INTERSHOP Communications : Quarterly Statement Q1 2024

Quarterly Statement

Q1 2024

January - March 2024

Letter to Our Stockholders

Dear stockholders and business partners,

After a challenging time last year, we got off to a good start in 2024 and achieved some sound results in the first quarter. All essential key performance indicators improved significantly compared to the same quarter of the previous year. Revenues in the strategically important cloud business increased by 32% compared to the previous year; we also recorded a positive trend in total revenue with a growth rate of 7%. Driven by the good revenue performance and strict cost management, we achieved a balanced operating result at the end of the first quarter of 2024.

After the first three months of the year, the cloud business accounted for 52% of total revenue, ten percentage points above the previous year's figure. We were also able to increase our cloud margin and our net new ARR; the only downside in an overall strong start to the year was the declining service segment, which faced complex major projects on the one hand, but also a lack of new orders to date.

Despite the positive development so far and although we have every reason to be optimistic, we still remain vigilant: In a macroeconomic environment that remains tense, the general reluctance to invest and significantly longer decision-making periods are still noticeable. We particularly notice this in the acquisition of new customers, which does not yet meet our expectations. However, with our cloud strategy - the successful implementation of which is increasingly reflected in our figures - coupled with the AI expansion by our subsidiary Sparque, we expect to make significant operational and strategic progress in 2024 and are optimistic that we will be able to continue the positive trend of the first quarter.

The measures that Intershop has taken as part of its strict cost management as well as efficiency enhancement, and process optimization measures also had an impact in the first quarter, and we are confident of achieving our targets for the current fiscal year. Accordingly, Intershop continues to expect a slight increase both in incoming cloud orders and in Net New ARR for the 2024 fiscal year, based on the assumptions for the various business segments. In addition, a moderate increase in revenue and a balanced operating result (EBIT) are forecast.

Best regards,

Markus Klahn

Petra Stappenbeck

Markus Dränert

INTERSHOP Communications AG / Quarterly Statement Q1 2024

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Key Figures for the Group

in EUR thousand		Q1 2024	Q1 2023	Change
KPIs
Cloud order entry	4,754	2,649	79%
Net New ARR	614	272	126%
Revenue	9,474	8,871	7%
EBIT	6	(856)	n.a.
REVENUES
Revenues		9,474	8,871	7%
Licenses and Maintenance		1,888	1,956	-3%
Cloud and Subscription		4,925	3,734	32%
Service Revenues		2,661	3,181	-16%
Revenues Europe		7,141	6,151	16%
Revenues USA		1,640	1,898	-14%
Revenues Asia/Pacific	693	822	-16%
EARNINGS
Cost of revenues	5,255	5,264	0%
Gross profit	4,219	3,607	17%
Gross margin	45%	41%
Operating expenses, operating income	4,213	4,463	-6%
Research and development	1,652	1,794	-8%
Sales and marketing	1,934	1,941	0%
General and administrative	778	818	-5%
Other operating income/expenses	(151)	(90)	68%
EBIT	6	(856)	n.a.
EBIT-Margin	0%	-10%
EBITDA	783	(5)	n.a.
EBITDA margin	8%	0%
Net result	(106)	(1,042)	++
Earnings per share (EUR)	(0.01)	(0.07)	++
NET ASSETS
Shareholders´equity	11,208	13,585	-17%
Equity ratio	29%	32%
Balance sheet total	38,205	41,843	-9%
Noncurrent assets	23,038	24,957	-8%
Current assets	15,167	16,886	-10%
Noncurrent liabilities	12,241	14,174	-14%
Current liabilities	14,756	14,084	5%
FINANCIAL POSITION
Cash and cash equivalents	8,889	11,127	-20%
Net cash operating activities	(199)	1,472	n.a.
Depreciation and amortization	777	851	-9%
Net cash used in investing activities	(399)	(208)	92%
Net cash provided by financing activities	(508)	(542)	-6%
EMPLOYEES	293	299	-2%

INTERSHOP Communications AG / Quarterly Statement Q1 2024

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Business development

Business performance during the first three months of 2024

In the first quarter of 2024, the Intershop Group recorded revenue of EUR 9.5 million, which corresponds to 7% growth compared to the same period of the previous year (previous year: EUR 8.9 million). Earnings before interest and taxes (EBIT) were balanced, amounting to EUR 6 thousand compared to EUR -0.9 million in the first quarter of the previous year.

The Group´s most important financial key figures (KPIs) are shown in the overview below.

in EUR thousand	Q1 2024	Q1 2023	Change
Cloud Order Entry	4,754	2,649	79%
Net New ARR	614	272	126%
Revenue	9,474	8,871	7%
EBIT	6	(856)	n.a.

