Results for the 12 Months Ended 31 October 2019€¦ · 6.2%). See appendix 2 for further detail. SaaS and other recurring and Consulting revenue accounts for 2.6ppts of the overall
35
Results for the 12 Months Ended 31 October 2019 Stephen Murdoch Brian McArthur-Muscroft 4 February, 2020
Results for the 12 Months Ended 31 October 2019Stephen MurdochBrian McArthur-Muscroft4 February 2020
2
Safe Harbour statementMicro Focus International
The following presentation is being made only to and is only directed at persons to whom such presentation may lawfully be communicated (ldquorelevant personsrdquo) Any person who is not a relevant person should not act or rely on this presentation or any of its contents Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments
This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite subscribe for or otherwise acquire securities in Micro Focus International plc (the ldquoCompanyrdquo) or any company which is a subsidiary of the Company
The release publication or distribution of this presentation in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this presentation is released published or distributed should inform themselves about and observe such restrictions
Certain statements contained in this presentation constitute forward-looking statements All statements other than statements of historical facts included in this presentation including without limitation those regarding the Companyrsquos financial condition business strategy plans and objectives are forward-looking statements These forward-looking statements can be identified by the use of forward-looking terminology including the terms ldquobelievesrdquo ldquoestimatesrdquo ldquoanticipatesrdquo ldquoexpectsrdquo ldquointendsrdquo ldquomayrdquo ldquowillrdquo or ldquoshouldrdquo or in each case their negative or other variations or comparable terminology Such forward-looking statements involve known and unknown risks uncertainties and other factors which may cause the actual results performance or achievements of the Company or industry results to be materially different from any future results performance or achievements expressed or implied by such forward-looking statements Such forward-looking statements are based on numerous assumptions regarding the Companyrsquos present and future business strategies and the environment in which the Company will operate in the future Such risks uncertainties and other factors include among others the level of expenditure committed to development and deployment applications by organisations the level of deployment-related turnover expected by the Company the degree to which organisations adopt web-enabled services the rate at which large organisations migrate applications from the mainframe environment the continued use and necessity of the mainframe for business critical applications the degree of competition faced by the Company growth in the information technology services market general economic and business conditions particularly in the United States changes in technology and competition and the Companyrsquos ability to attract and retain qualified personnel These forward-looking statements speak only as at the date of this presentation Except as required by the Financial Conduct Authority or by law the Company does not undertake any obligation to update or revise publicly any forward-looking statement whether as a result of new information future events or otherwise
Introduction
Chief Executive Officer (CEO) Update
Chief Financial Officer (CFO) Update
Strategic amp Operational Review Update
Outlook and Guidance
Agenda
CEO UpdateStephen Murdoch
Financial Summary Revenue in line with revised guidance at $33484m down 73 on constant currency basis compared to the prior year Improvement in Adjusted EBITDA margin from 387 to 407 on a constant currency basis Adjusted EBITDA decreased by
26 to $13625m compared to the prior year
$23bn returned to shareholders (which equates to $537 per share)
Final dividend of 5833c proposed today giving total dividend of 11666 cents for the twelve month period
Delivering Innovation for customers 500+ Product releases delivering key innovation such as Robotic Process Automation (RPA) Artificial Intelligence Behavioural
Analytics Hybrid Cloud management and Container deployment capabilities
Solid progress has been made on our key integration amp operational improvement initiatives
Strategic amp Operational Review announced in August 2019 Business performance below expectations amp integration of HPE Software proving more challenging and taking longer
Comprehensive in scope covering both assessment of full range of strategic options for value creation and critical assessmentof current integration programme and overall execution
Review is substantially complete with findings and next steps covered later in this presentation
5
Year in review
Continuing operations
6
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Making it easier to execute and move faster
Increasing agility3
Making it easier for us to do business and for people to do business with us
Simplifyingcore operations 2
Making it easier for us to connect with customers partners and across the organisation
Connecting teams 1
Systems
Simplifying our Business
Portfolio Actions
IT infrastructure migration 10000 PCs 25000 mail boxes2750 servers 139 applications
Business SystemsSingle Platform amp
Common Processes
ProcessesLegal Entity SimplificationStandardisation of Policies
Structure Finance amp HR Transformation
(60 reduced to 5 key locations)20 reduction in Real Estate
bull The fundamentals underpinning our model and approach remain valid
bull We significantly underestimated the challenges that have emerged in the integration of the HPE Software business
bull The key issues in relation to this integration and overall execution are understood in detail progress has been made on these and there is clear visibility of what remains to be done
bull The pace of change within the Enterprise software market has accelerated and we now need to evolve our business model to capture the opportunities
Strategic amp Operational Review Conclusions
The Board has concluded that at this time the greatest opportunity for value creation is through the successful execution of the internal plan built on four key actions targeted to deliver by 2023 a business with
bull Stable revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of sustainable free cash flow bull Built on a platform to enable accretive portfolio actions to be taken
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivityto capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
CFO UpdateBrian McArthur-Muscroft
Revenue declined 73 period-on-period on a CCY basis for the twelve months to 31 October 2019
Licence revenue decline of 72 in FY19 is less than the FY18 decline of 128
Decline in maintenance revenue was impacted by one off events including the disposal of Atalla and selling to the US Government via a strategic partner rather than direct Restating for these two items maintenance revenue decline would have been 47 (FY19 actual 62) See appendix 2 for further detail
SaaS and other recurring and Consulting revenue accounts for 26ppts of the overall decline
Adjusted EBITDA margin increase of 20 ppt to 407 in the twelve months ended 31 October 2019
Diluted adjusted Earnings per share from continuing operations of 19589 cents - an increase of 45 primarily driven by a lower share count
10
Micro Focus International Financial performance (1 of 2)
Per share data presented at Actual rates Diluted adjusted EPS (cents) 19589 18751 45Dividend per share (cents) 11666 10084 157
Change
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
11
HPE Software related actual exceptional charge of $2943m Total HPE software exceptional forecast spend still on target at $960M assuming delivery of systems project to current schedule
In the twelve months to 31 October 2019 adjusted cash conversion of 953 and free cash flow of $5762m Long term adjusted cash conversion target range remains 95-100
Underlying free cash flow of c $700-800m due to tailwind of the end of exceptional costs partially offset by tax increases
Net debt of $43385m and period end gearing of 32x Adjusted EBITDA Further gearing analysis presented later in this section
Other is net of costs and revenue
Cash flow includes results for SUSE for entire period in FY18 but for only 4 months in FY19
Adjusted EBITDA for FY19 is for continuing operations only the comparatives include the discontinued operation
FY19 FY18Reported Reported
Exceptional spend (at actual rates)System related spend ($m) 1263 1144 104Other integration costs ($m) 1680 2935 (428)Total HPE Software related exceptional spend 2943 4079 (278)Other ($m) (01) 318 (1003)Total (reported in operating profit) 2942 4397 (331)
Net debt ($m) 43385 42535 20 Net debt to Adjusted EBITDA ratio 32x 28x 04x
Change
Financial performance (2 of 2) Micro Focus International
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
12
$14025m
We continued to be a highly cash generative business in FY19
Improvement in collection of overdue trade receivables which de-risked the balance sheet offset by timing differences of exceptional cash costs and deferred revenue
Increase in tax payments of $884m in FY19 as we continue to utilise tax attributes acquired with HPE Software
Low capex since all RampD expensed through EBIDTA Underlying interest cover is c 45-50x before
dividend and after capex
Cash generation for twelve months ended 31 October 2019 Micro Focus International
Cash flow and Adjusted EBITDA includes results for SUSE for entire period in FY18 but for only 4 months in FY19
FY19 FY18
Cash generated from operations before working capital 11775 11912 Movement in working capital (1212) (396)Cash generated from operations 10563 11516 Interest payments (2271) (2195)Bank loan costs 00 (108)Tax payments (1674) (790)Purchase of intangible assets (293) (565)Purchase of property plant and equipment (563) (302)Free cash flow 5762 7556
Adjusted cash conversion 953 1057
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other integration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(104)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other intergration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(103)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
2
Safe Harbour statementMicro Focus International
The following presentation is being made only to and is only directed at persons to whom such presentation may lawfully be communicated (ldquorelevant personsrdquo) Any person who is not a relevant person should not act or rely on this presentation or any of its contents Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments
This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite subscribe for or otherwise acquire securities in Micro Focus International plc (the ldquoCompanyrdquo) or any company which is a subsidiary of the Company
The release publication or distribution of this presentation in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this presentation is released published or distributed should inform themselves about and observe such restrictions
Certain statements contained in this presentation constitute forward-looking statements All statements other than statements of historical facts included in this presentation including without limitation those regarding the Companyrsquos financial condition business strategy plans and objectives are forward-looking statements These forward-looking statements can be identified by the use of forward-looking terminology including the terms ldquobelievesrdquo ldquoestimatesrdquo ldquoanticipatesrdquo ldquoexpectsrdquo ldquointendsrdquo ldquomayrdquo ldquowillrdquo or ldquoshouldrdquo or in each case their negative or other variations or comparable terminology Such forward-looking statements involve known and unknown risks uncertainties and other factors which may cause the actual results performance or achievements of the Company or industry results to be materially different from any future results performance or achievements expressed or implied by such forward-looking statements Such forward-looking statements are based on numerous assumptions regarding the Companyrsquos present and future business strategies and the environment in which the Company will operate in the future Such risks uncertainties and other factors include among others the level of expenditure committed to development and deployment applications by organisations the level of deployment-related turnover expected by the Company the degree to which organisations adopt web-enabled services the rate at which large organisations migrate applications from the mainframe environment the continued use and necessity of the mainframe for business critical applications the degree of competition faced by the Company growth in the information technology services market general economic and business conditions particularly in the United States changes in technology and competition and the Companyrsquos ability to attract and retain qualified personnel These forward-looking statements speak only as at the date of this presentation Except as required by the Financial Conduct Authority or by law the Company does not undertake any obligation to update or revise publicly any forward-looking statement whether as a result of new information future events or otherwise
