PARIS–(BUSINESS WIRE)–Regulatory News:

Axway (Paris:AXW):

Axway Software’s Board of Directors, chaired by Pierre Pasquier, today approved the financial statements for the first half of 2021, which were subject to a limited review by the statutory auditors1. The Board of Directors welcomed the company’s growth and operational performance, in line with ambitions.

Patrick Donovan, Chief Executive Officer, declared:

“In line with the start of the year, Axway achieved excellent sales performance in the second quarter of 2021. Throughout the first half of 2021, the Subscription business drove Axway’s growth and this trend, supported by customers’ increasing willingness to adopt flexible contractual models, should continue going forward. As recently presented at our Capital Markets Meeting, our strategy is now based on two fundamental pillars. On the one hand, our core market leading products, where satisfying our existing customers is our top priority and we aim to maintain our leadership. On the other hand, our Amplify offering, based on our recognized API Management solution, which should enable us to accelerate our growth through a more aggressive market share expansion strategy. This vision has led to many changes within our teams, the first effects of which are already visible. Over the last 6 months, new customer signatures have increased, and we further improved our Net Promoter Score. Our operational performance is satisfactory, with a fourfold increase in profit from operating activities compared to the first half of 2020. These good results allow us to secure our annual targets although we expect the second half of the year to remain uncertain, split between the hope of a real return to normal and the risk of new disruptions worldwide.”

First observations on the progressive deployment of the new strategic plan

Axway’s business accelerated significantly in the first half of the year. The gradual deployment of the new strategic plan involved focused internal reorganisations with recruitment and the creation of new teams, while efforts to build the business pipeline continued.

Several important developments were observed during the period:

– Investment in marketing created numerous business opportunities, both with existing customers and prospects. The use of digital events for the second consecutive year did not prevent the company from interacting effectively with the various market stakeholders. In H1 2021, the Amplify pipeline grew by around 12% year-on-year.

– Axway’s strategy of winning new API customers and market share is bearing fruit. Amplify new customer signings rose 50% in the first half of the year.

– Axway customer satisfaction continues to increase. The company improved its Net Promoter Score once again, attaining 31 as of June 30, 2021, compared to 25 as of December 31, 2020, its previous high.

Comments on business activity and operating performance in the first half of 2021

In H1 2021, Axway generated revenue of EUR138.4 million, up 5.2% organically and 1.3% overall. While the consolidation scope did not change, currency fluctuations had a negative impact of EUR5.0 million on first-half revenue, mainly due to the weakening of the U.S. dollar and the Brazilian real against the euro. Profit on operating activities was EUR10.5 million, representing 7.6% of revenue compared with 1.9% in H1 2020. This significant improvement in profitability is primarily due to higher revenue, but also optimized cost management and the anticipated reduction in research and development expenses after the investment phase that was necessary to ramp up the Amplify offering.

License revenue was EUR9.3 million in H1 2021 (7% of total revenue), down 7.5% organically. While at the beginning of the year activity benefited from a more favourable comparison basis, license sales were again under pressure in the second half of the period. Although past seasonality suggests a slowdown in the decline in the second half of the year, the company nevertheless anticipates a decrease in annual revenue and is unable to confirm at this stage whether a low point has been reached for the activity.

With organic growth of 45.0%, the Subscription activity generated revenue of EUR51.8 million in H1 2021. The activity accounted for 37% of Axway’s H1 revenue, with total growth of 39.1%. While the acquisition of new customers accelerated, the company continued to benefit from its extensive existing customer base, which is accelerating its migration to the most flexible contractual models. Sales performance confirmed these trends, as demonstrated by the signing of new subscription contracts with an annual contract value (ACV) of EUR14.3 million during the first half, up 40.6% year-on-year.

The Signature Metric for January to June 2021 therefore improved 28.7%, while the Net Signature Metric, restated for Maintenance attrition, grew 20.8%.

Maintenance revenue reached EUR60.0 million in H1 2021, representing 43% of total revenue. As expected, activity declined 12.0% organically for the half-year. As customer adoption of more flexible contractual models leads to the migration of the value of certain maintenance services to the Subscription revenue line, Axway anticipates an annual decline in this activity of over 10%.

Axway’s recurring revenue, which includes Subscription and Maintenance activities, represented 81% of revenue in the first half of 2021, i.e., EUR111.8 million, an increase of 2 points compared to H1 2020. This includes EUR22.4 million of upfront revenue recognized on the signature of subscription contracts.

Impacted for more than a year now by the travel restrictions imposed by the health crisis, Services generated revenue of EUR17.3 million (13% of total revenue), almost stable organically year-on-year (-1.5%). While business grew in certain regions where remote services are possible, the situation remains very mixed from one country to another. Over the full year, Axway is targeting stable revenue for the activity.

France reported revenue of EUR39.4 million in H1 2021 (28% of total revenue), an organic decline of 3.7%. After a dynamic start to the year for both Subscription and License sales, activity fell in Q2 2021 due mainly to a particularly unfavourable comparison basis.

