Thank you to everyone who has joined us today for the SoftwareONE 2019 Results Conference Call. My name is Dieter Schlosser, CEO of SoftwareONE, and I'm here today on the phone together with Hans Grüter, our Chief Financial Officer, as well as with Alex Alexandrov, our Chief Operating Officer. It's our pleasure to have you all on our call. Thank you for joining during this extraordinary time. I hope all of you and your families are well and safe. We would like to walk you through our 2019 results slide presentation, which is also available on our website. I will start with a brief summary of our 2019 performance, will then hand over to Hans, who'll provide some more detailed overview of our 2019 financials, and Alex will take a closer look at our growth pillars and strategy.
I will then turn to the outlook and take you through how we are seeing COVID-19 impacts on our business and what we are doing about it. We will then round off with Q&A. Let's start with the presentation. As usual, I first point you to the disclaimer on page two, as well as on page three. We then go straight into the presentation on slide six for those who are just on the phone. Those who have heard us during the roadshow and during other press conferences, they are pretty much aware of the following slide. If you talk about SoftwareONE, you always talk about three pillars and one platform. I start right on the top with software and cloud.
This is our line where we help our customers on a daily basis with procuring the right solutions, the right software solutions for the right price in the right location for the right terms and concession, and highly automated. If you then go on to the left and to the right side, these are our two service pillars. On the left side is the software lifecycle management. Here we take it a step further, and we help our customers to understand what they have procured, what assets they own, how those digital assets are deployed on the data centers, on the mobile devices, in the cloud, and how the end user is really consuming those digital assets. On the right side, on the technology services, we define the technology roadmap with our customers. We execute those technology roadmaps, and then we run them in the cloud. We have various practices.
We have a future data center practice. We have a future workplace practice, particularly in the current time. There's high demand on the future workplace practice, but also a security practice, as well as critical workloads moving SAP into the cloud and modernization of applications to cloudify them. All three pillars are integrated through our own IP to our platform, PyraCloud. PyraCloud is integrating our business lines in a way that our customers have an end-to-end view of their complete landscape whether it's procurement behavior, whether it's spend on cloud, how they can optimize their spend on cloud, whether they have any vulnerabilities in their estates, whether they can simplify the landscape, move workloads into the cloud, that is taken care of by PyraCloud, something which is unique in the market, non-existent in the complete landscape, and highly consumed in our customer base.
If we talk about SoftwareONE, we always talk about three aspects. We are in the commercial transformation as well as in the technology transformation, and then finally, also in the digital transformation. The icing on the cake is the digital transformation, but our customers have a need on commercial transformation as well as on technology transformation. If I then go to slide seven, these are the key figures, how we describe SoftwareONE. SoftwareONE is 100% focused on software and cloud. We don't do hardware, we don't do network, we don't do equipment. We don't want to be everything for everyone. We want to be the experts in the area of software and cloud, and made that decision years back to be really reborn into the cloud.
That has given us a customer base of 65,000 customers globally, highly diversified from a size, 50% enterprise, 50% SME, also diversified from a geography and industry, which is also very important, particularly in the current scenario. From a numbers perspective, from a results perspective, we have closed with CHF 737 million on gross profit in FY 2019, and that has led to a CHF 224 million EBITDA, adjusted EBITDA with a margin which is above 30%, which is 30.3%. We are in the meanwhile 5,442 employees spread around 90 countries, and have done in the last 24 months, completed seven acquisitions, strategic acquisitions which were acquisitions of scale, acquisitions where we added capabilities, like I mentioned earlier, moving SAP into Azure and AWS, or capabilities like application modernization. Our customers trust us with CHF 13 billion of customer purchasing volume.
Last but not least, we also completed the IPO in October 2019 and run SoftwareONE as a public company since then. In terms of slide eight, in terms of FY 2019 results, we are happy to share a solid performance and good progress with COMPAREX integration in 2019, all in line with our IPO guidance. Our gross profit like-for-like growth is 4.3% in constant exchange rate, adding to CHF 737.2 million. Our adjusted EBITDA like-for-like is up 23.1% in constant exchange rates to CHF 223.6 million, with a margin at 30.3%. Our reported profit for the year is 59.9% up to CHF 125 million. Also happy to share with you that on the synergy side, we are ahead of plan. We guided with CHF 7 million, we reached CHF 10 million synergies, and we are absolutely on track to reach the CHF 60 million run rate in 2021.
You might recall CHF 20 million out of the CHF 60 million is on GP level, and CHF 40 million is on operating expenses. Particularly important right now is our strong balance sheet and our cash flow. We have free cash flow of CHF 2.6 million, a strong balance sheet with net cash positions of CHF 190.7 million and unused credit lines. The board is proposing to the AGM a dividend of CHF 0.21 per share. In terms of 2020, we see continued momentum with limited effects of COVID-19 on our financial performance. The likely impact since mid-March is unclear. Developments are quite unpredictable. The moment I finish later in the presentation, there's an outlook and there's a specific session on COVID. I'm handing over to Hans now, who will take a closer look at the financial performance.
Thank you, Dieter. Also from my side, I would like to welcome you to this conference call. I'm pleased to go through the financials in more detail. I'm starting with the page number 10. That's an overview of the financials 2018 and 2019. On the left side, you see the reported figures 2018 and 2019, and I would like to remember you that 2018, the reported figures comprise of the former SoftwareONE company. In 2019, it's 12 months of the former SoftwareONE and 11 months of COMPAREX, as we have acquired COMPAREX at the end of January 2019. On the reported figures, we have achieved CHF 7.6 billion revenue, which is more than double than the 2018 figures reported. On the profit for the year, we have achieved CHF 125 million, up from CHF 78 million a year ago.
More important for us and to assess the performance of the company in a much better way are the like-for-like figures, which were also adjusted by the special adjustments we will come back to you later on. These like-for-like figures are also the way we are managing the company and gives, in our view, a better view as well when we compare to our peers. We also group the revenue together with the pass-through cost and come to the term gross profit. We have achieved on a like-for-like basis gross profit of CHF 737 million, which is up 4.3% on a constant currency compared to the prior year, and achieved an adjusted EBITDA of CHF 224 million, which provides or gives you an adjusted EBITDA margin of 30.3%. More details and assessment of the performance we give on page 11, where I would like to start to right now.
