SAP Announces Fourth Quarter and Full-Year 2009 Results that Exceeded Expectations

WALLDORF, Germany, Jan. 27 /PRNewswire-FirstCall/ -- SAP AG (NYSE: SAP) today announced its preliminary financial results for the fourth quarter and full-year ended December 31, 2009.

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Revenues – Full Year 2009

• U.S. GAAP software and software-related service revenues were euro 8.20 billion (2008: euro 8.46 billion), a decrease of 3%.  Non-GAAP software and software-related service revenues were euro 8.21 billion (2008: euro 8.62 billion), a decrease of 5% (5% at constant currencies).
• U.S. GAAP total revenues were euro 10.67 billion (2008: euro 11.57 billion), a decrease of 8%.  Non-GAAP total revenues were euro 10.68 billion (2008: euro 11.73 billion), a decrease of 9% (9% at constant currencies).  
• U.S. GAAP software revenues were euro 2.61 billion (2008: euro 3.61 billion), a decrease of 28% (27% at constant currencies).

Full Year 2009 Non-GAAP revenue figures exclude an acquisition-related deferred support revenue write-down of euro 11 million (2008: euro 166 million).

Income – Full Year 2009

• U.S. GAAP operating income was euro 2.64 billion (2008: euro 2.84 billion), a decrease of 7%.  Non-GAAP operating income was euro 2.92 billion (2008: euro 3.30 billion), a decrease of 12% (11% at constant currencies). U.S. GAAP and Non-GAAP operating income were negatively impacted by restructuring charges of euro 196 million resulting from the previously announced reduction of positions.
• U.S. GAAP operating margin was 24.7% (2008: 24.6%), an increase of 0.1 percentage points.  Non-GAAP operating margin was 27.3% (2008: 28.2%), or 27.6% at constant currencies, a decrease of 0.9 percentage points (0.6 percentage points at constant currencies).  The euro 196 million in restructuring charges resulting from the previously announced reduction of positions negatively impacted the U.S. GAAP and Non-GAAP operating margin by 1.8 percentage points.
• U.S. GAAP income from continuing operations was euro 1.83 billion (2008: euro 1.93 billion), a decrease of 5%.  Non-GAAP income from continuing operations was euro 2.04 billion (2008: euro 2.27 billion), a decrease of 10%.  U.S. GAAP and Non-GAAP income from continuing operations were negatively impacted by restructuring charges of euro 138 million, net of tax, resulting from the previously announced reduction of positions.
• U.S. GAAP basic earnings per share from continuing operations were euro 1.54 (2008: euro 1.62), a decrease of 5%.  Non-GAAP earnings per share from continuing operations were euro 1.71 (2008: euro 1.91), a decrease of 10%. The restructuring charges, net of tax, resulting from the previously announced reduction of positions negatively impacted the U.S. GAAP and Non-GAAP basic earnings per share by euro 0.12.

Full Year 2009 Non-GAAP operating income excludes an acquisition-related deferred support revenue write-down and acquisition-related charges totaling euro 275 million (2008: euro 463 million), and Full Year 2009 Non-GAAP income from continuing operations and Non-GAAP earnings per share from continuing operations exclude an acquisition-related deferred support revenue write-down and acquisition-related charges totaling euro 211 million net of tax (2008: euro 341 million).

Cash Flow - Full Year 2009

Operating cash flow from continuing operations was euro 3.04 billion (2008: euro 2.18 billion), an increase of 39%. Free cash flow was euro 2.81 billion (2008: euro 1.84 billion), an increase of 52%. Free cash flow was 26% of total revenues (2008: 16%). At December 31, 2009, SAP had a total group liquidity of euro 2.28 billion (December 31, 2008: euro 1.66 billion), which includes cash and cash equivalents, restricted cash and short term investments.  At December 31, 2009, net liquidity, defined as total group liquidity less bank liabilities, was euro 1.58 billion.

