Proact IT Group — Interim / Quarterly Report 2021

Oct 21, 2021

Interim Report January - September 2021

Q3

Strong development in profitability driven by higher gross margin

July - September 2021

• Revenues decreased by 1 percent to SEK 810 (821) million.
• Adjusted EBITA increased by 11 percent and amounted to SEK 59.8 (54.1) million, corresponding to an adjusted EBITA margin of 7.4 (6.6) percent.
• Profit before tax amounted to SEK 49.6 (43.4) million.
• Profit after tax amounted to SEK 37.4 (35.1) million.
• Profit per share amounted to SEK 1.36 (1.28).
• New contracts relating to cloud services worth SEK 75 (61) million were contracted, an increase by 23 percent.

January - September 2021

• Revenues decreased by 3 percent to SEK 2,583 (2,651) million.
• Adjusted EBITA decreased by 4 percent and amounted to SEK 147.5 (153.0) million, corresponding to an adjusted EBITA margin of 5.7 (5.8) percent.
• Profit before tax amounted to SEK 114.5 (116.9) million.
• Profit after tax amounted to SEK 86.2 (92.2) million.
• Profit per share amounted to SEK 3.14 (3.37).
• New contracts relating to cloud services worth SEK 225 (189) million were contracted, an increase by 19 percent.

Financial summary

Amounts in SEK million	Jul-Sep 2021	Jul-Sep 2020	Jan-Sep 2021	Jan-Sep 2020	Rolling 12 2020/2021	Jan-Dec 2020
Total revenues	810.4	820.6	2,582.6	2,651.0	3,564.7	3,633.1
Growth, %	–1.2	17.1	–2.6	9.7	–2.1	6,6
of which currency rate effects, %	0.5	–3.7	–1.8	–0.9	–2.4	–1,7
of which effect from acquisitions and divestments %	7.5	10.6	5.3	8.5	4.9	7.0
Organic growth, % 1)	–9.2	10.3	–6.0	2.2	–4.3	1.3
Adjusted EBITA 2)	59.8	54.1	147.5	153.0	213.9	219.4
Adjusted EBITA margin, %	7.4	6.6	5.7	5.8	6.0	6.0
Operating profit (EBIT)	52.9	46.0	124.6	128.1	178.5	182.1
Operating margin (EBIT), %	6.5	5.6	4.8	4.8	5.0	5.0
Profit before tax	49.6	43.4	114.5	116.9	165.2	167.7
Net margin, %	6.1	5.3	4.4	4.4	4.6	4.6
Profit after tax	37.4	35.1	86.2	92.2	126.3	132.3
Profit margin, %	4.6	4.3	3.3	3.5	3.5	3.6
Earnings per share (outstanding shares), SEK 3)	1.36	1.28	3.14	3.37	4.57	4.80
Return on capital employed, % 4)	–	–	–	–	15.6	17.1
Cash flow from operations	–142.7	53.8	48.2	202.6	313.7	468.1

1) Organic growth refers to growth excluding currency rate effects and acquired and divested companies.

2) EBITA before items affecting comparability.

3) Proact has a long-term performance based share program that could result in dilution of maximum 1.34%. The comparative figures have been adjusted for the 1:3 share split that was implemented in May 2021. The company has bought back own shares which affects the key ratios above.

4) Calculated only for full year and rolling 12 months.

Proact is Europe's leading specialist in data and information management with focus on cloud services and data centre solutions. We help our customers to store, connect, protect, secure and drive value through their data whilst increasing agility, productivity and efficiency.

We've completed thousands of successful projects around the world, have more than 4,000 customers and currently manage hundreds of petabytes of information in the cloud. We employ over 1,000 people in 15 countries across Europe and North America. Founded in 1994, our parent company, Proact IT Group AB (publ), was listed on Nasdaq Stockholm in 1999 (under the symbol PACT).

Comments from the CEO of Proact

"Strong development in profitability driven by higher gross margin"

Proact's third quarter of 2021 generated the strongest third quarter EBITA result in the history of Proact. High gross margins and a high proportion of services resulted in a strong increase in profit compared to last year, despite somewhat lower revenues. Adjusted EBITA for the quarter amounted to SEK 59,8 (54,1) million, corresponding to an EBITA margin of 7,4 (6,6) percent.

Net sales during the quarter amounted to SEK 810 (821) million, corresponding to a decrease of 1 percent. Organically, the decrease in net sales was 9 percent. It is primarily the systems sales that has decreased, with an organic decline of 16 percent, to a large degree impacted by a decline in BU UK, where a large deal with NHS Blood and Transplant was delivered in the third quarter of 2020. Services revenues were organically unchanged and grew by 6 percent through the acquisitions of Cetus and Conoa. We see a healthy demand in several of our markets, while some countries still have challenges with long sales cycles and hesitant customers. Even though the growth in the quarter and for the first nine months is lower than our long-term targets we don't see any indications that this is due to changes in longer term demand, and our continued assessment is rather that this is a consequence of short-term effects, primarily due to the pandemic.

New contracts for cloud services of SEK 74 (61) million were contracted during the quarter, an increase of 23 percent. In the quarter, revenues from cloud services returned to growth with an organic growth of 2 percent, due to the new contracts we closed earlier in the year.

It is very positive that our gross margin in the quarter is higher, and that we thereby more than compensate for the decline in revenues. It is primarily a result of high systems gross margins, but also due to a higher proportion of services revenues. All our

business units show an increased EBITA margin compared to both last year and the previous quarter. In BU West where we have had challenges with profitability earlier in the year, we see a clear effect of the actions we have taken, with an organic growth of 1 percent in the quarter combined with a good profitability development.

To turn around the sales development we continue to invest in our employees, both within sales and in sales related resources, as well as in our service delivery. We see this as the key to generate growth going forward according to our longer-term targets.

The integration of our latest acquisitions continues according to plan and both Cetus in the UK and Conoa in Sweden now operate fully, or partly, under the Proact brand. Commercially the development is positive with clear synergies, where a good example is the modernized IT infrastructure of the Swedish customer AFA Försäkring, enabling accelerated application development. AFA Försäkring is supported by Proact and Conoa to put their application development on a container-based platform which enables shortening of the development time for new services from months to a few hours.

