Earnings call transcript: SoftwareONE Q2 2025 sees revenue beat, stock dips

SoftwareONE reported its Q2 2025 earnings, showing a revenue of 255.65 million CHF, exceeding the forecast of 250 million CHF. Despite this, the company’s stock fell by 7.78% to 6.34 CHF, reflecting investor concerns over broader market conditions and future guidance. The earnings call highlighted the company’s strategic focus on cost savings and integration of recent acquisitions. According to InvestingPro data, the company maintains a strong balance sheet with more cash than debt, suggesting financial stability amid its strategic initiatives.

Key Takeaways

• SoftwareONE’s revenue beat expectations, coming in at 255.65 million CHF.
• Stock price fell by 7.78%, closing at 6.34 CHF, amid cautious market sentiment.
• The company reported an EBITDA increase and improved margins.
• Cost synergies from recent acquisitions are expected to be realized by 2026.
• SoftwareONE remains optimistic about returning to growth in H2 2025.

Company Performance

SoftwareONE’s Q2 2025 performance was marked by a successful revenue beat, despite a reported decline of 8.1% in H1 2025 revenue. The company managed to improve its EBITDA by 3.5% to reach 85 million CHF, with an enhanced EBITDA margin of 1.9 percentage points. Trading at an EV/EBITDA multiple of 24.03x, the company currently carries a premium valuation. This performance is set against a backdrop of strategic cost reductions and a focus on expanding cloud services. InvestingPro analysis reveals additional insights about the company’s valuation and growth prospects, with subscribers gaining access to over 30 key financial metrics and exclusive ProTips.

Financial Highlights

• Revenue: 255.65 million CHF, beating the forecast of 250 million CHF.
• EBITDA: 85 million CHF, up 3.5% year-over-year.
• EBITDA margin improved by 1.9 percentage points.
• Cost reduction program saved 38 million CHF.

Earnings vs. Forecast

SoftwareONE’s actual revenue of 255.65 million CHF surpassed the forecast of 250 million CHF, resulting in a revenue surprise of 2.26%. This performance is a positive deviation from the expectations, highlighting the company’s effective cost management and market strategies.

Market Reaction

Despite the revenue beat, SoftwareONE’s stock dropped by 7.78% to 6.34 CHF. This decline reflects investor caution amid broader market trends and potential concerns over the company’s future growth prospects. The stock has experienced a significant 53.7% decline over the past year, though InvestingPro’s Fair Value analysis suggests the stock may be undervalued at current levels. The stock’s performance is within its 52-week range, which saw a high of 16.04 CHF and a low of 4.31 CHF, while offering an attractive dividend yield of 4.36%.

Outlook & Guidance

Looking forward, SoftwareONE expects flat revenue growth in 2025 in constant currency terms, with an adjusted EBITDA margin projected to exceed 20%. The company is targeting cost synergies of 80-100 million CHF by 2026 and anticipates a return to growth in H2 2025, particularly in Q3. InvestingPro analysts project the company will return to profitability this year, with comprehensive analysis available in the Pro Research Report, part of the extensive coverage of over 1,400 stocks.

Executive Commentary

Melissa Mulholland, Co-CEO, expressed confidence in the company’s growth trajectory, stating, "We are confident in returning to solid growth in H2." She emphasized the company’s strategic focus, noting, "Our focus is clear. We build a strong foundation and accelerate growth today."

Risks and Challenges

• Market saturation in cloud services could impact future growth.
• Changes in Microsoft Enterprise Agreement incentives may affect revenue streams.
• Economic uncertainties in key markets like the Nordics could pose challenges.
• Integration risks with recent acquisitions may affect operational efficiency.
• Competitive pressures in the software and cloud marketplace remain high.

Q&A

During the earnings call, analysts inquired about the company’s growth prospects in North America, which is expected to return to growth in Q3. Questions also addressed the minimal staff attrition during integration and the impact of Microsoft’s direct customer approach on revenue, both of which the company indicated were being managed effectively.

Full transcript - Softwareone Holding (SWON) Q2 2025:

Sandra, Chorus Call Operator, Chorus Call: Ladies and gentlemen, welcome to the SoftwareONE H1 twenty twenty five Results Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants have been in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast.

At this time, it’s my pleasure to hand over to Amna Engwal, Head of Investor Relations at SoftwareONE. Please go ahead, madam.

