Software : Q4 2019 Presentation

Q4/FY 2019 EARNINGS 29 JANUARY 2020

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.

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WELCOME

Q4/FY 2019 EARNINGS CALL AGENDA

1

2

Sanjay Brahmawar

Chief Executive Officer

Sanjay Brahmawar

Chief Executive Officer

John Schweitzer

Helix: Progress and Potential 2019 Headline numbers Outlook 2020

Focus, Execution, Team

3

4

5

Chief Revenue Officer
Arnd Zinnhardt		2019 Financial Performance
Chief Financial Officer
Sanjay Brahmawar		Summary
Chief Executive Officer

Your Questions

3 |

SOFTWARE AG IN 2020

SEIZING THE OPPORTUNITY OF OUR REINVENTION

Product

clarity and

strength

Clear Market

opportunity

2020

Deliver

Momentum

2019

Investment

Further

& Impact

Foundation

Laid

Winning in the market

Company and

Team 'match

fit'

starting to

pay off

investment

in 2020

4 |

HELIX - YEAR ONE

OUR TRANSFORMATION IS WORKING

Helix foundations laid

4Major focus areas

95%Year one workstreams completed

Subscription transition advanced

+10%	Growth in ARR for DBP
YoY	inc. IoT
51.5%	DBP inc. IoT bookings
	as SaaS/Subscription

Brought clarity to product set	Partner ecosystem evolving
40	SKUs, streamlined from		Blue-chip partnerships secured
	900+
NPS	Q4 and FY product NPS		FirstAdobe OEM deals closed
	both at record highs		in Q4, contributing revenue
Sales effectiveness improved		Fitter
342	New Logos in 2019	2020	Sharper

Beating competition & taking	Hungrier for growth
share

5 |

HEADLINE NUMBERS

GROUP GROWTH IN SPITE OF TRANSFORMATION

FY					Q4
		+/- change as % acc			+/- change as % acc
Group Revenue	€890.6m	1.0%		Group Revenue	€255.0m	-5%
Group Product Revenue	€702.7m	1.0%		Group Product Revenue	€205.9m	-7%
EBIT (IFRS)	€240.8m	-7%		EBIT (IFRS)	€65.9m	-23%
Non-IFRS EBITA Margin	29.2%			Non-IFRS EBITA Margin	33%
DBP excl. Cloud & IoT	€432.2m	-3%	DBP excl. Cloud & IoT	€135.6m	-4%
Cloud and IoT	€42.3m	+38%	Cloud and IoT	€11.3m	+16%
A&N	€228.9m	+3%		A&N	€59.2m	-16%

Leading Indicators

ARR (DBP incl. Cloud & IoT)	+10% YoY
SaaS/Subs as % Bookings (DBP incl Cloud	51.5%
&IoT)
6 |

IOT & ANALYTICS

LAND AND EXPAND AS THE MARKET IGNITES

Q4

79

New IoT Logos

won in 2019

Q1

Land

Dynamics

2020

IoT pipeline larger

than ever, well

over €100m

Q4

Landmark 5 year

subscription

agreement signed

Expand

Larger deals making up meaningful portion of pipeline

7 |

OUTLOOK

FULL YEAR 2020

DBP ex IoT - Product Bookings

DBP (excl. Cloud & IoT) - Product Bookings

DBP - Cloud & IoT Product Bookings

A&N - Product Bookings

Operating Margin Group (EBITA non-IFRS)2)

1. At constant currency rates
2. Adjusted fornon-operating items (see non-IFRS earnings results)

FY 2019	FY 2020 Outlook
(in €m)	(as of January 29, 2020)
PRELIMINARY
241.1	+10% to +15%1)
65.9	+40% to +60%1)
100.8	-3% to +3%1)
29.2%	20% to 22%

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OUR AMBITION

Accelerated growth, higher quality and higher visibility

of revenues, good margin and cash generation

Group	85% - 90%
Recurring
Revenue
Product
€1B+
Revenue

2023

25 - 30%	Digital
Operating	Business
Margin	~15% CAGR

9 |

BUILDING HELIX MOMENTUM

FOCUS,EXECUTION ANDTEAM, WORKING AS ONE

Product Market

FocusFocus

Market	People &	Subscription
Focus	Culture	Shift

Partnerships	Sales
to Scale	Excellence

10 |

GTM

EXECUTION IMPROVEMENTS DELIVERING RESULTS

		Integration & API			Adabas & Natural
NAM	EMEA
	APJ
Consistency of ethos			2020
and approach across	Business Transformation			Subscription
key regions	Invest
		Demand Gen
Predictability and
stability returned to
	NAM					Partner Channel

