Software AG: Software AG provides third quarter update demonstrating strong bookings growth

Darmstadt (pta007/21.10.2020/07:06 UTC+2) Software AG provides third quarter update demonstrating strong bookings growth and continued transformation progress

* Digital Business growth sustained: business line bookings growth anticipated in range of 14 to 17 percent
* Cloud and IoT accelerates: Third quarter bookings growth anticipated in range of approx. 60 percent
* Subscription shift progressing further: between 75 to 80 percent of third quarter Digital Business bookings were from subscription & Software as a Service (Q3 2019: 58 percent)
* Annual Recurring Revenue growth for total product business approx. 10 percent
* Investment in transformation and subscription impact on revenue brings third quarter non-IFRS EBITA margin to between 16 and 17 percent
* October malware attack now contained, customer operations and cloud services unaffected, with investigations ongoing
* Strong start to our fourth quarter execution with approx. Eur30 million bookings closed, including a strategic multi-year deal signed with Walgreens Boots Alliance
* Group remains confident in its ability to deliver to full year 2020 guidance.

[Unless otherwise stated, all figures are IFRS and unaudited. Increases at constant currency and rounded].

Darmstadt, Germany, October 21, 2020 - Software AG (Frankfurt MDAX: SOW) today announces a preliminary view of its third quarter 2020 financial figures and updates on the recent malware attack on its systems. Therefore, results presented in this announcement represent a first consolidation based on the currently available data, with full results to follow in due course.

During the third quarter, Software AG continued to deliver in line with its transformation plan. The Group's Digital Business (Digital Business Platform, DBP, incl. Cloud & IoT) performed well, with bookings growth anticipated between 14 and 17 percent. Demand for Software AG's DBP Cloud & IoT business line accelerated, with bookings growth anticipated to have been between 57 and 64 percent. As expected, the Group's Adabas & Natural (A&N) business line saw the impact of a large deal pulled forward into the second quarter, showing a decline of between 27 and 31 percent against a challenging comparative period. Reported revenue continued to reflect the successful shift to Software as a Service (SaaS) and subscription, where a greater proportion of revenue is recognized in future periods rather than up-front. Software AG also continues to balance investment in growth with prudent cost control, delivering third quarter non-IFRS EBITA of between Eur28.4 million and Eur31.9 million. While the malware attack on the Group's systems which occurred on October 3, 2020 is now contained, the Group continues work to investigate the attack and provide support to any employees, customers or other stakeholders who may have been affected.

"The update we are providing today shows that we remain resilient and, despite the continuing COVID-19 pandemic, our transformation is gathering momentum and delivering the change we have been striving for. Our products are mission-critical to our customers, our go-to-market is sharper, our execution capability is strengthened, and we continue to win against the competition. In the last few weeks, we've also seen our cultural transformation come to the fore in how our team has responded to a malware attack. I'm proud of the way our people have pulled together to support each-other and continued working night-and-day to support our customers," said Sanjay Brahmawar, CEO of Software AG.

"During third quarter we continued to invest in growth and saw another step-up in our planned shift to subscription. While this is now visible in the technical impact we anticipated on our reported revenue, bookings growth becomes the more meaningful measure of our progress. The excellent bookings growth we expect to have delivered in the third quarter is the clearest evidence yet that our customers are responding to our offerings and I am pleased that we've been able to start the fourth quarter with good momentum," said Dr. Matthias Heiden, CFO of Software AG.

Third quarter 2020 financial performance

DBP (excl. Cloud & IoT) continued its recent growth, anticipated to have delivered bookings growth of between 3 and 5 percent. This represents the continuous shift to subscription which led to a greater technical impact on reported revenue than was present in the second quarter, with the total of between Eur90.0 million and Eur91.5 million (2019: Eur108.7 million) representing a stated decline of between 12 and 14 percent. DBP Cloud & IoT continued to accelerate during the quarter, anticipated to have delivered bookings growth of between 57 and 64 percent flowing through to revenue growth of between 36 percent and 48 percent or between Eur11.5 million and Eur12.5 million (2019: Eur8.6 million). In total, Digital Business is anticipated to have delivered very strong bookings growth of between 14 and 17 percent, with stated revenue between 8 to 10 percent lower year-on-year at between Eur101.5 million and Eur104.0 million (2019: Eur117.4 million), again reflecting the technical impact of the Group's accelerating shift to subscription and SaaS. As expected, A&N is anticipated to have delivered bookings between 27 and 31 percent lower than the third quarter of 2019, with revenue of between Eur46 million and Eur47 million (2019: Eur62.0 million). The Company's EBIT is expected in the range of between Eur20.4 million and Eur23.9 million in the third quarter, and operating EBITA (non-IFRS) is expected in the range of between Eur28.4 million and Eur31.9 million. As a result, the Group's operating profit margin (non-IFRS) is anticipated to be between 16 and 17 percent.

