SAP Announces Third Quarter and Nine Months 2014 Results

SAP Accelerates Shift to the Cloud with 41% Revenue Growth in Third Quarter and Once Again Raises Cloud Revenue Outlook - Broad Market Adoption of SAP HANA - "Run Simple" Strategy Validated

• Fastest Growing Enterprise Cloud Company at Scale: Non-IFRS Cloud Subscriptions and Support Revenue Increased 41% to €278 Million
• Strong Cloud Billings: Non-IFRS Calculated Cloud Billings Increased 51%
• Expanding the World's Largest Business Network: More Than 1.6 Million Companies Transacting Nearly $600 Billion of Frictionless Commerce
• Broad Market Adoption of SAP HANA: More Than 4,100 HANA Customers and More Than 1,450 Business Suite on HANA Customers Demonstrate the Clear Business Benefits of the Leading Real-Time Business Platform
• Higher Revenue Share from More Predictable Cloud & Support Revenue: 62% in Third Quarter 2014 up From 59% a Year Ago
• Strong Overall SSRS Performance and Growing Operating Profit Despite Mix Shift to Cloud Subscription: Non-IFRS Software and Software-Related Service Revenue Increased 7% to €3.6 Billion, Non-IFRS Operating Profit Increased 5% to €1.36 Billion
• Non-IFRS Earnings Per Share Increased 8% to €0.84 Per Share
• Full Year Outlook Reflecting Accelerated Shift to the Cloud: Raising Non-IFRS Cloud Subscriptions and Support Revenue Outlook to €1,040 - €1,070 Million and Now Expecting Non-IFRS Operating Profit Outlook in a Range of €5.6 - €5.8 Billion at Constant Currencies

SAP SE (NYSE: SAP) today announced its financial results for the third quarter and nine months ended September 30, 2014.

BUSINESS HIGHLIGHTS IN THE THIRD QUARTER 2014

SAP again delivered strong growth in the cloud and a solid overall revenue performance. With non-IFRS cloud subscriptions and support revenue increasing 41% (42% at constant currencies) SAP is the fastest growing enterprise cloud company at scale1. Non-IFRS software and software-related service revenue grew 7% (7% at constant currencies). The negative effects from currency translation SAP experienced year-to-date dissipated in the third quarter and are expected to reverse in the fourth quarter 2014.

"We are accelerating our shift to the cloud with more than 40% revenue growth in the cloud. SAP is THE cloud company powered by SAP HANA helping customers run simple with over 44 million cloud users and the world's largest business network. We are leading the next generation customer engagement with the triple digit growth of our omni-channel e-commerce platform," said Bill McDermott of SAP. "Our portfolio depth in the cloud, global scale and industry domain expertise are the bedrocks that separate us in the marketplace. With SAP HANA and the Business Network, SAP will continue to shape the future of the enterprise software industry."

"We achieved a solid overall topline performance in the quarter with 7% growth in non-IFRS software and software-related service revenue. Year-to-date non-IFRS software and software-related service revenue is up 8% at constant currencies – at the high end of our full-year outlook range. Non-IFRS earnings per share increased 8% in the quarter," said Luka Mucic, CFO of SAP. "Our order entry for new business in the cloud was more than one third of the software license revenue in the third quarter, up significantly from a year ago. With this powerful shift we are raising the cloud outlook again while adjusting the operating income range to reflect less upfront and more ratable revenue."

SAP's annual cloud revenue run rate now exceeds €1.3 billion2 or $1.7 billion3. Non-IFRS calculated cloud billings4 increased 51% (27% at constant currencies). Non-IFRS deferred cloud subscriptions and support revenue was €498 million as of September 30, 2014, a year-over-year increase of 30% (22% at constant currencies). SAP's cloud applications total subscribers now exceed 44 million.

SAP is driving next generation customer engagement. Its hybris omni-channel e-commerce platform in combination with Cloud for Sales had another quarter of triple-digit growth in software revenue and cloud subscriptions and support revenue.

SAP is in the lead in the transformation to the global "Network Economy" with over 1.6 million connected companies on the world's largest cloud-based business trading community. Trailing twelve month network spend volume5 was close to $600 billion – more than Amazon, eBay and Alibaba all combined. The planned addition of Concur would amplify the "network effect" and ecosystem with broad reach into the US$1.2 trillion corporate travel market.

SAP saw continued broad market adoption of SAP HANA, the Real-Time Business Platform, across all industries and regions as customers realize the compelling business benefits of SAP HANA. SAP HANA is at the core of the Company's "Run Simple" strategy: integrating all SAP solutions on ONE business platform in the Cloud. SAP now has more than 4,100 SAP HANA customers and more than 1,450 customers for SAP Business Suite on HANA. SAP HANA is also evolving into the leading development platform with more than 1,600 startup companies building applications on SAP HANA.

Third Quarter 2014 Regional Revenue

SAP had a solid performance in EMEA, despite uncertainties in the Ukraine and the Middle East. Non-IFRS software and software-related service revenue increased 8% (8% at constant currencies) with a strong performance in Germany in both software and cloud subscriptions and support revenue. Non-IFRS cloud subscriptions and support revenue in EMEA was a particular highlight, growing 59% (59% at constant currencies), showing exceptional cloud traction in Europe.

The Americas region saw a mixed performance in Latin America. Similar to other companies in the industry SAP is seeing a more difficult macro and political environment in Latin America, in particular in Brazil and Argentina, combined with execution issues. Non-IFRS software and software-related service revenue in the Americas increased 5% (5% at constant currencies). Non-IFRS cloud subscriptions and support revenue grew by 34% (34% at constant currencies).

