CAPITAL MARKETS DAY LONDON FEBRUARY 5, 2019 - Software AG
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
CAPITAL MARKETS DAY LONDON FEBRUARY 5, 2019 © 2019 Software AG. All rights reserved.
SAFE-HARBOR-STATEMENT
This presentation includes forward-looking statements based on the beliefs of Software AG management.
Such statements reflect current views of Software AG with respect to future events and results and are
subject to risks and uncertainties. Actual results may vary materially from those projected here, due to
factors including changes in general economic and business conditions, changes in currency exchange,
the introduction of competing products, lack of market acceptance of new products, services or techno-
logies and changes in business strategy. Software AG does not intend or assume any obligation to update
these forward-looking statements.
This presentation constitutes neither an offer nor recommendation to subscribe or buy in any other way
securities of Software AG or any of the companies that are members of the Group at present or in the
future, nor does it form part of such an offer and it should not be understood as such. This presentation
does not constitute an offer of sale of securities in the United States of America. Securities may not be
offered or sold in the United States of America without registration or exemption from registration in
accordance with the U.S. Securities‘ Act of 1933 in its currently valid form.
2 | © 2019 Software AG. All rights reserved. For internal use only
SANJAY BRAHMAWAR CHIEF EXECUTIVE OFFICER © 2019 Software AG. All rights reserved.
Our pathway to sustainable, profitable growth
H E L I X
4 | © 2019 Software AG. All rights reserved.
THE RIGHT MOMENT TO ASSESS WHERE WE STAND
50
YEARS
5 | © 2019 Software AG. All rights reserved.
WHAT WORKS
Product
Best in Integral &
Strength Class Trusted
50
YEARS Financial
Solid
Balance Strong
Strength Sheet Cashflow
Cultural Creativity
& Diversity &
Strength
Flexibility Opportunity
6 | © 2019 Software AG. All rights reserved.
WHAT WE MUST WORK ON
No growth Essence
Growth
in growth & identity
markets
50
Product Siloes &
GTM and complexity
focus too
Operations broad
YEARS
Ecosystem Partner
focus too
narrow
7 | © 2019 Software AG. All rights reserved.
HELIX: A MULTI-YEAR TRANSFORMATION
• Targeting sustainable, profitable growth
• Committing ~€50m in investment
FOCUS
• Committing to medium term milestones, metrics and pathway
• Three levers will enable our success:
TEAM
• FOCUS
• Right products
• Right markets EXECUTION
• Right resources and capabilities
• EXECUTION
• Simpler, sharper, disciplined GTM
• Improved operating model and accountability
• Drive necessary shift to subscription
GENERATING
• TEAM SUSTAINABLE, PROFITABLE GROWTH
• Harnessing our talent
• Expanding and empowering our ecosystem
8 | © 2019 Software AG. All rights reserved.
RE-IMAGINING INTEGRATION
Of CIOs say their
business model has
49% changed or is
changing
- Gartner CIO Survey 2019
DIGITAL REAL-TIME
TRANSFORMATION DATA
Annual total
potential economic
$3.9tr -
impact of IoT by
$11.1tr pa
2025 €24
- McKinsey bn
€10.2 €7.9 €2.4 €3.4
bn bn TAM bn bn
The total digital
2018
transformation Integration IoT Business A&N
$1.37bn market in 2022 & Analytics Transformation
- IDC forecast
9 | © 2019 Software AG. All rights reserved.