When we compare our performance to the guidance provided during the IPO, we can clearly say we have achieved a solid performance in 2019. The gross profit in total achieved 4.3% growth and is in line with our guidance provided during the IPO. On the far right column, you see the midterm guidance 2020- 2022, where we confirm what we have given in the IPO. Dieter will come back, as he just announced, at the end of the presentation today, also, what does this mean for the year 2020. For the gross profit, we have the midterm guidance to achieve a double-digit growth. On the sale of software, we have achieved the growth 2.8% on constant currency, which is at the upper end of the guidance, reflecting the successful continuation of the business and the integration as well.
On the midterm guidance, we give the guidance of single-digit growth. Solution and services, we have achieved the growth of 9.2%, which was affected, this business line, by the harmonization of the service portfolio of COMPAREX and SoftwareONE, and is below the guidance we have given at 14%-16%. Going forward, midterms, we reconfirm the high-teen growth on constant currency. On the synergy side, we have achieved CHF 10 million of synergies in 2019. We have been ahead of our plan. The integration is, in that sense, on track and the synergies are ahead of plan. Going forward, we give the guidance as well on the midterm to achieve the CHF 60 million synergies, CHF 20 million in GP and CHF 40 million in OpEx towards the end of 2021. The adjusted EBITDA margin is 30.3%. Here we have been above the guidance.
I think that's a good demonstration that we have managed the business well and focused as well on the cost discipline and achieved these targets. We reconfirm on the midterm guidance an EBITDA margin towards 35% of the GP. The adjustments are CHF 47 million. This is higher than the CHF 20 million we guided during the IPO, but we need to say one important part of that increase is the management equity plan of CHF 21 million, which is fully funded by major shareholders, but need, through IFRS, go through the profit and loss statement of SoftwareONE. This, in that sense, a bit technically artificial costs we need to deduct off the CHF 47 million to make a clear reference point to the CHF 20. We have overspent still the CHF 20 million because of higher than expected IPO costs.
We will continuing to have some adjustments in this very clearly defined bucket on integration costs, the MAP-related cost, and M&A, depending on M&A activities going forward. The dividend, the board will propose to the AGM a dividend of CHF 0.21 per share. This corresponds to a payout ratio of the profit of the year of 26%, but also 30% taking into account one of non-cash items. There are two of these. This is Crayon and the MAP, which I will come back in this presentation on a later slide. Going forward, the midterm guidance is to pay out dividends in the range of 30%-50%. On the next page, number 12, you see the gross profit of the two different business lines. In total asset, we have achieved 4.3% of gross and gross profit of CHF 737.2 million.
We have seen a very strong growth in the SoftwareONE book of business, while COMPAREX has been affected by the integration. It's in line with the year of integration we already discussed in earlier times. The two business line sale of software is up 2.8% compared to the prior year, and the solution and service is 9.2%. Now we can say that at the end, the incentive plan now is fully aligned and service portfolio is combined with these two portfolio, SoftwareONE and COMPAREX. On the next page, number 13, we would like to show you where SoftwareONE does generate the GP. SoftwareONE is very diversified from a geographical point of view, but even more so from a customer size point of view and from an industry point of view. You see on the middle and on the right categories that it's 2018 figures.
This is because we have made, in 2019, an analysis of these two sizes, of these two buckets, with an industry expert, and we could not update that today, but we can reconfirm that for us, this diversification is still valid. The broad diversification brings stability in SoftwareONE as a company and also in its performance, and this is particularly of importance in the time we are in right now. Turning to the profitability on the next page 14, we have achieved an excellent EBITDA growth of 23% at constant currency, which provides a margin of 30.3%. This good development could have been achieved by, firstly, the growth of the company, but as well, and important, is how we manage the business. The process engineering and automation did went on.
We have leveraging our footprint in the global service delivery centers as well as in our regional hubs, we could also implement and realize the synergies as mentioned earlier. This demonstrates the results in the adjusted net operating expenses in percentage of the gross profit of 69.7% in 2019, down from 74.2% in 2018. These two affect the growth and the management of the cost resulted in the EBITDA growth up to the CHF 224 million, which corresponds to the 23% on constant currency. On the slide 15, we would like to provide you a bridge from the adjusted figures to the reported figures to the very end of the bottom line of the profit and loss statement, which is the profit of the year of CHF 125 million, as well as give you some more insight in key figures which we think are important for you.
Starting at the very left with an adjusted EBITDA of CHF 224, the adjustments we have made and disclose is CHF 1 million for M&A related cost, CHF 14 million from the integration cost. This is to run the integration, but as well as one-time cost. The IPO cost of CHF 11 million and the management equity plan of CHF 21 million, which is non-cash and was fully funded by the major shareholders. We need then also to take out the contribution of COMPAREX of this one month of January 2019, and are then with an EBITDA CHF 170 million on the reported figures. The depreciation amortization of CHF 51 million is depreciation and amortization, as well as amortization of the purchase price allocation.
Important to know, that's what we highlighted here on the net financial items, which is CHF 35 million at plus, is a gain which we have realized by the appreciation of our Crayon shareholding of CHF 35 million. The tax with CHF 29 million is a tax rate of 18%. It's not a normalized tax rate. We have benefited in 2019 from the impact of capitalization of tax losses carry forward and appreciation in the Crayon share is not taxable. We have achieved, in my opinion, a nice figure of CHF 125 million in net profit. On page 16, you see the cash impact of our asset-light business. We want to demonstrate this asset-light business which can generate strong cash flows on the left with the CapEx, tangible and intangible assets, which is CHF 21 million. A very low number.
We need as well to know that most of that is in conjunction with the investment in our platform, PyraCloud. In the middle on the operating cash flow, that's a very simple metrics, which is EBITDA minus the CapEx in tangible and intangible assets. We have achieved in 2019, CHF 150 million. On the far right, this is linked to the cash flow statement, and we have achieved CHF 193 million in free cash flow, which is the cash flow from operating activities minus investing activities and excluding the cash-related items for acquisitions in subsidiaries. On this CHF 193 million, a positive impact of CHF 53 million is coming from the change in net working capital. This is also the link on the next page, number 17, where we have on the top left the net working capital compared to the prior year.
