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EQUITY RESEARCH

CAG International AG

Fair Value: 13,5 Mio. Euro

October 11th 2019

Please read our disclosures regarding potential conflicts of interest as well as our disclaimer at the end of this document!

CAPITAL LOUNGE GMBH | EQUITY RESEARCH | AGNES-BERNAUER-STR. 88 | 80687 MÜNCHEN | DEUTSCHLAND

WWW.CAPITALLOUNGE.DE

CAG International AG | Business Analysis | 11/10/2019

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CONTENTS

OVERVIEW AND KEY FIGURES

03

BUSINESS MODELL

04

EXECUTIVE BODIES, SHAREHOLDERS AND HISTORY

07

STRATEGIC CONSIDERATIONS

12

MARKET AND COMPETITIVE ENVIRONMENT

18

CORPORATE TRAINING AND LEARNING ON THE STOCK EXCHANGE

19

SWOT ANALYSIS

21

FINANCIAL PLAN AND DCF ANALYSIS

22

PEER GROUP ANALYSIS

27

VALUATION AND COMMENTS

28

BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS 2016, 2017, 2018

29

SELECTED REFERENCE CLIENTS

32

DISCLAIMER & CONFLICTS OF INTEREST 33




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OVERVIEW AND KEY FIGURES

ISSUER CAG International AG • CAG International AG specializes in e-learning, corporate training, and corporate transformation.

• The company provides well-crafted, comprehensive and custom-made learning programs for large, international organizations.

• Today, ist learning and training services reach over 200,000 internal staff and employees.

• The customers of CAG International AG include leading manufacturing, financial, services and consumer products companies in the Scandinavian market and aborad. The company delivers over 1,500,000 blended learning, web-based, and classroom programs a year in more than 30 languages

• Furthermore, the company fosters strategic alliances and partnerships with international corporations such as Intrepid Learning, CrossKnowledge, InfoPro Worldwide Inc., WBT Systems, corpedia and Junglemap.

REGISTERED OFFICE BAAR, SWITZERLAND

WEBSITE WWW.CAG-INTERNATIONAL.COM

YEAR ESTABLISHED 2016 (2000)

LEI 8945 00SQ 8FO2 Z909 KI30

SHARE CAPITAL CHF 768,828.56

NUMBER OF SHARES 6,406,904

CLASS REGISTERED SHARES

PAR VALUE CHF 0.12

CUSIP NOT ISSUED

ISIN CH0330937209

CFI ESVUFR

WKN A2DQNE

SYMBOL (VIENNA STOCK EXCHANGE

CAG

STOCK EXCHANGE VIENNA STOCK EXCHANGE

APPLICANT ISSUER

SEGMENT DIRECT MARKET

TRADING MODEL CONTINUOUS TRADING

MARKET MAKER ICF BANK AG

CAPITAL MARKET COACH CAPITAL LOUNGE GMBH

Source: Capital Lounge GmbH

Source: CAG International AG

CAG International AG (in CHF) 2018 2019e 2020e 2021e

REVENUES 1,385,213 1,974,760 2,764,664 3,870,529

COST OF SERVICES 320,144 415,094 691,166 967,632

GROSS PROFIT 1,065,069 1,559,665 2,073,498 2,902,897

STAFF COSTS 842,735 1,036,946 1,244,099 1,354,685

OTHER EXTERNAL COSTS 417,250 398,704 691,166 870,869

OTHER OPERATING EXPENSES 6,535 22,117 27,647 38,705

EBITDA -201,451 101,898 110,587 638,637

EBIT -202,761 82,150 82,940 599,932

FREE CASH FLOW TO EQUITY -202,725 61,613 62,205 449,949

IPO-Analysis Risk Sector Compilation / Updates

Type: IPO-Valuation medium GICS 11/10/2019

EV: 20,6 Mio. EUR Beta: 1,2 IT- / Educational Services yearly

Source: Capital Lounge GmbH




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BUSINESS MODELL

CAG International AG offers clients a special outsourcing solution called CORE™. The CORE™

engagement model unencumbers a company’s internal training resources to quickly increase

efficiency and effectiveness while instantly reducing cost and moving key items out of the

client’s profit and loss responsibility. The CORE™ engagement model effectively mitigates

many problems connected to traditional outsourcing practices.

Core Business Operations:

The company provides the following products and services:

1. Agility Tools and Methods

2. Decision Making & Business Intelligence

3. Live and Remote Workshops

4. Learning Management Systems (LMS)

5. Special Training Programs

By combining training systems acquired from customers with the introduction of proprietary

learning management systems developed by the company CAG International AG is able to

quantify existing corporate knowledge assets, develop new and optimize existing corporate

training protocols, and attain training goals within a shorter period of time. As a result, the

client’s learning experience is better-targeted, faster, and generally superior to that provided

by companies which rely on in-house training programs.

CAG International AG is able to address the corporate training needs of very diverse set of

industries ranging from transportation, logistics, pharmaceuticals, finance, and information

technology, to tourism and manufacturing.

A diverse array of product offerings allows the company to respond to the diverse and

dynamic needs of its customers. For clients with more sophisticated needs, CAG International

AG is able to provide completely custom-tailored e-Learning solutions through its flexible

Learning Management Systems (LMS) software platform. The company intends to exploit and

further develop its inroads into the e-Learning market by taking advantage of technological

advances in software and hardware and the relative ubiquity of laptops, tablet computers and

smartphones. These advances allow to offer learning solutions that do not require expensive

and costly employee travel to live courses and conferences.

Agility Tools and Methods: Minerva Carve-Outsourcing CORE™

This corporate agility brand has its basis in focusing the clients’ resources back towards core

competencies and away from maintaining a captive vocational education institution within

the organization. By divesting non-core operations the clients realize immediate returns on

investment and reduced administrative and personnel costs.




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Dynamic Navigational Center3 (DNC3)

A key part of the company’s client service strategy is information collection and dissemination.

The DNC3 provides a comprehensive interface to Key Performance Indicators (“KPIs”) and real-

time information in an easy-to-read and use format where every corporate agility tool is

graphically and clearly displayed.

STA+R

Systematic Training Audit and Recommendations – STA+R – is a trademarked corporate agility

auditing process tool. STA+R measures existing training functions and sub-functions and

provides a detailed, industry specific best-practices analysis.

Other corporate agility tools and methods owned or licensed by the company:

▪ Understanding Transformation and Agility (Strategic)

▪ Forward Decision Drivers (FDDs) (Operational)

▪ 7S Framework (C7S) (Strategic)

▪ Inclusiveness Funnel (IFS) (Operational)

▪ Rolling Budget System (RBS) (Operational)

▪ Marketing Responsibility Assessment (MRA) (Strategic)

▪ Overhead Value Analysis (OVA) (Operational)

▪ Leadership Assessment (Strategic)

▪ Injecting Entrepreneurship into your organization (Strategic)

▪ Setting up a virtual or physical DNC (Operational)

▪ Evaluating direction with the Strategic Triangle (Strategic)

More Information on these tools can be found in “Mastering Agility, Successfully Navigating

Uncertainty”, written by Hans Amell and Kurt Larsson and available through Amazon.com or

via the Minerva Group.

E-Learning and Blended Learning

E-Learning or “electronic learning” is the term most used to describe training over the

internet. The term includes all kinds of training adapted for public, private, and corporate

educational requirements. This term can also include aspects of artificial intelligence, gaming,

multimedia, etc.

Blended learning is e-learning plus a balanced mix of traditional classroom or face to face

coaching. The idea is to blend more understanding, emotion and personal contact into the dry

logic often associated with strictly e-learning applications, and to reduce the costs associated

with traditional classroom settings without sacrificing direct and in-person student-teacher

interaction.




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Mobile Learning

Today’s busy professionals appreciate the opportunity to study while on the move and today’s

mobile devices provide more computing power than ever. The company’s platform deploys a

number of tools to produce customized digital training applications for smartphones and

tablets permitting the clients to instantly distribute training programs remotely to personnel

around the globe and continuously track progress and adjust methodologies in real-time.

