DGAP-News: SUSE S.A. / Key word(s): Quarter Results/Quarterly / Interim Statement SUSE S.A.: Quarterly Statement Q3 2021, for the Three Months ended July 31, 2021 2021-09-16 / 07:30 The issuer is solely responsible for the content of this announcement.

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Strong Third Quarter with Growth Across the Business

- As a result of a strong Q3, SUSE now expects to report full year Adjusted Revenue in the top half of the guidance range and Adjusted Cash EBITDA above the top of the guidance range

- ACV grew 39% to USD119.0 million in Q3. Core ACV grew 36% and Emerging ACV grew 59%

- Total ARR of USD555.5 million, growth of 20% on prior year; SUSE ARR of USD489.7 million, (+14%); Rancher ARR of USD65.8 million, (+115%)

- Adjusted Revenue was USD151 million, an increase of 21% above prior year

- Adjusted EBITDA of USD55.2 million for Q3 is up 10% from prior year with a margin of 37%, as SUSE continues to invest in growth

- Adjusted Cash EBITDA was USD65.0 million, an increase of 84% and a margin of 43%

- Net debt at quarter end was USD653.1 million; representing a reduced leverage ratio of 2.6x

- SUSE S.A. was listed on the Frankfurt Stock Exchange during the quarter, enabling a reduction in outstanding debt

- New solutions are driving customers' cloud-native transformation

- Significant continued investment in innovation and sales to drive further growth 


USD USD millions        Q3    Q3 Growth   Q3 YTD Q3 YTD Growth 
                    2021  2020      %     2021   2020      % 
 
ACV                119.0  85.9    39%    365.6  293.0    25% 
Adj Revenue        151.0 125.3    21%    421.9  365.7    15% 
Adj EBITDA          55.2  50.4    10%    164.1  137.8    19% 
Adj EBITDA Margin    37%   40%             39%    38% 
Adj cash EBITDA     65.0  35.4    84%    226.5  150.5    50% 
% Margin             43%   28%             54%    41% 
Adj uFCF            39.0  30.9    26%    145.4  126.5    15% 
Cash conversion      71%   61%             89%    92%

Note: This table contains Alternative Performance Measures as defined in Appendix 5 of this document. The presentation is based on pro forma numbers including Rancher on a coterminous basis in the prior year and in 2021 as if acquired on November 1, 2020. Statutory data for the year to date is given in Appendix 1.

Luxembourg - September 16, 2021 - SUSE S.A. (the "Company" or "SUSE"), an independent leader in open source software specializing in Enterprise Linux operating systems, Container Management and Edge software solutions, today announced its results for the third quarter of financial year 2021, which ended July 31, 2021.

"This is a strong quarter for SUSE," said Melissa Di Donato, SUSE CEO. "We continue to deliver upon our commitments, delivering strong results in our business across all segments and rolling out game-changing innovation that will drive further growth. The momentum of our business is proof that the foundation of SUSE is built for our future success."

"We have today strengthened our guidance as we continue to see strong growth across all our business areas," said Andy Myers, SUSE CFO. "All Routes to Market are powering significant and growing business in both Core and Emerging."

Financial and Business Review

The information in this section is based on the presentation of Alternative Performance Measures as defined in Appendix 5 and has not been audited. Historical data is also based on pro forma figures including Rancher prior to its acquisition by SUSE in December 2020. The Year to Date (YTD) numbers for 2021 include nine months for Rancher on a pro forma basis. A reconciliation to the IFRS financials is included in Appendix 2 and summary financial statements containing statutory data for 2021 year to date are included in Appendix 1. Results are shown using actual exchange rates.

Business Update

SUSECON Digital 2021, SUSE's principal annual commercial event, took place in early Q3. The Conference brings customers together for technical briefings and updates on new products and solutions, reinforcing SUSE's position as a global leader in innovative, reliable and enterprise-grade open source solutions. The conference was a resounding success, with attendance up almost 90% over the prior year's digital conference, demonstrating customer appreciation for SUSE's unique commitment to delivering truly open, interoperable products and solutions, giving them complete freedom, choice, and flexibility to define and easily adopt the IT strategy that best fits their needs.

