CIMdata PLM Industry Summary Online Archive
25 January 2012
Financial News
SAP Reports Best Ever Results – Full-Year 2011 Software Revenue Increases 25% at Constant Currencies to €4 Billion – Non-IFRS Operating Profit €4.8 Billion at Constant Currencies
- Best Ever Software Revenue Performance: Full-Year 2011 Software Revenue Increases 22% to €3.97 Billion (25% at Constant Currencies)
- Exceeding Revenue Guidance: Full-Year 2011 Non-IFRS Software and Software-Related Service Revenue Increases 15% (17% at Constant Currencies)
- Exceeding Operating Profit Guidance: Full-Year 2011 Non-IFRS Operating Profit €4.71 Billion (€4.78 Billion at Constant Currencies), Resulting in Full-Year 2011 Non-IFRS Operating Margin Increasing by 1.1 Percentage Points at Constant Currencies to 33.1%
- Double-Digit Earnings Per Share Growth: 23% Increase in Full-Year 2011 Non-IFRS Earnings Per Share
- Record Operating Cash Flow: 29% Increase to €3.78 Billion
- Strong Contribution From Innovations: SAP HANA and Mobile €270 Million
SAP AG announced its preliminary financial results for the fourth quarter and full-year ended December 31, 2011.
“SAP performed exceptionally well in 2011 clearly exceeding its guidance for revenue and profit. This record performance was driven by strong top line results with double-digit software revenue growth in all regions, resulting in year over year total revenue growth of €1.7 billion and a record cash flow,” said Werner Brandt, CFO of SAP. “We are well positioned to exceed our €20 billion revenue target and reach a 35% operating margin in 2015.”
“In an uncertain environment, we had the best year in our 40 year history and clearly outperformed the competition. We extended our leadership in enterprise applications, analytics and mobile and are reinventing the database and cloud markets,” said Bill McDermott and Jim Hagemann Snabe, co-CEOs of SAP. “We have significant momentum going into 2012, as our customers continue to benefit from faster innovation, easier adoption and our unmatched industry expertise.”
FINANCIAL RESULTS IN DETAIL
FINANCIAL HIGHLIGHTS – Fourth Quarter 2011
Fourth Quarter 20111) |
|||||||
IFRS |
Non-IFRS2) |
||||||
€ million, unless otherwise stated |
Q4 2011 |
Q4 2010 |
% change |
Q4 2011 |
Q4 2010 |
% change |
% change const. curr.3) |
Software revenue |
1,744 |
1,507 |
16 |
1,744 |
1,507 |
16 |
17 |
Support revenue |
1,874 |
1,654 |
13 |
1,875 |
1,692 |
11 |
11 |
Software and software-related service revenue |
3,720 |
3,273 |
14 |
3,721 |
3,311 |
12 |
13 |
Total revenue |
4,498 |
4,058 |
11 |
4,499 |
4,096 |
10 |
10 |
Total operating expenses |
−2,832 |
−3,514 |
−19 |
−2,718 |
−2,474 |
10 |
10 |
- thereof TomorrowNow litigation |
6 |
−934 |
<-100 |
N/A |
N/A |
N/A |
N/A |
Operating profit |
1,666 |
544 |
206 |
1,781 |
1,622 |
10 |
10 |
Operating margin (%) |
37.0 |
13.4 |
23.6pp |
39.6 |
39.6 |
0 |
0.1pp |
Profit after tax |
1,199 |
434 |
176 |
1,281 |
1,109 |
16 |
|
Basic earnings per share (€) |
1.01 |
0.37 |
173 |
1.08 |
0.93 |
16 |
|
Number of employees (FTE) |
55,765 |
53,513 |
4 |
N/A |
N/A |
N/A |
N/A |
1) All figures are preliminary and unaudited. |
|||||||
2) Adjustments in the revenue line items are for the support revenue that would have been recognized had the acquired entities 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, share-based compensation expenses, restructuring and discontinued activities. |
|||||||
3) Constant currency revenue and operating profit figures are calculated by translating revenue and operating income 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. |
|||||||
Revenue – Fourth Quarter 2011
- IFRS software revenue was €1.74 billion (2010: €1.51 billion), an increase of 16% (17% at constant currencies).
