Q2 2010 Earnings Call

July 30, 2010 12:30 pm ET


Otmar Winzig - Senior VP Investor Relations and Compliance

Karl-Heinz Streibich – Chief Executive Officer

Arnd Zinnhardt – Chief Financial Officer

Analyst s

Rajiv Bal – Piper Jeffery

[Mark Voda] – [Main First]

[Koriofla] – [Stoigan AG]

[Jonathan Kroze – [West Elby]

[Guna Plaga] - Nomura

Knut Bola - UniCredit



Good morning ladies and gentlemen, welcome to the Q2 2010 results conference call of Software AG. Please note that for the duration of the presentational participants will be in listen only mode and a conference is being recorded.

After the presentation there will be an opportunity to ask questions. (Operator Instructions). At this time I would like to turn the conference over to Otmar Winzig Senior VP Investor Relations and Compliance. Please go ahead Mr. Winzig.

Otmar Winzig

Thank Jason, good morning ladies and gentlemen. Before we start please allow me some housekeeping remarks of how to access the conference to dial in number for today’s call has been published by email and on our website. In addition the conference call will broadcast also via webcast in listen only mode. Access to the webcast via our investor relations website. The webcast will display the PowerPoint presentation charts used in this call, the same charts are on our website for download and the full presentation has been emailed to all invited parties in PDF format this morning.

The call on the webcast will be recorded and available for replay later today. The agenda of today’s call is the following Karl-Heinz Streibich will give you a summary of the achievements in the first half year and an update on the execution of our strategy including our outlook for fiscal 2010.

Then the CFO Arnd Zinnhardt will provide details on the Q2 2010 figures and the financial performance of Software AG. In addition we will explain the base model for evaluation as we go along.

After the presentations you may ask questions as the operator already indicated. With respect to capital market regulations I have to make the following statement. The presentation contains forward looking statements safe and beliefs of Software AG. Such statements reflect current views of Software AG’s management with respect to future events and results and are subject to risk and uncertainties. Actual results may vary materially from those projected here due to factors include changes in general economic and business conditions, changes in currency exchange, the introduction of competing products, like of market acceptance of new products, services or technology in charge of business strategy. Software AG does not intend or assume any obligation to these forward-looking statements.

Having said this let us now start and I’ll have over to Karl-Heinz Streibich the CEO of Software AG.

Karl-Heinz Streibich

Thank you very much Otmar, ladies and gentlemen good morning, I would like to give you the over view of our financial results for the second quarter of 2010 and an evaluation of the result from a strategic perspective.

I will also highlight several aspects of the company’s performance through the slides and finally illustrate the integration with idea share and a 2010 outlook.

My colleague Arnd Zinnhardt will give you more details concerning the numbers and all the financial supporting figures.

First a few key points, the operating policy EBIT improved by 33% to €58.9 million. And second [indiscernible] revenue was up by a stunning 31% in the quarter, and earnings per share increased by 29% to €1.32.

This clearly demonstrates that Software AG has returned another very strong order despite an ongoing economic crisis and despite tough competition in the software markets.

I would like to evaluate our results, first the second quarter of 2010 fully confirmed the growth strategy of Software AG.

[Indiscernible] business our business division with innovative middle way software for incorporating business applications and business process, continues to grow dynamically. After 8% growth of the business line in Q4 2009 and 9% in the first quarter this year WebMethods public future growth in Q2 18% stated.

This due to the increase maturity of our organization and the market full process optimization. We see an increase in both the number of large projects and in the average team size. The industry experts at Gardner Group expect double digit growth in the relevant markets in the coming years.

And second for the first time in the history of Software AG new products generated at Software AG more revenue than the traditional ones, this is a milestone in the company’s history.

The WebMethod business division is a blazing ETS the company’s growth driver if particularly planned. We are now witnessing the transitions of ETF’s our main business of many years into a so called cash [cow], but ETS will nevertheless follow foresee the future return robust sales figures in the high contribution to earnings and cash flow. And we achieved revenue stability in ETF’s through continued high maintenance premium rates and license revenue through additional [indiscernible] and natural products.

Earnings stability remained secure by sophisticated cost management and the symmetry possibilities provided by a growing company. This allows the growth of the mathematics business division to more than offset the gradually declining growth of ETS. [Indiscernible] enabling Software AG to continue the growth path of the last 7 years. And the integration of IDH share AG strengthened our growth trend and mid terms earnings momentum.

The product lines uniquely complement each other. The ARIS and the WebMethods products will be available by the end of this year as an integrated offering, for example the automatic transfer from process design to operational use of that process design in SAP and PPN and backwards to update the design description we call that model execute is a ground breaking innovation from which we can expect a significant sales impulse in the coming years.

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