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SOFTWARE AG

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Software : Quarterly Statement Q1-2022

06/22/2022 | 03:05am EDT

2022Q1 QUARTERLY STATEMENT

KEY FIGURES

As of March 31, 2022 and 2021

(IFRS, unaudited)

in € millions

Q1 2022

Q1 2022

Q1 2021

(unless otherwise stated)

IFRS

acc1

IFRS

+/- as %

+/- as % acc1

Group revenue

206.0

198.0

183.1

13

8

Product revenue

Digital Business

110.9

107.3

98.9

12

8

Adabas & Natural (A&N)

56.0

53.3

47.5

18

12

Licenses

55.5

53.7

38.5

44

40

Maintenance

97.5

93.4

98.5

-1

-5

Software as a Service (SaaS)

14.0

13.6

9.5

47

43

Group bookings

112.3

108.0

88.8

27

22

Digital Busines bookings2

79.7

77.4

67.4

18

15

A&N bookings2

32.6

30.6

21.4

53

43

March 31, 2022

March 31, 2022

acc1

March 31, 2021

+/- as %

+/- as % acc1

Group ARR3

605.5

578.1

522.6

16

11

Digital Business ARR3

429.4

411.9

368.7

16

12

A&N ARR3

176.1

166.2

154.0

14

8

Q1 2022

Q1 2021

+/- as %

Operating EBITA (non-IFRS)

40.9

24.5

67

as % of revenue

19.9

13.4

Digital Business segment earnings

8.0

2.6

208

Segment margin

7.2%

2.6%

A&N segment earnings

38.0

31.1

22

Segment margin

67.8%

65.4%

EBIT (IFRS)

30.0

15.3

96

Net income (non-IFRS)

25.3

17.0

49

Earnings per share (non-IFRS)4 in €

0.34

0.23

49

Operating cash flow

30.6

47.0

-35

CapEx5

-3.6

-3.9

-8

Repayments of lease liabilities

-2.7

-3.3

-18

Free cash flow

24.3

39.8

-39

Free cash flow per share

0.33

0.54

-39

Balance sheet

March 31, 2022

Dec. 31, 2021

+/- as %

Total assets

2,578.4

2,221.4

16

Cash and cash equivalents

943.9

585.9

61

Net cash

342.8

277.3

24

Employees (FTE)

4,801

4,819

0

  • At constant currency.
  • Bookings according to the definition in the 2021 Annual Report, page 78.
    3 Annual recurring revenue.
    4 Based on weighted average shares outstanding (basic) Q1 2022: 74.0 mn / Q1 2021: 74.0 mn.
    5 Cash flow from investing activities adjusted for acquisitions and investments in debt instruments.

2

Software AG   Q1 2022 Quarterly Statement

TABLE OF CONTENTS

  • Key Figures
  • Management's Assessment of First-Quarter Results
    6 Business Line Development
    6 Total Revenue and Earnings Development
  • Employees
  • 2022 Outlook
  • Consolidated Income Statement
    9 Consolidated Balance Sheet
    11 Consolidated Statement of Cash Flows
    12 Segment Report
    14 Statement of Comprehensive Income
    15 Disclaimer
    15 About Software AG
    16 Publication Credits

Unless otherwise stated, all figures are in accordance with IFRS. Increases are at constant currency and rounded.

Because the figures in this report are stated in accordance with commercial rounding principles, totals and percentages may not always be exact.

3

MANAGEMENT'S ASSESSMENT OF FIRST-QUARTER RESULTS

In the first quarter of 2022, we delivered a solid performance as we step into the fourth year of our Helix transformation. Our success was a continuation of the strong momentum we saw in the fourth quarter of 2021, with our increasingly consistent progress driven by our Digital Business. With our acquisition of StreamSets now closed, we stand ready to augment our accelerating organic growth, and have initiated a clear value creation plan to complement StreamSets' continued strong double-digit standalone performance.

From a financial perspective, we saw continued momentum in our Digital Business underpinned by the quality of our cloud-native product set. Digital Business bookings were up 15 percent and subscription and Software as a Service (SaaS) bookings accounted for 81 percent of our Digital Business bookings total. Annual recurring revenue (ARR) growth in the Digital Business was 12 percent, and product revenue was up 8 percent. This was the fourth consecutive quarter of Digital Business product revenue growth.

The quality and predictability of our revenue also continued to improve in the first quarter as illustrated by the 10 percent increase in recurring revenue. Recurring revenue comprised 89 percent of our total product revenue during the period, at the upper end of the range of our 2023 ambition.

Total product revenue growth was 10 percent in the period, clearly showing the progress of our business model transformation. This was driven by consistent performance in the Digital Business and strong growth year-on-year in Adabas & Natural (A&N).

Overall, Group bookings reached €112.3 million in the first quarter, an increase of 22 percent year-on-year. Group revenue was €206.0 million, representing growth of 8 percent year-on-year.First-quarter earnings before interest and taxes (EBIT) were €30.0 million, an increase in absolute terms year-on-year of 96 percent. The Group's earnings before interest, taxes and amortization (EBITA, non- IFRS) totalled €40.9 million in the period, up 67 percent in absolute terms year-on-year.

Our first-quarter operating margin (non-IFRS) was

19.9 percent, up 6.5 percentage points year-on-year, reflecting the continued impact of our transformation progress.

Operationally, our efforts to address more of our market opportunity are being powered by our three key growth drivers in new business, migrating customers to subscription and growth from subscription renewals.

