Techstep ASA — Investor Presentation 2020

Nov 6, 2020

Q3 2020 presentation

CEO Jens Haviken CFO Marius Drefvelin

Agenda

Highlights Optidev acquisition Financials

Market and offering

Q&A

Highlights Q3 2020

• Gross profit increase of 19%
• Signed five new Flow contracts with an estimated total contract value of NOK 43 million
• Acquired Optidev AB; strengthened position within Managed Mobility Services in the Nordics through
• Annual Recurring Revenue (ARR) up 60% with Optidev to NOK~60 million

The Q3 2020 figures 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.

Optidev acquisition

Optidev AB:

One of the leaders of cost-efficient mobility solutions in the Nordics

• Nordic supplier of mobility solutions with focus on transportation and logistic and public safety
• Provides both software solutions and hardware equipment to ensure full connectivity in real time
• Founded in 2000, 80 employees
• Offices in Borås (HQ) and Stockholm in Sweden and Son in Norway, sales office in Denmark

Key industries:

Mobile Device Management

Order & delivery

Tickets & Travel

Track & Trace

Hardware & Services

Key metrics improved as well as more geographically diversified

Proforma key figures including Optidev

Financials

Key figures

(amounts in NOK 1 000)	Q3 2020	Q3 2019	2019
Revenues	212 732	243 189	1 132 059
Annual Recurring Revenue (ARR)	37 632	34 754	36 632
Gross profit	71 447	59 803	279 338
EBITDA adjusted	16 470	5 827	29 007
EBITDA	13 940	5 827	27 040
EBITA	(6 709)	(67 374)	(58 174)
EBIT	(12 734)	(72 689)	(80 192)
Net profit (loss) for the period	(13 269)	(73 185)	(64 329)
EBITDA adj. margin (%)	7.7 %	2.4 %	2.6 %
EBITDA rep. margin (%)	6.6 %	2.4 %	2.4 %
EBITA margin (%)	(3.2 %)	(27.7 %)	(5.1 %)
EBIT margin (%)	(6.0 %)	(29.9 %)	(7.1 %)
Net profit (loss) for the period (%)	(6.2 %)	(30.1 %)	(5.7 %)
Cash	54 920	26 692	44 588
Net interest-bearing debt	12 338	16 564	1 996
Capex	48 697	4 478	33 611

• Revenue decreased by 12% y-o-y; lower hardware volumes and advisory activities
• Gross profit increased by 19% y-o-y; leasing portfolio effect, incl. one-off delivery
• EBITDA positively affected by the gross profit increase and cost mitigation
• Net interest-bearing debt of NOK 12 million
• Capex of NOK 49 million includes leased out hardware to customers of NOK 45 million

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.

Gross profit split and development

Gross Profit - last twelve months rolling NOK million

• Increase in leasing portfolio
• Leasing and own software improving gross profit in the quarter
• As expected, continued reductions in commissions
• Focus on rolling out the Managed Mobility Services (MMS) offering expected to grow gross profit from software and leasing of hardware going forward, driving recurring revenue/ARR, visibility and profitability

Gross profit to EBITDA

EBITDA adjusted and % of Gross Profit – last twelve months rolling NOK million and percent

• Profitability positively affected by increased leasing portfolio in Q3
• Positive effect of NOK 17 million
• Cost mitigation

16% quarterly growth in Origo users

of end-users

Annual recurring revenue (ARR) development 2020 NOK million

• Focus and expectation is to grow Origo,
• comprising 34k of the 209k users per Q3
  • 12% quarterly growth in Origo ARR, 16% user growth
  • 19% YTD growth in Origo ARR, 27% user growth
• Decrease in mobile expense management white label, as expected
• Operational progress
• Official launch of Flow and Origo in Sweden

MEM = Mobile Expense Management.

* Combined in Q3 2019, started separate reporting in Q4 2019

Market and offering

MMS is one of the fastest growing segments within IT-services and Telecom

IT-services and Telecom converging into Managed Mobility Services (MMS¹ ), helping enterprises and employees succeed when work is going mobile

Global MMS market valued at NOK 65 billion in 2019²– expected to reach NOK 334 billion by 2025, a CAGR of 31%

The primary driver for this growth is the increasing adoption of BYOD (Bring-Your-Own-Device) policies across various industries

CAGR '20-25 ~31% Global MMS growth2

Sources: 1) Gartner definition: Managed mobility services (MMS) comprise the vendor-provided IT and business process services required to plan, procure, provision, activate, manage, secure and support mobile devices, mobile network services, related mobile management systems and mobile applications. 2) https://www.mordorintelligence.com/industry-reports/mobility-managed-services-market

