2019 HELIX STRATEGY REFRESH & Q1 FINANCIALS/media/Files/S/Software... · 2019. 5. 14. · 2019 HELIX STRATEGY REFRESH & Q1 FINANCIALS . ... Focused sales investments Increased productivity

© 2019 Software AG. All rights reserved.

May 13, 2019

2019 HELIX STRATEGY REFRESH & Q1 FINANCIALS

2 |

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 techno-logies 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.

SAFE-HARBOR-STATEMENT


H E L I X

Our pathway to sustainable, profitable growth


4 |

THE RIGHT MOMENT TO ASSESS WHERE WE STAND


5 |

WHAT WORKS

Product Strength

Financial Strength

Cultural Strength

Best in Class

Solid Balance Sheet

Creativity & Flexibility

Integral & Trusted

Strong Cashflow

Diversity & Opportunity


6 |

WHAT WE MUST WORK ON Growth

GTM and Operations

No growth in growth markets

Product focus too

broad

Partner focus too narrow

Ecosystem

Siloes & complexity

Essence & identity


7 |

HELIX: A MULTI-YEAR TRANSFORMATION

FOCUS

EXECUTION

TEAM

• Targeting sustainable, profitable growth • Committing ~€50m in investment

• Committing to medium term milestones, metrics and pathway • Three levers will enable our success:

GENERATING SUSTAINABLE, PROFITABLE GROWTH


FOCUS EXECUTION TEAM

• Right products • Right markets • Right resources

and capabilities

• Simpler, sharper, disciplined GTM

• Improved operating model and accountability

• Drive necessary shift to subscription

• Harnessing our talent

• Expanding and empowering our ecosystem

8 |

RE-IMAGINING INTEGRATION

€24bn

TAM 2018

DIGITAL TRANSFORMATION

REAL-TIME DATA

€7.9 bn

IoT & Analytics

€2.4 bn

Business Transformation

€10.2 bn

€3.4 bn

A&N Integration

49%

Of CIOs say their business model has changed or is changing - Gartner CIO Survey 2019

$1.37bn

The total digital transformation market in 2022 - IDC forecast

Annual total potential economic impact of IoT by 2025 - McKinsey

$3.9tr - $11.1tr pa


9 |

EVOLVING SO THAT WE START WITH THE CUSTOMER

Real-life time sensitive problems

Intuitive UI and instant results

Plain-speaking support and responsiveness

Scale over time based on results

Experiment, test and probe capabilities

Facilitate, not sell

Value-based engagement

SaaS/Subscription 1st


10 |

TEAM EXECUTION FOCUS

THREE LEVERS WE CAN CONTROL


11 |

FOCUS SHAPING OUR OFFER AND ORGANISATION FOR SUCCESS

PRIORITIZE INVESTMENT WHERE WE SEE:

• Growth > market

• Potential to take share

• Low barriers to success

CLARIFY VALUE PROPOSITION BY:

• Realigning DBP portfolio:

Integration, IoT, Business Transformation

• Focus on areas where there is clear market growth

• Refocus R&D spending where it matters most

LEVERAGE STRATEGIC M&A TO:

• Enter adjacent markets

• Bolster existing strengths

• Gain a technology edge

M A R K E T S P R O D U C T S C A P A B I L I T Y


12 |

FOCUS IN ACTION – INTEGRATION

Customer integration opportunity

Legacy stack and existing architecture

• Integration: a big problem for enterprise • It’s only getting bigger • A business-level, front-line problem

$12bn

$18bn

Source: Gartner

2017

2022

50%

Integration Platform Market TAM

API iPaaS IoT & Analytics


13 |

FOCUS IN ACTION – IOT & ANALYTICS

Industrial IoT

Telecommunications

Insurance/Financial Services

2018 - 2023

Create replicable solutions

Scale OEM parterships

Cumulocity and System Integrators

$9.5bn

$25.6bn

2017

2023

18% CAGR

IoT Platform TAM

Source: McKinsey


14 |

EXECUTION – DELIVERY AS OUR WATCHWORD

Drive accountability

Create right leadership group

Reward success appropriately

Specialization

Geography

Sales coverage

Capitalize on major industry trend

Respond to customer preferences

Capture economic upside

1. New operating model 2. Refined go-to-market 3. Subscription sales

sustainable, profitable growth over the medium term


15 |

Sanjay Brahmawar Chief Executive Officer

Arnd Zinnhardt Chief Financial Officer

John Schweitzer Chief Customer Officer

Dr. Stefan Sigg Chief Product Officer

Paz Macdonald Chief Marketing Officer

Bernd Gross Chief Technology Officer

TEAM EXPERIENCE & ENERGY


16 |

TEAM — NURTURING AN ECOSYSTEM TO SUPPORT OUR GROWTH

Partners

People

Launch comprehensive new program

Embrace co-petition

Grow partner revenue to substantial % of mix

New employee value proposition

Agile talent and performance framework

Incentive structures to match

Scalable

Durable

Profitable


17 |

COMMITMENT. INVESTMENT. MEASUREMENT.

