Itera

Investor Presentation • Feb 25, 2020

INTERIM REPORT

ITERA FOURTH QUARTER 2019

CEO ARNE MJØS CFO BENT HAMMER

OSLO, 25 FEBRUARY 2020

PRESENTERS AND AGENDA

Highlights of the quarter

Business review

Financial review

Outlook

HIGHLIGHTS OF THE FOURTH QUARTER

• High growth and profitability in core digital business
  • Gross profit growth of 9%
  • EBIT margin of 14.4% (16.8%)
• Total business
  • Revenue NOK 146 (141) million, up by 3% y-o-y
  • Gross profit NOK 127.2 (117.9) million, up by 8% y-o-y
  • EBIT of NOK 18.6 (16.9) million, 12.7% (12.0%) margin
• Increasing revenue from strategic customers in new industries
• Strong order intake in digital business with book-to-bill ratio of 1.2 (1.3 full year)
• Proposed ordinary dividend for 2019 of NOK 0.30 per share

BUSINESS REVIEW

4

Top 25 in innovation 4 years in a row

Completed 200+ certifications on cloud platforms

Built a strong Managed Cloud Services offering

Strengthened recruitment and attractiveness

Itera + Microsoft + Google + Amazon

New customers and new industries

World class hybrid delivery model into new geographies

Solid development in Itera West & Iceland

THE SPECIALIST IN CREATING SUSTAINABLE DIGITAL BUSINESS

NEW USE CASES

WE UNDERSTAND THE USER

WE UNDERSTAND THE BUSINESS

DATA CENTRIC

WE UNDERSTAND THE TECHNOLOGY

ARTIFICIAL INTELLIGENCE

The next digital decade has started

PLATFORM FIRST

DIGITALIZATION BY REAL TIME DATA AND AI TRANSFORMING POWER & UTILITY

production

THE FUSION OF ENERGY AND SOFTWARE

• Driving innovation in multidisciplinary teams

• by combining deep domain knowledge, software engineering, partner ecosystems and industrial data in new ways

• Adapting our approach to fit into industry

• by matching with customer strategy, culture and governance and focus on use cases that show the value of digitalization and automation

• High scalability of digital talents and capabilities

• through hybrid delivery with a large pool of digital competences across borders

• Digital worker • Smart grid transformation • Resource efficiency • Smart maintenance • Flexibility • Platform first • New user experience • Data-centric mindset • Hybrid scalability • Cloud technology • Partner ecosystem • Industry solutions • Data SOFTWARE ENGINEERING PARTNERS ENERGY

SALESFORCE PARTNERSHIP

• Itera has entered into a strategic partnership with Salesforce to become a full scope scalable realization partner to enable new digital businesses
• Our capabilities are built in collaboration with a nearshore niche provider with 80+ certified Salesforce experts initially
• A large opportunity to build reusable components and integration with other systems as well

A FULL SCOPE REALIZATION PARTNER

MULTIDISCIPLINARY TEAM FAST

FULL RANGE OF SERVICES AND CAPABILITIES

Selected projects

BY 2021…

75% 30% of organizations that do not proactively manage their cloud implementation will spend at least

more than on-premises deployments

Source: Gartner

ITERA MANAGED CLOUD SERVICES

Microsoft Azure

ITERA MANAGED CLOUD PLATFORM

A platform that enables everyone to take a secure and controllable journey to a public cloud based on their actual needs with use of best practices from our specialists

SELECTED CUSTOMERS

«We are very satisfied with the flexibility and competence Itera has shown regarding cloud foundation, advisory and development. Actually, we would not have been able to launch the new system in production on Azure so fast without Itera.

Hence, Itera was crucial to Kredinor's realization and launch of our new customer solution in Azure».

INNOVATING POWER COMPANY

Glitre Energi and Agder Energi join forces into a 50-50% owned company, Oss Norge, as a fully digital power company based on real time data from smart meters.

