Interim report Q3 2020

Highlights Q3 2020

● Gross profit was NOK 71 million, up from NOK 60 million last year
● EBITDA adjusted was NOK 16 million, up from NOK 6 million
● ARR was NOK 38 million with 209,000 end-users at the end of the quarter
● Signed five new contracts for Techstep's software-based managed mobility service 'Flow', with an estimated value of NOK 43 million
● Strengthened position within managed mobility services through the acquisition of Optidev AB
● Digital transformation speeding up mobility market fundamentals strengthening further

CEO comment

"The world is going mobile and the ongoing pandemic speeds up the transformation and changes the way we move, interact and work. Although the market environment is challenging – with lower demand for hardware and traditional services – we see a positive development in our managed mobility services offering. Our 'Flow' concept has been well received in Sweden, and three of the five new Flow contracts signed in the quarter were with Swedish customers.

Our ambition is to become the leading managed mobility service provider in the Nordics, based on our own software and IP. The acquisition of the B2B mobility software and solutions provider Optidev marks a major step on this journey. While still in the early stages, we have high hopes for the roll-out of our managed mobility services across the Nordic market.

Our opportunity pipeline is promising, although we see continued uncertainties in the overall market as we move towards the end of 2020. Our main focus remains with the development of our managed mobility services platform, and continued onboarding of new and existing customers. We are working hard to improve both the customer experience and our operational efficiency to ensure that we succeed. Techstep is all set for making work mobile to society, people and organizations", says Techstep CEO Jens Haviken.

About Techstep

Techstep is purpose-built to become a leading Managed Mobility Services provider in the Nordics. Techstep combines device management, software, hardware and connectivity into a managed service. This enables enterprises and their employees to do their work across mobile devices and locations, with a high degree of security and operational stability. Techstep has 290 employees based in Norway, Sweden and Denmark, serving close to 4,000 customers across various industries in the private and public sectors. The company is listed on the Oslo Stock Exchange. For more information, see www.techstepasa.no.

Key Figures

(amounts in NOK 1 000)	Q3 2020	Q3 2019	YTD 2020	YTD 2019	2019

Revenues	212 732	243 189	743 582	797 335	1 132 059
Annual Recurring Revenue (ARR)	37 632	34 754	37 632	34 754	36 632

Gross profit	71 447	59 803	229 783	204 111	279 338

EBITDA adjusted	16 470	5 827	45 042	21 474	29 007
EBITDA	13 940	5 827	49 839	21 474	27 040
EBITA	(6 709)	(67 374)	3 074	(59 122)	(58 174)
EBIT	(12 734)	(72 689)	(14 351)	(75 421)	(80 192)
Net profit (loss) for the period	(13 269)	(73 185)	(12 673)	(75 739)	(64 329)

EBITDA adj. margin (%)	7.7 %	2.4 %	6.1 %	2.7 %	2.6 %
EBITDA rep. margin (%)	6.6 %	2.4 %	6.7 %	2.7 %	2.4 %
EBITA margin (%)	(3.2 %)	(27.7 %)	0.4 %	(7.4 %)	(5.1 %)
EBIT margin (%)	(6.0 %)	(29.9 %)	(1.9 %)	(9.5 %)	(7.1 %)
Net profit (loss) for the period (%)	(6.2 %)	(30.1 %)	(1.7 %)	(9.5 %)	(5.7 %)

Cash	54 920	26 692	26 692	26 692	44 588
Net interest-bearing debt	12 338	16 564	16 564	19 564	1 996
Capex	48 697	4 478	4 478	13 766	33 611

The Q3 2020 financial statements include the full consolidation effect of the leasing portfolio from Techstep Finance. The effect in Q3 2020 is an increase of NOK 25.5 million on revenue, an increase of NOK 17.0 million on gross profit and EBITDA and an increase of NOK 16.9 million on depreciation.

Operational review

Main developments

The acquisition of Optidev AB strengthened Techstep's position as the leading provider of Managed Mobility Services (MMS) in the Nordic region.

Optidev is a developer and provider of B2B mobility software and solutions, predominantly to customers in the transportation, logistics and public safety sectors in Scandinavia, and complements Techstep's offering in the growing MMS market.

Techstep continued its operational progress in the quarter, as the company signed several larger agreements after the official launch of the MMS-offering 'Flow' in Sweden.

Market conditions are still impacted by the Covid-19 pandemic, resulting in lower volumes and longer lead times on sales and implementation processes.

Growing relevance for Techstep's vision of making work mobile

Techstep has developed from being a traditional hardware telecom wholesaler to becoming a software- and IP-led provider offering MMS-solutions capable of handling complexity at scale.

Techstep launched its managed mobility service offering 'Flow' to existing and new customers in Norway at the end of 2019.

'Flow' allows Techstep to bundle value-adding mobility services together with hardware and software into one complete managed mobility service to enterprises. 'Flow' consists of a mobile device, Techstep's software solution ('Origo'), device life-cycle management services and financing.

Financing through Techstep Finance adds the customer benefit of a residual value at the end of the leasing period and contributes to a lower total cost of ownership for the customer. The customers can also choose among several addon services tailored to their needs.

Techstep's proprietary software-as-a-service solution 'Origo Business Cloud' is a key component of 'Flow' and a core value driver going forward. 'Origo' was introduced independently to customers in Norway during the first half of 2020 and the launch in Sweden at the end of second quarter enabled the official introduction of 'Flow' in Sweden in the third quarter. 'Origo' will also be sold independently as a software solution through partners.

Strategic initiatives to strengthen mobility offering

Techstep has acted as a market consolidator in Norway and Sweden over the past five years and continuously evaluates potential M&A.

In line with Techstep's growth strategy, the company concluded the acquisition of Optidev AB for SEK 200 million on 1 October 2020.

