ABAX GROUP AS 2020 - Q2 Report FROM THE DESK OF THE CEO Q2 2020 - - PowerPoint PPT Presentation

ABAX GROUP AS 2020 - Q2 Report

FROM THE DESK OF THE CEO

▪ Q2 2020 will likely be an historic quarter in the world economy. The quarter has seen a massive shutdown across many geographies, and hit our part of the world with what looks like a GDP reduction of between 6-10% over 2019. In light of these events, we are happy to announce our strong financial performance, where we have executed well, managed cost, and maintained a growth momentum in an uncertain world. June alone gave us a 12% increase in new subscriptions sold, and we have continued to see positive trends into

• Q3. Our engineering team has been workin uninterrupted with the release of our next

generation Telematics IOT platform, which is on schedule for a Q3 release. ▪ ▪ We have also, as previously presented, been working hard at our acquisition target list, and through Q2 we initated a final negotiation to sign our first acquisition in 2020 in early

• August. The financials of this transaction will be part of our Q3 reported results.

▪ ▪ Overall, our performance, the market improvements, and the growth initatives we have are showing positive results, and we expect a continued strong H2 performance.

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▪ Q2 2020 will likely be an historic quarter in the world economy. The quarter has seen a massive shutdown across many geographies, and hit our part of the world with what looks like a GDP reduction of between 6-10% over 2019. In light of these events, we are happy to announce our strong financial performance, where we have executed well, managed cost, and maintained a growth momentum in an uncertain world. June alone gave us a 22% increase in new subscriptions sold YoY, and we have continued to see positive trends into Q3. Our engineering team has been working uninterrupted with the release of our next generation Telematics IOT platform, which is on schedule for a Q3 release. ▪ We have also, as previously presented, been working hard at our acquisition target list, and through Q2 we initated a final negotiation to sign our first acquisition in 2020 in early August. The financials of this transaction will be part of our Q3 reported results. ▪ Overall, our performance, the market improvements, and the growth initatives we have are showing positive results, and we expect a continued strong H2 performance.

ABAX + WeForest launched

Some of many organisational achievements in Q2 2020

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Successful certification of ISO Standards Won Fleet Derby 2020 in Poland with ABAX Triplog ▪ ISO 9001 – General Quality Management ▪ ISO 27001 – Information Security ▪ ISO 14001 – Environmental ▪ In the Fleet Derby 2020 fleet plebiscite, specialists and managers from the fleet industry recognized ABAX Triplog as the best product, fleet service in the telematics category. ▪ ABAX Triplog received the award for the best product, fleet service in the telematics category ▪ In this year’s poll, a total of 170,000 votes were cast

Financial Results Q2 2020

Financial Highlights

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▪ Net sales increased by 1% from Q1 despite the impact of Covid 19 ▪ Adj. EBITDA of 71.2 MNOK. Holiday pay increased EBITDA in Q2 with 17 MNOK. Normalized EBITDA would be 54.2 MNOK, 1 MNOK above Q1 ▪ Cash Flow from operations adjusted at 26.9 MNOK slightly below last quarter ▪ Gross Margin at 92%, in line with Q1 ▪ Adjusted EBITDA margin of 49%. Normalized for holiday pay in Q2, EBITDA margin would be 37%, in line with last quarter ▪ New sales 22% higher in June 2020 compared to same month last year, despite the effect of COVID-19. ▪ Strong performance in the Netherlands as a result of the successful strategic agreement with Hitachi ▪ Number of subscriptions in our portfolio increased by nearly 15k (+6%) from last year

Net Sales

NOK millions

145.7

• Adj. EBITDA

Margin

Percentage

49%

• Adj. Operating

Cash Flow

NOK millions

26.9

• Adj. EBITDA

NOK millions

71.2

Gross Margin adj

Percentage

92%

Income Statement

Pro-forma financials under NGAAP and SaaS revenue recognition Commentary

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1) 2019 Prof-Forma Financial statement post finalised audit under NGAAP and SaaS revenue recognition

▪ Sales increased by 1 MNOK from 2020-Q1 towards 2020-Q2 despite COVID 19 impacting new sales ▪ Payroll cost in Q2 include seasonality effects from holiday pay in June resulting in lower payroll costs and hence increased EBITDA compared to the other quarters of the year ▪ Adj. PF EBITDA Q2 2020 vs 2019: +10% ▪ E/O items consists of legal costs treated as exceptionals, as they do not relate to the general operation of ABAX Group AS on a day to day basis ▪ See page 10-11 for further details around E/O items ▪ Organisational transition expenses of 28 MNOK reclassified to a reduction of equity in audit 2019 ▪ Tax calculations finalised in audit 2019 ▪ In 2020-Q1 financial net was positive due to large fluctuations in FX

