Interim report Q4 2019

Highlights Q4 2019

● 2019 financial results reflect transitional effects and investments related to the strategy of becoming a software and IP driven provider of mobility solutions
● Revenue was NOK 335 million in the quarter and NOK 1,132 million for the full year, an increase from NOK 317 million in the fourth quarter and NOK 1,064 million for the full year 2018
● Gross profit was NOK 75 million in the quarter and NOK 279 million for the full year, down from NOK 83 million in the fourth quarter and NOK 294 million for the full year 2018
● EBITDA adjusted was NOK 7.5 million in the quarter and NOK 29.0 million for the full year, compared to NOK 11.3 million in the fourth quarter and NOK 30.0 million for the full year 2018
● Net profit was NOK 11.4 million in the quarter and NOK -64.3 million for the full year, compared to NOK 10.9 million in the quarter and NOK 21.3 million for the full year 2018
● Net debt reduced from NOK 19.4 million at the end of 2018 to NOK 2.0 million at the end of 2019
● ARR increased to NOK 37 million in the fourth quarter, up from NOK 35 fourth quarter last year
● Launched evolved version of Techstep's mobile-as-a-service solution under new name; "Flow", signed first Flow contracts with seven existing and one new customer in the fourth quarter
● Increased ownership to 80% in subsidiary Techstep Finance AS to consolidate complementary financing services

CEO comment

"In 2019, Techstep started a fundamental transformation to become a software- and IP-driven mobility provider. This was the outcome of consolidation and integration efforts over the last years, as well as development and experiences harvested together with our customers. We have recognised that it is our software and IP based solutions that differentiate us, and truly enable our customers to harvest the benefits of mobile technology.

Our financial results in the fourth quarter and for the full year 2019 reflect the effects of investing our time and money in transformation and development of the solutions and organisation that will deliver profitable growth long-term.

We have now completed most of our technological transformation. Moving further into 2020, all activities are aligned to bring our software and IP to our existing customer base and select new customers. We have set a clear ambition of increasing our customers' investment in mobility solutions by converting them to Flow, and believe this will prove to be rewarding for them. We will also continue to invest in organic development of our software and capabilities, as well as continue to pursue M&A opportunities to maintain a leading offering that makes us the preferred mobility enabler in the Nordics" says Techstep CEO Jens Haviken.

About Techstep

Techstep is positioning itself as a leading Nordic enabler of the digital workplace. Techstep supplies hardware, software, connectivity and mobile device management bundled as 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 211 employees based in Norway and Sweden, serving close to 4,000 customers and 201,000 recurring revenue end-users 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)	Q4 2019	Q4 2018	FY2019	FY 2018

Revenues	334 724	317 351	1 132 059	1 064 114

Gross profit	75 227	82 932	279 338	294 419

EBITDA adj.	7 533	11 322	29 007	30 032
EBITDA rep.	5 566	14 288	27 040	43 023
EBITA	949	13 760	(58 174)	41 280
EBIT	(4 770)	9 213	(80 192)	22 362
Net profit (loss) for the period	11 409	10 861	(64 329)	21 329

EBITDA adj. margin (%)	2.3 %	3.6 %	2.6 %	2.8 %
EBITDA rep. margin (%)	1.7 %	4.5 %	2.4 %	4.0 %
EBITA margin (%)	0.3 %	4.3 %	(5.1 %)	3.9 %
EBIT margin (%)	(1.4 %)	2.9 %	(7.1 %)	2.1 %
Net profit (loss) for the period (%)	3.4 %	3.4 %	(5.7 %)	2.0 %

Cash and cash equivalents*	44 588	39 741	44 588	39 741
Net interest-bearing debt	1 996	19 354	1 996	19 354
Capex	19 845	4 896	33 610	11 689

Hardware share of revenue includes other revenue (comprising 0.4% for FY2019). Solutions revenue comprises own software, advisory and services, and third-party software.

The FY 2018 EBITDA excludes two one-off items with positive net effect of NOK 13 million, comprising a reversal of an earn-out obligation of NOK 20 million for an acquisition in Sweden, offset by a restructuring provision of NOK 7 million for remaining rent obligations on vacated premises in Norway. For Q4 2018, the net effect was NOK 3 million.

The effect of IFRS 16 Leases is a reduction of operational costs of NOK 3.0 million in Q4 2019. See note 5 for further details.

*The Q4 2018 and FY2018 cash and cash equivalents have been restated, see note 7.

Operational review

Main developments

During 2019 Techstep saw continued digitization of workplaces within both the private and public sectors, and enterprises looking for mobility solutions for employees. Techstep is purpose-built to capitalise on these trends. Since the outset in the beginning of 2017, the company's ambition has been to become the leading Nordic enabler of the digital workplace.

Techstep's strategy is to help enterprises handle the complexity that comes with providing hundreds or thousands of employees with mobility solutions. In 2019 Techstep continued to transition from a hardware wholesaler and distributor towards becoming an IP- and software-led provider offering mobility solutions capable of handling complexity at scale.

In line with this strategy and its software-asservice business model, Techstep continued to develop its "mobile-a-a-service" concept (formerly known as "MaaS") throughout 2019. In the fourth quarter an evolved offering named "Flow" was launched to existing and new customers.

Flow allows Techstep to bundle value-adding services together with hardware and software into one complete solution offered to enterprises for a fixed monthly fee per user. The basic Flow offering consists of a smartphone, Techstep's software solutions (Origo Business Cloud), device life-cycle management and financing. The financing through Techstep Finance adds the benefit of a residual value at the end of the leasing period, contributing to a lower total cost of ownership for the customer. In addition to the basic offering, the customer can choose among several add-on services tailored to its needs.

