Earnings Transcript for SOW.DE - Q1 Fiscal Year 2019

Otmar Winzig: Good morning, ladies and gentlemen. Welcome to Software AG's Analyst Telephone Conference and Webcast on Preliminary Results First Quarter of 2019. Yesterday evening, Software AG has preannounced preliminary results for the reported quarter. This morning, we also have published a P&L presentations used in this call. The full set of numbers including the balance sheet and cash flow statements will be published as planned on April 18th, the regular reporting date. Today's call will start with CEO, Sanjay Brahmawar followed by CFO, Arnd Zinnhardt. The presentations will be followed by a Q&A session. Our Chief Revenue Officer, John Schweitzer is also on the call to answer your questions. Because of the unplanned release, Sanjay and John are in the U.S. and call from Chicago, therefore please excuse some latency or possible minor quality of transmission. Arnd and I ensure the quality of Darmstadt. Nevertheless, we'll try to keep the call in the regular 1-hour time frame and cover as many of your questions as possible. Before we start, there are some housekeeping remarks. This telephone conference will also be broadcast via web. Access to the webcast is via our Investor Relations website. The webcast will display PowerPoint presentation charts related to this call. The same charts are on our website for download and after the presentations, you may ask questions. Please use only the dial-in phone number for posing questions because the dial-in numbers are also published on our website. For technical reasons, we cannot take any questions via e-mail during the conference call. The call and the webcast will be recorded and available for replay later today. With respect to capital market regulations, I would like to make the following safe harbor statement. Statements in presentation made in the course of this conference call and webcast include 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 technologies and changes in business strategy. Software AG does not intend to assume any obligation to update these forward-looking statements. Statements in presentation of this call and webcast contribute neither an offer nor recommendation to subscribe or buy in any other way securities of Software AG or any of the Company's that are members of the group at present or in future not does it form part of such offer and it should not be understood as such. Statements in presentations of this webcast do not constitute an offer for 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. Thank you for your patience. Now, let us start and I hand over to Chicago to Sanjay Brahmawar, the CEO of Software AG. Sanjay.

