7th Annual Pan European Small & Mid Cap Conference - Software AG
7th Annual Pan European Small & Mid Cap Conference - Software AG
7th Annual Pan European Small & Mid Cap Conference - Software AG
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<strong>7th</strong> <strong>Annual</strong> <strong>Pan</strong> <strong>European</strong><br />
<strong>Small</strong> & <strong>Mid</strong> <strong>Cap</strong> <strong>Conference</strong><br />
Arnd Zinnhardt, CFO<br />
<strong>Software</strong> <strong>AG</strong><br />
This presentation contains forward-looking statements based on beliefs of <strong>Software</strong> <strong>AG</strong> management. Such statements<br />
reflect current views of <strong>Software</strong> <strong>AG</strong> with respect to future events and results and are subject to risks and<br />
uncertainties. Actual results may vary materially from those projected here, due to factors including changes in<br />
general economic and business conditions, changes in currency exchange, the introduction of competing products, lack<br />
of market acceptance of new products, services or technologies and changes in business strategy. <strong>Software</strong> <strong>AG</strong> does<br />
not intend or assume any obligation to update these forward-looking statements.
Company Profile<br />
Business: System software provider for IT infrastructure<br />
- Enterprise transaction systems (Business Line ETS)<br />
- Enterprise SOA based integration solutions (Business Line<br />
Crossvision)<br />
Founded: 1969 in Darmstadt, Germany<br />
Revenue: € 483 million (2006; +10% vs. 2005)<br />
- License Revenue: € 166 million (+ 26% vs 2005)<br />
EBIT Margin: 23% (2006; 22% in 2005)<br />
Employees: 2,700 worldwide<br />
Customers: 3,000 worldwide across all industries<br />
Distribution: Global provider and support (more than 70 countries)<br />
Listing: Frankfurt Stock Exchange (TecDAX, ISIN DE 0003304002 / SOW)<br />
Market<strong>Cap</strong>: ~ € 1.6 bn. / ~ US$ 2.1 bn.<br />
(28.4 million shares, 70.75% Free Float)<br />
EPS: € 2.60 (€ 2.24 in 2005)<br />
Dividend: € 0.90 (proposal 2006) / € 0.80 (2005)<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 2
Main Geographic Markets 2006<br />
Revenue Share:<br />
Others<br />
23% (23%)<br />
New Markets<br />
12% (11%)<br />
UK<br />
8% (7%)<br />
Total FY 2006: 483.0 mn. €<br />
(FY 2005: 438.0 mn. €)<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 3<br />
USA/Canada<br />
26% (26%)<br />
Spain<br />
17% (18%)<br />
Germany<br />
14% (15%)<br />
2006<br />
2005<br />
2006<br />
2005<br />
2006<br />
2005<br />
2006<br />
2005<br />
2006<br />
2005<br />
USA/Canada<br />
Spain<br />
Germany<br />
New Markets<br />
UK<br />
28.7<br />
47.4<br />
37.0<br />
57.5<br />
66.7<br />
77.8<br />
69.7<br />
83.6<br />
113.0<br />
127.6<br />
Growth<br />
yoy<br />
+13%<br />
+7%<br />
+4%<br />
+21%<br />
+29%
3,000 Customers Worldwide in All Industries<br />
Financial Services<br />
Public Institutions<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 4
3,000 Customers Worldwide in All Industries<br />
Travel & Transport<br />
Media & Telecommunications<br />
Public Institutions<br />
Retail & Manufacturing<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 5
Business Model / Revenue Structure<br />
34%<br />
39%<br />
26%<br />
in % of total revenue 2006 (483 mn. €)<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 6<br />
License<br />
• Direct Sales Force<br />
• One-time payment for perpetual license<br />
• Additional payment for capacity upgrades and Add-on products<br />
• Price: <strong>Cap</strong>acity/MIPS based (database)<br />
User/Seats based (tools)<br />
Maintenance<br />
• <strong>Annual</strong> contracts with automatic renewal and 3-5 year<br />
contracts<br />
• Operational support and functional upgrades of software<br />
products<br />
• Price: around 15% of license list price<br />
Project Services<br />
• Implementation of own products / system integration<br />
• Cost plus or fixed price projects<br />
• Own staff + freelance
Characteristics of the Businesses<br />
Enterprise Transaction Systems (ETS)<br />
Business<br />
• Database (Adabas) and programming language<br />
(Natural)<br />
• Add-on products (enhance usage)<br />
Market environment – Mainframe/legacy market<br />
• Supplier power: market highly concentrated<br />
• Buyer power: significant switching costs<br />
