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Press Release

Software AG Reports Continuous Growth in the First Quarter of 2007

  • Group revenue rises 10% to €124.7 million
  • Licensing revenues grow 40% to €46.9 million
  • Operating result (EBIT) increases by 16% to €25.0 million
  • Earnings per share (EPS) improves by 24% to €0.63

Darmstadt, Germany, 4/24/2007

Software AG continued to expand in the first quarter of 2007 reporting a 10% increase in Group revenue to €124.7 million, 15% at constant currency rates. Growth in the first quarter was primarily driven by a 40% rise in licensing revenues to €46.9 million (51% net of currency effects). Profitability also improved in the first quarter, the operating result (EBIT) rose by 16% to €25.0 million while the EBIT margin improved by more than one percentage point to 20%. The increase in net earnings of 24% to €17.8 million, significantly higher than the previous year, demonstrated Software AG’s successful start to fiscal 2007.
(Software AG is listed on the Frankfurt TecDAX: SOW)

Substantial growth in revenue thanks to higher licensing revenues 
Total revenue rose by 10% to €124.7 million in the first quarter of 2007 (15% at constant currency rates). Software AG’s total revenue comprises of product revenue (licenses and maintenance) and service revenue and is generated by the two business lines Crossvision and Enterprise Transaction Systems (ETS). ETS generated 71% of revenue and Crossvision 29%. The significant rise in revenue was largely a result of the persistently strong growth of product revenue, which increased by 13% (20% net of currency effects) to €91.4 million. Licensing revenues exhibited especially dynamic growth, improving by 40% (51% at constant currency rates) to €46.9 million (Q1 2006: €33.4 million). In the Professional Services business, Software AG generated revenues totaling €32.6 million, up from €32.2 million in the first quarter in 2006. 

The rapidly growing Crossvision business line, which specializes in products for the company-wide integration of business processes and applications, recorded in the first quarter its most significant growth in revenue to date. Total revenue from Crossvision in this period rose by 33% to €36.4 million. Driven by the doubling of licensing revenues, Crossvision generated €20.0 million product revenue (licenses and maintenance), representing a 51% rise. The very strong growth in licensing revenues at Crossvision was a consequence of the signing of several major contracts, including Mapfre, one of the largest insurance companies in Spain. In the Professional Services business, Software AG generated revenues of €15.9 million in the integration sector, which was 17% higher than a year earlier. 
Total revenue from the data management business ETS amounted to €88.3 million (Q1 2006: €86.5 million). This includes product revenue of €71.4 million (an increase of 6% year on year, or a currency-adjusted 12%). Services and other revenue amounted to €16.9 million (Q1 2006: €18.9 million).

“Our growth is continuing in 2007. The success of our new Crossvision business line reflects our strong position in the market for service-oriented architectures and is a significant step in the direction of SOA market leadership,” says Karl-Heinz Streibich, CEO of Software AG. 

Increase of the EBIT margin on plan
The EBIT margin developed according to plan: at 20%, it was more than one percentage point higher than in the first quarter of 2006. The company achieved this further improvement in earnings with the rise in the proportion of licensing revenues to total revenue and a continued optimization of its business processes. Earnings before interest and taxes (EBIT) rose 16% to €25.0 million.

Net income and earnings per share rise further
Earnings after taxes improved by 24% year on year, reaching €17.8 million in the first quarter. This led to a corresponding rise in earnings per share to €0.63. The average number of shares outstanding amounted to 28.3 million at the end of the quarter, up from 28.0 million a year earlier. 

Good financial indicators and strong cash flow  
On March 31, 2007, shareholders’ equity amounted to €444.9 million, representing a 5% increase from year-end 2006. The equity-to-assets ratio remained constant at 65%. The continued increase in cash and cash equivalents (€211.2 million on March 31, 2007, up from €184.8 million on December 31, 2006) reflects the persistently strong cash flow from operating activities. Operational cash flow was €23.3 million, while free cash flow was €22.2 million. This represents 18% of the revenue generated, or €0.79 per share.

“Our tremendous success in the licensing business, coupled with sustained cost management and a continued improvement of business processes, has made it possible for us to further increase our EBIT margin,” says Arnd Zinnhardt, CFO of Software AG. “We’re well on the way to more than doubling our earnings in the next five years.”

Outlook
The figures for the first quarter confirm the company’s previous projections for the year 2007. The forecast called for an increase in revenue by 14% (net of currency effects) and a rise in the EBIT margin by one percentage point to 24%. The acquisition of the Israeli distributor SPL will be reflected on the books of Software AG as of the second quarter. 

This overall projection will be reviewed again after the successful acquisition of the U.S. software manufacturer webMethods Inc. (the public tender offer is currently in process). 

Software AG | Uhlandstraße 12 | 64297 Darmstadt | Germany
Software technology to increase the value of enterprise IT systems.  
Software AG is a global leader in mission-critical software infrastructure solutions based on open standards. At the forefront of advanced Service-Oriented Architecture (SOA), Software AG enables customers to create powerful enterprise applications – especially in heterogeneous IT environments. Software AG’s products Adabas, Crossvision, Natural and Tamino help more than 3,000 customers uncover the full potential of their IT and add value to existing systems. With technology from Software AG, enterprises can: create flexible business applications and processes; extend the value and life of core systems; manage data effectively across the enterprise; and control and govern their Service-Oriented Architecture.  

Software AG has more than 35 years of global IT experience and over 2,600 employees serving customers in 70 countries. The company is headquartered in Germany and listed on the Frankfurt Stock Exchange (TecDAX, ISIN DE 0003304002 / SOW). Software AG posted total revenues of €483 million in 2006.

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
or:
Software AG
Paul Hughes
Director Media Relations
Uhlandstrasse 12
64297 Darmstadt
Germany
Tel: +49 6151 92-1574
Fax: +49 6151 92-34-1574
press@softwareag.com
http://www.softwareag.com