Sanjay Brahmawar: Otmar, thank you. Otmar, thank you and good morning everyone from me too. I'm happy to have the opportunity to explain where we are as a business and where we move from in Q1 to Q2. First of all, I'm pleased to say that at a group level we are tracking in line with our plan. We have some strong group numbers to share this morning with good growth across our overall business in total product revenue and in total license sales. Indeed, on some of our key group metric, we are ahead of consensus expectations for the quarter. I am proud of that and this forms part of a rational for today's call. However, you can see from our ad hoc that the revenue mix and specifically the individual segment revenue growth rate behind these group figures are not consistent in Q1 with the ambition that we have for 2019 as a whole. I want to talk you through that mix, the reason for it and explain why I’m confident that the Helix changes we have begun to implement put us on track to deliver for the full year. Let's look first at the group numbers. Based on the initial consolidation of our Q1 performance, we see group revenue for the quarter of €201.4 million. This is 6% higher in constant currency than Q1 last year and around 2% about the consensus range. Within that, total product revenue is up 10% year-on-year at €154.5 million and total license revenue of €42.6 million well above the previous year's figure. At a group profitability levels, we saw a Q1 EBIT performance of €43.2 million, which is in line with our prior year Q1 EBIT performance and comfortably ahead of consensus. Non-IFRS EBITDA margin for the quarter came in at 26% again ahead of the markets consensus expectation. Those are the group level figures and I will terms to the mix details in a moment. Before I do, I want to make clear for the avoidance of any doubt that our stated 2019 guidance ranges for DBP, Cloud & IoT and non-IFRS EBITDA margin remains unchanged. We continue to expect to deliver EBP revenue growth at constant currency of between plus 3% and plus 7%, Cloud & IoT revenue growth at constant currency of plus 75% and 125% and a non-IFRS EBITDA margin of 28% to 30% for 2019 as a whole. The one change we do make today to our guidance is a modification to our 2019 expectations for Adabas & Natural. You can see from our release that the major driver of Q1 growth was a higher-than-expected license revenue performance in Adabas & Natural itself driven by a higher number of major deals. The work we have done in our Adabas & Natural 2050 plus innovation program is clearly resonating among customers. Through this program, they are able to protect the Adabas & Natural's investments they have made and benefit from all that A&N has to offer in today's digital age. And so because of that trend where we previously expected to see a year-on-year movement of between minus 5% and 0% for 2019 in Adabas & Natural, we now modify that expectation to a movement of between minus 3 and plus 3%. Let's turn now to the revenue mix. Our DBP business excluding Cloud & IoT delivered 1% year-over-year revenue growth to €90.5 million. Our Cloud & IoT business delivered revenue of €9.5 million that's an uplift of 49% year-over-year in constant currency, but not yet within the 75% to 125% growth rate range we believe we can achieve. I am not satisfied with this performance nor our in quarter execution. I am sure most of you who met me and have engaged with me will understand that. But at the same time, this performance does not diminish my belief in our potential for growth in this segment. In DBP, excluding Cloud & IoT, license sales were down 7% year-on-year. This is attributable to license deals slippages not losses where deal signings have slipped from first quarter into the second. External factors including the 25-day government shutdown in the U.S. have had their impact here. Importantly, we do expect the slipped Q1 deals to close in Q2. This quarter-on-quarter lumpiness will remain a feature of our business while we evolved from license sales to subscription and thereby increase the recurring nature of our revenue. Q1 is a confirmatory reminder to me of why we are right to drive this transition. If we step back for a moment and look at DBP and Cloud & IoT together, the slower start is largely down to important in decisive actions we have taken to drive operational change. One such action was the decision to push back our sales kick-off event in Madrid. This was a sensible decision which allowed us to truly wow our customer and partner audience with our new Freedom as a Service message. The later date stole few weeks Q1 sales momentum from us, but it was absolutely the right note on which to start our 2019. SKO and many other customers and partners interactions I have week-to-week prove to me that the market has not stopped moving in our favor. I believe passionately that our product offering remain best-in-class and aligned with the major market trends I outlined to you all in our Capital Market Day. The hardest evidence of this is the way in which we continue to regularly beat our competitors head-to-head. That winning formula however can only continue to play out, if we make changes to how we operate. In Q1, we have focused on one particularly important initiative, which is a major reorganization of our sales in North America. This is the first of many areas we committed to reshape and we have done so in a root-and-branch in nature. We have removed and addressed areas of underperformance, added new additional people to our team who have great potential but require time to adapt to the new roles, up skills and empowered existing colleagues who have the potential to be real enabler of change, and we have genuinely taken tough decisions that have hampered us in the short-term but put us on much firmer footing to deliver on our long-term potential. In Q1, we saw slower execution because of these changes. While there is much road left to travel, I am seeing the green shoots of this change come through. For example, while we have walked some hard yards in North America these past few months, I encourage you to remember that our Q1 performance in EMEA was at a record level. This time last year, Software AG did not sign a single DBP deal about €500.000 in EMEA, our most established region. This quarter, we closed our Q1 having signed six deals of this magnitude. Here our stated growth areas are making a powerful contribution to our progress. Another way to look at our progress is through the lens of customers wins and we have many exciting ones to talk about. In IoT, we have made good progress in the manufacturing space, growing our existing relationships with Novo Nordisk, the world's largest provider of insulin. Together we have embarked on a journey to explore the potential of predictive analytics and machine learning for them, as they continue to play the part in the fight against diabetes. In integration, we secured a fantastic win the British Army which is now adopting webMethods as its platform of choice for API management. This distinguish customer was also leverage ARIS for enterprise architecture and intends to deploy Alfabet in 2019. In Cloud, Air Canada selected our ARIS cloud solution to improve its new digital reservation system. They are using our expertise to target inefficiency and reduce complexity while at the same time ensuring a seamless interaction for agencies and external parties with their system. In February, we also announced a landmark agreement with Telstra a major telecom customer, who is now partnering with us to create a new solution for the automated management of water meters. Our solution provides off-the-shelves monitoring and data analysis tools in a new IoT-used case of Software AG. It's an exciting endeavor because it demonstrates the versatility of our offering and our ability to reach into existing customers and grow our share of wallet. In business transformation, we signed a major new ARIS deal with Google to update and optimize its internal finance division back-office operations. This is a fantastic win where one of the most successful technology companies on earth has chosen to work with us to transform. It proves that not only old work companies need to transform and it underscores just why our differentiated proposition is so important in this arena. And just hot off the press, we have Vodafone where we have signed a new agreement on IoT where Vodafone will be using our IoT solutions. So, we are wining, wining big and we want to continue to win that is where Helix comes in. Our Helix strategy is designed to deliver sustainable, profitable growth in the medium-term. In February, we took you through the detail of our strategy and we are making good early progress with implementation in our product focus, in our operating model, in our hiring efforts and in the groundwork we doing on our subscription shift. I see real action taking place right across our organization. It underscores my confidence in the ability of our team to execute and get us to our Helix stores. Across our business, a new operating model has been implemented. In February, I committed to creating a model with clear leadership, clear alignment to market opportunity and clear -to-end accountability. I now see this bedding down in how we operate today. We made a similar commitment to focus all our considerable R&D energies on areas best able to deliver growth. As we enter Q2, around 200 highly skilled R&D colleagues have transitioned their focus to accelerate product are. They are clear in the technologies they now aim to develop and they're each beginning to grow in their new roles. There is excitement in these teams and it is energizing to see. Optimization of our sales processes and go to market is of course key to our long-term success. So too is our evolution into a subscription-focused business. I'm pleased to say that good progress is being made in both of these areas in line with our timeframe and plan. So, in summary at a group level, our key metrics are in line with our plan and we have delivered a group performance that is ahead of consensus. Our Adabas & Natural business is performing ahead of expectations and so, we have positively modified our guidance for this business, at the same time reconfirmed all our 2019 guidance ranges. Our DPB and Cloud & IoT businesses have not delivered a performance consistent with our overall expectation for 2019, but we are not changing those expectations. We see deal slippages from Q1 coming through to conclusion in Q2, we are encouraged by the North American sales team changes we have made and how we they are bedding down, and by clear signs in our new wins that our Helix strategy remains right. So Arnd, let me handle briefly to you as I know you have some additional financial details you wish to share.