11 |

HYPERSCALERS

INVESTING IN PARTNERSHIPS TO DELIVER IMPACT

Firing up

6 products available on marketplace

Contributing revenue

	value of deals
$20m	currently in Microsoft
pipeline

of ADAMOS IoT

60%applications running on Cumulocity

Meaningful proportion of total revenue from Partner base over medium term

12 |

RESULTS 4thQUARTER 2019

(IFRS, unaudited)

January 29th, 2020

CURRENCY IMPACT ON REVENUE

Q4 2019 / FY 2019

• 33% revenue in Euro
• 67% revenue in foreign currency

Sonstige

Other

21% Euro

25%35%EUR

Currency impact on revenue

	Q4	Q4	FY	FY
(in €m; yoy)	2019	in %	2019	in %

GBP 5%

ILS 6%

33%

US USDDollar

25%

31%

Licenses	1.9	2%	4.8	2%
Maintenance	1.5	1%	8.1	2%
SaaS	0.1	1%	0.4	2%
Professional Services	0.9	2%	3.2	2%
& Other

Currency split FY 2019	Total	4.4	2%	16.5	2%

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DIGITAL BUSINESS PLATFORM (INCLUDING CLOUD & IoT)

SEGMENT REPORT Q4 2019 / FY 2019

(in €m)	Q4	Q4	∆%	∆%	FY	FY	∆%	∆%
	2019	2018		acc	2019	2018		acc
DBP(excl. Cloud & IoT)	135.6	138.4	-2%	-4%	432.2	434.4	-1%	-3%
- thereof Licenses	63.3	70.0	-10%	-11%	151.3	166.2	-9%	-11%
- thereof Maintenance	72.2	68.4	6%	4%	280.9	268.2	5%	3%
DBP Cloud & IoT	11.3	9.6	18%	16%	42.3	30.3	39%	38%
Total revenue	146.9	148.1	-1%	-2%	474.5	464.7	2%	0%
Cost of sales	-11.7	-9.8	20%	19%	-40.6	-35.9	13%	12%
Gross profit	135.2	138.3	-2%	-4%	433.9	428.8	1%	-1%
Sales & Marketing	-57.3	-57.5	0%	-2%	-198.2	-181.2	9%	7%
Research & Development	-27.7	-29.5	-6%	-11%	-105.1	-100.6	4%	4%
Segment result	50.2	51.3	-2%	-2%	130.6	147.0	-11%	-14%
Margin in %	34.2%	34.6%			27.5%	31.6%
Annual Recurring Revenue	340.0	305.4	11%	10%
as of December 31, 2019

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DBP CLOUD & IoT

SEGMENT REPORT Q4 2019 / FY 2019

(in €m)	Q4	Q4	∆%	∆%	FY	FY	∆%	∆%
	2019	2018		acc	2019	2018		acc
Licenses	2.6	3.1	-16%	-16%	12.6	8.7	45%	44%
Maintenance	2.0	1.5	36%	35%	7.0	4.1	72%	71%
SaaS / Usage based	6.6	5.0	33%	31%	22.7	17.6	29%	27%
Total revenue	11.3	9.6	18%	16%	42.3	30.3	39%	38%
			46
Annual Recurring Revenue	41.7	30.1	39%	37%
as of December 31, 2019

16 |

ADABAS & NATURAL

SEGMENT REPORT Q4 2019 / FY 2019

(in €m)	Q4	Q4	∆%	∆%	FY	FY	∆%	∆%
	2019	2018		acc	2019	2018		acc
Licenses	22.2	31.8	-30%	-33%	81.2	74.4	9%	7%
Maintenance	36.8	36.7	0%	-1%	147.0	143.2	3%	1%
Product revenue
59.0	68.5	-14%	-16%	228.2	217.6	5%	3%
Other
0.2	0.2	-	-	0.7	0.7	-	-
Total revenue	59.2	68.7	-14%	-16%	228.9	218.3	5%	3%
Cost of sales	-2.3	-1.6	43%	42%	-8.1	-6.3	29%	27%
Gross profit
56.9	67.1	-15%	-17%	220.9	212.1	4%	2%
Sales & Marketing
-9.5	-9.7	-2%	-3%	-34.9	-32.8	6%	5%
Research & Development	-7.2	-6.4	12%	9%	-26.2	-23.8	10%	7%
Segment result	40.2	51.0	-21%	-23%	159.8	155.4	3%	1%
Margin in %	68.0%	74.2%			69.8%	71.2%

