Komplett ASA — Earnings Release 2022

Oct 25, 2022

Third quarter results 2022

Lars Olav Olaussen, CEO Krister Pedersen, CFO

25 October 2022

Highlights for the quarter: Challenging consumer markets, mitigating actions implemented

• Despite the market decline in recent quarters, Komplett has reached 10 per cent organic revenue CAGR since 2019
• o Successful reduction of slow-moving inventory, with pressure on the gross margin
• Synergies with NetOnNet of at least NOK 200 million on track
• Continued strong cost control O
• o Net working capital improvement driven by factoring
• o Attractively positioned for long-term value creation

Challenging B2C markets partly offset by multi-segment business model

• o Contribution from NetOnNet of drives 39.4 per cent revenue growth
• Revenue decline of 15.3 per cent including NetOnNet pro forma due to challenging market conditions, especially in B2C
• Modest revenue growth in B2B and stable revenue in Distribution compared with major new distribution agreements in 2021

MPLETT®GROUP

| Gross margins under pressure

• o Weaker markets lead to tougher competition and price pressure driven by high inventory across the industry
• Inventory reduced by NOK 426 million YTD™
• Successfully reduced slow-moving inventory o
• o Supplier negotiations are yielding the expected synergies from NetOnNet combination

Gross margin by segment	03-21	03-22
B2C	15.5%	15.5%
B2B	16.9%	16.1%
Distribution	5.8%	4.9%

| Strong cost control, EBIT hit by lower gross margins

• o Volume decline in B2C and continued pressure on gross marqins
• Effects from NetOnNet combination include:
  • NOK 12 million EBIT impact from NetOnNet operations
  • o to NOK 11 million
• Industry leading cost position maintained
  • o expenses resulted in an opex share of 10.7 per cent, excluding the impact from M&A
  • o Cost initiatives with a total gross impact of SEK 70-90 million launched in NetOnNet with effect from 2023

*Adjusted for one-off costs of NOK 4 million mainly related to the acquisition of NetOnNet.

B2C

Positioned for long-term growth following current market headwind

• o Revenue base increased to NOK 2 528 million including contribution from NetOnNet
• Excluding NetOnNet, revenues declined due to: O
  • More conservative consumer spending and temporary O market saturation following consumption peak
  • o Out-of-stock situations following inventory reductions
  • Online share back at pre-pandemic levels O
• o Gross profit impacted by price pressure and efforts to reduce inventory
• EBIT impacted by lower sales volume and price pressure

B2B

Modest increase in revenue, profitability impacted by lower gross marqins

• Solid demand from medium-sized enterprises offset by softer demand from smaller businesses
• o Supply issues due to Covid-19 lockdowns in China with major constraints on Apple products
• Gross margin decline as a result of increased sales of lower-margin educational products, reduction of slow-moving stock and currency effects
• EBIT margin of 6.0 per cent (7.4 per cent excl. Ironstone) impacted by lower gross margin

Note: Ironstone has been consolidated as from 1 September 2021. In 03-22, Ironstone accounted for NOK 34 million of revenues, NOK 8 million of gross profit and negative NOK 3 million of EBIT. In 03-21, Ironstone reported NOK 7 million in revenue, NOK 2 million in gross profit and negative NOK 0.4 million EBIT.

Distribution

Revenue base holds up well, gross margin hampered by customer and product mix

• Revenue amounted to NOK 837 million, O representing an increase from 2021, which included major new distribution agreements
• o Growth was driven by large accounts and strong sales of Apple products, despite supply constraints
• o Gross margin impacted by lower growth among smaller retailers and a less favourable product mix
• EBIT fell back due to lower gross margins

| Financial performance

Krister Pedersen, CFO

Profit and loss

• Strong reported revenue growth was driven by M&A O
  • NetOnNet consolidated as of 1 April 2022 O
• o Revenue decline excluding NetOnNet due to softer consumer demand
• Strong cost control on operations O
• o EBIT reduction mainly driven by a volume decline in B2C and continued pressure on gross margins
• One-off costs related to the transaction with NetOnNet o
• Net financials included NOK 11 million in interest costs related to o the bridge facility
• o Profit on discontinued operations was NOK 6 million net of tax
• Profit for the period year-to-date negative NOK 91 million o
  • o

