SAP Reports 2003 Second Quarter and Six Months Results
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SAP Reports 2003 Second Quarter and Six Months Results

Second Quarter Operating Income Increased 6% to euro 340 Million Company Gains Additional Market Share

NEW YORK and WALLDORF, Germany, July 17 /PRNewswire-FirstCall/ -- SAP AG today announced its preliminary financial results for the second quarter and six months ended June 30, 2003.

  (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.

Regional Performance

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.

Outlook

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

SAP senior management will host a press conference in New York today at 3:00 PM (CET) / 2:00 PM (GMT) / 9:00 AM (Eastern) / 6:00 AM (Pacific), followed by an investor conference at 6:00 PM (CET) / 5:00 PM (GMT) / 12:00 PM (Eastern) / 9:00 AM (Pacific). Both conferences will be web cast live at http://www.sap.com/investor and will be available for replay as well. Slides related to today's announcement will be used during the conference and are also available on the SAP website.

  Footnotes

  1) The press release discloses certain financial measures, such as EBITDA,
     free cash flow, pro forma operating income, pro forma net income and
     pro forma EPS, that are considered non-GAAP financial measures. The
     non-GAAP measures included in our press release have been reconciled to
     the nearest GAAP measure as is required under SEC rules regarding the
     use of non-GAAP financial measures.

  2) Worldwide market share based on software revenues in U.S. dollars of
     i2 Technologies, Inc., J.D. Edwards & Company, Oracle Corporation,
     PeopleSoft, Inc. and Siebel Systems, Inc., who SAP considers to be its
     five largest competitors (for vendors that did not yet announce or
     pre-announce software revenues, analyst estimates were used).

  3) U.S. market share based on U.S. software revenues in U.S. dollars of i2
     Technologies, Inc., J.D. Edwards & Company, Oracle Corporation,
     PeopleSoft, Inc. and Siebel Systems, Inc., who SAP considers to be its
     five largest competitors (for vendors that did not yet announce or
     pre-announce software revenues, analyst estimates were used and for
     some vendors, U.S. software revenues are estimated).


   Revenue by Region (in EUR millions)
   SAP Group

                          Revenue       Revenue
                          2Q 2003        2Q 2002      Change      % Change

  Total                    1,638         1,778         -140           -8%
   - at constant
      currency rates                                                  +2%
  EMEA                       942           976          -34           -3%
   - at constant
      currency rates                                                  -2%
  Asia Pacific               190           209          -19           -9%
   - at constant
      currency rates                                                  +5%
  Americas                   506           593          -87          -15%
  - at constant
     currency rates                                                   +6%


  Key figures at a glance (in EUR millions)
  SAP Group

                         2Q 2003       2Q 2002        Change     % Change

  Revenues                 1,638         1,778         -140           -8%
  Software revenues          431           496          -65          -13%
  Income before taxes        347          -107         +454         +424%
  Net income                 219          -232         +451         +194%
  Headcount, in FTE
  (Jun 30)                28,961        29,354         -393           -1%

  About SAP

SAP is the world's leading provider of business software solutions. Through mySAP(TM) Business Suite, people in businesses around the globe are improving relationships with customers and partners, streamlining operations, and achieving significant efficiencies throughout their supply chains. The unique core processes of various industries, from Aerospace to Utilities, are supported effectively by SAP's 23 industry solution portfolios. Today, more than 20,000 companies in over 120 countries run more than 64,500 installations of SAP(R) software. With subsidiaries in over 50 countries, the company is listed on several exchanges including the Frankfurt stock exchange and NYSE under the symbol "SAP." (Additional information at http://www.sap.com/)

Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "should" and "will" and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission ("SEC"), including SAP's most recent Annual Report on Form 20-F filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.

SAP, the SAP logo, mySAP.com, mySAP, and all other SAP products and services mentioned herein are trademarks or registered trademarks of SAP AG in Germany and several other countries.

Other product or service names mentioned herein are the trademarks of their respective owners.

