Quarterly Report • Nov 13, 2015
Quarterly Report
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in € millions (unless otherwise stated)
| In € millions (unless otherwise stated) |
9m 2015 | 9m 2014 | Change in % |
Q3 2015 | Q3 2014 | Change in % |
|---|---|---|---|---|---|---|
| Revenue | 615.6 | 610.5 | 1% | 215.9 | 205.6 | 5% |
| By type: | ||||||
| • Products | 473.3 | 446.5 | 6% | 169.9 | 157.8 | 8% |
| • Services | 141.7 | 163.5 | −13% | 45.7 | 47.7 | −4% |
| • Other | 0.6 | 0.5 | 0.3 | 0.1 | ||
| By business line: | ||||||
| • Digital Business Platform | 294.0 | 276.4 | 6% | 103.2 | 96.6 | 7% |
| • Adabas&Natural | 179.8 | 168.4 | 7% | 66.9 | 61.3 | 9% |
| • Consulting | 141.8 | 165.7 | −14% | 45.8 | 47.7 | −4% |
| EBIT * | 129.3 | 104.6 | 24% | 66.8 | 49.1 | 36% |
| • as % of revenue | 21.0% | 17.1% | 30.9% | 23.9% | ||
| Net income | 83.4 | 63.1 | 32% | 44.8 | 30.4 | 47% |
| • as % of revenue | 13.5% | 10.3% | 20.8% | 14.8% | ||
| Earnings per share (€, basic) | 1.06 | 0.79 | 34% | 0.57 | 0.38 | 50% |
| Earnings per share (€, diluted) | 1.06 | 0.79 | 34% | 0.57 | 0.38 | 50% |
| Free cash flow | 128.8 | 85.8 | 50% | 22.6 | 19.4 | 16% |
| Employees (full-time equivalents) | 4,384 | 4,553 | ||||
| • of which in Germany | 1,176 | 1,237 | ||||
| • of which in R&D | 992 | 989 | ||||
| Balance sheet | Sept. 30, 2015 | Dec. 31, 2014 | ||||
| Total assets | 1,791.3 | 1,848.9 | ||||
| Cash and cash equivalents | 337.0 | 318.4 | ||||
| Net debt | 7.8 | 125.7 | ||||
| Shareholders' equity | 1,064.7 | 1,013.4 | ||||
| • as % of total assets | 59.4% | 55% | ||||
* EBIT: net income + income taxes + other taxes + net financial result
Digitization is changing the world. New technologies are improving the way companies do business. They are bringing about new organizational approaches. They are creating innovative work opportunities. This is happening at a speed that poses huge challenges, because an enormous volume of data is being produced and must be analyzed in mere milliseconds. Those who can utilize their data effectively will harness exciting opportunities and unlock great potential for success.
Innovative products will be unthinkable in the future without digitization. Every company and every organization needs a digital strategy now. Only those who master the massive amounts of data, optimize their use of information as a raw material and completely digitize their business models and processes will be successful.
Software AG provides what businesses and organizations need to grow and stay competitive. Our portfolio of products and services enables customers to fully exploit the opportunities of the digital era. We build on existing IT landscapes, harmonize them and implement digital technologies to create flexible infrastructures that analyze data in real time—including automated decision-making tools. For our customers, this means they can tap into new, agile business models and design running processes even more efficiently. They will be faster, more competitive and ultimately more successful.
Software AG is the global technology leader in application infrastructure and middleware software and drives innovation in real-time analytics products, which have great potential in the rapidly growing Industry 4.0 (Internet of Things) market. We focused on business-critical software solutions early on. Thanks to our products—comprising the most comprehensive and innovative portfolio of its kind—we are a pioneer in addressing key mega trends of information technology. For that reason, Forrester and Gartner have positioned Software AG as a leader in 13 market sectors worldwide.
SHAPING CHANGE. For a top position in the digital world.
Software AG's annual mega-event for customers, Innovation World, took place this year in Las Vegas from October 12–14, 2015. Leading up to this key international conference, Software AG unveiled a number of portfolio innovations and, in cooperation with leading companies, presented groundbreaking customer projects.
A year after its launch, Software AG unveiled Digital Business Platform 2.0, the world's first digital business platform with major enhancements. It enables enterprises and the public sector to plan, govern, design, implement and accelerate their digital projects and strategies even faster than before. As a strategic business partner, Software AG drives co-innovation with customers and partners providing the implementation technology in combination with transformation tools and methodologies needed to rapidly digitize. Software AG's Digital Business Platform 2.0 bridges the communication gap from strategic digitization planning to application development and implementation.
The event also marked Software AG's launch of its Digital Marketplace—an online hub designed to help customers respond faster to the accelerating digitization of the global economy. Customers can leverage the marketplace to find IT development components such as business process models, application components, adapters and industry frameworks as well as fully fledged solutions developed by Software AG's partners and customers.
At the beginning of August 2015, Software AG's Supervisory Board renewed its contract with Management Board member Arnd Zinnhardt until July 2021. As Chief Financial Officer of the company, he oversees the areas of Finance, Controlling, Taxes, Treasury, Mergers&Acquisitions, Business Operations, Investor Relations and Global Procurement. Mr. Zinnhardt has been a member of Software AG's Mangement Board since 2002.
The German state of Hesse contracted Software AG to develop an app for a festival celebrating German Unity Day, a German national holiday on October 3, 2015. It was aimed at giving visitors information on the wide variety of activities during the major event in Frankfurt.
Software AG announced on September 3, 2015 that, with the consent of the Supervisory Board, the Management Board had approved the buyback of treasury shares valued up to €70 million until December 31, 2015. This decision utilized the authorization granted by the Annual Shareholders' Meeting on May 13, 2015. Based on Software AG's Xetra closing price of €24.02 on September 2, 2015, this would equal a maximum volume of approx. 2.9 million shares. The volume of repurchased treasury shares is limited to no more than 10 percent of the share capital at the time of the resolution, less any other treasury shares that the company has already purchased and still holds or that are attributable to it (7,838,144 shares).
Software AG unveiled its Smart Logistics blueprint for its Digital Business Platform in early August 2015. The Smart Logistics blueprint overlays the Digital Business Platform with smart processes for real-time synchronization of global logistics networks. Smart Logistics can analyze streaming Internet of Things, vehicle telematics and contextual data to provide shipping and logistics companies with enhanced visibility across value chains.
Forrester Research Inc., a widely-respected industry analyst firm, named Software AG a "leader" in "The Forrester Wave™: Enterprise Architecture Management Suites" for its Alfabet solution. Part of Software AG's Digital Business Platform, Alfabet Enterprise Architecture Management combines core capabilities of Software AG's Alfabet and ARIS product lines providing a collaborative platform used by business and IT leaders to ensure the IT landscape supports business strategy. Furthermore, Forrester Research Inc. also cited Software AG as a "leader" in "The Forrester WaveTM: In-Memory Data Grids" for its Terracotta In-Memory Data Fabric Platform.
