Software AG (TecDAX: SOW) announced its financial results* for the first quarter ending March 31st , 2004.
Software AG announced operating results (EBIT) of 15.1 million Euro, an increase of 89%, compared to Q1 2003. Profit before tax of 15.8 million Euro was posted compared to a loss of 23.1 million Euro in Q1 2003 which included restructuring charges. Net income after tax was 9.8 million Euro compared to a loss of 14.8 million Euro in Q1, 2003.
License revenues rose by 6% to 23.3 million Euro. Total revenues in the first quarter of 2004 were 95.7 million Euro, compared to 103.1 million Euro in Q1, 2003. This represents a reduction of 7%, largely caused by the strong Euro and a decline in revenues from project services.
At today¹s press conference in Frankfurt, Karl-Heinz Streibich, Software AG¹s CEO, summarized first-quarter developments: "These results are an excellent start to reaching our 2004 objectives."
Both enterprise transaction license revenue and operating results (EBIT) came in above market expectations. This renewed vote of confidence by customers in Software AG¹s Enterprise Transaction System products and the improved company cost structure are a direct result of the rightsizing activities of 2003.
Revenue
Software AG¹s first-quarter product revenues remained strong. Reported revenues were 67.4 million Euro (compared to 69.2 million Euro in Q1, 2003). This represented a 3% rise at constant currency rates.
License revenue showed an increase of 6% to 23.3 million Euro (21.9 million Euro in 2003). Maintenance remained stable net of currency affects contributing 44.1 million Euro (47.3 million Euro in 2003).
The license revenue changes shown by the two business lines differed. License revenue for Enterprise Transaction Systems grew by 31% to 17.8 million Euro (13.6 million Euro in 2003). This represents further major customer investment in the company¹s classic product lines Adabas and Natural, demonstrating the stability of the customer base and the success of the ŒCustomer First¹ program initiated in 2003.
While customers are making significant investments in existing systems there is still some reluctance to invest in new technology. License revenue for the XML Integration business line was 3.8 million Euro in Q1 (6.1 million Euro in 2003). With the launch of XML Integration packages in Q2, an improvement in license revenue is expected during the course of the year.
Integration sales should also drive project services revenue posted at 28 million Euro in the first quarter of 2004 (33.6 million Euro in 2003). Excess market capacity has put severe pressure on prices, resulting in an adjustment to Software AG¹s services capacity during 2003.
Regional revenues affected by exchange rates
License revenues increased in three of Software AG¹s business regions, Northern Europe/Asia posted a 33% increase, Central and Eastern Europe a 21% increase and Southern and Western Europe an 19% increase.
The effects of foreign exchange rates were most pronounced in the Americas region with revenues of 27.4 million Euro in Q1 (33.4 million Euro in 2003).
Income
The restructuring program implemented in fiscal 2003 has led to lower expenditure. Cost of sales was reduced by 6.1 million Euro and operating expenses were 10.6 million Euro lower than in Q1 2003. As a result, Software AG posted operating EBIT up by 89% to 15.1 million Euro (compared with an operating EBIT of 8.0 million in Euro Q1 2003).
The results will be further positively affected in the second half of 2004. The consolidation of R&D will then further reduce operating expenses by 10 million Euro.
Software AG has no bank debts and reported financial income of 0.7 million Euro.
Profit before tax was 15.8 million Euro (compared to a loss of 23.1 million Euro in Q1, 2003 which included a restructuring charge 31.8 million Euro). There were no extraordinary income or expenses in Q1, 2004.
Net income was 9.8 million Euro (against -14.8 million Euro in Q1, 2003), which represents earnings per share of 0.36 Euro.
Balance sheet
Liquid assets increased to 83.1 million Euro (74.2 million Euro in 2003). Furthermore, liquid assets will be bolstered in Q2 by the sale of SAP SI shares for 26 million Euro which will also result in an extraordinary profit of 24 million Euro.
Fixed assets of 256.6 million Euro were posted (250.9 million Euro in 2003) including goodwill of 176.5 million Euro. Total assets increased to 523.5 million Euro (509.1 million Euro in 2003), and the shareholder¹s equity to 286.8 million Euro (269.2 million Euro in 2003). The equity-to-total-assets ratio rose from 52.8% to 54.8%, the highest since the initial public offering.
The free cash flow was 9.4 million Euro (9.7 million Euro in 2003) despite a 6.4 million Euro increase in cash-out for restructuring.
The effective headcount dropped between the 31st of March 2003 and the 31st of March 2004 by 373 or 13%.
Business Outlook
The focus for 2004 is on stabilizing revenue and improving the company cost structure. Based on Q1 operating results and license revenues the Executive Board believes that the company is well on track to achieving both goals.
The concentration on two business lines will continue to result in core business license revenue balancing out the revenue consolidation from non-strategic fields. Allied with the further reduction in operating expenses, the company therefore anticipates a significant increase in operating income by approximately 25%.
Operating margins should also improve. A lower cost base, sustainable strong cash flow, and the sale of SAP SI shares will further strengthen the corporate financial structure. Earnings per share are expected to be in the region of 2.50 -2.60 Euro.
*IFRS & HGB
These financial results are being presented under IFRS. Previously, Software AG has presented financial information under the German accounting regulations HGB.
All 2003 figures have been restated to comply with IFRS and may differ from previously stated or published financial accounts.
Full details of all changes will be published in the notes to the quarterly financial statements.
NOTE FOR THE EDITORSHIP
About Software AG
Software AG is one of Europe's largest system software providers and a global provider of high-performance databases, system software and services. This technology enables customers to run mission-critical, cross-platform applications, simplify the exchange of data between disparate systems and integrate cutting-edge Web applications into traditional IT architectures. Respected for technology leadership and professional services expertise, Software AG develops products that fully support the XML (eXtensible Markup Language) standard. Founded in 1969 and headquartered in Darmstadt, Germany, Software AG is represented in 59 countries with more than 2,500 employees. Software AG achieved 422 million euros in total revenue in 2003 and is listed on the Frankfurt Stock Exchange (TecDAX, ISIN DE 0003304002 / SOW).
For further information please contact:
Susanne Eyrich
VP Corporate Communications
Software AG
Uhlandstraße 12
D-64297 Darmstadt
Tel.: 06151-92-1201
Fax: 06151-92-1933
press@softwareag.com
www.softwareag.com