tbr 4q10 sap initial response

TBR

T EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .

SOFTWARE BUSINESS QUARTERLYSM

4Q10 INITIAL RESPONSE

SAP

Fourth Calendar Quarter 2010

Fourth Fiscal Quarter 2010 Ended December 31, 2010

Publish Date: January 26, 2011 Author: Jessica Breen ([email protected]), SBQ Analyst Content Editor: Stuart Williams, SBQ Practice Manager

TBR

SAP 4Q10 Initial Response | Software Business Quarterly ©2011 Technology Business Research, Inc. 2

SAP’s revamped business drove success in 2010, and its three-pronged strategy positions the company for continued growth in 2011

SAP Software Corporate Strategies • Leverage customer adoption of cloud and mobile

solutions to drive platform sales • Drive revenue growth and customer satisfaction

through value engineering and value consumption • Drive success in the midmarket by moving to volume

readiness across the portfolio • Expand ecosystem program to all partners to drive

revenue growth and end-user satisfaction • Target growth through a three-pronged strategy: on-

premise, on-demand and on-device with orchestration

TBR Position: SAP’s financial performance is the result of redirecting the company’s focus toward innovation, customer satisfaction and new growth opportunities in cloud and mobility. • SAP fully recovered from the effects of 2009’s

recession, as full-year growth reached 16.8% year-to-year. New product releases, like SAP’s on-demand offering Business ByDesign, along with core application offerings now being delivered via on-device, are driving net new growth for the company.

• SAP reported double-digit growth across all of its key segments, as the company’s go-to-market strategies in on-premise, on-demand and on-device gained traction.

• SAP realigned its Global Field Organization (GFO) to better capture growth opportunities across all geographies, especially in emerging regions.

• SAP made two tuck-in acquisitions during 4Q10 that will enable it to deliver stronger solutions in on-demand and on-device and increase its innovative power. SAP acquired the IP of Cundus AG and the security portion of SECUDE’s business to expand its capabilities.

Executive Summary

Reported euros are converted to U.S. dollars using the average quarterly exchange rate of 1.36 dollars per euro.

SAP 4Q10 PERFORMANCE VS. EXPECTATIONS

In $ Millions, except EPS Consensus Guidance Range Actual

Revenue 5,410$ SSRS 9%-11% YTY 5,512$

Operating Income N/A 30% - 31% OM 733$

Non-IFRS EPS 0.88$ N/A 0.78$

Coming Quarter

SAP 1Q11 GUIDANCE AND EXPECTATIONS

In $ Millions, except EPS TBR Estimate Consensus Guidance Range

Revenue 4,145$ 4,186$ SSRS 12%-15% YTY

Operating Income 1,103$ N/A 30% - 31% OM

Non-IFRS EPS N/A 1.08$ N/A

TBR


Key Developments

SAP’s focus on customers and innovation paid off with double-digit software growth

• SAP reported record software revenue of 35% year-to-year in its fourth quarter, as it reached €1.5 billion in 4Q10. Restructuring efforts and go-to-market strategies to listen to customers and accelerate innovation led to record growth, which prompted SAP to report preliminary earnings.

• Total revenue grew 27.2% year-to-year as SAP’s new on-device business led to net new revenue. Co-CEO Bill McDermott stated that SAP believes it is no longer seeing pent-up demand from the recession; the core business is back with SAP’s on-premise offerings in ERP and CRM.

• SAP reported that in the six months since the close of the acquisition, Sybase contributed three percentage points to full-year growth, and added €150 million to operating income, resulting in direct profit. TBR believes Sybase provides new opportunities for SAP to expand its applications business, via on-device and in-memory technology, and we expect further developments.

• Business ByDesign, SAP’s on-demand offering, has over 100 customers after being available for six months. SAP reported that Business ByDesign is its fastest growing product to date.

SAP realigned executive talent to take advantage of opportunities

• As part of SAP’s ongoing restructuring efforts, the company realigned its Global Field Organization. TBR believes SAP's success in the marketplace led McDermott to use his influence to promote from the inside, rather than routine executive shuffle. These leadership changes mark more changes to come.

• TBR believes the realignment will help SAP target growth across its core geographies, as well as across emerging regions.

• Despite the strength of SAP’s business in 2010, SAP lost some of its executive talent to HP when former CEO Leo Apotheker poached from SAP and Marge Breya left her position as EVP to become general manager of HP Software and Solutions. TBR believes SAP may see more departures as Apotheker offers executive roles within the growing HP Software division.

