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Software : shows strong growth in Q2 revenue, earnings

08/04/2015 | 05:53am US/Eastern

Software AG has released its financial results (IFRS, preliminary) for the second quarter of 2015. The business performance reported reflects the success of the company's value-oriented strategy, which is focused on profitable growth. Despite a challenging market environment in the global software industry, the group's total revenue for the period grew 10% to €205.6 million (2014: €187.7 million, adjusted for revenue from the SAP consulting business unit sold in Q2, 2014). Maintenance revenue hit a new record, surpassing €100 million in a single quarter for the first time in Software AG's history. At €103.6 million (2014: €91.1 million), this recurring revenue stream increased 14%. The company also posted an increase in total licence sales, up 7% to €53.5 million (2014: €50.2 million). Fuelled by the improved high-margin product business (licences + maintenance), EBIT rose significantly to total €33.2 million (2014: €25 million) – this reflects growth of 33% year-on-year. Moreover, free cash flow performed very positively, reaching €45.9 million (2014: €18.5 million) in the second quarter and €106.2 million (H1/2014: €66.3 million) in the first half of 2015, breaking two new records. Following the conclusion of the first half of the year, Software AG confirmed its outlook for fiscal 2015. Software AG CEO Karl-Heinz Streibich commented: "One year ago, we started to focus on a value-oriented strategy. Our positive business performance over the last three quarters again confirmed both our ability for fast execution and the value potential of our business." He continued: "In the second half of 2015, we will continue to concentrate on profitable growth through world-class operations and organic growth with our leading digital portfolio." CFO Arnd Zinnhardt elaborated: "The Q2 results reflect the implementation of targeted structural and operational improvements. Strong growth in maintenance revenues, higher earnings, increased profitability and a cash flow which more than doubled – all these key figures demonstrate our success in efficiency optimisation. On this basis, we will further drive the value of our company." Performance by business line Software AG's largest business line, the Digital Business Platform (DBP), reported revenue growth of 18% to a total of €99.8 million (2014: €84.6 million) in the second quarter of 2015. Maintenance revenues increased 21% to €62.8 million (2014: €51.9 million). Licences totalled €37 million (2014: €32.7 million), which reflects 13% growth year-on-year. The DBP segment earnings improved by 46 percent to reach €19.4 million (2014: €13.3 million); accordingly, the DBP segment margin rose to 19.5% (15.7%). Software AG's Adabas & Natural (A&N) database business posted revenue growth of 3% to total €57.5 million (2014: €55.9 million) in the second quarter. Of that amount, €40.9 million (2014: €38.4 million) was generated by A&N's recurring maintenance sales, which were up 7%. A&N licences reach €16.5 million (2014: €17.4 million). A&N segment earnings climbed to €40.6 million (2014: €37.9 million); the segment margin rose to 70.6% (67.8%). The Consulting business line generated €48.4 million (2014: €47.2 million, adjusted for revenue from the divested SAP consulting business unit) in revenue in the second quarter. Profitability increased significantly following the sale of non-strategic units. Segment earnings in the Consulting line were €3.8 million (2014: €1.5 million); and its margin improved 5.2 percentage points to 7.9% (2014: 2.7%). Total revenue, earnings performance Software AG's total Q2 revenue was €205.6 million (2014: €187.7 million, adjusted for revenue from the divested SAP consulting business unit) which equals a 10% increase. Product revenue from the DBP and A&N lines totalled €157.1 million (2014: €141.3 million), which is 11% growth year-on-year. This marks an increase to 76% (2014: 72%) of total revenue, confirming Software AG's focus on high margin product revenues. The company's maintenance revenue hit a new record level at €103.6 million (2014: €91.1 million). Licence revenue increased 7% to total €53.5 million (2014: €50.2 million). Operating income (EBITA, non-IFRS) was up 8% to €48.6 million (2014: €45.1 million): accordingly, the operating profit margin (non-IFRS) of 23.6% exceeded last year's level (2014: 23%). Earnings before interest and tax (EBIT) went up 33% to €33.2 million (2014: €25 million) in the second quarter. This reflects an EBIT margin of 16.1% (2014: 12.8%). Operating earnings per share significantly improved 39% to €0.25 (2014: €0.18). The strong performance is due to Software AG's value-oriented strategy with a focus on extension of product revenues, increased recurring maintenance revenues and active efficiency management. Software AG's equity ratio increased to 56% (31 December 2014: 55%) as of 30 June 2015; shareholders' equity rose to €1,079.1 million (31 December 2014: €1,013.4 million). The company's balance sheet showed a net cash position of 5.7 million (31 December 2014: -70.4 million), which reflects an improvement of plus €76.1 million. Software AG's free cash flow broke new quarterly and half-yearly records with €45.9 million in Q2 (30 June 2014: €18.5 million) and €106.2 million in the first half of 2015 (H1/2014: €66.3 million). Employees As of 30 June 2015, Software AG had 4 349 (2014: 4 421) employees worldwide. Of that total, 1 826 (2014: 1 821) worked in Consulting, 942 (2014: 993) in Sales and Marketing, 957 (2014: 968) in Research and Development, and 624 (2014: 639) in Administration. 2015 outlook Software AG has confirmed its outlook for fiscal 2015. The company anticipates revenue growth in the Digital Business Platform business line between 6% and 12% and revenue in Adabas & Natural between -8% and -14% year-on-year (each at constant currency). The operating profit margin (EBITA, non-IFRS) is expected to be between 27.5% and 28.5%.

In € millions

Q2/2015

Q2/2014*

 as %  rounded

Total revenue (excluding SAP consulting)

205.6

187.7

+10%

Total revenue (including SAP consulting)

205.6

196.0

+5%

Product revenue

157.1

141.3

+11%

Maintenance revenue

103.6

91.1

+14%

Licence revenue

53.5

50.2

+7%

Digital Business Platform

99.8

84.6

+18%

as % of total product revenue

63%

60%

-

            DBP maintenance

62.8

51.9

+21%

            DBP licences

37.0

32.7

+13%

Adabas & Natural

58.0

55.9

+4%

as % of total product revenue

37%

40%

-

            A&N maintenance

40.9

38.4

+7%

            A&N licences

16.5

17.4

-5%

Consulting (excluding SAP consulting)

48.4

47.2

+3%

Consulting (including SAP consulting)

48.4

55.5

-13%

Sales & marketing expenses

-70.3

-64.2

+10%

Research & development expenses

-26.8

-26.6

+1%

EBIT*

33.2

25.0

+33%

as % of total revenue

16%

13%

-

Operating income (EBITA, non-IFRS)**

48.6

45.1

+8%

as % of total revenue

24%

23%

-

Net income (IFRS)

19.9

14.2

+40%

Earnings per share (in €)

0.25

0.18

+39%

Free cash flow

45.9

18.5

+148%

June 30, 2015

December 31, 2014

Net liquidity/debt (in € millions)

5.7

-70.4  

+76.1

Equity ratio as %

56

55

-

Employees (FTE)

4,349

4,421  

-1.6%

* = Consolidated net income + income tax + other tax + financial result ** = EBITA adjusted for reduction of acquisition-related product revenue by purchase price allocation, other acquisition effects, share-based payment, restructuring/severance payments and operating income of divested units (IDS) from Q2 2014

(c) 2015 ITWeb Limited. All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers

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