House of Control : 2022-Q3 Report

INTERIM REPORT Q3 AND 9M 2022

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Interim report Q3 and 9M 2022

House of Control - The CFO's Best Friend

House of Control Group is a tech company that develops software as a service (SaaS) solutions for contract management and IFRS 16 compliance. The CFO and the finance departments of medium‐sized and large companies are the main target groups, and the group's software helps them improve financial and operational management. Private and public enterprises use the software to manage contracts and assets, communicate with suppliers, and get a faster overview over their business via dashboards. The CFO toolkit contributes to at least four important tasks: Cut costs, save time, reduce risk, and improve compliance - all key ingredients of a better‐ working finance department. House of Control's strong revenue growth is supported by a unique salesforce, with recurring revenues accounting for approximately 95 per cent of total sales.

• Best‐of‐breed horizontal software for CFOs across the Nordics
• Large and underpenetrated market opportunity with limited direct competition
• Scalable subscription‐based model with high recurring revenue
• Consistent organic growth supported by M&A
• Growth levers in increased penetration, upselling in existing portfolio and new products and services
• Opportunities in European expansion

Revenue last 12 months (NOKm)				ARR (NOKm)*
225								225
200							214	200						195	215
175						177		175
150							150
125					125			125					128
100							100
										102
75				94				75			83
50			71					50
	52						58
25	45						25	43
0								0
2016	2017	2018	2019	2020	2021	9M'22	2016	2017	2018	2019	2020	2021	9M'22

*ARR continuing business, excluding the divested 'on‐premises' business

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Interim report Q3 and 9M 2022

Highlights for the third quarter 2022

• Received voluntary cash offer from Visma of NOK 11.20 per share
• Annual recurring revenue (ARR) of NOK 215 million
• • ARR growth of 26%, of which organic growth for continuing business of 17%
  • ARR from new customers of NOK 6.9 million in Q3 (4.6), with net retention at 100% (100%)
• Revenue of NOK 54.5 million in Q3 (+23%), of which 15% organic growth
• Q3 EBITDA of NOK ‐2.4 million, with adjusted EBITDA of NOK +12.1 million excluding special items relating to the Visma transaction
• Expecting revenue of NOK 218‐222 million and adjusted EBITDA of NOK 16‐20 million for the full year 2022
• Expecting positive Cash EBITDA after capitalized R&D investments from mid‐2023

Key figures

NOK ('000), IFRS	Q3 21	Q4 21	Q1 22	Q2 22	Q3 22	%	9M 2021	9M 2022	%
Recurring revenue	41 748	49 365	50 660	50 256	51 929	24 %	115 381	152 845	32 %
Other revenue	2 432	3 325	3 373	2 602	2 588	6 %	9 092	8 563	‐6 %
Total revenue	44 179	52 689	54 033	52 858	54 517	23 %	124 473	161 408	30 %
Operating costs	‐51 576	‐71 080	‐57 019	‐52 390	‐56 921		‐134 471	‐166 331
EBITDA	‐7 397	‐18 391	‐2 987	469	‐2 405		‐9 998	‐4 923
EBITDA‐margin	‐17 %	‐35 %	‐6 %	1 %	‐4 %		‐8 %	‐3 %
Special items	‐3 811	‐13 362	‐1 036	‐1 196	‐14 464		‐11 462	‐16 695
Adjusted EBITDA	‐3 586	‐5 029	‐1 951	1 664	12 059		1 464	11 772
Adjusted EBITDA‐margin	‐8 %	‐10 %	‐4 %	3 %	22 %		1 %	7 %
Amortization PPA	‐6 239	‐8 192	‐5 539	‐5 895	‐4 390		‐17 613	‐15 824
Depr. / amort. tangible and intangible	‐5 987	‐6 575	‐6 117	‐5 845	‐7 876		‐17 725	‐19 838
Impairment	0	‐52 761	‐11	0	0		0	‐11
Total depr., amort., and impairment	‐12 226	‐67 528	‐11 667	‐11 739	‐12 266		‐35 338	‐35 673
Net other income	0	0	65	22	0		0	87
Operating profit/loss, EBIT	‐19 623	‐85 919	‐14 589	‐11 249	‐14 671		‐45 336	‐40 509
Net financial items	‐5 689	‐5 428	‐5 943	‐5 005	‐5 688		‐16 549	‐16 637
Profit/loss before tax	‐25 313	‐91 347	‐20 532	‐16 255	‐20 359		‐61 886	‐57 146
R&D Capex	6 845	10 443	8 167	6 862	6 531		22 656	21 560
R&D Capex, % of revenue	15 %	20 %	15 %	13 %	12 %		18 %	13 %
Adjusted Cash EBITDA*	‐10 431	‐15 472	‐10 118	‐5 198	5 529		‐21 192	‐9 788
*Adjusted Cash EBITDA defined as Adjusted EBITDA less R&D Capex
NOKm	Q3 21	Q4 21	Q1 22	Q2 22	Q3 22	%	9M 2021	9M 2022	%
ARR, continuing business*	171	195	199	208	215	26 %	171	215	26 %
New customers, ARR	5	9	6	8	7	49 %	21	21	‐3 %
Net retention, %	100 %	100 %	99 %	101 %	100 %	0 %	97 %	100 %	3 %

*ARR for the continuing business, i.e., excluding the divested on‐premises business

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Interim report Q3 and 9M 2022

Message from the CEO

We performed in‐line with prior guidance in the third quarter, maintaining a solid growth momentum and a strong focus on cost control and improving profitability. The main happening in the quarter was nevertheless the acquisition offer from Visma, valuing the company at a significant premium compared to the share price in the market. Being acquired by Visma is testament to what our organization has built, and we look forward to the opportunity to continue growing House of Control within the Visma Group.