• Jose Duarte, former president of EMEA, will assume the position of president of Global Services, while Franck Cohen will take over as president of EMEA. Robert Enslin is now the president of Global Sales, and Robert Courteau is the president of SAP North America, reporting to Enslin. Sanjay Poonen was promoted to president of Global Solutions Go-to-Market, where he will report to co-CEOs Jim Hagemann Snabe and McDermott.

Executive Summary

SAP will sustain its growth trajectory across 2011 by capitalizing on mobile and cloud opportunities

TBR


Quarterly Segment Performance

Segment Key Changes & Drivers 4Q10

Revenue Growth

Y/Y Trends to Monitor

Software

Software revenue increased significantly, as SAP saw a return to its core business applications in ERP and CRM.

€1.5

billion 34.7%

SAP will begin to deliver more mobile solutions from its core applications portfolio to support the on-device strategy.

Maintenance Maintenance revenue continues to grow as SAP adds net new customers to its installed base.

€1.7

billion 21.5%

Maintenance revenue streams will continue to increase following software growth.

Subscription Business ByDesign led revenue growth as SAP’s core on-demand offering.

€110 million

32.5% TBR expects SAP to develop and deliver additional on-demand solutions.

Consulting Consulting revenue increased as a result of new on-premise and on-demand deployments.

€625 million

20.2% SAP’s on-demand business will result in more rapid consulting services growth.

Other Sybase’s messaging business led to triple-digit growth on top of SAP’s existing “Other” revenue stream.

€82 million (est.)

355.6%

The messaging business will boost overall revenue growth in this segment until 2H11.

Pushing hard to close fourth quarter deals lifted revenue across all segments

Executive Summary


TBR


The €933 million litigation settlement with Oracle hobbled operating margin and will impact free cash flow for future investment


Expenses • SAP reported the Oracle settlement of €933 million under its operating expenses in 4Q10. • SAP added 592 new employees sequentially and 5,935 year-to-year, increasing expenses across all business functions. • Sales & marketing expenses rose 30.5% year-to-year to €787 million, or 19.4% of revenue. • G&A expenses increased 8.6% year-to-year to €177 million, or 4.4% of revenue. • R&D expenses rose 25.8% year-to-year to €481 million, or 11.9% of revenue.

Margins • SAP’s gross margin rose 100 basis points year-to-year to 71.9%

of revenue, as an increase in software and support lifted margins.

• Operating margin fell 1,880 basis points year-to-year as a result of the Oracle litigation and the €933 million settlement. Backing out the settlement, operating margin increased 420 basis points year-to-year.

• Net income was not greatly impacted by the litigation settlement due to a tax benefit; however, free cash flow was weakened as SAP waits for the repeals hearing.

Revenues • Software revenue grew 34.7% year-to-year, as SAP saw a

return in customer spending in its core applications. • Support revenue increased 21.5% year-to-year to

€1.66 billion, as prior license revenue stimulated revenue growth.

• Subscription and software-related service revenue increased 32.5% year-to-year, as SAP strategically pursued an on-demand business model to offer customers a choice between on-demand and on-premise.

Financial Model Strategy

32.2%13.4%

15.4%

11.9%

5.1%

4.4%

18.9%

19.4%

29.1%

28.1%

0%

20%

40%

60%

80%

100%

4Q09 4Q10

% o

f R

eve

nu

e

SAP OPERATING RATIOS

COS

S&M

G&A

R&D

Operating Margin

SOURCE: SAP AG

TBR

$1,539 $733

$727 $653

$1,133 $1,309

$3,346 $3,962

$0

$2,000

$4,000

$6,000

$8,000

4Q09 4Q10

In $

Mil

lions

SAP OPERATING METRICS

Gross Income

SG&A

R&D

Operating Income

SOURCE: SAP AG

TBR

TBR


Services Offerings Services Strategies

• Expand Enterprise Support from seven to nine years.

• Continue to roll out the combined Enterprise & Standard Support offerings, building support across key customers and segments.

• Increase the number of certified SAP technicians available to partners.

• Invest in packaged services to establish global standard service components that will reduce risk and improve profitability.

• Increase knowledge training and accessibility of on-demand offerings.

Product Strategies Software

Stack

• Integrate modular SaaS functionality into SAP’s flagship Business Suite to increase flexibility in deployment and consumption.

