Techstep ASA — Investor Presentation 2020

Aug 21, 2020

Q2 2020 presentation

Agenda

Highlights

Operations

Financials

Outlook

Operational progress and stronger results

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• Gross profit increase of 12% driven by Q1 Q2 improved margins
• Gross profit and cost control improving profitability
• Signed three new Flow contracts valued at NOK 27 million
• Released a new version of the Origo Business Cloud, enabling soft launch of Flow in Sweden
• Solid cash position and strong balance sheet

EBITDA adjusted excludes non-recurring items related to gross proceeds of NOK 8 million for the sale of the IT division in Q2 2020 and M&A activities (NOK 0.7 million in Q2 2020 and NOK 2 million in 2019).

The Q2 2020 figures include the full consolidation effect of the leasing portfolio from Techstep Finance. The effect in Q2 2020 is an increase of NOK 10.7 million on revenue and an increase of NOK 9.6 million on EBITDA.

Operations

Covid-19 response: People first while delivering to customers

Techstep responded swiftly and have been fully operational from day #1

Norway and Sweden affected by Covid-19

The health and safety of employees, customers and partners have been the top priority

Compliance with local public health advisory across all locations

No Covid-19 cases registered to date

Vision: Making work mobile

Tasks can be done across mobile devices and locations

Work gets done when needed more easily and efficiently

Mobile-first solutions enable new levels of employee productivity

The employee-focused enterprise can personalise mobility solutions

Enterprises can realise the benefits mobile technology offers via the cloud

The Telecom and IT-services industry converges into Managed Mobility Services (MMS)

• ~14 million employees in the Nordics, 80%1) are in jobs which are deskless in its nature. These workers have been forgotten and overlooked by technology providers
• Global MMS market valued at NOK 65 billion in 20192) expected to reach NOK 334 billion by 2025
• MMS is the fastest growing area within mobility business in Western Europe, growing at 8.7% CAGR towards 2023 2)
• Across all industries there is a planned increase in spend of 31% on deskless workers 1)
• 52% of Norwegian employees 4) have mobile devices financed and operated by their employer.

Sources:

1) http://desklessworkforce2018.com

• 2) Gartner Forecast: Enterprise Managed Communications Services, Growth Trends, Worldwide, 2019 Update
• 3)https://www.mordorintelligence.com/industry-reports/mobility-managed-services-market

4) NKOM, excluding pre-paid subs

Investment in deskless workers 1)

~31%

B2B subscriptions – Norway*

Techstep is purpose-built to become a leading Managed Mobility Services provider in the Nordics

From products to Managed Mobility Services

Our current Managed Mobility Service (MMS) solution

Managed Mobility Service business emerging

Origo Business Cloud Mobile Expense Management Hardwareas-a-service Service & Support Asset Management Connectivity

What it means for customers

Total value of Techstep's Flow contracts (NOKm, cumulative)

• Reduced administration
• Lower costs
• Flexibility and freedom of choice
• Safe handling and data protection
• Better for the environment
• Ready for more platform for mobile digitization

Adding new brands and organizations to the Flow customer base

A platform for Sveriges Radio's digital transformation journey

With Techstep Flow, Sveriges Radio gets a platform for faster, easier and secure mobile management, which can be scaled to deploy more apps and functionalities, while achieving internal time savings and active control at a lower cost. With Flow, their employees gets the flexibility to choose their own digital tools, with full overview and swift support, wherever and whenever they need it.

Total contract value (NOKm) 28

2 200

Flow end-users signed in total

Contract was signed early in Q3. Sveriges Radio is Sweden's national public radio broadcaster operating from approx. 50 locations across the country

Preparing Mesta for further digital transformation

Techstep Flow provides Mesta with a secure and scalable as-a-service platform for continuing their digital transformation. By using Managed Mobility Services, Mesta can deploy more apps and functionalities, whilst empowering their employees to increase efficiency and ultimately do a better job.

