SoftwareOne Holding AG ($SWON)

Ladies and gentlemen, welcome to the SoftwareOne Q1 2026 Trading Update Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Kjell Arne Hansen, Head of Investor Relations at SoftwareOne. Please go ahead.

Good morning, and thank you for joining Software Bank's Q1 presentation. My name is Kjell Arne Hansen, Head of Investor Relations. Joining me today are our co-CEO, Raphael Erb, and Melissa Mulholland and our CFO, Hanspeter Schraner. In terms of agenda, Melissa and Raphael will start with the Q1 business performance. Hanspeter will then take us through the detailed financial performance. And finally, Melissa will give her closing remarks. Before handing over, please set were drawing your attention to the disclaimer regarding forward-looking statements and non-IFRS measures on Slides 2 and 3. With that, I will hand it over to Melissa.

Thank you, Kjell Arne, and welcome to our Q1 26 presentation. Our head by numbers tell a compelling story. On a like-for-like basis, revenue for the quarter was CHF 387.7 million. on a constant currency basis, representing growth of 12.9%. This was a strong result. And importantly, it was broad-based with every region and every business line contributing to growth. Adjusted EBITDA grew 32.8% to CHF 79.4 million with margin increasing by 3.4 percentage points to 20.5%. And -- even stronger is the growth in our reported EBITDA, which increased to CHF 71 million, up from CHF 61.9 million in the comparable period. These results reflect our consistent execution of a clear strategy, building 1 stronger, more capable and more efficient company. Turning to our business lines. We delivered growth across all 3 areas, driven by strong customer demand. Software and Cloud Direct grew 5.8% and to CHF 153.8 million. We are seeing clear acceleration in our EA to CSP conversion as customers are increasingly moving to cloud-based licensing. Importantly, EA agreements are also positively impacting growth, demonstrating the depth and strength of our customer relationships. In addition, following Broadcom's partner program, restructuring for VMware, we remain a pinnacle partner, the highest tier and the only partner covering the whole of EMEA with this designation. Software and cloud channel grew by 37.3% to CHF 40.4 million. Growth was led by APAC driven by India, while Noram showed continued momentum. The Google Club partnership we announced in Q4 is gaining traction, further strengthening our hyperscaler mix alongside Microsoft and AWS. The market dynamic in our channel business is becoming increasingly competitive as Microsoft tightened CSP partner authorizations. -- significantly increasing revenue thresholds and consolidating the partner ecosystem. While this creates near-term pricing and competitive pressure our scale and capabilities position us well to benefit from when smaller partners exit or are de authorized. In Software and Cloud Services, we grew 14.9% in the quarter. The primary driver was CSP-related services activities. As customers transition to CSP licensing models, it becomes easier to bundle services with the license and to expand managed services over time. Furthermore, cloud services, data and AI and cybersecurity all showed strong momentum in the quarter. which tells us that the service portfolio is broadening and customers are increasingly turning to Software One for a wide set of their technology needs. That gives you a sense of our business line performance. Rafael will now take you through the regional results in detail.

Thank you very much, Melissa, and a warm welcome to everyone. Turning to our regional performance. I'm very pleased to report that every region delivered growth in Q1 '26. This also reflects the acceleration or the accelerated EA to CSP conversion we are seeing across business lines. I'm especially delighted with the performance in North America, which delivered 10% growth. This reflects the deliberate actions taken over the past year to stabilize and refocus the business. There is still more to do, but the direction is encouraging. 8.4% growth in DACH was driven by the accelerated EA to CSP conversions, especially in Germany and Switzerland. Overall, public sector demand in DACH remains robust. Western Europe grew 11.1%, led by both direct and channel, while we also saw encouraging progress in services. The Nordics delivered a standout performance with growth of 32.7%. This was driven primarily by the direct business where multivendor also contributed positively alongside a strong contribution from services. APAC grew 18.4% with all 3 business lines contributing. Services were the primary growth engine, reflecting strong demand for cloud, data, AI and cybersecurity. The direct business also performed well, supported by EA demand in Southeast Asia and Greater China. I'm pleased to confirm that the previously disclosed outstanding receivables from a public sector customer in the Philippines, have now been fully collected, bringing this matter to a close. CEE delivered 18.2% growth, a strong result for a region where we continue to build scale and strengthen our platform. I'm also pleased to see LATAM returning to growth with 9.4%. CSP growth was strong, supported by new customer wins, while services contributed through hybrid managed services. Now let me share with you a concrete example of how we can deliver tailor-made AI solutions for our customers. the district office of Waldo faced a challenge that many public sector organizations recognize. -- high volumes of citizen inquiries large amounts of information that was difficult to navigate and services that tied strictly to office opening hours. As demand continued to grow, while resources remain constrained, they needed a smarter, more scalable approach. Software run implemented a Google AI-powered multilingual chatbot, integrated directly into their website. The solution provides 24/7 access to administrative information independent of office hours. It requires no manual maintenance and automatically draws on up-to-date website content. The impact was immediate. Citizens can now access the information they need at any time. Recurring inquiries are handled automatically, significantly reducing phone and e-mail volumes. And the administration has freed up capacity to focus on more complex individual cases rather than routine inquiries. This is just 1 example, but it illustrates a broader pattern we are seeing across our customer base. AI is not a future opportunity for Software on. It is something we are delivering for customers today with real measurable impact. With that, I will now hand over to Hanspeter to walk you through the financial update.