Op Free Cash Flow

Bookings / ACV

ARR


18 |

HELIX: THE RIGHT PATHWAY

GENERATING SUSTAINABLE, PROFITABLE GROWTH

Unlock our greatest strengths

Convert a significant opportunity

Committed investment, strong team


19 |

EVOLVING OUR FINANCIAL PLATFORM FOR GROWTH

EVOLVING OUR FINANCIAL PLATFORM FOR GROWTH


20 |

30%+ Operating

Margin

Strong Free Cash Flow

Digital Business

10%+ CAGR

85% - 90% Recurring Revenue

Medium term

Accelerated growth, higher quality and higher visibility of revenues, good margin and cash generation

OUR AMBITION


21 |

ROUTES TO OUR AMBITION

Accelerated growth, higher quality and higher visibility of

revenues, good margin and cash generation

Sales Execution

R&D

OEM

Geographic Focus

Subscription

Operating Model

Our Ambition


22 |

Customer Value Team Increase deal value Upscale into existing customer base

Cross-sell into A&N base Sales efficiency New business / new logos

Sales Execution

Operating Model

Customer driven innovation Deepen sales knowledge Strengthen entrepreneurial ownership More customer touchpoints

Subscription

Customer Success Team Realise upsell potential Higher retention rate Higher visibility, reduced volatility

Geographic Focus

Focus on Tier 1 countries Focused sales investments Increased productivity

R&D

OEM

Re-allocation of resources Focus on key products that

drive revenue model

IoT Partnerships & White Labelling Scaling through partnerships,

penetrating the relevant IoT platforms

ROUTES TO OUR AMBITION


23 |

Rel

ativ

e Im

pact

2019 2021 2022 2023 2020

high

er

low

er

Sales Execution

Subscription OEM

R&D Operating Model

Geographic Focus

FIRST FINANCIAL IMPACT AND PHASING PER ROUTE


24 |

Customer Driven

Customer Benefit

Software AG Benefit

Fastest updates,

latest capabilities

Lower upfront cost

Higher contract values

Higher retention and lifetime value

Lower cost to serve

Lower customer

acquisition cost

By 2020, all new entrants and 80% of historical vendors will offer subscription-based business models Gartner, 2018

Realign our model Extract the benefit over time

ENABLING THE SHIFT TO SUBSCRIPTION

Scale up with demand & experiment

Maintenance as a Service


25 |

OLD IFRS

To 2017 2018 – 2019 2020+

Perpetual Upfront Upfront Upfront

Subscription Pro-rata Upfront Quarterly / Annually

SaaS / Usage Pro-rata Pro-rata Pro-rata

Perpetual license & support

Subscription revenue

1 2 3 4 5

Subscription Pathway Greater Lifetime Revenues

Cash flow & revenue

both up +30 to 40%

IFRS 15

NEW SUBSCRIPTION LICENSING MODEL


26 |

2018 as is as would beTotal Total Delta

PERPETUAL LICENSE 250 250

SUBSCRIPTION LICENSE 30 0 0 30 10 10 10 10 10 10 50 20

MAINTENANCE 400 400

CONSULTING 180 180

TOTAL REVENUE 860 840

COSTS 590 590

operating EBITA 270 250

MARGIN in % 31.5% ~29.5%

∆ ~200bp

MODEL CHANGE: IMPACT AND PHASING 2018 reimagined

2 3 2 3

4 5

As 2018 would have been


27 |

Product Revenue

Op EBITA Margin

Traditional KPIs

We will begin to introduce new metrics

that show our underlying progress in

creating a more valuable base

Bookings / ACV

Annual Recurring Revenue

From measuring simple up-front deal size to measuring long term customer value and increasing revenue predictability

Committed sales order in / annualized average revenue

per contract

Annual value of all recurring revenue components to a

contract

Op Free Cash Flow “Cash is King!”