- IFRS software and software-related service revenue was €3.72 billion (2010: €3.27 billion), an increase of 14%. Non-IFRS software and software-related service revenue was €3.72 billion (2010: €3.31 billion), an increase of 12% (13% at constant currencies).
- IFRS total revenue was €4.50 billion (2010: €4.06 billion), an increase of 11%. Non-IFRS total revenue was €4.50 billion (2010: €4.10 billion), an increase of 10% (10% at constant currencies).
Fourth Quarter 2011 non-IFRS software and software-related service revenue and total revenue exclude a deferred support revenue write-down from acquisitions of €1 million (2010: €38 million).
Profit – Fourth Quarter 2011
- IFRS operating profit was €1.67 billion (2010: €544 million), an increase of 206%. Non-IFRS operating profit was €1.78 billion (2010: €1.62 billion), an increase of 10% (10% at constant currencies).
- IFRS operating margin was 37.0% (2010: 13.4%), an increase of 23.6 percentage points. Non-IFRS operating margin was 39.6% (2010: 39.6%), or 39.7% at constant currencies, an increase of 0.1 percentage points at constant currencies.
- IFRS profit after tax was €1.20 billion (2010: €434 million), an increase of 176%. Non-IFRS profit after tax was €1.28 billion (2010: €1.11 billion), an increase of 16%. IFRS basic earnings per share was €1.01 (2010: €0.37), an increase of 173%. Non-IFRS basic earnings per share was €1.08 (2010: €0.93), an increase of 16%.
- The IFRS and non-IFRS effective tax rates in the fourth quarter of 2011 were 25.9% (2010: 4.0%) and 26.1% (2010: 27.5%), respectively.
- Fourth quarter 2011 operating profit and operating margin were impacted by SAP’s continued investments in go-to-market activities intended to capture future growth opportunities, resulting in a sequential increase in headcount in sales and marketing by almost 500 full-time-equivalents (FTEs). Total headcount for the Group grew in the fourth quarter by almost 1,200 FTEs compared to the previous quarter.
- Fourth quarter 2010 IFRS operating profit and operating margin were negatively impacted by the provision for the TomorrowNow litigation while there was no such effect on SAP’s non-IFRS operating profit and operating margin.
Fourth Quarter 2011 non-IFRS operating profit excludes a deferred support revenue write-down from acquisitions of €1 million, acquisition-related charges of €115 million, profit from discontinued activities of €6 million, share-based compensation expenses of €3 million and restructuring expenses of €2 million (2010: €38 million, €99 million, expenses of €935 million, €9 million and -€2 million). Fourth Quarter 2011 non-IFRS profit after tax and non-IFRS basic earnings per share exclude a deferred support revenue write-down from acquisitions of €1 million, acquisition-related charges of €78 million, profit from discontinued activities of €2 million, share-based compensation expenses of €4 million and restructuring expenses of €1 million (2010: €25 million, €70 million, expenses of €575 million, €6 million and -€1 million) net of tax.
