SAP announces fourth quarter, full-year 2009 results that exceeded expectations

SAP AG (NYSE: SAP) today announced its preliminary financial results for the fourth quarter and full-year ended 31 December 2009.

* US GAAP software and software-related service revenue was EUR8.20 billion (2008: EUR8.46 billion), a decrease of 3%. Non-GAAP software and software-related service revenue was EUR8.21 billion (2008: EUR8.62 billion), a decrease of 5% (5% at constant currencies).

* US GAAP total revenue were EUR10.67 billion (2008: EUR11.57 billion), a decrease of 8%. Non-GAAP total revenue was EUR10.68 billion (2008: EUR11.73 billion), a decrease of 9% (9% at constant currencies).

* US GAAP software revenue was EUR2.61 billion (2008: EUR3.61 billion), a decrease of 28% (27% at constant currencies).

Full-year 2009 non-GAAP revenue figures exclude an acquisition-related deferred support revenue write-down of EUR11 million (2008: EUR166 million).

* US GAAP operating income was EUR2.64 billion (2008: EUR2.84 billion), a decrease of 7%. Non-GAAP operating income was EUR2.92 billion (2008: EUR3.30 billion), a decrease of 12% (11% at constant currencies). US GAAP and non-GAAP operating income were negatively impacted by restructuring charges of EUR196 million resulting from the previously announced reduction of positions.

* US GAAP operating margin was 24.7% (2008: 24.6%), an increase of 0.1 percentage points. Non-GAAP operating margin was 27.3% (2008: 28.2%), or 27.6% at constant currencies, a decrease of 0.9 percentage points (0.6 percentage points at constant currencies). The EUR196 million in restructuring charges resulting from the previously announced reduction of positions negatively impacted the US GAAP and non-GAAP operating margin by 1.8 percentage points.

* US GAAP income from continuing operations was EUR1.83 billion (2008: EUR1.93 billion), a decrease of 5%. Non-GAAP income from continuing operations was EUR2.04 billion (2008: EUR2.27 billion), a decrease of 10%. US GAAP and non-GAAP income from continuing operations were negatively impacted by restructuring charges of EUR138 million, net of tax, resulting from the previously announced reduction of positions.

* US GAAP basic earnings per share from continuing operations were EUR1.54 (2008: EUR1.62), a decrease of 5%. Non-GAAP earnings per share from continuing operations were EUR1.71 (2008: EUR1.91), a decrease of 10%. The restructuring charges, net of tax, resulting from the previously announced reduction of positions negatively impacted the US GAAP and non-GAAP basic earnings per share by EUR0.12.

Full-year 2009 non-GAAP operating income excludes an acquisition-related deferred support revenue write-down and acquisition-related charges totalling EUR275 million (2008: EUR463 million), and full-year 2009 non-GAAP income from continuing operations and non-GAAP earnings per share from continuing operations exclude an acquisition-related deferred support revenue write-down and acquisition-related charges totalling EUR211 million net of tax (2008: EUR341 million).

Operating cash flow from continuing operations was EUR3.04 billion (2008: EUR2.18 billion), an increase of 39%. Free cash flow was EUR2.81 billion (2008: EUR1.84 billion), an increase of 52%. Free cash flow was 26% of total revenue (2008: 16%). At 31 December 2009, SAP had a total group liquidity of EUR2.28 billion (31 December 2008: EUR1.66 billion), which includes cash and cash equivalents, restricted cash and short-term investments. At 31 December 2009, net liquidity, defined as total group liquidity less bank liabilities, was EUR1.58 billion.

* US GAAP software and software-related service revenue was EUR2.57 billion (2008: EUR2.67 billion), a decrease of 4%. Non-GAAP software and software-related service revenue was EUR2.57 billion (2008: EUR2.69 billion), a decrease of 5% (2% at constant currencies).

* US GAAP total revenue was EUR3.19 billion (2008: EUR3.49 billion), a decrease of 9%. Non-GAAP total revenue was EUR3.19 billion (2008: EUR3.51 billion), a decrease of 9% (7% at constant currencies).

* US GAAP software revenue was EUR1.12 billion (2008: EUR1.32 billion), a decrease of 15% (14% at constant currencies).

* US GAAP operating income was EUR1.06 billion (2008: EUR1.28 billion), a decrease of 17%. Non-GAAP operating income was EUR1.12 billion (2008: EUR1.37 billion), decrease of 18% (16% at constant currencies). US GAAP and non-GAAP operating income were negatively impacted by restructuring charges of EUR10 million resulting from the previously announced reduction of positions.

