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Corporate News | Positive performance continues in third quarter of 2019

  • Revenue up 6% to EUR 64.1 million in the first nine months of 2019 (9M/2018: EUR 60.5 million)
  • Strong EBIT growth of 33% to EUR 3.2 million (9M/2018: EUR 2.4 million)
  • Consolidated profit up 20% to EUR 2.4 million (9M/2018: EUR 2.0 million)
  • Incoming orders up 9% to EUR 72.0 million (9M/2018: EUR 65.7 million)
  • Orders on hand as of September 30, 2019 at EUR 22.8 million (September 30, 2018: EUR 16.3 million)
  • 2019 guidance confirmed: annual revenue of EUR 88 million and EBIT of EUR 4 million expected

Softing AG (ISIN: DE0005178008, Prime Standard) today announced its financial figures for the third quarter and the first nine months of 2019. The positive trend seen in the first six months has continued in the third quarter of the year, lifting all key financials significantly above the figures recorded in the first nine months of 2018. In the first nine months of 2019, consolidated revenue rose by around 6% to EUR 64.1 million, up from EUR 60.5 million in the prior-year period. Against the backdrop of a weak economic environment, incoming orders even grew by almost 9% to reach EUR 72 million (previous year: EUR 65.7 million).

In the third quarter, an improved product mix again contributed to a disproportionately high increase in earnings. While EBITDA rose by around 48% to EUR 8.9 million in the first nine months (9M/2018: EUR 6.0 million), EBIT increased by around 33% to EUR 3.2 million (9M/2018: EUR 2.4 million). Accordingly, consolidated profit improved by 20% to EUR 2.4 million compared to EUR 2.0 million in the first nine months of 2018. As of the September 30, 2019 reporting date, Softing AG had cash and cash equivalents of EUR 15.0 million (September 30, 2018: EUR 9.7 million) and is therefore fully financed for organic growth.

Despite a challenging economic environment, the Industrial segment made a strong contribution to earnings and once again demonstrated its leading role within the Group. Revenue in this segment rose by 11.3% to EUR 42.3 million in the first nine months of the year (9M/2018: EUR 38 million). Our subsidiaries in the USA and Europe made key contributions in this segment. The acquisition of all products of US-based Phoenix Digital Corporation (PDC) is an excellent addition to Softing's portfolio of high-quality communication solutions in the Industrial segment, thus further enhancing Softing's position in providing IIoT solutions in the premium performance segment and opening up new markets. The Executive Board expects this acquisition to generate additional revenue of up to EUR 3 million annually in the coming years. Softing’s Asian business and its fledgling subsidiary in China also recorded growth. This applies not only to revenue but also to preparations for new business, providing a solid foundation for 2020 and beyond.

The performance of the Automotive segment is also promising, with revenue bucking the sector trend to rise by 12.8% to EUR 14.8 million (9M/2018: EUR 13.1 million). EBIT improved to EUR 0.1 million (9M/2018: EUR -0.3 million). This increase in earnings is all the more noteworthy as the figure for the first nine months of 2019 is still impacted by forward-looking investments of more than EUR 1 million made for the subsidiary GlobalmatiX, which is currently being set up. This is a result of investments in the segment’s traditional onboard and offboard diagnostics software business, where Softing is primarily developing software tools that offer customers the distributed development work and dynamic diagnostics structures they need to create the technical foundations for semi-autonomous driving in an age of fundamental upheaval.

GlobalmatiX AG, which has been integrated into the Automotive segment, is currently starting to conduct business with its first major customers. This involves processing existing customer requirements and adding supplementary ones. Most of the investments are being made to set up a team and the respective tools that will largely automatically record data for new vehicles or those modified by the manufacturer. With the number of connected vehicles scheduled to be expanded into the tens of thousands in 2020, this is essential for providing services effectively and efficiently. At the same time, Softing is in contact with a number of decision-makers at manufacturers and major fleet operators as part of a large-scale sales and marketing campaign. The feedback so far has been highly encouraging.

In the IT Networks segment, revenue continues to be affected by the discontinuation of the low-margin distribution business, which was still not offset completely despite the expansion of the proprietary product business. In the first nine months of 2019, this resulted in a decline in revenue of just over EUR 2 million to EUR 7 million. Combined with high development costs, of which only a portion was capitalized, this also depressed consolidated EBIT by EUR 0.7 million. The newly developed NetXpert will make the industry’s best-performing qualifiers available for distribution in the fourth quarter, which is a strong quarter in terms of revenue. The new verifier product line, which originally was expected to launch in this period as well, is scheduled to be completed in the second quarter of 2020. IT Networks will then be able to offer its customers a completely new, internally developed range of state-of-the-art verifiers in 2020, which will replace previously purchased devices and significantly increase the profitability of the IT Networks segment for years to come.

2019 guidance confirmed

Dr. Wolfgang Trier, Chief Executive Officer of Softing AG: “Although our earnings figures do not yet meet our medium-term targets, they are moving in the right direction despite the difficult environment. Having an international strategy, keeping our products and services up to date and cultivating long-term customer relationships has paid off and offset isolated declines. Overall, we are pleased to be able to confirm the Group’s guidance despite the highly challenging economic environment. We expect to generate annual revenue of EUR 88 million and earnings (EBIT) of EUR 4 million.”

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