EQS-News: SUSE S.A.: SUSE Q3 FY23 Quarterly Statement

SUSE Q3 FY23 Quarterly Statement

• Q3 IFRS Revenue of $173 million was up 2% versus the prior year, and IFRS Operating Profit Before D&A was $36 million, down 11%, reflecting continued investments in initiatives to support future growth
• ARR (as at April 30, 2023) of $665 million was up 4%
• Adjusted Revenue of $173 million, up 1% (same at constant currency), was supported by earlier-than-expected revenue from retrospective consumption contracts
• Adjusted EBITDA Margin of 32%, down 6 ppt, also reflects investments into initiatives to support future growth, including in R&D
• Adjusted Unlevered Free Cash Flow of $60 million, down 2%, with cash conversion of 108%, was supported by a core working capital inflow
• During Q3 FY23 and since the end of the quarter, SUSEs expectations for future performance and market outlooks have not changed materially
• There will be no further announcement of Q3 results, previously due on September 21, 2023, and no management conference call today

• On August 17, 2023, post quarter end, SUSE announced that its majority shareholder Marcel LUX III SARL (EQT Private Equity) intends to take the company private by delisting it from the Frankfurt Stock Exchange. As part of that, EQT Private Equity announced a voluntary public purchase price offer to acquire the shares it does not own. The offer price per SUSE share to be paid by EQT Private Equity will be EUR 16.00 less the gross amount per SUSE share of an interim dividend to be paid by SUSE to all shareholders, representing a premium of 67% on the XETRA closing share price on 17 August
• The interim dividend will be funded by SUSE through a combination of existing cash and additional borrowing and will be paid to all shareholders, allowing EQT Private Equity to finance its purchase of SUSE shares under the offer and certain transaction costs. For more information see ir.suse.com
• SUSEs Management Board and Supervisory Board support the strategic opportunity from delisting of the company as it will allow SUSE to focus fully on its operational priorities and execution of its long-term strategy
• On August 14, 2023, SUSE announced the appointments of Ian Halifax as Chief Financial Officer from December 11, 2023, and Frank Feldman as Chief Strategy Officer with immediate effect. These appointments completed SUSEs strengthened executive leadership team

Luxembourg August 30, 2023 SUSE S.A. (the Company or SUSE), an independent leader in open source software specializing in Enterprise Linux operating systems, Enterprise Container Management and Edge software solutions, today announced its results for the third quarter of financial year 2023, which ended July 31, 2023.

Notes

This document contains Alternative Performance Measures as defined in Appendix 4.

Operating expenses exclude non-recurring items, as shown in the IFRS operating loss to Adjusted EBITDA reconciliation in Appendix 2.

Constant Currency movements (CCY) have been provided for ACV, Adjusted Revenue and Adjusted EBITDA. The definition of constant currency is included within Appendix 4.

Statutory data for the financial period is reported in Appendix 1. Reconciliations to IFRS measures are shown in Appendix 2.

Summary IFRS Income Statement, KPIs and Adjusted Profit and Loss for Q3 and Q3 YTD FY23, and Q3 and Q3 YTD FY22

Summary IFRS Income Statement

KPIs and Adjusted Profit and Loss

Notes: Basic Adjusted Earnings Per Share is calculated on the basis of the weighted average number of ordinary shares in issue during the period. Diluted Adjusted Earnings Per Share takes into account potential dilution from outstanding share grants and options. The weighted average number of ordinary shares in issue, fully diluted, during the third quarter, was 174.2 million, and during the Q3 YTD FY23 was 173.5 million.

Financial and Business Review

The information in this section is based on the presentation of Alternative Performance Measures as defined in Appendix 4 and has not been audited.

A reconciliation to the IFRS financials is included in Appendix 2. Results are shown using actual exchange rates.

Business and Markets Update

On August 17, 2023, post quarter end, SUSE announced that its majority shareholder Marcel LUX III SARL (EQT Private Equity) intends to take the company private by delisting it from the Frankfurt Stock Exchange via a merger into an unlisted Luxembourg entity in the legal form of an S.A. As part of that, EQT Private Equity has announced a voluntary public purchase price offer to acquire the shares it does not own. The offer price per SUSE share to be paid by EQT Private Equity will be EUR 16.00 less the gross amount per SUSE share of an interim dividend to be paid by SUSE to all shareholders, representing a premium of 67% on the XETRA closing share price on 17 August.

