Software AG Investor Presentation/media/Files/S/Software-AG-IR/... · Software AG Investor...

©2014 Software AG. All rights reserved. 1 |

February 2014

Software AG

Investor Presentation


Safe-Harbor-Statement

This presentation contains forward-looking statements based on beliefs

of Software AG management. Such statements reflect current views of

Software AG with respect to future events and results and are subject to risks

and uncertainties. Actual results may vary materially from those projected

here, due to factors including changes in general economic and business

conditions, changes in currency exchange, the introduction of competing

products, lack of market acceptance of new products, services or technologies

and changes in business strategy. Software AG does not intend or assume any

obligation to update these forward-looking statements.


Software AG - At a Glance

High performance data management

Process planning, monitoring and

analysis

Middleware to integrate data, applications and

digital workflows

Intelligent Business Operations and Big Data

~ €1bn revenue (FY 2013)

~ 27% operating EBIT margin (FY 2013)

~ 16% free cash flow margin (FY 2013)

> 5,000 Employees worldwide

~ 1,000 R&D

> € 2bn market cap

> 60% free float

~ 29% Software AG Foundation

70 Countries

Global customer base: 80% of Fortune 10,000

Technology leader in system integration,

process automation and data management


Large Enterprise / Public Sector Customers in 70 Countries

Finance Public Sector Telecom Chemicals/Pharma Energy/Utilities

Manufacturing Logistics/ Transport

Healthcare/

Consumer Goods


The Impact of Differentiating Solutions by Software AG

Refreshments

Supply chain transformation in days

10s of millions increase in profit

higher response

rate to marketing

campaigns

reduction in

transfer time

for assets 98%

10x

several million

Average annual benefit of

now emergency-prepared

Employees and contractors


Americas EMEA

Germany Asia Pacific

*Based on group revenue FY 2013

Revenue Split – Well Balanced

Product Revenue by Region* Product Revenue by Industry*

Public Sector Financial Sector IT

Services Associations Manufacturing

Telcos Logistics Retail

Energy Other

22%

19%

38%

36%

17%

8%


Enterprise Transaction Systems ETS

• Manage cash cow

• Adjust cost to

maintain segment

margin > 60%

Business Process Excellence

• Product revenue: growth 10-20% p.a.

(incl. ca 50% growth in Big Data/IBO)

• >50% contribution to group result, mid-term

• Transform technology leadership into

market leadership

• Innovation M&A (cash-only; Cloud/Big Data/Analytics)

• Develop 3rd product line, mid-term

• Increase revenue with new products (non ETS) to € 1bn by 2018

Business Lines & Development

BPE

IT PORTFOLIO

MANAGEMENT

REAL-TIME INTELLIGENCE AND BIG DATA

PROCESS AUTOMATION

AND INTEGRATION

COLLABORATIVE

PROCESS ANALYSIS

DATABASE MANAGEMENT

SYSTEMS

Consulting

APPLICATION DEVELOPMENT &

MODERNIZATION

ENABLER FOR PRODUCT SALES

• Successful Turnaround

• Focus on Systems

Integration and

Business Solutions

• Focus on margin

expansion

44% 28%

28%

Software AG GROUP

S H A R E O F G R O U P R E V E N U E *

*based on revenue 2013: € 973m


0

50

100

150

200

250

300

350

400

2006 2007 2008 2009 2010 2011 2012 2013

Maintenance – High Level of Recurring Revenue and Profits

186 213

267

305

353 362 378

> 90% of Maintenance Revenue is recurring

€m

BPE

ETS

369*

*currency impact: € 16m


Free Cash Flow and Dividend per Share

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2006 2007 2008 2009 2010 2011 2012 2013

FCF per Share Div per Share

EUR


Transforming Software AG Prime Operational Targets 2014

Product

Revenue

60 %

40 %

ETS Enterprise

Transaction

Systems

Preserve

customer

base

BPE Business

Process

Excellence Dynamic

Growth

Minimize decline

Protect maintenance base

Utilize customer access for driving

strategic projects (ETS and BPE)

Increase sales efficiency

• 2013 – hires

• Utilize full market potential

Close strategic - 7/8-digit deals

Broaden customer base


0

50

100

150

200

250

300

350

2006 2007 2008 2009 2010 2011 2012 2013

License Revenue – Dynamic Growth in BPE Business

166

241

272 270

327

295 319

BPE License with sustainable growth

€m

BPE

ETS /Other

330*

*currency impact: € 17m


Turning Technology Leadership into Market Leadership:

Build Multi Channel Ecosystem and Integrated Portfolio Suite

Aris/web-Methods

webMethods

Apama

JackBe

LongJump

Alfabet, ARIS

Business Process Platform

Integration Platform

TerracottaMychannels

Cloud Suite & on-premise

Big Data/IBO Platform

Growth Multiple

Sales

Channels

Single

Sales

Channel

Growth acceleration

+ 200 sales/+ €50 m Invest.