Revenues - Fourth Quarter 2009

• U.S. GAAP software and software-related service revenues were euro 2.57 billion (2008: euro 2.67 billion), a decrease of 4%.  Non-GAAP software and software-related service revenues were euro 2.57 billion (2008: euro 2.69 billion), a decrease of 5% (2% at constant currencies).
• U.S. GAAP total revenues were euro 3.19 billion (2008: euro 3.49 billion), a decrease of 9%.  Non-GAAP total revenues were euro 3.19 billion (2008: euro 3.51 billion), a decrease of 9% (7% at constant currencies).
• U.S. GAAP software revenues were euro 1.12 billion (2008: euro 1.32 billion), a decrease of 15% (14% at constant currencies).  

Income - Fourth Quarter 2009

• U.S. GAAP operating income was euro 1.06 billion (2008: euro 1.28 billion), a decrease of 17%.  Non-GAAP operating income was euro 1.12 billion (2008: euro 1.37 billion), decrease of 18% (16% at constant currencies). U.S. GAAP and Non-GAAP operating income were negatively impacted by restructuring charges of euro 10 million resulting from the previously announced reduction of positions.  
• U.S. GAAP operating margin was 33.1% (2008: 36.6%), a decrease of 3.5 percentage points.  Non-GAAP operating margin was 35.1% (2008: 39.1%), or 35.0% at constant currencies, a decrease of 4.0 percentage points (4.1 percentage points at constant currencies).  The euro 10 million in restructuring charges resulting from the previously announced reduction of positions negatively impacted the U.S. GAAP and Non-GAAP operating margin by 0.3 percentage points.
• U.S. GAAP income from continuing operations was euro 0.75 billion (2008: euro 0.86 billion), a decrease of 13%.  Non-GAAP income from continuing operations was euro 0.80 billion (2008: euro 0.93 billion), a decrease of 14%.  U.S. GAAP and Non-GAAP income from continuing operations were negatively impacted by restructuring charges of euro 7 million, net of tax, resulting from the previously announced reduction of positions.
• U.S. GAAP basic earnings per share from continuing operations were euro 0.63 (2008: euro 0.72), a decrease of 13%.  Non-GAAP basic earnings per share from continuing operations were euro 0.67 (2008: euro 0.78), a decrease of 14% year-over-year. The restructuring charges, net of tax, resulting from the previously announced reduction of positions negatively impacted the U.S. GAAP and Non-GAAP basic earnings per share by euro 0.01.

Fourth Quarter 2009 Non-GAAP operating income excludes acquisition-related charges totaling euro 64 million (2008: euro 98 million, which also included an acquisition-related deferred support revenue write-down), and Fourth Quarter 2009 Non-GAAP income from continuing operations and Non-GAAP earnings per share from continuing operations exclude acquisition-related charges totaling euro 49 million net of tax (2008: euro 70 million, which also included a deferred revenue write-down).

"As a result of a very difficult and unstable market environment that began in the third quarter of 2008 and then continued into 2009, we rapidly put into place a plan to reduce operating expenses in order to protect our operating margin.  I am pleased to report that we exceeded our initial expectations," said Werner Brandt, CFO of SAP.  "In 2009, we significantly reduced Non-GAAP operating expenses by around euro 650 million to euro 7.8 billion despite restructuring costs of approximately euro 200 million.  The Non-GAAP operating margin at constant currencies was 27.6% which included a negative impact of 1.8 percentage points related to the restructuring charge.  For 2010, we will continue to maintain strict cost controls with a spotlight on further margin expansion."

Leo Apotheker, CEO of SAP continued, "Along with margin expansion for 2010, we are also ready to return to top-line growth, although the market continues to be challenging and uncertainty among customers still exists.  Despite the difficult environment last year, we never lost focus on innovation, which is the cornerstone for growth going forward.  Building on a strong foundation, we will drive growth by continuing to strengthen our core business and expand beyond the core with new products and technologies that speed implementation, provide for instant consumption and are easy accessible from anywhere, anytime, and from a broad range of devices."  

IFRS Financial Data

SAP will discontinue its U.S. GAAP reporting and will only report financial data under IFRS from fiscal 2010 onwards.  The guidance provided by SAP for 2010 is based on Non-IFRS numbers that are derived from SAP's IFRS figures by excluding acquisition-related charges and discontinued activities.  To prepare the capital markets for this change, IFRS financial data are provided in the financial section of this press release.

