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, Germany, July 26, 2011 /PRNewswire/ -- SAP AG (NYSE: SAP) today announced its financial results for the second quarter ended June 30, 2011.

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"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 EUR 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

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 EUR 802 million (2010: EUR 637 million), an increase of 26% (35% at constant currencies).
• IFRS software and software-related service revenue was EUR 2.58 billion (2010: EUR 2.26 billion), an increase of 14%. Non-IFRS software and software-related service revenue was EUR 2.59 billion (2010: EUR 2.26 billion), an increase of 15% (20% at constant currencies).
• IFRS total revenue was EUR 3.30 billion (2010: EUR 2.89 billion), an increase of 14%. Non-IFRS total revenue was EUR 3.31 billion (2010: EUR 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 EUR 8 million.

Profit – Second Quarter 2011

• IFRS operating profit was EUR 857 million (2010: EUR 774 million), an increase of 11%. Non-IFRS operating profit was EUR 1.02 billion (2010: EUR 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 EUR 588 million (2010: EUR 491 million), an increase of 20%. Non-IFRS profit after tax was EUR 703 million (2010: EUR 562 million), an increase of 25%. IFRS basic earnings per share was EUR 0.49 (2010: EUR 0.41), an increase of 20%. Non-IFRS basic earnings per share was EUR 0.59 (2010: EUR 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 EUR 8 million, acquisition-related charges of EUR 111 million, expenses from discontinued activities of EUR 10 million, share-based compensation expenses of EUR 32 million and restructuring expenses of EUR 1 million (2010: EUR 0 million, EUR 65 million, EUR 2 million, EUR 12 million and EUR 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 EUR 5 million, acquisition-related charges of EUR 75 million, expenses from discontinued activities of EUR 10 million, share-based compensation expenses of EUR 24 million and restructuring expenses of EUR 1 million (2010: EUR 0 million, EUR 49 million, EUR 12 million, EUR 9 million and EUR 1 million ) net of tax.

FINANCIAL HIGHLIGHTS – Six Months 2011

(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 EUR 1.39 billion (2010: EUR 1.10 billion), an increase of 26% (31% at constant currencies).
• IFRS software and software-related service revenue was EUR 4.91 billion (2010: EUR 4.21 billion), an increase of 17%. Non-IFRS software and software-related service revenue was EUR 4.93 billion (2010: EUR 4.21 billion), an increase of 17% (19% at constant currencies).
• IFRS total revenue was EUR 6.32 billion (2010: EUR 5.40 billion), an increase of 17%. Non-IFRS total revenue was EUR 6.35 billion (2010: EUR 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 EUR 25 million (2010: EUR 0 million).

Profit – Six Months 2011

• IFRS operating profit was EUR 1.45 billion (2010: EUR 1.33 billion), an increase of 9%.  Non-IFRS operating profit was EUR 1.80 billion (2010: EUR 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 EUR 991 million (2010: EUR 878 million), an increase of 13%. Non-IFRS profit after tax was EUR 1.23 billion (2010: EUR 1.00 billion), an increase of 23%. IFRS basic earnings per share was EUR 0.83 (2010: EUR 0.74), an increase of 12%. Non-IFRS basic earnings per share was EUR 1.04 (2010: EUR 0.84), an increase of 24%.  

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

Cash Flow – Six Months 2011

Operating cash flow was EUR 2.27 billion (2010: EUR 1.28 billion), an increase of 77%.  Free cash flow was EUR 2.02 billion (2010: EUR 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 EUR 4.40 billion (December 31, 2010: EUR 3.53 billion), which includes cash and cash equivalents and short term investments. Net liquidity at June 30, 2011 was EUR 531 million compared to - EUR 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: EUR 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 EUR 4.45 billion – EUR 4.65 billion at constant currencies (2010: EUR 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/investor 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. 

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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Appendix – Financial Information to Follow

FINANCIAL INFORMATION
FOR THE SECOND QUARTER 2011
(Condensed and Unaudited)

Financial Statements (IFRS)

* For the three months ended June 30, 2011 and 2010 the weighted average number of shares were 1,189 million (Diluted: 1,189 million) and 1,188 million (Diluted: 1,189 million), respectively (treasury stock excluded).

* For the six months ended June 30, 2011 and 2010 the weighted average number of shares were 1,188 million (Diluted: 1,189 million) and 1,188 million (Diluted: 1,189 million), respectively (treasury stock excluded).

Supplementary Financial Information

RECONCILIATIONS FROM NON-IFRS NUMBERS TO IFRS NUMBERS

(Unaudited)

The following table presents a reconciliation from our non-IFRS numbers (including our non-IFRS at constant currency numbers) to the respective most comparable IFRS numbers. Note: Our non-IFRS numbers are not prepared under a comprehensive set of accounting rules or principles.

* Adjustments in the revenue line items are for support revenue that entities acquired by SAP would have recognized had they 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 expenses and discontinued activities.

** Constant currency revenue figures are calculated by translating revenue 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.

Differences may exist due to rounding.

REVENUE BY REGION

(Unaudited)

The following table presents our IFRS and non-IFRS revenue by region based on customer location. The table also presents a reconciliation from our non-IFRS revenue (including our non-IFRS revenue at constant currency) to the respective most comparable IFRS revenue. Note: Our non-IFRS revenues are not prepared under a comprehensive set of accounting rules or principles.

* Adjustments in the revenue line items are for support revenue that entities acquired by SAP would have recognized had they remained stand-alone entities but that SAP is not permitted to recognize as revenue under IFRS as a result of business combination accounting rules. See Explanations of Non-IFRS Measures for details.

** Constant currency revenue figures are calculated by translating revenue 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.

Differences may exist due to rounding.

For a more detailed description of these adjustments and their limitations as well as our constant currency and free cash flow figures see Explanations of Non-IFRS Measures online (www.sap.com/about/investor/index.epx).

SOURCE SAP AG