Innofactor Plc Half-Yearly Report July 22, 2021, at 9:00 Finnish time

Innofactor achieved the best second quarter net sales and EBITDA in its history, as well as the highest order backlog ever

April–June 2021 in brief:

• The net sales were approximately EUR 17.3 million (2020: 16.8), which shows an increase of 3.2%
  • Excluding the Prime business sold on March 31, 2021, the comparable growth was 7.6%, which was entirely organic growth
• The operating margin was approximately EUR 2.1 million (2020: 2.1), which shows an increase of 1.6%
• The operating profit was EUR 1.3 million (2020: 0.9), which shows an increase of 43.8%
• The order backlog at the end of the review period was EUR 72.7 million (2020: 56.9), which shows an increase of 27.8%
• Innofactor received several significant orders in the second quarter, for example,
  • Case and document management services for the joint municipal authority for the county of Ostrobothnia, approximately EUR 0.9 million
  • A case management solution for six universities, approximately EUR 0.9 million (not yet in the order backlog at the end of the review period)
  • Case management solution for the Finnish Forest Centre, approximately EUR 0.6 million
    
    

January–June 2021 in brief:

• The net sales were approximately EUR 35.1 million (2020: 33.9), which shows an increase of 3.5%
  • Excluding the Prime business sold on March 31, 2021, the comparable growth as of April 1, 2021 was 5.6%, which was entirely organic growth
• The operating margin was approximately EUR 6.8 million (2020: 4.0), which shows an increase of 68.0%
  • The operating margin includes a sales gain of approximately EUR 2.6 million from the sale of the Prime business, without which the operating margin would have been approximately EUR 4.2 million (2020: 4.0), which shows an increase of 4.4%
• The operating profit was EUR 5.1 million (2020: 1.7), which shows an increase of 198.8%
  • The operating profit includes a corresponding sales gain as the operating margin, without which the operating profit would have been approximately EUR 2.5 million (2020: 1.7), which shows an increase of 48.5%

Key figures of the group, IFRS

*) In accordance with IFRS 3, the operating result for April 1–June 30, 2021, includes EUR 139 thousand (2020: 473) and for January 1–Jun 30, 2021, EUR 277 thousand (2020: 947) in depreciation related to acquisitions, consisting of allocations of the purchase price to intangible assets.

**) The Innofactor Group monitors the number of active personnel. The number of active personnel does not include employees who are on a leave of over 3 months.

Innofactor’s future outlook for 2021

Innofactor’s net sales and operating margin (EBITDA) in 2021 are estimated to increase from 2020, during which the net sales were EUR 66.2 million and operating margin was EUR 7.2 million.

CEO Sami Ensio's review: Innofactor continued to perform consistently during Q2 and repaid a large share of its debts to financial institutions prematurely from its cash assets

The net sales in the second quarter of 2021 were EUR 17.3 million, which shows an increase of 3.2 percent compared to the previous year. Excluding the Prime business sold on March 31, 2021, the comparable growth was 7.6% in the second quarter, which was entirely organic growth. The net sales grew in all countries. The operating margin (EBITDA) grew by 1.6 percent from the previous year and was EUR 2.1 million (12.1 percent of the net sales). EBITDA was positive in Finland, Norway and Denmark. In the second quarter, the order backlog once again grew to a record-breaking amount and was EUR 72.7 million at the end of the quarter, which shows an increase of 27.8 percent compared to the corresponding time in the previous year.

The net sales in the first half of 2021 were EUR 35.1 million, which shows an increase of 3.5 percent compared to the previous year. Excluding the Prime business sold on March 31, 2021, the comparable growth as of April 1, 2021 was 5.6%, which was entirely organic growth. The operating margin (EBITDA) grew by 68.0 percent from the previous year and was EUR 6.8 million (19.2 percent of the net sales), of which the sale of the Prime business during the first quarter accounted for approximately EUR 2.6 million.

Innofactor prematurely repaid approximately EUR 2.7 million of its loans to financial institutions using its cash assets. Together with normal loan repayments, this will significantly reduce Innofactor's annual financial expenses. Innofactor's equity ratio increased to 49.9 percent (53.6% excluding the effects of IFRS16) and net gearing decreased to 30.5 percent (16.8% cent excluding the effects of IFRS16). The strengthened financial position will provide the company with additional room for maneuver in the restructuring of the industry.

The COVID-19 pandemic is not expected to cause significant harm to Innofactor’s business in 2021. However, the prolonged epidemic has affected people's coping, which is why the summer holiday season has been sorely needed. The turnover of personnel was also higher than usual in the entire industry during the first half of the year, including at Innofactor, which has an impact on costs, among other things. Innofactor has defined a new hybrid working model for the post-COVID-19 period, based significantly on the ability of employees to choose between office and remote work. The new hybrid working model will be adopted without delay after the summer, once the COVID-19 situation allows.

