Q1 2025 SoftwareOne Holding AG Trading Update
Yes.
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Okay.
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Let me now take a look at the financial profile of the combined business based on 2020 full results.
These numbers are indicating and exclude the synergy potential.
Together, we generated $16 1 billion Swiss francs and billing.
Selecting our combined scale.
Revenue plus one 6 billion this growth in constant currency of nearly 5% adjust.
Adjusted EBITDA totaled 317 million Swiss francs, implying healthy margin of around 20%.
Driven by significant revenue and cost synergies, we see strong potential for accelerated growth together with improved profitability.
Our expanded geographic reach and capabilities will allow us to serve a broader customer base.
Our enhanced services I'll frame support cross and Upselling.
<unk> tier two platform can be further leveraged.
As a reminder, if identified 80 to 100 million Swiss francs in cost synergies.
Incremental to our implemented cost reduction program.
By achieving scale in many local operations and integrating premises and functions.
Do you expect to realize 30% of cost synergies within six months post closing and the remainder is in 18 months. These one off costs matching the run rate synergies.
We will of course be reporting on progress against these targets in the coming quarters.
Okay.
These expected closing only weeks away.
Our teams have made excellent progress on integration planning to ensure day one readiness.
Our integration ambition is clear to us.
Drive growth from day, one by delivering a superior customer and partner experience.
By building a unified high performing organization.
And as mentioned we are committed to capturing full run rate synergies by the end of 2026.
To get their key decisions and frameworks are currently being addressed such as post closing closing governance.
Detailed integration roadmap and synergy targets at the functional level.
We look forward to keeping you informed of key milestones.
Yeah.
Let's now look at software run Standalone performance in the first quarter.
Revenue declined by five 7% in Q1, while adjusted EBITDA grew two 3%, reflecting a margin improvement of one four percentage points to eight to 19, 8%.
Thanks to the impact of our cost reduction program, which is becoming clearly visible.
Also we had anticipated the revenue decline for the quarter growth at the group level slightly below expectations.
This was due to be current and anticipated results in North America, while all other regions are on track.
Underwent significant change as part of the <unk> transformation.
Macroeconomic uncertainty also became effective in March leading to delayed decision making by customer.
In addition, large transactions in the prior year distort year on year growth.
Further action has been taken interim and with another quarter of hard work and focus.
Im confident we can drive the turnaround the.
<unk> therapy to reach even that implementation initially failed.
In Mexico. For example, we have now delivered two quarters of double digit growth. The UK has stabilized the strong services led growth.
We are also navigating vendor incentive changes this year as flagged back in October two.
Two thirds of our total negative exposure on Microsoft Enterprise agreements falls in a truck.
Our managing these changes effectively true CSP transition initiatives and focus on pre and post sales related funding programs.
We'll have an accelerated growth in the second half of 2025.
Despite these changes fundamentals in our industry remain strong which is evident from 10% growth at the building level in our Microsoft business in Q1.
Customers continue to prioritize investments in software and cloud and increasingly in data and AI and our value added services relevant to these customers.
Looking ahead.
<unk> growth in Q2 is expected to remain negative.
Similar level to Q1 2025 due to the Microsoft incentive changes the 18 particular onshore.
For the second half of the year.
Expect a turnaround interim and Stu.
Strong positive momentum across the group driven by lower impact from the Microsoft incentive changes in H, two an acceleration and services led offerings such as CSP.
It's from the TTM transformation coming through as well as a more favorable compared our comparable periods.
The significantly improved top line performance in April gives us additional confidence in a strong recovery in H two.
In terms of profitability, we have now fixed our cost base. So I'm very confident in reaching our adjusted EBITDA margin target of 24% to 26%.
Moving on to the regional performance.
Overall, we are on track in the regions with the exception of North America. The F&B, New leadership in Das and rest of EMEA and highly experienced successor in APAC, who have my full confidence in leading our teams on the ground.
APAC delivered revenue growth of 16% with strong results across the region.
Excellent growth in services over 50% year on year, as we expand our AWS practice and drive growth in application services.
Revenue declined 4% driven by the Microsoft transactional business.
Our largest exposure on EAA incentives is in.