Thank you, Rafael, and welcome to everyone. Let me walk you through our financial performance for Q1 '26. For reference, this slide presents IFRS figures. Please note that Crayon was consolidated for the first time in June 2025. as a result the Q1 '25 figures reflect softer 1 on a stand-alone basis. As Melissa and Raphael mentioned, we delivered strong top line growth -- on a reported basis, revenue was CHF 38.7 million, up 67.4% year-over-year, reflecting both Crane acquisition and organic growth. Our reported EBITDA margin improved significantly, up 6.8 percentage points to 18.3%, driven by revenue growth and operating leverage. Q1 was impacted by a high volume of 3-year CSP agreements and early renewals ahead of Microsoft's upcoming price increases. Nevertheless, our Q1 2026 underlying growth was very solid. Turning to the adjusted EBITDA bridge. We continue to narrow the gap between the reported and adjusted EBITDA in order to improve the quality of earnings. In Q1, adjustments totaled CHF 8.4 million, primarily related to creameration expenses. You will notice that while the reported EBITDA margin improved substantially, the increase in adjusted EBITDA margin was more modest. This is purely a mathematical effect as EBITDA adjustments in Q1 26 are CHF 10.9 million lower than in previous year. This slide shows our cost base development, including third-party delivery costs on a like-for-like basis quarter-over-quarter. Starting from our Q1 25 adjusted OpEx base of CHF 301 million. There are a few moving parts to walk through. We delivered CHF 14 million in cost reductions from our synergy program. Offsetting this, personnel expenses inflation added CHF 11 million while variable compensation increased by CHF 9 million, reflecting a stronger performance in the quarter versus previous year. Third-party delivery cost added CHF 3 million, driven by growth in our Services businesses. We also had CHF 10 million one-offs in the quarter. This primarily related to management consulting strategy support, legal fees, audit fees related to crane acquisition, software costs related to the combination of soften and Creon as well as asset and CHF 6 million relates to strategic investments, mainly in IT infrastructure and selective hiring to support our transformation and growth. Finally, FX provided a tailwind of CHF 17 million. Total adjusted OpEx amounts to CHF 308 million, remaining broadly flat despite inflationary pressures. Given that OpEx adjustments in Q1 '26 are CHF 10.9 million lower than in Q1 '25, unadjusted costs are CHF 5.3 million below the previous year. Now turning to Slide 14, which shows our detailed business line P&L on a like-for-like basis. As of this quarter, we introduced the contribution margin per business line, consistent with previous reporting, starting with direct Revenue grew 5.7%, ending at CHF 153.8 million. Adjusted EBITDA margin was 44.8%. Revenue in software and cloud channel increased 37.3% in Q1 26% year-over-year at constant currency. -- with adjusted EBITDA growing CHF 8.3 million to CHF 24.3 million, reflecting a margin of 60.1%, an increase of 9.5 percentage points compared to previous year. Software and Cloud Services delivered a strong growth of 14.9% year-over-year at constant currency. Contribution margin was CHF 80.1 million, reflecting a margin of 41.4% compared to 38.5% in Q1 2025. The adjusted EBITDA margin increased from 1.5 million to 5.1%, driven by increase in revenue and operating leverage. With that financial overview, let me hand back to Melissa who will provide further insights into the 26 outlook followed by your closing remarks.

