SoftwareONE Holding AG (‘the company’) and its subsidiaries (together ‘the group’ or ‘SoftwareONE’) is a leading global provider of end-to-end software and cloud technology solutions. With capabilities across the entire value chain, it helps companies design and implement their technology strategy, buy the right software and cloud solutions at the right price, and manage and optimize their software estate.

The company is incorporated and domiciled in Stans, Switzerland. The address of its registered office is Riedenmatt 4, 6370 Stans. SoftwareONE Holding is traded on the SIX Swiss Exchange. The shares trade under the ticker symbol ‘SWON’.

These interim consolidated financial statements for the six months ended 30 June 2021 were authorized for issue by the Board of Directors on 25 August 2021.

Basis of presentation

The interim condensed consolidated financial statements for the six months ended 30 June 2021 have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the group’s annual financial statements as at 31 December 2020 approved by the Board of Directors on 24 March 2021.

New standards, interpretations and amendments adopted by the group

The accounting policies applied in these interim condensed consolidated financial statements are the same as those applied in the group’s consolidated financial statements as at and for the year ended 31 December 2020 except for changes effective from 1 January 2021.

As at 1 January 2021, the following amendments to the International Financial Reporting Standards (IFRS) entered into force:

• IFRS 9/IAS 39/IFRS 7/IFRS 4/IFRS 16: Interest Rate Benchmark Reform, Phase 2
• IFRS 16: Leases: COVID-19 Related Rent Concessions beyond 30 June 2021 – Amendments to IFRS 16 (early adopted by SoftwareONE in 2021)

These amendments do not have a significant impact on the group. SoftwareONE has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

Change in presentation

The comparative information for the six months ended 30 June 2020 presented in these interim financial statements has been amended to reflect the changes in presentation disclosed in the Annual Report 2020 under the heading ‘change in presentation’. In detail, the changes relate to the items below.

The comparative figures for revenue from Software & Cloud were increased by TCHF 18,761 due to a change in presentation of revenue from sale of hardware. Further changes were made in the consolidated statement of cash flows for the presentation of foreign currency effects on changes in net working capital and changes in provisions. The comparative figures were adjusted for change in trade receivables (TCHF 65,526), change in other receivables, prepayments and contract assets (TCHF 19,750), change in trade and other payables (TCHF -54,764), change in accrued expenses and contract liabilities (TCHF -24,649) and foreign currency effects on changes in net working capital (TCHF -5,863) as well as for change in provisions (TCHF -3,302) and other non-cash items (TCHF 3,302).

Accounting estimates and management judgements due to the COVID-19 pandemic

Due to the global consequences of the ongoing COVID-19 pandemic, accounting estimates and management judgements are subject to uncertainty. On the basis of the information available in the reporting period, an analysis of the effects on the accounting of SoftwareONE group was carried out as at 30 June 2021, in particular with respect to expected credit losses on trade receivables and contract assets and intangible assets. SoftwareONE group has determined that no significant effects as a result of COVID-19 had to be recorded in these interim condensed consolidated financial statements. Therefore, management has discontinued the separate monitoring with respect to the ongoing COVID-19 pandemic.

Foreign currency translation

The following exchange rates were used:

Seasonality of operations

The results of SoftwareONE group are subject to significant seasonality effects. Total revenue peaks towards the end of the second quarter as a result of year-end campaigns by Microsoft, our most important software vendor, whose fiscal year ends on 30 June, and towards the end of the fourth quarter of the financial year, driven by the IT budget cycle of many of our customers.

Acquisitions in 2021

On 1 March 2021, SoftwareONE acquired 100% of VB Technology Group AG, Switzerland (‘ITPC’), with subsidiaries in Switzerland and India. ITPC is an SAP specialist for S/4HANA transformations, public cloud migrations and related managed services offerings, including monitoring, maintenance and support. Continuing the series of quality SAP cloud acquisitions, ITPC further expands and strengthens the group’s SAP capabilities, underpinning its strategic importance.

On 29 April 2021, the group acquired a controlling shareholding of 70% in SynchroNet Corp. (‘SynchroNet’), an AWS-focused cloud specialist in digital workplace solutions. The acquisition expands SoftwareONE’s capabilities in the fast-growing market of cloud-based services for remote working and complements its global AWS services portfolio. SoftwareONE has applied the partial goodwill method. Due to an equity of zero, no minorities were taken into account at the time of initial consolidation.