Business Outlook

SAP is providing the following outlook for the full-year 2010:

• The Company expects full-year 2010 Non-IFRS software and software related service revenue to increase in a range of 4% to 8% at constant currencies (2009: euro 8.2 billion).
• The Company expects its full-year 2010 Non-IFRS operating margin to be in a range of 30% – 31% at constant currencies (2009: 27.4%).
• The Company projects an effective tax rate of 27.5% - 28.5% (based on IFRS) for 2010 (2009: 26.7%).

KEY EVENTS – Fourth Quarter 2009

• In the fourth quarter of 2009, SAP closed major contracts in several key regions including Achmea and Rabobank Nederland, Aeroflot Russian Airlines, AOK, Credit Agricole S.A., Deutsche Bank AG, Hilti AG, NMBS-SNCB Group, and Talanx AG in EMEA; 3M Company, Baker & McKenzie, Dairy Farmers of America, Inc., Pfizer Inc., Servicios Nacional de Chocolates S.A., Sybase Inc., Verizon Services Corporation, and W.W. Grainger, Inc. in Americas; and Daiwa House Industry Co., Ltd., Department of Defence, Australia, Hubei Electric Power Corporation, Malaysian Airline System Berhad, National Australia Bank Limited, Singapore Power Ltd, and Vietnam National Petroleum Corporation in the Asia Pacific Japan region.

• In December, Deutsche Bank and SAP signed a letter of intent to start a multi-year initiative in 2010 to replace individual software solutions in its home market by a new core banking system based on SAP for Banking solutions. The SAP implementation underpins the bank's strategy to push for a high degree of industrialization and standardization of processes.

• On December 17, SAP announced that Valero Energy Corporation signed a global enterprise agreement with SAP that will create a tighter relationship between the two companies, including a particular focus on collaboration on solution innovation and development over the next five years.

• On December 10, SAP announced the new SAP Business Objects Sustainability Performance Management application designed to help businesses more easily set sustainability goals and objectives, measure and communicate performance, and reduce data collection costs and errors. The new application helps organizations focus on improving economic, social and environmental performance rather than spending time on data collection and report compilation. The software features a library of key sustainability performance indicators and is the first solution to be certified by the Global Reporting Initiative Certified Software and Tools Program. The Global Reporting Initiative (GRI) is a network-based organization that has pioneered the development of the world's most widely used sustainability reporting framework and is committed to its continuous improvement and application worldwide.

• On December 7, SAP further extended its modular, market-leading solution offerings tailored for the banking industry by announcing innovations to its industry-specific banking software that supports banks' business processes from the front to the back office.

• On December 1, SAP announced that the 2009 Key Performance Indicator achievements of the SAP User Group Executive Network (SUGEN) SAP Enterprise Support program have shown clear value to participating SAP customers.

• On November 20, SAP reported that market research firm IDC identified SAP as a leading vendor of customer information systems (CIS) and customer relationship management (CRM) systems for the utilities industry. The IDC study, published by IDC Energy Insights, is conducted on an annual basis. The report evaluated the seven most relevant vendors of utility-specific CIS / CRM systems in the light of the challenges of the new energy economy. SAP received the highest ratings in the category "ownership confidence" and the second highest ratings in the category "ability to address market needs."

• On November 19, SAP was named as a leader in business performance solutions in a report by independent analyst firm Forrester Research. In the November 2009 report – "The Forrester Wave: Business Performance Solutions, Q4 2009" – SAP was positioned as a leader and ranked with the strongest overall current offering out of 10 other vendors.

• On October 27, SAP unveiled an interactive sustainability map for the SAP EcoHub solution marketplace, providing a clear view of the ecosystem of sustainability and "Green IT" solutions and services available from SAP and its partners. By simply clicking on defined areas in the SAP sustainability map within SAP EcoHub, customers can easily discover, evaluate and buy sustainability solutions and services from SAP and its partners.