33 _ Financial Calendar, Publication Credits
Preliminary Remarks
This quarterly report contains forward-looking statements. They are based on plans, estimates and projections that are currently available to Software AG's Management Board. Forward-looking statements therefore apply only to the date on which they were made. Software AG accepts no obligation to develop forward-looking statements based on new information or future events. Forward-looking statements by nature contain factors of risk and uncertainty. A number of important factors can contribute to actual results deviating considerably from forward-looking statements. All of the information in this report that does not represent forward-looking statements relates to the situation
on September 30, 2015, or the third quarter of the current fiscal year ended on that date, unless otherwise stated. Software AG's segment reporting is prepared in accordance with IFRS 8 (Segment Reporting). Segmentation is by business line and corresponds to the Group's internal controlling and reporting lines. Accordingly, Software AG reports on the following business lines: Digital Business Platform (DBP, including the webMethods, ARIS, Alfabet, Apama and Terracotta product families), Adabas&Natural (A&N, including the Adabas and Natural product families) and Consulting (all consulting services associated with Software AG products).
Software AG reported €215.9 million in total revenue for the third quarter of 2015. This is a year-on-year increase of 5 percent (2014: €205.6 million). This positive performance is a result of Software AG's committed focus to the high-margin product business, specifically, high, recurring maintenance revenues.
Software AG's total product revenue—comprising license and maintenance sales from the DBP (Digital Business Platform) and A&N (Adabas&Natural) product business lines—rose 8 percent to €169.9 million, an outperfomance of more than €12 million over last year (2014: €157.8 million). As a percentage of total revenue, product sales increased to 78.7 percent after 76.8 percent in the third quarter of 2014. This strong revenue mix trend illustrates Software AG's value-oriented strategy with a focus on profitable growth.
Up 8 percent, global maintenance revenue increased to €101.0 million (2014: €93.7 million). This shows a continuation of the robust trend from past quarters. Accounting for 46.8 percent of total revenue, recurring income is proving to be a key pillar of Software AG's business. License revenue from the DBP and A&N product lines was up 7 percent to total €68.9 million (2014: €64.1 million) and accounted for 31.9 percent (2014: 31.2 percent) of total revenue.
Currencies again had a positive effect on Software AG's total revenue in the third quarter of 2015, accounting for a 4-percent increase of €8.4 million. This was mainly because Software AG further increased product revenue generated
outside of its home European market, and the euro continued to stagnate against the U.S. dollar. Two-thirds (66 percent) of Software AG's revenue was generated outside the euro zone in the first nine months of 2015.
The positive impact of exchange rate fluctuations lessened after the first two quarters of the year. Of the three types of revenue, maintenance benefited most (+5 percent) from exchange rates in the quarter under review. Licenses and Consulting likewise improved by 3 percent from these effects.
All in all, exchange rates had a positive effect on revenue in the first nine months of the year, leading to 7-percent growth, or €40.8 million. The largest share of total revenue is generated in euros, accounting for 34 percent, followed by the U.S. dollar at 31 percent of revenue. Other currencies representing notable shares of revenue in the nine-month period were the pound sterling (GBP) at 7 percent, the South African rand (ZAR) at 5 percent, the Israeli shekel (ILS) and Brazilian real (BRL) at 4 percent respectively and the Australian dollar (AUD) at 3 percent.
Software AG further reduced its cost of sales in the third quarter of 2015. At €49.1 million (2014: €51.4 million), this is a 4-percent drop year-on-year. This led to an increase in gross profit margin of 2.3 percentage points to 77.3 percent (2014: 75.0 percent). This was primarily due to the growth in the product business—particularly in maintenance revenues—and the Consulting line's improved gross profit margin.
Research and development (R&D) expenses in the third quarter decreased 8 percent to €25.1 million compared to €27.2 million in 2014. Sales and marketing expenses rose to €63.1 million (2014: €57.5 million). General administrative expenses, in contrast, dropped considerably to total €11.1 million (2014: €19.4 million), or 43 percent, in the third quarter of 2015.
Earnings before interest and taxes (EBIT) climbed 36 percent year-on-year to €66.8 million (2014: €49.1 million) in the third quarter of 2015. Accordingly, the EBIT margin jumped to 30.9 percent (2014: 23.9 percent). Factors contributing to to the rise were operational improvements and positive one-time effects.
Software AG continued to grow its operating income in the third quarter while also netting positive one-time effects in the amount of €7.3 million. This amount is the balance of a cancellation of share-based compensation, which is relevant to the income statement, and expenses related to the company's forward-looking sales strategy. The sharebased compensation was part of a 5-year management stock option plan from 2011 that defined revenue targets based on organic and acquisitive growth. Software AG's value-oriented strategy, in place since 2014, along with its deliberate avoidance of acquisitions due to high prices in the M&A market will prevent its original aggressive revenue targets from being met. The cancellation increased Software AG's EBIT by €15.6 million gross. Software AG also continued to align its future-oriented Sales organization, which led to expenses in the amount of €8.3 million. The net result of the two one-time effects was a rise in quarterly earnings of €7.3 million.
In order to increase its enterprise value for the long term, Software AG wants to continue growing profitably and augmenting its financial strength. To achieve these strategic goals, the company employs an internal control system. Above all, Software AG regards product revenue based on IFRS reporting, operating income (non-IFRS) and operating profit margin (non-IFRS) to be its most relevant performance indicators. Software AG defines operating income as follows:
= Operating earnings EBITA (non-IFRS)
Operating profit margin is calculated by dividing EBITA (non-IFRS) by total Group revenue.
Operating income (EBITA, non-IFRS) increased more than 11 percent to €70.2 million (2014: €62.8 million) in the third quarter of 2015. This represents an operating profit margin of 32.5 percent (2014: 30.5 percent).
Net financial expense was further reduced due to repayment of financial liabilities to total −€0.4 million (2014: −€2.1 million). This is an improvement of 83 percent. Income taxes increased 39 percent to €20.1 million (2014: €14.5 million) in the third quarter of 2015. Software AG's tax rate was therefore 32.6 percent (2014: 35.3 percent).
As in the first two quarters of 2015, net income increased in the third quarter as well, up 47 percent to €44.8 million (2014: €30.4 million). Earnings per share (basic) gained an exceptional 50 percent, reaching €0.57 (2014: €0.38). These earnings increases reflect Software AG's effective efficiency and cost management as well as its commitment to operational core competencies.
| Interim Management Report |
|---|
| Sept. 30, 2015 |
Sept. 30, 2014 |
|---|---|
| 66.8 | 49.1 |
| 8.4 | 9.4 |
| – | – |
| – | 0.1 |
| −13.3 | 3.5 |
| 8.3 | 0.7 |
| – | – |
| 70.2 | 62.8 |
| 32.5% | 30.5% |
| 47.2 | 39.7 |
| €0.60 | €0.50 |
*) Weighted average shares outstanding (basic) Q3 2015: 78.6 million/Q3 2014: 78.9 million/9 million 2015: 78.8 million
Software AG's total Group revenue in the third quarter of 2015 was €215.9 million (2014: €205.6 million) and was distributed among the three business lines as follows:
The continued positive trend in Software AG's revenue mix with DBP's increasing share—given the high-growth field of digital transformation—reflects Software AG's value-oriented strategy. Software AG's intensified focus on high-margin product business is clearly expressed by the distribution of revenue share.
