Capnor Weasel Bidco Oyj, Financial Statements Bulletin 2023

CAPNOR WEASEL BIDCO OYJ

Financial Statements Bulletin

January – December 2023

 Financial Statements Bulletin 2023

*  Year 2023 and 2022 EBITDA, EBIT & Operational Cash Flow included an impact from a brand renewal project, IT Salonen transaction and a market
    study conducted with external companies together with costs related to iLOQ 20 years anniversary, which have been treated as items affecting
    comparability. The adjustment related to brand renewal was 378 thousand euros, IT Salonen acquisition 60 thousand euros, market study 488 thousand
    euros and iLOQ 20 years anniversary events 870 thousand euros. These costs have been excluded in the Adjusted EBITDA, EBIT and Operational
    Cash Flow figures above.

Management overview of the fourth quarter

iLOQ Group’s revenue increased compared to the corresponding period of the previous year despite the continued low activity in the multi-residential new construction and renovation markets in the Nordics. Strong performance continued in the rest of the world compared to the same period in the previous year. Revenue increased 12% compared to the same period in the previous year.

Prevailing geopolitical risks related to Russia’s invasion of Ukraine and the resulting rise in energy prices, together with an increasing interest rate environment have had a negative impact on the real estate sector during 2023. This negative market sentiment continued also in the fourth quarter of the year. Especially the new construction market has been affected, which constitutes only a small part of iLOQ’s revenue base. However, continued postponement in decision making in the renovation market has affected overall demand also in the fourth quarter. Management is confident that the long-term growth potential and drivers in the market remain intact despite a short-term slowdown, due to delayed investments by customers, and that iLOQ is well positioned to continue to outgrow the market also during periods of softer market activity.

iLOQ continues to invest in future growth and the market entry in the US is on schedule and progressing as planned. iLOQ has a local sales organization in place, which has already generated a solid pipeline in the US. Logistic channels and partner network are being built and the US standard ANSI cylinder products were launched during the review period. Market entry for the US built environment market also took place during the review period.

iLOQ has been able to successfully mitigate supply-chain disruptions in the market to be able to meet customer demand. This has required high inventory levels that have burdened iLOQ’s operational cash flow in 2023. However, inventories declined materially during the seasonally high fourth quarter as expected. This improved the operational cash flow compared to the previous quarters. However, the working capital remained relatively high as high delivery volumes increased receivables, which are expected to be collected during the first quarter of 2024.

The fourth quarter of 2023 included significant events for iLOQ:

iLOQ launched its battery-free product portfolio for the North American multifamily property market in October. iLOQ’s solution features the first lock cylinder on the planet to harvest operating energy from the NFC field generated by a smartphone for unlocking. This innovation takes physical keys, batteries and excess wiring out of the equation maximizing security while ensuring zero maintenance and massive OPEX savings as well as eliminating battery waste.

iLOQ announced in October that its science-based net-zero targets by 2050 had been validated by the Science Based Target initiative (SBTi). iLOQ commits to measure and reduce its scope 3 emissions. iLOQ commits to reach net-zero by 2050 and is already producing 0 emissions in Scope 1 and 2. As part of this, iLOQ commits to reduce total emissions 90% by 2050 from a 2022 base year.

Fourth quarter 2023

Total revenue increased 12% compared to Q4 2022 and fourth quarter was characterized by normal seasonality with high delivery volumes. Low activity in the multi-residential new construction and renovation markets in the Nordics continued, but strong performance in the rest of the world continued compared to the same period in the previous year.

Adjusted EBITDA amounted to MEUR 20.8 (16.6), corresponding to a 36% (33%) EBITDA margin. EBITDA and EBITDA margin were driven by the seasonally strong volume development and related operational gearing. Also gross margins have remained unchanged at the historical healthy levels. Continued investments in growth, including costs related to the US market entry, continued to increase opex and impacted EBITDA negatively in the quarter.

Adjusted EBIT amounted to MEUR 17.6 (14.0), corresponding to a 31% (27%) EBIT margin.

Adjusted Operational Cash Flow was MEUR 12.3 (7.1).

Full year 2023

Total revenue grew 6% compared to FY 2022. Revenue declined in the Nordics, while strong performance continued in the rest of the world compared to the previous year.

Adjusted EBITDA amounted to MEUR 32.7 (31.9), corresponding to a 23% (24%) EBITDA margin. EBITDA margin was negatively impacted by the low revenue growth and growth investments in the US and Australia market entries.

Adjusted EBIT amounted to MEUR 21.8 (22.3), corresponding to a 15% (17%) EBIT margin.

Adjusted Operational Cash Flow was MEUR 12.5 (9.1).

Events after the reporting period

There were no material events after the reporting period.

Quarterly Information

Declaration of the Board

We confirm that, to the best of our knowledge, the condensed financial statements give a true and fair view of the Group’s assets, liabilities, financial position and results of operations for the period. We also confirm, to the best of our knowledge, that the management overview includes a fair review of important events that have occurred during the full year of 2023.

