Softwareone Holding AG

SIX:SWON

Earnings Call Transcript 2021-Q4

[Operator]

Good day, and

thank

you

for

standing

by.

Welcome

to

the

Full-Year

Results

2021

Conference

Call.

At

this

time,

all

participants

are

in

a

listen-only

mode.

After

the

speakers'

presentation,

there'll

be

a

question-and-answer

session.

[Operator Instructions]



Please

be

advised

that

today's

conference

is

being

recorded.

[Operator Instructions]

I

would

now

like to

turn

the

conference

over

to your

speaker

today,

Anna

Engvall.

Please

go

ahead.

[Anna Engvall, Head-Investor Relations, SoftwareONE Holding AG]

Good

morning

and

thank

you

for

joining

SoftwareONE's

2021

full-year

results

webcast.

My

name

is

Anna

Engvall,

Head

of

Investor

Relations

at

SoftwareONE.

And

joining

me

today

are

Dieter

Schlosser,

CEO;

and

Rodolfo

Savitzky,

CFO.

Before

handing

over

to

Dieter,

let

me

draw

your

attention

to

the

usual

disclaimer

regarding

forward-looking

statements

and

non-IFRS

measures

on

slide

2.

With

that,

I

would

like

to

hand

over

to

Dieter.

[Dieter Schlosser]

Good

morning

and

welcome.

I'm

pleased

to

report

that

we

are

clearly

back

on

a

strong

growth

trajectory.

We

exited

2021

with

very

strong

growth

of

23%

in

H2,

and

the

full

year

was

close

to

18%

gross

profit

growth,

delivering

the

guidance

of

over

14%

that

we

said

one

year

ago.

Our

integrated

model

is

delivering.

Software

&

Cloud

returned

to

positive

territory,

up

3%

year-on-year

and

around

9%

in

H2 2021.

There's

very

positive

momentum

across

all

customer

segments.

Solutions

&

Services

grew

by

over

50%

as

our

portfolio

continued

to

resonate

very

well

with

our

customers.

We

delivered

25.7%

adjusted

EBITDA

margin,

below

our

guidance

of

approximately

30%.

This

reflects

continued

investments

to

support

accelerated

growth

and

strategic

M&A.

Whilst

we

are

capturing

the

market

opportunities

and

delivering

very

high

growth,

we

invested

in

the

business

to

support

this

trajectory.

Looking

ahead,

we

maintain

our

growth

outlook

of

mid-teens

for

2022

and

the

midterms.

In

terms

of

margin,

we

are

committing

to

a

margin

above

25%

for

2022

and

in

any

given

year

in

the

midterm

as

we

continue

to

capture

the

highly

attractive

market

opportunity.

Let

me

share

a

few

of

the

key

achievements

from

2021,

and

I'm turning

to

slide

5.

We

clearly

delivered

from

a

growth

perspective,

and

our

performance

in

H2

illustrates

the

momentum

in

the

business.

M&A

was

an

important

contributor

over

the

year,

and

we

have

succeeded

in

bringing

in

great

talent

and

capabilities

into

the

organization.

Scaling

out

our

service

business

with

expertise

across

the

three

major

hyperscalers.

We

also

now

support

6.9

million

managed

cloud

users.

This

is

up

from

5.4

million

six

months

ago

and

from

1.7

million

at

the

time

of

our

IPO.

This

is

clear

evidence

of

exactly

how

we

want

to

drive

scalability

in

the

business

and

create

a

much

stickier

revenue

streams.

In

addition,

we

brought

in

two

new

members

to

our

executive

board,

Rodolfo

Savitzky

as

CFO,

whom

you

will

hear

from

in

just

a

few

minutes;

as

well as

Bernd

Schlotter,

our

President

of

Services.

Finally,

we

remain

confident

in

the

future

as

the

market

opportunity

ahead

of

us

is

massive,

with

Software

&

Cloud

market

expected

to

grow

at

14%

and

our

addressable

service

market

at

over

30%

per

annum

until

2025.

Let

me

briefly

explain

what

is

driving

this

outlook.

Our

customers

continue

to

face

challenges

as

they

accelerate

their

journeys

to

the

cloud

post-COVID.

Customers

do

not

have

the

right

skills

internally.

The

cloud

dynamics

have

dramatically

increased

the

level

of

complexity

with

a

huge

wastage

of

cloud

spend.

Demand

for

data

security

and

privacy

are

rising

with

each

breach

costing

customer

millions.

Customers

are

buying

Azure,

AWS

and

Google

GCP,

which,

together

with

on-premise,

creates

a

hybrid

and a

multi-cloud

environment.

So

given

this

very

healthy

market

environment,

what

does

it

mean

for

SoftwareONE?

It

means

that

we

operate

in

a

very

healthy

growing

market;

and

importantly,

it's

all

about

the

pull

through

of

solution

and

services

to

address

increasing

needs

of

our

customers.

Customers

face

a

wide

range

of

choice

in

software

and

cloud

procurement.

They

are on

complex

migration

journeys

and

need

to

manage

their

hybrid

and

multi-cloud

environment

from

governance

and

security

perspectives.

And

that

gives

us

the

opportunity

to

engage

with

them

on

an

ongoing

and

recurring

basis

as

SaaS

and

public

cloud

spend

increases

and

traditional

on-premises

declines.

We

are

here

to

help

them

on

their

journey.

In

addition,

we

are

close

to

the

largest

vendors

and

have

a

role

to

play

in

terms

of

helping

customers

adopt

and

use

the

technology

which

they

have

purchased,

driving

consumption

and,

ultimately,

also

driving

renewals.

Our

two

business

lines

are

highly

synergistic

and

our

value

proposition

is

based

on

combining

software

and

cloud

with

services

because

one

naturally

pulls

along

the

other

because

when

our

customers

buy,

they

also

adopt

and

use

the

technology

via

our

service

business.

This

creates

stickiness

and

recurring

revenues.

In

2021, Solutions &

Services

accounted

for

38%

of

gross

profit.

Looking

ahead,

we

expect

that

to

reach

50/50

within

the

next

one

to

two

years,

which

is

ahead

of

the

plan.

Now,

let's

look

at

the

performance

of

each

of

the

business

lines

in

2021.

Software

&

Cloud

returned

to

a

positive

growth

in

2021,

in

line

with

our

expectation,

driven

by

a

recovery

across

the

hyperscalers,

but

also

the

ISVs.

Total

Microsoft

billings

reached

close

to CHF

15

billion,

and

our

business

grew

in

line

with

the

overall

Microsoft

market.

Cloud,

which

is

Azure,

365

and

Dynamics,

represented

73%

of

our

total

Microsoft

volume,

compared

to

67%

in

2020.

But

there

was

a

continued

impact

from

our

proactive

transitioning

of

customers

towards

the

pay-as-you-go

model.

This

involves

a

low

upfront

payment,

which

temporarily

negatively

impacts

Software

&

Cloud

growth,

but

significantly

increases

the

lifetime

customer

gross

profit

through

a

combination

of

higher

recurring

revenue

and

more

services

mostly

recognized

in

Solutions

& Services.

