creating great everyday experiences - tieto

Creating great

everyday experiences

© Tieto Corporation

Inte

rnal

43 %

39 %

10 %8 %

30 %

33 %

28 %

9 %

34 %

28 %

31 %

7 %

Adjusted 1) EBIT by segment

Customer sales in 2018: EUR 1 600 millionAdjusted1) EBIT margin: 10.2%

Tieto’s market position:

Leading market position in Finland

Among top 3 vendors in Sweden

Among top 8 vendors in Norway

Sales by segment

Sales by country

1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items 2

Financial facts

Digital Experience

Hybrid Infra

Industry Software

Product Development Services

Digital Experience

Hybrid Infra

Industry Software


Finland

Sweden

Norway

Other

Multi-year performance improvement

-5%

0%

5%

10%

15%

-100

-50

0

50

100

150

200

2014 2015 2016 2017 2018

EBIT, EUR million EBIT %

-6%

-4%

-2%

0%

2%

4%

-1000

-500

0

500

1000

1500

2000

2014 2015 2016 2017 2018

Net Sales, EUR million Growth %

2015 2016 2017 2018

2015 2016 2017 2018

CUSTOMER EXPERIENCE / NPS

EMPLOYEE ENGAGEMENT SCORE

REVENUE GROWTH, %

OPERATING MARGIN, %

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

2014 2015 2016 2017 2018

DIVIDEND/SHARE, EUR

Base dividend Additional dividend

-0,6

-0,4

-0,2

0,0

0,2

0,4

0,6

0,8

1,0

2014 2015 2016 2017 2018

NET DEBT / EBITDA

3

Market opportunity and

strategy 2019

4

Digital experience and data driving customers’ competitiveness

Adapt enterprise

architecture

Data and insights

Design and experience

Renew applications

How we

can help

Hybrid Infrastructure

Digital transformation

accelerating

Agile development

sprints a new norm

Business continuity and

cost optimization

Faster time to market

5

Predictive

healthcare

Digital

citizen

services

Connected

vehicles

Connected

consumer

products

New business outcomes

for customersTo be addressed by

customers

Digital

platforms

6

Digital Experience as the main growth driver

– all businesses expected to grow above market

✓ Investments in digital capabilities – addition of 2 500–3 000

people during the strategy period 2019–2022

✓ Scalable Industry Software continues to drive global expansion

Significant operational simplification

✓ Organizational simplification

✓ Overlapping roles of administrative nature cease to exist

✓ Impacting 700 roles globally, annualized savings of EUR

30–35 million

Implementation of the new strategy started

✓ New Leadership Network effective as of 1 April

✓ Country based Go-to-Market effective during Q2/2019

✓ Personnel negotiations proceeding as planned

✓ New reporting structure as of Q2/2019

Upgraded financial ambition

✓ Growth of over 5%

✓ Adjusted operating margin 13%

✓ Attractive dividend policy maintained

Strategy summary


Key markets: Finland, Sweden and Norway

Building on strong global delivery capabilities and long term

off-shore development

Focus on Nordic enterprises and the public sector

Selective international expansion of Industry Software

Longer term ambition for broader Tieto expansion

in European markets

PDS continues to grow its global customer base -

focusing on software R&D

Global delivery capabilities:China, Czech, India and Poland

Nordic focus, serving customers globally – with a global Tieto team

7Employing 15 000+

experts globally Serving customers in over

90 countries world-wide


Services driving competitiveness

Industry Software

for business critical

processes

Industry-specific

software/solutions, such as

Lifecare, Case Management,

Credit and SmartUtilities

Digital Experience

enabling new

business models

eCommerce and

customer experience

Data science

and platforms

Cloud-native

applications

Hybrid Infra

ensuring clients' business

continuity and efficiency

Hybrid cloud

(private and public)

