SAP Announces Best Ever Second Quarter Performance – Exceeding €1 Billion in Software Revenue

Press release:

SAP Announces Best Ever Second Quarter Performance – Exceeding €1 Billion in Software Revenue

Walldorf - July 24, 2012 | SAP - SAP Investor Relations

• Second Quarter 2012 Software Revenue Increased 26% to €1,059 Million (19% at Constant Currencies) Driven By Double-Digit Growth in All Regions
• Strong Growth Momentum From Key Innovations: SAP HANA Contributed €85 Million, Mobile €54 Million and Cloud €69 Million
• Second Quarter 2012 Non-IFRS Software and Software-Related Service Revenue Increased 21% to €3.14 Billion (15% at Constant Currencies)
• Second Quarter 2012 Non-IFRS Operating Profit Increased 15% to €1.17 Billion (8% at Constant Currencies)
• Second Quarter 2012 Non-IFRS Earnings Per Share Increased 19% to €0.70
• SAP Reiterates Full-Year Guidance

SAP AG (NYSE: SAP) today announced its financial results for the second quarter ended June 30, 2012.

BUSINESS HIGHLIGHTS IN THE SECOND QUARTER

SAP achieved record software revenue in the second quarter, exceeding €1 billion. All regions posted double-digit software revenue gains. Demand for SAP’s new innovation categories continued to accelerate: Cloud momentum continued with a 112% increase year-on-year in 12 month new and upsell subscription billings for SuccessFactors on a stand-alone basis. SAP’s strong combination with SuccessFactors is allowing the company to accelerate its strategy to become the leading cloud provider. SAP recorded €85 million in SAP HANA revenue putting the company on track to meet full-year expectations of at least €320 million. Mobile revenue was €54 million and keeps SAP on track to meet full-year expectations of €220 million. SAP also saw significant traction in strategic industries, with financial services and retail both growing more than 60 percent in software revenue, and solid growth across the manufacturing sectors, which grew more than 20 percent in software revenue.

„Our customer-focused innovation strategy is delivering exceptional business value for our customers and driving record results for SAP in an uncertain macro-economic environment,” said SAP Co-CEOs Bill McDermott and Jim Hagemann Snabe. “SAP stands apart in its ability to bring its customers innovations in cloud, mobile and in-memory computing on top of a proven, consistent and stable core. We will continue to provide game-changing solutions and remain on track to achieve our 2015 goals.“

„We reached the upper end of our second quarter software revenue guidance range and were at the mid-point of the software and software-related service revenue guidance range,” said Werner Brandt, CFO of SAP. “With this momentum in the first half of 2012 and our focused commitment to operational excellence we are on track to deliver on our targets for the full-year 2012 – in line with our 2015 goals.“

FINANCIAL RESULTS IN DETAIL

FINANCIAL HIGHLIGHTS – Second Quarter 2012

Second Quarter 20121)
	IFRS			Non-IFRS2)
€ million, unless otherwise stated	Q2 2012	Q2 2011	% change	Q2 2012	Q2 2011	% change	% change const. curr.
Software	1,059	838	26	1,059	838	26	19
Support	2,013	1,737	16	2,014	1,745	15	10
Cloud subscriptions and support	52	4	1,200	69	4	1,625	1,450
Software and software-related service revenue	3,124	2,579	21	3,142	2,587	21	15
Total revenue	3,898	3,300	18	3,916	3,308	18	12
Total operating expenses	−2,977	−2,443	22	−2,743	−2,289	20	14
Operating profit	921	857	7	1,173	1,019	15	8
Operating margin (%)	23.6	26.0	−2.4pp	30.0	30.8	−0.8pp	−1.2pp
Profit after tax	661	588	12	831	703	18
Basic earnings per share (€)	0.55	0.49	12	0.70	0.59	19
Number of employees (FTE)	60,972	54,043	13	N/A	N/A	N/A	N/A
1) All figures are unaudited.
2) For a detailed description of SAP’s non-IFRS measures see Explanation of Non-IFRS Measuresonline. For a breakdown of the individual adjustments see page F8 in the appendix to this press release.