* US GAAP operating margin was 33.1% (2008: 36.6%), a decrease of 3.5 percentage points. Non-GAAP operating margin was 35.1% (2008: 39.1%), or 35% at constant currencies, a decrease of 4 percentage points (4.1 percentage points at constant currencies). The EUR10 million in restructuring charges resulting from the previously announced reduction of positions negatively impacted the US GAAP and non-GAAP operating margin by 0.3 percentage points.

* US GAAP income from continuing operations was EUR0.75 billion (2008: EUR0.86 billion), a decrease of 13%. Non-GAAP income from continuing operations was EUR0.80 billion (2008: EUR0.93 billion), a decrease of 14%. US GAAP and non-GAAP income from continuing operations were negatively impacted by restructuring charges of EUR7 million, net of tax, resulting from the previously announced reduction of positions.

* US GAAP basic earnings per share from continuing operations were EUR0.63 (2008: EUR0.72), a decrease of 13%. Non-GAAP basic earnings per share from continuing operations were EUR0.67 (2008: EUR0.78), a decrease of 14% year-over-year. The restructuring charges, net of tax, resulting from the previously announced reduction of positions negatively impacted the US GAAP and non-GAAP basic earnings per share by EUR0.01.

Fourth quarter 2009 non-GAAP operating income excludes acquisition-related charges totalling EUR64 million (2008: EUR98 million, which also included an acquisition-related deferred support revenue write-down), and fourth quarter 2009 non-GAAP income from continuing operations and non-GAAP earnings per share from continuing operations exclude acquisition-related charges totalling EUR49 million net of tax (2008: EUR70 million, which also included a deferred revenue write-down).

“As a result of a very difficult and unstable market environment that began in the third quarter of 2008 and then continued into 2009, we rapidly put into place a plan to reduce operating expenses in order to protect our operating margin. I am pleased to report that we exceeded our initial expectations,” said Werner Brandt, CFO of SAP. “In 2009, we significantly reduced non-GAAP operating expenses by around EUR650 million to EUR7.8 billion despite restructuring costs of approximately EUR200 million. The non-GAAP operating margin at constant currencies was 27.6%, which included a negative impact of 1.8 percentage points related to the restructuring charge. For 2010, we will continue to maintain strict cost controls with a spotlight on further margin expansion.”

L'eo Apotheker, CEO of SAP, continued: “Along with margin expansion for 2010, we are also ready to return to top-line growth, although the market continues to be challenging and uncertainty among customers still exists. Despite the difficult environment last year, we never lost focus on innovation, which is the cornerstone for growth going forward. Building on a strong foundation, we will drive growth by continuing to strengthen our core business and expand beyond the core with new products and technologies that speed implementation, provide for instant consumption and are easily accessible from anywhere, anytime, and from a broad range of devices.”

SAP will discontinue its US GAAP reporting and will only report financial data under IFRS from fiscal 2010 onwards. The guidance provided by SAP for 2010 is based on non-IFRS numbers that are derived from SAP's IFRS figures by excluding acquisition-related charges and discontinued activities. To prepare the capital markets for this change, IFRS financial data are provided in the financial section of this press release.

SAP is providing the following outlook for the full-year 2010:

* The company expects full-year 2010 non-IFRS software and software-related service revenue to increase in a range of 4% to 8% at constant currencies (2009: EUR8.2 billion).

* The company expects its full-year 2010 non-IFRS operating margin to be in a range of 30%-31% at constant currencies (2009: 27.4%).

* The company projects an effective tax rate of 27.5%-28.5% (based on IFRS) for 2010 (2009: 26.7%).

* In the fourth quarter of 2009, SAP closed major contracts in several key regions, including Achmea and Rabobank Nederland, Aeroflot Russian Airlines, AOK, Cr'edit Agricole SA, Deutsche Bank AG, Hilti AG, NMBS-SNCB Group, and Talanx AG in EMEA; 3M Company, Baker & McKenzie, Dairy Farmers of America, Inc., Pfizer Inc., Servicios Nacional de Chocolates SA, Sybase, Verizon Services Corporation, and W.W. Grainger in Americas; and Daiwa House Industry, Department of Defence, Australia, Hubei Electric Power Corporation, Malaysian Airline System Berhad, National Australia Bank, Singapore Power, and Vietnam National Petroleum Corporation in the Asia Pacific Japan region.

* In December, Deutsche Bank and SAP signed a letter of intent to start a multi-year initiative in 2010 to replace individual software solutions in its home market by a new core banking system based on SAP for Banking solutions. The SAP implementation underpins the bank's strategy to push for a high degree of industrialization and standardization of processes.

