KEY PERFORMANCE INDICATORS
Overview Q1
Q1/2015
Q1/2014
Change
EUR (´000)
EUR (´000)
in %
Total sales revenue
6,248 8,700 -28%EBIT
-1,686 188 -997%EBT
-1,718 191 -999%Earnings after Tax
-1,866 212 -980%EPS (basic)
-0.16 0.02 -800%Equity
5,524 16,337 -66%Cash and cash equivalents
6,996 14,067 -50%E ARNI NG S PE R FOR M AN CE , CA SH FL O WS, AND F I N AN CIAL PO SITI ON
Revenue and earnings
In the period from January through March 2015, update software AG achieved sales revenues of EUR 6,248 thousand, which is around 28% less than in the previous year's reference period.
At EUR 4,153 thousand in total, recurring revenues (SaaS and Maintenance) accounted for 66% (previous year: 50%) of the company's sales revenues. SaaS revenues were kept up to the same level as in the previous year. Maintenance revenues decreased slightly, by 6% to EUR 3,174 thousand, because of maintenance contract terminations.
Non-recurring revenues (licenses and services) posted a significant drop by 52% to EUR 2,095 thousand, resulting from the Company's change in strategy that was resolved last year.
The Company's EBIT for the reporting period were EUR -1,686 thousand (previous year: EUR +188 thousand). The decline in revenues presented above could not yet be offset in the first quarter through corresponding cost savings. The decrease in cost of sales by EUR 409 thousand (around 13%) resulted from staff cuts in the Professional Services area. Operating expenses however decreased by around 3% only, to EUR 5,095 thousand, which can be explained by unexpectedly high one-time expenses in connection with the unplanned departure of employees.
Cash flows
Cash flow from operating activities was EUR 2,706 thousand as of the reporting date, significantly down by EUR 2,994 thousand year-on-year. Net cash flow from investing activities was EUR -34 thousand and results mainly from replacement purchases.
The cash flow in the first quarter is substantially influenced by the billings and subsequent payments of the annual billings of maintenance services.
Q1/ 2015 Q1/ 2014 EUR (´000) EUR (´000) SaaS - revenues 979 983 Maintenance revenues 3,174 3,373 Recurring revenues 4,153 4,356 License revenues 479 1,406 Service revenues 1,616 2,938 Non-recurring revenues 2,095 4,344
Financial position
Non-current assets at EUR 7,059 thousand remained virtually unchanged as compared to the balance sheet date.
Current assets increased by EUR 4,861 thousand (28%) to EUR 17,288 thousand in the reporting period. Both the increase in the cash balance by 38% to EUR 6,996 compared to December 31, 2014 and the increase in trade receivables from EUR 6,226 thousand to EUR 8,025 thousand resulted from billings and payments of annual maintenance services at the beginning of the fiscal year. The increase of 52% in other current assets to EUR 739 thousand is essentially due to prepaid expenses.
Due to the quarterly increase in total assets, the update group's equity ratio dropped to 23% as of 31 March 2015 (equity ratio on 31 December 2014: 37%). The provision for non-current personnel obligations was reduced to EUR 27 thousand as of the reporting date due to the termination of employments.
As expected, current liabilities increased significantly, from EUR 11,971 thousand on 31 December 2014 to EUR 18,796 thousand on the reporting date. This increase is due almost exclusively to the deferral of maintenance services that were billed in the first quarter for the entire fiscal year.
O UT LO OK
In 2015 the Company's realignment and several unplanned costs weighed down the Q1 results. However, the expectation for the full fiscal year 2015 is a positive development. Through a leaner cost structure and the new business focus, Management anticipates lower sales revenues than in 2014 and positive effects on the Company's earnings power. The Management Board of update software AG resolved in its meeting on March 3, 2015 to initiate the process of a delisting of the Company's shares. The aim is to carry out a restructuring measure under corporate law to change the Company's legal form in the course of the Company's annual shareholders' meeting on June 10, 2015. The Company's change of legal form to a limited liability company under Austrian law will also result in the expiry of its stock exchange listing.
O PPORT UNITI E S
AND
RI SK
R E PO RT
With respect to opportunities and risks please refer primarily to the Risk Report in the Group Management Report for the 2014 fiscal year.
