Softwareone Holding Ltd. · SIX:SWON
Softwareone — Crayon Group Holding — Q3 2019 Earnings Presentation
43 slides from Softwareone's earnings presentation, Oct 29, 2019
Slide 1: Q3 2019 Presentation
Q3 2019 Presentation CEO Torgrim Takle | CFO Jon Birger Syvertsen, 29 October 2019
Slide 2: Disclaimer
Page 2 Disclaimer These materials may contain statements about future events and expectations that are forward-looking statements. Any statement in these materials that is not a statement of historical fact including, without limitation, those regarding Crayon Group Holding ASA’s (the "Company") fin
Slide 3: Unique Business Model
Page 3 Unique Business Model Customers’ key challenges within IT Business Model IT investments & complexity Relentless SW innovation cycles SERVICES SOFTWARE How to optimize SW spending? GDPR INFINITY Costs Business Value Procurement & Deployment Managed Services Customer acquisition & IP Customer u
Slide 4: Creating value for software vendors and customers
Page 4 Creating value for software vendors and customers Software vendors Strategic partner End customer Need for intermediary function: Intermediary: Need for intermediary function: ▪ Distribution power for its products ▪ Help customers obtain control of their software ▪ Increased IT complexity and
Slide 5: Crayon is the preferred digital transformation partner
Page 5 Crayon is the preferred digital transformation partner… Crayon’s three-step framework to optimize customer’s IT spend BUSINESS VALUE Crayon efficient 1 frontier Reduce or right-size spending based CLIENT AND VENDOR Reduce IT ILLUSTRATIVE on customer’s existing needs and OPTIMIZED spend capabi
Slide 6: Assisting its clients to address key IT challenges
Page 6 …assisting its clients to address key IT challenges Clients faced with key questions… …that Crayon helps to adress Crayon’s business tailored to address the challenges: Services Organizations facing 3 main challenges within IT: Software Software and • Leading global specialist in optimizing c
Slide 7: Business Update
7 Business Update Q3 2019 | CEO Torgrim Takle
Slide 8: Q3 2019 Highlights
Page 8 Q3 2019 Highlights 1 7th CONSECUTIVE RECORD FINANCIAL QUARTER 2 INTERNATIONAL MARKETS OUTPERFORMING “ Navigating licensing options, use rights and agreements is becoming more 3 NEW CUSTOMER SEGMENT MANIFESTED: ISVs1 complex. 69% of organizations want software resellers to also take the role a
Slide 9: 7th Consecutive Record-breaking Quarter
Page 9 Q3 2019 Highlights 1 7th Consecutive Record-breaking Quarter Compared to corresponding period last year +66% +27% MNOK +29 Revenue Gross Profit EBITDA1 MNOK 2,559 MNOK 391 MNOK 34 MNOK 12,208 MNOK 1,741 MNOK 272 LAST 12 MONTHS 1 Adjusted EBITDA – EBITDA adjusted for share based compensation a
Slide 10: Strong Performance Across Business Areas
Page 10 Q3 2019 Highlights 1 Strong Performance Across Business Areas SW Direct SW Indirect (channel) SAM Consulting Gross profit growth1 51% +27% +14% +29% EBITDA margin2 38% 35% 1% 18% Significant client wins • Continued strong • Multi-tier scalability (# • Strong market demand • Strong market gro
Slide 11: International Markets Outperforming
Page 11 Q3 2019 Highlights 2 International Markets Outperforming Compared to corresponding period last year EBITDA improvement NOK millions 30 Size = gross profit1 25 International Market YoY performance2 Nordics 20 International Gross profit growth: +47% 15 Growth EBITDA: MNOK +24 10 USA Markets 5
Slide 12: Accelerated Cloud Leadership Through ISVs
Page 12 Q3 2019 Highlights 3 Accelerated Cloud Leadership Through ISVs Crayon ISV practice... ...accelerating cloud leadership All-up: CSP2 : ISVs Independent Software Vendors Cloud mix1 # Cloud subscriptions All other (“ISVs”) create and sell software 1 74% 1.6m Customer ISVs Crayon +12pps 2 62% Po
Slide 13: Strengthened Global Footprint & Scale
Page 13 Q3 2019 Highlights 4 Strengthened Global Footprint & Scale Rationale New geos established in Q3 2019 Financial impact New offices Medium • New attractive markets 2019 term • Industry consolidation CEE 100-200 • Partnerships and joint go-to-market models Gross with Hyperscalers profit 15-20 •
Slide 14: Financial Review
14 Financial Review Q3 2019 | CFO Jon Birger Syvertsen
Slide 15: Strong GP growth driven by international markets
