SAP Announces Record Third Quarter Results

Exceeds €1 Billion In Third Quarter Software Revenue

Walldorf, (PresseBox) - .
- Third Quarter 2012 Software Revenue Increased 17% to €1,026 Million (12% at Constant Currencies)
- Third Quarter 2012 Non-IFRS Software and Software-Related Service Revenue Increased 19% to €3.21 Billion (13% at Constant Currencies)
- Triple-Digit Growth in Key Innovation Areas: Cloud, SAP HANA, Mobile
- Third Quarter 2012 Non-IFRS Operating Profit Increased 10% to €1.24 Billion (4% at Constant Currencies)
- Year-over-Year Comparison of 2012 Third Quarter IFRS Operating Profit and Operating Margin Impacted by Profit in Q3 2011 of €723 Million From the Reduction in the TomorrowNow Litigation Provision
- SAP Refines Full-Year Revenue Guidance and Includes the Expected Results of Ariba

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

Business Highlights in the Third Quarter

SAP delivered double-digit growth in the third quarter. SAP had a strong performance in the Americas and solid double digit growth in APJ. SAP performed well in EMEA compared to the tremendous performance in EMEA last year. Demand for SAP's new innovation categories continued across all regions. SAP HANA revenue was €83 million, putting the company on track to meet full-year expectations of at least €320 million. Mobile revenue was €48 million which keeps SAP on track to meet full-year expectations of €220 million. SAP's cloud momentum continued in the third quarter: 12 months new and upsell subscription billings increased fourteenfold. Even when including SuccessFactors in SAP's 2011 numbers the growth is triple digit at 116%[1]. For SuccessFactors on a stand-alone basis, 12 month new and upsell subscription billings grew 92%. Non-IFRS cloud subscription and support revenue increased twentyfold to €80 million. SAP's core business also saw solid growth. Key industries such as retail, health sciences, manufacturing and energy as well as continued expansion of sales through SAP partners also contributed to the third quarter results.

"Our innovation strategy continues to deliver world-class value and market leading performance," said Bill McDermott and Jim Hagemann Snabe, Co-CEOs. "With SAP, businesses are innovating, achieving operational excellence and driving growth. We are proud of our relentless customer focus and confident that we'll continue to outperform the competition."

"I am pleased with SAP's overall performance in the third quarter. This is the 11th consecutive quarter of double-digit non-IFRS software and software related service revenue growth for SAP," said Werner Brandt, CFO. "We continued to invest in our cloud business in the third quarter. We remain focused on operating discipline and remain confident in our full-year outlook."

Financial Results in Details

IFRS software revenue was €1,026 million (2011: €875 million), an increase of 17% (12% at constant currencies). IFRS software and software-related service revenue was €3.19 billion (2011: €2.69 billion), an increase of 19%. Non-IFRS software and software-related service revenue was €3.21 billion (2011: €2.69 billion), an increase of 19% (13% at constant currencies). IFRS total revenue was €3.95 billion (2011: €3.41 billion), an increase of 16%. Non-IFRS total revenue was €3.97 billion (2011: €3.41 billion), an increase of 16% (10% at constant currencies).

In the third quarter of 2011, the reduction of the provision for the TomorrowNow litigation resulted in a significant profit from our discontinued TomorrowNow activities. This had a 21.2 percentage point positive influence on our third quarter 2011 IFRS operating margin. For this reason the 2012 and 2011 IFRS profit and margin numbers are not fully comparable.

IFRS operating profit was €921 million (2011: €1.76 billion), a decrease of 48%. Non-IFRS operating profit was €1.24 billion (2011: €1.13 billion), an increase of 10% (4% at constant currencies). IFRS operating margin was 23.3% (2011: 51.6%), a decrease of 28.3 percentage points. Non-IFRS operating margin was 31.2% (2011: 33.2%), or 31.1% at constant currencies, a decrease of 2.0 percentage points (a decrease of 2.1 percentage points at constant currencies).

Non-IFRS operating profit and non-IFRS operating margin for the third quarter 2012 were impacted by the acquisition of SuccessFactors, which impacted the non-IFRS operating margin by approximately 100 basis points. In addition, headcount grew by almost 6,800 FTE's year over year, thereof 2,300 FTE's from acquisitions.

IFRS profit after tax was €618 million (2011: €1.25 billion), a decrease of 51%. Non-IFRS profit after tax was €836 million (2011: €860 million), a decrease of 3%. IFRS basic earnings per share was €0.52 (2011: €1.05), a decrease of 50%. Non-IFRS basic earnings per share was €0.70 (2011: €0.72), a decrease of 3%. The IFRS and non-IFRS effective tax rates in the third quarter of 2012 were 24.8% (2011: 28.7%) and 26.7% (2011: 23.3%), respectively. Third quarter profit after tax and EPS were negatively impacted by a €64 million or €0.05 per share expense related to the currency hedging of the purchase price for the recently closed Ariba acquisition.

