Itera — Interim / Quarterly Report 2016

Aug 24, 2016

INTERIM REPORT

SECOND QUARTER 2016

CEO ARNE MJØS CFO BENT HAMMER

OSLO, 24 AUGUST 2016

Highlights of the second quarter

• Revenue
• NOK 110 million
• Pro forma growth of 10% y-o-y
• EBITDA
• Improved EBITDA of NOK 4.6 million, 14.2% margin
• EBIT
• Improved EBIT before non-recurring items of NOK 4.6 million, 9.7% margin
• Improving operating performance
• Significant growth and profitability improvement in Norway and Denmark, partly due to more working days.
• Double-digit nearshore growth y-o-y
• 7% growth of top 30 customers
• Dividend paid out
• NOK 0.12 per share

* Pro forma

FINANCIAL REVIEW

Key figures

	2016	2015*	Change*	2015	2016	Change*	2015*
NOK Million	Q2	Q2		Q2	H1		FY
Operating revenue	110,0	99,7	10 %	114,3	215,7	8 %	394,2
Gross profit	92,8	83,9	11 %	94,6	183,5	8 %	335,6
EBITDA	15,6	11,0	42 %	9,9	26,0	28 %	46,1
EBITDA margin	14,2 %	11,1 %	3,1 pts	8,6 %	12,1 %		2 pts 11,7 %
EBIT before non-recurring items	10,7	6,1	75 %	4,7	16,2	50 %	26,4
EBIT margin before non-recurring	9,7 %	6,2 %	3,6 pts	4,1 %	7,5 %	2,2 pts	6,7 %
EBIT	10,7	4,4	145 %	2,9	14,5	95 %	22,7
EBIT margin	9,7 %	4,4 %	5,3 pts	2,5 %	6,7 %	3,1 pts	5,7 %
Net cash flow from operations	10,7			-6,6	7,2
Cash and cash equivalents	52,6			43,7	52,6
Equity ratio	27 %			29 %	27 %
Employees at end of period	370	370	0 %	423	370	0 %	381
Employees in average	371	374	-1 %	428	381	-1 %	383

* Figures are pro forma for continuing operations

• Growth in Time & Material business driven by 5.5 more working days

Quarterly development

Operating revenue

NOK million

EBITDA

*: Pro forma for continuing operations. EBIT before non-recurring items

Employees

End of period

EBIT

Statement of income

	2016		2015* Change	2015	2016	Change	2015*
NOK Million	Q 2	Q2	*	Q 2	Η1	×	FY
Operating revenue	110.0	99.7	10 %	114.3	215.7	8%	394.2
Cost of sales	17.2	15.7	9%	19.8	32.2	7 %	58.6
Personnel expenses	67.0	61.2	10 %	70.8	136.8	6 %	246.9
Depreciation	4.9	4.9	$0\%$	5.2	9.8	$3\%$	19.7
Other operating expenses	10.2	11.7	$-13%$	13.8	20.7	$-3\%$	42.6
Total operating expenses	99.3	93.5	6 %	109.7	199.5	5 %	367.9
Operating profit before non-recurring items	10.7	6.1	75 %	4.7	16.2	50 %	26.4
Non-recurring items	0.0	1.8	$-100%$	1.8	1.6	$-42%$	3.7
Operating profit (EBIT)	10.7	4.4	145 %	2.9	14.5	95 %	22.7
Net financial income	$-0.3$			0.7	$-0.8$
Profit before tax	10.4			3.6	13.8
Tax	2.6			1.0	3.5
Net profit for the period	7.7			2.6	10.3

Continuing operations showed 8% growth and 50% higher operating profit before non-recurring items in H1

Statement of cash flow

2016	2015	2016	2015	2015
Q2	Q2	H1	H1	FY
15.6	9.9	26.0	17.6	46.1
-4.9	-16.4	-18.8	-32.3	-25.3
10.7	-6.6	7.2	-14.7	20.8
-3.1	-2.1	-6.1	-5.1	1.3
-3.6	0.0	-3.6	0.0	-0.5
-2.2	-1.6	-4.3	-3.7	-8.3
-9.7	0.0	-9.7	0.0	-12.3
-15.5	-1.6	-17.6	-3.7	-21.0
0.0	0.0	0.0	0.0	0.0
-7.9	-10.3	-16.4	-23.5	1.1
				68.4
				14.8
	52.6 1.3	43.7 2.0	52.6 3.4	43.7 2.0

