K3 Business Technology : Final Results Presentation (30th March 2023)

K3 Business Technology Group plc

Final Results

Year ended 30 November 2022

30 March 2023

Presentation Team

Tom Crawford, Chairman

• • Appointed Chairman in October 2020

• • Over 20 years' experience in the software industry in the UK, Europe and North America

• • Successful track record of growing international product-based software businesses

• • Former CEO of Aptitude Software Group Plc, global financial management software company

Marco Vergani, CEO

• • Appointed CEO on 30 March 2021

• • Over 30 years' experience in technology, principally in senior commercial sales in Europe, Far East and USA

• • Extensive retail, consumer and e-commerce experience (recently AI-driven personalisation)

• • Previously, IBM VP Business Process Outsourcing EMEA; Digital River SVP Global Sales & Account Management

A Significantly Stronger, Fitter K3

Financially stronger - transition to cash generation

Operationally fitter - positioned for future growth

Clear strategic focus - high growth opportunity; fashion products

Significant opportunity to increase recurring revenue, profitability & cash

K3 Overview/ Vision - Product-led Growth Business

High Growth Opportunity

K3 Products: Strategic Fashion Products

K3 Fashion | K3 Pebblestone | K3 ViJi

FY22: £13.5m rev | adj. EBITDA £0.7m | gross margin 78%

Strong Cash Flows

Third-party Solutions

• • ERP solutions for designer, fashion and apparel retailers and brands that transform 'concept-to-consumer' processes and margins (incl. design, assortments, manufacturing, supply chain, distribution, sales and returns)

• • Accelerate uptake via focus on:

  • ― Sustainability - supply chain traceability

  • ― Unified inventory optimisation/ enablement

  • ― Microsoft relationship - route to larger brands

• • Global Accounts - specialist services - focused on supporting IKEA platform enhancement, integration and global growth of IKEA franchisees

  Global Accounts (IKEA franchisees) | NexSys

  FY22: £34.0m rev | adj. EBITDA £12.8m | gross margin 52%

• • NexSys - SYSPRO-based ERP systems for UK manufacturers and distributors, with exclusive K3 add-ons and market-leading support in selected verticals e.g. aerospace, plastics

FY22 - Encouraging Underlying Financial Improvement

(£m)

Revenue from continuing operations - recurring & predictable revenues1 Gross profit

FY22 47.5 37.6 28.1

FY21

45.3 +5%

33.9 +11%

26.8 +5%

- gross profit margin Adj. EBITDA2

Loss before tax from continuing operations

59.2% 5.1 (3.8)

59.3%

4.4 +16%

Discontinued activities profit after tax incl. gain on disposal

0.1

(7.8) +£4m 12.3

Adj. EPS from continuing operations (p) Net cash 3

(2.6) 7.1

(13.6) +11p

9.0 -£1.9m

1 Recurring revenues comprises maintenance, support and services revenue under a framework agreement > 2 years

• 2 Adjusted Profit from operations plus Development amortization and depreciation

• 3 Bank borrowings and cash

FY21 - Disposal of non-core Sage and Starcom businesses included in discontinued activitiesAnnualised recurring contracts ("ARC") is the annual contracted income from support, maintenance, SaaS and term-contract software, spread over the term of the contract

Change

• • Strong Recurring & Predictable Revenue ― 79% of total revenue (2021: 76%)

• • Increased Annualised Recurring Contracts ("ARC")

  ― total up 11% to £22.9m (2021: 20.7m)

  ― strategic fashion products ARC up 32% to £5.7m (2021:

  -

  £4.3m)

• • Profitability Well Ahead ― Adj. EBITDA up 16% to £5.1m (2021: £4.4m)

  ― Legacy POS revenue attrition but margins maintained

• • Cash Outflow (annualised) Significantly Reduced ― transition to cash generation

• • Healthy Net Cash of £7.1m ― after Viji acquisition cost and £1.0m capex in systems Transition to 31 May 30 Nov LTM to 23 Mar

cash generation (£m annualised)

2022 2022 2023

31.5.22

22 30.11.22

(3.0)

28.2.23

Cash neutral