Axway Software – 2018 Full-Year Results: Execution of the AMPLIFY™ Strategy Accelerates in the Second-Half

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Regulatory News:

Axway Software’s Board of Directors (Paris:AXW), chaired by Pierre Pasquier, today conducted an in-depth review of the consolidated financial statements1 for the year ended December 31, 2018.

Axway Software: 2018 Full-year results
                         
Key income statement items* 2018 2017
  (‚¬m)   (% Rev) (‚¬m)   (% Rev)
Revenue 283.8   299.8  
Organic growth -3.6%
Growth at constant exchange rates -2.7%
Total growth -5.3%          
             
Profit on Operating Activities 31.9 11.2% 40.5 13.5%
Profit from Recurring Operations 22.5 7.9% 30.7 10.2%
Operating Profit 18.3 6.4% 27.7 9.2%
Net Profit attributable to the Group 11.0   3.9% 4.4   1.5%
             
Basic earnings per share (in ‚¬) 0.52     0.21    

* Alternative performance measures are defined in the glossary at the end of this document

Patrick Donovan, Chief Executive Officer, said:

“In the second half of 2018, we made significant investments and progress in achieving Axway’s strategic ambitions. Im delighted that our technology teams efforts, focusing on our core technologies and the fundamental components of the AMPLIFY„¢ Hybrid Integration Platform, have produced the desired results. Several product launches are now possible from the first half of 2019. Additionally, in 2018, we validated the viability of our strategy to become a market leader in Hybrid Integration Platforms with both our customers and the broader analyst community. In parallel with the AMPLIFY„¢ platform, whose catalogue of tools is expanding quarter after quarter, our Customer Success Organization has gained momentum and generated many opportunities over the year. This enabled us to record very strong growth in new Subscription contract ACV, up 56.1% year-on-year. For 2019, we target a return to growth for our activities and we will continue to invest in AMPLIFY„¢ and make further adjustments reflecting changes in our new Subscription contracts.

Comments on 2018 business activity and operating performance

Axway reported 2018 revenue of ‚¬283.8 million, down -3.6% organically. Currency fluctuations had a negative impact of -‚¬8.2 million for the year (mainly due to the depreciation of the US dollar against the euro), while the scope effect was positive at ‚¬2.8 million. At constant exchange rates, Axway’s organic revenue decline would have been contained to -2.7% for the year. Overall, revenue decreased by -5.3%.

Thanks to sound cost management, investing solely in the components necessary to achieving the AMPLIFY„¢ strategy, Axway’s profit on operating activities reached ‚¬31.9 million, or 11.2% of 2018 revenue.

In the second half of 2018, the Group accelerated the execution of its strategy by significantly strengthening its Research and Development efforts while continuing to adapt its structure and investments to the shift in its business mix towards Subscription offers. This strategy has enabled several important steps to be completed:

  • Confirmation of the ambition to become a market leader in Hybrid Integration Platforms by the end of 2020,
  • Product portfolio audit and first strategic rationalization decisions allowing the Group to focus an additional 20% of its development efforts on the key components of its future success,
  • Redesign of the sales structure and creation of a Customer Success Organization,
  • Additional R&D and Marketing investments dedicated to the AMPLIFY„¢ platform well above the ‚¬3 to ‚¬5 million planned in July 2018; the Group is bringing the offer to market at a faster pace than initially planned,
  • First commercial successes of AMPLIFY„¢ products on hybrid and Subscription models.

Axway’s 2018 performance can be broken down as follows:

Axway Software: Revenue by business line
                     
Full-year 2018 (‚¬m)   2018  

2017

Restated*

  2017

Reported

  Total

Growth

 

Organic Growth

License   56.5   63.7   65.3   -13.4%   -11.3%
Subscription 40.3 38.6 37.5 7.5% 4.4%
Maintenance 142.8 141.6 145.4 -1.8% 0.9%
Services   44.2   50.5   51.6   -14.4%   -12.6%
Axway Software   283.8   294.4   299.8   -5.3%   -3.6%

* Revenue at 2018 scope and exchange rates

License revenue was ‚¬56.5 million (20% of Group revenue) in 2018, down -11.3% organically and -13.4% in total. After a stabilization of sales during the first nine months of the year, marked in particular by a buoyant third quarter with the signing of several major projects ahead of schedule, the business suffered, as expected, from a particularly high comparison basis in the fourth quarter. The decline in activity over the last three months of the year was also accentuated by the deferral of two significant projects to the first half of 2019. By product, in line with previous announcements, API management and Managed File Transfer (MFT) were the most popular offers in 2018.