The DBP segment comprises all Software AG products for enterprise digitization. Software AG's largest business line increased its revenue in the third quarter to €103.2 million (2014: €96.6 million). This is 7 percent higher than last year. The business line's maintenance revenue performed especially well, up a solid 14 percent to €61.8 million (2014: €54.3 million). This sets a new third-quarter record for Software AG. This performance highlights the sustainability of Software AG's value-oriented strategy and focus on profitable growth.
After significant growth in DBP license sales in the second quarter of 2015 to total €37.0 million, DBP licenses in the quarter under review totaled €41.4 million (2014: €42.2 million), which is below last year. As strategic one-time revenue, license sales by nature are subject to greater volatility than maintenance or services, which are more evenly distributed over longer periods of time, and can have a strong impact on quarterly results. This is particularly true because order volume is increasing. On top of license sales, Software AG also closed new cloud deals worth a total of €3.0 million, which marks growth of 255 percent. Software AG is still positive that its long-term growth strategy for DBP licenses will pay off.
The cost of sales in the DBP line increased to €7.5 million (2014: €5.4 million) due in part to extraordinary one-time effects. Sales and marketing expenses were up at €46.2 million (2014: €40.8 million). A decrease, in contrast, was reported in R&D expenses, at €20.5 million (2014: €21.3 million). Due to the considerable growth in maintenance revenue and the nearly equal license volume year-on-year, the segment's earnings remained high at €29.0 million (2014: €29.1 million). The same was true for the segment's margin, which was 28.1 percent (2014: 30.1 percent).
The A&N business line, which encompasses Software AG's traditional database business, performed very well in the first two quarters of the year. In the third quarter of 2015, A&N revenue grew 9 percent to €66.9 million (2014: €61.3 million). The positive trend in A&N is an indication of Software AG's unique long-term care of its traditional database customers and their resulting satisfaction.
The loyalty of these long-standing customers is also reflected in the recurring maintenance revenues. Here, this business line approximated last year's level at €39.2 million (2014: €39.3 million). Maintenance thus accounted for 59 percent of the segment's revenue. This is evidence of the ongoing importance of the A&N product portfolio for Software AG's customer base.
The positive trend in A&N was primarily fueled by the exceptionally high license growth. A&N licenses increased 26 percent to €27.5 million (2014: €21.9 million) in the third quarter. Upgrades among the loyal A&N base and a large transaction in South Africa factored into this growth.
The cost of sales for A&N was slightly up from last year at €3.4 million (2014: €3.1 million). Sales and marketing expenses were also moderately higher at €7.9 million (2014: €7.8 million). In contrast, R&D expenses fell to €4.6 million (2014: €5.9 million).
Thanks to the significant increase in license revenues, the segment's earnings improved to €51.0 million (2014: €44.5 million). Accordingly, its margin also rose substantially to 76.2 percent (2014: 72.6 percent).
The Consulting business line generated €45.8 million (2014: €47.7 million) in third-quarter revenue.
The cost of sales in this segment continued to drop from the first two quarters of the year and totaled €34.3 million (2014: €37.6 million) in the third quarter. Similarly, sales and marketing expenses were also down slightly to €4.4 million (2014: €4.8 million).
Due to Software AG's improved efficiency and focus on profitable projects, the Consulting business line was able to increase profitability considerably over last year. The segment's earnings rose to €7.1 million (2014: €5.3 million). The segment's profit margin saw a significant improvement as well at 15.5 percent (2014: 11.1 percent). Consulting primarily enables product sales in the two product-related business lines. Its profitability is clearly Software AG's priority over revenue growth.
Software AG increased its total Group revenue for the first nine months of the current fiscal year to €615.6 million (2014: €610.5 million). Product revenue rose 6 percent to total €473.3 million (2014: €446.5 million). Of product revenue, licenses accounted for €169.0 million (2014: €171.5 million) and maintenance for €304.3 million (2014: €275.0 million). This is an 11-percent increase for maintenance revenue, which, with a quarterly growth rate of 14 percent, set a third-quarter record for Software AG. Software AG's efforts, initiated in early 2014, to boost maintenance sales combined with its strong license performance had a very positive impact on maintenance revenue, which translates to sustainable profitability. The Consulting line posted €141.8 million (2014: €143.5 million) in total revenue.
Earnings before interest and taxes (EBIT) increased 24 percent year-on-year to €129.3 million (2014: €104.6 million). As a result, Software AG's EBIT margin improved from 17 percent to 21 percent. The improvements in profitability were especially apparent with regard to Software AG's earnings per share (basic) for the nine-month period, which were up 34 percent at €1.06 (2014: €0.79).
The increased profitability was due primarily to growth in product sales, specifically in maintenance, as well as to the Consulting business line's improved gross profit margin. As part of its focus on a value-creation strategy, Software AG also leveraged additional ares of efficiency in its internal processes and conducted effective efficiency and cost management. Overall, this strong performance reflects the company's value-oriented strategy, which was established one year ago and consistently focuses on profitable growth through high-margin license and maintenance sales, efficient organization and operational core competencies.
Net cash provided by operating activities in the third quarter performed very well, increasing 28 percent to reach €28.2 million (2014: €22.0 million). Thanks to the high growth rates of the previous quarters, 48-percent growth was posted for the nine-month reporting period year-on-year.
Software AG achieved these sustainable cash flow increases by improving its operating income and ensuring consistent receivables management.
Cash outflows from investing activities increased from €7.5 million in 2014 to inflows of 19.4 million in the third quarter of 2015. This rise was due primarily to the sale of short-term securities worth €25.0 million in total (2014: net cash outflows of €4.8 million). Investments in property, plant and equipment totaled €3.2 million (2014: €2.6 million); and investments in financial assets totaled €2.4 million.
Cash outflows from financing activities rose significantly to €118.4 million, compared to just €0.5 million the year before. The considerable increase is due to the repayment of financial liabilities in the amount of €103.2 and a payment of €16.3 million for the repurchase of treasury shares.
As of September 30, 2015 cash and cash equivalents were €337.0 million, compared to €275.0 million on the same date one year before and €318.4 million at the beginning of the current fiscal year. In contrast, cash and cash equivalents decreased in the quarter under review by €87.0 million compared to €423.9 million as of June 30, 2015. This decrease was because of a repayment on financial liabilities in the amount of €103.2 million and a payout for the repurchase of treasury shares in the amount of €16.3 million during the quarter.
Free cash flow in the third quarter improved year-on-year by 16 percent to €22.6 million (2014: €19.4 million) and for the nine-month period by 50 percent to €128.8 million (2014: €85.8 million). With this result, the level of fiscal year 2014 has nearly been reached in the just first nine months of 2015. The ratio of free cash flow to total revenue in the third quarter went up to 10.5 percent (2014: 9.4 percent). Free cash flow per share increased to €0.29 (2014: €0.25) in the quarter under review.
