Q1 2020 EARNINGS

23 April, 2020

© 2020 Software AG. All rights reserved.

WELCOME

Q1 2020 EARNINGS CALL AGENDA

1

2

3

4

5

Sanjay Brahmawar

Covid-19 Actions

Q1 - Execution Against Strategy

Outlook

Arnd Zinnhardt

Q1 Financial Performance

John Schweitzer

CRO Perspective

Sanjay Brahmawar

Summary

Your Questions

2 |

© 2020 Software AG. All rights reserved.

Safe Harbor

This presentation includes forward-looking statements based on the 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.

This presentation constitutes neither an offer nor recommendation to subscribe or buy in any other way securities of Software AG or any of the companies that are members of the Group at present or in the future, nor does it form part of such an offer and it should not be understood as such. This presentation does not constitute an offer of sale of securities in the United States of America. Securities may not be offered or sold in the United States of America without registration or exemption from registration in accordance with the U.S. Securities' Act of 1933 in its currently valid form.

3 |

© 2020 Software AG. All rights reserved.

COVID-19

SWIFT ACTION TO SAFEGUARD PEOPLE & PLATFORM

A global team at

People & platform

Supporting our

its best

secure

Customers

Adaptable, energetic, collaborative

Priority 1: safety of our people

Listened to our customers

Supporting each other, supporting our

Remote working operational with

"Business as Unusual" product

communities

minimal friction

access initiative launched

Will emerge a stronger, more resilient,

No major workforce health issues,

Very positive customer

more agile business

service delivery unaffected

response and engagement

4 |

© 2020 Software AG. All rights reserved.

COVID-19

SURE-FOOTED: FINANCIALLY AND OPERATIONALLY

€500m gross cash, c.€200m headroom

€488m Annual recurring revenue

Prioritizing impactful

ROBUST

STRONG

investments, cost

FINANCIAL

OPERATING

actions taken

POSITION

PLATFORM

Diversified customer base

Low exposure to acutely affected industry sectors

Heightened product & market relevance

5 |

© 2020 Software AG. All rights reserved.

HEADLINE NUMBERS

EXECUTING TO DELIVER STRONG RESULTS

Q1

+/- change as % acc

Group Revenue

€ 207.0m

+2%

Group Product Revenue

€ 160.9m

+4%

DBP incl. IoT

€ 103.5m

+3%

A&N

€ 57.5m

+5%

EBIT (IFRS)

€ 28.7m

-32%

Non-IFRS EBITA Margin

19.2%

Leading Indicators

ARR (DBP incl. IoT)

+11% YoY

SaaS/Subs as % Bookings (DBP incl. IoT)

69%

Bookings KPIs

DBP incl. IoT

€ 58.1m

+19% YoY

IoT Bookings

€ 23.5m

+65% YoY

DBP Core Bookings

€ 34.6m

+1% YoY

A&N Bookings

€ 32.0m

+47% YoY

6 |

© 2020 Software AG. All rights reserved.

EXECUTION AND DELIVERY

INNOVATING, EXECUTING, WINNING

Maintaining our

Executing for

customers, winning

innovation pace

competitively

56

New customers

1stmilestone

delivered

API management win vs. [Mulesoft]

Continued A&N

resilience

zIIP & containerization

Available on Microsoft Azure

marketplace

A&N resilient in previous times of

economic shock

7 |

© 2020 Software AG. All rights reserved.

Q1 2020

STAYING FOCUSED ON OUR STRATEGY

Culture

Marketing

Business transformation underpinned by cultural transformation

Augmenting our leadership base, attracting industry talent

Investing in competencies, processes and cross-functional collaboration

43% YoY increase in Marketing Qualified Leads

20% YoY increase in website visitor traffic

Continue to lead Analyst Rankings in key product categories

8 |

© 2020 Software AG. All rights reserved.

FY 2020 OUTLOOK

DBP excl. Cloud & IoT Product Bookings

DBP Cloud & IoT Product Bookings

A&N Product Bookings

Operating Margin (EBITA, non-IFRS)2

1 at constant currency

2 adjusted for non-operating factors (see non-IFRS earnings definition in the 2018 annual report on p. 48f)

FY 2020 Outlook

FY 2020 Outlook

(as of January 28)

(revised)

As %1

As %1

+10% to +15%1

+0% to +10%1

+40% to +60%1

+20% to +40%1

-3% to +3%1

unchanged

20% to 22%

unchanged

Medium-term

ambitions

unchanged

2023

€1bn

Revenue

28% -

30% Op.

Margin

85%-

90% R. Product Rev.

9 |

© 2020 Software AG. All rights reserved.

