DJ PTA-News: Software AG: Software AG increases digital business product sales for the 7th consecutive quarter and meets forecast for fiscal year 22 – Strategic focus areas and outlook for 2023 published
Corporate announcement for the capital market
Darmstadt (pta/01/31/2023/19:59) – Results for the fourth quarter and the financial year 2022 announced as well as their strategic focus and the outlook for the financial year 2023 published.
Software AG Chief Executive Officer (CEO) Sanjay Brahmawar said:
“We were able to increase our product sales in the Digital Business for the seventh quarter in a row and closed the year 2022 with a strong result. We have thus met our sales and earnings forecasts for the 2022 financial year.
Today we announced clear priorities for 2023. We will focus even more on the cloud, driving application and data integration, and driving operational efficiencies to become a leaner enterprise. We are convinced that thanks to the resilience of our company and together with our new CFO Daniela, we will achieve the guidance for 2023 even in a difficult macroeconomic environment.”
Software AG Chief Financial Officer (CFO) Daniela Bünger said:
“With Helix, Software AG has laid a solid foundation for growth. Our task now is to continue to drive that growth and improve operational effectiveness by efficiently scaling the business. The plan for 2023 will structure our business more clearly and ensure that.” we will achieve our goals even in a difficult macroeconomic environment. We are convinced that we are setting realistic goals with the forecast for the 2023 financial year in the given context. I look forward to successful cooperation and implementation with the team.”
Key Results for 2022 – Transformation makes steady progress
[ Sofern nicht anders gekennzeichnet, erfolgen alle Angaben nach IFRS. Veränderungen werden währungsbereinigt und gerundet dargestellt. In den organischen Ergebnissen ist der Beitrag von StreamSets nicht berücksichtigt. Die Konzernergebnisse beinhalten StreamSets. ]
* Cloud business fuels strong Digital Business segment results: Organic bookings grew 15% in the fourth quarter and 12% for the full year, in line with guidance. * Transition to subscriptions underpins results in Adabas & Natural (A&N) segment: Subscriptions fueled fourth-quarter bookings growth of 144% and enabled full-year A&N bookings growth of 23%; the forecast was thus exceeded. * Cloud demand is picking up: Digital Business’ organic annual recurring revenue (ARR) grew 11%, with software-as-a-service (SaaS) bookings growing three times faster than subscriptions. Added to this was the continuous strong double-digit growth of StreamSets. * Robust Organic Product Revenue Growth: Organic product revenue improved 24% in the fourth quarter for full year organic product revenue growth of 7%, within guidance. * Continued robust organic results in line with expectations: Operating profit margin (EBITA, non-IFRS) was 23.1% for the fourth quarter and 21.2% for the full year, within the guidance range.
Priorities in 2023 – building on the Helix transformation program, the next phase of growth will be heralded
* Accelerated shift to cloud-first: Due to the high quality of the group’s cloud products, the demand for the cloud products increased more than expected, so that the organic SaaS bookings in the Digital Business segment increased by 30% in 2022. The Group will prioritize dedicated SaaS sales programs for growth products such as webMethods.io and StreamSets to capitalize on these market opportunities. * Focus on integration innovation: Cloud data integration and application integration markets are growing at 21% and will reach EUR 11 billion by 2026. The Group will direct resources to those areas where it offers leading products, is currently growing and has potential for further growth, and will accelerate innovation for its core products, webMethods.io and StreamSets. * Greater distribution specialization to increase effectiveness and efficiency: Beginning in North America, the Group will specialize its distribution to achieve greater impact with its growth products. This will improve the effectiveness of the go-to-market approach and lead to greater sales efficiency. * Exploiting A&N Opportunities: The Group will continue the ongoing transition to subscriptions that is paving the way for cloud rehosting and interaction with A&N customers and the Group’s broader digital business. *Optimization of operational strength: The efficiency and productivity of the group will be increased through a program that improves operational strength and will contribute to a margin improvement of around EUR 30 million to EUR 35 million in 2023 and deliver further benefits thereafter . Around 200 employees or 4% of the workforce (Full Time Equivalents, FTEs) will be affected.