The Group expects to be able to publish full third quarter 2020 financial results within a month of today's preliminary publication.

Cyber Incident Update

Software AG continues to respond to the malware attack on its systems which began on October 3, 2020. While the attack itself is now contained, the Group continues to investigate and do everything possible to support those who may have been affected. Immediately on becoming aware of the attack, the Group acted quickly and decisively to protect its systems, people and customers, working with experts to conduct a best-practice response. As a result of the attack, some of the Group's data has since been made public. Despite the severe disruption, none of the Group's services to customers, including its cloud services, were interrupted, and the Group continued to conduct business in all material respects.

2020 Outlook

The preliminary figures provided today indicate that Software AG performed strongly in the third quarter and continues to demonstrate resilience in the face of the ongoing COVID-19 pandemic. The pandemic and its resultant economic effects do remain dynamic, and the Group is watching this closely across all of the geographies in which it operates. While the Group will gain further granularity on its performance as its internal systems become fully available, Software AG's market positioning and increasing execution ability underpins its confidence in its ability to perform in-line with the stated full-year guidance ranges for 2020.

The stated guidance ranges for 2020 remain:

* DBP (excl. Cloud & IoT) product bookings growth of +0 to +10 percent
* DBP Cloud & IoT product bookings growth of +20 to +40 percent
* A&N product bookings growth of -3 to +3 percent
* Non-IFRS EBITA operating margin of between 20 and 22 percent

Over the medium-term, the Group continues to believe that market dynamics, including a broad trend towards digitization, remain in its favor and should intensify in the coming years. The Group therefore reconfirms its 2023 ambitions, including its ambition to reach 1 billion euro of revenue and expand operating margin to a 25 to 30 percent range.

Key Figures: Q3 / YTD 2020
[table]
Software AG Group#Q3 2020 # #YTD (9 months) 2020
# range in # Eur million#+/- PY %#(range acc1)#range in#Eur million#+/- PY %#(range acc1)
########
########
GROUP BOOKINGS# # # # # # # # #
DBP (excl. Cloud & IoT)#57.5#58.5#3%#5%#148.9#149.9#11%#12%#
DBP Cloud & IoT #22.5#23.5#57%#64%#70.8#71.8#53%#55%#
Digital Business line2 #80#82#14%#17%#219.7#221.7#22%#23%#
Adabas & Natural business line#18.5#19.5#-31%#-27%#78.7#79.7#12%#13%#
TOTAL BOOKINGS#98.5#101.5#1%#4%#298.5#301.5#19%#20%#
# # # # # # # # #
GROUP REVENUE# # # # # # # # #
DBP (excl. Cloud & IoT)#90#91.5#-14%#-12%#274.3#275.8#-6%#-6%#
DBP Cloud & IoT#11.5#12.5#36%#48%#37.3#38.3#21%#24%#
Digital Business line2#101.5#104#-10%#-8%#311.6#314.1#-4%#-3%#
Adabas & Natural business line#46#47#-21%#-19%#155.7#156.7#-5%#-5%#
TOTAL PRODUCT REVENUE#147.5#151#-14%#-12%#467.4#470.9#-4.3%#-3.5%#
Service & other3#33#34#-24%#-22%#124.8#125.8#-10%#-9%#
TOTAL REVENUE3#180.5#185#-16%#-14%#592.2#596.7#-5.5%#-4.7%#
# # ### # # ##
EBIT#20.4#23.9###81.1#84.6# ##
# # ### # # ##
EBITA NON-IFRS#28.4#31.9###109.5#113# ##
in % of TOTAL REVENUE#16%#17%###18%#19%# ##
# ## # # # # # # #
# # #
1 acc = at constant currency###########
2 Digital Business Platform, incl. Cloud & IoT##########
3 Net of impact from sale of Spanish Professional Services Business as of July 1, 2020###
[/table]

Conference Call

A conference call for financial analysts and media representatives will take place on Wednesday, October 21, 2020 at 9:30 a.m. CEST (8:30 a.m. BST). Please pre-register to receive dial-in details at https://investors.softwareag.com/en/events/financial-calendar.

About Software AG
We reimagine integration, spark business transformation and enable fast innovation on the Internet of Things so you can pioneer differentiating business models. We give you the freedom to connect and integrate any technology-from app to edge. We help you free data from silos so it's shareable, usable and powerful-enabling you to make the best decisions and unlock entirely new possibilities for growth.

Learn more about Software AG at www.softwareag.com

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Contact:

Otmar F. Winzig
Senior Vice President, Head of Investor Relations
frederic.freichel@softwareag.com

Dr. Astrid Kasper
Senior Vice President, Corporate Communications
astrid.kasper@softwareag.com

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Emitter:	Software AG Uhlandstraße 12 64297 Darmstadt Germany
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