   For more information, press only:
   Herbert Heitmann, +49 6227 7-61137, 
Email Contact, CET
   Laurie Doyle Kelly, +49 6227 7-61136 , 
Email Contact, CET
   Markus Berner, +49 6227 7-42548, 
Email Contact, CET

   For more information, financial community only:
   Stefan Gruber, +49 (6227) 7-44872, 
Email Contact, CET
   Martin Cohen, +1 (212) 653-9619, 
Email Contact, EDT




  Consolidated Income Statements
  SAP Group                    2. Quarter
   (unaudited)


  (in EUR millions)

                                       2003            2002        Change

      Software revenue                  431             496          -13%
      Maintenance revenue               633             595            6%
    Product revenue                   1,064           1,091           -2%
      Consulting revenue                479             545          -12%
      Training revenue                   75             115          -35%
    Service revenue                     554             660          -16%
    Other revenue                        20              27          -26%

  Total revenue                       1,638           1,778           -8%

    Cost of product                    -189            -205           -8%
    Cost of service                    -411            -480          -14%
    Research and development           -241            -231            4%
    Sales and marketing                -358            -438          -18%
    General and administration          -99             -96            3%
    Other income/expenses, net            0              -8         -100%
  Total operating expense            -1,298          -1,458          -11%

  Operating income                      340             320            6%

  Other non-operating income/
   expenses, net                          2              28          -93%
  Financial income, net                   5            -455          101%
  Income before income taxes            347            -107          424%

  Income taxes                         -127            -125            2%
  Minority interest                      -1               0           n/a
  Net income                            219            -232          194%

  Basic earnings
   per share (in euros)                0.71           -0.74          194%



  Consolidated Income Statements
  SAP Group                    2. Quarter
  (unaudited)

  additional information
  (in EUR millions)

                                     2003            2002         Change

  EBITDA reconciliation:

  Net income                          219            -232          194%

  Minority interest                     1               0           n/a
  Income taxes                        127             125            2%

  Net income before income taxes      347            -107          424%
  Financial income, net                -5             455          101%
  Other non-operating
   income/expenses, net                -2             -28          -93%

  Operating Income                    340             320            6%
  Depreciation & Amortization          52              57           -9%
  EBITDA (2)                          392             377            4%
   as a % of Sales                     24%             21%

  Pro forma operating
   income reconciliation:

  Operating Income                    340             320            6%
  LTI/STAR                             41             -18          328%
  Settlement of stock-based
   compensation programs                1              15          -93%
  Total stock-based compensation       42              -3         1500%
  Acquisition-related charges           6               7          -14%
  Pro forma operating income
   excluding stock-based compensation
   & acquisition-related charges (1)  388             324           20%
     as a % of Sales                   24%             18%


  Consolidated Income Statements
  SAP Group         2. Quarter
  (unaudited)

  additional information
  (in EUR millions)

                                      2003            2002        Change


  Finance Income                        5            -455          101%
  - thereof Impairment-related
   charges                             -2            -390          -99%

  Income before income taxes          347            -107          424%
  Income taxes                        127             125            2%
  Effective Tax Rate                  37%             n/a

  Pro forma Net income
   reconciliation:

  Net income                          219            -232          194%
  Stock-based compensation,
   net of tax                          27              -2         1521%
  Acquisition-related
   charges, net of tax                  3               4          -29%
  Impairment-related
   charges, net of tax                  2             385          -99%
  Pro forma net income
   excluding stock-based
   compensation, acquisition-
   related charges, and
   impairment-related charges (1)     251             155           62%

  Pro forma EPS reconciliation:

  Earnings per share (in euros)      0.71           -0.74          194%
  Stock-based compensation           0.09           -0.01         1000%
  Acquisition-related charges        0.01            0.01            0%
  Impairment-related charges         0.00            1.23         -100%
  Pro forma EPS excluding
   stock-based compensation,
   acquisition-related
   charges and
   impairment-related
   charges (in euros) (1)            0.81            0.49           62%
  Weighted average number of Shares
  (in thousands)                  310,580         313,853           -1%



  Consolidated Income Statements
  SAP Group
   (unaudited)