10.5

Total contract value (NOKm)

1 400

Flow end-users signed in total

Mesta is a Norwegian construction and engineering company with a predominantly mobile workforce

Financials

Key figures

NOK 1 000			Q2 2020 Q2 2019 H1 2020 H1 2019		2019
Revenues	238 173	270 045	530 850	554 146	1 132 059
Annual Recurring Revenue (ARR)	37 110	34 754	37 110	34 754	36 632
Gross profit	77 882	69 347	158 336	144 308	279 338
EBITDA adj.	17 193	6 426	28 572	15 647	29 007
EBITDA	24 270	6 426	35 899	15 647	27 040
EBITA	10 176	2 709	17 783	8 252	(58 174)
EBIT	3 816	(2 753)	6 385	(2 733)	(80 192)
Net profit (loss) for the period	3 987	(1 043)	596	(2 554)	(64 329)
EBITDA adj margin (%)	7.2 %	2.4 %	5.4 %	2.8 %	2.6 %
EBITDA rep. margin (%)	10.2 %	2.4 %	6.8 %	2.8 %	2.4 %
EBITA margin (%)	4.3 %	1.0 %	3.3 %	1.5 %	(5.1 %)
EBIT margin (%)	1.6 %	(1.0 %)	1.2 %	(0.5 %)	(7.1 %)
Net profit (loss) for the period (%)	1.7 %	(0.4 %)	0.1 %	(0.5 %)	(5.7 %)
Cash	36 561	30 647	36 561	30 647	44 588
Net interest-bearing debt	6 503	13 643	6 503	13 643	1 996
Capex	14 296	3 663	37 630	9 288	33 611

EBITDA adjusted excludes non (NOK 0.7 million in Q2 2020 and NOK 2 million in 2019). -recurring items related to gross proceeds of NOK 8 million for the sale of the IT division in Q2 2020 and M&A activities million

• Revenue decreased by 12% y-o-y; lower hardware volumes
• Gross profit increased by 12% y-o-y; increased margin and financing volume
• EBITDA positively affected by the gross profit increase and lower costs.
• Net proceeds of NOK 7.3 million relating to the sale of our IT Services division is excluded in EBITDA adjusted
• Reduction in net interest-bearing debt; improved working capital
• Capex of 14.3 million includes software development and internal IT of NOK 5.2

The Q2 2020 financial statements include the full consolidation effect of the leasing portfolio from Techstep Finance. The effect in Q2 2020 is an increase of NOK 10.7 million on revenue, an increase of NOK 9.6 million on EBITDA profit and an increase of NOK 8.9 million on depreciation.

Gross profit split and development

Gross Profit - last twelve months rolling NOK million

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Hardware Leasing Own software Advisory and services Other

• Positive gross profit trend last quarters
• Improved margins increase gross profit in the quarter
• As expected, continued reductions in operator commission within Advisory & Services
• 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
  • Underlying increase in gross profit from increased margins and increased demand on services
  • Increase from leasing portfolio
  • Lower cost base

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9% quarterly growth in Origo users

NOK 15,-

Annual recurring revenue (ARR)

• NOK million Focus and expectation is to grow Origo, comprising 29k of the 210k users per Q2
  • 9% quarterly growth
  • 11% YTD growth
  • Operational progress
    • Launched Origo platform in Sweden
    • Improved the supply chain from sales to delivery and customer sign off
  • Core value driver ARR consists of two offerings:
    • 1. Origo (own mobile expense management and asset management) - Sold by Techstep or partners
    • 1. White label mobile expense management

