SPAN Q3 2022 Capital Experience

SPAN stock rises amid Your Capital Experience

November 14th, 2022
the Big Tech drop
Recommendation
INVESTMENT SUMMARY
Target range 448.35 kn – 495.95 kn
SPAN showed its ability to react quickly to unexpected Current price 249.00 kn
circumstances by shifting revenue sources to more stable Potential upside 80.1% – 99.2%
Recommendation Strong Buy
markets. Additionally, the newly opened Cybersecurity Center
SPAN, S&P Global 1200 IT Sector & CROBEX
can address increased security demand. High-profit growth and Relatives Prices
generous dividends signal that SPAN is the investment for the long 1,8 SPAN
1,6 +42.3%

Relative Share Price

term. However, investors' sentiment is still less confident due to 1,4
recent Big Tech drops (FAANG stocks).
1,2 CROBEX -3.1%
1,0
0,8
Global equity stocks, global tech stocks, and the 0,6 S&P Global 1200 IT
0,4
Croatian equity market are accumulating losses while SPAN's 0,2
-19.4%
0,0
stock price steadily grows.

2021-09-23

2021-11-23

2022-01-23

2022-03-23

2022-05-23

2022-07-23

2022-09-23
The expected target share price for the SPAN is 469.53 kn
ranging from 448.35 kn to 495.95 kn. The potential upside ranges
Stock Information
from +80.1% to +99.2%, given the last closed price was 249.00 kn
Ticker Bloomberg SPAN CZ
(November 11th, 2022). Our recommendation is a strong buy for Ticker Zagreb SE SPAN
SPAN shares. ISIN HRSPANRA0007
Price range 245.00 kn – 249.00 kn
Price range (%) 1.6%
Market cap 488,040,000 kn
Equity Research Authors Free float shares 1,960,000
Karlo Cebović Filip Horvat Price 249.00 kn
Chief Executive Officer Associate Price date November 11th, 2022
[email protected] [email protected] Avg. daily volume 487,489 kn

Key SPAN Financials 2020 A 2021 A 2022 TTM 2023 F 2024 F 2025 F 2026 F 2027 F
Values in '000 kn
Revenue 613,757 774,124 840,212 1,027,424 1,262,049 1,525,507 1,831,872 2,238,645
Revenue growth +30.1% +26.1% +8.5% +22.3% +22.8% +20.9% +20.1% +22.2%
EBITDA Margin +5.5% +5.5% +8.0% +8.3% +13.5% +16.5% +18.2% +20.1%
Earnings per share +58.11 +15.61 +25.86 +29.84 +68.00 +102.68 +140.28 +192.10
Price/Earnings 14.87x 9.63x
Free cash flow to Firm 44,854 50,560 84,232 51,771 184,232 259,442 356,810 437,384
Free cash flow to Equity 15,650 11,689 52,102 119,145 175,239 262,420 347,120 449,381

INVESTMENT SUMMARY 1
 COMPANY INSIGHTS

SPAN’s stock price had a roller-coaster in Q3

Q3 2022 finished with approximately the

same revenue segment distribution. SAM
Business segments revenue share
segment decreased its lead from 67% in Q2 to Software Asset Management & Licensing
Cloud & Cybersecurity
66% in Q3. Software Development increased its
IT Service Management & Technical Support
portion from 7% in Q2 to 8% in Q3. Other Software Development & Business Solutions
segments didn't change their revenue portions.
8%
SPAN's stock price is approximately the
13%
same as three months ago, accompanied by
growth and drop spikes. SPAN's price rose until
Revenue
13% Share
mid-August when they released their treasury
66%
shares. Since then, it had been in a downward
trend until the beginning of October. The stock
price drop was briefly interrupted when SPAN opened a cybersecurity center, and International Institute for
Climate Action recognized SPAN's social and environmental contributions.

The stock price stabilized at around 238 kn when SPAN bought back 6.691 shares. At the end of
October, the stock price increased in anticipation of good Q3 results. SPAN's stock price remains the same as
at the beginning of the previous quarter.

