software ag investor roadshow usa july 2003. 2investor roadshow usa july 2003 software ag profile...
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Software AGInvestor Roadshow USA
July 2003
Investor Roadshow USA July 2003 2
Software AG Profile
Germany’s second largest software vendor
In the high-end, mission-critical IT business since 1969
Worldwide customer base of several thousand blue chip
companies and public sector organizations
Leader in XML system technology (DBMS and
integration)
System integrator for own products and solutions
Listed at Frankfurt stock exchange (TecDAX)
Market Cap 325 mio. € / 375 mio. $ - Free Float: 68.4%
Investor Roadshow USA July 2003 3
3
1985
Established First Platform
Independent Language
1983
TAPS (Trade Analysis & Process System) World’s Largest Clearing House System
1998
Introduced First XML Server
1997
First company to port DCOM to Mainframe
2000
First Mobile Fleet Mgmt System
2001
SCP Award Received 5 years in a row
2002
Over 5000 Customers Worldwide
2001/2002
Named Global Market Leader for XML Servers, IDC Profitable
2001
First Database to Utilize IBM’s New 64 bit Virtual Storage Architecture for Mainframe
1979
First Mainframe 4GL
1969
Software AG Foundedin Darmstadt
1991
Introduced First Service Broker for Distributed Applications
1971
First MainframeDatabase
1973
Software AG
AmericasFormed
Our History
Investor Roadshow USA July 2003 4
Global Business
Four Business Regions (share of revenue 2002):
Americas (35%)
Southern/ Western Europe (26%)
Central/ Eastern Europe (24%)
Asia/Northern Europe (15%)
Investor Roadshow USA July 2003 5
Source of Revenue / Business Lines
Project Services(Consulting and Implementation)
Licensing of Software ProductsMaintenance (24x7 world wide)
Product Business
0
20
40
60
80
100
120
140
160
180
1999 2000 2001* 2002 2003
(in mio. euros)
* first consolidation of US acquisition
Investor Roadshow USA July 2003 6
1999 2000 2001* 2002
Results
(in mio. euros)
* first consolidation of US acquisition
-40
-20
0
20
40
60
80
100
6669
91
38
67
39
70
-19
83
62 62
110
54
3234
41
366 417 589 475
Operating result Net profit Op. cash flowOp. EBITARevenue
Strategy
Investor Roadshow USA July 2003 8
Positioning of Software AG
Focus on product business
Licensing of software products
Excellent maintenance services
Global presence
Technology leader in XML
Expansion of the product portfolio to include
standardized solutions
System integrator for own products and solutions
Investor Roadshow USA July 2003 9
XML Server
- native XML server
- Storage, management, publishing and exchange of XML documents
- Extremely fast and reliable database
- Available on all major platforms
- For large and mission-critical applications
- Integration server
- Leveraging legacy systems for use in new (e-)business solutions
- Development platform
- For large-scale (e-)business applications
Core Products
Investor Roadshow USA July 2003 10
Number 2 worldwide market share for mainframe DBMS
Customers are predominantly blue chip companies and
large public authorities
Adabas and Natural currently account for about ¾ of
product revenue
Adabas and Natural being continuously enhanced:
Support for new platforms and technologies (Linux, 64 bit, XML,
SQL) protects customers’ software investment
1/3 of R&D resources are allocated for Adabas and Natural
(20 mio. euros in 2002)
Adabas and Natural remain the main sources of revenue
Investor Roadshow USA July 2003 11
Tamino XML Server sold more than 500 times
Great success with XML technology in projects
Daimler Chrysler – content management system (xDWS)
Local government in UK – e-government portal (IESD)
Vodafone – document management
North American Logistics (Van Lines) – Mobile field service application
California State Board of Equalization – e-filing
EntireX serves as (XML) integration server
Technologically and economically very attractive customer
solutions will be converted into standardized solutions
Strategy Realignment
Investor Roadshow USA July 2003 12
Software AG PortfolioEvolving from Technology to Solutions
Products Capabilities Solutions
• Tamino
• Communicator
• Mediator
• Adabas/Natural
• Partners
• Content
Management
• Digital Library
• Mobile
• Data Exchange
• Web Enablement
• Data Integration
• Self-Service Portals
• Content Suite
• Mobile Suite
• Partner Solutions
• Regional Solutions
• Individual Customer
Solutions
Committed to delivering value for our customers
Investor Roadshow USA July 2003 13
Current solution-business situation
Expansion of Portfolio with Solutions
Future solution business
Business Lines
Develop a custom application
Core products (Tamino, EntireX,Adabas/Natural)
Delivery to customer
Project services/system integration
Product business
(Licensing and Maintenance)
Standardized solution platform
Modify a solution to meet customer requirements
Core products (Tamino, EntireX,Adabas/Natural)
Marketing and Sales
Investor Roadshow USA July 2003 15
The New Software AG Sales Approach
Customer First is: Understanding our customers’
business and finding out how we can provide solutions that meet their needs
A fundamental change, not only in our culture, but in the entire software industry
Equally applicable to our installed base of customers or new prospects
The way we will do business
Customer First Strategy
Move from Product and “Event” go to market strategy to a proactive consultative sales process focused on understanding client business issues and positioning Software AG solutions/capabilities to meet those needs.