• High barriers to entry: proprietary know-how<br />
• Threat of substitutes: no new market entrants<br />
• Degree of rivalry: oligopolistic supplier structure<br />
Position of <strong>Software</strong> <strong>AG</strong><br />
• No 2 in mainframe market, after IBM<br />
Core Competence / Competitive Advantage<br />
• Platform neutral, high performance, low TCO<br />
• High customer loyalty<br />
Goal<br />
• Use leading position for revenue growth with<br />
add-on products and legacy modernization.<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 7<br />
Crossvision (SOA Integration)<br />
Business<br />
• Reuse and web-enable existing IT assets<br />
• Integrate heterogeneous IT- assets into flexible,<br />
architectures<br />
Market environment – SOA market<br />
• Two segments: platform and suite offerings<br />
• Strong competition within segments<br />
Position of <strong>Software</strong> <strong>AG</strong><br />
• No 1 in SOA product strategy, Forrester<br />
• Top Five in Integration-Centric PPM<br />
• Partner of platform vendors (SAP, Fujitsu)<br />
Core Competence / Uniqueness of offering<br />
• Only suite vendor with ability for legacy integration<br />
• Suite offers the complete range of SOA products and<br />
full flexibility for customer requirements (no lock-in)<br />
• Leading SOA Governance product<br />
Goal<br />
• Reach leading position through fast revenue growth<br />
with new products.
Focused on Two Business Lines<br />
Established Business:<br />
Enterprise Transaction Systems (ETS)<br />
Maintenance<br />
46%<br />
License Services<br />
35% 19%<br />
High margin business<br />
Highly cash generative<br />
High customer loyalty<br />
Recurring revenue stream<br />
Value generating with limited<br />
risk profile<br />
Optimize revenue<br />
from existing customers<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 8<br />
New Business:<br />
Crossvision (SOA integration)<br />
Maintenance<br />
24%<br />
License<br />
40%<br />
Services<br />
36%<br />
Cross-selling into existing<br />
customer base<br />
Win new customers<br />
and partners<br />
Leverage next wave in<br />
IT-industry<br />
Revenue in 2006: € 350 million Revenue in 2006: € 108 million
Customer-Focused Portfolio (step 1)<br />
Customers<br />
new<br />
customers<br />
3,000<br />
existing<br />
customers<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 9<br />
ETS<br />
Legacy Modernization<br />
cross selling<br />
Legacy<br />
Modernization<br />
new SOA /<br />
Integration<br />
Products
Customer-Focused Portfolio (step 2)<br />
Customers<br />
new<br />
customers<br />
3,000<br />
existing<br />
customers<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 10<br />
ETS<br />
cross selling<br />
direct selling and takeover<br />
customers from <strong>Software</strong><br />
<strong>AG</strong>’s distributors<br />
Legacy Modernization<br />
new<br />
selling<br />
cross selling<br />
Legacy<br />
Modernization<br />
Accelerated via:<br />
• vertical focus<br />
• dedicated sales force<br />
• partners<br />
new SOA /<br />
Integration<br />
Products
Position in the SOA Market<br />
Platform<br />
Vendors<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 11<br />
Suite Vendors Niche Players
Crossvision Suite<br />
6 integrated components<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 12<br />
CentraSite is the key to the suite
Leadership in the SOA Segments<br />
Enterprise Service Bus and SOA Governance and BPM<br />
Strong<br />
Current<br />
offering<br />
Weak<br />
Leaders<br />
<strong>Software</strong> <strong>AG</strong> is a leader<br />
in SOA — ESB<br />
Strategy Strong<br />
Source: The Forrester Wave TM : Enterprise<br />
Service Bus, Q2 2006<br />
by Ken Vollmer and Mike Gilpin.<br />
Strong Performers<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 13<br />
<strong>Software</strong> <strong>AG</strong><br />
is No 1 in<br />
SOA offering<br />
<strong>Software</strong> <strong>AG</strong><br />
is No 1 in<br />
product<br />
strategy<br />
Contenders<br />
Risky Bets<br />
Strong<br />
Current<br />
offering<br />
Weak<br />
<strong>Software</strong> <strong>AG</strong> is a leader<br />
in Governance & BPM<br />
Strategy Strong<br />
Source: The Forrester Wave TM : Integration-<br />
Centric Business Process Management Suites,<br />
Q4 2006 by Ken Vollmer and Henry Peyret.
