Results review
Key figures - Group
|
CHFm |
H1 2023 |
H1 2022 |
% Δ |
% Δ (CCY) |
Q2 2023 |
Q2 2022 |
% Δ |
% Δ (CCY) |
|
|
|
|
|
|
|
|
|
|
|
Software & Cloud Marketplace |
276.6 |
274.7 |
0.7 % |
5.5 % |
151.0 |
152.8 |
–1.2 % |
4.7 % |
|
Software & Cloud Services 1) |
230.2 |
217.6 |
5.8 % |
12.4 % |
116.4 |
116.2 |
0.1 % |
7.7 % |
|
Total revenue |
506.8 |
492.3 |
2.9 % |
8.5 % |
267.4 |
269.0 |
–0.6 % |
6.0 % |
|
Delivery costs |
–178.2 |
–177.4 |
0.4 % |
6.8 % |
–86.8 |
–90.6 |
–4.2 % |
2.8 % |
|
Contribution margin |
328.6 |
314.9 |
4.4 % |
9.5 % |
180.6 |
178.4 |
1.2 % |
7.6 % |
|
SG&A |
–216.9 |
–197.0 |
10.1 % |
16.2 % |
–108.6 |
–102.6 |
5.8 % |
13.6 % |
|
Adj. EBITDA |
111.7 |
117.9 |
–5.3 % |
–1.7 % |
72.1 |
75.8 |
–5.0 % |
–0.5 % |
|
Adj. EBITDA margin (% revenue) |
22.0 % |
23.9 % |
-1.9pp |
– |
27.0 % |
28.2 % |
-1.2pp |
– |
|
Adj. EPS (diluted) |
0.33 |
0.41 |
–20.5 % |
– |
– |
– |
– |
– |
|
|
|
|
|
|
|
|
|
|
|
IFRS reported |
|
|
|
|
|
|
|
|
|
Net cash from operating activities |
–286.4 |
–292.3 |
–2.0 % |
– |
– |
– |
– |
– |
|
Net debt/(cash) 2) |
71.6 |
5.2 |
– |
– |
– |
– |
– |
– |
|
Net working capital (after factoring) at period-end |
176.8 |
155.9 |
– |
– |
– |
– |
– |
– |
|
|
|
|
|
|
|
|
|
|
|
Headcount (end of period) |
9,257 |
8,890 |
4.1 % |
– |
– |
– |
– |
– |
1) Q2 2022 and H1 2022 revenue for Software & Cloud Services restated as a result of implementation of the IFRS IC agenda decision on IFRS 15, with further contracts identified which should have been accounted for on an agent basis
2) Based on new net debt/(cash) definition equal to bank overdrafts plus other current and non-current financial liabilities less cash and cash equivalents and financial assets (ie. Crayon shareholding)
Group revenue grew 2.9% YoY and 8.5% YoY in reported and constant currency (ccy), respectively, to CHF 506.8 million in H1 2023, compared to CHF 492.3 million in the prior year period.
The strengthening of the CHF versus several major currencies, including the EUR, USD and GBP led to a negative FX translation impact of over five percentage points on revenue.
Solid growth in key markets
By region, EMEA delivered a solid half-year, with revenue up 8.3% YoY ccy to CHF 307.1 million, driven by continued strong purchasing by large enterprises particularly in DACH and good momentum in the core service lines.
NORAM grew revenue by 3.7% YoY ccy to CHF 75.8 million in H1 2023, on the back of more cautious spending by clients. Revenue growth of 9.1% YoY ccy in Q2 was driven by an acceleration in the Microsoft business as customers transitioned to the New Commerce Experience (NCE) model.
APAC sustained strong revenue growth, up 23.4% YoY ccy to CHF 72.3 million in H1 2023, driven by excellent results across the region in both business lines.
Revenue in LATAM decreased by 0.2% YoY ccy to CHF 47.7 million in H1 2023 driven by weak Q2 2023 results in Brazil and Mexico.
