Annual Report 2007

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4. Financial performance

1/3 forward

4.1 Revenue trends

Group revenues increased to €621.3 million (2006: €483.0 million) in fiscal year 2007, up 29 percent from the previous year. This increase resulted primarily from organic growth and the acquisition of web-Methods, Inc. Excluding the IFRS adjustment for the initial consolidation of webMethods Inc., Group operating revenue came to €631.7 million. Currency adjusted, the increase over the previous year was 36 percent. Software AG was therefore able to record dynamic revenue growth without experiencing negative effects from the U.S. mortgage crisis.

Product revenues (licenses and maintenance) increased by 29 percent to €454.2 million (2006: €353.0 million). Adjusted for currency effects as well as the effects of initial consolidation, the increase amounted to 38 percent. The licensing revenues included in the product revenues performed especially well, climbing significantly by 46 percent to €241.3 million from €165.7 million. Currency adjusted, the rate of increase was 53 percent. Maintenance revenues, also benefiting from the acquisition of SPL and webMethods, Inc. were up by 14 percent (operating* and currency-adjusted: 24 percent) to €212.9 million from €187.3 million in 2006. As a result, licensing revenues exceeded maintenance revenues for the first time in seven years. This is confirmation of the sound dynamic growth of Software AG.

In the Professional Services business unit, Software AG generated revenues of €161.2 million, or 28 percent (currency-adjusted: 30 percent) more than in 2006 (€126.2 million).

Exchange rates have a direct impact on the local business of Software AG. The greatest share of the costs (marketing, sales, services, etc.) is incurred in local currency, changes in the dollar price, for instance, are reflected in the revenues reported in euros. However, they have only a limited impact on earnings. The translation effect from foreign currencies on the Group revenues level totaled €25.3 million, with the U.S. dollar accounting for 75 percent of that amount. Since the business in the U.S. is driven by licensing and maintenance revenues, the currency fluctuations in that business exhibit the greatest computed effect. We use financial instruments to hedge net currency translation gains/ losses. In addition, the 2007 acquisitions were executed in U.S. dollars, with the result that the outflow of liquidity exceeded the inflow of liquidity in U.S. dollars in fiscal 2007.

Exchange rate variations

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