As Flow was launched into the wider market, Origo Business Cloud – a key component of the Flow offering, was also introduced independently to selected customers. Being a software solution, Origo will also be sold independently through partners.

Techstep continued its sharp focus on the enterprise market in the fourth quarter in order to service end-users efficiently and harvest benefits of scale. The goal is to build a platform for growth through organic software innovation alongside acquisitions and partnerships.

M&A activities have played an important role in Techstep's growth strategy, and the company has acted as a market consolidator through a series of acquisitions in Norway and Sweden over the past years. In December 2019 Techstep increased its ownership to 80% in Techstep Finance AS to consolidate its complementary financing services. 30% of the shares in Techstep Finance AS were acquired for a consideration of NOK 12 million, settled in Techstep shares.

Sales activity

Techstep was awarded contracts with a potential total contract value of NOK 138 million in the fourth quarter, bringing the total potential value of awarded contracts for 2019 to NOK 954 million.

During the quarter Techstep signed a total of seven Flow agreements with a potential value of NOK 17 million. Six were signed in Norway and one in Sweden.

While Flow is Techstep's evolved version of its mobile-as-a-service solution consisting of both hardware, software, device lifecycle management and financing, the other new contracts in the quarter were a mix of both hardware-only and combinations of hardware and solutions.

The two largest contracts signed in the quarter were with Länstyrelsen and DNV-GL. Under the software focused agreement with Länstyrelsen, Techstep will deliver MobileIron software licenses and associated services, while the DNV-GL contract covers hardware and offers Flow as an option.

Recurring revenue base

Techstep's annual recurring revenue base (ARR¹ ) was NOK 37 million per Q4 2019 from a total end-user base of ~201,000. Techstep's recurring revenue relates to the sale of our own software with 100% gross margin; 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 has implemented the new IFRS 16 Leases standard with effect from 1 January 2019. The figures from last year have not been adjusted and are therefore not fully comparable with those presented for 2019. Operating expenses, depreciation and interest expenses are the items affected in the profit and loss statement. See note 5 for further details.

Profit and loss

Techstep generated total revenue of NOK 334.7 million in the fourth quarter of 2019, up 5% from NOK 317.4 million in the corresponding quarter of 2018.

Total Solution revenue amounted to NOK 65.9 million in the quarter (NOK 80.2 million), of which own software accounted for NOK 8.8 million in the quarter (NOK 8.6 million). Hardware sales amounted to NOK 269.6 million in the quarter (NOK 235.1 million).

Consequently, Hardware accounted for 80% of revenue, Own software for 3%, and Advisory, services and third-party software for the remaining 17%.

Gross profit was NOK 75.2 million in the fourth quarter (NOK 82.9 million), a 9% year-on-year decline. The decline relates to a decrease in operator commissions and the effect of terminating SME customers during 2019, partly offset by an increase in hardware volume.

The gross margin thus decreased from 26% in the fourth quarter of 2018 to 22% in the fourth quarter of 2019.

Hardware accounted for 37% of gross profit, own software for 12%, and Advisory, Services and third-party software for the remaining 51%.

Salaries and personnel costs declined by 10% year-on-year to NOK 48.3 million in the fourth quarter of 2019, reflecting a lower headcount and efficiency improvement initiatives in Norway. This effect was partly offset by increased recruiting in Techstep's software company Mytos.

Option costs were NOK 0.5 million in the fourth quarter of 2019, compared to NOK 1.3 million in the corresponding quarter of last year.

Other operational costs declined by 16% to NOK 21.2 million, down from NOK 24.8 million in the same quarter of 2018 (which included NOK 7 million in one-off costs for vacated premises). Moreover, the reclassification effect from changed accounting of leasing agreements (IFRS 16) is NOK 3.0 million and is reported as part of depreciation.

Capitalised costs relating to the development of own software were NOK 2.5 million (NOK 0.4 million last year), of which NOK 1.3 million were personnel costs and NOK 1.2 million were external development costs.

As a result, EBITDA was NOK 5.6 million in the fourth quarter of 2019, compared to NOK 14.3 million reported last year. Note that EBITDA last year included NOK 3 million net positive oneoffs following a NOK 10 million reversal of an earn-out liability related to the acquisition of BKE Telecom AB in Sweden and one-off costs of NOK 7 million for vacated premises. The Q4 2019 EBITDA includes a one-off negative effect of NOK 2 million related to ongoing M&A activities.

Operating loss (EBIT) came to NOK 4.8 million in the fourth quarter of 2019, down from an operating profit (EBIT) of NOK 9.2 million for the fourth quarter of 2018.

On 13 December 2019, ownership in Techstep Finance AS increased from 50% to 80%, resulting in a remeasurement on equity interests related to Techstep Finance of NOK 18.2 million (see note 8 for further details).

Net profit for the fourth quarter of 2019 amounted to NOK 11.4 million. Net profit for the fourth quarter of 2018 was NOK 10.9 million.

Profit and loss full-year 2019

Techstep had total revenue of NOK 1,132.1 in 2019 and an EBITDA of NOK 27.0 million. Total revenues for 2018 were NOK 1,064.1 million, while EBITDA was NOK 43.0 million.

Total net operating expenses were 1,212.3 million for 2019, compared with NOK 1,041.7 million the previous year. The ordinary operating loss (EBIT) amounted to NOK 80.2 million, including NOK 70 million in impairment of goodwill in the third quarter, compared to an operating profit of NOK 22.4 million in 2018.

The net loss for 2019 was NOK 64.3 million, compared to a net profit of NOK 21.3 million in 2018.

