Lumi Gruppen : quarterly report Q3 23

Q3QUARTERLY REPORT 2023

We facilitate lifelong learning

Contents

1. This is Lumi Gruppen
2. Highlights Q3 23 - Lumi Gruppen
3. Key financial and operational figures

8 Interim report - Lumi Gruppen

17 Condensed interim financial statement and notes

1. Alternative performance measures
2. Company information

2	LUMI GRUPPEN quarterly report Q3 23

This is Lumi Gruppen

Lumi Gruppen is a leading education provider in Norway, offering high-quality educational services. The group consists of two main operating segments: Sonans and Oslo Nye Høyskole (ONH).

Sonans is Norway's market leader within high school private candidate exam preparation courses, primarily to help former high school students achieve better exam results and/or complete their high school diploma to enter

higher education. ONH is a private university college established in 2007, acquired by Lumi Gruppen in 2019. ONH has one campus located in central Oslo, in addition to a strong online offering.

Sonans - market leader within private candidate exams

#1

Oslo Nye Høyskole - National Student Survey 2022:

#1

in overall student satisfaction amongst multidisciplinary University Colleges, #5 of all University Colleges.

Oslo Nye Høyskole - National Student Survey 2022:

5/5

Bachelor programmes in International Studies and Political Science rated 5/5 on overall satisfaction.

Lumi Gruppen Students

- Campus vs. Online (2023)

38% campus

7 666

students

Sonans Students

- Campus vs. Online (2023)

49% campus

4 396

students

ONH Students

- Campus vs. Online (2023)

24% campus

3 270

students

62% online

51% online

76% online

3	LUMI GRUPPEN quarterly report Q3 23

Highlights for the quarter

Oslo Nye Høyskole

Strong growth and profitability for ONH due to increased student intake and stabile cost development.

New ONH programmes

+12

NOK mill.

EBIT 10.7

(20.1)

ONH to integrate NTech initiative, with 12 new programmes in pipeline.

New cost programmes

to counter effects of weak private+candidate market.

/-

Operating revenue

NOK mill.

103.7

(121.5)

ONH receives recognition for its quality system which was formally approved by

NOKUT.

Revenue decline for Sonans partly explained by stricter credit control measures and accounting effects, indicating underlying reduction in revenue of about 10 per cent in Q3-23.

New board elected at EGM 1 vNo ember.

4	LUMI GRUPPEN quarterly report Q3 23

Key financial and operational figures

		QUARTERS	YEAR TO DATE	CHANGE 22 - 23
NOK MILLION	Q323	Q322	2023	2022	Q3	YR
INCOME STATEMENT
Revenue	103.7	121.5	316.1	388.5	-14.6%	-18.6%
Payroll expenses	58.2	65.6	155.4	185.8	-11.4%	-16.4%
Payroll expenses in % of revenue	56.1%	54.0%	49.2%	47.8%	2.1 pp	1.3 pp
Total other operating expenses	21.1	22.6	85.6	95.3	-6.7%	-10.1%
Operating expenses in % of revenue	20.3%	18.6%	27.1%	24.5%	1.7 pp	2.6 pp
EBITDA	24.5	33.3	75.1	107.4	-26.4%	-30.1%
EBITDA margin	23.6%	27.4%	23.7%	27.6%	-3.8 pp	-3.9 pp
Depreciation and amortization	13.8	13.2	42.1	42.3	4.5%	-0.5%
Impairment	-	-	270.3	-
EBIT	10.7	20.1	-237.4	65.1	-46.7%	-464.6%
EBIT margin	10.3%	16.5%	-75.1%	16.8%	-6.2 pp	-91.8 pp
Non-recurring Items	0.5	10.8	277.6	24.9	-95.4%	1015.0%
Adjusted EBIT	11.2	30.9	40.3	90.0	-63.7%	-55.3%
Adjusted EBIT margin	10.8%	25.4%	12.7%	23.2%	-14.6 pp	-10.4 pp
Net financial items	9.0	9.0	25.6	21.7	0.5%	18.2%
Profit/(loss) before income tax	1.7	11.1	-263.0	43.5	-84.8%	-705.1%
Tax	0.4	2.9	1.6	9.2	-86.6%	-83.1%
Profit/(loss) for the year	1.3	8.2	-264.5	34.3	-84.1%	-872.0%
Basic/diluted Earnings per share	0.02	0.23	-5.39	0.95	-89.6%	-666.5%
FINANCIAL POSITION
Capex (fixed assets and development costs)	1.3	4.2	6.7	13.1	-67.8%	-48.6%
Net Cash Flow from Operations	76.5	51.2	78.8	93.2	49.5%	-15.5%
Total assets	1 168	1 265	1 168	1 265	-7.7%	-7.7%
Equity	474	545	474	545	-13.0%	-13.0%
Equity %	40.6%	43.0%	40.6%	43.0%	-2.5 pp	-2.5 pp
Cash position	127	67	127	67	88.0%	88.0%
Net Debt (NIBD)	173	363	173	363	-52.2%	-52.2%
OPERATIONAL KPIS
Number of Employees (FTEs)	227	247	227	247	-8.3%	-8.3%
Sick-leave	5.8%	4.9%	4.8%	4.8%	0.9 pp	0.0 pp
Number of Campuses Sonans	9	12	9	12	-25.0%	-25.0%
Number of Campuses ONH	1	1	1	1	0.0%	0.0%
Number of Students Sonans	4 396	6 216	4 396	6 216	-29.3%	-29.3%
- of which online	2 232	3 119	2 232	3 119	-28.4%	-28.4%
Number of Students ONH	3 270	2 868	3 270	2 868	14.0%	14.0%
- of which online	2 490	2 031	2 490	2 031	22.6%	22.6%

