Zalaris

Earnings Release • Apr 29, 2022

29 April 2022

Presentation of financial results Q1 2022

Disclaimer

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This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in Zalaris ASA ("Company"). The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions.

This presentation includes and is based, inter alia, on forward-looking information and contains statements regarding the future in connection with the Company's growth initiatives, profit figures, outlook, strategies and objectives. All forward-looking information and statements in this presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for the Company. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions.

Important factors may lead to actual profits, results and developments deviating substantially from what has been expressed or implied in such statements. Although the Company believes that its expectations and the presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the presentation. The Company is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the presentation, and neither the Company nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.

Agenda

Today's presenters

• Highlights
• Company in brief
• Financial review
• Markets and outlook
• Q&A

Hans-Petter Mellerud CEO and Founder

Gunnar Manum CFO

Highlights

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Q1 2022: All time high quarterly revenue

• Revenue of NOK 209.7 million (NOK 192.8 million) for the first quarter. Revenue grew by +12.0% YoY in constant currency
• Adjusted EBIT of NOK 14.9 million (NOK 13.8 million) +8.0% YoY
• Adjusted EBIT margin of 7.1% (7.2%). The margin is expected to increase throughout the year to our 10% target, as our new projects go live and corresponding revenue being recognised
• Signed a seven-year agreement with Stora Enso in April, a leading Finish industrial company, for delivery of Payroll and Time Management technology and outsourcing services. The contract will be among our 10 largest and strengthens our position in the global production industry vertical
• Revenue deferred during the quarter was NOK 18.5 million (NOK 8.6 million), an increase of 119% as a result of many new customer contracts being implemented
• Acquired vyble, a German provider of cloud-based Payroll & HR management system (SaaS) for the SME market.
• Cash and cash equivalents of NOK 134.7 million, +NOK 17.1 million compared to last year
• The board has proposed a dividend for 2021 of up to NOK 1.00 per share in total, with NOK 0.35 to be paid immediately following shareholder approval, and up to NOK 0.65 planned to be paid before the end of the year pursuant to a proposed board authorisation

Continued development in new signings in Managed Services driving recurring revenue streams

• Several new BPO contracts and extensions signed
• Platform based deals utilizing existing capacity with higher incremental margin
• Pipeline of BPO opportunities still strong in all geographies not impacted of Ukrainian war

7-year agreement to deliver Peoplehub Payroll and Timebased outsourcing services to Stora Enso's 6000+ employees in Finland. Approx. 20 FTEs business transfer to Zalaris.

5-year agreement with KAEFER UK & Ireland to implement SAP SuccessFactors integrated with Zalaris PeopleHub and mobile solutions for their 3,000+ employees

5-year agreement with iconic retailer KaDeWe in Germany to implement Zalaris PeopleHub based Payroll services for their 1,900+ employees

Add-on to 5-year agreement announced in Q4'21 to deliver Zalaris' Travel solution as part of Zalaris PeopleHub for Yunex's 3,100+ employees in 22 countries

Professional Services continued development

• Several new agreements signed
• Implementing and maintenance of Managed Services projects
• Continued building a new generation of consultants through trainee programs
• Using smart shoring and robotized solutions to improve cost efficiency

brands as Hitachi, Veolia, and Porsche companies as ABB, Lidl, and Ryanair to provide Application Maintenance Services

maintenance services with the state of Rhineland-Pfalz, extended our agreement with Bitzer AG for a global rollout and finalized a new payroll solution to serve ThyssenKrupp Elevator's 7000 employees

agreement to implement payroll for Google Australia

Managed Services grew by 17% in the first quarter, in local currency

Revenue NOK 146.5m (+14.1%)

*Revenue in local currency converted to NOK using the avg. currency rate from the quarter last year. See Q1 interim report for definitions of APMs

• +17.4% higher revenue when adj. for currency effects
• The inclusion of ba.se added +10.2%, while +7.2% relates to new customers and volume increases
• Net new signings with annual recurring revenue (ARR) of NOK 6m during the quarter – immaterial churn
• Continued good activity level, particularly within the European multi-country HR & Payroll segment, where Zalaris has a strong position
• >90% of revenue is recurring based on long-term BPO contracts, while the remaining <10% relates to change orders etc.