Our

Solutions & Services

business

delivered

over

53%

year-on-year

gross

profit

growth

in

constant

currencies,

with

broad-based

strong

performance

across

all

service

lines,

customers

and

geographies.

Our

cross-selling

statistic

continued

to

move

in

the

right

direction

with

now

71%

of

our

gross

profit

being

generated

by

14,000

customers

purchasing

both

software

and

services.

That

is

up

from

63%

last

year.

The

gross

profit

multiplier

has

increased

from

7.9 times

to

8.9 times

for

customers

purchasing

both

software

and

cloud

and

services

compared

to

those

only

purchasing

software

and

cloud.

We

continue

to

see

further

upside

here.

Meanwhile,

our XSimples or

pay-as-you-go

offering,

based

on

Office

365

and Azure,

continued

to

be

a

key

driver

of

growth

for

the

Solutions

&

Services

business,

up

over

80%

year-on-year,

implying

a

further

acceleration

over

that

70%

that

we

reported

in

H1 2021.

From

a

regional

perspective,

performance

varies

primarily

driven

by

the

portfolio

mix

between

software

and

services.

In

NORAM

and

APAC,

where

Solutions

&

Services

represents

over

40%

of

total

gross

profit,

growth

was

very

strong. EMEA

delivered

a

solid

performance,

impacted

by

the

transition

to

pay-as-you-go

in

the

Microsoft

business,

while

the

remainder

of

Software

&

Cloud

and

the

Solutions

&

Services

delivered

strong

growth.

LATAM

grew

by

over

70%

as

a

result

of

the

InterGrupo

acquisition.

We

have

a

very

global

and

geographically

well-diversified

business

with

four

regions

at

scale,

with

NORAM

and

APAC

reporting

gross

profit

now

over

CHF

100 million.

And

we

expect

LATAM

to

cross

the

CHF

100 million

threshold

in

2022.

Now,

let

me

pause

here

for

a

minute

to

also

reflect

on

current

events

in

the

world.

On

a

personal level,

I'm

angered

by

the

senseless

act

of

war

initiated

by

the

Russian

government.

I'm

also

deeply

concerned

about

the

impact

on

so

many

people.

To

be

clear,

SoftwareONE

stands

categorically

against

the

invasion

and

we

will

do

all

we

can

to

support

those

affected.

Our

first

priority

was

and

is

the

safety

of

our

people.

We

have

offered

to

move

our

team

in

Ukraine,

including

their

immediate

family

members,

to

a

safe

location.

And

our

team

members

in

Russia,

who

are

in

complex

and

confusing

situation,

know

that

they

are

also

valued

members

of

the

SoftwareONE

family.

From

an

economic

perspective,

Ukraine

and

Russia

combined

accounts

for

only

approximately

1.5%

of

our

total

group

gross

profit.

However,

given

the

unpredictable

nature

of

the

situation,

you

would

appreciate

it

is

difficult

to

fully

assess

the

economic

impact

of

the

conflict

today.

Coming

back

to

our

business

and

performance

last

year,

let

me

remind

you

of

our

value

proposition

for

our

customers.

Our

portfolio

is

geared

to

cover

all

our

customer

needs,

helping

them

to

optimize

their

costs

in

the

cloud

with

[ph]



item

(00:11:37), as

well

as adopt

and

use

the

end

user

productivity

software

like

Office

365

with

Future

Workplace.

We

support

customers procure

software in

a

digital

way

with

digital

supply

chain.

This

application

services

and

SAP

on

cloud,

we

help

modernize

our

customer's

application

landscape

and

migrate

to

the

public

cloud.

And

once

customers

are

in

the

cloud,

we

manage

and

optimize

their

technology

environment

with

our

cloud

service.

Some

of

our

service

lines

are

already

scaled,

while

others

are

early

in

terms

of

maturity,

but

enjoy

very

strong

growth

outlooks,

which

gives

us

the

opportunity

to

drive

profitable

growth

to

a

number

of

levels.

As

we

mentioned

previously,

we

are

targeting

to

deliver

and

exceed

CHF 100

million

in

most

service

lines

based

on

run

rate

at

the

end

of

2023.

Having

taken

you

through

our

Solutions

&

Services

portfolio,

I

would

like

to

move

on

to

M&A.

This

has

been

a

key

enabler

in

terms

of

scaling

out

this

business

line

in

an

accelerated

way.

You

have

heard about

HeleCloud and Centiq at

our

Capital

Markets

Day.

And

just

a

few

weeks

ago,

we

completed

the

acquisition

of

Predica.

Predica

is

an

excellent

addition

to

our

service

business,

adding

over

300

Azure

cloud

technology

experts

serving

the

attractive

North

and

European

mark

and,

in

particular,

the

enterprise

segment,

so

very

complementary

to

our

existing

business.

We

are

very

impressed

with

their

growth

journey

to-date

and

have

welcomed

the

entire

company,

including

the

four

founding

entrepreneurs,

to

SoftwareONE.

In

the

face

of

very

high

growth,

we

are

focused

on

maintaining

a

lean

and

agile

organization

and

ensuring

high performance

through

our

Transformance

program.

Transformation

with

high

growth

only

works

together

with

high

performance.

We

mentioned

this

program

already

at

the

CMD and

launched

it

late

in

the

year,

so

the

impact

will

be

evident

in

2022.

At

the

heart

of

our

success,

our

people

and

ESG

has

always

been

a

core

strand

of

our

DNA

from

the

start.

Our

approach

to

ESG

is

twofold:

on

the

one

hand,

we

want

to

help

our

customers

operate

in

a

more

sustainable

way

by

using

cloud-based

solution

which

have

a

much

lower

environmental

impact;

and

on

the

other

hand,

we

want

to

improve

our

own

internal

processes

with

respect

to

ESG.

We

introduced

a

comprehensive

road map

and

we

are

well

underway

to

executing.

In

parallel,

our

local

teams

around

the

world

are

high

engaged

with

community

services

and

other

ESG-related

activities.

The

SoftwareONE

Academy

is

a

learning

platform

to

develop

people

from

all

walks

of

life

into

digital

experts.

We

have

the

ambition

to

make

our

largest

market, DACH,

carbon-neutral

by

next

year;

and

various

fundraisers

and

donations

for

charities

around

the

world.

So

you

will

continue

to

hear

more

from

us

on

the

ESG

front

as

I

continue

to

lead

this

very

important

initiative

with

the

full

support

and

direction

from

the

board.

With

that,

I

would

like

to

hand

over

to

Rodolfo

to

take

you

through

our

financial

performance

in

2021.

[Rodolfo J. Savitzky, Chief Financial Officer, SoftwareONE Holding AG]

Thank

you,

Dieter.

Good

morning

and

a

warm

welcome

from

my

side

as

well.

My

name

is

Rodolfo

Savitzky,

and

I

joined

SoftwareONE

as

CFO

this

January.

