Itera — Interim / Quarterly Report 2021

Aug 19, 2021

• 1. Highlights of the Quarter
• 1. Business Review
• 1. Financial Review
• 1. Outlook
• 1. Q & A

Arne Mjøs CHIEF EXECUTIVE OFFICER

Bent Hammer CHIEF FINANCIAL OFFICER

Q2 in brief

Key figures core digital business

02 Business review

Crisis accelerates digitalisation and sustainability

Towards the fourth industrial revolution

Itera is setting the agenda for Industry 4.0

Industry 4.0 report DN Studio Live May 4 and 5

Creating shared understanding for value creation

Delivery Factory at Scale for data-driven businesses

Faster business innovation through autonomous teams and adoption of cloud services

Speed/Agility

Business agility and reduced timeto-market through efficient DevSecOps teams

Efficient use of distributed delivery across borders and public cloud scale

Control

Secure, predictable and flexible service delivery and operations capability end to end

Custom teams to solve complex challenges

TOP 1 IN THE WORLD IN CROSS-BORDER DELIVERY

Awarded by the Global Sourcing Association 2018

MULTIDISCIPLINARY TEAMS

FULL RANGE OF SERVICES AND CAPABILITIES SCALABILITY & COST-EFFICIENCY

Taking pole position: World Class Cloud Center of Excellence

LANDING ZONE FOR WORKLOADS

The 15 MNOK investment in creating a world class Cloud Center of Excellence (CCoE) was completed successfully in Q2.

• Managing everything as a code.
• Not only software and infrastructure provisioning but also Operation and Service delivery
• Customers in own data centre operation are migrated to the cloud by end of this year
• We are demonstrating our leadership in live production for both existing and new customers
• Strong pipeline of opportunities

Growing our strategic partnership with Aize

Combating financial crime with artificial intelligence

Itera and IBM are teaming up by combining local and global capabilities, industry experience, proven software, and a data driven approach with use of advanced cognitive solutions and artificial intelligence.

• Artificial intelligence is at the forefront of reducing money laundering and combating the financing of crime
• BM's is one of the global leaders in the market in this field according to Gartner and Forrester
• Our joint ambition is high and is to quickly become a preferred partner for the Nordic financial industry in the fight against financial crime

Major framework agreements in the public sector

Three large frame agreements in a strong vendor alliance for the next four years (2+1+1)

• Cover almost all Itera services, including system development, architecture, test management, total experience (design), agile coaching, analytics, and data science
• Expected to bring substantial value to our yearly revenue contributing to fulfil our growth ambitions

17

Order intake

Order intake from selected new and existing customers

Book-to-bill ratio*) of 1.0 in Q2 for core digital business and 1.2 for the last 12 months

Customer development

▪ New business

• Existing customers accounted for 85.5% (89.0%) of revenues in Q3 2021
• New customers won over the past year generated revenues of NOK 23.4 (16.4) million in Q2 2021 (14.5%)
• Good visibility
• Share of revenue from top 30 customers 74% (76%)
• High customer concentration signifies
  • Strategic relationships
  • Full range of services
  • Distributed delivery across borders

Revenue customers split (in MNOK)

Largest customers' share of revenue

Top 30 Top 10

* Existing customers defined as customers that were invoiced in the corresponding quarter last year

** New customers defined as customers won since end of corresponding quarter last year

Transformation of own data centre to the cloud

• Itera has invested MNOK 15 in a world-class Cloud Centre of Excellence that will provide a scaling engine for massive data
• Revenue from the data centre operations was down 64% to NOK 10 million in Q2 following the planned exit of on-premise customers
• Data centre revenue will continue to decrease, mitigated by an increase in cloud revenue towards the year end

Skilled and innovative employees in core digital business

• 539 employees at the end of the quarter
• Up by 15 in the quarter
• Up by 76 last twelve months
• Nearshore ratio of 52% (50%)
• Our distributed delivery model of onshore and nearshore consultants are increasing our price competitiveness as well as providing high scalability through access to a very large resource pool

Number of employees end of quarter by shore

Year-over-year growth in no. of employees

03 Financial review

Financial reporting 2021

▪ Given the sunsetting of the data centre operations, focus for financial reporting is on the core digital business, including the investment in the Cloud Centre of Excellence.