Optidev is a developer and provider of B2B mobility software and solutions, predominantly to customers in the transportation, logistics and public safety sectors in Sweden, Norway and Denmark. Optidev has been developing and supplying business-critical mobility solutions since 2000. The company has 85 employees.

The combined company will be a leading IPand software-focused provider of deskless technology to make work mobile and help companies transform and enhance their capabilities. The combined company will have NOK ~60 million in ARR, solid positions in Norway and Sweden and a growing presence in Denmark. Techstep will continue to pursue organic growth and M&A to further strengthen and expand its managed mobility service offering and Nordic position.

Increasing sales activity

During the third quarter Techstep signed a total of five 'Flow' agreements with a potential value of NOK 43 million, whereof three in Sweden. The largest contract was with Radio Sweden, with an estimated contract value of NOK 18 million.

Since 'Flow' was launched late 2019, Techstep has signed a total of 21 customers with a total value potential of NOK 91 million.

The largest contract signed in Norway in the quarter was with BAMA Gruppen, for the delivery of devices and managed mobility services to approx. 2 000 employees. The contract has an estimated value of NOK 14.5 million over three years.

Techstep sees an increasing pipeline for its 'Flow' and 'Origo' offerings going into the fourth quarter 2020.

Recurring revenue base

Techstep's annual recurring revenue base (ARR¹ ) was NOK 37.6 million as of the third quarter 2020, based on a total end-user base of ~209,000. Techstep's recurring revenue relates to the sale of own software with 100% gross margin comprising Mobile Expense Management and Origo Business Cloud - sold either as a white-label service through partners or directly by Techstep.

¹ *Refer to alternative performance measures

Financial review

The interim financial information has not been subject to audit or review.

Techstep ASA gained control over Techstep Finance AS in the fourth quarter 2019, and Techstep Finance AS was fully consolidated in the consolidated financial statements with effect from the first quarter 2020.

Profit and loss third quarter 2020

Techstep generated total revenue of NOK 212.7 million in the third quarter of 2020, down from NOK 243.2 million in the corresponding quarter last year. The decline is primarily related to lower hardware volumes and advisory activities.

Own software accounted for NOK 9.7 million (NOK 8.4 million), whereas leasing revenue accounted for NOK 25.5 million. Advisory & services amounted to NOK 30.4 million (NOK 39.7) and related commissions were NOK 6.0 million in the third quarter (NOK 9.2). Hardware sales (excluding leasing) remain the largest revenue generator with NOK 140.9 million (NOK 184.6 million).

Gross profit increased by 19% year-over-year to NOK 71.4 million. Gross margin for the quarter thus increased to 34%, from 25% in the corresponding quarter of 2019. Gross profit included an effect of NOK 17 million from the leasing portfolio, whereof NOK 7 million related to a one-off delivery.

Salaries and personnel costs amounted to NOK 41.6 million in the third quarter of 2020, which included option costs of NOK 1.1 million.

Other operational costs were NOK 13.5 million in the third quarter 2020, up from NOK 12.3 million in the same quarter of 2019.

EBITDA amounted to NOK 13.9 million in the third quarter of 2020, compared to NOK 5.8 million in the same quarter last year. This included a gain on sale of the office building in Karlstad, Sweden of NOK 4.8 million and oneoff costs related to M&A activities of NOK 7.3 million.

Adjusted EBITDA margin increased to 7.7% from 2.4% in the corresponding quarter last year, which reflects the improved gross profit in the quarter.

Operating loss (EBIT) came to NOK 12.7 million in the third quarter of 2020. This compares to an operating loss (EBIT) of NOK 72.7 million for the third quarter of 2019, which included a goodwill impairment of NOK 70 million.

Net loss in the third quarter of 2020 amounted to NOK 13.3 million, compared to a net loss of NOK 73.2 million in the third quarter of 2019.

Proforma key figures

Techstep announced on 3 September 2020 a binding agreement to acquire 100 % of the shares in Optidev AB and completed the transaction 1 October 2020. Optidev AB is not consolidated in Techstep's Q3 2020 reporting.

Proforma, the combined companies generated gross profit of NOK 99 million (NOK 80 million), and EBITDA adjusted of NOK 27 million (NOK 11 million) for the third quarter.

Last twelve-month, gross profit was NOK 416 million and EBITDA adjusted NOK 88 million (proforma).

Financial position

As at 30 September 2020, total assets were NOK 842.2 million, compared with NOK 789.4 million as at 30 June 2020.

Total tangible assets were NOK 135.9 million as at 30 September 2020, including NOK 94.5 million in hardware leased out to customers and NOK 32.7 million in premises and IT licenses.

Total inventories and receivables were NOK 162 million as at 30 September 2020. The increase from NOK 147.8 million at the end of the preceding quarter primarily reflects increasing accounts receivables.

Total equity at the end of the third quarter was NOK 459.6 million (NOK 469.2 million), corresponding to an equity ratio of 55% (59%).

Other non-current debt of NOK 47 million mainly relates to leasing commitments of NOK 22.5 million and a buy-back obligation for leased hardware of NOK 17.9 million.

Current interest-bearing liabilities amounted to NOK 13.7 million, mainly allocated to the acquisition of Optidev. All outstanding factoring debt was repaid in the quarter.

Other current liabilities of NOK 133.5 million as at 30 September 2020 mainly include vacation pay of NOK 19.7 million, deferred revenue of NOK 89 million, leasing commitments of NOK 11.3 million and a buy-back obligation for leased hardware of NOK 6.6 million.

Net interest-bearing debt was NOK 12.3 million at the end of the third quarter 2020, compared to NOK 6.5 million at the end of the preceding quarter.

Cash flow third quarter 2020

Net cash outflow from operating activities was NOK 2.3 million in the third quarter of 2020 and included a negative effect of NOK 8.1 million from increased net working capital.

