2. Financial performance

2/2 previous

EBIT improves again significantly
Software AG increased EBITA by 48 percent in the third quarter to €52.3 million (Q3 2007: €35.3 million). EBIT grew from €32.4 million in Q3 2007 to €48.7 million, an increase of approximately 50 percent. The EBIT margin reached a record 27 percent compared to 20.5 percent in the third quarter of 2007. As a result, we raised our projection for full-year 2008 and are now calling for an EBIT margin of between 24 and 25 percent.

Research and development expenses rose by approximately 5 percent to €19.4 million compared to €18.4 million in Q3 2007. The increase was related to the successful integration of R&D departments and the corresponding synergy effects as well as the outsourcing of R&D services to low-wage countries. Marketing and sales expenses amounted to €42.2 million. This was approximately the same as in the previous year due to foreign currency effects (Q3 2007: €42.5 million).

Net income and earnings improve again
Profit after tax saw another significant increase in the third quarter, rising 61 percent to €31 million compared to €19.2 million in Q3 2007. The decline in the tax rate from between 36 and 37 percent to between 33 and 34 percent also contributed to the improvement of net income. Earnings per share improved from €0.67 to €1.08 in the third quarter. As of September 30, 2008, 28.6 million shares were in circulation (excl. dilutive shares), an increase of nearly 180,000 shares year-on-year.

Nine-month figures are solid basis for full-year 2008
The figures for the first nine months, along with orders on hand for the fourth quarter, support our current forecast for fiscal 2008 as a whole. During the first nine months of 2008, net income of Software AG rose by 17 percent to €508.2 million, up from €434.7 million in the previous year. Licensing revenue rose by 14 percent to €184.5 million in the same period (September 30, 2007: €161.6 million). Maintenance revenues increased by 25 percent, from €153.5 million in the first nine months of 2007 to €191.4 million. Due to consolidations, the Professional Services business increased by 12 percent in the first nine months to €130.5 million (September 30, 2007: €116.6 million).

The substantial rise in product business in particular had a positive impact on operating earnings: Earnings before interest and taxes (EBIT) improved by 34 percent to €125.6 million (September 30, 2007: €94.0 million). The EBIT margin rose from 21.6 percent to 24.7 percent. Operating cash flow was also strong at €96.3 million, an increase of 107 percent year-on-year.

KEY EARNIINGS INDICATORS

in € million

Q3|2008

Q3|2007

Change
in %

January 1 -
Sept. 30,
2008
January 1 -
Sept. 30,
2007
Change
in %
EBIT 48.7 32.4 50.3 125.6 94 33.6
EBITA 52.3 35.3 48.2 136.8 98.3 39.2
Financial income/expense, net -1.6 -2.0
-4.4 2.5
Earnings before taxes 47.1 30.4 55.0 121.2 96.5 26.0
Net income 31 19.2 61.5 80.6 61.5 31.1
Earnings per share in Euro (basic) 1.08 0.67 61.0 2.82 2.16 31.0