Live and Remote Workshops

The company offers customized sales and sales management training workshops tailored to

the clients’ specific needs. Workshops are based on proven collaborative sales techniques

blended with clinics on “soft skills” such as conscious communication and body language

awareness. This unique combination enables each participant to understand, act upon, and

complete every stage of the sales process more effectively. The result is higher close rates,

fewer customer returns, and a measurable increase in customer loyalty. The company also

offers leadership training to improve the leadership skill-sets in senior sales executives.

Furthermore, CAG International AG offers customer service training programs. These

packages are designed to sharpen the necessary communication skills with the ultimate aim

to provide a seamless, outstanding customer service experience, and in the process, to

generate more contagious customer loyalty.

Learning Management Systems (LMS)

CAG International AG has at its disposal two modern, cloud-based distinctive Learning

Management Systems (LMS), focused on deploying different learning strategies. The company

continues to survey the marketplace and evaluate new systems for potential additions to its

platform.

Special Training Programs

CAG International AG also offers bespoke training programs designed from the ground up for

unique or non-traditional training requirements.

The management of CAG International AG believes that the work environment should be a

positive and developmental space. Challenges presented by the faster pace between new

implementations and changes, increased volatility, increased personnel changes, rapidly

shifting laws and tax rules, as well as a drastic trend in ever shorter business cycles, all

contribute to turbulence and uncertainty and are prone to frustrate the goal of a positive and

developmental workplace.

The service offerings are designed to provide agile assistance to our clients to enable them to

identify, act quickly, decisively, then measure and learn from the constant changes and

adjustments needed to survive and more importantly thrive in a competitive global

environment.




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EXECUTIVE BODIES, SHAREHOLDERS AND HISTORY Its two Directors, Hans Amell, and Kurt Larsson and Swiss Manager Oliver Speilmann manage the

company at present. The broadest powers are vested in the Board of Directors to act under all

circumstances on behalf of the Company. The Board of Directors (subject to Shareholder approval

where applicable) directs the general management of the Company as well as the policies for

administration and investment. Any or all members of the Board of Directors may be dismissed only

under the circumstances prescribed by the Memorandum and Articles of Association.

EXECUTIVE BODIES

Hans B. Amell – Founding Partner, Chairman, CSO

Mr. Amell began his career with McKinsey & Co. (Scandinavia) in 1978. He has spent over two

decades providing clients with management and operational advice. Mr. Amell has frequently

been called upon to execute change in Fortune 500 and Global 1000 companies from C-level

or Board positions including as a corporate officer and Senior Vice President of Marketing for

Allied Signal, Senior Vice President of Marketing for Unisys, Chief Operating Officer of

Rosenbluth International, Managing Director of The Conference Board, President and General

Manager of Ericsson Workstations (Sweden), Chief Executive Officer and General Manager of

Ericsson (Denmark), Senior Vice President of Cognizant Corporation, as a Corporate Officer

and Senior Vice President of Dun and Bradstreet and Chairman, President and CEO of Dun and

Bradstreet’s Software Units.

Mr. Amell’s career as a change agent has focused on the converging technologies of hardware,

software, telecommunications and business services. Mr. Amell holds a BA/MBA equivalent in

Marketing and Organizational Behavior from the University of Stockholm and Uppsala. Mr.

Amell also attended the Post-Graduate ISMP Executive MBA Program sponsored by McKinsey

at the Harvard Business School and holds post graduate credentials in Marketing. Author with

Kurt Larsson of the newly released hit business book “Mastering Agility, successfully

navigating uncertainty”.

Christer Sandin – Head of Stockholm Office and Country Manager for Sweden

Christer Sandin has 19 years’ experience in B2B Services sales and Management, having

successfully developed and led global sales teams as senior executive in learning and

corporate development. Christer started his career with sales at a small startup within

consulting and outsourcing of students before he moved on to selling ERP system at both small

and larger suppliers such as Visma for a couple of years. 10 years ago, Christer started his

career within learning as KAM and Sales Manager at Outsmart AB, which was renamed to

Minerva Group. Christer is since 2016 leading the Swedish operations at Minerva Group.

Christer has a background from engineering physics at Luleå university of technology.




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Malina Andrén – production manager and head of Gothenburg office

Malina Andrén has 19 years’ experience in strategic and operational communication as well

as production management within digital learning production at various positions at digital

learning suppliers.

She is responsible for daily operations including hiring, staff scheduling and supplier

management. Her background is Masters of science Computational linguistics at Gothenburg

University.

Kennet Oxelgren

Kennet Oxelgren began his career in the music-industry in 1979 as chief accountant for

Polydor AB . In 1990 became CFO for PolyGram AB and CFO for Universal Music AB as well as

Chairman of the Board. 1991-1999 was even CFO for Sweden Music AB and reported directly

to Stikkan Andersson of ABBA Fame. Today, he works as CFO for The Artist House Stockholm

AB and reports to Ola Håkansson. Also engaged in a number of consulting projects mostly in

the Music Business. Began as Chief Economic Officer at Minerva Group in December, 2018.

Martin R Wade III – Partner in Residence

Mr. Wade is Chief Executive Officer of IMSI, Inc. He also served from 1998 to 2000 in Mergers

and Acquisitions at Prudential Securities and from 1996 to 1998 as a managing director in

Mergers and Acquisitions at Salomon Brothers. From 1991 to 1996, Mr. Wade was National

Head of Investment banking at Price Waterhouse, LLC. Mr. Wade also spent six years in the

Mergers and Acquisitions department at Bankers Trust and eight years at Lehman Brothers

Kuhn Loeb. Mr. Wade is credited with participating in over 200 Mergers and Acquisitions

transactions involving a variety of Fortune 500 clients.

Mr. Wade was a partner in M/A Group at both Lehman and Solomon Brothers where he

completed over twenty software company acquisitions and sales. From 2000 to 2006 , Mr.

Wade served as Chairman and CEO of a public software development company where he was

responsible for acquiring or establishing the commercial development of many leading

software products. Mr. Wade has also consulted with other companies such as Alliance One

in the development of proprietary inside software into successful outside products.

Mr. Wade is a member of the Board of Directors of NexMed (OTC: NEXM), Command Security

Corporation (OTC: CMMD) and Energy Transfer Group of Dallas, Texas.

Kurt Larsson – Director & Resident Partner

Mr. Larsson has an extensive background in international sales and marketing management

having sold everything from car tires in Houston, Texas to retail banking delivery systems in

over 20 different countries to tons of retail investment gold bars and coins. His

accomplishments include being in the President’s Club for top sales in three different

organizations as well as the author of 4 books. He currently sits on the Board of 4 companies,

has been Sales Director for a precious metals investment company and has a B.S. in Finance




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from Virginia Tech. He is also an Executive Coach and has worked both in London and

Stockholm as such.

For over past 20 years he has driven his own educational consulting company Expanding

Understanding, specializing in effective communication in leadership, sales, service and

teamwork. His workshops, seminars and coaching sessions focus upon the growing

importance the Collaborative Sales Model and the leveraging effect of more conscious body

language. He has worked in these areas with organizations such as Ericsson, SEB (Banking) and

Sabre Travel Network.

His passions include his family, jogging, technology, Austrian economics and the study of

conscious body language. He is also a certified International Body Harmony Teacher with over

20 years of hands-on experience in this conscious and soft touch method of bodywork. He is

also the two-time Past President of the Stockholm International Rotary Club, resides in

Sweden and speaks the language fluently. He still loves to travel.

Jared Schnackenberg – Partner in Residence

Prior to the Catalyst Acquisition Group, Mr. Schnackenberg was the President of Oticon

Medical, U.S.. There, Mr. Schnackenberg was recruited to prepare the U.S. organization to

bring to the U.S. market a new cochlear implant system, something which hasn’t been done

in the last 20 years. Mr. Schnackenberg assumed full responsibility for the U.S. organization

and for the support to cochlear implant clinics, ENT physicians, Audiologists and recipients.

Operating in a FDA class III market his whole career, Mr. Schnackenberg brings a wealth of

experience to the field. Mr. Schnackenberg has developed a solid track record building and

leading high-performance teams within sales and marketing, service, regulatory, clinical

research, and reimbursement departments.