So this loss expected.
The rest of EMEA was down 1%.
Clear improvement compared to Q4, which was down over 6%.
Based on current pipeline and backlog I'm very confident in a return to growth, possibly already in Q2.
Disappointingly neuron bus down 31% driven by persistent TTM relate to say this execution issues impacting both business lines.
Revenue in Latam decreased by nearly 3% is Colombia down for one final quarter due to the lost public sector contract mix.
In Mexico performance valid <unk> Central America, and the Caribbean.
Now turning to our business lines.
Software and cloud marketplace revenue declined 11% driven by the Microsoft transactional business.
Chris: Chris of gross billings grew 10%. So we continue to see momentum at that level by the revenue declined due to the incentive changes.
Chris: This impact was anticipated and we have mitigated the initiatives in place.
Chris: Yes accelerated efforts to transition customers to CSP.
Chris: Collaborating with Microsoft who has also announced more options around subscription terms for customers.
Chris: We are also focusing on Microsoft funded pre and post sales activities.
Chris: Revenue more than doubling quarter to quarter.
Chris: Will increasingly help to compensate for a sizable part of the EAA attentive impacting H.
Chris: In the meantime services was flat.
Chris: Mainly nora and large deals in prior year weighing on growth.
Chris: Excluding Lorem survey.
Chris: Services revenue growth over 6%.
Chris: Going into Q2, I am confident in seeing our services business returning to solid growth.
Chris: Okay.
Chris: Driving a turnaround interim is critical and we have taken further action in April and May to ensure the region is back on track for each to.
Chris: Specifically <unk>.
Alibaba Birch: We have deployed our president of software and cloud Alibaba Birch told to the region for the risk for the rest of Q2.
Alibaba Birch: Yeah, three hired key sales people in the ultra ISP space and built dedicated Tiger teams for priority sales motions.
Alibaba Birch: CSP.
Alibaba Birch: Other Isps and asset management.
Alibaba Birch: We also have global and local subject matter experts coaching and enabling new joiners to ensure they ramp up quickly.
Alibaba Birch: As our normal business matched with crayons. We also look forward to benefiting from further scale talent and services capabilities.
Speaker Change: Keven topline headwinds the cost reduction program that we initiated with nice CEO announcement in November last year has proved critical.
Speaker Change: By end of Q1, we had achieved 88 million space francs annual savings against an original targets of over $50 million by removing unnecessary management layers and unproductive costs.
Speaker Change: This meant we were able to increase profitability for the quarter and reestablish sustainable cost structure going forward.
Speaker Change: The program is now completed as cost control remains a high priority for me.
Speaker Change: We are also now in a strong starting position for the integration of his curriculum is an additional 80 to 100 million Swiss francs of synergies.
Speaker Change: Lastly on the next two slides I would like to highlight two key growth opportunities.
Speaker Change: Each sector, and AI, and how we leverage our capabilities and hyperscale relationships to drive digital transformation and business outcomes for our customers.
Speaker Change: This quarter, we secured a $1 5 billion Danish kroner cloud consumption spend framework agreements over four years, Mr. Danesh government go.
Speaker Change: Going forward, we will be supporting them with all cloud related projects across the Hyperscale, which also creates services relates to opportunities to drive.
Speaker Change: Grow that cloud consumption.
Speaker Change: Another customer called oxygen finance specializes in public sector insights. They are a great example of how we help clients harnessed the power of AI to better serve customers and drive efficiencies.
Speaker Change: Faced with the challenge of manually reviewing thousands of public sector Records every months.
Speaker Change: Collaborations with Microsoft and oxygen silence to develop an AI powered solution that would streamline data extraction and analyses.
Speaker Change: Implementing it and then and advanced that crawler that extracts relevance data from public sector sources, and using Microsoft Azure and open not yet opened.
Speaker Change: Automatically categorizes and summarizes the information.
Speaker Change: This solution significantly reduced progressing processing time by the state of coverage and that currency improved.
Speaker Change: I would now like to hand over to Rodolfo to take us through the Q1 financial.
Speaker Change: As this will be <unk> first lost time presenting results for us I would like to thank him for his contribution over the last few years.
