Welcome!

News Feed Item

Software AG 2012: Largest Business Line (BPE) Outperforms Market with 15.5 Percent License Revenue Growth

Software AG (Frankfurt TecDAX: SOW) today released its financial results (IFRS, preliminary) for fiscal year 2012. The company reported €1.05 billion (2011: €1.1 billion) in total group revenue thereby achieving its target for the year. Product revenue (licenses and maintenance) increased 5.7 percent to reach €712.2 million (2011: €673.9 million) in the period under review. Software AG implemented a number of operational and strategic measures in 2012 to set the course for further growth, including intensifying investments by €40 million in sales as well as research and development for the high-growth Business Process Excellence (BPE) division. The implemented growth-generating initiatives began bearing the first fruits during the year. The largest business line achieved a dynamic 15.5 percent growth in license sales. At the same time, the high-margin Enterprise Transaction Systems (ETS) business line developed more solidly than had been projected at the start of 2012. Group EBIT was €248.3 million (2011: €269.2 million) due to targeted investment expenses and lower revenue in the IDS Scheer Consulting (IDSC) line. The company's EBIT margin climbed steadily over the course of the year from 21.5 to 27.2 percent due to better-than-expected ETS performance, continuously increasing BPE license revenues and effective cost management. Software AG plans to make more dedicated investments in the high-growth BPE business and thus lay the foundation for further dynamic growth.

Karl-Heinz Streibich, CEO of Software AG, states, "2012 was a successful year of transformation for Software AG. We consolidated traditional areas of business and strengthened new areas of growth with increased investments. Our financial results, for example our dynamic revenue growth of more than 400 percent with the big data products, are a clear confirmation that we are right on track. Based on these positive experiences, we have developed a new growth strategy with the goal of reaching more than one billion euros in product revenue in the BPE business line in 2018."

Business Line Development

Software AG was able to increase group product revenue by 5.7 percent to €712.2 million (2011: €673.9 million) in fiscal 2012. It represents about 68 percent of total revenue, which was €1.05 billion (2011: €1.1 billion). The distribution of revenue thus shifted in favor of the company's growth-driving, high-margin license and maintenance revenue.

The BPE business line made the largest contribution with product revenue growth of 13.9 percent to total €384.7 million (2011: €337.8 million). License revenue growth reached 15.5 percent. This dynamic growth was propelled by sales of the big data products by Terracotta, a U.S.-based Software AG subsidiary. Revenue from these products more than quadrupled in 2012, totaling €16.5 million (2011: €3.6 million). About 54 percent of total product revenue was attributable to integration and process software or to innovative in-memory/big data solutions. Software AG's revenue is driven primarily by the BPE business line. This trend confirms the forward-looking direction of the company. Software AG set the course for further long-term, dynamic growth with an additional investment of €40 million in sales and marketing as well as in research and development.

The profitable ETS business line surpassed expectations considerably in the period under review. The traditional database business produced fairly stable results year on year with product revenue at €309.6 million (2011: €312.9 million). Total ETS revenue was €375.3 million (2011: €381.3 million) in fiscal 2012, down just 1.6 percent from last year.

Reorganization of the IDSC business line continued in 2012. The focal points were the withdrawal from unprofitable markets and an emphasis on the process side of SAP application consulting —particularly in German-speaking countries. These measures led to a decrease in revenue to €125.1 million (2011: €189.2 million). The sale of North American SAP-related service activities in January 2013 was a successful step forward in the realignment of IDSC.

Earnings Performance

Due to expenses associated with the expansion of sales in order to access new high-growth business areas, intensified investments in research and development, and expenses from the consolidation of the SAP consulting business, EBIT (earnings before interest and taxes) was down about 8 percent year on year to €248.3 million (2011: €269.2 million). At the same time, the EBIT margin improved steadily over the course of the year due to stable ETS performance and continuously increasing BPE revenues (Q1 2012: 21.5 percent; Q2 2012: 22.1 percent; Q3 2012: 23.7 percent; Q4 2012: 27.2 percent). With respect to the full fiscal year, the EBIT margin was 23.7 percent (2011: 24.5 percent) and thus in the top half of the forecast range. Net income after taxes totaled €164.7 million (2011: €177.2 million). Based on Software AG's total assets of approximately €1.8 billion as of December 31, 2012, the company's equity ratio was about 60 percent. Software AG reported net liquidity as of December 31, 2012 with a cash surplus (cash less financial liabilities) of €49.6 million.

