Software AG reports further profitable growth in the third quarter 2009
- Revenue up 19% to €214 million in Q3
- Operating results (EBIT) up 16 percent in Q3 to €56 million
- EBIT margin of 26.4 percent in the third quarter
- Third quarter net income up 23 percent to €38 million
- Free Cash Flow up 37 percent to €47 million
- Earnings per share up 25 percent from €1.08 to €1.35
- Software AG raises its 2009 outlook: Revenue in the €835-€845 million range, EBIT margin between 25 and 25.5 percent
Darmstadt, Germany, 05/11/2009
Software AG (Frankfurt TecDAX: SOW) again reported an increase in revenue and earnings for the third quarter of 2009. Group revenue grew during the quarter by 19 percent year-on-year to €214 million. In the same period, product revenue increased by 4 percent to €143 million and Consulting by 66 percent to €70 million. Operating results (EBIT) grew by 16 percent to €56 million and net income to €38 million, up 23 percent. The EBIT margin for the third quarter at 26.4 percent closely matched the record 27 percent reported in Q3, 2008. Earnings per share in the quarter rose 25 percent to €1.35 (€1.08 in 2008). The consolidation of IDS Scheer, as of August 20 2009, had a positive net impact on revenue; €39 million and net income; €0.4 million.
Software AG continued its stable performance despite the persistently difficult economic environment. The third quarter did however show the normal business development seasonal effects and this indicates an overall improvement in market outlook.
Total revenue for Software AG rose 19 percent to €214 million in the third quarter of 2009 over the same period in 2008 (€180 million). Total product revenue was up 4 percent to €143 million (€138 million in 2008) and Consulting at €70 million (€42 million in 2008) up 66%, reflecting a significant contribution from IDS Scheer.
Total revenue from the data management business ETS amounted to €99 million, marginally under the third quarter 2008 figure of €101 million, which included a major contract in Brazil. Product revenue was stable at €83.1 million (Q3 2008: €83.9 million) reflecting further strong growth in Brazil and continuing customer investments in their running businesses.
The webMethods business line further raised the Group EBIT margin in Q3 2009; raising its segment contribution by 7% to €29.8 million (28 million in 2008) through increased sales efficiencies. Q3 product revenue, down by 8% compared to the previous year’s quarter, reflects the difficult market conditions for new projects. A sequential comparison however, with the previous quarter (Q2 2009), shows a normal seasonal impact on license revenue, signaling an encouraging improvement in the business environment. With a continuing level of R&D investment and the potential cross-selling opportunities offered by over 7,000 customers of IDS Scheer, the webMethods business line will significantly benefit from a future upturn in business sentiment.
“We are proud of our performance in the face of a continuing difficult market”, said Software AG CEO, Karl-Heinz Streibich. “We continue to increase our efficiency, protecting and improving our profitability. Recent large and strategic customer deals give grounds for cautious optimism as does the significant cross-selling opportunities presented by the acquisition of IDS Scheer.”
Earnings and cash flow
Software AG standalone reported a 11 percent drop in total operating costs in Q3 2009. This significantly contributed to the increase in EBIT to €56.0 million, an increase of 15 percent (€48.6 million in 2008) and a margin of 32 percent. This enabled the consolidated company to absorb the acquisition costs and consolidation effects for the quarter while keeping the EBIT margin at the previous year’s level.
The EBIT of the consolidated company at €56.4 million represents a 16 percent increase over 2008 (€48.7 million) delivering a 25 percent increase in earnings per share of €1.35 (€1.08 in 2008).
Free cash flow performed very well in the third quarter, rising 37 percent to €47.0 million from €34.2 million in the third quarter of 2008. Free cash flow for the first nine months of 2009 reached €119.8 million – a 31 percent increase compared to the figure for the first nine months of 2008.
“In the past quarter we were able to reap the benefits of the cost measures we launched in December 2008. We were able to maintain our EBIT margin at the targeted high level in the third quarter and for the first nine months, increase our EPS by 25 percent and our Free Cash Flow by 37 percent. Our sustainable business model has proven itself in the crisis. Building on this financial strength, we will now focus on realizing the business opportunities presented by the acquisition of IDS Scheer and the growth potential of the Business Process Excellence market”, said Arnd Zinnhardt, CFO of Software AG.
As of September 30, 2009, Software AG had 6,086 employees (full-time equivalents) compared with 3,466 in the previous year. The number of employees in Germany was 2,196 (Q3 2008: 759), and the number of employees outside of Germany 3,140 (Q3 2008: 2,707). These numbers reflect the acquisitions of ÍDS Scheer which resulted in significant growth in employee headcount in the third quarter. A standalone comparison of Software AG headcount would show a moderate growth of 4 percent year-on-year.
IDS Scheer acquisition
Software AG’s acquisition of IDS Scheer AG, Germany’s third-largest software company, is on track. Following approval by the relevant supervisory bodies and a six-week acceptance period for shareholders, Software AG had acquired more than 90 percent of IDS Scheer AG shares. Karl-Heinz Streibich and Arnd Zinnhardt have also assumed positions on the IDS Scheer AG supervisory board. The planned next step is a domination and profit transfer agreement.
Revised forecast for 2009
Originally, Software AG’s forecast for the full year anticipated an increase in revenue of between 4 and 8 percent and an EBIT margin of between 24.5 and 25.5 percent. Following the acquisition of IDS Scheer the EBIT margin forecast has been raised to the 25 to 25.5 percent range and the revenue forecast to between €835 and €845 million.
|Financial statements in accordance with IFRS|
- Product revenue
- Consulting revenue
- Revenue ETS business division
- Revenue webMethods business division
EBIT margin (in %)
Earnings per share (in €)
Free cash flow
Software AG | Uhlandstraße 12 | 64297 Darmstadt | Germany
Software AG is the world’s largest independent provider of Business Infrastructure Software. Our 4,000 global enterprise customers achieve business results faster by modernizing, integrating and automating their IT systems and processes. As a result, they rapidly build measurable business value and meet changing business demands. Based on our solutions, organizations are able to liberate and govern their data, systems, applications, processes and services – achieving new levels of business flexibility.
Our leading product portfolio includes solutions for high performance data management, developing and modernizing applications, enabling service-oriented architecture, and improving business processes. By combining our technology with industry expertise and best practices experience, our customers improve and differentiate their businesses – faster.
Software AG has 40 years of global IT experience and over 3,600 employees serving customers in 70 countries. The company is headquartered in Germany and listed on the Frankfurt Stock Exchange (TecDAX, ISIN DE 0003304002 / SOW). Software AG posted total revenues of €721 million in 2008.
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