Income statement

(amounts in NOK 1 000)	Q2 2020	Q2 2019	H1 2020	H1 2019	2019
Revenue	235 927	267 507	528 146	550 962	1 127 763
Other income	2 246	2 538	2 704	3 184	4 296
Total revenues	238 173	270 045	530 850	554 146	1 132 059
Cost of goods sold	(160 291)	(200 698)	(372 514)	(409 838)	(852 722)
Salaries and personnel costs	(45 039)	(46 364)	(94 819)	(97 759)	(187 994)
Other operational costs	(15 900)	(17 137)	(34 945)	(31 847)	(65 363)
Share of profit (loss) in joint ventures	-	580	-	945	1 059
Depreciation	(14 094)	(3 716)	(26 116)	(7 395)	(15 214)
Amortisation	(6 360)	(5 462)	(11 398)	(10 985)	(22 018)
Impairment	-	-	-	-	(70 000)
Other income	8 000	-	8 000	-	-
Other expenses	(673)	-	(673)	-	-
Operating profit (loss)	3 816	(2 753)	(1 615)	(2 733)	(80 192)
Remeasurement on equity interests	-	-	-	-	18 206
Financial income	1 764	2 845	6 412	3 300	5 546
Financial expense	(3 065)	(1 164)	(8 641)	(2 355)	(5 948)
Profit before taxes	2 515	(1 072)	(3 844)	(1 789)	(62 388)
Income taxes	1 472	29	4 440	(765)	(1 941)
Net profit (loss) for the period	3 987	(1 043)	596	(2 554)	(64 329)

• Inclusion of leasing portfolio started in Q1 2020. Effect in Q2 2020 of NOK 9.6 million on gross profit, NOK 8.9 million on depreciation
• Reduction in other opex reflects reduced IT and marketing costs
• Amortisation is non-cash mainly relates to acquisitions (customer relations), completed by 2023

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.

Balance sheet

NOK 1 000	30.06.2020	31.12.2019
Intangible assets	489 272	480 285
Tangible assets	110 208	111 787
Financial assets	185	225
Inventories	25 381	11 828
Accounts receivable	108 045	147 411
Other receivables	14 335	16 104
Cash and cash equivalents	36 561	44 588
Assets classified as held for sale	5 392	4 962
Total assets	789 379	817 191
Total equity	469 243	455 970
Deferred tax	2 820	4 483
Non-current interest-bearing debt	-	162
Other non-current debt	47 203	47 688
Current interest-bearing liabilities	43 064	46 423
Accounts payable	93 539	122 328
Tax payable	(1 059)	936
Public taxes, provisions	22 539	22 381
Other current liabilities	112 030	116 820
Total equity and liabilities	789 379	817 191

• Equity ratio at 59%
• Intangible assets include goodwill of NOK 426 million and customer relations and technology of NOK 63 million
• Property, plant and equipment includes leased out hardware NOK 78 million and IFRS 16 leasing (premises, IT licenses) NOK 32 million
• Decrease in accounts receivable of NOK 39 million due to lower volumes and focus on improved working capital.
• Current interest-bearing liabilities of NOK 43 million relate to factoring debt of NOK 35 million and property loan in Sweden of NOK 8 million
• Other current liabilities include NOK 67 million deferred revenue on hardware leasing contracts
• Net interest-bearing debt NOK 6.5 million

Cash flow

NOK 1 000	Q2 2020	Q2 2019	H1 2020	H1 2019	FY 2019
Net cash flow from operational activities	25 806	4 462	24 739	17 199	51 079
Net cash used on investment activities	(6 296)	6 504	(29 630)	879	(18 259)
Net cash flow from financing activities	(3 427)	(18 754)	(6 675)	(26 232)	(27 494)
Net change in cash and cash equivalents	16 083	(7 788)	(11 566)	(8 154)	5 326
Cash and cash equivalents at beginning of
period	19 996	38 629	44 382	39 716	39 716
Effects of exchange rate changes on cash
and cash eq.	481	(194)	3 745	(914)	(453)
Cash and cash equivalents at end
of the period	36 561	30 647	36 561	30 647	44 588

