Itera — Interim / Quarterly Report 2016

Apr 27, 2016

INTERIM REPORT

FIRST QUARTER 2016

CEO ARNE MJØS CFO BENT HAMMER

OSLO, 27 APRIL 2016

Highlights of the first quarter

• Revenue
• NOK 106 million
• Pro forma growth of 5% y-o-y, despite Easter holidays in Q1 vs Q2 last year
• EBITDA
• Improved EBITDA of NOK 10.4 million, 9.8% margin
• EBIT
• Improved EBIT before non-recurring items of NOK 5.5 million, 5.2% margin
• Improving operating performance
• Significant growth and profitability improvement in Norway and Denmark.
• Swedish consulting unit closed down
• Double-digit nearshore growth y-o-y
• 7% growth of top 20 customers
• Dividend proposal
• NOK 0.12 per share

Revenues NOK million

FINANCIAL REVIEW

Key figures

	2016	2016*	2015*	$Change^*$	2015*
NOK Million	Q1	Q1	Q1		FY.
Operating revenue	105.6	104.1	99.3	5 %	394.2
Gross profit	90.6	89.4	85.2	5 %	335.6
EBITDA	10.4	11.0	9.8	13 %	46.1
EBITDA margin	9.8%	10.6%	9.8%	$0.8$ pts	11.7 %
EBIT before non-recurring items	5.5	6.1	5.1	20 %	26.4
EBIT margin before non-recurring	5.2%	5.9%	5.1%	15 %	6.7%
EBIT	3.8
EBIT margin	3.6%
Net cash flow from operations	-4
Cash and cash equivalents	60
Equity ratio	28 %
Employees at end of period	373	373	377	$-1\%$	381
Employees in average	380	373	381	$-2\%$	383

• Double-digit growth in Denmark and Nearshore. Solid growth in Managed Services
• Non-recurring items related to office moves in Oslo and Copenhagen and

gain from de-consolidating Swedish consulting unit

Quarterly development

Operating revenue

NOK million

End of period

EBITDA

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

EBIT

Statement of income

	2016	2016*	2015*	Change*	2015*
NOK Million	Q1	Q1	Q1	Q1	FY
Operating revenue	105.6	104.1	99.3	5 %	394
Cost of sales	15.0	14.7	14.1	4 %	59
Personnel expenses	69.7	68.2	66.2	$3\%$	247
Depreciation	4.9	4.9	4.7	5 %	20
Other operating expenses	10.5	10.1	9.2	10 %	43
Total operating expenses	100.2	97.9	94.2	4 %	368
Operating profit before non-recurring items	5.5	6.1	5.1	20 %	26
Non-recurring items	1.6				0
Operating profit (EBIT)	3.8				26
Net financial income	$-0.5$
Profit before tax	3.4
Tax	0.8
Net profit for the period	2.5

Improved growth and profitability in continued business despite Easter holidays in Q1 vs in Q2 last year

Statement of cash flow

	2016	2015	2015
NOK Million	Q1	Q1	FY
Cash flow from operations (EBITDA)	10	8	40
Change in balance sheet items	-14	-16	-20
Net cash flow from operating activities	-4	-8	20
Net cash flow from investment activities	-3	-3	1
Purchase of own shares	0	0	0
Borrowings repaid	-2	-2	-8
External dividend paid	0	0	-12
Net cash flow from financing activities	-2	-2	-21
Currency effect on cash	0	0	1
Net change in bank deposits and cash	-9	-13	1
Bank deposits at the end of the period	60	67	68
New borrowing related to leasing	2	0	15

12 month rolling cash flow from operations

• Cash flow from operations NOK -3.5 million
• 12 month rolling cash flow from operations was NOK 25 million

Dividend proposal

• The Board of Directors is proposing a dividend of NOK 0.12 per share
• The Annual General Meeting will take place on the 23rd May 2016
• If the Board of Directors' proposal for dividend is approved, the share is traded ex dividend on the 24th May 2016
• Total distribution to shareholders of NOK 3.55 per share 2005-16

Statement of financial position

• Group equity ratio of 28 (26) % in Q1
• Cash balance of MNOK 60 (67)
• Deconsolidation of Itera Consulting AB

BUSINESS REVIEW

Long-term profitable growth: Key enablers

Larger projects and revenue visibility

Communication AND Technology

Our future picture

Itera creates great experiences for the customer's customer

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

Applying the full scope of Iteras 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 Q1 from existing and new customers

Book-to-bill ratio1) of 1.0 in Q1 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

Integrated Cloud Managed Services and Service Operation

CLOUD READINESS

A service designed to help organizations review and understand their IT maturity level and readiness to consider adopting cloud services

Itera's Value:

• Capability Assessment
• Functionality Assessment
• Licenses Assessment
• Risk Assessment

IT HELPDESK

Itera's Value:

• 24/7 IT Helpdesk: 1,2,3 lines support
• Services Management
• Monitoring
• Backup & Disaster Recovery

• License Management

• Azure IaaS

• Azure SaaS
• Hybrid Datacenter Services

MS OFFICE 365

• Exchange Online
• Lync Online
• Office365 Platform
• Office Applications
• SharePoint Online

Itera's Value:

• Deployment
• Integration
• Daily service operations
• 24/7 support in Norwegian and English

MS EMS/ INTUNE

Itera's Value:

• Mobile Device & Application Management
• Identify management
• Security & Access management

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Our multi-site strategy provides agility, scalability and access to top notch resources

• A Nordic full-service provider
• Serving leading customers in fast-growing industries
• Flexibility of a hybrid model
• Delivery across borders in the Nordics and nearshore locations
• Sourcing for value over volume

• EU Data Protection Law compliance

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

Nearshore ratio development

• Nearshore ratio of 36 % in Q1
• 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 6 % in Q1
• Top 10: 45 % of total revenue
• Top 20: 63 % of total revenue
• Top 30: 71 % 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.

Order intake in Q1 from existing and new customers

Book-to-bill ratio1) of 1.0 in Q1 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

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 $\sim$	Percentage $\widehat{\mathbf{z}}$	Name ≑	Account type $\widehat{\mathbf{z}}$	Citizenship $\widehat{\mathbb{F}}$
17.218.298	20.95	ARNE MJØS INVEST AS		NOR
5.504.472	6.70	STOREBRAND VEKST JPMORGAN EUROPE LTD.		NOR
4.329.031	5.27	OP CAPITAL AS		NOR
3.699.098	4.50	MIDELFART INVEST AS		NOR
2,900,000	3.53	EIKESTAD A/S		NOR
2,846,058	3.46	VERDIPAPIRFONDET DNB		NOR
2,580,000	3.14	SEPTIM CONSTULTING A		NOR
2.282.698	2.78	BOINVESTERING AS		NOR
2.280,500	2.77	GIP 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
1,630,028	1.98	STOREBRAND NORGE I JPMORGAN EUROPE LTD.		NOR
1.000.000	1.22	FRAMAR INVEST AS		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
510,000	0.62	SOBER KAPITAL AS		NOR
56 543 907	68.81