Aug 30, 2017

USU Software AG: Positive International Business Underpins Growth

  • Sales growth of 17% in Q2 2017
  • International sales increased by 28% in Q2 2017
  • License income climbs 34% in Q2 2017
  • Investment outside Germany makes earnings impact
  • Business performance as planned in the first half of the year
  • Sales and earnings planning for the year as a whole and 2020 confirmed

The USU Group generated a 17.0% increase in consolidated sales (IFRS) to EUR 19,984 thousand in Q2 2017 (Q2 2016: EUR 17,074 thousand). This was partly due to above-average growth in the foreign markets of France and the USA, which resulted in a 27.5% increase in sales generated outside Germany to EUR 6,037 thousand (Q2 2016: EUR 4,734 thousand). Here USU benefited above all from the targeted expansion of investment in sales and marketing outside Germany and the new USU subsidiary EASYTRUST SAS.

The licensing business was particularly successful in this context. USU expanded it by 34.2% year-on-year to EUR 3,158 thousand in the reporting quarter (Q2 2016: EUR 2,354 thousand). At the same time, the company increased its maintenance sales, including software-as-a-service (SaaS) revenue, by 18.6% to EUR 5,588 thousand in the same period (Q2 2016: EUR 4,710 thousand). Consulting business was up by 12.4% year-on-year at EUR 10,858 thousand in the second quarter (Q2 2016: EUR 9,660 thousand).

Due to strategic investment in the expansion of international business, the USU Group’s cost base increased by 26.1% year-on-year to EUR 19,291 thousand (Q2 2016: EUR 15,297 thousand). As expected, the development of earnings therefore fell short of the figures for the previous year. For example, USU’s EBITDA fell by 56.2% as against Q2 2016 to currently EUR 981 thousand (Q2 2016: EUR 2,241 thousand). At the same time, EBIT declined by 82.0% from EUR 1,585 thousand in the second quarter of 2016 to EUR 286 thousand in the reporting quarter. The USU Group’s consolidated net profit (IFRS) fell from EUR 1,376 in the same quarter of the previous year to EUR 62 thousand. This corresponds to earnings per share of EUR 0.01 (Q2 2016: EUR 0.13).

Adjusted for the extraordinary effects of acquisitions, USU’s adjusted EBIT halved year-on-year in the second quarter of 2017 to EUR 876 thousand (Q2 2016: EUR 1,960 thousand). Adjusted consolidated earnings dropped by 65.1% to EUR 607 thousand (Q2 2016: EUR 1,740 thousand).  This corresponds to a decline in adjusted earnings per share from EUR 0.13 in the second quarter of 2016 to currently EUR 0.06.

Over the first six months of fiscal 2017, the company increased its consolidated sales (IFRS) by 14.2% year-on-year to EUR 38,871 thousand (Q1-Q2 2016: EUR 34,031 thousand). USU benefited from stronger international business in the first half of the year. In the period under review, USU increased the sales generated outside Germany by an above-average 17.1% as against the same period of the previous year to EUR 11,063 thousand (Q1-Q2 2016: EUR 9,447 thousand). Accordingly, the share of consolidated sales generated abroad increased from 27.8% in the previous year to 28.5% in the first half of 2017.

The operating cost base of the USU Group increased by 22.5% year-on-year to EUR 37,826 thousand in the first half of 2017 (Q1-Q2 2016: EUR 30,873 thousand). This reflects firstly the higher level of investment in marketing and sales outside Germany and secondly the costs of unitB technology GmbH and EASYTRUST SAS, which were acquired in the period under review. In line with planning, USU invested in the continuing development of EASYTRUST software products and merging them with existing USU Group products in the period under review. The USU Group’s cost increase also resulted from higher staff costs owing to the strategic expansion of the Group’s workforce to 639 (Q1-Q2 2016: 531) in order to successfully implement the medium-term growth target for 2020.

The earnings development in the first six months of 2017 fell short of the previous year following the broader investment in further growth outside Germany. Accordingly, EBITDA declined by 54.4% to EUR 1,777 thousand (Q1-Q2 2016: EUR 3,895 thousand). Adjusted for depreciation and amortization of EUR 1,352 thousand (Q1-Q2 2016: EUR 1,301 thousand), USU generated EBIT of EUR 425 thousand in the same period (Q1-Q2 2016: EUR 2,594 thousand). Net finance costs amounted to EUR -62 thousand in the first half of 2017 (Q1-Q2 2016: EUR -44 thousand). Taking into account the income tax expense of EUR -416 thousand (Q1-Q2 2016: EUR -292 thousand), consolidated net profit declined from EUR 2,258 thousand in the first half of 2016 to EUR -53 thousand in the first six months of 2017. Earnings per share therefore amounted to EUR -0.01 (Q1-Q2 2016: EUR 0.21).

The increased level of investment outside Germany meant that adjusted EBIT declined by 53.0% year-on-year to EUR 1,565 thousand in the first half of 2017 (Q1-Q2 2016: EUR 3,328 thousand). In the same period, adjusted consolidated net profit fell by 66.0% to EUR 1,010 thousand (Q1-Q2 2016: EUR 2,970 thousand). Adjusted earnings per share declined accordingly from EUR 0.28 in the previous year to EUR 0.10 in the period under review.

The Management Board expects the growth trend recorded in recent years to continue in 2017 as a whole. Impetus from the core market of Germany will be accompanied by growth in product business outside Germany in particular, especially in the USA, Canada and Central Europe. In view of the current forecast and the development of the orders on hand, which increased by 6.2% to EUR 43,023 thousand as of June 30, 2017 (June 30, 2016: EUR 40,512 thousand), the Management Board confirms the 2017 Guidance for the USU Group. It is therefore anticipating an increase in consolidated sales to between EUR 86 and EUR 91 million (2016: EUR 72.1 million) with a rise in adjusted EBIT to between EUR 10 and EUR 11.5 million (2016: EUR 9.6 million). At the same time, the Management Board is confirming its medium-term forecast for the USU Group to 2020, with sales set to rise to EUR 140 million and adjusted EBIT expanding to more than EUR 20 million.