Cash flow

Net cash flow from operating activities was NOK 33.3 million in the fourth quarter of 2019.This includes a positive effect of NOK 27.0 million from reduced net working capital, largely due to deferred revenue from the consolidation of Techstep Finance AS.

Net cash flow used for investment activities was NOK 14.7 million. This includes capital expenditure in IT and software development of NOK 5 million and hardware (leased out to customers through Techstep Finance) of NOK 14.8 million, for a total of NOK 19.8 million in gross payments. This amount was offset by a positive cash contribution of NOK 5.2 million from the consolidation effect of Techstep Finance AS.

Net cash flow from financing activities was negative at NOK 1.1 million in the fourth quarter 2019, relating to lease repayments (IFRS 16), partly offset by positive exchange differences on finances.

Cash and cash equivalents increased by NOK 17.6 million in the fourth quarter to NOK 44.6 million.

Financial position

As at 31 December 2019, total assets were NOK 814.7 million, compared with NOK 773.7 million at 31 December 2018.

Intangible assets account for NOK 477.8 million.

Total tangible assets were NOK 111.8 million at 31 December 2019, including hardware leased out to customers of NOK 72.0 million and premises and IT licenses NOK 36.6 million.

Total inventories and receivables were NOK 175.3 million as at 31 December 2019. The reduction of NOK 10.3 million year-on-year relates to reduced inventories and other receivables.

Assets classified as held for sale were NOK 5.0 million and relate to the premises in Karlstad, Sweden. In December, an agreement was signed to sell the premises for SEK 12.8 million. There is a property loan of NOK 7.1 million classified as current interest-bearing liabilities which will be settled when the building has been handed over to the new buyer, scheduled for summer 2020.

At the end of 2019, total equity was NOK 454.6 million, corresponding to an equity ratio of 56%.

Other non-current debt of NOK 47.7 million includes an earn-out obligation related to the acquisition of Wizor AS of NOK 4.9 million, leasing commitments of NOK 26.2 million buyback obligations for leased hardware of NOK 14.1 million.

Current interest-bearing liabilities amount to NOK 46.4 million and includes factoring debt NOK 39.2 million and the property loan for the Swedish office building NOK 7.1 million.

Other current liabilities of NOK 116.8 million per 31 December 2019 mainly include vacation pay and bonus provisions NOK 31.6 million, deferred revenue NOK 63.8 million and leasing commitments of NOK 12.0 million.

Net interest-bearing debt was NOK 2.0 million at the end of 2019, compared to NOK 19.4 million per year-end 2018.

Outlook

Techstep is positioning itself as the leading Nordic enabler of the digital workplace and the company's strategy is to help enterprises handle the complexity that comes with providing hundreds or thousands of employees with mobility solutions. In 2019 Techstep continued to transition from a hardware wholesaler and distributor towards becoming an IP- and software-led provider to offer mobility solutions capable of handling complexity at scale.

In line with this strategy and its software-asservice business model, Techstep continued to develop its "mobile-a-a-service" concept (formerly known as "MaaS") throughout 2019. In the fourth quarter, an evolved offering named "Flow" was launched to existing and new customers.

The Flow offering has been developed together with customers as a response to market developments, reflecting the simplicity and security level which enterprises increasingly are looking for.

While the transition from a hardware supplier to a software and solutions provider is materialising gradually, Techstep has experienced lower gross profit due to reduced operator commissions and volumes from the Norwegian SME segment that the company discontinued in the second quarter 2019. Short term, the company does not expect that software and solutions will be able to compensate for reduced revenue and profit contribution from commissions and hardware margins.

In 2020, all Techstep activities are aligned to grow the sales of the company's value creating, higher margin software and services solutions to enterprise customers in Norway and Sweden. In addition to investments in the software platform and organizational development and capabilities, Techstep will continue to pursue potential M&A opportunities.

Consolidated income statement

(amounts in NOK 1 000) Note	Q4 2019	Q4 2018	FY 2019	FY 2018
Revenue 2, 3	334 898	317 351	1 127 763	1 059 596
Other income	(174)	-	4 296	4 518
Total revenues	334 724	317 351	1 132 059	1 064 114

Cost of goods sold	(259 498)	(234 419)	(852 722)	(769 695)
Salaries and personnel costs	(48 331)	(53 726)	(187 994)	(195 376)
Other operational costs	(21 168)	(24 825)	(65 363)	(76 101)
Share of profit (loss) in joint ventures	(162)	(19)	1 059	119
Depreciation 5	(4 618)	(528)	(15 214)	(1 743)
Amortisation	(5 719)	(4 547)	(22 018)	(18 918)
Impairment 6	-	-	(70 000)	-
Other income	-	9 928	-	19 962
Operating profit (loss)	(4 770)	9 213	(80 192)	22 362

Remeasurement on equity interests 8	18 206	-	18 206	-
Financial income	1 726	622	5 546	1 108
Financial expense	(1 951)	(525)	(5 948)	(4 462)
Profit before taxes	13 211	9 311	(62 388)	19 009
Income taxes	(1 802)	1 550	(1 941)	2 320
Net profit (loss) for the period	11 409	10 861	(64 329)	21 329

Net income attributable to
Non-controlling interests	(1)	-	(1)	644
Shareholders of Techstep ASA	11 410	10 861	(64 328)	20 685

Earnings per share in NOK:
Basic	0.07	0.07	(0.40)	0.13
Diluted	0.07	0.07	(0.40)	0.13

Consolidated statement of comprehensive income

(amounts in NOK 1 000)	Q4 2019	Q4 2018	FY 2019	FY 2018
Net profit (loss) for the period	11 409	10 861	(64 329)	21 329