A fully digital power company Cross-industry services The flexibility market

• Oss Norge was created as a new startup by Glitre Energi based on smart metering data to disrupt the industry
• Itera plays an important role with a range of services, including strategic advisory and key management positions

• 50-60% of fires in homes are caused by faults in electrical systems or incorrect use of electrical equipment
• Itera facilitated Oss Norge with a large Nordic insurance company in piloting the potential of using smart metering data to prevent fire in homes and buildings

• Nodes provides an independent marketplace for trading decentralized flexibility in the energy market
• Itera facilitated Nodes to create a new concept of micro payments based on block chain technology by Nets Smart Payments

ELECTRIC GRIDS IN USA

Utility asset management for electric grid on Microsoft Azure

18

• Itera has become a key realization partner for DNV GL in assisting them to develop Cascade 2.0, a cloud ready utility asset management solution.
• Itera has been brought in to shorten the time to market for Cascade 2.0
• Itera is providing the following services to DNV GL DevOps advisory, Test automation, Architecture advisory, development and testing.

Corvallis, Oregon CASCADE – Utility asset management using data analytics and condition-based maintenance to maximize equipment lifetimes

NORDIC ORIGIN, GLOBAL REACH

Our ONE Itera strategy and world class hybrid delivery model bring us into new customers, new industries and new geographies

Order intake from new and existing customers

Book-to-bill ratio*) of 1.2 in Q4 for Digital Business and 1.3 full year

*) The book-to-bill ratio is the ratio of orders received to the amount of revenue for a specific period for Itera units ²⁰

CUSTOMER DEVELOPMENT

• New business
  • Existing customers accounted for 86.3% (94.8%) of revenues in Q4 2019
  • New customers won over the past year generated revenues of NOK 20.0 (7.3) million in Q4 2019
• Good visibility
  • Share of revenue from top 30 customers down by 4 points y-o-y to 75%
  • High customer concentration signifies
    • Strategic relationships
    • Full range of services
    • Hybrid delivery across borders

* 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

Nearshore ratio % of all staff located nearshore

• Our hybrid teams of onshore and nearshore consultants are increasing our price flexibility as well as providing access to a very large resource pool

TOP 3 IN PROJECT MANAGEMENT!

The Project Management Institute in Ukraine has ranked the country's best Project Management offices. Evaluation criteria: Customer service, Best practices, Innovations, Community creating, Generating value and Competence development.

FINANCIAL REVIEW

	2019	2018	Change	2019	2018	Change
NOK Million	10-12	10-12	%	1-12	1-12	%
Sales revenue	146 0	141 3	3 %	560 3	531 3	5 %
Gross profit	127 2	117 9	8 %	483 0	444 0	9 %
Personnel expenses	87 9	83 7	% 5	348 3	327 8	6 %
Other opex	11 3	11 9	(5 %)	42 7	52 3	(18 %)
EBITDA	28 0	22 3	26 %	92 0	64 0	44 %
EBITDA margin	19 2 %	15 8 %	3 4 pts	16 4 %	12 0 %	4 4 pts
Depreciation	9 5	4 5	76 %	35 8	21 2	69 %
EBIT	18 6	16 9	10 %	56 2	42 8	31 %
EBIT margin	12 % 7	12 0 %	0 8 pts	10 0 %	8 1 %	1 9 pts
Net cash flow from operations	43 1	42 0	3 %	80 0	56 8	41 %
Cash and cash equivalents	53 1	3 55	(4 %)	53 1	3 55	(4 %)
Equity ratio	19 2 %	24 3 %	1 -5 pts	19 2 %	24 3 %	1 -5 pts
Employees end of period at	512	486	5 %	512	486	5 %
Employees in average	508	489	4 %	498	488	2 %

• subcontractors
• Positive capacity growth
• Strong cash flow from operations

CLOUD TRANSFORMATION

Total Q4 2019

• Gross profit growth 8% (FY: 9%)
• EBIT margin 12.7% (FY: 12.0%)

Core digital business

• Gross profit growth 9% (YTD: 10%)
• EBIT margin 14.4% (YTD: 12.1%)

QUARTERLY DEVELOPMENT

EBITDA NOK million

Employees End of period

Q4-18

Q1-19

Margin

Q2-19 Q3-19 0%

Q4-19

27

REVENUE SPLIT

Revenue increased by 3% y-o-y

• Service revenues from own consultants increased by 13% to NOK 99 million
• Subscription revenue increased by 7% to NOK 37 million
• 3 rd party service revenue decreased by 49% to NOK 6 million
• Other revenue, incl. HW/SW sales, decreased by 40% to NOK 4 million as Itera closed its web shop towards end of Q1 2019

