SAP Q2 2011 Presentation E
Transcript of SAP Q2 2011 Presentation E
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Second Quarter 2011Results Release
Walldorf, GermanyWednesday, July 27, 2011
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Safe Harbor Statement
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 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-looking
statements. 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.
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Agenda
Income Statement
Balance Sheet and Cash Flow Analysis
Outlook
Appendix
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6th Consecutive Quarter of Double-Digit Non-IFRSSSRS Revenue Growth
Operating Margin (%)
IFRS Non-IFRS
Q2/11Q2/10 Q2/11 Q2/10
-0.7pp 1.3pp
(1.5pp*)
Basic Earnings Per Share (€)
IFRS Non-IFRS
Q2/11Q2/10 Q2/11 Q2/10
20% 26%
30.826.7 29.526.0 0.590.41
0.470.49
Software Revenue (€ bn)
IFRS Non-IFRS
26%
(35%*)
SW & SW-Related Service Revenue (€ bn)
IFRS Non-IFRS
Q2/10 Q2/11
26%
Q2/10 Q2/11Q2/11Q2/10 Q2/11 Q2/10
* at constant currencies
14% 15%
(20%*)
0.800.64
0.800.64
2.26 2.58 2.26 2.59
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Strong Top-Line Performance in First Half 2011 ShowsThat SAP is on Track to Achieve Fiscal Year Targets
Operating Margin (%)
IFRS Non-IFRS
H1/11H1/10 H1/11 H1/10
-1.6pp 1.1pp
(1.2pp*)
Basic Earnings Per Share (€)
IFRS Non-IFRS
H1/11H1/10 H1/11 H1/10
12% 24%
28.324.6 27.223.0 1.040.74 0.840.83
Software Revenue (€ bn)
IFRS Non-IFRS
26%
(31%*)
SW & SW-Related Service Revenue (€ bn)
IFRS Non-IFRS
H1/10 H1/11
26%
H1/10 H1/11H1/11H1/10 H1/11 H1/10
* at constant currencies
17% 17%
(19%*)
1.391.10
1.391.10 4.21
4.914.21
4.93
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Successful Quarter with Double-Digit Top-Line Growthand Strong Non-IFRS Margin Expansion
€ 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 3
SSRS 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 37
Professional services & other serv. rev. 721 636 13 721 636 13 19
Total revenue 3,300 2,894 14 3,308 2,894 14 20
Total operating expenses -2,443 -2,120 15 -2,289 -2,040 12 17
Operating profit 857 774 11 1,019 854 19 26
Finance income, net -18 -12 50 -18 -12 50
Profit before tax 804 676 19 966 767 26
Income tax expense -216 -185 17 -263 -205 28
Profit after tax 588 491 20 703 562 25
Basic earnings per share, in € 0.49 0.41 20 0.59 0.47 26
IFRS Non-IFRS
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Top-Line Growth in First Half 2011 Combined withOperational Excellence Results in Strong Profitability
€ 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 0
SSRS 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 42
Professional services & other serv. rev. 1,418 1,198 18 1,418 1,198 18 20
Total revenue 6,324 5,403 17 6,349 5,403 18 19
Total operating expenses -4,870 -4,072 20 -4,551 -3,933 16 17
Operating profit 1,454 1,331 9 1,798 1,470 22 24
Finance income, net -32 -12 >100 -32 -12 >100
Profit before tax 1,388 1,197 16 1,732 1,354 28
Income tax expense -397 -319 24 -501 -354 42
Profit after tax 991 878 13 1,231 1,000 23
Basic earnings per share, in € 0.83 0.74 12 1.04 0.84 24
IFRS Non-IFRS
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SSRS Revenue Breakdown by Region**
Second Quarter 2011
€ millions | yoy percent change
IFRS Non-IFRS
* At constant currencies** Based on customer location
Total
2,579 | +14%
EMEA
1,251 | +16% | +16%*
thereof Germany
397 | +10% | +10%*thereof rest of EMEA854 | +19% | +19%*
Americas
909 | +11% | +24%*thereof United States:
679 | +10% | +26%*thereof rest of
Americas231 | +12% | +17*
Asia Pacific Japan
427 | +19% | +23%*thereof Japan137 | +23% | +25%*
thereof rest of APJ289 | +17% | +21%*
Total2,587 | +15% | +20%*
EMEA
1,249 | +16%
thereof Germany
397| +10%thereof rest of EMEA
852| +19%
Americas
904| +10%thereof United States:
675 | +10%thereof rest of
Americas230 | +11%
Asia Pacific Japan
426| +19%thereof Japan137 | +23%
thereof rest of APJ289 | +17%
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SSRS Revenue Breakdown by Region**
First Half 2011
€ millions | yoy percent change
IFRS Non-IFRS
* At constant currencies** Based on customer location
EMEA
2,375 | +14%
thereof Germany
728 | +8%thereof rest of EMEA
1,647 | +17%
Americas
1,746 | +18%thereof United States:
1,295 | +19%thereof rest of
Americas451 | +13%
Asia Pacific Japan
785 | +22%thereof Japan261 | +25%
thereof rest of APJ525 | +22%
Total
4,906 | +17%
EMEA
2,382| +15% | +14%*
thereof Germany
728 |+ 8% | +8%*thereof rest of EMEA
1,654 | +17% | +16%*
Americas
1,762 | +19% | +25%*thereof United States:1,309 | +20% | +29%*
thereof rest ofAmericas
453 | +14% | +14%*
Asia Pacific Japan
787 | +23% | +21%*thereof Japan262 | +26% | +21%*
thereof rest of APJ526 | +22% | +21%*
Total4,931 | +17% | +19%*
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Non-IFRS Operating Margin Expanded 130 Basis Pointsin the Second Quarter 2011 Despite Currency Headwind
30.8% | 31.0%*+1.3pp | +1.5pp*
29.5%
* at constant currencies
Strong top-line growth paired withcontinued focus on operationalexcellence resulted in further marginexpansion.
