Software AG Achieves Double-Digit Growth in Largest Business Line
*BPE license revenue up 19 percent
*Strategic growth initiatives show positive effects
*LongJump acquisition bolsters cloud offering
*Full-year forecast confirmed
RESTON, Va. -- April 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.
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, high-margin license and maintenance revenue.
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 and 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.
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).
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.
Key Figures for Q1 2013
Change in %
in € thousands Q1/2013 Q1/2012 Change in % (at
BPE licenses 41,919 35,679 +18 +19
BPE maintenance 48,426 44,876 +8 +10
BPE product revenue 90,345 80,555 +12 +14
as % of total revenue 40.2 31.6
ETS product revenue 64,276 76,333 -16 -14
as % of total revenue 28.6 30.0
Product revenue 154,621 156,889 -1 +1
(Software AG products)
Consulting 70,085 97,382 -28 -27
as % of total revenue 31.2 38.3
Total revenue 224,910 254,554 -12 -10
Sales & marketing 72,811 59,274 +23
Research & development 26,220 24,237 +8
EBIT* 41,628 54,820 -24
as % of total revenue 18.5 21.5
Net income 27,213 35,863 -24
Earnings per share in € 0.32 0.41 -22
Free cash flow 62.7 59.1 +6
Total assets 1,855.1 1,771.9
Cash and cash 422.8 315.7
Net liquidity 60.8 49.6
Equity ratio in % 56 60
Employees (FTE) 5,300 5,419
*EBIT = Consolidated net income + income taxes + other taxes + financial
About Software AG
Software AG (FRA: SOW) helps organizations achieve their business objectives
faster. The company's big data, integration and business process technologies
enable customers to drive operational efficiency, modernize their systems and
optimize processes for smarter decisions and better service. Building on over
40 years of customer-centric innovation, the company is ranked as a leader in
15 market categories, fueled by core product families Adabas and Natural,
ARIS, Terracotta and webMethods. Software AG has around 5,300 employees in 70
countries and had revenues of €1.05 billion in 2012. Learn more
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