The net working capital excluding the factoring, so adding back the factoring is CHF 93 million at the end of 2019. This corresponds to a metric of 13% compared to the gross profit. This is a nice level, I have also disclosed here that we had a target of in average during the year of 25%, which is at 38%. This means that over the period, over the 12 months, we have not achieved the 25%, we have made very good progress at the end of the last month in 2019 and achieved a nice level at the end of December. On this page, a part of the net working capital, or in addition of the net working capital, we want to demonstrate that we have a strong balance sheet at SoftwareONE, and we provide or propose an attractive dividend at the AGM.
I'm saying this because of the net debt position at the end of 2019 is -CHF 190 million. That means that the cash on hand is CHF 190 million higher than the net debt. This cash position is increased compared to 2018, which was CHF 134 million. On the equity side, the equity ratio is more or less on the same level as in prior year, even though we have consummated the complex acquisition. The board does propose a dividend of CHF 0.21 per share to the AGM, which corresponds to 30% of an adjusted net profit, adjusted by the impact of the MAP, which is positive, and the negative of CHF 39 million of Crayon. Without this adjustment, it would have been 26%.
With this strong balance sheet, we are convinced that we are well prepared for the future, for investing in the business for all the special situation we are in. With this, I'm handing over to Alex for a more detailed presentation of the business and the strategy update. Please, Alex.
Thank you, Hans. Hello everyone. Very warm welcome from me. I will spend the next few minutes with you to walk through our business and strategy update. Kicking off on slide 19, just want to highlight that our solutions around software and cloud, and services and solutions, have become even more important as the actual underlying technology itself has become mission-critical and complex for our customers. No matter the type of business, every business is now somehow powered by technology, and the technology is seen as a key differentiator or a competitive advantage. Customers are spending much more on technology, and at the same time, they're spending that in the form of OpEx, which again, just increases the amount of focus and attention to that spend. Technology's no longer just in the CIO suite.
This concept of consumerization of that technology across all parts of an organization have been really positive to enable the business models, but have also created the increased complexity that we now see across all of our customers. The complexity that we see shows up really any time we look at a customer that might be 500 or 1,000 end users, and we could see as many as 100 applications across their environment. And that's just in the lower end of the SME. At the same time, what we see across our customers is that many are at the start or are in the middle of their journey to the cloud, so many are operating still a very mixed or a hybrid environment.
It's these two factors, the importance of the technology to our customers as well as the complexity that it creates, that creates the need for our customers to engage with SoftwareONE, with partners like us. We really help customers figure out where they are today, where they're trying to go, and really support and enable them along that journey. On slide 20, just as a quick highlight, we operate in very large and growing markets. On the left-hand side, again, referring to our software and cloud business. The market itself is over CHF 520 billion, as Dieter mentioned in his initial slides. We don't do hardware and devices and appliances, what you see here in the red is just software and cloud. This market is large and forecasted to grow at 10% over the next several years.
On the right, what you see here is in the IT services market, we only participate or we only focus on cloud only. When we select those relevant markets, which are cloud only, we find that the market is a little over 30 billion, but growing at a very fast rate of 17%. We approach this market backdrop, we approach everything that we do with customers, with our customer-first mindset. That is how we've built our business model. That's how we've built our operating model as well. Starting at the top left of slide 21, what you see is we are locally present in 90 countries around the world. This is really important for us because we want to have that local touch in local language of the customer.
We want to have that customer intimacy, and that means we have to be there on the ground with customers. At the same time, we enable that local model through our regional and global setup. What we mean by that is we drive one standard global portfolio. We focus a lot on standardized processes, automation. When we do that, we're able to drive much better utilization of our local and regional resources, as well as support all of our subsidiaries with our global backbone if it comes to any sort of managed service. We then, as Dieter mentioned, power that, enable our model as well as the experience for customers with our own IP. We call it PyraCloud. For us, the platform is really the center of everything that we do with customers.
Starting with the advisory side, where the customers are looking for a certain piece of software, we help them find it, we help them provide some insights on what they already have in their environment as they look for their existing assets or to purchase something new. We really enable the entire digital supply chain for customers on the software side, from all the way to the customer site to our entire procurement engine. The ability to connect all of those dots in the middle and simplify and shorten the entire process for customers is what we call digital supply chain. We're investing heavily today in what we call cloud management, cloud control capabilities. Finally, we utilize PyraCloud as our central communication channel, as our central hub with customers.
Our value proposition spans both the entire technology life cycle for customers, as well as the goals and priorities for software publishers. Just to highlight a few points here. With customers, we're able to engage with them all the way from the beginning of the technology life cycle, where they're trying to make a decision, to the actual transactional, the buy portion, where they're trying to find the product, they're trying to buy it at the lowest price with the right terms and conditions, to helping them implement or migrate to the cloud. Once they're in the cloud, supporting them, helping manage their environment and optimize their costs in the cloud. We are able to support, and we do today, support customers along each stage of that life cycle. At the same time, what's really important is we don't stop at just the buy segment.
This is really important for the software publishers, because the software publishers are looking for partners which help engage very deeply with customers to drive the digital readiness, to drive the adoption of the software. As you know, even the largest software publishers in the world are really measured based on usage, consumption, and renewal rates. By having a trusted partner like us that is able to engage with customers around the world, that is able to engage with customers locally in their language, but able to deliver a consistent value-add approach across the globe, is very valuable and well-aligned for the software publishers. We run our strategy in four-year vision cycles, and in terms of our execution strategy against that four-year vision cycle, we are steadfast and remain consistent.
As I mentioned, the underlying market, software and cloud market, is very large and growing at 10%, and that is the first pillar of our execution strategy, which is to continue to grow that software and cloud spend, both with our existing customer base and new customers. At the same time, we see a significant uplift in our gross profit and significant stickiness with our customers when we are able to cross-sell our services and solutions. We continue to see a significant opportunity there. We're continuing to always evolve our portfolio to make sure that it suits the needs of our customers. We do all of that, as I mentioned, through our global and local model, local empowerment, global standardization, and global support.
Finally, we do engage in M&A activities, where we're trying to accelerate and where we see opportunity, and we power all of our customer experience, customer interaction, with PyraCloud. Switching to slide 23, just want to spend a few minutes speaking about our lines of business and highlight some of the underlying drivers, as well as what we see in the current environment. Starting with software and cloud, it is approximately 76% of our gross profit. As I mentioned, the underlying market here is very healthy and growing fast at 10%, and that's what we see with our customers as well. Customers, again, are using the software, using the technology as a core component of how they power their business, how they compete, how they differentiate themselves. That shows up in terms of the software spend.