SPAN News Events

18/Aug/2022
Released 375 treasury shares
03/Oct/2022
- 16,870 out of 17,245 31/Oct/2022
Buyback of 6.691
261 kn shares - 23.490 out 2022 Q3 Financial
of 16.799 Report Published
251 kn
The new season of
252 kn SPAN Management
06/Sep/2022
08/Aug/2022 SPAN invited to the ESG Academy
Independent Equity Summit & GRIT Awards by announced 246 kn
Research Published the International Institute 238 kn
09/Nov/2022
for Climate Action
Released 1.207
treasury shares -
SPAN opened the center for
20.029 out of
cybersecurity in
21.236
cooperation with Cybergym
2022-08-08

2022-08-15

2022-08-22

2022-08-29

2022-09-05

2022-09-12

2022-09-19

2022-09-26

2022-10-03

2022-10-10

2022-10-17

2022-10-24

2022-10-31

2022-11-07

COMPANY INSIGHTS 2
Profit growth is off the charts, again
Revenue, EBITDA & net income are growing even faster than in Q2 2022. The global equities (MSCI
ACWI All Cap), Global IT (S&P Global IT 1200), and Croatian market (CROBEX) are down -18.1%, -25.8%, and -
7.9% YTD, respectively.

Revenue growth was +20.7% annually in the last 5 Revenue Growth

years. We expect approximately the same growth rate of +8.5%
+21.7% annually in the next 5 years. 2022 TTM Year-over-Year

EBITDA margin ranged from +2.6% to +8.0% in the last EBITDA Growth
5 years. We expect an EBITDA margin from +8.3% to +20.1% in +57.0%
the next 5 years due to a lower OPEX portion of revenue. 2022 TTM Year-over-Year

Net income margin ranged from -0.2% to +6.0% in the Net Income Growth
last 5 years. Operating profit can drive net income margins +110.2%
from +5.6% to +16.7% in the next 5 years. 2022 TTM Year-over-Year

Advantages

1. High profit growth

2. Improved risk-adjusted returns
3. Opening of a new Cybersecurity Center
4. High solvency

Risks

1. Revenue stagnation of the Software Asset Management & Licensing segment

2. Increased tech industry risk
3. Highly skilled employee shortages
4. EBITDA margin lower than its peer group

Disclaimer

The equity share prices are highly volatile financial instruments. It is impossible to predict future share
prices, and this analysis shouldn't be used for predictions. Rather, we are trying to explain conditions under
which certain expected prices can occur. Capital Experience is not responsible in any way for losses that can
arise from using this analysis. SPAN d.d. ordered this analysis, and it is as such its ownership.

COMPANY INSIGHTS 3
MAIN VALUE DRIVERS

The most influential drivers that can change share price are the Cost of Capital/Equity, revenue, and
OPEX. The ±1% change in the Cost of Capital and Cost of Equity can change target share price by ±22.9% and
±17.9%, respectively. Revenue variations of only ±1% can change target share price by ±6.1%. OPEX ±1%
change can impact the target share price by ±5.1%.

Cost of Capital/Equity had the highest increase of impact on the share price in Q3. Focusing on
customers from developed markets can significantly reduce the Cost of Capital/Equity. Revenue and OPEX
also increased the impact on the share price in Q3. Revenue growth and tighter cost control have more impact
on the share price.

The impact of 1% change in key drivers on target share price

453.87 kn 485.28 kn
456.40 kn
Full
482.71 kn
Company
467.67 kn 471.39 kn Control
469.47 kn 469.59 kn

598.76 kn 750.90 kn
Partial
Company
538.58 kn 643.56 kn
Control

484.07 kn 488.35 kn
412.49 kn 419.59 kn
Without
Company
382.51 kn 390.24 kn
Control
274.34 kn 279.89 kn

Revenue

The expected revenue CAGR is +21.7% in the next 5 years. The revenue growth is due to the expansion
of the client base in each of SPAN business segments:

1. Software Asset Management & Licensing CAGR +18.6%,

2. Cloud & Cybersecurity CAGR +31.7%,
3. IT Service Management & Technical Support CAGR +17.9%,
4. Software Development & Business Solutions CAGR +31.3%,
5. Other revenue CAGR +21.4%.