Growth in Key Financials<br />
(in mn. €)<br />
175<br />
150<br />
125<br />
100<br />
75<br />
50<br />
25<br />
0<br />
FY<br />
03<br />
License Revenue EBIT* EPS**<br />
+9%<br />
FY<br />
04<br />
+15%<br />
FY<br />
05<br />
+26%<br />
FY<br />
06<br />
* EBIT before income from investment<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 14<br />
FY<br />
03<br />
+42%<br />
FY<br />
04<br />
+15%<br />
FY<br />
05<br />
+15%<br />
FY<br />
06<br />
FY<br />
03<br />
FY<br />
04<br />
** Number of shares outstanding: 28.4 mn.<br />
2004 pro forma without earnings from divestment<br />
+15%<br />
FY<br />
05<br />
+16%<br />
FY<br />
06<br />
(in €)<br />
3.0<br />
2.5<br />
2<br />
1.5<br />
1<br />
0.5<br />
0
Outlook 2007 - Growth in Revenue and Profit<br />
Revenue<br />
-Licensing<br />
- Maintenance<br />
- Services<br />
Revenue BL ETS<br />
Revenue BL crossvision<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 15<br />
2006a<br />
(in €m)<br />
483.0<br />
165.7<br />
187.3<br />
126.2<br />
350.0<br />
107.9<br />
2007 Forecast* update (previous)<br />
Growth: 14% (10%)<br />
Growth: 22 to 27% (20 to 25%)<br />
Growth: 5 to 7% (3 to 5%)<br />
Growth: 12 to 15% (3 to 5%)<br />
Growth: 8 to 10 % (5 to 7%)<br />
Growth: 20 to 30% (unchanged)<br />
EBIT Margin (Group) 23.0 Growth: 1 pp to 24% (unchanged)<br />
EPS (in €) 2.60<br />
* Change vs. FY 2006 at constant currency (Euro / USD rate 1 : 1.255)<br />
Growth: 3.00 to 3.20 (2.90 to 3.10)
Growth Drivers<br />
Portfolio<br />
Enhancement<br />
Geographic<br />
Expansion<br />
Sales &<br />
Marketing<br />
Increase<br />
Partner<br />
Networking<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 16<br />
Adabas 2006 (shipment Q1/2006)<br />
Natural 2006 (shipment Q1/2006)<br />
Crossvision Suite (shipment Q2/2006)<br />
New markets (Latin America, <strong>Mid</strong>dle East, Eastern Europe, Asia)<br />
Start direct sales in Japan (Q4/2006)<br />
Start direct sales in Brazil (Q1/2008)<br />
Increased marketing investment<br />
Sales Force Skill Development (increased efficiency)<br />
New global branding starts Q1 2007<br />
System integrators, e.g. Atos Origin (UK); Bearing Point (US)<br />
Technology partners, e.g. Fujitsu, IDS Scheer, SAP, ILOG<br />
CentraSite Community (approx. 20 software vendors)
<strong>Software</strong> <strong>AG</strong> Growth Strategy<br />
5 Year Vision: €1 billion Revenue by 2011<br />
(in €)<br />
483 m<br />
+14%*<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 17<br />
Revenue more than doubling<br />
+60% (organic)<br />
1 bn<br />
100 m<br />
2006 2007 2011<br />
* at constant curreny<br />
Acquisition(s)<br />
• Partner sales<br />
• Geographic expansion<br />
(e.g. Brazil, Japan)<br />
• Growth in<br />
established markets<br />
(new and existing<br />
customers)
Appendix<br />
Key Financial Ratios & Latest Financial Results<br />
Stock Information<br />
Products and Market Details<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 18
Key Financial Results Ratios &<br />
Latest Financial Results<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 19
Key Financial Ratios (IFRS)<br />
1. Adjusted by sale of SAP SI shares in Q2 2004<br />
2. Net operating profit after tax = op. PbT ./. tax rate x (op. PbT + goodwill)<br />
3. Operating EBIT / Equity<br />
4. Operating PBT / (Fixed assets + Working capital)<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 20<br />
FY 2006<br />
FY 2005 FY 2004 FY 2003<br />
Operating EBITDA1 margin (% of revenue) 24.7% 23.8% 23.1% 16.6%<br />
Operating EBIT1 margin (% of revenue) 23.0% 22.0%<br />
Operating PbT 24.5%<br />
15.2%<br />
11.6%<br />
26.4%<br />
26.7%<br />
n/a<br />
42.5%<br />
12.7%<br />
38.3%<br />
€5.2m<br />