Software AG's total assets as of September 30, 2015 were equivalent to last year's level (€1,791.8 million) at €1,791.3 million. This is however a drop of €58 million compared to December 31, 2014 (€1,848.9 million). The main reasons for the decrease in assets were the drop in trade receivables and in financial liabilities and securities. On the assets side of the balance sheet, cash and cash equivalents increased 6 percent to €337.0 million compared to the beginning of 2015 (€318.4 million). Active working capital management resulted in a reduction of short and long-term trade receivables from €298.6 million at the beginning of fiscal 2015 to €255.1 million as of September 30, 2015. Fueled by favorable exchange rates, goodwill increased by €30.8 million to €888.1 million (Dec. 31, 2014: €857.3 million). At €46.3 million, the sum of income tax receivables and deferred tax assets approximated the comparable figure at the end of fiscal 2014.
On the liabilities side, financial liabilities decreased by €99.4 million to €344.7 million compared to December 31, 2014 due to a large loan repayment. Thanks to the dedicated expansion of the maintenance business, deferred income, which includes the increasing volume of future maintenance revenues, grew to €137.9 million as compared to €134.3 million as of September 30, 2014.
Software AG's shareholders' equity increased by €51.3 million to total €1,064.7 million (Dec. 31, 2014: €1,013.4 million) as of September 30, 2015. Accordingly, the equity ratio continued on an upward climb to 59.4 percent from 54.8 percent at the beginning of the year.
As of September 30, 2015, the Software AG Group employed 4,384 (Dec. 31, 2014: 4,421) people (full-time equivalents). This shows a slight increase with respect to June 30, 2015 (4,349) and a decrease with respect to September 30, 2014 (4,553).
From a functional point of view, the number of employees in Consulting and Services was 1,853 (2014: 1,884), in Sales and Marketing 919 (2014: 1,026), in R&D 992 (2014: 989) and in Administration 620 (2014: 654).
Broken down by worldwide regions, the number of employees in Germany was 1,176 (2014: 1,237) and in the USA 602 (2014: 695) as of September 30, 2015. The vast majority of Software AG staff members work in the other countries in which Software AG operates, accounting for 2,606 (2014: 2,621) employees.
Software AG's value-oriented strategy focusing on sustainable profitability, which we have been committed to for more than a year, translated to a continual increase in earnings strength in the first nine months of 2015. As the Management Board of the Group, we consider this to be confirmation of our value-creating strategy.
We focus on seven fundamental value drivers: profitable growth, efficiency, recurring revenue (maintenance), growth through the Digital Business Platform enhanced by partners and co-innovation with customers, loyal A&N customers and attractive dividends and share buybacks. We are on track to further expanding our lead with the Digital Business Platform. Our early adoption of the digitization mega trend and our technology lead are producing initial successes. We aim to further increase the value of our company with these unique selling points and our focus on profitable growth.
We continued our trend of improving results in the past quarter. Maintenance revenue posted 8-percent growth, confirming the strong performance of the previous quarters. Up 9 percent, the A&N business line again contributed to revenue growth, fueled by an exceptional 26-percent increase in licenses. The high level of loyalty customers in our traditional database segment as well as the robust and reliable nature of our technology are decisive to this success. With 14-percent growth, maintenance revenue in the Digital Business Platform business line performed especially well. This marks a new third-quarter record for Software AG. Software AG again increased its total Group revenue, exceeding last year by 5 percent.
Operating earnings (EBITA, non-IFRS) improved significantly with double-digit growth—both year-on-year (+12 percent) and quarter-on-quarter (+44 percent). This is the case for the operating figure as well as the reported figure, which includes special effects. This led to a jump in our operating margin (EBITA, non-IFRS) to 32.5 percent, which is first-rate for our industry.
Our free cash flow demonstrated exceptional performance, increasing 50 percent to reach the level of the last full year in just nine months. Software AG also reported very solid assets in the same period, with the equity ratio up to 59.4 percent. In addition, we launched a share buyback in the third quarter to continue improving earnings per share. All of these measures reflect our focus on profitability and value. Based on this foundation we are very well equipped for the future and can respond quickly to dynamic market developments.
There were no significant events after the balance sheet date.
Software AG's 2014 Annual Report contains a comprehensive Risk and Opportunity Report (see pp. 81–89) which describes specific risks that could have a negative impact on business and financial performance or assets and financial position. It also describes key opportunities for Software AG. There were no changes to the risk and opportunity situation of the Software AG Group in the third quarter of 2015 as compared to the risks and opportunities identified in the 2014 Annual Report.
Based on its performance in the first nine months of the year and its project pipeline for the fourth quarter, Software AG updated its forecast for the 2015 fiscal year on October 13, 2015. The company now anticipates revenue growth in the Digital Business Platform business line between 0 and 3 percent (previously 6 to 12 percent; after Q3 2015 = −2 percent at constant currency) and a revenue decline in Adabas&Natural between 4 and 6 percent (previously 8 to 14 percent; after Q3 2015 = 0 percent at constant currency) year-on-year and at constant currency. Furthermore, Software AG has raised its forecast for its operating profit margin (EBITA, non-IFRS) by 50 basis points to between 28.0 and 29.0 percent (previously 27.5 to 28.5 percent).
