CIMdata PLM Industry Summary Online Archive
20 October 2005
Financial News
SAP Reports 20% Growth in Software Revenues for the 2005 Third Quarter
Company Raised Guidance for Full-year 2005 Software Revenues
to a Range of 12 - 14% Growth
Third Quarter Net Income Increased 15% Company Continued to Gain Peer
Group Share
SAP AG announced its preliminary financial results for the third quarter and nine months ended September 30, 2005. Highlights of the results are as follows.
View the Detailed Results (PDF, 210 KB)
View the Detailed Spreadsheet (XLS, 152 KB)
View the Presentation (PDF, 2.86 MB)
HIGHLIGHTS - Third Quarter 2005
Revenues
- Software revenues were €590 million for the third quarter of 2005 (2004: €491 million), representing an increase of 20% compared to the same period in 2004. At constant currencies1, software revenues increased 19% year-over-year.
- Total revenues for third quarter of 2005 were €2.01 billion (2004: €1.78 billion), which was an increase of 13% compared to the third quarter of 2004. At constant currencies1, total revenues increased 12% year-over-year.
- Software revenues in the U.S. increased 34% to €199 million for the third quarter of 2005 (2004: €149 million). At constant currencies 1 , software revenues in the U.S. increased 34% year-over-year.
- Software revenues in the EMEA region grew 6% to €263 million for the third quarter of 2005 (2004: €249 million). At constant currencies 1 , software revenues in the EMEA region increased 6% compared to the third quarter of 2004. Software revenues in Germany rose by 12% year-over-year.
- Software revenues in the APA region increased 18% to €81 million (2004: €69 million) for the third quarter of 2005. At constant currencies 1 , software revenues in the APA region increased 15% compared to the same period last year.
Peer Group Share
- The strong software revenue results ($710 million globally and $240 million in the U.S. on a quarter-end U.S. dollar exchange rate basis) enabled the Company to continue to gain share against its peer group 2 worldwide and in the U.S. On a rolling four quarter basis, the Company's worldwide share against its peer group 2 based on software revenues was 60% at the end of the third quarter of 2005, compared to 58% at the end of the second quarter of 2005 and 55% at the end of the third quarter of 2004. In the U.S., on a rolling four quarter basis, the Company's share against its peer group 3 based on software revenues was 44% at the end of the third quarter of 2005, compared to 41% at the end of the second quarter of 2005 and 36% at the end of the third quarter of 2004.
Income
- Operating income for the third quarter of 2005 was €517 million (2004: €461 million), which was an increase of 12% compared to the third quarter of 2004. Pro forma operating income4 was €520 million (2004: €475 million) for the quarter, representing an increase of 9% compared to the same period in 2004.
- The operating margin for the third quarter of 2005 was 25.7%, which was down by 0.30 percentage points compared to the same quarter in 2004. The pro forma operating margin 4 for the third quarter of 2005 was 25.8%, which represented a decrease of 0.90 percentage points compared to the same period in 2004.
- Net income for the third quarter of 2005 was €334 million (2004: €291 million), or €1.08 per share (2004: €0.94 per share), representing an increase of 15% compared to the third quarter of 2004. Third quarter 2005 pro forma net income 4 was €337 million (2004: €302 million), or pro forma €1.09 earnings per share 4 (2004: €0.97 per share), representing an increase of 12% compared to the third quarter of 2004.
"The third quarter marked another strong performance for SAP," said Henning Kagermann, CEO of SAP. "We had record third quarter software revenues, we gained share against our peer group and we extended our lead in the U.S."
Mr. Kagermann continued, "While we continue to move forward in delivering on our Enterprise Services Architecture roadmap, we also decided to accelerate investments. Therefore, in addition to rolling out the entire mySAP Business Suite and all of SAP's industry solutions on SAP NetWeaver as planned in October, we also service enabled the mySAP Business Suite and industry solutions with more than 500 enterprise services. This was a significant milestone as we are the first company to deliver such a robust, service-enabled suite of software solutions. What sets us apart is that we have a clear and defined roadmap for the future of our software investments and we are investing wisely - spending on more efficient organic growth and on smart, fill-in acquisitions."
