Northern Data : Annual Report 2022

ANNUAL REPORT 2022

At a glance

Key data of Northern Data Group

				2022	2021
Revenues		EUR million	193.3	189.9
Total income		EUR million	249.5	492.8
EBITDA		EUR million	-58.1	320.1
Adjusted EBITDA		EUR million	42.4	89.6
EBIT		EUR million	-265.4	254.1
Adjusted EBIT		EUR million	-59.1	10.7
Net result		EUR million	-265.8	287.2
Cash flow from operating activities		EUR million	1.0	88.1
Cash flow from investing activities		EUR million	-95.2	126.6
Cash flow from financing activities		EUR million	-82.9		-69.0
Shares outstanding (undiluted)		Thousand units	23,816	17,653
Shares outstanding (diluted)		Thousand units	23,816	23,816
Earnings per share (undiluted)		EUR	-11.16	16.27
Earnings per share (diluted)		EUR	-11.16	12.06
Employees (annual average)		FTE	209	144
				31 Dec. 2022		31 Dec. 2021
Cash and cash equivalents		EUR million	39.9	221.6

				GROUP MANAGEMENT		GROUP FINANCIAL	NOTES TO THE GROUP
TO THE SHAREHOLDERS	ESG REPORT (UNAUDITED)	REPORT		STATEMENTS	FINANCIAL STATEMENTS

Content

A	To the Shareholders	2
	Letter to the shareholders	4
	Report of the Supervisory Board	6
	Northern Data on the Capital Market	9

B	ESG Report (unaudited)	13
	ESG - acting responsibly with an eye to the future	14
	ESG Data Overview	15
	ESG Reporting at Northern Data	16
	Material Topics	17
	Environmental	20
	Social	23
	Governance	26
	ESG in the Future	27

C	Group Management Report	28
	Basis of the Group	29
	Economic Report	32
	Opportunity, Risk and Forecast Report	40

D	Group Financial Statements	55
	Consolidated Statement of Comprehensive Income for the year ended 31 December	56
	Consolidated Statement of Financial Position as at 31 December	57
	Consolidated Statement of Changes in Equity for the year endet 31 December	59
	Consolidated Statement of Cash Flows for the year ended 31 December	60

E	Notes to the Group Financial Statements	61
	1 Information about the Company and basics of the preparation
	of the Financial Statements	62
	2 Business combinations	85
	3 Notes to the Statement of Comprehensive Income	90
	4 Notes to the Statement of Financial Position	100
	5 Other explanatory notes	111
	Auditor's Report	130
	Imprint	135

NORTHERN DATA AG	1	ANNUAL REPORT 2022

TO THE SHAREHOLDERS

• Northern Data continued to make progress toward its ambition to be the leading value generator of High-Performance Computing infrastructure solutions, laying firm foundations for future accomplishments. «

Aroosh Thillainathan

				GROUP MANAGEMENT		GROUP FINANCIAL		NOTES TO THE GROUP
TO THE SHAREHOLDERS		ESG REPORT (UNAUDITED)	REPORT		STATEMENTS		FINANCIAL STATEMENTS

Letter to the shareholders

Letter to the shareholders

Dear shareholders, employees and friends of Northern Data,

in 2022, Northern Data continued to make progress toward its ambition to be the leading value generator of High-Performance Computing (HPC) infrastructure solutions, laying foundations for future accomplish- ments.

Amidst challenging conditions, including crypto market fluctuations, interest rate hikes, and rising inflation and energy prices, we met our market-adjusted annual targets. Specifically, we generated revenues of EUR 193.3 million, with an adjusted EBITDA of EUR 42.4 million, from our core segments, namely "Mining" and "Hardware & Other". Nevertheless, depreciation of fixed assets as well as impairment of GPU servers, which resulted from the Ethereum network switch from proof-of-work to proof-of-stake, led to a net loss of EUR 266 million in the financial year.

Throughout the year, our focus was on optimizing revenue from our Bitcoin mining operations, a key contributor of the Group's revenue and earnings. Bitcoin mining remains an important component of our broader strategy, and the generated revenue has been strategically reinvested in improving our data center infrastructure and advancing cloud computing solutions. These strategic investments position us for ongoing success within the HPC market.

To ensure ongoing stability in our business we initiated a structured optimization process, aligning our internal structure to complement the diversification of our data center infrastructure and cloud services. This reinforces our commitment to excellence and positions us strategically for ongoing success in the dynamic landscape of HPC.

Momentum throughout fiscal year 2022

In the face of challenging market conditions, including a significant drop of over 60 percent in Bitcoin prices in 2022, Northern Data demonstrated resilience and met market adjusted targets, outside of the write-downs relating to legacy technology assets. Our prudent investment strategy allowed us to increase the number of ASIC servers for mining by 234 percent to over 36 thousand devices, resulting in a 210 percent boost in computing power to over 3.3 EH/s in fiscal year 2022.