9.2%<br />
109<br />
€8.2m<br />
€444.0m<br />
1 20.4% 14.1%<br />
margin (% of revenue) 23.1% 21.2%<br />
NOPAT 12.9%<br />
5.3%<br />
25.9%<br />
26.3%<br />
3.3%<br />
23.5%<br />
16.5%<br />
39%<br />
€6.9m<br />
8.7%<br />
95<br />
2 14.7%<br />
margin (% of revenue) 14.1%<br />
9.5%<br />
Free Cash Flow margin (% of revenue) 10.4%<br />
1.4%<br />
ROE 21.9%<br />
23.4%<br />
0.0%<br />
1.1%<br />
21%<br />
39%<br />
€7.6m<br />
7.4%<br />
99<br />
€9.3m €10.8m<br />
3 24.5%<br />
ROCE4 24.1%<br />
Dividend yield (based on Ø share price) 5 2.4%<br />
Working <strong>Cap</strong>ital (% of revenue) 6 35.8%<br />
R&D (% of product revenue) 13.8%<br />
Normalized corporate tax rate 39.0%<br />
<strong>Cap</strong>ex €10.1m<br />
WACC 8.2%<br />
DSO7 105<br />
Depreciation<br />
€7.9m<br />
<strong>Cap</strong>ital Employed €318.7m €252.1m<br />
8 €399.6m<br />
5. Depending <strong>AG</strong>M decision<br />
6. Current assets ./. Current liabilities /Total revenue<br />
7. Without Factoring<br />
8. Fixed assets + Working capital
Revenue Q4 / Full Year 2006<br />
Q4 2006 2005 Δ %<br />
Product<br />
License<br />
Maintenance<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 21<br />
90.0<br />
43.4 + 25%<br />
46.6 - 3%<br />
Δ%<br />
at constant<br />
currency<br />
+ 31%<br />
+ 1%<br />
Service 33.1 32.7 + 1% + 2%<br />
Other 2.0 0.9<br />
TOTAL 134.4 123.6 + 9% + 13%<br />
FY 2006 2005 Δ %<br />
Product<br />
License<br />
Maintenance<br />
99.3<br />
54.1<br />
45.2<br />
353.0<br />
165.7<br />
187.3<br />
313.0<br />
131.6<br />
181.4<br />
Service 126.2 122.7<br />
Other 3.8 2.3<br />
TOTAL 483.0<br />
438.0<br />
+ 10% + 15%<br />
Δ%<br />
at constant<br />
currency<br />
+ 13% + 14%<br />
+ 26% + 28%<br />
+ 3% + 4%<br />
+ 3%<br />
+ 10%<br />
+ 3%<br />
+ 11%<br />
(in mn. euros)
License Revenue by Product Suite Q4 / Full Year 2006<br />
Q4 2006 2005 Δ %<br />
ETS*<br />
37.6<br />
Δ%<br />
at constant<br />
currency<br />
(in mn. euros)<br />
* Enterprise Transaction Systems (Adabas and Natural) ** Compares to XML Integration <strong>Software</strong> <strong>AG</strong> products of previous year<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 22<br />
32.5<br />
Crossvision** 15.3 9.3 +65%<br />
Third Party 0.8 1.2<br />
All Other 0.4 0.4<br />
+16%<br />
+22%<br />
+72%<br />
TOTAL 54.1 43.4 +25% +31%<br />
FY 2006 2005 Δ %<br />
ETS*<br />
121.7<br />
96.0<br />
Crossvision** 41.6 26.0 +60%<br />
Third Party 1.8 4.3<br />
All Other 0.6 5.3<br />
+27%<br />
Δ%<br />
at constant<br />
currency<br />
+29%<br />
+63%<br />
TOTAL 165.7 131.6 +26% +28%
Growth in Both Business Lines<br />
Revenue by Business Line (FY € millions)<br />
91.5<br />
38.3<br />
22.9<br />
30.3<br />
Crossvision<br />
+18% /<br />
+23%*<br />
107.9<br />
39.1<br />
25.4<br />
43.4<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 23<br />
Enterprise Transaction<br />
Systems (ETS)<br />
+8%<br />
325.2<br />
73.1<br />
156.1<br />
96.0<br />
350.0<br />
68.0<br />
160.3<br />
121.7<br />
2005 2006 2005 2006<br />
License Maintenance Services & Other<br />
* net of currency and excl. third party<br />
license rev. (2006: 1.8 m€; 2005: 4.3 m€)
Headcount by Functional Areas*<br />
in FTE<br />
Total<br />
Sales & Marketing<br />
Maintenance & Service<br />
R&D<br />
Mgmt & Admin<br />
* According to P+L cost structure<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 24<br />
Dec 31,<br />
2006<br />
2,62<br />
590<br />
1,19<br />
401<br />
440<br />
Sept 30,<br />
2006<br />
2,66<br />
623<br />
1,21<br />
386<br />
446<br />
Δ%<br />
qoq<br />
-2%<br />
-5%<br />
-2%<br />
+4%<br />
-1%<br />
Dec 31,<br />
2005<br />
2,75<br />
633<br />
1,29<br />
371<br />
450<br />
Δ%<br />