  Six months ended June 30,
  (in EUR millions)

                                         2003            2002        Change

      Software revenue                    783             898          -13%
      Maintenance revenue               1,241           1,192            4%
    Product revenue                     2,024           2,090           -3%
      Consulting revenue                  955           1,084          -12%
      Training revenue                    152             225          -32%
    Service revenue                     1,107           1,309          -15%
    Other revenue                          27              37          -27%
  Total revenue                         3,158           3,436           -8%

      Cost of product                    -373            -426          -12%
      Cost of service                    -844            -990          -15%
      Research and development           -459            -453            1%
      Sales and marketing                -665            -840          -21%
      General and administration         -173            -211          -18%
      Other income/expenses, net           -6             -10          -40%
  Total operating expense              -2,520          -2,930          -14%

  Operating income                        638             506           26%

  Other non-operating income/
   expenses, net                           12              28          -57%
  Financial income, net                     8            -514          102%
  Income before income taxes              658              20         3190%

  Income taxes                           -250            -185           35%
  Minority interest                        -3              -2           50%
  Net income                              405            -167          343%

  Basic EPS (in euro)                    1.31           -0.53          343%



  Consolidated Income Statements
  SAP Group
  (unaudited)

  Six months ended June 30,
  additional information
  (in EUR millions)

                                     2003            2002         Change

  EBITDA reconciliation:

  Net income                          405            -167          343%

  Minority interest                     3               2           50%
  Income taxes                        250             185           35%

  Net income before
   extraordinary gain
                                      658              20         3190%
  Financial income, net                -8             514          102%
  Other non-operating
   income/expenses, net               -12             -28          -57%

  Operating Income                    638             506           26%
  Depreciation & Amortization         102             111           -8%
  EBITDA 2)                           740             617           20%
  as a % of Sales                     23%             18%

  Pro forma operating
   income reconciliation:

  Operating Income                    638             506           26%
  LTI/STAR                             40              22           82%
  Settlement of stock-based
   compensation programs                2              20          -90%
  Stock-based compensation             42              42            0%
  Acquisition-related charges          12              14          -14%
  Pro forma operating income
   excluding stock-based
   compensation & acquisition-
   related charges (1)                692             562           23%
    as a % of Sales                    22%             16%


  Consolidated Income Statements
  SAP Group
  (unaudited)

  Six months ended June 30,
  additional information
  (in EUR millions)

                                     2003            2002         Change

  Finance Income                        8            -514          102%
  - thereof Impairment-
    related charges                   -12            -402          -97%

  Income before income taxes          658              20         3190%
  Income taxes                        250             185           35%
  Effective Tax Rate                   38%            n/a

  Pro forma Net income reconciliation:

  Net income                          405            -167          343%
  Stock-based compensation,
   net of tax                          27              27            0%
  Acquisition-related
   charges, net of tax                  7               8          -15%
  Impairment-related
   charges, net of tax                 12             396          -97%
  Pro forma net income excluding
   stock-based compensation,
   acquisition-related charges,
   and impairment-related charges (1) 451             264           71%

  Pro forma EPS reconciliation:

  Earnings per share (in euros)      1.31           -0.53          343%
  Stock-based compensation           0.09            0.08           13%
  Acquisition-related charges        0.02            0.02            0%
  Impairment-related charges         0.03            1.27          -98%
  Pro forma EPS excluding
   stock-based compensation,
   acquisition-related
   charges and impairment-related
   charges (in euros) (1)            1.45            0.84           71%
  Weighted average number
   of Shares (in thousands)       310,848         314,090           -1%



  Consolidated Statements of Cash Flows
  SAP Group (unaudited)
  Six months ended June 30, '(in EUR millions)
                                                      2003         2002

  Net income before minority interest                  405         -167
  Minority interest                                      3            2

  Net income                                           408         -165

  Depreciation and amortization                        102          111

  Gains/Losses on disposal of property,
   plant and equipment and marketable
   equity securities, net                                0           -2

  Losses from equity investments, net                    0          372

  Write-downs of financial assets, net                  11          100
  Impacts of hedging                                     3           49

