Continued Revenue and Earnings Growth in First Half of 2001
· Total revenue up 46 percent from last year
· Operational earnings up 82 percent from last year
· Second quarter out performs expectations:
· 88 percent licensing revenue growth
· Doubled Tamino XML Server revenue
· Global alliances with IBM and HP
Bracknell, UK, 30th July 2001 – "Despite the dismal market conditions, Software AG again reported record half-year results and exceeded expectations for revenue and earnings," Dr. Erwin Königs, Chairman and CEO, summarized Software AG's fiscal year 2001 half-time score at a press conference in Frankfurt. Revenue from all business segments showed significant growth, totaling 287.4 million euros (+46%). Operational earnings (EBITDA excluding one-time items) climbed to 53.2 million euros (+82%). Königs added: "We increased our second-quarter operational earnings by 94 percent year-on-year. And despite extraordinary charges associated with our US acquisition we are reporting a very pleasing first half-year profit."
Again this year, all three business segments contributed to the revenue growth. Licensing revenue increased the most, rising 71 percent to 100.3 million euros. This growth can be attributed to the strong continued revenue generated by Software AG's well established mainframe products (Adabas/Natural: +46% revenue growth in first HY). In addition, demand for electronic business products EntireX (Middleware) and Tamino (XML server) was high. These products showed above-average revenue growth (+150% in first HY) and continued to improve their market position. Up 22 percent to 91.9 million euros, Professional Services revenue grew less rapidly than expected. Maintenance, however, exceeded expectations, increasing 51 percent to 93.7 million euros.
As Software AG's single largest market, the US was the major contributor to Software AG's above-industry results. The frequently quoted overall decline of investments in IT products had no significant impact on Software AG's second-quarter performance.
Geoff Cooke, UK and Ireland Country Manager, comments, "I am delighted that Software AG in the UK and Ireland has been able to make a significant contribution to the Group's excellent overall results for the first half of the year. XML adoption in the UK seems to be growing faster than ever, and the scalability issues being faced by corporate clients is fuelling sales of our Tamino XML server. Similarly, our focus on Total Business Integration is bringing the full extent of Software AG's solutions capability in this area sharply into focus"
Consecutive Record Results
Totaling 53.2 million euros (2000: 29.3 m euros), operational earnings (earnings before interest, tax, depreciation, amortization, and one-time items) once again grew significantly faster than revenue. "Here we see the synergy effects from the successful February 2001 acquisition of our former US distribution partner at work," comments Volker Dawedeit, CFO.
As a result of the acquisition, a one-time restructuring charge in the amount of 20.2 million euros was incurred in the first quarter of 2001. This item pushed earnings before tax for the first half year down to 19.9 million euros, while pre-tax earnings last year (43.2 m euros) benefited from one-time profits totaling 13.6 million euros from the sale of equity interests. Net profit in the first half of 2001 was posted at 10.8 million euros (2000: 22.5 m euros). Earnings per share were 0.41 euros (0.86 euros in 2000), and earnings per share as calculated according to DVFA/SG totaled 0.27 euros (0.57 euros in 2000).
Cash and equivalents totaled 40.8 million euros as of June 30, 2001, and the group equity ratio was 28 percent.
The number of employees worldwide increased to 3,488 (2.846 end of 2000) – primarily a result of acquisitions. As of June 30, 2001, 1,307 of these employees worked in Germany (1,292 end of 2000).
Second Quarter Exceeds Expectations
Up 56 percent year-on-year to 159.1 million euros, second-quarter revenue also performed well – in contrast to the market trend. Second-quarter operational earnings (EBITDA) rose to 31.7 million euros (2000: adjusted for income from one-time sale of equity interest, 16.3 m euros).
Licensing revenue demonstrated once again the strongest momentum with a total growth rate of 88 percent. This performance can be attributed to the robust continued growth of the classical enterprise transaction products (38% over Q2 2000). An additional factor was the positive development of second-quarter sales of the company's electronic business products with 44 percent (Q2 2000: 27%) of licensing revenue. The highest revenue came from middleware technology.
Tamino – Market-Leading XML Database
A very recent study conducted by International Data Corporation, USA, shows that Software AG holds the leading position in the up-and-coming XML database market with a share of 67 percent in western Europe and 41 percent worldwide. According to analysts, this market is expected to have a lightning-speed annual growth rate of more than 100 percent and is believed to reach USD 1.26 billion by the year 2004.