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PROFESSIONAL SERVICES

SEGMENT REPORT Q4 2019 / FY 2019

(in €m)	Q4	Q4	∆%	∆%	FY	FY	∆%	∆%
	2019	2018		acc	2019	2018		acc
Total revenue	49.0	47.8	2%	1%	187.2	182.6	2%	1%
Cost of sales	-39.0	-38.0	3%	0%	-146.2	-144.9	1%	-1%
Gross profit	9.9	9.8	2%	1%	41.0	37.8	9%	7%
Sales & Marketing	-5.3	-4.8	12%	10%	-18.2	-17.4	5%	3%
Segment result	4.6	5.0	-8%	-7%	22.7	20.3	12%	11%
Margin in %	9.4%	10.5%			12.1%	11.1%

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RESULTS

Q4 2019 / FY 2019

(in €m)	Q4	Q4	∆%	∆%	FY	FY	∆%	∆%
	2019	2018		acc	2019	2018		acc
Total revenue	255.0	264.6	-4%	-5%	890.6	865.7	3%	1%
Cost of sales	-55.0	-51.2	7%	6%	-203.1	-195.0	4%	3%
Gross profit	200.0	213.3	-6%	-8%	687.5	670.7	2%	0%
Margin in %	78.4%	80.6%	-	-	77.2%	77.5%	-	-
Research & Development	-34.8	-35.9	-3%	-4%	-131.3	-124.4	6%	4%
Sales & Marketing	-75.5	-75.4	0%	-1%	-265.0	-244.7	8%	6%
Administration	-20.4	-19.7	4%	3%	-74.8	-74.0	1%	0%
Other income / expense	-3.3	0.5	-	-	-1.6	3.9	-	-
EBIT	65.9	82.8	-20%	-23%	214.8	231.6	-7%	-10%
Margin in %	25.9%	31.3%			24.1%	26.8%

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NON-IFRS EARNINGS

Q4 2019 / FY 2019

(in €m)	Q4	Q4	∆%	FY	FY	∆%
	2019	2018	2019	2018
EBIT (before all taxes)	65.9	82.8	-20%	214.8	231.6	-7%

Amortization on acquisition related intangible assets Share based payments

Restructuring / severances / legal case

Other impacts / impacts from M&A activities

EBITA (Non-IFRS)

5.5	5.2	5%	21.9	21.1	4%
3.1	2.1	49%	11.3	11.0	3%
6.8	4.7	44%	9.0	6.9	31%
2.9	1.6	76%	3.2	2.3	35%
84.2	96.4	-13%	260.3	272.9	-5%

in % of revenue (Non-IFRS)	33.0%	36.5%		29.2%	31.5%
Net income (Non-IFRS)	61.6	71.5	-14%	188.1	195.0	-4%
EPS in € (Non-IFRS)*	0.83€	0.97€	-14%	2.54€	2.64€	-4%

* Weighted average shares outstanding (basic) Q4 2019: 74.0m / Q4 2018: 74.0m; FY 2019: 74.0m / FY 2018: 74.0m

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CASH FLOW

Q4 2019 / FY 2019

(in €m)	Q4	Q4	∆%	FY	FY	∆%
	2019	2018	2019	2018
Operating cash flow	48.0	61.4	-22%	172.0	195.1	-12%
./. CapEx* (long-term,non-current)	-0.5	-2.3		-10.0	-11.0
./. Repayment of lease liabilities**	-4.6	-		-16.2	-
Free cash flow	42.9	59.1	-27%	145.8	184.1	-21%

Payment adjustments for

• Share based compensation
• Restructuring/ severances/ legal cases
• Payments of other expenses associated with M&A activities