Professional Services had revenue in line with last year, in local currency

Revenue NOK 61.9m (-2.4%)

*Revenue in local currency converted to NOK using the avg. currency rate from the quarter last year. See Q1 interim report for definitions of APMs

• Revenue in Professional Services was in line with last year when adjusted for negative currency effects
• Significant PS capacity still being utilized on implementing new customers in MS (transformation projects)
• In local currency, revenue in Poland grew by ~38%, from additional volume from existing clients, while Germany had a reduction of ~5%

Majority of Professional Services revenue is recurring and supports a continuous presence with customers

Distribution of Projects vs long term AMS based revenue

• ~55 % of Professional Services revenue is recurring, or recurring like, and based on long term agreements and relationships
• ~90 % of Professional Services revenue is from customers that were customers 12 months prior

Revenue customer split

* Customers that were invoiced in the same quarter previous year

** New customers since the end of the same quarter previous year

Investments in new growth initiatives

Established operations in Australia, with further expansion in the APAC region planned

• Better support European HQed customers as 64% of deals with European origin included APAC coverage*
• APAC one of fastest growing markets for Multi Country Payroll
• Vendor consolidation opened opportunity to acquire seasoned team of industry experts to build Australian and Singapore foothold. Already working closely with SAP in the region.
• Building up Application Maintenance Service (AMS) centre in Poland to support smartshoring
• Gradual build-up during 2022, with 30+ FTEs planned
• Capacity at attractive cost to produce change orders for Managed Services customers
• Aftermarket support to growing base of SuccessFactors and Workday customers

*) Source: Everest Group 2018

Acquired vyble® - German provider of cloud-based payroll & HR management (SaaS) for the SME market

• Complete suite of Payroll and HR delivered as Software as a Service (SaaS)
• Targeting German SME market (companies with 1- 250 employees) valued at estimated EUR 2,6 billion
• 20 employees located in Hamburg and ARR of approx. EUR 1m
• Assets acquired by Zalaris ASA through a new subsidiary vyble GmbH for EUR 1.1m effective on Feb 1st, 2022
• Initial focus on Germany. Explore expanding market coverage to other European markets.
• Serve as basis for solutions covering white space in Zalaris solution portfolio.

Company in brief

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Payroll & HR Solutions that Enable Fully Digital Organizations

Local presence with one global IT platform

• Zalaris is a leading European provider of Payroll and Human Capital Management Solutions delivered through Software as a Service, Outsourcing, or Consulting delivery models
• Supporting fully digital processes for Payroll and Human Capital Management targeting 20-30% cost savings
• One common multi-country solution satisfying GDPR requirements combined with competent resources serving complex customers from with local competence and language

> 1,500,000	880	> 300,000	21
employees served monthly	Zalaris	employees served monthly	years of experience and
across all HR solutions	employees	through payroll services	continuous growth
2021 Revenue: NOK 775 million	Own service centers in 13 Countries with expertise in local laws and regulations	Together with partners 150+ Countries with expertise in local laws and regulations	Managed Services Professional Services

Zalaris offering is built around Peoplehub – covering the whole employee life cycle

Payroll and HR partner to mid- and large size organizations

MANAGED SERVICES (MS)

PROFESSIONAL SERVICES (PS)

*BPaaS – Business Process as a Service

Significant European player with Germany largest entity

Revenue per country Q1 2022 (%)

Diversified customer base across a wide range of industries

Financial Review

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Revenue increased by 12% for the quarter in local currency

Revenue NOK 210m (+8.8%)

Revenue growth +12.0% YoY in constant currency

• Revenue growth (as reported) for the quarter YoY: +8.8%
• From new entities (ba.se and vyble): +7.4%
• New contracts/volume changes: +1.4%
• MS +14.5% to NOK 146.5
• PS -3.7% to NOK 61.9 (negatively impacted by EUR/NOK)
• New BPO contracts awarded yet to be implemented has annual recurring revenue of ~NOK 71m (+9% vs total revenue for 2021), not including Stora Enso (signed in April)

*See Q1 financial report for definitions of APMs

New BPO contracts will result in significant revenue increase going forward

Revenue development over time based on signed MS contracts (NOKm)

Contracted ARR* evolution over time based on signed contracts (NOKm)

• Total annual revenue expected to increase by NOK 125m (+16%) by Q1 2023 vs. FY 2021, based on signed contracts (assuming no material churn)
• Any new contract signings after Q1 2022, with a revenue effect by Q1 2023, will come in addition (including Stora Enso)
• Revenue from new contracts signed will materialise gradually through to Q1 2023
• Assumes MS change order levels at historical ~10% and PS revenue at actual 2021

*The ARR for the quarter is an estimate calculated by annualising the actual recurring revenue (according to contract revenue) for the quarter, for customers at the end of the quarter. Please refer to the APMs section of the interim financial report for further details.

