CAPITAL MARKETS DAYTalenom Plc

CEO Otto-Pekka Huhtala

The agenda of the day:

Overview of Talenom, Otto-Pekka HuhtalaCEO

Development of automation continues, Juha JutilaDirector, Business Development

An unbeatable customer experience yields a competitive edge, Juho AhosolaDirector, Accounting Services

Acquisitions boost growth, Antti AhoCFO

International growth, Tuomas IivanainenDirector, International Business

Small customer concept, Miikka HätäläDirector, Small Customers

CAPITAL MARKETS DAYTalenom Plc

1. EASY FINANCIAL MANAGEMENT ROUTINES FOR ENTREPRENEURS

2. AUTOMATED ACCOUNTING PROCESS

3. PLAIN LANGUAGECARE SERVICES

Choices for the strategy period: Effortless, automated and attentive

OUR VIsION:UNBEATABLE

accounting and banking services

for smes

International change drivers in the accounting and banking sector: Developing infrastructure and legislative changes

promote digital transformation

Legislation supports an open environmentthat promotes competition:

• New e-Invoicing Directive into force on 1 April 2020: companies have the right to receive an e-invoice from another company. E-invoicing between the government and companies (B2G) accelerates the change.

• The Payment Services Directive PSD2 obligates opening up bank interfaces across the EU, which lowers banks’ service fees.

• Basel regulations have tightened the solvency requirements of banks, which has created the need for new financing channels for SMEs.

Source: Billentis (2019)

B2B/B2G/G2B

Expected marketpenetration in 2019:

>40%20-40%

0

50

100

150

200

250

300

Lightentrepreneurs

0 - 39 40 - 99 100 - 399 400 - 1,999 2,000 - 9,999

Size

of th

e ac

coun

ting

mar

ket

(m

illio

neu

ros)

Range of variation of SME net sales (thousand euros)

overview of the market by customer segment in Finland

A NEW TARGET MARKET FOR TALENOM:SMALL CUSTOMER SECTOR OF

SMEs, THE SIZE OF THE MARKET ISAPPROX. 40% OF THE ACCOUNTING MARKET.

Our services by customer segment

SMALL CUSTOMER SECTOR REQUIRES A DIFFERENT KIND OF PRODUCT PORTFOLIO

TALENOM ACCOUNTING SERVICE

The company is in good shape

TALENOM IS ONE OF

THE BEST PLACES TO WORK

IN FINLAND

DEVELOPMENT OF THE DEGREE OFAUTOMATION HAS CONTINUED

HIGH

NET PROMOTER SCORE (NPS)

sTRONG PROFITABILITY,

OPERATING PROFIT 21.5% OF NET SALES

(1-9/2020)

202530354045505560

hein

ä.19

syys

.19

mar

ras.

19

tam

mi.2

0

maa

lis.2

0

touk

o.20

hein

ä.20

syys

.20

NPS, 3 months (7/2019-10/2020)

51

7/19

9/19

11/1

9

1/20

3/20

5/20

7/20

9/20

7.1 9.0 10.55%7%9%11%13%15%17%19%21%23%

0

2

4

6

8

10

12

1-9/2018 1-9/2019 1-9/2020

Operating profit, January-September

Liikevoitto Liikevoitto %EBITEBIT, %EBIT, MEUR

MEUR

19.4%

20.8% 21.5%

of net sales

10/2

0

• The accountancy market is a fragmented and growing market characterised by the statutory accounting requirement and the transition created by digitalisation.

• The accounting market in Finland is highly fragmented:

• In 2019, there were 4,105 (4,134) companies(")

• The average company size was 3 (3) employees (")

• The size of the accounting market in Finland was 1,148 (1,099) million euros in 2019 (")

• Annual market growth has remained good despite various financial crises (")

• Historically, price rises, the increase in receipts and higher sales of value-added services have acted as drivers of growth.

* NB: When referring to structural business and financial statement statistics, which have been published since the 2013 figures, statistics preceding that year are also included: 2001-2006 Business Register statistics (TOL 2002) and 2007-2012 Business Register statistics (TOL 2008).

(1) Statistics Finland, structural business and financial statement statistics*

BUSINESS ENVIRONMENT IN THE ACCOUNTING SECTOR

Size of the sector, million euros

DEVELOPMENT OF AUTOMATION CONTINUES

Juha JutilaDirector, Business Development

Mission:100% automation of accounting and payroll service. Eliminating routines, experts to support customers.