KPIS TO TRACK OUR PROGRESS


28 |

Management KPI Development 2018 – 2023

Statutory KPI Development 2018 – 2023

ARR OpCF Bookings Product revenue (old licensing model)

Product revenue (new licensing model) Cost

12-17% CAGR

15- 20% CAGR

5-10% CAGR

MEDIUM TERM KPI DEVELOPMENT


29 |

2019

DBP

IoT

A&N

EBITA Margin

3 to 7%

75 to 125%

-3 to +3%*

28 to 30% Non IFRS

Medium Term Capital Returns

Dividend Pay Out

Share Buy Back

25 to 33% FCF

Opportunity Based

Revenue

Non-IFRS EBITA Margin

Bookings 15 to 20% CAGR

ARR 12 to 17% CAGR

Operating Cash Flow 5 to 10% CAGR

GROWTH AND CAPITAL RETURNS


*as of April 11, 2019

30 |

Higher retention, contract and lifetime values

TOD

AY

MED

IUM

TER

M

10%+

CAG

R

85–90% recurring

~ 65% recurring

Lower cost to serve

Lower customer acquisition cost

Digital Business Driving Recurring Revenue

THIS TRANSITION BUILDS US A BETTER BUSINESS

30%+ Operating

Margin Strong Free Cash Flow

Digital Business

10%+ CAGR

85%–90% Recurring Revenue

Medium term

Ambition Accelerated growth, higher quality and

higher visibility of revenues, good margin and cash generation


31 |

OUR TECHNOLOGY VISION


Cloud computing ‘Everything as a Service’ (XaaS)

Market Trends Smart Products/ Smart Services

Convergence of IT & OT Data Security and Privacy

IoT Shortage of skilled employees 5G

Edge computing LP WAN Industry 4.0

AI/ ML Data Accessibility Globalization 4.0

33 |

A TRULY CONNECTED

WORLD The revolution has already started…


34 |

WHAT DOES ‘A TRULY CONNECTED WORLD’ MEAN FOR OUR CUSTOMERS & PARTNERS

A tsunami of Cloud applications is emerging Cloud-based applications continue to eat up enterprise apps

Demand is moving from data acquisition to data integration Integration of Applications, Devices, Clouds and Data to drive operational excellence and superior customer experience

Innovations will be increasingly based on platforms Openness and ‘freedom of choice’ is a key requirement


35 |

A TRULY CONNECTED WORLD IN ACTION


36 |

iPaaS: a fully connected sports arena

Business application integration is key

Software AG and Coca-Cola European Partners have entered into a strategic partnership around business application integration and transformation.

Together with SK we developed an application that unlocks their new state-of-the-art arena capabilities and integrates a range of connected services, including real-time game stats, ticket bookings as well as in-seat food ordering.


37 |

Next generation of digital offerings

Software AG’s platform is centrally deployed to enable the next generation of digitalization including Smart Products.

Location of goods and wagons on rail network is a real issue. If an item is delayed or misrouted, fast recovery is important. If refrigeration fails or product knocked in transit, immediate alerts are key (condition monitoring).

Condition monitoring and tracking


38 |

“With Cumulocity IoT Edge, the health of each of the 5,500 wind turbines can be monitored and analyzed locally using a variety of different sensors for vibration, power output, temperatures and wind conditions using a combination of low-cost edge devices and sensors.”

- Stefan Ewald, CIO of Nordex

THE NEW WAY TO GO: CLOUD + EDGE = SUCCESS Optimize power generation and prevent breakdowns - globally


39 |

“We have taken Software AG’s Cumulocity IoT platform and rebranded it ‘STW machines.cloud’. Big data can be used to detect patterns alerting problems in bus engines. This reduces the amount of data transmitted, and enables predictive maintenance which avoids unnecessary preventive actions and breakdowns.”

- Dr. Michael Schmitt, CEO, STW

REMOTE MONITORING OF 5,000 LONDON BUSES To reduce emissions and prevent breakdowns


40 |

The speedway to the Industrial Internet of Things is just ahead! Cumulocity IoT Edge powered by Dell Technologies - a joint software appliance by Software AG and Dell EMC - offers plug-and-play entry onto the IIoT, literally the shortest time-to-market. The performance-optimized, industrial-grade appliance comes with preinstalled software, making it fully usable out of the box.

