Software AG - Equity Story 10th HSBC s Equity Conference March 27, 2012
March 2012 2 Safe-Harbor-Statement 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.
March 2012 3 Software AG - At a Glance Revenue over 1 bn Global Leader for Process & Integration Solutions Enterprise & Public Sector Customers 5,500+ Employees Worldwide 2,900 Consultants 890 R&D Staff Free Float >70% Software AG Foundation
March 2012 4 Shareholder Structure Shareholder structure Major institutional investors 34% 29% Software AG Foundation Institutional Investors Alken 4.8% Deka 4.6% DWS 3.3% T. Rowe Price 3.1% 37% Private Investors & undisclosed Fidelity 3.0% Allianz Global Investors 3.0% Disclosed Institutional Investors regional split* Share data 6% 6% 7% 14% 27% 40% Germany UK US France Scandinavia Other Number of total shares: 86,827,845 Freefloat: ~ 71% Indices: TecDAX, DAX 100, TechAllShare Codes: SOW, SOW GR, SOWG.DE ISIN: DE0003304002 ADR U.S. trading symbol: STWRY * Source: ThomsonOne; own research
March 2012 5 Software AG - Sustainable Growth REVENUE -2% +7% +10% +29% +16% +17% +32% -2% 13% CAGR (in m) 420 411 438 483 621 721 847 1,120 1,098 EARNINGS PER SHARE (IN )** +646% +16% +16% 0.09* 0.65* 0.75 0.87 +20% 1.04 +30% 1.35 +22% 1.64 +26% 2.06 +/-0% 2.05 48% CAGR FREE CASH FLOW +200% 8* 24* +41% +62% +92% 46 +22% 56 +46% 82 133 188 2003 2004 2005 2006 2007 2008 2009 +16% 218 2010-14% 188 2011 218 48% CAGR * excluding gains from sale of assets ** adjusted for 1:3 share split (May 2011)
March 2012 6 Business Model in m 600 500 400 300 200 100 0 Total revenue: 1,098m (FY 2011) License 528 169 169 190 Maintenance 381 120 193 68 189 23 166 BPE ETS IDS Scheer Consulting Consulting & Services License Direct sales force One-time payment for perpetual license Additional payment for capacity upgrades and add-ons Price: Capacity/MIPS or CPU based Maintenance Annual contracts with automatic renewal and 3-5 year contracts Pricing: - BPE: around 18% of license - ETS: around 15% of license Consulting & Services BPE & ETS: implementing own products IDS Scheer: implementing SAP products Cost plus or fixed price projects Own staff + freelance
March 2012 7 Revenue Split* Product Revenue by Region Product Revenue by Industry 14% 9% 46% Retail Transport & Logistics Others 22% Financial Sector PIIGS 5% 32% Telecos Manufacturing 21% Public Sector Associations Americas Germany EMEA BRICS 14% Asia Pacific IT *Based on product revenue: 674m (FY 2011)
March 2012 8 Enterprise Transaction Systems Generating Strong Cash Flows Revenue Revenue development FY 2011 ( 381m) Service 17% License 32% 51% Maintenance in m 400 300 200 100 Business characteristics High performance data base (Adabas) Rapid business application development (Natural) Products are mission-critical for 70% of our customers High margins and strong recurring cash flow Annual maintenance renewal rate: ~ 95% (average) Cost management: transfer R&D to low-cost countries 0 2004 2005 2006 2007 2008 2009 2010 2011 Market and Positioning Mature market limited to existing customer base Installed systems difficult to replace Migration/outsourcing to UNIX/OS possible Market volume in decline Lifecycle enhancement by modernization and add-on products
March 2012 9 Business Process Excellence Driving Growth Revenue split Revenue development FY 2011 ( 528m) in m 500 400 36% 32% Service License 32% Maintenance Business characteristics 300 200 100 0 2004 2005 2006 2007 2008 2009 2010 2011 Market and Positioning * Comprehensive middleware to design, develop, deploy, operate, monitor and analyze end-to-end process applications (products: webmethods, ARIS, Terracotta) BPE products save cost and add business value Digitization makes enterprises more competitive and public administrations more efficient. Technology leader (Gartner, Forrester) Software works across all installed systems Software AG is top 3 vendor(esb/bpm) Market growth perspective (CAGR > 10%) Average deal size (deals > 100k) > 450k *2010: transfer of ARIS related revenues into BPE segment
March 2012 10 Growing Relevance of BPE also on Income Level 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% Ongoing margin improvement in BPE 52% -20% 55% 53% 54% 2% 19% 22% 58% 57% 29% 29% 2006 2007 2008 2009 2010 2011 29% 140 120 100 80 60 40 20 0-20 -40 in % 115% leads to a balanced income split 98% 78% 72% 63% 58% 42% 37% 28% 2% 22% -15% 2006 2007 2008 2009 2010 2011 Business Process Excellence Enterprise Transaction Systems Segment margin (in %) Segment contribution split BPE/ETS (in %)