SI‘s

OEM‘s/ISV‘s

Products

Suite

©2014 Software AG. All rights reserved. 13 | ©2013 Software AG. All rights reserved.

13 |

APPS

SEARCH

ERP

CRM, HR

ADABAS ETC.

ESB / SOA-GOV.

DATA MGMT.

COLLABORATION

EVENT MGMT.

RULES

Process Automation

IntegrationMiddleware

Application Silos HW Infrastructure

Analytics Visualization

REAL-TIME DATA

In-Memory Big Data

STRATEGY: Enabler of the Digital Enterprise

IT 1.0

IT 2.0

IT 3.0


B I G D ATA a n d I N - M E M O RY D ATA M A N A G E M E N T

Software AG Agility Platform

I N T E L L I G E N T B U S I N E S S O P E R AT I O N S

Event Processing Process Mining Historic KPI's Activity Monitoring Data Analytics

Business Process Analysis

PORTFOLIO MANAGEMENT

IT Portfolio Management Enterprise Architecture

COLLABORATIVE PROCESS ANALYSIS

Proactive Alerts Dashboards Real-Time Insight Mobile Anywhere

P R O C E S S A U TO M AT I O N / I N T E G R AT I O N

Application Integration B2B Integration SOA Governance Composite Applications

ERP Custom CRM

Process Automation

Governance, Risk & Compliance


In-memory Data Management

Intelligent Business Operations

Event Processing

Dashboards Real-Time Insight

Integration / SOA

Collaborative Process Analysis / Management

Enterprise Architecture

Event Processing

IT Portfolio Management

Visualization (Presto)

Application Development

Messaging

Organic Growth sparked by Innovations

In Memory Computing


Software AG Suite is a Top-Ranked Technology Leader

Application Integration Suites • • • • •

Application Services Governance • •

Business Process Analysis Tools • • •

Business Process Management Suites • • •

Enterprise Architecture Tools • •

Governance, Risk and Compliance • •

Integrated IT Portfolio Analysis Apps •

Complex Event Processing Platforms • • •

Comprehensive Integration Solutions • • • • •

EA Management Suites •

Elastic Caching Platforms • • •

ESB • • • •

Integrated SOA Governance • •

SOA Service Life-Cycle Management •


IBM 29%

Oracle 8%

Pegasystems 8%

Software AG 7%

Open Text 4%

Tibco 4%

Others 40%

IBM 31%

Oracle 24%

Microsoft 13%

Software AG

11%

Tibco 9%

Others 12%

Business Process Management Suite Enterprise Service Bus Suite

Source: Gartner, Inc., Market Share: All Software Markets, Worldwide, 2012, Colleen Graham et al, March 2013

Market Share in Main Markets: BPM and ESB


Best of 2 Worlds - Big Data and AIM merge to IBO

18

slow fast

AIM Big

Data

Apama

Terracotta

Nirvana

BPM

ESB

SOA

IBO

modern traditional


Intelligent Business Operations – Driving growth of AIM Market

Modern

ESB

SOA, B2B

& other

Modern

BPMS

Addressable AIM

Market Segments= $7.1bn

Addressable AIM

Market Segments = $9.2bn

1.1bn

1.6bn

1.2bn

2.1bn

SOA, B2B

& other

2014 2017 Tradit.

ESB Tradit.

BPMS 1.5bn

1.7bn 2.1bn

1.3bn

3.0bn

0.6bn

Modern

ESB

Modern

BPMS

Tradit.

BPMS

Tradit.