12 month rolling cash flow from operations

• Cash flow from operations NOK 11 million in Q2
• 12 month rolling cash flow from operations was NOK 43 million

Dividends

• A dividend of NOK 0.12 per share was paid out in Q2
• 990 990 own shares were bought in Q2
• The Board was granted a proxy to decide further dividend payments in 2016
• Total distribution to shareholders of NOK 3.59 per share 2005-16

Statement of financial position

• Group equity ratio of 27 (29) % per June 30
• Cash balance of MNOK 53 (44)

BUSINESS REVIEW

We are entering the era of digital business

By 2020, information will be used to reinvent, digitalize, or eliminate 80% "

of business processes and products from a decade earlier. "

Source: Gartner

Self-service, smart machines and things are creating massive changes in all sectors

Example: By 2020, data mastery will be an element of the corporate DNA for insurers.

Long-term profitable growth: Key enablers

Larger projects and revenue visibility

Communication AND Technology

The forces of disruptive technology are driving our service offerings and key focus areas

Applying the full scope of Itera's capabilities

We focus on our customer's customers through service design and lean startup

We work in project teams that have both communication and technology skills

We take life-cycle responsibility that also embrace cloud and data protection issues

We involve seamless nearshoring for greater scalability and cost effectiveness

Order intake in Q2 from existing and new customers

Book-to-bill ratio1) of 1.1 in Q2 2016.

1) The book-to-bill ratio is the ratio of orders received to the amount of revenue for a specific period for Itera units

Nearshore ratio development

• Nearshore ratio of 36 % in Q2
• Improving sales pipeline of larger engagements
• Target is for the nearshore ratio to be in excess of 50 %
• Mixed teams are increasing our price flexibility as well as providing access to a very large resource pool

Nearshore ratio

% of all staff located nearshore

Developing larger projects and higher revenue per customer

• Revenue from top 30 customers up by 7 % in Q2
• Top 10: 48 % of total revenue
• Top 20: 65 % of total revenue
• Top 30: 73 % of total revenue
• Benefits:
• Increased revenue visibility
• Improved operational efficiency
• Lower sales and overhead costs

We are approaching our target: several customers are likely to spend more than NOK 50 million per year on services from Itera.

OUTLOOK

• Customer demand remains strong in all Nordic markets
• Profitable growth and cash flow are key focus areas
• Larger projects and customers expected to continue to increase revenue visibility, efficiency and scalability

• Itera does not provide guidance to the market on future prospects

Top 20 shareholders

Holding $\ast$	Percentage $\hat{\bar{\mathbf{v}}}$	Name ≑	Account type $\widehat{\mathcal{F}}$	Citizenship $\widehat{\mathbb{F}}$
19,518,298	23.75	ARNE MJØS INVEST AS		NOR.
5,846,754	7.11	STOREBRAND VEKST JPMORGAN EUROPE LTD,		NOR
4,340,481	5.28	OP CAPITAL AS		NOR.
2,880,000	3.50	EIKESTAD A/S		NOR
2,674,098	3.25	MIDELFART INVEST AS		NOR
2,615,000	3.18	SEPTIM CONSTULTING A		NOR
2,464,590	3.00	GIP AS		NOR
2,282,698	2.78	BOINVESTERING AS		NOR
2,200,000	2.68	JØSYRA INVEST AS		NOR
2,068,787	2.52	GAMST INVEST AS		NOR
2,031,588	2.47	MARXPIST INVEST AS		NOR
1,841,955	2.24	STOREBRAND NORGE I JPMORGAN EUROPE LTD.		NOR
1,000,000	1.22	FRAMAR INVEST AS		NOR
965,455	1.17	ITERA ASA		NOR
900,000	1.10	AANESTAD PANAGRI AS		NOR
818,349	1.00	BRØDRENE JOHANSSEN H		NOR
600,000	0.73	MORTEN JOHNSEN HOLDI		NOR
600,000	0.73	ALTEA PROPERTY DEVEL		NOR.
545,000	0.66	NYVANG JETMUND GUNNAR		NOR
520,000	0.63	GRØSLAND KIM-KJETIL		NOR