- Second Quarter Operating Income Increased 6% to €340 Million
- Company Gains Additional Market Share
NEW YORK/WALLDORF – July 17, 2003 – SAP AG (NYSE: SAP) today announced its preliminary financial results for the second quarter and six months ended June 30, 2003.
Operational Performance
For the second quarter of 2003, operating income increased 6% to €340 million (2002: €320 million). Pro forma operating income1, excluding stock-based compensation and acquisition-related charges, increased 20% to €388 million (2002: €324 million). The operating margin for the second quarter of 2003 was up three percentage points to 21% compared to the second quarter of last year. The pro forma operating margin1, before stock-based compensation and acquisition related charges, was up six percentage points to 24% compared to same period last year.
Software revenues for the 2003 second quarter were €431 million (2002: €496 million), down 13% from the second quarter of last year. On a constant currency basis, software revenues were down 5% compared to last year.
Based on software revenues, the Company believed it continued to gain additional market share in the second quarter of 2003. On a rolling four quarter basis, the Company’s worldwide share of the market (consisting of SAP and the five companies mentioned in footnote 2) based on software revenues was 55% at the end of the second quarter of 2003 compared to 54% at the end of the first quarter of 2003 and 45% at the end of the second quarter of 2002.
Total revenues for the second quarter of 2003 were down 8% to €1.6 billion (2002: €1.8 billion). At constant currency rates, however, total revenues for the 2003 second quarter increased by 2% compared to the second quarter of 2002. Product revenues, which include software and maintenance revenues, for the second quarter were €1.1 billion (2002: €1.1 billion). Maintenance revenues were €633 million (2002: €595 million). Consulting and training revenues were €479 million (2002: €545 million) and €75 million (2002: €115 million), respectively.
Net income for the second quarter of 2003 was €219 million (2002: €-232 million), or €0.71 per share (2002: €-0.74 per share). The second quarter 2002 net income included impairment charges related to the Commerce One write down of €297 million. Excluding stock-based compensation, acquisition-related charges and impairment-related charges, pro forma net income1 for the second quarter of 2003 was €251 million (2002: €155 million), or €0.81 per share (2002: €0.49 per share), representing an increase of 62%.
The Company had 28,961 full-time equivalent employees at June 30, 2003. This represents an increase of 307 full-time employees since March 31, 2003.
Regional Performance
For the second quarter of 2003, revenues in the Europe, Middle East and Africa (EMEA) region decreased 3% to €942 million (2002: €976 million). Revenues in Germany decreased 1%. Second quarter 2003 revenues in the Americas region were down 15% to €506 million (2002: €593 million). More importantly, however, at constant currency rates, revenues in the Americas were up 6%. The Company continued to outperform its U.S. based competitors, as it believed it continued to gain market share in this region. Moreover, the Company also believed that in the second quarter it remained the number one business software application vendor in the U.S. based on software revenues.3 Revenues in the Asia-Pacific region (APA) for the second quarter of 2003 decreased 9% to €190 million (2002: €209 million). At constant currency rates, however, APA revenues increased 5%.
“The business environment remains tough, but we executed better than most of our competitors and, more importantly, we once again achieved our goals of improved operating margins and continued market share gains,” said Henning Kagermann, chief executive officer, SAP AG. “We remain focused on investing in product innovation and on continually evolving our business to meet the requirements of a changing industry environment.”
Software Revenue by Solution
For the second quarter of 2003, software revenues related to mySAP CRM (Customer Relationship Management) reached approximately €85 million, down 16% from the same period last year (€101 million) and represented 20% of total software revenues. mySAP SCM (Supply Chain Management) related second quarter 2003 software revenues totaled approximately €86 million, down 17% from the second quarter of 2002 (€104 million) and represented 19% of total software revenues. These figures include revenues from designated solution contracts, as well as figures from integrated solution contracts, which are allocated based on usage surveys.
Six Months Results
For the six months ended June 30, 2003, total revenues decreased 8% to €3.2 billion (2002: €3.4 billion). On a constant currency basis, total revenues for the first six months increased 1% compared to the same period last year.
For the first six months of 2003, operating income increased 26% to €638 million (2002: €506 million). Pro forma operating income,1 excluding stock-based compensation and acquisition-related charges, for the 2003 six month period increased 23% to €692 million (2002: €562 million).
For the first half of 2003, software revenues decreased 13% to €783 million (2002: €898 million). On a constant currency basis, software revenues for the first six months decreased 5% compared to the same period last year. Consulting revenues for the 2003 six month period were €955 million (2002: €1.1 billion) and training revenues were €152 million (2002: €225 million).
In the first half of 2003, sales in the EMEA region decreased 4% to €1.8 billion (2002: €1.9 billion). Sales in the Americas declined 17% to €974 million (2002: €1.2 billion) and in the APA region revenues were down 2% to €388 million (2002: €394 million).
In the first half of 2003, the Company generated €717 million of free cash flow1 (defined as operating cash flow less capital expenditures, which were €90 million for the first half of 2003), and at June 30, 2003, the Company had €1.8 billion of liquid assets.
Outlook
SAP continues to expect pro forma earnings per share1 for 2003, excluding stock-based compensation, acquisition-related charges and impairment-related charges, to be in the range of €3.45 per share to €3.60 per share. The Company has slightly increased its target for pro forma operating margin1, excluding stock-based compensation and acquisition-related charges. Previously, the Company expected its 2003 pro forma operating margin1 to increase by around 1 percentage point compared to 2002. The Company now expects its 2003 pro forma operating margin1 to be between 1 and 1.5 percentage points higher than the level achieved in 2002. While the Company continued to not provide revenue expectations, it expects to achieve its pro forma operating margin1 and pro forma earnings per share1 targets through continued market share gains and cost containment amid the current business environment and business seasonality in line with historical patterns.
