Innofactor as an Investment

A Leading Nordic Provider of Digitalization and Cloud Solutions

Innofactor is a leading Nordic provider of digitalization and cloud solutions. We have Microsoft Ecosystem's leading expertise, the most comprehensive offering in the Nordics, and over 600 eager and motivated top professionals in Finland, Sweden, Denmark and Norway. We serve over 1,500 commercial, public, and third sector organizations. In 2013 to 2017, the annual growth of our net sales has been approximately over 20%. The Innofactor Plc share is listed in the technology section of the main list of NASDAQ Helsinki Ltd.

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A Challenging First Quarter Despite Several Significant Orders

January–March 2018 in brief:

The net sales were approximately EUR 16.5 million (2017: 17.3), which shows a decrease of 4.5%.
The operating margin was approximately EUR 0.3 million (2017: 0.9), which shows a decrease of 62.1%.
The operating loss was EUR 364 thousand (2017: operating profit 222), which shows a decrease of 264.0%.
The weaker than expected profitability was contributed to by the lower than expected net sales.
Innofactor got several significant orders on the first quarter, for example, HAIPA for the Legal Register Centre, approximately EUR 2.0 million; Swedish adult educational association Folksuniversitet, approximately EUR 0.5 million; and the Swedish Teachers' Union Lärarförbundet, approximately EUR 0.5 million.

Year 1–12/2017:

The net sales were approximately EUR 66.1 million (2016: 59.6), which shows an increase of 10.9%.
The operating margin was approximately EUR 1.7 million (2016: 4.8), which shows a decrease of 64.2%.
The operating loss was approximately EUR 1,0 million (2016: operating profit 2.3), decreasing by 144.6% due to increased write-offs related to acquisitions, in accordance with IFRS 3, resulting in a decrease of EUR 2,030 thousand (2016: 1,884).

CEO's Review

May 8, 2018

The year started with challenges, but a turn is expected within the second quarter

The net sales decreased by 4.5 percent in the first quarter of 2018 (net sales EUR 16.5 million). The operating margin (EBITDA) was EUR 0.3 million (2.1 percent of the net sales) and decreased by 62.1 percent from the previous year. The weaker than expected profitability was primarily contributed to by the lower than expected net sales. In Innofactor's history, the end of the year has typically been better in terms of operating margin than the beginning of the year, but special attention still needs to be paid to improving the profitability and raising it to the goal level.

We have made remarkable progress in implementing Nordic operating models and systems, and this has had a positive effect in controlling the company's operation. Our goal is to start using the common ERP system in Sweden at the beginning of July 2018, after which the system will be in use in all countries. We believe that a positive turn in Innofactor's profitability will take place during the second half of 2018.

A new deal significant for our business, valued at approximately EUR 2.0 million, was published on March 16, 2018, as the Legal Register Centre selected us in a public procurement competition to deliver a service package that includes an ERP and case management information system in which data will be handled in an electronic format throughout the entire administrative court process. The background for this is the government HAIPA project, which aims at renewing the work methods of the administrative courts and enabling electronic collaboration with other authorities, private law organizations, and citizens. The system delivery is planned to be implemented during 2018 and 2019. The system to be delivered by Innofactor will be base on the latest version of the Innofactor's Dynasty product into which we have made significant product development investments in 2016 and 2017. We consider the product to have significant business potential.

Innofactor's vision is to be the leading implementer of cloud solutions and digitalization in each of the Nordic Countries. We believe in our chosen Nordic strategy and in reaching our long term goals. This requires perseverance and determination from the company's management and employees as well as investors. Innofactor is still actively looking for new strategic partnerships in the Nordic Countries. The Group's goal is to grow both organically and through acquisitions.

Sami Ensio
Innofactor's founder, major owner, and CEO

Business Environment

Market Outlook and Business Environment

Main forces affecting market changes and main trends of innovation are, for example, augmented and virtual reality, Internet of Things (IoT), artificial intelligence, and robotics. Factors enabling these include transfer of software into the cloud, data analytics, social media, and mobility. The purchase habits of customers have continued to change as these business changes are taking place. Our customers expect their IT provider to focus more on business benefits instead of technology benefits. Our customers want to get solutions that are ready for use without a need to make major customer-specific changes. Additionally, customers increasingly wish to purchase continuous services instead of large one-off projects.

