Zalaris Asa · OSL:ZAL
Zalaris Asa — Investor Day (September 2023)
53 slides from Zalaris Asa's investor day presentation, Sep 19, 2023
Slide 1: Capital Markets Day
19 September 2023 Capital Markets Day
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 • Strategy and goals Today’s presenters Hans-Petter Mellerud • PeopleHub: HR and Payroll platform with global reach Halvor Leirvåg • Market positioning and growth opportunities Øyvind Reiten Hans-Petter Mellerud Halvor Leirvåg • A competitive global delivery model CEO and Founder CTO Øyvind R
Slide 4: The three main points that we want to convey today
The three main points that we want to convey today 1) Zalaris PeopleHub is increasingly in favour by mid-market and large customers seeking to digitalize their Payroll & HR processes resulting in 33% reported growth in Q2. We are now a 100 MEUR annualized revenue company and expect to continue deliv
Slide 5: Strategy and goals
Strategy and goals Hans-Petter Mellerud CEO and Founder Simplify work life. Achieve more.
Slide 6: Payroll & HR solutions that enable digital organizations
Payroll & HR solutions that enable digital organizations One global IT platform with local presence Geographical footprint Zalaris is a leading European provider of global payroll and human capital management solutions delivered through software as a service, outsourcing, or consulting delivery mode
Slide 7: PeopleHub covers the full employee life cycle
PeopleHub covers the full employee life cycle HR system Benefits Country specific Employee self Organizational Employee Co2 Document management locations services structures footprint archive Payroll Cloud Global Payroll Payroll payroll payroll hr-automation HR-transformation Workforce management Ti
Slide 8: Services delivered by two integrated business units with recurring revenues
Services delivered by two integrated business units with most revenues being recurring of nature Managed services (MS) Professional services (PS) Zalaris’ cloud solution and comprehensive payroll and HR outsourcing Consulting services including delivery of traditional consulting services projects as
Slide 9: Diversified customer base across a wide range of industries
Diversified customer base across a wide range of industries Customer traits Bank, Insurance & Financial services Health & Life Science Infrastructure & Transportation Managed services >1,000 employees >2 countries IT, Technology & Telecom Offshore & Energy Product & Industrials Software agnostic Pro
Slide 10: Continuing growth journey to become the leading European provider
Continuing growth journey to become the leading European provider of Global Payroll & HR Solutions and Services to Mid- market and Large customers. Grow to MEUR 150+ Annualized Revenue and EBIT of 12-15% by 2026 Q4 Deliver Fully Digitalized Payroll and HR Solutions Helping Customers Implement and Ru
Slide 11: Zalaris PeopleHub
Zalaris PeopleHub HR and Payroll platform with Global reach Halvor Leirvåg CTO Simplify work life. Achieve more.
Slide 12: PeopleHub is a global scalable solution used for all new customers
Zalaris PeopleHub-platform is a global scalable Zalaris Private solution used for all new customers Hosting Centers PeopleHub Hybrid Cloud offers a state-of-the-art technology stack combined with a proven and robust payroll engine The Core is Powered by SAP Payroll with vendor support until 2040 off
Slide 13: PeopleHub transforming acquired companies' infrastructure into a common framework
PeopleHub is an integral part in transforming acquired companies' infrastructure into a common delivery framework Past Present Future Hosting Centers > * > * Fully migrated by Q4 2023 CRMs Email > > SAP-systems, DB & OS > > © zalaris 2023 Page 13
Slide 14: Privacy by design and cyber security embedded in our DNA
Zalaris has privacy by design and Cyber security embedded in our DNA Security and privacy by design Inhouse Cyber Security Operations Centre(CSOC) in place since 2016 and running 24/7/365 Great feedback received from current, new and even lost customers on ongoing security-efforts even if we keep so
Slide 15: PeopleHub increasingly based on own IP and user centric approach
PeopleHub increasingly based on own IP and winning with a user centric approach 100% Zalaris IP on new developments Microservices, microfrontend, hexagonal architecture Cutting edge technology like ReactJS, Tailwind, Spring Cloud Utilizing Azure services like hybrid databases, messaging, Kubernetes,
Slide 16: Artificial intelligence has improved user experience and new services
Artificial intelligence (AI) has been instrumental to improved user experience and increasingly being used for new services Current AI-usage which will be extended in immediate future AI-based ticket categorisation in new Helpdesk. To be extended with GPT-options for customers who opt-in Conversatio
Slide 17: Market positioning and growth opportunities
Market positioning and growth opportunities Øyvind Reiten EVP Group Commercial and Sales Simplify work life. Achieve more.
