Second Quarter 2011 Preliminary Results Release

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Second Quarter 2011 Preliminary Results Release

  1. 1. Second Quarter 2011Results ReleaseWalldorf, GermanyWednesday, July 27, 2011
  2. 2. Safe Harbor StatementAny 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 of1995. Words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,”“may,” “plan,” “project,” “predict,” “should” and “will” and similar expressions as theyrelate to SAP are intended to identify such forward-looking statements. SAPundertakes no obligation to publicly update or revise any forward-lookingstatements. All forward-looking statements are subject to various risks anduncertainties that could cause actual results to differ materially from expectations.The factors that could affect SAP’s future financial results are discussed more fullyin 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 Securitiesand Exchange Commission. Readers are cautioned not to place undue reliance onthese forward-looking statements, which speak only as of their dates.© 2011 SAP AG. All rights reserved. 2
  3. 3. AgendaIncome StatementBalance Sheet and Cash Flow AnalysisOutlookAppendix© 2011 SAP AG. All rights reserved. 3
  4. 4. 6th Consecutive Quarter of Double-Digit Non-IFRSSSRS Revenue Growth Software Revenue (€ bn) SW & SW-Related Service Revenue (€ bn) IFRS Non-IFRS IFRS Non-IFRS 26% 26% 14% 15% (35%*) (20%*) 2.26 2.58 2.26 2.59 0.80 0.80 0.64 0.64 Q2/10 Q2/11 Q2/10 Q2/11 Q2/10 Q2/11 Q2/10 Q2/11 Operating Margin (%) Basic Earnings Per Share (€) IFRS Non-IFRS IFRS Non-IFRS -0.7pp 1.3pp 20% 26% (1.5pp*) 29.5 30.8 0.59 26.7 26.0 0.49 0.47 0.41 Q2/10 Q2/11 Q2/10 Q2/11 Q2/10 Q2/11 Q2/10 Q2/11 * at constant currencies© 2011 SAP AG. All rights reserved. 4
  5. 5. Strong Top-Line Performance in First Half 2011 ShowsThat SAP is on Track to Achieve Fiscal Year Targets Software Revenue (€ bn) SW & SW-Related Service Revenue (€ bn) IFRS Non-IFRS IFRS Non-IFRS 26% 26% 17% 17% (31%*) (19%*) 1.39 1.39 4.91 4.93 1.10 1.10 4.21 4.21 H1/10 H1/11 H1/10 H1/11 H1/10 H1/11 H1/10 H1/11 Operating Margin (%) Basic Earnings Per Share (€) IFRS Non-IFRS IFRS Non-IFRS -1.6pp 1.1pp 12% 24% (1.2pp*) 24.6 27.2 28.3 1.04 23.0 0.74 0.83 0.84 H1/10 H1/11 H1/10 H1/11 H1/10 H1/11 H1/10 H1/11 * at constant currencies© 2011 SAP AG. All rights reserved. 5
  6. 6. Successful Quarter with Double-Digit Top-Line Growthand Strong Non-IFRS Margin Expansion IFRS Non-IFRS % % %€ millions, unless otherwise stated Q2/11 Q2/10 Q2/11 Q2/10 at cc Software revenue 802 637 26 802 637 26 35 Support revenue 1,681 1,526 10 1,689 1,526 11 15 Subscription & other SW-rel. serv. rev. 96 95 1 96 95 1 3SSRS revenue 2,579 2,258 14 2,587 2,258 15 20 Consulting revenue 579 528 10 579 528 10 15 Other service revenue 142 108 31 142 108 31 37Professional services & other serv. rev. 721 636 13 721 636 13 19Total revenue 3,300 2,894 14 3,308 2,894 14 20Total operating expenses -2,443 -2,120 15 -2,289 -2,040 12 17Operating profit 857 774 11 1,019 854 19 26Finance income, net -18 -12 50 -18 -12 50Profit before tax 804 676 19 966 767 26Income tax expense -216 -185 17 -263 -205 28Profit after tax 588 491 20 703 562 25Basic earnings per share, in € 0.49 0.41 20 0.59 0.47 26 © 2011 SAP AG. All rights reserved. 6