While there was moderate market activity in electronic business projects at the beginning of the year, the second quarter saw a slight upswing. Tamino XML Database performed particularly well with second-quarter licensing revenue leaping 124 percent to 6.5 million euros (Q2 2000: 2.9 m euros).
US Generates One-Third of Revenue
Through the acquisition of its former US distributor, Software AG achieved massive expansion of its position in North America. The US market accounted for 35 percent of total revenue in the first half of 2001. Germany was the second-largest market with 18 percent of total sales. The rest of Europe accounted for 37 percent of revenue, and in the rest of the world, the global software provider achieved 10 percent of its revenue.
The integration of the acquired US subsidiary has progressed well and is increasingly delivering the expected synergies. Sales force training in the new XML-based products has been completed, and the first sales deals have been closed. Königs describes the positive development: "We were completely dedicated to the integration process. It is running smoothly and our revenue and profit targets have been met completely."
Major Step with Worldwide Distribution Partners
Activities to build a network of indirect sales partners initiated last year continued in the first half of 2001. Eleven percent of licensing revenue came from channel sales. Software AG has signed 170 partners worldwide, whose primary role is to bolster penetration of the market for electronic business products. In addition to smaller-sized specialists, major systems integrators are also showing increased interest in Tamino XML Server.
In the second quarter, worldwide distribution and marketing cooperation agreements were signed with IBM Global Services, Hewlett Packard and BEA Systems. These partnerships are based on the integration of Tamino with Internet-capable application servers. The new product packages are expected to be released by the end of 2001.
Technological Lead Widened
In the first half of 2001, spending for research and development totaled 34.0 million euros (2000: 26.9 m euros) – about 18 percent of product revenue. Software AG shored up its lead in XML technology through product enhancements to Tamino. Tamino is presently the leading product offering a comprehensive software environment for application development and integration as well as exchange and storage of XML-based documents.
Software AG's next move in product development will be the broadening of the EntireX middleware platform to meet the future requirements of Total Business Integration. TBI will push the electronic exchange of data within an organization, between its separate entities and with external partners to a level of automation that allows applications and business processes running in completely different IT environments to communicate directly with each other.
The use of the new XML standard in these scenarios will enable enormous improvements in productivity. "We will bring the new product platform onto the market by the end of this year – in time for the next boom in electronic business that we expect to see mid- 2002,“ reported Königs.
Strong Double-Digit Revenue and Profit Growth Rate in Fiscal Year 2001
"Software AG showed robust growth in the first six months of the current fiscal year in spite of unfavorable market conditions. Revenue and operating income developed at an excellent rate. For the second half of the year, we expect the rather weak investment climate for IT products to continue. Our intensified sales in the US and penetration of new market segments via technology and distribution partners should have a positive impact on licensing revenue in the second half of 2001 and, subsequently, drive it up further. For fiscal year 2001, we continue to forecast revenue growth of at least 45 percent. We plan to increase operational earnings considerably faster than revenue the rest of the year also," Königs confirms the company's expectations.
about Software AG
Software AG, Darmstadt, Germany, is Europe’s largest system software provider and a major global player offering cutting edge technology for data management and electronic business. Since 1998 the company has focused its development activities on XML products for the Internet. With some 3,500 employees and representatives in over 70 countries, Software AG expects revenues to exceed euros 600 million in 2001. Its distribution and technology partners include market leaders such as IBM, Microsoft and SCO as well as innovative IT solutions providers like Extensibility, Softquad and Sequoia. Software AG’s products control the central IT processes of thousands of renowned companies worldwide. Some examples of these are Lufthansa, British Sky Broadcasting, ZDF, Dresdner Bank AG, Swiss Post, DaimlerChrysler, Deutsche Bahn AG (German Rail), BP and VIAG Interkom. Software AG is listed on the Frankfurt Stock Exchange (MDAX, Security identification number 724264 / SOWGn.F). Software AG’s UK offices are located in Bracknell and Derby.
More information at http://www.softwareag.co.uk
For more information on Software AG, please contact:
Tel: 01344 403 800
Tamsin Keynton/Richard Bennett
Tel: +44 (0)1962 888100
Fax: +44 (0)1962 888125
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