SoftwareOne Holding Ltd. · SIX:SWON
SoftwareOne — Crayon Group Holding — Debt Investor Presentation (June 2021)
67 slides from SoftwareOne's debt investor presentation, Jun 28, 2021
Slide 1: Investor presentation
Investor presentation 1 28 June 2021
Slide 2: Important information
Important information This presentation (the “Presentation”) has been produced by Crayon Group Holding ASA (the “Company” or the “Issuer” and, together with its direct and indirect subsidiaries, the “Group”) solely for use in connection with the contemplated offering of bonds by the Issuer (the “Bon
Slide 3: Important information (cont’d)
Important information (cont’d) In relation to each Member State of the European Economic Area (each, a "Relevant State"), no offer of Bond will be made to the public in that Relevant State other than: (a) to any legal entity which is a qualified investor as defined in the Prospectus Regulation; (b)
Slide 4: Summary of risk factors
Summary of risk factors Risk Factors The Group could be subject to liabilities if the Group's strategic partners, software vendors, service An investment in the Bonds involves a high degree of financial risk. The below is a summary of providers or subcontractors do not perform their obligations or d
Slide 5: Summary of risk factors (cont’d)
Summary of risk factors (cont’d) Risk relating to customer relationships and third parties Risks relating to the Bonds The Group's success depends on its ability to retain customers and procure additional work from The Bonds are unsecured and rank behind certain lenders which means that there is a r
Slide 6: Transaction summary
Vi Transaction summary Company introduction Industry overview Financial overview Appendix Risk factors
Slide 7: Transaction summary
Transaction summary Transaction summary Consolidated corporate structure • Crayon Group Holding ASA, listed on Oslo Børs with a market capitalization of NOK 300m unsecured bond Crayon Group Holding ASA approximately NOK 10.1bn, contemplates issuing a new NOK 1,800 million in issue senior unsecured b
Slide 8: Main bond terms
Main bond terms Issuer Crayon Group Holding ASA Status Senior unsecured Initial issue amount NOK 1,800 million Max issue amount NOK 2,500 million Use of Proceeds Net proceeds from the Bond Issue will be used to i) part financing of an acquisition and ii) for general corporate purposes Tenor 4 years
Slide 9: Credit highlights
Credit highlights Crayon, listed on Oslo Børs with a market capitalization of NOK ~10.1bn, is a global leading IT advisory firm in software and digital transformation services, covering The global leader in software 80% of the addressable market through its highly scalable and recurring revenue-ba
Slide 10: Company introduction
Vi Transaction summary Company introduction Industry overview Financial overview Appendix Risk factors
Slide 11: Crayon at a glance
Crayon at a glance Company in brief An international growth story with strong momentum NOKm 20 years 2 465 of expertise in software and Publicly listed 2 345 cloud advisory on the Oslo Stock Exchange with a market cap of NOK 1 809 10.1 billion ~1,000 certifications on a wide range 1 486 of technolog
Slide 12: Crayon is the preferred digital transformation partner…
Crayon is the preferred digital transformation partner… Crayon’s three-step framework to optimize customers’ IT spend BUSINESS VALUE Crayon efficient 1 frontier Reduce or right-size spending based on Reduce IT spend the customer’s existing needs and capabilities 2 3 Improve business Enabling the cus
Slide 13: …assisting its clients to address key IT challenges
…assisting its clients to address key IT challenges Clients faced with key questions… …that Crayon helps to address • Leading global specialist in optimizing clients’ IT How to reduce/optimize total IT spending while spend and managing software complexity 1 ensuring compliance? Software and Cloud Ec
Slide 14: Crayon adds value for both end customers and software vendors
Crayon adds value for both end customers and software vendors Crayon’s end customers Crayon Software vendors Provides an overview and expertise in an IT Help customers obtain control of their Increased complexity and solution possibilities environment with increasing complexity and costs softw