We also continue to work close to our suppliers and partners, and were awarded several notable awards during the quarter, among others the Netapp EMEA Solution Partner of the Year and the Cohesity EMEA Impact Marketing Partner of the Year, which we are very proud of.

Kista, 21 October, 2021

Jonas Hasselberg CEO

The Group's development

Revenues and result Third quarter

For the third quarter, total revenues amounted to SEK 810 (821) million, a decrease by 1 percent. Currency rate effects affected by 0 percent, acquisitions and divestments affected by 8 percent. Organically, revenues decreased by 9 percent.

System revenues decreased by 6 percent to SEK 444 (473) million and organically the decrease was 16 percent, mainly due to a decline in BU UK. Service revenues increased by 6 percent to SEK 367 (348) million and organically revenues were unchanged. Service revenues accounted for 45 (42) percent of the company´s total revenues for the quarter.

New contracts relating to cloud services worth SEK 75 (61) million were contracted during the quarter. The contracts normally have a term of three to five years. Total revenues from cloud services increased by 2 percent and amounted to SEK 178 (176) million. Also organically they increased by 2 percent.

Gross margin increased in the quarter, compared with the same period previous year, mainly through increasing margins in system business.

Sales and administration expenses increased organically by 4 percent, from low levels previous year.

Adjusted EBITA increased by 11 percent compared to previous year and amounted to SEK 59.8 (54.1) million as a result of increased gross profit. Adjusted EBITA margin was 7.4 (6.6) percent. Profit before tax amounted to SEK 49.6 (43.4) million.

January - September

For the first nine months, total revenues amounted to SEK 2,583 (2,651) million, a decrease by 3 percent. Currency rate effects affected by –3 percent, acquisitions and divestments affected by 5 percent. Organically, revenues decreased by 6 percent.

System revenues decreased by 6 percent to SEK 1,487 (1,575) million and organically the decrease was 10 percent. Service revenues increased by 2 percent to SEK 1,094 (1,075) million and

organically they were unchanged. Service revenues accounted for 42 (41) percent of the company´s total revenues for the first nine months.

New contracts relating to cloud services worth SEK 225 (189) million were contracted during the first nine months. The contracts normally have a term of three to five years. Total revenues from cloud services decreased by 3 percent and amounted to SEK 519 (537) million. Organically they decreased by 1 percent.

Gross margin increased for the first nine months, compared with the same period previous year, mainly through increased gross margin in system business.

Sales and administration expenses decreased organically by 3 percent, while revenues decreased organically by 6 percent. Sales and administration expenses decreased in part as a result of the implemented cost savings program, but also as a result of reduced travel and selling expenses due to the prevailing pandemic.

Adjusted EBITA decreased by 4 percent compared to previous year and amounted to SEK 147.5 (153.0) million. Adjusted EBITA margin was 5.7 (5.8) percent. Profit before tax amounted to SEK 114.5 (116.9) million.

Revenues by industry

	Jul- Sep	Jul-Sep	Jan-Sep	Jan-Sep	Rolling	Jan-Dec
MSEK	2021	2020	2021	2020	12 mths	2020
Telecom	66	62	300	263	385	348
Bank, Finance	60	84	237	227	299	289
Oil, Energy	51	59	158	146	233	221
Manufacturing	109	120	323	340	433	450
Media	20	18	64	40	87	62
Trading &
Services	160	148	451	533	604	687
Public sector	199	292	644	723	953	1,033
Other	144	37	406	381	570	545
Total revenue	810	821	2,583	2,651	3,565	3,633

Revenues Adjusted EBITA

Revenues from cloud services Profit per share and return on equity, rolling 12 months, %

Amounts in SEK million	Jul-Sep 2021	Jul-Sep 2020	Jan-Sep 2021	Jan-Sep 2020	Rolling 12 months	Jan-Dec 2020
Total Revenues	810.4	820.6	2,582.6	2,651.0	3,564.7	3,633.1
Cost of goods and services sold, excl. amortizations and depreciations	–578.6	–612.6	–1,895.2	–1,961.4	–2,621.7	–2,687.9
Gross profit excl. amortizations and depreciations	231.8	208.0	687.3	689.6	943.0	945.2
Gross margin excl. amortizations and depreciations, %	28.6	25.3	26.6	26.0	26.5	26.0
Operational expenses excl. amortizations and depreciations	–134.5	–118.1	–428.6	–420.7	–580.7	–572.8
Adjusted EBITDA1)	97.3	89.9	258.7	268.9	362.3	372.4
Adjusted EBITDA margin, %	12.0	11.0	10.0	10.1	10.2	10.3
Deprecations and write-downs of tangible assets	–37.5	–35.8	–111.3	–115.9	–148.4	–153.0
Adjusted EBITA1)	59.8	54.1	147.5	153.0	213.9	219.4
Adjusted EBITA margin, %	7.4	6.6	5.7	5.8	6.0	6.0
Amortizations and write-downs of intangible assets	–7.0	–8.0	–21.7	–24.9	–31.4	–34.6
Items affecting comparability	–	–	–1.2	–	–3.9	–2.8
Operating profit/loss (EBIT)	52.9	46.0	124.6	128.1	178.5	182.1
Operating margin (EBIT), %	6.5	5.6	4.8	4.8	5.0	5.0

1) EBITDA and EBITA before items affecting comparability

Cash flow

Third quarter

Cash flow for the quarter was SEK –181 (7) million, of which SEK –143 (54) million from operating activities.

January - September

Cash flow for the first nine months was SEK –163 (35) million, of which SEK 48 (203) million from operating activities. Cash flow from changes in working capital amounted to SEK –193 (–69) million, mainly related to a decrease in accounts receivable by SEK 136 million, decrease in accounts payable by SEK 264 million and a decrease in short-term payables by SEK 59 million. During the period, SEK 84 million was paid for acquired business, net of cash, and repayments of leasing liabilities was made by SEK 90 million.

Investments

During the first nine months 2021, SEK 31 (62) million has been invested in fixed assets, of which SEK 10 (36) million in Proact Finance for customer deliveries.