Investor Roadshow USA July 2003 16
Focus on Industries
Financial Services
Manufacturing
Pharma
Trade and Logistics
Media
Public Administration
Regions will focus on their most important segments
Investor Roadshow USA July 2003 17
• American Samoa• Alaska• Arizona• California• Colorado• Delaware• Florida• Guam• Idaho• Illinois• Louisiana• Los Angeles, CA• Massachusetts• Minnesota• Mississippi
• New Jersey
• New York City, NY
• North Dakota
• Pennsylvania
• Philadelphia, PA
• Puerto Rico
• Rhode Island
• South Carolina
• South Dakota
• Texas
• Washington
• Utah
• Vermont
• Virginia
• Washington, D.C.
• West Virginia
• Wyoming
BOE: 2nd Largest Tax System
SPARRS: Statewide HR
System
Digital Drivers License
PennDOT: CRASH Accident System
CRIS: Rehabilitation
System
DMV :Department of Motor Vehicles
Software AG Experiencewith States and Cities
Investor Roadshow USA July 2003 18
Creating a Technology Vision to Leverage Existing IT Investments
IncreaseProductivity &
Profitability
Deliver Solutions to New Business
Challenges
Open & Extend Existing
Applications
Migrate or Outsource
Improve Performance
Investor Roadshow USA July 2003 19
Quick Wins
Technology Vision Strategy
How We Build the Vision
Val
ue
t o C
us t
om
er
Software AG Technology Vision
Open Systems XML Access Web Services Desktop Access Data Exchange Web Enablement Data Integration Self-Service
Portals Digital Library Application
Development
Add New Solutions
Client Communication Management
Insurance Coverage
Reporting
Pension Statement
Management
XML Enablement
Content & Document
Management
Case Management
Optimize 24x7 AvailabilityAdministrationPerformance SecurityApplication MaintenanceApplication Re-Engineering
Partner Offerings
Investor Roadshow USA July 2003 20
North American Van Lines
North American Logistics is focused on high touch, high service levels and high value segment Major clients include Hewlett Packard, Compaq and Dell Services include transportation, distribution, manufacturing support and business controls Business growing at 10-20% per year, mostly through new, additional services
Business problems/challengesOrder receiving and logistics trackingOrder to invoice time cycleLogistics centers turnaround
Systems support for new services (ie. installation)
Investor Roadshow USA July 2003 21
nAL Mobile project (Phase 2)
Project size: $710K (License $280K, PS $430K)
Description:
Mobile field service application integrated with SAG and non-SAG backend systems
Repeatable, YesPartnering with Extended Systems, Inc. for mobile solution called One BridgeOur Extended System partner brought valuable expertise in mobile and was key to securing this phase of nAL’s businessIntegrated the One Bridge Toolset with EntireX and Tamino
Cellular
EntireX
ViaPhoneTamino
Bill of Lading
Asset Mgmt
Warehouse Mgmt
Product Tracking
LEGACY SYSTEMS
Investor Roadshow USA July 2003 22
“Diogenes” / xDWS Project size
Licenses: 285 K€ PS: 1.3 mio. €
ProblemReduce the effort and expense to maintain and adapt automation and test systems in the areas of development, production and service.