  Change in accounts receivable and other assets       348          252

  Change in deferred stock compensation
                                                        35           29

  Change in reserves and liabilities                  -555         -412
  Change in deferred taxes                              36          -16

  Change in other current assets                       -52          -43

  Change in deferred income                            471          464

  Net cash provided by operating activities            807          739

  Purchase of intangible assets
   and property, plant and equipment                  -101         -135
  Purchase of financial assets                         -11          -26

  Change in the scope of consolidation                   0           -5

  Proceeds from disposal of fixed assets                16           19
  Investment in Commerce One                             0           -2

  Change in liquid assets (maturities
   greater than 90 days) and marketable securities    -226           17 (1)
  Net cash used in investing activities               -322         -132
  Dividends paid                                      -186         -182

  Purchase of treasury stock                           -71         -150

  Impacts of convertible bonds, net                      2            6

  Other changes to additional paid-in-capital           -1           -4

  Proceeds from/Repayments of line of credit           122           -2

  Effect of 2002 STAR-hedge                              0          -43

  Effect of 2003 STAR-hedge                             -9            0

  Net cash used in financing activities               -143         -375
  Effect of foreign exchange rates on cash             -25         -123

  Net change in cash and cash equivalents              317          109 (1)
  Cash and cash equivalents
   at the beginning of the period                    1,122          755 (1)
  Cash and cash equivalents at
  the end of the period                              1,439          864 (1)

  (1) adjusted for restricted cash

  Consolidated Balance Sheets 'SAP Group
  '(in EUR millions) (unaudited)
  ASSETS
                               06/30/2003      12/31/2002        Change
  Intangible assets                   410             441           -7%
  Property, plant and equipment     1,011           1,034           -2%
  Financial assets                    167             164            2%
  FIXED ASSETS                      1,588           1,639           -3%

  Accounts receivables              1,530           1,967          -22%
  Inventories and other assets        395             275           44%
  Liquid assets/Marketable
   securities                       1,782           1,239           44%
  CURRENT ASSETS                    3,707           3,481            6%

  DEFERRED TAXES                      303             402          -25%

  PREPAID EXPENSES                    133              88           51%
  TOTAL ASSETS                      5,731           5,610            2%

  SHAREHOLDERS' EQUITY
   AND LIABILITIES             06/30/2003      12/31/2002        Change

  SHAREHOLDERS' EQUITY              3,014           2,872            5%

  MINORITY INTEREST                    55              56           -2%

  RESERVES AND ACCRUED LIABILITIES  1,130           1,562          -28%

  OTHER LIABILITIES                   699             758           -8%

  DEFERRED INCOME                     833             362          130%

  TOTAL SHAREHOLDERS'
   EQUITY AND LIABILITIES           5,731           5,610            2%

  Days Sales Outstanding               80              87


  Footnote(1):

SAP has provided guidance and information in 2002 and 2001 using pro forma measures on a consolidated basis. Management believes that those pro forma measures provide supplemental meaningful information to the investor to fully assess our financial performance of the core operations. Management excludes stock-based compensation expenses because we have no direct influence over the actual expense of these awards once we enter into Stock-Based Compensation Plans.

Footnote(2):

Acquisition-related charges include amortization of intangible assets acquired in acquisitions. Impairment-related charges include other than non-temporary impairment charges on minority equity investments. Stock-based compensation includes stock-based compensation expenses and settlements of stock-based compensation plans in the context of mergers and acquisitions. However these measures should be considered in addition to, and not as a substitute, or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with generally accepted accounting principles. The pro forma measures used by us may be different from pro forma measures used by other companies.

CONTACT: Press only - Herbert Heitmann, +49-6227-7-61137,
Email Contact, or Laurie Doyle Kelly, +49-6227-7-61136,
Email Contact, Markus Berner, +49-6227-7-42548,
Email Contact, or Financial community only -
Stefan Gruber, +49-6227-7-44872, Email Contact, or Martin Cohen,
+1-212-653-9619, Email Contact, all of SAP

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