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SAP SE — Earnings Release 2011
Oct 26, 2011
365_ip_2011-10-26_ffca377e-491e-4f90-a7f5-c44d8e270c27.pdf
Earnings Release
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Third Quarter 2011 Results Release
Walldorf, Germany Wednesday, October 26, 2011
Safe Harbor Statement
Any statements contained in this document that are not historical facts are forwardlooking 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 Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.
Agenda
Income Statement
Balance Sheet and Cash Flow Analysis
Outlook
Appendix
7th Consecutive Quarter of Double-Digit Non-IFRS SSRS Revenue Growth
* At constant currencies
Strong Revenue and Profit Growth Despite of Challenging Macroeconomic Situation in 9M/11
* At constant currencies
Software Revenues Increased By 32 % at Constant Currencies in Q3
| IFRS | Non-IFRS | ||||||
|---|---|---|---|---|---|---|---|
| € millions, unless otherwise stated | Q3/11 | Q3/10 | ¨% | Q3/11 | Q3/10 | ¨% | ¨% at cc |
| Software revenue | 841 | 656 | 28 | 841 | 656 | 28 | 32 |
| Support revenue | 1,757 | 1,559 | 13 | 1,758 | 1,595 | 10 | 13 |
| Subscription & other SW-rel. serv. rev. | 93 | 101 | -8 | 93 | 101 | -8 | -7 |
| SSRS revenue | 2,691 | 2,316 | 16 | 2,692 | 2,352 | 14 | 18 |
| Consulting revenue | 578 | 565 | 2 | 578 | 565 | 2 | 6 |
| Other service revenue | 140 | 122 | 15 | 140 | 122 | 15 | 18 |
| Professional services & other serv. rev. | 718 | 687 | 5 | 718 | 687 | 5 | 8 |
| Total revenue | 3,409 | 3,003 | 14 | 3,410 | 3,039 | 12 | 15 |
| Total operating expenses | -1,650 | -2,287 | -28 | -2,279 | -2,124 | 7 | 10 |
| Operating profit | 1,759 | 716 | 146 | 1,131 | 915 | 24 | 27 |
| Finance income, net | -2 | -14 | -86 | -9 | -14 | -36 | -86 |
| Profit before tax | 1,757 | 689 | 155 | 1,122 | 880 | 28 | |
| Income tax expense | -505 | -188 | 169 | -261 | -251 | 4 | |
| Profit after tax | 1,251 | 501 | 150 | 860 | 629 | 37 | |
| Basic earnings per share, in € | 1.05 | 0.42 | 150 | 0.72 | 0.53 | 36 |
Top-Line Growth in 9M/11 Combined with Strong Increase in Operating Profit Results in Significant Margin Expansion
| IFRS | Non-IFRS | ||||||
|---|---|---|---|---|---|---|---|
| € millions, unless otherwise stated | 9M/11 | 9M/10 | ¨% | 9M/11 | 9M/10 | ¨% | ¨% at cc |
| Software revenue | 2,226 | 1,757 | 27 | 2,226 | 1,757 | 27 | 31 |
| Support revenue | 5,093 | 4,479 | 14 | 5,119 | 4,515 | 13 | 15 |
| Subscription & other SW-rel. serv. rev. | 278 | 285 | -2 | 278 | 285 | -2 | -2 |
| SSRS revenue | 7,597 | 6,521 | 17 | 7,623 | 6,557 | 16 | 18 |
| Consulting revenue | 1,726 | 1,572 | 10 | 1,726 | 1,572 | 10 | 12 |
| Other service revenue | 410 | 313 | 31 | 410 | 313 | 31 | 33 |
| Professional services & other serv. rev. | 2,136 | 1,885 | 13 | 2,136 | 1,885 | 13 | 15 |
| Total revenue | 9,733 | 8,406 | 16 | 9,759 | 8,442 | 16 | 18 |
| Total operating expenses | -6,520 | -6,359 | 3 | -6,830 | -6,057 | 13 | 15 |
| Operating profit | 3,213 | 2,047 | 57 | 2,929 | 2,386 | 23 | 25 |
| Finance income, net | -34 | -25 | 36 | -41 | -25 | 64 | |
| Profit before tax | 3,145 | 1,886 | 67 | 2,854 | 2,234 | 28 | |
| Income tax expense | -902 | -507 | 78 | -762 | -605 | 26 | |
| Profit after tax | 2,242 | 1,379 | 63 | 2,091 | 1,629 | 28 | |
| Basic earnings per share, in € | 1.88 | 1.16 | 62 | 1.76 | 1.37 | 28 |
SSRS Revenue Breakdown by Region** Third Quarter 2011
€ millions | yoy percent change
© 2011 SAP AG. All rights reserved. 8
SSRS Revenue Breakdown by Region** First Nine Months 2011
€ millions | yoy percent change
** Based on customer location
Non-IFRS Operating Margin Expanded 310 Basis Points in the Third Quarter 2011
Strong top-line growth paired with continued focus on operational excellence resulted in further margin expansion
- In Q3 2011, non-IFRS operating profit increased by 24% to €1.1bn yoy
- In Q3 2011, non-IFRS operating margin increased 3.1pp to 33.2% yoy
- Currency affected non-IFRS operating margin negatively only by -0.1pp resulting in 33.1% at cc
- Outperformance in revenues dropped down to strong increase of non-IFRS operating profit
* At constant currencies
Non-IFRS Operating Margin Expanded 170 Basis Points in the First Nine Months 2011
Strong top-line growth paired with continued focus on operational excellence resulted in further margin expansion.
