Software AG's first quarter financial results confirm expectations

Software AG (Frankfurt TecDAX: SOW) reported record first quarter Business Process Excellence (BPE) revenue of EUR124.3 million (EUR123.9 million in 2011). This growth was primarily driven by very strong performances in Europe and the introduction of new products. Enterprise Transaction Systems (ETS) performed better than expected, with total revenue of EUR94.4 million.

The company's software product business (licence and maintenance) reported total revenue of EUR161.5 million, close to the outstanding performance of Q1, 2011. Total maintenance revenue reached an all-time high for a quarter of EUR96.3 million. Despite higher spending on R&D, Sales and Marketing, the EBIT margin reached 21.5% and free cash flow was increased by 20%. The company confirmed its guidance for the full year 2012, published in January of this year.

“The sustained success of the Business Process Excellence division in Europe once again demonstrates the strength of both our product portfolio and our new go-to-market strategy, a strategy that we are now rolling out globally,” said Software AG CEO Karl-Heinz Streibich.

The first quarter has laid the basis for the full fiscal year.

The Business Process Excellence division showed the same development as in the second half of 2011, with strong growth in DACH and EMEA. It is expected that this positive development will also be seen in the USA in the second half of the year. The first quarter 2012 showed a 1.5% increase in BPE product revenue to EUR80.6 million, exceeding the extraordinary first quarter of 2011 by EUR1.2 million. Total business division revenue of EUR124.3 million is a record high for a first quarter.

During the quarter under review, the Enterprise Transaction Systems performed better than anticipated. Product revenue of EUR76.3 million, services of EUR17.8 million and total revenue of EUR94.4 million have laid the basis for a full-year performance within the guided corridor.

The IDS Scheer Consulting division reported sales of EUR35.8 million. The withdrawal from unprofitable markets such as China and Russia and the general focus on profitable projects resulted in a reduction of revenue. As previously announced, Software AG has conducted a review of strategic options for the further development of the global IDS Scheer Consulting business. The company has decided to develop the IDS Scheer Consulting business as an independent operating company with an innovative partner management structure. Software AG is therefore focusing on continuity and the stability of customer relationships to generate growth.

Software AG significantly increased BPE business line investment (+EUR7 million) in R&D, Marketing and Sales in the first quarter of 2012, laying the basis for accelerated global growth with new products. The company also further optimised administrative costs and therefore achieved an EBIT margin of 21.5% and an EBIT of EUR54.8 million (EUR60.2 million in Q1, 2011).

Net income in the quarter under review was EUR35.9 million (2011: 40 million) and earnings per share EUR0.41 (2011: EUR0.47).

Free cash flow increased by 20% to EUR59.1 million and net debt was significantly reduced by over EUR100 million over the past 12 months to almost zero.

”We have invested substantially in R&D, Sales and Marketing, laying the basis for accelerated growth of our BPE business in the second half of this year; but we have also maintained a high EBIT margin and increased the free cash flow significantly,” said Software AG CFO, Arnd Zinnhardt.

A total dividend payout of EUR39.9 million or EUR0.46 per share (2011: EUR0.43) for fiscal year 2011 will be proposed by Software AG's Executive and Supervisory Boards at the shareholders' meeting on 4 May 2012.

The financial results of Q1, 2012 have laid the basis for the successful development of the core business and for achieving the full-year targets for fiscal 2012. Therefore, the company affirms the forecast for the full-year 2012, published in January, with growth of 5% to 15% in the BPE division and corresponding group revenue in the range of +/- 3%, both in comparison to 2011 (at constant currency). Software AG expects an EBIT margin of 23% to 24.5% for the current fiscal year.