UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20142015
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
¨ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
For the transition period from to
Commission file number: 1-14251
SAP SE
(Exact name of Registrant as specified in its charter)
SAP EUROPEAN COMPANY
(Translation of Registrant’s name into English)
Federal Republic of Germany
(Jurisdiction of incorporation or organization)
Dietmar-Hopp-Allee 16
69190 Walldorf
Federal Republic of Germany
(Address of principal executive offices)
Wendy Boufford
c/o SAP Labs
3410 Hillview Avenue, Palo Alto, CA, 94304, United States of America
650-849-4000 (Tel)
650-843-2041 (Fax)
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
American Depositary Shares, each Representing | New York Stock Exchange | |
Ordinary Shares, without nominal value | New York Stock Exchange* |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
Ordinary Shares, without nominal value: 1,228,504,232 (as of December 31, 2014)2015)**
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ No ¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ¨ No þ
Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)
Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ | Accelerated filer ¨ | Non-accelerated filer ¨ |
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board þ Other ¨
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ¨ Item 18 ¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ
* | Listed not for trading or quotation purposes, but only in connection with the registration of American Depositary Shares representing such ordinary shares pursuant to the requirements of the Securities and Exchange Commission. |
** | Including |
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1 | ||||
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ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | ||||
Consolidated Financial Statements and Financial Statement Schedule | ||||
91 | ||||
91 | ||||
91 | ||||
95 | ||||
95 |
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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | ||||
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | ||||
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | ||||
Management’s Annual Report on Internal Control Over Financial Reporting | ||||
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | ||||
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | ||||
F-1 | ||||
Report | F-2 | |||
F-3 |
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SAP SE is a European Company (Societas Europaea, or “SE”) and is referred to in this report, together with its subsidiaries, as SAP, or as “Company,” “Group,” “we,” “our,” or “us.” Our Consolidated Financial Statements included in “Item 18. Financial Statements” in this report have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, referred to as IFRS throughout this report.
In this report: (i) references to “US$,” “$,” or “dollars” are to U.S. dollars; (ii) references to “€‘‘€” or “euro” are to the euro. Our financial statements are denominated in euros, which is the currency of our home country, Germany. Certain amounts that appear in this report may not add up because of differences due to rounding.
Unless otherwise specified herein, euro financial data have been converted into dollars at the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on December 31, 2014,2015, which was US$1.21011.0859 per €1.00.€1.00. No representation is made that such euro amounts actually represent such dollar amounts or that such euro amounts could have been or can be converted into dollars at that or any other exchange rate on such date or on any other date. The rate used for the convenience translations also differs from the currency exchange rates used for the preparation of the Consolidated Financial Statements. This convenience translation is not a requirement under IFRSInternational Financial Reporting Standards (IFRS) and, accordingly, our independent registered public accounting firm has not audited these US$ amounts. For information regarding recent rates of exchange between euro and dollars, see “Item 3. Key Information – Exchange Rates.” On March 6, 2015,11, 2016, the Noon Buying Rate for converting euro to dollars was US$1.08551.1180 per €1.00.€1.00.
Unless the context otherwise requires, references in this report to ordinary shares are to SAP SE’s ordinary shares, without nominal value. References in this report to “ADRs” are to SAP SE’s American Depositary Receipts, each representing one SAP ordinary share. References in this report to “ADSs” are to SAP SE’s American Depositary Shares, which are the deposited securities evidenced by the ADRs.
SAP, ABAP, Adaptive Server, Advantage Database Server, Afaria, Ariba, Business ByDesign,
BusinessObjects, ByDesign, Concur, Crystal Reports, ExpenseIt, Fieldglass, GDSX, hybris, PartnerEdge, PowerBuilder, PowerDesigner, Quadrem, R/3, Replication Server, SAP BusinessObjects Explorer, SAP Business Workflow, SAP EarlyWatch, SAP Fiori, SAP HANA, SAP Jam, SAP Lumira, SAP NetWeaver, SAP S/4HANA, SAPPHIRE, SAPPHIRE NOW, Smart Expense, SQL Anywhere, Sybase, SuccessFactors, The Best-Run Businesses Run
SAP, TravelTrax, TripIt, TripLink, TwoGo, Web Intelligence and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other countries.
Throughout this report, whenever a reference is made to our website, such reference does not incorporate by reference into this report the information contained on our website.
We intend to make this report and other periodic reports publicly available on our web site (www.sap.com) without charge immediately following our filing with the U.S. Securities and Exchange Commission (SEC). We assume no obligation to update or revise any part of this report, whether as a result of new information, future events or otherwise, unless we are required to do so by law.
This report contains forward-looking statements and information based on the beliefs of, and assumptions made by, our management using information currently available to them. Any statements contained in this report that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations, assumptions, and projections about future conditions and events. As a result, our forward-looking statements and information are subject to uncertainties and risks. A broad range of uncertainties and risks, many of which are beyond our control, could cause our actual results and performance to differ materially from any projections expressed in or implied by our forward-looking statements. The uncertainties and risks include, but are not limited to:
Uncertainty in the global economy, financial markets or political conditions could have a negative impact on our business, financial position, profit, and cash flows and put pressure on our operating profit.
Third parties have claimed, and might claim in the future, that we infringe their intellectual property rights, which could lead to damages being awarded against us and limit our ability to use certain technologies in the future.
Claims and lawsuits against us could have an adverse effect on our business, financial position, profit, cash flows and reputation.
We may not be able to protect our critical information and assets or to safeguard our business operations against disruption.
– | Uncertainty in the global economy, financial markets or political conditions could have a negative impact on our business, financial position, profit, and cash flows and put pressure on our operating profit. |
– | Third parties have claimed, and might claim in the future, that we infringe their intellectual property rights, which could lead to damages being awarded against us and limit our ability to use certain technologies in the future. |
– | Claims and lawsuits against us could have an adverse effect on our business, financial position, profit, cash flows and reputation. |
– | We may not be able to protect our critical information and assets or to safeguard our business operations against disruption. |
We describe these and other risks and uncertainties in the Risk Factors section.
If one or more of these uncertainties or risks materializes, or if management’s underlying assumptions prove incorrect, our actual results could differ materially from those described in or inferred from our forward-looking statements and information.
The words “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “counting on,” “is confident,” “development,” “estimate,” “expect,” “forecast,” “future trends,” “guidance,” “intend,” “may,” “might,” “outlook,” “plan,” “project,” “predict,” “seek,” “should,” “strategy,” “want,” “will,” “would,” and similar expressions as they relate to us are intended to identify such forward-looking statements. Such statements include, for example, those made in the Operating Results (IFRS) section, our quantitative and qualitative disclosures about market risk pursuant to the International Financial Reporting Standards (IFRS), namely IFRS 7 and related statements in our Notes to the Consolidated Financial Statements thesection, Expected Developments section, thesection; Risk Factors section,section; and other forward-looking information appearing in other parts of this report. To fully consider the factors that could affect our future financial results, both this report and our Annual Report should be considered, as well as all of our other filings with the Securities and Exchange Commission (SEC). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date specified or the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements as a result of new information that we receive about conditions that existed upon issuance of this report, future events, or otherwise unless we are required to do so by law.
This report includes statistical data about the IT industry and global economic trends that comes from information published by sources including
International Data Corporation (IDC), a provider of market information and advisory services for the information technology, telecommunications, and consumer technology markets; the European Central Bank (ECB); and the International Monetary Fund (IMF). This type of data represents only the estimates of IDC, ECB, IMF, and other sources of industry data. SAP does not adopt or endorse any of the statistical information provided by sources such as IDC, ECB, IMF, or other similar sources that is contained in this report. In addition, although we believe that data from these sources is generally reliable, this type of data is imprecise. We caution readers not to place undue reliance on this data.
We use various performance measures to help manage our performance with regard to our primary financial goals, which are growth and profitability, and our primary
non-financial goals, which are customer loyalty and employee engagement. We view growth and profitability as indicators for our current performance, while customer loyalty and employee engagement are indicators for our future performance.
Measures We Use to Manage Our Financial Performance
Changes to Income Statement Structure
Starting with the first quarter of 2015, we modified our overall income statement structure. We reclassified premium support revenue and related costs to the respective services line items to align our financial reporting with the changes in our services business. We further simplified and clarified the labeling of several income statement line items. For more information about the changes to our income statement structure, see the Notes to the Consolidated Financial Statements section, Note (3).
Measures We Use to Manage Our Operating Financial Performance
In 2014,2015, we used the following key measures to manage our operating financial performance:
Cloud subscriptions and support revenue (non-IFRS): This revenue driver comprises the main revenues of our fast-growing cloud business. We generate cloud subscriptions and support revenue (non-IFRS) when we provide software functionality in a cloud-based infrastructure (SaaS) to our customers, when we provide our customers with access to a cloud-based infrastructure to develop, run, and manage applications (PaaS) and also when we provide hosting services for software hosted by SAP (IaaS). Cloud subscriptions and support revenue is also generated when providing additional premium cloud subscription support beyond the respectiveregular support, for deliverywhich is embedded in the cloud.basic cloud subscription fees as well as business network services to our customers. We use the measure cloud subscriptions and support revenue (non-IFRS) both at actual currency and at constant currency.
SoftwareCloud and software-related service (SSRS)software revenue (non-IFRS): We use SSRScloud and software revenue (non-IFRS) and constant currency SSRScloud and software revenue (non-IFRS) to measure our revenue growth. Our SSRScloud and software revenue includes cloud subscriptions and support revenue plus software licenses and related support revenue. Cloud subscriptions and support revenue and software revenue are our key revenue drivers because they tend to affect our
other revenue streams. Generally, customers that buy software licenses also enter into maintenancerelated support contracts, and these generate recurring software-related service revenue in the form of support revenue after the software sale. MaintenanceSupport contracts cover standardized support services andthat comprise unspecified future software updates and
enhancements. Software licenses revenue as well as cloud subscriptions and support revenue also tend to stimulate serviceservices revenue earned from consultingproviding customers with professional services, premium support services, training services, messaging services, and training sales.payment services.
New and upsellcloud bookings: For our cloud activities, we also look at new and upsellcloud bookings. This measure reflects the committed order entry of a given period from new customers and from incremental purchases by existing customers for offerings that generate cloud subscriptionsubscriptions and support revenue. Thus,In this way, it is an indicator for cloud-related sales success in a given period and for secured future cloud subscriptionsubscriptions and support revenue. We focus primarily on the average contract value variant of the new and upsellcloud bookings measure that considerstakes into account annualized amounts for multiyear contracts. Additionally, we monitor the total contract value variant of the new and upsellcloud bookings measure that considerstakes into account the total committed order entry amounts regardless of the contract durations. There are no comparable IFRS measures for these bookings metrics.
Operating profit (non-IFRS)/operating margin (non-IFRS): We use operating profit (non-IFRS)/operating margin (non-IFRS) and constant currency operating profit (non-IFRS)/operating margin (non-IFRS) to measure our overall operational process efficiency and overall business performance. Operating margin (non-IFRS) is the ratio of our operating profit (non-IFRS) to total revenue (non-IFRS), expressed as a percentage. See below for more information on the IFRS and non-IFRS measures we use.
Cloud subscriptions and support gross margin (non-IFRS): We use our cloud subscriptions and support gross margin (non-IFRS) to measure our process efficiency and our performance in our cloud business. Cloud subscriptions and support gross margin (non-IFRS) is the ratio of our cloud subscriptions and support gross profit (non-IFRS) to cloud subscriptions and support revenue (non-IFRS), expressed as a percentage.
Measures We Use to Manage Our Non-Operating Financial Performance
We use the following measures to manage our non-operating financial performance:
Financial income, net: This measure provides insight especially into the return on liquid assets and capital investments and the cost of borrowed funds. To manage our financial income, net, we focus on cash flow, the composition of our liquid assetassets and capital investment portfolio, and the average rate of interest at which assets are invested. We also monitor average outstanding borrowings and the associated finance costs.
Days’Days Sales Outstanding (DSO) and Days’ Payables Outstanding (DPO): We manage working capital by controlling the days’days sales outstanding (DSO) for operating receivables or DSO (defined as the average
number of days from the raised invoice to cash receipt from the customer), and the days’ payables outstanding for operating liabilities, or DPO (defined as average number of days from the received invoice to cash payment to the vendor).
Measures We Use to Manage Overall Financial Performance
We use the following measures to manage our overall financial performance:
Earnings per share (EPS): EPS measures our overall performance because it captures all operating and non-operating elements of profit as well as income tax expense. It represents the portion of profit after tax allocable to each SAP share outstanding (using the weighted average number of shares outstanding over the reporting period).outstanding. EPS is influenced not only by our operating and non-operating business andas well as income taxes but also by the number of shares outstanding. We are authorized by our shareholders to repurchase shares and believe that such repurchases, additional to dividend distributions, are a good means to return value to our shareholders.
Effective tax rate: We define our effective tax rate as the ratio of income tax expense to profit before tax, expressed as a percentage.
Operating, investing, and financing cash flows and free cash flow: Our consolidated statement of cash flows provides insight as to how we generated and used cash and cash equivalents. When usedapplied in conjunction with the other primary financial statements, it provides information that helps us evaluate the changes of our net assets, our financial structure (including our liquidity and solvency), and our ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities. We use our free cash flow measure to estimatedetermine the cash flow remaining after all expenditures required to maintain or expand our organic business have been paid off. This measure provides management with supplemental information to assess our liquidity needs. We calculate free cash flow as net cash from operating activities minus purchases (other than purchases made in connection with business combinations) of intangible assets and property, plant, and equipment.
Measures We Use to Manage Our Non-Financial Performance
In 2014,2015, we used the following key measures to manage our non-financial performance in the areas of employee engagement, customer loyalty and customer loyalty:leadership trust:
Employee Engagement Index: We use the employee engagementthis index to measure the motivation and loyalty of our employees, how proud they are of our company, and how strongly they identify with SAP. The index is derived from surveys conducted among our employees. WithApplying this measure we recognizeis recognition that we can achieve our growth strategy withdepends on engaged employees only.employees.
Customer Net Promoter Score (NPS)(NPS): This score measures the willingness of our customers to
recommend or promote SAP to others. It is derived from our annual customer survey. Conducted each year, this survey that identifies, on a scale of 0–10, whether a customer is loyal and likely to recommend SAP to friends or colleagues, is neutral, or is unhappy. We introduced this measure in 2012, as we are convinced that we can achieve our financial goals only when our customers are loyal to, and satisfied with, SAP and our solutions. To derive the Customer NPS, we start with the percentage of “promoters” of SAP – those who give us a score of 9 or 10 on a scale of 0 to 0–10. We then subtract the percentage of “detractors” – those who give us a score of 0 to 6. The method ignores “passives,” who give us a score of 7 or 8. In additionDue to our on-premise customers,changes in 2014 forsampling, resulting from ongoing efforts to implement the first time we included Ariba, SuccessFactors and Sybase customerssurvey process holistically in recently acquired entities, the survey. Therefore, the 2014 Customer NPS2015 score is not fully comparable towith the prior year’s score.
Leadership Trust Score:We use this score to further enhance accountability and to measure our collective effort to foster a work environment based on trust. It is derived from a question in our annual global employee survey that gauges employees’ trust in our leaders. We measure leadership trust by using the Net Promoter Score (NPS) methodology.
Value-Based Management
Our holistic view of the performance measures described above, together with our associated
analyses, comprises the information we use for value-based management. We use planning and control processes to manage the compilation of these key measures and their availability to our decision makers across various management levels.
SAP’s long-term strategic plans are the point of reference for our other planning and controlling processes, including a multiyear plan through 2020. We identify future growth and profitability drivers at a highly aggregated level. This process is intended to identify the best areas in which to target sustained investment. Next, we evaluate our multiyear plans for our support and development functions and break down the customer-facing plans by sales region. Based on our detailed annual plans, we determine the budget for the respective year. We also have processes in place to forecast revenue and profit on a quarterly basis, to quantify whether we expect to realize our strategicfinancial goals, and to identify any deviations from plan. We continuously monitor the concerned units in the Group to analyze these developments and define any appropriate actions.
Our entire network of planning, control, and reporting processes is implemented in integrated planning and information systems, based on SAP software, across all organizational units so that we can conduct the evaluations and analyses needed to make informed decisions.
Non-IFRS Financial Measures Cited in This Report
As in previous years, we provided our 20142015 financial outlook on the basis of certain non-IFRS measures. Therefore, this report contains a non-IFRS based comparison of our actual performance in 20142015 against our outlook in the Performance Against Outlook for 20142015 (Non-IFRS) section.
Reconciliations of IFRS to Non-IFRS Financial Measures for 20142015 and 20132014
The following table reconciles our IFRS financial measures to the respective and most comparable non-IFRS financial measures of this report for each of 20142015 and 2013.2014. Due to rounding, the sum of the numbers presented in this table might not precisely equal the totals we provide.
ReconciliationsReconciliation of IFRS to Non-IFRS Financial Measures for the Years Ended December 31
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2014 | 2013 | IFRS | Adj. | Non-IFRS | Currency Impact | Non-IFRS Constant Currency | IFRS | Adj. | Non-IFRS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
IFRS | Adj. | Non-IFRS | Currency Impact | Non-IFRS Constant Currency | IFRS | Adj. | Non- IFRS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue measures | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cloud subscriptions and support | 1,087 | 14 | 1,101 | –3 | 1,098 | 696 | 61 | 757 | 2,286 | 10 | 2,296 | –297 | 1,999 | 1,087 | 14 | 1,101 | ||||||||||||||||||||||||||||||||||||||||||||||||
Software | 4,399 | 0 | 4,399 | 0 | 4,399 | 4,516 | 2 | 4,518 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Support | 9,368 | 5 | 9,373 | 114 | 9,487 | 8,738 | 19 | 8,756 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software and support | 13,767 | 5 | 13,773 | 113 | 13,886 | 13,254 | 21 | 13,275 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software and software-related service revenue | 14,855 | 19 | 14,874 | 110 | 14,984 | 13,950 | 82 | 14,032 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Professional services and other service revenue | 2,706 | 0 | 2,706 | 32 | 2,738 | 2,865 | 0 | 2,865 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Software licenses | 4,835 | 1 | 4,836 | –255 | 4,581 | 4,399 | 0 | 4,399 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software support | 10,093 | 0 | 10,094 | –678 | 9,416 | 8,829 | 5 | 8,834 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software licenses and support | 14,928 | 2 | 14,930 | –933 | 13,997 | 13,228 | 5 | 13,233 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cloud and software | 17,214 | 11 | 17,226 | –1,230 | 15,996 | 14,315 | 19 | 14,334 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Services | 3,579 | 0 | 3,579 | –276 | 3,304 | 3,245 | 0 | 3,245 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenue | 17,560 | 19 | 17,580 | 142 | 17,722 | 16,815 | 82 | 16,897 | 20,793 | 11 | 20,805 | –1,505 | 19,299 | 17,560 | 19 | 17,580 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Operating expense measures | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of software and software-related services | –2,894 | 350 | –2,543 | –2,629 | 364 | –2,265 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of professional services and other services | –2,379 | 121 | –2,258 | –2,402 | 123 | –2,278 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of cloud subscriptions and support | –1,022 | 232 | –789 | –481 | 88 | –393 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of software licenses and support | –2,291 | 283 | –2,008 | –2,076 | 258 | –1,818 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of cloud and software | –3,313 | 516 | –2,797 | –2,557 | 346 | –2,211 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of services | –3,313 | 180 | –3,133 | –2,716 | 125 | –2,590 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total cost of revenue | –5,272 | 471 | –4,801 | –5,031 | 487 | –4,543 | –6,626 | 696 | –5,930 | –5,272 | 471 | –4,801 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross profit | 12,288 | 490 | 12,778 | 11,784 | 570 | 12,354 | 14,167 | 707 | 14,874 | 12,288 | 490 | 12,778 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Research and development | –2,331 | 127 | –2,204 | –2,282 | 120 | –2,162 | –2,845 | 202 | –2,643 | –2,331 | 127 | –2,204 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales and marketing | –4,304 | 170 | –4,134 | –4,131 | 205 | –3,926 | –5,401 | 449 | –4,952 | –4,304 | 170 | –4,134 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
General and administration | –892 | 86 | –806 | –866 | 70 | –796 | –1,048 | 116 | –932 | –892 | 86 | –806 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring | –126 | 126 | 0 | –70 | 70 | 0 | –621 | 621 | 0 | –126 | 126 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
TomorrowNow and Versata litigation | –309 | 309 | 0 | 31 | –31 | 0 | 0 | 0 | 0 | –309 | 309 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other operating income/expense, net | 4 | 0 | 4 | 12 | 0 | 12 | 1 | 0 | 1 | 4 | 0 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total operating expenses | –13,230 | 1,288 | –11,942 | –152 | –12,093 | –12,336 | 921 | –11,415 | –16,541 | 2,084 | –14,457 | 1,062 | –13,395 | –13,230 | 1,288 | –11,942 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Operating profit measures | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating profit | 4,331 | 1,307 | 5,638 | –9 | 5,628 | 4,479 | 1,003 | 5,482 | 4,252 | 2,095 | 6,348 | –443 | 5,904 | 4,331 | 1,307 | 5,638 | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating margin (in %) | 24.7 | 32.1 | 31.8 | 26.6 | 32.4 |
Explanation of Non-IFRS Measures
We disclose certain financial measures, such as revenue (non-IFRS), operating expenses (non-IFRS), operating profit (non-IFRS), operating margin (non-IFRS), and earnings per share (non-IFRS), deferred revenue (non-IFRS), and calculated cloud billings measures (non-IFRS), as well as constant currency revenue, expense, profit, deferred revenue, and calculated cloud billings measuresprofit that are not prepared in accordance with IFRS and are therefore considered non-IFRS financial measures. Our non-IFRS financial measures may
not correspond to non-IFRS financial measures that other companies report. The non-IFRS financial measures that we report should only be considered in addition to, and not as substitutes for or superior to, our IFRS financial measures.
We believe that the disclosed supplemental historical and prospective non-IFRS financial information provides useful information to investors because management uses this information, in addition to financial data prepared in accordance with IFRS, to attain a more transparent understanding of our past
performance and our anticipated future results or – in the case of calculated cloud billings (non-IFRS) – management uses the measures to anticipate metrics that investors use.results. We use the revenue (non-IFRS) and profit (non-IFRS) measures consistently in our internal planning and forecasting, reporting, and compensation, as well as in our external communications, as follows:
Our management primarily uses these non-IFRS measures rather than IFRS measures as the basis for making financial, strategic, and operating decisions.
The variable components of our Executive Board members’ and employees’ remuneration are based on revenue (non-IFRS) and operating profit (non-IFRS) measures rather than the respective IFRS measures.
The annual budgeting process for all management units is based on revenue (non-IFRS) and operating profit (non-IFRS) numbers rather than the respective IFRS financial measures.
All forecast and performance reviews with all senior managers globally are based on these non-IFRS measures, rather than the respective IFRS financial measures.
Both our internal performance targets and the guidance we provided to the capital markets are based on revenue (non-IFRS) and profit (non-IFRS) measures rather than the respective IFRS financial measures.
– | Our management primarily uses these non-IFRS measures rather than IFRS measures as the basis for making financial, strategic, and operating decisions. |
– | The variable components of our Executive Board members’ and employees’ remuneration are based on revenue (non-IFRS), operating profit (non-IFRS), as well as new cloud bookings measures rather than the respective IFRS measures. |
– | The annual budgeting process for all management units is based on revenue (non-IFRS) and operating profit (non-IFRS) numbers rather than the respective IFRS financial measures. |
– | All forecast and performance reviews with all senior managers globally are based on these non-IFRS measures, rather than the respective IFRS financial measures. |
– | Both our internal performance targets and the guidance we provided to the capital markets are based on revenue (non-IFRS) and profit (non-IFRS) measures rather than the respective IFRS financial measures. |
Our non-IFRS financial measures reflect adjustments based on the items below, as well as adjustments for the related income tax effects.
Revenue (Non-IFRS)
Revenue items identified as revenue (non-IFRS) have been adjusted from the respective IFRS financial measures by including the full amount of software support revenue, cloud subscriptions and support revenue, and other similarly recurring revenue that we
are not permitted to record as revenue under IFRS due to fair value accounting for the contracts in effect at the time of the respective acquisitions.
Under IFRS, we record at fair value the contracts in effect at the time entities were acquired. Consequently, our IFRS software support revenue, IFRS cloud subscriptions and support revenue, IFRS softwarecloud and software-related servicesoftware revenue, and IFRS total revenue for periods subsequent to acquisitions do not reflect the full amount of
revenue that would have been recorded by entities acquired by SAP had they remained stand-alone entities. Adjusting revenue numbers for this revenue impact provides additional insight into the comparability of our ongoing performance across periods.
Operating Expense (Non-IFRS)
Operating expense numbers that are identified as operating expenses (non-IFRS) have been adjusted by excluding the following expenses:
Acquisition-related charges
Amortization expense/impairment charges of intangibles acquired in business combinations and certain stand-alone acquisitions of intellectual property (including purchased in-process research and development)
Settlements of pre-existing business relationships in connection with a business combination
Acquisition-related third-party expenses
Expenses from the TomorrowNow litigation (formerly labeled as discontinued activities) and the Versata litigation cases
Share-based payment expenses
Restructuring expenses
– | Acquisition-related charges |
¡ | Amortization expense/impairment charges of intangibles acquired in business combinations and certain stand-alone acquisitions of intellectual property (including purchased in-process research and development) |
¡ | Settlements of preexisting business relationships in connection with a business combination |
¡ | Acquisition-related third-party expenses |
– | Expenses from the TomorrowNow litigation (formerly labeled as “discontinued activities”) and the Versata litigation cases |
– | Share-based payment expenses |
– | Restructuring expenses |
We exclude certain acquisition-related expenses for the purpose of calculating operating profit (non-IFRS), operating margin (non-IFRS), and earnings per share (non-IFRS) when evaluating SAP’s continuing operational performance because these expenses generally cannot be changed or influenced by management after the relevant acquisition other than by disposing of the acquired assets. Since management at levels below the Executive Board does not influence these expenses, we generally do not consider these expenses for the purpose of evaluating the performance of management units. Additionally, these non-IFRS measures have been adjusted from the respective IFRS measures for the results of the share-based payment expenses and restructuring expenses, as well as the TomorrowNow and Versata litigation expenses.
The adjustment for expenses and income from the Versata litigation was introduced in 2014 (for details regarding this litigation refer to our Notes to the Consolidated Financial Statements section, Note (24)). Prior-year amounts have been adjusted to comply with the modified set of
non-IFRS adjustments. We exclude expenses and income from the Versata litigation to provide additional insight into the comparability of our ongoing operating performance across periods and to continue the alignment of our non-IFRS measures with our internal performance measures.
Operating Profit (Non-IFRS), Operating Margin (Non-IFRS), and Earnings per Share (Non-IFRS)
Operating profit, operating margin, and earnings per share identified as operating profit (non-IFRS), operating margin (non-IFRS), and earnings per share (non-IFRS)
have been adjusted from the respective IFRS measures by adjusting for the above-mentionedaforementioned revenue (non-IFRS) and operating expenses (non-IFRS).
Deferred Cloud Subscriptions and Support Revenue (Non-IFRS) and Calculated Cloud Billings (Non-IFRS)
It is common in capital markets to use metrics based on billings to help evaluate the performance of cloud subscription offerings. A common metric of this kind is calculated cloud billings that can be calculated as the total of a period’s cloud subscriptions and support revenue and the respective period’s change in the deferred cloud subscriptions and support revenue balance. To ease the effort of determining this metric, we report the metric’s components as well as a calculation of the metric itself. To allow an alignment of this calculated cloud billings metric with our revenue reporting, we present the calculated cloud billings metric on an IFRS basis (that is, derived from IFRS numbers) as well as on a non-IFRS basis and a non-IFRS at constant currency basis. The calculated cloud billings (non-IFRS) are derived from both:
Our cloud subscriptions and support revenue (non-IFRS), which is adjusted from the respective IFRS number for the effect of fair value accounting for the contracts in effect at the time of the respective acquisitions as outlined above
Our deferred cloud subscriptions and support revenue (non-IFRS), which is adjusted from the respective IFRS number accordingly
Constant Currency Information
We believe it is important for investors to have information that provides insight into our sales.
Revenue measures determined under IFRS provide information that is useful in this regard. However, both sales volume and currency effects impact period-over-period changes in sales revenue. We do not sell standardized units of products and services, so we cannot provide relevant information on sales volume by providing data on the changes in product and service units sold. To provide additional information that may be useful to investors in breaking down and evaluating changes in sales volume, we present information about our revenue and various values and components relating to operating profit that are adjusted for foreign currency effects.
We calculate constant currency revenue and operating profit measures by translating foreign currencies using the average exchange rates from the comparative period instead of the current period. Constant currency deferred revenue balances are calculated by translating the current period’s opening and closing deferred revenues balances as well as the comparative period’s closing deferred revenue balance using the opening exchange rates of the comparative period.
Free Cash Flow
The following table shows our free cash flow measure. We use this measure among others to manage our overall financial performance.
Free Cash Flow
The following table shows our free cash flow measure. We use this measure among others to manage our overall financial performance.
Free Cash Flow
€ millions | 2014 | 2013 | Change (in %) | 2015 | 2014 | in % | ||||||||||||||||||
Net cash flows from operating activities | 3,499 | 3,832 | –9 | 3,638 | 3,499 | 4 | ||||||||||||||||||
Purchase of intangible assets and property, plant, and equipment (without acquisitions) | –737 | –566 | 30 | –636 | –737 | –14 | ||||||||||||||||||
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Free cash flow | 2,762 | 3,266 | –15 | 3,001 | 2,762 | 9 |
Usefulness of Non-IFRS Measures
We believe that our non-IFRS measures are useful to investors for the following reasons:
Our revenue (non-IFRS), expense (non-IFRS), and profit (non-IFRS) measures provide investors with insight into management’s decision making because management uses these non-IFRS measures to run our business and make financial, strategic, and operating
– | Our revenue (non-IFRS), expense (non-IFRS), and profit (non-IFRS) measures provide investors with insight into management’s decision making because management uses these non-IFRS measures to run our business and make financial, strategic, and operating decisions. We include the revenue adjustments outlined above and exclude the expense adjustments outlined above when making decisions to allocate resources. In addition, we use these non-IFRS measures to gain a better understanding of SAP’s operating performance from period to period. |
The non-IFRS measures provide investors with additional information that enables a comparison of year-over-year operating performance by eliminating certain direct effects of acquisitions, share based compensation plans, restructuring plans, and the TomorrowNow and Versata litigation cases.
Non-IFRS and non-GAAP measures are widely used in the software industry. In many cases, inclusion of our non-IFRS measures may facilitate comparison with our competitors’ corresponding non-IFRS and non-GAAP measures.
Our deferred cloud subscriptions and support revenue (non-IFRS) and calculated cloud billings (non-IFRS) metrics provide additional insight into amounts that are contracted for and invoiced and that are expected to be recognized in cloud subscriptions and support revenue in the future.
– | The non-IFRS measures provide investors with additional information that enables a comparison of year-over-year operating performance by eliminating certain direct effects of acquisitions, share-based compensation plans, restructuring plans, and the TomorrowNow and Versata litigation cases. |
– | Non-IFRS and non-GAAP measures are widely used in the software industry. In many cases, inclusion of our non-IFRS measures may facilitate comparison with our competitors’ corresponding non-IFRS and non-GAAP measures. |
Limitations of Non-IFRS Measures
We believe that our non-IFRS financial measures described above have limitations, including but not limited to, the following:
The eliminated amounts could be material to us.
Without being analyzed in conjunction with the corresponding IFRS measures, the non-IFRS measures are not indicative of our present and future performance, foremost for the following reasons:
While our profit (non-IFRS) numbers reflect the elimination of certain acquisition-related expenses, no eliminations are made for the additional revenue that result from the acquisitions.
While we adjust for the fair value accounting of the acquired entities’ recurring revenue contracts, we do not adjust for the fair value accounting of deferred compensation items that result from commissions paid to the acquired company’s sales force and third parties for closing the respective customer contracts.
The acquisition-related charges that we eliminate in deriving our profit (non-IFRS) numbers are likely to recur should SAP enter into material business combinations in the future. Similarly, the restructuring expenses that we eliminate in deriving our profit(non-IFRS) numbers are likely to recur should SAP perform restructurings in the future.
The acquisition-related amortization expense that we eliminate in deriving our profit(non-IFRS) numbers is a recurring expense that will impact our financial performance in future years.
The revenue adjustment for the fair value accounting of the acquired entities’ contracts and the expense adjustment for acquisition-related charges do not arise from a common conceptual basis. This is because the revenue adjustment aims to improve the comparability of the initial post-acquisition period with future post-acquisition periods, while the expense adjustment aims to improve the comparability between post-acquisition periods andpre-acquisition periods. This should particularly be considered when evaluating our operating profit (non-IFRS) and operating margin(non-IFRS) numbers as these combine our revenue (non-IFRS) and expenses (non-IFRS) despite the absence of a common conceptual basis.
Our restructuring charges could result in significant cash outflows. The same applies to our share-based payment expense because most of our share-based payments are settled in cash rather than shares.
The valuation of our cash-settled share-based payments could vary significantly from period to period due to the fluctuation of our share price and other parameters used in the valuation of these plans.
In the past, we have issued share-based payment awards to our employees every year and we intend to continue doing so in the future. Thus, our share-based payment expenses are recurring although the amounts usually change from period to period.
The deferred cloud subscriptions and support revenue (non-IFRS) and calculated cloud billings (non-IFRS) metrics that we disclose may be impacted significantly by our revenue recognition policies, for example, when fees from components other than cloud subscriptions sold in multiple element
– | The eliminated amounts could be material to us. |
– | Without being analyzed in conjunction with the corresponding IFRS measures, the non-IFRS measures are not indicative of our present and future performance, foremost for the following reasons: |
¡ | While our profit (non-IFRS) numbers reflect the elimination of certain acquisition-related expenses, no eliminations are made for the additional revenue or other income that results from the acquisitions. |
¡ | While we adjust for the fair value accounting of the acquired entities’ recurring revenue contracts, we do not adjust for the fair value accounting of deferred compensation items that result from commissions paid to the acquired company’s sales force and third parties for closing the respective customer contracts. |
¡ | The acquisition-related charges that we eliminate in deriving our profit (non-IFRS) numbers are likely to recur should SAP enter into material business combinations in the future. Similarly, the restructuring expenses that we eliminate in deriving our profit (non-IFRS) numbers are likely to recur should SAP perform restructurings in the future. |
¡ | The acquisition-related amortization expense that we eliminate in deriving our profit (non-IFRS) numbers is a recurring expense that will impact our financial performance in future years. |
¡ | The revenue adjustment for the fair value accounting of the acquired entities’ contracts and the expense adjustment for acquisition-related charges do not arise from a common conceptual basis. This is because the revenue adjustment aims to improve the comparability of the initial post-acquisition period with future post-acquisition periods, while the expense adjustment aims to improve the comparability between post-acquisition periods and pre-acquisition periods. This should particularly be considered when |
|
¡ | Our restructuring charges could result in significant cash outflows. The same applies to our share-based payment expense because most of our share-based payments are |
¡ | The valuation of our cash-settled share-based payments could vary significantly from period to |
¡ | In the past, we have issued share-based payment awards to our employees every year and we intend to continue doing so in the future. Thus, our |
We believe that constant currency measures have limitations, particularly as the currency effects that are eliminated constitute a significant element of our revenue and expenses and could materially impact our performance. Therefore, we limit our use of constant currency measures to the analysis of changes in volume as one element of the full change in a financial measure. Additionally, we use different prior period exchange rates for deferred revenue versus revenue items to adjust for currencies.
We do not evaluate our results and performance without considering both constant currency measures in revenue (non-IFRS) and operating profit(non-IFRS) measures on the one hand, and changes in revenue, operating expenses, operating profit, or other measures of financial
performance prepared in accordance with IFRS on the other. We caution the readers of our financial reports to follow a similar approach by considering constant currency measures only in addition to, and not as a substitute for or superior to, changes in revenue, operating expenses, operating profit, or other measures of financial performance prepared in accordance with IFRS.
Despite these limitations, we believe that the presentation of the non-IFRS measures and the corresponding IFRS measures, together with the relevant reconciliations, provide useful information to management and investors regarding present and future business trends relating to our financial condition and results of operations. We do not evaluate our growth and performance without considering both non-IFRS measures and the comparable IFRS measures. We caution the readers of our financial reports to follow a similar approach by considering ournon-IFRS measures only in addition to, and not as a substitute for or superior to, revenue or other measures of our financial performance prepared in accordance with IFRS.
Part I
Item 1, 2, 3
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
The following table sets forth our selected consolidated financial data as of and for each of the years in the five-year period ended December 31, 2014.2015. The consolidated financial data has been derived from, and should be read in conjunction with, our Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS), presented in “Item 18. Financial Statements” of this report.
Our selected financial data and our Consolidated Financial Statements are presented in euros. Financial data as of and for the year ended December 31, 20142015 has been translated into U.S. dollars for the convenience of the reader.
Part ISelected Financial Data: IFRS
millions, unless otherwise stated | 2015(1) US$ | 2015 € | 2014 € | 2013 € | 2012 € | 2011 € | ||||||||||||||||||
Income Statement Data: Years ended December 31, | ||||||||||||||||||||||||
Cloud subscriptions and support | 2,482 | 2,286 | 1,087 | 696 | 270 | 18 | ||||||||||||||||||
Software licenses and support | 16,210 | 14,928 | 13,228 | 12,809 | 12,532 | 11,012 | ||||||||||||||||||
Cloud and software | 18,693 | 17,214 | 14,315 | 13,505 | 12,801 | 11,030 | ||||||||||||||||||
Total revenue | 22,579 | 20,793 | 17,560 | 16,815 | 16,223 | 14,233 | ||||||||||||||||||
Operating profit | 4,618 | 4,252 | 4,331 | 4,479 | 4,041 | 4,884 | ||||||||||||||||||
Profit after tax | 3,318 | 3,056 | 3,280 | 3,325 | 2,803 | 3,437 | ||||||||||||||||||
Profit attributable to owners of parent | 3,327 | 3,064 | 3,280 | 3,326 | 2,803 | 3,435 | ||||||||||||||||||
Earnings per share(2) | ||||||||||||||||||||||||
Basic in€ | 2.78 | 2.56 | 2.75 | 2.79 | 2.35 | 2.89 | ||||||||||||||||||
Diluted in€ | 2.78 | 2.56 | 2.74 | 2.78 | 2.35 | 2.89 | ||||||||||||||||||
Other Data: | ||||||||||||||||||||||||
Weighted-average number of shares outstanding | ||||||||||||||||||||||||
Basic | 1,197 | 1,197 | 1,195 | 1,193 | 1,192 | 1,189 | ||||||||||||||||||
Diluted | 1,198 | 1,198 | 1,197 | 1,195 | 1,193 | 1,190 | ||||||||||||||||||
Statement of Financial Position Data: At December 31, | ||||||||||||||||||||||||
Cash and cash equivalents | 3,704 | 3,411 | 3,328 | 2,748 | 2,477 | 4,965 | ||||||||||||||||||
Total assets(3) | 44,945 | 41,390 | 38,565 | 27,091 | 26,306 | 23,227 | ||||||||||||||||||
Current financial liabilities(4) | 913 | 841 | 2,561 | 748 | 802 | 1,331 | ||||||||||||||||||
Non-current financial liabilities(4) | 9,427 | 8,681 | 8,980 | 3,758 | 4,446 | 2,925 | ||||||||||||||||||
Issued capital | 1,334 | 1,229 | 1,229 | 1,229 | 1,229 | 1,228 | ||||||||||||||||||
Total equity | 25,296 | 23,295 | 19,534 | 16,048 | 14,133 | 12,689 |
Item 3
SELECTED FINANCIAL DATA: IFRS(1) Amounts presented in US$ have been translated for the convenience of the reader at€1.00 to US$1.0859, the Noon Buying Rate for converting€1.00 into dollars on December 31, 2015. See “Item 3. Key Information – Exchange Rates” for recent exchange rates between the Euro and the dollar.
(2) Profit attributable to owners of parent is the numerator and weighted average number of shares outstanding is the denominator in the calculation of earnings per share. See Note (11) to our Consolidated Financial Statements for more information on earnings per share.
millions, unless otherwise stated | 2014(1) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||
US$ | € | € | € | € | € | |||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
Software and software-related service revenue | 17,975 | 14,855 | 13,950 | 13,165 | 11,319 | 9,794 | ||||||||||||||||||
Total revenue | 21,250 | 17,560 | 16,815 | 16,223 | 14,233 | 12,464 | ||||||||||||||||||
Operating profit | 5,240 | 4,331 | 4,479 | 4,041 | 4,884 | 2,591 | ||||||||||||||||||
Operating margin in %(2) | 24.7 | 24.7 | 26.6 | 24.9 | 34.3 | 20.8 | ||||||||||||||||||
Profit after tax | 3,969 | 3,280 | 3,325 | 2,803 | 3,437 | 1,813 | ||||||||||||||||||
Profit attributable to owners of parent | 3,969 | 3,280 | 3,326 | 2,803 | 3,435 | 1,811 | ||||||||||||||||||
Earnings per share(2) | ||||||||||||||||||||||||
Basic in € | 3.32 | 2.75 | 2.79 | 2.35 | 2.89 | 1.52 | ||||||||||||||||||
Diluted in € | 3.32 | 2.74 | 2.78 | 2.35 | 2.89 | 1.52 | ||||||||||||||||||
Other Data: | ||||||||||||||||||||||||
Weighted-average number of shares outstanding | ||||||||||||||||||||||||
Basic | 1,195 | 1,195 | 1,193 | 1,192 | 1,189 | 1,188 | ||||||||||||||||||
Diluted | 1,197 | 1,197 | 1,195 | 1,193 | 1,190 | 1,189 | ||||||||||||||||||
Statement of Financial Position Data: At December 31, | ||||||||||||||||||||||||
Cash and cash equivalents | 4,027 | 3,328 | 2,748 | 2,477 | 4,965 | 3,518 | ||||||||||||||||||
Total assets(3) | 46,597 | 38,507 | 27,091 | 26,306 | 23,227 | 20,839 | ||||||||||||||||||
Current financial liabilities(4) | 3,099 | 2,561 | 748 | 802 | 1,331 | 142 | ||||||||||||||||||
Non-current financial liabilities(4) | 10,867 | 8,980 | 3,758 | 4,446 | 2,925 | 4,449 | ||||||||||||||||||
Issued capital | 1,487 | 1,229 | 1,229 | 1,229 | 1,228 | 1,227 | ||||||||||||||||||
Total equity | 23,715 | 19,598 | 16,048 | 14,133 | 12,689 | 9,824 |
(3) The large increase in total assets from 2011 to 2012 was mainly due to the acquisitions of SuccessFactors and Ariba in 2012, whereas the large increase in total assets from 2013 to 2014 was mainly due to the acquisition of Concur.
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Part I
Item 3
The sales prices for our ordinary shares traded on German stock exchanges are denominated in euro. Fluctuations in the exchange rate between the euro and the U.S. dollar affect the dollar equivalent of the euro price of the ordinary shares traded on the German stock exchanges and, as a result, may affect the price of the ADRs traded on the NYSE in the United States. See “Item 9. The Offer and Listing” for a description of the ADRs. In addition, SAP SE pays cash dividends, if any, in euro. As a result, any exchange rate fluctuations will also affect the dollar amounts received by the holders of ADRs on the conversion into dollars of cash dividends paid in euro on the ordinary shares represented by the ADRs. Deutsche Bank Trust Company Americas is the depositary (the Depositary) for SAP SE’s ADR program. The deposit agreement with respect to the ADRs requires the Depositary to convert any dividend payments from euro into dollars as promptly as practicable upon receipt. For additional information on the Depositary and the fees associated with SAP’s ADR program see “Item 1212. Description of Securities Other Than Equity Securities – American Depositary Shares.”
A significant portionFor details on the impact of our revenue and expense is denominated in currencies other than the euro. Therefore, fluctuations in the exchange rate between the euro and the respective currencies in which we conduct business could materially affect our business, financial position, income or cash flows. Seefluctuations see “Item 5. Operating and Financial Review and Prospects – Foreign Currency Exchange Rate Exposure” for details on the impact of these exchange rate fluctuations..
The following table sets forth (i) the average, high and low Noon Buying Rates for the euro expressed as U.S. dollars per €1.00€1.00 for the past five years on an annual basis and (ii) the high and low Noon Buying Rates on a monthly basis from July 20142015 through and including March 6, 2015.11, 2016.
Year | Average(1) | High | Low | Average(1) | High | Low | ||||||||||||||||||
2010 | 1.3216 | 1.4536 | 1.1959 | |||||||||||||||||||||
2011 | 1.4002 | 1.4875 | 1.2926 | 1.4002 | 1.4875 | 1.2926 | ||||||||||||||||||
2012 | 1.2909 | 1.3463 | 1.2062 | 1.2909 | 1.3463 | 1.2062 | ||||||||||||||||||
2013 | 1.3303 | 1.3816 | 1.2774 | 1.3303 | 1.3816 | 1.2774 | ||||||||||||||||||
2014 | 1.3210 | 1.3927 | 1.2101 | 1.3210 | 1.3927 | 1.2101 | ||||||||||||||||||
2015 | 1.1032 | 1.2015 | 1.0524 |
Month | High | Low | High | Low | ||||||||||||
2014 | ||||||||||||||||
2015 | ||||||||||||||||
July | 1.3681 | 1.3378 | 1.1150 | 1.0848 | ||||||||||||
August | 1.3436 | 1.3150 | 1.1580 | 1.0868 | ||||||||||||
September | 1.3136 | 1.2628 | 1.1358 | 1.1104 | ||||||||||||
October | 1.2812 | 1.2517 | 1.1437 | 1.0963 | ||||||||||||
November | 1.2554 | 1.2394 | 1.1026 | 1.0562 | ||||||||||||
December | 1.2504 | 1.2101 | 1.1025 | 1.0573 | ||||||||||||
2015 | ||||||||||||||||
2016 | ||||||||||||||||
January | 1.2015 | 1.1279 | 1.0964 | 1.0743 | ||||||||||||
February | 1.1462 | 1.1197 | 1.1362 | 1.0868 | ||||||||||||
March (through March 6, 2015) | 1.1212 | 1.0855 | ||||||||||||||
March (through March 11, 2016) | 1.1180 | 1.0845 |
(1) The average of the applicable Noon Buying Rates on the last day of each month during the relevant period.
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The Noon Buying Rate on March 6, 201511, 2016 was US$1.08551.1180 per €1.00.€1.00.
Dividend Distribution Policy
Dividends are jointly proposed by SAP SE’s Supervisory Board (Aufsichtsrat) and Executive Board (Vorstand) based on SAP SE’s year-end stand-alone statutory financial statements, subject to approval by the Annual General Meeting of Shareholders. Dividends are officially declared for the prior year at SAP SE’s Annual General Meeting of Shareholders. SAP SE’s Annual General Meeting of Shareholders usually convenes during the second quarter of each year. Dividends are usually remitted to the custodian bank on behalf of the shareholder within one business day following the Annual General Meeting of Shareholders. Record holders of the ADRs on the dividend record date will be entitled to receive payment of the dividend declared in respect of the year for which it is declared. Cash dividends payable to such holders will be paid to the Depositary in euro and, subject to certain exceptions, will be converted by the Depositary into U.S. dollars.
Dividends paid to holders of the ADRs may be subject to German withholding tax. See “Item 8. Financial Information – Other Financial Information – Dividend Policy” and “Item 10. Additional Information – Taxation,” for further information.
Part I
Item 3
Annual Dividends Paid and Proposed
The following table sets forth in euro the annual dividends paid or proposed to be paid per ordinary share in respect of each of the years indicated. One SAP ADR currently represents one SAP SE ordinary share.
Accordingly, the final dividend per ADR is equal to the dividend for one SAP SE ordinary share and is dependent on the euro/U.S. dollar exchange rate. The table does not reflect tax credits that may be available to German taxpayers who receive dividend payments. If you own our ordinary shares or ADRs and if you are a U.S. resident, refer to “Item 10. Additional Information – Taxation,” for further information.
Dividend Paid per Ordinary Share | ||||||||||||||||
Year Ended December 31, | € | US$ | Dividend Paid per Ordinary Share | |||||||||||||
2010 | 0.60 | 0.85 | (1) | |||||||||||||
Year Ended December 31, | € | US$ | ||||||||||||||
1.10 | (2) | 1.38 | (1) | 1.10 | (2) | 1.38(1) | ||||||||||
2012 | 0.85 | 1.11 | (1) | 0.85 | 1.11(1) | |||||||||||
2013 | 1.00 | 1.37 | (1) | 1.00 | 1.37(1) | |||||||||||
2014(proposed) | 1.10 | (3) | 1.19 | (3),(4) | ||||||||||||
2014 | 1.10 | 1.22(1) | ||||||||||||||
2015(proposed) | 1.15 | (3) | 1.29(3 | ),(4) |
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(1) Translated for the convenience of the reader from euro into U.S. dollars at the Noon Buying Rate for converting euro into U.S. dollars on the dividend payment date. The Depositary is required to convert any dividend payments received from SAP as promptly as practicable upon receipt.
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(2) Thereof a special dividend of€0.35 per share to celebrate our 40th anniversary.
(3) Subject to approval at the Annual General Meeting of Shareholders of SAP SE currently scheduled to be held on May 12, 2016. (4) Translated for the convenience of the reader from euro into U.S. dollars at the Noon Buying Rate for converting euro into U.S. dollars on March 11, 2016 of US$1.1180 per€1.00. The dividend paid may differ due to changes in the exchange rate. |
The amount of dividends paid on the ordinary shares depends on the amount of profits to be distributed by SAP SE, which depends in part upon our financial performance. In addition, the amount of dividends received by holders of ADRs may be affected by fluctuations in exchange rates (see “Item 3. Key Information – Exchange Rates”). The timing, declaration, amount and amountpayment of any future dividend payments will depend upon our future earnings, capital needs and other relevant factors, in each case as proposed by the Executive Board and the Supervisory Board of SAP SE and approved by the Annual General Meeting of Shareholders.
Economic, Political, Social, and Regulatory Risk
Uncertainty in the global economy, financial markets, or political conditions could have a negative impact on our business, financial position, profit, andas well as cash flows, and put pressure on our operating profit.
Our business is influenced by multiple risk factors that are both difficult to predict and beyond our influence and
control. These factors include global economic and business conditions, and fluctuations in national currencies. Other examples are political developments and general regulations as well as budgetary constraints or shifts in spending priorities of national governments.
Macroeconomic developments, such as afinancial market volatility episodes, global economic crisis,crises, chronic fiscal imbalances, and slowing economic conditions, or disruptions in emerging markets, might decrease thecould limit our customers’ ability and willingness of our customers to invest in our solutions or might lead to delays in purchasing.delay purchases. In addition, changes in the euro conversion rates for particular currencies might have an adverse effect on business activities with local customers and partners. Furthermore, political instabilities in regions such as the Middle East and Africa, crisis situationspolitical crises (such as in Greece or Ukraine), natural disasters, and pandemic diseases (such as Ebola)Ebola in West Africa) and terrorist attacks (such as the attacks in Paris, France, in November 2015) could contribute to economic and political uncertainty.
These events could reduce the demand for SAP software and services, and lead to:
Delays in purchases, decreased deal size, or cancelations of proposed investments
Potential lawsuits from customers due to denied provision of service as a result of sanctioned party lists or export control issues
Higher credit barriers for customers, reducing their ability to finance software purchases
Increased number of bankruptcies among customers, business partners, and key suppliers
Increased default risk, which may lead to significant impairment charges in the future
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Market disruption from aggressive competitive behavior, acquisitions, or business practices
Increased price competition and demand for cheaper products and services
– | Delays in purchases, decreased deal size, or cancellations of proposed investments |
– | Potential lawsuits from customers due to denied provision of service as a result of sanctioned-party lists or export control issues |
– | Higher credit barriers for customers, reducing their ability to finance software purchases |
– | Increased number of bankruptcies among customers, business partners, and key suppliers |
– | Increased default risk, which may lead to significant impairment charges in the future |
– | Market disruption from aggressive competitive behavior, acquisitions, or business practices |
– | Increased price competition and demand for cheaper products and services |
Any one or more of these mightdevelopments could reduce our ability to sell and deliver our software and services which could have an adverse effect on our business, financial position, profit, and cash flows.
Our international business activities and processes expose us to numerous and often conflicting laws and regulations, policies, standards or other requirements and sometimes even conflicting regulatory requirements, and to risks that could harm our business, financial position, profit, and cash flows.
We are a global company and currently market our products and services in more than 180 countries and territories in the Americas (including Latin(Latin America and North America); Asia Pacific Japan (APJ); China, Hong Kong, TaiwanMacau, and MacauTaiwan (Greater China); Europe, Middle East, and Africa (EMEA); and Middle and Eastern Europe (MEE) regions. Our business in these countries is subject
to numerous risks inherent in international business operations. Among others, these risks include:
Conflict and overlap among tax regimes
Possible tax constraints impeding business operations in certain countries
Expenses associated with the localization of our products and compliance with local regulatory requirements
Discriminatory or conflicting fiscal policies
Operational difficulties in countries with a high corruption perceptions index
Protectionist trade policies and regulations for import and export
Works councils, labor unions, and immigration laws in different countries
Data protection and privacy in regard to access by government authorities to customer, partner, or employee data
Difficulties enforcing intellectual property and contractual rights in certain jurisdictions
Country-specific software certification requirements
– | Data protection and privacy regulation regarding access by government authorities to customer, partner, or employee data |
– | Data residency requirements (the requirement to store certain data only in and, in some cases, also to access such data only from within a certain jurisdiction) |
– | Conflict and overlap among tax regimes |
– | Possible tax constraints impeding business operations in certain countries |
– | Expenses associated with the localization of our products and compliance with local regulatory requirements |
– | Discriminatory or conflicting fiscal policies |
– | Operational difficulties in countries with a high corruption perceptions index |
– | Protectionist trade policies, import and export regulations, and trade sanctions and embargoes |
– | Works councils, labor unions, and immigration laws in different countries |
– | Difficulties enforcing intellectual property and contractual rights in certain jurisdictions |
– | Country-specific software certification requirements |
– | Challenges with effectively managing a large distribution network of third-party companies |
– | Compliance with various industry standards (such as Payment Card Industry Data Security Standard) |
As we expand further into new countries and markets, these risks could intensify. The
application of these laws and regulations to our business is sometimes unclear, subject to change over time, and sometimes mayoften conflict between differentamong jurisdictions. Additionally, these laws and governments’ approachgovernment approaches to enforcement as wellare continuing to change and evolve, just as our products and services are continuing to change andcontinually evolve. Compliance with these types of regulation mayvarying laws and regulations could involve significant costs or require changes in products or business practices. Non-compliance could result in the imposition of penalties being imposed on us or cessation of orders that we stop thedue to alleged noncompliantnon-compliant activity. One or more of these factors could have an adverse effect on our operations globally or in one or more countries or regions, which could have an adverse effect on our business, financial position, profit, and cash flows.
Social and political instability caused by state-based conflicts, terrorist attacks, civil unrest, war, or international hostilities, as well as pandemic disease outbreaks or natural disasters, may disrupt SAP’s business operations.
Terrorist attacks and(such as the attacks in Paris in November 2015) as well as other acts of violence or war, civil, religious, and political unrest (such as in Ukraine, Israel, Syria, and in other parts of the Middle East, in Ukraine, Israel, Syria, Libya, and in other parts of Africa),; natural disasters (such as
hurricanes, flooding, or similar events); or pandemic diseases (such as Ebola)Ebola in West Africa) could have a significant adverse effect on the relatedlocal economy orand beyond. Such an event could lead, for example, to the loss of a significant number of our employees, or to the disruption or disablement of operations at our locations, and could affect our ability to provide business services and maintain effective business operations. Furthermore, this could have a significant adverse effect on our partners as well as our customers and their investment decisions, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
Market Risks
Our established customers might not buy additional software solutions, subscribe to our cloud offerings, renew maintenance agreements, purchase additional professional services, or they might switch to other products or service offerings (including competitive products).
In 2014,2015, we offered a wide range of support services including SAP MaxAttention, SAP Enterprise Support, and SAP Product Support for
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Large Enterprises. We continuecontinued to depend materially on the success of our support portfolio and on our ability to deliver high-quality services. Traditionally, our large installed customer base generates additional new software, maintenance, consulting, and training revenue. Despite the high quality and service level of our transformed and expanded service offering in the area of premium engagements,support services, we may be unable to meet customer expectations.expectations with regards to delivery and value proposition. This may lead to a potentially adverse impact on customer experience. Existing customers might cancel or not renew their maintenance contracts, decide not to buy additional products and services, not subscribe to our cloud offerings, or accept alternative offerings from other vendors. In addition, the increasing volume in our cloud business as well as the conversion of traditional on-premise licenses to cloud subscriptionsubscriptions licenses could have a potential negative impact on our software and maintenance revenue streams. This could have an adverse effect on our on-premise software and maintenance business, financial position, profit, and cash flows.
The success of our cloud computing strategy depends on market perception and an increasing market adoption of our cloud solutions and managed cloud services. Insufficient adoption of our solutions and services could lead to a loss of SAP’s position as a leading cloud company.
The market for cloud computing is increasing and shows strong growth relative to the market for our on-premise solutions. To offer a broad cloud service portfolio and generate the associated business value for our customers, we have acquired cloud computing companies such as SuccessFactors, Ariba, Concur, Fieldglass, and Concur.SuccessFactors. Due to ongoing contracts and previous
substantial investments to integrate traditional on-premise enterprise software into their businesses, as well as concerns about data protection, security capabilities, and reliability, customers and partners might be reluctant or unwilling to migrate to the cloud.
Other factors that could affect the market acceptance of cloud solutions and services include:
Concerns with entrusting a third party to store and manage critical employee or company confidential data
Customer concerns about security capabilities and reliability
Customer concerns about the ability to scale operations for large enterprise customers
The level of configurability or customizability of the software
Missing integration scenarios betweenon-premise products and cloud-to-cloud solutions
Failure in secure and successful delivery of cloud services by any cloud service provider could have a negative impact on customer trust in cloud solutions
Strategic alliances amongst our competitors in the cloud area could lead to significantly increased competition in the market
– | Concerns with entrusting a third-party to store and manage critical employee or company confidential data |
– | Customer concerns about security capabilities and reliability |
– | Customer concerns about the ability to scale operations for large enterprise customers |
– | The level of configurability or customizability of the software |
– | Missing integration scenarios between on-premise products and cloud-to-cloud solutions |
– | Failure to securely and successfully deliver cloud services by any cloud service provider could have a negative impact on customer trust in cloud solutions |
– | Strategic alliances among our competitors in the cloud area could lead to significantly increased competition in the market with regards to pricing and ability to integrate solutions |
– | Failure to get the full commitment of our partners might reduce speed and impact in the market reach |
If organizations do not perceive the benefits of cloud computing, the market for cloud business might not develop further, or it may develop more slowly than we expect, either of which could have an adverse effect on our business, financial position, profit, reputation and cash flows.
Our market share and profit could decline due to increased competition, market consolidation and technological innovation andas well as new business models in the software industry.
The software industry continues to evolve rapidly and is currently undergoing a significant shift due to innovations in the areas of mobile,enterprise mobility, cybersecurity, Big Data, connectivity,hyperconnectivity, the Internet of Things, digital,digitization, supercomputing, cloud computing, and social media. While smaller innovative companies tend to create new markets continuously and expand their reach through mergers, large traditional IT vendors tend to enter such markets mostly through acquisitions. SAP faces increased competition in itsour business environment from traditional as well as new competitors. This competition could result in increasedcause price pressure, cost increases, and loss of market share, which could have an adverse effect on our business, financial position, profit, and cash flows.
Additionally, related to our Applications, Technology, and Services segment, customers could change their buying behavior by accelerating their acceptance of cloud solutions to reduce their investments, which might have a temporary adverse effect on our operating results. Furthermore, the trend in the market to invest more in cloud solutions might lead to an increaseda risk of the potential loss of existing on-premise customers. It may also have a temporary adverse effect on our revenue due to an increasedthe number of conversions from on-premise licenses to cloud subscriptions from existing SAP customers in our installed base.base, as we recognize cloud subscriptions revenue over the respective service provision, and that typically ranges from one-to-three years with some up to five years.
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Business Strategy Risks
Demand for our new solutions may not develop as planned and our strategy on new business models and flexible consumption models may not be successful.
Our software business consists of new software licenses, software license updates, and support and maintenance fees as well as of cloud subscriptions. Our customers are lookingexpecting to take advantage of technological breakthroughs from SAP without compromising their previous IT investments. However, the introduction of new SAP solutions, technologies, and business models as well as delivery and consumption models is subject to uncertainties as to whether customers will be able to perceive the additional value and realize the expected benefits.benefits we deliver along our road maps. There is an increaseda risk that such uncertainties may lead customers to wait for proof of concept through reference customers or more mature versions first, which might result in a lower level of adoption of our new solutions, technologies, business models, and flexible consumption models, or no adoption at all. This could have an adverse effect on our business, financial position, profit, and cash flows.
We recognize cloud subscription and support revenue over the term of the respective service periods, and our business depends substantially on customers renewing their agreements and purchasing additional modules or user licenses from us. Although anyThough downturns or upturns in cloud sales may not be immediately reflected in our operating results, any decline in our customer renewals would harm the future operating results of theour cloud business.
We recognize cloud subscription and supportsubscriptions revenue overas we provide the respective service provision,services, which typically range from one to threeone-to-three years with some up to five years. As a result, most of the respectiveThis revenue recognized in a given period originates from agreements entered into in earlier periods. Consequently, a shortfall in demand forrecognition and our cloud portfolio in any period may not significantly impact our cloudincreasing subscription and support revenue for that quarter, butrevenues could have ana temporary adverse effect on targeted cloud subscriptionour financial position, profit, and support revenue in future periods.cash flows.
To maintain or improve our operating results in the cloud business, it is important that our
customers renew their agreements with us when the initial contract term expires and purchase additional modules or additional users.
capacities. Our customers have no obligation to renew their subscriptions after the initial subscription period, and we cannot assure that customers will renew subscriptions at the same or at a higher level of service, or at all.
Our customers’ renewal rates may decline or fluctuate as a result of a number ofvarious factors, including their satisfaction or dissatisfaction with our cloud solution and services portfolio,portfolio; our ability to efficiently provide cloud services according to customer expectations and meeting the service level agreements, service availability and provisioning, the integration capabilities of our cloud solutions into their existing solutionIT environment (including hybrid solutions combining both cloud andon-premise solutions),; our customer support,support; concerns onregarding stable, efficient, and secure cloud operations and in compliance with legal and regulatory requirements,requirements; our pricing,pricing; the pricespricing of competing products or services,services; mergers and acquisitions affecting our customer base, the effects ofbase; global economic conditions, orconditions; and reductions in our customers’ spending levels.
If our customers do not renew their subscriptions, renew on terms less favorable terms,to us, or fail to purchase additional modules or users, our revenue and billings maywill decline, and we may not realize significantly improved operating results from our customer base. This could have an adverse effect on our business, financial position, profit, and cash flows.
If we are unable to scale and enhance an effective partner ecosystem, increased revenue already included in our forecast might be endangered.not increase as expected.
An open and vibrant partner ecosystem is a fundamental pillar of our success and growth strategy. We have entered into partnership agreements that drive co-innovation on our platforms, profitably expand all our routes-to-marketroutes to market to optimize market coverage, optimize cloud delivery, and provide high-quality services capacity in all market segments. Partners play a key role in driving market adoption of our entire solutions portfolio, by co-innovating on our platforms, embedding our technology, and reselling and/or implementing our software.
If partners consider our products or services model less strategic and/or financially less attractive compared to our competition and/or less appropriate for their respective channel and target market, if partners fear direct competition by SAP or if SAP fails to establish and enable a network of qualified partners that meetmeeting our quality requirements and the
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requirements of our customers, then, among other things, partners might not:
– | Develop a sufficient number of new solutions and content on our platforms |
– | Provide high-quality products and services to meet customer expectations |
– | Drive growth of references by creating customer use cases and demo systems |
Develop a sufficient number of new solutions and content on our platforms
Provide high-quality products and services to our customers
Drive growth of references by creating customer use cases and demo systems
Sufficiently embed our solutions to profitably drive product adoption, especially with new innovations such as SAP HANA
Enable and train sufficient resources to promote sell and support to scale into targeted markets
Comply with applicable laws and regulations, resulting in delayed, disrupted, or terminated sales and services
Transform their business model in accordance with the transformation of SAP’s business model in a timely manner
Renew their existing agreements with us or enter into new agreements on terms acceptable to us or at all
– | Embed our solutions sufficiently enough to profitably drive product adoption, especially with innovations such as SAP S/4HANA and SAP HANA Cloud Platform |
– | Enable and train sufficient resources to promote, sell, and support to scale to targeted markets |
– | Comply with applicable laws and regulations, resulting in delayed, disrupted, or terminated sales and services |
– | Transform their business model in accordance with the transformation of SAP’s business model in a timely manner |
– | Renew their existing agreements with us or enter into new agreements on terms acceptable to us or at all |
– | Provide ability and capacity to meet customer expectations regarding service provisioning. |
If one or more of these risks materialize, this may have an adverse effect on the demand for our products and services.services as well as the partner’s loyalty and ability to deliver. As a result, we may not be able to scale our business to compete successfully with other software vendors, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
Human Capital Risks
If we do not effectively manage our geographically dispersed workforce, we may not be able to run our business efficiently and successfully.
Our success is dependent on appropriate alignment of our internal and external workforce planning processes and our location strategy with our general strategy. It is critical that we manage our internationally dispersed workforce effectively, taking shortshort- and long-term workforce and skill requirements into consideration. This applies to the management of our internal as well as our external workforce. Changes in headcount and infrastructure needs as well as local legal or tax regulations could result in a mismatch
between our expenses and revenue. Failure to manage our geographically dispersed workforce effectively could hinder our ability to run our business efficiently and successfully and could have an adverse effect on our business, financial position, profit, and cash flows.
If we are unable to attract, develop, and retain leaders and employees with specialized knowledge and technology skills, or are unable to achieve internal diversity and inclusion objectives, we might not be able to manage our operations effectively and successfully, or develop successful new solutions and services.
Our highly qualified workforce is the foundation for our continued success. In certain regions and specific technology and solution areas, we continue to set very
high growth targets, specifically in countries and regions such as Africa, China, Latin America, and Latin America.the Middle East. In the execution of SAP’s strategic priorities, we depend on highly skilled and specialized personnel and leaders, both male and female. Successful maintenance and expansion of our highly skilled and specialized workforce in the area of cloud is a key success factor for our transition to becomebe the leading cloud company. The availability of such personnel is limited and, as a result, competition in our industry is intense and could expose us to claims by other companies seeking to prevent their employees from working for a competitor. If we are unable to identify, attract, develop, motivate, adequately compensate, and retain well-qualified and engaged personnel, or if existing highly skilled and specialized personnel leave SAP and ready successors or adequate replacements are not available, we may not be able to manage our operations effectively, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows. Furthermore, we may not be able to develop, sell, or implement successful new solutions and services as planned. This is particularly true as we continue to introduce new and innovative technology offerings and expand our business in emerging markets. The lack of appropriate or inadequately executed benefit and compensation programs could limit SAP’s ability to attract or retain qualified employees and lead to financial losses. In addition, we might not be able to achieve our internal gender diversity objectives to increase the number of women in management from 18% in 2010 to 25% by 2017.
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Organizational and Governance-Related Risks
Laws and regulatory requirements in Germany, the United States, and elsewhere have become much more stringent.
As a European company domiciled in Germany with securities listed in Germany and the United States, we are subject to European, German, U.S., and other governance-related regulatory requirements. Changes in laws and regulations and related interpretations, including changes in accounting standards and taxation requirements, and increased enforcement actions and penalties may alter the business environment in which we operate. Regulatory requirements have become significantly more stringent in recent years, and some legislation, such as the anticorruption legislation in Germany, the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, and other local laws prohibiting corrupt payments by employees, vendors, distributors, or agents, is being applied more rigorously. Emerging markets are a significant focus of our international growth strategy. The nature of these markets presents a number of inherent risks. A failure by usSAP to comply with applicable laws and regulations, or any related
allegations of wrongdoing against us, whether merited or not, could have an adverse effect on our business, financial position, profit, cash flows and reputation.
Non-compliance with applicable data protection and privacy laws or failure to adequately meet the requirements of SAP’s customers with respect to our products and services could lead to civil liabilities and fines, as well as loss of customers and damage to SAP’s reputation.
As a global software and service provider, SAP is required to comply with thelocal laws in the locations wherewherever SAP does business. SAPConsequently, we must ensure that any legal requirements in connection with the provision of products and its subsidiariesservices are facing a surge ofproperly implemented. With regards to data protection and privacy laws and regulations aroundrequirements, significant changes are expected subject to the world, with further changes to be expected in the future, for example, by theupcoming European Data Protection Regulation proposedRegulation. Furthermore, SAP is affected by the consequences of the decision of the European Commission.Court of Justice (ECJ), which declared Safe Harbor invalid, so that data transfers from within the European Union (EU) to the United States are no longer permitted based on Safe Harbor. This means that acquired SAP affiliates that have not already implemented the requirements for data transfers based on the Standard Contractual Clauses will have to implement these requirements immediately. However, this will be ensured by the implementation of the new Intra Group Agreement that provides a data protection level at the Standard Contractual Clauses within the SAP Group. These laws and regulations amend and supplement existing requirements regarding the processing of personal data that SAP and SAP customers must fulfill and which we must consequently address with our products and
services, including cloud delivery. Failure to comply with applicable laws or to adequately address privacy concerns of customers, even if unfounded, could lead to investigations by supervisory authorities, civil liability, fines, (in the future, potentially calculated based on the Company’s annual revenue), loss of customers, damage to our reputation, and could have an adverse effect on our business, financial position, profit, and cash flows.
Further, recent landmark decisions by the ECJ on data protection matters, as well as official statements made by the European data protection supervisory authorities, require SAP to carefully review our globalized business practices. Most importantly, the ECJ on October 6, 2015, ruled that data transfers by European companies to data processors in the United States can no longer be based on Safe Harbor. While SAP has not widely relied upon Safe Harbor, the data protection supervisory authorities have challenged the legality of other transfer mechanisms, such as the Standard Contractual Clauses used by SAP, on the same grounds by which the ECJ has declared Safe Harbor invalid. The data protection
supervisory authorities have threatened to start enforcement activities as early as end of January 2016 against European companies that still transfer data to the United States (or grant U.S. companies remote access to systems containing personal data in the EU) based on a transfer mechanism that the authorities consider invalid. Enforcement activities against SAP or against SAP customers because of services and products that SAP provides with the help of our U.S.-based entities and/or U.S.-based suppliers could lead to fines, civil liability, loss of customers, and damage to our reputation, and could have an adverse effect on our business, financial position, profit, and cash flows.
It is conceivable that data transfers to further countries that do not provide a level of data protection and privacy comparable to the European level may be challenged, too.
Failure to respond to meet customer, partner, or other stakeholder expectations or generally accepted standards on climate change, energy constraints, and our social investment strategy could negatively impact SAP’s business, results of operations, and reputation.
Energy and emissions management are an integral component of our holistic management of social, environmental, and economic risks and opportunities. We have identified risks in these major areas:
Our solutions and green IT
Our own operations – energy management and other environmental issues such as carbon management, water use, and waste
– | Our solutions |
– | Our own operations – energy management and other environmental issues such as carbon management, water use, and waste |
Because our customers, employees, and investors expect a reliable energy and carbon strategy, we have reemphasized our previously communicated targets, especially our 2020 target for greenhouse gas emissions. In addition,case these targets cannot be achieved, our customers might no longer recognize SAP for itsour environmental leadership and might buy other vendors’ products and services. Consequently, we could fail to achieve our revenue target. If we do not meet stakeholder expectations in the areas identified, our rating in sustainable investment indicesindexes might decrease, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
Unethical behavior and non-compliance with our integrity standards due to intentional and fraudulent employee behavior of employees could seriously harm our business, financial position, profit, and reputation.
SAP’s leadership position in the global market is founded on the long-term and sustainable trust of
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our stakeholders worldwide. Our heritage is one of corporate transparency, open communication with financial markets, and adherence to recognized standards of
business integrity. The SAP Code of Business Conduct, adopted by the Executive Board on January 29, 2003, put into wordsand updated as necessary since then, memorialized and supplemented the already existing guidelines and expectations for the business behavior practiced at SAP.
However, we may encounter unethical behavior and non-compliance with our integrity standards due to intentional and fraudulent behavior of individual employees, possibly in collusion with external third parties. In addition to intentional behavior, problems could also arise due to negligence in the adherence to rules and regulations. Unethical behavior and misconduct attributable to SAP could not only lead to criminal charges, fines, and claims by injured parties, but also to financial loss, and severe reputational damage. This could have an adverse effect on our business, financial position, profit, and cash flows.
Principal shareholders may be able to exert control over our future direction and operations.
If SAP SE’s principal shareholders and the holdings of entities controlled by them vote in the same manner, this could delay, prevent or facilitate a change in control of SAP or other significant changes to SAP SE or its capital structure. See “Item 7. Major Shareholders and Related-Party Transactions – Major Shareholders” for further information.
U.S. judgments may be difficult or impossible to enforce against us or our Board members.
Currently, except for Bill McDermott and Robert Enslin, all members of SAP SE’s Executive Board and all members of the Supervisory Board are non-residents of the United States. A substantial portion of the assets of SAP and our Board members are located outside the United States. As a result, it may not be possible to effect service of process within the United States upon non-U.S. resident persons or SAP or to enforce against non-U.S. resident persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the securities laws of the United States. In addition, awards of punitive damages in actions brought in the United States or elsewhere might be unenforceable in Germany.
Communication and Information Risks
Our controls and efforts to prevent the unauthorized disclosure of confidential information might not always be effective.