Second Quarter Highlights
· SAP continues to gain market share in the business applications market. Key contracts in the second quarter include Coca-Cola Enterprises, Fender, Sony Pictures, and University of Cincinnati in the Americas region, European Central Bank, Ferrero, Telecom Italia and Vattenfall in the EMEA region and Dentsu Information Services, Sharp, Shougang und Toyota Tsusho in the Asia/Pacific region.
· SAP hosted its annual SAPPHIRE customer conference in Orlando, FL, attracting more than 7,000 attendees. SAP highlighted the continued momentum and value of SAP NetWeaver and announced several key partnerships dedicated to develop and deliver solutions for the SMB market with IBM and BearingPoint. In addition, the Company announced the first vertical solution developed by American Express based on SAP Business One for wholesale distribution.
· Also featured at SAPPHIRE Orlando was the latest release of mySAP CRM, delivering the most comprehensive solution on the market with a powerful set of industry-specific end-to-end processes adapted for unique industry environments. Also announced was the latest release of mySAP SCM, which provides customers in the discrete, process manufacturing, and consumer products industries with more than twenty new processes and more than thirty process enhancements to help them build their adaptive supply chain networks.
· SAP launched the SAP Customer Services Network. The initiative offers easy and more coordinated access to the comprehensive scope of SAP services including new offerings such as services for increasing the quality in upgrades and risk management, business and benefit mapping, consulting, custom development and global customer competence center programs.
· SAP held its Annual General Meeting in May. All items proposed by the Supervisory Board and Executive Board were approved at the meeting by more than 99 percent of the represented voting capital. Hasso Plattner, former Co-Chairman and CEO of the SAP Executive Board, was elected as a member of the Supervisory Board and then elected Chairman by that Board. A dividend in the amount of €0.60 per non-par value share was paid to SAP shareholders.
Conference Call / Webcast
SAP senior management will host a press conference in New York today at 3:00 PM (CET) / 2:00 PM (GMT) / 9:00 AM (Eastern) / 6:00 AM (Pacific), followed by an investor conference at 6:00 PM (CET) / 5:00 PM (GMT) / 12:00 PM (Eastern) / 9:00 AM (Pacific). Both conferences will be web cast live at http://www.sap.com/investor and will be available for replay as well. Slides related to today's announcement will be used during the conference and are also available on the SAP website.
Footnotes
1) The press release discloses certain financial measures, such as 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.
2) Worldwide market share based on software revenues in U.S. dollars of i2 Technologies, Inc., J.D. Edwards & Company, Oracle Corporation, PeopleSoft, Inc. and Siebel Systems, Inc., who SAP considers to be its five largest competitors (for vendors that did not yet announce or pre-announce software revenues, analyst estimates were used).
3) U.S. market share based on U.S. software revenues in U.S. dollars of i2 Technologies, Inc., J.D. Edwards & Company, Oracle Corporation, PeopleSoft, Inc. and Siebel Systems, Inc., who SAP considers to be its five largest competitors (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).
Revenue by Region (in € millions)
SAP Group
Revenue
2Q 2003 Revenue
2Q 2002 Change % Change
Total 1,638 1,778 -140 -8%
- at constant currency rates +2%
EMEA 942 976 -34 -3%
- at constant currency rates -2%
Asia Pacific 190 209 -19 -9%
- at constant currency rates +5%
Americas 506 593 -87 -15%
- at constant currency rates +6%
Key figures at a glance (in € millions)
SAP Group
2Q 2003 2Q 2002 Change % Change
Revenues 1,638 1,778 -140 -8%
Software revenues 431 496 -65 -13%
Income before taxes 347 -107 +454 +424%
Net income 219 -232 +451 +194%
Headcount, in FTE
(Jun 30) 28,961 29,354 -393 -1%
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 most recent Annual Report on Form 20-F filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.
Over SAP
SAP is wereldwijd marktleider in business software-oplossingen. Met behulp van mySAP Business Suite, verbeteren mensen overal ter wereld hun relaties met klanten en partners, stroomlijnen zij de operaties en bereiken zij aanzienlijke efficiencyverbeteringen binnen hun toeleveringsketens. Op dit moment gebruiken ruim 19.300 bedrijven verspreid over meer dan 120 landen software van SAP. Het totaal aantal SAP-installaties is wereldwijd gestegen tot boven 60.100. SAP heeft dochterondernemingen in meer dan 50 landen Het bedrijf is genoteerd aan een aantal beurzen, waaronder de beurs van Frankfurt en de NYSE onder het symbool ‘SAP’.
Meer informatie over SAP is te vinden op www.sap.com.
Voor meer informatie:
SAP Nederland B.V.
Renee de Bruin
Telefoon: 073 64 57 816
e-mail: renee.de.bruin@sap.com
Monogram Communication Strategies (MCS) BV
Mirjam Jonker
Telefoon: 023 56 28 208
e-mail: mirjamj@monogram.nl
SAP en mySAP.com zijn gedeponeerde handelsmerken van SAP AG. Alle andere merk- en productnamen zijn handelsmerken of geregistreerde handelsmerken van hun respectievelijke houders.