• SAP Enhancement Packages reduce update and upgrade time to value.

• Shift from a platform focus to an industry-focused portfolio to better address unique requirements.

• Integrate BusinessObjects to add intelligence and performance management.

• Expand OnDemand offerings, including SAP ByDesign and BusinessObjects.

SMB customers represent new business opportunities that SAP will tap with its mature ecosystem

BI

Apps

MW

DB

OS

Consult

Premium

Base

Support

Education

Go to Market and Product Strategies

• TBR believes SAP is well-positioned to grow its application footprint within SMB accounts through the delivery of prepackaged software solutions that reduce the cost and complexity for growing businesses.

• SAP delivered a preconfigured, end-to-end package for small and mid-sized businesses with SAP Business All-in-One. The solution provides SMB customers with a simplified user interface to eliminate the need for coding, as small businesses may not have the IT experience required.

• SAP’s Business All-in-One solution was the collaboration of SAP and its partners and gives said partners more opportunities to target the SMB market through the delivery of Business All-in-One.

• SAP Business All-in-One allows users to perform accounting, finance, purchasing and sales functions from one dashboard, providing all the core functions for running a business in one solution.

Software Stack

TBR


SAP simplified in-house communication through its ongoing development of SAP Streamwork and EcoHub

SAP 4Q10 Revenue Mix By Segment


• TBR believes SAP’s upgraded Streamwork application enables customers to leverage strategic partnerships and develop applications more effectively for customers to collaborate more easily.

• The SAP Streamwork application allows customers to relay company information via a live, streaming feed, allowing customers to receive time-sensitive information more quickly. The application also provides collaborative decision-making (CDM) technology, creating a think tank for decision-making.

• SAP also relaunched EcoHub, which offers over 100 solutions for trial or purchase. Like SAP Streamwork, EcoHub enables collaboration and product review.

• SAP’s EcoHub portal increases visibility for partners as customers have an easily accessible search engine tool to find specific solutions available through either SAP or its partners.

Go to Market and Product Strategies

Services

$1.07 billion

License

$2.20 billion

Maintenance

$2.25 billion

18%

40%

42%

Indirect Sales Strategies

• Invest in formal ecosystem development, cooperation and community building.

• Support partners with development tools, templates, marketing resources, development funds and training/certification.

• Cooperate with partners on joint sales engagements.

• Leverage distributors to better manage resellers.

Direct Sales Strategies

• Target large enterprise through industry, compliance and business intelligence perspectives to expand SAP’s footprint and wallet share.

• Partner with VARs and SIs to maintain channel involvement, even for direct-named accounts.

• Sustain customer contact and control of accounts by handling custom coding and support contract renewals directly.

TBR


A new executive leadership team will continue driving rapid growth

Leadership Changes

• Patricia Hume, head of SAP Global Indirect Sales Organization, has left the company. The position has been filled by Fritz Neumeyer, previously head of SAP Ecosystem Operations.

• Doug Scott joined SAP as VP of Sales. Scott previously worked as head of Global Enterprise CRM Business at Amdocs.

• Marge Breya left her position as executive VP and general manager at SAP Business Objects for a position as general manager of HP Software and Solutions.

• SAP realigned its GFO positions: Jose Duarte to president of Global Services, Franck Cohen to president of SAP EMEA, and Robert Enslin to president of Global Sales, among others.

Acquisition

• SAP will acquire security offerings from SECUDE as market competitors place greater pressure to host in-house security products. Technology acquired includes security, identity and access-managed software solutions.

• SAP plans to acquire the disclosure solutions management branch of Cundus, a German-based company. The acquisition will give SAP intellectual property rights and ownership of both Cundus Financial Statement Factory and InformationCollector finance solutions. The acquisition will equip SAP with financial software that meets customers needs as global financial reporting standards grow more rigid.

Strategy

• SAP continues to increase headcount inorganically, through acquisitions, and organically, filling in positions to support its new businesses. Headcount increased by 5,935 year-to-year.

• SAP and Sybase continue to build out mobile and on-demand offerings to target new growth opportunities. These offerings will continue to play a crucial role in SAP’s competitive advantage.

14,783 employees are located in the

Americas

11,741 employees are located

in Asia Pacific

26,989 employees are located

in EMEA

SAP employs 53,513 globally

Resource Management Strategy

TBR


Income Statement

Note: Income Statement reported using IFRS

SAP AG

CONSOLIDATED STATEMENT OF INCOME

CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est.