DELL SELECTED SOFTWARE AG’S CUMULOCITY EDGE


41 |

SIEMENS MINDSPHERE IS POWERED BY SOFTWARE AG

MindConnect API

MindConnect Integration • Simplified integration of application data into

MindSphere • Combine machine data with data out of our

applications, on premise or in the cloud

MindConnect IoT Extensions • Extends range of IoT devices • Combines device identity, asset and software

management • Use other customizable software agents on custom

devices

Connect and integrate data into MindSphere


42 |

FROM MACHINE MANUFACTURERS FOR MACHINE MANUFACTURERS, THEIR SUPPLIERS AND CUSTOMERS


43 |

Application driven Create new apps

Integration Driven Integrate (Apps, Clouds, Devices, Data) to drive operational excellence

Innovation driven New Business Models, New Products, Predictive Analytics (AI/ ML)

Value

A typical agile project adoption based on ‘Land & Expand’

E.g. remote management & control, condition monitoring

Enterprise wide integration with e.g. ERP/ CRM systems

Predictive Maintenance, Everything-as-a-Service

A UNIQUE OFFERING IN AN EARLY MARKET We combine integration, IoT and platform enabled innovations based on distributed architectures


44 |

Leapfrogging to Hybrid Integration & Distributed Architectures (Cloud & Edge)

Co-Innovations with Customers & Partners is key

We have a unique position - combine integration, IoT and platform enabled innovations

SUMMARY


45 |

OUR PRODUCT STRATEGY

OUR PRODUCT STRATEGY


46 |

Challenge for Operating & Manufacturing Companies Improved efficiency, consistency, quality for construction processes

• Reduction of operating costs • Easiness of machine handling • Real-time analytics • Data mining to increase quality and machine

availability

CO-INNOVATION


47 |

Solution for Dürr and its customers Streaming analytics powered by the ADAMOS IIoT Platform • Real-time streaming analytics • Real-time quality control during production • Intuitive UI for machine operators • Toolkit for self-service real-time data analytics

and algorithm

CO-INNOVATION


48 |

Applications – Databases – BI … “take it or leave it”

“IT DICTATORSHIP”

Product Manager Plant Manager Operations Manager Support Engineer Machine Operator

IT MANAGED CONSISTENCY

BUSINESS AGILITY


49 |

“DEMOCRATIZATION” BY INTEGRATION

Easy & Intuitive Experience

(Web/Mobile UI/App)

Cloud (Private or public)

DaaS

PaaS PaaS


SaaS

Contextual - Self service - Low Code – … “empower and serve”

IT MANAGED CONSISTENCY

BUSINESS AGILITY


50 |

INTEGRATE TO INNOVATE

Data Clouds Devices Apps

Easy & Intuitive Experience

(Web/Mobile UI/App)

Cloud (Private or public)

DaaS

PaaS PaaS


SaaS

Contextual - Self service - Low Code


51 | © 2019 Software AG. All rights reserved.

