Softwareone Holding Ltd. · SIX:SWON
Softwareone — Crayon Group Holding — Q1 2018 Earnings Presentation
46 slides from Softwareone's earnings presentation, May 15, 2018
Slide 1: Q1 2018 presentation
Q1 2018 presentation CEO Torgrim Takle | CFO Jon Birger Syvertsen 15 May 2018
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: Crayon at a glance
Page 4 Crayon at a glance Revenue (NOKm) 8,000 +29% 7,302 6,015 6,000 4,688 ~80% global market coverage 4,000 3,045 3,732 2,047 Numbers 2,000 0 2012 2013 2014 2015 2016 2017 ~1100 teammates 21 countries ~30% revenue CAGR Software Asset Management (SAM) Software Direct Business 49% % of gross 51% Are
Slide 5: Business Update
5 Business Update Q1 2018 | CEO Torgrim Takle
Slide 6: Q1 2018 Highlights
Page 6 Q1 2018 Highlights 1 STRONG GROWTH & EBITDA PERFORMANCE 2 THE NORDICS “BACK ON TRACK” 3 CONTINUED CLOUD LEADERSHIP “Global IT spending to grow with 4 INTELLECTUAL PROPERTY MOMENTUM record highs for enterprise software ” April, 2018 5 ACQUISITION OF KRYPTOS (INDIA) 6 IMPROVED MID-TERM CAPITAL
Slide 7: Strong Growth & EBITDA Performance
Page 7 Q1 2018 Highlights 1 Strong Growth & EBITDA Performance Compared to corresponding period last year +37% +15% +NOK 8m Revenue Gross Profit EBITDA1 (MNOK 1,856) (MNOK 310) (MNOK 13) 1 Adjusted EBITDA, excluding extraordinary costs
Slide 8: The Nordics "Back on Track"
Page 8 Q1 2018 Highlights 2 The Nordics “Back on Track” Compared to corresponding period last year EBITDA improvement NOK millions 14 Size = gross profit1 Gross profit: +12% 12 Nordics 10 EBITDA: +NOK 11m 8 6 4 Start-ups 2 0 US Growth Markets -2 0 5 10 15 20 25 30 35 40 Gross profit growth % 1 Q1 20
Slide 9: Continued Cloud Leadership
Page 9 Q1 2018 Highlights 3 Continued Cloud Leadership Cloud mix1 # CSP2/cloud subscriptions: 624 000 57% • Fastest growing global Microsoft x1.4 40% partner & highest cloud mix • 5th largest CSP partner globally (Microsoft’s new “flagship” channel licensing program) Global Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q
Slide 10: Intellectual Property Momentum
Page 10 Q1 2018 Highlights 4 Intellectual Property Momentum +121 new partners & customers onboarded (total ~1,900) +77 new subscriptions signed (double compared to previous quarter) 20 SAM projects delivered (double compared to previous quarter) GDPR INFINITY 2 new services launched (GDPR portal & M
Slide 11: Strengthening Crayon's cloud service offerings
Page 11 Q1 2018 Highlights 5 Strengthening Crayon’s cloud service offerings • Acquisition of Kryptos Technologies Pvt. Ltd (“Kryptos”) in March 2018, initially acquired a majority stake at an enterprise value of MNOK 8.5 • Offering relevant & valuable services to all of Crayon’s customers worldwide
Slide 12: Q1 2018 Business Area Summary
Page 12 Q1 2018 Business Area Summary SW Direct SW Indirect SAM Consulting Q1 2018 Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1 2017 Gross profit growth1 +23% +5% +10% +21% +7% +15% +18% +1% EBITDA margin2 29% 23% 32% 42% 10% 12% 11% 8% Selected contract wins • Significant customer • Strong un
Slide 13: Financial Review
13 Financial Review Q1 2018 | CFO Jon Birger Syvertsen
Slide 14: Gross profit growth driven by Nordics
Page 14 Q1 2018 Gross profit growth driven by Nordics Gross profit YoY gross profit growth by market cluster YoY gross profit growth by business area NOK millions NOK millions NOK millions +15% / NOK 40m 310 Software Nordics 22 20 Direct 270 Growth Software 10 3 Markets Indirect Start-Ups 7 SAM 4 US
Slide 15: EBITDA growth driven by Nordics
Page 15 Q1 2018 EBITDA growth driven by Nordics Adjusted EBITDA YoY Adj EBITDA growth by market cluster YoY Adj EBITDA growth by business area NOK millions NOK millions NOK millions NOK 8.4m 13.3 Software Nordics 12 11 Direct Growth Software 1 2 Markets Indirect Start-Ups 3 SAM 1 4.9 USA 0 Consultin
Slide 16: International expansion momentum continues
Page 16 Q1 2018 International expansion momentum continues Gross profit Established Markets2 NOK millions Less Established Markets2 1 128 1 216 1 256 HQ/Elim. 915 13 13 826 171 17 238 247 4 64 1 826 851 940 965 996 • Gross profit in less established -4 markets has increased 3.7x over two years Adjus
