SAP Reports 35% Growth in Software Revenue at Constant Currencies and 20% Growth in Non-IFRS Software and Software-Related Service Revenue at Constant Currencies for the Second Quarter

Walldorf - July 26, 2011 | SAP -

SAP AG (NYSE: SAP) today announced its financial results for the second quarter ended June 30, 2011

  • 6th Consecutive Quarter of Double-Digit Growth in Non-IFRS Software and Software Related Service Revenue
  • Second Quarter Non-IFRS Operating Profit Increased 26% at Constant Currencies Resulting in a 1.5 Percentage Point Increase in Non-IFRS Operating Margin at Constant Currencies
  • Second Quarter Non-IFRS Earnings Per Share Increased 26%

“We are pleased to report another strong quarter,” said Werner Brandt, CFO of SAP AG. “The strong customer demand for our industry leading innovations positions us well to achieve our goal of at least €20 billion in total annual revenue and a 35% operating margin by the middle of the decade, as well as for the long term.”

“The team delivered another outstanding quarter as customers in all regions and across every industry embrace the power of SAP’s strategy,” said Bill McDermott, co-CEO of SAP AG. “Our innovations such as SAP HANA along with our mobility and business analytics solutions are fueling our pipeline as customers want to grow their business and solve their most pressing industry-specific challenges. Our consistent results and ever-expanding ecosystem demonstrate that SAP is the better choice for customers of all sizes.”

“We are witnessing a structural change in the IT market - customers are shifting more of their investments toward software as it continues to become a larger and more important component of the overall technology stack. As a result, we are seeing strong demand from customers,” said Jim Hagemann Snabe, Co-CEO of SAP. “We focused our strategy on innovation at the right time and are now reshaping the industry with our mobility, in-memory and cloud solutions. Innovation is driving growth again at SAP.”

FINANCIAL HIGHLIGHTS – Second Quarter 2011

Second Quarter 20111)
IFRS Non-IFRS2)
€ million, unless
otherwise stated		 Q2 2011 Q2 2010 % change Q2 2011 Q2 2010 % change % change const. curr.3)
Software revenue 802 637 26% 802 637 26% 35%
Support revenue 1.681 1.526 10% 1.689 1.526 11% 15%
Software and software-related service revenue 2.579 2.258 14% 2.587 2.258 15% 20%
Total revenue 3.300 2.894 14% 3.308 2.894 14% 20%
Total operating expenses -2.443 -2.120 15% -2.289 -2.040 12% 17%
Operating profit 857 774 11% 1.019 854 19% 26%
Operating margin (%) 26,0 26,7 -0,7pp 30,8 29,5 1,3pp 1,5pp
Profit after tax 588 491 20% 703 562 25%
Basic earnings per share (€) 0,49 0,41 20% 0,59 0,47 26%
Number of employees (FTE) 54.043 48.021 13% na na na na

1) All figures are unaudited.
2) Adjustments in the revenue line items are for the support revenue that would have been recognized had the acquired entities remained stand-alone entities but that SAP is not permitted to recognize as revenue under IFRS as a result of business combination accounting rules. Adjustments in the operating expense line items are for acquisition-related charges, share-based compensation expenses, restructuring and discontinued activities.
3) Constant currency revenue and operating profit figures are calculated by translating revenue and operating income of the current period using the average exchange rates from the previous year's respective period instead of the current period. Constant currency period-over-period changes are calculated by comparing the current year's non-IFRS constant currency numbers with the non-IFRS number of the previous year's respective period.

Revenue – Second Quarter 2011

  • IFRS software revenue was €802 million (2010: €637 million), an increase of 26% (35% at constant currencies).
  • IFRS software and software-related service revenue was €2.58 billion (2010: €2.26 billion), an increase of 14%. Non-IFRS software and software-related service revenue was €2.59 billion (2010: €2.26 billion), an increase of 15% (20% at constant currencies).
  • IFRS total revenue was €3.30 billion (2010: €2.89 billion), an increase of 14%. Non-IFRS total revenue was €3.31 billion (2010: €2.89 billion), an increase of 14% (20% at constant currencies).

Second quarter 2011 non-IFRS software and software-related service revenue and total revenue exclude a deferred support revenue write-down from acquisitions of €8 million.

