Zalaris Asa · OSL:ZAL
Zalaris Asa — Q3 2022 Earnings Presentation
32 slides from Zalaris Asa's earnings presentation, Oct 26, 2022
Slide 1: Presentation of financial results Q3 2022
26 October 2022 Presentation of financial results Q3 2022
Slide 2: Disclaimer
Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated (“relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. This presentation doe
Slide 3: Agenda
Agenda Today’s presenters • Highlights • Company in brief • Financial review • Markets and outlook • Q&A Hans-Petter Mellerud Gunnar Manum CEO and Founder CFO © zalaris 2022 Page 3
Slide 4: Highlights
Highlights Simplify work life. Achieve more.
Slide 5: Q3 2022 key takeaways
Q3 2022 key takeaways Accelerated growth: Revenue growth of 17 percent (constant currency). Managed Services grew by 24 percent Rapid growth has affected EBIT negatively: Stable margins on existing customers. EBIT temporarily negatively affected by ramp-up cost to handle large volume increases EBIT
Slide 6: Continued development in new signings secure recurring revenue growth
Continued development in new signings to serve additional 15’300 employees secure recurring revenue growth Several new landmark deals and extensions signed securing continued growth in 2023 Pipeline of Multi-Country Peoplehub powered opportunities strong and potential of another year of record sales
Slide 7: Managed Services grew by 24% in the third quarter, in local currency
Managed Services grew by 24% in the third quarter, in local currency Revenue +24.2% higher revenue when adj. for currency effects NOK 160.6m (+21.2%) 164.5 The inclusion of ba.se added +3.3%, while +20.9% relates to new 160.6 customers and volume increases 151.7 More change orders contributed with 5
Slide 8: Professional Services had marginally higher revenue compared to last year
Professional Services had marginally higher revenue compared to last year, in local currency Revenue NOK 61.3m (-2.5%) Revenue in Professional Services grew by 1% was 66.0 when adjusted for negative currency effects 64.3 63.5 62.4 62.9 61.9 61.3 Significant PS capacity still being utilized on 59.6 5
Slide 9: Majority of Professional Services revenue is recurring
Majority of Professional Services revenue is recurring and supports a continuous presence with customers Distribution of Projects vs long term AMS based revenue ~50 % of Professional Services revenue is recurring, or recurring like, and based on long Projects 49% 50% 46% 45% 49% 52% term agreements
Slide 10: EBIT improvements program lifting underperforming entities to target EBIT levels
EBIT improvements program lifting underperforming entities to target EBIT levels Target EBIT margin of 15 – 20% per entity (before any allocation of group costs) EBIT% YTD Q3’22 per country: Key characteristics of high performing entities 21% High level of standardization with customer deliveries on
Slide 11: EBIT improvement program to increase annual EBIT by minimum NOK 40–50m by end-23
EBIT improvement program to increase annual EBIT by minimum NOK 40 – 50m by end-23 Improve customer margins in Northern Europe through full implementation of Zalaris 4.0 operating model and near-/offshoring by end of 2023 resulting in NOK 8 - 10m annualized cost savings Implement Zalaris 4.0 operati
Slide 12: Company in brief
Company in brief Simplify work life. Achieve more.
Slide 13: Payroll & HR solutions that enable digital organizations
Payroll & HR solutions that enable digital organizations One global IT platform with local presence Our vision: Supporting multi-national companies manage HR and payroll across borders Zalaris today: A leading European provider of payroll and human capital management solutions based on BPaaS and Saa
Slide 14: Zalaris offering is built around Peoplehub
Zalaris offering is built around Peoplehub – covering the whole employee life cycle Benefits Country Specific Employee Organizational Employee Professional Service (Advisory, Analytics, Technology, Implementation) Document Management Localizations Self Services Structures Co2 Footprint Archive Busin
Slide 15: Payroll and HR partner to mid- and large size organizations
Payroll and HR partner to mid- and large size organizations MANAGED SERVICES (MS) PROFESSIONAL SERVICES (PS) Comprehensive Outsourcing of HR, Payroll and Travel Expenses (BPaaS) Zalaris is responsible for SAP Cloud Services all end-to-end • SuccessFactors • Fieldglass transactional HR Managed payrol
Slide 16: Significant European player with Germany largest entity
Significant European player with Germany largest entity Revenue per country Q3 2022 (%) UK Other +16.8% 3% Poland 5% +18.7% 7% Germany +5.8% 33% Finland +83% 10% Denmark 8% +3.7% 12% Sweden 23% +10.7% Norway +6.5% © zalaris 2022 Page 16
Slide 17: Diversified customer base across a wide range of industries
Diversified customer base across a wide range of industries BAN K, INSUR AN CE & HEALT H AND LIFE INFR AST RU CT U RE & FINAN CI AL SERVICES SCIENCES T RANS PO RT AT IO N IT , T ECHNO LO G Y & PRO DUCT S & O FFSHO RE & ENERG Y T ELECO M INDUST RI ALS PUBLIC SERVICES AN D RET AIL AN D HO SPIT AL IT Y
Slide 18: Financial Review
Financial Review Simplify work life. Achieve more.