Financial position

Cash and cash equivalents amounted to SEK 321 million as of September 30, 2021, compared to SEK 396 million previous year. Of the total overdraft credit facility of SEK 158 million, none was utilized. Bank loans amounted to SEK 256 million and relate to a three-year revolving credit facility. Under the quarter Proact concluded an agreement of a three-year revolving credit facility, with a possibility of up to two years extension, of SEK 600 million.

Net debt

SEK million	Sep 30 2021	Jun 30 2021	Sep 30 2020	Jun 30 2020
Cash and cash equivalents	321	500	396	389
Bank overdraft facilities	–	–	–	–
Liabilities to credit institutions excl. financial leasing liabilities	–257	–257	–230	–230
Net cash (+)/Net debt (–) excl. financial
leasing	64	243	166	159
Financial leasing liabilities	–223	–217	–259	–266
Net cash (+)/Net debt (–) incl. financial
leasing	–160	26	–92	–108
Unutilized bank overdraft facility	158	158	250	245
Total bank overdraft facility	158	158	250	245

Investments in IT-equipment for the cloud operations are financed through leasing agreements. The Group's equity ratio at the end of the period was 24 (22) percent.

Income tax

The Group's tax expense includes the sum of current tax and deferred tax calculated on the basis of current tax rates in each country. The reported tax expense for the first nine months amounted to SEK 28.3 (24.7) million, corresponding to an efficient tax rate of 25 (21) percent.

Buy-back of own shares

The Annual General Meeting on May 6, 2021 authorized the Board to acquire up to 10 percent of the company's shares until the next Annual General Meeting. As of September 30, 2021, no shares have been acquired within this authorization.

As of September 30, 2021, the company holds 546,807 shares in own repository, which corresponds to 2.0 percent of the total number of shares.

Employees

The company had 1,062 (979) employees as of September 30, 2021, of which the acquisition of Cetus and Conoa have contributed with 71 employees.

Parent Company in brief

The Parent Company's total revenues for the first nine months amounted to SEK 76.9 (78.8) million. Profit before tax amounted to SEK 15.4 (–15.9) million.

The Parent Company's liabilities in a joint group currency account amounted as at 30 September 2021 to SEK 185 (234) million.

At the end of the period, the number of people employed by the parent company totalled 18 (16).

The Parent Company's operations have remained unchanged over the period. There have been no significant transactions with related parties.

Business Units

Nordics & Baltics

Revenues and result Third quarter

In Nordics & Baltics, revenues increased by 6 percent during the quarter and organically they decreased by 2 percent, with the acquisition of Conoa which contributed positively. System revenues decreased by 1 percent and organically the decrease was 9 percent. The organic decrease in system sales is mainly due to low system sales in Norway. Service revenues increased by 20 percent and organically they increased by 14 percent, with a good development especially for cloud services. Acquisition of Conoa contributed positively especially to consulting revenues.

Adjusted EBITA amounted to SEK 35.6 (33.1) million and EBITA margin was 8.5 (8.3) percent for the quarter. In Nordics & Baltics, EBITA was positively affected mainly by increased revenues and a good gross margin.

January - September

In Nordics & Baltics, revenues were unchanged during the first nine months and organically they decreased by 3 percent. System revenues decreased by 4 percent and organically the decrease was 6 percent. System revenues was primarily affected negative by low system sales in Norway. Service revenues increased by 10 percent and organically the increase was 6 percent. In addition to the acquisition of Conoa, good growth in cloud services contributed to organic growth.

Adjusted EBITA amounted to SEK 86.6 (93.9) million and EBITA margin was 6.4 (6.9) percent for the first nine months. In Nordics & Baltics EBITA was negatively affected primarily by the decrease in system revenues.

	Jul-Sep	Jul-Sep		Jan-Sep	Jan-Sep		Rolling	Jan-Dec
SEK million	2021	2020	Change, %	2021	2020	Change, %	12 months	2020
System revenues	268	269	–1	920	955	–4	1,317	1,352
Service revenues	153	128	20	436	396	10	574	534
of which support
revenue	66	65	2	200	193	4	266	259
of which revenue from
cloud services	54	38	43	136	113	21	175	151
of which consulting
revenue	32	25	30	99	91	9	133	124
Other	0	0	5	2	1	100	2	1
Total revenues	421	398	6	1,358	1,352	0	1,893	1,887
Adjusted EBITA	35.6	33.1	8	86.6	93.9	–8	121.1	128.4
Margin, %	8.5	8.3		6.4	6.9		6.4	6.8

UK

Revenues and result Third quarter

In UK, revenues decreased by 20 percent during the quarter, The acquisition of Cetus contributed positively and organically revenues decreased by 42 percent. System revenues decreased by 46 percent, while organically the decrease was 70 percent, During third quarter 2020 a large deal to NHS Blood and Transplant was delivered which affects comparative figures. In addition long decision cycles still affects sales negatively. Service revenues increased by 21 percent, while organically the increase was 4 percent, driven by strong development in both the consulting and support business.

Adjusted EBITA amounted to SEK 9.0 (9.7) million and the EBITA margin was 6.4 (5.5) percent for the quarter. EBITA decreased as a result of lower sales while margin however increased driven by increased gross margin, the acquisition of Cetus and a continued low cost level.

January - September

In UK, revenues increased by 12 percent during the first nine months, through the acquisition of Cetus. Organically revenues decreased by 5 percent. System revenues increased by 15 percent, while organically they decreased by 10 percent, mainly due to low system sales in the third quarter compared to the same quarter previous year. Service revenues increased by 10 percent, while organically they were unchanged.

Adjusted EBITA amounted to SEK 31.7 (27.9) million and the EBITA margin was 6.4 (6.3) percent for the first nine months. In UK, EBITA margin was positively affected by the acquisition of Cetus, to some extent offset by the organic decrease in revenues.

SEK million	Jul-Sep 2021	Jul-Sep 2020	Change, %	Jan-Sep 2021	Jan-Sep 2020	Change, %	Rolling 12 months	Jan-Dec 2020
System revenues	59	108	–46	260	227	15	345	312
Service revenues	83	68	21	239	217	10	315	293
of which support revenue	28	21	36	82	67	22	106	92
of which revenue from cloud services	44	44	–1	131	141	–7	175	185
of which consulting revenue	11	3	245	27	10	174	34	17
Other	–	–	–	–	–	–	0	–
Total revenues	141	176	–20	499	444	12	660	605
Adjusted EBITA	9.0	9.7	–6	31.7	27.9	14	42.9	39.1
Margin, %	6.4	5.5		6.4	6.3		6.5	6.5

West

Revenues and result Third quarter

In West, revenues decreased by 1 percent during the quarter and organically they increased by 1 percent. System revenues were unchanged and organically they increased by 2 percent, where the result of directed actions for systems sales begins to take effect. Service revenues decreased by 1 percent and organically they were unchanged.

