SAP Announces 2004 Second Quarter and Six Months Results

Juli 22, 2004 van SAP News 0

Company Reports 15% Growth in Software Revenues for the Second Quarter
Operating Income Increases 15% and Net Income Rises 14% for the Second Quarter
Company Continued to Gain Share Against its Peer Group

NEW YORK/WALLDORFSAP AG (NYSE: SAP) today announced its preliminary financial results for the second quarter and six months ended June 30, 2004. Highlights of the results are as follows.

View the Detailed Results (PDF, 233 KB)

View the Detailed Spreadsheet (XLS, 132 KB)

Download the Analyst Presentation (PDF, 677 KB)

View the Webcast

HIGHLIGHTS – Second Quarter 2004

Revenues

  • Software revenues were €497 million (2003: €431 million), representing an increase of 15% compared to 2003. At constant currencies1, software revenues increased 17% year-over-year.
  • Software revenues in the U.S. increased 63% to €140 million (2003: €86 million). At constant currencies1, software revenues in the U.S. increased 70% year-over-year.
  • Total revenues were €1.8 billion (2003: €1.6 billion), which was an increase of 9% compared to 2003. At constant currencies1, total revenues increased 11% year-over-year.

Income

  • Operating income was €391 million (2003: €340 million), which was an increase of 15% compared to last year. Pro forma operating income2 was €428 million (2003: €388 million), representing an increase of 10% compared to 2003.
  • The operating margin was 22%, which was up 1 percentage point year-over-year. The pro forma operating margin2 was 24%, which represented the same level as 2003.
  • Net income was €249 million (2003: €219 million), or €0.80 per share (2003: €0.71 per share), representing an increase of 14% compared to 2003. Pro forma net income2 was €273million (2003: €253 million), or pro forma €0.87 per share2 (2003: €0.81 per share), representing an increase of 8% compared to 2003.

Peer Group Share

  • With approximately $600 million in software revenues on a quarter-end U.S. dollar exchange rate basis, SAP continued to gain worldwide share against its peer group. On a rolling four quarter basis, the Company’s worldwide share against its peer group (defined as SAP and the four companies mentioned in footnote 3) based on software revenues was 55% at the end of the second quarter of 2004 compared to 51% at the end of the second quarter of 2003.
  • On a rolling four quarter basis, the Company’s U.S. share against its peer group (defined as SAP and the four companies mentioned in footnote 4) based on software revenues was 37% at the end of the second quarter of 2004 compared to 29% at the end of the second quarter of 2003.

HIGHLIGHTS – Six Months 2004

Revenues

  • Six month software revenues were €867 million (2003: €783million), representing an increase of 11% compared to the same period in 2003. At constant currencies1, software revenues increased 14% for the six month period.
  • Total revenues for the first half were €3.3 billion (2003: €3.2 billion), which was an increase of 6% compared to 2003. At constant currencies1, total revenues increased 9% for the first half.

Income

  • Operating income for the six month period was €724 million (2003: €638 million), which was an increase of 13% compared to the same period last year. Pro forma operating income2 was €760 million (2003: €692 million), representing an increase of 10% compared to 2003.
  • The operating margin for the first half of 2004 was 22%, which was up 2 percentage points compared to the first half of 2003. The pro forma operating margin2 for the six month period was 23%, which represented an increase of 1 percentage point compared to the same period in 2003.
  • Net income for the 2004 six month period was €478 million (2003: €405 million), or €1.54 per share (2003: €1.31 per share), representing an increase of 18% compared to the 2003 six month period. Pro forma net income2 was €502 million (2003: €453 million), or pro forma €1.61 earnings per share2 (2003: €1.45 per share), representing an increase of 11% compared to 2003.

Cash Flow

  • Operating cash flow was €1.2 billion (2003: €804 million), which was an increase of 45% compared to last year. Free cash flow2 as a percentage of total revenues was 33% (2003: 23%). At June 30, 2004, the Company had €2.8 billion in liquid assets (June 30, 2003: €1.8 billion), representing a 55% increase compared to last year.