We estimate that the IT service market in the Nordic Countries grew by approximately 2–3% in 2016. In Finland, the growth was still slower than in the other Nordic Countries, but increased slightly. We estimate that the growth of the IT service market in the Nordic Countries in 2017 will be approximately 3–4%. The competitiveness contract signed in 2016 is estimated to have a positive effect on markets in Finland. Our estimate is based on research institutes' forecasts and our own outlook on markets.

As concerns Microsoft-based solutions, competition in the Nordic Countries is divided between different kinds of parties. The first group is formed by large companies that operate in all of the Nordic Countries. Typically, these companies offer a wide range of IT solutions for companies and organizations, using several competing technologies of which Microsoft technology is one option. The second group is formed by companies that focus on a narrower solution area in the Nordic level. These companies also offer IT solutions for companies and organizations using several competing technologies of which Microsoft technology is typically just one option. The third group is formed by companies operating in just one country. These small or medium-sized companies often focus on one solution area, client and/or field.

Innofactor has made a strategic choice by focusing on solutions implemented with and utilizing the Microsoft platforms and by selecting as its solution areas the ones in which Microsoft's growth and offering, and thus its partners' and ecosystem's growth, has exceeded the general average growth of IT service and software markets many times over. Innofactor is primarily focused on Nordic large and medium-sized companies and government organizations, which have high standards in their IT solution acquisitions. Innofactor develops solutions, products and services suitable for this group by itself and in cooperation with its partners. Innofactor's strategy supports well the change in the markets. Innofactor believes it can gain market share from its competitors and utilize possible IT market growth in the future.

Microsoft's partner network in the Nordic Countries, as well as elsewhere in Europe, is quite fragmented and mainly consists of a large number of small and medium-sized local providers. For Innofactor, this provides interesting potential for consolidation and globalization. Innofactor's good reputation concerning the Microsoft ecosystem, unique proofs of rapid and profitable growth and successful acquisitions together with business culture with entrepreneurial spirit make Innofactor a very attractive partner when making reorganizations in the field in the Nordic Countries.

Mission, Vision and Strategy

Strategy and its realization in the review period

Innofactor is the one of the leading implementers of cloud solutions and digitalization in the Nordic Countries. Innofactor has the widest solution offering and leading know-how in the Microsoft ecosystem in the Nordic Countries. Innofactor has over 600 enthusiastic and motivated top specialists in Finland, Sweden, Denmark and Norway. Innofactor's customers include over 1,500 companies and public administration and third sector organizations. During the years 2018–2020, Innofactor will primarily strive to unify its operating model and offering in the Nordic Countries in its selected areas. Unifying the offering may take place either through organic growth or selected acquisitions.

Innofactor's mission:

We empower organizations and people to make a difference in the digital world.

Innofactor's vision:

We are the leading implementer of cloud solutions and digitalization in each of the Nordic Countries (Finland, Sweden, Denmark and Norway).

Innofactor's strategy for achieving this vision includes:

The best Nordic professionals in the Microsoft ecosystem
The leading offering in cloud solutions and digital transformation
A proactive, value-adding and flexible delivery model
Visionary Nordic customers in defined industries

Innofactor's long term financial goal is to grow profitably:

To achieve annual growth of approximately 20 percent, most of which should be organic
To achieve approximately 20 percent operating margin (EBITDA) in relation to the net sales
To keep the cash flow positive and to secure solid financial standing in all situations

In the review period of January 1–March 31, 2018, Innofactor's net sales decreased by 4.5 percent. The company did not reach the goal it had set for organic growth.

Innofactor's operating margin (EBITDA) in relation to net sales was 2.1 percent in the review period of January 1–March 31, 2018. This is low and very far away from the set target level of 20 percent.

