Software AG increases earnings in the third quarter 2008

  • Group revenue rises 14%
  • Product revenues climb 20%
  • Professional Services maintain prior-year level
  • Earnings per share rose by 61%

Darmstadt, Germany, 10/24/2008

In the third quarter of 2008 (July 1 – September 30, 2008), the revenue and earnings of Software AG (Frankfurt TecDAX: SOW) continued to grow despite the difficult market environment. Group revenue (IFRS) increased to €180.1 million (Q3 2007: €157.8 million), a rise of 14 percent. Revenue growth was again driven by product revenues (licenses and maintenance), which increased 20 percent to €138.0 million (Q3 2007: €115.1 million) and therefore accounted for 77 percent of Group revenue. The remaining 23 percent was generated by the Professional Services business, whose revenues of €41.8 million approximated last year's level (€42.3 million). Both business lines contributed more or less equally to revenue growth: The ETS business line grew by 15 percent to €101.1 million (Q3 2007: €87.9 million), and the webMethods business line saw revenue growth of 13 percent to €79.0 million (Q3 2007: €69.9 million). Earnings (EBIT) climbed 50 percent to €48.7 million, and the EBIT margin to 27.0 percent (Q3 2007: 20.5 percent).

The strong increase in product business is an indication of the sustainability of the business model as well as Software AG’s good global presence. Expansion of the strategically important licensing business and the long-term maintenance business contributed approximately equally to revenue growth: licensing revenues rose to €67.8 million (Q3 2007: €57.4 million), and maintenance revenues reached €70.2 million (Q3 2007: €57.7 million). The increase in licensing revenues amounted to 18 percent and maintenance revenues to 22 percent. The clear increase in product business had a positive impact on operating earnings, raising the EBIT margin in the third quarter to 27 percent.

Karl-Heinz Streibich, CEO of Software AG comments: "Our third-quarter results are good in view of the general economic situation. The robustness of our business model is clear, especially when looking at product revenues. I am therefore optimistic about the product business for the year as a whole.”

CFO Arnd Zinnhardt states: “In times of economic difficulty, we pay special attention to margin performance and free cash flows. Both of these indicators have risen substantially over the previous year, showing that Software AG is soundly positioned and will remain financially strong.”

The webMethods business line registered growth of 13 percent to €79.0 million (Q3 2007: €69.9 million) based on continuing successful integration in the quarter under review. Licensing revenues increased by 18 percent to a total of €30.6 million (Q3 2007: €25.9 million). Maintenance revenues for this business line rose 22 percent over the prior-year period to €23.5 million (Q3 2007: €19.3 million).

The ETS business line contributed €101.1 million to total revenue (Q3 2007: €87.9 million), a rise of 15 percent. A good portion of this came from our Brazilian business. Licensing revenue increased by 18 percent to €37.1 million (Q3 2007: €31.4 million). The maintenance business saw even stronger growth increased growth to reach €46.7 million in the third quarter (Q3 2007: €38.4 million).

Cash flow
Free cash flow performed very well in the third quarter, rising 229 percent to €34.2 million from €10.4 million in the third quarter of 2007. Free cash flow for the first nine months of 2008 reached €91.2 million – a 104 percent increase compared to the figure for the first nine months of 2007.

As of September 30, 2008, Software AG had 3,466 employees (full-time equivalents) compared with 3,552 in the previous year. The number of employees in Germany was 759 (Q3 2007: 759), and the number of employees outside of Germany decreased by 3% to 2,707 (Q3 2007: 2,793).

Software AG’s robust business model promises to lead to further increases in product business in both business lines during the fourth quarter. The revenue of the Professional Services business will remain at last year’s levels. The pipeline orders for the fourth quarter supports this prognosis. For the full year 2008, Group revenue is expected to grow to between €710 and €730 million. Concurrently, the Management now forecasts an EBIT margin of 24% to 25%, up from 24%.

Software AG views 2009 with cautious optimism. The prognosis for growth is 4% to 8% (net of currency) and an increased EBIT margin of 24.5% to 25.5%.


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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 almost 40 years of global IT experience and over 3,600 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 €621 million in 2007.

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Software AG
Paul Hughes
Director Media Relations
Uhlandstrasse 12
64297 Darmstadt
Tel: +49 6151 92-1787
Fax: +49 6151 92-1623
Software AG
Norbert Eder
Vice President Corporate Communications
Uhlandstrasse 12
64297 Darmstadt
Tel: +49 6151 92-1146
Fax: +49 6151 92-1623