Kontron AG (formerly S&T AG)

Earnings Release • Aug 3, 2023

Explore the Kontron Group

We are a fast-moving multinational technology leader.

Earnings Call Q2 2023

August 3rd, 2023

Kontron: Q2 Results & Company Highlights

Results Highlights

• › Gross margin rose to 40.6% (Q2 2022: 37.8%)
• › EUR 326m of liquidity +EUR 59m payable by Vinci; Approx. EUR 100m debt reduction in H1 2023
• › EUR 1.6bn backlog Q2 book-to-bill ratio of 1.1
• › Chip shortage: Further reduction to EUR 72m of overdue orders (down EUR 55m from peak)

Company Highlights

› Record dividend of EUR 1 per share paid: Based on strong FY 2022 results and sale of IT service

› 2 M&A transactions

Telit + Comlab, yearly revenues of approx. EUR 120m

› Kontron listed in TecDAX:

As of 9 May 2023, Kontron is once again listed in the TecDAX

› Sale of IT service "Focus" completed (Moldavia sold in June)

KPIs Q2 2023

KPIs 6M 2023

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The New Kontron

Backlog and Design wins

(in EUR bn) Backlog Design wins

Top Design Wins in 6M 2023	Country	Volume EUR
Railway	FR	150m
Medical	DE	60m
Telecommunication	AT	50m
Medical	DE	50m
Defense	US	42m
Railway	SK	40m
Industrial	US	35m
Defense	US	34m

Kontron Group Balance Sheet

Equity and liquidity very strong

in m EUR	6/30/2023	12/31/2022
NON-CURRENT ASSETS	4920-7	412.1
Fixed Assets	388.4	379.0
as of Property, plant and equipment	101.3	95.5
as of Goodwill	188.1	189.4
Other Assets	32.3	33.1
CURRENT ASSETS	846.0	1,028.8
Inventories	225.9	192.6
Trade receivables	131.4	148.1
Contract Assets from Customers	50.4	54.2
Cash and cash equivalents	326.0	437.8
Other receivables and prepayments	112.3	189.7
assets classified as held for sales	0.0	6.3
Total Assets	1,266.7	1,440.9

in EUR m	6/30/2023	12/31/2022	6/30/2023 in EUR m		12/31/2022
NON-CURRENT ASSETS	420 7	412 1	EQUITY	597 8	635 7
Fixed Assets	388 4	379 0	accumulated results	420 7	449 6
of , plant and equipment Property as	101 3	95 5	of shares Treasury -9 2 as		0 0
of Goodwill as	188 1	189 4	NON-CURRENT LIABILITIES 135 8		252 6
Other Assets	32 3	33 1	loans and borrowings Long-term	65 7	193 8
CURRENT ASSETS	846 0	1 028 8 ,	Other Liabilities Non-Current	70 1	58 9
Inventories	225 9	192 6	CURRENT LIABILITIES	533 0	552 6
Trade receivables	131 4	148 1	Trade payables	192 5	226 3
from Contract Assets Customers	50 4	54 2	Liabilities from Contract Customers	78 0	78 5
Cash and cash equivalents	326 0	437 8	Short-term loans and borrowings	154 6	125 7
Other receivables and prepayments	112 3	189 7	Other Liabilities Current	108 0	117 3
classified held for sales assets as	0 0	6 3	liabilities classified held for sale as	0 0	4 8
Total Assets	1 266 7 ,	1 440 9 ,	Total Liabilities & Equity	1 266 7 ,	1 440 9 ,
			Equity Ratio	47 2%	44 1%
			Cash/(Net Debt)* Total Net	105 7	118 3
			15** Working Capital excluding IFRS	164 8	114 4

In Q2 EUR 26m of reduction in debt Very strong cash position: EUR 326m cash + EUR 59m open purchasing price from Vinci

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Additional Disclosures

Q2-2023

Cash generation (op CF) 7 100
65	59		-13
2021	2022	2023E	6M 2021	-71 6M 2022	6M 2023
ORGANIC GROWTH In TEUR				Q2 2022	Q2 2023
Stated revenues				245,574	283,219
Divestments (RUS/UA/BY/CZ+)				-3,455
Acquisitions (Lucom/Arce)					-4,304
ORGANIC GROWTH					15.2%
GEOGRAPHICAL SPLIT Q2 2023 (In %)				Revenue	EBITDA
Europe				81.0%	82.6%
North America				13.0%	11.3%
Asia				6.0%	6.1%

