Definitions of Alternative Performance Measures and Reconciliation to IFRS
SoftwareONE has prepared a selection of unaudited pro forma financial information as at and for the 12 months ended 31 December 2018 and as at and for the six months ended 30 June 2018 and 2019 to illustrate the effect of the Comparex acquisition on its consolidated income statement by giving effect to the transaction as if it had been completed on 1 January 2018. Some unaudited pro forma financial information has been included to describe a hypothetical situation and has been prepared on the basis of certain assumptions:
- Alignment of reporting periods: Comparex’s financial year ended on 31 March, while SoftwareONE’s on 31 December. This is why the group made certain adjustments to align the reporting period for the Comparex pro forma financial data to the twelve-month period ended 31 December 2018. This data is derived from the audited consolidated income statement of Comparex for the financial year ended 31 March 2019, by subtracting the information from the unaudited interim condensed consolidated income statement for the three-month period ended on 31 March 2019 and adding the information from the unaudited interim condensed consolidated income statement for the three-month period ended 31 March 2018, in each case to the information from the audited consolidated income statement for the financial year ended on 31 March 2019.
- Accounting policy alignment: Comparex has historically accounted for foreign exchange gains and losses as “other operating income” and “other operating expenses”, while according to SoftwareONE’s accounting policy such gains and losses are accounted for as “foreign exchange differences, net”. In addition, Comparex has historically accounted for fair value adjustments of contractual liabilities (such as earn-outs) as “other operating income” and “other operating expenses”, while according to SoftwareONE’s accounting policy such adjustments are accounted for as “finance income” or “finance costs”. Comparex also did not implement IFRS 16 for the period ending 31 March 2019 whereas SoftwareONE implemented the standard as at 1 January 2019. As a result of these differences in accounting policies, SoftwareONE adjusted the historical consolidated income statement of Comparex for the year ended 31 March 2019, the one-month period ended 31 January 2019 and the six-month period ended 30 June 2018 to conform to SoftwareONE’s accounting policies.
- Reclassification: The historical consolidated income statement of Comparex was structurally adjusted to conform to the presentation structure of SoftwareONE.
- Currency translation: Comparex’s financial statements were presented in euro, while SoftwareONE’s are presented in Swiss francs. For the purpose of the Comparex pro forma financial data, the average EUR/CHF exchange rates were used for full-year 2018: 1.155 CHF/EUR, one-month period ended 31 January 2019: 1.129 CHF/EUR, and six-month period ended 30 June 2018: 1.171 CHF/EUR.
Like-for-like 2019 has been prepared by adding audited IFRS reported numbers 2019 (12 months SoftwareONE and 11 months Comparex) and the single month of January of Comparex as included in pro forma numbers for the six months ended 30 June 2019.
Results Overview
IFRS like-for-like
|
|
SoftwareONE reported 1) |
Adding Comparex 2) |
Like-for-like 3) |
|||
|
in CHF million |
2018 |
2019 |
2018 |
2019 |
2018 |
2019 |
|
|
|
|
|
|
|
|
|
Revenue from sale of software |
3,600.2 |
7,296.3 |
2,969.8 |
230.4 |
6,570.0 |
7,526.7 |
|
Revenue from solutions and services |
124.4 |
296.9 |
243.2 |
18.7 |
367.6 |
315.6 |
|
Other revenue |
16.1 |
17.6 |
–0.1 |
0.0 |
16.0 |
17.6 |
|
|
|
|
|
|
|
|
|
Total revenue |
3,740.6 |
7,610.8 |
3,213.0 |
249.1 |
6,953.6 |
7,859.9 |
|
Cost of software purchased |
–3,293.6 |
–6,773.4 |
–2,737.3 |
–209.0 |
–6,030.9 |
–6,987.4 |
|
Third-party service delivery costs |
–37.6 |
–123.1 |
–161.0 |
–12.1 |
–198.6 |
–135.3 |
|
Personnel expenses |
–224.3 |
–439.9 |
–211.2 |
–18.2 |
–435.5 |
–458.0 |
|
Other operating expenses |
–57.4 |
–115.3 |
–56.5 |
–5.9 |
–113.9 |
–116.2 |
|
Other operating income |
2.1 |
11.2 |
8.9 |
2.2 |
11.0 |
13.4 |
|
|
|
|
|
|
|
|
|
Earnings before net financial items, taxes, depreciation and amortization |
129.8 |
170.3 |
55.8 |
6.1 |
185.7 |
176.4 |
|
Depreciation and amortization |
–17.0 |
–51.3 |
–20.6 |
–1.0 |
–37.6 |
–52.3 |
|
|
|
|
|
|
|
|
|
Earnings before net financial items and taxes |
112.8 |
119.0 |
35.2 |
5.1 |
148.0 |
124.1 |
|
Finance income |
6.3 |
52.1 |
10.5 |
0.1 |
16.8 |
52.2 |
|
Finance costs |
–6.9 |
–9.7 |
–7.3 |
–0.8 |
–14.2 |
–10.5 |
|
Foreign exchange differences, net |
–3.5 |
–7.1 |
–1.9 |
–0.4 |
–5.4 |
–7.5 |
|
|
|
|
|
|
|
|
|
Earnings before income tax |
108.6 |
154.4 |
36.6 |
3.9 |
145.2 |
158.3 |
|
Income tax expense |
–30.5 |
–29.3 |
–15.9 |
0.3 |
–46.3 |
–29.1 |
|
|
|
|
|
|
|
|
|
Profit for the year |
78.2 |
125.0 |
20.8 |
4.2 |
98.9 |
129.2 |
1) SoftwareONE reported figures include Comparex since 1 February 2019.