Net investments of NOK 35.7 million includes leased out equipment of NOK 45.4 million and capital expenditure to software and IT development of NOK 3.3 million, partly offset by proceeds of NOK 13 million for the sale of premises in Karlstad, Sweden.

Net financing of NOK 56.1 million includes proceeds from borrowings related to the acquisition of Optidev AB, lease repayments (IFRS 16) for premises and licenses and

repayment of property loan on the premises in Karlstad, Sweden.

Cash and cash equivalents increased by NOK 18.1 million in the third quarter to NOK 54.9 million. In connection with the acquisition of Optidev AB, NOK 67 million is held in escrow as part of the settlement for the transaction that took place on 1 October 2020.

Outlook

Techstep is transitioning from a hardware supplier to a software and Managed Mobility Services (MMS) provider, with increasing organic sales of MMS and the strategic acquisition of Optidev as major steps in this direction.

However, Techstep is experiencing a lower gross profit contribution from operator commissions and from the discontinuation of the Norwegian SME segment in the second quarter 2019. It will take time before the products and services offering that is now gradually being introduced to customers will fully compensate for this shortfall.

The acquisition of the B2B mobility software and solutions provider Optidev will strengthen Techstep's position in the MMS segment, which is one of the fastest growing segments in the global Telecom and IT-services industry.

Techstep launched its own MMS offering 'Flow' in Sweden during the third quarter 2020, and the onboarding of new and existing customers to this platform will be a top priority in the coming period.

Techstep will continue to invest in the software platform and further development of its

organizational capabilities and continue to pursue M&A opportunities to further strengthen and expand its Nordic position and the products and services offering.

With a possible second wave of the Covid-19 pandemic, the macroeconomic development remains uncertain. Techstep is monitoring the situation closely and is prepared for various future scenarios. The company has established contingency plans to adjust operations and expenditures to maintain a solid financial position and assure business continuity.

Looking further ahead, the relevance of workplace mobility offerings is perhaps higher than ever. Digital transformation has accelerated, and the long-term fundamentals for the mobility market are solid.

Managed mobility services will hence be even more relevant in the future. Techstep offers an attractive and secure solution with 'Flow', combined with financing and leasing options that reduce the customers' short-term liquidity requirements and the life-cycle cost of ownership. This offers a favourable long-term, Techstep's 'Flow' offering is making managed mobility services available to a potentially large Nordic market.

Consolidated income statement

(amounts in NOK 1 000)	Note	Q3 2020	Q3 2019	YTD 2020	YTD 2019	2019

Revenue	2, 3	212 432	241 903	740 578	792 865	1 127 763
Other revenue		300	1 286	3 004	4 470	4 296
Total revenues		212 732	243 189	743 582	797 335	1 132 059

Cost of goods sold		(141 286)	(183 386)	(513 800)	(593 224)	(852 722)
Salaries and personnel costs		(41 579)	(41 904)	(136 398)	(139 663)	(187 994)
Other operational costs		(13 398)	(12 348)	(48 343)	(44 195)	(65 363)
Share of profit (loss) in joint ventures		-	276	-	1 221	1 059
Depreciation	5	(20 650)	(3 201)	(46 765)	(10 596)	(15 214)
Amortisation		(6 025)	(5 314)	(17 423)	(16 300)	(22 018)
Impairment		-	(70 000)	-	(70 000)	(70 000)
Other income	8	4 795	-	12 795	-	-
Other expenses	8	(7 324)	-	(7 997)	-	-
Operating profit (loss)		(12 734)	(72 689)	(14 350)	(75 422)	(80 192)

Remeasurement of equity interest		-	-	-	-	18 206
Financial income		1 791	521	8 203	3 821	5 546
Financial expense		(3 641)	(1 642)	(12 282)	(3 998)	(5 948)
Profit before taxes		(14 584)	(73 811)	(18 428)	(75 599)	(62 388)
Income taxes		1 315	626	5 755	(139)	(1 941)
Net profit (loss) for the period		(13 269)	(73 185)	(12 673)	(75 739)	(64 329)

Net income attributable to
Non-controlling interests		45	-	113	-	(1)
Shareholders of Techstep ASA		(13 315)	(73 185)	(12 786)	(75 739)	(64 328)

Earnings per share in NOK:
Basic		(0.08)	(0.46)	(0.08)	(0.48)	(0.40)
Diluted		(0.08)	(0.46)	(0.08)	(0.48)	(0.40)

Consolidated statement of comprehensive income

(amounts in NOK 1 000) Note	Q3 2020	Q3 2019	YTD 2020	YTD 2019	2019
Net profit (loss) for the period	(13 269)	(73 185)	(12 673)	(75 739)	(64 329)
Items that may be reclassified to profit and loss
Exchange differences on translating foreign operations	3 583	1 724	18 502	(10 694)	(7 613)
Income tax related to these items	(636)	(144)	(3 354)	1 339	923
Total comprehensive income	(10 323)	(71 606)	2 474	(85 094)	(71 019)
Total comprehensive income attributable to Non-controlling interests Shareholders of Techstep ASA	- (10 323)	- (71 606)	2 474	- (85 094)	- (71 019)

*Exchange differences on translating foreign operations relate to revaluation of group values held in foreign currency and the currency effect on net investments in foreign operations.