Solution Seamless development of automotive electronic control units with function
prototyping, production code generation and hardware-in-the-loop test based on common XML based DTD’s (xDWS / Tamino).
BenefitsTight integration of all supply-chain-members. Cost-reduction. Better Quality. FASTER development!
Tamino in Projects:DaimlerChrysler
Investor Roadshow USA July 2003 23
Tamino in Projects:Vodafone Spain
Project size : 2.2 mio. €
Licenses: 1.4 mio. € PS: 740 K€
Description: Electronic Bills Presentation Solution Phase: A system that enables its clients and its internal
users to see their invoices and the billing information through Internet, using XML technology (Tamino XML Server).
Archiving System Solution Phase: Prepare a corporate platform to archive different types of documents coming from other applications (SAP, Lotus Notes, MS Exchange,…) using Ixos products.
1st Quarter 2003Financial Report
Investor Roadshow USA July 2003 25
Revenue Q1 2002/2003
30.6
40.0 -24%
(-21%)
47.4
21.9
0.3
0.3
51.5
24.6
-8%
(+3%)
-11%
(-2%)
116.4 100.2
Q1 2002 Q1 2003
-14%(-6%)
(...) in constant currencies
(in mio. euros)
Other
Project Services(Consulting and Implementation)
Maintenance(24x7 world wide)
Licensing of Software Products
Product Business
Investor Roadshow USA July 2003 26
Licensing Revenue by Product Group Q1 2002/2003
Q1 2002 Q1 2003
Solutions
Tamino
EntireX
Enterprise Transaction
Other
11%
4%
60%
15%
10%
56%
18%
8%
8%
24.6 21.9
10%
(in mio. euros)
Investor Roadshow USA July 2003 27
Revenue by Region Q1 2002/2003
33.139.5
Americas Southern / Western Europe
Northern EuropeAsia-SA
Central / Eastern Europe
Actual Q1 2002
Actual Q1 2003
7.8
24.4
7.2
0.1
Project ServicesMaintenance Licensing Other
4.1
21.3
7.4
0.3
Actual Q1 2002
Actual Q1 2003
Actual Q1 2002
Actual Q1 2003
Actual Q1 2002
Actual Q1 2003
28.029.3 16.917.5 23.030.4
18.6
6.8
3.8
0.1
16.8
6.7
4.5
3.5
9.7
4.3
1.8
9.4
5.6
0.1
10.4
10.6
9.3
0.1
8.3
10.2
4.4
0.1
0.0
0.0
(in mio. euros)
Investor Roadshow USA July 2003 28
Operating EBITA by Region Q1 2002/2003
Q1 2002 Q1 2003
7.5
6.9
+9%
2.9 2.9 3.4
1.2
2.2
4.0
+0% +82% -65%
Americas Southern / Western Europe
Northern EuropeAsia-SA
Central / Eastern Europe
(in mio. euros)
Investor Roadshow USA July 2003 29
R&D by Product Group
Q1 2002 Q1 2003
30%
35%
25%
10%
36%
20%
16%
4%
18.0 15.2
24%
0%
Solutions
Tamino
EntireX
Enterprise Transaction
Other
(in mio. euros)
Investor Roadshow USA July 2003 30
Result Q1 2002/2003
2003 2002 Operating EBI TDA 9.0 5.6
Depreciation -2.2 -2.7
Operating EBI TA 6.8 2.9
Goodwill Amortization -5.5 -5.5
Financial income +1.0 +0.6
Operating result 2.3 -2.0
I ncome from investments 0.0 +9.3
Restructuring expenses -23.8 -11.3
Profit before tax -21.5 -4.0
Taxes +11.8 +1.6
Net income -9.7 -2.4
Earnings per share (in euro) -0.36 -0.09
(in mio. euros)
Investor Roadshow USA July 2003 31
Assets March 31, 2003
Dec. 31, 2002
Liabilities March 31, 2003
Dec. 31 2002
Fixed Assets
215.7
221.1
Shareholders’ equity
216.9
214.5
I nventories 5.7 4.6 Provisions 124.9 108.7
Trade receivables and other assets
