Software AG posts a significant increase in profit and license revenue
Darmstadt, 4/27/2004
Software AG (TecDAX: SOW) announced its financial results* for the first quarter ending March 31st , 2004. Software AG announced operating results (EBIT) of €15.1 million, an increase of 89%, compared to Q1 2003. Profit before tax of €15.8 million was posted compared to a loss of €23.1 million in Q1 2003 which included restructuring charges. Net income after tax was €9.8 million compared to a loss of €14.8 million in Q1, 2003. License revenues rose by 6% to €23.3 million. Total revenues in the first quarter of 2004 were €95.7 million, compared to €103.1 million in Q1, 2003. This represents a reduction of 7%, largely caused by the strong Euro and a decline in revenues from project services.
View detailed Q1 results here.
At today’s press conference in Frankfurt, Karl-Heinz Streibich, Software AG’s CEO, summarized first-quarter developments: “These results are an excellent start to reaching our 2004 objectives.” Both enterprise transaction license revenue and operating results (EBIT) came in above market expectations. This renewed vote of confidence by customers in Software AG’s Enterprise Transaction System products and the improved company cost structure are a direct result of the rightsizing activities of 2003.
Revenue
Software AG’s first-quarter product revenues remained strong.
Reported revenues were €67.4 million (compared to €69.2 million in
Q1, 2003). This represented a 3% rise at constant currency
rates. License revenue showed an increase of 6% to €23.3
million (€21.9 million in 2003). Maintenance remained stable net of
currency affects contributing €44.1 million (€47.3 million in
2003).
The license revenue changes shown by the two business lines differed. License revenue for Enterprise Transaction Systems grew by 31% to €17.8 million (€13.6 million in 2003). This represents further major customer investment in the company’s classic product lines Adabas and Natural, demonstrating the stability of the customer base and the success of the ‘Customer First’ program initiated in 2003.
While customers are making significant investments in existing systems there is still some reluctance to invest in new technology. License revenue for the XML Integration business line was €3.8 million in Q1 (€6.1 million in 2003). With the launch of XML Integration packages in Q2, an improvement in license revenue is expected during the course of the year.
Integration sales should also drive project services revenue posted at €28 million in the first quarter of 2004 (€33.6 million in 2003). Excess market capacity has put severe pressure on prices, resulting in an adjustment to Software AG’s services capacity during 2003.
Regional revenues affected by exchange
rates
License revenues increased in three of Software AG’s business
regions, Northern Europe/Asia posted a 33% increase, Central and
Eastern Europe a 21% increase and Southern and Western Europe an
19% increase.
The effects of foreign exchange rates were most pronounced in the
Americas region with revenues of €27.4 million in Q1 (€33.4 million
in 2003).
Income
The restructuring program implemented in fiscal 2003 has led to
lower expenditure. Cost of sales was reduced by €6.1 million and
operating expenses were €10.6 million lower than in Q1 2003. As a
result, Software AG posted operating EBIT up by 89% to €15.1
million (compared with an operating EBIT of €8.0 million in Q1
2003).
The results will be further positively affected in the second
half of 2004. The consolidation of R&D will then further reduce
operating expenses by €10 million. Software AG has no bank
debts and reported financial income of €0.7 million. Profit before
tax was €15.8 (compared to a loss of €23.1 million in Q1, 2003
which included a restructuring charge €31.8 million). There were no
extraordinary income or expenses in Q1, 2004. Net income was
€9.8, (against -€14.8 in Q1, 2003), which represents earnings per
share of €0.36.
Balance sheet
Liquid assets increased to €83.1 million (€74.2 million in
2003). Furthermore, liquid assets will be bolstered in Q2 by
the sale of SAP SI shares for €26 million which will also result in
an extraordinary profit of €24 million. Fixed assets of €256.6
million were posted (€250.9 million in 2003) including goodwill of
€176.5 million. Total assets increased to €523.5 million (€509.1
million in 2003), and the shareholder’s equity to €286.8 million
(€269.2 million in 2003). The equity-to-total-assets ratio rose
from 52.8% to 54.8%, the highest since the initial public offering.
The free cash flow was €9.4 million (€9.7 million in 2003) despite
a €6.4 million increase in cash-out for restructuring. The
effective headcount dropped between the 31st of March 2003 and the
31st of March 2004 by 373 or 13%.
Business Outlook
The focus for 2004 is on stabilizing revenue and improving the
company cost structure. Based on Q1 operating results and license
revenues the Executive Board believes that the company is well on
track to achieving both goals.
The concentration on two business lines will continue to result in core business license revenue balancing out the revenue consolidation from non-strategic fields. Allied with the further reduction in operating expenses, the company therefore anticipates a significant increase in operating income by approximately 25%.
Operating margins should also improve. A lower cost base, sustainable strong cash flow, and the sale of SAP SI shares will further strengthen the corporate financial structure. Earnings per share are expected to be in the region of €2.50-€2.60.
*IFRS & HGB
These financial results are being presented under IFRS. Previously,
Software AG has presented financial information under the German
accounting regulations HGB. All 2003 figures have been restated to
comply with IFRS and may differ from previously stated or published
financial accounts.
Full details of all changes will be published in the notes to the
quarterly financial statements.
View detailed Q1 results here.
Software AG is one of Europe's largest system software providers and a global provider of high-performance databases, system software and services. This technology enables customers to run mission-critical, cross-platform applications, simplify the exchange of data between disparate systems and integrate cutting-edge Web applications into traditional IT architectures. Respected for technology leadership and professional services expertise, Software AG develops products that fully support the XML (eXtensible Markup Language) standard. Founded in 1969 and headquartered in Darmstadt, Germany, Software AG is represented in 59 countries with more than 2,500 employees. Software AG achieved 422 million euros in total revenue in 2003 and is listed on the Frankfurt Stock Exchange (TecDAX, ISIN DE 0003304002 / SOW).
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Contact: Software AG Susanne Eyrich VP Corporate Communications Uhlandstr.12 64297 Darmstadt Germany Tel: +49 6151 92-1511 Mobile: + 49 170 4522702 Fax: +49 6151 92-1621 press@softwareag.com http://www.softwareag.com |
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