Confidential or strictly confidential information and internal information that is related to topics such as our strategy, new technologies, mergers and acquisitions, unpublished financial results, or personal data, could be prematurely or inadvertently disclosed and subsequently lead to market
misperception in the market.and volatility. This could require us to notify multiple regulatory agencies and comply with applicable regulatory requirements and, where appropriate, the data owner, which could result in a loss of reputation for SAP. For example, leaked information during a merger or acquisition deal could cause the loss of our deal target, or our share price could declinereact significantly in case of prematurely published financial results. This could have an adverse effect on our market position and lead to fines and penalties. In addition, this could have an adverse effect on our business, financial position, profit, and cash flows.
Financial Risks
Our sales are subject to quarterly fluctuations and our sales forecasts may not be accurate.
Our revenue and operating results can vary and have varied in the past, sometimes substantially, from quarter to quarter. Our revenue in general, and in particular our software revenue in particular, is difficult to forecast for a number of reasons, including:
The relatively long sales cycles for our products
The large size, complexity, and extended timing of individual license transactions
The introduction of new licensing and deployment models such as cloud subscription models
The timing of the introduction of new products or product enhancements by SAP or our competitors
Changes in customer budgets
Decreased software sales that could have an adverse effect on related maintenance and services revenue
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The timing, size, and length of customers’ services projects
Deployment models that require the recognition of revenue over an extended period of time
Adoption of and conversion to new business models leading to changed or delayed payment terms
Seasonality of a customer’s technology purchases
Limited visibility during the ongoing integration of acquired companies into their ability to accurately predict their sales pipelines and the likelihood that the projected pipeline will convert favorably into sales
Other general economic, social, environmental, and market conditions, such as the global economic crisis and the current difficulties for countries with large debt
– | The relatively long sales cycles for our products |
– | The large size, complexity, and extended timing of individual customer transactions |
– | The introduction of licensing and deployment models such as cloud subscription models |
– | The timing of the introduction of new products or product enhancements by SAP or our competitors |
– | Changes in customer budgets |
– | Decreased software sales that could have an adverse effect on related maintenance and services revenue |
– | The timing, size, and length of customers’ services projects |
– | Deployment models that require the recognition of revenue over an extended period of time |
– | Adoption of, and conversion to, new business models leading to changed or delayed payment terms |
– | Seasonality of a customers’ technology purchases |
– | Limited visibility during the ongoing integration of acquired companies into their ability to accurately predict their sales pipelines and the likelihood that the projected pipeline will convert favorably into sales |
– | Other general economic, social, environmental, and market conditions, such as a global economic crisis and difficulties for countries with large debt |
Since many of our customers make their IT purchasing decisions near the end of calendar quarters, and with a significant percentage of those decisions being made during our fourth quarter, even a small delay in purchasing decisions for our on-premise software could have an adverse effect on our revenue results for a given year. Our dependence on large transactions has decreased in recent years with a trend towards an increased number of transactions coupled with a decrease in deal size. However, the loss or delay of one
or a few large opportunities which are still characteristic of the large enterprise segment, could have an adverse effect on our business, financial position, profit, and cash flows.
External factors could impact our liquidity and increase the default risk associated with, and the valuation of, our financial assets.
Macroeconomic factors such as an economic downturn could have an adverse effect on our future liquidity. We use a globally centralized financial management to control financial risk, such as liquidity, exchange rate, interest rate, counterparty, and equity price risks. The primary aim is to maintain liquidity in the SAP Group at a level that is adequate to meet our obligations at any time. Our total Group liquidity is supported by our strong operating cash flows, of which a large
part is recurring, and by credit facilities onfrom which we can draw if necessary. However, adverse macroeconomic factors could increase the default risk associated with the investment of our total Group liquidity including possible liquidity shortages limiting SAP’s ability to repay financial debt. This could have an impact on the value of our financial assets, which could have an adverse effect on our business, financial position, profit, and cash flows.
Management’sManagement use of estimates could negatively affect our business, financial position, profit, and cash flows.
To comply with IFRS, management is required to make numerous judgments, estimates, and assumptions (among others for our major patent disputes) that affect the reported financial figures. The facts and circumstances, as well as assumptions on which management bases these estimates and judgments and management’s judgment regarding the facts and circumstances, may change from time to time and this could result in significant changes in the estimates and judgments and, consequently, in the reported financials. Such changes could have an adverse effect on our business, financial position, profit and cash flows.
Current and future accounting pronouncements and other financial reporting standards, especially but not only concerning revenue recognition, may negatively impact theour financial results we present.results.
We regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us. As a result of new standards, changes to existing standards (including the new IFRS 15 on revenue from contracts with customers that we will likely need to adopt in 2017),2018) and changes in their interpretation, we might be required to change our accounting policies, particularly concerning revenue recognition, to alter our operational policies so that they reflect new or amended financial reporting standards, or to restate our published financial
statements. Such changes may have an adverse effect on our reputation, business, financial position, and profit, or cause an adverse deviation from our revenue and operating profit target.
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Because we conduct operations throughout the world, our business, financial position, profit, and cash flows may be affected by currency and interest rate fluctuations.
Our SAP Group-wide management reporting and our external financial reporting are both in euros. Nevertheless, a significant portion of our business is conducted in currencies other than the euro. Approximately 71%74% of our revenue in 20142015 was attributable to operations outside the euro area and was translated into euros. Consequently, period-over-period changes in the euro rates for particular currencies can significantly affect our reported revenuerevenues, profits and income.cash flows. In general, appreciation of the euro relative to another currency has an adverse effect while depreciation of the euro relative to another currency has a positive effect. Variable interest balance-sheet items are also subject to changes in interest rates. Such changes may have an adverse effect on our business, financial position, profit and cash flows or cause an adverse deviation from our revenue and operating profit target.
The cost of using derivative instruments to hedge share-based payments may exceed the benefits of hedging them.
We use derivative instruments to reduce the impact of our share-based payments on our income statement and to limit future expense associated with those plans. We decideBased on a case-by-case basis whether and to what extentdefined hedging strategy, we should hedge this risk.align the decision of individual hedging transactions with the Group CFO in the Treasury Committee. The expense of hedging the share-based payments could exceed the benefit achieved by hedging them. On the other hand, a decision to leave the plans materially unhedged could prove disadvantageous. This could have an adverse effect on our business, financial position, profit and cash flows or cause an adverse deviation from our revenue and operating profit target.
The market price for our ADRs and ordinary shares may be volatile.
The market prices of our ADRs and ordinary shares have experienced and may continue to experience significant volatility in response to various factors including, but not limited to:
unauthorized or inadvertent premature disclosure of confidential information, including information concerning pending acquisition negotiations or acquisition rumors;
– | unauthorized or inadvertent premature disclosure of confidential information, including information concerning pending acquisition negotiations or acquisition rumors; |
the announcement of new products or product enhancements by us or our competitors;
technological innovation by us or our competitors;
quarterly variations in our results or our competitors’ results of operations or results that fail to meet market expectations;
changes in revenue and revenue growth rates on a consolidated basis or for specific geographic areas, business units, products or product categories;
changes in our externally communicated outlook;
changes in our capital structure, for example due to the potential future issuance of additional debt instruments;
general market conditions specific to particular industries;
litigation to which we are a party;
general and country specific economic or political conditions (particularly wars, terrorist attacks, etc.);
proposed and completed acquisitions or other significant transactions by us or our competitors; and
general market conditions.
– | the announcement of new products or product enhancements by us or our competitors; |
– | technological innovation by us or our competitors; |
– | quarterly variations in our results or our competitors’ results of operations or results that fail to meet market expectations; |
– | changes in revenue and revenue growth rates on a consolidated basis or for specific geographic areas, business units, products or product categories; |
– | changes in our externally communicated outlook; |
– | changes in our capital structure, for example due to the potential future issuance of additional debt instruments; |
– | general market conditions specific to particular industries; |
– | litigation to which we are a party; |
– | general and country specific economic or political conditions (particularly wars, terrorist attacks, etc.); |
– | proposed and completed acquisitions or other significant transactions by us or our competitors; and |
– | general market conditions. |
Many of these factors are beyond our control. In the past, companies that have experienced volatility in the market price of their stock have been subject to shareholder lawsuits, including securities class action litigation. Any such lawsuits against us, with or without merit, could result in substantial costs and the diversion of management’s attention and resources, resulting in a decline in our results of operations and our stock price.
Project Risks
Implementation of SAP software often involves a significant commitment of resources by our customers and is subject to a number of significant risks over which we often have no control.
A core element of our business is the successful implementation of software solutions to enable
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our customers to makemaster complexity and help our customers’ business run at their business a best-run business.best. The implementation of SAP software is led by SAP, by partners, by customers, or by a combination thereof. Depending on various factors, such as the complexity of solutions, the customer’s implementation, integration and migration needs, or the resources required, SAP faces a number of different risks. For example, functional requirement changes, delays in timeline, or deviation from recommended best practices may occur during the course of a project. These scenarios have a direct impact on the project resource model and on securing adequate internal personnel or consultants in a timely manner and could therefore prove challenging.
As a result of these and other risks, SAP and/or some of our customers have incurred significant implementation
costs in connection with the purchase and installation of SAP software products. Some customers’customer implementations have taken longer than planned. We cannot guarantee that we can reduce or eliminate protracted installation or significant third-party consulting costs, for example, that trained consultants will be readily available, that our costs will not exceed the fees agreed in fixed-price contracts, or that customers will be satisfied with the implementation of our software and solutions. Unsuccessful, lengthy, or costly customer implementation and integration projects could result in claims from customers, harm SAP’s reputation, and could have an adverse effect on our business, financial position, profit, and cash flows.
Product and Technology Risks
Undetected security vulnerabilities shipped and deployed within our software products might cause damage to SAP and our customers, and partners.
Customer systems or systems operated by SAP itself to provide services could potentially be compromised by vulnerabilities if they are exploited by hackers. This could lead to theft, destruction, or abuse of data, or systems could be rendered unusable (for example, due to distributed denial of service attacks). The detection of security vulnerabilities in our software, our customers’ systems, or SAP systems used in the provision of services, especially in case of exploitation, could prevent us from meeting our contractual obligations and subsequently might lead to customer claims and
reputational damage, which might have an adverse effect on our business, financial position, profit, and cash flows.
Undetected defects in the introduction of new products and product enhancements could increase our costs, and reduce customer demand.
To achieve market acceptanceOur development investment, including new product launches and high customer satisfaction, our new products and product enhancements, often require long development and testing periods. Development work and market introduction areis subject to risks. For example, software products and services might not completely meet our stringent high-quality standards, including security standards,standards; might not fulfill market needs or customer expectations,expectations; or might not comply with local standards and requirements. Furthermore, this risk also exists with respect to acquired companies’ technologies and products where we might not be able to manage these as quickly and successfully as expected. Therefore, market launches, entering new markets, or the introduction of new innovations could be delayed or not be successful.
In addition, new products and cloud offerings, including third-party technologies we have licensed and open source software components we use in those products, could contain undetected defects or they might not be mature enough from the customer’s point of view for business-critical solutions. The detection and correction of any defects especially after shipmentdelivery could be expensive andtime-consuming and we might not be able to meet the expectations of customers regarding time and quality in the defect resolution process. In some circumstances, we might not be in a position to rectify such defects or entirely meet the expectations of customers, specifically as we are expanding our product portfolio into additional markets. As a result, we might be faced with customer claims for cash refunds, damages, replacement software, or other concessions. The risk of defects and their adverse consequences could increase as we seek to introduce a variety of new software products simultaneouslyand product enhancements at a higher innovation rate. This is especially relevant for cloud products as delivery cycles are even shorter (up to daily deliveries) and our complete cloud product customer base could receive undetected defects simultaneously. Furthermore, for products that use third-party (not SAP) cloud services, we cannot detect defects in advance. Significant undetected defects or delays in introducing new products or product enhancements could affect market acceptance of SAP software products and could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
The use of existing SAP software products by customers in business-critical solutions and
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processes and the relative complexity and technical interdependency of our software products and services create a risk that customers or third parties may pursue warranty, performance, or other claims against us for actual or alleged defects in SAP software products, in our provision of services, or in our application hosting services. We have in the past been, and may in the future be, subject to warranty, performance, or other similar claims.
Although our contracts generally contain provisions designed to limit our exposure due to actual or alleged defects in SAP software products or in our provision of services, these provisions may not cover every eventuality or be effective under the applicable law. Regardless of its merits, any claim could entail substantial expense and require the devotion of significant time and attention by key management personnel. Publicity surrounding such claims could affect our reputation and the demand for our software.
Changes in our rights to use software, cloud services, and technologies we license from third parties whichthat are an integral part of SAP’s products could slow down time to market and influence our license pricing and therefore the competitiveness with other software vendors. Furthermore, it could diminish our software’s or cloud functional capabilities and therefore could jeopardize the stability of our solution portfolio offering.
The numerous third-party technologiessolutions we have licensed and certain open source software components we use have become an integral part of our product and service portfolio. We depend on those technologiessolutions for the functionality of our software orand cloud services. Changes to, or the loss of, third-party licenses as well as open source licenses being construed could significantly increase the cost of these licenses and significantly reduce software or cloud functionality and/or usability of SAP’s software products.or cloud offerings. As a result, we might incur additional development or license costs to ensure the continued functionality of our products, which could have an adverse effect on our business, financial position, profit, and cash flows. This risk increases with each acquisitionof our acquisitions of a company or a company’s intellectual property assets that had been subject to third-party technologysolution licensing, open source software and product standards less rigorous than our own.
If we are unable to keep up with rapid technological, process and service innovations, and new business models andas well as changing market expectations, we might not be able to compete effectively.
Our future success depends upon our ability to keep pace with technological and process innovations and new business models, as well as our ability to develop new products and services, enhance and expand our existing products and services portfolio, and integrate products and services we obtain through acquisitions. To be successful, we are required to shiftadapt our products and our go-to-market approach to a cloud-based delivery model to satisfy changing customer demand.
We might not be successful in bringing new business models, solutions, solution enhancements, and/or services to market before our competitors. We may also face increasing competition from open source software initiatives in which competitors may provide software and intellectual property free and/or under terms and conditions unfavorable for SAP. In addition, we might not be able to generate enough revenue to offset the significant research and development costs we incur to deliver technological innovations or to offset the required infrastructure costs to deliver our solutions and services as part of our new business models. Moreover, we might not anticipate and develop technological improvements or succeed in adapting our products, services, processes, and business models to technological
change, changing regulatory requirements, emerging industry standards, and changing requirements of our customers and partners. Finally, we might not succeed in producing high-quality products, enhancements, and releases in a timely andcost-effective manner to compete with products, solutions, and other technologies offered by our competitors, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
Our technology and/or product strategy may not be successful or our customers and partners might not adopt our technology platforms and other innovations accordingly.
We offer customers a broad portfolio of products, solutions, and services. Our technology strategy
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centers on SAP HANA as a real-time in-memory computing platform for analytics and applications.applications, the SAP S/4HANA suite as the digital core, the business network, and SAP HANA Cloud Platform as our platform-as-a-service offering. The success of our technology strategy depends on the convergence of SAP HANA with our mobile, cloud, and SAP NetWeaver platform. It also depends on the delivery of SAP solutions based on the SAP HANA platformnew digital framework, as well as the success of our new frameworktechnology continues to deliver business value to meet changing customer expectations regarding end-to-end user experience.expectations. Our technology strategy also relies on our ability to maintain a dynamic network of partner organizations developing their own business applications using our technology platforms.
We might not be successful in integrating our platforms, enabling the complete product and cloud service portfolio, harmonizing our user interface design and technology, integrating acquired technologies, or bringing new solutions based on the SAP HANA platform as well as SAP HANA Cloud Platform to the market as fast as expected.expected, in particular, innovative applications such as SAP S/4HANA. In addition, we may not be able to compete effectively in the area of managed cloud services.services and our new applications and services might not meet customer expectations. As a result, our partner organizations and customers might not adopt the SAP HANA platformour technology platforms, applications, or our managed cloud services quickly enough or they might consider competitive solutions. This could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
Our cloud offerings might be subject to a security attack, become unavailable, or fail to perform properly.
The software used in our cloud portfolio is inherently complex and any defects in product functionality, system stability, or data center operations, or system stability that cause interruptions in the availability of our application portfolio could result in the following:
Lost or delayed market acceptance and sales
Breach of warranty or other contract breach or misrepresentation claims
Sales credits or refunds to our customers or partners
Loss of customers and/or partners
Diversion of development and customer service resources
Breach of data protection and privacy laws and regulations
– | Lost or delayed market acceptance and sales |
– | Breach of warranty or other contract breach or misrepresentation claims |
Customers considering competitive cloud offerings
– | Sales credits or refunds to our customers or partners |
– | Loss of customers and/or partners |
– | Diversion of development and customer service resources |
– | Breach of data protection and privacy laws and regulations |
– | Customers considering competitive cloud offerings |
– | Loss of customer satisfaction and brand reputation |
The costs incurred in correcting any defects or errors might be substantial and could have an adverse effect on our reputation, business, financial position, profit, and cash flows. The availability of our cloud applications could be interrupted by a number of factors, resulting in customers’ inability to access their cloud applications, system outages, failure of our network due to human or other errors, security breaches, or variability in user traffic for our cloud applications. Because of the large amount of data that we collect and manage, it is possible that hardware failures, defects in our software, or errors in our systems could result in data loss or corruption, or cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as significant. Furthermore, the availability of our cloud applications could be interrupted by a number of factors, including customers’ inability to access the Internet, the failure of our network or software systems due to human or other error, security breaches, or variability in user traffic for our cloud applications. Additionally, any loss of the right to use hardware purchased or leased from third parties could result in delays in our ability to provide our cloud applications until equivalent technology is either developed by us or, if available, identified. Furthermore, our cooperation with partners in the area of cloud includes the co-location of data centers that might expose SAP to additional risks in the area of security and data protection, as well as the potential for breached service-level agreements by partners.
We have administrative, technical, and physical security measures in place as well as contracts that require third-party data centers to have appropriate security and data protection and privacy measures in place. In this context, customers might demand to use only use specific and/or local data centers. However, if these security measures are breached as a result of third-party action, employee error or malfeasance, or otherwise, and if, as a result, someone obtains unauthorized access to our customers’ data, which may include personally identifiable information regarding users, our reputation could be damaged, our business may suffer, local data protection and privacy laws or regulations might be breached, and we could incur significant liability.
In addition, our insurance coverage might not cover claims against us for loss or security breach of data or other indirect or consequential damages. Moreover, defending a suit, regardless of its merit, could be costly and time-consuming. In addition to potential liability, if we experience interruptions in the availability of our cloud applications, our reputation could be harmed and we could lose customers.
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Operational Risks
Third parties have claimed, and might claim in the future, that we infringe their intellectual property rights, which could lead to damages being awarded against us and limit our ability to use certain technologies in the future.
We believe that we will increasingly be subject to intellectual property infringement claims as the number of products in our industry segment grows,solution portfolio grows; as we acquire companies with increased use of third-party code including open source code,code; as we expand into new industry segmentsindustries with our products,offerings, resulting in greater overlap in the functional scope of products,offerings; and as non-practicing entities that do not design, manufacture, or distribute products increasingly assert intellectual property infringement claims.
Any claims, with or without merit, and negotiations or litigation relating to such claims, could preclude us from utilizing certain technologies in our products, be time-consuming, result in costly litigation, and require us to pay damages to third parties, stop selling or reconfigure our products and, under certain circumstances, pay fines and indemnify our customers, which could have an adverse effect on our business, financial profile, profit, cash flows, and reputation. They could also require us to enter into royalty and licensing arrangements on terms that are not favorable to us, cause product shipment delays, subject our products to injunctions, require a complete or partial redesign of products, result in delays to our customers’ investment decisions, and damage our reputation.
Software includes many components or modules that provide different features and perform different functions. Some of these features or functions may be subject to third-party intellectual property rights. The rights of another party could encompass technical aspects that are similar to one or more technologies in one or more of our products. Intellectual property rights of third parties could preclude us from using certain technologies in our products or require us to enter into royalty and licensing arrangements on unfavorable or expensive terms.
The software industry is making increasing use of open source software in its development work on solutions. We also integrate certain open source software components from third parties into our software. Open source licenses may require that
the software code in those components or the software into which they are integrated be freely accessible under open source terms. Third-party claims may require us to make freely accessible under open source terms one of our products or non-SAPthird-party (not SAP) software upon which we depend.
Claims and lawsuits against us could have an adverse effect on our business, financial position, profit, cash flows, and reputation.
Claims and lawsuits are brought against us, including claims and lawsuits involving businesses we have acquired. Adverse outcomes to some or all of the claims and lawsuits pending against us might result in the award of significant damages or injunctive relief against us that could hinder our ability to conduct our business and could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
The outcome of litigation and other claims or lawsuits is intrinsically uncertain. Management’s view of the litigation may also change in the future. Actual outcomes of litigation and other claims or lawsuits could differ from the assessments made by management in prior periods, which are the basis for the lawsuit-related provisions we set up according to theour accounting for these litigations and claims under IFRS.
We might not acquire and integrate companies effectively or successfully and our strategic alliances might not be successful.
To expand our business, we have in the past made acquisitions ofacquire businesses, products, and technologies. Suchtechnologies, and we expect to continue to make acquisitions in the future. Over time certain of these acquisitions have increased in size and in strategic importance for SAP, and we expect to continue to make acquisitions in the future. Management’sManagement negotiation of potential acquisitions and alliances and integration of acquired businesses, products, or technologies demands time, focus, and resources of management and of the workforce. Acquisitions of companies, businesses, and technology expose us to unpredictable operational difficulties, expenditures, and increased risks. These risks include, among others:
The selection of the wrong integration model for the acquired company
The failure to integrate the acquired business and its different business and licensing models
– | Selection of the wrong integration model for the acquired company and/or technology |
– | Failure to properly evaluate the acquired business and its different business and licensing models |
– | Failure to successfully integrate acquired technologies or solutions into SAP’s solution portfolio and strategy in a timely and profitable manner |
– | Failure to integrate the acquired company’s operations across SAP’s different cultures, languages, and local protocols, all within the constraints of applicable local laws |
– | Failure to meet the needs of the acquired company’s customers and partners in the combined company |
– | The diversion of management’s time and attention from daily operations |
– | Loss of key personnel of the acquired business |
– | Material unknown liabilities and contingent liabilities of acquired companies, including legal, tax, accounting, intellectual property, or other significant liabilities that may not be detected through the acquisition due diligence process |
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Failure to successfully integrate acquired technologies or solutions into SAP’s solution portfolio and strategy in a timely and profitable manner
The failure to integrate the acquired company’s operations across SAP’s different cultures, languages, and local protocols, all within the constraints of applicable local laws
The failure to meet the needs of the acquired company’s customers and partners in the combined company
The diversion of management’s time and attention from daily operations
The loss of key personnel of the acquired business
Material unknown liabilities and contingent liabilities of acquired companies, including legal, tax, accounting intellectual property, or other significant liabilities that may not be detected through the due diligence process
Legal and regulatory constraints (such as contract obligations, privacy frameworks and agreements)
Difficulties in implementing, restoring, or maintaining internal controls, procedures, and policies
Practices or policies of the acquired company that may be incompatible with our compliance requirements
An adverse effect on relationships with existing customers, partners, or third-party providers of technology or products
Difficulties in integrating the acquired company’s accounting, HR, and other administrative systems and coordination of the acquired company’s research and development (R&D), sales, and marketing functions
Debt incurrence or significant cash expenditures
Constraints in enforcing acquired companies’ compliance with existing SAP security standards in a timely manner
Difficulties in customer implementation projects combining technologies and solutions from both SAP and the acquired company
– | Legal and regulatory constraints (such as contract obligations, privacy frameworks, and agreements) |
– | Difficulties in implementing, restoring, or maintaining internal controls, procedures, and policies |
– | Practices or policies of the acquired company that may be incompatible with our compliance requirements |
– | An adverse effect on relationships with existing customers, partners, or third-party providers of technology or products |
– | Difficulties in integrating the acquired company’s accounting, HR, and other administrative systems and coordination of the acquired company’s research and development (R&D), sales, and marketing functions |
– | Debt incurrence or significant cash expenditures |
– | Constraints in enforcing acquired companies’ compliance with existing SAP security standards in a timely manner |
– | Difficulties in customer implementation projects combining technologies and solutions from both SAP and the acquired company |
In addition, acquired businesses might not perform as anticipated, resulting in charges for the impairment of goodwill and other intangible assets on our statements of financial position. Such charges may have an adverse effect on our business, financial position, profit, and cash flows. We have entered into, and expect to continue to enter into, alliance arrangements for a variety of purposes, including the development of new products and services. There can be no assurance that any such products or services will be successfully developed or that we will not incur significant unanticipated liabilities in connection with such arrangements. We may not be successful in overcoming these risks and we may therefore not benefit as anticipated from acquisitions or alliances.
We may not be able to obtain adequate title to, or licenses in, or to enforce, intellectual property.
Protecting and defending our intellectual property is crucial to our success. We use a variety of means to identify and monitor potential risks and to protect our intellectual property. These include applying for patents, registering trademarks and other marks and copyrights, implementing measures to stop copyright and trademark infringement, entering into licensing, confidentiality, and non-disclosure agreements, and deploying protection technology. Despite our efforts, we might not be able to prevent third parties from obtaining, using, or selling without authorization what we regard as our proprietary technology and information. All of these measures afford only limited protection, and our proprietary rights could be challenged, invalidated, held unenforceable, or otherwise affected. Some intellectual property might be vulnerable to disclosure or
misappropriation by employees, partners, or other third parties. Third parties might independently develop technologies that are substantially equivalent or superior to our technology. Finally, third parties might reverse-engineer or otherwise obtain and use technology and information that we regard as proprietary. Accordingly, we might not be able to protect our proprietary rights against unauthorized third-party copying or utilization, which could have an adverse effect on our competitive and financial positions, and result in reduced sales. Any legal action we bring to enforce our proprietary rights could also involve enforcement against a partner or other third party, which may have an adverse effect on our ability, and our customers’ ability, to
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use that partner’s or other third parties’ products. In addition, the laws and courts of certain countries may not offer effective means to enforce our intellectual property rights. This could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
SAP’s business strategy focuses on certain business models that are highly dependent on a working cyberspace. A cybersecurity breach could have an adverse effect on our customers, our reputation, and our business.
The key cybersecurity risks currently applicable to SAPus include state-driven economic espionage as well as competitor-driven industrial espionage, and criminal activities including, but not limited to, cyber-attackscyberattacks and “ mega“mega breaches” against cloud services and hosted on-premise software, hosted, and cloud services.software. This might result in, for example, leakagedisclosure of confidential information and intellectual property, defective products, production downtimes, supply shortages, and compromised data (including personal data). A failure of our cybersecurity measures could impact our compliance with legal demands (for example, Sarbanes-Oxley Act, Payment Card Industry Data Security Standard, data privacy) and expose our business operations andas well as service delivery to the described risks, for example, virtual attack, disruption, damage, and/or unauthorized access. Additionally, we could be subject to recovery costs, for example, as well as significant contractual and legal claims by customers, partners, authorities, and third-party service providers for damages against us, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
We may not be able to protect our critical information and assets or to safeguard our business operations against disruption.
SAP is highly dependent on the exchange of a wide range of information across our global operations and on the availability of our infrastructure. With regardregards to our physical environment, we face several key security risks such as industrial and/or economic espionage, serious
and organized crime, and other illegal activities, as well as violent extremism and terrorism. We might be endangered by threats including, but not limited to, social engineering, misuse, or theft of information or assets, or damage to assets by trespassers in our facilities or by people who have gained unauthorized physical access to our facilities, systems, or information. These could have an adverse effect on our business, financial profile, profit, and cash flows.
Our insurance coverage might not be sufficient and we might be subject to uninsured losses may occur.losses.
We maintain insurance coverage to protect us against a broad range of risks, at levels we believe are appropriate and consistent with current industry practice. Our objective is to exclude or minimize risk of financial loss at reasonable cost. However, we may incur losses that may be beyond the limits, or outside the scope, of coverage of our insurance and that may limit or prevent indemnification under our insurance policies. In addition, we might not be able to maintain adequate insurance coverage on commercially reasonable terms in the future. Further, certain categories of risks are currently not insurable at reasonable cost, which could have an adverse effect on our business, financial position, profit, and cash flows. Finally, there can be no assurance of the financial ability of the insurance companies to meet their claim payment obligations.
We could incur significant losses in connection with venture capital investments.
Through Sapphire Ventures (formerly SAP Ventures), our consolidated venture investment funds, we plan to continue investing in new and promising technology businesses. Many such investments initially generate net losses and require additional expenditures from their investors. Changes to planned business operations have, in the past affected, and may in the future affect, the performance of companies in which Sapphire Ventures holds investments, and that could have an adverse effect on the value of our investments in Sapphire Ventures, which could have an adverse effect on our business, financial position, profit, and cash flows. Furthermore, tax deductibility of capital losses and impairment in connection with equity securities are often restricted and could therefore have an adverse effect on our effective tax rate.
Our legal corporate name is SAP SE. SAP SE is translated in English to SAP European Company (Societas Europaea, or “SE”). SAP SE changed its legal form from ais organized in the Federal Republic of Germany under German stock corporation (Aktiengesellschaft) to aand European Company (SE), and its name from “SAP AG” to “SAP SE”, with effect from July 7, 2014.law, see “Item 10. Additional Information.” Where the context requires in the discussion below, SAP SE also
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refers to our predecessor or previous legal forms and names, as
the case may be, i.e. Systemanalyse und Programmentwicklung GbR(1972-1976), SAP Systeme, Anwendungen, Produkte in der Datenverarbeitung GmbH (1976-1988), “SAP Aktiengesellschaft Systeme, Anwendungen, Produkte in der Datenverarbeitung” (1988 – 2005)(1988-2005) and “SAP AG” (2005 – 2014)(2005-2014). Our principal executive offices, headquarters and registered office are located at Dietmar-Hopp-Allee 16, 69190 Walldorf, Germany. Our telephone number is +49-6227-7-47474.
As part of our activities to reduce the number of legal entities in the SAP group, in 20142015 we integrated certain subsidiaries into the following significant SAP subsidiaries: SAP (Schweiz) AG, SAP (UK) Limited, SAP France S.A., SAP America Inc., SuccessFactors, Inc., SAP Brasil Ltda, andJapan Co. Ltd., SAP Australia Pty Ltd.Limited and SAP Nederland B.V.
For (i) a (i) description of our principal capital expenditures and divestitures and the amount invested (including interests in other companies) since January 1, 20122013 until the date of this report and (ii) information concerning our principal capital expenditures and divestitures currently in progress, including the distribution of these investments geographically and the method of financing, see “Item 4. Information About SAP – Description of Property – Capital Expenditures.”
Founded in 1972, SAP today is the world’sglobal leader in business application and analytics software for enterprises in terms of market share and the market leader in mobile enterprise management.digital commerce. Further, SAP is the enterprise cloud company with the greatest number of users and the fastest-growing major database company. Our continued growth over more than four decades is attributable to relentless innovation, a diverse portfolio, and our ability to anticipate ever-
changingeverchanging customer requirements.requirements, and a broad ecosystem of partners. With more than 282,000approximately 300,000 customers in over 180 countries, the SAP Group includes subsidiaries in all major countries and employs more than 74,400approximately 77,000 people.
Our company’s culture puts our customers’ success at the center of everything we do. With Run Simple as our operating principle, we focus on helping our customers master complexity and run their businesses better, which is the most intractable challenge facing business today.
SAP is headquartered in Walldorf, Germany; our legal corporate name is SAP SE. The corporation isOur ordinary shares are listed on the Frankfurt Stock Exchange, as well as several regional stock exchanges in Germanythe Berlin Stock Exchange and the Stuttgart Stock Exchange. The principal trading market for the ordinary shares is Xetra, the electronic dealing platform of Deutsche Börse AG. American Depositary Receipts (ADRs) representing SAP SE ordinary shares are listed on the New York Stock Exchange in the United States. At the end of 2014,(NYSE), and currently each ADR represents one ordinary share. As at December 31, 2015, our market capitalization was €71.6 billion.€90.1 billion on the DAX and US$97.2 billion on the NYSE. SAP is a member of Germany’s DAX, the Dow Jones EURO STOXX 50, and the Dow Jones Sustainability index.Index.
Our company culture puts our customers’ success at the center of everything we do. With our vision to help the world run better and improve people’s lives, and with Run Simple as our operating principle, we focus on helping our customers master complexity, and innovate and transform to become a sustainable digital business.
We derive our revenue from fees charged to our customers for the use of our cloud solutions, and for licensing of on-premise software products and solutions.solutions, and transaction fees for activity on our business networks. Additional sources of revenue are support, professional services, development, training, and other services.
As ofat December 31, 2014,2015, SAP SE controlled directly or indirectly controlled a worldwide networkgroup of 287255 subsidiaries in more than 180 countries to distribute our products, solutions, and services. Distributorship agreements are in place with independent resellers in many countries. For more information, see the Strategy and Business Model section.
Our subsidiaries perform tasks such as sales and marketing, consulting, research and development, cloud delivery, customer support, training, or administration. For a complete list of subsidiaries, associates, and other equity investments, see the Notes to the Consolidated Financial Statements section, Note (35)(33).
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The following table illustrates our most significant subsidiaries based on total revenues as of December 31, 2014:2015. All subsidiaries are wholly owned by SAP SE.
Name of Subsidiary | Country of Incorporation |
| ||||||
Germany | ||||||||
SAP Deutschland SE & Co. KG, Walldorf |
| Germany |
| |||||
Rest of EMEA | ||||||||
SAP (UK) Limited, Feltham | Great Britain | |||||||
SAP (Schweiz) AG, Biel | Switzerland | |||||||
SAP France, | France | |||||||
| The Netherlands | |||||||
| SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A., Vimercate |
|
| |||||
United States | ||||||||
SAP America, Inc., Newtown Square | USA | |||||||
SAP Industries, Inc., Newtown Square | USA | |||||||
SuccessFactors, Inc., South San | USA | |||||||
Ariba, Inc., | USA | |||||||
Concur Technologies, Inc., Bellevue | USA | |||||||
Rest of Americas | ||||||||
SAP Brasil Ltda, São Paulo | Brazil | |||||||
Japan | ||||||||
SAP | Japan | |||||||
Rest of APJ | ||||||||
SAP Australia Pty | Australia | |||||||
SAP (Beijing) Software System Co. Ltd., Beijing |
|
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Our Vision and MissionHelping our Customers Reimagine their Businesses
The world is experiencing unprecedented change that is transforming both our use of technology and society more broadly. People are connected in ways like never before. Entire industries have been disrupted by innovations that have brought the once unimaginable within reach. Technology trends such as hyperconnectivity, cloud computing, and Big Data go hand-in-hand with social and business trends that are changing how we live and work. Rapid urbanization, the sharing economy, enormous demographic change, and resource scarcity are demanding that leaders of tomorrow adapt to a world in which the pace of change continues to accelerate.
To remain competitive – and create a sustainable competitive advantage – businesses today must become
sustainable digital businesses. In fact, experts across industries know that in the new digital economy, only the most adaptive businesses will prevail. SAP provides what is needed to become a digital business. Our enduring vision is to help the world run better and improve people’s lives. Our missionvision is not just relevant in this time of change and disruption – it is essential.
Complexity has become a problem of staggering proportions and stands in the way of digital transformation and innovation. It is what keeps companies from turning the trends of our time – from the explosion of data to a rapidly growing middle class – into business opportunities. Becoming a digital business means that companies must first cut through this complexity, as simplicity is a prerequisite for innovation. Companies must make their digital strategy a core part of their business strategy.
We enable organizations to tackle complexity by unlocking their ability to Run Simple. This principle guides everything we do and powers our customers’ transformation into digital businesses. We offer what is required to support this transformation – our deep experience as a leader in enterprise software for more than 40 years; our solutions and services; and our global reach, which includes a base of approximately 300,000 customers across 25 distinct industries; and an ecosystem of thousands of partners.
Our digital approach is built on two critical elements – our SAP Cloud portfolio and the SAP HANA platform. And our strategy to become THE cloud company powered by SAP HANA refers not just to our own transformation but that of our customers – and their customers.
SAP Cloud powered by SAP HANA simplifies consumption and the user experience, while SAP HANA simplifies the IT landscape. SAP HANA enables business processes and analytics to run on the same platform, something that was simply not conceivable even five years ago.
With the release of SAP S/4HANA in 2015, our next-generation business suite, we have brought a new level of performance and simplicity to core business processes. And SAP HANA Cloud Platform is facilitating the development of a much broader and richer landscape of applications to support our customers’ needs.
With these capabilities, SAP partners with companies on every aspect of their digital transformation, helping them run better and improving people’s lives. As they become digital businesses, our customers are becoming more sustainable organizations by improving how they serve their customers, engaging and developing their workforce, increasing transparency of their suppliers’
social performance, using resources more efficiently, and interacting with local communities. Our global business networks expand the world that our customers operate in, connecting them with a vast ecosystem of partners that creates more efficient, powerful, and simpler ways of managing such key functions as procurement, travel, and workforce management.
Furthermore, we connect all of these realms to core business processes, such as finance and logistics, for a seamless and simplified customer experience. And we provide deep industry expertise to help our customers design an IT strategy that best supports their business strategy. While each of these capabilities would bring value on its own, together they set us apart – we are unique in our ability to guide customers on all essential elements of their digital transformation, enabling them to reimagine their business and then realize their vision for the future.
SAP has big ambitions. We measure our success across both financial and non-financial indicators: revenue growth, profitability, customer loyalty, and employee engagement. And we are creating value for our customers by helping them to navigate a changed world so that they can find business opportunities across social, environmental, and economic dimensions.
With our broad portfolio of solutions, we are convinced that we can position our customers for greater success in the digital world. SAP can help our customers better serve their customers with the sophisticated experiences they have come to expect; reach new markets as the world’s cities expand; find new customers as millions of people join the modern economy; and innovate in the face of resource scarcity and ever changing technologies. Most of all, we can help them understand and capitalize on the ways that technology and societal trends intersect, so that – along with SAP – they can not only become better organizations, but also help create a better world.
Creating Societal Impact by Enabling our Customers to Innovate
As a software company that serves many of the world’s leading organizations, we have enormous opportunity to impact people and society by helping our customers innovate, run more efficiently, improve their IT security, and offer new products and services. For example, when major manufacturers gain greater transparency into their energy usage and create more efficient supply chains, they create a more positive impact on society while minimizing impact on environment. When banks offer mobile banking services to people who lack opportunities, they address inequality and promote economic growth. When healthcare companies utilize data in new and faster ways, they help patients gain access to potentially life-saving treatments.
In addition, at SAP and within our ecosystem, we support job creation and economic prosperity through demand for highly qualified workers to develop, sell, implement, and enhance our software for our customers. As our customers grow their best. To fulfillown businesses, they also create opportunities for others through new products and services as well as economic growth.
At the heart of realizing these possibilities is our mission, we apply our Run Simple operating principleability to help our customers runcut through complexity and direct their businesses simpler and master complexity, which isresources to the most intractable challenge businesses face today. We do this by delivering technologywork that matters most: new innovations that help the world run better and improve people’s lives. We work to create long-term value by addressing future needs as well as current ones, with the goal of helping to transform how people use software, conduct business, and live their lives.
To achieve our vision, SAP provides solutions and services to customers throughout the world based on our deep expertise in business processes across industries. As leader of the enterprise software market, we believe addressmust continually adapt to new technology and business trends. For this reason, we rely on the challengespeople of todaySAP to drive our success – their intellectual and tomorrow without disruptingsocial capital provide us with key knowledge, expertise, and business relationships. Along with the financial capital of our customers’investors, an engaged, highly skilled, and agile workforce is at the core of our business operations.model.
For more than 40Our organization must be as adaptable as our employees – and in recent years, we have managed highly advanced, mission-criticalmade important shifts to our sales model to accommodate enormous changes in how companies use technology. In the past, our approach was focused on charging a one-time, upfront fee for a perpetual license to our software that is typically installed at the customer site. In addition, the customer usually concludes a support contract covering support, services, and software updates. As we have seen customer preferences evolve, we are increasingly delivering our solutions in the cloud through a software-as-a-service (SaaS) model. Depending on the solution, the customer pays either usage-based or periodic fees to use our software, which is hosted in the cloud, and accesses it over the Internet. Further, we receive transaction fees from business processes thatconducted over our business networks.
Despite these shifts, we still rely on the strengths of our direct sales organizations to drive most business development. As a global company, we set our sales go-to-market strategies at the global level, with our regional subsidiaries then adapting and executing them. Our customer-facing employees, in close collaboration with sales support and marketing, drive demand, build pipeline, and enhance relationships with customers. Our marketing efforts cover large enterprises as well as small and midsize enterprises, with our broad portfolio of
solutions and services addressing the needs of customers of all sizes across industries. Additionale-commerce and digitally native offerings further enable entire industries. We continue to deliver sophisticated solutions for 25 industriesa low-touch or no-touch customer journey.
Our business model aligns with and 12 lines ofsupports our business strategy and puts us in a simple manner. It isstrong position to drive future growth. By helping organizations transform into digital businesses, we see enormous potential to increase our challenge to do the most sophisticated thingsshare of their overall IT spend while providing them with greater value. As our technology unlocks simplicity for our customers, yetthey, in simple ways.turn, bring new advances to their customers in areas that directly impact people’s lives.
Our Goals for Sustained Business Success
We have strong ambitions for sustainable business success, both for our company and for our customers. We believe the most important indicators to measure this success comprise both financial and non-financial indicators: growth, profitability, customer loyalty, and employee engagement.
Growth: SAP uses various revenue metrics to measure growth. We expect full-year 20152016 non-IFRS cloud subscriptions and support revenue to be in a range of €1.95€2.95 billion to €2.05€3.05 billion at constant currencies (2014: €1.10(2015:€2.30 billion). Further, we expect full-year 20152016 non-IFRS cloud and software revenue to increase by 8%6% to 10%8% at constant currencies (2014: €14.33(2015:€17.23 billion). Looking beyond 2015,2016, we have updatedraised our 2017 ambition.ambition to reflect the current currency exchange rate environment and excellent business momentum. Assuming a stable exchange rate environment going forward, SAP now expects non-IFRS cloud subscriptions and support revenue in a range of€3.8 billion to€4.0 billion in 2017. By 2017, SAP’sSAP continues to expect its rapidly growing cloud subscriptions and support revenue is expected to be close to software license revenue and is expected to exceed software license revenue in 2018. In 2017, we expect non-IFRS cloud subscriptions and support revenue to reach a range of €3.5 billion to €3.6 billion in 2017. Non-IFRS total revenue is expected to reach €21€23.0 billion to €22€23.5 billion in 2017. Further, we have also introducedOur high-level 2020 ambitions remain unchanged, with 2020 non-IFRS cloud subscriptions and support revenue expected to reach €7.5€7.5 billion to€
€8.0 billion and total revenue is expected to be in a range of €26€26 billion to €28€28 billion.
Profitability: SAP expects full-year 20152016 non-IFRS operating profit to be in a range of €5.6€6.4 billion to €5.9€6.7 billion at constant currencies (2014: €5.64(2015:€6.35 billion). We expect non-IFRS operating profit to be in a range of €6.3€6.7 billion to €7.0€7.0 billion in 2017 and to be in a range of €8€8.0 billion to €9€9.0 billion in 2020.
Customer loyalty: SAP has useduses the Customer Net Promoter Score (NPS) as a key performance indicator (KPI) to measure customer loyalty since 2012. As we gather experience with the metric and as our business evolves, we expanded our customer base when conducting the 2014 assessment to better reflect our business completely. In addition to our on-premise customers, in 2014, for the first time we included Ariba, SuccessFactors, and Sybase customers in the survey. Therefore, the 2014 Customer NPS score is not fully comparable to the prior year’s score.
In 2014, we achieved a global Customer NPS of 19.1% (2013: 12.1%). This very positive score exceeded our 2014 target of 16%.loyalty. We aim to
achieve a Customer NPS score of 24%25% in 2015.2016 (2015: 22.4%). Due to changes in sampling, resulting from ongoing efforts to implement the survey process holistically in recently acquired entities, the 2015 score is not fully comparable with the prior year score.
Employee engagement: We use the employee engagement index to measure motivation and loyalty of our employees, how proud they are of our company, and how strongly they identify with SAP. We saw a solid increase in our score in 2014 (2014: 79%) compared to 2013 (2013: 77%) and remain committed to achieving a82% employee engagement score of 82% in 2015.2016 (2015: 81%).
These four goalscorporate objectives affirm our commitment to innovation and sustainability, and help us deliver on our vision and mission.vision.
In addition to primary key performance indicators (KPIs),KPIs, which directly measure our performance on our four goals, we manage a number of secondary performance indicators, which influence the primary KPIs in a variety of ways. Our integrated report seeks to clarify some of those relationships, for example, the link between our energy consumption and our profitability.
Our main goalsobjectives are presented with more detail throughout the report.
For more information on our strategic goals, see the Performance Management System;System section; Expected Developments; Customers;Developments section; Customers section; and Employees sections.
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Our Strategy: THE Cloud Company powered by SAP HANA
As described above, complexity has become a significant challenge to business. With our history and focus on software innovation, we believe SAP is uniquely positioned to tackle the challenge of complexity for our customers by enabling them to Run Simple. We are realizing the potential of Run Simple through our strategy to become “THE cloud company powered by SAP HANA.” Together, SAP HANA and SAP Cloud powered by SAP HANA equal Run Simple.
SAP HANA simplifies IT landscapes, technology, and business models. By moving most of our applications and analytics to the SAP HANA platform, we are simplifying the solutions we can offer our customers. We further simplify how customers consume our solutions by bringing them onto our cloud – SAP Cloud powered by SAP HANA. The cloud can offer a better user experience while radically simplifying business processes.
We will focus on three key initiatives to deliver on our commitment to Run Simple:
Simplify consumption: We continue to streamline and simplify consumption of our portfolio of products. Our focus will remain on solutions specific to 25 industries and 12 lines of business. We will support our customers with a mix of public cloud, managed cloud, and on-premise capabilities through a world-class platform based on SAP HANA.
Simplify business processes: At the foundation of our innovation and strategy is SAP HANA. With SAP HANA as the common platform, we help our customers dramatically accelerate the speed of their business by radically simplifying their IT stack and enabling smarter and faster business processes.
Simplify user experience: With SAP Fiori we provide a holistic and consistent consumer grade user experience based on modern design principles and across lines of business, tasks, and devices.
We see enormous potential to increase our share of our customers’ overall IT spend. Through simplification, customers can dramatically reduce their expenditures on hardware and services, shift the savings to innovation, transform their businesses, and create positive societal impact.
We aim to better innovate and grow by:
Building simple, yet sophisticated applications by lines of business and industries that deliver superior customer experience, coverage of end-to-end processes, and insights
Continuing to invest in SAP HANA as an industry-leading platform for innovation and promoting SAP HANA Cloud Platform as a world-class platform as a service (PaaS)
Continuing to be the world’s leading business network, connecting businesses, devices, and people to drive unparalleled collaboration and productivity
For example, by enhancing their efficiency, we help customers cope with resource scarcity and reduce their energy usage and emissions. By partnering with our banking customers, we help them bring banking services to the “unbanked,” thereby creating opportunity for people seeking to enter the modern economy. Through software focused on healthcare, education, and public services, we help create a positive social impact by enhancing people’s quality of life. In all of these ways, our solutions are advancing our vision to help the world run better and improve people’s lives.
Our Business Model
Our vision and mission also unlock our ability to create positive economic, environmental, and social impact. As we help our customers tackle complexity and run at their best, they contribute to the world’s economies, create jobs, and unleash the potential of their employees. As we help them become more efficient, they can mitigate their environmental footprint. And as we help them run their businesses simpler, they free up space for innovation, creating opportunities for people and communities.
To realize our vision, SAP provides business solutions to customers throughout the world based on our deep expertise in business processes across industries. Through our customers – which represent 98% of the top 100 most valued brands in the world, according to the annual ranking from Interbrand – we can increase our ability to create value.
Playing this role for our customers requires us to deploy several key types of capital. First, we rely on financial capital provided by our investors. But
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what truly enables our success is the intellectual and social capital of our employees. They are the gateway to our knowledge, expertise, and business relationships. For this reason, engaged, highly skilled, and agile employees are central to our business model and success.
Our direct sales organizations drive most business development. Sales go-to-market strategies are established at the global level, and then adapted and executed by regional subsidiaries. Our customer-facing employees, in close collaboration with sales support and marketing, drive demand, build pipeline, and enhance relationships with customers within our target industries. Our marketing efforts cover large enterprises as well as small and midsize enterprises. We believe our broad portfolio of solutions and services enables us to meet the needs of customers of all sizes and across industries. We will amplify our efforts in the digital channel through additional e-commerce and digitally native offerings that further enable a low-touch or no-touch customer journey.
Our extensive ecosystem provides scalability to meet the demand for SAP innovation and provide customers with a wide selection of third-party competencies. We have developed an independent sales and support force through independent value-added resellers. We have also established partnerships with hardware and software suppliers, systems integrators, and third-party consultants. For more information, see the Partner Ecosystem section.
Historically, our sales model was focused on charging a one-time, upfront fee for a perpetual license to our software that was typically installed at the customer site. In addition, the customer usually concluded a maintenance contract that covered support and software updates. As we have seen customer preferences evolve, we are increasingly delivering our solutions in the cloud, which we believe is a simple and efficient software consumption model. Our cloud solutions are offered through a subscription-based software-as-a-service (SaaS) model. Depending on the solutions offered, the customer pays either usage-based or periodic fees to use our software. This software is installed at an SAP or an SAP partner location, and the customer accesses the software over the Internet.
To help companies invest in SAP solutions and the associated services and hardware, the SAP Financing service offers customers payment plans optimized for maximum economic benefit. It can help preserve liquidity, provide an alternative to
credit from customers’ existing banking relationships, and balance their budgetary priorities – while giving them the flexibility to choose the best possible solution.
By executing on our strategy, SAP contributes to the creation of holistic, long-term value for society in a number of ways. SAP’s greatest strength in making environmental impact comes through the solutions we deliver. For example, our software enables our customers to have more efficient and sustainable supply chains or provide greater transparency of energy consumption and emissions.
We also apply our expertise in business processes across industries to direct our innovations to the world’s greatest challenges, such as the social and environmental strains posed by a rapidly expanding global middle class. Our goal is to create long-term value by providing solutions that not only address the current challenges faced by our customers, but also those of the future. In this way, we see our role moving beyond the creation of new and efficient solutions: We want to fundamentally help change how people use software, conduct business, and live their lives. This objective underscores how SAP can create its greatest impact through the use of our solutions by more than 282,000 customers worldwide.
At SAP and within our ecosystem, we support job creation and economic prosperity through demand for highly qualified workers to develop, sell, implement, and enhance our software for our customers. Our solutions also enable customers to provide greater learning and talent development opportunities for their employees. In addition, SAP solutions, such as those for manufacturing, are designed not only to ensure health and safety during the production process, but also to increase the quality of the resulting consumer products, which impact millions of people throughout the world.
Our business has historically experienced the highest revenue in the fourth quarter of each year, due primarily to year-end capital purchases by customers. Such factors have resulted in 2015, 2014, 2013, and 20122013 first quarter revenue being lower than revenue in the prior year’s fourth quarter. We believe that this trend will continue in the future and that our total revenue will continue to peak in the fourth quarter of each year and decline from that level in the first quarter of the following year.
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Unlike our on-premise software revenues, our on-premise support revenues and cloud subscriptionsubscriptions and support revenues are less subject to seasonality.
PRODUCTS, RESEARCH & DEVELOPMENT, AND SERVICES
Steering Our Customers Through Unprecedented ChangeUnlocking the Potential of Digital Transformation
For leading companies, the question is no longer whether they need to become a digital business, but how. The worldrole of software has moved beyond enabling the realization of business strategy to becoming an intrinsic part of that strategy. In an increasingly complex landscape – with the amount of stored data doubling every 18 months – speed, innovation, and agility are the new differentiators. It is operatingnot just about doing yesterday’s work faster. Companies in every industry must take a timeunified approach to managing every aspect of accelerated change that has created new complexity, challenges,their business, and opportunities for boththey need solutions whose innovation matches their own ambitions to grow and win in the market.
In 2015, we unveiled one of the most important products in our history: SAP S/4HANA, our next-generation business suite, designed to provide the digital core our customers and SAP. Digitalization represents more than a trend but a paradigm shift, one that is shaping whole industries,need to run their entire business models, and sources of competitive advantage.
Software is at the heart of this transformation – for many organizations, it isin the new differentiator.digital world. We recognize that enterprise software today must do far more than runexpect SAP S/4HANA to drive our business processes. It is an enabler for navigating complexity and unlocking innovation. Throughout our history,years to come, enabling companies to integrate their core business processes with running their key operations, from their supply chain to their workforce. With SAP S/4HANA, we have helped our customers manage other major paradigm shifts impacting their business, from the massive expansion of the Internet to globalization. Today, we are supporting their transition to a cloud-based world, as increasingly complex business problems demand simple solutions.
We help customers Run Simple by innovating with the SAP HANA platform as our foundation. This strategy combines ease of use and flexibility with sizeable computing power. Through the capabilities of SAP HANA, we can now enable a real-time enterprise; we can leverage Big Data to achieve deeper insight; and we can empower users through the ease of mobile apps, so that people can access what they need securely and flexibly.
These developments – similar to packaged software in the 1980s and client/server architecture in the 1990s – signal a new wave of innovation at SAP. Wherever they are on their journey, we are helping our customers reinvent how they do business while making the transition seamless and providing a holistic and consistent user experience. As we aim to become “THE cloud company powered by SAP HANA,” we are going far beyond incremental change to achieve radical
simplification – enabling our customers to stay ahead of trends, make better decisions faster, and propel innovation.
SAP HANA
Nothing signifies the changes we are making at SAP – and for our customers – more than SAP HANA. The platform holds the power to simplify both the user experience and the overall IT landscape, creating a smaller data footprint, increased system throughput, and easier data processing and operation. For this reason, we have evolved SAP HANA from a database toprovide companies a full business platform that will actto reimagine their businesses and achieve the creation of their own next-generation products and services so critical in the digital economy.
SAP S/4HANA creates unique opportunities to simplify the IT landscape, helps reduce total cost of ownership with SAP HANA, and provides a simple and role-based user experience. Enterprises can now reduce their data footprint and work with larger data sets in one system to save hardware costs, operational costs, and time as well as reduce complexity.
After launching in February 2015, over 2,700 customers have chosen SAP S/4HANA, with approximately 100 customers live at the basis for our products going forward.end of 2015.
Driving Simplicity and Innovation through SAP HANA and SAP HANA Cloud Platform
SAP HANA remains at the center of our strategy to help our customers transform their businesses. The SAP HANA platform combines database, data processing, integration, and application platform capabilitiesin-memory. By providing advanced capabilities – such as predictive text analytics spatial processing, and data virtualization – on the same architecture, it further simplifies application development and processing across Big Data sources and structures.
To takeThe SAP HANA Vora engine adds a new dimension to these capabilities, allowing our capabilitiescustomers to the next level,combine their business data with Big Data managed on Hadoop compute clusters. It simplifies ownership of Big Data and supports faster, interactive, and more precise decision making.
In addition to expanding our own portfolio, we built the openare enabling others to develop a much broader landscape of applications through SAP HANA Cloud Platform, which is the embodiment of our SAP Cloud powered by SAP HANA strategy. The cloud platform enablesstrategic platform-as-a-service offering. Providing both ease and flexibility, in building, extending, and integrating business applications – available to all SAP partners,this cloud platform allows our customers and third-party developers.
Realizing that one size does not fit all, we are providing a bridge for our customerspartners to build, extend, run, and sell applications and services in the transition to the cloud. WeIt includes infrastructure, data, and storage, as well as a toolbox of platform and application extension services. SAP HANA Cloud Platform also offer to manage mission-criticalenables connectivity between SAP solutions, including on-premise software such as SAP Business Suite and SAP Business Warehouse as well as customsoftware-as-a-service offerings such as SAP SuccessFactors solutions.
Building on our experience, we are developing a suite of SAP solutions for the Internet of Things (IoT). The functionalities of our SAP HANA applications inCloud Platform IoT services help accelerate development and deployment, as well as improve the ability to manage real-time IoT and machine-to-machine applications. To support the development of these new innovations, we continue to leverage our cloud data centers.customer co-innovation framework, which helps us address the evolving digitization needs of our customers.
The road to becoming a digital business is unique to every organization. Our overarching goal isportfolio supports our customers wherever they are on their journey. We want to createoffer the broadest integration offering in the industry, wherewith customers can connectseamlessly connecting SAP and third-party software across heterogeneousa range of environments by leveraging application lifecycle management to reduce IT complexity. Our customers can enhanceAt the power of an integrated landscape with a refreshingsame time, our user experience provides both elegance and ease-of-use across multiple devices and interfaces. AtCustomers also have the same time, all corebenefits of efficiency and flexibility through a variety of deployment models.
Launching SAP S/4HANA
SAP S/4HANA represents a huge step forward in simplifying how applications are built, consumed, and deployed. It provides real-time, mission-critical industry-specific business processes across organizations and lines of business. As a basis, enterprises can be builtnow support end-to-end operations across key business functions through a fully digitized enterprise management solution named SAP S/4HANA Enterprise Management.
A prime example of our innovations is SAP S/4HANA Finance, a comprehensive solution for the office of the CFO. This solution brings enhanced functionality to a range of key areas – from financial planning and runanalysis to collaborative finance operations. It also provides our customers with seamless flexibility, with deployment either on premise or in the cloud or on premise, giving developerscloud.
Beyond SAP S/4HANA Finance, the on-premise edition of SAP S/4HANA drives business value in other areas such as materials management as well as sales and distribution, among others, taking full advantage of a powerful tool to build applications with flexibilitysimplified data model and efficiency.
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ApplicationsInnovating for Industries and Lines of Business
As the market leader in enterprise application software, we offer end-to-end solutions specific to
25 industries grouped in six industry sectors and 12 lines of business, localized by country and for companies of any size.
Industries
| Industry Portfolio |
| ||
Consumer | SAP for Consumer Products | |||
SAP for Life Sciences | ||||
SAP for Retail | ||||
SAP for Wholesale Distribution | ||||
Discrete manufacturing | SAP for Aerospace & Defense | |||
SAP for Automotive | ||||
SAP for High Tech | ||||
SAP for Industrial Machinery & Components | ||||
Energy and natural resources | SAP for Chemicals | |||
SAP for Mill Products | ||||
SAP for Mining | ||||
SAP for Oil & Gas | ||||
SAP for Utilities | ||||
Financial services | SAP for Banking | |||
SAP for Insurance | ||||
Public services | SAP for Defense & Security | |||
SAP for Healthcare | ||||
SAP for Higher Education & Research | ||||
SAP for Public Sector | ||||
Services | SAP for Engineering, Construction & Operations | |||
SAP for Media | ||||
SAP for Professional Services | ||||
SAP for Sports & Entertainment | ||||
SAP for Telecommunications | ||||
SAP for Travel & Transportation |
Lines of Business
– | Asset Management |
– | Commerce |
– | Finance |
– | Human Resources |
– | Manufacturing |
– | Marketing |
– | R&D/Engineering |
– | Sales |
– | Service |
– | Sourcing and Procurement |
– | Supply Chain |
– | Sustainability |
Today, we are delivering solutions that simplify how applications are built, consumed, and deployed. Our SAP Business Suite powered by SAP HANA software optimizes business-critical processes for companies from large enterprises to small businesses. Building on SAP HANA, we are
providing an innovative suite of business applications unifying analytics and transactions into a single in-memory platform, thereby helping customers to dramatically simplify their IT landscape.
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At the same time,In addition, we are building other functional innovations that serve each line of businessbusiness. For example:
Human capital management (HCM): Our HCM solutions, including SAP SuccessFactors solutions, help organizations increase the value of their total workforce by developing, managing, engaging, and industry toempowering their people. These solutions address the specificfull range of HR needs, from hiring the right people and evolving needs of our customers, for example:
Human capital management: On-premise solutions from SAP, as well as cloud solutions for human resources from SuccessFactors, an SAP company, help HR organizations transform business strategies into measurable business outcomes bymanaging contingent workers to simplifying HR processesthe way people work. We focus on delivering a simple and helping increase employee engagement. We combine global and industry expertise with a unique combination of key HR enablers: a modernintuitive user experience talent and core HR applications, embedded content, and analytics.through mobile device or desktop.
Customer engagement and commerce: Solutions fromcommerce (CEC): Our CEC solutions comprise SAP and SAP Hybris software from hybris, an SAP company, servingthat serve the commerce, marketing, sales, and service lines of business, enableenabling business-to-business (B2B) and business-to-consumer (B2C) companies everywhere to provide real-time, consistent, contextual, and relevant experiences to their customers regardlesscustomers. Regardless of channel or device. SAPdevice, these solutions for customerdeliver personalized engagement based on context and commerce are a direct response to the fact that theproven industry expertise and therefore go beyond traditional focus of customer relationship management, (mostly sales force automation) iswhich no longer enough to satisfymeets the demandsneeds of a customer-driventoday’s consumer-driven market.
Finance: In 2014, we launched the SAP Simple Finance solution to address the critical need for flexibility in the most complex finance processes and IT landscapes. Created through close collaborationProviding users with our customers, SAP Simple Finance is a comprehensive solution of finance applications that decreases runtime for financial analysis, delivers instant insight, and is easy to use and consume. Continuing to leverage SAP HANA as a driver of simplicity, we launched SAP S/4HANA (SAP Business Suite 4 SAP HANA) in early 2015, a next-generation and innovative business suite that will redefine business processes and drive business value for our customers.
Freedom, Flexibility, and Elegant Design
AsWe believe digital transformation must include a focus on the user experience, as expectations by our customers adapt– and their customers – have risen enormously in recent years. For many, mobile has become the technology of choice, providing simple, always-on access to shiftinginformation, processes, and services. To that end, key mobile services such as app creation and management, security, and extensibility are available as part of SAP HANA Cloud Platform, giving our customers simple access to the technologies that support new business conditions, we also provide themmodels.
Providing an elegant, intuitive user experience, SAP Fiori has evolved since its introduction in 2013 into the new user experience (UX) for SAP software. It reflects a broader shift in software design that puts as much focus on how people actually use technology as on specific features and functions. SAP Fiori offers innovative new features such as improved contextual interaction and action-oriented personal notifications. The updated design delivers improvements while staying consistent with the freedomour original UX principles of being role-based, responsive, simple, coherent, and flexibility of our mobile solutions. These solutions enable companies to better serve customers and provide employees with securedelightful.
access to important tools and data anywhere, anytime – using their mobile devices. Mobile solutions from SAP allow our customers to:
Innovate rapidly to deliver user-centric capabilitiesWe were awarded the prestigious Red Dot Award for employees, consumers, and partners
Lower their total cost of ownership by streamlining operations and processes
Protect themselves against security risks and challenges at the device, app, and content levels
Regardless of how our customers consume our software, we are building applications using the SAP Fiori UX design concept in the Interaction Category in September 2015.
Delivering Greater Value through the Power of Business Networks
In today’s hyperconnected business landscape, how companies interact with the outside world is undergoing profound change. At SAP, we are helping to lead this transformation through our business networks, which are helping drive innovation in key areas that impact an organization’s core operations. Our business network strategy is to bring the world’s vast network of partners, suppliers, and services to best-in-class solutions that fulfill the needs of specific lines of business – all within a few clicks. Moving far beyond basic automation, our network solutions are enabling new processes and outcomes for customers. They are also part of a new wave of solutions that are more consumer-friendly and business-ready than in the past.
We recognize that business applications today must deliver an effortless user experience (UX), which deliverswhile ensuring that information and data flow back into the business and across networks in a personalized, responsive,secure way. These applications serve to maintain compliance while enabling choice. They are designed for a more digital, highly mobile, and simple UX. Applying moderninterconnected world, and consistent design principles,help drive greater value for employees, organizations, and the vast networks of partners and individuals they rely on.
Today, our business network portfolio includes SAP FioriAriba, Concur, and SAP Fieldglass solutions. Each is the new facea leading provider of SAP software. We also offercloud applications, services, and cloud networks through open platforms that connect internal business processes to a portfolioglobal ecosystem of UX services, including design, rapid deployment, and custom development, to enhance customer engagement.
Business Networkpartners.
The cloud has profoundly changedAriba Network is a leading marketplace used by approximately two million companies to discover, connect, and collaborate over US$740 billion in commerce every year. The network connects companies across the way people interact,full commerce process – from sourcing through payment settlement. It also provides insights and this impact will only grow as enterprisestechnology to help companies improve their operations – and to connect and collaborate in new ways with their global networks of customers and partners. We believe these new networksthat are transforming how companies do business, and we are helping to lead this wave of innovation.only possible in a networked environment.
With our sourcing, procurement, andConcur Travel & Expense is the world’s leading travel and expense management solutions from SAP; Ariba, an SAP company; Fieldglass; and Concur Technologies, we now run the world’s largest business network, connectingsystem, with more than 1.732 million companies. SAP internal analysis showsusers. The Concur system goes beyond the basic automation of expense reports and provides visibility and insights that support better decision making for employee travel and spend, helping businesses conduct more than US$700 billion in commerceto focus on the network annually, and it holds the potential to alter the B2B landscape. Procurement leaders can achieve cost savings, integrate sourcing and procurement operations, improve supplier collaboration, and realize purchasing compliance. Combining our innovations and core applications, the network is helping companies interact outside of silos and gain far greater visibility into different parts of their operations.
By digitizing business transactions and facilitating the sharing of information across global valuewhat matters most.
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chains, we are providing customers with a greater ability to connect with othersSAP Fieldglass solutions simplify the process of procuring and take action. As a result, we are facilitating far more than simple transactions but helping companies tapmanaging external workforce services. They provide visibility into information and insights, incorporate them into their business processes, and make better real-time decisions. Customers can easily identify and connect with high-quality suppliers, collaboratively enhance supplier performance, transact seamlessly with intelligent rules, and drive additional savings through dynamic discounting.
Our vision for the network extends to managing all of a company’s business expenditures. Therefore, we have moved from a procurement network to a business network to a network of networks that includes all types of parties: suppliers, B2B partners, logistics providers, financial service providers and individuals,non-employee workers and help improve compliance and cost control. As a centralized, single point of access to engage with more than 1.9 million external workers in approximately 130 countries, SAP Fieldglass solutions connect consultancies, staffing firms, independent contractors, and other service providers, so business users can procure services from anywhere in the world with just a few clicks. As an open platform, SAP Fieldglass also connects to financial, HR, payroll, and procurement systems.
Each of these three cloud network companies has made connecting to partners, suppliers, and services through an open platform a core part of their architecture and approach. Ultimately, we aim to go further, connecting all the world’s networks. We are working to create platforms for networks and services that will further transform the business landscape – with the purpose of creating new outcomes, services and experiences that make businesses run more simply and with greater opportunities for innovation.
Providing Real-Time, Advanced Analytics to Drive Better Decision Making
The speed of the digital economy demands that companies make informed decisions faster than ever before, as well as travel agents.
Analytics
data can become obsolete in a matter of seconds. SAP HANA has vastly increased the efficiency with which our customers can use analytics to drive business decisions. SAP HANA is able to bridge the historical divide betweendecision making. With transactions and analytics that had hindered real-time decision making. Now transactions and analytics can be combined into a singlein-memory platform, allowingour customers tocan access a “single source of truth” for real-time planning, execution, reporting, analysis, and analysispredictive modeling on very large volumes of data.
WithIn 2015, we further simplified our offering with the amountintroduction of data growing exponentially, ourthe SAP Cloud for Analytics solution, a software is helping customers have accessas a service that aims to immediate, actionable intelligence, thereby simplifying their business processes. They can retrieve availablebring all analytics capabilities together for a richer user experience.
Based on SAP Cloud for Analytics, we also launched SAP Digital Boardroom, a multifaceted solution that offers executive decision makers new ease and elegance in accessing company data in real time. Ourtime, and the ability to engage in what-if queries and create visualizations. Designed to provide far greater transparency to board members, executives, and other decision makers, fully automated business intelligence capabilities in the solution not only improve the quality and speed of reporting, but also facilitate greater trust through more effective collaboration and decision making.
Whether in the cloud, on premise, or a combination of the two, our analytics offerings deliver outstandingsolutions enable our customers to access immediate, actionable intelligence. Even as data
volumes grow exponentially, companies can simplify their business value by providingprocesses and gain insights to better manage every aspect of the enterprisetheir organization – from integrated planning and metrics monitoring to risk and compliance.
Namely,Among other features, key analytics solutions from SAP comprise:
support:
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Research and Development
FromWith businesses shifting at an ever-accelerating pace towards digitalization and the earliest days of SAP, we have worked diligently to stay ahead of trends and develop new solutions to meet the challenges faced bycloud, leading our customers through change is more important than ever before. We do this every day by empowering our employees and those they serve. Ourcollaborating with our customers to develop world-class software and next-generation solutions. SAP further strengthened our global research and development (R&D) is a global effort that centers on bringing togetherefforts in 2015 by investing in our SAP Labs network and the creative ideas and talentsnew SAP Innovation Center Network.
Nearly all of our customers as well as valued partners from industry, technology, the public sector, and academia. Our focus on co-innovation ensures that we keep up with groundbreaking research and ultimately turn it into solutions that create a real-world impact.
In 2014, we made organizational changes to enhance collaboration betweensoftware products are developed at our R&D teams, thereby speeding up innovation. Rather than operating independently, research and development is now embedded in our development organization, so that the exploration and execution of ideas are happening side by side, with each informing the other.
Our product development organization is truly global, with the majority of our R&D teams located in 1415 SAP Labs locations in 12 countries. Research teams are also based13 countries across the globe. This global reach means that we have access to leading talent worldwide; in addition, we can collaborate with top universities throughout the world and span a network across multiple locations.
We follow a dual and complementary research and innovation approach. First, topic-focused research teams within existing development units drive innovation projects. These teams focus on improving existing productshave access to major technology hubs as well as delivering short-term innovation with a time horizon of up to two years.
Second, we established a dedicated central unit that pursues both short-termdiverse and long-term strategic innovation. This unit supports projects with a time horizon of two to five years by providing a protected environment for business ideas and focusing on a limited number of new solutions. It also develops the future generation of high-growth opportunitiesvibrant startup communities. By understanding trends in areas suchdifferent regions, as well as the Internetspecific needs of Things or personalized medicine. Withour customers that operate there, SAP has a time horizon of fivemajor strategic advantage in developing products and services for the future.
In addition to eight years, these projects focus on technologies, applications and new business models that do not fit the
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product portfolio but hold the potential to open up new opportunities, markets, and user groups for SAP.
our SAP Labs, we also expanded from two SAP Innovation Center locations based in Potsdamto an SAP Innovation Center Network of 10 locations across four continents. This network is a dedicated unit within our development organization that is responsible for identifying new markets for SAP and Walldorf,pioneering game-changing solutions using transformational technologies. Through the SAP Innovation Center Network, we can closely collaborate with customers, partners, and academia to explore trends such as machine learning and block chain, among others.
We have identified several key markets and opportunities that hold significant revenue potential and allow us to apply our unique capabilities. Currently, areas include future enterprise applications, personalized medicine,
and smart cities. We are parttackling a range of challenges facing these areas, from designing the future of business software to developing new approaches to treating cancer and helping decrease traffic congestion.
Our revitalized research organization has become an applied research entity with its main focus on machine learning for enterprise applications, personalized medicine, in-memory data management, and security. Our new research approach focuses sharply on potential business impact while collaborating with the best research institutions worldwide for selected topics.
Our innovation stems from many places, and we draw on the ideas of our customers, partners, startups, academia, and, most importantly, our own employees. Our overarching goal is to foster organic innovation and support the transformation of great ideas into profitable business. In support of this organization. They combine the creativity and agility ofvision, we established a startup culture with the backbone of a world market leaderCompany-wide “intrapreneurship” program that enables employees to develop their ideas in enterprise applications. As the future end users ofan internal incubator at SAP.
In addition to our innovations,employees, our customers provide us with unique insights about their business models and digitization challenges. We also work with customers on co-innovation and custom development projects. Our partners are involved during the entire runtimeand their solutions enhance these efforts in a range of projects and come from industries and companies of all sizes, from longstandingways, such as at our SAP customers to early stage startups with no current SAP footprint. With a focus on the SAP HANA platform and our cloud and mobile solutions, these innovation centers strive to open up new application areas for SAP software,Co-Innovation Lab locations, which support engagements ranging from personalized cancer therapystrategic alliances to smart services that leverage the connectivitykey proofs of things with the Internet.concept.
Regardless of the setting, SAP embeds methods such as design thinking into all projects and researches innovative approaches to generate and evaluate applications, technologies, and business ideas.
R&D Investment
SAP’s strong commitment to R&D is reflected in our expenditures: In 2014,2015, we increased our R&D expense (IFRS) slightly by €49€515 million, to €2,331€2,845 million (2013: €2,282(2014:€2,331 million). We spent 13.3%13.7% of total revenue on R&D in 2014 (2013: 13.6%2015 (2014: 13.3%). Our non-IFRS R&D expense as a portion of total operating expenses declined slightly from 18.9%18.5% to 18.5%18.3% year-over-year.
At the end of 2014,2015, our total full-time equivalent (FTE) count in development work was 18,908 (2013: 17,804)20,938 (2014: 18,908). Measured in FTEs, our R&D headcount was 25%27% of total headcount (2013: 27%(2014: 25%). Total R&D expense not only includes our own personnel costs but also the external cost of works and services from the providers and cooperation partners we work with to deliver and enhance our products. We also incur external costs for translating, localizing, and testing products, for obtaining certification for them in different markets, patent attorney services and fees, strategy consulting, and the professional development of our R&D workforce.
Research and Development (IFRS)
Patents
As a market leader in enterprise applications, SAP actively seeks intellectual property protection for innovations and proprietary information. Our software innovations continue to strengthen our market position in enterprisebusiness solutions and services. Our investment in R&D has resulted in numerous patents. As at December 31, 2015, SAP holds a total of more than 6,8007,224 validated patents worldwide. Of these, 916893 were granted and validated in 2014.2015.
While our intellectual property is important to our success, we believe our business as a whole is not dependent on any particular patent.