HIGHLIGHTS - Nine Months 2005
Revenues
- Software revenues increased 18% to €1.60 billion (2004: €1.36 billion) for the 2005 nine month period. At constant currencies 1 , software revenues increased 18% for the first nine months.
- Nine month 2005 total revenues were €5.76 billion (2004: €5.11 billion), which was an increase of 13% compared to the same 2004 nine month period. At constant currencies 1 , total revenues for the first nine months of 2005 increased 13%.
Income
- Operating income for the 2005 nine month period was €1.35 billion (2004: €1.19 billion), which was an increase of 14% compared to the same period last year. Pro forma operating income 4 for the first nine months of 2005 was €1.40 billion (2004: €1.24 billion), representing an increase of 13% compared to the first nine months of 2004.
- The operating margin for the 2005 nine month period was 23.5%, which was up by 0.30 percentage points compared to the same period in 2004. The pro forma operating margin 4 was 24.3% for the first nine months of 2005, which increased by 0.10 percentage points compared to the same period in 2004.
- Net income for the first nine months of 2005 was €877 million (2004: €769 million), or €2.83 per share (2004: €2.47 per share), representing an increase of 14% compared to the first nine months of 2004. Pro forma net income 4 for the 2005 nine month period was €910 million (2004: €804 million), or pro forma €2.94 per share 4 (2004: €2.59 per share), representing an increase of 13% compared to the 2004 nine month period.
Cash Flow
- Operating cash flow for the first nine months of 2005 was €1.02 billion (2004: €1.34 billion). Free cash flow 4,6 for the first nine months of 2005 was €832 million (2004: €1.22 billion), which was 14% as a percentage of total revenues in 2005 (2004: 24%). At September 30, 2005, the Company had €3.1 billion in liquid assets (December 31, 2004: €3.2 billion).
BUSINESS OUTLOOK
The Company provided an update on its outlook for the full year 2005.
- The Company raised its software revenue outlook and now expects full-year 2005 software revenues to increase in a range of 12%-14% compared to 2004. Previously, the Company expected an increase in a range of 10%-12%.
- The Company continues to expect the full-year 2005 pro forma operating margin, which excludes stock-based compensation and acquisition-related charges, to increase in a range of 0.0 - 0.5 percentage points compared to 2004. This has not changed from the previously issued outlook.
- The Company raised its pro forma earnings per share outlook and now expects full-year 2005 pro forma earnings per share, which excludes stock-based compensation, acquisition-related charges and impairment-related charges, to be in a range of €4.85 to €4.95 per share. The Company previously expected a range of €4.70 to €4.80 per share.
- The Company changed its assumed average U.S. Dollar to Euro exchange rate for the above outlook to $1.25 per €1.00. The Company previously assumed an average U.S. Dollar to Euro exchange rate of $1.30 per €1.00.
Share Buy-Back Program
- SAP's current share buy-back program allows the Company to purchase shares in the amount of up to 10% of the total shares outstanding, or approximately 30 million shares. In the first nine months of 2005, the Company bought back 2.8 million shares at an average price of €126.07 (total amount: €347 million). This compares to 1.1 million shares bought back in the first nine months of 2004. At September 30, 2005, treasury stock stood at 6.7 million shares. Given the Company's strong free cash flow 4,6 generation, SAP plans to continue to evaluate opportunities to buy back shares in the future.