The main actions for reaching the approximately 20 percent growth and 20 percent operating margin:

In the Nordic Countries, we will focus on those fields and customer segments, which have great growth potential, such as social services and health services.
We will improve sales of our products and services to existing customers in order to get a greater share of the budget the customers are using for digitalization.
We will invest in using modern digital marketing methods to improve our sales.
We will concentrate on management of know-how, recruiting, and resource optimization in the Nordic level.
We will move the focus in our offering and net sales more and more to products and productized services.
We will continuously improve our specialists' skills, so customers will be willing to pay a higher than the average price on the field for them and our leading offering.
We will develop our flexible delivery model, which enables fast added value, in such a way that the amount of unnecessary work is minimized and our billing rate and customer satisfaction improve.
We will invest in operative efficiency by developing the Financial Quarterly Accountability (FQA), internal information systems and predictability.

Innofactor's operating cash flow in the review period of January 1–March 31, 2018, was EUR 0.6 million positive (2017: EUR 2.3 million). Innofactor's financial stability is good. Net gearing at the end of the review period was 53.2 percent (2017: 53.3%).

Key Figures

	2017	2016	2015	2014	2013
Net sales, EUR thousand	66,088	59,616	44,452	43,834	32,685
Operating profit before depreciation and amortization (EBITDA), EUR thousand	1,730	4,831	3,705	3,794	3,284
percentage of net sales	2.6%	8.1%	8.3%	8.7%	10.0%
Operating profit (EBIT), EUR thousand	-1,039	2,332	2,542	2,407	2,255
percentage of net sales	-1.6%	3.9%	5.7%	5.5%	6.9%
Earnings before taxes, EUR thousand	-1,157	1,920	1,935	1,946	1,863
percentage of net sales	-1.8%	3.2%	4.4%	4.4%	5.7%
Earnings, EUR thousand	-926	1,536	1,548	1,556	1,407
percentage of net sales	-1.4%	2.6%	3.5%	3.5%	4.3%
Shareholders' equity, EUR thousand	25,101	22,501	24,534	22,462	19,626
Interest bearing liabilities, EUR thousand	14,228	16,701	9,219	10,638	11,955
Cash and cash equivalents, EUR thousand	910	902	843	997	991
Deferred tax assets, EUR thousand	5,583	5,760	6,704	7,238	7,604
Return on equity	-3.9%	6.5%	6.6%	7.4%	8.4%
Return on investment	-1.3%	6.4%	7.6%	9.1%	12.9%
Net Gearing	53.1%	70.2%	34.1%	42.9%	55.9%
Equity ratio	43.8%	35.8%	56.9%	48.7%	43.1%
Balance sheet total, EUR thousand	58,609	63,587	43,983	47,413	46,671
Research and development, EUR thousand	3,298	3,394	2,495	1,981	2,067
percentage of net sales	5.0%	5.7%	5.6%	4.5%	6.3%
Personnel on average during the year	610	532	409	421	307
Personnel at the end of the year	601	591	415	411	416
Number of shares at the end of the year	36,188,225	32,901,377	33,453,737	32,153,737	30,909,052
Earnings per share (EUR)	-0.0262	0.0467	0.0475	0.0485	0.0432
Shareholders' equity per share (EUR)	0.694	0.684	0.733	0.699	0.635

* Currently, Innofactor primarily monitors the number of active personnel. The number of active personnel does not include employees who are on a leave of over 3 months. However, for 2014 and 2013, the figures include also these persons, so the figures cannot be compared.

Growth and Financial Targets

Innofactor's growth has been fast and profitable. Annual net sales growth from 2013 to 2017 has been over 20% on average.

Systematic Growth since 2000

Innofactor's long-term financial goal is to grow profitably:

By achieving annual growth of about 20 percent, of which majority is intended to be achieved by organic growth
By achieving approximately 20 percent operating margin (EBITDA) in relation to the net sales
By keeping cash flow positive and securing a solid financial standing in all situations

We believe that we can achieve the 20% organic growth by following means:

In the Nordic Countries, we will focus on those fields and customer segments, which have great growth potential in digitalization and implementing cloud services. Social services and healthcare along with wellbeing services are an example of a field in which we will focus strongly in 2017 and coming years.
We will improve sales of our products and services to existing customers in order to compete for an increasing share of the budget the customers are using for digitalization and to develop customer relationships in long term.
We will invest in using modern digital marketing methods to improve acquiring of new customers and to strengthen the customers' image of Innofactor as the leading Nordic implementer of digitalization and cloud services, as well as to improve our sales.

