Techstep ASA — Interim / Quarterly Report 2017

Feb 15, 2018

Q4 2017

Gaute Engbakk, CEO Marius Drefvelin, CFO

"Making work mobile"

Highlights Q4-2017

Operations	• Organic growth in end-users of 14% in 2017 to ~620,000 • Transformation to solution selling, new products and services and improve efficiency in delivery has been focus in 2017 • Won double digit material, public tenders with new customers (reported four) • Positive cash flow Q4-2017 NOK 7.9 million
Financials	• Revenue growth of 73% to NOK 281 million (NOK 162 million) • EBITDA adjusted NOK 12.8 million (NOK 2.4 million) – Revenue and EBITDA growth driven by acquisitions and solutions growth • Organic growth in solutions of 54% vs. target of 27% in full year 2017 – Relative share of solutions increased from 14% in 2016 to 22% in full year 2017
Outlook	• New technical solutions for management of devices expected to have an impact on managed services revenue • Market forces driving the need for mobility and solutions • Expect improved margins as solutions revenues increase further

Work is changing

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

Enterprises want and employees expect a digital workplace

Capability of mobile technology now surpass desktop

Barriers around security, device management, user experience and regulatory

Digitization is happening everywhere both in public and private sector

What we see happening Digitization in the news

digital tools

Strong expectations

Management focus

Employees, owners and consumers expect organizations to adopt

• The consequence of this is that digitization is an important part of the agenda for top management
• Focus on improving work processes

Pressure on IT-department

• This puts pressure on organizations especially IT-departments to change much faster than before, and since everything is digitizing, the scope of IT's activities is increasing but budgets aren't necessarily doing the same because of focus on costs
• Lack of competency in the new technologies

Rise of new solutions

• Therefore new IT-systems and IT-operating models are required
• Enterprises are continuously adapting cloud services; in 2017 48% of enterprises were using cloud services compared with 29% in 2013¹
• New solutions (UEM² ) is the new trend to manage several types of devices and operating systems

Although majority of workforce is mobile in nature, mobility solutions currently 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

Industry sector	Mobility	# people
Agriculture, forestry and fishing	娇娇	58753
Iining and quarrying		59 994
1 anufacture	咏	215521
lectricity, water supply, sewerage, vaste management	娇	29 639
Construction	盛	207 492
Wholesale and retail trade		349 128
ransportation and storage	咏	138614
Accommodation and food service activities	盛	86 117
nformation and communication	ç	88 199
inancial and insurance activities	ç	46839
leal estate, professional, scientific and echnical activities	ıПı	161247
Administrative and support service activities	딫	120678
ublic adm., defense, soc. security	Q	163 153
ducation	رور	209 533
luman health and social work activities	咏	532 683
Other service activities	īП	99 002
Jnspecified	ı٦ı	21112

Market potential

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

Techstep positioning

Techstep is built to serve the 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 enterprises – financing/subscription (OPEX) based

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

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

Market adoption

The proliferation of mobile devices is still relatively immature compared to the PC's - managing mobile devices professionally is still due

Enterprise market adoption of devices

• The usage of smartphones and tablets is still relatively new in organizations <10 years
• Lack professional platform to manage devices
• Old school way of managing PC's
• Shadow IT

Techstep will be able to deliver management of all devices including Mac and PC at a lower cost, improved quality and better user experience

Market definition Market size Unified Endpoint Management Norway & Sweden

Unified Endpoint Management

Unified Endpoint Management is an approach to securing and controlling desktop computers, laptops, smartphones, tablets and IoT in a from a single console. Can be deployed via the cloud, on premise or hybrid. Unified endpoint management typically relies on the mobile device management (MDM) application program interfaces (APIs) in desktop and mobile operating systems

To conclude; the digitization and mobility trend is well documented, and the companies with mobile DNA are best suited to ride the wave

