Innovation and Profitable Growth – SAP´s Capital Market Story.

 

Brooklyn Bridge by night

Capital Market Story* (October 2014)

  • Why invest in SAP?

    Three reasons to invest in SAP:

    • Global market leader in enterprise business applications and a leading enterprise cloud provider. Over 40 years of experience as a software provider
    • Strong track record of growth
    • Excellent profitability profile with strong track record of returning cash to shareholders through continuous dividends


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  • Vision, Mission, and Strategy

    SAP’s vision is to help the world run better and improve people’s lives. Our mission is to help our customers run at their best. To fulfill our mission, we Run Simple by helping them master complexity. We do this by delivering technology innovations that we believe address today’s and tomorrow’s challenges without disrupting our customers’ business operations.

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  • Portfolio

    We offer a portfolio of solutions that addresses 25 industries and 12 lines of business. Our solutions help customers manage highly sophisticated, mission-critical business processes that drive entire industries in a simple way.

    SAP HANA simplifies IT landscapes by reducing the amount of data in applications, which reduces the need for hardware. SAP HANA can simplify technology for our customers and drive simpler business models for them. We will simplify our solutions by moving all of our applications and analytics to the SAP HANA platform.

    Further, we simplify how customers consume our solutions, by bringing them into the SAP Cloud powered by SAP HANA. By offering a better user experience and faster consumption, the cloud model radically simplified business processes.

    Our software is built according to a “mobile first” approach based on SAP Fiori applications, which offer a simple and easy-to-use experience for broadly used SAP software functions that work seamlessly across devices.

    Most of our solutions can be delivered on-premise and through the Cloud as software-as-a-service (SaaS) offerings. SAP offers a large number of cloud solutions, covering such lines of business as human resources, finance, sales, and procurement.

    The Cloud Company powered by SAP HANA

    For more information about SAP’s portfolio of products, visit http://www.sap.com/solution.html.

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  • Markets & Competitors


    Markets and Trends

    SAP’s portfolio is clearly focused on the IT software and services markets. We are delivering enterprise applications, analytics, and databases, as well as the related services and support. SAP provides its solutions both on premise and in the cloud. They are accessible via mobile devices and all kind of other user interfaces. By 2020 we aim to extend our addressable market to $350 billion worldwide from $110 billion in 2010.

    Three major technology trends – in-memory computing, enterprise mobility and the cloud – have triggered change in the world of IT and SAP is playing a crucial role in accelerating that change.

    Those trends are changing not only the way enterprise adopt and deploy business technology, but also fundamentally the way how work is done. The pervasiveness of the cloud and mobile devices, together with the power of in-memory computing, allow people to connect and collaborate whenever possible and whenever they choose.

    These changes are simplifying and removing layers from the traditional technology stack and making it easier for everybody to consume technology.

    Competitive Position
    SAP is the world market leader for enterprise applications, analytics and mobile solutions. We are also the second-largest enterprise cloud company and fastest-growing database provider.

    In the applications market our main competitors are IBM, Oracle and Microsoft. Compared with SAP, those companies derive a much higher portion of their revenue from other segments of the IT market, such as hardware (IBM, Oracle); operating system and desktop applications (Microsoft); and IT services (IBM).

    Key competitors in the analytics market include IBM (Cognos), SAS Institute, and Oracle (Hyperion).

    In the cloud market, we face line-of-business players such as Salesforce.com, Workday and NetSuite. Oracle has also become a competitor in this market through the acquisitions of RightNow and Taleo.

    Principal competitors in the database and technology business include IBM, Microsoft, and Oracle. Our offerings also compete with those of specialized vendors in various local markets and subsegments.

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  • Business Model

    For its software, SAP provides two different licensing models: software licenses and cloud subscriptions.

    Software Licenses
    For software licenses, we recognize the majority of our revenue as one-time up front license fee. The customers receive a perpetual license to our software, which is typically installed at the customer site.

    The list price for the perpetual license forms the basis for the support fees. Support is usually sold and invoiced on a monthly or annual basis. Support revenue is a strong recurring revenue stream for SAP, representing 52% of our 2013 total revenue.

    Cloud Subscriptions
    As we saw customers’ preferences evolve, we expanded the delivery of our solutions in the cloud and provided the cloud subscription model, which we believe is a simple and efficient software consumption model for the future. For cloud subscriptions, we recognize our revenue ratably over several years. Our cloud offerings are typically installed in a data center of SAP or one of its partners. Cloud subscriptions include license, support, and operation costs for the data center. It is our second recurring revenue stream, strongly growing and in 2013 contributing about 4% of total revenue.

    SAP Business Model

    Offering more and more software in the Cloud, SAP is helping drive change as customers reduce the amount they spend on hardware and services in favor of investment in software-based innovation. At the same time, SAP’s business gets more predictable and profitable in the long term due to a steadily growing portion of recurring revenue.

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  • Key Performance Metrics and Financing


    Financial Results
    SAP delivered strong constant currency growth of 11% in non-IFRS software and software-related services (SSRS) in 2013. With that, we are reporting a 4th consecutive year of double-digit growth. Non-IFRS SSRS revenue reached €14.0 billion, non-IFRS total revenue was €16.9 billion. The non-IFRS operating margin stood at 32.6%. Total cash flow was €3.8 billion.

    More information about SAP’s performance can be found at: http://www.sap.com/corporate-de/investors/newsandreports/index.epx

    Share Ownership Structure
    The number of issued no-par common shares of SAP AG on August 31, 2014, was 1,228,504,232 (December 31, 2013: 1,228,504,232). Each share has an attributable value of €1.

    By the end of August 2014, the free float - which excludes treasury stock - stood at 75.7% (December 31, 2013: 74.7%). As in previous years, Canadian and US investors form the largest investment group.

    SAP Sharholder Structure

    Dividends and Share Buybacks
    SAP has paid a dividend every year since the stock was floated in 1988. SAP has for several years been buying back shares. Accordingly, SAP repurchases shares primarily for purposes of redemption and – to a lesser extent – to meets its obligations arising from share-based compensation programs.

    Dividends and Share Buybacks

    Debt
    Depending on our future cash position and future market conditions, we might issue additional debt instruments to fund acquisitions, maintain financial flexibility, and limit repayment risk. Therefore, we continuously monitor funding options available in the capital market and trends in the availability of funds, as well as the cost of such funding.

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  • Outlook


    Outlook for 2014

    Outlook for 2014
    Mid-term outlook

    2015:
    • At least €20 billion total revenue
    • ~ €2.0 billion revenue from cloud business
    • Employee Engagement 82%

    2017:
    • At least €22 billion total revenue
    • €3.0 billion - €3.5 billion revenue revenue from cloud business
    • 35% operating margin (non-IFRS)
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*Any statements contained in this website 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.