CLOUD & IOT @ SOFTWARE AG

CLOUD & IOT @ SOFTWARE AG THE NEW GROWTH DRIVER

COMMERZBANK SECTOR CONFERENCE

FRANKFURT, 30 AUGUST 2018

© 2018 Software AG. All rights reserved.

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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.


SAFE-HARBOR-STATEMENT

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SOFTWARE AG AT A GLANCE


Technology leader for more than 40 years in data management

and application development platforms

~ €3bn MARKETCAP

~ 66% Free Float

€870+ MILLION

IN REVENUE

50%+ recurring

75% product revenue

4,500+ EMPLOYEES**

R&D 26%

S&M 19%

Consulting

&Services

42%

Admin

13%

41%

Americas

51%

EMEA

REVENUE

51%

DBP

26%

A&N

23%

Services

BY REGION* BY BUSINESS LINES*

* Based on Group product revenue – FY 2017 **P&L as of December 31, 2017

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BUSINESS LINES


*Group revenue split FY 2017

Share of

Revenue* 52%

Growing Revenue

• IoT and Industry 4.0 Platforms

• Integration & Automation

• Analytics & Decisions

• In-Memory Data

• Business & IT Transformation

Share of

Revenue*

Growing Stability

• Application Development

• Data Management System

• Modernization

• System Support 2050+

Share of

Revenue*

Growing Margin

• Strategy & Design

• Product Implementation &

Customized Solutions

• Education & Cloud Services

• Global Delivery (on-/offshore)

25% 23%

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2018 TURNING POINT / DIGITAL BUSINESS DRIVING GROWTH


0%

20%

40%

60%

80%

100%

2010

License Revenue

0%

20%

40%

60%

80%

100% Maintenance Revenue

2012

0%

20%

40%

60%

80%

100% Segment Result

Digital Business Platform

Adabas & Natural

2018e

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DATA CENTERED ERA REQUIRES SOFTWARE CENTRICITY


Source: Morgan Stanley Research, The Data Era Becomes Investable, April 9, 2018

Entering the next computing cycle – which is centered on data…

Software AG is ready to reap proceeds from higher IT investments by providing a comprehensive

workbench along the IT value chain.

Software AG has singled out a distinct area of growth in (industrial) IoT to leverage its capabilities.

Source: Bain & Company, 2017

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SOFTWARE AG IOT PLATFORM CAPABILITES ACQUISITIONS TO CATER THE IOT NEEDS

2011 2013 2016


2017

Big Data &

Streaming

Analytics

Machine

Learning

Edge

Computing

Device

Connectivity

IoT Acquisitions

2010 2018

Strategic

decision

for IoT

Artificial

Intelligence

Time-series

Analytics

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ESSENTIAL CAPABILITIES TO SUCCEED IN IOT


Big Data &

Streaming Analytics

Edge Computing Device Connectivity

IoT

Machine Learning

Artificial Intelligence

Time-series Analytics

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DIGITAL BUSINESS PLATFORM (DBP) & IOT EVOLUTION


CREATING NEW DIGITAL BUSINESS IN REAL TIME ECONOMY

I oT

Connect device &

production process data

DBP

Apply real-time analytics

Connect

business data & logic

Build new digital business models (algorithms)

Create new digital enterprise

10 | © 2018 Software AG. All rights reserved.

The Forrester Wave™:

HYBRID INTEGRATION

(SAG WebMethods)

Gartner Magic Quadrant:

Full Life Cycle API

Management

IoT Solutions

(SAG Cumulocity*)

The Forrester Wave™:

STREAMING ANALYTICS

(SAG Apama)

*Cumulocity is the IoT solution portfolio of Software AG

encompassing Hybrid Integration, In-Memory

Computing and Streaming Analytics

MARKET AWARENESS OF LEADERSHIP IS BUILDING UP BEST IOT TECHNOLOGY PARTNER IN THE MARKET…

Source: Gartner, Inc., Magic Quadrant for Full Life Cycle API Management, Paolo Malinverno, Mark O’Neill., April 30, 2018 This graphic was published by

Gartner, Inc. as part of a larger research document and should be evaluated in the context of the entire document. The Gartner document is available upon

request from Software AG. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology

users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research

organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including

any warranties of merchantability or fitness for a particular purpose.