Building Techstep

Techstep has acquired key companies with hardware and solutions business

T E C H S T E P ¹³ Note: 1) Techstep has an option to acquire the remaining shares in Techstep Finance on certain conditions 2) Techstep has an option to acquire the remaining shares in Conneqted on certain conditions

2017: Company transformation and integration – lead to poor EBITDA performance in 2017, but will have positive effects long term

Creating a platform for transitioning to more solution selling, that will drive long-term EBITDA growth

Techstep has launched MaaS to customers in both Norway and Sweden

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

By establishing standardised processes, Techstep can reach customers and partners more effectively

Step 1 Acquire hardware vendor

Financials

Financial summary Q4 2017

Key figures (reported)
(amounts in NOK 1 000)	Q4 2017	Q4 2016	FY 2017	FY 2016
Revenue	281 544	162 335	789 792	573 498
Adjusted EBITDA1)	12 809	2 417	29 477	13 078
Adjusted EBITA1)	12 386	2 141	28 134	12 175
Adjusted EBIT1)	5 817	(1 435)	6 973	(6 808)
EBITDA	3 796	(1 316)	3 096	(4 433)
EBITA	3 372	(1 592)	1 753	(5 336)
EBIT	(3 196)	(5 168)	(19 408)	(24 319)
Adjusted EBITDA margin (%)	4.5 %	1.5 %	3.7 %	2.3 %
Adjusted EBITA margin (%)	4.4 %	1.3 %	3.6 %	2.1 %
Hardware, commission & bonuses, share of revenue	78%	84%	78%	88%
Solutions, share of revenue	22%	16%	22%	12%
Total Assets	764 214	508 409	771 355	508 409
Cash	35 278	81 692	35 278	81 692
Equity	453 441	260 294	455 688	260 294
Employees	219	121	219	121

• Revenue growth driven both by acquisitions and organic growth
• Adjusted EBITDA margin in Q4-17 of 4.5% (1.5%)
• 2017 pro forma revenues NOK 937m, adjusted EBITDA NOK 42.6m

^• Equity ratio 59%

Revenue and EBITDA adjusted development Q4 2016 – Q4 2017

Revenue development in Hardware and Solution Q4 2016 – Q4 2017

From FY16 - FY17 Solution sales grew 54%, Solutions now constitute 22% of the total revenue

Pro forma revenue per product type FY16 to FY17

• Target solutions growth was 27%, actual growth has been twice as high at 54%
• On the top-line we are starting to see the effects of cross selling of solutions to hardware customers
• Going forward we expect to see this effect increasingly on the bottom-line, because of the higher margins from solutions
• Total pro forma revenue NOK 937m in FY17 vs NOK 953m in FY16

Consolidated income statement

Q4 2017	Q4 2016	FY 2017	FY 2016
279 827	162 071	786 561	570 526
1 716	264	3 231	2 972
281 544	162 335	789 792	573 498
(205 975)	(117 421)	(559 508)	(405 210)
(46 924)	(29 282)	(141 579)	(104 041)
(15 770)	(13 214)	(59 451)	(51 169)
(66)	-	223	-
12 809	2 417	29 477	13 078
(423)	(277)	(1 344)	(903)
(6 568)	(3 575)	(21 161)	(18 984)
(9 013)	(3 733)	(26 381)	(17 511)
(3 196)	(5 168)	(19 408)	(24 319)
-	(21 217)	-	(21 217)
-	-	(5 356)	-
1 956	881	12 627	1 008
(27 070)	(1 749)	(23 642)	(6 126)
(28 309)	(27 253)	(35 779)	(50 654)
3 132	103	8 034	5 954
(25 177)	(27 150)	(27 746)	(44 700)

• Increased profitability

• One-off costs reflecting high M&A and restructuring activities in 2017

• Write-down in financial assets of NOK 25m (Kjedehuset, 8.25% holding)

