5,359	-3,148	-3,517
Surplus reserves and consolidated unappropriated profit	96,981	88,801	98,369
Other reserves	6,907	6,705	4,891
	114,386	108,145	116,358
Non-controlling interests	403	111	197
Shareholders' equity, total	114,789	108,256	116,555
Liabilities and shareholders' equity, total	259,252	228,149	245,747

1) In former accounting periods current lease liabilities were presented under other liabilities.

CONSOLIDATED CASHFLOW STATEMENT

from 1 January 2023 to 30 September 2023(IFRS) with comparative values (unaudited)

EUR '000	01/01 to 30/09/2023	01/01 to 30/09/2022
Cash flow from operating activities
Net income	5,001	6,826
Depreciation	8,390	7,545
Losses on the disposal of fixed assets	-8	-31
Change in provisions and accruals	-265	-2,450
Change in inventories	-6,835	-1,881
Change in trade accounts receivable and contract assets	-9,851	3,829
Change in other assets, not provided by / used in investing or financing activities	-1,717	2,814
Change in trade accounts payable	-3,562	-471
Change in advanced payments received and contract liabilities	3,547	1,154
Change in other liabilities, not provided by /
used in investing or financing activities	-489	-5,822
Amount of other non-cash income and expenses	1,834	-2,278
Net cash from operating activities	-3,955	9,235
Cash flow from investing activities
Payments received on disposal of tangible fixed assets	328	342
Investments in property, plant and equipment	-2,940	-3,436
Investments in other intangible assets	-3,921	-3,213
Investment in associated companies	-1,072	-1,110
Investment in subsidiaries less acquired cash	144	177
Net cash flows used in investing activities	-7,461	-7,240
Cash flow from financing activities
Dividend paid out	-6,920	-5,456
Payments received from equity contributions	245	0
Cash payments for purchase of treasury shares	-1,874	-1,442
Payments received from bank loans	32,214	15,943
Redemption of bank loans	-16,665	-5,186
Payment of repayment portion of lease liabilities1)	-3,238	-2,667
Interest payment from lease liabilities1)	-187	-115
Net cash flows used in financing activities	3,575	1,077
Net effects of currency translation and consolidation changes in cash and cash equivalents	91	1,851
Decrease in cash and cash equivalents	-7,750	4,923
Cash and cash equivalents at the beginning of the period	40,050	28,158
Cash and cash equivalents at the end of the period	32,300	33,081

1) Presentation has been changed from the previous year. In the previous year the figures were shown as a single item.

FINANCIAL CALENDAR 2023

Contact:

init innovation in traffic systems SE Kaeppelestrasse 4-10 76131 Karlsruhe Germany

P.O. Box 3380 76019 Karlsruhe Germany

Ph. +49.721.6100.0 Fax +49.721.6100.399

ir@initse.com www.initse.com

27/28 November

One-on-one Meetings - Equity Forum, Frankfurt

28 November 1:30pm

the Hong Kong room

Presentation - Equity Forum, Frankfurt

Disclaimer:

This quarterly statement and any information contained therein must not be brought into, or transferred to, the United States of America (USA), or distributed or transferred to US-American persons (including legal persons) and publications with general distribution in the USA. Any breach of this restriction may constitute a violation of the US-American securities law. Shares of init SE are not offered for sale in the USA. This quarterly statement is not an offer for the purchase or subscription of shares.

This statement contains future-related statements, which are based on current estimates of the company with regard to future developments. Such statements are inherently subject to risks and uncertainties, as they may be affected by factors that are neither controllable nor foreseeable by init, such as on the development of the future market environment and economic conditions, the behaviour of other market participants and government measures. If one of these uncontrollable or unforeseeable factors occurs, respectively changes or the assumptions on which these statements are based prove inaccurate, actual developments and results could differ materially from the results cited explicitly or contained implicitly in these statements.