Second Quarter Operating Income Increased 6% to euro 340 Million Company Gains Additional Market Share
(Logo: http://www.newscom.com/cgi-bin/prnh/20020923/SFM002LOGO ) Operational Performance
For the second quarter of 2003, operating income increased 6% to euro 340 million (2002: euro 320 million). Pro forma operating income(1), excluding stock-based compensation and acquisition-related charges, increased 20% to euro 388 million (2002: euro 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 margin(1), 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 euro 431 million (2002: euro 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 euro 1.6 billion (2002: euro 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 euro 1.1 billion (2002: euro 1.1 billion). Maintenance revenues were euro 633 million (2002: euro 595 million). Consulting and training revenues were euro 479 million (2002: euro 545 million) and euro 75 million (2002: euro 115 million), respectively.
Net income for the second quarter of 2003 was euro 219 million (2002: euro -232 million), or euro 0.71 per share (2002: euro -0.74 per share). The second quarter 2002 net income included impairment charges related to the Commerce One write down of euro 297 million. Excluding stock-based compensation, acquisition-related charges and impairment-related charges, pro forma net income(1) for the second quarter of 2003 was euro 251 million (2002: euro 155 million), or euro 0.81 per share (2002: euro 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.
For the second quarter of 2003, revenues in the Europe, Middle East and Africa (EMEA) region decreased 3% to euro 942 million (2002: euro 976 million). Revenues in Germany decreased 1%. Second quarter 2003 revenues in the Americas region were down 15% to euro 506 million (2002: euro 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 euro 190 million (2002: euro 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 euro 85 million, down 16% from the same period last year (euro 101 million) and represented 20% of total software revenues. mySAP SCM (Supply Chain Management) related second quarter 2003 software revenues totaled approximately euro 86 million, down 17% from the second quarter of 2002 (euro 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 euro 3.2 billion (2002: euro 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 euro 638 million (2002: euro 506 million). Pro forma operating income,(1) excluding stock-based compensation and acquisition-related charges, for the 2003 six month period increased 23% to euro 692 million (2002: euro 562 million).
For the first half of 2003, software revenues decreased 13% to euro 783 million (2002: euro 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 euro 955 million (2002: euro 1.1 billion) and training revenues were euro 152 million (2002: euro 225 million).
In the first half of 2003, sales in the EMEA region decreased 4% to euro 1.8 billion (2002: euro 1.9 billion). Sales in the Americas declined 17% to euro 974 million (2002: euro 1.2 billion) and in the APA region revenues were down 2% to euro 388 million (2002: euro 394 million).
In the first half of 2003, the Company generated euro 717 million of free cash flow(1) (defined as operating cash flow less capital expenditures, which were euro 90 million for the first half of 2003), and at June 30, 2003, the Company had euro 1.8 billion of liquid assets.
SAP continues to expect pro forma earnings per share(1) for 2003, excluding stock-based compensation, acquisition-related charges and impairment-related charges, to be in the range of euro 3.45 per share to euro 3.60 per share. The Company has slightly increased its target for pro forma operating margin(1), excluding stock-based compensation and acquisition-related charges. Previously, the Company expected its 2003 pro forma operating margin(1) 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 margin(1) and pro forma earnings per share(1) 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 euro 0.60 per non-par value share was paid to SAP shareholders. Conference Call / Webcast