for the nine months and quarter ended September 30, 2015 (IFRS, unaudited)
| in € thousands | 9m 2015 | 9m 2014 | Change in % | Q3 2015 | Q3 2014 | Change in % |
|---|---|---|---|---|---|---|
| Licenses | 168,950 | 171,495 | −1% | 68,897 | 64,184 | 7% |
| Maintenance | 304,328 | 274,986 | 11% | 101,002 | 93,631 | 8% |
| Services | 141,705 | 163,549 | −13% | 45,736 | 47,685 | −4% |
| Other | 575 | 480 | 20% | 236 | 141 | 67% |
| Total revenue | 615,558 | 610,510 | 1% | 215,871 | 205,641 | 5% |
| Cost of sales | −157,857 | −182,316 | −13% | −49,034 | −51,412 | −5% |
| Gross profit | 457,701 | 428,194 | 7% | 166,837 | 154,229 | 8% |
| Research and development expenses |
−79,350 | −81,010 | −2% | −25,123 | −27,210 | −8% |
| Sales, marketing and distribution expenses |
−197,529 | −191,105 | 3% | −63,062 | −57,463 | 10% |
| General and administrative expenses |
−50,079 | −54,413 | −8% | −11,135 | −19,401 | −43% |
| Other taxes | −4,449 | −6,150 | −28% | −1,548 | −2,109 | −27% |
| Operating earnings | 126,294 | 95,516 | 32% | 65,969 | 48,046 | 37% |
| Other income | 21,304 | 37,707 | −44% | 4,727 | 21,495 | −78% |
| Other expenses | −22,712 | −34,749 | −35% | −5,422 | −22,528 | −76% |
| Net financial income/expense | −2,793 | −7,602 | −63% | −354 | −2,126 | −83% |
| Earnings before income taxes | 122,093 | 90,872 | 34% | 64,920 | 44,887 | 45% |
| Income taxes | −38,657 | −27,748 | 39% | −20,125 | −14,485 | 39% |
| Net income | 83,436 | 63,124 | 32% | 44,795 | 30,402 | 47% |
| Thereof attributable to shareholders of Software AG |
83,269 | 62,990 | 32% | 44,720 | 30,369 | 47% |
| Thereof attributable to non-controlling interests |
167 | 134 | 75 | 33 | ||
| Earnings per share in € (basic) | 1.06 | 0.79 | 34% | 0.57 | 0.38 | 50% |
| Earnings per share in € (diluted) | 1.06 | 0.79 | 34% | 0.57 | 0.38 | 50% |
| Weighted average number of shares outstanding (basic) |
78,816,237 | 79,331,652 | 78,611,023 | 78,918,844 | ||
| Weighted average number of shares outstanding (diluted) |
78,885,704 | 79,374,563 | 78,715,932 | 78,918,844 |
for the nine months and quarter ended September 30, 2015 (IFRS, unaudited)
| in € thousands | 9m 2015 | 9m 2014 | Q3 2015 | Q3 2014 |
|---|---|---|---|---|
| Net income | 83,436 | 63,124 | 44,795 | 30,402 |
| Currency translation differences | 22,240 | 42,924 | −27,460 | 29,061 |
| Net gain/loss on remeasuring financial assets | 1,709 | 523 | 310 | 36 |
| Net gain/loss arising from translating net investments in foreign operations |
3,082 | 3,112 | −50 | 2,796 |
| Items that may be reclassified to profit or loss | 27,031 | 46,559 | −27,200 | 31,893 |
| Net actuarial gain/loss and asset caps on defined benefit plans |
0 | −79 | 0 | −160 |
| Items not to be reclassified to profit or loss | 0 | −79 | 0 | −160 |
| Other comprehensive income | 27,031 | 46,480 | −27,200 | 31,733 |
| Total comprehensive income | 110,467 | 109,604 | 17,595 | 62,135 |
| Thereof attributable to shareholders of Software AG | 110,300 | 109,470 | 17,520 | 62,102 |
| Thereof attributable to non-controlling interests | 167 | 134 | 75 | 33 |
as of September 30, 2015 (IFRS, unaudited)
| in € thousands | Sept. 30, 2015 | Dec. 31, 2014 |
|---|---|---|
| Current assets | ||
| Cash and cash equivalents | 336,955 | 318,396 |
| Securities | 6,135 | 55,311 |
| Inventories | 90 | 85 |
| Trade receivables | 204,152 | 211,178 |
| Other receivables and other assets | 20,175 | 20,689 |
| Income tax assets | 28,084 | 29,725 |
| 595,591 | 635,384 | |
| Non-current assets | ||
| Intangible assets | 163,423 | 180,196 |
| Goodwill | 888,065 | 857,279 |
| Property, plant and equipment | 55,660 | 61,171 |
| Financial assets | 11,620 | 7,103 |
| Trade receivables | 50,948 | 87,447 |
| Other receivables and other assets | 7,736 | 4,996 |
| Income tax assets | 5,494 | 4,423 |
| Deferred taxes | 12,768 | 10,937 |
| 1,195,714 | 1,213,552 | |
| Total Assets | 1,791,305 | 1,848,936 |
| in € thousands | Sept. 30, 2015 | Dec. 31, 2014 |
|---|---|---|
| Current liabilities | ||
| Financial liabilities | 132,240 | 103,646 |
| Trade payables | 25,816 | 32,600 |
| Other liabilities | 47,513 | 56,049 |
| Other provisions | 66,803 | 78,849 |
| Tax liabilities | 26,040 | 32,605 |
| Deferred income | 137,257 | 111,348 |
| 435,669 | 415,097 | |
| Non-current liabilities | ||
| Financial liabilities | 212,517 | 340,499 |
| Trade payables | 0 | 0 |
| Other liabilities | 1,651 | 6,320 |
| Provisions for pensions | 42,278 | 42,566 |
| Other provisions | 16,202 | 13,205 |
| Deferred taxes | 17,708 | 17,131 |
| Deferred income | 604 | 738 |
| 290,960 | 420,459 | |
| Equity | ||
| Share capital | 79,000 | 86,944 |
| Capital reserves | 39,741 | 43,195 |
| Retained earnings | 990,969 | 1,161,411 |
| Other reserves | −27,504 | −54,535 |
| Treasury shares | −18,021 | −224,466 |
| Share attributable to shareholders of Software AG | 1,064,185 | 1,012,549 |
| Non-controlling interests | 491 | 831 |
| 1,064,676 | 1,013,380 | |
| Total Equity and Liabilities | 1,791,305 | 1,848,936 |
for the nine months and quarter ended September 30, 2015 (IFRS, unaudited)
| in € thousands | 9m 2015 | 9m 2014 | Q3 2015 | Q3 2014 |
|---|---|---|---|---|
| Net income | 83,436 | 63,124 | 44,795 | 30,402 |
| Income taxes | 38,657 | 27,748 | 20,125 | 14,485 |
| Net financial income/expense | 2,793 | 7,602 | 354 | 2,126 |
| Amortization/depreciation of non-current assets | 37,957 | 39,625 | 11,500 | 12,185 |
| Other non-cash income/expense | −8,890 | 11,220 | −15,432 | 7,271 |
| Operating cash flow before changes in working capital |
153,953 | 149,319 | 61,342 | 66,469 |
| Changes in inventories, receivables and other current assets |
34,131 | 38,135 | −5,427 | −17,414 |
| Changes in payables and other liabilities | 2,012 | −16,313 | −8,779 | −4,437 |
| Income taxes paid | −45,901 | −65,798 | −15,428 | −17,658 |
| Interest paid | −10,195 | −16,976 | −5,702 | −6,752 |
| Interest received | 5,944 | 6,171 | 2,161 | 1,837 |
| Net cash provided by operating activities | 139,944 | 94,538 | 28,167 | 22,045 |
| Proceeds from the sale of property, plant and equipment/ intangible assets |
2,388 | 2,418 | 0 | 1,083 |
| Purchase of property, plant and equipment/intangible assets |
−9,174 | −8,609 | −3,198 | −2,607 |
| Proceeds from the sale of financial assets | 144 | 177 | 6 | 21 |
| Purchase of financial assets | −4,503 | −2,769 | −2,373 | −1,136 |
| Proceeds from the sale of current financial assets | 49,232 | 26,000 | 25,011 | 20,000 |
| Purchase of current financial assets | −3 | −29,533 | 0 | −24,779 |
| Proceeds from the sale of disposal groups | −1,000 | 18,057 | 0 | −131 |
| Payment for acquisitions, net | 0 | −3,667 | 0 | 0 |
| Net cash used in investing activities | 37,084 | 2,074 | 19,446 | −7,549 |
| Free cash flow | 128,799 | 85,755 | 22,602 | 19,406 |
|---|---|---|---|---|
| Cash and cash equivalents at the end of period | 336,955 | 275,033 | 336,955 | 275,033 |