-0.3	3.4	7.5	22.3
0.2	4.7	8.4	8.6
0.2	-	0.2	0.3

Adjusted operational Free Cash flow	43.0	67.2	-36%	161.9	215.3	-25%
in % of revenue	16.9%	25.4%		18.2%	24.9%
Adjusted operational Free Cash flow per share***	€0.58	€0.91	-36%	€2.19	€2.91	-25%

• 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) Q4 2019: 74.0m / Q4 2018: 74.0m; FY 2019: 74.0m / FY 2018: 74.0m

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BALANCE SHEET

(in €m)

Assets

Dec 31,		Dec 31,
2019		2018
513.6	Cash and cash equivalents	462.3
22.8	Financial assets	34.9
303.1	Trade and other receivables	276.2
75.9	Non-financial assets*	62.1
1,200.7	Fixed assets	1,172.4
(Goodwill 980.1 / 964.6)
2,116.1	Total	2,007.9

* incl. assets/liabilities hold for disposal

Liabilities

Dec, 31		Dec 31,
2019		2018
296.6	Financial liabilities	313.3
300.9	Other liabilities*	316.0
161.1	Deferred income	139.5

1,357.5	Shareholders' equity	1,239.1
(ratio 64.2% / 61.7%)

2,116.1

Total

2,007.9

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THREE KEY DRIVERS

WELL POSITIONED TO GROW AND TAKE SHARE

Connected Customer	1	2	Hybrid and Multi Cloud
Enterprise

3

Operational

Excellence

23 |

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Appendix

HEADCOUNT

BY FUNCTIONAL AREAS* AND GEOGRAPHY

(in FTE)	Dec 31,	Sep 30,	∆%	Dec 31,	∆%
	2019	2019		2018	yoy
Total	4,948	4,883	1%	4,763	4%
Professional Services	1,915	1,890	1%	1,901	1%
Research & Development	1,419	1,391	2%	1,310	8%
Sales & Marketing	961	963	0%	926	4%
Administration	653	640	2%	626	4%
Germany	1,278	1,269	1%	1,243	3%
USA	584	579	1%	580	1%
India	1,004	953	5%	895	12%
Rest of world	2,082	2,083	0%	2,044	2%

* According to P+L structure

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EARNINGS

Q4 2019 / FY 2019

(in €m)	Q4	Q4	∆%	FY	FY	∆%
	2019	2018	2019	2018
EBIT (before all taxes)	65.9	82.8	-20%	214.8	231.6	-7%
Financial result	2.2	0.9	-	7.1	4.3	-
Profit before taxes	68.1	83.7	-19%	221.9	235.9	-6%
Other taxes	-2.7	-2.2	21%	-6.8	-7.0	-3%
Income taxes	-17.2	-20.2	-15%	-59.8	-63.7	-6%
Tax rate in %	29.2%	26.8%		30.0%	30.0%
Net income	48.2	61.3	-21%	155.3	165.2	-6%
EPS in €*	0.65€	€0.83	-21%	2.10€	€2.23	-6%

* Weighted average shares outstanding (basic) Q4 2019: 74.0m / Q4 2018: 74.0m; FY 2019: 74.0m / FY 2018: 74.0m

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AMORTIZATION / DEPRECIATION IMPACT

(PRELIMINARY)

(in €m)	Q1	Q2	Q3	Q4		FY	FY	FY
	2019	2019	2019	2019		2019	2020*	2021*

Amortization

-5.6

-5.4

-5.4

-5.5

-21.9

-14.4

-14.0

Depreciation	-6.0	-5.5	-7.6	-6.5		-25.6	-26.0	-26.0

* Estimated

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REVENUE

Q4 2019 / FY 2019

(in €m)	Q4	Q4	∆%	∆%	FY	FY	∆%	∆%
	2019	2018		acc	2019	2018		acc
Product revenue	205.9	216.5	-5%	-7%	702.7	682.3	3%	1%
Licenses	88.2	105.0	-16%	-18%	245.1	249.4	-2%	-4%
Maintenance	111.0	106.6	4%	3%	435.0	415.4	5%	3%
SaaS / Usage based
6.6	5.0	33%	31%	22.7	17.6	29%	27%
Services	49.0	47.7	3%	1%	187.2	182.5	3%	1%
Other	0.2	0.3	-	-	0.7	0.9	-	-
Total	255.0	264.6	-4%	-5%	890.6	865.7	3%	1%

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