The shift in Axway’s business model towards Subscription implies significant variations in quarterly License revenue. The Group’s overall objective of stabilizing revenue at around ‚¬300 million by the end of 2020 is not, however, impacted.

The Subscription business, with revenue of ‚¬40.3 million (14% of Group revenue), grew by 7.5% overall in 2018. Organically, the business grew by 4.4% year-on-year. The annual contract value (ACV) of new Subscription contracts signed in 2018 was ‚¬13.1 million, representing organic growth of 56.1% compared to 2017. This strong commercial momentum, supported by several structuring signatures for AMPLIFY„¢ products, demonstrates the attractiveness of Axway’s positioning on the hybrid integration market and reinforces the Group’s ability to achieve its 2020 ambitions. The company’s organization was reshaped mid-year to support the growth of Subscription offers and the launch of several new AMPLIFY„¢ products in the coming months. The solid growth momentum in new contract ACV should continue throughout 2019.

Maintenance generated revenue of ‚¬142.8 million (50% of Group revenue) in 2018. In line with the first nine months of the year, business grew slightly in organic terms over 2018 (+0.9%), as Axway aims to stabilize its revenue by 2020.

Axway’s recurring revenue, which includes contract revenue for Subscription and Maintenance activities, represented 65% of the Group’s total revenue in 2018 compared to 61% in the previous year.

Services posted revenue of ‚¬44.2 million (16% of Group revenue) in 2018, an organic decline of -12.6% over the full year. This downturn was mainly due to the ongoing strategic focus on profitability and high value-added contracts, combined with the continuing decline in the overall services market as Subscription offerings ramp-up.

Axway Software: Revenue by geographic area
                     
Full-year 2018 (‚¬m)   2018   2017

Restated*

  2017

Reported

  Total

Growth

 

Organic Growth

France   80.9   83.8   83.8   -3.4%   -3.4%
Rest of Europe 65.7 71.4 71.7 -8.4% -7.9%
Americas 122.3 124.3 128.8 -5.0% -1.6%
Asia/Pacific   14.9   15.1   15.6   -4.6%   -1.2%
Axway Software   283.8   294.4   299.8   -5.3%   -3.6%

* Revenue at 2018 scope and exchange rates

In France, Axway generated revenue of ‚¬80.9 million in 2018 (29% of Group revenue), representing an organic decline of -3.4%. Over the year, slight growth in Maintenance and Subscription activities only partially offset the decrease in License and Services business volume.

Activities in the Rest of Europe generated revenue of ‚¬65.7 million (23% of Group revenue) for the year, down -7.9% organically. While the Subscription business grew significantly, with organic growth of more than 32% over the year, the Company’s growth was penalized by lower License and Services sales. Maintenance was stable over the full year.

The Americas (USA & Latin America) recorded an organic decline of -1.6% in 2018, with revenue of ‚¬122.3 million (43% of Group revenue). The slight increases posted by the Maintenance and Subscription activities over the full year were insufficient to offset the drop in License revenue.

In the Asia-Pacific region, the Group revenue amounted to ‚¬14.9 million (5% of Group revenue) in 2018. The organic revenue decline of -1.2% for the year was mainly due to the License business despite a very strong rebound in the fourth quarter.

Comments on 2018 net profit

Profit from recurring operations reached ‚¬22.5 million in 2018, representing 7.9% of revenue including intangible asset amortization charges of ‚¬8.3 million.

Operating profit, including ‚¬4.2 million of other operating income and expenses, amounted to ‚¬18.3 million, or 6.4% of revenue in 2018.

Finally, Axway’s net profit amounted to ‚¬11.0 million for the year, or 3.9% of revenue, a ‚¬6.6 million increase compared to 2017. Group earnings per share more than doubled to ‚¬0.52, from ‚¬0.21 a year earlier.

Financial position at December 31, 2018

At the end of 2018, Axway had a solid financial position, with cash of ‚¬35.8 million and bank debt limited to ‚¬46.0 million.

Free cash flow amounted to ‚¬17.5 million in 2018 compared to ‚¬24.3 million in 2017 as the Group continues to invest in its changing business model.

At December 31, 2018, shareholders’ equity amounted to ‚¬362.7 million compared to ‚¬344.1 million a year earlier.

At the beginning of 2019, the Group renegotiated its bank lines for 5 years (with a possible extension until 2026) and thus has secured financing of up to ‚¬125.0 million.

Proposed dividend for financial year 2018

At its upcoming Annual General Meeting scheduled for June 5, 2019, Axway will ask shareholders to approve the distribution of a dividend of ‚¬0.40 per share, compared with ‚¬0.20 in 2017.