What we see with our existing customers, they're renewing, they're focused on what features they have and what they're utilizing, and we see additional drive and additional usage here from the cloud and SaaS adoption across our customers. Just as a reminder, in our software and cloud business, of the 76%, 54 out of that 76 is Microsoft. Microsoft being a large portion of our gross profit, it is mostly on three-year agreements, as well as subscriptions. Our Microsoft business spans the three Microsoft clouds, Microsoft 365, Azure, and Dynamics. On the right side, in terms of our services and solutions business, which is approximately 24% of our business in 2019, this is split roughly 50/50 between professional services and managed services. What we see in the current environment is the professional services side is actually rotating very fast to help enable customers in the work from home.
What this really means is, what Dieter mentioned as the future workplace practice. Customers need to make sure they have all of the collaboration tools in place, and they can utilize unified communication as well in the form of Teams. We see a significant rotation of our professional services in that area, as well as requests from customers to help them with cost takeout, and Dieter mentioned digital transformation, and this now is very much focused on business continuity. What we also see is that the current buying behavior by customers to really make sure that they're able to work in a virtual way, they're able to work from home. We do see that this will create some additional software life cycle work or perhaps cleanup, in the midterm.
As customers figure out what is steady state for them, they will have to go back through and rationalize some of the software in terms of what is virtualized and what is still on-site or on-premise for them. In the other side of our business, the other 50% that is managed service, we continue to see very healthy trends here. These are typically subscription or longer-term contracts, we see this as a very sticky and recurring business with our customers. Again, as I mentioned, all of our services and solutions are cloud-only. Finally, I'd like to wrap up with an update on our integration activities. On the top left of slide 24, just a quick recap on the most recent acquisitions that we've done.
We have completed the integrations of the unified communication and collaboration practice, as well as services business in France and the SAMSentry, the SLM technology that we've integrated into PyraCloud. Over the course of Q1, we're wrapping up the acquisition of an AWS managed cloud business in Asia-Pacific called RightCloud. Over the course of Q2, we're wrapping up a small acquisition of an AWS player in Japan called Massive R&D. The very exciting acquisition of BNW that we did at the end of 2019, we will wrap up towards the end of 2020. As Dieter mentioned in his opening remarks, the SAP to the cloud workloads is a really important and exciting strategy for us and our customers. Finally, InterGrupo, we still hold a 40% stake here, and so the relationship here continues to be at arm's length.
Now, on the COMPAREX acquisition, as you heard from Hans and Dieter, we continue to be on track with what we laid out. This has been a very intensive planning effort, and we've now been in a very intensive execution phase. As a reminder, the COMPAREX acquisition for us was very much a familiar book of business. The COMPAREX by itself was in the same software and cloud business that we have today. What we saw is an opportunity to enhance the key talents that we had at SoftwareONE. We saw some very talented people at COMPAREX, as well as because it is a familiar book of business, we saw an opportunity to significantly grow our business and get synergies out of the combined business. Over the course of 2019, we completed a number of very important steps.
Specifically, we first focused on the customer-facing integration, we wanted to make sure that anytime customers saw us, they saw one unified company. That's why we focused on the brand, on the website. We made sure that we had leadership appointments across all of our countries, and it was very clear that it was one leadership team. Finally, as you heard towards the end of the year, and as we kicked off our sales activity in 2020, we made sure that we harmonized the portfolio. Today, as our sales force goes to customers, we have one consistent portfolio across the company. At the same time, we have harmonized the sales force compensation, and this also went into effect as of beginning of 2020. What we also did in 2019 and what still remains in 2020 are the back-end integrations.
Here we are migrating systems and data, and we're doing this in a very structured step-by-step way, and we have done a number of them in 2019, and we will complete the rest of them over the course of 2020. In terms of synergies, as you've heard us describe before, we target approximately CHF 60 million of synergies for the COMPAREX acquisition. That's broken up into CHF 40 million of OpEx and CHF 20 million of gross profit. Over the course of 2019, we already achieved CHF 10 million out of that CHF 40 million. Over the course of this year, over the course of 2020, we plan on achieving approximately 60% of that CHF 40 million of OpEx. Then finally, we intend to wrap up all of our integration activities towards the end of 2020.
Over the course of 2021, we plan to have the full run rate of the CHF 60 million from the COMPAREX integration. I will wrap up here and turn it back over to Dieter.
Thank you, Alex. As mentioned in the beginning, I will now turn to our outlook and also to the COVID-19 situation and its impact on our business. I'm moving now to slide 26. Over here, I will be talking about four areas which should be relevant for any organization. How to cope with COVID-19. First and foremost, focus on your employees. Second, do your part as a global citizen. Third, focus on the customer and then manage the business accordingly. SoftwareONE has been coming to our employees, has been very strongly utilizing our tools and platforms on the collaboration side since ages. We are spread across 90 countries. We have a global service portfolio, and we have a global delivery model. Everyone is really used on working remotely and virtually. Our core values and our culture underlie this completely.
On the second part, as a global citizen, we have been 98% on work from home, 100% in where our shared services centers are, like in India. We made those decisions much more in advance of local mandates, doing our part to flatten the curve. We banned the international travel also much earlier than it was advised by the local mandate. On our customers, I want to highlight three areas. First and foremost, you need to continue your service level. We have 100% availability. We have zero interruption on our services. As you might be recalling what Alex mentioned as well, we have a split ratio of managed services to professional services. Our managed services were to a high extent, over 80% already delivered out of our global delivery centers. The remaining part is now flowing over to the regional on local ones.
Our teams are locally available to support our customers further. The second part is helping the customers in the current situation and making sure that we come up with the right solutions so that they can cope with COVID-19. There we have launched a customized portfolio, making sure that our customers get the right help to take out costs in the current environment, but also help them to cope with business continuity with BCP. At the same token, everybody needs to work from home. Not every company, actually, most companies had never planned with a nearly 100% work from home strategy, maybe with a 20% or 30% strategy. The digital workplaces and unified cooperation communication were all not ready. We have launched services to really help those customers, speeding those solutions up and ramping them up quite quickly and made it all available remotely.