Revenue deferred as part of transformation projects for new BPO contracts continues to show a high activity level

Deferred revenue and employee hours capitalised, LTM (NOKm)

• Significant potential revenue generating capacity utilised on implementing new BPO contracts, which will generate recurring revenue from go-live date
• Amount of revenue deferred increased by 115% to NOK 18.5m for the quarter YoY
• Value of employee hours capitalised increased by 164% to NOK 21.1m for the quarter YoY
• Deferred revenue and costs will be recognised over the contract period, from the go-live date

EBIT for Q1 impacted by vyble and investments in 2022 revenue

Adj. EBIT (NOKm) and margin (%)

MS - EBIT (NOKm) and margin (%) PS - EBIT (NOKm) and margin (%)

• Adj. EBIT NOK 14.9m (NOK 13.8m) +8.0%
• Adj. EBIT margin 7.1% (7.2%)
• Adj. EBIT margin impacted by build-up of delivery capacity for new contracts +42 FTEs (65% near/offshore) since Q4'21 to 837 FTEs ex. Vyble
• New contracts that go live in 2022 and 2023 will support further increase in EBIT margins
• MS EBIT: In line with last year NOK 1.0m in additional costs relating to establishing Application Maintenance Service (AMS) centre in Poland
• PS EBIT: positively impacted by increased revenue and customer margins in Poland

© zalaris 2022 Page 23 * Items excluded from adjusted EBIT Q1 2022: share-based payments (NOK 1.9m), amortization of excess values on acquisitions (NOK 3.0m), vyble EBIT ( NOK 3.8m), establishing costs Australia and AMS Poland (NOK 1.5) (see definition of adj. EBIT under APMs in Q1 2022 Interim Report)

Condensed Profit and Loss

	2022	2021	2021
(NOK 000) 1	Jan-Mar	Jan-Mar	Jan-Dec
Revenue	209 650	192 778	775 265
License costs	19 862	15 575	67 481
Personnel expenses	107 324	106 062	405 949
Other operating expenses	57 307	42 226	199 886
Amortization implementation projects costs customer	8 022	6 756	29 874
Depreciation , amortization and impairments	12 448	11 893	49 488
EBIT	4 686	10 265	22 585
Adjustment items	10 212	3 523	26 989
Adjusted EBIT*	14 899	13 788	49 574
Adjusted EBIT margin %	1% 7 ,	2% 7 ,	6 4% ,
Net financial income/(expense)	6 289	11 220	(7 571)
Profit/(loss) before tax	10 975	21 485	15 014
Income tax expense	(1 518)	(4 010)	(2 203)
Profit/(loss) for the period	9 457	17 475	12 812
Basic earnings share (NOK) per	0 44 ,	0 89 ,	0 60 ,

License costs: Increase from inclusion of ba.se (+NOK 2.1) and volume/revenue increases

• Personnel expenses: Increased number of FTEs YoY (+123 incl. ba.se) and higher option costs (+NOK 1.3m), mainly offset by more costs being deferred through customer projects (-NOK 13.1m) and positive currency movements (-NOK 2.7m),
• Other op. exp.: Increase of NOK 15.1m mainly from the use of external SAP consultants (+NOK 10.5), and inclusion of ba.se and vyble (+NOK 2.0m) and vyble

* Items excluded from adjusted EBIT Q1 2022: share-based payments (NOK 1.9m), amortization of excess values on acquisitions (NOK 3.0m), vyble EBIT ( NOK 3.8m), establishing costs Australia and AMS Poland (NOK 1.5) (see definition of adj. EBIT under APMs in Q1 2022 Interim Report)

Continued strong cash position

Development in cash balance (NOKm)

• Cash balance at 31 March of NOK 135m
• NOK 17.7m for share buy-back program completed (1.6% of total issued share
• NOK 10.1m investment on acquisition of vyvle
• Net interest-bearing debt of NOK 212.9m vs. NOK 183.0m at the end of previous quarter.
• The board has proposed a dividend for 2021 of up to NOK 1.00 per share in total, with NOK 0.35 to be paid immediately following shareholder approval, and up to NOK 0.65 planned to be paid before the end of the year pursuant to a proposed board authorisation

Markets and Outlook

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57% of European senior stakeholders from global enterprises expect the use of HR Outsourcing to grow

Multi-Country payroll market is growing at 10%+

Market Segment	2018 Market Size (\$m)	2018-2023 CAAGR (%)	2023 Market Size (\$m)
Multi-country scope:	3,696	10.7	5,932
Global (>2 regions)	656	10.1	925
Multi-region $($ > 1 region)	1,807	8.9	2,745
Multi-country (>1 country within a region)	1,233	13.1	2,262
Single country	16,254	2.5	18,755
Total	19,950	$^{\sim}4.4\%$	24,687

Source: Nelson-Hall, "Next Generation Payroll Services"

Leaving Q1 Zalaris is well positioned to deliver on expectations

Zalaris brand increasingly known in growing market

• Communicated growth of 11,5% within sight and annualized revenue of NOK 900+ million by end of year and expected to continue into 2023
• EBIT on track to 10% as revenue from projects under implementation are recognized and improvements from Zalaris 4.0 implemented
• Well capitalized to continue M&A, increase geographic coverage and add own IP to cover white space in our own solution footprint
• Long term contracts with recurring revenue streams from diversified customer base

Q&A

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We simplify HR and payroll administration, and empower you with useful information so that you can invest more in people.

Thank you!

Zalaris ASA | +47 4000 3300 | www.zalaris.com

Simplify work life. Achieve more.