Optiva Inc. — Management Reports 2025

Mar 25, 2025

Optiva

OPTIVA INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

YEAR ENDED DECEMBER 31, 2024

DATED: March 25, 2025

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Optiva
Management's Discussion and Analysis

SCOPE OF ANALYSIS

This Management's Discussion and Analysis ("MD&A") provides a review of the results of operations, financial condition and cash flows of Optiva Inc. (the "Company" or "Optiva") as at and for the three and twelve month period ended December 31, 2024.

The MD&A should be read in conjunction with the audited consolidated financial statements for the years ended December 31, 2024 and December 31, 2023, which we prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IFRS").

Information contained in this MD&A is based on information available to management as of March 25, 2025.

Unless otherwise indicated, all dollar amounts are expressed in U.S. Dollars. In this document, "we," "us," "our," "Company" and "Optiva" all refer to Optiva Inc. collectively with its subsidiaries.

FORWARD-LOOKING INFORMATION

All information other than statements of current and historical fact contained in this MD&A is forward-looking information (within the meaning of applicable securities laws). In certain cases, forward-looking information can be identified by the use of words such as "plans", "expects", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "believes", or variations of such words and phrases, or statements that certain actions, events or results "may", "could", "would", "might" or "will", "occur" or "be achieved", and similar words or the negative thereof. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement.

Forward-looking information in this MD&A includes, but is not limited to, the Company's beliefs regarding business trends, our customers' preferences and our ability to address their requirements, the basis for our future growth and competition in our industry. By its nature, forward-looking information is inherently uncertain, is subject to risk and is based on numerous assumptions, including those set out under the "Risks and Uncertainties" section of this MD&A, and assumptions that: the Company will continue to develop products that meet its customer's needs; that the Company will be able to implement business improvements and achieve cost savings; the Company's customers and their respective businesses will continue to perform as expected; that demand for the Company's products will remain stable; the Company will be able to retain key personnel; currency exchanges rates in the jurisdictions in which the Company operates will remain relatively consistent; and capital can be obtained at reasonable costs; as well as risks and assumptions regarding present and future business strategies, the environment in which the Company will operate in the future, expected revenues, and the Company's ability to achieve its goals. Although management of the Company believes that the expectations represented in such forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct.

The future outcomes that relate to forward-looking information may be influenced by many factors that could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking information, including, but not limited to, risks associated with: the effectiveness of, and the Company's ability to successfully

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Optiva
Management's Discussion and Analysis

implement, the Company’s strategic plan; the strength of the Company’s customers and their respective businesses and demand for the Company’s products; the impact of management and other changes on the Company’s business relationships; the Company’s solutions failing to perform as expected; cybersecurity risks, including the risk of system failures or data security breaches; geopolitical uncertainties; market developments; global pandemic; intense competition; the ability to recruit and retain personnel; currency fluctuations; the time period of the Company’s sales and product development cycles; customer credit and defaults; variances in quarterly revenue and operating results; customer concentration risks; intellectual property and infringement risks; product liability claims; transfer pricing; taxation; liquidity and financial resources; risks relating to the Debentures; dependence on sales channel partners and suppliers; and the other risk factors described under the heading “Risk Factors” in the Company’s most recent Annual Information Form. The Company cautions that such list of factors is not exhaustive, and when relying on forward-looking information to make decisions with respect to the Company, readers should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking information.

There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. Forward-looking information is provided as of the date of this MD&A or such other date specified herein, and the Company assumes no obligation to update or revise such forward-looking information to reflect new events or circumstances, except as required under applicable securities laws.

Cautionary Note Regarding Non-IFRS Measures

This MD&A makes reference to certain non-IFRS measures and operating metrics, specifically Adjusted EBITDA and Operating working capital. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Such non-IFRS measures are operating metrics used in our industry. We also include these measures because we believe certain investors use these measures and metrics as a means of assessing financial performance and that such measures highlight trends in our financial performance that may not otherwise be apparent when one relies solely on IFRS measures. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts. Non-IFRS measures should not be considered in isolation, nor as a substitute for analysis of the financial information reported under IFRS including revenue, net income, cash flows generated by operating, investing or financing activities, or other financial statement data presented in accordance with IFRS, and may not be comparable to similarly titled measures used by other companies. See Schedule I to this MD&A for a reconciliation of such measures to IFRS.

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Optiva
Management's Discussion and Analysis

FOURTH QUARTER HIGHLIGHTS

Financial Highlights¹

| Q4 Fiscal 2024 Highlights
($ US Millions, except per share information)
(Unaudited) | Three Months Ended
December 31, | | Twelve Months Ended
December 31, | |
| --- | --- | --- | --- | --- |
| | 2024 | 2023 | 2024 | 2023 |
| Revenue | 12.0 | 12.0 | 47.1 | 47.5 |
| Net Income (Loss) | (4.7) | (4.0) | (19.7) | (12.3) |
| Earnings (Loss) Per Share | ($0.75) | ($0.65) | ($3.17) | ($1.98) |
| Adjusted EBITDA(1) | (1.8) | (1.8) | (6.4) | (1.9) |
| Cash from (used in) operating activities | (2.1) | (0.9) | 0.4 | (3.2) |
| Total cash, including restricted cash | 11.1 | 20.4 | 11.1 | 20.4 |

Business Highlights

• TCV of Q4 bookings totaled $22.5 million. For the year ended December 31, 2024, TCV of bookings totaled $66.3 million.
• Omantel, the first and leading provider of integrated telecommunication and ICT services in Oman, and Optiva successfully completed a complex real-time rating and charging transformation project. Over 200 Omantel products and services across all business lines were migrated and upgraded to Optiva’s convergent charging engine, hosted on Omantel’s private cloud, enabling innovative use cases for consumers and enterprises powered by GenAI and 5G technologies.
• BH Telecom, the leading telecom operator in Bosnia and Herzegovina, signed a multi-year agreement with Optiva to upgrade Optiva Charging Engine to a cloud-native, 5G-enabled platform with enhanced monetization capabilities. The upgrade will allow BH Telecom to launch new products and services faster using Optiva's cloud-native agility, automation and Optiva Testing Framework. It will also strengthen BH Telecom's market position, empowering it to lead its market in 5G services and deliver on its commitment to enhance service quality and customer experience.
• Afghan Wireless Communication Company (AWCC), Afghanistan’s first and largest wireless communications company, signed a multi-year renewal with Optiva. The agreement includes the expansion of Optiva software to a cloud platform, which will increase AWCC's capacity to support the growing demand for its services.

¹ Adjusted EBITDA and Adjusted Earnings (Loss) Per Share are non-IFRS measures. For definitions and reconciliations of non-IFRS financial measures to their most directly comparable IFRS financial measures, see Schedule I.

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Optiva
Management's Discussion and Analysis

• A newly established greenfield telecommunications operator in sub-Saharan Africa has selected Optiva to deliver a comprehensive end-to-end digital BSS stack. The partnership will enable the operator to effectively deploy its new 5G network and launch its services to the market.
• On February 12, 2025, subsequent to quarter-end, the Company announced that its Optiva BSS Platform and Optiva Charging Engine now seamlessly incorporate agentic AI using advanced generative AI (GenAI) technology powered by Google’s Gemini models, enabling real-time insights using BigQuery and Looker. Optiva’s agentic AI-powered BSS will enable operators to achieve measurably improved outcomes by enhancing operational efficiency, cost savings, customer experience and business productivity. The agentic AI platform is already being used in digital BSS transformations by Optiva customers in the Middle East and the Americas.
• On February 14, 2024, subsequent to quarter-end, Optiva was selected as a nominee for Excellence in Data & AI Innovation by the TM Forum Excellence Awards. The nomination is for achieving significant business impact through innovative applications of AI and data capabilities in the implementation of agentic AI, large language models (LLMs) and small language model (SLMs) for intelligent telco operations and business growth.
• On February 20, 2025, subsequent to quarter-end, BT Group, the UK’s leading mobile and fixed telecommunications provider, broadened and strengthened its partnership with Optiva to implement innovative B2B and B2B2X BT network communication services using Optiva’s latest state-of-the-art Application Server. Central to the initiative is Optiva Charging Engine, the cloud-native, open-architecture service creation platform featuring Optiva’s Open API framework. The advancement will enhance BT Group’s ability to grow cutting-edge services and create new revenue opportunities

OPTIVA OVERVIEW

Optiva, which commenced operations in July 1999, is an innovative provider of cloud-native monetization and business support systems ("BSS") products on the private and public cloud to communication service providers ("CSPs") worldwide.