Speaker Change: At the same time I would like to welcome Hans Peter <unk>, who will be joining our software runs group Chief Financial Officer as of first June.
Speaker Change: These more than 20 years of international Senior financial leadership experience. We are pleased to have him joining us at this pivotal time.
Speaker Change: You will have the opportunity to meet him soon.
Speaker Change: For those so thanks again and please go ahead.
Rafael: Thank you Rafael.
Speaker Change: I'd like to start by extending a warm welcome to everyone joining us today.
Speaker Change: Let me provide an overview of our financial performance at the crude glib.
Speaker Change: Revenue declined by five 7% year on year on a constant currency basis.
Speaker Change: All regions saw a track with the exception of northern which delivered weaker than expected resold Chief March.
Speaker Change: This region continues to struggle with go to market related execution issues.
Speaker Change: Sensor baited by macroeconomic uncertainty towards the end of the court.
Speaker Change: Importantly, we were able to offset these declines which significant cost reductions initiated in Q4 last year.
Speaker Change: Our contribution margin slightly declined by eight percentage points due to mix.
Speaker Change: Adjusted EBITDA margin was 19, 8% for the quarter.
Speaker Change: And improvement of one four percentage points compared to the same period last year.
Speaker Change: I will go into further detail on the EBITA building blocks authentic style.
Speaker Change: This slide provides a detailed view of the year on year changes in adjusted EBITA marketplace delivery cost improved significantly compared to prior year. Thanks to continued process optimization services delivery cost remained flat.
Speaker Change: The significant reduction in sales marketing and administrative expenses again reflects the success of our cost reduction program.
Speaker Change: Moving on to the business line.
Speaker Change: The marketplace revenue declined by 11, 3%.
Speaker Change: Revenue growth in other Isps was flat, while Microsoft revenue phase driven by the anticipated vendor incentive changes.
Speaker Change: Increased efficiency in our <unk> operations contributed to an improvement in contribution margin, reaching 86, 5% for two point.
Speaker Change: Up by <unk> four percentage points.
Speaker Change: The adjusted EBITDA margin for the quarter was 48, 3% up two two percentage points from the prior year, reflecting the SG&A reductions.
In services Q1 growth was impacted by GPM relate to the execution issues ignore them in certain large transactions in quarter, one last year.
Speaker Change: Delivery costs decreased slightly with the contribution margin increasing by six percentage points.
Speaker Change: G&A decreased by seven point to driving that improvement in the adjusted EBITDA margin by over three percentage points to six nine.
Speaker Change: Perfect.
Rafael: I'll now hand back to Rafael for our full year outlook.
Rafael: Thank you Rodolfo.
Rafael: We confirm our 2025 outlook on a standalone basis, which is based on a recovery in neuro.
Rafael: Revenue growth will continue to be negative in Q2 at a similar level to Q1 this year.
Rafael: We then expect a strong positive momentum in H b.
Rafael: It's only one third of the total impact from the Microsoft incentive changes hitting us in this period.
Rafael: That's very important in terms of explaining the growth dynamics between the two halves.
Rafael: This outlook is also driven by an acceleration and services led offerings such as CSP.
Rafael: Benefits of the TTM transformation and the more favorable comparable periods.
Rafael: Our improved performance in April gives us further confidence in the underlying momentum of the business and recovery in <unk>.
Rafael: At the same time, we are very confident in achieving our margin guidance of 24% to 26% based on our already achieved cost savings and continued strict cost control.
Rafael: Along these adjustments below $30 million the confirm our target to more than double reported EBITDA in 2025 on a standalone basis.
Rafael: Finally as mentioned previously we will provide guidance for the combined company following completion of the transaction.
Rafael: With this I'll now hand back to the operator for the Q&A session.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: One who wishes to ask a question May press star and one on your telephone.
Speaker Change: You will hear a tone to confirm that you have entered the queue.
Speaker Change: If you wish to and we will go from the question queue, you May Press Star two.
Speaker Change: Questions on the phone I requested disease able the loudspeaker mode and eventually turn up the volume of the webcast when asking a question.
Speaker Change: Anyone who has a question with star and one at this time.
