Software AG’s third quarter net income doubles, license revenue up 10 percent
Darmstadt, 10/28/2004
Darmstadt, Germany, October 28, 2004. Software AG (TecDAX: SOW) announced its financial results for the third quarter ending September 30th, 2004. License revenue and profit again showed significant increases over Q3, 2003. License revenue rose by 10 percent to EUR 25.1 million. Total revenues were EUR 96.6 million, stable net of currency effects. The company reported EBIT of EUR 21 million, an increase of 34 percent. Income before tax rose to EUR 21.9 million compared to EUR 16.4 million in Q3, 2003. Net income after tax rose 95 percent to EUR 12.7 million.
View detailed Q3 results here.
Revenue
Software AG’s third-quarter product revenues remained stable at EUR
71.1 million (EUR 71.2 million in Q3, 2003), a rise of 3 percent at
constant currency rates. License revenue showed an increase of 10
percent to EUR 25.1 million (EUR 22.9 million in 2003). Maintenance
dropped by 1 percent net of currency effects contributing EUR 46.0
million (EUR 48.3 million in 2003).
Project services revenue of EUR 25.2 million was posted in the third quarter (EUR 27.1 million in 2003) reflecting continuing weakness in the German market and seasonal factors in Southern Europe.
Both business lines reported license revenue growth, Enterprise Transaction Systems by 10 percent to EUR 17.5 and XML Business Integration by 2 percent to EUR 5.2 million.
License revenues showed large gains in the regions Southwest Europe and Central and East Europe, 56 percent and 61 percent respectively. The Northern Europe/Asia Pacific region posted a 14 percent decrease in license revenue and the Americas region an 11.8 percent decrease net of currency effects.
Income
The company posted operating results (EBIT) of EUR 21 million, a 34
percent increase on Q3, 2003. There was neither extraordinary
income nor expenses. The company reported profit before tax of EUR
21.9 million (compared to EUR 16.4 million in Q3, 2003). Net income
was EUR 12.7 million, (against EUR 6.5 million in Q3, 2003), which
represents earnings per share for the third quarter of EUR 0.47,
(EUR 0.24 in Q3, 2003).
Software AG has cash reserves of EUR 110.2 million, which is 21 percent of total assets, and continues to have no bank debts.
Q3 Highlights
The highlights in the third quarter include:
- Expansion of Software AG’s partner network
- The favorable customer response to the Enterprise Transaction Systems productivity packages and Adabas SQL Gateway
- Successful direct entry into the Chilean market
Software AG continued to develop its strategic alliance network with the announcement of the partnership with Novell Inc. promoting XML based products on Suse Linux. Major Q3 customer successes include the implementation of the community portal by Dorset County Council (UK) on Suse Linux in partnership with Sun Microsystems. The same partnership is helping Tewkesbury Borough Council comply with the UK Government’s electronic service legislation.
The partnership with Shanghai 5A Technology Development Co. Ltd resulted in its first XML Business Integration sale to the Shanghai Government in the People’s Republic of China.
The Enterprise Transaction System productivity and performance packages and the Adabas SQL Gateway generated over EUR 1 million in revenue in their first full quarter.
The direct entry into the Chile market resulted in immediate successes in both the Government and Healthcare markets including the Chilean Post Office and a deal including five hospitals and seven medical emergency centers.
Investments
Foreign Direct Investments include the establishment of Software AG
Chile and the expansion of Software AG South Africa. The
investments in South America and the Research & Development
investments in productizing local Spanish solutions were
significant factors in the drop in EBITA for region South and West
Europe.
Developments year-to-date
Total revenue remained stable at EUR 298.6 million for the first
nine months of 2004, (-2 percent including currency effects and an
increase of 1 percent net of currency effects). Total product
revenue (license and maintenance) grew by 1 percent to EUR 214.6
million, (4 percent net of currency effects), with license revenue
up 13 percent to EUR 77.7 million.
Compared to the same period in 2003, administration costs were down by 18 percent, marketing and sales costs by 12 percent and research and development costs by 22 percent. Software AG posted EBIT of EUR 84.9 million (EUR 9.4 million in first nine months of 2003). This includes extraordinary income of EUR 24.5 in the second quarter from the sale of Software AG’s stake in SAP Systems Integration AG (SAP SI).
Strong Cash Flow and Balance Sheet
Organic cash flow rose to EUR 42.4 million (EUR 40.9 million for
the first nine-months of 2003), that is 14.2 percent of total
revenue. This increase is despite nearly doubling cash-out for
restructuring and does not include EUR 26 million cash received
from the sale of financial assets. The free cash flow doubled to
EUR 11.4 million in the first nine months (EUR 5.7 million in the
corresponding period in 2003).
Liquid assets increased to EUR 110.2 million (EUR 74.8 million in 2003). Fixed assets of EUR 228.8 million were posted (EUR 247.8 million in 2003). The drop in fixed assets was due to the sale of Software AG’s interest in SAP SI in Q2, 2004.
Total assets increased to EUR 515.3 million (EUR 494.2 million in 2003), and the shareholder’s equity to EUR 312.7 million (EUR 262.2 million in 2003). The equity-to-total-assets ratio rose to 61 percent, the highest since the initial public offering.
The effective headcount dropped between the 30th of September 2003 and the 30th of September 2004 from 2,743 to 2,445.
Business Outlook
Software AG expects moderate customer investment in the short-term
leading to single digit revenue growth in 2005 with double digit
growth in the mid-term. The company expects growth to be achieved
maintaining current margins. Free Cash Flow of approximately EUR 2
per share is expected.
The forecast for 2004 remains unchanged. Earnings per share will
be in the range of EUR 2.75 to EUR 2.85 (including EUR 0.88 for the
sales of the company interest in SAP SI).
*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 Q3 results here.
Software AG provides a real-time single view of strategic business information by integrating applications and systems, in addition to modernizing mainframe and open system IT environments. Its offerings are based on the product families Adabas, Natural, EntireX and Tamino. Around 2,500 employees in 59 countries support the mission-critical systems of 3,000 customers around the world. The company maintains five R&D facilities across three continents. Founded in 1969, Software AG today is Europe’s largest and most established systems software provider. It is headquartered in Darmstadt, Germany and is listed on the Frankfurt Stock Exchange (TecDAX, ISIN DE 0003304002 / SOW). In 2003 Software AG posted 420 million euros in total revenue.
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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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