A stable start into fiscal year 2009 for Software AG
- Total revenue up 4 percent to €165.3 million
- Product revenue up 7 percent to €122.5 million
- Free cash flow increased by 26 percent to €43.0 million
- EBIT margin improved to 23 percent
- 2009 growth outlook confirmed
Darmstadt, Germany, 4/23/2009
Software AG’s (Frankfurt TecDAX: SOW) first-quarter performance for 2009 was stable despite the global economic recession. The company’s total revenue (unaudited IFRS) was €165.3 million (2008: €159.4 million), representing growth of 4 percent. Margin-enhancing product revenue totaled €122.5 million (2008: €114.8 million), a 7 percent increase. Operating results (EBIT) rose 6 percent to total €38.1 million (2008: €36.0 million). Net income also grew by 14% to €25.6 million (2008: €22.5 million). Based on its performance to date, Software AG reconfirms its outlook for the 2009 fiscal year and still expects 4 to 8 percent revenue growth year on year.
In spite of the on-going economic recession, Software AG concluded a satisfactory first quarter 2009. Solid growth in product sales underscored the company’s robust business model and broad global presence. This growth was primarily a result of expansion of the company’s sustainable maintenance business, which increased by 23 percent to €73.2 million. Services in contrast dropped 4 percent from first quarter last year to €42.3 million. This is in line with the current trend in the IT services sector.
The webMethods business division with 9 percent revenue growth was the company’s highest growth area, performing well in spite of the difficult market climate and in comparison to competitors. This division’s success depends greatly on new projects and accounts, which are ever more difficult to win in the current market environment. However, webMethods software enables process optimization and cost savings which are vital to customers’ business performance. For this reason, there was no discernable decline in demand in this division. The webMethods division generated €74.6 million (Q1 2008: €68.7 million) in revenues and accounted for 46 percent (Q1 2008: 40 percent) of first-quarter 2009 group license revenues. This result confirms the company’s strategy of establishing webMethods as a strong second business division which will drive sustainable growth in the high-potential integration software market (SOA/BPM).
ETS, Software AG’s traditional business division, reaffirmed its stability with revenue equaling that of the first quarter last year at €90.7 million (Q1 2008: €90.7 million). As expected, maintenance revenue again increased sharply and accounted for more than half of this division’s Q1 2009 revenue. In contrast, license revenue was affected by three orders, which were in the pipeline for Q1, but could not be closed by quarter’s end.
Karl-Heinz Streibich, CEO of Software AG, commented: “Software AG continues to exhibit stability in times of crisis. Our sustainable maintenance business contributed to this significantly. Our business model, our team and our customer base equally contribute to this stability. I am optimistic for 2009, because of our sales success in the first quarter and particularly because two of three postponed deals have already been closed.”
Currency effects lose impact
The significant effects of foreign currencies – particularly of the U.S. dollar – on stated revenue have continued to weaken because of the company’s geographic expansion in recent years. Only 28 percent of revenue in Q1 2009 was in U.S. dollars. Other currencies outside the euro zone accounted for 37 percent of revenue. The total effect of foreign currencies on revenue was less than 2 percent and may continue to diminish over the course of the year.
Earnings and cash flow
Earnings performance was particularly pleasing. The EBIT margin climbed 50 points to 23.1 percent (2008: 22.6 percent). Of particular note is the increase in free cash flow, which in the quarter under review, jumped 26 percent to total €43.0 million (2008: €34.0 million).
Arnd Zinnhardt, CFO, added: “An especially positive aspect of our growth is the repeated increase in cash flow. It enabled us to reduce our net debt over the past 12 months by more than €100 million to just €31 million.”
This resulted in a lower interest payment, which, in combination with a further reduced tax rate (33.4 percent), increased net earnings to €25.6 million or by 14 percent.
As of March 31, 2009, Software AG employed 3,640 people (full-time equivalents) as compared to 3,426 in 2008 (+ 6 percent). In Germany, the number of employees rose by 13 percent to total 851 (2008: 755). Outside Germany, the number of employees increased to 2,789 (2008: 2,671), which is a 4 percent increase. The sharp rise in employees in Germany is mainly due to the majority holding Software AG took in software company itCampus (located in Leipzig) in early March 2009.
Outlook for 2009 unchanged
Software AG is committed to continuing its profitable growth. Provided normal seasonality in fiscal 2009, second-quarter results will be stronger, generating even higher revenue than in Q1. “The current pipeline continues to support our expected full year revenue growth of between 4 and 8 percent,” commented Karl-Heinz Streibich. He explained that maintenance business in particular would churn out a double-digit growth rate. Slower growth is likely in the project business due to the economy. Though if expectations of the economy picking up speed in the second half of the year materialize, greater potential could be leveraged from the project business and therefore also for Professional Services.
The EBIT margin for the year is projected to be between 24.5 and 25.5 percent. The 50 basis point increase in the first quarter has already laid a solid foundation for reaching this target.
∆ in %
|Financial statements in accordance with IFRS|
- Product revenue
- Service revenue
- ETS business division
- webMethods business division
Earnings per share (in €)
Free cash flow
* Growth into comparison to 2008 at constant currency rates
Software AG | Uhlandstraße 12 | 64297 Darmstadt | Germany
Software AG is the world’s largest independent provider of Business Infrastructure Software. Our 4,000 global enterprise customers achieve business results faster by modernizing, integrating and automating their IT systems and processes. As a result, they rapidly build measurable business value and meet changing business demands. Based on our solutions, organizations are able to liberate and govern their data, systems, applications, processes and services – achieving new levels of business flexibility.
Our leading product portfolio includes solutions for high performance data management, developing and modernizing applications, enabling service-oriented architecture, and improving business processes. By combining our technology with industry expertise and best practices experience, our customers improve and differentiate their businesses – faster.
Software AG has 40 years of global IT experience and over 3,500 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 €721 million in 2008.
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