52 |

Integration & API

IoT & Analytics


Adabas & Natural

THE FOUR PRODUCT UNITS – FOCUS PER MARKET SEGMENT


53 |

EAI B2B ETL

ESB SOA Messaging

iPaaS API Mgmt Hybrid / Edge IoT Analytics

AI/ML DaaS Blockchain IoT Solutions

1990s 2020s

we are here

Application-driven Integration

Services-driven Integration

Self-service Integration

Securely Automated Integration of

Everything

MATURITY OF THE CONVERGENCE OF INTEGRATION AND IOT


54 |

INTERPLAY BETWEEN DEVICE INTEGRATION AND ANALYTICS

APAMA

CUMULOCITY

ZEMENTIS

Data Science

Operations The Analytics Flow

TRENDMINER

WEBMETHODS External data context

External models

∑


55 |

KEY TAKE-AWAYS

FOCUS ON WELL-DEFINED MARKETS

CONVERGENCE OF INTEGRATION AND IOT

CLOUD AND EDGE SCALABILITY

ANALYTICS AND SOLUTIONS



57 |

SALES AND GTM SALES AND GTM


58 |

THE STRENGTH OF OUR FOUNDATION

TRUSTED BRAND

10K CUSTOMERS

FINANCIAL STRENGTH

20%+

PRODUCT INNOVATION

10+ ANALYST

LEADERSHIP OP. CASH FLOW /

REVENUE


59 |

EVOLVING SALES AND GO-TO-MARKET

FOCUS EXECUTE

Specialization

Sales Coverage

Geographies MARKET IMPACT

Customer Experience

Alliances and Channels

Sales Operations


60 |

SPECIALIZED ACCOUNT EXECUTIVE: SALES BAG AND ROLE

SPECIALIST ROLES TO PERSONAS

TARGETED SALES BAGS

MARKET FOCUS

1

2

3

Professional Services

Customer

Adabas Natural

Integration & API

IoT & Analytics


Personae

Markets

NAM

DACH

EMEA

LATAM

APJ

……… iPaaS ……… Process Mining ……… IoT

Platform


61 |

FOCUSED GEOGRAPHY

Sweden

Switzerland

B+Lux Netherlands

China Canada

Japan Australia

Korea Brazil

Italy South Africa

France

UK

Germany

USA

Spain UAE

Biggest market

opportunity

Best established

footprint

BIGGEST MARKET IMPACT


62 |

FOCUSED SALES COVERAGE

NEW LOGOS

GROW SHARE OF

WALLET

NEW CHANNELS

1

2

3

Strategic Account Manager

Enterprise Account Manager

Territory Account Manager

TERRITORY ACCOUNTS

STRATEGIC ACCOUNTS

ENTERPRISE ACCOUNTS Alliances and

Channels


63 |

MODERN CUSTOMER EXPERIENCE

Evaluate

Adopt

Onboard Expand

Buy Renew

Evaluate and select

Upsell / Xsell

On-board and enable Value realization reference

Secure renewal

Contract execution Customer Life Cycle


64 |

ALLIANCES AND CHANNELS

ISV – extend reach G2000 Application Partners

OEM – embedded solutions White-labelling

ISV OEM Marketplace

Marketplace – extend reach SMB Cloud, Public and Private

SI

SI – expand wallet-share Increase competitiveness


65 |

SALES OPERATIONS

Simplification Metrics Sales Methodology

Quoting tools, approvals, contracts, revenue recognition

Leading and lagging indicators

Planning and continuous enablement

Simpler, faster quote to cash process

Increase accountability:

analyze, plan, adjust

Drive Alignment: resources and

efficiency

Demand Generation

Sales playbook and improved lead flow

Maximize Pipeline: volume, conversion


66 |

INCENTIVES: CORE AE COMPENSATION PRINCIPLES

DRIVE SUBSCRIPTIONS

OUTSIZED PERFORMANCE

RENEWALS: PROTECT & EXPAND

DRIVE SOLUTION PERFORMANCE

RIGHT-SIZED TERM LENGTHS

IMPROVE LINEARITY


67 |

SALES AND GTM TRANSFORMATION

Sales Operations

Geographies

2019 2020 2021 2022 2023

Rel

ativ

e Im

pact

Specialization

Sales Coverage

Customer Experience


TODAY


68 |

SUMMARY – DELIVERING MARKET IMPACT

FOCUS

EXECUTE

EXECUTE

EVALUATE

GROWTH

Specialization

Sales Coverage

Geographies

Customer Experience


Sales Operations


69 |

APRIL 18, 2019

RESULTS 1ST QUARTER 2019 (IFRS, UNAUDITED)


70 |

in €m, IFRS 2018 2017 2016 2015 2014

Total Revenue 865.7 879.0 871.8 873.1 857.8 BL DBP ex Cloud & IoT 434.4 441.4 441.4 431.5 394.5 BL Cloud & IoT 30.3 14.9 n/a n/a n/a

BL A&N 218.3 223.7 234.6 248.0 245.3 BL Consulting / Services 182.6 198.8 195.8 193.6 218.0 Group License 249.4 250.1 263.0 271.9 270.1

Group Maintenance 415.4 420.2 412.2 406.9 371.3

SaaS / Usage based 17.6 9.1 n/a n/a n/a

EBIT 231.6 222.8 213.9 209.4 176.0

EBITA (non-IFRS) 272.9 279.5 272.0 259.1 239.3

EPS (in €, non-IFRS)* 2.64 2.38 2.37 2.22 1.96

Dividend cash out n/a 44.3 41.9 39.5 39.5

Free cash flow 184.1 161.9 187.0 170.0 132.7

Net cash / Net debt 149.0 55.2 73.1 -25.7 -15.1

Shareholders’ equity 1,239.1 1,118.3 1,196.8 1,089.8 1,013.4

Employees (FTE) 4,763 4,596 4,471 4,337 4,421


FINANCIAL DATA KEY FIGURES

71 |

1. Return on equity: Operating EBIT / Equity 2. Return on cap. employed: Operating EBIT / (Fixed assets + Working capital) 3. Current assets ./. Cash and Cash Equivalents ./. Current liabilities