  7. 7. Top-Line Growth in First Half 2011 Combined withOperational Excellence Results in Strong Profitability IFRS Non-IFRS % % %€ millions, unless otherwise stated H1/11 H1/10 H1/11 H1/10 at cc 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 Subscription & other SW-rel. serv. rev. 185 184 1 185 184 1 0SSRS revenue 4,906 4,205 17 4,931 4,205 17 19 Consulting revenue 1,148 1,007 14 1,148 1,007 14 15 Other service revenue 270 191 41 270 191 41 42Professional services & other serv. rev. 1,418 1,198 18 1,418 1,198 18 20Total revenue 6,324 5,403 17 6,349 5,403 18 19Total operating expenses -4,870 -4,072 20 -4,551 -3,933 16 17Operating profit 1,454 1,331 9 1,798 1,470 22 24Finance income, net -32 -12 >100 -32 -12 >100Profit before tax 1,388 1,197 16 1,732 1,354 28Income tax expense -397 -319 24 -501 -354 42Profit after tax 991 878 13 1,231 1,000 23Basic earnings per share, in € 0.83 0.74 12 1.04 0.84 24 © 2011 SAP AG. All rights reserved. 7
  8. 8. SSRS Revenue Breakdown by Region**Second Quarter 2011€ millions | yoy percent changeIFRS Non-IFRS EMEA EMEA 1,249 | +16% 1,251 | +16% | +16%* thereof Germany thereof Germany 397| +10% 397 | +10% | +10%* thereof rest of EMEA thereof rest of EMEA 852| +19% 854 | +19% | +19%* Americas Americas 904| +10% 909 | +11% | +24%* Total thereof United States: Total thereof United States: 2,579 | +14% 675 | +10% 2,587 | +15% | +20%* 679 | +10% | +26%* thereof rest of thereof rest of Americas Americas 230 | +11% 231 | +12% | +17* Asia Pacific Japan Asia Pacific Japan 426| +19% 427 | +19% | +23%* thereof Japan thereof Japan 137 | +23% 137 | +23% | +25%* thereof rest of APJ thereof rest of APJ 289 | +17% 289 | +17% | +21%* * At constant currencies ** Based on customer location© 2011 SAP AG. All rights reserved. 8
  9. 9. SSRS Revenue Breakdown by Region**First Half 2011€ millions | yoy percent changeIFRS Non-IFRS EMEA EMEA 2,375 | +14% 2,382| +15% | +14%* thereof Germany thereof Germany 728 | +8% 728 |+ 8% | +8%* thereof rest of EMEA thereof rest of EMEA 1,647 | +17% 1,654 | +17% | +16%* Americas Americas 1,746 | +18% 1,762 | +19% | +25%* Total thereof United States: Total thereof United States: 4,906 | +17% 1,295 | +19% 4,931 | +17% | +19%* 1,309 | +20% | +29%* thereof rest of thereof rest of Americas Americas 451 | +13% 453 | +14% | +14%* Asia Pacific Japan Asia Pacific Japan 785 | +22% 787 | +23% | +21%* thereof Japan thereof Japan 261 | +25% 262 | +26% | +21%* thereof rest of APJ thereof rest of APJ 525 | +22% 526 | +22% | +21%* * At constant currencies ** Based on customer location© 2011 SAP AG. All rights reserved. 9
  10. 10. Non-IFRS Operating Margin Expanded 130 Basis Pointsin the Second Quarter 2011 Despite Currency Headwind 29.5% 30.8% | 31.0%* +1.3pp | +1.5pp* Total Strong top-line growth paired with Revenue continued focus on operational €3.3bn excellence resulted in further margin Total Revenue expansion. €2.9bn Total In Q2 2011, non-IFRS operating Operating Total Expenses margin increased 1.3 percentage Operating €2.3bn points to 30.8% yoy, which exceeded Expenses €2.0bn expectations. Currency affected operating margin negatively by 0.2 pp. Q2/10 Q2/11 * at constant currencies© 2011 SAP AG. All rights reserved. 10