You've

heard from

Dieter

about

the

attractive

market

fundamentals

and

strength

of

our

business.

I

would

now

like

to

take

you

through

how

that

has

translated

into

a

strong

financial

performance

in

2021.

In

addition,

I

would

like

to

share

my

observations

on

the

SoftwareONE

business

model,

which

has

exceptionally

attractive

opportunities

for

accelerated

growth.

I

will

only

share

one

technical

financial

slide,

and

this

relates

to

revenue

recognition

as

IFRS

guidance

is

changing.

Let

me

now

refer

to

the

graph

and

only

focus

on

Software

&

Cloud

as

Solutions

&

Services

is

not

affected

by

the

change

in

policy.

Under

the

previous

recognition

policy,

we

would

have

recognized

the

consideration

from

customers

of

CHF

8.3

billion

as

revenue.

And

deducted

the

cost

of

purchased

software,

resulting

in

CHF

534

million

in

gross

profit.

Now,

under

the

new

policy,

we

only

record

the

consideration

from

the

customer,

net

of

the

cost

of

purchased

software,

to

get

to

net

revenue

of

CHF

534

million,

which

is

equal

to

the

gross

profit.

As

you

can

see,

our

gross

profit

KPI

remains

completely

unchanged.

Let me

underscore

some

of

Dieter's

messages.

SoftwareONE

has

very

positive,

strong

growth

momentum

with

23%

gross

profit

growth

in

the

second

half,

resulting

in

close

to

18%

gross

profit

growth

for

the

year.

Going

back

to

the

growth

drivers.

Software

& Cloud

continues

to

see

a

transition

towards

the

pay-as-you-go

model,

which

we

are

also

proactively

driving.

This

transition

has

a

negative

short-term

impact

on

gross

profit

growth,

but

is

a

much

more

attractive

model

in

the

long-term.

Customer

stickiness

is

high,

and

it

gives

us

the

opportunity

to

bundle

in

additional

services

to

cover

more

of

our

customers'

technology

needs

in

the

cloud.

While

Solutions

&

Services

benefit

from

acquisitions

in

2021,

the

underlying

growth

rate

of

more

than

40%,

excluding

InterGrupo,

is

very

strong.

And

the

performance

was

broad-based

across

our

offerings,

customer

segments

and

regions.

As

Dieter

explained,

we

continue

to

scale

up

service

offerings.

Operating

expenses

increased

ahead

of

gross

profit,

which

reflects

a

combination

of

organic

and

inorganic

investments

behind

commercial

capabilities

to

support

our

services

portfolio,

as

well

as

building

up

our

global

and

regional

service

delivery

centers.

As

we will

discuss

later,

some

of

this

accelerated

growth

is

related

to

scaling

up

our

operations,

but

the

OpEx

evolution

will

slow

down

relative

to

revenue

growth

in

the

future.

On

the

margin,

we

ended

below

guidance

of

approximately

30%,

which

reflects

a

combination

of

M&A

activity,

which

had

a

dilutive

margin

impact,

and

the

limited

impact

of

Transformance

in

the

second

half

of

2021.

Now,

let's move

to

the

SoftwareONE

business

model,

which

has

a

very

attractive

growth

fundamental,

underpinned

by

the

underlying

market

growth

and

strong

margin

upside

from

efficiency

and

operating

leverage.

I

will

spend

the

next

couple

of

slides

on

this.

Let's

start

with

the

portfolio

mix.

With

the

strong

growth

momentum

in

Solutions

&

Services,

the

portfolio

mix

will

be

close

to

50/50

in

the

next

one

to

two

years,

which,

in

fact,

is

even

sooner

than

anticipated.

While

Software &

Cloud

has

a

very

high

margin,

the

short-term

growth

opportunity

is

moderate,

as

gross

billings

are

expected

to

continue

to

grow

double-digit,

but

our

gross

profit

will

grow

slower

in

the

short-term.

We

will

change

this

dynamic

in

the

midterm

and

accelerate

gross

profit

growth

of

these

business

lines

through

disruptive

initiatives

such

as

marketplace

or

digital

supply

chain,

which

can

transact

very

high

volumes

at

very

low

cost.

On

the

other

hand,

in

Solutions

&

Services,

we

have

an

immediate,

very

high

growth

opportunity.

While

the

current

margin

is

lower,

we

are

improving

it

every

year

as

we

continue

to

scale

the

business.

So,

overall,

we

combine

our

huge

Software

&

Cloud

platform

to

upsell

IP

value-added

services

to

customers.

This is

a

very

attractive

proposition,

because,

as

Dieter

mentioned,

customers

who

purchase

both

software

and

services

generate

nearly

nine

times

the

gross

profit

of

customers

who

only

purchase

software

and

cloud.

How

are

we

expanding

margin

in

our

high

growth

business?

We

have

a

couple

of

very

important

levers:

one

is

operating

leverage;

and

the

other

is

operational

excellence.

Operating

leverage

is

very

important

as

the

business

is

expected

to

grow

at

mid-teens

in

the

midterm.

As

we

double-click

on

the

operating

expenses,

roughly

speaking,

the

expenses

are

equally

distributed

across

sales

and

marketing,

operations

and

G&A.

The Harvey Balls

illustrate

the

operating

leverage

across

these

three cost

buckets.

As

you

can

imagine,

the

operating

leverage

on

the

G&A

cost

is

very

high.

In

high-growth

companies

such

as

SoftwareONE,

these admin

areas

have

had

to

grow

at

an

accelerated

pace

to

support

the

largest

case.

I

am

convinced

that

SoftwareONE

has

reached

the

size

where

we

can

start

to

optimize

our

spending

in

admin

functions.

The

good

news

for

a

high-growth

company

is

that

productivity

initiatives

do

not

mean

cutting

jobs,

but

rather

growing

expenses

significantly

below

sales

or

gross

profit

growth.

Sales

and marketing

is

the

other

area

where

we

have

reached

a

reasonable

critical

mass.

While

we

will

need

to

continue

to

support

the

commercialization

of

the

different

service

lines,

many

areas

of

sales,

such

as

business

development,

internal

sales

and

key

account

management,

are

completely

scalable.

We

also

have

an

opportunity

to

optimize

our

sales

expenses

through

our

sales

effectiveness

initiatives

like

Next Gen

Sales,

which

was

launched

in

2021.

We

also

have

disruptive

initiatives

for

the

midterm

such

as

marketplace

and

digital

supply

chain,

which

can

completely

revolutionize

the

way

we

sell

software,

cloud

and

services.

Last,

but

not

least,

we

have

operations

to

support

our

two

business

lines.

Let

me

focus

on

the

services

portfolio.

At

SoftwareONE, our

services

are

configured,

but

not

customized,

which

makes

them

highly

scalable.

Standard

service

packages

can

be

configured

for

different

customer

needs

without

reinventing

the

wheel.

We

also

leverage

a

global

local

delivery

model

that

ensures

a

maximum

standardization

of

global

service

packages

delivered

from

lower

cost

centers,

such

as

India

and

Mexico.

