Early preparation for global economic downturn and diligent cost management mitigates impact on profitability
Exact Holding N.V. (Exact) announces its results for FY 2009.
Financial highlights
The global economic crisis impacted revenue across all regions negatively, resulting in a decline of total revenue by 10.9% to € 232.5 million (FY 2008: € 261.0 million). This was caused by a decline in license and service revenue, which was partly offset by an increase in maintenance revenue.
Total operating costs have been reduced by € 24.8 million to € 186.8 million (FY 2008: € 211.6 million), representing a decline of 11.7% and mainly driven by a decrease in personnel expenses.
EBITDA margin increased to 23.4% (FY 2008: 22.3%) as a result of compensating some 85% of the revenue decline by early initiation of cost savings. EBITDA amounted to € 54.3 million (FY 2008: € 58.2 million), representing a decline of 6.6%.
Net income amounted to € 33.6 million (FY 2008: € 36.4 million), representing a decrease of 7.7% as a result of a lower operating income.
Despite the negative economic climate the operating cash flow increased by 5.6% to € 49.8 million (FY 2008: € 47.1 million), representing a profit to cash conversion of 147% (FY 2008: 128%).
The net cash position increased to € 48.9 million as per December 31, 2009 (December 31, 2008: € 44.7 million). The balance sheet remains very strong and virtually debt free.
EPS amounted to € 1.47 (FY 2008: € 1.54), representing a decrease of 4.5%.
A final dividend payout of € 0.81 per share will be proposed in addition to the interim dividend of € 0.66 per share paid on August 7, 2009. This amounts to a total dividend for 2009 of € 1.47 per share, which represents a 100% payout of net income in line with dividend policy.

Strategic and operational highlights
As a result of measures taken in 2008 to align the company’s cost structure to the current economic conditions and ongoing cost prudency programs, operating expenses decreased by 11.7%, mainly driven by a decrease in personnel expenses. The total number of employees excluding acquisitions and divestments was further reduced by 7% in 2009 to approximately 2,200. Associated one-time restructuring costs amounted to € 1.3 million.
New business remained weak throughout the year and the recovery trend in Q3 was not continued in Q4, leading to a decline in license revenue of 26.5% for the full year 2009 and subsequently a decline in service revenue of 24.0%. Sales to existing customers remained robust and accounted for approximately 80% of license revenue.
As a result of stable renewal rates and a CPI based price increase per January 2009, maintenance revenue increased by 3.8% to € 134.5 million (FY 2008: € 129.6 million).
As a strategic investment going forward, Exact, in association with its 25th anniversary, successfully rolled out a new brand identity globally in the fourth quarter of 2009 with associated one-time costs of € 1.4 million.
The demand from larger international companies for Exact’s solutions as an alternative to tier 1 solutions has increased and led to a number of significant contract wins such as DEKRA Claims and Expert Services International N.V..
Exact Online continues to show strong growth. The total number of Exact Online subscriptions grew by more than 40% to 12,500, leading to more than 30,000 administrations being accounted with Exact Online.
Exact announced on December 28, 2009 the appointment of Max Timmer as CFO per January 1, 2010. He will be nominated by the Supervisory Board at the General Meeting of Shareholders on April 22, 2010 for appointment as member of the Board of Managing Directors.
Major contract wins: Robeco, KLM Jetcenter, Gulf Cryo, Bugaboo International B.V., GCH Retail, Sanyo HQ Device Vietnam Co. Ltd., United Standard, United States Postal Services (USPS), AEGON companies, Meridian.

Outlook
Exact believes that the effects of the global economic downturn reached their bottom at the end of 2009, but expects that the global economy will only gradually recover in the next 24 months. In anticipation thereof and in line with the expected gradual improvement of the market conditions for business software solutions, we will continue to invest sensibly in key strategic areas driving profitable growth mainly in selected strategic market segments. These are international companies successfully addressed with Exact’s parenting strategy, the professional services sector globally and the low end SMB market in the Netherlands and Belgium with a focus on solutions based on Exact Online. However, our main focus will continue to be EBITDA and cash flow until an improvement of the current economic situation have materialized in structural revenue growth. In light of the continued uncertain economic and business climate, Exact does not provide a specific guidance for 2010

