The second quarter of 2008 saw Software AG (Frankfurt TecDAX: SOW) achieve its financial targets and therefore continue the rise in earnings reported in recent quarters. Both product revenue and revenue in the two business divisions were within expectations. Consolidated revenue (IFRS) amounted to €168.8 million (Q2 2007: €152.2 million), a rise of 11 percent (currency-adjusted: 18 percent). The company increased license revenue to €61.4 million (Q2 2007: €57.3 million) and maintenance revenue to €61.8 million (Q2 2007: €51.4 million). Adjusted for currency exchange rate effects, this equates to growth of 15 percent in license revenue and 30 percent in maintenance revenue. Revenue in the ETS business division rose to €92.1 million (Q2 2007: €90.6 million), and in webMethods to €76.7 million (Q2 2007: €61.6 million), equating to increases of 7 percent and 34 percent respectively on a currency-adjusted basis. EBIT was up by 11 percent to just under €41 million, with the EBIT margin increased to 24.3 percent (Q2 2007: 24.1 percent).
Karl-Heinz Streibich, CEO of Software AG, explained: "The second quarter results are in line with our forecasts both for the company as a whole and for the ETS and webMethods business divisions. We also expect to see growth in revenue in the second half of the year, particularly in the fourth quarter. Given the changes to our sales and marketing organization that we carried out in May, I'm confident that we will achieve the challenging targets that we set ourselves for 2008."
Arnd Zinnhardt, CFO, added: "The stability we achieved in the second quarter demonstrates that we are on the right track and we are confident that we will be able to achieve our target EBIT margin of 24 percent. We will also continue to push ahead with the streamlining of our cost structure."
In Q2 2008, license revenue in the webMethods business division was a total of €26.6 million (Q2 2007: €24.5 million), a currency-adjusted increase of 19 percent compared to the equivalent period in 2007. Growth in webMethods license revenue in the EMEA region was up slightly in the second quarter and growth in the US business continued to be robust. Maintenance revenue in the webMethods business division climbed, as a result of both organic growth and acquisitions, to €22.5 million (Q2 2007: €11.8 million), a rise of 91 percent (currency-adjusted: 108 percent). The Professional Service business generated revenue of €27.6 million compared with €25.3 million in the equivalent period in 2007. The lower revenue increase compared with the product business is attributable to the low webMethods license revenue in previous quarters.
In Q2 2008, the ETS business division contributed €92.1 million (Q2 2007: €90.6 million) to total revenue, equivalent to growth of 7 percent on a currency-adjusted basis. Revenue from licenses amounted to €34.7 million (Q2 2007: €32.8 million), up 11 percent on a currency-adjusted basis.
A notable development in the ETS business division is the growth in Brazil, where the company took over direct responsibility for its sales and marketing from the beginning of the year. Following an excellent performance in the first half of the year, Software AG is expecting to see further significant expansion in the business in Brazil over the rest of the year.
Employees
As at June 30, 2008, Software AG employed 3,427 people (full-time equivalent) compared with 3,719 as at June 30, 2007. At 754, the number of employees in Germany was roughly at the same level as in 2007 (June 30, 2007: 763), whereas the number of employees outside Germany fell to 2,673, down 9.6 percent (June 30, 2007: 2,956).
First six months of 2008
Consolidated revenue for the first six months of 2008 amounted to €328.2 million (Jan-June 2007: €276.9 million). On a currency-adjusted basis, this equates to an increase of 26 percent.
License revenue for the first half of the year was €116.8 million, up 12 percent (currency-adjusted: 21 percent) on the equivalent figure for 2007 of €104.2 million. Maintenance revenue amounted to €121.1 million, a currency-adjusted increase of 36 percent on the equivalent period in 2007. Revenue from the service business grew from €74.3 million to €88.7 million.
EBIT for the first six months of 2008 rose by just under 25 percent to €77 million (Jan-June 2007: €61.7 million). The EBIT margin for the six-month period was up from 22.3 percent in 2007 to 23.5 percent. Operating cash flow reached €60.2 million, up 75.5 percent on the first six months of 2007.