IFRS software revenue was €1,059 million (2011: €838 million), an increase of 26% (19% at constant currencies). IFRS software and software-related service revenue was €3.12 billion (2011: €2.58 billion), an increase of 21%. Non-IFRS software and software-related service revenue was €3.14 billion (2011: €2.59 billion), an increase of 21% (15% at constant currencies). IFRS total revenue was €3.90 billion (2011: €3.30 billion), an increase of 18%. Non-IFRS total revenue was €3.92 billion (2011: €3.31 billion), an increase of 18% (12% at constant currencies).

IFRS operating profit was €921 million (2011: €857 million), an increase of 7%. Non-IFRS operating profit was €1.17 billion (2011: €1.02 billion), an increase of 15% (8% at constant currencies). IFRS operating margin was 23.6% (2011: 26.0%), a decrease of 2.4 percentage points. Non-IFRS operating margin was 30.0% (2011: 30.8%), or 29.6% at constant currencies, a decrease of 0.8 percentage points (a decrease of 1.2 percentage points at constant currencies).

Non-IFRS operating profit and non-IFRS operating margin for the second quarter 2012 were impacted by severance expenses which amounted to €31 million (2011: €12 million) and the acquisition of SuccessFactors, which impacted the non-IFRS operating margin by approximately 100 basis points (at constant currencies). In addition, the company increased its headcount by 3,655 FTEs (thereof 1,866 from acquisitions) in the first quarter of 2012 and another 1,552 FTEs (thereof 176 from acquisitions) in the second quarter of 2012 to capture future growth opportunities.

IFRS profit after tax was €661 million (2011: €588 million), an increase of 12%. Non-IFRS profit after tax was €831 million (2011: €703 million), an increase of 18%. IFRS basic earnings per share was €0.55 (2011: €0.49), an increase of 12%. Non-IFRS basic earnings per share was €0.70 (2011: €0.59), an increase of 19%. The IFRS and non-IFRS effective tax rates in the second quarter of 2012 were 23.6% (2011: 26.9%) and 25.6% (2011: 27.2%), respectively.

FINANCIAL HIGHLIGHTS – First-Half 2012

First-Half 20121)
	IFRS			Non-IFRS2)
€ million, unless otherwise stated	1H 2012	1H 2011	% change	1H 2012	1H 2011	% change	% change const. curr.
Software	1,696	1,453	17	1,696	1,453	17	11
Support	3,966	3,445	15	3,968	3,470	14	10
Cloud subscriptions and support	81	8	913	104	8	1,200	1,088
Software and software-related service revenue	5,743	4,906	17	5,768	4,931	17	12
Total revenue	7,248	6,324	15	7,273	6,349	15	10
Total operating expenses	−5,696	−4,870	17	−5,266	−4,551	16	12
Operating profit	1,551	1,454	7	2,007	1,798	12	6
Operating margin (%)	21.4	23.0	−1.6pp	27.6	28.3	−0.7pp	−1.1pp
Profit after tax	1,104	991	11	1,414	1,231	15
Basic earnings per share (€)	0.93	0.83	12	1.19	1.04	14
Number of employees (FTE)	60,972	54,043	13	N/A	N/A	N/A	N/A
1) All figures are unaudited.
2) For a detailed description of SAP’s non-IFRS measures see Explanation of Non-IFRS Measuresonline. For a breakdown of the individual adjustments see page F8 in the appendix to this press release.

IFRS software revenue was €1.70 billion (2011: €1.45 billion), an increase of 17% (11% at constant currencies). IFRS software and software-related service revenue was €5.74 billion (2011: €4.91 billion), an increase of 17%. Non-IFRS software and software-related service revenue was €5.77 billion (2011: €4.93 billion), an increase of 17% (12% at constant currencies). IFRS total revenue was €7.25 billion (2011: €6.32 billion), an increase of 15%. Non-IFRS total revenue was €7.27 billion (2011: €6.35 billion), an increase of 15% (10% at constant currencies).

