SAP Announces Preliminary 2007 Q1 Results
by SAP AG
SAP AG today announced its preliminary financial results for the first quarter ended March 31, 2007.
HIGHLIGHTS - First Quarter 2007
Revenues
* Software and software related service revenues for the 2007 first
quarter were EUR1.52 billion (2006: EUR1.39 billion), which is an
increase of 9% (15% at constant currencies(1)) compared to the same
period in 2006.
* Software revenues for the first quarter of 2007 were EUR563 million(2)
(2006: EUR514 million), representing an increase of 10% (16% at constant
currencies(1)) compared to the first quarter of 2006.
* Total revenues were EUR2.2 billion for the first quarter of 2007 (2006:
EUR2.0 billion), which represented an increase of 6% (11% at constant
currencies(1)) compared to the first quarter of 2006.
Income
* Operating income for the first quarter of 2007 was EUR433 million (2006:
EUR409 million), which was an increase of 6% compared to the first
quarter of 2006.
* The operating margin for the first quarter of 2007 was 20.0%, which was
flat compared to the first quarter of 2006.
* Net income for the 2007 first quarter was EUR310 million (2006: EUR282
million), or EUR0.26 per share (2006: EUR0.23 per share), representing
an increase of 10% compared to the first quarter of 2006.
Core Enterprise Applications Vendor Share(3)
SAP continued to gain share for the first quarter of 2007. Based on software and software related service revenues on a rolling four quarter basis, SAP's worldwide share of Core Enterprise Applications vendors(3), which account for approximately $34.8 billion in software and software related service revenues as defined by the Company based on industry analyst research, increased to 25.1% for the four quarter period ended March 31, 2007 compared to 24.5% for the four quarter period ended December 31, 2006. Compared to the four quarter period ended March 31, 2006, the year-over-year share gain was 2.4 percentage points.
"We are pleased with our first quarter results. On a constant currency basis, we achieved a strong increase in software and software related service revenues and reported double digit growth rates in each region," said Henning Kagermann, CEO of SAP.
Mr. Kagermann continued, "As we enter the SAPPHIRE season, we look forward to building on the success we have already achieved in our established business for both the large enterprise and small businesses and midsized companies. The traction we have seen in our flagship solution SAP ERP has been tremendous and the adoption of our Enterprise Services Oriented Architecture continues to grow as measured by the strong acceptance of the Business Process Platform (BPP).
"To gauge the wide acceptance of the BPP you only need to look at the robust pace of SAP ERP and SAP NetWeaver sales. At the end of the first quarter, we had over 8,500 customers on SAP ERP, which is an increase of 122% compared to the same time last year and SAP NetWeaver sales were EUR156 million in the first quarter, which represented a gain of over 40% compared to the first quarter of 2006. Additionally, we are right on schedule with our roadmap to deliver the entire SAP Business Suite on the BPP by the end of this year and we expect to continue to bring additional enterprise services to market throughout the year on top of the 1,000 already delivered."
Cash Flow
* Operating cash flow for the first quarter was EUR848 million (2006:
EUR858 million). Free cash flow(1) for first quarter of 2007 was EUR769
million (2006: EUR795 million), which was 36% of total revenues (2006:
39%). At March 31, 2007, the Company had EUR3.8 billion in cash and
cash equivalents and short-term investments (March 31, 2006: EUR4.2
billion). The year-over-year decrease is primarily the result of
increased share buy-backs in 2006.
Share Buy-Back
* In the first quarter of 2007, the Company bought back 9.6 million shares
at an average price of EUR35.16 (total amount: EUR339 million). This
compares to 10.1 million shares (total amount: EUR423 million) bought
back in the first quarter of 2006. Of the total shares purchased in the
first quarter of 2007, approximately 0.6 million shares were used to
serve exercises under SAP's share based compensation programs. The
number of shares bought back in the first quarter of 2007 represented
0.76% of the total shares outstanding. As of March 31, 2007, the
Company held Treasury stock in the amount of 58.3 million shares
(approximately 4.6% of total shares outstanding) at an average price of
EUR35.33. SAP's current share buy-back program allows the Company to
purchase up to 120 million shares. All prior year share related numbers
above have been adjusted to account for the capital share increase that
took effect in December 2006 that effectively increased the number of
shares outstanding four-fold. Given SAP's strong free cash flow(1)
generation, the Company plans to further evaluate opportunities to buy
back shares in the future.
BUSINESS OUTLOOK
The Company continues to provide the following outlook for the full-year 2007 as described in its January 24, 2007 fourth quarter results press release.
* The Company expects full-year 2007 software and software related service
revenues to increase in a range of 12% - 14% at constant currencies(1)
compared to 2006 growth of 12% at constant currencies(1).
* In order to address additional growth opportunities in new, untapped
segments in the midmarket, the Company will invest an additional EUR300
million - EUR400 million over eight quarters to build up a new business.
Depending on the exact timing of these accelerated investments, this is
equivalent to the Company reinvesting approximately one to two
percentage points of margin in 2007 into additional future growth
opportunities. Therefore, the Company expects the full-year 2007
operating margin to be in the range of 26.0% to 27.0% compared to the
2006 operating margin of 27.3%.
* The Company is projecting an effective tax rate of 32.5% - 33.0% for
2007.