• On October 21, SAP announced that Siemens AG, a global leader in electronics and electrical engineering, expanded its strategic relationship with SAP through its selection of the SAP Supplier Relationship Management application for Siemens' worldwide e-procurement operations. Also announced was the completion of Siemens' contract renewal for SAP maintenance support services for all SAP solutions based on SAP's maintenance standards for large customers for duration of three years.

Use of Non-GAAP and Non-IFRS Financial Measures

This press release contains certain financial measures such as Non-GAAP and Non-IFRS revenues, Non-GAAP and Non-IFRS operating income, Non-GAAP and Non-IFRS operating margin, free cash flow, constant currency revenue and operating income measures, as well as U.S. Dollar based Non-GAAP revenue numbers. These measures are not prepared in accordance with U.S. GAAP or IFRS and therefore are considered Non-GAAP or Non-IFRS financial measures. SAP's Non-GAAP and Non-IFRS financial measures may not correspond to Non-GAAP and Non-IFRS financial measures that other companies report. The Non-GAAP and Non-IFRS financial measures that SAP reports should be considered in addition to, and not as a substitute for or superior to, revenue, operating margin or SAP's other measures of financial performance prepared in accordance with U.S. GAAP and IFRS. See the financial section of this press release for additional information regarding the Non-GAAP and Non-IFRS measures included in this press release and for the reconciliations to the corresponding U.S. GAAP and IFRS measures.

Webcast / Supplementary Financial Information

SAP senior management will host a press conference in Frankfurt today at 10:00 AM (CET) / 9:00 AM (GMT) / 4:00 AM (Eastern) / 1:00 AM (Pacific), followed by an investor conference at 2:00 PM (CET) / 1:00 PM (GMT) / 8:00 AM (Eastern) / 5:00 AM (Pacific). Both conferences will be web cast live on the Company's website at http://www.sap.com/investor and will be available for replay. Supplementary financial information pertaining to the full-year and quarterly results can be found at http://www.sap.com/investor.

Note to editors (TV/ radio/ print/ online)

SAP will post material from the press conference as well as collective TV interviews with SAP CEO Leo Apotheker in both English and German, in which he will discuss the Company's Q4 2009 and full-year 2009 financial results. You can find these interviews on the SAP stock footage platform www.sap.com/stockfootage on Wednesday, January 27, 2010, following the event. The interviews will be conducted by TV journalists in English and German language.

These interviews will be published in their entirety and without any edits, as well as for your unrestricted use free of charge (also for parts of it). In addition, these clips are not branded, are clean feed, and will be available as high resolution video files, as well as mp3 files for radio journalists. SAP will also broadcast these clips via satellite starting at approximately 11:35 a.m. CET. If you are interested in recording this feed, please contact us via [email protected] for the necessary satellite and technical information.

About SAP

SAP is the world's leading provider of business software, offering applications and services that enable companies of all sizes and in all industries to become best-run businesses. With approximately 95,000 customers in over 120 countries, SAP is listed on several exchanges, including the Frankfurt stock exchange and NYSE, under the symbol "SAP." (For more information, visit www.sap.com)

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," "outlook," "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.

Copyright © 2010 SAP AG. All rights reserved.

SAP, R/3, SAP NetWeaver, Duet, PartnerEdge, ByDesign, SAP Business ByDesign, and other SAP products and

services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in

Germany and other countries. Business Objects and the Business Objects logo, Business Objects, Crystal Reports,

Crystal Decisions, Web Intelligence, Xcelsius, and other Business Objects products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of Business Objects S.A. in the United States and in other countries. Business Objects is an SAP company. All other product and service names mentioned are the trademarks of their respective companies. Data contained in this document serves informational purposes only. National product specifications may vary.