BUSINESS REVIEW - Third Quarter and Nine Months 2005
Third Quarter 2005 key figures (in € millions, except headcount
- unaudited)
SAP Group
|
3Q 2005 |
3Q 2004 |
Change |
% Change |
Revenues |
2,014 |
1,776 |
+238 |
+13% |
Software revenues |
590 |
491 |
+99 |
+20% |
Income before taxes |
517 |
465 |
+52 |
+11% |
Net income |
334 |
291 |
+43 |
+15% |
Headcount, |
35,022 |
31,582 |
3,440 |
+11% |
Third Quarter 2005 Software Revenue by Region (in € millions,
unaudited)
SAP Group
|
Software |
Software |
Change |
% Change |
Total |
590 |
491 |
+99 |
+20% |
- at constant currency rates |
|
|
|
+19% |
EMEA |
263 |
249 |
+14 |
+6% |
- at constant currency rates |
|
|
|
+6% |
Asia Pacific |
81 |
69 |
+12 |
+18% |
- at constant currency rates |
|
|
|
+15% |
Americas |
246 |
173 |
+73 |
+42% |
- at constant currency rates |
|
|
|
+40% |
Software revenues were strong in the Americas and Asia-Pacific regions with a solid performance from the EMEA region. In the Americas region, software revenues in the U.S. increased 34% at constant currencies 1 . Latin America and Canada also performed well in the Americas regions in the third quarter. In the Asia-Pacific region, Japan reported an increase in software revenues of 19% at constant currencies 1 . Australia and India also performed well in the Asia Pacific region in the third quarter. In the EMEA region, the outstanding results came from Germany, which was expected to improve from its 2005 first half performance. For the third quarter, software revenues in Germany increased 12%.
Third Quarter 2005 Total Revenue by Region (in € millions,
unaudited)
SAP Group
|
Revenue |
Revenue |
Change |
% Change |
Total |
2,014 |
1,776 |
+238 |
+13% |
- at constant currency rates |
|
|
|
+12% |
EMEA |
1,018 |
968 |
+50 |
+5% |
- at constant currency rates |
|
|
|
+5% |
Asia Pacific |
243 |
211 |
+32 |
+15% |
- at constant currency rates |
|
|
|
+12% |
Americas |
753 |
597 |
+156 |
+26% |
- at constant currency rates |
|
|
|
+23% |
Third Quarter 2005 Software Revenue by Solution (in € millions,
unaudited) 5
SAP Group
|
Q3 2005 |
Q3 2004 |
Change |
% Change |
ERP |
229 |
206 |
+23 |
+11% |
SCM |
98 |
96 |
+2 |
+2% |
CRM |
147 |
104 |
+43 |
+41% |
SRM |
38 |
33 |
+5 |
+15% |
PLM |
35 |
40 |
-5 |
-13% |
SAP NetWeaver and |
43 |
12 |
+31 |
+258% |
Total Software Revenue |
590 |
491 |
+99 |
+20% |
SAP reported growth in all product areas with the exception of PLM. CRM-related software revenues increased 41% in the third quarter of 2005 and the Company continued to gain share against its peer group 2 in CRM software-related revenues, strengthening its number one position in the peer group 2 in CRM worldwide. At €147 million, CRM represented 25% of total software revenues. ERP-related software revenues increased 11% to €229 million and represented 39% of total software revenues. SCM-related software revenues rose 2% to €98 million and represented 17% of total software revenues. The strongest growth came from SAP NetWeaver (on a standalone basis) and other related products, which increased 258% to €43 million. These figures include revenues from designated solution contracts, as well as figures from integrated solution contracts, which are allocated based on usage surveys.