Prior to Oticon Medical, Mr. Schnackenberg was Vice President, North American Sales and

Service for Advanced Bionics, another neuromodulation cochlear implant company. He served

with Advanced Bionics for 11 years, gaining deep experience in hearing implants and proving

success in relationship-building and business development.

Schnackenberg earned a Master of Arts in Audiology from the University of Northern Colorado

and holds board certification in Audiology with a specialty in Cochlear Implants from the

American Academy of Audiology.




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SHAREHOLDERS As the date of this Business Analysis and according to the shareholders’ register, the shareholders breakdown is shown in the table below:

SHAREHOLDER BENEFICIAL OWNER(S) SHARES PERCENT

Catalyst International, Ltd Hans Amell

Robert Vollers

4,283,070 66.9

Orbital AG Cyrill Staeger 480,268 7.5

Trifft Group AG Cyrill Staeger 480,268 7.5

Gores Trust Tewfik Gores 443,794 6.9

Kotzubei-Beckmann Trust Jacob Kotzubei 146,821 2.2

Hans Amell 572,684 9.0

TOTAL 6,406,904 100.0

HISTORY On 7 August 2016 CAG International AG acquired all of the shares issued and outstanding of

CAG Sweden AB (a company limited by shares and incorporated under the laws of Sweden on

2 July 2010 with registration number 556814-4082). At the time of the acquisition, CAG

Sweden AB operated as a holding company with two wholly-owned subsidiaries: MCLP

Sweden AB (the operational entity in the e-learning and corporate training space formed on 4

May, 2000 and MA Sweden AB (a technology holding entity created on 2 February, 2013 to

manage licensing and royalties related to intellectual property developed by the company).

Both subsidiaries are companies limited by shares, formed under the laws of Sweden with

principal offices currently in Stockholm, Sweden (see Figure I, below).




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History of the subsidiaries Outsmart AB was founded in 2000 by Volvo Technology Transfer AB, Sigma AB and Volvo

Trucks AB. In 2010, Outsmart was acquired by Catalyst International. Volvo Technology

Transfer AB required a Swedish Holding Company to own 100% of this Acquisition. Therefore,

CAG Sweden AB (Owned 100% by CAG International AG) owned 100% of MCLP Sweden AB.

Under Catalyst’s direction the company’s business model evolved to include developing and

presenting digital content for learning system support in the form of a platform-based

“learning management system” (an “LMS”). Consulting services to support individual

customer needs and provide ongoing support and development were rolled out soon after

inception.

Catalyst expanded the enterprise’s corporate strategy to include advanced management

consulting services. The combined business strategy aimed to leverage the existing training

platform with information management services to enable the executive corps within The

company’s clients to collect data on and analyse existing levels of corporate training and

expertise within the organization. Once this data is collected, management can use The

company’s services to quickly develop and deploy training programs to address internal needs

in the areas of marketing, sales, compliance, and administration. The company now markets

these services under the “Corporate Agility” brand.

To facilitate rapid adoption within an organisation, Catalyst offers a unique “Carve-

Outsourcing” model in which Catalyst acquires or “carves out” existing training and human

resource functions within an organization and, while rationalising and leaving the resources in

place with the client, runs the new group as an “on-site” consulting vendor (hence “Carve-

Outsourcing”).

Using this acquisition model, on 2 February, 2013 CAG Sweden AB acquired parts of SJ Service

Academy, the internal training function of Swedish Railways eventually housing the new

acquisition in the newly formed entity “MA Sweden AB” (for “Minerva Academy Sweden”).

Following the restructuring of the Swedish Railways project, The Group streamlined MA

Sweden AB and expanded the mandate of the firm to include services to external customers.

Substantial changes gripped the corporate training market between 2012-2015. Despite this,

during this period the Group maintained and expanded its client and partner portfolio which

include firms such as SKF AB, SCA AB Following a period of downsizing in the Group added

GANT Pyramid AB and Cellmark AB to its client list.

Debt management issues, SJ restructuring, and a difficult regulatory and employment-

compliance environment in Sweden, along with extremely high benefits and pension expense

in that country caused MCLP Sweden AB to seek restructuring to reduce fixed personnel

expenses and certain other debts. MCLP’s restructuring request was granted by Göteborgs




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Tingsrätt in Gothenburg, Sweden on 2 March 2018. The company was able to significantly

reduce personnel expense and restructure certain debts but was thereafter obligated to

finance its current operating costs from current cashflow.

CAG International AG is now focused on expanding its operations around two core-

competencies: delivering and supporting LMS, and deploying digital content in the field of

education technology. The company’s target market remains large and multi-national

corporations and other enterprises with acute training needs.

STRATEGIC CONSIDERATIONS

Sales and Marketing Summary

CAG International AG was created as the parent company and platform company for

marketing the world-wide expansion using its proprietary services of CORE™, STA+R™ and A²

Index™ as drivers for growth:

CORE™ is a unique outsourcing system that mitigates most issues encountered in traditional

outsourcing by “carving out” existing corporate learning functions and selling the service back

to the client on a long-term contract.

STA+R™ is a proprietary tool that effectively analyses all aspects of a learning organization

against the accumulated inventory of industry best practices.

A² Index™ is a world leading proprietary survey based tool to assess a company’s corporate

agility.

The early sales strategy entails the retention of four senior executives with extensive

outsourcing experience to market and sell services with an early focus on markets in Europe

and the United States. Following an intensive introductory training program to familiarize the

new executives with our service offerings and platform, CAG International AG will conduct a

detailed market segmentation and develop potential market introduction efforts.

The corporate learning market is large and extremely fragmented, both on the supply as well

as the demand side. Corporate learning has become a major obstacle to corporate agility.

Training cannot be developed until products or services are well defined and ready to launch.

Life cycles of new products and services are growing shorter.

Developing a training curriculum or creating an effective corporate learning program is a

highly specialized skill and is generally not a core competency of the target clients: large global

corporations. CAG International AG faces challenges in its sales efforts from internal sources

within its clients, particularly where its services promise to reduce headcount (for example in

human resources departments). As a result, CAG International AG views the sales process as

beginning at the C-Suite level.




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The sales and marketing strategy therefore begins with senior executive level networking and

participating both as speakers and sponsors of high-level events. Public relations professionals

and opinion leader initiatives will be paramount. Deep collaboration with transformational

and change agent entities and serial acquirers (for example large investment groups or private

equity funds) is also a key strategy.

Initial Target Industries

Certain industries have higher training expenditures than others and thereby are a higher

priority at the outset. Various reasons contribute to these industries’ higher level of

expenditures, including: greater need for compliance with the law, quality standards and

industry requirements; higher rates of change that require training to stay competitively

abreast; workforce demographics which demand greater investment in career-enhancing

skills; and corporate cultural emphases on knowledge attainment.

The early target industries include:

High Technology and Communications Firms.

These companies usually represent the leading edge in training, compensation, and quality

practices. They have large internal training staffs and generally spend more money per

employee on training than any other industry group. They also are more likely than any other

industry group to embrace learning technologies to deliver training.

Pharmaceutical, Health Care, and Medical Device Manufacturing Firms.

Safety and quality assurance programs are a key part of these businesses given their high

exposure to product liability and other legal, regulatory, and compliance risks. Quality control

programs and advanced workplace practices are essential needs. Some of these programs are

mandatory due to governmental and industry regulations. These companies have some of the

largest per-employee expenditures and invest heavily in most forms of training using both off-

the-shelf and customized programs. However, most training dollars are spent on “in person”

programs and hard assets (e.g. corporate university campuses). These existing programs

present an enormous opportunity for cost improvement.

Financial Services and Insurance.

Because most employees in these sectors are trained on the job, these organizations spend a

considerable amount of money on classroom education programs. Many firms in these

industries have dramatically dispersed geographic operations (e.g. commercial and retail

banking). They are also positively inclined to use computer-based training. Like some sectors

of the health care industry, many members of the financial services and insurance industry

are required to complete a minimum number of hours of continuous education programs to

maintain certifications and stay current with the changes in their industries.