Appendix – Financial Information to Follow

Explanations of Non-GAAP Measures

This document discloses certain financial measures, such as non-GAAP revenues, non-GAAP expenses, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP earnings per share, free cash flow, constant currency revenue and operating income measures as well as U.S. dollar-based non-GAAP revenue numbers that are not prepared in accordance with U.S. GAAP and are therefore considered non-GAAP financial measures. Our non-GAAP financial measures may not correspond to non-GAAP financial measures that other companies report. The non-GAAP financial measures that we report should be considered as additional to, and not as substitutes for or superior to, revenue, operating income, cash flows, or other measures of financial performance prepared in accordance with U.S. GAAP. Our non-GAAP financial measures included in this document are reconciled to the nearest U.S. GAAP measure in the tables on the pages F5 to F11 above.

We believe that the supplemental historical and prospective non-GAAP financial information presented here provides useful supplemental information to investors because it is the same information used by our management in running our business and making financial, strategic and operational decisions – in addition to financial data prepared in accordance with U.S. GAAP – to attain a more transparent understanding of our past performance and our future results. Beginning in 2008, we used these non-GAAP measures as defined below consistently in our planning and forecasting, reporting, compensation and external communication. Specifically,

• Our management primarily uses these non-GAAP numbers rather than U.S. GAAP numbers as the basis for making financial, strategic and operating decisions.
• The variable remuneration components of our board members and employees that are compensated  with regard to our group targeted measures were based in 2009 on SAP's achievement of its targets for non-GAAP operating income, non-GAAP operating margin at constant currencies and cash flow conversion ratio. These targets are monitored on a yearly basis and are adjusted  if necessary.
• The annual budgeting process involving all management units, which includes costs such as stock based compensation and restructuring, is based on non-GAAP revenues and non-GAAP operating income numbers rather than U.S. GAAP numbers.
• All monthly forecast and performance reviews with all senior managers globally are based on these non-GAAP measures, which are derived from U.S. GAAP measures, rather than U.S. GAAP numbers.
• Both, company-internal target setting and guidance provided to the capital markets are based on non-GAAP revenues and non-GAAP income measures rather than U.S. GAAP numbers.

We believe that our non-GAAP measures are useful to investors for the following reasons:

• The non-GAAP measures provide investors with insight into management's decision-making since management uses these non-GAAP measures to run our business and make financial, strategic and operating decisions.
• The non-GAAP measures provide investors with additional information that enables a comparison of year-over-year operating performance by eliminating certain direct effects resulting from acquisitions.

Our non-GAAP financial measures reflect adjustments based on the items below, as well as the related income tax effects:

Non-GAAP revenue:

Revenues in this document identified as non-GAAP revenue have been adjusted from the respective U.S. GAAP numbers by including the full amount of support revenues that would have been recorded by the acquired entity had it remained a stand-alone entity but which we are not permitted to record as revenue under U.S. GAAP due to fair value accounting for the support contracts in effect at the time of the respective acquisition.

Under U.S. GAAP we record at fair value the support contracts in effect at the time an entity was acquired. Consequently, our U.S. GAAP support revenues, our U.S. GAAP software and software-related service revenues and our U.S. GAAP total revenues for periods subsequent to acquisitions do not reflect the full amount of support revenue that would have recorded for these support contracts absent the acquisition by SAP. Adjusting revenue numbers for this revenue impact provides additional insight into the comparability across periods of our ongoing performance.

Non-GAAP operating expense:

Operating expense figures in this report that are identified as non-GAAP operating expense have been adjusted by excluding the following acquisition-related charges:

• amortization expense/impairment charges of intangibles acquired in business combinations and certain standalone acquisitions of intellectual property;
• expense from purchased in-process research and development;
• restructuring expenses and settlements of pre-existing relationships incurred in connection with a business combination; and
• acquisition-related third-party costs (since our early adoption of SFAS 141R and the revision of IFRS 3) as of January 1, 2009, which requires expensing these costs: the previous version of SFAS 141 and IFRS 3 required capitalization.

Non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per share:

Operating income, operating margin, net income and earnings per share in this document identified as non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per share have been adjusted from the respective operating income, operating margin, net income and earnings per share numbers as recorded under U.S. GAAP by adjusting for the above mentioned non-GAAP revenues and non-GAAP expenses.