Page 15 Q3 2019 Strong GP growth driven by international markets Gross profit YoY gross profit growth by market cluster YoY gross profit growth by business area NOK million NOK million NOK million +27% / NOK 83m 393 + 20% Software Nordics 35 49 + 51% Direct Growth + 47% Software 310 23 12 + 27% Mark
Slide 16: Strong EBITDA growth in Q3 2019
Page 16 Q3 2019 Strong EBITDA growth in Q3 2019 Adjusted EBITDA YoY Adj EBITDA growth by market cluster YoY Adj EBITDA growth by business area NOK million NOK million NOK million NOK 29m 34 Software Nordics 23 40 Direct Growth Software 9 0 Markets Indirect Start-Ups 6 SAM 2 USA 10 Consulting 9 5 HQ
Slide 17: International expansion momentum continues
Page 17 Q3 2019 International expansion momentum continues Gross profit Nordic NOK million 1 741 International2 1 486 8 HQ/Elim. 1 128 1 216 23 915 714 17 13 561 354 442 231 1 758 761 902 1 018 683 2015 2016 2017 2018 LTM • Continued gross profit growth in international markets, with Adjusted EBITDA
Slide 18: International EBITDA margins continues to improve
Page 18 Q3 2019 International EBITDA margins continues to improve LTM adjusted EBITDA margin1 40% 32% • Nordics with continued 30% Nordics strong EBITDA margins 20% • Growth Markets EBITDA 13% margin improvements 10% Growth Markets driven by strong growth 1% in reach and relevance in 0% Start-Ups co
Slide 19: Working capital driven by seasonality
Page 19 Q3 2019 Working capital driven by seasonality 2019 Q3 net working capital Net working capital over time NOK million NOK million -65 -25 Accounts -95 -81 1 682 -137 -182 receivable -343 Inventory 19 -405 Accounts -716 -1 288 payable Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Trade
Slide 20: Cash flow is driven by working capital
Page 20 Q3 2019 Cash flow is driven by working capital Cash flow from operating activities NOK million 713 350 353 114 • Cash flow from operations is -210 -251 -102 -238 seasonal and driven by -640 changes to net working capital Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 • Q3 2019 cash fl
Slide 21: P&L - summary
Page 21 Q3 2019 P&L - summary NOKm Q3 2018 Q3 2019 YTD Q3 18 YTD Q3 19 Operating revenue 1 545.9 2 558.9 6 308.0 9 468.7 Cost of sales -1 236.1 -2 165.7 -5 280.9 -8 186.6 Gross profit 309.8 393.1 1 027.1 1 282.1 Payroll and related costs -258.8 -309.0 -786.9 -949.8 • Depreciation and amortization in
Slide 22: Balance sheet and net interest bearing debt
Page 22 Q3 2019 Balance sheet and net interest bearing debt NOKm 30.09.2018 30.09.2019 Net interest bearing debt - NOKm 30.09.2018 30.09.2019 Assets Long-term interest bearing debt 452.8 7.2 Inventory 23.1 18.8 Short-term interest bearing debt 492.5 Accounts receivable 1 119.3 1 682.5 Income tax, ot
Slide 23: Cash flow development
Page 23 Q3 2019 Cash flow development • Q3 2019 cash flow from negative in NOKm Q3 2018 Q3 2019 YTD Q3 18 YTD Q3 19 line with seasonality, however more Net income before tax -34.8 -8.2 11.7 41.4 negative than Q3 2018, primarily Taxes paid -3.9 -3.3 -16.9 -14.2 Depreciation and amortization, incl. wr
Slide 24: Outlook
Outlook
Slide 25: Strong commercial momentum reaffirms 2019 guiding
Page 25 Q3 2019 Strong commercial momentum reaffirms 2019 guiding INCLUDES IFRS 16 EFFECTS 2018 actuals LTM actuals 2019 outlook Medium term Comment Above market growth from Gross profit growth +22.4 % +25.4% +20-25% +10-15 % scaling up international markets Adjusted EBITDA as Continued margin 15.6%
Slide 26: Q&A session
Q&A session
Slide 27: Investor Relations
Page 27 Investor Relations Main communications channels Analysts covering Crayon: • Crayon IR webpages https://www.crayon.com/en/about-us/investor-relations/ Company Analyst Telephone − Group fact & figures Carnegie Hans Rettedal Christiansen +47 22 00 93 21 − Reports & Presentations Danske Bank Eri
Slide 28: Data pack available at crayon.com
Data pack available at crayon.com
Slide 29: Appendix
29 Appendix
Slide 30: Introduction to key P&L drivers
Page 30 Introduction to key P&L drivers • Revenue will be subject to fluctuations that do not impact absolute gross profit NOK million 2015 2016 2017 2018 level as customers shift between direct and indirect billing1 Revenue model Services Software Operating revenue 4 687.9 6 015.2 7 301.7 9 047.5 •
Slide 31: Crayon at a glance