	03-22	03-21	Y 10-222	Y TD-21	FY 2021
Operating revenue	3784	2 715	9 981	7 751	11 043
EBIT (adj.)	-10	83	17	270)	333
One-off cost	-4	-5	-(80)	-16	-19
EBIT	-14	79	-45	254	2 (46)
Net financials	-29	-5	-65	-15	-22
Profit before tax	-45	74	-106	259	547
lax expense	8	-14	10	-21	-48
PROFIT FROM CONTINUING OPERATIONS	-35	60	-97	218	300
Profit/loss on discontinued operations	6		6
PROFIT FOR THE PERIOD	-29	60	-91	218	300

| Cash flow & working capital

• Improved cash flow from operation from NOK 153 million O in Q3 last year to NOK 380 million this year
• o by the successful reduction in net working capital of NOK 200 million from factoring
• A further improvement of NOK 100-200 million is O estimated in 04, and the effect is expected to increase in 2023
• o moving stock
• o Cash flow from investing activities amounted to NOK 29 million, compared with NOK 77 million in 03 2021
• o Cash flow from financing activities was NOK 314 million, compared with NOK 61 million in the same period last year

Cash flow	03-22		03-21 YTD-22	YTD-21 -	FY 2021
Net cash from operating activities	330	153	542	13	65
Net cash used in investing activities	-29	-77	-1 624	-100	-114
Net cash (used in)/from financing activities	-34	-61	1 126	66	36
Net increase in cash and cash equivalents	રાજ	15	44	-21	-12

Change in net working capital	03-22	03-21 -	YTD-22 YTD-21		FY 2021
Change in inventory	68	37	-23	194	425
Changes in trade receivables - regular	-201	10	-226	69	186
Changes in payables	-13	-100	245		-190
Changes in other assets and liabilities	-56	-1	127	98	35
Change in net working capital	-302	-54	-368	362	455

Financial position

• Net interest-bearing debt (NIBD) incl. IFRS 16 for the period was O NOK 2 853 million compared with NOK 880 million last year
• o acquisition of NetOnNet, and NOK 593 million from leasing liability. The leasing liability increased by NOK 285 million from NetOnNet
• o compared to NOK 667 million last year
• o The bridge facility is without covenants, giving a leverage ratio (NIBD/ LTM EBITDA) of 2.8x compared with 1.7x last year
• o The liquidity reserve was NOK 969 million at the end of the third quarter compared with NOK 521 million one year earlier

| Summary and outlook

Lars Olav Olaussen, CEO

Key takeaways

• Challenging markets, especially in B2C O
• o Mitigating actions have been implemented to:
  • Maintain cost leadership position O
  • Ensure an attractive inventory position O
  • Secure a healthy balance sheet O
• o Supplier negotiations following the combination with NetOnNet are yielding the expected synergies
• o 10 per cent organic revenue CAGR since 2019 despite the temporary market decline in recent quarters

| Priorities going forward

• Execute integration with NetOnNet O
  • o Continue supplier negotiations to extract synergies from NetOnNet combination
  • o Secure long-term refinancing of bridge loan facility
• o Maintain cost leadership position
  • o Cost initiatives with gross impact of SEK 70-90 million launched in NetOnNet with effect from 2023
• Committed to continue lowering inventory and improve stock composition
• o Secure a healthy balance sheet
  • o
  • o improvement of NOK 100-200 million in Q4
  • The effect is expected to increase in 2023 O
• o Over time, the market is expected to recover and return to its attractive growth trajectory

KOMPLETT GROUP

Alternative Performance Measures (APMs)

Reconciliation

The APMs used by Komplett Group are set out below(presented in alphabetical order):

EBIT adjusted: Derived from Financial Statements as operating result (EBIT) excluding one-off costs. The Group has presented this item because it considers it to be a useful measure to show Management's view on the efficiency in the profit generation of the Group's operations before one-off items. Reconciliation

	03-22	03°21	YTD'22	YTD'21	FY-21
Total Operating revenue	3784	2 715	9 961	7751	11 043
EBIT	-14	79	-43 1	254	369
+ One-off cost	4	5	60	16	19
= EBIT adjusted	-10	83	17	270	388
EBIT Margin adjusted	-0.3 %	3,1 %	0,2 %	3,5 %	3,5 %

EBIT Margin: Operating result (EBIT) as a percentage of total operating revenue. The Group has presented this item because it considers it to be a useful measure to show Management's view on the efficiency in the profit generation of the Group's operations as a percentage of total operating revenue.