On

operational

excellence,

the

key

initiative

is

Transformance

that

we

introduced

at

our

Capital

Markets

Day

and

that

Dieter

mentioned

earlier.

We

have

established

a

CHF 9.1

billion

provision

associated

with

separation

of

employees

to

make

sure

we

have

the

right

capabilities

in

place,

and

we

foresee

to

make

this

initiative

an

ongoing

program.

We

are

reinforcing

it

with

several

other

initiatives

around

process

standardization

and

automation

to

continue

to

drive

efficiency.

Let

me

touch

on

M&A,

where

we

have

a

very

strong

track

record

of

not

only

successfully

closing

transactions,

but

also

smoothly

integrating

them

into

SoftwareONE

and

creating

value.

We

completed

six

M&A

transactions

in

2021.

The

vast

majority

of

these

transactions

expanded

our

Solutions

&

Services

business,

in

particular

our

SAP

services,

as

well

as

our

cloud

services,

allowing

us

to

build

capabilities

in

an

accelerated

way.

As

we

explained

at

the

Capital

Markets

Day,

the

impact

of

most

of

these

acquisitions

is

margin

diluted

in

year

one.

But

most

of

them

quickly

scale

up

as

we

drive

cross-selling

on

the

top

line,

as

well

as

optimize

the

delivery

model

and

delivered

synergies

on

the

back end.

Not

only

is the

SoftwareONE

business

model

high

growth

and

high

operating

leverage,

it

also

generates

strong

operating

cash

flow

as

it

is

asset

light.

Despite

the

very

high

business

growth,

net

working

capital

generated CHF

27

million

positive

cash

flow

by

maintaining

receivable

days

and

expanding

payable

days.

The

improvement

in

net

working

capital

was

smaller

than

last

year's

cash

inflow,

but

this

is

still

a

significant

achievement

for

a

high

growth

company.

Operating

cash

flow

in

2021

was

CHF

158

million;

and

while

lower

than

prior

year,

it

still

represented

a

72%

cash

conversion

relative

to

adjusted

EBITDA.

The

lower

operating

cash

flow

was

mainly

due

to

the

lower

inflow

from

net

working

capital.

Let's

now

look

at

the

last

piece

in

any

CFO

puzzle,

which

is

the

balance sheet.

SoftwareONE

maintains

an

exceptionally

solid

balance

sheet

with

a

positive

CHF

0.5 billion

net

cash

position.

Our

equity

to

book

capitalization

ratio

stays

at

around

25%.

Given

the

strong

cash

flow

generation,

we

would

recommend

to

the

General

Assembly

a

dividend

increase

to

CHF

0.33

per

share,

fully

in

line

with

the

higher

end

of

our

dividend

payout

guidance

of

between

30%

to

50%

of

adjusted

profit

for

the

year.

In summary,

2021

closed

with

very

strong

growth

profit

growth

momentum.

Going

forward,

the

combination

of

strong

growth,

operating

leverage

and

cash

flow

conversion

will

provide

the

headroom

to

invest

in

a

disciplined

way

to

capture

market

opportunities.

And

now,

back

to

Dieter

Schlosser for

the

strategy

and

outlook

section.

[Dieter Schlosser]

Our

strategy

remains

unchanged,

and

we

remain

focused

on

execution

based

on

the

same

five

pillars.

Firstly,

we

will

continue

to

grow

and

digitize

Software

&

Cloud.

We

have

seen,

based

on

trends,

that

there

will

be

two

sales

motions:

customers

want

Software

&

Cloud

in

a

digital

way,

using

a

marketplace

and

self-service;

or

managed

using

our

digital

supply

chain.

We

are

very

well-positioned

and

will

be

providing

that

digital

experience

for

our

customers.

Secondly,

we

will

continue

to

cross

and

upsell

Solutions

&

Services.

Our

biggest

asset

is

our

customer

base. XSimples

is

a

highly

scalable

service

with

a

great

contribution

margin.

Thirdly,

we

will

expand

portfolio

to

serve

the

customer's

journey.

Our

strategic

growth

areas

are

based

on

market

opportunity

increasing

the

ratio

of

managed

services.

Fourthly,

we

will

scale

our

global

local

operating

model

for

continued

profitable

growth.

We

want

to

decouple

gross

profit

growth

from

head

count

growth.

And

lastly,

selectively

pursue

M&A.

With

this

strategy, we

remain

confident

of

delivering

our

guidance

of

mid-teens

growth

in

constant

currency

across

the

group.

This

level

of

growth

needs

to

be

balanced

with

profitability

as

we

continue

to

prioritize

growth

to

capture

the

phenomenal

market

opportunities

ahead

of

us.

So

for

FY

2022

and

the

midterm,

we

will

deliver

above

25%

adjusted

EBITDA

margin.

As

a

result

of

our

organic

investment

and

integration

of

acquired

companies

like

Predica,

in

the

first

half

of

2022,

we

will

see

a

slightly

lower

than

25%

margin.

But

this

will

be

compensated

for

in

the

second

half

as

the

strong

operating

leverage

flows

through.

Our

dividend

policy

remains

the

same

and for

2021,

a

dividend

of

CHF

0.33

per

share

will

be

proposed

at

the

AGM.

Finally,

I

would

like

to

put

this

guidance

into

context.

As

you

can

see

from

the

Magic

Quadrant

shown

on

page

27,

we

are

one

of

the

very

few,

on

the

top

right

quadrant,

next-generation

service

providers

where

we

generate

high

growth

of

over

15%

and

high

EBITDA

margin

of

over

25%.

In

conclusion,

SoftwareONE

has

delivered

very

strong

growth

in

2021

with

clear

acceleration

in

the

second

half.

We

are

well-positioned

to

carry

that

growth

into

2022.

Our

synergistic

business

model

of

Software

&

Cloud

and

Services

&

Solutions

resonates

very

well

with

our

customer

base.

Our

highly

scalable

business

model

allows

us

to

invest

in

a

disciplined

way

to

capture

the

market

opportunity

and

deliver

above

25%

EBITDA

margin

with

mid-teens

growth.

Thank

you.

And

now,

we

will take

your

questions.

[Operator]

Thank

you.

[Operator Instructions]



Your

first

question

today

comes

from

Varun

Rajwanshi

from

JPMorgan.

Please

go

ahead.

Your

line

is

open.

[Varun Rajwanshi, Analyst, JPMorgan Securities Plc]

Hi.

Good

morning.

I

have

three

questions.

Firstly,

on

margins,

there

has

been

some

flip

flop

on

margin

guidance

over

the

past 12

months

or

so.

I'm

just

trying

to

understand

what

drove

this

margin

reset

compared

to

your expectation

six

months

ago?

Are

you

now

confident

that

you

can

sustainably

deliver

25%

plus

margins

going

forward?

i.e.,

have

you

left

yourselves

sufficient

buffer

to

deliver

on

this

target

whilst

accelerating

services

growth?

My

second

question

is

on

the

take

rate

compression

that

you

alluded

to.

