Interim report January–March 2020

Vitec in brief

Vertical markets

Vitec is the Nordic market leader in Vertical Market Software. We develop and deliver standardized software aimed at various niche markets. This entails adapting our offering to the unique needs and requirements of companies operating within specific niche markets, to enable the management and development of their business operations.

Standardized products

Our standardized products are cost-efficient for our customers, as they allow for the assimilation of developments and upgrades by all users. This enables us to provide our customers with the optimal conditions to develop and future-proof their operations.

Recurring revenues

Our business model is based on a high percentage of recurring revenues, This provides us with stable and predictable cash flows that create the prerequisites for a long-term approach. It also makes the Group less sensitive to temporary declines within individual business units.

Growth by acquisition

Vitec has an explicit acquisitions-based growth strategy with a sharp focus on profitability and stable cash flows. Our focus on strong cash flows creates the financial prerequisites for continued acquisition-driven growth.

Summary of interim period Jan–Mar 2020

Net sales SEK 309 million (279)
EBITA was SEK 65 million (59), with an EBITA margin of 21% (21)
Operating profit was SEK 32 million (36), with an operating margin of 10% (13)
Profit after net financial items SEK 29 million (33)
Earnings per share before dilution SEK 0.67 (0.80)
Cash flow from operating activities SEK 233 million (182)
Acquisition of Visiolink Management Aps and ALMA Consulting OY

Known and unknown territory

As CEO of Vitec, I have lived through the Swedish 1990s crisis, the internet bubble around the turn of the millennium, the 2008 financial crisis, and right now, the coronavirus crisis. In the 1990s, Vitec was a small company with limited resources and extremely sensitive to discontinued individual projects. At its worst, around 1993, it was a matter of days to save the company when all liquidity was wiped out. At the turn of the millennium, we had a better business model and we were profitable, which other "IT companies" in general were not, and by the financial crisis we had learned the importance of risk diversification. Many of the components we experienced in those different crises are present now in this crisis, but the lockdown of the entire society is of course a new ingredient.

In our normal operation, our risk diversification is excellent; this will be put to the test in the current situation. Our business ranges from beauty salons in Norway, which are forbidden to operate – with total and immediate closure as a consequence, to pharmacies in Denmark, which is considered an essential business in a pandemic. We have 15,000 customers in 24 different business niches in 4 countries; public services account for approximately 40% of all customers. In the short term, we have only been marginally affected. If the lockdown of society becomes prolonged, we expect an impact on service revenue and the variable portion of recurring "unit-based" revenues. Bankruptcies on the customer side cannot be ruled out, either, but as long as there are customers, our systems are necessary for their daily operations.To be properly prepared for a pronounced negative and prolonged course of events, Group management has been in close dialogue with all business units. We have analyzed potential scenarios and established a strategy to plan for such eventualities with measures to address various outcomes.

Liquidity planning and cash flow are key when uncertainty is high. Our current situation is good, with a large amount of advance invoicing that is reflected in a strong positive cash flow at the beginning of the year. So far, we have not seen any customer losses, but they can of course occur the longer the lockdown continues. Our liquidity situation is extremely good and our financial opportunities are considerable.

We are engaged in acquisition discussions that started well before the coronavirus outbreak, which can continue with only digital contacts. However, we have found that initiating new discussions is more difficult when it is impossible to meet in person.

In line with our growth, our previous segment reporting is no longer adequate. Beginning with this report, we will present data for each of our business units. Previously, the individual business units have only been one part in one of our seven segments. From now on, the operations, sales and percentage of recurring revenues of each business unit will be described in greater detail. Dependence on individual customers and the distribution among countries will also be clarified. In addition, this approach reflects our acquisition strategy, as we look for companies that meet our criteria and allow niche to become a less interesting aspect. We believe this change will provide a more relevant description of our business, geography, size and distribution of customers.

So, in this time of the pandemic – what do we do? We listen to the authorities, wash our hands, work from home, hold digital meetings, serve our customers and carry on.

Lars Stenlund, CEO

Group financial information

Net sales and earnings

January–March 2020

Net sales

Net sales for the period totaled SEK 309.1 million (279.0), corresponding to a 11% increase. Recurring revenues for the period rose 22% from the year-earlier period and totaled SEK 253.3 million (206.9), corresponding to 82.0% (74.1) of net sales. License revenues declined 57% year-on-year, totaling SEK 2.7 million (6.3). Service revenues were unchanged at SEK 44.6 million (44.6). Other revenues declined 60% to a total of SEK 8.5 million (21.3). The acquired Group, Visiolink Aps, which was consolidated as of January 30, contributed SEK 11.5 million in net sales during the period. The acquired company, ALMA Consulting Oy, which was consolidated as of March 17, contributed SEK 2.5 million in net sales during the period.

Comments on sales

Net sales rose a total of 11% for the period; recurring revenues rose 22%, including 4% organically. Recurring revenues amounted to SEK 954 million on a rolling 12-month basis. Other revenues dropped 60% as an effect of the discontinued hardware business in the Vitec MV business unit. Licensing declined by 57%, which is completely in line with our shift to increased recurring revenues. Service revenues are unchanged year-on-year. Taken together, recurring revenues account for 82%, compared with 74% for the corresponding period in 2019.

Earnings

EBITA was SEK 64.8 million (58.6), with an EBITA margin of 21.0% (21.0). Operating profit was SEK 32.3 million (35.9), with an operating margin of 10.5% (12.9). Profit after tax for the period amounted to SEK 21.7 million (25.8). Earnings per share before dilution totaled SEK 0.67 (0.80).

Comments on earnings

EBITA gained 11%, compared with the corresponding period in 2019. Acquisition-related costs had an impact of SEK 6.2 million on earnings, compared with SEK 1.9 million in 2019. The effects of capitalized development costs adjusted for amortization and impairment of intangible fixed assets and acquisition-related amortization for the period are comparable with 2019.