Consolidated statement of financial position

ASSETS Note	Q3 2020	2019
Non-current assets
Deferred tax asset	879	-
Goodwill	427 508	418 385
Customer relations and technology	60 957	61 901
Total intangible assets	489 344	480 285
Right-of-use assets 5	32 722	36 590
Property, plant and equipment	103 168	75 197
Total tangible assets	135 890	111 787
Joint ventures	-	-
Shares and investments	44	44
Other non-current assets	141	181
Total financial assets	185	225
Total non-current assets	625 419	592 298
Inventories	19 363	11 828
Accounts receivable	123 103	147 411
Other receivables	19 387	16 104
Total inventories and receivables	161 853	175 343
Cash and cash equivalents 7	54 920	44 588
Assets classified as held for sale	-	4 962
Total current assets	216 773	224 893
Total assets	842 191	817 191

EQUITY AND LIABILITIES Note	Q3 2020	2 019
Share capital 4	162 795	162 795
Other equity	296 999	293 478
Total equity attributable to the owners of Techstep ASA 4	459 794	456 273
Non-controlling interests	(194)	(304)
Total equity	459 601	455 970
Deferred tax	2 939	4 483
Non-current interest-bearing debt	53 600	162
Other non-current debt	46 958	47 688
Total non-current debt	103 498	52 333
Current interest-bearing liabilities	13 657	46 423
Accounts payable	97 907	122 328
Tax payable	(1 942)	936
Public taxes, provisions	36 008	22 381
Other current liabilities	133 464	116 820
Total current debt	279 093	308 888
Total liabilities	382 591	361 221
Total equity and liabilities	842 191	817 191

Consolidated statement of changes in equity

(amounts in NOK 1 000)	Share capital	Other paid-in capital	Other equity	Reval. reserve	SUM	Minority interest	Total equity capital

Equity as at 1 January 2019	159 057	497 096	(143 670)	1 296	513 780	-	513 780
Profit for the period Other comprehensive	- -	- -	(64 328) -	- (6 690)	(64 328) (6 690)	(1) -	(64 329) (6 690)
income Total comprehensive income for the period	-	-	(64 328)	(6 690)	(71 018)	(1)	(71 019)
Transactions with owners in their capacity as owners: Issue of ordinary shares as consideration for a
business combination, net of transaction costs and tax	3 738	7 178	-	-	10 916	(305)	10 611
Share-based payments Equity as at 31 December 2019	- 162 795	- 504 273	2 597 (205 402)	- (5 394)	2 597 456 273	- (304)	2 597 455 970

Equity as at 1 January 2020	162 795	504 273	(205 402)	(5 394)	456 273	(304)	455 970
Profit for the period Other comprehensive	- -	- -	(12 786)	15 148	(12 786) 15 148	113 (2)	(12 673) 15 146
income Total comprehensive income for the period	-	-	(12 786)	15 148	2 362	111	2 473
Transactions with owners in their capacity as owners:
Share-based payments Equity as at 30 September 2020	- 162 795	- 504 273	1 159 (217 028)	9 754	1 159 459 794	- (194)	1 159 459 601

Consolidated statement of cash flow

(amounts in NOK 1 000)	Note	Q3 2020	Q3 2019	YTD 2020	YTD 2019	2019

Profit before tax Profit from joint venture		(14 584) -	(73 811) (276)	(18 428) -	(75 599) (1 221)	(62 388) (1 059)
Depreciation equipment and other fixed
assets	5	17 225	278	36 741	2 439	4 281
Depreciation right-of-use assets	5	3 425	2 923	9 012	8 157	10 933
Amortisation		6 025	5 314	18 435	16 299	22 018
Share-based payments Dividend and other reclassified to		681	535	1 159	2 062	2 597
investment activities	8	-	-	(8 000)	(2 094)	(2 103)
Gain from sale of property plant and
equipment reclassified to investment		(4 795)	-	(4 795)	-	-
activities Impairment		-	70 000	-	70 000	70 000
Remeasurement of equity interest		-	-	-	-	(18 206)
Net exchange differences		(139)	379	(133)	379	1 451
Taxes paid		(850)	(1 578)	(2 850)	(1 707)	(2 508)
Changes in net operating working capital		(1 104)	(4 382)	(8 361)	(5 439)	2 681
core Changes in other net operation working
capital		(8 146)	1 180	(511)	4 462	23 382
Net cash flow from operational activities		(2 262)	563	22 271	17 739	51 079

Payment for acquisition of subsidiaries net of cash acquired		-	-	8 000		5 184
Payment for equipment and other fixed
assets	5	(45 426)	(4 478)	(72 864)	(13 393)	(16 221)
Payment for intangible assets		(3 271)	-	(13 464)	(373)	(17 389)
Repayment of invested capital		-	-	-	8 073	8 073
Proceeds from dividends received Proceeds from sale of property, plant and		-	-	-	2 093	2 094
equipment		12 980	-	12 980	-	-
Net cash used on investment activities		(35 717)	(4 478)	(65 347)	(3 599)	(18 259)

Proceeds from issuance of shares		-	-	-	-	-
Proceeds from borrowings Repayment of borrowings	7	67 000 (7 529)	- (186)	67 000 (7 655)	- (15 266)	- -
Lease repayments		(3 358)	(2 650)	(9 907)	(8 151)	(15 350)
Net exchange differences finance		-	2 661	-	(2 990)	(12 145)
Net cash flow from financing activities		56 113	(175)	49 438	(26 407)	(27 494)

Net change in cash and cash equivalents		18 134	(4 089)	6 362	(12 266)	5 326

Cash and cash equivalents at		36 560	30 648	44 390	39 739	39 716
beginning of period
Effects of exchange rate changes on cash and cash equivalents		225	134	4 168	(781)	(453)
Cash and cash equivalents at end of		54 920	26 691	54 920	26 692	44 588
period

Notes to the consolidated financial statements

Note 1. Accounting principles

Techstep (the Group) consists of Techstep ASA (the Company) and its subsidiaries. Techstep ASA is a limited liability company, incorporated in Norway. The consolidated interim financial statements consist of the Group and the Group's interests in a joint arrangement. As a result of rounding differences, numbers or percentages may not add up to the total. All amounts are in NOK thousand except otherwise noted.