5	LUMI GRUPPEN quarterly report Q3 23

		QUARTERS	YEAR TO DATE	CHANGE 22 - 23
NOK MILLION	Q323	Q322	2023	2022	Q3	YR
LUMI GROUP KEY FIGURES
Operating Revenue	103.7	121.5	316.1	388.5	-14.6%	-18.6%
- Campus	46.4	57.7	147.5	217.1	-19.6%	-32.0%
- Online	57.3	63.7	168.5	171.2	-10.1%	-1.6%
Total operating revenue	103.7	121.5	316.1	388.5	-14.6%	-18.6%
Payroll Expenses	58.2	65.6	155.4	185.8	-11.4%	-16.4%
Payroll Expenses in % of operating revenue	56.1%	54.0%	49.2%	47.8%	2.1 pp	1.3 pp
Other Expenses	19.0	22.6	71.3	76.5	-15.7%	-6.8%
Other expenses in % of operating revenue	18.3%	18.6%	22.6%	19.7%	-0.2 pp	2.9 pp
Bad debt expenses	2.1	0.0	14.3	18.8	7151.3%	-23.9%
Bad debt expenses in % of operating revenue	2.0%	0.0%	4.5%	4.8%	2 pp	-0.3 pp
Total operating expenses	79.2	88.2	241.0	281.1	-10.2%	-14.2%
EBITDA	24.5	33.3	75.1	107.4	-26.4%	-30.1%
EBITDA margin	23.6%	27.4%	23.7%	27.6%	-3.8 pp	-3.9 pp
Depreciation and amortization	13.8	13.2	42.1	42.3	4.5%	-0.5%
Impairment	-	-	270.3	-
EBIT	10.7	20.1	-237.4	65.1	-46.7%	-464.6%
EBIT margin	10.3%	16.5%	-75.1%	16.8%	-6.2 pp	-91.8 pp
Non-recurring items	0.5	10.8	277.6	24.9	-95.4%	1015.0%
Adjusted EBIT	11.2	30.9	40.3	90.0	-63.7%	-55.3%
Adjusted EBIT margin	10.8%	25.4%	12.7%	23.2%	-14.6 pp	-10.4 pp
Number of FTEs	226.6	247.2	226.6	247.2	-8.3%	-8.3%
Sick-leave	5.8%	4.9%	4.8%	4.8%	0.9 pp	0.0 pp

Operating Revenue

NOKm

Lumi Gruppen

140		121.5
105	103.7
70
35
0	23	22
		Q3

Sonans
100
75		73.1
50	44.4
25
0	23	22
		Q3

ONH
80
60	59.3
		48.4
40
20
0	23	22
		Q3

6	LUMI GRUPPEN quarterly report Q3 23

We are an important part of the Norwegian educational system and provide opportunities for people who want to take higher education and participate in the workforce.

7	LUMI GRUPPEN quarterly report Q3 23

ONH continues progress, market for Sonans still weak

Executive Summary

The positive development for Oslo Nye Høyskole (ONH) continued in the third quarter, with strong profitability due to a combination of top-line growth and cost initiatives. ONH has now become our most significant operating segment.

The Group is also pleased to announce the approval of the quality system at ONH by NOKUT. ONH received recognition as well for its development of the quality system and how it is integrated in the organisation. The quality system is key for maintaining the accreditation of study programmes and will also contribute to an improved competitive position with a strong reputation and brand.