The Company's products and services empower CSPs to monetize on their various customer segments, including consumer, enterprise, wholesale and IoT. The Company's solutions allow the introduction of new innovative tariffs and marketing offerings, through its rating, charging and billing solutions. Coupled with complementing products such as payment solutions, policy control, wholesales billing, customer care and subscriber self-service applications, Optiva allows its customers to achieve their objectives and address their challenges, including monetization of their communication services, convergence of their service portfolio and diversification of their offering, all through improving customer experience and reduced costs.

The common shares of Optiva Inc. (TSX: OPT) are listed on the Toronto Stock Exchange (the "TSX"). The Debentures (NEO: OPT.DB.U) are listed on the NEO Exchange. For more information, visit www.optiva.com.

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Optiva
Management's Discussion and Analysis

The Company derives its revenue from three main geographic areas, namely:

1. APAC – Asia and Pacific Rim
2. Americas – North America, Latin America, and the Caribbean
3. EMEA – Europe, Middle East, and Africa

Optiva's award-winning cloud-native real-time converged charging and billing platform delivers the benefits of a flexible, end-to-end software platform, including real-time charging, rating, billing, product catalog, policy management and customer care for any digital services of a CSP. Optiva's product family supports any type of CSP from tier 1 to tier 5, in the private or public cloud, MVNOs, MVNE, MNOs and IoT. It enables a digital customer journey delivering innovative end-user services from real-time offering towards digital guide self-management of customer interaction.

Optiva supports the telecommunication industry with the following market solutions:

• Optiva BSS Platform™ – Optiva BSS Platform provides a fully managed, end-to-end digital, cloud-native BSS solution available on private and public cloud for CSPs, including MNOs, MVNEs, and MVNOs. Optiva BSS Platform is Optiva's proposition in the SaaS market. The modular, multi-tenant and unified platform allows customers to focus on their business, not on deploying and managing enterprise software. Customers can design marketing plans, onboard subscribers, and deploy their services with stability and scale. With Optiva BSS Platform, customers can run an end-to-end digital BSS stack with all of the mandatory components such as unified rating and charging, billing, customer care and self-care, product catalog, payments and voucher management, collections and settlements, and dealer care. The solution is platform agnostic and runs natively on the Google Cloud and Microsoft Azure, and is also available on an OpenShift infrastructure on a private cloud as a preferred choice.

• Optiva Charging Engine™ – Optiva's highly scalable, battle-tested, convergent charging solution is a cloud native platform for private and public cloud. Its true convergence backed by a universal data model and extensive north and south bound integrations make monetization possible for any network attribute, service and business model. This extensive monetization capability empowers a traditional telco business to drive new revenue streams. The solution is agnostic and runs natively on the Google Cloud and Microsoft Azure, and is also available on an OpenShift infrastructure on a private cloud as a preferred choice. With cloud investments, Kubernetes Engine hosted containers, and flexible customization framework, Optiva Charging Engine™ enables fast adaptation to the market with cloud-native automatic release management and new use cases with short time to market and low total cost of ownership (TCO). It enables operators to launch and monetize their 4G and 5G networks and any other line of business to deliver advanced monetization services, including Voice over LTE/VoNR, fixed line broadband, TV, machine to machine, IoT, cloud services, and OTT offerings.

• Optiva MVNO Hubs – Optiva MVNO Hubs is a unified and multi-tenant BSS -as a Service for MVNO/Es, leveraging Optiva BSS Platform hosted on Google Cloud infrastructure. The service will be pre-integrated with the major MNOs in various geographic regions and enables the accelerated launch of MVNO operations by simplifying integration complexities. Optiva MVNO Hubs supports integration with payment vendors, taxation services and a range of value added services and partner ecosystem including OTT, gaming and more. Optiva MVNO Hubs can be

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Optiva
Management's Discussion and Analysis

migrated to a customer's own Google infrastructure, providing a seamless growth path for successful MVNOs.

• Optiva Partner Monetization – Optiva Partner Monetization platform is an end-to-end partner lifecycle management platform designed to rapidly onboard and manage telco B2B2X partner ecosystems. It is a scalable cloud-native solution that includes a self-service partner portal to ensure better management for thousands of partners while controlling costs and eliminating complexity. Multi-tiered partner relationships, long account hierarchies, tree structured settlements, real-time charging, all-in-one bundles, and more are all enabled with B2B2X billing and charging lifecycles.

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Optiva
Management's Discussion and Analysis

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets out selected consolidated financial information of Optiva for the periods indicated. Each investor should read the following information in conjunction with those financial statements and related notes. The operating results for any past period are not necessarily indicative of results for any future period. The selected financial information set out below has been derived from the Company's audited consolidated financial statements.

| Consolidated Statements of Comprehensive Income (loss)
(all amounts in millions of US$, except per share amounts) | Three Months Ended | | Twelve Months Ended | |
| --- | --- | --- | --- | --- |
| | December 31, | | December 31, | |
| (unaudited) | 2024 | 2023 | 2024 | 2023 |
| Revenue | | | | |
| Support and subscription | 7.8 | 7.4 | 30.4 | 31.3 |
| Software, services and other | 4.2 | 4.7 | 16.7 | 16.2 |
| Total Revenue | 12.0 | 12.0 | 47.1 | 47.5 |
| Cost of revenue | 4.9 | 4.5 | 19.8 | 16.9 |
| Gross profit | 7.1 | 7.6 | 27.3 | 30.6 |
| Operating expenses | | | | |
| Sales and marketing | 2.2 | 2.8 | 9.5 | 10.3 |
| General and administrative | 2.7 | 3.1 | 9.9 | 7.8 |
| Research and development | 4.0 | 3.8 | 15.4 | 13.8 |
| Total Operating Expenses | 8.9 | 9.7 | 34.8 | 31.9 |
| Loss from operations | (1.8) | (2.1) | (7.6) | (1.3) |
| Foreign exchange gain (loss) | (0.1) | 0.6 | (0.4) | (0.1) |
| Other income | - | - | - | 0.5 |
| Finance income | 0.1 | 0.3 | 0.6 | 0.6 |
| Finance costs | (3.0) | (2.9) | (11.5) | (10.0) |
| Loss before income taxes | (4.8) | (4.1) | (18.9) | (10.3) |
| Income tax expense | (0.1) | (0.1) | 0.8 | 2.0 |
| Net Loss for the period | (4.7) | (4.0) | (19.7) | (12.3) |
| Loss per common share | | | | |
| Basic | $ (0.75) | $ (0.65) | $ (3.17) | $ (1.98) |
| Diluted | $ (0.75) | $ (0.65) | $ (3.17) | $ (1.98) |
| Weighted average number of common shares (millions) | | | | |
| Basic | 6.2 | 6.2 | 6.2 | 6.2 |
| Diluted | 6.2 | 6.2 | 6.2 | 6.2 |