1. ACCOUNTING PRINCIPLES

The interim consolidated financial statements are prepared under International Financial Reporting Standards (IFRS) for the periods presented. The interim financial report is presented in accordance with IAS 34 Interim Financial Reporting. The interim consolidated financial statements do not include all the information and disclosures required in the Annual Financial Statements and should be read in conjunction with the Group's Annual Financial Statements 2019. The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group's Annual Financial Statements for the year ended 31 December 2019. The report has not been audited.

Note 2. Business segments

Techstep has two business segments, which are represented by the geographic locations where the Group's entities are incorporated. The entities are controlled and owned by the Techstep Group. Other companies are included in the segment Headquarters and other.

Operating segments are changed from 1 October 2018 and restated retrospectively to give comparable information.

Eliminations comprise intersegment sales. Transactions between operating segments are conducted on normal commercial terms.

1) Norway

Techstep Norway AS: The offerings of the company are mobile hardware, servicing, support and mobility consultancy services. The company is located in Oslo and Sandefjord.
Mytos AS: A Norwegian based software as a services company with mainly recurring revenue. Mytos offers a full range of mobile expense management (TEM) modules, all with proprietary software and highly user-friendly implementation and operation. The company is located in Oslo.
Techstep Denmark ApS: Established to invoice Danish customers. The company is fully supported from Norway and does not have any employees.
Techstep Finance AS: Provides financing and remarketing services.

2) Sweden:

Techstep Sweden AB: The company offers mobile hardware, industry leading cloud-based (UCaaS) PBX solutions, Mobility consultancy services and Enterprise Mobility Management (EMM) services, including Mobile Security, system design, implementation, mobile device management. The company is located in Karlstad, Gothenburg and Stockholm.
Techstep Finance AB: Provides financing and remarketing services.

3) Headquarters and other:

• Techstep ASA, Techstep Nordic AS, Netconnect AS and Techstep Holding AB.

			HQ and	Elim
Q3 2020	Norway	Sweden	other	inations	Total
Operating revenues from external customers	150 412	62 074	246	-	212 732
Operating revenues from other segments	111	534	8 274	(8 919)	-
Operating revenues	150 523	62 609	8 521	(8 919)	212 732
Cost of goods sold	(94 211)	(47 726)	-	651	(141 286)
Salaries and personnel costs	(22 920)	(11 285)	(7 374)	-	(41 579)
Other operational costs	(11 661)	(4 986)	(12 022)	15 271	(13 398)
Share of profit (loss) of joint venture	-	-	-	-	-
Depreciation	(16 596)	(1 826)	(2 228)	-	(20 650)
Amortisation	(3 468)	(1 958)	(599)	-	(6 025)
Impairment	-	-	-	-	-
Other income	-	4 795	-	-	4 795
Other expenses	(150)	-	(7 174)	-	(7 324)
Operating profit (loss)	1 518	(378)	(20 876)	7 002	(12 734)

Employees 30 September 2020	127	61	19		207

			HQ and	Elim
Q3 2019	Norway	Sweden	other	inations	Total
Operating revenues from external customers	185 474	58 037	322	-	243 833
Operating revenues from other segments	154	1 062	6 521	(7 738)	-
Operating revenues	185 628	59 099	6 199	(7 738)	243 189
Cost of goods sold	(139 600)	(45 196)	(4)	1 413	(183 386)
Salaries and personnel costs	(26 213)	(8 931)	(6 999)	239	(41 904)
Other operational costs	(11 841)	(2 605)	(4 017)	6 115	(12 348)
Share of profit (loss) of joint venture	-	-	276	-	276
Depreciation	(927)	(644)	(1 631)	-	(3 201)
Amortisation	(2 591)	(1 755)	(969)	-	(5 314)
Impairment	(70 000)	-	-	-	(70 000)
Other income	-	-	-	-	-
Other expenses	-	-	-	-	-
Operating profit (loss)	(65 543)	(32)	(7 144)	30	(72 689)

Employees 30 September 2019	134	60	18		212

			HQ and	Elim
YTD 2020	Norway	Sweden	other	inations	Total
Operating revenues from external customers	525 414	217 429	739	-	743 582
Operating revenues from other segments	3 145	3 270	24 823	(31 239)	-
Operating revenues	528 559	220 699	25 562	(31 239)	743 582
Cost of goods sold	(359 297)	(159 668)	(283)	5 448	(513 800)
Salaries and personnel costs	(78 827)	(34 465)	(23 470)	365	(136 398)
Other operational costs	(40 538)	(15 072)	(38 318)	45 586	(48 343)
Share of profit (loss) of joint venture	-	-	-	-	-
Depreciation	(35 234)	(5 349)	(6 182)	-	(46 765)
Amortisation	(9 944)	(5 779)	(1 700)	-	(17 423)
Impairment	-	-	-	-	-
Other income	8 000	4 795	-	-	12 795
Other expenses	(105)	-	(7 892)	-	(7 997)
Operating profit (loss)	12 613	5 160	(52 283)	20 161	(14 350)

			HQ and	Elim
YTD 2019	Norway	Sweden	other	inations	Total
Operating revenues from external customers	577 454	219 881	-	-	797 335
Operating revenues from other segments	4 336	2 574	15 383	(22 293)	-
Operating revenues	581 790	222 455	15 383	(22 293)	797 335
Cost of goods sold	(428 010)	(171 383)	(10)	6 180	(593 224)
Salaries and personnel costs	(85 616)	(30 893)	(23 916)	762	(139 663)
Other operational costs	(39 217)	(8 507)	(12 936)	16 466	(44 195)
Share of profit (loss) of joint venture	-	-	1 221	-	1 221
Depreciation	(5 098)	(1 947)	(3 551)	-	(10 596)
Amortisation	(8 316)	(5 268)	(2 716)	-	(16 300)
Impairment	(70 000)	-	-	-	(70 000)
Other income	-	-	-	-	-
Other expenses	-	-	-	-	-
Operating profit (loss)	(54 467)	4 457	(26 527)	1 115	(75 422)