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Large Diversified Manufacturing.

Many manufacturing companies have large “legacy” training departments. Many of these

organizations have “corporate universities” that were created in the 1980s and 1990s with

associated infrastructure (facilities, large in-person training departments, etc.). As competitive

pressures have increased, these companies are under increased scrutiny to improve financial

performance yet have not been at the forefront of embracing e-Learning technologies. While

these companies have significant amounts of “blue-collar” employees, many of these

organizations have decided to offer significant career education in order to attract highly-

skilled employees (or retain their legacy workforce). In addition, the demographics of certain

companies’ workforces increase the importance of legal compliance training courses that

inform them on proper workplace conduct. The financial opportunity offered by large

diversified manufacturing companies makes these organizations ideal target clients.

There are certain characteristics of a firm or recent material events that may serve as catalysts

for change in the training department and increase the likelihood a potential client will

contract the company’s services. These include:

Forward-Thinking Management Teams

The ideal client is a forward-thinking organization that embraces modern management and

workforce practices, particularly the ongoing education of its workforce. In the quest to

maintain a competitive edge, the client’s managers often do business with new, cutting edge

organizations that can show demonstrable gains to the bottom line, particularly those that do

so using technology.

History of Outsourcing Non-Core Competencies

This potential client is amenable to outsourcing and has already outsourced or is taking steps

to outsource some of its non-core components. For example, Ericsson, British Petroleum,

most airlines, J. P. Morgan Chase, Bank of America have conspicuously outsourced many of

their non-core operating functions.

High Turnover Rates

Companies that experience high-turnover rates often under-invest in employee education due

to a fear of losing such investment in the near term. Companies in high-turnover industries

that can deploy inexpensive programs will gain a competitive advantage over those that do

not.

Firms with Significant Regulatory and Compliance Education Requirements

Many legal, financial services, and healthcare firms have significant mandatory and

continuous training requirements. Most of such training is still conducted “live” and could be

offered on a more efficient basis via blended learning and e-Learning.




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Rapidly Growing Organizations

Mainly due to resource constraints, many rapidly growing organizations are unable to keep

pace in building a training department to service the needs of their expanding workforces. The

concept of outsourcing this service may be very appealing to these organizations because they

can divert the accumulated cost savings to other revenue generating investments

Geographically Disperse Operations

Organizations with geographically dispersed operations can reduce travel expenses and

minimize productivity losses by having employees participate in training at their desks as

opposed to fixed-cost generating regional training centres.

Turnover in Training Department Management or Recent Training Failures

Many training departments are plagued by management turnover. The higher the

management turnover, the more likely an organization will be prepared to outsource the

function. Furthermore, organizations with high profile or costly training failures such as

headline-making discrimination lawsuits, conspicuous product liability issues, or a failed

product or service launch due to an undereducated sales force, may be inclined to take

remedial action by outsourcing the training function within the human resources department.

High Per-Employee Spending at Under Performing Organizations

Numerous large corporations are under performing yet continue to maintain bloated training

departments. This function often remains bloated in part due to senior management

inattention.

Non-existent Training Department At large Organizations

There are two types of large organizations that do not have an organized training function.

Some have eliminated any internal training function owing to dissatisfaction and short term

cost savings efforts. In other corporations, the training function simply never has been

consolidated and continues to be executed locally in an inconsistent manner.

Turnover at C-Level

In cases where there has been turnover at the senior management level the new management

team may be more willing to take aggressive steps towards change. This is particularly true

where executive turnover is a result of underperformance by the prior management team and

the new team feels the need to focus down to core competencies and fewer managerial

priorities.

Our Multi-Stage Marketing Plan

Stage One: Anchor Clients (Years 1-2)

Stage One involves growing the CAG International AG through complementary

acquisitions, strategic alliances, introduction of selected training products and securing




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CORE™ (Carve Outsourcing™) contracts with organizations CAG International AG has

targeted as potential anchor clients.

These are forward-thinking, companies that have a situational reason or general

propensity to consider outsourcing their entire training and/or education programs.

The ideal anchor client is based in Europe or the United States, has 20,000 or more

employees, and maintains an annual training budget of at least $30 million. The

successful implementation of the training program with the anchor client will establish

the company’s credibility and demonstrate viability in the marketplace. Furthermore,

with market leadership, ongoing thought leadership through its research capabilities,

effective execution, establishment of key partnerships, and selective acquisitions, CAG

International AG believes that many existing training services clients are potential

outsourcing anchor clients.

The company estimates that it may take as little as six months and as long as 18 months

to secure the initial anchor client and negotiate the associated service level agreement.

Stage Two: International Expansion (Years 2-3)

The second stage entails more aggressively marketing our services by highlighting

successes with anchor clients and expanding our focus to include companies outside

Europe and the United States.

The company’s unique experience in implementing training outsourcing solutions and

the company’s purchasing leverage should accelerate and shorten the sales cycle

during the early stages of our marketing campaign. Furthermore, the company’s

platforms, content relationships (or ownership), and operational or execution

expertise should allow it to target certain vertical industries effectively. In the latter

parts of this stage, CAG International AG feels that it will be able to provide training

outsourcing solutions on a profitable basis to companies with as few as 10,000

employees and training budgets of at least $15 million annually.

Stage Three: Leveraging a Premium Brand, Downmarket Focus (Years 3-5)

In stage three we believe our experience and reputation will result in a premium brand,

well positioned for a strategic potential buyer or a secondary large IPO. Size and scale

will also allow us to target smaller companies as well as multinationals. We expect in

this stage to profitably service corporations with as few as 2,000 employees with

annual training budgets as little as $5 million.

Pricing of Services

Upon signing of an engagement with a client, all client training expenditures within specified

training areas covered by the CAG International AG service level agreement (“SLA”) will be

billed directly the client. CAG International AG offers clients significant pricing flexibility via

four pricing methodologies: “Guaranteed Savings”, “Cost Plus”, “Purchase Option”, and




17

“Hybrid”. Regardless of the pricing methodology for any particular client, the company’s

implementation process and schedule will largely remain the same.

Guaranteed Savings Method

Under the “Guaranteed Savings” methodology, CAG International AG establishes a baseline

per-employee spend-rate for the corporate client. As most corporations do not track training

expenditures as a separate expense item, there necessarily will be an interim, post-SLA signing

period of a minimum six months (the “pass-through period”) during which CAG International

AG will ‘pass-through’ all training expense items as incurred with a small administrative fee

added. During this period the company will also conduct a pre-SLA audit to determine as

accurately as possible the full extent of client expenditures incurred in the 24 months

preceding the SLA date. Analysis of the pre-SLA audit and spending during the six-month post-

SLA period will yield the total amount and forms of training currently conducted, the efficacy

of such training, and a baseline per-employee spend rate (the “BPE” rate). This BPE rate will

provide basis against which future expenditures will be measured. The allowable growth rate

(due to inflation) and minimum cost savings against the BPE rate will be determined on a

client-by-client basis and negotiated as part of the SLA.

CAG International AG assumes that the average allowable growth rate and minimum cost

savings will be 5% and 15% respectively under the Guaranteed Savings pricing option. Upon

completion of the pass-through period, CAG International AG shall bill the client according to

whatever incremental guaranteed savings rates have been agreed to in the SLA .

Cost Plus

The Cost Plus pricing methodology is also commonly used in outsourcing engagements,

particularly in situations where baseline current spending is difficult to determine. Under the

Cost Plus methodology, all costs of CAG International AG to manage clients’ training

operations are billed back to client with a small additional administrative fee. The Cost Plus

arrangement is easier to implement, as detailed pre-SLA audits are less necessary. Cost Plus

ensures a higher quality of training but not guaranteed savings, although the Company will try

to produce cost savings to clients so that they will be inclined to renew their contracts. The

company also expects that Cost Plus clients will be more sensitive about the dollar level of

upfront process improvements made by CAG International AG into the relationship (e.g. into

software, infrastructure, etc.) in order to be able to deliver better service at lower cost over

the term of the SLA. Furthermore, the company expects that the administrative fee added to

pass-through costs will be small at the outset of the SLA (estimated at 5%) but shall increase

over the SLA period (up to 20%), as the company brings promised efficiencies and efficacy to

client’s training operations.




