BTS : Interim Report January 1 - September 30, 2020

BTS GROUP AB (PUBL)

BTS INTERIM REPORT JANUARY 1-SEPTEMBER 30, 2020

Third quarter clearly outperformed the second quarter

January 1 - September 30, 2020

• Net sales amounted to MSEK 1,042 (1,313). Adjusted for changes in foreign exchange rates, sales decreased 20 percent.
• Operating profit (EBITA) decreased 71 percent to MSEK 45 (156).
• The operating margin (EBITA margin) was 4.3 (11.9) percent.
• Profit after tax decreased 88 percent to MSEK 12 (96).
• Earnings per share decreased 88 percent to SEK 0.60 (4.98).

Third quarter 2020

• Net sales amounted to MSEK 347 (460). Adjusted for changes in foreign exchange rates, sales decreased 20 percent.
• Operating profit (EBITA) decreased 62 percent to MSEK 21 (54).
• The operating margin (EBITA margin) was 6.0 (11.8) percent.
• Profit after tax decreased 76 percent to MSEK 8 (32).
• Earnings per share decreased 76 percent to SEK 0.40 (1.67).

• By comprehensively investing in virtual and digital solutions, BTS has managed to compensate for two thirds of the 70 percent of total revenue which were lost as a result of the cancellation of physical deliveries during the second and third quarters.
• BTS has continued to invest in marketing and product development and has kept its personnel, with the aim of achieving growth and higher earnings moving forward. By making selective savings, total costs have been lowered by 22 percent in the second and third quarters compared to last year.
• Revenue increased 8 percent in the third quarter compared with the second quarter (revenue has fallen by an average of 12 percent between the quarters during the past three years). EBITA increased 72 percent from the second to the third quarter (to be compared with an average decrease of 30 percent).
• The Board proposes a dividend for the 2019 fiscal year of SEK 3.60 (3.60) per share, to be resolved at the Extraordinary General Meeting in December.

Q3

CEO COMMENTS

Third quarter - a step in the right direction and many opportunities on the horizon

Due to the global spread of COVID-19, all physical training deliveries during Q2 and Q3 were canceled or postponed.

With our rapid and total focus on virtual and digital solutions from February, we have managed to compens­ ate for almost two thirds of the 70 percent lost revenue. Our total revenue decreased 32 percent during the second quarter and 20 percent during the third quarter compared to last year, but the revenue of equivalent competitors (for which official data is available) has decreased approximately 40 percent.

The third quarter was a step in the right direction, and has clearly outperformed the second quarter. Typically, it is the other way around.

We have also achieved an important lead. The changes in the market will be lasting; even when the COVID-19 crisis is behind us, a significant share of demand will center on virtual and digital solutions.

Many of our customers have indicated that demand for physical deliveries will return when travel restrictions and the limitations on meeting others are lifted, and that they will demand a combination of physical, virtual and digital solutions. Here, BTS has a great opportunity to grow rapidly and profitably moving forward.

Our focus in 2020 - with a challenging market and major changes - has been to implement the ­measures that make us stronger in the long term, allowing us to continue to increase revenue and earnings for the years ahead.

We have chosen to keep our personnel - we have a well-oiled and high-performing organization which has delivered growth and increases in earnings for many years. We have continued to invest in marketing and product development. The major transition to virtual and digital solutions has required extensive investment and a great deal of extra work during the year. We will be reusing the design, methodology and capacity that we have built up, as well as the many solutions that we have created, for many years to come.

For 18 years on the stock market until 2019, we have achieved a growth of an average of 14 percent per year, and an average EBITA improvement of 18 percent. Our goal for 2020 is not to maximize profit, but to ­create the prerequisites for continual long-term profit increases for many years to come.

In order to maintain revenue from existing customers and to increase the inflow of new customers, we have reallocated our sales resources to focus on the industries and areas in which companies continue to invest. From

March 1 until November 6, BTS has won deals corre­ sponding to circa MUSD 100 in the form of new digital and virtual projects.

We have also implemented selective savings, that will not negatively impact our long-term ability to grow, and lowered expenses by a total of 22 percent ­during the ­second and third quarters. In total, and despite the very challenging market conditions, we have achieved a positive EBITA of MSEK 21 for the third quarter. I would like to take this opportunity to thank all our employees for their incredible commitment and hard work during this difficult period - you made this possible.

The market recovery that began in the third quarter continues during the fourth quarter up to the time of today. Physical deliveries are still not being carried out, but many customers who have previously been awaiting the development of the crisis are now undertaking virtual and digital projects, and our extensive and prompt investment allows us to offer attractive solutions. The number of confirmed COVID-19 cases has risen quickly in October and November, in the same way as in March and April, but in general customers are responding differently - they know how to tackle the situation and continue their operations and investments.

BTS's focus is to exit the 2020 pandemic and recession as a stronger company, and to achieve a level of profit higher than prior to the recession as well as ­sustainably growing. Our goal is to have a larger and more profitable operation than before the pandemic - based on an expanded customer base, deeper customer relations, a stronger organization and increased revenue from virtual and digital solutions combined with physical deliveries.

Stockholm, November 11, 2020

Henrik Ekelund

President and CEO of BTS Group AB (publ)

2 BTS INTERIM REPORT JANUARY 1-SEPTEMBER 30, 2020

OPERATIONS

Sales

BTS's net sales for the nine-month period amounted to MSEK 1,042 (1,313). Adjusted for changes in foreign exchange rates, total sales decreased 20 percent.