125.2 132.6 Liabilities to Banks 0.0 0.0
Cash and cash equivalents
80.9
75.4
Other liabilities 29.9 35.9
Prepaid expenses
40.5
7.1
Deferred income
96.3
81.7
Total
468.0
440.8
Total
468.0
440.8
Balance Sheet(in mio. euros)
Investor Roadshow USA July 2003 32
Cash flow Q1 2002/2003
Q1 2003
Q1 2002
Net cash used in / provided by operating activities
11.5 12.1
Net cash used in / provided by investing activities
-2.0 5.6
Net cash used in / provided by financing activities
-2.9 -27.0
Change in cash funds from exchange rate movements, changes in group structure for cash funds
-1.1 0.1
Net change in cash and cash equivalents
5.5 -9.2
Cash and cash equivalents as of December 31 75.4
50.3
Cash and cash equivalents as of March 31
80.9
41.1
Operating cash flow per share
0.42
0.44
(in mio. euros)
Investor Roadshow USA July 2003 33
Our medium-term goal is a Profit Margin of 15%
(operating result = PbT excluding one-time effects)
Savings potential of 55 to 60 million euros annually
Increase in profitability
Alignment of the organization in the regions
Focusing R&D on the future portfolio
Reduction of overhead
Headcount reduction ca. FTE 300
Approx. 1/3 of the savings will be reinvested in the
development of new solutions
Cost cuts in 2003 cover the restructuring expenses
Rightsizing of the Company
Investor Roadshow USA July 2003 34
Full year product revenue same level as 2002
(at constant currency)
Maintenance ensuring about 45% of total revenue
Project services continue to show weakness
Positive operating result (about the amount of 2002)
Positive operating cash flow
Positive net income
Outlook 2003
Software AG Stock information(as of June 30, 2003)
Investor Roadshow USA July 2003 36
Shareholder Structureas of June 30, 2003 (Number of Shares: 27,3 mio.)
Software-AG-Foundation
31.6%
Private Investors
11.5%
InstitutionalInvestors
56.9%
Germany36.2%
UK14.9%
Rest of Europe35.7%
USA13.1%
Shareholder Structure Free Float by Region
Market Cap: 325 mio. euros Free Float: 68.4%
Major Funds:Classic Fund Aktiengesellschaft, LiechtensteinCapital Group Companies, Inc., USAFidelity International Ltd., USA
Rest of World: 0.1%
Investor Roadshow USA July 2003 37
24.03.03 Entry in TecDAX
Software AG
MDAX
Nemax/TecDAX
Share Price Developmentas of June 30, 2002 – June 30, 2003
SAG share price:30.06.02: 14.30 €30.06.03: 11.90 €
Investor Roadshow USA July 2003 38
Top Ten TecDAX as of June 30, 2003
Stock Turnover (in Euro)
I ndex Weight (in % )
EPCOS AG
2,491,266,923 7.81
T-ONLINE INTERN.
2,200,613,731 10.93
QIAGEN
1,022,178,127
9.96
SINGULUS
951,385,894 7.92
MOBILCOM AG
690,050,909 2.00
AIXTRON AG
577,685,595 3.14
BB BIOTECH
370,149,580 9.69
UTD.INTERNET AG
239,853,722 5.15
Software AG
235,174,363 3.15
NORDEX 175,905,977
0.48
(in euros)
Investor Roadshow USA July 2003 39
Key Figures per Share(in euros)
2002 2001 2000 1999 Earnings
1.23 1.44 2.55 1.47
Operating cash flow
1.49 3.05 -0.71 2.70
Dividend 0.00 0.43 0.38 0.28
Price High
44.10 87.00 167.00 63.55
Price Low
8.41 35.90 57.00 22.50
Price / earnings ratio at fiscal year-end
7 30 32 41