Kontron AG (formerly S&T AG) — Investor Presentation 2023

Aug 16, 2023

Explore the Kontron Group

We are a fast-moving multinational technology leader.

Investor Presentation

August 2023

Who we are Pure-Play Leader of Smart Industrial IoT Solutions

4,547 Employees (6/2023)

2023E Net result (EUR)*

1.2bn 2023E Revenue (EUR)*

66m

10% Organic growth p.a.*

Member of SDAX® Member of TecDAX®

HQ in Austria; listed in Germany

• › Focused on the large, diverse and growing Industrial IoT market (IIoT)
• › Fully integrated technology platform Integrated (SW+HW) solutions for smart factories, transportation, data connectivity, medical and smart energy
• › Driven by customers success, blue-chip customers Highly diversified customer base, top 10 customers account for approx. 12% of revenues, >3,000 customers in total
• › Leading provider of disruptive IoT connectivity technology

Real time 5G/6G connectivity, susietec® toolset, over 3,200 engineers

The IoT Market

64 billion

connected IoT devices by 2025 worldwide (from 29 billion in 2022)

31% growth

machines connected to the Internet by 2025

4bn 20bn

2016 2020 2025

\$ 148.6 billion

Industrial IoT revenue with a 11.4% CAGR from 2022

21% adoption

of 5G across mobile internet

connections by 2025

Key Metrics Focus Industries

High entry barriers: single source customization – real time software – expensive customer products with low volume

Sources: Mgmt. estimates, Techjury, Ericsson, Enterra Solutions, Markets and Markets, Market Data Forecast, McKinsey Global Institute, Statista

75bn

3

The New Kontron

7 divisions in 3 segments

Europe		Global		Software & Solutions
Industrial	Telecom	OT Services	North America	Asia	Software	Transport
Industrial, Medical and Defense	Adding 5G connectivity to IoT products	IT converted to Service contracts for IoT	Sales channel for Europe products; Avionics	Sales channel for Europe products	susietec® & customized IoT software	Data for high speed trains in Europe & China
Revenue* FC 2023		Revenue* FC 2023		Revenue* FC 2023
€ 810m			€ 260m		€ 230m
Targets EBITDA** 11% GM 40% Growth p.a.: 10%			Targets EBITDA** 8% GM 30% Growth p.a.: 12%		Targets EBITDA** 15% GM 60% Growth p.a.: 16%

* incl. intercompany revenues | ** EBITDA before HQ fee in % of external revenue 4

Kontron: H1 Results & Company Highlights

Results Highlights

• › Q2 Gross margin rose to 40.6% (Q2 2022: 37.8%)
• › EUR 326m of cash +EUR 59m payable by Vinci
• › EUR 1.6bn backlog H1 book-to-bill ratio of 1.25
• › Supply chain normalization: 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 signed Telit + Comlab adding 2024 revenues of appr. EUR 120m
• › Kontron listed in TecDAX: Kontron is listed in the TecDAX
• › Sale of IT Service business "Focus" completed (Moldavia Q2 sold in June)

KPIs 6M 2023

Gross margin Q2 exceeded 40%

Kontron Group Balance Sheet

Equity and liquidity very strong

in m EUR	6/30/2023	12/31/2022
NON-CURRENT ASSETS	4.20 -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	in EUR m	6/30/2023	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 as	-9 2	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	028 8 1 ,	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	266 1 7 ,	440 9 1 ,	Total Liabilities & Equity	266 1 7 ,	440 9 1 ,
			Equity Ratio	47 2%	44 1%
			Cash/(Net Debt)* Total Net	105 7	118 3
			Working Capital excluding 15** 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

Europe: Biggest segment

Target is to increase EBITDA margin in 2025 to 12%

• * 3 rd Party and Intercompany revenues
• ** EBITDA before Intercompany HQ fees (part of Europe Segment)
• *** EBITDA before HQ fee in % of external revenue

Global: Ongoing recovery

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

• * 3 rd Party and Intercompany revenues
• ** 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

• * 3 rd Party and Intercompany revenues
• ** 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

Most M&A activities in "Software + Solutions", up the value chain for existing markets

Europe Global Software + Solutions

Our competition

Our distinctive competitive advantages

Selected competitors in Industrial IoT	Revenue (in USD m)	Region
Curtiss Wright*	2,600	North America
Advantech	2,200	Asia
Beckhoff	1,600	Europe
Kontron	1,200	Europe
ABB B&R	1,100	Europe
Mercury*	1,000	North America
Adlink	380	Asia
Seco	215	Europe
Eurotech	100	Europe
% as of total market (USD 148bn)	7%