In addition to what was presented above, we believe that we can achieve the 20% operating margin by following means:

We will move the focus in our offering more and more to our own products and productized services, which ease our customers' transfer to cloud services and maintenance. Thus, we can continue to offer our customers better services and greater added value, while strengthening long-term customer relationships.
We will improve the skills of our own specialists, so that our customers will see significant added value in their know-how as compared to our competitors and will be willing to pay a rate that is higher than the field's average.
We will develop our flexible delivery model, which enables fast added value, in such a way that it will further improve customer satisfaction. In the development of our delivery model, we will focus on as efficient planning of the work as possible, while minimizing unnecessary work that will not provide added value to the customer. At the same time, our invoicing rate will improve.
In the Nordic level, we will focus on gaining synergies that provide cost savings, for example, by implementing in 2017–2018 the cloud-based Nordic Microsoft Dynamics 365 for Operations ERP system.

Customers

Q1 2018

Innofactor's business operations were focused on Finland, Sweden, Denmark and Norway. In January 1–March 31, 2018, approximately 57 percent of the net sales came from Finland, approximately 28 percent from Sweden, approximately 7 percent from Denmark and approximately 8 percent from Norway.

Of the net sales in January 1–March 31, 2018, approximately 48 percent came from commercial clients, approximately 30 percent from public sector clients and approximately 22 percent from third sector clients.

Innofactor's net sales in the review period of January 1–March 31, 2018, came from the following sources:

approximately 54 percent from IT system delivery projects and consulting
approximately 22 percent from specialist work based on recurring service contracts, such as smaller customer-specific changes and further development of IT systems
approximately 17 percent from services based on recurring service contracts, such as SaaS, cloud and hosting services, and from software maintenance
approximately 7 percent from licenses, of which the share of licensing income to third parties was approximately 4 percent of the net sales

Due to ERP implementation revenue source classification was clarified effective from 1.1.2018, thus before presented shares of revenue sources are not directly comparable to previous year similar shares.

Innofactor's 10 largest clients accounted for approximately 28 percent of the net sales during the review period January 1–March 31, 2018.

Get to know our customer stories

Year 2017

Innofactor's business operations were focused on Finland, Sweden, Denmark and Norway. Of the net sales in January 1–December 31, 2017, approximately 56 percent came from Finland, approximately 28 percent from Sweden, approximately 8 percent from Denmark and approximately 8 percent from Norway.

Of the net sales in January 1–December 31, 2017, approximately 48 percent came from commercial clients, approximately 33 percent from public sector clients and approximately 19 percent from third sector clients.

Innofactor's net sales in the review period of January 1–December 31, 2017, came from the following sources:

approximately 59 percent from IT system delivery projects and consulting
approximately 16 percent from specialist work based on recurring service contracts, such as smaller customer-specific changes and further development of IT systems
approximately 19 percent from services based on recurring service contracts, such as SaaS, cloud and hosting services, and from software maintenance
approximately 6 percent from licenses, of which the share of licensing income to third parties was approximately 4 percent of the net sales

Innofactor's 10 largest clients accounted for approximately 25 percent of the net sales during the review period January 1–December 31, 2017.

Personnel

Our strength lies in our highly competent and motivated personnel. We employ more than 600 enthusiastic and motivated top professionals in Finland, Sweden, Denmark, and Norway who are united by the desire to work on the front line of innovation and new technology. We take pride in our highly competent professionals and significantly invest in competence development. Our employees maintain and improve their professional skills by acquiring technological qualifications, such as Microsoft Certified Professional, and by participating in training provided by our own Innofactor Academy. Their high level of expertise is evidenced by more than 1,600 individual Microsoft certificates in our organization.