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Optiva

Management's Discussion and Analysis

Statement of Financial Position Data	As at December 31,		As at December 31,
$US Millions (unaudited)	2024	2023	$ Change	% Change
Cash, Cash Equivalents and Restricted Cash	11.1	20.4	(9.3)	(46%)
Trade Accounts, Other Receivables and Unbilled Revenue	16.9	22.6	(5.7)	(25%)
Goodwill and Intangible Assets	32.3	32.3	0.0	0%
Total Assets	70.1	84.3	(14.2)	(17%)
Trade Payable and Accrued Liabilities	16.2	14.2	2.0	14%
Deferred Revenue	2.8	1.8	1.0	56%
Other long-term liabilities	1.9	2.0	(0.1)	(6%)
Debentures	102.7	101.3	1.4	1%
Total Liabilities	126.9	123.6	3.3	3%
Shareholders’ Deficit	(56.7)	(39.3)	(17.4)	44%

CURRENT PERIOD OPERATING RESULTS

Revenue

The following tables set forth the Company's revenues by type and as a percentage of total revenue for the periods indicated:

$US Millions	Three Months Ended		Twelve Months Ended
	December 31,		December 31,
(unaudited)	2024	2023	2024	2023
Support and Subscription	7.8	7.4	30.4	31.3
Software and Services	4.1	4.5	16.0	15.8
Third Party Software and Hardware	0.1	0.1	0.7	0.4
Total	12.0	12.0	47.1	47.5
Percentage of Total Revenue	Three Months Ended		Twelve Months Ended
---	---	---	---	---
	December 31,		December 31,
(unaudited)	2024	2023	2024	2023
Support and Subscription	65%	61%	65%	66%
Software and Services	34%	37%	34%	33%
Third Party Software and Hardware	1%	1%	1%	1%
Total	100%	100%	100%	100%
Change
---	---
Quarter	YTD
$	$
0.4	(0.9)
(0.4)	0.2
(0.0)	0.3
(0.0)	(0.4)

The Company recognizes revenue from the sale of software licenses, including initial perpetual licenses, term licenses, capacity increases and/or upgrades, professional services, third-party hardware and software components and customer support contracts.

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Optiva
Management's Discussion and Analysis

Support and Subscription Revenue

Support and subscription revenue consists of revenue from our customer support and maintenance contracts and term-based software licensing. The term of these agreements typically commences on successful completion of acceptance testing of the software deployment, with customers initially entering into these contracts for a period of one or more years and then renewing for similar periods thereafter.

Support and subscription revenue for the three-month period ended December 31, 2024, was $7.8 million, or 65% of total revenue, compared to $7.4 million, or 61% of total revenue, for the same period last year. The increase in support and subscription in the period mainly relates to the support revenue from new customers in the Americas. For the year ended December 31, 2024, the Company's support and subscription decreased to $30.4 million, or 65% of total revenue, compared to $31.3 million or 66% of total revenue for the same period last year. The decrease in support and subscription revenue compared to last year is mainly due to the discontinuation of support to customers who had previously notified us of their exit partially offset by support revenue from new customers.

Software and Services Revenue

Software and services revenue consists of fees earned from the on-premise licensing, except for term-based licenses, which are recorded as subscription, and deployment of software products to our customers as well as the revenues resulting from consulting and training service contracts related to the software products.

Software and services revenue for the three-month period ended December 31, 2024, decreased to $4.1 million, or 34% of total revenue, compared to $4.5 million, or 37% of total revenue for the same period last year. The decrease in the period mainly relates to fewer software implementations mainly in the EMEA region. For the year ended December 31, 2024, the Company's software and services revenue was $16.0 million, or 34% of total revenue, compared to $15.8 million, or 33% of total revenue for the same period last year. The increase in software and services revenue compared to last year is mainly due to higher number of software implementations on existing and new customers, mainly in the EMEA region slightly offset by lower implementation revenue in Americas, compared to the prior period.

Third-Party Software and Hardware Revenue

Third-party software and hardware revenue consist of revenue from the sale of other vendors' software and hardware components as part of Optiva's solutions, including server platforms, database software and other ancillary components.

Third-party software and hardware revenue for the three-month period ended December 31, 2024 was $0.1 million compared to $0.1 million for the same period last year. For the year ended December 31, 2024, the Company's third party software and hardware revenue was $0.7 million, compared to $0.4 million, for the same period last year. Management continues its initiative to minimize the sale of third-party software and hardware components, which have minimal contribution to overall profitability.

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Optiva
Management's Discussion and Analysis

Revenue by Geography

Revenue is attributed to geographic locations based on the location of the customer. The following tables set forth revenues by main geographic area and as a percentage of total revenue for the periods indicated:

| $US Millions
(unaudited) | Three Months Ended
December 31, | | Twelve Months Ended
December 31, | | Change between Periods | |
| --- | --- | --- | --- | --- | --- | --- |
| | 2024 | 2023 | 2024 | 2023 | Quarter
$ | YTD
$ |
| Asia and Pacific Rim | 1.8 | 1.8 | 6.9 | 7.4 | (0.0) | (0.5) |
| North America, Latin America and Caribbean | 5.0 | 4.3 | 17.6 | 17.0 | 0.7 | 0.6 |
| Europe, Middle East and Africa | 5.2 | 5.9 | 22.6 | 23.1 | (0.7) | (0.5) |
| Total | 12.0 | 12.0 | 47.1 | 47.5 | (0.0) | (0.4) |
| Percentage of Total Revenue
(unaudited) | Three Months Ended
December 31, | | Twelve Months Ended
December 31, | |
| --- | --- | --- | --- | --- |
| | 2024 | 2023 | 2024 | 2023 |
| Asia and Pacific Rim | 15% | 15% | 15% | 15% |
| North America, Latin America and Caribbean | 41% | 36% | 37% | 36% |
| Europe, Middle East and Africa | 44% | 49% | 48% | 49% |
| Total | 100% | 100% | 100% | 100% |

For the three-month period ended December 31, 2024, revenue from the APAC region was $1.8 million, or 15% of total revenue, compared to $1.8 million, or 15% of total revenue, for the same comparable period. For the year ended December 31, 2024, revenue from the APAC region was $6.9 million, or 15% of total revenue, compared to $7.4 million, or 15% of total revenue, for the same comparable period. This decrease is mainly a result of lower support and subscription revenue in the region offset by higher software revenue from software implementation.

For the three-month period ended December 31, 2024, revenue from the Americas region increased to $5.0 million, or 41% of total revenue, compared to $4.3 million, or 36% of total revenue, for the same comparable period. For the year ended December 31, 2024, revenue from the Americas region increased to $17.6 million, or 37% of total revenue, compared to $17.0 million, or 36% of total revenue, for the same comparable period. The increase is mainly due to higher support revenue partially offset by decrease in software license revenue.

For the three-month period ended December 31, 2024, revenue from the EMEA region decreased to $5.2 million, or 44% of total revenue, compared to $5.9 million, or 49% of total revenue, for the same comparable period. For the year ended December 31, 2024, revenue from the EMEA region decreased to $22.6 million, or 48% of total revenue, compared to $23.1 million, or 49% of total revenue, for the same comparable period. The decrease in revenue during the three and twelve months ended December 31, 2024, is mainly a result of lower support revenue due to the loss of certain customers partially offset by higher software and services revenue from new customers.

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Optiva
Management's Discussion and Analysis

Cost of Revenue and Gross Margin

Cost of revenue consists of cross-functional personnel costs providing professional services to implement and provide post-sales technical support for our solutions, and the costs of third party hardware and software components sold as part of Optiva’s solutions. In addition, cost of revenue includes an allocation of certain direct and indirect costs attributable to these activities. Personnel levels are determined based on expected revenue and support demand levels; therefore, gross margin as a percentage of revenue can vary significantly from quarter to quarter.

