Techstep ASA — Interim / Quarterly Report 2017

Nov 17, 2017

Q3 2017

Gaute Engbakk, CEO Marius Drefvelin, CFO

"Making work mobile"

Techstep built to serve expanding market for digital workplace and mobile solutions in the Nordics

A mobile native solutions provider tailored for expanding Nordic market market for digital workplace and mobile solutions

Built Mobile-as-a-Service solution consisting of hardware and value adding software and services for private and public entreprises – financing/subscription (OPEX) based

Acquired 8 and est. 1 company since Q3'16 | Built high quality customer and large scale end-user base | Listed on Oslo stock exchange

Highlights Q3 2017

Operations	• Organic growth in end-users of 15% YTD to 600,000+ • Started to deliver and win joint customer bids to cross-Nordic customers • Won four material, public tenders with new customers
Financials	• Revenue growth of 36% to NOK 181 million (NOK 133 million) – Driven by acquisitions and organic growth in Solutions • EBITDA adjusted NOK 9.8 million (NOK 4.1 million) • Driven by acquisitions, Solutions revenue and increase in gross margin
Outlook	• Delivered three MaaS pilots, now ready to launch to customers in Q4-17 • Establish Mytos in Sweden • Cross company and Nordic integration

Work is changing

«Mobile first» - 60% of all internet traffic comes from mobile devices

Enterprises want and employees expect a digital workplace

Market potential

Significant market opening up in the Nordics – driven by digitization agenda

Although majority of workforce is mobile in nature, mobility solutions mostly present in 'stationary' jobs = high mobility = some mobility = little mobility

"More than 80% of the Norwegian workforce requires some mobility or higher"

1,678,000 491,000 419,000

Significant installbase – mobile first

Techstep serves ~30% of Telenor's B2B customers in Norway and delivers EMM solutions to 20% of all employees in the top 45 largest companies in Sweden

Techstep has just launched MaaS to customers!

Techstep delivers a complete stack of solutions that provides an improved total-cost-of-ownership (TCO) and lower risk to the customer

Customer case

DNB and SAS are two companies leading in digitization

Customer case

Meny – Move from the back office to storefront

			MENY
Driftsoppfølging			A UNION CAR CAME
By Americans	A information	O testos	Services Address
D Harolds	ID TypeWater	Matthyrettenet	EXI Entre pennet
P. Ancour

Storebrand – Mobile First!

Other players in the business – will create a pull from customers towards digitization

Building Techstep

© Nordialog 2016

Introduction

Techstep has acquired key companies with hardware and solutions business

Company progress towards becoming a Nordic enabler of the digital workplace

2017
Focus: M&A, integration and product development		and sales focus	Focus: Product rollout
Q1	Q2	Q3	Q4
✓  Acquisition of Mytos ✓  Acquisition of Infra Advice ✓  Acquisition of Apro ✓  Equity issue of NOKm 100	✓  Initiate integration of acquired companies ✓  MaaS pilot customers ✓  In process to acquire BKE ✓  Initiated cross sales efforts	 Full MaaS launch Norway ✓  Launch of Mytos' asset management solution ✓  In process to acquire Conneqted	 Enable financing (leasing) in Sweden  Launch of MaaS in Sweden  Launch of new vertical solutions ✓  Launch of Mytos in Sweden

Expected positive effect on profitability

Techstep has taken several significant steps in Q3 2017

Launched MaaS to customers.. ..entered Sweden with Mytos.. .. and launched a new Mytos app!