Arnd Zinnhardt: Thank you, Sanjay, and good morning ladies and gentlemen, and a warm welcome to our conference call also from my side. Like Sanjay I would like to keep the analysis of Q1 as brief as possible to spend more time on questions you might have; however, I would like to make some opening remarks which in points that Sanjay already also embarked upon. So, total revenue grew by 6% net of currency. And as Sanjay mentioned, this growth is predominantly driven by license. And in fact, we grew our license revenue by 25% whereas digital ex-IoT Cloud showed a slower start into the year. Adabas net flow demonstrated a superb performance of doubling license revenue in the first quarter. This performance and the pipeline ahead of us made us believe that this part of the business will do better than projected three months ago. Consequently, we raised our Adabas & Natural guidance. Profitability measured in non-IFRS operational EBITDA came in at a margin of 25.6%, a good performance well in line with our annual outlook. As expected, the strong FX impact did not continue as the euro weakened against the U.S. dollar. As a consequence, we had tailwinds out of the euro-U.S. dollar exchange rate. All other currencies had an effect of less than 1 million. The net effect of all other currencies was basically zero. The DBP licenses amount to €21.7 million, which is equivalent to a decline of 8%. This decline in license is predominantly due to a weak performance in North America. Sanjay addressed this part in his presentation and will answer respective questions on this topic. Maintenance showed an increase of 1% to 2%, resulting in a flattish digital ex-IoT Cloud product performance. In line with our strategy project, Helix, we invested into sales and marketing, compared to Q1 2018, the respective costs increased by 18% to 45.8 million. The respective investments are meant to predominantly strengthen the positioning in North America as well as the central marketing team. The R&D expenses increased by 4.6 million or 19%, the increase is due to the acquisitions of TrendMiner and Built.io, which were not included in the prior year Q1 number to further investments into existing IoT and cloud R&D team and due to some restructuring costs in the life of the project Helix. As of to date, roughly 60% of our digital R&D people work in low cost locations. These individuals are doing a fantastic job in the highly contributing to our leading edge technology. Let me also highlight that ARR continued to grow double-digit exceeding 300 million. Let me continue with Cloud IoT. The overall IoT Cloud business showed again a dynamic growth of 47%. This growth was driven by licensed plus 70% and maintenance plus 89%. In particularly, a TrendMiner has some nice successes, especially in Germany. That usage space grew by 26%. This growth was generated almost in the all regions around the globe. And finally, ARR almost doubled year-on-year. In 2018, Adabas & Natural grew by 2% net of currency. This positive trend continued or even accelerated in Q1. The license result was honestly above our expectation 17.8 million or growth of 102%. Biggest contributors to this success were EMEA and APJ region. In addition to the license development also maintenance grew by 2%. This positive development is achieved in almost all regions. Due to this performance and a strong pipeline, we decided to increase our outlook for 2019 to plus or minus 3%. All those elements led to a segment results for the first quarter of 71.7%. Actually, I looked into my historic files. This leads me to believe that the result achieved is one of the best or even the best to one Adabas & Natural margins ever. The consulting business saw revenues slightly above last year, turning around the decline in trend observed in the last quarter. Our Q1 margin top last year's achievement and regarding gross margin as well as the segment margin. With the segment margin of 14.4%, I have the luxury to present a pleasing result. Total revenue grew by 6% mainly driven by Adabas & Natural license. Consequently, the percentage of product revenue compared to total revenue increased from 75.2% to 76.7%. This development combined with a stronger consulting profitability boosted the total company's gross margins from 73.5% to 75.4% or 190 basis points. During our Capital Market Day in London, we informed you that we will further invest in sales and marketing. The respective sales and marketing costs increased by 15% or $9 million. Most of the investments were allocated to the central marketing team as well as North America. Compared to last year, we had net hired of 68 full time equivalents. Regarding the R&D expenses, I'll refer to my explanation made five minutes ago. In addition, let me highlight that we added 142 full-time equivalents in total to our R&D organization. This slightly higher cost level and thanks to a very strong Adabas & Natural license, we were able to keep absolute EBIT on prior year's level. The overall margin development is aligned with our annual guidance given three months ago. The comments regarding the operating margins can be short and crisps. Based on the underlying set of numbers, we observe a "normal pattern." Like in Q2, the delta between IFRS EBIT and operating EBITDA, non-IFRS amounts to $9 million. Consequently, the operating result is about 2018 Q1 and came in at $51.6 million. This is equivalent to a margin of 25.6% in line with our expectation at the beginning of the year. The first three months support our guidance given earlier this year. Ladies and gentlemen, let me close my remark on Q1 just making one statement regarding our cash flow. We have not finalized our work yet and will provide you with a detail next week. However, I have good reasons to believe that the operating cash flow will be around the mid 50 plus minus. Otmar, over to you.