MAIN VALUE DRIVERS 4

 REVENUE DRIVERS 2021 A 2022 TTM 2023 F 2024 F 2025 F 2026 F 2027 F
Software Asset Management & Licensing 557,834 550,206 673,627 813,161 948,915 1,087,630 1,290,088
Revenue Growth +25.0% -1.4% +22.4% +20.7% +16.7% +14.6% +18.6%

Cloud & Cybersecurity 73,515 106,140 134,782 177,276 237,540 318,830 419,842
Revenue Growth +33.1% +44.4% +27.0% +31.5% +34.0% +34.2% +31.7%

IT Service Management & Technical Support 88,093 110,227 127,756 148,117 178,253 212,705 250,734
Revenue Growth +24.4% +25.1% +15.9% +15.9% +20.3% +19.3% +17.9%

Software Development & Business Solutions 47,830 66,144 81,662 112,482 148,006 196,504 258,183
Revenue Growth +26.8% +38.3% +23.5% +37.7% +31.6% +32.8% +31.4%

Other Revenue 6,852 7,495 9,597 11,012 12,793 16,203 19,798

Portion of Segment Revenue +0.9% +0.9% +0.9% +0.9% +0.8% +0.9% +0.9%

Revenue 774,124 840,212 1,027,424 1,262,049 1,525,507 1,831,872 2,238,645

Revenue Growth +26.1% +8.5% +22.3% +22.8% +20.9% +20.1% +22.2%

Operating expenses

The expected OPEX CAGR is +18.1% in the next 5 years. The OPEX growth is similar to revenue growth
due to the strong association between the cost of goods sold and other operating expenses with revenues.

The highest expected OPEX is COGS. Employee expenses are the second largest OPEX but have the
highest expected growth rate in the next five years.

OPEX DRIVERS 2021 A 2022 TTM 2023 F 2024 F 2025 F 2026 F 2027 F
Cost of Goods Sold (507,619) (496,566) (585,297) (652,273) (719,248) (786,224) (853,200)
Portion of Revenue -65.6% -59.1% -57.0% -51.7% -47.1% -42.9% -38.1%

Employee Expenses (138,584) (181,331) (250,339) (308,109) (391,355) (515,710) (694,827)

Number of Employees 423 697 830 988 1,215 1,553 2,030
Expenses per Employee (328) (260) (302) (312) (322) (332) (342)
Employee Growth +12.8% +64.8% +19.1% +19.1% +23.0% +27.7% +30.7%

Other Operating Expenses (85,062) (95,047) (106,976) (131,492) (163,167) (197,210) (240,004)
Portion of Revenue -11.0% -11.3% -10.4% -10.4% -10.7% -10.8% -10.7%

Operating Non-recurring Items (333) 1,685 0 0 0 0 0

Operating Expenses (747,192) (790,155) (961,763) (1,112,230) (1,298,956) (1,523,230) (1,815,735)

OPEX Growth +25.3% +5.7% +21.7% +15.6% +16.8% +17.3% +19.2%

5
VALUATION

Investors are skeptical about future cash flows

Both investors' sentiment and future cash flows suggest that the current SPAN stock price is
undervalued. However, the investors' sentiment is more conservative than what the expected free cash flows
would recommend.