Adjusted EBITA amounted to SEK 9.9 (7.4) million and EBITA margin was 5.6 (4.2) percent for the quarter.

The action program which was initiated during the first quarter has been successfully implemented, which reflects that gross margins and hence gross profit increased under the quarter. This resulted in an increase of EBITA and EBITA margin, to some extent offset by increased sales and administration expenses organically by 10 percent.

January - September

In West, revenues decreased by 15 percent during the first nine months and organically the decrease was 11 percent. System revenues decreased by 32 percent and organically the decrease was 30 percent. Service revenues decreased by 5 percent and organically the decrease was 2 percent.

Adjusted EBITA amounted to SEK 10.5 (28.0) million and EBITA margin was 2.1 (4.8) percent for the first nine months.

Long sales cycles and customers' uncertainty regarding Covid-19 brought a sharp decline in system revenues during the first six months of the year, and also service revenues decreased for the same reason. Reduced sales in combination with a changed mix in service sales reduced gross margin, which brought a decrease in EBITA while sales and administration expenses were unchanged organically. An action program was initiated during the first quarter to both increase sales and decrease costs, which resulted in a significantly better development during the third quarter.

SEK million	Jul-Sep 2021	Jul-Sep 2020	Change, %	Jan-Sep 2021	Jan-Sep 2020	Change, %	Rolling 12 months	Jan-Dec 2020
System revenues	54	54	0	137	203	–32	189	255
Service revenues	121	123	–1	361	382	–5	498	519
of which support revenue	13	14	–10	38	43	–12	52	57
of which revenue from cloud services	83	82	0	236	251	–6	327	342
of which consulting revenue	26	26	–2	88	89	–1	119	120
Other	–0	0	–190	0	0	312	0	–
Total revenues	175	177	–1	499	585	–15	688	774
Adjusted EBITA	9.9	7.4	34	10.5	28.0	–63	11.9	29.5
Margin, %	5.6	4.2		2.1	4.8		1.7	3.8

Central

Revenues and result Third quarter

In Central, revenues increased by 14 percent during the quarter and organically the increase was 15 percent, System revenues increased by 20 percent and organically the increase was 22 percent, as a result of strong sales during summer. Service revenues increased by 3 percent and organically the increase was 4 percent.

Adjusted EBITA amounted to SEK 6.7 (4.4) million and EBITA margin was 7.6 (5.7) percent for the quarter.

In Central, EBITA was positively affected mainly by increased sales. Organically, sales and administration expenses decreased by 2 percent.

January - September

In Central, revenues decreased by 10 percent during the first nine months and organically the decrease was 7 percent, as a result of decreasing sales during the second quarter. System revenues decreased by 15 percent and organically the decrease was 12 percent. Service revenues decreased by 1 percent and organically they increased by 2 percent.

Adjusted EBITA amounted to SEK 19.7 (17.2) million and EBITA margin was 7.4 (5.9) percent for the first nine months.

In Central, EBITA was positively affected primarily by reduced sales and administration expenses of 15 percent, which led to increased EBITA margin.

	Jul-Sep	Jul-Sep		Jan-Sep	Jan-Sep		Rolling	Jan-Dec
SEK million	2021	2020	Change, %	2021	2020	Change, %	12 months	2020
System revenues	54	45	20	162	191	–15	226	255
Service revenues	34	33	3	101	102	–1	137	139
of which support
revenue	10	10	4	29	27	4	38	37
of which revenue from
cloud services	18	18	0	54	56	–3	73	75
of which consulting
revenue	6	5	13	19	19	–4	26	26
Other	1	0	698	2	0	395	2	1
Total revenues	88	78	14	264	294	–10	365	395
Adjusted EBITA	6.7	4.4	51	19.7	17.2	14	30.6	28.2
Margin, %	7.6	5.7		7.4	5.9		8.4	7.1

Proact Finance

Revenues and result Third quarter

Proact Finance revenues decreased for the quarter compared to the same period previous year due to a decrease in financed volume and amounted to SEK 13 (19) million. Management has made a decision to in major extent start offering external financing solutions to customers, which has contributed to the decline. Net financial items amounted to SEK 0.8 (1.0) million. Profit before tax amounted to SEK 2.7 (1.6) million.

January - September

Proact Finance revenues decreased for the first nine months compared to the same period previous year due to a decrease in financed volume and amounted to SEK 38 (77) million. Net financial items amounted to SEK 2.6 (2.9) million. Profit before tax amounted to SEK 9.5 (1.4) million. Future contracted cash flows from Proact Finance amounted to SEK 135 (156) million, a decrease of 13 percent.

SEK million	Jul-Sep 2021	Jul-Sep 2020	Change, %	Jan-Sep 2021	Jan-Sep 2020	Change, %	Rolling 12 months	Jan-Dec 2020
Revenues	13	19	–33	38	77	–50	67	105
EBIT	1.8	0.6	195	6.9	–1.4	583	7.9	–0.4
Net financial items	0.8	1.0	–18	2.6	2.9	–8	3.6	3.8
Profit before tax	2.7	1.6	63	9.5	1.4	557	11.4	3.4

Operating segments

Nordics & Baltics: Denmark, Estonia, Finland, Latvia, Lithuania, Norway, Sweden and USA

• UK: United Kingdom
• West: Belgium, Netherlands and Spain

Central: Czech Republic and Germany

Proact Finance: Proact's own in-house finance company is reported separately as this company supports all geographical regions.