Number of Personnel and Key Figures

Q1 2018 – The number of Innofactor personnel remained the same

Primarily, Innofactor monitors the number of active personnel. The number of active personnel does not include employees who are on a leave of over 3 months. The average number of active personnel in January 1–March 31, 2018, was 605 persons (2017: 596), which shows an increase of 1.5 percent.

In the review period of January 1–March 31, 2018, the net sales per active person was approximately EUR 27.2 thousand (2017: 28.9), which shows an approximate decrease of EUR 2 thousand per person. In the future, we will focus on increasing the net sales per active person.

At the end of the review period, the number of active personnel was 599 (2017: 597), which shows an increase of 0.3 percent. At the end of the review period, the average age among personnel was 39.8 years (2017: 39.9). Women accounted for 28 percent (2017: 28%) of the personnel. Men accounted for 72 percent (2017: 72%) of the personnel.

Offering

Innofactor is a leading Nordic provider of cloud solutions and digital transformation with Microsoft Ecosystem's leading expertise and the most comprehensive offering in the Nordics. We offer our customers business-critical solutions, project deliveries and maintenance services, and develop our own software products and services. Our own product development is focused on Microsoft-based cloud solutions.

We offer our customers comprehensive Microsoft-based solutions that builds on the leading products, services, and expertise of the ecosystem. Our offering has been developed based on our customers' needs. We serve more than 1,500 commercial, public sector and membership-based customers in Finland, Sweden, Denmark and Norway.

Acquisitions

Our aspiration is to grow organically and through acquisitions. Our past acquisitions are as follows:

10 October, 2016
Innofactor signed a contract to acquire the entire share capital of the Lumagate group.
See Stock Exchange Release for more details.

22 December, 2015
Innofactor signed a contract to acquire the entire share capital of the Swedish company Cinteros AB.
See Stock Exchange Release for more details.

22 December, 2015
Finnish Arc Technology, which is focused on HR systems, bought Innofactor Plc's HRM (Human Resources Management) business.
See press release for more details.

31 December, 2013
Innofactor signed a contract to acquire the entire share capital of Enabling Group.
See Stock Exchange Release for more details.

30 September, 2013
Innofactor acquired Dynamic Team (company name Lainetar Oy, based in Tampere, Finland) and its business in order to strengthen its offering in the Microsoft Dynamics AX business area.
See press release for more details.

6 June, 2013
Innofactor signed a contract to acquire the entire share capital of atBusiness Ltd.
See Stock Exchange Release for more details.

30 November, 2012
Innofactor signed a contract to acquire the Microsoft project and project portfolio management solutions business from Tietotalo Infocenter Ltd.

25 June, 2012
Innofactor signed a contract to acquire the entire share capital of Bridgeconsulting A/S.
See Stock Exchange Release for more details.

3 December, 2010
Westend ICT Plc and Innofactor Ltd merged to become the Innofactor Plc Group.
See Stock Exchange Release for more details.

3 June, 2010
Visual Management Ltd became part of Innofactor Software Ltd.

12 October, 2009
Innofactor Software Ltd acquired Software Innovation Finland Ltd.

1 April, 2007
Innofactor purchased the Enfo Ltd business unit responsible for electronic business solutions.

15 December, 2004
Innofactor Software Ltd acquired TietoEnator Plc's parish-software business.

Sustainability

The key operating principles governing sustainability at Innofactor are documented in the company's Code of Conduct and environmental policy. The Code of Conduct is based on legal requirements and the underlying international standards, such as the ILO Declaration on Fundamental Principles and Rights at Work, the UN Universal Declaration of Human Rights, the UN Sustainable Development Goals and the ICC Business Charter for Sustainable Development.

Innofactor's internal operations are managed through various processes and standards. The key processes related to sustainability include the company's processes pertaining to legal affairs, risk management and employees, which govern many of the key aspects of corporate responsibility. The framework for Innofactor's operations is provided by the ISO 9001, ISO 27001, ISO 13485 and AQAP-2110 standards, which the company's various processes adhere to.

Innofactor is committed to supporting the achievement of the UN Sustainable Development Goals (SDGs) by 2030. Accordingly, we have mapped the main objectives from the perspective of our business operations.