24/7 services

and datacenters

End-user services

Product Development

Services

making customers

products connected

Telecom

Automotive

Consumer electronics

8

Global solutions include Payments

Hydrocarbon Management,

Production Excellence

Digital

Experience

Hybrid Infra

Industry

Software

Product

Development

Services

Business potential and value drivers

9

• Build scale for Design, Analytics and Cloud integration

• Increase customer impact by combining capabilities

from Design, Data and Application Modernization

• Build multicloud platforms to enable unified service

experience

• Accelerate automation and machine-led delivery models

• Unified practices, scalability and synergies across

software businesses

• Expand functionality for further differentiation

• Continue expanding global customer base

• Extend value proposition to adjacent industries

Today Ambition

Today Ambition

Today Ambition

Today Ambition

Capability / Performance uplift

© Tieto Corporation10

Primary reporting segments

Revenue

by

country

Digital

Experience

Industry

Software

Hybrid Infra Product

Development

Services

Norway

Sweden

Finland

Other countries

New reporting segments starting Q2 2019

Value creation

11

Consistent value creation continuesWell positioned to gain market share in the Nordics

Accelerated growth driven

by Digital Experience and

Industry Software – active

M&A agenda continues Recognized for innovation –

investments to capture data-driven

opportunities continue

Upgraded financial

ambition and attractive

dividend policy

12

Clear market

opportunity to

accelerate customers’

digital transformation

with data-rich services

Financial ambition as announced at the strategy launch in February 2019 3)

Ambition 2022

Growth over 5% (CAGR 2019–2022)

Adjusted operating margin (EBIT) 13%1)

1) Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital

gains/losses, goodwill impairment charges and other items affecting comparability

In accordance with IFRS 16, effective as from 1 Jan 2019

2) In accordance with IFRS 16, effective as from 1 Jan 2019 – equals to around 1.5 prior to IFRS 16

3) 3) Subject to change after the planned merger of Tieto and EVRY

Aim is to increase base dividend

annually in absolute terms

Net debt/EBITDA below 2.0

in the long term2)

• Temporarily may exceed 2.0 during the period

• CAPEX expected to remain below 4% of sales and

offering development costs at ~ 5% of sales

• Strong cash flow driving attractive dividend profile

• Continued active M&A in addition to organic growth

• Main drivers include growth, simplified operations

and automation

13

Investments focusing on accelerating digital capabilities and

software business expansion

Investment focus

• Accelerate digital capabilities e.g. Design, AI, Public cloud

• Incubate future technologies e.g. Blockchain

• Solution accelerators, data assets and platforms

• Ongoing renewals in Healthcare, Utilities and Payments

• Expand functionality to drive competitiveness

• Selective international expansion and SaaS models

• Infra service experience and multi-cloud orchestration

• Enable PDS customer base expansion

• Skill renewal and learning as a Lifestyle

Investment drivers

Digital Experience

Industry Software

Other

70-80% of

investments

14

Q2/2019 and

outlook for 2019

15

406 404 367 422 408 403

9,39,0

11,7

12,1 10,0

8,4

0

5

10

15

0

100

200

300

400

500

Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19

Customer sales Adjusted1) EBIT, %

Q2 2019 key figures

Net sales at the 2018 level› EUR 403.2 (404.1) million, up by 1% in local

currencies› Negative impact of the shorter quarter and

currencies ~EUR 9 million, 2 percentage point

Adjusted EBIT margin 8.4% (9.0%)› EBIT EUR 18.1 (31.3) million, 4.5% (7.7)

› Includes EUR 15.9 million in adjusted items

› Adjusted1) EBIT EUR 34.0 (36.2) million, 8.4% (9.0%)

› Negative impact of the shorter quarter and currencies ~EUR 4 million, 1 percentage point

Order backlog EUR 1 800 (1 731) million

MEUR %

16

1) adjusted for amortization of acquisition-related intangible

assets, restructuring costs, capital gains/losses, goodwill

impairment charges and other items affecting comparability

14581 14956 15109 15190 15275 15101

49,4 49,8 50,6 50,6 50,9 51,0

0,0

20,0

40,0

60,0

0

5000

10000

15000

20000

Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19

Number of full-time employees and offshore ratio

Number of personnel Offshore ratio

0,5

1,0 1,0

0,7

1,1

1,5

0

0,5

1

1,5

2

Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19

Net debt/EBITDA

406 404 367 422 408 4030

100200300400500

Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19

Net sales

Customer sales

Quarterly development

Number of personnel down by a net amount of 89 in H1/2019

%

MEUR

Employees

MEUR

17

61,5 12,3 18,7 81,7 43,3 37,1

-8,2 -11,4 -8,7 -16,7 -9,4 -12,5

-25

-5

15

35

55

75

95

Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19

Net cash flow from operations and capital expenditure

Net cash from operations Capital expenditure


Inte

rnal

Healthy development in a number of growth businesses

Digital Experience

› Customer Experience Management +13% (24%)