The interim dividend will be paid to all shareholders prior to the settlement of the offer and will allow EQT Private Equity to finance its purchase of SUSE shares under the offer and certain transaction costs incurred by it. The payment of the interim dividend will be funded by SUSE through a combination of existing cash and additional borrowing. Any additional borrowing will be in the form of loans taken out by companies of the SUSE group to a maximum of EUR 500 million. The amount of the loans taken out will only be determined after the expiry of the offer acceptance period.

SUSEs Management Board and Supervisory Board support the strategic opportunity from delisting of the company as it will allow SUSE to focus fully on its operational priorities and execution of its long-term strategy.

For more information, see the press release and ad hoc announcement at https://ir.suse.com/websites/suse/English/4900/eqt-purchase-offer.html

On August 14, 2023, SUSE announced the appointments of Ian Halifax as Chief Financial Officer from December 11, 2023, and Frank Feldman as Chief Strategy Officer with immediate effect. These appointments completed SUSEs strengthened executive leadership team.

Ian Halifax will take over as CFO on December 11, 2023, following a handover with the interim CFO Jonathan Atack, who retains full responsibility for the role until then. Ian Halifax has more than 30 years' experience in senior financial leadership positions, including as Chief Financial Officer at leading global technology providers such as Trellix, Riverbed Technology, ON24, Wind River Systems and Micromuse. He has substantial strategic and executional experience in private and public technology companies, and he has developed and led global teams to drive performance, rapid growth and diversification.

Frank Feldmanns career includes more than 15 years in several senior management roles at Red Hat, as well as at Novell. Feldmann has a strong foundation in technology product management, sales and technology marketing, focused on business and technology transformation and growth. His role at SUSE includes the development and execution of long-term business strategies.
 

ACV and Revenues

Q3 ACV was $117.0 million, up 2%, comprising Core ACV of $93.4 million, flat versus the prior year, and Emerging ACV of $23.6 million, up 11%. At constant currency, Q3 total ACV growth was up 1%, Core was down 1% and Emerging up 11%.

Q3 Adjusted Revenue was $173.3 million, up 1%, comprising Core Revenue of $144.0 million, up 1%, and Emerging Revenue of $29.3 million, up 4%. At constant currency, movements are the same for total Adjusted Revenue and Emerging Revenue, with Core Revenue flat versus the prior year.

The average contract duration on a last-12-months basis was 18 months, the same as the prior quarter. This only considers contracts paid up front.

ACV By Route-to-Market

End User and Cloud ACV was up 6% in Q3, driven by growth in both Cloud and End User routes-to-market.

Independent Hardware Vendors (IHV) and Embedded ACV declined 28% in Q3, driven by lower hardware shipments and a shift to selling through other routes, primarily through Cloud Service Providers.
ACV By Region

Annual Recurring Revenue and Net Retention Rate

Total Annual Recurring Revenue (ARR) as at April 30, 2023, was $664.9 million, up 4%.

SUSEs Net Retention Rate (NRR) as at April 30, 2023, was 100.4%.

ARR and NRR are reported three months in arrears as a significant portion of the revenues are invoiced retrospectively.

Costs

SUSEs Q3 Adjusted Cost of Sales grew broadly in line with Adjusted Revenue versus the prior year, resulting in a consistently high Adjusted Gross Profit margin of 92%.

Total Operating Expenses increased by 12% in Q3, 10% at constant currency.

Profitability

Adjusted EBITDA declined 14% versus the prior year, as revenue growth was more than offset by higher operating costs.

Change in Deferred Revenue was negative $13.6 million, despite higher ACV and stable contract lengths in Q3 versus the prior year, as revenue recognition more than offset the total contract value booked in the period.

The decrease in Adjusted EBITDA was partly offset by the lower negative Change in Deferred Revenue, leading to Q3 Adjusted Cash EBITDA of $42.3 million, down 8%.

Cash Flow

Adjusted Unlevered Free Cash Flow of $60.1 million in Q3 was down 2% versus the prior year, driven primarily by the lower Adjusted Cash EBITDA, partly offset by lower commissions paid (net of amortization). The Core Working Capital inflow of $27.5 million in Q3 was broadly similar to the prior year, reflecting customer payment for contracts signed in the prior quarter.

Leverage

Net Debt at the end of Q3 was $507.3 million, a reduction of $96.8 million versus the prior year, driven by SUSEs strong cash flow.