Slide 17: LTM adjusted EBITDA margin
Page 17 Q1 2018 LTM adjusted EBITDA margin LTM adjusted EBITDA margin1 40% 30% 24.7% • Nordics continue on a Nordics strong EBITDA margin 20% • Growth Markets 10% EBITDA margin 1.5% reflects continued 0% Growth Markets investments in USA resources to drive -10% -10.1% Start-Ups growth -20% • USA, St
Slide 18: Working capital is seasonal, but consistently negative
Page 18 Q1 2018 Working capital is seasonal , but consistently negative 2018 Q1 net working capital Net working capital over time NOK millions NOK millions Accounts 1 147 -95 receivable -124 -140 -138 -230 -205 Inventory 24 -289 -340 Accounts -401 1 019 payable Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3
Slide 19: Cash flow from operations affected by working capital buildup
Page 19 Q1 2018 Cash flow from operations affected by working capital buildup Cash flow from operating activities NOK millions 327 • Cash flow from operations is 161 223 152 seasonal and driven by changes to net working capital -140 -104 -139 • Cash flow from operations -210 -251 reduced with NOK 11
Slide 20: Factoring agreement with BNP in place
Page 20 Q1 2018 Factoring agreement with BNP in place • Non-recourse factoring agreement with BNP • Factoring arrangement provides • Scope is Nordic markets significant financial flexibility • Total scope of EUR 120m mid-term • 125 bps margin • Factoring reduces AR and thus leads to more negative NW
Slide 21: P&L - summary
Page 21 Q1 2018 P&L - summary NOKm Q1 2017 Q1 2018 Operating revenue 1 358.5 1 855.7 Materials and supplies -1 088.7 -1 545.5 Gross profit 269.8 310.2 • Depreciation and amortization in line with plan Payroll and related costs -228.4 -256.4 Other operating expenses -36.7 -40.5 • Amortizations increa
Slide 22: Balance sheet and net interest bearing debt
Page 22 Q1 2018 Balance sheet and net interest bearing debt NOKm 31.03.2017 31.03.2018 Net interest bearing debt - NOKm 31.03.2017 31.03.2018 Assets Long-term intrest debt 666.6 455.6 Inventory 18.8 23.6 Net cash and cash equivalents -66.5 -76.4 Accounts receivable 722.0 1 147.0 Restricted cash 8.7
Slide 23: Cash flow development
Page 23 Q1 2018 Cash flow development • Decrease in cash flow from operations y-o-y driven by NOKm Q1 2017 Q1 2018 Net income before tax -26.8 -18.2 • Higher trade working capital as a consequence Taxes paid -9.5 -6.6 of quarter ending during Easter Depreciation and amortization, incl. write-down 15
Slide 24: Outlook
Outlook Q1 2018
Slide 25: In sum – Q1 reaffirms 2018 outlook
Page 25 Q1 2018 In sum – Q1 reaffirms 2018 outlook 2017 actuals LTM 2018 outlook Medium term Gross profit growth +7.7% +9.3% +8-10% +8-10% Adjusted EBITDA as Gradually increase to 10.7% 11.0% 12-14% share of gross profit 15% NWC1 -20.4% -18.4% Around -20% Around -15% Capex NOK 51 mn NOK 59 mn NOK 45
Slide 26: Continued Focus on Profitability And New Services/IP
Page 26 Continued Focus on Profitability And New Services/IP • Favorable market trends (Gartner) Management mid-term priorities Move less established markets along the EBITDA vintage • Well positioned in most markets (from a size & curve (GP to EBITDA conversion upside) capability perspective) Conti
Slide 27: Q&A session
Q&A session
Slide 28: Investor Relations
Page 28 Investor Relations Update Main communications channels • Crayon IR webpages Communicating https://www.crayon.com/en/about-us/investor-relations/ with current and future shareholders, both in − Group fact & figures Norway and abroad, is a − Reports & Presentations high priority for Crayon − S
Slide 29: Datapack
Datapack
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 millions 2014 2015 2016 2017 level as customers shift between direct and indirect billing1 Revenue model Services Software Operating revenue 3 731.8 4 687.9 6 015.2 7 301.7
Slide 31: Income statement