For the three months ended December 31, 2024, cost of revenue increased to $4.9 million, compared to $4.5 million incurred for the same period last year. The gross margin for the quarter decreased to 59% in the three months ended December 31, 2024, compared to 63% in the three months ended December 31, 2023. For the year ended December 31, 2024, cost of revenue increased to $19.8 million from $16.9 million incurred for the same comparable period. The gross margin has decreased to 58% for the year ended December 31, 2024 compared to 64% for the year ended December 31, 2023. The increase in cost of revenue is primarily due to higher implementation activity for new and existing customers. The gross margin is lower mainly due to customizations with lower margins ordered by customers that required fulfillment, compared to the previous period. We expect our gross margins may fluctuate as our cloud-native model and product capabilities are adopted by new and existing customers in the public or private cloud in future periods.

Operating Expenses

Total operating expenses in the three months ended December 31, 2024, decreased to $8.9 million as compared to $9.7 million in the same period last year. Excluding depreciation and amortization costs and share-based compensation, total operating costs in the quarter ended December 31, 2024, decreased to $9.0 million, or 75% of total revenue, compared to $9.4 million, or 78% of total revenue, for the same period last year. The decrease in overall operating expenses (excluding depreciation and amortization costs and share-based compensation) is mainly attributable to lower sales and marketing costs, marginally lower general and administrative costs, offset by higher R&D cost, as further explained below.

Total operating expenses in the year ended December 31, 2024, increased to $34.8 million as compared to $31.9 million in the year ended December 31, 2023. Excluding depreciation and amortization costs and share-based compensation, total operating costs in the year ended December 31, 2024, increased to $33.8 million, or 72% of total revenue, compared to $32.5 million, or 68% of total revenue, for the year ended December 31, 2023. The increase in overall operating expenses (excluding depreciation and amortization costs and share-based compensation) is mainly attributable to higher general and administrative costs and higher R&D cost, offset by lower sales and marketing costs, as further explained below.

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Optiva
Management's Discussion and Analysis

The following tables set forth total operating expenses by function and as a percentage of total revenue for the periods indicated:

$US Millions	Three Months Ended		Twelve Months Ended
	December 31,		December 31,
(unaudited)	2024	2023	2024	2023
Sales and Marketing	2.2	2.8	9.5	10.3
General and Administrative	2.7	3.1	9.9	7.8
Research and Development	4.0	3.8	15.4	13.8
Total Operating Expenses	8.9	9.7	34.8	31.9
Excluding Depreciation, amortization and share-based compensation	9.0	9.4	33.8	32.5
Percentage of Total Revenue (unaudited)	Three Months Ended December 31,		Twelve Months Ended December 31,
---	---	---	---	---
	2024	2023	2024	2023
Sales and Marketing	18%	23%	20%	22%
General and Administrative	23%	26%	21%	16%
Research and Development	33%	31%	33%	29%
Total Operating Expenses	74%	80%	74%	67%
Excluding Depreciation, amortization and share-based compensation	75%	78%	72%	68%

Sales and Marketing Expenses

Sales and Marketing (“S&M”) expenses consist primarily of salaries, variable compensation costs and other personnel costs, travel, advertising, marketing and conference costs, plus the allocation of certain overhead costs to support the Company’s sales and marketing activities.

For the three-month period ended December 31, 2024, S&M expenditures decreased to $2.2 million, or 18% of total revenue, compared to $2.8 million, or 23% of total revenue, compared to the same period last year. For the year ended December 31, 2024, S&M expenditures decreased to $9.5 million, or 20% of total revenue, compared to $10.3 million, or 22% of total revenue, for the comparable period. The decrease in S&M expenditures is mainly due to lower headcount related costs and lower marketing costs.

General and Administrative Expenses

General and administrative (“G&A”) expenses include personnel costs, professional fees, depreciation and share-based compensation costs associated with the Company’s corporate leadership, compliance and support activities such as finance, human resources, information technology, legal and tax.

For the three-month period ended December 31, 2024, G&A expenditures decreased to $2.7 million or 23% of total revenue, from $3.1 million, or 26% of total revenue, compared to the same comparative period. Excluding the share-based compensation, amortization and depreciation, G&A expenses were at $3.0 million or 25% of total revenue for the three months ended December 31, 2024 compared to $3.0

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Optiva
Management's Discussion and Analysis

million or 25% of total revenue in the same comparable period. The higher compensation related costs were offset by lower professional fees related to ongoing tax audits.

For the year ended December 31, 2024, G&A expenditures increased to $9.9 million, or 21% of total revenue, from $7.8 million, or 16% of total revenue, compared to the same comparative period. Excluding share-based compensation, amortization and depreciation, G&A expenses have increased to $9.7 million or 21% of total revenue for the year ended December 31, 2024 compared to $9.4 million or 20% of total revenue in the same comparable period. The increase in G&A expenditures in the twelve months ended December 31, 2024 is mainly due to higher professional fees offset by lower legal fees.

Research and Development Expenses

R&D expenses consist primarily of personnel costs associated with product management, code optimization and the development and testing of new products and features. The Company continues to invest in its product roadmap through expanding its R&D team and working with other strategic partners to enhance its R&D activities.

For the three-month period ended December 31, 2024, R&D expenditures increased to $4.0 million, or 33% of total revenue, from $3.8 million, or 31% of total revenue, as compared to the same comparative period. For the year ended December 31, 2024, R&D expenditures increased to $15.4 million, or 33% of total revenue, from $13.8 million, or 29% of total revenue, as compared to the same comparative period. The increase is primarily associated with key investments in R&D resources and roadmap commitments.

The Company's spend on R&D activities, including those on account of cloud innovation, is discretionary in nature. Consequently, the R&D spend is generally expected to vary by quarter, and sometimes this variation can be significant.

Foreign Exchange Gain/Loss

We operate internationally and have foreign currency risks related to our revenue, operating expenses, monetary assets, monetary liabilities and cash denominated in currencies other than the U.S. Dollar, which is our functional currency. Consequently, movements in the foreign currencies in which we transact have and could significantly affect current and future net earnings. Currently, we do not use derivative instruments to hedge such currency risks.

The Company has monetary assets and liabilities in a number of currencies, the most significant of which are denominated in Euro and the Canadian Dollar. For the three months ended December 31, 2024, the Company had a foreign currency exchange loss of $0.1 million, compared to exchange gain of $0.6 million in the comparable period. For the year ended December 31, 2024, the Company had a foreign currency exchange loss of $0.4 million, compared to exchange loss of $0.1 million in the comparable period. The increase in foreign currency exchange loss is attributed mainly to the strengthening of the U.S. Dollar against the Euro and the Canadian Dollar.

A change in foreign exchange rates as at December 31, 2024, of 10% would result in a gain or loss of approximately $0.2 million arising from the translation of the Company's foreign currency-denominated monetary assets and liabilities as at December 31, 2024. This foreign currency gain or loss arising from

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Management's Discussion and Analysis

translation would be recorded in the consolidated statements of comprehensive income in the period realized.

Income Taxes

The Company's operations are global, and the income tax provision is determined in each of the jurisdictions in which the Company conducts its business. The Company's current income tax expense for the year ended December 31, 2024 of $1.0 million (compared to $2.2 million in 2023) mainly includes recovery of $0.1 million (compared to an expense of $0.3 million in 2023) of corporate tax incurred by foreign subsidiaries generating taxable profits and $1.1 million (compared to $1.9 million in 2023) of foreign withholding taxes. The Company's deferred tax recovery of $0.2 million (compared to a recovery of $0.3 million in 2023) consists primarily of changes in temporary differences recognized during the current period.

The income tax expense relating to foreign subsidiaries that are virtually inactive may vary in future quarters as tax audits for previous years are brought to their conclusion, and there is a risk that such assessments may exceed the provision that the Company is carrying, resulting in additional income tax charges.