Jackie: The first question is from MS. Jackie <unk> Deutsche Bank. Please go ahead.
Jackie: Hi, Good morning, Thanks for taking my question a couple on my point on my side.
Jackie: Can you. Please elaborate on the decline in North America is it mainly due to contract loss or churn.
Jackie: Are there reasons here and.
Jackie: The measures taken to regain some market share.
Jackie: Are these to retain existing customer or regain the market share can you tell us like what are the measures exactly you are hoping for to achieve here and then what is the overall exposure to public sector globally, especially in the in Europe.
Jackie: And I was wondering also if you have taken any action.
Jackie: Specifically in <unk> and <unk>.
Jackie: At that time to restore growth. Thank you.
Jackie: Thank you and our Saudi for the question.
Jackie: Quickly when he put on the public sector.
Jackie: Creation, so our public sector exposure or on.
Jackie: The total revenue is around 15% on the total revenue is public sector is just for your information.
Jackie: In terms of North America and to decline.
Jackie: Bi has this happened you have already mentioned.
Jackie: And some of the reasons.
Jackie: On one side, we have to be implemented that.
Jackie: TTM from Q2 into Q3 last year in a very or Australia, 90, 90% of customer accounts switched hence.
Jackie: And then I would say the Australia chocolate.
Jackie: Mm tool to recover as fast as the initially wanted on on that what we see though is on building levels that the Microsoft billing levels. As an example are still growing not double digit, but theyre growing single digit you see a slight decline on.
Jackie: The multi vendor billing levels, so for other Isps and for sure we need to make sure.
Jackie: That's the focus on our altice, although <unk> business. Therefore, we also have put measures in place.
Jackie: I mentioned before we have a free high art some of our alumnae spec into the business. It's a handful of people who have very specialized experience on ultra ISC and.
Jackie: They are now already in place and fully focused on it.
Jackie: Hello team, and and and and and improving the situation on the on the Ador ISP.
Jackie: Hum.
Jackie: Another topic, which is important to emphasize on this.
Jackie: Remember that last year in Q1 in North America, you had about 26% growth. So we had quite a big growth last year in Q1, and there are some significant one timers and tend to be large deals.
Jackie: Beach, which is affecting now on the on the growth basically.
Jackie: In this quarter. These are some of the reasons in indoor them.
Jackie: In Dos and Latina America, we are basically on track with our performance is in line with our expectations.
Jackie: Has the largest exposure on Microsoft enterprise agreements, hence they are impacted from the incentive changes.
Jackie: And that's why you see a negative 4% as a reminder, in Q4 I think they had negative 6%. So the trajectory is improving if we look into our other ISP business and thus it's crawling around 20%. So we see nice growth there and.
Jackie: So I would say the underlying business the buildings. The momentum is there and therefore, we are in line with expectations, there and lot Tom is an auto quarter impacted by this.
Jackie: A large public sector deals in Colombia, but overall going into <unk>.
Jackie: Very positive to see solid growth numbers in Latam again.
Speaker Change: Thank you my question just a follow up on North America. So is there any contract loss that you report to us or it's just purely on what was it that the suites at the accounts and you are managers.
Speaker Change: Yeah, especially on the other I S V side for sure we have some some deals which we lost.
Speaker Change: Which we couldnt repeat.
Speaker Change: For sure. We also see some customer churn and that's that's the impact we also win some new customers that you would use.
Speaker Change: At the moment for sure.
Speaker Change: Behalf.
Speaker Change: <unk> lost some some business as well in North America.
Speaker Change: Understood. Thank you.
Speaker Change: Yeah.
Speaker Change: The next question is from Baader.
Speaker Change: <unk> Bank. Please go ahead.
Speaker Change: Yes.
Speaker Change: Good morning, and thank you for taking my questions also trying to get back on North America, roughly can you give us some color.
Speaker Change: Here did.
Speaker Change: Do you see already first impact from the Rehiring did you see some stabilization, particularly in terms of churn and.
Speaker Change: Also on the Microsoft incentive headwind can you give us some numbers to the to the headwind.
Speaker Change: And a final question on formal dogs from first to start with them all the best Rodolfo going forward.