EVOLVING SO THAT WE START WITH THE CUSTOMER
Real-life time
sensitive problems
Intuitive UI and
instant results
Facilitate, not sell
Plain-speaking
support and
responsiveness SaaS/Subscription 1st
Experiment, test and
probe capabilities Value-based engagement
Scale over time
based on results
10 | © 2019 Software AG. All rights reserved.THREE LEVERS
WE CAN CONTROL
FOCUS EXECUTION TEAM
11 | © 2019 Software AG. All rights reserved.FOCUS
SHAPING OUR OFFER AND ORGANISATION FOR SUCCESS
M A R K E T S P R O D U C T S C A P A B I L I T Y
PRIORITIZE INVESTMENT CLARIFY VALUE LEVERAGE STRATEGIC M&A
WHERE WE SEE: PROPOSITION BY: TO:
• Growth > market • Realigning DBP portfolio: • Enter adjacent markets
Integration, IoT, Business Transformation
• Potential to take share • Bolster existing strengths
• Focus on areas where there is clear market
• Low barriers to success growth • Gain a technology edge
• Refocus R&D spending where it matters most
12 | © 2019 Software AG. All rights reserved.FOCUS IN ACTION – INTEGRATION
• Integration: a big problem for enterprise
2022
• It’s only getting bigger
• A business-level, front-line problem
$18bn
IoT &
API iPaaS
Analytics
2017
50%
Customer integration opportunity
$12bn Integration Platform
Market TAM
Legacy stack and existing architecture
Source: Gartner
13 | © 2019 Software AG. All rights reserved.FOCUS IN ACTION – IOT & ANALYTICS
2023
Create replicable
Industrial IoT
solutions
$25.6bn
Scale OEM
Telecommunications
2017 parterships
18% CAGR
$9.5bn IoT Platform
2018TAM
- Insurance/Financial Cumulocity and
2023 Services System Integrators
Source: McKinsey
14 | © 2019 Software AG. All rights reserved.EXECUTION – DELIVERY AS OUR WATCHWORD
1. New operating model 2. Refined go-to-market 3. Subscription sales
Capitalize on major
Drive accountability Specialization
industry trend
Create right leadership Respond to customer
Geography
group preferences
Reward success Capture economic
Sales coverage
appropriately upside
sustainable, profitable growth over the medium term
15 | © 2019 Software AG. All rights reserved.TEAM
EXPERIENCE & ENERGY
Sanjay Brahmawar Arnd Zinnhardt John Schweitzer Dr. Stefan Sigg Paz Macdonald Bernd Gross
Chief Executive Officer Chief Financial Officer Chief Customer Officer Chief Product Officer Chief Marketing Officer Chief Technology Officer
16 | © 2019 Software AG. All rights reserved.TEAM – NURTURING AN ECOSYSTEM TO SUPPORT OUR GROWTH
- Launch comprehensive new program
Scalable
- Embrace co-petition
- Grow partner revenue to substantial
Partners % of mix
Durable
- New employee value proposition
- Agile talent and performance framework
Profitable
- Incentive structures to match
People
17 | © 2019 Software AG. All rights reserved.COMMITMENT. INVESTMENT. MEASUREMENT.
ARR
Bookings / ACV
Op Free Cash Flow
18 | © 2019 Software AG. All rights reserved.HELIX: THE RIGHT PATHWAY
Unlock our greatest Convert a significant Committed investment,
strengths opportunity strong team
GENERATING
SUSTAINABLE, PROFITABLE GROWTH
19 | © 2019 Software AG. All rights reserved.EVOLVING OUR FINANCIAL PLATFORM FOR GROWTH ARND ZINNHARDT CHIEF FINANCIAL OFFICER © 2019 Software AG. All rights reserved.
OUR AMBITION
Digital 85% - 90%
Business Recurring
10%+ CAGR Revenue
Accelerated growth,
higher quality and
higher visibility Medium
of revenues, term
good margin and
30%+
cash generation Operating
Strong Free
Cash Flow
Margin
21 | © 2019 Software AG. All rights reserved.ROUTES TO OUR AMBITION
Our Ambition Sales Operating
Execution Model
OEM
Accelerated growth,
higher quality and
higher visibility of Geographic
revenues, good margin Focus
and cash generation
Subscription R&D
22 | © 2019 Software AG. All rights reserved. For internal use onlyROUTES TO OUR AMBITION
Customer Value Team Customer driven innovation
Increase deal value Deepen sales knowledge
Sales Upscale into existing customer base Operating Strengthen entrepreneurial ownership
Execution Cross-sell into A&N base Model
More customer touchpoints