80% of the global workforce is deskless

82% of the surveyed companies¹are planning to increase spend in deskless technologies. Across all industries there is an average planned increase in spend of 31%

% of Companies planning to Increase spending on Deskless Technology

Productivity is the primary driver, however keeping people happy is also critical

1) Source: http://desklessworkforce2018.com

Large MMS market opening up in the Nordics

Customers' needs shaping Techstep's offering

Techstep Service Stack Industry Solutions

Device Management Lifecycle Management Policy compliance Support and Service

Mobile Expense Management Self service portal Origo Business Cloud

Platform Management Security App and Identity Management EMM/UEM

Advisory services

Management consulting Project Management

Operations

Adding new brands and organizations to the MMS offering Flow

13k Flow contracts signed in the quarter Flow contracts signed YTD Flow end-users signed YTD 3 16 5 14

Helping BAMA improve its warehouse management

Techstep provides BAMA with devices and Managed Mobility Services to help automate processes and improve communication, planning and administration within areas such as warehouse and logistics. With Techstep's solution, BAMA achieves significant time savings and control, while empowering their employees to increase efficiency - and ultimately perform better at work.

14.5

Total contract value (NOKm)

2 500

Employees to be included

BAMA is a Norwegian wholesale trader of imported and Norwegian-produced fresh produce in fruits, vegetables and flowers, with a largely mobile workforce

Summary

• Strengthened position within Managed Mobility Services through the acquisition of Optidev AB
• The Managed Mobility Service offering Flow expanded geographically with launch in Sweden
• The MMS market opportunity and the rise of the deskless worker creates a strong foundation for future growth
• Continue to invest in software and IP and pursue M&A

Next event: Capital Markets Update on 1 December 2020

Agenda:

The online event will provide an update on Techstep's strategic development, market and outlook and include presentations by CEO Jens Haviken, CFO Marius Drefvelin and CCO Erik Haugen, as well as a presentation of Techstep's most recent acquisition, Optidev AB.

Time: 10:00 – 12:00

More information from www.techstepasa.no

Appendix

Income statement

(amounts in NOK 1 000)	Q3 2020	Q3 2019	2019
Revenue	212 432	241 903	1 127 763
Other income	300	1 286	4 296
Total revenues	212 732	243 189	1 132 059
Cost of goods sold	(141 286)	(183 386)	(852 722)
Salaries and personnel costs	(41 579)	(41 904)	(187 994)
Other operational costs	(13 398)	(12 348)	(65 363)
Share of profit (loss) in joint ventures	-	276	1 059
Depreciation	(20 650)	(3 201)	(15 214)
Amortisation	(6 025)	(5 314)	(22 018)
Impairment	-	(70 000)	(70 000)
Other income	4 795	-	-
Other expenses	(7 324)	-	-
Operating profit (loss)	(12 734)	(72 689)	(80 192)
Remeasurement on equity interests	-	-	18 206
Financial income	1 791	521	5 546
Financial expense	(3 641)	(1 642)	(5 948)
Profit before taxes	(14 584)	(73 811)	(62 388)
Income taxes	1 315	626	(1 941)
Net profit (loss) for the period	(13 269)	(73 185)	(64 329)

In Q4 2019, Techstep ASA acquired the remaining 80% stake in Techstep Finance AS. As of Q1 2020, Techstep Finance AS is consolidated according to IFRS 16 accounting standards. Thus, comparable y-o-y will be affected by the effects from IFRS 16 –mainly increasing revenue, gross profit and depreciation.

• Inclusion of leasing portfolio started in Q1 2020. Effect in Q3 2020 of NOK 25.5 million on revenue and NOK 17 million on gross profit and depreciation
• Other income includes a gain on sale for the office building in Karlstad, Sweden
• Other expenses includes one-off costs related to M&A activities of NOK 7.3 million
• Amortisation is non-cash and mainly relates to acquisitions (customer relations), completed by 2023

Balance sheet

NOK 1 000	30.06.2020	31.12.2019
Intangible assets	489 344	480 285
Tangible assets	135 890	111 787
Financial assets	185	225
Inventories	19 363	11 828
Accounts receivable	123 103	147 411
Other receivables	19 387	16 104
Cash and cash equivalents	54 920	44 588
Assets classified as held for sale	-	4 962
Total assets	842 191	817 191
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
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 equity and liabilities	842 191	817 191

• Equity ratio at 55%
• Intangible assets include goodwill of NOK 428 million and customer relations and technology of NOK 61 million
• Property, plant and equipment includes leased out hardware NOK 100 million and IFRS 16 leasing (premises, IT licenses) NOK 33 million
• Non-current interest-bearing debt of NOK 54 million and current interest-bearing liabilities of NOK 14 million relate to acquisition financing of Optidev, closed on 1 October 2020
• Other current liabilities include NOK 74 million deferred revenue on hardware leasing contracts
• Net interest-bearing debt NOK 12.4 million