ESB

IBO related segments 2.9bn

5.1bn

21% CAGR

9% CAGR

©2014 Software AG. All rights reserved. 20 | December 9, 2011 20

Market Potential - Intelligent Business Operations / Big Data

Solutions

Source: Wikibon (Big Data Application (Analytic & Transactional) Revenue Forecast, in $bn, 2014 – 2017 Δ 113%)

Gartner (estimate for IBO: customer use case oriented solution)

3.5

5.3

6.5

7.4

0

1

2

3

4

5

6

7

8

2014 2015 2016 2017

Wikibon

Gartner

$bn


BPE License Growth vs Market Peers 2010-2013

0%

3%

6%

9%

12%

15%

18%

2011 2012 2013

Peer Group Average

Growth

yoy acc


Outlook FY 2014

Product Revenue BPE

Product Revenue ETS 273.8

+2% to +7%

- 9% to -16%*

422.9 +12% to +18%*

260.7

FY 2013 (in €m)

Outlook FY 2014 (as of March 31, 2014)

Operating Result (Non-IFRS)**

* Revenue growth or decline at constant currency

** Before adjustments for non-operating items (see non-IFRS earnings results)


€1 Billion

>80%

New Products (BPE+)

• Organic Growth

• Integration Technology

• Business Process Mgt.

• IBO / Big Data

• Cloud / Partner / OEM

• M&A/Innovative Technologies

2013 2018

40% Enterprise Transaction

Systems (ETS)

20%

80%

2006

60%

<20%

Revenue Targets 2013 - 2018 (BPE + ETS)

Product Revenue


Revenue and Margin Drivers 2014+

2014 2015 2016 2017 2018

Impact new sales staff

Growing Ø deal size

Platforms / use case packaging

Recurring projects

Cloud based offerings

Partner sales / OEM

Revenue mix

Economies of scale

(R&D, G&A)

Metrics

Channel

sales

Sales

productivity


Key Investment Indicators

1. Footprint: Established global software player with blue chip customer base

2. USP: Unique technology leadership in fast growing IT segments

3. Financials: Strong balance sheet and cash generation

4. Assets: Experienced management team and loyal expert staff

5. Timing: Post ramp-up investments for future growth / leverage ahead


*Source: ThomsonOne, January 2014

Number of total shares: 86,943,945

Freefloat: ~ 62%

Indices: TecDAX, DAX 100, TechAllShare

Codes: SOW, SOW GR, SOWG.DE

ISIN: DE0003304002

ADR U.S. trading symbol: STWRY

Share Data

Major Institutional Investors

Shareholder Structure

Shareholder Structure

Institutional Investors by Region*

Software AG Foundation

Institutional Investors

Private & undisclosed

25% 29%

37%

30%

23%

14%

8%

12% Germany

US

UK

Scandinavia

France

Rest of World

7%

Own Shares**

9%

**as of February, 2014

Fidelity (FMR LLC) 3.5%

Templeton 3.0%

Alken Asset Management 3.0%

Deka 2.9%

Norges Bank 2.9%

BeNeLux 6%

©2013 Software AG. All rights reserved.

Appendix

Financials


Euro 36%

US Dollar 26%

Other 10%

GBP 6%

AUD 5%

ZAR 2%

ILS 4%

CAD 3%

BRL 8%

(in €m; yoy)

Q4

2013

Q4

in %

FY

2013

FY

in %

Licenses -7.5 -6% -16.9 -5%

Maintenance -5.1 -5% -16.4 -4%

Consulting &

Other -1.4 -2% -4.5 -2%

Total -14.0 -5% -37.8 -4%

Currency impact on revenue

Currency impact on revenue

Q4 2013 / FY 2013

36% revenue in Euro

64% revenue in foreign currency

Currency split FY 2013


Revenue Q4 2013 / FY 2013

(in €m) Q4

2013

Q4

2012

Δ% Δ% acc

FY

2013

FY

2012

Δ% Δ% acc

Product 204.4 196.8 4% 10% 705.7 712.2 -1% 4%

Licenses 110.9 97.1 14% 22% 330.1 318.9 4% 9%

Maintenance 93.5 99.7 -6% -1% 375.6 393.3 -5% -

Consulting & services 67.0 79.6 -16% -14% 266.0 333.3 -20% -19%

Other 0.1 0.3 - - 1.0 1.8 - -

Total 271.5 276.7 -2% 3% 972.7 1,047.3 -7% -4%


Segment report Q4 2013 / FY 2013

Business Process Excellence (BPE)

