INTERIM REPORT FIRST QUARTER 2018 CEO ARNE MJØS CFO BENT HAMMER OSLO, 14 MAY 2018 1
HIGHLIGHTS OF THE FIRST QUARTER Revenues • Revenue NOK million NOK 131 (119) million • Growth of 11% y-o-y • • Gross Profit • NOK 110 (103) million Growth of 8% y-o-y • • EBITDA EBITDA of NOK 15.2 (16.1) million, 11.6% (13.6%) margin • • EBIT EBIT EBIT of NOK 10.0 (11.3) million, 7.6% (9.5%) margin • NOK million • Cash flow NOK -8.2 (-0.8) million cash flow from operations • • Capacity Number of employees up by 70 last 12 months • • Dividends Proposed ordinary dividend of NOK 0.25 per share • 2
FINANCIAL REVIEW 3
KEY FIGURES High growth in own service revenue, especially in nearshore deliveries and outside Norway Revenue and EBIT reduced by more than MNOK 3 from Easter holidays Cash conversion lowered by 3 bank holidays end of month 4
STATEMENT OF INCOME Strong growth in nearshore deliveries and markets outside of Norway Cost of sales higher due to more 3 rd party subcontractors Double office rental costs in Kiev due to relocation 5
Operating revenue Employees NOK million End of period EBITDA EBIT Margin NOK million NOK million QUARTERLY Margin DEVELOPMENT 6
REVENUE Revenue split (quarterly figures) MNOK • Revenue increased by 11% y-o-y • Service revenues from own consultants increased by 16% to NOK 85 million • Subscription revenue increased by 2% to NOK 33 million • 3 rd party service revenue increased by 33% to NOK 8 million Revenue percentage split (rolling 12 months) • Other revenue, incl. HW/SW sales, decreased by 32% to NOK 5 million 7
STATEMENT OF CASH FLOW 12 month rolling cash flow from operations (MNOK) Cash flow from operations NOK -8.2 (-0.8) million in Q1, negatively impacted by 3 bank holidays end of March 12 month rolling cash flow from operations was NOK 42 million 8
• The Board has recommended an ordinary dividend for 2017 of NOK 0.25 per share (68% of net profits) and an option to pay out an extraordinary dividend later in the year • Share price was NOK 8.18 on 31 March, up NOK 1.94 (31%) from same time in 2017 • Current holding of own shares is unchanged at 213 935 shares • Consistent high distribution of earnings DIVIDENDS AND OWN SHARES 9
• Group equity ratio of 25% (29%) per March 31. • Cash balance of MNOK 44 (65). • Receivables and WIP 18 MNOK higher (8 MNOK from IFRS 15 effects). • Customer receivables high due to bank holidays period end. Assets Equity and Liabilities STATEMENT OF Non-current assets Current FINANCIAL liabilities Receivables and WIP POSITION Non-current liabilities Equity Cash 10
IMPACT OF IFRS 15 IMPLEMENTATION EXPECTED TO BE LOW ON REVENUE AND EARNINGS IFRS 15 implementation effects Q1 2018: Q1 2018 effects: Negative impact of MNOK 0.5 on sales revenue • (deferred income recognition) • Positive EBIT impact of MNOK 0.4 due to capitalisation of costs Book equity on Jan 1 reduced by MNOK 3.0 • Change in book equity during the quarter: Affected areas for timing of revenue recognition: Customised development based where Itera retains • the IP will change from a point in time (at delivery) to over time (over the licence contract period) Transition projects will be recognised when the • customer can use and benefit from the services rendered 11
BUSINESS REVIEW 12
ITERA TOWARDS 2020 #1 in creating digital business WE FOCUS ON OUR WE WORK IN WE INVOLVE WE TAKE LIFE-CYCLE MULTIDISCIPLINARY SEAMLESS CUSTOMERS’ RESPONSIBILITY CUSTOMER TEAMS NEARSHORING through customer combining embracing cloud and for greater scalability journeys and lean communication & data protection issues and cost-efficiency startup technology skills
LARGE TRANSFORMATION OF DIGITAL CUSTOMER CHANNELS AT KLP • Shortly after the closing of the first quarter, KLP announced their choice of Itera as their partner for digitalisation of KLP’s customer channels. • Responsibility for the design and development of the future digital customer experiences to 900,000 members • 403 municipalities • 16 county municipalities • 24 health companies • • 2500 companies Sverre Thornes, Chief Executive KLP, Marianne Sevaldsen, EVP KLP and Rune Hørnes, CIO KLP Photo: KLP Event after the reporting period 14
Prototype Disruptive Design Technology Customer centric Customer Time to Through human-centered, cross-functional FAST Journeys market teams and co-creative processes, we identify new opportunities, digitize processes and create great experiences that engage people Continuous Ideate innovation Nordic presence Specialists in creating digital business Cross-border delivery Work are done where it HYBRID make sense, executed by cross border delivery management FAST AND Hybrid capabilities High quality services, efficiency and scalability HYBRID Continuous delivery Using digital platforms, DevOps and hybrid cloud solutions, we provide capabilities along the whole lifecyle for digital solutions including GDPR and data protection issues
