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SAP Announces Strong Quarter with Double-Digit Growth – Leading the Transition to Cloud and In-Memory

€1.2 Billion in Non-IFRS Software and Cloud Subscription Revenue; €1.3 Billion in Non-IFRS Operating Profit

Walldorf, Germany - SAP AG (NYSE: SAP) today announced its financial results for the third quarter and nine months ended September 30, 2013.

  • Third Quarter 2013 Non-IFRS Software and Cloud Subscription Revenue Increased 13% at Constant Currencies (6% at Actual Currencies to €1.17 Billion)
  • Third Quarter 2013 Non-IFRS Software and Software-Related Service Revenue Increased 12% at Constant Currencies (5% at Actual Currencies to €3.36 Billion)
  • Triple-Digit Year-Over-Year Growth in Cloud Subscription and Support Revenue – Annual Cloud Revenue Run Rate Now Exceeds €1 Billion
  • Accelerating SAP’s In-Memory Leadership – 90% Year-Over-Year Growth at Constant Currencies in HANA Software Revenue (79% at Actual Currencies)
  • Third Quarter 2013 Non-IFRS Operating Profit Reached €1.30 Billion, a 15% Increase at Constant Currencies (5% at Actual Currencies)
  • Strong Growth in Third Quarter 2013 Earnings Per Share
  • Full Year Outlook Reiterated

BUSINESS HIGHLIGHTS IN THE THIRD QUARTER 2013

“SAP is clearly leading the transition to cloud and in-memory. SAP HANA is the market’s most advanced in-memory database and we are well on our way to reach €1 billion in HANA software revenue since market launch. The strong customer adoption of SAP Business Suite on HANA demonstrates our leadership in innovating the future platform for business," said Bill McDermott and Jim Hagemann Snabe, Co-CEOs of SAP. "We now are the second largest enterprise cloud company with an annual cloud revenue run rate exceeding €1 billion. We continue to gain market share and grow significantly faster than our primary competitor in all regions.”

“SAP had a very strong performance in the third quarter, considering the mixed macroeconomic environment and the strong currency headwinds. Our ongoing focus on operating discipline while successfully scaling our cloud business is paying off. We continued our double-digit growth momentum and increased our Non-IFRS operating margin by 180 basis points at constant currencies,” said Werner Brandt, CFO of SAP.

Third quarter non-IFRS software and cloud subscriptions revenue increased 13% at constant currencies year-over-year (6% at actual currencies to €1.17 billion). SAP’s third quarter non-IFRS cloud subscription and support revenue is growing faster than most cloud competitors. SAP closed another significant contract in the cloud: EMC, a US-headquartered Fortune 500 company, selected SAP’s Cloud solutions including Employee Central to attract and better retain and reward employees, and achieve better visibility and collaboration with its suppliers. The annual cloud revenue run rate now exceeds €1 billion1). With approximately 33 million cloud users, SAP has the largest subscriber base in the cloud market. Non-IFRS deferred cloud subscription and support revenue2) was €382 million as of September 30, 2013, a year-over-year increase of 79%. The Ariba business is showing accelerated synergies with new and upsell application billings growing high double digits. The trailing twelve month Ariba network spend volume3) was approximately $500 billion. Today Ariba is the world’s largest Web-based business trading community with 1.2 million connected companies.

SAP HANA, the platform for real-time business applications, continues to be a major growth engine, with accelerating software revenue growth of 90% year-over-year at constant currencies (79% at actual currencies to €149 million) and over 2,100 customers. SAP Business Suite powered by SAP HANA is the best-in-class platform for high-performance applications and in fact SAP has now over 450 customers. Customers are showing strong interest in SAP HANA Enterprise Cloud.

Overall, SAP’s double-digit growth momentum continued in the third quarter with Non-IFRS software and software-related service revenue increasing 12% at constant currencies (5% at actual currencies) to €3.36 billion.

Efficiency in SAP’s business has further improved with Non-IFRS operating profit reaching €1.30 billion in the third quarter, a 15% increase at constant currencies (5% at actual currencies), resulting in a 180 basis points expansion of the non-IFRS operating margin at constant currencies despite a negative effect from acquisitions of 50 basis points.

Third Quarter 2013 Regional Results
The Americas region delivered a strong third quarter in non-IFRS software and cloud subscription revenue4) with 17% growth year-over-year at constant currencies, driven by an excellent software revenue performance in Latin America and strong non-IFRS cloud subscription and support revenue growth in North America. The EMEA region saw strong growth with non-IFRS software and cloud subscription revenue increasing 14% year-over-year at constant currencies, amidst a mixed market environment. Software revenue in EMEA grew double-digit at constant currencies driven by strong double-digit growth in the Netherlands, Switzerland and the U.K. Non-IFRS software and cloud subscription revenue in the Asia Pacific Japan (APJ) region marked a return to growth with solid single-digit growth at constant currencies, driven by a strong performance in China.