4. Current assets ./. Current liabilities / Total revenue 5. (Operating Cash flow ./. Capex) / Revenue.

IFRS unless stated different FY 2018 FY 2017 FY 2016 FY 2015 FY 2014 Operating margin (EBITA, non-IFRS) 31.5 31.8 31.2 29.7 27.9

EBITDA margin 30.5 30.0 29.1 29.7 26.4 EBIT margin 26.8 25.3 24.5 24.0 20.5 ROE1 18.7 19.9 17.9 19.2 17.4 ROCE2 16.4 18.0 15.2 16.1 12.6 Net working capital (€m)3 -€225,8 -€298.1 -€200.2 -€155.9 -€98.1 Working capital ratio4 27.3 7.7 20.0 16.6 25.7 Free cash flow margin5 21.3 18.4 21.4 19.5 15.5 Corporate tax rate 30.0 37.3 33.0 32.4 33.7 WACC6 5.32 4.95 4.05 4.13 4.35 Equity ratio 61.7 58.6 61.2 60.1 54.8 DSO (Days Sales Outstanding) 10.3 103 113 111 115 Capex (in €m) €11.0 €27.5 €16.7 €15.5 €10.5 Capital employed7 (in €m) €1,408.9 €1,248.4 €1,381.9 €1,282.8 €1,326.0


KEY FINANCIAL RATIOS IN PER CENT OF REVENUE

6. Pro forma, not applied for corporate management 7. Fixed assets + Working capital

72 |

CURRENCY IMPACT ON REVENUE


Q1 2019 / FY 2018

Euro 34%

US Dollar 31%

Other 17%

ILS 4%

BRL 4%

AUD 4%

GBP 6%

(in €m; yoy)

Q1 2019

Q1 in %

FY 2018

FY in %

Licenses 0.0 0% -5.2 -2%

Maintenance 2.4 2% -17.0 -4% SaaS 0.1 3% -0.4 -2%

Services & Other 0.6 1% -4.2 -2%

Total 3.1 2% -26.7 -3%

Currency impact on revenue

34% revenue in Euro 66% revenue in foreign currency

Currency split FY 2018

73 |

(in €m) Q1 2019

Q1 2018

∆% ∆% acc

FY 2018

FY 2017

∆% ∆% acc

DBP (excl. Cloud & IoT) 90.5 89.4 1% -1% 434.4 441.4 -2% 1%

- thereof Licenses 21.7 23.4 -7% -8% 166.2 176.7 -6% -4%

- thereof Maintenance 68.7 66.0 4% 1% 268.2 264.7 1% 5%

DBP Cloud & IoT 9.5 6.4 49% 47% 30.3 14.9 103% 106%

Total revenue 100.0 95.8 4% 2% 464.7 456.5 2% 5%

Cost of sales -9.3 -8.6 9% 8% -35.9 -34.4 4% 7%

Gross profit 90.6 87.2 4% 1% 428.8 422.0 2% 5%

Sales & Marketing -45.8 -37.8 21% 18% -181.2 -174.3 4% 7%

Research & Development -27.4 -22.8 20% 19% -100.6 -96.9 4% 6%

Segment result 17.5 26.7 -35% -38% 147.0 150.9 -3% 1%

Margin in % 17.5% 27.8% 31.6% 33.1%

Annual Recurring Revenue *as of March 31 308.6 276.5 12% 10% 434.4 441.4 -2% 1%

DIGITAL BUSINESS PLATFORM (including DBP Cloud & IoT)