In response to the increased profitability of Bitcoin mining on our own account, we strategically shifted our focus, moving away from providing hosting services to third-party miners. Simultaneously, the Ethereum transition from proof-of-work to proof-of-stake negatively impacted revenue. In addition, this resulted in impairments from the valuation of the affected GPU servers.

To drive advancement in the data center and cloud solutions business, Northern Data attracted top-tier executives to enhance our portfolio and maximize the potential of our HPC infrastructure.

While our cloud computing plans in 2022 fell short of our ambitions, we meticulously laid the groundwork for future success, establishing key partnerships and customer relationships. The adjustment of our investment strategy and active resource management in fiscal year 2022 addressed immediate challenges and established a foundation for future successes.

NORTHERN DATA AG	4	ANNUAL REPORT 2022

				GROUP MANAGEMENT		GROUP FINANCIAL		NOTES TO THE GROUP
TO THE SHAREHOLDERS		ESG REPORT (UNAUDITED)	REPORT		STATEMENTS		FINANCIAL STATEMENTS

Letter to the shareholders

From vision to strategy to growth

Our focus on a company-wide strategy for Northern Data aimed at driving value creation and achieving profitable, sustainable growth by 2025 and beyond, remains steadfast. We believe that the next waves of innovation will be driven by sustainable, state-of-the-art, and powerful HPC solutions, and we are committed to continuous investment in advanced technology roadmaps.

As part of this commitment, in 2022 we prepared for the segmentation of Northern Data's business structure into three independent, global business divisions: Bitcoin mining, Cloud Solutions and Data Center Infrastructure solutions, to fully utilize the opportunity in each specialization. This strategic move enhances transparency and accountability allowing us to articulate the value proposition of each of Northern Data's business divisions.

Future-ready, today

We started 2023 with no financial liabilities and good cash reserves, positioning us to raise both equity and debt to accelerate the Company's growth, and readying us to make significant investments in scaling our business divisions. Accordingly we accelerated growth plans, entered the generative AI market, and acquired the latest mining hardware. The newly formed business units Taiga Cloud, Ardent Data Centers and Peak Mining operate as Northern Data Group branded companies, seizing major opportunities - from the near doubling of the Bitcoin price within a few months to the widespread use of various AI applications and the associated demand for computing power - and strengthening leadership teams.

ESG remains a key focus

Our energy-intensive business drives our responsibility to act sustainably. With our new corporate structure and dedication, we are set to redefine our sustainability strategy, ensuring alignment with environmen- tal, social, and governance (ESG) principles. We will continue to voluntarily report on our progress in this area, and detailed ESG reporting can be found in this year's ESG Report.

Positive outlook for 2023

In 2023 we expect revenue to be between EUR 65 million to EUR 75 million and adjusted EBITDA to be in a range of EUR -20 million to EUR -5 million.

Looking forward, I would like to thank our shareholders, partners, and friends for your continued support of Northern Data. To our employees, your dedication fuels Northern Data's progress daily, as we collectively shape the future of HPC.

As we express our thanks, we eagerly anticipate sharing updates about our future developments. The horizon is filled with possibilities, and we look forward to the journey ahead. Stay tuned for more milestones as we navigate the landscape of tomorrow. Thank you for being an integral part of our journey!

Sincerely yours,

Aroosh Thillainathan

Chairman of the Management Board

NORTHERN DATA AG	5	ANNUAL REPORT 2022

				GROUP MANAGEMENT		GROUP FINANCIAL	NOTES TO THE GROUP
TO THE SHAREHOLDERS		ESG REPORT (UNAUDITED)	REPORT		STATEMENTS	FINANCIAL STATEMENTS

Report of the

Supervisory Board

Report of the

Supervisory Board

Dear Ladies and Gentlemen,

Fiscal year 2022 was characterized by challenges for the global economy caused by the start of the war in Ukraine in February. Especially in the second half of the year, Bitcoin and Ethereum price dropped sharply affecting the entire crypto industry as well as the Ethereum merge from the proof-of-work to the proof-of- stake consensus mechanism in September. In trustful cooperation between the Supervisory Board and the Management Board, these challenges were well navigated at Northern Data.

Composition of the Supervisory Board and Management Board

In accordance with the provisions of the Articles of Association of Northern Data AG, the Supervisory Board is composed of three members. In 2022, these were the Chairman of the Supervisory Board, Dr. Tom Oliver Schorling, the Deputy Chairman, Dr. Bernd Hartmann, and Hermann-Josef Lamberti. In

­addition to the Chairman, Aroosh Thillainathan, the members of the Management Board in fiscal year 2022 were Dr. Mathias Dähn (CFO) until February 28 and Stefan Sickenberger (COO) until October 31.

