Software AG Achieves Record Results in 2006
Darmstadt, Germany, 1/23/2007
- Group revenues rise 10% to €483.0 million
- License revenues grow 26% to €165.7 million
- Earnings before interest and taxes (EBIT) improve by 15% to €111.2 million
- EBIT margin reaches 23% of total revenue
- Net Profits rise 18% to €73.2 million
In the fiscal year 2006, Software AG increased its revenues by 10% to €483.0 million. At constant currency rates, this represents an 11% rise and exceeds the company’s target. In the same period, earnings before interest and taxes (EBIT) increased by 15% to €111.2 million. Software AG was able to improve its operating margin to an all-time high of 23% – an increase of 100 basis points from the previous year. At €73.2 million, consolidated income was 18% higher than in 2005.
Significant growth in revenues
Software AG once again achieved significant growth in revenues in fiscal 2006. Worldwide, customers purchased software licenses and services worth €483.0 million. This was 10% higher than in the previous year (11% at constant currency rates). The high margin software license business exhibited the strongest growth of all revenue segments increasing by 26% (28% at constant currency rates) to €165.7 million (2005: €131.6 million). Revenue from licenses rose to more than 34% of the total (2005: 30%).
In the classic database business (ETS, Enterprise Transaction Systems), license revenues grew 27% (29% at constant currency rates) from €96.0 million to €121.7 million. The new crossvision product line, for the company-wide integration of business processes on differing systems, exhibited dynamic growth. License revenues from Software AG’s own products increased from €26.0 million to €41.6 million. This represents a 60% expansion (63% at constant currency rates).
Maintenance revenues amounted to €187.3 million, up 3% from €181.4 million in the previous year (up 4% at constant currency rates). Software AG generated €126.2 million in service revenues, 3% higher than in the previous year.
EBIT margin rises to 23%
Software AG was also able to increase its gross margin once again; after 67% in 2005 it reached 69% in 2006. This continuous improvement is the result of the strategic focusing on the company’s own products and the over proportional growth of the license business. In the past fiscal year, Software AG continued to improve its cost structure with active cost management and the optimization of internal processes. This permitted the company to continue to invest in marketing, enter new markets, and at the same time increase its EBIT margin from 22% to 23%. As a consequence, EBIT rose 15% to €111.2 million.
“Through the positive overall results for 2006 we have achieved our ambitious goals,” says Karl-Heinz Streibich, CEO of Software AG.
Net income and earnings per share continue to improve
Net income improved by 18.4% to €73.2 million (2005: €61.8 million). Earnings per share amounted to €2.60 in 2006, which was 16% higher than in previous year (2005: €2.24).
Solid balance sheet and cash flow
Software AG generated €56.2 million in free cash flow from operating activities in 2006 (2005: €45.6 million). This represents a free cash flow per share of €2.00, up from €1.66 in the previous year. Accordingly, cash and cash equivalents increased from €161.6 million to €184.8 million. Shareholders’ equity rose from €393.0 million to €422.2 million. The equity-to-assets ratio remained unchanged at 66%.
“The Cash Flow Margin is once again above 10%. This shows the value generation of our business, allowing further investments into growth and the payment of an attractive dividend,” said Arnd Zinnhardt, Chief Financial Officer at Software AG.
Employees
As of December 31, 2006, Software AG had 2,621 employees worldwide, nearly 5% fewer than in the previous year (2,750 employees). In Germany, the total headcount was 761 (2005: 774).
Earnings heavily influenced by exchange rates in fourth quarter of 2006
Software AG generated €134.4 million in sales revenues in the fourth quarter, representing an increase of 9% (13% at constant currency rates). The EBIT margin was 25.6% (up from 23.4 % in 2005), and EBIT rose 19% to €34.4 million (2005: €28.9 million).
License revenues remained an important growth driver in the fourth quarter as well. At €54.1 million, they rose 25% from €43.4 million in the previous year (a 31% rise at constant currency rates). In the fourth quarter, €37.6 million in license revenues was generated from the ETS business (2005: €32.5 million) and €15.3 million from Software AG’s own products from the crossvision business line or product family (2005: €9.3 million). This means ETS license revenues increased by 16% (22% at constant currency rates) and crossvision by 65% (72% at constant currency rates).
Due to the high proportion of revenues in US dollars, maintenance revenues declined somewhat to €45.2 million (2005: €46.6 million) in the fourth quarter. At constant currency rates, this revenue segment realized growth of 1.1%. Services revenue improved by 1.2% (2.3% at constant currency rates) to €33.1 million (2005: €32.7 million).
Outlook for 2007
For 2007, the company once again expects to achieve a 10% rise in Group revenues, at constant currency rates. Software AG anticipates that the ETS business will achieve growth in the range of 5% to 7% while crossvision will increase its revenues by 20% to 30%. As a consequence, the company projects that it will be able to improve its EBIT margin by another percentage point to 24%. Software AG plans to increase its earnings per share to between €2.90 and €3.10.
In connection with its strategic positioning as a profit-oriented growth company, Software AG has restructured its executive divisions. The classic database business line ETS will now be a separate executive division. The Supervisory Board appointed David Broadbent to the Executive Board of Software AG to fulfill this role. Within the ETS business line, Broadbent is responsible for product management and product marketing as well as research and development. This step is meant to underscore the significance and the development of the growing database business. As a consequence, ETS will be the second business line alongside crossvision to be organized as a separate executive division.
As part of the reorganization of executive responsibilities there will be two main sales regions. The former Executive Board member Christian Barrios is leaving the company by mutual agreement.
The new Executive Board structure will offer the best conditions to quickly and effectively respond to current and future market trends with new product offerings. Software AG will also structure its financial reporting according to the ETS and crossvision business lines as of 2007. “Our sales targets remain ambitious,” says Karl-Heinz Streibich. “Regarding our long-term growth strategy; we are defining our Executive Board structure accordingly and focusing even more strongly on the customer.”
Software AG offers an extensive range of products and services relating to IT infrastructures for service-oriented architectures (SOAs) and is backed by 37 years of experience with high-performance databases, application development tools, and integration technologies. Software AG’s technology facilitates process-driven integration through the modernization of legacy systems and permits a uniform view of strategic business information in real time. Software AG helps its customers achieve a competitive advantage by creating the conditions for flexible and adaptable business processes through the rapid and simple integration of existing IT systems. More than 3,000 customers around the world count on Software AG for their business critical systems. The company is present in 70 countries with more than 2,600 employees. Software AG is based in Darmstadt, Germany, and is listed on the Frankfurt Stock Exchange (TecDAX, ISIN DE 0003304002 / SOW). Software AG posted total revenues of €483 million (unaudited) in 2006.
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Contact: Software AG Norbert Eder Vice President Corporate Communications Uhlandstrasse 12 64297 Darmstadt Germany Tel: +49 6151 92-1146 Fax: +49 6151 92-1623 norbert.eder@softwareag.com http://www.softwareag.com |
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or: Software AG Paul Hughes Director Media Relations Uhlandstrasse 12 64297 Darmstadt Germany Tel: +49 6151 92-1787 Fax: +49 6151 92-1623 press@softwareag.com http://www.softwareag.com |
