Lumi Gruppen
Presentation Q3 2022, 2 November 2022 CEO Erik Brandt and CFO Martin Prytz Q3
Lumi Gruppen — a leading private education provider in Norway
Lumi
Sonans
Oslo Nye Høyskole
Sonans
Sonans
Oslo
market
Oslo Nye Høyskole
(2021)
student
National Student Survey:
Oslo Nye Høyskole — National Student Survey: Online educational offer (2021)
Introduction About Lumi Gruppen Executive Summary Financials
Gruppen
Strategy & Operations
Nye Høyskole Outlook Disclaimer
Attractive market position and financial characteristics
—
leader within private candidate exams
—
overall
satisfaction
Top 1 Top 3 Top 1 Revenue 2021 (NOK million) Adj. EBIT 2021 (NOK million) Adj. EBIT% 2021 532 133 25%
The group consists of two main operating segments: Sonans and Oslo Nye Høyskole (ONH). Sonans is Norway’s market leader within high school private candidate exam preparation courses. ONH is a private university college, with a campus in central Oslo, and a strong online offering.
High school private candidate exam preparation courses in Norway.
Private university college with strong online offering and campus in Oslo.
LUMI GRUPPEN presentation Q3 223
Introduction
About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole
Outlook Disclaimer
Challenging market conditions post-Covid, cost reduction programmes implemented
Online shift and decline in application to higher education
significantly affects the private candidate market
Revenue ended at NOK 121.5 million for the third quarter (-7.2%)
Adjusted EBIT ended at NOK 30.9 million for the third quarter (-4.6%)
Cost reduction programme totalling NOK 61 million implemented in
Sonans to mitigate the effect of the online shift and the decline in campus sales
Introduction of “Live” successful, already a mid-sized campus with profitable operations and an integrated part of the campus course offering
Oslo Nye Høyskole with a stronger performance compared to the higher education market, cost reduction programme totalling NOK 15 million decided on and implemented in Q4 2022
Operating
LUMI GRUPPEN presentation Q3 225
Revenue Q3 and Ytd (NOKm) Adj. EBIT Q3 and Ytd (NOKm) Q3-22 Q3-21 Ytd-21Ytd-22 121.5 130.9 398.3388.5 -7.2% -2.5% Q3-22 Q3-21 Ytd-22 Ytd-21 30.9 32.4 90.0 109.6 -4.6% -17.8%
Introduction About Lumi Gruppen Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole Outlook Disclaimer
Financials
LUMI GRUPPEN presentation Q3 227
Introduction
About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole Outlook Disclaimer
Solid growth for online in a challenging market
Operating revenue ended at NOK 121.5 for the third quarter (-7.2%)
Sonans revenue ended at NOK 73.1 million (-15.5%) in the third quarter, online revenue grew by 54.8% while campus revenue declined by 40.7%
Changes in commercial terms for Sonans online positively affects online revenue in the quarter together with the price increases implemented
ONH revenue ended at NOK 48.4 million (+8.5%) in the third quarter, online revenue grew by 13.6% and campus revenue grew by 1.9%
Quarterly Operating Revenue (NOKm) Development
LUMI GRUPPEN presentation Q3 229
in Operating Revenue Q on Q (NOKm) ONH Campus -25.9 Q3-22Sonans Campus Q3-21 12.5 Sonans Online 0.4 3.4 ONH Online 130.9 121.5 -7.2% Q3-22 Q3-21 121.5 130.9 -7.2%
Introduction
About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole
Outlook Disclaimer
Decline in campus revenue for Sonans offset by the cost reduction programme implemented in Q3
Adj. EBIT ended at NOK 30.9 million for the third quarter (-4.6%)
Adj. EBIT margin improved by 0.7% compared to same period last year
Cost reduction programme totalling NOK 61 million implemented for Sonans and reported savings in personnel cost on adjusted basis was
NOK 12.3 million in the third quarter. Other expenses were down by NOK 3.4 million
ONH OpEx increased by NOK 5.3 million in the third quarter compared to last year, while revenues grew by NOK 3.8 million. Growth in OpEx driven by the new programmes
Cost programme totalling NOK 15 million decided on for ONH, yielding impact already from fourth quarter and full effect from first quarter next year
LUMI GRUPPEN presentation Q3 2211 Adj. EBIT (NOKm) and Adj. EBIT (%) Development in Adj. EBIT Q on Q (NOKm) Q3-22 Q3-21 25.4% 24.7% 30.9 32.4 -4.6% Sonans Revenue Adj. EBIT Q3-21 5.3 13.4 15.6 Sonans OpEx 3.8 ONH Revenue ONH OpEx 1.6 Group/ NTECH 0.6 Depr. & Amortisation Adj. EBIT Q3-22 32.4 30.9
Introduction
About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole
Outlook Disclaimer
Sonans
Online revenue growth and cost reduction programme implemented in Q3
Operating Revenue ended at NOK 73.1 million (-15.5%) for the third quarter
Growth for online driven by higher volumes (i.e., online shift) and the effect of changes in the commercial terms for online courses from January 1, 2022