According to CFO Arnd Zinnhardt, "Our bold investments, which began paying off in part during the year, enabled us to significantly strengthen the operational side of business in 2012. At the same time, our financial discipline allowed us to increase our EBIT margin over the course of the year and further optimize our balance sheet structure. This positions us ideally for further dynamic growth."

Q4 2012

Software AG increased its product revenue by 4.0 percent to €196.8 million (2011: €189.2 million) in the fourth quarter of 2012. The BPE business line made the largest contribution to growth with a 12.2 percent increase in product revenue year-on-year at €113.7 million (2011: €101.3 million). ETS product revenue performed according to expectations with a slight decline of 4.3 percent to total €78.0 million (€81.5 million). As a result of the previously mentioned revenue reduction in SAP consulting (IDSC), total revenue for the Software AG group was down 5.9 percent year on year to €276.7 million (2011: €294.0 million) in the fourth quarter of 2012. Due to increased investments and expenses from the IDSC consolidation, fourth-quarter EBIT was €75.4 million (2011: €78.0 million).

Employees

As of December 31, 2012 Software AG had 5,419 (2011: 5,535) employees, of which 1,131 (2011: 1,023) worked in Sales and Marketing and 887 (2011: 887) in Research and Development. The total number of employees in Germany was 1,768 (2011: 1,881). The total number of employees working in Darmstadt as of December 31, 2012 was 733 (2011: 719).

Outlook for 2013

Software AG's outlook continues to be positive. For fiscal year 2013, it anticipates BPE product revenue growth between 16 and 22 percent (at constant currency) and a revenue decline in the traditional ETS database business between 4 and 9 percent (at constant currency). In light of the average growth forecast of about 10 percent in the promising BPE market, Software AG plans to gain market share and therefore continues investing in sales and marketing in the current fiscal year.

Through the additional investments in sustainable, dynamic growth for the high-potential BPE business, the BPE revenue contribution will account for about 80 percent of the company’s total revenue in the year 2018. BPE product revenue is expected to reach €1 billion by that time. The company’s early entrance into the future-oriented integration and process software market space as well as the big data market is paying off strategically and thus securing the company's long-term success.

###

About Software AG

Software AG (FRA: SOW) helps organizations achieve their business objectives faster. The company's big data, integration and business process technologies enable customers to drive operational efficiency, modernize their systems and optimize processes for smarter decisions and better service. Building on over 40 years of customer-centric innovation, the company is ranked as a "leader" in fifteen market categories, fueled by core product families Adabas and Natural, ARIS, Terracotta and webMethods. Software AG has more than 5,400 employees in 70 countries and had revenues of €1.05 billion in 2012 (IFRS, unaudited). Learn more at www.softwareag.com.

Software AG - Get There Faster

Detailed press information about Software AG including a picture and multimedia database are available at: www.softwareag.com/press

