Smartoptics Group AS — Investor Presentation 2023

Nov 8, 2023

Financial Presentation

Q3 2023

November 8, 2023

2

The market for fiber optical network equipment is worth 16 billion USD worldwide

16 billion USD world market

• 50% is Metro
• 50% is EMEA and North America
• In total Smartoptics addresses about 30%

Key driver is data growth

• Cloud migration & new data centers
• Migration to 400Gbit/s
• 5G roll-out
• Fiber access roll-out
• Government funding

Open and disaggregated solutions

• Shift toward more cost-efficient networks
• IP over DWMD

Data centers, Cloud, Enterprises and Small to Medium Operators

Smartoptics is well positioned for long term profitable growth

Attractive technology Strong financial model Open solutions Cost efficient No legacy products, unique position

Well positioned in small and mediumsized customers

Opportunity to expanding into larger accounts

Strong footprint in Americas and Europe

Investing into selected emerging markets

and outlook

Solid margin & capital light Debt free & good cash flow Paying dividend

Continue to gain market share in metro segment in key markets and expand adressable market

Continued strong financial development

15.9% 0 5 10 15 20 25 30 35 40 45 50 55 60 4.9 5.8 -2.0% 2018 7.9 6.6 6.7 5.0 3.8% 2019 11.5 9.2 7.9 6.6 5.1% 2020 12.4 11.1 12.4 10.0 10.0% 2021 17.5 13.5 14.6 11.8 16.2% 6.0 13.6 17.0 14.1 2023 22.6 2022 35.1 45.9 57.4 44.7 5.9 26.2

EBIT % Q1 Q2 Q3 Q4

Revenue and profitability development since 2018 Key milestones

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

26%

• Last twelve months revenue is 62.1 MUSD
• Operational situation more favourable in 2023, enabling shorter lead times

Continued solid profitability and strong cash flow in Q3 2023 13% revenue growth excluding 5G related projects in Q3

Revenue		Gross Margin		Earnings Per Share
Q3: 9m:	13.6 MUSD (+1.1%) 44.7 MUSD (+11.9%)	Q3: 9m:	50.0% (+2.5 p.p.) 49.9% (+3.9 p.p.)	Q3: 9m:	0.15 NOK 0.71 NOK
EBITDA Margin		EBIT1 Margin		Operating Cash Flow
Q3:	19.8% (2.7 MUSD)	Q3:	16.3% (2.2 MUSD)	Q3:	+5.5 MUSD
9m:	19.0% (8.5 MUSD)	9m:	15.9% (7.1 MUSD)	9m:	+9.7 MUSD

Strong growth in business area Software & Services

Revenue by business area Q3 specific development

(MUSD)

• Software and Services showing very strong growth
• Significant portion of Software and Service is recurring
• Solutions slightly down due to lack of large projects which contributed to 2022 numbers
• Software & Services shown after reduction of deferred revenue, i.e. numbers shown are the recognized revenue

Growth in Americas, while EMEA declined slightly

Revenue per Region and Quarter – Last 5 quarters

Increased cash position due to profitability and decreased working capital

Balance Sheet Sep 30, 2023 Working Capital Development past 5 quarters

Solid profitability and strong cash flow

EBITDA & EBIT

Return on Capital Employed

Q1 Q2

Q3 Q4

Q1 Q2

Q3

Operating Cash Flow (MUSD)

Note: Return on Capital Employed (ROCE) defined as EBIT divided Capital Employed. Capital Employed is defined as Fixed Assets + Current Assets – Current Liabilities

Long term ambitions stay firm

	2023 Q3	2025/26 aspirations
Revenue	13.6 MUSD (LTM 62.1 MUSD)	~100 MUSD
Gross margin	50.0%	~45%
EBITDA margin	19.8%	~17-20%
EBIT margin	16.3%	~13-16%