Are

you

seeing

an

accelerated

pressure

on

take

rates

from

your

key

vendors,

Microsoft

and

others?

Is

there

a

risk

that

Software

&

Cloud

gross

profit

growth

slows

further

to

mid-single

digit?

And

lastly,

on

capital

allocation,

you

have

a

solid

net

cash

position,

which

can

be

further

increased

if

you

choose

to

divest

your

stake

in

Crayon.

Now,

this

gives

you

sufficient

firepower

to

do

both

bolt-on

acquisitions,

as well

as

initiate

share

buyback.

So

given

that

the

shares

are

today,

is

that

something

you're

considering

or

are

you

looking

to

do

bigger

deals

in

the

coming

months?

Thanks.

[Dieter Schlosser]

Yeah.

Thanks,

Varun,

for

the

three

questions.

Let

me

start

with

the

first

two

ones,

and

then

I

will

hand

over

to

Rodolfo

on

the

capital

allocation.

In

terms

of

the

margin,

historically,

but

also

in

terms

of

having

enough

buffer

in

the

future

to

accelerate

growth,

let

me

cover

this

and

explain

first

why

we

had

the

miss

on

the

margin

guidance

in

FY

2021.

Actually,

we

had

a

fantastic

growth,

as

you

have

seen

as

well,

with

23%

growth

in

H2.

In

fact,

we

had

an

expectation

to

be

1%

to

2%

higher,

which

has

slipped

over

in

2022.

And

then,

in

addition

to

that,

we

had

a

delayed

impact

of

the

initiative

of

Transformance,

which

we

explained

earlier.

So

that

explains

where

we

ended

up

where

we

landed

with

25.7%.

Now,

going

forward,

we

do

have

now

a

proven

growth

momentum

and,

at

the

same

time,

Rodolfo

explained

this,

we

have

operating

leverage

in

the

system.

So

now,

we

are

at

a

position,

Varun,

where

we

have

a

choice

to

improve

the

margin

or

invest

in

growth.

Now,

let's

assume –

and

I

think

we

can

all

align

on

that,

if

you

look

at

the

Magic

Quadrant,

we

are

in

the

leader's

quadrant

with

the

25%

margin.

So

if

we

are already

in

that

leading

quadrant,

in

this

current

environment,

we,

obviously,

would

need

to

invest

into

growth,

provided

there

are

two

fundamental

aspects

realistic:

the

number

one,

there

is

a

growth

in

the

market

– in

the

addressable

market;

and

number

two,

we

have

a

portfolio

which

resonates

with

the

customers,

and

we

are

able

to

deliver;

and

both

are

assured.

So

we

have

a

high

growth

in

terms

of

the

addressable

market,

if

you

just

piggyback

on

the

market,

it

will

be

always

above

13%

on

Solutions

&

Services

and

it

will

be

above

14%

on

Software

&

Cloud.

And

as

you

have

seen,

our

portfolio

resonates

very

well

with

our

customers,

and

delivery

models

have

been

streamlined

and

will

be

further

streamlined

going

forward.

On

the

gross

billing,

and

whether

that's

having

an

impact

going

forward

on

gross

profit,

our

margins

on

Software

&

Cloud

was

always

stable,

but

also

always

under

pressure.

We

have

a

competitive

advantage

with

our

scales

being

in

90

markets

and

providing

9,000

vendors.

But,

of

course,

with

the

future

of

this,

our

investment

in

the

digital

marketplace

which

removes

all

boundaries,

as

well

as

our

digital

supply

chain,

we

have

an

opportunity

to

enhance

this

further

and

hence

we

don't

see

a

compression

on

that.

In

terms

of

capital

allocation,

Rodolfo,

I

hand

over

to

you.

[Rodolfo J. Savitzky, Chief Financial Officer, SoftwareONE Holding AG]

Thanks,

Dieter.

And

thanks,

Varun,

for

the

question.

Look,

on

the

capital

allocation,

as

we

have

discussed

during

our

presentation,

we

see

many new

opportunities

to

accelerate

growth

to

build

capabilities.

And

so,

in

that

sense,

the

general

strategy

remains

unchanged.

We'll

continue

with

our

dividend

policy,

as

we

have

reiterated.

And

we

will

also

continue

with

our

M&A

activity.

But,

of

course,

we

continuously

reassess

other

opportunities

for

capital

reallocation

as

buybacks

all

the

time.

[Varun Rajwanshi, Analyst, JPMorgan Securities Plc]

Thank

you,

both.

[Operator]

Thank

you.

Your

next

question

comes

from

the

line

of

Ross

Jobber

from

Citi.

Please

go

ahead.

Your

line

is

open.

[Ross A. Jobber, Analyst, Citigroup Global Markets Ltd.]

Thank

you. Good

morning,

gentlemen.

I've

got

a

couple

of questions,

if

I

may,

on

Transformance;

a

couple of

things.

First

of

all,

what

exactly

are

you

spending

that

money

on?

Could

you

give

us

a

little

bit

more

color

on

that?

Secondly,

I

think

you

said

in

your

comments

that

this

is

an

ongoing

expense.

And

if

I

misunderstood

that,

how

long

might

we

expect

there

to

be

a

Transformance

investment?

And

the

third

one

is just

a

point

of

clarity.

I

think

in

the

last

question

you

said

that

part

of

the

miss

on

margin

was

the

unexpected

Transformance

cost.

But

if I'm

right,

Transformance

is

stripped

out

of

the

adjusted

EBITDA.

Maybe

I'm

not

right

about

that.

So

those are

my

three.

Thank

you.

[Dieter Schlosser]

Yeah.

Thanks,

Ross,

for

the

questions.

Let

me

start

with

Transformance

as

an ongoing

initiative

and

what

we

are

actually

spending

the

money

on. So

you

have

seen

we

have

made

provisions

of

around

CHF 9

million

into

adjusted

EBITDA

for

that.

And

that

CHF

9

million

is

meant

to

separate

from

some

of

our

team

members

who

are

fitting

anymore

in

terms

of

the

capabilities

which

we

require

for

the

future.

That's

basically

one

of

the

underlying

assumptions for

Transformance,

which

is

a

combination

of

transformation

and

performance.

It's

a

made-up

word,

Ross.

And

what

we

want

to

achieve

is

if

you

are

in

a

high

transformation

environment,

you

need

high

performance

at

the

same

time.

So

you

need

to

have

permanently

adjusted

capabilities

and

adjusted

performance

towards

that

high

performance

to

achieve

it.

So

that's

towards

the

initiative

in

itself.

And

as

you

can

see,

we

are

focusing

on

growth

going

forward,

so

we

have

to

make

this

an

ongoing

initiative

to

be

able

to

achieve

our

targets.

On

the

second

point

on

why

would

that

have

an

impact

on

the

EBITDA

margin

is

because

it's

booked

on

the

adjusted

EBITDA.

It's

not

the

provision

which

we

are

referring

to.

It's

the

impact

of

the

lower

OpEx,

which

we

are

referring

to.

