SoftwareOne Holding AG (‘the company’) and its subsidiaries (together ‘the group’ or ‘SoftwareOne’) is a leading software and cloud service provider. It develops and delivers the technology solutions that modernise applications and software in the cloud, while enabling those purchases and optimising those investments over time.

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

These interim condensed consolidated financial statements for the six months ended 30 June 2023 were authorised for issue by the Board of Directors on 23 August 2023.

Basis of presentation

The interim condensed consolidated financial statements for the six months ended 30 June 2023 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 of 31 December 2022 approved by the Board of Directors on 30 March 2023.

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 of and for the year ended 31 December 2022 except for changes effective from 1 January 2023 and the change in presentation of revenue disclosed further below.

As of 1 January 2023, the following amendments to the International Financial Reporting Standards (IFRS) entered into force:

• IAS 1: Presentation of Financial Statements: Disclosure of Accounting Policies
• IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates
• IAS 12: Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction
• IAS 12: Income Taxes: International Tax Reform — Pillar Two Model Rules

With regard to the implementation of the Pillar Two Model Rules, SoftwareOne has applied the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes. All other mentioned 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 and correction of errors

The comparative information for the six months ended 30 June 2022 presented in these interim condensed consolidated financial statements has been amended to reflect the changes in accounting policies related to the agenda decision of the IFRS Interpretations Committee (IFRS IC) on ‘Principal versus Agent: Software Reseller (IFRS 15)’ as disclosed in the Annual Report 2022 under the heading ‘Change in accounting policies’.

In the second half of 2022, SoftwareOne identified an impact on the accounting for multi-year licensing contracts with annual billing of the corresponding fee in which the end customer has the right to change the software reseller during the contract term and recognises revenue upfront for the entire term when the contract is signed. For the comparative period of six months ending 30 June 2022, the adjustment resulted in a reduction in revenue from Software & Cloud Marketplace of TCHF 4,076, in personnel expenses of TCHF 187 and in income tax expenses of TCHF 1,011. This results in a total effect of TCHF –3,889 on earnings before income tax and an effect of TCHF –2,878 on loss for the period, refer to the table below. Basic earnings per share and diluted earnings per share decreased by CHF 0.02. The comparative figures in the interim condensed consolidated statement of cash flows were adjusted for profit/(loss) for the period of TCHF –2,878, income tax expense of TCHF –1,011, change in other receivables, prepayments and contract assets of TCHF 4,076 and change in accrued expenses and contract liabilities of TCHF –187. In addition, SoftwareOne also concluded that it acts as an agent for external tooling costs, i.e., on-premise software used for software asset management solutions. For the comparative period of six months ending 30 June 2022, the adjustment resulted in a reduction of revenue from Software & Cloud Services of TCHF 11,232 and a reduction of third-party service delivery costs of TCHF 11,232.

In the first half of 2023, SoftwareOne identified a further type of service contracts in Software & Cloud Services which should have been accounted for as agent on a net basis. For the comparative period of six months ending 30 June 2022, the correction of this error resulted in a reduction of revenue from Software & Cloud Services of TCHF 11,102 and a reduction of third-party service delivery costs of TCHF 11,102. For the entire year 2022, the correction of this error leads to a reduction in revenue from Software & Cloud Services of TCHF 23,735 and to a reduction in third-party service delivery costs of TCHF 23,735.

The result of the change in accounting policies and the correction of error within the interim condensed consolidated income statement for the comparative period of six months ending 30 June 2022 is shown in the following table:

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 2023

On 25 May 2023, SoftwareOne acquired the remaining 80% of AppScore Technology Ltd, UK, following its initial investment of 20% in 2021. The consideration of the 80% ownership interests was paid to an amount of TCHF 2,238 in cash. The carrying amount of previously held interest in an associated company amounted to TCHF 1,004 immediately before the acquisition date. The fair value remeasurement of previously held equity interest resulted in a fair value loss of TCHF 445. Thus, the total purchase consideration amounted to TCHF 2,797.