Total Revenue 3,189,000€ 2,509,000€ 2,894,000€ 3,003,000€ 4,058,000€ 2,961,000€

Cost of Sales 928,000€ 850,000€ 912,000€ 1,044,000€ 1,141,000€ 977,000€

Gross Profit 2,261,000€ 1,659,000€ 1,982,000€ 1,959,000€ 2,917,000€ 1,984,000€

Sales and Marketing 603,000€ 557,000€ 658,000€ 642,000€ 787,000€ 592,000€

General and Administrative 163,000€ 148,000€ 156,000€ 157,000€ 177,000€ 169,000€

Research and Development 491,000€ 393,000€ 397,000€ 453,000€ 481,000€ 435,000€

Restructuring 5,000€ -€ 1,000€ (2,000)€ 2,000€ -€

Other Expenses (39,000)€ 4,000€ (4,000)€ (7,000)€ (931,000)€ -€

Operating Expense less COGS 1,223,000€ 1,102,000€ 1,208,000€ 1,243,000€ 2,374,000€ 1,196,000€

Total Operating Expenses 2,151,000€ 1,952,000€ 2,120,000€ 2,287,000€ 3,515,000€ 2,173,000€

Operating Income 1,026,000€ 557,000€ 774,000€ 716,000€ 543,000€ 788,000€

Investment Income -€ -€ -€ -€ -€ -€

EBITD 995,000€ 521,000€ 676,000€ 689,000€ 451,000€ 742,000€

Income Taxes 276,000€ 134,000€ 185,000€ 188,000€ 14,000€ 208,000€

Net Income 719,000€ 387,000€ 491,000€ 501,000€ 437,000€ 534,000€

Earnings per Share 0.60€ 0.33€ 0.41€ 0.42€ 0.37€ 0.45€

Shares Outstanding (in millions) 1,188,000€ 1,172,727€ 1,188,000€ 1,188,000€ 1,188,000€ 1,188,000€

Cost of Product 15.7% 15.9% 14.3% 17.1% 13.5% 15.0%

Cost of Services 13.4% 18.0% 17.2% 32.5% 14.6% 18.0%

Cost of Sales 29.1% 33.9% 31.5% 34.8% 28.1% 33.0%

Gross Margin 70.9% 66.1% 68.5% 65.2% 71.9% 67.0%

Sales and Marketing 18.9% 22.2% 22.7% 21.4% 19.4% 20.0%

General and Administrative 5.1% 5.9% 5.4% 5.2% 4.4% 5.7%

R&D 15.4% 15.7% 13.7% 15.1% 11.9% 14.7%

Operating Margin 32.2% 22.2% 26.7% 23.8% 13.4% 26.6%

Other, Net -0.3% -1.4% -3.0% -0.4% -1.2% -1.6%

Investment Income 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

EBITD 31.2% 20.8% 23.4% 22.9% 11.1% 25.1%

Income Taxes 8.7% 5.3% 6.4% 6.3% 0.3% 7.0%

Net Margin 22.5% 15.4% 17.0% 16.7% 10.8% 18.0%

YEAR-TO-YEAR CHANGE

Total Revenue 4.7% 12.3% 19.7% 27.2% 18.0%

Cost of Sales -6.3% 5.2% 23.1% 23.0% 14.9%

Gross Profit 11.3% 16.0% 18.0% 29.0% 19.6%

Sales and Marketing 8.6% 17.3% 24.4% 30.5% 6.3%

General and Administrative 6.5% 26.8% 18.0% 8.6% 14.2%

R&D 7.7% 6.4% 18.6% -2.0% 10.7%

Operating Income 81.4% 20.7% 15.7% -47.1% 41.5%

EBITD 81.5% 13.4% 22.6% -54.7% 42.4%

Net Income -46.2% 26.9% 2.0% -12.8% 22.2%

(in € Thousands ; except shares in mi l l ions)

AS A PERCENTAGE OF REVENUE

SOURCE: TBR ESTIMATES AND SAP.

TBR

TBR


Income Statement

Note: Income Statement reported using IFRS

SAP AG

CONSOLIDATED STATEMENT OF INCOME

(in USD Thousands)

Exchange Rate ($ per €) for € to $

Conversion 1.48 1.38 1.27 1.29 1.36 1.40

CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est.