yoy<br />
-5%<br />
-7%<br />
-8%<br />
+8%<br />
-2%
Operating Result Q4 / Full Year 2006<br />
Total Revenue<br />
Cost of Sales<br />
Gross Profit<br />
Margin in %<br />
R&D<br />
Sales & Marketing<br />
Mgmt & Admin<br />
Other income/expense<br />
EBIT<br />
Margin in %<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 25<br />
Q4<br />
2006<br />
Q4<br />
2005<br />
Δ<br />
%<br />
FY<br />
2006<br />
FY<br />
2005<br />
134.4 123.6 +9% 483.0 438.0 +10%<br />
-42.8 -38.6 +11% -149.5 -143.5 +4%<br />
91.6<br />
68.2%<br />
85.0<br />
68.8%<br />
+8% 333.5<br />
69.0%<br />
294.5<br />
67.2%<br />
Δ<br />
%<br />
+13%<br />
-11.5 -10.7 +7% -44.9 -43.2 +4%<br />
-33.3 -33.4 0% -127.2 -109.1 +17%<br />
-14.4 -14.9 -3% -52.3 -48.3 +8%<br />
+2.0 +2.9 +2.1 +2.5<br />
34.4<br />
25.6%<br />
28.9<br />
23.4%<br />
+19% 111.2<br />
23.0%<br />
96.4<br />
22.0%<br />
(in mn. euros)<br />
+15%
Net Result Q4 / Full Year 2006<br />
Average number of shares 28.1 28.0 28.1 27.5<br />
(in mn.)<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 26<br />
Q4<br />
2006<br />
EBIT 34.4<br />
Q4<br />
2005<br />
28.9<br />
Δ<br />
%<br />
FY<br />
2006<br />
+19% 111.2<br />
FY<br />
2005<br />
(in mn. euros)<br />
Δ<br />
%<br />
96.4 +15%<br />
Financial income +0.9 +0.6 +50% +7.4 +4.7 +57%<br />
Profit before tax<br />
Margin in %<br />
Taxes<br />
Tax Rate in %<br />
Net income<br />
Margin in %<br />
35.3<br />
26.3%<br />
-13.0<br />
37.4%<br />
22.3<br />
16.6%<br />
29.5<br />
23.9%<br />
-10.7<br />
36.3%<br />
18.8<br />
15.2%<br />
+20% 118.6<br />
24.5%<br />
+22% -45.4<br />
38.4%<br />
+19% 73.2<br />
15.2%<br />
101.1<br />
23.1%<br />
-39.3<br />
38.9%<br />
61.8<br />
14.1%<br />
+17%<br />
+16%<br />
+18%<br />
EPS 0.78 0.67 +16% 2.60 2.24 +16%
Cash Flow Q4 / Full Year 2006<br />
* Cash Flow from investing activities except acquisitions<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 27<br />
Q4<br />
2006<br />
Q4<br />
2005<br />
Operating Cash Flow 23.4 7.5<br />
FY<br />
2006<br />
FY<br />
2005<br />
Δ<br />
%<br />
55.7 +10%<br />
./. <strong>Cap</strong>Ex* -1.6 -3.0 -5.2 -10.1 -49%<br />
Free Cash Flow 21.8 4.5 56.2 45.6 +23%<br />
as % of revenue 16.2% 5.3% 11. 6% 10.4%<br />
Free Cash Flow<br />
per share (in €)<br />
Average number<br />
of shares (in mn.)<br />
61.4<br />
0.78 0.16 2.00<br />
1.66 +20%<br />
28.1 28. 0 28. 1<br />
27.5 +2%<br />
(in mn. euros)
Balance Sheet<br />
Dec. 31,<br />
2006<br />
184.8<br />
182.5<br />
11.2<br />
22.0<br />
4.7<br />
238.7<br />
643.9<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 28<br />
Assets Liabilities<br />
Cash and cash<br />
equivalents<br />
Trade receivables<br />
Inventories and<br />
other assets<br />
Deferred Taxes<br />
Prepaid expenses<br />
Fixed assets<br />
(Goodwill 188/188)<br />
Total<br />
Dec. 31,<br />
2005<br />
161.6<br />
150.3<br />
5.1<br />
35.1<br />
4.5<br />
242.7<br />
Dec. 31,<br />
2006<br />
105.7<br />
33.5<br />
18.2<br />
64.3<br />
422.2<br />
Current liabilities<br />
Non-current liabilities<br />
Deferred taxes<br />
Deferred income<br />
Shareholders’ Equity<br />
(Ratio 66%/66%)<br />
Dec. 31,<br />
2005<br />
599.3 643.9 Total<br />
599.3<br />
(in mn. euros)<br />
94.3<br />
33.5<br />
15.5<br />
63.0<br />
393.0
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 29<br />
Stock Information
Shareholder Information<br />
Actual amount of shares outstanding: 28,439,782<br />
- <strong>Software</strong> <strong>AG</strong> Foundation: 29.25%<br />
- Free Float: 70.75%<br />
ISIN: E0003304002<br />
WKN: 330400<br />
Symbol: SOW<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 30<br />
Shareholders‘ Structure by Countries<br />
Percentage of Free Float, as of February 2007*<br />