The target share prices for the SPAN

750,90 kn
643,56 kn
492,62 kn 419,59 kn 496,13 kn
664,37 kn 390,24 kn
584,93 kn 488,35 kn 279,89 kn 469,53 kn
416,04 kn 386,37 kn
277,11 kn
598,76 kn 538,58 kn 484,07 kn 412,49 kn 382,51 kn 448,46 kn
274,34 kn
EV/Revenue

EV/EBITDA

Target Price
Price/Earnings

Price/Book
Free Cash Flow to

Free Cash Flow to

Equity
Firm

The expected target share price for the SPAN is 469.53 kn ranging from 448.46 kn to 496.13 kn. Target
share price and its range is average of EV/Revenue, EV/EBITDA, Price/Earnings, Price/Book, Free Cash Flow to
Firm (to all investor types), and Free Cash Flow to Equity (to equity investors) valuation methods. The potential
upside ranges from +80.1% to +99.3%, given the last closed price was 249.00 kn (November 11th, 2022). We
recommend a strong buy of SPAN shares.

Valuation methods used to determine target share price

SPAN
Target Price
Intrinsic Relative
Value Value

Free Cash Flow Free Cash Flow

EV/Revenue EV/EBITDA
to Firm to Equity

Price/Earnings Price/Book

VALUATION 6
Relative comps – Investors are most bullish on earnings in Q3

The highest multiple is related to earnings (Price/Earnings), suggesting that net income has the highest
target share price impact. However, SPAN's highest target share price arises from the EV/Revenue multiple.
High revenue compared to the peer group secured the highest target share price.

For peer-group comparison, we choose only companies operating in Software Asset Management &
Licensing, Cloud Infrastructure & Cybersecurity Services, IT Service Management & Technical Support,
Business Software Development & Solutions most similar to SPAN. After conducting research, we choose
Glintt Global Intelligent Tech, Ctac, KPS, Siili Solutions, Orbis, B3 Consulting, Prevas and Gofore for the SPAN
peer group.

Given the peer group performance, the expected market value is 1.0x higher than revenue, 10.3x
higher than EBITDA, 15.1x higher than earnings and 2.4x higher than book value (shareholders equity).
Therefore, the SPAN target share price for EV/Revenue is 488.35 kn/share, EV/EBITDA is 416.04 kn/share,
Price/Earnings is 386.37 kn/share and for Price/Book is 277.11 kn/share.

We performed a sensitivity analysis on EV/Revenue, EV/EBITDA, Price/Earnings and Price/Book multiple to

get a SPAN target share price range of 484.07 kn – 492.62 kn, 412.49 kn – 419.59 kn, 382.51 kn – 390.24 kn
and 274.34 kn – 279.89 kn, respectively.

EV/Revenue EV/EBITDA Price/Earnings Price/Book

Change Price Change Price Change Price Change Price
0.0% 488.35 kn 0.0% 416.04 kn 0.0% 386.37 kn 0.0% 277.11 kn
1.0% 492.62 kn 1.0% 419.59 kn 1.0% 390.24 kn 1.0% 279.89 kn
-1.0% 484.07 kn -1.0% 412.49 kn -1.0% 382.51 kn -1.0% 274.34 kn

VALUATION 7
 Market Data Valuation Multiples
Company Price Shares Market Cap Net Debt Enterprise Value EV/Revenue EV/EBITDA Price/Earnings Price/Book
(HRK/share) (x) ('000 000 HRK) ('000 000 HRK) ('000 000 HRK) (x) (x) (x) (x)

Glintt GIT SA 1.58 86,962,870 138 283 421 0.5 5.8 7.3 0.2
Ctac NV 25.58 13,931,650 356 25 381 0.5 4.4 10.6 1.8
KPS AG 23.77 37,412,100 889 321 1,210 0.9 10.7 16.7 1.6
Siili Solutions Plc 106.38 8,130,070 865 -31 834 1.1 10.6 19.5 3.1
Orbis Se 55.08 9,766,040 538 -49 489 0.6 13.2 19.9 1.9
B3 Consulting Group AB 109.60 8,578,770 940 17 958 1.4 11.2 13.6 5.9
Prevas AB 83.89 12,250,090 1,028 8 1,036 1.3 8.3 12.7 3.0
Gofore Oyj 167.49 15,506,130 2,597 -117 2,480 2.8 18.5 29.9 4.9
EV/Revenue x 488.35 1,960,000 957 -120 838 1.0
EV/EBITDA x 416.04 1,960,000 815 -120 696 10.3
Price/Earnings x 386.37 1,960,000 757 -120 638 15.1
Price/Book x 277.11 1,960,000 543 -120 424 2.4