Change in the workforce

At December 31, 2018, Axway had 1,848 employees (25% in France and 75% outside France) compared to 1,780 at the end of June 2018.

2019 Targets & 2020 Outlook

For 2019, the Group is anticipating:

  • A return to organic growth in its business that should continue into 2020 to enable Axway to achieve the level of around ‚¬300 million revenue (stable compared to 2017),
  • An operating margin on business activity of between 8 and 10% representing a low point during the period of transformation of the business model, before a rebound in profitability expected in 2020.

Financial Calendar

Thursday, February 21, 2019 – 5:30 pm: Presentation of 2018 Full-Year Results “ Cloud Business Center, Paris.

Wednesday, April 17, 2019 (after closing): Publication of Q1 2019 Revenue.

Friday, April 26, 2019: Publication of the 2018 Registration Document.

Wednesday, June 5, 2019 (after closing): Annual General Meeting “ ‰toile Business Center “ Paris.

2018 Full-Year Results Presentation Meeting

The 2018 Full-Year Results will be presented to the financial community at a meeting to be held on Thursday, February 21, 2019 at 5:30pm (CEST) at the Cloud Business Center in Paris. The meeting will be held in English and simultaneously translated into French.

This presentation can also be followed remotely via a dedicated bilingual webcast:

Or by phone:

  • From France: +33 (0)1 76 70 07 94
  • From the United States: +1 631 510 7495
  • From the United Kingdom: +44 (0)207 192 8000
  • Other countries: please use one of the numbers above

For the choice of language please use the following PIN codes: English = 4791326 / French = 8667039

Practical information about the conference may be found on Axways website: http://www.investors.axway.com/en

Glossary “ Alternative Performance Measures

Restated revenue: Revenue for the prior year, adjusted for the consolidation scope and exchange rates of the current year.

Organic growth: Growth in revenue between the period under review and the prior period, restated for consolidated scope and exchange rate impacts.

Growth at constant exchange rates: Growth in revenue between the period under review and the prior period restated for exchange rate impacts.

ACV: Annual Contract Value “ Annual contract value of the Subscription agreement.

TCV: Total Contract Value “ Full value of the Subscription agreement including both recurring revenue over the contract term and one-time payments.

Signature metric: Amount of License sales plus three times the annual value (3xACV) of new Subscription contracts signed over a given period.

Profit on operating activities: Profit from recurring operations adjusted for the share-based payment expense for stock options and free shares, as well as the amortization of allocated intangible assets.

Disclaimer

This presentation contains forward-looking statements that may be subject to various risks and uncertainties concerning the Groups growth and profitability, notably in the event of future acquisitions. The Group highlights that signatures of license contracts, which often represent investments for clients, are more significant in the second half of the year and may therefore have a more or less favorable impact on full-year performance. In addition, the Group notes that potential acquisition(s) could also impact this financial data. Furthermore, activity during the year and/or actual results may differ from those described in this document as a result of a number of risks and uncertainties set out in the 2017 Registration Document filed with the French Financial Markets Authority (Autorit des Marchs Financiers, AMF) on April 26, 2018 under number D.18-0393. The distribution of this document in certain countries may be subject to prevailing laws and regulations. Natural persons present in these countries and in which this document is disseminated, published or distributed, should obtain information about such restrictions and comply with them.

About Axway

Axway (Euronext: AXW.PA), as a software company, unlocks digital experiences by connecting individuals, systems, businesses and customer ecosystems with digital infrastructure solutions. AMPLIFY„¢, Axways hybrid integration platform, connects data from any device anywhere, expands collaboration, fuels millions of apps and supplies real-time analytics to build customer experience networks. From idea to execution, Axways expertise in API management, secure file exchange and B2B/EDI integration have solved the toughest data challenges for more than 11,000 organizations in 100 countries. To learn more, visit http://www.investors.axway.com/en or Axway IR mobile App available on Apple Store & Android.

Appendices (1/5)

Axway Software: Revenue by business line
                     
1st Quarter 2018 (‚¬m)   Q1 2018   Q1 2017

Restated*

  Q1 2017

Reported

  Total

Growth

 

Organic Growth

License   8.2   9.0   9.6   -14.3%   -8.7%
Subscription 9.1 9.0 7.3 24.6% 1.5%
Maintenance 34.7 34.9 37.3 -6.8% -0.5%
Services   11.2   13.6   14.4   -22.0%   -17.8%
Axway Software   63.2   66.5   68.5   -7.7%   -4.9%
Axway Software: Revenue by business line
                     