Effects of Coronavirus and Covid-19 Pandemic

Our focus is on reducing the risk of spreading the virus and protecting the health of our employees, at the same time that we are working to minimize the impact on our business. We have changed our way of working and most employees now work from home.

We have a well-developed IT infrastructure that we have benefited from greatly in this situation. Our leaders have been reorganized to lead their business units through collaboration and meeting platforms such as Teams, and we have so far managed to maintain our operations in general.

Direct effects due to the corona pandemic negatively impacted EBITA for the period by just under SEK 2 million. We have a good risk spread by operating in a number of niches, where about 40% of our customers are public sector. Depending on how long we will be in this situation, we may have effects on our service revenues and sales, as well as an impact on the variable proportion of recurring revenues. Planned projects may also be delayed.

	2020 Jan–Mar	2019 Jan–Mar	Change
Net sales, SEK million	309.1	279.0	11%
Recurring share, %	82%	74%
EBITA, SEK million	64.8	58.6	11%
EBITA margin %	21%	21%
Operating profit/loss, SEK million	32.3	35.9	-10%
Operating margin %	10%	13%
Net profit/loss for the period, SEK million	21.7	25.8	-16%
Earnings per share, SEK	0.67	0.80

Diagrams on Group trends

Sales by country, January–March 2020 Breakdown of revenue, January–March 2020

Sales broken down by business unit and customer

Since we operate in a number of niche markets in the Nordic region, the Group has good diversification of revenue in terms of both geography and area of operation. Although we operate in several niche markets, we still engage essentially in the same type of business. We develop and deliver standardized software to meet the various needs of our customers. Some of our software products comprise complete enterprise systems, while others provide support for specific aspects of our customers' operations. We serve a large number of customers with our products. No individual customer accounts for more than approximately 2% of the Group's total revenues. As we continue to acquire profitable vertical software companies in the Nordic region, we expect the distribution of risk to continue in a positive direction.

Breakdown of sales

The diagram below shows our sales broken down based on our 24 business units. No individual business unit accounts for more than 15% of consolidated sales.

Customers

We have about 15,000 customers. The Group's ten largest customers account for approximately 9% of sales. The single largest customer accounts for approximately 2% of sales.

Our business units

Vitec develops and provides software applications for various niche markets, where each niche represents a separate market. We conduct our operations through our 24 independent business units. The information below shows details about all business units that were in the Group as of the publication of this report. Read more about our business on our website vitecsoftware.com.

Business unit	Niche market and domicile	Year of acquisi tion	Sales 2019, SEKm	Repet itive share
Actor Smartbook Software for municipal culture and recreation administration offices, as well as other visitor facilities in Norway and Sweden. Their product is a turnkey solution for handling reservations, visitors and grants. The busi ness unit includes the company Vitec Smart Visitor System AB.	Recreation facilities	2018	26	77%
Acute Software for healthcare companies in Finland. The products are used by district healthcare centers, hospitals, physiotherapy and rehabilitation facilities, and by occupational health services and public organizations. The business unit includes the company AcuVitec Oy.	Healthcare	2013	67	88%
Agrando Software for church activities in the Nordic region, with its primary markets comprising Norway and Sweden. The product supports specific processes for individuals working with church operations, such as the administration of burial plots, HR systems and online chapel services. The business unit includes the companies Vitec Agrando AS and Vitec Agrando AB.	Churches	2018	50	88%
Alma Software for information management for the processing industry and energy companies in Finland. The products enable companies to stream line and plan their production supporting processes. The business unit includes the company Vitec ALMA Oy.	Process indus try and energy companies	2020	32	47 %

Niche market Business unit and domicile		Year of acquisi tion	Sales 2019, SEKm	Repet itive share
Autosystemer	Auto repair	2015	58	88%
Software for the automotive and machinery industry in Norway. The products support work processes, such as car sales, auto repair shops, tire storage and the distribution of auto components. The business unit	shops
includes the companies Vitec Autodata AS and Vitec Infoeasy AS.
Avoine Software for local associations and national organizations in Finland. The products provide the organizations with support for communication with members and for managing members. The business unit includes the company Avoine Oy.	Unions	2019	30	83%
Bygg & Fastighet Software for the construction and property management industry in Swe den. The products are comprehensive enterprise-management systems that include project reporting, leasing, sales, customer service, account ing, technical property management and energy-consumption monitor ing. The business unit includes the companies Vitec Förvaltningssystem AB and Vitec PP7 AB.	Property Man agement	1985	175	66%
Capitex finanssystem Software for the banking and finance industry in Sweden. The products are designed for specific tasks such as calculations for mortgages, pen sions and business loans. The business unit includes the company Vitec Capitex AB.	Finance	2010	23	85%
Cito Applications for the pharmacy market in Denmark. The product is devel oped to manage the entire chain of the Danish pharmacy workflow, such as product inventory, cash operations and prescriptions processing. The business unit includes the company Vitec Cito A/S.	Pharmacies	2018	41	62%
Datamann Software for car dealers and auto repair shops in Denmark. The prod ucts support work processes, such as car sales, auto repair shops, tire storage and spare parts inventory management. The business unit also offers software for the property management industry in Denmark. The products provide effective IT support for property management and real estate companies. The business unit includes the company Vitec Datama nn A/S.	Auto repair shops and prop erties	2015	47	80%
Energy Software for electricity traders and owners of electricity and district heating grids. The products are advanced forecasting systems and calcu lation and mapping systems. The customers are located in 22 countries. This business unit includes the company Vitec Energy AB.	Energy forecasts	2003	29	75%
Fixit Software for hair and beauty salons in Norway. The products include an enterprise-management system for salons including appointment system, cash system and online appointment scheduling for end customers. This business unit includes the company Vitec Fixit AS.	Hair and beauty salons	2019	62	94%
Futursoft Software for the automotive industry and machinery sector in Finland and Sweden. The products have been developed to support services and technical trade, such as spare parts inventory management for cars and maintenance of everything from light machinery to heavy equipment. This business unit includes the company Vitec Futursoft Oy.	Auto repair shops	2016	79	89%
HK data Software for the health and welfare sector in Norway. The products are used by businesses, municipalities, counties and volunteer organizations. For example, products are offered to assist with treatment of addiction problems. The business unit includes the company HK Data AS.	Health and welfare	2019	16	80%