VALUATION 8
Discounted cash flows to firm (all types of investors) & equity (equity investors only)

Historical & expected revenue, free cash flow to firm & equity
EBITDA Revenue Free Cash Flow to Firm Free Cash Flow to Equity
3.000.000 500.000

Free Cash Flows ('000 HRK)

450.000
2.500.000 400.000
Revenue ('000 HRK)

350.000
2.000.000 300.000
250.000
1.500.000
200.000
1.000.000 150.000
100.000
500.000 50.000
0
0 -50.000

2027 F
2023 F

2024 F

2025 F

2026 F
2022 TTM
2018 A

2019 A

2020 A

2021 A

The expected sum of available free cash flows can be 1,289,639 thousand kn to all investor types (Free
Cash Flow to Firm) and 1,338,816 thousand kn to equity investors (Free Cash Flow to Equity) in the next 5
years. Future free cash flows will be achievable under growth conditions described in the "Main Value Drivers"
section.

VALUATION 9
 Historical and expected free cash flow to firm & equity
2018 A 2019 A 2020 A 2021 A 2022 TTM 2023 F 2024 F 2025 F 2026 F 2027 F
Revenue 396,171 471,807 613,757 774,124 840,212 1,027,424 1,262,049 1,525,507 1,831,872 2,238,645
Operating Expenses -377,770 -459,426 -579,929 -731,265 -772,944 -942,613 -1,091,874 -1,273,771 -1,499,144 -1,788,030
EBITDA 18,401 12,381 33,828 42,859 67,268 84,811 170,175 251,736 332,728 450,615

Cash from Operations 12,472 1,089 47,628 55,772 97,253 42,025 162,343 257,154 331,113 432,149
Interest -2,063 -2,005 -2,020 -1,238 -868 -3,366 -3,042 -3,438 -3,134 -3,937
Interest After Tax (-14.4%) -1,767 -1,717 -1,730 -1,060 -743 -2,882 -2,606 -2,945 -2,684 -3,372
CAPEX -10,957 -9,514 -4,504 -6,272 -13,764 6,863 19,283 -657 23,013 1,863
Free Cash Flow to Firm 3,282 -6,708 44,854 50,560 84,232 51,771 184,232 259,442 356,810 437,384
Debt Flows 5,088 6,926 -29,204 -38,871 -32,130 67,375 -8,994 2,978 -9,690 11,997
Free Cash Flow to Equity 6,603 -1,499 13,920 10,629 51,359 116,263 172,633 259,476 344,436 446,009

VALUATION 10
 The present value of the before-mentioned sum of available free cash flows is 691,367 thousand kn after discounting it with the weighted average cost
of capital (WACC) to all investor types and 688,659 thousand kn after discounting it with the cost of equity (CoE) to equity investors in the next five years.

Present value of expected free cash flows to firm & equity

2018 A 2019 A 2020 A 2021 A 2022 TTM 2023 F 2024 F 2025 F 2026 F 2027 F
Free Cash Flow to Firm 3,282 -6,708 44,854 50,560 84,232 51,771 184,232 259,442 356,810 437,384
Weighted Average Cost of Capital 0.0% 0.0% 0.0% 0.0% 0.0% 18.9% 41.3% 68.0% 99.8% 137.5%
Discount Rate 100.0% 100.0% 100.0% 100.0% 100.0% 84.1% 70.7% 59.5% 50.1% 42.1%
Present Value of Free Cash Flow to Firm 3,282 -6,708 44,854 50,560 84,232 43,552 130,380 154,457 178,701 184,278
Free Cash Flow to Equity 6,603 -1,499 13,920 10,629 51,359 116,263 172,633 259,476 344,436 446,009
Cost of Equity 0.0% 0.0% 0.0% 0.0% 0.0% 21.2% 47.0% 78.2% 116.0% 161.9%
Discount Rate 100.0% 100.0% 100.0% 100.0% 100.0% 82.5% 68.0% 56.1% 46.3% 38.2%
Present Value of Free Cash Flow to Equity 6,603 -1,499 13,920 10,629 51,359 95,897 117,449 145,608 159,427 170,278