Sales efficiency
New business / new logos
IoT Partnerships & White Labelling Focus on Tier 1 countries
Scaling through partnerships, Focused sales investments
penetrating the relevant IoT platforms Geographic
OEM Increased productivity
Focus
Re-allocation of resources Customer Success Team
Focus on key products that Realise upsell potential
R&D drive revenue model Subscription Higher retention rate
Higher visibility, reduced volatility
23 | © 2019 Software AG. All rights reserved. For internal use onlyFIRST FINANCIAL IMPACT AND PHASING PER ROUTE
higher
Sales Subscription OEM
Execution
Relative Impact
Operating
R&D
Model
Geographic Focus
lower
2019 2020 2021 2022 2023
24 | © 2019 Software AG. All rights reserved. For internal use onlyENABLING THE SHIFT TO SUBSCRIPTION
Fastest
Higher
updates,
contract
latest
values
capabilities
Scale up with Higher
demand & retention and
experiment lifetime value
Customer Customer Software
Driven Benefit AG Benefit
Lower cost to
Lower
serve
upfront cost
By 2020, all new entrants
Lower
and 80% of historical customer
Maintenance
vendors will offer as a Service
acquisition
cost
subscription-based business
models
Realign our model Extract the benefit over time
Gartner, 2018
25 | © 2019 Software AG. All rights reserved. For internal use onlyNEW SUBSCRIPTION LICENSING MODEL
OLD IFRS IFRS 15
To 2017 2018 – 2019 2020+
Perpetual Upfront Upfront Upfront
Quarterly /
Subscription Pro-rata Upfront
Annually
SaaS / Usage Pro-rata Pro-rata Pro-rata
Subscription Pathway Cash flow
Greater Lifetime Revenues Subscription & revenue
revenue
both up
Perpetual +30 to
license & 40%
support
1 2 3 4 5
26 | © 2019 Software AG. All rights reserved. For internal use onlyMODEL CHANGE: IMPACT AND PHASING
2018 reimagined
As 2018 would
2018 as is 2 3 as would be
have been 2 3
Total Total Delta
PERPETUAL LICENSE 250 250 4 5
SUBSCRIPTION LICENSE 30 0 0 30 10 10 10 10 10 10 50 20
MAINTENANCE 400 400
CONSULTING 180 180
TOTAL REVENUE 860 840
COSTS 590 590
operating EBITA 270 250
MARGIN in % 31.5% ~29.5%
∆ ~200bp
27 | © 2019 Software AG. All rights reserved. For internal use onlyKPIS TO TRACK OUR PROGRESS
From measuring simple up-front deal size to measuring long term
customer value and increasing revenue predictability
Committed sales order in /
Bookings / ACV annualized average revenue
We will begin per contract
to introduce
Traditional KPIs new metrics
Annual value of all recurring
that show our Annual Recurring
revenue components to a
Product Revenue underlying Revenue
contract
progress in
Op EBITA Margin creating a more
valuable base
Op Free Cash Flow “Cash is King!”
28 | © 2019 Software AG. All rights reserved. For internal use onlyMEDIUM TERM KPI DEVELOPMENT
12-17% CAGR
Statutory KPI Development Management KPI Development
2018 – 2023 2018 – 2023
15- 20% CAGR
5 - 10% CAGR
Product revenue Product revenue Bookings OpCF
Cost ARR
(old licensing model) (new licensing model)
29 | © 2019 Software AG. All rights reserved. For internal use onlyGROWTH AND CAPITAL RETURNS
2019 Medium Term Capital Returns
ARR Dividend 25 to 33 %
DBP 3 to 7 % 12 to 17% CAGR Pay Out FCF
Bookings Share Opportunity
IoT 75 to 125 % 15 to 20% CAGR Buy Back Based
Operating Cash Flow
A&N -5 to 0 % 5 to 10% CAGR
EBITA 28 to 30 % Revenue
Margin Non IFRS
Non IFRS EBITA Margin
30 | © 2019 Software AG. All rights reserved. For internal use onlyTHIS TRANSITION BUILDS US A BETTER BUSINESS
Digital Business Ambition
Driving Recurring Revenue Accelerated growth, higher quality and higher visibility
of revenues, good margin and cash generation
TODAY
~ 65%
Digital 85% - 90%
recurring Business Recurring
10%+ CAGR Revenue
MEDIUMTERM
Medium
CAGR
10%+
85 - 90% recurring term
30%+
Strong Free
Operating
Lower customer acquisition cost Cash Flow
Margin
Lower cost to serve
Higher retention, contract and lifetime values
31 | © 2019 Software AG. All rights reserved. For internal use onlyOUR TECHNOLOGY VISION BERND GROSS CHIEF TECHNOLOGY OFFICER © 2019 Software AG. All rights reserved.