Business unit	Niche market and domicile	Year of acquisi tion	Sales 2019, SEKm	Repet itive share
Katrina	Churches	2019	19	75%
Software for church-related administration in Finland. The products are used to coordinate staff, inventory and premises in parishes. The business unit includes the company Vitec Katrina Oy.
Mäklarsystem Software for real estate agents in Norway and Sweden. The products support real estate agents at every step of their business process, from the registration of an object, to marketing, viewing, bidding, sale and con tract. The business unit includes the company Vitec Mäklarsystem AB.	Real estate agents	2010	77	93%
Megler Software for real estate agents in Norway. The products support real es tate agents at every step of their business process, from the registration of an object, to marketing, viewing, bidding, sale and contract. The busi ness unit includes the companies Vitec Megler AS and Vitec Megler AB.	Real estate agents	2012	89	85%
Nice Software for liability insurance companies in Norway and Sweden. Complete enterprise-management system for both established insurance companies and startups. The business unit includes the company Vitec Nice AS.	Property and liability insurance	2015	18	73%
Plania Software for the property management industry in Norway. The products include comprehensive enterprise-management systems to monitor and streamline all aspects of management, operation and maintenance of buildings and production equipment within property management and industry. The business unit includes the company Vitec Plania AS.	Property Man agement	2016	35	61%
Tietomitta Software for private and municipal waste-and-resource processing in Finland. The products are used to manage the entire chain, from the weighing of waste and driving schedules, to invoicing, accounting and reporting. The business unit includes the company Vitec Tietomitta Oy.	Waste manage ment	2016	51	81%
Visiolink Software for media companies in Europe. Offers publishing system for digital versions of print media, such as daily newspapers. The business unit includes the companies Vitec Visiolink Management Aps, Vitec Visio link Aps and Vitec LIVEdition Aps.	Media	2020	62	74%
Vitec Aloc Software for the banking and finance industry in Denmark and Norway. The niche products are designed for specific tasks such as portfolio and risk management and stock exchange trading. The business unit includes the group Vitec Aloc A/S.	Finance	2014	105	89%
Vitec MV Software for the education sector in Denmark, Norway and Sweden. Our primary offering is a cloud-based product for people with reading and writing difficulties and are used within compulsory school and other education companies as a teaching tool. The business unit includes the group Vitec MV A/S.	Reading and writing difficulties	2017	106	48%
WIMS AS Software for insurance companies in Norway. Complete enterprise-man agement system for insurance companies. The business unit includes the company Vitec Wims AS.	Property and liability insurance	2019	25	64%

Balance sheets and cash flow

Cash and cash equivalents

The Group's cash and cash equivalents, including current investments at the end of the period, totaled SEK 110.2 million (129.4). In addition to cash and cash equivalents, Vitec had overdraft facilities of SEK 250.0 million and SEK 61.5 million in unutilized portions of the credit facility.

Interest-bearing liabilities

At Tuesday, March 31, 2020, interest-bearing liabilities totaled SEK 522.2 million (290.1) and comprised SEK 498.2 million (284.5) in non-current interest-bearing liabilities and SEK 23.9 million (5.6) in current interest-bearing liabilities.

Non-current interest-bearing liabilities comprised bank loans of SEK 454.0 million, as well as convertible debentures totaling SEK 44.2 million. Current interest-bearing liabilities comprised bank loans of SEK 3.0 million as well as convertible debentures totaling SEK 20.9 million. The terms and conditions of the company's credit agreement with the bank comprises restrictions, known as covenants. The Group has fulfilled the terms and conditions in their entirety during the period.

Cash flow and investments

During the period, SEK 77.9 million of the credit facility was utilized for acquisitions and SEK 39.8 million pertaining to previous acquisitions was repaid to the credit facility. Amortization of bank loans amounted to SEK 0.8 million; amortization related to leasing totaled SEK 8.4 million. Cash flow from operating activities was SEK 233.2 million (182.4). Investments totaled to SEK 40.8 million in capitalized work, SEK 0.1 million in other intangible assets and SEK 1.3 million in property, plant and equipment. The acquisitions of Visiolink Group and ALMA Consulting Oy generated SEK 143.1 million in product rights, brands, customer agreements and goodwill.

Convertible debentures

Convertible debentures are included under non-current and current interest-bearing liabilities:

• Loan 1801 (current liability, convertible program, em-

ployees). SEK 20.9 million. The duration of the loan is from January 1, 2018 to December 31, 2020. The interest rate is based on Stibor 180 (Stockholm Interbank Offered Rate). The conversion price is SEK 104.00. Conversion may be exercised between November 1 and November 30, 2020, upon which the share capital may increase by no more than SEK 20,029. Full conversion would entail a dilution of approximately 0.7% of the capital and 0.3% of the votes.

• Loan 1906 (non-current liability, convertible, acquisition of Odin Systemer AS) SEK 31.2 million. The duration of the loan is from June 12, 2019- June 30, 2022. The interest rate is based on Stibor 180 (Stockholm Interbank Offered Rate). The conversion price is SEK 125.00. Conversion may be exercised from January 1, 2021 to June 30, 2022. upon which the share capital may increase by no more than SEK 26,048. Full conversion would entail a dilution of approximately 0.8% of the capital and 0.4% of the votes.

• Loan 2001 (non-current liability, convertible, acquisition of Visiolink Management Aps) SEK 13.1 million. The duration of the loan is from January 30, 2020 to December 30, 2022. The interest rate is based on Stibor 180 (Stockholm Interbank Offered Rate). The conversion price is SEK 230.00. Conversion may be exercised from January 1, 2021 to June 30, 2022. upon which the share capital may increase by no more than SEK 6,130. Full conversion would entail a dilution of approximately 0.2% of the capital and 0.1% of the votes.