S E GM ENT RE PO RTI NG
Q1 2015 Q1 2014EUR (´000) EUR (´000) Sales revenues Holding 0 0 DACH 5,067 7,157 ROW 1,181 1,543 6,248 8,700
Total sales revenues
Intersegment sales revenues
Holding 2,637 3,833
DACH 550 616
ROW 8 41
Total
3,195 4,490
Intersegment sales revenues EBIT
Holding -1,422 49
DACH 61 540
ROW -325 -401
-1,686 188
Total operating income (EBIT)
Segment Reporting is based on the respective location of assets. The update software companies are grouped together in the following segments:
HOLDING: headquarter of the group, responsible for strategic activities such as planning, research & development, marketing, corporate finance, human resources and investor relations
DACH: Germany, Austria and Switzerland ROW: Rest of world
The sharp drop in earnings in the Holding segment
to EUR -1,422 thousand (previous year: EUR +49
thousand) is due to the decline in royalty income
from the license business as well as to intercompany
service charges from the Aurea Group and one-time
cost in connection with unexpected termination of
employment contracts.
1 Adjusted for the effect of the share buyback program
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
Q1/ 2015 Q1/ 2014 EUR (´000) EUR (´000) Sales revenueTotal recurring revenue (Maintenance and SaaS) 4,153 4,356
Total non-recurring revenue (Licenses and Services) 2,095 4,344
Total sales revenue 6,248 8,700
Cost of goods sold
Cost of maintenance -649 -619
Cost of service and license agreements -2,190 -2,629
Total cost of goods sold -2,839 -3,248
Gross profit 3,409 5,452
Operating expenses
Sales and marketing -2,093 -2,560
Research and development -2,020 -1,827
General and administrative costs -905 -782
Other operating expenses -77 -95
Total operating expenses -5,095 -5,264
Operating income/loss (EBIT) -1,686 188
Interest income 15 15
Interest expenses -2 -7
Other income and expenses -45 -5
Earnings/loss before taxes (EBT) -1,718 191
Income taxes -148 21
Earnings/loss after taxes -1,866 212
Other comprehensive income/loss 44 1
thereof currency translation 44 1
Comprehensive income/loss -1,822 213
Earnings per share (basic) in EUR -0.16 0.02
Earnings per share (diluted) in EUR -0.16 0.02
Average number of issued shares1 (basic) 11,333,240 11,236,177
CONSOLIDATED BALANCE SHEET
31/03/2015 31/12/2014 EUR (´000) EUR (´000) ASSETS: A. NON-CURRENT ASSETSIntangible assets and goodwill 5,167 5,176
Property, plant and equipment 291 352
Deferred tax assets 1,571 1,695
Other non-current assets 30 30
Total non-current assets 7,059 7,253
B. CURRENT ASSETS
Cash and cash equivalents 6,996 4,324
Trade receivables 8,025 6,226
Trade receivables from production or service contracts 28 25
Current tax receivables 1,500 1,500
Other current assets 739 352
Total currents assets 17,288 12,427
Total assets 24,347 19,680
EQUITY AND LIABILITIES:
A. EQUITY
Share capital 11,569 11,569
Additional paid-in capital 5,108 5,108
Other reserves 666 622
Treasury Stock -696 -696
Net unappropriated profit -11,123 -9,257
Total shareholder´s equity 5,524 7,346
B. NON-CURRENT LIABILITIES
Provision for non-current personnel liabilities 27 363
Total non-current liabilities 27 363
C. CURRENT LIABLITIES
Trade accounts payable 577 514
Tax liabilities 1 1
Other liabilities 18,218 11,456
Total current liabilities 18,796 11,971
CONSOLIDATED CASH FLOW STATEMENT
EUR (´000) Q1/ 2015 EUR (´000) Q1/ 2014Operating activities:
Net result -1,866 212
Reconciliation of the net profit for the period to net cash
flow from operating activities:
Depreciation, amortization and write-downs 97 111
Asset disposals 7 0
Change in non-current provisions -336 20
Change in deferred taxes 124 -42
Unrealized remeasurement gains/losses on currency translation differences 45 1
Change in assets and liabilities:
Change in trade accounts receivable -1,799 -3,335
Change in other assets -390 -576
Change in trade accounts payable 63 -57
Change in provisions and other liabilities 6,761 9,366
Net cash flow from operating activities 2,706 5,700
Cash flow from investing activities:
Investments in intangible assets -10 -7
Investments in property, plant and equipment -24 -58
Net cash flow from investing activities -34 -65
Cash flow from financing activities
Change in Treasury Stock 0 -69
Net cash flow from financing activities 0 -69
2,672 5,566
Change in cash and cash equivalents
Cash and cash equivalents at the beginning of the period 4,324 8,501