Revenue by region
|
CHFm |
H1 2023 |
H1 2022 |
% Δ (CCY) |
Q2 2023 |
Q2 2022 |
% Δ (CCY) |
|
EMEA |
307.1 |
297.4 |
8.3 % |
157.8 |
158.3 |
4.8 % |
|
NORAM |
75.8 |
76.0 |
3.7 % |
43.2 |
42.3 |
9.1 % |
|
LATAM |
47.7 |
52.4 |
–0.2 % |
22.9 |
28.4 |
–9.2 % |
|
APAC |
72.3 |
63.4 |
23.4 % |
41.0 |
36.9 |
23.5 % |
Continued growth momentum across business lines
Software & Cloud Marketplace
Revenue in Software & Cloud Marketplace grew 5.5% YoY ccy to CHF 276.6 million in H1 2023, compared to CHF 274.7 million in the prior year period.
Gross billings in the Microsoft business amounted to USD 10.6 billion in H1 2023, up 12% compared to H1 2022. Revenue growth accelerated in Q2 2023 driven by the shift from legacy CSP to the New Commerce Experience (NCE) model, as a result of price increases and a more favourable incentive structure.
Following a strong performance in Q1 2023, revenue growth in other ISVs slowed in Q2 2023 against a strong comparable in the prior year period.
Contribution margin grew to CHF 238.9 million in H1 2023, with the margin remaining stable at 86.4% of revenue.
Adjusted EBITDA declined by 9.2% YoY ccy to CHF 127.5 million in H1 2023, compared to CHF 146.2 million in the prior year period, driven by increased SG&A and a reallocation of sales specialists from Software & Cloud Services, as part of the operational excellence programme.
Key figures – Software & Cloud Marketplace
|
CHFm |
H1 2023 |
H1 2022 |
% Δ (CCY) |
Q2 2023 |
Q2 2022 |
% Δ (CCY) |
|
Revenue |
276.6 |
274.7 |
5.5 % |
151.0 |
152.8 |
4.7 % |
|
Contribution margin |
238.9 |
237.2 |
5.5 % |
132.3 |
135.3 |
3.7 % |
|
Contribution margin (% of revenue) |
86.4 % |
86.4 % |
– |
87.6 % |
88.6 % |
– |
|
Adj. EBITDA |
127.5 |
146.2 |
–9.2 % |
74.1 |
87.4 |
–10.7 % |
|
EBITDA margin (% of revenue) |
46.1 % |
53.2 % |
– |
49.1 % |
57.2 % |
– |
Software & Cloud Services
Software & Cloud Services delivered revenue growth of 12.4% YoY ccy to CHF 230.2 million in H1 2023, up from CHF 217.6 million in the prior year period, driven by ~20% YoY ccy revenue growth in core service lines Cloud Services, Application Services and SAP Services, partially offset by an acceleration in the phasing out of legacy services.
Focus on cross-selling continued with 71% of LTM (to 30 June 2023) revenue generated by c. 15.6k clients purchasing both software and services, up from 14.8k a year ago.
Revenue in xSimples3) was up 22% YoY ccy in H1 2023, with 8.4 million users in the cloud as at 30 June 2023, up from 7.7 million one year ago.
Contribution margin increased to CHF 89.7 million in H1 2023, driving the margin to 39.0% of revenue, up from 35.7% in the prior year period driven by strong progress in optimising the delivery network.
Adjusted EBITDA was CHF 7.1 million in H1 2023, compared to CHF 2.3 million in the prior year period. The margin improved to 3.1% compared to 1.0% in the prior year period, driven by a strong contribution margin and operating leverage as the business continues to scale.
3) Including AzureSimple, 365 Simple and AWS
Key figures – Software & Cloud Services
|
CHFm |
H1 2023 |
H1 2022 |
% Δ (CCY) |
Q2 2023 |
Q2 2022 |
% Δ (CCY) |
|
Revenue |
230.2 |
217.6 |
12.4 % |
116.4 |
116.2 |
7.7 % |
|
Contribution margin |
89.7 |
77.7 |
21.9 % |
48.3 |
43.1 |
19.7 % |
|
Contribution margin (% of revenue) |
39.0 % |
35.7 % |
– |
41.5 % |
37.1 % |
– |
|
Adj. EBITDA |
7.1 |
2.3 |
217.6 % |
4.8 |
5.9 |
–14.1 % |
|
EBITDA margin (% of revenue) |
3.1 % |
1.0 % |
– |
4.1 % |
5.1 % |
– |
Focus on profitable growth
Adjusted EBITDA for H1 2023 was CHF 111.7 million, decreasing 1.7% YoY ccy, while the adjusted EBITDA margin was down by 1.9pp YoY, reflecting an improved contribution margin offset by a normalisation of marketing and travel costs post-Covid and co-marketing investments in the prior year period.
