Results review

Revenue at the group level grew 14.1% YoY and 10.2% YoY in constant currency (ccy) and reported currency, respectively, to CHF 1,011.0 million in 2022, compared to CHF 917.7 million in the prior year. Revenue growth in Q4 2022 was 7.5% YoY ccy as clients took a more cautious approach to spend, particularly evident in the Microsoft business in EMEA.

Gross profit increased by 13.8% YoY ccy to CHF 939.5 million in 2022, compared to CHF 855.1 million in 2021.

The negative FX translation impact of approximately four percentage points at the revenue level was due to the strengthening of the CHF versus the EUR, partially offset by some weakness against the USD.

Key figures

Double-digit growth across regions

EMEA grew revenue and gross profit by 13.7% and 12.6% YoY ccy to CHF 611.6 million and CHF 563.9 million, respectively, in 2022, including the acquisition of Predica. In Q4 2022, revenue and gross profit growth was 8.0% and 4.3% YoY ccy, respectively, primarily driven by weaker results in Microsoft.

NORAM delivered a strong performance in 2022, with revenue and gross profit up 14.8% and 15.5% YoY ccy to CHF 158.3 million and CHF 152.5 million, respectively, driven by strong results in Microsoft and other ISVs. Momentum continued into Q4 2022 with revenue and gross profit growth at 11.7% and 14.1% YoY ccy, respectively.

APAC delivered revenue and gross profit growth of 12.1% and 13.7% YoY ccy to CHF 125.5 million and CHF 118.8 million, respectively, in 2022. In Q4 2022, revenue and gross profit growth was 2.7% and 11.9% YoY ccy, respectively, driven by continued strength in China, as well as Australia and Hong Kong.

LATAM grew revenue and gross profit by 12.2% and 11.7% YoY ccy to CHF 109.3 million and CHF 98.8 million, respectively, in 2022 primarily led by services. In Q4 2022, revenue and gross profit growth was 7.7% and 5.6% YoY ccy, respectively, driven by slowdowns in key markets Brazil and Colombia due to the political environment.

Continued growth momentum across business lines

Software & Cloud Marketplace

Revenue and gross profit from Software & Cloud Marketplace grew 5.7% YoY ccy to CHF 545.3 million in 2022, compared to CHF 533.6 million in the prior year.

Gross billings in the Microsoft business amounted to USD 16.9 billion in 2022, up 13.0% compared to 2021. In Q4 2022, billings were USD 3.2 billion, up 2.0% compared to the prior year, as clients became more cautious given the macroeconomic environment. Other ISVs demonstrated strong momentum through Q4 2022, growing double-digit in constant currency.

Adjusted EBITDA for Software & Cloud Marketplace grew 5.0% YoY ccy to CHF 289.1 million in 2022, compared to CHF 281.4 million in the prior year. The adjusted EBITDA margin in 2022 increased slightly to 53.0% of gross profit, a sector-leading level.

Software & Cloud Services

Software & Cloud Services achieved revenue growth of 26.0% YoY ccy to CHF 465.7 million in 2022, up from CHF 384.1 million in the prior year.

Gross profit grew 27.4% YoY ccy to CHF 394.2 million in 2022, up from CHF 321.4 million during the prior year, driven primarily by xSimples, Cloud Services and Application Services. Momentum slowed in Q4 2022, with growth of 15.0% YoY ccy, driven by a normalisation of growth in xSimples and a lower contribution from acquisitions.

Focus on cross-selling continued with 71% of LTM (to 31 December 2022) gross profit generated by c. 16.5k clients purchasing both software and services, up from 15.3k a year ago. Gross profit in xSimples was up 56.0% and 41.5% YoY ccy in 2022 and Q4 2022, respectively. By 31 December 2022, SoftwareOne supported 8.8 million users in the cloud, up from 6.9 million one year ago.

Adjusted EBITDA for Software & Cloud Services was CHF 13.6 million in 2022, with a margin of 3.4% of gross profit, compared to CHF (5.8) million in the prior year, driven by a strong contribution margin and operating leverage as the business continues to scale.

Focus on disciplined execution

Adjusted total operating expenses in 2022 were CHF 699.1 million, increasing 14.5% YoY ccy compared to the prior year.  In Q4 2022, total operating expenses amounted to CHF 176.3 million, remaining broadly stable for five quarters since Q4 2021 as a result of strict cost control.

Adjusted EBITDA for 2022 was CHF 240.4 million, increasing 11.9% YoY ccy compared to CHF 219.4 million in the prior year. The adjusted EBITDA margin was 25.6% of gross profit, demonstrating stable profitability compared to prior year.

Adjusted profit for the year was CHF 115.0 million in 2022, representing an increase of 4.6% YoY in reported currency, compared to CHF 110.0 million in the prior year.

IFRS reported profit for the year decreased to CHF (58.3) million in 2022, compared to CHF 117.6 million in the prior year, reflecting a mainly non-cash loss related to the sale of the Russian operations and a fair value loss on shares in Norwegian listed company Crayon (partially realised due to sell-down in April 2022), as well as the impact of M&A and integration-related expenses, restructuring and a change in revenue recognition for Microsoft Enterprise Agreements.

For a reconciliation of IFRS reported profit to adjusted profit for the year, see Alternative Performance Measures.

Driving operational excellence

SoftwareOne will implement a new programme in 2023 geared towards embedding operational excellence across the organisation. The programme spans three pillars – commercial effectiveness, efficient service delivery and right-sized support functions. Cost savings are expected to be CHF 15 million in 2023 and CHF 50 million on an annualised basis from 2024 onwards. Up to 50% of cost savings achieved in each year will be re-invested into strategic growth areas. A restructuring cost is expected to be recognised in Q1 2023.

Strong liquidity and unlevered balance sheet

Net working capital (after factoring) remained negative at CHF (158.3) million, with payables exceeding receivables in 2022, compared to CHF (187.5) million in the prior year. Net cash from operating activities was CHF 91.1 million in 2022, down from CHF 158.0 million in the prior year, driven primarily by working capital.

Capital expenditure totalled CHF 47.3 million, mainly relating to investments in Goatpath, compared to CHF 33.3 million in the prior year.

Proceeds from the sale of financial assets (related to Crayon) were CHF 115.5 million. Cash outflow relating to acquisitions of businesses amounted to CHF 78.4 million.

Net cash position was CHF 461.2 million as at 31 December 2022, compared to CHF 547.4 million in 2021.

Launch of buyback programme

As previously announced, SoftwareOne will launch a buyback programme of up to CHF 70 million. The programme is expected to start in Q2 2023.

The share buyback programme is for capital reduction purposes and will be executed on a second trading line on the SIX Swiss Exchange. SoftwareOne intends to request shareholder approval to cancel the shares purchased through this programme and to reduce the share capital at future shareholders’ meetings.

Outlook for 2023 and mid-term guidance

SoftwareOne will execute on its well-defined strategy in order to capitalise on a healthy environment in 2023. Organisations are expected to continue prioritising digital transformation, although the uncertain macroeconomic backdrop remains a consideration.

Based on the new reporting methodology, with growth and margin based on revenue rather than gross profit, the outlook for 2023 is for:

• Double-digit revenue growth for the group in constant currency;
• Adjusted EBITDA margin of 24-25% of revenue;
• Dividend pay-out ratio of 30-50% of adjusted profit for the year.

The mid-term guidance has been adjusted to reflect the full impact of the new operational excellence programme and continued commitment to the company’s growth strategy and enhanced returns to shareholders.

The table below allows for a comparison of the outlook and mid-term guidance based on both the new and old reporting methodologies.

FY 2023 outlook and mid-term guidance