Background: MSc (Econ.), BSc (Tech.)

Development and management positions in Talenom’s accounting services since the beginning of 2015.

DEVELOPMENT OF AUTOMATION CONTINUES

Focus in 2019 and 2020: improving process efficiency

• A leap forward was achieved especially in the accounting process, in which the number of intermediate stages was reduced from ten to three

• System development has reduced the need for labour and thereby improved our capacity to take on new customers without hiring more accountants

Focus shifts again to the development of automation

• The degree of automation in the accounting production line is slightly over 70%, with potential for further development. Target: over 90% (2023)

• Payroll service automation has only just begun. This year, it is rising from almost zero to over 25%. The aim is 100% automation of manual routines

• There is also potential for development in the degree of automation in sales invoicing. The first sub-process nearing 100% (now about 95%)

Thanks to development, there is more time to take care of customers than ever before!

THE BENEFITS OF AUTOMATION IN NUMBERS: OPERATING PROFIT HAS IMPROVED 215% IN THREE YEARS

1,000 euros

Year 2017 includes non-recurring costs of 310 thousand euros related to stock listing.Talenom Group adopted IFRS 16 Leases on 1 January 2019, due to which the review periods are not fully comparable. During the period 1-12/2019, the standard had a positive effect on operating profit (+115 thousand euros).

4,840

8,545

10,409

0

2000

4000

6000

8000

10000

12000

2017 2018 2019

Operating profit

EBIT

12,000

10,000

8,000

6,000

4,000

2,000

An unbeatable customer experience yields a competitive edge

Juho AhosolaDirector, Accounting Services

Mission:Developing an unbeatable customer service experience with Talenom’s excellent personnel.

Background: BBA, MScA (financial law)

Various expert, development and management positions at Talenom since 2013

Target market of the accounting business

0

50

100

150

200

250

300

Lightentrepreneurs

0 - 39 40 - 99 100 - 399 400 - 1,999 2,000 - 9,999

Size

of th

e ac

coun

ting

mar

ket

(mill

ion

euro

s)

Net sales of SMEs, range of variation (thousand euros)

An unbeatable customer experience yields a competitive edge

The objective is to provide an unbeatable customer experience• We believe in the seamless combination of technology and

service. An unbeatable customer experience is created by combining a digital user experience with high-quality, proactive service.

• We want to stand out as an active player that works for the benefit of entrepreneurs.

• In addition to ordinary accounting services, we help our customers with added value services for finance, taxation and administration.

There is more time to take care of customers than ever before!• The time freed up by automation is directed/invested in

customer encounters.• The number of proactive contacts by experts has grown

many times over.• Experts hold regular care meetings with customers.

Satisfaction with one’s own expert is higher than ever.

The journey towards an unbeatable customer experience

Continuous and uncompromising development of competence and satisfaction• We invest heavily in competence development à we continuously train our personnel.• Almost 100 KLT experts graduated from our own KLT training programme in 2016-2019.

Development in customer satisfaction• We continuously survey our customer experience. Based on thousands of responses, our

NPS for 2020 is 51.• àCustomers feel that encounters provide significant added value. They are particularly

satisfied with their own contact person/accountant.

Accountant-specific NPS measurement• Every expert has a personal NPS rating on their scorecard – Talenom is possibly the only

accounting firm in the world to do this.

Financial effects

• Higher customer satisfaction is seen in improved customer retention. During the past two years, the trend in our customer retention has been positive.

Highly personal service is a winning concept also in the future!

Continuous customer experience measurement – NPS (3-month AVERAGE)

20

25

30

35

40

45

50

55

60heinä.19 elo.19 syys.19 loka.19 marras.19 joulu.19 tammi.20 helmi.20 maalis.20 huhti.20 touko.20 kesä.20 heinä.20 elo.20 syys.20 loka.20

NPS 3 months (graph)Jul 19 Aug 19 Sept 19 Oct 19 Nov 19 Dec 19 Jan 20 Feb 20 Mar 20 April 20 May 20 Jun 20 Jul 20 Aug 20 Sept 20 Oct 20

GROWTH CONTINUES

We want to be an active player in the market, both now and in the future:

• Finland's best-known accounting firm (Innolink 2020)

• Sales and franchising teams comprise the engine, both now and in the future

• We aim to grow both teams in 2021

In addition:

• We seek geographical coverage through distance sales

• Acquisitions support organic sales

ACQUISITIONS BOOST GROWTH

Antti Aho CFO

Mission:Better thinking, better decisions

Background: MSc (Econ.), KLT

Expert, development and management positions at Talenom since 2003

Our substantial investments in software and achievements in developing efficiency support increasing volume through acquisitions as well

Why is an acquisition currently a viable option for a small accounting firm?• A system replacement calls for major investments of time and money• Digitalisation is changing the balance of power between software companies

and accounting firms – unfavourably for the latter• Developing your own platform requires massive investments• Administrative resources are needed to deal with the ever-tightening regulation

of accounting firms (e.g. Incomes Register, GDPR, Money Laundering Act)

Why carry out acquisitions?

Accounting firms in Finland by net sales category (M€)• No financial information 1,700• 0 – 0.5 2,200• 0.5 – 1 170• 1 – 2 60• 2 – 5 30• 5 – 10 7• >10 9

Average operating profit of companies in the field 10%

In acquisitions, the valuation of accounting firms is generally approximately:

• 0.3–1 x net sales or• 3–5 x EBITDA

M&A market

(FIGURES: ROLLING 12 MONTHS TO Q3,

ACQUISITIONS LESS THAN 3 YEARS AGO

ELIMINATED)

Short-term effect of acquisitions

10/2017–9/2018

10/2018–9/2019

10/2019–9/2020

Net sales excl. acquisitions 45,717 51,950 55,860

Growth % 14% 14% 8%

Operating profit excl. acquisitions 7,935 10,797 12,743

Operating profit % 17% 21% 23%

Net sales of acquirees 1,404 3,541 7,751

Operating profit of acquirees 7 -327 -843

Operating profit % 1% -9% -11%

Total net sales 47,121 55,491 63,610

Growth % 17% 18% 15%

Total operating profit 7,942 10,470 11,899

Operating profit % 17% 19% 19%

CASE EXAMPLE KUOPIO *

1. Year: Customers and personnel• Building trust• Administrative changes

2. Year: Systems and processes• System replacements• Training customers and personnel

3. Year: Stabilisation• Development of productivity• New customer acquisition

Year 1 Year 2 Year 3

Net sales 1,163 1,467 1,572

Operating profit -82 296 306

Operating profit % -7% 20% 19%

-200

0

200

400

600

800

1000

1200

1400

1600

1800(Thousand euros)

* NOTE! DEVELOPMENT IN SWEDISH ACQUISITIONS IS SLOWER THUS FAR

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

-200

INTERNATIONAL GROWTH

Tuomas IivanainenDirector, International Business

Mission:Make Talenom international

Background: MSc (Tech.)

Management positions at Talenom since 2016

THE NUMBER OF SMALL AND MEDIUM-SIZED ENTERPRISES IN EUROPE IS GREAT – AND THERE IS SIGNIFICANT POTENTIAL TO ENHANCE EFFICIENCY

• The micro and small segment is served by countless individual consultants and small accounting firms.

• Very traditional working processes (AUT, EST, GER).

• Short-term efficiency potential:• Process development + simple

automation tools + systematic management

• Long-term efficiency potential:• Talenom’s software and best practise

processes

15,717,000

997,100152,100 33,800

0

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

12 000 000

14 000 000

16 000 000

0-9 10-49 50-250 more than 250

Number of enterprises by size category in terms of number of employeesAUT, BEL, DEN, EST, FIN, FRA, GER, GRE, ITA, LAT, LIT, NED, POR, SWE, SPA

16,000,000

14,000,000

12,000,000

10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

0

Observations on Europe:• Legislation has evolved into its current rather complex

form over hundreds of years -> permanent need for expertise

• Weak economic growth is a driver for projects to boost efficiency

• SMEs account for a significant share of GDP (+50%)• Fragmented accounting firm market –> limited

investment capacity• Traditional working methods -> great need for

investments• Lack of skilled professionals -> optimisation of workload

through networking and subcontracting

INTERNATIONAL POTENTIAL – an example

Population (million)

GDP (EUR billion)

Market size (EUR million)

Finland 5.5 239 1,000Sweden 10.2 479 2,000Austria 8.9 392 2,500Germany 82.9 3,403 32,000Netherlands 17.3 788 7,400

44,900

We develop our approach to adapting operating models in the target country to match Talenom’s own Service as A Service model

WE ARE LEARNING HOW TO VENTURE INTO NEW MARKETS…

... BECAUSE THERE ARE MANY VERY ATTRACTIVE COUNTRIES IN EUROPE WITH A MASSIVE NUMBER OF SMALL AND MEDIUM-SIZED ENTERPRISES, TRADITIONAL FINANCIAL PROCESSES AND FRAGMENTED MARKETS FOR ACCOUNTING SERVICES.