Forecast for the year 2023 and forecast assumptions
As Software AG advances its business model transition to subscriptions, it announced today that it will use ARR as its leading forecasting metric, replacing product bookings. This applies to the two segments Digital Business and A&N. The other forecast parameters remain unchanged. Software AG will publish further details on the drivers of the ARR at its Capital Markets Day in June 2023.
The forecast for fiscal year 2023 is based on the continuous growth targets and the strategic focus for 2023 and takes into account the unpredictability of the overall economic environment.
The Group’s constant currency forecast ranges (excluding margin), including StreamSets, are as follows:
* Digital Business ARR growth between 10% and 15% * A&N ARR development between -2% and 2% * Consolidated product revenue growth between 6% and 10% * Operating profit margin (EBITA, non-IFRS) between 16% and 18%
Development of the business areas in the fourth quarter and for the full year 2022
Software AG’s organic bookings reached EUR 273.9 million in the fourth quarter. This corresponded to growth of 35% compared to the previous year (previous year EUR 195.1 million), for the year as a whole they rose to EUR 623.4 million or 15% (previous year EUR 517.7 million). ). Including StreamSets, group bookings amounted to EUR 315.0 million in the fourth quarter and EUR 700.1 million for the full year.
Organic bookings in the digital business increased by 15% year-on-year to EUR 197.6 million in the fourth quarter (previous year: EUR 164.8 million) and by 12% to EUR 478.9 million in the full year (previous year: EUR 406.0 million). Including StreamSets, group bookings in the digital business reached EUR 238.7 million in the fourth quarter and EUR 555.6 million for the year as a whole.
On an organic basis, Digital Business booked 93% of subscriptions and SaaS bookings in the fourth quarter and 91% for the full year.
In the A&N segment, the Group generated bookings of EUR 76.3 million in the fourth quarter (previous year: EUR 30.3 million) and EUR 144.5 million for the year as a whole (previous year: EUR 111.7 million). Compared to the previous year, this corresponded to an increase of 144% and 23% respectively.
Sales and earnings development in the fourth quarter and full year 2022
Software AG posted total organic revenue of EUR 292.0 million in the fourth quarter (prior year: EUR 234.6 million) and EUR 930.8 million for the full year (prior year: EUR 833.8 million). Including StreamSets, Software AG generated consolidated sales of EUR 303.8 million in the fourth quarter and EUR 958.2 million for the full year.
Organic product sales increased by 24% to EUR 251.4m in the fourth quarter (prior year: EUR 194.6m) and by 7% to EUR 773.4m for the full year (prior year: EUR 684.0m) . Including StreamSets IFRS revenue, Group product revenue reached EUR 261.0 million in the fourth quarter and EUR 795.6 million for the full year.
StreamSets IFRS revenue was €9.6 million in the fourth quarter and €22.1 million in the eight and a half months since the closing of the acquisition. The non-IFRS revenue contribution was calculated by adding the net negative non-operating effects, including the change in accounting principles to IFRS and the purchase price allocation in connection with the acquisition. Adjusted for these factors, the StreamSets non-IFRS revenue contribution for the full year was around EUR 27 million.
Organic product sales in the Digital Business increased by 7% to EUR 159.8 million in the fourth quarter. The Group has thus recorded an increase in product sales for the seventh consecutive quarter (previous year: EUR 143.3 million). For the year as a whole, organic digital business product sales grew by 7% to EUR 527.5 million (previous year: EUR 469.5 million). Including StreamSets, product sales in the Digital Business amounted to EUR 169.4 million in the fourth quarter and EUR 549.7 million for the full year.
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January 31, 2023 13:59 ET (18:59 GMT)