Items that may be reclassified to profit and loss
Exchange differences on translating foreign operations	1 483	9 959	(9 211)	414
Income tax related to these items	(415)	(806)	923	396
Total comprehensive income	12 477	20 014	(72 617)	22 138

Total comprehensive income attributable to
Non-controlling interests	(1)	-	(1)	644
Shareholders of Techstep ASA	12 477	20 014	(72 617)	21 495

Consolidated statement of financial position

(amounts in NOK 1 000)			RESTATED*
ASSETS	Note	Q4 2019	FY 2018
Non-current assets
Deferred tax asset		-	2 439
Goodwill	6, 8	415 878	457 388
Customer relations and technology		61 901	67 733
Total intangible assets		477 779	527 560
Property, plant and equipment	5, 8, 9	111 787	9 377
Total tangible assets		111 787	9 377
Joint ventures		-	735
Shares and investments		44	8 117
Other non-current assets		181	2 568
Total financial assets		225	11 420
Total non-current assets		589 791	548 357
Inventories		11 828	16 155
Accounts receivable		147 411	146 565
Other receivables		16 104	22 881
Total inventories and receivables		175 343	185 601
Cash and cash equivalents		44 588	39 741
Assets classified as held for sale		4 962	-
Total current assets		224 893	225 342
Total assets		814 684	773 699

EQUITY AND LIABILITIES	Note	Q4 2019	FY 2018
Share capital	4, 8	162 795	159 057
Other equity		291 880	354 722
Total equity attributable to the owners of Techstep ASA	4	454 675	513 780
Non-controlling interests		(76)	-
Total equity		454 599	513 780
Deferred tax		4 283	3 608
Non-current interest-bearing debt		162	7 341
Other non-current debt	8	47 688	8 081
Total non-current debt		52 134	19 030
Current interest-bearing liabilities		46 423	51 754
Accounts payable		122 328	116 694
Tax payable		-	3 470
Public taxes, provisions		22 381	21 842
Other current liabilities	5, 8	116 820	47 131
Total current debt		307 951	240 890
Total liabilities		360 085	259 920
Total equity and liabilities		814 684	773 699

*Refer to note 7

Consolidated statement of changes in equity

	Share	Other paid-in	Other		Minority	Total equity
(amounts in NOK 1 000)	capital	capital	equity	Sum	interest	capital
Equity as of 1 January 2018	146 252	473 292	(169 805)	449 739	369	450 110

Profit for the period	-	-	20 685	20 685	644	21 329
Other comprehensive income	-	-	809	809	-	809
Total comprehensive income
for the period	-	-	21 495	21 495	644	22 138
Transactions with owners in their capacity as owners: Contributions of equity net of transaction costs Issue of ordinary shares as	7 937	16 062	-	23 999	-	23 999
consideration for a business combination, net of transaction costs and tax Purchase of minority interest in	4 869	7 741	-	12 610	-	12 610
subsidiary	-	-	1 013	1 013	(1 013)	-
Share-based payments	-	-	4 924	4 924	-	4 924
Equity as of 31 December 2018	159 057	497 096	(142 374)	513 780	-	513 780

Equity as of 1 January 2019	159 057	497 096	(142 374)	513 780	-	513 780
Profit for the period	-	-	(64 328)	(64 328)	(1)	(64 329)
Other comprehensive income	-	-	(8 288)	(8 288)	-	(8 288)
Total comprehensive income for the period	-	-	(72 616)	(72 616)	(1)	(72 617)
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	(76)	10 839
Share-based payments	-	-	2 597	2 597	-	2 597
Equity as of end December 2019	162 795	504 272	(212 393)	454 675	(76)	454 599

Consolidated statement of cash flow

(amounts in NOK 1 000)	Note	Q4 2019	Q4 2018	FY 2019	FY 2018*

Profit before tax		13 211	9 311	(62 388)	19 009
Profit from joint venture		162	19	(1 059)	(119)
Depreciation, amortisation	5, 9	10 336	5 075	37 232	20 660
Share-based payments		535	1 191	2 597	4 924
Impairment		-	-	70 000	-
Remeasurement of contingent liability		-	(9 928)	-	(19 962)
Remeasurement of equity interest	8	(18 206)	-	(18 206)	-
Net exchange differences		1 072	(2 133)	1 451	(2 133)
Taxes paid		(801)	3 874	(2 508)	(1 518)
Changes in net operation working capital		27 039	23 565	23 959	6 489
Net cash flow from operational activities		33 340	30 969	51 079	27 347

Payment for acquisition of subsidiaries net of cash acquired		5 184	-	5 184	(5 335)
Payment for property, plant and equipment	9	(19 845)	(4 896)	(33 610)	(11 689)
Repayment of invested capital		-		8 073	-
Proceeds from dividends received		-	-	2 093	-
Proceeds from sale of equity instruments		-	-	-	760
Net cash used on investment activities		(14 661)	(4 896)	(18 259)	(16 264)

Proceeds from issuance of shares		-	-	-	23 700
Repayment of borrowings		(84)	(5 683)	(15 350)	(12 008)
Lease repayments	5	(3 993)	-	(12 145)	-
Net exchange differences finance		2 990	-	-	-
Net cash flow from financing activities		(1 088)	(5 683)	(27 494)	11 692

Net change in cash and cash equivalents		17 592	20 391	5 325	22 774
Cash and cash equivalents at beginning of period		26 694	18 466	39 716	17 336
Effects of exchange rate changes on cash and cash equivalents		305	883	(453)	(370)
Cash and cash equivalents at end of period		44 588	39 741	44 588	39 741

*Refer to note 7

Notes to the consolidated financial statements

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.