Results 1stQuarter 2020 (IFRS, unaudited)

23 April, 2020

Currency Impact on RevenueQ1 2020

  • 32% revenue in Euro
  • 68% revenue in foreign currency

ILS 5%

GBP 6%

Sonstige

Other

21% Euro

24%35% EUR 32%

USUSDDollar

25%

33%

Currency split Q1 2020

Currency impact on revenue

Q1

Q1

(in €m; yoy)

2020

in %

Licenses

0.1

0%

Maintenance

0.5

1%

SaaS

0.0

1%

Professional Services

0.6

1%

& Other

Total

1.3

1%

11| © 2020 Software AG. All rights reserved.

Digital Business Platform (excluding Cloud & IoT)

SEGMENT REPORT Q1 2020

(in €m)

Q1

Q1

∆%

∆%

2020

2019

acc

Bookings

34.6

34.9

-1%

1%

Licenses

18.6

21.7

-14%

-13%

Maintenance

69.4

68.7

1%

0%

Total revenue

88.1

90.5

-3%

-3%

Annual Recurring Revenue

295.3

272.4

8%

9%

as of March 31

12| © 2020 Software AG. All rights reserved.

DBP Cloud & IoT

SEGMENT REPORT Q1 2020

(in €m)

Q1

Q1

∆%

∆%

2020

2019

acc

Bookings

23.5

14.1

67%

65%

Licenses

6.5

3.1

112%

107%

Maintenance

2.0

1.6

28%

27%

SaaS / Usage based

6.9

4.9

42%

41%

Total revenue

15.4

9.5

62%

60%

Annual Recurring Revenue

45.8

36.2

26%

27%

as of March 31

13| © 2020 Software AG. All rights reserved.

Digital Business Platform (including Cloud & IoT)

SEGMENT REPORT Q1 2020

(in €m)

Q1

Q1

∆%

∆%

2020

2019

acc

Bookings

58.1

48.9

19%

19%

Licenses

25.1

24.8

1%

2%

Maintenance

71.4

70.3

2%

1%

SaaS

6.9

4.9

42%

41%

Total revenue

103.5

100.0

4%

3%

Cost of sales

-11.5

-9.3

23%

23%

Gross profit

92.0

90.6

2%

1%

Sales & Marketing

-50.7

-45.8

11%

10%

Research & Development

-28.0

-27.4

2%

0%

Segment result

13.4

17.5

-23%

-21%

Margin in %

12.9%

17.5%

Annual Recurring Revenue

341.0

308.6

11%

11%

as of March 31

14| © 2020 Software AG. All rights reserved.

Adabas & Natural

SEGMENT REPORT Q1 2020

(in €m)

Q1

Q1

∆%

∆%

2020

2019

acc

Bookings

32.0

21.4

49%

47%

Licenses

21.5

17.8

21%

20%

Maintenance

35.9

36.8

-3%

-2%

Product revenue

57.4

54.6

5%

5%

Other

0.1

0.2

-

-

Total revenue

57.5

54.7

5%

5%

Cost of sales

-2.6

-2.2

16%

17%

Gross profit

55.0

52.5

5%

4%

Sales & Marketing

-9.3

-7.4

26%

26%

Research & Development

-8.5

-5.9

44%

43%

Segment result

37.2

39.3

-5%

-5%

Margin in %

64.6%

71.7%

15| © 2020 Software AG. All rights reserved.

Professional Services

SEGMENT REPORT Q1 2020

(in €m)

Q1

Q1

∆%

∆%

2020

2019

acc

Total revenue

46.0

46.7

-2%

-3%

Cost of sales

-39.2

-35.7

10%

8%

Gross profit

6.8

11.0

-39%

-39%

Sales & Marketing

-4.4

-4.3

3%

2%

Segment result

2.4

6.7

-65%

-65%

Margin in %

5.1%

14.4%

16| © 2020 Software AG. All rights reserved.

Results

Q1 2020

(in €m)

Q1

Q1

∆%

∆%

2020

2019

acc

Total revenue

207.0

201.4

3%

2%

Cost of sales

-55.3

-49.5

12%

11%

Gross profit

151.8

152.0

0%

-1%

Margin in %

73.3%

75.4%

Research & Development

-36.5

-33.3

10%

9%

Sales & Marketing

-66.0

-60.8

8%

8%

Administration

-21.4

-17.6

22%

21%

Other income / expense

0.9

2.0

-

-

EBIT

28.7

42.2

-32%

-32%

Margin in %

13.9%

21.0%

17| © 2020 Software AG. All rights reserved.