Otmar Winzig: Thank you, Arnd. Thank you, Sanjay. So, ladies and gentlemen, we know coming to the Q&A session and you may ask questions. Operator, please be kind to repeat instructions how to proceed in the question call.

Operator: [Operator Instructions]

Otmar Winzig: Thank you. So the first question goes to Toby Ogg from JP Morgan. Toby?

Toby Ogg: Just a question on the guidance for Adabas & Natural. Clearly, you've upgraded that for the full year yet have held the guidance for the EBITA margin. Could you perhaps provide some insight into where the margin drag is actually coming from as I would probably have expected sort of a strong expectation for the A&N business to result in a better margin for the group overall?

Arnd Zinnhardt: Well, Toby, at the end of the day, we need to differentiate between the average margin and the incremental margin. So whereas the average margin on Adabas & Natural is obviously better than in any other business line, the incremental margin on the extra dollar on license is exactly the same or more or less exactly the same in Adabas & Natural and digital. So therefore, you need to compare the total license number with the profitability. And this is very much in line with the expectation. So if you take the increase in license and compare that to the profitability, you see that we have overachieved compared to guidance on the license side and the same is true for the profitability.

Otmar Winzig: Next question goes to Alastair Nolan of Morgan Stanley. Alastair?

Alastair Nolan: Just a quick one specifically on the reorganization of the sales force. Could you just give us a bit of a better guide as to when we get the benefit in terms of timing? Should that be Q2, Q3 when the full impact is felt? And then also on the deal slippages, maybe could you give us a sense of the size? And is that maybe a reason why you're confident in the rebound from Q2 onwards particularly in DBP?