I

think

there

you

can

appreciate

if

you

have CHF

9

million

of

provisions,

that

usually

you

can

say,

what,

20 –

around

20%

of

costs

of

the

overall

OpEx

cost.

And

that's

basically

what

we

have

not

been

able

to

achieve

in

2021

and

see

now

the

full

impact

in

2022.

[Ross A. Jobber, Analyst, Citigroup Global Markets Ltd.]

Thank

you.

[Dieter Schlosser]

Thanks,

Ross.

[Operator]

Thank

you.

Your

next

question

comes

from

the

line

of

Alastair

Nolan

from

Morgan

Stanley.

Please

go

ahead.

Your

line

is

open.

[Alastair P. Nolan, Analyst, Morgan Stanley & Co. International Plc]

Hi

there.

Thanks

for taking

my

question.

I

just

want

to maybe

go

back

to

the

Capital

Markets

Day

because

– maybe

just

to

see

in

a

little

bit

more

detail

what's

changed, because

I

guess

the

message

then

was

very

much

that

there

was

an

ability

to

deliver

EBITDA

growth

ahead

of

gross

profit

growth.

Obviously,

today,

that's

changed. But

what

exactly

has

driven

that

change,

I

guess,

because

we're

getting,

in

essence,

an

increase

in

costs,

but

there's

no

additional

uplift

on

the

gross

profit

guidance

in

the

midterm?

And

then,

secondly,

on

the

cost-cutting

program.

Can

you

just

articulate –

and

apologies

if

I

missed

it

– exactly

how

much

cost

you

expect

to

be

able

to

take

out

of

the

business

over,

say,

a

one,

two-year

basis?

And

again,

that

doesn't

necessarily

seem

to

be

showing

up

in

the

midterm

profit

guidance

and

the

fact

that that's

been taken

down

as

well

today.

So

maybe

if you

could

just

explain

that, it'd

be

much

appreciated?

Thank

you.

[Dieter Schlosser]

Yeah.

Hi,

Alastair.

Thanks

for

the

questions.

In

terms

of

the

first

one,

on

the

Capital

Markets

Day,

where

we

affirmed

the

guidance,

what

I

iterated

earlier

was

that

we

had

an

expectation

that

we

had

a

much

higher

growth,

much

higher

in

terms

of

1%

to

2%

higher

growth

towards

the

H2.

And

that

slipped

through

in

2022.

You

can

also

appreciate

that

the

last

two

months

were,

basically,

impacted

on

Omicron.

So

that's

already –

if

you

look

at

the

difference

on

the

GP side,

that's

already

accounting

around

CHF

15

million

in

terms

of

differences.

And

the

second

point

is

really

the

impact

of

the

Transformance.

We

should

have –

and

I

clearly

stated

this,

we

should

have

accelerated

Transformance

faster,

so

that

we

had

a

faster

impact

in

2021.

Now,

we

had

the

full

impact

in

2022.

In

terms

of

is

that

reflected

in

the

future –

and

you

don't

see

the

uplift

in

the

future

in

terms

of

the

mid-teens

growth

as

well

as

the

EBITDA

margin.

This

is exactly

where

we

see

now

that

we

are

in

a

position

to

have

that

choice,

where

we

can

either

invest

into

growth

or

we

invest

into

EBITDA

margin.

It's

up

to

the

market

opportunity

and

our

positioning

as

a

company

from

our

portfolio.

I

think

you

would

tell

me

that I'm

not

doing

the

right

job

if

I

miss

the

opportunity

which

we

see

in

the

market

right

now.

We

have

built

that

engine

in

a

scalable

way

and

are

able

to

capture

the

market

opportunity,

becoming

a

leader

in

many

areas,

which

we

have

shown

earlier.

And

that's

our

choice

now.

We

want

to

focus

on

that

and

still

maintain

a

world-class

margin

above

25%.

[Alastair P. Nolan, Analyst, Morgan Stanley & Co. International Plc]

Thank

you.

[Dieter Schlosser]

Thanks,

Alastair.

[Operator]

Thank

you.

Your

next

question

comes

from

the

line

of

Andreas

Müller,

ZKB.

Please

go

ahead.

Your

line

is

open.

[Andreas Müller, Analyst, Zürcher Kantonalbank]

Yes.

Hello,

gentlemen.

Thanks

for

taking

my

question.

I've

got

also

a

question

about

the

personnel

cost

increase,

what

was

the

effect?

Or

what

would

you

consider

is

the

effect

of

wage

inflation?

So

salary

increases

and

the

other

part

from

the

FTE

increases

this

year,

would

that

accelerate

even

more

this

year?

That's

the

first

question.

Then, I have

a

small

question

on

the

exposure

towards

Russia, Belarus

and

Ukraine.

Do

we

have

any

assets

over

there?

And

then,

I

was

wondering

what's

the

size

of

the

SAP

business

and

also

the

application

services?

How

much

gross

profit

are

you

generating

with

the

two

business

lines

on

a

run

rate

basis

by

now?

Is

that

compliant

with

what

you

showed

in

the

graph,

this

pie

graph

earlier?

Thank

you.

[Dieter Schlosser]

Yeah.

Thanks,

Andreas,

and

looking

forward

to

meet

you tomorrow.

On

the

wage

inflation

and

the

FTE

increase,

let

me

start

just

in

our

wage

inflation.

We

see

– in

certain

pockets,

we

see

an

increased

salary

demand.

That's

absolutely

correct.

You

have

heard

about

the

Great

Resignation

and

post-COVID

how

we

have

mitigated

the

steps.

And

we

have

a

combination

of

grooming

our

talent

as

well

as

hiring

our

talent.

And

actually

we

have

built

it

into

the

budget

as

it

is.

In

terms

of

the

FTE

increase,

so

just

to

be

precise,

so

we

had

an

FTE

increase

last

year

of

with

1,450

FTEs

from

InterGrupo.

That's

our

acquisition

on

application

service,

as

you

remember.

And

then,

we

had

additional

1,000

head

count

or

experts

brought

into

the

company,

and

that's

a

combination

of

organic

as

well

as

acquisitions.

We

believe,

going

forward,

that

we

will

have

all

this

around

1,000 FTEs

on

a

yearly

basis

added

to

our

capabilities.

And

looking

at

the

market

opportunity

and

looking

at

how

we

split

head

count

relevance

from

solution

and

services

growth,

we

believe

we

are

in

a

good

ratio

over

there.

On

the

second

question

in

terms

of

exposure

in

Russia,

Ukraine,

Belarus,

so

we

are

asset-light

company,

right?

So

we

are

people

company

as

well.

So

we

don't

have

assets

in

the

various

countries.

We

have

obviously

closed

the

office

in

Ukraine

and

moved

the

people

into

safe

locations

at

the

border

to

Poland

and

across,

where

it

was

possible.

In

Russia,

we

are

following

the

sanctions,

of

course,

the

EU

as

well as

the

US

sanctions,

very,

very

rigidly.

