SAP Reports 2005 Second Quarter and Six Months Results Page 12 SAP Group 2nd Quarter Software revenue 576 497 16% Maintenance revenue 779 698 12% Product revenue 1,355 1,195 13% Consulting revenue 540 487 11% Training revenue 91 78 17% Service revenue 631 565 12% Other revenue 30 21 43% Total revenue 2,016 1,781 13% Cost of product -221-200 11% Cost of service -481-439 10% Research and development -302-261 16% Sales and marketing -452-400 13% General and administration -107-93 15% Other income/expenses, net 7 3 133% Total operating expense -1,556-1,390 12% Operating income 460 391 18% Other non-operating income/ expenses, net -4-11 -64% Financial income, net -16 11-245% Income before income taxes 440 391 13% Income taxes -151-141 7% Minority interest 0-1 -100% Net income 289 249 16% Basic earnings per share (in ) 0.93 0.80 16%
SAP Reports 2005 Second Quarter and Six Months Results Page 13 SAP Group 2nd Quarter additional information Pro forma EBITDA reconciliation: Net income 289 249 16% Minority interest 0 1-100% Income taxes 151 141 7% Net income before income taxes 440 391 13% Financial income, net 16-11 -245% Other non-operating income/expenses, net 4 11-64% Operating Income 460 391 18% Depreciation & Amortization 52 51 2% Pro forma EBITDA 4,6) 512 442 16% as a % of Sales 25% 25% Pro forma operating income reconciliation: Operating Income 460 391 18% LTI/STAR/SOP 29 29 0% Settlement of stock-based compensation programs 0 1-100% Total stock-based compensation 29 30-3% Acquisition-related charges 7 7 0% Pro-forma operating income excluding stock-based compensation & acquisition-related charges 4) 496 428 16%
SAP Reports 2005 Second Quarter and Six Months Results Page 14 SAP Group 2nd Quarter additional information Finance Income -16 11-245% - thereof Impairment-related charges -1 0 N/A Income before income taxes 440 391 13% Income taxes 151 141 7% Effective Tax Rate 34% 36% Pro forma Net income reconciliation: Net income 289 249 16% Stock-based compensation, net of tax 20 20 0% Acquisition-related charges, net of tax 4 4 0% Impairment-related charges, net of tax 1 0 N/A Pro-forma net income excluding stock-based compensation, acquisition-related charges, and impairment-related charges 4) 314 273 15% Pro forma EPS reconciliation: Earnings per share (in ) 0.93 0.80 16% Stock-based compensation 0.06 0.06 0% Acquisition-related charges 0.02 0.01 0% Impairment-related charges 0.00 0.00 N/A Pro-forma EPS excluding stock-based compensation, acquisition-related charges and impairment-related charges (in ) 4) 1.01 0.87 15% Weighted average number of Shares (in thousands), treasury stock excluded 309,695 310,888
SAP Reports 2005 Second Quarter and Six Months Results Page 15 SAP Group 1st half year Software revenue 1,010 867 16% Maintenance revenue 1,518 1,364 11% Product revenue 2,528 2,231 13% Consulting revenue 1,015 929 9% Training revenue 163 148 10% Service revenue 1,178 1,077 9% Other revenue 39 29 34% Total revenue 3,745 3,337 12% Cost of product -417-382 9% Cost of service -922-840 10% Research and development -568-492 15% Sales and marketing -809-725 12% General and administration -201-174 16% Other income/expenses, net 6 0 N/A Total operating expense -2,911-2,613 11% Operating income 834 724 15% Other non-operating income/ expenses, net 11-6 -283% Financial income, net -8 37-122% Income before income taxes 837 755 11% Income taxes -293-274 7% Minority interest -1-3 -67% Net income 543 478 14% Basic earnings per share (in ) 1.75 1.54 14%
SAP Reports 2005 Second Quarter and Six Months Results Page 16 SAP Group 1st half year additional information Pro forma EBITDA reconciliation: Net income 543 478 14% Minority interest 1 3-67% Income taxes 293 274 7% Net income before income taxes 837 755 11% Financial income, net 8-37 -122% Other non-operating income/expenses, net -11 6-283% Operating Income 834 724 15% Depreciation & Amortization 101 100 1% Pro forma EBITDA 4,6) 935 824 13% as a % of Sales 25% 25% Pro forma operating income reconciliation: Operating Income 834 724 15% LTI/STAR/SOP 29 22 32% Settlement of stock-based compensation programs 0 1-100% Total stock-based compensation 29 23 26% Acquisition-related charges 14 13 8% Pro-forma operating income excluding stock-based compensation & acquisition-related charges 4) 877 760 15%