Service and SupportGuiding our Customers through Every Step of their Digital Transformation
Many ofIn addition to creating new solutions for the digital era, we recognize that we must partner with our customers are experiencing profound shifts in how they use technologyto help them make the most of these innovations based on their unique needs and run their businesses. Ourgoals. Through our worldwide service and support, professionalswe guide companies at every stage of their digital transformation. We focus on helping them navigate these changes with greater speed, efficiency,creating and impact. A
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prime exampledelivering strategies for our customers’ digital journey, accelerating innovation, driving simplification of business and IT, and ensuring that expected business value is our recognition that customers have different needsrealized and goals to innovate and make use of the cloud, while preserving their investment to date. Regardless of their path, we have a broad offering to chart their course. Our teams regularly partner with customers to create a road map, removing obstacles and building a business case for migration.continuously optimized.
In 2014,2015, we began a significant transformation ofradically simplified how we engage with our professional consulting servicecustomers and support teams, bringing them together into one organization called Global Service & Support. Our goal withdeliver services, greatly harmonizing our portfolio. Under the SAP ONE Support program is to provide customers with an integrated support experience regardless of whether their landscape is on premise, in the cloud, or a hybrid of the two. Customers also benefit from a simplified experience with SAP with the next generation of premium support engagements.
In addition, SAP ONE Support is designed to enhance SAP Enterprise Support services to simplify the customer experience. This includes a multitude of aspects, such as removing underlying complexity typically associated in managing end-to-end support across hybrid landscapes, helping customers choose how to migrate to the cloud, and driving innovation while building on existing on-premise investments. We simplify customer interactions with us through a single touch point for all services across the entire solution landscape, creating a unified experience across multiple channels as well as expanding opportunities for co-innovation.
Our new SAP ONE Service approach, goes far beyondwe also introduced a new commercial model providing one service portfolio, out of one global organization, and under one contract.
We see enormous potential for our customers to simplify their own businesses and seize new opportunities through SAP HANA, with SAP S/4HANA as their new digital core. For this reason, adoption of these innovations is a key pillar in our service and support strategy. To ensure the traditional consulting model.expected customer outcomes, we offer high-value services tailored to the various customer scenarios supporting the adoption of SAP S/4HANA:
– | System conversion: Customers changing their current SAP system to SAP S/4HANA |
– | Landscape transformation: Customers consolidating their landscape or carving out selected entities or processes into a system running SAP S/4HANA |
– | New implementation: Customers migrating from a third-party legacy system or installation of SAP S/4HANA for a new customer |
In mid-2015, we also introduced SAP Activate, an innovation adoption framework to further support the fast and effective implementation of SAP S/4HANA. Offering a unique combination of SAP Best Practices and guided configuration, the new methodology provides ready-to-run digitized business processes optimized for SAP S/4HANA. It allows customers to flexibly choose the approach for their business needs, from a new implementation to an integration to a migration scenario.
As they continue on their path to digitization, we work with large enterprise customers to forge a co-engineering and co-innovation relationship, so that they can influence and shape existing SAP solutions while gaining early access to product innovation. We combine strong engineering skillshelp define future software solution standards together with experienced program management and the domain capabilities of consulting. In a cloud-based environment, this framework is critical to support our customers in buildingcomprehensive engagements and runningend-to-endserve as a trusted advisor during delivery of innovative solutions for the future, mapping their technology strategy to their business strategy, and prioritizing the steps to migrate to SAP HANA and the cloud.
An important element of our organization is education. Each year, more than 500,000 individuals are trained by SAP Education, making it one of the largest IT training organizations in the world. In 2014, we updated SAP Learning Hub, providing customers with an even easier-to-use, cloud-based platform that allows for flexible, individualized training. Winner of the prestigious Technology Services Industry Association (TSIA)
Star Award in the fall of 2014, this platform solution further simplifies the user experience of SAP software.
SAP has been a frontrunner in the adoption of Massive Open Online Courses (MOOCs) for use in an enterprise context. openSAP is SAP’s enterprise MOOC provider delivering 18 courses through the end of 2014 free of charge on topics such as SAP HANA, cloud, user experience, sustainability, and business innovation. openSAP has reached over 500,000 course enrollments with more than 170,000 individual learners.
In addition, the SAP University Alliances program brings SAP to over 2,000 universities in more than 80 countries, and aims to develop highly-qualified graduates with critical skills for the21st-century workforce. In partnership with SAP’s six University Competence Centers around the world, universities gain access to an ever-expanding range of SAP software and curriculums, enabling faculty to help students better connect business and IT concepts to practice.future.
Focusing on Organic Growth and Targeting “Fill-in” Technology through Acquisitions
As SAP views acquisitions as strategic investments in people, technologies, and growth. In 2014, SAP focused onprepares itself for the new digital economy, we may make acquisitions that would enhanceadvance our strategic goals. In 2015, SAP acquired Multiposting, a French cloud-computing company with more than 80 employees that provides software for the automatic posting of jobs and internships on the Internet. Multiposting is based in Paris and is a European leader in job posting solutions. With this acquisition, SAP plans to offer customers the best end-to-end cloud recruiting suite on the market, including the ability to efficiently post jobs to a global network of thousands of channels. The Multiposting solution will be available as part of the existing recruiting offering in our human capital management portfolio as well as in all its positioncurrent forms – as a cloudstand-alone product, as a Web service, and business network company and advance its mission of helping customers Run Simple.
New Acquisitions
In May, SAP acquired Fieldglass, a leading provider of cloud solutions for procuring and managing contingent labor and third-party services. Combined with the collaborative, network-based procurement capabilities of Ariba and the human resources expertise of SuccessFactors, the Fieldglass acquisition uniquely positions SAP to deliver a platform for businesses to manage their entire workforce – both temporary and permanent staff.through import.
In June, SAP acquired SeeWhy, a leading provider of cloud-based behavioral target marketing solutions to help businesses increase customer engagement and drive revenues.
In December, SAP acquired Concur Technologies. With more than 23,000 customers and 25 million active users in over 150 countries, Concur is the leader in the
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Organic growth remainsis the primary driver of our growth strategy. We will continue to invest in our own product development and technology innovation, improving the speed, number of projects, and innovations brought to market. We willmay also continue to acquire targeted strategic, and “fill-in” technology and software to add to our broad solution offerings and improve coverage in key strategic markets. By doing so, we will strive to best support our customers’ needs for simplified operations. We do not anticipate significant acquisitions in 2016 or 2017.
For more information about our acquisitions, see the Notes to the Consolidated Financial Statements section, Note (4).
Investing in the Next Generation of Technology Leaders through Venture Activities
Through investments in venture capital funds managed by Sapphire Ventures (formerly called SAP Ventures), which comprises our consolidated investments in venture investment funds, SAP supports investments in renowned entrepreneurs worldwide that aspire to build industry-leading businesses. Over the past 19 years, Sapphire Ventures has invested in more than 125130 companies on five continents for more than 18 years.continents. Some of these companies have been acquired by third parties or have become publicly listed companies.
Sapphire Ventures investsaims to invest in the next generation of global category technology leaders as well as early-stage venture capital funds in enterprise and consumer technology. Specifically, Sapphire Ventures pursues opportunities in which it can help fuel growth by adding expertise, relationships, geographic reach, and capital. It invests globally with a particular focus on emerging companies and early stage funds in Europe, Israel, and the United States, as well as in Brazil, China, and India.
SAP’s total commitment to Sapphire Ventures is US$1.4 billion for use over the lifetime of its respective funds. Investments through the funds are currently ongoing.
For more information about our consolidated investment funds, see the Notes to the Consolidated Financial Statements section, Note (35)(33).
Helping PartnersWorking together to extend SAP’s Reach in the Marketplace
SAP proudly works with a network of more than 13,000 partners worldwide that helps companies of all sizes tackle complexity, grow their business, and Run Simple
We engage with an extensive partner ecosystem to help customers around the world overcome complexity, create value, innovate, and thrive. OurSimple. SAP partners help expandextend our reach toin the marketplace and accelerate our Company’s growth, reaching thousands moreof new companies and millions more users. With more than 12,800 partners at the end of 2014, ourusers each year. Our partner ecosystem remainscommunity plays an
important elementrole in our success, delivering expertise through pioneering solutions to provide our mutual customers tools to succeed in the developing digital and services-based economy.
Partners add tremendous value to both SAP and customers. They sell our software and cloud services, develop complementary software and solutions, and provide a broad portfolio of implementation and professional services that support customers across all geographies and industries.
Last year we continue to create innovative wayssaw outstanding growth in SAP’s partnerships. For example, partners were responsible for nearly 90% of new SAP software customers. SAP Business One, one of our core ERP solutions for small and midsize enterprises (SMEs) and sold exclusively through partners, reached its 50,000th customer. Nearly 55% of all kindsSAP S/4HANA software license deals were won by partners and our cloud revenue through partners reported triple-digit growth. Together with our strategic technology and service partners, we created a number of powerful and compelling joint solutions and services that help customers transform and run their businesses simpler.
In the past year, SAP made several transformational moves designed to collaborate with us for mutual success.
Partners operate independently of SAP, yet complementincrease our businessjoint success in one or more of the following ways:
market, including:
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While reselling, implementation, and services are a large part of our ecosystem’s effort, SAP partner innovation on our technology platforms is also essential to market penetration. Partners develop their own applications and solutions called SAP Solution Extensions, which can then be sold to customers and other partners. These partner-developed solutions are tested, validated, approved, and supported by SAP.
In addition, the SAP PartnerEdge program for Application Development, which grew to more than 1,100 active members in 2015, encourages partners to build complementary solutions on top of our technology platforms – and quickly monetize those solutions through SAP e-commerce channels. Partners also embed SAP technology within their offerings under an original equipment manufacturer (OEM) licensing agreement, giving customers SAP software functionality backed by partner industry knowledge and expertise. 2015 was a seminal year for |
To help our partner ecosystem Run Simplemanaged cloud business, where our partner recruitment and achieve itsenablement success has expanded the number of customers benefiting from the flexibility, rapid time to value, and pay-as-you-go economics of a managed cloud with enterprise-class SAP solutions.
SAP will continue to drive business goals, we provide an extensive array of business support offerings. For example,growth through partners in 2016, continuing to identify and recruit key partners and develop the innovative programs and initiatives that fuel our flagship partner program, SAP PartnerEdge, offers a tiered engagement model that provides marketing, sales, and technical enablement, as well as education, deal support, and other resources. In addition, we provide selected global partners with dedicated teams that work closely with them to proactively engage in specialized business development and technical initiatives. Many of our partners participate in SAP Community Network, an online community that facilitates networking and information sharing. In addition, many also participate in the SAP Listens program, which surveys partners for feedback and addresses partner issues.
Our partner ecosystem is rapidly embracing our cloud, mobile, and in-memory computing offerings, including SAP HANA, with more than 3,200 partners or startups already building on our
platform. This ecosystem remains a key component in our efforts to simplify our customers’ technology landscapes and improve the lives of people everywhere.mutual success.
When our customers reduce complexity andHelping Customers Run Simple they can
When SAP customers Run Simple, it improves their ability ultimately to become best-run businesses that create more sustainable business models – which, in turn, helpshelp us ensure our own long-term viability. That is why we strive to provide more than just software. Wesoftware and services; we continually engage with our customers at every stage – not only during the sales and implementation phases, but also through the ongoing sharing of best practices and innovations.
One example of this strategy is our Customer Engagement Initiative. This program offers customers early insight into certain aspects of potential future products and product enhancementsour planned innovations, so they can provide early input and feedback in the development cycle.influence new developments. In addition, it offers customers the opportunity to network on topics of mutual interest. These networking opportunities take place at a variety of global events, including the SAPPHIRE NOW, SAP Select, SAP Forum, and SAP TechEd conferences, as well as virtual events.
Customer Loyalty
We gauge customer loyalty through an annual survey that measures ourFocus Reflected in Customer Net Promoter Score (NPS).
Customer loyalty is one of our four enterprise-wideCompany-wide strategic goals,objectives, along with growth, profitability, and employee engagement.
SAP has used In 2015, our combined on-premise and cloud Customer NPS as a key performance indicator since 2012. As we gather experience withis 22.4% (2014: 19.1%). Due to changes in sampling, resulting from ongoing efforts to implement the metric and as our business evolves, we expanded our customer base when conductingsurvey process holistically in recently acquired entities, the 2014 assessment to better reflect our business completely. In addition to our on-premise customers, in 2014 for the first time we included Ariba, SuccessFactors, and Sybase customers in the survey. Therefore, the 2014 Customer NPS2015 score is not fully comparable towith the prior year’s score.
In 2014, we achieved a global Customer NPS of 19.1%. This very positive score exceeded our 2014 target of 16%. We aim to achieve a Customer NPS score of 24% in 2015.
Our increased NPS reflects our continued commitment to listening to our customers and
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responding to their needs. Our goal iscontinues to be to best support both theirour customers’ success and the success of SAP. For example, we conducted global in-person and online focus groups with customersare expanding on the insights provided by our surveys through root cause analysis to gain additional insights into “business benefits” themes identified through the surveys. These sessions have enabled usa better understanding of customer problems, why they happened, and what needs to identify the underlying reasons behind issuesbe done to prevent those problems from happening again.
Our combined on-premise and focus more precisely on where we need to make improvements.cloud NPS target for 2016 is 25%, 2.6 percentage points above our 2015 achievement.
For more information onabout the Customer NPS, see the Performance Management System.System section.
Strong Customer Demand
Our strategy focuses on offering solutions and services to help customers Run Simple today and tomorrow. To do so, we offer a spectrum, from complete suites to applications that are lean, focused, quick to implement, and highly mobile. In 2014,2015, we saw customers embrace ourthis strategy by licensing or subscribing to the full range of the SAP portfolio –software, from comprehensive solutions for large enterprises to the latest mobile apps.
Some examples by region include the following customers:
AmericasNorth America and Latin America (Americas) Region
Antofagasta Minerals, a Chilean-based copper mining group, selected SAP solutions – including SAP HANA and SuccessFactors HR solutions – to manage its operations on a single platform and help support innovation through Big Data analytics as well as cloud and mobile solutions.
Bombardier Recreational Products, a Canadian-based global leader in motorized recreational vehicles and powersports engines, selected SAP solutions, including SuccessFactors Employee Central, to optimize its HR solutions and delivery.
The National Hockey League(NHL), composed of 30 member clubs in the United States and Canada, plans to use the power of SAP HANA to create new statistics that increase fan engagement. This content is expected to be served to fans through a variety of online, television, and mobile media channels.
Banco Central de Costa Ricaselected SAP ERP, SuccessFactors, and other software to obtain an integrated business platform for all administrative, financial, and accounting functions. The Central Bank of Costa Rica plans to create a centralized and integrated business information warehouse for efficient reporting and decision making.
– | Adobe, a multinational computer software company, has chosen the SAP Hybris Billing solution as its monetization and billing platform to support a new SaaS business model. Adobe seeks to support fast subscription-revenue growth on a flexible and scalable platform, while significantly reducing time to launch innovative and flexible offers and promotions. |
– | American Airlines, the world’s largest airline, has selected several SAP SuccessFactors solutions, as |
Ralph Lauren, one of the world’s most successful fashion brands, has chosen solutions from hybris and Ariba, both SAP companies, to pursue its growth objectives. Ralph Lauren will use hybris solutions to improve the consumer shopping experience through better omnichannel capabilities and Ariba’s global procurement network to reduce costs and enhance service quality.
well as the SAP HANA Enterprise Cloud service and SAP HANA Cloud Platform. The company’s goal is to enhance service to its employees and reduce operating costs while remaining focused on its core business. |
– | Eastman Kodak, a technology company focused on imaging, selected the SAP S/4HANA suite to help reduce total cost of IT ownership. In addition, Kodak plans to establish an IT infrastructure to position its organization for future growth and innovation. |
– | Hewlett Packard Enterprise Company (HPE) has committed to and invested in implementing one of the largest installations of the SAP S/4HANA Finance solution for their internal foundational platform to support its digital transformation. With SAP S/4HANA, HPE aims to be better able to take advantage of real-time access to operational and financial data with the goal of improving the speed of decision making and operating more efficiently; reducing the time for financial close; and delivering actionable intelligence throughout its business. The aim is to ensure HPE becomes more competitive in the marketplace. |
– | Stara, a leader in agricultural machinery headquartered in Brazil, selected SAP HANA Cloud Portal, as well as SAP Cloud for Customer, SAP SuccessFactors Employee Central, and SAP SuccessFactors Talent Management solutions. Stara expects to simplify its business processes while improving sales efficiency through greater control of critical company information. |
Asia Pacific Japan (APJ) Region
AGL Corporate Services Pty, one of Australia’s leading renewable energy companies, recently went live with SAP Fiori apps for purchase order approval and leave request approval. SAP Fiori helps AGL simplify business processes through an improved user interface and external access to workflow tasks.
Infosys, a global leader in technology, consulting, outsourcing, and next-generation services has gone live with SAP Business Suite powered by SAP HANA. With SAP HANA, Infosys expects to accelerate its financial closing processes and progressively move more and more batch activities into a real-time environment.
Singapore Health Services, one of the largest healthcare groups in Singapore, has selected Ariba solutions to replace its existing procurement platforms. Singapore Health Services expects to improve collaboration with vendors and standardize purchasing practices across its network.
Tatung Group, a major computer and electronic home appliance company in Taiwan, has chosen SAP as its strategic partner for co-innovation and simplification of all business processes on SAP HANA. Over a five-year period, Tatung plans to implement multiple SAP solutions to transform its business, simplify operations, and become a leader in the “smart energy” industry.
Mitsui Knowledge Industry(MKI), an IT services provider in Japan, selected the SAP HANA Enterprise Cloud service. In addition to its own professional data analysis service, MKI now aims to provide a market forecasting service for various commodities through a highly available and efficient enterprise cloud infrastructure.
– | Boryung Pharmaceutical, one of the leading pharmaceutical manufacturers in South Korea, selected SAP S/4HANA Finance for its simple user experience, simple business solution, simple data model, and shorter go-live time. |
– | La Trobe University in Australia went live with SAP S/4HANA Finance. As one of the first organizations globally to adopt SAP S/4HANA Finance, La Trobe University aims to benefit from instant insight across financial and operational processes to drive value through planning, analysis, prediction and simulation. They have a term for it; they call it “Brilliant Basics.” |
– | Lenovo Group, a multinational computer technology company, is expanding its HANA footprint by moving data from all systems to the SAP HANA platform. |
– | PetroChina, China’s largest oil producer, has implemented SAP Business Warehouse powered by SAP HANA and SAP BusinessObjects Business Intelligence solutions. Since the system went live in late July, HR reporting performance is three to ten times faster than before, which has empowered HR director-level management to make strategic decisions based on Big Data analysis. |
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– | St Barbara, an Australian-based, ASX-listed gold producer and explorer, selected the SAP SuccessFactors Performance & Goals solution. The solution has enabled St Barbara to replace its paper-based performance management process with a cloud-based solution that also supports its offshore locations. |
Europe, Middle East, and Africa (EMEA) Region
– | ArcelorMittal, the world’s leading steel and mining company, selected SAP S/4HANA to streamline business processes, improve productivity, and decrease costs. The company seeks to enhance its position by serving an increasingly strong innovation agenda around the world. |
– | Bosch Group, a leading global supplier of technology and services, has chosen SAP S/4HANA to rebuild its IT infrastructure, seeking a simplified and harmonized landscape that helps them offer connected services to customers. |
– | City Football Group (CFG) is the owner of a number of soccer-related businesses including Manchester City Football Club and New York City Football Club. CFG and its clubs will implement a wide variety of cloud-based solutions powered by SAP HANA with the aim of simplifying their worldwide operations, scaling their business, increasing productivity, and enhancing the fan experience. |
– | E.ON Group has chosen the limited runtime edition of SAP HANA; SAP Mobile Platform; and SAP SuccessFactors HCM Suite. The company, which is splitting into two entities, seeks to streamline its system landscape, replace homegrown software, and reduce its on-premise footprint. |
– | Hydro, a global aluminium company based in Norway, selected SAP S/4HANA to “replatform” and renew its IT system landscape. With the suite, Hydro expects to have access to real time information, thereby running at optimal efficiency and safety, which are key elements of its strategic vision. |
TheDepartment of ZakatHelping Customers Invest
To help companies invest in SAP solutions and Income Tax(DZIT), reportingassociated services and hardware, SAP Payment services offers customers payment plans. SAP Payment services can help preserve liquidity, provide an alternative to credit from customers’ existing banking relationships, and balance their budgetary priorities, while giving them the Ministry of Finance of the Kingdom of Saudi Arabia, selected the SAP Fraud Management analytic application powered by SAP HANA with the goal of reducing fraud exposure. With the help of SAP, DZIT looksflexibility to replace manual processes and increase the revenue for the Kingdom of Saudi Arabia.choose their preferred solution.
The Kenya Electricity Transmission Company has selected the SAP HANA platform for innovation and the SAP Fiori user experience to simplify its user interface. With these solutions, Ketraco expects to increase its capacity to provide a premium customer experience based on real-time data and analysis.
Spire Healthcare, a provider of private healthcare in the United Kingdom, selected SAP HANA with the aim of improving its patient overall experience.
Telefónica, an international telecommunications company based in Spain, with more than 120,000 employees selected SuccessFactors HCM Suite as its solution to provide employees with an optimal workplace, demonstrate a commitment to talent, and ensure the best opportunities for professional development.
Euromaster, a leading integrated tire service and car maintenance network in Europe, chose SAP Business Suite powered by SAP HANA to help handle its finance and supply chain processes. The company hopes to improve efficiency, optimize network coverage and make its business processes more efficient. Euromaster chose SAP software as SAP was the only company offering a concrete industry-specific solution for retail and wholesale using the power of SAP HANA.
ENVIRONMENTAL PERFORMANCE: ENERGY AND EMISSIONS
OneIn 2015, we made significant progress toward our goals for the reduction of greenhouse gas emissions, taking advantage of the primary waysdigitalization and green technology trends that weare driving transformational changes across the global economy. These trends can help bothhave a significant
impact on energy consumption and greenhouse gas emissions. We are applying these trends to our own business and helping our customers apply them to their businesses. For example, by enabling business model transformation, using advances such as smart grids and the Internet of Things, SAP tackle the challenge of complexity is by increasing efficiency. Simplificationhelping connected digital business networks reduce overall carbon footprints.
Strengthening our “Green Cloud”
We see that energy consumption in data centers is closely related to innovation and efficiency go hand in hand, and we have worked to enhance both by taking responsibility for our energy usage and carbon emissions including IT-related impactcustomer adoption of our customers consuming our cloud offerings.
solutions. As we accelerate our shift to the cloud, we have tied our business strategy to our environmental strategy by creating a completely green cloud“green cloud” at SAP, referring to carbon neutrality, by purchasing 100% renewable electricity certificates and compensation by CO2offsets. This change – which we implemented in 2014 – does more than mitigate our own impacts. It also means that we can better serve our customers, as we simplify their IT landscape through our cloud offerings and help them increase their own efficiency. Our green cloud strategy is complemented by 100% renewable energy for facilities and electric company cars charged at SAP locations.
The evolution of our green cloud reflects the critical links we see between our environmental and business performance. We bring equal rigor to addressing and measuring both of these areas. In assessing our environmental impact, we focus on energy usage throughout SAP, as well as greenhouse gas emissions across our value chain. Since the beginning of 2008, our energy efficiency measures have generated a cumulative cost avoidance of €310 million, compared to a business-as-usual scenario, with €45 million of that amount created in 2014.
Total Energy Consumed
Because our energy usage drives our emissions, one of the most important measures we look at is our total energy consumed. This includes all energy that SAP generates or purchases to run our facilities, data centers, company cars, and corporate jets. Our total energy consumption increased to 920 gigawatt hours (GWh) in 2014, compared to 910 GWh in 2013.
This increase is due to significant growth in our business. In addition, as software usage shifts to the cloud, we are operating more of our customers’ systems in our data centers, as well as other locations where we are supplementing our servers. This additional cloud operation, along with the accompanying servers and facilities, consumes more energy. At the same time, we believe this shift has the opposite effect for our customers, who can simplify their technology and which save energy through our shared infrastructure, reducing the overall IT-related energy consumption through our highly energy-efficient cloud provisioning.
As our business grows, we have maintained the efficiency gains we have made over the past several years. For example, our total corporate car
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fleet is not consuming more fuel despite the fact that a significant number of company cars have been added, since the average company car has become more fuel-efficient. So, while our car fleet grew by 5%, we had efficiency gains of 3% across the entire fleet. As a result, our total energy consumption decreased slightly to 13,400 kilowatt hours (kWh) per employee in 2014 (2013: 13,900 kWh).
Reducing Greenhouse Gas Emissions
Our goal is to reduce the net greenhouse gas (GHG) emissions from our operations to levels of the year 2000 by 2020. This target includes all direct and indirect emissions from running our business (Scopes(GHG Protocol Scopes 1 and 2), as well as a selected subset of other indirect (Scope 3) emissions. We do not include all of our Scope 3 emissions in our target because we chosechoose to focus first on those emissions over which we have direct control or capabilityability to influence. However, we are increasingly addressing both our upstream and downstream emissions to support a comprehensive carbon strategy for SAP.
Specifically, we are working to reduce our emissions through three primary approaches: increasing our operational efficiency combined with innovative approaches to the way we do things; purchasing high-quality renewable electricity certificates; and investing in high-quality carbon credits.
In addition to our long-term goalcommitment for 2020, we have setderived annual targets.targets for our internal operational steering. Despite integrating new acquisitions in 2014,2015, our total net emissions decreased to 500455 kilotons CO2 (2013: 545 (2014: 500 kilotons). This decrease stems primarily from our shift to powering alla reduction of our data centersbusiness flights and facilitiescompensation with 100% renewable electricity.carbon emission offsets. We are effectively compensating the emissions caused by our customers’from those customer systems that have moved into our green cloud. Given the large size of our customers’ CO2 footprints and our growth strategy in the cloud, we see significant potential to reduce both our own and our customers’ environmental impact.
Nonetheless, we missedSince the beginning of 2008, our annual target to reduce our emissions to 440 kilotons. The reason is that our business has continued to grow, and more of our overall emissions are caused by business travel. In other words, our shift to green energy – while critical to our long-term reduction strategy – could not fully compensate for the business travel enabling our growth. At the same
time, this shift did enhance our efficiency. Our greenhouse gas emissions decreased from 32.4 grams CO2 per euro of total revenue in 2013 to 28.4 grams CO2 per euro in 2014. Ourfocus on carbon emissions per employee also decreased by about 12%has generated a cumulative cost avoidance of
€346 million, compared to a business-as-usual scenario. This leads to an avoidance of€124 million in 2014.the past three years, with€39.8 million avoided in 2015 alone.
In addition to greater efficiency, we have achieved an overall absolute reduction of 16% since our peak year 2007, when we set our long-term carbon target. This reduction has occurred even as the average number of employees at SAP has increased by almost 32%.
Investing in Environmental Innovations
TheWe are pursuing new strategies to contend with the ongoing tension between growth in our business and our goal to reduce our emissions has led usemissions. One such approach is the introduction of carbon emission offsets for business flights in 2015. In addition to pursueavoiding and reducing overall business flights, we began, in the second half of 2015, to offset selected business flights in the United States, as this is the country with the greatest number of business flights. This offset effort resulted in a compensation of 35 kilotons of CO2.
SAP continues to invest in technology that enables virtual collaboration, supporting our efforts to reduce the need for employees to travel. In addition to our TelePresence and video conferencing platforms, new approaches. collaboration rooms based on the Skype for Business communications platform bring new features that enable teamwork across borders and time zones. More than 100 collaboration rooms have been installed throughout SAP with more planned for 2016. Because more employees adopt video chat as their preferred method of communication, more than 1,200 meeting spaces have been equipped with 360-degree cameras – giving remote participants a more interactive experience. Skype for Business also enables each employee to video chat from their computer.
To further decrease our car-related emissions, in 2014, we committedplan to increase the portion of electric vehicles (or alternatives) in our company car fleet from currently less thanthe current 1% to 20% by 2020. This initiative addressesAt the end of 2015, we have 57 charging stations and 55 pure electric vehicles in our company car fleet at our headquarters in Walldorf, and approximately300 e-cars globally. Our company car initiatives address a dilemma that has grown in recent years. Namely, along withAs a result of our business expansion, the number of SAP employees who are eligible for a company car has increased annually. We aimwant to ensure that we do not undo our efficiency gains with our growing car fleet.
In keeping with our existing policy for office buildings and data centers, we continue to powerall our electric company cars charged at SAP are powered with 100% renewable sources. In Germany, for example, we are incentivizingprovide employees with an incentive to make the switch to electric alternatives by offering a battery subsidy that offsets the costcosts of using an electric vehicle. We are also developing a management solution that will address “range anxiety,” helping drivers intelligently plan out their trips, their maximum range and the availability of charging stations. We believe that our electric car initiative will play a critical role in helping us achieve our 2020 carbon reduction goal.
Our shift to a green cloud will also bring us closer to our carbon emission goal while extending our reach beyond SAP. In addition to reducing our own emissions, this change enables us to create a far greater impact through our customers. In 2014 alone, the2015, emissions caused by SAP products in use at the sites of our more than 282,000300,000 customers were at least 10almost
15 times larger than SAP’s own footprint, meaning theythese products caused more than 6,200approximately 6,800 kilotons of CO2.CO2. By using 100% renewable energy,electricity, we dramatically broaden our sustainability efforts and align them with our cloud strategy. We believe this move not only helps the
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world run better, but significantly reducesstrategy, reducing the carbon produced both inside and outside SAP.emissions of our cloud solutions to zero.
In 2014, we also began realizingWe continued to realize the benefits of another key sustainability initiative, our investment in the Livelihoods Fund, a unique investment fund whose returns consist of high-quality carbon credits. Several years ago, we made an initial investment of €3a commitment to investing€3 million covering a 20-year participation in the fund, which supports the sustainability of agricultural and rural communities worldwide.
Projects of this fund focus on ecosystem restoration, agriculture, agro-forestry,agroforestry, and rural energy. In eastern India, for example, the fund has helped communities plant fruit trees to diversify food sources and address the overcultivation of soil. As opposed toInstead of a charitable donation, we have made a long-term investment that brings benefits to society, the environment, and SAP. In 2014,2015, we received our first carbon credits from the fund, which helped us reduceto offset our carbon footprint by another 11.223 kilotons.
Another important piece of progressprogram in 20142015 was the further implementation of ISO 14001 in SAP locations throughout the world. This well acceptedwell-accepted environmental management system is now in place in 23at 32 of our locations worldwide, including our SAP North America headquarters in Newtown Square, Pennsylvania, in the United States, as well as in such diversePalo Alto, San Francisco, Sunnyvale, and Dublin, California, both in the United States; and other countries asincluding Austria, Brazil, Canada, (Vancouver), the Czech Republic, France, Germany, Israel, Italy, and South Africa. New sites in Singapore and Switzerland, as well as Rio de Janeiro and São Paulo in Brazil, were certified in 2015. To act fastermore quickly and achieve consistency, we have created a template for rollingto roll out to newin other sites, enabling us to efficiently build a large global network in whichwhere different sites interact and share best practices. Our goal is to continually increase the number of certified locations; we aim for total full-time equivalent (FTE) coverage of 70% by 2018. By end of 2015, SAP had an environmental management system (ISO 14001) in place in 15 countries and 32 single sites. This represents a total FTE coverage of 22.2%.
Measuring our Total Energy Consumed
Because our energy usage drives emissions, one of the most important measures for us is total energy consumed. This includes all energy that SAP generates or purchases to run our facilities, data centers, company cars, and corporate jets. Our total energy consumption increased to 965 gigawatt hours (GWh) in 2015, compared to 920 GWh in 2014.
This increase is due to growth in our workforce and business. In addition, as software usage shifts to the
cloud, we are operating more of our customers’ systems in our data centers, as well as other locations where we supplement our servers. This additional cloud operation, along with accompanying servers and facilities, consumes more energy. At the same time, we believe this shift has the opposite effect for our customers that are now able to simplify their technology and save energy through our shared infrastructure. This reduces overall IT-related energy consumption through our highly energy-efficient cloud provisioning.
Optimizing Efficiency in our Data Center EnergyCenters
Data centers are at the heart of how SAP provides solutions to our customers. The energy consumption in data centers is closely related to technology innovationcustomers and customer adoptionrepresents a significant part of our solutions.total greenhouse gas emissions. At the same time, with our energy consumption rising as more of our business moves to the cloud, data centers have become a primary focus of our carbon reduction efforts.
As noted earlier, in 2014 we addressedefforts and the adoption of our technology innovations and solutions towards our customers. We continue to drive efficiency and innovation around buildings, data center electricity consumption by shifting entirely tooperations, and infrastructure. For example, in one of our largest data centers in St. Leon-Rot, Germany, we received an energy efficiency certificate from TÜV Rheinland, a green cloud at SAP. This means that 100%leading provider of technical, safety, and certification services, with an efficiency score of 98.7%. One hundred percent of our energy usage to providethat provides internal and external computation power now comes from renewable sources. At the same time, we began utilizing
external data centers to meet the growing needs of our cloud customers. For this reason, ourOur total data center electricity consumption – at both our internal and external sites – increased from 173179 in 2014 to 179 GWh. To reflect249 GWh in 2015. In recognition of the exemplary actions SAP has taken to improve our strategic shift towards a cloud delivery model based on internal and external data centers, we decided to normalize total data center electricity consumption against revenue instead of per SAP employee. On a per million euro basis, this consumption stayed flat at 10.2 megawatt hours (MWh) per million euro revenue between 2013 and 2014.were awarded the European Datacentre Sustainability Award in 2015.
Reinforcing our Renewable EnergyElectricity Strategy
Our investment in renewable energy plays a critical role in mitigating our environmental impact, helping us better serve our customers and support a more sustainable energy market. We are committed to buying from renewable sources – in 2014 we focused on solar, wind, and hydro. Our shift in 2014commitment to 100% renewable energyelectricity in all of our internal and external data centers and facilities is one of ourthe most significant actions to date to makesteps toward making our operations more sustainable.
In 2014, renewable energy accounted for 100% of our total electricity, compared with 43% in 2013.2015, we mainly focused on wind and, to a lesser extent, on biomass. While we produce a small amount of renewable energyelectricity through solar panels in some locations, we mainly rely primarily on the purchase of Renewable Electricity Certificatesrenewable electricity certificates (RECs) to increase the renewable electricity in our energy mix. We procure RECs regionally that add value and drive change in the electricity market, adopting a set of key criteria to establish high-quality standards which werein our procurement guidelines that are aligned with two NGOs.non-governmental organizations (NGOs). For example, we will consider renewable electricity from biomass only if it is disconnected from coal or other fossil power plants and if the biomass itself is not related to deforestation. In addition, we require that power plants must be no more than 10 years old, as we aim to foster new innovation andin the production of renewable energy.electricity. Furthermore, SAP is not considering RECs from power plants that are currently supported by governments. As a vintage
requirement, we define that renewable electricity must be produced in the same year or the year before the reporting period will be applied.
In 2015, SAP joined the green initiative RE100 and is now one of the global corporations that have signed on to the RE100 initiative. RE100 is led by The Climate Group in partnership with CDP (formerly Carbon Disclosure Project) and the goal of the campaign is to have 100 of the world’s most influential businesses committed to 100% renewable electricity.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES
We rely on a combination of the protections provided by applicable statutory and common law rights, including trade secret, copyright, patent, and trademark laws, license and non-disclosure agreements, and technical measures to establish and protect our proprietary rights in our products. For further details on risks related to SAP’s
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intellectual property rights, see “Item 33. Key Information – Risk Factors – Operational Risks.”
We may be dependent in the aggregate on technology that we license from third parties that is embedded into our products or that we resell to our customers. We have licensed and will continue to license numerous third-party software products that we incorporate into and/or distribute with our existing products. We endeavor to protect ourselves in the respective agreements by obtaining certain rights in case such agreements are terminated.
We are a party to certain patent cross-license agreements with certainseveral third parties.
We are named as a defendant or plaintiff in various legal proceedings for alleged intellectual property infringements. See Note (24)(23) to our Consolidated Financial Statements for a more detailed discussion relating to certain of these legal proceedings.
Our principal office is located in Walldorf, Germany, where we own and occupy approximately 430,000 square meters of office and datacenter space including our facilities in neighboring St. Leon-Rot. We also own and lease office space in various other locations in Germany, totaling approximately 120,000 square meters. In approximately 70 countries worldwide, we occupy roughly 1,585,0001,615,000 square meters. The space in most locations other than our principal office in Germany is leased. We also own certain real properties in Newtown Square and Palo Alto (United States); Bangalore (India); Sao Leopoldo (Brazil); London (UK) and a few other locations in and outside of Germany.
The office and datacenter space we occupy includes approximately 300,000305,000 square meters in the EMEA region, excluding Germany, approximately 410,000 square meters in the region North and Latin America, and approximately 325,000350,000 square meters in the APJ Region.
With the acquisition of Concur in 2014, we added approximately 46,00050,000 square meters to our real estate portfolio. This portfolio is included in the group portfolio disclosed above.
The space is being utilized for various corporate functions including research and development, our
data centers, customer support, sales and marketing, consulting, training, administration and messaging. Substantially all our facilities are being fully used or sublet. For a discussion on our non-current assets by geographic region see Note (29)(28) to our Consolidated Financial Statements. Also see, “Item 6. Directors, Senior Management and Employees – Employees,” which discusses the numbers of our employees, in FTE’s, by business area and by geographic region, which may be used to approximate the productive capacity of our workspace in each region.
We believe that our facilities are in good operating condition and adequate for our present usage. We do not have any significant encumbrances on our properties. We do not believe we are subject to any environmental issues that may affect our utilization of any of our material assets. We are currently undertaking construction activities in various locations to increase our capacity for future expansion of our business. Our significant construction activities are described below, under the heading “Principal Capital Expenditures and Divestitures Currently in Progress.”
Capital Expenditures
Principal Capital Expenditures and Divestitures Currently in Progress
In 2014,2015, we continued with various construction projects and started new construction activities in several locations. The expansion of our data centers is again an important aspect of our investments planned for 2016. We aim to extend our office space to be able to cover future growth. We plan to cover all of these projects in full from operating cash flow. TheOur most important projects are:
In Bangalore, India, we want to add additional capacity of roughly 2,500 employees. We estimate the total cost to be approximately €49 million, of which we had paid approximately €3 million as of December 31, 2014. We expect to complete the construction of this office building in 2016.
– | In Bangalore, India, we want to add additional capacity of roughly 2,500 employees. We estimate the total cost to be approximately€50 million, of which we had paid approximately€7 million as at December 31, 2015. We expect to complete the construction of this office building in 2017. |
– | In Ra’anana, Israel, we continued with the construction of a new building. We estimate the total |
In Ra’anana, Israel, we commenced construction of a new building. We estimate the total cost of this project to be approximately €54 million, of which we had paid approximately €15 million as of December 31, 2014. We expect to complete the construction of this office building in 2016.
In our research center in Potsdam, Germany, we started with a second construction phase in order to realize additional capacity for
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cost of this project to be approximately€60 million, of which we had paid approximately€25 million as at December 31, 2015. We expect to complete the construction of this office building in 2016. |
– | In our research center in Potsdam, Germany, we started a third construction phase to realize additional capacity for approximately 150 employees. With the extension of our research center, we aim to create the general conditions for further teams contributing innovations to SAP products in miscellaneous fields. We estimate the total cost to be approximately |
– | In New York, New York, in the United States, we continued executing the leasehold improvements for our new office space. The project includes the consolidation of our New York City offices for approximately 450 employees. We estimate the total capital expenditures for this project to be approximately€34 million, of which we had paid approximately€3.5 million as at December 31, 2015. We expect to complete the leasehold improvements in 2016. |
– | In Dubai, United Arab Emirates, we continued with our office consolidation project including an expansion of office space adding additional capacity for 100 employees. We estimate the total cost to be approximately€11 million, of which we had paid approximately€0.9 million as at December 31, 2015. We expect to complete the leasehold improvements in 2016. |
– | In Walldorf, Germany, we started construction on a new office building for about 700 employees. We estimate the total cost to be approximately€71 million, of which we had paid approximately€0.5 million as of December 31, 2015. We expect to complete the construction in 2018. |
– | In Walldorf, Germany, we also started construction on a new data center as well as a new power station. We estimate the total cost to be approximately€58 million, of which we had paid approximately€0.7 million as at December 31, 2015. We expect to complete the construction for both projects in 2017. |
– | In Prague, Czech Republic, we started the expansion of an office building and began an office move. We estimate the total capital expenditures for this project to be approximately€19 million. We expect to complete the project in 2016. |
– | In Colorado Springs, Colorado, in the United States, we started construction on a new data center in 2015. We estimate the total cost of this project to be approximately€75 million. We expect to complete the construction of this data center in 2017. |
In New York City, New York, United States, we started planning the leasehold improvements for our new office space. The project includes the consolidation of our New York City offices for approximately 450 employees. We estimate the total capital expenditures for this project to be approximately €31 million, of which we had paid approximately €1 million as of December 31, 2014. We expect to complete the leasehold improvements in 2016.
In Paris, France, we started an office consolidation project. The project aims to consolidate three office spaces in Paris into one office space. We estimate the total cost of the leasehold improvements to be approximately €32 million. We expect to complete the leasehold improvements in 2015.
In Dubai, United Arab Emirates, we started an office consolidation project including an expansion of office space adding additional capacity for 100 employees. We estimate the total cost to be approximately €11 million. We expect to complete the leasehold improvements in 2016.
– | In San Ramon, California, in the United States, we began an office move. We estimate the total cost of this move to be approximately€22 million. We expect to complete this project in 2017. |
– | In Shanghai, China, we started an expansion of our office building. We estimate the total cost to be approximately€15 million, of which we had paid approximately€2 million as at December 31, 2015. We expect to complete the construction in 2016. |
For more information about planned capital expenditures, see the Investment Goals section. There were no material divestitures within the reporting period.
Principal Capital Expenditures and Divestitures for the Last Three Years
Our principal capital expenditures for property, plant, and equipment amounted to €666€580 million for 2014 (2013: €553in 2015 (2014:€666 million; 2012: €5082013:€553 million). Principal capital expenditures in 20142015 for property, plant, and equipment increaseddecreased compared to 20132014 mainly due to lower replacement investments in hardware. Furthermore, compared to 2014, SAP did not have material acquisitions in 2015, resulting in fewer additions. The increase from 2013 to 2014 was due to the acquisition of Concur, the replacement and purchase of computer hardware and vehicles acquired in the normal course of business and investments in data centers. The increase from 2012 to 2013 was mainly due to
purchases of computer hardware including data center infrastructure. Principal capital expenditures for property, plant and equipment for the period from January 1, 20152016 to the date of this report were €82€97 million. For a further information on our property, plant, and equipment see Note (17) to our Consolidated Financial Statements.
Our capital expenditures for intangible assets such as acquired technologies and customer relationships amounted to €1,956€70 million in 2015 compared to€1,954 million in 2014 from €419 million in 2013 (2012: €1,794(2013:€419 million). TheCapital expenditures for intangible assets decreased from 2014 to 2015 because we only executed one small acquisition in 2015, while the increase from 2013 to 2014 was due to the acquisitionacquisitions of Concur and Fieldglass in 2014, while in 2013 we only executed a few smaller business combinations.2014. Our investments allocated to goodwill amounteddecreased to €6,012€27 million in 2015 from€6,072 million in 2014 from €842 million in 2013 (2012: €4,557(2013:€842 million). The decrease from 2014 to 2015 in the additions to goodwill was primarily attributable to executing only one small acquisition in 2015 compared to 2014 when we acquired Concur and Fieldglass. These 2014 acquisitions also caused the significant increase from 2013 to 2014 was again due to the acquisition of Concur in 2014 compared to the few smaller business combinations in 2013. The decrease from 2012 to 2013 in the addition to goodwill and intangible assets was primarily attributable to executingas we executed only a few small business combinationsacquisitions in 2013 compared to the acquisition of SuccessFactors and Ariba in 2012.2013. For further details on acquisitions and related capital expenditures, see Note (4) and Note (16)(15) to our Consolidated Financial Statements.
For further information regarding the principal markets in which SAP conducts business, including a breakdown of total revenues by category of activity and geographic market for each of the last three years, see “Item 5. Operating and Financial Review and Prospects – Operating Results (IFRS)” of this report.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
We derive our revenue from fees charged to our customers for (a) the use of our cloud offerings, (b) licenses to our on-premise software products and (c) support, consulting, customer-specific on-premise software development arrangements, training, and other services.
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Depending on the product or service provided we classify our revenues either as (a) software and software-related services revenue or (b) professional services and other service revenue.
For more information on our principal sources of revenue and how the different types of revenue are classified in our income statement refer to Note (3b) to our Consolidated Financial Statements, section Revenue Recognition.
See “Item 4. Information about SAP – Products, Research & Development, and Services” for a more detailed description of the products and services we offer.
The following discussion is provided to enable a better understanding of our operating results for the periods covered, including:
the factors that we believe impacted our performance in 2014;
our outlook for 2014 compared to our actual performance (non-IFRS);
a discussion of our operating results (IFRS) for 2014 compared to 2013 and for 2013 compared to 2012;
the factors that we believe will impact our performance in 2015; and
our operational targets for 2015 (non-IFRS).
– | the factors that we believe impacted our performance in 2015; |
– | our outlook for 2015 compared to our actual performance (non-IFRS); |
– | a discussion of our operating results for 2015 compared to 2014 and for 2014 compared to 2013; |
– | the factors that we believe will impact our performance in 2016; and |
– | our operational targets for 2016 (non-IFRS). |
The preceding overview should be read in conjunction with the more detailed discussion and analysis of our financial condition and results of operations in this Item 5, “Item 3. Key Information – Risk Factors” and “Item 18. Financial Statements.”
Global Economic Trends
The global economy recovered during the course of 2014, although slowly and heterogeneously, according toIn its most recent report, the European Central Bank (ECB). The ECB reports concludes that progress in some advanced economies was restrained early in the year, gained momentum in the second and third quarters, but then weakened slightly in the fourth quarter. In the emerging economies, in contrast, the ECB says, structural problems and a tight credit environment impeded growth throughout the year.
On the other hand, geopolitical crises, such as those in Ukraine and the Middle East, had little impact on the global economy grew gradually and unevenly in 2014,2015. The ECB finds that low oil prices, favorable financing conditions, and improving labor markets helped advanced economies perform better than in previous years. However, growth in emerging markets and developing economies remained relatively weak, according to the ECB. It cites tight global financing conditions and declining commodity prices as the causes.
Year-over-year growth inFor the Europe, Middle East, and Africa (EMEA) region, was significantly slower than the global average. The ECB reports that growth incontrasting developments. According to its calculations, the gross domestic product of the euro area lost momentum throughout 2014; itgrew 1.5% in 2015. It finds that this recovery was particularly weak in the fourth quarter given unexpectedly low investment and exports.mainly due to increasing domestic demand. The ECB estimates that euro-area gross domestic product (GDP) increased 0.8% year-over-year. It notes that overall growth was robust ineconomies of Central and Eastern EuropeEuropean countries were robust, according to the ECB, while Russia was in the first half of 2014 but that in some countries growth slowed in the second halfsignificant recession.
The economic performance of the year. The intensifying conflict in Ukraine, the international sanctions, and falling oil prices all hampered growth in the Russian economy, especially in the second half of the year.
Year-over-year growthcountries in the Americas region was also slower than the global average,uneven. According to the ECB, reports. Strong domestic demand underpinned substantial growththe United States economy firmed in 2015, and weakened slightly only in the U.S. economy, especially in the second and third quarters. In contrast, economic growthquarter. However, a number of countries in Latin America weakened andslipped into recession; notably Brazil, where the disparity between countries’ growth increased in 2014. For example, the ECB reports that the Brazilian economy grew little – indeed, it contracted in the first six months – while experiencing steep inflation. In contrast, the Mexican economy regained traction in 2014 after suffering a marked reversal the previous year, accordingdownturn was mainly due to the ECB.political uncertainty.
Economic trends inIn the Asia Pacific Japan (APJ) region, were again mixed. In Japan, economic growth slowed again. In the second and third quarters, Japan’s economy even contracted;struggled to gain momentum in 2015, the ECB links this development withnotes. However, the increase in consumption tax on April 1, 2014. Japan returnedECB also points to growtha slight recovery in the lastthird quarter and signs of growth at the end of the year. Year-over-year,China refocused its economy in 2015, easing its monetary policy and introducing a new exchange rate regime in the summer, the ECB reports. This increased political uncertainty and economic growth slowed. The ECB writes that business-friendly reforms in China decelerated – primarily because ofIndia boosted investment and, after a temporary decline in investments. National and local stimulus programs brought a returnthe second quarter, led to greater stabilityan increase in the fourth quarter. According to the ECB, the outcome was full-year economic growth in China at a rate in the upper single-digit percentage range.from mid-year onwards.
The IT Market
According toGrowth in the global IT market slowed from the second quarter of 2015, U.S. market research firm International Data Corporation (IDC), reports. It attributes this development to the globalcontracting PC market, the encroachment on traditional IT business by cloud services, and weak economic performance in countries such as Brazil, China, and Russia. IDC lowered its forecast for IT market expanded 4.1% in 2014, which is in the
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lower end of the range IDC expected in its earlier quarterly projections. Drivers were a decrease in production and a decline of average prices for tablets and smartphones in a saturated market, according to IDC. These effects had not been foreseen at the beginning of the year. On the other hand, PC-related sales revenue shrank less than IDC had forecasted in its projections earlier in the year. Indeed, in the advanced economies PC spending rose for the first time since 2010, although it continued to decline in the emerging economies. IDC’s expectations for the software and related services markets remained broadly constant all year. IDC expected that the software market grew 6.1% and the services market grew 3.3% in 2014. According to IDC companies continue to invest in software; increasingly so in solutions for the cloud, mobile, and Big Data. Such investment is targeted at cost reduction, more efficient operation, and optimized hardware utilization.
Each segment of the IT market in the EMEA region expanded less than the global average. IDC states that, in Western Europe, a resurgent PC market (8.2% growth) drove an increase in total IT spending. Nonetheless, overall growth in the IT market in Western Europe market was 1.8% (Germany: 3.6%), which was negatively influenced by political tensions with Russia. The impact of the Ukraine crisis was more noticeable in Central2015, and Eastern Europe, where the IT market nearly stagnated with 0.1% growth (Russia 0.1%). The IT market in the Africa and the Middle East grew by a percentage well into double digits.
In the Americas region, IDC estimates the U.S. IT market as relatively stable and calculated growth of 3.8% in 2014. Progress was slowest in the first quarter, similar to what was seen in the U.S. economy. IT demand grew most rapidly for cloud products, and that growth was at the expense of traditional software products. The markets in Latin America grew more slowly than previously. IDC estimates that the IT market in Latin America grew only 6.2% year-over-year (Brazil: 7.1%; Mexico: 2.8%) after double-digit growth in the previous year and despite a projection of 8% growth for 2014 made at the beginning of the year.
The two largest economies in the APJ region, China and Japan, experienced some difficulty in 2014, and in both countries the IT market was affected, IDC reports. In Japan, where IT spending had grown 4.0% in 2013, IDC estimates that it increased only 0.6% in 2014, held back by the weakness of the overall economy. For China, IDC
projected 13.3% growth in 2014 at the beginning of the year, but by the end of the year it expected the global IT market to have grown 4.9% year over year – still ahead of the economy as a whole.
However, according to IDC, IT spending did not grow evenly across the segments. It pointed to strong growth in cloud, mobile, and Big Data, with service providers increasing investment in server and data storage hardware. IDC reports that smartphone market expansion, which had trimmedbeen rapid in the previous year, slowed significantly in 2015 due to saturation. In 2015, the rate of smartphone market growth was closer to that of the IT market as a whole. Even the tablet market was unable to make up for this loss of momentum, IDC notes.
By contrast, worldwide spending on business software increased significantly, at 6.8% in 2015, according to IDC. The share of investment in cloud, mobile, and Big Data solutions continued to increase. However, according to IDC, this had an adverse effect on services, which grew only 2.8%.
IDC reports that IT spending in the Europe, Middle East, and Africa region (EMEA) increased 1.5% in 2015, and by as much as 5% in Western Europe due to the economic recovery there. In Germany, the IT market grew even more strongly at over 6%. In Russia, though, low oil
prices, depreciation of the ruble, and economic sanctions had a significant negative impact, IDC reports. It expects the Russian IT market declined 15% in 2015.
In the Americas region, the IT market grew 4.6% according to IDC. In its expectationview, the U.S. market remained largely stable. It grew 3% overall, somewhat less than in the previous year, mainly due to 9.8%the weakening market for smartphones and tablets. Software, on the other hand, grew strongly at 7% in the United States, according to IDC. In Brazil, IT investment increased 11% in 2015, though this increase has to be seen in the context of high inflation. IDC put growth in the Mexican IT market at almost 13%.
In the Asia Pacific Japan (APJ) region, IDC reports that the IT market there grew almost 6% in 2015. The IT markets in individual countries performed very differently. In Japan, IT spending remained constant year over year. In China, growth in the IT market slowed to 8% (2014: 12%). In India, however, in 2015 IT spending grew very strongly at 11%, according to IDC.
Impact on SAP
Once again, growth in the overall global economy and in the IT industry was relatively slow in 2014, and it became increasinglya volatile as the year progressed.market environment in 2015. This confronted SAP with considerable challenges. However, thanksBut our tremendous 2015 results validate our strategy of innovating across the core, the cloud, and business networks to help our innovation strategy, extended product portfolio, and strong diversification, wecustomers become true digital enterprises. We once again succeeded in significantly expanding our business and outperformed the overall global economy and IT industry in all regions in 20142015 with regards to revenue growth.
Our non-IFRS softwarecloud and software-related servicessoftware revenue increased 7%12% at constant currencies in 2014.2015. Both our core business and our cloud business contributed substantially to the increase. In ourOur core business grew with non-IFRS software and support revenue increased 5%increasing 6% at constant currencies, although software revenue growthcurrencies. This was affecteddriven by difficult economic conditions in almost all of the most important emerging economies for us, notably in Latin America, Russia and Ukraine, and Japan. That led to a 3%4% year-over-year declineincrease in our non-IFRS software revenue at constant currencies, while our resilient constant currency non-IFRS support revenue grew 8%7%. Support revenue is a robust feature of our core business model because a maintenance contract generally continues for as long as the customer uses the software. Our cloud business growth was strong.strong as well. Non-IFRS cloud subscriptionsubscriptions and support revenue grew 45%82% over the year at constant currencies. That growth was 32% even after eliminating
For more details about our regional performance, see the results from the acquired cloud companies.Revenue by Region section below.
In the EMEA region, we were again highly successful, attaining 7% growth in non-IFRS software and software-related services revenue at constant currencies, while our performance in the United Kingdom was especially noteworthy. A 57% year-over-year increase in non-IFRS cloud subscription and support revenue at constant currencies is an indication that the cloud business is also of growing importance in the EMEA region.
In the Americas region, we achieved 7% growth in non-IFRS software and software-related services revenue at constant currencies despite the difficulties of weak economic progress, particularly in Latin America. Non-IFRS cloud subscription and support revenue grew 39% in the full year at constant currencies.
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In the APJ region, the economic environment remained weak in 2014 and was also reflected in our modest revenue growth. However, our strong growth in cloud and a solid performance in India are worth highlighting. In the APJ region, our non-IFRS software and software-related services revenue grew 7% year-over-year at constant currencies, considerably supported by a 60% increase in constant currency non-IFRS cloud subscription and support revenue.
In 2014,2015, we again demonstrated that we are consistently pursuing our strategy for innovation and growth – and that globally we are able to generate growth that few other IT companies can match.
In the first quarter of 2014, we took significant steps to drive forward our strategy and our ambition to become THE cloud company powered by SAP HANA. To execute this strategy, we merged certain areas of the company that performed similar tasks (for example, the on-premise sales forces with the cloud sales force, and the on-premise support units with the cloud support units) to achieve the seamless organization of SAP.
Since this integration and in the entire year 2014, our cloud-related activities were no longer handled by separate components in our Company. Our Executive Board assesses the financial performance of our Company on an integrated basis only. Consequently, SAP had one single operating segment in 2014.
For more information about the changes to our segment reporting, see the Notes to the Consolidated Financial Statements section, Note (29).
PERFORMANCE AGAINST OUTLOOK FOR 20142015 (NON-IFRS)
Our 20142015 operating profit-related internal management goals and published outlook were based on our non-IFRS financial measures. For this reason, in thisthe next section we discuss performance against our outlook referring solely to these non-IFRS financial measures. All discussion in the Operating Results (IFRS) section, however, isonly in terms of measuresnon-IFRS numbers derived from IFRS measures. The subsequent section about IFRS operating results discusses numbers only in accordance withterms of the International Financial Reporting Standards as issued by the International Accounting
Standards Board (IASB), and(IFRSs). So the numbers in that section are not explicitlyexpressly identified as IFRS measures.
Starting in the second quarter of 2014, we additionally adjusted our non-IFRS operating expense by excluding the expenses resulting from the Versata litigation. (For more information about this litigation, see the Notes to the Consolidated Financial Statements section, Note (24)). Prior-year amounts have been adjusted accordingly. We exclude the Versata litigation expenses to provide additional insight into the comparability of our ongoing operating performance across periods and to continue the alignment of our non-IFRS measures with our internal performance measures.
Guidance for 2014 (Non-IFRS)
At the beginning of 2014, we gave the guidance that our cloud subscription and support revenue (non-IFRS) will increase to between €950 million and €1 billion (2013: €757 million) at constant currencies. For our software and software-related service revenue (non-IFRS) for 2014, we forecasted an increase of between 6% and 8% at constant currencies (2013: €14,032 million). We expected our full-year operating profit (non-IFRS) for 2014 to be between €5.8 billion and €6.0 billion (2013: €5.48 billion) at constant currencies. We anticipated an effective tax rate (IFRS) of between 26.0% and 27.0% (2013: 24.4%) and an effective tax rate (non-IFRS) of between 27.5% and 28.5% (2013: 25.9%).
In April, we confirmed the guidance for 2014 that we had published in January 2014. In July, we increased our outlook for cloud subscription and support revenue (non-IFRS) to between €1,000 million and €1,050 million (2013: €757 million) at constant currencies.
Based on the strong momentum in SAP’s cloud business, we raised our cloud outlook again in October and expected non-IFRS cloud subscriptions and support revenue to be in a range of €1,040 million to €1,070 million at constant currencies (2013: €757 million). With the customer-driven mix shift from upfront to cloud subscription revenue we expected full-year 2014 non-IFRS operating profit to be in a range of €5.6 billion to €5.8 billion (previously €5.8 billion to €6.0 billion) at constant currencies (2013: €5.48 billion). We confirmed our predictions for software and software-related service revenue (non-IFRS at constant currencies) and for the anticipated effective tax rates.
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To assist in understanding our 2014 performance as compared to our 2014 outlook a reconciliation from our IFRS financial measures to our non-IFRS financial measures is provided below. These IFRS financial measures reconcile to the nearest non-IFRS equivalents as follows:
€ millions, except | IFRS Financial Measure | Recurring Revenue not Recorded Under IFRS | Acquisition- Related Charges | Share- Based Payments | Restruc- turing | Tomorrow Now and Versata Litigation | Non-IFRS Financial Measure | Currency Effect on the Non-IFRS Financial Measure | Non-IFRS Financial Measure at Constant Currency | |||||||||||||||||||||||||||
Software andsoftware-related service revenue | 14,855 | 19 | NA | NA | NA | NA | 14,874 | 110 | 14,984 | |||||||||||||||||||||||||||
Total revenue(1) | 17,560 | 19 | NA | NA | NA | NA | 17,580 | 142 | 17,722 | |||||||||||||||||||||||||||
Operating profit(1) | 4,331 | 19 | 562 | 290 | 126 | 309 | 5,638 | –9 | 5,628 | |||||||||||||||||||||||||||
Operating margin in % | 24.7 | 0.1 | 3.2 | 1.7 | 0.7 | 1.8 | 32.1 | –0.3 | 31.8 |
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Actual Performance in 2014 Compared to Guidance (Non-IFRS)
We achieved or exceeded the amended outlook guidance for revenue and operating profit we published in October.
Comparison of Forecast and Results for 2014
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Despite ongoing economic uncertainty throughout 2014, our new and existing customers continued to show a strong willingness to invest in our solutions. We saw a strong impetus toward growth in the cloud business.
At constant currencies, non-IFRS cloud subscription and support revenue grew from €757 million in 2013 to €1,098 million in 2014. That represents an increase of 45% at constant currencies. The increase includes effects relating to acquisitions not included, or not included in full, in the 2013 amount. These acquisition-related effects account for 13 percentage points in the increase. The increase in our cloud subscription
and support revenue led to an increase in our annual cloud revenue run rate to €1,716 million (2013: €1,016 million), with Concur and Fieldglass having together contributed €0.3 billion to the 2014 run rate. In 2014, we began to use the sum of non-IFRS fourth-quarter cloud subscription and support revenue (€360 million) and fourth-quarter non-IFRS cloud-related professional services and other service revenue (€69 million), multiplied by four, to calculate our annual cloud revenue run rate.
Our non-IFRS software and software-related services revenue grew 7% at constant currencies to €14,984 million (2013: €14,032 million).
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Despite adverse economic conditions weighing on business in Russia and Ukraine, our performance in the Europe, Middle East, and Africa (EMEA) region was again sound. Non-IFRS software and software-related service revenue grew 6% (7% at constant currencies) and non-IFRS cloud subscription and support revenue increased 58% (57% at constant currencies) in the EMEA region. In the Americas region, non-IFRS software and software-related service revenue increased 6% (7% at constant currencies), with strong growth in the United States. The economic and political environment in Latin America remained difficult. Our non-IFRS cloud subscription and support revenue increased 39% (39% at constant currencies) in the Americas region. In the Asia Pacific Japan (APJ) region, our non-IFRS software and software-related service revenue increased 4% (7% at constant currencies). Non-IFRS cloud subscription and support revenue increased 59% (60% at constant currencies) in the APJ region.
In 2014, we achieved a non-IFRS operating profit of €5,628 million at constant currencies. Thus, constant currency non-IFRS operating profit was within the range (€5.6 billion to €5.8 billion) we had expected in our updated outlook.
We achieved an effective tax rate (IFRS) of 24.7% and an effective tax rate (non-IFRS) of 26.1%, which is below the outlook of 26.0% to 27.0% (IFRS) and 27.5% to 28.5% (non-IFRS). The reduction mainly results from the regional allocation of income, from tax effects on changes in foreign currency exchange rates, and from taxes for prior years.
This section on operating results (IFRS) discusses results only in terms of IFRS measures, so the IFRS numbers are not expressly identified as such.numbers.
We acquired Concur Technologies in December 2014, so Concur results are incorporated in our 2014 results only for December. We acquired Fieldglass in May 2014, so Fieldglass results are incorporated in our 2014 results only forfrom May to December. Similarly, because we acquired hybris in August 2013, hybris results are incorporated in our 2013 results only forfrom August to December.
Guidance for 2015 (Non-IFRS)
At the beginning of 2015, we projected, based on the strong momentum in our cloud business, that our non-IFRS cloud subscriptions and support revenue would end between€1.95 billion and€2.05 billion at constant currencies (2014:€1.10 billion). The upper end of this range represents a growth rate of 86% at constant currencies. The acquired companies Concur and Fieldglass were expected to contribute approximately 50 percentage points to this growth. SAP expected full-year 2015 non-IFRS cloud and software revenue to increase by 8% to 10% at constant currencies (2014:€14.33 billion). We also expected our full-year operating profit (non-IFRS) for 2015 to end between€5.6 billion and€5.9 billion (2014:€5.64 billion) at constant currencies. We anticipated an effective tax rate (IFRS) of between 25.0% and 26.0% (2014: 24.7%) and an effective tax rate (non-IFRS) of between 26.5% and 27.5% (2014: 26.1%).
To assist in understanding our 2015 performance as compared to our 2015 outlook a reconciliation from our IFRS financial measures to our non-IFRS financial measures is provided below. These IFRS financial measures reconcile to the nearest non-IFRS equivalents as follows:
€ millions, except operating margin | IFRS Financial Measure | Recurring Revenue not Recorded Under IFRS | Acqui- sition- Related Charges | Share- Based | Restruc- turing | Non-IFRS Financial Measure | Currency Effect on the Non- IFRS Financial Measure | Non-IFRS Financial Measure at Constant Currency | ||||||||||||||||||||||||
Cloud subscriptions and support | 2,286 | 10 | NA | NA | NA | 2,296 | –297 | 1,999 | ||||||||||||||||||||||||
Software licenses and support | 14,928 | 2 | NA | NA | NA | 14,930 | –933 | 13,997 | ||||||||||||||||||||||||
Cloud and software | 17,214 | 11 | NA | NA | NA | 17,226 | –1,230 | 15,996 | ||||||||||||||||||||||||
Total revenue(1) | 20,793 | 11 | NA | NA | NA | 20,805 | –1,505 | 19,299 | ||||||||||||||||||||||||
Operating profit(1) | 4,252 | 11 | 738 | 724 | 621 | 6,348 | –443 | 5,904 | ||||||||||||||||||||||||
Operating margin (in %) | 20.5 | 0 | 3.5 | 3.5 | 3.0 | 30.5 | 0.1 | 30.6 |
(1) Operating profit is the numerator and total revenue is the denominator in the calculation of our IFRS operating margin and the comparable non-IFRS operating margin, and is included in this table for the convenience of the reader.
Actual Performance Compared to Guidance 2015
(Non-IFRS)
We achieved or exceeded the amended outlook guidance for revenue and operating profit we published at the beginning of the year.
Comparison of Forecast and Results for 2015
Forecast for 2015 | Results for 2015 | |||||||
Cloud subscriptions and support revenue | €1.95 billion | €2.00 billion | ||||||
(non-IFRS, at constant currencies) | to €2.05 billion | |||||||
Cloud and software revenue | +8% | +12% | ||||||
(non-IFRS, at constant currencies) | to +10% | |||||||
Operating profit | €5.6 billion | €5.90 billion | ||||||
(non-IFRS, at constant currencies) | to €5.9 billion | |||||||
Effective tax rate (IFRS) | 25.0% | 23.4% | ||||||
to 26.0% | ||||||||
Effective tax rate (non-IFRS) | 26.5% | 26.1% | ||||||
to 27.5% |
Despite ongoing economic uncertainty throughout 2015, our new and existing customers continued to show a strong willingness to invest in our solutions.
At constant currencies, non-IFRS cloud subscriptions and support revenue grew from€1.1 billion in 2014 to€2.0 billion in 2015. That represents an increase of 82% at constant currencies. The increase includes effects relating to acquisitions not included, or not included in full, in the 2014 amount. Besides these positive acquisition effects our cloud line of business also continued to benefit from strong organic growth (32% at constant currencies), which surpassed our long-term growth expectations for 2015.
Starting with the reporting for the first quarter of 2015, SAP reports a new cloud related measure called “new cloud bookings.” This measure is an order entry measure that is determined by including all order entry of a given period that meets all of the following conditions:
– | The revenue from the orders is expected to be classified as cloud subscriptions and support revenue. |
– | It results from purchases by new customers and incremental purchases by existing customers. Consequently, orders to renew existing contracts are not included. |
– | The order amount is contractually committed (that is, variable amounts from pay-per-use and similar arrangements are not included). Consequently, due to their uncommitted pay-per-use nature, transaction- |
based fees from SAP Ariba and SAP Fieldglass solutions are not reflected in the new cloud bookings metric. |
– | Amounts are annualized. That is, for contracts with durations of more than one year, the average annual order entry amount is included in the number. |
Thus, the new cloud bookings measure is an indicator for our cloud-related sales success in a given period and for future cloud subscriptions revenue. New cloud bookings increased 100% in 2015 to€874 million (2014:€436 million). Concur contributed€169 million to new cloud bookings. In addition to the strong growth of the new cloud bookings the combination of our cloud backlog (unbilled future revenue based on existing customer contracts) and deferred cloud revenue that together reflect the committed future cloud subscriptions and support revenue climbed by 53% to€4.6 billion (2014:€3.0 billion). This committed business will drive cloud growth in 2016 and beyond.
Besides the cloud business also our core on-premise business showed an exceptional growth in 2015. Cloud and software revenue (non-IFRS) was€17.2 billion (2014:€14.3 billion). On a constant currency basis, the increase was 12% and based on that result significantly above the forecast for 2015.
Our total revenue (non-IFRS) rose 18% in 2015 to€20.8 billion (2014:€17.6 billion). On a constant currency basis, the increase was 10%.
Operating expenses (non-IFRS) in 2015 were€14.5 billion (2014:€11.9 billion), an increase of 21%. On a constant currency basis the increase was 12%.
Our expense base in 2015 was impacted by the transformation to a fast-growing cloud business resulting in a significant higher share of more predictable revenue. The gross margins of our cloud offerings made good progress throughout 2015. Our gross margin (Non-IFRS) in our business network segment resulted in ~75% for 2015, already close to our long-term ambition of ~80%. This good result is based on an overall improved profitability as well as related to positive effects of the Concur acquisition. The revenue growth of our private cloud offering was more positive than expected. At the same time, the profitability of our private cloud offering could also be improved further; it is still negative but based on the good progress we saw throughout 2015, we expect break even in the course of 2016. Profitability in our public cloud offering was ~70% for 2015 compared to our long-term ambition of ~80%. Our overall cloud gross margin improved year over year from 64.3% in 2014 to 65.6% in 2015, despite incremental investments in the cloud infrastructure. These investments were necessary so as to be able in future periods to satisfy the increased
customer demand that can be seen in the significantly higher cloud backlog as well as the increased cloud bookings.
Efficiency improvements in both our core and our cloud business drove absolute operating profit growth. Non-IFRS operating profit in 2015 was€5.904 billion, an increase of 5% at constant currencies. The growth in our operating profit in 2015 reflects the continued success of our business transformation in combination with the strong top-line growth. In 2015, we had a positive impact from our Company-wide transformation program in the triple-digit million euro range. On the other hand, we had a net increase of more than 2,500 employees in 2015 as we continued to invest in innovation and growth markets. Thus, constant currency non-IFRS operating profit amounting to€5.904 billion slightly exceeded the range (€5.6 billion to€5.9 billion) we had expected in our outlook.
We achieved an effective tax rate (IFRS) of 23.4% and an effective tax rate (non-IFRS) of 26.1%, which is below the outlook of 25.0% to 26.0% (IFRS) and 26.5% to 27.5% (non-IFRS). The reduction mainly results from taxes for prior years.
This section on operating results (IFRS) discusses results only in terms of IFRS measures, so the IFRS numbers are not expressly identified as such.
Our 20142015 Results Compared to Our 20132014 Results (IFRS)
Revenue
Revenue
€ millions | 2014 | 2013 | Change in % 2014 vs 2013 | |||||||||
Cloud subscriptions and support | 1,087 | 696 | 56 | % | ||||||||
Software | 4,399 | 4,516 | –3 | % | ||||||||
Support | 9,368 | 8,738 | 7 | % | ||||||||
Software and support | 13,767 | 13,254 | 4 | % | ||||||||
Software and software-related service revenue | 14,855 | 13,950 | 6 | % | ||||||||
Professional services and other service revenue | 2,706 | 2,865 | –6 | % | ||||||||
Total revenue | 17,560 | 16,815 | 4 | % |
€ millions | 2015 | 2014 | Change in % 2015 vs 2014 | |||||||||
Cloud subscriptions and support | 2,286 | 1,087 | 110% | |||||||||
Software licenses | 4,835 | 4,399 | 10% | |||||||||
Software support | 10,093 | 8,829 | 14% | |||||||||
Software licenses and support | 14,928 | 13,228 | 13% | |||||||||
Cloud and software | 17,214 | 14,315 | 20% | |||||||||
Services | 3,579 | 3,245 | 10% | |||||||||
Total revenue | 20,793 | 17,560 | 18% |
Total Revenue
Total revenue increased from €16,815 million in 2013 to €17,560€17,560 million in 2014 to€20,793 million in 2015, representing an increase of €746€3,233 million, or 4%18%. This growth reflects a 5%10% increase from changes in volumes and pricesnew business and a 1% decrease9% increase from currency effects. The growth in revenue resulted primarily from a €391€1,264 million rise in support revenue, a€1,199 million increase in cloud subscriptionsubscriptions and
support revenue, software license revenue increased€436 million and a €631 million rise in
support revenue. Consultingservices revenue declined €147 milliongrew by€334 million. Cloud and software revenue declined €117 million. Software and software-related service revenue climbed to €14,855€17,214 million in 2014,2015, an increase of 6%20%. SoftwareCloud and software-related servicesoftware revenue represented 85%83% of total revenue in 2014 (2013: 83%2015 (2014: 82%). Professional services and other serviceService revenue declined 6%increased 10% from €2,865€3,245 million in 20132014 to €2,706€3,579 million, which was 15%17% of total revenue, in 2014.2015.
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For more information about the breakdown of total revenue by region and industry, see the Revenue by Region and Industry section below.
Cloud and Software and Software-Related Service Revenue
Software licenses revenue results from the fees earned from selling or licensing software to customers. Revenue from cloud subscriptions and support refers to the income earned from contracts that permit the customer to access specific software solutions hosted by SAP during the term of its contract with SAP. Support revenue represents fees earned from providing technical support services and unspecified software upgrades, updates, and enhancements to customers.
Cloud subscriptionsubscriptions and support revenue increased from €696€1,087 million in 2014 to€2,286 million in 2015.
Despite a combination of a challenging macroeconomic and political environment and the accelerating industry shift to the cloud, we achieved a€436 million increase in software license revenue. This increase, from€4,399 million in 2014 to€4,835 million in 2015, reflects a 4% increase from new license business and a 6% increase from currency effects.
Our customer base continued to expand in 2015. Based on the number of contracts concluded, 13% of the orders we received for software in 2015 were from new customers (2014: 12%). The total value of software orders received increased 16% year-over-year. The total number of software license contracts increased 6% to 57,439 (2014: 54,120 contracts), while the average order value increased by 9%. Of all our software orders received in 2015, 27% were attributable to deals worth more than€5 million (2014: 22%), while 40% were attributable to deals worth less than€1 million (2014: 44%).