Total Revenue 4,720,000$ 3,470,000$ 3,684,000$ 3,878,000$ 5,512,000$ 4,145,000$

Cost of Sales 1,373,000 1,176,000 1,161,000 1,348,000 1,550,000 1,368,000

Gross Profit 3,346,000$ 2,294,000$ 2,523,000$ 2,530,000$ 3,962,000$ 2,778,000$

Sales and Marketing 892,000 770,000 838,000 829,000 1,069,000 829,000

General and Administrative 241,000 205,000 199,000 203,000 240,000 237,000

Research and Development 727,000 543,000 505,000 585,000 653,000 609,000

Other Expenses (58,000) 6,000 (5,000) (9,000) (1,265,000) -

Operating Income 1,539,000$ 770,000$ 985,000$ 924,000$ 3,263,000$ 1,103,000$

Other, Net (16,300) (49,800) (109,500) (16,800) (67,900) (64,400)

EBITD 1,473,000$ 720,000$ 861,000$ 890,000$ 613,000$ 1,039,000$

Income Taxes 408,000 185,000 236,000 243,000 19,000 291,000

Net Income 1,064,000$ 535,000$ 625,000$ 647,000$ 594,000$ 748,000$

Earnings per Share 0.89$ 0.46$ 0.52$ 0.54$ 0.50$ 0.63$

Shares Outstanding 1,188,000 1,172,727 1,188,000 1,188,000 1,188,000 1,188,000

AS A PERCENTAGE OF REVENUE

Cost of Sales 29.1% 33.9% 31.5% 34.8% 28.1% 33.0%

Gross Margin 70.9% 66.1% 68.5% 65.2% 71.9% 67.0%

Sales and Marketing 18.9% 22.2% 22.7% 21.4% 19.4% 20.0%

General and Administrative 5.1% 5.9% 5.4% 5.2% 4.4% 5.7%

R&D 15.4% 15.6% 13.7% 15.1% 11.8% 14.7%

Operating Margin 32.6% 22.2% 26.7% 23.8% 59.2% 26.6%

Other, Net -0.3% -1.4% -3.0% -0.4% -1.2% -1.6%

EBITD 31.2% 20.7% 23.4% 22.9% 11.1% 25.1%

Income Taxes 8.6% 5.3% 6.4% 6.3% 0.3% 7.0%

Net Margin 22.5% 15.4% 17.0% 16.7% 10.8% 18.0%

YEAR-TO-YEAR CHANGE

Total Revenue 10.5% 9.2% 8.1% 16.8% 19.5%

Cost of Sales -1.1% 2.2% 11.1% 12.9% 16.3%

Gross Profit 17.5% 12.7% 6.6% 18.4% 21.1%

Sales and Marketing 14.6% 14.0% 12.3% 19.8% 7.7%

General and Administrative 12.6% 23.6% 6.8% -0.4% 15.6%

R&D 13.6% 3.3% 7.1% -10.2% 12.2%

Operating Income 24.2% 14.3% 2.7% 112.0% 43.2%

EBITD 91.5% 10.2% 10.7% -58.4% 44.3%

Net Income 108.2% 12.0% 1.3% -44.2% 39.8%

SOURCE: TBR ESTIMATES AND SAP.

TBR

TBR


Balance Sheet

Note: Balance Sheet reported using IFRS

SAP AG

(in € Thousands)

CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10

ASSETS

Current Assets

Cash and Equivalents 1,884,000€ 2,413,000€ 3,605,000€ 2,828,000€ 3,518,000€

Other Financial Assets 486,000€ 683,000€ 574,000€ 258,000€ 158,000€

Trade and Other Receivables 2,546,000€ 3,555,000€ 2,768,000€ 2,382,000€ 3,101,000€

Other non-financial Assets 147,000€ 168,000€ 217,000€ 223,000€ 180,000€

Tax Assets 192,000€ 124,000€ 202,000€ 311,000€ 186,000€

Total Current Assets 5,255,000€ 6,943,000€ 7,366,000€ 6,002,000€ 7,143,000€

Goodwill 4,994,000€ 5,052,000€ 5,136,000€ 8,285,000€ 8,378,000€

Intangible Assets 894,000€ 849,000€ 829,000€ 2,400,000€ 2,376,000€

Property, Plant, Equip. (Net of Dep.) 1,371,000€ 1,393,000€ 1,415,000€ 1,415,000€ 1,450,000€