Business Process Excellence The Way Forward Disruptive Technology for Innovative Business Models (Digital Enterprise)
Applications Silos versus Business Models March 2012 12
March 2012 13 Business Problems with Packaged Applications How significant are the following business problems in your existing enterprise app implementations? Important & very important High cost of ownership 87% Poor cross-functional processes 85% Lack of visibility into process results 85% Mismatch between apps and business requirements 85% Difficult to upgrade 83% Inflexibility limits process change 79% Apps form a barrier to innovation 65% Poor internal/external collaboration tools 65% Poor support for unstructured content 59% Poor industry-specific funtionality 57% Can t extend processes to external partners 55% Difficult to connect to mobile and cloud solutions 43% Source: September 2011 Business Process Online Survey Base: 119 business process professionals
March 2012 14 Digital Enterprise Enables Flexibility and Agility e.g. Orderto-cash Process Intelligence Process logic (BPM) ESB (Integration logic) IN-MEMORY DATA STORE Analytics Processes Integration Data Mgmt. New services (Business logic) Application Platform
Collaborative Process Platform March 2012 15
March 2012 16 BPE Lifecycle Cloud Real time Collaboration EnterpriseBusiness EnterpriseProcess Business Process Management Mobile Model2 Execute Management Lifecycle Governance Social Ease of use
March 2012 17 Model to Execute Allows Roundtripping (USP) Business Model B-BPMN Model ARIS T-BPMN Model Execution webmethods
March 2012 18 Big Data Provide new Data Management Challenges Applications Analytics 110010100011100011010 Database bottlenecks 110000101010001111010 Costly to scale 110010100011100011010 Restricted data models 111010010100011101110 110000101010001111010 SPEED SCALE FLEXIBILITY 110010100011100011010 Batch processing delays 111010010100011101110 Capacity constrained 110010100011100011010 New data 111010010100011101110 110000101010001111010 Transactional Data Analytical Data
March 2012 19 Current Offering: Solution for Transactional Challanges Applications Analytics 110010100011100011010 Database bottlenecks 110000101010001111010 Costly to scale 110010100011100011010 Restricted data models 111010010100011101110 110000101010001111010 SPEED SCALE FLEXIBILITY 110010100011100011010 Batch processing delays 111010010100011101110 Capacity constrained 110010100011100011010 New data 111010010100011101110 110000101010001111010 Transactional Data Analytical Data
March 2012 20 The Way Forward Solution for Transactions & Analytics (USP) Applications Analytics Real-time access and analytics to terabytes of in-memory data NEXT-GENERATION DATA MANAGEMENT Low latency integration for existing and new data Transactional Data Analytical Data
March 2012 21 Cloud Enablement End-to-End Processes Inquiry process Offer process Example: Order-to-cash Process logic (BPM) Order process Shippment process Billing process Integration logic On Premise ESB ipaas SaaS SaaS On premise SaaS new business logic Business logic
March 2012 22 Software AG Cloud Strategy: Platform-as-a-Service Collaborative Process Platform Enterprise BPM Platform BPMPaas Integration/SOA Platform ipaas Application Platform apaas Data Management Platform dbpaas Platform-as-a-Service (PaaS)
IT Megatrend Digitization and Disruptive Technologies March 2012 23
March 2012 24 BPE New Business Outgrowing the Cash-Cow ETS (in m) 1000 900 800 46% 42% 700 56% 52% 600 500 400 74% 62% Business line ETS 54% 58% 300 200 100 26% 38% 48% 44% Business line BPE 0 2006 2007 2008 2009 2010 2011
March 2012 25 Outlook FY 2012 (in m) Total Revenue 2011 Outlook 2012 (as of January 24, 2012) Business line BPE Business line ETS Group (incl. IDSC) 527.9 +5% to +15%* 381.3-12% to -7%* 1,098.3-3% to +3%* EBIT Margin** 24.5% 23.0% to 24.5% Outlook Q1 2012 Given the normal seasonality, Q1 2012 is expected to be below the extraordinary good results of Q1 2011. * Net of currency ** Stated IFRS
March 2012 26 Mid-term Goals (3 to 5 years) BPE Business Division Double digit license revenue growth A doubling of revenue by end of 2015* ETS Business Division Maintenance revenue largely stable Optimize the cost structure to maintain an operating margin > 50% The Group Increase the EBIT margin to 30% A doubling of net income by end of 2015* M&A: large acquisition every 2-4 years * Base 2010
Thank you Please contact: Investor Relations Uhlandstrasse 12 64297 Darmstadt Germany phone: +49 (0) 6151 / 92-3046 fax: +49 (0) 6151 / 92-1933 web: softwareag.com e-mail: investor.relations@softwareag.com