Slide 15: Crayon has four separate business areas
Crayon has four separate business areas Top 10 client’s share Business area Description Value proposition % of GP1 of segment GP² • Software license offering from partners (e.g. Microsoft, Adobe, 1 Symantec, Citrix, VMware, Oracle, IBM etc.) • Lower total software and cloud Software & costs • Cloud
Slide 16: Software & Cloud – Direct and Channel
Software & Cloud – Direct and Channel 1 Direct – license offering directly from vendor to customers 2 Channel – license offering towards channel partners • Provides customers with standard software that the customers use consistently • Crayon's license offering towards channel partners year after ye
Slide 17: Services – Software & Cloud Economics and Consulting
Services – Software & Cloud Economics and Consulting 3 Software & Cloud Economics; Crayon’s customer acquisition 4 Consulting – cloud and solutions consulting services • Crayon’s offering seeks to optimize the IT structure of customers by • Total of ~660 consultants per Q1 2021 • improving software
Slide 18: SW&Cloud Channel: Strong growth from hyper-scalable indirect cloud models
SW&Cloud Channel: Strong growth from hyper-scalable, low-risk indirect cloud models Software & Cloud channel value chain Hyper-scalable model with monthly recurring revenue # of end customers through Channel model (in thousands)1 70 60 Indirect customer relation 50 40 Software Channel partner Custom
Slide 19: SW&Cloud Direct: Diversified and sticky customer base
SW&Cloud Direct: Well diversified and sticky customer base with 28% of gross profit from public sector counterparties Low customer concentration... …with sticky recurring revenue Top 10 (% of GP in SW&Cloud Direct) Gross profit NOKm 1 Customers by % of GP Average % repeat customer buy Customer 1 (2.
Slide 20: SW&Cloud: Strategic partnerships with global software vendors
SW&Cloud: Crayon has strategic partnerships with the global software vendors …safeguards Crayon’s position as strategic High scores on vendor KPIs… …while fulfilling key criteria… partner. 1 ~75% Clients facing increased complexity Consultative capabilities to drive cloud sales and support Technical
Slide 21: SW&Cloud: Market position is growing on strong momentum
SW&Cloud: Market position is growing on the back of strong momentum Crayon continues to outgrow its market1… ..with positive momentum in all markets2 Rank FY Rank FY Rank FY Market 2018 2019 2020 0,7 5 Total Nordic APAC 0,7 5 0,6 5 18% 37% 15% 19% 25% 115% Nordic #2 #2 #1 0,6 5 0,5 5 1,6 0,5 5 1,4 0
Slide 22: SW&Cloud Economics: Significant savings potential – customer example
SW&Cloud Economics: Significant savings potential – customer example Cost savings strength with multicloud capability Strategic value creation levers Nordic Choice Hotels: USD 26.3k USD 22.5k Nordic Choice Annual savings Annual savings Hotels 22% 18% 16,500 employees faced with business impact from
Slide 23: Crayon named market leader by Gartner’s Magic Quadrant
SW&Cloud Economics: Crayon named market leader by Gartner’s Magic Quadrant Crayon demonstrated benefit delivery beyond its peers Crayon claimed the number 1 spot The report is the first of its kind, and therefore a recognition of the fact that 10 0 software asset management (SAM) is officially an
Slide 24: Consulting: Crayon adds value along digital maturity journey
Consulting: Crayon adds value along the customer’s digital maturity journey IDC End-Customer Digital Maturity Stages Optimized Managed Repeatable Opportunistic Ad Hoc Digital Disruptor Digital Transformer Disruptive use of new digital Digital player technologies to affect markets Integrated business
Slide 25: The Crayon strategy for continuous global success
The Crayon strategy for continuous global success People first Customer-centric Multicloud Acquisition Crayon values and invests in Understanding our customer We provide cost optimization We have ongoing focus on their employees and is needs is always the priority in multicloud environments growth a
Slide 26: Committed to build a greener and more sustainable future
Committed to build a greener and more sustainable future Environment Social Governance Reports on GHG footprint in terms of CO2 emission by Eco Crayon’s team in India distributed food and medical Good corporate governance is considered a prerequisite in Light House (Miljøfyrtårn) since 2011 an