Institutional Investors<br />
Germany<br />
United Kingdom<br />
Rest of Europe<br />
North America<br />
Private investors and<br />
undisclosed institutional<br />
investors<br />
* Source: Thomson Financial<br />
30%<br />
12%<br />
15%<br />
3%<br />
40%
Analyst Expectations Coverage<br />
(in mn. euros)<br />
2007e<br />
2008e<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 31<br />
Revenue<br />
License<br />
Revenue<br />
EBIT<br />
Margin<br />
EPS<br />
in EUR<br />
Min 514.00 196.00 23.5 2.73<br />
Max 540.00 207.70 25.5 3.25<br />
Average 532.03 202.26 24.3 3.01<br />
∆ yoy + 10.15%<br />
Min 542.00 238.50 23.8 2.87<br />
Max 636.90 258.00 28.9 4.31<br />
Average 601.66 246.90 25.6 3.62<br />
∆ yoy +13.09%<br />
Source: <strong>Software</strong> <strong>AG</strong>, current sell side analysts as of March 2007,<br />
up to 24 international brokers,<br />
yoy calculations based on 2007e vs. 2006 and 2008e based on average 2007e<br />
24 Banks / Broker cover<br />
<strong>Software</strong> <strong>AG</strong>’s stock:<br />
Arete<br />
Berenberg Bank<br />
BNP Paribas<br />
Chevreux<br />
Citigroup<br />
DDL<br />
Deutsche Bank<br />
DrKW<br />
DZ Bank<br />
Helaba Trust<br />
HSBC<br />
HVB/Unicredit<br />
JP Morgan<br />
Kepler Equities<br />
LB BW<br />
Merck Finck<br />
Merrill Lynch<br />
Metzler<br />
MM Warburg<br />
Sal. Oppenheim<br />
Societe Generale<br />
UBS<br />
West LB<br />
MainFirst
Financial Calendar<br />
2007<br />
October 26 Q3 2007 financial figures (IFRS, unaudited)<br />
July 24 Q2/H1 2007 financial figures (IFRS, unaudited)<br />
June 21 German Corporate <strong>Conference</strong>, Deutsche Bank (Frankfurt am<br />
Main, Germany)<br />
June 12 <strong>Mid</strong> <strong>Cap</strong> <strong>Conference</strong>, Cheuvreux (London, UK)<br />
June 11/12 <strong>Mid</strong> <strong>Cap</strong> Forum, Sal. Oppenheim (New York, USA)<br />
June 5 TMT <strong>Conference</strong>, Merrill Lynch (London, UK)<br />
May 14 <strong>Small</strong> & <strong>Mid</strong> <strong>Cap</strong> <strong>Conference</strong>, UBS (Frankfurt am Main,<br />
Germany)<br />
May 11 <strong>Annual</strong> General Shareholders' Meeting (Frankfurt, Germany)<br />
April 24 Q1 2007 financial figures (IFRS, unaudited)<br />
For further details concerning Investor Relations Events please visit our homepage: www.softwareag.com/investor<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 32
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 33<br />
Products and Market Details
37 Years Heritage of Technology Leadership<br />
First<br />
Mainframe<br />
Database<br />
developed by<br />
Peter Schnell<br />
1969<br />
Company<br />
founded<br />
1979<br />
First<br />
Mainframe<br />
4GL<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 34<br />
First Platform<br />
Independent<br />
Language<br />
1992<br />
First Service<br />
Broker for<br />
Distributed<br />
Applications<br />
IPO —<br />
Frankfurt Stock<br />
Exchange<br />
Introduced<br />
First XML<br />
Server<br />
2001<br />
First Database to utilize<br />
IBM’s 64- bit Virtual<br />
Storage Architecture<br />
“Global Market Leader<br />
for XML Servers” (IDC)<br />
SOA<br />
Integration Packages:<br />
Legacy Integrator<br />
Service Integrator<br />
Information Integrator<br />
Launched:<br />
1971 1985 1999 2003 2005<br />
2004<br />
Launched Industry<br />
Integration<br />
Solutions:<br />
ISF<br />
iServices<br />
Application Composer<br />
Business Process<br />
Manager<br />
powered by<br />
2006<br />
Launch of
<strong>Software</strong> <strong>AG</strong> – Statement of Direction<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 35<br />
Continues as the best transactional database<br />