And

over

there,

overall,

what

I

mentioned

in

my

presentation,

our

exposure

from

GP,

from

a

gross

profit,

is

around

1.5%

of

the

overall

business

of

SoftwareONE.

In

terms

of

SAP

and

application

services

side,

you

remember

we

are

not

splitting

our

segment

yet

in

terms

of

run

rate

and

profitability.

But

you

can

assume

two

things.

Number

one,

we're

absolutely

on

track

on

my

commitment,

which

I've

given

to

you

last

year,

which

is

the

CHF 100

million

run

rate

at

the

end

of

2023.

And

the Harvey Balls,

which

you

see,

are

also

in

terms

of

reflecting

the

scale

towards

it.

[Andreas Müller, Analyst, Zürcher Kantonalbank]

Okay.

Thanks.

[Dieter Schlosser]

Thanks,

Andreas.

[Operator]

Thank

you.

Your

next

question

comes

from

the

line

of

Knut

Woller

from

Baader

Bank.

Please

go

ahead.

Your

line

is

open.

[Knut Woller, Analyst, Baader Bank AG]

Yeah.

Thank

you.

First,

on

the

transition

to

pay-as-you-go,

when

will

that

be

behind

us

to

be

a

headwind

in

terms

of

gross

profit?

Then,

secondly,

regarding

your

comment

on

the

weaker

first

half

in

terms

of

the

EBITDA

margin.

Looking

at

the

accounting

change

and

here

a

better

feeling

for

Predica,

is

it

around

CHF 100

million

in

terms

of

revenues?

And

looking

now

at

the

changed

accounting

that

this

is

having

here

on

the

business

model

being

more

on

services

here,

a

negative

headwind

for

the

margin.

Is

that

the

right

way

to

look

at

things?

And

then,

lastly,

on

the

net

retention

rate

you're

having.

Can

you

give

us

here

some

updates?

Thank

you.

[Dieter Schlosser]

Hi,

Knut.

Thanks

for

the

question.

The

last

question

on

the

net

retention

towards

our

people...

[Knut Woller, Analyst, Baader Bank AG]

No.

In

terms

of

the

customers,

I

mean,

you're

doing

a

lot

of

cross-selling...

[Dieter Schlosser]

Okay.

Yeah.

[Knut Woller, Analyst, Baader Bank AG]

...and

trying

to

shift

it

more

to

sticky

business.

So

what

is

the

net

retention

rate

currently

and

how

are

you expecting

that

to

shape?

[Dieter Schlosser]

Okay.

Thank

you.

So

let

me

start

with

the

first

one

on

pay-as-you-go

and

the

timing.

So

we

are

more

than

halfway

through,

so

we

expect

this

to

be

another

one

to

two

years

until

we

have

addressed

our

customer

base.

Of

course,

there's

always

net

new

customers

which

we

are

hunting,

but

converting

our

existing

book

of

business

to

pay-as-you-go,

one

to

two

years

you

can

expect.

And

we're

over

that.

And

then,

we

have

all

on

the

subscription

base

and

all

on

recurring

revenue.

What's

interesting

is,

of

course,

that

with

every

pay-as-you-go,

you

get

the

attachment

of

the

cloud

support

as

a

managed

service.

These

are

the

6.9

million

users

which

we

referred

to.

And

that,

of

course,

gives

us

quite

a

deep

insight

into

the

customer

base

and

the application

landscape.

On

the

second

question

which

you

had

on

the

EBITDA

impact,

maybe

I'll

just

transfer

to

Rodolfo.

[Rodolfo J. Savitzky, Chief Financial Officer, SoftwareONE Holding AG]

Yeah.

So

in

terms

of

the

EBITDA

margin

first

half

versus second

half,

what

we're

seeing

is,

as

we

mentioned

before,

we

have

certain

investments

in

the

first

half

associated

with Predica

in

some

of

the

service

lines.

And

what

we

are

seeing

is

the

same

level

of

OpEx

first

half

versus

second

half

on

this

particular

investment,

but

we

see

significant

GP

uplift in

the

second half. And

this drives

the

small

asymmetry

in

the

margin

between

H1

and

H2.

[Dieter Schlosser]

Yeah.

Thanks,

Rodolfo.

On

the

net

retention, let's

go

through

the

numbers

again.

So

we

have

65,000

customers,

right,

which

offers

a

huge

existing

book

of

business

for

the

upselling

and

cross-selling.

At

the

moment,

we

have

reached

71%

of

our

GP

through

customers

who

buy

both

software

and

cloud,

as

well as

services.

And

that

gives

us

that

8.9%

multiplier,

which

is,

of

course,

a

massive

opportunity.

There

is

a

certain

churn

towards noted

in

the

lower

transaction

end

of

customers,

which

you

usually

have,

right?

They

buy

in

one

year,

they

don't

buy

in

the

second

year,

and

then

they

buy

again

in

the

third

year.

And

that's

something

which,

of

course,

will,

in

the

future,

be

all

digitized.

So

it

doesn't

impact

anymore

on

our

operating

efficiency.

[Knut Woller, Analyst, Baader Bank AG]

Thank

you.

[Dieter Schlosser]

Thanks,

Knut.

[Operator]

Thank

you.

Your

next

question

comes

from

the

line

of

Ben

Castillo

from BNP

Paribas.

Please

go

ahead.

Your

line

is

open.

[Ben Castillo-Bernaus, Analyst, Exane BNP Paribas]

Good

morning.

Thanks

very

much

for

taking

my

question.

And a

couple

for

me.

Firstly,

you

had

previously

commented

that

you

expected

the

OpEx to

be

flat

sequentially

H2

over

H1.

It

looked

like

that

was

actually

up

around

CHF

30 million

or

around 10%

some

way

off.

I'm

just

wondering

what

the moving

parts

were

there?

How

much

of

that

was,

sort

of,

wage

inflation

versus

discretionary

growth

investments?

Second

point,

on,

kind of,

contribution

margin.

It's

something

we've

continued

to

ask

you.

But

what

can

you

tell

us

around

the

level

of

profitability

for

the

services

business

that

you

might

be

targeting

perhaps

in

comparison

to

peers?

And

something

on

slide

17, you

mentioned

about

full

segment

reporting.

So

should

we expect

that

this

time

next

year?

And

then,

thirdly,

on

the

2022

guidance.

With

services

kind

of

reaching

50-50 a

little

quicker

than

you

first

thought,

that

could

imply

that

software and

cloud

growth

uplift

is

pretty

minimal

from

the

sort of

3%

level

that

you've

just

delivered.

So

just

if

you

could

give

us

a

steer

on

your

expectations

for

the

Software

& Cloud

business

for

2022?

Thank

you.

[Dieter Schlosser]

Yeah.

Thanks,

Ben. And

I'll

let Rodolfo

start

with

the

first

two

questions,

and

then

go

into

the

Software

&

Cloud

to

third

question.

[Rodolfo J. Savitzky, Chief Financial Officer, SoftwareONE Holding AG]

Just

one

clarification.