FINANCIAL HIGHLIGHTS – Full-Year 2011
Full-Year 20111) |
|||||||
IFRS |
Non-IFRS2) |
||||||
€ million, unless otherwise stated |
FY 2011 |
FY 2010 |
% change |
FY 2011 |
FY 2010 |
% change |
% change const. curr.3) |
Software revenue |
3,970 |
3,265 |
22 |
3,970 |
3,265 |
22 |
25 |
Support revenue |
6,967 |
6,133 |
14 |
6,994 |
6,207 |
13 |
14 |
Software and software-related service revenue |
11,318 |
9,794 |
16 |
11,345 |
9,868 |
15 |
17 |
Total revenue |
14,232 |
12,464 |
14 |
14,259 |
12,538 |
14 |
15 |
Total operating expenses |
−9,353 |
−9,873 |
−5 |
−9,549 |
−8,531 |
12 |
13 |
- thereof TomorrowNow litigation |
717 |
−981 |
<-100 |
N/A |
N/A |
N/A |
N/A |
Operating profit |
4,879 |
2,591 |
88 |
4,710 |
4,007 |
18 |
19 |
Operating margin (%) |
34.3 |
20.8 |
13.5pp |
33.0 |
32.0 |
1.0pp |
1.1pp |
Profit after tax |
3,441 |
1,813 |
90 |
3,371 |
2,738 |
23 |
|
Basic earnings per share (€) |
2.89 |
1.52 |
90 |
2.83 |
2.30 |
23 |
|
Number of employees (FTE) |
55,765 |
53,513 |
4 |
N/A |
N/A |
N/A |
N/A |
1) All figures are preliminary and unaudited. |
|||||||
2) Adjustments in the revenue line items are for the support revenue that would have been recognized had the acquired entities 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, share-based compensation expenses, restructuring and discontinued activities. |
|||||||
3) Constant currency revenue and operating profit figures are calculated by translating revenue and operating income 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. |
|||||||
Revenue – Full-Year 2011
- IFRS software revenue was €3.97 billion (2010: €3.27 billion), an increase of 22% (25% at constant currencies).
- IFRS software and software-related service revenue was €11.32 billion (2010: €9.79 billion), an increase of 16%. Non-IFRS software and software-related service revenue was €11.35 billion (2010: €9.87 billion), an increase of 15% (17% at constant currencies).
- IFRS total revenue was €14.23 billion (2010: €12.46 billion), an increase of 14%. Non-IFRS total revenue was €14.26 billion (2010: €12.54 billion), an increase of 14% (15% at constant currencies).
Full-Year 2011 Non-IFRS software and software-related service revenue as well as total revenue exclude a deferred support revenue write-down from acquisitions of €27 million (2010: €74 million).
Profit – Full-Year 2011
- IFRS operating profit was €4.88 billion (2010: €2.59 billion), an increase of 88%. Non-IFRS operating profit was €4.71 billion (2010: €4.01 billion), an increase of 18% (19% at constant currencies).
- IFRS operating margin was 34.3% (2010: 20.8%), an increase of 13.5 percentage points. Non-IFRS operating margin was 33.0% (2010: 32.0%), or 33.1% at constant currencies, an increase of 1.0 percentage points (1.1 percentage points at constant currencies).
- IFRS profit after tax was €3.44 billion (2010: €1.81 billion), an increase of 90%. Non-IFRS profit after tax was €3.37 billion (2010: €2.74 billion), an increase of 23%. IFRS basic earnings per share was €2.89 (2010: €1.52), an increase of 90%. Non-IFRS basic earnings per share was €2.83 (2010: €2.30), an increase of 23%.
- Full year 2011 IFRS operating profit and operating margin numbers were favorably impacted by the re-measurement of the TomorrowNow litigation provision while full year 2010 IFRS operating profit and operating margin were negatively impacted by the TomorrowNow litigation provision. The provision in 2010 as well as the re-measurement in 2011 did not affect SAP’s non-IFRS operating profit and operating margin results.
- The IFRS and non-IFRS effective tax rates in the first twelve months 2011 were 27.8% (2010: 22.5%) and 26.5% (2010: 27.2%), respectively.
- The main reason for the significant year over year difference is the change in the measurement of the TomorrowNow litigation provision. While 2010 saw a tax rate reduction of almost 5 percentage points as a result of the significant increase of the TomorrowNow litigation provision, 2011 experienced the tax rate increase resulting from the reduction of the same provision. However, this increase was offset by tax effects related to intercompany financing.
