Software AG reports continued revenue growth and margin expansion in third quarter 2005
Darmstadt, Germany, 10/28/2005
- Revenues rise by 7% to €103.7 million
- Operating income (EBIT) up by 10% to €23.1 million
- Net income increases by 20% to €15.2 million
Software AG (Frankfurt TecDAX: SOW), today announced its results for the third quarter and first nine months ended 30 September 2005. Operating income for the third quarter rose to €23.1 million, an increase of 10% over the €21.0 million for the year-ago period. The operating (EBIT) margin rose to 22.3% compared to 21.7% for the same period of 2004. The improvement in third quarter operating income was driven by sustained growth in revenues, which rose by 7.3% to €103.7 million for the period. Further enhancements to the product mix and continued discipline in managing operating expenses contributed to the margin improvement. Net income for the third quarter rose by 20% to €15.2 million, reflecting a lower tax rate for the period. Earnings per share for the third quarter were €0.55, an increase of 17% from the year-ago period.
View detailed Q3 results here.
Licensing revenue for third quarter up by
16%
Total licensing revenue for the third quarter was €29.2 million, an
increase of 16% over the €25.1 million for the year-ago period. The
growth in licensing revenue was supported by continued positive
developments in both the XML Business Integration and the
Enterprise Transaction Systems (ETS) business lines, reflecting
increasing demand from clients in connection with the modernization
of their mainframe systems and the integration of their IT
infrastructure. In the XML Integration business line, licensing
revenue with the company’s own products was €5.5 million, an
increase of 22% over the year-ago period, while third party sales
declined to €0.5 million in keeping with the decision to phase-out
this activity. For the ETS business line, licensing revenue rose to
€19.7 million, up 9% (8% at constant currencies) over the year-ago
period. Maintenance revenues for the third quarter were €45.8
million, substantially unchanged from the year-ago period (€46
million). Revenues for professional services amounted to €28.5
million, an increase of 13% from the third quarter of 2004. "The
increase in licensing revenues further validates our strategy of
focusing on the growth opportunities in XML Business Integration
while capitalizing on the sustained potential of the established
ETS business line," said CEO Karl-Heinz Streibich.
Improved operating margin while investing in
growth
The operating margin (EBIT as a percentage of total revenue) for
the third quarter was 22.3%, an increase of just over one half
percentage point from the 21.7% of the year-ago period. Total
operating expenses for the third quarter were €47.4 million, up
5.3%, less than the rate of revenue growth. As a result, operating
expenses as a percentage of revenue declined by 0.9% to 45.7% from
the year-ago period. This was achieved in spite of continuing
investments to introduce new products, enter new markets, expand
the partnership network, and strengthen sales and marketing
activities. In addition, the company acquired Casabac Technologies
GmbH, a specialist for web-enabled enterprise applications, during
the third quarter.
The total number of employees at the end of the third quarter was 2,664, an increase of 219 or 9% from the year-ago period, reflecting the company’s growth through selective hiring, mainly to enhance the sales force.
Net income and earnings per share
Net income for the third quarter was €15.2 million, up 20% from the
€12.7 million of the year ago period. Net income rose more rapidly
than EBIT as a result of an improvement in net interest income
(€1.5 million for the third quarter of 2005 compared with €0.8
million in the year-ago period) and, more especially, because of a
slightly lower effective tax rate. Earnings per share were €0.55
per share, an increase of 17% over the €0.47 per share for the
year-ago period, reflecting an increase in the number of weighted
averages shares outstanding.
Strong balance sheet and cash flow
Total shareholders’ equity at 30 September 2005 was €370.5 million,
an increase of 18% from the year-ago period. The equity to assets
ratio was 65% in comparison with 61% a year ago. The continuing
improvement in the balance sheet ratios results from the company’s
sustained net operating cash flow, which was €9.7 million for the
third quarter, substantially over the €2.6 million for the year-ago
period.
Results for the nine months
For the nine months, revenues rose by 5.3% (5.8% at constant
currencies) to €314.5 million. Operating income for the nine months
increased by 12% to €67.5 million, corresponding to an operating
margin of 21.5%. Net income for the nine months was €43.0 million
in comparison with €61.9 million for the nine months of 2004.
During the first nine months of 2004, the company realized a gain
of €24 million from the sale of its shares in SAP Systems
Integration AG. Excluding the effect of this gain, net income for
the first nine months of 2005 increased substantially over the
comparable period of 2004.
Outlook
For the year 2005, the company confirms its expectation of total
revenue growth in a corridor between 4% and 6%. Growth in licensing
revenues for the year is anticipated to be at the upper end of the
target corridor of 10% to 12% previously indicated. Maintenance
revenues will remain substantially unchanged in comparison with
2004, while service revenues are projected to increase from 8% to
10% for the year as a whole, consistent with existing guidance. “We
believe that we have a very good chance of achieving an EBIT margin
at the upper end of the target corridor of 20% to 22% that we set
for the company at the end of last year,” said Karl-Heinz
Streibich. “With respect to 2006, we have already announced our
goal of achieving revenue growth of 10%, and we will stick to this
ambitious target. We also expect to maintain an operating EBIT
margin of 21% to 23% in 2006. A disciplined focus on implementing
our long-term strategy will continue to be a hallmark of Software
AG and the underpinning of our earnings growth.”
View detailed Q3 results here.
Software AG, headquartered in Darmstadt, Germany, provides a full range of products and services to deliver a Service Oriented Architecture (SOA) IT infrastructure, based on over thirty-five years experience in high-performance databases, application development tools and integration technologies. Its technology offers process driven integration through legacy modernization and realtime single views of strategic business information. Software AG helps its customers to achieve a competitive advantage through flexible and adaptive business processes based on fast and easy integration of existing IT assets. It supports the mission-critical systems of over 3,000 customers globally. Software AG is represented in around 60 countries with more than 2,600 employees. It is listed on the Frankfurt Stock Exchange (TecDAX, ISIN DE 0003304002 / SOW). In 2004 Software AG posted €411 million 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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