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 2018. 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 2018, with the exceptions stated below. The report has not been audited.

Leases

standard.

From Q1 2019, Techstep has adopted the new accounting standard IFRS 16 Leases.

The group applies the modified retrospective approach where right-to-use assets are measured at an amount equal to the lease liability at 1 January 2019. The lease liability is calculated as the present value of future lease payments. The future lease payments are discounted by the incremental borrowing rate ate the time of transition.

The modified retrospective approach does not have any effect on equity. Using this approach, the 2018 comparable numbers are not restated as if IFRS 16 was applied in 2018. The presented amounts are calculated based on judgements and interpretations at the time of adopting the new

The Group has elected to apply the recognition exemption to leases for which underlying assets are of low value. Lease of intangible assets that are within the scope of the standard are accounted for in accordance with IFRS 16.

The right-to-use assets are depreciated over the lifespan of the lease using a linear approach. The assets are presented on the line item property plant and equipment.

The corresponding lease liability is reduced when down payments are made.

The interest element of the lease is calculated using the incremental borrowing rate. For the group the rate varies between 3-5 % depending on the company holding the lease and the underlying asset.

The transition effect adopting the standard are shown in note 5 Leases.

Revenue recognition

As a part of the Flow-offering and as a stand-alone product, the Group offers a leasing alternative to customers. The Group uses external funding to finance the transactions. The Group sells the devices to an external funder and receives payment in full. The devices are delivered to the end-users, and the end-users are invoiced over the contract period from the funder. The Group has no credit risk related to the end-user. The funder is in the following description the customer.

The Group has contracts with customers where upon the customer can, at the end of the contract period, require that the Group repurchases the devices at a predetermined price. This price is always lower than the original selling price.

When contracts containing repurchase options are entered into, management assesses whether or not the customer has a significant economic incentive to utilise the option. Where it is determined that the customer has a significant economic incentive to utilise the option, the contract is determined to be a lease and the transaction is accounted for as a lease in accordance with IFRS 16.

Leasing - Lessor accounting

For each leasing contract the Group enters into with customers, management assesses whether the contract shall be classified as an operational or financial lease based on the substance of the transaction. As at the balance sheet date, the Group only has operational lease contracts with customers.

The devices sold with repurchase agreements are accounted for as leased to the customer under operating leases with rentals payable up front at the inception of the lease. There are no other variable lease payments. The Group is exposed to changes in the residual value at the end of the lease period. At the end of the lease period the Group expects to repurchase the devices from the customer.

Payment received from the customer is accounted for as deferred revenue and recognised as revenue on a straightline basis over the lease term, less the agreed-upon residual value (repurchase amount)

Expectations about the future second hand-values are reflected in the fair value of the devices. The respective leased assets are included in the balance sheet based on their nature and depreciated over the lease term to the expected second-hand market value.

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.
Mowizor AB: A Swedish based security software company, located in 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
Q4 2019	Norway	Sweden	other	inations	Total
Operating revenues from external customers	246 665	88 059	-	-	334 724
Operating revenues from other segments	1 721	598	7 184	(9 503)	-
Operating revenues	248 386	88 657	7 185	(9 503)	334 724
Cost of goods sold	(194 387)	(66 890)	(25)	1 804	(259 498)
Salaries and personnel costs	(29 313)	(11 551)	(7 670)	204	(48 331)
Other operational costs	(15 900)	(4 381)	(7 608)	6 721	(21 168)
Share of profit (loss) of joint venture	-	-	(162)	-	(162)
Depreciation	(1 996)	(654)	(1 968)	-	(4 618)
Amortisation	(4 982)	(1 800)	1 063	-	(5 719)
Impairment	-	-	-	-	-
Other income and expenses	-	-	-	-	-
Operating profit (loss)	1 807	3 382	(9 185)	(774)	(4 770)

Employees 31 December 2019	134	59	18		211

			HQ and	Elim
Q4 2018	Norway	Sweden	other	inations	Total
Operating revenues from external customers	244 568	72 789	-	-	317 351
Operating revenues from other segments	(1 509)	(463)	(323)	2 287	-
Operating revenues	243 059	72 326	(323)	2 287	317 351
Cost of goods sold	(182 346)	(54 631)	-	2 558	(234 419)
Salaries and personnel costs	(35 729)	(11 541)	(9 166)	2 710	(53 726)
Other operational costs	(9 219)	(2 217)	(5 834)	(7 556)	(24 825)
Share of profit (loss) of joint venture	-	-	(19)	-	(19)
Depreciation	(271)	(237)	(21)	-	(528)
Amortisation	(2 596)	(1 680)	(271)	-	(4 547)
Impairment	-	-	-	-	-
Other expenses	-	-	9 928	-	9 928
Operating profit (loss)	12 898	2 020	(5 706)	(1)	9 213

Employees 31 December 2018	142	61	18		221

			HQ and	Elim
FY 2019	Norway	Sweden	other	inations	Total
Operating revenues from external customers	824 119	307 940	-	-	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 expenses	-	-	-	-	-
Operating profit (loss)	(52 660)	7 839	(35 712)	340	(80 192)

			Head quarter
FY 2018	Norway	Sweden	and other	Elim inations	Total
Operating revenues from external customers	805 318	258 606	190	-	1 064 114
Operating revenues from other segments	19 455	432	16 010	(35 898)	-
Operating revenues	824 773	259 038	16 201	(35 898)	1 064 114
Cost of goods sold	(592 098)	(198 991)	(51)	21 445	(769 695)
Salaries and personnel costs	(127 909)	(42 172)	(28 004)	2 710	(195 376)
Other operational costs	(51 106)	(15 640)	(21 098)	11 744	(76 101)
Share of profit (loss) of joint venture	-	-	119	-	119
Depreciation	(772)	(893)	(78)	-	(1 743)
Amortisation	(10 001)	(6 786)	(2 131)	-	(18 918)
Impairment	-	-	-	-	-
Other income and expenses	-	-	19 962	-	19 962
Operating profit (loss)	42 887	(5 444)	(15 080)	-	22 362