18

Purchase Option

Another form of transaction that will be considered by the company is the “purchase” of

existing corporate training departments in the form of “buy out”. Under a buy out structure,

CAG International AG would pay an upfront amount of cash in exchange for a long-term

contract to continue to provide training management services. Any amount of guaranteed

savings under such a contract will be reduced to account for the adjusted Net Present Value

(NPV) of the upfront payment. This alternative may be attractive to companies looking to

improve their capital structure and show short-term gains.

Hybrid

To provide additional flexibility, CAG International AG can offer any blend of the Guaranteed

Savings and Cost Plus methodologies to potential clients (the “Hybrid” pricing model).

ACQUISITION STRATEGY

CAG International AG believes that there are numerous opportunities for acquisitions within

the corporate training industry. Acquisitions are particularly attractive for the foreseeable

immediate future due to industry uncertainty and extreme fragmentation. At present CAG

International AG assesses that there are thousands of small training firms with headcounts of

between 5-10 training professionals. The company’s acquisition strategy will focus on those

targets that can provide a unique and sustainable competitive advantage or the acquisition of

existing clients. CAG International AG will also target potential acquisitions of other

intellectual capital suppliers to training departments. This may include companies that provide

unique and proprietary training content, as well as highly regarded companies that provide

training consulting services to an attractive customer base.

MARKET AND COMPETITIVE ENVIRONMENT

THE CORPORATE TRAINING MARKET

▪ According to www.trainingindustry.com, in 2013, worldwide global corporate training

expenditures totalled approximately $ 307 billion with 75% of expenditures taking

place in North America and Europe, while Asia accounted for much of the balance.

▪ Global Market Insights predicts that the eLearning market will exceed $ 200 billion by

2024.

▪ ResearchMoz expects the Corporate workforce development training market to grow

at a CAGR of 13.26% from 2017-2021.

▪ The „Training Industry Report 2017“ states that United States corporations spend an

average of approximately 0.7% of their total annual revenue on corporate training.

http://www.trainingindustry.com/




19

Further analysis (source: Trade Conference Information) revealed the following trends:

▪ Organizations now invest over 40% of their training related budget on employees,

compared to just under half on customers.

▪ These same companies only invest 7% on suppliers and channel partners.

▪ Companies in North America spend almost 60% of their training budget on internal

activities (people, facilities, etc.), and over 40% of the budget on services from outside

sources. This means a market for outsourced training of almost $ 60 billion and an

insourced spending budget of more than $ 80 billion.

▪ Training BPO (business process outsourcing) services in North America amounted to

approximately $ 5.76 billion, or 9.7% of the external spend for training services. This

includes both comprehensive and selective outsourcing deals.

COMPETITION

The company’s competitors include: Cornerstone, On Demand, Click2Learn, Centra, and

Skillsoft.

The company believes it maintains a critical competitive advantage versus its competitors via

the superior digital platform it offers services from, its holistic approach to training and

analysis (“Corporate Agility”), and its ability to maintain internal knowledge and expertise

through our Carve-Outsourcing enrolment process.

This proprietary approach mitigates traditional problems associated with conventional

outsourcing arrangements. The offered solution is designed to capitalize on opportunities for

shorter turnaround cycles with very low or no risk for the client

CORPORATE TRAINING AND LEARNING ON THE STOCK EXCHANGE

The following table shows ten selected companies (in alphabetical order) out of the corporate

training and learning industry that are publicly traded:

COMPANY EXCHANGE ISIN MARKET CAP REVENUE 2018

Career Education Corp NASDAQ US1416651099 1.3 Mrd. EUR 492.6 Mio. EUR

Cornerstone OnDemand, Inc. NASDAQ US21925Y1038 3.0 Mrd. EUR 459.0 Mio. EUR

GP Strategies Corp. NYSE US36225V1044 197.7 Mio. EUR 463.7 Mio. EUR

Grand Canyon Education, Inc. NASDAQ US38526M1062 4.7 Mrd. EUR 716.5 Mio. EUR

InVision AG Deutsche Börse DE0005859698 39.1 Mio. EUR 13.1 Mio. EUR

Laureate Education, Inc. NASDAQ US5186132032 1,8 Mrd. EUR 3.0 Mrd. EUR

SER Educational S.A. São Paulo Exchange BRSEERACNOR5 634.1 Mio. EUR 294,0 Mio. EUR

TAL Education Group NYSE US8740801043 12.4 Mrd. EUR 1.5 Mrd. EUR

Tarena International, Inc. NASDAQ US8761081012 53.2 Mio. EUR 286.8 Mio. EUR

Zovio Inc. NASDAQ US98979V1026 30,3 Mio. EUR 399.0 Mio. EUR




20

Detailed profiles of the peer companies:

Career Education Corp.

Career Education Corporation provides private for-profit postsecondary education in the

United States and Canada. The Company offers a variety of bachelor's, associate, and non-

degree programs, with a core curricula of information technologies, visual communication and

design technologies, business studies, and culinary arts.

Cornerstone OnDemand, Inc.

Cornerstone OnDemand, Inc. develops and markets on demand employee development

computer software. The Company offers software includes learning development, enterprise

social networking, performance management, and succession planning. Cornerstone markets

to multi-national corporations, large domestic enterprises, midmarket companies, state and

local public sector organizations, and colleges.

GP Strategies Corp.

GP Strategies Corporation provides performance improvement services and products. The

Company's customers include multinational companies in manufacturing and process

industries, electrical power utilities, and other commercial and governmental customers. GP

Strategies also manufactures and distributes molded and coated optical products.

Grand Canyon Education, Inc.

Grand Canyon Education, Inc. provides online post secondary education services. The

Company offers graduate and undergraduate degree programs in disciplines of education,

business, and healthcare.

InVision AG

InVision AG develops software products with a focus on enterprise-wide workforce

management.

Laureate Education, Inc.

Laureate Education, Inc. provides educational services. The University offers undergraduate

and doctoral degrees in business and management, medical and health sciences, engineering,

information technology, architecture, education, law, communications, and hospitality

management. Laureate Education operates worldwide.

SER Educational S.A.

Ser Educacional SA operates a Brazilian education company. The Company offers higher

education course in Brazil through multiple institutions.




21

TAL Education Group

TAL Education Group provides educational services. The Company offers comprehensive

tutoring services to students covering core academic subjects such as mathematics, English,

Chinese, physics, chemistry, political science, history, and biology. TAL Education Group serves

students in China.

Tarena International, Inc.

Tarena International, Inc. provides professional education services. The Company specializes

in Information Technology (IT) professional education services including classroom training.

Tarena International offers its services throughout China.

Zovio Inc.

Zovio Inc operates as an education technology services company. The Company provides data

management and software to curriculum and financial aid, including enrollment, retention,

academic, and tuition for higher educational institutions, upskilling courses, degree programs,

and certifications for employers. Zovio serves customers in the State of California.

Adjusted by the exclusion of the companies with peak figures, the average price/sales

ratio of the peergroup is 4,18.

SWOT-ANALYSIS

STRENGTHS

▪ Appealing history and development of the company’s participations since the year

2000.

▪ Reference clients such as Deutsche Bahn, Galderma, Schenker, Swedbank, TUI or

Volvo serve the reputational strength to acquire new clients.

▪ Strong strategic alliances and partners such as CrossKnowledge, InfoPro Worldwide,

Intrepid Learning, Junglemap or WBT systems put CAG International AG in the position

to acta s a full service corporate learning provider as one-stop-shop.

▪ Experienced management: the Executive Board has decades of experience in

providing clients with management and operational advice.

WEAKNESSES

▪ Fluctuation in revenues: the company's operating revenue may fluctuate due to

seasonality, budget cycles of the Group's customers etc., which may cause the Group's

results to be above or below investor expectations.




22

▪ Dependence on key individuals: The company is strongly dependent on the expertise of its founders. Losing key personnel would probably include losing key clients.

▪ Small size of the company: currently, CAG International AG has to be considered as relatively small compared to its main competitors. This refers also to the financial means within the industry sector.