Slide 27: Industry overview
Vi a7 Transaction summary Company introduction Industry overview Financial overview Appendix Risk factors
Slide 28: Global IT spending is growing and becoming increasingly important
Global IT spending is growing and becoming increasingly important Global IT spending expected to reach over USD 2 trillion in 2022 IT spending is becoming a strategic consideration Global IT spending in USDbn1 Median IT spend as % of revenue2 10% 8% 248 237 220 572 517 467 5% 1 113 1 193 1 021 2020
Slide 29: IT projects have an increasing priority – driving IT budgets
IT projects have an increasing priority – driving IT budgets Top cloud challenges Most important factors for increased IT budgets Main challenges listed by % of companies surveyed Main factors listed by % of companies surveyed 56% Security 81% 45% 39% 38% 36% Managing cloud spend 79% 33% 25% 23% Gov
Slide 30: Transition to cloud
Transition to cloud Digital transformation brings new value adding services, all made possible by cloud Strong cloud growth in coming years Cloud enables… Cloud computing • New technology has lowered the cost of new Reduced costs Cyber security highly value-adding services Flexibility Mobility •
Slide 31: Cloud evolution creates new service opportunities
Cloud evolution creates new service opportunities Cloud infrastructure evolution Service opportunities for Crayon: Multi-cloud • USD ~100bn workloads to be migrated environment to hybrid clouds • Increased complexity is driving Cloud increased demand | for SAM & Cloud • ~100% of enterprises to trans
Slide 32: Microsoft is highly dependent on and expects growth from partner network
Microsoft is highly dependent on and expects significant growth from partner network The Partner Ecosystem is expected to outgrow Microsoft revenue and reach USD 1.2 trillion Partner Ecosystem revenue vs. Microsoft revenue $1 $9.58 $1 $10.04 Microsoft Microsoft generated generated revenue revenue Pa
Slide 33: Artificial Intelligence and Machine Learning are gaining momentum
Artificial Intelligence and Machine Learning are gaining momentum Crayon is on the forefront of innovation Taking advantage of market opportunities Crayon AI & ML services Applications Data insight …the 2019 Global Artificial Intelligence & Machine Learning Partner of the Year No. 1 among ~3,000 par
Slide 34: Significant growth for hyperscale cloud platforms expected to continue
Significant growth for hyperscale cloud platforms expected to continue Consensus revenue growth estimates for the largest cloud suppliers Average YOY growth Growth estimates, indexed 32% 299 20% 21% 251 17% 16% 206 237 166 177 206 131 170 158 154 133 132 100 • Crayon’s main suppliers are Microsoft,
Slide 35: Financial overview
Vi Transaction summary Company introduction Industry overview Financial overview Appendix Risk factors
Slide 36: Gross profit is the key performance measure
Gross profit is the key performance measure Revenues underpins scale and footprint… …however gross profit is the key performance measure Revenues, NOKm Gross profit, NOKm • Revenues includes the gross • Crayon has grown its gross 20,918 cost of software licences which profit with 25% CAGR since 19,5
Slide 37: Strong focus on profitability drives EBITDA
Strong focus on profitability drives EBITDA Payroll and related expenses Other operating expenses Adj. EBITDA development NOKm NOKm NOKm % of gross profit not PF adj. 74% 71% 72% 72% 19% 18% 13% 16% 1,770 12% 505 1,686 413 40 1,293 11% 13% 1,106 9% 292 224 246 229 188 192 465 2018 2019 2020 LTM Q1 2
Slide 38: International expansion momentum continues
International expansion momentum continues Gross profit development Adjusted EBITDA1 development NOKm NOKm 36% 38% 43% 48% 48% International GP share 2,465 465 2,345 413 133 1,809 105 1,192 1,119 292 1,486 23 774 38 1,216 13 558 188 439 444 131 415 1,235 1,282 335 905 1,036 266 763 180 -2 -9 -9 -28
Slide 39: International EBITDA margins continue to improve
International EBITDA margins continue to improve Positive EBITDA margins across geographies Comments LTM adj. EBITDA as % gross profit • Nordics with continued strong and growing Nordics 40% EBITDA margins 35% • The Nordic adj. EBITDA margin as % of gross 30% profit represent the margin in a fully s