Thank you, Hanspeter. Based on our strong Q1 performance, we raised our 2026 revenue growth outlook from mid-single digit to mid to high single digit, while margin guidance above 23% remains. Our Q1 growth and 2026 expectations reflect the structural shift from traditional licensing models towards cloud-based subscription and consumption-driven solutions, combined with broader multi-vendor expansion. Growth in services is expected to be driven by customers' increasing need to optimize complex cloud environments, managing software states more efficiently and unlock value from data and AI. We remain on track to achieve the CHF 100 million in run rate cost synergies by early May. We have achieved more than CHF 80 million of run rate cost synergies to date. Let me close with 3 key takeaways from Q1 '26. First, our strategy is delivering. Growth was broad-based. Every region, every business line contributing. This reflects the strength of the combined company we are building. Second, margins are expanding, growth and operating leverage are driving this expansion while we remain committed to continuous cost control. Third, the integration itself is on track to reach CHF 100 million by year-end. We are executing with discipline, capturing synergies ahead of our plan and building the foundation of sustained performance. Altogether, Q1 demonstrates progress on our strategy and gives us confidence in the long-term value we are creating. We look forward to sharing more details on our combined strategy, midterm financial targets and ambitions at our Capital Markets Day in June. Thank you

[Operator Instructions] The first question comes from Nooshin Nejati from Deutsche Bank.

Congrats on the strong results. Maybe 2 questions on the services and direct, if I may. So services growth accelerated to 15% and significantly outperformed expectations. How much of this is structural demand? This is linked to related activity and project timing. How should we think about the momentum for the rest of the year. Services margins improved to 5% this quarter also. Do you see a path for Services margin to structurally move higher as the businesses scale, and also on direct margins declined this quarter despite revenue growth with SG&A cited as a driver. To what extent is this deliberate investment? And how should we think about margins from here?

Thank you, Nooshin, for the question. What we're seeing on the services portfolio is structured strong customer demand. A significant portion of that is driven, of course, by the strength of our Microsoft business on CSP, but also importantly, on the increased growth that we're seeing with data and AI. This reconfirms the fact that we've been doing this for a number of years and are really now seeing this come through with momentum across the business overall. We continue to drive revenue synergies on the combined company, which I think also implies the improved margin overall. We are committed to improving services profitability as a company and structurally would expect this to continuously improve throughout the year. On the direct side, yes, you're correct to point out the, let's say, the margin difference there. This is, let's say, an aspect around SG&A relative to the accounting when we merged Creon and SoftwareOne together. And I can hand it over to Hanspeter for any further comments on that.

Yes, Melissa, thank you. So the SG&A is probably flat -- and as Melissa said, it's an effect of the consolidation of Crayon. And it's also influenced by less EBITDA adjustments, which had an impact on the direct business.

Understood. So how should we think about the margins in both divisions for the rest of the year?

What we see is we see overall positive demand across our business portfolio, and we're really pleased to see growth across all business lines, but also, of course, across all regions. And so we would expect that to continue and progress also, hence, the adjustment to our guiding.

The next question comes from Ines Mao from Bank of America.

This is Ines from BNP. So I have 2 questions. And first, can you give us an update on initial number gets typically does you knew who to include any revenue synergies going forward? And the second question comes back to service strong.

Sorry, I think you need to repeat the question.

Sorry, you're cutting out, unfortunately. Can you repeat from the beginning. I'm sorry, your connection is bad maybe try again or we could see if your connection improves. Now it's better. .

Can you hear me later?

Yes. Unfortunately, we lost you. Maybe we'll try to because there you are.

Yes, sorry. So let me just repeat my 2 questions. My first question is about the revenue synergies. Can you give us an update on where they stand today versus your initial targets? And does your new full year guidance include any revenue synergies going forward? And my second question comes back to the strong performance in services. Was it mostly related to strong demand for a more complex environment to navigate it, which means not driven by 1 vendor particularly. Or was it primarily wrapped around Microsoft renewals or more demand for Microsoft products? I hope it was clear.

