COMMUNIQUÉ DE PRESSE

par SUSE S.A. (isin : LU2333210958)

SUSE S.A.: SUSE Q3 FY23 Quarterly Statement

EQS-News: SUSE S.A. / Key word(s): Quarter Results
SUSE S.A.: SUSE Q3 FY23 Quarterly Statement

30.08.2023 / 07:30 CET/CEST
The issuer is solely responsible for the content of this announcement.


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, SUSE’s 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
  • SUSE’s 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 SUSE’s strengthened executive leadership team
All USD $m unless otherwise statedFY23
Q3
FY22
Q3
YoY
Actual
YoY
CCY
 FY23
Q3 YTD
FY22
Q3 YTD
YoY
Actual
YoY
CCY
Non-IFRS measures         
ACV117.0114.42%1% 394.6397.6(1)%0%
ARR (as at April 30)664.9639.64%  664.9639.64% 
Adjusted Revenue 173.3171.21%1% 504.7487.54%4%
Adjusted EBITDA55.965.1(14)%(12)% 175.2176.0(0)%(3)%
Adjusted EBITDA Margin32%38%   35%36%  
Adjusted uFCF60.161.5(2)%  151.5143.85% 
IFRS measures         
Revenue173.0170.12%  503.3483.44% 
Gross Profit159.4156.82%  462.5444.74% 
Operating Profit Before D&A36.240.8(11)%  118.8107.910% 
Net Cash Inflow from Operating Activities40.954.0(24)%  103.4105.1(2)% 


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

All USD $m unless otherwise statedFY23
Q3
FY22
Q3
YoY
Actual
 FY23
Q3 YTD
FY22
Q3 YTD
YoY
Actual
        
Revenue 173.0170.12% 503.3483.44%
Cost of sales(13.6)(13.3)2% (40.9)(38.7)6%
Gross profit159.4156.82% 462.4444.74%
Operating expenses(123.2)(116.0)6% (343.6)(336.8)2%
Amortization of intangible assets(34.4)(35.2)(2)% (102.7)(107.6)(5)%
Depreciation - PPE(1.2)(0.9)33% (3.3)(2.8)18%
Depreciation - Right of Use assets(1.2)(1.7)(29)% (4.2)(5.9)(29)%
Operating profit/(loss)(0.6)3.0n.m. 8.6(8.4)n.m.
Net finance costs(12.5)(9.1)37% (40.1)(30.7)31%
Share of losses on associate(0.2)(0.3)(33)% (1.4)(1.7)(18)%
Profit/(Loss) before tax(13.3)(6.4)108% (32.9)(40.8)(19)%
Taxation(0.7)(6.5)(89)% (6.6)1.4n.m.
Profit/(Loss) for the period(14.0)(12.9)9% (39.5)(39.4)0%

 

KPIs and Adjusted Profit and Loss

All USD $m unless otherwise statedFY23
Q3
FY22
Q3
YoY
Actual
YoY
CCY
 FY23
Q3 YTD
FY22
Q3 YTD
YoY
Actual
YoY
CCY
ACV by Solution         
Core 93.493.20%(1)% 319.4326.7(2)%(1)%
Emerging23.621.211%11% 75.270.96%7%
Total ACV   117.0114.42%1% 394.6397.6(1)%0%
          
ARR (as at April 30)664.9639.64%  664.9639.64% 
NRR as % (as at April 30)100.4%107.6%(7)%  100.4%107.6%(7)% 
          
Adjusted Revenue by Solution         
Core144.0142.91%0% 413.5407.02%2%
Emerging29.328.34%4% 91.280.513%13%
Total Adjusted Revenue173.3171.21%1% 504.7487.54%4%
Adjusted Cost of Sales13.413.31%0% 40.238.25%7%
Adjusted Gross Profit159.9157.91%1% 464.5449.33%3%
Adjusted Gross Profit Margin92%92%   92%92%  
          