“We are seeing a clear trend in the industry. Customers are demanding reliability, financial strength, innovative capabilities and a broad product portfolio from their software partners. Our ability to deliver on all four of these qualities along with the investments we have made in expanding our product offerings and technology have all contributed to our continued share gains against our peer group,” said Henning Kagermann, CEO of SAP. “We continue to experience a sound economic environment in the U.S. while our European business is showing signs of stabilization in a more subdued economy. We remain committed to investing in R&D and strengthening our sales force with the expectation of turning additional market opportunities into further share gains.”

BUSINESS OUTLOOK


SAP has not changed its outlook for 2004, which is as follows:

  • Software revenues are expected to increase by around 10% compared to 2003.
  • The pro forma operating margin, which excludes stock-based compensation and acquisition-related charges, is expected to increase by around one percentage point compared to 2003.
  • Pro forma earnings per share, which excludes stock-based compensation, acquisition-related charges and impairment-related charges, are expected to be in the range of €4.20 to €4.30 per share.
  • The outlook is based on an assumed U.S. Dollar to Euro exchange rate of $1.25 per €1.00.

BUSINESS REVIEW – Second Quarter and Six Months 2004


Second Quarter 2004 key figures at a glance (in €millions)
SAP Group










































Revenue
2Q 2004
Revenue
2Q 2003
Change % Change
Revenues 1,781 1,638 +143 +9%
Software revenues 497 431 +66 +15%
Income before taxes 391 347 +44 +13%
Net income 249 219 +30 +14%
Headcount, in FTE
(June 30)
30,945 28,961 1,984 +7%

Second Quarter 2004 Software Revenue by Region (in €millions)
SAP Group





































Revenue
2Q 2004
Revenue
2Q 2003
Change % Change
Total 497 431 +66 +15%
– at constant currency rates +17%
EMEA 266 261 +5 +2%
– at constant currency rates +1%
Asia Pacific6958+11+19%
– at constant currency rates +17%
Americas162112+50+45%
– at constant currency rates+52%

The Americas region, specifically the U.S., continued to be the growth driver for SAP in the second quarter. Software revenues in the U.S. increased 63% year-over-year, but at constant currencies1 U.S. software revenues were 70% higher. The Company believes that it continued to significantly outperform its U.S. based peer group in the U.S. In the EMEA region, the Company is experiencing a slow, but stable recovery as demonstrated by the 2% increase (1% at constant currencies1) in software revenues for the second quarter. Germany trended upward from the first quarter to the second quarter with a strong 10% year-over-year growth in software revenues. The APA region reported a 19% increase (17% at constant currencies1) in software revenues for the second quarter with another quarter of solid growth coming from the emerging market countries of China and India. Japan, like EMEA, saw a better performance in the second quarter indicating some stabilization in that country. Software revenues in Japan grew 8% (5% at constant currencies1) compared to the second quarter of 2003.

Second Quarter 2004 Total Revenue by Region (in €millions)
SAP Group
























































Revenue
2Q 2004
Revenue
2Q 2003
Change % Change
Total 1,781 1,638 +143 +9%
– at constant currency rates +11%
EMEA 994 942 +52 +6%
– at constant currency rates +5%
Asia Pacific 209 190 +19 +10%
– at constant currency rates +9%
Americas 578 506 +72 +14%
– at constant currency rates +21%

Six Months 2004 Key figures at a glance (in €millions)
SAP Group












































6M 2004 6M 2003 Change % Change
Revenues 3,337 3,158 +179 +6%
Software revenues 867 658 +84 +11%
Income before taxes 755 311 +97 +15%
Net income 478 405 +73 +18%
Headcount, in FTE
(Mar. 31)
30,945 28,961 +1,984 +7%

Six Months 2004 Software Revenue by Region (in €millions)
SAP Group












































Revenue
6M 2004
Revenue
6M 2003
Change% Change
Total 867 783 +84 +11%
– at constant currency rates +14%
EMEA 463 466 -3 -1%
– at constant currency rates -2%
Asia Pacific 115 117 -2 -2%
– at constant currency rates -0%
Americas 289 200 +89 +45%
– at constant currency rates+57%