Slide 18: Leading European player with Global reach
Leading European player with Global reach Established Providing outsourced Payroll and HR services to In flight large and mid-size companies, mainly in northern and Strategic target central Europe Leading consultancy practice providing the full spectrum of SAP and SAP SuccessFactors services 5+ coun
Slide 19: We successfully support European companies globally
We successfully support European companies globally The addressable market has increased significantly with global opportunities We efficiently manage CAPEX exposure by leveraging our established partner ecosystem for PeopleHub implementation and operation in larger GEOs – and full long-tail coverag
Slide 20: We target specific customer characteristics enabling efficient selling
We target specific customer characteristics enabling efficient selling Multi-country vs. Single –country Focusing on multicountry and large single-country opportunities Company size Large and mid-size enterprises in one or multiple countries Industry type Covers most industries with some strongholds
Slide 21: Attractive market expected to grow with a CAGR of ~8-10%
We operate in an attractive market which is expected to grow with a CAGR of ~8-10% Attractive market with a strong growth outlook across both managed and professional services for which Zalaris currently outperforms Market supported by several tailwinds such as increasing global workforce, intensify
Slide 22: Competitive environment according to industry analysts
Competitive environment according to industry analysts The Global competitive Europe for which Zalaris is landscape for which Zalaris is a vs. considered among the providers strong challenger of choice for enterprise customers
Slide 23: Customers choose us due to qualitative measures
Customers choose us due to qualitative measures “Zalaris were selected due to their professional competency with payroll, digitization, and the personal fit of the team. The Zalaris leadership team and Other 6% the team members were impressive and convinced us with pragmatism, efficiency, and trustw
Slide 24: A uniform value proposition across all GEOs fuels growth
A uniform value proposition across all GEOs fuels growth Exemplified by Germany's current upswing Combination of global standards and local entrepreneurship being a catalysator for growth Addressable market in DACH being >3x the Nordics Deal values typically being 2.5x the average in the Nordics wit
Slide 25: A competitive global operating model
A competitive global operating model Richard E. Schiørn EVP Solution & Delivery – Global Managed Services Simplify work life. Achieve more.
Slide 26: Global operating model with strong local competence
Global operating model with strong local competence enables scalability and profitability Managed Services (MS) Zalaris’ solution and services 891 customers, ~73%2 of total revenues with ~90% recurring revenues Degree of standardization LOW MEDIUM HIGH HIGH Industrialization LOW LOW MEDIUM HIGH inte
Slide 27: Bring DACH/Germany to the same level as Northern Europe
Key focus for Managed Services is to bring DACH/Germany to the same level as the Northern Europe the next 12 months Areas driving Cost Efficiency Status Cost improvement NE DACH Target 12 Current Current months • Consistent & Predictable Outcomes • Reduce Non-compliance/deviations Process Standardiz
Slide 28: Rightshoring and Digitalization maximize value creation
Rightshoring and Digitalization maximize value creation without compromising quality Nearshore Onshore Target Status Nearshore represents service locations in Latvia NE DACH and Poland, and manages processes characterized Onshore represents local service locations e.g., by; Norway, Sweden etc. and m
Slide 29: Delivering business value and growing partnership with our customers
Delivering business value and growing partnership with our customers Guiding Standardization, harmonization, consolidation Leverage and develop PeopleHub solution, process Automation and rightshoring of services Principles cross countries / services engineering, globalization Solution Approach Build
Slide 30: Consulting business
Consulting business Hans-Petter Mellerud CEO and Founder Simplify work life. Achieve more.
Slide 31: Professional Services: An SAP Focused Powerhouse
Professional Services: An SAP Focused Powerhouse Professional services (PS) Consulting services including delivery of traditional consulting projects as well as outsourcing and cloud implementation projects Application Implementation / SAP advisory and management transformation consulting services (
Slide 32: SAP operates in a large and expanding market
SAP operates in a large and expanding market that offers many possibilities for growth and has a strong leadership in its key areas of expertise. Source: Equitec research, SAP, Gartner, IDC MarketScape © zalaris 2023 Page 32
Slide 33: Zalaris Professional Services transforming to a Unified Global Practice
Zalaris Professional Services – in the process of transforming to a 295+ Unified Global Practice FTEs Of which 66% employees and 34% external consultants With 130+ certifications 12 Present in 12 Countries with Global Delivery Capability 21 235+ Clients Legend1: Local Consulting Delivery Centre Stro
Slide 34: Our 360o Service Offering give End-to-End Coverage
Our 360o Service Offering give End-to-End Coverage • Transformation & • BTP/ ABAP Program Implementation Design & Services Development • Requirements • Org & Process • Solution Architecture • Test Management & Definition Design Services Execution • HR Roadmap • Change Implementation Advisory • Funct
Slide 35: 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 Projects 49% 46% 43% 52% 53% ~57 % of Professional Services revenue is recurring, or recurring like, and based on AMS 54% 57% 51% 48% 47% l
Slide 36: A strong Professional Services is integral to Zalaris' strategy
A strong Professional Services is integral to Zalaris’ strategy Access to a global team of HR Domain & SAP SuccessFactors Experts that secure capacity for Peoplehub projects & advisory Global Delivery capability ensuring high quality and high value approach Develop customer relationships that can be
Slide 37: Professional Services strategic projects
Professional Services strategic projects target increased customer satisfaction, growth and improved margins Recruit and build own consultants to reduce dependency on external consultants Leverage install base to generate cross sell opportunities and additional value to customers Use RightShoring to
Slide 38: Turning internal HR to a business opportunity
Turning internal HR to a business opportunity Simplify work life. Achieve more.