Thank you. I appreciate your patience press on that. So in terms of revenue synergies, -- we don't actually report the full year number or, let's say, any number around revenue synergies. What we've stated overall is that we expect them to or exceed the cost synergies. And we continue to see improvement, I would say, overall, and that's reflected across our business lines. because it's very difficult to quantify the effect of that. But certainly, what I can say is the organization is working really well together, as indicated based on the results, which we're very pleased by. Of course, this would naturally be, let's say, pulled into the full year guidance. I think around the services side, we see strong demand across the board. This is not just with respect to Microsoft, but as mentioned, we're seeing continued delivery around Google as implied to the customer case example. -- but also AWS. So this is extremely important for us is our customers are operating in multi-cloud environments, and we have the capabilities to deliver against that.

The next question comes from Christian Bader from Turkey Cantonal Bank.

Yes. I have a couple of questions. So the first one, related to your strong performance in software and cloud services. So this like-for-like growth of 14.9%, is it possible to break this down into, let's say, a volume effect and a price effect. .

We don't necessarily look at it from that perspective between volume and price. I would say that overall, it's just improved efficiency as we brought our organization together, really delivering a stronger capability across our services, Nice and capturing demand.

Maybe to add on, we see growth on services in every region, right? So every region is growing on our services line, which, of course, further helps to contribute to the overall growth.

But I remember the last call, you mentioned that there's strong demand that you see for higher value-added services. So I was kind of assuming that there's also some sort of price effect maybe included in this strong revenue performance.

I would say that important part to mention is that the increased services is also related to how we bundle services with CSP. And -- so naturally, we're seeing a strong delivery on the CSP portfolio, and we executed accordingly. That would also play into effect. So I think that's another important element to state. .

Okay. All right. Good. And then in terms of your, let's say, outlook for the rest of the year in terms of top line, which we have slightly upgraded. So I was just wondering, I mean, this is different momentum that we saw in the first quarter with the direct business being up in mid-single-digit territory services up 15% to high teens. And software cloud channel, 37% up. So we further highest. I mean, shall we expect a similar momentum for the rest of the year.

I think certainly, we see the strong demand continuing throughout the rest of the year. It's also important just to remind, in terms of the seasonality of our business, Q1 is our smallest quarter. So with that, we want to make sure that we deliver to our expectations that we set to the market, but we do not necessarily see demand slowing down.

Okay. But do you expect the software and cloud channel to be the fastest-growing segment followed by software and cloud services in the full year?

Yes. I think looking into our forecast, I think software and cloud channel, our channel business we are positive that we see good growth, probably based on the forecast, this is the fastest-growing business line throughout the year. yes, that's -- we have indications for this, yes. .

All right. SP204726263 And then I have 2 other questions. What will be the full year integration expenses for prior year [ 2020. ] [Technical Difficulty]

Apologies, there was a standbackground. So you asked what the full year integration expenses would be SP-17 Yes, that was the question, yes.

Yes.

Yes. So what we said is the total integration cost is in line with the this is an aggressive assumption. So we said last quarter, it will be a little bit below. We had integration cost of CHF 25 million in 2025. In the first quarter, we had 7.4% and I would use the 1.4 as a run rate for 2026. .

For each quarter, you mean? Yes. Okay. I see all right. And my last question .

Which, of course, depends on the acceleration on the steps we do, but think as guidance, I would take it as a runner.

Okay. The CHF 7.1 million quarterly run rate is good. And so -- and the then I assume that there will be no integration expenses in 2027.

Yes.

Okay. Right. And my last question is which corporate tax rate I'll be modeled for this year, please?

That's a good question. Actually, I would model 30%.

The next question comes from Christopher Tong from UBS.

Good morning, everyone. Just maybe 2 questions from me. So you called out early customer renewals ahead of Microsoft price increases. So I was just wondering if you could sort of quantify the impact -- and my second question is that the full year results, you said that profitability would sort of accelerate towards the back half of the year. I was just wondering if that's still the case.

It's a good question. In terms of the Q1 performance, if we exclude, let's say, the price, let's say, impact and pull forward from those specific deals, the growth implied would be approximately 8.5%, still delivering a very solid performance for the quarter. In terms of your comment regarding the full year expectations, that was alluded to the fact that if you look at the seasonality of our business, being the largest quarter. Q2 being the second largest quarter tends to be much more towards the back half in terms of volume of that cycle. And certainly, we continue to see a solid, let's say, demand overall also with Microsoft just launching ME7 as a SKU. So we see continued, let's say, business momentum going throughout the year.