In the long term, we believe that the digital step the society is taking due to the COVID-19 pandemic will increase Innofactor's possibilities to grow its business. The abilities of a modern digital organization will be even more important for our customers in the future. It is also possible that some of our customers will transfer some of their operations back to the Nordic countries in order to be closer to their customers. This would have a favorable effect as regards the business model of Innofactor's chosen strategy based on Nordic specialists. We also believe that Microsoft's position has strengthened during the COVID-19 pandemic. We are confident in our chances of increasing our market share.

Innofactor's goal is to accelerate our growth further. We will update our strategy in this regard during the summer and expect to publish it at the end of August.

Innofactor’s aim is to be the leading provider of organizations' digital transformation in each of the Nordic countries. We believe in our chosen Nordic strategy and in reaching our long-term goals. This requires perseverance and determination from the company's management and employees as well as investors. Innofactor is still actively looking for new strategic partnerships in the Nordic countries. The Group’s goal is to grow both organically and through acquisitions.

Strategy and its realization in the review period

Innofactor’s strategy comprises our purpose, mission, vision, strategic choices, values, working principle, and long-term financial goals.

Our purpose: Innovating to make the world work better

Our mission: Driving the modern digital organization

Our vision: Leading Nordic digital transformation partner in the Microsoft ecosystem

Our strategic choices:

• The most competent Nordic teams
• Productized and specialized offering
• Proactive and agile way of working
• Innovation with top customers

Our values:

• Accountability
• Empowerment
• Innovation
• Customer

Our working principle: Our principle is to put people first in everything we do. We want to provide solutions that make our customers’ everyday work and life run smoothly and bring a smile to their faces.

Our long-term financial goals:

• To achieve annual growth of about 20 percent, majority of which is intended to be achieved by organic growth
• To achieve about 20 percent EBITDA in relation to the net sales
• To keep the cash flow positive and secure good financial standing in all situations.
  
  

Innofactor’s net sales in the first half of the year were EUR 35.1 million (2020: 33.9), which shows an increase of 3.5 percent compared to the previous year. Excluding the Prime business sold on March 31, 2021, the comparable growth as of April 1, 2021 was 5.6%, which was entirely organic growth. During the first half of the year, Finland, Norway and Denmark accounted for the growth, and in the second quarter all countries saw growth. The strategic goal of getting the net sales to grow is also supported by the record-breaking order backlog of EUR 72.7 million (2020: 56.9). In 2021, Innofactor will pay special attention to the management of growth, sales, expertise and resourcing, in connection with which we have revised our organization, among other measures, with Martin Söderlind starting in the new Chief Innovation and Talent Officer role in April 2021. In our strategy to be revised in August, we will focus particularly on supporting the acceleration of growth.

The operating margin (EBITDA) grew in the review period by 68.0 percent from the previous year and was EUR 6.8 million (19.2 percent of the net sales). Without the divestment of the Prime business, the operating margin would have grown by 4.4 percent in the review period and would have been EUR 4.2 million (12.0 percent of the net sales). As regards profitability (excluding the Prime divestment), Innofactor was able to improve its performance slightly, but some effort is still needed in order to reach the long-term goal of approximately 20 percent.

Innofactor’s operating cash flow in the review period of January 1–June 30, 2021, was EUR 6.9 million (2020: EUR 6.3 million) and the equity ratio at the end of the review period was 49.9 percent (2020: 41.3 percent). In the review period, Innofactor repaid approximately EUR 2.7 million of its loans prematurely. The strong operating cash flow and financial position support Innofactor’s strategic goal of profitable growth and securing solid financial standing in all situations.

Espoo, July 22, 2021

INNOFACTOR PLC

Board of Directors

Additional information:
CEO Sami Ensio, Innofactor Plc
tel. +358 50 584 2029
sami.ensio@innofactor.com

Briefings concerning the half-yearly report January 1–June 30, 2021

Innofactor will publish the half-yearly report for January–June 2021 on Thursday, July 22, 2021, at around 9:00 Finnish time.

A video conference in Finnish concerning the half-yearly report will be held for media, investors and analysts on the same day at 10:00 Finnish time. The corresponding video conference in English will be held at 12:00 Finnish time. The report will be presented by CEO Sami Ensio and CFO Markku Puolanne.

Please register for the conferences beforehand by sending email to ir@innofactor.com. The link for participating will be sent to the registered persons on the previous day.

The presentations will be available on Innofactor's web site after the conferences.

Distribution:
NASDAQ Helsinki
Main media
www.innofactor.com

Innofactor
Innofactor is the leading driver of the modern digital organization in the Nordic Countries for its approximately 1,000 customers in commercial, public and third sector. Innofactor has the widest solution offering and leading know-how in the Microsoft ecosystem in the Nordics. Innofactor has over 500 enthusiastic and motivated top specialists in Finland, Sweden, Denmark and Norway. In 2016–2020, the annual growth of Innofactor's net sales has been approximately 8.3%. The Innofactor Plc share is listed in the technology section of the main list of NASDAQ Helsinki Oy. www.innofactor.com #ModernDigitalOrganization #PeopleFirst #CreatingSmiles