Work and topics in the Supervisory Board plenum

In the reporting year 2022, a total of 30 meetings of the Supervisory Board were held, all of which were attended by the Supervisory Board as a whole. One meeting was held as a face-to-face meeting in Frankfurt/ Main. Eighteen meetings were held as video conferences. In other cases, the Supervisory Board adopted resolutions outside meetings by written procedure, and on one occasion also by telephone.

The Supervisory Board monitored the management activities of the Management Board throughout fiscal year 2022 and advised the Management Board on the management of the Company. This included in particular the development of business, the earnings and financial situation, and the Company's investment plans. The Management Board always fulfilled its information duties to an appropriate extent. The Management Board provided the Supervisory Board with regular, prompt, and comprehensive written and oral reports on all relevant issues of corporate planning, the course of business, strategic development, and the current situation and overall development of the Group.

Supervisory Board Meeting Attendance

Member of the Supervisory Board

Dr. Tom Oliver Schorling

Hermann Josef Lamberti

Dr. Bernd Hartmann

Number of Meetings

30/30

30/30

30/30

Attendance Rate

100%

100%

100%

NORTHERN DATA AG	6	ANNUAL REPORT 2022

				GROUP MANAGEMENT		GROUP FINANCIAL	NOTES TO THE GROUP
TO THE SHAREHOLDERS		ESG REPORT (UNAUDITED)	REPORT		STATEMENTS	FINANCIAL STATEMENTS

Report of the

Supervisory Board

Overview of meetings and resolutions

With regard to the Company's operating business, 2022 was not characterized by acquisitions as in the previous year. Instead, the focus was on the commencement of the corporate reorganization of the Northern Data Group, with the goal of setting up three separate business units underneath the roof of Northern Data AG. The last resolution of the year at the end of December dealt with the sale of the Kelvin Emtech Group.

About a third of the meetings from the beginning of the year to the end of April focused primarily on topics relating to Northern Data's annual and consolidated financial statements for 2021 and their audit in accordance with IFRS standards. The Supervisory Board invited members of Northern Data's global management team, including the Management Board, representatives of the auditor KPMG, and the tax consultancy firm, in various constellations depending on the respective topic.

At a meeting in August together with the auditor, the annual financial statements of Northern Data AG, the consolidated financial statements, and the Group management report as of December 31, 2021, were discussed and approved, and the Supervisory Board Report 2021 was adopted. The following meetings and resolutions dealt with the Annual General Meeting, its implementation, agenda, invitation, and chairing of the meeting.

Other meetings and resolutions during the year focused on the following topics: Stock option program (January), unfounded allegations by Northern Data critics on the Internet (March), the new Group structure and CEO compensation (July), the reorganization plan (December).

Audit and adoption of the annual financial statements

The annual financial statements and consolidated financial statements of Northern Data AG for fiscal year 2022 have been audited by KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, the auditor appointed by the Annual General Meeting, and have been issued with an unqualified audit opinion. The Supervisory Board examined both the annual financial statements of Northern Data AG as of December 31, 2022, and the consolidated financial statements, in particular with regard to their legality, propriety and appropriate- ness, and discussed the documents in detail with the Management Board and the auditor on the basis of a draft audit report.

The auditor reported on the progress of the audit at several Supervisory Board meetings and participated in the Supervisory Board meeting of March 21, 2024, at which the results of the audit as a whole and the individual focal points of the audit were reported. The auditor was available to answer any questions arising from the members of the Supervisory Board. The members of the Supervisory Board noted and critically evaluated the audit reports and audit opinions and discussed them, as well as the audits themselves, among themselves and with the auditors. This included a questionnaire on the nature and scope of the audit and on the audit findings. In the process, the Supervisory Board was able to satisfy itself as to the appropriateness of the audits and the audit reports. The Supervisory Board has conclusively assessed the annual financial statements as of December 31, 2022, of Northern Data AG and the consolidated financial statements, taking the auditor's audit reports into account, and raises no objections based on the results of its review. The Supervisory Board approved and thus adopted the annual financial statements prepared by the Management Board by Supervisory Board resolution dated March 21, 2024; it also approved the consolidated financial statements.

NORTHERN DATA AG	7	ANNUAL REPORT 2022

				GROUP MANAGEMENT		GROUP FINANCIAL	NOTES TO THE GROUP
TO THE SHAREHOLDERS		ESG REPORT (UNAUDITED)	REPORT		STATEMENTS	FINANCIAL STATEMENTS

Report of the

Supervisory Board

Acknowledgement

The Supervisory Board would like to thank the members of the Management Board and all employees of the Company for their personal commitment, their hard work in the interests of the Company and for the successes achieved in fiscal year 2022. The Supervisory Board would also like to thank the shareholders for their interest in our Company and for their trust.

Sincerely yours,

Dr. Tom Oliver Schorling

Chairman of the Supervisory Board

NORTHERN DATA AG	8	ANNUAL REPORT 2022