			HQ and	Elim
FY 2019	Norway	Sweden	other	inations	Total
Operating revenues from external customers	824 119	307 940	0	-	1 132 059
Operating revenues from other segments	6 057	3 172	22 567	(31 796)	-
Operating revenues	830 176	311 112	22 567	(31 796)	1 132 059
Cost of goods sold	(622 397)	(238 273)	(35)	7 984	(852 722)
Salaries and personnel costs	(114 929)	(42 444)	(31 587)	965	(187 994)
Other operational costs	(55 118)	(12 888)	(20 544)	23 187	(65 363)
Share of profit (loss) of joint venture	-	-	1 059	-	1 059
Depreciation	(7 094)	(2 600)	(5 519)	-	(15 214)
Amortisation	(13 298)	(7 068)	(1 653)	-	(22 018)
Impairment	(70 000)	-	-	-	(70 000)
Other income	-	-	-	-	-
Other expenses	-	-	-	-	-
Operating profit (loss)	(52 660)	7 839	(35 712)	340	(80 192)

Employees 31 December 2019	134	59	18		211

Note 3: Disaggregation of revenues

In the following tables, Total revenue is disaggregated by major revenue streams divided into the reportable segments as shown in note 2:

			HQ
Q3 2020	Norway	Sweden	and other	Eliminations	Group
Total revenues	150 523	62 609	8 521	(8 919)	212 732

Hardware
Hardware revenues	89 520	43 969	-	(31)	133 457
Leasing	19 473	6 039	-	-	25 511
Bonus	7 289	152	-	-	7 441
Total	116 282	50 159	-	(31)	166 409

Solutions
Advisory & Services	19 699	11 277	-	(614)	30 363
Own Software	9 662	-	-	-	9 662
Commission	4 765	1 234	-	-	5 999
Total	34 126	12 511	-	(614)	46 023

Other revenues
Other	115	(62)	8 521	(8 274)	300
Total	115	(62)	8 521	(8 274)	300

			HQ
Q3 2019	Norway	Sweden	and other	Eliminations	Group
Total revenues	185 628	59 099	6 199	(7 738)	243 189

Hardware
Hardware revenues	132 392	45 036	-	(331)	177 097
Leasing	-	-	-	-	-
Bonus	6 370	1 165	-	-	7 535
Total	138 763	46 201	-	(331)	184 632

Solutions
Advisory & Services	29 059	11 477	-	(886)	39 650
Own Software	8 395	-	-	-	8 395
Commission	7 793	1 432	-	-	9 225
Total	45 247	12 909	-	(886)	57 271

Other revenues
Other	1 618	(11)	6 199	(6 521)	1 286
Total	1 618	(11)	6 199	(6 521)	1 286

			HQ	Elim
YTD 2020	Norway	Sweden	and other	inations	Group
Total revenues	528 559	220 699	25 562	(31 239)	743 582

Hardware
Hardware revenues	345 794	149 074	-	(2 774)	492 095
Leasing	41 301	9 801	-	-	51 102
Bonus	21 979	2 950	-	-	24 929
Total	409 074	161 825	-	(2 774)	568 125

Solutions
Advisory & Services	72 193	51 649	-	(3 642)	120 200
Own Software	28 903	-	-	-	28 903
Commission	16 376	6 974	-	-	23 350
Total	117 472	58 623	-	(3 642)	172 453

Other revenues
Other	2 013	252	25 562	(24 823)	3 004
Total	2 013	252	25 562	(24 823)	3 004

			HQ	Elim
YTD 2019	Norway	Sweden	and other	inations	Group
Total revenues	581 790	222 455	15 383	(22 293)	797 335

Hardware
Hardware revenues	411 310	139 356	-	(4 374)	546 292
Leasing	-	-	-	-	-
Bonus	19 017	2 738	-	-	21 755
Total	430 328	142 094	-	(4 374)	568 047

Solutions
Advisory & Services	93 874	73 655	-	(2 536)	164 993
Own Software	25 536	-	-	-	25 536
Commission	27 612	6 677	-	-	34 289
Total	147 022	80 332	-	(2 536)	224 818

Other revenues
Other	4 441	29	15 383	(15 383)	4 470
Total	4 441	29	15 383	(15 383)	4 470

			Headquarter
2019	Norway	Sweden	and other	Eliminations	Group
Total revenues	830 176	311 112	22 567	(31 796)	1 132 059

Hardware
Hardware revenues	605 596	203 723	-	(5 266)	804 053
Leasing	1 540	263	-	-	1 804
Bonus	28 380	2 807	-	-	31 187
Total	635 517	206 793	-	(5 266)	837 044

Solutions
Advisory & Services	121 390	95 765	-	(3 963)	213 192
Own Software	34 361	-	-	-	34 361
Commission	34 388	8 780	-	-	43 167
Total	190 139	104 544	-	(3 963)	290 720

Other revenues
Other	4 521	(225)	22 567	(22 567)	4 296
Total	4 521	(225)	22 567	(22 567)	4 296

Note 4: Share capital and shareholders

The company's share capital as at 30 September 2020 was NOK 162,795,337 consisting of 162,795,337 ordinary shares with a par value of NOK 1.00.

Each share gives the right to one vote at the company's annual general meeting. At the time of this report, Techstep holds 1,914 treasury shares.

