Global Press Releases

Software AG accelerates growth in its Digital Business

License revenue up 18 percent, product revenue up 12 percent in Q1
  • North America: Continuously strong performance in the world’s largest technology market
  • Germany: Multiple major Internet of Things (IoT) and Industry 4.0 customer projects boost the digital business performance
  • Acquisition of Industrial Internet specialist Cumulocity further strengthens Software AG’s technology leadership
  • Profitability remains on a high level
  • Full confirmation of outlook 2017
[All figures are rounded unless otherwise indicated.]

Darmstadt, Germany, Friday, April 21, 2017

Software AG (Frankfurt TecDAX: SOW) today announced its financial figures (IFRS, preliminary) for the first quarter of 2017. An increasing number of large companies are relying on Software AG’s leading technology to drive their digital transformations. Additionally, the IoT and Industry 4.0 adoption boosted the performance of the company’s largest business line – the Digital Business Platform (DBP). With a license revenue jump of 18 percent and increased product revenues of 12 percent, Software AG strongly demonstrated its increasing relevance and digital leadership. Driven by a strong performance in North America, the global early adopter market, and propelled by new Industry 4.0 projects in Germany, DBP product revenue exceeded the €100 million benchmark for the first time in a first quarter. Reflecting the company’s growing success in the IoT market and extending its technology leadership, Software AG acquired the Industrial Internet specialist Cumulocity at the end of Q1. Cumulocity’s cloud-based platform integrates IT applications with physical devices (Operational Technology). Moreover, Software AG’s database business Adabas & Natural (A&N) grew by 8 percent in maintenance revenue demonstrating stability and a high degree of customer loyalty as seen in 2016. The Consulting business division also developed very positively and recorded revenue growth of 9 percent and a double digit segment margin. This development underlines the successful transformation of the company into a strategic partner for major enterprises delivering high value digital consulting services. With an overall stable revenue performance, the Group continued to maintain its profitability at a very high level: the operating profit margin (EBITA, non-IFRS) was 27.3 percent, exceeding expectations. Based on these positive business developments in Q1 and the depth of the project pipeline for the rest of the year, Software AG fully confirms its outlook for the year 2017.

“The outstanding success of the Digital Business Platform in Q1 validates our strategic focus on profitable growth. We entered the year as we finished the previous one: with strong momentum. This positive trend is also evidence that enterprises recognize how important it is to invest in leading Internet of Things and Industry 4.0 technologies”, said Karl-Heinz Streibich, CEO of Software AG. “Digital transformation has become the maxim of all industries and, internationally, we are taking a pioneering role in driving digitalization through strategic co-innovation partnerships with world market leaders such as Bosch, Dürr, Dell, Huawei and others” continued Streibich.

“In the first quarter of 2017, we further expanded revenue in our growth segment while maintaining our operating profit margin at a consistently high level. Revenue growth and thus increase in profitability remain our declared priorities. We also successfully advanced the development of our leading portfolio through the strategic innovation-driven acquisition of Cumulocity in the first quarter. Therefore, we have established an excellent and strong starting position for the rest of the year and beyond,” commented CFO Arnd Zinnhardt.


Business area development

In the Digital Business Platform (DBP) segment, license revenues of €38.4 million (Q1 2016: €32.7 million) were generated in the first quarter, an increase of 18 percent compared to the previous year. Maintenance revenue rose to €67.2 million (Q1 2016: €61.9 million) in the same period, 9 percent higher than in the previous year. Accordingly, the DBP product revenue (licenses + maintenance) amounted to a total of €105.6 million (Q1 2016: €94.5 million) in the first quarter—an increase of 12 percent.

The Adabas & Natural (A&N) division improved its maintenance revenues to €40.1 million (Q1 2016: €37.0 million), an increase of 8 percent compared to the previous year. The positive development of maintenance revenues underscores the stability of the business and high level of loyalty of the A&N customer base. A further stabilizing factor was the company’s “Adabas & Natural 2050+” innovation program which provides support and digital innovations for customers beyond the year 2050. With this program, Software AG is contributing, in the long term, to protecting its customers' investments and actively modernizing their IT landscapes. Measured against the extraordinarily strong 2016 first quarter, A&N product sales declined to €47.9 million (Q1 2016: €63.4 million). The main reason was the license sales development which as expected was lower, reaching €7.8 million (Q1 2016: €26.4 million). While Q1 2016 performance was driven by extraordinarily early capacity expansions and contract renewals, Q1 2017 reflects a normal seasonal license revenue development. Therefore, the company remains confident in delivering its A&N total year revenue guidance.

Sales in the Consulting division rose to €52.3 million (Q1 2016: €48.0 million) in the first quarter, an improvement of 9 percent. The segment contribution margin increased to 10 percent (Q1 2016: 4 percent).


Total revenue and earnings development

In the quarter under review, Software AG recorded stable total turnover of €205.9 million (Q1 2016: €206.2 million). The Group's maintenance revenue developed very positively reaching €107.2 million (Q1 2016: €98.9 million), an increase of 8 percent. As a result of the expected weaker development in the A&N license business, the Group's license revenue of €46.3 million (Q1 2016: €59.1 million) was below the previous year's figure in the quarter under review. Accordingly, the company's product sales (licenses + maintenance) totaled €153.5 million (Q1 2016: €158.0 million) in the first quarter.