Techstep entities started to deliver and win joint customer bids to cross-Nordic customers

Nordialog/SmartWorks/BKE/InfraAdvice/Conneqted - joint bids to cross-Nordic customers

Financials

© Nordialog 2016

Financial summary Q3 2017

Key figures (reported)
(amounts in NOK 1 000)	Q3 2017	Q3 2016	YTD 2017	FY 2016
Revenue	180 811	132 676	508 248	573 498
Adjusted EBITDA 1)	9 800	4 139	16 669	13 078
Adjusted EBITA 1)	9 535	3 925	15 748	12 175
Adjusted EBIT 1)	3 893	202	1 156	(6 808)
EBITDA	6 569	(9 639)	(700)	(4 433)
EBITA	6 304	(9 853)	(1 620)	(5 336)
EBIT	662	(13 576)	(16 212)	(24 319)
Adjusted EBITDA margin (%)	5.4 %	3.1 %	3.3 %	2.3 %
Adjusted EBITA margin (%)	5.3 %	3.0 %	3.1 %	2.1 %
Hardware, commission and bonuses, share of revenue (%)	77 %	88 %	78 %	88 %
Solutions, share of revenue (%)	23 %	12 %	22 %	12 %
Total assets	737 686	398 073	737 686	508 409
Cash	27 086	6 162	27 086	81 692
Equity	477 576	12 496	477 576	260 294
Employees	214	133	214	121

• Revenue growth driven both by acquisitions and organic growth
• 22% underlying reduction in commission & bonuses
• Despite this, an improvement in EBITDA adjusted margin to 5.4% vs. 3.1%
• EBITDA adj. of NOK 16.7m YTD-17, includes growth investments and transformation activities

Revenue and EBITDA adjusted development Q3 2016 – Q3 2017

Revenue development in Hardware and Solution Q3 2016 – Q3 2017

Consolidated income statement

Consolidated income statement
(amounts in NOK 1 000)	Q3 2017	Q3 2016	YTD 2017	2016
Revenue	180 588	131 394	506 734	570 526
Other revenue	223	1 282	1 515	2 972
Total revenue	180 811	132 676	508 248	573 498
Cost of goods sold	(124 264)	(92 199)	(353 533)	(405 210)
Salaries and personnel costs	(33 575)	(25 336)	(94 654)	(104 041)
Other operational costs	(13 461)	(11 003)	(43 681)	(51 169)
Share of profit (loss) in joint ventures	289	-	289	-
Gross operating profit	9 800	4 139	16 669	13 078
Depreciation	(265)	(214)	(920)	(903)
Amortization	(5 642)	(3 723)	(14 593)	(18 984)
Other income and expenses	(3 231)	(13 778)	(17 368)	(17 511)
Operating profit (loss)	662	(13 576)	(16 212)	(24 319)
Technical loss				(21 217)
Remeasurement on equity interests	(5 356)	-	(5 356)
Financial income	62	54	4 600	1 008
Financial expense	(773)	(1 804)	(2 502)	(6 126)
Profit before taxes	(5 404)	(15 326)	(19 470)	(50 654)
Income taxes	3 844	2 929	4 901	5 954
Net income	(1 561)	(12 397)	(14 569)	(44 700)

• Share of profit joint venture relates to contribution from Techstep Finance
• Re-measurement on equity interest relates to a 50% ownership in Nordialog Asker made in 2012; the remaining 50% was acquired in February 2017 at a lower price, resulting in a one-off adjustment

Balance sheet

Amounts in NOK 1 000	Q3 2017	Q3 2016		2016
Intangible assets	512 515	275 216	272 350
Tangible assets	10 535	3 346	3 159
Financial assets	35 995	20 130	41 829
Inventories	15 620	10 173	9 526
Accounts receivable	122 855	65 707	83 250
Other receivables	13 080	17 338	16 603
Cash and cash equivalents	27 086	6 162	81 692
Total assets	737 686	398 073	508 409
Total equity	477 576	12 496	260 294
Deferred tax	10 575	6 049	-
Non-current interest bearing debt	-	16 875	12 656
Other non-current debt	46 484	-	-
Current interest bearing liabilities	71 028	47 568	113 721
Accounts payable	76 310	47 423	62 050
Tax payable	6 114	12 968	9 338
Public taxes, provisions	17 312	26 455	14 007
Other current liabilities	32 288	53 896	36 342
Total equity and liabilities	737 686	398 073	508 409