Profit – Second Quarter 2011

  • IFRS operating profit was €857 million (2010: €774 million), an increase of 11%. Non-IFRS operating profit was €1.02 billion (2010: €854 million), an increase of 19% (26% at constant currencies).
  • IFRS operating margin was 26.0% (2010: 26.7%), a decrease of 0.7 percentage points. Non-IFRS operating margin was 30.8% (2010: 29.5%), or 31.0% at constant currencies, an increase of 1.3 percentage points (1.5 percentage points at constant currencies).
  • IFRS profit after tax was €588 million (2010: €491 million), an increase of 20%. Non-IFRS profit after tax was €703 million (2010: €562 million), an increase of 25%. IFRS basic earnings per share was €0.49 (2010: €0.41), an increase of 20%. Non-IFRS basic earnings per share was €0.59 (2010: €0.47), an increase of 26%. The IFRS effective tax rate in the second quarter of 2011 was 26.9% (2010: 27.4%). The non-IFRS effective tax rate in the second quarter of 2011 was 27.2% (2010: 26.7%).

Second quarter 2011 non-IFRS operating profit excludes a deferred support revenue write-down from acquisitions of €8 million, acquisition-related charges of €111 million, expenses from discontinued activities of €10 million, share-based compensation expenses of €32 million and restructuring expenses of €1 million (2010: €0 million, €65 million, €2 million, €12 million and €1 million). Second quarter 2011 non-IFRS profit after tax and non-IFRS basic earnings per share exclude a deferred support revenue write-down from acquisitions of €5 million, acquisition-related charges of €75 million, expenses from discontinued activities of €10 million, share-based compensation expenses of €24 million and restructuring expenses of €1 million (2010: €0 million, €49 million, €12 million, €9 million and €1 million ) net of tax.

FINANCIAL HIGHLIGHTS – Six Months 2011

First Half 20111)
IFRS Non-IFRS2)
€ million, unless
otherwise stated		 1H 2011 1H 2010 % change 1H 2011 1H 2010 % change % change const. curr.3)
Software revenue 1.385 1.101 26% 1.385 1.101 26% 31%
Support revenue 3.336 2.920 14% 3.361 2.920 15% 16%
Software and software-related service revenue 4.906 4.205 17% 4.931 4.205 17% 19%
Total revenue 6.324 5.403 17% 6.349 5.403 18% 19%
Total operating expenses -4.870 -4.072 20% -4.551 -3.933 16% 17%
Operating profit 1.454 1.331 9% 1.798 1.470 22% 24%
Operating margin (%) 23,0 24,6 -1,6pp 28,3 27,2 1,1pp 1,2pp
Profit after tax 991 878 13% 1.231 1.000 23%
Basic earnings per share (€) 0,83 0,74 12% 1,04 0,84 24%
Number of employees (FTE) 54.043 48.021 13% na na na na

1) All figures are unaudited.
2) Adjustments in the revenue line items are for the support revenue that would have been recognized had the acquired entities remained stand-alone entities but that SAP is not permitted to recognize as revenue under IFRS as a result of business combination accounting rules. Adjustments in the operating expense line items are for acquisition-related charges, share-based compensation expenses, restructuring and discontinued activities.
3) Constant currency revenue and operating profit figures are calculated by translating revenue and operating income of the current period using the average exchange rates from the previous year's respective period instead of the current period. Constant currency period-over-period changes are calculated by comparing the current year's non-IFRS constant currency numbers with the non-IFRS number of the previous year's respective period.

Revenue – Six Months 2011

  • IFRS software revenue was €1.39 billion (2010: €1.10 billion), an increase of 26% (31% at constant currencies).
  • IFRS software and software-related service revenue was €4.91 billion (2010: €4.21 billion), an increase of 17%. Non-IFRS software and software-related service revenue was €4.93 billion (2010: €4.21 billion), an increase of 17% (19% at constant currencies).
  • IFRS total revenue was €6.32 billion (2010: €5.40 billion), an increase of 17%. Non-IFRS total revenue was €6.35 billion (2010: €5.40 billion), an increase of 18% (19% at constant currencies).

First- half 2011 Non-IFRS software and software-related service revenue as well as total revenue exclude a deferred support revenue write-down from acquisitions of €25 million (2010: €0 million).

Profit – Six Months 2011

  • IFRS operating profit was €1.45 billion (2010: €1.33 billion), an increase of 9%. Non-IFRS operating profit was €1.80 billion (2010: €1.47 billion), an increase of 22% (24% at constant currencies).
  • IFRS operating margin was 23.0% (2010: 24.6%), a decrease of 1.6 percentage points. Non-IFRS operating margin was 28.3% (2010: 27.2%), or 28.4% at constant currencies, an increase of 1.1 percentage points (1.2 percentage points at constant currencies).
  • IFRS profit after tax was €991 million (2010: €878 million), an increase of 13%. Non-IFRS profit after tax was €1.23 billion (2010: €1.00 billion), an increase of 23%. IFRS basic earnings per share was €0.83 (2010: €0.74), an increase of 12%. Non-IFRS basic earnings per share was €1.04 (2010: €0.84), an increase of 24%.

