Itera — Interim / Quarterly Report 2014

Oct 29, 2014

INTERIM REPORT

THIRD QUARTER 2014

CEO ARNE MJØSCFO TORUNN HAVRE

OSLO, 29 OCTOBER 2014

Highlights in the third quarter

• • Revenue
• MNOK 102; showing sequential growth after seasonality
• • EBITDA
• MNOK 7.7; margin 7.6 %
• • EBIT
• MNOK 2.5; margin 2.4 %
• • Revenue and profit are affected by Ukraine tensions in 1H 2014
• • New Nearshore Development Center opened successfully in Bratislava
• •Strong order intake

Profit was affected by revenue drop in 1H 2014 due to Ukraine tensions but demand is picking up

In Q3, the new Nearshore

was ready for customers

FINANCIAL REVIEW

Key figures

		2014	2013	Change	2014		2013 Change
		Q 3	Q3		YTD	YTD
Operating revenue	MNOK	102.3	102.5	$0\%$	329.5	340.1	$-3\%$
Gross profit	MNOK	84.7	85.1	$-1\%$	272.2	272.5	$0\%$
EBITDA	MNOK	7.7	10.0	$-22%$	22.2	30.7	$-28%$
EBITDA margin		7.6%	9.7%		6.7%	9.0%
Operating profit (EBIT)	MNOK	2.5	4.7	$-48%$	6.1	14.9	$-59%$
EBIT margin		2.4%	4.6 %		1.8%	4.4 %
Profit before taxes	MNOK	2.3	3.7	$-36%$	5.7	13.4	$-58%$
Profit for the period	MNOK	1.7	2.6	$-35%$	4.1	9.7	$-57%$
Net cash flow from operations	MNOK	$-3.2$	4.0	$-179%$	$-1.0$	21.9	$-104%$
Cash and cash equivalents	MNOK	25	38	$-34%$	25	38	$-34%$
Equity ratio		36 %	43 %		36 %	43 %
Employees at end of period		465	453	3%	465	453	3%

First half year was affected by the geopolitical tensions in Ukrainebut demand was picking up again in Q3 2014

Quarterly development

Operating revenue

NOK million

EBITDA

NOK million

Employees

End of period

EBIT

NOK million

Statement of income

	2014	2013	Change	2014	2013	Change
NOK Million	Q3	Q3	$\%$	YTD	YTD	$\%$
Operating revenue	102.3	102.5	$0\%$	329.5	340.1	$-3\%$
Cost of sales	17.6	17.3	1%	57.3	67.7	$-15%$
Personnel expenses	64.0	61.9	$3\%$	213.0	204.6	4 %
Depreciation	5.3	5.2	1%	16.1	15.8	2%
Other operating expenses	12.9	13.3	$-3\%$	37.0	37.2	$-1\%$
Total operating expenses	99.8	97.8	2%	323.4	325.2	$-1\%$
Operating profit (EBIT)	2.5	4.7	$-48%$	6.1	14.9	$-59%$
Net financial income	$-0.1$	$-1.0$		$-0.4$	$-1.5$
Profit before taxes	2.3	3.7	$-36%$	5.7	13.4	$-58%$
Income taxes	0.6	1.0	$-38%$	$1.5\,$	3.8	$-59%$
Net profit for the period	1.7	2.6	$-35%$	4.1	9.7	$-57%$

Profit is affected by extraordinary expenses for establishing new nearshore development center in Bratislava.

Statement of cash flow

	2014	2013	2014	2013	2013
NOK Million	Q3	Q 3	YTD	YTD	FY
Cash flow from operations (EBITDA)	7.7	10.0	22.2	30.7	43.9
Change in balance sheet items	$-10.9$	$-6.0$	$-23.1$	$-8.8$	13.8
Net cash flow from operating activities	$-3.2$	4.0	$-1.0$	21.9	57.7
Net cash flow from investment activities	$-2.2$	$-1.2$	$-7.4$	$-4.0$	$-8.8$
Purchase of own shares	$-0.1$	0.0	$-0.1$	0.0	0.0
Borrowings repaid	$-1.8$	$-1.6$	$-5.7$	$-4.0$	$-6.1$
External dividend paid	0.0	0.0	$-28.8$	$-4.9$	$-4.9$
Net cash flow from financing activities	$-1.9$	$-1.6$	$-34.6$	$-9.0$	$-11.1$
Currency effect on cash	0.0	$-0.1$	0.0	0.4	1.3
Net change in bank deposits and cash	$-7.3$	1.0	$-43.0$	9.3	39.1
Bank deposits at the end of the period	25.0	38.1	25.0	38.1	68.0

Rolling 12-month operating cash flow amounted to MNOK 35.