We include these non-GAAP revenues and exclude these non-GAAP expenses for the purpose of calculating non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per share when evaluating the continuing operational performance of the Company because these expenses generally cannot be changed or influenced by management after the relevant acquisition other than by disposing of the acquired assets. As management at levels below the Executive Board has no influence on these expenses we generally do not consider these expenses for the purpose of evaluating the performance of management units. As we believe that our Company-wide performance measures need to be aligned with the measures generally applied by management at varying levels throughout the Company, we include these revenues and exclude these expenses when making decisions to allocate resources, both, on a Company level and at lower levels of the organization. In addition, we use these non-GAAP measures to gain a better understanding of the Company's comparative operating performance from period to period. We believe that our non-GAAP financial measures described above have limitations, which include but are not limited to the following:

• The eliminated amounts may be material to us.
• Without being analysed in conjunction with the corresponding U.S. GAAP measures the non-GAAP measures are not indicative of our present and future performance, foremost for the following reasons:
• While our non-GAAP income numbers reflect the elimination of certain acquisition-related expenses, no eliminations are made for the additional revenues and other revenues that result from the acquisitions.
• The acquisition-related charges that we eliminate in deriving our non-GAAP income numbers are likely to recur should SAP enter into material business combinations in the future.
• The acquisition-related amortization expense that we eliminate in deriving our non-GAAP income numbers is a recurring expense that will impact our financial performance in future years.
• The revenue adjustment for the fair value accounting of the acquired entities' support contracts and the expense adjustment for acquisition-related charges do not arise from a common conceptual basis. This is because the revenue adjustment aims to  improve the comparability of the initial post-acquisition period with future post-acquisition periods while the expense adjustment aims to  improve the comparability between post-acquisition periods and pre-acquisition periods. This should particularly be considered when evaluating our non-GAAP operating income and non-GAAP operating margin numbers as these combine our non-GAAP revenues and non-GAAP expenses despite the absence of a common conceptual basis.

We believe, however, that the presentation of the non-GAAP measures in conjunction with the corresponding U.S. GAAP measures provide useful information to management and investors regarding present and future business trends relating to our financial condition and results of operations. We therefore do not evaluate our growth and performance without considering both non-GAAP measures and U.S. GAAP measures. We caution the readers of this document to follow a similar approach by considering our non-GAAP measures only in addition to, and not as a substitute for or superior to, revenues or other measures of our financial performance prepared in accordance with U.S. GAAP.

Free Cash Flow

We believe that free cash flow is a widely accepted supplemental measure of liquidity. Free cash flow measures a company's cash flow remaining after all expenditures required to maintain or expand the business have been paid off. We calculate free cash flow as our net cash provided by operating activities from continuing operations minus purchases of long-lived assets excluding additions from business combinations. Free cash flow should be considered in addition to, and not as a substitute for or superior to, cash flow or other measures of liquidity and financial performance prepared in accordance with U.S. GAAP.

Constant Currency Period-Over-Period Changes

We believe it is important for investors to have information that provides insight into our sales. Revenue measures determined under U.S. GAAP provide information that is useful in this regard. However, both sales volume and currency effects impact period-over-period changes in sales revenue. We do not sell standardized units of products and services, so we cannot provide relevant information on sales volume by providing data on the changes in product and service units sold. To provide additional information that may be useful to investors in breaking down and evaluating changes in sales volume, we present information about our revenue and various values and components relating to operating income that are adjusted for foreign currency effects. We calculate constant currency year-over-year changes in revenue and operating income by translating foreign currencies using the average exchange rates from the previous year instead of the report year.

We believe that data on constant currency period-over-period changes has limitations, particularly as the currency effects that are eliminated constitute a significant element of our revenues and expenses and may severely impact our performance. We therefore limit our use of constant currency period-over-period changes to the analysis of changes in volume as one element of the full change in a financial measure. We do not evaluate our results and performance without considering both constant currency period-over-period changes on the one hand and changes in revenues, expenses, income, or other measures of financial performance prepared in accordance with U.S. GAAP on the other. We caution the readers of this document to follow a similar approach by considering data on constant currency period-over-period changes only in addition to, and not as a substitute for or superior to, changes in revenues, expenses, income, or other measures of financial performance prepared in accordance with U.S. GAAP.

