Recording of webcast presenting the Q3 2022 results

We invite all shareholders to attend the annual general meeting of ECIT, held Friday April 8th at 14.00 CET through a live formal webcast. The deadline for registration has passed, and for your information there will be no opportunity for online voting. Use this link to attend the webcast:

Webcast: Ordinary Annual General Assembly

Q&A

A live Q and A was also held during the webcast, and here is the summary of the questions asked and the answers given.

Q: Your organic revenue growth is high in Q3 2022 and well above your financial target of 5.5 %- what are your expectations going forward?

A: Well, we are very pleased that we had a high growth – 11.5 % in Q3, 9.3 % all over the three quarters, we work continuously to actually improve as part of these consolidation and merger processes, to improve our organic growth, and we think we will be able to meet the financial targets on 5.5 %, a little plus maybe, for as long as we can see standing from here.

Q: Given the number of acquisitions made so far in the year, is it still the ambition to meet the target of 350 MNOK of acquired annualized revenue?

A: Absolutely, of course you can never really time when you do an acquisition, and make sure it lands in December or January, but let me say, if we do not meet the target by the end of December, we will make it by the 25^th of January is my guess. So yes, we will meet the target this year as well. You will see the ketchup effect, when we are coming out to do the presentation of the Q4 results, you will see that we have done two thirds of the acquisitions in Q4, I promise you.

Q: As you become larger, it is natural that you will start to look at larger M&A opportunities, can you shed some light on how your M&A-strategy has developed recently? And what kind of acquisitions are you looking to do going forward?

Acquiring technology, acquiring competence, acquiring geography, acquiring customer bases is what we are always looking into. However, we can see that we are looking more and more into a bit larger companies, with a bit better earnings and a bit better organization behind, and these companies are a bit more expensive than where we are coming from historically, but it is coming gradually, it is a gradual improvement that we meet as we go forward. So we think we will simply just acquire gradually better and better companies as we progress.

Q: In the nature of being an M&A-compounder, margins are obviously affected when you do acquisitions and large mergers. Can you say something about the underlying margins and how they have developed recently?

A: It is clear that the base business that has been with us for many years perform very well actually, compared to many of the new businesses we are acquiring. Normally, when we do an acquisition of a low margin company, it takes around between one to three years to get the margin in place, but through those consolidation processes we are doing, it takes time, we can also see that it builds the margin gradually as we move forward.

Q: How much has cost inflation impacted the financials of ECIT and what is expected going forward?

A: So far, our financials have not been impacted by cost inflation, at least a limited impact to our financials. But no doubt, going forward, we expect that cost will increase, and that`s why also we have this on our agenda to mitigate, and make sure we can defend our margins going forward.

And I can add, being an outsourcing company, we are constantly under pressure on our margins. So meaning, we are very good at making more efficient processes, change systems, better production, and we are also in a business where it is natural to mitigate pressure on the margin, which is what a high inflation actually is. We cannot fly, but we think we are able to handle it going forward.

In tough times, people still need accounting and IT, and of course one should not be cocky about it, but it is something all of our customers will need, always so to speak, whether the sun is shining or it is snowing or raining, you will still need your accountant and you will still need your IT-support.

Q: What are the future expectations to pay out larger dividends as the operational cash flow eventually becomes larger than needed for acquisitions?

A: I think we will keep the dividend level around where we have been, it is not something that has been discussed in the board yet, we have initiated a small share buyback programme, which actually increased the amount spent on paying back to the investors. I am not really sure in my time we will be in a position where we are not able to spend the cash flow from operations to do new acquisitions. I think our heart is in building the business, and eventually we will be a dividend share, but there`s pretty much geography and companies to conquer so to speak before we think we have done what we should do in the building phase. A clever level on dividends for as long as we can see.