Net income (loss)

Net loss for the three months ended December 31, 2024 was $4.7 million, compared to a net loss of $4.0 million in the same period in 2023. Net loss for the year ended December 31, 2024 was $19.7 million, compared to a net loss of $12.3 million for the year ended December 31, 2023. The net loss for the year ended December 31, 2024 was higher mainly due to the lower revenue, lower gross margin and higher operating expenses as discussed above.

Adjusted EBITDA

Adjusted EBITDA² loss for three months ended December 31, 2024 amounted to $1.8 million as compared to Adjusted EBITDA loss of $1.8 million during the same period in 2023. Adjusted EBITDA loss for the year ended December 31, 2024, amounted to $6.4 million as compared to Adjusted EBITDA loss of $1.9 million for year ended December 31, 2023. The lower Adjusted EBITDA for the year ended December 31, 2024 is mainly due to lower revenue and higher operating costs as discussed above.

² Adjusted EBITDA is a non-IFRS measure. For definitions and reconciliations of non-IFRS financial measures to their most directly comparable IFRS financial measures, see Schedule I.

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Management's Discussion and Analysis

SUMMARY OF EARNINGS RESULTS

All financial results are in thousands, unless otherwise stated, with the exception of per share amounts, and have been prepared in accordance with IFRS. The table below provides summarized information for our eight most recently completed quarters:

$US Millions, except share and per share amounts (Unaudited)	4Q 24	3Q 24	2Q 24	1Q 24	4Q 23	3Q 23	2Q 23	1Q 23
Revenue	12.0	12.0	11.4	11.7	12.0	11.7	11.1	12.7
Net Income (loss)	(4.7)	(3.4)	(5.6)	(6.0)	(4.0)	(4.2)	(1.3)	(2.8)
Earnings (loss) per Share	$(0.76)	$(0.54)	$(0.90)	$(0.98)	$(0.65)	$(0.68)	$(0.21)	$(0.45)
Diluted Earnings (loss) per Share	$(0.76)	$(0.54)	$(0.90)	$(0.98)	$(0.65)	$(0.68)	$(0.21)	$(0.45)
Weighted average shares outstanding - Basic (thousands)	6.2	6.2	6.2	6.2	6.2	6.2	6.2	6.2
Weighted average shares outstanding - Diluted (thousands)	6.2	6.2	6.2	6.2	6.2	6.2	6.2	6.2

Revenue in the three months ended December 31, 2024 remained the same compared to the quarter ended September 30, 2024. Revenue in the three months ended September 30, 2024 increased from the previous quarter mainly due to increase in support and subscription revenue. Revenue in three months ended June 30, 2024 and March 31, 2024 decreased from the previous quarter due to decrease in Software and Services revenue. Revenue in the quarter ended December 31, 2023 increased from the previous quarter due to higher Software and Services revenue. Revenue for the quarter ended September 30, 2023 increased from the previous quarter due to higher implementations and higher support and subscription revenue. Revenue for the quarters ended June 30, 2023 and March 31, 2023 were lower than the previous quarters due to fewer implementations resulting in lower software and services revenue and due to certain customer losses resulting in lower support and subscriptions revenue. The net loss for the three months ended December 31, 2024 was higher compared to last year due to higher operating costs. The net loss for the three months ended September 30, 2024 was lower than the previous quarter due to higher revenue and lower operating costs. The net loss for the quarter ended June 30, 2024 was marginally lower than the previous quarter as a result of lower operating costs offset by lower revenue. The net loss for the quarter ended March 31, 2024 was higher than the previous quarter mainly as a result of higher operating costs and a foreign exchange loss. The net loss for the quarter ended December 31, 2023 was lower than the previous quarter as a result of foreign exchange gains, a recovery of income taxes partially offset by a provision of $1.1 million with respect to unbilled revenue. The net loss for the quarter ended September 30, 2023 was higher compared to the previous quarter mainly due to lower share-based compensation resulting from the reversal of unvested forfeited awards in the previous quarter. The net loss in the quarter ended June 30, 2023 was lower than the previous quarter due to lower share-based compensation offset by lower revenue. The net loss in the quarter ended March 31, 2023 was higher than the previous quarter due to lower revenue that was slightly offset by lower costs in the prior quarter.

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Management's Discussion and Analysis

LIQUIDITY AND CAPITAL RESOURCES

The Company’s objective in managing capital resources is to ensure sufficient liquidity to drive its organic growth, fund operations and implement its strategic plan, while managing financial risk. The Company currently funds its operations and capital expenditure requirements through its cash and cash flows generated by operating activities, proceeds from the issuance of equity instruments (including common shares, warrants and preferred shares), proceeds from the issuance of debentures and cash on hand.

Key Balance Sheet Amounts and Liquidity Ratios	As at December 31,	As at December 31,	$ Change	% Change
$US Millions, except ratios and metrics (unaudited)	2024	2023
Cash, Cash Equivalents and Restricted Cash	11.1	20.4	(9.3)	(46%)
Trade Accounts Receivable	6.3	6.4	(0.1)	(2%)
Operating Working capital	(105.0)	8.2	(113.2)	(1388%)
Days sales outstanding in trade accounts receivable (days)	49.2	42.6	6.6	15%
Days sales outstanding in unbilled revenue (days)	96.0	127.7	(31.7)	(25%)

The Company uses operating working capital³, days sales outstanding ("DSO") in trade accounts receivable and DSO in unbilled revenue as measures to enhance comparisons between periods. Management believes these DSO measures to be important indicators of the Company’s ability to convert trade receivables and unbilled revenue into cash. A lower DSO indicates a more efficient cash collection process and delivery and customer acceptance process. These terms do not have a standardized meaning under IFRS and are unlikely to be comparable to similarly titled measures reported by other issuers. The calculation of each of these items is more fully described below.

DSO - The Company has calculated DSO based on annualized revenue and the average of the beginning and ending accounts receivable balance for the three-month period being reported.

DSO in unbilled revenue - The Company has calculated DSO in unbilled revenue based on annualized revenue and the average of the beginning and ending unbilled revenue balance for the three-month period being reported.

Cash and restricted cash decreased by $9.3 million to $11.1 million at December 31, 2024, compared to December 31, 2023. This was mainly as a result of interest payment on debentures offset by higher collections. The Company generated $0.4 million of cash from operating activities in the year ended December 31, 2024.

Operating working capital³ represents the Company’s current assets less its current liabilities, excluding cash and cash equivalents. The Company’s operating working capital balance decreased by $113.2 million to a deficit of $105.0 million at December 31, 2024, from $8.2 million at December 31, 2023. The operating working capital deficit was mainly due to reclassification of debentures from non-current to current liabilities. The Debentures in the amount of $103.5 million as at December 31, 2024, has a

³ Operating working capital is a non-IFRS measure. For definitions and reconciliations of non-IFRS financial measures to their most directly comparable IFRS financial measures, see Schedule I.

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Management's Discussion and Analysis

maturity date of July 20, 2025. Please see further discussion in the “Risks and Uncertainties” section below. The rest of the decrease in the operating working capital mainly related to decrease in unbilled revenue, income taxes receivable, increase in accrued liabilities and increase in deferred revenue.

The table below outlines a summary of cash inflows (outflows) by activity.

| Statement of Cash Flows Summary
($ US Millions)
(Unaudited) | Three months ended
December 31, | | Twelve Months Ended
December 31, | |
| --- | --- | --- | --- | --- |
| | 2024 | 2023 | 2024 | 2023 |
| Cash inflows and (outflows) by activity: | | | | |
| Operating activities | (2.1) | (0.9) | 0.4 | (3.2) |
| Investing activities | (0.3) | (0.2) | (0.4) | 0.8 |
| Financing activities | - | - | (10.1) | 3.9 |
| Effect of FX changes on cash and cash equivalents | 0.3 | (0.2) | 0.7 | (0.2) |
| Net cash inflows (outflows) | (2.1) | (1.3) | (9.4) | 1.3 |
| Cash and cash equivalents, beginning of period | 12.3 | 20.9 | 19.6 | 18.4 |
| Cash and cash equivalents, end of period | 10.2 | 19.6 | 10.2 | 19.6 |
| Cash (including Restricted Cash), end of period | 11.1 | 20.4 | 11.1 | 20.4 |

Cash From (Used for) Operating Activities

Net cash used in operating activities was $2.1 million in the three months ended December 31, 2024, compared to cash used of $0.9 million in the same period last year. Cash used in operating activities in the three months ended December 31, 2024, mainly related to operating loss and cash used in working. Cash used in operating activities in the three months ended December 31, 2023, mainly related to the operating loss and taxes paid, offset by cash generated from working capital.