Introduction
Chief Executive Officer (CEO) Update
Chief Financial Officer (CFO) Update
Strategic amp Operational Review Update
Outlook and Guidance
Agenda
CEO UpdateStephen Murdoch
Financial Summary Revenue in line with revised guidance at $33484m down 73 on constant currency basis compared to the prior year Improvement in Adjusted EBITDA margin from 387 to 407 on a constant currency basis Adjusted EBITDA decreased by
26 to $13625m compared to the prior year
$23bn returned to shareholders (which equates to $537 per share)
Final dividend of 5833c proposed today giving total dividend of 11666 cents for the twelve month period
Delivering Innovation for customers 500+ Product releases delivering key innovation such as Robotic Process Automation (RPA) Artificial Intelligence Behavioural
Analytics Hybrid Cloud management and Container deployment capabilities
Solid progress has been made on our key integration amp operational improvement initiatives
Strategic amp Operational Review announced in August 2019 Business performance below expectations amp integration of HPE Software proving more challenging and taking longer
Comprehensive in scope covering both assessment of full range of strategic options for value creation and critical assessmentof current integration programme and overall execution
Review is substantially complete with findings and next steps covered later in this presentation
5
Year in review
Continuing operations
6
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Making it easier to execute and move faster
Increasing agility3
Making it easier for us to do business and for people to do business with us
Simplifyingcore operations 2
Making it easier for us to connect with customers partners and across the organisation
Connecting teams 1
Systems
Simplifying our Business
Portfolio Actions
IT infrastructure migration 10000 PCs 25000 mail boxes2750 servers 139 applications
Business SystemsSingle Platform amp
Common Processes
ProcessesLegal Entity SimplificationStandardisation of Policies
Structure Finance amp HR Transformation
(60 reduced to 5 key locations)20 reduction in Real Estate
bull The fundamentals underpinning our model and approach remain valid
bull We significantly underestimated the challenges that have emerged in the integration of the HPE Software business
bull The key issues in relation to this integration and overall execution are understood in detail progress has been made on these and there is clear visibility of what remains to be done
bull The pace of change within the Enterprise software market has accelerated and we now need to evolve our business model to capture the opportunities
Strategic amp Operational Review Conclusions
The Board has concluded that at this time the greatest opportunity for value creation is through the successful execution of the internal plan built on four key actions targeted to deliver by 2023 a business with
bull Stable revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of sustainable free cash flow bull Built on a platform to enable accretive portfolio actions to be taken
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivityto capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
CFO UpdateBrian McArthur-Muscroft
Revenue declined 73 period-on-period on a CCY basis for the twelve months to 31 October 2019
Licence revenue decline of 72 in FY19 is less than the FY18 decline of 128
Decline in maintenance revenue was impacted by one off events including the disposal of Atalla and selling to the US Government via a strategic partner rather than direct Restating for these two items maintenance revenue decline would have been 47 (FY19 actual 62) See appendix 2 for further detail
SaaS and other recurring and Consulting revenue accounts for 26ppts of the overall decline
Adjusted EBITDA margin increase of 20 ppt to 407 in the twelve months ended 31 October 2019
Diluted adjusted Earnings per share from continuing operations of 19589 cents - an increase of 45 primarily driven by a lower share count
10
Micro Focus International Financial performance (1 of 2)
Per share data presented at Actual rates Diluted adjusted EPS (cents) 19589 18751 45Dividend per share (cents) 11666 10084 157
Change
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
11
HPE Software related actual exceptional charge of $2943m Total HPE software exceptional forecast spend still on target at $960M assuming delivery of systems project to current schedule
In the twelve months to 31 October 2019 adjusted cash conversion of 953 and free cash flow of $5762m Long term adjusted cash conversion target range remains 95-100
Underlying free cash flow of c $700-800m due to tailwind of the end of exceptional costs partially offset by tax increases
Net debt of $43385m and period end gearing of 32x Adjusted EBITDA Further gearing analysis presented later in this section
Other is net of costs and revenue
Cash flow includes results for SUSE for entire period in FY18 but for only 4 months in FY19
Adjusted EBITDA for FY19 is for continuing operations only the comparatives include the discontinued operation
FY19 FY18Reported Reported
Exceptional spend (at actual rates)System related spend ($m) 1263 1144 104Other integration costs ($m) 1680 2935 (428)Total HPE Software related exceptional spend 2943 4079 (278)Other ($m) (01) 318 (1003)Total (reported in operating profit) 2942 4397 (331)
Net debt ($m) 43385 42535 20 Net debt to Adjusted EBITDA ratio 32x 28x 04x
Change
Financial performance (2 of 2) Micro Focus International
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
12
$14025m
We continued to be a highly cash generative business in FY19
Improvement in collection of overdue trade receivables which de-risked the balance sheet offset by timing differences of exceptional cash costs and deferred revenue
Increase in tax payments of $884m in FY19 as we continue to utilise tax attributes acquired with HPE Software
Low capex since all RampD expensed through EBIDTA Underlying interest cover is c 45-50x before
dividend and after capex
Cash generation for twelve months ended 31 October 2019 Micro Focus International
Cash flow and Adjusted EBITDA includes results for SUSE for entire period in FY18 but for only 4 months in FY19
FY19 FY18
Cash generated from operations before working capital 11775 11912 Movement in working capital (1212) (396)Cash generated from operations 10563 11516 Interest payments (2271) (2195)Bank loan costs 00 (108)Tax payments (1674) (790)Purchase of intangible assets (293) (565)Purchase of property plant and equipment (563) (302)Free cash flow 5762 7556
Adjusted cash conversion 953 1057
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other integration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(104)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other intergration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(103)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
Introduction
Chief Executive Officer (CEO) Update
Chief Financial Officer (CFO) Update
Strategic amp Operational Review Update
Outlook and Guidance
Agenda
CEO UpdateStephen Murdoch
Financial Summary Revenue in line with revised guidance at $33484m down 73 on constant currency basis compared to the prior year Improvement in Adjusted EBITDA margin from 387 to 407 on a constant currency basis Adjusted EBITDA decreased by
26 to $13625m compared to the prior year
$23bn returned to shareholders (which equates to $537 per share)
Final dividend of 5833c proposed today giving total dividend of 11666 cents for the twelve month period
Delivering Innovation for customers 500+ Product releases delivering key innovation such as Robotic Process Automation (RPA) Artificial Intelligence Behavioural
Analytics Hybrid Cloud management and Container deployment capabilities
Solid progress has been made on our key integration amp operational improvement initiatives
Strategic amp Operational Review announced in August 2019 Business performance below expectations amp integration of HPE Software proving more challenging and taking longer
Comprehensive in scope covering both assessment of full range of strategic options for value creation and critical assessmentof current integration programme and overall execution
Review is substantially complete with findings and next steps covered later in this presentation
5
Year in review
Continuing operations
6
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Making it easier to execute and move faster
Increasing agility3
Making it easier for us to do business and for people to do business with us
Simplifyingcore operations 2
Making it easier for us to connect with customers partners and across the organisation
Connecting teams 1
Systems
Simplifying our Business
Portfolio Actions
IT infrastructure migration 10000 PCs 25000 mail boxes2750 servers 139 applications
Business SystemsSingle Platform amp
Common Processes
ProcessesLegal Entity SimplificationStandardisation of Policies
Structure Finance amp HR Transformation
(60 reduced to 5 key locations)20 reduction in Real Estate
bull The fundamentals underpinning our model and approach remain valid
bull We significantly underestimated the challenges that have emerged in the integration of the HPE Software business
bull The key issues in relation to this integration and overall execution are understood in detail progress has been made on these and there is clear visibility of what remains to be done
bull The pace of change within the Enterprise software market has accelerated and we now need to evolve our business model to capture the opportunities
Strategic amp Operational Review Conclusions
The Board has concluded that at this time the greatest opportunity for value creation is through the successful execution of the internal plan built on four key actions targeted to deliver by 2023 a business with
bull Stable revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of sustainable free cash flow bull Built on a platform to enable accretive portfolio actions to be taken
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivityto capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
CFO UpdateBrian McArthur-Muscroft
Revenue declined 73 period-on-period on a CCY basis for the twelve months to 31 October 2019
Licence revenue decline of 72 in FY19 is less than the FY18 decline of 128
Decline in maintenance revenue was impacted by one off events including the disposal of Atalla and selling to the US Government via a strategic partner rather than direct Restating for these two items maintenance revenue decline would have been 47 (FY19 actual 62) See appendix 2 for further detail
SaaS and other recurring and Consulting revenue accounts for 26ppts of the overall decline
Adjusted EBITDA margin increase of 20 ppt to 407 in the twelve months ended 31 October 2019
Diluted adjusted Earnings per share from continuing operations of 19589 cents - an increase of 45 primarily driven by a lower share count
10
Micro Focus International Financial performance (1 of 2)
Per share data presented at Actual rates Diluted adjusted EPS (cents) 19589 18751 45Dividend per share (cents) 11666 10084 157
Change
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
11
HPE Software related actual exceptional charge of $2943m Total HPE software exceptional forecast spend still on target at $960M assuming delivery of systems project to current schedule
In the twelve months to 31 October 2019 adjusted cash conversion of 953 and free cash flow of $5762m Long term adjusted cash conversion target range remains 95-100
Underlying free cash flow of c $700-800m due to tailwind of the end of exceptional costs partially offset by tax increases
Net debt of $43385m and period end gearing of 32x Adjusted EBITDA Further gearing analysis presented later in this section
Other is net of costs and revenue
Cash flow includes results for SUSE for entire period in FY18 but for only 4 months in FY19
Adjusted EBITDA for FY19 is for continuing operations only the comparatives include the discontinued operation
