Nepa : Interim report Q2 2022 (English translation)

Interim Report Nepa AB (publ)

Q2 2022

CONTINUED GROWTH AND PROFITABILITY

This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs.

SECOND QUARTER, APRIL - JUNE 2022

• Net sales increased by 10.2%, or 7.9% FX adjusted, to MSEK 86.5 (78.5)
• Gross profit increased by 9.3%, or 6.5% FX adjusted, to MSEK 67.0 (61.3)
• EBIT was MSEK 9.6 (11.7)
• Earnings after tax was MSEK 9.0 (10.7)
• Earnings per share was SEK 1.14 (1.35)

FIRST HALF YEAR, JANUARY - JUNE 2022

• Net sales increased by 10.9%, or 8.8% FX adjusted, to MSEK 166.4 (150.1)
• Gross profit increased by 12.2%, or 9.5% FX adjusted, to MSEK 129.1 (115.1)
• EBIT was MSEK 18.5 (18.2)
• Earnings after tax was MSEK 16.9 (18.0)
• Earnings per share was SEK 2.15 (2.28)

IMPORTANT EVENTS

DURING THE PERIOD

• The AGM on May 19th elected Dan Foreman and
  Anne Årneby as new members to Nepa's board of directors. The previous board members P-O Westerlund and Martin Burkhalter had declined re-election.
• Lena Landahl was appointed as new Head of HR.
• Jack Suliman was recruited as new Chief Information Officer (CIO).

AFTER THE PERIOD ENDED

• Ferry Wolswinkel was recruited to the newly established role Chief Revenue Officer (CRO) and starts on the 3rd of October.

1

Nepa AB (publ) • 556865-8883 • Maria Skolgata 83, 118 53 Stockholm • nepa.com

Q2 2022

A WORD FROM OUR CEO

Nepa's net sales increased by 10.2 percent or 7.9 percent currency adjusted in the second quarter compared to the corresponding quarter last year, despite increased uncertainty in the world around us. Our customers' willingness to invest remained good in general in most of our markets. In Finland, we geared up our sales efforts to meet a more hesitant attitude among many of the customers who have market exposure to Eastern Europe and have been affected by the war in Ukraine. The share of recurring revenue continues to be at a high level of 65.4 percent in Q2, which is in line with our targets.

Gross profit increased by 9.3 percent to SEK 67.0 million (61.3) compared to the second quarter last year. The gross margin decreased 0.6 percentage points to 77.5 percent (78.1). Operating profit (EBIT) amounted to SEK

9.6 million (11.7) while the EBIT margin was 11.1 percent (14.9). Profit after tax amounted to SEK 9.0 million (10.7), corresponding to earnings per share of SEK 1.14 (1.35).

Our investments for the future affected costs and thus our margins during the quarter. Among other things, we increased our sales and marketing investments. Of Other external costs totalling SEK 12.9 million, approximately SEK 2.2 million was of a more temporary nature for, among other things, system upgrades. Total Personnel costs increased by 18.2% to SEK 48.9 million, of which SEK 6.4 million are attributable to investments in internally generated intangible assets. We have for example invested in the development of a proprietary platform and digital tools. Adjusting for these, our Operational personnel costs increased by 8.1%, including provisions for an incentive program, the final outcome of which depends on the result for the full year 2022.

On the revenue side we gradually introduced price adjustments in both Q1 and Q2 to compensate for increased costs. The price adjustments will take effect gradually as our long-term customer agreements are renewed. We continue our growth efforts by strengthening management and sales capacity, including the recruitment of a Chief Revenue Officer (CRO).

Cash flow from operating activities amounted to SEK 7.4 million for the quarter and SEK 18.0 million for the first half of the year. We maintain a strong financial position with net cash of SEK 79.6 million at the end of the period.

Strengthened position

I am pleased to announce that during the quarter we completed the transition of our business, the legacy clean-up, as planned. As we have previously communicated, we have taken measures for increased internal efficiency and a more streamlined product range to ensure a stable high proportion of recurring revenue, mainly from tracking-based services. We are now focusing on further strengthening profitability and growth.

Outlook

It is gratifying to once again be able to report record sales and gross profit levels, but it is not something we are satisfied with. We can grow both faster and with higher scalability, which Nepa will prove when we now take the next step in our strategic plan further described in the Q1 report.

We are on the right track and continue to expect that we will start to see the effects of our investments by the end of the current year. At the same time, it is important to emphasize that we have a tight cost control and can pull the brakes in case of a deteriorating market climate, however this is not something we see a need for now. Although our investments are pressuring our margins this year, we are convinced that they will create value going forward. Nepa enters the expansion phase with a scalable and automated platform, a strong track record among our customers, and a clear strategy for the future.