• Intangible assets include goodwill of NOK 444m and customer relations of NOK 68m

• Increase in accounts receivable due to higher volume and acquisitions

• Other non-current debt includes earn-out and vendor note for the BKE acquisition, NOK 35m and a long term loan in BKE of NOK 8m
• Current interest bearing liabilities include factoring NOK 31.8m and drawn credit facility of NOK 26.8m
• Current cash position of NOK 27m

Techstep growth platform

Solid customer base spanning across the Nordics includes both public and private sector

Growth of unique end-users

Total unique end-users base

• Organic end-user growth of ~15% YTD primarily driven by organic growth in solution
• Just beginning to see effects from cross sales that will increase ARPU

Solid user growth is a platform for future revenue and profitability growth

Solid cross-sell potential as only 23% of Techstep's unique end-users have a combined hardware and solution today

Summary

• Spent Q3'16-Q3'17 developing offerings and preparing for growth OSE listing, M&A, consolidation, transformation and organisational development
• 6,000 customers today, organic YTD'17 growth in end-users of 15% to 600,000+
• Prioritized long term growth over short term profitability in order to take the market position as the Nordic enabler of making work mobile
• Started integration cross Nordic
• Techstep built to serve expanding market for digital workplace and mobile solutions:
• solid existing customer base,
• new solutions that we now deliver into the market,
• experience growing demand for our solutions,
• sales and delivery capacity in place

Appendix

Revenue and EBITDA adjusted development Q3 2016 – Q3 2017

Revenue development in Hardware and Solution Q3 2016 – Q3 2017

Appendix

Top 20 shareholders at 13 November 2017

NAME	SHAREHOLDING	% SHARE
DATUM AS	31 829 142	21.76%
MIDDELBORG INVEST AS	29 066 931	19.87%
PALOS NORGE AS	11 666 667	7.98%
SKANDINAVISKA ENSKILDA BANKEN AB	4 991 128	3.41%
CIPRIANO AS	4 651 375	3.18%
DOVRAN INVEST AS	3 763 372	2.57%
JYST INVEST AS	3 763 372	2.57%
SKARESTRAND INVEST AS	3 763 372	2.57%
TINDE INDUSTRIER AS	3 763 372	2.57%
TIGERSTADEN AS	3 300 000	2.26%
ZONO HOLDING AS	3 000 007	2.05%
SÅ&HØSTE AS	2 925 936	2.00%
TVENGE TORSTEIN INGVALD	2 700 000	1.85%
NOMO HOLDING AS	1 946 253	1.33%
NORDIALOG ENSJØ AS	1 946 253	1.33%
UNIFIED AS	1 849 457	1.26%
VERDIPAPIRFONDET DNB SMB	1 838 929	1.26%
RAKNES HOLDING AS	1 649 348	1.13%
SONGA TRADING INC	1 438 596	0.98%
ARCTIC FUNDS PLC	1 304 673	0.89%
Total number owned by top 20	121 158 183	82.84%
Other shareholders	25 093 606	17.16%
Total number of shares	146 251 789	100%

Appendix

Management team

Gaute Engbakk – CEO

Mr Engbakk is an experienced change leader from working many years in Accenture with large international companies. He joined Techstep in November 2016. In Accenture, he worked in a variety of markets and industries and built up a division within analytics and information management. Engbakk led Creuna AS, a significant Nordic player within digital solutions, branding and advertising during 2010-2014, and during 2014-2016 he was the CEO of Gambit Hill & Knowlton Strategies.

Inge Paulsen – Chief Operating Officer

Mr Paulsen is an experienced executive manager with a proven track record from companies like Clear Channel, Eltel Networks/Sønnico Tele, Infratek/Hafslund, Implement and Accenture. His broad experience comes from heading strategic business development projects in venture businesses or turn around cases as well as holding various executive positions responsible for profit & loss. Paulsen joined Techstep in May 2017.