Clear growth in the cloud business: Increase in incoming orders, revenue and margin

EUR 4.9 million was posted in the first quarter of 2024 for revenues from the cloud business, corresponding to a growth rate of 32% (previous year: EUR 3.7 million). The share of cloud revenue in the total revenue also increased by 10 percentage points to 52% (previous year: 42%). In addition, the cloud margin improved by 7 percentage points to 64% (previous year: 57%). Incoming cloud orders were up 79% in the first quarter of 2024 compared to the first quarter of the previous year and amounted to EUR 4.8 million (previous year: EUR 2.6 million). The increase is due in particular to the low result in the first quarter of the previous year, which was particularly affected by a general reluctance to invest in the context of macroeconomic uncertainties. In total, two new customers accounted for EUR 1.2 million in incoming orders in the first three months of 2024 and existing customers accounted for EUR 3.6 million. Annual recurring revenue (ARR) reached EUR 18.0 million at the end of the first quarter of 2024, which corresponds to an increase of 15% (previous year: EUR 15.7 million). The New ARR also developed positively, increasing by 98% to EUR 0.7 million. Here, too, the base effect of the same quarter of the previous year had a decisive impact on the increase in the current reporting period. For the New ARR, EUR 0.2 million in the first quarter of 2024 is attributable to new customers and EUR 0.5 million to existing customers. Net New ARR (New ARR less cancellations and currency translation differences) was up 126% in the first quarter of 2024 to EUR 0.6 million (previous year EUR 0.3 million).

INTERSHOP Communications AG / Quarterly Statement Q1 2024

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Cloud Business Development

			4,925			ARR development
						in Q1 2024
Cloud Revenue	3,734				in EUR thousand
						ARR December 31, 2023	17,337
Cloud Revenue in %					New ARR new customers	200
42%	52%			New ARR existing
of total revenue
				customers	546
in EUR thousand	Q1 2023	Q1 2024	change	New ARR total	746
Cloud order entry	2,649	4,754	79%		Churn	(142)
New ARR	376	746	98%		Currency changes	10
Net New ARR	272	614	126%		Net New ARR	614
ARR	15,663	17,951	15%		ARR March 31, 2024	17,951

Earnings Position

The development of the key earnings figures of the Group is shown in the overview below:

	in EUR thousand			Q1 2024			Q1 2023		Change
	Revenues			9,474		8,871	7%
	Cost of revenues			5,255		5,264	0%
	Gross margin			45%		41%
	Operating expenses, operating income			4,213		4,463	-6%
	EBIT			6		(856)		n.a.
	EBIT margin			0%		-10%
	EBITDA			783		(5)		n.a.
	EBITDA margin			8%		0%
	Earnings after tax			(106)		(1,042)	++

In the first quarter of 2024, the Intershop Group generated revenues of EUR 9.5 million, which corresponds to an increase of 7% compared to the same period of the previous year (EUR 8.9 million).

Revenues within the software and cloud core group rose by 20% to EUR 6.8 million (previous year: EUR 5.7 million), which corresponds to 72% of the total revenue. This core group comprises the license and maintenance segment as well as the cloud and subscription segment. As expected, revenues from the licenses and maintenance business fell by 3% to EUR 1.9 million (previous year: EUR 2.0 million), whereas the Intershop Group continued its growth in the cloud and subscription segment and recorded an increase of 32% to EUR 4.9 million in this area (previous year: EUR 3.7 million).

Service revenues, on the other hand, declined. Revenues in this segment in the first quarter of 2024 amounted to EUR 2.7 million, which was 16% less than the value for the previous year (EUR 3.2 million). The service business was impacted in the first quarter of 2024 in particular by individual complex and long-term major projects and a simultaneous decline in new projects.

INTERSHOP Communications AG / Quarterly Statement Q1 2024

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The following overview shows the development of revenues:

	in EUR thousand		Q1 2024	Q1 2023	Change
	Software and Cloud Revenues		6,813	5,690	20%
	Licenses and Maintenance		1,888	1,956	-3%
	Licenses		113	165	-32%
	Maintenance		1,775	1,791	-1%
	Cloud and Subscription		4,925	3,734	32%
	Service Revenue		2,661	3,181	-16%
	Revenues total		9,474	8,871	7%

Europe remains the predominant sales region for Intershop. In the first quarter of 2024, the Group was able to record clear growth here with an increase in 16% and revenues of EUR 7.1 million (previous year: EUR 6.2 million). European customers accounted for 75% (previous year: 69%) of total revenue. In the US market, in contrast, Intershop recorded a decline in revenues of 14% to EUR 1.6 million (previous year: EUR 1.9 million), corresponding to a share of 17% of total revenue (previous year: 21%). The reason for this is the declining service business in this region, whereas the cloud business actually recorded growth here. The situation is similar in the Asia-Pacific region, where Intershop recorded a 16% decline in revenue to EUR 0.7 million (previous year: EUR 0.8 million) due to the subdued order situation.