As a part of the purchase price agreement, a contingent consideration arrangement was agreed that could result in additional cash payments to the previous shareholders. The earn-out amount in the maximum of TCHF 3,480 is related to a continuing employment of the selling shareholders and is recognised as a personnel expense over the service period of four years and thus not part of the purchase price. The calculation depends on the retention of three key employees, which is reduced proportionately in the event of termination, and to a partial amount of TCHF 2,020 additionally on active users of the acquired software and revenue growth.

No significant goodwill resulted from the purchase price allocation. The purchase price allocation is still provisional as at 30 June 2023.

For the six months ended 30 June 2023, payments of contingent considerations of TCHF 3,836 were made for acquisitions of prior periods.

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 analysed 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 2023 and 30 June 2023, nor between 1 January 2022 and 30 June 2022.

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

Financial assets consist of an investment in listed equity instruments. For a part of these listed equity instruments, the group entered into a total return swap agreement in 2022, in which it sold shares but remains exposed to the price risk related to these shares. Therefore, refer to section 4.1 Financial risk factors in the Annual Report 2022. In the period to 30 June 2023, the group recognised a fair value gain of TCHF 1,644 in finance income (comparative period: fair value loss of TCHF 57,155).

The change in carrying values associated with ‘Level 3’ contingent consideration liabilities from 31 December 2022 to 30 June 2023 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 of 30 June 2023: TCHF 2,721; 31 December 2022: TCHF 3,438)

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 of 30 June 2023: TCHF 1,028; 31 December 2022: TCHF 2,065)

The contingent consideration liability of Intelligence Partner depends on the future EBITDA over this year and an additional catch-up year if necessary. An amount of TCHF 1,128 was paid in 2023. The development of the future EBITDAs and the contingent consideration is not linear and capped for the remaining amount at a maximum of TEUR 1,050.

Predica (fair value as of 30 June 2023: TCHF 4,742; 31 December 2022: TCHF 8,750)

The contingent consideration liability of Predica depends on certain KPIs of the years 2023 to 2024 and the retention of three key employees. An early termination of one key employee resulted in a fair value gain of TCHF 1,300 for the six months ended 30 June 2023. An amount of TCHF 2,708 was paid in 2023. The remaining contingent consideration is capped at a maximum of TCHF 4,742. A partial amount of TCHF 3,338 is exclusively related to the retention of the two key employees. The calculation for the performance years 2023 and 2024 is primarily based on chargeability of delivery resources and new customers and amounts to a maximum of TCHF 1,404.

SoftwareOne generates its revenue from Software & Cloud Marketplace by arranging software license agreements between software providers and end customers and managing cloud subscriptions for them (point in time). Revenue from Software & Cloud Services is generated by providing services to customers (over time), the sale of on-premise software only used to provide software asset management solutions and the resale or sale of self-developed on-premise software (point in time).

In the Software & Cloud Marketplace 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. SoftwareOne acts as an agent in both types of software selling arrangements and, hence, recognises revenue in the net amount, i.e. the agency fee or the difference between the consideration received from the end customer and cost of software purchased.

For management purposes, SoftwareOne is organised 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 Marketplace:

In May 2023, SoftwareOne had introduced a share buyback programme. The programme has a volume of up to CHF 70 million, started on 22 May 2023, and shall be concluded by May 2026, at the latest. The shares are repurchased for the purpose of a capital reduction, subject to approval by future Annual General Shareholders’ Meetings.

As of 30 June 2023, SoftwareOne Holding AG had acquired 229,877 company shares for a purchase price of TCHF 3,449.

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 2023 was TCHF 54,315 or CHF 0.35 per share (excluding treasury shares; prior year TCHF 51,109, or CHF 0.33 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 2023, SoftwareOne granted new awards under the Long-term Incentive Plan (‘LTIP23’). In addition, arrangements that were launched in previous years, the Employee Share Purchase Plan and the Long-term Incentive Plan (‘LTIP21’ and ‘LTIP22’) still exist.

