SUSE S.A. — Investor Presentation 2022

Sep 22, 2022

SEPTEMBER 22, 2022

Copyright © SUSE 2022

Q3-22 Results Presentation

Important Notice

This presentation as well as any information communicated in connection therewith (the "Presentation") contains information regarding SUSE S.A. (the "Company") and its subsidiaries (the Company, together with its subsidiaries, "SUSE" or "Group"). It is being provided for informational purposes only and should not be relied on for any purpose and may not be redistributed, reproduced, published, or passed on to any other person or used in whole or in part for any other purpose.

This document contains alternative performance measures (APMs) which are further specified on page 22.

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

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

Today's Presenters

Copyright © SUSE 2022

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Business Update

Copyright © SUSE 2022 2021

Melissa Di Donato, CEO

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Highly Profitable Business Model With Recurring Earnings

Mission-critical infrastructure solutions
Rapidly growing markets
Subscription model
Diversified enterprise customer base
Multi-year contracts
Upfront payments

Resilient business model drives long-term sustainable growth with high profitability and high cash conversion

Q3-22 Financial Highlights – Delivering High Revenue Growth, Profitability and Cash Conversion

Operational Highlights

Product Updates	Delivered significant enhancements to SUSE Rancher, SUSE NeuVector and SUSE Linux Enterprise, which landed well with customers and are supporting our order pipeline
Partnerships	Built on our work with AWS with a new strategic collaboration, including integrated go-to market activities across sales and marketing, shared channel enablement and training
People	Expanded our organization, adding 69 people to our workforce in Q3 Focussed investments on our sales force and container management product development
ESG	Awarded EcoVadis silver medal for our ESG practices SUSE amongst the top 25% of the rated companies

Important Wins In The Quarter

	Fortune 500 US Sports Apparel Giant	Global Leader in Sensors, Logistics and Manufacturing Automation	Prominent Indian Banking and Payments Institution
Overview	Upsell as SUSE Linux Enterprise expanded its footprint in world-famous sports brand	Upsell for SUSE Rancher at this global leader in sensors, logistics and manufacturing automation	Cross-sell and our first SUSE Liberty win in India, supporting world's largest digital payment infrastructure and supplementing existing SUSE Rancher subscription
Products	SUSE Linux Enterprise Server for SAP Applications, SUSE Manager, Live Patching, Gold Premium Engineer, Consulting, eLearning	SUSE Rancher Management Server, Rancher Nodes Priority and Rancher Nodes Standard Support	SUSE Liberty Support Priority Subscription
Why SUSE	ü SUSE was the incumbent, recommended technology for SAP ü Strong account relationship with the Microsoft Account Team supporting the customer	ü Delivery of a future-proofed next generation platform for customer's environment ü Flexibility and responsiveness to customer needs, and swift resolution of support tickets ü Good vendor, partner and customer relationship	ü Trust and confidence in the SUSE team, based on the positive experience with SUSE Rancher ü SUSE's openness and flexibility; avoidance of vendor lock-in ü Reduced opex costs through streamlined management; savings used to innovate and fuel business modernization

The Fundamental Drivers Of Container Market Growth Remain Strong

Global mega-trends Market growth

Data Analytics

IoT and Edge Computing

Cloud Transformation

AI and Machine Learning

Super-computing

Rising need for multi-cloud support and portability driving container usage and orchestration

Containers are predominantly a Linux technology, with adoption driving paid Linux and vice-versa

Rancher adoption

Market-leading container management platform with continued strong usage

Market-leading product in rapidly growing market Our plans to evolve our business will capitalize on this significant opportunity

Delivering Value From Rancher's Strong Adoption

Financial Update

Andy Myers, CFO

Copyright © SUSE 2022 2021

Financial Results Summary

Delivering high revenue growth, profitability and cash conversion

ACV By Solutions – Strong Cloud Growth Continues

Group ACV growth down 4% (down 1% at constant currency) in Q3-22

• − Core down 8%, down 5% at constant currency, reflecting our usual sales cycle, available renewal pool in Q3 2022 and a large retrospective consumption contract in Q3 2021, together with a foreign currency headwind
• − Emerging up 21%, up 25% at constant currency, reflecting continued strong Rancher renewals partly offset by lower new business

Highlights by geography

• − Growth in Asia Pacific, up 20%, and in Latin America, up 21%, remained strong
• − North America down 6%, driven primarily by a smaller renewal pool

Highlights by RTM

• − End User growth of 4% driven by continued strong growth in cloud sales across all CSPs
• − IHV/Embedded ACV down 41% driven primarily by a smaller renewal pool in our Embedded routeto-market, hardware shortages and a shift to selling through other routes, primarily through CSPs

Adjusted Revenue By Solutions – Robust Growth

Q3-22 Adjusted Revenue of \$171m, up 13% YoY (15% at constant currency), underpinned by continued strength in cloud revenue

Annual Recurring Revenue and Net Retention Rate

• − Q3-22 ARR of \$640m, up 14% YoY, demonstrating the continued strength of its subscription business
• − Q3-22 NRR of 108%, demonstrating a consistent ability to build on and expand existing customer relationships

Operating Costs Evolution– Strong Cost Control

	(\$m)	Q3-22	Q3-21	9M-22	9M-21
	Adjusted Revenue	171.2	151.0	487.5	421.9
	Cost of Sales	(13.3)	(11.6)	(38.2)	(30.2)
	As % of Revenue	8%	8%	8%	7%
1	Gross Profit	157.9	139.4	449.3	391.7
	% Margin	92%	92%	92%	93%
2	Sales, Marketing & Operations	(45.0)	(39.0)	(134.3)	(106.4)
3	Research & Development	(27.1)	(25.4)	(81.2)	(69.8)
4	General & Administrative	(20.7)	(19.8)	(57.8)	(51.4)
	Total Operating Costs	(92.8)	(84.2)	(273.3)	(227.6)
5	Adjusted EBITDA	65.1	55.2	176.0	164.1
	% Margin	38%	37%	36%	39%

— Gross Profit Margin:

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• − Gross margin maintained at 92%, in line with the prior year
• Sales, Marketing & Operations:
  • − 15% increase driven by continued investments in our sales force and marketing which focused on pipeline generation and qualification

Research & Development:

− 7% increase driven by investments in engineering and product management, with significant funding directed to our container management products

General & Administrative:

− 5% increase driven by headcount investments and an adverse realized foreign exchange movements

Adjusted EBITDA margin: 5

• − 1 ppt increase, with revenue growth further enhanced by strong cost control and a positive impact from foreign exchange movements
• − Increased margin despite highly inflationary environment

Strong Profitability And Cash Conversion In 9M-22

Consistent Performance in LTM Metrics

Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-2 1 Q4-21 Q1-22 Q2-22 Q3-22

ARR (\$m) NRR

LTM Revenue (\$m)

Note: FY20 financial figures only include SUSE Rancher actual contribution on a coterminous basis starting from November 2019. For definition of APM metrics please refer to page 22.

FY22 Guidance

			FY22 Guidance Prior to FX Impact
		Previous	Revised	Estimated Full Year FX Impact(1)	Medium Term Guidance
e u al al V ct u	Core	Mid-teens growth	c. 10% growth	c. (4) ppt	Mid-to-high teens growth
n a n ntr A o C	Emerging	c. 50% growth	c. 20% growth	c. (3) ppt	In excess of 50% growth
Total Adjusted Revenue		Mid-to-high teens growth	No change	c. (2) ppt	Growth around 20%
Adjusted EBITDA margin		Around mid-thirties percent	No change	c. +2 ppt	Gradual increase towards 40%
	Adjusted uFCF Conversion	Stable-to-slight increase from FY21 levels	Over 80%	Slight negative	Stable-to-slight increase from FY21 levels

Highly Profitable Business Model With Recurring Earnings

Mission-critical infrastructure solutions
Rapidly growing markets
Subscription model
Diversified enterprise customer base
Multi-year contracts
Upfront payments

Resilient business model drives long-term sustainable growth with high profitability and high cash conversion

Alternative Performance Measures (APMs)

This document contains certain alternative performance measures (collectively, "APMs") including ACV, ARR, NRR, , Adjusted Revenue, Adjusted EBITDA, Adjusted EBITDA Margin Adjusted Cash EBITDA, Adjusted Cash EBITDA margin, Adjusted uFCF, Cash Conversion, and Net Debt and Leverage that are not required by, or presented in accordance with, IFRS, Luxembourg GAAP or any other generally accepted accounting principles. Certain of these measures are derived from the IFRS accounts of the Company and others are derived from management reporting or the accounting or controlling systems of the Group.

SUSE presents APMs because they are used by management in monitoring, evaluating and managing its business, and management believes these measures provide an enhanced understanding of SUSE's underlying results and related trends. The definitions of the APMs may not be comparable to other similarly titled measures of other companies and have limitations as analytical tools and should, therefore, not be considered in isolation or as a substitute for analysis of SUSE's operating results as reported under IFRS or Luxembourg GAAP. APMs such as ACV, ARR, NRR, Adjusted Revenue, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash EBITDA, Adjusted Cash EBITDA Margin, Adjusted uFCF, Cash Conversion, RPO and Net Debt and Leverage are not measurements of SUSE's performance or liquidity under IFRS, Luxembourg GAAP or German GAAP and should not be considered as alternatives to results for the period or any other performance measures derived in accordance with IFRS, Luxembourg GAAP, German GAAP or any other generally accepted accounting principles or as alternatives to cash flow from operating, investing or financing activities.

SUSE has defined each of the following APMs as follows:

"Annual Contract Value" or "ACV": ACV represents the first 12 months monetary value of a contract. If total contract duration is less than 12 months, 100% of invoicing is included in ACV;

"Annual Recurring Revenue" or "ARR": ARR represents the sum of the monthly contractual value for subscriptions and recurring elements of contracts in a given period, multiplied by 12. ARR is calculated three months in arrears, given backdated royalties relating to IHV and Cloud, and hence reflects the customer base as of three months prior;

"Net Retention Rate" or "NRR": expressed as a percentage, NRR indicates the proportion of ARR that has been retained over the prior 12-month period, which is inclusive of up-sell, cross-sell, down-sell, churn and pricing. It excludes ARR from net new logo end-user customers. The NRR is calculated three months in arrears, aligned to the calculation of ARR;

"Adjusted Revenue": Revenue as reported in the statutory accounts of the Group, adjusted for fair value adjustments;

"Adjusted Gross Profit": this APM represents Adjusted Revenue less operating costs adjusted for non-recurring items;

"Adjusted Gross Profit Margin" expressed as a percentage, this APM represents Adjusted Gross Profit divided by Adjusted Revenue

"Adjusted EBITDA": this APM represents earnings before net finance costs, share of loss of associate and tax, adjusted for depreciation and amortization, share-based payments, fair value adjustment to deferred revenue, statutory separately reported items, specific non-recurring items and net unrealized foreign exchange (gains)/losses;

"Adjusted EBITDA margin": expressed as a percentage, this APM represents Adjusted EBITDA divided by Adjusted Revenue

"Adjusted Cash EBITDA": this APM represents Adjusted EBITDA plus changes in contract liabilities in the related period and excludes the impact of contract liabilities – deferred revenue haircut;

"Adjusted Cash EBITDA Margin": expressed as a percentage, this APM represents Adjusted Cash EBITDA divided by Adjusted Revenue;

"Adjusted Profit before Tax" is Adjusted EBITDA (post IFRS 15 and 16), less D&A (excluding intangible amortisation for Customer relationships, intellectual property and non-complete agreements) less net financial expense

"Adjusted Profit after Tax" is Adjusted Profit before Tax less notional tax

"Adjusted Earnings Per Share" represents Adjusted Profit after Tax less notional tax divided by the weighted average number of shares during the period

"Adjusted Unlevered Free Cash Flow" or "Adjusted uFCF": this APM represents Adjusted Cash EBITDA less capital expenditure related cash outflow, working capital movements (excluding deferred revenue, which is factored into Adjusted Cash EBITDA, and non-recurring items), cash taxes and the reversal of non-cash accounting adjustments relating to IFRS 15 and IFRS 16;

"Cash Conversion": expressed as a percentage, this APM represents Adjusted uFCF divided by Adjusted EBITDA;

"Constant Currency": Constant Currency for ACV and costs, is calculated by re-stating the prior year period results to reflect exchange rates prevailing during the reported period. Constant currency for Adjusted revenue, is calculated by re-stating the in-period revenue generated in the prior period from the prior period ACV to reflect exchange rates prevailing during the reported period. No such restatement is needed for revenues in prior periods unwinding from deferred revenue, as these revenues are locked into US denominated values when the associated ACV was generated;

"Contractual Liabilities and Remaining Performance Obligations" or "RPO": RPO represents the unrecognized proportion of remaining performance obligations towards subscribers (e.g., the amount of revenue that has been invoiced, but not yet recognized as revenue) plus amounts for which binding irrevocable commitments have been received but have yet to be invoiced. Deferred Revenue is another term used for Contractual Liabilities;

"Net Debt": This APM represents the sum of current and non-current interest bearing borrowings (net of un-amortized capitalized arrangement fees, gains or losses on loan modifications), current and non-current lease liabilities, less cash and cash equivalents; and

"Leverage" - Expressed as a multiple, Leverage is Net Debt divided by Adjusted Cash EBITDA

Continued De-Leveraging

Note: All figures are expressed in \$m unless otherwise specified. For definition of APM metrics please refer to page 22.

Impact Of Exchange Rates

Impact of foreign exchange rate changes on 9M-22 YoY growth (constant currency (CCY FX) versus Actual FX growth)

	9M-22
ACV Core	(4) ppt
ACV Emerging	(3) ppt
Total ACV	(3) ppt
Adjusted Revenue	(1) ppt
Adjusted EBITDA	3 ppt

Key financial metrics by currency

9M-22	USD	EUR	GBP	Other
Total ACV	65%	25%	2%	8%
Adjusted Revenue	91%	6%	0%	3%
Operating Expenses	47%	25%	11%	17%

Key Financial Metrics By Quarter

(\$m)	Q1-21	Q2-21	Q3-21	Q4-21	FY-21	Q1-22	Q2-22	Q3-22
Total ACV	137.6	109.0	119.0	125.0	490.6	143.8	139.4	114.4
o/w Core	111.3	94.6	101.5	98.7	406.1	119.9	113.6	93.2
o/w Emerging	26.3	14.4	17.5	26.3	84.5	23.9	25.8	21.2
Adjusted Revenue	134.1	136.8	151.0	154.0	575.9	155.0	161.3	171.2
o/w Core	118.6	121.4	133.2	133.4	506.6	130.2	133.9	142.9
o/w Emerging	15.5	15.4	17.8	20.6	69.3	24.8	27.4	28.3
Adjusted EBITDA	60.7	48.2	55.2	48.0	212.1	52.3	58.6	65.1
% Margin	45%	35%	37%	31%	37%	34%	36%	38%
Change in Deferred Revenue	46.4	6.2	9.8	3.7	66.1	40.8	17.3	(18.9)
Adjusted Cash EBITDA	107.1	54.4	65.0	51.7	278.2	93.1	75.9	46.2
% Margin	80%	40%	43%	34%	48%	60%	47%	27%

Adjusted Revenue Reconciliation

(\$m)	Q3-22	Q3-21	9M-22	9M-21
Statutory Revenue	170.1	148.0	483.4	407.7
Plus: Contract Liability Haircut Amortised	1.1	3.0	4.1	10.5
Plus: Pro Forma Rancher Contribution(1)	-	-	-	3.7
Adjusted Revenue	171.2	151.0	487.5	421.9

Adjusted EBITDA Reconciliation

(\$m)	Q3-22	Q3-21	9M-22	9M-21
Operating Profit/Loss	3.0	(30.5)	(8.4)	(181.3)
Minus: Amortisation and Depreciation	37.7	40.3	116.2	119.1
Minus: Separately Reported Items	-	4.9	-	14.1
Minus: Contract Liability Haircut Amortised	1.1	3.0	4.1	10.5
Minus: Non-recurring Items	5.3	5.0	14.4	18.3
Minus: Share Based Payments(1)	15.2	18.3	37.8	166.1
Minus: Share Based Payments - Employer Taxes	-	1.2	0.9	7.0
Plus: Foreign Exchange (unrealised)	2.8	13.0	11.0	12.1
Adjusted EBITDA (Statutory Basis, Excluding Rancher Pro Forma Contribution)	65.1	55.2	176.0	165.9
Minus: Adjustment for Actual Rancher Contribution(2)	-	-	-	(1.8)
Adjusted EBITDA	65.1	55.2	176.0	164.1

Note: For definition of APM metrics please refer to page 22.

(1) Q1-21 increase in share based compensation driven by pre-IPO option program.

(2) Adding 1 month of SUSE Rancher for Q1-21

Adjusted PBT Bridge

(\$m)	Q3-22	Q3-21	9M-22	9M-21
Adjusted Revenue	171.2	151.0	487.5	421.9
Adjusted EBITDA	65.1	55.2	176.0	164.1
Minus: Depreciation & Amortisation	(5.0)	(4.8)	(16.3)	(14.9)
Minus: Net Finance Costs	(9.1)	(8.1)	(30.7)	(38.1)
Adjusted PBT	51.0	42.3	129.0	111.1
% Margin	30%	28%	26%	26%

Adjusted Unlevered FCF Bridge

(\$m)	Q3-22	Q3-21	9M-22	9M-21
Adjusted Cash EBITDA	46.2	65.0	215.2	226.5
Minus: Gross Capex	(2.5)	(1.3)	(7.2)	(2.1)
Plus: Change in Core Working Capital	27.2	(14.2)	(27.2)	(41.8)
Minus: IFRS 15	(5.3)	(8.3)	(18.6)	(25.6)
Minus: IFRS 16	(1.9)	(1.8)	(5.7)	(5.4)
Minus: Cash Taxes	(2.2)	(0.4)	(12.7)	(4.4)
Rancher pro-forma uFCF	-	-	-	(1.8)
Adjusted uFCF	61.5	39.0	143.8	145.4

Thank You

Copyright © SUSE 2022