The provisional fair values of the identifiable assets and liabilities as at the date of acquisition were:

Details of the purchase considerations recognized at acquisition and the derivation of goodwill are as follows:

The purchase price paid for the acquisition of ITPC and SynchroNet mainly relates to the skilled workforce and, therefore, represents goodwill.

From the date of acquisition, the acquired companies contributed TCHF 1,642 to revenue and TCHF-499 to the profit for the year.

If all acquisitions had taken place at the beginning of the year, total revenue of SoftwareONE group would have been TCHF 4,368,015 and the net profit for the period would have been TCHF 35,889 as at 30 June 2021.

Acquisitions in 2020

On 9 November 2020, SoftwareONE exercised a call option to acquire the remaining 60% and obtained control of IG Services SAS, Colombia (‘InterGrupo’), following its initial investment of 40% in 2019. During the period to 30 June 2021, the group adjusted the purchase accounting. An additional contingent liability was considered in an amount of TCHF 1,593 of which TCHF 1,245 is covered by an indemnity. This led to an increase in goodwill of TCHF 348 to TCHF 17,091. As the audited consolidated financial statements of InterGrupo for the last financial year were not yet available at the time the interim condensed consolidated financial statements were prepared, a subsequent purchase price adjustment is expected. Therefore, the purchase price allocation of InterGrupo is still provisional.

On 31 December 2020, SoftwareONE acquired 100% of Intelligence Partner SL, Spain (‘Intelligence Partner’), a leading Google cloud services company with subsidiaries in Brazil and Dubai. As the audited financial statements of Intelligence Partner for the last financial year were not yet available at the time the interim condensed consolidated financial statements were prepared, a subsequent purchase price adjustment is expected. Therefore, the purchase price allocation of Intelligence Partner is still provisional.

On 20 May 2020, the group acquired 100% of GorillaStack Pty Ltd., an Australian-based provider of cloud cost management and real-time event monitoring software as a service (SaaS) platform for Amazon Web Services (AWS). On 10 July 2020, SoftwareONE acquired 100% of B-Lay B.V., Netherlands (‘B-Lay’), a leading provider of Software Asset Management (SAM) advisory and managed services for SAP and Oracle solutions with subsidiaries in the US and Romania. On 30 December 2020, the group acquired the activities and assets of Optimum Consulting LLC, US (‘Optimum’), an SAP-certified technology consulting company, by way of an asset deal. During the period to 30 June 2021, the group finalized the purchase accounting and there were no changes in the final fair values of acquired assets and liabilities compared to the provisional amounts disclosed in the Annual Report 2020.

Cash flows on acquisitions

In January 2021, the purchase price for the acquisition of the remaining 60% of the shares of InterGrupo (TCHF 20,142) was paid.

Reconciliation of carrying amount of goodwill

The change in carrying values for goodwill from 1 January 2021 to 30 June 2021 are set forth below:

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) is based on observable price quotations at the reporting date. The fair value of derivatives is determined on the basis of input factors observed directly or indirectly on the market. The fair value of foreign exchange forward contracts is based on forward exchange rates. Currency options are valued based on option pricing models using observable input data.

Financial instruments carried at fair value are analyzed 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 balance sheet 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 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.

There have been no transfers between the different hierarchy levels between 1 January 2021 and 30 June 2021, nor between 1 January 2020 and 30 June 2020.

The following table discloses financial assets and liabilities measured at fair value:

Financial assets consist of an investment in listed equity instruments for which the group recognized a fair value gain of TCHF 420 in finance income in the period to 30 June 2021 (comparative period: TCHF 13,314).

The change in carrying values associated with ‘Level 3’ contingent consideration liabilities from 31 December 2020 to 30 June 2021 are set forth below:

The most significant contingent consideration liabilities relate to the acquisition of the customer base of CompuCom and the acquisition of Intelligence Partner.

CompuCom (fair value as at 30 June 2021: TCHF 5,892; comparative period: TCHF 6,266)

The purchase price for the customer base of CompuCom acquired in 2015 is fully based on variable payments that depend on the future revenues generated from those customers over a period of 10 years. The most significant unobservable input used to determine the fair value of the CompuCom contingent consideration is the cash flow forecast, which is mainly based on future gross profit. The development of the future gross profit and the contingent consideration is linear. Thus, a change of +/– 10% in gross profit development leads to a change of cash outflow by +/– 10%.