This year's conference was not only an update on SUSE Linux products, it also introduced SUSE Rancher for the first time following the acquisition last year with an exciting announcement of a new SUSE Rancher product. This shows the rapid progress that has been made by the combination of Rancher and SUSE to accelerate new products and bring together complementary capabilities that are attractive to all customers of our company. It also enabled the announcement of a complete software stack, SUSE Hybrid IT, to run traditional and cloud-native applications in data center and cloud environments.

The key new product announcements were:

- SUSE Linux Enterprise Server 15 Service Pack 3 (SLES 15 SP3): the next evolution of our core operating system that helps IT operators and developers drive faster digital transformation.

- SUSE Rancher 2.6: Further increases the usability of Kubernetes at scale and delivers full lifecycle management of Microsoft AKS and Google GKE clusters, adding to existing support for Amazon EKS. Customers can now take advantage of the unique benefits of each public cloud service provider's Kubernetes service while leveraging the consistent management, advanced features, and automation provided by SUSE Rancher.

- SUSE Edge: An open, lightweight software infrastructure for customers to build, deploy and manage enterprise applications at the edge. SUSE Edge connects edge-based workloads to the cloud and on-prem data centers with an automated and secure management framework.

SUSE continued its investment in open source innovation and introduced its engagement in a number of new open source projects at the conference, including Harvester, Epinio, Opni and Trento. These projects and others are helping maintain and expand SUSE's technology leadership in both Linux and Kubernetes, and SUSE continues to engage with leading-edge projects to contribute, collaborate and help shape Kubernetes and Linux technologies to meet customer challenges today and tomorrow.

SUSE Rancher and Arm have continued to provide customers with a highly efficient cloud-native architecture at the edge with initiatives such as Project Cassini and the recently announced Scalable Open Architecture for Embedded Edge (SOAFEE). As part of SLES for Arm 15 SP3, new features have been added to achieve higher performance on Arm Neoverse-based platforms.

This level of innovation and increasing product features demonstrates SUSE's commitment to building on its strong commercial base and excellent reputation, facilitating increased sales across all business areas and building its presence in key growth markets such as containers and the edge, leveraging its scale and expertise to integrate and accelerate growth with SUSE Rancher.

SUSE's customer-focused innovation and high levels of customer service are, we believe, the primary reasons we once again increased our Net Promoter Score and delivered the strong financial growth set out below.

Annual Contract Value (ACV) and Revenue 


              USD USD millions     Q3    Q3 Growth   Q3 YTD Q3 YTD Growth 
                               2021  2020      %     2021   2020      % 
 
ACV by Sol's  Core            101.5  74.9    36%    307.4  260.3    18% 
              Emerging         17.5  11.0    59%     58.2   32.7    78% 
              Total           119.0  85.9    39%    365.6  293.0    25% 
 
Adj Revenue   Core            133.2 114.5    16%    373.2  335.6    11% 
              Emerging         17.8  10.8    65%     48.7   30.1    62% 
              Total           151.0 125.3    21%    421.9  365.7    15%

SUSE continued to see strong growth in Q3 with ACV growing across all business areas, most notably in the Emerging business where SUSE Rancher continues to gain traction. In the End User routes to market (RTM), the cloud service providers (CSPs), particularly the hyperscalers, contributed to strong growth. All geographical regions also contributed to the growth.

Core ACV grew by 36% year on year to USD101.5 million for the quarter. This strong performance was driven by delivery of expected renewals and upselling within the End User and CSP RTMs and supported by two retrospective consumption contracts. This included a number of important multiyear renewals which contributed significantly to ACV growth and deferred revenue. The IHV RTM grew by 8% year on year, having seen a 2% decline in the previous quarter, as embedded sales increased significantly, offsetting continued weakness in IHV driven by hardware supply chain delays.

One particular Embedded win of note in Q3 was with a large U.S.-based Systems Integrator, where we have up-sold an existing USD5.4 million ACV deal with an ACV renewal of USD7.8 million. This includes expansion of additional workloads, and it also displaces competitor OS footprints within the account. Secured with this win is a binding commitment of recurring ACV over the next five years with a monetary value of USD56 million. This win underscores the resiliency and mission criticality of SUSE's business model.

Core ACV Growth for the year to date was 18%, which is in line with our guidance for the year.

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September 16, 2021 01:30 ET (05:30 GMT)