  11. 11. Non-IFRS Operating Margin Expanded 110 Basis Pointsin the First Half 2011 27.2% 28.3% | 28.4%* +1.1pp | +1.2pp* Total Strong top-line growth paired with Revenue continued focus on operational €6.3bn excellence resulted in further margin Total Revenue expansion. €5.4bn Total Operating In H1 2011, non-IFRS operating Total Expenses margin increased 1.1 percentage Operating €4.6bn points to 28.3% yoy. Expenses €3.9bn Currency affected operating margin negatively by 0.1 pp. H1/10 H1/11 * at constant currencies© 2011 SAP AG. All rights reserved. 11
  12. 12. Gross Margin Increased by 70 Basis PointsNon-IFRS, Second Quarter 2011 Gross Margin SSRS Margin Professional Services* 70.6% | +0.7pp 83.5% | +0.1pp Margin Total 24.1% | +1.9pp Revenue €3.3bn Total Revenue SSRS €2.9bn Revenue €2.6bn SSRS Revenue €2.3bn SSRS + SSRS + Services* Services* Expenses Expenses €1.0bn Services* Services* Revenue Services* €0.9bn SSRS Revenue Services* Expenses SSRS Expenses €0.7bn Expenses Expenses €0.5bn €0.6bn €0.5bn €0.4bn €0.4bn Q2/10 Q2/11 Q2/10 Q2/11 Q2/10 Q2/11* Professional services and other services© 2011 SAP AG. All rights reserved. 12
  13. 13. Gross Margin Expansion Supported by All Line ItemsNon-IFRS, First Half 2011 Gross Margin SSRS Margin Professional Services* 69.2% | +0.3pp 82.9% | +0.3pp Margin Total 21.7% | +0.6pp Revenue €6.3bn Total Revenue SSRS €5.4bn Revenue €4.9bn SSRS Revenue €4.2bn SSRS + SSRS + Services* Services* Expenses Expenses €2.0bn Services* Services* Revenue Services* €1.7bn SSRS Revenue Services* Expenses SSRS Expenses €1.4bn Expenses Expenses €1.1bn €1.2bn €0.9bn €0.7bn €0.8bn H1/10 H1/11 H1/10 H1/11 H1/10 H1/11* Professional services and other services© 2011 SAP AG. All rights reserved. 13
  14. 14. Cost RatiosNon-IFRS, Second Quarter 2011 R&D S&M G&A as a % of Total Revenue as a % of Total Revenue as a % of Total Revenue13.4% 13.6% 22.1% 21.3% 5.0% 5.0% +0.2pp -0.8pp +/-0.0pp Total Total Total Revenue Revenue Revenue Total €3.3bn Total €3.3bn Total €3.3bn Revenue Revenue Revenue €2.9bn €2.9bn €2.9bn S&M R&D S&M R&D Expenses G&A Expenses Expenses G&A Expenses €0.7bn Expenses €0.5bn €0.6bn Expenses €0.2bn €0.4bn €0.1bn Q2/10 Q2/11 Q2/10 Q2/11 Q2/10 Q2/11© 2011 SAP AG. All rights reserved. 14
  15. 15. Cost RatiosNon-IFRS, First Half 2011 R&D S&M G&A as a % of Total Revenue as a % of Total Revenue as a % of Total Revenue14.4% 14.6% 21.9% 21.2% 5.4% 5.2% +0.2pp -0.7pp -0.2pp Total Total Total Revenue Revenue Revenue Total €6.3bn Total €6.3bn Total €6.3bn Revenue Revenue Revenue €5.4bn €5.4bn €5.4bn S&M R&D S&M R&D Expenses G&A Expenses Expenses G&A Expenses €1.3bn Expenses €0.9bn €1.2bn Expenses €0.3bn €0.8bn €0.3bn H1/10 H1/11 H1/10 H1/11 H1/10 H1/11© 2011 SAP AG. All rights reserved. 15
  16. 16. AgendaIncome StatementBalance Sheet and Cash Flow AnalysisOutlookAppendix© 2011 SAP AG. All rights reserved. 16
  17. 17. Balance SheetJune 30, 2011, IFRSAssets Equity and liabilities 06/30/11 12/31/10 06/30/11 12/31/10€ millions € millionsCash, cash equivalents and Financial liabilities 136 142 4,563 3,676other financial assets Deferred income 2,161 911Trade and other receivables 2,738 3,099 Provisions 1,287 1,287Other non-financial assets and 379 368tax assets Other liabilities 2,004 2,813Total current assets 7,680 7,143 Current liabilities 5,588 5,153Goodwill 8,213 8,428 Financial liabilities 3,945 4,449Intangible assets 2,107 2,376 Provisions 244 292 Other non-current liabilities 1,122 1,121Property, plant, and equipment 1,463 1,449 Non current liabilities 5,311 5,862Other non-current assets 1,433 1,443 Total liabilities 10,899 11,015Total non-current assets 13,216 13,696 Total equity 9,997 9,824Total assets 20,896 20,839 Equity and liabilities 20,896 20,839© 2011 SAP AG. All rights reserved. 17