2nd Quarter 2018 (‚¬m)   Q2 2018   Q2 2017

Restated*

  Q2 2017

Reported

  Total

Growth

 

Organic Growth

License   15.5   14.8   15.4   0.6%   4.7%
Subscription 9.5 9.2 9.8 -3.1% 3.3%
Maintenance 35.2 34.8 36.2 -2.8% 1.1%
Services   11.5   12.4   12.8   -10.2%   -7.3%
Axway Software   71.7   71.2   74.3   -3.5%   0.7%
Axway Software: Revenue by business line
                     
3rd Quarter 2018 (‚¬m)   Q3 2018   Q3 2017

Restated*

  Q3 2017

Reported

  Total

Growth

 

Organic Growth

License   13.9   11.8   12.0   15.7%   17.5%
Subscription 10.8 9.9 9.8 9.9% 9.3%
Maintenance 36.3 36.3 36.3 -0.1% -0.1%
Services   10.7   12.4   12.4   -14.1%   -14.4%
Axway Software   71.6   70.4   70.5   1.5%   1.6%
Axway Software: Revenue by business line
                     
4th Quarter 2018 (‚¬m)   Q4 2018   Q4 2017

Restated*

  Q4 2017

Reported

  Total

Growth

 

Organic Growth

License   18.9   28.1   28.3   -33.1%   -32.7%
Subscription 10.9 10.6 10.5 4.0% 3.3%
Maintenance 36.6 35.6 35.6 2.9% 3.0%
Services   10.8   12.1   12.0   -9.7%   -10.1%
Axway Software   77.3   86.3   86.5   -10.6%   -10.4%

* Revenue at 2018 scope and exchange rates

Appendices (2/5)

Axway Software: Revenue by geographic area
                     
1st Quarter 2018 (‚¬m)   Q1 2018   Q1 2017

Restated*

  Q1 2017

Reported

  Total

Growth

 

Organic Growth

France   17.3   19.5   19.5   -11.2%   -11.2%
Rest of Europe 14.5 15.7 15.8 -8.3% -7.5%
Americas 28.0 28.0 29.5 -5.1% 0.2%
Asia/Pacific   3.4   3.3   3.6   -7.5%   1.6%
Axway Software   63.2   66.5   68.5   -7.7%   -4.9%
Axway Software: Revenue by geographic area
                     
2nd Quarter 2018 (‚¬m)   Q2 2018   Q2 2017

Restated*

  Q2 2017

Reported

  Total

Growth

 

Organic Growth

France   19.9   19.1   19.1   4.2%   4.2%
Rest of Europe 18.0 17.8 17.9 0.6% 1.1%
Americas 30.3 30.5 33.2 -8.7% -0.7%
Asia/Pacific   3.5   3.9   4.1   -14.6%   -10.3%
Axway Software   71.7   71.2   74.3   -3.5%   0.7%
Axway Software: Revenue by geographic area
                     
3rd Quarter 2018 (‚¬m)   Q3 2018   Q3 2017

Restated*

  Q3 2017

Reported

  Total

Growth

 

Organic Growth

France   20.6   17.3   17.3   19.3%   19.4%
Rest of Europe 14.9 16.4 16.4 -9.3% -9.2%
Americas 32.6 32.6 32.8 -0.6% 0.0%
Asia/Pacific   3.5   4.2   4.0   -13.5%   -16.8%
Axway Software   71.6   70.4   70.5   1.5%   1.6%
Axway Software: Revenue by geographic area
                     
4th Quarter 2018 (‚¬m)   Q4 2018   Q4 2017

Restated*

  Q4 2017

Reported

  Total

Growth

 

Organic Growth

France   23.1   27.9   27.8   -17.1%   -17.2%
Rest of Europe 18.3 21.5 21.7 -15.5% -14.9%
Americas 31.4 33.1 33.3 -5.8% -5.4%
Asia/Pacific   4.6   3.7   3.8   19.7%   23.3%
Axway Software   77.3   86.3   86.5   -10.6%   -10.4%

* Revenue at 2018 scope and exchange rates

Appendices (3/5)

Axway Software : Consolidated Income Statement
                         
Full-year 2018 2018 2017 2016
  ‚¬m   % Rev. ‚¬m   % Rev. ‚¬m   % Rev.
Revenue 283.8   299.8   301.1  
of which License 56.5 65.3 81.3
of which Subscription 40.3 37.5 19.1
of which Maintenance 142.8 145.4 143.0
Sub-total License, Subscription & Maintenance 239.7 248.3 243.4
Services 44.2     51.6     57.7    
                   