Intelligence Partner (fair value as at 30 June 2021: TCHF 3,455; comparative period: TCHF 3,417)

The contingent consideration liability of Intelligence Partner depends on the future EBITDA over the next three years and an additional catch-up year if necessary. The development of the future EBITDAs and the contingent consideration is not linear and capped at a maximum of TEUR 3,150. SoftwareONE estimates that the maximum amount will be paid.

SoftwareONE generates its revenue from contracts with customers through the sale of Software & Cloud (point in time), the delivery over time of Solutions & Services as well as revenue related to the resale or sale of self-developed on-premises software (point in time, presented in Solutions & Services).

For management purposes, SoftwareONE is organized by geographical areas. The below breakdown of revenue follows the regional clusters by the group’s operating segments, refer to Note 10 Segment reporting.

Revenue is broken down as follows:

SoftwareONE group splits its revenue from Software & Cloud between Microsoft indirect, Multivendor indirect and Microsoft direct. Multivendor represents all license transactions excluding Microsoft. Microsoft indirect and Multivendor indirect includes revenue from indirect business in which SoftwareONE acts as a principal, whereas Microsoft direct includes revenue from direct business in which SoftwareONE acts as an agent.

Basic EPS is calculated by dividing the profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The dividend approved in 2021 was TCHF 46,396, or CHF 0.30 per share (excluding treasury shares; prior year TCHF 32,460, or CHF 0.21 per share). The dividend was paid out of the capital contribution reserve of SoftwareONE Holding AG and thus deducted from share premium in these condensed interim consolidated financial statements.

In the first half of 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’) 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 8,860 for the six months to 30 June 2021 (comparative period: TCHF 12,534). 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 8,816 for share-based payment (comparative period: TCHF 14,054). In the comparative period tax effects of TCHF 1,520 were considered.

Long-term Incentive Plan

The LTIP21 grants the Executive Board, the Executive Leadership Team and selected key employees so-called performance share unit (PSU) subscription rights.

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 (rTSR). In both variables, the target factor is 1.00, while the minimum factor is 0.00 and the maximum factor is 2.00. 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 rTSR 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 of >= 33% to a vesting factor of 2.0. The rTSR vesting factor distributes linearly between the target ranges. The award cycle (service period) is three years from the contractual grant date.

The PSUs granted under the LTIP21 were classified as an equity-settled share-based payment according to IFRS 2. The LTIP21 is valued using a Monte Carlo simulation.

SoftwareONE has taken into account the following parameters 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). 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 30 June 2021 based on historical fluctuation and management estimates.

Remuneration of Board of Directors partially paid in shares

The Board of Directors' 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. 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).

As an internationally operating group, SoftwareONE is exposed to contingencies in respect of legal and tax claims in the ordinary course of business. It is not anticipated that any material liabilities will arise from the contingent liabilities.

In 2016, the Federal Revenue Office in São José dos Campos (‘DRF/SJC’) issued an Infraction Notice against SoftwareONE Brazil for the fiscal year 2012, levying alleged debts related to sales tax contributions (‘PIS/COFINS’), charging the difference between the non-cumulative system (9.25%) and the cumulative system (3.65%). As expected, in July 2017, the administrative appeal against this Infraction Notice was rejected. Thus, SoftwareONE Brazil has filed a further appeal before the Administrative Tax Appeal Court (‘CARF’), which is waiting for an announcement. In 2020, The Federal Revenue Office issued a further infraction notice against SoftwareONE Brazil for the fiscal year 2017 for the same subject mentioned above. Nevertheless, SoftwareONE Brazil and SoftwareONE group are still of the opinion that the cumulative system was and continues to be correctly applied in line with the industry standard, and is defending its position for both fiscal years 2012 and 2017 with the support of third-party lawyers. SoftwareONE Brazil therefore filed a further appeal before CARF against this infraction notice, which was rejected in July 2021. SoftwareONE submitted an action for annulment at court level. Neither the amount under dispute nor the probability of the outcome of the dispute can be reliably predicted at this stage.