Six Months Total Revenue by Region (in €millions)
SAP Group





















Revenue
6M 2004
Revenue
6M 2003
Change% Change
Total 3,3373,158+179+6%
– at constant currency rates+9%
EMEA1,8651,796+69+4%
– at constant currency rates+4%
Asia Pacific394388+6+2%
– at constant currency rates +4%
Americas1,078974+104+11%
– at constant currency rates+21%

Six Months Software Revenue by Solution (in €millions)5
SAP Group











































Q1 2004 Q2 2004
ERP 156 205
SCM 81 107
CRM 71 110
SRM 24 27
PLM 31 29
Other 7 19
Total Software Revenue 370 497

KEY EVENTS IN THE SECOND QUARTER OF 2004

  • In the second quarter, SAP demonstrated strong momentum, announcing major deals in all key regions. These included in the Americas: Adobe System, Citrix, Massachusetts Mutual Life Insurance and Pepsi Co (all in the US), Petroflex Industria e Comercia (Brazil); in EMEA: Akzo Nobel (Netherlands), Swarovski (Austria), Thyssen Krupp and Vodafone (Germany), Yves Rocher (France), Mediaset (Italy) and South African Post Office (South Africa); and in Asia Pacific: NEC Micro Systems, Cosmo Oil, Yokohama Rubber (all Japan), National Australian Bank (Australia), Hyundai Heavy Industries (Korea), Shanghai Municipal Electric Power (China), and Jet Airways and Tata Motors (both India).
  • SAP hosted its annual SAPPHIRE conferences in North America (New Orleans), Australia (Brisbane) and Japan (Tokyo). The conferences attracted in total more than ten thousand customers, prospects, and partners, and served as forums in which SAP presented new products and developments. SAP’s NetWeaver integration and applications platform was a focal point at the SAPPHIRE conferences this year. During SAPPHIRE ’04 in New Orleans, SAP introduced new adaptive computing capabilities for NetWeaver. The new functionalities are designed to help customers leverage existing investments, drive enhanced customer efficiencies and improve flexibility.
  • SAP and IBM announced a major retail partnership in May during the SAPPHIRE conference in New Orleans. The deal is an expansion of a global strategic alliance aimed at enabling leading retailers to strategically transform their businesses to meet rapidly changing consumer demands and global competition. SAP and IBM jointly agreed to promote the end-to-end retail offering comprised of SAP and IBM retail solutions and technologies, leveraging in particular IBM store capabilities and SAP retail business solutions.
  • SAP and Microsoft also announced a significant expansion of their long-standing relationship during SAPPHIRE ‘04 in New Orleans. The partnership is based on a shared commitment to Web services as the foundation for the next generation of enterprise software. The two companies detailed a road map for deeper integration between Microsoft® .NET and SAP NetWeaver™, the companies’ respective strategic platform initiatives, allowing customers to get more out of business-critical SAP® applications and technologies running in collaboration with Microsoft .NET. The jointly developed solutions will greatly enhance access to SAP NetWeaver functionality for developers using Microsoft Visual Studio® .NET and will increase the interoperability between SAP solutions and the Microsoft Office System.
  • SAP acquired A2i, Inc., a privately held software company, to broaden master data management capabilities of the SAP NetWeaver open integration and applications platform. The acquisition was part of SAP’s continuing strategy to identify and acquire businesses that can enhance SAP’s ability to deliver the most innovative suite of products available, helping customers address specific business challenges for competitive advantage.

Investor Conference / Webcast
SAP senior management will host an investor conference in New York today at 2:00 PM (CET) / 1:00 PM (GMT) / 8:00 AM (Eastern) / 5:00 AM (Pacific). The conference will be web cast live at <http://www.sap.com/investor> and will be available for replay purposes as well.

View the Detailed Results (PDF, 233 KB)

View the Detailed Spreadsheet (XLS, 132 KB)

Download the Analyst Presentation (PDF, 677 KB)

Footnotes
1) Constant currency data excludes the impact of currency exchange rates.

