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Press Release

Delays in large-deal projects slows license growth - Target operating margin: 26 to 28 percent

Darmstadt, Germany, 7/24/2014

Software AG (Frankfurt TecDAX: SOW) today reported its business results for the second quarter 2014. It had already informed the market about its Q2 preliminary financial figures on 14 July per regulatory pre-release. These preliminary numbers are now confirmed.

The Business Process Excellence (BPE) division had revenues of €84.6 million (previous year: €91.4 million) in the second quarter. License revenue with €32.7 million (previous year: €42.8 million) was under the previous year’s level. Maintenance revenue, however, rose in the second quarter to €51.9 million (previous year: €48.6 million), an operating growth by 11 percent.

The traditional database business Enterprise Transaction Systems (ETS) was in line with expectations, with sales of €55.9 million (previous year: €75.8 million). License revenue amounted to €17.4 million (previous year: €32.6 million). ETS maintenance revenue was €38.3 million euros (previous year: €43.1 million).

The Consulting division reported revenues of €55.5 million (previous year: €70.5 million). The main reason was the deconsolidation of the SAP service activities. After the sale of the business focused on third-party solutions, Software AG will concentrate exclusively on the development, distribution and service of its own products.

The operating profit (non-IFRS) decreased in the second quarter to €45.1 million (previous year: €58.7 million); this corresponds to an operating margin of 23 percent. The reported EBIT (IFRS) was impacted by one-off effects from the deconsolidation of the SAP consulting business and is €25 million (previous year: €44.4 million). Net income after taxes reached €14.2 million (previous year €28.8 million). Accordingly, earnings per share were €0.18 (previous year €0.34).

As of 30 June, Software AG’s balance sheet totaled to €1,730.7 million (31. Dec. 2013: €1,996.9 million). The company’s equity ratio improved to 53 percent (31. Dec. 2013: 48 percent). The free cash flow in the first half of 2014 was €66.3 million (previous year: €77.3 million).

Outlook
For the full year 2014, the Group now expects BPE revenues to remain approximately at the previous year’s level. Revenue forecast in the traditional database business ETS remains unchanged at a reduction of -16 percent to -9 percent (net of currency effects). The company expects an operating margin (non-IFRS) of 26-28 percent for the full year 2014 (previous year: 26.8 percent).


Key Figures for Q2 2014 (IRFS, unaudited)

in € millions

Q2/2014

Q2/2013

Change in % (at constant currency)

Change in % (rounded)

BPE licenses

32.7

42.8

-22

-24

BPE maintenance

51.9

48.6

+11

+7

BPE revenue

84.6

91.4

-5

-7

as % of total revenue

43

38

 

 

 

 

 

 

 

ETS licenses

17.4

32.6

-47

-47

ETS maintenance

38.3

43.1

-6

-11

ETS revenue

55.9

75.8

-24

-26

as % of total revenue

29

32

 

 

Product revenue (Software AG products)

141.3

169.1

-14

-16

Consulting

55.5

70.5

-20

-21

related to BPE/ETS products

47.2

50.4

-4

-6

as % of total revenue

28

30

 

 

Total revenue

196.0

237.7

-15

-18

Sales & marketing expenses

64.2

73.9

 

 

Research & development expenses

26.6

26.2

 

 

EBIT*

25.0

44.4

 

 

Operating result (non-IFRS)**

45.1

58.7

 

 

Net income

14.2

28.8

 

 

Earnings per share (in €)

0.18

0.34

 

 

Free cash flow

18.5

9.6

 

 

* = consolidated net income + income tax + other tax + financial result
** = EBIT adjusted for amortization on acquisition-related intangible assets, reduction of acquisition-related product revenue by purchase price allocation, other acquisition effects, share-based payment and restructuring/severance payments, operating result from discontinued operations (IDS) from Q2


Key Figures for H1 2014 (IRFS, unaudited)

in € millions

H1/2014

H1/2013

Change in % (at constant currency)

Change in % (rounded)

BPE licenses

76.5

84.7

-6

-10

BPE maintenance

103.3

97.1

+11

+6

BPE revenue

179.8

181.8

+3

-1

as % of total revenue

44

39

 

 

 

 

 

 

 

ETS licenses

30.7

53.6

-40

-43

ETS maintenance

76.0

86.3

-7

-12

ETS revenue

107.0

140.3

-20

-24

as % of total revenue

26

30

 

 

Product revenue (Software AG products)

288.7

326.2

-8

-11

Consulting

118.0

140.6

-15

-16

related to BPE/ETS products

95.9

99.5

-1

-4

as % of total revenue

29

30

 

 

Total revenue

404.9

462.7

-9

-12

Sales & marketing expenses

133.6

146.8

 

 

Research & development expenses

53.8

52.4

 

 

EBIT*

55.5

86.0

 

 

Operating result (non-IFRS)**

88.1

110.7

 

 

Net income

32.7

56.0

 

 

Earnings per share (in €)

0.41

0.66

 

 

Free cash flow

66.3

72.3

 

 

 

June 30, 2014

Dec. 31, 2013

 

 

Total assets

1,730.7

1,996.9

 

 

Cash and cash equivalents

253.9

450.0

 

 

Equity ratio as %

53

48

 

 

Employees (FTE)

4,606

5,328

 

 

* = consolidated net income + income tax + other tax + financial result
** = EBIT adjusted for amortization on acquisition-related intangible assets, reduction of acquisition-related product revenue by purchase price allocation, other acquisition effects, share-based payment and restructuring/severance payments, operating result from discontinued operations (IDS) from Q2



About Software AG
Software AG (Frankfurt TecDAX: 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 fifteen market categories, fueled by core product families Adabas and Natural, ARIS, Terracotta, webMethods, Alfabet and Apama. Software AG has more than 4,600 employees in 70 countries and had revenues of 973 million in 2013. Learn more at www.softwareag.com

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Software AG | Uhlandstraße 12 | 64297 Darmstadt | Germany

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Contact:
Software AG
Byung-Hun Park
Head of Corporate Communications
Uhlandstrasse 12
64297 Darmstadt
Germany
Tel: +49 6151 92-2070
Mobile: +49 151 64 911 317
byung-hun.park@softwareag.com
http://www.softwareag.com
or:
Software AG
Barbara Koegler
Senior Vice President Corporate Communications
Uhlandstrasse 12
64297 Darmstadt
Germany
Tel: +49 6151 92-1574
press@softwareag.com
http://www.softwareag.com