Financial Highlights - Nine Months 2012

IFRS software revenue was €2.72 billion (2011: €2.33 billion), an increase of 17% (12% at constant currencies). IFRS software and software-related service revenue was €8.94 billion (2011: €7.60 billion), an increase of 18%. Non-IFRS software and software-related service revenue was €8.98 billion (2011: €7.62 billion), an increase of 18% (13% at constant currencies). IFRS total revenue was €11.20 billion (2011: €9.73 billion), an increase of 15%. Non-IFRS total revenue was €11.24 billion (2011: €9.76 billion), an increase of 15% (10% at constant currencies).

For the first nine months ended September 30, 2011, the reduction of the provision for the TomorrowNow litigation resulted in a significant profit from our discontinued TomorrowNow activities. This had a 7.3 percentage point positive influence on our nine months ended September 30, 2011 IFRS operating margin. For this reason the 2012 and 2011 IFRS profit and margin numbers are not fully comparable.

IFRS operating profit was €2.47 billion (2011: €3.21 billion), a decrease of 23%. Non-IFRS operating profit was €3.25 billion (2011: €2.93 billion), an increase of 11% (5% at constant currencies). IFRS operating margin was 22.1% (2011: 33.0%), a decrease of 10.9 percentage points. Non-IFRS operating margin was 28.9% (2011: 30.0%), or 28.6% at constant currencies, a decrease of 1.1 percentage points (a decrease of 1.4 percentage points at constant currencies).

IFRS profit after tax was €1.72 billion (2011: €2.24 million), a decrease of 23%. Non-IFRS profit after tax was €2.25 billion (2011: €2.09 billion), an increase of 8%. IFRS basic earnings per share was €1.45 (2011: €1.88), a decrease of 23%. Non-IFRS basic earnings per share was €1.89 (2011: €1.76), an increase of 8%. The IFRS and non-IFRS effective tax rates in the first nine months of 2012 were 24.9% (2011: 28.7%) and 26.7% (2011:26.7%), respectively.

Operating cash flow was €3.06 billion (2011: €2.97 billion), an increase of 3%. Free cash flow was €2.69 billion (2011: €2.64 billion), an increase of 2%. Free cash flow was 24% of total revenue (2011: 27%). At September 30, 2012, SAP had a total group liquidity of €3.93 billion (December 31, 2011: €5.60 billion), which includes cash and cash equivalents and short term investments. Net liquidity at September 30, 2012 was €278 million compared to €1.64 billion at December 31, 2011. This decrease in net liquidity was primarily the result of the annual shareholder dividend payment and the acquisition of SuccessFactors in the first nine months of 2012.

Change in Segment Reporting

Following its increased focus on the cloud business, in the third quarter 2012 SAP changed both the structure of the components that the SAP management uses to make decisions about operating matters and the main profit measure used for the purposes of allocating resources to these components and measuring their performance. SAP now has two divisions - 'On Premise' and 'Cloud' which are further divided into operating segments. The On Premise division is comprised of two operating segments: 'On Premise Products' and 'On Premise Services'. In the third quarter 2012, SAP's Cloud division was comprised of one operating segment: 'Cloud Applications'. Following the acquisition of Ariba SAP intends to establish a second operating segment in the Cloud Division, mainly consisting of the acquired Ariba business. Please see link to a Webinar at SAP's webpage for more information.

Business Outlook

The Company is providing the following outlook for the full-year 2012, which has changed from the previous outlook provided on July 24, 2012. The Company has refined the outlook for non-IFRS software and software-related service revenue at constant currencies and has included Ariba's expected revenue and profit contribution from the acquisition date (October 1, 2012) to year end:

Including Ariba, the Company now expects full-year 2012 non-IFRS software and software-related service revenue to increase in a range of 10.5% - 12.5% at constant currencies (2011: €11.35 billion). This includes a combined contribution of approximately 2.5 percentage points from SuccessFactors and Ariba. The respective outlook provided in July which did not yet consider Ariba, was 10.0% - 12.0%.

Assuming that the macroeconomic environment does not deteriorate the Company expects to reach the upper end of the 10.5% - 12.5% non-IFRS software and software-related service revenue growth range (at constant currencies).

The Company continues to expect 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 and Ariba is expected to be in a similar range. The outlook is unchanged from the outlook given in July.

The Company still 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%). The outlook is unchanged from the outlook given in July.

Additional Information

As of February 21, 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. These results do not include any impact from the Ariba acquisition which closed on October 1, 2012.

TomorrowNow litigation update: Oracle, after the trial judge issued an order on September 1, 2011, filed a motion seeking an early appeal from the ruling vacating the jury's damages award, which was denied by the judge. Consequently, Oracle elected to proceed with a new trial. In lieu of a new trial, the parties stipulated to a judgment in the amount of $306 million, while each preserving all rights for appeal. SAP remains determined to work through the legal process to bring this case to resolution. Please see SAP's third quarter 2012 interim report for more details.

SAP has updated its non-IFRS estimates for the full-year 2012. For the updated estimates please see SAP's third 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.

Third Quarter 2012 Interim Report
SAP's Third Quarter 2012 Interim Report was published today and is available for download at www.sap.com/investor. The interim report includes an update on SAP's sustainability performance.

Webcast
SAP senior management will host a conference call for financial analysts and investors on Wednesday, October 24th at 2:00 PM (CET) / 1:00 PM (GMT) / 8:00 AM (EDT) / 5:00 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.

SAP AG

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 197,000 customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com.


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