Q4 2019 presentation

Techstep is on a journey fundamentally transforming into a software and solutiondriven mobility provider

Highlights 2019

Launched own software "Origo" and evolved mobile-as-aservice solution "Flow" in Q4, winning seven Flow contracts covering 5,000 end-users
Established a channel-led go to market approach for own software, targeting the SME market
Strategic reorganisation and sale of SMB customers in Norway to optimise towards large enterprises
Turnaround in Sweden, positioned for further growth
Acquisition of additional 30% of Techstep Finance AS, increasing total ownership to 80%
Technology transformation concluded. Customer transformation started

Financials 2019

Full-year revenue increased by 6%
Gross margin decreased as a result of reduced operator provisions and lower margins within the large enterprise market
Full-year adjusted EBITDA in line with 2018, driven by underlying reduction of opex following the sharpened focus on large enterprises
Improved cash development during 2019, net debt reduced to NOK 2 million

The FY 2018 EBITDA adjusted 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 is NOK 3 million.

Operations

Our journey to become a leading enabler of the mobile workplace

Work is going 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

Alle går rundt med iPad

I tillegg er er det tatt i bruk ny teknologi. Ny løfteteknologi sparte utbyggingen for mer enn to millioner arbeidstimer i havet. Dette reduserte sikkerhetsrisikoen, og forkortet utbyggingstiden med flere måneder.

– Vi har også tatt i bruk digitale løsninger på feltet som forbedrer og effektiviserer driften. Nå går alle rundt med en Ipad der de for eksempel kan få tegninger rett opp på skjermen, istedenfor å gå til arkivet for å hente. Også dette har spart oss for minst én måneds arbeid i gjennomføringsfasen, sier Opedal.

Example: Apps and solutions in Field Services

Creating the best solution for customers and end-users

Flow – simple, cost effective and secure

What it includes

Adapted company policy for devices and mobile expenses
Asset management and self-service administration through Origo Business Cloud
Mobile Expense Management for administration of devices and subscriptions
Lifecycle management of mobile devices delivered as-a-service
Eco-friendly and secure end-of-life handling

What it means for customers

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

Flow – increased customer value, improved margins and competitive advantages

Customer cost of ownership (24 months)

Customer cost of ownership OLD Customer cost of ownership NEW

Hardware cost Techstep Gross Profit

Flow allows Techstep to bundle value-adding services into one solution offered to enterprises at a fixed monthly fee per user
Financing ensures a residual value at the end of the leasing period, contributing to a lower total cost of ownership for the customer
Flow users typically have a 24-months cycle, compared to up-front bulk sale from hardware deals, and renewals are done automatically

Some recent Flow wins and conversions

Developing solutions together with customers

Financials

Quarterly and full-year sales update

New contracts awarded Potential value in NOK million

Signed agreements with an estimated total contract value of NOK 954 million
Gained traction with Flow with seven wins, of which six in Norway

Key figures

NOK 1 000	Q4 2019	Q4 2018	FY 2019	FY 2018
Revenue	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	30 023
EBITDA rep. EBITA	5 566 949	14 288 13 760	27 040 (58 174)	43 023 41 280
EBIT Net profit (loss) for the period	(4 770) 11 409	9 213 10 861	(80 192) (64 329)	22 362 21 329

EBITDA adj. margin (%) EBITDA rep.margin (%)	2.3 % 1.7 %	3.6 % 4.5 %	2.6 % 2.4 %	2.8 % 4.0 %
EBITA margin (%) EBIT margin (%)	0.3 % (1.4 %)	4.3 % 2.9 %	(5.1 %) (7.1 %)	3.9 % 2.1 %
Net profit (loss) for the period (%)	3.4 %	3.4 %	(5.7 %)	2.0 %
Cash	44 588	39 741	44 588	39 741
Net interest-bearing debt Capex	1 996 19 845	19 354 4 896	1 996 33 610	19 354 11 689

Hardware share of revenue includes other revenue (comprising 0.4% in FY 2019). Solutions revenue comprises own software, advisory and services, and third-party software.

The Q4 and FY 2019 EBITDA excludes one-off costs of NOK 2 million related to ongoing M&A activities.

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.