Cash and cash equivalents at the end of the period 6,996 14,067 Additional information regarding net cash flow from operating activities:
Cash received for interest in the reporting period 16 8
Cash paid for interest in the reporting period 0 0
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Additional paid-in capital Other reserves Treasury Stock Net unappropriated result Total2015
EUR (´000)As of 31 December 2014 11,569 5,108 622 -696 -9,257 7,346
Income/loss after taxes 0 0 0 0 -1,866 -1,866
Other income/loss 0 0 44 0 0 44 Comprehensive income 0 0 44 0 -1,866 -1,822 Options granted/ Treasury Stock 0 0 0 0 0 0 As of 31 March 2015 11,569 5,108 666 -696 -11,123 5,524
2014
Share capital Additional paid-in capital Other reserves Treasury Stock Net unappropriated result Total EUR (´000) As of 31 December 2013 11,569 5,597 651 -906 -718 16,193Income/loss after taxes 0 0 0 0 212 212
Other income/loss 0 0 1 0 0 1 Comprehensive income 0 0 1 0 212 213 Options granted/ Treasury Stock 0 0 0 -69 0 -69 As of 31 March 2014 11,569 5,597 652 -975 -506 16,337
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENT AS OF
3 1
M A RCH 2015
Accounting principles
This quarterly report of update software AG as of 31 March 2015 has been prepared in EUR, the company's corporate currency, as per IAS 34 "Interim Financial Reporting" in accordance with the International Financial Reporting Standards (IFRS) to be applied as at the end of the reporting period. The accounting principles and calculation methods used in the consolidated financial statements for the year ended 31 December 2014 have not changed. For further details see the consolidated financial statements of update software AG as of 31 December 2014.
Auditor review
This report has not been audited nor reviewed by independent auditors.
Guarantees and other commitments
The aggregate amount of cash and cash equivalents pledged for rental deposits and payment guarantees as of 31 March 2015 was EUR 411 thousand (Q1/2014: EUR 458 thousand).
Material subsequent events
Aurea Software FZ-LLC, the principal shareholder of update software AG, submitted a voluntary offer on April 22, 2015 to the other shareholders of update software AG for the purchase of all update software AG shares. The offer price was EUR 3.15 per share. The offer ended on midnight of May 5, 2015.
These 185,170 update shares purchased outside the offer process correspond to 1.6% of update's share capital and voting rights.
Significant legal cases
The insolvency proceedings of a distribution partner in Germany, in which update had claimed receivables in the amount of EUR 1,002 thousand, was completed in the summer of 2014. As expected, in accordance with the roughly 4% share of assets available to cover liabilities, update received about EUR 43 thousand. At the beginning of September, update sales GmbH, as
subsidiary of update software AG had to file suit against an Austrian customer.
Outstanding receivables of about EUR 150 thousand are being claimed in these proceedings for the delivery of licenses and the rendering of services. The customer filed a counterclaim in the same month. update's legal counsel estimates that the chances of success in these proceedings are very good.
Stock Option Program
Options issued as of 31/12/2014 26,988 3.44
Options granted - -
Options exercised - -
Options expired 480 3.44
Options issued as of 31/3/2015 26,500 3.49 Exercisable as of the end of the quarter 26,500 3.49
Options available for granting 372,590
Total options exercised 985,713
The 26,500 options currently in issue could potentially dilute future diluted earnings per share. They have not been included in the diluted earnings per share as they do not have a dilutive effect on average for the reporting period. Share buyback
At the 16th annual shareholders' meeting on June 19, 2013, the Management Board was authorized to conduct another share buyback program.
In connection with the program, common bearer shares of update software AG may be repurchased to the extent of up to 10 % of the share capital, including the treasury shares already purchased. If the approved volume is utilized in full, the number of treasury shares would increase to 1.156 million shares The price range for the buyback was set at EUR 1 to EUR 10 at the 16th annual shareholders' meeting.