Profit and Loss Statement

Profit and Loss Statement Q3 2023

		kUSD
	2023 Q3	2022 Q3	Change
Total revenue and other operating income	13 602	13 451	+1.1%
Direct cost of sales	-6 805	-7 070	-3.8%
Employee benefit expenses	-3 188	-2 679	+19.0%
Other operating expenses	-913	-773	+18.1%
Total operating expenses	-10 906	-10 522
Depreciation	-418	-282
Amortization of intangible assets	-67	-78
Total depreciation and amortization	-484	-360
Operating profit/(loss)	2 211	2 569
Financial income	5	1
Financial expenses	-66	-36
Net foreign exchange gains (losses)	-652	455
Net Finance Items	-714	420
Profit/(loss) before income tax	1 497	2 989
Estimated income tax	-329	-496
Profit/(loss) for the period	1 168	2 493
Shares outstanding (Basic)	96 286 593	96 286 593
Shares outstanding (Diluted)	97 293 383	96 286 593
Earnings per share (Basic) USD	\$ 0.012	\$ 0.026
Earnings per share (Diluted) USD	\$ 0.012	\$ 0.026
Earnings per share (Basic) NOK	NOK 0.147	NOK 0.270
Earnings per share (Diluted) NOK	NOK 0.146	NOK 0.270

Comments to Q3 events

• Continued strengthening of the organization with focus on R&D drives employee expenses
• Improved gross margin (lower direct cost of sales)
• Increase in employee benefit expenses and other operating expenses slowed down as recruiting and external spend are at lower level
• YTD (9m) EPS 0.71 NOK
• LTM (12m) EPS 0.82 NOK
• EBITDA Q3 2023 2,696 kUSD
• EBITDA Q3 2022 2,929 kUSD

Cash Flow Statement

Cash Flow Statement for Q3 of 2023 Comments

Amounts in USD 1,000	2023 Q3	2022 Q3
Cash flows from operating activities
Profit/(loss) before income tax	1 497	2 989
Adjustments for
Taxes paid	-67
Depreciation and amortization	484	360
Interest	38	19
Change in inventory	1 165	1 369
Change in trade receivable	2 364	-655
Change in contract liabilities (deferred revenue)	309	-68
Change in trade payable	-1 001	-1 444
Change in other current assets and other liabilities	707	-1 033
Interest received	5	1
Net cash inflow from operating activities	5 502	1 537
Net cash (outflow) from investing activities	-242	-282
Net cash inflow from financing activities	-6	-227
Net increase/(decrease) in cash and cash equivalents	5 254	1 027
Cash and cash equivalents at the beginning of period	2918	5 749
Effects of exchange rate changes on cash and cash equivalents	-344	-659
Cash and cash equivalents at the end of period	7 829	6 117

• Lower inventory due to continuous efficiency improvement and purchases during semiconductor shortage being shifted out
• Lower trade receivables as revenue late in Q2 converted to cash

Balance Sheet

Balance Sheet for Sep 30, 2023

	kUSD
	2023	2022
	Q3	Q3
Intangible assets	975	834
Property, plant and equipment	2 667	1 352
Right of use assets	1 973	1 442
Noncurrent receivables against related party	-	-
Deferred tax assets	1 232	2 643
Total Non Current Assets	6 847	6 271
Inventories	12 958	11 851
Trade receivable	15 585	10 741
Recaivables to related party	-	-
Other current assets	1 006	1 298
Cash and cash equivalents	7 829	6 116
Total Current Assets	37 378	30 006
TOTAL ASSETS	44 225	36 277

	kUSD
	2023	2022
	Q3	Q3
Share capital	181	177
Share premium	11 879	11 622
Other paid in capital	141	138
Foreign currency translation reserves	73	99
Retained earnings	15 227	13 307
Total Equity	27 501	25 343
Lease liabilities (noncurrent portion)	1 107	1 013
Contract liabilities (noncurrent deferred revenue)	3 099	1 847
Other noncurrent liabilities	1 361	1 497
Total noncurrent liabilities	5 567	4 357
Lease liabilities (current portion)	679	470
Trade payable	3 339	3 149
Contract liabilities (deferred revenue)	2 649	1 486
Current tax liabilities	2 541	461
Other current liabilities	1 949	1 010
Total current liabilities	11 157	6 577
Total Liabilities	16 723	10 934
TOTAL EQUITY AND LIABILITIES	44 225	36 277

Thank you