| Cash and cash equivalents at the beginning of period | 318,396 | 449,984 | 423,936 | 253,944 |
| Net change in cash and cash equivalents | 18,559 | −174,951 | −86,981 | 21,089 |
| Valuation-related change in cash and cash equivalents | −2,480 | 11,592 | −16,173 | 7,147 |
| Change in cash and cash equivalents from cash-relevant transactions |
21,039 | −186,543 | −70,808 | 13,942 |
| Net cash provided by/used in financing activities | −155,989 | −283,155 | −118,421 | −554 |
| Payments for non-controlling interests | −500 | 0 | −500 | 0 |
| Repayments of financial liabilities | −106,201 | −212,566 | −103,245 | −10,554 |
| Additions to financial liabilities | 6,170 | 35,000 | 1,323 | 10,000 |
| Dividends paid | −39,633 | −36,430 | −174 | 0 |
| Sale of treasury stock | 466 | 1,423 | 466 | 0 |
| Repurchase of treasury stock (including hedge premiums paid) |
−16,291 | −70,582 | −16,291 | 0 |
| in € thousands | 9m 2015 | 9m 2014 | Q3 2015 | Q3 2014 |
for the nine months ended September 30, 2015 (IFRS, unaudited)
| Common shares outstanding (no.) |
Share capital | Capital reserves | Retained earnings |
|
|---|---|---|---|---|
| in € thousands | ||||
| Equity as of January 1, 2014 | 81,513,689 | 86,944 | 46,144 | 1,087,328 |
| Comprehensive income | 62,990 | |||
| Transactions with shareholders | ||||
| Dividend payment | −36,275 | |||
| New shares issued | ||||
| Stock options | 2,679 | |||
| Issue and disposal of treasury stock | 59,000 | −165 | ||
| Repurchase of treasury stock | −2,653,845 | |||
| Other | ||||
| Transactions between shareholders | ||||
| Equity as of September 30, 2014 | 78,918,844 | 86,944 | 48,658 | 1,114,043 |
| Equity as of January 1, 2015 | 78,918,844 | 86,944 | 43,195 | 1,161,411 |
| Comprehensive income | 83,269 | |||
| Transactions with shareholders | ||||
| Dividend payment | −39,459 | |||
| New shares issued | ||||
| Stock options | −3,287 | |||
| Issue and disposal of treasury stock | 19,300 | −7,944 | −214,252 | |
| Repurchase of treasury stock | −634,943 | |||
| Other | ||||
| Transactions between shareholders | −167 | |||
| Equity as of September 30, 2015 | 78,303,201 | 79,000 | 39,741 | 990,969 |
| Total | interests | Attributable to shareholders of Software AG |
Treasury shares | Other reserves | |||
|---|---|---|---|---|---|---|---|
| Non-controlling 793 134 −155 772 831 167 −174 |
Currency translation gains/losses from net investments in foreign operations |
Actuarial gains/ losses from de fined benefit plans |
Fair value measure ment of securities and derivatives |
Currency translation differences |
|||
| 965,595 | 964,802 | −155,534 | 2,031 | −22,945 | −2,055 | −77,111 | |
| 109,604 | 109,470 | 3,112 | −79 | 523 | 42,924 | ||
| −36,430 | −36,275 | ||||||
| 2,679 | 2,679 | ||||||
| 1,485 | 1,485 | 1,650 | |||||
| −70,582 | −70,582 | −70,582 | |||||
| 0 | |||||||
| 0 | |||||||
| 972,351 | 971,579 | −224,466 | 5,143 | −23,024 | −1,532 | −34,187 | |
| 1,013,380 | 1,012,549 | −224,466 | 6,437 | −27,308 | −1,365 | −32,299 | |
| 110,467 | 110,300 | 3,082 | 0 | 1,709 | 22,240 | ||
| −39,633 | −39,459 | ||||||
| 0 | |||||||
| −3,287 | −3,287 | ||||||
| 540 | 540 | 222,736 | |||||
| −16,291 | −16,291 | −16,291 | |||||
| 0 | |||||||
| −500 | −333 | −167 | |||||
| 1,064,676 | 491 | 1,064,185 | −18,021 | 9,519 | −27,308 | 344 | −10,059 |
Software AG's condensed and unaudited consolidated financial statements (interim financial statements) as of September 30, 2015 have been prepared in accordance with International Financial Reporting Standards (IFRS) applicable on the balance sheet date, as endorsed by the EU. The IASs/ IFRSs applicable as of September 30, 2015 were observed, as were the corresponding interpretations of the International Financial Reporting Interpretations Committee (IFRIC formerly SIC).
Software AG is a registered stock corporation under German law with registered offices in Darmstadt. Software AG is the parent company of a group that is globally active in the fields of software development, licensing and maintenance as well as IT services.
The consolidated interim financial statements of Software AG are expressed in thousands of euros unless otherwise stated.
Software AG waived a voluntary audit and review of the consolidated interim financial statements.
The following changes occurred in the consolidated Group in the first nine months of fiscal 2015.
| Germany | Foreign | Total | |
|---|---|---|---|
| January 1, 2015 | 11 | 70 | 81 |
| Disposals (including mergers) |
2 | 1 | 3 |
| September 30, 2015 | 9 | 69 | 78 |
The disposals resulted from two mergers in Germany and one closure in Singapore.
The same accounting policies have been applied to the consolidated interim financial statements as were applicable to the consolidated financial statements as of December 31, 2014. For more detailed information on accounting policies, please see Note 3 of the consolidated financial statements for fiscal 2014. These quarterly financial statements have been prepared in accordance with IAS 34: Interim Financial Reporting.
First-time application of new accounting rules The new accounting rules to be applied starting in the 2015 fiscal year had no significant effect on Software AG's quarterly financial statements.
New but not yet effective accounting rules For more details on new but not yet effective accounting rules and those for which Software AG has not opted for early application, please refer to Note 3 of the 2014 Annual Report.
Software AG did not acquire any companies during the first nine months of 2015.
Goodwill amounted to €888,065 thousand as of September 30, 2015, an increase of €30,786 thousand compared to December 31, 2014. This change is due solely to exchange rate fluctuations.
Software AG's share capital totaled €79,000 thousand as of September 30, 2015 (Dec. 31, 2014: €86,944 thousand), divided into 79,000,000 bearer shares (Dec. 31, 2014: 86,943,945). Each share entitles its holder to one vote.
The change resulted from the redemption of a total of 7,943,945 treasury shares, which the Management Board of Software AG approved on April 28, 2015. That represents 9.14 percent of Software AG's share capital prior to the redemption and capital decrease.
The decision was passed making use of the authorization granted by the Annual Shareholders' Meeting of May 3, 2013. The shares were retired on April 30, 2015.
Pursuant to the proposal of the Management Board and the Supervisory Board, the Annual Shareholders' Meeting resolved on May 13, 2015 to appropriate €39,459 thousand (2014: €36,275 thousand) for a dividend payout from the net retained profits of €91,144 thousand reported by Software AG, the controlling Group company, in 2014. This corresponded to a dividend of €0.50 (2014: €0.46) per share. A total amount of €51,685 thousand (2014: €99,767 thousand) was carried forward.