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DIGITAL BUSINESS PLATFORM & IOT


GTM / DISTRIBUTION CHANNELS

Direct

Cloud

OEM

Project based Product

Sales and Upgrades

Standardized / Use Case

Product Offerings

(e.g. ARIS & Alfabet)

Sales Scale with Partner

Platform or Solution

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CUSTOMER BASE IS MATCHING IOT GROWTH SECTORS


20%

19%

18%

12%

10%

4% 5%

12%

Government Financial Services

IT Services Manufacturing

Services Telco & Media

Transp. & Log. Other

Software AG Customer by Sector

(Product Revenue 2017) IoT Demand by Sector (2015-2020)

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Strengthening Mindsphere platform across

industries enabling powerful industry applications


SOFTWARE AG’S SUCCESS STORIES IN IOT IOT ECOSYSTEMS – INDUSTRY 4.0, TELCOS, AUTOMOTIVE, …

JV of leading machinery manufactures:

DMG MORI, DUERR, ZEISS, ASM, ENGEL,

KARL MAYER

Leveraging Bosch IoT Cloud platform with Real-

time predictive analytics technology

Enabling customers to use geo-sensing alerts,

reduce theft and anticipate maintenance needs

KPN (NL), Telstra (AUS), Telia (SWE), Reliance

Communications (India), NTT (Japan), Deutsche Telekom

(T-Systems), Nokia or Huawei.

Transforming auto insurance through behavioral,

contextual and driving analytics

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SOFTWARE AG’S OPEN IoT ECOSYSTEM OVERVIEW

Consortia &

Alliances

Infrastructure &

Connectivity

System

Integrator

Hardware &

Devices Technology

& Analytics

Value-added

reseller


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DBP Total Revenue

Adabas & Natural

Operating Margin Group

(EBITA non-IFRS)2)

OUTLOOK


FULL YEAR 2018

1) At constant currency rates 2) Adjusted for non-operating items (see non-IFRS earnings results) 3) Weighted average shares outstanding (basic/IAS 33.19) FY 2017: 74.6m / H1 2018: 74.0m; based on new US-Federal-Tax and Euro/US-Dollar exchange rate of 1/1.18

- DBP Cloud & IoT

- DBP (excl. Cloud & IoT)

EPS non-IFRS3)

FY 2018 Outlook (as of April 13, 2018)

30% to 32%

-6% to -2%1)

N/A

FY 2017 (in €m)

223.7

456.4

31.8%

14.9 +100% to +135%1)

+3% to +7%1) 441.5

+5% to +15% €2.38

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*At constant currency

** at internal FX plan rate 2018

in €m, IFRS H1 2018 H1 2017 Δ FY 2017 FY 2016 Δ

Total Revenue 392.3 413.3 1%* 879.0 871.8 2%*

BL DBP (including Cloud & IoT) 202.9 210.3 3%* 456.4 441.4 5%*

Thereof Cloud & IoT 11.6 6.4 88%* 14.9 N/A N/A

BL A&N 97.3 100.3 4%* 223.7 234.6 -4%*

BL Consulting 92.1 102.7 -7%* 198.8 195.8 2%*

Annual Recurring Revenue (Cloud & IoT) 24.8 12.2 106%* 14.8** N/A N/A

EBIT 94.3 89.6 5% 222.8 213.9 4%

EBITA (non-IFRS) 112.7 117.6 -4% 279.5 272.0 3%

EPS (in €, non-IFRS) 1.06 1.03 3% 2.38 2.37 0%

Dividend per share €0.65 €0.60 8%

Free cash flow 88.6 85.8 3% 161.9 187.0 -13%

Operating Margin Group (EBITA non-IFRS) 28.7% 28.4% 30bps 31.8% 31.2% 60bps

Shareholders’ equity ratio 59.4% 58.7% 70bps 58.6% 61.1% -250bps

FINANCIAL DATA


KEY FIGURES

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ARR – ANNUAL RECURRING REVENUE


COMPONENTS AND DEFINITION

Term- / Subscription License

• Rented on-premises software (Term / Subscription)

is installed on systems of the customer and customer

takes possession of the software

• Even though IFRS 15 provides upfront License

Revenue Recognition - for ARR purposes the

respective monthly / quarterly pro-rata amount will be

used due to its recurring character

Software as a Service (SaaS)

• Revenue from Software as a Service contracts

including License, Maintenance and Hosting

components net of one-time effects

Maintenance

• Maintenance from Perpetual and Term-/ Subscription

contracts recognized for the respective period net of

one-time effects

Usage Based

• Revenues from software usage (measured by number

of connected devices, exchanged data volume etc.) in

a given period of time

Definition: ARR = Total Conctract Value (TCV) of active contracts at period end divided by contract duration in

months, times 12.

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ARR – DBP CLOUD & IoT DEVELOPMENT STATUS JUNE 30, 2018


* Net of currency (based on prior year rates)

** vs. previous quarter status

+27%**

0

5

10

15

20

25

30

Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

in m€

Subscription License

Maintenance

SaaS

Apr 30, 2017 Jun 30, 2017 Sept 30, 2017 Dec 31, 2017 Apr 30, 2018 Jun 30, 2018

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Investor Relations

Uhlandstrasse 12

64297 Darmstadt

Germany

T: +49 (0) 6151 / 92 1900

F: +49 (0) 6151 / 9234 1900

W: softwareag.com

E: [email protected]


mailto:[email protected]

CLOUD & IOT @ SOFTWARE AG

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