U.S. Dollar-Based Non-GAAP Revenue Measures

Substantially all of our major competitors report their financial performance in U.S. dollars. Thus changes in exchange rates, particularly in the U.S. dollar to euro rates, affect the financial statements of our competitors differently than our euro-based financial statements. We therefore believe that U.S. dollar-based revenues for SAP provide investors with useful additional information that enables them to better compare SAP's revenue growth with SAP's competitors' revenue growth irrespective of movements in exchange rates.

Our U.S. dollar non-GAAP revenues are determined as if SAP's reporting currency was the U.S. dollar. In fact, the reporting currency of our U.S. GAAP and IFRS consolidated financial statements as filed in Germany and in the United States with the U.S. Securities and Exchange Commission is the euro. Additionally, our U.S. dollar non-GAAP revenue numbers have been adjusted from the respective U.S. GAAP revenues by the same support revenue fair value adjustment as our non GAAP revenues explained above.

SAP's management uses our U.S. dollar non-GAAP revenues to gain a better understanding of SAP's operating results compared to SAP's major competitors.

We believe that our U.S. dollar non-GAAP revenues have limitations, particularly because the impact of currency exchange rate fluctuations and the eliminated amounts may be material to us. We therefore do not evaluate our growth and performance without considering both non-GAAP revenues and euro-based U.S. GAAP revenues. We caution the readers of this document to follow a similar approach by considering our U.S. dollar non-GAAP revenues only in addition to, and not as a substitute for or superior to, revenues or other measures of our financial performance prepared in accordance with U.S. GAAP and reported in euro.

U.S. GAAP - IFRS Significant Differences with Impact on Income

Acquisition-related restructuring expense

In certain circumstances, U.S. GAAP requires that restructuring expense incurred in connection with a business combination be shown as an assumed liability, and therefore it does not normally affect income. However, this restructuring expense must be shown as a current expense under IFRS. After the application of SFAS 141R and the revision to IFRS 3, the accounting has been aligned under both U.S. GAAP and IFRS. Therefore, we do not expect material differences going forward.

Acquired in-process research and development

Under U.S. GAAP, all in-process research and development acquired in connection with a business combination must be amortized immediately. Under IFRS, if certain criteria are met, it must be shown as an asset and, once completed and ready for market, amortized over its normal useful life. After the application of SFAS 141R and the revision to IFRS 3, the accounting has been aligned under both U.S. GAAP and IFRS. Therefore, we do not expect material differences going forward.

Discontinued operations

SAP's U.S. GAAP income statement shows the revenue and income of our TomorrowNow subsidiary's activities separately because we discontinued its operation. IFRS does not allow us to show them separately because TomorrowNow is not a material operation. This leads to the only difference between our presentation of revenue under U.S. GAAP and IFRS.

Provisions for litigation costs

The accounting requirements regarding provisions are different under IFRS compared to U.S. GAAP. Particularly, the probability threshold for recording provisions is lower under IFRS than under U.S. GAAP and the measurement differs in certain scenarios. Consequently, provisions (e.g. for litigations) may be recorded earlier or at a higher amount under IFRS compared to U.S. GAAP. In addition, under IFRS litigation provisions include attorney's fees and other legal costs whereas under U.S. GAAP we record these expenses when incurred.

Deferred taxes

Where differences between our IFRS financial statements and our U.S. GAAP financial statements arise out of tax-relevant transactions that result in temporary differences between the financial statements and our tax accounts, they also result in differences in the deferred tax in our IFRS financial statements and our U.S. GAAP financial statements.

Explanations of Non-IFRS Measures

Since 2007, we have been required by German and European law to prepare consolidated financial statements in accordance with IFRS. We did not, however, discontinue preparing financial statements under U.S. GAAP but have prepared consolidated financial statements under both U.S. GAAP and IFRS through 2009.