In 2019, the National Tax Administration Superintendence ('SUNAT') in Lima issued an Infraction Notice against SoftwareONE Peru for the fiscal year 2016, levying alleged debts related to withholding taxes (‘Impuesto a la Renta de no Domiciliados’ – IRND), charging the not contributed withholding taxes related to Software Assurance for payments made abroad. According to Resolution 042-2014-SUNAT/5D0000 from 2014, licensing purchased abroad is not subject to withholding taxes, whereas services are subject to withholding tax contribution. As expected, in June 2020, the administrative appeal (2nd SUNAT instance) against this Infraction Notice was rejected. Nevertheless, SoftwareONE Peru and the group are still of the opinion that the non-contribution of withholding taxes was and continues to be correctly applied as Software Assurance is defined as Licensing and not Services in line with the industry standard, and is defending its position with the support of third-party lawyers. SoftwareONE Peru therefore filed a further appeal before the administrative Tax Court (Tribunal Fiscal), the last administrative instance, in July 2020, which ruled in favor of SoftwareONE Peru in January 2021. SUNAT took the right to appeal the decision before the civil court in May 2021. The probability of the outcome of the dispute cannot be reliably predicted at this stage.

For management purposes, the group is organized by geographical areas. The following regional clusters are the group’s operating segments:

• EMEA (Europe and South Africa)
• NORAM (US, Canada)
• LATAM (Latin America)
• APAC (Asia Pacific, including India and Dubai)

No operating segments have been aggregated to reportable segments.

The Executive Board (CEO, CFO, COO and President of Sales) is the Chief Operating Decision Maker (CODM) and assesses each of the reported segments separately for the purpose of evaluating performance and allocating resources. Gross profit and EBITDA are the key performance indicators used for internal management and monitoring purposes of the group and are reported as segment results. The group allocates revenue and expenses to regions based on its customers’ headquarter domicile, since this region is responsible for the global client relationship with a particular customer. There are no intersegment revenues. Different average exchange rates are used in management reporting than for group consolidation purposes.

The group’s financing (including finance income and finance costs) and income taxes are managed on a group basis and are not allocated to the operating segments.

The segment totals are reconciled to the figures reported in the interim condensed consolidated income statement (column ‘Total’) as follows:

The column ‘Corporate’ includes the group cost centers such as management and shared services costs. The column FX eliminates the effect of using differing average foreign exchange rates in the segment reporting. The column Other includes other reconciling items that are not allocated to the segments and Corporate in internal reporting such as share-based payment plans (with the exception of LTIP and ESPP), earn-outs and integration costs as well as differences in accounting policies of IFRS 16 that are not reflected in the segment reporting. Additionally, the column Other includes a reclassification of bad debt provisions that are presented in gross profit in internal reporting but in operating expenses in the consolidated income statement.

For the six months ended 30 June 2021

For the six-month ended 30 June 2021, the most relevant reconciliation items in the column Other were costs for share-based payments (TCHF 7,519), for earn-outs (TCHF 5,817), for integration (TCHF 2,624) and an opposite effect from the difference in accounting policies of IFRS 16 (TCHF 8,748). The reclassification of bad debt provisions amounts to TCHF 746. All other reconciliation items were minor.

For the six months ended 30 June 2020

For the six-month ended 30 June 2020, the most relevant reconciliation items in the column Other were costs in relation to bad debt provisions (TCHF 5,966), which are presented within gross profit in internal reporting. Additional reconciliation items were costs for share-based payments (TCHF 12,365) and positive effects from the application of IFRS 16 (TCHF 8,481), which are not considered in internal reporting. All other reconciliation items were minor.

Switzerland, the US, Germany and the Netherlands are the main geographical markets for SoftwareONE and represent approximately 54% (comparative period: 55%) of total revenue. Revenue is reported based on the customers' headquarter domicile:

Additional geographical information

No transactions with one single external customer exceed 10% of consolidated revenue of the group.

From the balance sheet date until the interim consolidated financial statements were approved by the Board of Directors on 25 August 2021, the following significant events occurred:

Acquisitions

On 14 July 2021, SoftwareONE acquired 100% of ITST Consultoria em Informática Ltda., Brazil ('ITST'), a specialist for professional and managed SAP services, including cloud strategy advisory, architecture assessment, migration and administration. Through this first SAP-related acquisition in Latin America, ITST will strengthen SoftwareONE’s capabilities in this strategic growth stream. An amount of TCHF 1,470 was paid in cash. As part of the purchase agreement, an earn-out arrangement related to the continuing employment of the selling shareholders was agreed that could result in additional cash payments to the previous owners of ITST. The amount of the payments depends on gross profit development for 2022 to 2024 and a multiplier derived from other variables and is recognized as personnel expenses over the service period of three years. SoftwareONE did not finalize the provisional purchase price allocation at the time of preparing the interim condensed consolidated financial statements.