Reconciliation

	03-22		03'21 YTD'22	YTD'21	FY-21
Total Operating revenue	3784	2 715	1966	7751	11 043
EBIT	-14	79	-43	254	369
EBIT marqin	-0.4 %		2.9 % -0.4 % -	3,3 %	3,3 %

EBIT Margin adjusted: EBIT adjusted as a percentage of total operating revenue. The Group has presented this item because it considers it to be a useful measure to show Management's view on the efficiency in the profit generation of the Group's operations before one-off items as a percentage of total operating revenue. Reconciliation - see above under EBIT adjusted

EBITDA excl. impact of IFRS-16: Derived from Financial Statements as the sum of operating result (EBIT) plus the sum of depreciation and amortisation for the segments B2C, B2B, Distribution and Other. The Group has presented this item because it considers it to be a useful measure to show Management's view on the overall picture of operational profit and cash flow generation before depreciation and amortisation in the Group's operations, excluding any impact of IFRS-16.

	03-22		03'21 YTD'22	YTD'21	FY-2
EBIT	-14	79	-43	254	36
- EBIT - IFRS 16	-3	-2	-9	-6
+ Dep B2C, B2B, Dist. Other	33	15	82	48	6
= EBITDA excl IFRS 16	16	92	30	296	42

Gross Margin: Gross Profit (as defined below) as a percentage of total operating revenue. The Group has presented this item because it considers it to be auseful measure to show Management's view on the efficiency of gross profit generation of the Group's operations as a percentage of total operating revenue. Reconciliation - see below under Gross Profit

Gross Profit: Total operating revenue less cost of goods sold. The Group has presented this item because it considers it to be a useful measure to show Management's view on the overall picture of profit generation before operating costs in the Group's operations. Reconciliation

	03-22		03'21 YTD'22 YTD'21		FY-21
Total Operating revenue	3784	2 715	9 961	7 751	11 043
- Cost of goods sold	-3 338	-2 368	-8 765	-6 710	-9 581
= Gross Profit	447	347	1196	1041	1462
Gross Margin		11.8 % 12.8 % 12.0 % 13.4 %			13.2 %

Net Interest-Bearing Debt: Interest-bearing liabilities less cash and cash equivalents. The Group has presented this item because Management considers it to be a useful indicator of the Group's indebtedness, financial flexibility and capital structure. Reconciliation

	03-22		03'21 YTD'22	YTD'21	FY"21
Long-term loans	500	400	500	400	400
+ Bank overdraft	1844	211	1844	211	207
- Cash/cash equivalents	-85	-33	-85	-33	-41
= Net Int.Bear. Debt	2 259	579	2 259	579	566

Net Working Capital: Working capital assets, comprising inventories plus total current receivables less trade receivables from deferred payment arrangements less current lease receivables, less working capital liabilities, comprising total current liabilities less current lease liabilities less bank overdraft. Management considers it to be a useful indicator of the Group's capital efficiency in its dayto-day operational activities.

Reconciliation

	03°22	03°21	YTD'22	YTD'21	FY-21
Inventories	2 101	1074	2 101	1074	1305
Total Curr. receivables	1067	ggg	1067	ggg	1152
Deferred payment	-96	-127	-96	-127	-130
Curr. lease receivables	-12	-12	-12	-12	-12
Total curr. liabilities	-4 030	-1699	-4030	-1699	-1984
Curr. lease liabilities	175	80	175	80	80
Bank overdraft	1844	211	1844	211	207
- Net Working Capital	1047	525	1047	525	619

