Software AG increases operating income (EBIT) by 19% to €18 million in first quarter 2005 on strength of higher revenues and effective cost control
Darmstadt, 4/28/2005
Software AG (Frankfurt, SOW) today announced its results for the first quarter ended March 31, 2005. Operating income (EBIT) rose to €18 million, an increase of 19% over the €15.1 million for the corresponding period of 2004. The operating margin (EBIT as a percentage of revenue) for the first quarter was 18%, an increase of more than two percentage points over the 16% margin recorded for the year-ago period. The improvement in operating income was driven by higher revenues, which rose by 5% (or 6% on a currency adjusted basis) to €100.3 million from €95.7 million for the year-ago period. The increase in revenues resulted primarily from higher license revenues, most notably for the XML Business Integration line of business, which the company sees as a strategic focus for growth. In addition, a sustained focus on effective cost control allowed the company to improve its operating margin while continuing to invest in the expansion of its business.
View detailed Q1 results here.
Growth in license revenue driven by XML Business
Integration
Total license revenues for the first quarter rose to €27 million,
up 16% over the €23.3 million of the year-ago period. License
revenues for Enterprise Transactions Systems (ETS) rose by 9% to
€19.9 million, reflecting the continued strength of this business
line. License revenues for XML Business Integration, including
third party sales, increased by 52% (net of currency) to €6.9
million as a result of new product launches and intensified
marketing. This was the second quarter of double-digit license
growth for XML Business Integration, following an increase of 20%
(net of currency) in license revenues for the fourth quarter of
2004. Revenue for maintenance was €43.7 million, a decline of 1%
from the year-ago period (unchanged on a constant currency basis),
while revenue for professional services increased by 4% to €29.2
million.
Region North America/Northern Europe the most dynamic
region
The North America/Northern Europe geographical segment including
South Africa saw the most dynamic growth during the first quarter,
with revenues of €44 million, an increase of 10% from the year-ago
period. The region confirmed its role as the company’s most
important geographical market with 44% of total revenue in the
first quarter in comparison with 42% in the year-ago period.
Southern and Western Europe (with Latin America) had revenues of
€30.3 million (up 2%) while Central and Eastern Europe with Asia
recorded revenues of €26.4 million (also up 2%).
Improved operating margin through cost
control
The improvement in operating margin to 18% (up 2 percentage points
from 16% in the year-ago period) reflected the company’s continued
success in maintaining cost discipline while investing in the
expansion of the business. While ensuring cost discipline, the
company also pursued its growth strategy by introducing new
products, primarily in the XML Business Integration line of
business, entering new geographical markets, and reinforcing its
technological offering through targeted acquisitions or
partnerships. The total number of employees remained substantially
unchanged at 2,515 (in comparison with 2,512 a year ago), although
the percentage of employees outside Germany rose from 64% a year
ago to 70% in the first quarter of 2005, reflecting the company’s
focus on expanding its business geographically while managing its
cost base.
Net income and earnings per share also increase by
19%
Net income rose to €11.7 million, an increase of 19% over the
year-ago period. This represented a return on sales (ROS) of 12% in
comparison with 10% a year ago. Earnings per share were €0.43, also
up 19% over the first quarter of 2004, as there was no change in
the average number of shares outstanding.
“The results for the first quarter confirm that the value of our
business strategy, including a renewed focus on the customer, is
being recognized in the market,” said CEO Karl-Heinz Streibich. “We
are well on our way to achieving our objectives for the current
year. In addition, the improvements in our operating performance
are flowing through to our shareholders, who are seeing a
significant improvement in earnings per share.”
Strong balance sheet, sustained positive cash
flow
Total shareholders’ equity on March 31, 2005 was €336.9 million, an
increase of 17% from the year-ago period. The equity to assets
ratio rose to 62% from 55% a year ago. Cash and cash equivalents
were €134.7 million, up 62% from €83.1 million. The improvement in
the balance sheet ratios reflected the company’s sustained strong
operating cash flow which, for the first quarter of 2005, amounted
to €21.8 million, more than double the €10.7 million for the
year-ago period. The strength of the balance sheet is a critical
factor in giving the company the flexibility to pursue its
long-term business strategy.
Outlook
The company does not intend to modify its outlook for 2005 at this
time. Accordingly, Software AG continues to expect revenue growth
for the year as a whole in the range of four to six percent, net of
currency effects. The company also continues to project an
operating EBIT margin for the year as a whole between 20 and 22
percent. “We are pleased that we have succeeded in achieving our
initial objectives for 2005,” said Karl-Heinz Streibich. “Going
forward, we intend to build on these initial successes to achieve
the momentum that will carry us to our longer-term
goals.”
View detailed Q1 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, Tamino and ApplinX. 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 2004 Software AG posted 411 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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