Sales, Marketing & Operations47.745.06%5% 134.2134.3(0)%2%
Research & Development33.427.123%21% 93.181.215%16%
General & Administrative22.920.711%6% 62.057.87%9%
Total Operating Expenses104.092.812%10% 289.3273.36%8%
          
Adjusted EBITDA55.965.1(14)%(12)% 175.2176.0(0)%(3)%
Adjusted EBITDA Margin32%38%   35%36%  
Depreciation & Amortization4.95.0(2)%  15.016.3(8)% 
Adjusted EBIT51.060.1(15)%  160.2159.70% 
Net Finance Costs12.59.137%  40.130.731% 
Adjusted Profit Before Tax38.551.0(25)%  120.1129.0(7)% 
Notional Tax11.014.2(23)%  38.437.23% 
Adjusted Profit After Tax27.536.8(25)%  81.791.8(11)% 
Weighted average shares in issue170.6169.21%  169.9169.10% 
Basic Adjusted Earnings Per Share0.160.22(27)%  0.480.54(11)% 
Diluted Adjusted Earnings Per Share0.160.21(24)%  0.470.53(11)% 

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.

SUSE’s 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 SUSE’s 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 Feldmann’s 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

All USD $m unless otherwise statedFY23
Q3
FY22
Q3
YoY
Actual
 FY23
Q3 YTD
FY22
Q3 YTD
YoY
Actual
        
End User & Cloud108.0101.96% 343.8335.92%
IHV & Embedded9.012.5(28)% 50.861.7(18)%
Total ACV117.0114.42% 394.6397.6(1)%


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

All USD $m unless otherwise statedFY23
Q3
FY22
Q3
YoY
Actual
 FY23
Q3 YTD
FY22
Q3 YTD
YoY
Actual
        
Europe, Middle East and Africa53.841.430% 178.8159.712%
North America43.853.6(18)% 154.0171.5(10)%
Asia Pacific and Japan9.710.8(10)% 29.128.52%
Greater China5.44.617% 16.920.8(19)%
Latin America4.34.08% 15.817.1(8)%
Total ACV117.0114.42% 394.6397.6(1)%

 

Annual Recurring Revenue and Net Retention Rate

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

SUSE’s 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

SUSE’s 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

All USD $m unless otherwise statedFY23
Q3
FY22
Q3
YoY
Actual
 FY23
Q3 YTD
FY22
Q3 YTD
YoY
Actual
        
Adjusted EBITDA55.965.1(14)% 175.2176.0(0)%
Adjusted EBITDA Margin32%38%  35%36% 
Change in Deferred Revenue(13.6)(18.9)(28)% (17.8)39.2n.m
Adjusted Cash EBITDA42.346.2(8)% 157.4215.2(27)%
Adjusted Cash EBITDA Margin24%27%  31%44% 

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

All USD $m unless otherwise statedFY23
Q3
FY22
Q3
YoY
Actual
 FY23
Q3 YTD
FY22
Q3 YTD
YoY
Actual
        
Adjusted Cash EBITDA 42.346.2(8)% 157.4215.2(27)%
        
Gross capital expenditure(1.3)(2.5)(48)% (6.9)(7.2)(4)%
Change in core working capital27.527.21% 30.6(27.2)n.m.
Commission paid (net of amortization)(2.6)(5.3)(51)% (10.9)(18.6)(41)%
Leases paid(2.1)(1.9)11% (6.3)(5.7)11%
Cash taxes(3.7)(2.2)68% (12.4)(12.7)(2)%
Adjusted uFCF60.161.5(2)% 151.5143.85%
Adj. uFCF Conv from Adj. EBITDA108%94%  86%82% 

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

All USD $m unless otherwise statedFY23
End Q3
FY22
End Q3
YoY
Actual
    
Net Debt  507.3604.1(16)%
Adjusted Cash EBITDA (LTM)237.4266.9(11)%
Leverage2.12.3(9)%