Personnel expenses were reduced by NOK 12.3 (-35.3%) million in the third quarter compared to same period last year. Number of FTEs is down by 22%
Other operating expenses were reduced by NOK 3.4 million (-15.9%), mainly related to lower campus operation expenses, overhead, and marketing expense
Adj. EBIT ended at NOK 20.9 million (+1.7%) for the third quarter
Adj. EBIT margin improved by 4.8% compared to the same period last year
—
LUMI GRUPPEN presentation Q3 2213 Revenue (NOKm) Adj. EBIT (NOKm) Active studentsAdj. OpEx (NOKm) 86.4 Q3-22 Q3-21 73.1 -15.5% 40.3 Q3-22 Q3-21 55.9 -28.0% 20.5 Q3-22 Q3-21 20.9 +1.7% 3,526 Campus Online 3,1193,097 4,911 -36.9% -11.5% Q3-22 Q3-21
Introduction
About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole
Outlook Disclaimer
Sonans
— Online revenue growth and cost reduction programme implemented in Q3, cont.
Cost reduction programme has been successfully implemented in Q3
2022 In Q3 2022, reduction in total operating expenses was NOK 15.6 million, of which NOK 9.6 (61%) million on reported basis
Reduced personnel expenses largest contributor in the cost reduction programme, followed by reduced campus operation expenses and reduced marketing expenses
Majority of measures not short term in nature and will continue to yield impact going forward and contribute to an improved profitability for Sonans
LUMI GRUPPEN presentation Q3 2215 Number of FTEs in Sonans Specification of the cost reduction programme 105 112 143 Q3-21FC Q4-22 Q3-22 -27% 14 28 6 9 4 LTM Adj. OpEx Q22022* Estimated 12M Adj. OpEx Base Q2-2023 Reduced Service Fee from Group 232 Closing 3 Campuses FTE Reduction Sonans Reduced Marketing Expense Otber 171 -26% * LTM OpEx Q2 2022 = the period from Q3 21 to Q2 22
Introduction
About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole
Outlook Disclaimer
Oslo Nye Høyskole
— continued revenue growth, ramp up in cost to be offset by the cost reduction programme
Operating Revenue ended at NOK 48.4 million (+8.5%) in the third quarter, online revenue growing by 13.6% and campus revenue growing by 1.9%
Growth driven by new programmes in combination with a higher share of recurring revenues from the multi-year programmes (bachelor and master’s programmes)
Operating expenses at ONH increased by NOK 5.4 million in the third quarter. This is mainly related to personnel expenses for the new programmes. Other expenses decreased by NOK 0.9 million
Cost reduction programme totalling NOK 15 million decided on and implemented in the fourth quarter. Expect full effect from January 2023
Adj. EBIT ended at NOK 11.0 (-12.3%) with a corresponding margin of 22.7% (-5.5%)
LUMI GRUPPEN presentation Q3 2217 Revenue (NOKm) Adj. EBIT (NOKm) Active studentsAdj. OpEx (NOKm) Q3-21Q3-22 48.4 44.6 +8.5% 29.6 Q3-22 Q3-21 35.0 +18.0% Q3-22 Q3-21 11.0 12.6 -12.3% 837 938 Campus Online 2,031 1,860 -10.8% +9.2% Q3-22 Q3-21
Introduction
About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole Outlook Disclaimer
Lumi Group
— Improved financial flexibility with the amendment to the loan agreement
Agreement with Nordea on new terms for the school year 2022/2023. The new agreement allows for a sufficient headroom
Covenant waiver for Q3 and Q4, leverage covenant @4.0 in Q1 2023 and @5.0 in Q2 2023
Slightly higher interest rate next 9 months (+0.25%) and penalty fee of NOK 1.25 million
Measures taken to improve net working capital and liquidity. Negotiation on payment terms with suppliers and monthly payment for leases vs. pre-quarterly payments
LUMI GRUPPEN presentation Q3 2219 Cash and RCF NIBD, ex. Lease New Leverage Covenant 70 70 67 107 177 137 Q3-22 Q3-21 -22.4% 363 342 Q3-22 Q3-21 +6.0% Cash RCF Q3-22 Q1-23 0.0 Q4-22 Q2-23 0.0 4.0 5.0 CovenantWaiver/holiday
Introduction
About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole Outlook Disclaimer
Group
— Financial Focus
Sonans
Execute on the cost reduction programme totalling NOK 61 million to mitigate the effect of the decline in revenue for the school year 2022/2023
Additional measures in pipeline, including a review and assessment of the campus network and online offering (channel strategy)
ONH
Execute on the cost reduction programme totalling NOK 15 million to mitigate the effect of flat volumes year on year and ramp -up in OpEx from new programmes Group Functions
Contribute to optimization of processes cross business units and continue the process to reduce overhead expenses for Sonans and ONH
LUMI GRUPPEN presentation 3 2221
Introduction About Lumi Gruppen Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole Strategy & Operations
Sonans Oslo Nye Høyskole Outlook Disclaimer
Strategy & Operations
LUMI GRUPPEN presentation Q3 2223