Good Health and Well-Being

We invest in the digital transformation of social services and healthcare, which has a broad impact on society. We are part of the national Virtual Hospital project, coordinated by the Joint Authority for the Hospital District of Helsinki and Uusimaa (HUS), under which we have played an important role in the implementation of HUS' unique Health Village concept. The online service gives citizens access to reliable information on health, self-care and getting treatment for medical conditions, regardless of the time and the user's location.

We also look after the well-being of our employees by providing comprehensive occupational health services and emphasizing workplace ergonomics at our offices.

Quality Education

At Innofactor, we develop digital services that support inclusive education and promote lifelong learning. With Innofactor Skilli, we have contributed to the personalization of students' learning in schools across Finland. Our application helps learners reflect on and evaluate their learning and provides teachers with valuable information on the students' learning. For example, with Skilli, teachers can get information on which learning methods are the most effective for improving the learners' skills and how the students have felt about the different learning sessions.

We develop the learning and development of our employees through Innofactor Academy, which we launched in 2017. Innofactor Academy arranges training for our employees on various topics. Innofactor Academy is being continuously developed in accordance with the employees' suggestions.

Gender Equality

We offer equal opportunities to all of our employees, regardless of gender and regard Innofactor's workplace diversity as one of our most valuable assets. Women currently represent 28 percent of our personnel. To further promote the employment of women in the ICT sector, we joined Women in Tech in 2017. The network aims to inspire more women to enter the technology industry and stimulate discussion on choices related to studying and career choices.
Decent Work and Economic Growth

We contribute to economic growth through innovation and new technologies. The measures we have taken to employ young people also help support this goal.

Environmental Responsibility

Innofactor's environmental impacts are guided by our environmental policy, which was revised in 2017. The long-term goal of the policy is to continuously improve our environmental impacts and proactively respond to the changing expectations and requirements of society.

We carried out an energy survey for major companies, as required by the Energy Efficiency Act, in 2015. Based on the survey, we have implemented measures to improve energy efficiency in our organization and regularly monitor our energy consumption. We are preparing for another energy survey in 2019 and strive to actively identify further energy saving opportunities within our organization.

Public transport access to Innofactor's head office at the Espoo Campus was substantially improved when the west metro began operating in the end of 2017. In addition to the Espoo Campus, Innofactor's other offices are also easily accessible by public transport. We encourage our employees to commute by bicycle and use virtual meetings instead of travelling, whenever possible.

For several years, we have recycled waste and reduced our paper consumption at our offices, reflecting our commitment to environmental values. Innofactor's remote work policy motivates our employees to take advantage of flexible working arrangements and reduces our total carbon footprint.

Social Responsibility

In 2017, Innofactor systematically recruited young talents and participated inseveral employment-oriented training programs, such as the Microsoft Azure Academy and Microsoft Dynamics 365 Academy.

We participated in the Microsoft Azure Academy and Dynamics 365 Academy again as a Microsoft partner company. The main objective of the six-month Academy is to find employment for the participants in a Microsoft partner company at the end of the program. The Dynamics 365 Academy includes participation in practical projects, a Boot Camp training period, practical exercises and two Microsoft certification tests. Our aim is to help the participants accumulate valuable work experience and develop them into experts in their field. In 2017, we recruited a total of seven employees through the Microsoft Academy programs.

Youth unemployment is one of the most significant challenges in the Nordic countries today. We are committed to promoting the employment of young people through our Young Talent Recruitment program. We employed 14 young talents through the program. Young people coming in through the recruitment program are placed in various types of positions at Innofactor.

In May, we organized our annual InSpirit employee event and invited our employees from all the Nordic countries to participate. The event featured Nordic networking, presentations of our different country organizations and the sharing of knowledge and expertise related to our customers and products.

Innofactor monitors employee well-being by conducting an annual employee satisfaction survey. The results of the survey are processed at the team level and by the Group's various management teams. Based on the results, we identify development areas that we can improve to further increase employee satisfaction among our personnel. We support the recreational activities of our employees in various ways, including the Innofactor Fun Club, which covers many different activities ranging from culture to sports.

