Software AG Company Presentation/media/Files/S/... · conditions, changes in currency exchange, the introduction of competing products, lack of market acceptance of new products,

©2015 Software AG. All rights reserved. 1 |

March 2015

Software AG

Investor Presentation


Safe-Harbor-Statement

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 presentations 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.


Committed to helping our customers succeed for more than 40 years

CUSTOMER BASE

70% More than

Software AG

of the Fortune 1,000

A Leader in Digital Business IT

15 x Gartner– and

Forrester

leader

€850+ million

in revenue

2.5m+ users

4,400+ employees

worldwide


• Regulation causing significant and

continuous change

• Controls are slow to respond to

changing business risks

• Controls rooted in analysis of the

past and slow to respond

• Large number and variety of data

sources needed to derive ‘context’

• Unable to combine customer

insights, inventory and competitor

data on-the-fly

• Extreme speed and scale needed

to act on customer context

• Integration with countless “things”

disrupting enterprise architectures

• Unable to automate maintenance

scheduling, procurement and other

core business services

• Challenged to combine historical

and streaming big data on-the-fly

Digital Business - Disruption is Everywhere

Resurgent Risk Managers Connected Customers Internet of Things


Paradigm Shift – every Business will become Digital

Custom Software

Adabas -

Natural SAP Oracle

Back Office Standardization happened

Packaged Applications

e.g. Salesforce.com

Front Office Standardization begins

C U S T O M E R S

Space of differentiation & Innovation Business and IT

Transformation (Processes, Applications)

Agile Development

BPM/Apps

Integration & Connectivity (Internet of Things, Big Data, Cloud)

Streaming

Analytics

Adaptive Applications Marketing

Support

Commerce

Business and IT

Transformation (Processes, Applications)

Agile Development

BPM/Apps

Integration & Connectivity (Internet of Things, Big Data, Cloud)

Streaming

Analytics

Adaptive Applications Marketing

Support

Commerce

Packaged Applications


Application infrastructure and middleware

Develop, deploy and

integrate applications

Manage business

and IT transformation

Market Focus Area to become Digital


Application Integration Middleware – Marketsize & Growth


Business Software on the Road Map

1970 1990 2015

Own Innovation

IT enabled processes

D e p a r t m e n t a l

Custom applications

Acquired

Innovation

Standardizing processes

C r o s s d e p a r t m e n t

Packaged applications

Co-Innovation

Agility

C u s t o m e r E n g a g e m e n t

Adaptive applications


IT-Spending Trend – Share by Market Segment

Source: Forrester Research

79

45

18

41

3

14

0 20 40 60 80 100

2011

2016

Systems of

record

investment

Systems of

engagement

spending

Mobile/tablet

front-end app

budgets

%

%


Accelerate deployment of Adaptive Apps (with Solutions)

Customer engagement systems

Front office

Marketing

Sales

Finance & Controlling

Order Management

Customer Management

Procurement Supply Chain Management

Core operational systems (ERP, SCM, …)

Back office • Stable

• Reliable

• Efficient

• Standardization

DIGITAL BUSINESS PLATFORM

Adaptive Applications Agility, Speed, Innovation, Differentiation

IoT Predicitve Maintenance

iGRC Customer

Experience Management

Pre-built by Software AG

The benefits of Adaptive Apps

Accelerated Deployment

Agile & Customizable

Industry Focused

Includes CEM, IoT, iGRC

“ Prebuilt solutions accelerate the deployment

of my Adaptive Applications.“ “The digital business platform enables me to

build Adaptive Applications.“

©2015 Software AG. All rights reserved. 11 | ©2015 Software AG. All rights reserved. 11 |

Solutions to Digitize and Differentiate

Internet of Things

Connected Customer

Intelligent Governance, Risk & Compliance

Logistics & Supply Control

Market Surveillance

FX eCommerce


Credit Suisse Saved several million

in six months

Coca-Cola Has doubled their

efficiency and

profit margins

Statoil has emergency-prepared

over 40,000 employess

and contractors

Electrolux saw a supply chain

transformation

in just days

Partnering with Software AG

ING Produced a faster solution

delivery in 3 months

instead of 18.