Regional Performance
First Quarter 2007 Software and Software Related Service Revenues by
Region
(in EUR millions, unaudited)
SAP Group
Software Software
& SW & SW
Related Related
Service Service Constant
Revenues Revenues Currency
Q1 2007 Q1 2006 Change %Change %Change
Total 1,519 1,388 +131 +9% +15%
EMEA 752 688 +64 +9% +10%
Asia-Pacific Japan 197 190 +7 +4% +10%
Americas 570 510 +60 +12% +22%
First Quarter 2007 Software Revenues by Region
(in EUR millions, unaudited)
SAP Group
Software Software Constant
Revenues Revenues Currency
Q1 2007 Q1 2006 Change %Change %Change
Total 563 514 +49 +10% +16%
EMEA 237 220 +17 +8% +9%
Asia-Pacific Japan 77 70 +7 +10% +16%
Americas 249 224 +25 +11% +22%
First Quarter 2007 Total Revenues by Region (in EUR millions, unaudited)
SAP Group
Constant
Revenues Revenues Currency
Q1 2007 Q1 2006 Change %Change %Change
Total 2,166 2,041 +125 +6% +11%
EMEA 1,081 1,006 +75 +7% +8%
Asia-Pacific Japan 267 256 +11 +4% +11%
Americas 818 779 +39 +5% +15%
KEY EVENTS - First Quarter 2007
* In the first quarter of 2007, SAP announced major contracts: Adobe
Systems, Inc., Diblo Corporativo, S.A. de C.V., INFRA S.A., Lojas Quero
Quero S.A., Northwest Natural Gas, Public Service Enterprise Group, Inc.
in the Americas; Bobst SA, Coop Norge AS, Deutsche Lufthansa AG,
Grundfos Management A/S, Service Birmingham Ltd., Swiss Re, Wartsila Oyj
Abp., in EMEA and Alaska Milk Corporation, Fittec Electronics Co., Ltd.
GMR Group, KOBE STEEL, Ltd., Marubeni-Itochu Steel, Inc., The Hong Kong
and China Gas, Welspun India Limited in Asia-Pacific Japan region.
* At the CeBIT 2007 trade fair in Hanover, Germany, SAP made several
announcements underlying its continuing commitment to empowering
midmarket customers with new ways to leverage software for business
growth and success. SAP announced more than 80 new additions to its
portfolio of qualified SAP All-in-One industry solutions offered by SAP
partners. SAP also announced enhancement packages for SAP Business One,
a new series of downloadable packages as part of SAP standard support
that offer customers faster and more frequent access to new
functionality, best practice tools and maintenance updates. The
downloadable update model dramatically shortens to a matter of months
the software industry's typical multiyear cycle for introducing new
functionality.
* At CeBIT, SAP unveiled the next wave of business innovation with radio
frequency identification (RFID) and other auto-identification
technologies, enabling companies across many industries to apply the
technology in unprecedented ways to solve pressing business challenges.
Product tracking and authentication (PTA) marks the first in this new
generation of business processes that tap into the new SAP object event
repository.
* Further empowering customers to make governance, risk and compliance
(GRC) management an integral part of their business and IT strategies,
SAP announced new GRC products and initiatives at the CeBIT trade fair.
New software in the portfolio of SAP(R) solutions for GRC will help
companies comply with newly mandated electronic customs procedures in
Europe, and a joint solution with partner TechniData AG addresses
customer needs to comply with the newly enacted legislation impacting
the chemicals sector. Building on growing partner support for SAP
solutions for GRC, SAP announced its plans to create an executive
advisory council to increase GRC collaboration with partners and
customers.
* SAP announced the acquisition of Pilot Software, a privately-held
company specializing in strategy management software on February 20,
2007. With this "tuck-in" acquisition, SAP added a critical piece to its
portfolio of analytic applications and furthering its commitment to
provide C-level executives with the tools necessary for effective
performance management by fostering alignment across their
organizations.
* On January 31, 2007, SAP announced executive appointments in its newly
formed global organization responsible for overseeing sales, marketing,
operations and the alignment of resources to small businesses and
midsize companies. Under the leadership of Hans-Peter Klaey, president
of SAP's SME organization, SAP has aligned its team to support a growing
focus on the market segment over the years come and to create additional
opportunities for both customers and partners.
* On January 30, 2007, SAP announced that more than 1,000 customers are
live on SAP ERP 2005-the latest release of SAP's enterprise resource
planning (ERP) application. The milestone marks the fastest adoption
rate of an ERP release in the Company's history.
* On January 24, 2007, SAP revealed plans for a next-generation solution
designed to reshape the way midsize companies purchase, adopt and
finance software applications. Complementing SAP's existing portfolio
for midsize companies, the solution will leverage "enterprise SOA by
design" and will be available to customers through on-demand and hosted
delivery. To more efficiently reach untapped midmarket segments, SAP
announced plans to invest in an additional business model that will
operate in parallel with its established business.
* On January 16, 2007, SAP introduced the next version of its SAP All-in-
One solutions, with significant enhancements to provide midsize
companies with greater agility in managing their businesses. SAP also
introduced programs and tools to make it easier for its worldwide
network of channel partners to immediately evolve existing SAP All-in-
One solutions and build new solutions to address additional industry
segments.
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