SAP Reports 2005 Second Quarter and Six Months Results Page 17 SAP Group 1st half year additional information Finance Income -8 37-122% - thereof Impairment-related charges -2-1 100% Income before income taxes 837 755 11% Income taxes 293 274 7% Effective Tax Rate 35% 36% Pro forma Net income reconciliation: Net income 543 478 14% Stock-based compensation, net of tax 20 15 33% Acquisition-related charges, net of tax 8 8 0% Impairment-related charges, net of tax 2 1 100% Pro forma net income excluding stock-based compensation, acquisition-related charges, and impairment-related charges 4) 573 502 14% Pro forma EPS reconciliation: Earnings per share (in ) 1.75 1.54 14% Stock-based compensation 0.06 0.05 33% Acquisition-related charges 0.03 0.02 0% Impairment-related charges 0.01 0.00 100% Pro-forma EPS excluding stock-based compensation, acquisition-related charges and impairment-related charges (in ) 4) 1.85 1.61 14% Weighted average number of Shares (in thousands), treasury stock excluded 309,820 310,895
SAP Reports 2005 Second Quarter and Six Months Results Page 18 Consolidated Balance Sheets SAP Group PRELIMINARY and UNAUDITED ASSETS 06/30/2005 12/31/2004 Intangible assets 583 525 11% Property, plant and equipment 1,031 999 3% Financial assets 104 100 4% FIXED ASSETS 1,718 1,624 6% Accounts receivables 1,803 1,929-7% Inventories and other assets 629 549 15% Liquid assets/marketable securities 3,451 3,207 8% CURRENT ASSETS 5,883 5,685 3% DEFERRED TAXES 200 206-3% PREPAID EXPENSES 129 70 84% TOTAL ASSETS 7,930 7,585 5% SHAREHOLDERS' EQUITY AND LIABILITIES 06/30/2005 12/31/2004 SHAREHOLDERS' EQUITY 4,826 4,594 5% MINORITY INTEREST 14 22-36% RESERVES AND ACCRUED LIABILITIES 1,501 1,908-21% OTHER LIABILITIES 640 736-13% DEFERRED INCOME 949 325 192% TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 7,930 7,585 5% Days Sales Outstanding 70 71
SAP Reports 2005 Second Quarter and Six Months Results Page 19 Consolidated Statements of Cash Flows SAP Group Six months ended June 30, 2005 2004 Net income 543 478 Minority interest 1 3 Income before minority interest 544 481 Depreciation and amortization 101 100 Gains/Losses on disposal of property, plant and equipment and marketable equity securities, net -2-12 Write-downs of financial assets, net 2 4 Impacts of hedging 29-11 Change in accounts receivable and other assets 84 301 Change in deferred stock compensation -5-2 Change in reserves and liabilities -505-115 Change in deferred taxes -25-34 Change in other current assets -70-100 Change in deferred income 624 552 Net cash provided by operating activities 777 1,164 Acquisition of minorities in subsidiaries -25-156 Purchase of intangible assets and property, plant and equipment -133-89 Purchase of financial assets -11-27 Proceeds from disposal of fixed assets 12 42 Change in liquid assets (maturities greater than 90 days) and marketable securities -136-330 Net cash used in investing activities -293-560 Dividends paid -340-249 Change in treasury stock -162-20 Change in bonds 27 18 Other changes to additional paid-in-capital 19 5 Principal payments made on/proceeds from line of credit and long-term debt -1 6 Proceeds from acquired derivative equity instruments (STAR-hedge) 39 0 Acquisition of derivative equity instruments (STAR-hedge) -47-43 Net cash used in financing activities -465-283 Effect of foreign exchange rates on cash 89 18 Net change in cash and cash equivalents 108 339 Cash and cash equivalents at the beginning of the period 1,513 984 Cash and cash equivalents at the end of the period 1,621 1,323
SAP Reports 2005 Second Quarter and Six Months Results Page 20 Six Month Free Cash Flow (in millions, unaudited) SAP Group 6 Mos 2005 6 Mos 2004 % Change Operating Cash Flow 777 1,164-33 Capital Expenditure -112-77 +45 Free Cash Flow 4,6 665 1,087-39 Free Cash Flow 18% 33% -15 PP as a % of Revenue Total Revenue 3,745 3,337 +12 Footnotes 1) Constant currency data excludes the impact of currency exchange rates. 2) Worldwide share of what SAP considers to be its peer group of Microsoft Corp. (business solutions segment only), Oracle Corp. (business applications only) and Siebel Systems, Inc. is based on comparable software revenues in U.S. dollars (for vendors that did not yet announce or pre-announce software revenues, analyst estimates were used). SAP s results have been converted into U.S. dollars. For Oracle Corp. (business applications only), the software revenues of Oracle, PeopleSoft and Retek were combined based on publicly available data. SAP s first quarter 2005 worldwide share against its peer group was adjusted downward by 1 percentage point compared to the number reported in the first quarter 2005 earnings release resulting from 1) the inclusion of Retek Inc. software revenue into Oracle s software revenue numbers following Oracle s acquisition of Retek and 2) the replacing of estimated data by actual data, where only estimates were available at the time the peer group share was originally calculated and actuals were published after that date. Subsequent revisions of peer group data will often occur as a result of using estimated data at the time the peer group share is originally calculated because actual data is often not yet available. 