Anna Engvall, Head of Investor Relations, SoftwareONE: Good morning, and thank you to everyone for joining SoftwareONE’s H1 twenty twenty five results. I’m Anna Engvall, Head of Investor Relations at SoftwareONE. Joining me today are Co CEOs, Raphael Erb and Melissa Mulholland and Hans Peter Schane, CFO. In terms of agenda, we will kick off with an update on the crayon combination, followed by a summary of SoftwareONE’s stand alone H1 twenty twenty five results presented by Rafael. Hans Petter will then take us through our financial performance.

Thereafter, Melissa will cover Crayon’s stand alone results, progress on integration and outlook. We will finish the session with Q and A as usual. Before handing over, please let me draw your attention to the disclaimer regarding forward looking statements and non IFRS measures on Slides two to three. With that, I will hand over to Rafa.

Raphael Erb, Co-CEO, SoftwareONE: A very good morning, everyone, and thank you for joining us. Together with Melissa and Hans Peter, I’m very excited to be presenting our results for the first time together as a combined company. By joining forces with Creon, we have brought together two global software and cloud providers, creating a leader at scale with complementary businesses across 70 plus countries. Integration is progressing according to plan. Based on thorough preparation, we are executing on a clear road map.

We will, of course, keep you posted on key milestones over the coming quarters. In terms of cost synergies, we are fully on track with CHF 11,000,000 run rate savings already achieved. We remain confident in reaching CHF 30,000,000 run rate by year end and 80,000,000 to €100,000,000 by 2026. Importantly, we are also laying the ground for capturing significant revenue synergies based on our combined marketplace, enhanced services portfolio to drive cross and upsell and joint GTM model. Looking to H2, we expect to return to growth already in quarter three after a challenging first half of the year.

A lower negative impact from Microsoft incentive cuts plus a more favorable comparable period will support this recovery. Overall, for full year 2025, we expect revenue growth to be flat in constant currency compared to 2024 on a combined like for like basis, with an adjusted EBITDA margin over 20% of revenue in a transitional period focused on integration. Let’s now look at SoftwareONE’s stand alone performance. Revenue declined by 4.3% in constant currency in Q2, an improvement compared to Q1 and in line with guidance communicated in May with our trading update. We navigated Microsoft’s incentive changes during the period with twothree of the expected total negative impact affecting us in the first half, particularly in June.

We continue to implement mitigating measures, including CSP conversion. Recently announced measures by Microsoft also support this transition. Adjusted EBITDA was down 2.7%, reflecting a margin improvement of 0.5 percentage points to 23.5% in H1. This was thanks to the impact of our cost reduction program and continued strict cost control. Moving on to the regional performance.

Overall, we are on track in the regions with exception of North America, but here we are seeing improved momentum on the back of our implemented action plan. And together with Creon, we have a stronger business and leadership team in this region. APAC delivered revenue growth of 13% in constant currency in H1 with strong results across the region. We continued to see excellent growth in services in Q2 with AWS services more than doubling in size compared to prior year. DAC revenue declined nearly 3% driven by the Microsoft transactional business.

Our largest exposure on EA incentives is in DACH, so this was expected. Partially offsetting this impact was solid momentum in our public sector business, where we had a number of new customer wins. Rest of EMEA was down 1.7% with solid results in Benelux and Southern Europe, offset by other countries, including The Nordics, where a number of large deals slipped into the second half. As mentioned, while Q2 was again challenging, Noram is showing signs of recovery from the GTM related sales execution issues, and we are confident in returning to growth already in Q3. Finally, revenue in LatAm decreased by around 5%, largely driven by Brazil, while Mexico delivered another strong quarter in Q2 and Colombia returned to growth.

Now turning to our business lines. Software and Cloud Marketplace revenue declined 11% constant currency in H1, driven by the Microsoft transactional business. Microsoft gross billings declined 2% as a result of proactive business management given the enterprise agreement incentive cuts. And in alignment with Microsoft taking a few large transactions direct. The incentive changes and resulting impact were, of course, anticipated.

And as mentioned, we have mitigating initiatives in place. We have accelerated efforts to transition customers to CSP, collaborating with Microsoft, who also recently announced price increases on EAs and more options around subscription terms for customers to support the transition. We are also focusing on Microsoft funded pre and post sales activities, with revenue more than doubling quarter to quarter, which will increasingly help to compensate for a sizable part of EA incentive impact in H2. In the meantime, Services gained some momentum with mainly North America and large deals in prior year weighing on growth. Excluding North America, services revenue growth was 7.5% in constant currency in H1, demonstrating the solid momentum that we are seeing in most of the regions.