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

 

Outlook

During Q3 FY23 and since the end of the quarter, SUSE’s 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

  Nine months ended 31 July 2023 Nine months ended 31 July 2022
   Separately   Separately 
Income statement:  
Headline
reported items 
Total
  
Headline
reported items 
Total
  US$’000US$’000US$’000 US$’000US$’000US$’000
Revenue 503,307-503,307 483,409-483,409
Cost of sales (40,857)-(40,857) (38,751)-(38,751)
Gross profit 462,450-462,450 444,658-444,658
Selling and distribution costs (140,646)(6,836)(147,482) (136,914)-(136,914)
Research and development costs (95,858)-(95,858) (86,075)-(86,075)
Administrative expenses (100,940)-(100,940) (114,378)-(114,378)
Impairment credit on trade receivables 657-657 531-531
Operating profit before depreciation/impairment and amortization125,663(6,836)118,827 107,822-107,822
         
Amortization of intangible assets (102,707)-(102,707) (107,568)-(107,568)
Depreciation – Property, plant and equipment (3,266)-(3,266) (2,760)-(2,760)
Depreciation/impairment – Right of use assets (4,237)-(4,237) (5,888)-(5,888)
Operating profit/( loss) 15,453(6,836)8,617 (8,394)-(8,394)
         
Finance costs (44,132)-(44,132) (30,949)-(30,949)
Finance income 4,074-4,074 268-268
Net finance costs (40,058)-(40,058) (30,681)-(30,681)
         
Share of losses of associate (1,501)-(1,501) (1,745)-(1,745)
Loss before tax (26,106)(6,836)(32,942) (40,820)-(40,820)
         
Taxation (8,295)1,706(6,589) 1,419-1,419
Loss for the period (34,401)(5,130)(39,531) (39,401)-(39,401)
Attributable to:        
Equity shareholders of the parent (34,401)(5,130)(39,531) (39,401)-(39,401)
Non-controlling interests --- ---
Loss for the period (34,401)(5,130)(39,531) (39,401)-(39,401)
         
Basic loss per share (USD/share) (1)   (0.2)   (0.2)

(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

 Nine months ended 31 July 2023 Nine months ended 31 July 2022
  Separately   Separately 
  
Headline
reported items 
Total
  
Headline
reported items 
Total
 US$’000US$’000US$’000 US$’000US$’000US$’000
        
Loss for the period(34,401)(5,130)(39,531) (39,401)-(39,401)
        
Other comprehensive (loss)/income:       
        
Items not to be reclassified to income statement:       
Remeasurement of defined benefit pension schemes325-325 2,304-2,304
Related tax impact(8)-(8) (706)-(706)
        
Items that may be reclassified to income statement:       
Currency translation differences(32,587)-(32,587) 48,671-48,671
Cash flow hedge – changes in fair value                                      7,832-7,832 (49)-(49)
Cash flow hedge – reclassified to income statement               89-89 4,386-4,386
Related tax impact(1,861)-(1,861) (1,003)-(1,003)
Other comprehensive (loss)/income for the period(26,210)-(26,210) 53,603-53,603
        
Total comprehensive (loss)/income for the period(60,611)(5,130)(65,741) 14,202-14,202
        
Attributable to:       
Equity shareholders of the parent(60,611)(5,130)(65,741) 14,202-14,202
Non-controlling interests--- ---
Total comprehensive (loss)/income for the period(60,611)(5,130)(65,741) 14,202-14,202

 

Interim Condensed Consolidated Statement of Financial Position (unaudited)

As at 31 July 2023

  As at
31 July 2023
As at
31 October 2022
  US$’000US$’000
Non-current assets   
Goodwill 2,686,3202,686,320
Intangible assets 294,269393,427
Property, plant and equipment 17,58013,914
Right of use assets 16,68118,089
Investment in associate 10,77512,276
Derivative asset 12,1944,051
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