Results Review

Key figures

In a strong demand environment, revenue at the group level grew 15.4% YoY and 12.8% YoY in constant currency (ccy) and reported currency, respectively, to CHF514.6 million in H1 2022, compared to CHF456.2 million in the prior year period.

Gross profit increased by 16.0% YoY ccy to CHF469.9 million in H1 2022, compared to CHF414.4 million in H1 2021, with growth of 17.2% YoY ccy in Q2 2022.

The negative FX translation impact was due to the strengthening of the CHF versus the EUR, partially offset by some weakness against the USD.

Double-digit growth across regions

All regions reported double-digit gross profit growth in constant currency in H1 2022, supported by the global trend towards digital transformation and the cloud.

EMEA delivered a strong performance with gross profit up 14.2% YoY ccy in H1 2022, while NORAM grew 18.0% YoY ccy on the back of strong results in Microsoft. APAC posted gross profit growth of 17.4% YoY ccy, demonstrating strength across both business lines and particularly in markets such as China, Australia and Singapore. LATAM was up 13.7% YoY ccy driven by strong performances in Brazil and Colombia.

Growth momentum in Q2 2022 carried on after a strong first quarter, with a slight sequential acceleration across all regions.

Continued growth momentum across business lines

Software & Cloud

Revenue and gross profit from Software & Cloud grew 4.7% YoY ccy to CHF274.7 million in H1 2022, compared to CHF267.6 million in the prior year period. While gross profit in Q1 2022 grew 1.1% YoY ccy in the context of a strong comparative quarter due to an exceptional vendor payment in Q1 2021, growth in Q2 2022 was 7.9% YoY ccy on the back of continued strong momentum across the hyperscaler practices and ISV portfolio.

With regards to Microsoft, gross billings amounted to USD9.6 billion in H1 2022, growing in line with the overall Microsoft market. Momentum was positive across all customer segments, although public SMEs showed lower growth in Q2 2022. Microsoft Cloud billings demonstrated double-digit growth, comprising 77% of total Microsoft volume in H1 2022, compared to 73% for FY2021.

Adjusted EBITDA for Software & Cloud grew 4.0% YoY ccy to CHF145.0 million in H1 2022, compared to CHF141.2 million in the prior year period. The adjusted EBITDA margin in H1 2022 was 52.8%, broadly stable compared to last year.

Key figures – Software & Cloud

Solutions & Services

Solutions & Services achieved revenue growth of 30.7% YoY ccy to CHF240.0 million in H1 2022, up from CHF188.5 million in the prior year period. Given a limited increase in third-party delivery costs, gross profit grew 36.5% YoY ccy to CHF195.2 million in H1 2022, up from CHF146.7 million during the prior year period. Momentum in Q2 2022 remained broadly in line with Q1 2022, with growth of 34.1% YoY ccy.

Focus on cross-selling to support complete customer journeys continued with 73% of LTM (to 30 June 2022) gross profit generated by c. 16.4k customers purchasing both software and services, up from 67% a year ago.

Key growth drivers continued to be XSimples – standardized managed solutions for SMEs – and Cloud Services (Azure), as well as the acquisition of Predica. Gross profit in XSimples was up >70% YoY in H1 2022. By 30 June 2022, SoftwareONE supported 7.7 million users 24/7 in 13 languages in the cloud, up from 6.9 million as at 31 December 2021.

Adjusted EBITDA for Solutions & Services was CHF3.4 million in H1 2022, compared to CHF(6.7) million in the prior year period, driven by operating leverage as the business continued to scale rapidly.

Key figures – Solutions & Services

Focus on operational excellence to drive profitable growth

Adjusted total operating expenses in H1 2022 were CHF352.0 million, increasing 18.4% YoY ccy compared to the prior year period. The higher personnel costs were a result of investments in sales & marketing and delivery capabilities to drive growth, particularly in Solutions & Services. The increase in adjusted total operating expenses in Q2 2022 compared to Q1 2022 was limited.

Adjusted EBITDA for H1 2022 was CHF117.9 million, increasing 9.3% YoY ccy compared to CHF109.1 million in the prior year period. The adjusted EBITDA margin was 25.1%, remaining sequentially flat compared to H2 2021 driven by a focus on cost control and completion of ‘Transformance’.

Adjusted profit for the period was CHF63.9 million in H1 2022, representing an increase of 17.6% YoY in reported currency, compared to CHF54.3 million in the prior year period.

IFRS reported profit for the period decreased to CHF(60.4) million in H1 2022, compared to CHF38.3 million in the prior year period, 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 realized due to sell-down in April 2022), as well as the impact of M&A and integration-related expenses and ‘Transformance’.

Strong liquidity and unlevered balance sheet

Net working capital increased in H1 2022, translating into a CHF366.5 million reduction in net cash generated from operating activities. This development was due to timing of vendor payments in H1 2022. Importantly, vendor payment terms and customer collection terms remain unchanged.

Capital expenditure totaled CHF22.6 million, mainly relating to investments in Goatpath/ PyraCloud, compared to CHF14.3 million in the prior year period.

Proceeds from the sale of financial assets, reflecting the sell-down of 4.4 million shares in Crayon in April 2022, were CHF68.1 million. Cash outflow relating to acquisitions of businesses amounted to CHF76.9 million.

Net cash position was CHF109.8 million as at 30 June 2022 compared to CHF385.5 million one year earlier and CHF547.4 million as of 31 December 2021.

Divestment of Russian operations

After suspending a significant part of its business operations in Russia in March, SoftwareONE subsequently divested the business and transitioned its employees to a new owner.

As a consequence, SoftwareONE recorded a mainly non-cash loss in the amount of CHF35.8 million during Q2 2022 due to the deconsolidation of the Russian business and impairment of assets.

Outlook

SoftwareONE continues to expect a strong market environment and demand growth in the second half of the year.

Based on its H1 2022 performance, SoftwareONE reiterates its full-year guidance for 2022, assuming no material deterioration in the macroeconomic environment.

• ‘Mid-teens’ gross profit growth for the group in ccy;
• Adjusted EBITDA margin above 25%;
• Dividend pay-out ratio of 30-50% of adjusted profit for the year.

Reporting changes from 2023 onwards

As announced on 19 May 2022, SoftwareONE will implement certain accounting-related changes from 2023 onwards to more accurately reflect the performance by business line.

In that context, SoftwareONE re-assessed the classification of cost of goods sold (COGS) and operating expenses, primarily in the Solutions & Services business line. With the implementation of the changes, COGS will reflect all direct (internal and external) costs of delivery. Furthermore, a new Alternative Performance Measure called Contribution margin will be introduced, reflecting revenue less COGS. There will be no impact at the revenue and EBITDA levels.

Following the implementation of IFRS IC’s tentative decision on revenue recognition in 2021, SoftwareONE will also base certain KPIs, including growth and margin, on revenue rather than gross profit, in line with market practice. As a consequence, FY2023 and mid-term guidance will be re-stated accordingly.