Market Trends
Smart Products/ Smart Services
Globalization 4.0 AI/ ML Data Accessibility
Convergence of IT & OT Data Security and Privacy
IoT Shortage of skilled employees 5G
Cloud computing ‘Everything as a Service’ (XaaS)
Industry 4.0 Edge computing LP WAN
© 2019 Software AG. All rights reserved.A TRULY
CONNECTED
WORLD
The revolution has already started…
34 | © 2019 Software AG. All rights reserved. For internal use onlyWHAT DOES ‘A TRULY CONNECTED WORLD’ MEAN
FOR OUR CUSTOMERS & PARTNERS
A tsunami of Cloud applications is emerging
Cloud-based applications continue to eat up enterprise apps
Demand is moving from data acquisition to data integration
Integration of Applications, Devices, Clouds and Data to drive operational
excellence and superior customer experience
Innovations will be increasingly based on platforms
Openness and ‘freedom of choice’ is a key requirement
35 | © 2019 Software AG. All rights reserved. For internal use onlyA TRULY CONNECTED WORLD
IN ACTION
36 | © 2019 Software AG. All rights reserved. For internal use onlyBusiness application iPaaS: a fully connected
integration is key sports arena
Software AG and Coca-Cola European Partners Together with SK we developed an application that
have entered into a strategic partnership around unlocks their new state-of-the-art arena capabilities
business application integration and transformation. and integrates a range of connected services,
including real-time game stats, ticket bookings as
37 | © 2019 Software AG. All rights reserved. For internal use only
well as in-seat food ordering.Next generation of Condition monitoring
digital offerings and tracking
Software AG’s platform is centrally deployed to Location of goods and wagons on rail network is a
enable the next generation of digitalization real issue. If an item is delayed or misrouted, fast
including Smart Products. recovery is important. If refrigeration fails or product
knocked in transit, immediate alerts are key
38 | © 2019 Software AG. All rights reserved. For internal use only (condition monitoring).THE NEW WAY TO GO:
CLOUD + EDGE = SUCCESS
Optimize power generation and prevent breakdowns - globally
“With Cumulocity IoT Edge, the health of each of the 5,500 wind
turbines can be monitored and analyzed locally using a variety of
different sensors for vibration, power output, temperatures and wind
conditions using a combination of low-cost edge devices and sensors.”
- Stefan Ewald, CIO of Nordex
39 | © 2019 Software AG. All rights reserved. For internal use onlyREMOTE MONITORING OF
5,000 LONDON BUSES
To reduce emissions and prevent breakdowns
“We have taken Software AG’s Cumulocity IoT platform and rebranded
it ‘STW machines.cloud’. Big data can be used to detect patterns
alerting problems in bus engines. This reduces the amount of data
transmitted, and enables predictive maintenance which avoids
unnecessary preventive actions and breakdowns.”
- Dr. Michael Schmitt, CEO, STW
40 | © 2019 Software AG. All rights reserved. For internal use onlyDELL SELECTED SOFTWARE AG’S CUMULOCITY EDGE The speedway to the Industrial Internet of Things is just ahead! Cumulocity IoT Edge powered by Dell Technologies - a joint software appliance by Software AG and Dell EMC - offers plug-and-play entry onto the IIoT, literally the shortest time- to-market. The performance-optimized, industrial-grade appliance comes with preinstalled software, making it fully usable out of the box. 41 | © 2019 Software AG. All rights reserved. For internal use only
SIEMENS MINDSPHERE IS POWERED
BY SOFTWARE AG
Connect and integrate data into MindSphere
MindConnect API
MindConnect Integration
• Simplified integration of application data into
MindSphere
• Combine machine data with data out of our
applications, on premise or in the cloud
MindConnect IoT Extensions
• Extends range of IoT devices
• Combines device identity, asset and software
management
• Use other customizable software agents on custom
devices
42 | © 2019 Software AG. All rights reserved. For internal use onlyFROM MACHINE MANUFACTURERS FOR MACHINE MANUFACTURERS, THEIR SUPPLIERS AND CUSTOMERS 43 | © 2019 Software AG. All rights reserved. For internal use only
SOFTWARE AG HAS A UNIQUE OFFERING IN AN EARLY MARKET
- We combine integration, IoT and platform enabled innovations based on distributed architectures
A TRULY
CONNECTED
WORLD
The revolution has already started…
Innovation driven
Value
New Business Models, New Products,
Predictive Analytics (AI/ ML)
Predictive Maintenance,
Everything-as-a-Service
Integration Driven
Integrate (Apps, Clouds, Devices, Data)
to drive operational excellence
Enterprise wide integration
with e.g. ERP/ CRM systems
Application driven
Create new apps
E.g. remote management &
control, condition monitoring
A typical agile project adoption based on ‘Land & Expand’
44 | © 2019 Software AG. All rights reserved. For internal use onlySUMMARY
Leapfrogging to Hybrid
Integration & Distributed
Architectures (Cloud & Edge)
Co-Innovations with
Customers & Partners is key
We have a unique position -
combine integration, IoT and
platform enabled innovations
45 | © 2019 Software AG. All rights reserved. For internal use onlyOUR PRODUCT STRATEGY DR STEFAN SIGG CHIEF PRODUCT OFFICER © 2019 Software AG. All rights reserved.