The Rest of Europe zone grew organically by 14.2% in H1 2021, with revenue of EUR33.9 million, representing 25% of total revenue. The excellent Subscription momentum (+98.3%) more than offset the decline in revenue from other activities. This trend is explained by renewals and reinvestments by several of the largest Amplify customers eager to move to subscription-based contracts.

The Americas (USA & Latin America) generated revenue of EUR57.1 million over the half-year (41% of total revenue), with organic growth of 5.6%. After significant operational changes at the end of last year, the Subscription activity has, as expected, accelerated significantly from Q2 2021. This recovery, combined with the resilience of the Services activity, explains the region’s performance over the period.

Lastly, in the Asia/Pacific region, Axway achieved half-year revenue of EUR8.0 million (6% of total revenue), with organic growth of 16.3%. Thanks to strong License and Subscription growth, and more generally a return to normal business levels compared to the first half of 2020, Axway reported a good start to the year in the region.

Comments on net profit for the first half of 2021

Profit from recurring operations reached EUR5.0 million in H1 2021, 3.6% of revenue, including amortization of allocated intangible assets of EUR3.2 million and the non-cash share-based payment expense of EUR2.3 million.

Operating profit for the half-year was EUR3.1 million, or 2.3% of revenue.

Axway’s net profit amounted to EUR1.8 million for the half-year, or 1.3% of revenue.

Finally, basic earnings per share was EUR0.08 in H1 2021, a significant increase compared to H1 2020 (-EUR0.28).

Financial position at June 30, 2021

At June 30, 2021, Axway had a solid financial position, with cash of EUR23.7 million and bank debt of EUR38.9 million.

Free cash flow amounted to EUR16.1 million in the first half of 2021 compared to EUR4.9 million a year earlier.

Shareholders’ equity was EUR359.6 million at June 30, 2021, compared with EUR360.1 million at end-June 2020.

As a reminder, Axway renegotiated its bank lines until 2026, thereby securing financing of up to EUR125.0 million.

Change in the workforce

Axway had 1,796 employees at June 30, 2021, vs.1,888 at December 31, 2020.

2021 Targets & Outlook

For 2021, Axway confirms its objective of achieving organic revenue growth of between 2% and 4%. The company also confirms that it is aiming to improve its profitability with an operating margin of between 11% and 13% of revenue for the year.

In the medium term, Axway’s ambitions remain:

-> to achieve revenue of EUR500 million through organic growth in sales and acquisitions

-> to return to operating margin on business activity rates above 15% and gradually move towards 20%

-> to sustainably increase earnings per share to above EUR1

Today, Tuesday, July 27, 2021, 6.30 p.m. (UTC+1): 2021 Half-Year Results Virtual Analyst Conference

-> Virtual conference registration: Click here

Or join by phone by dialling one of the numbers below and announcing “Axway” at the operator’s request:

– International: +44 (0) 33 0551 0200 / France: +33 (0) 1 7037 7166 / USA: +1 212 999 6659

Please note that the meeting will be held in English.

Financial Calendar

Thursday, September 2, 2021: Publication of the 2021 half-year financial report.

Wednesday, October 20, 2021, after close of trading: Publication of Q3 2021 revenue.

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 consolidation 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 a subscription agreement.

TCV: Total Contract Value – Full contracted value of a subscription agreement over the contract term.

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

Net Signature metric: Signature metric net of the maintenance attrition by migration to new subscription contracts

Profit on operating activities: Profit from recurring operations adjusted for the non-cash share-based payment expense, as well as the amortization of allocated intangible assets.

NPS: Net Promoter Score – Customer satisfaction and recommendation indicator for a company.

Employee Engagement Score: Measurement of employee engagement through an independent annual survey.

Disclaimer

This press release contains forward-looking statements that may be subject to various risks and uncertainties concerning the Axway’s growth and profitability, notably in the event of future acquisitions. Axway highlights that signature of contracts, which represent investments for customers, are more significant in the second half of the year and may therefore have a more or less favourable impact on full-year performance. In addition, Axway 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 2020 Universal Registration Document filed with the French Financial Markets Authority (Autorite des Marches Financiers, AMF) on March 18, 2021, under number D.21-0147. 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) empowers customers to succeed using hybrid integration to connect people, systems, businesses, and digital ecosystems. Axway’s hybrid integration platform, Amplify, helps enterprise power users, IT specialists, developers, and partners accelerate digital transformation, create captivating experiences, and innovate new services. Amplify speeds integrations by combining traditional integration patterns with API Management and Application Integration (providing over 150 prebuilt connectors). Over 11,000 organizations in 100 countries rely on Axway for their data integration challenges. To learn more, visit www.investors.axway.com/en

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1 The interim consolidated financial statements were subject to limited review procedures. The limited review report is in the process of being issued by the auditors.