To wrap up this section, I would like to highlight a great example of how we are helping customers boost productivity through AI. We supported A. ON in introducing an AI chatbot that gives employees instant access to process knowledge, streamlines collaboration and enhances customer service. The solution is now being packaged to scale across other major clients.

Hans Peter Schane, CFO, SoftwareONE: I will now hand over to Hans Peter to take us through their H1 result in further detail. Thank you, Rafael. I would like to start by extending a warm welcome to everyone joining us today. It’s a pleasure to meet you all virtually. Let me provide an overview of our financial performance at group level, starting with the condensed IFRS income statement.

Revenue declined by 8.1% on a reported and 4.9% on a constant currency basis in H1. This was driven by the go to market related issues in NurOwn as well as Microsoft incentive changes. Reported EBITDA was 85,000,000, up 3.5% with a margin improvement of 1.9 percentage points, driven by the cost reduction program and continued strict cost control despite of the revenue decline. Higher CapEx in recent years led to increased depreciation. Meanwhile, flat asset development despite higher investments is mainly driven by FX effects.

Net financing expense reflects a negative CHF 12,000,000 year over year impact driven by the change in the fair market value of our Creon shareholding. Finally, the tax rate was supported by Crayon acquisition related effects and non tax deductible expenses, including M and A earn out expenses. Moving to the reported EBITDA bridge. On the left, you can see the decline in revenue by €6,200,000 in constant currency, primarily driven by Nordholm, partially offset by growth in APAC with all other regions were flat to single digit negative. On the right, we highlight the significant OpEx savings of CHF 38,000,000, mainly personnel expenses driven by our cost reduction program.

This effect is expected to continue to materialize in H2. In addition, EBITDA adjustments decreased by CHF 10,000,000, reflecting our commitment to materially lowering the level of adjustments. The achieved cost reductions were partially offset by wage inflation and other adverse effects. EBITDA adjustments totaled to 29,700,000.0 in H1 twenty twenty five, a net reduction of CHF 10,000,000, as mentioned. The main adjustments related to cost reduction program.

The total is in line with our expectation of being below CHF 30,000,000 on a stand alone basis. Additionally, we incurred Graon transaction integration related costs. These costs have been clearly defined to ensure that only expenses directly attributable to integration are adjusted for. As a reminder, we expect integration costs within the same range as the run rate cost synergies of CHF 80,000,000 to 100,000,000. Moving on to the business lines.

In Marketplace, revenue declined by 13.9% in reported currency in H1. Microsoft revenue fell, partially offset by modest growth in other independent software vendors. The contribution margin remained stable at 87.8%, driven by optimization of delivering costs. The adjusted EBITDA margin was 53.4, up 3.3 percentage points from the prior year, reflecting sizable SG and A reductions. In Services, revenue declined 1%.

Excluding Noron, Services grew by 4%. Delivery costs decreased slightly with the contribution margin up 0.7 percentage points. SG and A decreased by 2.8, driving improvement in the adjusted EBITDA margin by over one percentage point to 8.6%. A few words on the balance sheet developments. To finance the cash consideration of the Crayon transaction, the company entered into a bridge facility in H1 twenty twenty five.

CHF424 was drawn as of June 30, which is reflected in cash and cash equivalents as well as in other financial liabilities. We successfully refinanced the bridge in July with a €600,000,000 term loan while also refinancing the existing €600,000,000 revolving credit facility, supported by a broad group of leading Swiss and international banks, the financing provides security for a minimum of four years plus a potential one year extension. The bridge remains open for an amount of CHF 100,000,000 until its latest expiry in Q2 twenty twenty six. As of June 30, net working capital was negative by CHF 216,600,000.0, an improvement of CHF 400,600,000.0 year over year, driven by nonrecourse factoring. The reduction in equity is mainly due to the dividend distribution of CHF 45,600,000.0, negative currency translation adjustments of CHF 34,800,000.0 from the Swiss franc depreciation, hedging effects recognized directly in equity and partially offset by the net profit for the 2025.

Turning now to our cash flow for the six month period ended June 30. Operating cash flow was positive, driven by the net profit and the net working capital. Cash used in investing activities includes CapEx of €30,100,000 in line with the previous year. In addition, investing activities includes the settlement of the total return swap of $35,700,000 Cash flow from financing activities reflects the bridge drawdown of CHF424 million for the Crane acquisition, dividend payments of CHF45.6 million as well as interest paid of CHF13.7 million. Cash and cash equivalents at June 30 was at CHF 655,100,000.0.

