Crayon : Q2 2023

Q2 2023 Financial Report

Contents

Highlights	3
Business review	4
Financial review	5
Financial statements and notes	7

2

Highlights

• Strong growth momentum continues, gross profit increased 23%, to NOK 1,533m mainly driven by Nordics and Europe delivering 16% and 50% respectively.
• Investments and focused strategy in US driving improved performance, gross profit growing 31%.
• Software & Cloud Economics gross profit increased 28%, reflecting high demand from customer to optimize their IT estate.
• Adj. EBITDA totaled NOK 351m corresponding to a margin of 23%, mainly impacted by temporary decline in Consulting margin due to continued investments to support growth and lead time in price increases to offset inflation.

Key figures

			Year to date	Year to date	Full year
	Q2 2023	Q2 2022	Q2 2023	Q2 2022	2022
		Restated		Restated
(NOK millions)	Unaudited	Unaudited	Unaudited	Unaudited	Audited
Revenue	1,715	1,416	3,132	2,487	5,200
Gross profit	1,533	1,245	2,790	2,205	4,496
EBITDA	296	343	480	459	751
Adjusted EBITDA	351	345	536	468	839
Operating profit/EBIT	217	269	319	316	417
Net income	68	24	-23	80	23
Cash flow from operations	158	449	227	121	102
Adjusted EBITDA margin (%)	22.9%	27.7%	19.2%	21.2%	18.7%
Earnings per share (NOK)	0.69	0.06	-0.33	0.71	0.29
			June 30, 2023	June 30, 2022	Dec 31, 2022
Net interest-bearing debt			1,840	1,253	1,805
Liquidity reserve			2,165	1,627	1,487
Leverage ratio (multiple)			2.0	1.4	2.2
Net working capital			-132	-280	-121
Full time equivalents (FTE)			3,878	3,219	3,447

Figures for Q2 and June 30, 2022, are restated and reported according to revised accounting policy regarding agent versus principal assessment for software resellers. See note 3 for further information. See last section for details on Alternative Performance Measures.

3

Revenue

NOK million

Gross Profit

NOK million

Adjusted EBITDA

NOK million

Business review

(Figures in parentheses refer to the same period in the previous year)

In the second quarter of 2023 demand remained strong and gross profit grew with 23% driven mainly by Nordics and Europe growing 16% and 50% respectively. In addition, US contributed positively, delivering 31% growth in Gross Profit.

Adj. EBITDA increased with NOK 6m, corresponding to a margin of 23%, down from 28% in the same quarter previous year. The decline was mainly due to higher overall inflation and lower profitability in Consulting. Gross profit from international markets now represents 57% of the group, and 40% of Adj. EBITDA for the last twelve months.

Market Clusters

Demand in the Nordics remains high, and the region continues to deliver strong growth across business areas. Software & Cloud Direct grew 9% while Channel also contributed to the solid performance growing 23%. The consulting segment in the Nordics delivered a very strong quarter growing 20% driven mainly by Norway and Iceland. Adj. EBITDA margin in the Nordics ended at 29%, a decline compared to the same quarter previous year. The decline is mainly due to weaker profitability in Consulting as there is a time lag reflecting cost increases on to pricing with customers.

Europe continued its exceptional start of the year growing Gross Profit with 50% in the second quarter and 51% for the first half year of 2023. Demand for software and cloud licensing remains high with Direct and Channel growing 50% and 87% respectively. The service business continues to expand and gain market share, with Software & Cloud Economic and Consulting growing 30% and 40% respectively. The performance in the region clearly demonstrates the company's strategic efforts to expand services capabilities to fuel growth in cloud and licensing. Adj. EBITDA increased with NOK 22m to NOK 86m, reflecting a margin of 25%, somewhat lower than the comparable quarter in 2022, mainly due to continued investments in resources to fuel growth.

APAC & MEA Gross profit in the quarter was NOK 322m, an increase of 5%. Software and Cloud Direct grew 22% while Channel declined 18% compared to Q2 2022. The decline in the Channel business is mainly due to weaker performance and market sentiment in southeast Asia and India. Channel business in

Australia, which represents approximately half of Channel Gross Profit, grew in line with historical performance. Services delivered a solid quarter with Software & Cloud Economics and Consulting growing 20% and 38% respectively. Adj. EBITDA ended at NOK 43m, a reduction of NOK 68m compared to the same quarter previous year, corresponding to a margin of 13% (37%). The reduction is mainly driven by performance in Channel.

