Software AG Heading for Growth

Transcription

1 Software AG Heading for Growth Karl-Heinz Streibich, CEO June 01, 2006 Credit Suisse European Technology Conference, Barcelona, Spain This presentation contains forward-looking statements based on 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.

2 Profile of Software AG The No. 1 European IT System Software Provider High performance Products and Services for Enterprise level IT infrastructure Database management systems (DBMS) Application Development Tools Tools for Legacy Modernization Enterprise level Integration Solutions (BPM, SOA) Revenue: 438 mn. (2005; +6% yoy) EBIT Margin: 22% (2005; +160 bp yoy) Employees: > 2,700 worldwide Customers: > 3,000 worldwide across all industries Distribution: > 70 countries (biggest revenue contribution from the US-market) Headquarter: Darmstadt, Germany Listing: MarketCap: Frankfurt Stock Exchange (TecDAX, ISIN DE / SOW) ADR Program (Sponsored Level 1; U.S. Security Code: 83403H 10 1 (Cusip)) ~ 1.1 bn. EUR (28 mn. shares, 70% Free Float) News: Launch of new product line crossvision February 2006 June 2006 / 2 Software AG

3 History of Software AG: 37 Years Heritage of Technology Leadership 1971 First Mainframe Database developed by Peter Schnell 1985 First Platform Independent Language 1999 IPO Frankfurt Stock Exchange Introduced First XML Server 2004 Industry Integration Solutions: 2006 Launch of Company founded 1979 First Mainframe 4GL 1992 First Service Broker for Distributed Applications 2001 First Database to utilize IBM s 64- bit Virtual Storage Architecture 2003 SOA Integration Packages: Legacy Integrator Service Integrator 2005 Acquisition: Strategic partnership with Global Market Leader for XML Servers (IDC) Information Integrator Business Process Manager Application Composer June 2006 / 3 Software AG

4 Asset of Software AG: 3,000 Customers Worldwide in All Industries Finance Travel & Transport Media & Telecommunications Public Institutions Retail & Manufacturing June 2006 / 4 Software AG

5 Main Geographic Markets Revenue by Main Markets Total Revenue: million Growth Markets: Latin America Mexico Venezuela Chile and others Eastern Europe Russia Poland Turkey and others Asia / Middle East Hong Kong South East Asia Israel and others Growth Markets 9 % Others 32 % USA/Canada 26 % Germany 15 % Spain 18 % June 2006 / 5 Software AG

6 Business Model / Revenue Structure 30% Licensing Direct Sales Force (380 staff) One-time payment for perpetual license Additional payment for capacity upgrades and Add-on products Price: Capacity/MIPS based (database) User/Seats based (tools) 42% 28% Maintenance Annual contracts with automatic renewal and 3-5 year contracts Operational support and functional upgrades of software products Price: around 15% of license list price Project Services Implementation of own products / system integration Cost plus or fixed price projects Own staff (1,100) + freelance in % of total revenue 2005 (438 mn. euros) June 2006 / 6 Software AG

7 Strategy of Software AG: Focus on two Markets Mature Market: Enterprise Transaction Systems (ETS) Stable consolidated market Growing with use of capacity Legacy modernization Competition Limited competition Loyal customers Position of Software AG Independent specialist for high volume and high performance (mainframe) systems Goal Use leading position for revenue growth with legacy modernization. Revenue Growth 2005: 5% New Growth Market: Integration with Service-Oriented Architecture (SOA) Dynamic and fragmented market Growing with new offerings New technology (BPM, SOA, XML) Competition Platform vendors (one size fits all) Suite vendors (freedom of choice) Component vendors (incomplete) Position of Software AG Independent suite vendor Partner of platform vendors (e.g. SAP) Goal Reach leading position through fast revenue growth with new products Revenue Growth 2005: 16% June 2006 / 7 Software AG

8 Top Line Dynamics: Growth in Both Business Lines Revenue by Business Line ( millions) crossvision (SOA integration) Enterprise Transaction Systems (ETS) +5% +5-7% +16% % e e June 2006 / 8 Software AG

9 Financial Strength: Growth in Key Financials (in mn. ) License Revenue EBIT* Free Cash Flow** +9% +14% % +15% % +106% * EBIT before income from investment ** Net cash operating./. CapEx June 2006 / 9 Software AG