Our stable customer relations and continued investment in new software licenses by customers throughout 2015 and the previous year resulted in an increase in software support revenue from€8,829 million in 2014 to€10,093 million in 2015. The SAP Enterprise Support offering was the largest contributor to our software support revenue. The€1,264 million, or 14%, growth in software support revenue reflects a 7% increase from new support business and an 8% increase from currency effects. This growth is primarily attributable to SAP Product Support for Large Enterprises and SAP
Enterprise Support. The acceptance rate for SAP Enterprise Support among new customers slightly increased to 99% in 2015 (2014: 98%).
Software licenses and software support revenue rose€1,700 million, or 13%, from€13,228 million in 2014 to€14,928 million in 2015. This growth breaks down into a 6% increase from new software licenses and software support business and a 7% increase from currency effects.
Cloud and software revenue grew from€14,315 million in 2014 to€17,214 million in 2015, an increase of 20%. This reflects a 12% increase from new cloud and software business and a 9% increase from currency effects.
Services Revenue
Services Revenue combines revenue from professional services, premium support services, training services, messaging services and payment services. Professional services primarily relate to the installation and configuration of our cloud subscriptions and on-premise software products. Our premium support offering consists of high-end support services tailored to customer requirements. Messaging services are primarily transmission of electronic text messages from one mobile phone provider to another. Payment services are primarily delivered in connection with our travel and expense management offerings.
Services revenue increased€334 million, or 10%, from€3,245 million in 2014 to€3,579 million in 2015. This increase reflects a 2% increase from new services business and an 8% increase from currency effects.
A solid market demand led to an 8% increase of€222 million in consulting revenue and premium support revenue from€2,634 million in 2014 to€2,856 million in 2015. This increase reflects a 0% increase from new business and an 8% increase from currency effects. Consulting and premium support revenue contributed 80% of the total service revenue (2014: 81%). Consulting and premium support revenue contributed 14% of total revenue in 2015 (2014: 15%).
Revenue from other services increased€112 million, or 18%, to€723 million in 2015 (2014:€611 million). This reflects a 9% increase from new business and a 10% increase from currency changes.
Revenue by Region and Industry
Revenue by Region | ||||||||||||
€ millions | 2015 | 2014 | Change in % 2015 vs 2014 | |||||||||
Germany | 2,771 | 2,570 | 8% | |||||||||
Rest of EMEA | 6,409 | 5,813 | 10% | |||||||||
EMEA | 9,181 | 8,383 | 10% | |||||||||
United States | 6,750 | 4,898 | 38% | |||||||||
Rest of Americas | 1,678 | 1,591 | 5% | |||||||||
Americas | 8,428 | 6,489 | 30% | |||||||||
Japan | 667 | 600 | 11% | |||||||||
Rest of APJ | 2,517 | 2,088 | 21% | |||||||||
APJ | 3,185 | 2,688 | 18% | |||||||||
SAP Group | 20,793 | 17,560 | 18% |
Revenue by Industry | ||||||||||||
€ millions | 2015 | 2014 | Change in % 2015 vs 2014 | |||||||||
Energy & Natural Resources | 4,834 | 4,158 | 16% | |||||||||
Discrete Manufacturing | 3,672 | 3,051 | 20% | |||||||||
Consumer | 4,934 | 4,045 | 22% | |||||||||
Public Services | 2,174 | 1,786 | 22% | |||||||||
Financial Services | 1,881 | 1,697 | 11% | |||||||||
Services | 3,298 | 2,824 | 17% | |||||||||
Total revenue | 20,793 | 17,560 | 18% |
Revenue by Region
EMEA Region
In 2015, the EMEA region generated€9,181 million in revenue, which was 44% of total revenue (2014:€8,383 million; 48%). This represents a year-over-year increase of 10%. Revenue in Germany increased 8% to€2,771 million in 2015 (2014:€2,570 million). Germany contributed 30% (2014: 31%) of all EMEA region revenue. The remaining revenue in the EMEA region was primarily generated in France, Italy, the Netherlands, Russia, Switzerland, and the United Kingdom. Cloud and software revenue generated in the EMEA region in 2015 totaled€7,622 million (2014:€6,819 million). Cloud and software revenue represented 83% of all revenue in the region in 2015 (2014: 81%). Cloud subscriptions revenue rose 83% to€507 million in 2015 (2014:€277 million). This growth reflects a 69% increase from new cloud business and a 14% increase from currency effects. Software licenses and software support revenue rose 9%
to€7,115 million in 2015 (2014:€6,542 million). This growth reflects an 8% increase from new software license and software support business and a 1% increase from currency effects.
Americas Region
In 2015, 41% of our total revenue was generated in the Americas region (2014: 37%). Total revenue in the Americas region increased 30% to€8,428 million; revenue generated in the United States increased 38% to€6,750 million. This growth reflects a 16% increase from new business and a 22% increase from currency effects. The United States contributed 80% (2014: 75%) of all revenue generated in the Americas region. In the remaining countries of the Americas region, revenue increased 5% to€1,678 million. This reflects a 3% increase from new business and a 2% increase from currency effects. This revenue was primarily generated in Brazil, Canada, and Mexico. Cloud and software
revenue generated in the Americas region in 2015 totaled€6,929 million (2014:€5,276 million). Cloud and software revenue represented 82% of all revenue in the Americas region in 2015 (2014: 81%). Cloud subscriptions revenue rose by 123% to€1,579 million in 2015 (2014:€709 million); currency effects were 34%, growth in new cloud business was 89%. Software licenses and software support revenue rose 17% to€5,350 million in 2015 (2014:€4,566 million). This growth reflects a 2% increase from new business; currency effects were 15%.
APJ Region
In 2015, 15% (2014: 15%) of our total revenue was generated in the APJ region, with the strongest revenue growth being achieved in India. Total revenue in the APJ region increased 18% to€3,185 million. In Japan, revenue increased 11% to€667 million. Revenue from Japan was 21% (2014: 22%) of all revenue generated in the APJ region. The revenue growth in Japan was attributable to a 6% increase from new business and a 5% increase from currency effects. In the remaining countries of the APJ region, revenue increased 21%. Revenue in the remaining countries of the APJ region was generated primarily in Australia, China, and India. Cloud and software revenue in the APJ region totaled
€2,663 million in 2015 (2014:€2,221 million). That was 84% of all revenue from the region (2014: 83%). Cloud subscriptions revenue grew 98% to€200 million in 2015 (2014:€101 million). This growth reflects an 82% increase from new cloud business and a 17% increase from currency effects. Software licenses and software support revenue increased 16% to€2,463 million in 2015 (2014:€2,120 million). This increase reflects an 8% increase from new business and an 8% increase from currency effects.
Revenue by Industry
We allocate our customers to one of our industries at the outset of an initial arrangement. All subsequent revenue from a particular customer is recorded under that industry sector.
In 2015, we achieved above-average growth in the following industry sectors, measured by changes in total revenue: Public Services (€2,174 million, at a growth rate of 22%); Consumer (€4,934 million, at a growth rate of 22%); and Discrete Manufacturing (€3,672 million, at a growth rate of 20%). Revenue from the other industry sectors was Services (€3,298 million, at a growth rate of 17%); Energy & Natural Resources (€4,834 million, at a growth rate of 16%); and Financial Services (€1,881 million, at a growth rate of 11%).
Operating Profit and Operating Margin
Total Operating Expenses | ||||||||||||||||||||
€ millions | 2015 | % of total revenue(1) | 2014 | % of total revenue(2) | Change in % 2015 vs 2014 | |||||||||||||||
Cost of cloud and software | –3,313 | 16% | –2,557 | 15% | 30% | |||||||||||||||
Cost of services | –3,313 | 16% | –2,716 | 15% | 22% | |||||||||||||||
Research and development | –2,845 | 14% | –2,331 | 13% | 22% | |||||||||||||||
Sales and marketing | –5,401 | 26% | –4,304 | 25% | 25% | |||||||||||||||
General and administration | –1,048 | 5% | –892 | 5% | 17% | |||||||||||||||
Restructuring | –621 | 3% | –126 | 1% | >100% | |||||||||||||||
TomorrowNow and Versata litigation | 0 | 0% | –309 | 2% | <–100% | |||||||||||||||
Other operating income/expense, net | 1 | 0% | 4 | 0% | –86% | |||||||||||||||
Total operating expenses | –16,541 | 80% | –13,230 | 75% | 25% |
(1) Total revenue for 2015:€ 20,793 million.
(2) Total revenue for 2014:€ 17,560 million.
Operating profit Operating margin (in %)Operating Profit and Operating Margin € millions, except for operating margin 2015 2014 Change in % 2015
vs 2014 4,252 4,331 –2% 20.5% 24.7% –4.2pp
SAP continued to invest in innovation and its cloud business and generated record turnover in 2015. The strong growth in revenue, however, also led to an increase in compensation payments to our employees, while the climbing stock price translated into higher share-based payment expenses. As a result, our operating profit declined slightly by 2% to€4,252 million (2014:€4,331 million).
In 2015, our operating expenses increased€3,311 million or 25% to€16,541 million (2014:€13,230 million). The main contributors to that increase were our acquisition of Concur in December 2014, our greater investment- and revenue-related cloud subscriptions and support costs, our continued investment in sales activities, and higher restructuring expenses.
The effect of acquisition-related expenses, which were€738 million (2014:€562 million), of restructuring expenses, which were€621 million (2014:€126 million), and of a€724 million expense for share-based payments (2014:€290 million) weighed more heavily on operating profit than in the previous year. The record revenue generated increased the cost of bonus payments, and the improving performance of the share price in 2015 pushed share-based payment expenses higher. Continuing investment in the cloud infrastructure, in sales activities around the world, and in research and development also affected operating profit. Our employee headcount (measured in full-time equivalents, or FTEs) increased by 2,579 year-over-year.
These short-term, negative effects on operating profit largely represent investments in the future and were in part offset by the increase in revenue.
The overall result of these effects on operating profit was a 4.2 percentage point narrowing of our operating margin in 2015 to 20.5% (2014: 24.7 %).
Changes to the individual elements in our cost of revenue were as follows:
Cost of Cloud and Software
Cost of cloud and software consists primarily of customer support costs, cost of developing custom solutions that address customers’ specific business requirements, costs for deploying and operating cloud solutions, amortization expenses relating to intangibles,
and license fees and commissions paid to third parties for databases and the other complementary third-party products sublicensed by us to our customers.
In 2015, the cost of cloud and software increased 30% to€3,313 million (2014:€2,557 million).
Significant costs included an additional€539 million year-over-year to extend our cloud business in response to the sustained strength of customer demand, with an associated increase in the expense of delivering and operating cloud applications, a€164 million revenue-related increase in the license fees we pay to third parties, and a€74 million rise in the cost of providing custom development projects. These investments contributed to revenue growth. Our margin on cloud subscriptions and support narrowed 0.4 percentage points to 55.3% (2014: 55.8%). This decrease was primarily due to increasing expenses related to the extension of our cloud infrastructure. These expenses represent an investment in our fast-growing cloud business of the future, and were in part already offset by a significant increase in cloud subscriptions and support revenue.
The gross margin on cloud and software, defined as cloud and software profit as a percentage of cloud and software revenue, narrowed to 80.8% in 2015 (2014: 82.1%). This change is driven by the revenue mix effect with a rising cloud subscriptions and support revenue share while both cloud subscriptions and support margin as well as software license and support margin only changed marginally.
Cost of Services
Cost of services consists primarily of the cost of consulting, premium services and training personnel and the cost of bought-in consulting and training resources. This item also includes sales and marketing expenses for our services resulting from sales and marketing efforts where those efforts cannot be clearly distinguished from providing the services.
Although we were able to increase our service revenue by 10% year-over-year to€3,579 million in 2015 (2014:€3,245 million), our service business continues to be greatly affected as we trend away from classic software licensing and consulting revenue toward more subscription revenue from cloud solutions. We are also
investing in our SAP ONE Service organization. As a result, cost of service rose 22% to€3,313 million (2014:€2,716 million). Our gross margin on services, defined as services profit as a percentage of services revenue, narrowed to 7.4% (2014: 16.3%).
Research and Development Expense
Our research and development (R&D) expense consists primarily of the personnel cost of our R&D employees, costs incurred for independent contractors we retain to assist in our R&D activities, and amortization of the computer hardware and software we use for our R&D activities.
Due to growing personnel costs because of the 11% increase in our headcount by the end of the year, and the revenue-related year-over-year increase in compensation payments, our R&D expense increased by 22% to€2,845 million in 2015 from€2,331 million in 2014. R&D expense as a percentage of total revenue increased to 13.7% (2014: 13.3%). For more information, see “Item 4. Information About SAP – Products, Research & Development, and Services.”
Sales and Marketing Expense
Sales and marketing expense consists mainly of personnel costs, direct sales costs, and the cost of marketing our products and services.
Our sales and marketing expense rose 25% from€4,304 million in 2014 to€5,401 million in 2015. The increase was mainly the result of greater personnel costs as we expanded our global sales force, and of increased expenditure for bonus payments prompted by the strong revenue growth. The ratio of sales and marketing expense to total revenue, expressed as a percentage, increased to 26.0% year-over-year (2014: 24.5%), an increase of 1.5 percentage points.
General and Administration Expense
Our general and administration expense consists mainly of personnel costs to support our finance and administration functions.
General and administration expense increased 17% from€892 million in 2014 to€1,048 million in 2015. That this expense grew less rapidly than revenue is primarily the result of careful cost management. Consequently, the ratio of general and administration expense to total revenue dropped slightly in 2015 to 5.0% (2014: 5.1%).
Segment Information (Non-IFRS)
In 2015, SAP had two reportable segments: the Applications, Technology, and Services segment; and the SAP Business Network segment. These are the components of SAP that our Executive Board regularly reviews to assess the performance of our Company and to make resource allocation decisions.
Revenue and profit figures for each of our operating segments are calculated in line with our internal management reporting and therefore differ from the corresponding revenue and profit in our Consolidated Statements of Income prepared according to IFRS. For more information about our segment reporting, the activities that our two segments derive their revenues from, financial performance measures, and reconciliation from our internal management reporting to our external IFRS reporting, see the Notes to the Consolidated Financial Statements section, Note (28), and the Performance Management System section.
The financial data presented for 2015 contain all revenues and expenses from Concur and Fieldglass, whereas the prior year’s comparison figures only include their financial data as of their respective acquisition dates. Fieldglass was acquired on May 2, 2014; Concur on December 4, 2014.
Applications, Technology & Services Segment
€ millions, unless otherwise stated | 2015 | 2014 | Change in % | Change in % (Constant Currency) | ||||||||||||
(Non-IFRS) | ||||||||||||||||
Segment revenue | 19,126 | 16,871 | 13% | 6% | ||||||||||||
Gross margin (in %) | 72% | 73% | –1pp | –1pp | ||||||||||||
Cloud subscription and support margin (in %) | 53% | 55% | –2pp | –5pp | ||||||||||||
Segment profit | 7,918 | 7,099 | 12% | 4% | ||||||||||||
Segment margin (in %) | 41% | 42% | –1pp | –1pp |
In 2015, the Applications, Technology & Services segment revenue increased 13% (6% at constant currencies) to€19,126 million (2014:€16,871 million).
This increase was driven mainly by strong growth in software support revenue, which increased 14% (7% at constant currencies) to€10,061 million and a 10%
increase in software licenses (5% at constant currencies) to€4,836 million. As a consequence of continuous strong demand in the human capital management, customer engagement and commerce, and SAP HANA Enterprise Cloud business, cloud subscriptions and support revenue in the Applications, Technology & Services segment grew 64% (45% at constant currencies) to€961 million.
The increase of cloud subscriptions and support revenue and software support revenue results in an increasing revenue share of more predictable revenue streams in this segment of 2 percentage points from 56% in 2014 to 58% in 2015. Software license revenue attributable to this segment increased 10% (5% at constant currencies) to€4,835 million (2014:€4,381 million).
The segment’s cost of revenue during the same time period increased 17% (9% at constant currencies) to
€5,343 million (2014:€4,564 million). This increase in expenses was primarily the result of greater investment in expanding our cloud infrastructure and in providing and operating our cloud applications, as well as additional personnel expenses to support the growth of the SAP HANA Enterprise Cloud service. The cloud subscriptions and support margin for the segment, therefore, decreased by 2.2 percentage points to 52.9% (50.4% at constant currencies). Segment gross profit increased 12% in 2015 (5% at constant currencies) to€13,784 million (2014:€12,307 million), which resulted in a decrease of the segment gross margin from 72.9% to 72.1% (72.1% at constant currencies). Segment profit increased 12% (4% at constant currencies) to€7,918 million (2014:€7,099 million), while the segment margin decreased by 0.7 percentage points to 41.4% (41.3% at constant currencies).
SAP Business Network Segment
€ millions, unless otherwise stated
(Non-IFRS) | 2015 | 2014 | Change in % | Change in % (Constant Currency) | ||||||||||||
Segment revenue | 1,614 | 644 | 150% | 116% | ||||||||||||
Gross margin (in %) | 67% | 66% | 1pp | 0pp | ||||||||||||
Cloud subscription and support margin (in %) | 75% | 75% | –0pp | –1pp | ||||||||||||
Segment profit | 312 | 105 | 199% | 139% | ||||||||||||
Segment margin (in %) | 19% | 16% | 3pp | 2pp |
In 2015, revenue from the SAP Business Network segment, which combines all of our business network solutions, increased 150% (116% at constant currencies) to€1,614 million (2014:€644 million). Concur and Fieldglass, which were acquired in 2014, together contributed€909 million (2014:€107 million) to the segment’s revenue. SAP internal analyses show that more than US$740 billion in commerce is conducted on the network annually.
The segment’s cost of revenue increased 144% in 2015 (114% at constant currencies) to€530 million (2014: €217 million), of which€299 million in expenses are attributable to Concur and SAP Fieldglass (2014: €28 million). The cloud subscriptions and support margin for the segment decreased by 0.4 percentage points to 74.9% (74.5% at constant currencies). The SAP Business Network segment achieved a segment gross profit of€1,084 million in 2015 (2014:€427 million), an increase of 154% (117% at constant currencies). This resulted in an increase of the segment gross margin from 66.3% to 67.2% (66.5% at constant currencies). Segment profit increased 199% year on year
(139% at constant currencies) to€312 million (2014:€105 million), resulting in an increase in the segment margin of +3.1 percentage points to 19.4% (18.0% at constant currencies).
Financial Income, Net
Financial income, net, changed to–€5 million (2014:–€25 million). Our finance income was€241 million (2014: €127 million) and our finance costs were€246 million (2014:€152 million).
Finance income mainly consists of gains from disposal of equity securities and interest income from loans and receivables, financial assets (cash, cash equivalents, and current investments), and income of derivatives.
Finance costs mainly consist of interest expense on financial liabilities (€135 million in 2015 compared to€93 million in 2014) due to higher average indebtedness and negative effects from derivatives (€72 million in 2015 compared to€28 million in 2014). For more information about financing instruments, see the Notes to the Consolidated Financial Statements section, Note (17b).
Income Tax
Our effective tax rate decreased to 23.4% in 2015 (2014: 24.7%). The year-over-year decrease in the effective tax rate mainly resulted from changes in taxes for prior
years. For more information on income taxes, see the Notes to the Consolidated Financial Statements section, Note (10).
Our 2014 Results Compared to Our 2013 Results (IFRS)
Revenue
€ millions | 2014 | 2013 | Change in % 2014 vs 2013 | |||||||||
Cloud subscriptions and support | 1,087 | 696 | 56% | |||||||||
Software licenses | 4,399 | 4,516 | –3% | |||||||||
Software support | 8,829 | 8,293 | 6% | |||||||||
Software licenses and support | 13,228 | 12,809 | 3% | |||||||||
Cloud and software | 14,315 | 13,505 | 6% | |||||||||
Services | 3,245 | 3,310 | –2% | |||||||||
Total revenue | 17,560 | 16,815 | 4% |
Total Revenue
Total revenue increased from€16,815 million in 2013 to €1,087€17,560 million in 2014. Deferred2014, representing an increase of€746 million, or 4%. This growth reflects a 5% increase from changes in volumes and prices and a 1% decrease from currency effects. The growth in revenue resulted primarily from a€391 million increase in cloud subscriptionsubscriptions and support revenue totaled €690and a€536 million on December 31,rise in software support revenue. Services revenue declined€65 million and software licenses revenue declined€117 million. Cloud and software revenue climbed to€14,315 million in 2014, an increase of 56% (December 31, 2013: €443 million)6%. Cloud and software revenue represented 82% of total revenue in 2014 (2013: 80%). Services revenue declined 2% from€3,310 million in 2013 to€3,245 million, which was 18% of total revenue in 2014.
TheFor more information about the breakdown of total revenue shareby region and industry, see the Revenue by Region and Industry section below.
Cloud and Software Revenue
Software licenses revenue results from more predictablethe fees earned from selling or licensing software to customers. Revenue from cloud subscriptionsubscriptions and support refers to the income earned from contracts that permit the customer to access specific software solutions hosted by SAP during the term of its contract with SAP. Software support revenue represents fees earned from providing technical support services and unspecified software upgrades, updates, and enhancements to customers.
Cloud subscriptions and support revenue together with support revenue increased from€696 million in 2013 to 60% (2013: 56%) of total revenue.€1,087 million in 2014.
A combination of a challenging macroeconomic and political environment in Russia, Ukraine, and some Latin American markets and the accelerating industry shift to the cloud resulted in a €117€117 million decline in software licenses revenue. That decline, from €4,516€4,516 million in 2013 to €4,399€4,399 million in 2014, reflects a 3% decrease from changes in volumes and prices.new software business.
Our customer base continued to expand in 2014. Based on the number of contracts concluded, 12% of the orders we received for software in 2014 were from new customers (2013: 16%). The total value of software orders received declined 3% year-over-year. The total number of software license contracts signed for new software decreased 3% to 54,120 (2013: 55,909 contracts), while the average order value increased by 1%. Of all our software orders received in 2014, 22% were attributed to deals worth more than €5€5 million (2013: 24%), while 44% were attributed to deals worth less than €1€1 million (2013: 44%).
Our stable customer base, continued investment in software by customers throughout 2014 and the previous year, and the continued success of
our premium support offerings resulted in an increase in software support revenue from €8,738€8,293 million in 2013 to €9,368€8,829 million in 2014. The SAP Enterprise Support services offering was the largest contributor to our support revenue. The €631€536 million, or 7%6%, growth in software support revenue reflects a 9%an 8% increase from changes in volumes and pricesnew support business and a 1% decrease from currency effects. This growth is primarily attributable to SAP Product Support for Large Enterprises and SAP Enterprise Support, and our premium offerings.Support. The acceptance rate for SAP Enterprise Support among new customers remained high at 98% in 2014.
Software licenses and support revenue rose €514€419 million, or 4%3%, from €13,254€12,809 million in 2013 to €13,767€13,228 million in 2014. This growth breaks down into a 5%4% increase from changes in volumes and pricesnew business and a 1% decrease from currency effects.
SoftwareCloud and software-related servicesoftware revenue grew from €13,950€13,505 million in 2013 to €14,855€14,315 million in 2014, an increase of 6%. This reflects a 7% increase from changes in volumesnew cloud and pricessoftware business and a 1% decrease from currency effects.
Professional Services and Other Service Revenue
Professional services and other service revenue consists primarily of consulting and other service revenue. We generate most of our consultingServices Revenue combines revenue from the implementation of our software products. Other service revenue consists mainly of revenue fromprofessional services, premium support services, training services, messaging services and of training revenue from educationalpayment services.
Professional services suppliedprimarily relate to customersthe installation and partners on the useconfiguration of our cloud subscriptions and on-premise software productsproducts. Our premium support offering consists of high-end support services tailored to customer requirements. Messaging services are primarily transmission of electronic text messages from one mobile phone provider to another. Payment services are delivered in connection with our travel and related subjects.expense management offerings.
Professional services and other serviceServices revenue decreased €159€65 million, or 6%2%, from €2,865€3,310 million in 2013 to €2,706€3,245 million in 2014. This decline reflects a 4%1% decrease from changes in volumes and pricesnew services business and a 1% decrease from currency effects.
Customers’ cautious buying behavior toward large services projects led to a decline in consulting revenue from €2,242 million in 2013 to €2,095 million in 2014, a decrease of €147 million, or 7%. This decline reflects a 5% decrease from changes in volumes and prices and a 1% decrease from currency effects. Consulting
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revenue contributed 77% of the total professional services and other service revenue (2013: 78%). Consulting revenue contributed 12% of total revenue in 2014 (2013: 13%).
Revenue from other services decreased €12 million, or 2%, to €611 million in 2014 (2013: €623 million). This reflects a 1% decrease from changes in volumes and prices and a 1% decrease from currency changes.
Revenue by Region and Industry
Revenue by Region
€ millions | 2014 | 2013 | Change in % 2014 vs 2013 | |||||||||
Germany | 2,570 | 2,513 | 2 | % | ||||||||
Rest of EMEA | 5,813 | 5,462 | 6 | % | ||||||||
EMEA | 8,383 | 7,975 | 5 | % | ||||||||
United States | 4,898 | 4,487 | 9 | % | ||||||||
Rest of Americas | 1,591 | 1,746 | –9 | % | ||||||||
Americas | 6,489 | 6,233 | 4 | % | ||||||||
Japan | 600 | 631 | –5 | % | ||||||||
Rest of APJ | 2,088 | 1,975 | 6 | % | ||||||||
APJ | 2,688 | 2,606 | 3 | % | ||||||||
SAP Group | 17,560 | 16,815 | 4 | % |
Revenue by Industry
Revenue by Region | ||||||||||||
€ millions | 2014 | 2013 | Change in % 2014 vs 2013 | |||||||||
Germany | 2,570 | 2,513 | 2% | |||||||||
Rest of EMEA | 5,813 | 5,462 | 6% | |||||||||
EMEA | 8,383 | 7,975 | 5% | |||||||||
United States | 4,898 | 4,487 | 9% | |||||||||
Rest of Americas | 1,591 | 1,746 | –9% | |||||||||
Americas | 6,489 | 6,233 | 4% | |||||||||
Japan | 600 | 631 | –5% | |||||||||
Rest of APJ | 2,088 | 1,975 | 6% | |||||||||
APJ | 2,688 | 2,606 | 3% | |||||||||
SAP Group | 17,560 | 16,815 | 4% |
Revenue by Industry | ||||||||||||||||||||||||
€ millions | 2014 | 2013 | Change in % 2014 vs 2013 | 2014 | 2013 | Change in % 2014 vs 2013 | ||||||||||||||||||
Energy & Natural Resources | 4,158 | 4,077 | 2 | % | 4,158 | 4,077 | 2% | |||||||||||||||||
Discrete Manufacturing | 3,051 | 2,987 | 2 | % | 3,051 | 2,987 | 2% | |||||||||||||||||
Consumer | 4,045 | 3,778 | 7 | % | 4,045 | 3,778 | 7% | |||||||||||||||||
Public Services | 1,786 | 1,691 | 6 | % | 1,786 | 1,691 | 6% | |||||||||||||||||
Financial Services | 1,697 | 1,633 | 4 | % | 1,697 | 1,633 | 4% | |||||||||||||||||
Services | 2,824 | 2,649 | 7 | % | 2,824 | 2,649 | 7% | |||||||||||||||||
Total revenue | 17,560 | 16,815 | 4 | % | 17,560 | 16,815 | 4% |
Revenue by Region
We break our operations down into three regions: the Europe, Middle East, and Africa (EMEA) region, the Americas region, and the Asia Pacific Japan (APJ) region.
We allocate revenue amounts to each region based on where the customer is located. For more information about revenue by geographic region, see the Notes to the Consolidated Financial Statements section, Note (29)(28).
EMEA Region
EMEA Region
In 2014, the EMEA region generated €8,383€8,383 million in revenue, which was 48% of total revenue (2013: €7,975;€7,975; 47%). This represents a
year-over-year increase of 5%. Revenue in Germany increased 2% to €2,570€2,570 million in 2014 (2013: €2,513€2,513 million). Germany contributed 31% (2013: 32%) of all EMEA region revenue. The remaining revenue in the EMEA region was primarily generated in France, Italy, the Netherlands, Russia, Switzerland, and the United Kingdom. SoftwareCloud and software-related servicesoftware revenue generated in the EMEA region in 2014 totaled €7,028€6,819 million (2013: €6,616€6,428 million). SoftwareCloud and software-related servicesoftware revenue represented 84%81% of all revenue in the region in 2014 (2013: 83%81%). Cloud subscriptionsubscriptions and support revenue rose 58% to €277€277 million in 2014 (2013: €176€176 million). This growth reflects a 57% increase from changes in volumes and pricesnew cloud business and a 1% increase from currency effects. Software licenses and support revenue rose 5% to
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€6,7516,542 million in 2014 (2013: €6,440€6,252 million). This growth reflects a 6%5% increase from changes in volumes and pricesnew business and a 1% decrease from currency effects.
Americas Region
In 2014, 37% of our total revenue was generated in the Americas region (2013: 37%). Total revenue in the Americas region increased 4% to €6,489€6,489 million; revenue generated in the United States increased 9% to €4,898€4,898 million. This growth reflects an 8% increase from changes in volumes and pricesnew business and a 1% increase from currency effects. The United States contributed 75% (2013: 72%) of all revenue generated in the Americas region. In the remaining countries of the Americas region, revenue declined 9% to €1,591€1,591 million. This reflects a 5% decrease from changes in volumes and pricesnew business and a 4% decrease from currency effects. This revenue was principally generated in Brazil, Canada, and Mexico. SoftwareCloud and software-related servicesoftware revenue generated in the Americas region in 2014 totaled €5,489€5,276 million (2013: €5,097€4,922 million). SoftwareCloud and software-related servicesoftware revenue represented 85%81% of all revenue in the Americas region in 2014 (2013: 82%79%). Cloud subscriptionsubscriptions and support revenue rose by 55% to €709€709 million in 2014 (2013: €457€457 million); currency effects were 0%. Software licenses and support revenue rose 3%2% to €4,780€4,566 million in 2014 (2013: €4,641€4,465 million). This growth reflects a 3% increase from changes in volumes and prices;new business; currency effects were almost 0%.
APJ Region
APJ Region
In 2014, 15% (2013: 15%) of our total revenue was generated in the APJ region, with the strongest revenue growth being achieved in Australia. Total revenue in the APJ region
increased 3% to €2,688€2,688 million. In Japan, revenue decreased 5% to €600€600 million. Revenue from Japan was 22% (2013: 24%) of all revenue generated in the APJ region. The decline in revenue from Japan was attributable to a 2% increase from changes in volumes and pricesnew business and a 7% decrease from currency effects. In the remaining countries of the APJ region, revenue increased 6%. Revenue in the remaining countries of the APJ region was generated primarily in Australia, China, and India. SoftwareCloud and software-related servicesoftware revenue in the APJ region totaled €2,337€2,221 million in 2014 (2013: €2,237€2,155 million). That was 87%83% of all revenue from the region (2013: 86%83%). Cloud subscriptionsubscriptions and support revenue grew 59% to €101€101 million in 2014 (2013: €64€64 million). This growth reflects a 60% increase from changes in volumes and pricesnew cloud business and a 1% decrease from currency effects. Software licenses and support revenue increased 3%1% to €2,236€2,120 million in 2014 (2013: €2,173€2,092 million). This increase reflects a 5%4% increase from changes in volumes and pricesnew business and a 2% decrease from currency effects.
Revenue by Industry
We allocate our customers to one of our industries at the outset of an initial arrangement. All subsequent revenue from a particular customer is recorded under that industry sector.
In 2014 we achieved above-average growth in the following industry sectors, measured by changes in total revenue: Services (€(€2,824 million, at a growth rate of 7%); Consumer (€(€4,045 million, at a growth rate of 7%); Public Services (€(€1,786 million, at a growth rate of 6%); and Financial Services (€(€1,697 million, at a growth rate of 4%). Revenue from the other industry sectors: Energy and Natural Resources (€(€4,158 million, at a growth rate of 2%); and Discrete Manufacturing (€(€3,051 million, at a growth rate of 2%).
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Operating Profit and Margin
Total Operating Expenses
€ millions | 2014 | % of total revenue(1) | 2013 | % of total revenue(2) | Change in % 2014 vs 2013 | |||||||||||||||
Cost of software and software-related services | –2,894 | 16% | –2,629 | 16% | 10% | |||||||||||||||
Cost of professional services and other services | –2,379 | 14% | –2,402 | 14% | –1% | |||||||||||||||
Research and development | –2,331 | 13% | –2,282 | 14% | 2% | |||||||||||||||
Sales and marketing | –4,304 | 25% | –4,131 | 25% | 4% | |||||||||||||||
General and administration | –892 | 5% | –866 | 5% | 3% | |||||||||||||||
Restructuring | –126 | 1% | –70 | 0% | 80% | |||||||||||||||
TomorrowNow and Versata litigation | –309 | 2% | 31 | 0% | <-100 | |||||||||||||||
Other operating income/expense, net | 4 | 0 | 12 | 0% | –65% | |||||||||||||||
Total operating expenses | –13,230 | 75% | –12,336 | 73% | 7% |
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Operating Profit and Operating Margin
€ millions, except for operating margin | 2014 | 2013 | Change in % 2014 vs 2013 | |||||||||
Operating profit | 4,331 | 4,479 | –3% | |||||||||
Operating margin (in %) | 24.7% | 26.6% | –2.0pp |
Total Operating Expenses | ||||||||||||||||||||
€ millions | 2014 | % of total revenue(1) | 2013 | % of total revenue(2) | Change in % 2014 vs 2013 | |||||||||||||||
Cost of cloud and software | –2,557 | 15% | –2,370 | 14% | 8% | |||||||||||||||
Cost of services | –2,716 | 15% | –2,660 | 16% | 2% | |||||||||||||||
Research and development | –2,331 | 13% | –2,282 | 14% | 2% | |||||||||||||||
Sales and marketing | –4,304 | 25% | –4,131 | 25% | 4% | |||||||||||||||
General and administration | –892 | 5% | –866 | 5% | 3% | |||||||||||||||
Restructuring | –126 | 1% | –70 | 0% | 80% | |||||||||||||||
TomorrowNow and Versata litigation | –309 | 2% | 31 | 0% | <–100% | |||||||||||||||
Other operating income/expense, net | 4 | 0% | 12 | 0% | –65% | |||||||||||||||
Total operating expenses | –13,230 | 75% | –12,336 | 73% | 7% |
(1) Total revenue for 2014:€17,560 million.
(2) Total revenue for 2013:€16,815 million.
Operating Profit and Operating Margin | ||||||||||||
€ millions, except for operating margin | 2014 | 2013 | Change in % 2014 vs 2013 | |||||||||
Operating profit | 4,331 | 4,479 | –3% | |||||||||
Operating margin (in %) | 24.7% | 26.6% | –2.0pp |
In 2014, SAP continued to invest in innovation and made substantial advances in the cloud business. In addition and among other influences, negative currency effects and the difficult economic situation in Latin America and Russia affected our profitability. As a result, our operating profit in 2014 was €4,331€4,331 million, a little less than in the previous year (2013: €4,479€4,479 million).
In 2014, our operating expenses increased €894€894 million or 7% to €13,230€13,230 million (2013: €12,336€12,336 million). The increase relates primarily to an expense in connection with the TomorrowNow and Versata litigation, restructuring costs, continuing investment in our sales organization, and a rise in personnel and infrastructure costs, especially for our cloud business.
The effect of acquisition-related expenses, which were €562€562 million (2013: €555€555 million), of restructuring expenses, which were €126€126 million (2013: €70€70 million), and of a €309€309 million expense relating to the TomorrowNow and Versata litigation weighed more heavily on operating profit than in the previous year. Continuing investment in sales activities around the world and in the cloud also affected operating profit. Our
employee headcount (measured in full-time equivalents, or
FTEs) increased 7,834 year-over-year. Acquisitions accounted for more than 5,500 of the added FTEs.
Those negative effects on operating profit were in part offset by the reduced cost of share-based compensation programs totaling €290€290 million (2013: €327€327 million) resulting from the declining year-over-year performance of the stock and by savings in general administration costs.
The overall result of these effects on operating profit was a 2.0 percentage point narrowing of our operating margin in 2014 to 24.7% (2013: 26.6%).
Changes to the individual elements in our cost of revenue were as follows:
Cost of SoftwareCloud and Software-Related ServicesSoftware
Cost of softwarecloud and software-related servicessoftware consists primarily of customer support costs, cost of developing custom solutions that address customers’ specific business requirements, costs for deploying and operating cloud solutions, amortization expenses relating to intangibles, and
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and license fees and commissions paid to third parties for databases and the other complementary third-party products sublicensed by us to our customers.
In 2014, the cost of cloud and software and software-related services increased 10%8% to €2,894€2,557 million (2013: €2,629€2,370 million).
Significant costs included an additional €180€180 million to extend our cloud business, especially outside the United States, with an associated increase in the expense of delivering and operating cloud applications, and a €112€34 million rise in the cost of providing customer support. They both represent investments that contributed to revenue growth. Our margin on cloud subscriptions and support widened 0.9 percentage points to 55.8% (2013: 54.8%). This improvement in margin was achieved primarily through strong growth in our cloud subscriptionsubscriptions and support revenue and despite the increased expense we incurred to extend our cloud infrastructure. At the same time, the license fees we pay to third parties decreased by €49€49 million.
The gross margin on our softwarecloud and software-related services,software, defined as softwarecloud and software-related servicessoftware profit as a percentage of softwarecloud and software-related servicessoftware revenue, remained constant year-over-year at 81%82% in 2014 (2013: 81%82%).
Cost of Professional Services and Other Services
Cost of professional services and other services consists primarily of the cost of consulting, premium services and training personnel and the cost of bought-in third-party consulting and training resources. This item also includes sales and marketing expenses for our professional services and other services resulting from sales and marketing efforts where those efforts cannot be clearly distinguished from providing the professional services and other services.
Our consulting business is being greatly affected as we trend away from classic software licensing and consulting revenue toward more subscription revenue from cloud solutions. As a result, both our professional and other services revenue anddecreased while our professional and other services expense decreased. We reduced costs for professional and other services 1%increased by 2% from €2,402€2,660 million in 2013 to €2,379€2,716 million in 2014. Our gross margin on
professional and other services, defined as professional and other services profit as a percentage of professional and other services revenue, narrowed to 12%16% (2013: 16%20%).
Research and Development Expense
Our research and development (R&D) expense consists primarily of the personnel cost of our R&D employees, costs incurred for independent contractors we retain to assist in our R&D activities, and amortization of the computer hardware and software we use for our R&D activities.
Although our personnel costs grew because of the 6% increase in our headcount by the end of the year, our R&D expense increased only 2% to €2,331€2,331 million in
2014 from €2,282€2,282 million in 2013. R&D expense as a percentage of total revenue was slightly less year-over-year at 13.3% (2013: 13.6%). For more information, see the“Item 4. Information About SAP – Products, Research & Development, and Services section.Services.”
Sales and Marketing Expense
Sales and marketing expense consists mainly of personnel costs, direct sales costs, and the cost of marketing our products and services.
Our sales and marketing expense rose 4% from €4,131€4,131 million in 2013 to €4,304€4,304 million in 2014. The increase was mainly the result of greater personnel costs as we expanded our global sales force and of the reallocation and re-tasking of employees to sales-related work. By increasing our sales force we accelerated our revenue growth. The ratio of sales and marketing expense to total revenue, expressed as a percentage, decreased slightly to 24.5% year-over-year (2013: 24.6%) because costs grew less rapidly than revenue.
General and Administration Expense
Our general and administration expense consists mainly of personnel costs to support our finance and administration functions.
General and administration expense increased 3% from €866€866 million in 2013 to €892€892 million in 2014. That this increase was modest compared to the growth in our revenue is primarily the result of careful cost management. The ratio of general and administration expense to total revenue was unchanged in 2014 at 5% (2013: 5%).
Segment Information (Non-IFRS)
The segment information below for 2014 and 2013 is presented based on the reportable segments created in 2015 (Applications, Technology & Services segment and the SAP Business Network Segment). These segments are the components of SAP that our Executive Board regularly reviews to assess the performance of our company and to make resource allocation decisions.
Revenue and profit figures for each of our operating segments are calculated in line with our internal management reporting and therefore differ from the corresponding revenue and profit in our Consolidated Statements of Income prepared according to IFRS. For more information about our segment reporting, the activities that our two segments derive their revenues from, the financial performance measures, and a reconciliation from our internal management reporting to our external IFRS reporting, see the Notes to the Consolidated Financial Statements section, Note (28), and the Performance Management System section.
The financial data presented for 2014 contains the revenue and expenses from Concur and SAP Fieldglass as of their respective acquisition dates. Their financial data is not included in the prior-year amounts, as Concur and SAP Fieldglass were acquired on December 4, 2014, and May 2, 2014, respectively.
Applications, Technology & Services Segment
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€ millions, unless otherwise stated
(Non-IFRS) | 2014 | 2013 | Change in % | Change in % (Constant Currency) | ||||||||||||
Segment revenue | 16,871 | 16,386 | 3% | 4% | ||||||||||||
Gross margin (in %) | 73% | 74% | –1pp | –1pp | ||||||||||||
Cloud subscriptions and support margin (in %) | 55% | 70% | –15pp | –15pp | ||||||||||||
Segment profit | 7,099 | 7,056 | 1% | 1% | ||||||||||||
Segment margin (in %) | 42% | 43% | –1pp | –1pp |
In 2014, Applications, Technology & Services segment revenue increased 3% (4% at constant currencies) to€16,871 million (2013:€16,386 million). This increase was mainly driven by strong growth in software support revenue, which increased 6% (8% at constant currencies) to€8,806 million, offset by a decrease in software licenses of 3% (3% at constant currencies) to€4,381 million. As a consequence of a continuous strong demand in the human capital management, Customer Engagement and Commerce, and SAP HANA Enterprise Cloud lines of business, cloud subscriptions and support revenue in the Applications, Technology & Services segment grew 42% (42% at constant currencies) to€585 million (2013:€ 413 million).
The increase of cloud and software revenue did mainly result from a strong increase in cloud subscriptions and support revenue and software support revenue, whereas software licenses revenue slightly decreased. This overall results in an increase in the revenue share of more predictable revenue streams in this segment of three percentage points from 53% in 2013 to 56% in 2014. Software licenses revenue attributable to this segment decreased 3% (3% at constant currencies) to€4,381 million (2013:€4,519 million). This decline was
due to a combination of challenging macroeconomic and political environments in Russia, Ukraine, and some Latin American markets and the accelerating industry shift to the cloud.
The segment’s cost of revenue during the same time period increased 6% (7% at constant currencies) to€4,564 million (2013:€4,312 million). This increase in expenses was the result of greater investment in expanding our cloud infrastructure and in providing and operating our cloud applications. The cloud subscriptions and support margin for the segment, therefore, decreased by 15 percentage points to 55.1% (55.1% at constant currencies). Segment gross profit increased 2% in 2014 (3% at constant currencies) to€12,307 million (2013:€12,074 million) which resulted in a decrease of the segment gross margin of–0.7 percentage points to 72.9% (–0.8 percentage points to 72.9% in constant currencies). Segment profit increased 1% year on year to€7,099 million (2013:€7,056 million) and was unchanged on a constant currency basis, resulting in a narrowing of the segment margin by one percentage point to 42.1% (41.9% at constant currencies).
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€ millions, unless otherwise stated
(Non-IFRS) | 2014 | 2013 | Change in % | Change in % (Constant Currency) | ||||||||||||
Segment revenue | 644 | 460 | 40% | 39% | ||||||||||||
Gross margin (in %) | 66% | 65% | 1pp | 1pp | ||||||||||||
Cloud subscriptions and support margin (in %) | 75% | 76% | –0pp | –0pp | ||||||||||||
Segment profit | 105 | 99 | 5% | 2% | ||||||||||||
Segment margin (in %) | 16% | 22% | –5pp | –6pp |
In 2014, revenue from the SAP Business Network segment, which combines all of our business network solutions, increased 40% (39% at constant currencies) to€644 million (2013:€460 million). This figure includes€107 million in segment revenue attributable to SAP Fieldglass and Concur, which were acquired in 2014 and are reflected in these results for the first time.
The segment’s cost of revenue increased 36% in 2014 (37% at constant currencies) to€217 million, of which€28 million in expenses are attributable to Concur and SAP Fieldglass. The cloud subscriptions and support margin for the segment decreased by 0.5 percentage points to 75.2% (–0.4 percentage points to 75.3% in constant currencies). The SAP Business Network segment thus achieved a gross profit of€427 million in 2014, an increase of 42% (41% at constant currencies) which resulted in an increase of the segment gross margin of 1.0 percentage points to 66.3% (0.7 percentage points to 66.0% in constant currencies). Segment profit increased year-over-year by 5% (2% at constant currencies) to€105 million (2013:€ 99 million), resulting in a narrowing of the segment margin by 5 percentage points to 16.2% (15.8% at constant currencies).
Financial Income, Net
Financial income, net, changed to –€–€25 million (2013: –€–€66 million). Our finance income was €127€127 million (2013: €115€115 million) and our finance costs were €152€152 million (2013: €181€181 million).
Finance income mainly consists of interest income from loans, financial assets (cash, cash equivalents, and current investments) and income of derivatives. This increase is attributable to a higher average liquidity and slightly higher interest rates than in 2013.
Finance costs mainly consist of interest expense on financial liabilities (€(€93 million in 2014
compared to €131€131 million in 2013). The decrease year-over-year is mainly due to positive effects from interest rate derivatives and due to lower average indebtedness. For more information about these financing instruments, see the Notes to the Consolidated Financial Statements section, Note (18b)(17b).
Income Tax
Our effective tax rate increased slightly to 24.7% in 2014 (2013: 24.4%). For more information, see the Notes to the Consolidated Financial Statements section, Note (11).
Our 2013 Results Compared to Our 2012 Results (IFRS)
Revenue
Revenue
€ millions | 2013 | 2012 | Change in % 2013 vs 2012 | |||||||||
Cloud subscriptions and support | 696 | 270 | >100 | |||||||||
Software | 4,516 | 4,658 | –3% | |||||||||
Support | 8,738 | 8,237 | 6% | |||||||||
Software and support | 13,254 | 12,895 | 3% | |||||||||
Software and software-related service revenue | 13,950 | 13,165 | 6% | |||||||||
Professional services and other service revenue | 2,865 | 3,058 | –6% | |||||||||
Total revenue | 16,815 | 16,223 | 4% |
Total Revenue
Total revenue increased from €16,223 million in 2012 to €16,815 million in 2013, representing an increase of €592 million, or 4%. This growth reflects an 8% increase from changes in volumes and prices and a 5% decrease from currency effects. The growing revenue resulted primarily from a €426 million increase in cloud subscription and support revenue and a €501 million rise in support revenue. Consulting revenue declined by €200 million and software revenue by €142 million. Software and software-related service revenue climbed to €13,950 million in 2013, an increase of 6%. Software and software-related service revenue represented 83% of total revenue in 2013 (2012: 81%). In 2013, professional and other service revenue contributed €2,865 million to our total revenue, representing a drop of 6% compared to 2012.
For more information about the breakdown of total revenue by region and industry, see the Revenue by Region and Industry section below.
Software and Software-Related Service Revenue
Revenue from cloud subscriptions and support refers to the income earned from contracts that permit the customer to access specific software solutions hosted by SAP during the term of its contract with SAP. Software revenue results from the fees earned from the sale or license of software to customers. Support revenue represents fees earned from providing customers with technical support services and unspecified software upgrades, updates, and enhancements.
Cloud subscriptions and support revenue increased from €270 million in 2012 to
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€696 million in 2013. This increase is largely due to the acquisition of Ariba on October 1, 2012, and due to continuing strong growth at SuccessFactors and Ariba in 2013.
A combination of a challenging macroeconomic environment in key markets and the accelerating industry shift to the cloud resulted in a 2% software revenue increase from changes in volumes and prices. There was also a 5% decrease from currency effects. Overall, software revenue declined €142 million or 3% from €4,658 million in 2012 to €4,516 million in 2013. In 2013, SAP HANA contributed €633 million to total software revenue.
Software and support revenue rose from €12,895 million in 2012 to €13,254 million in 2013, representing an increase of €359 million, or 3%. This growth consists of an 7% increase from changes in volumes and prices and a 5% decrease from currency effects.
In 2013, software and software-related service revenue grew from €13,165 million in 2012 to €13,950 million, representing an increase of 6%. This software and software-related service revenue growth reflects an 11% increase from changes in volumes and prices and a 5% decrease from currency effects.
Our customer base continued to expand in 2013. Based on the number of contracts concluded, 16% of the orders we received for software in 2013 were from new customers (2012: 19%). The total value of software orders received fell 7% year over year. The total number of contracts signed for new software decreased 6% to 55,909 (2012: 59,289 contracts), while the average order value decreased by 1%.
Our stable customer base, continued investment in software by new and existing customers throughout 2013 and the previous year, and the continued success of our premium support offerings resulted in an increase in support revenue from €8,237 million in 2012 to €8,738 million in 2013. The SAP Enterprise Support services offering was the largest contributor to our support revenue. The
€501 million, or 6%, growth in support revenue reflects an 11% increase from changes in volumes and prices and a 5% decrease from currency effects. This growth is primarily attributable to SAP Product Support for Large Enterprises, SAP Enterprise Support, and our premium offerings. Accordingly, the acceptance rate for SAP Enterprise Support among new customers rose from 96% in 2012 to 98% in 2013.
Professional Services and Other Service Revenue
Professional services and other service revenue consists primarily of consulting and other service revenue. We generate most of our consulting revenue from the implementation of our software products. Other service revenue consists mainly of revenue from the messaging services acquired from Sybase and of training revenue from educational services supplied to customers and partners on the use of our software products and related topics.
Professional services and other service revenue decreased from €3,058 million in 2012 to €2,865 million in 2013, representing a decline of €193 million, or 6%. This decline reflects a 3% decrease from changes in volumes and prices and a 4% decrease from currency effects.
Customers’ cautious buying behavior toward large services projects led to a decline in consulting revenue from €2,442 million in 2012 to €2,242 million in 2013, representing a decrease of €200 million, or 8%. This decline reflects a 5% decrease from changes in volumes and prices and a 4% decrease from currency effects. Consulting revenue contributed 78% of the total professional and other service revenue (2012: 80%). Consulting revenue contributed 13% of total revenue (2012: 15%).
Revenue from other services increased €7 million, or 1%, to €623 million in 2013 (2012: €616 million). This reflects a 5% increase from changes in volumes and prices and a 4% decrease from currency changes.
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Revenue by Region and Industry
Revenue by Region
€ millions | 2013 | 2012 | Change in % 2013 vs 2012 | |||||||||
Germany | 2,513 | 2,382 | 5 | % | ||||||||
Rest of EMEA | 5,462 | 5,130 | 6 | % | ||||||||
Total EMEA | 7,975 | 7,512 | 6 | % | ||||||||
United States | 4,487 | 4,413 | 2 | % | ||||||||
Rest of Americas | 1,746 | 1,647 | 6 | % | ||||||||
Total Americas | 6,233 | 6,060 | 3 | % | ||||||||
Japan | 631 | 791 | –20 | % | ||||||||
Rest of APJ | 1,975 | 1,860 | 6 | % | ||||||||
APJ | 2,606 | 2,650 | –2 | % | ||||||||
SAP Group | 16,815 | 16,223 | 4 | % |
Revenue by Industry
€ millions | 2013 | 2012 | Change in % 2013 vs 2012 | |||||||||
Energy & Natural Resources | 4,077 | 3,926 | 4 | % | ||||||||
Discrete Manufacturing | 2,987 | 3,109 | –4 | % | ||||||||
Consumer | 3,778 | 3,646 | 4 | % | ||||||||
Public Services | 1,691 | 1,614 | 5 | % | ||||||||
Financial Services | 1,633 | 1,444 | 13 | % | ||||||||
Services | 2,649 | 2,485 | 7 | % | ||||||||
Total revenue | 16,815 | 16,223 | 4 | % |
Revenue by Region
We break our operations down into three regions: the Europe, Middle East, and Africa (EMEA) region, the Americas region and the Asia Pacific Japan (APJ) region. We allocate revenue amounts to each region based on where the customer is located. For more information about revenue by geographic region, see the Notes to the Consolidated Financial Statements section, Note (29).
The EMEA Region
In 2013, the EMEA region generated €7,975 million in revenue, which was 47% of total revenue (2012: €7,512; 46%). This represents a year-over-year increase of 6%. Total revenue in Germany increased 5% to €2,513 million in 2013 (2012: €2,382 million). Germany contributed 32% (2012: 32%) of all EMEA region revenue. The remaining revenue in the EMEA region was primarily generated in the United Kingdom, France, Switzerland, the Netherlands, Russia, and
Italy. Software and software-related service revenue generated in the EMEA region in 2013 totaled €6,616 million (2012: €6,126 million). Software and software-related service revenue represented 83% of total revenue in 2013 (2012: 82%). Software & Support revenue rose by 7% to €6,440 million in 2013 (2012: €6,043 million). This growth reflects an 8% increase from changes in volumes and prices and a 2% decrease from currency effects. Cloud subscription and support revenue grew 113% to €176 million (2012: €82 million).
The Americas Region
In 2013, 37% of our total revenue was generated in the Americas region (2012: 37%). Total revenue in the Americas region increased 3% to €6,233 million; revenue generated in the United States increased 2% to €4,487 million. This growth reflects an 5% increase from changes in volumes and prices and a 4% decrease from currency effects. The United States contributed 72% (2012: 73%) of all revenue generated in the
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Americas region. In the remaining countries of the Americas region, revenue climbed 6% to reach €1,746 million. This growth reflects a 15% increase from changes in volumes and prices and a 9% decrease from currency effects. This revenue was principally generated in Brazil, Canada, and Mexico. Software and software-related service revenue generated in the Americas region in 2013 totaled €5,097 million (2012: €4,789 million). Total software and software-related service revenue represented 82% of all revenue in the Americas region in 2013 (2012: 79%). Software and support revenue remained flat as a 5% increase in volume and prices was offset by a 5% decrease from currency effects. Cloud subscription and support revenue grew by 184% to €457 million (2012: €161 million), representing 66% of worldwide cloud subscription and support revenues.
The APJ Region
In 2013, 15% (2012: 16%) of our total revenue was generated in the APJ region, with the strongest revenue growth being achieved in China. Total revenue in the APJ region decreased by 2% to €2,606 million. In Japan, revenue fell by 20% to €631 million, which represents 24% (2012: 30%) of the total revenue generated in the APJ region. This drop in revenue is attributable, in full, to currency effects. In the remaining countries of the APJ region, revenue increased by 6%. Revenue in the remaining countries of the APJ region was generated primarily in Australia, China, and India. Software and software-related service revenue generated in the APJ region in 2013 totaled €2,237 million (2012: €2,250 million). That was 86% of total revenue (2012: 85%). Software and support revenue decreased by 2% to €2,173 million (2012: €2,224). This decline reflects an 9% increase from changes in volume and prices and a 11% decrease from currency
effects. Cloud subscription and support revenue grew by 139% to €64 million (2012: €27 million).
Revenue by Industry
With effect from January 2013, we rearranged our industry sectors from nine groups into six so that we could focus better on the requirements of existing and potential customers.
We merged one of our existing industry sectors, process manufacturing – which covers the chemicals and mill products industries – with the energy and natural resources industry sector. We combined our former consumer products and the retail and wholesale distribution industry sector into the consumer sector. The healthcare and life sciences (medical and pharmaceutical) industries, which were previously grouped together under the healthcare sector, now belong to the public services or consumer industry sectors, respectively. To address the changing needs of our customers, a new industry subgroup was established, sports and entertainment, which is part of the professional services sector.
We allocate our customers to one of our industries at the outset of an initial arrangement. All subsequent revenue from a particular customer is recorded under that industry sector.
In 2013, we achieved above-average growth in the following sectors, measured by changes in total revenue: Financial Services (€1,633 million, at a growth rate of 13%), Services (€2,649 million, at a growth rate of 7%), Public Services (€1,691 million, at a growth rate of 5%), and Energy and Natural Resources (€4,077 million, at a growth rate of 4%). The revenue from the other industry sectors: Consumer €3,778 million, which was a 4% improvement on the prior year; Discrete Manufacturing €2,987 million, which was a 4% decline mainly related to APJ and the Americas.
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Operating Profit and Operating Margin
Total Operating Expenses
€ millions | 2013 | % of total revenue(1) | 2012 | % of total revenue(2) | Change in % 2013 vs 2012 | |||||||||||||||
Cost of software and software-related services | –2,629 | 16% | –2,553 | 16% | 3% | |||||||||||||||
Cost of professional services and other services | –2,402 | 14% | –2,520 | 16% | –5% | |||||||||||||||
Research and development | –2,282 | 14% | –2,261 | 14% | 1% | |||||||||||||||
Sales and marketing | –4,131 | 25% | –3,912 | 24% | 6% | |||||||||||||||
General and administration | –866 | 5% | –949 | 6% | –9% | |||||||||||||||
Restructuring | –70 | 0% | –8 | 0% | >100 | |||||||||||||||
TomorrowNow and Versata litigation | 31 | 0% | –2 | 0% | <-100 | |||||||||||||||
Other operating income/expense, net | 12 | 0% | 23 | 0% | –46% | |||||||||||||||
Total operating expenses | –12,336 | 73% | –12,181 | 75% | 1% |
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Operating Profit and Operating Margin
€ millions, except for operating margin | 2013 | 2012 | Change in % 2013 vs 2012 | |||||||||
Operating profit | 4,479 | 4,041 | 11% | |||||||||
Operating margin (in %) | 26.6% | 24.9% | 1.7pp |
In 2013, our operating profit totaled €4,479 million (2012: €4,041 million), a significant year-over-year increase despite adverse currency effects. We invested in innovations and made substantial advances in our cloud business in 2013.
In 2013, operating expenses increased €155 million or 1% to €12,336 million (2012: €12,181 million). The main contributors to that increase were our greater acquisition-related and restructuring expenses, continued investment in sales activities and the cloud, and higher personnel and infrastructure expenses related to acquisitions.
The effect of acquisition-related expenses, which were €555 million (2012: €537 million), and restructuring expenses, which were €70 million (2012: €8 million), on operating profit was greater than in the prior year. The operating profit for 2013 was also affected by continued investments in global sales activities and cloud computing. The number of SAP employees (expressed in full-time equivalents – FTEs) rose year over year by 2,150 persons, including more than 1,100 employees from acquired businesses.
Those negative effects on operating profit were in part offset by a reduced expense for share-based payments, which totaled €327 million in 2013 (2012: €522 million) owing to a less steep increase in the SAP stock price, and a reduction in our general and administration expense.
As an overall result of these effects on operating profit, our operating margin widened 1.7 percentage points to 26.6% in 2013 (2012: 24.9%).
The sections that follow discuss our costs by line item.
Cost of Software and Software-Related Services
Cost of software and software-related services consists primarily of customer support costs, cost of developing custom solutions that address customers’ specific business requirements, costs for deploying and operating cloud solutions, amortization expenses relating to intangibles, and license fees and commissions paid to third parties for databases and the other complementary third-party products sublicensed by us to our customers.
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In 2013, the cost of software and software-related services increased a modest 3% to €2,629 million (2012: €2,553 million). The main factors were a €95 million acquisition-related increase in the cost of providing and operating our cloud solutions and a €13 million increase in customer support costs. They both represent investments that contributed to revenue growth. At the same time, the license fees we pay to third parties decreased by €29 million. The gross margin on our software and software-related services, defined as software and software-related services profit as a percentage of software and software-related services revenue, remained constant year over year in 2013 at 81% (2012: 81%).
Cost of Professional Services and Other Services
Cost of professional services and other services consists primarily of the cost of consulting and training personnel and the cost of bought-in third-party consulting and training resources. This item also includes sales and marketing expenses for our professional services and other services resulting from sales and marketing efforts where those efforts cannot be clearly distinguished from providing the professional services and other services.
The growth of our cloud business and increased demand for pre-bundled offerings led to a reduction in our professional and other services revenue as well as in our professional and other services expense. We reduced costs for professional and other services 5% from €2,520 million in 2012 to €2,402 million in 2013. Our gross margin on professional and other services, defined as professional and other services profit as a percentage of professional and other services revenue, narrowed to 16% (2012: 18%).
Research and Development Expense
Our research and development (R&D) expense consists primarily of the personnel cost of our R&D employees, costs incurred for independent contractors we retain to assist in our R&D activities, and depreciation of the computer hardware and software we use for our R&D activities.
We acquired Ariba and SuccessFactors in the course of 2012, so in 2012 our R&D expense did not include a full year’s Ariba and SuccessFactors
R&D. Moreover, the depreciation expense for R&D servers and computer systems was greater in 2013 than in 2012. Nonetheless, our total R&D expense increased only slightly, by 1% to €2,282 million (2012: €2,261 million). Therefore, while we continue to increase our innovative capacity our R&D expense as a percentage of total revenue was slightly less year over year at 13.6% (2012: 13.9%). For more information, see the Research and Development section.
Sales and Marketing Expense
Sales and marketing expense consists mainly of personnel costs and direct sales expense to support our sales and marketing teams in selling and marketing our products and services.
Our sales and marketing expense rose 6% from €3,912 million in 2012 to €4,131 million in 2013. The increase was mainly the result of greater personnel costs as we expanded our global sales force, notably for cloud business, and of the reallocation and re-tasking of employees to sales-related work. By increasing our sales force we accelerated our revenue growth. The ratio of sales and marketing expense to total revenue, expressed as a percentage, increased slightly to 24.6% (2012: 24.1%) because costs grew more rapidly than revenue.
General and Administration Expense
Our general and administration expense consists mainly of personnel costs to support our finance and administration functions.
General and administration expense decreased 9% from €949 million in 2012 to €866 million in 2013. This resulted mainly from a reduced expense for share-based payment and efficient cost management. Consequently, the ratio of general and administration expense to total revenue decreased in 2013 to 5% (2012: 6%).
Financial Income, Net
Financial income, net, changed to –€66 million (2012: –€72 million). Our finance income was €115 million (2012: €103 million) and our finance costs were €181 million (2012: €175 million).
Finance income mainly consists of interest income from loans and financial assets (cash, cash equivalents, and current investments), which was
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€37 million in 2013 (2012: €45 million). This decrease is attributable to a lower average liquidity and lower interest rates than in 2012.
Finance costs mainly consist of interest expense on financial liabilities (€131 million in 2013 compared to €130 million in 2012) and remained virtually stable year over year. For more information about these financing instruments, see the Notes to the Consolidated Financial Statements section, Note (18b).
Another factor in financial income, net, in 2013 was the derivatives we utilize to execute our financial risk management strategy. The associated time value effects from derivatives were reflected in interest income of €32 million (2012: €27 million) and interest expenses of €23 million (2012: €28 million).
Income Tax
Our effective tax rate decreased to 24.4% in 2013 (2012: 26.2%). The reason for the year-over-year decrease mainly resulted from prior year taxes. For more information, see the Notes to the Consolidated Financial Statements section, Note (11)(10).
FOREIGN CURRENCY EXCHANGE RATE EXPOSURE
Although our reporting currency is the euro, a significant portion of our business is conducted in currencies other than the euro. Since the Group’s entities usually conduct
their business in their respective functional currencies, our risk of exchange rate fluctuations from ongoing ordinary operations is not considered significant. However, occasionally we generate foreign-currency-denominated receivables, payables, and other monetary items by transacting in a currency other than the functional currency; to mitigate the extent of the associated foreign currency exchange rate risk, the majority of these transactions are hedged as described in Note (26)(25) to our Consolidated Financial Statements. Also see Notes (3) and (25)(24) for additional information on foreign currencies.
In 2014, as in 2013, approximately 71%Approximately 74% of our total revenue in 2015 (2014: 71%) was attributable to operations in non-euro participating countries. That revenue had to be translated into euros for financial reporting purposes. Fluctuations in the exchange value of
the euro had a favorable impact of€1,504 million on our total revenue for 2015, an unfavorable impact of €143€143 million on our total revenue for 2014 and an unfavorable impact of €734€734 million on our total revenue for 2013, and a favorable impact of €548 million on our total revenue for 2012.2013.
The impact of foreign currency exchange rate fluctuations discussed in the preceding paragraph is calculated by translating current period figures in local currency to euros at the monthly average exchange rate for the corresponding month in the prior year. Our revenue analysis, included within the “Operating Results (IFRS)”Results” section of Item 5, discusses at times the effect of currency movements which are calculated in the same manner.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Global Financial Management
We use global centralized financial management to control liquid assets and monitor exposure to interest rates and currencies. The primary aim of our financial management is to maintain liquidity in the Group at a level that is adequate to meet our obligations. Most SAP companies have their liquidity managed centrally by the Group, so that liquid assets across the Group can be consolidated, monitored, and invested in accordance with Group policy. High levels of liquid assets help keep SAP flexible, sound, and independent. In addition, various credit facilities are currently available for additional liquidity, if required. For more information about these facilities, see the Credit Facilities section.
We manage credit, liquidity, interest rate, equity price, and foreign exchange rate risks on a Group-wide basis. We use selected derivatives exclusively for this purpose and not for speculation, which is defined as entering into a derivative instrument for which we do not have a corresponding underlying transaction. The rules for the use of derivatives and other rules and processes
concerning the management of financial risks are collected in our treasury guideline document, which applies globally to all companies in the Group. For more information about the management of each financial risk and about our risk exposure, see the Notes to the Consolidated Financial Statements section, Notes (25)(24) to (27)(26).
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Liquidity Management
Our primary source of cash, cash equivalents, and current investments is funds generated from our business operations. Over the past several years, our principal use of cash has been to support operations and our capital expenditure requirements resulting from our growth, to quickly repay financial debt, to acquire businesses, to pay dividends on our shares, and to buy back SAP shares on the open market. On December 31, 2014,2015, our cash, cash equivalents, and current investments were primarily held in euros and U.S. dollars. We generally invest only in the financial assets of issuers or funds with a minimum credit rating of BBB, and pursue a policy of cautious investment characterized by wide portfolio diversification with a variety of counterparties, predominantly short-term investments, and standard investment instruments. We rarely invest in the financial assets of issuers with a credit rating lower than BBB, and such investments were not material in 2014.2015.
We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our present operating needs and, together with expected cash flows from operations, will support debt repayments and our currently planned capital expenditure requirements over the near term and medium term. It may also be necessary to enter into
financing transactions when additional funds are required that cannot be wholly sourced from free cash flow (for example, to finance large acquisitions).
To expand our business, we have made acquisitions of businesses, products, and technologies. 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 markets and trends in the availability of funds, as well as the cost of such funding. In the recent years, we were able to repay additional debt within a short period of time due to our persistently strong free cash flow. For more information about the financial debt, see the Cash Flows and Liquidity section.
Capital Structure Management
The primary objective of our capital structure management is to maintain a strong financial profile for investor, creditor, and customer confidence, and to support the growth of our business. We seek to maintain a capital structure that will allow us to cover our funding requirements through the capital markets at reasonable conditions, and in so doing, so, ensure a high level of independence, confidence, and financial flexibility.
After undergoing an externalThe long-term credit rating process, on September 19, 2014,for SAP SE was assigned a first-time long-term issuer credit rating ofis “A” by Standard and Poor’s and “A2” by Moody’s, and “A” by Standard & Poor’s, both with stable outlook. Since their initial assignment in September 2014, the outlook “Stable.”ratings and outlooks have not changed.
Our general intention is to remain in a position to return excess liquidity to our shareholders by distributing annual dividends and potentially repurchasing shares. The amounttotaling more than 35% of our profit after tax. There are currently no plans for future dividends and the extent of future repurchases of shares will be balanced with our effort to continue to maintain an adequate liquidity position.share buybacks.
Capital Structure
2014 | 2013 | Change (in %) | 2015 | 2014 | ||||||||||||||||||||||||||||||||||||
€ millions | % of Total equity and liabilities | € millions | % of Total equity and liabilities | € millions | % of Total equity and liabilities | € millions | % of Total equity and liabilities | D in % | ||||||||||||||||||||||||||||||||
Equity | 19,598 | 51 | 16,048 | 59 | 22 | 23,295 | 56 | 19,534 | 51 | 19 | ||||||||||||||||||||||||||||||
Current liabilities | 8,544 | 22 | 6,347 | 23 | 35 | 7,867 | 19 | 8,574 | 22 | –8 | ||||||||||||||||||||||||||||||
Non-current liabilities | 10,366 | 27 | 4,695 | 17 | 121 | 10,228 | 25 | 10,457 | 27 | –2 | ||||||||||||||||||||||||||||||
Liabilities | 18,909 | 49 | 11,043 | 41 | 71 | 18,095 | 44 | 19,031 | 49 | –5 | ||||||||||||||||||||||||||||||
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Total equity and liabilities | 38,507 | 100 | 27,091 | 100 | 42 | 41,390 | 100 | 38,565 | 100 | 7 |
In 2014,2015, we took out a two-tranche bank loan of €4,270repaid€1,270 million in totalbank loans that we had taken to finance the Concur acquisition and issuedrefinanced another part of this loan through the issuance of a three-tranche Eurobond of €2,750 million€1.75 billion in total with
maturities of fourtwo to 12 years to finance the acquisition of Concur. In addition a €500 million short-term bank loan was taken for the acquisition
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of Fieldglass and was repaid in the same year.ten years. We also repaid a €500
€550 million Eurobond and the lasta US$300 million U.S. private placement tranche of the promissory notes amounting to €86 million.at their maturity. Thus, the ratio of total financial debt to total equity and liabilities increaseddecreased by 137 percentage points to 29%22% at the end of 2014 (16%2015 (29% as at December 31, 2013)2014).
Total financial debt consists of current and non-current bank loans, bonds, and private placements. For more information about our financial debt, see the Notes to the Consolidated Financial Statements section, Note (18)(17).
As part of our financing activities in 2015,2016, the Company intends to repay a €550 million Eurobond as well as a US$300600 million U.S. private placement tranche when they mature. Furthermore, we are planning to repayit matures and a further substantial portion of our outstanding bank loans.loan.
Total liabilities on December 31, 2014,2015, mainly comprised financial liabilities of €11,542€9,522 million (of which €8,980€8,681 million are non-current). Financial liabilities on
December 31, 2014,2015, consisted largely of financial debt, which included amounts in euros (€8,799(€6,994 million) and U.S. dollars (€2,276(€2,202 million). On December 31, 2014,2015, approximately 70%64% of financial debt was held at variable interest rates, partially swapped from fixed into variable using interest rate swaps. Total liabilities on December 31, 2014,2015, also comprised non-financial liabilities. Most of these non-financial liabilities result from employee-related obligations.
For more information about financial and non-financial liabilities, see the Notes to the Consolidated Financial Statements section, Note (18).
Cash Flows and Liquidity
Group liquidity on December 31, 2014,2015, primarily comprised amounts in euros and U.S. dollars. Current investments are included in other financial assets in the statement of financial position. Financial debts are included within financial liabilities in the statement of financial position.
Group Liquidity of the SAP Group
€ millions | 2014 | 2013 | Change | 2015 | 2014 | D | ||||||||||||||||||
Cash and cash equivalents | 3,328 | 2,748 | 580 | 3,411 | 3,328 | 83 | ||||||||||||||||||
Current investments | 95 | 93 | 2 | 148 | 95 | 53 | ||||||||||||||||||
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Group liquidity | 3,423 | 2,841 | 582 | 3,559 | 3,423 | 136 | ||||||||||||||||||
Current financial debt | –2,157 | –586 | –1,571 | –567 | –2,157 | 1,590 | ||||||||||||||||||
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Net liquidity 1 | 1,266 | 2,255 | –989 | 2,992 | 1,266 | 1,726 | ||||||||||||||||||
Non-current financial debt | –8,936 | –3,722 | –5,214 | –8,607 | –8,936 | 329 | ||||||||||||||||||
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Net liquidity 2 | –7,670 | –1,467 | –6,203 | –5,615 | –7,670 | 2,055 | ||||||||||||||||||
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Group liquidity consists of cash and cash equivalents (for example, cash at banks, money market funds, and time deposits with original maturity of three months or less) and current
investments (for example, investments with
original maturities of greater than three months and remaining maturities of less than one year) as reported in our Consolidated Financial Statements.
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Net liquidity is Group liquidity less total financial debt as defined above.
The increase in Group liquidity compared to 20132014 was mainly due to cash inflows from our operations and financing activities in issuing bonds. They were partly offset by cash outflows for acquisitions (such as Concur and Fieldglass), dividend payments and loan repayments.repayments of borrowings.
For information about the impact of cash, cash equivalents, current investments, and our financial liabilities on our income statements, see the analysis of our financial income, net, in the Operating Results (IFRS) section.
Analysis of Consolidated Statements of Cash Flows
Years ended December 31, | Change in % 2014 vs. 2013 | Change in % 2013 vs. 2012 | ||||||||||||||||||||||||||||||||||||||
€ millions | 2014 | 2013 | 2012 | Years ended December 31, | ||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | Change in % 2015 vs. 2014 | Change in % 2014 vs. 2013 | ||||||||||||||||||||||||||||||||||||
Net cash flows from operating activities | 3,499 | 3,832 | 3,822 | –9 | 0 | 3,638 | 3,499 | 3,832 | 4% | –9% | ||||||||||||||||||||||||||||||
Net cash flows from investing activities | –7,240 | –1,781 | –5,964 | >100 | –70 | –334 | –7,240 | –1,781 | –95% | >100% | ||||||||||||||||||||||||||||||
Net cash flows from financing activities | 4,298 | –1,589 | –194 | <-100 | >100 | –3,356 | 4,298 | –1,589 | <–100% | <–100% |
Analysis of Consolidated Statements of Cash Flows: 2015 compared to 2014
Net cash provided by operating activities increased 4% year-over-year to€3,638 million in 2015 (2014:€3,499 million). Payments in connection with the restructuring of€204 million to employees and€272 million to insurance policies have offset partly the non-recurring effect from litigations in 2014. In 2015, days’ sales outstanding (DSO) for receivables, defined as the average number of days from the raised invoice to cash receipt from the customer, increased six days to 71 days (2014: 65 days).