Fujitsu Customer onboarding

became 30% faster


Go-to-Market: 2015 – Key Success Factors

Eco System expansion to get ready for scale Strategic initiative and major KPI

Maximize Maintenance Revenue New dedicated Line of Business

Improve BPE Sales Productivity & Excellence New GTM Model

Standard & effective supporting processes (Sales Enablement, Account & Territory, etc…)

2 From Product to Industry Use Cases driven Go to Market Cross-board areas strategic initiative

GCS Value Creation & Knowledge Multiplier Co-Innovation with Customers

Partner Enablement

1

3

4

5


Complementing Software AG’s capabilities with a partner ecosystem focused on customer value

Partner Added Value for the Digital Enterprise

Innovation Industry Specialization

Global Coverage Horizontal Expertise

Operational Support Joint Solutions

Tech-

nology

Partner

Reseller

& VAR

OEM

Partner Sales

Partner

Services

Partner

Referral

Partner

Technology Partner

Global Strategic Alliance Partner


Leading Global Partners


Revenue and Margin Drivers Mid Term

2014 2015 2016 2017 2018

Sales efficiency

Platforms / use case packaging

Recurring projects

Cloud based offerings

Partner sales / OEM

Revenue mix

Economies of scale

(R&D, G&A)

Metrics

Channel

sales

Sales

productivity


Outlook FY 2015 (as of January 28, 2015)

Product Revenue BPE

Product Revenue ETS

Operating Margin

(Non-IFRS)3)

1) At constant currency rates

2) Assuming current (January 2015) exchange rates would apply throughout FY 2015; translated into projected stated results

3) Before adjustments for non-operating items (see non-IFRS earnings results)

27.5% to 28.5%

-8% to -14%1)

+6% to +12%1)

FY 2014 (in €m)

Outlook FY 2015

244.7

394.5

27.9%

Scenario 2015

+10% to +16%2)

-4% to -10%2)

IFRS EBIT Margin

+100 bp to +200 bp


Mid-Term Scenario until 2020 (as of February 4, 2015)

BPE

Group Maintenance

Operating Margin

(Non-IFRS)

ETS

32% to 35%

• Sustainable single digit growth

• High single digit to low double digit license growth

• Continuous focus on sales efficiency

• Loyal customer base

• Maintenance proportion increases steadily,

thus having a higher impact on revenue

development


Key Investment Indicators

1. Footprint: Established global player in enterprise IT

• Risk balanced revenue by industry and geography

• Blue Chip customer base built over 40+ years

• Experienced management team and loyal expert staff

2. USP: Technology leadership and vendor neutrality

• Leadership in 15 product categories by Gartner and Forrester

• Innovator: First Digital Business Platform

• Neutral vendor to integrate systems from large brands

3. Financials: Solid profit base and high cash generation

• 40+ percent of revenue is recurring maintenance

• 75 percent of license revenue from growing IT market segments

• High operating margin (2014: 28%)

• Continuous dividend payments (current yield 2%+)