Slide 39: Zalaris HR is structured as a modern centralized organization
Zalaris HR is structured as a modern centralized organization serving the whole group based on standardization, digitalization, and automatization Talent Attraction & Acquisition People Brand Regional & HRBP Engagement The HR organization consist of 22 employees distributed according to our rightsho
Slide 40: Scalable Global Shared Services
Scalable Global Shared Services Global HR Shared Services Recruitment admin support Workforce & org data mgmt Onboarding & Offboarding Training & dev. Admin / candidate experience Comp. & Ben Analytics (master data & system mgmt) management support management Quality & Compliance HR Support Center ©
Slide 41: Fully integrated digital HCM is key for strategic HR
Fully integrated digital HCM is key for strategic HR GDRP compliant with focus on employee experience PeopleHub SuccessFactors © zalaris 2023 41
Slide 42: Whole employee life cycle digitalized with SuccessFactors and PeopleHub
We deliver the whole employee life cycle fully digitalized based on SAP SuccessFactors fully integrated with PeopleHub Recruiting Onboarding Employee Central Learning Performance Compensation Offboarding Global Talent Sourcing, Securing same processes Complete and Mandatory and Goal Management, Comp
Slide 43: Evaluating going from cost center to profit center
Evaluating going from cost center to profit center launching HR as our next tower of services Using own HR organization to build market tech enabled HR Services offering to customers. Enabling customers to scale into new geographies with limited addition of overhead functions Taking responsibility f
Slide 44: Financial strategy and targets
Financial strategy and targets Gunnar Manum CFO Simplify work life. Achieve more.
Slide 45: Solid revenue growth and ambition to grow to NOK 1.5 billion
Solid revenue growth last 2 years and ambition to grow to NOK 1.5 billion by 2026 (+10% p.a.) Development in revenue >10% annual organic revenue growth driven by: NOKm ~11% CAGR 2023E–2026E Growing HR and payroll market New large multi-country/global long-term contracts ~14% CAGR 2021–2023E in const
Slide 46: Closing in on adj. EBIT margin target of 10%
Closing in on short-term adj. EBIT margin target of 10% and ambition to expand to 12 - 15% by end-2026 >10% adj. EBIT margin short-term driven by: Development in adj. EBIT and adj. EBIT margin NOKm and % Current EBIT improvement program (Zalaris 4.0) Further right-shoring and standardisation to impr
Slide 47: Cash flow LTM hampered by investment initiatives
Cash flow LTM hampered by investment initiatives and rapid revenue growth Cash flow LTM Q2’23 NOKm • NWC negatively impacted by Cash flow improvements a 33% revenue increase Q2’23 vs Q2’22 EBITDA expansion • NOK 20 – 30m lower impact going forward Reinvestment in organic growth • EBITDA expansion -2
Slide 48: Increased focus on operating cash flow conversion
Increased focus on growing operating cash flow conversion and prudent capital allocation Targeted long-term operating cash flow conversion* of 70% Achieved mainly through: Working capital improvements Transformation projects for new customers to be minimum cash neutral Target Target EBIT Target EBIT
Slide 49: Bond financing secured to 2028
Bond financing secured to 2028 with potential for early redemption - conversion to bank financing is target Issued 5-year EUR 40 million bond loan in March 2023 ~Revenue by currency YTD Q2’23 Early redemption possible from Sep.25 Target to reduce leverage (NIBD/EBITDA) to <2.5 to DKK Other improve r
Slide 50: Summary of long-term financial targets (to 2026)
Summary of long-term financial targets (to 2026) Revenue: >10% organic growth (Managed Services >15%, Professional Services >5%) Fuelled by large multi-country contracts and expansion with existing customers Profitability: 12% - 15% adj. EBIT margin Utilising right shoring, automation (AI) and incre
Slide 51: Key take-aways
Key take-aways Hans-Petter Mellerud CEO and Founder Simplify work life. Achieve more.
Slide 52: The three main points that we conveyed today
The three main points that we conveyed today 1) Zalaris PeopleHub is increasingly in favour by mid-market and large customers seeking to digitalize their Payroll & HR processes resulting in 33% reported growth in Q2. We are now a 100 MEUR annualized revenue company and expect to continue delivering
Slide 53: Q&A
Q&A Simplify work life. Achieve more.