On new business, we secured 57 new logos during the first quarter, with growth impacted by short-termdecision-making pauses driven by the macro environ- ment. New logos have come back strongly in the first month of the second quarter and we remain confident that 2022 will be another record new logo year.

On migrations, we continued to see strong inno- vation-led value increases with existing customers. Our Digital Business migration multiplier is tracking well at 1.5x for the first quarter.

The mission-critical nature of our products contin- ues to ensure stickiness, leading to good gross reten- tion. This dynamic was a supporting factor for the strong renewal success we delivered in the first quar- ter, underpinning Digital Business net retention rate (NRR) which is tracking ahead of 100 percent.

Our progress in each of these drivers owes more than anything to the quality of our "growth" products, which help customers solve some of the biggest data-related challenges that occur along their digital backbones. These products sit in the areas of IoT & Analytics, Integration Platform as a Service (iPaaS), API Management, and in our ARIS portfolio.

Customers are responding so well to these products because of the continuous stream of problem-­solving innovation we are delivering for each of them. We have made significant investments in our unified CI/CD platform, including a complete re- fresh of our user experience. Leveraging Gainsight's platform, we have introduced real-timein-product customer feedback to influence product development priorities in the future and will be tracking the results

4

Software AG   Q1 2022 Quarterly Statement

using a new in-product net promoter score (NPS) metric.

This innovation is supporting increasingly powerful sales execution, with our Digital Business conversion rate increasing year-on-year. We are also increasing our ability to cross-sell into our Digital Business from A&N. During the quarter, eight out of our top ten A&N deals included a cross-sell element into our Digital Business, primarily around hybrid integration. With our product set well aligned to market needs, we have made good progress in specializing our sales force to drive improved results, with greater emphasis on selling key growth products. Our top-of-funnel demand continued to build in the period through marketing digitization and increased impact from our partner ecosystem. We are rolling out digital marketing campaigns to tier-1 markets worldwide and have seen a 9 percent increase in inbound lead volumes in the first three months. These initiatives give us increased confidence in our pipeline as we build towards our 2022 ambitions.

Finally, we continue to invest in our people and cul- ture. We are very proud of our unique culture, which is ever stronger and enables us to sharpen our focus. Driven by our new cultural framework, our employees work with passion for our products, innovative spirit and commitment to customers. This cultural framework includes our key drivers, our values and our leadership practices to create a sense of belonging, especially after two years in a pandemic. This cultural development is also helping Software AG become more competitive in attracting and retaining the best talent in its industry and is supporting its push towards and beyond its ambitious future growth targets.

Having announced our StreamSets acquisition at the end of February and seen it close early in the second quarter, we have been focused on ensuring StreamSets' momentum as a standalone company. StreamSets has continued to deliver strong double -digit growth in the months following signing and has gained excellent early traction with new releases like its Snowflake Transformer. We have started to enable the value creation levers that will further complement StreamSets' standalone performance, identifying the first 50+ Software AG customers already in the market for StreamSets' technology. Secondly, we have incentivized our sales people to build new demand across all regions with

StreamSets in mind, putting the full weight of our transformed go-to-market operation behind Stream- Sets from the start.

Our string-of-pearls M&A strategy, supported by our partner Silver Lake, remains a key part of our overall plan to supplement organic growth in the future and we continue to build, assess and progress our M&A pipeline.

Overall, we are confident we are right where we need to be in order to deliver on our ambitions for this 2022 financial year and beyond. We are pleased to have reconfirmed both our 2022 full-year guidance and our mid-term ambitions for the organic business and look forward to another year of transformation progress and acceleration towards sustainable, profitable growth.

Sanjay Brahmawar, CEO of Software AG

"Software AG has delivered four consecutive quarters of Digital Business product revenue growth, and we are now seeing that growth translate into margin expansion. Our success, underpinned by continued Digital Business momentum, has been enabled by three years of successful transformation. During that time, we have developed best-of-breed products in Hybrid Integration, IoT & Analytics and Business Transformation, the most exciting growth areas of our market. With our StreamSets acquisition now closed, our fourth quarter momentum continuing into the start of the year, and our ongoing investment to enable our people for success, I'm confident we'll deliver a strong 2022 and continue to accelerate our sustainable, profitable growth thereafter."

Dr. Matthias Heiden, CFO of Software AG

"Our transformation has made Software AG a higher qual- ity, more predictable and more resilient business. With Digital Business ARR growth of 12 percent in the first quarter, I am confident the quality and predictability of our revenue will continue to increase from here. Our revenue growth also continues to flow through to profit growth, which we expect to continue as our business model shift completes its transition from headwind to tailwind on our P&L. This will enable investment behind opportunities where we see them. With our ongoing focus on cost control and productivity, our solid start gives me confidence we can achieve our full-year and 2023 targets."

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Software AG published this content on 22 June 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 June 2022 07:04:01 UTC.


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Sales 2022 935 M 958 M 958 M
Net income 2022 90,5 M 92,8 M 92,8 M
Net Debt 2022 249 M 255 M 255 M
P/E ratio 2022 23,4x
Yield 2022 2,61%
Capitalization 2 094 M 2 147 M 2 147 M
EV / Sales 2022 2,51x
EV / Sales 2023 2,10x
Nbr of Employees 5 059
Free-Float 68,9%
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Managers and Directors
Sanjay Brahmawar CEO & Chairman-Management Board
Matthias Heiden Chief Financial Officer
Christian Y. Lucas Chairman-Supervisory Board
Bernd Groß Chief Technology Officer
Benno Quade Group Chief Operating Officer
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