We don't need to be on-site to do this for our customers. The third point for our customers is making sure that we are there once we are through COVID-19. We see a huge backlog, in particular on professional services creeping up. That will continue because now nobody debates anymore whether and when they should move into the cloud. Nobody debates anymore whether BCP is required or not. Nobody debates anymore whether security is a necessity or not if I have my full employee base working from home. On the fourth point, managing the business closely. That's very important. We have changed our cadence to address this, making sure we have regular business reviews with every single country and every region, making sure that we have a case-by-case review of every large deal. What is the advantage? What is the risk? What is our risk appetite?
What is the impact on payment terms? What is the payment behavior of those customers? Are they impacted? How are they impacted in the certain industry? Managing our network and capital on a daily basis. Also make sure that we have the right discussions with our software publishers and distributors so that we have a back-to-back agreement when customers are approaching us on network and capital requests, like extended payment terms. Moving now to the outlook, slide 27. I'm very happy to reaffirm our midterm guidance provided at IPO. However, with the current COVID-19 situation, we are currently not positive to predict whether we can already reach the GP, the gross profit targets in 2020, as expected during the IPO. I just want to remind you on the key midterm guidance, what they include.
We have double-digit gross profit growth resulting from high single-digit growth in sale of software and cloud and other revenue, and growth in the high teens in solution and services. Our adjusted EBITDA margin is approaching 35%, with adjusted EBITDA growth in excess of the gross profit growth. A progressive dividend policy with a payout ratio of 30%-50% of the profit for the year. You heard it from Hans. He has shown you the details with our strong balance sheet and our liquidity and unused credit lines and cash flow. We believe SoftwareONE is prepared to weather a potentially large downturn and we will continue to invest into our business. Thank you for your attention, and thank you, Hans and Alex. We are now happy to take your questions. Operator, can you pass on the first question, please?
The first question comes from Stacy Pollard from JP Morgan. Please go ahead.
Thank you. I have a couple of questions, please. First of all, can you quantify what SoftwareONE gross profits grew in 2019 versus what COMPAREX book of business grew, just so we can understand the impact? Do you expect that the COMPAREX drag will ease in 2020 because you talked about the portfolio and sales incentives are now aligned. Do you think that's completely done or does that continue to cause a bit of a drag in 2020? Second question, just any quick performance differentials in growth or margins across the different geographies? Third question, just in the current situation, do you see any delays because you can't maybe get to see your customers or they themselves are in limbo? Is there any particular tech that is either very popular or very unpopular, i.e., is being put on hold?
Thanks, Stacy. I'm having an echo, maybe. Okay. Thank you. Let me start with the third question. There are many popular choices right now, Stacy. Everybody's looking into unified collaboration and communication, Teams, Zoom, Google Hangouts, whatever is out there is quite in demand. The readiness of the customer, and that is from a commercial and technology point of view, not always there. That demands, of course, an uptake on professional services to help them over the line. The same token through the landscape of certain customers, that they might have a ratio of desktops to laptops in an inefficient manner, they would require now the virtual desktop, and we see a huge uptake in that aspect as well. Overall, what it means. Again, the echo has come back.
What it means that we see a pivot from professional services towards those activities and whatever requires on-site, we see a delay on the customer side. They would postpone professional services if it doesn't help them right now, either saving costs or enabling the business to work remotely, or enable the business to survive and to conquer the wave of COVID-19. On the second question, where you asked about the gross margins across geographies. With our distribution on geographies and our customer base, which is quite similar across all geographies and one global portfolio, which is always delivered in the same way, we actually don't see a difference in gross margins.
On the first point, on the first question where you asked about performance from SoftwareONE versus Comparex, I can share with you that SoftwareONE was in their usual growth traction, which is the high teens and Comparex was in the low single digits.
That's helpful. Thank you very much.
Thanks, Stacy.
The next question comes from the line of Andreas Müller from ZKB. Please go ahead.
Can you talk about the challenges in harmonization of the products, portfolios, and so forth, and also the incentive plans? I mean, the growth from the COMPAREX side on solution and services, was that triggered also by the incentive scheme, or was it more sort of technically driven by the not harmonized solution? That's the first question. Can you give me a sense of the payment terms towards your suppliers, but also what you think is going to happen towards your clients, and do you see going forward also a change in the factoring behavior of your factors? What's the size of the unused credit line, just to get a sense, basically, what's the cushion you can rely on in terms of cash? The third question, some of your competitors are probably going to be more cash-strapped going forward.
Would that make you more lean to acquisitions going forward, or is the dividend and also the protection of your balance sheet a priority, or do you see really huge opportunity on the M&A side? Thank you.
Thanks, Andreas. On the first point on the harmonization on the incentive plan, yes, that was the whole purpose of our year of integration in 2019. As we shared with you, we had a different incentive plan, we had a different compensation plan. CompuCom had it not harmonized. We had a global one. CompuCom had a different approach taken, which is not very sales-driven. SoftwareONE always had a very sales-focused driven incentive plan. Most importantly also from a delivery point of view, CompuCom didn't have a global delivery model and not a global portfolio. That was what Alex mentioned in his slide, was the big work which he had to do in 2019. Of course, it affected then the growth on the CompuCom side, because we wanted to really do this digitally.
We wanted to make the hard decisions in one year and really standardize, automate, and offshore what in the same way SoftwareONE has lived through the last couple of years, so that we gain in a long-term basis. I agree with you. That had an impact last year, and we guided on that as well. We assume with the kickoff in January, where we had one global kickoff across the world on one portfolio, that will not impact anymore in 2020, our growth. On the second point on payment terms and I'll ask Hans to jump in a bit on the cushion. We have standard payment terms, Andreas, we have 30 days payment terms. That's our standard. Every single payment request, which is about 30 days, is going through a workflow through Hans and myself. We monitor this right now on a daily basis.
To also have further cushion, we are having negotiations, also successful negotiations already with our major publishers to extend our payments done to them so that we would be actually having a positive cash flow if the 30 days would be taken care of. On the cushion of the unused credit lines, Hans, what do you want to share here?
Yes, this is Hans, Andreas. What I can share with you, we have disclosed in the annual report that we have committed and uncommitted credit lines of CHF 985 million, where we have drawn down 22% at the end of December. This is more or less also in line what we have seen in the two months going forward into 2020.
On the third question, which was acquisitions and how do we react to the situation that many of our competitors are not taking care of digital assets only, but also on hardware and on-premise services, which we know is highly impacted at the moment. SoftwareONE will remain opportunistic on the acquisition side. We told everyone on view that we want to focus on COMPAREX from a bigger point of view, from a scale point of view, and complete this end of the year. From next year onwards, we would be ready to look in those areas if they make sense from a geography, if they make sense from a portfolio, if they make sense from a customer base, and of course, from a valuation point of view.
The capability acquisitions, we will continue on an ongoing basis because those are mostly smaller outfits, which are either local or regionally, and they're very easy to integrate and to absorb and get the value creation quickly out of the acquisition.
Okay. Thank you.
The next question comes from the line of Stefan Slowinski . Please go ahead.
Yes. Good morning. Thanks for taking my question. I just had a question on the Microsoft relationship. If I'm not mistaken, Microsoft, as a percent of gross profit, is actually going down from 57%- 54%. Is that right? If so, why is that? I would have thought Microsoft would have been the fastest growing portion of your business. Is something else growing faster or is it maybe due to changes in the Microsoft Partner program? It seems like they have made some changes in the back half of last year, maybe around commissions and incentive structures for partners. I'm just wondering if that's something that you're seeing, if that's having an impact on your business or if that was something that was anticipated and is already baked into the outlook going out to 2022.
Any color you can give us around the Microsoft partnership and what you're seeing there and how that impacts your outlook for 2020 and going out to 2022 would be of interest. Thank you.
Thanks for the question. It was anticipated. It's actually our plan was to have it around 50%. We are very happy if it's 50%-55%. We don't see this as a negative in terms of dependency, and we don't see it that we need to grow it beyond because we need to be that agnostic partner and advisor of our customer, also being able to advise them on different solutions so that we come to the right conclusion and to the right solution for our customer base. The transformation, which we have started seven years back, has already leaned to a much stronger service and solution portfolio, but also to a diversity on other publishers or hyperscalers. We will continue to do so.
Overall, the pie has been growing. With that, I would say we never had a better partnership with Microsoft than we have right now. We are very close. We are on a regular basis in Redmond. We just had been there prior to COVID with our entire executive team. We are deeply aligned from Satya to his entire leadership team. You saw the growth numbers Microsoft was announcing and the utilization of Azure in the current phase. Obviously, we are very close on this thing to leapfrog and piggyback on that.
Okay. Thank you. Maybe just one follow-up question. I'm just wondering if you can give us some insight as to what percent of your business is directly related to new software license sales. When we looked at the non-Microsoft cloud revenue that you disclosed at IPO, if you look at the Microsoft on-premise and the multi-vendor bucket, is that mainly new licenses or is there other kind of maintenance or recurring revenue portions in there as well?
Yeah. Thanks, Stefen. Alex, you want to jump in here?
Yeah. I would say the dynamics we look at actually is more around existing customers and new customer SoftwareONE. The analysis and what we monitor closely is, are we continue to see strong gross profit retention renewal rates with existing customers? There, it's yes. Then what you also saw from us is with the acquisition of COMPAREX, we didn't go after as many new logos because we felt that we were already getting 25,000 new customers that we needed to go after, make sure we got them onto the same SoftwareONE portfolio. I'd say that's been the focus over 2019. What you will see going forward is the focus on existing customers and kind of cross-pollinating them with services and solutions as well as we are now, as we communicated, we've started growing our sales force from the end of 2019, beginning of 2020.
You will see us now starting to grow the new logos as well. In terms of maybe if your specific question is existing or new software purchases, we see both. We actually see in our numbers is if the overall market is, let's say, 60%-65% on-premise and the rest is SaaS and public cloud, we see a much greater adoption of SaaS and public cloud with our customers. Our customers are already well over 50% in terms of SaaS and public cloud consumption. That's how I would describe it, the customer dynamics as well as the software purchases.
Okay, just a final clarification there. If 60%-65% is on-premise, how much of that is kind of recurring in nature, and how much of that would be sort of one-off license sales?
I see. I'd say the 60%-65% is a market number, and I think it's a typical breakdown of there's the ongoing maintenance stream. I don't know. We ourselves are not a big beneficiary of the maintenance stream, to be honest. I think we typically make sure we put the customers into the right agreements, and we get paid on these three-year contracts. The ongoing maintenance stream is really something that the software publishers would benefit from, not us.
Okay, great. Thanks for the color.
The next question comes from the line of Charles Brennan from Credit Suisse. Please go ahead.
Great. Thanks very much. Just a couple of questions from me as well. Can you just give us a little bit more color on your guidance versus current momentum? I don't actually recall you giving specific 2020 profit targets at the time of the IPO, and you referenced those in the statement. Can you just give us an idea of what your 2020 expectations were? Just as a follow-up to that, your second half growth rates from 2019 feel quite a long way away from your medium-term growth ambitions. Can you give us any insight into Q1 trading? Is that already consistent with those medium-term growth numbers, or does 2020 require an acceleration as we go through the year? Lastly, on the guidance, you specifically call out trends in the second half of March being hard to interpret.
Is that because you don't yet have the data to draw any conclusions, or you are seeing some signs of mixed trading and it's just too early to draw any hard conclusions? Just away from the guidance, can I ask one on the cash flow? You missed your average net working capital expectations. That implies a very strong December performance. Do you think there's anything one-off in nature in the December working capital, or is that a sensible base to extrapolate forward from? Any insights into the volume of factoring would be useful as well. Thank you.
Thanks, Charles. On the first question on the guidance, we have guided that we would be in the low teens on the gross profit, and that's basically a weighted average across the two business lines, which is high single digits on software and cloud and high teens on solution and services. That was the midterm guidance for 2020- 2022. In what you say in reflection now, what we see in Q1 and could be already predict the impact. We believe that, and again, this is all just a caveat of how long COVID is lasting through, but we believe we see an impact in Q2 and in Q3, and it would come back to normal in Q4. At the moment, we haven't seen an impact on Q1.
As we mentioned, there was a continued momentum on Q1, and so we would expect that impact to really kick in on in Q2 and continue in Q3. On the net working capital and the factoring, I just pass on to Hans because he always loves to answer that question. Hans, over to you.
Yes, thank you, Dieter. Charles, what I can say is about the factoring. You have asked what is the amount of factoring. It was CHF 136 million at the end of December. When we talk about the net working capital figure, we exclude the factoring, so it's before the factoring. The balance sheet number is lower than this. About the missing of the average, and I would say what are the factors in between that or the measures. I think in 2019 that there has been some, let's say, not yet adjustment processes with the integration of COMPAREX, that had some impact on the net working capital during the year. That's one effect. Another effect is that the net working capital follows certain trends throughout the year, which is directly linked to the peaks which we see in our businesses, which are in March, June, September, and December.
The net working capital is the highest one month or six weeks after this peak, depending on the payment terms from the customer and the vendor, that cannot always be aligned. For us, the net working capital is a very big topic, which we have processes in place which are local but also quite centralized in some areas. As perhaps Dieter just said before on the payment terms when it comes to extended payment terms, but it's also very monitored and driven when it comes to the cash collection throughout the group, which we monitor from the top as well. I think it's really a micromanagement topic, the net working capital, what I'm saying all the time. We need to every day to chase the cash collection and to make sure that we get the cash from our customers.
An even more important part of the net working capital is basically the link to the business. It's not purely a finance-driven topic. It's also a topic of businesses. You want to make a deal or not make a deal. When you have a situation in place where a customer is asking extending payment terms, then you need to make a decision, to what extent you want to assure the deal or not. That's quite a balance you have to make as a management. As Dieter said earlier, this is coming even to Dieter and myself to make the final decision on this. Going forward, I think that the net working capital, as you said, what is expecting, it does fluctuate every day. Of course, we do everything, and we push very hard to have it on a very low level.
Can also be that at a certain balance sheet date, it's up or down, depending on is the cash just coming in or not from a specific customer.
Just one clarification. It sounds like Q1 has traded in line with your plan. Can you tell us if that's consistent with low teens profit growth? Was 2020 always based on an acceleration through the year?
Yes. Charles, we have seen Q1 and we are at the last day of the quarter, right? We have seen Q1 trading according to our expectation. What I mentioned earlier, this harmonized service portfolio and harmonized commission plan and incentive plan, we were ready from 1st of January onwards to deliver it across the entire SoftwareONE community, inclusive of COMPAREX. It would be evenly spread out through the quarters.
Okay. Thank you.
The next question comes from the line of Balajee Tirupati from Citigroup. Please go ahead.
Thanks for taking my question. Congratulations on good set of results. Two questions from my side, if I may. First on synergies. You have delivered strong performance in 2019 and have integrated your target of CHF 60 million. Are you already seeing instances of cross profit synergies? Do you see potential of doing more than the target CHF 60 million number and embedding caution on account of current uncertain environment? That is the first question, and second one is on the workforce integration of the COMPAREX business. How has been the attrition rate over the past one year, particularly amongst the senior management of COMPAREX? Thank you.
Balajee, thank you very much. Can you just repeat the second question? I didn't understand that. The line was a bit bad.
Sorry. Second question is on the workforce integration of the COMPAREX business. Question is how has the attrition rate over the past one year? That is particularly amongst the senior management of COMPAREX.
Okay. Thank you very much. Let me quickly answer that second question. We have two sorts of attrition, which we want to, of course, manage very carefully. First is attrition of key talents, and second is attrition of customers. We have not lost any customer of strategic relevance or tactical relevance or size. We have, in terms of leadership, actually very quickly established a harmonized leadership team, which we invoked on 1st of February already. The attrition we have seen was a planned attrition through the harmonization of the leadership team. Does this answer your question? On the first, Alex, you want to help out here?
Yes, of course. Hi, Balajee. What we planned as part of the integration is we would have first, through the integration of systems of teams, we would get all of the OpEx synergies, and that's what you see already in the progress in 2019, and that's why you see that approximately 60% over the course of 2020. What we always planned on is that the gross profit synergies would come in 2021, and so that's still our current plan. To be honest, the gross profit synergies for us was always a topic of discipline. Which is, as we acquired COMPAREX, there was overlap in certain regions, certain geographies, and we wanted to have that discipline from a budgeting perspective. The cross-sell, up-sell opportunity that we're going after is really more in our-- that we try to illustrate in our customer base.
If you remember, some of the illustrations we did as part of the IPO process, which is when we look at customers that are software and cloud only, there's a significant opportunity when we are able to sell services and solutions to them. That's really the big opportunity and what we're going after. The CHF 20 million we're still planning on achieving, and that's very much kind of a disciplined budget process that will be part of 2021 as we set the targets for the countries. I think you also had embedded in there a question around, we're not changing guidance in terms of the CHF 60. We're still guiding to CHF 40 of OPEX and CHF 20 of GP.
Yeah. Maybe just to add to that.
Yeah, go ahead, please.
on the CHF 20 million of GP, what Alex said is absolutely right. It's upselling and the cross-selling. What we also see is a margin uptick on the multi-vendor side because of leveraging scale and leveraging different certification levels and different relationships with publishers. The CHF 60 million is outstanding. Absolutely.
Thank you.
Andre, are there any further questions?
Next question comes from the line of Michael Briest from UBS. Please go ahead.
Thank you. Good morning. A couple from me. Just looking at the solution and services business. There's a very impressive improvement in the margin, but equally revenues and costs look to have fallen almost by CHF 60 million, half on half. I seem to recall COMPAREX had a lot of subcontracting and low-margin activity. Is that what's driving that? Looking forward, a 70% gross margin in the second half of 2019, what sort of room is there to improve that? Should we assume that the high teens growth in solutions and services gross profit is equated by the similar growth rate in revenues? Just get a feel for that. Then I have a follow-up on the factoring.
Yeah. Hi, Michael. Thank you. On the first question, what we have seen during the process of last year, we had with COMPAREX not only certain subcontracting, as you mentioned, but it was just a locally customized portfolio and locally delivered. With that, you can't scale out and you can't optimize, and you can't find synergies to really optimize, to repeat activities. The second part was, also from a strategy point of view, where do you want to be as a service provider? COMPAREX had the flexibility to also sell hardware and had the flexibility to also be on premise and help someone in their data centers. That was, of course, positive in one way, but in another way, not sustainable in the future. That's what we have completely changed, right?
Where we clearly say we have not only one global catalog, but we deliver it to our shared service center. Whatever we can standardize, we automate. If we can't automate it, we offshore it into our delivery centers. It is one portfolio which is cloud-based. We don't want to be on-premise. We want to be the born and the cloud provider. With that, we will see a continued development on the margin. On the second part of it, Alex, you want to jump in here?
Yes. Hi, Michael. I think you're right in your analysis that what we saw is that there was quite a bit more subcontracting on the COMPAREX side. As Dieter mentioned, it naturally is part of our strategy. When we bring it into kind of our one harmonized portfolio, we will do a lot less of that. I would almost, to be honest, I would caution you a bit from using the metric that you're using from taking the revenue over the gross profit in our services business, because to me, that's almost a way what we will do there as the portfolio comes together, I would expect that the third-party number to continue to decline. I would say I couldn't even give you a target on what that should look like, because for us, we're very much focused on that gross profit number.
That's what we're driving.
That's why I would caution you a little bit against that ratio. I think the rest of the equation, everything else is exactly kind of as you're alluding to, which is as we have a common portfolio, as we focus everyone on the same kind of services and solutions, we expect that high teens growth. That's what we expect from the combined book of business, and if you recall, that's a bit lower than what SoftwareONE standalone was able to get. Again, we still feel that we're transforming the combined book of business. That's the high teens target that we've put out.
Okay. Just on sort of credit risk, I think one of the pie charts shows probably a quarter of your gross profit coming from customers with less than 250 employees. I guess SMEs might be more vulnerable in this crisis than in 2008. When I look at the receivables balance, I think CHF 320 million of it is overdue at the end of the year, CHF 60 million of that is more than 90 days overdue. Can you talk about what you do to chase down that debt? When I look at the provision for bad debts, it's actually gone down a little bit in percentage terms. It's 1% of receivables. It was 1.3% at the end of 2018. Clearly, this is potentially a very dangerous time for SME.
How comfortable are you in that book of debtors, and are you using factoring in some way to de-risk it? I don't know what the decision-making is behind the factoring.
Well, first of all, I would say.
You want to answer.
First of all, I would say we are fine with the receivables and how we have the receivables make allowances for the receivables in the annual report. It's a clear process in place where we need to assess the risk and the risk of collection, of collecting this receivable. This is fine with us, and we do not see a big take. We are chasing all these outstanding receivables. It's a process, what I said earlier today on the micromanagement every day. It's a very, very diligent process which is ongoing. You said about the factoring and the risk. I would say there are two elements on this. The factoring is something we use as an instrument when we need to close a deal with long payment terms. Usually these are customers which are having even a better rating than ourselves.
It's also, in that sense, a cheap financing methodology. Factoring is used for this when we are in such situation with long payment terms and the customer really wants to go into such situations, then we offer that. When it's factored and off balance sheet, then the risk is gone, of course. On the other side, in general, about the accounts receivable, we have different pockets. The very small deals, we do not insure and take our risk. We try to insure all the receivables globally. We do not succeed on all that, of course, because sometimes the deal need to be closed very urgently or in last days, and the insurer does not have time or is not able to give a feedback. Then the customers which are very credit-worth, we do not insure them at all.
BBB plus, we do not insure them. We think with this method and how we treat these accounts receivable, we cover the risk quite well.
Sorry. I think you disclosed the level of insurance at the end of 2018 in the IPO. What was it at 2019? What proportion of credit was insured?
Oh, I don't have it in top of my mind, but I think it's on the same level, more or less of 2018, probably.
About 75.
Yeah.
Okay.
Yeah. Michael, also from a SME point of view, what we see from a consumption now, they consume our portfolio rather in two ways. It is either service business, which is then monthly billing, so there is no big lump sum, and the risk is very much taken care of. The second one on solution, it would be our simple solutions, which are our particular SMB and SME-targeted solution which are again based on monthly billing. We usually don't have this SME, the long-term exposure.
Okay, understood. Thanks.
Last question from today comes from the line of Alex Tout from Deutsche Bank. Please go ahead.
Yeah. Hi. Morning, guys. Thanks for taking the questions. Just wanting to try and get an idea of what you see as realistic downside risk in the current environment for FY 2020. I appreciate you don't want to give formal guidance, but could we see software gross profit and/or IT services gross profit declining in FY 2020 overall based on what you understand of the situation at this point? Kind of related, do you think that you can at least maintain EBITDA margin at the current level, but perhaps before the synergies from COMPAREX, based on the situation you see now? I have a follow-up, but if you could give answers to that first. Thanks.
Thanks, Alex. We believe that on the software and cloud services, there will be limited impact. Simply because we are not in the SAP reselling business where our customers would delay the bigger purchases. We are in the technology projects of SAP, which again is done offshore. On the solution and services side, Alex, it really depends how much we can compensate from the increased demand on security, on future workplace, on BCP, on UCC, on collaboration tools compared to those ones which we usually would have as a professional service where you migrate users to the cloud. At the moment, we see that's compensated, but I would assume this depends on, again, how long COVID lasts through. On the managed services side, since we deliver this mainly out of our shared service centers, we don't see an impact.
Great. Just directly as a follow-up to what you just said, what proportion of the solutions and services gross profit in FY 2019 was coming from security, unified communications, procurement, these areas that you would expect in the current environment would see some benefit, at least over the course of FY 2020 overall?
You remember we have two sub-lines of business in the solution and services space. One is the software lifecycle management, and the other one is the technology services. On one side, on the other side, we have a 50/50 ratio, managed services versus professional services. Actually, managed services is about 50%. On the software lifecycle management, Alex, at the moment, we are helping customers to take out costs, right? Helping them to optimize their landscape. There we haven't seen a dip. On the technology services side, the future data center practice has been rather pivoted to the future workplace and the security and the apps practice. Again, at the moment, it's compensated. Clearly, I mentioned earlier, we see an impact in Q2, and we anticipate an impact in Q2, in Q3.
It, of course, all depends how long the COVID takes and once the curve is flattened.
Great. Thank you.
Thanks, Alex.
That was the last question.
All right. If there are no more questions, we would like to thank you again for attending this conference. We wish you a good day and look forward to speak to you the next time. Thank you. Stay well and stay safe, and goodbye.