Net cash generated by operating activities was $0.4 million in the year ended December 31, 2024, compared to cash used of $3.2 million in the same period last year. Cash generated by operating activities in the year ended December 31, 2024, mainly related to cash generated from working capital and tax refunds received, offset by operating loss. Cash used by operating activities in the year ended December 31, 2023, mainly related to payment of taxes and operating loss, offset by cash generated from working capital.

Cash From (Used for) Investing Activities

In the three months ended December 31, 2024, cash used in investing activities was $0.3 million, compared to $0.2 million during the same period in fiscal 2023. The use of cash in three months ended December 31, 2024 mainly related to increase in restricted cash. In the year ended December 31, 2024, there was $0.4 million of cash used in investing activities, compared to cash generated of $0.8 million during the same period in 2023. The use of cash in the year ended December 31, 2024 mainly related to purchase of property and equipment. The cash generated in the year ended December 31, 2023 related to decrease in restricted cash offset by purchase of property and equipment.

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Management's Discussion and Analysis

Cash From (Used for) Financing Activities

There were no cash activities from financing activities for the three months ended December 31, 2024, and the same period in 2023. In the year ended December 31, 2024, cash used in financing activities was $10.1 million compared to cash generated of $3.9 million in the same period last year. The use of cash in the year ended December 31, 2024 related to interest paid on the debentures. The source of cash for the year ended December 31, 2023 related to issue of new debentures, offset by payment of interest on debentures.

MANAGEMENT OF CAPITAL

The Company's objective in managing capital is to ensure sufficient liquidity to organically grow revenue, increase cash flow and create shareholder value by delivering innovative and market-leading products, while managing financial risk. The Company's primary uses of capital are financing its operations, increases in working capital, and capital expenditures. The Company currently funds these requirements from cash flows from operations and cash raised through past debt issuance. The Company's outstanding debentures are due in July 2025 are classified as current liability as at December 31, 2024. The Company's board of directors has formed a Special Committee that is in active discussions with key note holders regarding refinancing options. The Company's ability to continue its operations is dependent upon its ability to refinance this debt or implement other financial alternatives including other sources of financing through debt or equity, however there is no assurance that this will be successful.

OUTSTANDING SHARE DATA

The number of common shares outstanding as at March 25, 2025, is 6,212,992 (December 31, 2023 – 6,180,335). In addition, at December 31, 2024, there were 130,000 (December 31, 2023 – 130,000) stock options outstanding with exercise prices ranging from CAD $23.74 to CAD $32.45 per share.

COMMITMENTS, CONTRACTUAL OBLIGATIONS AND CONTINGENT LIABILITIES

Commitments

At December 31, 2024, the Company had various lease payments and purchase commitments in normal course of operations. Below is a summary of future minimum payments for contractual obligations that are not recognized as liabilities at December 31, 2024:

	$ (millions)
Less than 1 year	4.7
Between 1 and 5 years	2.9
More than 5 years	–
	7.6

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Management's Discussion and Analysis

RELATED PARTY TRANSACTIONS

Key Management Personnel

The aggregate remuneration of key management personnel during the years ended December 31, 2024 and 2023 is as follows:

$US Millions	2024	2023
Salaries and employee benefits	$ 3.3	$ 3.3
Share-based compensation (a)	0.6	(0.2)
	$ 3.9	$ 3.1

(a) Share-based compensation includes cash-settled and equity-settled awards

FINANCIAL INSTRUMENTS AND CAPITAL MANAGEMENT

Fair values

The Company adopts a three-level fair value hierarchy that reflects the significance of the inputs used to measure fair value. The three levels of the fair value hierarchy based on the reliability of inputs are as follows:

• Level 1 - quoted prices (unadjusted) in active markets for identical financial assets or financial liabilities;
• Level 2 - inputs other than quoted prices included in Level 1 that are observable for the financial asset or financial liability, either directly (i.e. prices) or indirectly (i.e. derived from prices); and
• Level 3 - inputs for the financial asset or financial liability that are not based on observable market data (i.e. unobservable inputs that represent the Company's own judgments about what assumptions market place participants would use in pricing the asset or liability developed, based on the best information available in the circumstances).

There were no transfers of financial assets between levels during the fiscal periods ended December 31, 2024 and 2023

The Company's financial instruments are classified as financial assets and financial liabilities at fair value through profit or loss or as financial assets and financial liabilities measured at amortized cost.

The carrying values of cash and cash equivalents, restricted cash, trade accounts and other receivables, trade payables, accrued liabilities, provisions and other liabilities approximate fair values because of the

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Management's Discussion and Analysis

short-term nature of these financial instruments. The carrying value of debentures approximate their fair values because the interest rates approximate the market interest rates for similar debts.

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. The estimates are subjective in nature and involve uncertainties and matters of judgment.

Financial Risk Management

The Board has the overall responsibility and oversight of the Company's risk management practices. The Company does not follow a specific risk model, but rather includes risk management analysis in all levels of strategic and operational planning. The Company's management, specifically the Senior Leadership Team, is responsible for developing and monitoring the Company's risk strategy. The Company's management reports regularly to the Board on its activities.

The Company's management identifies and analyzes the risks faced by the Company. Risk management strategy and risk limits are reviewed regularly to reflect changes in the market conditions and Company's activities. The Company's management aims to develop and implement a risk strategy that is consistent with the Company's corporate objectives.

The Company has exposure to the following risks from its use of financial instruments:

• Credit risk
• Liquidity risk
• Market risk

Credit risk:

Credit risk arises from the potential that a counterparty will fail to perform its obligations. The Company is exposed to credit risk from banks and customers.

The Company has credit risk relating to cash and cash equivalents and restricted cash, which it manages by dealing with large chartered Canadian and international banks and investing in highly liquid investments of a rating of no less than R1, the credit rating assigned to those who pay on time.

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Management's Discussion and Analysis

The Company's exposure to credit risk geographically for cash and cash equivalents and restricted cash as at December 31, 2024 and 2023 was as follows:

	2024	2023
Europe, Middle East and Africa	32%	22%
North America, Latin America and Caribbean	57%	73%
Asia and Pacific Rim	11%	5%
	100%	100%

There was no customer concentration (accounting for greater than 10% of revenue) for the year ended December 31, 2024 (one customer for year ended December 31, 2023). In order to minimize the risk of loss for trade receivables, the Company's extension of credit to customers involves review and approval by senior management, as well as progress payments as contracts are performed. The Company also insures accounts receivable balances in certain countries.

Credit reviews take into account the counterparty's financial position, past experience and other factors. Management regularly monitors customer credit limits. The Company believes that the concentration of credit risk from trade receivables is limited, as they are widely distributed among customers in various countries.

The Company reviews its trade receivable accounts regularly and reduces amounts to their expected realizable values by making an allowance for doubtful accounts as soon as the account is perceived not to be fully collectible.

Allowance for doubtful accounts is charged to general and administrative expenses. Estimates for allowance for doubtful accounts are determined on a customer-by-customer evaluation of collectability at each consolidated statement of financial position reporting date, taking into account the amounts that are past due and any available relevant information on the customers' liquidity and going concern risks.