)perating Cost Percentage (adj.): Total operating expenses less >ost of goods sold and One-off cost as a percentage of total operating revenue. The Group has presented this item because Managenent considers it to be a useful measure of the Group's efficiency in perating activities.

leconciliation

	03.22	03°21	YTD'22	YTD'21	FY-21
Total Operating revenue	3 784	2 715	9 961	7 751	11 043
Total operating exp.	3 798	2 637	10 004	7 498	10 674
- Cost of goods sold	-3 338	-2 368	-8 765	-6 710	-0 581
- One-off cost	-4	-5	-60	-16	-19
= Total operating expenses (adj.)	457	264	1180	771	1074
Uperating Costs %	12.1 %	9.7 %	11,8 %	10.0 %	9.7 %

Operating Free Cash Flow: EBITDA excl. impact of IFRS16 less investment in property, plant and equipment, less change in Net Working Capital less change in trade receivable from deferred payment arrangements. The Group has presented this item because Management considers it to be a useful measure of the Group's operating activities' cash generation. Reconciliation

	03'22		03'21 YTD'22	YTD'21	FY"21
EBITDA excl IFRS 16	16	92	30	296	424
Investments	-29	-18	101	-42	-56
+/- Change in Net Working Capital	302	54	-429	-362	-455
+/- Change in deferred payment	6	3	33	25	22
= Operating Free Cash Flow	295	132	-265	-84	-85

Total operating expenses (adj.): Total operating expenses less cost of goods sold and One-off cost. The Group has presented this item because Management considers it to be a useful measure of the Group's efficiency in operating activities. Reconciliation - see above under Operating Cost Percentage

Komplett + NetOnNet pro forma key figures

Key figures 03 2022

	Group	Komplett	NetOnNet	Adjustment
Amounts in NOK million	03 2022	03 2022	03 2022	03 2022
Operating revenue	3784	2322	1 462
Growth (%)	-15.3%	-14.5%	-16.5%
Gross profit 1	447	246	200
Gross margin (%)1	11.8%	10.6%	13.7%
Operating expenses (ex dep and one-off)(adj.)	-383	-226	-157
Depreciation and amortisation	-74	-31	-31	-11
Total operating expenses (adj.)	-457	-257	-188	-11
Operating Cost Percentage (adj.)1	-12.1%	-11.1%	-12.9%
EBIT (adj.)1	-10	-10	12	-11
EBIT margin (adj.) (%)1	-0.3%	-0.4%	0.8%
One-off cost	-4	-4
FBIT	-14	-14	12	-11
Net financials	-29	-14	-3	-11
Profit before tax	-43	-29	9	-23
Profit before tax (%)	-1.1%	-1.2%	0.6%

Key figures Q3 2021

Pro forma Group	Komplett	NetOnNet	Adjustment
03 2021	03 2021	03 2021	03 2021
4 467	2 715	1752
10.9%	14.8%	5.4%
631	347	284
14.1%	12.8%	16.2%
-411	-232	-179
-76	-32	-33	-11
-488	-264	-212	-11
-10.9%	-9,7%	-12.1%
143	83	71	-11
3.2%	3.1%	4.1%
-5	-5
139	79	71	-11
-19	-5	-2	-12
119	74	69	-24
2.7%	2.7%	4.0%

KOMPLETT®GROUP

1 Alternative performance measure (APMs)

Komplett + NetOnNet pro forma key figures

Key figures YTD 2022

	Pro forma Group	Komplett	NetOnNet	Adjustment
Amounts in NOK million	YTD 2022	YTD 2022	YTD 2022	YTD 2022
Operating revenue	11 429	6 999	4 430
Growth (%)	-12.2%	-9.7%	-15.7%
Gross profit 1	1410	780	630
Gross margin (%)1	12.3%	11.1%	14.2%
Operating expenses (ex dep and one-off)(adj.)	-1182	-662	-520
Depreciation and amortisation	-223	-93	-95	-34
Total operating expenses (adj.)	-1 405	-756	-615	-34
Operating Cost Percentage (adj.)1	-12.3%	-10.8%	-13.9%
EBIT (adj.)1	5	25	15	-34
EBIT margin (adj.) (%)1	0.0%	0.4%	0.3%
One-off cost	-56	-56
FBIT	-51	-32	15	-34
Net financials	-78	-31	-10	-36
Profit before tax	-129	-63	5	-71
Profit before tax (%)	-1.1%	-0.9%	-0.1%

