ESI : H1-FY22 - Financial Report

HALF-YEAR FINANCIAL REPORT

AS OF JUNE 30, 2022

SUMMARY

1. MANAGEMENT REPORT	.	3
1.1. Overall presentation	.	3
1.2. Revenues and consolidated financial statements	.	3
1.3. Cash-flows	.	5
1.4. Balance sheet	.	5
1.5. Significant events of the period	.	5
1.6. Outlook	.	6
1.7. Risk factors	.	6
1.8. Transactions with related parties	.	6
1.9. Information on shareholding	.	6
1.10 Adjusted EBIT.................................................................................................................................................................	7
2. INTERIM FINANCIAL STATEMENTS	.	9
2.1. Consolidated income statement	.	9
2.2.Balance sheet	.	11
2.3. Consolidated statement of changes in equity	.	12
2.4.Consolidated statement of cash flows	.	14
2.5.Notes to the interim consolidated financial statements	.	15
Note 1. Accounting principles	.	15
Note 2. Significant events for the first half-year	.	18
Note 3. Scope of consolidation	.	19
Note 4. Operating data	.	21
Note 5. Intangible assets	.	23
Note 6. Financing	.	24
Note 7. Tax	.	25
Note 8. Subsequent events	.	26
3. STATUTORY AUDITORS' REVIEW REPORT ON THE 2021 HALF YEAR FINANCIAL INFORMATION	.	27
4. DECLARATIONS BY THE PERSON RESPONSIBLE OF THE HALF YEAR FINANCIAL REPORT	.	29

ESI GROUP • 2021 HALF-YEAR FINANCIAL REPORT • 2

1. MANAGEMENT REPORT

Preamble

The financial information below presents the activity and the financial statements of ESI Group, a French "société

anonyme", registered with the Creteil Trade and Company Register under number 381 080 225. The Group's

headquarters are located 3 bis rue Saarinen, Immeuble Le Séville, 94528 Rungis Cedex, France. The company is

listed in compartment B of Euronext Paris, under the ISIN code: FR 0004110310.

In this report, ESI Group is hereinafter referred to as "ESI Group" or the "Company". The Company and all its

affiliated companies are hereinafter referred to as the "Group" or "ESI".

1.1. Overall presentation

Founded in 1973, ESI Group envisions a world where Industry commits to bold outcomes, addressing high stakes

concerns - environmental impact, safety & comfort for consumers and workers, adaptable and sustainable

business models. ESI provides Virtual Prototyping software solutions anchored on predictive physics modeling and

its capacity to chain the physics and its solutions to allow industries to make the right decisions at the right time,

while managing their complexity. Acting principally in automotive & land transportation, aerospace, energy and

heavy industry, ESI is present in more than 20 countries, employs around 1,100 people globally and reported 2021

sales of €136.6 million.

As part of the implementation of its new OneESI2024 strategy, the Group has reassessed the nature of the services provided under the Co-funded Projects: these services do not constitute services from the entity's ordinary activities, but meet the definition of subsidies granted by public organizations, and the corresponding revenues have been reclassified from the "Co-funded Projects" line within revenues as a reduction in research and development expenses. Correspondingly, costs incurred in connection with "Co-funded Projects" have been reclassified from cost of sales to research and development expenses. After this reclassification, revenues in 2021 are 132.6 million euro.

ESI is headquartered in France and is listed on compartment B of Euronext Paris.

1.2. Revenues and consolidated financial statements

Revenue growth and positive momentum on profitability indicators

Half-year revenue rose by 5.5% (+4.0% at constant exchange rates) to €84.3 million. This growth was mainly led by the licenses business at €73.9m (representing ~88% of semester revenue and growing by 5.6% YoY, +4.0% cer). Recurring revenues (excluding perpetual contracts and before deferred revenue) increased by 7.5% (+6.1% cer) to

ESI GROUP • 2021 HALF-YEAR FINANCIAL REPORT • 3

75.0 million euro. The recurrence rate was 93.5% compared with 92.2% in the first half of 2021. EUR 5.2 million came from perpetual contracts compared to EUR 5.9 million in H1 2021 and deferred revenue was EUR 6.2 million (compared to EUR 5.6 million in H1 2021).

This performance illustrates the capability of the Group to navigate a complex macro-economic context while continuing to deliver on its commitment. It demonstrates the reliability of its solutions and the strength of its relationship with its key customers allowing sustained growth.

ESI Group posted both revenue growth and cost reductions. Adjusted EBIT improved by €7.1m to €25.6 million (+ 38.2%). Adjusted EBIT margin, calculated based on revenue excluding special projects (public grant for R&D projects), achieved 30.4% vs 23.2% in H1 2021.