• Operational cash flow of NOK 26 million includes positive effect from working capital related to accounts receivables and reduction in hardware supply in Sweden
• Net investments includes software development and IT investments (NOK 5 million) and payment for hardware leased out (NOK 9 million), offset by proceeds from sale of IT Operations and Support business (NOK 8 million)
• Financing expenses of NOK 3.4 million relates to lease repayments (IFRS 16) for premises and licenses

Outlook

Techstep aims to be the leading provider of Managed Mobility Services in the Nordics

Techstep is purpose built to service enterprise and business mobility needs

• Work is going mobile…

• ~14 million employees in the Nordics
• Larger enterprises provide larger-scale value creation opportunity
• SMEs to be served by a combination of Techstep and partners

Software and Intellectual Property (IP) to lead future growth

• Our software, mobility expertise and customer needs will be at the core of what we do and drive value creation
• All our activities will be aligned to bring our own software and services to the market
• Third party software and hardware to support own software and services
• Pursuing M&A to strengthen competency and software platform

Short-term priorities

Operational priorities

• Employees health and well-being, build culture
• Efficiency and quality of offering
• Onboard customers to Flow
• Continue development of software and IP
• Solidify growth platform and longer-term scalability

Financial priorities

• Ensuring financial solidity and flexibility

Platform for 2021 and beyond

• Formulate updated strategic roadmap
• Update portfolio of KPI and priorities
• Set longer term financial ambition and targets
• Incorporate learnings from 2020

Capital markets update

• Strategic update to investors and other stakeholders on 1 December 2020

2020 2021 –

Summary

• Operational progress and stronger results in extraordinary market environment
• Digital transformation amplified, mobility market fundamentals strengthening
• Near-term market environment mixed signs of improving pipeline
• Managed Mobility Service offering Flow expanding geographically with launch in Sweden
• Focus on "Flow" onboarding and solutions sales
• Continue to invest in software and IP and pursue M&A

Next events

Q3 2020 Presentation, 6 November 2020

Capital Markets Update, 1 December 2020

Appendix

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.

Bartek Regerqvist – Managing Director Sweden

Mr Regerqvist joined Techstep in 2018 with long experience from the telecom and integrator industry with focus on managed services in a Nordic offering. He has proven track record in performance management and efficient cost management, creating structure and driving a performance culture within the teams he leads. Prior to Techstep, Regerqvist held a position as Regional Manager at Tele2 and several Management roles at TDC since 2006.

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.

Top 20 shareholders at 17 August 2020

NAME	SHAREHOLDING	% SHARE
DATUM AS	31,817,975	19.54 %
MIDDELBORG INVEST AS	30,517,764	18.75 %
KARBON INVEST AS	17,736,689	10.90 %
TIGERSTADEN AS	6,405,064	3.93 %
CIPRIANO AS	4,968,835	3.05 %
ZONO HOLDING AS	4,000,007	2.46 %
BRIDGE CAPITAL AS	3,813,317	2.34 %
VERDIPAPIRFONDET DNB SMB	3,652,403	2.24 %
SKANDINAVISKA ENSKILDA BANKEN AB	3,544,306	2.18 %
TVENGE TORSTEIN INGVALD	3,000,000	1.84 %
SÅ&HØSTE AS	2,925,936	1.80 %
NORDHOLMEN AS	2,206,512	1.36 %
PIKA HOLDING AS	2,206,512	1.36 %
ADRIAN AS	2,038,851	1.25 %
NOMO HOLDING AS	1,946,253	1.20 %
NORDIALOG ENSJØ AS	1,946,253	1.20 %
DOVRAN HOLDING AS	1,863,372	1.14 %
UNIFIED AS	1,849,457	1.14 %
IDEKAPITAL AS	1,797,532	1.10 %
TINDE INDUSTRIER AS	1,674,202	1.03 %
Total number owned by top 20	129,911,240	79.80 %
Total number of shares	162,795,337	100 %

Disclaimer

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

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

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

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

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

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

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

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