Q1 2019 segment report


74 |

(in €m) Q1 2019

Q1 2018

∆% ∆% acc

FY 2018

FY 2017

∆% ∆% acc

Licenses 3.1 1.8 71% 70% 8.7 3.5 149% 149%

Maintenance 1.6 0.8 91% 89% 4.1 2.4 72% 73%

SaaS / Usage based 4.9 3.8 30% 26% 17.6 9.1 93% 97%

Total revenue 9.5 6.4 49% 47% 30.3 14.9 103% 106%

Annual Recurring Revenue as of March 31 36.2 18.7 94% 91%

DBP CLOUD & IOT Q1 2019 segment report


75 |

(in €m) Q1 2019

Q1 2018

∆% ∆% acc

FY 2018

FY 2017

∆% ∆% acc

Licenses 17.8 9.0 98% 102% 74.4 69.9 6% 8%

Maintenance 36.8 35.7 3% 2% 143.2 153.1 -6% -1%

Product revenue 54.6 44.6 22% 22% 217.6 223.0 -2% 2%

Other 0.2 0.2 0.7 0.7 0% 0%

Total revenue 54.7 44.8 22% 22% 218.3 223.7 -2% 2%

Cost of sales -2.2 -1.4 54% 53% -6.3 -10.1 -38% -35%

Gross profit 52.5 43.4 21% 21% 212.1 213.6 -1% 3%

Sales & Marketing -7.4 -6.6 11% 11% -32.8 -33.3 -2% 1%

Research & Development -5.9 -5.6 7% 8% -23.8 -23.8 0% -1%

Segment result 39.3 31.2 26% 25% 155.4 156.5 -1% 5%

Margin in % 71.7% 69.7% 71.2% 70.0%

ADABAS & NATURAL


Q1 2019 segment report

76 |

SERVICES


Q1 2019 segment report (in €m) Q1

2019 Q1

2018 ∆% ∆%

acc FY 2018

FY 2017

∆% ∆% acc

Total revenue 46.7 46.1 1% 0% 182.6 198.8 -8% -6%

Cost of sales -35.7 -37.5 -5% -6% -144.9 -155.8 -7% -5%

Gross profit 11.0 8.5 29% 28% 37.8 43.0 -12% -10%

Sales & Marketing -4.3 -4.4 -3% -4% -17.4 -19.2 -9% -6%

Segment result 6.7 4.2 62% 61% 20.3 23.8 -15% -12%

Margin in % 14.4% 9.0% 11.1% 12.0%

77 |

(in €m) Q1 2019

Q1 2018

∆% ∆% acc

FY 2018

FY 2017

∆% ∆% acc

Total revenue 201.4 186.6 8% 6% 865.7 879.0 -2% 2%

Cost of sales -49.5 -49.5 0% -1% -195.0 -213.4 -9% -7%

Gross profit 152.0 137.1 11% 9% 670.7 665.6 1% 4%

Margin in % 75.4% 73.5% 77.5% 75.7%

Research & Development -33.3 -28.3 17% 15% -124.4 -120.6 3% 5%

Sales & Marketing -60.8 -52.0 17% 15% -244.7 -243.5 1% 3%

Administration -17.6 -17.0 3% 3% -74.0 -75.9 -3% -1%

Other income / expense 2.0 2.4 3.9 -2.8

EBIT 42.2 42.1 0% — 231.6 222.8 4% —

Margin in % 21.0% 22.5% 26.8% 25.3%

RESULTS


Q1 2019

78 |

(in €m) Q1 2019

Q1 2018 ∆% FY

2018 FY 2017 ∆%

EBIT (before all taxes) 42.2 42.1 0% 231.6 222.8 4%

Amortization on acquisition related intangible assets 5.6 5.3 6% 21.1 29.6 -29%

Share based payments 2.5 2.9 -14% 11.0 20.7 -47%

Restructuring / severances / legal case 1.1 0.8 27% 6.9 4.7 45%

Other impacts / impacts from M&A activities 0.2 0.1 128% 2.3 1.7 39%

EBITA (Non-IFRS) 51.6 51.2 1% 272.9 279.5 -2%

in % of revenue (Non-IFRS) 25.6% 27.4% 31.5% 31.8%

Net income (Non-IFRS) 36.3 36.5 -1% 195.0 177.3 10%

EPS in € (Non-IFRS)* €0.49 €0.49 -1% €2.64 €2.38 11%

NON-IFRS EARNINGS


Q1 2019

* Weighted average shares outstanding (basic) Q1 2019: 74.0m / Q1 2018: 74.0m

79 |

(in €m) Q1 2019

Q1 2018 ∆% FY

2018 FY 2017 ∆%

Operating cash flow 60.0 61.6 -3% 195.1 189.4 3%

./. CapEx* (long-term, non-current) -2.2 -1.5 -11.0 -27.5****

./. Repayment of lease liabilities** -3.3 0.0

Free cash flow 54.5 60.1 -9% 184.1 161.9 14%

Payment adjustments for

- Share based compensation 3.9

- Restructuring/ severances/ legal cases 7.2

- Other payments/ M&A impacts 0.0

Adjusted operational Free Cash flow 65.6

in % of revenue 32.6%

Adjusted operational Free Cash flow per share*** €0,89


CASH FLOW Q1 2019

* 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 2019: 74.0m/ Q1 2018: 74.0m | **** YOY change because of one-time property investment at Darmstadt