VALUATION 11
 A Cost of Equity of 21.2% depreciates the present Weighted Average Cost of Capital 18.9%
value of future Free Cash Flows to Equity. Operating on
Cost of Debt 4.8%
markets with lower expected equity premiums, risk-free rates, Total Debt Weight 13.8%
and default spread risk reduces the Cost of Equity. Default Spread 0.7%
Risk Free Rate 4.1%
Conducting business in these markets also results in a Tax rate 14.4%
lower Weighted Average Cost of Capital of 18.9%, which again Cost of Equity 21.2%
depreciates the present value of future Free Cash Flows to Firm Equity Weight 86.2%
at a lower rate. Risk Free Rate 4.1%
Industry Beta 1.4
Equity Risk Premium 8.0%
Country Risk Premium 4.1%

Risk-Free Rate, Equity Risk Premium & Country Default Risk

Revenue Revenue Share Revenue Share

Risk Equity Country
Revenue Share x x
Country Free Risk Risk
Share x Equity Risk Country Risk
Rate Premium Premium
Risk-Free Rate Premium Premium

Croatia 35.0% 3.5% 9.7% 5.5% 1.2% 3.4% 1.9%

Slovenia 20.0% 3.6% 8.4% 4.2% 0.7% 1.7% 0.8%
USA 18.0% 4.4% 6.2% 2.0% 0.8% 1.1% 0.4%
UK 11.0% 3.4% 7.8% 3.6% 0.4% 0.9% 0.4%
Ukraine 4.0% 26.4% 22.3% 13.9% 1.1% 0.9% 0.6%

Revenue Share Weighted Average: 4.1% 8.0% 4.1%

We expect that SPAN will generate free Terminal value

cash flows after 5 years, however, not at the same Free Cash Flow to Firm 184,278
growth rate. We will use a conservative estimate Risk Free Rate 4.1%
Weighted Average Cost of Capital (WACC) 18.9%
that the perpetual growth rate after 5 years
Terminal Value FCFF 1,303,356
approximates the inflation rate and real GDP Present Terminal Value FCFF 549,129
growth. Free Cash Flow to Equity 170,278
Risk Free Rate 4.1%
Cost of Equity (CoE) 21.2%
Terminal Value FCFE 1,037,613
Present Terminal Value FCFE 396,142

VALUATION 12
 Based on the present value sum of free cash flows and terminal value, we get an intrinsic enterprise
value of 1,240,496 thousand kn for all types of investors and 1,084,801 thousand kn for equity investors only.

We get the market value of 1,302,165 thousand kn for all types of investors and 1,146,469 thousand
kn for equity investors only after accounting for total debt and cash and cash equivalents.

The target share price is 664.37 kn/share for all types of investors and 584.93 kn/share for equity
investors only.

Intrinsic Value to All Investors (Free Cash Flow to Firm)

& Equity Investors (Free Cash Flow to Equity)
Free Cash Flow Free Cash Flow
to Firm to Equity
Enterprise Value 1,240,496 1,084,801
Total Debt 78,304 78,304
Cash & Cash Equivalents 139,972 139,972
Market Capitalization 1,302,165 1,146,469
Total Shares Outstanding 1,960,000 1,960,000
Share Price 664.37 kn 584.93 kn

We performed a sensitivity analysis on WACC and perpetual growth rate to get a SPAN target share
price range 598.76 kn/share – 750.90 kn/share (Free Cash Flow to Firm), and on Cost of Equity and perpetual
growth rate for 538.58 kn/share – 643.56 kn/share (Free Cash Flow to Equity).