The seasonality of the activity of ESI Group is to be considered here, as H1 captures a large part of the revenue growth & in H1 there is a positive impact of R&D capitalization of €1.8 million net of related capitalized projects amortization due to the rhythm of releases in June and the impact of the impairment of intangible assets in 2021 which reduced the level of depreciation.

Key figures

Half year closed on June 30, 2022

(€m)	06/30/2022	06/30/2021	Change	Change
	6m	6m (4)		Constant
				exchange
				rate (cer)
Revenue	84.3	80.0	+5.5%	+4.0%
Licenses	73.9	70.0	+5.56%	+4.0%
Services	10.4	9.9	+4.7%	+3.5%
Gross margin	68.6	64.0	+7.2%	+8.5%
% revenue	81.3%	80.0%
Adjusted EBIT (1)	25.6	18.5	+38.2%	+37.3%
Adjusted EBIT margin (2)	30.4%	23.1%
EBIT	21.9	18.1	+20.9%	+20.0%
Net result	14.0	11.0	+26.5%	+25.9%
% revenue	16.6%	13.8%
Cash and cash equivalent	35.4	36.2	-2.1%
Net Financial Debt (3)	-0.6	6.8
Gearing (in %)	-0.7%	6.9%

1. Adjusted EBIT is a non-GAAP indicator based on EBIT (IFRS). Adjusted EBIT corresponds to EBIT before stock-based compensation expenses, restructuring charges, impairment and amortization of intangibles related to acquisition, IFRS 16 standard on leases and other non-recurring items.
   (2)The adjusted operating income margin is a non-IFRS indicator corresponding to the ratio of adjusted operating income to revenue.

1. Net financial debt : Financial debts (long term and short term) less cash and cash equivalent
2. The financial statements for the six months ended June 30, 2021 and for the year ended December 31, 2021 have been retrospectively restated to reflect the implementation of the IFRIC decision on the recognition of configuration or customization costs for software used in SaaS mode (see note 1.2 to the interim financial statements) and the reclassification of revenue relating to Co-funded Projects from revenues to research and development costs - the corresponding costs have been reclassified from cost of sales to research and development costs.

Sales in line with the key strengths of the Group

The geographical breakdown of half-year revenues has changed slightly compared to the first half of 2021: the EMEA region accounts for 50.2% (compared to 51.2%) of total revenues, Asia 33.7% (compared to 34.3%) and the

ESI GROUP • 2021 HALF-YEAR FINANCIAL REPORT • 4

Americas 16.0% (versus 14.6%).

H1 licensing revenue was led by the Automotive industry, the aeronautics one grew significantly, mainly driven by the Group's key customers in Americas.

ESI strengthens its cash position and balance sheet

During the first half of 2022, ESI Group consolidated its balance sheet and maintained a strong cash position at

35.4 million euros, compared with 36.2 million euros at the end of June 2021. The Group no longer has any net financial debt. It stands at -0.6 million euros, compared with 6.8 million euros at the end of June 2021, with a debt- to-equity ratio of -0.7% (net financial debt/equity) compared with 6.9% at the end of June 2021.

1.3. Cash-flows

Cash position amounted to €35.4m as at June 30, 2022, compared with €30.3m at December 31, 2021 and €36.2m

at June 30, 2021.

Evolution of cash position between December 31, 2021 and June 30, 2022 is mainly due to:

• A net cash margin of €19m (before impact of IFRS 16 standard representing €2.6m) compared to €18m in 2021 first half, this increase resulting mostly from raise in profitability;
• A change in WCR of -€5.7m compared to €0.2m in 2021 first half including cash outflows related to the restructuring announced in October 2021, bonuses for the year 2021 (higher than in 2020) and taxes;
• Capital expenditures of -€0.5m compared to -€0.6m in 2021 first half;
• Payment of the annual instalment of the syndicated loan of €5 million and repayment of the promissory bill of €2.5 million. Last year only 4.5 million euro of the syndicated loan was repaid.

As of June 30, 2022, ESI Group held 5.5% of its capital in treasury shares.

1.4. Balance sheet

Gross financial debt is €34,8m (vs. €42.8m as of December 2021) and net financial debt decreased to €-0.6m (vs.

€12.5m) related to business seasonality. The main flow of the period is the -€5m payment of syndicated loan

installment.

Gearing (net financial debt-to-equity) thus stood at -0.7% compared with 6.9% at end of June 2021 and 17% at end

of December 2021.

1.5. Significant events of the period

These H1 FY22 results are a considerable achievement for ESI Group demonstrating the momentum we have built in this 1st 6 months of the 3-year "OneESI 2024 - Focus to Grow" plan.

ESI GROUP • 2021 HALF-YEAR FINANCIAL REPORT • 5