(in €m) Q4

2013

Q4

2012

Δ% Δ% acc

FY

2013

FY

2012

Δ% Δ% acc

Licenses 73.6 63.5 16% 23% 220.1 194.7 13% 18%

Maintenance 53.1 50.2 6% 11% 202.8 190.0 7% 11%

Total revenue 126.7 113.7 11% 18% 422.9 384.7 10% 15%

Cost of sales -6.0 -4.5 33% 41% -22.4 -18.8 19% 23%

Gross profit 120.7 109.2 11% 17% 400.5 365.9 9% 14%

Sales & marketing -56.9 -38.0 50% 57% -201.5 -137.3 47% 53%

R & D -22.9 -19.7 16% 18% -82.5 -74.9 10% 12%

Segment result 40.9 51.5 -21% -13% 116.5 153.7 -24% -19%



Enterprise Transaction Systems (ETS)

(in €m) Q4

2013

Q4

2012

Δ% Δ% acc

FY

2013

FY

2012

Δ% Δ% acc

Licenses 36.0 32.3 11% 21% 107.4 121.3 -11% -6%

Maintenance 39.0 45.7 -15% -9% 166.4 188.3 -12% -7%

Product revenue 75.0 78.0 -4% 3% 273.8 309.6 -12% -7%

Other 0.2 0.2 - - 0.7 0.9 - -

Total revenue 75.2 78.2 -4% 3% 274.5 310.5 -12% -7%

Cost of sales -3.6 -3.5 3% 7% -14.1 -15.6 -10% -6%

Gross profit 71.6 74.7 -4% 3% 260.4 294.9 -12% -7%

Sales & marketing -13.3 -16.8 -21% -16% -50.4 -61.7 -18% -15%

R&D -6.5 -6.6 -2% -1% -25.3 -26.1 -3% -3%

Segment result 51.8 51.3 1% 9% 184.7 207.1 -11% -5%


(in €m) Q4

2013

Q4

2012

Δ% Δ% acc

FY

2013

FY

2012

Δ% Δ% acc

Licenses 1.3 1.4 -7% -10% 2.6 2.9 -10% -9%

Maintenance 1.4 3.8 -63% -63% 6.5 15.0 -57% 57%

Product revenue 2.7 5.2 -48% -48% 9.1 17.9 -49% -49%

Services & other 66.9 79.6 -16% -14% 266.3 334.2 -20% -19%

Total revenue 69.6 84.8 -18% -16% 275.4 352.1 -22% -20%

Cost of sales -57.1 -74.8 -24% -22% -232.6 -320.0 -27% -26%

Gross profit 12.5 10.0 25% 29% 42.8 32.1 33% 37%

Sales & marketing -7.1 -7.2 -1% 4% -33.5 -33.8 -1% 3%

Segment result 5.4 2.8 93% 93% 9.3 -1.7 >100% >100%


Consulting


44

Results Q4 2013 / FY 2013

(in €m) Q4

2013

Q4

2012

Δ% Δ% acc

FY

2013

FY

2012

Δ% Δ% acc

Total revenue 271.5 276.7 -2% 3% 972.7 1,047.3 -7% -4%

Cost of sales -72.7 -88.9 -18% -17% -294.6 -378.4 -22% -21%

Gross profit 198.8 187.8 6% 13% 678.1 668.9 1% 6%

Margin in % 73.2% 67.9% 69.7% 63.9%

R & D -29.4 -26.3 12% 13% -107.9 -101.1 7% 8%

Sales & marketing -80.8 -65.6 23% 30% -300.1 -246.9 22% 26%

Administration -20.7 -21.6 -4% -2% -73.2 -75.8 -3% -2%

Other

income/expense 2.5 1.1 - - 8.6 3.2 - -

EBIT 70.4 75.4 -7% 3% 205.5 248.3 -17% -10%

Margin in % 25.9% 27.2% 21.1% 23.7%


Non-IFRS Earnings (Operating Result) Q4 2013 / FY 2013

* Based on average outstanding shares: Q4 2013: 82.2m / Q4 2012: 86.8m // FY 2013: 83.7m / FY 2012: 86.8m

(in €m) Q4

2013

Q4

2012

FY

2013

FY

2012

EBIT (before all taxes) 70.4 75.4 205.5 248.3

Amortization on acquisition related

intangible assets 9.4 9.7 40.4 38.1

Reduction acquisition related product

revenue by purchase price allocation 0.3 - 1.2 1.0

Other acquisition impacts 0.1 - 1.7 0.6

Share based payment 0.2 3.7 -0.7 7.9

Restructuring/severances 3.4 0.5 12.6 3.0

Operating Result (Non-IFRS) 83.8 89.3 260.7 298.9

in % of revenue (Non-IFRS) 30.8% 32.3% 26.8% 28.5%

Net income (Non-IFRS) 56.6 60.9 172.9 200.7

EPS (Non-IFRS)* 0.69 0.70 2.07 2.31

Net income (IFRS) 46.9 50.7 134.0 164.7


Cash flow Q4 2013 / FY 2013

* Cash flow from investing activities except acquisitions and except investments in debt instruments