FY19 FY18Reported Reported
Exceptional spend (at actual rates)System related spend ($m) 1263 1144 104Other integration costs ($m) 1680 2935 (428)Total HPE Software related exceptional spend 2943 4079 (278)Other ($m) (01) 318 (1003)Total (reported in operating profit) 2942 4397 (331)
Net debt ($m) 43385 42535 20 Net debt to Adjusted EBITDA ratio 32x 28x 04x
Change
Financial performance (2 of 2) Micro Focus International
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
12
$14025m
We continued to be a highly cash generative business in FY19
Improvement in collection of overdue trade receivables which de-risked the balance sheet offset by timing differences of exceptional cash costs and deferred revenue
Increase in tax payments of $884m in FY19 as we continue to utilise tax attributes acquired with HPE Software
Low capex since all RampD expensed through EBIDTA Underlying interest cover is c 45-50x before
dividend and after capex
Cash generation for twelve months ended 31 October 2019 Micro Focus International
Cash flow and Adjusted EBITDA includes results for SUSE for entire period in FY18 but for only 4 months in FY19
FY19 FY18
Cash generated from operations before working capital 11775 11912 Movement in working capital (1212) (396)Cash generated from operations 10563 11516 Interest payments (2271) (2195)Bank loan costs 00 (108)Tax payments (1674) (790)Purchase of intangible assets (293) (565)Purchase of property plant and equipment (563) (302)Free cash flow 5762 7556
Adjusted cash conversion 953 1057
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other integration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(104)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other intergration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(103)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
CEO UpdateStephen Murdoch
Financial Summary Revenue in line with revised guidance at $33484m down 73 on constant currency basis compared to the prior year Improvement in Adjusted EBITDA margin from 387 to 407 on a constant currency basis Adjusted EBITDA decreased by
26 to $13625m compared to the prior year
$23bn returned to shareholders (which equates to $537 per share)
Final dividend of 5833c proposed today giving total dividend of 11666 cents for the twelve month period
Delivering Innovation for customers 500+ Product releases delivering key innovation such as Robotic Process Automation (RPA) Artificial Intelligence Behavioural
Analytics Hybrid Cloud management and Container deployment capabilities
Solid progress has been made on our key integration amp operational improvement initiatives
Strategic amp Operational Review announced in August 2019 Business performance below expectations amp integration of HPE Software proving more challenging and taking longer
Comprehensive in scope covering both assessment of full range of strategic options for value creation and critical assessmentof current integration programme and overall execution
Review is substantially complete with findings and next steps covered later in this presentation
5
Year in review
Continuing operations
6
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Making it easier to execute and move faster
Increasing agility3
Making it easier for us to do business and for people to do business with us
Simplifyingcore operations 2
Making it easier for us to connect with customers partners and across the organisation
Connecting teams 1
Systems
Simplifying our Business
Portfolio Actions
IT infrastructure migration 10000 PCs 25000 mail boxes2750 servers 139 applications
Business SystemsSingle Platform amp
Common Processes
ProcessesLegal Entity SimplificationStandardisation of Policies
Structure Finance amp HR Transformation
(60 reduced to 5 key locations)20 reduction in Real Estate
bull The fundamentals underpinning our model and approach remain valid
bull We significantly underestimated the challenges that have emerged in the integration of the HPE Software business
bull The key issues in relation to this integration and overall execution are understood in detail progress has been made on these and there is clear visibility of what remains to be done
bull The pace of change within the Enterprise software market has accelerated and we now need to evolve our business model to capture the opportunities
Strategic amp Operational Review Conclusions
The Board has concluded that at this time the greatest opportunity for value creation is through the successful execution of the internal plan built on four key actions targeted to deliver by 2023 a business with
bull Stable revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of sustainable free cash flow bull Built on a platform to enable accretive portfolio actions to be taken
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivityto capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
CFO UpdateBrian McArthur-Muscroft
Revenue declined 73 period-on-period on a CCY basis for the twelve months to 31 October 2019
Licence revenue decline of 72 in FY19 is less than the FY18 decline of 128
Decline in maintenance revenue was impacted by one off events including the disposal of Atalla and selling to the US Government via a strategic partner rather than direct Restating for these two items maintenance revenue decline would have been 47 (FY19 actual 62) See appendix 2 for further detail
SaaS and other recurring and Consulting revenue accounts for 26ppts of the overall decline
Adjusted EBITDA margin increase of 20 ppt to 407 in the twelve months ended 31 October 2019
Diluted adjusted Earnings per share from continuing operations of 19589 cents - an increase of 45 primarily driven by a lower share count
10
Micro Focus International Financial performance (1 of 2)
Per share data presented at Actual rates Diluted adjusted EPS (cents) 19589 18751 45Dividend per share (cents) 11666 10084 157
Change
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
11
HPE Software related actual exceptional charge of $2943m Total HPE software exceptional forecast spend still on target at $960M assuming delivery of systems project to current schedule
In the twelve months to 31 October 2019 adjusted cash conversion of 953 and free cash flow of $5762m Long term adjusted cash conversion target range remains 95-100
Underlying free cash flow of c $700-800m due to tailwind of the end of exceptional costs partially offset by tax increases
Net debt of $43385m and period end gearing of 32x Adjusted EBITDA Further gearing analysis presented later in this section
Other is net of costs and revenue
Cash flow includes results for SUSE for entire period in FY18 but for only 4 months in FY19
Adjusted EBITDA for FY19 is for continuing operations only the comparatives include the discontinued operation
FY19 FY18Reported Reported
Exceptional spend (at actual rates)System related spend ($m) 1263 1144 104Other integration costs ($m) 1680 2935 (428)Total HPE Software related exceptional spend 2943 4079 (278)Other ($m) (01) 318 (1003)Total (reported in operating profit) 2942 4397 (331)
Net debt ($m) 43385 42535 20 Net debt to Adjusted EBITDA ratio 32x 28x 04x
Change
Financial performance (2 of 2) Micro Focus International
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
12
$14025m
We continued to be a highly cash generative business in FY19
Improvement in collection of overdue trade receivables which de-risked the balance sheet offset by timing differences of exceptional cash costs and deferred revenue
Increase in tax payments of $884m in FY19 as we continue to utilise tax attributes acquired with HPE Software
Low capex since all RampD expensed through EBIDTA Underlying interest cover is c 45-50x before
dividend and after capex
Cash generation for twelve months ended 31 October 2019 Micro Focus International
Cash flow and Adjusted EBITDA includes results for SUSE for entire period in FY18 but for only 4 months in FY19
FY19 FY18
Cash generated from operations before working capital 11775 11912 Movement in working capital (1212) (396)Cash generated from operations 10563 11516 Interest payments (2271) (2195)Bank loan costs 00 (108)Tax payments (1674) (790)Purchase of intangible assets (293) (565)Purchase of property plant and equipment (563) (302)Free cash flow 5762 7556
Adjusted cash conversion 953 1057
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other integration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(104)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other intergration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(103)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
Financial Summary Revenue in line with revised guidance at $33484m down 73 on constant currency basis compared to the prior year Improvement in Adjusted EBITDA margin from 387 to 407 on a constant currency basis Adjusted EBITDA decreased by
26 to $13625m compared to the prior year
$23bn returned to shareholders (which equates to $537 per share)
Final dividend of 5833c proposed today giving total dividend of 11666 cents for the twelve month period
Delivering Innovation for customers 500+ Product releases delivering key innovation such as Robotic Process Automation (RPA) Artificial Intelligence Behavioural
Analytics Hybrid Cloud management and Container deployment capabilities
Solid progress has been made on our key integration amp operational improvement initiatives
Strategic amp Operational Review announced in August 2019 Business performance below expectations amp integration of HPE Software proving more challenging and taking longer
Comprehensive in scope covering both assessment of full range of strategic options for value creation and critical assessmentof current integration programme and overall execution
Review is substantially complete with findings and next steps covered later in this presentation
5
Year in review
Continuing operations
6
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Making it easier to execute and move faster
Increasing agility3
Making it easier for us to do business and for people to do business with us
Simplifyingcore operations 2
Making it easier for us to connect with customers partners and across the organisation
Connecting teams 1
Systems
Simplifying our Business
Portfolio Actions
IT infrastructure migration 10000 PCs 25000 mail boxes2750 servers 139 applications
Business SystemsSingle Platform amp
Common Processes
ProcessesLegal Entity SimplificationStandardisation of Policies
Structure Finance amp HR Transformation
(60 reduced to 5 key locations)20 reduction in Real Estate
bull The fundamentals underpinning our model and approach remain valid
bull We significantly underestimated the challenges that have emerged in the integration of the HPE Software business
bull The key issues in relation to this integration and overall execution are understood in detail progress has been made on these and there is clear visibility of what remains to be done
bull The pace of change within the Enterprise software market has accelerated and we now need to evolve our business model to capture the opportunities
Strategic amp Operational Review Conclusions
The Board has concluded that at this time the greatest opportunity for value creation is through the successful execution of the internal plan built on four key actions targeted to deliver by 2023 a business with
bull Stable revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of sustainable free cash flow bull Built on a platform to enable accretive portfolio actions to be taken
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivityto capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
CFO UpdateBrian McArthur-Muscroft
Revenue declined 73 period-on-period on a CCY basis for the twelve months to 31 October 2019
Licence revenue decline of 72 in FY19 is less than the FY18 decline of 128
Decline in maintenance revenue was impacted by one off events including the disposal of Atalla and selling to the US Government via a strategic partner rather than direct Restating for these two items maintenance revenue decline would have been 47 (FY19 actual 62) See appendix 2 for further detail
SaaS and other recurring and Consulting revenue accounts for 26ppts of the overall decline
Adjusted EBITDA margin increase of 20 ppt to 407 in the twelve months ended 31 October 2019
Diluted adjusted Earnings per share from continuing operations of 19589 cents - an increase of 45 primarily driven by a lower share count
10
Micro Focus International Financial performance (1 of 2)
Per share data presented at Actual rates Diluted adjusted EPS (cents) 19589 18751 45Dividend per share (cents) 11666 10084 157
Change
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
11