Page 31 Income statement NOK millions 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Q1 2018 Operating revenue 6 015.2 1 358.5 2 401.7 1 249.7 2 291.7 7 301.7 1 855.7 Growth 28.3% 9.4% 23.1% 25.5% 25.4% 21.4% 36.6% Materials and supplies -4 886.8 -1 088.7 -2 045.2 -1 022.0 -1 930.1 -6 085.9 -1 545.5 Gros
Slide 32: Balance sheet
Page 32 Balance sheet NOK millions Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Assets Inventory 17.5 18.8 24.0 13.6 26.3 23.6 Accounts receivable 1 206.8 722.0 1 573.7 769.8 1 541.4 1 147.0 Income tax receivable 2.7 6.1 2.9 1.6 - - Other receivables 54.4 36.0 45.9 43.4 60.0 56.4 Net cash and cas
Slide 33: Cash flow statement
Page 33 Cash flow statement NOK millions 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Q1 2018 Cash flow from operating activities Net income before tax -39.8 -26.8 23.8 -63.4 12.7 -53.7 -18.2 Taxes paid -17.6 -9.5 -1.4 -3.3 2.3 -11.9 -6.6 Depreciation and amortization 99.0 15.3 17.1 16.2 23.1 71.7 17.7
Slide 34: Income statement by market cluster
Page 34 Income statement by market cluster NOK millions 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Q1 2018 Revenue Nordic Markets 3 767.9 869.8 1 106.7 600.2 1 323.8 3 900.5 1 127.9 Growth Markets 1 243.5 230.7 697.8 428.4 545.6 1 902.5 357.9 Start-Ups 890.9 202.8 483.3 171.6 334.8 1 192.6 273.1 USA
Slide 35: Income statement by business area
Page 35 Income statement by business area NOK millions 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Q1 2018 Revenue SAM 291.2 75.2 85.4 67.6 82.4 310.7 78.8 Consulting 403.4 101.0 101.4 87.5 123.9 413.9 121.9 Software (Direct) 3 935.7 790.0 1 774.5 694.9 1 597.0 4 856.5 1 156.0 Software (Indirect) 1 44
Slide 36: Revenue – Market cluster by business area
Page 36 Revenue – Market cluster by business area NOK millions 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Q1 2018 Nordic Markets Services 498.0 121.4 126.7 105.9 144.1 503.4 143.7 Software 3 261.0 745.2 978.8 493.8 939.9 3 391.3 982.6 Admin 8.9 3.2 1.2 0.5 2.9 5.8 1.6 Nordic Markets revenue 3 767.9 8
Slide 37: Gross profit – Market cluster by business area
Page 37 Gross profit – Market cluster by business area NOK millions 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Q1 2018 Nordic Markets Services 386.3 93.8 95.2 82.1 112 383.1 109.8 Software 364.4 78.6 116.4 55.6 122.5 373.1 86.0 Admin 6.9 2.7 0.6 0.4 0.8 4.5 1.2 Nordic Markets gross profit 757.7 175.1
Slide 38: Financial targets
Page 38 Q1 2018 Financial targets 2017 2018 target Medium-term target NOK 1,216m • 8-10% growth compared to • 8-10% growth Gross profit Growth from 2016: 8% 2017 Gross margin 16.7% • 15-16% • 14-15% Adj. EBITDA % of 10.7% • 12-14% • Gradually increase to 15% gross profit Depreciation: NOK 9.7m • Dep
Slide 39: Appendix
39 Appendix
Slide 40: Crayon – a fast growing global software and services expert
Page 40 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 • Owne
Slide 41: Services – SAM and Consulting
Page 41 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 42: Services
Page 42 Services SAM Consulting Gross profit development, NOKm EBITDA development, NOKm Gross profit development, NOKm EBITDA development, NOKm +18% +7% +59% -17% +13 +4 +4 -1 90 68 73 76 9 8 7 6 9.7% 7.8% 10.5% 12.4% Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1 2017 Q1 2018 EBITDA margin1 Gro
Slide 43: Software – Direct and Indirect
Page 43 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 44: Software
Page 44 Software Software Direct Software Indirect Gross profit development, NOKm EBITDA development, NOKm Gross profit development, NOKm EBITDA development, NOKm +23% +55% -15% +10% +20 +11 -2 +3 14 108 31 35 11 88 32 20 42.1% 22.7% 28.6% 32.3% Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1 201
Slide 45: Extensive portfolio of intellectual property
Page 45 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
Slide 46: Proven execution of international expansion strategy
Page 46 Proven execution of international expansion strategy Successful development from being a Norwegian licensing provider to global ambitions Revenue, NOK millions Business model applicable 7,302 across geographies 6,015 +29% 4,688 Ability to win global customers 3,732 3,045 CAGR: +22% 2,047 Pos