Cash outflows from investment activities decreased significantly to€334 million in 2015 (2014:€7,240 million). Cash outflows from purchase of intangible assets and property, plant, and equipment remained stable. Cash outflows in 2014 had resulted mainly from business combinations of Concur and Fieldglass. For more information about current and planned capital expenditures, see the Investment Goals section.
Net cash outflows from financing activities were€3,356 million in 2015, compared to net cash inflows of€4,298 million in 2014. The 2015 cash outflows had resulted from repayments of€1,270 million bank loans,€550 million Eurobonds and US$300 million private placements. We refinanced another part of the bank loan through the issuance of a three-tranche Eurobond of€1,750 million in total. Cash inflows in 2014 were the result of issuing a€2,750 million Eurobond and drawing two tranches (of€1,270 million and€3,000 million) of a bank loan. Cash outflows in 2014 arose chiefly from repayments of€1,086 million borrowings and US$1,160 million convertible bonds that we assumed in connection with our acquisition of Concur.
The dividend payment of€1,316 million made in 2015 exceeded the amount of€1,194 million in the prior year resulting from the increased dividend paid per share from€1.00 to€1.10.
Analysis of Consolidated Statements of Cash Flows: 2014 comparedCompared to 2013
Net cash provided by operating activities decreased 9% year-over-year to €3,499€3,499 million in 2014 (2013: €3,832€3,832 million). Payments in connection with the TomorrowNow and Versata litigation had a €555€555 million negative effect on net cash provided by operating activities. A €61€61 million increase to €1,356€1,356 million in our income tax payments also negatively affected net cash provided by operating activities. In 2014, days’ sales outstanding (DSO) for receivables, defined as the average number of days from the raised invoice to cash receipt from the customer, increased three days to 65 days (2013: 62 days).
Cash outflows from investment activities increased significantly to €7,240€7,240 million in 2014 (2013: €1,781€1,781 million). The increase resulted principally from the Concur, Fieldglass, and SeeWhy acquisitions. For more information about current and planned capital expenditures, see the Investment Goals section.
Net cash inflows from financing activities were €4,298€4,298 million in 2014, compared to net cash outflows of €1,589€1,589 million in 2013. Cash inflows in 2014 were the result of issuing a €2,750€2,750 bond and drawing two tranches (of €1,270€1,270 million and €3,000€3,000 million) of a loan. Cash outflows arose chiefly from repayments of borrowings (€(€1,086 million) and the repayment of convertible bonds that we assumed in connection with our acquisition of Concur (US$1,160 million). The
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2013 cash outflows had resulted chiefly from dividends paid and the repayment of a €600€600 million bond.
The dividend payment of €1,194€1,194 million made in 2014 was greater than that of €1,013€1,013 million in the prior year because the dividend paid per share increased from €0.85€0.85 to €1.00.
Analysis of Consolidated Statements of Cash Flows: 2013 Compared to 2012€1.00.
Net cash provided by operating activities remained stable in 2013 (€3,832 million) compared to the prior year (2012: €3,822 million). Increased income tax payments of €193 million to €1,295 million in 2013 burdened net cash flows from operating activities. In addition, days’ sales outstanding (DSO) for receivables, defined as average number of days from the raised invoice to cash receipt from the customer, was 62 days, a three-day increase compared to 2012 (59 days).
Cash outflows from investment activities totaled €1,781 million in 2013, much decreased from the 2012 figure of €5,964 million that were attributed mainly to business combinations of SuccessFactors and Ariba. In 2013, cash outflows were mainly driven by the acquisitions of consolidated companies (especially hybris) as well, for which we paid €1,160 million in total.
Cash outflows from financing activities totaled €1,589 million in 2013, compared to €194 million in 2012. In 2013, cash outflows were mainly driven by dividends paid and a repayment of an issued €600 million Eurobond. In addition, we took out a short-term bank loan in the amount of €1,000 million to finance the acquisition of hybris that was fully offset by repayments in the same amount and year. In the previous year, cash outflows from financing activities were mainly driven by repayments of a Eurobond tranche (€600 million) and several tranches (€611 million) of the promissory notes we issued in 2009 and dividends paid. This was almost fully compensated by a successfully placed Eurobond transaction totaling €1.3 billion and a U.S. private placement transaction of US$1.4 billion.
The decrease of total dividends paid in 2013 to €1,013 million (2012: €1,310 million) was due to
a decrease in dividend paid to €0.85 per share compared to €1.10 per share in the previous year, of which €0.35 per share was an extraordinary payout to celebrate our 40th anniversary in 2012.
Credit Facilities
Other sources of capital are available to us through various credit facilities, if required.
We are party to a revolving €2.0€2.0 billion credit facility contract with a current tenor of five years plus one extension option for an additional year.maturity in November 2020. The credit line may be used for general corporate purposes. A possible future withdrawal is not boundsubject to any financial covenants. Borrowings under the facility bear interest at the Euro Interbank Offered Rate (EURIBOR) or London Interbank Offered Rate (LIBOR) for the respective optional currency plus a margin ranging from 0.3% to 0.525%. We pay a commitment fee of 0.079% per annum on unused amounts of the available credit facility. So far, we have not used and do not currently foresee any need to use, this credit facility.
As at December 31, 2014,2015, SAP SE had additional available credit facilities totaling €471€471 million. Several of our foreign subsidiaries have credit facilities available that allow them to borrow funds in their local currencies at prevailing interest rates, generally to the extent SAP SE has guaranteed such amounts.rates. As at December 31, 2014,2015, approximately €54€49 million was available through such arrangements. There were immaterial borrowings outstanding under these credit facilities from our foreign subsidiaries as at December 31, 2014.2015.
OFF-BALANCE SHEET ARRANGEMENTS
Several SAP entities have entered into operating leases for office space, hardware, cars and certain other equipment. These arrangements are sometimes referred to as a form of off-balance sheet financing. Rental expenses under these operating leases are set forth below under “Contractual Obligations.” We do not believe we have forms of material off-balance sheet arrangements that would require disclosure other than those already disclosed.
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The table below presents our on- and off-balance sheet contractual obligations as of December 31, 2014:2015:
Contractual obligations | Payments due by period | Payments due by period | ||||||||||||||||||||||||||||||||||||||
€ millions | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||||||||||||||||
Financial liabilities(1) | 12,025 | 2,377 | 4,601 | 1,785 | 3,262 | 10,127 | 863 | 3,759 | 1,822 | 3,683 | ||||||||||||||||||||||||||||||
Derivative financial liabilities(1) | 344 | 295 | 22 | 19 | 8 | 132 | 74 | 29 | 29 | 0 | ||||||||||||||||||||||||||||||
Operating lease obligations(3) | 1,332 | 262 | 374 | 355 | 341 | 1,347 | 294 | 410 | 246 | 396 | ||||||||||||||||||||||||||||||
Purchase obligations(3) | 859 | 479 | 236 | 81 | 62 | 872 | 428 | 260 | 118 | 66 | ||||||||||||||||||||||||||||||
Capital contribution commitments(3) | 77 | 77 | 0 | 0 | 0 | 111 | 111 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
Other non-current non-financial liabilities(2) | 219 | 0 | 93 | 24 | 101 | 331 | 0 | 201 | 36 | 94 | ||||||||||||||||||||||||||||||
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Total | 14,856 | 3,490 | 5,326 | 2,265 | 3,775 | 12,920 | 1,770 | 4,660 | 2,251 | 4,239 | ||||||||||||||||||||||||||||||
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(1) For more information on financial liabilities and derivative financial liabilities see Note (24) to our Consolidated Financial Statements.
(2) For more information on other non-current non-financial liabilities see Note (17c) to our Consolidated Financial Statements. (3) See Note (22) to our Consolidated Financial Statements for additional information about operating lease obligations, purchase obligations, and capital contribution commitments. Our expected contributions to our pension and other post-employment benefit plans are not included in the table above. For more information on these contributions see Note (18a) to our Consolidated Financial Statements. |
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We expect to meet these contractual obligations with our existing cash, our cash flows from operations and our financing activities. The timing of payments for the above contractual obligations is based on payment schedules for those obligations where set payments exist. For other obligations with no set payment schedules, estimates as to the most likely timing of cash payments have been made. The ultimate timing of these future cash flows may differ from these estimates.
Obligations under Indemnifications and Guarantees
Our software license agreements and our cloud subscription agreements generally include certain provisions for indemnifying customers against liabilities if our software products infringe a third party’s intellectual property rights. In addition, we occasionally provide function or performance guarantees in routine consulting contracts and development arrangements. We also generally provide a six to twelve month warranty
on our software. Our warranty liability is included in other provisions. For more information on other provisions see Note (19b)(18b) to our Consolidated Financial Statements. For more information on obligations and contingent liabilities refer to Note (3) and Note (23)(22) in our Consolidated Financial Statements.
For information on our R&D activities see “Item 4. Information about SAP – Products, Research & Development, and Services.” For information on our R&D costs see “Item 5. Operating and Financial Review and Prospects – Operating Results (IFRS)” and for information related to our R&D employees see “Item 6. Directors, Senior Management and Employees – Employees.”
Our Consolidated Financial Statements are prepared based on the accounting policies described in Note (3) to our Consolidated Financial Statements in this report. The application of such policies requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, revenues and expenses in our Consolidated Financial Statements. We base our judgments, estimates and assumptions on historical and forecast information, as well as regional and industry economic conditions in which we or our customers operate, changes to which could adversely affect our estimates. Although we believe we have made reasonable estimates about the ultimate resolution of the underlying uncertainties, no assurance can be
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given that the final outcome of these matters will be consistent with what is reflected in our assets, liabilities, revenues and expenses. Actual results could differ from original estimates.
The accounting policies that most frequently require us to make judgments, estimates, and assumptions, and therefore are critical to understanding our results of operations, include the following:
– | revenue recognition; |
– | valuation of trade receivables; |
– | accounting for share-based payments; |
– | accounting for income tax; |
– | accounting for business combinations; |
– | subsequent accounting for goodwill and other intangible assets; |
– | accounting for legal contingencies; and |
– | recognition of internally generated intangible assets from development. |
revenue recognition;
valuation of trade receivables;
accounting for share-based payment;
accounting for income tax;
accounting for business combinations;
subsequent accounting for other intangibles;
determination of operating segments;
accounting for legal contingencies; and
recognition of internally generated intangible assets from development.
Our management periodically discusses these critical accounting policies with the Audit Committee of the Supervisory Board. See Note (3c) to our Consolidated Financial Statements for further discussion on our critical accounting estimates and critical accounting policies.
NEW ACCOUNTING STANDARDS NOT YET ADOPTED
See Note (3e) to our Consolidated Financial Statements for our discussion on new accounting standards not yet adopted.
Future Trends in the Global Economy
TheIn its most recent report, the European Central Bank (ECB) forecasts moderate growth in the world economy and it expects that global economic activitythis growth will continue to regain
strength gradually but that the recovery will remain modest. Economicvary across regions and countries in 2016. It foresees more favorable prospects for the various countries and regions are becoming increasingly mixed: The ECB believes key advanced economies should do well in the years to come; while structural problems will grow more severethan for emerging markets and credit will become tighter in the emergingdeveloping economies. Developments in current geopolitical flashpoints, for exampleGeopolitical risks, especially of heightened tensions in the Middle East, and Ukraine, could also be a crucial factor,undermine global economic performance, the ECB says.warns.
In the Europe, Middle-East,Middle East, and Africa (EMEA) region, economic growth may be slowerthe ECB expects the euro-area economy to recover slightly more rapidly in 2016 than the worldwide average in 2015. Notably, growth in the euro areaprevious year. It suggests that low oil prices, increased publicsector spending on assistance for refugees, and its own monetary measures may remain weak.encourage that acceleration. In the euro area, the ECB now expects annual growth of a little more than 1% in 2015 and 2016, which is a downward correction of its earlier forecasts. However, the ECB believes various monetary interventions could bear fruit in 2015, encouraging company investment. The ECB projects relatively robust growth in Central and Eastern Europe, rooted in a gradual increase in domestic demand. Onthe ECB expects economic activity to remain stable but for performance to vary from country to country. The European Union’s structural funds and strong consumer spending may be principal factors behind such growth. In Russia, on the other hand, itthe economic situation is expected to remain difficult. The ECB expects export trade will be hampered by the geopolitical tensions between Russia and Ukraine.further cuts in public spending as a consequence of declining oil revenue.
Growth may also be slower than the global averageThe ECB’s forecasts for 2016 for a number of major countries in the Americas region in 2015, says the ECB. The ECB predicts strong economic growth inare cautious. For the United States, in the future. Better conditions on the labor and housing markets and continuing easier finance should have a positive influence. However, the ECB believesexpects that economic growth may slow following the Federal Reserve’s move on interest rates in Latin America growth will stay onDecember 2015. The ECB expects political uncertainty, a low level as commodity pricestightening of monetary policy, and more restrictive financing conditions to continue to fall and production costs increase. Clear differences in countries’ performance may remain. The ECB observes constraining factors in Brazil in particular, whereas it notes that in Mexico growth may accelerate in years to come as a result of that country’s far-reaching structural reforms.weigh on Brazil’s economy.
Growth prospects remain mixed inFor the Asia Pacific Japan (APJ) region, for the coming years, according to the ECB. In light of encouraging signs from housing and industrial output, the ECB expects that wage increases and low oil prices will improve consumer spending in Japan. Japan’s exports should also pick up. For China, though, the ECB expects that economic growth will continue to slow following the refocusing of its economy. It believes that the prospects for India’s economy are positive numbers from Japan in 2015. It estimates that in 2015, the Chinese economy will grow slightly slower than in 2014. Consumer spending and trade are expected to make the largest contributions to growth in China.2016.
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Economic Trends – Year-Over-Year GDP Growth
% | 2013e | 2014p | 2015p | |||||||||
World | 3.3 | 3.3 | 3.5 | |||||||||
Advanced economies | 1.3 | 1.8 | 2.4 | |||||||||
Developing and emerging economies | 4.7 | 4.4 | 4.3 | |||||||||
Europe, the Middle East, and Africa (EMEA) | ||||||||||||
Euro area | –0.5 | 0.8 | 1.2 | |||||||||
Germany | 0.2 | 1.5 | 1.3 | |||||||||
Central and Eastern Europe | 2.8 | 2.7 | 2.9 | |||||||||
Middle East and North Africa | 2.2 | 2.8 | 3.3 | |||||||||
Sub-Saharan Africa | 5.2 | 4.8 | 4.9 | |||||||||
Americas | ||||||||||||
United States | 2.2 | 2.4 | 3.6 | |||||||||
Canada | 2.0 | 2.4 | 2.3 | |||||||||
Central and South America, Caribbean | 2.8 | 1.2 | 1.3 | |||||||||
Asia-Pacific-Japan (APJ) | ||||||||||||
Japan | 1.6 | 0.1 | 0.6 | |||||||||
Asian developing economies | 6.6 | 6.5 | 6.4 | |||||||||
China | 7.8 | 7.4 | 6.8 |
In % | 2014e | 2015p | 2016p | |||||||||
World | 3.4 | 3.1 | 3.4 | |||||||||
Advanced economies | 1.8 | 1.9 | 2.1 | |||||||||
Developing and emerging economies | 4.6 | 4.0 | 4.3 | |||||||||
Europe, Middle East, and Africa (EMEA) | ||||||||||||
Euro area | 0.9 | 1.5 | 1.7 | |||||||||
Germany | 1.6 | 1.5 | 1.7 | |||||||||
Central and Eastern Europe | 2.8 | 3.4 | 3.1 | |||||||||
Middle East and North Africa | 2.8 | 2.5 | 3.6 | |||||||||
Sub- Saharan Africa | 5.0 | 3.5 | 4.0 | |||||||||
Americas | ||||||||||||
United States | 2.4 | 2.5 | 2.6 | |||||||||
Canada | 2.5 | 1.2 | 1.7 | |||||||||
Central and South America, Caribbean | 1.3 | –0.3 | –0.3 | |||||||||
Asia Pacific Japan (APJ) | ||||||||||||
Japan | 0.0 | 0.6 | 1.0 | |||||||||
Asian developing economies | 6.8 | 6.6 | �� | 6.3 | ||||||||
China | 7.3 | 6.9 | 6.3 |
e = estimate; p = projection
Source: International Monetary Fund (IMF), World Economic Outlook Update January 2015, Cross Currents,2016, Subdued Demand, Diminished Prospects, as of January 20, 2015, p.319, 2016, p. 6.
IT Market: The Outlook for 20152016
ExpansionThe worldwide IT market is at the dawn of a new era, according to U.S. market research firm IDC. It expects IT market growth to decline in a number of emerging economies, notably Brazil, China, and Russia. For a decade, these countries were the driving force in all segments of the global IT market while the advanced economies were already focusing on the transition from traditional technologies to innovations such as cloud and mobile computing. IDC expects that the growth in traditional IT will also slow in the emerging markets and developing economies in the years ahead. It believes that cloud, mobile, and Big Data will offer the main opportunities for growth. In view of that prediction, IDC expects the worldwide IT market year-over-year will slow slightly to 3.7% (software: 6.5%)grow just 2.8% in 2015, according2016. Hardware spending is expected to International Data Corporation (IDC)increase by about 1%, a market research firm based in the United States. It believes that across the advanced, emerging, and developing economies, there will be stable demand for IT in the coming years. However, it expects pricessoftware spending by almost 7% (mainly due to come under increasing pressure as competing segments, such as cloud offeringssoftware-as-a-service and classic software products, react to one another. In IDC’s view, moreover, the future expansion of the IT market depends on the resilience of the global economy in the face of many risk factors, for example the Ebola epidemic, the activities of Islamic State in the Middle East, the troubles in Ukraine, and the political tension in Southeast Asia.platform-as-a-service solutions).
In the EMEAEurope, Middle East, and Africa (EMEA) region, IDC expects overall IT market growth to decelerate to 3.0%2% in 2015. Nonetheless, it predicts growth2016. Notably, the IT market in Western Europe is
expected to grow just 1% to 2% in the software and services segments of 5.3% and 3.3% respectively; both higher thancoming years. The IT market in 2014. According
Germany is not expected to IDC,grow much above these rates either, according to IDC. The institute believes that IT spending in Western Europe will possiblyRussia might recover as early as 2016 and grow 1.2% in 2015 – considerably more slowly than in 2014. The German IT market may grow only slightly more quickly than that, at 1.5%. In Central and Eastern Europe, IT spending growth could again increase, to 7.1% (Russia: 5.9%) in 2015, but in the Middle East and Africa it might slow to single-digit growth6% as a result of 8.6%, short-term government stimulus measures.
IDC says.
Inexpects the Americas region IDC projects thatIT spending to increase 3.7% in 20152016. It believes the IT market will continue to expand at 3.9% – a similar rate to that in 2014. It forecasts 7.3% growth in the software segment, as in 2014, and 2.7% growth in the services segment, somewhat slower than in 2014. IDC forecasts that IT spending may grow 3.5% in the United States will grow at a similar rate and 5.7% in Latin America (Brazil: 3.2%; Mexico 6.3%) in 2015.
Expansionthat, with 7% growth, the software segment will again be the fastest to expand there. For Brazil, IDC expects that the government will pursue a strict program of overall IT spendingeconomic reform in the APJnext few years, which could slow growth in the IT market to a rate of 3% or 4%. IDC forecasts that the IT market in Mexico will also grow by about 3% annually in the next few years.
In the Asia Pacific Japan (APJ) region, may be sustainedIDC believes growth in the IT market might reach 2.5%. However, growth rates again are expected to vary from country to country. IDC expects the IT market in Japan will grow by about 3% in 2016. It anticipates that China’s IT market
will expand only in the low to middle single-digit percentage range in the years ahead. The IT market in
India, on the other hand, might continue to grow by rates at 4.4% in 2015,or above 10% a year, according to IDC. That could include accelerated growth of 6.2% in the software segment. IDC expects IT market growth to slow by 0.2% in Japan and 4.4% in China in 2015.
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Trends in the IT Market – Increased IT Spending Year-Over-Year
% | 2013e | 2014p | 2015p | |||||||||
World | ||||||||||||
Total IT | 4.6 | 4.1 | 3.7 | |||||||||
Hardware | 4.9 | 3.8 | 2.8 | |||||||||
Packaged software | 7.4 | 6.1 | 6.5 | |||||||||
Applications | 7.3 | 6.0 | 6.2 | |||||||||
IT services | 2.6 | 3.3 | 3.5 | |||||||||
Europe, Middle East, and Africa (EMEA) | ||||||||||||
Total IT | 3.1 | 3.6 | 3.0 | |||||||||
Packaged software | 4.5 | 4.1 | 5.2 | |||||||||
Applications | 4.5 | 4.2 | 5.0 | |||||||||
IT services | 1.5 | 2.6 | 3.3 | |||||||||
Americas | ||||||||||||
Total IT | 5.2 | 4.3 | 3.9 | |||||||||
Packaged software | 8.9 | 7.3 | 7.3 | |||||||||
Applications | 8.9 | 7.1 | 7.0 | |||||||||
IT services | 2.8 | 3.1 | 2.7 | |||||||||
Asia-Pacific-Japan (APJ) | ||||||||||||
Total IT | 5.7 | 4.4 | 4.4 | |||||||||
Packaged software | 8.2 | 5.8 | 6.2 | |||||||||
Applications | 7.8 | 6.0 | 5.9 | |||||||||
IT services | 4.3 | 5.5 | 5.8 |
Increased IT Spending Year-Over-Year
| ||||||||||||
In % | 2014e | 2015p | 2016p | |||||||||
World | ||||||||||||
Total IT | 4.5 | 4.9 | 2.8 | |||||||||
Hardware | 5.2 | 5.5 | 1.1 | |||||||||
Packaged software | 5.6 | 6.8 | 6.8 | |||||||||
Applications | 6.9 | 7.3 | 7.1 | |||||||||
IT services | 3.0 | 2.8 | 3.0 | |||||||||
Europe, Middle East, and Africa (EMEA) | ||||||||||||
Total IT | 3.9 | 4.6 | 2.0 | |||||||||
Packaged software | 4.0 | 4.8 | 5.2 | |||||||||
Applications | 4.5 | 5.4 | 5.6 | |||||||||
IT services | 2.2 | 1.9 | 2.6 | |||||||||
Americas | ||||||||||||
Total IT | 4.2 | 4.6 | 3.7 | |||||||||
Packaged software | 6.8 | 8.4 | 7.3 | |||||||||
Applications | 8.5 | 8.9 | 7.8 | |||||||||
IT services | 2.8 | 2.8 | 2.6 | |||||||||
Asia Pacific Japan (APJ) | ||||||||||||
Total IT | 5.9 | 5.9 | 2.5 | |||||||||
Packaged software | 4.5 | 4.9 | 8.0 | |||||||||
Applications | 5.6 | 5.1 | 7.7 | |||||||||
IT services | 5.3 | 4.6 | 4.6 |
e = estimate, p = projection
Source: IDC Worldwide Black Book Pivot V3.1, 2015
Impact on SAP
SAP expects to outperform the global economy and the IT industry again in 20152016 in terms of revenue growth. The last years
Our 2015 results validate our strategy of growth momentum underscore our leadership ininnovating across the transformation ofcore, the industry.
In 2014, we delivered on our Run Simple strategycloud, and business networks to help our customers transform their businesses. SAP’s strong growthbecome true digital enterprises.
Our innovation cycle for SAP S/4HANA is driven by the SAP HANA platform, the broadest cloud portfolio,well underway and the largest business networkcompleteness of our vision in the world.cloud has distinguished SAP powersfrom both legacy players and point solution providers. We have beaten our guidance for 2015 on cloud and software as well as on operating income.
In 2015, we have transformed our Company and made it leaner by shifting investments from non-core activities to strategic growth areas enabling us to capture the clear path to growth for businessesopportunities in the 21st century: run real time, run networked, Run Simple. We will continue to push relentlessly toward a much more predictable business model, in parallel we will further expand our core business and at the same time we will continue to expand our operating profit.market.
We are well-positioned for the future as reflected in the increase of our ambition for 2017.
We plan to continue to invest in countries in which we expect significant growth, helping us reach our ambitious 2016 outlook targets and thereforemedium-term aspirations for 2017 and 2020.
We are confident we can achieve our medium-term targets for 2017 and 2020, assuming that the economic
environment and IT industry develop as currently forecasted. Balanced in terms of regions as well as industries, we are well-positioned with our product offering to offset smaller individual fluctuations in the global economy and IT market.
The significantly more volatile market environment challenges also SAP to reach its ambitious targets. Our market and the demands of our customers are changing rapidly. We anticipated these changes early and positioned ourselves strategically. A comparison of our business outlook with forecasts for the global economy and IT industry shows that we can be successful even in a tough economic environment and will further strengthen our position as the market leader of enterprise application software.
We plan to continue to invest in countries in which we expect significant growth. Such countries include Brazil, China, India, Russia, as well as countries in the Middle East and Africa. We therefore expect to see further future growth potential not only regionally but also with our
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broad product offering helping us reach our ambitious 2015 outlook targets and medium-term aspirations for 2017 and 2020.
Operational Targets for 20152016 (Non-IFRS)
Changes to Income Statement Structure
As outlined in the Service and Support section in this report, we have started to combine several of our services under our SAP ONE Service approach. In aligning our financial reporting with this change, starting in 2015, we are combining the revenue from premium support services with the revenue from professional services and other services in a new services revenue line item in our income statement. Until 2014, revenues from premium support services were classified as support revenues. Simultaneously with this change, we are simplifying and clarifying the labeling of several line items in our income statement. This includes renaming the previous revenue subtotal labeled software and support (which included premium support revenues) to software licenses and support (which no longer includes premium support revenues). The previous revenue subtotal labeled software and software-related service revenue is renamed cloud and software and accordingly no longer includes premium support revenue, which is now reclassified under the new services revenue line item. The two revenue line items, cloud subscriptions and support and total revenue are not affected by any of these changes and remain unaltered.
Our outlook for 2015 and beyond as outlined below is based on this modified income statement.
Revenue and Operating Profit Outlook
We are providing the following outlook for the full year 2015:full-year 2016:
– | Based on the continued strong momentum in SAP’s cloud business the Company expects full year 2016 non-IFRS cloud subscriptions and support revenue to be in a range of€2.95 billion to€3.05 billion at constant currencies (2015:€2.30 billion). The upper end of this range represents a growth rate of 33% at constant currencies. |
– | SAP expects full year 2016 non-IFRS cloud and software revenue to increase by 6% to 8% at constant currencies (2015:€17.23 billion). |
– | SAP expects full-year 2016 non-IFRS operating profit to be in a range of€6.4 billion to€6.7 billion at constant currencies (2015:€6.35 billion). |
We expect our headcount to experience an increase similar to the increase in 2015.
SAP expects full-year 2015 non-IFRS cloud subscriptions and support revenue to be in a range of €1.95 billion to €2.05 billion at constant currencies (2014: €1.10 billion). The upper end of this range represents a growth rate of 86% at constant currencies. Concur and Fieldglass are expected to contribute approximately 50 percentage points to this growth.
SAP expects full year 2015 non-IFRS cloud and software revenue to increase by 8% to 10% at constant currencies (2014: €14.33 billion).
SAP expects full-year 2015 non-IFRS operating profit to be in a range of €5.6 billion to €5.9 billion at constant currencies (2014: €5.64 billion).
While our full-year 20152016 business outlook is at constant currencies, actual currency reported figures are expected to continue to be impacted by currency exchange rate fluctuations. In January 2015, we disclosed that if exchange rates remain at the December 2014 closing rates for the rest of the year 2015, the Company expects thenon-IFRS cloud and software revenue growth rate to experience a currency benefit of approximately two percentage points and thenon-IFRS operating profit growth rate at actual currencies to experience a currency benefit of approximately one percentage point for thefull-year 2015. In March 2015, we updated this estimate by disclosing if exchange rates remain at the closing rates of March 6, 2015, the Company expects non-IFRS cloud and software revenue and non-IFRS operating profit growth rates at actual currency to experience a positive currency impact of approximately 12 percentage points and 17 percentage points respectively for the first quarter of 2015 and a positive currency effect of approximately 11 percentage points and 14 percentage points respectively for the full year 2015.
We expect that non-IFRS total revenue will continue to depend largely on the revenue from cloud and software.
However, the revenue growth we expect from this is below the outlook provided for non-IFRS cloud subscriptions and support revenue.
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We expect that most of the total revenue growth (non-IFRS) will come from the Applications, Technology, and Services segment, equally distributed into software licenses and support revenue growth and cloud subscriptions and support revenue growth. Nevertheless, we anticipate our SAP Business Network segment will outpace the Applications, Technology, and Services segment with a significantly higher total revenue growth rate at lower absolute levels. As such, we expect we will seize a huge market opportunity with continued strong mid- and long-term growth potential.
We continuously strive for profit expansion in all our segments, therefore, we expect an increase in both segments’ profits. The vast majority of the profit expansion comes from our Applications, Technology, and Services segment. Overall, in the SAP Business Network segment, operating profit growth is higher than in the Applications, Technology, and Services segment, but at significantly lower volume.
Across all segments we expect our 2016 non-IFRS cloud subscriptions and support gross margin to be at least stable or to slightly increase compared to 2015. For SAP’s managed-cloud offerings, we still expect negative margins in 2016 which by 2017 are expected to break even.
The following table shows the estimates of the items that represent the differences between our non-IFRS financial measures and our IFRS financial measures.
Non-IFRS Measures
€ millions | Estimated Amounts for | Actual Amounts for | ||||||
Revenue adjustments | < 20 | |||||||
Share-based payment expenses | ||||||||
Acquisition-related charges | ||||||||
Restructuring |
In 2014, we incurred an expense of €309 millionWe do not expect any Company-wide restructuring programs in connection with the TomorrowNow und Versata lawsuits. Versata and SAP have entered into a patent license and settlement agreement in Q3 2014.2016.
The companyCompany expects a full-year 20152016 effective tax rate (IFRS) of 25.0%22.5% to 26.0% (2014: 24.7%23.5% (2015: 23.4%) and an effective tax rate (non-IFRS) of 26.5%24.5% to 27.5% (2014:25.5% (2015: 26.1%).
Goals for Liquidity and Finance
On December 31, 2014,2015, we had a negative net liquidity. We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our present operating financing needs also in 20152016 and, together with expected cash flows from operations, will support debt repayments and our currently planned capital expenditure requirements over the near term and medium term.
In 2016, we expect a positive development of our operating cash flow mainly due to lower restructuring related payments.
We intend to repay a US$300600 million U.S. private placement and a €550 million Eurobond when they matureit matures in October and November 2015, respectively. Furthermore,June. Additionally, we are planning to further repay a substantial amount of our outstanding€1.25 billion bank loans and refinance another part through the debt capital markets. loan.
By the time of this report, we have no concrete plans for future share buybacks.
Based on this planning, at this point in time we expect we will noticeably reduce our net debt in 2016 and gradually return to a positive net liquidity in subsequent years.
Investment Goals
Our planned capital expenditures for 20152016 and 2016,2017, other than from business combinations, mainly comprise the construction activities described in Item“Item 4. Information About SAP – Description of Property – Capital Expenditures.Expenditures”. We expect investments from these activities of approximately €170€450 million during the next two years. These investments can be covered in full by operating cash flow.
SAP does not plan any significant acquisitions in 2016 and 2017 but will rather focus on organic growth.
Proposed Dividend
Until now,We intend to continue our dividend policy has been to distribute more than 30% of profit after tax in dividend. In practice however, the payout has been greater than 35% of profit after tax in all recent years. We are therefore amending our policy,2017 as well, which from now on will beis to pay a dividend totaling more than 35% of the prior year’s profit after tax.
Premises on Which Our Outlook Is Based
In preparing our outlook guidance, we have taken into account all events known to us at the time we prepared this report that could influence SAP’s business going forward.
Among the premises on which this outlook is based are those presented concerning economic development and the assumption that there will be no effects from a major acquisition.acquisitions in 2016 and 2017.
Medium-Term Prospects
In this section, all discussion of the medium-term prospects is based exclusively on non-IFRS measures.
SAP expectsWe expect to grow itsour more predictable revenue business while steadily increasing operating profit. Our strategic objectives are focused primarily on the following financial and non-financial objectives: growth, profitability, customer loyalty, and employee engagement.
Looking beyondWe are raising our 2017 ambition compared to our outlook previously communicated in 2015 to reflect both the current exchange rate environment and our excellent business momentum.
Assuming a stable exchange rate environment going forward, SAP updated its ambition for 2017. We continue to expect fast growth in our cloud business, withnow expects non-IFRS cloud subscriptions and support revenue reachingin a range between €3.5of€3.8 billion to €3.6€4.0 billion in 2017. TotalThe upper end of this range represents a 2015 to 2017 compound annual growth rate (CAGR) of 32%. Non-IFRS total revenue is expected to reach €21be in a range of€23.0 billion to €22 billion and operating profit is expected to be between €6.3 billion and €7.0€23.5 billion in 2017.
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The changesWe continue to the 2017 goals reflect the impact of the Concur acquisition and anticipated faster customer adoption of SAP’s managed cloud offering. SAP also anticipatesanticipate that itsthe fast-growing cloud business along with growth in support revenue will drive a higher share of more predictable revenue. Given the current software license revenue withmomentum, we now expect the total of cloud subscriptions and support revenue and software support revenue reachingto be in a range of 63% to 65% to 70% of total revenue in 2017 (2014: 57%).2017.
By 2017, SAP’swe continue to expect the rapidly growing cloud subscriptions and support revenue is expected to be close to software license revenue – and isthey are expected to exceed software licenseslicense revenue in 2018. At that time, SAP expects to reach a scale in its cloud business that will clear the way for accelerated operating profit expansion.
SAP also hasIn 2015, we communicated our long term, high-level ambitions for the year 2020. We are not adjusting this long-term ambition at this time. Thus, we continue to strive for reaching the following by 2020:
– | €7.5 billion to€8.0 billion non-IFRS cloud subscriptions and support revenue |
– | €26 billion to€28 billion non-IFRS total revenue |
– | €8.0 billion to€9.0 billion non-IFRS operating profit |
– | 70% to 75% share of more predictable revenue (defined as the total of cloud subscriptions and support revenue and software support revenue) |
By 2020, withwe expect our business network offering to generate the largest portion of the cloud subscriptions and support revenue. The share of this portion of revenue is expected to be followed by our public cloud offerings. Both of these offerings are expected to each generate, in 2020, cloud subscriptions and support revenue expected to reach €7.5 billion to €8.0 billion. Total revenue is expected to be between €26 billion and €28 billion and operating profit is expected to be in a range of €8 billion to €9 billion in 2020. We expectrevenues that are significantly higher than the share of more predictable revenue to grow further, with the total of cloud subscriptions and support revenue and software support revenue reaching between 70% and 75%generated from our private cloud offerings.
We also strive for significantly improving, over the next few years, the profitability of total revenue in 2020. To realizeour cloud business. We expect that the expected increase in operating profit, until 2020 SAP aims to grow gross profit fromflat or slightly increasing cloud subscriptions and support (defined asmargin development in 2016 will be followed by further margin increases in the difference betweenfollowing years until we reach our envisioned long-term cloud subscriptionsubscriptions and support revenue andmargin targets in 2020. These will continue to increase at different rates: We expect the respective cost of revenue) by a compound annual growth rate ofgross margin from our public cloud to reach approximately 40% on the 2014 figure. This growth80% (2015: approximately 70%) in 2020. Likewise, we expect our business network gross margin to reach approximately 80% (2015: approximately 75%) in 2020. The gross margin for our private cloud is expected to resultbreak even in 2016 and reach about 40% in 2020.
In a mature state of our cloud subscription and support gross margin; in other words, the gross margin derived frombusiness, we expect that approximately 80% of the cloud subscription business will be generated from existing contracts and support gross profittheir renewals and approximately 20% from new business. This is compared to approximately 60% from existing contracts and renewals and 40% from new business in the fast-growth phase of our cloud business.
We also communicated in 2015 that is approximately 9 percentage points higher in 2020 than in 2014 (2014: 64%). Inwe aim at further improving the same period,profitability of our on-premise software
business. It is our target, isfrom that point in time, to grow, until 2020, our gross profit from software licenses and support by a compound annual growth rate of approximately 3%, leading to an improvement in the software licenses and support gross margin of approximately 2 percentage points (2014: 86%).
SAP anticipates that the gross margins of the various cloud business models will continue to differ significantly in the long term. While the gross margin from public cloud subscriptions and from the business network are both expected to reach approximately 80% long term, we anticipate that in the long-term, gross margin on managed cloud offerings will be about 40%. In addition,
based on subscription bookings, we expect, once our cloud business has achieved a mature state, approximately 80% of the cloud subscription business will be generated from existing contracts and their renewals (2014: approximately 60%) and approximately 20% from new business (2014: approximately 40%).points.
Non-Financial Goals 20152016
In addition to our financial goals, we also focus on two non-financial targets: customer loyalty and employee engagement.
We believe it is essential that our employees are engaged, drive our success, and support our strategy. Therefore, weWe remain committed to increasing ourachieving an 82% employee engagement index score to 82% by 2015 (2014: 79%in 2016 (2015: 81%).
Further, our customers’ satisfaction with the solutions we offer is very important to us. We want our customers to not only to be satisfied, but also to see us as a trusted partner for innovation. We measure this customer loyalty metric using the Customer Net Promoter Score (NPS). For 2015,2016, we aim to achieve a combined (on-premise and cloud)Customer NPS score of 24%25% (2015: 22.4%).
Our financial and non-financial goals affirm our commitment to innovation and sustainability, and will help us deliver on our vision 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 apply our Run Simple operating principle to help our customers run their businesses better and master complexity, which is the most intractable challenge businesses face today. We do this by delivering technology innovations that we believe address the challenges of today and tomorrow without disrupting our customers’ business operations.
Part I
Item 6
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
The current members of the Supervisory Board of SAP SE, each member’s principal occupation, the year in which each was first elected and the year in which the term of each expires, respectively, are as follows:
Name | Age | Principal Occupation | Year First Elected | Year Term Expires | ||||||||||
Prof. Dr. h.c. mult. Hasso Plattner, Chairman(1)(2)(5)(6)(9)(10) | 71 | Chairman of the Supervisory Board | 2003 | 2019 | ||||||||||
Pekka Ala-Pietilä(1)(5)(6)(9) | 58 | Chairman of the Board of Directors, SolidiumOy | 2002 | 2019 | ||||||||||
Prof. Anja Feldmann(1)(5)(10) | 49 | Professor at the Electrical Engineering and Computer Science Faculty at the Technische Universität Berlin | 2012 | 2019 | ||||||||||
Prof. Dr. Wilhelm Haarmann(1)(2)(4)(9)(10) | 64 | Attorney at Law, Certified Public Auditor and Certified Tax Advisor; Linklaters LLP, Rechtsanwälte, Notare, Steuerberater | 1988 | 2019 | ||||||||||
Bernard Liautaud(1)(2)(5)(6) | 52 | General Partner, Balderton Capital | 2008 | 2019 | ||||||||||
Dr. h.c. Hartmut Mehdorn(1)(4)(10) | 72 | CEO of FBB, Flughafen Berlin-Brandenburg GmbH | 1998 | 2019 | ||||||||||
Dr. Erhard Schipporeit(1)(3)(8)(9) | 66 | Independent Management Consultant | 2005 | 2019 | ||||||||||
Jim Hagemann Snabe(1)(2)(4) | 48 | Managing Director of Snabe ApS | 2014 | 2019 | ||||||||||
Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer(1)(3) |
| 70 |
| Managing Director of Dr. Klaus Wucherer Innovations- und Technologieberatung GmbH | 2007 | 2019 | ||||||||
Christiane Kuntz-Mayr, Vice Chairperson(2)(7)(10) | 52 | Employee, Development Manager | 2009 | 2015 | ||||||||||
Panagiotis Bissiritsas(2)(4)(7) | 46 | Employee, Support Expert | 2007 | 2015 | ||||||||||
Catherine Bordelon(7)(10) | 54 | Deputy Secretary of the French Works Council | 2014 | 2015 | ||||||||||
Margret Klein-Magar(2)(5)(7)(9) | 50 | Employee, Vice President Head of People Principles | 2012 | 2015 | ||||||||||
Lars Lamadé(2)(7)(9)(10) | 43 | Employee, Project Manager OPD COO | 2002 | 2015 | ||||||||||
Steffen Leskovar(3)(5)(7) | 43 | Resource Manager | 2014 | 2015 | ||||||||||
Dr. Kurt Reiner(4)(5)(7) | 56 | Employee, Development Expert | 2012 | 2015 | ||||||||||
Mario Rosa-Bian(4)(7)(10) | 58 | Employee, Project Principal Consultant | 2012 | 2015 | ||||||||||
Stefan Schulz(3)(5)(7) | 45 | Employee, Vice President, IP at HANA Enterprise Cloud | 2002 | 2015 |
Name | Age | Principal Occupation | Year First Elected | Year Term Expires | ||||||||||
Prof. Dr. h.c. mult. Hasso Plattner, Chairman(1)(2)(5)(6)(9)(10) | �� | 72 | Chairman of the Supervisory Board | 2003 | 2019 | |||||||||
Pekka Ala-Pietilä(1)(4)(5)(6)(9) | 59 | Chairman of the Board of Directors, Solidium Oy | 2002 | 2019 | ||||||||||
Prof. Anja Feldmann(1)(5)(10) | 50 | Professor at the Electrical Engineering and Computer Science Faculty at the Technische Universität Berlin | 2012 | 2019 | ||||||||||
Prof. Dr. Wilhelm Haarmann(1)(2)(4)(9)(10) | 65 | Attorney at Law, Certified Public Auditor and Certified Tax Advisor; Linklaters LLP, Rechtsanwälte, Notare, Steuerberater | 1988 | 2019 | ||||||||||
Prof. Dr. Gesche Joost(1)(5)(10) | 41 | Professor for Design Research and Head of the Design Research Lab, University of Arts Berlin | 2015 | 2016 | ||||||||||
Bernard Liautaud(1)(2)(5)(6) | 53 | General Partner, Balderton Capital | 2008 | 2019 | ||||||||||
Dr. Erhard Schipporeit(1)(3)(8)(9) | 67 | Independent Management Consultant | 2005 | 2019 | ||||||||||
Jim Hagemann Snabe(1)(2)(4) | 49 | Supervisory Board Member | 2014 | 2019 | ||||||||||
Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer(1)(3) | 71 | Managing Director of Dr. Klaus Wucherer Innovations- und Technologieberatung GmbH | 2007 | 2019 | ||||||||||
Margret Klein-Magar, Vice Chairperson(2)(4)(5)(7) | 51 | Employee, Vice President Head of People Principles | 2012 | 2019 | ||||||||||
Panagiotis Bissiritsas(3)(4)(5)(7) | 47 | Employee, Support Expert | 2007 | 2019 | ||||||||||
Martin Duffek(3)(7)(10) | 40 | Employee, Product Manager | 2015 | 2019 | ||||||||||
Andreas Hahn(2)(5)(7) | 45 | Employee, Product Expert, Industry Standards & Open Source | 2015 | 2019 | ||||||||||
Lars Lamadé(2)(7)(9)(10) | 44 | Employee, Head of Customer & Events GSS COO | 2002 | 2019 | ||||||||||
Christine Regitz(5)(7)(10) | 50 | Employee, Vice President User Experience, Chief Product Expert | 2015 | 2019 | ||||||||||
Robert Schuschnig-Fowler(7)(10) | 56 | Employee, Account Manager, Senior Support Engineer | 2015 | 2019 | ||||||||||
Dr. Sebastian Sick(2)(4)(7)(9) | 43 | Head of Company Law Unit, Hans Boeckler Foundation | 2015 | 2019 | ||||||||||
Pierre Thiollet(5)(7) | 54 | Employee, Webmaster | 2015 | 2019 |
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Part I
Item 6
(1) Elected by SAP SE’s shareholders on May 20, 2015.
(2) Member of the General and Compensation Committee.
(3) Member of the Audit Committee.
(4) Member of the Finance and Investment Committee.
(5) Member of the Technology and Strategy Committee.
(6) Member of the Nomination Committee.
(7) Appointed by the SAP SE Works Council Europe on May 6, 2015.
(8) Audit Committee financial expert.
(9) Member of the Special Committee.
(10) Member of the People and Organization Committee
For detailed information on the Supervisory Board committees and their tasks, including the Audit Committee and the General and Compensation Committee, please refer to “Item 10 Additional Information – Corporate Governance.”
Pursuant to the Articles of Incorporation of SAP SE and the Agreement on the Involvement of Employees in SAP SE, members of the Supervisory Board of SAP SE consist of nine representatives of the shareholders and nine representatives of the European employees. The current nine employees’ representatives were appointed inby the Agreement on the Involvement of Employees in SAP SE (“Employee Involvement Agreement”, or “EIA”).Works Council Europe on May 6, 2015.
Certain current members of the Supervisory Board of SAP SE were members of supervisory boards and comparable governing bodies of enterprises other than SAP SE in Germany and other countries as of December 31, 2014.2015. See Note (30)(29) to our Consolidated Financial Statements for more detail. Apart from pension obligations for employees, SAP SE has not entered into contracts with any member of the Supervisory Board that provide for benefits upon a termination of the employment or service of the member.
The current members of the Executive Board, the year in which each member was first appointed and the year in which the term of each expires, respectively, are as follows:
Name | Year First Appointed | Year Current Term Expires | Year First Appointed | Year Current Term Expires | ||||||||||||
Bill McDermott, CEO | 2008 | 2017 | 2008 | 2021 | ||||||||||||
Robert Enslin | 2014 | 2017 | 2014 | 2021 | ||||||||||||
Michael Kleinemeier | 2015 | 2018 | ||||||||||||||
Bernd Leukert | 2014 | 2017 | 2014 | 2021 | ||||||||||||
Luka Mucic | 2014 | 2017 | 2014 | 2021 | ||||||||||||
Gerhard Oswald | 1996 | 2016 | 1996 | 2016 |
The following changes occurred in the Executive Board in 2014:
2015:
On May 4, 2014,October 8, 2015, the SAP Supervisory Board appointed Robert Enslin and Bernd LeukertMichael Kleinemeier to the SAP Executive Board, with immediate effect.
On May 4, 2014, Vishal Sikka stepped down from the Executive Board.
On May 21, 2014, Jim Hagemann Snabe stepped down from the Executive Board.
On Julyeffective November 1, 2014, Luka Mucic succeeded Werner Brandt as Chief Financial Officer, who withdrew, as planned, from the Executive Board.2015.
A description of the management responsibilities and backgrounds of the current members of the Executive Board are as follows:
Bill McDermott, CEO (Vorstandssprecher), 5354 years old, holds a master’s degree in business administration. He joined SAP in 2002 and became a member of its Executive Board on July 1, 2008. On February 7, 2010 he
became Co-CEO alongside Jim Hagemann Snabe and when Jim Hagemann Snabe concluded his current role as Co-CEO in May 2014, Bill McDermott became sole CEO. Besides the duties asAs CEO he is responsibleleading SAP with organizational responsibility for strategy, governance, business development, corporate development, communications, marketing and marketing.internal audit. In addition he assumed responsibility for human resources and is the Labor Relations Director. With the acquisition of Concur, he is also responsible for SAP’s Business Network. He represents SAP as a member of the European Roundtable of Chief Executive Officers, the U.S. Business Council and the World Economic Forum. Prior to joining SAP, he served as a global executive in several technology companies.
Robert Enslin, 5253 years old, holds diplomas in data science as well as computer science and data management. He joined SAP in 1992 and became a member of the Executive Board in May 2014. He is president of Global Customer Operations and is responsible for global go-to-market efforts, cloud andsales, industry & line of business (LoB) solutions sales, regionalservices sales, andsales operations specialized industry sales, ecosystem and channels as well as end-to-end customer experience.the Global Customer Office. Before joining SAP, Robert Enslin spent 11 years in various roles in the IT industry.
Michael Kleinemeier, 59 years old, holds a degree in commercial management from the University of Paderborn. He first joined SAP in 1989 and became a member of the Executive Board in November 2015. He leads the Global Service & Support organization including global consulting delivery, all global and regional support and premium engagement functions, maintenance go-to-market, global user groups, and mobile services.
Bernd Leukert,, 47 48 years old, holds a master’s degree in business administration.administration with an emphasis on engineering and information technology. He joined SAP in 1994 and became a member of the Executive Board in May 2014. HeAs SAP’s Chief Technology Officer he is responsible for the board area Products & Innovation including the global development organization, including analytics, applications,innovation & cloud database & technology, quality governance & production,delivery, product strategy, development services, and mobile as well as joint leadership of SAP Labs Network with Gerhard Oswald.Global Security. In addition, Bernd Leukert heads strategic innovation initiatives at SAP and is responsible for leading design and user experience for SAP.
Luka Mucic,, 43 44 years old, holds master’s degrees in law and business administration. He joined SAP in 1996 and became Chief Financial Officer (CFO), Chief Operating Officer (COO) and a member of the Executive Board in July 2014. He is
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responsible for finance and administration including investor relations and data protection and privacy. In addition, as the company’s COO, Luka Mucic is responsible for the Process Office of the company.company and for Business Innovation & IT.
Gerhard Oswald,, 61 62 years old, economics graduate. Gerhard Oswald joined SAP in 1981 and became a member of the Executive Board in 1996. He is responsible for the Board Area Global Serviceboard area Product Quality & SupportEnablement covering SAP Active Global Support, Professional Services, Solutionquality governance & Knowledge Packaging, as well as joint leadership of SAP Labs Network with Bernd Leukert. In addition Gerhard Oswald is responsible for Cloud Deliveryvalidation, scale, enablement & transformation, logistics services, and Services, and operations of the new SAP Cloud powered by HANA.special tasks.
The members of the Executive Board of SAP SE as of December 31, 20142015 that are members on other supervisory boards and comparable governing bodies of enterprises, other than SAP, in Germany and other countries, are set forth in Note (30)(29) to our Consolidated Financial Statements. SAP SE has not entered into contracts with any member of the Executive Board that provide for benefits upon a termination of the employment of service of the member, apart from pensions, benefits payable in the event of an early termination of service, and abstention compensation for the postcontractualnon-compete noncompete period.
To our knowledge, there are no family relationships among the Supervisory Board and Executive Board members.
Compensation for Executive and Supervisory Board Members
This compensation report outlines the criteria that we applied for the year 20142015 to determine compensation for Executive Board and Supervisory Board members, discloses the amount of compensation paid, and describes the compensation systems. It also contains information aboutshare-based payment plans for Executive Board members, shares held by Executive Board and Supervisory Board members, and the directors’ dealings required to be disclosed in accordance with the German Securities Trading Act.
Compensation for Executive Board Members
Compensation System for 20142015
The compensation for 20142015 for Executive Board members is intended to reflect SAP’s company size and global presence as well as our economic and financial standing. The compensation level is internationally competitive to reward committed, successful work in a dynamic business environment.
The Executive Board compensation package is performance-based. It has three elements:
– | A fixed annual salary element |
– | A variable short-term incentive (STI) element to reward performance in the plan year |
– | A variable long-term incentive (LTI) element tied to the price of SAP shares to reward performance over multiple years |
A fixed annual salary element
A variable short-term incentive (STI) element to reward performance in the plan year
A variable long-term incentive (LTI) element tied to the price of SAP shares to reward performance over multiple years
The Supervisory Board setsets a compensation target for the sum of the fixed and the variable elements. It reviews, and if appropriate, revises, this compensation target every year. The review takes into account SAP’s business performance and the compensation paid to board members at comparable companies on the international stage. The amount of variable compensation depends on SAP’s performance against performance targets that the Supervisory Board sets for each plan year. The performance targets are key performance indicator (KPI) values aligned to the SAP budget for the plan year.
The following criteria apply to the elements of Executive Board compensation for 2014:2015:
The fixed annual salary element is paid as a monthly salary.
The variable STI element was determined under the STI 2014 plan. Under this plan, the STI compensation depends on the SAP Group’s performance against the predefined target values for three KPIs: non-IFRS constant currency software and software-related services growth, non-IFRS constant currency operating margin increase, and non-IFRS constant currency new and upsell bookings. In addition, the STI 2014 plan provides for a discretionary
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Item 6
– | The fixed annual salary element is paid as a monthly salary. |
– | The variable STI element was determined under the STI 2015 plan. Under this plan, the STI compensation depends on the SAP Group’s performance against the predefined target values for three KPIs: non-IFRS constant currency cloud and software growth; non-IFRS constant currency operating margin increase; and non-IFRS constant currency new and upsell bookings. In addition, the STI 2015 plan provides for a discretionary element that allows the Supervisory Board, after the end of the fiscal year |
Moreover, if there has been any extraordinary and unforeseeable event, the Supervisory Board can, at its reasonable discretion, retroactively adjust payouts up or down in the interest of SAP. For 2014, this discretion was applied.
On February 18, 2016, the Supervisory Board assessed SAP’s performance against the agreed targets and determined the amount of compensation payable under the STI 2015 plan. The STI 2015 plan pays out after the Annual General Meeting of Shareholders in May 2016.
– | The variable LTI element was determined under the RSU Milestone Plan 2015. “RSU” stands for “restricted share unit.” This originally four-year plan was established in 2012 and focuses on the SAP share price and on certain objectives derived from our Company strategy for the years through 2015. For each of the four years, the members of the Executive Board are allocated a certain number of RSUs for the respective year based on a budget amount that was granted to each Executive Board member in 2012 already for each of the years 2012 through 2015. The number of RSUs allocated to each member for a given year is their target amount (an amount in euros) for |
that year divided by the SAP share price over a reference period (defined in the RSU Milestone Plan 2015 terms) at the beginning of the respective year. The number of RSUs an Executive Board member actually earns in respect of a given year depends on the Company performance against the |
The variable LTI element was determined under the RSU Milestone Plan 2015. “RSU” stands for “restricted share unit.” This originally four-year plan was established in 2012 and focuses on the SAP share price and on certain objectives derived from our Company strategy for the years through 2015. For each of the four years, the members of the Executive Board are allocated a certain number of RSUs for the respective year based on a budget amount that was granted to each Executive Board member in 2012 already for each of the years 2012 through 2015. The number of RSUs allocated to each member for a given year is his or her target amount (an amount in euros) for that year divided by the SAP share price over a reference period (defined in the RSU Milestone Plan 2015 terms) at the beginning of the respective year.
The number of RSUs an Executive Board member actually earns in respect of a given year depends on the Company performance against the objectives for that year (a year is a “performance period” in the plan). The objectives derive from SAP’s strategy for the period to 2015. The plan objectives relate to two KPIs: non-IFRS total revenue and non-IFRS operating profit. The KPI targets have already been set for the entire life of the RSU Milestone Plan 2015 for the years 2012 to 2015. The original terms and conditions of the plan only allowed discretion to adjust those KPIs for predefined extraordinary events. In December 2014, the Supervisory Board adjusted the terms and conditions of the plan to allow more discretion to adjust the KPIs and/or the minimum performance levels embedded in the plan. The plan amendment may only be
exercised to preserve the fair and equitable nature of the plan in consideration of business developments that were not foreseeable when the LTI was implemented in 2012. In February 2014, the Supervisory Board modified the RSU Milestone Plan 2015 prospectively for 2014 and 2015 by eliminating the effects of exchange rate fluctuation on the underlying KPI targets. In February 2015, the Supervisory Board modified the RSU Milestone Plan 2015 and reduced the minimum performance level of the financial KPIs defined in the plan from 80% to 60%. In addition, the Supervisory Board also resolved to set new target values for those two financial KPIs for 2015 regarding this plan.
After the end of each fiscal year, the Supervisory Board assesses the Company’s performance against the objectives set for that year and determines the number of RSUs to be finally allocated to (and which then vest in)and vested in each Executive Board member. No RSUs vest if minimum performance levels of 60%, predefined for each of the two KPIs, are not achieved. There is also a cap:cap. Normally, the quantity of vested RSUs a member can attain in respect of a plan year is capped at 150% of his or hertheir initial RSU allocation for that year.
The Company strategy underlying the RSU Milestone Plan 2015 focuses on where SAP aimsaimed to be by the end of 2015, so the plan givesgave greater weight to performance against the KPI targets for 2015 (the final year of the plan) than against the targets for 2012 through 2014. AfterDue to the end of 2015,adjustment factor, the number of vested RSUs a member of the Executive Board actually receives for that year is revised. In circumstances where the targets for the individual years 2012 to 2014 were not achieved but the 2015 targets are achieved, the outcome of this revision would be that a member would receive as many vested RSUsreceived for 2015 as would make up for any that he or she did not receive in the earlier years by reason of failurehas been revised according to achieve targets. On the other hand, if the Company underachieves against the 2015 objectives, Executive Board members may, in a worst-case scenario, lose all of the vested RSUs allocated to them for 2015.plan terms.
All vested RSUs are subject to a three-year holding period. The holding period commences at the end of the year for which the RSUs were allocated. The amount an RSU eventually pays out depends on the SAP share price at the end of the holding period. A member who leaves the Executive Board before the end of the plan
Part I
Item 6
retains his or hertheir vested RSUs for completed plan years but does not retain any allocated but unvested RSUs for the year during which he or she leaves.they leave. If a member leaves the Executive Board before the beginning of the subsequent year, no RSUs are finally allocated.
Each vested RSU entitles its holder to a (gross) payout corresponding to the price of one SAP share after the end of the three-year holding period. The applicable share price is measured over a reference period defined in the RSU Milestone Plan 2015 terms.
For the terms and details of the RSU Milestone Plan 2015, see the Notes to Consolidated Financial Statements section, Note (28)(27). The number of RSUs issued initially issued to each member of the Executive Board under the RSU Milestone Plan 2015 for 20142015 was decided by the Supervisory Board on February 13, 2014.12, 2015. The number of RSUs allocated finally allocated to each member of the Executive Board under the RSU Milestone Plan 2015 for 20142015 was decideddetermined by the Supervisory Board on February 12, 2015.18, 2016.
The contracts of Executive Board members Bill McDermott and Robert Enslin require that
compensation payments are made in U.S. dollars. The contracts include clauses that determine the exchange rates for the translation of euro-denominated compensation into U.S. dollars.
Changes to Compensation System in 2016
As the RSU Milestone Plan 2015 expired at the end of 2015, the Supervisory Board developed a new LTI 2016 plan for the Executive Board effective January 1, 2016 with the first grant occurring in March 2016. The purpose of the LTI 2016 is to reflect the operating profit target achievement, to ensure long-term retention of our Executive Board members and to reward a share price outperformance by SAP as compared to a group of its peers (Peer Group).
The LTI 2016 is an annual revolving remuneration element that is linked to the price of the SAP share. A grant amount determined by the Supervisory Board is converted into virtual shares, referred to as Share Units, by dividing the grant amount by the price of the SAP share (calculated on the basis of a defined average value). The grant amount is determined by the Supervisory Board in its discretion for each financial year at a level of between 80% and 120% of the contractual target amount; taking into account the achievement of the operating profit targets set for the preceding financial year.
The Share Units granted comprise 40% Retention Share Units (RSUs) and 60% Performance Share Units (PSUs). Both types of Share Units have a vesting period of four years. Each share unit that finally vests entitles its holder to a (gross) payout corresponding to the price of one SAP share after the end of the four-year holding period, but capped at three times the SAP share price applied for the conversion of the grant amount into Share Units.
The number of PSUs, that finally vests depends on the performance of the SAP share. If the increase of price of the SAP share over the four-year vesting period of the PSUs exceeds the increase of a defined Peer Group Index over the same period, the number of PSUs will be increased by a percentage equal to the outperformance expressed as percentage points. This percentage will be doubled if, in addition to the outperformance over the Peer Group Index, the price of the SAP share at the end of the vesting period of the PSUs is higher than the price at the start of this period. The number of vested PSUs a member can attain in respect of a plan year is capped at 150% of their initial PSU allocation for that year. Conversely, if the increase of price of the SAP share over the four-year vesting period of the PSUs underperforms the Peer Group Index, the number of PSUs will be reduced by a percentage equal to the underperformance expressed as percentage points. No PSUs vest if the underperformance exceeds 50%.
Amount of Compensation for 20142015
We present separately Executive Board compensation disclosures under three different compensation disclosure approaches:
Compensation disclosures under a management view that follows the requirements of sections 314 and 315 of the German Commercial Code |
Compensation disclosures fully in accordance the requirements of sections 314 and 315 of the HGB as specified in GAS 17
Compensation disclosures in accordance with the recommendations of the German Corporate Governance Code (“Code”)
– | Compensation disclosures fully in accordance the requirements of sections 314 and 315 of the HGB as specified in GAS 17 |
– | Compensation disclosures in accordance with the recommendations of the German Corporate Governance Code (“Code”) |
I. Executive Board Members’ Compensation – Management View
Executive Board Members’ Compensation for 2015 – Management View
€ thousands | Fixed Elements | Performance- Related Element | Compensation for 2015 | |||||||||||||||||
Short-Term Incentive Element | Long-Term Incentive Element | |||||||||||||||||||
Salary | Other1) | STI | Share-Based Payment (RSU Milestone Plan 2015)2) | |||||||||||||||||
Bill McDermott (CEO) | 1,150.0 | 1,258.0 | 2,743.5 | 4,127.5 | 9,279.0 | |||||||||||||||
Robert Enslin | 700.0 | 103.3 | 1,660.5 | 1,480.6 | 3,944.4 | |||||||||||||||
Michael Kleinemeier (from November 1, 2015) | 116.7 | 0 | 277.5 | 315.0 | 709.2 | |||||||||||||||
Bernd Leukert | 700.0 | 11.7 | 1,660.5 | 1,480.6 | 3,852.8 | |||||||||||||||
Luka Mucic | 700.0 | 12.1 | 1,660.5 | 1,480.6 | 3,853.2 | |||||||||||||||
Gerhard Oswald | 700.0 | 22.4 | 1,660.5 | 1,480.6 | 3,863.5 | |||||||||||||||
Total | 4,066.7 | 1,407.5 | 9,663.0 | 10,364.9 | 25,502.1 |
Executive Board Members’ Compensation for 2014 – Management View
€ thousands | Fixed Elements | Performance- Related Element | Compensation for 2014(1) | |||||||||||||||||
Short-Term Incentive Element | Long-Term Incentive Element | |||||||||||||||||||
Salary | Other(1) | STI | Share-Based Payment (RSU Milestone Plan 2015)(2) | |||||||||||||||||
Bill McDermott (CEO) | 1,150.0 | 861.4 | 2,036.7 | 4,040.5 | 8,088.6 | |||||||||||||||
Jim Hagemann Snabe (co-CEO and member until May 21, 2014) | 448.8 | 2,647.1 | – | – | 3,095.9 | |||||||||||||||
Dr. Werner Brandt (until June 30, 2014) | 350.0 | 1,418.8 | – | – | 1,768.8 | |||||||||||||||
Robert Enslin (from May 4, 2014) | 462.9 | 121.0 | 817.3 | 939.4 | 2,340.6 | |||||||||||||||
Bernd Leukert (from May 4, 2014) | 462.9 | 12.2 | 817.3 | 939.4 | 2,231.8 | |||||||||||||||
Luka Mucic (from July 1, 2014) | 350.0 | 4.3 | 621.4 | 729.0 | 1,704.7 | |||||||||||||||
Gerhard Oswald | 700.0 | 22.0 | 1,232.7 | 1,449.4 | 3,404.1 | |||||||||||||||
Dr. Vishal Sikka (until May 4, 2014) | 291.7 | 1,367.5 | – | – | 1,659.2 | |||||||||||||||
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Total | 4,216.3 | 6,454.3 | 5,525.4 | 8,097.7 | 24,293.7 | |||||||||||||||
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Part I
€ thousands | Fixed Elements | Performance- Related Element | Compensation for 20141) | |||||||||||||||||
Short-Term Incentive Elements | Long-Term Incentive Element | |||||||||||||||||||
Salary | Other1) | STI | Share-Based Payment (RSU Milestone Plan 2015)2) | |||||||||||||||||
Bill McDermott (CEO) | 1,150.0 | 861.4 | 2,036.7 | 4,040.5 | 8,088.6 | |||||||||||||||
Jim Hagemann Snabe (co-CEO and member until May 21, 2014) | 448.8 | 2,647.1 | — | — | 3,095.9 | |||||||||||||||
Dr. Werner Brandt (until June 30, 2014) | 350.0 | 1,418.8 | — | — | 1,768.8 | |||||||||||||||
Robert Enslin (from May 4, 2014) | 462.9 | 121.0 | 817.3 | 939.4 | 2,340.6 | |||||||||||||||
Bernd Leukert (from May 4, 2014) | 462.9 | 12.2 | 817.3 | 939.4 | 2,231.8 | |||||||||||||||
Luka Mucic (from July 1, 2014) | 350.0 | 4.3 | 621.4 | 729.0 | 1,704.7 | |||||||||||||||
Gerhard Oswald | 700.0 | 22.0 | 1,232.7 | 1,449.4 | 3,404.1 | |||||||||||||||
Dr. Vishal Sikka (until May 4, 2014) | 291.7 | 1,367.5 | — | — | 1,659.2 | |||||||||||||||
Total | 4,216.3 | 6,454.3 | 5,525.4 | 8,097.7 | 24,293.7 |
Item 6
Executive Board Members’ Compensation1) Insurance contributions, benefits in kind, expenses for 2013 – Management Viewmaintenance of two households, non-recurring payments, use of aircraft, tax, cash disbursement of short-term and long-term incentive elements, and discrete payments arising through application of the fixed exchange-rate clause.
€ thousands | Fixed Elements | Performance- Related Element | Compensation for 2013(1) | |||||||||||||||||||||
Short-Term and Medium-Term Incentive Elements | Long-Term Incentive Element | |||||||||||||||||||||||
Salary | Other(1) | STI | MTI 2011 | Share-Based Payment (RSU Milestone Plan 2015)(2) | ||||||||||||||||||||
Bill McDermott (co-CEO) | 1,150.0 | 1,570.5 | 1,737.2 | 1,011.1 | 4,143.5 | 9,612.3 | ||||||||||||||||||
Jim Hagemann Snabe (co-CEO) | 1,150.0 | 6,082.9 | 1,737.2 | 1,011.1 | – | 9,981.2 | ||||||||||||||||||
Dr. Werner Brandt | 700.0 | 29.0 | 1,051.5 | 611.0 | 1,486.4 | 3,877.9 | ||||||||||||||||||
Lars Dalgaard (until May 31, 2013)(3) | 291.7 | 203.3 | 469.1 | – | – | 964.1 | ||||||||||||||||||
Luisa Deplazes Delgado (until June 30, 2013)(3) | 350.0 | 26.1 | 421.0 | – | – | 797.1 | ||||||||||||||||||
Gerhard Oswald | 700.0 | 17.0 | 1,051.5 | 611.0 | 1,486.4 | 3,865.9 | ||||||||||||||||||
Dr. Vishal Sikka | 700.0 | 383.6 | 1,051.5 | 611.0 | 1,486.4 | 4,232.5 | ||||||||||||||||||
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Total | 5,041.7 | 8,312.4 | 7,519.0 | 3,855.2 | 8,602.7 | 33,331.0 | ||||||||||||||||||
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Compensation attributable to Executive Board members for the respective year, including the respective year’s plan tranche of LTI 2015 based on |
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In 2012, the Executive Board members acting at that time already received all grants for the years 2012 to 2015 under the RSU Milestone Plan 2015. The Executive Board members appointed in 2014 received respective grants for the years 2014 and 2015 after their appointment. These grants, which are dependent on recipients’ uninterrupted tenure as Executive Board members in the respective years, are tied to the respective years and thus – from an economic perspective – represent compensation for the Executive Board members in the respective years. Accordingly, the share-based payment amounts in the tables above include in the 2014 and 2013 compensation the grants under the RSU Milestone Plan 2015 for the years 2014 and 2013 respectively although they were already granted in 2012. For the Executive Board members appointed in 2014, the 2014 compensation includes the RSU Milestone Plan 2015 awards granted for 2014 but excludes the awards granted in 2014 for 2015. Except for this allocation of share-based compensation awards to the fiscal years, the disclosures above comply with the sections 314 and 315 of HGB as specified in GAS 17.
Jim Hagemann Snabe resigned from the Executive Board with effect from May 21, 2014 (Annual General Meeting of Shareholders). To replace the payout for the RSUs granted to him in 2012 under the RSU Milestone Plan he was paid €6,485,800. Of that amount, the grant value at time of grant amounting to €4,318,400 was already included in his 2012 compensation. The remaining €2,167,400 was included in his 2013 compensation (see below) as it was granted to him in 2013. The RSUs granted to Mr. Snabe in 2013 were converted into a fixed payment of €3,768,300 which was included in 2013 compensation. To compensate for his 2014 RSUs, Mr. Snabe received a prorated payment of €1,700,000 in respect of the period he served in 2014 which is included in 2014 compensation. Both amounts were paid out after the close of the Annual General Meeting of Shareholders in May 2014.grant.
The share-based payment amounts included in the 20142015 and 20132014 compensation result from the following RSUs under the RSU Milestone Plan 2015.
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Grants for 2015 | ||||||||||||
Quantity | Grant Value per Unit at Time of Grant | Total Grant Value at Time of Grant | ||||||||||
€ | €thousands | |||||||||||
Bill McDermott (CEO) | 77,099 | 53.53 | 4,128 | |||||||||
Robert Enslin | 27,656 | 53.53 | 1,481 | |||||||||
Michael Kleinemeier (from November 1, 2015) | 4,622 | 68.16 | 315 | |||||||||
Bernd Leukert | 27,656 | 53.53 | 1,481 | |||||||||
Luka Mucic | 27,656 | 53.53 | 1,481 | |||||||||
Gerhard Oswald | 27,656 | 53.53 | 1,481 | |||||||||
Total | 192,345 | 10,365 |
Share-Based Payment Under RSU Milestone Plan 2015 (Grants for 2014)
Grants for 2014 | Grants for 2014 | |||||||||||||||||||||||
Quantity | Grant Value per Unit at Time of Grant | Total Grant Value at Time of Grant | Quantity | Grant Value per Unit at Time of Grant | Total Grant Value at Time of Grant | |||||||||||||||||||
€ | € thousands | € | € thousands | |||||||||||||||||||||
Bill McDermott (CEO) | 76,374 | 52.90 | 4,040.5 | 76,374 | 52.90 | 4,040.50 | ||||||||||||||||||
Dr. Werner Brandt (until June 30, 2014)(1) | – | – | – | |||||||||||||||||||||
Dr. Werner Brandt (until June 30, 2014)1) | — | — | — | |||||||||||||||||||||
Robert Enslin (from May 4, 2014) | 18,164 | 51.72 | 939.4 | 18,164 | 51.72 | 939.40 | ||||||||||||||||||
Bernd Leukert (from May 4, 2014) | 18,164 | 51.72 | 939.4 | 18,164 | 51.72 | 939.40 | ||||||||||||||||||
Luka Mucic (from July 1, 2014) | 13,811 | 52.78 | 729.0 | 13,811 | 52.78 | 729.00 | ||||||||||||||||||
Gerhard Oswald | 27,396 | 52.90 | 1,449.4 | 27,396 | 52.90 | 1,449.40 | ||||||||||||||||||
Dr. Vishal Sikka (until May 4, 2014)(1) | – | – | – | |||||||||||||||||||||
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Dr. Vishal Sikka (until May 4, 2014)1) | — | — | — | |||||||||||||||||||||
Total | 153,909 | 8,097.7 | 153,909 | 8,097.70 | ||||||||||||||||||||
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Share-Based Payment Under RSU Milestone Plan 2015 (Grants for 2013)
Grants for 2013 | ||||||||
Quantity | Total Grant Value at Time of Grant(1) | |||||||
€ thousands | ||||||||
Bill McDermott (co-CEO) | 73,289 | 4,143.5 | ||||||
Jim Hagemann Snabe (co-CEO)(2) | – | – | ||||||
Dr. Werner Brandt | 26,290 | 1,486.4 | ||||||
Lars Dalgaard (until May 31, 2013)(2) | – | – | ||||||
Luisa Deplazes Delgado (until June 30, 2013)(2) | – | – | ||||||
Gerhard Oswald | 26,290 | 1,486.4 | ||||||
Dr. Vishal Sikka | 26,290 | 1,486.4 | ||||||
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Total | 152,159 | 8,602.7 | ||||||
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1) The allocations for Werner Brandt (27,396 RSUs), and Vishal Sikka (27,396 RSUs) were forfeited at the end of their contracts. Consequently, they are not disclosed in the table above.
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II. Executive Board Members’ Compensation According to HGB and GAS 17
Under the compensation disclosure rules of the German HGB and GAS 17, share-based compensation awards are to be included in the compensation of the year of grant, even if the awards are tied to future years. Accordingly, and in contrast to, the compensation amounts disclosed under the management view above, the Executive Board compensation
amounts determined under HGB and GAS 17 for 20132014 and 2014;2015:
– | Exclude the share-based compensation awards granted to Executive Board members in 2012 for the years 2014 and 2015 as these were already included in the 2012 compensation |
– | Include in full the grants for 2014 and 2015 made to Executive Board members appointed in 2014, that is, also including the grant for 2015 |
– | Include the grant for 2015 made to Michael Kleinemeier who was appointed to the Executive Board in 2015 |
Including RSU Milestone Plan 2015 awards for 2015 granted in 2015 to Michael Kleinemeier (€263,200) upon his appointment to the Executive Board, members in 2012 for the years 2013 and 2014 as these were already included in the 2012 compensation
Include in full the grants for 2014 and 2015 made tototal Executive Board members appointed in 2014, that is, also includingcompensation for 2015 calculated as required under section 314 of the grant for 2015
Part I
Item 6
Including RSU Milestone Plan 2015 awards for 2014 and 2015 granted in 2014 to Robert Enslin (€(€1,574,800 for each of the two years),; Bernd Leukert (2014: €1,280,000;
€1,280,000; 2015: €1,574,800),€1,574,800); and Luka Mucic (2014: €1,141,000;€1,141,000; 2015: €1,574,800)€1,574,800) upon their appointment to the Executive Board, the total Executive Board compensation for 2014 calculated as required under section 314 of the German Commercial Code amounts to €23,216,200,€23,216,200, thereof: Bill McDermott €4,048,100;€4,048,100; Jim Hagemann Snabe €1,395,900;€1,395,900; Werner Brandt €1,768,800;€1,768,800; Robert Enslin €4,550,800;€4,550,800; Bernd Leukert €4,147,200;€4,147,200; Luka Mucic €3,691,500;€3,691,500; Gerhard Oswald €1,954,700;€1,954,700; and Vishal Sikka €1,659,200.€1,659,200.