Ulrich Boyer

CEO

2

Nepa AB (publ) • 556865-8883 • Maria Skolgata 83, 118 53 Stockholm • nepa.com

THE GROUP

DEVELOPMENT OF THE GROUP

REVENUES

Net sales increased in the second quarter by 10.2 percent to KSEK 86,505 (78,506), and 7.9 percent currency adjusted. Gross profit increased by 9.3 percent to KSEK 67,007 (61,291), and 6.5 percent currency adjusted.

For the first half year, net sales increased by 10.9 percent to KSEK 166,382 (150,064), and 8.8 percent currency adjusted. Gross profit increased by 12.2 percent to KSEK 129,134 (115,107), and 9.5 percent currency adjusted.

The strongest sales growth during the first half year was in Marketing Optimization (MO). It was primarily the result of strong growth of one of our products MO Brand Tracker.

Q2 2022

In absolute numbers, Sweden showed the highest growth, increasing sales by MSEK 7.8 equivalent to 8 percent. That is also mainly due to our product MO Brand Tracker.

Detailed information about segments is found in note 2 on page 11.

EARNINGS

The group's EBIT amounted in the second quarter to KSEK 9,612 (11,693) and earnings after tax amounted to KSEK 8,982 (10,655).

For the first half year, the group's EBIT amounted to KSEK 18,488 (18,227) and earnings after tax amounted to KSEK 16,878 (17,966).

3

Nepa AB (publ) • 556865-8883 • Maria Skolgata 83, 118 53 Stockholm • nepa.com

Q2 2022

GROUP INCOME STATEMENTS

KSEK	Apr-Jun 2022	Apr-Jun 2021	Jan-Jun 2022	Jan-Jun 2021	Full year 2021
Net sales	86 505	78 506	166 382	150 064	295 457
Capitalized expenditure	6 392	2 046	13 360	2 932	10 841
Other external income	1 476	1 396	3 336	3 209	6 374
	94 373	81 949	183 078	156 206	312 672
Direct costs	-19 498	-17 216	-37 247	-34 957	-64 132
Other external costs	-12 878	-8 271	-24 668	-15 976	-33 216
Personnel costs	-48 939	-41 387	-95 516	-79 787	-161 027
Depreciations	-2 681	-2 599	-5 262	-5 038	-10 223
Other operating costs	-766	-783	-1 897	-2 220	-4 050
Earnings Before Interest and Tax	9 612	11 693	18 488	18 227	40 024
Interest income and similar income items	1 661	363	2 764	1 920	3 832
Interest expenses and similar income items	-335	-1 077	-912	-1 351	-2 259
Earnings Before Tax	10 938	10 979	20 340	18 797	41 596
Tax	-1 956	-325	-3 463	-831	-3 010
Earnings After Tax	8 982	10 655	16 878	17 966	38 586
Profit attributable to the parent company's	8 982	10 655	16 878	17 966	38 586
shareholders
Number of shares, end of period (pcs.)	7 863 186	7 863 186	7 863 186	7 863 186	7 863 186
Average number of shares during the period	7 863 186	7 863 186	7 863 186	7 863 186	7 863 186
(pcs.)
Earnings per share (SEK)	1.14	1.35	2.15	2.28	4.91

4

Nepa AB (publ) • 556865-8883 • Maria Skolgata 83, 118 53 Stockholm • nepa.com

Q2 2022

GROUP BALANCE SHEETS

ASSETS (KSEK)	June 30, 2022	June 30, 2021	December 31, 2021
Intangible assets	39 033	27 998	30 819
Tangible assets	1 226	384	832
Financial assets	955	877	914
Sum non-current assets	41 214	29 259	32 565
Trade receivables	44 657	35 418	64 792
Tax receivables	-	2 826	-
Other current receivables	2 637	1 973	2 216
Prepayments and accrued income	21 909	22 283	12 068
Cash and cash equivalents	79 573	79 191	85 071
Sum current assets	148 776	141 690	164 148
TOTAL ASSETS	189 990	170 949	196 712
EQUITY (KSEK)
Shareholders' equity	1 573	1 573	1 573
Other capital contributions	115 383	115 383	115 383
Translation difference	-389	1 127	745
Retained earnings incl. net profit for the period	-7 698	-35 524	-14 904
Total equity	108 868	82 558	102 797
LIABILITIES (KSEK)
Due to customers	13 792	16 810	27 666
Tax liabilities	1 507	-	544
Trade payables	20 196	17 835	23 507
Other current liabilities	9 821	17 714	13 731
Accrued expenses, deferred income	35 807	36 032	28 467
Total short-term liabilities	81 122	88 391	93 915
Total liabilities	81 122	88 391	93 915
TOTAL EQUITY AND LIABILITIES	189 990	170 949	196 712
Pledged (KSEK)
Chattle	14 000	14 000	14 000
Total pledged	14 000	14 000	14 000

5

Nepa AB (publ) • 556865-8883 • Maria Skolgata 83, 118 53 Stockholm • nepa.com