Tieto Corporation · OMXHEX:TIETO
Tieto — Tietoevry — Q3 2023 Earnings Presentation
22 slides from Tieto's earnings presentation, 2023
Slide 1: Q3 2023 Mixed performance in a softer market
Q3 2023 Mixed performance in asofter market Kimmo Alkio, President and CEO Tomi Hyrylainen, CFO Wiz tietoeucy
Slide 2: Growth 2% — solid performance in software businesses
Growth 2% — solid performance in software businesses, weaker demand in Tietoevry Create and Tech Services Profitability of 13% despite softer market and continued high inflation — improved profitability in Tietoevry Industry and Tech Services MentorMate acquisition closed in Q3 - business performanc
Slide 3: Current macroeconomic and geopolitical environment
Current macroeconomic and geopolitical environment impacting demand visibility Economic slowdown — declining demand impacting primarily smaller consulting engagements and time and material volumes in managed services Prolonged war impacting Cost inflation remains at our business in Ukraine — high le
Slide 4: Consistent value creation building on cloud, data and software mega trends
Consistent value creation building on cloud, data and software mega trends Cloud, data and software Shareholder value acceleration Specialized Strategic businesses reviews “ake Specialized businesses taking advantage of cloud, data and software market growth Strategic reviews to accelerate value cre
Slide 5: MentorMate acquisition — accelerating strategy execution and value creation
MentorMate acquisition — accelerating strategy execution and value creation Tietoevry Create becoming leading digital engineering player globally * Expands customer base and growth potential in the US * Strengthens global digital talent scale across design, data, cloud and Al - presence in the attra
Slide 6: Strategic reviews of Tietoevry Banking and Tech Services
Strategic reviews of Tietoevry Banking and Tech Services on track with earlier announced schedules TIETOEVRY BANKING STRATEGIC REVIEW Strategic review announced 22 Jul'22 TIETOEVRY TECH SERVICES STRATEGIC REVIEW Strategic review announced 30 Nov'22 Go-live with integrated business Strategic Finalize
Slide 7: Customer wins
omer wins Digital engineering fF a HEINZEL GROUP Tietoevry Create as the digitalization partner in a wide-scale IT integration. _ AN TTOSEr Tietoevry Create maintains and develops applications, mobile apps for ticket sales and customer service. Software and platforms @ Savings Bank Tietoevry Banking
Slide 8: Business highlights
Business highlights oe
Slide 9: Tietoevry Group
Tietoevry Group Softer market impacting performance Organic growth! Adj. EBITA2 2% “abe 13.0% (8%) (14.2%) €86m (98) Cash flow from operations 3 Order backlog -€2m “ads -1%' Q3/22 Q4/22 Q1/23 Q2/23 Q3/23 (€40m) €2957m (3180) m Revenue, €m Backlog invoiced in Q4 +3%! Adj. EBITA 1) Adjusted for curren
Slide 10: Tietoevry Create
Tietoevry Create Weaker demand for smaller customer engagements 204 220 223 205 13.3% 16.0% 15.3% 11.8% Q3/22 Q4/22 Q1/23__ Q2/23 Revenue, €m Adj. EBITA 196 11.1% Q3/23 Organic growth -4% (19%) j. EBITA 11% (13.3%) €22m (27) Highlights * Growth impacted by lower demand for smaller customer engagemen
Slide 11: Tietoevry Banking
Tietoevry Banking Continued strong growth Organic growth Highlights 1 1 % * Solid growth in all businesses Oo * Profitability negatively impacted by increased technology costs and increased costs resulting from legal separation oo * Performance improvement measures, including technology cost optimiz
Slide 12: Tietoevry Care
Tietoevry Care Consistent strong profitability 54 63 63 59 33.9% 32.2% 30.3% 28.9% Q3/22 Q4/22 Q1/23__ Q2/23 Revenue, €m Adj. EBITA 52 30.4% Q3/23 Organic growth 3% (1%) j. EBITA 30. A% (33.9%) €16m (18) Highlights * Continued solid growth in Welfare and Data & Analytics * Temporary demand reduction
Slide 13: Tietoevry Industry
Tietoevry Industry Healthy progress in growth and profitability Organic growth Highlights 6 % + Strong growth in Pulp & Paper, Public 360 te) and Data Platforms (2%) * Profitability supported by strong growth of scalable software businesses oo * Carsten Henke appointed as Managing Director as of 1 N
Slide 14: Tietoevry Tech Services
Tietoevry Tech Services Solid profitability driven by efficiency measures 273 9.3% Q3/22 298 10.1% Q4/22 289 266 73% 4.9% Q1/23, Q2/23 Revenue, €m Adj. EBITA 243 9.5% Q3/23 Organic growth 4% j. EBITA 9.5% (9.3%) €23m (25) Highlights + Business mix evolving towards scalable data, application and clou
Slide 15: CFO report
CFO report oe
Slide 16: Q3'23 financials — softer market impacting performance
Q3’23 financials — softer market impacting performance Q3'23 highlights sz Revenue and growth * Organic growth of 2% despite softer market. Underlying Revenue 660 690 growth 4% - 1.3 fewer working days, Ukrainian currency Reported growth 4% 7% devaluation Q3’22. Organic growth 2% 8% FX revenue impac
Slide 17: Q3 free cash flow and net debt impacted by MentorMate acquisition
Q3 free cash flow and net debt impacted by MentorMate acquisition Q3 22 Q4 22 Q123 Q2 23 Q3 23 * Cash flow from operations negative €2m (40) 166 aon — Net working capital increased €97m — accounts tvs 69 receivable increase (quarter ending on weekend), 40 0 Hi N seasonal vacation accrual decrease an
Slide 18: Attrition normalizing — salary inflation estimate 5%
Attrition normalizing — salary inflation estimate 5% . ; Attrition 15.3 14,4 13,5 12,5 108 + LTMattrition continues to decrease — down % last twelve e ~2 pp. since Q2'23 — quarterly attrition (voluntary) stabilising to ~10% Q3 22 Q4 22 Q123 Q2 23 Q3 23 + Net personnel increase from Q2’23 to Q3’23 -
Slide 19: Performance drivers — Q4'23
Performance drivers — Q4’23 + Weaker economic environment resulting in customers’ cost savings actions and postponed investments, impacting primarily Tietoevry Create and Tech Services businesses Growth drivers + Banking growth impacted by high comparable and expectation of modest end of year licens
Slide 20: Q4 profitability outlook
Q4 profitability outlook Tietoevry Create Tietoevry Banking Tietoevry Care Tietoevry Industry Tietoevry Tech Services Q4’22 adj. EBITA % 16.0% 17.8% 32.2% 18.1% 10.1% Profitability outlook Below 04'22 level Below Q4'22 level At the Q4'22 level Above Q4'22 level At the Q4'22 level
Slide 21: Our way forward
Our way forward
Slide 22: Way forward — specialization at the core of competitiveness
Way forward — specialization at the core of competitiveness We actively drive our Tietoevry Banking and In light of the current strategic agenda expanding Tietoevry Tech Services macroeconomic and scalable software and strategic reviews for value geopolitical environment, digital engineering acceler