Including RSU Milestone Plan 2015 awards for 2014 and 2015 granted in 2013 to Gerhard Oswald (€1,574,800 for each of the two years) upon the extension of his Executive Board contract, the total Executive Board compensation for 2013 calculated as required under section 314 of the German Commercial Code amounts to €24,109,600, thereof: Bill McDermott €5,468,800; Jim Hagemann Snabe €6,212,900; Werner Brandt €2,391,500; Lars Dalgaard €964,100; Luisa Deplazes Delgado €797,100; Gerhard Oswald €5,529,100; and Vishal Sikka €2,746,100.
All amounts as determined under HGB and GAS 17, other than share-based compensation, are identical to the amounts disclosed under the management view above.
III. Executive Board Members’ Compensation According to the Code
Pursuant to the recommendations of the Code, dated June 24, 2014, the value of benefits granted for the year under review as well as the allocation, that is the amounts disbursed for the year under review, are disclosed below based on the reference tables recommended in the Code.
In contrast to the disclosure rules stipulated in the German HGB and GAS 17, the Code includes the service cost according to IAS 19 in the Executive Board compensation and requires the additional disclosure of the target value for the one-year variable compensation and the maximum and minimum compensation amounts achievable for the variable compensation elements. However, due to the payouts under the RSU Milestone Plan 2015 not being capped, there is no disclosure to be made for the maximum variable compensation amount achievable (marked as “NA” in the table below).
German Corporate Governance Code (Benefits Granted in 20132014 and 2014)2015)
Benefits granted € thousands | Bill McDermott CEO | Jim Hagemann Snabe Co-CEO and Member of the Executive Board (until May 21, 2014) | Dr. Werner Brandt Member of the Executive Board (until June 30, 2014) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefits Granted | Bill McDermott CEO | Robert Enslin Member of the | Michael Kleinemeier Member of the (from November 1, 2015) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(1) | 2014 (Min) | 2014 (Max) | 2013(1) | 2014(2) | 2014 (Min) | 2014 (Max) | 2013 | 2014(2) | 2014 (Min) | 2014 (Max) | 2013 | 20151) | 2015 (Min) | 2015 (Max) | 20141) | 20151) | 2015 (Min) | 2015 (Max) | 20141) | 2015 | 2015 (Min) | 2015 (Max) | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed compensation | 1,150.0 | 1,150.0 | 1,150.0 | 1,150.0 | 2,148.8 | 2,148.8 | 2,148.8 | 1,150.0 | 1,138.0 | 1,138.0 | 1,138.0 | 700.0 | 1,150.0 | 1,150.0 | 1,150.0 | 1,150.0 | 700.0 | 700.0 | 700.0 | 462.9 | 116.7 | 116.7 | 116.7 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fringe benefits(3) | 861.4 | 861.4 | 861.4 | 1,570.5 | 228.6 | 228.6 | 228.6 | 147.2 | 68.0 | 68.0 | 68.0 | 29.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fringe benefits2) | 1,258.0 | 1,258.0 | 1,258.0 | 861.4 | 103.3 | 103.3 | 103.3 | 121.0 | 0 | 0 | 0 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 2,011.4 | 2,011.4 | 2,011.4 | 2,720.5 | 2,377.4 | 2,377.4 | 2,377.4 | 1,297.2 | 1,206.0 | 1,206.0 | 1,206.0 | 729.0 | 2,408.0 | 2,408.0 | 2,408.0 | 2,011.4 | 803.3 | 803.3 | 803.3 | 583.9 | 116.7 | 116.7 | 116.7 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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One-year variable compensation | 1,860.0 | 0 | 3,371.3 | 1,860.0 | 1,860.0 | 0 | 3,371.3 | 1,860.0 | 1,125.8 | 0 | 2,040.5 | 2,040.5 | 1,860.0 | 0 | 3,371.3 | 1,860.0 | 1,125.8 | 0 | 2,040.5 | 746.4 | 188.1 | 0 | 340.9 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Multi-year variable compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI HANA | – | – | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Multiyear variable compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU Milestone Plan 2015 | – | – | NA | – | – | – | NA | – | – | – | NA | – | — | 0 | NA | — | — | 0 | NA | 939.4 | 315.0 | 0 | NA | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | 3,871.4 | 2,011.4 | NA | 4,580.5 | 4,237.4 | 2,377.4 | NA | 3,157.2 | 2,331.8 | 1,206.0 | NA | 2,769.5 | 4,268.0 | 2,408.0 | NA | 3,871.4 | 1,929.1 | 803.3 | NA | 2,269.7 | 619.8 | 116.7 | NA | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Service cost | 646.8 | 646.8 | 646.8 | 698.4 | 117.9 | 117.9 | 117.9 | 282.9 | 0 | 0 | 0 | 0 | 682.4 | 682.4 | 682.4 | 646.8 | 308.0 | 308.0 | 308.0 | 148.1 | 0 | 0 | 0 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | 4,518.2 | 2,658.2 | NA | 5,278.9 | 4,355.3 | 2,495.3 | NA | 3,440.1 | 2,331.8 | 1,206.0 | NA | 2,769.5 | 4,950.4 | 3,090.4 | NA | 4,518.2 | 2,237.1 | 1,111.3 | NA | 2,417.8 | 619.8 | 116.7 | NA | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Part I
Item 6
Benefits granted € thousands | Robert Enslin Member of the Executive Board (from May 4, 2014) | Bernd Leukert Member of the Executive Board (from May 4, 2014) | Luka Mucic Member of the Executive Board (from July 1, 2014) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(1) | 2014 (Min) | 2014 (Max) | 2013(1) | 2014 | 2014 (Min) | 2014 (Max) | 2013 | 2014 | 2014 (Min) | 2014 (Max) | 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefits Granted | Bernd Leukert Member of the Executive | Luka Mucic Member of the Executive | Gerhard Oswald Member of the Executive | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2015 (Min) | 2015 (Max) | 2014 | 2015 | 2015 (Min) | 2015 (Max) | 2014 | 2015 | 2015 (Min) | 2015 (Max) | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed compensation | 462.9 | 462.9 | 462.9 | – | 462.9 | 462.9 | 462.9 | – | 350.0 | 350.0 | 350.0 | – | 700.0 | 700.0 | 700.0 | 462.9 | 700.0 | 700.0 | 700.0 | 350.0 | 700.0 | 700.0 | 700.0 | 700.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fringe benefits(3) | 121.0 | 121.0 | 121.0 | – | 12.2 | 12.2 | 12.2 | – | 4.3 | 4.3 | 4.3 | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fringe benefits2) | 11.7 | 11.7 | 11.7 | 12.2 | 12.1 | 12.1 | 12.1 | 4.3 | 22.4 | 22.4 | 22.4 | 22.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 583.9 | 583.9 | 583.9 | – | 475.1 | 475.1 | 475.1 | – | 354.3 | 354.3 | 354.3 | – | 711.7 | 711.7 | 711.7 | 475.1 | 712.1 | 712.1 | 712.1 | 354.3 | 722.4 | 722.4 | 722.4 | 722.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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One-year variable compensation | 746.4 | 0 | 1,352.9 | – | 746.4 | 0 | 1,352.9 | – | 567.5 | 0 | 1,028.6 | – | 1,125.8 | 0 | 2,040.5 | 746.4 | 1,125.8 | 0 | 2,040.5 | 567.5 | 1,125.8 | 0 | 2,040.5 | 1,125.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Multi-year variable compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTI HANA | – | – | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Multiyear variable compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU Milestone Plan 2015 | 939.4 | 0 | NA | – | 939.4 | 0 | NA | – | 729.0 | 0 | NA | – | — | 0 | NA | 939.4 | — | 0 | NA | 729.0 | — | 0 | NA | 1,449.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | 2,269.7 | 583.9 | NA | – | 2,160.9 | 475.1 | NA | – | 1,650.8 | 354.3 | NA | – | 1,837.5 | 711.7 | NA | 2,160.9 | 1,837.9 | 712.1 | NA | 1,650.8 | 1,848.2 | 722.4 | NA | 3,297.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Service cost | 148.1 | 148.1 | 148.1 | – | 0 | 0 | 0 | – | 0 | 0 | 0 | – | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | 2,417.8 | 732.0 | NA | – | 2,160.9 | 475.1 | NA | – | 1,650.8 | 354.3 | NA | – | 1,837.5 | 711.7 | NA | 2,160.9 | 1,837.9 | 712.1 | NA | 1,650.8 | 1,848.2 | 722.4 | NA | 3,297.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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1) The value of the fixed and one-year variable elements is subject to a contractual exchange-rate clause applied at the end of the year, so the amounts actually paid may be greater.
Benefits granted € thousands | Gerhard Oswald Member of the Executive Board | Dr. Vishal Sikka Member of the Executive Board (until May 4, 2014) | ||||||||||||||||||||||||||||||
2014 | 2014 (Min) | 2014 (Max) | 2013 | 2014(1) | 2014 (Min) | 2014 (Max) | 2013(1) | |||||||||||||||||||||||||
Fixed compensation | 700.0 | 700.0 | 700.0 | 700.0 | 291.7 | 291.7 | 291.7 | 700.0 | ||||||||||||||||||||||||
Fringe benefits(3) | 22.0 | 22.0 | 22.0 | 17.0 | 92.8 | 92.8 | 92.8 | 383.6 | ||||||||||||||||||||||||
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Total | 722.0 | 722.0 | 722.0 | 717.0 | 384.5 | 384.5 | 384.5 | 1,083.6 | ||||||||||||||||||||||||
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One-year variable compensation | 1,125.8 | 0 | 2,040.5 | 1,125.8 | 1,125.8 | 0 | 2,040.5 | 1,125.8 | ||||||||||||||||||||||||
Multi-year variable compensation | ||||||||||||||||||||||||||||||||
LTI HANA | – | – | – | – | 1,000.0 | 0 | 2,000.0 | 586.3 | ||||||||||||||||||||||||
RSU Milestone Plan 2015 | 1,449.4 | 0 | NA | – | – | – | NA | – | ||||||||||||||||||||||||
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Total | 3,297.2 | 722.0 | NA | 1,842.8 | 2,510.3 | 384.5 | NA | 2,795.7 | ||||||||||||||||||||||||
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Service cost | 0 | 0 | 0 | 0 | 59.9 | 59.9 | 59.9 | 153.9 | ||||||||||||||||||||||||
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Total | 3,297.2 | 722.0 | NA | 1,842.8 | 2,570.2 | 444.4 | NA | 2,949.6 | ||||||||||||||||||||||||
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2) Insurance contributions, benefits in kind, expenses for maintenance of two households, use of aircraft, tax and discrete payments arising through application of the fixed exchange-rate clause.
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The total Executive Board compensation granted according to the Code amounted to €23,302,200 (2013: €16,280,900)€13,330,900 (2014: €23,302,200).
German Corporate Governance Code (Allocation)
Allocation € thousands | Bill McDermott CEO | Jim Hagemann Snabe Co-CEO and Member of the Executive Board (until May 21, 2014) | Dr. Werner Brandt Member of the Executive Board (until June 30, 2014) | Robert Enslin Member of the Executive Board (from May 4, 2014) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||
Allocation | Bill McDermott CEO | Robert Enslin Member of the Executive Board | Michael Kleinemeier Member of the Executive Board (from November 1, 2015) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed compensation | 1,150.0 | 1,150.0 | 2,148.8 | 1,150.0 | 1,138.0 | 700.0 | 462.9 | – | 1,150.0 | 1,150.0 | 700.0 | 462.9 | 116.7 | — | ||||||||||||||||||||||||||||||||||||||||||
Fringe benefits(1) | 861.4 | 1,570.5 | 228.6 | 147.2 | 68.0 | 29.0 | 121.0 | – | ||||||||||||||||||||||||||||||||||||||||||||||||
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Fringe benefits1) | 1,258.0 | 861.4 | 103.3 | 121.0 | 0 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 2,011.4 | 2,720.5 | 2,377.4 | 1,297.2 | 1,206.0 | 729.0 | 583.9 | – | 2,408.0 | 2,011.4 | 803.3 | 583.9 | 116.7 | — | ||||||||||||||||||||||||||||||||||||||||||
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One-year variable compensation | 1,737.2 | 1,545.7 | 1,737.2 | 1,545.7 | 1,051.5 | 935.5 | – | – | 2,036.7 | 1,737.2 | 817.3 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Multi-year variable compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU Milestone Plan 2015 | – | – | 10,254.1 | – | – | – | – | – | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
LTI HANA | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||
MTI | 1,011.1 | 1,067.6 | 1,011.1 | 1,067.6 | 611.0 | 645.1 | – | – | — | 1,011.1 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
SAP SOP 2011 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
SAP SOP 2010 | – | – | – | – | – | – | – | – | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
SAP SOP 2009 | 378.7 | – | – | – | – | – | – | – | — | 378.7 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Other | – | – | – | – | – | – | – | – | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
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Total | 5,138.4 | 5,333.8 | 15,379.8 | 3,910.5 | 2,868.5 | 2,309.6 | 583.9 | – | 4,444.7 | 5,138.4 | 1,620.6 | 583.9 | 116.7 | — | ||||||||||||||||||||||||||||||||||||||||||
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Service cost | 646.9 | 698.4 | 117.9 | 282.9 | 0 | 0 | 148.1 | – | 682.4 | 646.9 | 308.0 | 148.1 | 0 | — | ||||||||||||||||||||||||||||||||||||||||||
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Total | 5,785.3 | 6,032.2 | 15,497.7 | 4,193.4 | 2,868.5 | 2,309.6 | 732.0 | – | 5,127.1 | 5,785.3 | 1,928.6 | 732.0 | 116.7 | — | ||||||||||||||||||||||||||||||||||||||||||
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Part I
Item 6
Allocation € thousands | Bernd Leukert Member of the Executive Board (from May 4, 2014) | Luka Mucic Member of the Executive Board (from July 1, 2014) | Gerhard Oswald Member of the Executive Board | Dr. Vishal Sikka Member of the Executive Board (until May 4, 2014) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||
Allocation | Bernd Leukert Member of the Executive | Luka Mucic Member of the | Gerhard Oswald Member of the | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed compensation | 462.9 | – | 350.0 | – | 700.0 | 700.0 | 291.7 | 700.0 | 700.0 | 462.9 | 700.0 | 350.0 | 700.0 | 700.0 | ||||||||||||||||||||||||||||||||||||||||||
Fringe benefits(1) | 12.2 | – | 4.3 | – | 22.0 | 17.0 | 92.8 | 383.0 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Fringe benefits1) | 11.7 | 12.2 | 12.1 | 4.3 | 22.4 | 22.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 475.1 | – | 354.3 | – | 722.0 | 717.0 | 384.5 | 1,083.0 | 711.7 | 475.1 | 712.1 | 354.3 | 722.4 | 722.0 | ||||||||||||||||||||||||||||||||||||||||||
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One-year variable compensation | – | – | – | – | 1,051.5 | 935.5 | 1,051.5 | 935.5 | 817.3 | — | 621.4 | — | 1,232.7 | 1,051.5 | ||||||||||||||||||||||||||||||||||||||||||
Multi-year variable compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU Milestone Plan 2015 | – | – | – | – | – | – | – | – | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
LTI HANA | – | – | – | – | – | – | 892.2 | – | ||||||||||||||||||||||||||||||||||||||||||||||||
MTI | – | – | – | – | 611.0 | 645.1 | 611.0 | 577.9 | — | — | — | — | — | 611.0 | ||||||||||||||||||||||||||||||||||||||||||
SAP SOP 2011 | — | — | — | — | 1,126.7 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
SAP SOP 2010 | – | – | – | – | 1,590.9 | – | – | – | — | — | — | — | — | 1,590.9 | ||||||||||||||||||||||||||||||||||||||||||
SAP SOP 2009 | – | – | – | – | – | – | – | – | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Other | – | – | – | – | – | – | – | – | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
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Total | 475.1 | – | 354.3 | – | 3,975.4 | 2,297.6 | 2,939.2 | 2,596.4 | 1,529.0 | 475.1 | 1,333.5 | 354.3 | 3,081.8 | 3,975.4 | ||||||||||||||||||||||||||||||||||||||||||
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Service cost | 0 | – | 0 | – | 0 | 0 | 59.9 | 153.9 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
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Total | 475.1 | – | 354.3 | – | 3,975.4 | 2,297.6 | 2,999.1 | 2,750.3 | 1,529.0 | 475.1 | 1,333.5 | 354.3 | 3,081.8 | 3,975.4 | ||||||||||||||||||||||||||||||||||||||||||
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1) Insurance contributions, benefits in kind, expenses for maintenance of two households, use of aircraft, tax and discrete payments arising through application of the fixed exchange-rate clause.
The total Executive Board compensation allocated according to the Code amounted to €32,687,400 (2013: €17,583,100)€13,116,700 (2014:€32,687,400).
End-of-Service Benefits
Regular End-of-Service Undertakings
Retirement Pension Plan
The following retirement pension agreements apply to the individual members of the Executive Board:
Werner Brandt (who retired as of June 30, 2014), Bernd Leukert, Luka Mucic, and Gerhard Oswald receive a retirement pension when they reach the retirement age of 60 (62 for Board Members appointed after January 1, 2012) and retire from their Executive Board seat, or a disability pension if, before reaching the regular retirement age, they become subject to occupational disability or permanent incapacity. A surviving dependent’s pension is paid on the death of a former member of the Executive Board. The disability pension is 100% of the vested retirement pension entitlement and is payable until the beneficiary’s 60th birthday, after which it is replaced by a retirement pension. The surviving dependent’s pension is 60% of the retirement pension or vested disability pension entitlement at death.
– | Michael Kleinemeier, Bernd Leukert, Luka Mucic, and Gerhard Oswald receive a retirement pension when they reach the retirement age of 60 (62 for Board Members appointed after January 1, 2012) and retire from their Executive Board seat, or a disability pension if, before reaching the regular retirement age, they become subject to occupational disability or permanent incapacity. A surviving dependent’s pension is paid on the death of a former member of the Executive Board. The disability pension is 100% of the vested retirement pension entitlement and is payable until the beneficiary’s 60th birthday, after which it is replaced by a retirement pension. The surviving dependent’s pension is 60% of the retirement pension or vested disability pension entitlement at death. Entitlements are enforceable against SAP SE. Current pension payments are reviewed annually for adjustments and, if applicable, increased according to the surplus in the pension liability insurance. If service is ended before the retirement age of 60 (62 for Board Members appointed after January 1, 2012), pension entitlement is reduced in proportion as the actual length of service stands in relation to the maximum possible length of service. The applied retirement pension plan is contributory. The contribution is 4% of applicable compensation up to the applicable income threshold plus 14% of applicable compensation above the |
The applied retirement pension plan is contributory. The contribution is 4% of applicable compensation up to the applicable income threshold plus 14% of applicable compensation above the applicable income threshold. For this purpose, applicable compensation is 180% of annual base salary. The applicable income threshold is the statutory annual income threshold for the state pension plan in Germany (West), as amended from time to time.
Originally, Gerhard Oswald was under a performance-based retirement plan. This plan was discontinued when SAP introduced a contributory retirement pension plan in 2000. His pension benefits are derived from any accrued entitlements on December 31, 1999, under performance-based pension agreements and a salary-linked contribution for the period commencing January 1, 2000. Gerhard Oswald’s rights to retirement pension benefits
Part I
Item 6
will increase by further annual contributions because he remains a member of the Executive Board after his 60th birthday until his scheduled retirement on December 31, 2016.
Werner Brandt’s rights to retirement pension benefits increased by further contributions after his 60th birthday until he retired from the Executive Board on June 30, 2014.
Instead of paying for entitlements under the pension plan for Executive Board members, SAP paid an equivalent amount to a third-party pension plan for Jim Hagemann Snabe (2014: €117,900; 2013: €282,900).
Bill McDermott has rights to future benefits under the portion of the pension plan for SAP America classified as “Non-Qualified Retirement Plan” according to the U.S.
applicable income threshold. For this purpose, applicable compensation is 180% of annual base salary. The applicable income threshold is the statutory annual income threshold for the state pension plan in Germany (West), as amended from time to time. Originally, Gerhard Oswald was under a performance-based retirement plan. This plan was discontinued when SAP introduced a contributory retirement pension plan in 2000. His pension benefits are derived from any accrued entitlements on December 31, 1999, under performance-based pension agreements and a salary-linked contribution for the period commencing January 1, 2000. Gerhard Oswald’s rights to retirement pension benefits will increase by further annual contributions because he remains a member of the Executive Board after his 60th birthday until his scheduled retirement on December 31, 2016. |
– | Bill McDermott has rights to future benefits under the portion of the pension plan for SAP America classified as “Non-Qualified Retirement Plan” according to the U.S. Employee Retirement Income Security Act (ERISA). The “Non-Qualified” pension plan of SAP America is a cash balance plan that on retirement provides either monthly pension payments or a lump sum. The pension becomes available from the beneficiary’s 65th birthday. Subject to certain conditions, the plan also provides earlier payment or invalidity benefits. The “Non-Qualified” pension plan closed with effect from January 1, 2009. Interest continues to be paid on the earned rights to benefits within this plan. |
SAP made contributions to a third-party pension plan for Bill McDermott (2014: €646,800; 2013: €698,400),(2015:€682,400; 2014:€646,800) and Robert Enslin (2014: €148,100), and Vishal Sikka (2014: €59,900; 2013: €153,900)(2015:€308,000; 2014:€148,100). SAP’s contributions are based on payments by Bill McDermott and Robert Enslin and Vishal Sikka into this pension plan.
Total Defined Benefit ObligationObligations (DBO) and the Total Accruals for Pension Obligations to Executive Board Members
€ thousands | Bill McDermott (CEO) | Dr. Werner Brandt (until June 30, 2014) | Bernd Leukert (from May 4, 2014)(1) | Luka Mucic (from July 1, 2014)(1) | Gerhard Oswald | Total | ||||||||||||||||||
DBO January 1, 2013 | 1,075.1 | 2,041.5 | – | – | 5,716.8 | 8,833.4 | ||||||||||||||||||
Less plan assets market value January 1, 2013 | 0 | 1,348.0 | – | – | 4,194.5 | 5,542.5 | ||||||||||||||||||
Accrued January 1, 2013 | 1,075.1 | 693.5 | – | – | 1,522.3 | 3,290.9 | ||||||||||||||||||
DBO change in 2013 | –32.4 | 96.0 | – | – | 99.7 | 163.3 | ||||||||||||||||||
Plan assets change in 2013 | 0 | 226.2 | – | – | 456.8 | 683.0 | ||||||||||||||||||
DBO December 31, 2013 | 1,042.7 | 2,137.5 | – | – | 5,816.5 | 8,996.7 | ||||||||||||||||||
Less plan assets market value December 31, 2013 | 0 | 1,574.2 | – | – | 4,651.3 | 6,225.5 | ||||||||||||||||||
Accrued December 31, 2013 | 1,042.7 | 563.3 | – | – | 1,165.2 | 2,771.2 | ||||||||||||||||||
DBO change in 2014 | 169.8 | 475.1 | 123.2 | 102.8 | 1,404.9 | 2,275.8 | ||||||||||||||||||
Plan assets change in 2014 | 0 | 176.0 | 94.6 | 67.8 | 341.1 | 679.5 | ||||||||||||||||||
DBO December 31, 2014 | 1,212.5 | 2,612.6 | 123.2 | 102.8 | 7,221.4 | 11,272.5 | ||||||||||||||||||
Less plan assets market value December 31, 2014 | 0 | 1,750.2 | 94.6 | 67.8 | 4,992.4 | 6,905.0 | ||||||||||||||||||
Accrued December 31, 2014 | 1,212.5 | 862.4 | 28.6 | 35.0 | 2,229.0 | 4,367.5 |
€ thousands | Bill McDermott (CEO) | Michael (from November 1, | Bernd Leukert1) | Luka Mucic1) | Gerhard Oswald | Total | ||||||||||||||||||
DBO January 1, 2014 | 1,042.7 | — | — | — | 5,816.5 | 6,859.2 | ||||||||||||||||||
Less plan assets market value January 1, 2014 | — | — | — | — | 4,651.3 | 4,651.3 | ||||||||||||||||||
Accrued January 1, 2014 | 1,042.7 | — | — | — | 1,165.2 | 2,207.9 | ||||||||||||||||||
DBO change in 2014 | 169.8 | — | 123.2 | 102.8 | 1,404.9 | 1,800.7 | ||||||||||||||||||
Plan assets change in 2014 | — | — | 94.6 | 67.8 | 341.1 | 503.5 | ||||||||||||||||||
DBO December 31, 2014 | 1,212.5 | — | 123.2 | 102.8 | 7,221.4 | 8,659.9 | ||||||||||||||||||
Less plan assets market value December 31, 2014 | — | — | 94.6 | 67.8 | 4,992.4 | 5,154.8 | ||||||||||||||||||
Accrued December 31, 2014 | 1,212.5 | — | 28.6 | 35.0 | 2,229.0 | 3,505.1 | ||||||||||||||||||
DBO change in 2015 | 170.0 | 29.7 | 129.2 | 129.9 | –171.2 | 287.6 | ||||||||||||||||||
Plan assets change in 2015 | — | 25.4 | 145.6 | 138.0 | 356.9 | 665.9 | ||||||||||||||||||
DBO December 31, 2015 | 1,382.5 | 29.7 | 252.4 | 232.7 | 7,050.2 | 8,947.5 | ||||||||||||||||||
Less plan assets market value December 31, 2015 | — | 25.4 | 240.2 | 205.8 | 5,349.3 | 5,820.7 | ||||||||||||||||||
Accrued December 31, 2015 | 1,382.5 | 4.3 | 12.2 | 26.9 | 1,700.9 | 3,126.8 |
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Part I
Item 6
1) The values shown here only reflect the pension entitlements that Michael Kleinemeier, Bernd Leukert and Luka Mucic will receive from the retirement pension plan for Executive Board members.
The table below shows the annual pension entitlement of each member of the Executive Board on reaching the scheduled retirement age (60 for Executive Board members initially appointed before 20142012 and 62 for Executive Board members initially appointed in 2014)after January 1, 2012) based on entitlements from SAP under performance-based and salary-linked plans vested on December 31, 2014.2015.
Annual Pension Entitlement
€ thousands | Vested on December 31, 2014 | Vested on December 31, 2013 | ||||||
Bill McDermott (CEO)(1) | 94.0 | 88.4 | ||||||
Dr. Werner Brandt (until June 30, 2014) | 95.7 | (3) | 89.8 | (2) | ||||
Bernd Leukert (from May 4, 2014) | 3.5 | – | ||||||
Luka Mucic (from July 1, 2014) | 2.6 | – | ||||||
Gerhard Oswald(4) | 279.4 | 267.9 |
€ thousands | Vested on December 31, 2015 | Vested on December 31, 2014 | ||||||
Bill McDermott (CEO)1) | 106.9 | 94.0 | ||||||
Michael Kleinemeier (from November 1, 2015) | 0.7 | — | ||||||
Bernd Leukert | 8.8 | 3.5 | ||||||
Luka Mucic | 7.8 | 2.6 | ||||||
Gerhard Oswald2) | 302.5 | 279.4 |
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1) The rights shown here for Bill McDermott refer solely to rights under the pension plan for SAP America. 2) Due to the extension of Gerhard Oswald’s contract beyond June 30, 2014, these values represent the retirement pension entitlement that he would receive after his current Executive Board contract expires on December 31, 2016, based on the entitlements vested on December 31, 2015 (December 31, 2014).
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These are vested entitlements. To the extent that members continue to serve on the Executive Board and that therefore more contributions are made for them in the future, pensions actually payable at the scheduled retirement age will be higher than the amounts shown in the table.
Postcontractual Non-Compete Provisions
During the agreed 12-month postcontractual non-compete period, each Executive Board member receives abstention payments corresponding to 50% of his or herthe final average contractual compensation as agreed in the respective contract on an individual basis. Any other occupational income generated by the Executive Board member
will be deducted from histheir compensation in
accordance with section 74c of the German Commercial Code.
The following table presents the net present values of the postcontractual non-compete abstention payments. The net present values in the table reflect the discounted present value of the amounts that would be paid in the fictitious scenario in which the Executive Board members leave SAP at the end of their respective current contract terms and their final average contractual compensation prior to their departure equals the compensation in 2014.2015. Actual postcontractual non-compete payments will likely differ from these amounts depending on the time of departure and the compensation levels and target achievements at the time of departure.
Net Present Values of the Postcontractual Non-Compete Abstention Payments
€ thousands | Contract Term | Net Present Value Postcontractual Non-Compete Abstention Payment | ||||
Bill McDermott (CEO) | June 30, 2017 | |||||
Robert Enslin | June 30, 2017 | |||||
Michael Kleinemeier (from November 1, 2015) | October 31, 2018 | 349.6 | ||||
Bernd Leukert | June 30, 2017 | |||||
Luka Mucic | June 30, 2017 | |||||
Gerhard Oswald | December 31, 2016 | |||||
1,928.9 | ||||||
Total | ||||||
Part I
Item 6
1) For the purpose of this calculation, the following discount rates have been applied: Bill McDermott 0.18% (2014: 0.46%); Robert Enslin 0.18% (2014: 0.46%); Michael Kleinemeier 0.50%; Bernd Leukert 0.18% (2014: 0.46%); Luka Mucic 0.18% (2014: 0.46%); Gerhard Oswald 0.15% (2014: 0.38%).
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Early End-of-Service Undertakings
Severance Payments
The standard contract for all Executive Board members provides that on termination before full term (for example, where the member’s appointment is revoked, where the member becomes occupationally disabled, or in connection with a change of control), SAP SE will pay to the member the outstanding part of the compensation target for the entire remainder of the term, appropriately discounted for early payment. A member has no claim to that payment if he or she hasthey have not served SAP as a member of the Executive Board for at least one year or if he or she leavesthey leave SAP SE for reasons for which he or she isthey are responsible. Upon the appointment of Robert Enslin, Bernd Leukert, Luka Mucic, and Michael Kleinemeier to the Executive Board, the Supervisory Board abstained from the waiting period of one year due to their previous membership to the Global Managing Board.
If an Executive Board member’s appointment to the Executive Board expires or ceases to exist because of, or as a consequence of, change or restructuring, or due to a change of control, SAP SE and each Executive Board member has the right to terminate the employment contract within eight weeks of the occurrence by giving six months’ notice. A change of control is deemed to occur when a third party is required to make a mandatory takeover offer to the shareholders of SAP SE under the German Securities Acquisition and Takeover Act, when SAP SE merges with another company and becomes the subsumed entity, or when a control or profit transfer agreement is concluded with SAP SE as the dependent company. An Executive Board member’s contract can also be terminated before full term if his or hertheir appointment as an Executive Board member of SAP SE is revoked in connection with a change of control.
Postcontractual Non-Compete Provisions
Abstention compensation for the postcontractual non-compete period as described above is also payable on early contract termination.
Permanent Disability
In case of permanent disability, the contract will end at the end of the quarter in which the permanent inability to work was determined. The Executive Board member receives the monthly basic salary for a further 12 months starting from the date the permanent disability is determined.
Payments to Executive Board Members Resigning or Retiring in 2014
Vishal Sikka resigned from his position as Executive Board member with effect from May 4, 2014, with the approval of the Supervisory Board. He received the following payments in connection with his retirement with effect from May 31, 2014:
Vishal Sikka received monthly abstention compensation for a period of 24 months for the postcontractual non-compete period totaling €3,663,400.
The unforfeitable rights allocated to him under the RSU Milestone Plan 2015 for the tranches 2012 and 2013 with the value of €2,420,800 (2012) and €1,434,500 (2013) remain available to him until their cash settlement in 2016 and 2017.
Werner Brandt retired from his position as Executive Board member upon the end of his current term on June 30, 2014. He received the following payments in connection with his retirement:
For a period of twelve months he receives monthly abstention compensation for the postcontractual non-compete period totaling €1,841,500.
The unforfeitable rights allocated to him under the RSU Milestone Plan 2015 for the tranches 2012 and 2013 remain available to him until their cash settlement in 2016 and 2017.
In 2014 he receives for six months a retirement pension totaling €47,840.
Part I
Item 6
Payments to Former Executive Board Members
In 2014,2015, we paid pension benefits of €1,425,000€1,580,000 to Executive Board members who had retired before January 1, 2014 (2013: €1,387,000)2015 (2014:€1,425,000). At the end of the year, the DBO for former Executive Board members was €33,764,000 (2013: €29,181,000)€32,758,000 (2014:€33,764,000). Plan assets of €25,584,000€26,716,000 are available to meet these obligations (2013: €26,015,000)(2014:€25,584,000).
Executive Board Members’ Holdings of Long-Term Incentives
Members of the Executive Board hold or held share-based payment rights throughout the year under the RSU Milestone Plan 2015 and the SAP SOP 2010 (which were granted in previous years). For information about the terms and details of these programs, see the Notes to the Consolidated Financial Statements section, Note (28)(27).
RSU Milestone Plan 2015
The table below shows Executive Board members’ holdings, on December 31, 2014,2015, of restricted share unitsRSUs issued to them under the RSU Milestone Plan 2015. The plan is a cash-settled long-term incentive scheme with a payout subsequent to a performance period of one year and an additional holding period of three years. The RSU Milestone Plan 2015 consists of four plan tranches to be issued with respect to the calendar years 2012 through 2015.
RSU Milestone Plan 2015 (2015 Tranche)
Quantity of RSUs | Holding on January 1, 2015 | Grants in 2015 | Performance- Related Adjustment | Exercised Units | Forfeited Units | Holding on December 31, 2015 | ||||||||||||||||||
Bill McDermott (CEO) | 255,050 | 77,099 | 36,568 | — | — | 368,717 | ||||||||||||||||||
Robert Enslin | 14,148 | 27,656 | 12,329 | — | — | 54,133 | ||||||||||||||||||
Michael Kleinemeier (from November 1, 2015) | 0 | 4,622 | 599 | — | — | 5,221 | ||||||||||||||||||
Bernd Leukert | 14,148 | 27,656 | 13,922 | — | — | 55,726 | ||||||||||||||||||
Luka Mucic | 10,757 | 27,656 | 13,474 | — | — | 51,887 | ||||||||||||||||||
Gerhard Oswald | 91,490 | 27,656 | 13,117 | — | — | 132,263 | ||||||||||||||||||
Total | 385,593 | 192,345 | 90,009 | 0 | 0 | 667,947 |
The holding of RSUs on December 31, 2015, which were issued and not forfeited in 2015, reflects the number of RSUs multiplied by the total target achievement. The total target achievement consists of the addition of the target achievement of the financial KPIs of 112.96% and the adjustment factor based on individual plan
participation. The RSUs allocated in 2012 have a remaining term of 0.08 years; the RSUs allocated in 2013 have a remaining term of 1.08 years; the RSUs allocated in 2014 have a remaining term of 2.08 years; and the RSUs allocated in 2015 have a remaining term of 3.08 years.
RSU Milestone Plan 2015 (2014 Tranche)
Quantity of RSUs | Holding on January 1, 2014 | Grants in 2014 | Performance- Related Adjustment | Exercised Units | Forfeited Units | Holding on December 31, 2014 | ||||||||||||||||||
Bill McDermott (CEO) | 195,562 | 76,374 | –16,886 | – | – | 255,050 | ||||||||||||||||||
Dr. Werner Brandt | 70,151 | 27,396 | – | – | 27,396 | 70,151 | ||||||||||||||||||
Gerhard Oswald | 70,151 | 27,396 | –6,057 | – | – | 91,490 | ||||||||||||||||||
Dr. Vishal Sikka | 70,151 | 27,396 | – | 70,151 | 27,396 | – | ||||||||||||||||||
Robert Enslin | 0 | 18,164 | –4,016 | – | – | 14,148 | ||||||||||||||||||
Bernd Leukert | 0 | 18,164 | –4,016 | – | – | 14,148 | ||||||||||||||||||
Luka Mucic | 0 | 13,811 | –3,054 | – | – | 10,757 | ||||||||||||||||||
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Total | 406,014 | 208,701 | –34,029 | 70,151 | 54,792 | 455,743 | ||||||||||||||||||
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Quantity of RSUs | Holding on January 1, 2014 | Grants in 2014 | Performance- Related Adjustment | Exercised Units | Forfeited Units | Holding on December 31, 2014 | ||||||||||||||||||
Bill McDermott (CEO) | 195,562 | 76,374 | –16,886 | — | — | 255,050 | ||||||||||||||||||
Dr. Werner Brandt (until June 30, 2014) | 70,151 | 27,396 | — | — | 27,396 | 70,151 | ||||||||||||||||||
Gerhard Oswald | 70,151 | 27,396 | –6,057 | — | — | 91,490 | ||||||||||||||||||
Dr. Vishal Sikka (until May 4, 2014)1) | 70,151 | 27,396 | — | 70,151 | 27,396 | — | ||||||||||||||||||
Robert Enslin (from May 4, 2014) | 0 | 18,164 | –4,016 | — | — | 14,148 | ||||||||||||||||||
Bernd Leukert (from May 4, 2014) | 0 | 18,164 | –4,016 | — | — | 14,148 | ||||||||||||||||||
Luka Mucic (from July 1, 2014) | 0 | 13,811 | –3,054 | — | — | 10,757 | ||||||||||||||||||
Total | 406,014 | 208,701 | –34,029 | 70,151 | 54,792 | 455,743 |
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Part I
Item 6
1) According to the termination agreement with Vishal Sikka, the 2012 grants will be paid out after the close of the Annual General Meeting of Shareholders in 2016, based on a fixed share price of€52.96. The 2013 grants will be paid out after the close of the Annual General Meeting of Shareholders in 2017 based on a fixed share price of€58.69.
The holding of RSUs on December 31, 2014, which were issued and not forfeited in 2014, reflects the number of RSUs multiplied by the 77,89%77.89% target achievement. The RSUs allocated in 2012 have a remaining term of 1.08 years; the RSUs allocated in 2013 have a remaining term of 2.08 years; and the RSUs allocated in 2014 have a remaining term of 3.08 years.
RSU Milestone Plan 2015 (2013 Tranche)
Quantity of RSUs | Holding on January 1, 2013 | Grants in 2013 | Performance- Related Adjustment | Exercised Units | Forfeited Units | Holding on December 31, 2013 | Holding on January 1, 2013 | Grants in 2013 | Performance- Related Adjustment | Exercised Units | Forfeited Units | Holding on December 31, 2013 | ||||||||||||||||||||||||||||||||||||
Bill McDermott (co-CEO) | 127,425 | 73,289 | –5,152 | – | – | 195,562 | 127,425 | 73,289 | –5,152 | — | — | 195,562 | ||||||||||||||||||||||||||||||||||||
Jim Hagemann Snabe | 127,425 | 73,289 | –5,152 | 195,562 | – | – | ||||||||||||||||||||||||||||||||||||||||||
Jim Hagemann Snabe (co-CEO)1) | 127,425 | 73,289 | –5,152 | 195,562 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Dr. Werner Brandt | 45,709 | 26,290 | –1,848 | – | – | 70,151 | 45,709 | 26,290 | –1,848 | — | — | 70,151 | ||||||||||||||||||||||||||||||||||||
Gerhard Oswald | 45,709 | 26,290 | –1,848 | – | – | 70,151 | 45,709 | 26,290 | –1,848 | — | — | 70,151 | ||||||||||||||||||||||||||||||||||||
Dr. Vishal Sikka | 45,709 | 26,290 | –1,848 | – | – | 70,151 | 45,709 | 26,290 | –1,848 | — | — | 70,151 | ||||||||||||||||||||||||||||||||||||
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Total | 391,977 | 225,448 | –15,849 | 195,562 | – | 406,014 | 391,977 | 225,448 | –15,849 | 195,562 | 0 | 406,014 | ||||||||||||||||||||||||||||||||||||
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1) According to the termination agreement with Jim Hagemann Snabe, the 2012 and 2013 grants were paid out after the close of the Annual General Meeting of Shareholders on May 21, 2014, based on a fixed share price of€52.96 for the 2012 grants and€58.69 for the 2013 grants. |
The holding of RSUs on December 31, 2013, which were issued and not forfeited in 2013, reflects the number of RSUs multiplied by the 92.97% target achievement.
RSU Milestone Plan 2015 (2012 Tranche)
Quantity of RSUs | Holding on January 1, 2012 | Grants in 2012 | Performance- Related Adjustment | Exercised Units | Forfeited Units | Holding on December 31, 2012 | Holding on January 1, 2012 | Grants in 2012 | Performance- Related Adjustment | Exercised Units | Forfeited Units | Holding on December 31, 2012 | ||||||||||||||||||||||||||||||||||||
Bill McDermott (co-CEO) | – | 95,414 | 32,011 | – | – | 127,425 | — | 95,414 | 32,011 | — | — | 127,425 | ||||||||||||||||||||||||||||||||||||
Jim Hagemann Snabe | – | 95,414 | 32,011 | – | – | 127,425 | — | 95,414 | 32,011 | — | — | 127,425 | ||||||||||||||||||||||||||||||||||||
Dr. Werner Brandt | – | 34,226 | 11,483 | – | – | 45,709 | — | 34,226 | 11,483 | — | — | 45,709 | ||||||||||||||||||||||||||||||||||||
Gerhard Oswald | – | 34,226 | 11,483 | – | – | 45,709 | — | 34,226 | 11,483 | — | — | 45,709 | ||||||||||||||||||||||||||||||||||||
Dr. Vishal Sikka | – | 34,226 | 11,483 | – | – | 45,709 | — | 34,226 | 11,483 | — | — | 45,709 | ||||||||||||||||||||||||||||||||||||
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Total | – | 293,506 | 98,471 | – | – | 391,977 | — | 293,506 | 98,471 | — | — | 391,977 | ||||||||||||||||||||||||||||||||||||
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The holding on December 31, 2012, reflects the number of RSUs issued in 2012 multiplied by the 133.55% target achievement.
Part I
Item 6
SAP SOP 2010
The table below shows Executive Board members’ holdings, on December 31, 2014,2015, of virtual share options issued to them under the SAP SOP 2010 since its inception. The strike price for an option is 115% of the base price. The issued options have a term of seven years and can only be exercised on specified dates after the vesting period. The options issued in 2010 were exercisable beginning in September 2014 and the options issued in 2011 arewere exercisable beginning in June 2015.
SAP SOP 2010 Virtual Share Options
Year Granted | Holding on January 1, 2014 | Strike Price per Option | Rights Exercised in 2014 | Price on Exercise Date | Exercisable Rights of Retired Members of the Executive Board | Forfeited Rights | Holding on December 31, 2014 | |||||||||||||||||||||||||||||||||
Quantity of Options | Remaining Term in Years | € | Quantity of Options | € | Quantity of Options | Quantity of Options | Quantity of Options | Remaining Term in Years | ||||||||||||||||||||||||||||||||
Bill McDermott | 2010 | 135,714 | 3.69 | 40.80 | – | – | – | – | 135,714 | 2.69 | ||||||||||||||||||||||||||||||
2011 | 112,426 | 4.44 | 48.33 | – | – | – | – | 112,426 | 3.44 | |||||||||||||||||||||||||||||||
Jim Hagemann Snabe (co-CEO and member until May 21, 2014) | 2010 | 135,714 | 3.69 | 40.80 | 135,714 | 60.10 | – | – | – | – | ||||||||||||||||||||||||||||||
2011 | 112,426 | 4.44 | 48.33 | – | – | – | – | 112,426 | 3.44 | |||||||||||||||||||||||||||||||
Dr. Werner Brandt (until June 30, 2014) | 2010 | 82,428 | 3.69 | 40.80 | 82,428 | 60.10 | – | – | – | – | ||||||||||||||||||||||||||||||
2011 | 68,284 | 4.44 | 48.33 | – | – | – | – | 68,284 | 3.44 | |||||||||||||||||||||||||||||||
Gerhard Oswald | 2010 | 82,428 | 3.69 | 40.80 | 82,428 | 60.10 | – | – | – | – | ||||||||||||||||||||||||||||||
2011 | 68,284 | 4.44 | 48.33 | – | – | – | – | 68,284 | 3.44 | |||||||||||||||||||||||||||||||
Dr. Vishal Sikka | 2010 | 82,428 | 3.69 | 40.80 | 82,428 | 60.10 | – | – | – | – | ||||||||||||||||||||||||||||||
2011 | 68,284 | 4.44 | 48.33 | – | – | – | – | 68,284 | 3.44 | |||||||||||||||||||||||||||||||
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Total | 948,416 | 382,998 | – | – | 565,418 | |||||||||||||||||||||||||||||||||||
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Year Granted | Holding on January 1, 2015 | Strike Price per Option | Rights Exercised in 2015 | Price on Exercise Date | Forfeited Rights | Holding on December 31, 2015 | ||||||||||||||||||||||||||||||
Quantity of Options | Remaining Term in Years | € | Quantity of Options | € | Quantity of Options | Quantity of Options | Remaining Term in Years | |||||||||||||||||||||||||||||
Bill McDermott (CEO) | 2010 | 135,714 | 2.69 | 40.80 | — | — | — | 135,714 | 1.69 | |||||||||||||||||||||||||||
2011 | 112,426 | 3.44 | 48.33 | — | — | — | 112,426 | 2.44 | ||||||||||||||||||||||||||||
Gerhard Oswald | 2010 | 0 | — | — | 0 | — | — | — | — | |||||||||||||||||||||||||||
2011 | 68,284 | – | 48.33 | 68,284 | 64.83 | — | — | — | ||||||||||||||||||||||||||||
Total | 316,424 | 68,284 | — | 248,140 |
Total Expense for Share-Based Payment
Total expense for the share-based payment plans of Executive Board members was recognized as follows.
Total Expense for Share-Based Payment
€ thousands | 2014 | 2013 | ||||||
Bill McDermott (co-CEO) | 5,063.8 | – | 1,529.7 | |||||
Jim Hagemann Snabe (co-CEO and member until May 21, 2014) | –201.0 | – | 2,967.0 | |||||
Dr. Werner Brandt (until June 30, 2014) | –330.8 | 1,042.9 | ||||||
Robert Enslin (from May 4, 2014) | 1,833.5 | – | ||||||
Bernd Leukert (from May 4, 2014) | 1,759.7 | – | ||||||
Luka Mucic (from July 1, 2014) | 1,577.2 | – | ||||||
Gerhard Oswald | 1,891.1 | –376.0 | ||||||
Dr. Vishal Sikka (until May 4, 2014) | –460.7 | –376.0 | ||||||
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Total | 11,132.8 | – | 4,205.8 | |||||
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Part I
Item 6
€ thousands | 2015 | 2014 | ||||||
Bill McDermott (CEO) | 12,291.1 | 5,063.8 | ||||||
Robert Enslin | 1,851.2 | 1,833.5 | ||||||
Michael Kleinemeier (from November 1, 2015) | 364.7 | — | ||||||
Bernd Leukert | 2,208.6 | 1,759.7 | ||||||
Luka Mucic | 2,148.5 | 1,577.2 | ||||||
Gerhard Oswald | 3,445.6 | 1,891.1 | ||||||
Total | 22,309.7 | 12,125.3 |
The expense is recognized in accordance with IFRS 2 “Share-Based Payments.” Because the RSU Milestone Plan 2015 tranche for 2015 was allocated at the respective grant date(Share-Based Payments) and consists exclusively of eachobligations arising from Executive Board member, we are required to recognize the respective expense in part in 2014 even though this future tranche depends on the achievement of specific financial targets in future periods. Share-based payment expenses were affected by a decrease in fair values of SOP 2010. Negative expenses also arose out of the lapsing of rights under the RSU Milestone Plan 2015 in connection with the departures from the company of Werner Brandt and Vishal Sikka before the end of the year.activities.
Shareholdings and Transactions of Executive Board Members
No member of the Executive Board holds more than 1% of the ordinary shares of SAP SE. Members of the
Executive Board held a total of 36,42645,309 SAP shares on December 31, 2014 (2013: 30,2012015 (2014: 36,426 shares).
The table below shows transactions by Executive Board members and persons closely associated with them notified to SAP pursuant to the German Securities Trading Act, section 15a, in 2014.2015.
Transactions in SAP Shares
Transaction Date | Transaction | Quantity | Unit Price | |||||||||||||
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Purchase of ADRs | ||||||||||||||||
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| 2,000 | US$ | ||||||||||||||
Robert Enslin | August 26, 2015 | Purchase of ADRs | 1,145 | US$ | ||||||||||||
| May 7, 2015 | Share sale | 1,595 | €66.2364 | ||||||||||||
August 13, 2015 | Share purchase | 830 | €63.7290 | |||||||||||||
Luka Mucic | May 20, 2015 | 700 | €68.9990 | |||||||||||||
Gerhard Oswald | July 22, 2015 | Share purchase | 930 | €66.7100 |
Executive Board: Other Information
We did not grant any compensation advance or credit to, or enter into any commitment for the benefit of, any member of our Executive Board in 20142015 or the previous year.
As far as the law permits, SAP SE and its affiliated companies in Germany and elsewhere indemnify and hold harmless their respective directors and officers against and from the claims of third parties. To this end, we maintain directors’ and officers’ (D&O) group liability insurance. The policy is annual and is renewed from year to year. The insurance covers the personal liability of the insured group for financial loss caused by its managerial acts and omissions. The current D&O policy includes an individual deductible for Executive Board members of SAP SE as required by section 93 (2) of the German Stock Corporation Act.
Compensation for Supervisory Board Members
Compensation System
Supervisory Board members’ compensation is governed by our Articles of Incorporation, section 16. By resolution of our May 20, 2015, Annual General Meeting of Shareholders the section was changed from the compensation with fixed and performance-related components to a fixed compensation plus fixed amounts for membership in and chairing of committees.
Each member of the Supervisory Board receives, in addition to the reimbursement of his or hertheir expenses, an annual basic compensation composed of fixed elements€165,000. The chairperson receives€275,000 and a variable element. The variable element depends on the dividend paid by SAP on its shares.
The fixed element is €100,000 for the chairperson, €70,000 for a deputy chairperson and €50,000 for other members. €220,000.
For membership of the Audit Committee, Supervisory Board members receive additional fixed annual remuneration
compensation of €15,000,€16,500, and for membership of any other Supervisory Board committee
Part I
Item 6
€10,000,11,000, provided that the committee concerned has met in the year. The chairperson of the Audit Committee receives €25,000,€27,500, and the chairpersons of the other committees receive €20,000.€22,000. The fixed remuneration is payable after the end of the year.
The variable compensation element is €10,000 for the chairperson, €8,000 for a deputy chairperson, and €6,000 for the other members of the Supervisory Board for each €0.01 by which the dividend distributed per share exceeds €0.40. The variable remuneration is payable after the end of the Annual General Meeting of Shareholders that resolves on the dividend for the relevant year.
However, the aggregate compensation excluding compensation for committee memberships must not exceed €250,000 for the chairperson, €200,000 for a deputy chairperson, and €150,000 for other members of the Supervisory Board.
Any members of the Supervisory Board having served for less than the entire year receive one-twelfth of the annual remuneration for each month of service commenced. This also applies to the increased compensation of the chairperson and the deputy chairperson(s) and to the remuneration for the chairperson and the members of a committee.
Amount of Compensation
Subject to the resolution on the appropriation of retained earnings by the Annual General Meeting of Shareholders on May 20, 2015, the compensation paid to Supervisory Board members in respect of 2014 will be as set out in the table below.
Supervisory Board Members’ Compensation in 20142015
2014 | 2013 | |||||||||||||||||||||||||||||||
€ thousands | Fixed Compensation | Compensation for Committee Work | Variable Compensation | Total | Fixed Compensation | Compensation for Committee Work | Variable Compensation | Total | ||||||||||||||||||||||||
Prof. Dr. h.c. mult. Hasso Plattner (chairperson) | 100.0 | 100.0 | 150.0 | 350.0 | 100.0 | 81.7 | 150.0 | 331.7 | ||||||||||||||||||||||||
Christiane Kuntz-Mayr (deputy chairperson) | 70.0 | 20.8 | 130.0 | 220.8 | 70.0 | 10.8 | 130.0 | 210.8 | ||||||||||||||||||||||||
Pekka Ala-Pietilä | 50.0 | 30.0 | 100.0 | 180.0 | 50.0 | 30.0 | 100.0 | 180.0 | ||||||||||||||||||||||||
Catherine Bordelon (from July 7, 2014) | 25.0 | 5.0 | 50.0 | 80.0 | NA | NA | NA | NA | ||||||||||||||||||||||||
Panagiotis Bissiritsas | 50.0 | 20.0 | 100.0 | 170.0 | 50.0 | 20.0 | 100.0 | 170.0 | ||||||||||||||||||||||||
Prof. Anja Feldmann | 50.0 | 20.0 | 100.0 | 170.0 | 50.0 | 10.8 | 100.0 | 160.8 | ||||||||||||||||||||||||
Prof. Dr. Wilhelm Haarmann | 50.0 | 50.0 | 100.0 | 200.0 | 50.0 | 40.8 | 100.0 | 190.8 | ||||||||||||||||||||||||
Margret Klein-Magar | 50.0 | 30.0 | 100.0 | 180.0 | 50.0 | 20.0 | 100.0 | 170.0 | ||||||||||||||||||||||||
Lars Lamadé | 50.0 | 30.0 | 100.0 | 180.0 | 50.0 | 20.8 | 100.0 | 170.8 | ||||||||||||||||||||||||
Steffen Leskovar (from July 7, 2014) | 25.0 | 12.5 | 50.0 | 87.5 | NA | NA | NA | NA | ||||||||||||||||||||||||
Bernard Liautaud | 50.0 | 30.0 | 100.0 | 180.0 | 50.0 | 30.0 | 100.0 | 180.0 | ||||||||||||||||||||||||
Dr. h. c. Hartmut Mehdorn | 50.0 | 20.0 | 100.0 | 170.0 | 50.0 | 10.8 | 100.0 | 160.8 | ||||||||||||||||||||||||
Dr. Kurt Reiner | 50.0 | 20.0 | 100.0 | 170.0 | 50.0 | 20.0 | 100.0 | 170.0 | ||||||||||||||||||||||||
Mario Rosa-Bian | 50.0 | 15.0 | 100.0 | 165.0 | 50.0 | 9.2 | 100.0 | 159.2 | ||||||||||||||||||||||||
Dr. Erhard Schipporeit | 50.0 | 35.0 | 100.0 | 185.0 | 50.0 | 35.0 | 100.0 | 185.0 | ||||||||||||||||||||||||
Stefan Schulz | 50.0 | 30.8 | 100.0 | 180.8 | 50.0 | 25.8 | 100.0 | 175.8 | ||||||||||||||||||||||||
Jim Hagemann Snabe (from July 7, 2014) | 25.0 | 10.0 | 50.0 | 85.0 | NA | NA | NA | NA | ||||||||||||||||||||||||
Inga Wiele (until July 6, 2014) | 29.2 | 14.6 | 58.3 | 102.1 | 50.0 | 25.0 | 100.0 | 175.0 | ||||||||||||||||||||||||
Prof. Dr.-Ing.Dr.-Ing. E.h. Klaus Wucherer | 50.0 | 20.8 | 100.0 | 170.8 | 50.0 | 25.0 | 100.0 | 175.0 | ||||||||||||||||||||||||
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Total | 924.2 | 514.5 | 1,788.3 | 3,227.0 | 870.0 | 415.7 | 1,680.0 | 2,965.7 | ||||||||||||||||||||||||
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Part I
Item 6
€ thousands | 2015 | 2014 | ||||||||||||||||||||||||||
Fixed Compen- sation | Compen- tee Work | Total | Fixed Compen- sation | Compen- tee Work | Variable Compen- sation | Total | ||||||||||||||||||||||
Prof. Dr. h.c. mult. Hasso Plattner (chairperson) | 275.0 | 66.0 | 341.0 | 100.0 | 100.0 | 150.0 | 350.0 | |||||||||||||||||||||
Margret Klein-Magar (deputy chairperson from May 20, 2015) | 215.4 | 29.3 | 244.8 | 50.0 | 30.0 | 100.0 | 180.0 | |||||||||||||||||||||
Pekka Ala-Pietilä | 165.0 | 27.5 | 192.5 | 50.0 | 30.0 | 100.0 | 180.0 | |||||||||||||||||||||
Panagiotis Bissiritsas | 165.0 | 32.1 | 197.1 | 50.0 | 20.0 | 100.0 | 170.0 | |||||||||||||||||||||
Catherine Bordelon (until May 20, 2015) | 68.8 | 0 | 68.8 | 25.0 | 5.0 | 50.0 | 80.0 | |||||||||||||||||||||
Martin Duffek (from May 20, 2015) | 110.0 | 18.3 | 128.3 | NA | NA | NA | NA | |||||||||||||||||||||
Prof. Anja Feldmann | 165.0 | 22.0 | 187.0 | 50.0 | 20.0 | 100.0 | 170.0 | |||||||||||||||||||||
Prof. Dr. Wilhelm Haarmann | 165.0 | 44.0 | 209.0 | 50.0 | 50.0 | 100.0 | 200.0 | |||||||||||||||||||||
Andreas Hahn (from May 20, 2015) | 110.0 | 14.7 | 124.7 | NA | NA | NA | NA | |||||||||||||||||||||
Christiane Kuntz-Mayr (deputy chairperson and member until May 20, 2015) | 91.7 | 9.2 | 100.8 | 70.0 | 20.8 | 130.0 | 220.8 | |||||||||||||||||||||
Prof. Dr. Gesche Joost (from May 28, 2015) | 110.0 | 11.0 | 121.0 | NA | NA | NA | NA | |||||||||||||||||||||
Lars Lamadé | 165.0 | 22.0 | 187.0 | 50.0 | 30.0 | 100.0 | 180.0 | |||||||||||||||||||||
Steffen Leskovar (until May 20, 2015) | 68.8 | 11.5 | 80.2 | 25.0 | 12.5 | 50.0 | 87.5 | |||||||||||||||||||||
Bernard Liautaud | 165.0 | 22.0 | 187.0 | 50.0 | 30.0 | 100.0 | 180.0 | |||||||||||||||||||||
Dr. h. c. Hartmut Mehdorn (until May 15, 2015) | 68.8 | 9.2 | 77.9 | 50.0 | 20.0 | 100.0 | 170.0 | |||||||||||||||||||||
Christine Regitz (from May 20, 2015) | 110.0 | 14.7 | 124.7 | NA | NA | NA | NA | |||||||||||||||||||||
Dr. Kurt Reiner (until May 20, 2015) | 68.8 | 9.2 | 77.9 | 50.0 | 20.0 | 100.0 | 170.0 | |||||||||||||||||||||
Mario Rosa-Bian (until May 20, 2015) | 68.8 | 9.2 | 77.9 | 50.0 | 15.0 | 100.0 | 165.0 | |||||||||||||||||||||
Dr. Erhard Schipporeit | 165.0 | 27.5 | 192.5 | 50.0 | 35.0 | 100.0 | 185.0 | |||||||||||||||||||||
Stefan Schulz (until May 20, 2015) | 68.8 | 11.5 | 80.2 | 50.0 | 30.8 | 100.0 | 180.8 | |||||||||||||||||||||
Robert Schuschnig-Fowler (from May 20, 2015) | 110.0 | 7.3 | 117.3 | NA | NA | NA | NA | |||||||||||||||||||||
Dr. Sebastian Sick (from May 20, 2015) | 110.0 | 14.7 | 124.7 | NA | NA | NA | NA | |||||||||||||||||||||
Jim Hagemann Snabe | 165.0 | 22.0 | 187.0 | 25.0 | 10.0 | 50.0 | 85.0 | |||||||||||||||||||||
Pierre Thiollet (from May 20, 2015) | 110.0 | 7.3 | 117.3 | NA | NA | NA | NA | |||||||||||||||||||||
Inga Wiele (until July 6 , 2014) | NA | NA | NA | 29.2 | 14.6 | 58.3 | 102.1 | |||||||||||||||||||||
Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer | 165.0 | 16.5 | 181.5 | 50.0 | 20.8 | 100.0 | 170.8 | |||||||||||||||||||||
Total | 3,249.6 | 478.5 | 3,728.1 | 924.2 | 514.5 | 1,788.3 | 3,227.0 |
In addition, we reimburse members of the Supervisory Board for their expenses and the value-added tax payable on their compensation.
In total, we received services from members of the Supervisory Board (including services from employee representatives on the Supervisory Board in their capacity as employees of SAP) in the amount of €2,295,000 (2013: €1,503,600)€1,282,800 (2014:€2,295,000). This amount includes fees paid to Linklaters LLP in Frankfurt am Main, Germany (which Supervisory Board member Wilhelm Haarmann is a partner of) of €1,001,700 (2013: €327,500)€224,500 (2014:€1,001,700).
Long-Term Incentives for the Supervisory Board
We do not offer members share options or other share-based payment for their Supervisory Board
work. Any share options or other share-based payment received by employee-elected members relate to their position as SAP employees and not to their work on the Supervisory Board.
Shareholdings and Transactions of Supervisory Board Members
Supervisory Board chairperson Hasso Plattner and the companies he controlled held 107,442,74390,248,789 SAP shares on December 31, 20142015 (December 31, 2013: 119,300,8822014: 107,442,743 SAP shares), representing 7.346% (2014: 8.746% (2013: 9.711%) of SAP’s share capital. No other member of the Supervisory Board held more than 1% of the SAP SE share capital at the end of 20142015 or of the previous year. Members of the Supervisory Board held a total of 107,467,37290,262,686 SAP shares on December 31, 20142015 (December 31, 2013: 119,316,4442014: 107,467,372 SAP shares).
The table below shows transactions by Supervisory Board members and persons closely associated with them notified to SAP pursuant to the German Securities Trading Act, section 15a, in 2014:2015:
Transactions in SAP Shares
Transaction Date | Transaction | Quantity | Unit Price | Transaction Date | Transaction | Quantity | Unit Price | |||||||||||||||||||
Andreas Hahn | May 28, 2015 | Share purchase | 12 | € | 57.3600 | |||||||||||||||||||||
June 2, 2015 | Share sale | 100 | € | 67.4170 | ||||||||||||||||||||||
August 5, 2015 | Share sale | 115 | € | 66.2200 | ||||||||||||||||||||||
October 28, 2015 | Share sale | 38 | € | 70.0100 | ||||||||||||||||||||||
Margret Klein-Magar | May 7, 2015 | Share sale | 120 | € | 66.2364 | |||||||||||||||||||||
Hasso Plattner | May 5, 2014 | Sale of ADRs | 24,100 | US$ | 77.9873 | December 18, 2015 | Share purchase | 2,444,816 | € | 72.9300 | ||||||||||||||||
Mario Rosa-Bian | June 2, 2014 | Share sale | 118 | € | 56.1100 | |||||||||||||||||||||
Hasso Plattner GmbH & Co. Beteiligungs-KG | August 29, 2014 | | Compensation | |
| 9,567,786 |
|
|
| (1) | December 23, 2015 | Compensation in kind (granting party) | 87,803,973 | 1 | ) | |||||||||||
HP Vermögensverwaltungs GmbH & Co. KG | December 23, 2015 | Compensation in kind (receiving party) | 87,803,973 | 1 | ) | |||||||||||||||||||||
Sabine Plattner GmbH & Co. Beteiligungs-KG | November 25, 2015 | Share sale | 480,000 | 2 | ) | |||||||||||||||||||||
Riitta Schuschnig-Fowler | December 8, 2015 | Share sale | 50 | € | 72.4500 | |||||||||||||||||||||
Robert Schuschnig-Fowler | December 8, 2015 | Share sale | 35 | € | 72.6500 | |||||||||||||||||||||
Ingrid van Skyhawk | May 28, 2015 | Share purchase | 11 | € | 57.3600 | |||||||||||||||||||||
November 21, 2014 | Share sale | (2) | (2) | June 2, 2015 | Share sale | 75 | € | 67.4170 | ||||||||||||||||||
Sabine Plattner GmbH & Co. Beteiligungs-KG | August 29, 2014 | | Compensation | |
| 4,783,893 |
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|
| (3) | ||||||||||||||||
November 20, 2014 | Share sale | (4) | (4) | August 4, 2015 | Share sale | 122 | € | 65.6800 | ||||||||||||||||||
November 18, 2015 | Share sale | 90 | € | 73.7700 |
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Part I
Item 6
1) Compensation in kind of 87,803,973 shares, hypothetical volume of the transaction€6,299,935,062.75.
2) The notifying party concluded a contract with a bank acting as commission agent for the sale of 10,000 SAP shares per week. The sale will be carried out at the bank’s own discretion in the stock market or over the counter in the months December 2015 through November 2016.
Supervisory Board: Other Information
We did not grant any compensation advance or credit to, or enter into any commitment for the benefit of, any member of our Supervisory Board in 20142015 or the previous year.
Hasso Plattner, the chairperson of the Supervisory Board, entered into a consulting contract with SAP after he joined the Supervisory Board in May 2003. The contract does not provide for any compensation. The only cost we incurred under the contract was the reimbursement of expenses.
As far as the law permits, we indemnify Supervisory Board members against, and hold them harmless from, claims brought by third parties. To this end, we maintain directors’ and officers’ (D&O) group liability insurance. The current D&O policy does not include an individual deductible for Supervisory Board members as envisaged in the German Corporate Governance Code.
Headcount
Note (8)(7) to our Consolidated Financial Statements presents the number of employees, measured infull-time equivalents by functional area and by geographic region.
On December 31, 2014,2015, we had 74,40676,986 full-time equivalent (FTE) employees worldwide (December 31, 2013: 66,572)2014: 74,406). This represents an increase in headcount of 7,8342,579 FTEs in comparison to 2013. Of the overall headcount increase in 2014, 5,535 resulted from acquisitions.2014. The average number of employees in 20142015 was 68,343 (2013: 65,409)75,180 (2014: 68,343).
We define the FTE headcount as the number of people we would employ if we only employed people on full-time employment contracts. Students employed part-time and certain individuals who are employed by SAP but who, for various reasons, are not currently working, are excluded from our figures. Also, temporary employees are not included in the above figures. The number of such temporary employees is not material.
On December 31, 2014,2015, the largest number of SAP employees (45%(44%) were employed in the
EMEA Europe, Middle East, and Africa (EMEA) region (including 24%23% in Germany)Germany and 21% in other countries of the region), while 30%29% were employed in the AmericasNorth America and Latin America (Americas) region (including 21% in the United States)States and 26%8% in other countries of the region) and 27% in the APJAsia Pacific Japan (APJ) region.
Unless otherwise stated, the main driver for the following headcount increases were SAP’s acquisition activities (mainly Concur). Our worldwide headcount in the field of cloud and software and software-related services grew 34%decreased less than 1% to 15,07414,991 FTEs (2013: 11,261)(2014: 15,074). Cloud operations and support accounted for most of the increase. Professional services and other servicesServices counted 14,63915,085 FTEs at the end of 20142015 – an increase of less than 1% (2013: 14,629)3% (2014: 14,639). Our R&D
headcount saw a year-over-year increase of 6%11% to 18,90820,938 FTEs (2013: 17,804)(2014: 18,908). This growth stemmed from an increase in headcount in the area of Products & Innovation. Sales and marketing headcount grew by 14%1% to 17,96918,206 FTEs at the end of the year (2013: 15,824)(2014: 17,969). General and administration headcount rose 10% to 5,023stayed constant at 5,024 FTEs at the end of the year (2013: 4,566)(2014: 5,023). Our infrastructure employees numbered 2,7942,743 FTEs – an increasea decrease of 12% (2013: 2,488) driven primarily by our investments in IT.2% (2014: 2,794).
In the Americas region, headcount (FTEs) increased by 2,503,95, or 13%less than 1%; in the EMEA region, the increase was 2,347,566, or 8%2%; and in the APJ region, it was 2,985,1,919, or 19%10%.
Our personnel expense per employee stayed essentially flat atincreased to approximately €115,000€135,000 in 2014 (2013:2015 (2014: approximately €114,000)€115,000). This rise in expense is primarily attributable to an increase in salaries, employee-related restructuring expenses, share-based payments, and a significant rise in the share price in 2015. The personnel expense per employee is defined as the personnel expense divided by the average number of employees. For more information about employee compensation and a detailed overview of the number of people SAP employed,we employ, see the Notes to the Consolidated Financial Statements section, Note (8)(7).
Employee and Labor Relations
On a worldwide basis, we believe that our employee and labor relations are excellent.
On a corporate level employees of SAP in Europe are represented by the SAP SE Works Council (WoC) (Europe). By law and agreement with SAP the SAP SE WoC (Europe) is entitled to receive information on transnational matters and to consult with the Executive Board or a representative thereof. The SAP SE WoC (Europe) was established in November 2014 as a result of the legal transformation of SAP AG into SAP SE. The SAP SE WoC (Europe) replaced the European Works Council which was dissolved following the conversion.
Part I
Item 6, 7
On the legal entity level, the SAP SE works council (Germany) represents the employees of SAP SE with 39 members; theSE. The employees of SAP Deutschland SE & Co. KG (SAP Germany) are represented by a separate works council with 31 members. For different areas of co-determination the entity-level works councils have elected committees. By law the works councils are entitled to consultation and, in some areas, toco-determination rights concerning labor conditions at SAP SE and SAP Germany.council. Other employee representatives include the group works council currently having seven members (members of the works councils of SAP SE and SAP Germany), the representatives of severely disabled persons in all entities and on group level (Germany) and the spokespersons committee as the representation of the executives.
Employees of SAP France, S.A., SAP France Holding and SAP Labs France S.A.SAS are subject to a collective bargaining agreement. Each of SAP France, S.A. & SAP France Holding, SAP Labs France S.A.SAS, Multiposting SAS France andb-process France are represented by a French works council. French works councils are entitled to certain company information and to consult with management on matters that are expected to have an impact on company structure or on the employees it represents. The union negotiatesrepresented unions negotiate agreements with SAP France S.A. and SAP Labs France S.A.SAS.
In addition, the employees of various other SAP Espanaentities, including SAP España – Sistemas, Aplicaciones y Productos en la Informática, S.A., SAP Belgium N.V.NV/SA., SAP Nederland B.V., SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A. and, Concur France are each represented by separate works councils. Each of(France) SAS, SAP (UK) LimitedBrasil Ltda, SAP sistemi, aplikacije in produkti za obdelavo podatkov d.o.o.(Slovenia), SAP Romania SRL, SAP Argentina S.A. and SAP Ireland Limited has an employee consultation forum which represents the employees’ interests. There are workers representatives in Slovenia at SAP Systems, Applications and Products for Data Processing Ltd. and in Romania at SC SAP Romania SRL. Furthermore, union stewards as well as a corresponding cooperation agreement exist for SAP Sweden.
Employees of SAP Brazil and SAP Labs BrazilSvenska Aktiebolag (Sweden), are represented by a specific union related to technology companies andworks councils, worker representatives, employee consultation forums and/or unions. In addition, some of these employees are subject to a collective bargaining agreement.
For Argentina, all employees are legally required to be affiliated with the particular union specified by the government. However, for the IT Industry, as of 2014, no union had completed all registration procedures with the Ministry of Labor
and the IT Chamber, to be recognized by the government as an Industry Union.
Beneficial Ownership of Shares
The ordinary shares beneficially owned by the persons listed in Item 6. Directors, Senior Management and Employees —– Compensation Report” are disclosed in “Item 7. Major Shareholders and Related-Party Transactions —– Major Shareholders.”
SHARE-BASED COMPENSATION PLANS
Share-Based Compensation
We maintain certain share-based compensation plans. The share-based compensation from these plans result from cash-settled and equity-settled awards issued to employees. For more information on our share-based compensation plans refer to “Item 6. Directors, Senior Management and Employees —– Compensation Report” and Note (28)(27) to our Consolidated Financial Statements.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS
The share capital of SAP SE consists of ordinary shares, which are issued only in bearer form. Accordingly, SAP SE generally cannot determine the identity of its shareholders or how many shares a particular shareholder owns. SAP’s ordinary shares are traded in the United States by means of ADRs. Each ADR currently represents one SAP SE ordinary share. On March 6, 2015,11, 2016, based on information provided by the Depositary there were 48,469,92741,751,316 ADRs held of record by 970917 registered holders. The ordinary shares underlying such ADRs represented 3.95%3.40% of the then-outstanding ordinary shares (including treasury stock). Because SAP’s ordinary shares are issued in bearer form only, we are unable to determine the number of ordinary shares directly held by persons with U.S. addresses.
Part I
Item 7, 8
The following table sets forth certain information regarding the beneficial ownership of the ordinary shares to the extent known to SAP as of March 6, 201511, 2016 of: (i) each person or group known by SAP SE to own beneficially 5% or more of the outstanding ordinary shares; and (ii) the beneficial ownership of all members of the Supervisory Board and all members of the Executive Board,
individually and as a group, in each case as reported to SAP SE by such persons. There was, as far as we are able to tell given the nature of our shares, no significant change in the percentage ownership held by any major shareholder during the past three years. None of the major shareholders have special voting rights.