Other assets 284,000€ 307,000€ 337,000€ 374,000€ 404,000€

Trade and Other Receivables 52,000€ 58,000€ 66,000€ 68,000€ 78,000€

Tax Assets 91,000€ 110,000€ 125,000€ 120,000€ 123,000€

Deferred Tax Assets 398,000€ 447,000€ 364,000€ 391,000€ 735,000€

Total non-current Assets 8,119,000€ 8,250,000€ 8,306,000€ 13,084,000€ 13,575,000€

Total Assets 13,374,000€ 15,193,000€ 15,672,000€ 19,086,000€ 20,718,000€

LIABILITIES AND EQUITY

Current Liabilities

Trade and other Payables 638,000€ 708,000€ 698,000€ 766,000€ 908,000€

Tax Liabilities 125,000€ 74,000€ 3,000€ 136,000€ 160,000€

Bank Loans 4,000€ 7,000€ -€ -€ -€

Other financial Liabilities 142,000€ 258,000€ -€ -€ -€

Financial Liabilities 146,000€ 265,000€ 219,000€ 238,000€ 142,000€

Provisions 332,000€ 345,000€ 354,000€ 389,000€ 1,285,000€

Deferred Income 598,000€ 2,248,000€ 1,919,000€ 1,334,000€ 911,000€

Total Current Liabilities 3,416,000€ 4,752,000€ 4,183,000€ 4,050,000€ 5,133,000€

Trade and other Payables 35,000€ 33,000€ 34,000€ 54,000€ 50,000€

Tax Liabilities 239,000€ 247,000€ 259,000€ 359,000€ 371,000€

Bank Loans 699,000€ 699,000€ -€ -€ -€

Other financial Liabilities 30,000€ 46,000€ -€ -€ -€

Financial Liabilities 729,000€ 745,000€ 1,764,000€ 4,422,000€ 4,449,000€

Provisions 198,000€ 206,000€ 224,000€ 270,000€ 291,000€

Deferred Tax Liabilities 190,000€ 151,000€ 137,000€ 605,000€ 576,000€

Deferred Income 64,000€ 76,000€ 88,000€ 94,000€ 63,000€

Total non-current Liabilities 1,467,000€ 1,470,000€ 2,518,000€ 5,825,000€ 5,811,000€

Total Liabilities 4,883,000€ 6,222,000€ 6,701,000€ 9,875,000€ 10,944,000€

Total Shareholder's Equity 8,491,000€ 8,971,000€ 8,971,000€ 9,194,000€ 9,757,000€

Noncontrolling Interests 14,000€ 14,000€ 15,000€ 17,000€ 17,000€

Total Liabilities and Equity 13,374,000€ 15,193,000€ 15,672,000€ 19,086,000€ 20,718,000€

FINANCIAL RATIOS

Turns on Inventory 71.90 127.50 86.10 71.40 68.80

Fixed Asset Turnover 9.23 7.27 8.34 8.59 11.45

Days Cash Outstanding 66.89 111.06 129.96 92.49 81.53

Total Asset Turnover 0.93 0.70 0.75 0.69 0.82

Debt/Asset Ratio 0.37 0.41 0.43 0.52 0.53

Current Ratio 1.54 1.46 0.57 0.67 0.72

Return on Assets 12.4% 13.6% 14.0% 13.6% 10.8%

Return on Equity 23.1% 24.8% 24.6% 24.2% 20.0%

Average Annual Revenue per Employee € 224,263 € 226,522 € 231,149 € 219,100 € 232,915

Employee Count 47,578 47,598 48,021 52,921 53,513

SOURCE: SAP.

CONSOLIDATED BALANCE SHEETS TBR

TBR


Balance Sheet

Note: Balance Sheet reported using IFRS

SAP AG

(in € Thousands)

Exchange Rate ($ per €) for € to $ Convers ion1.48 1.38 1.27 1.29 1.36

CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10

ASSETS

Current Assets

Cash and Equivalents 2,788,000$ 3,337,000$ 4,589,000$ 3,652,000$ 4,778,000$

Other Financial Assets 719,000$ 945,000$ 731,000$ 333,000$ 215,000$

Trade and Other Receivables 3,768,000$ 4,916,000$ 3,524,000$ 3,076,000$ 4,212,000$