JAMES BOND (12 MONTHS)• market analysis• networking• infrastructure• de facto working methods• looking into acquisitions

BRIDGEHEAD POSITION (12 MONTHS)• conceptualisation and organic

growth• process efficiency analysis and

development of working methods• systematic development of the

organisation and management

GROWTH AND DEVELOPMENT (24 MONTHS)• growing the sales organisation• acquisitions• developing sector concepts• continuous development model• localisation of own software

OWN TECHNOLOGY AND SERVICE• service as a service• own technology in vital processes• strong growth and profitability

PHASE 1.

PHASE 2.

PHASE 3.

PHASE 4.

APPROX: 3

.5-4.5 YE

ARS

Small customer concept

Miikka HätäläDirector, Small Customers

Mission:Developing and launching the best-ever software platform for small entrepreneurs and harnessing it in business operations with a start-up entrepreneur’s mindset in cooperation with the best experts in the

field.

Background: MSc (Tech.)

Marketing and Communications Director at Talenom since 2015

Major new business potential

0

50

100

150

200

250

300

0 - 39 40 - 99 100 - 399 400 - 1,999 2,000 - 9,999

Size

of

the

acco

untin

g m

arke

t (M

EUR

)

Net sales of Finnish SMEs (thousand euros)

New market for Talenom: SMEs SmallCap sector. 40% of market,

amounting to MEUR 381.8.Talenom’s target market: Medium-sized

SMEs. 49% of market.

Distribution channel: organic proactive sales in direct customer

encounters

Talenom’s target market has to date mainly consisted of medium-sized SMEs

A new, concerted effort to enter the market for small customers in the SME sector

New target market: Small customers in the SME sector. The size of the market

is approx. 40% of the accounting market.

Light entrepreneurship: a new way to start the journey as a Talenom

customer, targeted at the smallest entrepreneurs.

Distribution channel:

Automated platform

marketing

Distribution channel: organic proactive sales in direct customer

encounters

0

50

100

150

200

250

300

Lightentrepreneurs

0 - 39 40 - 99 100 - 399 400 - 1,999 2,000 - 9,999

Size

of

the

acco

untin

g m

arke

t (M

EUR

)

Net sales of Finnish SMEs (thousand euros)

Talenom’s target market: Medium-sized SMEs. 49% of market.

More reasons to grow not only among mid-sector SMEs but also among small customers

Excellent suitability of the independent platform for productisation in Talenom’s technology environment

Growth outlaysyield clear mutual benefits

Due to the substantial customer volume, small customers are pivotal

A product family for small entrepreneursthat scales perfectly

2. TiliJaska Free

3. TiliJaska Pro

4. TiliJaska Premium

1. Talenom Light Entrepreneur

TALENOM ACCOUNTING SERVICE

TiliJaska™

Free + Premium = Freemium:• Free: A free basic system for DIY accounting,

suitable for the smallest customers• Premium: Seamless distribution channel for

Talenom’s high-quality accounting services

Brand new banking services – cards and IBAN accounts• A unique product offering – even internationally

In small customers, the speed is an advantage

Key to success:

1. Unbeatable product portfolio

2. High expertise and development speed

3. Most visible brand and the financing required to fuel the fast rate of growth

Coming next to

TiliJaska

Target schedule

10/2020 11/2020 12/2020 1/2021 2/2021 3/2021 4/2021 5/2021 6/2021 7/2021 8/2021

in Q3 report(26 Oct. 2020):Release of the

first versions of TiliJaska and the

Light Entrepreneur

service60 customers in

closed beta.

31 Dec. 2020: Beta phase limitations

will begin to be partially lifted

More than 100 customers in open

beta.

End of beta. Banking services made available to customers

(IBAN accounts and debit cards).

1 Feb.–31 Mar. 2021: release of TiliJaska

version 1.0 with bank services (IBAN

accounts and debit cards)

200–300 customers. Beta phase ends.

Release of the first Swedish version

1 Jun.–31 Jul. 2021: Release of the first

Swedish versionFirst customers in the

Swedish beta.

Talenom Light Entrepreneur service

Thank you

Questions?