Marius Drefvelin – CFO

Mr Drefvelin joined Techstep in January 2017 and was previously the Group CFO of Creuna, a leading Nordic technology and communications consultancy firm with 350 employees. He has been with Creuna since 2012. During 2010-2012, he was a financial advisor at Deloitte, working with mergers, acquisitions and IPOs. Before this, he worked at Jebsen Asset Management from 2007-2009. During 2001-2007, Drefvelin worked at KPMG, also working with transactions.

Erik Haugen – Chief Commercial Officer

Mr Haugen is an international business professional, bringing with him broad commercial experience within finance, telecommunications, consumer electronics, the entertainment licencing industry, as well as IT. He has 20 years experience, whereof 12 from London, working with sales, marketing, business development and management for companies such as Pioneer, Sony Ericsson, Norwegian Air Shuttle ASA and Lindorff AS (now Intrum). Haugen joined Techstep in October 2017.

Mads Vårdal – Chief Innovation Officer

Mr Vårdal has been with companies within the Techstep sphere for more than eleven years. He came from a central position in Teki Solutions AS and has been a leading figure for the development of SmartWorks. He has previously had a leading position in Nordialog Skøyen AS and CEO in Buskerud Tele AS.

Disclaimer

This presentation (the "Presentation") has been prepared by Techstep ASA ("Techstep" or the "Company" and together with its subsidiaries the "Techstep Group"). The Presentation has been prepared and is delivered for information purposes only. It has not been reviewed or registered with, or approved by, any public authority, stock exchange or regulated market place.

The contents of the Presentation are not to be construed as financial, legal, business, investment, tax or other professional advice. Each recipient should consult with its own professional advisors for any such matter and advice.

The Company makes no representation or warranty (whether express or implied) as to the correctness or completeness of the information contained herein, and neither the Company nor any of its subsidiaries, directors, employees or advisors assume any liability connected to the Presentation and/or the statements set out herein. This Presentation is not and does not purport to be complete in any way. By receiving this Presentation you acknowledge that you will be solely responsible for your own assessment of the Company, its financial position and prospects and that you will conduct your own analysis and be solely responsible for forming your own view of any refinancing and the potential future performance of the Company's business.

The information included in this Presentation may contain certain forward-looking statements relating to the business, financial performance and results of the Techstep Group and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", "expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely views and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company or any other company in the Techstep Group, or any of its advisors or any of their parent or subsidiary undertakings or any such person's affiliates, officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company and its advisors assume no obligation to update any forward-looking statements or to conform these forward-looking statements to the Techstep Group's actual results. Investors are advised, however, to inform themselves about any further public disclosures made by the Company, such as filings made with Oslo Børs or press releases.

This Presentation does not constitute any solicitation for any offer to purchase or subscribe any securities and is not an offer or invitation to sell or issue securities for sale in any jurisdiction, including the United States. Distribution of the Presentation in or into any jurisdiction where such distribution may be unlawful, is prohibited. The Company and its advisors require persons in possession of this Presentation to inform themselves about, and to observe, any such restrictions.

This Presentation speaks as of the date set out on the front page, and there may have been changes in matters which affect the Techstep Group subsequent to the date of this Presentation. Neither the issue nor delivery of this Presentation shall under any circumstance create any implication that the information contained herein is correct as of any time subsequent to the date hereof or that the affairs of the Techstep Group have not since changed, and the Company does not intend, and does not assume any obligation, to update or correct any information included in this Presentation.

This Presentation is subject to Norwegian law, and any dispute arising in respect of this Presentation is subject to the exclusive jurisdiction of Norwegian courts with Oslo City Court as exclusive venue.

By receiving this Presentation, you accept to be bound by the terms above.