Key figures YTD 2021

Pro forma Group	Komplett	NetOnNet	Adjustment
YTD 2021	YTD 2021	YTD 2021	YTD 2021
13 010	7 751	5 258
18.2%	20.5%	14.9%
1904	1 041	862
14.6%	13.4%	16.4%
-1242	-674	-568
-231	-97	-100	-34
-1 473	-771	-668	-34
-11.3%	-10.0%	-12.7%
430	270	195	-34
5.5%	3.5%	3.7%
-16	-16
414	254	195	-34
-57	-15	-4	-37
358	239	191	-72
2.7%	3.1%	3.6%

	Group	Komplett	NetOnNet	Adjustment
Amounts in NOK million	03 2022	03 2022	03 2022	03 2022
Total operating income	3784	2 322	1 462
Cost of goods sold	-3 338	-2 076	1262
Employee benefit expenses	-223	-121	-103
Depreciation and amortisation expense	-74	-31	-31	-1-
Other operating expenses	-163	-109	-54
Total operating expenses	=5793	-2 - 57	-1450	-11
OPERATING RESULT	-14	-14	12	-11
Net finance income and expenses	-29	-14	-3	-1
PROFIT BEFORE TAX	-43	-29	9	-23
Tax expense	8	5	-2	57
PROFIT FROM CONTINUING OPERATIONS	-35	-24	7	-18
Profit/loss on discontinued operations	6	6
PROFIT FOR THE PERIOD	-29	-18	7	-18

	Pro forma Group	Komplett	NetOnNet	Adjustment
Amounts in NOK million	03 2021	03 2021	03 2021	03 2021
Total operating income	4 467	2 715	1 752
Cost of goods sold	-3 836	-2 368	-1 468
Employee benefit expenses	-246	-127	-119
Depreciation and amortisation expense	-76	-32	-33	-11
Other operating expenses	-169	-109	-60
Total operating expenses	-4 3929	-2 657/	-1631	-11
OPERATING RESULT	139	79	71	-11
Net finance income and expenses	-19	-5	-2	-12
PROFIT BEFORE TAX	119	74	69	-24
Tax expense	-23	-14	-14	5
PROFIT FOR THE PERIOD	96	60	55	-19

	Pro forma Group	Komplett	NetOnNet	Adjustment
Amounts in NOK million	YTD 2022	YTD 2022	YTD 2022	YTD 2022
Total operating income	11 429	6 999	4 430
Cost of goods sold	-10 018	-6 218	-3 800
Employee benefit expenses	-693	-355	-339
Depreciation and amortisation expense	-223	-93	-95	-34
Other operating expenses	-545	-364	-182
Total operating expenses	-11 480	-7 030	-445	-34
OPERATING RESULT	-51	-32	15	-34
Net finance income and expenses	-78	-31	-10	-36
PROFIT BEFORE TAX	=129	-63	5	-71
l ax expense	16	1		15
PROFIT FROM CONTINUING OPERATIONS	-113	-62	4	-56
Profit/loss on discontinued operations	6	6
PROFIT FOR THE PERIOD	-107/	-56	4	-56

	Pro forma Group	Komplett	NetOnNet	Adjustment
Amounts in NOK million	YTD 2021	YTD 2021	YTD 2021	YTD 2021
Total operating income	15 010	7 751	5 258
Cost of goods sold	-11 106	-6 710	-4 396
Employee benefit expenses	-728	-362	-367
Depreciation and amortisation expense	-231	-97	-100	-34
Other operating expenses	-530	-329	-201
Total operating expenses	=12595	-7 498	-5 064	-34
OPERATING RESULT	414	254	195	-34
Net finance income and expenses	-57	-15	-4	-37
PROFIT BEFORE TAX	5153	239	191	-72
l ax expense	-44	-21	-38	15
PROFIT FOR THE PERIOD	314	218	152	-56

KOMPLETT GROUP