The next question comes from Mark Burke from Finance on Wershaft.

The first question was already asked in part by my speaker before this effect of those renewals of those price increases you mentioned something, I didn't understand it correctly silly, maybe you could repeat your answer. I mean I just would like to understand how much you said the momentum will continue -- so is it not the case that maybe some orders were replaced early in light of coming price increases? I mean how that yes, that's the first question. And the second question is -- you mentioned those new thresholds that Microsoft imposes on its vendors. So I'm interested in how this changes the market. I mean, I assume that you profit from that because you're 1 of -- you're the biggest partner of Microsoft. So -- but just maybe could you maybe shed some more light on this changing dynamic of the market due to those thresholds, but thresholds that Microsoft imposes on vendors.

Thank you for asking the clarifying question. Regarding the overall price increase, just to start there. What I was referring to is that, that price increase really starts in July. So with the point of it being that customers, especially in Q1 are taking advantage of that renewal cycle. And the overall effect of it, if we exclude that, would be -- our growth on a stand-alone would be 8.5% approximately. So it's still a very good performance excluding, say, the pull forward demand that we saw on these agreements. I hope that... .

So 8.5% compared to what?

To the [indiscernible] Yes. Hopefully, that clarifies. In terms of the thresholds, what I was referring to is that Microsoft is consolidating down the number of CSP providers in the market that are authorized due to volumes. So to your point, this would imply, let's say, an opportunity for SoftwareOne to capture that. as there's more of a consolidation in the market overall

Okay. So you're profiting from that.

Yes. Of course, there could always be some competitive aspect in the market as others are also certainly taking advantage of this as well.

The next question comes from Andreas Wolf from Berenberg.

Congratulations on the strong start to the year. I'm also interested in the pre-buying activity of clients. Should we expect a similar momentum? Should we expect similar momentum in Q2? Or might they even be an acceleration given the fact that the price increases will kick in from the middle of the year. And then could you also comment on the growth rates within the enterprise agreement contract from same work? My understanding is that enterprise agreements are still expanding. And the last question is related to the working capital, Apparently, there is a massive valuation level hidden in the receivables at Crane, the business operator at negative working capital. Do you believe this is also achievable at Software one? And if so, over what time frame? .

Thank you very much, Andreas, for the questions. So first of all, related to Q2 and the price increase on Microsoft, I think as we have highlighted, we saw very good performance in Q1, right? Melissa mentioned before, the impact on, let's say, the normalized growth of 8.5% without this impact. So we saw many, you could call it, early renewables already in Q1. And we maybe don't think that in Q2, it will be at that many are aggressive early renewables like in Q1. So -- but overall, we see the momentum continuing. The demand is there but Q1 was clearly a lot of early renewals already happening. Then if we go into the second question related to the growth of the enterprise agreement, I think as we always mentioned, enterprise agreements are going to continue, especially in our public sector segment. And we have a very good, robust business in public sector. We see continuous good growth in public sector, and that's also helping, of course, the overall growth around enterprise. -- agreements. On the working capital question, I hand over to you, Hanspeter.

Thank you, Rafi. The net working capital, I mean, it's a high focus area for us, and we are actively working on specific areas. The topics are time to invoice, credit rebill and payment terms. We made significant progress in overdue -- so overall, you can assume that we will improve our net working capital situation through 2026.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Shilan Hansen for any closing remarks. Oh, sorry, we have a last-minute question from Christian Bader, TekCotonal Bank.

Yes, I have a follow-up question. These integration expenses for Cryan, can we assume that those are all included in the corporate cost?

I mean -- what do you mean including the corporate cost?

Well, in terms of segment reporting segment results, I was just wondering the integration expenses that you have shown the CHF 7.1 million -- are those allocated on the segments? Or are they 100% included in the corporate cost item?

We show the adjusted EBITDA in the segment. And so they are not included - in the segments. They are not all act segments.

So they are in corporate costs completely.

There are no more questions from the phone now.

Well, thank you, everyone, for participating in the call. And as always, please feel free to reach out to the IR team for any other follow-up questions.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.