Techstep's 20 largest shareholders at 30 September 2020 were as follows:

Shareholder	# of shares	Ownership %
DATUM AS	32 317 975	19.85 %
MIDDELBORG INVEST AS	30 517 764	18.75 %
KARBON INVEST AS	18 236 689	11.20 %
TIGERSTADEN AS	4 999 351	3.07 %
CIPRIANO AS	4 968 835	3.05 %
VERDIPAPIRFONDET DNB SMB	4 651 774	2.86 %
ZONO HOLDING AS	4 000 007	2.46 %
BRIDGE CAPITAL AS	3 813 317	2.34 %
TVENGE	3 500 000	2.15 %
SÅ&HØSTE AS	2 925 936	1.80 %
SKANDINAVISKA ENSKILDA BANKEN AB	2 384 048	1.46 %
NORDHOLMEN AS	2 206 512	1.36 %
ADRIAN AS	2 038 851	1.25 %
PIKA HOLDING AS	1 956 512	1.20 %
NORDIALOG ENSJØ AS	1 946 253	1.20 %
UNIFIED AS	1 849 457	1.14 %
IDEKAPITAL AS	1 797 532	1.10 %
MODIOLA AS	1 649 348	1.01 %
NOMO HOLDING AS	1 630 831	1.00 %
DATUM VEKST AS	1 600 000	0.98 %
Total number owned by top 20	128 990 992	79.24 %
Total number of shares	162 795 337	100.00 %

1) Datum AS is controlled by deputy board member Jan Haudemann-Andersen

2) Karbon Invest AS is owned by chairman of the board Jens Rugseth

3) Cipriano AS, owned by vice chairman of the Board of Directors Einar J. Greve

4) Zono Holding AS owned by Middelborg Invest AS 50.44%, Cipriano AS 4.65%, Duo Jag AS 0.93%

Idekapital AS, which is controlled by board member Anders Brandt, owns 1,797,532 shares in Techstep ASA.

Duo Jag AS, which is partly owned by board member Ingrid Leisner, owns 554,834 shares in Techstep ASA.

Note 5: Property, plant and equipment

	Land and	Right-of-use		Other fixed
	buildings	assets	Equipment*	assets	Total
Accumulated cost as at 1 January
2020	-	47 552	105 865	19 966	173 383
Additions	-	5 209	57 739	5 142	68 090
Additions arising from business	-	-	-	-	-
combinations
Disposals	-	-	-	-	-
Translation differences Reclassified to asset classified as	-	530	1 694	3 556	5 780
held for sale	-	-	-	-	-
Accumulated cost	-	53 291	165 298	28 665	247 254
30 September 2020

Accumulated cost as at 1 January 2019	8 166	-	-	17 950	26 115
Additions	-	47 686	14 858	2 049	64 593
Additions arising from business	-	-	91 007	-	91 007
combinations
Disposals	-	-	-	-	-
Translation differences	(133)	(135)	-	(32)	(300)
Reclassified to asset classified as held for sale	(8 032)	-	-	-	(8 032)
Accumulated cost
31 December 2019	-	47 552	105 865	19 966	173 383

Accumulated depreciation as at 1 January 2020	-	(10 962)	(33 871)	(16 763)	(61 596)
Additions arising from business
combinations	-	-	-	-	-
Current year depreciation	-	(9 012)	(36 741)	(1 011)	(46 765)
Reclassified to held for sale	-	-	-	-	-
Disposals	-	-	-	-	-
Translation differences	-	(595)	(155)	(2 253)	(3 003)
Reclassified to asset classified as held for sale	-	-	-	-	-
Accumulated depreciation
30 September 2020	-	(20 569)	(70 767)	(20 027)	(111 363)

Accumulated depreciation as at 1 January 2019	(3 056)	-	-	(13 682)	(16 739)
Additions arising from business
combinations	-	-	(32 034)	-	(32 034)
Current year depreciation	(82)	(10 933)	(1 834)	(2 365)	(15 214)
Reclassified to held for sale	-	-	-	-	-
Disposals	-	-	-	-	-
Translation differences	68	(28)	(3)	(110)	(75)
Reclassified to asset classified as held for sale	3 070	-	-	(605)	2 465
Accumulated depreciation
31 December 2019	-	(10 962)	(33 871)	(16 763)	(61 596)

Book value of assets	-	36 590	71 994	3 203	111 787
31 December 2019 Book value of assets 30 September
2020	-	32 722	94 531	8 638	135 890

* Equipment comprise mobile phones, tablets and other equipment where the Group is the lessor.

Note 6: Impairment

Management has assessed Covid-19 and the global pandemic to be an indicator for impairment. The group's assets have been assessed for impairment, and it is management's judgement that no impairment charge is necessary.

Note 7: Cash and cash equivalents

In connection with the acquisition of Optidev AB (refer to note 8 subsequent events) Techstep secured bank financing amounting to NOK 67 million. The amount is restricted and accounted for as a part of the Group's cash and cash equivalents as per the balance sheet date.

Note 8: Subsequent events

Techstep completed the acquisition and assumed 100% ownership of Optidev AB and its subsidiaries on 1 October 2020.

Alternative performance measures

Techstep Group's financial information is prepared in accordance with international financial reporting standards (IFRS). In addition, it is management's intention to provide alternative performance measures that are regularly reviewed by management to enhance the understanding of Techstep's performance, but not instead of the financial statements prepared in accordance with IFRS. The alternative performance measures presented may be determined or calculated differently by other companies. The principles for measuring the alternative performance measures are in accordance with the principles used both for segment reporting in Note 2 and internal reporting to Group Executive Management (chief operating decision makers) and are consistent with financial information used for assessing performance and allocating resources.

Gross profit

Gross profit is defined as Total revenue less Cost of goods sold.

Gross margin

Gross margin is defined as Total revenue less Cost of goods sold divided by Total revenue.

EBITDA

Earnings before interest, tax, depreciation, amortisation and impairment (EBITDA) is a key financial parameter for Techstep. This measure is useful to users of Techstep's financial information in evaluating operating profitability on a more variable cost basis as it excludes depreciation and amortisation expense related primarily to leases, capital expenditures and acquisitions that occurred in the past. The EBITDA margin presented is defined as EBITDA divided by total revenues.