The Company's exposure to credit risk for trade receivables by geographic area as at December 31, 2024 and 2023 was as follows:

	2024	2023
Europe, Middle East and Africa	59%	59%
North America, Latin America and Caribbean	32%	28%
Asia and Pacific Rim	9%	13%
	100%	100%

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Management's Discussion and Analysis

Liquidity risk:

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities. The Company's financial liabilities as at December 31, 2024 will mature as follows:

US$ Millions	Less than 1 year	1 to 2 years	2 years and thereafter
Trade payables	$ 1.9	$ –	$ –
Accrued liabilities	14.2	–	–
Other liabilities	–	–	1.8
Debentures	103.5	–	–
	$ 119.6	$ –	$ 1.8

The Company also has contractual obligations in the form of operating leases and certain purchase commitments.

Management does not believe the Company's existing cash and cash equivalents, restricted cash and cash from operating activities will be adequate to support all of its financial liabilities and contractual commitments as they become due. Please see further discussion in the "Risks and Uncertainties" section below.

The Company operates in a number of jurisdictions, some of which impose currency remittance restrictions and income tax withholdings, which impacts the timing and amount of cash which can be repatriated from these countries.

Market risk:

Market risk is the risk that the value of the Company's financial instruments will fluctuate due to changes in the market risk factors. The market risk factors which affect the Company are foreign currency and interest rates.

(a) Foreign currency risk:

The Company conducts a significant portion of its business activities in foreign countries. Foreign currency risk arises because of fluctuations in foreign currency exchange rates. The Company's objective in managing its foreign currency risk is to minimize its net exposures to foreign currency cash flows by converting foreign-denominated cash balances into U.S. dollars to the extent practical to match U.S. dollar obligations. The monetary assets and liabilities that are denominated in foreign currencies are affected by changes in the exchange rate between the U.S. dollar and these foreign currencies. The Company recognized a foreign currency exchange

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Management's Discussion and Analysis

loss of $0.4 million during the year ended December 31, 2024 (year ended December 31, 2023 – loss of $0.1 million).

If a shift in foreign currency exchange rates of 10% were to occur, the foreign currency exchange gain or loss on the Company's net monetary assets could change by approximately $0.3 million (2023 - $0.1 million) due to the fluctuation and this would be recorded in the consolidated statements of comprehensive loss.

(b) Interest rate risk:

Interest rate risk arises because of the fluctuation in interest rates. The Company is subject to interest rate risk on its cash and cash equivalents, and restricted cash. If a shift in interest rates of 10% were to occur, the impact on cash and cash equivalents and restricted cash and the related income for the year ended December 31, 2024 would not be material.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING ("ICFR")

Disclosure controls and procedures within the Company have been designed to provide reasonable assurance that all relevant information is identified and passed to its Disclosure Committee to ensure appropriate and timely decisions are made regarding public disclosure.

Internal controls over financial reporting have been designed by management, with the participation of the Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), to provide reasonable assurance regarding the reliability of the Company's financial reporting and its preparation of financial statements for external purposes in accordance with IFRS. The control framework used to design the Company's internal control over financial reporting is the "Internal Control – Integrated Framework (2013)" published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

The CEO and CFO have evaluated, or caused to be evaluated under their supervision, the effectiveness of the Company's internal control over financial reporting and based on this assessment have concluded that the Company's internal control over financial reporting is effective as of December 31, 2024.

There have been no changes to the Company's internal controls over financial reporting during the three and twelve months ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements and application of IFRS often involve management's judgment and the use of estimates and assumptions deemed to be reasonable at the time they are made. The Company reviews estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the year in which the estimates are revised and may impact future years as well. Other results may be derived with different judgments or using different assumptions or estimates

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Management's Discussion and Analysis

and events may occur that could require a material adjustment. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Estimates are based on historical experience and other assumptions that are considered reasonable in the circumstances. The actual amount or values may vary in certain instances from the assumptions and estimates made. Changes will be recorded, with corresponding effect in profit or loss, when, and if, better information is obtained.

Our significant accounting policies are fully described in Note 2 to our financial statements for the years ended December 31, 2024 and 2023 which are available on SEDAR (www.sedar.com). Certain accounting policies are particularly important to the reporting of our financial position and results of operations, and require the application of significant judgment by our management. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different, estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could have a material impact on the financial statements. We believe that there have been no significant changes in our critical accounting estimates for the year ended December 31, 2024.

Revenue Recognition

The Company’s accounting policy under IFRS 15, adopted effective October 1, 2018, is as follows:

General

The Company's revenue is derived primarily from licensing of software products under non-cancellable license agreements, the provision of related professional services (including installation, integration and training) and post-contract customer support ("PCS"). In certain cases, the Company also provides customers with hardware in conjunction with its software offerings. Revenue comprises the fair value of consideration received or receivable from the sale or license of products or the provision of services in the ordinary course of business, net of discounts and sales taxes. Out-of-pocket expenses that are contractually reimbursable from customers are recorded as gross revenue and expenses.

Arrangements with multiple performance obligations

The Company enters into arrangements that contain separately identifiable components, which may include any combination of software, services, PCS and/or hardware.

Where multiple transactions or contracts are linked, such that the individual transactions have no commercial effect on their own, the transactions are evaluated as a combined customer arrangement for purposes of revenue recognition. When two or more revenue-generating activities or deliverables are sold under an arrangement, each deliverable that is considered a separate component is accounted for separately. A deliverable is separately accounted for when a delivered item has standalone value from undelivered items based on the substance of the arrangement. When services are essential to the functionality of the software, the software does not have standalone value and is combined with the essential services as a single component.

Where an arrangement includes multiple components, revenue is allocated to the different components based on their relative fair values or the residual method, as applicable. The Company generally uses optional stated renewal rates to evidence fair value of undelivered term-license/PCS services when the

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Management's Discussion and Analysis

renewal fees and terms are substantive. When stated renewal rates do not exist for an arrangement, the Company considers fees charged on standalone PCS renewals in other similar arrangements to establish fair value. The Company typically evidences fair value for other products and services based on the pricing when those deliverables are sold separately. Where reasonable vendor-specific or third party inputs do not exist to reliably establish fair value, the Company allocates revenue based on its best estimate of selling price that the Company would transact at if the deliverable were sold on a standalone basis. For services, this includes the expected cost of delivery plus an estimated profit margin. Under the residual method, revenue is allocated to undelivered components of the arrangement based on their fair values and the residual amount of the arrangement revenue is allocated to delivered components.

The revenue policies below are applied to each separately identifiable component. Revenue associated with each component is deferred until the criteria required to recognize revenue have been met.

The Company recognizes revenue once persuasive evidence exists, generally in the form of an executed agreement, it is probable the economic benefits of the transaction will flow to the Company and revenue and costs can be measured reliably. If collection is not considered probable, revenue is recognized only once fees are collected.

Software

The Company sells on-premise software licenses primarily on a perpetual basis. Where licensed software is combined with non-distinct services as a combined performance obligation, revenue is recognized according to the percentage-of-completion method. The Company uses either the ratio of hours to estimated total hours or the completion of applicable milestones, as appropriate, as the measure of its progress to completion on each contract. If a loss on a contract is considered probable, the loss is recognized at the date determinable. Distinct software licenses, when not combined with services for accounting purposes, are recognized upon delivery and commencement of the customer's right to use the software.

Software-as-a-service (SaaS)

SaaS allows a customer access to the Company's software on a platform hosted by a third-party without taking possession of the software. SaaS is typically offered on a fixed-term basis. Where fees are fixed for the term, revenue is recognized rateably over the term commencing when the customer has the right to access the platform. Where the fees are based on periodic activity, revenue is recognized as invoiced to the customer at each period.