Slide 40: Strong cash generative business model
Strong cash generative business model Net working capital Capex (non-acquisition related) Cash conversion1 NOKm NOKm NOKm > 100% if adjusted for net working capital 81 80% 83% 76 77 74% -343 -338 70 -491 63% 388 332 -979 216 -23% -19% -20% 119 -42% 2018 2019 2020 LTM Q1 2018 2019 2020 LTM Q1 2018 20
Slide 41: Inherent seasonality in the business model
Inherent seasonality in the business model Quarterly gross profit seasonality Quarterly net working capital Quarterly cash balance NOKm NOKm NOKm 666 667 1 689 635 527 -137 -65 -81 -25 -99 1 394 515 494 496 -182 459 -343 -338 395 408 393 -395 -491 962 310 310 -718 708 -979 413 379 330 239 166 -1 363
Slide 42: Financial policies
Financial policies • The company does not expect to distribute dividends, but a potential dividend payment will be restricted to maximum 50% of consolidated net profits Dividends • Any distributions will only happen when it is strategically optimal, subject to a satisfactory underlying financial per
Slide 43: Appendix
Vi 43 Transaction summary Company introduction Industry overview Financial overview Appendix Risk factors
Slide 44: Management overview
Management overview Executive management – highly experienced within the respective fields Melissa Mulholland Jon Birger Syvertsen Bente Liberg Mattias Ödlund Abbey Lin Chief Executive Officer Chief Financial Officer Chief Operating Officer Chief Technology Officer Chief Compliance Officer • Joined
Slide 45: Board of directors
Board of directors Board of directors Rune Syversen Camilla Magnus Eivind Roald Brit Smestad Jennifer Lee Koss • Chairman of the board and Co-founder of Crayon • Lawyer and partner of Norwegian law firm Selmer • Senior Industrial Advisor with Altor Equity partners • Employee, serving as as Customer
Slide 46: Quality of earnings
FINANCIAL REVIEW Quality of earnings Comments EBITDA • The financial figures throughout this presentation are based on the consolidated figures for the operational company Crayon Group Holding ASA and are unadjusted as reported in the audited and financial statements • Q1 2021 LTM figures are based
Slide 47: Profit & loss
FINANCIAL REVIEW Profit & loss Comments Income statement • Right-of-use assets recognized and depreciated from 2019, increasing depreciation by NOK 26.4m and 35.5m in 2019 and 2020 respectively • Increase in amortization and depreciation in 2019 due to increased impairment of goodwill related to FAS
Slide 48: Balance sheet
FINANCIAL REVIEW Balance sheet Comments Assets Equity & Liabilities • Development costs are stated at acquisition cost minus accumulated depreciation and amortization. Expenses capitalized as development costs include material cost, direct wage costs and a share of directly attributable overhead cos
Slide 49: Cash flow
FINANCIAL REVIEW Cash flow Comments Cash flow • During 2020 the company has further increased its focus on working capital management in order to improve cash flow and reduce credit risk, which has allowed the company to deliver significant growth while improving the working capital • The major driv
Slide 50: 2021 margin outlook updated
Q1 2021 OUTLOOK 2021 margin outlook updated 2020 LTM 2021 Medium actuals actuals outlook term Comment Continued strong momentum; Sensa Gross profit growth +29.6 % +27.8% +20-25% +15-20 % included in guidance Adjusted EBITDA as Gradually 16-17% Accelerating productivity ramp-up of 17.6% 18.9% increas
Slide 51: Crayon achieves global ISO certification
Q1 2021 OUTLOOK Crayon achieves global ISO certification Company wide certification • 50+ legal entities included • One centralized audit process Three different ISOs • ISO 27001 – Information Security • ISO 27701 – Privacy • ISO 9001 – Quality Information Security ISO/IEC 27001:2013 Scope Privacy I
Slide 52: Shareholder overview and group structure
Shareholder overview and group structure Shareholder overview 52
Slide 53: ESG check list (1/6)
GENERAL INDUSTRY ESG check list (1/6) • Energy management • Privacy and Data Security Please list the industry’s biggest • Product Design sustainability-related challenges • Diversity and inclusion • Risk management • Crayon has a clear strategy to make sustainability our competitive advantage. Sust