Financial Results
Key financial figures
(in € thousands) FY 2009 FY 2008 Change
License revenue 54,600 74,257 (26.5%)
Maintenance revenue 134,53 129,630 3.8%
Service revenue 43,376 57,086 (24.0%)
Total revenue 232,516 260,973 (10.9%)
Total operating expenses 1) 178,166 202,770 (12.1%)
EBITDA 54,350 58,203 (6.6%)
EBITDA margin (in %) 23.4 22.3% 1.1 pts
EBIT 45,729 49,373 (7.4%)
EBIT margin (in %) 19.7% 18.9% 0.8 pts
Operating cash flow 49,751 47,127 5.6%
Net income after tax 33,841 36,825 (8.1%)
Net income margin (in %) 14.6% 14.1% 0.5 pts
Diluted EPS2) (in €) 1.47 1.54 (4.5%)
Diluted Cash EPS 2) (in €) 2.18 2.00 9.0%

1)Excluding amortization and depreciation
2)Based on average diluted number of shares outstanding (FY 2009: 22.816 million; FY 2008: 23.618 million)

Rajesh Patel, CEO Exact Holding N.V.:
“Although expected, revenue developments in 2009 have been broadly disappointing, while EBITDA and cash flows, defined as key objectives have been widely achieved. We prepared well and early for the global economic downturn and our execution to align the company’s cost structure to revenue demand have remained diligent. Most of these measures were executed already in 2008, and became effective in 2009. Our large installed customer base enables strong cash flows and cross-selling opportunities as reflected during the year.

Substantially reduced operating expenses in 2009 have allowed us to gradually invest in key strategic areas such as our brand, Exact Online, Longview and our parenting strategy, in anticipation of a gradual improvement in the economy in 2010 and onwards. These clear choices remain the areas in which we will continue to invest in 2010, albeit carefully. As an organization we remain strategically and financially healthy and based on our operational fitness and readiness, I am confident we will see good operational leverage when the economy rebounds.”



Revenue
The global economic downturn negatively impacted revenue across all regions, resulting in a decline of total revenue by 10.9% to € 232.5 million (FY 2008: € 261.0 million), caused by a decline in license and service revenue. Total organic revenue declined by 11.3% to € 230.0 million (FY 2008: € 259.3 million). This excludes a positive foreign exchange rate effect of € 0.5 million and a contribution from the acquisition of Orisoft Technology of € 2.0 million.

License revenue declined by 26.5% to € 54.6 million (FY 2008: € 74.3 million). Organic license revenue declined by 27.1% to € 53.9 million (FY 2008: € 74.0 million).

The license revenue decline has been mainly caused by substantially less new business throughout the year as companies continued to postpone new software investments. In addition new business sales cycles in 2009 were on average twice as long as in pre-crisis times.
With the exception of the Americas region, add-on license sales to existing customers showed less impact and remained robust throughout the year. This is reflected in add-on sales comprising more than 80% of total license revenue, confirming an early shift of focus from new site sales to the existing customer base.
Although the second and third quarter license revenue indicated a stabilization of the downwards trend, this trend did not continue in Q4. Nonetheless, in absolute numbers Q4 was still the strongest quarter of the year.
Maintenance revenue increased by 3.8% to € 134.5 million (FY 2008: € 129.6 million) as a result of both a CPI-based price increase per January 2009 and stable renewal rates despite an increase in bankruptcies. Organic maintenance revenue increased by 3.3% to € 133.8 million (FY 2008: € 129.5 million).

Service revenue declined by 24.0% to € 43.4 million (FY 2008: € 57.1 million). Significantly lower new business intake since Q4 2008 resulted in a decline of implementation services. Furthermore increased cost prudency of customers had a substantial impact on training revenues. Organic service revenue declined by 24.3% to € 42.3 million (FY 2008: € 55.8 million).

EBITDA and EBIT
An early alignment of the company’s cost structure to the market conditions in 2008 and continued cost and prudency programs, resulted in a reduction of total operating costs of € 24.8 million to € 186.8 million (FY 2008: € 211.6 million), representing a decline of 11.7% mainly driven by a decrease in personnel expenses. These cost savings compensated some 85% of the total revenue decline and mitigated a significant impact of the global economic downturn on profitability. As a result, the EBITDA margin increased to 23.4% (FY 2008: 22.3%) and EBITDA amounted to € 54.3 million (FY 2008: € 58.2 million), representing a decline of 6.6%. EBIT amounted to € 45.7 million (FY 2008: € 49.4 million) representing an EBIT margin of 19.7% (FY 2008: 18.9%).