Adjusted EBITDA

Adjusted Earnings before interest, tax, depreciation, amortisation and impairment (EBITDA) is based on EBITDA but adjusted for transactions of a non-recurring nature. Such non-recurring transactions include, but are not limited to: restructuring costs, gains or losses related to sale of subsidiaries, acquisition related costs and other non-recurring income and expenses.

EBITA

Earnings before interest, tax and amortisation (EBITA) is a key financial parameter for Techstep. This measure is useful to users of Techstep's financial information in evaluating operating profitability on a more variable cost basis as it excludes depreciation related primarily to leases and capital expenditures and acquisitions that occurred in the past. The EBITA margin presented is defined as EBITA divided by total revenue.

EBIT

Earnings before interest and tax (EBIT) is useful to users with regard to Techstep's financial information in evaluating operating profitability on the cost basis as well as the historic cost related to past business combinations and capex. The EBIT margin presented is defined as EBIT divided by total revenue.

Total net operating expenses

Total net operating expenses includes the line items Cost of goods sold, Salaries and personnel costs, Other operating costs, Share of profit (loss) in joint venture, Depreciation, Amortisation, Impairment and Other income.

Hardware revenue

Hardware revenue is defined as revenue from sales of tangible goods and related discounts from suppliers and partners.

Hardware share of revenue is the hardware revenue divided by total revenues.

Solutions revenue

Solutions revenue is defined as revenue from sales of licenses, support and other non-tangible items to customers. Also included are discounts from suppliers and partners. Solutions share of revenue is the solutions revenue divided by total revenue.

Net interest-bearing debt (NIBD)

Net interest-bearing debt is non-current interest-bearing debt plus current interest-bearing liabilities less cash and cash equivalents.

Equity ratio

Equity ratio is defined as Total equity divided by total equity and liabilities.

Capital Expenditure (Capex)

Capital expenditure is the same as payment for property, plant and equipment and intangible assets.

Annual Recurring Revenue (ARR)

ARR is calculated as the revenue the following 12 months from own software as at the balance sheet date. The ARR is calculated by multiplying the number of users of own software with the price per product and in turn annualized.

APM's in the income statement	Q3 2020	Q3 2019	YTD 2020	YTD 2019	2019
Total revenue	212 732	243 189	743 582	797 335	1 132 059
Cost of goods sold	(141 286)	(183 386)	(513 800)	(593 224)	(852 722)
Gross profit	71 447	59 803	229 783	204 111	279 338
Gross margin	34 %	25 %	31 %	26 %	25 %
Salaries and personnel costs	(41 579)	(41 904)	(136 398)	(139 663)	(187 994)
Other operational costs	(13 398)	(12 348)	(48 343)	(44 195)	(65 363)
Share of profit (loss) in joint ventures	-	276	-	1 221	1 059
Other income	4 795	-	12 795	-	-
Other expenses	(7 324)	-	(7 997)	-	-
EBITDA	13 940	5 827	49 839	21 474	27 040
Depreciation	(20 650)	(3 201)	(46 765)	(10 596)	(15 214)
Impairment	-	(70 000)	-	(70 000)	(70 000)
EBITA	(6 709)	(67 374)	3 074	(59 122)	(58 174)
Amortisation	(6 025)	(5 314)	(17 423)	(16 300)	(22 018)
EBIT	(12 734)	(72 688)	(14 350)	(75 422)	(80 192)

Adjusted EBITDA	Q3 2020	Q3 2019	YTD 2020	YTD 2019	2019
EBITDA	13 940	5 827	49 839	21 474	27 040
Other income	(4 795)	-	(12 795)	-	-
Other expense	7 324	-	7 997	-	1 967
Adjusted EBITDA	16 470	5 827	45 042	21 474	29 007

Total net operating expenses	Q3 2020	Q3 2019	YTD 2020	YTD 2019	2019
Cost of goods sold	(141 286)	(183 386)	(513 800)	(593 224)	(852 722)
Salaries and personnel costs	(41 579)	(41 904)	(136 398)	(139 663)	(187 994)
Other operational costs	(13 398)	(12 348)	(48 343)	(44 195)	(65 363)
Share of profit (loss) in joint ventures	-	276	-	1 221	1 059
Depreciation	(20 650)	(3 201)	(46 765)	(10 596)	(15 214)
Amortisation	(6 025)	(5 314)	(17 423)	(16 300)	(22 018)
Impairment	-	(70 000)	-	(70 000)	(70 000)
Other expenses	(7 324)	-	(7 997)	-	-
Total net operating expenses	(230 261)	(315 877)	(770 726)	(872 757)	(1 212 252)

Revenue splits	Q3 2020	Q3 2019	YTD 2020	YTD 2019	2019
Revenue	212 732	243 189	743 582	797 335	1 132 059
Hardware revenue	166 709	185 918	571 129	572 517	841 340
Solutions revenue	46 023	57 271	172 453	224 818	290 720
Hardware share of revenue	78 %	76 %	77 %	72 %	74 %
Solutions share of revenue	22 %	24 %	23 %	28 %	26 %

NIBD	Q3 2020	2 019
Cash and cash equivalents	54 920	44 588
Non-current interest-bearing borrowings	53 600	162
Current interest-bearing borrowings	13 657	46 423
NIBD	(12 338)	(1 996)

Equity ratio	Q3 2020	2 019
Total equity	459 601	455 970
Total equity and liabilities	842 191	817 191
Equity ratio	55 %	56 %

ARR	Q3 2020	2019
Number of users	209	201
Average price own software	180	182
ARR	37 632	36 628

TECHSTEP ASA

Brynsalléen 4 0667 Oslo, Norway +47 915 233 37