Jan-Sep 2021 SEK million	Nordics & Baltics	UK	West	Central	Proact Finance	Groupwide	Eliminations	Group
Total revenue	1,358	499	499	264	38	98	–174	2,583
EBITDA, before items affecting comparability	116.4	68.5	35.3	28.1	6.9	3.5	–	258.7
Depreciations and write-down on tangible fixed assets	–29.8	–36.8	–24.8	–8.4	–	–11.4	–	–111.3
EBITA, before items affecting comparability	86.6	31.7	10.5	19.7	6.9	–7.9	–	147.5
Items affecting comparability	–1.2	–	–	–	–	–	–	–1.2
EBITA	85.5	31.7	10.5	19.7	6.9	–7.9	–	146.3
Amortizations and write-down on intangible fixed assets	–2.9	–5.7	–5.9	–1.3	–	–5.9	–	–21.7
EBIT	82.6	26.0	4.6	18.4	6.9	–13.9	–	124.6
Net financial items	–2.4	–2.5	–2.1	–0.7	2.6	–5.1	–	–10.1
Profit before tax	80.2	23.5	2.5	17.7	9.5	–18.9	–	114.5
Tax								–28.3

Comprehensive income for the period 86.2

Jan-Sep 2020 SEK million	Nordics & Baltics	UK	West	Central	Proact Finance	Groupwide	Eliminations	Group
Total revenue	1,352	444	585	294	77	105	–205	2,651
EBITDA, before items affecting comparability	125.0	65.3	53.7	26.3	–1.4	–0.1	–	268.9
Depreciations and write-down on tangible fixed assets	–31.2	–37.4	–25.7	–9.1	–	–12.4	–	–115.9
EBITA, before items affecting comparability	93.9	27.9	28.0	17.2	–1.4	–12.5	–	153.0
Items affecting comparability	–	–	–	–	–	–	–	–
EBITA	93.9	27.9	28.0	17.2	–1.4	–12.5	–	153.0
Amortizations and write-down on intangible fixed assets	–1.1	–6.4	–11.8	–1.9	–	–3.7	–	–24.9
EBIT	92.8	21.5	16.3	15.3	–1.4	–16.3	–	128.1
Net financial items	–3.5	–2.8	–2.2	–0.6	2.9	–5.0	–	–11.2
Profit before tax	89.3	18.7	14.0	14.7	1.4	–21.2	–	116.9
Tax								–24.7

Comprehensive income for the period 92.2

Market Review

Understanding market trends, identifying new technology with commercial potential, and then building competence around this is something Proact always have been strong in. In this way, we can be at the forefront of the markets development and establish ourselves early in segments where demand is expected to grow. This is a successful cornerstone of our strategy – but we are also seeing some major, widespread trends from the buyers. For our customers, IT has historically been a tool mainly for rationalisation and efficiency. In particular, with Proact's focus on data centres, sales have largely been driven by new technology with a constantly improving price/performance ratio.

Well-functioning IT delivery is, of course, a prerequisite for any organisation to run efficiently, but the ongoing digital transformation adds a new dimension giving IT an even greater strategic importance. Cost savings and/or efficiency are no longer the main drivers of customer IT investments. Instead, people are expecting IT to drive business development, business revenue and business growth.

Flexibility and hybrid delivery models

To drive business and business development through IT, there is a strong and widespread vision of a cloud-based IT infrastructure. However, there are very few organisations in Proact's segments that can, or will, put everything into public clouds. This could be for any number of reasons, including data sovereignty, data regulations, organisations' internal policies, security concerns, cost implications and latency issues, to name but a few.

Instead, we are seeing that most of our customers choose a hybrid solution that takes advantage of the benefits of traditional IT infrastructure, managed cloud services, private cloud services and public cloud services. However, this type of hybrid delivery model adds complexity. Organisations face new challenges, especially relating to security and networking – and this opens up new opportunities for systems and cloud integrators with a strong range of services and expertise.

Other information

Transactions with related parties

No transactions between Proact and related parties, which have significantly affected the Group's position and profits, have taken place during the quarter.

Risks and uncertainty factors within the enterprise

The company currently not seen any major effects from United Kingdom's exit from the EU, except for changes in currency rates which can impact the financial statements of the group short term.

The continued spread of Covid-19 means that many companies may be in a financially strained situation with liquidity problems, declining sales and in the long run impact on earnings. Against this background, Proact is working in parallel to secure shortterm solutions and to find long-term alternatives in the current situation. Proact currently has a better insight into the short-term consequences of Covid-19 and continues to make the assessment that in the short term, the Group can handle the resulting situation as the company has good liquidity and stable financing. The company's ability to continue to supply contracted services such as support and operations services and outsourcing services is good. However, there is still significant uncertainty about the future development of the pandemic and its effect on economies and companies. There are still risks that supply chains will be adversely affected, which in turn can affect the availability of the products and sub-components that the company sells. Proact has not furloughed any staff and has only received governmental contribution in the form of reductions in social security costs to a very limited extent.

Otherwise, no risks or uncertainty factors have altered, compared to those commented upon in the latest Annual Report issued. For a more detailed description of significant risks and uncertainty factors, please see Proact's annual report for 2020, page 26.

Alternative Performance Measures

The company presents financial key figures in the interim report that are not defined according to IFRS. The company believes that these key figures provide valuable supplementary information to investors and the company's management. For definitions of the financial ratios, see the Annual Report 2020.

Nomination Committee

According to a decision from the previous Annual General Meeting of Proact IT Group AB, after the end of the quarter, a nomination committee was appointed with the task to work out proposals to be submitted to the company's annual general meeting 2022. The Nomination Committee consists of the following members:

• * Malin Ruijsenaars, Chairman (Aktiebolaget Grenspecialisten) * Stephanie Göthman (Livförsäkringsbolaget Skandia)
• * Johannes Wingborg (Länsförsäkringar Fondförvaltning AB)
• * Karin Möllborg (Carey Trustees Limited)

Financial calendar

10 Feb 2022	Year-end Report 2021
26 Apr 2022	Interim Report Q1 2022
5 May 2022	Annual General Meeting 2022
14 Jul 2022	Interim Report Q2 2022
25 Oct 2022	Interim Report Q3 2022
9 Feb 2023	Year-end Report 2022

Kista 21 October 2021 Proact IT Group AB (publ)

Jonas Hasselberg CEO

This interim report has not been audited.