3) U.S. share of what SAP considers to be its peer group of Microsoft Corp. (business solutions segment only), Oracle Corp. (business applications only), and Siebel Systems, Inc. is based on comparable U.S. software revenues in U.S. dollars (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). SAP s results have been converted into U.S. dollars. For Oracle Corp. (business applications only), the software revenues of Oracle, PeopleSoft and Retek were combined based on publicly available data. SAP s first quarter 2005 U.S. share against its peer group was adjusted downward by 1 percentage point compared to the number reported in the first quarter 2005 earnings release resulting from 1) the inclusion of Retek Inc. software revenue into Oracle s software revenue numbers following Oracle s acquisition of Retek and 2) the replacing of estimated data by actual data, where only estimates were available at the time the peer group share was originally calculated and actuals were published after that date. Subsequent revisions of peer group data will often occur as a result of using estimated data at the time the peer group share is originally calculated because actual data is often not yet available.
SAP Reports 2005 Second Quarter and Six Months Results Page 21 4) Non-GAAP Measures: This press release discloses certain financial measures such as pro forma EBIDTA, free cash flow, pro-forma operating income, pro-forma expenses, pro-forma net income, pro-forma earnings per share (EPS) and currency-adjusted year-on-year changes in revenue and operating income. These measures are not prepared in accordance with generally accepted accounting principles and are, therefore, considered non-gaap financial measures. The non- GAAP measures should be considered in addition to, and not as a substitute for, 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 SAP may be different from pro-forma measures used by other companies. Management believes that pro-forma operating income, pro-forma expenses, pro-forma net income and pro-forma EPS provide supplemental meaningful information to the investor to fully assess the financial performance of SAP s core operations. The pro-forma operating measures disclosed are the same SAP uses in its internal management reporting and as criteria for variable elements of management compensation. Eliminated expenses in pro-forma expenses, pro-forma operating income, pro-forma net income and pro-forma EPS are defined as follows: Stock-based compensation includes expenses for stock-based compensation as defined under U.S. GAAP (STAR, LTI and SOP) as well as expenses related to the settlement of stock-based compensation plans in the context of mergers and acquisitions. Management excludes stock-based compensation expenses because SAP has no direct influence over the actual expense of these awards once the Company enters into stock-based compensation plans. Acquisition-related charges include amortization of intangible assets acquired in acquisitions of businesses or intellectual property. Impairment-related charges include other-than-temporary impairment charges on minority equity investments. Please note: In the second quarter of 2005, SAP changed its definition of acquisition related charges which is used to determine SAP s pro forma operating income, pro forma earnings per share and other pro forma information provided by SAP. In the past, SAP regarded amortization of intangibles only as acquisition related charges if the intangibles were acquired as part of an acquisition of an entire business. In the future, SAP expects to conduct acquisitions more frequently by acquiring from the target only the intellectual property rights and other related intangibles instead of acquiring the target s entire business. Therefore, beginning in the second quarter of 2005, SAP will also regard as acquisition related charges the amortization of intellectual property rights, patents etc. that were acquired individually, i.e. not as part of a business combination. This change in definition has no material impact on any pro forma information provided in the past, as SAP has so far not conducted any material acquisitions of intangibles outside of business combinations. 5) These figures include revenues from designated solution contracts, as well as figures from integrated solution contracts, which are allocated based on usage surveys provided by SAP s customers. SAP s solution reporting includes the following specific software solutions: ERP