VALUATION 13
 Share price sensitivity analysis to all types of investors
(Free Cash Flow to Firm)
Weighted Average Cost of Capital
663.51 17.9% 18.4% 18.9% 19.4% 19.9%
3.1% 696.67 kn 669.33 kn 644.03 kn 620.57 kn 598.76 kn
Perpetual 3.6% 708.80 kn 680.24 kn 653.87 kn 629.46 kn 606.81 kn
Growth 4.1% 721.81 kn 691.92 kn 664.37 kn 638.92 kn 615.36 kn
Rate 4.6% 735.81 kn 704.44 kn 675.61 kn 649.04 kn 624.48 kn
5.1% 750.90 kn 717.91 kn 687.67 kn 659.86 kn 634.22 kn

Share price sensitivity analysis to equity investors

(Free Cash Flow to Equity)
Cost of Equity
584.93 20.2% 20.7% 21.2% 21.7% 22.2%
3.1% 609.97 kn 590.31 kn 571.93 kn 554.72 kn 538.58 kn
Perpetual 3.6% 617.61 kn 597.25 kn 578.25 kn 560.48 kn 543.84 kn
Growth 4.1% 625.72 kn 604.61 kn 584.93 kn 566.57 kn 549.39 kn
Rate 4.6% 634.36 kn 612.42 kn 592.02 kn 573.01 kn 555.26 kn
5.1% 643.56 kn 620.74 kn 599.56 kn 579.85 kn 561.47 kn

VALUATION 14
BUSINESS ENVIRONMENT

SPAN operates within four industries: Software Asset Management & Licensing, Cloud Infrastructure
& Cybersecurity Services, IT Service Management & Technical Support, and Business Solutions & Software
Development. Determining companies similar to the SPAN is challenging due to differences in business
models, size, geographical coverage, and other relevant features. Given all the challenges, we think the
current list of companies is reasonably comparable to the SPAN. The peer group includes Glintt Global
Intelligent Tech, Ctac, KPS, Siili Solutions, Orbis, B3 Consulting, Prevas and Gofore.

SPAN’s stock and fundamentals outperform their competition

The peer group generated 7.66 billion kn

SPAN & peer-group
in revenues in the last 12 months. SPAN has a
11.0% revenue share, placing him in 3rd place out
benchmark
of 9. Peer Group SPAN
22,4%
The company's EBITDA margin is +8.0%,
16,2%
placing him in 8th place out of 9, and net income
10,2%11,0% 10,1%
margin of +6.0%, resulting in 4th place out of 9. 8,0%
5,7% 6,0%
Span's Return on Equity of +22.4% is
higher than the peer group benchmark, placing
Revenue EBITDA Net Income ROE
him in 3rd place out of 9. Share Margin Margin

SPAN's market performance significantly outperformed the Croatian market (CROBEX), global IT sector
(S&P Global 1200 IT), and global equity (MSCI ACWI All Cap). Since its IPO, SPAN stock has been more volatile
than comparable indices. However, SPAN has a more favorable return-risk profile than CROBEX, S&P Global
1200 IT, and MSCI ACWI All Cap.

SPAN, Croatian market, global IT sector and global equity

market performance
MSCI ACWI S&P GLOBAL 1200
CROBEX SPAN
All Cap Information Technology
Number of Trading Days 278 278 278 278

Annualized Return -20.4% -24.6% -4.1% +58.9%

Annualized Standard Deviation ±11.4% ±14.5% ±5.0% ±14.8%

Return Risk Ratio -1.8 -1.7 -0.8 +4.0

BUSINESS ENVIRONMENT 15
SPAN’s risk profile remains stable

SPAN primary markets are in Croatia (35%), Slovenia (20%), USA (18%), UK (11%), Ukraine (4%) and
the rest of the world (12%).

