• BPE license revenue up 19 percent
• Strategic growth initiatives show positive effects
• LongJump acquisition bolsters cloud offering
• Full-year forecast confirmed
Darmstadt, Germany, 4/25/2013 - Software AG (Frankfurt TecDAX: SOW) reported license
revenue growth of 19 percent (at constant currency) in its largest business line, Business
Process Excellence (BPE), in the first quarter of the current fiscal year. These results, clearly
outperforming the market, illustrate that the company's expansion of sales, begun last year,
continue to have a positive impact. In addition to its quarterly results, Software AG
announced its acquisition of LongJump, a U.S. based firm headquartered in California.
LongJump offers a cloud-based software platform that enables customers to independently
develop enterprise applications. In order to further fuel dynamic growth, Software AG plans
to drive its growth initiatives with targeted investments in the BPE business line during the
course of the current fiscal year. The company's full-year forecast for 2013 has been
confirmed.
Software AG CEO, Karl-Heinz Streibich stated, "Our first-quarter results confirm that we are
exactly on track with our strategic growth initiatives. There is unprecedented demand for
products around the four technological megatrends: Big Data, Cloud, Mobile and Social
Collaboration. Our BPE offering addresses precisely what our customers need and helps them
successfully implement their digitization strategies. Additionally, we are enhancing organic
growth through selective acquisitions."
Business line development
The BPE business line made the largest contribution to total revenue with growth of about 14
percent (at constant currency) to total €90.3 million (2012: €80.6 million). The business line's
license revenue went up 19 percent (at constant currency) to €41.9 million (2012: €35.7 million).
With these results, the company clearly outperformed its competitors which should lead to an
increase of its market share in the period under review. This dynamic development verifies the
impact of strategic growth measures—including the expansion of the company's sales force in
specific markets—introduced last year. Based on its project pipeline, Software AG is optimistic
about upcoming quarters and expects BPE license revenue to continue to rise over the course of
the year.
The traditional Enterprise Transaction Systems (ETS) database business generated €64.5 million
(2012: €76.6 million) in the first quarter. The expected decline in the current year is due to a
weaker cycle of contract renewals. Because the ETS products Adabas-Natural are a key
technology to a large customer base, Software AG anticipates the division's performance to
improve during the second half of 2013.
The Consulting business line, which comprised the services of BPE, ETS and IDS Scheer
Consulting for the first time this quarter, posted revenue at €70.1 million (2012: €97.4 million).
As part of the realignment of its SAP consulting business, Software AG continues to withdraw
from unprofitable markets and to focus on process optimization for SAP applications in the
German speaking region. The sale of its North American SAP-related service activities in January
2013 was a major step in this direction.
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Software AG's total revenue for the first quarter of 2013 was €224.9 million (2012: €254.6
million) due to decreased consulting revenue. Revenue from Software AG's own products (BPE
+ ETS product revenue) at constant currency was slightly above the figure of €156.9 million from
the same quarter last year. Product sales represented about 70 percent (2012: 63 percent) of
total revenue. The revenue mix therefore further improved in favor of growth-driving, highmargin
license and maintenance revenue.
Earnings
Due to the planned increase in sales and marketing expenses, at €72.8 million (2012: €59.3
million), for addressing new high-potential markets, EBIT was €41.6 million (2012: €54.8 million).
Net income after taxes totaled €27.2 million (2012: €35.9 million).
Software AG's equity ratio declined from 60 percent (Dec. 31, 2012) to a still very high 56
percent as of March 31, 2013 due to the ongoing successful share buy-back program. Software AG
again reported net liquidity as of March 31, 2013 with a cash surplus (cash less financial
liabilities) of €60.8 million (Dec. 31, 2012: €49.6 million).
CFO Arnd Zinnhardt stated, "We invested in organic growth and also continued to accumulate
liquidity, as planned, in the first quarter. In addition, we used free cash for our current share
buy-back program. Even after acquiring LongJump, we will keep our options open for further
acquisitions that will enhance our portfolio and accelerate Software AG's growth."
Acquisition of LongJump
Software AG today announced its acquisition of LongJump, a U.S. based company. It was founded
in 2003 and has its headquarters in Santa Clara, California as well as a research & development
center in Indore, India.
LongJump serves a customer base of more than 220 international companies, offering them a
digital platform that enables users to create cloud-based applications independently, easily,
quickly and, most importantly, without the need for help from their IT department. The demand
for platforms such as this to efficiently develop applications internally is increasing steadily as
enterprises become digital.
Software AG is expanding its cloud expertise and extending its own cloud-ready product offering
with the acquisition of LongJump. At this year's CeBIT trade show in March Software AG
announced that it would gradually begin offering its product portfolio as Software-as-a-Service
from the cloud.
Employees
As of March 31, 2013 Software AG had 5,300 (Dec. 2012: 5,419) employees, of which 1,176 (Dec.
2012: 1,131) worked in Sales and Marketing and 901 (Dec. 2012: 887) in Research and
Development. The total number of employees in Germany was 1,727 (Dec. 2012: 1,768).
Outlook 2013
Software AG expects the positive business development to continue and confirms the forecast
which was released with the 2012 full-year results on January 29, 2013. Accordingly, the
company expects an increase in BPE revenue between 16 and 22 percent (at constant currency)
for fiscal year 2013. Revenue for the traditional ETS database business is likely to shrink between
4 and 9 percent (at constant currency), which will be more than offset by the targeted BPE
growth. Taking into account the additional investments for the expansion of sales and marketing,
earnings per share should be between €1.70 and €1.80.
Posted by C. d'Adesky