Sanjay Brahmawar: Alastair, it's Sanjay. Thanks for the question. So look, in terms of the rebound, first and foremost, if you think about the miss on the consensus, it was roughly in the range of about €4 million to €5 million on license. And that was specifically related to a few deals that have moved across. And I think I mentioned in my first part that we had a few slippages. Now we're confident about these slippages. They are not lost. We have not lost these deals and we are confident about Q2 closure. On the second thing which is about the changes that we made in North America, so we made some changes in terms of taking out underperformance. We added some new capacity. And we have now been focusing on building pipeline with obviously the existing people that we have up-skilled and trained in our SKO and of course, the new people that we've added. So we believe that we will start seeing the impact of all this new pipeline building, new capacity addition and focus on the product areas in Q3, Q4. So the second half is where we will see the impact and power of North America. However, in the meantime, as I said, our EMEA region as example, the APJ region example are really performing very strongly. And we expect that, that performance will also come through in Q2. So hence, that leads to our confidence. And the fact that this initial start challenges of North America we will be able to catch up in the second half.

Otmar Winzig: The next question goes to Michael Briest from UBS.

Michael Briest: A couple for me. Could you give some context on the Vodafone contract? I guess financially not that significant given the Q1 performance, but what are you actually doing with them and the potential there? And then in terms of the sales changes, can you maybe sort of talk to the level of change in North American sales force and whether this is something which will happen in Europe and Asia in time or are you happy with the sort of quota carriers there?

Sanjay Brahmawar: Yes. So Michael, thank you for the question. First and foremost, very happy to talk about Vodafone. And in fact, 2 weeks ago, I was there and meeting with Vodafone. Look, this is a very important deal from the perspective of Vodafone in using our Cumulocity platform within their IoT solutions. Of course, we will be announcing later on boldly with Vodafone about this deal, but in fact, it relates to IoT offerings that Vodafone will be offering to their end customers and our solution is embedded into their capabilities. So that's why we're excited because it's a great embedded relationship. The second question about the quota carriers, yes, first and foremost, in the last or at the Capital Market Day, I had mentioned that our focus is going to be on increasing capacity in quota-carrying sellers. And that's what we've been doing. So the net new additions that we've done in North America, they are all quota-carrying sellers. And while it takes time to obviously bed down any new capacity, we are very much focused on selecting and hiring the right people into North America. North America is a very buoyant talent market so it has been challenging to bring new people on board, but we made good progress now and we are focusing on bedding down these quota-carrying sellers.

Michael Briest: But is it completed in North America? Have you got everybody you want or will this be still affecting Q2? And can you maybe say how many people, the percentage of people that have changed?

Sanjay Brahmawar: I missed that part. So we have added a total of about 30%, 50% of the people that we had to add in North America that we completed and we will carry on adding more in Q2.

Otmar Winzig: The next question goes to Martin Jungfleisch from Kepler Cheuvreux. Martin?

Martin Jungfleisch: Yes. I have 2. Also, the first one is on headcount. I see that headcount in sales and marketing was up by 10 people in Q1. Could you provide some color how you expect this to develop going forward? And also, the headcount in the U.S. was lower in the first quarter compared to Q4. Was this also more or less driven by a reduction in total professional services personnel or did you also lose some sales and marketing there? And in professional services, do you expect to reduce the number of people going forward? And what impact would this have on your Consulting business line revenue? And also, if you could provide some quick overview on how the new strategy and sales incentives were received by your employees. That's the first question. And the second question is on the Adabas & Natural line. I want to understand if this growth in the past few quarters was just driven by IBM's zIIP enablement and also the extended support or is there any other drivers? And also, how long you would see these tailwinds to persist?

Sanjay Brahmawar: Okay. Martin, there were 2 or 3 questions there so I'll try to answer. First and foremost, let me just talk about the total number of people. I think Arnd had mentioned that year-on-year we've increased 68 people. I think that's the number that you will remember, 30 of those North America. Of the 30, 14 were added in the Q1 actually. So we've been continuously stepping up the addition of capacity in North America and we will carry on adding, as I mentioned previously. I think your second question was around professional services. So we made a commitment at the Capital Markets Day that we were shifting the attention of our Global Consulting Services to be really focused around both obviously delivering our implementations at our customers, but also as professional services being able to support the ecosystem and the license sales. And I'm glad to say that actually this transformation mindset shift in professional services is moving very smoothly. In fact, you can see that actually in our Q1 our professional services grew. And they are -- in fact, we are now putting a lot of energy to be able to actually bring our partners in and at the same time being able to use more experts from our professional services team. So I don't see any negative impact of this going forward in our professional services. I only see that we would actually leverage professional services more to drive better ecosystem results for us. So I think that was your second question. Third question was Adabas & Natural. And look, Adabas & Natural, we are benefiting from a couple of things in Adabas & Natural. First and foremost, we launched a very exciting 2050+ program which I think you are aware about. So we are seeing the response of our customers which have been very positive. And of course, we are seeing the impact of deals and license extensions, capacity extensions with our customer. So that's kind of one element that is helping and driving this excitement in Adabas & Natural. Of course, we've also had a benefit from the product cycle zIIP which carries on now. And we will continue to see some benefits from this during the year 2019. I think Adabas & Natural for us is really an example of when you have a focused strategy on a product area, you have a focused team totally driving that particular area and you have experts in the market who really understand Adabas & Natural, talking to customers, you can drive some very good results. So this is exactly the kind of focus we are bringing in the market around our other segments, integration and API, IoT and analytics and ARIS and Alfabet. And I expect that slowly we will start seeing the same kind of strong results that we're demonstrating in Adabas & Natural.