Note

The information in this interim report is such information as Proact IT Group (publ) is obliged to publish pursuant to the EU Market Abuse Regulation, the Securities Market Act, and/or the Act on Trading in Financial Instruments. This information was submitted for publication at 08:00 (CET) on 21 October 2021.

Contact

Jonas Hasselberg, CEO +46 722 13 55 56 jonas.hasselberg@proact.eu Kistagången 2, Kista Linda Höljö, CFO +46 725 07 40 85 linda.holjo@proact.eu Tel. +46 8 410 666 00

Proact IT Group AB

www.proact.eu

Org.no: 556494-3446 Reg. Office: Stockholm

Financial reports

Consolidated statement of comprehensive income

Amounts in SEK million	Jul-Sep 2021	Jul-Sep 2020	Jan-Sep 2021	Jan-Sep 2020	Rolling 12 months	Jan-Dec 2020
System income	443.6	472.9	1,486.5	1,575.1	2,103.5	2,192.1
Service income	366.5	347.5	1,094.0	1,075.0	1,458.7	1,439.7
of which support revenue	115.9	113.3	348.1	334.0	458.9	444.8
of which revenue from cloud services	178.4	175.7	519.2	537.2	697.5	715.5
of which consulting revenue	72.3	58.5	226.7	203.8	302.2	279.4
Other operating income	0.3	0.2	2.1	0.9	2.5	1.3
Total income	810.4	820.6	2,582.6	2,651.0	3,564.7	3,633.1
Cost of goods and services sold	–608.6	–642.8	–1,984.8	–2,058.0	–2,743.5	–2,816.7
Gross profit	201.8	177.9	597.8	593.0	821.2	816.4
Sales and marketing expenses	–88.0	–73.9	–285.5	–266.7	–378.6	–359.9
Administration expenses	–60.9	–57.9	–186.5	–198.1	–260.1	–271.7
Items affecting comparability	–	–	–1.2	–	–3.9	–2.8
Operating profit/loss (EBIT)	52.9	46.0	124.6	128.1	178.5	182.1
Net financial items	–3.2	–2.6	–10.1	–11.2	–13.3	–14.4
Profit before tax	49.6	43.4	114.5	116.9	165.2	167.7
Income tax	–12.3	–8.3	–28.3	–24.7	–38.9	–35.4
Comprehensive income for the period	37.4	35.1	86.2	92.2	126.3	132.3
Other comprehensive income
Items which may be reversed later in the income statement
Change of hedging reserve (net investment in foreign operations)	1.8	–0.1	8.3	0.7	–0.5	–8.0
Tax effect of change of reserve (net investment in foreign operations)	–0.4	0.0	–1.7	–0.1	0.2	1.7
Translation differences from remaining foreign operations	2.6	1.9	15.6	–14.2	2.0	–27.8
Total items which may be reversed later in the income statement	4.0	1.9	22.2	–13.7	1.8	–34.1
Total comprehensive income for the period	41.4	37.0	108.4	78.6	128.1	98.3
Comprehensive income attributable to:
Shareholders of the Parent company	37.4	35.1	86.3	92.5	125.4	131.7
Holdings without a controlling influence	–0.0	–0.0	–0.1	–0.3	0.9	0.7
Total comprehensive income for the period attributable to:
Shareholders of the Parent company	41.4	37.0	108.3	78.8	127.2	97.7
Holdings without a controlling influence	–0.0	–0.0	0.0	–0.3	0.9	0.6

Data per share1)

	Jul-Sep 2021	Jul-Sep 2020	Jan-Sep 2021	Jan-Sep 2020	Rolling 12 months	Jan-Dec 2020
Earnings per share for the period attributable to the shareholders of the parent company, SEK	1.36	1.28	3.14	3.37	4.57	4.80
Equity per share attributable to the shareholders of the parent company, SEK	24.42	22.00	24.42	22.00	24.42	21.93
Cash flow from operations per share, SEK	–5.20	1.96	1.76	7.38	11.43	17.05
Number of outstanding shares at end of period	27,454,851	27,454,851	27,454,851	27,454,851	27,454,851	27,454,851
Weighted average number of outstanding shares	27,454,851	27,454,851	27,454,851	27,454,851	27,454,851	27,454,851

1) Proact has a long-term performance based share program that could give rise to dilution of maximum 1.34 percent. The comparative figures have been adjusted for the 1:3 share split that was implemented in May 2021.

Consolidated Balance Sheet in Brief

Amounts in SEK million	30 Sep 2021	30 Sep 2020	31 dec 2020
ASSETS
Fixed assets
Goodwill	649.8	511.2	551.7
Other intangible fixed assets	126.0	70.9	112.2
Tangible fixed assets	292.2	336.5	309.8
Other long-term receivables	409.9	405.5	408.8
Deferred tax receivables	18.0	20.3	15.9
Current assets
Inventories	17.6	13.6	13.0
Trade and other receivables	934.1	1,034.3	1,044.3
Cash and cash equivalents	320.6	396.0	468.3
Total assets	2,768.3	2,788.4	2,923.9
EQUITY AND LIABILITIES
Equity attributable to the shareholders of the parent company	670.4	604.0	601.9
Equity attributable to holdings without a controlling influence	3.1	1.3	3.1
Total equity	673.5	605.3	605.0
Long-term liabilities
Long-term liabilities, interest-bearing	407.7	412.6	358.9
Long-term liabilities, non-interest-bearing	471.4	449.3	461.1
Deferred tax liabilities	39.2	25.2	33.2
Short-term liabilities
Short-term liabilities, interest-bearing	131.4	123.6	131.0
Short-term liabilities, non-interest-bearing	1,045.2	1,172.3	1,334.7
Total equity and liabilities	2,768.3	2,788.4	2,923.9

Consolidated Statement of Changes in Equity

Amounts in SEK million	Jan-Sep 2021	Jan-Sep 2020	Jan-Dec 2020
At beginning of period	605.0	525.9	525.9
Total comprehensive income for the period	108.4	78.6	98.3
Dividend	–41.2	–	–22.9
Dividend to holdings without a controlling influence	–	–0.1	–0.2
Financial liability to holdings without a controlling influence	–	–	2.4
Share savings and share option programs	1.3	0.9	1.5
At end of period	673.5	605.3	605.0

Holdings without a controlling influence: Proact Lietuva UAB 26.14 percent and Proact Czech Republic, s.r.o. 14.7 percent.