OPPORTUNITIES

▪ Speeding up the internationalization process by getting access to additional funding

sources due to the listing on Vienna Stock Exchange.

▪ Benefiting from cross-boarder corporations:The clients of CAG International AG are

huge international corporations offering the opportunity to win the same client in

additional countries.

▪ Expansion of market position: The acceleration of growth will quickly result in an increase in market share.

THREATS

▪ Storage of sensitive data: loss and theft of data/failure to implement secure data

controls could have a negative impact on Group’s operational performance.

▪ Failure to effectively manage growth: Failure to adequately manage growth and its

resulting resources and working capital requirements could place a strain on the

current human, financial and operational resources (including infrastructure).

▪ Unsuccessful client management: The company’s success depends on its ability to

retain existing clients and to attract new clients.

FINANCIAL PLAN AND DCF ANALYSIS

The company’s management provided revenue projections based on sales pipeline and

market share analysis. Some customer concentration was apparent with 5 pending projects

representing 60-65% of revenue projections in years 2 and 3. To evaluate the plausibility of

these revenue growth curves we conducted a comparable company analysis by identifying 14

firms as likely peers in similar lines of business (consulting with significant software,

information technology, and networking elements as significant parts of the business’ value

change, and status in their niche as early-movers). We focused on firms with available revenue

data in a similar stage of development (Series A-B or self-funding firms no more than 4 years

from formation). After further research we eliminated two firms from our analysis as

imperfect peers vis-a-vis to the Company’s line of business, and three firms which had unusual

access to significant financing resources (i.e. as portfolio firms of large venture capital funds

with significant invested capital interests and pre-committed future funding rounds, or, in one




23

case, a firm that conducted an initial public offering prior to completing a Series C round) that

would be unrealistic for the Company to secure.

We calculated year-on-year revenue growth figures for the nine remaining firms and

synchronized those growth figures to the model years in management’s revenue build table

with the firm’s respective formation date at “Year 0”.

We observed a wide range of values in early growth years discouraging us from using the mean

as a reference figure. Further, negative revenue growth values in some years prompted us to

discard the geometric mean values, leaving us with the median value as a reference figure for

year-on-year revenue growth.

pre-model period model impacting period

years since inception 0 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8

revenue growth (YoY)

C1 9.1% 11.7% 21.6% 62.6% 41.6% 60.0% 32.6% 19.1%

C2 38.0% 39.0% 42.0% 46.0% 45.0% 21.0%

C3 -11.5% 25.0% 23.1% 59.5% 42.5% 41.0%

C4 62.7% 302.6% 91.1% 75.6% 81.2% 62.9%

C5 62.3% 102.0% 81.5% 42.3% 35.2% 10.5%

C6 59.5% 102.1% 86.9% 191.3%

C7 16.1% 8.5% 11.6% 19.3% 22.1% 8.7% 8.0%

C8 62.6% 105.1% 28.6% 18.6% 11.1% 4.5%

C9 45.0% 20.6%

Mean 35.7% 46.1% 44.0% 66.4% 47.1% 43.7% 54.5% 32.7%

Median 35.7% 38.0% 42.0% 42.0% 38.4% 52.3% 32.6% 30.1%

Selected value 40.0% 40.0% 35.0% 30.0% 30.0% 25.0%

Delta to median value -2.0% -2.0% -3.4% 22.3% -2.6% -5.1%

To bring management’s revenue growth assumptions more in line with our findings we

significantly smoothed management’s revenue curve by discounting early-year growth figures

by as much as 50% and assuring that no single year-on-year revenue growth figure exceeded

the median of our comparable company analysis. As the resulting revenue curve remains

below the median of year-on-year revenue growth for the selected peer group we believe that

the final revenue growth figures used in our valuation are a more conservative and defensible

basis for modelling. The results of our comparable company analysis and the growth values

we selected for our valuation model are depicted in the table above.




24

EXPENSE AND PROFITABILITY ANALYSIS

Gross Margin Analysis

As a general matter we found management’s “Cost of Services” figures in-line with

expectations. We performed some smoothing and corrected these figures to trend in the

direction of 40.00% of revenue by the final years of the model. The resulting Gross Margin

figure of 60.00% in year 7 aligns with our expectations of a growth firm offering tech-driven

platform services of comparable size in its 5th-6th year of growth and after one or two early-

stage financing rounds. While labeled “product related”, because of the nature of the “Other

External Costs” line items in the Company’s financials we excluded these from the Gross

Margin calculation to put that figure more in-line with the accounting treatment used by the

peer group we selected.

Personnel Cost Analysis

To project personnel costs we used management’s early year assumptions and rounded

figures down, assuring that these figures generally trended towards 20.00% of revenue in the

final years of the model when the business should begin to enjoy certain economies of scale.

Other Fixed and Related Costs

Other than rounding percentage of revenue figures down to even numbers we found no

particular need to make major modifications to management’s other fixed cost assumptions.

EBITDA Margins

Our model’s EBITDA margins show steady increases, eventually ranging from 4.00% to 29.00%

in the final year of the model. We view these as in-line with conservative margins for similar

firms in similar lifecycle stages and supported by similar-industry operating margins in mature

firms, e.g.: Information Services: 28.87%, Software (Entertainment) 35.00%.

Taxes

We have used management’s general assumptions about effective tax rate (25.00%) and,

despite accumulated losses of in excess of CHF 1,000,000 ignored any potential loss-

carryforward or tax credits as we are in a poor position to evaluate the quality of those

assumptions without a more detailed tax-analysis. Net Income and Free Cash Flow figures in

our model may therefore be artificially low through Year 4, when cumulative EBIT exceeds

potential loss carry-forwards.

SELECTING INPUTS FOR THE DISCOUNTED CASH FLOW ANALYSIS

Risk Free Rate

Given the firm’s location and the fact that its consolidated financials are in Swiss Francs, we

looked to the yield to maturity rate on long-term government bonds issued by the Swiss




25

National Bank to establish the appropriate Risk Free Rate for our analysis. As we elected to

use a 7 year discounted cash flow model we selected the 7 year rate on the yield curve for

Swiss Government bonds. At the time of this report’s writing this rate was -1.04%1, as this

figure was near 12 month lows we computed the 4 year average2 of the 7 year rate. The

resulting figure was -0.74%.

Normally we would be reticent to use a negative Risk Free Rate, but for reasons discussed

below we eventually found that the Risk Free Rate had little influence on our final valuation

figures.

Discount Rate

Given the difficulty presented by negative Risk Free Rates, we elected to use a multiple of the

default spread derived equity risk premium for Switzerland of 5.96%.3 Using a multiple (beta)

of between 1.4x and 1.5x and ignoring the negative Risk Free Rate we settled on 8.50% as a

suitable discount rate. We note in passing that our model uses a more aggressive discount

rate compared to prior valuation work done by the Company.

Terminal Calculations: EBITDA Multiple

While an exit multiple for a comparable firm would likely be elevated vis-a-vis large, publicly

held and widely-traded firms for which robust EBITDA multiple data is available, we elected to

use a conservative EBITDA multiple of 11.50x. We feel this figure compares favorably with

current multiples for publicly held firms in relevant industries/sectors. e.g.:

Industry EV/EBITDA Multiple

Education 11.59x

Entertainment 14.18x

Information Services 18.78x

Software (Entertainment) 16.22x

Software (Internet) 18.98x

Total Market 14.77x

Source: U.S. Enterprise value multilpes via Damodaran (January 2019)

Terminal Calculations: Perpetual Growth Method

Using perpetual growth method to calculate a terminal rate for the terminal year of our model

resulted in figures that dominated the model’s valuation and therefore we discarded these

higher valuations in favor of the EBITDA Multiple Method for terminal value calculation.