** Based on average outstanding shares: Q4 2013: 82.2m / Q4 2012: 86.8m / FY 2013: 83.7m / FY 2012: 86.8m

(in €m) Q4

2013

Q4

2012

Δ% FY

2013

FY

2012

Δ%

Operating cash flow 56.4 50.9 11% 171.8 184.4 -7%

./. CapEx* -2.9 -5.7 -12.7 -13.7

Free cash flow 53.5 45.2 18% 159.1 170.7 -7%

as % of revenue 19.7% 16.3% 16.4% 16.3%

Free cash flow per share** 0.65 0.52 25% 1.90 1.97 -4%


Dec. 31,

2013

Dec. 31,

2013

1,996.9 1,996.9

450.0

323.2

57.3

1,109.9

613.4

309.9

108.0

965.6

1,771.9

315.7

341.3

75.9

1,039.0

1,771.9

266.0

333.9

111.9

1,060.1

Cash and cash

equivalents

Trade receivables

Inventory, other assets

Fixed assets

(goodwill 829.2/756.4)

Total

Financial liabilities

Other liabilities

Deferred income

Shareholders equity

(ratio 48.4%/59.8%)

Total

Assets Liabilities

Balance sheet

(in €m)

Dec. 31,

2012

Dec. 31,

2012

Securities 56.5


Earnings Q4 2013 / FY 2013

* Weighted average shares outstanding (basic) Q4 2013: 82.2m / Q4 2012: 86.8m / FY 2013: 83.7m / FY 2012: 86.8m

(in €m) Q4

2013

Q4

2012

Δ% FY

2013

FY

2012

Δ%

EBIT (before all taxes) 70.4 75.4 -7% 205.5 248.3 -17%

Financial result -3.8 -3.5 9% -8.4 -8.8 -5%

Profit before taxes 66.6 71.9 -7% 197.1 239.5 -18%

Other taxes -2.3 -2.5 -8% -7.1 -8.0 -11%

Income taxes -17.4 -18.7 -7% -56.0 -66.8 -16%

Tax rate in % 29.6% 29.5% 32.0% 31.2%

Net Income 46.9 50.7 -7% 134.0 164.7 -19%

EPS in €* 0.57 0.58 -2% 1.60 1.90 -16%


Earnings Q4 2013 / FY 2013

(in €m) Q4

2013

Q4

2012

Δ%

FY

2013

FY

2012

Δ%

Net Income 46.9 50.7 -7% 134.0 164.7 -19%

Income taxes 17.4 18.7 -7% 56.0 66.8 -16%

Other taxes 2.3 2.5 -8% 7.1 8.0 -11%

Financial result 3.8 3.5 9% 8.4 8.8 -5%

EBIT (before all taxes) 70.4 75.4 -7% 205.5 248.3 -17%

Margin in % 25.9% 27.2% 21.1% 23.7%

Amortization 9.4 9.7 -3% 40.4 38.1 6%

EBITA 79.8 85.1 -6% 245.9 286.4 -14%

Margin in % 29.4% 30.8% 25.3% 27.3%

Depreciation 3.0 3.4 -12% 12.9 12.9 -

EBITDA 82.8 88.5 -6% 258.8 299.3 -14%

Margin in % 30.5% 32.0% 26.6% 28.6%


Amortization / depreciation impact 2013ff

(preliminary)

Q4

2013

2.7

6.7

3.0

FY

2013

FY

2014ff*

* Estimated

Amortization IDS

(in €m)

Amortization other

Depreciation

10.6

29.8

12.9

10.6

28.6

12.6


Headcount by functional areas* and geography

* According to P+L structure

(in FTE) Dec.31,

2013

Sept.30,

2013

Δ% qoq

Dec.31,

2012

Δ% yoy

Total 5,238 5,356 -2% 5 5,419 -3%

Consulting & services 2,347 2,375 -1% 2,658 -12%

R & D 998 1,005 -1% 887 13%

Sales & marketing 1,180 1,261 -6% 1,131 4%

Administration 713 715 - 743 -4%

USA 778 804 -3% 758 3%

Germany 1,711 1,735 -1% 1,768 -3%

Rest of world 2,749 2,817 -2% 2,893 -5%

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