Softwareone Holding Ltd. · SIX:SWON
Softwareone — Crayon Group Holding — Q4 2019 Earnings Presentation
43 slides from Softwareone's earnings presentation, Feb 11, 2020
Slide 1: Q4 2019 Presentation
Q4 2019 Presentation 11 February 2020
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: Changes to financial reporting segments
Page 7 Changes to financial reporting segments Nordics Europe US APAC & MEA Geos Market Share of 20% 11% 12% clusters 57% gross profit1 1.036 355 198 222 905 270 763 216 132 155 Historical 133 91 gross profit2 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 Software & Software Software &
Slide 8: Business Update
8 Business Update Q4 2019 | CEO Torgrim Takle
Slide 9: Q4 2019 Highlights
Page 9 Q4 2019 Highlights 1 RECORD FINANCIAL QUARTER & FY 2019 2 STRONG PERFORMANCE IN US & EUROPE 3 SERVICES GROWTH & PROFITABILITY “ Tech spend as a percentage of GDP is projected to double over the next decade ” Satya Nadella, CEO Microsoft 29 January 2020 4 RECRUITMENT & PEOPLE PROCESSES AT SCAL
Slide 10: Record Financial Quarter & FY
Page 10 Q4 2019 Highlights 1 Record Financial Quarter & FY Compared to corresponding period last year +54% +15% MNOK +20 Revenue Gross Profit EBITDA1 MNOK 4,228 MNOK 527 MNOK 98 MNOK 13,697 MNOK 1,808 MNOK 292 FY 2019 1 Adjusted EBITDA – EBITDA adjusted for share based compensation and other one-off
Slide 11: Strong Performance in US & Europe
Page 11 Q4 2019 Highlights 2 Strong Performance in US & Europe Compared to corresponding period last year Share of gross profit (Q4 2019) Nordics Gross +6% • Continued strong market Profit 56% • Norway performing well, remaining markets below expectations EBITDA MNOK +2 • Sales targets & plans reinf
Slide 12: Services Demonstrating Strong Growth & Profitability Improvements
Page 12 Q4 2019 Highlights 3 Services Demonstrating Strong Growth & Profitability Improvements SOFTWARE SERVICES Software & Cloud Software & Cloud Software & Cloud Consulting Direct Channel Economics Gross profit growth1 +4% +28% +25% +32% EBITDA margin2 51% (+2pp) +2pp 31% (-10pp) -10pp 13% (+3pp)
Slide 13: Recruitment & People Processes at Scale
Page 13 Q4 2019 Highlights 4 Recruitment & People Processes at Scale People investments Headcount & LTM productivity1 (gross profit/salary) Centralized global Employee Share recruitment engine Purchase Program with 305 new hires launched with 405 Nordics 167% signed during FY employees 2019 part
Slide 14: Financial Review
14 Financial Review Q4 2019 | CFO Jon Birger Syvertsen
Slide 15: Strong Q4 leads to 22% gross profit growth LTM
Page 15 Q4 2019 Strong Q4 leads to 22% gross profit growth LTM LTM gross profit by market cluster LTM gross profit by business area NOK million NOK million 3 11 222 198 507 1 036 355 363 1 809 1 809 707 221 Nordics Europe APAC US HQ/Elim Total Software Software Software Consulting Admin/ Total & MEA
Slide 16: Q4 GP growth driven by international markets
Page 16 Q4 2019 Q4 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 +15% / NOK 68m 527 + 6% Software & Cloud Nordics 16 8 + 4% Direct 459 Software & Cloud Europe 37 + 49% 13 +
Slide 17: LTM Adjusted EBITDA of NOK 292 million
Page 17 Q4 2019 LTM Adjusted EBITDA of NOK 292 million LTM adjusted EBITDA by market cluster LTM adjusted EBITDA by business area NOK million NOK million -9 92 11 329 34 20 -72 -244 292 80 344 292 Nordics Europe APAC US HQ/Elim Total Software Software Software Consulting Admin/ Total & MEA & Cloud &
Slide 18: Strong EBITDA growth in Q4 2019
Page 18 Q4 2019 Strong EBITDA growth in Q4 2019 Adjusted EBITDA YoY Adj EBITDA growth by market cluster YoY Adj EBITDA growth by business area NOK million NOK million NOK million NOK 20m 98 Software & Cloud Nordics 2 8 Direct 78 Software & Cloud Europe 9 -1 Channel APAC & Software & Cloud -9 5 MEA E
Slide 19: International expansion momentum continues
Page 19 Q4 2019 International expansion momentum continues Gross profit Nordic NOK million International2 1 809 1 486 HQ/Elim. 1 128 1 216 23 915 775 17 13 558 349 439 229 1 762 763 905 1 036 685 -3 2015 2016 2017 2018 2019 • Continued gross profit growth in international markets, with Adjusted EBIT
Slide 20: International EBITDA margins continues to improve
Page 20 Q4 2019 International EBITDA margins continues to improve LTM adjusted EBITDA margin1 40% 32% • Nordics with continued 30% Nordics strong EBITDA margins 20% • Europe EBITDA margin 10% improvements driven by 10% Europe continued GP growth APAC & MEA • APAC & MEA EBITDA 0% 5% margin drops due
Slide 21: Working capital driven by seasonality
Page 21 Q4 2019 Working capital driven by seasonality 2019 Q4 net working capital Net working capital over time NOK million NOK million -65 -25 Accounts -81 2 554 -137 -182 receivable -343 -338 Inventory 14 -405 Accounts -716 -2 361 payable Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 2019 Tra
Slide 22: Cash flow is driven by working capital
Page 22 Q4 2019 Cash flow is driven by working capital Cash flow from operating activities NOK million 713 350 353 395 114 -251 -102 -238 -640 • Cash flow from operations is Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 seasonal and driven by changes to net working capital LTM cash developme