26

VALUATION MODEL

in CHF Actual Partial Estimate

2018 2019 2020 2021 2022 2023 2024 2025

Revenues 1,385,213 1,974,760 2,764,664 3,870,529 5,225,214 6,792,778 8,830,612 11,038,265

% YoY 9.73% 42.56% 40.00% 40.00% 35.00% 30.00% 30.00% 25.00%

Cost of Services 320,114 415,094 691,116 967,643 1,567,564 2,037,833 3,532,245 4,415,306

% of Revenues 23.11% 21.02% 25.00% 25.00% 30.00% 30.00% 40.00% 40.00%

Gross Profit 1,065,069 1,559,665 2,073,498 2,902,897 3,657,650 4,754,845 5,298,367 6,622,959

Gross Margin 76.89% 78.98% 75.00% 75.00% 70.00% 70.00% 60.00% 60.00%

Staff Costs 842,735 1,036,946 1,244,099 1,354,685 1,567,564 1,698,195 1,766,122 2,207,653

% of Revenues 60.84% 52.51% 45.00% 35.00% 30.00% 25.00% 20.00% 20.00%

Other External Costs 417,250 398,704 691,166 870,869 1,045,043 1,358,556 1,324,592 1,103,826

% of Revenues 30.12% 20.19% 25.00% 22.50% 20.00% 20.00% 15.00% 10.00%

Other Operating Expenses 6,535 22,117 27,647 38,705 52,252 67,928 88,306 110,383

% of Revenues 0.47% 1.12% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%

EBITDA -201,451 101,898 110,587 638,637 992,791 1,630,267 2,119,347 3,201,097

EBITDA Margin -14.54% 5.16% 4.00% 16.50% 19.00% 24.00% 24.00% 29.00%

Depreciation & Amortization 1,310 19,748 27,647 38,705 52,252 67,928 88,306 110,383

% of Revenues 0.09% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%

EBIT -202,761 82,150 82,940 599,932 940,539 1,562,339 2,031,041 3,090,714

EBIT Margin -14.64% 4.16% 3.00% 15.50% 18.00% 23.00% 23.00% 28.00%

Financial Income 36 0 0 0 0 0 0 0

% of Revenues 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Taxes 0 20,538 20,735 149,983 235,135 390,585 507,760 772,679

Tax Rate (%) 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%

Free Cash Flow to Equity -202.725 61,613 62,205 449,949 705,404 1,171,754 1,523,281 2,318,036

Risk Free Rate -0,74% CHF EUR

Discount Rate 8,50% 0.91844

EBITDA Multiple 11.50x

Terminal Rate 3,50% EBITDA in Terminal Year 3,201,097 2,940,023

FCFE in Terminal Year 2,318,036 2,128,982

7 Year (1-7) DCF of FCFE 3,993,373 3,667,682

Terminal Value According to:

EBITDA Multiple (11.50x) 36,812,613 33,810,261

Perpetual Grwoth Method (3,50%) 46,360,712 42,579,640

Total Firm Value Using:

EBITDA Mutliple 24,789,787 22,760,990

Perpetual Growth Method 30,183,760 27,722,043




27

VALUATION DISCUSSION, SENSITIVITY ANALYSIS, AND CONCLUSION

Valuation Sensitivity Analysis: EBITDA Multiple vs. Discount Rate:

Valuation Sensitivity Analysis: EBITDA Multiple v. Discount Rate

Firm Value (EUR)

€ 22,767,990 9.00% 8.75% 8.50% 8.25% 8.00%

11.00x € 21,267,582 € 21,599,541 € 21,937,542 € 22,281,710 € 22,632,173

11.25x € 21,669,655 € 22,008,129 € 22,352,766 € 22,703,694 € 23,061,042

11.50x € 22,071,728 € 22,416,717 € 22,767,990 € 23,125,677 € 23,489,911

11.75x € 22,473,802 € 22,825,305 € 23,183,214 € 23,547,660 € 23,918,780

12.00x € 22,875,875 € 23,233,894 € 23,598,438 € 23,969,644 € 24,347,648

Reference Value (EUR Per Share)

19,220,714 9.00% 8.75% 8.50% 8.25% 8.00%

11.00x € 1.11 € 1.12 € 1.14 € 1.16 € 1.18

11.25x € 1.13 € 1.15 € 1.16 € 1.18 € 1.20

11.50x € 1.15 € 1.17 € 1.18 € 1.20 € 1.22

11.75x € 1.17 € 1.19 € 1.21 € 1.23 € 1.24

12.00x € 1.19 € 1.21 € 1.23 € 1.25 € 1.27

The mid-point of our valuation analysis results in a valuation of the firm at EUR 22,767,990

with an implied per share reference price of EUR 3.55. Using bounded EBITDA exit multiple

and discount rate sensitivity analysis we arrive at a potential range of valuations between EUR

22,008,129 and EUR 23,547,660 or implied per share reference prices of between EUR 3.44

and 3.68. The resulting valuation ranges are depicted in the figure above.

PEER GROUP ANALYSIS

According to the peer group analysis of the before mentioned ten listed companies out of the

e-learning and corporate training industry, the average sales/ev multiple is 4,18.

The table below shows the market cap / price indication for CAG International based on this

multiple in the upcoming years:

2019 2020 2021 2022 2023 2024 2025

Revenues in CHF 1,974,760 2,764,664 3,870,529 5,225,214 6,792,778 8,830,612 11,038,265

Revenues in EUR 1,813,699 2,539,178 3,554,849 4,799,046 6,238,759 8,110,387 10,137,984

Market Cap in EUR 7,581,260 10,613,764 14,859,267 20,060,010 26,078,013 33,901,419 42,376,774

Price per shares 1.18 € 1.66 € 2.32 € 3.13 € 4.07 € 5.29 € 6.61 €

Valuations based on profit mutliples are not constructive at the moment.




28

PEER GROUP ANALYSIS

As described before, the most reasonable way to calculate the fair value of CAG International

AG is the Discounted Cashflow Model (DCF), leading to a valuation (lowest range) of 22,008,129

EUR. A peer group analysis only based on revenue multiples is much less meaningful.

Therefore, we used for our final value a ratio of DCF (40%) and Sales/EV peer group comparison

(60%).

This method leads to the following present value of CAG International AG: 13,352,008 EUR

Accordingly, the fair value per share (6,406,904 shares issued and outstanding): 2.08 EUR




29

BALANCE SHEETS & PROFIT & LOSS ACCOUNTS

BALANCE SHEET 2016 (SINGLE)

PROFIT & LOSS ACCOUNT 2016 (SINGLE)




30

BALANCE SHEET 2017 (CONSOLIDATED)

PROFIT & LOSS ACCOUNT 2017 (CONSOLIDATED)




31

BALANCE SHEET 2018 (CONSOLIDATED)

PROFIT & LOSS ACCOUNT 2018 (CONSOLIDATED)




32

SELECTED REFERENCE CLIENTS




33

DISCLAIMER & CONFLICTS OF INTEREST

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Alltag in Rumänien. Korruption und Amtsmissbrauch gelten in dem Land als gravierendes Problem. Die Kultur

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Teils der rumänischen Bevölkerung verwurzelt und wird in vielen Fällen noch als normale

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Unterbezahlung der öffentlich Bediensteten: Besonders von orthodoxen Priestern, Behördenmitarbeitern,

Krankenhausangestellten und Lehrern werden Geldbeträge als Zusatzeinkommen eingefordert. Die

Gesetzeslage ist immer noch instabil; Abgeordnete verweisen darauf, EU-Stellen hätten sie zu

Antikorruptionsgesetzen gezwungen und verhindern in der Folge deren Umsetzung. Auch die

Selbstbereicherungsmentalität der politischen und wirtschaftlichen Eliten spielt eine große Rolle. Gemäß

Umfragen glauben 96 Prozent der Rumänen, dass Korruption zu den schwerwiegendsten Problemen im Land

gehöre. Ein Drittel der Befragten konnte Beispiele für die Zahlung von eigenen Schmiergeldern in den letzten

12 Monaten angeben. Die rumänische Sprache kennt 30 Redewendungen für die Umschreibung von

Schmiergeld. Bereits in den ältesten rumänischen Texten kamen die ursprünglich slawischen und türkischen

Begriffe bacșiș, ciubuc, șperț, șpagă und mită vor. Rumänien lag 2017 im Korruptionswahrnehmungsindex von

Transparency International im weltweiten Vergleich auf Platz 59, gleichauf mit Griechenland, hinter Italien

(54. Platz) aber vor Bulgarien (71. Platz). Zwar ist der innenpolitische Wille und der außenpolitische Druck –

besonders durch die Europäische Union – für Reformen vorhanden, jedoch sind die Sicherheitsbehörden und

die Justiz dabei strukturelle Gründe für das Phänomen und mit ihrer Aufgabe oftmals überfordert oder selbst

Teil des Problems. (Quelle: https://de.wikipedia.org/wiki/Korruption_in_Rumänien)




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substantial assets covered by Article 49(2)(A) to (D) of the Regulation and other persons to whom the

document may lawfully be communicated pursuant to Article 49(1) of the Regulation (all such persons

together being referred to as “Relevant Persons”). Any person who is not a Relevant Person should not

consider this business valuation and its contents as a basis for information or action.