Slide 19: Revenue increased by 17% for the quarter in local currency
Revenue increased by 17% for the quarter in local currency Revenue NOK 224m (+14%) +14% +17% Revenue growth +17.5% YoY in constant currency 229.5 Revenue growth (as reported) for the quarter YoY: +14.4% 223.6 210.2 • From new entities (ba.se): +2.2% 209.7 203.5 201.7 • Increased change orders in MS:
Slide 20: New BPO contracts will result in significant revenue increase going forward
New BPO contracts will result in significant revenue increase going forward Revenue development over time based on signed MS contracts (NOKm) Total annual revenue expected to increase by ~NOK 87m 241 (+10%) by Q3 2023 vs. LTM Q3 2022, based on signed 63 contracts (assuming no material churn) 3 71 93
Slide 21: Revenue deferred as part of transformation projects for new BPO contracts
Revenue deferred as part of transformation projects for new BPO contracts continues to show a high activity level Deferred revenue and employee hours capitalised, LTM (NOKm) Significant potential revenue generating capacity utilised on implementing new 70 72 BPO contracts, which will generate recurr
Slide 22: Adj. EBIT (ex. APAC) for Q3 impacted by onboarding of customers
Adj. EBIT (ex. APAC) for Q3 impacted by onboarding of customers and recruitment and training of new resources to handle increased volumes Adj. EBIT* excluding APAC (NOKm) and margin (%) 7.2% Adj. EBIT (ex APAC) NOK 11.4 (NOK 14.1m) -19.1% 7.1% Adj. EBIT (ex APAC) margin 5.2% (2.0pp) 5.1% Adj. EBIT m
Slide 23: Condensed Profit and Loss
Condensed Profit and Loss 2022 2021 2022 2021 2021 (NOK 1 000) Jul-Sep Jul-Sep Jan-Sep Jan-Sep Jan-Dec Revenue 223 564 195 376 642 191 573 569 775 265 License costs 20 704 17 200 61 120 48 963 67 481 Personnel expenses 120 179 98 730 343 792 303 753 405 949 Other operating expenses 58 392 51 676 163
Slide 24: Continued strong cash position
Continued strong cash position Development in cash balance (NOKm) 116,8 Cash balance at 30 Sep of NOK 96m -10,6 -8,0 Negative cash flow from operating 95,6 -4,6 2,0 activities from NOK 20m increase in trade receivables (increased sales and timing effects) Investments relates mainly to internal syste
Slide 25: Markets and Outlook
Markets and Outlook Simplify work life. Achieve more.
Slide 26: 57% of European senior stakeholders expect the use of HR Outsourcing to grow
57% of European senior stakeholders from global enterprises expect the use of HR Outsourcing to grow © zalaris 2022 Page 26
Slide 27: Well positioned in most attractive market segment
Well positioned in most attractive market segment Above 10% 2018-2023 growth (CAGR) for the multi-country segment Multi country scope 13% 10% 9% CAGR 3% sweet spot Single country Global (>2 Multi-region Multi-country regions) (>1 region) (>1 country within a region) 2023 Market size ($bn) 18.8bn 0.9
Slide 28: Well protected to changes in global macro picture
Well protected to changes in global macro picture Higher inflation Most long-term contracts have a provision for annual indexation based on salary and CPI increases Experiencing some pressure on salary levels in a competitive market for resources Fear of recession Zalaris performed well during the f
Slide 29: Leaving Q3 continuing growth with aim of delivering on margin expectations
Leaving Q3 continuing growth with aim of delivering on margin expectations through EBIT improvement program Communicated growth of 10%+ within sight and becoming a NOK 1 billion company in 2023 Maintain target EBIT of 10% as revenue from projects under implementation are recognized and EBIT improvem
Slide 30: Q&A
Q&A Simplify work life. Achieve more.
Slide 31: Thank you!
We simplify HR and payroll administration, and empower you with useful information so that you can invest more in people. Thank you! Zalaris ASA | +47 4000 3300 | www.zalaris.com Simplify work life. Achieve more.
Slide 32: RESILIENT
RESILIENT - "Able to withstand or recover quickly from difficult conditions" https://youtu.be/Q7shBX_olWs © zalaris 2022 Page 32