Nine Month 2005 key figures (in €millions, except headcount
- unaudited)
SAP Group
|
9 Mos 2005 |
9 Mos 2004 |
Change |
% Change |
Revenues |
5,759 |
5,113 |
+646 |
+13% |
Software revenues |
1,600 |
1,358 |
+242 |
+18% |
Income before taxes |
1,354 |
1,220 |
+134 |
+11% |
Net income |
877 |
769 |
+108 |
+14% |
Headcount, |
35,022 |
31,582 |
+3,440 |
+11% |
Nine Month 2005 Software Revenue by Region (in €millions,
unaudited)
SAP Group
|
Software |
Software |
Change |
% Change |
Total |
1,600 |
1,358 |
+242 |
+18% |
- at constant currency rates |
|
|
|
+18% |
EMEA |
767 |
712 |
+55 |
+8% |
- at constant currency rates |
|
|
|
+8% |
Asia Pacific |
231 |
184 |
+47 |
+26% |
- at constant currency rates |
|
|
|
+25% |
Americas |
602 |
462 |
+140 |
+30% |
- at constant currency rates |
|
|
|
+31% |
Nine Month 2005 Total Revenue by Region (in €millions,
unaudited)
SAP Group
|
Revenue |
Revenue |
Change |
% Change |
Total |
5,759 |
5,113 |
+646 |
+13% |
- at constant currency rates |
|
|
|
+13% |
EMEA |
3,030 |
2,833 |
+197 |
+7% |
- at constant currency rates |
|
|
|
+7% |
Asia Pacific |
699 |
605 |
+94 |
+16% |
- at constant currency rates |
|
|
|
+15% |
Americas |
2,030 |
1,675 |
+355 |
+21% |
- at constant currency rates |
|
|
|
+22% |
KEY EVENTS IN THE THIRD QUARTER OF 2005
- Major contracts in the third quarter included Applied Materials, Bose Corporation, Carrier Corporation, North Carolina Office of the State Controller, Jim Beam Brands and FEMSA Empaques in the Americas; Allianz AG, Ministry of Defense (Netherlands), Hexagon, The Capita Group, Lloyds TSB Bank and Southern Water Services in EMEA; Horiba Ltd, Taiwan Cement Corporation, Sumitomo Corporation, Dongkuk Steel Mill and Shinhan Financial Group, CSIRO (Commonwealth Scientific and Industrial Research Organisation Australia) in APA.
- More than 10,000 SAP customers and partners convened at SAP TechEd '05 in Vienna and in Boston in September to learn about SAP NetWeaver and SAP's Enterprise Services Architecture.
- SAP and IBM announced their intention to test and make available a low-cost, high-performance analytics packaged solution to enable clients to gather and analyze business information. The solution will integrate the new high-performance analytics capability of SAP NetWeaver with IBM BladeCenter and TotalStorage systems.
- SAP and Siemens AG expanded their global strategic alliance through the delivery of a flexible, standards-based identity management solution. Through the SAP NetWeaver® platform, the Siemens identity management solution, HiPath SIcurity DirX Identity, integrates with SAP applications to help companies manage their employees' IT access rights.
- The number of independent software vendors that became certified Powered by SAP NetWeaver partners increased significantly. To date, 855 solutions, developed by 522 ISVs, have achieved Powered by SAP NetWeaver or Certified for SAP NetWeaver status.
- SAP acquired Toronto-based Triversity, a leading North American provider of point-of-sale (POS) retail software solutions, to extend its market leadership in the retail sector.
- SAP announced the extension of its Safe Passage program for Oracle's customers using PeopleSoft and JD Edwards (JDE) solutions to cover business process outsourcing (BPO).
- SAP announced results of its collaboration with Kimberly-Clark Corporation (NYSE: KMB), a global health and hygiene company, to develop and implement the industry's next generation of business solutions with radio frequency identification (RFID).
- SAP employees joined in the FIRST LEGO League (FLL), a hands-on robotics program developed by The LEGO Group and U.S.-based nonprofit organization FIRST (For Inspiration and Recognition of Science and Technology).
- SAP announced a software deployment advancing NATO's efforts to improve "net-centric" military capabilities. The Coalition Warrior Interoperability Demonstration demonstrated the reliability of the SAP for Defense & Security solution to transfer information between enterprise resource planning and command and control systems.
- SAP announced a recent round of informal discussions involving the U.S. Department of Commerce, European Union (EU) officials and other public and private leaders on the opportunities presented by radio frequency identification (RFID) technology.
- SAP and Siemens Automation and Drives announced their intent to form a partnership to deliver a solution to help companies eliminate the disconnect of mission-critical information between Manufacturing Execution Systems and business software solutions.
Webcast/Supplementary Financial Information
SAP senior management will host a conference call today at 3:00 PM (CET)
/ 2:00 PM (GMT) / 9:00 AM (Eastern) / 6:00 AM (Pacific). The conference
call will be web cast live at < http://www.sap.com/investor
> and will be available for replay purposes as well. Supplementary
financial information pertaining to the quarterly results can be found
on the Company's website at http://www.sap.com/investor
.
(*) SAP defines business solutions as consisting of Enterprise Resource Planning and related software solutions such as Supply Chain Management, Customer Relationship Management, Product Lifecycle Management, Supplier Relationship Management.
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