HPE Software related actual exceptional charge of $2943m Total HPE software exceptional forecast spend still on target at $960M assuming delivery of systems project to current schedule
In the twelve months to 31 October 2019 adjusted cash conversion of 953 and free cash flow of $5762m Long term adjusted cash conversion target range remains 95-100
Underlying free cash flow of c $700-800m due to tailwind of the end of exceptional costs partially offset by tax increases
Net debt of $43385m and period end gearing of 32x Adjusted EBITDA Further gearing analysis presented later in this section
Other is net of costs and revenue
Cash flow includes results for SUSE for entire period in FY18 but for only 4 months in FY19
Adjusted EBITDA for FY19 is for continuing operations only the comparatives include the discontinued operation
FY19 FY18Reported Reported
Exceptional spend (at actual rates)System related spend ($m) 1263 1144 104Other integration costs ($m) 1680 2935 (428)Total HPE Software related exceptional spend 2943 4079 (278)Other ($m) (01) 318 (1003)Total (reported in operating profit) 2942 4397 (331)
Net debt ($m) 43385 42535 20 Net debt to Adjusted EBITDA ratio 32x 28x 04x
Change
Financial performance (2 of 2) Micro Focus International
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
12
$14025m
We continued to be a highly cash generative business in FY19
Improvement in collection of overdue trade receivables which de-risked the balance sheet offset by timing differences of exceptional cash costs and deferred revenue
Increase in tax payments of $884m in FY19 as we continue to utilise tax attributes acquired with HPE Software
Low capex since all RampD expensed through EBIDTA Underlying interest cover is c 45-50x before
dividend and after capex
Cash generation for twelve months ended 31 October 2019 Micro Focus International
Cash flow and Adjusted EBITDA includes results for SUSE for entire period in FY18 but for only 4 months in FY19
FY19 FY18
Cash generated from operations before working capital 11775 11912 Movement in working capital (1212) (396)Cash generated from operations 10563 11516 Interest payments (2271) (2195)Bank loan costs 00 (108)Tax payments (1674) (790)Purchase of intangible assets (293) (565)Purchase of property plant and equipment (563) (302)Free cash flow 5762 7556
Adjusted cash conversion 953 1057
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other integration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(104)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other intergration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(103)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
6
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Making it easier to execute and move faster
Increasing agility3
Making it easier for us to do business and for people to do business with us
Simplifyingcore operations 2
Making it easier for us to connect with customers partners and across the organisation
Connecting teams 1
Systems
Simplifying our Business
Portfolio Actions
IT infrastructure migration 10000 PCs 25000 mail boxes2750 servers 139 applications
Business SystemsSingle Platform amp
Common Processes
ProcessesLegal Entity SimplificationStandardisation of Policies
Structure Finance amp HR Transformation
(60 reduced to 5 key locations)20 reduction in Real Estate
bull The fundamentals underpinning our model and approach remain valid
bull We significantly underestimated the challenges that have emerged in the integration of the HPE Software business
bull The key issues in relation to this integration and overall execution are understood in detail progress has been made on these and there is clear visibility of what remains to be done
bull The pace of change within the Enterprise software market has accelerated and we now need to evolve our business model to capture the opportunities
Strategic amp Operational Review Conclusions
The Board has concluded that at this time the greatest opportunity for value creation is through the successful execution of the internal plan built on four key actions targeted to deliver by 2023 a business with
bull Stable revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of sustainable free cash flow bull Built on a platform to enable accretive portfolio actions to be taken
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivityto capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
CFO UpdateBrian McArthur-Muscroft
Revenue declined 73 period-on-period on a CCY basis for the twelve months to 31 October 2019
Licence revenue decline of 72 in FY19 is less than the FY18 decline of 128
Decline in maintenance revenue was impacted by one off events including the disposal of Atalla and selling to the US Government via a strategic partner rather than direct Restating for these two items maintenance revenue decline would have been 47 (FY19 actual 62) See appendix 2 for further detail
SaaS and other recurring and Consulting revenue accounts for 26ppts of the overall decline
Adjusted EBITDA margin increase of 20 ppt to 407 in the twelve months ended 31 October 2019
Diluted adjusted Earnings per share from continuing operations of 19589 cents - an increase of 45 primarily driven by a lower share count
10
Micro Focus International Financial performance (1 of 2)
Per share data presented at Actual rates Diluted adjusted EPS (cents) 19589 18751 45Dividend per share (cents) 11666 10084 157
Change
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
11
HPE Software related actual exceptional charge of $2943m Total HPE software exceptional forecast spend still on target at $960M assuming delivery of systems project to current schedule
In the twelve months to 31 October 2019 adjusted cash conversion of 953 and free cash flow of $5762m Long term adjusted cash conversion target range remains 95-100
Underlying free cash flow of c $700-800m due to tailwind of the end of exceptional costs partially offset by tax increases
Net debt of $43385m and period end gearing of 32x Adjusted EBITDA Further gearing analysis presented later in this section
Other is net of costs and revenue
Cash flow includes results for SUSE for entire period in FY18 but for only 4 months in FY19
Adjusted EBITDA for FY19 is for continuing operations only the comparatives include the discontinued operation
FY19 FY18Reported Reported
Exceptional spend (at actual rates)System related spend ($m) 1263 1144 104Other integration costs ($m) 1680 2935 (428)Total HPE Software related exceptional spend 2943 4079 (278)Other ($m) (01) 318 (1003)Total (reported in operating profit) 2942 4397 (331)
Net debt ($m) 43385 42535 20 Net debt to Adjusted EBITDA ratio 32x 28x 04x
Change
Financial performance (2 of 2) Micro Focus International
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
12
$14025m
We continued to be a highly cash generative business in FY19
Improvement in collection of overdue trade receivables which de-risked the balance sheet offset by timing differences of exceptional cash costs and deferred revenue
Increase in tax payments of $884m in FY19 as we continue to utilise tax attributes acquired with HPE Software
Low capex since all RampD expensed through EBIDTA Underlying interest cover is c 45-50x before
dividend and after capex
Cash generation for twelve months ended 31 October 2019 Micro Focus International
Cash flow and Adjusted EBITDA includes results for SUSE for entire period in FY18 but for only 4 months in FY19
FY19 FY18
Cash generated from operations before working capital 11775 11912 Movement in working capital (1212) (396)Cash generated from operations 10563 11516 Interest payments (2271) (2195)Bank loan costs 00 (108)Tax payments (1674) (790)Purchase of intangible assets (293) (565)Purchase of property plant and equipment (563) (302)Free cash flow 5762 7556
Adjusted cash conversion 953 1057
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other integration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(104)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other intergration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(103)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
7
bull The fundamentals underpinning our model and approach remain valid
bull We significantly underestimated the challenges that have emerged in the integration of the HPE Software business
bull The key issues in relation to this integration and overall execution are understood in detail progress has been made on these and there is clear visibility of what remains to be done
bull The pace of change within the Enterprise software market has accelerated and we now need to evolve our business model to capture the opportunities
Strategic amp Operational Review Conclusions
The Board has concluded that at this time the greatest opportunity for value creation is through the successful execution of the internal plan built on four key actions targeted to deliver by 2023 a business with
bull Stable revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of sustainable free cash flow bull Built on a platform to enable accretive portfolio actions to be taken
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivityto capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
CFO UpdateBrian McArthur-Muscroft
Revenue declined 73 period-on-period on a CCY basis for the twelve months to 31 October 2019
Licence revenue decline of 72 in FY19 is less than the FY18 decline of 128
Decline in maintenance revenue was impacted by one off events including the disposal of Atalla and selling to the US Government via a strategic partner rather than direct Restating for these two items maintenance revenue decline would have been 47 (FY19 actual 62) See appendix 2 for further detail
SaaS and other recurring and Consulting revenue accounts for 26ppts of the overall decline
Adjusted EBITDA margin increase of 20 ppt to 407 in the twelve months ended 31 October 2019
Diluted adjusted Earnings per share from continuing operations of 19589 cents - an increase of 45 primarily driven by a lower share count
10
Micro Focus International Financial performance (1 of 2)
Per share data presented at Actual rates Diluted adjusted EPS (cents) 19589 18751 45Dividend per share (cents) 11666 10084 157
Change
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
11
HPE Software related actual exceptional charge of $2943m Total HPE software exceptional forecast spend still on target at $960M assuming delivery of systems project to current schedule
In the twelve months to 31 October 2019 adjusted cash conversion of 953 and free cash flow of $5762m Long term adjusted cash conversion target range remains 95-100
Underlying free cash flow of c $700-800m due to tailwind of the end of exceptional costs partially offset by tax increases
Net debt of $43385m and period end gearing of 32x Adjusted EBITDA Further gearing analysis presented later in this section
Other is net of costs and revenue
Cash flow includes results for SUSE for entire period in FY18 but for only 4 months in FY19
Adjusted EBITDA for FY19 is for continuing operations only the comparatives include the discontinued operation
FY19 FY18Reported Reported
Exceptional spend (at actual rates)System related spend ($m) 1263 1144 104Other integration costs ($m) 1680 2935 (428)Total HPE Software related exceptional spend 2943 4079 (278)Other ($m) (01) 318 (1003)Total (reported in operating profit) 2942 4397 (331)
Net debt ($m) 43385 42535 20 Net debt to Adjusted EBITDA ratio 32x 28x 04x
Change
Financial performance (2 of 2) Micro Focus International
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
12
$14025m
We continued to be a highly cash generative business in FY19
Improvement in collection of overdue trade receivables which de-risked the balance sheet offset by timing differences of exceptional cash costs and deferred revenue
Increase in tax payments of $884m in FY19 as we continue to utilise tax attributes acquired with HPE Software
Low capex since all RampD expensed through EBIDTA Underlying interest cover is c 45-50x before
dividend and after capex
Cash generation for twelve months ended 31 October 2019 Micro Focus International
Cash flow and Adjusted EBITDA includes results for SUSE for entire period in FY18 but for only 4 months in FY19
FY19 FY18
Cash generated from operations before working capital 11775 11912 Movement in working capital (1212) (396)Cash generated from operations 10563 11516 Interest payments (2271) (2195)Bank loan costs 00 (108)Tax payments (1674) (790)Purchase of intangible assets (293) (565)Purchase of property plant and equipment (563) (302)Free cash flow 5762 7556
Adjusted cash conversion 953 1057