Otmar Winzig: So next question then goes to Knut Woller of Baader Bank. Knut?

Knut Woller: Just a couple of quick ones. Regarding the share of North America within your DBP unit, is that broadly in line with the share of revenues derived in U.S. dollars? Is there any deviation? And then secondly, we talked a lot about DBP excluding Cloud/IoT. Also, Cloud & IoT was a bit weak. Can you give us some reasons here what gives you the confidence regarding the acceleration that is needed with regards to the full year targets in the remainder of the year?

Arnd Zinnhardt: Knut, I'll take the first one and then I pass over to Chicago. The first one was currency, U.S. dollar and American business. Almost equal, I would say, yes? There might be one of the other contract in emerging countries where we insist on paying in U.S. dollar, but in general that is the America performance. And if you just look to the U.S. dollar and you want to elaborate on the North American performance then you should add the Canadian dollar to that number as well, please.

Sanjay Brahmawar: Yes. Thanks, Arnd. And I'll take the second part which is effectively around our IoT and analytics business. And again, here, of course, there is the aspect of a few slippages on deals. But more importantly is, how does it look for Q2 and how does it look for the rest of the year? And I think what I can be very confident about is that we have a very strong pipeline on IoT and analytics. We are not resting. We are running some very specific campaigns on IoT and analytics with our customers. We have a 3x coverage from our pipeline perspective. And we believe that we have exactly the number of deals that are needed to be able to drive IoT and analytics results. So we are -- yes, of course, 50%. By any means, 50% is not a bad result, but of course, not in line with our expectations of 75% to 125%. But we believe we can catch up on the IoT and analytics piece and deliver to the expectations of 75% to 125%.

Otmar Winzig: Is it okay, Knut?

Knut Woller: Yes. And are you willing just to give us an idea about the U.S. business in DBP what the actual numbers were. So what was the magnitude of the decline to get a feeling for that? Are you willing to disclose that or not?

Arnd Zinnhardt: Sanjay elaborated on that already. So U.S. was very disappointing, put it that way. And you were already putting the finger into the wound, if I may say so, when addressing the U.S. dollar performance. And if you compare Q4 to Q1, you already see the magnitude. So U.S., the North American market only contributed some 15% to 20% of the overall digital license number, which is clearly under the normal 1/3 that we would expect.

Otmar Winzig: So, this is an analyst and media call that's now representing by Reuters. Next question goes to Nadine Schimroszik from Reuters. Nadine?

Nadine Schimroszik: I just wanted to ask about, well, possible deals in the future. You mentioned at the beginning of this year that you have around €1.5 billion to invest. And are you already in contact with companies? Are there projects you are ready to light up?

Sanjay Brahmawar: Let me take that, Nadine. Look, Nadine, Helix, as I said at the Capital Markets Day, is a strategy that is based on organic growth. So you will find that we are fully focused on execution of Helix and making sure that these changes that we are making are bedding down to drive properly organic growth in our company, number one. Of course, in parallel, we have a work stream that is working and busy on identifying opportunities to be able to help us accelerate. But as we said at the Capital Markets Day, we are going to be very focused in this M&A activity. And I'll just repeat again what I said in terms of our area of focus. We aim to be a leader in integration of applications, integration of cloud, integration of IoT devices and integration of data. And if you look at our portfolio on apps, we are very strong. On cloud with our Built.io acquisition, we are very strong. In IoT, we are very strong with Cumulocity and TrendMiner, et cetera. And in the space of data, we are looking at how we can strengthen ourselves. So we are busy and we will carry on.