Visma acquiring House of Control

On 26 September, Visma presented a voluntary cash offer to acquire all outstanding shares of House of Control Group at a price of NOK 11.20 per share. This was unanimously recommended by the Board of Directors of House of Control.

Together with the company's financial advisers the Board has conducted a thorough strategic process this year, with Visma proving to be the most attractive and preferred buyer.

The transaction is contingent on 90% acceptance of the offer and regulatory approval and is expected to be completed during the fourth quarter. I look forward to getting the deal closed and to start a new chapter in the development of House of Control as an operating entity within the Visma Group. Their unique position, experience and expertise makes them an ideal partner for us.

Focus on profitable growth showing results

Annual recurring revenue (ARR) was NOK 215 million at the end of the third quarter, an increase of NOK 44 million or 26 per cent year‐on‐year. Organic growth was 17 per cent over the past year, mainly driven by new sales.

Focusing on profitable growth, we started implementing significant cost reductions at the beginning of the year, expecting this to translate into a reduction of the annual cost base by approximately NOK 45 million once the cost savings take full effect.

We turned EBITDA positive in the second quarter, and on an adjusted level we showed a strong positive EBITDA supported by seasonally lower costs in the third quarter. Reported results was slightly negative in the quarter due mainly to costs related to the strategic divestment process which ended with the bid from Visma.

Overall, we have generated revenue of NOK 161 million in the first nine months, with a positive EBITDA of NOK 12 million excluding special items.

As communicated in late September, in connection with the acquisition offer from Visma, we are steering towards a revenue level of NOK 218‐222 million and an adjusted EBITDA of NOK 16‐20 million for the full year.

We see the positive development continuing into 2023, when we expect to generate positive Cash EBITDA after capitalized R&D investments.

Continuing to be the CFO's best friend

House of Control has been engaged in customer‐driven innovation for more than 16 years and has built a strong brand as a leading provider of mission‐critical SaaS‐solutions. Our achievements are the result of the hard work of our employees, satisfied customers, and the dedication of our shareholders, and with new owners onboard we are ready to continue our profitable growth journey.

Over the past years we have added a lot of functionality and supplementary solutions to our Complete Control contract management offering, and we continue to see exciting long‐ term growth opportunities for both Complete Control and our internationally unique IFRS 16 software solution. Linking our solutions to Visma's strong suite of software solution can only make us stronger. We will continue to be the CFO's best friend.

"I look forward to the opportunity to continue growing House of Control within the Visma Group"

CEO Lasse Sten, House of Control

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Interim report Q3 and 9M 2022

Operational review

ARR growth continuing

ARR by geographical area

ARR increased by NOK 8 million to NOK 215 million in the third quarter, reflecting new sales of NOK 7 million and slightly positive net retention and positive effects of foreign exchange rates.

Year‐to‐date, ARR increased by NOK 21 million, adjusting for the divestment of the non‐core on‐premises business. The net retention rate for the first nine months was 100%, and the increase in entirety reflects new sales.

Q3 ARR development, NOK million

225	3
	7
	3
200

Source: Company data.

175

150

208

215

Product overview

Branding itself as "The CFO's best friend", House of Control has built a strong product portfolio within contract management and adjacent areas. The commercial offering is divided into two main solutions: Contract management - Complete Control and IFRS 16 software.

ARR Q2'22 New sales Upsell & Net Churn ARR Q3'22

Cross‐sell

Source: Company data.

The ARR is generated from a customer base of more than 2,700 unique customers of different sizes in all kinds of sectors. The portfolio has limited concentration as the top‐10 customers accounting for only around 4% of total revenue.

ARR by geography

House of Control's Scandinavian business accounts for approximately 97% of the total ARR of NOK 215 million, with Norway at NOK 148 million (68%), Sweden at NOK 40 million (19%), and Denmark at NOK 21 million (10%). The company also has NOK 7 million (3%) of ARR in Europe, Australia, and Canada.

All geographical areas showed growth in the first nine months of 2022. Although absolute numbers are still relatively small, the company also gained some traction outside of Scandinavia after launching its IFRS 16 solution internationally in the first quarter.

Complete Control is a fully digital cloud‐based contract management system enabling customers to maintain control throughout the contract lifecycles. The solution has been continuously upgraded, improved, and expanded, and over the past few years the group has also acquired a series of companies offering add‐ons to the Complete Control platform.

The company's IFRS 16 compliance solutions are unique in Europe, and a pilot version of the solution was launched in selected international markets earlier in 2022.

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