On the other hand, the market setback continued to affect our private candidate business in Sonans negatively in the third quarter. Lumi Gruppen has taken significant measures to adapt to the market situation for Sonans. The cost reduction programme in Sonans is well on track, with additional savings of NOK 10 million expected to be realised in the second half of 2023.

Further cost measures will be implemented, with an effect in the range of NOK 12-18 million. Most of this will have effect from the school year 2024/2025.

The expected post-Covid normalisation of our private candidate business in Sonans has not yet materialised. The labour market for young people in Norway has been strong, which has probably contributed to fewer applications for higher education and, hence, lower demand in the private candidate market in general. We see no indication that Sonans has lost material market share.

We are now adjusting the cost base of Sonans to the current market. However, a market recovery will rapidly translate into profit improvement.

Lumi Gruppen has decided to restructure the NTech vocational initiative and integrate it with ONH, with 12 new programmes in the pipeline.

On 16 October 2023, the Group announced a rights issue to raise gross proceeds of approximately NOK 53. The rights issue was not approved, and the Group is working on various alternatives to improving its financing. Further announcement on this matter will be made in due course.

Third quarter 2023 review 1

Total operating revenue was NOK 103.7 million compared to NOK 121.5 million last year and represents a decline of 14.6 per cent. The decline was driven by a continuing weak private candidate market, and the third quarter last year was boosted by a change in commercial terms for online. Oslo Nye Høyskole (ONH) continued its uninterrupted growth over the last four years with 22.5 per cent growth in the third quarter, driven by new and existing online study programmes and a higher share of recurring revenues for multi-year programmes.

Operating expenses decreased by NOK 9.0 million or 10.2 per cent in the third quarter compared to the same period last year. The largest contributor was personnel expenses, which decreased by 11.4 per cent from NOK 65.6 million to NOK 58.2 million. The decrease in operating expenses is a result of the cost programmes implemented for both Sonans and ONH and strict cost focus throughout the organisation.

Strict credit control has been implemented and has already yielded a positive effect on expenses and cash flow. However, bad debt expenses were still higher in the third quarter compared to last year. The reason for this is explained by the sale of the collection portfolio on a non- recourse basis last year which led to a positive gain and reduced expenses by NOK 2 million. The market for the sale and purchase of collection portfolios has been soft this year and no similar divestment and sale was made in the third quarter this year. Excluding this special item, the actual reduction in operating expenses was NOK 12.0 million for the third quarter.

Earnings before interest and tax (EBIT) in the third quarter were NOK 10.7 million compared to NOK 20.1 million last year. The EBIT margin ended at 10.3 per cent compared to 16.5 per cent last year.

The decrease in EBIT and lower margin in the quarter was a result of the decline in revenues. Reduced student volumes and lower revenue in the private candidate market have been offset by the cost programme implemented together with the growth in volumes and revenue for Oslo Nye Høyskole. The negative deviation of NOK 17.8 million in revenue was therefore reduced to only NOK 9.4 million in lower EBIT and NOK 7.4 million when excluding the aforementioned bad debt gain last year of NOK 2 million.

1. Figures in brackets = same quarter previous year, unless otherwise specified

8	LUMI GRUPPEN quarterly report Q3 23

The total liquidity reserve including the revolving credit facility was NOK 197 million in the third quarter (137) and net interest-bearingdebt excl. IFRS 16 was NOK 173 million (363).

Lumi Gruppen has agreed with its bank on updated and amended terms for its financing. Compared to the existing senior facility agreement, the following changes have been made:

• Repayment of NOK 50 million on existing NOK 300 million facility
• From 1 to 2 term loans (Term Loan A ("TLA") of NOK 50 million and Term Loan B ("TLB") NOK 200 million)
• Current revolving credit facility ("RCF") of NOK 70 million to remain in place
• Changes in margin ratchet with separate margins for TLA and TLB
• Margin range for the total facility (NOK 300m)

was 220 bps to 345 bps

• TLA New and RCF: 300 bps to 450bps
• TLB New: 350 bps to 500 bps
• Arrangement and change of control waiver fee of NOK 5.2 million
• Amendment fee of 0.15% of the total facilities

A covenant reset has also been agreed with the following covenant profile for the current school year and thereafter:

• Covenant reset (NIBD / EBITDA) for quarters Q3 2023 - Q2 2024: 3.5x, 4.5x, 3.6x and 5.1x
• Thereafter, flat at 3.0x in Q1 and Q3, and 4.0x in
  Q2 and Q4 to account for seasonal working capital fluctuations

Cost programmes for ONH and Sonans were successfully implemented last year. With the current full visibility on this year's intake, the Group has continued its work on cost measures to compensate for the expected decline in profitability for this school year. At the end of the third quarter, the estimated effect from new initiatives is in the range of NOK 12-18million. Most of this will have effect from the school year 2024/25 as it is related to more structural changes for the Group and changes related to the campus network.