Product Revenue by Region Product Revenue by Industry

Risk Balanced Revenue by Industry and Geography

45%

31%

14%

10%

EMEA

Germany Asia Pacific

Americas

Based on Group product revenue - FY 2014

Government Financial Services

IT Services Services

Manufacturing Telco & Media

Transport & Logistics Other

21%

20%

17%

11%

10%


Blue Chip Customer Base Built Over 40+ years

Public Sector Telecom Chemicals/Pharma Energy/Utilities

Manufacturing Logistic/Transport Consumer Goods

Finance


Experienced Management Team and Loyal Expert Staff

Karl-Heinz Streibich Arnd Zinnhardt Dr. Wolfram Jost

Corporate Communications,

Global Legal, Global Audit,

Corporate Office and Top

Management Development,

Global Information Services,

Corporate University

Chief Executive Officer

- since 2003 -

Finance, Controlling,

Taxes, Treasury,

Mergers & Acquisitions,

Business Operations,

Investor Relations, Global

Purchasing, Human

Resources

Chief Financial Officer

- since 2002 -

Research & Development

Chief Technology Officer

- since 2010 -

Eric Duffaut

Chief Customer Officer

- since 2014 -

Global Sales

Global Consulting Services

Marketing

Partner Management

















Technology Leadership by Gartner and Forrester

Application Integration Suites • • • • •

Application Services Governance • •

Business Process Analysis Tools • • •

Business Process Management Suites • • •

Enterprise Architecture Tools • •

Governance, Risk and Compliance • •

Integrated IT Portfolio Analysis Apps •

Big Data Streaming Analytics Platforms • • •

EA Management Suites •

Elastic Caching Platforms • • •

Hybrid Integration • • • •

Integrated SOA Governance • •

SOA Service Life-Cycle Management •


Gartner has positioned

webMethods products

in their Application

Integration Magic

Quadrant 13 times

since 2000

Source: Gartner, Inc., Magic Quadrant for On-Premises

Application Integration Suites, Jess Thompson, et al.,

July 29, 2014.

This graphic was published by Gartner, Inc. as part of a larger research document and should

be evaluated in the context of the entire document. The Gartner document is available upon

request from Software AG. \

Gartner does not endorse any vendor, product or service depicted in its research publications,

and does not advise technology users to select only those vendors with the highest ratings.

Gartner research publications consist of the opinions of Gartner's research organization and

should not be construed as statements of fact. Gartner disclaims all warranties, expressed or

implied, with respect to this research, including any warranties of merchantability or fitness

for a particular purpose.

©2015 Software AG. All rights reserved. 26 | 26 |

Innovator for competitive differentiation

First ever Digital

Business Platform

First high-performance

transactional database

One of the first 4GL

(4th-gen programming

languages) introduced

First B2B

server and SOA

integration

platform

First business

process analysis

and design

platform

First Big Data

and Streaming

Analytics

platform


Neutral - because we are vendor independent

• Our solutions work

in harmony with

your existing IT

landscape

• We make all leading

databases and

application platforms

work in synergy with

one another.

• We won’t lock you

into proprietary

systems

















0

100

200

300

400

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e*

40%+ of Revenue is Recurring Maintenance

186 213

267 305

353 362 378

> 90% of Maintenance Revenue is recurring

369 €m 369

> 40% of Group Revenue from Maintenance 44%

Maintenance 32% License

24%

Consulting

379*

* Analyst consensus (as of Jan. 2015)

BPE

ETS

FY 2014 Group revenue, adjusted for divestments


0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e*

License Revenue: 3/4 from Growing IT Market Segments

BPE

ETS

BPE offering focused on growing

IT-market segments, like AIM

24%

37% 42%

62% 67% 66%

76% 63%

58% 56% 49% 42% 38% 33% 34%

44%

58% 51%

44%

Maintenance 32% License

24%

Consulting

25%

75%

* Analyst consensus (as of Jan. 2015)

FY 2014 Group revenue, adjusted for divestments


Continuous Improvement of Operating Result

Non–IFRS EBITA in € million

40

50

60

70

80

90

Q1 Q2 Q3 Q4

Non–IFRS EBITA in % of revenue

20%

30%

40%

Q1 Q2 Q3 Q4

2013

2014

27%

(FY 2013)

28%

(FY 2014)


Dividend policy reflects profit, cash flow and financing requirements for growth

Continuous Dividend Payments

0.25 0.27 0.30 0.33 0.37 0.38

0.43 0.46 0.46 0.46

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Ordered by fiscal year/in €

©2015 Software AG. All rights reserved. For internal use only 33 |

Financials


Euro 39%

US Dollar 26%

Other 11%

BRL 5%

ILS 4%

AUD 4%

CAD 4%

GBP 7%

(in €m; yoy)