Gross profit increased by 17% to EUR 4.2 million in the reporting period (previous year: EUR 3.6 million). The gross margin rose four percentage points to 45%. Operating expenses and income fell by 6% to EUR 4.2 million (previous year: EUR 4.5 million). Research and development costs decreased by 8% to EUR 1.7 million (previous year: EUR 1.8 million). At EUR 1.9 million, sales and marketing expenses were on a par with the figure for the same period last year, as were general administrative expenses at EUR 0.8 million. Total costs, including the cost of revenues and operating expenses/ income, amounted to EUR 9.5 million, 3% lower than in the same period of the previous year. In terms of the operating result (EBIT), Intershop recorded a slightly positive figure of EUR 6 thousand in the first three months of 2024 (previous year: EUR -0.9 million). The earnings before interest, depreciation and amortization (EBITDA) amounted to EUR 0.8 million (previous year: EUR -5 thousand). Although the result for the period (earnings after taxes), at EUR -0.1 million, was negative, the figure was higher than in the previous year (previous year: EUR -1.0 million). This corresponds to earnings per share of EUR -0.01 (previous year: EUR -0.07).

Net Asset and Financial Position

As of the interim reporting date of March 31, 2024, the balance sheet total of the Intershop Group was EUR 38.2 million and thus 0.4% above the figure at the end of 2023. On the assets side, non- current assets remained stable at around EUR 23.0 million. Current assets increased by 2% to EUR 15.2 million. This was mainly due to the 26% increase in trade receivables to EUR 4.9 million (December 31, 2023: EUR 3.9 million) and the 46% increase in other receivables and assets to EUR 1.4 million (December 31, 2023: EUR 1.0 million). Cash and cash equivalents decreased by 12% to EUR 8.9 million at the end of March 2024 compared to the end of 2023 (December 31, 2023: EUR 10.0 million).

INTERSHOP Communications AG / Quarterly Statement Q1 2024

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On the liabilities side, equity fell slightly to EUR 11.2 million (December 31, 2023: EUR 11.4 million). As a result, the equity ratio of 29% was also slightly below the comparative figure at the end of 2023 (December 31, 2023: 30%). At the same time, non-current liabilities to banks decreased by 11% to EUR 1.0 million (December 31, 2023: EUR 1.1 million) and non-current liabilities from leasing were down 3% to EUR 6.9 million (December 31, 2023: EUR 7.1 million). Current liabilities rose 4% to EUR 14.8 million (December 31, 2023: EUR 14.1 million), which can primarily be attributed to a rise in liabilities as a result of higher advance payments from cloud contracts.

Group Balance Key Figures March 31, 2024

Assets Liabilities

Intangible assets	13.5		11.2	Shareholders´equity
				Liabilities to banks
		1.5
Rights of use			2.2	Warrant bond
IFRS 16	8.2	8.5	Leasing liabilities

Cash and

8.9

cash equivalents

14.8 Other Liabilities

Other Assets

7.6

38.2 38.2

in EUR million

Equity ratio: 29%

In the first three months of the year, the cash flow from operating activities amounted to EUR -0.2 million compared to EUR 1.5 million in the prior-year period. The main reason for the decline was the increase in trade receivables. The cash outflow from investment activities amounted to EUR 0.4 million, compared with EUR 0.2 million in the prior-year period. The cash outflow from financing activities remained on a par with the previous year at EUR 0.5 million. Overall, cash and cash equivalents fell by EUR 1.2 million to EUR 8.9 million at the end of the first quarter of 2024 compared to the end of 2023.

Employees

As of March 31, 2024, the Intershop Group had 293 full-time employees worldwide. Compared to the reporting date of December 31, 2023, this is a reduction of six employees. The same applies to the comparison with the prior-year quarter.

The following overview shows the breakdown of full-time employees by business unit.

Employees by department*	March 31, 2024	Dec. 31, 2023	March 31, 2023
Technical Departments
(Service functions, Research and Development)	223	229	225
Sales and Marketing	44	46	45
General and administrative	26	24	29
	293	299	299
*based on full time staff, including students and trainees
INTERSHOP Communications AG / Quarterly Statement Q1 2024		7

As at March 31, 2024, 257 employees were employed in Europe, which amounts to 88% of the workforce. There were 21 employees (7%) in the Asia-Pacific region and 15 employees (5%) in the US.