In Q2 2011, non-IFRS operatingmargin increased 1.3 percentagepoints to 30.8% yoy, which exceededexpectations.
Currency affected operating marginnegatively by 0.2 pp.
TotalRevenue
€2.9bn
TotalOperatingExpenses
€2.0bn
TotalRevenue
€3.3bn
TotalOperatingExpenses
€2.3bn
Q2/10 Q2/11
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Non-IFRS Operating Margin Expanded 110 Basis Pointsin the First Half 2011
28.3% | 28.4%*+1.1pp | +1.2pp*
27.2%
* at constant currencies
Strong top-line growth paired withcontinued focus on operationalexcellence resulted in further marginexpansion.
In H1 2011, non-IFRS operatingmargin increased 1.1 percentagepoints to 28.3% yoy.
Currency affected operating marginnegatively by 0.1 pp.
TotalRevenue
€5.4bn
TotalOperatingExpenses
€3.9bn
TotalRevenue
€6.3bn
TotalOperatingExpenses
€4.6bn
H1/10 H1/11
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Gross Margin Increased by 70 Basis Points
Gross Margin
70.6% | +0.7ppSSRS Margin
83.5% | +0.1ppProfessional Services*
Margin24.1% | +1.9pp
Q2/10 Q2/11
€0.4bn€0.4bn€0.5bn
€0.5bn
Q2/10 Q2/11Q2/10 Q2/11
€0.6bn €0.7bn
SSRS +Services*Expenses
€0.9bn
SSRSRevenue
€2.3bn
Services*Revenue
Services*Revenue
SSRS
Expenses
SSRS
Expenses
Services*
Expenses
Services*Expenses
TotalRevenue
€2.9bn
TotalRevenue
€3.3bn
SSRS +Services*Expenses
€1.0bn
SSRSRevenue
€2.6bn
* Professional services and other services
Non-IFRS, Second Quarter 2011
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Gross Margin Expansion Supported by All Line Items
Gross Margin
69.2% | +0.3ppSSRS Margin
82.9% | +0.3ppProfessional Services*
Margin21.7% | +0.6pp
H1/10 H1/11
€0.8bn€0.7bn€0.9bn
€1.1bn
H1/10 H1/11H1/10 H1/11
€1.2bn €1.4bn
SSRS +Services*Expenses
€1.7bn
SSRSRevenue
€4.2bn
Services*Revenue
Services*Revenue
SSRS
Expenses
SSRS
Expenses
Services*
Expenses
Services*Expenses
TotalRevenue
€5.4bn
TotalRevenue
€6.3bn
SSRS +Services*Expenses
€2.0bn
SSRSRevenue
€4.9bn
* Professional services and other services
Non-IFRS, First Half 2011
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Cost Ratios
R&Das a % of Total Revenue
S&Mas a % of Total Revenue
G&Aas a % of Total Revenue
13.6%+0.2pp
13.4% 21.3%-0.8pp
22.1% 5.0%+/-0.0pp
5.0%
R&DExpenses
€0.4bn
TotalRevenue
€3.3bnTotalRevenue
€2.9bn
R&D
Expenses
€0.5bn
TotalRevenue
€2.9bn
TotalRevenue
€2.9bn
TotalRevenue
€3.3bn
TotalRevenue
€3.3bn
S&M
Expenses€0.6bn
S&MExpenses
€0.7bnG&A
Expenses
€0.1bn
G&AExpenses
€0.2bn
Q2/10 Q2/11 Q2/10 Q2/11Q2/10 Q2/11
Non-IFRS, Second Quarter 2011
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Cost Ratios
R&Das a % of Total Revenue
S&Mas a % of Total Revenue
G&Aas a % of Total Revenue
14.6%+0.2pp
14.4% 21.2%-0.7pp
21.9% 5.2%-0.2pp
5.4%
R&DExpenses
€0.8bn
TotalRevenue
€6.3bnTotalRevenue
€5.4bn
R&D
Expenses
€0.9bn
TotalRevenue
€5.4bn
TotalRevenue
€5.4bn
TotalRevenue
€6.3bn
TotalRevenue
€6.3bn
S&M
Expenses€1.2bn
S&MExpenses
€1.3bnG&A
Expenses
€0.3bn
G&AExpenses
€0.3bn
H1/10 H1/11 H1/10 H1/11H1/10 H1/11
Non-IFRS, First Half 2011
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Agenda
Income Statement
Balance Sheet and Cash Flow Analysis
Outlook
Appendix
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Balance Sheet
June 30, 2011, IFRS
Assets€ millions
06/30/11 12/31/10
Cash, cash equivalents andother financial assets
4,563 3,676
Trade and other receivables 2,738 3,099
Other non-financial assets andtax assets
379 368
Total current assets 7,680 7,143
Goodwill 8,213 8,428
Intangible assets 2,107 2,376
Property, plant, and equipment 1,463 1,449
Other non-current assets 1,433 1,443
Total non-current assets 13,216 13,696
Total assets 20,896 20,839
Equity and liabilities€ millions
06/30/11 12/31/10
Financial liabilities 136 142
Deferred income 2,161 911
Provisions 1,287 1,287
Other liabilities 2,004 2,813
Current liabilities 5,588 5,153
Financial liabilities 3,945 4,449
Provisions 244 292
Other non-current liabilities 1,122 1,121