  18. 18. Highest Operating Cash Flow for a First Half Yearin SAP’s History € millions, unless otherwise stated 06/30/11 06/30/10Operating cash flow 2,270 1,282 77% - Capital expenditure -248 -125 98%Free cash flow 2,022 1,157 75%Free cash flow as a percentage of total revenue 32% 21% 11ppCash conversion rate 2.29 1.46 57%Days sales outstanding (DSO) 63 73 -10days1) cash and cash equivalents + current investments – (bank loans, private placement transactions, and bonds) 1) Defined as cash and cash equivalents + short-term investments less bank loans, private placements and bonds© 2011 SAP AG. All rights reserved. 2) Defined as cash and cash equivalents + short-term investments 18
  19. 19. Net Group Liquidity Increased by €1.4bn Driven byStrong Revenues and Good Working Capital Management€ millions Capital Net Operating expenditure repayments Total cash flow -248 of borrowings Group Financial +2,270 -486 Dividend Liquidity1) Debt Other Total Group 06/30/11 Liquidity1) -713 +44 12/31/10 4,395 -3,864 3,528 Total Net Liquidity2) Total Net 06/30/11 Liquidity2) 531 12/31/10 -8501) Cash and cash equivalents + current investments2) Total Group Liquidity minus bank loans, private placement transactions, and bonds© 2011 SAP AG. All rights reserved. * Defined as cash and cash equivalents + restricted cash + short-term investments 19
  20. 20. Successful Second US Private PlacementWell-balanced financial debt maturity profile EUR million (in % of total financial debt) 1,250 1,000 % Fixed interest rate % Variable interest rate 1.023 750 26% 415 500 638 104 600 774 208 17% 250 11% 16% 20% 100 3% 5% 0 3% 2012 2013 2014 2015 2016 2017 2018 On June 1, 2011, we successfully completed a private placement with a volume of US$750 million This enhances Groups financial flexibility by broadening its investor base and extending its maturity profile Proceeds of issue were used to repay existing Group financial debt incurred to finance Sybase acquisition A group of 16 institutional investors participated in the two tranches • US$600 million tranche with a five-year term • US$150 million tranche with a seven-year term. • coupon was less than 3.5% on both tranches© 2011 SAP AG. All rights reserved. * Defined as cash and cash equivalents + restricted cash + short-term investments 20
  21. 21. AgendaIncome StatementBalance Sheet and Cash Flow AnalysisOutlookAppendix© 2011 SAP AG. All rights reserved. 21
  22. 22. SAP Refines Outlook for Non-IFRS SSRS Revenue at CCand Non-IFRS Operating Profit at CC SAP’s Outlook Basis for comparison FY 2011 FY 2010 SSRS Revenue + 10% to 14% Company now expects € 9.87bn (Non-IFRS at cc) to reach the high end of the range. Operating Profit €4.45bn to €4.65bn Company now expects € 4.01bn (Non-IFRS at cc) to reach the high end of the range. Operating Margin +0.5pp to +1.0pp 32.0% (Non-IFRS at cc) Effective Tax Rate 27.0% to 28.0% 22.5%* (IFRS) Effective Tax Rate 27.5% to 28.5% 27.3% (Non-IFRS) * Impacted by 4.7pp due to increased provisions for TomorrowNow Litigation© 2011 SAP AG. All rights reserved. 22
