Software AG announces strong license growth in the second quarter

Software AG has recently announced a significantly increased customer demand for its Business Process Excellence BPE products with license revenue up by 46 per cent to €45.6 million in the second quarter of 2012, 2011: €31.3 million.The company’s Enterprise Transaction Systems, ETS business line reported license revenue growth of 20 per cent to €30.1 million, 2011:  €25.1 million. With ETS maintenance stable at €47.6 million and BPE maintenance significantly up to €48.1 million, Software AG is reporting a total product revenue increase of 16 per cent to €175.5 million, 2011:  €151.5 million. Software AG also reported total revenue of €258.6 million, 2011: €257.1 million. 

Group revenue for Q2 2012

Software AG cited significantly increasing demand across its product portfolio with total license sales up by 32 per cent to €76.0 million (2011: €57.7 million). The BPE license growth was primarily driven by dynamic development in Europe, South Africa and the Americas. The North America organization benefited from the implementation of reorganizational measures and is back to double digit BPE license 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. 

Marco Gerazounis, Senior VP Middle East North Africa & Turkey, Software AG, said: “The strong growth performance clearly reflects the impact of Software AG’s Business Process Excellence products in successfully achieving the strategic objectives of enterprises worldwide. This is particularly evident in the Middle East region, which has witnessed a significant increase in adoption of Software AG’s product suite across industries. We will capitalize on this growing awareness to further grow in key regional markets.” 

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 revenues of €82.7 million, 2011: €104.8 million in the second quarter. Thereof, the SAP consulting business delivered €27.3 million, 2011: €40.2 million, as Software AG continued to exit from unprofitable markets. The remaining €55.4 million, 2011: €64.6 million was generated in the BPE and ETS services area. Whereas ETS service revenue showed a modest increase, BPE services revenues were down due to the lower level of BPE license sales in previous quarters. 

Group results for Q2 2012

Total Group turnover was slightly up to €258.6 million, 2011: €257.1 million. The company reported an EBIT of €57.1 million and a margin of 22.1 per cent, €58.9 million and 22.9 per cent 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 €37.5 million for the quarter, 2011: €38.7 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."

First half of 2012

Product revenue for the first six months also grew, by 7 per cent to €337.1 million, 2011: €315.8 million. Revenues from the services business during the reporting period were €175.4 million, 2011: €211.1 million. Group revenue amounted to €513.2 million, 2011: €529.7 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 €111.9 million, (2011: €119.1 million. The EBIT margin was 21.8 per cent compared to 22.5 in 2011. Net income was €73.3 million, 2011: €78.7 million. Cash and cash equivalents increased by €53.5 million to €270.0 million, and the equity ratio climbed to 58 per cent (2011: 49 percent).

Business Lines Development

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 €256.6 million in the first half of 2012, an increase of 4 per cent, 2011: €245.6 million. Product revenues for Business Process Excellence grew by 14 per cent to €174.3 million (2011: €152.3 million. Service revenues were €82.1 million, 2011: 92.4 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 €189.3 million, 2011: €186.4 million. The ETS product revenue rose to €154.0 million, 2011: €152.3 million. This increase is primarily due to increased demand in the EMEA region. 

The SAP consulting business line contributed €67.3 million (2011: €97.7 million) to Software AG’s revenues in the first six months of this fiscal year. 

More Employees in Research & Development

As of June 30, 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).