Non current liabilities 5,311 5,862
Total liabilities 10,899 11,015
Total equity 9,997 9,824
Equity and liabilities 20,896 20,839
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Highest Operating Cash Flow for a First Half Yearin SAP’s History
1) Defined as cash and cash equivalents + short-term investments less bank loans, private placements and bonds2) Defined as cash and cash equivalents + short-term investments
1) cash and cash equivalents + current investments – (bank loans, private placement transactions, and bonds)
€ millions, unless otherwise stated 06/30/11 06/30/10
Operating 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% 11pp
Cash conversion rate 2.29 1.46 57%
Days sales outstanding (DSO) 63 73 -10days
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Successful Second US Private Placement
Well-balanced financial debt maturity profile
* Defined as cash and cash equivalents + restricted cash + short-term investments
On June 1, 2011, we successfully completed a private placement with a volume of US$750 million
This enhances Group's 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
1.023
600 774208
415
11%
638 104
3%
26%
16% 20% 5%
17%
0
250
500
750
1,000
1,250
2012 2013 2014 2015 2016 2017 2018
EUR million (in % of total financial debt)
100 3%
% Variable interest rate% Fixed interest rate
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Agenda
Income Statement
Balance Sheet and Cash Flow Analysis
Outlook
Appendix
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+0.5pp to +1.0pp
SSRS Revenue(Non-IFRS at cc)
SAP Refines Outlook for Non-IFRS SSRS Revenue at CCand Non-IFRS Operating Profit at CC
+ 10% to 14%
Operating Margin(Non-IFRS at cc)
SAP’s OutlookFY 2011
* Impacted by 4.7pp due to increased provisions for TomorrowNow Litigation
32.0%
€ 9.87bn
Basis for comparisonFY 2010
27.0% to 28.0%Effective Tax Rate(IFRS) 22.5%*
€4.45bn to €4.65bnOperating Profit(Non-IFRS at cc)
€ 4.01bn
27.5% to 28.5%Effective Tax Rate(Non-IFRS)
27.3%
Company now expectsto reach the high endof the range.
Company now expectsto reach the high endof the range.
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Agenda
Income Statement
Balance Sheet and Cash Flow Analysis
Outlook
Appendix
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Explanations of Non-IFRS Measures
Adjustments 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 year's respective period instead of thecurrent period. Constant currency period-over-period changes are calculated by comparing thecurrent year's non-IFRS constant currency numbers with the non-IFRS number of the previousyear's 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).
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Explanations of Currency Impact
1) Defined as cash and cash equivalents + short-term investments less bank loans, private placements and bonds2) Defined as cash and cash equivalents + short-term investments
* 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 f low figures see
‘Explanation of non-IFRS Measures’ which is available at http://www.sap.com/investor
Currency 2010 Q2*
USD per € 1.27GBP per € 0.85
JPY per € 117.38
CHF per € 1.41
CAD per € 1.31
AUD per € 1.44
SAP’s guidance formatSAP provides a yearly outlook, which is based on non-IFRSat constant currencies
because these numbers are used as a basis for SAP’sinternal management reporting
since we cannot influence currency movements, and
it helps prevent frequent changes in guidance due tofluctuations in currency
The elimination of currency effects is achieved by translatingforeign currencies using the average exchange rates fromthe previous year’s period (i.e. quarter) instead of thecurrent year
Currency impact on past performanceHistorically, every 1% impact on total revenue resulting from
foreign currency movements has resulted in a 10-15 basispoint movement in margin.
Overview on the majorcurrencies for Q2 2010