Kontron AG (formerly S&T AG)

Investor Presentation • Nov 7, 2019

COMPANY PRESENTATION

Q3 2019 Results | November 2019

Hannes Niederhauser, CEO Richard Neuwirth, CFO

S&T GROUP FIGURES: GOOD RESULTS IN ALL PARAMETERS

S&T HIGHLIGHTS

Profit Focus	Revenue 9M 2019 (9M 2018): +14,1% EUR 753,2 Mio. (EUR 660,0 Mio.)   EBITDA 9M 2019 (9M 2018): +25,3% EUR 71,7 Mio. (EUR 57,2 Mio.)  Net income after NCI 9M 2019 (9M 2018): +13,5% EUR 29,0 Mio. (EUR 25,6 Mio.)
Leading IoT alliance	Manufacturing cooperation and IoT cooperation with Foxconn in progress  Alliance with Microsoft and Intel for Industry 4.0 Cloud Solutions  IoT software framework SUSiEtec expanded by AIS acquisition 
Finance Growth	Cash and cash equivalents of EUR 261,0 Mio. at hand   Liquidity available to finance organic and an-organic growth  Working Capital Optimization progressing well through PEC program
Shareholder Focus	 TecDAX® listed since Sept. 2016 , SDAX® listed since Sept. 2018  Continuous dividend increase: 2014 - 2018: 7ct; 8ct; 10ct; 13ct; 16ct 2019: up to EUR 30 Mio. share buyback, EUR 13 Mio executed so far 

Adjusted EBITDA margins 9M****

"IOT SOLUTIONS EUROPE" SEGMENT DRIVES PROFITABILITY

Revenue 9M 2018 vs 9M 2019*

EBITDA 9M 2018 vs 9M 2019

IOT Europe growth on high margins, EE countries stronger, upswing in USA ongoing

*3rd party revenues including IC | ** USD FX effect ~ EUR 2,2 Mio. | *** Difference based on charged management fees to S&T AG (part of IT Services Segment) ****HQ-fee adjusted EBITDA margins in % of external revenue

KAPSCH M&A: TURNAROUND FASTER THAN EXPECTED

Status	Turnaround measures	2019	2020	2021
Revenues / Growth	Revenues: 2019: stop EUR 20 Mio. unprofitable biz, 2021: 10% growth	-	-	4,8 Mo.
Sales Synergies	Sales channel synergies	1,0 Mio.	3,2 Mio.	-
Synergies Technology	Use Kapsch Software in Kontron		1,2 Mio.	2,3 Mio.
Synergies Engineering	Insource engineers to cost efficient S&T	2,0 Mio.	4,2 Mio.	-
Cost savings	Reduce 70 FTE, space, better GM	3,5 Mio.	2,9 Mio.	- 2,5 Mio.
Improvement	Total improvement per year	+6,5 Mio.	+11,5 Mio.	+4,6 Mio.

• Turnaround of Kapsch goes faster and better than expected
• EUR 100 Mio. profitable biz remains (2018: EUR124 Mio.), 470 employees reduce to < 400
• Q3 2019 was profitable, FY 2019 incl. restructuring charges: EUR 1,5 Mio. (before 4,9 Mio) of loss
• For 2020 we expect ~ 10% of EBITDA, 2021: 12% of EBITDA and 10% growth

Kapsch forecast	2018*	2019**	2020	2021
Revenues	124	~50	100	110
EBITDA	-16,9	-1,5	10	13,6

*FY: 4/2018 – 3/2019; **consolidated in S&T

STATUS PEC PROGRAM (PROFITABILITY | EFFICIENCY | CASHFLOW)

Profitability

GOAL: INCREASE EBITDA MARGIN MID TERM BY 2%

• Better ROI: Global roll out of new technologies: ITP program initiated for 2020, 2020 separate P&L reporting
• Intensify Manufacturing cooperation with Foxconn and further benefit from their supply chain power: Implemented, visible in Q4, US tariffs addressed
• Achieve savings of EUR 20 Mio. pa. within 12 months: Measures identified – visible in H1 2020 like for like