- The 2011 effective tax rate based on Non-IFRS profit was 26.5% and thus below the respective rate in 2010 (27.2%). The main reasons for the decrease were tax effects related to intercompany financing.
Full-Year 2011 non-IFRS operating profit excludes a deferred support revenue write-down from acquisitions of €27 million, acquisition-related charges of €448 million, profit from discontinued activities of €717 million, share-based compensation expenses of €69 million and restructuring expenses of €4 million (2010: €74 million, €304 million, expenses of €983 million, €58 million and -€3 million). Full-Year 2011 non-IFRS profit after tax and non-IFRS basic earnings per share exclude a deferred support revenue write-down from acquisitions of €18 million, acquisition-related charges of €303 million, profit from discontinued activities of €444 million, share-based compensation expenses of €51 million and restructuring expenses of €2 million (2010: €50 million, €221 million, expenses of €613 million, €42 million and -€1 million) net of tax.
Cash Flow – Full-Year 2011
Operating cash flow was €3.78 billion (2010: €2.92 billion), an increase of 29%. Free cash flow was €3.33 billion (2010: €2.59 billion), an increase of 29%. Free cash flow was 23% of total revenue (2010: 21%). At December 31, 2011, SAP had a total group liquidity of €5.60 billion (December 31, 2010: €3.53 billion), which includes cash and cash equivalents and short term investments. Net liquidity at December 31, 2011 was €1.64 billion compared to -€850 million at December 31, 2010. This increase in net liquidity was mainly due to the increased operating cash flow in the fiscal year 2011.
SuccessFactors
On December 3, 2011, SAP entered into a merger agreement with SuccessFactors, Inc. a provider of cloud-based human capital management solutions. A successful closing of the acquisition will add SuccessFactors’ team and technology to SAP’s cloud assets, significantly accelerating SAP’s momentum as a provider of cloud applications, platforms and infrastructure.Currently, we expect the acquisition to close in the first quarter of 2012.
Change in Income Statement Presentation
In light of SAP’s strong focus on the cloud market, SAP intends to realign, for periods starting on or after January 1, 2012, its income statement to provide additional transparency on cloud-related revenue streams and revenues from multi-year licensing arrangements (formerly known as software subscriptions):
- ‘Cloud subscriptions and support’ will no longer be included in the line item ‘Subscription and other software-related service revenue’ but will be presented as a separate line item within ‘Software and software-related service revenue’
- Revenues from multi-year licensing arrangements and all other revenues so far included in the ‘Subscription and other software-related service revenue’ line item will be split into their software portion and support portion with these portions being allocated to the ‘Software revenue’ and ‘Support revenue’ line items respectively.
This reclassification only affects sub items of ‘Software and software-related service revenue’. The total of ‘Software and software-related service revenue’ and consequently total revenue as well as profit numbers and operating margin figures will not be affected by this change. The financial section of this press release also includes the preliminary full year 2011 income statement and the reconciliations from non-IFRS numbers to IFRS numbers under the new format.
In addition, for periods starting on or after January 1, 2012, SAP has modified the definition of its non-IFRS revenue and profit measures. See the section below called Adjustment to Definition of Non-IFRS Revenue and Profit Measures for additional details.
Business Outlook
Based on the expectation of a successful closing of the SuccessFactors acquisition in the first quarter of 2012, SAP is providing the following outlook for the full-year 2012:
- The Company expects full-year 2012 non-IFRS software and software-related service revenue to increase in a range of 10% – 12% at constant currencies (2011: €11.35 billion). This includes a contribution of up to 2 percentage points from SuccessFactors’ business.
- The Company expects 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 is expected to be in a similar range.
- The Company projects a full-year 2012 IFRS effective tax rate of 26.5% – 27.5% (2011: 27.8%) and a non-IFRS effective tax rate of 27.0% – 28.0% (2011: 26.5%).