80 |

34.9

Mar 31, 2019

Mar 31, 2019

Assets Liabilities


BALANCE SHEET (in €m)

Dec 31, 2018

Dec 31, 2018

462.3

276.2 62.1

1,172.4

2,007.9

Cash and cash equivalents

Financial assets Trade and other receivables

Fixed assets (Goodwill 975.9 / 964.6)

Total

Non-financial assets

313.3

316.0

139.5

1,239.1

2,007.9

Financial liabilities

Other liabilities

Deferred income

Shareholders’ equity (ratio 63.5% / 61.7%)

Total

483.5

246.0 66.8

1,216.3

2,036.5

23.9

306.6

251.1 185.3

1,293.5

2,036.5

81 |

DBP Total Revenue

Adabas & Natural

Operating Margin Group (EBITA non-IFRS)2)


OUTLOOK FULL YEAR 2019

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

- DBP Cloud & IoT

- DBP (excl. Cloud & IoT)

FY 2019 Outlook (as of January 31, 2019)

28% to 30%

-5% to -0%1)

N/A

FY 2018 (in €m)

218.3

464.7

31.5%

30.3 +75% to +125%1)

+3% to +7%1) 434.4

FY 2019 Outlook (as of April 11, 2019)

28% to 30%

-3% to +3%1)

N/A

+75% to +125%1)

+3% to +7%1)

82 |

APPENDIX


83 |

(in FTE) Mar 31, 2019

Dec 31, 2018

∆%

Mar 31, 2018

∆% yoy

Total 4,737 4,763 -1% 4,610 3%

Professional Services 1,843 1,901 -3% 1,938 -5%

Research & Development 1,339 1,310 2% 1,197 12%

Sales & Marketing 936 926 1% 868 8%

Administration 619 626 -1% 607 2%

Germany 1,240 1,243 0% 1,210 2%

USA 570 580 -2% 575 -1%

India 886 895 -1% 813 9%

Rest of world 2,041 2,044 0% 2,011 1%


HEADCOUNT BY FUNCTIONAL AREAS* AND GEOGRAPHY

* According to P+L structure

84 |

(in €m) Q1 2019

Q1 2018 ∆% FY

2018 FY

2017 ∆%

EBIT (before all taxes) 42.2 42.1 0% 231.6 222.8 4%

Financial result 1.4 1.4 2% 4.3 1.4 195%

Profit before taxes 43.6 43.4 0% 235.9 224.2 5%

Other taxes -1.5 -1.8 -19% -7.0 -7.2 -2%

Income taxes -12.5 -11.7 7% -63.7 -76.4 -17%

Tax rate in % 32.0% 31.0% 30.0% 37.3%

Net income 29.7 29.9 -1% 165.2 140.6 17%

EPS in €* 0.40 0.40 -1% €2.23 €1.88 19%


EARNINGS Q1 2019

* Weighted average shares outstanding (basic) Q1 2019: 74.0m / Q1 2018: 74.0m

85 |

FY 2020*

FY 2019*

* Estimated


AMORTIZATION / DEPRECIATION IMPACT (PRELIMINARY)

(in €m) Amortization

Depreciation

Q1 2019

FY 2021*

-5.6

-6.0

-21.8

-24.6

-14.1

-24.0

-13.7

-24.0

86 |

(in €m) Q1 2019

Q1 2018

∆% ∆% acc

FY 2018

FY 2017

∆% ∆% acc

Product revenue 154.5 140.4 10% 8% 682.3 679.4 0% 4%

Licenses 42.6 34.2 25% 25% 249.4 250.1 0% 2%

Maintenance 107.1 102.5 5% 2% 415.4 420.2 -1% 3%

SaaS / Usage based 4.9 3.8 30% 26% 17.6 9.1 93% 97%

Services 46.7 46.1 1% 0% 182.5 198.8 -8% -6%

Other 0.2 0.2 0.9 0.8

Total 201.4 186.6 8% 6% 865.7 879.0 -2% 2%

REVENUE Q1 2019



SOFTWARE AG Investor Relations Uhlandstrasse 12 64297 Darmstadt Germany T: +49 (0) 6151 / 92 1900 F: +49 (0) 6151 / 9234 1900 W: softwareag.com E: [email protected]


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