Page 31 Crayon at a glance Revenue (NOKm) 10,000 9,458 +29% 7,302 6,015 4,688 ~80% global market coverage 5,000 3,045 3,732 2,047 Numbers 0 2012 2013 2014 2015 2016 2017 2018 ~1500 teammates 35 countries ~30% revenue CAGR Software Asset Management (SAM) Software Direct Business 48% % of gross 52% Ar
Slide 32: Crayon – a fast growing global software and services expert
Page 32 Crayon – a fast growing global software and services expert Company at a glance An international growth story with strengthening momentum • Founded in 2002 with headquarters in Oslo, Norway Country locations of Crayon customers Crayon HQ (Oslo, Norway) 80% Crayon locations Addressable • Publ
Slide 33: Proven execution of international expansion strategy
Page 33 Proven execution of international expansion strategy Successful development from being a Norwegian licensing provider to global ambitions Revenue, NOK million Business model applicable 9,048 across geographies 7,302 +28% 6,015 Ability to win global customers 4,688 3,732 3,045 CAGR: +22% Posi
Slide 34: Strong Q3 leads to 25% gross profit growth LTM
Page 34 Q3 2019 Strong Q3 leads to 25% gross profit growth LTM LTM gross profit by market cluster LTM gross profit by business area NOK million NOK million 1 741 1 741 8 23 199 205 470 1 018 311 340 700 208 Nordics Growth Start-Ups USA HQ/Elim Total SW Direct SW SAM Consulting Admin/ Total Markets I
Slide 35: LTM Adjusted EBITDA of NOK 272 million
Page 35 Q3 2019 LTM Adjusted EBITDA of NOK 272 million LTM adjusted EBITDA by market cluster LTM adjusted EBITDA by business area NOK million NOK million 79 2 -15 15 321 42 -77 81 -238 272 336 272 Nordics Growth Start-Ups USA HQ/Elim Total SW Direct SW SAM Consulting Admin/ Total Markets Indirect El
Slide 36: Consolidation Trend: Significant Value Potential for Crayon
Page 36 Consolidation Trend: Significant Value Potential for Crayon Consolidation trend demonstrated by SW1/Comparex merger Crayon has an attractive consolidation platform M&A play Value lever # of processes • Economies of scale • Cost synergies Scale 2-3 Mega-merger (total 5,500 employees) between
Slide 37: Strong Market Momentum
Page 37 Strong Market Momentum Market growth, 2017-2018 CRAYON ADDRESSABLE MARKET PREDICTED TO DOUBLE 11% Software Cloud Infrastructure Services YoY growth, Q2 2018 • New, fast growing market Infrastructure cloud • Strategically positioned 53% • More services • Better margins Infrastructure hardware
Slide 38: Unique business model resulting in strong & loyal customer base
Unique business model resulting in strong & loyal customer base Unique customer value proposition Extensive portfolio of Intellectual Property (IP) Unparalleled customer loyalty 20-30% Gross profit generated Average repeat customer buy • SAM is the go-to- x through own IP 95% 96% 95% 95% 95% 96% mar
Slide 39: Services – SAM and Consulting
Page 39 Services – SAM and Consulting SAM – IT optimization; Crayon’s customer acquisition tool Consulting – cloud and solutions consulting services • Crayon’s offering seeks to optimize the IT structure of customers by • Crayon offers consulting services in principally two areas: Cloud and Solution
Slide 40: Services
Page 40 Services SAM Consulting Gross profit development, NOKm EBITDA development, NOKm Gross profit development, NOKm EBITDA development, NOKm +14% +29% +9 +10 19 +2 +25 83 73 0 110 11 17.6% 85 12.5% -2.1% 0.5% -2 Q3 2018 Q3 2019 Q3 2018 Q3 2019 Q3 2018 Q3 2019 Q3 2018 Q3 2019 EBITDA margin1 Gross
Slide 41: Software – Direct and Indirect
Page 41 Software – Direct and Indirect Direct – license offering directly from vendor to customers Indirect – license offering towards channel partners • Focus on standard software that customers use consistently year after year, and which play • Crayon's license offering towards channel partners: a
Slide 42: Software
Page 42 Software Software Direct Software Indirect Gross profit development, NOKm EBITDA development, NOKm Gross profit development, NOKm EBITDA development, NOKm +51% +40 0 +27% 55 19 19 +49 +12 145 56 95 44 15 43.2% 38.3% 34.5% 15.9% Q3 2018 Q3 2019 Q3 2018 Q3 2019 Q3 2018 Q3 2019 Q3 2018 Q3 2019
Slide 43: Extensive portfolio of intellectual property
Page 43 Extensive portfolio of intellectual property Unique proprietary intellectual property portfolio… …providing differentiation and customer stickiness ✓ Help customers improve internal ~500 customers signed up on a subscription processes and capabilities model, typically on multi-year agreement