CO-INNOVATION
Challenge
for Operating & Manufacturing Companies
Improved efficiency, consistency, quality for
construction processes
• Reduction of operating costs
• Easiness of machine handling
• Real-time analytics
• Data mining to increase quality and machine
availability
47 | © 2019 Software AG. All rights reserved.CO-INNOVATION
Solution
for Dürr and its customers
Streaming analytics powered by the ADAMOS IIoT
Platform
• Real-time streaming analytics
• Real-time quality control during production
• Intuitive UI for machine operators
• Toolkit for self-service real-time data analytics
and algorithm
48 | © 2019 Software AG. All rights reserved.BUSINESS
AGILITY
Product Manager Plant Manager Operations Manager Support Engineer Machine Operator
Applications – Databases – BI … “take it or leave it”
“IT DICTATORSHIP”
IT MANAGED
CONSISTENCY
49 | © 2019 Software AG. All rights reserved.BUSINESS
AGILITY
Product Manager Plant Manager Operations Manager Support Engineer Machine Operator
SaaS Easy & Intuitive
DaaS Experience
(Web/Mobile UI/App)
PaaS
“DEMOCRATIZATION” PaaS Cloud
(Private or public)
BY
INTEGRATION
Contextual - Self service - Low Code – … “empower and serve”
IT MANAGED
CONSISTENCY
50 | © 2019 Software AG. All rights reserved.Product Manager Plant Manager Operations Manager Support Engineer Machine Operator
SaaS
DaaS Easy & Intuitive
Experience
(Web/Mobile UI/App)
PaaS
PaaS Cloud
(Private or public)
Contextual - Self service - Low Code
INTEGRATE TO INNOVATE
Apps Clouds Devices Data
51 | © 2019 Software AG. All rights reserved.© 2019 Software AG. All rights reserved.
THE FOUR PRODUCT UNITS – FOCUS PER MARKET SEGMENT
Integration & API
IoT & Analytics
Business Transformation
Adabas & Natural
53 | © 2019 Software AG. All rights reserved.MATURITY OF THE CONVERGENCE OF INTEGRATION AND IOT
AI/ML
DaaS
Blockchain
iPaaS
IoT Solutions
API Mgmt
Hybrid / Edge
ESB
IoT
SOA
Analytics
Messaging
EAI
B2B
ETL
we are here
Securely Automated
Application-driven Services-driven Self-service
Integration of
Integration Integration Integration
Everything
1990s 2020s
54 | © 2019 Software AG. All rights reserved.INTERPLAY BETWEEN DEVICE INTEGRATION AND ANALYTICS
External models
ZEMENTIS APAMA
Data Science
The Analytics Flow
Operations
TRENDMINER CUMULOCITY
WEBMETHODS
External data context
55 | © 2019 Software AG. All rights reserved.KEY TAKE-AWAYS
FOCUS ON WELL-DEFINED
MARKETS
CONVERGENCE OF INTEGRATION
AND IOT
CLOUD AND EDGE SCALABILITY
ANALYTICS AND SOLUTIONS
56 | © 2019 Software AG. All rights reserved.57 | © 2019 Software AG. All rights reserved.