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:

			Headquarter
Q4 2019	Norway	Sweden	and other	Eliminations	Group
Total revenues	248 386	88 657	7 185	(9 503)	334 725

Hardware
Hardware revenues	195 826	64 630	-	(891)	259 565
Bonus	9 363	69	-	-	9 432
Commission	-	-	-	-	-
Total	205 189	64 699	-	(891)	268 997

Solutions
Solutions revenues	36 341	22 110	-	(1 427)	57 024
Bonus	-	-	-	-	-
Commission	6 776	2 103	-	-	8 878
Total	43 117	24 212	-	(1 427)	65 902

Other revenues
Other	80	(254)	7 185	(7 184)	(174)
Total	80	(254)	7 185	(7 184)	(174)

			Headquarter
Q4 2018	Norway	Sweden	and other	Eliminations	Group
Total revenues	243 059	72 326	(323)	2 287	317 351

Hardware
Hardware revenues	177 868	56 714	-	(3 734)	230 848
Bonus	4 122	98	-	-	4 220
Commission	-	-	-	-	-
Total	181 990	56 812	-	(3 734)	235 068

Solutions
Solutions revenues	38 750	13 336	-	4 528	56 614
Bonus	-	-	-	-	-
Commission	21 155	2 455	-	-	23 609
Total	59 904	15 790	-	4 528	80 223

Other revenues
Other	1 165	(276)	(323)	1 493	2 059
Total	1 165	(276)	(323)	1 493	2 059

In Q4 2018 NOK 6.6 million were reported as Solution bonus. The amount has been reclassified to Solutions commission.

			Headquarte	Elimination
FY 2019	Norway	Sweden	r and other	s	Group
Total revenues	830 176	311 112	22 567	(31 796)	1 132 059

Hardware
Hardware revenues	607 136	203 986	-	(5 266)	805 857
Bonus	28 380	2 807	-	-	31 187
Commission	-	-	-	-	-
Total	635 517	206 793	-	(5 266)	837 044

Solutions
Solutions revenues	155 751	95 765	-	(3 963)	247 552
Bonus	-	-	-	-	-
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

			Headquarter
FY 2018 Restated	Norway	Sweden	and other	Eliminations	Group
Total revenues	824 773	259 038	16 201	(35 898)	1 064 114

Hardware
Hardware revenues	581 825	193 956	-	(19 412)	756 369
Bonus	23 463	323	-	-	23 786
Provisions	-	-	-	-	-
Total	605 289	194 279	-	(19 412)	780 155

Solutions
Solutions revenues	161 651	55 027	-	(475)	216 203
Bonus	-	-	-	-	-
Provisions	53 596	9 623	-	-	63 219
Total	215 247	64 650	-	(475)	279 422

Other revenues
Other	4 237	109	16 201	(16 010)	4 536
Total	4 237	109	16 201	(16 010)	4 536

In 2018 NOK 21.5 million were reported as Solutions bonus. The amount has been reclassified to Solutions Provisions.

Note 4: Share capital and shareholders

The company's share capital as at 31 December 2019 was NOK 162,795,337 consisting of 162,795,337 ordinary shares with a par value of NOK 1.00. This includes new shares of 3,738,317 issued to Bridge Capital AS on 13 December 2019, related to the acquisition of 30% of Techstep Finance AS.

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.

Shareholder	# of shares	Ownership %
Datum AS1	31 817 975	19.54 %
Middelborg Invest AS	30 517 764	18.75 %
Karbon Invest AS2	17 236 689	10.59 %
Cipriano AS3	4 968 835	3.05 %
Verdipapirfondet DNB SMB	4 582 321	2.81 %
Zono Holding AS4	4 000 007	2.46 %
Tigerstaden AS	4 000 000	2.46 %
Palos Norge AS	3 966 667	2.44 %
Bridge Capital AS	3 813 317	2.34 %
Skandinaviska Enskilda Banken AB	3 731 967	2.29 %
Tinde Industrier AS	3 063 372	1.88 %
Torstein Ingvald Tvenge	3 000 000	1.84 %
Så&Høste AS	2 925 936	1.80 %
Adrian AS	2 038 851	1.25 %
Nomo Holding AS	1 946 253	1.20 %
Nordialog Ensjø AS	1 946 253	1.20 %
Skarestrand Invest AS	1 922 315	1.18 %
Dovran Invest AS	1 863 372	1.14 %
Unified AS	1 849 457	1.14 %
Modiola AS	1 649 348	1.01 %
Total number owned by top 20	130 840 699	80.37%
Total number of shares	162 795 337	100%

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 1,287,245 shares in Techstep ASA.

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

Share option grant

As of 31 December, the total number of outstanding share options was 12 million, which is equivalent to 7% of the number of shares (including 1,914 treasury shares) in Techstep ASA.

Overview of shares and share options held by members of the management group as at 31 December 2019:

Name	Position	Shares	Share options
Jens Haviken	CEO	100,000	5,000,000
Marius Drefvelin	CFO	40,000	1,500,000
Mads Vårdal	CIO	5,019	1,500,000
Erik Haugen	CCO	-	1,000,000
Inge Paulsen	Managing Director Norway	150,000	1,000,000
Bartek Regerqvist	Managing Director Sweden	-	200,000

Note 5: Leases

Effects on the consolidated statement of financial position.