NOKm 2019 IP Delta 2019A1 2020 – Q1 2020 – Q2 Sales 558

• 558

145 146 COGS (31)

• (31)

(11) (11) Gross profit 528

• 528

134 134 Personnel cost sales (89) 2 (92) (27) (20) Other sales fixed cost (21)

• (21)

(6) (4) Personnel cost marketing (15)

• (15)

(2) (1) Other marketing fixed cost (12)

• (12)

(3) (2) Other administrative personnel cost (107)

• (107)

(25) (16) Other administrative fixed cost (80) (2) (78) (19) (20) Total operating expenses (323)

• (323)

(81) (63) Adjusted pro-forma EBITDA 204

• 204

53 71 E/O items (19) (11) (30) (8) (7) Depreciation (4)

• (4)

(1) (1) Organisation transition expenses (28) 28

• EBITA

154 17 171 45 64 Amortisation (249)

• (249)

(55) (59) EBIT (96) 17 (78) (11) 5 Financial net (40)

• (40)

21 (41) Income before tax (135) 17 (118) 11 (36) Tax

• 31

31

• Net Income

(135) (49) (86) 11 (36)

Balance Sheet

Pro-forma financials under NGAAP and SaaS revenue recognition Commentary

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1) 2019 Prof-Forma Financial statement post finalised audit under NGAAP and SaaS revenue recognition

▪ The 2020-Q2 balance sheet is mainly affected by the Nordic bond transactions which increased cash from 114 MNOK to 476 MNOK and increased long term liabilities from 649 MNOK to 1017 MNOK. ▪ Equity Ratio of 37% 2Q 2020 compared to 41% 1Q 2020. ▪ Leverage ratio of Q2-LTM: 2.4x − Debt: NOK 1 000m (Interest bearing debt) − Cash: NOK 476m − 2020-Q2 LTM EBITDA: NOK 223m ▪ In conjunction of the audit process, ABAX recategorize “accrued not invoiced” and “invoiced not accrued” amounts. As both items are built up during the year, both items are then reduced and hence explains the difference between the IP and actual

• financials. The recategorization is only

conducted once a year in conjunction with the audit process ▪ The change in “Deferred tax liabilities” is derived to the tax calculation, finalised in the audit 2019

NOKm 2019 IP Delta 2019A1 2020 – Q1 2020 – Q2 Intangible assets 1 918

• 1 918

1 906 1 870 Tangible assets 134

• 134

131 119 Financial assets 1 1 2 1 2 Total fixed assets 2 053 1 2 054 2 039 1 990 Inventory 9

• 9

8 9 Accounts receivables 61 (1) 60 65 56 Other receivables 90 14 104 83 88 Prepaid expenses and accrued income 217 (115) 102 75 61 Cash 47

• 47

114 476 Total current assets 423 (101) 322 345 690 Total assets 2 476 (101) 2 375 2 384 2 680 Total equity 978 9 987 987 981 Deferred tax liabilities 317 (32) 284 287 286 Long term liabilities 584 8 591 649 1 017 Total non-current liabilities 900 (24) 876 936 1 303 Advance payments

• Accounts payable

39

• 39

27 37 Tax payable (5) 6 1 (2) (4) Other current liabilities 379 (91) 288 283 267 Deferred income and accrued expenses 184

• 184

154 96 Total current liabilities 597 (85) 597 461 397 Total equity and liabilities 2 476 (101) 2 375 2 384 2 680

Capex, NWC and operating cash flow

Pro-forma financials under NGAAP and SaaS revenue recognition Commentary

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1) 2019 Prof-Forma Financial statement post finalised audit under NGAAP and SaaS revenue recognition

▪ CAPEX increased by 3 MNOK from Q1 towards Q2, mainly due to activity in the tech section as they reach the releasing point of our next generation Telematics IOT platform ▪ The change in NWC in Q2 is affect by the holiday accruals in June for the Nordic countries (normalized for holiday accruals, change in NWC would be 0) ▪ Cash conversion is also affected by the holiday accruals, increasing EBITDA and decreasing NWC in Q2. Normalised cash conversion would then be 51% in Q2, compared to 54% in Q1 ▪ The change in Net Working Capital between 2019 IP and actual is derived to the recategorization of “accrued not invoiced” and “invoiced not accrued” amount, described in the previous page