SPAN increased exposure to the Croatian market while decreasing exposure to foreign markets. The
current redistribution of revenue doesn't affect its risk profile. However, further exposure to Croatia or other
frontier markets could increase the Cost of Capital/Equity. As a result, this would reduce expected free cash
flows and target share price.

Geographic distribution of SPAN revenues

Croatia 35,0%

Slovenia 20,0%

United States 18,0%

Developed United Kingdom

Markets 11,0%

29%

Revenue Ukraine 4,0%

Share
Frontier Rest of
Markets the World
Rest of the World 12,0%
59% 12%

BUSINESS ENVIRONMENT 16
A beacon during the tech sector's dark times

In Q3 2022, SPAN achieved its high net income growth Strengths

of a staggering 110.2% while at the same time lowering total
Profit Growth
debt levels. Additionally, rewarding investors with a high
Highly Solvent Company
dividend payout of 19.4%.
Generous Dividend Payout
A lower cash ratio combined with stagnating core
revenue segment (Software Asset Management & Licensing) Weaknesses
can scare off investors during a market downturn. On top of Lower Cash Ratio

that, peer group companies outperformed SPAN's EBITDA EBITDA Margin Lower Than Peer Group
Margin.
SAM Business Segment Stagnating
SPAN opened a new Cybersecurity Center, which
enables gaining a larger market share in that industry. As a
Opportunities
New Cybersecurity Center
result, SPAN diversified its revenue sources across business
and geographical segments, which reduces the risk for Superior Risk-Adjusted Returns
investors and improves already superior risk-adjusted returns. Diversified Revenue Sources

The high inflation rate and global tech stock losses push Threats
investors away from equity investments. Additionally, highly
High Inflation Rate
skilled employee bottlenecks can reduce SPAN's ability to meet
Highly Skilled Employee Bottleneck
the demand.
Global Tech Sector Losses
SPAN strategy is to develop through 4 key areas:
growth on the existing market, key international clients, expansion into new markets, and development of
Span.Zone. Span.Zone is a digital platform that allows the end-user fully autonomous procurement, activation,
management, and maintenance of cloud licenses and services. Overall, we think that these strategic goals will
increase share price if executed.

BUSINESS ENVIRONMENT 17
 Strategic courses of action and expected effect on share price
Strategy Course of Action Share price decrease Share price increase
Increase cost of equity
Lower operating costs
due to exposure to frontier markets
Organic growth in Croatia, Increase cost of capital Higher return on
Slovenia, Ukraine, and Azerbaijan
Existing Market

due to exposure to frontier markets invested capital

Growth on

War in Ukraine
Retaining the existing Microsoft LSP status and Higher supplier Higher capital
expanding it in other countries concentration risk investment requirements
Profitability growth through Free cash flows
EBITDA and net income margins increase
Focus on offering a
Ensuring stable revenue streams
comprehensive portfolio of service
Higher revenue growth
International

Strengthening the business relationships with existing international Higher customer

Ensuring stable revenue streams
Clients

clients by expanding the number and types of services concentration risk

Key

Higher capital investment requirements

Lower customer concentration risk
International client growth
Higher revenue growth
Increase cost of equity
Lower operating costs
Expansion

Markets

Geographic expansion to due to exposure to frontier markets

New
into

Eastern Europe and Central Asia (EECA) markets Increase cost of capital
Higher return on invested capital
in which SPAN has Microsoft LSP partner status due to exposure to frontier markets
War in Ukraine
Decrease cost of equity
digital platform

due to exposure to developed markets

Span.Zone

Decrease cost of capital

Higher operating costs due to exposure to developed markets
Highly standardized solutions for developed markets (EU)
due to a maintenance Higher revenue growth
due to quicker workflows
Lower operating costs
due to workflow automatization

BUSINESS ENVIRONMENT 18