Major Customer Wins
In the fourth quarter of 2011, SAP closed major contracts in key regions:
EMEA
Deutsch Lufthansa AG, Bundesrechenzentrum GmbH, Lidl, Clariant International Ltd., FIAT, Vodafone
Americas
U.S. Department of Agriculture, ConAgra Foods, Inc., Ace Hardware Corporation, Delta Air Lines, Inc., Banco de Galicia y Buenos Aires S.A., Petróleos Mexicanos
Asia Pacific/Japan
Yonghui Superstores Co. Ltd., Tingyi Holding Corporation, Department of Finance and Deregulation, Usha International Ltd., Powercor, Sharp Corporation
HANA
Gonhermex, S.A. de C.V., Grupo Gonher, Schukat electronic Vertriebs GmbH, EBY-Brown Company LLC, Newell Rubbermaid, Inc., Coinstar, Inc., T-Mobile USA, Inc.
SAP Business ByDesign
EC Bioenergie GmbH, DESANO Pharmacy, Innogence Limited, Matchcode, metaio, Schaltbau Holding AG, Schukat electronic Vertriebs GmbH
Adjustment to Definition of Non-IFRS Revenue and Profit Measures
In light of SAP’s strong focus on the cloud market and considering the planned acquisition of SuccessFactors, SAP widens the range of revenues for which acquisition-related deferred revenue write-downs are adjusted in determining SAP’s non-IFRS revenue and profit numbers. SAP continues to adjust for deferred revenue write-downs, i.e. for revenues that would have been recognized had the acquired entities remained stand-alone entities but that SAP is not permitted to recognize as revenue under IFRS as a result of business combination accounting rules. However, in the definitions of SAP’s non-IFRS measures used through 2011, such adjustments for deferred revenue write downs were limited to support revenues. From 2012 onwards, SAP will additionally make such deferred revenue write -down adjustments for cloud subscription revenues and other similarly recurring revenues.
All other non-IFRS measures will remain unchanged. Since the deferred revenue write-down adjustments for recurring revenues other than support revenue from acquisitions that were executed through 2011 were immaterial, SAP does not restate prior period non-IFRS measures to align with the new definition.
For a more detailed description of all of SAP’s non-IFRS 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/investor).
Additional Information
Fourth Quarter and year-to-date 2011 revenue, profit and cash flow figures include the revenue, profits and cash flows from Sybase. For the prior-year periods those numbers were only included since the acquisition (July 26, 2010).
In 2011, SAP re-measured the provision recorded for the TomorrowNow litigation following the motion granted by the judge on the original jury verdict. The judge’s decision vacated the original verdict of $1.3 billion, but gave Oracle the choice of accepting $272 million or seeking a new trial. The deadline for Oracle to make that choice depended on the outcome and timing of a ruling on Oracle’s motion for an early appeal. The early appeal was denied on January 6, 2012, and Oracle now has the choice to accept the reduced damages of $272 million or seek a new trial to determine damages.
The re-measurement of the provision additionally reflects currency exchange rate changes and changes in the estimate of related legal expenses. While the resulting re-measurement of the TomorrowNow litigation provision favorably impacted SAP’s fiscal year 2011 IFRS operating profit and operating margin it did not have an effect on SAP’s fiscal year 2011 non-IFRS operating profit and operating margin.
2011 Annual Report
SAP’s 2011 Annual Report to Shareholders and 2011 Annual Report on Form 20-F are scheduled to be published on March 23, 2012, and will be available for download at www.sap.com/investor.
Webcast
SAP senior management will host a press conference in Frankfurt today at 10:00 AM (CET) /
9:00 AM (GMT) / 4:00 AM (Eastern) / 1:00 AM (Pacific), followed by an investor conference at 2:00 PM (CET) / 1:00 PM (GMT) / 8:00 AM (Eastern) / 5:00 AM (Pacific). Both conferences will be web cast live on the Company’s website at www.sap.com/investor and will be available for replay. Supplementary financial information pertaining to the full-year and quarterly results can be found at www.sap.com/investor.
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