Outlook
The Management Board has confirmed its existing forecast for the whole of the 2008 fiscal year: growth in consolidated revenue is expected to be between 24 and 27 percent on a currency-adjusted basis with the EBIT margin rising to 24 percent. A rise in revenue forecasts for Brazil will allow the company to counter the risk of an economic slowdown in established markets. Similarly, the proportion of revenue growth accounted for by the ETS business division is expected to be greater than originally planned.
Karl-Heinz Streibich, CEO of Software AG, explained: "The second quarter results are in line with our forecasts both for the company as a whole and for the ETS and webMethods business divisions. We also expect to see growth in revenue in the second half of the year, particularly in the fourth quarter. Given the changes to our sales and marketing organization that we carried out in May, I'm confident that we will achieve the challenging targets that we set ourselves for 2008."
Arnd Zinnhardt, CFO, added: "The stability we achieved in the second quarter demonstrates that we are on the right track and we are confident that we will be able to achieve our target EBIT margin of 24 percent. We will also continue to push ahead with the streamlining of our cost structure."
In Q2 2008, license revenue in the webMethods business division was a total of €26.6 million (Q2 2007: €24.5 million), a currency-adjusted increase of 19 percent compared to the equivalent period in 2007. Growth in webMethods license revenue in the EMEA region was up slightly in the second quarter and growth in the US business continued to be robust. Maintenance revenue in the webMethods business division climbed, as a result of both organic growth and acquisitions, to €22.5 million (Q2 2007: €11.8 million), a rise of 91 percent (currency-adjusted: 108 percent). The Professional Service business generated revenue of €27.6 million compared with €25.3 million in the equivalent period in 2007. The lower revenue increase compared with the product business is attributable to the low webMethods license revenue in previous quarters.
In Q2 2008, the ETS business division contributed €92.1 million (Q2 2007: €90.6 million) to total revenue, equivalent to growth of 7 percent on a currency-adjusted basis. Revenue from licenses amounted to €34.7 million (Q2 2007: €32.8 million), up 11 percent on a currency-adjusted basis.
A notable development in the ETS business division is the growth in Brazil, where the company took over direct responsibility for its sales and marketing from the beginning of the year. Following an excellent performance in the first half of the year, Software AG is expecting to see further significant expansion in the business in Brazil over the rest of the year.
Employees
As at June 30, 2008, Software AG employed 3,427 people (full-time equivalent) compared with 3,719 as at June 30, 2007. At 754, the number of employees in Germany was roughly at the same level as in 2007 (June 30, 2007: 763), whereas the number of employees outside Germany fell to 2,673, down 9.6 percent (June 30, 2007: 2,956).
First six months of 2008
Consolidated revenue for the first six months of 2008 amounted to €328.2 million (Jan-June 2007: €276.9 million). On a currency-adjusted basis, this equates to an increase of 26 percent.
License revenue for the first half of the year was €116.8 million, up 12 percent (currency-adjusted: 21 percent) on the equivalent figure for 2007 of €104.2 million. Maintenance revenue amounted to €121.1 million, a currency-adjusted increase of 36 percent on the equivalent period in 2007. Revenue from the service business grew from €74.3 million to €88.7 million.
EBIT for the first six months of 2008 rose by just under 25 percent to €77 million (Jan-June 2007: €61.7 million). The EBIT margin for the six-month period was up from 22.3 percent in 2007 to 23.5 percent. Operating cash flow reached €60.2 million, up 75.5 percent on the first six months of 2007.
Outlook
The Management Board has confirmed its existing forecast for the whole of the 2008 fiscal year: growth in consolidated revenue is expected to be between 24 and 27 percent on a currency-adjusted basis with the EBIT margin rising to 24 percent. A rise in revenue forecasts for Brazil will allow the company to counter the risk of an economic slowdown in established markets. Similarly, the proportion of revenue growth accounted for by the ETS business division is expected to be greater than originally planned.