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other integration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(104)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other intergration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(103)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivityto capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
CFO UpdateBrian McArthur-Muscroft
Revenue declined 73 period-on-period on a CCY basis for the twelve months to 31 October 2019
Licence revenue decline of 72 in FY19 is less than the FY18 decline of 128
Decline in maintenance revenue was impacted by one off events including the disposal of Atalla and selling to the US Government via a strategic partner rather than direct Restating for these two items maintenance revenue decline would have been 47 (FY19 actual 62) See appendix 2 for further detail
SaaS and other recurring and Consulting revenue accounts for 26ppts of the overall decline
Adjusted EBITDA margin increase of 20 ppt to 407 in the twelve months ended 31 October 2019
Diluted adjusted Earnings per share from continuing operations of 19589 cents - an increase of 45 primarily driven by a lower share count
10
Micro Focus International Financial performance (1 of 2)
Per share data presented at Actual rates Diluted adjusted EPS (cents) 19589 18751 45Dividend per share (cents) 11666 10084 157
Change
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
11
HPE Software related actual exceptional charge of $2943m Total HPE software exceptional forecast spend still on target at $960M assuming delivery of systems project to current schedule
In the twelve months to 31 October 2019 adjusted cash conversion of 953 and free cash flow of $5762m Long term adjusted cash conversion target range remains 95-100
Underlying free cash flow of c $700-800m due to tailwind of the end of exceptional costs partially offset by tax increases
Net debt of $43385m and period end gearing of 32x Adjusted EBITDA Further gearing analysis presented later in this section
Other is net of costs and revenue
Cash flow includes results for SUSE for entire period in FY18 but for only 4 months in FY19
Adjusted EBITDA for FY19 is for continuing operations only the comparatives include the discontinued operation
FY19 FY18Reported Reported
Exceptional spend (at actual rates)System related spend ($m) 1263 1144 104Other integration costs ($m) 1680 2935 (428)Total HPE Software related exceptional spend 2943 4079 (278)Other ($m) (01) 318 (1003)Total (reported in operating profit) 2942 4397 (331)
Net debt ($m) 43385 42535 20 Net debt to Adjusted EBITDA ratio 32x 28x 04x
Change
Financial performance (2 of 2) Micro Focus International
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
12
$14025m
We continued to be a highly cash generative business in FY19
Improvement in collection of overdue trade receivables which de-risked the balance sheet offset by timing differences of exceptional cash costs and deferred revenue
Increase in tax payments of $884m in FY19 as we continue to utilise tax attributes acquired with HPE Software
Low capex since all RampD expensed through EBIDTA Underlying interest cover is c 45-50x before
dividend and after capex
Cash generation for twelve months ended 31 October 2019 Micro Focus International
Cash flow and Adjusted EBITDA includes results for SUSE for entire period in FY18 but for only 4 months in FY19
FY19 FY18
Cash generated from operations before working capital 11775 11912 Movement in working capital (1212) (396)Cash generated from operations 10563 11516 Interest payments (2271) (2195)Bank loan costs 00 (108)Tax payments (1674) (790)Purchase of intangible assets (293) (565)Purchase of property plant and equipment (563) (302)Free cash flow 5762 7556
Adjusted cash conversion 953 1057
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other integration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(104)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other intergration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(103)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
CFO UpdateBrian McArthur-Muscroft
Revenue declined 73 period-on-period on a CCY basis for the twelve months to 31 October 2019
Licence revenue decline of 72 in FY19 is less than the FY18 decline of 128
Decline in maintenance revenue was impacted by one off events including the disposal of Atalla and selling to the US Government via a strategic partner rather than direct Restating for these two items maintenance revenue decline would have been 47 (FY19 actual 62) See appendix 2 for further detail
SaaS and other recurring and Consulting revenue accounts for 26ppts of the overall decline
Adjusted EBITDA margin increase of 20 ppt to 407 in the twelve months ended 31 October 2019
Diluted adjusted Earnings per share from continuing operations of 19589 cents - an increase of 45 primarily driven by a lower share count
10
Micro Focus International Financial performance (1 of 2)
Per share data presented at Actual rates Diluted adjusted EPS (cents) 19589 18751 45Dividend per share (cents) 11666 10084 157
Change
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
11
HPE Software related actual exceptional charge of $2943m Total HPE software exceptional forecast spend still on target at $960M assuming delivery of systems project to current schedule
In the twelve months to 31 October 2019 adjusted cash conversion of 953 and free cash flow of $5762m Long term adjusted cash conversion target range remains 95-100
Underlying free cash flow of c $700-800m due to tailwind of the end of exceptional costs partially offset by tax increases
Net debt of $43385m and period end gearing of 32x Adjusted EBITDA Further gearing analysis presented later in this section
Other is net of costs and revenue
Cash flow includes results for SUSE for entire period in FY18 but for only 4 months in FY19
Adjusted EBITDA for FY19 is for continuing operations only the comparatives include the discontinued operation
FY19 FY18Reported Reported
Exceptional spend (at actual rates)System related spend ($m) 1263 1144 104Other integration costs ($m) 1680 2935 (428)Total HPE Software related exceptional spend 2943 4079 (278)Other ($m) (01) 318 (1003)Total (reported in operating profit) 2942 4397 (331)
Net debt ($m) 43385 42535 20 Net debt to Adjusted EBITDA ratio 32x 28x 04x
Change
Financial performance (2 of 2) Micro Focus International
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
12
$14025m
We continued to be a highly cash generative business in FY19
Improvement in collection of overdue trade receivables which de-risked the balance sheet offset by timing differences of exceptional cash costs and deferred revenue
Increase in tax payments of $884m in FY19 as we continue to utilise tax attributes acquired with HPE Software
Low capex since all RampD expensed through EBIDTA Underlying interest cover is c 45-50x before
dividend and after capex
Cash generation for twelve months ended 31 October 2019 Micro Focus International
Cash flow and Adjusted EBITDA includes results for SUSE for entire period in FY18 but for only 4 months in FY19
FY19 FY18
Cash generated from operations before working capital 11775 11912 Movement in working capital (1212) (396)Cash generated from operations 10563 11516 Interest payments (2271) (2195)Bank loan costs 00 (108)Tax payments (1674) (790)Purchase of intangible assets (293) (565)Purchase of property plant and equipment (563) (302)Free cash flow 5762 7556
Adjusted cash conversion 953 1057
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other integration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(104)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other intergration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(103)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
Revenue declined 73 period-on-period on a CCY basis for the twelve months to 31 October 2019
Licence revenue decline of 72 in FY19 is less than the FY18 decline of 128
Decline in maintenance revenue was impacted by one off events including the disposal of Atalla and selling to the US Government via a strategic partner rather than direct Restating for these two items maintenance revenue decline would have been 47 (FY19 actual 62) See appendix 2 for further detail
SaaS and other recurring and Consulting revenue accounts for 26ppts of the overall decline
Adjusted EBITDA margin increase of 20 ppt to 407 in the twelve months ended 31 October 2019
Diluted adjusted Earnings per share from continuing operations of 19589 cents - an increase of 45 primarily driven by a lower share count
10
Micro Focus International Financial performance (1 of 2)
Per share data presented at Actual rates Diluted adjusted EPS (cents) 19589 18751 45Dividend per share (cents) 11666 10084 157
Change
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
11
HPE Software related actual exceptional charge of $2943m Total HPE software exceptional forecast spend still on target at $960M assuming delivery of systems project to current schedule
In the twelve months to 31 October 2019 adjusted cash conversion of 953 and free cash flow of $5762m Long term adjusted cash conversion target range remains 95-100
Underlying free cash flow of c $700-800m due to tailwind of the end of exceptional costs partially offset by tax increases
Net debt of $43385m and period end gearing of 32x Adjusted EBITDA Further gearing analysis presented later in this section
Other is net of costs and revenue
Cash flow includes results for SUSE for entire period in FY18 but for only 4 months in FY19
Adjusted EBITDA for FY19 is for continuing operations only the comparatives include the discontinued operation
FY19 FY18Reported Reported
Exceptional spend (at actual rates)System related spend ($m) 1263 1144 104Other integration costs ($m) 1680 2935 (428)Total HPE Software related exceptional spend 2943 4079 (278)Other ($m) (01) 318 (1003)Total (reported in operating profit) 2942 4397 (331)
Net debt ($m) 43385 42535 20 Net debt to Adjusted EBITDA ratio 32x 28x 04x
Change
Financial performance (2 of 2) Micro Focus International
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
12
$14025m
We continued to be a highly cash generative business in FY19
Improvement in collection of overdue trade receivables which de-risked the balance sheet offset by timing differences of exceptional cash costs and deferred revenue
Increase in tax payments of $884m in FY19 as we continue to utilise tax attributes acquired with HPE Software
Low capex since all RampD expensed through EBIDTA Underlying interest cover is c 45-50x before
dividend and after capex
Cash generation for twelve months ended 31 October 2019 Micro Focus International
Cash flow and Adjusted EBITDA includes results for SUSE for entire period in FY18 but for only 4 months in FY19
FY19 FY18
Cash generated from operations before working capital 11775 11912 Movement in working capital (1212) (396)Cash generated from operations 10563 11516 Interest payments (2271) (2195)Bank loan costs 00 (108)Tax payments (1674) (790)Purchase of intangible assets (293) (565)Purchase of property plant and equipment (563) (302)Free cash flow 5762 7556
Adjusted cash conversion 953 1057
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other integration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(104)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other intergration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(103)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
11
HPE Software related actual exceptional charge of $2943m Total HPE software exceptional forecast spend still on target at $960M assuming delivery of systems project to current schedule
In the twelve months to 31 October 2019 adjusted cash conversion of 953 and free cash flow of $5762m Long term adjusted cash conversion target range remains 95-100
Underlying free cash flow of c $700-800m due to tailwind of the end of exceptional costs partially offset by tax increases
Net debt of $43385m and period end gearing of 32x Adjusted EBITDA Further gearing analysis presented later in this section
Other is net of costs and revenue
Cash flow includes results for SUSE for entire period in FY18 but for only 4 months in FY19
Adjusted EBITDA for FY19 is for continuing operations only the comparatives include the discontinued operation
FY19 FY18Reported Reported
Exceptional spend (at actual rates)System related spend ($m) 1263 1144 104Other integration costs ($m) 1680 2935 (428)Total HPE Software related exceptional spend 2943 4079 (278)Other ($m) (01) 318 (1003)Total (reported in operating profit) 2942 4397 (331)
Net debt ($m) 43385 42535 20 Net debt to Adjusted EBITDA ratio 32x 28x 04x
Change
Financial performance (2 of 2) Micro Focus International
Financial performance 1
Financial performance 2