- In 9M 2011, non-IFRS operating profit increased by 23% to €2.9bn yoy
- In 9M 2011, non-IFRS operating margin increased 1.7pp to 30.0% yoy
- Non-IFRS operating margin was not affected by currency
Significant Increase of Operating Margin (IFRS) in Q3/11 due to Reduction of TomorrowNow Provision
* At constant currencies
Gross Margin Increased by 190 Basis Points in Q3/11
Non-IFRS, Third Quarter 2011
* Professional services and other services
© 2011 SAP AG. All rights reserved. 13
Gross Margin Expansion Supported by All Line Items in the First Nine Months 2011
Non-IFRS, 9M/11
* Professional services and other services
© 2011 SAP AG. All rights reserved. 14
R&D to Total Revenue Ratio Decreased Significantly in Q3 Due to Ongoing Focus to Improve Operational Efficiency
Non-IFRS, Third Quarter 2011
Increased Profitability Supported by Operational Excellence in All Areas in the First Nine Months
Non-IFRS, 9M/11
Agenda
Income Statement
Balance Sheet and Cash Flow Analysis
Outlook
Appendix
Balance Sheet, condensed September 30, 2011, IFRS
| Assets € millions |
09/30/11 | 12/31/10 |
|---|---|---|
| Cash, cash equivalents and other financial assets |
5,061 | 3,676 |
| Trade and other receivables | 2,530 | 3,099 |
| Other current assets | 409 | 368 |
| Total current assets | 8,000 | 7,143 |
| Goodwill | 8,441 | 8,428 |
| Intangible assets | 2,081 | 2,376 |
| Property, plant, and equipment | 1,497 | 1,449 |
| Other non-current assets | 1,220 | 1,443 |
| Total non-current assets | 13,239 | 13,696 |
| Total assets | 21,239 | 20,839 |
| Equity and liabilities € millions |
09/30/11 | 12/31/10 |
|---|---|---|
| Financial liabilities | 177 | 142 |
| Deferred income | 1,536 | 911 |
| Provisions | 542 | 1,287 |
| Other liabilities | 2,272 | 2,813 |
| Current liabilities | 4,527 | 5,153 |
| Financial liabilities | 4,007 | 4,449 |
| Provisions | 239 | 292 |
| Other non-current liabilities | 1,127 | 1,121 |
| Non current liabilities | 5,373 | 5,862 |
| Total liabilities | 9,900 | 11,015 |
| Total equity | 11,339 | 9,824 |
| Equity and liabilities | 21,239 | 20,839 |
Highest Operating Cash Flow for First Nine Months Ever in SAP's History
| € millions, unless otherwise stated | 09/30/11 | 09/30/10 | ¨ |
|---|---|---|---|
| Operating cash flow | 2,966 | 2,052 | 45% |
| - Capital expenditure | -329 | -200 | 65% |
| Free cash flow | 2,637 | 1,852 | 42% |
| Free cash flow as a percentage of total revenue | 27% | 22% | 5pp |
| Cash conversion rate | 1.32 | 1.49 | -11% |
| Days sales outstanding (DSO) | 62 | 70 | -8 days |
Net Group Liquidity Increased by €1.9bn Driven by Strong Revenues and Good Working Capital Management
€ millions
- y Total net liquidity as of 12/31/10 was €-850m
- 1) Cash and cash equivalents + current investments
- 2) Total Group Liquidity minus bank loans, private placement transactions, and bonds
Agenda
Income Statement
Balance Sheet and Cash Flow Analysis
Outlook
Appendix
Macroeconomic Environment Remains Uncertain – Outlook for FY/11 Unchanged Except Effective IFRS Tax Rate
| SAP's Outlook** FY 2011 |
Basis for comparison FY 2010 |
||
|---|---|---|---|
| SSRS Revenue (Non-IFRS at cc) |
+ 10% to 14% | Company expects to reach the high end of the range. |
€ 9.87bn |
| Operating Profit (Non-IFRS at cc) |
€4.45bn to €4.65bn | Company expects to reach the high end of the range. |
€ 4.01bn |
| Operating Margin (Non-IFRS at cc) |
+0.5pp to +1.0pp | 32.0% | |
| Effective Tax Rate (IFRS) |
28.5% to 29.5% | 22.5%* | |
| Effective Tax Rate (Non-IFRS) |
27.5% to 28.5% | 27.3% |
* Impacted by 4.7pp due to increased provisions for TomorrowNow Litigation
** Business outlook was provided on July 27th, 2011 at the time of SAP's second quarter 2011 results announcement and is reiterated today - except the guidance for the IFRS tax rate - announcing SAP's third quarter 2011 results
Agenda
Income Statement
Balance Sheet and Cash Flow Analysis
Outlook
Appendix
Non-IFRS Definition
| IFRS Profit Measure | Actual Amounts from 2010 |
Actual Amounts 9M 2011 |
Estimated amounts for 2011 |
|
|---|---|---|---|---|
| +/- | Discontinued activities | €983m | €-711m | €-700m |
| + | Deferred maintenance write-down | €74m | €26m | €20m to €30m |
| + | Acquisition related charges | €300m | €333m | €430m to €460m |
| = | Non-IFRS profit measure until 2010 | |||
| + | Share-based compensation expenses | €58m | €66m | €80m to €120m |
| + | Restructuring charges | €3m | €2m | < €10m |
Non-IFRS profit measure since 2011
Explanations of Non-IFRS Measures
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, sharebased 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.
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/corporate-en/investors/reports and web message non-IFRS an web message currency effects).