* Also not Industrial IoT revenues

› Unmatched R&D scale

› 3,200 FTEs, annual budget of EUR 170m

› Cost efficient solutions

• › (EUR 45k p.a.) in-house engineering resources in CEE
• › Differentiated technology platform
  • › Purpose-built solutions for high-value low-volume use cases

› Deep and established relationships in the ecosystem

› Intel, ARM, FoxConn, Microsoft, Siemens, GE

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

Acquisitions closed so far in 2023

• › Carve out Telit (DE): 5G modules for IOT 2022: 100m Revenues
• › Comlab (CH): data communication for trains 2022: 20m Revenues

Kontron M&A pipeline

• › Currently 5 offers out (total up to EUR 700m revenues)
• › On 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

14

2.35 2.97 3.41 3.41 (in EUR bn) Backlog Design wins

The New Kontron

Backlog and 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

The New Kontron

Confident in guidance 2023 – better operational performance

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

Why invest in Kontron?

Profitable long-term growth

• › Excellent position to profit from the megatrends digitalization, AI and sustainability via IoT products
• › Expand high-margin high-growth software business
• › Utilize European technology worldwide
• › Highly diversified, global and long-term customer base in a niche market with high entry barriers
• › Track record of value-accretive M&A

Strong financial position

• › Cash conversion rate target of 75%
• › Solid tax shield in Austria for the next 2 years
• › Favorable low debt profile in high interest environment
• › High cash position after sale of majority of IT Services business for EUR 392m in December 2023
• › Active partner and minority shareholder Ennoconn

Engineering excellence

› Unmatched R&D power of 3,200 engineers and annual investment of approx. 14% of revenues

• › Cost efficient in-house engineering resources in CEE (average salary: 45k p.a.) as an attractive Western employer
• › Increasing share of software in portfolio: proprietary IoT toolset susietec®
• › Customized IoT solutions for Industrial, Medical, Defense, 5G Connectivity, Avionics, Transportation, Electricity sectors

Attractive shareholder return

• › Strong cash generating business
• › 50% of net income distributed as a dividend and/or to use for share buybacks
• › Record dividend of EUR 1 per share paid out in 2023

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 Kontron 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 Kontron AG. The actual financial position and the actual results of Kontron 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 Kontron 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, Kontron 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 Kontron'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 Kontron 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 Kontron 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 Kontron 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 Kontron 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.

Explore the Kontron Group

We are a fast-moving multinational technology leader.

The Kontron Share

SDAX® & TecDAX® member

Alster Research	Buy: EUR 32.00
Erste Group	Buy: EUR 24.50
Hauck & Aufhäuser	Buy: EUR 30.00
Jefferies	Buy: EUR 28.00
Kepler Cheuvreux	Buy: EUR 25.00
Pareto Securities	Buy: EUR 28.00
Stifel	Buy: EUR 27.00
Warburg Research	Buy: EUR 26.00
Median Target Share Price	EUR 27.50

Target: Increase strategic shareholder base

1 additional analyst will take on coverage of Kontron

Update on ESG

Achievements

• › MSCI: BBB (stable since 2021)
• › EcoVadis: 44 (industry average: 44)
• › Sustainalytics: 20.2 (medium* risk)
• › UN Global Compact joined and 9 SDGs identified we support

› Education

Kontron Leadership Academy (focus on female employees) Data Security Training Focus

✓

› Employee Survey – conducted among approx. 5,000 employees

Outlook & Targets

• › Increasing interest of sustainable investors to be met
• › Customers and Investors CO² disclosure requests more often

Making our data easily accessible and transparent to our diverse stakeholder groupswill become increasingly important

• › Carbon Disclosure Project experience ✓
• › EU Taxonomy requirements expected to be extended
• › Implementation of scope I and II to be achieved until 2023
• › Kontron's Green Products communicating our products better

Preparation scope I and II Reporting expansion (incl. EU Taxonomy) ✓ ESG-Goal extension ✓ ESG-Risk assessment ✓ Update material analysis ✓	Evaluation ESG-Goals Implementation stage launched Enhanced reporting according to EU Taxonomy and ESG standards	Implementation finalized Continuous improvement process
Continuous stakeholder dialogue ✓ 2021 2022		2023

Acquisitions Telit Cinterion & Comlab AG

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%)

› 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
• › Low impact in 2023
• › Outlook 2024:
  • › Revenues: EUR 25 million
• › 5% EBITDA (midterm 15%)