Otmar Winzig: The next question goes to Johannes Ries of Apus Capital.

Johannes Ries: Maybe a follow-on to the postponed deals. Is it right to expect because you mentioned you expect maybe a recovery of the U.S. business in the second half since most of the postponed deals which will now come back in the second half had even been -- despite the disappointing development in U.S., in Europe and had already maybe 1 or at least 2 postponed deals already signed? The second question, maybe I missed it, but I don't think you mentioned it. Can you give us a feeling about how the whole pipeline in the DBP business have proceeded compared to last year, maybe percentage upside or not? And maybe some words about the partner program. You didn't mention how much maybe you accelerated or maybe proceed during the last weeks on the partner topic.

Sanjay Brahmawar: Okay. Johannes, thank you for the question. Let me start with the first one which is, absolutely, our full focus has been from the 1st of April on bringing in our slipped deals within the first 2 weeks. Our expectation is, as I said, there was roughly between €4 million or so which we missed the consensus by. Our expectation is between €2 million to €3 million of that will be closed in the first 2 weeks of April. So that is sort of just helping you understand that we are off to a fast start in Q2. The second question was around the ecosystem. So at the Capital Markets Day, we announced that we have appointed a new General Manager for the ecosystem, Mike Saxton, who we have taken from our APJ region and with a lot of expertise. And he has been very busy on our ecosystem area. Some of the areas that we are progressing very strongly are, for example, our partnership with AWS, where all our products are now launched on the container marketplace and are getting traction. We have fully launched our Dell partnership with the Edge servers where Cumulocity is installed on the Edge servers. That is fully in place. And now we are in conversations with Microsoft and other ISVs such as Adobe to be able to make significant announcements in quarter 2. So you will see more of our ecosystem plays coming out as we progress through Q2 and Q3.

Johannes Ries: But maybe on the pipeline, how it may be improved or changed compared to the year ago.

Sanjay Brahmawar: Yes. Sure. I mean, John is also sitting right next to me, so I'll ask him to make a comment on the pipeline because he's been very busy with campaigns.

John Schweitzer: Yes. Johannes, this is John. So with respect to the pipeline, as Sanjay mentioned, we've got currently -- I'm working the pipe on a rolling 3-quarter basis for the rest of the year or remainder of the year about 3x. Our focus now is increasing that to approximately 3.5x. If I could just speak to IoT for a moment. The strength of that pipeline is even more significant at about 4, 4.5 or so. On that basis, our focus is on nurturing that pipeline around use case development and making sure that we use our broader portfolio to differentiate in areas of integration and analytics. So I'm confident as I look forward into the pipeline that the development that we've made over the last 150 days since I've been here and the last year will result in steady and consistent performance for the second half of the year.

Otmar Winzig: Okay. We have no more questions. I think it's one of the first quarterly calls I remember. So we have some more time. And Sanjay, I hand over to you for closing remark then.

A - Sanjay Brahmawar: Okay, Otmar. Thank you very much. So thank you very much for your interest. Look, I just wanted to conclude to say, Helix for us is a journey. We are doing the right things to bring Software AG back to growth, but in a profitable, sustainable way. So we are going to do it step by step and we are making sure that the changes that we make bed down in our organization and our people are able to be able to deliver on the commitment we make. So I feel very strong about the performance that we've had in Q1. Yes, we want to step up on DBP, no doubt about it. But as an overall group, we have beaten consensus. So that's something we can be proud about. Our Adabas & Natural continues to be exceptionally strong and that is really good for us in the portfolio. And now we have a tremendous amount of focus in terms of pipeline, capacity and focus that we need in the market around our segments. And I'm very confident that, that should start delivering results in the second half as we progress through 2019. So, thank you very much for your interest and look forward to updating you and keeping you informed about our progress on our strategy. Thank you, Otmar.

Otmar Winzig: Thank you, Sanjay and John in Chicago and Arnd here in Darmstadt. So we close this call. Please let me remind you that the full set of financial data with balance sheet and cash flow statement will be available as originally planned in April 18. However, we will not host another call then. Thank you for your participation today. And as always, if there are any further questions, the IR team is happy to help you. Goodbye for now and thank you. Have a good morning.

Operator: Ladies and gentlemen, the conference has now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.