Services

Revenue for installation, implementation, training and other services, when not combined with software as a combined performance obligation, is recognized as the services are delivered to the customer. Fixed fee service arrangements are recognized using the percentage-of-completion method. The Company uses either the ratio of hours to estimated total hours or the completion of applicable milestones, as appropriate, as the measure of its progress to completion on each contract.

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Management's Discussion and Analysis

Post-contract customer support ("PCS")

PCS revenue is recognized rateably over the term of the PCS agreement.

Third party software and hardware

Third party software and hardware revenue is recognized when control of the product transfers to the customer. When the products are distinct, control typically transfers upon delivery to the customer. Where such products are related to professional services as a combined performance obligation, the percentage-of-completion method is applied.

Pension and non-pension post-employment benefit plans

The actuarial valuation of defined benefit obligation and fair value of plan assets require estimates, including discount rates applied to the Company's pension plan and non-pension post-employment benefit liabilities.

Goodwill valuation

We use estimates in determining the recoverable amount of our cash-generating unit ("CGU") in performing annual impairment testing of goodwill. The determination of the recoverable amount for the purpose of impairment testing requires the use of significant estimates, such as future cash flows, terminal growth rate and discount rate.

We estimate value in use for impairment tests by discounting estimated future cash flows for periods up to five years to their present value. The future cash flows are based on our estimates of expected future operating results of the CGU after considering economic conditions and a general outlook for the CGU's industry. Our discount rates consider market rates of return, debt to equity ratios and certain risk premiums, among other things. The terminal value is the value attributed to the CGU's operations beyond the projected time period of the cash flows using a perpetuity rate based on expected economic conditions and a general outlook for the industry.

We make certain assumptions when deriving expected future cash flows, which may include assumptions pertaining to discount and terminal growth rates. These assumptions may differ or change quickly depending on economic conditions or other events. It is therefore possible that future changes in assumptions may negatively affect future valuations of the CGU and goodwill, which could result in impairment losses.

Share-based compensation

The Company issues stock options and restricted share units ("RSUs") and performance share units ("PSUs") pursuant to several share-based compensation plans. Stock options are settled with common shares of the Company. RSUs and PSUs are settled with either cash or common shares of the Company at discretion of the board. Compensation costs for options, RSUs and PSUs settled in equity are measured based on the grant date fair value of the award and recognized, net of estimated forfeitures, over the vesting period with a corresponding credit to contributed surplus. For awards with graded vesting, the fair value of each tranche is recognized over its respective vesting period. At the end of each

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Optiva
Management's Discussion and Analysis

reporting period, the Company reassesses its estimates of the number of awards that are expected to vest and recognizes the impact of the revisions in the period. Compensation cost for PSUs intended to be settled in cash is measured based on the fair value of the PSUs liability at the reporting date. The Company also has a deferred share units ("DSUs") plan. The plan allows for settlement of DSUs by cash or shares. The fair value of the Company's DSUs is recognized using the liability method. Since the DSUs will be settled in cash or shares, the fair value of the vested DSUs is revalued each period until the settlement date and any changes in the fair value of the liability are recognized in profit or loss. The Company has recognized a liability in the consolidated statements of financial position for the total fair value of the vested DSUs included in other long-term liabilities.

PATENT PORTFOLIO

As part of Optiva’s commitment to R&D to maintain its position as a key industry innovator in the real-time BSS software space, the Company currently has a portfolio with over 40 patents. To date, Optiva has not initiated any action with respect to assertions and/or claims of patent infringement.

RISKS AND UNCERTAINTIES

Going Concern

For the year ended December 31, 2024, the Company had a net loss of $19.7 million (year ended December 31, 2023 – net loss of $12.3 million) and a total comprehensive loss of $17.8 million (year ended December 31, 2023 – net loss of $12.4 million). The Company also had a working capital deficit (current assets less current liabilities) of $94.8 million as at December 31, 2024 (December 31, 2023 – working capital of $27.8 million), reflecting the reclassification of 9.75% secured PIK toggle debentures due July 20, 2025 (the “Debentures”), from non-current to current liabilities (note 5). The Debentures in the amount of $103.5 million as of December 31, 2024, have a maturity date of July 20, 2025.

Based on the cash balance of $10.2 million as of December 31, 2024 and forecasted cash flows from operations to the Debentures maturity date on July 20, 2025, the Company expects to have insufficient cash to meet its obligations upon maturity of the Debentures in July 2025. The Company’s board of directors has formed a Special Committee that is in active discussions with key Debenture holders regarding refinancing options. The Company’s ability to continue its operations is dependent upon its ability to refinance this debt or implement other financial alternatives including other sources of financing through debt or equity, however there is no assurance that this will be successful. These factors indicate the existence of a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern.

The consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and settle its obligations in the normal course of business. The consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate, and these adjustments could be material.

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Optiva
Management's Discussion and Analysis

In addition to above, a complete description of the risks and uncertainties affecting the Company is included in the most recently filed Annual Information Form. Additional risks and uncertainties not presently known to us or that we currently consider immaterial also may impair our business and operations and cause the price of the common shares to decline. If any of the noted risks actually occur, our business may be harmed and the financial condition and results of operation may suffer significantly. In that event, the trading price of the common shares could decline, and shareholders may lose all or part of their investment.

ADDITIONAL INFORMATION

Additional information, including the quarterly and annual consolidated financial statements, annual information form, management proxy circular and other disclosure documents may be examined by accessing the SEDAR website at www.sedarplus.com.

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Optiva
Management's Discussion and Analysis

SCHEDULE I

NON-IFRS FINANCIAL MEASURES

"EBITDA" and "Adjusted EBITDA" are not financial measures calculated and presented in accordance with International Financial Reporting Standards (IFRS) and should not be considered in isolation or as a substitute to net income (loss), operating income or any other financial measures of performance calculated and presented in accordance with IFRS, or as an alternative to cash flow from operating activities as a measure of liquidity. The Company defines EBITDA as net income (loss) excluding amounts for depreciation and amortization, other income, finance costs, finance income, income tax expense (recovery), foreign exchange gain (loss) and share-based compensation. The Company defines "Adjusted EBITDA" as EBITDA (as defined above), excluding restructuring costs, provision amounts and other one-time unusual items. The Company believes that Adjusted EBITDA is a metric that investors may find useful in understanding the Company's financial position. The following table provides a reconciliation of Net Income to EBITDA and Adjusted EBITDA ($US millions).

	Three months ended, December 31,		Year ended, December 31,
	2024	2023	2024	2023
Net loss for the period	$ (4.7)	$ (4.0)	$ (19.7)	$ (12.3)
Add back / (subtract):
Depreciation of computer equipment	0.1	0.2	0.6	0.7
Amortization of intangible assets	-	-	-	0.4
Finance income	(0.1)	(0.3)	(0.6)	(0.6)
Finance costs	3.0	2.8	11.5	10.0
Income tax expense (recovery)	(0.1)	(0.1)	0.8	2.0
Foreign exchange loss (gain)	0.1	(0.6)	0.4	0.1
Share-based compensation	(0.3)	0.2	0.4	(1.7)
Loss on disposal of computer equipment	0.2	-	0.2	-
EBITDA	(1.8)	(1.8)	(6.4)	(1.4)
Other income	-	-	-	(0.5)
Adjusted EBITDA	$ (1.8)	$ (1.8)	$ (6.4)	$ (1.9)

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Optiva
Management's Discussion and Analysis

"Operating working capital" is a Non-IFRS measure. The Company defines operating working capital as the Company's current assets less its current liabilities, excluding cash and cash equivalents. The following table provides the calculation for the operating working capital.

| | December 31
2024 | December 31,
2023 |
| --- | --- | --- |
| Total current assets | $ 30.1 | $ 47.8 |
| Less: Total current liabilities | (124.9) | (20.0) |
| Less: Cash and cash equivalents | (10.2) | (19.6) |
| Operating Working Capital | $ (105.0) | $ 8.2 |

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