Slide 23: P&L - summary
Page 23 Q4 2019 P&L - summary NOKm Q4 2018 Q4 2019 YTD Q4 18 YTD Q4 19 Operating revenue 2 739,6 4 228,2 9 047,5 13 696,9 • Depreciation in line with plan, with Cost of sales -2 280,6 -3 701,6 -7 561,4 -11 888,2 higher deprecation driven by IFRS 16 Gross profit 459,0 526,6 1 486,1 1 808,7 • Impairme
Slide 24: Balance sheet and net interest-bearing debt
Page 24 Q4 2019 Balance sheet and net interest-bearing debt NOKm 31.12.2018 31.12.2019 Assets Development Costs 77,6 86,6 Net interest bearing debt - NOKm 31.12.2018 31.12.2019 Technology and software 33,6 26,8 Long-term interest bearing debt 452,8 303,4 Contracts 66,1 69,8 Software licenses (IP) 1,
Slide 25: Cash flow development
Page 25 Q4 2019 Cash flow development NOKm Q4 2018 Q4 2019 YTD Q4 18 YTD Q4 19 Net income before tax 42,0 -31,8 53,8 9,6 • Q4 2019 cash flow from operations is Taxes paid -6,7 -16,3 -23,6 -30,5 positive in line with seasonality and Depreciation and amortization, incl. write-down 20,9 89,6 76,5 172,9
Slide 26: Outlook
Outlook
Slide 27: Strong outlook for 2020 and medium term
Page 27 Q4 2019 Strong outlook for 2020 and medium term 2019 initial 2019 latest outlook3 outlook 2019 actuals 2020 outlook Medium term Comment Above market growth Gross profit growth +15-20% +20-25% +21.7% +15-20% +10-15 % from scaling up international markets Adjusted EBITDA as Gradually Continued
Slide 28: Q&A session
Q&A session
Slide 29: Investor Relations
Page 29 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 Danske Bank Erik Ehrenpohl Sand +47 85 40 61 31 − Reports & Presentations DNB Christoffer Wan
Slide 30: Data pack available at crayon.com
Data pack available at crayon.com
Slide 31: Appendix
31 Appendix
Slide 32: Introduction to key P&L drivers
Page 32 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 33: Crayon at a glance
Page 33 Crayon at a glance Revenue (NOKm) 10,000 +28% 9,048 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 & Cloud Economics Software & Cloud Direct Business 48% % of gross 52%
Slide 34: Crayon – a fast growing global software and services expert
Page 34 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 35: Crayon's key strategic priorities to drive value
Page 35 Crayon’s key strategic priorities to drive value Drive consolidation – Improved position amongst Business Increased share of wallet increase scale key software vendors ▪ Continue strategic positioning ▪ Highly scalable business ▪ Global partners is a strategic ▪ Significant value in being a
Slide 36: Business overview
Page 36 Business overview Top 10 client’s share Business segment Description Value proposition % of GP1 of segment GP² • Software license offering from partners (e.g. Microsoft, Adobe, Symantec, Citrix, VMware, Oracle, IBM etc.) • Lower total software costs Software & Cloud 39% 14% • Standard softwa
Slide 37: Software & Cloud – Direct and Channel
Page 37 Software & Cloud – Direct and Channel Direct – license offering directly from vendor to customers Channel – 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 partn
Slide 38: Software
Page 38 Software Software & Cloud Direct Software & Cloud Channel Gross profit development, NOKm EBITDA development, NOKm Gross profit development, NOKm EBITDA development, NOKm -1 +4% +28% +8 19 19 +8 +13 94 102 194 201 60 48.5% 50.9% 47 41.3% 30.7% Q4 2018 Q4 2019 Q4 2018 Q4 2019 Q4 2018 Q4 2019 Q
Slide 39: Services – Software & Cloud Economics and Consulting
Page 39 Services – Software & Cloud Economics and Consulting Software & Cloud Economics – IT optimization 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 an
Slide 40: Services
Page 40 Services Software & Cloud Economics Consulting Gross profit development, NOKm EBITDA development, NOKm Gross profit development, NOKm EBITDA development, NOKm +5 +25% +32% +13 14 +22 +37 31 9 152 18 20.1% 110 88 116 15.5% 12.6% 9.7% Q4 2018 Q4 2019 Q4 2018 Q4 2019 Q4 2018 Q4 2019 Q4 2018 Q4
Slide 41: Well diversified and loyal customer base
Page 41 Well diversified and loyal customer base Low customer concentration¹ Unparalleled customer loyalty Top 10 (% of GP) Gross profit NOKm Customers by % of GP Average % repeat customer buy Top 10 Customer 1 customers (1.1%) 18,7 10% 2018 96% Customer 2 (0.8%) 13,5 ~10,000 customers Customer 3 (0
Slide 42: Crayon ticks all the boxes for global software vendors
Page 42 Crayon ticks all the boxes for global software vendors Scoring well on relevant KPIs… …and fulfilling key criteria for vendors Consultative capabilities to drive cloud sales and support the full life 1 ~69% Clients facing increased complexity cycle of cloud workloads Cloud mix¹ and complia
Slide 43: Committed to build a greener and more sustainable future
Page 43 Committed to build a greener and more sustainable future CSR themes: Selected CSR measures executed by Crayon ✓ Measures to reduce CO2 emissions from business travel ENVIRONMENT ✓ Measures to reduce energy consumption ✓ Measures to recycle IT equipment ✓ Internal audits on health & safety is