Hybrid Infra

› Cloud services +10% (8%)

› Security services +29% (41%)

Industry Software

› Lifecare +6% (5%)

› Payments +11% (12%)

› Oil & Gas +5% (13%)

Annual sales in 2018

~ EUR 60 million

~ EUR 125 million

~ EUR 12 million

~ EUR 180 million

Growth1) in Q2 (H1)

~ EUR 50 million

~ EUR 60 million

181) In local currencies

125 127 106 130 130 123

13,712,8

10,9 14,6 14,98,6

0

5

10

15

20

0

50

100

150

Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19

%MEUR


Digital Experience

Customer sales Q2› EUR 123 (127) million› Down by 3%, or 2% in local currencies

EBIT› Adjusted1) EBIT EUR 10.6 (16.2) million, 8.6% (12.8)

Q2 highlights› Sales decline attributable to continued currency

headwinds and a shorter quarter› Application Services growth 1% - impacted by one

large customer insourcing› CEM +13% in local currencies, growth supported by

the acquisition of Meridium› In Q3, adjusted operating margin anticipated to be at or

above the level of Q3/2018

19




132 131 124 133 129 134

7,5

10,8

12,5

9,7

6,9

10,8

0

5

10

15

0

50

100

150

Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19

%MEUR


Hybrid Infra

Customer sales in Q2› EUR 134 (131) million› Up by 2%%, or 3% in local currencies


Q2 highlights› Infrastructure cloud +10% and Security Services

+29% in local currencies› Decline in traditional infrastructure services

decelerated, sales down by 2% › EBIT margin at Q2/2018 level

› Somewhat higher personnel costs› Effieciency measures initiated Q2 anticipated

to have a positive effect during H2/2019› In Q3, adjusted operating margin anticipated to be

above the level of Q3/2018

20




115 113 105 122 113 111

10,3

7,5

16,918,0

12,510,9

0

5

10

15

20

0

50

100

150

Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19

%MEUR


Industry Software

Customer sales Q2› EUR 111 (113) million, down by 1%› Organic growth in local currencies 1%


Q2 highlights› Strong growth in Payments solutions › In Lifecare, customer deployments proceeding on

schedule and with positive customer feedback › In SmartUtilities, offering development accelerated to

support customer deployments starting in 2020› Investments in common software platforms with

longer-term financial returns – Lifecare and SmartUtilities

› EUR 4.1 million in offering development costs capitalized

› In Q3, adjusted operating margin anticipated to be slightly below the level of Q3/2018

21




34 34 32 36 37 35

12,7

8,79,9 10,1

12,3

7,9

0

5

10

15

0

25

50

Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19

%MEUR



Customer sales Q2› EUR 35 (34) million› Up by 3%, or 5% in local currencies


Q2 highlights› Growth affected by continued currency headwinds

and a shorter quarter› Strong volume development with the largest key

customers and good development in automotive› Excluding the impact of currency headwinds and a

shorted quarter, adjusted EBIT margin remained at Q2/2018 level

› In Q3, adjusted operating margin anticipated to be at or below the level of Q3/2018

22




Performance drivers in 2019

› Aim to grow faster than the market in local currencies

› Productivity improvement measures, incl. automation, optimized

subcontracting, offshoring, management of competence pyramid

› Salary inflation over EUR 30 million

› Operational simplification anticipated to result in annualized gross savings of

EUR 30–35 million› Around EUR 15 million anticipated to contribute to the H2/2019 performance

› Restructuring costs anticipated to amount to EUR 20–25 million, of which of which

