Software AG closes fiscal 2017 with record-breaking quarter

• Digital Business Platform: most successful quarter in company’s history
• Adabas & Natural: Strong growth in Q4
• Profitability: Q4 operating profit margin at all-time high
• Increase in all major operational KPIs: Total revenue, Operating profit & EBIT 
• Accelerated growth in Cloud: Order entry up +110 percent, revenue grows by +66 percent
• 2018 Outlook: Strong growth in IoT / Cloud expected

Software AG today released its financial results (IFRS, preliminary) for the fourth quarter and 2017 fiscal year. The company reported the most successful quarter in its history for its growth engine Digital Business Platform. Both license and maintenance revenues reached all-time quarterly highs. New strategic IoT partnerships formed in 2017 with global corporations laid the foundation for scalable and dynamic growth. Accordingly, Software AG will report its IoT / Cloud revenues separately starting in 2018. License revenue in the Adabas & Natural database business also demonstrated above average growth in the fourth quarter. Along with a total revenue increase, Software AG was also able to increase profitability. The company’s operating profit margin (EBITA, non-IFRS) set a new record in Q4, climbing 250 basis points to hit 36.7 percent. These results confirm Software AG’s growing relevance in the global IT market and underline the company’s increasing momentum in strategic IoT and Industry 4.0 projects, which lay the foundation for further profitable growth.

Software AG CEO Karl-Heinz Streibich stated: “Thanks to our initiatives in the areas of the Internet of Things and Industry 4.0, we started seeing initial results and gained increased market share in 2017. We will continue in this direction in 2018 and will extend our market leadership.”

Software AG CFO Arnd Zinnhardt added: “There is enormous growth potential in the global IoT market. This is why we established a new business area on IoT / Cloud. We have built a solid foundation for dynamic, exponential growth, and we are convinced to outperform the market in 2018.”

Fourth-Quarter 2017 Performance (Growth in percentage reported net of currency)

The Digital Business Platform (DBP) business line reported record-breaking results in the fourth quarter. At €144.7 million in revenue, Software AG concluded its most successful quarter in its history in the digital business line. This is an increase of 6 percent year-on-year.  License revenue also grew by 6 percent to total €77.8 million. Fourth-quarter maintenance revenue was €66.9 million (2016: €66.3 million), which is also 6 percent higher than last year. At the same time, Software AG succeeded in increasing cloud revenue by 66 percent with order entry up by 110 percent.

The Adabas & Natural (A&N) database line saw 14 percent growth with €74.6 million (2016: €69.5 million) in revenue. This positive development underscores the stability of the business and the loyalty of the A&N customer base. A further stabilizing factor was the company’s “Adabas & Natural 2050+” innovation program which provides support and digital innovations for customers beyond the year 2050. With this program, Software AG is contributing, in the long term, to protecting its customers‘ investments and actively modernizing their IT landscapes.

Revenue in the Consulting business line totaled €49.2 million (2016: €50,0 million) in Q4, at the previous year’s level.

In the same reporting period, total revenue grew 7 percent to €268.4 million (2016: €263.9 million). Software AG’s license revenue was also up in the fourth quarter, showing 14 percent growth at €115.3 million (2016: €107.5 million). At €103.7 million, maintenance revenue was up 2 percent year-on-year.

Fiscal 2017 performance (Growth in percentage reported net of currency)

Software AG’s Digital Business Platform business line delivered a strong performance in fiscal 2017 with 5 percent growth to €455.4 million (2016: €441.4 million).  Fiscal 2017 revenue for the Adabas & Natural (A&N) database business was at the mid forecast range at €223.7 million (2016: €234.6 million). The Consulting business segment revenue also performed well, growing 2 percent to €199.9 million (2016: €195.9 million).

At €879.0 million (2016: €871.8 million), Software AG’s total revenue was up a slight 2 percent year-on-year. Maintenance revenue grew by 3 percent year-on-year. License revenue for the fiscal year reached last year’s level totaling €256.7 million (2016: €263.0 million).

Earnings performance

EBITA (non-IFRS) improved by 3 percent totaling €279.5 million (2016: €272.0 million) in fiscal 2017. The company’s operating profit margin rose accordingly by 60 basis points to 31.8 percent (2016: 31.2 percent) and marked a new record in the company’s history. This operating margin is in the upper half of Software AG’s forecast range, which had been raised during the year.  EBIT (IFRS) was up by 4 percent to €222.8 million (2016: €213.9 million) in 2017.

Free cash flow totaled €161,9 million (2016: €187.0 million) in fiscal 2017, which reflects 18 percent of total revenue.

Employees

As of December 31, 2017 Software AG had 4,596 (2016: 4,471) employees worldwide (full-time equivalents). Of that total, 1,935 (2016: 1,914) worked in Consulting and Services, 862 (2016: 842) in Sales and Marketing, 1,176 (2016: 1,110) in Research and Development and 623 (2016: 605) in Administration.

2018 Outlook

Based on its 2017 financial results and its current business performance, Software AG expects revenue growth in 2018 in the Digital Business Platform, excluding IoT/Cloud, of between +3 and +7 percent net of currency. Based on the high demand for Software AG solutions in the IoT and Industry 4.0 markets in particular, Software AG anticipates IoT/Cloud revenue to increase by +70 to +100 net of currency. The company foresees revenue development in the Adabas & Natural business line of between -2 and -6 percent net of currency. Additionally, Software AG expects an operating earnings margin (EBITA, non-IFRS) between 30 and 32 percent as well as an earnings per share (EPS, non-IFRS) improvement of between +5 and +15 percent for fiscal 2018.