Shareholders' equity

Equity attributable to Vitec's shareholders totaled SEK 777.3 million (711.8). The equity/assets ratio is 37% (44). A dividend of SEK 1.35 per share was proposed to the Annual General Meeting in June totaling SEK 44.0 million.

Taxes

Current tax for the period amounted to SEK 6.7 million (6.3). Deferred tax totaled SEK 0.2 million (1.3)

Acquisitions during the period

Acquisition Visiolink Management Aps

On January 30, Vitec acquired all shares and voting rights in the Danish software company Visiolink Management Aps with subsidiaries, which together have around 200 customers all over Europe. Visiolink offers a publishing system for digital versions of print media, such as daily newspapers, and targets media companies. Visiolink currently has customers in nine European countries, where the Nordic countries account for a large portion of sales. The Visiolink Group reported sales of SEK 62.4 million in 2019, with an adjusted EBITDA of SEK 14.9 million.

Payment was in cash and with a convertible, with deviation from shareholders' preferential rights in accordance with the authorization from the Annual General Meeting on April 10, 2019. The convertible matures in 36 months and at full conversion will have a dilutive effect on share capital of 0.2%. The acquisition is expected to yield an immediate increase in earnings per share.

The company was consolidated as of the acquisition date. The goodwill item is not tax deductible and is deemed to be attributable to anticipated profitability, complementary expertise requirements, as well as anticipated synergy effects, in the form of the joint development of our products. No acquisition-related costs were recognized during the period. From the acquisition date up to and including March 31, revenues in the acquired company totaled SEK 11.5 million and profit before tax totaled SEK 2.4 million. If consolidation had occurred at the beginning of the year, the company would have provided the Group with an additional approximately SEK 4.7 million in sales and SEK 0.2 million in loss before tax.

The acquisition of the Visiolink Group added SEK 38.0 million in product rights, SEK 1.9 million in brands, SEK 4.7 million in customer agreements and SEK 40.7 million in goodwill. The expensed convertible totals SEK 14.1 million.

Acquisition ALMA Consulting Oy

On March 17, Vitec acquired all shares and voting rights of the Finnish software company, ALMA Consulting Oy. The company reported sales of SEK 31.6 million, with an adjusted EBITDA of SEK 7.9 million for the 2019 financial year. ALMA Consulting Oy develops and delivers information management software for the processing industry and energy companies in Finland. The products enable companies to streamline and plan their production supporting processes. The company currently has about 100 customers.

Payment was made in cash plus a supplementary purchase consideration. The acquisition is expected to yield an immediate increase in earnings per share.

The company was consolidated as of the acquisition date. The goodwill item is not tax deductible and is deemed to be attributable to anticipated profitability, complementary expertise requirements, as well as anticipated synergy effects, in the form of the joint development of our products. At March 31, acquisition-related costs totaled SEK 1.1 million and were recognized as other external costs in the statement of comprehensive income. From the acquisition date up to and including March 31, revenues in the acquired company totaled SEK 2.5 million and profit before tax totaled SEK 0.2 million. If consolidation had occurred at the beginning of the year, the company would have provided the Group with an additional approximately SEK 4.7 million in sales and SEK 1.3 million in profit before tax.

The acquisition of ALMA added SEK 12.0 million in product rights, SEK 0.9 million in brands, SEK 2.5 million in customer agreements and SEK 42.4 million in goodwill. The expensed portion of the contingent consideration amounts to SEK 11.1 million and is subject to EBITDA improvements at December 31, 2020 and is measured at maximum outcome.

Acquisition-driven growth

Vitec has an explicit acquisitions-based growth strategy with a sharp focus on profitability and stable cash flows. Our focus on strong cash flows through a high proportion of recurring revenues creates the financial foundation for continued acquisition-driven growth.

Acquired annual sales

Net sales, rolling 12 months

SEK million	Apr 19–Mar 20
Reported net sales, rolling 12 months	1,186
of which recurring revenues, rolling 12 months	954
Annual effect of acquired units	117
of which recurring revenues	87
Proforma net sales, rolling 12 months	1,303
Proforma recurring revenues, rolling 12 months	1,041

Other significant events during the period

January 20: Gert Gustafsson was appointed to serve as the new COO for Vitec

Vitec appointed Gert Gustafsson to serve as COO. He was most recently Chief Operating Officer for 7 of a total of 23 business units within the Group and has been employed since 2017. His new position begins on March 1, 2020 and he will take over after Lars Eriksson, who has chosen to retire after nine years at Vitec.

March 23: Vitec postpones Annual General Meeting until June 2020

Because of the current situation related to the coronavirus and Covid-19, the Board of Directors of Vitec Software Group AB (publ) resolved to postpone the company's Annual General Meeting until 23 June 2020. The meeting will be held at P5 Konferens i Väven, Umeå.

The decision to postpone the Annual General Meeting is the result of a carefully considered assessment. The point of departure is that we want to help to reduce the spread of infection and protect people in risk groups. The decision was also influenced by restrictions on meetings, as well as on domestic and international travel.

Vitec will take measures to ensure that the AGM is held in compliance with recommendations from the authorities and we are carefully monitoring the coronavirus and Covid-19 situation. Originally, the Annual General Meeting was to be held at Norrlandsoperan on April 28, 2020.

The invitation to the AGM will be sent no later than four weeks prior to the new date.

Risks and uncertainties

Material risks and uncertainties are described in the administration report of the of the 2019 Annual Report under "Risks and uncertainties" on pages 38-41, in Note 1, under the section, Assessments and estimates on pages 66-67, and in Note 11 "Financial risks and the management of such risks" on pages 102-103. No material changes have occurred since then.