2) The press release discloses certain financial measures, such as pro forma EBITDA, free cash flow, pro forma operating income, pro forma net income and pro forma EPS, that are considered non-GAAP financial measures. The non-GAAP measures included in our press release have been reconciled to the nearest GAAP measure as is required under SEC rules regarding the use of non-GAAP financial measures. Pro forma operating income and pro forma operating margin exclude stock-based compensation and acquisition-related charges. Pro forma net income and pro forma earnings per share exclude stock-based compensation, acquisition-related charges and impairment-related charges.

3) Beginning in the first quarter of 2004, the Company’s peer group changed, better reflecting what SAP believes it to be its peer group of major global business applications providers. Worldwide share of what SAP considers to be its peer group of Microsoft Corp. (Business Solutions segment only), Oracle Corp. (business applications only), PeopleSoft, Inc. and Siebel Systems, Inc. is based on comparable software revenues in U.S. dollars (for vendors that did not yet announce or pre-announce software revenues, analyst estimates were used). SAP’s results have been converted into U.S. dollars. Until the end of 2003, SAP considered its peer group to be i2 Technologies, Inc., Oracle Corp. (business applications only), PeopleSoft, Inc. and Siebel Systems, Inc. Based on the peer group used in 2003, SAP’s share would have been 61% in the second quarter of 2004.

4) Beginning in the first quarter of 2004, the Company’s peer group changed, better reflecting what SAP believes it to be its peer group of major global business applications providers. U.S. share of what SAP considers to be its peer group of Microsoft Corp. (business solutions segment only), Oracle Corp. (business applications only), PeopleSoft, Inc. and Siebel Systems, Inc. is based on comparable U.S. software revenues in U.S. dollars (for vendors that did not yet announce or pre-announce software revenues, analyst estimates were used, and for some vendors U.S. software revenues are estimated). SAP’s results have been converted into U.S. dollars. Until the end of 2003, SAP considered its peer group to be i2 Technologies, Inc., Oracle Corp. (business applications only), PeopleSoft, Inc. and Siebel Systems, Inc. Based on the peer group used in 2003, SAP’s share would have been 42% in the second quarter of 2004.

5) These figures include revenues from designated solution contracts, as well as figures from integrated solution contracts, which are allocated based on usage surveys provided by SAP’s customers. Beginning in 2004, the Company changed its usage surveys for determining software revenues by solution. The usage surveys no longer include certain technology components, including BI and Portals since all technology components are now integrated with SAP NetWeaver. No prior comparable figures are available using the new method. For prior years’ information under the old method, please refer to SAP’s annual report on Form 20F.

About SAP
SAP is the world’s leading provider of business software solutions. SAP® solutions are designed to meet the demands of companies of all sizes—from small and midsize businesses to global enterprises. Powered by the SAP NetWeaver™ open integration and application platform to reduce complexity and total cost of ownership and empower business change and innovation, mySAP™ Business Suite solutions are helping enterprises around the world improve customer relationships, enhance partner collaboration and create efficiencies across their supply chains and business operations. The unique core processes of various industries, from aerospace to utilities, are supported by more than 25 SAP industry solutions. Today, more than 23,400 customers in over 120 countries run more than 79,800 installations of SAP® software. With subsidiaries in more than 50 countries, the company is listed on several exchanges, including the Frankfurt stock exchange and NYSE under the symbol “SAP.” (Additional information at <http://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 Annual Report on Form 20-F for 2003 filed with the SEC on March 23, 2004. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.

Copyright © 2004 SAP AG. All rights reserved.
SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. Data contained in this document serves informational purposes only. National product specifications may vary.

For more information, press only:
Herbert Heitmann, +49 170-8555098, herbert.heitmann@sap.com, EST
Markus Berner, +49 160-8896462, markus.berner@sap.com, EST

For more information, financial community only:
Stefan Gruber, +49 (6227) 7-44872, investor@sap.com, CET
Martin Cohen, +1 (212) 653-9619, investor@sap.com, EST