Q4

2014

Q4

in %

FY

2014

FY

in %

Licenses 2.9 3% -0.5 -

Maintenance 2.6 3% -6.4 -2%

Consulting &

Other 0.8 2% -0.9 -

Total 6.3 3% -7.8 -1%

Currency impact on revenue

Currency impact on revenue - Q4 2014 / FY 2014

39% revenue in Euro

61% revenue in foreign currency

Currency split FY 2014


(in €m) Q4

2014

Q4

2013

Δ%

Δ%

acc FY

2014

FY

2013

Δ%

Δ%

acc

Licenses 60.2 73.6 -18% -21% 178.9 220.1 -19% -19%

Maintenance 57.9 53.1 9% 6% 215.6 202.8 6% 8%

Total revenue 118.1 126.7 -7% -10% 394.5 422.9 -7% -6%

Cost of sales -6.3 -6.0 5% 2% -22.8 -22.4 2% 4%

Gross profit 111.8 120.7 -7% -10% 371.7 400.5 -7% -7%

Sales & marketing -47.2 -56.9 -17% -20% -182.5 -201.5 -9% -8%

R & D -22.1 -22.9 -3% -7% -84.8 -82.5 3% 2%

Segment result 42.5 40.9 4% 1% 104.4 116.5 -10% -10%

Business Process Excellence (BPE)

Segment report Q4 2014 / FY 2014


(in €m) Q4

2014

Q4

2013

Δ%

Δ%

acc

FY

2014

FY

2013

Δ%

Δ%

acc

Licenses 38.4 36.0 7% 4% 91.0 107.4 -15% -15%

Maintenance 38.4 39.0 -2% -3% 153.7 166.4 -8% -5%

Product revenue 76.8 75.0 2% - 244.7 273.8 -11% -9%

Other 0.2 0.2 - - 0.6 0.7 -14% -14%

Total revenue 77.0 75.2 2% - 245.3 274.5 -11% -9%

Cost of sales -3.3 -3.6 -8% -10% -12.6 -14.1 -11% -9%

Gross profit 73.7 71.6 3% 1% 232.7 260.4 -11% -9%

Sales & marketing -15.3 -13.3 15% 14% -41.1 -50.4 -18% -18%

R&D -6.0 -6.5 -8% -8% -24.3 -25.3 -4% -4%

Segment result 52.4 51.8 1% -2% 167.3 184.7 -9% -8%

Enterprise Transaction Systems (ETS)