Espoo February 14, 2023

                                                     Heikki Hiltunen                                       Magnus Hammarström

                                                  President and CEO                                         Member of the Board

INCOME STATEMENT

BALANCE SHEET

STATEMENT OF CASH FLOWS

*) Other adjustment relates to previous year’s retained earnings and a misstatement in the bonus and commission provision.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Notes to the interim consolidated financial statements

1. Reporting Entity
 

Capnor Weasel Bidco Oyj (the Company) is domiciled in Finland. These condensed interim financial statements for the quarter which ended on December 31, 2023 comprise the Company and its subsidiaries (together referred to as the ‘Group’)

2. Accounting Principles
 

The Group’s Financial Statement Bulletin for January–December 2023 has been prepared in line with IAS 34, ‘Interim Financial Reporting’ and should be read in conjunction with the Group’s financial statements for 2023, which will be published on week 15, 2024. The Group has applied the same accounting principles in the preparation of this Financial Statements Bulletin as in its Financial Statements for 2022.

3. Seasonality

The Group operates in an industry that sees seasonal changes in revenue. In a typical year, the first three quarters

amount to approximately two thirds of the Group’s full-year revenue while the last quarter sees the revenue rise to amount to one third of the full-year revenue. Therefore, in a normalized year, the financial results of the fourth quarter can be expected to be stronger than first three quarters.

4. Segment reporting
 

Capnor Weasel Bidco Group is a Finnish group of companies. In addition to the parent company Capnor Weasel Bidco Oyj, iLOQ Group belongs to the Group. Industrial operations are in the iLOQ Group that offers solutions for electronical locking. iLOQ Group operates with a network business model in the manufacture and distribution of products. iLOQ Group’s products are sold through iLOQ’s distribution channel providing professional installation and maintenance services. iLOQ Group has subsidiaries in Sweden, Denmark, Norway, Germany, Benelux, France, Spain, the United Kingdom, USA, Canada, Poland, Australia and Singapore.

The Group's business operations are managed and monitored as one entity. Subsidiaries are sales organizations,

and their turnover consists of commission charges from the iLOQ Group's parent company. Based on the similarity of business operations, products, services and production processes, the Group has only one operating segment. The Executive Board is iLOQ Group's chief operative decision maker. The Executive Board evaluates the performance of the company and the use of resources as a whole. Composition of the Group's turnover and geographical distribution is presented with the notes related to turnover. The Group has one external customer with net sales over 10% of the Group's total net sales. The Group's most significant non-current assets are located at the domicile state of the parent company.

5. Revenue
 

The revenue of Capnor Weasel Bidco Group consists of digital locking and access management systems. The Group's products consist of supplied locks, software as well as lock operation and maintenance services. The Group's main customers are retailers and partners of locking products and major end-customers in the Critical Infrastructure segment with a signed frame agreement.

Revenue is recognized when control over the goods or the service is transferred to the customer. Product deliveries are recognized as revenue when control is transferred on the basis of the delivery of the products, when the risks and benefits have been transferred to retailers. EX Works Incoterms delivery term is generally used on the delivery of products. For few significant customers, performance obligation is satisfied at the time of the delivery, and for these deliveries Delivered Duty Paid Incoterms are applied. Revenue from maintenance and repair services is recognized over time as the customer receives the benefits simultaneously as the service is provided. Sales contracts are made with the regular payment terms. A yearly discount can be granted to customers for products sold.

The Group's revenue by geographical area is presented below.

INTANGIBLE ASSETS AND GOODWILL

PROPERTY, PLANT AND EQUIPMENT

RELATED PARTY TRANSACTIONS

The Group’s related parties consist of parent company iLOQ Oy and its subsidiaries. In addition, related parties include iLOQ-Group’s Board members as key management personnel, the CEO and members of the Group management, as well as entities that are under the control of key management personnel and their family members. There were no related party transactions during the reported period.

GROUP STRUCTURE AND ACQUISITIONS

During 2023, iLOQ opened the subsidiaries iLOQ Oceania Pte LTD and iLOQ Middle-East FZ-LCC.

In 2022 the group acquired IT-Salonen Oy and founded a subsidiary iLOQ Polska sp. z o o and started business in the subsidiary iLOQ USA Inc.

CONTINGENT LIABILITIES

Definitions of alternative performance measures

1. EBITDA = EBIT before depreciation, amortization and impairments

2. Operational Cash Flow = EBITDA + Change in trade and other receivables + Change in inventory + Change in trade and other payables + Change in provisions + Investments in intangible assets + Investments and Payments in tangible assets. Operational Cash Flow is used internally by the group to follow EBITDA which takes into account investments and change in working capital

3. Operational Cash Flow % = Operational Cash Flow / Revenue

4. Adjusted EBITDA, Adjusted EBIT & Adjusted Operational Cash Flow = Same as above but excluding an impact from a brand renewal project, a market study, IT-Salonen acquisition and iLOQ 20 years anniversary which have been treated as items affecting comparability. The adjustment related to brand renewal in Q1 2023 was 378 thousand euros, in Q3 2023 IT Salonen acquisition 60 thousand euros and iLOQ 20 years anniversary 870 thousand euros. In FY 2022 conducted market study adjustment was 488 thousand euros. These costs have been excluded in the Adjusted EBITDA, EBIT and Operational Cash Flow figures above.

CONTACT

Additional information about the company can be found on the corporate website www.iloq.com. The company can be contacted by e-mail, info@iloq.com

For questions concerning this report please contact:

Heikki Hiltunen

CEO and President

Heikki.Hiltunen@iloq.com

Timo Pirskanen

CFO

Timo.Pirskanen@iloq.com