Cash flow

NOK 1 000	Q3 2020	Q3 2019	FY 2019
Net cash flow from operational activities	(2 262)	563	51 079
Net cash used on investment activities	(35 717)	(4 478)	(18 259)
Net cash flow from financing activities	56 113	(175)	(27 494)
Net change in cash and cash equivalents	18 134	(4 089)	5 326
Cash and cash equivalents at beginning of period	36 560	30 648	39 716
Effects of exchange rate changes on cash and cash eq.	225	134	(453)
Cash and cash equivalents at end of the period	54 920	26 691	44 588

• Operational cash outflow includes negative effect of NOK 8 million from increased other net working capital
• Net investments includes leased out equipment (NOK 45 million) and software development and IT investments (NOK 3 million), partly offset by proceeds from sale of premises in Sweden (NOK 13 million)
• Net financing of NOK 56 million includes proceeds from bank loan in connection with Optidev (NOK 67 million), repayment of property loan in Sweden and lease repayments (IFRS 16) for premises and licenses

Management team

Jens Haviken – CEO

Mr. Haviken is an experienced executive within consulting, managed services, software and hardware distribution. He has a proven track record of developing, rebuilding and streamlining operations of companies in the ICT sector. Prior positions held by Haviken includes VP Services and Solutions and Country Manager at Dustin Group AB (publ). and various Director roles at Microsoft and Accenture.

Erik Haugen – Chief Commercial Officer

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

Marius Drefvelin – CFO

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

Mads Vårdal – Chief Innovation Officer

Mr Vårdal has been with companies within the Techstep sphere for more than 11 years. He came from a central position in Teki Solutions AS and has been a leading figure for the development of SmartWorks. He has previously had a leading position in Nordialog Skøyen AS and CEO in Buskerud Tele AS.

Inge Paulsen – Managing Director Norway

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

Board of Directors

Jens Rugseth – Chairman of the board (since 2019)

Jens Rugseth is a co-founder and Chairman of the Board of Crayon Group ASA and Link Mobility Group ASA. He has been a serial founder of a number of companies within the IT-sector over the past 30 years. Mr. Rugseth has also held the position a chief executive officer in some of the largest IT-companies in Norway, including ARK ASA, Cinet AS and Skrivervik Data AS. Mr. Rugseth studied business economics at the Norwegian School of Management. Jens Rugseth is a Norwegian citizen, currently residing in Oslo, Norway.

Einar J. Greve – Vice chairman (board member since 2016)

Mr. Greve was Chairman of the Board of Techstep from 2016 to April 2019. Mr. Greve works as a strategic advisor at Cipriano AS and has previously worked as partner of Wikborg Rein & Co and as Partner of Arctic Securities ASA. Mr. Greve has held and holds various positions as chairman or director in several listed and unlisted companies. He holds a degree in law (cand.jur) from the University of Oslo.

Anders Brandt - Board member (since 2018)

Mr. Brandt has more than 20 years of experience in international entrepreneurship, technology, venture capital and digital services. He is managing partner in the venture capital fund Idekapital, and has co-funded and exited numerous companies including DinSide, OMG, Viken Fibernett, Mytos, Meshtech and Bubbly Group. Brandt has 14 years of board experience of listed companies on Oslo Børs and Nasdaq Stockholm, whereof several tech companies.

Ingrid Leisner - Board member (since 2016)

Ms. Leisner has served on the Board in Techstep since January 2016. Ms. Leisner's directorships over the last five years include current board positions in Storage Group ASA, Norwegian Air Shuttle ASA, Maritime and Merchant ASA. Ms. Leisner has a background as a trader of different oil and gas products in her 15 years in Equinor ASA. Her years of experience and skills within business strategy, M&A, management consulting and change management has been very valuable when serving on the board of several companies listed on Oslo Børs. She holds a Bachelor of Business degree with honors from the University of Texas in Austin.

Toril Nag - Board member (since 2018)

Ms. Nag is Group Executive Vice President, responsible for customer service and the telecommunications business area of the Lyse Group. She holds extensive experience in telecom and digital service, as well as banking and finance. She has held a number of board appointments in technology, energy and R&D-related companies, and her directorships includes Dolphin Group ASA, IKT-Norge, Kolumbus AS and Altibox AS. Nag is a qualified civil engineer in Computer Science from the University of Strathclyde and has further education in management from the Norwegian Business School BI.

Disclaimer

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

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

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

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

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

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

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