Coronavirus and Covid-19

On March 11, 2020, the World Health Organization (WHO) declared the spread of the coronavirus and Covid-19 to be a pandemic. We have seen that the pandemic has had a severe effect on communities in large parts of Asia, the US,

Europe and even the Nordic countries, where most of our operations are located. Not only has the pandemic had major consequences for human health, but the economic impact of the outbreak of the disease is also expected to be substantial. Our focus is on reducing the risk of spreading the virus and protecting the health of our employees, at the same time that we are working to minimize the impact on our business.

We have not yet seen any significant effects on the Group's finances and earnings. Depending on how long we will be in this situation, we may have effects on our service revenues and sales, as well as an impact on the variable proportion of recurring revenues. Planned projects may also be delayed.

Parent Company

Net sales totaled SEK 26.8 million (24.2) and essentially comprised invoicing to subsidiaries for services rendered. Profit after tax was SEK -3.7 million (-9.5). Parent Company earnings were charged with unrealized foreign-exchange losses

totaling SEK -2.6 million. The Parent Company is generally exposed to the same risks and uncertainties as the Group; refer to the above section, Risks and uncertainties.

Related-party transactions

No significant transactions with related parties occurred in the Group or Parent Company during the period.

Accounting and measurement policies

This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting. The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU, and the Swedish Annual Accounts Act. The Parent Company's accounts were prepared in accordance with the Annual Accounts Act and recommendation RFR 2 Accounting for Legal Entities. A number of new or amended standards entered into force as of 2020. None of these changes are expected to have a material effect on the Group's accounts.

In Denmark, a new law on vacation days has come into force. The law entails a change in accounting policies for our Danish companies and will result in higher liabilities in the balance sheet. Part of the vacation liability must remain on the books until employees retire or leave the company, and have therefore been classified as non-current, SEK 7.5 million.

Operating segments

Operating segments are defined as business units, of which there were 24 as at the first quarter, each generating revenue and incurring costs. Their operating profit/loss is regularly followed up by the highest executive decision-maker, the CEO and group chief executive. Separate financial information is available for each unit. The operating segments form the operational structure for internal governance, follow-ups, and reporting. Based on the character of the services offered

with their high proportion of recurring revenues, similar range of products, and similar financial characteristics, all of the group's operating segments/business units have been aggregated into one operating segment in the financial reports as of 1 January 2020 in accordance with the rules of IFRS 8.

Financial instruments

Classification and measurement

Financial instruments are recognized initially at cost corresponding to the instrument's fair value plus transaction costs. A financial instrument is classified at initial recognition based on, among other factors, the purpose for which the instrument was acquired. Vitec has financial instruments under the categories, loans and accounts receivable, financial liabilities at fair value and financial liabilities measured at amortized cost.

Financial liabilities measured at fair value

In accordance with IFRS 7, the fair value of each financial asset and financial liability must be disclosed, regardless of whether they are recognized in the balance sheet. Vitec deems the fair value of the financial assets/liabilities to be close to the recognized carrying amount.

All of our financia3l instruments that are subject to measurement at fair value are classified as level 3 and pertain to supplementary purchase considerations in conjunction with the acquisition.

Recurring measurements at fair value, at March 31, 2020, SEK thousands
	Level 1	Level 2	Level 3	Book value
Supplementary purchase consideration, ALMA Consulting Oy			10,716	11,083
Supplementary purchase consideration, Avoine OY			5,542	5,542
Supplementary purchase consideration, M&V Software Oy			10,789	11,083
Supplementary purchase consideration, WIMS AS			27,083	27,823

Signatures

Umeå, April 17, 2020

Lars Stenlund Chief Executive Officer

Condensed consolidated statement of comprehensive income

SEK THOUSANDS	2020 Jan–Mar	2019 Jan–Mar	2019 Jan–Dec
OPERATING REVENUES
Recurring revenues	253,335	206,856	907,535
License revenues	2,682	6,283	17,836
Service revenues	44,638	44,581	162,672
Other revenues	8,475	21,258	68,206
NET SALES	309,130	278,978	1,156,249
Capitalized development costs	40,821	34,037	138,738
Reversal of supplementary purchase consideration	-	-	-
TOTAL REVENUES	349,951	313,015	1,294,987
OPERATING EXPENSES
Goods for resale	-7,130	-18,007	-51,728
Subcontractors and subscriptions	-38,431	-28,609	-130,142
Other external expenses	-36,720	-34,437	-137,939
Personnel expenses	-174,350	-146,732	-609,114
Depreciation of property, plant and equipment	-11,027	-10,101	-48,451
Amortization and impairment of intangible fixed assets	-18,455	-16,758	-69,935
Unrealized exchange-rate gains/losses (net)	983	209	-351
TOTAL EXPENSES	-285,130	-254,435	-1,047,659
EBITA	64,821	58,580	247,328
Acquisition-related costs	-6,154	-1,876	-11,752
Acquisition-related depreciation/amortization and impairment losses	-26,356	-20,817	-91,654
OPERATING PROFIT/LOSS	32,311	35,887	143,922
Financial income	225	494	1,851
Financial expenses	-3,914	-3,028	-15,748
TOTAL FINANCIAL ITEMS	-3,689	-2,534	-13,897
PROFIT AFTER FINANCIAL ITEMS	28,622	33,353	130,025
Tax	-6,890	-7,591	-27,858
NET PROFIT FOR THE PERIOD	21,732	25,762	102,166

OTHER COMPREHENSIVE INCOME, ITEMS THAT MAY BE RECLASSIFIED AS PROF IT/LOSS FOR THE YEAR
Restatement of net investments in foreign operations and hedge accounting of the same	-4,945	16,366	6,425
OTHER COMPREHENSIVE INCOME FOR THE PERIOD	-4,945	16,366	6,425
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	16,786	42,128	108,592

PROFIT FOR THE PERIOD ATTRIBUTABLE TO
– Parent Company shareholders	21,732	25,762	102,166
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO
– Parent Company shareholders	16,786	42,128	108,592