This slide shows the net bridge over the twelve month periods. We closed H1 with a net cash position of 36,200,000.0, primarily driven by the positive swing in net working capital. Major cash outflows included CapEx, M and A and earn out payments, interest paid as well as significant returns to our shareholders in form of dividends and the share buyback program completed in 2024. The chart on the left shows net working capital as defined, which was negative CHF216.6 million at June. As mentioned, we launched a new nonrecourse factoring program in The U.

S. And in the DACH region for the sale of eligible and insured receivables. Total factoring amounted to 4 and €88,500,000 as of June at the June, up from €116,800,000 one year ago. Excluding factoring, the underlying improvement in net working capital was €29,000,000 being a stabilization of the underlying working capital compared to previous year. Beyond this program, working capital remains a top priority for the group.

We continue to execute on initiatives to expedite collections, improving invoicing accuracy to limit rebuilds, leveraging dashboards to track collections, supported by KPIs linked to bonus achievements. We are, of course, also sharing best practices with Creon, who has demonstrated strong improvements in working capital over recent quarters. Turning to my last slide. I would like to wrap up with our planned segment reporting structure going forward. This structure aligns our financial reporting with our integrated go to market strategy.

Our primary reportable region will remain at Doch, Rest Of EMEA, Nurhaum, LATAM and APAC. Graon’s Nordics business, along with softer ones, is included in Rest Of EMEA. The new business segments will be Software and Cloud Direct, Software and Cloud Channel and Services. The Direct business combines Marketplace with Crane Software and Cloud Direct business. Channel consists mainly of Crayon’s channel business, while Services brings together our combined offering, including Crayon Software and Cloud Economics and Consulting.

To provide a clear basis for comparison, we will be providing restated historical numbers on the new reporting segments prior to our Q3 twenty twenty five trading update in November. I will now hand over to Melissa to go through results.

Melissa Mulholland, Co-CEO, SoftwareONE: Thank you for joining us today. I’m pleased to share Crayon’s stand alone results for the second quarter. In H1 twenty twenty five, we continue to see good underlying demand as reflected in our gross sales growth of 20%. However, growth in gross profit ended at 0.2%. In H1, we focused intensely on the transition from enterprise agreements to CSP, given the benefits to a customer and the increased earnings opportunity for Crayon.

Like SoftwareONE, two thirds of our EA volume lands in H1. I’m pleased with the CSP performance where we grew 58% and we’re able to recover the total enterprise agreement loss in the first half of the year. The transition takes focus and careful alignment with the customer and consequently this resulted in less enterprise software deals such as IBM and Oracle, which generate high margin. In June, we had negative growth. This is due to the large volume of EA agreements as it’s our largest EA renewal month in the year.

In combination with less enterprise software, which is not Microsoft, this compressed our gross margin and gross profit in our Software and Cloud Direct, which ended flat in H1. In addition, growth was impacted by underperformance in The Nordics consulting business. The Nordics consulting market remains cautious, holding back on larger consulting investments, focusing on need to do investments. This applies for both private segment, but also specifically in the public sector, which represents 50% of our total Nordics business. We see reluctance to invest in larger longer term consultancy projects.

Adjusted EBITDA ended at NOK469 million for H1, reflecting a margin of 15% on gross profit. This was a decline compared to the prior year, driven by the lower than expected gross profit growth. At the same time, we delivered record setting working capital performance. Underlying the resilience and the strong execution capabilities of our teams. Our focus on working capital has resulted in sustainable improvements.

Looking ahead, we are well positioned to accelerate growth in H2 and I’m confident in returning to solid growth in the second half of the year. Q3 has been off to a good start with great momentum and we can see a turnaround in our performance. We have spent twenty three years building a growth orientated business and our success in navigating the various market challenges illustrates the strength and resilience of our business model. On January 1, Microsoft reduced incentives related to enterprise agreements. This represents a shift from large multi year agreements to consumption based agreements known as CSP.

This benefits the combined company as the margin on CSP is higher than on EA. One of the key changes in Microsoft incentives has been a higher focus on value added services. As Microsoft incentives shift away from one off EA deals, they’re increasingly rewarding partners who can attach high value services like cloud, AI and security. In the past, the incentive was almost exclusively tied to the software or cloud license itself. Now as the chart illustrates, partners are rewarded for the license in addition to the services provided.

In addition, Microsoft’s upcoming pricing changes on EA as of November 1 will accelerate the change to CSP and provide growth opportunities for the combined company. Turning to integration, I’m pleased to report that we are progressing fully as planned. Our focus since closing has been on ensuring business continuity while laying the foundation for value creation. In the first three months, we have prioritized stability and continued customer focus. We introduced our new operating model and have appointed key leaders for the organization, regions and countries, all with leader representation from both companies.