DIGITAL BUSINESS & EXPERIENCE WE CREATE DIGITAL BUSINESS THAT REALLY VÅRT BIDBRAG ENGAGES PEOPLE SAMMEN MED OSS SKAPER DERE DIGITAL FORRETNING SOM ENGASJERER FOLK
CONTENT DESIGN BUSINESS DESIGN ► We specialize in designing AND BRANDING digital strategies, new ► We inspire interest and business models and create engaging content that realizing business meets the company's brand opportunities. and their customers’ demands. DIGITAL BUSINESS & EXPERIENCE OVER 50 SPECIALISTS DESIGN (IxD/UX) SERVICE DESIGN ► We design digital and future- ► We create innovative services CREATE MAGIC oriented user experiences that through customer-centric functionally, emotionally and methods and insights that meet TOGETHER visually touch the hearts of the the full spectrum of customer users. demands. Design Thinking Lean Startup Business Model Canvas
PUSHING TOWARDS INNOVATIVE PROCESSES IS KEY Build Prototype Explore LEAN SERVICE SPRINT STARTUP Idea Measure DESIGN Critique Test Learn Human-centered & time to market • Experiment & learn • Autonomy & alignment • Value to the customer & the • customer’s customer
CROSS-FUNCTIONAL TEAMS DRIVE INNOVATION AND TIME TO MARKET Olena the Organiser Christian the Customer’s Sarah the Strategist Ellen the Engager Tony the Tech Magician Birger the Bug finder friend Project Manager Business Content Developer Test Designer One team - Same goal - Across borders
• Engaged by Europe’s number 1 to shape the future of parking • The new automated parking solution is using machine learning (Automatic Number Plate Recognition) and cameras to start and stop the parking. • Better customer experience and more efficient operations • No more fines! • Strong results and fast scaling of the solution
DELIVERING THE NEW EXPERIENCE Outstanding Open & scalable Data driven DevOps: Continuous experiences cloud platform intelligence innovation Initiatives Digital Business Cloud platforms DevOps & & Experience Azure, Amazon, Google Hybrid Cloud 50+ consultants 150+ consultants 100+ consultants
Order intake from existing and new customers ORDER INTAKE • Book-to-bill ratio* ) of 1.3 in Q1 2018 *) The book-to-bill ratio is the ratio of orders received to the amount of revenue for a specific period for Itera units 22
CUSTOMER DEVELOPMENT Revenue customers split • New business MNOK • Existing clients accounted for 95.0% of revenues in Q1 2018 • New customers won over the past year generated revenues of NOK 6.5 million in Q1 2018 • Increasing visibility Share of revenue • Share of revenue from top 30 customers up by 3 points y-o-y to 80% • Benefits of higher revenue per customer: • Increased revenue visibility • Improved operational efficiency • Lower sales and overhead costs * Existing customers defined as customers that were invoiced in the corresponding quarter last year 23 ** New customers (Rolling Twelve Months) defined as customers won since end of corresponding quarter last year
Nearshore ratio % of all staff located nearshore NEARSHORE RATIO • Nearshore ratio of 44 % in Q1. • Target >50% • Mixed teams of onshore and nearshore are increasing our price flexibility as well as providing access to a very large resource pool 24
NEW OFFICE FACILITIES IN KIEV • Construction and re- allocation into new professional office facilities in Kiev in Q1 • About 230 working seats in one floor, with option for another 130 seats. • Additional possibilities for growth in the same business centre. 25
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OUTLOOK 27
• Customer demand remains strong in all Nordic markets • Profitable growth and cash flow are key focus areas • Digitalisation creates a strong market demand in all sectors where Itera is operating • Larger projects and customers expected to continue to increase revenue visibility, efficiency and scalability OUTLOOK Itera does not provide guidance to the market on future prospects 28
* TOP 20 SHARE- HOLDERS *Arne Mjøs Invest AS holds a future contract expiring 13 June 2018 on 3 700 000 shares currently owned by DNB Nor Bank ASA. The total controlling interest of Arne Mjøs Invest AS is thus 24 327 688 (29.6%). 30
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