Itera — Interim / Quarterly Report 2020

Feb 18, 2021

Q 4 INTERIM REPORT 2020

PRESENTERS AND AGENDA

Arne Mjøs Chief Executive Officer

Highlights of the quarter Business review

Bent Hammer Chief Financial Officer

Financial review Outlook

2

HIGHLIGHTS OF THE FOURTH QUARTER

High growth and profitability in core digital business (81% of total)

Gross profit growth of 14%

EBIT margin of 10.0% (16.1%)

Total business

Revenue NOK 168.2 (146.0) million, up by 15% y-o-y

Gross profit NOK 149.5 (127.2) million, up by 18% y-o-y

Adjusted EBIT of NOK 16.8 (18.6) million, 10.0% (12.7%) margin

Business

Accelerating in B2B market segments

Strong bookto-bill of 1.6 in core digital business

Downscaling of own data centres and migration to cloud

Grow people

Named Top 10 European Digital Banking solution provider

Number of employees increased by 57 last 12 months

Cash & Dividend

Strong 12 month rolling cash flow from operations of NOK 102 million

Proposed ordinary dividend of NOK 0.25 per share

HIGHLIGHTS OF THE FOURTH QUARTER

Core digital business:

• Gross profit growth of 14.0% (12.1% YTD)
• EBIT margin of 10.0% (11.8% YTD)

Total business:

• Gross profit growth of 17.5% (12.5% YTD)
• Adjusted EBIT margin of 10.0% (10.7% YTD)

EBIT, adjusted NOK million

Revenues

NOK million

Business review

2020 HIGHLIGHTS

CRISIS IMPACT ON DIGITAL BUSINESS TRANSFORMATION

TOWARDS INDUSTRIAL DIGITALISATION

DIGITAL TRANSFORMATION B2C

INDUSTRIAL DIGITALISATION B2B

Digital transformation has been underway for 10- 15 years

Medium/high digital maturity

Steady growth potential

• Banking
• Insurance
• Public
• Retail
• Others

Industry at the very beginning of its digitalisation journey

Low digital maturity, increasing sense of urgency

Fast growth potential

• Oil & gas and its green transition
• Power & utilities
• Manufacturing
• Maritime
• Fishery

DIGITALISATION = SUSTAINABILITY

THE SPECIALIST IN CREATING SUSTAINABLE DIGITAL BUSINESS

WE UNDERSTAND THE USER

New use cases

WE UNDERSTAND THE BUSINESS Data centric

WE UNDERSTAND THE TECHNOLOGY

Artificial intelligence

STRONG INTERNATIONAL TRACTION

TOP 25 MOST INNOVATIVE COMPANY IN NORWAY

Award by Innovasjonsmagasinet across all industries in Norway 2016, 2017, 2018, 2019 and 2020

TOP 1 IN THE WORLD IN CROSS-BORDER DELIVERY

Award by the Global Sourcing Association 2018

TOP 1 IN EUROPE WITHIN PROJECT MANAGEMENT

Award by the Global PMO Alliance in 2020

TOP 10 EUROPEAN DIGITAL BANKING SOLUTION PROVIDER

Award by Banking CIO Outlook in 2020

NORDIC ORIGIN WITH AN INTERNATIONAL APPROACH

• The Nordics is often positioned as digital and sustainable frontrunners that gives us an attractive position for international customers
• We are growing together with international customers and partners based on our ONE Itera model across borders
• We will consider moving into new geographies if the opportunity is substantial, long-term value and controllable risks

REVITALISING OUR BRAND

We are launching a new revitalised brand in Q1:

• more professional outlook
• stronger international position
• high value partner

SMART ENERGY

TRANSFORMING THE ENERGY SECTOR

SMART ENERGY

TOWARDS AI POWERED WELL EXPLORATION

• The Released Well Initiative is an example of digital transformation of Norwegian Continental Shelf where large volume of historical drilling cutting samples from released wells digital are made available to the public
• About 1600 wells until now
• 600 000 cuttings samples
• Pandion Energy teamed up with Itera to build upon this initiative to assess, visualise and analyse large amount of well cuttings data and use AI solutions powered by cloud technology to transform the way geoscientists work
• The new solution Cutting Insight enables Pandion Energy to make more data-driven and sustainable decisions such as:
• seek exploration and delimitation opportunities in areas with possible access to renewable electricity
• include the carbon cost in the calculations for new investments

SMART ENERGY

REALISE THE FUTURE OF ENERGY

INSIGHTS: MARKEDSRAPPORT STRØM MARKET ACTIVITIES KEY NOTES & PODCASTS

• Power market analysis report developed in partnership with Thema Consulting
• Sold to the Norwegian power market
• Good media exposure

• Next editions in March and September 2021

• New customer meetings

• Seminars and webinars
• Podcasts

• New partnerships, i.e Norwegian offshore wind cluster

• Cognite Ignite Conferance

• Cognite and Itera Utilities Webinar
• Microsoft seminars
• Energi Norge Market Conference