Slide 54: ESG check list (2/6)
ENVIRONMENT ESG check list (2/6) • Crayon’s inherent nature of business of helping companies move from on-prem to the cloud is a climate reduction related opportunity. As part of our Combatting Climate change within the ESG strategy, we will measure the environmental impact of all of our countries o
Slide 55: ESG check list (3/6)
ENVIRONMENT ESG check list (3/6) Does the firm rely on any scarce resources for its operations? If so, • We do not rely on any scarce resources for our operations what efforts are made to mitigate the risk of those resources becoming even more scarce in the future, e.g. recycling, reusing, substitut
Slide 56: ESG check list (4/6)
SOCIAL ESG check list (4/6) Does the firm have a history of • No, not relevant for our industry accidents? If so, how have these been managed? Are there any preventive measures, such as policies? • Yes, this includes among others distributing food, creating “fAIr by Design”, donating to children’s h
Slide 57: ESG check list (5/6)
GOVERNANCE ESG check list (5/6) Do all staff members receive continuing education on anti-corruption? Is there an external whistle- • Yes, there is mandatory annual training for all staff about our integrity policy. Crayon has their own employee integrity policy, and we blower function? Are there an
Slide 58: ESG check list (6/6)
GOVERNANCE ESG check list (6/6) Is the remuneration of the CEO and other members of the management • Yes, Crayon’s policy in regard to determination of salaries and other remuneration for senior management is to pay market rates and team in line with industry peers? provide other benefits that are c
Slide 59: Risk factors
Vi Transaction summary Company introduction Industry overview Financial overview Appendix Risk factors
Slide 60: Risk factors (1/7)
Risk factors (1/7) Risk Factors requirements and evolving industry standards. The Group's future success depends on its ability to An investment in the Bonds involves a high degree of financial risk. Potential investors should carefully continue to provide high quality consulting services and to dev
Slide 61: Risk factors (2/7)
Risk factors (2/7) The contemplated acquisition may not materialize, and acquisitions, investments and other strategic which is essential for the Group in order to conduct its business in a profitable, even sustainable, transactions could result in operating difficulties and other negative consequen
Slide 62: Risk factors (3/7)
Risk factors (3/7) The Group is exposed to the risk of breaching international sanctions and anti-bribery/anti-corruption laws, any of which may have a negative impact to the Group's reputation and financial condition Any failure to comply with data protection and data privacy policies, privacy-rela
Slide 63: Risk factors (4/7)
Risk factors (4/7) Any system failures could harm the Group's ability to provide its services and solutions, damage the reduced operating revenue. Any claim brought against the Group could be expensive to defend and Group's reputation or otherwise adversely affect the Group's business require the ex
Slide 64: Risk factors (5/7)
Risk factors (5/7) Any failure in a customer's infrastructure or applications as a result, or alleged result, of the Group's The Group conducts its business in currencies other than its functional reporting currency, making its consulting services' failure could result in a claim for substantial dam
Slide 65: Risk factors (6/7)
Risk factors (6/7) The distribution of the Group's technology and applications across a wide variety of jurisdictions the Bonds, plus accrued and unpaid interest to the date of redemption and a premium calculated in exposes the Group to risks inherent to operating internationally and in regions with
Slide 66: Risk factors (7/7)
Risk factors (7/7) Limited secondary market There is no existing market for the Bonds, and no assurances can be provided as regards the future development of a market for the Bonds, and, therefore, the liquidity of the Bond and the volume it is traded in cannot be guaranteed. This may apply even if
Slide 67: Thank you
CJ) Crayon Thank you
Crayon Group Holding — Debt Investor Presentation (June 2021) on 6ix