Cost of sales 84.2 88.2 86.6
of which License and Maintenance 23.1 23.8 23.7
of which Subscription 21.7 21.1 12.7
of which Services 39.4     43.3     50.3    
                   
Gross profit 199.7   70.3% 211.6   70.6% 214.4   71.2%
                   
Operating expenses 167.8 171.1 163.7
of which Sales and marketing 83.3 83.8 81.9
of which Research and development 58.0 59.4 53.3
of which General and administrative 26.4 27.9 28.4
Profit on operating activities 31.9   11.2% 40.5   13.5% 50.8   16.9%
                   
Stock option expense -1.1 -1.3 -1.1
Amortization of intangible assets -8.3 -8.5 -7.9
Profit from recurring operations 22.5   7.9% 30.7   10.2% 41.8   13.9%
                   
Other income and expenses -4.2 -2.9 -6.7
Operating profit 18.3   6.4% 27.7   9.2% 35.1   11.7%
                   
Cost of net financial debt -0.7 -1.1 -0.4
Other financial revenues and expenses -0.9 1.8 0.5
Income taxes -5.6 -24.0 -3.7
Net profit 11.0   3.9% 4.4   1.5% 31.5   10.5%
                   
Basic earnings per share (in ‚¬) 0.52     0.21     1.51    
 

Appendices (4/5)

Axway Software: Simplified Balance Sheet
             
Full-year 2018 12/31/2018 12/31/2017 12/31/2016
  (‚¬m) (‚¬m) (‚¬m)
Assets
Goodwill 344.1 333.6 288.8
Intangible assets 42.3 48.9 49.8
Property, plant and equipment 13.4 14.4 14.5
Other non-current assets 22.9 23.7 49.6
Non-current assets 422.7 420.7 402.7
       
Trade receivables 65.6 71.1 78.2
Other current assets 29.7 31.2 25.3
Cash and cash equivalents 35.8 28.1 51.7
Current assets 131.1 130.4 155.2
       
Total Assets 553.8 551.1 557.8
Equity and Liabilities
Share capital 42.5 42.4 42.0
Reserves and net profit 320.3 301.7 332.8
Total Equity 362.7 344.1 374.8
       
Financial debt – long-term portion 41.8 47.8 35.5
Other non-current liabilities 11.4 22.5 10.3
Non-current liabilities 53.2 70.3 45.7
       
Financial debt – short-term portion 4.2 4.5 3.7
Deferred Revenues 75.2 67.3 74.5
Other current liabilities 58.4 64.9 59.1
Current liabilities 137.9 136.7 137.3
       
Total Liabilities 191.1 207.0 183.0
       
Total Equity and Liabilities 553.8 551.1 557.8

Appendices (5/5)

Axway Software: Cash Flow Statement
             
Full-year 2018 2018 2017 2016
  (‚¬m) (‚¬m) (‚¬m)
Net profit for the period 11.0 4.4 31.5
Net charges to amortization, depreciation and provisions 12.9 12.2 10.0
Other income and expense items 0.3 1.6 1.9
Cash from operations after cost of net debt and tax 24.2 18.2 43.5
       
Change in operating working capital requirements (incl. employee benefits liability) -3.6 -11.7 -5.9
Cost of net financial debt 0.7 1.1 0.4
Income tax paid net of accrual 1.2 22.0 0.5
Net cash from operating activities 22.6 29.6 38.4
       
Net cash used in investing activities -4.0 -57.5 -57.3
       
Proceeds on share issues 0.2 3.2 3.4
Dividends paid -4.2 -8.5 -8.3
Change in loans -2.9 13.3 31.3
Net interest paid -0.9 -1.1 -0.4
Other flows -3.0 -0.1
Net cash from (used in) financing activities -10.7 6.8 26.0
       
Effect of foreign exchange rate changes -0.3 -2.4 0.8
Net change in cash and cash equivalents 7.6 -23.6 7.8
       
Opening cash position 28.1 51.7 43.9
Closing cash position 35.8 28.1 51.7
 
Axway Software: Impact on revenue of changes in scope and exchange rates
             
Full-year 2018 (‚¬m)   2018   2017   Growth
Revenue   283.8   299.8   -5.3%
Changes in exchange rates -8.2
Revenue at constant exchange rates 283.8 291.6 -2.7%
Changes in scope +2.8
Revenue at constant scope and exchange rates   283.8   294.4   -3.6%
 
Axway Software: Changes in exchange rates
             

Full-year 2018 For 1‚¬

 

Average rate 2018

 

Average rate 2017

  Change
US Dollar   1.188   1.127   – 5.1%
     

1 Audit procedures have been carried out on the financial statements. The Statutory Auditors report is in the process of being issued.

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