Outlook

According to the IMF's latest outlook in April, the global economic growth rate in 2024 is expected to be just 3.2%. The IMF's outlook for the growth rate in industrialized countries in 2024 is 1.7%. Projections predict that the growth rate in the Eurozone will increase from the very low rate of 0.4% in 2023 to 0.8% in 2024. According to the IMF, the economic growth outlook for Germany is just 0.2% in 2024 due to weak consumer confidence. In its January outlook, analyst company Gartner anticipates global IT expenditure of approximately USD 5 trillion in 2024. That would correspond to a 6.8% increase compared to 2023. Accordingly, capital expenditure on IT services is expected to exceed capital expenditure on communication services for the first time, with IT services becoming the largest area of IT expenditure in 2024. Here, Gartner forecasts a total expenditure of USD 1.5 trillion, which would correspond to an increase of almost 9%. The reason for this is that companies are increasingly investing in organizational efficiency and optimization processes. In addition, according to the analyst company's outlook, spending on cloud services is also set to rise by 20.4% to a total of USD 679 billion in 2024. Forecasts for the B2B e-commerce market are also optimistic. According to surveys by Research and Markets, this sector is expected to achieve average annual growth of 18.7% up to 2028.

Intershop has already recorded a positive development in the cloud business over the first three months of 2024. All key performance indicators relevant to management improved in the first quarter, and the cost management measures implemented are already having an impact. Against this backdrop, Intershop continues to expect a slight increase in incoming cloud orders as well as in net new ARR for the 2024 fiscal year, based on the assumptions for the various business segments. In addition, a moderate increase in revenue and a balanced operating result (EBIT) are still forecast.

Jena, April 22, 2024

The Management Board of INTERSHOP Communications Aktiengesellschaft

Markus Klahn

Petra Stappenbeck

Markus Dränert

INTERSHOP Communications AG / Quarterly Statement Q1 2024

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Consolidated Balance Sheet

	in EUR thousand			March 31, 2024			December 31, 2023
	ASSETS
	Noncurrent assets
	Intangible assets		13,506		13,464
	Property, plant and equipment		425		449
	Rights of use IFRS 16		8,202		8,363
	Other noncurrent assets		543		506
	Restricted cash		244		246
	Deferred tax assets		118		121
			23,038		23,149
	Current assets
	Trade receivables		4,883		3,884
	Other receivables and other assets		1,395		954
	Cash and cash equivalents		8,889		10,047
			15,167		14,885
	TOTAL ASSETS		38,205		38,034
	SHAREHOLDERS' EQUITY AND LIABILITIES
	Shareholders' equity
	Subscribed capital		14,582		14,582
	Capital reserve		3.030		3,030
	Other reserves		(6,404)		(6,244)
			11,208		11,368
	Noncurrent liabilities
	Warrant Bond		2,229		2,242
	Liabilities to banks		995		1,119
	Leasing liabilities IFRS 16		6,928		7,119
	Other noncurrent liabilities		2,089		2,050
			12,241		12,530
	Current liabilities
	Other current provisions		340		348
	Liabilities to banks		497		497
	Trade accounts payable		1,834		1,960
	Contract liabilities		7,844		6,872
	Income tax liabilities		36		37
	Leasing liabilities IFRS 16		1,567		1,524
	Other current liabilities		2,638		2,898
			14,756		14,136
	TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES		38,205		38,034

INTERSHOP Communications AG / Quarterly Statement Q1 2024

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Consolidated Statement of Comprehensive Income

Three months ended March 31,

in EUR thousand	2024		2023
Revenues
Software and Cloud Revenues	6,813		5,690
Service Revenues	2,661		3,181
	9,474		8,871
Cost of revenues
Cost of revenues - Software and Cloud	(2,762)		(2,649)
Cost of revenues - Services	(2,493)		(2,615)
	(5,255)		(5,264)
Gross profit	4,219		3,607
Operating expenses, operating income
Research and development	(1,652)		(1,794)
Sales and marketing	(1,934)		(1,941)
General and administrative	(778)		(818)
Other operating income	158		90
Other operating expenses	(7)		0
	(4,213)		(4,463)
Result from operating activities	6		(856)
Interest income	33		1
Interest expense	(126)		(141)
Financial result	(93)		(140)
Earnings before tax	(87)		(996)
Income taxes	(19)		(46)
Earnings after tax	(106)		(1,042)
Other comprehensive income:
Exchange differences on translating foreign		(54)		(70)
operations
Other comprehensive income from exchange		(54)		(70)
differences
Total comprehensive income	(160)		(1,112)
Earnings per share (EUR, basic, diluted)	(0.01)		(0.07)

INTERSHOP Communications AG / Quarterly Statement Q1 2024

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