Growth varied between the units: BTS Europe -13 ­percent, BTS North America -19 percent, APG -22 percent and BTS Other markets -25 percent (growth measured in local currency).

Earnings

Operating profit (EBITA) decreased 71 percent for the nine-month period to MSEK 45 (156). The operating

margin­ (EBITA margin) was 4.3 (11.9) percent. Operating profit (EBIT) decreased 81 percent for

the nine-month period to MSEK 27 (142). The operating margin (EBIT margin) was 2.6 percent (10.8). Operating profit (EBIT) for the nine-month period was charged with MSEK 18.3 (14.3) for amortization of intangible assets attributable to acquisitions.

The Group's profit before tax decreased 88 percent to MSEK 17 (136).

The Group's profitability was negatively affected by a decrease in profit in all operating units.

Third quarter

BTS's third-quarter net sales amounted to MSEK 347 (460). Adjusted for changes in foreign exchange rates, sales decreased 20 percent.

Operating profit (EBITA) decreased 62 percent in the third quarter to MSEK 21 (54). The operating margin (EBITA margin) was 6.0 (11.8) percent.

Operating profit (EBIT) decreased 71 percent to MSEK

14 (49). The operating margin (EBIT margin) was 4.2 percent (10.7). Operating profit for the third quarter was charged with MSEK 6.3 (5.4) for amortization of intangible assets attributable to acquisitions.

Profit before tax for the third quarter decreased

76 percent to MSEK 11 (46).

The Group's profitability, except for in BTS Other ­markets, was negatively affected by a decrease in profit in all operating units.

REVENUE

BY QUARTER

MSEK
600
500
400
300
200
100
0
16 17 18 19 20	16 17 18 19 20	16 17 18 19 20	16 17 18 19
Q1	Q2	Q3	Q4

OPERATING PROFIT (EBITA)

BY QUARTER

100	MSEK
80
60
40
20
0	16 17 18 19 20	16 17 18 19 20	16 17 18 19 20	16 17 18 19
	Q1	Q2	Q3	Q4

NET SALES AND OPERATING PROFIT (EBITA)

ROLLING 12 MONTHS

2,000	MSEK					MSEK	250
1,600							200
1,200							150
800							100
400							50
0	Q3 Q4 Q1	Q2 Q3 Q4 Q1	Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1	Q2 Q3	0
	2016	2017	2018	2019	2020

Net sales		Operating profit (EBITA)

PROFIT BEFORE TAX AND OPERATING MARGIN

(EBITA) BY QUARTER

80	MSEK					%	40
70							35
60							30
50							25
40							20
30							15
20							10
10							5
0	Q3 Q4 Q1	Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1	Q2 Q3	0
	2016	2017	2018	2019	2020

Profit before tax, MSEK		EBITA margin, %

BTS INTERIM REPORT JANUARY 1-SEPTEMBER 30, 2020

3

Market development

The market has changed dramatically during the year. As a result of the spread of COVID-19 and the subsequent social restrictions, demand for physical deliveries, which typically makes up approximately 70 percent of BTS's ­revenue, has been non-existent. The resulting recession, with cost saving measures implemented by many com­ panies, has also had a negative impact on demand. In

certain­ industries and companies there is still a strong demand for our services.

The market situation has improved since the beginning of the third quarter and this situation has remained in place thus far in the fourth quarter.

NET SALES BY SOURCE OF REVENUE JANUARY 1-SEPTEMBER 30, 2020 (2019)

Other revenue

Licenses 2 (6)% 14 (7)%

Programs 48 (62)%

Development 36 (25)%

SEGMENT REPORTING

The effects of IFRS 16 are not included in the

BTS Operating units reporting, which is why the effects are recognized as Group adjustments.

Operating units

BTS North America consists of BTS's operations in the USA, excluding APG but including SwissVBS with its ­operations in Canada and Switzerland.

BTS Europe consists of operations in France, Germany, the Netherlands, the UK and Sweden.

BTS Other markets consists of operations in Argentina, Australia, Brazil, China, Costa Rica, India, Italy, Japan, Mexico, Singapore, South Africa, South Korea, Spain,

Taiwan, Thailand and the United­ Arab Emirates.

APG consists of operations in Advantage Performance Group in the USA.

NET SALES PER OPERATING UNIT

NET SALES PER OPERATING UNIT

JANUARY 1-SEPTEMBER 30, 2020 (2019)

APG 6 (6)%

BTS North America 49 (48)%

BTS Other market 23 (26)%

BTS Europe 22 (20)%

		Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Oct-Sep	Jan-Dec
	MSEK	2020	2019	2020	2019	2019/20	2019
BTS North America	156	224	514	633	758	877
BTS Europe	76	95	224	257	353	386
BTS Other markets	93	116	240	341	389	490
	APG	22	24	64	82	94	112
	Total	347	460	1,042	1,313	1,594	1,865
OPERATING PROFIT (EBITA) PER OPERATING UNIT
		Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Oct-Sep	Jan-Dec
	MSEK	2020	2019	2020	2019	2019/20	2019
BTS North America	7.0	29.3	37.1	86.3	69.4	118.6
BTS Europe	3.0	14.2	10.7	33.4	40.5	63.3
BTS Other markets	9.8	9.8	-3.2	33.3	20.7	57.2
	APG	-0.7	-0.3	-3.8	0.0	-2.3	1.5
	Total	19.2	53.0	40.8	153.1	128.3	240.5

4 BTS INTERIM REPORT JANUARY 1-SEPTEMBER 30, 2020