Condensed consolidated statement of financial position

SEK THOUSANDS	Mar 31, 2020	Mar 31, 2019	Dec 31, 2019
ASSETS
FIXED ASSETS
Goodwill	695,606	424,822	617,900
Other intangible fixed assets	941,938	771,207	847,798
Tangible property, plant and equipment	134,090	101,175	130,656
Financial fixed assets	1,728	980	2,008
Deferred tax assets	7,581	8,151	7,015
TOTAL FIXED ASSETS	1,780,943	1,306,335	1,605,377
CURRENT ASSETS
Inventories	3,661	5,559	3,781
Current receivables	189,200	174,077	264,521
Short-term investments	-	47	-
Cash and cash equivalents	110,216	129,309	16,658
TOTAL CURRENT ASSETS	303,077	308,992	284,960
TOTAL ASSETS	2,084,020	1,615,326	1,890,336
SHAREHOLDERS' EQUITY AND LIABILITIES
Equity attributable to Parent Company shareholders	777,316	711,757	759,432
Long-term interest-bearing liabilities	498,236	284,517	467,407
Deferred tax liabilities	186,472	154,607	174,031
Other long-term liabilities	121,418	63,461	105,540
TOTAL LONG-TERM LIABILITIES	806,126	502,584	746,979

Payables	27,083	33,793	34,758
Short-term interest-bearing liabilities	23,926	5,633	3,026
Other short-term liabilities	130,652	90,235	115,148
Accrued expenses	116,896	110,996	86,037
Prepaid recurring revenues	202,020	160,328	144,956
TOTAL SHORT-TERM LIABILITIES	500,578	400,985	383,925
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	2,084,020	1,615,326	1,890,336

Condensed consolidated statement of changes in equity

SEK THOUSANDS	2020 Jan–Mar	2019 Jan–Mar	2019 Jan–Dec
EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS
Opening balance	759,432	669,628	669,628
Correction of error attributable to previous year	-	-	-2,456
Convertible debenture with stock options	1,098	-	2,448
Debenture conversion	-	-	20,026
Dividends paid	-	-	-38,807
Total comprehensive income	16,786	42,129	108,592
CLOSING BALANCE	777,316	711,757	759,432

Condensed consolidated statement of cash flow

SEK THOUSANDS	2020 Jan–Mar	2019 Jan–Mar	2019 Jan–Dec
OPERATING ACTIVITIES
Operating profit	32,311	35,888	143,922
Adjustments for non-cash items
Other operating revenues	-	-	-
Depreciation/amortization and impairment losses	55,838	47,675	210,040
Unrealized foreign exchange gains/losses	-983	-209	351
	87,166	83,354	354,313
Interest received	225	494	1,851
Interest paid	-3,088	-2,326	-11,022
Income tax paid	-3,372	-9,780	-24,515
CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN WORKING CAPITAL	80,931	71,742	320,627
Changes in working capital
Increase/Decrease in inventories	121	-257	2,200
Increase/Decrease in accounts receivable	121,221	100,665	13,165
Increase/Decrease in operating receivables	-16,044	-16,375	-9,943
Increase/decrease in accounts payable	-8,894	-6,182	-9,288
Increase/Decrease in operating liabilities	55,881	32,840	-33,517
CASH FLOW FROM OPERATING ACTIVITIES	233,216	182,433	283,245
INVESTING ACTIVITIES
Acquisition of subsidiaries, net*	-109,003	-18,633	-218,865
Purchase of intangible fixed assets and capitalized development costs	-40,920	-34,448	-141,022
Purchase of property, plant and equipment	-1,280	-6,794	-15,625
CASH FLOW FROM INVESTING ACTIVITIES	-151,204	-59,875	-375,512
FINANCING ACTIVITIES
Dividends to Parent Company shareholders	-	-	-38,807
Borrowings	77,910	54,768	236,962
Repayment of loans	-48,969	-280,553	-325,488
CASH FLOW FROM FINANCING ACTIVITIES	28,941	-225,785	-127,334
CASH FLOW FOR THE PERIOD	110,953	-103,227	-219,600
OPENING CASH AND CASH EQUIVALENTS, INCLUDING CURRENT INVEST MENTS	16,658	235,302	235,302
Exchange-rate differences in cash and cash equivalents	-17,395	-2,719	956
CASH AND CASH EQUIVALENTS INCLUDING CURRENT INVESTMENTS AT THE END OF THE PERIOD**	110,216	129,356	16,658

*Payment for the acquisition of subsidiaries during the period was in cash for Visiolink ApS and ALMA Consulting Oy. Net cash flow was SEK 109.0 million. The acquisitions pertained to all shares outstanding in their entirety and entailed the gain of controlling influence.

Payments pertaining to the acquisition of subsidiaries in 2019 comprised payments for Avoine Oy. Net cash flow was SEK 18.6 million. The acquisition pertained to all shares outstanding in their entirety and entailed the gain of controlling influence. .

**Cash and cash equivalents are defined as funds exposed to an insignificant risk of fluctuations in value, and which are easily convertible to cash at a known amount. Current investments comprise funds that are convertible to cash at a known amount within one bank day.

Parent company income statement, condensed

SEK THOUSANDS	2020 Jan–Mar	2019 Jan–Mar	2019 Jan–Dec
Operating revenues	26,838	24,219	66,159
Operating expenses	-25,505	-20,411	-86,065
Unrealized exchange-rate gains/losses (net)	-2,592	-13,145	-6,237
OPERATING PROFIT/LOSS	-1,260	-9,337	-26,143
Profit/loss from financial investments
Income from participation in Group companies	-	-	131,301
Interest income	186	13	772
Interest expenses	-3,395	-2,539	-12,357
PROFIT AFTER FINANCIAL ITEMS	-4,468	-11,862	93,573
Appropriations	0	-	40,506
PROFIT/LOSS BEFORE TAX	4,468	-11,862	134,080
Tax	810	2,363	-264
NET PROFIT FOR THE PERIOD	-3,658	-9,499	133,816

Profit/Loss for the period corresponds to total comprehensive income.