Free cash flow
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA56370000000000005575300000000000076226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA23116473NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsMovements in provisionsOther non-cash itemsWorking capitalCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANANA117739135900000000000006NALines70215407000000000000554070000000000005563700000000000055753000000000000762266226504900000000000034658429942990954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base+1NANANA23116473NANANANANANANANA56370000000000005575300000000000076226NANANANANA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2Base-NA1614NANANANANA117739135900000000000006NA1NA54070000000000005NANANANANA5049000000000000346584299NA0954545454545454590863636363636363650772727272727272710681818181818181770590909090909090940504090909090909091203181818181818181802272727272727272701363636363636363545454545454545456E-2
Free cashflow updatye
Pillars
Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow7021NA54070000000000005NANA6226NANANA4299InvisibleAdjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA7021NA6116226NA62265049000000000000346579999999999995NALabel+Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA703116NANANANANALabel-Adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA1614NANANANA117739135900000000000006NALines702154070000000000005540700000000000056116226622650490000000000003465842994299095085075065055000000000000004045035025015005Base+1NANANA703116NANANANANANANANA6116226NANANANANA095085075065055000000000000004045035025015005Base-NA1614NANANANA117739135900000000000006NA1NA54070000000000005NANANANA5049000000000000346584299NA095085075065055000000000000004045035025015005
Sheet1
Revenue
Revenue -Amended (v2)
FCF bridge
ampArialRegularamp8ampK01+049httpswwwvertex42comExcelTemplateswaterfall-charthtmlampArialRegularamp8ampK01+049Waterfall Chart Template by Vertex42com
Pillars
Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flow13625NA14025NA11083NANA1056NANANA5759InvisibleAdjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA14025NA14025NA110831056NA105682896615NALabel+Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNA40NANANANA312NANANANANALabel-Adjusted EBITDA (cont ops)Adjusted EBITDA (SUSE)Group adjusted EBITDAExceptional itemsAdjusted EBITDA less exceptionalsChange in working capitalOther non-cash itemsCash from operationsInterest paymentsTax paymentsCapex and intangiblesFree cash flowNANANA2942NA835NANA22711674856NALines136251402514025110831108310248105610568289661557595759095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base+1NA40NANANANA312NANANANANANA14025NANANANA1056NANANANANA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2Base-NANANA2942NA835NANA22711674856NA1NANANA11083NA10248NANA828966155759NA095833333333333337087507916666666666666307083333333333333706250541666666666666630458333333333333310375029166666666666669020833333333333334012541666666666666664E-2
$400m
$14025m
$2942m
FCF table
Cash conversion
Capital discipline
Leverage profile
Net debt
October 2017April 2018October 2018April 2019October 20194409742004254380743385AEBITDA ratio
October 2017April 2018October 2018April 2019October 20193062079022290118929370629370629371282732
Intergration costs6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total14263999999999999200292054292999999999999Property severance and legal6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total24820000000000002960599999999999995062088000000000001Exceptional CAPEX- FAST6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total101075956 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total2113814113809999999999756138099999999997To come
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total200150188619Total
6 months to Apr-176 months to Oct-176 months to Apr-18Total incurred todateFY18FY19FY20Total750
Costs
image1png
12
$14025m
We continued to be a highly cash generative business in FY19
Improvement in collection of overdue trade receivables which de-risked the balance sheet offset by timing differences of exceptional cash costs and deferred revenue
Increase in tax payments of $884m in FY19 as we continue to utilise tax attributes acquired with HPE Software
Low capex since all RampD expensed through EBIDTA Underlying interest cover is c 45-50x before
dividend and after capex
Cash generation for twelve months ended 31 October 2019 Micro Focus International
Cash flow and Adjusted EBITDA includes results for SUSE for entire period in FY18 but for only 4 months in FY19
FY19 FY18
Cash generated from operations before working capital 11775 11912 Movement in working capital (1212) (396)Cash generated from operations 10563 11516 Interest payments (2271) (2195)Bank loan costs 00 (108)Tax payments (1674) (790)Purchase of intangible assets (293) (565)Purchase of property plant and equipment (563) (302)Free cash flow 5762 7556
Adjusted cash conversion 953 1057
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
H119
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4046)
75
1067
88
(2816)
Selling and distribution costs
(6027)
29
2398
05
(3595)
Research and development expenses
(2505)
14
00
64
(103)
(2530)
Administrative expenses
(3667)
1496
700
98
171
195
(1007)
Total costs
(16245)
1614
700
3563
328
(103)
195
(9948)
Check
-9948
-11368
H118
-00
Reported
Exceptional costs
Share based payments
Amortisation of purchased intangible assets
Depreciation of property plant and equipment
Product development intangible costs capitalised
Foreign exchange gains
Included within AEBITDA
Cost of sales
(4826)
251
1320
108
(3147)
Selling and distribution costs
(5741)
120
2203
05
(3413)
Research and development expenses
(2544)
75
76
(146)
(2539)
Administrative expenses
(4484)
1508
250
101
152
204
(2269)
Total costs
(17595)
1954
250
3624
341
(146)
204
(11368)
CCY Impact
376
Total costs as reported
(10992)
6 months to Oct-16
6 months to Apr-17
6 months to Oct-17
6 months to Apr-18
Total incurred todate
FY18
FY19
FY20
Total
Intergration costs
14
20
20
54
Property severance and legal
2
10
50
62
Exceptional CAPEX- FAST
10
10
75
95
Costs to come
200
150
189
Total
750
Intergration costs
Property severance and legal
Exceptional CAPEX- FAST
To come
Total
6 months to Apr-17
14
2
10
6 months to Oct-17
20
10
10
6 months to Apr-18
20
50
75
Total incurred todate
54
62
95
FY18
211
200
FY19
411
150
FY20
561
189
Total
750
DRAFT full year databook Confidential and limited to restricted distribution list Numbers may be subject to change until document is finalised
REVENUE - ACTUAL v CCY
Twelve months to 31 Oct 2019
Twelve months to 31 Oct 2018
ACTUAL (REVISED)
CONSTANT CURRENCY
CHANGE
CHANGE
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
Licence
Maintenance
SaaS amp other recurring
Consulting
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
AMC
1709
3261
00
117
5087
1801
3281
00
119
5201
(92)
(21)
00
(02)
(114)
-51
-06
00
-14
-22
ADM
1303
4854
878
182
7217
1360
5019
956
313
7647
(57)
(165)
(77)
(131)
(430)
-42
-33
-81
-419
-56
ITOM
2375
6458
110
1275
10218
2470
7260
141
1492
11364
(95)
(802)
(31)
(217)
(1146)
-39
-111
-220
-146
-101
Security
1857
4167
350
439
6813
2136
4406
352
619
7513
(279)
(239)
(03)
(180)
(700)
-131
-54
-08
-290
-93
IMampG
756
1836
1459
166
4217
857
1970
1700
234
4761
(100)
(135)
(240)
(68)
(544)
-117
-68
-141
-292
-114
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
Regional
North America
3858
10740
2061
772
17431
3833
11850
2334
1136
19154
24
(1110)
(273)
(364)
(1723)
06
-94
-117
-321
-90
International
2950
7660
599
1123
12332
3614
7915
646
1285
13460
(664)
(255)
(47)
(162)
(1128)
-184
-32
-73
-126
-84
Asia Pacific amp Japan
1192
2176
138
284
3789
1176
2172
169
356
3873
16
04
(31)
(72)
(83)
13
02
-183
-202
-21
Revenue before haircut
8000
20576
2797
2179
33552
8624
21937
3148
2777
36486
(624)
(1361)
(351)
(598)
(2934)
-72
-62
-112
-215
-80
Haircut
00
(60)
(08)
(68)
00
(279)
(55)
(14)
(348)
00
219
46
14
279
00
-786
-846
-1000
-804
Revenue after haircut
8000
20516
2789
2179
33484
00
8624
21657
3094
2763
36139
(624)
(1141)
(305)
(584)
(2655)
-72
-53
-99
-211
-73
00
00
00
00
00
00
00
00
00
00
00
(00)
00
00
(00)
00
(00)
00
00
(00)
2020
2021
2022
2023
2023+
Total
000
-1415206190
-16549500
-3509990000
-330816557500
-477502116581
-477502116581
Check
000
0
1415
17
35
3308
477502
477500
Per ARA
-002
Diff
FY19
Reported maintenance revenue
20576
CCY change
(62)
Adjustments
Atalla
06
US Government
09
15
Adjusted maintenance revenue decline
(47)
FY19
CCY change to FY18 (restated)
$m
Licence
Maintenance
SaaS and other recurring
Consulting
Total
Licence
Maintenance
SaaS and other recurring
Consulting
Total
AMC
1709
3261
- 0
117
5087
(51)
(06)
00
(14)
(22)
ADM
1303
4854
878
182
7217
(42)
(33)
(81)
(419)
(56)
ITOM
2375
6458
110
1275
10218
(39)
(111)
(220)
(146)
(101)
Security
1857
4167
350
439
6813
(131)
(54)
(08)
(290)
(93)
IMampG
756
1836
1459
166
4217
(117)
(68)
(141)
(292)
(114)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
North America
3858
10740
2061
772
17431
06
(94)
(117)
(321)
(90)
International
2950
7660
599
1123
12332
(184)
(32)
(73)
(126)
(84)
Asia Pac amp Japan
1192
2176
138
284
3789
13
02
(183)
(202)
(21)
Revenue before haircut
8000
20576
2797
2179
33552
(72)
(62)
(111)
(215)
(80)
Haircut
00
(60)
(08)
00
(68)
na
(786)
(846)
(1000)
(804)
Revenue
8000
20516
2789
2179
33484
(72)
(53)
(99)
(211)
(73)
Net debt
Adjusted EBITDA
April 2016
1078
20x
32
5325
April 2017
1411
22x
32
6409
October 2017
4410
31x
32
14401
April 2018
4200
29x
32
1430
October 2018
4254
28x
32
132938
April 2019
3807
27x
32
118969
October 2019
4339
32x
32
13625
Term loans
FY20
0
FY21
05
FY22
1431
FY23
35
FY23+
3308
477502
Cash
FY19
FY18
$m
$m
Adjusted EBITDA
- Continuing operations
13625
14136
- Discontinued operation
40
116
Total Adjusted EBITDA
14025
15296
Less Exceptional items (included in AEBITDA)
-2942
-4397
Adjusted EBITDA less exceptional items
11083
10899
Cash from operations
1056
11516
Adjusted Cash conversion ratio
953
1057
FY19
FY18
Cash generated from operations before working capital
11775
11912
Movement in working capital
(1212)
(396)
Cash generated from operations
10563
11516
Interest payments
(2271)
(2195)
Bank loan costs
00
(108)
Tax payments
(1674)
(790)
Purchase of intangible assets
(293)
(565)
Purchase of property plant and equipment
(563)
(302)
Free cash flow
5762
7556
Adjusted cash conversion
953
1057
HPE Software related exceptional spend (at actual rates)
System related spend
Other
Total
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (cont ops)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
096
008
Adjusted EBITDA (SUSE)
400
14025
ERRORNA
14025
ERRORNA
40
ERRORNA
14025
40
ERRORNA
088
008
Group adjusted EBITDA
x
00
14025
14025
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
079
008
Exceptional items
(2942)
11083
ERRORNA
ERRORNA
11083
ERRORNA
2942
14025
ERRORNA
2942
071
008
Adjusted EBITDA less exceptionals
x
00
11083
11083
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
063
008
Change in working capital
(835)
10248
ERRORNA
ERRORNA
10248
ERRORNA
835
11083
ERRORNA
835
054
008
Other non-cash items
312
1056
ERRORNA
1056
ERRORNA
312
ERRORNA
1056
312
ERRORNA
046
008
Cash from operations
x
00
1056
1056
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
038
008
Interest payments
(2271)
8289
ERRORNA
ERRORNA
8289
ERRORNA
2271
1056
ERRORNA
2271
029
008
Tax payments
(1674)
6615
ERRORNA
ERRORNA
6615
ERRORNA
1674
8289
ERRORNA
1674
021
008
Capex and intangibles
(856)
5759
ERRORNA
ERRORNA
5759
ERRORNA
856
6615
ERRORNA
856
013
008
Free cash flow
x
00
5759
5759
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
004
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
100
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
-
(35)
(01)
ADM
630
2465
425
104
3624
(14)
(23)
(127)
(388)
(51)
ITOM
1080
3444
62
670
5256
(169)
(24)
(127)
(126)
(72)
Security
691
2100
192
244
3227
(239)
(36)
171
(220)
(95)
IMampG
316
940
757
87
2100
26
(48)
(141)
(315)
(88)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
00
(37)
(05)
00
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
Americas
1532
5572
1057
433
8594
(06)
(50)
(96)
(278)
(63)
100
EMEA
1386
3897
306
584
6173
(219)
(07)
(78)
(111)
(77)
Asia Pac amp Japan
519
1111
73
143
1846
(55)
38
(284)
(192)
(27)
Revenue before haircut
3437
10580
1436
1160
16613
(111)
(26)
(104)
(191)
(65)
Haircut
-
(37)
(05)
-
(42)
-
(824)
(884)
(1000)
(843)
Revenue
3437
10543
1431
116
16571
(111)
(10)
(83)
(183)
(53)
H119
Change on H118 at CCY
Licence
Maintanance
SaaS and other recurring
Consulting
Total
Licence
Maintanance
SaaS and other recurring
Consulting
Total
AMC
720
1631
-
55
2406
14
(07)
na
(35)
(01)
ADM
630
2466
426
104
3626
(14)
(23)
(126)
(388)
(51)
ITOM