Speaker Change: And I'm looking at cash collection.
Speaker Change: That you are not disclosing cash collection and conversion for the quarter, but can you give us some insights whether that the patterns of cash collection changed.
Speaker Change: Meaningful and in Q1 compared to prior years. Thank you.
Speaker Change: Thank you very much for the questions.
Speaker Change: Our Lora again.
Speaker Change: What makes us positive is that the services related to the pipeline is growing.
Speaker Change: We are actually very confident they are also going into the second half of the year that we're going to see the fruits.
Speaker Change: And that we can come back into growth territory in the second half of the year.
Speaker Change: And again I think what's important to understand also is that if you look into the Q1 last year you had some large one time. They also have an exposure on that in Q2.
Speaker Change: Also related to vendor incentives and therefore, you see them.
Speaker Change: Recovery in Q2.
Speaker Change: Is difficult, but we are positive that we can turnaround things going into it.
Speaker Change: Second half of the year.
Speaker Change: On Microsoft on the incentives on enterprise agreement. So I think what's very important to emphasize again is that two thirds of the impact is in the first half of the year one search only in the second half so that should help us <unk>.
Speaker Change: Currently two <unk>.
Speaker Change: Life, better results and come back into growth territory.
Speaker Change: In the second half after a year.
Speaker Change: Or are there also and over to you, yes, thanks, and thanks for your kind words.
Speaker Change: On the cash collection, we see a positive development on the networking capital Ah, let's say compared to the prior year each at similar levels and then compare to the developments in the second half of 'twenty 'twenty, four which an improvement important to mentioned we have a an initiative across the <unk>.
Speaker Change: Current regions due to accelerated collections.
Speaker Change: <unk>, a clear priority for us and so I'm also quite confident that when we report second.
Speaker Change: Second quarter.
Speaker Change: You would see a positive evolution on the networking capital.
Speaker Change: Thank you.
Christian Baader: The next question from Christian Baader <unk>. Please go ahead.
Speaker Change: Hi, Yes, good morning, gentlemen.
Speaker Change:
Speaker Change: Three questions for me please.
Speaker Change: One after the other and I'd like to start with something positive and I wanted to ask you could you maybe talk a little bit more about the strong development in Asia in the first quarter.
Speaker Change: First quarter and whether you see this.
Speaker Change: To continue for the rest of the year My first question.
Speaker Change: Thank you Chris Jim.
Speaker Change: I would say in APAC, we have just continued to trend basically we had it's similar growth rate to previous quarters.
Speaker Change: We are very happy as I mentioned, especially on the services side.
Speaker Change: The improved a lot this 50% growth for sure.
Speaker Change: I'm looking forward I think you're also seeing the are also affected in APAC like in every other market by the Microsoft Yea incentive changes. So this affects us from Ken asked a little bit of an impact also in the in the following quarters on the overall growth rate.
Speaker Change: But we are very confident that we continue to see.
Speaker Change: So I'll need to positive growth in that region for the reminder, I'll sneak in.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: My next question is on these enterprise agreements.
Speaker Change: Can you tell us whether you do expect.
Speaker Change: Another headwind for your results next year.
Speaker Change: No we actually expect these to bottom out by the end of 2025, you've mentioned that.
Speaker Change: A few tie yourself, an idea and I think that's very important the EAA incentives headwinds are done by <unk> and this will actually kind of give us the opportunity to start into next year.
Speaker Change: Base.
Speaker Change: I would say a balanced baseline and it should help us to even accelerate growth because again importantly, as also our billings I mentioned Q4 Q1, our billings grew 10%.
Speaker Change: So as long as these billings are growing these are the fundamentals right and they are trending in the right direction.
Speaker Change: And so once the EAA incentive fees are done each would have a positive impact on growth.
Speaker Change: Okay.
Speaker Change: My last question is you gave some examples with the Danish government that you've won a framework agreement was one 5 billion Danish krone.
Speaker Change: What does this mean for you for you.
Speaker Change: Turnover numbers.
Speaker Change: Here on the table what does it mean in general.
Speaker Change: Yeah. This is a cloud spend commitment from the Danish.
Speaker Change: Government basically of each day.