We will fully migrate to IFRS and discontinue the preparation of U.S. GAAP financial information with effect from the end of 2009. This press release will be the last document in which we will provide U.S. GAAP financial information. In our annual report as well as our annual report on Form 20-F for fiscal year 2009 and all quarterly and annual reports thereafter, we will include only IFRS financial statements. Our business outlook for 2010 and years thereafter will be based on non-IFRS numbers derived from IFRS numbers. Concurrently with this change in our external financial communication, we will modify our internal management reporting, our planning and forecasting, and our variable compensation plans to align to the non-IFRS numbers we provide in our external communication.

To give our investors an insight into what our migration from U.S. GAAP/non-GAAP to IFRS/non-IFRS will mean for SAP's key performance measures, the table titled Reconciliations from U.S. GAAP and Non-GAAP to IFRS and Non-IFRS Numbers on page F17 of this press release shows a reconciliation from our U.S. GAAP and non-GAAP numbers to their most comparable IFRS and non-IFRS numbers. Note: Our non-GAAP and non-IFRS numbers are not prepared under a comprehensive set of accounting rules or principles. For more information on our non-GAAP measures, which also applies to our non-IFRS measures subject to the additional explanations below, see the section titled Explanations of Non-GAAP Measures.

We have adjusted both our non-GAAP measures and our non-IFRS measures from the respective U.S. GAAP and IFRS numbers by:

• Including the full amount of support revenue that the acquired entity would have recognized had it remained a stand-alone entity but that we are not permitted to recognize as revenue under U.S. GAAP and IFRS as a result of fair value accounting for the support contracts in effect at the time of the respective acquisition.
• Excluding acquisition-related charges.

However, the adjustment amounts for acquisition-related charges differ between our non-GAAP measures and our non-IFRS measures, due to differences between U.S. GAAP and IFRS. Specifically:

• For acquisitions taking place up to the end of 2008, U.S. GAAP required that certain acquisition-related restructuring expenses to be accounted for as liabilities assumed in a business combination; however, these expenses are required to be charged to expense under IFRS. Consequently, these acquisition-related restructuring expenses are eliminated only in our non-IFRS numbers.
• For acquisitions taking place up to the end of 2008, purchased in-process research and development was charged to expense immediately under U.S. GAAP, while being capitalized and amortized over the expected life under IFRS. Consequently, the immediate charge to expense is eliminated in our non-GAAP measures while only the amortization is eliminated in our non-IFRS measures.

Starting on January 1, 2009 our accounting for acquisitions has been aligned through the adoption of new accounting standards under both U.S. GAAP and IFRS. Therefore, we do not expect material differences for upcoming acquisitions with respect to acquisition-related restructuring expenses and purchased in-process research and development.

Additionally, our non-IFRS measures have been adjusted from the respective IFRS numbers for the results of the discontinued operations that qualify as such in all respects except that the fact that they do not represent a major line of business. We will refer to these activities as "discontinued activities." Under U.S. GAAP, we present the results of operations of the TomorrowNow entities as discontinued operations. Under IFRS, results of discontinued operations may only be presented as discontinued operations if a separate major line of business or geographical area of operations is discontinued. Our TomorrowNow operations were not a separate major line of business and thus did not qualify for separate presentation under IFRS. We believe that this additional adjustment to our IFRS numbers for the results of our discontinued TomorrrowNow activities is useful to investors for the following reasons:

• Despite the migration from U.S. GAAP to IFRS, we will continue to internally view the ceased TomorrowNow activities as discontinued activities and thus will continue to exclude potential future TomorrowNow results, which are expected to mainly comprise of expenses in connection with the Oracle lawsuit, from our internal management reporting, planning, forecasting, and compensation plans. Therefore, adjusting our non-IFRS measures for the results of the discontinued TomorrowNow activities provides insight into the financial measures that SAP will use internally once SAP has fully migrated to IFRS.
• By adjusting the non-IFRS numbers for the results from our discontinued TomorrowNow operations, the non-IFRS numbers are more comparable to the non-GAAP measures that SAP used through the end of 2009, which makes SAP's performance measures before and after the full IFRS migration easier to compare.

SOURCE SAP AG