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Software AG improves revenue on transformation

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Software AG has announced its preliminary financial figures (IFRS, preliminary) for the first quarter 2016.
The company continued its successful transformation reaching further improvements on all key performance parameters. Total revenue improved by +9%, driven by strong total license sales of +31%.
Product revenue (Licenses + Maintenance) increased by +11%, while Services improved by +2%. The company’s database business Adabas & Natural (A&N) grew by +20% due to early contract closings and driven by Software AG’s announcement in Q4 last year to support its A&N customer base with innovative product developments beyond 2050.
The Digital Business Platform (DBP) improved by +6 % with licenses increasing by +7% and maintenance by +5%.
Along with a positive revenue development, the Group also managed to materially increase its profitability again, also due to operational efficiency improvements: the earnings before interest and taxes (EBIT) increased by +55% and operating earnings (EBITA, non-IFRS) by +23%.
Accordingly, the operating earnings margin (EBITA, non-IFRS) was at 29 percent. Based on the positive business development in the first quarter, Software AG confirmed its outlook for the full year 2016.
“The Q1 financial results underline our total customer focus, our high operational efficiency standards and the success of our value strategy. Our commitment to support our A&N client base beyond 2050, announced in Q4 last year, is perceived very well in the market. Additionally, our leading position with our digital product portfolio results in organic growth and a strong project pipeline,” says Karl-Heinz Streibich, CEO of Software AG. “Our value-oriented strategy for the hybrid software market – on premise and in the cloud – shows stunning results.”
“We are smoothly continuing the journey in Q1 that we ended in Q4 last year: Organic growth, process optimisation and financial discipline,” says CFO Arnd Zinnhardt. “The financial figures display only once a quarter what we constantly execute in our everyday operations: We drive profitable growth in the long-term interest of our employees, customers and shareholders.”

Development of the business divisions
The Digital Business Platform (DBP) achieved license revenue of EUR 32,7-million (Q1 2015: EUR 31,1-million) in the first quarter – a plus of 7% over the previous year. Maintenance revenues amounted to EUR 61,9-million (Q1 2015: EUR 59,9-million), approximately +5 percent over the same period. Accordingly, total DBP product revenue (Licenses + Maintenance) amounted to EUR 94,6-million in the first quarter (Q1 2015: EUR 91-million), up +6%.
Additionally, Software AG’s cloud order entry increased by +155% in the reporting period. Including the substantial growth in the cloud business area, total DBP licenses showed double-digit growth.
The Adabas & Natural (A&N) business line recorded revenue of EUR 63.6 million (Q1 2015: EUR 55.4 million) – a plus of 20%. License sales increased to EUR 26,4-million (Q1 2015: EUR 15,5-million) which equals a significant improvement of +79%, reflecting early closing of deals and the strong commitment of the A&N customer base to continue to run their critical business applications on Software AG’s proven technology. A&N maintenance reached EUR 37-million (Q1 2015: EUR 39,8-million).
Revenues in the Consulting line of business were EUR 48-million (Q1 2015: EUR 47,7-million) which equals an improvement of +2%.

Total revenue and earnings development
Software AG’s total revenue in the quarter under review was EUR 206,2-million (Q1 2015: EUR 194,1-million), an increase of +9%. The company’s product revenue (Licenses + Maintenance) was up +11% for the quarter at EUR 158-million (Q1 2015: EUR 146.2 million). The license revenue for the reporting quarter was EUR 59.1 (Q1 2015: EUR 46,5-million), representing a +31 5 rise. The Group’s maintenance revenue reached EUR 98,9-million (Q1 2015: EUR 99,7-million).
The company’s earnings before interest and taxes EBIT in the first quarter was EUR 45,3-million (Q1 2015: EUR 29,3-million), a plus of 55%. The operating earnings (EBITA, non-IFRS) increased strongly due to a higher product revenue, improved sales mix, higher efficiency and active cost management reaching EUR 59,1-million (Q1 2015: EUR 48,1-million) in the quarter reported – an improvement by +23%. Accordingly, the operating earnings margin (non-IFRS) reached 29% (Q1 2015: 25%).