In the US Gross Profit increased 31% to NOK 171m driven by solid growth across all business segments. Software and Cloud grew 26% combined while Software & Cloud Economics and Consulting grew 31% and 65% respectively. Adj. EBITDA ended at NOK 10m a margin of 6%. The financial result in the US for the first half of 2023 reflects the efforts in stabilizing the organization, ramping up sale capacity and strengthening sales leadership as well as a clearer and more focused go to market strategy.

Business Areas

All business areas developed positively in the quarter, with Software & Cloud and Services Gross Profit growing 23% and 28% respectively.

Gross profit in Software & Cloud Direct grew 30% to NOK 560m (NOK 430m), while Channel grew 10% to NOK 253m. Overall performance in the Channel was strong, but the total result was negatively impacted by performance in APAC & MEA. Profitability remains strong for the Software & Cloud division with an Adj.

EBITDA before admin & shared services of NOK 427m (NOK 404m), corresponding to a margin of 52% (61%).

Gross profit in the Services division grew by 29% to NOK 598m. Adj. EBITDA before admin & shared services came in at NOK 24m with a positive margin of 4%, which is a reduction from 15% in Q2 2022. The reduction in margins is driven by weaker performance both in Nordics and APAC & MEA, as well as continued investments in new service capabilities and ramp-up time of new resources in particular in Europe and US.

Software & Cloud Gross Profit	Services Gross Profit	Gross Profit by Market Cluster	Adj. EBITDA by Market Cluster
NOK million	NOK million	NOK million	NOK million

4

Financial review

(Figures in parentheses refer to the same period in the previous year)

In 2022 Crayon changed its interpretation regarding principal versus agent assessment under IFRS 15 for Software Resellers. Comparable numbers for Q2, 2022 have been restated according to this change, and all comments are based on restated numbers. See Note 3 for more details on the change in accounting policy.

Revenue and gross profit

Revenue in Q2 2023 increased 21% YoY to NOK 1,715m. Gross profit was NOK 1,533m, up from NOK 1,245m in Q2 2022. The constant currency gross profit growth was 14% and distributed across all market clusters except for APAC & MEA. Europe contribution most with a constant currency growth of 30%.

Adjusted EBITDA

Adjusted EBITDA was NOK 351m, about the same level as last year. Year to date adjusted EBITDA grew 15% to NOK 536m. The increase derives from an increase in gross profit of 27%. Payroll and other operating expenses increased with 30%.

Adjustments for the quarter include share-based compensations of NOK 25m and other income and expenses of NOK 30m. Other income and expenses include increase in net earn-out provisions of NOK 5m and other M&A expense, largely related to estimated expenses entering markets in the Middle East currently controlled by partners.

Net income

Depreciation, amortization and impairment increased 7% YoY to NOK 79m.

Interest expenses increased YoY by NOK 24m in Q2 to NOK 68m due to increase in both rates and net interest-bearing debt including new leases.

Net other financial items contributed with an expense for the quarter of NOK 57m compared to an expense NOK 187m the same quarter last year. The expense is largely due to currency effects of NOK weakening significantly towards significant group currencies such as EUR, USD, DKK and SEK. Having a significant number of transactions and settlements in foreign currencies, several companies in the group and in particular Norway, are sensitive to currency changes on monetary assets such as accounts receivables, accounts payables, loans and cash, including group internal balances. Correspondingly we had other comprehensive income of NOK 122m related to positive effect of currency translation of subsidiaries to NOK, of which effect of translating cash in subsidiaries to NOK contributed with NOK 48m.

Net income amounted to NOK 68m compared to NOK 24m last year. Due to the positive currency translation difference of NOK 122m, total comprehensive income ended at NOK 189m.

Earnings per share allocated to owners amounted to NOK 0,69 for Q2 compared to NOK 0,06 last year.

5

Gross Profit by Market Cluster

NOK million

Adj. EBITDA by Market Cluster

NOK million

For illustration purposes. 2020 is based on historical numbers while 2021 and 2022 are in accordance with new accounting policy.