Segment report Q4 2014 / FY 2014


Revenue Q4 2014 / FY 2014

(in €m) Q4

2014

Q4

2013

Δ%

Δ%

acc FY

2014

FY

2013

Δ%

Δ%

acc

Product Revenue 195.0 204.4 -5% -7% 641.4 705.7 -9% -8%

License 98.6 109.6 -10% -13% 269.9 327.5 -18% -17%

Maintenance 96.4 92.1 5% 2% 369.3 369.1 - 2%

Product IDS (SAP) - 2.7 - - 2.2 9.1 -76% -76%

Consulting BPE/ETS 52.2 52.9 -1% -3% 195.8 199.6 -2% -1%

Consulting IDS (SAP) - 14.0 - - 20.0 66.4 -70% -70%

Other 0.1 0.2 - - 0.6 1.0 -40% -40%

Total 247.3 271.5 -9% -11% 857.8 972.7 -12% -11%


Results Q4 2014 / FY 2014

(in €m) Q4

2014

Q4

2013

Δ%

Δ%

acc FY

2014

FY

2013

Δ%

Δ%

acc

Total revenue 247.3 271.5 -9% -11% 857.8 972.7 -12% -11%

Cost of sales -54.0 -72.7 -26% -27% -236.3 -294.6 -20% -19%

Gross profit 193.3 198.8 -3% -6% 621.5 678.1 -8% -7%

Margin in % 78.2% 73.2% 72.5% 69.7%

R & D -28.1 -29.4 -4% -7% -109.1 -107.9 1% 1%

Sales & marketing -71.9 -80.8 -11% -13% -263.0 -300.1 -12% -11%

Administration -19.6 -20.7 -5% -5% -74.1 -73.2 1% 2%

Other income/expense -2.3 2.5 - - 0.7 8.6 - -

EBIT 71.4 70.4 1% -4% 176.0 205.5 -14% -14%

Margin in % 28.9% 25.9% 20.5% 21.1%


Non-IFRS Earnings Q4 2014 / FY 2014

(in €m) Q4

2014

Q4

2013

FY

2014

FY

2013

EBIT (before all taxes) 71.4 70.4 176.0 205.5

Amortization on acquisition related

intangible assets 8.3 9.4 39.2 40.4

Reduction acquisition related product revenue by

purchase price allocation - 0.3 0.5 1.2

Other impacts from M&A activities 1.1 0.1 0.1 1.7

Share based payment 5.5 0.2 11.7 -0.7

Restructuring/severances 2.1 3.4 9.1 12.6

Result from sold operations - - 2.7 -

EBITA (Non-IFRS) 88.4 83.8 239.3 260.7

in % of revenue (Non-IFRS) 35.7% 30.8% 27.9% 26.8%

Net income (Non-IFRS) 59.3 56.6 155.1 172.9

EPS (Non-IFRS)* 0.75 0.69 1.96 2.07

* Weighted average shares outstanding (basic) Q4 2014: 78.9m / Q4 2013: 82.2m // FY 2014: 79.2m / FY 2013: 83.7m


Headcount by functional areas* and geography

(in FTE) Dec. 31,

2014

Sept. 30,

2014

Δ%

qoq

Dec. 31,

2013

Δ%

yoy

Total 4,421 4,553 -3% 5,238 -16%

Consulting & services 1,821 1,884 -3% 2,347 -22%

R & D 968 989 -2% 998 -3%

Sales & marketing 993 1,026 -3% 1,180 -16%

Administration 639 654 -2% 713 -10%

USA 654 695 -6% 778 -16%

Germany 1,216 1,237 -2% 1,711 -29%

Rest of world 2,551 2,621 -3% 2,749 -7%

* According to P+L structure


Cash flow Q4 2014 / FY 2014

(in €m) Q4

2014

Q4

2013

Δ% FY

2014

FY

2013

Δ%

Operating cash flow 48.7 56.4 -14% 143.2 171.8 17%

./. CapEx* -1.7 -2.9 -10.5 -12.7

Free cash flow 47.0 53.5 -12% 132.7 159.1 -17%

as % of revenue 19.0% 19.7% 15.5% 16.4%

Free cash flow per share** 0.60 0.65 8% 1.68 1.90 -12%

* Cash flow from investing activities except acquisitions and except investments in debt instruments

** Based on average outstanding shares: Q4 2014: 78.9m / Q4 2013: 82.2m // FY 2014: 79.2m / FY 2013: 83.7m


Dec. 31,

2014

Dec. 31,

2014

1,848.9

373.7

298.6

70.9

1,105.7

444.1

279.3

112.1

1,013.4

Cash and cash

equivalents/Securities

Trade receivables

Inventory, other assets

Fixed assets

(goodwill 857.3/829.2)

Total

Financial liabilities

Other liabilities

Deferred income

Shareholders’ equity

(ratio 54.8%/48.4%)

Total

Assets Liabilities

Balance Sheet (in €m)

Dec. 31,

2013

Dec. 31,

2013

613.4

309.9

108.0

965.6

506.5

323.2

57.3

1,109.9

1,996.9 1,996.9 1,848.9


Number of total shares: 86,943,945

Freefloat: ~ 62%

Indices: TecDAX, DAX 100, TechAllShare

Codes: SOW, SOW GR, SOWG.DE

ISIN: DE0003304002, ADR symbol: STWRY

Solid Shareholder Structure

Software AG Foundation

Institutional Investors

Private & undisclosed 24%

29%

38%

Own Shares**

**as of February 2015

Fidelity (FMR LLC) 3.5%

Templeton 2.9%

Deutsche Asset & Wealth 2.9%

Deka 2.9%

Norges Bank 2.9%

Shareholder Value 2.1%

35%

14%

10%

11% Germany

United States

United

Kingdom

Scandinavia

France

Rest of World

6%

9%

24%

Shareholder Structure

Institutional Investors by Region*

Major Institutional Investors*

Share Data

*Source: Ipreo (Factset), February 2015


Investor Relations

Uhlandstrasse 12

64297 Darmstadt

Germany

phone: +49 (0) 6151 / 92 1900

fax: +49 (0) 6151 / 9234 1900

softwareag.com

e-mail: [email protected]

@SoftwareAG_IR

mailto:[email protected]

Documents

Software AG Company Presentation/media/Files/S/... · conditions, changes in currency exchange, the introduction of competing products, lack of market acceptance of new products,