Adjusted profit for the period was CHF 50.1 million in H1 2023, representing a decrease of (21.6)% YoY in reported currency, compared to CHF 63.9 million in the prior year period.
IFRS reported profit for the period increased to CHF 33.8 million in H1 2023, compared to CHF (63.3) million in the prior year period. The improvement in H1 2023 was primarily driven by lower expenses relating to integration and M&A, as well as the impact from the exit from Russia and the financial loss relating to the company’s shareholding in Crayon, both of which impacted the prior year period.
For a reconciliation of IFRS reported profit to adjusted profit for the year, see Alternative Performance Measures.
Delivering on operational excellence
In early 2023, SoftwareOne began implementation of the operational excellence programme across three pillars – commercial effectiveness, efficient service delivery and right-sized support functions to improve efficiency and accelerate sales growth. Cost savings are expected to reach CHF 15 million in 2023 and CHF 50 million on an annualised basis from 2024 onwards, with up to 50% being re-invested into strategic growth areas.
In the first half of 2023, the company achieved cost savings of CHF 8 million, driven by re-balancing of sales resources and launch of AI-driven cross-selling initiatives, optimisation of the services delivery network and transitioning Finance and HR resources to shared service centres.
The full restructuring charge for 2023 is expected to be approximately CHF 25 million, of which CHF 12.5 million was recognised in H1 2023.
Strong liquidity and solid balance sheet
Net working capital (after factoring) increased by CHF 20.9 million to CHF 176.8 million, compared to CHF 155.9 million in the prior year. Net cash from operating activities was CHF (286.4) million in H1 2023, broadly in line with the prior year period.
Capital expenditure totalled CHF 26.7 million, including investments in the SoftwareOne Client Portal (previously Goatpath / PyraCloud), compared to CHF 22.6 million in the prior year period.
Based on a new, more stringent definition of net debt/(cash)4) to align with best practice, the net debt position was CHF 71.6 million as at 30 June 2023, compared to CHF 5.2 million as at 30 June 2022. According to the old definition, the net debt/(cash) position was CHF (56.5) million and CHF (109.8) million, respectively.
4) Equal to bank overdrafts plus other current and non-current financial liabilities less cash and cash equivalents and financial assets (ie. Crayon shareholding)
Outlook for 2023 and mid-term guidance
Based on its half-year performance, SoftwareOne reiterates its 2023 full-year guidance, assuming no material deterioration in the macroeconomic environment:
- Double-digit revenue growth for the group in constant currency;
- Adjusted EBITDA margin of 24-25% of revenue;
- Dividend pay-out ratio of 30-50% of adjusted profit for the year.
First ESG report published
SoftwareOne today published its first Environmental, Social and Governance (ESG) report, including targets to further reduce the company’s environmental impact, enhance social inclusivity and diversity, and further strengthen its overall governance practices.
The targets include achieving net zero for Scope 1 & 2 emissions by 2030, primarily reducing the carbon footprint that SoftwareOne is responsible for and investing in impact projects for the remaining emissions. In addition, SoftwareOne will help clients reduce their carbon footprint via the company’s Cloud Sustainability practice.
For further details, please see the complete 2022 ESG report available here.
CEO update
Building on progress made with the operational excellence programme, ‘Ignite, Focus, Accelerate’ will sharpen execution of the existing strategy to deliver enhanced performance:
- Ignite: SoftwareOne will leverage its leading market position as a global provider of software & cloud solutions to ignite client and vendor relationships. As a trusted advisor to 65k clients, the company will work together with the ecosystem to capitalise on the opportunity to help customers move to the cloud and embrace Generative AI to drive innovation, while keeping cloud costs under control.
- Focus: SoftwareOne will seek to drive the global roll-out of Copilot, which represents a USD 100 million revenue opportunity to help clients re-imagine employee productivity, and leverage the potential with other ISV partners. In general, sales excellence and execution will be in focus, including the implementation of growth initiatives. Bolt-on M&A will remain a key part of the company’s strategy.
- Accelerate: SoftwareOne will further develop its Generative AI offering and pivot as required to accelerate growth. In addition, the company will execute on its Client Portal roadmap to capitalise on the digital opportunity. Finally, SoftwareOne will build on its people & culture strategy to attract and retain talent.