This will ensure clear alignment and clarity across the company. Our sales force is a crucial connection to our customers, so enabling them remains a top priority. We have identified key customers for upselling opportunities where we can expand our licensing and service offerings into existing accounts by leveraging SoftwareONE and Crayon’s complementary strengths. An example of this is SoftwareONE’s ServiceNow global capability that was announced. This serves as a new sales motion that we can extend into Crayon’s customers worldwide.

Multiple sales initiatives in security and AI are also underway and support services are being aligned to increase margin and productivity. Another example that I want to highlight is Crayon’s channel business. This is strategic as it delivers high EBITDA margin given the scalability in reaching mid market and SMB customers. With SoftwareONE, we will extend the channel business into the countries and transition small customers to our partners to drive increased sales efficiency and overall profitability. In terms of early synergy realization, run rate cost savings of CHF 11,000,000 were achieved by the August 2025 due to reduction of duplicate management roles.

As we move into the six month phase, the targeting operating model is being rolled out. The go to market and segmentation strategy are in place and we are realizing synergies. Looking ahead to eighteen months, our ambition is full value realization in line with our commitment to our investors, customers, partners and employees. By then, we will operate fully as one company with a single set of targets, harmonized operations, aligned vendor and channel strategy and sales place deployed across integrated countries. Throughout this process, we prioritize active change management and ongoing communication with all our stakeholders to track impact and reduce risks during the transformation.

Importantly, we are confident that we will achieve cost synergies of CHF 80,000,000 to CHF 100,000,000 by the 2026 as committed. Before the outlook, let’s move on to the combined like for like financials. These financials have been prepared to allow for better comparability and transparency. They illustrate the combined performance as if the transaction had taken place on 01/01/2024. On a combined basis, H1 revenue declined by 3.1% in constant currency with a margin of 20%.

Importantly, the 2024 numbers provided baseline for our full year 2025 guidance for the combined company. Taking into account our year to date combined performance and the integration period which lies ahead of us, we have adjusted our expectations for the full year. On a combined like for like basis, we expect revenue growth to be flat in constant currency over 2024. We are confident in returning to solid growth in H2, driven by a lower impact from EA incentives, only one third of the total impact for the year, accelerated CSP growth and a turnaround in North America. We will also benefit from a more favorable comparable period.

Adjusted EBITDA margin as a percentage of revenue is expected to be above 20% driven by the full impact from SoftwareONE’s cost reduction program initiated late last year, a high emphasis on cost control as well as synergies. Beyond 2025, we expect to accelerate growth and enhance profitability supported by run rate cost synergies of 80,000,000 to $100,000,000 as well as meaningful revenue synergies. Microsoft EA incentives will also have bottomed out and the CSP transition fully taken a hold. Guidance for 2026 and midterm targets for the combined company will be provided with our full year 2025 results early next year. I will close by looking ahead and outlining how we see the journey for our combined company over the next few years.

Our focus is clear. We build a strong foundation and accelerate growth today, creating sustainable long term value for our stakeholders in the future. In 2025, our priority is to set the integration engine running. We prepared thoroughly, started integration and now have a combined leadership team with a clear execution plan. In the meantime, we have already captured early cost synergies to support stable profitability even as the top line growth will be limited.

In addition, we are driving multiple sales plays to capture revenue synergies across the business. From 2026, we expect the growth engines to shift gears. We’ll be unlocking revenue synergies while benefiting from a stronger momentum in our Microsoft partnership and other ISVs and hyperscaler opportunities. Importantly, 2025 will mark the bottoming out of EA incentives giving us a cleaner base for growth. From 2027 and onwards, we have crossed the finish line of the integration with the full realization of both cost and revenue synergies.

Revenue synergies are expected to exceed cost synergies. At this stage, the combined company will be in the best position it ever was in the global IT services and software market and will be driving a higher share of recurring, high margin services, making our growth both stronger and more predictable. Before concluding the presentation, we would like to highlight a change in our Investor Relations team. Shalana Huntsman, former Head of IR at Crayon will take over as Head of IR of SoftwareONE, while Anna Englahl moves on to a new opportunity. We would like to thank Anna for her significant contributions over the last five years and well wish Shalarna all the best in his new role.

With this, I will now hand it back to the operator for the Q and A session.

Sandra, Chorus Call Operator, Chorus Call: Thank you. We will now begin the question and answer session. Session. Our first question comes from Christian Barder from ZKB. Please go ahead.