1080
3445
62
670
5257
(169)
(24)
(127)
(126)
(72)
Security
691
2099
192
244
3226
(239)
(36)
164
(223)
(95)
IMampG
314
940
757
88
2099
16
(48)
(140)
(302)
(88)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(839)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Americas
1470
5577
1057
435
8539
(126)
(99)
(123)
(297)
(120)
EMEA
1425
3894
306
583
6208
(128)
82
32
(86)
07
Asia Pac amp Japan
540
1110
74
143
1867
(17)
37
(275)
(192)
(17)
Haircut
-
(38)
(05)
-
(43)
na
(819)
(884)
(1000)
(842)
Revenue
3435
10543
1432
1161
16571
(111)
(10)
(82)
(182)
(53)
Six months
Six months
ended
ended
30-Apr-19
30-Apr-18
$m
$m
Adjusted EBITDA
7021
7105
-1
Less
ERRORDIV0
Exceptional items
-1614
-1954
-17
Movements in provisions
23
140
-84
Other non-cash items
116
168
-31
Cash generated from operations before working capital
5753
6719
-14
Movement in working capital
473
-1769
-127
Cash generated from operations
6226
495
26
Interest payments
-1177
-1228
-4
Bank loan costs
-
-107
ERRORVALUE
Tax payments
-391
-71
-45
Purchase of intangible assets
-128
-539
-76
Purchase of property plant and equipment
-231
-22
5
Free cash flow
4299
2137
101
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA (continuing operations)
x
13625
13625
13625
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
010
Exceptional items
(2942)
10683
ERRORNA
ERRORNA
10683
ERRORNA
2942
136250
ERRORNA
29420
085
010
Adjusted EBITDA less exceptionals
x
10683
21366
21366
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
075
010
Change in working capital
(803)
20563
ERRORNA
ERRORNA
20563
ERRORNA
803
213660
ERRORNA
8030
065
010
Impact of SUSE
680
21243
ERRORNA
21243
ERRORNA
680
ERRORNA
212430
6800
ERRORNA
055
010
Cash from operations
x
10560
31803
31803
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
045
010
Interest payments
(2271)
29532
ERRORNA
ERRORNA
29532
ERRORNA
2271
318030
ERRORNA
22710
035
010
Tax payments
(1674)
27858
ERRORNA
ERRORNA
27858
ERRORNA
1674
295320
ERRORNA
16740
025
010
Capex and intangibles
(856)
27002
ERRORNA
ERRORNA
27002
ERRORNA
856
278580
ERRORNA
8560
015
010
Free cash flow
x
5759
32761
32761
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
copy 2015 Vertex42 LLC
Waterfall Chart Template
Instructions
In the table edit the Label Pillar and Delta values
Place an x in the Pillar column to show a value as a
full column Except for the start value the Delta value for
a pillar should be zero
To edit or format different parts of this chart select
the Chart and go to Layout gt Current Selection and
choose the series you want to edit from the drop-down
list then click on Format Selection
See the Help worksheet for additional Help
Label
Pillar Vertex42 PillarsPlace a letter x in this column to display the Flow value as a full-length bar or column Except for the Start column the Delta for a pillar should be zero (0)
Delta Vertex42 DeltaEnter the positive and negative adjustments in this column or zero (0) for a pillar
Flow Vertex42 FlowThis column is labled Flow because in many waterfall charts this would represent Cash Flow
Pillars
Base+
Base-
Delta+
Delta-
Invisible
Label+
Label-
Lines
LineY
Adjusted EBITDA
x
7021
7021
7021
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
095
009
Exceptional items
(1614)
5407
ERRORNA
ERRORNA
5407
ERRORNA
1614
70210
ERRORNA
16140
086
009
Adjusted EBITDA less exceptionals
x
5407
5407
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
077
009
Movements in provisions
230
5637
ERRORNA
5637
ERRORNA
230
ERRORNA
56370
2300
ERRORNA
068
009
Other non-cash items
116
5753
ERRORNA
5753
ERRORNA
116
ERRORNA
57530
1160
ERRORNA
059
009
Working capital
473
6226
ERRORNA
6226
ERRORNA
473
ERRORNA
62260
4730
ERRORNA
050
009
Cash from operations
x
6226
6226
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
041
009
Interest payments
(1177)
5049
ERRORNA
ERRORNA
5049
ERRORNA
1177
62260
ERRORNA
11770
032
009
Tax payments
(391)
4658
ERRORNA
ERRORNA
4658
ERRORNA
391
50490
ERRORNA
3910
023
009
Capex and intangibles
(359)
4299
ERRORNA
ERRORNA
4299
ERRORNA
359
46580
ERRORNA
3590
014
009
Free cash flow
x
4299
4299
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
ERRORNA
005
ERRORNA
larr Insert new rows ABOVE this one then copy formulas down
FY19
FY18
Change
Reported
Reported
Exceptional spend (at actual rates)
System related spend ($m)
1263
1144
104
Other integration costs ($m)
1680
2935
(428)
Total HPE Software related exceptional spend
2943
4079
(278)
Other ($m)
(01)
318
(1003)
Total (reported in operating profit)
2942
4397
(331)
Adjusted cash conversion
953
1057
(104)ppt
Free cash flow ($m)
5762
7556
(237)
Diluted adjusted EPS (cents)
8553
7893
84
Dividend per share (cents)
583
583
-
Net debt ($m)
43385
42535
20
Net debt to Adjusted EBITDA ratio
32x
28x
04x
FY19
FY18
Change
Reported
CCY
Licence
8000
8624
(72)
624
17
Maintenance
20576
21937
(62)
1360
38
SaaS and other recurring
2797
3148
(111)
351
10
Consulting
2179
2777
(215)
598
17
Constant currency revenue (before haircut)
33552
36486
(80)
Deferred revenue haircut
(68)
(347)
(804)
-279
-08
Constant currency revenue
33484
36139
(73)
73
Total constant currency costs
(19859)
(22144)
(103)
Constant currency adjusted EBITDA
13625
13995
(26)
Constant currency adjusted EBITDA margin
407
387
20 ppt
Per share data presented at Actual rates
Diluted adjusted EPS (cents)
19589
18751
45
Dividend per share (cents)
11666
10084
157
HPE Software related exceptional spend (at actual rates)
System related spend
809
448
806
Other
823
144
(428)
Total
1632
1888
(136)
12
$14025m
We continued to be a highly cash generative business in FY19
Improvement in collection of overdue trade receivables which de-risked the balance sheet offset by timing differences of exceptional cash costs and deferred revenue
Increase in tax payments of $884m in FY19 as we continue to utilise tax attributes acquired with HPE Software
Low capex since all RampD expensed through EBIDTA Underlying interest cover is c 45-50x before
dividend and after capex
Cash generation for twelve months ended 31 October 2019 Micro Focus International
Cash flow and Adjusted EBITDA includes results for SUSE for entire period in FY18 but for only 4 months in FY19
FY19 FY18
Cash generated from operations before working capital 11775 11912 Movement in working capital (1212) (396)Cash generated from operations 10563 11516 Interest payments (2271) (2195)Bank loan costs 00 (108)Tax payments (1674) (790)Purchase of intangible assets (293) (565)Purchase of property plant and equipment (563) (302)Free cash flow 5762 7556
Adjusted cash conversion 953 1057
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
Medium term leverage target of 27x remains Actions resulting from Strategic and Operational
Review will mean leverage increasing in the short term before decreasing towards our medium-term target
Net debt is forecast to reduce by the end of FY21 Repayment totalling $200m in the period following
SUSE disposal No term loan amortisation payments until late FY21 $500m RCF remains undrawn and is not due until
2022 Cash on balance sheet was $3557m as at 31 October
2019
13
FY21 as the $200m was treated as a prepayment of amortisation and first term loan not due for repayment until FY22
4410
4200 4254
3807
4339 31x
29x
28x
27x
32x
20x
22x
24x
26x
28x
30x
32x
34x
2000
2500
3000
3500
4000
4500
5000
October 2017 April 2018 October 2018 April 2019 October 2019
Leverage profile
Net debt AEBITDA ratio
Capital discipline and balance sheet strength Micro Focus International
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
Strategic amp Operational ReviewStephen Murdoch
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
Strategic amp Operational Review High Level Plan
ACCELERATE a targeted transition to Subscription amp SaaS
1
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
TRANSFORM GTM Function
4
COMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market Organisation and Approach
OBJECTIVE Deliver the platform for significantlyimproved execution and foundation for margin expansion
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
To drive the value creation potential we see in the business we need to
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
Strategic amp Operational Review High Level Plan
1 TRANSFORM GTM FunctionCOMPLETE the Core Systems amp Operational Simplification work
1 2 TRANSFORM our Go-to-Market organisation and approach
In our Go-to-Market we will leverage these improvements but in parallel execute a very structured transformation plan tobull Improved productivity overall amp selling time specificallybull Improved cross-selling amp upselling within portfolio amp customer basebull Improved renewal rates ndash differentiated approach in top customers
OBJECTIVE Drive material increase in sales productivity to capture under-exploited opportunity to cross-sell and improve renewal rates
To drive the value creation potential we see in the business we need to
OBJECTIVE Deliver the platform for significantly improved execution and foundation for margin expansion
We need to complete the execution programmes in flight to deliver the foundation for bull Significantly improved execution levels through better
tooling and simpler processes bull Cost and operational efficiencies through organisational
efficiencies amp removal of duplication
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
OPPORTUNITY-BASED COVERAGETiered Resource Model
bull Consistent global operating plan built on a single sales methodology amp common tools
bull To deliver reduced complexity removal of duplication amp more predictable performance
bull Systematic amp targeted deployment of resources
bull To deliver resource assignment that is better optimized to our target opportunity
TRANSFORM ndash Go-to-Market
INSTALLED BASE SALES MODELSystematic Path to Revenue Improvement
bull Better alignment of the company to support our installed base of over 40000 customers
bull To deliver improved renewal rates and cross sell opportunities within our broad portfolio
GLOBAL STRATEGY amp PLANSingle Global Strategic Plan amp Execution Model
Selling time is ~30 below benchmark capturing this amp converting 50 of it into sales would beequivalent to adding 100-150 sales people
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
18
Increased cloud adoption amp move to hybrid We deliver capabilities to enable customers to exploit a mix of on-premise amp cloud deployment options to ensure that they can manage the balance of cost risk and availability
Proliferation of things apps and data
Growth of Agile amp DevOps
We deliver a full suite of solutions focused on protecting identities (things and people) applications (new amp existing) and data (structured amp unstructured) and capabilities to derive insights from the explosion of data
We enable faster deployment cycles through increased collaboration and adoption of development testing and security tools that can support this new ecosystem
InsightsSpeed Agility Security
Enterprise DevOps
Hybrid ITManagement
Security Riskamp Governance
Predictive Analytics
Ensuring Sky can meet growing demands by
providing a flexible and scalable
performance testing platform
Delivering production ready public and
private cloud infrastructure and IT
services for new build state of the art new
airport
Micro Focus enables government agencies
to protect govern and facilitate access to electronic records
Micro Focus powers a digital agriculture
platform to help drive sustainable and innovative farming
Micro Focus Enables
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Key Market Trends
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
Strategic amp Operational Review High Level PlanTo drive the value creation potential we see in the business we need to
ACCELERATE a targeted transition to Subscription amp SaaS
3 EVOLVE our Business Model to establish stronger positions in growth areas
OBJECTIVE Drive growth in our Security and Big Data solutions
4
OBJECTIVE Build Subscription amp SaaS revenues to capture relevant growth opportunities amp improve mix of recurring revenues
1 The Enterprise software market is growing amp the pace of change is accelerating
2 Micro Focus has existing strengths emerging capabilities amp strong customer bases from which to be able to participate more fully in targeted areas ofthis market growth
3 The review identified the key areas having a disproportionate impact on performance amp that our overall approach in Security amp Big Data needs to change more fundamentally
4 Corrective action plans with associated investment amp organisational changes have been established focused on