* On 17 December, SAP announced that Valero Energy Corporation signed a global enterprise agreement with SAP that will create a tighter relationship between the two companies, including a particular focus on collaboration on solution innovation and development over the next five years.

* On 10 December, SAP announced the new SAP BusinessObjects Sustainability Performance Management application designed to help businesses more easily set sustainability goals and objectives, measure and communicate performance, and reduce data collection costs and errors. The new application helps organisations focus on improving economic, social and environmental performance rather than spending time on data collection and report compilation. The software features a library of key sustainability performance indicators and is the first solution to be certified by the Global Reporting Initiative Certified Software and Tools Program. The Global Reporting Initiative (GRI) is a network-based organisation that has pioneered the development of the world's most widely used sustainability reporting framework, and is committed to its continuous improvement and application worldwide.

* On 7 December, SAP further extended its modular, market-leading solution offerings tailored for the banking industry by announcing innovations to its industry-specific banking software that supports banks' business processes from the front to the back office.

* On 1 December, SAP announced that the 2009 Key Performance Indicator achievements of the SAP User Group Executive Network (SUGEN) SAP Enterprise Support program have shown clear value to participating SAP customers.

* On 20 November, SAP reported that market research firm IDC identified SAP as a leading vendor of customer information systems (CIS) and customer relationship management (CRM) systems for the utilities industry. The IDC study, published by IDC Energy Insights, is conducted on an annual basis. The report evaluated the seven most relevant vendors of utility-specific CIS/CRM systems in the light of the challenges of the new energy economy. SAP received the highest ratings in the category “ownership confidence” and the second highest ratings in the category “ability to address market needs”.

* On 19 November, SAP was named as a leader in business performance solutions in a report by independent analyst firm Forrester Research. In the November 2009 report - “The Forrester Wave: Business Performance Solutions, Q4 2009” - SAP was positioned as a leader and ranked with the strongest overall current offering out of 10 other vendors.

* On 27 October, SAP unveiled an interactive sustainability map for the SAP EcoHub solution marketplace, providing a clear view of the ecosystem of sustainability and “Green IT” solutions and services available from SAP and its partners. By simply clicking on defined areas in the SAP sustainability map within SAP EcoHub, customers can easily discover, evaluate and buy sustainability solutions and services from SAP and its partners.

* On 21 October, SAP announced that Siemens AG, a global leader in electronics and electrical engineering, expanded its strategic relationship with SAP through its selection of the SAP Supplier Relationship Management application for Siemens' worldwide e-procurement operations. Also announced was the completion of Siemens' contract renewal for SAP maintenance support services for all SAP solutions based on SAP's maintenance standards for large customers for duration of three years.

This press release contains certain financial measures such as non-GAAP and non-IFRS revenues, non-GAAP and non-IFRS operating income, non-GAAP and non-IFRS operating margin, free cash flow, constant currency revenue and operating income measures, as well as US dollar-based non-GAAP revenue numbers. These measures are not prepared in accordance with US GAAP or IFRS and therefore are considered non-GAAP or non-IFRS financial measures. SAP's non-GAAP and non-IFRS financial measures may not correspond to non-GAAP and non-IFRS financial measures that other companies report. The non-GAAP and non-IFRS financial measures that SAP reports should be considered in addition to, and not as a substitute for or superior to, revenue, operating margin or SAP's other measures of financial performance prepared in accordance with US GAAP and IFRS. See the financial section of this press release for additional information regarding the non-GAAP and non-IFRS measures included in this press release and for the reconciliations to the corresponding US GAAP and IFRS measures.

Webcast/supplementary financial information:

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 Web site at <http://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 http://www.sap.com/investor.

Note to editors (TV/ radio/ print/ online)

SAP will post material from the press conference as well as collective TV interviews with SAP CEO L'eo Apotheker in both English and German, in which he will discuss the company's Q4 2009 and full-year 2009 financial results. You can find these interviews on the SAP stock footage platform http://www.sap.com/stockfootage on Wednesday, January 27, 2010, following the event. The interviews will be conducted by TV journalists in English and German language.

These interviews will be published in their entirety and without any edits, as well as for your unrestricted use free of charge (also for parts of it). In addition, these clips are not branded, are clean feed, and will be available as high resolution video files, as well as mp3 files for radio journalists. SAP will also broadcast these clips via satellite starting at approximately 11:35 a.m. CET. If you are interested in recording this feed, please contact us via broadcast@sap.com for the necessary satellite and technical information.