Nine Months 2013 Regional Results
The Americas region delivered a very strong first nine months performance in non-IFRS software and cloud subscription revenue with 23% year-over-year growth at constant currencies. The EMEA region saw strong growth with non-IFRS software and cloud subscription revenue increasing 10% at constant currencies for the first nine months of 2013, which is an impressive result in light of continued market uncertainty. Non-IFRS software and cloud subscriptions revenue in the APJ region declined slightly by 2% at constant currencies in the first nine months of 2013.

1) The annual revenue run rate is the third quarter 2013 cloud division revenue of €252 million multiplied by 4.

2) Beginning in Q1 2013, SAP discloses non-IFRS deferred cloud subscription and support revenue, which is a subset of the total, non-IFRS deferred revenue number reported on the balance sheet.

3) Network spend volume is the total value of purchase orders transacted on the Ariba Network in the trailing 12 months.

4) Non-IFRS software and cloud subscription revenue in the regional paragraphs follow SAP’s management view, which is calculated as the combination of software revenue based on location of negotiation and cloud subscription and support revenue based on customer location; growth rates at constant currencies. See SAP’s third quarter and nine month interim report for details.

FINANCIAL RESULTS IN DETAIL

FINANCIAL HIGHLIGHTS – Third Quarter 2013

Third Quarter 20131)

 

IFRS

 

 

Non-IFRS2)

 

 

 

€ million, unless otherwise stated

Q3 2013

Q3 2012

% change

Q3 2013

Q3 2012

% change

% change const. curr.

Software

975

1,026

−5

977

1,026

−5

2

Cloud subscriptions and support

191

63

203

197

80

146

162

Software and cloud subscriptions

1,167

1,089

7

1,174

1,106

6

13

Support

2,184

2,105

4

2,189

2,106

4

11

Software and software-related service revenue

3,351

3,194

5

3,363

3,212

5

12

Total revenue

4,045

3,952

2

4,057

3,970

2

9

Total operating expenses

−3,003

−3,031

−1

−2,761

−2,731

1

6

Operating profit

1,043

921

13

1,296

1,239

5

15

Operating margin (%)

25.8

23.3

2.5pp

32.0

31.2

0.8pp

1.8pp

Profit after tax

762

618

23

933

836

12

 

Basic earnings per share (€)

0.64

0.52

23

0.78

0.70

11

 

Number of employees (FTE)

66,061

61,344

8

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 Measures online. For a breakdown of the individual adjustments see page F8 in the appendix to this press release.

IFRS software revenue was €975 million (2012: €1.03 billion), a decrease of 5%. Non-IFRS software revenue was €977 million (2012: €1.03 billion), a decrease of 5% (an increase of 2% at constant currencies). IFRS software and cloud subscription revenue was €1.17 billion (2012: €1.09 billion), an increase of 7%. Non-IFRS software and cloud subscription revenue was €1.17 billion (2012: €1.11 billion), an increase of 6% (13% at constant currencies). IFRS software and software-related service revenue was €3.35 billion (2012: €3.19 billion), an increase of 5%. Non-IFRS software and software-related service revenue was €3.36 billion (2012: €3.21 billion), an increase of 5% (12% at constant currencies). IFRS total revenue was €4.05 billion (2012: €3.95 billion), an increase of 2%. Non-IFRS total revenue was €4.06 billion (2012: €3.97 billion), an increase of 2% (9% at constant currencies).

IFRS operating profit was €1.04 billion (2012: €921 million), an increase of 13%. Non-IFRS operating profit was €1.30 billion (2012: €1.24 billion), an increase of 5% (15% at constant currencies). IFRS operating margin was 25.8% (2012: 23.3%), an increase of 2.5 percentage points. Non-IFRS operating margin was 32.0% (2012: 31.2%), an increase of 0.8 percentage points. Non-IFRS operating margin at constant currencies was 33.0%, an increase of 1.8 percentage points. Non-IFRS operating margin for the third quarter 2013 was negatively impacted affected by approximately 50 basis points due to the acquisitions of Ariba and hybris.

 IFRS profit after tax was €762 million (2012: €618 million), an increase of 23%. Non-IFRS profit after tax was €933 million (2012: €836 million), an increase of 12%. IFRS basic earnings per share was €0.64 (2012: €0.52 per share), an increase of 23%. Non-IFRS basic earnings per share was €0.78 (2012: €0.70 per share), an increase of 11%. The IFRS and non-IFRS effective tax rates were 26.4% (2012: 24.8%) and 27.6% (2012: 26.7%), respectively.

FINANCIAL HIGHLIGHTS – Nine Months 2013

Nine Months 20131)

 

IFRS

Non-IFRS2)

€ million, unless otherwise stated

9M 2013

9M 2012

% change

9M 2013

9M 2012

% change

% change const. curr.