EUR 13 million were booked during Q2/2019 – the remainder anticipated to materialize

during H2/2019

› Costs related to the merger, subject to the approval of the transaction,

anticipated to amount to EUR 15-20 million – affecting EBIT in H2/2019 (reported in adjusted items)

23


Inte

rnal

Guidance for 2019 unchanged

› Tieto expects its full-year adjusted1) operating profit (EBIT) to

increase from the previous year’s level (EUR 168.0 million in 2018)

added by the impact of IFRS 16 2) to maintain the comparability

after the adoption of the new standard

1) adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses,

goodwill impairment charges and other items affecting comparability

2) The company estimates that the adoption of IFRS 16 will have a positive impact on operating profit in

2019. In the first half, the impact was EUR 2.0 million. Comparative periods are not restated. More

information on the adoption of the standard can be found in the Accounting Policies in the tables section.

24


Digital Advantagefor Nordic Enterprises and Societies

NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN OR ANY JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE LOCAL SECURITIES LAWS OR REGULATIONS OF SUCH JURISDICTION.


Creating a leading Nordic digital services company

Note: EVRY financials converted at NOK/EUR = 9.6006.

• One of the leading digital services and software

companies in the Nordics serving key industries across

Sweden, Norway and Finland

• Stronger combined position in Sweden

• Significant employer in digital services and software in

Sweden, Finland and Norway with 24 000 professionals

globally

• 5 000 digital consultants accelerating Nordic customers

digital transformation

• Competitive hyperscale platform for cloud and infra

services

• Globally competitive product development services

• Strong Fintech solutions and industry software

• Combined revenues of EUR 3 billion with 25%

generated from software and related services and 40%

from Digital Consulting and Software R&D services

Combined

Revenue 2018A

€2.9 billion

Combined Adj.

EBIT 2018A

€327 million (11.1%)

61%

31%

8%

Complementary markets and services

2018 revenue breakdown by business line and geography

Source: Company Filings as of 31 December 2018. EVRY financials converted at NOK/EUR = 9.6006

€1.3bn 43%

39%

10%

8%

€1.6bn Finland

Sweden

Norway

Other

Norway

Sweden

(incl.

Finland)

Other

46%

15%

30%

8%

28%

32%

31%

9%

€1.3bn

Technology

Services &

Modernization

Business Consulting

& Implementation

Industry

Solutions

Product Development

Services

Digital

Platform

Services

Consulting Services

Application

Services

Fulfilment

Services

€1.6bn

Complementary market presence

• Solid market positions in Norway and Finland

based on respective strengths of EVRY and Tieto

• High complementarity and scale in Sweden,

positioned for growth

Complementary scale of services and capabilities

• One of the leading Digital consulting practices in

Norway, Sweden and Finland

• Complementary cloud and infrastructure

managed services – scalable and competitive

• Competitive combined software business

including a strong value proposition to Financial

services

Strategic rationale

1

2

3

4

5

6

Creation of a leading Nordic digital services company

Complementary markets and services

Delivering customers’ digital success and experience

Opportunity for employees to shape the future today

Strong value creation for shareholders

Common values and innovation as a foundation

for future expansion

Indicative

timeline for

the merger

H2/2019• Targeted publication of prospectus in mid-August 2019

• Tieto’s and EVRY’s EGMs to be held in September 2019 at the latest

• Closing expected in Q4 2019 or Q1 2020 at the latest (subject to

approval by EGMs in Tieto and EVRY as well as obtaining necessary

merger control approvals and customary closing conditions)

Appendix

30


Key customersTop 10 customers account for 29% of sales

Financial Services Public, Healthcare and Welfare Industrial and Consumer Services

Tieto has around 900 customers across industry groups. According to the terms and

conditions of the customer agreements, Tieto is able to introduce only part of them.

31

All information in this material is for informational purposes only.

The opinions and viewpoints regarding, inter alia, the future of the

company and markets are of Tieto and may not actually materialize.

This information should not be construed as an investment recommendation or

investment advice. All information expressed herein is subject to change without

notice. Neither Tieto nor its officers nor employees shall have any liability for any loss

sustained by anyone who has relied on the information provided.

32

creating great everyday experiences - tieto

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