Speaker Change: They have based on contracts with the hyperscale or V or transactional or for this year.
Speaker Change: We are going to be the partner, who is helping them to I would say consume these cloud consumption.
Speaker Change: And I seen chatter out of these cloud based agreements you will get some incentives.
Speaker Change: Related to that also from the hyperscale or seats out of so it should have an impact, especially as the consumption is growing.
Speaker Change: It should have.
Speaker Change: A positive impact on our overall.
Speaker Change: Revenue growth.
Speaker Change: And Australia I think in addition.
Trigger opportunities on the services side has been Hum.
Speaker Change: They are driving consumption into the cloud.
Speaker Change: Okay. So in terms of modeling for US we should then.
Speaker Change: May kind of assumption about the incentives on the overall value of the contract.
Speaker Change: He said if that is actually an exact except okay and when does this contract again.
Speaker Change: On already.
Speaker Change: It has begun already.
Speaker Change: And B, we'll see this is a four year agreement. So the total spend is over four year maximum spend.
And that's the spend and the consumption is growing.
Speaker Change: More impact you would see.
Speaker Change: From a revenue perspective, okay.
Speaker Change: Okay.
Speaker Change: 10% incentive fees is a good assumption.
Speaker Change: Sorry.
Speaker Change: You said, 10% incentive on the overall framework that a good assumption that's too high assumption.
Speaker Change: Okay.
Speaker Change: Alright, okay. Thanks, that's clear.
Speaker Change: The next question from Florian.
Speaker Change: Please go ahead.
Speaker Change: Yes. Thank you good morning, gentlemen, I have a question on your cost savings so.
Speaker Change: The feedback you gave.
Speaker Change: 88, and stepped off initially is it 50 million targeted so my first question would be.
Speaker Change: Well, how can you explain kind of all the achievement.
Speaker Change: Whereas the biggest skip and then on the <unk>.
Speaker Change: Second and this is why I'm, probably asking is I think what youll.
Speaker Change: Youre lessons learnt from it that's I believe a smooth execution on cost cutting measures.
Speaker Change: Really be key to generate the cost from the <unk> targeting with some much of Trey and really trying to get to feeling how you have confidence has developed with executing your own cost cutting measure that you can do the same or replicate these kind of efforts.
Speaker Change: Combined entity going forward. Thank you.
Julian: Yeah, Julian Thanks for the question on the cost savings.
Julian: When do you have followed the trajectory of Borgwarner I think we haven't had to face of here one was operational excellence, which was.
Julian: A transformation of our operating model to make it more scalable and then the second phase win win.
Rafi joined it has been about making sure we.
Julian: We refuse lasers, we reviews.
Julian: Let's see.
Julian: Less productive resources in the organization. So we go back to two a lean agile organization. So I think it's.
Julian: It.
Julian: These two programs right.
Julian: Hill.
Julian: <unk> changed the operating model as well as make it easier and more agile.
Julian: It's a great learning so as you say as we go forward.
Julian: Think about integrating the two companies we have these learnings from one that we will apply to the combination.
Julian: That gives us very high confidence in achieving the synergies of 80 to 100 gig and going forward, which will come up.
Julian: Yes, maybe to emphasize a little bit also from my side right I think we have now.
Julian: Debit eastern New cost base, you know our company, which is also much more aligned again to our income streams.
Julian: And I would say this is really paving the way now for a future base I.
Julian: I would say the ongoing profitable growth. So it's a fundamentally important and I would say, it's a key milestone achieved.
Julian: Great. Thank you very much and looking forward for a combined sophomore in crane. Thank you.
Julian: Thank you.
Speaker Change: As a reminder, if you wish to register for questions. Please press star and one on your telephone.
Anna: Ladies and gentlemen, this was the last question I would like to turn the conference back over to Anna <unk> for any closing remarks. Thank you.
Speaker Change: Thank you and thank you to everyone for joining the call. This morning, we look forward to speaking with you again.
Anna: Yeah.
Anna: Ladies and gentlemen, the conference is now open. Thank you for choosing chorus call and thank you for participating in the conference you May now disconnect your lines Goodbye.
Anna: [music].
Anna: [music].