Christian Barder, Analyst, ZKB: Yes, good morning, and thank you for this dynamic presentation. I have plenty of questions, but I will limit those to three, and I’d like to do them one after the other. So first of all, apparently, SoftwareONE has achieved cost savings already in the first six months. And together with Cryon, you foresee additional cost savings. I’m assuming this is predominantly derived from staff savings.

So therefore, I think the obvious concern is, do you experience additional fluctuations at this point at your from your staff?

Raphael Erb, Co-CEO, SoftwareONE: I can take that, Christian. Thanks for the question. I think we are seeing a very limited increased attrition, yes, but it’s very limited in certain geographies. Other than that, I would say we are, in general, retaining the talents, and we are very focused also on this, and we are not seeing this impacting really our plans and results in the future.

Christian Barder, Analyst, ZKB: Okay. And my next question has to do with factoring. Two, if I may, on this one. First of all, why increase the factoring facility right now? And secondly, the change of the amount of factoring that I have calculated back on the envelope is $364,000,000 against the year end.

Can you confirm that, please?

Hans Peter Schane, CFO, SoftwareONE: Thank you for this question. I can take it. So first of all, we are talking here about nonrecourse factoring. We have these new programs. And this factoring helps us to manage the seasonality and the peaks of our net working capital.

Christian Barder, Analyst, ZKB: The changes against the year end, please?

Hans Peter Schane, CFO, SoftwareONE: I mean the changes against the year end depends at the end. I mean, first of all, we have a seasonality in net working capital, and net working capital is peaking July, August. So we are now at the peak. The change is against year end, what I can say today, it will be lower. But at the end, I cannot commit to a number today because at the end, it depends on our ability to improve the underlying working capital and the seasonality actually.

Christian Barder, Analyst, ZKB: Okay. And my last question has to do with your refinancing. You’ve mentioned that you have refinanced the bridge facility with a term loan. Is it possible to get additional, let’s say, terms and conditions for this term loan, in particular, the interest rate?

Hans Peter Schane, CFO, SoftwareONE: I mean, the interest rate is market standards, giving our financial structure and rating. So you yes, it’s market standing in terms of the term loan has to be amortized with an annual amortization of 50,000,000. And the committed facility has a tenure of four a year with an extension option of one year.

Christian Barder, Analyst, ZKB: Okay. But where would the cost of debt for SoftwareONE stand alone or on a combined basis turn out after this refinancing,

Hans Peter Schane, CFO, SoftwareONE: I mean, at the end, it depends on how much we have drawn on the revolving credit facility during the year. But you really can assume a market interest. You can assume that the term loan is fully drawn. And the revolving credit facility was drawn at midyear by $180,000,000 And after acquisition, it was drawn by $470,000,000 this to finance the acquisition. So apply market rates and you will find this number.

Christian Barder, Analyst, ZKB: Okay. All right. That’s it for me. Thank you. Thank you.

Sandra, Chorus Call Operator, Chorus Call: The next question comes from Knud Bohler from Baader Bank.

Knud Bohler, Analyst, Baader Bank: Also a couple of questions. Just starting firstly with the North American go to market challenges. Can you provide us here with an update where you are in terms of this go to market implementation?

Raphael Erb, Co-CEO, SoftwareONE: Thank you, Knud for the question. So on North America, the action plan, which we have basically announced also with our Q1 result update last time, has been fully implemented and successfully implemented. Just to give you some flavors, we announced that we had one of our EB members and current CEO, Oliver Berchstold, spending most of his Q2 over in North America, really working closely with the leadership team over there. We have reinstalled and hired some employees specifically focused on our multi vendor business, which has been under pressure. So we have rehired dedicated ISV experts.

We have had some global experts supporting North America and this has shown already in June actually some first results with an increased and improved renewal rate on the multi vendor business. And now it’s great. We also have new leadership from Creon coming in. And we have basically announced the leadership team in Noram for the combined company. They are already working well together.

And we are positive, very positive actually going into Q3 already that we are seeing growth in North America, and we will see growth Q3, Q4, H2 in North America. So we are positive that North America is back on growth territory going into Q3.

Knud Bohler, Analyst, Baader Bank: Thank you, Rafael. And another question. When you so when you look at your promise of return to growth already in Q3, does this also hold for SoftwareONE standalone and Cayenne standalone? Or is it just a commitment for the combined entity?

