Publication of insider information in accordance with Article 17 of Regulation (EU) No 596/2014

Software AG adopts new strategic direction / Outlook 2019 / Medium term financial ambitions

The Management Board of Software AG (MDAX, ISIN DE000A2GS401 / SOW) adopted the following resolutions:

1. New strategic direction (Project Helix)

The strategic reorientation has the goal of accelerating revenue growth while both achieving higher recurring revenue and maintaining high profitability. As part of this strategy, the product portfolio will be focused on growth segments and Sales and Marketing activities in core markets will be increased. For this purpose, EUR20 to EUR30 million in new net investment will be made in the new business model in 2019. Furthermore, in 2020, while the business volume will continue to grow, the licensing model will be changed in such a way that revenue will no longer be recognized immediately, but spread over several years ("Subscription").

2. Outlook 2019

In view of the above investments, the outlook for 2019 is as follows:

Outlook for Fiscal Year 2019
	FY 2018 in EUR mn	FY 2019 Outlook as of January 31, 2019 as %
DBP revenue	464.7	-
DBP excl. DBP Cloud & IoT	434.4	+3 to +71
DBP Cloud & IoT	30.3	+75 to +1251
A&N revenue	218.3	-5 to 01
Operating margin (EBITA, non-IFRS)2	31.5%	28.0 to 30.0

¹ at constant currency

² adjusted for non-operating factors (see non-IFRS earnings definition in annual report 2017 from p. 46 onward)
 

3. Medium term financial ambitions

Whilst the product business will continue to grow, the change in the licensing model will, in 2020 (the first year of full application), have an effect on the reported operating EBITA margin (non-IFRS) compared to the previous year (2019) of no more than -2 percentage points.

From 2021 onwards, business growth should once again be reflected in sales and in a rising EBITA margin (non-IFRS) that is expected to reach more than 30% over the medium term. In order to be able to better assess the operational development of the company in 2020 and the following years, additional industry-standard metrics (Annual recurring revenue (ARR), bookings and operating cash flow) will be reported from 2019, in addition to the IFRS key figures.

These resolutions of the Management Board are subject to the approval of the Supervisory Board.

Darmstadt, 31.01.2019

The Management Board
Software AG, Uhlandstr. 12, 64297 Darmstadt

Contact:
Person making the notification:
Frederic Freichel
Manager Investor Relations

Email: [email protected]
Tel: +49 6151 92 1106