Annual Report 2021

25 Share-based payments

In 2021, SoftwareONE granted new awards under the Long-term Incentive Plan (‘LTIP21’). In addition, arrangements that were launched in previous years, the Share-based Payment Plan, the Management Equity Plan (‘MEP’), the Free Share Grant and the Long-term Incentive Plan (‘LTIP20’) still exist. The objective of the programs is to support a business policy that is primarily oriented towards the interests of the shareholders by creating long-term increase in value through greater customer focus, employee satisfaction as well as enhanced passion, loyalty and retention of employees. Furthermore, the remuneration of the Board of Directors is partially paid out in shares.

SoftwareONE recognized total share-based payment expenses of TCHF 17,060 in 2021 (prior year: TCHF 25,266). The following table discloses how the expenses are allocated to the existing share-based payment arrangements:

SoftwareONE has recognized an increase in equity in the balance sheet of TCHF 17,256 for share-based payment (prior year: TCHF 26,256), of which TCHF 431 (prior year: TCHF 911) are related to tax effects.

Share-based Payment Plan

In 2015, SoftwareONE group started to grant SoftwareONE Holding AG shares to selected employees free of charge if the vesting condition (still being employed with SoftwareONE at a defined point in time) is fulfilled. The fair value of these shares at grant date is recognized in personal expenses over the vesting period (one to 50 months) and was calculated using a market approach model.

Management Equity Plan

Selected senior SoftwareONE employees participate in the MEP, a plan set up/sponsored by shareholders of the company in 2017 and amended in 2019 immediately prior to the IPO.  While SoftwareONE has no obligation to settle the entitlements of MEP participants, the plan is accounted for as equity-settled by SoftwareONE because the group receives employee service from the MEP participants. Upon the IPO in 2019, 33% of the MEP was paid in cash and 67% in unvested shares transferred by the shareholders to a blocked account.

The MEP includes certain conditions such as a restriction period and non-compete clause as well as a call option of the company to buy the unvested shares at a nominal price on termination of employment by bad and early leavers during a staggered vesting period of one, two and three years starting with the date of the IPO. The non-compete clause is a post vesting restriction, with no significant effect on the grant date measurement of fair value. The company’s call option to buy the unvested shares from bad and early leavers is considered a service condition and the expense of the amended MEP is recognized over the remaining vesting periods of one, two and three years from the IPO using a graded vesting scheme.

The fair value of the amended MEP granted in 2019 amounted to TCHF 53,288 (cash and 2,072,322 shares) and was determined based on the opening listing price at the SIX Swiss Exchange of the company’s shares on 25 October 2019. In 2019, SoftwareONE Holding AG received a cash payment from shareholders for the amount of TCHF 15,986 to settle social security liabilities relating to the amended MEP.

Free Share Grant

In 2020, the Free Share Grant was granted. The plan provides all entitled SoftwareONE employees 100 bonus shares each on a one-time basis and therefore represents a share-based remuneration with compensation through equity instruments.

In 2020, 387,200 free shares were granted at a fair value of CHF 23.40 per share. 50% of the free shares granted vest over a service period of 16 months and the other 50% vest over a period of 28 months. There are no voting rights and no dividend claims until the end of the contractual vesting period.

Employee Share Purchase Plan

The program allows eligible SoftwareONE employees to participate in a sponsored ESPP granted in 2020. Participants are able to make periodic contributions to acquire investment shares at the respective market price over a purchase period, which will generally be one year. At the end of the purchase period, participants receive free matching shares based on the number of investment shares bought during the purchase period and held until the end of the purchase period. For every four investment shares acquired, SoftwareONE grants each employee one matching share free of charge. The matching shares granted represent an equity-settled share-based payment and are recognized over a service period ending 12 months after the purchase period. The program is ongoing.

Long-term Incentive Plan

In 2020, the LTIP was launched. The LTIP grants the Executive Board, the Executive Leadership Team and selected key employees so-called performance share unit ('PSU') subscription rights. In 2021, SoftwareONE granted new awards under this plan (‘LTIP21’).

The number of PSUs granted is determined by dividing the individual LTIP grant on the grant date by the fair value of one PSU, rounding up to the next whole PSU. Each PSU subscription right securitizes a right to receive shares depending on the development of the underlying vesting factor. The vesting factor depends 75% on a gross profit and 25% on a relative total shareholder return ('TSR'). In both variables, the target factor is 1.0, while the minimum factor is 0.0 and the maximum factor is 2.0. The gross profit vesting factor depends on SoftwareONE’s gross profit during year three and is determined on a straight-line basis between the target ranges. The relative TSR vesting factor depends on the TSR of the company and the TSR of the STOXX® Global 1800 Industry Technology index. A relative TSR of <= -33% leads to a vesting factor of 0 and a TSR >= 33% to a vesting factor of 2.0. The relative TSR vesting factor distributes linearly between the target ranges. The award cycle (service period) is three years from the contractual grant date.

The LTIP is valued using a Monte Carlo simulation. SoftwareONE has taken the following parameters into account in the valuation:

The term of the PSUs granted in 2021 starts on 4 June 2021 (valuation date) and ends on 3 June 2024 (end of the vesting period). The term of the PSUs granted in 2020 starts on 29 May 2020 and ends on 28 May 2023. An average expected fluctuation of 0% p.a. for the Executive Board, 5.0% p.a. for the Executive Leadership Team including the regional leaders and 15% p.a. for the other beneficiaries has been applied as at 31 December 2021 based on historical fluctuation and management estimates.

Remuneration of Board of Directors partially paid in shares

The Board of Director's fees are settled 60% in cash and 40% in SoftwareONE shares. The share part of the compensation is granted immediately after the Annual General Meeting and the election or re-election of the members of the Board of Directors. For the share-based compensation, the Swiss franc amount is converted into shares at the closing price of the ex date, the first date after the Annual General Meeting the shares are traded ex dividend (for 2021: 25 May 2021). The shares vest until the next Annual General Meeting and afterwards are subject to transfer restrictions of three years.

On 28 June 2021, the granted amount of TCHF 628 was converted into 27,846 shares (CHF 22.55 per share).