Raphael Erb, Co-CEO, SoftwareONE: I mean, we issued the guidance for the combined company. So I want to continue to talk about the combined company. And here we are positive that we are in growth back in growth territory Q3

Knud Bohler, Analyst, Baader Bank: onwards. Okay. And just quickly to get a better understanding of I understand that you’re now just thinking in terms of the combined entity of Rafael, but is it still fair? Or would there be any reason to believe that your former guidance for SoftwareONE stand alone wouldn’t hold given the confirmed drivers for H2?

Raphael Erb, Co-CEO, SoftwareONE: Knud, over the recent months, SoftwareONE has successfully, I would say, very successfully implemented our cost reduction program and also taken action to resolve the GTM related issues, particularly in North America, to ensure we deliver the standalone guidance we issued earlier this year. And I think these measures really ensure that we are on track to reaching our combined guidance for the full year 2025, which we have just announced

Knud Bohler, Analyst, Baader Bank: previously. Excellent, Rafael. Thank you for this color. And just lastly, quickly, how to think about the combined company in terms of margin expansion potential from 2026 onwards? Can you give here some qualitative comments already?

Raphael Erb, Co-CEO, SoftwareONE: Or is it still too early? We will basically announce our guidance for 2026 with full year 2025 results announcement. So it’s a bit too early. I think we made some statements that we are, of course, focused on realizing the cost synergies. We have a plan in place to also realize significant revenue synergies.

And yes, if that works out, I think there is a positive outlook. But yes, we will provide full year guidance with 2025 results.

Christian Barder, Analyst, ZKB: Thank you very much, Rafa,

Knud Bohler, Analyst, Baader Bank: and all the best for the first one as a combined entity.

Raphael Erb, Co-CEO, SoftwareONE: Thank you, Knut.

Sandra, Chorus Call Operator, Chorus Call: The next question comes from Nooshin Mejjati from Deutsche Bank. Please go ahead.

Nooshin Mejjati, Analyst, Deutsche Bank: Hi, good morning and thanks for taking my question. I have also two. Regarding Nora, can you please elaborate further on the development? Any KPI regarding the rehiring units or announced last quarter? I am just wondering how much of the return to growth in next quarter is contributed to improvements in NurOwn versus much easier comps?

I believe the standalone guidance was highly dependent on new RAM turnaround. So it would be very helpful to know what’s the situation now there. And what are the risks of that customer loss to Microsoft direct approach? What percentage of your customer base is at risk here? Thank you.

Raphael Erb, Co-CEO, SoftwareONE: Well, the first question on Oram again. Thank you. So as I mentioned before, we expect North America to return to solid growth in H2, driven actually by the improved business momentum. And we also I mean a few more factors, right, aside of the resolving the GTM issues. I think also in North America, we see a lower impact from Microsoft incentives going into H2.

So also there, it’s a bit front loaded, which should help us going into H2. And we are also entering into a more favorable comparable period, right? If you look into H2 last year in North America, North America in H2 twenty twenty four SoftwareONE standalone declined by about 15%, right, due to some one timers and so on. So I would say we are entering into a more favorable period, which also helps to kind of be positive that we are backing growth going into H2 solid growth actually.

Nooshin Mejjati, Analyst, Deutsche Bank: Okay. Understood. So I was just wondering if that impact is coming mainly on comp easier comps or it’s actually returning to growth way ahead of those 15% decline last year?

Raphael Erb, Co-CEO, SoftwareONE: I mean it’s a mix of all the factors which I mentioned. I think the new leadership team which is in place helps. We are having clear plans in place on how we execute the multi vendor business. We see first signs of improvement, thanks to the people we put in place, thanks to the KPIs also we put in place. And then again, maybe also highlighting about the combination because we are really now a combined company, right?

Creon has been growing very well in North America over recent quarter. We see this trend, I think, to continue. And we are also very happy with the leadership and, in general, the team from Creon in North America, which yes, we are together now. And I think this helps as well.

Nooshin Mejjati, Analyst, Deutsche Bank: Thank you. Very helpful. Just to add from a

Melissa Mulholland, Co-CEO, SoftwareONE: Crayon perspective, we’ve been deeply focused on building up our channel business, which as we mentioned, we will continue report on as a combined company because we see this to be a significant opportunity in North America, but also of course globally. And this has been a big driver of our Crayon turnaround and growth performance in North America, which will be helpful in terms of the combination of the two companies where we see an opportunity together.

Nooshin Mejjati, Analyst, Deutsche Bank: Understood. Thanks.

