Software AG announces Q3 financial results: delivers strong quarterly revenue and profit; confirms existing Group guidance ranges for FY 2019
[Unless otherwise stated, all figures are IFRS-conform and rounded.]
Software AG (Frankfurt MDAX: SOW) today announces its financial figures (IFRS, preliminary) for third quarter 2019. Software AG delivered a strong Group-level performance in both revenue and profit. The operational performance is consistent and confirms the financial guidance for the full year 2019. A&N continued to deliver strong results ahead of expectations, with revenues up 15 percent year-on-year. DBP (excl. Cloud & IoT) delivered a recovery from the first half, with measures taken in North America to de-risk pipelines, improve sales structures and embed new leadership having a positive impact. Cloud & IoT had a slower performance in the period, as sizeable second half 2019 pipeline opportunities are expected to be signed in Q4, although momentum in new logo acquisition continued to build. Reflecting the ambition to increase the proportion of predictable and higher quality license revenues, SaaS or subscription commitments as a proportion of DBP (incl. Cloud & IoT) bookings more than doubled year-on-year to 63 percent.
"Eight months in to our Helix transformation program, I am encouraged to see the first benefits of our tough decisions, disciplined focus and sharper execution showing through. There is much still to do – but strong growth in recurring revenue, a full cloud suite for all of our major products, strong momentum in new logo wins and a steadying of our business in North America all show that we are pointing in the right direction. I am delighted to see us extend our partnership ecosystem further today, with our new Marketo OEM relationship extending the deep bonds we have already built with Adobe. Our position in the key market “hybrid integration” is getting stronger, and we remain focused as a team on the initiatives that will see us deliver on our long-term growth ambitions,” said Sanjay Brahmawar, CEO of Software AG.
"Our financial performance in Q3 was strong, following a slower start in the first half year of our digital business. This underpins our confidence that the markets and opportunities we are pursuing are the right ones. Our divisional performance was encouraging, and despite a slower revenue recognition in Cloud & IoT, we are trending in line with our guidance ranges for the year as a whole. We have made great progress with our subscription model conversion program and we remain on a solid financial footing to support this and our other Helix priorities moving forward,” commented Arnd Zinnhardt, CFO of Software AG.
Third Quarter 2019 Business Line Performance
In the third quarter of 2019 Software AG’s A&N business performed for the quarter, generating revenue of €62.0 million. A&N license sales increased by 48 percent compared to the prior year to €25.0 million (2018: €16.1 million). A&N maintenance reached €36.8 million in Q3 2019, consistent to €36.0 million in Q3 2018.
DBP (excl. Cloud & IoT) also delivered results ahead of our expectations, experiencing an overall revenue growth 1 percent to €108.7 million (2018: €104.7 million). License revenues show a flat development with €37.9 million from €37.1 million.
Software AG's Cloud & IoT business had a relatively weaker license revenue performance, albeit against a strong prior year. Despite maintenance and SaaS showing strong double-digit growth, in total, business line revenue declined by 6 percent to €8.6 million, compared to €9.1 million in Q3 2018.
Third Quarter 2019 Total Revenue and Earnings Performance
Software AG reported €224.2 million (2018: €208.8 million) in total revenue in the period. This is an increase of 5 percent. Group license revenue grew 9 percent to €64.1 million (2018: €56.7 million). Group maintenance revenue totalled €109.3 million (2018: €104.7 million), or 2 percent growth. Accordingly, Software AG's total third quarter product revenue (licenses and maintenance) was €179.2 million (2018: €165.9 million), which reflects 5 percent growth.
The company's EBIT was €59.0 million (2018: €54.5 million) in the quarter under review. This reflects an EBIT margin of 26.3 percent (2018: 26.1 percent). At €68.4 million (2018: €63.8 million), operating EBITA (non-IFRS) also performed well, ahead of expectations in the quarter. Subsequently, the operating profit margin (non-IFRS) was 30.5 percent (2018: 30.5 percent).
As of September 30, 2019, Software AG had 4,883 (2018: 4,714) employees worldwide (full-time equivalents). Of that total, 1,890 (2018: 1,903) worked in Professional Services.
Software AG confirms its outlook for FY 2019. Based on the expectations of business performance for the fourth quarter, Software AG's Management Board continues to anticipate an operating profit margin (EBITA, non-IFRS) between 28.0 and 30.0 percent for the 2019 fiscal year. Digital Business Platform (excl. Cloud & IoT) revenue is expected to end up in a range of 0 to 6 percent below previous year. Cloud & IoT revenue is expected to increase between 75 and 125 percent. The revenue growth target for the Adabas & Natural database business line remains unchanged between -3 and +3 percent.
The table below shows the full forecast for the 2019 fiscal year:
About Software AG
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Learn more about Software AG and Freedom as a Service at www.softwareag.com.
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