Proud of my team on a great Q3

This morning I did my first quarterly results call as CEO of Software AG. I’m really proud of the Software AG team for their focus on execution and delivering a strong quarter. A big thank you to my entire team.

Below, you can read my statement to the analysts from this morning.

--------------------

Hello everyone and welcome to Software AG’s Q3 2018 financial results call. I would like to thank you for taking the time to participate today.

For those of you who don’t recognize my voice, I am Sanjay Brahmawar, the new CEO of Software AG. We don’t know each other yet, but I’m excited to start this journey together and look forward to getting to know all of you and building a trustful relationship.

Before we get to the financial figures, let me say that it is an honour and a privilege to serve as the new CEO of Software AG.

Software AG will be 50 years old next year. Before I started, I met our founder Dr Schnell who is 80 years old and in good health. And he and I thought hard but could not think of any other software company that started in 1969 and still exists today. We are where we are because of our ability to reinvent ourselves, the immense passion of our people and the sustained support of our founder Dr Schnell’s Foundation. We have 50 years of heritage and expertise that we can build on.

As you probably have read, I am coming from IBM, having worked for 16 years in many roles. My last role was serving as General Manager for Watson IoT Global revenue. I was managing a broad range of software application, middleware, platform and AI capabilities to bring IoT solutions to our customers.

So why am I here and why am I so excited about Software AG?

1. We are in the market of Digital Transformations that is growing. Every company that needs to capitalise on the power of DATA needs to Digitalise and drive insights out of data. This requires a digital platform and core integration across applications, clouds and IoT devices. Software AG has exactly those capabilities.
2. Almost all our products are ranked as leaders by Gartner and Forrester. We are application and Cloud-neutral, so offer total flexibility and no lock-in to our clients.
3. We have more than 50% of the fortune 500 customers as our clients. And these are long-lasting relationships that we can further build on.
4. We have a very robust financial position with strong cashflow. That gives us the muscle-power to take bold steps if and when we want.
5. Finally, we have great talent. I have been very impressed with the quality of talent we have.

So I am here because I believe there is tremendous potential for further success.

Let me say a few words about my first 60 days. I decided the fastest way to learn about Software AG was to get out and go and meet as many clients and colleagues as possible. I spent one day in Darmstadt and then travelled twice around the world to meet with 2500 colleagues and 40 clients and partners.

I learnt from our clients that we are integral to their operation; our technology is reliable and works at scale. And our innovation is helping them modernise and embark on digital transformation.

I also learnt that they want to see us improve our visibility, they want more access to our technical talent and they want to co-innovate more with us on core integration and IoT.

All this input from employees, clients and partners forms the basis of the strategy refresh project we have kicked off. We call the project Helix as a symbol of our strength, our DNA on which we will build, growing towards our future success.

We will be ready with the results of this strategy early next year and I look forward to sharing more with you in February.

OK, let’s get to the part you are most interested in – how did the quarter go?

Let me just state that when I started, I shared the following three priorities for the first six months with my entire team:

1. Listen and learn
2. Deliver on Q3 and Q4 commitments
3. Define the go-forward strategy together with my team

So in spite of a CEO change, we have had a sharp focus on execution in Q3. I am pleased to inform you that the team has done an exceptional job to push hard and deliver a strong Q3.

• First, we knew that we had a slow start to our DBP license business in the first half of the year. So we put a sharp focus here to step up our performance on our core revenue engine. DBP license for Q3 has grown 15% year-on-year, while DBP total product revenue for Q3 is up 8% year-on-year. Most importantly, we have caught up on the gap in the first half and are now on track to deliver our full year commitment of 3-7% growth, thanks to a great push and excellent job by our team.
• Second, we wanted to accelerate our IoT and Cloud business. IoT and Cloud revenue grew by 144% year-on-year. The team pushed hard to boost the Q3 IoT license revenue and importantly, our ARR has grown by 111% year-on-year.
• Third, once again our team has delivered an amazing result on Adabas & Natural. A&N Q3 license revenue grew by 48%, while A&N product revenue was up by 11%. So year-to-date we are still ahead of last year’s revenue and feel very confident of achieving the upper end of our full-year commitment.
• Finally, we continue to demonstrate our ability for strong fiscal management. Q3 EBIT is €54million, a growth of 8% year-on-year.

In summary, we are confident of delivering our full year 2018 commitments.

Apart from the major customer successes we have seen in Q3, there are few other points around our progress that I would like to share with you.

1. We are serious about becoming leaders in the high-growth iPaaS market. Hence we recently acquired built.io, a San Francisco-based iPaaS company that extends our webMethods integration portfolio. We will leverage built.io’s use of modern node-js technology to open up new markets and developer communities to Software AG.
2. We are strengthening our partner ecosystem with a deeper relationship with AWS. Last month I met with Andy Jassy, CEO of AWS and we agreed to deploy a full selection of our products on the AWS Marketplace. This makes it super-simple for AWS customers to launch and deploy our products.
3. We have just signed a unique partnership with Dell Technologies to develop and launch a joint plug-and-play IoT Edge solution that makes IoT simpler for our customers. They can connect, power up and start their IoT projects immediately thanks to Cumulocity IoT Edge & Dell. We will share joint customer successes in future calls.
4. Our R&D team did an amazing job in packing our latest product release with a wealth of innovations. Released this week, it includes  widespread Kubernetes support, self-service analytics for real-time and time-series data, webMethods Cloud deployment and B2B integration in the Cloud. Our API management platform is rapidly becoming a recognised leader in the market. Watch out for more news on that in the coming weeks. And we received great feedback from clients and partners on these innovations.
5. In line with our and the Software AG Foundation’s commitment to give back to society we have recently piloted a new programme in India to encourage young women who have taken a break in their career to re-enter the workforce. The programme is called Software AGain and aims to create an attractive environment for mothers to reengage in technology in a way that fits their new family situation. In its first iteration, we are refreshing the skills of 13 young professionals through training and coaching and the second wave is already over-subscribed. This exceeded our expectations and is a wonderful success in a fiercely competitive labour market.

So we have a solid foundation on which to build and project Helix will define how we do that in the coming months. I am convinced that we will together be able to drive a positive transition for Software AG as we enter the year of our 50th anniversary.

Meanwhile I’m proud at the great progress and focus the team has shown in delivering a strong Q3. We will continue that relentless focus to stay on track in Q4 and deliver our full year commitments.

I look forward to your questions as well as having the opportunity to meet our shareholders over the coming days and months to share more of my vision for the company.

Thank you.