  23. 23. AgendaIncome StatementBalance Sheet and Cash Flow AnalysisOutlookAppendix© 2011 SAP AG. All rights reserved. 23
  24. 24. Non-IFRS Definition Actual Amounts Actual Amounts Estimated amounts IFRS Profit Measure from 2010 H1 2011 for 2011 +/- Discontinued activities €983m €12m < €20m + Deferred maintenance write-down €74m €25m €20m to €30m + Acquisition related charges €300m €222m €430m to €460m = Previous Non-IFRS profit measure + Share-based compensation expenses €58m €84m €140m to €160m + Restructuring charges €3m €1m < €10m = New Non-IFRS profit measure© 2011 SAP AG. All rights reserved. 24
  25. 25. Explanations of Non-IFRS MeasuresAdjustments in the revenue line items are for support revenue that entities acquired by SAPwould have recognized had they remained stand-alone entities but that SAP is not permittedto 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 periodusing the average exchange rates from the previous years respective period instead of thecurrent period. Constant currency period-over-period changes are calculated by comparing thecurrent years non-IFRS constant currency numbers with the non-IFRS number of the previousyears respective period.For a more detailed description of these adjustments and their limitations as well as ourconstant currency and free cash flow figures see Explanations of Non-IFRS Measures online(www.sap.com/corporate-en/investors/reports and web message non-IFRS an web messagecurrency effects).© 2011 SAP AG. All rights reserved. 25
  26. 26. Explanations of Currency ImpactOverview on the major SAP’s guidance formatcurrencies for Q2 2010 SAP provides a yearly outlook, which is based on non-IFRS at constant currencies because these numbers are used as a basis for SAP’sCurrency 2010 Q2* internal management reporting since we cannot influence currency movements, andUSD per € 1.27 it helps prevent frequent changes in guidance due to fluctuations in currencyGBP per € 0.85 The elimination of currency effects is achieved by translatingJPY per € 117.38 foreign currencies using the average exchange rates from the previous year’s period (i.e. quarter) instead of theCHF per € 1.41 current year Currency impact on past performanceCAD per € 1.31 Historically, every 1% impact on total revenue resulting from foreign currency movements has resulted in a 10-15 basisAUD per € 1.44 point movement in margin.* These exchange rates are rates SAP used in its financial statements** Currency impacts on past performance are not a prediction of future performance resulting from currency impacts.For a more detailed description of these adjustments and their limitations as well as our constant currency and free cash flow figures see ‘Explanation of non-IFRS Measures’ which is available at http://www.sap.com/investor 1) Defined as cash and cash equivalents + short-term investments less bank loans, private placements and bonds© 2011 SAP AG. All rights reserved. 2) Defined as cash and cash equivalents + short-term investments 26

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