The Asia Pacific Japan (APJ) region had a strong performance with 10% growth in non-IFRS software and software-related service revenue (10% at constant currencies). Non-IFRS cloud subscriptions and support revenue grew by 57% (56% at constant currencies). SAP achieved a turnaround in its business in Japan with solid double-digit growth.

FINANCIAL RESULTS IN DETAIL

IFRS cloud subscriptions and support revenue was €277 million (2013: €191 million), an increase of 45%. Non-IFRS cloud subscriptions and support revenue was €278 million (2013: €197 million), an increase of 41% (42% at constant currencies). IFRS software and support revenue was €3.32 billion (2013: €3.16 billion), an increase of 5%. Non-IFRS software and support revenue was €3.32 billion (2013: €3.17 billion), an increase of 5% (5% at constant currencies). IFRS software and software-related service revenue was €3.60 billion (2013: €3.35 billion), an increase of 7%. Non-IFRS software and software-related service revenue was €3.60 billion (2013: €3.36 billion), an increase of 7% (7% at constant currencies). IFRS total revenue was €4.25 billion (2013: €4.05 billion), an increase of 5%. Non-IFRS total revenue was €4.26 billion (2013: €4.06 billion), an increase of 5% (5% at constant currencies).

IFRS cloud subscriptions and support revenue was €738 million (2013: €488 million), an increase of 51%. Non-IFRS cloud subscriptions and support revenue was €741 million (2013: €547 million), an increase of 35% (40% at constant currencies). IFRS software and support revenue was €9.39 billion (2013: €9.08 billion), an increase of 3%. Non-IFRS software and support revenue was €9.40 billion (2013: €9.10 billion), an increase of 3% (6% at constant currencies). IFRS software and software-related service revenue was €10.13 billion (2013: €9.57 billion), an increase of 6%. Non-IFRS software and software-related service revenue was €10.14 billion (2013: €9.65 billion), an increase of 5% (8% at constant currencies). IFRS total revenue was €12.10 billion (2013: €11.71 billion), an increase of 3%. Non-IFRS total revenue was €12.11 billion (2013: €11.78 billion), an increase of 3% (5% at constant currencies).

IFRS operating profit was €2.58 billion (2013: €2.68 billion), a decrease of 4%. Non-IFRS operating profit was €3.51 billion (2013: €3.39 billion), an increase of 4% (6% at constant currencies). IFRS operating margin was 21.3% (2013: 22.9%), a decrease of 1.6 percentage points. Non-IFRS operating margin was 29.0% (2013: 28.7%), an increase of 0.3 percentage points (0.1 percentage points at constant currencies).

IFRS profit after tax was €1.97 billion (2013: €2.01 billion), a decrease of 2%. Non-IFRS profit after tax was €2.62 billion (2013: €2.47 billion), an increase of 6%. IFRS basic earnings per share was €1.65 (2013: €1.68), a decrease of 2%. Non-IFRS basic earnings per share was €2.19 (2013: €2.08), an increase of 6%. The IFRS and non-IFRS effective tax rates in the nine months of 2014 were 24.8% (2013: 23.4%) and 26.4% (2013: 25.6%), respectively.

Cash Flow – Nine Months 2014

Operating cash flow was €3.08 billion (2013: €3.04 billion), an increase of 1% year-over-year. Free cash flow was €2.61 billion (2013: €2.64 billion), a decrease of 1% year-over-year. Free cash flow was 22% of total revenue (2013: 23%). At September 30, 2014, SAP had a total group liquidity of €3.40 billion (December 31, 2013: €2.84 billion), which includes cash and cash equivalents and short term investments. Net liquidity at September 30, 2014 was -€1.01 billion compared to -€1.47 billion at December 31, 2013.

BUSINESS OUTLOOK 2014

The Company updated its outlook for the full year 2014.

Based on the strong momentum in SAP's cloud business, the Company is raising its cloud outlook again and now expects full year 2014 non-IFRS cloud subscriptions and support revenue to be in a range of €1,040 – €1,070 million (previously €1,000 – €1,050 million) at constant currencies (2013: €757 million). The upper end of this range represents a growth rate of 41%. The Company continues to expect full year 2014 non-IFRS software and software-related service revenue to increase by 6% – 8% at constant currencies (2013: €14.03 billion).

With the customer-driven mix shift from upfront to cloud subscription revenue the Company now expects full-year 2014 non-IFRS operating profit to be in a range of €5.6 billion – €5.8 billion (previously €5.8 – €6.0 billion) at constant currencies (2013: €5.48 billion).

SAP anticipates the fast-growing cloud business along with growth in support revenue will drive a higher proportion of more predictable revenue in the future.

The 2014 business outlook does not include any contributions from the planned addition of Concur Technologies, Inc.

While the Company's full-year 2014 business outlook is at constant currency, actual currency reported figures are expected to continue to be impacted by currency exchange rate fluctuations. If exchange rates remain at the September 2014 level for the rest of the year, the Company expects non-IFRS software and software-related service revenue and non-IFRS operating profit growth rates at actual currency to experience a positive currency impact of approximately 3 percentage points and 3 percentage points respectively for the fourth quarter of 2014 and a negative currency effect of approximately 1 percentage points and neutral impact respectively for the full year 2014.

Additional Information
2014 revenue, profit and cash flow figures include the revenue and profits from hybris and Fieldglass. The comparative numbers for 2013 do not include Fieldglass and hybris was included first on August 1, 2013.

www.sap.com

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