Condensed balance sheet, Parent Company

SEK THOUSANDS	Mar 31, 2020	Mar 31, 2019	Dec 31, 2019
ASSETS
FIXED ASSETS
Intangible fixed assets	1,405	2,110	1,559
Tangible property, plant and equipment	11,465	11,712	11,684
Financial fixed assets	1,691,221	1,241,316	1,535,376
TOTAL FIXED ASSETS	1,704,091	1,255,138	1,548,619

CURRENT ASSETS
Current receivables	209,436	122,130	199,970
Cash and cash equivalents	64,223	108,884	-
TOTAL CURRENT ASSETS	273,659	231,014	199,970
TOTAL ASSETS	1,977,749	1,486,151	1,748,589

SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity	698,294	574,732	701,767
Untaxed reserves	2,042	2,448	2,042
Non-current liabilities	548,225	284,517	508,534
Current liabilities	729,188	624,454	536,245
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	1,977,749	1,486,151	1,748,589

Acquired assets and liabilities 2020

Preliminary acquisition calculations

Some items in the acquisition plans may be remeasured, due to our brief ownership of the company. These comprise brands, product rights, customer agreements and goodwill. For this reason, the acquisition plans remain preliminary, until 12 months after the acquisition date.

ACQUIRED ASSETS AND LIABILITIES, TSEK	Book value	Fair value adjustment	Fair value recognized in the Group
Goodwill	-	83,100	83,100
Intangible fixed assets	34,867	59,965	94,831
Tangible property, plant and equipment	646	-	646
Non-current receivables	929	-	929
Current receivables	28,645	-	28,645
Cash and cash equivalents	20,552	-	20,552
Deferred tax liabilities	-	-13,192	-13,192
Accounts payable	-41,473	-	-41,473
Other short-term liabilities	-19,300	-	-19,300
Total	24,865	129,872	154,738

EFFECT OF ACQUISITIONS ON CASH FLOW, TSEK
Group's purchase costs	-154,738
Expensed portion of purchase consideration	11,083
Convertible debenture	14,100
Acquired cash and cash equivalents	20,552
Net cash outflow	-109,003

Allocation of revenues and date of revenue recognition

Allocation of revenues and date of revenue recognition, MSEK	2020 Jan–Mar	2019 Jan–Mar	2019 Jan–Dec
Recurring revenues	253.3	206.9	907.5
Other revenues	55.8	72.1	248.7
Net sales	309.1	279.0	1,156.2

Date of revenue recognition
Services transferred to customers over time, flat distribution	219.8	178.4	780.7
Services transferred to customers over time, in pace with use	78.1	73.1	289.5
Services transferred to customers at a given time	11.2	27.5	86.0
	309.1	279.0	1,156.2

Shareholder information

Publication

This information is such information that Vitec Software Group AB (publ) is required to disclose pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, at 8:00 a.m. (CET) on April 17, 2020.

Financial calendar

Annual General Meeting	June 23, 2020 5:30 p.m.

Interim report January–June	July 10, 2020 8:00 a.m.
Interim report January–September	Oct. 15, 2020 8:00 a.m.
Year-end report January–December	Feb. 11, 2021 8:00 a.m.

Financial information

Our website, vitecsoftware.com, is our primary channel for IR information, where we publish financial information immediately upon release.

We can also be contacted through the following channels: By e-mail: [email protected] By post: Investor Relations, Tvistevägen 47 A, SE-907 29 Umeå, Sweden By telephone: +46 (0)90 15 49 00 Vitec's 2019 annual report is available at vitecsoftware.com

Corporate registration number

Vitec Software Group AB (publ), corp. reg. no. 556258-4804.

Lars Stenlund, CEO +46 (0)70 659 49 39 [email protected]

Olle Backman, CFO +46 (0)70 632 89 93 [email protected]

Patrik Fransson, IR Officer +46 (0)76 942 85 97 [email protected]

Definitions of key figures

This interim report refers to several financial measurements that are not defined under IFRS, known as alternative performance measures, in accordance with ESMA's guidelines. These measurements provide senior management and investors with significant information for analyzing trends in the company's business

operations. Alternative performance measures are not always comparable with measurements used by other companies. They are intended to complement, not replace, financial measurements presented in accordance with IFRS. The key figures presented on the final page of this report are defined as follows:

Non-IFRS key indicators	Definition	Description of usage
Recurring revenues	Recurring contractual revenues with no direct rela tionship between our work efforts and the contracted price. The contractual amount is usually billed in advance and the revenues are recognized during the contract's term.	A key indicator for the manage ment of operational activities.
Percentage of recurring revenues	Recurring revenues in relation to net sales.	A key indicator for the manage ment of operational activities.
Growth	The trend of the company's net sales in relation to corresponding year-earlier period.	Used to monitor the company's sales trend.
Growth in recurring revenues	Trend in recurring revenues in relation to the corre sponding year-earlier period.	Used to monitor the company's sales trend.
Organic growth in recurring revenues	Development of the company's recurring revenues, excluding acquired companies during the period, in relation to the corresponding year-earlier period.	Used to monitor the company's sales trend.
EBITA	Net profit/loss for the period before acquisition-relat ed costs, acquisition-related depreciation/amortiza tion and impairment losses, net financial items and tax.	Indicates the company's net profit/loss for the period be fore acquisition-related costs, acquisition-related deprecia tion/amortization.
EBITDA	Earnings before interest, tax, depreciation and amorti zation for the period.	Indicates the company's operating profit/loss before depreciation/amortization.
Acquisition-related costs	Costs such as broker fees, legal fees and stamp tax (tax on single property purchases).	Used to disclose items affect ing comparability.
Acquisition-related depreciation/amorti zation and impairment losses	Depreciation/amortization and impairment losses regarding product rights and customer agreements.	Used to disclose items affect ing comparability.
Earnings growth attributable to the Parent Company shareholders	The trend of the company's profit after tax in relation to the corresponding year-earlier period.	Used to monitor the company's earnings trend.
EBITA margin	Operating profit before acquisition-related costs, in relation to net sales.	Used to monitor the company's earnings trend.
Operating margin	Operating profit in relation to net sales.	Used to monitor the compa ny's earnings trend.
Profit margin	Profit after tax for the period, in relation to net sales.	Used to monitor the compa ny's earnings trend.
Equity/assets ratio	Shareholders' equity, including equity attributable to non-controlling interests as a percentage of total assets.	This measurement is an indica tor of the company's financial stability.
Equity/assets ratio after full conversion	Shareholders' equity and convertible debentures as a percentage of total assets.	This measurement is an indica tor of the company's financial stability.
Debt/equity ratio	Average debt in relation to average shareholders' equity and non-controlling interests.	This measurement is an indica tor of the company's financial stability.
Average shareholders' equity	The average between shareholders' equity for the period attributable to Parent Company shareholders and shareholders' equity for the preceding period attributable to Parent Company shareholders.	An underlying measurement on which the calculation of other key indicators is based.