As of December 31, 2014 Software AG held 8,025,101 (Dec. 31, 2013: 5,430,256) treasury shares representing an interest of €8,025,101 (Dec. 31, 2013: €5,430,256) or 9.23 percent (Dec. 31, 2013: 6.25 percent) of the share capital. As of September 30, 2015 Software AG held 696,799 (Sept. 30, 2014: 8,025,101) treasury shares representing an interest of €696,799 (Sept. 30, 2014: €8,025,101) or 0.88 percent (Sept. 30, 2014: 9.23 percent) of the share capital.
The change resulted from above mentioned redemption of 7,943,945 treasury shares and the transfer of 19,300 treasury shares related to the exercise of options under Management Incentive Plan III (MIP III). In addition, Software AG repurchased 634,943 treasury shares (based on a value date) between September 8, 2015 up to and including September 30, 2015 at an average price of €25.65 per share—not including transaction fees (€25.66 including transaction fees)—for a total cost of €16,286 thousand not including transaction fees (€16,291 thousand including transaction fees).
Segmentation is in accordance with the internal control of the Group. Software AG therefore reports on the following three segments:
• Digital Business Platform
(DBP: integration, business process management and big data with the webMethods, ARIS, Alfabet, Apama and Terracotta product families)
The table below shows the segment data for the first nine months of 2015 and 2014:
Segment report for the nine months ended September 30, 2015, IFRS, unaudited
| Adabas&Natural | |||
|---|---|---|---|
| 9m 2015 | 9m 2014 | ||
| in € thousands | |||
| Licenses | 59,456 | 52,610 | |
| Maintenance | 119,893 | 115,271 | |
| Product revenue | 179,349 | 167,881 | |
| Services | 0 | 0 | |
| Other | 445 | 465 | |
| Total revenue | 179,794 | 168,346 | |
| Cost of sales | −10,037 | −9,318 | |
| Gross profit | 169,757 | 159,028 | |
| Sales, marketing and distribution expenses | −24,981 | −25,750 | |
| Segment contribution | 144,776 | 133,278 | |
| Research and development expenses | −15,377 | −18,407 | |
| Segment result | 129,399 | 114,871 | |
| General and administrative expenses | |||
| Other taxes | |||
| Operating earnings | |||
| Other income/expense, net | |||
| Financial income/expense, net | |||
| Earnings before income taxes | |||
| Income taxes | |||
| Net income | |||
| nterim Management Report | |
|---|---|
| Total | Reconciliation | Consulting | Digital Business Platform |
|||
|---|---|---|---|---|---|---|
| 9m 2015 | 9m 2014 | 9m 2015 | 9m 2014 | 9m 2015 | 9m 2014 | 9m 2015 |
| 168,950 | 192 | 0 | 118,693 | 109,494 | ||
| 304,328 | 1,983 | 0 | 157,732 | 184,435 | ||
| 473,278 446,481 |
2,175 | 0 | 276,425 | 293,929 | ||
| 141,705 | 163,549 | 141,703 | 0 | 2 | ||
| 575 | 15 | 122 | 0 | 8 | ||
| 615,558 610,510 |
165,739 | 141,825 | 276,425 | 293,939 | ||
| −157,857 −182,316 |
−18,787 | −13,911 | −137,655 | −112,913 | −16,556 | −20,996 |
| 457,701 428,194 |
−18,787 | −13,911 | 28,084 | 28,912 | 259,869 | 272,943 |
| −197,529 −191,105 |
−12,087 | −13,703 | −17,947 | −14,215 | −135,321 | −144,630 |
| 260,172 237,089 |
−30,874 | −27,614 | 10,137 | 14,697 | 124,548 | 128,313 |
| −79,350 | 0 | 0 | 0 | 0 | −62,603 | −63,973 |
| 180,822 156,079 |
−30,874 | −27,614 | 10,137 | 14,697 | 61,945 | 64,340 |
| −50,079 | ||||||
| −4,449 | ||||||
| 126,294 | ||||||
| −1,408 | ||||||
| −2,793 | ||||||
| 122,093 | ||||||
| −38,657 | ||||||
| 83,436 |
| Adabas&Natural | |||
|---|---|---|---|
| Q3 2015 | Q3 2014 | ||
| in € thousands | |||
| Licenses | 27,507 | 21,949 | |
| Maintenance | 39,240 | 39,259 | |
| Product revenue | 66,747 | 61,208 | |
| Services | 0 | 0 | |
| Other | 154 | 136 | |
| Total revenue | 66,901 | 61,344 | |
| Cost of sales | −3,374 | −3,100 | |
| Gross profit | 63,527 | 58,244 | |
| Sales, marketing and distribution expenses | −7,939 | −7,816 | |
| Segment contribution | 55,588 | 50,428 | |
| Research and development expenses | −4,606 | −5,923 | |
| Segment result | 50,982 | 44,505 | |
| General and administrative expenses | |||
| Other taxes | |||
| Operating earnings | |||
| Other income/expense, net | |||
| Financial income/expense, net | |||
| Earnings before income taxes | |||
| Income taxes | |||
| Net income | |||
| Consulting | Reconciliation | Total | |||||
|---|---|---|---|---|---|---|---|
| Q3 2015 | Q3 2014 | Q3 2015 | Q3 2014 | Q3 2015 | Q3 2014 | ||
| 0 | 0 | 68,897 | 64,184 | ||||
| 0 | 27 | 101,002 | 93,631 | ||||
| 0 | 27 | 169,899 | 157,815 | ||||
| 45,736 | 47,685 | 45,736 | 47,685 | ||||
| 81 | 5 | 236 | 141 | ||||
| 45,817 | 47,717 | 215,871 | 205,641 | ||||
| −34,327 | −37,642 | −3,898 | −5,290 | −49,034 | −51,412 | ||
| 11,490 | 10,075 | −3,898 | −5,290 | 166,837 | 154,229 | ||
| −4,397 | −4,768 | −4,504 | −4,073 | −63,062 | −57,463 | ||
| 7,093 | 5,307 | −8,402 | −9,363 | 103,775 | 96,766 | ||
| 0 | 0 | 0 | 0 | −25,123 | −27,210 | ||
| 7,093 | 5,307 | −8,402 | −9,363 | 78,652 | 69,556 | ||
| −11,135 | −19,401 | ||||||
| −1,548 | −2,109 | ||||||
| 65,969 | 48,046 | ||||||
| −695 | −1,033 | ||||||
| −354 | −2,126 | ||||||
| 64,920 | 44,887 | ||||||
| −20,125 | −14,485 | ||||||
| 44,795 | 30,402 |
As in 2014, there were no reportable contingent liabilities as of September 30, 2015. The carrying amount of collateral received was €13 thousand (2014: €32 thousand).
