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 2022 were authorized for issue by the Board of Directors on 24 August 2022.

Basis of presentation

The interim condensed consolidated financial statements for the six months ended 30 June 2022 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 2021 approved by the Board of Directors on 2 March 2022.

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 2021 except for changes effective from 1 January 2022 and the change in presentation of revenue disclosed further below.

As at 1 January 2022, the following amendments to the International Financial Reporting Standards (IFRS) entered into force:

• IFRS 3: Business Combinations: References to the Conceptual Framework
• IAS 37: Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts, Costs of Fulfilling a Contract
• IAS 16: Property, Plant and Equipment: Proceeds before Intended Use
• Annual Improvements Project 2018-2020: Changes to IFRS 1, IFRS 9, IFRS 16, IAS 41

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 accounting policies

The comparative information for the six months ended 30 June 2021 presented in these interim financial statements has been amended to reflect the changes in accounting policies disclosed in the Annual Report 2021 under the heading ‘Change in  accounting policies’. In December 2021, the IFRS Interpretations Committee (IFRS IC) issued a tentative agenda decision on ‘Principal versus Agent: Software Reseller (IFRS 15)’ about whether a reseller of software licenses is acting as principal or agent for the purposes of recognizing revenue under IFRS 15 Revenue from Contracts with Customers. As an addendum to its April 2022 meeting, the IFRS IC issued the final agenda decision 'Principal versus Agent: Software Reseller (IFRS 15)' on 30 May 2022.

In view of the clarifications from the draft agenda decision management re-assessed and concluded in 2021 that SoftwareONE does not control the software licenses from the third-party software providers before they are transferred to the customer and therefore acts as an agent for transactions in the indirect business. Consequently, SoftwareONE recognizes revenue from Software & Cloud in the net amount that the group is entitled to retain in return for its agent services and end customer invoicing to the software provider, ie, the difference between the consideration received from the customer and cost of software purchased. During the assessment in the first half of 2022 whether there are any other potential effects of the clarification by the IFRS IC on its revenue contracts, SoftwareONE identified a type of service contracts in Solutions & Services in which SoftwareONE also acts as an agent and, therefore, recognizes revenue in the net amount.

The comparative period for the six months ending 30 June 2021, in which SoftwareONE reported revenue from Software & Cloud (indirect business only) and the identified service contracts as a principal based on a gross amount in the interim condensed consolidated income statement, is adjusted. The result of the change in accounting policies for the comparative period is shown in the following table:

The assessment of the implications of the agenda decision on some revenue contracts is still ongoing and management expects that there could be other potential effects of the clarification by the IFRS IC on contracts with customers. The Group plans to complete this assessment in the second half of 2022.

Disclosure of additional information on business line performance in the segment reporting

The identification of the group's reporting segments has not changed. However, starting 2022, SoftwareONE internally also reports EBITDA by business lines to the Chief Operating Decision Maker. The view presents a breakdown of total revenue, gross profit, contribution margin and EBITDA for the business lines Software & Cloud, Solutions & Services and Corporate to measure the individual success of the business lines. For additional information on business line performance, refer to Note 11 Segment Reporting.

Impact of the Ukraine war on the interim condensed consolidated financial statements

In light of the invasion of Ukraine by Russian forces and the changed political and economic environment in Russia, which does not offer potential to operate with stability in this market in the mid-term, SoftwareONE decided in March 2022 to suspend a significant part of its sales and business operations in Russia. As a consequence of this decision, SoftwareONE LLC, Russia, was sold to a third-party on 20 May 2022. For more information, refer to Note 3 Changes in the scope of consolidation.

On the basis of the information available in the reporting period, an analysis of the effects on the accounting of SoftwareONE was carried out as at 30 June 2022, in particular with respect to the expected credit losses on trade receivables and contract assets. SoftwareONE has determined additional expected credit losses of CHF 4,6 million for receivables of customers in Russia that are recorded in these interim condensed consolidated financial statements.

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 2022

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

Acquisition of Predica

On 2 February 2022, SoftwareONE acquired 100% of Predica Sp zoo, Poland (‘Predica’), a cloud-native provider of industry-leading Azure cloud professional and managed services with subsidiaries in Europe and Middle East and the US. As an acclaimed Microsoft Gold partner with 15 Gold competencies and Azure Expert Managed Service Provider, the company specializes in applications & DevOps, cloud infrastructure, security and data analytics in order to drive digital transformation with customers.

A contingent consideration arrangement was agreed that could result in additional cash payments to the previous shareholders of Predica. The calculation is based on future revenue, revenue growth and other KPIs. The earn-out amount contingent on continuing employment of the selling shareholders is recognized as a personnel expense over the service period of three years and thus not part of the purchase price. The fair value of the contingent consideration of TCHF 8,750 payable to selling shareholders without continuing employment is part of the purchase price and recognized as a financial liability. Cash outflows for both earn-outs are expected on a yearly basis.

The goodwill recognized is primarily attributed to the workforce and the expected synergies and other benefits from combining the activities of Predica with those of the group. The goodwill is not deductible for income tax purposes. Transaction costs of TCHF 1,082 are related to this acquisition.

From the date of acquisition, Predica has contributed TCHF 13,091 of revenue and TCHF 1,616 to the profit for the period.

If all acquisitions had taken place at the beginning of the year, total revenue of SoftwareONE would have been TCHF 516,939 and net loss for the period would have been TCHF -60,479.

The purchase price allocation for the business combinations is still provisional as at 30 June 2022.

Purchase considerations and goodwill

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

Cash flows on acquisitions

Reconciliation of carrying amount of goodwill

The change in carrying values for goodwill from 1 January 2022 to 30 June 2022 is set forth below:

Acquisitions in 2021

During the period to 30 June 2022, the group finalized the purchase accounting of the acquisitions made in 2021:

• 29 September 2021: Dino Newco Ltd, UK, a leading certified SAP services partner, with subsidiaries, in particular Centiq Ltd in the UK.
• 23 September 2021: HeleCloud Ltd, UK, a certified and independent Amazon Web Services (AWS) premier consulting partner, with subsidiaries in the Netherlands and Bulgaria.
• 13 September 2021: activities and assets of SE16N Sp zoo and SE16 Consulting Sp zoo, Poland, two leading SAP technology service providers and SAP S/4HANA specialists.
• 14 July 2021: ITST Consultoria em Informática Ltda, Brazil, a specialist for professional and managed SAP services.
• 29 April 2021: 70% in SynchroNet Corp, US, an AWS-focused cloud specialist in digital workplace solutions.
• 1 March 2021: VB Technology Group AG, Switzerland, an SAP specialists for S/4HANA transformations and public cloud migrations, with subsidiaries in Switzerland and India.

There were no changes in the final fair values of acquired assets and liabilities compared to the provisional amounts disclosed in the Annual Report 2021. For more details, refer to Note 3 Changes in the scope of consolidation of the Consolidated Financial Statements 2021.

Sale of subsidiaries in 2022

On 20 May 2022, SoftwareONE LLC, Russia, was sold to a third-party. Sale proceeds consisted of RUB 1,000. In the course of the sale, the recoverability of the group's existing receivables and loans against the company was reassessed and their fair value was estimated to be TCHF 2,021. The repayment is subject to the risk of potential sanctions which might prohibit the transfer of cash.

Upon closing of the sale, the group recognized a loss in an amount of TCHF 29,655, included in the line other operating expenses of the interim condensed consolidated income statement. The composition of the loss on disposal is set forth below:

On 7 April 2022, ISP*D International Software Partners GmbH, Germany,  was sold to a third-party. The sale proceeds consisted of TCHF 619 in cash. The group recognized a loss on disposal of TCHF 27, which is included in the line other operating expenses of the interim condensed consolidated income statement.

Cash flows on sale of subsidiaries

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 2022 and 30 June 2022, nor between 1 January 2021 and 30 June 2021.

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

Financial assets consist of an investment in listed equity instruments. In April 2022, SoftwareONE sold 5% of the shares for cash proceeds of TCHF 68,101. In the period to 30 June 2022 the group recognized a fair value loss of TCHF 57,155 in finance expenses (comparative period: fair value gain of TCHF 420).

The change in carrying values associated with ‘Level 3’ contingent consideration liabilities from 31 December 2021 to 30 June 2022 is set forth below:

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

CompuCom (fair value as at 30 June 2022: TCHF 4,373; comparative period: TCHF 5,212)

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 2022: TCHF 2,477; comparative period: TCHF 3,264)

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. 

Predica (fair value as at 30 June 2022: TCHF 8,750)

The contingent consideration liability of Predica depends on the continued employment of three former shareholders, future net revenue, revenue growth rates and other KPIs over the next three years. The development of these performance KPIs and the contingent consideration is not linear and capped at a maximum of TCHF 8,750.

SoftwareONE generates its revenue from Software & Cloud by arranging software license agreements between software providers and end customers and managing cloud subscriptions for them (point in time), providing Solutions & Services to customers (over time) and generates revenue related to the resale or sale of self-developed on-premise software (point in time, presented in Solutions & Services).

In the Software & Cloud business a distinction is made between two types of software selling arrangements. In the direct business, the group’s obligation is only to arrange for another entity to provide the software license to the end customer and therefore receives an agency commission from the software provider. In the indirect business, the group is party to a contractual relationship between the software provider and the end customer. SoftwareONE provides pre-sales consulting services to end customers, but is not primarily responsible for fulfilling the promise to provide the software or cloud solution. SoftwareONE invoices the end customer and receives the considerations from the end customer. In addition, SoftwareONE is compensated by the software provider to place orders and manage customer purchases on behalf of the end customer. For additional information on revenue recognition policies, refer to Note 2 Summary of significant accounting policies of the group's consolidated financial statements 2021.

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 11 Segment reporting.

Revenue is broken down as follows:

SoftwareONE distinguishes between indirect and direct business when generating revenue from Software & Cloud:

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 2022 was TCHF 51,109 or CHF 0.33 per share (excluding treasury shares; prior year TCHF 46,396, or CHF 0.30 per share). The dividend was paid out of the capital contribution reserve of SoftwareONE Holding AG and thus deducted from share premium in these interim condensed consolidated financial statements.

In the first half of 2022, SoftwareONE granted new awards under the Long-term Incentive Plan (‘LTIP22’). 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’ and ‘LTIP21’) exist.

SoftwareONE recognized total share-based payment expenses of TCHF 7,117 for the six months to 30 June 2022 (comparative period: TCHF 8,860). 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 6,951 for share-based payment (comparative period: TCHF 8,816).

Long-term Incentive Plan

The LTIP22 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 gross profit and 25% on 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 LTIP22 were classified as an equity-settled share-based payment according to IFRS 2. The LTIP22 is valued using a Monte Carlo simulation.

In 2022, 760,282 PSUs were granted at a fair value of CHF 12.89 per share. The term of the PSUs starts on 19 May 2022 (valuation date) and ends on 18 May 2025 (end of the vesting period). 

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 2022: 9 May 2022). The shares vest until the next Annual General Meeting and afterwards are subject to transfer restrictions of three years.

On 13 June 2022, the granted amount of TCHF 580 was converted into 45,025 shares (CHF 12.88 per share).

The group’s retirement plans include funded defined benefit pension plans in Switzerland, Belgium and Germany. The other plans are unfunded.

Based on the independent actuarial valuation for the Swiss plan as at 30 June 2022, the present value of funded obligations decreased by TCHF 11,196 due to an increase in discount rate from 0.3% to 1.8%. As a result, the fair value of the plan asset exceeds the present value of funded obligations at the end of the reporting period. The surplus is subject to an asset ceiling which is recognized in other comprehensive income.

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.

There are no significant changes for the contingent liabilities disclosed in Note 26 Contingencies of the Consolidated Financial Statements 2021.

Related to the sale of SoftwareONE Russia, SoftwareONE is still exposed to the risk of a claim under a parental guarantee issued to a software supplier in the event that former SoftwareONE Russia fails to pay its existing liabilities. As at 30 June 2022, SoftwareONE Russia had an open exposure of RUB 1,2 billion (CHF 23 million). SoftwareONE does not expect any cash outflow at the reporting date.

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 CEO is the Chief Operating Decision Maker (CODM). He 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 the customer’s headquarter domicile since the region is responsible for the global client relationship. 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 'Group' includes the group cost centers and shared services costs. The column 'FX & Consolidation' eliminates the effect of using differing average foreign exchange rates in the segment reporting and consolidation effects. The column 'Other' includes other reconciling items that are not allocated to the segments and group in internal reporting. They consist of one-time costs such as share-based payment plans (with the exception of LTIP and ESPP), earn-outs, integration and M&A expenses, transformance costs (for restructuring), one-time expenses related to Ukraine war and the disposal of the Russian subsidiary and a reclassification of bad debt provisions that are presented in gross profit in internal reporting but in operating expenses in the interim condensed consolidated income statement. Additionally, the column 'Other' includes accounting related adjustments such as differences in accounting policies of IFRS 16 that are not reflected in the segments and, to a limited extent, minor reconciliation items.

For the six months ended 30 June 2022

The most relevant reconciliation items in the column 'Other' were related to one-time costs and accounting related adjustments:

For the six months ended 30 June 2021

The most relevant reconciliation items in the column 'Other' were related to one-time costs and accounting related adjustments:

Additional information for business lines

The regions continue to be the operating segments. However, SoftwareONE internally also reports EBITDA by business lines to the CODM. 

The business line view presents a breakdown of total revenue, directly attributable external and internal delivery costs and indirectly attributable other operating costs such as sales and marketing costs as well as general and admin costs. It discloses gross profit, contribution margin and EBITDA by business line 'Software & Cloud', 'Solutions & Services' and 'Corporate' which includes non-operational group costs.

The column 'FX & Consolidation' eliminates the effect of using differing average foreign exchange rates in the segment reporting and consolidation effects. The column 'Adjustments' includes one-time costs, so-called 'EBITDA adjustments', that enhance the comparability of other operating costs with adjusted EBITDA, refer to section Alternative Performance Measures of this report. In contrast to the segment reporting, all accounting related adjustments are allocated to the business line 'Software & Cloud' and 'Solutions & Services', ie, the application of IFRS 16.

For the six months ended 30 June 2022

For the six months ended 30 June 2021

Additional geographical information

Switzerland, the US, Germany and the Netherlands are the main geographical markets for SoftwareONE and represent approximately 49% (comparative period: 51%) of total revenue. Revenue is reported based on the customers' headquarter domicile:

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