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The business performance in the second quarter of 2010 totally confirmed the effectiveness of Software AG's growth strategy. The webMethods business division, with innovative software for integrating business applications and processes, continued to show dynamic growth. Total business division growth accelerated to 18% in the second quarter after a 9% increase in the Q1. The webMethods licensing business grew dynamically by 31% to €29.6m. This growth was based on the experience and skills of the business organization operating in a growing software market and resulted in an increase in the number of large projects as well as an increase in the average deal size.
"We have passed a milestone at Software AG. We have succeeded in establishing a second, stable business division whose organic growth and successful acquisitions complement our profitable ETS business,"
stated Karl-Heinz Streibich, CEO of Software AG.
"Our strategy has paid off. With webMethods we have a new, profitable growth driver that will propel the company into a new dimension. And this is only the beginning. The integration of IDS Scheer AG will strengthen our growth trend and dynamic results even further in the future."
Revenue by segment
The webMethods business division reported 18% growth in second quarter revenue of €89.4m. The Enterprise Transaction Systems business division (Adabas, Natural) posted revenue of €96.3m (€100.9m in 2009), 5% under Q2 2009 but 8% higher than the first quarter 2010 figure. The Enterprise Process Innovation division, which represents the IDS Scheer business acquired by Software AG in August 2009, contributed a total of €81.6m to Software AG's revenue growth. Of that figure, €23.4m came from product revenues and €57.9m from IDS Scheer Global Consulting and product implementation.
Operating earnings and cash flow
The sharp rise in webMethods business volume and continued effective cost management resulted in increased operating earnings in the first quarter of €58.9m. Net income grew by 29% to €37.4m compared to €28.9m in Q2 2009. Earnings per share climbed to €1.32 (2009: €1.02).
"We have established the webMethods business division as a successful growth engine in recent years. It is now also as a significant contributor to Software AG's total earnings. webMethods and ARIS will also drive the dynamic growth of Software AG's EBIT in the coming quarters," said Arnd Zinnhardt, CFO of Software AG. "Earnings and cash flow growth are the basis for the further strategic development of Software AG."
First half of 2010
Software AG's Group revenue totaled €517.6m in the first half of 2010 (H1 2009: €341.7m), a 51% increase over the previous year. In the same period, product revenues were €308.6m, 20% higher than in the prior year (H1 2009: €256.2m).
Maintenance revenues grew by 21% to €178.6m (H1 2009: €147.1m). License revenue climbed by 19% from €109.1m to €130.1m. The webMethods business division showed revenue growth of 14% to €170.7m, up from €150.1m in the first half of 2009. Total ETS revenue of €185.4m was just under the 2009 figure of €191.5m.
Forecast
Software AG confirms its forecast for fiscal year 2010 first published in February of this year; with total revenue growth of between 25 and 30% and product revenue growth of between 12 and 15%, at constant currency rates.
The ETS product revenue is forecast to grow between 2 and 4% and the webMethods/ARIS product revenue between 25 and 30%. As regards earnings, the company expects a somewhat higher increase in profit after tax and earnings per share than before, raising the current profit growth to the range of 10 to 12%, at the upper end of the previous forecast.
Posted by Nadeen El Ajou
