Annual Report 2025

4 Financial risk management

4.1 Financial risk factors

The group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk), credit risk and liquidity risk. The group’s overall risk management program is focused on mitigating the unpredictability of financial markets and aims to minimize potential adverse effects on the group’s financial performance. To hedge certain risk exposures, the group uses derivative financial instruments, which are measured using standardized mathematical models.

Risk management is carried out by Group Treasury under the Global Treasury Policy approved by the Board of Directors. Group Treasury identifies, evaluates, and hedges financial risks in close cooperation with the group’s operating entities. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments and investment of excess liquidity.

Market risk

Foreign exchange risk

The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

The group hedges its foreign exchange risk exposure of recognized assets and liabilities and future commercial transactions with derivative contracts. The group reviews the currency exposure regularly and covers its risks in two ways:

• The group hedges the net exposure from foreign currency balance sheet positions with forward contracts. Such contracts, however, are not accounted for using hedge accounting.
• Highly probable future transactions (sales and purchase) are hedged with forward transactions. These contracts are designated as cash flow hedges. The transactions are expected to affect profit and loss within the next 36 months. At inception of a hedge relationship, the group designates and documents the hedge relationship to apply hedge accounting. The hedge relationship includes the hedging instrument, the hedged item and the nature of the risk being hedged. The hedges are expected to be highly effective.

There are certain investments in foreign operations whose net assets are exposed to foreign currency translation risk which, as per group policy, is not hedged. Long-term receivables from a foreign operation for which settlement is neither planned nor likely to occur in the foreseeable future, are considered a part of the net investment. These differences are recognized in other comprehensive income and accumulated in equity. Translation risk is not considered in the analysis below.

The following table details the group’s sensitivity to the major currencies with all other variables held constant:

Interest rate risk

The group’s interest-bearing instruments with variable interest are cash, bank overdrafts, bank loans, a multi-currency revolving credit facility and a term loan facility, see also Note 20 Financial liabilities. An interest rate risk exists due to changes in market interest rates. The group has managed the risk of changes in the interest rates based on limits using interest rate derivatives as part of the defined risk strategy. The underlying transactions are designated as cash flow hedges. They are expected to affect profit and loss until August 2029, respectively. At inception of a hedge relationship, the group designates and documents the hedge relationship to apply hedge accounting. The hedge relationship includes the hedging instrument, the hedged item, and the nature of the risk being hedged. The hedges are expected to be highly effective.

Interest rate swaps are held in CHF and USD. A change in interest rates of +/–0.25 basis points with all other variables held constant would have no impact on earnings before income tax for 2025 and 2024. The impact would be recognized in equity through the hedging reserve and would lead to an increase/decrease of CHF 2.7 for CHF in 2025. The impact for USD in 2025 would not be significant as well as the impact on both currencies for 2024.

Credit risk

Group Credit & Collection is responsible for managing and analyzing the credit risk for all new clients before standard payment and delivery terms and conditions are offered. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to end customers, including outstanding receivables and contract assets. Risk control assesses the credit quality of the end customers, considering their financial position, past experience and other factors. No collateral is required. Individual risk limits are set based on internal or external ratings in accordance with guidelines set by the Board. The utilization of credit limits is regularly monitored.

There is no concentration of credit risk with respect to trade receivables, as the group has many end customers that are internationally diversified. 37% of trade receivables are covered through credit insurance (prior year: 33%).

The remaining part is not insured for one of the following reasons:

• From end customers with top ratings (based on internal and credit insurance assessment): 26% (prior year: 63%)
• Too small to be insured: 2% (prior year: 1%)
• No insurance available: 35% (prior year: 3%)

Most changes compared to prior year result from Crayon’s customer portfolio. Refer to Note 11 Trade receivables for information about the credit risk exposure on the group’s trade receivables and contract assets using a provision matrix.

Liquidity risk

Short-term cash flow forecasting is performed in the operating entities of the group and aggregated by Group Treasury. Group Treasury monitors rolling forecasts of the group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while always maintaining sufficient headroom on its undrawn borrowing facilities (for further details see below). Mid-term cash planning is performed by Group Controlling.

The table below analyses the group’s non-derivative financial liabilities according to relevant maturity groupings based on the remaining period from the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, i.e., undiscounted interest and principal payments:

As of December 31, 2025, the group had total committed and uncommitted credit lines (including term loan and factoring) of CHF 2,000.0 million (prior year: CHF 1,168.0 million) available, of which 60% (prior year: 38%) was drawn. Of the drawn amount, CHF 775.0 million were subject to financial covenants which were fulfilled as of December 31, 2025 (prior year: CHF 250.0 million), refer to Note 20 Financial liabilities.

The maturity structure of the derivative financial instruments based on cash flows is as follows:

The contractual agreement determines whether the contracting parties must fulfil their obligations from derivative financial instruments net or gross.

4.2 Capital risk management

The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

Capital is measured based on the group’s consolidated financial statements and monitored closely on an ongoing basis. Management’s goal for the period under review was to strengthen the capital base to sustain and support further development of the business.

The equity ratio for the period ended December 31, 2025, and the prior year were as follows:

The equity ratio for 2025 increased compared to the previous year, primarily as a result of the Crayon acquisition and newly issued shares totaling CHF 472.0 million, which were part of the Crayon purchase consideration. In this context, the total assets also increased. However, the rise in equity was partially offset by dividend payments and negative currency translation adjustments.

4.3 Categories of financial instruments and fair value estimation

For purposes of subsequent measurement, SoftwareOne has financial assets at amortized cost (debt instruments), financial assets at fair value through profit or loss and derivatives designated as hedging instruments.

The group’s financial assets at amortized cost comprise trade and other receivables, loans and cash and cash equivalents.