Respecting Human Rights, Anti-Corruption and Anti-Bribery

Innofactor launched its Code of Conduct in summer 2017. The Code of Conduct is an important risk management tool that defines the general principles and guidelines that the company's employees and partners must adhere to. The Code of Conduct was approved by Innofactor's Board of Directors, it has been covered in various training events, and it is binding on all of the Group's business areas.

At Innofactor, we are committed to conducting our business transparently and in accordance with the highest ethical standards. We encourage our employees and other stakeholders to report suspected infringements against the Code of Conduct through our anonymous whistleblowing channel. All information collected via the whistleblowing channel is processed in strict confidence.

Code of Conduct

Introduction

Innofactor Plc together with all its affiliates ("Innofactor") commits to be a reliable employer and business partner and thus requires all members of the organization to adhere to the standards set by this Code of Conduct. In addition to the Code of Conduct, Innofactor follows applicable laws, certain international standards and its binding obligations. Innofactor also requires that all its suppliers, subcontractors and partners commit to similar level of compliance.

Innofactor has an appropriate management system in place to enable adherence to this Code of Conduct.

Innofactor reserves the right to change and update this Code of Conduct.

Conflict of interest

All employees, directors (jointly hereinafter "Employees") and Board Members must recognize possible sources of conflicts of interest and take appropriate actions to avoid such conflicts and situations that may be deemed as conflicting by third parties. Any potential conflict of interest shall be properly disclosed by the person subject to it as soon as it arises.

Anti-corruption and anti-trust

Innofactor condemns all forms of corruption, including bribery and unlawful restriction of fair competition. Transparency and fairness in business practices are key, especially when co-operating with government officials. Conformity with anti-trust laws is enforced.

Employees shall withhold from conducting any acts affecting competition that would be deemed to be unethical.

Insider information

Abuse of insider information is forbidden. We take our utmost to follow the EU Market Abuse Regulation and national insider guidelines and emphasize in all occasions that insider information must be kept strictly confidential and may not be disclosed to any non-insider within or outside Innofactor, including family members.

Innofactor whistleblowing-scheme exists to ensure that violations are caught and made notifications may be dealt with confidentiality.

Confidentiality and data processing

Confidentiality and lawful processing of personal data must be respected. Confidential information shall be handled with care and vigilance, especially information regarding Innofactor's customers and business partners. Access to all confidential information must be limited.

All Employees are required to participate in information security trainings.

Non-discrimination

An accepting and welcoming work environment is essential for the well-being of our Employees. Innofactor offers each Employee equal opportunity to succeed and advance in their career regardless of gender, nationality, religion, race, age, disability, sexual orientation, political opinion, union membership, or social or ethnic origin. Employees are expected to act according to non-discrimination policies both within and outside the workplace.

Innofactor has a zero-tolerance policy regarding harassment and abuse. Employees are encouraged to report any disruptive behavior should they become aware of it.

Fair labor and wages

Innofactor acts in accordance to treaties composed by the International Labor Organization and does not utilize child labor nor forced labor. We respect our Employees' right of association.

All Employees shall be paid a fair wage in accordance to the law and applicable collective bargaining agreements.

Health and safety, training

The health and safety of our Employees is a priority. We provide our Employees with safe working conditions and sufficient training to conduct their work with minimal hazard. Employee health is supported through promoting healthy living habits and offering occupational health care. We value lifelong learning and education and encourage our Employees' active participation to various courses and training programs.

Environment

Innofactor abides by the principles of sustainable development. Our environmental policy ensures that important environmental factors are considered in our daily functions, projects and further development.

Accountability

Innofactor does not condone diversions from the Code of Conduct. Employees who fail to abide by the Code of Conduct shall be held accountable. Avenues for reporting violations are upheld.

Future Outlook

Innofactor's future outlook for 2018

Innofactor's net sales and operating margin (EBITDA) in 2018 is estimated to increase from 2017, during which the net sales were EUR 65.7* million and operating margin was EUR 1.3* million. Innofactor monitors the result development actively.

*) The net sales and operating margin for 2017 have been adjusted in accordance with the IFRS 15 standard. A separate release on this was published on May 7, 2018.