Revenue split (quarterly figures) NOK Million

Revenue percentage split (rolling 12 months)

STATEMENT OF CASH FLOW

	2019	2018	2019	2018
NOK Million	10-12	10-12	1-12	1-12
Cash flow from operations (EBITDA)	28 0	22 3	92 0	64 0
Change in balance sheet items	15 1	19 7	(12 0)	(7 1)
Net cash flow from operating activities	43 1	42 0	80 0	56 8
Net cash flow from investment activities	(5 7)	(4 9)	(18 8)	(20 7)
Purchase of shares own	-	-	(0 1)	(22 6)
Sale of shares	-	1 1	2 1	11 1
of Instalment lease liabilities	(5 5)	(2 5)	(20 8)	(8 7)
External dividend paid	(24 4)	-	(44 7)	(20 5)
Net cash flow from financing activities	(29 9)	(1 4)	(63 5)	(40 7)
in deposits Net change bank and cash	7 4	35 7	(2 2)	(4 6)
Bank deposits the end of the period at	53 1	55 3	53 1	55 3
New borrowing related leasing to	3 4	0 6	11 5	3 7

12 month rolling cash flow from operations (NOK Million excluding the effect of IFRS 16)

• Cash flow from operations NOK 43.1 (42.0) million in Q4
• Shift of NOK 3.4 million from cash flow from operations to financing activities due to IFRS 16
• 12 month rolling cash flow from operations was NOK 67 million, excluding the effect of IFRS 16

• The Board will propose an ordinary dividend of NOK 0.30 per share to be paid on 4 June 2020
• Share price was NOK 11.50 on 31 December 2019 vs NOK 8.50 the year before, representing a yield of 35% (42% incl. dividends)
• Current holding of own shares is 769,891 shares, unchanged as at end of Q3 2019
• Consistent high distribution of earnings

STATEMENT OF FINANCIAL POSITION

• Right-of-use assets of MNOK 45 introduced following adoption of IFRS 16 Leases with corresponding lease liability
• Equity ratio of 19% (24%) per 31 December
  • -3.9 points impact from IFRS 16

MNOK

• Cash balance of MNOK 53 (MNOK 55)

31

OUTLOOK

• Attractive market with high demand for digitalisation 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.

34

2

TOP 20 SHARE-HOLDERS

No.	Name	%	Nat.	Shareholding
1	ARNE MJØS INVEST AS*	27.78	NOR	22 831 318
2	OP CAPITAL AS	5.40	NOR	4 438 357
3	EIKESTAD AS	4.84	NOR	3 975 000
4	GIP AS	4.58	NOR	3 767 295
5	DnB NOR Bank ASA	4.08	NOR	3 350 000
6	SEPTIM CONSULTING AS	3.49	NOR	2 865 000
7	BOINVESTERING AS VERDIPAPIRFONDET STOREBRAND	3.21	NOR	2 635 000
8	VEKST	2.81	NOR	2 306 896
9	GAMST INVEST AS	2.77	NOR	2 273 441
10	JØSYRA INVEST AS	2.68	NOR	2 200 000
11	MARXPIST INVEST AS	2.47	NOR	2 031 588
12	FRAMAR INVEST AS	1.22	NOR	1 000 000
13	AANESTAD PANAGRI AS	1.10	NOR	900 000
14	ITERA ASA	0.94	NOR	769 891
15	SÆTRANG	0.81	NOR	662 566
16	ALTEA PROPERTY DEVELOPMENT AS	0.80	NOR	660 377
17	NYVANG	0.80	NOR	655 000
18	HØGBERG	0.78	NOR	640 166
19	JENSEN	0.77	DEN	634 800
20	SOBER KAPITAL AS	0.75	NOR	620 000
	TOP 20	72.05		59 216 695

*Arne Mjøs Invest AS holds a future contract expiring 20 March 2020 on 3,350,000 shares at an average price of NOK 9.1907 per share. The total controlling interest of Arne Mjøs is thus 26,181,318 shares (31.9%).

COPYRIGHT AND DISCLAIMER

Copyright

Copyright of all published material including photographs, drawings and images in this document remains vested in Itera and third party contributors as appropriate. Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior permission and applicable acknowledgements. No trademark, copyright or other notice shall be altered or removed from any reproduction.

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.