When

you

talk

about

the

discrepancy

in the

OpEx, you

refer

to

the

2021

results,

right?

[Ben Castillo-Bernaus, Analyst, Exane BNP Paribas]

Exactly.

So, yeah,

the

previous

commentary

was

that

H1 would

be

broadly

the

same.

It

would be

flat

in

H2.

But

I

think

it

looked like

it

stepped

up

in

H2

of

2021,

yeah.

[Rodolfo J. Savitzky, Chief Financial Officer, SoftwareONE Holding AG]

Yeah,

that's

correct.

That's

exactly –

I

mean,

I

would

say

the

vast

majority

of

the

difference is

what

Dieter already

explained.

So

there

was

this

Transformance

initiative

for

which

we

created

a

provision.

The

expectation

was

to

realize

a

significantly

higher

amount

of

savings

already

in

H2

of

last

year.

That

didn't

happen,

and

we

will,

of

course,

realize

the

savings

now

in

2022.

So

that

is

as

it

relates

to

2021.

And

the

commentary I made

on

2022

does

reflect

the

overall

OpEx

I

just

mentioned it

in

the

certain

big

investment

areas

that

I

mentioned

here,

we

see

similar

investment

patterns

H1,

H2.

But,

of

course,

you

get

the

uplift

in

the

GP

in

the

second

half.

And

then

talking

about

the –

let

me

take

your

third

point.

We

want

to

provide

the

transparency,

so

we

are

aiming

for

full

segment

reporting,

frankly,

end

of

2022.

I

think

it's

important

to

have

that

and

I

think

to

make

sure

we

have

all

our

system

and

reporting

ready

in

order

to

do

that.

And

then,

as

it

relates

to

the

services,

what

we

have

explained,

this

is

a

highly

scalable

business.

When

we

monitor

the

recent

progress,

we

see

the

huge

operating

leverage.

And

you

will,

of

course,

get

the

numbers

at

the

end

of

the

year.

We

would

say,

right

now,

that

services

business

is

in

positive

profit

territory.

But

more

details

to

come

once

we

provide

the

segment

report.

[Dieter Schlosser]

And

on

your

last

– yeah,

Ben,

I

think

you

had

one

last

question

on

the

Software

&

Cloud

in

terms

of

growth

opportunity

in

2022.

So

in

the

second

half,

we

saw

an 8%

growth

on

Software

&

Cloud,

and

we

see

this

momentum

carrying

over

into

2022

as

well.

There

are

certain

aspects,

of

course,

which

we

need

to

consider.

One

of

the

aspects

is

that

you

have,

of

course,

in

2020,

in

the

second

half

of

year

also

height

of

COVID.

So

you

need

to

make

sure

that

you

baseline

against the

right

normal

base.

We

believe

that

Software

&

Cloud,

the

growth

opportunity

are

there,

but

they

are

moderate.

They'll

be

in

the

single

digits –

in

mid

to

high-single

digits.

But

we

also

believe

that

with

our

offerings,

which

we

have

on

digital

supply

chain

as

well

as

marketplace,

we

have

quite

an

upside,

which

is,

at

the

moment, not

yet built into it.

[Ben Castillo-Bernaus, Analyst, Exane BNP Paribas]

Got

it.

Thanks

very

much.

[Operator]

Thank

you.

We

will

now

take

our

last

question.

And

the

question

comes

from

Jad

Younes

from

UBS.

Please

go

ahead.

Your

line

is

open.

[Jad Younes, Analyst, UBS AG (London Branch)]

Hi.

Thank

you.

A

couple

of

questions

from

me

as

well.

So

if

you're

guiding

that

H1

costs

are

going

to

be

flat

over

H2,

wouldn't

Transformance

basically

be

expected

to

drive

benefits

in

H1?

And

then,

how

much

exceptional

from

the

Transformance

program

would

we

expect

this

year?

Secondly,

can

you

give

us

a

number

on

the

attrition

number

that

you've

seen

basically

for

this

year

as

well?

And

then,

lastly,

on

the

M&A,

can

you

also

give

us

a

bit

of

an

idea

about

the

acquisition

pipeline

and

what's

the

average

gross

profit

multiple

that

you're

paying

for

the

acquisitions?

[Dieter Schlosser]

Yeah.

Let

me

start

on

M&A;

and

hi,

Jad.

We

have

a

very

strong

pipeline

on

M&A.

That's

always

part

of

our

model.

As

you've

seen,

it's

usually

between

six

and 10

acquisitions,

which

we

are

able

to

find

the

right

targets

in

the

market.

It

has

to

be

clear

what

– if

you

acquire

in solution

and

services

that

it

will

be

always

margin dilutive

in most

of the

cases. And

it

will

take us, obviously,

a

year to

bring

them

up

to

a

level

on

the

EBITDA

margin,

where

we

see

our

benchmark

and

where we

see

our

Magic

Quadrant.

In

terms

of

attrition,

I

didn't

mention

this

earlier,

but

I

could

share

with

you

that

through

Transformance,

we

always

talk

around

5%

to

7%

in

terms

of

right-sizing

capabilities.

And

then,

you

usually

have

a

normal

attrition,

which

is

slightly

above

10%.

So

that's

the

overall

attrition

which

we

are

talking

about.

On the

first

question,

Rodolfo,

you

want

to

jump

in?

[Rodolfo J. Savitzky, Chief Financial Officer, SoftwareONE Holding AG]

Yeah,

absolutely.

So,

again,

it

boils

to

the

same

topic

we

have

been

discussing

so

far.

As

Dieter

explained,

the

Transformance

program,

definitely,

we

want

to

make

sure

we

keep

sharpening

the

capabilities

in

the

organization.

You

want

to

be

– the

position

that

will

be

reduced

in

H1

of

2022,

that's

where

you

would

see

the

bulk

of

the

impact.

But

we

are

reinvesting

the

behind

growth

mainly

of

these

services,

right?

So

this

is

the

decision

we

are

taking

in

the

investments,

which

should

–

possibility

for

long-term

growth.

And

we

see

that

as

the

priority

at

this

stage

rather

than

bringing

the

savings

to

the

bottom

line.

[Jad Younes, Analyst, UBS AG (London Branch)]

And

then,

on

the

total

level

of

exceptionals

this

year

from

the

Transformance

program?

[Rodolfo J. Savitzky, Chief Financial Officer, SoftwareONE Holding AG]

No.

It

just,

typically,

many

companies

is

these

Transformance

or

restructuring

provision

of

CHF 9

million

that

we

have

this

year.

This

is

the

only

exceptional,

let's

say,

associated

with

this

particular

program.

[Jad Younes, Analyst, UBS AG (London Branch)]

Okay.

Thank

you.

[Operator]

Thank

you.

That

does

conclude

today's

conference

call.

Thanks

for

participating.

You

may

now

disconnect.

[Dieter Schlosser]

Thanks,

everyone.

[Rodolfo J. Savitzky, Chief Financial Officer, SoftwareONE Holding AG]

Thank

you.

Bye.