Raphael Erb, Co-CEO, SoftwareONE: I’m sorry, your second question maybe can you repeat again? I have I’m

Nooshin Mejjati, Analyst, Deutsche Bank: not Absolutely. So I was wondering what are the risks of better customer loss to Microsoft Direct approach?

Raphael Erb, Co-CEO, SoftwareONE: I think look in general on the Microsoft, yes, I think look it’s out there for some time already. We have mentioned it as well that for the very large enterprise customers, some of them Microsoft wants to transact directly with them, which maybe also partly explains our slight decline on gross billings. And we are also the EA incentive reductions. And we have also looked proactively to managing certain unprofitable E8s and trying to transition them into new licensing models or kind of collaborating with Microsoft on taking them direct. What’s very important for I think to mention is that we don’t see any negative impact of those Microsoft taking some customers direct on our revenue, on our profitability of the business.

So there is no negative impact because of this. It actually provides probably even more opportunities to on the services side, especially related to helping customers maximizing the value from their investments, our Microsoft advisory services and so on. So I would say this impact of Microsoft taking some customers on the transaction direct doesn’t have a negative impact on our revenue.

Nooshin Mejjati, Analyst, Deutsche Bank: Understood. Thank you so much.

Sandra, Chorus Call Operator, Chorus Call: The next question comes from Florian Tray from Kepler Cheuvreux. Please go ahead.

Florian Tray, Analyst, Kepler Cheuvreux: Yes, good morning all and thank you for taking my question. My question is on the implied H2 growth rate. I would argue that before offering a combined guidance that the implied H2 growth was probably bit better than what is implied by the combined guidance. So my first question would be around what has been the negative data to it, if I would say, in general, you have confirmed the overall, let’s say, positive factors contributing to a return to growth? And then a quick let’s say, second part to it, would you expect the non Noram business to return to growth as well in the second half?

Thank you.

Raphael Erb, Co-CEO, SoftwareONE: I’ll start with the second one. I think in general, of course, as mentioned, overall, we are positive that the company is back in growth territory in H2. I would say based on what we see in the business, we see the chances that most of the regions, if not all the regions, can achieve positive growth again in H2. And it’s certainly the goal which we have.

Melissa Mulholland, Co-CEO, SoftwareONE: I think to your question around the guiding, it’s also important to say that, yes, we are very much committed to growth for the back half of the year. On a full year basis, of course, there is negative growth. And when you add it together, it’s also important to mention that we are in an integration phase. So we’re very much focused on the cost synergies, but also the revenue synergies, but we are still coming together as an organization. So that has also been factored into the guiding all up, but we are very positive based on the momentum we see coming into Q3.

Florian Tray, Analyst, Kepler Cheuvreux: Great. Thank you very much.

Sandra, Chorus Call Operator, Chorus Call: The next question comes from Christopher Tong from UBS. Please go ahead.

Christopher Tong, Analyst, UBS: Hi, good morning. Thanks for taking my question. Maybe just two questions. Back to NORA, was there anything incremental that got worse in Q2 because growth was sort of similar to Q1 despite having easier comps? And secondly, on Microsoft’s news on sort of eliminating discounts on some of the EA incentives, what are sort of the expectations internally on how that will affect your business?

Thank you.

Raphael Erb, Co-CEO, SoftwareONE: Look, I think the outcome in Q2 in North America is as expected. It’s as we communicated also with our Q1 result. So I think there is not any real negative surprises. As I mentioned, we have been working very hard on implementing the actions throughout Q2. We have seen early successes in June, and we are very positive for the future that we will see solid growth again in North America.

Melissa, maybe you can take the Yes. Microsoft related question

Melissa Mulholland, Co-CEO, SoftwareONE: Thank you, Christopher. It’s a great question. As I saw that UBS also provided a report on this. The EA price changes presents a great opportunity for partners like SoftwareONE and Crayon. And the reason for that is that it makes CSP even more attractive from a pricing perspective to customers.

And CSP does have a higher margin profile than enterprise agreements. So Microsoft continues to invest in this area because it also enables and unlocks the value of services. It is hard to quantify what this opportunity will bring, but we certainly see it is a great mechanism to also drive customer demand and the transition to CSP. And this is quite helpful as we, let’s say, close out Q4 and go into 2026.

Christopher Tong, Analyst, UBS: Got it. Thank you very much.

Sandra, Chorus Call Operator, Chorus Call: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Anna Engbahl for any closing remarks.

Anna Engvall, Head of Investor Relations, SoftwareONE: Thank you for joining the call and speak soon. Bye.

Sandra, Chorus Call Operator, Chorus Call: 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.

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