Portfolio of treasury shares as of March 31, 2015:
Material transactions with related parties
By unanimous resolution on December 29, 2014, the Management Board of update software AG approved the granting of a short-term loan to the majority owner, Aurea Software FZ-LLC, in the amount
of EUR 1,500 thousand, repayable by February 28, 2015 and bearing 6% interest. A majority of the Supervisory Board approved this transaction on December 30, 2014. In its meeting on March 12, 2015, the Supervisory Board resolved to extend the loan on the same terms until May 31, 2015.
Shares held
Part of share capital in EUR
Part of share capital in %
Employees
Due to the Company's strategic realignment, the number of employees decreased to 192 persons in the first quarter of 2015. In the first quarter, the decrease
affected the Professional Services and Product Development areas in particular.
Head Count (HC) Q1/ 2015 Q1/ 2014
R&D, Product Management 77 107
Sales, marketing & business solutions 85 159
Administration 30 32
Total 192 298
Overview of Corporate Board Members (As of 31 March 2015)
Member of Shares Options
Frank Hurtmanns Supervisory Board 0 0
Scott Brighton Supervisory Board 0 0
Andrew Price Supervisory Board 0 0
Mirjam Riesemann Management Board 0 0
Christian Stadlmann Management Board 0 0
CAPITAL MARKET
Source: EQS Group AG / ARIVA.DE AG
Shareholder Structure
In the period from July 2 through August 19, 2014, Aurea Software FZ-LLC acquired 9,381,643 shares in connection with a voluntary public takeover offer submitted to the shareholders of update software AG and is therefore the major shareholder of update software AG.
With that, 2% of the Company's shares are own shares held by the Company and around 16.5% is free float.
*Joseph Liemandt is the direct sole shareholder of ESW Capital LLC, ESW Capital LLC is the direct sole shareholder of Aurea Software, Inc., and Aurea Software Inc. is the direct sole shareholder of Aurea Software FZ-LLC.
Listing: Regulated Market
(transparency level General Standard) on the
Frankfurt Stock Exchange Price on 31/12/2014: 2.88 EUR*
Price on 31/03/2015: 3.07 EUR*
Price Performance YTD + 7 % (31/12/2014-31/03/2015)* Ø Volume/Day Q1 15: 4,257 pcs Ø Volume/Day Q1 14: 3,919 pcs Total Volume 2015 Q1: 372,362 pcs ISIN: AT0000747555 WKN: 934523 * Source: XETRA 81,5% 2,0% 16,5% Aurea Software FZ-LLC* update software AG Free float
About the Company - update software AG
For 25 years, update has been valued by customers and partners alike as a provider of industry-oriented CRM solutions. Drawing on this longstanding experience, update helps internationally active companies optimize their sales, marketing, and services processes quickly and flexibly. Since the acquisition of the majority interest by the American Aurea Group, the Company has been aligning its focus on accompanying customers as long-term partners through service-oriented solutions to achieve Customer Experience Transformation (CXT).
Headquartered in Vienna, Austria, update software AG currently has around 192 employees and generated sales revenues of EUR 34 million in 2014. The Company works with numerous strategic partners around the globe to help its customers be more successful. Founded in Vienna in 1988, update concentrates on companies in vertically structured markets and offers industry-specific solutions especially for the following segments: construction, mechanical engineering, pharmaceuticals, financial
services, and consumer goods. The use of standardized processes for update's core industries combined with extensive ability for customization makes update's offering unique in the market. Among the customers of update software AG are UniCredit Bank, Hansa, Hansgrohe, Lafarge, Laufen, Bahlsen, Pipelife, Saint-Gobain, Terex, KSB, Rothenberger, Trotec, BAWAG P.S.K., Forstinger, Shimano, HassiaGruppe, Ratiopharm, Weleda, Limbach Gruppe, Paul Hartmann AG, and many others.
Other information
Note on rounding: When adding up rounded amounts and data given as a percentage, rounding differences may occur due to the use of automatic calculation methods. Rounding, typing or printing errors cannot be excluded.
No information contained herein constitutes or shall be construed as an offer or recommendation to subscribe to or buy securities or financial instruments in update software AG.
Contact: update software AG Investor Relations Operngasse 17-21, 1040 Wien Phone: +43 (1) 878 55 – 512 Fax: +43 1 878 55 206 Mail: [email protected]
