Software AG announces strong licence growth in second quarter

Software AG (Frankfurt TecDAX: SOW) today announced significantly increased customer demand for its Business Process Excellence (BPE) products, with licence revenue up by 46% to EUR45.6 million in the second quarter of 2012 (2011: EUR31.3 million).

The company's Enterprise Transaction Systems (ETS) business line reported licence revenue growth of 20% to EUR30.1 million (2011: EUR25.1 million). With ETS maintenance stable at EUR47.6 million and BPE maintenance significantly up to EUR48.1 million, Software AG is reporting a total product revenue increase of 16% to EUR175.5 million (2011: EUR151.5 million). Software AG also reported total revenue of EUR258.6 million (2011: EUR257.1 million).

Software AG cited significantly increasing demand across its product portfolio with total licence sales up by 32% to EUR76 million (2011: EUR57.7 million). The BPE licence growth was primarily driven by dynamic development in Europe, South Africa and the Americas.

The North America organisation benefited from the implementation of re-organisational measures and is back to double-digit BPE licence growth. A further major contributor to the revenue growth was Software AG's subsidiary, Terracotta, based in Silicon Valley, and its technology for the management of big data.

Software AG CEO Karl-Heinz Streibich commented on the results: "It is clear that there is a growing global demand for integration and process management software that increases business efficiency and competitiveness. Business Process Excellence is playing a strategic role in customers achieving their growth targets."

Software AG generated services revenue of EUR82.7 million (2011: EUR104.8 million) in the second quarter. Thereof, the SAP consulting business delivered EUR27.3 million (2011: EUR40.2 million), as Software AG continued to exit from unprofitable markets. The remaining EUR55.4 million (2011: EUR64.6 million) was generated in the BPE and ETS services area. Whereas ETS service revenue showed a modest increase, BPE services revenue was down due to the lower level of BPE licence sales in previous quarters.

Xgead = Group results for Q2 2012

Total group turnover was slightly up to EUR258.6 million (2011: EUR257.1 million). The company reported an EBIT of EUR57.1 million and a margin of 22.1% (EUR58.9 million and 22.9% in Q2, 2011). Software AG invested in BPE sales and marketing in the US and other key markets. Investment in research and development is also higher than in the previous year. As a result, with the tax rate unchanged, net income was EUR37.5 million for the quarter (2011: EUR38.7 million)

Arnd Zinnhardt, Chief Financial Officer of Software AG, added: "Our investment in sales and marketing is driving sustainable growth and showing the first successes in North America. Therefore, we will continue our investment in sales and marketing activities in the coming quarters."

Product revenue for the first six months also grew, by 7% to EUR337.1 million (2011: EUR315.8 million). Revenue from the services business during the reporting period was EUR175.4 million (2011: EUR211.1 million). Group revenue amounted to EUR513.2 million (2011: EUR529.7 million) during the first six months of the current fiscal year.

The EBIT in the first half of 2012, reflecting increased investments in BPE business development, was EUR111.9 million (2011: EUR119.1 million). The EBIT margin was 21.8% compared to 22.5% in 2011. Net income was EUR73.3 million (2011: EUR78.7 million). Cash and cash equivalents increased by EUR53.5 million to EUR270 million, and the equity ratio climbed to 58% (2011: 49%).

The Business Process Excellence business line, which includes the product groups webMethods (IT integration), ARIS (business process software) and Terracotta products (big data), achieved total revenue of EUR256.6 million in the first half of 2012, an increase of 4% (2011: EUR245.6 million). Product revenue for Business Process Excellence grew by 14% to EUR174.3 million (2011: EUR152.3 million. Service revenue was EUR82.1 million (2011: EUR92.4 million) in the first half of 2012.

The Enterprise Transaction Systems business line (high-transaction database software) was up in the first half of 2012, with reported revenue of EUR189.3 million (2011: EUR186.4 million). The ETS product revenue rose to EUR154 million (2011: EUR152.3 million). This increase is primarily due to increased demand in the EMEA region.

The SAP consulting business line contributed EUR67.3 million (2011: EUR97.7 million) to Software AG's revenue in the first six months of this fiscal year.

As of 30 June 2012, Software AG had 5 461 (2011: 5 478) full-time employees, of which 896 (2011: 845) work in Research and Development (R&D). Employees in Germany numbered 1 803 (2011: 1 946).

Looking at the individual product business lines, the Business Process Excellence forecast remains unchanged at plus five to plus fifteen percent, while Enterprise Transaction Systems has been increased to minus six to minus three percent (the original forecast corridor was minus twelve to minus seven percent).

Software AG is forecasting total product revenue growth of plus two to plus seven percent. The EBIT margin range remains at 23% to 24.5%. All revenue growth forecasts are at constant currency rates.

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