The Group will, along with the cost optimisation, also put efforts into continuing to strengthen and expand its study programme offering and exploiting new market opportunities using the available funds for such initiatives. In addition, it will review pricing of the offerings to fully compensate for the expected inflation in the cost base.

9	LUMI GRUPPEN quarterly report Q3 23

Operating Segments

The Group's reporting structure comprises two operational segments: Sonans and Oslo Nye Høyskole (ONH).

SONANS

Operating revenue decreased by 39.2 per cent to NOK

1. million (73.1). The decline in revenue is largely explained by lower student volumes for both the online and the campus offering. In addition, the decline is explained by no revenue effect from changes in commercial terms for online. Starting from the third quarter last year, most online programmes were offered for six months compared to twelve months previously. This led to a different accrual of revenue than in previous years with approximately NOK 10 million in higher online revenues in both the third and the fourth quarter of last year. Adjusting for this, the decline in revenue was approximately 30 per cent, in line with the trading update announcement made on 4 October 2023.
   The Group previously announced a change in its revenue recognition for full-year contracts. In the case where students demonstrate low payment ability in the first semester, revenue from their contracts 2 will not be recognised in the second semester of the school year. The full-year contract revenue will however be recognised when payment is received. The effect of this change was a NOK

1. million in reduction of revenue for the third quarter and is expected to be NOK 3.6 million for the second half of 2023.
   The Group has strengthened its order-to-cash process by implementing credit checks and tighter follow-up of students that are late with payments. This has resulted in a stronger credit quality and hence a stronger cash flow. At the end of the third quarter, the cash flow from students in the third quarter was 90 per cent of the cash flow last year.
   On a cash basis, this indicates that the decline in revenue for Sonans is most likely around 10 per cent and not the 30 per cent which is the case when comparing with last year's revenue number excluding the online effect. As observed, higher revenue last year was offset by higher bad debt expenses in the following quarters. A stronger cash flow from students is also a good indicator for the expectation of lower bad debt expenses going forward.

Total operating expenses excluding depreciation and amortisation equalled NOK 37.4 million (47.6) in the third quarter. This represents a decrease of 21.4 per cent and

NOK 10.2 million compared to last year. The decrease in operating expenses is a result of the cost programme implemented. Personnel expenses constituted 66 per cent of the cost reduction, but underlying savings are higher as the sales and marketing department, previously employed by Lumi Services, was transferred to Sonans on 1 January 2023. As a result, other expenses (the service fee from the parent company) were reduced by NOK 3 million in the quarter and personnel expenses were increased by the same amount. Taking this into account, personnel expenses were reduced by NOK 9.7 million compared to last year. Last year's accounts have not been adjusted to reflect this change.

Bad debt expenses ended at NOK 1.5 million in the quarter compared to NOK 2.2 million last year. When excluding the additional online revenue of NOK 10 million, the bad debt expense percentage is approximately on the same level as last year. However, the bad debt expense this quarter also includes a provision for accounts receivables belonging to the previous school year 2022/2023. This was not the case in the third quarter last year as 100 per cent of the accounts receivables (also referred to as the collection portfolio) were sold. Compared to last year, any change in the expected credit loss for the portfolio of receivables from the previous school year will have an impact on the profit and loss for the current school year. This has not been the case in previous years as the receivables have always been sold at the end of each school year.

Depreciation and amortisation expenses ended at NOK 9.2 million (10.7) in the third quarter. There was no impairment of right-of-useassets in the third quarter.

Earnings before interest and tax (EBIT) for Sonans in the third quarter were minus NOK 2.2 million (14.8). The decline in EBIT is, as mentioned, a result of lower volumes and the non-recurringonline revenue of NOK 10 million in Q3 2022.

Sonans has completed the first phase of its turnaround strategy, which has led to a stronger digital offering and reduced the number of campuses from 15 to 9. The campus operations will in the future be concentrated in the largest cities in Norway and the new education offering Live will provide students with the campus quality experience in the areas without a physical campus.

At the end of the third quarter, the number of full-time employees (FTEs) was 84.5 (111.7) and the average number of FTEs during the first nine months was 93.6.

2. Two different periods for full-year students: July to June or January to December.

10	LUMI GRUPPEN quarterly report Q3 23