Continues as the most efficient development<br />
platform for business applications<br />
Achieve global market leadership<br />
in Legacy Modernization<br />
Achieve global market leadership in Service-Oriented<br />
Architecture (SOA) with an IT <strong>Software</strong> Alliance
Service-Oriented Development of Business Applications<br />
¬ Enterprise-wide<br />
interoperability<br />
¬ High productivity for a<br />
low TCO<br />
¬ Any data type, any data<br />
volume, any platform<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 36<br />
SOA and<br />
Web Services<br />
Event-Driven<br />
Distribution<br />
Systems<br />
Management<br />
Cross-Platform<br />
Support<br />
SQL<br />
<br />
Adabas<br />
Gateways<br />
Event<br />
Replicator<br />
for Adabas<br />
Adabas<br />
Manager<br />
Mainframe,<br />
Linux, Unix,<br />
Windows
Service-Oriented Development of Business Applications<br />
¬ One tool for any type of<br />
application<br />
¬ High productivity to meet<br />
business goals quickly<br />
¬ Agility to support and extend<br />
existing environments<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 37<br />
Rich Internet<br />
Applications<br />
Developer<br />
Productivity<br />
SOA and<br />
Web Services<br />
Cross-Platform<br />
Support<br />
Application<br />
Designer<br />
Natural for<br />
Eclipse<br />
Natural<br />
Business<br />
Services<br />
Mainframe,<br />
Linux, Unix,<br />
Windows
Legacy Market – User Situation<br />
Today 70% or more of an organization’s information is estimated to reside in legacy<br />
systems. This raises a number of challenges in supporting their future business goals,<br />
due to:<br />
¬ Lack of interoperability, which leads to inefficiencies, higher costs and poor<br />
responsiveness<br />
¬ Cumbersome and dated user-interfaces, which result in end-user inefficiency<br />
¬ Lack of real-time access to operational data, which negatively impacts business<br />
decisions<br />
¬ Resource intensive maintenance, which prevents focus on strategic business<br />
initiatives<br />
¬ Siloed and closed legacy systems, which limit growth potential of the business<br />
¬ Business rules are hardcoded<br />
¬ Complex “spaghetti” code, poor documentation, and diminishing skills, which<br />
prevent reuse of valuable data and applications putting business continuity at risk<br />
Legacy systems continue to provide tremendous value through their<br />
reliability and high-performance for running mission-critical data and<br />
applications<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 38
Legacy Integration and Modernization<br />
for SOA Enablement<br />
Legacy Modernization<br />
Extending, refactoring and integrating legacy applications<br />
with an SOA increases the return on IT assets.<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 39<br />
<br />
<br />
<br />
Extending<br />
Engineer<br />
Refactoring<br />
Communicator<br />
Integrating
Crossvision<br />
CentraSite TM<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 40<br />
Crossvision<br />
Application Composer<br />
Crossvision<br />
Business Process<br />
Manager<br />
Crossvision<br />
Information Integrator<br />
Crossvision<br />
Service Orchestrator<br />
Crossvision<br />
Legacy Integrator<br />
Manage and govern your SOA environment for maximum<br />
openness and transparency.<br />
Rapidly create new business applications from existing<br />
systems.<br />
Coordinate the flow of business processes across your<br />
organization.<br />
Combine data from different systems into a single userfriendly<br />
view.<br />
Create new business services from existing<br />
functionality.<br />
Integrate existing assets and create new functionality.