SoftwareOne recognised total share-based payment expenses of TCHF 4,334 for the six months ended 30 June 2023 (comparative period: TCHF 7,117). The following table discloses how the expenses are allocated to the existing share-based payment arrangements:

SoftwareOne has recognised an increase in equity in the balance sheet of TCHF 4,271 for share-based payment (comparative period: TCHF 6,951). The difference in share-based payments recorded in the interim condensed consolidated income statement compared to the related expenses recognised in equity is due to foreign exchange gains of TCHF 63 (comparative period: TCHF 166).

Long-term Incentive Plan

The LTIP23 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 securitises a right to receive shares depending on the development of the underlying vesting factor. The vesting factor depends 40% on revenue growth, 40% EBITDA margin and 20% on relative total shareholder return (rTSR). In all variables, the target factor is 1.00, while the minimum factor is 0.0 and the maximum factor is 2.0. The revenue growth vesting factor depends on SoftwareOne’s average revenue growth over three years. The EBITDA margin vesting factor depends on SoftwareOne’s average EBITDA margin over three years. Both are 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 LTIP23 were classified as an equity-settled share-based payment according to IFRS 2. The LTIP23 is valued using a Monte Carlo simulation.

In 2023, 1,176,844 PSUs were granted at a fair value of CHF 11.41 per share. The term of the PSUs starts on 17 May 2023 (valuation date) and ends on 16 May 2026 (end of the vesting period).

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 2022.

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

• EMEA (Europe, including Mauritius and South Africa)
• NORAM (USA, Canada)
• LATAM (Latin America)
• APAC (Asia Pacific, including Dubai and Qatar)

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. Contribution margin 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 centres 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 costs affecting comparability in operating expenses such as earn-outs, integration and M&A expenses, restructuring expenses for the operational excellence programme and an adjustment for the upfront recognition of multi-year licensing contracts in which the end customer has the right to change the software reseller during the contract term. Additionally, the column 'Other' includes an adjustment for differences in accounting policies of IFRS 16 that are not reflected in the segments, an allocation of internal delivery costs to transition from the internal to the external reporting structure and, to a limited extent, minor reconciliation items.

In the first half of 2023, the group made a change in presentation for bad debts provisions to align the internal and external reporting structure. In prior year, bad debt provisions were presented in gross profit in internal reporting but in operating expenses in the interim condensed consolidated income statement. The comparative period was restated.

For the six months ended 30 June 2023

The most relevant reconciliation items in the column 'Other' break down as follows:

For the six months ended 30 June 2022

The most relevant reconciliation items in the column 'Other' break down as follows:

Additional information for business lines

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 contribution margin and EBITDA by business line 'Software & Cloud Marketplace', 'Software & Cloud Services' and 'Corporate' which includes non-operational group costs.

The column 'Adjustments' includes costs affecting comparability in operating expenses and are therefore adjusted in internal reporting and an adjustment for the upfront recognition of multi-year licensing contracts in which the end customer has the right to change the software reseller during the contract term. In contrast to the segment reporting, the IFRS 16 adjustment and minor reconciliation items are allocated to the business lines 'Software & Cloud Marketplace' and 'Software & Cloud Services'.

For the six months ended 30 June 2023

For the six months ended 30 June 2022

Additional geographical information

Switzerland, the US, Germany and the Netherlands are the main geographical markets for SoftwareOne and represent approximately 49% (comparative period: 50%) of total revenue. Revenue is reported based on the customer's headquarter domicile:

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

From the balance sheet date until the interim condensed consolidated financial statements were approved by the Board of Directors on 23 August 2023, the following significant events occurred:

Acquisitions

On 5 July 2023, SoftwareOne acquired 100% of Beniva Consulting Group Inc, Canada, and 100% of Beniva International Ltd, US (together ‘Beniva’). Beniva is a leading provider in ServiceNow, Configuration Management Database, IT and Operations Management, Cloud Advisory and Application Services. The acquisition adds deep process automation and service management specialisation to SoftwareOne’s existing market-leading IT Asset Management services. An amount of TCHF 18,082 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 Beniva.

No disclosures are made in accordance with IFRS 3 due to the recent acquisition dates, as no purchase accounting information was available at the time of publication of this report.