Europe: Biggest segment

Target is to increase EBITDA margin in 2025 to 12%

• * EBITDA before Intercompany HQ fees (part of Europe Segment)
• ** EBITDA before HQ fee in % of external revenue

Global: Back to normal profitability

Today 20% of revenues in North America + Asia; target 30%

• * EBITDA before Intercompany HQ fees (part of Europe Segment)
• ** EBITDA before HQ fee in % of external revenue

Software & Solutions: Fast growing

Will be the biggest segment by 2025

• * EBITDA before Intercompany HQ fees (part of Europe Segment)
• ** EBITDA before HQ fee in % of external revenue

Margin improvement strategy (MIS): Focus on "Software + Solutions" segment

Allocate all resources to "Software + Solutions"

M&A strategy

replace sold IT segment by strategic IOT acquisitions

• › Replace EUR 387m sold IT business by IoT acquisitions
• › Target: high synergies with Kontron = >12% EBITDA within 2 years
• › Complementary IoT technologies to improve portfolio
• › Finance by existing cash and cash flow not shares

Kontron M&A pipeline

• › H1 2023 Telit and Comlab done; EUR 120m yearly revenues
• › Currently 5 offers/LOIs running at probability > 50%
• › Total revenues: EUR >700m
• › Thereof 4 for "Software + Solutions", 1 for "Global"
• › Thereof 3 we expect a go/no go decision in the next 3 months

We will replace more than EUR 387m IT revenues before June 2024 = base for EUR 2bn revenues in 2025

Europe Global Software + Solutions

M&A is a core competence of Kontron M&A revenues H2/2022 – H2/2024

M&A deals: Telit Cinterion & Comlab AG

Two IoT business-relevant deals successfully completed in Q2

Telit Cinterion (DE) Comlab AG (CH)

• › Purchase of Telit's 5G automotive module unit
• › Integrated into Kontron Europe GmbH
• › Reported in the "Europe" segment
• › Markets: Globally, mainly Germany

Benefits + synergies

• › 5G technology and products
• › Proprietary software technology for the automotive sector
• › Software/4G/5G solutions

Metrics

• › Purchasing price: EUR 24.5 million
• › 2022 revenues ~EUR 100 million
• › 105 FTEs
• › Low impact in 2023
• › Outlook 2024:
• › Revenues: EUR 100 million
• › 5% EBITDA (midterm 10%)

-

• › Low impact in 2023
• › Outlook 2024:
  • › Revenues: EUR 25 million

• › 5% EBITDA (midterm 15%)

• › Data communication for railways › Integrated into Kontron Transportation

• › Reported in the "Software + Solutions" segment
• › Markets: Mainly Switzerland, Germany, and China

Benefits + synergies

• › Kontron enters the important Swiss railway market
• › Enhance Kontron Railway portfolio for mission-critical networks for amplifying and repeating signals

Metrics

• › Purchasing price: mid-single-digit million
• › 2022 revenues ~EUR 20 million
• › 110 FTEs

The New Kontron

Confident in guidance 2023 – better operational performance

Vision 2030: Transformation to IoTaaS / SLAs will boost Net Earnings close to 10%

Summary

Achievements Q2-23 Two successful M&A transactions › Strong order intake of EUR 310m (book-bill 1.1) › Significant improved net income of EUR 17.5m › Q2-23) vs EUR 8.9m (Q2-22)	Targets FY2023 Guidance: › Revenue EUR 1,200m › Net income EUR > 66m › EUR 2,000m IIoT revenues at › > 13% EBITDA in 2025 Further M&A transactions in 2023 ›
Risks Economical climate › Political instability › External risks are greater than minor internal › risks	Opportunities Sufficient cash for "game changer" acquisitions › One of only a handful of European Technology › players 5G connectivity for machines ›

Explore the Kontron Group

We are a fast-moving multinational technology leader.

Q&A Session – Q2 2023 Earnings Call

August 3rd, 2023