Balance sheet

Balance sheet
(amounts in NOK 1 000)	31.12.2017	31.12.2016
Intangible assets	511 586	272 350
Tangible assets	9 021	3 159
Financial assets	11 040	41 829
Inventories	21 860	9 526
Accounts receivable	156 663	83 250
Other receivables	18 766	16 603
Cash and cash equivalents	35 278	81 692
Total assets	764 214	508 409
Total equity	453 441	260 294
Deferred tax	7 629	-
Non-current interest-bearing debt	23 551	12 656
Other non-current debt	22 277	-
Current interest-bearing liabilities	67 604	113 721
Accounts payable	116 431	62 050
Tax payable	4 719	9 338
Public taxes, provisions	19 403	14 007
Other current liabilities	49 160	36 342
Total equity and liabilities	764 214	508 409

• Intangible assets include goodwill of NOK 434m and customer relations of NOK 77m
• Non-current interest-bearing debt includes vendor note for the BKE acquisition NOK 15m and long-term loan in BKE of NOK 8m
• Current interest bearing liabilities include factoring NOK 35m, bank overdraft NOK 21m and term loan 11m
• Positive operational cash flow in Q4-17
• Solid balance sheet to support further growth

Techstep customers and user base

Customer base

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

End-users

Growth of unique end-users, opportunity in cross selling to the 34% of customers that today have hardware only

Total unique end-users base

Number of unique end-users in 1000's

• Organic end-user growth of ~14% in 2017 primarily driven by organic growth in solutions
• A customer base of more than 200 thousand hardware users that potentially could become solutions users also
• Just beginning to see effects from cross sales that will increase ARPU

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

Customer case

DNB and SAS are two companies leading in digitization

Customer case

Meny – Move from the back office to storefront

Driftsoppfølging By American y O moros A information Services Adam D Heavier ID TypeWater EZI Entre pennet Matthynoltenak × P. Ancour		MENY
		A UNION CAR CAME

Storebrand – Mobile First!

Vertical offering

MaaS in Health – industry specific use cases that drive the need for Techstep's products and services

• Use case and user driven
• Focus on return on investment for customer
• Bundled and delivered as a service (MaaS)

Summary

• Spent FY17 developing offerings and preparing for growth M&A, integration, transformation product and organisational development – taking market position
• ~6,000 customers today, organic growth in end-users of 14% to ~620,000
• 54% organic growth in solutions revenue from FY16 to FY17. From NOK 132m (14% of revenues) in FY16 to NOK 203m (22% of revenues) in FY17
• 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

Appendix

Top 20 shareholders at 12 February 2018

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	4 991 100	3.41%
CIPRIANO AS	4 651 375	3.18%
SKARESTRAND INVEST AS	4 563 097	3.12%
DOVRAN INVEST AS	3 763 372	2.57%
JYST 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	1 836 322	1.26%
RAKNES HOLDING AS	1 649 348	1.13%
SONGA TRADING INC	1 438 596	0.98%
KAPPA FINANS AS	1 354 839	0.93%
Total number owned by top 20	122 005 439	83.42%
Other shareholders	24 246 350	16.58 %
Total number of shares	146 251 789	100.00 %

Revenue and EBITDA adjusted development Q4 2016 – Q4 2017

Revenue development in Hardware and Solution Q4 2016 – Q4 2017

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. Mr. 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.

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, Mr. Drefvelin worked at KPMG, also working with transactions.

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.

Inge Paulsen – Chief Operations 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.

Erik Haugen – Chief Commercial Officer

Mr Haugen is an international business professional, bringing with him broad commercial experience. He spent spent twelve years in London working with focus on sales, marketing and business management for companies like Pioneer and Sony Ericsson. Subsequently he moved into finance and professional services sales at Lindorff AS (now Intrum) in 2011 where he has been responsible for strategic sales, key account management and business development for a large portfolio of clients within telecoms, utilities, trade, SME and public sector.

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.

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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.

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