Other non-financial Assets 218,000$ 232,000$ 276,000$ 288,000$ 244,000$

Tax Assets 284,000$ 171,000$ 257,000$ 402,000$ 253,000$

Total Current Assets 7,777,000$ 9,601,000$ 9,377,000$ 7,751,000$ 9,702,000$

Goodwill 7,391,000$ 6,986,000$ 6,538,000$ 10,699,000$ 11,380,000$

Property, Plant, Equip. (Net of Dep.) 2,029,000$ 1,926,000$ 1,801,000$ 1,827,000$ 1,969,000$

Other assets 420,000$ 425,000$ 429,000$ 483,000$ 549,000$

Trade and Other Receivables 77,000$ 80,000$ 84,000$ 88,000$ 106,000$

Other non-financial Assets 52,000$ 47,000$ 43,000$ 40,000$ 42,000$

Tax Assets 135,000$ 152,000$ 159,000$ 155,000$ 167,000$

Deferred Tax Assets 589,000$ 618,000$ 463,000$ 505,000$ 998,000$

Total non-current Assets 12,016,000$ 11,409,000$ 10,574,000$ 16,896,000$ 18,439,000$

Total Assets 19,794,000$ 21,010,000$ 19,950,000$ 24,647,000$ 28,141,000$

LIABILITIES AND EQUITY

Current Liabilities

Trade and other Payables 944,000$ 979,000$ 889,000$ 989,000$ 1,233,000$

Tax Liabilities 185,000$ 102,000$ 4,000$ 176,000$ 217,000$

Bank Loans 6,000$ 10,000$ -$ -$ -$

Other financial Liabilities 210,000$ 357,000$ -$ -$ -$

Financial Liabilities 216,000$ 366,000$ 279,000$ 307,000$ 193,000$

Other non-financial liabilities 2,334,000$ 1,538,000$ 1,260,000$ 1,533,000$ 2,346,000$

Provisions 491,000$ 477,000$ 451,000$ 502,000$ 1,745,000$

Deferred Income 885,000$ 3,109,000$ 2,443,000$ 1,723,000$ 1,237,000$

Total Current Liabilities 5,056,000$ 6,572,000$ 5,325,000$ 5,230,000$ 6,972,000$

Trade and other Payables 52,000$ 46,000$ 43,000$ 70,000$ 68,000$

Tax Liabiliities 354,000$ 342,000$ 330,000$ 464,000$ 504,000$

Bank Loans 1,035,000$ 967,000$ -$ -$ -$

Other financial Liabilities 44,000$ 64,000$ -$ -$ -$

Financial Liabilities 1,079,000$ 1,030,000$ 2,246,000$ 5,710,000$ 6,043,000$

Other non-financial liabilities 18,000$ 17,000$ 15,000$ 27,000$ 15,000$

Provisions 293,000$ 285,000$ 285,000$ 349,000$ 395,000$

Deferred Tax Liabilities 281,000$ 209,000$ 174,000$ 781,000$ 782,000$

Deferred Income 95,000$ 105,000$ 112,000$ 121,000$ 86,000$

Total non-current Liabilities 2,171,000$ 2,033,000$ 3,205,000$ 7,522,000$ 7,893,000$

Total Liabilities 7,227,000$ 8,604,000$ 8,530,000$ 12,752,000$ 14,865,000$

Total Shareholder's Equity 12,567,000$ 12,406,000$ 11,420,000$ 11,873,000$ 13,253,000$

Noncontrolling Interests 21,000$ 19,000$ 19,000$ 22,000$ 23,000$

Total Liabilities and Equity 19,794,000$ 21,010,000$ 19,950,000$ 24,647,000$ 28,141,000$

FINANCIAL RATIOS

Days Sales Outstanding 71.85 127.50 86.09 71.39 68.77

Turns on Inventory 14.05 11.12 13.22 7.47 6.97

Fixed Asset Turnover 7.30 4.96 5.34 5.29 6.78

Days Cash Outstanding 66.87 111.06 129.97 92.48 81.53

Total Asset Turnover 0.95 0.69 0.73 0.73 0.94

Debt/Asset Ratio 0.37 0.41 0.43 0.52 0.53

Current Ratio 0.65 0.68 0.57 0.67 0.72

Return on Assets 15.9% 13.9% 14.3% 13.6% 10.6%

Return on Equity 20.4% 25.3% 25.1% 24.2% 19.5%

Average Annual Revenue per Employee $311,510 $318,312 $321,942 $297,651 $309,159

Employee Count 47,578 47,598 48,021 52,921 53,513

SOURCE: SAP.

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