The group’s financial liabilities include trade and other payables, accrued expenses, contingent consideration liabilities and other financial liabilities including bank overdrafts, bank loans and derivative financial instruments.

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value through profit or loss except for the effective portion of cash flow hedges, which is recognized in OCI and later reclassified to the income statement when the hedged item affects profit or loss or as part of the initial carrying amount of the non-financial assets or liability recognized. The ineffective portion is recognized immediately in the income statement.

In the case of a positive value, the derivative is recognized as an asset and in the case of a negative value, as a liability (classified as non-current when the remaining maturity of the hedged item is more than 12 months and as current when the remaining maturity of the hedged item is less than 12 months).

Categories of financial instruments

The following table discloses the carrying amounts and fair values, as required, of the group’s financial instruments by class and category:

SoftwareOne held listed Crayon shares which were measured at fair value through profit or loss until they were derecognized. Up to the date of the Crayon acquisition, the group recorded a fair value gain of CHF 9.6 million as finance income (prior year: CHF 21.5 million).

In December 2022, the group entered into a total return swap agreement related to listed shares in Crayon. Under the total return swap, SoftwareOne sold the underlying shares for a cash consideration of CHF 42.6 million but remained exposed to changes in the market value of these shares. As a result, the group did not derecognize the financial asset and recorded a financial liability for the receipts from swap contracts. In April 2025, the total return swap agreement was amended, allowing for early termination and physical settlement of the swap. On June 27, 2025, SoftwareOne terminated the agreement and exercised the physical settlement option. The shares were transferred back to SoftwareOne at the inception price of the total return swap. The recorded financial liability for the receipts from swap contracts was settled at CHF 35.7 million, which is presented under investing cashflow (prior year: cash inflow of CHF 10.1 million).

Fair value estimation

The carrying amounts of cash and cash equivalents, trade and other receivables and trade and other payables with a remaining term of up to 12 months, as well as other current financial assets and liabilities, represent a reasonable approximation of their fair values, due to the short-term maturities of these instruments.

The fair value of financial assets (equity instruments) was based on observable price quotations at the reporting date. The fair value of derivatives is determined based on input factors observed directly or indirectly on the market. The fair value of foreign exchange forward contracts is based on forward exchange rates. The fair value of financial liabilities (related to a swap contract) is determined based on input factors observed directly or indirectly on the market.

Financial instruments carried at fair value are classified by valuation method. The fair value hierarchy has been defined as follows:

Level 1: The fair value of financial instruments traded in active markets is based on quoted market prices for identical assets or liabilities at the reporting date.

Level 2: The fair value measurements are those derived from valuation techniques using inputs for the asset or liability that are observable market data, either directly or indirectly. Such valuation techniques include the discounted cash flow method and option pricing models. For example, the fair value of interest rate and currency swaps is determined by discounting estimated future cash flows, and the fair value of forward foreign exchange contracts is determined by using the forward exchange market at the end of the reporting period.

Level 3: The fair value measurements are those derived from valuation techniques using significant inputs for the asset or liability that are not based on observable market data.

No transfers between the hierarchy levels were made in 2025. There was a transfer from level 3 to level 2 in 2024.

The following table discloses valuation classes for financial instruments measured at fair value:

The changes in carrying values associated with “Level 3” contingent consideration liabilities are set out below:

The contingent consideration liability relates to the acquisition of Medalsoft (fair value as of December 31, 2025: CHF 4.5 million; prior year: CHF 6.3 million). The contingent consideration liability of Medalsoft depends on the achievement of certain fixed events (CHF 2.1 million, prior year: CHF 2.3 million) and the retention of a key employee (CHF 2.4 million, prior year: CHF 4.0 million). The cash outflows are expected on a yearly basis until 2027. In the event of termination by this key employee, the contingent consideration is reduced.

The remaining contingent consideration of Predica, which was assigned to “Level 2” in the fair value hierarchy in 2024, was paid in 2025 in the amount of CHF 1.4 million and reported under acquisition of business in investing cash flows.

4.4 Transfer of financial assets

The group has entered into transactions in which it transfers trade receivables under factoring agreements and, as a result, may either be eligible to derecognize the transferred receivables in their entirety or must continue to recognize the transferred receivables to the extent of any continuing involvement, depending on certain criteria.

Receivables subject to factoring arrangements are derecognized on sale and these assets are not held to collect contractual cash flows and would be measured at fair value through profit or loss. However, due to their short-term nature, the difference between transaction price and fair value is not considered to be material. Where the factored receivables continue to be recognized in the balance sheet, they are treated as held to collect contractual cash flows and are measured at amortized cost.

In 2025, new portfolio factoring programs were established for SoftwareOne Germany and SoftwareOne US. Provided that defined eligibility criteria are met, invoices are sold on a non-recourse basis. The German program has a purchase limit of EUR 150.0 million. The US program includes a limit of USD 115.0 million plus an additional USD 95.0 million for a specific purchase relating to a single obligor. Almost all receivables sold under the portfolio programs are insured against default risks. Receivables subject to these factoring arrangements are derecognized upon sale.

The amount of the receivables sold as of December 31, 2025, is CHF 376.4 million (prior year: CHF 151.6 million). The amount is fully derecognized from the balance sheet. SoftwareOne records liabilities to factoring partners for forwarding incoming payments from customers under other current payables. These amounted to CHF 57.1 million as of December 31, 2025 (prior year: nil).

4.5 Offsetting of financial assets and liabilities

The group has entered into arrangements that do not meet the criteria for offsetting but still allow for the related amounts to be offset if certain credit events occur (such as a default). The following table shows the amounts which cannot be offset under IFRS, but which could be settled net under the terms of master netting agreements, to show the total net exposure of the group.