Key financials core digital business

	2021	2020	change	change
in million Amounts NOK	4-6	4-6		%
Sales revenue	150 8	121 6	29 2	24 1 %
of sales Cost	12 3	8 4	3 9	46 8 %
profit Gross	138 5	113 2	25 3	22 4 %
margin Gross	91 9 %	93 1 %	-1 3 pts	-1 3 pts
Personnel expenses	100 7	81 5	19 2	23 6 %
Other operating expenses	9 1	8 3	0 9	10 7 %
Depreciation and amortisation	6 4	7 9	-1 5	-19 5 %
Total operating expenses	128 5	106 0	22 5	21 2 %
EBITDA	28 7	23 5	5 2	22 1 %
margin EBITDA	19 0 %	19 3 %	-0 3 pts	-0 3 pts
EBIT	22 3	15 6	6 7	43 4 %
EBIT margin	14 8 %	12 8 %	2 pts	2 pts
. of employees the end of the period No at	539	463	7 6	3 % 16

• Strong growth of 24% fuelled by some major new accounts and more subcontractors
• Personnel expense increase from FTE growth, salary increases, bonus accruals and last year's Covid reliefs
• Some opex savings from Covid (travel and sub-rental of Kyiv office)
• EBIT up 43% to MNOK 22.3
• EBIT margin of 14.8% (12.8%)
• No. of FTEs up 76 to 539

Revenue and earnings development

Quarterly Revenue and EBIT margin*

• Momentum picking up after front loading of resources through Covid in anticipation of growth
• Margin improvements also aided by Covid-related cost avoidance, e.g. travel costs.
• Quarterly figures are impacted by number of working days net of vacations

Subscription revenue from data centre operations

▪ Subscription revenue from data centre operations will continue to drop as customers are migrated to cloud or exited

Segment reporting

Amounts in NOK million	Core digital business (94%)	Data centre operations (6%)	Total	Core digital business (81%)	Data centre operations (19%)	Total	Core digital business	Data centre operations	Total
Sales revenue	150.8	10.3	161.1	121.6	28.3	149.9	24.1 %	-63.7 %	7.5 %
Cost of sales	12.3	4.6	16.9	8.4	9.9	18.2	46.8 %	-53.3 %	-7.4 %
Gross profit	138.5	5.7	144.2	113.2	18.4	131.6	22.4 %	-69.2 %	9.6 %
Gross margin	91.9 %	55.1 %	89.5 %	93.1 %	65.1 %	87.8 %	-1.3 pts	-10 pts	1.7 pts
Personnel expenses	100.7	8.8	109.5	81.5	14.8	96.2	23.6 %	-40.4 %	13.8 %
Other operating expenses	9.1	1.5	10.7	8.3	1.3	9.6	10.7 %	13.8 %	11.1 %
Depreciation and amortisation	6.4	1.0	7.4	7.9	2.0	10.0	-19.5 %	-48.6 %	-25.4 %
Total operating expenses	128.5	16.0	144.5	106.0	28.0	134.0	21.2 %	-43.0 %	7.8 %
EBITDA	28.7	-4.6	24.0	23.5	2.3	25.8	22.1 %	-300.4 %	-6.8 %
EBITDA margin	19.0 %	-45.3 %	14.9 %	19.3 %	8.2 %	17.2 %	-0.3 pts	-53.5 pts	-2.3 pts
EBIT	22.3	-5.7	16.6	15.6	0.3	15.8	43.4 %	-2020.1 %	4.8 %
EBIT margin	14.8 %	-55.4 %	10.3 %	12.8 %	1.0 %	10.6 %	2 pts	-56.4 pts	-0.3 pts

• Data centre operations revenue MNOK 10.3 (-64%)
• Decline in data centre operations revenue and profits more than mitigated by growth in core digital business