First-half 2011 non-IFRS operating profit excludes a deferred support revenue write-down from acquisitions of €25 million, acquisition-related charges of €222 million, expenses from discontinued activities of €12 million, share-based compensation expenses of €84 million and restructuring expenses of €1 million (2010: €0 million, €119 million, €2 million, €17 million and €1 million). First-half 2011 non-IFRS profit after tax and non-IFRS basic earnings per share exclude a deferred support revenue write-down from acquisitions of €16 million, acquisition-related charges of €150 million, expenses from discontinued activities of €12 million, share-based compensation expenses of €61 million and restructuring expenses of €1 million (2010: €0 million, €90 million, €18 million, €13 million and €1 million) net of tax.

Cash Flow – Six Months 2011

Operating cash flow was €2.27 billion (2010: €1.28 billion), an increase of 77%. Free cash flow was €2.02 billion (2010: €1.16 billion), an increase of 75%. Free cash flow was 32% of total revenue (2010: 21%). At June 30, 2011, SAP had a total group liquidity of €4.40 billion (December 31, 2010: €3.53 billion), which includes cash and cash equivalents and short term investments. Net liquidity at June 30, 2011 was €531 million compared to - €850 at December 31, 2010. This is mainly due the positive development of the operating cash flow in the first six months of 2011.

Business Outlook

The Company is providing the following outlook for the full-year 2011, which has changed from the previous outlook provided on April 28, 2011. The Company has refined the outlook for Non-IFRS software and software-related service revenue at constant currencies and non-IFRS operating profit at constant currencies.

  • The Company reaffirmed that it expects full-year 2011 non-IFRS software and software-related service revenue to increase in a range of 10% – 14% at constant currencies (2010: €9.87 billion), but the Company now expects to reach the high end of the range.
  • The Company reaffirmed that it expects full-year 2011 non-IFRS operating profit to be in a range of €4.45 billion – €4.65 billion at constant currencies (2010: €4.01 billion), but the Company now expects to reach the high end of the range, resulting in 2011 non-IFRS operating margin increasing in a range of 0.5 - 1.0 percentage points at constant currencies (2010: 32.0%).
  • The Company reaffirmed for the full-year 2011 that it projects an IFRS effective tax rate of 27.0% – 28.0% (2010: 22.5%) and a non-IFRS effective tax rate of 27.5% - 28.5% (2010: 27.3%).

Major Customer Wins

In the second quarter of 2011, SAP closed the following major contracts.

EMEA
Nycomed Danmark ApS, GK ALMI, Fressnapf Tiernahrungs GmbH, Boehringer Ingelheim Pharma GmbH & Co. KG, ZF Friedrichshafen AG, Rieter Machine Works Ltd.

Americas
Servicios Liverpool, S.A. de C.V., Hydro One Networks Inc., Medtronic, Inc., Molex Incorporated, Johns Hopkins, Southwest Airlines Company.

Asia Pacific/Japan
Fortescue Metals Group Ltd, China National Biotec Group, Krishak Bharati Cooperative Limited, Centre For Railway Information Systems (CRIS), Hyundai Logiem Co., Ltd , Central Pattana Public Co., Ltd.

SAP Business ByDesign
Treveri Basketball AG, Ströhmann Steinkult GmbH, Bruno Söhnle GmbH, Agilita, College of Management and Technology, JBM Shelters, Aerospace Engineers, Channel Tech, RTC Industries.

Q2 2011 Interim Report

SAP’s Q2 2011 Interim Report was published today and is available at www.sap.com/corporate-en/investors/reports/quarterlyreport/2011/pdf/SAP_Interim_Report_Q22011.pdf for download. The interim report includes an update on SAP’s sustainability performance.

Webcast

SAP senior management will host a conference call Wednesday, July 27th at 2:00 PM (CET) / 1:00 PM (GMT) / 8:00 AM (Eastern) / 5:00 AM (Pacific). The conference call will be web cast live on the Company’s website at www.sap.com/investor and will be available for replay.

About SAP

As market leader in enterprise application software, SAP (NYSE: SAP) helps companies of all sizes and industries run better. From back office to boardroom, warehouse to storefront, desktop to mobile device – SAP empowers people and organizations to work together more efficiently and use business insight more effectively to stay ahead of the competition. SAP applications and services enable more than 172,000 customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com.

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Appendix – Financial Information to Follow

Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “predict,” “should” and “will” and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission ("SEC"), including SAP's most recent Annual Report on Form 20-F filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.

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