HIGH VALUE CREATION DELIVERY

• To succeed in digital transformation, our customers reorganise themselves into a product-based structure which is crossfunctional and orchistrated around customer problems to increase time-tomarket
• The increase in service- and productbased delivery is a big opportunity for Itera since we can distribute our work as ONE Itera with a full range of services across borders

TOWARDS DELIVERY AT SCALE

• Our Delivery Factory at Scale consists of a full range of services and capabilities as ONE Itera across borders
• Accelerate digitalisation
• Total experience end-to-end
• New revenue models, i.e. subscriptionbased
• We are investing in a Cloud Center of Excellence that will provide a scaling engine for massive data
• Investments estimated to MNOK 15
• Managing everything as a code
• Both B2C and B2E customers

OWN DATA CENTER TRANSITION

• By the end of 2020, almost 2/3 of the business volume of our data centre operations had been successfully migrated to the cloud by customers.
• Most of the remaining customers will be engaged to move to the cloud by end of 2021

Book-to-bill ratio*) of 1.6 in Q4 for core digital business

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

CUSTOMER DEVELOPMENT

• New business

• Existing customers accounted for 92.8% (86.3%) of revenues in Q4 2020
• New customers won over the past year generated revenues of NOK 12.1 (20.0) million in Q4 2020
• Good visibility
• Share of revenue from top 30 customers 80% (75%)
• High customer concentration signifies
  • Strategic relationships
  • Full range of services
  • Hybrid delivery across borders

Revenue customers split (in MNOK)

Largest customers' share of revenue

Top 30 Top 10

SKILLED AND INNOVATIVE EMPLOYEES

• 569 employees at the end of the quarter
• Up 13 from last quarter and 57 from same period last year

• 7 quarters of sequential growth

• Nearshore ratio of 47% (49%)

• Our hybrid delivery model of onshore and nearshore consultants are increasing our price competitiveness as well as providing a high degree of 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

Financial review

KEY
FIGURES

	2020	2019	Change	2020	2019	Change
NOK Million	10-12	10-12	%	1-12	1-12	%
Sales revenue	168 2	146 0	15 %	619 1	560 3	10 %
Gross profit	5 149	127 2	18 %	543 6	483 0	13 %
Personnel expenses	110 5	87 9	26 %	392 4	348 3	13 %
Other opex	13 6	11 3	20 %	46 0	42 7	8 %
EBITDA	29 2	28 0	4 %	108 9	92 0	18 %
EBITDA margin	17 3 %	19 2 %	-1 9 pts	17 6 %	16 4 %	1 2 pts
Depreciation	12 4	9 5	31 %	5 42	35 8	19 %
EBIT	13 0	18 6	(30 %)	62 6	56 2	11 %
EBIT margin	7 7 %	12 % 7	-5 pts	10 1 %	10 0 %	0 1 pts
EBIT adj	16 8	18 6	(10 %)	66 4	56 2	18 %
EBIT margin adj	10 0 %	12 7 %	-2 8 pts	10 7 %	10 0 %	0 7 pts
Profit before taxes	12 4	17 6	(30 %)	61 8	53 6	15 %
Profit for the period	9 7	14 2	(32 %)	48 2	41 6	16 %
flow from Net cash operations	37 6	43 1	(13 %)	101 7	80 0	27 %
Cash and cash equivalents	54 4	53 1	2 %	54 4	53 1	2 %
Equity ratio	15 2 %	19 2 %	-4 1 pts	15 2 %	19 2 %	-4 1 pts
Employees end of period at	569	512	11 %	569	512	11 %
Employees in average	562	508	11 %	538	498	8 %

• High FTE-driven growth
• Revenue and depreciation incl. 2.8m contract termination fee and expense, respectively
• Personnel exp high due to restructuring costs, FX and bonus accruals
• Continued strong cash flow from operations

BUSINESS
SEGMENTS

Revenue growth	Q4	YTD
Core digital business	14 % 7	10 8 %
Data transformation centre	17 5 %	9 0 %
Total	15 2 %	10 5 %
Gross profit growth	Q4	YTD
Core digital business	14 0 %	12 1 %
Data transformation centre	41 9 %	15 3 %
Total	17 5 %	12 5 %
EBIT margin	Q4	YTD
Core digital business	10 0 %	11 8 %
Data transformation centre	-2 0 %	2 9 %
Total	7 7 %	10 1 %

Share of revenue

• Core digital business
• Growing at high speed and profitability
• Data centre operations
• MNOK 2.8 of termination fees with corresponding financial lease writedowns
• MNOK 3.8 in restructuring charges from downsizing

REVENUE AND EARNINGS DEVELOPMENT

Quarterly Revenue and EBIT margin Last 12 months Revenue and EBIT margin

• Revenue increased by 15% to 168 MNOK. EBIT margin down by 2.7 pts to 10.0% adjusted for restructuring costs.
• Last 12 months rolling revenue increased by 10% to 619 MNOK and EBIT by 11% to 66.4 MNOK before restructuring costs (62.6 MNOK including). EBIT margin of 10.7% (10.0%) adjusted for restructuring costs (10.1% reported)