Ordinary Shares Beneficially Owned | Ordinary Shares Beneficially Owned | |||||||||||||||
Major Shareholders | Number | % of Outstanding | Number | % of Outstanding | ||||||||||||
Dietmar Hopp, collectively(1) | 65,273,200 | 5.313 | % | 65,273,200 | 5.313 | % | ||||||||||
Hasso Plattner, Chairperson Supervisory Board, collectively(2) | 106,259,972 | 8.650 | % | 90,248,789 | 7.346 | % | ||||||||||
Klaus Tschira, collectively(3) | 92,079,595 | 7.495 | % | |||||||||||||
Executive Board Members as a group (5 persons) | 36,426 | 0.003 | % | |||||||||||||
Joint heirs of Klaus Tschira, collectively (3) | 88,149,595 | 7.175 | % | |||||||||||||
Executive Board Members as a group (6 persons) | 45,309 | 0.004 | % | |||||||||||||
Supervisory Board Members as a group (18 persons) | 106,284,601 | 8.652 | % | 90,262,818 | 7.347 | % | ||||||||||
Executive Board Members and Supervisory Board Members as a group (21 persons)(4) | 106,321,027 | 8.655 | % | |||||||||||||
Options and convertible bonds that are vested and exercisable within 60 days of March 6, 2015, held by Executive Board Members and Supervisory Board Members, collectively | 0 | NA | ||||||||||||||
Executive Board Members and Supervisory Board Members as a group (24 persons)(4) | 90,308,127 | 7.351 | % | |||||||||||||
Options and convertible bonds that are vested and exercisable within 60 days of March 11, 2016, held by Executive Board Members and Supervisory Board Members, collectively | 0 | NA | ||||||||||||||
BlackRock, Inc.(5) | NA | >5 | % |
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(1) Represents 65,273,200 ordinary shares beneficially owned by Dietmar Hopp, including 3,404,000 ordinary shares owned by DH Besitzgesellschaft mbH & Co. KG (formerly known as Golf Club St. Leon-Rot GmbH & Co. Betriebs-oHG) of which DH Verwaltungs-GmbH is the general partner and 61,869,200 ordinary shares owned by Dietmar Hopp Stiftung, GmbH. Mr. Hopp exercises voting and dispositive powers of the ordinary shares held by such entities. The foregoing information is based solely on a Schedule 13G filed by Dietmar Hopp and Dietmar Hopp Stiftung, GmbH on February 15, 2016. (2) Includes HP Vermögensverwaltungs GmbH & Co. KG in which Hasso Plattner exercises sole voting and dispositive power. (3) Includes Klaus Tschira Stiftung gGmbH and Dr. h. c. Tschira Beteiligungs GmbH & Co. KG in which the joint heirs of Klaus Tschira exercise sole voting and dispositive power. (4) We believe each of the other members of the Supervisory Board and the Executive Board beneficially owns less than 1% of SAP SE’s ordinary shares as of March 11, 2016. (5) As required under German law, BlackRock, Inc. informed SAP that they own more than 5% of SAP’s outstanding ordinary shares. BlackRock, Inc. is not required to provide SAP with the number of shares owned and has not provided such information. |
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We at present have no knowledge about any arrangements, the operation of which may at a subsequent date result in a change in control of the company.
For further information on related-party transactions see Note (31)(30) to our Consolidated Financial Statements.
CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
See “Item 18. Financial Statements” and pagesF-1 through F-93.F-73.
Legal Proceedings
We are subject to a variety of legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including claims and lawsuits involving businesses we have acquired.
Refer to Note (24)(23) to our Consolidated Financial Statements for a detailed discussion of our material legal proceedings.
Dividend Policy
For more information on dividend policy see the disclosure in “Item 3. Key Information — Dividends”.
Part I
Item 8, 9
Significant Changes
Not applicable.We are in the process of preparing the consolidation of intellectual property rights from hybris AG to SAP SE. For more information about this transfer, see Note (32).
The Supervisory Board of SAP SE appointed Stefan Ries and Steve Singh to the SAP Executive Board, with effect from April 1, 2016.
Stefan Ries will continue his role as Chief Human Resources Officer and also take on the role of SAP Labor Relations Director. Steve Singh will continue to lead the SAP Business Network Group.
The Global Managing Board will be dissolved on March 31, 2016.
Our ordinary shares are officially listed on the Frankfurt Stock Exchange, the Berlin Stock
Exchange and the Stuttgart Stock Exchange. The principal trading market for the ordinary shares is Xetra, the electronic dealing platform of Deutsche Boerse AG.
ADRs representing SAP SE ordinary shares are listed on the New York Stock Exchange (NYSE) under the symbol “SAP,” and currently each ADR represents one ordinary share.
TRADING ON THE FRANKFURT STOCK EXCHANGE AND THE NYSE
The table below sets forth, for the periods indicated, the high and low closing sales prices for the ordinary shares on the Xetra trading System of the Frankfurt Stock Exchange together with the closing highs and lows of the DAX, and the high and low closing sales prices for the ADRs on the NYSE (information is provided by Reuters):
Price per Ordinary Share in € | DAX(1) in points | Price per ADR in US$ | Price per Ordinary Share in € | DAX(1) in points | Price per ADR in US$ | |||||||||||||||||||||||||||||||||||||||||||
High | Low | High | Low | High | Low | High | Low | High | Low | High | Low | |||||||||||||||||||||||||||||||||||||
Annual Highs and Lows | ||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 38.40 | 31.12 | 7,077.99 | 5,434.34 | 54.08 | 41.59 | ||||||||||||||||||||||||||||||||||||||||||
2011 | 45.90 | 34.26 | 7,527.64 | 5,072.33 | 68.31 | 48.39 | 45.90 | 34.26 | 7,527.64 | 5,072.33 | 68.31 | 48.39 | ||||||||||||||||||||||||||||||||||||
2012 | 61.43 | 41.45 | 7,672.10 | 5,969.40 | 81.21 | 53.25 | 61.43 | 41.45 | 7,672.10 | 5,969.40 | 81.21 | 53.25 | ||||||||||||||||||||||||||||||||||||
2013 | 64.80 | 52.20 | 9,589.39 | 7,459.96 | 87.14 | 70.27 | 64.80 | 52.20 | 9,589.39 | 7,459.96 | 87.14 | 70.27 | ||||||||||||||||||||||||||||||||||||
2014 | 62.55 | 50.90 | 10,087.12 | 8,571.95 | 85.45 | 64.14 | 62.55 | 50.90 | 10,087.12 | 8,571.95 | 85.45 | 64.14 | ||||||||||||||||||||||||||||||||||||
2015 | 74.85 | 54.53 | 12,374.73 | 9,427.64 | 80.91 | 63.37 | ||||||||||||||||||||||||||||||||||||||||||
Quarterly Highs and Lows | ||||||||||||||||||||||||||||||||||||||||||||||||
2013 | ||||||||||||||||||||||||||||||||||||||||||||||||
First Quarter | 64.80 | 57.82 | 8,058.37 | 7,581.18 | 84.58 | 77.38 | ||||||||||||||||||||||||||||||||||||||||||
Second Quarter | 64.05 | 54.42 | 8,530.89 | 7,459.96 | 83.11 | 71.45 | ||||||||||||||||||||||||||||||||||||||||||
Third Quarter | 57.80 | 53.42 | 8,694.18 | 7,806.00 | 76.94 | 70.27 | ||||||||||||||||||||||||||||||||||||||||||
Fourth Quarter | 62.31 | 52.20 | 9,589.39 | 8,516.69 | 87.14 | 70.94 | ||||||||||||||||||||||||||||||||||||||||||
2014 | ||||||||||||||||||||||||||||||||||||||||||||||||
First Quarter | 62.55 | 54.31 | 9,742.96 | 9,017.79 | 85.45 | 74.87 | 62.55 | 54.31 | 9,742.96 | 9,017.79 | 85.45 | 74.87 | ||||||||||||||||||||||||||||||||||||
Second Quarter | 59.15 | 54.41 | 10,028.80 | 9,173.71 | 81.77 | 74.21 | 59.15 | 54.41 | 10,028.80 | 9,173.71 | 81.77 | 74.21 | ||||||||||||||||||||||||||||||||||||
Third Quarter | 61.12 | 56.53 | 10,029.43 | 9,009.32 | 82.30 | 72.16 | 61.12 | 56.53 | 10,029.43 | 9,009.32 | 82.30 | 72.16 | ||||||||||||||||||||||||||||||||||||
Fourth Quarter | 58.73 | 50.90 | 10,087.12 | 8,571.95 | 71.70 | 64.14 | 58.73 | 50.90 | 10,087.12 | �� | 8,571.95 | 71.70 | 64.14 | |||||||||||||||||||||||||||||||||||
2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
First Quarter | 67.60 | 54.53 | 12,167.72 | 9,469.66 | 73.53 | 63.56 | ||||||||||||||||||||||||||||||||||||||||||
Second Quarter | 70.72 | 62.60 | 12,374.73 | 10,944.97 | 77.27 | 70.23 | ||||||||||||||||||||||||||||||||||||||||||
Third Quarter | 68.77 | 55.89 | 11,735.72 | 9,427.64 | 74.60 | 63.37 | ||||||||||||||||||||||||||||||||||||||||||
Fourth Quarter | 74.85 | 57.12 | 11,382.23 | 9,509.25 | 80.91 | 64.16 | ||||||||||||||||||||||||||||||||||||||||||
Monthly Highs and Lows | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 | ||||||||||||||||||||||||||||||||||||||||||||||||
2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
July | 61.12 | 56.53 | 10,029.43 | 9,407.48 | 82.30 | 77.40 | 68.77 | 61.29 | 11,735.72 | 10,676.78 | 74.60 | 68.26 | ||||||||||||||||||||||||||||||||||||
August | 59.92 | 56.60 | 9,588.15 | 9,009.32 | 79.19 | 76.32 | 66.79 | 56.90 | 11,636.30 | 9,648.43 | 73.08 | 65.47 | ||||||||||||||||||||||||||||||||||||
September | 60.66 | 56.77 | 9,799.26 | 9,422.91 | 78.54 | 72.16 | 59.83 | 55.89 | 10,317.84 | 9,427.64 | 67.07 | 63.37 | ||||||||||||||||||||||||||||||||||||
October | 56.60 | 50.90 | 9,382.03 | 8,571.95 | 71.41 | 64.14 | 71.88 | 57.12 | 10,850.14 | 9,509.25 | 78.71 | 64.16 | ||||||||||||||||||||||||||||||||||||
November | 56.90 | 52.96 | 9,980.85 | 9,166.47 | 71.12 | 66.45 | 74.85 | 72.33 | 11,382.23 | 10,708.40 | 80.22 | 77.96 | ||||||||||||||||||||||||||||||||||||
December | 58.73 | 53.96 | 10,087.12 | 9,334.01 | 71.70 | 67.20 | 74.75 | 69.40 | 11,261.24 | 10,139.34 | 80.91 | 77.21 | ||||||||||||||||||||||||||||||||||||
2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
January | 58.26 | 54.53 | 10,798.33 | 9,469.66 | 70.04 | 63.56 | 74.25 | 70.58 | 10,310.10 | 9,391.64 | 80.36 | 76.90 | ||||||||||||||||||||||||||||||||||||
February | 62.84 | 58.70 | 11,401.66 | 10,663.51 | 70.19 | 66.31 | 73.19 | 64.90 | 9,757.88 | 8,752.87 | 79.70 | 73.68 | ||||||||||||||||||||||||||||||||||||
March (through March 6, 2015) | 63.59 | 62.79 | 11,550.97 | 11,280.36 | 71.11 | 68.48 | ||||||||||||||||||||||||||||||||||||||||||
March (through March 11, 2016) | 71.17 | 68.62 | 9,831.13 | 9,498.15 | 78.65 | 76.34 |
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Part I
Item 9, 10
(1) The DAX is a continuously updated, capital-weighted performance index of 30 German blue chip companies. In principle, the shares included in the DAX are selected on the basis of their stock exchange turnover and the issuer’s free-float market capitalization. Adjustments to the DAX are made for capital changes, subscription rights and dividends.
On March 6, 2015,11, 2016, the closing sales price per ordinary share on the Frankfurt Stock Exchange (Xetra Trading System) was €63.47€69.97 and the closing sales price per ADR on the NYSE was US $68.48,$78.65, as reported by Reuters.
ITEM 10. ADDITIONAL INFORMATION
Organization and Register
SAP SE is a European Company (Societas Europaea, or “SE”) organized in the Federal Republic of Germany under German and European law, including Council Regulation (EC) No. 2157/2001 on the Statute for a European Company (the “SE Regulation”), the German Act on the Implementation of Council Regulation No. 2157/2001 of October 8, 2001 on the Statute for a European Company (Gesetz zur Ausführung der Verordnung (EG) Nr. 2157/2001 des Rates vom 8. Oktober 2001 über das Statut der Europäischen Gesellschaft (SE) – SE-Ausführungsgesetz; “SE-AG”) of December 22, 2004, and the German Stock Corporation Act (Aktiengesetz). SAP SE is registered in the Commercial Register (Handelsregister) at the Lower Court of Mannheim, Germany, under the entry number “HRB 719915.” SAP SE publishes its official notices in the Federal Gazette (www.bundesanzeiger.de).
Objects and Purposes
SAP’s Articles of Incorporation state that our objects involve, directly or indirectly, the development, production and marketing of products and the provision of services in the field of information technology, including:
developing and marketing integrated product and service solutions for e-commerce;
developing software for information technology and the licensing of its use to others;
organization and deployment consulting, as well as user training, for e-commerce and other software solutions;
selling, leasing, renting and arranging the procurement and provision of all other forms of use of information technology systems and related equipment; and
making capital investments in enterprises active in the field of information technology to promote the opening and advancement of international markets in the field of information technology.
– | developing and marketing integrated product and service solutions for e-commerce; |
– | developing software for information technology and the licensing of its use to others; |
– | organization and deployment consulting, as well as user training, for e-commerce and other software solutions; |
– | selling, leasing, renting and arranging the procurement and provision of all other forms of use of information technology systems and related equipment; and |
– | making capital investments in enterprises active in the field of information technology to promote the opening and advancement of international markets in the field of information technology. |
SAP is authorized to act in all the business areas listed above and to delegate such activities to affiliated entities within the meaning of the German Stock Corporation Act; in particular SAP is authorized to delegate its business in whole or in part to such entities. SAP SE is authorized to establish branch offices in Germany and other countries, as well as to form, acquire or invest in other companies of the same or related kind and to enter
into collaboration and joint venture agreements. SAP is further authorized to invest in enterprises of all kinds principally for investment purposes. SAP is authorized to dispose of investments, to consolidate the management of enterprises in which it participates, to enter into affiliation agreements with such entities, or to limit its activities to manage its shareholdings.
Introduction
SAP SE, as a European Company with a two-tier board system, is governed by three separate bodies: the Supervisory Board, the Executive Board and the Annual General Meeting of Shareholders. Their rules are defined by European and German law, by the Agreement on the Involvement of Employees in SAP SE (“Employee Involvement Agreement”, or “EIA”), by the German Corporate Governance Code and by SAP’s Articles of Incorporation (Satzung) and are summarized below. See “Item 16G. Differences in Corporate Governance Practices” for additional information on our corporate governance practices.
The Supervisory Board
The Supervisory Board appoints and removes the members of the Executive Board and oversees and advises the management of the corporation. At regular intervals it meets to discuss current business as well as business development and planning. The SAP Executive Board must consult with the Supervisory Board concerning the corporate strategy, which is developed by the Executive Board. Types of transactions for which the Executive Board requires the Supervisory Board’s consent are listed in the Articles of
Part I
Item 10
Incorporation; in addition, the Supervisory Board has specified further types of transactions that require its consent. Accordingly, the Supervisory Board must also approve the annual budget of SAP upon submission by the Executive Board and certain subsequent deviations from the approved budget. The Supervisory Board is also responsible for representing SAP SE in transactions between SAP SE and Executive Board members.
The Supervisory Board, based on a recommendation by its Audit Committee, provides its proposal for the election of the external independent auditor to the Annual General Meeting of Shareholders. The Supervisory Board is also responsible for monitoring the auditor’s independence, a task it has delegated to its audit committee.
Pursuant to Article 40 (3) sentence 1 of the SE Regulation, the number of members of the supervisory board and the rules for determining this number are to be laid down in the articles of incorporation. Furthermore, pursuant to Section 17 (1) SE-AG, the size of supervisory boards of companies which, like SAP SE, have a capital stock exceeding€ 10,000,000, is limited
to 21 members. Moreover, the number of members must be divisible by three. In line with these provisions as well as the EIA, the Articles of Incorporation of SAP SE provide that the Supervisory Board shall be composed of 18 members. Furthermore, it is provided in the EIA that the shareholders of SAP SE have the possibility to reduce the size of the Supervisory Board in the future (i.e. at the earliest in the Annual General Meeting of Shareholders in 2018, with effect from the Annual General Meeting of Shareholders in 2019) to 12 members.
The current and first Supervisory Board of SAP SE consists of eighteen members, of which nine members were elected by SAP SE’s shareholders at the Annual General Meeting of Shareholders in 2014, for the period until the close of the Annual General Meeting of Shareholders in 2019, and nine members were appointed by the SAP SE Works Council Europe in the EIA for the period until2015. The term of office of all eighteen members will end upon the conclusion of the Annual General Meeting of Shareholders in 2015. Pursuant to the EIA and the Articles of Incorporation, the term of office of the succeeding employees’ representatives on the first Supervisory Board of SAP SE appointed subsequent to this term of office shall end at the same time as the term of office of the shareholders’ representatives on the first Supervisory Board (i.e. at the close of the Annual General Meeting of Shareholders in 2019).
The procedure for the appointment of the employees’ representatives on the Supervisory Board of SAP SE is governed by the EIA. The employees’ representatives succeeding the current members in 2015 will be appointed by the SE Works Council. Pursuant toIn accordance with the EIA, the nine seats on the first Supervisory Board reserved for employees’ representatives arewere allocated as follows: Thethe first six seats arewere allocated to Germany, the seventh seat iswas allocated to France, the eighth seat iswas also allocated to Germany, and the ninth seat iswas allocated to a European country not represented by the first eight seats, as determined by the SAP SE Works Council.Council Europe. The employees’ representatives for the first six seats allocated to Germany will bewere determined by direct vote by all SAP employees with their principal place of employment in Germany. The employees’ representative for the seventh seat allocated to France will bewas determined according to the applicable provisions of French law on the election or appointment of employees’ representatives on a supervisory board. With regard to the eighth and ninth seat, members of the SAP SE Works Council Europe from the relevant countries to which those seats are allocated shall beGermany and Slovakia were appointed by the SE Works Council as employees’ representatives.
Any Supervisory Board member elected by the shareholders at the Annual General Meeting of Shareholders may be removed by three-quarters of the votes cast at the Annual General Meeting of Shareholders. Any Supervisory Board member appointed in accordance with the EIA may be removed by the SAP SE Works Council Europe upon application by the body that nominated the respective employees’ representative for appointment by the SE Works Council or, in case the employees’ representative was directly elected, the majority of the employees entitled to vote.
The Supervisory Board elects a chairperson and one or two deputy chairperson(s) among its members by a majority of the votes cast. Only a shareholders’
representative may be elected as chairperson of the Supervisory Board. When electing the chairperson of the Supervisory Board, the oldest member in terms of age of the shareholders’ representatives on the Supervisory Board will chair the meeting and, in the event of a tied vote, will have the casting vote.
Unless otherwise mandatorily prescribed by law or the Articles of Incorporation, resolutions of the Supervisory Board are adopted by simple majority of the votes cast. In the event of a tie, the vote of
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the chairperson and, in the event that the chairperson does not participate in passing the resolution, the vote of the deputy chairperson, provided that he or she is a shareholders’ representative, will be decisive (casting vote).
The members of the Supervisory Board cannot be elected or appointed, as the case may be, for a term longer than six years. Other than for the employees’ representatives on the first Supervisory Board of SAP SE, the term expires at the close of the Annual General Meeting of Shareholders giving its formal approval of the acts of the Supervisory Board for the fourth fiscal year following the year in which the term of office of the Supervisory Board members commenced.Re-election is possible. Our Supervisory Board normally meets four times a year. The compensation of the members of the Supervisory Board is set in the Articles of Incorporation.
As stipulated in the German Corporate Governance Code (GCGC), an adequate number of our Supervisory Board members are independent. To be considered for appointment to the Supervisory Board and for as long as they serve, members must comply with certain criteria concerning independence, conflicts of interest and multiple memberships of management, supervisory and other governing bodies. They must be loyal to SAP in their conduct and must not accept any position in companies that are in competition with SAP. Members are subject to insider trading prohibitions and the respective directors’ dealing rules of the German Securities Trading Act. A member of the Supervisory Board may not vote on matters relating to certain contractual agreements between such member and SAP SE. Further, as the compensation of the Supervisory Board members is set in the Articles of Incorporation, Supervisory Board members are unable to vote on their own compensation, with the exception that they are able to exercise voting rights in a General Meeting of Shareholders in connection with a resolution amending the Articles of Incorporation.
The Supervisory Board may appoint committees from among its members and may, to the extent permitted by law, entrust such committees with the authority to make decisions on behalf of the Supervisory Board. Currently the Supervisory Board maintains the following committees:
The Audit Committee
The focus of the Audit Committee (Prüfungsausschuss) is the oversight of SAP’s
external financial reporting as well as SAP’s risk management, internal controls (including internal controls over the effectiveness of the financial reporting process), corporate audit and compliance matters. According to German Law SAP’s Audit Committee includes at least one independent member with specialist expertise in the fields of financial reporting or auditing. Among the tasks of the Audit Committee are the discussion of SAP’s quarterly and year end financial reporting prepared under German and U.S. regulations, including this report. The Audit Committee proposes the appointment of the external independent auditor to the Supervisory Board, determines focus audit areas, discusses critical accounting policies and estimates with and reviews the audit reports issued and audit issues identified by the auditor. The audit committee also negotiates the audit fees with the auditor and monitors the auditor’s independence and quality. SAP’s Corporate Audit, SAP’s Office of Legal Compliance and Integrity and SAP’s Risk Management Office report upon request or at the occurrence of certain findings, but in any case at least once a year (Office of Legal Compliance and Integrity and Risk Management Office) or twice a year (Corporate Audit), directly to the Audit Committee.
The Audit Committee has established procedures regarding the prior approval of all audit and non-audit services provided by our external independent auditor. See “Item 16C. Principal Accountant Fees and Services” for details. Furthermore the Audit Committee monitors the effectiveness of our internal risk management and other monitoring processes that are or need to be established.
The Supervisory Board has determined Erhard Schipporeit to be an audit committee financial expert as defined by the regulations of the SEC issued under Section 407 of the Sarbanes-Oxley Act as well as an independent financial expert as defined by the German Stock Corporation Act. See “Item 16A. Audit Committee Financial Expert” for details. He is also the chairperson of the Audit Committee.
The General and Compensation Committee
The General and Compensation Committee (Präsidial- und Personalausschuss) coordinates the work of the Supervisory Board, prepares its meetings and deals with corporate governance issues. In addition, it carries out the preparatory
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work necessary for the personnel decisions made by the Supervisory Board, notably those concerning compensation for the Executive Board members and the conclusion, amendment and termination of the Executive Board members’ contracts of appointment.
The German Stock Corporation Act prohibits the Compensation Committee from deciding on the
compensation of the Executive Board members on behalf of the Supervisory Board and requires that such decision is made by the entire Supervisory Board. This Act also provides the General Meeting of Shareholders with the right to vote on the system for the compensation of Executive Board members, such vote, however, not being legally binding for the Supervisory Board.
The Finance and Investment Committee
The Finance and Investment Committee (Finanz- und Investitionsausschuss) addresses general financing issues. Furthermore, it regularly discusses acquisitions of intellectual property and companies, venture capital investments and other investments with the Executive Board and reports to the Supervisory Board on such investments. It is also responsible for the approval of such investments if the individual investment amount exceeds certain specified limits.
The Technology and Strategy Committee
The Technology and Strategy Committee (Technologie-und Strategieausschuss) monitors technology transactions and provides the Supervisory Board with in-depth technical advice.
The Nomination Committee
The Nomination Committee (Nominierungsausschuss) is exclusively composed of shareholder representatives and is responsible for identifying suitable candidates for membership of the Supervisory Board for recommendation to the Annual General Meeting of Shareholders.
The Special Committee
The Special Committee (Sonderausschuss) deliberates on matters arising out of substantial exceptional risks, such as major litigations.
The People and Organization Committee
The People and Organization Committee (Ausschuss für Mitarbeiter- und Organisationsangelegenheiten) deliberates and advises the Executive and Supervisory Board on key personnel matters and major organizational changes below the Executive Board and Global Managing Board level as well as equal opportunities for women at SAP.
The duties and procedures of the Supervisory Board and its committees are specified in their respective rules of procedure, if any, which reflect the requirements of European and German law, including the SE Regulation and the German Stock Corporation Act, the Articles of Incorporation and the recommendations of the GCGC.
According to the provisions of the Sarbanes-Oxley Act, SAP does not grant loans to the members of the Executive Board or the Supervisory Board.
The Executive Board
The Executive Board manages the Company’s business, is responsible for preparing its strategy and represents it in dealings with third parties. The Executive Board reports regularly to the Supervisory Board about SAP operations and business strategies and prepares special reports upon request. A person may not serve on the Executive Board and on the Supervisory Board at the same time.
The Executive Board and the Supervisory Board must cooperate closely for the benefit of the Company. Without being asked, theThe Executive Board mustis required to provide to the Supervisory Board regular, prompt and comprehensive information about all of the essential issues affecting the SAP Group’s business progress and its potential business risks. Furthermore, the Executive Board must maintain regular contact with the chairperson of the Supervisory Board and vice versa. The Executive Board must inform the chairperson of the Supervisory Board promptly about exceptional events that are of significance to SAP’s business. The Supervisory Board chairperson must inform the Supervisory Board accordingly and shall, if required, convene an extraordinary meeting of the Supervisory Board.
Pursuant to the Articles of Incorporation, the Executive Board must consist of at least two members. SAP SE’s Executive Board is currently
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comprised of fivesix members. Any two members of the Executive Board jointly or one member of the Executive Board and the holder of a special power of attorney (Prokurist) jointly may legally represent SAP SE. The Supervisory Board appoints each member of the Executive Board for a maximum term of five years, with the possibility of re-appointment. Under certain circumstances, a member of the Executive Board may be removed by the Supervisory Board prior to the expiration of that member’s term. A member of the Executive Board may not vote on matters relating to certain contractual agreements between such member and SAP SE, and may be liable to SAP SE if such member has a material interest in any contractual agreement between SAP and a third party which was not previously disclosed to and approved by the Supervisory Board. Further, as the compensation of the Executive Board members is set by the Supervisory Board, Executive Board members are unable to vote on their own compensation, with the exception that they are able to exercise voting rights in a General Meeting of Shareholders resolving a non-binding vote on the system for the compensation of Executive Board members.
Under German law SAP SE’s Supervisory Board members and Executive Board members have a duty of loyalty and care towards SAP SE. They must exercise the standard of care of a prudent and diligent businessman and bear the burden of proving they did so if their actions
are contested. Both bodies must consider the interest of SAP SE shareholders and our employees and, to some extent, the common good. Those who violate their duties may be held jointly and severally liable for any resulting damages, unless they acted pursuant to a lawful resolution of the Annual General Meeting of Shareholders.
SAP has implemented a Code of Business Conduct for employees (see “Item 16B. Code of Ethics” for details). The employee code is equally applicable to managers and members of the Executive Board. Its rules are observed as well by members of the Supervisory board as applicable.
Under German law the Executive Board of SAP SE has to assess all major risks for the SAP Group. In addition, all measures taken by management to reduce and handle the risks have to be documented. Therefore, SAP’s management has adopted suitable measures such as implementing an enterprise-wide risk monitoring system to ensure that adverse developments endangering the corporate standing are recognized at a reasonably early point in time.
The Office of Legal Compliance and Integrity was created by the SAP Executive Board in 2006 to oversee and coordinate legal and regulatory policy compliance at SAP. The Chief Global Compliance Officer heading the Office of Legal Compliance and Integrity directly reports to the CFO of SAP SE and also has direct communication channels and reporting obligations to the Audit Committee of the Supervisory Board. The Office of Legal Compliance and Integrity manages a network of more than 100 local subsidiary Compliance Officers who act as the point of contact for local questions or issues under the SAP Code of Business Conduct for employees. The Office of Legal Compliance and Integrity provides training and communication to SAP employees to raise awareness and understanding of legal and regulatory compliance policies. Employee help lines are also supported in each region where questions can be raised or questionable conduct can be reported without fear of retaliation.
Pursuant to Sec. 289a of the German Commercial Code (Handelsgesetzbuch) the Executive Boards of publicly listed companies like SAP SE are required to issue a corporate governance statement (Erklärung zur Unternehmensführung) every year together with their annual financial statements. Companies are free to include the corporate governance statement in their management report or publish the statement on their website. SAP has chosen to publish the statement on its website under (//www.sap.com/corporate-en/investors/governance/index.epx). As stipulated by law the statement comprises the declaration of implementation of the recommendations of the GCGC pursuant to Sec. 161 of the German Stock Corporation Act, relevant disclosures of the company’s corporate governance practices such as ethical, work and welfare standards, and a description of the Executive Board and Supervisory Board’s rules of procedure as well as information on the composition and rules of procedure of their sub-committees.
The Global Managing Board
In May 2012, SAP created a Global Managing Board in addition to the SAP Executive Board, which retains ultimate responsibility for overseeing and deciding on the activities of the company. The Global Managing Board allows SAP to appoint a broader range of global leaders to help steer the organization. The Global Managing Board has advisory and decision-supporting functions for the Executive Board and comprises all Executive
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Board members as well as Helen Arnold, Quentin Clark, Stefan Ries Michael Kleinemeier, and Steve Singh.
The Annual General Meeting of Shareholders
Shareholders of the Company exercise their voting rights at shareholders’ meetings. The Executive Board calls the Annual General Meeting of Shareholders, which must take place within the first six months of each fiscal year. The Supervisory Board or the Executive Board may call an extraordinary meeting of the shareholders if the interests of the stock corporation so require. Additionally, shareholders of SAP SE holding in the aggregate a minimum of 5% of SAP SE’s issued share capital may call an extraordinary meeting of the shareholders. Shareholders as of the record date are entitled to attend and participate in shareholders’ meetings if they have provided timely notice of their intention to attend the meeting.
At the Annual General Meeting of Shareholders, the shareholders are asked, among other things, to formally approve the actions taken by the Executive Board and the Supervisory Board in the preceding fiscal year, to approve the appropriation of the corporation’s distributable profits and to appoint an external independent auditor. Shareholder representatives of the Supervisory Board are generally elected at the Annual General Meeting of Shareholders for a term of approximately five years. Shareholders may also be asked to grant authorization to repurchase treasury shares, to resolve on measures to raise or reduce the capital of the Company or to ratify amendments of our Articles of Incorporation. The Annual General Meeting of Shareholders can make management decisions only if requested to do so by the Executive Board.
There are no provisions in the Articles of Incorporation of SAP SE that would have an effect of delaying, deferring or preventing a change in control of SAP SE and that would only operate with respect to a merger, acquisition or corporate restructuring involving it or any of its subsidiaries.
According to the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz) a bidder seeking control of a company with its corporate seat in Germany or another state of the European Economic Area
(EEA) and its shares being traded on an EEA stock exchange must publish an advance notice of its decision to make a tender offer, submit an offer statement to the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) for review, and obtain certification from a qualified financial institution that adequate financing is in place to complete the offer. The offer statement must be published upon approval by the Federal Financial Supervisory Authority or expiry of a certain time period without such publication being prohibited by the Federal Financial Supervisory
Authority. Once a shareholder has acquired shares representing at least 30% of the voting rights in an EEA-listed company, it must make an offer for all remaining shares. The Securities Acquisition and Takeover Act requires the executive board of the target company to refrain from taking any measures that may frustrate the success of the takeover offer. However, the target executive board is permitted to take any action that a prudent and diligent management of a company that is not the target of a takeover bid would also take. Moreover, the target executive board may search for other bidders and, with the prior approval of the supervisory board, may take other defensive measures, provided that both boards act within the parameters of their general authority under the German Stock Corporation Act. An executive board may also adopt specific defensive measures if such measures have been approved by the supervisory board and were specifically authorized by the general shareholders’ meeting no earlier than 18 months in advance of such measures by a resolution of at least 75% of the shares represented.
Under the European Takeover Directive of 2004 member states had to choose whether EU restrictions on defensive measures apply to companies that are registered in their territory. Germany decided to opt out and to retain its current restrictions on a board implementing defensive measures (as described above). As required by the Directive if a country decides to opt out the German Securities Acquisition and Takeover Act grants companies the option of voluntarily applying the European standard by a change of the Articles of Incorporation (opt-in). SAP SE has not made use of this option.
Under German law, the capital stock may be increased in consideration of contributions in cash or in kind, or by establishing authorized capital or
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contingent capital or by an increase of the company’s capital reserves. Authorized capital provides the Executive Board with the flexibility to issue new shares for a period of up to five years. The Executive Board must obtain the approval of the Supervisory Board before issuing new shares with regard to the authorized capital. Contingent capital allows the issuance of new shares for specified purposes, including stock option plans for Executive Board members or employees and the issuance of shares upon conversion of convertible bonds and exercise of stock options. By law, the Executive Board may only issue new shares with regard to the contingent capital for the specified purposes. Capital increases require an approval by at least 75% of the valid votes cast at the General Meeting of Shareholders in which the increase is proposed, and requires an amendment to the Articles of Incorporation.
The share capital may be reduced by an amendment to the Articles of Incorporation approved by at least 75% of the valid votes cast at the General Meeting of Shareholders. In addition, the Executive Board of SAP SE is allowed to authorize a reduction of the company’s capital stock by canceling a defined number of repurchased treasury shares if this repurchasing and the subsequent reduction have already been approved by the General Meeting of Shareholders.
The Articles of Incorporation do not contain conditions regarding changes in the share capital that are more stringent than those provided by applicable European and German law.
RIGHTS ACCOMPANYING OUR SHARES
There are no limitations imposed by German law or the Articles of Incorporation of SAP SE on the rights to own securities, including the rights of non-residents or foreign holders to hold the ADRs or ordinary shares, to exercise voting rights or to receive dividends or other payments on such shares.
According to the German stock corporation law, the rights of shareholders cannot be amended without shareholders’ consent. The Articles of Incorporation do not provide more stringent conditions regarding changes of the rights of shareholders than those provided by applicable European and German law.
Voting Rights
Each ordinary SAP SE share represents one vote. Cumulative voting is not permitted under applicable European and German law. A corporation’s articles of incorporation may stipulate a majority necessary to pass a shareholders’ resolution differing from the majority provided by law, unless the law mandatorily requires a certain majority. Section 21 (1) of SAP SE’s Articles of Incorporation provides that resolutions may be passed at the General Meeting of Shareholders with a majority of valid votes cast, unless a larger majority is prescribed by law or the Articles of Incorporation. SAP SE’s Articles of Incorporation as well as applicable European and German law require that the following matters, among others, be approved by at least 75% of the valid votes cast at the General Meeting of Shareholders in which the matter is proposed:
changing the corporate purpose of the company set out in the Articles of Incorporation;
capital increases and capital decreases;
excluding preemptive rights of shareholders to subscribe for new shares or for treasury shares;
dissolution;
a merger into, or a consolidation with, another company;
a transfer of all or virtually all of the assets;
a change of corporate form, includingre-conversion into a German stock corporation;
a transfer of the registered seat to another EU member state; and
any other amendment to the Articles of Incorporation (pursuant to section 21 (2) sentence 1 of the Articles of Incorporation). For any amendments of the Articles of Incorporation which require a simple majority for stock corporations established under German law, however, section 21 (2) sentence 2 of SAP SE’s Articles of Incorporation provides that the simple majority of the valid votes cast is sufficient if at least half of the subscribed capital is represented or, in the absence of such quorum, the majority prescribed by law (i.e. two thirds of the votes cast, pursuant to sec. 59 of the SE Regulation) is sufficient.
– | changing the corporate purpose of the company set out in the Articles of Incorporation; |
– | capital increases and capital decreases; |
– | excluding preemptive rights of shareholders to subscribe for new shares or for treasury shares; |
– | dissolution; |
– | a merger into, or a consolidation with, another company; |
– | a transfer of all or virtually all of the assets; |
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– | a change of corporate form, including re-conversion into a German stock corporation; |
– | a transfer of the registered seat to another EU member state; and |
– | any other amendment to the Articles of Incorporation (pursuant to section 21 (2) sentence 1 of the Articles of Incorporation). For any amendments of the Articles of Incorporation which require a simple majority for stock corporations established under German law, however, section 21 (2) sentence 2 of SAP SE’s Articles of Incorporation provides that the simple majority of the valid votes cast is sufficient if at least half of the subscribed capital is represented or, in the absence of such quorum, the majority prescribed by law (i.e. two thirds of the votes cast, pursuant to sec. 59 of the SE Regulation) is sufficient. |
Dividend Rights
See “Item 3. Key Information ��– Dividends.”
Preemptive Rights
Shareholders have preemptive rights to subscribe (Bezugsrecht) for any issue of additional shares in proportion to their shareholdings in the issued capital. The preemptive rights may be excluded under certain circumstances by a shareholders’ resolution (approved by at least 75% of the valid votes cast at the General Meeting of Shareholders) or by the Executive Board authorized by such shareholders’ resolutions and subject to the consent of the Supervisory Board.
Liquidation
If SAP SE were to be liquidated, any liquidation proceeds remaining after all of our liabilities were paid would be distributed to our shareholders in proportion to their shareholdings.
Disclosure of Shareholdings
SAP SE’s Articles of Incorporation do not require shareholders to disclose their share holdings. The German Securities Trading Act (Wertpapierhandelsgesetz), however, requires holders of voting securities of SAP SE to notify SAP SE and the Federal Financial Supervisory Authority of the number of shares they hold if that number reaches, exceeds or falls below specified thresholds. These thresholds are 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% of the corporation’s outstanding voting rights. In respect of certificates representing shares, the notification requirement shall apply exclusively to the holder of the certificates. In addition, the German Securities Trading Act also obliges anyone who holds, directly or indirectly, financial instruments that convey an unconditional entitlement to acquire under a legally binding agreement, shares in SAP SE, to notify SAP SE and the Federal Financial Supervisory Authority if the thresholds mentioned above have been reached, exceeded or fallen
below, with the exception of the 3% threshold. This notification obligation also exists for the holder of a financial instrument which merely de facto enables its holder or a third party to acquire shares in SAP SE, subject to the thresholds mentioned in the preceding sentence. In connection with this notification obligation positions in voting rights and other financial instruments have to be aggregated.
Exchange Controls and Other Limitations Affecting Security Holders
The euro is a fully convertible currency. At the present time, Germany does not restrict the export or import of capital, except for investments in certain areas in accordance with applicable resolutions adopted by the United Nations and the European Union. However, for statistical purposes only, every individual or corporation residing in Germany (“Resident”) must report to the German Central Bank (Deutsche Bundesbank), subject only to certain immaterial exceptions, any payment received from or made to an individual or a corporation residing outside of Germany (“Non-Resident”) if such payment exceeds €12,500€12,500 (or the equivalent in a foreign currency). In addition, German Residents (except for individuals and certain financial institutions) must report any accounts payable to or receivable from Non-Residents if such payables or receivables, in the aggregate, exceed €5€5 million (or the equivalent in a foreign currency) at the end of any calendar month. Furthermore, companies resident in Germany with accounts payable to or receivable from Non-Residents in excess of €500€500 million have to report any payables or receivables to/from Non-Residents arising from derivative instruments at the end of each calendar quarter. Residents are also required to report annually to the German Central Bank any shares or voting rights of 10% or more which they hold directly or indirectly in non-resident corporations with total assets of more than €3€3 million. Corporations residing in Germany with assets in excess of €3€3 million must report annually to the German Central Bank any shares or voting rights of 10% or more held directly or indirectly by a Non-Resident.
General
The following discussion is a summary of certain material German tax and U.S. federal income tax consequences of the acquisition, ownership and disposition of our ADRs or ordinary shares to a U.S. Holder. In general, a U.S. Holder (as hereinafter defined) is any beneficial owner of our ADRs or ordinary shares that (i) is a citizen or resident of the U.S. or a corporation organized under the laws of the U.S. or any political subdivision thereof, an estate whose income is subject to U.S. federal income tax regardless of its source or a trust, if a U.S. court can exercise
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primary supervision over its administration and one or more U.S. persons are authorized to control all substantial
decisions of the trust; (ii) is not a resident of Germany for purposes of the income tax treaty between the U.S. and Germany (Convention between the Federal Republic of Germany and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and to certain other Taxes, as amended by the Protocol of June 1, 2006 and as published in the German Federal Law Gazette 2008 vol. II pp. 611/851; the “Treaty”); (iii) owns the ADRs or ordinary shares as capital assets; (iv) does not hold the ADRs or ordinary shares as part of the business property of a permanent establishment or a fixed base in Germany; and (v) is fully entitled to the benefits under the Treaty with respect to income and gain derived in connection with the ADRs or ordinary shares.
THE FOLLOWING IS NOT A COMPREHENSIVE DISCUSSION OF ALL GERMAN TAX AND U.S. FEDERAL INCOME TAX CONSEQUENCES THAT MAY BE RELEVANT FOR U.S. HOLDERS OF OUR ADRs OR ORDINARY SHARES. THEREFORE, U.S. HOLDERS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE OVERALL GERMAN TAX AND U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR ADRs OR ORDINARY SHARES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE EFFECT OF ANY STATE, LOCAL OR OTHER FOREIGN OR DOMESTIC LAWS.
German Taxation
The summary set out below is based on German tax laws, interpretations thereof and applicable tax treaties to which Germany is a party and that are in force at the date of this report; it is subject to any changes in such authority occurring after that date, potentially with retroactive effect, that could result in German tax consequences different from those discussed below. This discussion is also based, in part, on representations of the Depositary and assumes that each obligation of the Deposit Agreement and any related agreements will be performed in accordance with its terms. For additional information on the Depository and the fees associated with SAP’s ADR program see “Item 12. Description of Securities Other Than Equity Securities – American Depository Shares.”
For purposes of applying German tax law and the applicable tax treaties to which Germany is a party, a holder of ADRs will generally be treated as owning the ordinary shares represented thereby.
German Taxation of Dividends
Under German income tax law, the full amount of dividends distributed by an incorporated company is generally subject to German withholding tax at a
domestic rate of 25% plus a solidarity surtax of 5.5% thereon (effectively 1.375% of dividends before withholding tax), resulting in an aggregate withholding tax rate from dividends of 26.375%. Non-resident corporate shareholders will generally be entitled to a refund in the amount of two-fifths of the withholding tax (including solidarity surtax). This does not preclude a further reduction or refund of withholding tax, if any, available under a relevant tax treaty.
Generally, for many non-resident shareholders the withholding tax rate is currently reduced under applicable income tax treaties. Rates and refund procedures may vary according to the applicable treaty. To reduce the withholding tax to the applicable treaty tax rate a non-resident shareholder must apply for a refund of withholding taxes paid. Claims for refund, if any, are made on a special German claim for refund form, which must be filed with the German Federal Tax Office (Bundeszentralamt für Steuern, D-53221 Bonn, Germany; http://www.bzst.de). The relevant forms can be obtained from the German Federal Tax Office or from German embassies and consulates. For details, such non-resident shareholders are urged to consult their own tax advisors. Special rules apply for the refund to U.S. Holders (we refer to the below section “Refund Procedures for U.S. Holders”).
Refund Procedures for U.S. Holders
Under the Treaty, a partial refund of the 25% withholding tax equal to 10% of the gross amount of the dividend and a full refund of the solidarity surtax can be obtained by a U.S. Holder. Thus, for each US$100 of gross dividends paid by SAP SE to a U.S. Holder, the dividends (which are dependent on the euro/dollar exchange rate at the time of payment) will be initially subject to a German withholding tax of US$26.375, of which US$11.375 may be refunded under the Treaty. As a result, a U.S. Holder effectively would receive a
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total dividend of US$85 (provided the euro/dollar exchange rate at the time of payment of the dividend is the same as at the time of refund, otherwise the effective dividend may be higher or lower). Further relief of German withholding tax under the Treaty may be available for corporate U.S. Holders owning at least 10% of the voting stock of SAP or U.S. Holders qualifying as pension fund within the meaning of the Treaty, subject to further requirements being met.
To claim the refund of amounts withheld in excess of the Treaty rate, a U.S. Holder must submit (either directly or, as described below, through the Data Medium Procedure participant) a claim for refund to the German tax authorities, with, in the case of a direct claim, the original bank voucher (or certified copy thereof) issued by the paying entity documenting the tax withheld, within four years from the end of the calendar year in which the dividend is received. Claims for refund are made on a
special German claim for refund form, which must be filed with the German Federal Tax Office (Bundeszentralamt für Steuern,D-53221 Bonn, Germany). The German claim for refund form may be obtained from the German tax authorities at the same address where applications are filed, from the Embassy of the Federal Republic of Germany, 4645 Reservoir Road NW, Washington, DC 20007, or can be downloaded from the homepage of the German Federal Tax Office (http://www.bzst.de).
U.S. Holders must also submit to the German tax authorities a certification of their U.S. residency status (IRS Form 6166). This certification can be obtained from the Internal Revenue Service by filing a request for certification (generally on an IRS Form 8802, which will not be processed unless a user fee is paid) with the Internal Revenue Service, P.O. Box 71052, Philadelphia, PA 19176-6052. U.S. Holders should consult their own tax advisors regarding how to obtain an IRS Form 6166.
An IT-supported quick-refund procedure is available for dividends received (the “Data Medium Procedure – DMP”). If the U.S. Holder’s bank or broker elects to participate in the DMP, it will perform administrative functions necessary to claim the Treaty refund for the beneficiaries. The refund beneficiaries must confirm to the DMP participant that they meet the conditions of the Treaty provisions and that they authorize the DMP participant to file applications and receive notices and payments on their behalf. Further each refund beneficiary must confirm that (i) it is the beneficial
owner of the dividends received; (ii) it is resident in the U.S. in the meaning of the Treaty; (iii) it does not have its domicile, residence or place of management in Germany; (iv) the dividends received do not form part of a permanent establishment or fixed base in Germany; and (v) it commits, due to its participation in the DMP, not to claim separately for refund.
The beneficiaries also must provide an IRS Form 6166 certification with the DMP participant. The DMP participant is required to keep these documents in its files and prepare and file a combined claim for refund with the German tax authorities by electronic media. The combined claim provides evidence of a U.S. Holder’s personal data including its U.S. Tax Identification Number.
The German tax authorities reserve the right to audit the entitlement to tax refunds for several years following their payment pursuant to the Treaty in individual cases. The DMP participant must assist with the audit by providing the necessary details or by forwarding the queries to the respective refund beneficiaries.
The German tax authorities will issue refunds denominated in euros. In the case of shares held through banks or brokers participating in the Depository, the refunds will be issued to the Depository, which will convert the refunds to dollars. The resulting amounts will be paid to banks or brokers for the account of the U.S. Holders.
German Taxation of Capital Gains
Under German income tax law, a capital gain derived from the sale or other disposition of ADRs or ordinary shares by a non-resident shareholder is subject to income tax in Germany only if such non-resident shareholder has held, directly or indirectly, ADRs or ordinary shares representing 1% or more of the registered share capital of a company at any time during the five-year period immediately preceding the sale or other disposition.
However, a U.S. Holder of ADRs or ordinary shares that qualifies for benefits under the Treaty is not subject to German income or corporate income tax on the capital gain derived from the sale or other disposition of ADRs or ordinary shares.
Part I
Item 10
German Gift and Inheritance Tax
Generally, a transfer of ADRs or ordinary shares by a shareholder at death or by way of gift will be subject to German gift or inheritance tax, respectively, if (i) the decedent or donor, or the heir, donee or other transferee is resident in Germany at the time of the transfer, or with respect to German citizens who are not resident in Germany, if the decedent or donor, or the heir, donee or other transferee has not been continuously outside of Germany for a period of more than five years; (ii) the ADRs or ordinary shares are part of the business property of a permanent establishment or a fixed base in Germany; or (iii) the ADRs or ordinary shares subject to such transfer form part of a portfolio that represents 10% or more of the registered share capital of the Company and has been held, directly or indirectly, by the decedent or donor, respectively, at the time of the transfer, actually or constructively together with related parties.
However, the right of the German government to impose gift or inheritance tax on a non-resident shareholder may be limited by an applicable estate tax treaty. In the case of a U.S. Holder, a transfer of ADRs or ordinary shares by a U.S. Holder at death or by way of gift generally will not be subject to German gift or inheritance tax by reason of the estate tax treaty between the U.S. and Germany (Convention between the Federal Republic of Germany and the United States of America for the Avoidance of Double Taxation with respect to Estate, Gift and Inheritance Taxes, German Federal Law Gazette 1982 vol. II page 847,846, as amended by the Protocol of
December 14, 1998 and as published on December 21, 2000, German Federal Law Gazette 2001 vol. II, page 65; the “Estate Tax Treaty”) so long as the decedent or donor, or the heir, donee or other transferee was not domiciled in Germany for purposes of the Estate Tax Treaty at the time the gift was made, or at the time of the decedent’s death, and the ADRs or ordinary shares were not held in connection with a permanent establishment or a fixed base in Germany. In general, the Estate Tax Treaty provides a credit against the U.S. federal gift or estate tax liability for the amount of gift or inheritance tax paid in Germany, subject to certain limitations, in a case where the ADRs or ordinary shares are subject to German gift or inheritance tax and U.S. federal gift or estate tax.
Other German Taxes
There are currently no German net worth, transfer, stamp or other similar taxes that would apply to a U.S. Holder on the acquisition, ownership, sale or other disposition of our ADRs or ordinary shares.
U.S. Taxation
The following discussion applies to U.S. Holders only if the ADRs and ordinary shares are held as capital assets for tax purposes. It does not address tax considerations applicable to U.S. Holders that may be subject to special tax rules, such as dealers or traders in securities, financial institutions, insurance companies, tax-exempt entities, regulated investment companies, U.S. Holders that hold ordinary shares or ADRs as a part of a straddle, conversion transaction or other arrangement involving more than one position, U.S. Holders that own (or are deemed for U.S. tax purposes to own) 10% or more of the total combined voting power of all classes of voting stock of SAP SE, U.S. Holders that have a principal place of business or “tax home” outside the United States or U.S. Holders whose “functional currency” is not the dollar and U.S. Holders that hold ADRs or ordinary shares through partnerships or other pass-through entities.
The summary set out below is based upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), the Treaty and regulations, rulings and judicial decisions thereunder at the date of this report. Any such authority may be repealed, revoked or modified, potentially with retroactive effect, so as to result in U.S. federal income tax consequences different from those discussed below. No assurance can be given that the conclusions set out below would be sustained by a court if challenged by the IRS. The discussion below is based, in part, on representations of the Depositary, and assumes that each obligation in the Deposit Agreement and any related agreements will be performed in accordance with its terms.
For U.S. federal income tax purposes, a U.S. Holder of ADRs will be considered to own the ordinary shares represented thereby. Accordingly, unless the context otherwise requires, all references in this section to ordinary shares are deemed to refer likewise to ADRs representing an ownership interest in ordinary shares.
Part I
Item 10
U.S. Taxation of Dividends
Subject to the discussion below under “Passive Foreign Investment Company Considerations”, distributions made by SAP SE with respect to ordinary shares (other than distributions in liquidation and certain distributions in redemption of stock), including the amount of German tax deemed to have been withheld in respect of such distributions, will generally be taxed to U.S. Holders as ordinary dividend income.
As discussed above, a U.S. Holder may obtain a refund of German withholding tax under the Treaty to the extent that the German withholding tax exceeds 15% of the dividend distributed. Thus, for each US$100 of gross dividends paid by SAP SE to a U.S. Holder, the dividends (which are dependent on the euro/dollar exchange rate at the time of payment) will be initially subject to German withholding tax of US$25 plus US$1.375 solidarity surtax, and the U.S. Holder will receive US$73.625. A U.S. Holder who obtains the Treaty refund will receive from the German tax authorities an additional amount in euro that would be equal to US$11.375. For U.S. tax purposes, such U.S. Holder will be considered to have received a total distribution of US$100, which will be deemed to have been subject to German withholding tax of US$15 (15% of US$100) resulting in the net receipt of US$85 (provided the euro/dollar exchange rate at the time of payment of the dividend is the same as at the time of refund, otherwise the effective dividend may be higher or lower).
In the case of a distribution in euro, the amount of the distribution generally will equal the dollar value of the euro distributed (determined by reference to the spot currency exchange rate on the date of receipt of the distribution, or receipt by the Depositary in the case of a distribution on ADRs), regardless of whether the holder in fact converts the euro into dollars, and the U.S. Holder will not realize any separate foreign currency gain or loss (except to the extent that such gain or loss arises on the actual disposition of foreign currency received). However, a U.S. Holder may be required to recognize foreign currency gain or loss on the receipt of a refund in respect of German withholding tax to the extent the U.S. dollar value of the refund differs from the U.S. dollar equivalent of that amount on the date of receipt of the underlying dividend.
Dividends paid by SAP SE generally will constitute “portfolio income” for purposes of the limitations on the
use of passive activity losses (and,
therefore, generally may not be offset by passive activity losses) and as “investment income” for purposes of the limitation on the deduction of investment interest expense. Dividends paid by SAP SE will not be eligible for the dividends received deduction generally allowed to U.S. corporations under Section 243 of the Code. Dividends paid by SAP SE to an individual are treated as “qualified dividends” subject to capital gains rates, i.e. at a maximum rate of 20%, if SAP SE was not in the prior year and, is not in the year in which the dividend is paid, a passive foreign investment company (“PFIC”). Based on our audited financial statements and relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income taxes with respect to our 20142015 tax year. In addition, based on our audited financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for the 20152016 tax year. With the enactment of The Health Care and Education Reconciliation Act of 2010, certain US holders who are individuals, trusts, or estates, must pay a Medicare tax at a rate of 3.8% on the lesser of (i) net investment income such as dividends and (ii) the excess of modified adjusted gross income over the statutory thresholds.
U.S. Taxation of Capital Gains
In general, assuming that SAP SE at no time is a PFIC, upon a sale or exchange of ordinary shares to a person other than SAP SE, a U.S. Holder will recognize gain or loss in an amount equal to the difference between the amount realized on the sale or exchange and the U.S. Holder’s adjusted tax basis in the ordinary shares. Such gain or loss will be a capital gain or loss and will be considered a long-term capital gain (taxable at a reduced rate for individuals) if the ordinary shares were held for more than one year. Capital gains may also be subject to the Medicare tax at a rate of 3.8%. The deductibility of capital losses is subject to significant limitations. Upon a sale of ordinary shares to SAP SE, a U.S. Holder may recognize a capital gain or loss or, alternatively, may be considered to have received a distribution with respect to the ordinary shares, in each case depending upon the application to such sale of the rules of Section 302 of the Code.
Deposit and withdrawal of ordinary shares in exchange for ADRs by a U.S. Holder will not result in its realization of gain or loss for U.S. federal income tax purposes.
Part I
Item 10
U.S. Information Reporting and Backup Withholding
Dividend payments made to holders and proceeds paid from the sale of shares or ADRs are subject to information reporting to the Internal Revenue Service and will be subject to backup withholding taxes (currently
(currently imposed at a 28% rate) unless the holder (i) is a corporation or other exempt recipient or (ii) provides a taxpayer identification number on a properly completed IRS Form W-9 and certifies that no loss of exemption from backup withholding has occurred. Holders that are not U.S. persons are not subject to information reporting or backup withholding. However, such a holder may be required to provide a certification of its non-U.S. status in connection with payments received within the United States or through a U.S.-related financial intermediary.
Backup withholding is not an additional tax and any amounts withheld as backup withholding may be credited against a holder’s U.S. federal income tax liability. A holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information.
Shareholders may be subject to other U.S. information reporting requirements and should consult their own tax advisors for application of these reporting requirements to their own facts and circumstances.
U.S. Foreign Tax Credit
In general, in computing its U.S. federal income tax liability, a U.S. Holder may elect for each taxable year to claim a deduction or, subject to the limitations on foreign tax credits generally, a credit for foreign income taxes paid or accrued by it. For U.S. foreign tax credit purposes, subject to the applicable limitations under the foreign tax credit rules, German tax withheld from dividends paid to a U.S. Holder, up to the 15% provided under the Treaty, will be eligible for credit against the U.S. Holder’s federal income tax liability or, if the U.S. Holder has elected to deduct such taxes, may be deducted in computing taxable income.
For U.S. foreign tax credit purposes, dividends paid by SAP SE generally will be treated as foreign-source income and as “passive category income” (or in the case of certain holders, as “general category income”). Gains or losses
realized by a U.S. Holder on the sale or exchange of ordinary shares generally will be treated as U.S.-source gain or loss.
Passive Foreign Investment Company Considerations
Special and adverse U.S. tax rules apply to a U.S. Holder that holds an interest in a passive foreign investment company (PFIC). Based on current projections concerning the composition of SAP SE’s income and assets, SAP SE does not believe that it will be treated as a PFIC for its current or future taxable years. However,
because this conclusion is based on our current projections and expectations as to its future business activity, SAP SE can provide no assurance that it will not be treated as a PFIC in respect of its current or any future taxable years.
Concur Technologies, Inc.
Pursuant to the Agreement and Plan of Merger dated as of September 18, 2014 by and among Concur Technologies, Inc., SAP America, Inc. and Congress Acquisition Corp., on December 4, 2014 SAP America acquired Concur, the leader in the multi-billion travel and expense management software industry, for US$129.00 per share which represents an enterprise value of approximately US$8.3 billion. The transaction was funded primarily from a EUR 7.0 billion credit facility.
See “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Disclosures”, for information on our credit facilities.
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports and furnish other information as a foreign private issuer with the SEC. These materials, including this report and the exhibits thereto, may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The SEC also maintains a Web site at www.sec.gov that contains reports and other information regarding registrants that file electronically with the SEC. This report as well as some of the other information submitted by us to the SEC may be
Part I
Item 10, 11, 12
accessed through this Web site. In addition, information about us is available at our Web site:www.sap.comwww.sap.com..
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various financial risks, such as market risks, including changes in foreign currency exchange rates, interest rates and equity prices, as well as credit risk and liquidity risk. We manage these risks on a Group-wide basis. Selected derivatives are exclusively used for this purpose and not for speculation, which is defined as entering into derivative instruments without a corresponding underlying transaction. Financial risk management is done centrally. See Notes (25)(24), (26)(25) and (27)(26) to our Consolidated Financial Statements for our quantitative and qualitative disclosures about market risk.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Fees and Charges Payable by ADR Holders
Deutsche Bank Trust Company Americas is the Depositary for SAP SE’s ADR program. ADR holders may be required to pay the following charges:
taxes and other governmental charges;
registration fees as may be in effect from time to time for the registration of transfers of SAP ordinary shares on any applicable register to the Depositary or its nominee or the custodian or its nominee in connection with deposits or withdrawals under the Deposit Agreement;
applicable air courier, cable, telex and facsimile expenses of the Depositary;
expenses incurred by the Depositary in the conversion of foreign currency;
$5.00 or less per 100 ADSs (or portion thereof) to the Depositary for the execution and delivery of ADRs (including in connection with the
– | taxes and other governmental charges; |
– | registration fees as may be in effect from time to time for the registration of transfers of SAP ordinary shares on any applicable register to the Depositary or its nominee or the custodian or its nominee in connection with deposits or withdrawals under the Deposit Agreement; |
– | applicable air courier, cable, telex and facsimile expenses of the Depositary; |
– | expenses incurred by the Depositary in the conversion of foreign currency; |
– | US $5.00 or less per 100 ADSs (or portion thereof) to the Depositary for the execution and delivery of ADRs (including in connection with the depositing of SAP ordinary shares or the exercising of rights) and the surrender of ADRs as well as for the distribution of other securities; |
a maximum aggregate service fee of U.S. $2.00
– | a maximum aggregate service fee of US $3.00 per 100 ADSs (or portion thereof) per calendar year to the Depositary for the services performed by the Depositary in administering the ADR program, including for processing any cash dividends and other cash distributions; and |
– | US $5.00 or less per 100 ADSs (or portion thereof) to the Depositary for distribution of securities other than SAP ordinary shares or rights. |
These fees may at any time and from time to time be changed by agreement between SAP SE and the Depositary for the services performed by the Depositary in administering the ADR program, including for processing any cash dividends and other cash distributions; and
$5.00 or less per 100 ADSs (or portion thereof) to the Depositary for distribution of securities other than SAP ordinary shares or rights.
Depositary. These charges are described more fully in Section 5.9 of the Amended and Restated Deposit Agreement dated as of November 25, 2009, as amended by Amendment No. 1 dated as of March 18, 2016 and as may be further amended from time to time, incorporated by reference as ExhibitExhibits 4.1.1 and 4.1.2 to our 2010 Annual Report on Form 20-F filed with the Commission on March 18, 2011.this report.
Applicable service fees are either deducted from any cash dividends or other cash distributions or charged separately to holders in a manner determined by the Depositary, depending on whether ADSs are registered in the name of investors (whether certificated or in book-entry form) or held in brokerage and custodian accounts (via DTC). In the case of distributions of securities other
than SAP ordinary shares or rights, the Depositary charges the applicable ADS record date holder concurrent with the distribution. In the case of ADSs registered in the name of the investor, whether certificated or in book entry form, the Depositary sends invoices to the applicable record date ADS holders. For ADSs held in brokerage and custodian accounts via DTC, the Depositary may, if permitted by the settlement systems provided by DTC, collect the fees through those settlement systems from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in such case may in turn charge their clients’ accounts the amount of the service fees paid to the Depositary.
In the event of a refusal to pay applicable fees, the Depositary may refuse the requested services until payment is received or may set off the amount of the service from any distribution to be made to the ADR holder, all in accordance with the Deposit Agreement.
If any taxes or other governmental charges are payable by the holders and/or beneficial owners
Part I
Item 12
of ADSs to the Depositary, the Depositary, the custodian or SAP may withhold or deduct from any distributions made in respect of the deposited SAP ordinary share and may sell for the account of the holder and/or beneficial owner any or all of the deposited ordinary shares and apply such distributions and sale proceeds in payment of such taxes (including applicable interest and penalties) or charges, with the holder and the beneficial owner thereof remaining fully liable for any deficiency.
Fees and Other Payments Payable by the Depositary to SAP
TheIn connection with the ADR program, the Depositary has agreed to make certain payments to SAP as reimbursement for expenses
incurred by SAP in connection with itsand waive certain costs of providing ADR administrative and reporting services, including reporting of ADR program activity, distribution of information to investors, managing the ADR program, including ADR processing activities and in support of SAP’s ongoingcorporate actions, ADR broker desk services and ADR investor relations activities related to the ADR program.services, including production of investor targeting, peer analysis, shareholder identification reports and market perception studies. For the year ended December 31,period beginning November 25, 2014 and ending November 24, 2015, the Depositary has made direct and indirect payments to SAP in an aggregate amount of US $526,103 for investor relations activities$1,287,940.78 related to the ADR program, includingprogram. In 2015, the productionDepositary agreed to reimburse up to US $25,000 in legal fees associated with the cost of annual reports and Form 20-F filings, 2014 NYSE listing fees, road shows, productionrenewal of investor targeting, peer analysis, shareholder identification reports and perception studies, postage for mailing annual and interim reports and other communications tothe ADR holders and participation in retail investor activities, broker conferences, SAP sponsored analyst events and capital markets days.program.
Part II
Item 13, 14, 15, 16, 16A
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
ITEM 15. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures of SAP that are designed to ensure that information required to be disclosed by SAP in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by SAP in the reports that it files or submits under the Exchange Act is accumulated and communicated to SAP management, including SAP’s principal executive and financial officers (i.e. SAP’s chief executive officer (CEO) and chief financial officer (CFO)), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. SAP’s management evaluated, with the participation of SAP’s CEO and CFO the effectiveness of SAP’s disclosure controls and procedures as of December 31, 2014.2015. The evaluation was led by SAP’s Global Governance Risk & Compliance function, including dedicated “SOX Champions” in all of SAP’s major entities and business units with the participation of process owners, SAP’s key corporate senior management, senior management of each business group, and as indicated above under the supervision of SAP’s CEO and CFO. Based on the foregoing, SAP’s management, including SAP’s CEO and CFO, concluded that as of December 31, 2014,2015, SAP’s disclosure controls and procedures were effective.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of SAP is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. SAP’s internal control over financial reporting is a process designed under the supervision of SAP’s CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in
accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
SAP’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014.2015. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control – Integrated Framework (2013)”.
Based on the assessment under these criteria, SAP management has concluded that, as of December 31, 2014,2015, the Company’s internal control over financial reporting was effective.
KPMG, our independent registered public accounting firm, has issued its attestation report on the effectiveness of SAP’s internal control over financial reporting, which is included in Item 18. Financial Statements, “Report of Independent Registered Public Accounting Firm.”
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There has been no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our Supervisory Board has determined that Erhard Schipporeit is an “audit committee
Part II
Item 16A, 16B, 16C
financial expert”, as defined by the regulations of the Commission issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002 and meeting the requirements of Item 16A. He is “independent”, as such term is defined in Rule 10A-3 under the Exchange Act.
In 2003, SAP adopted a Code of Business Conduct that applies to all employees (including all personnel in the accounting and controlling departments), managers and the members of SAP’s Executive Board (including our CEO and CFO). Our Code of Business Conduct constitutes a “code of ethics” as defined in Item 16.B of Form 20-F. Our Code of Business Conduct sets standards for all dealings with customers, partners, competitors and suppliers and includes, among others, regulations with regard to confidentiality, loyalty, preventing conflicts of interest, preventing bribery, and avoiding anti-competitive practices. International differences in culture, language, and legal and social systems make the adoption of uniform Codes of
Business Conduct across an entire global company challenging. As a result, SAP has set forth a master code containing minimum standards. In turn, each company within the SAP Group has been required to adopt a similar code that meets at least these minimum standards, but may also include additional or more stringent rules of conduct. Newly acquired companies also are required to meet the minimum standards set forth in the Code of Business Conduct. Effective February 2012, SAP amended its Code of Business Conduct to address certain changes in bribery laws, and to update the intellectual property and non-retaliation provisions. We have made our amended Code of Business Conduct publicly available by posting the full text on our Web site under http://www.sap.com/corporate-en/investors/governance/policies-statutes.epx.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES, AUDIT RELATED FEES, TAX FEES AND ALL OTHER FEES
Refer to Note (32)(31) to our Consolidated Financial Statements for information on fees billedcharged by our independent registered public accounting firm, KPMG, for audit services and other professional services.
AUDIT COMMITTEE’S PRE-APPROVAL POLICIES AND PROCEDURES
As required under German law, our shareholders appoint our external independent auditors to audit our financial statements, based on a proposal that is legally required to be submitted by the Supervisory Board. The Supervisory Board’s proposal is based on a proposal by the Audit Committee. See also the description in “Item 10. Additional Information – Corporate Governance.”
In 2002 our Audit Committee adopted a policy with regard to the pre-approval of audit and non-audit services to be provided by our external independent auditors. This policy, which is designed to assure that such engagements do not impair the independence of our auditors, was amended and expanded in 2003, 2007 and 2009 (changes in 2009 only related to information requirements). The policy requires prior approval of the Audit Committee for all services to be provided by our external independent auditors for any entity of the SAP Group. With regard to non-audit services the policy distinguishes among three categories of services:
– | (i) “Prohibited services:” This category includes services that our external independent auditors must not be engaged to perform. These are services that are not permitted by applicable law or that would be inconsistent with maintaining the auditors’ independence. |
(i) “Prohibited services:” This category includes services that our external independent auditors must not be engaged to perform. These are services that are not permitted by applicable law or that would be inconsistent with maintaining the auditors’ independence.
(ii) “Services requiring universal approval:” Services of this category may be provided by our external independent auditors up to a certain aggregate amount in fees per year that is determined by the Audit Committee.
(iii) “Services requiring individual approval:” Services of this category may only be provided by our external independent auditors if they have been individually (specifically) pre-approved by the Audit Committee or an Audit Committee member who is authorized by the Audit Committee to make such approvals.
– | (ii) “Services requiring universal approval:” Services of this category may be provided by our external independent auditors up to a certain aggregate amount in fees per year that is determined by the Audit Committee. |
– | (iii) “Services requiring individual approval:” Services of this category may only be provided by our external independent auditors if they have been individually (specifically) pre-approved by the Audit Committee or an Audit Committee member who is authorized by the Audit Committee to make such approvals. |
Our Chief Accounting Officer or individuals empowered by him review all individual requests to engage our external independent auditors as a service provider in accordance with this policy and determines the category to which the requested service belongs. All requests for engagements with expected fees over a specified limit are additionally reviewed by our CFO. Based on the
Part II
Item 16C, 16D, 16E, 16F, 16G
determination of the category the request is (i) declined if it is a “prohibited service,” (ii) approved if it is a “service requiring universal approval” and the maximum aggregate amount fixed by the Audit Committee has not been reached or (iii) forwarded to the Audit Committee for individual approval if the “service requires individual approval” or is a “service requiring universal approval” and the maximum aggregate amount fixed by the Audit Committee has been exceeded.
Our Audit Committee’s pre-approval policies also include information requirements to ensure the Audit Committee is kept aware of the volume of engagements involving our external independent auditors that were not individually pre-approved by the Audit Committee itself.
Substantially all of the work performed to audit our Consolidated Financial Statements was performed by our principal accountant’s full-time, permanent employees.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Rule 10A-3 of the Exchange Act requires that all members of our audit committee be independent, subject to certain exceptions. In accordance with German law, the Audit Committee consists of both employee and shareholder elected members. Rule 10A-3 provides an exception for an employee of a foreign private issuer such as SAP who is not an executive officer of that issuer and who is elected to the supervisory board or audit committee of that issuer pursuant to the issuer’s governing law. In this case, the employee is exempt from the independence requirements of Rule 10A-3 and is permitted to sit on the audit committee.
We rely on this exemption. Our Audit Committee includes two employees representatives, Steffen LeskovarPanagiotis Bissiritsas and Stefan Schulz,Martin Duffek , who were appointed to our Supervisory Board pursuant to the Agreement on the Involvement of Employees in SAP SE (see “Item 6. Directors, Senior Management and Employees.” for details). We believe that the reliance on this exemption does not materially adversely affect the ability of our Audit Committee to act independently and to satisfy the other requirements of Rule 10A-3.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
In 2014 there were no purchases made by us or on our behalf or on behalf of affiliates of SAP of SAP shares or SAP ADRs. The total number of SAP shares that SAP could purchase under existing repurchase programs was 89,575,571 as of December 31, 2014.
At the Annual General Meeting of Shareholders on June 4, 2013, the Executive Board was authorized to acquire, on or before June 3, 2018, up to 120 million shares of SAP. The authorization from June 4, 2013 replaced the authorization from June 8, 2010.
Both authorizations wereThe authorization is subject to the provision that the shares to be purchased, together with any other shares already acquired and held by SAP, do not account for more than 10% of SAP’s capital stock.
In 2015 there were no purchases made by us or on our behalf or on behalf of affiliates of SAP of SAP shares or SAP ADRs. The total number of SAP shares that SAP could purchase under existing repurchase programs was 92,299,388 as of December 31, 2015.
ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES
The following summarizes the principal ways in which our corporate governance practices differ from the New York Stock Exchange (NYSE) corporate governance rules applicable to U.S. domestic issuers (the NYSE Rules).
SAP is incorporated under the laws of the European Union and Germany, with securities publicly traded on markets in Germany, including the Frankfurt Exchange and in the United States on the NYSE.
The NYSE Rules permit foreign private issuers to follow applicable home country corporate governance practices in lieu of the NYSE corporate governance standards, subject to certain exceptions. Foreign private issuers electing
Part II
Item 16G
to follow home country corporate governance rules are required to disclose the principal differences in their corporate governance practices from those required under the NYSE Rules. This Item 16G
summarizes the principal ways in which SAP’s corporate governance practices differ from the NYSE Rules applicable to domestic issuers.
The primary sources of law relating to the corporate governance of a European Company are the Council Regulation (EC) No. 2157/2001 on the Statute for a European Company (the “SE Regulation”“SE Regulation”), the German Act on the Implementation of Council Regulation No. 2157/2001 of October 8, 2001 on the Statute for a European Company (Gesetz zur Ausführung der Verordnung (EG) Nr. 2157/2001 des Rates vom 8. Oktober 2001 über das Statut der Europäischen Gesellschaft (SE) – SE-Ausführungsgesetz; “SE-AG”“SE-AG”) of December 22, 2004, and the German Stock Corporation Act (Aktiengesetz). Additionally, the Securities Trading Act (Wertpapierhandelsgesetz), the German Securities Purchase and Take Over Act (Wertpapiererwerbs- und Übernahmegesetz), the Stock Exchange Admission Regulations, the German Commercial Code (Handelsgesetzbuch) and certain other German statutes contain corporate governance rules applicable to SAP. In addition to these mandatory rules, the German Corporate Governance Code (“GCGC”) summarizes the mandatory statutory corporate governance principles found in the German Stock Corporation Act and other provisions of German law. Further, the GCGC contains supplemental recommendations and suggestions for standards on responsible corporate governance intended to reflect generally accepted best practices.
The German Stock Corporation Act requires the executive and the supervisory board of publicly listed companies like SAP to declare annually that the recommendations set forth in the GCGC have been and are being complied with or which of the recommendations have not been or are not being complied with and why not. SAP has disclosed and reasoned deviations from a few of the GCGC recommendations in its Declaration of Implementation on a yearly basis since 2003. Declarations for the past five yearsfrom 2007 forward are available on the SAP website (http://www.sap.com/corporate-en/investors/governance/policies-statutes.epx).
We believe the following to be the significant differences between applicable European and German corporate governance practices, as SAP has implemented them, and those applicable to domestic companies under the NYSE Rules.
SAP SE IS A EUROPEAN COMPANY WITH A TWO-TIER BOARD SYSTEM
SAP is governed by three separate bodies: (i) the Supervisory Board, which counsels, supervises and
controls the Executive Board; (ii) the Executive Board, which is responsible for the management of SAP; and (iii) the General Meeting of Shareholders. The rules applicable to these governing bodies are defined by European and German law and by SAP’s Articles of Incorporation. This corporate structure differs from the unitary board of directors established by the relevant laws of all U.S. states and the NYSE Rules. Under the SE Regulation and the German Stock Corporation Act, the Supervisory Board and Executive Board are separate and no individual may be a member of both boards. See “Item 10. Additional Information –— Corporate Governance” for additional information on the corporate structure.