SALES AND GTM JOHN SCHWEITZER CHIEF CUSTOMER OFFICER © 2019 Software AG. All rights reserved.
THE STRENGTH OF OUR FOUNDATION
10K 20%+ 10+
CUSTOMERS OP. CASH FLOW / ANALYST
REVENUE LEADERSHIP
TRUSTED FINANCIAL PRODUCT
BRAND STRENGTH INNOVATION
59 | © 2019 Software AG. All rights reserved.EVOLVING SALES AND GO-TO-MARKET
FOCUS EXECUTE
Specialization Customer Experience
Geographies MARKET Alliances and Channels
IMPACT
Sales Coverage Sales Operations
60 | © 2019 Software AG. All rights reserved.SPECIALIZED ACCOUNT EXECUTIVE: SALES BAG AND ROLE
Customer
1
TARGETED
Personae
SALES BAGS
Process IoT
Markets iPaaS……… ………
Mining ………
Platform
2
SPECIALIST
ROLES TO
NAM
PERSONAS
DACH
EMEA
3
LATAM
MARKET
APJ FOCUS
Integration & Business Adabas Professional
IoT & Analytics
API Transformation Natural Services
61 | © 2019 Software AG. All rights reserved.FOCUSED GEOGRAPHY
USA Canada China
Biggest Best
market established
opportunity footprint Germany Australia Japan
UK Brazil Korea
France B+Lux Netherlands
Italy South Africa Switzerland
BIGGEST MARKET IMPACT
Sweden UAE Spain
62 | © 2019 Software AG. All rights reserved.FOCUSED SALES COVERAGE
1
GROW Strategic
SHARE OF STRATEGIC ACCOUNTS Account
WALLET Manager
2
Alliances and Enterprise
NEW
Channels ENTERPRISE ACCOUNTS Account
LOGOS
Manager
3
NEW Territory
CHANNELS
TERRITORY ACCOUNTS Account
Manager
63 | © 2019 Software AG. All rights reserved.MODERN CUSTOMER EXPERIENCE
Evaluate and select
Secure renewal
Evaluate
Renew Buy
Customer Contract execution
Upsell / Xsell Life Cycle
Expand Onboard
Adopt
Value realization
On-board and enable
reference
64 | © 2019 Software AG. All rights reserved.ALLIANCES AND CHANNELS
OEM ISV Marketplace SI
OEM – embedded solutions ISV – extend reach G2000
White-labelling Application Partners
Marketplace – extend reach SMB SI – expand wallet-share
Cloud, Public and Private Increase competitiveness
65 | © 2019 Software AG. All rights reserved.SALES OPERATIONS
Metrics Demand Generation Sales Methodology Simplification
Quoting tools,
Leading and lagging Sales playbook and Planning and
approvals, contracts,
indicators improved lead flow continuous enablement
revenue recognition
Increase Drive Alignment:
Maximize Pipeline: Simpler, faster quote
accountability: resources and
volume, conversion to cash process
analyze, plan, adjust efficiency
66 | © 2019 Software AG. All rights reserved.INCENTIVES: CORE AE COMPENSATION PRINCIPLES
OUTSIZED PERFORMANCE RIGHT-SIZED TERM LENGTHS
RENEWALS: PROTECT & EXPAND IMPROVE LINEARITY
DRIVE SUBSCRIPTIONS DRIVE SOLUTION PERFORMANCE
67 | © 2019 Software AG. All rights reserved.SALES AND GTM TRANSFORMATION
Specialization
Geographies TODAY
Relative Impact
Sales Coverage
Customer Experience
Alliances and Channels
Sales Operations
2019 2020 2021 2022 2023
68 | © 2019 Software AG. All rights reserved.SUMMARY – DELIVERING MARKET IMPACT
Specialization
Geographies
FOCUS EXECUTE
Sales Coverage
GROWTH
Customer Experience
Alliances and Channels
EXECUTE EVALUATE
Sales Operations
69 | © 2019 Software AG. All rights reserved.SANJAY BRAHMAWAR CLOSING REMARKS © 2019 Software AG. All rights reserved.
FOCUS EXECUTION TEAM 71 | © 2019 Software AG. All rights reserved.
!, soft1uare
AGYou can also read