Outlook

During Q3 FY23 and since the end of the quarter, SUSEs expectations for future performance and market outlooks have not changed materially.
 

Additional Information

About SUSE

SUSE is a global leader in innovative, reliable and secure enterprise-grade open source solutions, relied upon by more than 60% of the Fortune 500 to power their mission-critical workloads. The company behind Rancher, NeuVector and SUSE Linux Enterprise (SLE), SUSE collaborates with partners and communities to empower customers to innovate everywhere from the data center to the cloud, to the edge and beyond. SUSE puts the open back in open source, giving customers the ability to tackle innovation challenges today and the freedom to evolve their strategy and solutions tomorrow. The company employs more than 2,400 people globally and is listed on the Frankfurt Stock Exchange. For more information, visit www.suse.com.

For reference you'll find all releases here https://www.suse.com/news/

Contacts

Investors:     

Matt Jones     

Investor Relations, SUSE    

Phone: +44 7809 690 336  

Email: ir@suse.com    

 

Media:

Christopher Deifuss

Kekst CNC

Phone: +49 162 2059754

Email: christopher.Deifuss@kekstcnc.com

Monique Perks

Kekst CNC

Phone: +44 758 1033 557

Email: monique.perks@kekstcnc.com

Webcast Details

There will be no management conference call covering Q3 FY23 results. Please see above contact details for any questions.

Important Notice

Certain statements in this communication may constitute forward-looking statements. These statements are based on assumptions that are believed to be reasonable at the time they are made, and are subject to significant risks and uncertainties, including, but not limited to, those risks and uncertainties described in SUSE's disclosures. You should not rely on these forward-looking statements as predictions of future events, and we undertake no obligation to update or revise these statements. Our actual results may differ materially and adversely from any forward-looking statements discussed in these statements due to several factors, including without limitation, risks from macroeconomic developments, external fraud, lack of innovation capabilities, inadequate data security and changes in competition levels.

The Company undertakes no obligation, and does not expect to publicly update, or publicly revise, any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to it or to persons acting on its behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this communication.

APPENDIX 1 IFRS Figures

Interim Condensed Consolidated Statement of Comprehensive Income (unaudited)

For the nine months ended 31 July 2023

⁽¹⁾For the nine months ended 31 July 2023 and 31 July 2022, potential ordinary shares are anti-dilutive, as their inclusion in the diluted loss per share calculation would reduce the loss per share, and hence have been excluded.

Interim Condensed Consolidated Statement of Comprehensive Income (unaudited)

For the nine months ended 31 July 2023

Interim Condensed Consolidated Statement of Financial Position (unaudited)

As at 31 July 2023

Interim Condensed Consolidated Statement of Changes in Equity (unaudited)

For the nine months ended 31 July 2023

Interim Condensed Consolidated Statement of Changes in Equity (unaudited)

For the nine months ended 31 July 2022

Interim Condensed Consolidated Statement of Cash Flows (unaudited)

For the nine months ended 31 July 2023

Interim Condensed Consolidated Statement of Cash Flows (unaudited)

For the nine months ended 31 July 2023

APPENDIX 2 Reconciliation from IFRS to Adjusted Pro Forma Figures

IFRS Revenue to Adjusted Revenue

IFRS Operating Profit/(Loss) to Adjusted EBITDA

Adjusted Deferred Revenue to IFRS Deferred Revenue

IFRS Net Cash Inflow from Operating Activities to Adjusted uFCF

IFRS Working Capital Movements to Change in Core Working Capital

APPENDIX 3 Comparable Data for Prior Periods

APPENDIX 4 Alternative Performance Measures (APMs)

This document contains certain alternative performance measures (collectively, APMs) as defined below that are not required by, or presented in accordance with, IFRS, Luxembourg GAAP or any other generally accepted accounting principles. Certain of these measures are derived from the IFRS accounts of the Company and others are derived from management reporting or the accounting or controlling systems of the Group.

SUSE presents APMs because they are used by management in monitoring, evaluating and managing its business, and management believes these measures provide an enhanced understanding of SUSEs underlying results and related trends. The definitions of the APMs may not be comparable to other similarly titled measures of other companies and have limitations as analytical tools and should, therefore, not be considered in isolation or as a substitute for analysis of SUSEs operating results as reported under IFRS or Luxembourg GAAP. SUSE has defined each of its APMs as follows: