Results for the 12 Months Ended 31 October 2019 Stephen Murdoch - PowerPoint PPT Presentation

Results for the 12 Months Ended 31 October 2019 Stephen Murdoch Brian McArthur-Muscroft 4 February, 2020

Micro Focus International Safe Harbour statement The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated (“relevant  persons”). 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 “Company”) 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 Company’s 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 “believes”, “estimates”, “anticipates”, “expects”, “intends”, “may”, “will”, or “should” 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 Company’s 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 Company’s 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. 2

Agenda: Introduction Chief Executive Officer (CEO) Update Chief Financial Officer (CFO) Update Strategic & Operational Review Update Outlook and Guidance

CEO Update Stephen Murdoch

Year in review  Financial Summary  Revenue in line with revised guidance at $3,348.4m, down 7.3% on constant currency basis compared to the prior year*.  Improvement in Adjusted EBITDA margin from 38.7% to 40.7% on a constant currency basis; Adjusted EBITDA decreased by 2.6% to $1,362.5m compared to the prior year*.  $2.3bn returned to shareholders (which equates to $5.37 per share).  Final dividend of 58.33c proposed today, giving total dividend of 116.66 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 & operational improvement initiatives Strategic & Operational Review announced in August 2019   Business performance below expectations & 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 assessment of current integration programme and overall execution  Review is substantially complete with findings and next steps covered later in this presentation. 5 *Continuing operations

Solid progress in execution of our key integration & operational simplification programs coupled with significant portfolio actions within the period Making it easier for Systems us to connect with 1 Connecting customers, partners Business Systems IT infrastructure migration teams Single Platform & and across the 10,000 PCs / 25,000 mail boxes 2750 servers / 139 applications Common Processes organisation Simplifying our Business Making it easier for us 2 Structure Simplifying to do business and for Finance & HR Transformation Processes core operations people to do business (60 reduced to 5 key locations) Legal Entity Simplification with us 20% reduction in Real Estate Standardisation of Policies Single HR Platform Portfolio Actions 3 Increasing Making it easier to Interset Acquisition agility execute and move faster SUSE Divestiture User & Entity Behavioural Analytics 310 Apps, 17 Workstreams capability being leveraged 1600 People, 33 Legal Entities across the portfolio 6

Strategic & Operational Review: Conclusions • The fundamentals underpinning our model and approach remain valid • We significantly underestimated the challenges that have emerged in the integration of the HPE Software business • 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 • The pace of change within the Enterprise software market has accelerated and we now need to evolve our business model to capture the opportunities 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: • Stable revenues • EBITDA margins in the mid-40s • Generating more than $700M of sustainable free cash flow • Built on a platform to enable accretive portfolio actions to be taken 7

Strategic & Operational Review: High Level Plan To drive the value creation potential we see in the business we need to: 2 1 1 TRANSFORM: our Go-to-Market TRANSFORM GTM Function COMPLETE: the Core Systems & organisation and approach Operational Simplification work OBJECTIVE: Drive material increase in sales productivity OBJECTIVE: Deliver the platform for significantly to capture under-exploited opportunity to cross-sell and improved execution and foundation for margin improve renewal rates expansion 4 3 ACCELERATE: a targeted transition to EVOLVE: our Business Model to establish Subscription & SaaS stronger positions in growth areas OBJECTIVE: Build Subscription & SaaS revenues to OBJECTIVE: Drive growth in our Security and Big capture relevant growth opportunities & improve mix Data solutions of recurring revenues

CFO Update Brian McArthur-Muscroft

Micro Focus International Financial performance (1 of 2) Revenue declined 7.3% period-on-period on a CCY basis  FY19 FY18 Change % for the twelve months to 31 October 2019. Reported CCY Licence 800.0 862.4 (7.2%)  Licence revenue decline of 7.2% in FY19 is less than the Maintenance 2,057.6 2,193.7 (6.2%) FY18 decline of 12.8% SaaS and other recurring 279.7 314.8 (11.1%) Consulting 217.9 277.7 (21.5%) Decline in maintenance revenue was impacted by one  Constant currency revenue (before haircut) 3,355.2 3,648.6 (8.0%) off events including the disposal of Atalla and selling to Deferred revenue haircut (6.8) (34.7) (80.4%) the US Government via a strategic partner rather than Constant currency revenue 3,348.4 3,613.9 (7.3%) direct. Restating for these two items maintenance Total constant currency costs (1,985.9) (2,214.4) (10.3%) revenue decline would have been 4.7% (FY19 actual: Constant currency adjusted EBITDA 1,362.5 1,399.5 (2.6%) 6.2%). See appendix 2 for further detail. Constant currency adjusted EBITDA margin % 40.7% 38.7% 2.0 ppt  SaaS and other recurring and Consulting revenue Per share data presented at Actual rates accounts for 2.6ppts of the overall decline. Diluted adjusted EPS (cents)* 195.89 187.51 4.5% Adjusted EBITDA margin increase of 2.0 ppt to 40.7% in  Dividend per share (cents) 116.66 100.84 15.7% the twelve months ended 31 October 2019. * Diluted adjusted EPS from continuing operations Diluted adjusted Earnings per share from continuing  operations of 195.89 cents - an increase of 4.5% primarily driven by a lower share count. 10