Software

2,614

2,722

−4

2,616

2,722

−4

0

Cloud subscriptions and support

488

144

238

547

183

198

208

Software and cloud subscriptions

3,101

2,866

8

3,163

2,905

9

14

Support

6,470

6,071

7

6,484

6,075

7

11

Software and software-related service revenue

9,571

8,937

7

9,647

8,980

7

12

Total revenue

11,708

11,200

5

11,784

11,243

5

9

Total operating expenses

−9,031

−8,727

3

−8,368

−7,998

5

7

Operating profit

2,677

2,473

8

3,416

3,245

5

12

Operating margin (%)

22.9

22.1

0.8pp

29.0

28.9

0.1pp

0.9pp

Profit after tax

2,006

1,723

16

2,498

2,249

11

 

Basic earnings per share (€)

1.68

1.45

16

2.09

1.89

11

 

Number of employees (FTE)

66,061

61,344

8

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 Measures online. For a breakdown of the individual adjustments see page F8 in the appendix to this press release.

IFRS software revenue was €2.61 billion (2012: €2.72 billion), a decrease of 4%. Non-IFRS software revenue was €2.62 billion (2012: €2.72 billion), a decrease of 4% (flat at constant currencies). IFRS software and cloud subscription revenue was €3.10 billion (2012: €2.87 billion), an increase of 8%. Non-IFRS software and cloud subscription revenue was €3.16 billion (2012: €2.91 billion), an increase of 9% (14% at constant currencies). IFRS software and software-related service revenue was €9.57 billion (2012: €8.94 billion), an increase of 7%. Non-IFRS software and software-related service revenue was €9.65 billion (2012: €8.98 billion), an increase of 7% (12% at constant currencies). IFRS total revenue was €11.71 billion (2012: €11.20 billion), an increase of 5%. Non-IFRS total revenue was €11.78 billion (2012: €11.24 billion), an increase of 5% (9% at constant currencies).

IFRS operating profit was €2.68 billion (2012: €2.47 billion), an increase of 8%. Non-IFRS operating profit was €3.42 billion (2012: €3.25 billion), an increase of 5% (12% at constant currencies). IFRS operating margin was 22.9% (2012: 22.1%), an increase of 0.8 percentage points. Non-IFRS operating margin was 29.0% (2012: 28.9%), an increase of 0.1 percentage points. Non-IFRS operating margin at constant currencies was 29.8%, an increase of 0.9 percentage points.

IFRS profit after tax was €2.01 billion (2012: €1.72 billion), an increase of 16%. Non-IFRS profit after tax was €2.50 billion (2012: €2.25 billion), an increase of 11%. IFRS basic earnings per share was €1.68 (2012: €1.45 per share), an increase of 16%. Non-IFRS basic earnings per share was €2.09 (2012: €1.89 per share), an increase of 11%. The IFRS and non-IFRS effective tax rates were 23.4% (2012: 24.9%) and 25.6% (2012: 26.7%), respectively.

Operating cash flow was €3.04 billion (2012: €3.06 billion), a decrease of 1%. Free cash flow was €2.64 billion (2012: €2.69 billion), a decrease of 2%. Free cash flow was 23% of total revenue (2012: 24%). At September 30, 2013, SAP had a total group liquidity of €3.31 billion (December 31, 2012: €2.49 billion), which includes cash and cash equivalents and short term investments. Net liquidity at September 30, 2013 was -€2.04 billion compared to -€2.50 billion at December 31, 2012.

BUSINESS OUTLOOK
SAP reiterates the outlook for the full year 2013, which remains unchanged from the outlook provided on July 18, 2013:

  • The Company expects full year 2013 non-IFRS software and software-related service revenue to increase by at least 10% at constant currencies (2012: €13.25 billion).
  • The Company expects full year 2013 non-IFRS cloud subscription and support revenue of around €750 million at constant currencies (2012: €343 million)
  • The Company expects full year 2013 SAP HANA software revenue in a range of €650 – €700 million (2012: €392 million).
  • The Company expects full-year 2013 non-IFRS operating profit to be in a range of €5.85 billion – €5.95 billion at constant currencies (2012: €5.21 billion).
  • The Company projects a full-year 2013 IFRS effective tax rate of 24.0% – 25.0% (2012: 26.2%) and a non-IFRS effective tax rate of 25.5% – 26.5% (2012: 27.5%).

If exchange rates remain at the September 2013 level for the rest of the year, the Company expects both the fourth quarter and full year 2013 non-IFRS software and software-related service revenue growth rate to be negatively impacted by approximately 5 percentage points from currency and the fourth quarter and full year 2013 non-IFRS operating profit growth rate to be negatively impacted by approximately 7 percentage points from currency.

Additional Information
2013 revenue and profit figures include the revenue and profits from Ariba, SuccessFactors and hybris. The comparative numbers for 2012 do not include SuccessFactors until February 21, 2012, Ariba until October 1, 2012.The hybris acquisition closed on August 1, 2013.

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 2013 Interim Report
SAP’s third quarter 2013 Interim Report was published today and is available for download at www.sap.com/investor.

Webcast
SAP senior management will host a conference call for financial analysts and media on Monday, October 21st at 2:00 PM (CEST) / 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.

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 251,000 customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com.

# # #

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Appendix – Financial Information to Follow