APPENDIX 2

Methodology for preparing proforma information
in the context of change of closing date

Half-year results press release Sept 10, 2020

Further to change of closing date, half-year financial statements refer to period from January 1 to June 30 (previously February 1 to July 31). As January is a significant month in terms of sales (renewal of almost half of the contracts in the licensing business), result for the new half-year differ substantially from those of the previous half-year.

To ensure good comparability of information and in accordance with AMF Recommendation 2013-08, the main aggregates of the financial statements have been recalculated on proforma basis from January to June 2019.

H1 2019 proforma data have been prepared using the same methodology as for 2019 12-months proforma data presented end 2019:

- Additional consolidation closings have been made for ESI Group and all subsidiaries as of December 31, 2018 and June 30, 2019, completing “historical” closings done as of January 31, 2019 and July 31, 2019. These additional closings enabled to produce income statement from January to June 2019 and balance sheet as of June 30, 2019, directly comparable with the balance sheet as of June 30, 2020.

- The process applied for additional consolidation closings was the same as for a usual “historical” closing, for all Group subsidiaries.

- More specifically, the following methods have been applied:

• Licensing revenue is related to two performance obligations: access to the software (or license itself) and the maintenance service. Revenue for the access to the license is recognized at a point in time at the moment when control is transferred to the client, and the revenue from maintenance service is recognized on a straight-line basis over the one-year term of the support agreement – which is the usual method of each closing, in accordance with IFRS 15;
• Service revenue consists mainly of consulting fees. The consulting revenue is recognized according the percentage of completion method at end June 2019, for all entities with monthly monitoring. In the absence of monthly monitoring, a prorata by month has been calculated – this approach being acceptable given the month-to-month linearity of this activity’s sales;
• Costs directly linked to revenue (such as royalties paid to third parties or commissions paid to agents) were calculated on the basis of monthly revenue;
• Staff costs excluding bonuses result from the payroll and social security charges paid each month, related accruals have been calculated according to the actual situation existing at each closing date. Bonus accruals have been adjusted end June 2019 using same hypothesis than calculation done end June 2020;
• The net impact of the capitalization of development costs and net charges to amortization, depreciation and provisions were calculated at each closing date;
• Some other external costs may result from prorata temporis estimates, such as office rental expenses which are invoiced quarterly.

Components of the cash flow were determined through a cash flow statement drawn up according to the usual consolidation process.

APPENDIX 3

Reconciliation of EBIT with EBITDA before IFRS 16 impact

Half-year results press release

Sept 10, 2020