IFRS operating profit was €1.55 billion (2011: €1.45 billion), an increase of 7%. Non-IFRS operating profit was €2.01 billion (2011: €1.80 billion), an increase of 12% (6% at constant currencies). IFRS operating margin was 21.4% (2011: 23.0%), a decrease of 1.6 percentage points. Non-IFRS operating margin was 27.6 (2011: 28.3%), or 27.2% at constant currencies, a decrease of 0.7 percentage points (a decrease of 1.1 percentage points at constant currencies).

IFRS profit after tax was €1.10 billion (2011: €991 million), an increase of 11%. Non-IFRS profit after tax was €1.41 billion (2011: €1.23 billion), an increase of 15%. IFRS basic earnings per share was €0.93 (2011: €0.83), an increase of 12%. Non-IFRS basic earnings per share was €1.19 (2011: €1.04), an increase of 14%. The IFRS and non-IFRS effective tax rates in the first six months of 2012 were 25.0% (2011: 28.6%) and 26.7% (2011: 28.9%), respectively.

Operating cash flow was €2.40 billion (2011: €2.27 billion), an increase of 6%. Free cash flow was €2.13 billion (2011: €2.02 billion), an increase of 5%. Free cash flow was 29% of total revenue (2011: 32%). At June 30, 2012, SAP had a total group liquidity of €3.60 billion (December 31, 2011: €5.60 billion), which includes cash and cash equivalents and short term investments. Net liquidity at June 30, 2012 was −€376 million compared to €1.64 billion at December 31, 2011. This decrease in net liquidity was primarily the result of the dividend payment and the acquisition of SuccessFactors in the first half of 2012.

BUSINESS OUTLOOK

SAP reiterates the following outlook for the full-year 2012:

• The Company expects full-year 2012 non-IFRS software and software-related service revenue to increase in a range of 10% – 12% at constant currencies (2011: €11.35 billion). This includes a contribution of up to 2 percentage points from SuccessFactors’ business.
• The Company expects full-year 2012 non-IFRS operating profit to be in a range of €5.05 billion – €5.25 billion at constant currencies (2011: €4.71 billion). Full-year 2012 non-IFRS operating profit excluding SuccessFactors is expected to be in a similar range.
• The Company projects a full-year 2012 IFRS effective tax rate of 26.5% – 27.5% (2011: 27.9%) and a non-IFRS effective tax rate of 27.0% – 28.0% (2011: 26.6%).

Additional Regional Disclosure

Starting with the reporting for the second quarter 2012, SAP will report both, software revenue by customer location and software revenue by location of negotiation. The focus of the communication will be on the reporting by location of negotiation. For additional information please refer to the pages F9 and F10 of the appendix to this press release as well as SAP’s second quarter 2012 interim report.

Other Additional Information

Second quarter 2012 revenue, profit and cash flow figures include the revenue, profits and cash flows from SuccessFactors. For the prior-year period those numbers were not included.

TomorrowNow litigation update: The retrial date was scheduled for June 18, 2012. Due to a scheduling conflict affecting Oracle’s legal team the trial has been rescheduled to August 27, 2012.SAP has updated its non-IFRS estimates for the full-year 2012. For the updated estimates please see SAP’s second quarter 2012 interim report. For a more detailed description of all of SAP’s non-IFRS measures and their limitations as well as our constant currency and free cash flow figures see Explanation of Non-IFRS Measures online.

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Second Quarter 2012 Interim Report
SAP’s second quarter 2012 Interim Report was published today and is available for download atwww.sap.com/investor. The interim report includes an update on SAP’s sustainability performance.

Webcast
SAP senior management will host a conference call on Tuesday, July 24th at 1:00 PM (CEST) / 12:00 PM (GMT) / 7:00 AM (EDT) / 4:00 AM (PDT). 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 195,000 customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com.

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