This business valuation constitutes neither an offer nor an invitation to subscribe to or purchase any

financial instrument of the analysed company or to conclude a consultancy agreement. Neither this

business valuation nor any components thereof form the basis of any contract or other obligations of

any kind. Capital Lounge GmbH and its affiliated companies disclaim any liability for damages in

connection with the publication and/or use of this business valuation or its contents. Neither Capital

Lounge GmbH nor any of its affiliates makes any representations or warranties as to the completeness

or accuracy of the information contained in this business valuation. No independent verification of the

information used herein was performed. All evaluations, opinions and predictions contained in this

business valuation are those of the author of this business valuation which are provided in connection

with their research activity. They reflect prevailing conditions when this business valuation was prepared

and may change due to future events and developments.

No statements contained herein may be automatically attributed to Capital Lounge GmbH or any of the

companies affiliated with Capital Lounge GmbH. No future updates to the analysis and

recommendations contained herein are planned and the timing of any such updates is not foreseeable;

however, such updates are usually performed following the publication of relevant financial reports.

Capital Lounge GmbH reserves the right to withdraw or change any opinions expressed in the business

valuation at any time and without notice. Capital Lounge GmbH may have published studies that have

different results with respect to the information contained in this business valuation. These studies can

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be sent via industry-specific news agencies and financial portals and by email to all interested

professional investors with regard to whom it may be assumed that they will not make their investment

decisions improperly on the basis of this business valuation.

Competent authority: German Federal Financial Supervisory Authority (“BaFin”). The securities prices

stated in this business valuation are XETRA closing prices of the trading day preceding the publication

date of the respective business valuation. If the relevant security is not traded on XETRA, the security

prices stated in the business valuation are the closing prices of the respective stock exchange on the

trading day preceding the publication date of the business valuation.

Investment recommendations (for an investment horizon of 12 months)

Buy: We expect the price of the financial instrument analysed to rise by at least 10%.

Hold: We expect outperformance or underperformance the DAX benchmark by a maximum of 10%.

Sell: We expect the price of the financial instrument analysed to decline by at least 10%.

Information on possible conflicts of interest pursuant to section 85 (1) German Securities Trading Act

(“WpHG”) and Article 20 Regulation (EU) No. 596/2014 as well as the Delegation Regulation (EU)

2016/958:




35

Pursuant to section 85 of the German Securities Trading Act (Wertpapierhandelsgesetz) and the

Financial Analysis Ordinance (Finanzanalyseverordnung), there is an obligation, among other things, to

draw attention to possible conflicts of interest in relation to the company analysed as part of a financial

analysis. A conflict of interest is presumed in particular where the company performing the analysis

▪ Holds an interest of more than 5% in the share capital of the analysed company;

▪ Has been a member of a consortium in the last twelve months which has acquired securities of

the company analysed;

▪ Manages securities of the analysed company on the basis of an existing contract;

▪ Has performed investment banking services for the analysed company in the last twelve months

on the basis of an existing contract which resulted in a service or promise of service with which

the analysed company has entered into an agreement for the preparation of the financial

analysis

▪ and affiliated companies regularly trade shares of the analysed company or derivatives derived

from them;

▪ Or the analyst responsible for this company has other significant financial interests in relation

to the company being analysed, such as holding an office within the company being analysed.

Capital Lounge GmbH uses the following keys for the description of conflicts of interest pursuant to

section 85 (1) WpHG and Article 20 Regulation (EU) No. 596/2014 as well as Delegation Regulation (EU)

2016/958: .

Key 1: The analysed company actively provided information for the preparation of this business

valuation.

Key 2: This business valuation was sent to the analysed company before distribution and changes were

made subsequently. No research report or draft that already contained an investment recommendation

or price target was sent to the analysed company.

Key 3: The analysed company holds an interest of more than 5% in Capital Lounge GmbH and/or one of

its affiliated companies.

Key 4: Capital Lounge GmbH and/or a company affiliated with it and/or the author of this business

valuation holds an interest of more than 5% in the analysed company.


valuation has acquired shares of the analysed company free of charge or at a price below the indicated

price target prior to its public offering.

Key 6: Capital Lounge GmbH and/or an affiliated company manages the securities of the analysed

company as market maker or designated sponsor.

Key 7: Capital Lounge GmbH and/or a company affiliated with it and/or a person/company closely

associated with it and/or the author of this business valuation was bound by an agreement with the

analysed company regarding services in connection with investment banking transactions within the

past 12 months or received benefits under such an agreement.

Key 8: Capital Lounge GmbH and/or one of its affiliated companies has reached an agreement with the

analysed company on the preparation of this business valuation. Capital Lounge GmbH received a

standard flat fee paid in advance within the scope of this agreement.

Key 9: Capital Lounge GmbH and/or a company affiliated with it has an interest in the trading activities

of the analysed company in the form of commission income.




36

Key 10: A member of Capital Lounge GmbH and/or the author of this business valuation is a member of

the supervisory board of the analysed company.


valuation holds a net selling or buying position in the analysed company that exceeds the threshold of

0.5% of the total issued share capital of the company.

Key 12: Capital Lounge GmbH and/or an affiliated company of Capital Lounge GmbH was or was co-lead

partner in a public issue of financial instruments of the company.

The following keys are relevant for this business valuation: Key 1, Key 7

Statements pursuant to section 85 (1) WpHG and Article 20 Regulation (EU) No. 596/2014 as well as the

Delegation Regulation (EU) 2016/958: Information sources

The business valuation is based on information obtained from carefully selected public sources, in

particular from financial data providers, publications from the analysed company and other public

media.

Valuation principals/methods/risks and parameters

Company-specific methods from fundamental stock analysis, quantitative statistical methods and

models for the preparation of the business valuation in addition to technical analytical methods (inter

alia historical valuation approaches, substance valuation approaches or sum-of-the-parts valuation

approaches, discount models, the economic profit approach, multiplier models or peer group

comparisons). Valuation models depend on economic parameters such as currencies, interest rates,

commodities and economic assumptions. In addition, market sentiment and political developments

influence company valuations. Selected approaches are also based on expectations that may change

quickly and without warning depending on industry-specific developments. As a result,

recommendations and price targets based on individual models may also change accordingly.

Investment recommendations applicable to a 12-month time horizon may also be subject to market

conditions and therefore constitute a snapshot. Expected price developments may occur faster or

slower or can be revised upwards or downwards.

Compliance declaration

Capital Lounge GmbH has taken regular internal precautions to prevent conflicts of interest with regard

to the company analysed herein and to disclose possible conflicts of interest. Adrian Fuhrmeister,

[email protected] responsible for compliance with these precautionary measures.

Statement by the authors of the studies

All valuations, opinions and forecasts contained in this business valuation reflect the views of the

business valuation’s author. The author’s remuneration is not directly or indirectly related, whether in

the past, present or future, to the recommendation or views expressed in the business valuation.

The following online sources were used:

Bloomberg, Finanzen.net, Onvista.de, Ariva.de, Handelsblatt.com, Immoscout24.de

Wirtschaftswoche.de; and others

Copyright: Capital Lounge GmbH, October 2019

Analyst.: Alexander Coenen, Capital Lounge GmbH, October 2019

mailto:[email protected]

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