Due to €5.2 million higher investments of €92.3 million (Q1 2016: €87.1 million) in research and development as well as sales and marketing, the company's earnings before interest and taxes EBIT amounted to €41.5 million (Q1 2016: €45.3 million) in the first quarter. This corresponds to an      of 20.2 percent (Q1 2016: 22.0 percent). The operating EBITA (non-IFRS) reached €56.3 (Q1 2016: €59.1 million). The operating profit margin (non-IFRS) of 27.3 percent (Q1 2016: 28.7 percent) continued to be on a very high level.

The net result reached €27.3 million (Q1 2016: €29.5 million), while earnings per share (non-IFRS) amounted to €0.49 (Q1 2016: €0.51).

The equity ratio was 61 percent (Q1 2016: 59 percent). The operating cash flow reached previous year’s record high and amounted to €61.7 million (Q1 2016: €61.9 million). Due to a one-time property investment in Q1, the free cash flow of €43.3 million (Q1 2016: €60.5 million) was below last year’s record level.


Employees

As of March 31, 2017, Software AG employed a total of 4,486 (Q1 2016: 4,299) employees (full-time equivalents), of which 1,891 (Q1 2016: 1,853) in consulting and service, 1,122 (Q1 2016: 1,011) in research and development, 863 (Q1 2016: 833) in Sales and Marketing as well as 610 (Q1 2016: 602) in Administration.


Outlook for 2017

Software AG confirms its forecast for fiscal year 2017 and expects a currency-adjusted increase in DBP sales of between 5 and 10 percent. In the A&N segment, the company expects a currency-adjusted decline of 2 to 6 percent compared to the previous year. The Group also expects a high operating profit margin (EBITA, non-IFRS) of 30.5 to 31.5 percent.


2017 Outlook

 

 

 

 

 

FY 2016
(in € millions)

FY 2017 Outlook
(as of January 26, 2017)

Q1 2017
(as of March 31, 2017)

 

Product Revenue
Digital Business Platform

441.4

+5% to +10%*

+9%*

 

Product Revenue
Adabas & Natural

233.9

-2% to -6%*

-29%*

 

Operating profit margin
(EBITA, non-IFRS)**

31.2%

30.5% to 31.5%

27.3%

 

 

 

 

 








*     At constant currency
**    Before adjusting for non-operating factors (see non-IFRS results)

 

A conference call for financial analysts and media representatives will take place on Friday, April 21, 2017 at 9:30 am CEST (08:30 BST). For dial-up information, visit the company's website at www.SoftwareAG.com/investors.


Key Figures

Key Figures as of March 31, 2017

in € millions(unless otherwise stated)

Q1 2017

Q1 2016

ras %

ras % acc*

Revenue

205.9

206.2

0%

-3%

DBP business line

105.6

94.5

12%

9%

thereof licences

38.4

32.7

18%

15%

thereof maintenance

67.2

61.9

9%

6%

A&N business line

48.0

63.5

-24%

-29%

Consulting business line

52.3

48.0

9%

7%

Operating EBITA (non-IFRS)

56.3

59.1

-5%

 

as % of revenue

27.3%

28.7%

-140 bp 

 

DBP segment earnings

30.0

23.8

26%

23%

Segment margin

28.4%

25.1%

+330 bp

 

A&N segment earnings

31.0

44.8

-31%

-36%

Segment margin

64.6%

70.3%

-570 bp

 

Net income (non-IFRS)

37.3

38.7

-4%

 

Earnings per share (non-IFRS)**

0.49

0.51

-4%

 

Operating cash flow

61.7

61.9

0%

 

CapEx***

18.4

1.4


 

Free cash flow

43.3

60.5

-28%

 

Balance sheet

Mar. 31, 2017

Dec. 31, 2016

 

 

Total assets

1,961.9

1,957.2

 

 

Cash and cash equivalents

362.3

374.6

 

 

Net liquid assets / (net debt)

75.0

73.1

 

 

Employees (FTE)

4,486

4,471

 

 

 

 

 

 

 

*     acc = at constant currency
**    Based on weighted average shares outstanding (basic) Q1 2017: 75.9m / Q1 2016: 76.2m
***  Cash flow from investing activities adjusted for acquisitions and investments in debt instruments


About Software AG

The digital transformation is changing enterprise IT landscapes from inflexible application silos to modern software platform-driven IT architectures which deliver the openness, speed and agility needed to enable the digital real-time enterprise.

Software AG offers the first end-to-end Digital Business Platform, based on open standards, with integration, process management, in-memory data, adaptive application development, real-time analytics and enterprise architecture management as core building blocks. The modular platform allows users to develop the next generation of application systems to build their digital future, today.

With over 45 years of customer-centric innovation, Software AG is ranked as a leader in many innovative and digital technology categories. Software AG has more than 4,500 employees, is active in 70 countries and had revenues of €872 million in 2016.

Learn more at www.softwareag.com.

Contact

Software AG

Byung-Hun Park

Senior Vice President, Corporate Communications

Uhlandstr. 12

64297 Darmstadt

Germany

Phone: +49-6151-92-2070

Mobile: +49-151-64-911-317

Byung-Hun.Park@softwareag.com

http://www.softwareag.com

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