Non-IFRS Earnings

Q1 2020

(in €m)

Q1

Q1

∆%

2020

2019

EBIT (before all taxes)

Amortization on acquisition related intangible assets Share based payments

Restructuring / severances / legal case Other impacts / impacts from M&A activities

EBITA (Non-IFRS)

28.7

42.2

-32%

3.6

5.6

-35%

3.2

2.5

28%

3.8

1.1

233%

0.4

0.2

108%

39.7

51.6

-23%

in % of revenue (Non-IFRS)

19.2%

25.6%

Net income (Non-IFRS)

27.9

36.3

-23%

EPS in € (Non-IFRS)*

0.38€

0.49€

-23%

* Weighted average shares outstanding (basic) Q1 2020: 74.0m / Q1 2019: 74.0m

18| © 2020 Software AG. All rights reserved.

Cash Flow

Q1 2020

(in €m)

Q1

Q1

2020

2019

Operating cash flow

61.5

60.0

./. CapEx* (long-term,non-current)

-5.5

-2.2

./. Repayment of lease liabilities**

-4.0

-3.3

Free cash flow

52.0

54.5

in % of revenue

25.1%

27.1%

Free cash flow per share***

€0.70

€0.74

∆%

2%

-5%

-5%

  • Cash flow from investing activities except acquisitions and except investments in debt instruments
  • New reporting line due to IFRS 16
  • Based on weighted average shares outstanding (basic) Q1 2020: 74.0m / Q1 2019: 74.0m

19| © 2020 Software AG. All rights reserved.

Balance Sheet

(in €m)

Mar 31,

Assets

Dec 31,

2020

2019

510.0

Cash and cash equivalents

513.6

22.3

Financial assets

22.8

279.8

Trade and other receivables

303.1

79.6

Non-financial assets*

75.9

1,203.2

Fixed assets

1,200.7

(Goodwill 986.9 / 980.1)

2,094.9

Total

2,116.1

* incl. assets/liabilities hold for disposal

Mar 31,

2020

244.2

271.1

203.3

1,376.3

2,094.9

Liabilities

Financial liabilities

Other liabilities* Deferred income

Shareholders' equity (ratio 65.7% / 64.2%)

Total

Dec 31,

2019

296.6

300.9

161.1

1,357.5

2,116.1

20| © 2020 Software AG. All rights reserved.

Q1 2020 EARNINGS

23 April, 2020

© 2020 Software AG. All rights reserved.

CRO PERSPECTIVE

MOMENTUM AS HELIX TAKES HOLD

Sales & GTM

1

3 2

Focus Areas

3

Regions achieved targets for Q1

Delight our customers

World class sales

organization

Double-digit

Bookings growth

North America significantly exceeded Q1 targets DBP in NAM was greater than 20%

A&N and IoT significantly beat Bookings expectations Slipped Q1 DBP deals expected to close in Q2

NPS at record high - 48%

Hired leaders from Mulesoft, Apigee, Tibco, Axway

56 new customers, 69% of Bookings from subscription

22 | © 2020 Software AG. All rights reserved.

CRO PERSPECTIVE

WINNING AGAINST THE COMPETITION

•Hybrid integration

•Optimizing purchasing experience while integrating real-time inventory systems

•Ability to rapidly respond to growing customer and business needs

•Integrating applications on-premise and in the cloud

•Gain single point-of-view on its enterprise architecture

•Ability to integrate with third-party solutions

23| © 2020 Software AG. All rights reserved.

CRO PERSPECTIVE

PARTNERSHIPS - SCALING AND GAINING

Building

Establishing

Existing

New

Relationships

Connections

Software AG Alliance & Channels business shown significant double digit YoY growth

24| © 2020 Software AG. All rights reserved.

CRO PERSPECTIVE

LOOKING FORWARDS WITH PRECISION

H1 2020

Pipeline

Professional

Planning

Services

Confident in

Prudently

c. 5% current

Planned for various

delivering a solid

requalified - overall

projects impacted

outcomes

H1

10-15% reduction

Robust Q2 DBP

Majority moved to

Strong and

Able to control

expected based on

2021, not lost

Resilient

EBIT in each

customer

outcome scenario

commitments

c. 70% current

pipeline across

less impacted

industry sectors

25| © 2020 Software AG. All rights reserved.

SOFTWARE AG

OPPORTUNITY AND STRATEGY UNCHANGED

Clear Opportunity

Demonstrating Momentum

Robust Foundations

Integration

Platform

Strong financial platform

market

$18bn by 2022

Mission-critical product

positioning

IoT Platform

Strong customer relationships

Market

$23.6bn by

2023 mid-term objectives

2023

remain unchanged

26| © 2020 Software AG. All rights reserved.

Your Questions

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Software AG published this content on 23 April 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 April 2020 07:42:07 UTC