Questions to SWON after the Q4 results

SoftwareOne is in Oslo today to meet Norwegian Investors. Here are some of the questions we (and maybe you?) want to get answered.

Q&A 1: The latest cost program is progressing extremely fast – can we trust it to improve costs?

In Q4 you have increased your new cost improvement program up from 50 to 70 MCHF and you have already “achieved” 58 MCHF. Impressive. To trust this to be converted to “hard cash” we would like to understand how your last cost savings program converted into “real savings”. After Q2 (IR presentation page 19) you said that your “operational excellence program” was completed “with 76MCHF annual savings”. This cost savings program started in 2023, one -off costs were taken and it should result in reduced costs in your 2024 P&L with 60-70 MCHF? The problem is that in your Q4 presentation (page 17) your SG&G cost are up 12,4% (in CCY). Your “Delivery costs” are down 1,2%, but it does not really help. Your Q4 report tells us a story about increased cost around 50 MCHF in 2024… Please help us to understand how 76 MCHF in cost reductions ended up in 50 MCHF in increased costs. The difference is 120 MCHF and we are sure we missed something?

Q&A 2: 3 Services sector and IR communication questions

Q4 have always been the by far best quarter in services sector in SWON. Q4 2023 ended with 7,9% growth and 16,6% adj. margin. Q4 2024 ended with 4,3% growth and 5,4% adj. margin.

1.  Why did services turn so sharply in a negative direction in Q4 2024?

2.  Why did SWON not communicate such a (dramatic) negative development in your Q4 presentation and why did you pick "continued momentum" on page 9 in the Q4 presentation as a title and include the same phrase on page 19?

3.  Do you consider your services sector to be profitable in 2024?

Q&A 3: 4 Marketplace sector and IR communication questions

1.  In Q4 you had a negative growth sized 14,5% (or 16,9% in CHF) in Marketplace. Please explain how and why it happened. This is unprecedented for you, is that right?

2.  Why did you not comment in more detail around this rather dramatic drop in volume in the Q4 presentation? On page 9 in your presentation, you picked “Continued momentum in Services” as a title. Why not -14,5% growth as a title, or something similar? If there is no good answer here it seems to us that you are trying to mislead investors.

3.  You are guiding on growth in 2025, despite having announced a 20-30 MCHF drop in marketplace revenue because of incentive changes. Will the growth come from Marketplace, Services or both?

4.  After 2 years with approx. 24,5% in adj EBITDA you dropped to 22% in 2024. This is after adjustments around 100 MCHF in the last years. You are guiding on rapidly declining adjustments, and your mid-point adj EBITDA guiding for 2025 is at 25% despite losing 20-30 MCHF in margin on Microsoft changes (2-3% points of total revenue). You are entering 2025 with an underlying adj. EBITDA around 19,5% and you guide on 25%. Given your track record of announcing cost reduction without seeing them through in your P&L, why is this improvement credible entering 2025?

Best regards,

David and Sverre 

Hvaler Invest AS
Lillestrøm, Norway

26.02.25

Disclaimer: Hvaler Invest is a significant shareholder so you cannot trust us (or perhaps you can?)