The organic number of employees was further reduced in 2009 by 7% in addition to the 10% reduction in 2008. This has resulted in a decrease of organic personnel expenses of 13.7% compared to FY 2008. Organic marketing expenses were further reduced by 12.0% as a result of reduced sponsoring and new business marketing activities. Furthermore marketing focus has shifted from new business to existing customers within existing budgets. Ongoing cost prudency programs resulted in a decrease of other operating expenses including revenue related expenses by 9.4% or € 5.1 million.

One-time restructuring costs associated with the reduction of personnel amounted to € 1.3 million and one-time investments in the launch of the new brand identity amounted to € 1.4 million. Excluding these one-time costs totaling € 2.7 million EBITDA amounted to € 57.0 million (FY 2008: € 58.8 million) representing and EBITDA margin of 24.5% (FY 2008: 22.5%).

Corporate costs including research and development (R&D) costs for corporate product lines and Holding costs, excluding depreciation and amortization amounted to € 24.0 million (FY 2008: € 23.3 million). This includes € 1.4 million in personnel costs for employees transferred from regional to corporate level as result of the globalization from operations support functions such as HR.

Interest and Tax
The total financial income and expense decreased by € 1.1 million to € -0.3 million (FY 2008: € 0.8 million). This was mainly the result of significantly lower interest rates on cash deposits. The average tax rate decreased from 26.6% to 25.5%, mainly as a result of further utilization of available tax losses in Germany.
Balance Sheet and Cash Flow

The net cash position increased to € 48.9 million as per December 31, 2009 (December 31, 2008: € 44.7 million) and the balance sheet continued to be very strong and virtually debt free.

Despite the negative economic climate and the negative impact on payment behavior, the continued high focus on cash collection kept the average days sales outstanding almost stable at 63 (FY 2008: 62). The operating cash flow increased by 5.6% to € 49.8 million (FY 2008: € 47.1 million), representing a profit to cash conversion of 147% (FY 2008: 128%). Working capital showed a € 8.8 million improvement, primarily driven by lower trade receivables.

Net Income and EPS
Net income attributable to shareholders amounted to € 33.6 million (FY 2008: € 36.4 million), representing a decrease of 7.7% as a result of a lower operating income. Earnings per share (EPS) decreased by only 4.5% to € 1.47 (FY 2008: € 1.54), as a result of the lower number of average shares outstanding in 2009 compared to 2008. As a result of ongoing strong operating cash flows, cash EPS increased by 9.0% to € 2.18 (FY 2008: € 2.00)

Based on the continued strong cash flow and despite the negative economic climate, a final dividend payout of € 0.81 per share will be proposed at the General Meeting of Shareholders on April 22, 2010, in addition to the interim dividend of € 0.66 per share paid on August 7, 2009. This amounts to a total dividend for 2009 of € 1.47 per share, which is in line with the company’s dividend policy of 100% payout of the net result in any year in which it does not execute a material acquisition.

Financial and operational highlights FY 2009

Total revenue declined by 5.5% to € 16.8 million (FY 2008: € 17.8 million). Total revenue at constant currencies declined by 7.4% to € 16.4 million (FY 2008: € 17.8 million) driven by a decline in license and service revenue.
License revenue during H2 significantly increased compared to H1 as result of the completion of several large orders in backlog.
Although expenses were tightly managed, EBITDA declined to € 2.9 million (FY 2008: € 4.2 million), representing an EBITDA margin of 17.3% (FY 2008: 23.7%). This is mainly the result of continued investments in Khalix 7, the new version of Longview Solutions’ CPM suite.
Pilot activities around Khalix 7 were successfully completed in H1 and the product was successfully launched in H2.
A number of Longview customers also extended their CPM footprint in the first half of the year, implementing additional business processes, preparing for IFRS readiness (Canada) and deploying Longview’s advanced dashboard reporting capabilities.
Major contract wins: AEGON companies, GrafTech, Gaz Metro, Meridian, Pfizer, TUI Travel PLC.