Efficiency

GOAL: OPTIMIZATION AND EFFICIENCY GAINS ACROSS THE GROUP

• Reduce/merge number of legal entities Status: Minus 8 legal entities in 2019, 2020 further reduction of 16 entities
• Process improvements measured by extensive reporting. Status: Reporting partially established, ITP, Divisions, working capital fully running 2020
• General tax optimization: Status: Implemented and visible as of today

Cashflow

GOAL: GENERATE EUR 60 MIO. CASH ACROSS THE GROUP

• Reduction in inventory and working capital Status: despite revenue growth inventory reduced by EUR 7,5 Mio., additional reduction of EUR > 20 Mio. in Q4
• Adjustment of supplier contracts (VMI) Status: Renegotiations partially completed, first improvements in Q4 2019 (EUR 10 Mio. working capital reduction)
• Strict Accounts Receivable management Status: Q3 A/R outstanding improved from 83 to 77 days

Gain 2% EBITDA margin by 2023, reduce working capital from 22% (6M 2019) to 15% (12M 2020)

STATUS PEC PROGRAM (PROFITABILITY | EFFICIENCY | CASHFLOW)

PEC program: Significant improvements in operating cash flow in Q3 2019

ONE-TIME EFFECTS ON PROFIT IN Q3 2019

in TEUR	One time effects	in TEUR	R&D capitalization Q3	in TEUR	PPA
+1.649	Release purchase price consideration	+4.193	Capitalization R&D in Q3*	1.394	Q3 2018 Amortization
-396	Restructuring – close Fremont office	-3.882	Amortization of R&D in Q3	2.084	Q3 2019 Amortization
-103	FX losses	+311	Impact R&D Capitalization	+690	Increase in PPA Amort.
-312	Expenses on stock options
-289	Side costs from M&A
+549	Total impact on Q3 results

No major impacts of one time effects on Q3 results

* Only 13,6% of R&D&E cost capitalized

S&T GROUP BALANCE SHEET

Mio EUR	30 09 2019	31 12 2018		30 09 2019	31 12 2018
NON CURRENT ASSETS -	447 3 ,	292 5 ,	CAPITAL AND RESERVES	370 1 ,	367 3 ,
Fixed Assets	407 6 ,	262 7 ,	Equity	370 1 ,	367 3 ,
Other Assets	39 8 ,	29 8 ,	NON CURRENT LIABILITIES -	340 1 ,	131 9 ,
CURRENT ASSETS	711 7 ,	555 5 ,	loans and borrowings Long -term	225 0 ,	79 4 ,
Inventories	160 7 ,	130 8 ,	Other Liabilities Non Current -	2 115 ,	52 4 ,
receivable Trade accounts	186 8 ,	202 7 ,	CURRENT LIABILITIES	448 8 ,	348 8 ,
from Contract Assets Customers	24 0 ,	4 4 ,	Trade payable accounts	146 1 ,	177 0 ,
Cash and cash equivalents	261 0 ,	171 8 ,	Liabilities from Contract Customers	67 5 ,	37 5 ,
Other receivables and prepayments	79 2 ,	46 0 ,	Short loans and borrowings -term	85 0 ,	39 6 ,
			Other Liabilities Current	150 4 ,	94 7 ,
Total Assets	1 159 1 ,	847 9 ,	Total Liabilities & Equity	1 159 1 ,	847 9 ,
			Equity Ratio	31 9% ,	43 3% ,
			* Cash Net	105 4 - ,	44 6 ,
			** Working Capital	225 4 ,	160 8 ,

PEC Program to increase balance sheet ratios

*From 2019 onwards new calculation of net cash based on IFRS 16: Cash and cash equivalents less non-current and current financial liabilities (incl. liabilities from leasing) ** WC= Inventories + AR (trade) + Contract Assets – AP (trade)

ACQUISITION STRATEGY - AGENDA 2023: 2 BN OF REVENUES

• M&A focus on restructuring cases with low multiples and technology/synergy potential
• EUR 200 Mio. and 30 Mio. in shares (buy back) for M&A add EUR 100 Mio revenues p.a.

Acquisition targets:

• No. 1: "Volume companies" – 2019: Kapsch
• Buy synergetic loss companies at reasonable prices (multiples <6)
• Turnaround by synergies, savings and reduction of unprofitable biz
• Increase GM from 25% to 40% and 10% EBITDA under S&T ownership

No. 2: "Technology Pearls" – 2019: Kapsch + AIS

• Complement our technology with focus on Software at reasonable prices (e.g. AIS)
• Increase GM constantly by replacing low margin HW biz by SW enabled IoT biz
• Target opportunities at reasonable prices

• EUR 100 Mio for organic growth add EUR 100 Mio revenues p.a.