Consolidated Cash Flow Statement in Brief

Amounts in SEK million	Jul-Sep 2021	Jul-Sep 2020	Jan-Sep 2021	Jan-Sep 2020	Rolling 12 months	Jan-Dec 2020
Cash flow from operating activities before changes in working capital	96.6	96.9	241.6	271.2	332.2	361.8
Cash flow from changes in working capital	–239.3	–43.0	–193.4	–68.6	–18.5	106.3
Cash flow from operating activities	–142.7	53.8	48.2	202.6	313.7	468.1
Cash flow from investing activities	–10.6	–15.6	–111.9	–62.2	–198.4	–148.7
Cash flow from financing activities	–28.1	–31.2	–99.1	–105.1	–187.4	–193.4
Total cash flow for the period	–181.4	7.1	–162.8	35.3	–72.1	126.0
Cash and cash equivalents at beginning of the period	499.8	388.6	468.3	373.2	396.0	373.2
Currency translation difference in cash and cash equivalents	2.2	0.3	15.0	–12.4	–3.4	–30.8
Cash and cash equivalents at end of the period	320.6	396.0	320.6	396.0	320.6	468.3

Key ratios

	Jul-Sep 2021	Jul-Sep 2020	Jan-Sep 2021	Jan-Sep 2020	Rolling 12 months	Jan-Dec 2020
Total revenue, SEK millions	810	821	2,583	2,651	3,565	3,633
of which attributable to acquisition and divestments, SEK millions	62	74	139	220	165	318
of which currency effects, SEK millions	4	–26	–48	–23	–84	–59
Total revenue, organic, SEK million	745	772	2,491	2,454	3,484	3,373
Organic growth total revenue, %	–9.2	10.3	–6.0	2.2	–4.3	1.3
System revenue, SEK millions	444	473	1,486	1,575	2,103	2,192
of which attributable to acquisition and divestments, SEK millions	44	12	90	31	109	61
of which currency effects, SEK millions	3	–16	–22	–17	–43	–38
Total system revenue, organic, SEK million	396	477	1,418	1,561	2,037	2,169
Organic growth system revenue, %	–16.1	14.9	–10.0	0.4	–7.9	–0.6
Service revenue, SEK millions	367	347	1,094	1,075	1,459	1,440
of which attributable to acquisition and divestments, SEK millions	19	60	47	188	53	254
of which currency effects, SEK millions	1	–10	–26	–5	–41	–21
Total service revenue, SEK millions	347	297	1,072	892	1,446	1,206
Organic growth service revenue, %	0.1	3.5	–0.3	5.5	1.2	4.9
EBITDA, SEK million	97.3	89.9	257.6	268.9	358.3	369.6
EBITDA margin, %	12.0	11.0	10.0	10.1	10.1	10.2
Depreciation and write-down on tangible assets, SEK million	–37.5	–35.8	–111.3	–115.9	–148.4	–153.0
EBITA, SEK million	59.8	54.1	146.3	153.0	209.9	216.7
EBITA margin, %	7.4	6.6	5.7	5.8	5.9	6.0
Depreciation and write-down on intangible assets, SEK million	–7.0	–8.0	–21.7	–24.9	–31.4	–34.6
EBIT, SEK million	52.9	46.0	124.6	128.1	178.5	182.1
EBIT margin, %	6.5	5.6	4.8	4.8	5.0	5.0
Profit before tax, SEK million	49.6	43.4	114.5	116.9	165.2	167.7
Net margin, %	6.1	5.3	4.4	4.4	4.6	4.6
Profit after tax, SEK million	37.4	35.1	86.2	92.2	126.3	132.3
Profit margin, %	4.6	4.3	3.3	3.5	3.5	3.6
Equity	673.5	605.3	673.5	605.3	673.5	605.0
Total assets	2,768.3	2,788.4	2,768.3	2,788.4	2,768.3	2,923.9
Equity ratio, %	24.3	21.7	24.3	21.7	24.3	20.7
Capital turnover rate, times	0.3	0.3	0.9	0.9	1.3	1.3
Return on equity, % 1)	–	–	–	–	19.8	23.4
Financial costs included in net financial items, SEK million	4.5	4.0	14.0	16.2	18.5	20.7
Capital employed	1,212.5	1,141.6	1,212.5	1,141.6	1,212.5	1,094.9
Return on capital employed, % 1)	–	–	–	–	15.6	17.1
Investments in fixed assets, SEK million	46.7	36.9	225.4	122.0	372.5	269.1
Profit before tax per employee, SEK thousands	48.7	45.4	113.5	120.3	165.6	172.3
Average number of employees	1,019.1	957	1,008.3	972	997.9	973

1) Calculated only for full year and rolling 12 months.

For a five-year summary, see Note 2. Definitions of key ratios, see Annual Report 2020.

Key figures Proact reports and monitors the business by are common key figures used by the industry and by companies' listed on Nasdaq Stockholm.

Parent Company´s Income Statement, in brief

Amounts in SEK million	Jan-Sep 2021	Jan-Sep 2020	Jan-Dec 2020
Net sales	76.9	78.8	108.6
Cost of goods and services sold	–	–	–
Gross profit	76.9	78.8	108.6
Administration expenses	–91.0	–94.6	–120.7
Operating profit	–14.1	–15.7	–12.2
Net financial items	29.5	–0.2	36.2
Profit after financial items	15.4	–15.9	24.0
Provisions	–	–	30.0
Profit before tax	15.4	–15.9	54.0
Income tax	1.4	4.0	–1.6
Comprehensive income for the period	16.8	–11.9	52.5

Parent Company´s Balance Sheet, in brief

Amounts in SEK million	30 Sep 2021	30 Sep 2020	31 dec 2020
ASSETS
Fixed assets	832.9	762.6	765.9
Current assets	108.8	120.7	205.5
Total assets	941.7	883.3	971.4
EQUITY AND LIABILITIES
Restricted Equity	80.1	56.4	76.6
Non-restricted Equity	292.5	297.2	319.1
Equity	372.6	353.6	395.7
Long-term liabilities	267.7	241.1	222.9
Short-term liabilities	301.5	288.5	352.8
Total equity and liabilities	941.7	883.3	971.4

Explanatory information

Note 1 Accounting principles

The consolidated accounts for the interim report have been compiled in accordance with IAS 34 and the Swedish Annual Accounts Act. The Parent Company's accounts have been compiled in accordance with the Annual Accounts Act and the Swedish Financial Reporting Board's recommendation RFR 2 (Accounting for Legal Entities). The Group applies the same accounting principles as those described in the annual report for 2020, with the exception of the additional accounting principle for government grants. Government grants are reported in the financial statements when there is reasonable certainty the grant will be received and that the company will meet the conditions associated with the grant. Government grants relating to cost coverage are systematically accrued and reported as income in the profit for the year in the same way and over the same periods as the costs the grants are intended to compensate for. The grants are reported as deductions from corresponding costs such as cost reduction.