Follow us on Twitter
Find us on Facebook

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
"Evatronix provides design services to companies that need to integrate the IoT technology in their products but they don't necessarily have the expertise, knowledge and design team to do so," explained Adam Morawiec, VP of Business Development at Evatronix, in this SYS-CON.tv interview at @ThingsExpo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
In his session at 21st Cloud Expo, Raju Shreewastava, founder of Big Data Trunk, provided a fun and simple way to introduce Machine Leaning to anyone and everyone. He solved a machine learning problem and demonstrated an easy way to be able to do machine learning without even coding. Raju Shreewastava is the founder of Big Data Trunk (www.BigDataTrunk.com), a Big Data Training and consulting firm with offices in the United States. He previously led the data warehouse/business intelligence and B...
Most technology leaders, contemporary and from the hardware era, are reshaping their businesses to do software. They hope to capture value from emerging technologies such as IoT, SDN, and AI. Ultimately, irrespective of the vertical, it is about deriving value from independent software applications participating in an ecosystem as one comprehensive solution. In his session at @ThingsExpo, Kausik Sridhar, founder and CTO of Pulzze Systems, discussed how given the magnitude of today's application ...
DevOps promotes continuous improvement through a culture of collaboration. But in real terms, how do you: Integrate activities across diverse teams and services? Make objective decisions with system-wide visibility? Use feedback loops to enable learning and improvement? With technology insights and real-world examples, in his general session at @DevOpsSummit, at 21st Cloud Expo, Andi Mann, Chief Technology Advocate at Splunk, explored how leading organizations use data-driven DevOps to clos...
The 22nd International Cloud Expo | 1st DXWorld Expo has announced that its Call for Papers is open. Cloud Expo | DXWorld Expo, to be held June 5-7, 2018, at the Javits Center in New York, NY, brings together Cloud Computing, Digital Transformation, Big Data, Internet of Things, DevOps, Machine Learning and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding busin...
Nordstrom is transforming the way that they do business and the cloud is the key to enabling speed and hyper personalized customer experiences. In his session at 21st Cloud Expo, Ken Schow, VP of Engineering at Nordstrom, discussed some of the key learnings and common pitfalls of large enterprises moving to the cloud. This includes strategies around choosing a cloud provider(s), architecture, and lessons learned. In addition, he covered some of the best practices for structured team migration an...
Mobile device usage has increased exponentially during the past several years, as consumers rely on handhelds for everything from news and weather to banking and purchases. What can we expect in the next few years? The way in which we interact with our devices will fundamentally change, as businesses leverage Artificial Intelligence. We already see this taking shape as businesses leverage AI for cost savings and customer responsiveness. This trend will continue, as AI is used for more sophistica...
Recently, REAN Cloud built a digital concierge for a North Carolina hospital that had observed that most patient call button questions were repetitive. In addition, the paper-based process used to measure patient health metrics was laborious, not in real-time and sometimes error-prone. In their session at 21st Cloud Expo, Sean Finnerty, Executive Director, Practice Lead, Health Care & Life Science at REAN Cloud, and Dr. S.P.T. Krishnan, Principal Architect at REAN Cloud, discussed how they built...
The “Digital Era” is forcing us to engage with new methods to build, operate and maintain applications. This transformation also implies an evolution to more and more intelligent applications to better engage with the customers, while creating significant market differentiators. In both cases, the cloud has become a key enabler to embrace this digital revolution. So, moving to the cloud is no longer the question; the new questions are HOW and WHEN. To make this equation even more complex, most ...
As you move to the cloud, your network should be efficient, secure, and easy to manage. An enterprise adopting a hybrid or public cloud needs systems and tools that provide: Agility: ability to deliver applications and services faster, even in complex hybrid environments Easier manageability: enable reliable connectivity with complete oversight as the data center network evolves Greater efficiency: eliminate wasted effort while reducing errors and optimize asset utilization Security: imple...
In his Opening Keynote at 21st Cloud Expo, John Considine, General Manager of IBM Cloud Infrastructure, led attendees through the exciting evolution of the cloud. He looked at this major disruption from the perspective of technology, business models, and what this means for enterprises of all sizes. John Considine is General Manager of Cloud Infrastructure Services at IBM. In that role he is responsible for leading IBM’s public cloud infrastructure including strategy, development, and offering m...
With tough new regulations coming to Europe on data privacy in May 2018, Calligo will explain why in reality the effect is global and transforms how you consider critical data. EU GDPR fundamentally rewrites the rules for cloud, Big Data and IoT. In his session at 21st Cloud Expo, Adam Ryan, Vice President and General Manager EMEA at Calligo, examined the regulations and provided insight on how it affects technology, challenges the established rules and will usher in new levels of diligence arou...
The past few years have brought a sea change in the way applications are architected, developed, and consumed—increasing both the complexity of testing and the business impact of software failures. How can software testing professionals keep pace with modern application delivery, given the trends that impact both architectures (cloud, microservices, and APIs) and processes (DevOps, agile, and continuous delivery)? This is where continuous testing comes in. D
Modern software design has fundamentally changed how we manage applications, causing many to turn to containers as the new virtual machine for resource management. As container adoption grows beyond stateless applications to stateful workloads, the need for persistent storage is foundational - something customers routinely cite as a top pain point. In his session at @DevOpsSummit at 21st Cloud Expo, Bill Borsari, Head of Systems Engineering at Datera, explored how organizations can reap the bene...
Digital transformation is about embracing digital technologies into a company's culture to better connect with its customers, automate processes, create better tools, enter new markets, etc. Such a transformation requires continuous orchestration across teams and an environment based on open collaboration and daily experiments. In his session at 21st Cloud Expo, Alex Casalboni, Technical (Cloud) Evangelist at Cloud Academy, explored and discussed the most urgent unsolved challenges to achieve f...