• Dedicated acquisition department installed at S&T responsible for:

• Due diligence
• Technology synergies
• 1 year integration phase

Agenda 2023: Achieve 2 Bn. of revenues without major capital increases, focus on cash generation (PEC program)

S&T'S GROWTH PATH CONTINUES: EUR 2 BN. IN 2023

EBITDA

Backlog EUR Mio.	12/13	12/14	12/15	12/16	12/17	12/18	09/19
Project Pipeline	308	644	701	1.002	1.105	1.632	1.988
Scheduled Orders	97	157	181	306	474	607	815

Revenue (in EUR Mio.)

2019: Approx. EUR 1,145 Bn. revenues and more than EUR 100 Mio. EBITDA | PEC Program to boost EBITDA margin mid term to 12%

SUMMARY

Achievements

• PEC in Q3: EUR 16 Mio. operating cash flow and 37,7% gross margin
• 9M 2019: Revenue growth of 14% and EBITDA growth of 25%
• 9M 2019: Project pipeline 22% up to EUR 1,99 Bn

• 2 Bn. revenues in 2023
• Ongoing GM Improvement to 40% and EBITDA to > 10%
• Targets MDAX membership

• Big players enter our niches in Industry 4.0
• US-Dollar development

• Risks Address right technology trends

• PEC Program boosts CF and EBITDA

• Growth areas America + China
• Leading technologies in the high growing IIoT market Opportunities

DISCLAIMER

This document includes 'forward-looking statements'. Forward-looking statements are all statements, which do not describe facts of the past, but containing the words "believe", "estimate", "expect", "anticipate", "assume", "plan", "intend", "could", and words of similar meaning. These forward-looking statements are subject to inherent risks and uncertainties since they relate to future events and are based on current assumptions and estimates of S&T AG, which might not occur at all or occur not as assumed. They therefore do not constitute a guarantee for the occurrence of future results or performances of S&T AG. The actual financial position and the actual results of S&T AG, as well as the overall economic development and the regulatory environment may differ materially from the expectations, which are assumed explicitly or implicitly in the forward-looking statements and do not comply to them. Analysts and investors, and any other person or entity that may need to take decisions, or prepare or release opinions about the shares / securities issued by S&T AG are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date of this document. Past performance cannot be relied upon as a guide to future performance.

Except as required by applicable law, S&T AG undertakes no obligation to revise these forward-looking statements to reflect events and circumstances after the date of this presentation, including, without limitation, changes in S&T's business or strategy or to reflect the occurrence of unanticipated events. The financial information and opinions contained in this document are unaudited and are subject to change without notice. This document contains summarized information or information that has not been audited. In this sense, this information is subject to, and must be read in conjunction with, all other publicly available information, including if it is necessary, any fuller disclosure document published by S&T AG. None of the Company, its subsidiaries or affiliates or by any of its officers, directors, employees, advisors, representatives or agents shall be liable whatsoever for any loss however arising, directly or indirectly, from any use of this document its content or otherwise arising in connection with this document.

This document or any of the information contained herein do not constitute, form part of or shall be construed as an offer or invitation to purchase, subscribe, sale or exchange, nor a request for an offer of purchase, subscription, sale or exchange of shares / securities of S&T AG, or any advice or recommendation with respect to such shares / securities. This document or a part of it shall not form the basis of or relied upon in connection with any contract or commitment whatsoever.

This document does not constitute an offer to purchase securities in the United States, Canada, Australia, South Africa and Japan. Securities, including the bond of S&T AG may not be sold or offered for sale within the United States or to or for the account of / in favor of US citizens (as defined in Regulation S under the U.S. Securities Act of 1933 in the current version (the "Securities Act") unless they are registered under the regulations of the Securities Act or unless they are subject to an exemption from registration. Neither S&T AG nor any other person intend to register the offer or a part thereof in the United States or to make a public offer of the securities in the United States.

Q&A SESSION

Thank you for your attention

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S&T AG

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