Statement of cash flow

Million NOK	2021 4-6	2020 4-6	2021 1-6	2020 1-6	2020 F Y
Cash flow from operations (EBITDA)	24 0	25 8	49 8	55 1	108 9
Change in balance sheet items	0 1	13 8	(24 5)	(7 9)	(9 7)
cash flow from operating activities Net	24 1	39 6	25 3	47 1	99 2
cash flow from investment activities Net	(11 7)	(8 0)	(19 6)	(7 7)	(17 0)
Purchase of shares own	(23 5)	(22 6)	(23 5)	(18 2)	(18 2)
Sale of shares	8 4	2 9	8 4	2 3	8 0
Principal elements of lease payments	(4 3)		(11 6)	(12 4)
Instalment of sublease receivable	0 9	(2 1)	1 8	-	-
External dividend paid	(19 8)	(20 5)	(19 8)	(16 3)	(48 0)
cash flow from financing activities Net	(38 3)	(42 3)	(44 7)	(44 7)	(58 3)
change in bank deposits and cash Net	(25 8)	(28 7)	(39 0)	(5 2)	3 1
Bank deposits the end of the period at	15 4	47 9	15 4	47 9	54 4
borrowing related leasing New to	-	1 3	-	1 9	2 4

• Cash flow from operations NOK 24.1 (39.6) million in Q2
• 12 month rolling cash flow from operations was NOK 77 million
• Q2 of 2020 had significant public duty payments deferred to Q3 as a Corona relief measure

Dividend and own shares

• An ordinary dividend of NOK 0.25 per share based on 2020 results was paid and board received authorisation to decide on a supplemental dividend later in the year
• Share price was NOK 14.0 at the end of Q2 2021, an increase of 21% (27% incl. dividends) from NOK 11.55 at the end of Q2 2020.
• Current holding of own shares is 1,637,006 shares. Value at 30 June 2021 was MNOK 22.9
• Consistent high distribution of earnings

Statement of financial position

• Equity ratio of 12% (19%) per 30 June 2021
• 14% excl. IFRS 16 Leasing
• Cash balance of MNOK 15 (MNOK 48)
• Total balance reduced by MNOK 15 to MNOK 220

Outlook

Outlook

Attractive market driven by sustainability and digitalisation after Covid-19.

Strong position through its end-toend services, worldclass distributed delivery and industrial partnerships.

Core digital business will continue to grow at full speed. Profitable growth and cash flow are key focus areas.

Transforming own data centres to the cloud with short-term revenue drop.

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.

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Top 20 shareholders

No	Name	%	Nat	Shareholding
1	MJØS AS* ARNE INVEST	30 01	NOR	24 663 031
2	OP CAPITAL AS	5 54	NOR	083 4 551
3	GIP AS	03 5	NOR	137 375 4
4	EIKESTAD AS	37 4	NOR	3 590 000
5	SEPTIM CONSULTING AS	3 57	NOR	2 930 000
6	BOINVESTERING AS	3 26	NOR	2 676 968
7	NOR Bank ASA DnB	3 16	NOR	2 600 000
8	GAMST INVEST AS	2 98	NOR	2 448 134
9	JØSYRA INVEST AS	2 68	NOR	2 200 000
1 0	ITERA ASA	1 99	NOR	1 637 006
1 1	VERDIPAPIRFONDET STOREBRAND VEKST	1 39	NOR	1 139 659
1 2	HØGBERG	1 18	NOR	967 959
1 3	FRAMAR INVEST AS	1 13	NOR	925 000
1 4	AANESTAD PANAGRI AS	1 10	NOR	900 000
1 5	DZ PRIVATBANK S A	1 02	LUX	839 355
1 6	ALTEA PROPERTY DEVELOPMENT AS	0 85	NOR	700 000
1 7	GRØSLAND	0 77	NOR	630 000
8 1	NYVANG	0 75	NOR	000 615
1 9	JENSEN	0 75	DEN	614 450
2 0	MORTEN JOHNSEN HOLDING AS	0 73	NOR	600 000
	TOP 20	72 23		59 365 020

*Arne Mjøs Invest AS holds a future contract on 2,600,000 shares. The total controlling interest of Arne Mjøs is thus 27,263,031 shares (33.2%).