26 Itera | Q4 2020

REVENUE SPLIT

Revenue increased by 15% y-o-y

• Service revenues from own consultants increased by 15% to NOK 114 million
• Subscription revenue increased by 7% to NOK 40 million
• 3 rd party service revenue increased by 33% to NOK 8 million
• Other revenue, incl. HW/SW sales, increased by 62% to NOK 7 million

Revenue split (quarterly figures) NOK Million

Revenue percentage split (rolling 12 months)

STATEMENT OF CASH FLOW

	2020	2019	2020	2019
NOK Million	10-12	10-12	1-12	1-12
Cash flow from (EBITDA) operations	29 2	28 0	108 9	92 0
Change in balance sheet items	8 5	15 1	(7 1)	(12 0)
flow from operating activities Net cash	37 6	43 1	101 7	80 0
Net cash flow from investment activities	(4 8)	(4 9)	(17 0)	(18 8)
Purchase of shares own	-	-	(18 8)	(0 1)
Sale of shares	1 4	1 1	7 3	2 1
Principal elements of lease payments	(3 6)
Instalment of lease liabilities	(1 5)	(2 5)	(8 6)	(9 1)
External dividend paid	(32 4)	-	(48 6)	(44 7)
Net cash flow from financing activities	(36 1)	(1 4)	(68 8)	(51 8)
Net change in bank deposits and cash	(3 3)	35 7	1 3	(2 2)
Bank deposits the end of the period at	54 4	53 1	54 4	53 1
New borrowing related leasing to	-	3 4	2 4	11 5

• Cash flow from operations NOK 37.6 (43.1) million in Q4

• 12 month rolling cash flow from operations was NOK 102 million

• The Board has proposed an ordinary dividend of NOK 0.25 per share based on 2020 results

• Share price was NOK 15.0 at the end of Q4 2020, an increase of 30% from NOK 11.5 at the end of Q4 2019.
• Current holding of own shares is unchanged at 1,269,136 shares. Value at 31 Dec 2020 was MNOK 19.0
• Consistent high distribution of earnings

STATEMENT OF FINANCIAL POSITION

• Equity ratio of 15% (19%) per 31 December (17% excl. IFRS 16 Leasing)
• Cash balance of MNOK 54 (MNOK 53)
• Total balance reduced by MNOK 17 to MNOK 224

Outlook

• Attractive market driven by sustainability and digitalisation after Covid-19
• Itera is well positioned through its full ranges of services, attractive hybrid delivery model across borders and strong industrial partnerships
• Expect to complete transformation of own data centres to the cloud with short-term revenue drop
• Investment in a leading edge Cloud Centre of Excellence with high scalability and increasing recurring revenue
• 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.

Q&A session

TOP 20 SHARE-HOLDERS

No	Name	%	Nat	Shareholding
1	MJØS INVEST AS* ARNE	29 26	NOR	24 048 214
2	OP CAPITAL AS	5 45	NOR	4 478 110
3	GIP AS	4 80	NOR	3 945 000
4	EIKESTAD AS	4 26	NOR	3 500 000
5	SEPTIM CONSULTING AS	3 53	NOR	2 900 000
6	SPAREBANK MARKETS AS 1	3 41	NOR	2 800 000
7	BOINVESTERING AS	3 22	NOR	2 650 000
8	GAMST INVEST AS	2 92	NOR	2 399 165
9	JØSYRA INVEST AS	2 68	NOR	2 200 000
10	MARXPIST INVEST AS	2 47	NOR	2 031 588
11	VERDIPAPIRFONDET STOREBRAND VEKST	1 86	NOR	1 529 077
12	ITERA ASA	1 54	NOR	1 269 136
13	INVEST AS FRAMAR	1 13	NOR	925 000
14	AANESTAD PANAGRI AS	1 10	NOR	900 000
15	HØGBERG	0 95	NOR	782 045
16	ALTEA PROPERTY DEVELOPMENT AS	0 85	NOR	700 000
17	NYVANG	0 77	NOR	630 000
18	GRØSLAND	0 74	NOR	610 000
19	JENSEN	0 74	DEN	609 100
20	MORTEN JOHNSEN HOLDING AS	0 73	NOR	600 000
	TOP 20	72 40		59 506 435

*Arne Mjøs Invest AS holds a future contract expiring 19 March 2021 on 2,800,000 shares at an average price of NOK 9.9736 per share. The total controlling interest of Arne Mjøs is thus 26,848,214 shares (32.7%).

COPYRIGHT AND DISCLAIMER

Copyright

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Disclaimer

This Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and this Presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Itera ASA and Itera ASA's (including subsidiaries and affiliates) lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for Itera ASA. Although Itera ASA believes that its expectations and the Presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. Itera ASA is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither Itera ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.