Financial instruments

Proact's financial instruments consist of derivatives, accounts receivable, cash and cash equivalents, accounts payable, accrued trade creditors and interest-bearing liabilities. Derivative instruments are recognized in the balance sheet as per the contract date and are valued at fair value, both initially and in subsequent revaluations. All derivatives are reported continuously at fair value with the value changes reported in the statement of comprehensive income within cost sold for those derivatives that are linked to accounts payable and financial items for the derivatives that are linked to financial leasing contracts. Derivatives are valued at fair value within level 2, i.e. fair value determined on the basis of valuation techniques with observable market data, either directly (as price) or indirectly (hence to price). All other financial assets have been classified as loans and receivables, which includes accounts receivable and cash and cash equivalents. All other financial liabilities have been classified as other financial liabilities valued at amortized cost, which includes accounts payable, accrued supplier costs and liabilities to credit institutions. Liabilities to credit institutions run at variable interest rates, and reported interest rates are on a par with current interest on liabilities to credit institutions and other financial assets and liabilities with short maturities. Based on this, the book values of all financial assets and liabilities are judged to be a reasonable estimate of fair value.

Note 2 Five-year summary

	Oct-Sep 2020/2021	Jan-Dec 2020	Jan-Dec 2019	Jan-Dec 2018	Jan-Dec 2017
Total revenue, SEK million	3,565	3,633	3,408	3 318	3 243
EBITDA, SEK million	358.3	369.6	271.7	231.1	218.8
EBITDA margin, %	10.1	10.2	8.0	7.0	6.7
EBITA, SEK million	209.9	216.7	134.2	200.5	188.1
EBITA margin, %	5.9	6.0	3.9	6.0	5.8
EBIT, SEK million	178.5	182.1	105.4	164.5	155.6
EBIT margin, %	5.0	5.0	3.1	5.0	4.8
Profit before tax, SEK million	165.2	167.7	101.7	167.8	151.1
Net margin, %	4.6	4.6	3.0	5.1	4.7
Profit after tax, SEK million	126.3	132.3	80.2	127.3	114.0
Profit margin, %	3.5	3.6	2.4	3.8	3.5
Equity ratio, %	24.3	20.7	18.3	21.2	19.8
Capital turnover rate, times	1.3	1.3	1.3	1.6	1.7
Return on equity, %	19.8	23.4	16.1	29.8	31.8
Return on capital employed, %	15.6	17.1	13.2	29.5	29.2
Dividend to shareholders of the Parent company, SEK million 1)	41.2	22.9	38.0	34.3	32.4
Investments in fixed assets, SEK million	372.5	269.1	440.7	83.8	166.7
Financial costs included in net financial items, SEK millions	18.5	20.7	11.3	3.9	11.4
Profit before tax per employee, SEK thousands	166	172	122	211	189
Average number of employees	998	973	834	797	799
Earnings per share for the period, SEK 2)	4.57	4,80	2,92	4,62	4,07

1) Relates to the year in which the dividend was executed. For business year 2020 a dividend of SEK 4.50, total SEK 41.2 million, was made.

2) Calculated on the basis of the weighted average number of outstanding shares. The comparative figures have been adjusted for the 1:3 share split that was implemented in May 2021. Proact has a long-term performance based share program that could give rise to dilution of maximum 1.34 percent.

Note 3 Acquired companies net assets at the time of acquistion

	Apr 2021
Intangible fixed assets	–
Tangible fixed assets	2
Financial fixed assets
Trade and other receivables	10
Cash and cash equivalents	15
Long-term liabilities	–3
Accounts payable and other short-term liabilities	–8
Net identifiable assets	16
Goodwill	81
Fair value adjustment acquired intangible assets	29
Deferred tax related to acquired assets	–6
Purchase price	120
Deduct:
Acquired cash	–15
Deferred payment of part of consideration	–21

Net outflow of cash 84

The acquisition relates to 100 percent of the shares and votes in Conoa AB. The acquisition was completed on April 12, 2021.

Total acquisition costs charged to earnings in 2021 amounted to SEK 1.2 million.

Of the total purchase price of SEK 120 million, SEK 99 million was paid in cash at the time of acquisition, the rest of the purchase price will be settled 18 months after the acquisition date.

In the acquisition, the purchase price was higher than the recognised assets of the acquired business, which resulted in the acquisition analysis giving rise to intangible assets.

Goodwill in this acquisition is motivated by the fact that the acquisition is an important part of Proact's growth strategy with the ambition to broaden the offering and expand its presence in the company's key markets. The pace of innovation among the company's customers drives a clear demand for new types of IT infrastructure solutions that simplify and streamline the development of so-called cloud native applications.

Conoa, founded in 2012, is a privately-owned company with 28 employees and has thanks to its strong growth been awarded the Gazell business award for five consecutive years (2016-2020) by Dagens industri and to Super company by Veckans Affärer.

Through the acquisition of Conoa, Proact strengthens its offering and expertise in modern platforms such as Kubernetes and container technologies.

The acquisition was completed on April 12, 2021 and until third quarter 2021 Conoa contributed with SEK 54 million in revenue and SEK 1 million in operating profit. If Conoa had been consolidated from the beginning of the year, Conoa would have contributed SEK 83 million in revenue and SEK 3 million in operating profit. On a full-year basis, Conoa is expected to contribute to the Group's sales of approximately SEK 80 million and EBITA of approximately SEK 11 million.