Return on capital employed	Profit after net financial items plus interest expenses, as a percentage of average capital employed. Capital employed is defined as total assets less interest-free liabilities and deferred tax.	This measurement is an indica tor of the company's profit ability in relation to externally financed capital and sharehold ers' equity.
Return on equity	Reported profit/loss after tax in relation to average equity attributable to Parent Company shareholders.	This measurement is an indica tor of the company's profitabil ity and gauges the return on shareholders' equity.
Sales per employee	Net sales in relation to the average number of employ ees.	This metric is used to assess the company's efficiency.
Added value per employee	Operating profit/loss plus depreciation/amortization and personnel expenses in relation to average number of employees.	This metric is used to assess the company's efficiency.
Personnel expenses per employee	Personnel expenses in relation to average number of employees.	A key indicator used to mea sure operational efficiency.
Average no. of employees	The average number of employees in the Group during the period.	An underlying measurement on which the calculation of other key indicators is based.
AES (Adjusted equity per share)	Shareholders' equity attributable to Parent Company shareholders, in relation to the number of shares issued at the balance-sheet date.	This measurement indicates the equity per share at the balance-sheet date
Cash flow per share	Cash flow from operating activities before changes in working capital, in relation to the average number of shares.	Used to monitor the company's trend in cash flow per share.
Number of shares after dilution	The average number of shares during the period plus the number of shares added following the full conver sion of convertibles.	An underlying measurement on which the calculation of other key indicators is based.

IFRS key indicators	Definition	Description of usage
Earnings per share	Profit after tax attributable to Parent Company share holders, in relation to the average number of shares during the period.	IFRS key indicators
Earnings per share after dilution	Profit after tax attributable to Parent Company share holders, plus interest expenses pertaining to convert ible debentures, in relation to the average number of shares after dilution.	IFRS key indicators

Key figures

		2020 Jan–Mar	2019 Jan–Mar	2019 Jan–Dec
Net sales	SEK 000s	309,130	278,978	1,156,249
Recurring revenues	SEK 000s	253,335	206,856	907,535
Recurring share of net sales	(%)	82%	74%	78%
Growth net sales	(%)	11%	25%	14%
EBITA	SEK 000s	64,820	58,580	247,328
EBITA margin	(%)	21%	21%	21%
Growth EBITA	(%)	11%	31%	14%
Operating profit/loss (EBIT)	SEK 000s	32,311	35,887	143,922
Operating margin	(%)	10%	13%	12%
Profit after financial items	SEK 000s	28,622	33,353	130,025
Profit after tax	SEK 000s	21,732	25,762	102,166
Profit margin	(%)	7%	9%	9%
Profit after tax attributable to the Parent Company shareholders	SEK 000s	21,732	25,762	102,166
Balance-sheet total	SEK 000s	2,084,020	1,615,326	1,890,336
Equity/assets ratio	(%)	37%	44%	40%
Equity/assets ratio after full conversion	(%)	40%	46%	43%
Debt/equity ratio	(multiple)	1.48	1.47	1.50
Return on capital employed	(%)	12%	15%	12%
Return on equity	(%)	13%	18%	14%
Sales per employee	SEK 000s	398	430	1,669
Added value per employee	SEK 000s	346	355	1,339
Personnel expenses per employee	SEK 000s	225	226	879
Average no. of employees	(persons)	776	649	693
Adjusted equity per share (AES)	(SEK)	23.86	22.01	23.31
Earnings per share	(SEK)	0.67	0.80	3.16
Earnings per share after dilution	(SEK)	0.67	0.79	3.18
Dividend paid per share	(SEK)	-	-	1.20
Cash flow per share	(SEK)	2.54	2.22	9.90

Basis of computation:
Earnings from calculation of earnings per share	SEK 000s	21,732	25,762	102,166
Cash flow from calculation of cash flow per share	SEK 000s	82,897	71,742	320,627
Weighted average number of shares (weighted average)	(share)	32,573,216	32,338,900	32,372,267
Number of shares after dilution	(share)	33,075,298	32,773,505	32,717,425
No. of shares issued at balance-sheet date.	(share)	32,573,216	32,338,900	32,573,216
Share price at close of the respective period	(SEK)	179.00	92.00	185.00

Vitec is the Nordic market leader in Vertical Market Software. We develop and deliver standardized software aimed at various niche markets. Vitec grows through acquisitions of well-managed and established applications companies. The Group's overall processes, combined with the in-depth knowledge of our employees regarding our customers' local markets, creates the conditions for improvement and continuous innovation. Our 800 employees are located in Denmark, Finland, Norway and Sweden. Vitec is listed on the Nasdaq Stockholm and had sales of SEK 1,156 million in 2019. Read more about us at vitecsoftware.com.