Introduction About Lumi Gruppen Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole Outlook Disclaimer
• Strong market position maintained in a challenging market
• Underlying market demand for education still strong
• Significant cost programme implemented according to plan, a more scalable and flexible operational model established
• Strong intake for Bachelor and Master’s programmes
• Outperformed the market development for higher education in Norway
• Growth strategy from 2019 implemented, updated growth strategy in process
25
Introduction About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole Outlook Disclaimer
Sonans
— improved sales towards end of the autumn student intake
Total sales for the student intake this autumn down by 28% vs. last year
― Campus declined by 42%
― Online including “Live” up 12%
― Total sales declined by 28% as of week 37
Key market drivers affecting the education market in 2022
Strong decline in applicants to higher education (-13%)
— Strong decline in students without an admission place (-43%)
— Third consecutive year with cancelled exams in high schools, improved grades and less students failing (low drop out rate and “grade inflation”)
— Low unemployment rate
— Young people can travel and do something else for the first time since 2019
292 209 Total -28% Total sale LY Total sale 218 126 Campus -42% 74 83 Online +12% 209 292 323 0 50 100 150 200 250 300 350 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 -10% -28% 2022 2021 2020 Final student sales autumn intake 2022 Accumulated student sales autumn intake 2020 to 2022 LUMI GRUPPEN presentation Q3 2227
Lumi
Gruppen
Nye Høyskole
& Operations
Nye Høyskole
A future oriented operation established
Sonans
aligned with the challenging market conditions
time employees reduced by 22% per Q3
campuses closed
efficiency optimized
Administration re-organized
more scalable and flexible business model established
of «Live» successful
already a mid-size campus and profitable
Significant increase in online students possible without additional costs
capacity not fully utilized
increased geographical reach
financial metrics for digital platforms with limited
cost and a more flexible cost base
Introduction About
Gruppen Executive Summary Financials Lumi
Sonans Oslo
Strategy
Sonans Oslo
Outlook Disclaimer Operations
— Full
— Three
— Classroom
—
A
— Introduction
—
—
— Campus
— Significantly
Attractive
investment
—
LUMI GRUPPEN presentation Q3 2229
Lumi Gruppen
Summary
Gruppen
Nye Høyskole
& Operations
Nye Høyskole
Market fundamentals and need for higher education still strong
Sonans
for skilled workers
Technological advances
in society increasing
Increased job opportunities
wages Report from SSB*
the importance of
diploma before
schools
for
private candidate schools
people wanting to
education
their
labour market
candidates are
growth in the market for
from
when including
years
older
education
Introduction About
Executive
Financials Lumi
Sonans Oslo
Strategy
Sonans Oslo
Outlook Disclaimer Demand
increasing —
— Complexity
—
— Improved
confirms
private candidate schools — 62% didn’t have any
entering
— Private candidate
crucial
young
change
lives — 80% of private candidates entering either higher
or
— Up to 45% of first-time private
25
or
Stable
higher
recent years — CAGR 3%
2013 to 2019, 4%
2021 and 2022
—
* Statistics Norway
Continuous growth in campus sales since 2008 with a CAGR of 11% until the Covid outbreak in 2020 80 100 135 145 165 160 182 162 194 219 236 246 266 218 126 0 50 100 150 200 250 300 2010 20132008 20122009 2011 20162014 2015 2017 2018 2019 2020 2021 2022 +11% -31% LUMI GRUPPEN presentation Q3 2231
Introduction
About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole Outlook Disclaimer
Solid market position maintained despite the market decline
Sonans
Stable market share of around 60% maintained since 2014
— Four times higher than #2 private candidate school
Highest student satisfaction among private candidate schools
— Considerable resources devoted to create optimal learning environment
— Never compromised on student satisfaction when implementing efficiency measures
— Student satisfaction on same high level Autumn 2022 despite significant cost reduction
— Student critical functions remained at local campuses
Sonans with strongest multichannel student offerings
—
Solid market position of around 60% maintained since 2014* 60% 15% 12% 7% 5% 1% Sonans Comp. 3Comp. 1 Comp. 2 Comp. 4 Comp. 5 * Source: proff.no (“Comp.” = competitor) LUMI GRUPPEN presentation Q3 22 37 10 2 1 1 1 Sonans Comp. 5Comp. 3Comp. 1 Comp. 2 0 Comp. 4 Other Successful online transformation – Sonans uniquely positioned among private candidate schools “Top of mind” within online teaching* * Source: Sonans survey (“Comp.” = competitor) 33