The equity effect of the adoption of IFRS 16 was zero. The table below presents the effects in assets and liabilities presented in the fourth quarter report and financial statements of 2018 before and after the adoption of IFRS 16.

	31 December 2018	IFRS 16 implementation effect	1 January 2019
Total tangible assets	9 377	21 563	30 940
Other non-current debt	(8 081)	(10 315)	(18 396)
Other current liabilities	(47 131)	(11 248)	(58 378)
Total	(45 835)	-	(45 835)

Effects on income statement Q4 2019

	Excluding IFRS 16
	Q4 2019	IFRS 16 effects	Total Q4 2019
Other operational costs	3 036	-	(3 036)
Depreciation	-	4 924	4 924
Finance expenses	-	349	349
Total	3 036	5 273	2 237

Effects on income statement

	Excluding IFRS 16
	2019	IFRS 16 effects	Total 2019
Other operational costs	11 623	-	(11 623)
Depreciation	-	13 081	13 081
Finance expenses	-	1 102	1 102
Total	11 623	14 183	2 560

Note 6: Impairment

For impairment testing, goodwill and customer relationships acquired through business combinations are allocated to the CGUs as shown in the table below.

Carrying amount of goodwill and customer relationships allocated to each of the CGUs:

	Goodwill		Customer relationships
	2019	2018	2019	2018
Techstep Norway AS	210 833	280 833	3 918	8 412
Techstep Sweden AB	79 711	82 982	17 858	25 467
Mytos AS	93 570	93 570	8 208	12 147
Total	384 114	457 388	29 984	46 027

In the 2018 Group financial statements, Wizor AS was a separate CGU. Wizor AS was merged into Techstep Norway AS at the end of 2019 and is considered as one CGU for management reporting purposes.

Goodwill (and customer relationships) are monitored by management at the level defined in the table above. These CGUs represent the lowest level within the Group at which the goodwill and other intangible assets are monitored for internal management purposes.

The Group considers the relationship between cash flows from budgets versus actual performance and forecasts for future performance when reviewing for indicators for impairment.

The estimate of the recoverable amount of the CGU is largely based on management's assumption pertaining to future cash flow projections.

Techstep Norway AS:

In Q3 2019 there were indications of impairment in Techstep Norway and an impairment was performed. There was no indication of impairment in the other CGUs.

The recoverable amount of the CGU was as at 30 September 2019 as follows:

	Company books	Group values	Total
Goodwill	93 184	117 649	210 833
Customer relationships	-	4 114	4 114
Deferred taxes	-	(905)	(905)
Net other assets	(9 396)	-	(9 396)
Equity value	83 788	120 857	204 646

The recoverable amount has been determined based on value in use calculation using cash flow projections from financial forecasts covering a period of 5 years.

For the reporting period, the recoverable amount of the cash generating unit (CGUs) was determined based on value-in-use calculations which require the use of several key assumptions. The calculations use cash flow projections based on financial budgets covering a five-year period. Cash flows beyond the five-year period are calculated using the estimated growth rates stated below.

Techstep Norway business includes the business areas own software, advisory, security and "as-is" business in 2019. All businesses are dependent on each other and therefore considered as one CGU. Own software constitutes being a reseller of the Mytos software product portfolio mainly related to the products Origo business cloud and telecom expense management. The telecom expense management product is a part of the product portfolio in 2019.

Advisory is related to the strengthening of the company's consulting department. Security is related to the product Secusmart. The "as-is" business is the offering as per today, hereunder the hardware business.

The market for the hardware business is competitive with declining and low margins. Techstep Norway has also experienced a decline in operator commissions as the company has made strategic decisions to exit some low margin SMB business.

For the reporting period, the recoverable amount of the cash generating unit (CGUs) was determined based on value-in-use calculations which require the use of several key assumptions. The starting point of the projected cash flows is the strategy plan for the Group translated into the CGU. The free cash flows have been updated to reflect the transition the CGU and the entire Group are undertaking. The transition establishes new cash flows from software and advisory services and diminishes the free cash flows from the legacy hardware business. The calculations use cash flow projections covering a five-year period. Cash flows beyond the five-year period are calculated using the estimated growth rates stated below.

Key assumptions

2019	2018
Equity ratio 56 %	65 %
Growth in terminal value 0.5 %	0.5 %
WACC 11.9 %	11.9 %

Discount rates

The pre-tax discount rate applied for the impairment testing is set at 11.9 %. This rate of return is calculated based on the weighted average of required rates of return on the Group's equity and debt (WACC) using the capital asset pricing model (CAPM).

The required rate of return on debt is estimated based on a long-term risk-free interest rate, to which a premium is added to reflect the creditors' risk when lending funds to the Group. The discount rate includes a small business premium (operational risk) and the expected future levels of inflation. For impairment reviews performed at yearend 2018, these assumptions have been applied consistently across the Group.

Investments

Capital expenditure is assumed to be equal to depreciation in the terminal year.

Budget assumptions

The budget for the company is built bottom up with expected growth rates in all business areas. The Group's strategy is the core of where growth is expected. Most of the expected future cash flows are not defined by binding contracts and are dependent on multiple factors such as: market penetration for own software, the ability to build and maintain a professional service organisation and the ability to increase the efficiency in the current operations. Compounded average annual growth rate in EBITDA for the 5-year period covered by the discounted cash flow analysis is 16 %. The growth rate is based both on historic performance and the expected growth rate for the strategic direction.