Financial results reflect the investments in transforming Techstep to become a SW and IP driven company with higher margins and growth potential going forward
Gross profit reduction mainly due to reduction in operator commission and SME volume in Norway (terminated in Q2 2019)
EBITDA adjusted of NOK 7.5 million, impacted by the gross profit reduction and growth investments
Net interest-bearing debt of NOK 2 million

Revenue and gross profit split

Revenue - last twelve months rolling NOK million and % of total

Gross Profit - last twelve months rolling NOK million and % of total

Strategic decision to focus on enterprises, led by own IP and software
➢ Lower short-term revenue and gross profit
➢ Increased recurring revenue and gross profit expected long-term

Gross profit to EBITDA

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

Short term profitability affected by the transition towards own IP and software
Cost reducing initiatives are re-invested to generate long-term profits
Headcount increased for Software and IP development, plus Advisory & Services
Verticals and industry focus (education, high security)
Increased IT costs and system development costs
Increased marketing costs

Recurring revenue up 6% last quarter, driven by new users and new offering, Origo

- 1. White label mobile expense management
1. Origo (mobile expense management and asset management)
Growth in Q4 2019 due to:
Growth in users (+5%)
Launch of own offering Origo

Income statement

NOK 1 000	Q4 2019	Q4 2018	FY 2019	FY 2018

Revenue	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	(4 618)	(528)	(15 214)	(1 743)
Amortisation	(5 719)	(4 547)	(22 018)	(18 918)
Impairment	-	-	(70 000)	-
Other income	-	9 928	-	19 962
Operating profit (loss)	(4 770)	9 213	(80 192)	22 362

Remeasurement on equity interests	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

Reduction of salaries and personnel costs of 10% y-o-y, reflects lower headcount and efficiency initiatives in Norway
Lower other operational costs include an IFRS 16 effect of NOK 3 million
Capitalised costs of NOK 2.5 million reflects focus on development of own software and IP
Amortisation mainly relates to acquisitions (customer relations), completed by 2023
Increased ownership in Techstep Finance from 50% to 80%, resulted in a remeasurement on equity interests related to Techstep Finance of NOK 18.2 million. No cash effect

Balance sheet

NOK 1 000	FY 2019	FY 2018

Intangible assets	477 779	527 560
Tangible assets	111 787	9 377
Financial assets	225	11 420

Inventories	11 828	16 155
Accounts receivable	147 411	146 565
Other receivables	16 104	22 881

Cash and cash equivalents	44 588	39 741
Total assets	814 684	773 699

Total equity	454 675	513 780
Deferred tax	4 283	3 608
Non-current interest-bearing debt	162	7 341
Other non-current debt	47 688	8 081

Current interest-bearing liabilities	46 423	51 754
Accounts payable	122 328	116 694
Tax payable	(0)	3 470
Public taxes, provisions	22 381	21 842
Other current liabilities	116 820	47 131
Total equity and liabilities	814 684	773 699

• Equity ratio at 56%

Intangible assets include goodwill of NOK 416 million and customer relations and technology of NOK 62 million
Property, plant and equipment includes leased out hardware NOK 72 million and IFRS 16 leasing (premises, IT licenses) NOK 36 million
Current interest-bearing liabilities of NOK 46 million relate to factoring debt NOK 39 million and property loan in Sweden NOK 7 million
Other current liabilities include NOK 64m deferred revenue on hardware leasing contracts

Cash flow

(NOK 1 000)	Q4 2019	Q4 2018	FY 2019	FY 2018

Net cash flow from operational activities	33 340	30 969	51 079	27 347
Net cash used on investment activities	(14 661)	(4 896)	(18 259)	(16 264)

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 eq.	305	883	(453)	(370)
Cash and cash equivalents at end of period	44 588	39 741	44 588	39 741

Operational cash flow NOK 33 million, which includes working capital improvement of NOK 27 million. This is due to reduced inventory, increased accounts payable and deferred revenue on leased out hardware.
Net investments of NOK 15 million which includes software development and IT investments (NOK 5 million) and payment for hardware leased out (NOK 15 million), offset by cash contribution from Techstep Finance acquisition of NOK 5 million

Summary and Outlook

Secure, simple and cost-efficient solutions, enabled by unique software and IP

Own software and IP based solutions, e.g Asset Management, Telecom Expense Management, and the Origo Self Service Portal will be at the core of Techstep
All activities will be aligned to bring Techstep's own software and services to the market, either via our fully owned companies or channel partners
Third party software and hardware will be bundled with our own software and services to provide the best possible solution for the customers

The Origo platform is at tool for companies and their users to digitalize the full lifecycle of mobile devices

Summary and outlook

2019 financial results reflect strategic development
Convert existing customers and their users to Flow
Win enterprise customers in Sweden
Launch Flow in Sweden
Continue to invest in software and IP to strengthen mobility solutions offering
Continue to pursue M&A opportunities to strengthen offering and market position

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.

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.

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.

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 10 February 2020

NAME	SHAREHOLDING	% SHARE
DATUM AS	31 817 975	19.54%
MIDDELBORG INVEST AS	30 517 764	18.75%
KARBON INVEST AS	17 236 689	10.59%
CIPRIANO AS	4 968 835	3.05%
VERDIPAPIRFONDET DNB SMB	4 554 419	2.80%
ZONO HOLDING AS	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	3 716 523	2.28%
TINDE INDUSTRIER AS	3 063 372	1.88%
TVENGE TORSTEIN INGVALD	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 HOLDING 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	130 797 353	80.34%
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.

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