i Accelerating the delivery of new amp required capabilities in our IT Operations Management amp Application Delivery Management portfoliosii Expanding amp accelerating our SaaS and Subscription roadmaps amp plansiii Managing amp operating our Security amp Big Data (Vertica) portfolios much more autonomously following a modified version of our SUSE playbook
5 Our core propositions and approach continues to resonate with customers and address key market trends they need help with
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
Security market is growing amp through specific focus Micro Focus can participate in that growth
20
0809 09
10
1213
00
02
04
06
08
10
12
14
2017 2018 2019 2020 2021 2022
TAM
(4BN
)
Year
A P P L I C A T I O N S E C U R I T Y T E S T I N G M A R K E T $ B N
+10
+10 1700+ developers using Fortify on a daily basis to scan 2bn+ lines of code
Fortify on Demand helps reduce risk in moving applications to the
Cloud
Large amp Growing Market Opportunity Micro Focus has Broad Domain Coverage Already Trusted by Customers
Micro Focus offers a unique portfolio of offerings covering a number of core use cases that span cybersecurity and data privacy Micro Focus has the opportunity to be both best-of-breed and to solve more complex use cases that focus on the intersection of security and privacy domains
For example Detecting advanced threats by combining Security Operations and Identity and Access Management
ArcSight is crucial to running the Cyber Security Intelligence amp Operations Center
+14
+12
2326
3034
3944
0005101520253035404550
2017 2018 2019 2020 2021 2022
TAM
($bn
)
Year
S E C U R I T Y amp E V E N T M A N A G E M E N T M A R K E T ( $ B N )
Source PWC and Gartner Strategic Analysis
Core Use Cases
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
bull Hadoop decline amp cloud storage growth leaves exabytes of data that cannot be unified analyzed and monetized without an engine like Vertica
bull Leverages the performance flexibility and scale of cloud-public private yet equally supports on-premise hybrid and embedded
bull Vertica moves ML and Data Science lab projects to fully operational in production at scale
powered by
Mapping drivers and riders for more than 14 million daily rides powering surge pricing globally
Verticarsquos exabyte scale analytics enables 10 million ad auctions
every second
Vertica personalizes 50 million online tax filing experiences at the peak of tax season
Massivedata
growth
Cloud economics and more
Machine Learning and Automation
Vertica analyzes 10 billion embedded RTMS timers per
month in milliseconds
Verticarsquos exabyte scale analytics are key to 50 billion personalized ad placements
daily spanning 30 countries
Verticarsquos Market Opportunity is driven by three new and current market demands
Performance Scale
Customers use Vertica at scale today to power new business models amp enable unique approaches
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
22
The investments we are making
Security portfolio- Acceleration of SaaS roadmap in Identity Access Management - Additional language capability within Fortify- Specialist sales amp product marketing resources
Vertica (Big Data)- Acceleration of SaaS amp Subscription roadmaps- Investments in core RampD to accelerate product roadmap delivery- Dedicated Customer Success team
Increased investment to expand our Enterprise DevOps capabilities amp accelerated delivery of improvements in targeted areas within our IT Operations Management portfolio
Total Investment
Split across
Research and development
$45-50m
Go-to-Marketc $25- 30m
c $70 - $80m
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
FY20 Guidance and SummaryStephen Murdoch
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
Based on the conclusions of the Strategic amp Operational Review we expect revenues for the 12 months ending 31 October 2020 to be in the range of minus 6 to minus 8 at constant currency when compared to the 12 months ended 31 October 2019
Within this we expect total revenues in the first half of FY20 to be broadly consistent with the trajectory achieved in the second half of FY19 with improvement in the second half of FY20 and progressive improvement thereafter
The investments we are announcing today are not expected to deliver revenue benefit in the current financial year with revenue returns expected to begin in FY21 and will therefore impact our Adjusted EBITDA margins in FY20 and FY21
By the end of FY21 we expect to be showing a demonstrable improvement in our growth prospects and revenue quality which in turn should flow through into higher returns thereafter This should also coincide with the delivery of the systems platform enabling cost and operational efficiencies to further contribute to margin expansion in line with our longer term objectives
Mid term leverage target remains 27x but investment will result in leverage increasing in the short term
We expect to reduce net debt in absolute terms through FY20 (excluding the impact of IFRS16) with our strong underlying cash flows from operations continuing to comfortably fund our remaining integration related exceptional costs and the additional investments
24
FY20 Outlook
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
25
Micro Focus Equity Story
The Strategic amp Operational initiatives being executed are directly linked to driving achievement of these objectives
bull Completion of the existing operational amp integration work especially systems to deliver platform for significantly improved execution and lower costs
bull Transformation of our Go-to-Market organization to deliver improved productivity to be deployed against growth opportunities or to further improve margins
bull Execution of differentiated approach to Security amp Big Data to capture available growth
bull Delivery of of the foundations for accretive portfolio actions to be executed
bull Value accretion through corporate development activities
bull Long term sustainable Adjusted EBITDA growth
bull Efficient allocation of capital
bull Strong and consistent cash flow to provide scope for continued shareholder returns
In support of this our execution plan aims to deliver by 2023 a business with
bull Stable Revenuesbull EBITDA margins in the mid-40s bull Generating more than $700M of free cash flow bull Built on a platform to enable further accretive portfolio actions
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
QampA
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
ISSUE Progress
Operational Systems and Business
processes
To enable this ldquocarve outrdquo of their software division HPE designed and built new IT systems new business processes and a standalone organisation
In reality the systems were not fit for purpose
A fully standalone IT hardware infrastructure was delivered on time and budget Organisational consolidation in each of the Finance and HR functions has
advanced and will consolidate operations from more than 60 locations into 5 global
Legal entity rationalisation progressing well with aim of reducing Group structure materially
Go-to-market organisation
A mix of regional and product orientated go-to-market models
Inconsistent approaches to customer engagement and the associated deployment of resources
Further impacted by system issues
Stabilisation of staff attrition On-boarding new people has been improved Investments made in better enablement and training
Product Portfolio MixRe-alignment
The operating model for product development drove ldquosiloedrdquo approaches
Product roadmaps did not fully exploit the advantages of significant customer installed bases and strong market positions
The operating model has been re-structured to drive collaboration and the leverage of innovation
Core product roadmaps have been re-shaped in every portfolio with the major remedial corrective actions in product design now complete
Revenue Composition amp
Alignment to Strategy
Professional services revenue has needed to be realigned to support the Micro Focus product strategy
Professional services revenue has been broadly stable for the last 3 quarters and is on track to be stable on a year-over-year basis by the end of FY20
The remedial product roadmap work for the impacted SaaS offerings is complete and the remaining activities will be completed within the next 6 months
29
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
Products (eg Robotic Process Automation) or consumption models (eg cloud) that open
new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace
New Models
Products or enabling technology (eg Artificial
IntelligenceMachine Learning) with consistent growth
performance and market opportunity to build the future
revenue foundations of the Group
Growth Drivers
Products with declining revenue performance driven by the
market or execution Investments directed to correct trajectory to move back to the
core category or focused to optimise long-term returns
Optimize
Products that have maintained broadly flat revenue
performance but represent the current foundations of the
Group and must be protected and extended
Core
FOUR BOX
MODEL
ldquoFund of fundsrdquo approach to product portfolio
Investment and focus driven by four box model
High levels ofprofitability strong cash flow
Growth where achievable
Delivered through efficient and
focused investment across portfolio
The Micro Focus Business Model
30
Long term AEBITDA Growth
Efficient use of capital
Creation of shareholder
value through corporate
development
Our business model continues to be relevant and is the foundation of our strategy to achieve value creation
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
Appendix 2 ndash Financial analysis
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
32
The prior year comparatives have been restated to reflect the reorganisation of the LATAM operations from North America (previously named the ldquoAmericasrdquo) to International (previously named ldquoEMEArdquo) This restatement ensures consistent revenue trend reporting
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
34
The weighting of revenue and costs across key currencies are shown below
Average exchange rate movements for the above currencies in the 12 months to October 19 vs the 12 months to October 18 show the following
110
120
130
140
150
Nov
-17
Jan-
18
Mar
-18
May
-18
Jul-1
8
Sep-
18
Nov
-18
Jan-
19
Mar
-19
May
-19
Jul-1
9
Sep-
19
GBP to USD
Pound Sterling 12m average
100105110115120125130
Nov
-17
Jan-
18
Mar
-18
May
-18
Jul-1
8
Sep-
18
Nov
-18
Jan-
19
Mar
-19
May
-19
Jul-1
9
Sep-
19
EUR to USD
Euro 12m average
065
070
075
080
085
Nov
-17
Jan-
18
Mar
-18
May
-18
Jul-1
8
Sep-
18
Nov
-18
Jan-
19
Mar
-19
May
-19
Jul-1
9
Sep-
19
CAD to USD
Canadian Dollar 12m average
EURUSD USD is stronger by 54GBPUSD USD is stronger by 53 CADUSD USD is stronger by 32
12 Months to 31 October 2019 12 Months to 31 October 2018
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
The Micro Focus Business Model
Appendix 2 ndash Financial analysis
Revenue by product portfolio and region
Slide Number 33
Slide Number 34
Slide Number 35
Results for the 12 Months Ended 31 October 2019
Safe Harbour statement
Agenda
CEO Update
Year in review
Solid progress in execution of our key integration amp operational simplification programs coupled with significant portfolio actions within the period
Strategic amp Operational Review Conclusions
Strategic amp Operational Review High Level Plan
CFO Update
Financial performance (1 of 2)
Financial performance (2 of 2)
Cash generation for twelve months ended 31 October 2019
Capital discipline and balance sheet strength
Strategic amp Operational Review
Strategic amp Operational Review High Level Plan
Strategic amp Operational Review High Level Plan
Slide Number 17
We have clear value propositions amp proven capabilities to help customers address the opportunities amp challenges they face in both running amp transforming their businesses
Strategic amp Operational Review High Level Plan
Security market is growing amp through specific focus Micro Focus can participate in that growth
Vertica offers a differentiated platform that fills a market void combining operational reporting machine learning and robust predictive analytics at massive scale across the spectrum of on-premise cloud and embedded use cases
We are investing $70-$80m in key areas of our portfolio in which we see specific opportunity for revenue growth or accelerated moderation of revenue decline
FY20 Guidance and Summary
FY20 Outlook
Micro Focus Equity Story
QampA
Slide Number 27
Appendix 1 ndash Strategic Initiatives
Assessment of key issues and progress to date The key issues that have emerged relating to overall execution and the complexities of the integration of the HPE Software acquisition are understood in detail progress has been made and there is clear visibility of what remains to be done