NOKm 2019 IP Delta 2019A1 2020 – Q1 2020 – Q2 Capex 3

• 3

1 2 Capitalised R&D 61

• 61

16 19 Capitalised device cost 42

• 42

7 6 Capex and capitalised R&D 107

• 107

24 27 As % of sales Capex 1% 1% 1% 1% 1% Capitalised device cost 11% 11% 11% 11% 13% Capitalised sales commission 8% 9% 8% 5% 4% Capex and capitalised R&D 19% 21% 19% 17% 18% NOKm 2019 IP Delta 2019A 2020 – Q1 2020 – Q2 Delta Net Working Capital 45 (25) 20 (0) (18) Delta Net Working Capital % of sales 8% n.a. 4% (0%) (12%) NOKm 2019 IP Delta 2019A 2020 – Q1 2020 – Q2 Adjusted EBITDA under new rev. rec. 204

• 204

53 71 Capex (3)

• (3)

(1) (2) Capitalised R&D (61)

• (61)

(16) (19) Capitilised device cost (42)

• (42)

(7) (6) Deferred sales commission (6)

• (6)
• Change in Net Working Capital

45 (25) 20 (0) (18) Adjusted Operating Cash Flow 136 (25) 111 29 27 E/O items (19) (11) (30) (8) (7) Organisation transition expenses (28) 28

• Reported Operating Cash Flow

89 (8) 81 21 20 Adjusted cash conversion (as % of adjusted EBITDA) 66% 41% 54% 54% 38% Reported cash conversion (as % of reported EBITDA) 56% 19% 47% 46% 31%

Current trading update Q2 2020

Subscription base bridge Revenue bridge

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Adjusted EBITDA bridge

• Adj. Operating Cash Flow bridge

252 255 3 Q1-20 Delta Q2-20 145 146 1 Q1-20 Delta Q2-20 53 71 19 Q1-20 Delta Q2-20 71 27 (18) (27)

• Adj. EBITDA

Q2-20 Delta NWC Capex

• Adj. Operating Cash Flow

Continued growth in the subscription base along with a strong focus on cost control and the value proposition to ensure that the COVID-19 impact on the global economy does not significantly impede ABAX and its future prospects

Subscriptions (000s) NOKm NOKm NOKm 1% 34% 1% 38% Adjusted cash conversion Growth %

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Appendix

Complimentary information to ABAX Group AS 2019 Financial Statements (1/2)

Revenue bridge from Investor Presentation to Financial Statements Commentary

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1) Revenues in ABAX Group AS IFRS, Group Financial Statements 2019

Recognition of up-front revenue over contract term – See adjustment no 2.1 page 64 Investor Presentation 558 539 530 19 9 Revenues per IP

• Rev. Rec. Adj.

Revenues NGAAP 2019 FS per IP Revenue adj. from 2019 Audit Revenues 2019 FS NOKm Revenues NGAAP Financial Statement per Investor Presentation – reported NGAAP EBITDA pro-forma under new revenue recognition Revenues per Investor Presentation – See page 64 Investor Presentation Exceptional adjustment – Related to audit of historical contracts for which the majority is related to previous years but with some impact on fiscal year 2019. Under IFRS, revenue has to be adjusted but can market as exceptional Revenues Financial Statement – See ABAX Group AS Financial Statement 2019 (Audit)1

Complimentary information to ABAX Group AS 2019 Financial Statements (2/2)

EBITDA bridge from Investor Presentation to Financial Statements Commentary

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1) Revenues in ABAX Group AS IFRS, Group Financial Statements 2019

Adjustment related to recognition of up-front revenue over contract term – See adjustment no 1, 3 and 6 page 67 Investor Presentation 186 130 119 119 119 145 56 9 2 26 Reported EBITDA per IP

• Rev. Rec. Adj.

EBITDA FS per IP Revenue adj. from 2019 Audit COGS adj. from 2019 Audit EBITDA NGAAP 2019 FS NGAAP to IFRS adj. EBITDA IFRS 2019 FS NOKm EBITDA Financial Statements per Investor Presentation– See page 67 Investor Presentation Reported EBITDA per Investor Presentation – See page 67 Investor Presentation Exceptional adjustment – See exceptional adjustment comment on the previous page EBITDA Financial Statement IFRS – See ABAX Group AS Financial Statement 2019 (Audit)1 Additional adjustment related to closure of operations in China – See Adjustment no 4 page 65 Investor Presentation Reported EBITDA Financial Statement NGAAP Adjustment going from NGAAP to IFRS – Adjustment mainly related to leasing