Sensitivities

The estimation of recoverable amount is based on assumptions regarding the future development of several factors. These include price development for products, sales volumes and growth rates. Inherently there are uncertainties in these calculations. In relation to the assumptions made in the calculation of the present value of future cash flows, recoverable amount is sensitive to:

Sensitivity	Impairment indication
10 % decrease in growth rate in users on own software	- NOK 10 million
10 % decrease in ARPU	- NOK 14 million

Impairment charge

The Group recognises an impairment charge in 2019 (Q3) amounting to NOK 70 million. The impairment is related to the reduction in hardware margins and operator commissions. Moreover, it is a consequence of the Group's strategic direction and the ongoing transformation of the business. Management's assessment is that the impairment is an effect of replacing legacy cash flows with the inherent uncertainties in future cash flows from new products. This does not constitute that management does not believe in the business model going forward.

Note 7: Reclassification

Restatement: impact on statement of financial position

		Current
	Cash and cash	interest
	equivalents	bearing debt
2018 Restated	39 741	51 754
2018 Reported	53 996	66 009
Change	(14 255)	(14 255)

Reclassification impact in consolidated statement of cash flows

	Changes in net operation working capital	Cash and cash equivalents at beginning of period	Cash and cash equivalents at end of period
Q4 2018 Restated	23 565	18 466	39 741
Q4 2018 Reported	13 137	43 200	53 996
Change	10 428	(24 734)	(14 255)

	Changes in net operation working capital	Cash and cash equivalents at beginning of period	Cash and cash equivalents at end of period
2018 Restated	6 489	17 336	39 741
2018 Reported	2 556	35 524	53 996
Change	3 933	(18 188)	(14 255)

Note 8: Business combinations

In Q4 2019, Techstep acquired 30% of the shares in Techstep Finance AS, increase the total ownership to 80%. The transaction was settled in 3,738,317 consideration shares in Techstep ASA. At the time completion, this corresponded to NOK 10.9 million.

As a consequence of the acquisition, Techstep Finance AS and its subsidiary Techstep Finance AB are consolidated as a subsidiary in the Techstep Group accounts. Up until 13 December 2019, Techstep Finance AS was accounted for as a joint venture.

Acquisition related costs amounting to NOK 0.3 million are recognized in the consolidated income statement in the line item Other operational costs.

The tables below summarise the consideration transferred and the amounts recognised for assets acquired and liabilities assumed after the business combinations:

Calculation of remeasurement of previously held equity

interest
Techstep Finance valuation	40 000
Techstep's share	50 %
Value of previously held equity interest	20 000
Book value of previously held equity interest	1 794
Remeasurement gain	18 206

Consideration and amount recognised
Consideration shares	10 916
Book value of previously held equity interest	1 794
Remeasurement of previously held equity interest	18 206
Total	30 916

Net assets
Property plant and equipment	58 973
Trade and other receivables	3 535
Cash and cash equivalents	5 169
Other non-current liabilities	(2 360)
Current liabilities	(66 105)
Net assets	(788)
Excess value	31 704

Purchase price allocation
Goodwill	31 704
Total	31 704

The goodwill of NOK 31.4 million recognised is the systems, back to back contracts, work practices and knowhow in the company for efficient execution of transactions as well as proven synergies with other companies in the Group. None of the goodwill recognised is expected to be deductible for income tax purposes. The business combination is carried out as part of the Group's growth strategy.

The companies acquired in business combinations completed through purchase of shares have since the acquisition dates contributed NOK 1.8 million to operating revenues and NOK 0.0 million to consolidated net profit. If the acquisition date of all business combinations completed through purchase of shares was as at 1 January 2019, the operating revenues of the Group would have increased by NOK 36.2 million and the effect on the consolidated net profit would have been positive NOK 0.6 million.

			Note 9: Property, plant and equipment
--	--	--	---------------------------------------

			Lessee assets
	Land and	Leased	classified as operational	Other fixed
FY 2019	buildings	assets	leases	assets	Total

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

Accumulated cost as at 1 January 2018	8 414	-	-	17 025	25 439
Additions	-	-	-	1 031	1 031
Additions arising from business combinations	-	-	-	-	-
Translation differences	(248)	-	-	(106)	(354)
Accumulated cost as at 31 December 2018	8 166	-	-	17 950	26 115

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)	(10 428)	(1 834)	(2 870)	(15 214)
Reclassified to held for sale	-	-	-	-	-
Translation differences	68	(534)	(3)	(210)	(680)
Reclassified to asset classified as held for sale	3 070	-	-	-	3 070
Accumulated depreciation as at 31 December 2019	-	(10 962)	(33 871)	(16 763)	(61 596)

Accumulated depreciation as at 1 January 2018	(3 055)	-	-	(11 917)	(14 972)
Additions arising from business	-	-	-	(675)	(675)
combinations Depreciation	(91)	-	-	(1 155)	(1 246)
Translation differences	90	-	-	65	155
Accumulated depreciation as at 31	(3 056)	-	-	(13 682)	(16 739)
December 2018
Book value of assets 31 December 2018	5 109	-	-	4 268	9 377
Book value of assets 31 December 2019	-	36 590	71 994	3 203	111 787

Note 10: Subsequent events

No material events have occurred after the balance sheet date until the publication of the financial statements that have had material impact on the Group's financial position and that should have been reflected in the published financial statements.

Alternative Performance Measures

"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 and amortisation (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."

"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."

"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.

Capital Expenditure (Capex)

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

*ARR

ARR is calculated as the monthly revenue in the last month of the quarter, multiplied by twelve months.

ARPU

Average Revenue Per User is calculated as total revenue from own software in the period divided by the number of users at the end of the period.

TECHSTEP ASA

Brynsalléen 4 0667 Oslo, Norway +47 915 233 37