Leadership in the SOA Segment - Enterprise Service Bus<br />
and SOA Repository and Governance<br />
Application Integration and <strong>Mid</strong>dleware Market<br />
compound annual growth rate (C<strong>AG</strong>R) from 2005 to 2010<br />
World Market (C<strong>AG</strong>R)<br />
Asia / Pacific<br />
49.7%<br />
<strong>Mid</strong>dle East and Africa 43.6%<br />
Central and Eastern Europe 42.4%<br />
Latin America<br />
41.8%<br />
U.S.<br />
38.3%<br />
Canada<br />
37.6%<br />
Western Europe 37.1%<br />
Japan<br />
34.0%<br />
Market potential 585.5 Mio USD in 2010<br />
<strong>Software</strong> <strong>AG</strong>‘s Enterprise Service Bus (Crossvision<br />
Service Orchestrator) is currently ranked as #4<br />
based on market share*<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 41<br />
38.5%<br />
*Source: Gartner Dataquest (May 2006) –<br />
Application Integration and <strong>Mid</strong>dleware and Portal Market Share<br />
Strong<br />
Current<br />
offering<br />
Weak<br />
<strong>Software</strong> <strong>AG</strong> is No 1<br />
in product strategy<br />
Weak Strategy<br />
Strong<br />
Source: The Forrester Wave TM: Enterprise Service Bus, Q2 2006<br />
by Ken Vollmer and Mike Gilpin.
Target Market – Crossvision<br />
SOA <strong>Software</strong> Spending<br />
75% five-year compound annual growth rate<br />
(C<strong>AG</strong>R) from 2004 to 2009<br />
Reaching nearly $9 billion in 2009<br />
<strong>Software</strong> <strong>AG</strong> had 3% market share in 2004<br />
License revenue for Crossvision grew by<br />
76% in Q3/2006 compared to Q3/2005<br />
See IDC Report: Worldwide SOA-Driven <strong>Software</strong> 2005.2009 Forecast<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 42<br />
<strong>Software</strong> <strong>AG</strong> is No 1<br />
in SOA offering<br />
Source: The Forrester Wave TM: Integration-Centric<br />
Business Process Management Suites, Q4 2006<br />
by Ken Vollmer and Henry Peyret.
Growth Driver: Strategic Partners<br />
One Strategy + Three Focus Areas<br />
Global System Integrators<br />
2006: Focus on 10 global partners<br />
2007: Build up projects in countries<br />
2008: Expand local partners<br />
…<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 43<br />
Tier 1 Technology Partners<br />
Global relationships supporting<br />
expanded portfolio and<br />
customer base<br />
CentraSite Community<br />
Establish CentraSite as an<br />
industry standard and show<br />
SOA technology leadership
CentraSite TM Community<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 44<br />
Universities<br />
User<br />
Productivity<br />
Semantic<br />
Technologies<br />
Business<br />
Apps<br />
Business<br />
Rules<br />
Governance<br />
BPM<br />
EA<br />
ESB<br />
BI<br />
Registries/<br />
Repositories<br />
Legacy<br />
Modernization<br />
Infrastructure<br />
Identity<br />
Management<br />
Testing<br />
Security
Acquisitions 2005<br />
Sabratec, Israel<br />
January 2005<br />
Target Strategy Deal Structure<br />
Main product: Applinx<br />
Casabac, Germany<br />
July 2005<br />
Main product: Composite<br />
Application Integrator<br />
APS, Venezuela<br />
August 2005<br />
Distributor of <strong>Software</strong> <strong>AG</strong><br />
in Central America<br />
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 45<br />
Enhance legacy<br />
modernization portfolio<br />
(Non-invasive application<br />
integration)<br />
Enhance SOA product<br />
portfolio<br />
Enables rapid development<br />
of Composite and Rich<br />
Internet Applications (RIA)<br />
used in Natural and XMLi<br />
Direct access to customer<br />
base - higher revenue<br />
potential: selling new<br />
products & larger projects<br />
$7 million in cash<br />
plus earn-out<br />
Key R&D personnel retained<br />
€1.5 million in cash<br />
plus earn-out<br />
Key R&D personnel retained<br />
$4.6 million in cash<br />
plus earn-out<br />
Revenue 2004: $4.6 million
<strong>Software</strong> <strong>AG</strong> | 22 March 2007 | Page 46<br />
Please contact:<br />
Investor Relations<br />
Uhlandstraße 12, 64297 Darmstadt, Germany<br />
phone: +49 (0) 61 51 / 92- 1899<br />
fax: +49 (0) 61 51 / 92- 1933<br />
e-mail: investor.relations@softwareag.com