Smartoptics Group AS — Interim / Quarterly Report 2021

Nov 12, 2021

Q3 2021 presentation

2021 Q3 and first 9 months highlights

Gross Margin Q3 2021

42.4% (42.1% 9 months)

Adjusted EBITDA Margin Q3 2021

11.3% (12.1% 9 months)

Our market is driven by mega trends that generate strong demand for data traffic and higher capacity

Market with underlying market growth of 15.2% per year

Source: Cignal.AI October 2021. Transport Applications Report

Market – Compact Modular EMEA + North America Comments

• Compact modular segment is expected to grow by 15.2% in North America and EMEA between 2020-2025
• Compact modular products are compact in design and best suited for building open and disaggregated networks
• Smartoptics is starting to close in on the larger players on the compact modular market
• No other challenger visible on the market

Good business momentum, strong order booking, while component shortage is a risk

	Key events during the quarter		Supply situation		Outlook
•	Strong order booking – orders booked increased with 73% in Q3 2021 compared to Q3 2020	•	Expected impact on revenue during Q3 is around 0.5 MUSD (delayed revenue)	•	Supply constraints to continue into next year
				•	High customer engagement levels
•	Continued success with larger customers	•	Build-up of inventory to mitigate component shortage has led to higher working capital and		and high appreciation of our products both in terms of network design / philosophy and cost levels
•	Customers in Americas have		negatively impacted cash flow
	consumed a larger share of the			•	Long term revenue growth
	business (revenue) during the quarter				ambitions maintained

Strong order booking in 2021, accelerating throughout the year

Orders booked Q1 through Q3 2020 and 2021 Comments

Americas key driver for growth in 2021

Invoiced Revenue per Region and Quarter – 2020 and 2021 Comments

• Strong growth in Americas, driven by large deals and key customers
• EMEA lower revenue an effect of business prioritization and catch-up effects in Q3 2020 (related to weak H1 2020 due to Covid-19)
• APAC showing high growth, although from lower levels

Summary of financial performance

2020 2020 2020 2020 2021 2021 2021

Note: *) EBITDA adjusted for around 175 KUSD in one-off IPO costs

Financial guidance unchanged

Profit and Loss Statement

Profit and Loss Statement Q3 and first 9 months of 2021 and 2020

Profit and Loss Statement	2021 Q3	2020 Q3	2021 9m	2020 9m	Q3 21 vs Q3 20	9m 21 vs 9m 20
Invoiced Revenue	11 389	9 565	34 048	23 999	+19.1%	+41.90%
Net Change Deferred Revenue	-304	-305	-569	-488
Total Recognized Revenue	11 085	9 261	33 479	23 511	+19.7%	+42.4%
Total COGS	-6 382	-5 465	-19 373	-14 115
Gross profit	4 704	3 795	14 106	9 396	+23.9%	+50.1%
Gross margin	42,4%	41,0%	42,1%	40,0%
Operating expenses	-3 446	-2 651	-10 056	-8 015	+30.0%	+25.5%
Adjusted EBITDA1)	1 258	1 145	4 050	1 382	+9.9%	+193.1%
EBITDA in %	11,3%	12,4%	12,1%	5,9%
Total Depreciation	-225	-167	-662	-459
EBIT	996	978	3 208	923	+1.8%	+247.6%
EBIT in %	9,0%	10,6%	9,6%	3,9%
Net Finance Items	-14	-163	-70	317
Earnings before taxes	982	815	3 138	1 240	+20.5%	+153.0%
EBT in %	8,9%	8,8%	9,4%	5,3%
Tax	-216	4	-690	11
Earnings after tax	766	819	2 447	1 251

Cash Flow Statement

Cash Flow Statement for Q3 and first 9 months of 2021 and 2020

Cash Flow Statement	2021 Q3	2020 Q3	2021 9m	2020 9m	Comment
Cash at the beginning of the period	12 187	2 124	3 625	2 094
EBITDA	1 258	1 145	4 050	1 382
Changes in Accounts Receivables	-2 389	-1 272	-2 732	-1 296
Changes in Accounts Payable	203	606	-391	662
Changes in Inventory	-2 007	-1 589	-247	-1 673
Changes in Deferred Revenue	281	320	550	422
Other Working Capital Changes	-568	-60	-1 543	124
Cash Flow from Operating Activities	-3 224	-851	-314	-378
Changes in Non-Current Assets	52	-263	-342	-144
Cash Flow from Investing Activities	52	-263	-342	-144
Changes in short term financing	0	-515	-2 163	-980
Changes in long term financing	-81	1 040	-176	939
Interest paid	-1	-34	-46	-115
Cash Flow from Financing Activities	-83	491	-2 385	-156
Dividend	0	0	-2 231	0
New shares issued	0	0	11 159	0
Translation Differences	-400	3	-980	89
Net Cash Flow	-3 654	-620	4 907	-590
Cash at the End of Period	8 533	1 504	8 533	1 504

Comments

• The negative Operating Cash Flow was attributable to increase in Working Capital driven by:
  • ─ Increase in Accounts Receivable due to large portion of the revenue coming at the end of the quarter
  • ─ Increase in Inventory related to 1) ramp-up for deliveries in the fourth quarter and the general growth trend and 2) larger purchases of components in order to mitigate the general component shortage
• Normally Q3 has a weaker Cash Flow due to seasonality effects, and 2021 is no exception

Balance Sheet

Balance Sheet for Q3 2021 and Q3 2020

Assets (MUSD)	Sep 30, 2021	Sep 30, 2020
Non-Current Assets	6 229	5 917
Capitalized Development Cost	877	964
Deferred Tax Asset	4 019	3 685
Property Plant and Equipment	1 334	550
Financial Assets	0	718
Other Non-Current Assets	0	0

Current Assets	27 088	15 005
Inventory	8 350	6 517
Accounts Receivables	8 845	6 049
Prepaid Expenses	1 361	833
Cash and Cash Equivalents	8 532	1 504
Other Current Asset	0	102

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Equity and Liabilities (MUSD)	Sep 30, 2021	Sep 30, 2020
Total Equity	23 454	10 798
Non-Current Liabilities	3 655	3 033
Liabilities to Financial Institutions	2 057	2 075
Deferred Revenue	1 598	959
Other Non-Current Liabilities	0	0
Current Liabilities	6 208	7 091
Liabilities to Financial Institutions	0	1 297
Deferred Revenue	1 229	753
Accounts Payable	3 619	2 944

Public Duties 127 795 Other Current Liabilities 1 233 1 301

Total Liability 9 863 10 124 Total Liability and Equity 33 317 20 922