2) Adding Comparex figures adjusting for reporting period alignment, accounting policy alignment, reclassification and currency translation and including like-for-like adjustments.
3) In order to present 2019 in the same way as 2018, the expense accounts receivable allowances of CHF 5.0m are reclassified from cost of software purchased to other operating expenses.
Non-IFRS
|
|
Like-for-like adjusted |
|
|
|
in CHF million |
2018 |
2019 |
% change constant currency |
|
|
|
|
|
|
Revenue from sale of software |
6,570.0 |
7,526.7 |
|
|
Other revenue |
16.0 |
17.6 |
|
|
Cost of software purchased |
–6,030.9 |
–6,987.4 |
|
|
|
|
|
|
|
Gross profit from sale of software and other revenue |
555.1 |
556.9 |
2.8 % |
|
Revenue from solutions and services |
367.6 |
315.6 |
|
|
Third-party service delivery costs |
–198.6 |
–135.3 |
|
|
|
|
|
|
|
Gross profit from solutions and services |
168.9 |
180.4 |
9.2 % |
|
|
|
|
|
|
Gross profit total |
724.0 |
737.2 |
4.3 % |
|
Personnel expenses |
–435.5 |
–458.0 |
|
|
Other operating expenses |
–113.9 |
–116.2 |
|
|
Other operating income |
11.0 |
13.4 |
|
|
Adjustments for share-based payment compensation |
0.0 |
21.4 |
|
|
Adjustments for integration expenses |
1.0 |
13.9 |
|
|
Adjustments for IPO expenses |
0.0 |
10.5 |
|
|
Adjustments for merger & acquisition and earn-out expenses |
0.2 |
1.4 |
|
|
|
|
|
|
|
Adjusted EBITDA |
186.9 |
223.6 |
23.1 % |
|
Adjusted EBITDA margin |
25.8 % |
30.3 % |
|
Non-IFRS financial measures and group key performance indicators (KPIs)
The group presents non-IFRS financial measures because they are used by management to monitor the business performance and as they might be helpful for external stakeholders to evaluate SoftwareONE’s financial results compared to other companies in the same industry. They include the following:
Gross profit from sale of software and other revenue is the sum of revenue from the sale of software and other revenue less cost of software purchased, while gross profit from solutions and services is calculated as revenue from solutions and services less third-party service delivery costs. The total gross profit helps as a KPI to manage and monitor SoftwareONE’s business as well as for incentivizing the salesforce.
Adjustments in operating expenses are made for defined one-time specific items as follows:
- Management equity plan expenses in connection with the IPO; these are fully funded by major shareholders with no equity impact
- Integration costs of acquired companies limited to incremental external and internal costs but no salary and travel costs for SoftwareONE employees involved in the integration
- IPO-related third-party costs
- M&A-related third-party costs and earn-out expenses
Adjusted EBITDA is defined as the underlying like-for-like earnings before interests, tax, depreciation and amortization including one-time specific adjustments in operating expenses.
EBITDA adjusted margin is defined as adjusted EBITDA divided by gross profit total, giving a good representation of the operating performance of the business.
Growth at constant currencies: Assessing the group's performance and for relevant comparative purposes, the change between two periods are presented on a constant currency basis. For this purpose, the current period profit and loss figures are translated from the subsidiaries’ respective local currencies into Swiss francs at the applicable average exchange rate of the prior year period. This calculation is based on the underlying management account in order to reflect the seasonality and the businesses.
(Net cash)/net debt comprises the group’s cash and cash equivalents, short and long term financial assets and long-term other receivables less bank overdrafts, contingent consideration liabilities, lease liabilities, other current and non current financial liabilities and any open payments related to the management equity plan.
Net working capital is defined as the group’s trade receivables, other receivables, prepayments and contract assets minus trade payables, other payables and accrued expenses and contract liabilities (excluding any open payments related to the management equity plan).
Free cash flow is defined as the group net cash generated from/(used in) operating activities plus cash from/(used in) investing activities excluding cash-related items related to acquisition of subsidiaries