10 Outlook 2006 Growth in Revenue and Profit 2005 Growth 2005* Q1 2006a* FY 2006 Forecast* Revenue % +10% Growth: 10% - License % +19% Growth: 18 to 20% - Maintenance Stable + 4% Stable - Services % + 9% Growth: 12 to 15% Operating EBIT Margin 22.0% +160 bp +100 bp 21 to 23% Revenue BL ETS Revenue BL crossvision % +16% +10% +15% Growth: 5 to 7% Growth: 20 to 30% * At constant currency June 2006 / 10 Software AG

11 Growth Drivers A Portfolio Enhancements Launch of Adabas 2006 and Natural 2006: Modernization and extension of mainframe systems Active account management New crossvision product suite: Integration with service oriented architecture B Geographic Expansion Enter markets with high growth potential: Latin America, Eastern Europe, Middle East and Asia (revenue growth 2005: 71%) C Organizational Readiness Increased sales force and service capacity Increased sales and service efficiency New sales partners / system integrators June 2006 / 11 Software AG

12 Drivers of Mid-term Profitability Improvements Sales Efficiency (increase sales per sales representative) Professional Services Efficiency (increase service margin) Average Deal Size (component sale vs. suite sale; follow-up projects vs. seeding projects) Partner Sales Channel (System Integrators and Reselling Partners) Gross profit margin: 2003: 63.9% 2004: 66.6% 2005: 67.2% Economies of Scale (G+A, R+D, Marketing) Process Excellence Program (internal organization) EBITA margin (op.): 2004: 20.4% 2005: 22.0% Mid-term: 25% June 2006 / 12 Software AG

13 The Next Step Towards Market Leadership: 10 % Growth Our goal: Global market leadership in specific segments % Revenue Growth % Revenue Growth 22% EBIT Margin Achieved 2004 Back to Growth ETS & Integration Focus Achieved 2003 Financial Turnaround Achieved June 2006 / 13 Software AG

14 Our Strategy: Service Oriented Architecture (SOA) SOA is the 5th big paradigm change in the IT industry SOA Internet PCs / Servers Business Applications Data Centers 1st Wave 2nd Wave 3rd Wave 4th Wave 5th Wave 1970s 1980s 1990s June 2006 / 14 Software AG

15 Launching crossvision February 28, 2006 Software AG s Offering for SOA New brand for SOA suite, products and business line New comprehensive offering New flexible suite pricing General availability end of May 2006 June 2006 / 15 Software AG

16 crossvision Suite: the New Comprehensive Offering CentraSite New: crossvision application composer Upgrades: crossvision business process manager crossvision information integrator Two new products, four upgrades: CentraSite manage and govern the lifecycle of your enterprise wide service landscape is the leading SOA registry/repository in the market crossvision application composer rapidly compose new business applications out of existing systems is a leading edge approach to composite applications crossvision service orchestrator crossvision legacy integrator June 2006 / 16 Software AG

17 Current Position of Software AG: ETS and Integration / SOA Market Tier 1 > 1 bn. revenue Tier 2 < 1 bn. revenue Tier 3 < 10 mn. revenue June 2006 / 17 Software AG

18 Worldwide SOA-Driven Software Revenue by Software Category, (CAGR 75%) Market Size 2004: mn. USD Market Share Software AG: 3% June 2006 / 18 Software AG

19 Outlook 2006 (I) Growth of Business Line crossvision will accelerate in H Full availability of products Fully trained sales force Growing pipeline for crossvision Suite sales will increase average deal size Partner Focus Success with technology partners - Fujitsu, IDS Scheer, i-log - Eclipse community Start CentraSite community / OEM Build sales partner channel (dedicated team at Headquarter) with focus on system integrators and ISVs June 2006 / 19 Software AG

20 Outlook 2006 (II) Geographic Expansion Ramp up in Latin America continues (Potential for 20% of group revenue within 5 years) Progress in Eastern Europe and Middle East Enter Japan / Change agreement with distributor for larger revenue generation Improved Market Awareness & Image New branding and image New positioning with industry analysts Acquisition Policy Sustain organic growth EPS accretive June 2006 / 20 Software AG

21 Please contact: Investor Relations Uhlandstraße 12, Darmstadt, Germany phone: +49 (0) / fax: +49 (0) / investor.relations@softwareag.com June 2006 / 21 Software AG