The Group's rental agreements and operating leases relate chiefly to office space, vehicles and IT equipment. Lease payments under operating leases are recognized as an expense over the term of the lease.
| in € thousands | Up to 1 year | >1 to 5 years | > 5 years | Total |
|---|---|---|---|---|
| Contractually agreed payments (gross amount) | 9,813 | 50,464 | 13,008 | 73,285 |
| Estimated income from subleases | 876 | 3,520 | 0 | 4,396 |
| Contractually agreed payments (net amount) | 8,937 | 46,944 | 13,008 | 68,889 |
Revenues and pre-tax earnings were distributed over fiscal year 2014 as follows:
| in € thousands | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | 2014 |
|---|---|---|---|---|---|
| License revenue | 57,103 | 50,207 | 64,184 | 98,605 | 270,099 |
| as % of license revenue for the year | 21 | 19 | 24 | 36 | 100 |
| Total revenue | 208,886 | 195,984 | 205,641 | 247,323 | 857,834 |
| as % of revenue for the year | 24 | 23 | 24 | 29 | 100 |
| Earnings before taxes | 25,994 | 19,991 | 44,887 | 67,512 | 158,384 |
| as % of earnings for the year | 16 | 13 | 28 | 43 | 100 |
Based on historical data, the revenue and earnings distribution from 2014 is not fully representative. The distribution of revenue and earnings is regularly affected by large individual deals and is thus difficult to predict.
The following graph illustrates the development of license revenues in 2014 and 2013.
All litigation that is potentially significant to Software AG has been described in Note 32 of the 2014 consolidated financial statements. There were no substantial changes in the first three quarters of 2015 with respect to the legal disputes reported, nor were there any new legal disputes or other legal risks that, based on present assessments, could potentially have a significant effect on the company's financial position, financial performance or cash flows.
Provisions for litigation totaled €6,880 thousand (Dec. 31, 2014: €3,295 thousand) as of September 30, 2015. In addition, contingent liabilities in the amount of €25,886 thousand existed (Dec. 31, 2014: €25,100 thousand). But since a resource outflow as of September 30, 2015 was not probable, no provisions were set up. These are also related to specific legal disputes, for which accounting provisions were made.
Software AG has various stock option plans for members of the Management Board, managers and other Group employees. Our stock price-based remuneration plans as of March 31, 2015 are described in detail on pages 172–178 of our 2014 Annual Report.
fiscal year:
| Number of rights |
Exercise price per right |
Remaining term |
|
|---|---|---|---|
| (in €) | (in years) | ||
| Balance as of December 31, 2014 | 555,600 | 0 | 3.00 |
| Granted | 28,050 | ||
| Forfeited | -52,300 | ||
| Balance as of September 30, 2015 | 531,350 | 2.25 | |
| Thereof exercisable as of September 30, 2015 | 0 |
Management Incentive Plan 2011 (MIP IV) (2011–2016) The rights granted under Management Incentive Plan 2011 (MIP IV) changed as follows in the first nine months of the fiscal year:
| Number of rights |
Exercise price per right |
Remaining term |
Aggregated intrinsic value |
|
|---|---|---|---|---|
| (in €) | (in years) | (in €) | ||
| Balance as of December 31, 2014 | 4,182,500 | 41.34 | 6.50 | 0 |
| Forfeited | -680,000 | 41.34 | ||
| Balance as of September 30, 2015 | 3,502,500 | 41.34 | 5.75 | 0 |
| Thereof exercisable as of September 30, 2015 | 0 |
Due to management's expectation that the plan's defined revenue targets will not be met, income in the amount of the expense accumulated to date (€15.6 million) was recognized for the third quarter. The plan's target required Group revenue for new products to double by 2015 as compared to fiscal year 2010. Please refer to Note 33 on page 173 of our 2014 Annual Report for a detailed description of the plan's targets.
(2007–2011)
The rights granted under Management Incentive Plan 2007 (MIP III) changed as follows in the first nine months of the fiscal year:
| Number of rights |
Exercise price per right (in €) |
Remaining term (in years) |
Aggregated intrinsic value (in €) |
|
|---|---|---|---|---|
| Balance as of December 31, 2014 | 1,719,800 | 24.12 | 4.50 | 0 |
| Exercised (in Q3) | -19,300 | 24.12 | ||
| Forfeited | -11,000 | 24.12 | ||
| Balance as of September 30, 2015 | 1,689,500 | 24.12 | 3.75 | 3.328*) |
| Thereof exercisable as of September 30, 2015 | 1,689,500 | 24.12 |
*) Based on the closing price on September 30, 2015
In the first three quarters of 2015 the average number of employees (i.e., part-time employees are taken into account on a pro-rata basis only) by area of activity was as follows:
| Sept. 30, 2015 |
Sept. 30, 2014 |
|
|---|---|---|
| Maintenance and Services | 1,832 | 2,024 |
| Sales and Marketing | 943 | 1,072 |
| Research and Development | 970 | 987 |
| Administration | 622 | 672 |
| 4,367 | 4,755 |
In absolute terms (i.e., part-time employees are counted in full), the Group employed 4,547 (Sept. 30, 2014: 4,704) people as of September 30, 2015.
No changes occurred on the Management Board between January 1, 2015 and September 30, 2015.
As scheduled, Software AG shareholders elected their new representatives to the Supervisory Board at the company's Annual Shareholders' Meeting on May 13, 2015. The new Supervisory Board of Software AG is now composed of the following members:
Software AG employees had elected their representatives to the Supervisory Board on May 7, 2015 as follows:
In its inaugural session on June 15, 2015, the Supervisory Board elected Dr. Bereczky as its new Chairman and Mr. Guido Falkenberg as Deputy Chairman.
The composition of the Supervisory Board's committees as of June 15, 2015 was as follows:
Dr. Andreas Bereczky (Chairman) Guido Falkenberg Alf Henryk Wulf
Markus Ziener (Chairman) Eun-Kyung Park Christian Zimmermann
Dr. Andreas Bereczky (Chairman) Alf Henryk Wulf Markus Ziener
There were no events that occurred between September 30, 2015 and the date of release of this report that were of significance to the consolidated financial statements.
Software AG's Management Board approved the consolidated financial statements on November 12, 2015.
To the best of our knowledge, and in accordance with the applicable principles of interim financial reporting, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and the Group management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.
Darmstadt/Germany, November 12, 2015
Software AG
K.-H. Streibich E. Duffaut
Dr. W. Jost A. Zinnhardt
January 27 Financial results Q4 2015 and FY 2015 (IFRS, unaudited), Darmstadt, Germany Notes to the Interim Financial StatementsInterim Management Report Interim Financial Statements Notes to the Interim Financial Statements Additional Information
Software AG Corporate Communications Uhlandstraße 12 64297 Darmstadt Germany
Tel. +49 61 51-92-0 Fax +49 61 51-1191 [email protected]
Concept and Design IR-One AG&Co., Hamburg www.ir-1.com
Software AG Corporate Headquarters Uhlandstraße 12 64297 Darmstadt Germany
Tel. +49 61 51-92-0 Fax +49 61 51-1191 Email: [email protected]
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