Introduction About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole Outlook Disclaimer
Continues to outperform market for higher education
ONH
ONH with stable student intake vs last year, excluding single subjects
— Overall market for higher education fell 12.6% in 2022
Bachelor programmes up 9% secures increased earnings visibility
Limits operational risk
— Master programme up 65%
— Annual programmes fell by 11%
Robust growth for new programmes
— Existing programmes affected by challenging markets due to post-covid effects
ONH applied for new bachelor programme
— Plan to launch new annual programmes derived from multi year programmes
—
Signed contracts: Solid performance for multi year programmes in a challenging market 618 23 677 20 1 338 671 38 600 27 1 336 Bachelor Master Annual units Other Total +9% +65% -11% +35% 0% 2021 2022 LUMI GRUPPEN presentation Q3 2235
Introduction
About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole Outlook Disclaimer
ONH — Higher student intake expected given investments made last 2 years
Key priority to increase number of students in existing programmes
— Increase economies of scale
Cost reduction programme totalling NOK 15 million in annual cost savings
Full effect from January 2023
— Positive P&L impact expected already in Q4 2022
Cost reduction mainly related to personnel reductions
Doubling
programmes since
of multi year
2020 Total number of students up 14% since 2020 5 10 10 Q3 2020 Q3 2021 Q3 2022 LUMI GRUPPEN presentation Q3 22 988 1,618 Q3 2020 Q3 2021 2,513 Q3 2022 1,236 2,798 1,880 2,868 1,277 1,180 Number of Students multi year programmes Number of Students other 37
Introduction About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans
Oslo Nye Høyskole Outlook Disclaimer
— Update of growth strategy in progress
ONH
Growth strategy implemented in 2019 completed
— Continue to develop new programmes with a solid market potential
Business model increasingly more effective and scalable
— Simplify reporting routines
Comprehensive update of ONHs quality systems
— Quality audit by NOKUT in Q1 2023
Improve coordination of operations
— Identify synergies and better coordinate operations at ONH and Norwegian School of Technology when operational
Developing the digital offering
— More Bachelor students attending online programmes
— ONH: a unique position within online courses
— public sector does not prioritize
LUMI GRUPPEN presentation Q2 2239
Introduction About Lumi Gruppen
Executive Summary
Financials
Lumi Gruppen
Sonans
Oslo Nye Høyskole
Strategy & Operations
Sonans Oslo Nye Høyskole Outlook Disclaimer
Outlook
Operations aligned with challenging market conditions
— Sonans: cost programme implemented, additional measures in pipeline
— ONH: cost reduction programme of NOK 15 million decided on
Financial flexibility restored
— Financial covenants in 2022 waived, adjusted for the first half of 2023
Financial forecast for 2022
— Expect revenues in the area of NOK 505 million (532) and Adj. EBIT in the area of NOK 105 million (134)
Well prepared for a likely market recovery next year
— Still a strong need for higher education in Norway
— A new more scalable business model established
— Competitive position for Lumi Gruppen strengthened during the pandemic
Challenging macro environment with increasing interest rates and inflation
Disclaimer
This presentation includes forward-looking statements which are based on our current expectations and projections about future events. Statements herein, other than statements of historical facts, regarding future events or prospects, are forward-looking statements. All such statements are subject to inherent risks and uncertainties, and many factors can lead to actual profits and developments deviating substantially from what has been expressed or implied in such statements. As a result, you should not place undue reliance on these forward-looking statements.
The Group reports its financial results in accordance with accounting principles IFRS. However, management believes that certain alternative performance measures (APMs) provide management and other users with additional meaningful financial information that should be considered when assessing the Group’s ongoing performance. These APMs are non-IFRS financial measures, and should not be viewed as a substitute for any IFRS financial measure. Management, the board of directors and the long term lenders regularly uses supplemental APMs to understand, manage and evaluate the business and its operations. These APMs are among the factors used in planning for and forecasting future periods, including assessment of financial covenants compliance.
LUMI GRUPPEN presentation Q3 2241
LUMI GRUPPEN presentation Q3 2242