Statement of financial position

	2 0 1 4	2 0 1 3	C h a n g e	2 0 1 3
N O K M i l l i o n	3 0 S t e p	S 3 0 t e p	%	D 3 1 e c
D f d t t e e r r e a x a s s e s	8	1 0	-1 8 %	9
O h i i b l t t t e r n a n g e a s s e s	1 5	1 7	-1 3 %	1 7
F i d t e a s s e s x	2 8	2 7	5 %	2 8
T l t t t o a n o n- c u r r e n a s s e s	2 5	5 4	5 % -	5 4
W k i o r n p r o g r e s s	7	1 3	-4 8 %	1 6
A i b l t c c o u n s r e c e v a e	6 8	6 6	3 %	7 0
O h i b l t e r r e c e v a e s	1 8	1 2	5 2 %	1 3
B k d i t a n e p o s s	2 5	3 8	-3 4 %	6 8
T l t t t o a c u r r e n a s s e s	1 1 8	1 2 9	9 % -	1 6 6
T l t t o a a s s e s	1 6 9	1 8 4	8 % -	2 2 0
T l i t t o a e q u y	6 1	7 9	2 3 % -	8 7
N l i b i l i i t t o n- c u r r e n a e s	1 8	1 6	1 2 %	1 6
A b l t c c o n s p a a e u y	1 4	1 8	-2 4 %	2 7
P b l i d i d b l t t c e s a n a p a a e s u u x y	2 6	2 0	3 2 %	2 5
O h h l i b i l i i t t- t t e r s o r e r m a e s	5 1	5 1	0 %	6 5
T l l i b i l i i t t t o a c r r e n a e s u	9 1	8 9	2 %	1 1 7
T l i d l i b i l i i t t t o a e q u y a n a e s	6 9 1	1 8 4	8 % -	2 2 0
E i i t t q u y r a o	3 6 %	4 3 %		3 9 %

The financial position is strong with a equity ratio of 36 % after dividend payment of MNOK 28.8 in Q2 2014

BUSINESS REVIEW

Long term profitable growth: Key enablers

50 %+ of staff nearshore

Larger projectsand revenuevisibility

Communication AND Technology

Itera is a communication and technologycompany that provides innovative solutions

Our multi site strategy provides agility, scalabilityand access to top notch resources

• • A Nordic full service provider with seamless nearshoring
• Serving leading customers in fast growing industries
• • Flexibility of a hybrid model
• Sourcing for value before volume by maximizing efficiency instead of capacity only

•A multi-site strategy

Nearshore development centers(NDC) are located inside and outside EU

• EU Data Protection Law compliance

Binding corporate rules (BCR) ensures data protection for all flows of data across borders

Disruptive IT forces drive our service offerings and key focus areas

New services are developed to move customers into cloud solutions

• • Seizing the cloud opportunity
• Fast growth
• New value-added services
• Recurring revenue
• New ecosystem
• Shift from CAPEX to OPEX.

Itera is transforming new and existing customers into hybrid cloud.

Development of larger projects and larger revenue per customer

• • Top 5 customers are 27 % of total revenue, up from 25 % last year
• • Top 10 customers are 42 % of total revenue, up from 39 % last year
• • Top 30 customers are 62 % of total revenue, down from 63 % last year
• • Benefits:
• Increasing revenue visibility
• Improving operational efficiency
• Declining sales and overhead cost

FutureMNOK

We are approaching our target: several customers should buy services from Itera for more than MNOK 50 per year.

Solid order intake in Q3, both in public and private sector

Nearshore ratio development

• • Nearshore ratio 33 % in Q3, showing a temporary flat development
• • Nearshore ratio target is more than 50 %
• • Mixed teams are increasing our price flexibility in addition to unlimited access to resources

Nearshore ratio

% nearshore of all staff

FTE: Full time employee

OUTLOOK

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

•Itera makes no forecasts

Top 20 shareholders

Holding $\sim$	Percentage $\hat{=}$	Name ≑	Account type $\hat{=}$	Citizenship $\hat{=}$
15,018,298	18.27	ARNE MJØS INVEST AS		NOR
5,751,150	7.00	STOREBRAND VEKST JPMORGAN EUROPE LTD,		NOR
5,242,206	6.38	MIDELFART INVEST AS		NOR
4,007,320	4.88	OP CAPITAL AS		NOR
3,275,250	3.99	VERDIPAPIRFONDET DNB		NOR
3,000,000	3.65	EIKESTAD A/S C/O PARTNER REVISJON		NOR
2,240,698	2.73	BOINVESTERING AS		NOR
2,200,000	2.68	JØSYRA INVEST AS		NOR
2,062,300	2.51	SEPTIM CONSTULTING A		NOR
2,031,588	2.47	MARXPIST INVEST AS		NOR
1,928,587	2.35	GAMST INVEST AS		NOR
1,761,808	2.14	STOREBRAND NORGE I JPMORGAN EUROPE LTD,		NOR
1,410,000	1.72	GIP AS		NOR
1,000,000	1.22	FRAMAR INVEST AS C/O FRANK MARTINSEN		NOR
988,338	1.20	JOHS. HAUGERUDSVEI A		NOR
900,000	1.10	AANESTAD PANAGRI AS		NOR
600,000	0.73	MORTEN JOHNSEN HOLDI MORTEN JOHNSEN		NOR
532,447	0.65	DANSKE BANK A/S 3887 OPERATIONS SEC.	NOM	DNK
507,400	0.62	DnB NOR MARKETS, AKS		NOR
500,000	0.61	LIE JØRUND ARNE		NOR