The NYSE Rules require that a majority of the members of the board of directors of a listed issuer and each member of its nominating, corporate governance, compensation and audit committee be “independent.” As a foreign private issuer, SAP is not subject to the NYSE board, compensation committee and corporate governance committee independence requirements but instead can elect to follow its home country rules. With respect to the audit committee, SAP is required to satisfy Rule 10A-3 of the Exchange Act, which provides certain exemptions from the audit committee independence requirements in the case of employee board representatives. The NYSE Rules stipulate that no director qualifies as “independent” unless the board of directors has made an affirmative determination that the director has no material direct or indirect relationship with the listed company. However, under the NYSE Rules a director may still be deemed independent even if the director or a member of a director’s immediate family has
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received during a 12 month period within the prior three years up to $120,000 in direct compensation. In addition, a director may also be deemed independent even if a member of the director’s immediate family works for the company’s auditor in a non-partner capacity and not on the company’s audit. By contrast, the GCGC requires that the Supervisory Board ensure that proposed candidates are persons with the necessary knowledge, competencies and applicable experience. Additionally, the Supervisory Board is required to implement and adhere to concrete director independence criteria, including a consideration of the total number of independent Supervisory Board members as defined in Section 5.4.2 of the Code. According to this definition, a Supervisory Board member will not be considered independent in particular if s/he has personal or business relations with the company, its executive bodies, a controlling shareholder or an enterprise associated with any of the preceding persons and entities which could cause a substantial and sustained conflict of interest. The members of the Supervisory Board must have enough time to perform
their board duties and must carry out their duties carefully and in good faith. For as long as they serve, they must comply with the criteria that are enumerated in relation to the selection of candidates for the Supervisory Board concerning independence, conflict of interest and multiple memberships of management, supervisory and other governing bodies. They must be loyal to SAP in their conduct and they must not accept appointment in companies that are in competition with SAP. Supervisory Board members must disclose any planned non-ordinary course business transactions with SAP to the Supervisory Board promptly. The Supervisory Board members cannot carry out such transactions before the Supervisory Board has given its permission. The Supervisory Board may grant its permission for any such transaction only if the transaction is based on terms and conditions that are standard for the type of transaction in question and if the transaction is not contrary to SAP’s interest. SAP complies with these GCGC director independence requirements.
Applicable European and German corporate law requires that for publicly listed stock corporations at least one member of the Supervisory Board who has expert knowledge in the areas of financial accounting and audit of financial statements must be independent. Mr. Erhard Schipporeit who is the Chairman of SAP’s Audit Committee meets these requirements. However, applicable European and
German corporate law and the GCGC do not require the Supervisory Board to make an affirmative determination for each individual member that is independent or that a majority of Supervisory Board members or the members of a specific committee are independent.
The NYSE independence requirements are closely linked with risks specific to unitary boards of directors that are customary for U.S. companies. In contrast, the two-tier board structure requires a strict separation of the executive board and supervisory board. In addition, the supervisory board of a European Company formed by conversion from a large German stock corporation which was subject to the principle of employee codetermination as outlined in the GermanCo-Determination Act of 1976 (Mitbestimmungsgesetz) is subject to at least the same level of employee participation which formerly existed in the German stock corporation that was converted to an SE. The terms of employee participation with regard to the Supervisory Board of SAP SE are, among others, set out in the Agreement on the Involvement of Employees in SAP SE. As a result, the Supervisory Board of SAP SE consists of 18 members, of which nine are representatives of SAP SE���sSE’s shareholders elected at the Annual General Meeting and nine members are representatives of the European employees. Only a shareholders’ representative may be elected as chairperson of the Supervisory Board. In case
of a tied vote, the vote of the chairperson and, in the event that the chairperson does not participate in passing the resolution, the vote of the deputy chairperson, provided that he or she is a shareholders’ representative, will be decisive (casting vote). This board structure creates a different system of checks and balances, including employee participation, and cannot be directly compared with a unitary board system.
As a foreign private issuer, the NYSE Rules require SAP to establish an Audit Committee that satisfies the requirements of Rule 10A-3 of the Exchange Act with respect to audit committee independence. SAP is in compliance with these requirements. The Chairman of SAP’s Audit Committee and Prof. Dr. Klaus Wucherer meet the independence requirements of Rule 10A-3 of the Exchange Act. The other two Audit Committee members, Steffen LeskovarPanagiotis Bissiritsas and Stefan Schulz,
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Martin Duffek, are employee representatives who are eligible for the exemption provided by Rule 10A-310 A-3 (b) (1) (iv) (C) (see “Item 16D Exemptions from the listing standards for audit committees” for details).
The Audit Committee independence requirements are similar to the Board independence requirements under applicable European and German corporate law and the GCGC. See the section above under “Director Independence Rules.” Nonetheless, SAP meets the NYSE Rules on audit committee independence applicable to foreign private issuers.
RULES ON NON-MANAGEMENT BOARD MEETINGS ARE DIFFERENT
Section 303 A.03 of the NYSE Rules stipulates that the non-management board of each listed issuer must meet at regularly scheduled executive sessions without the management. Under applicable European and German corporate law and the GCGC the Supervisory Board is entitled but not required to exclude Executive Board members from its meetings. The Supervisory Board exercises this right generally during its meetings.
RULES ON ESTABLISHING COMMITTEES DIFFER
Pursuant to Section 303 A.04 and 303 A.05 of the NYSE Rules listed companies are required to set up a Nominating/Corporate Governance Committee and a Compensation Committee, each composed entirely of independent directors and having a written charter specifying the committee’s purpose and responsibilities. In addition, each committee’s performance must be reviewed annually. Applicable European and German corporate law does not mandate the creation of specific supervisory board committees. The GCGC recommends that the Supervisory Board establish an Audit Committee and a Nomination Committee. SAP has the following committees, which are in compliance with the GCGC: General and Compensation Committee, Audit Committee, Strategy and Technology Committee,
Finance and Investment Committee, Nomination Committee, Special Committee and People and Organization Committee (See “Item 10. Additional Information –— Corporate Governance” for more information).
RULES ON SHAREHOLDERS’ COMPULSORY APPROVAL ARE DIFFERENT
Section 312 of the NYSE Rules requires U.S. companies to seek shareholder approval of all equity-compensation plans, including certain material revisions thereto (subject to certain exemptions as described in the rules), issuances of common stock, including convertible stock, if the common stock has, or will have upon issuance, voting power of or in excess of 20% of the then outstanding common stock, and issuances of common stock if they trigger a change of control.
According to applicable European law, the German Stock Corporation Act and other applicable German laws, shareholder approval is required for a broad range of matters, such as amendments to the articles of association, certain significant corporate transactions (including inter-company agreements and material restructurings), the offering of stock options and similar equity compensation to its Executive Board members or its employees by a way of a conditional capital increase or by using treasury shares (including significant aspects of such an equity compensation plan as well as the exercise thresholds), the issuance of new shares, the authorization to purchase the corporation’s own shares, and other essential issues, such as transfers of all, or substantially all, of the assets of the stock corporation, including shareholdings in subsidiaries.
SPECIFIC PRINCIPLES OF CORPORATE GOVERNANCE
Under the NYSE Rules Section 303A.09 listed companies must adopt and disclose corporate guidelines. Since October 2007, SAP has applied, with few exceptions, the recommended corporate governance standards of the GCGC rather than company-specific principles of corporate governance. The GCGC recommendations differ from the NYSE Standards primarily as outlined in this Item 16G.
SPECIFIC CODE OF BUSINESS CONDUCT
NYSE Rules Section 303 A.10 requires listed companies to adopt and disclose a code of business conduct and ethics for directors, officers
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and employees, and to disclose promptly any waivers of the code for directors or executive officers. Although not required under applicable European and German law, SAP has adopted a Code of Business Conduct, which is equally applicable to employees, managers and members
of the Executive Board. SAP complies with the requirement to disclose the Code of Business Conduct and any waivers of the code with respect to directors and executive officers. See “Item 16B. Code of Ethics” for details.
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Not applicable.
The Consolidated Financial Statements are included herein on pages F-1 through F-93.F-73.
The following are filed as part of this report:
Report of Independent Registered Public Accounting Firm.
– | Report of Independent Registered Public Accounting Firm. |
– | Consolidated Financial Statements |
– | Consolidated Income Statements for the years ended December 31, 2015, 2014, |
– | Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 |
– | Consolidated Statements of Financial Position as of December 31, |
– | Consolidated Statements of Changes in Equity for the years ended December 31, 2015, 2014 |
– | Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 |
– | Notes to the Consolidated Financial Statements. |
The following documents are filed as exhibits to this report:
The following documents are filed
1 | Articles of Incorporation (Satzung) of SAP SE, effective as
Certain instruments which define rights of holders of long-term debt of SAP SE and its subsidiaries are not being filed because the total amount of securities authorized under each such instrument does not exceed 10% of the total consolidated assets of SAP SE and its subsidiaries. SAP SE and its subsidiaries hereby agree to furnish a copy of each such instrument to the Securities and Exchange Commission upon request.
Dated: March 29, 2016 SAP SE AND SUBSIDIARIES INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Supervisory Board of SAP SE: We have audited the accompanying consolidated statements of financial position of SAP SE and subsidiaries (“SAP” or “the Company”) as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2015. We also have audited SAP’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). SAP’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SAP SE and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB). Also in our opinion, SAP SE maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.
Mannheim, Germany February 25, 2016 SAP SE AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENTS OF SAP GROUP for the years ended December 31,
(1) The 2015 figures have been translated solely for the convenience of the reader at an exchange rate of US$1.0859 to€1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York on December 31, 2015. The accompanying Notes are an integral part of these Consolidated Financial Statements. SAP SE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF SAP GROUP for the years ended December 31,
The accompanying Notes are an integral part of these Consolidated Financial Statements. SAP SE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION OF SAP GROUP as at December 31,
(1) The 2015 figures have been translated solely for the convenience of the reader at an exchange rate of US$1.0859 to€1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York on December 31, 2015. The accompanying Notes are an integral part of these Consolidated Financial Statements. SAP SE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY OF SAP GROUP as at December 31,
The accompanying Notes are an integral part of these Consolidated Financial Statements. SAP SE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS OF SAP GROUP for the years ended December 31,
(1) The 2015 figures have been translated solely for the convenience of the reader at an exchange rate of US$1.0859 to€1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York on December 31, 2015. The accompanying Notes are an integral part of these Consolidated Financial Statements.
SAP SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Entities Consolidated in the Financial Statements
The additions relate to legal entities added in connection with acquisitions and foundations. The disposals are mainly due to mergers and liquidations of legal entities.
(3a) Bases of Measurement The Consolidated Financial Statements have been prepared on the historical cost basis except for the following:
Where applicable, information about the methods and assumptions used in determining the respective measurement bases is disclosed in the Notes specific to that asset or liability. (3b) Relevant Accounting Policies Reclassifications We modified and simplified the presentation of our services revenue in our income statement starting with the first quarter of 2015 to align our financial reporting with the change in our services business under the ONE Service approach. Under this approach, we combine premium support services and professional services in a way that no longer allows us to separate premium support revenues from professional services revenues or to separate their related cost of services. Consequently, we have combined the revenue from premium support services with the revenue from professional services and other services in a new services revenue line item. Previously, revenues from premium support services were classified as support revenues (2014:€539 million, 2013:€445 million) and related costs were classified as cost of software and software-related services (2014:€337 million, 2013:€259 million). Simultaneously with this change, we simplified and clarified the labeling of several income statement line items. This includes renaming the previous revenue subtotal labeled software and support (which included premium support revenues) to software licenses and support (which no longer includes premium support revenues). The previous revenue subtotal labeled software and software-related service revenue is renamed cloud and software and accordingly no longer includes premium support revenue. All of these changes have been applied retrospectively. The two other revenue line items cloud subscriptions and support and total revenue are not affected by any of these changes and remain unaltered.
Business Combinations and Goodwill We decide on a transaction-by-transaction basis whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets.Acquisition-related costs are accounted as expense in the periods in which the costs are incurred and the services are received, with the expense being classified as general and administration expense. Foreign Currencies Income and expenses and operating cash flows of our foreign subsidiaries that use a functional currency other than the euro are translated at average rates of foreign exchange (FX) computed on a monthly basis. Exchange differences resulting from foreign currency transactions are recognized in other non-operating income/expense, net. The exchange rates of key currencies affecting the Company were as follows: Exchange Rates
Revenue Recognition Classes of Revenue We derive our revenue from fees charged to our customers for (a) the use of our hosted cloud offerings, (b) licenses to our on-premise software products, and (c) standardized and premium support services, consulting, customer-specificon-premise software development
We account for out-of-pocket expenses invoiced by SAP and reimbursed by customers as cloud Timing of Revenue Recognition We do not start recognizing revenue from customer arrangements before evidence of an arrangement exists and the amount of revenue and associated costs can be measured reliably and collection of the related receivable is probable. If, for any of our product or service offerings, we determine at the outset of an arrangement that the amount of revenue cannot be measured reliably, we conclude that the inflow of economic benefits associated with the transaction is not probable, and we defer revenue recognition until the arrangement fee becomes due and payable by the customer. If, at the outset of an arrangement, we determine that collectability is not probable, we conclude that the inflow of economic benefits associated with the transaction is not probable, and we defer revenue recognition until the earlier of when collectability becomes probable or payment is received. If a customer is specifically identified as a bad debtor, we stop recognizing revenue from the customer except to the extent of the fees that have already been collected. In general, we invoice fees for standard software upon contract closure and delivery. Periodical fixed fees for cloud subscription services and software support services are mostly invoiced yearly or quarterly in advance. Fees based on actual transaction volumes for cloud subscriptions and fees charged for non-periodical services are invoiced as the services are delivered. Cloud In general, our cloud subscriptions and support contracts include certain set-up activities. If these set-up activities have stand-alone value, they are accounted for as distinct deliverables with the respective revenue being classified as service revenue and recognized as the set-up activity is performed. If we conclude that such set-up activities are not distinct deliverables, we do not account for them separately. Revenue from the sale of perpetual licenses of our standard on-premise software products is recognized upon delivery of the software, that is, when the customer has access to the software. Occasionally, we license on-premise software for a specified period of time. Revenue from short-term time-based licenses, which usually include support services during the license period, is recognized ratably over the license term. Revenue from multi-year time-based licenses that include support services, whether separately priced or not, is recognized ratably over the license term unless a substantive support service renewal rate exists; if this is the case, the amount allocated to the delivered software is recognized as software licenses revenue based on the residual method once the basic criteria described above have been met. In general, our on-premise software license agreements We usually recognize revenue from on-premise software arrangements involving resellers on evidence of sell-through by the reseller to the end-customer, because the inflow of the economic benefits associated with the arrangements to us is not probable before sell-through has occurred. Software licenses revenue from customer-specific on-premise software development agreements that qualify for revenue recognition by reference to the stage of completion of the contract activity is recognized using the percentage-of-completion method based on contract costs incurred to date as a percentage of total estimated contract costs required to complete the development work. On-premise software subscription contracts combine software and support service elements, as under these contracts the customer is provided with current software products, rights to receive unspecified future software products, and rights to product support during the on-premise software subscription term. Typically, customers pay a periodic fee for a defined subscription term, and we recognize such fees ratably over the term of the arrangement beginning with the delivery of the first product. Revenue from on-premise software subscription contracts is allocated to the software licenses revenue and software support revenue line items in our Consolidated Income Statements.
We recognize Measurement of Revenue Revenue is recognized net of returns and allowances, trade discounts, and volume rebates. Our contributions to resellers that allow our resellers to execute qualified and approved marketing activities are recognized as an offset to revenue, unless we obtain a separate identifiable benefit for the contribution and the fair value of that benefit is reasonably estimable. Multiple-Element Arrangements We combine two or more customer contracts with the same customer and account for the contracts as a single contract if the contracts are negotiated as a package or otherwise linked. Thus, the majority of our contracts that contain cloud offerings or on-premise software also include other goods or services (multiple-element arrangements). We account for the different goods and services promised under our customer contracts as separate units of account (distinct deliverables) unless:
Goods and services that do not qualify as distinct deliverables are combined into one unit of account (combined deliverables). The portion of the transaction fee allocated to one distinct deliverable is recognized in revenue separately under the policies applicable to the respective deliverable. For combined deliverables consisting of cloud offerings or on-premise software and other services, the allocated portion of the transaction fee is recognized using the percentage-of-completion method, as outlined above, or over the cloud subscription term, if applicable, depending on which service term is longer. We allocate the total transaction fee of a customer contract to the distinct deliverables under the contract based on their fair values. The allocation is done relative to the distinct deliverables’ individual fair values unless the residual method is applied as outlined below. Fair value is determined by company-specific objective evidence of fair value which is the price charged consistently when that element is sold separately or, for elements not yet sold separately, the price established by our management if it is probable that the price will not change before the element is sold separately. Where company-specific objective evidence of fair value and third-party evidence of selling price cannot be established due to lacking stand-alone sales or lacking pricing consistency, we determine the fair value of a distinct deliverable by estimating its stand-alone selling price. Company-specific objective evidence of fair value and estimated stand-alone selling prices (ESP) for our major products and services
Cost of Cost of Cost of Cost of Research and Development Research and development includes the costs incurred by activities related to the development of software solutions (new products, updates, and enhancements) including resource and hardware costs for the development systems. We have determined that the conditions for recognizing internally generated intangible assets from our software development activities are not met until shortly before the products are available for sale. Development costs incurred after the recognition criteria are met have not been material. Consequently, research and development costs are expensed as incurred. Sales and Marketing Sales and marketing includes costs incurred for the selling and marketing activities related to our software General and Administration General and administration includes costs related to finance and administrative functions, human resources, and general management as long as they are not directly attributable to one of the other operating expense line items. Accounting for Uncertainties in Income Taxes We Share-Based Payments Share-based payments cover cash-settled and equity-settled awards issued to our employees. The respective expenses are recognized as employee benefits expenses and classified in our We grant our employees discounts on certain share-based Where we hedge our exposure to cash-settled awards, changes in the fair value of the respective hedging instruments are also recognized as employee benefits expenses in profit or loss. The fair values For more information about our share-based payments, see Note Financial Assets Our financial assets comprise cash and cash equivalents (highly liquid investments with original maturities of three months or less), loans and receivables, acquired equity and debt investments, and derivative financial instruments (derivatives) with positive fair values. Regular way purchases and sales of financial assets are recorded as at the trade date.
Derivatives Derivatives Not Designated as Hedging Instruments Many transactions constitute economic hedges, and therefore contribute effectively to the securing of financial risks but do not qualify for hedge accounting under IAS 39. To hedge currency risks inherent in foreign-currency denominated and recognized monetary assets and liabilities, we do not designate our held-for-trading derivative financial instruments as accounting hedges, because the profits and losses from the underlying transactions are recognized in profit or loss in the same periods as the profits or losses from the derivatives. In addition, we occasionally have contracts Derivatives Designated as Hedging Instruments We use derivatives to hedge foreign currency risk or a) Cash Flow Hedge In general, we apply cash flow hedge accounting to the foreign currency risk of highly probable forecasted transactions and With regard to foreign currency risk, hedge accounting relates to the spot price and the intrinsic values of the derivatives designated and qualifying as cash flow hedges, while gains and losses on the interest element and on those time values excluded from the hedging relationship as well as the ineffective portion of gains or losses are recognized in profit or b) Fair Value Hedge We apply fair value hedge accounting for Valuation and Testing of Effectiveness The effectiveness of the hedging relationship is tested prospectively and retrospectively. Prospectively, we apply the critical terms match for our foreign currency hedges as currencies, maturities, and the amounts are identical for the forecasted transactions and the spot element of the forward exchange rate contract or intrinsic value of the currency options, respectively. For The method of retrospectively testing effectiveness depends on the type of the hedge as described further below: a) Cash Flow Hedge Retrospectively, effectiveness is tested on a cumulative basis applying the dollar offset method by using the hypothetical derivative method. Under this approach, the change in fair value of a constructed hypothetical derivative with terms reflecting the relevant terms of the hedged item is compared to the change in the fair value of the hedging instrument employing its relevant terms. The hedge is deemed highly effective if the results are within the range 80% to 125%. b) Fair Value Hedge Retrospectively, effectiveness is tested using statistical methods in the form of a regression analysis by which the validity and extent of the relationship between the change in value of the hedged items as the independent variable and the fair value change of the derivatives as the dependent variable is determined. The hedge is deemed highly effective if the determination coefficient between the hedged items and the hedging instruments exceeds 0.8 and the slope coefficient lies within a range of –0.8 to –1.25. Trade and Other Receivables Trade receivables are recorded at invoiced amounts less sales allowances and allowances for doubtful accounts. We record these allowances based on a specific review of all significant outstanding invoices. When analyzing the recoverability of our trade receivables, we consider the following factors:
Account balances are written off, that is, charged off against the allowance after all collection efforts have been exhausted and the likelihood of recovery is considered remote. In our Consolidated Income Statements, expenses from recording bad debt allowances for a portfolio of trade receivables are classified as other operating income, net, whereas expenses from recording bad debt allowances for specific customer balances are classified as cost of Included in trade receivables are unbilled receivables related to fixed-fee and time-and-material consulting arrangements for contract work performed to date. Other Non-Financial Assets Other non-financial assets are recorded at amortized cost. We Intangible Assets We classify intangible assets according to their nature and use in our operation. Software and database licenses consist primarily of technology for internal use, whereas acquired technology consists primarily of purchased software to be incorporated into our product offerings and in-process research and development. Customer relationship and other intangibles consist primarily of customer contracts and acquired trademark licenses. All our purchased intangible assets other than goodwill have finite useful lives. They are initially measured at acquisition cost and subsequently amortized either based on expected Amortization for acquired in-process research and development project assets starts when the projects are complete and the developed software is taken to the market. We typically amortize these intangibles over five to seven years. Amortization expenses of intangible assets are classified as cost of Property, Plant, and Equipment Property, plant, and equipment are carried at acquisition cost plus the fair value of related asset retirement costs if any and if reasonably estimable, Property, plant, and equipment are depreciated over their expected useful lives, generally using the straight-line method. Useful Lives of Property, Plant, and Equipment
Impairment of Goodwill and Non-Current Assets The Impairment losses are presented in other operating income/expense, net in profit or loss. Liabilities Financial Liabilities Financial liabilities include trade and other payables, bank loans, issued bonds, private placements, and other financial liabilities Customer funding liabilities are funds we draw from and make payments on on behalf of our customers for customers’ employee expense reimbursements, related credit card payments, and vendor payments. We present these funds in cash and cash equivalents and record our obligation to make these expense reimbursements and payments on behalf of our customers as customer funding liabilities. Expenses and gains/losses on financial liabilities mainly consist of interest expense, Provisions The employee-related provisions include, amongst others, long-term employee benefits. They are secured by pledged reinsurance coverage and are offset against the settlement amount of the secured commitment. Post-Employment Benefits The discount rates used in measuring our post-employment benefit assets and liabilities are derived from rates available on high-quality corporate bonds and government bonds for which the timing and amounts of payments match the timing and the amounts of our projected pension payments. The assumptions used to calculate pension liabilities and costs are disclosed in Note Since our domestic defined benefit pension plans primarily consist of an employee-financed post-retirement plan that is fully financed with qualifying insurance policies, current service cost may become a credit as a result of adjusting the defined benefit liability’s carrying amount to the fair value of the qualifying plan assets. Such adjustments are recorded in service cost. Deferred Income Deferred income is recognized as cloud (3c) Management Judgments and Sources of Estimation Uncertainty The preparation of the Consolidated Financial Statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues, and expenses, as well as disclosure of contingent assets and liabilities. We base our judgments, estimates, and assumptions on historical and forecast information, as well as on regional and industry economic conditions in which we or our customers operate, changes to which could adversely affect our estimates. Although we believe we have made reasonable estimates about the ultimate resolution of the underlying uncertainties, no assurance can be given that the final outcome of these matters will be consistent with what is reflected in our assets, liabilities, revenues, and expenses. Actual results could differ from original estimates. The accounting policies that most frequently require us to make judgments, estimates, and assumptions, and therefore are critical to understanding our results of operations, include the following:
Our management periodically discusses these critical accounting policies with the Audit Committee of the Supervisory Board. Revenue Recognition As described in the Revenue Recognition section of Note (3b), we do not recognize revenue before the amount of revenue can be measured reliably and collection of the related receivable is probable. The determination of whether the amount of revenue can be measured reliably or whether the fees are collectible is inherently judgmental, as it requires estimates as to whether and to what extent subsequent concessions may be granted to customers and whether the customer is expected to pay the contractual fees. The timing and amount of revenue recognition can vary depending on what assessments have been made. The application of the percentage-of-completion method requires us to make estimates about total revenue, total cost to complete the project, and the stage of completion. The assumptions, estimates, and uncertainties inherent in determining the stage of completion affect the timing and amounts of revenue recognized. In the accounting for our multiple-element arrangements, we have to determine the following:
The determination of whether different contracts with the same customer are to be accounted for as one contract is highly judgmental, as it requires us to evaluate whether the contracts are negotiated together or linked in any other way. The timing and amount of revenue recognition can vary depending on whether two contracts are accounted for separately or as one single contract. Under a multiple-element arrangement including a cloud subscription, or on-premise software, and other deliverables, we do not account for the cloud subscription, or on-premise software, and the other deliverables separately if one of the other deliverables (such as consulting services) is deemed to be essential to the functionality of the cloud subscription or on-premise software. The determination whether an undelivered element is essential to the functionality of the delivered element requires the use of judgment. The timing and amount of revenue recognition can vary depending on how that judgment is exercised, because revenue may be recognized over a longer service term. In the area of allocating the transaction fee to the different deliverables under the respective customer contract, judgment is required in the determination of an appropriate fair value measurement which may impact the timing and amount of revenue recognized depending on the following:
Additionally, our revenue for on-premise software contracts would be significantly different if we applied a revenue allocation policy other than the residual method. Valuation of Trade Receivables As described in the Trade and Other Receivables section in Note (3b), we account for impairments of trade receivables by recording sales allowances and allowances for doubtful accounts on an individual receivable basis and on a portfolio basis. The assessment of whether a receivable is collectible is inherently judgmental and requires the use of assumptions about customer defaults that could change significantly. Judgment is required when we evaluate available information about a particular customer’s financial situation to determine whether it is probable that a credit loss will occur and the amount of such loss is reasonably estimable and thus an allowance for that specific account is necessary. Basing the general allowance for the remaining receivables on our historical loss experience, too, is highly judgmental, as history may not be indicative of future development. Changes in our estimates about the allowance for doubtful accounts could materially impact Accounting for Share-Based Payments We use certain assumptions in estimating the fair values for our share-based payments, including expected future share price volatility and expected option life (which represents our estimate of the average amount of time remaining until the options are exercised or expire unexercised). In addition, the final payout for these plans also depends on our share price at the respective exercise dates. For the purpose of determining the estimated fair value of our stock options, we believe expected volatility is the most sensitive assumption. Regarding future payout under Accounting for Income Tax We The deferred tax assets, we consider all available positive and negative evidence, including the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are recoverable. Our judgment regarding future taxable income is based on For more information about our income tax, see Note Accounting for Business Combinations In our accounting for business combinations, judgment is required in determining whether an intangible asset is identifiable, and should be recorded separately from goodwill. Additionally, estimating the acquisition date fair values of the identifiable assets acquired and liabilities assumed involves considerable management judgment. The necessary measurements are based on information available expectations and assumptions that have been deemed reasonable by management. These judgments, estimates, and assumptions can materially affect our financial position and profit for several reasons,
Subsequent Accounting for Goodwill and Other As described in the Intangible Assets section in Note (3b), all of our intangible assets other than goodwill have finite useful lives. Consequently, the depreciable amount of the intangible assets is amortized on a systematic basis over their useful lives. Judgment is required in determining the following:
Both the amortization period and the amortization method have an impact on the amortization expense that is recorded in each period. In making impairment assessments for our intangible assets and goodwill, the outcome of these tests is highly dependent on management’s latest estimates and assumptions regarding future cash flow projections and economic risks, which are complex and require significant judgment and assumptions about future developments. They can be affected by a variety of factors, including changes in our business strategy, our internal forecasts, and an estimate of our The outcome of goodwill impairment tests and thus the carrying amounts of our recognized goodwill may depend on the allocation of goodwill to segments. This allocation involves judgment as it is based on our estimates regarding which operating segments are expected to benefit from the
Accounting for Legal Contingencies As described in Note required in the determination of whether a provision is to be recorded and what the appropriate amount for such provision should be. Notably, judgment is required in the following:
Due to uncertainties relating to these matters, provisions are based on the best information available at the time. At the end of each reporting period, we reassess the potential obligations related to our pending claims and litigation and adjust our respective provisions to reflect the current best estimate. In addition, we monitor and evaluate new information that we receive after the end of the respective reporting period but before the Consolidated Financial Statements are authorized for issue to determine whether this provides additional information regarding conditions that existed at the end of the reporting period. Recognition of Internally Generated Intangible Assets from Development We believe that determining whether internally generated intangible assets from development are to be recognized as intangible assets requires significant judgment, particularly in the following areas:
These judgments impact the total amount of intangible assets that we present in our balance sheet as well as the timing of recognizing development expenses in profit or
No new accounting standards adopted in (3e) New Accounting Standards Not Yet Adopted The standards and interpretations (relevant to the Group) that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective:
(5) REVENUE For detailed information about our revenue recognition policies, see Note (3).
For revenue information by geographic region, see Note Revenue from Construction
To further drive our transition from an on-premise software vendor to a cloud company, we have carried out additional organizational changes as part of a new restructuring plan, which is intended to minimize cost-intensive and low-growth business activities worldwide. In addition, more redundancies resulted from the integration of our acquired companies. Restructuring provisions primarily include personnel costs that result from severance payments for employee terminations and onerous contract costs. Prior-year restructuring provisions relate to restructuring activities incurred in connection with the organizational changes triggered by our new cloud and simplification strategy and the integration of employees of our acquisitions. For If not presented separately Restructuring Expenses by Functional Area
Cost of cloud and software Cost of services Research and development Sales and marketing General and administration Restructuring expenses
Employee Benefits Expense
Pension expense includes the amounts recorded for our defined benefit and defined contribution plans as described in Note
Number of Employees
Allocation of Share-Based Payment Expense The allocation of expense for share-based payments, net of the effects from hedging these instruments, to the various operating expense items is as follows: Share-Based Payments
For more information about our share-based payments, see Note
Tax Expense According to Region
Major Components of Tax Expense
Profit Before Tax
Germany Foreign Total The following table reconciles the expected income tax expense computed by applying our combined German tax rate of Relationship Between Tax Expense and Profit Before Tax
Recognized Deferred Tax Assets and Liabilities
Items Not Resulting in a Deferred Tax Asset
€
In 2015, subsidiaries that suffered a tax loss in either the current or the preceding period recognized deferred tax assets in excess of deferred tax liabilities amounting to€129 million (2014:€73 million, 2013:€61 million), because it is probable that sufficient future taxable profit will be available to allow the benefit of the deferred tax assets to be utilized. We have not recognized a deferred tax liability on approximately for undistributed profits of our subsidiaries, because we are in a position to control the timing of the reversal of the temporary difference and it is probable that such differences will not reverse in the foreseeable future. The proposed dividend payment of
Total Income Tax
We are subject to ongoing tax audits by domestic and foreign tax authorities. Currently, we are mainly in dispute with the German and the Brazilian tax authorities. The German dispute is in respect of intercompany financing matters and certain secured capital investments, while the Brazilian dispute is in respect of license fee deductibility. In would expect to have an additional tax expense (including related interest expenses and penalties) of approximately
Loans and Other Financial Receivables Loans and other financial receivables mainly consist of time deposits, investments in pension assets for which the corresponding liability is included in employee-related obligations (see Note As at December 31, Available-for-Sale Financial Assets Our available-for-sale financial assets consist of debt investments in bonds of mainly financial and non-financial corporations and municipalities and equity investments in listed and unlisted
For more information Derivatives Detailed information about our derivative financial instruments is presented in Note
Carrying Amounts of Trade Receivables
The changes in the allowance for doubtful accounts charged to expense were immaterial in all periods presented.
Aging of Trade Receivables
For more information about financial risk and how we manage it, see Notes
Prepaid expenses primarily consist of prepayments for operating leases, support services, and software royalties.
The additions, other than from business combinations, to software and database licenses in
Significant Intangible Assets
Goodwill Impairment Testing SAP had two operating segments in 2015 (in 2014, we had a single operating
The amount unallocated on January 1, 2015, relates to the goodwill from the acquisition of Concur in December 2014. Prior-year goodwill amounts have been adjusted by€55 million relating mainly to tax and non-controlling interest adjustments. For more information, see Note (10). The key assumptions on which management based its cash flow projections for the period covered by the underlying business plans are as follows:
Key Assumptions
Applications, Technology & Services The recoverable amounts of the segment have been determined based on value-in-use calculations. The calculations use cash flow projections based on actual operating results and a group-wide five-year business plan approved by management. We SAP Business Network The recoverable amounts of the segment have been determined based on fair value less costs of disposal and a group-wide five-year business plan approved by management. The projected results were determined based on management’s estimates and are consistent with the assumptions a market participant would make. The segment operates in a relatively immature area with significant growth rates projected for the near future. We therefore have a longer and more detailed planning period than one would apply in a more mature segment. We are using a target margin of The recoverable amount exceeds the carrying amount by The
The (16) PROPERTY, PLANT, AND EQUIPMENT
Total additions (other than from business combinations)
(17a) Trade and Other Payables
Miscellaneous other liabilities mainly include
(17b) Financial Liabilities
Financial liabilities are unsecured, except for the retention of title and similar rights customary in our industry. Effective interest rates on our financial debt (including the effects from For an analysis of the contractual cash flows of our financial liabilities based on maturity, see Note
Bonds
Since September 2012, we have used a debt issuance program to issue bonds in a number of
All of our Eurobonds are listed for trading on the Luxembourg Stock Exchange.
Private Placement Transactions
The U.S. private placement notes were issued by one of our subsidiaries that has the U.S. dollar as its functional currency.
Bank Loans
Other Financial Liabilities Our current other financial liabilities mainly comprise liabilities for accrued
(17c) Other Non-Financial Liabilities
Other employee-related liabilities mainly relate to vacation accruals, bonus and sales commission accruals, as well as employee-related social security obligations. For more information about our share-based payments, see Note Other taxes mainly comprise
Defined Benefit Plans The measurement dates for our domestic and foreign benefit plans are December 31.
Present Value of the
€664 million (2014:€714 million) of the present value of the DBO of our domestic plans relate to plans that provide for lump sum payments not based on final salary, and€287 million (2014:€234 million) of the present value of the DBO of our foreign plans relate to plans that provide for annuity payments not based on final salary. The following weighted average assumptions were used for the actuarial valuation of our domestic and foreign pension liabilities as well as other post-employment benefit obligations as at the respective measurement date: Actuarial Assumptions
The sensitivity analysis table shows how the present value of all defined benefit obligations would have been influenced by reasonable possible changes to above actuarial assumptions. The sensitivity analysis table presented below considers change in one actuarial assumption at a time, holding all other actuarial assumptions constant.
Sensitivity Analysis
Total Expense of Defined Benefit Pension Plans
Our investment strategy on domestic benefit plans is to invest all contributions in stable insurance policies. Our investment strategies for foreign benefit plans vary according to the conditions in the country in which the respective benefit plans are situated. Generally, a long-term investment horizon has been adopted for all major foreign benefit plans. Although our policy is to invest in a risk-diversified portfolio consisting of a mix of assets, both the defined benefit obligation and plan assets can fluctuate over time, which exposes the Group to actuarial and market (investment) risks. Depending on the statutory requirements in each country, it might be necessary to reduce
Plan Asset Allocation
Our expected contribution in defined benefit plans amounted to 14 years as at December 31, Total future benefit payments from our defined benefit plans as at December 31, 2015, are expected to be€1,432 million (2014:€1,409 million). Eighty-three percent of this amount has maturities of over five years.
Maturity Analysis
Defined Contribution Plans/State Plans We also maintain domestic and foreign defined contribution plans. Amounts contributed by us under such plans are based on a percentage of the employees’ salaries or the amount of contributions made by employees. Furthermore, in Germany and some other countries we make contributions to public pension plans that are operated by national or local government or a similar institution. Total Expense of Defined Contribution Plans and State Plans
(18b) Other Provisions
Intellectual property-related provisions relate to litigation matters. Customer-related provisions relate primarily to disputes with individual customers.
The cash outflows associated with employee-related restructuring costs are substantially short-term in nature. In 2015, employees received, under certain restructuring activities, credits to their working time accounts which will allow them to discontinue work earlier than their retirement date. These obligations are classified as employee-related provisions rather than restructuring provisions. Onerous contract and other provisions comprise facility-related and supplier-related provisions. The timing of (19) DEFERRED INCOME Deferred income consists mainly of prepayments made by our customers for cloud subscriptions and support; software support
(20) TOTAL EQUITY Issued Capital As at December 31,
Change in Issued Capital and Treasury Shares
Authorized Shares The Articles of Incorporation authorize the Executive Board to increase the issued
Contingent Shares SAP SE’s share capital is subject to a contingent capital increase which may be effected only to the extent that the holders or creditors of convertible bonds or stock options issued or guaranteed by SAP SE or any of its directly or indirectly controlled subsidiaries under certain share-based payments exercise their conversion or subscription rights, and no other methods for servicing these rights are used. As at December 31, Other Comprehensive Income
Items Recognized in Other Comprehensive Income That
Treasury Shares By resolution of SAP SE’s General Meeting of Shareholders held on June 4, 2013, the authorization granted by the General Meeting of Shareholders of June 8, 2010, regarding the acquisition of treasury shares was revoked to the extent it had not been exercised at that time, and replaced by a new authorization of the Executive Board of SAP SE to acquire, on or before June 3, 2018, shares of SAP SE representing a pro rata amount of capital stock of up to Dividends The total dividend available for distribution to SAP SE shareholders is based on the profits of SAP SE as reported in its statutory financial statements prepared under the accounting rules in the German Commercial Code Dividends per share for 2014 and 2013 were€1.10 and (21) ADDITIONAL CAPITAL DISCLOSURES Capital Structure Management The primary objective of our capital structure management is to maintain a strong financial profile for investor, creditor, and customer confidence, and to support the growth of our business. We seek to maintain a capital structure that will allow us to cover our funding requirements through the capital markets at reasonable conditions, and in so doing, ensure a high level of independence, confidence, and financial flexibility.
Capital Structure
In Total financial debt consists of current and non-current bank loans, bonds, and private placements. For more information about our financial debt, see Note As part of our financing activities in 2016, the Company intends to repay a
While we continuously monitor the ratios presented in and below the table above, we actively manage our Group Liquidity of SAP Group
Distribution Policy Our general intention is to remain in a position to return In
As a result of our equity-settled share-based payments transactions (as described in Note
Our operating leases relate primarily to the lease of office space, hardware, and vehicles, with remaining non-cancelable lease terms between less than one and
SAP invests and holds interests in other entities. As of December 31,
Our rental and operating lease expenses were (23) LITIGATION AND CLAIMS We are subject to a variety of claims and lawsuits that arise from time to time in the ordinary course of our business, including proceedings and claims that relate to companies we have acquired, claims that relate to customers demanding indemnification for proceedings initiated against them based on their use of SAP software, and claims that relate to with the products and services that we have delivered to them. We will continue to vigorously defend against all claims and lawsuits against us. We currently believe that resolving the claims and lawsuits pending as of December 31, However, the outcome of litigation and claims is intrinsically subject to considerable uncertainty. Management’s view of the litigation may also change in the future. Actual outcomes of litigation and claims may differ from the assessments made by management in prior periods, which could result in a material impact on our business, financial position, profit, cash flows, or reputation. Most of the lawsuits and claims are of a very individual nature and claims are either not quantified by the claimants or claim amounts quantified are, based on historical evidence, not expected to be a good proxy for the expenditure that would be required to settle the case concerned. The specifics of the jurisdictions where most of the claims are located further impair the predictability of the outcome of the cases. Therefore, it is not practicable to reliably estimate the financial effect that these lawsuits and claims would have if SAP were to incur expenditure for these cases. Among the claims and lawsuits are the following classes: Intellectual Intellectual property-related litigation and claims The carrying amount of the provisions primarily from the unpredictability of the outcomes of legal disputes in several jurisdictions. For more information, see Note (3c). Contingent liabilities exist from intellectual property-related litigation and claims for which no provision has been recognized. Generally, it is not practicable to estimate the financial impact of these contingent liabilities due to the uncertainties around the litigation and claims, as outlined above. The total amounts claimed by plaintiffs in those intellectual property-related lawsuits or claims in which a claim has been quantified were not material to us as of December 31, intellectual property-related litigation and claims tend to be either dismissed in court or settled out of court for amounts significantly below the originally claimed amounts and not material to our consolidated financial statements. Only a few cases (specifically the TomorrowNow and the Versata litigation) ultimately resulted in a significant cash outflow
In April 2007, United States-based Versata Software, Inc. (formerly Trilogy Software, Inc.) (Versata) instituted legal proceedings in the United States District Court for the Eastern District of Texas against SAP. Versata alleged that SAP’s products infringe one or more of the claims in
In February 2010, United States-based TecSec, Inc. (TecSec) instituted legal proceedings in the United States against SAP (including its subsidiary Sybase) In April 2010, SAP instituted legal proceedings (a action, Wellogix has re-asserted trade secret misappropriation claims against SAP (which had previously been raised and abandoned). The court granted SAP’s motion for an early dispositive decision on the trade secret
Customer-related litigation and claims include cases in which we indemnify our customers against liabilities arising from a claim that our products infringe a third party’s patent, copyright, trade secret, or other proprietary rights. Occasionally, consulting or software implementation projects result in disputes with customers. Where customers are dissatisfied with the products and services that we have delivered to them in routine consulting contracts or development arrangements, we may grant functions or performance guarantees. The carrying amount of the provisions recorded for customer-related litigation and claims and the development of the carrying amount in the reporting period are disclosed in Note Contingent liabilities exist from customer-related litigation and claims for which no provision has been recognized. Generally, it is not practicable to estimate the financial impact of these contingent liabilities due to the uncertainties around these lawsuits and claims outlined above. Non-Income We are subject to ongoing audits by domestic and foreign tax authorities. Along with many other companies operating in Brazil, we are involved in various proceedings with Brazilian authorities regarding assessments and litigation matters on non-income taxes on intercompany royalty payments and intercompany services. The total potential amount related to these matters for all applicable years is approximately For more information about income tax-related litigation, (24) FINANCIAL RISK FACTORS We are exposed to various financial risks, such as market risks (including foreign currency exchange rate risk, Market Risk a) Foreign Currency Exchange Rate Risk As from ongoing ordinary operations is not considered significant. However, we occasionally In rare circumstances, transacting in a currency other than the functional currency also leads to embedded foreign currency derivatives being separated and measured at fair value through profit or loss. In addition, the currencies of subsidiaries with significant operations, for example the U.S. dollar, the pound sterling, the Japanese yen, the Swiss franc, the Brazilian real, and the Australian dollar. Generally, we are not exposed to any significant foreign currency exchange rate risk with regard to our investing and financing activities, as such activities are normally conducted in the functional currency of the investing or borrowing entity. However, we were exposed to a cash flow risk from the consideration to be paid in U.S. dollars for the acquisition of Concur and Fieldglass in 2014, b) We are exposed to
c) Equity Price Risk We are exposed to Credit Risk To reduce the credit risk in investments, we Liquidity Risk
or not the fair value of the derivative is negative, except for the derivative forward contracts entered into in connection with the acquisition of Concur, where we
Contractual Maturities of Non-Derivative Financial Liabilities
Trade payables Financial liabilities Total of non-derivative financial liabilities Contractual Maturities of Derivative Financial Liabilities and Financial Assets
(25) FINANCIAL RISK MANAGEMENT We manage market risks (including foreign currency exchange rate risk, In the following sections we provide details on the management of each respective financial risk and our related risk exposure. In the sensitivity analyses that show the effects of hypothetical changes of relevant risk variables on profit or other comprehensive income, we determine the periodic effects by relating the hypothetical changes in the risk variables to the balance of financial instruments at the reporting date. Foreign Currency Exchange Rate Risk Management We continually monitor our exposure to currency fluctuation risks based on monetary items and forecasted transactions and pursue a Group-wide strategy to manage foreign currency exchange rate risk, using derivative financial instruments, primarily foreign exchange forward contracts, as appropriate, with the primary aim of reducing profit or loss volatility. Currency Hedges Not Designated as Hedging Instruments The foreign exchange forward contracts we enter into to offset exposure relating to foreign-currency denominated monetary assets and liabilities are not designated as being in a hedge accounting relationship, Currency hedges not designated as hedging instruments also include foreign currency derivatives embedded in non-derivative host contracts that are separated and accounted for as derivatives according to the requirements of IAS In addition, during 2014 we held foreign exchange forward contracts and foreign currency options to hedge the cash flow risk from the consideration paid in U.S. dollars for the acquisition of Concur. Currency Hedges Designated as Hedging Instruments (Cash Flow Hedges) We enter into derivative financial instruments, primarily foreign exchange forward contracts, to hedge significant forecasted cash flows (royalties) from foreign subsidiaries denominated in foreign currencies with a defined set of hedge ratios and a hedge horizon of up to 12 months. Specifically, we exclude the interest component and only designate the spot rate of the foreign exchange forward contracts as the hedging instrument to offset anticipated cash flows relating to the subsidiaries with significant
For the years ended December 31, Foreign Currency Exchange Rate Exposure In line with our internal risk reporting process, we use the cash flow-at-risk method to quantify our risk positions with regard to our forecasted intercompany transactions and value-at-risk for our foreign-currency denominated financial instruments. In order not to provide two different methodologies, we have opted to disclose our risk exposure based on a sensitivity analysis considering the following:
Consequently, we are only exposed to significant foreign currency exchange rate fluctuations with regard
We calculate our sensitivity on an upward/downward shift of +/–25% of the
Our foreign currency exposure as at December 31 (and if year-end exposure is not representative, also our average/high/low exposure) was as follows: Foreign Currency Exposure
During
The aim of our
Derivatives Designated as Hedging Instruments (Fair Value Hedges) The majority of our investments are based on variable rates and/or short maturities (2015: 87%; 2014: 71%) while most of our financing transactions are based on fixed rates and long the Treasury Committee. Including None of the fair value adjustment from the receiver swaps, the basis adjustment on the underlying hedged items held in fair value hedge relationships, and the difference between the two recognized in financial income, net is material in any of the years presented.
A sensitivity analysis is provided to show the impact of our
The designation of
Due to the points for the U.S. dollar/euro area
If, on December 31, 2015, 2014, Interest-Rate Sensitivity
Our Interest-Rate Risk Exposure
Equity Price Risk Management Our investments in equity instruments with quoted market prices in active markets securities and the corresponding entries in other comprehensive income. We are exposed to equity price risk with regard to our share-based payments. In order to reduce resulting profit or loss volatility, we hedge certain cash flow exposures associated with these plans through the purchase of derivative instruments, but do not establish a designated hedge relationship. In our sensitivity analysis we include the underlying share-based payments and the hedging instruments. Thus, we base the calculation on our net exposure to equity prices as we believe taking only the derivative instrument into account would not properly reflect our equity price risk exposure. An assumed 20% increase (decrease) in equity prices as at December 31, Credit Risk Management To mitigate the credit risk from our investing activities and derivative financial assets, we conduct all our activities only with approved major financial institutions and issuers that carry high external ratings, as required by our internal treasury guideline. Among its stipulations, the guideline requires that we invest only in assets from issuers with a minimum rating of at least “BBB flat”. We only make investments in issuers with a lower rating in exceptional cases. Such investments were not material in To further reduce our credit risk, we require collateral for certain investments in the full amount of the investment volume which we would be allowed to make use of in the case of default of the counterparty to the investment. As such collateral, we only accept bonds with at least investment grade rating level. In addition, the concentration of credit risk that exists when counterparties are involved in similar activities by instrument, sector, or geographic area is further mitigated by diversification of counterparties throughout the world and adherence to an internal limit system for each counterparty. This internal limit system stipulates that the business volume with individual counterparties is restricted to a defined limit, which depends on the lowest official long-term credit rating available by at least one of the major rating agencies, the Tier 1 capital of the respective financial institution, or participation in the German Depositors’ Guarantee Fund or similar protection schemes. We continuously monitor strict compliance with these counterparty limits. As the premium for credit default swaps mainly depends on market participants’ assessments of the creditworthiness of a debtor, we also closely observe the development of credit default swap spreads in the market to evaluate probable risk developments to timely react to changes if these should manifest. The default risk of our trade receivables is managed separately, mainly based on assessing the creditworthiness of customers through external ratings and our Liquidity Risk Management Our liquidity is managed by our global treasury department with the primary aim of maintaining liquidity at a level that is adequate to meet our financial obligations.
Apart from effective working capital and cash management, we have reduced the liquidity risk inherent in managing our day-to-day operations and meeting our financing responsibilities by arranging an adequate volume of available credit facilities with various financial institutions on which we can draw if necessary. In order to retain high financial flexibility, on November 13, 2013, SAP SE entered into a of one year to November Additionally, as at December 31, (26) ADDITIONAL FAIR VALUE DISCLOSURES ON FINANCIAL INSTRUMENTS Fair Value of Financial Instruments We use various types of financial instrument in the ordinary course of business, which are
Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
Assets Cash and cash equivalents1 Trade and other receivables Trade receivables1 Other receivables2 Other financial assets Available-for-sale financial assets Debt investments Equity investments Investments in associates2 Loans and other financial receivables Financial instruments related to employee benefit plans2 Other loans and other financial receivables Derivative assets Designated as hedging instrument FX forward contracts Interest rate swaps Not designated as hedging instrument FX forward contracts Call options for share-based payments Call option on equity shares Liabilities Trade and other payables Trade payables1 Other payables2 Financial liabilities Non-derivative financial liabilities Bonds Private placements Other non-derivative financial liabilities Derivatives Designated as hedging instrument FX forward contracts Interest rate swaps Not designated as hedging instrument FX forward contracts Total financial instruments, net Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
Fair Values of Financial Instruments Classified According to IAS 39
Determination of Fair Values It is our policy at the beginning of the period of the event or change in circumstances that caused the transfer. A description of the valuation techniques and the inputs used in the fair value measurement is given below: Financial Instruments Measured at Fair Value on a Recurring Basis
Financial Instruments Not Measured at Fair Value
For other non-derivative financial assets/liabilities and variable rate financial debt, it is assumed that their carrying value reasonably approximates their fair values. Transfers Between Levels 1 and 2 Transfers of available-for-sale equity investments from Level 2 to Level 1 which occurred because disposal restrictions lapsed and deducting a discount for such restriction was no longer necessary were not material in all years presented, while transfers from Level 1 to Level 2 did not occur at all. Level 3 Disclosures The following table shows the reconciliation from the opening to the closing balances for our unlisted equity investments and call options on equity shares classified as Level 3 fair values: Reconciliation of Level 3 Fair Values
Changing the unobservable inputs to reflect reasonably possible alternative assumptions would not have a material impact on the fair values of our unlisted equity investments held as available-for-sale as of the reporting date. (27) SHARE-BASED PAYMENTS SAP has granted awards under various cash-settled and equity-settled share-based payments to its directors and employees. Most of these awards are described in detail below. SAP has other share-based
SAP’s cash-settled share-based payments include the following programs: Employee Participation Plan (EPP) andLong-Term Incentive Plan (LTI Plan for the Global Managing Board) 2015, Stock Option Plan 2010 (SOP 2010 (2010– As at December 31, 2015, the Fair Value and Parameters Used at Year End 2015 for Cash-Settled Plans
1) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing share price as of the valuation date. As at December 31, 2014, the valuation of our outstanding cash-settled plans was based on the following parameters and assumptions:
Fair Value and Parameters Used at
1) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing share price as of the valuation date.
Expected volatility of the SAP share price is based on a blend of implied volatility from traded options with corresponding lifetimes and exercise prices as well as historical volatility with the same expected life as the options granted. Expected remaining life of the options reflects both the contractual term and the expected, or historical, exercise behavior. The risk-free interest rate is derived from German government bonds with a similar duration. Dividend yield is based on
Changes in Numbers of Outstanding Awards Under Our Cash-Settled Plans
a.1) Employee Participation Plan (EPP) and Long-Term Incentive Plan (LTI Plan) 2015 SAP implemented two The plans are focused on SAP’s share price and the achievement of two financial key performance indicators (KPIs): non-IFRS total revenue and non-IFRS operating profit, which are derived from the Company’s 2015 financial KPIs. Under these plans, virtual shares, called restricted share units (RSUs), are granted to participants. Participants are paid out in cash based on the number of RSUs that vest. The RSUs were granted and allocated at the beginning of each year through 2015, with EPP 2015 RSUs subject to annual Executive Board approval. Participants in the LTI Plan 2015 have already been granted a budget for the years 2012 to 2015 The RSU allocation process At the end of the given year, the number of RSUs that finally vest with plan participants depends on SAP’s actual performance for the given year, and might be higher or lower than the number of RSUs originally granted. If performance against both KPI targets reaches at least the defined 60% (80% for 2012 and 2013 tranches) threshold, the RSUs vest. Depending on performance, the vesting can reach a maximum of 150% of the budgeted amount. If performance against either or both of those KPI targets does not reach the defined threshold of 60% (80% for 2012 and 2013 tranches), no RSUs vest and RSUs granted for that year will be forfeited. The adjustment to the threshold of those performance indicators was made to reflect our updated expectations due to the accelerated shift to the cloud. For the year Under the EPP 2015, the RSUs are paid out in the first quarter of the year after the one-year performance period, whereas the RSUs for members of the Global Managing Board under the LTI Plan 2015 are subject to a The The final financial effect of each tranche of the EPP 2015 and the LTI Plan 2015 will depend on the number of vested RSUs and the SAP share price, which is set directly after the announcement of the preliminary fourth quarter and full-year results for the last financial year under the EPP 2015 (of the respective three-year holding period under the LTI Plan 2015), and thus may be significantly above or below the budgeted amounts. a.2) SAP Stock Option Plan 2010 (SOP 2010 (2010–2015 Tranches)) Under the SAP Stock Option Plan 2010, we granted members of the Senior Leadership The grant-base value is based on the average fair market value of one ordinary share over the five business days prior to the Executive Board resolution date. The virtual stock options granted under the SOP 2010 give the employees the right to receive a certain amount of money by exercising the options under the terms and conditions of this plan. After a three-year vesting period (four years for members of the Executive Board), the plan provides for 11 predetermined exercise dates every calendar year (one date per month except in April) until the rights lapse six years after the grant date (seven years for members of the Executive Board). Employees can exercise their virtual stock options only if they are employed by SAP; if they leave the Company, they forfeit them. Executive Board members’ options are non-forfeitable once granted – if the service agreement ends in the grant year, the number of options is reducedpro rata The exercise price is 110% of the grant base value (115% for members of the Executive Board) which is Monetary benefits will be capped at 100% of the exercise price (150% for members of the Executive Board). a.3) Restricted Stock Unit Plan (RSU Plan (2013–2015 tranches)) We maintain share-based payment plans that allow for the issuance of restricted stock units (RSU) to retain and motivate executives and certain employees. Under the RSU Plan, we granted a certain number of RSUs
The number of RSUs that could vest under the
Depending on performance, the number of RSUs vesting could have ranged between Performance against the KPI targets was 112.96% (2014: 90.27% The RSUs are paid out in cash upon vesting.
Under the Share Matching Plan (SMP) implemented in 2010, SAP offers its employees the opportunity to purchase SAP SE shares at a discount of 40%. The number of SAP shares an eligible employee may purchase through the SMP is limited to a percentage of the employee’s annual base salary. After a three-year holding period, such plan participants will receive one The terms for the members of the Senior Leadership different than those for the other employees. They do not receive a discount when purchasing the shares. However, after a three-year holding period, they receive two The following table shows the parameters and assumptions used at grant date to determine the fair value of free matching shares, as well as the quantity of shares purchased and free matching shares granted through this program in 2015, 2014, Fair Value and Parameters at Grant Date for SMP
Changes in Numbers of Outstanding Awards Under SMP
Recognized Expense at
(28) SEGMENT AND GEOGRAPHIC INFORMATION General Information
The SAP Business Network qualifies as an operating segment and as a reportable segment under IFRS 8. Since fiscal year 2015 SAP thus has two reportable segments that are regularly reviewed by our Executive Board, which is responsible for assessing the performance of our Company and for making resource allocation decisions as our Chief Operating Decision Maker (CODM)
The Applications, Technology & Services segment derives its revenue primarily from the The SAP Business Network segment emerged from combining all SAP network offerings into one network of networks that Our Concur and Fieldglass acquisitions are included in the Revenue and Results of Segments
Revenue and Results of Segments
Segment asset/liability information is not regularly provided to
Measurement and Presentation
Most of our depreciation and amortization expense affecting Our management reporting system produces a variety of reports that differ by the currency exchange rates used in the accounting for foreign-currency transactions and operations. Reports based on actual currencies use the same currency rates as are used in our statements. Reports based on constant currencies report revenues and expenses using the average exchange rates from the previous year’s corresponding period. We use an operating
The measurements of
The
Certain corporate-level activities are not allocated to our segments, including finance, accounting, legal, human resources, and marketing. They are disclosed in the The segment
Reconciliation of
Geographic Information We have aligned our revenue by region disclosures with the changes made to the structure of our income statement as outlined in Note (3b). The amounts for revenue by region in the following tables are based on the location of customers. The regions in the following table are broken down into EMEA (Europe, Middle East, and Africa), Americas (North America and Latin America) and APJ (Asia Pacific Japan).
Revenue by Region
Total Revenue by Region
Non-Current Assets by Region
The table above shows non-current assets excluding financial instruments, deferred tax assets, post-employment benefits, and rights arising under insurance contracts. For information about the breakdown of our workforce by region, see Note (29) BOARD OF DIRECTORS Executive Board Memberships on supervisory boards and other comparable governing bodies of enterprises, other than subsidiaries of SAP on December 31, 2015 Bill McDermott Chief Executive Officer, Labor Relations Director Strategy, Governance, Business Development, Corporate Development, Communications and Marketing, Human Resources, Business Network Board of Directors, ANSYS, Inc., Canonsburg, PA, United States Board of Directors, Under Armour, Inc., Baltimore, MD, United States Robert Enslin Global Customer Operations Global Sales, Industry & LoB Solutions Sales, Services Sales, Sales Operations, Global Customer Office Michael Kleinemeier (from November 1, 2015) Global Service & Support Global Consulting Delivery, Global and Regional Support and Premium Engagement Functions, MaintenanceGo-to-Market, Global User Groups, Mobile Services Bernd Leukert Chief Technology Officer Products & Innovation Global Development Organization, Innovation & Cloud Delivery, Product Strategy, Development Services, SAP Global Security Supervisory Board, DFKI (Deutsches Forschungszentrum für Künstliche Intelligenz GmbH), Kaiserslautern, Germany (from October 13, 2015) Luka Mucic Chief Financial Officer, Chief Operating Officer Global Finance and Administration including Investor Relations and Data Protection & Privacy, Process Office, Business Innovation & IT Gerhard Oswald Product Quality & Enablement Quality Governance & Validation, Scale, Enablement & Transformation, Logistics Services Supervisory Board Memberships on supervisory boards and other comparable governing bodies of enterprises, other than subsidiaries of SAP on December 31, 2015 Prof. Dr. h.c. mult. Hasso Plattner 2), 4), 6), 7), 8) Chairman Margret Klein-Magar 1), 2), 4) Deputy Chairperson Vice President, Head of SAP Alumni Relations Chairperson of the Spokespersons’ Committee of Senior Managers of SAP SE Pekka Ala-Pietilä 4), 5), 6), 7) Chairman of the Board of Directors, Huhtamäki Oyj, Espoo, Finland Chairman of the Board of Directors, Solidium Oy, Helsinki, Finland (until April 22, 2015) Board of Directors, Pöyry Plc, Vantaa, Finland Chairman of the Board of Directors, CVON Group Limited, London, United Kingdom Board of Directors, CVON Limited, London, United Kingdom Chairman of the Board of Directors, CVON Innovation Services Oy, Turku, Finland Board of Directors, CVON Future Limited, London, United Kingdom Chairman of the Board of Directors, Blyk International Ltd., London, United Kingdom Board of Directors, Sanoma Corporation, Helsinki, Finland Panagiotis Bissiritsas 1), 3), 4), 5) Support Expert Martin Duffek (from May 20, 2015)1), 3), 8) Product Manager Prof. Anja Feldmann 4), 8) Professor at the Electrical Engineering and Computer Science Faculty at the Technische Universität Berlin Prof. Dr. Wilhelm Haarmann 2), 5), 7), 8) Attorney-at-law, certified public auditor, certified tax advisor Linklaters LLP, Rechtsanwälte, Notare, Steuerberater, Frankfurt am Main, Germany Supervisory Board, Celesio AG, Stuttgart, Germany (until March 1, 2015)
Product Expert, Industry Standards & Open Source Prof. Dr. Professor for Design Research and Head of the Design Research Lab, University of Arts Berlin Lars Lamadé 1), 2), 7), 8) Head of Customer & Events GSS COO Managing Director, Rhein Neckar-Loewen GmbH, Kronau, Germany Bernard Liautaud 2), 4), 6) General Partner Balderton Capital, London, United Kingdom Board of Directors, nlyte Software Ltd., London, United Kingdom Board of Directors, Talend SA, Suresnes, France Board of Directors, Wonga Group Ltd., London, United Kingdom Board of Directors, SCYTL Secure Electronic Voting SA, Barcelona, Spain Board of Directors, Vestiaire Collective SA, Levallois-Perret, France Board of Directors, Dashlane, Inc., New York, NY, United States Board of Directors, Recorded Future, Inc., Cambridge, MA, United States Board of Directors, eWise Group, Inc., Redwood City, CA, United States Board of Directors, Qubit Digital Ltd., London, United Kingdom Board of Directors, Stanford University, Stanford, CA, United States Board of Directors, Citymapper Ltd., London, United Kingdom Board of Directors, Sunrise Atelier, Inc., New York, NY, United States (until February 11, 2015) Board of Directors, Opbeat Inc., San Francisco, CA, United States Christine Regitz (from May 20, 2015)1), 4), 8) Vice President User Experience Chief Product Expert Dr. Erhard Schipporeit 3), 7) Independent Management Consultant Supervisory Board, Talanx AG, Hanover, Germany Supervisory Board, Deutsche Börse AG, Frankfurt am Main, Germany Supervisory Board, HDI V.a.G., Hanover, Germany Supervisory Board, Hannover Rückversicherung SE, Hanover, Germany Supervisory Board, Fuchs Petrolub SE, Mannheim, Germany Supervisory Board, BDO AG, Hamburg, Germany Board of Directors, Fidelity Funds SICAV, Luxembourg Supervisory Board, Rocket Internet AG, Berlin, Germany (until June 23, 2015) Robert Schuschnig-Fowler (from May 20, 2015)1), 8) Account Manager, Senior Support Engineer Dr. Sebastian Sick (from May 20, 2015)1), 2), 5), 7) Head of Company Law Unit, Hans Böckler Foundation Supervisory Board, Georgsmarienhütte GmbH, Georgsmarienhütte, Germany Jim Hagemann Snabe Supervisory Board Member Board of Directors, Bang & Olufsen A/S, Struer, Denmark Board of Directors, Danske Bank A/S, Copenhagen, Denmark Supervisory Board, Allianz SE, Munich, Germany Supervisory Board, Siemens AG, Munich, Germany
Webmaster Prof. Dr.-Ing. Dr.-Ing. E. h. Klaus Wucherer 3) Managing Director of Dr. Klaus Wucherer Innovations- und Technologieberatung GmbH, Erlangen, Germany Deputy Chairman of the Supervisory Board, HEITEC AG, Erlangen, Germany Supervisory Board, Dürr AG, Bietigheim-Bissingen, Germany (until December 31, 2015) Deputy Chairman of the Supervisory Board, LEONI AG, Nuremberg, Germany Chairman of the Supervisory Board, Festo AG & Co. KG, Esslingen, Germany Supervisory Board Members Who Left During 2015 Catherine Bordelon (until May 20, 2015) Christiane Kuntz-Mayr (until May 20, 2015) Steffen Leskovar (until May 20, 2015) Dr. h. c. Hartmut Mehdorn (until May 15, 2015) Dr. Kurt Reiner (until May 20, 2015) Mario Rosa-Bian (until May 20, 2015) Stefan Schulz (until May 20, 2015) Information as at December 31,
Executive Board Compensation
1) Portion of total executive compensation allocated to the respective year based on management view
The share-based payment amounts disclosed above are based on the grant date fair value of the restricted share units (RSUs) issued to Executive Board members during the year. The Executive Board members already received, in 2012, the LTI grants for the years 2012 to 2015 subject to continuous service as member of the Executive Board in the respective years. Although these grants are linked to and thus, economically, compensation for the Executive Board members in the respective years, section 314 of the German Commercial Code (HGB) requires them to be included in the total compensation number for the year of grant. The share-based payment as defined in section 314 of the German Commercial Code (HGB) amounts to Considering the grant date fair value of the RSUs allocated during the year instead of the economically allocated amount of share-based payments in the table above, the sum of short-term employee benefits and share-based payment amounts to Share-Based Payment for Executive Board Members
In the table above, the share-based payment expense is the amount recorded in profit or loss under IFRS 2 in the respective period. The defined benefit obligation (DBO) for pensions to Executive Board members and the annual pension entitlement of the members of the Executive Board on reaching age 60 based on entitlements from performance-based and salary-linked plans were as follows: Retirement Pension Plan for Executive Board Members
The total annual compensation of the Supervisory Board members for Supervisory Board Compensation
The Supervisory Board members do not receive any share-based payment for their services. As far as members who are employee representatives on the Supervisory Board receive share-based payment, such compensation is for their services as employees only and is unrelated to their status as members of the Supervisory Board.
Payments
SAP did not grant any compensation advance or credit to, or enter into any commitment for the benefit of, any member of the Executive Board or Supervisory Board in 2015, 2014,
Shareholdings of Executive and Supervisory Board Members
(30) RELATED PARTY TRANSACTIONS Certain Executive Board and Supervisory Board members of SAP SE currently hold, or held within the last year, positions of significant responsibility with other entities, as presented inNote Companies controlled by Hasso Plattner, chairman of our Supervisory Board and Chief Software Advisor of SAP, engaged in the following transactions with SAP: providing consulting services to SAP, receiving sport sponsoring from SAP, making purchases of SAP products and services. Christiane Kuntz-Mayr, vice chairperson and member of the SAP Supervisory Board Wilhelm Haarmann practices as a partner in the law firm Linklaters LLP in Frankfurt am Main, Germany. SAP occasionally purchased and purchases legal and similar services from Linklaters. Occasionally, members of the Executive Board of SAP SE obtain services from SAP for which they pay a consideration believed to be consistent with those negotiated at arm’s length between unrelated parties. All amounts related to the In total, we sold products and services to companies controlled by members of the Supervisory Board in the amount of In total, we sold services to members of the Executive Board and the Supervisory Board in the amount of€2 million (2014:€0 million) and we received services from members of the Supervisory Board (including services from employee representatives on the Supervisory Board in their capacity as employees of SAP) in the amount of For information about the compensation of our Executive Board and Supervisory Board members, see Note
At the Annual General Meeting of Shareholders held on May independent auditor for Fees for Audit and Other Professional Services
Audit fees are the aggregate fees charged by KPMG for under audit fees. Tax fees are fees for professional services rendered by KPMG for tax advice on transfer pricing, restructuring, and tax compliance on current, past, or contemplated transactions. The (32) EVENTS AFTER THE REPORTING PERIOD After December 31, 2015, the following change took place: We are in the process of preparing the consolidation of intellectual property rights held by SAP’s group company hybris AG at the level of SAP SE in Germany. Based on deviating applicable tax rates, the Group expects an overall positive income tax effect in a range between approximately€180 million and€220 million in 2016. (33)
SAP Erste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf6),7) SAP Foreign Holdings GmbH, Walldorf SAP Fünfte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf7) SAP Hosting Beteiligungs GmbH, St. Leon-Rot SAP Portals Europe GmbH, Walldorf SAP Portals Holding Beteiligungs GmbH, Walldorf SAP Projektverwaltungs- und Beteiligungs GmbH, Walldorf6),7) SAP Puerto Rico GmbH, Walldorf SAP Retail Solutions Beteiligungsgesellschaft mbH, Walldorf SAP Sechste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf7) SAP Ventures Investment GmbH, Walldorf7) SAP Vierte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf SAP Zweite Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf6),7) TechniData GmbH, Markdorf TRX Germany GmbH, Berlin REST OF EUROPE, MIDDLE EAST, AFRICA Ambin Properties (Proprietary) Limited, Johannesburg, South Africa Ariba Czech s.r.o., Prague, Czech Republic Ariba France, SAS, Paris, France Ariba Iberia, S.L., Madrid, Spain Ariba International Sweden AB, Stockholm, Sweden Ariba Middle East & North Africa FZ-LLC, Dubai, United Arab Emirates Ariba Slovak Republic s.r.o., Kosice, Slovakia Ariba Technologies Ireland Ltd., Dublin, Ireland Ariba Technologies Netherlands B.V., Amsterdam, the Netherlands Ariba UK Limited, Egham, United Kingdom8) b-process, Paris, France Business Objects (UK) Limited, London, United Kingdom8) Business Objects Holding B.V.,‘s-Hertogenbosch, the Netherlands Business Objects Software Limited, Dublin, Ireland Christie Partners Holding C.V., Rotterdam, the Netherlands ClearTrip Inc. (Mauritius), Ebene, Mauritius Cleartrip MEA FZ LLC, Dubai, United Arab Emirates Concur (Austria) GmbH, Vienna, Austria Concur (France) SAS, Paris, France Concur (Italy) S.r.l., Milan, Italy Concur (Switzerland) GmbH, Zurich, Switzerland Concur Czech (s.r.o.), Prague, Czech Republic Concur Denmark ApS, Frederiksberg, Denmark Concur Holdings (France) SAS, Paris, France Concur Holdings (Netherlands) B.V., Amsterdam, the Netherlands Concur International Holdings (Netherlands) CV, Amsterdam, the Netherlands Concur Technologies (UK) Ltd., London, United Kingdom ConTgo Consulting Limited, London, United Kingdom8) ConTgo Limited, London, United Kingdom ConTgo MTA Limited, London, United Kingdom Crossgate UK Ltd., Slough, United Kingdom8) Crystal Decisions (Ireland) Limited, Dublin, Ireland Crystal Decisions Holdings Limited, Dublin, Ireland Crystal Decisions UK Limited, London, United Kingdom8) EssCubed Procurement Pty. Ltd., Johannesburg, South Africa Fieldglass Europe Limited, London, United Kingdom8) GlobalExpense (Consulting) Limited, London, United Kingdom GlobalExpense (UK) Ltd, London, United Kingdom hybris AG, Rotkreuz, Switzerland hybris Austria GmbH, Vienna, Austria hybris France SAS, Levallois-Perret, France hybris Netherlands BV, Amsterdam, the Netherlands hybris Software AB, Västerås, Sweden hybris Sp.z.o.o., Gliwice, Poland hybris UK Ltd., London, United Kingdom8) Joe D Partners C.V., Utrecht, the Netherlands KXEN Ltd., London, United Kingdom8) Limited Liability Company “SAP Labs”, Moscow, Russia Limited Liability Company “SAP CIS”, Moscow, Russia Limited Liability Company SAP Kazakhstan, Almaty, Kazakhstan Limited Liability Company SAP Ukraine, Kiev, Ukraine Merlin Systems Oy, Espoo, Finland OOO hybris Software, Moscow, Russia Quadrem Africa Pty. Ltd., Johannesburg, South Africa Quadrem Netherlands B.V., Amsterdam, the Netherlands Quadrem Overseas Cooperatief U.A., Amsterdam, the Netherlands SAP (Schweiz) AG, Biel, Switzerland SAP (UK) Limited, Feltham, United Kingdom8) SAP Belgium NV/SA, Brussels, Belgium SAP Bulgaria EOOD, Sofia, Bulgaria SAP Business Services Center Europe s.r.o., Prague, Czech Republic SAP Business Services Center Nederland B.V., Utrecht, the Netherlands SAP Commercial Services Ltd., Valletta, Malta SAP ČR, spol. s r.o., Prague, Czech Republic SAP Cyprus Ltd, Nicosia, Cyprus SAP d.o.o., Zagreb, Croatia SAP Danmark A/S, Copenhagen, Denmark SAP East Africa Limited, Nairobi, Kenya SAP Egypt LLC, Cairo, Egypt SAP EMEA Inside Sales S.L., Barcelona, Spain SAP España – Sistemas, Aplicaciones y Productos en la Informática, S.A., Madrid, Spain SAP Estonia OÜ, Tallinn, Estonia SAP Finland Oy, Espoo, Finland SAP France Holding, Paris, France SAP France, Paris, France SAP Hellas S.A., Athens, Greece SAP Holdings (UK) Limited, Feltham, United Kingdom8) SAP Hungary Rendszerek, Alkalmazások és Termékek az Adatfeldolgozásban Informatikai Kft., Budapest, Hungary SAP Ireland Limited, Dublin, Ireland SAP Ireland US-Financial Services Ltd., Dublin, Ireland SAP Israel Ltd., Ra’anana, Israel SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A., Milan, Italy SAP Labs Bulgaria EOOD, Sofia, Bulgaria SAP Labs Finland Oy, Espoo, Finland SAP Labs France SAS, Mougins, France SAP Labs Israel Ltd., Ra’anana, Israel SAP Latvia SIA, Riga, Latvia SAP Malta Investments Ltd., Valletta, Malta SAP Middle East and North Africa L.L.C., Dubai, United Arab Emirates3) SAP Nederland B.V.,‘s-Hertogenbosch, the Netherlands SAP Nederland Holding B.V.,‘s-Hertogenbosch, the Netherlands SAP Norge AS, Lysaker, Norway SAP Österreich GmbH, Vienna, Austria SAP Polska Sp. z o.o., Warsaw, Poland SAP Portals Israel Ltd., Ra’anana, Israel SAP Portugal – Sistemas, Aplicações e Produtos Informáticos, Sociedade Unipessoal, Lda., Porto Salvo, Portugal SAP Public Services Hungary Kft., Budapest, Hungary SAP Romania SRL, Bucharest, Romania SAP Saudi Arabia Software Services Ltd, Riyadh, Kingdom of Saudi Arabia SAP Saudi Arabia Software Trading Ltd, Riyadh, Kingdom of Saudi Arabia SAP Service and Support Centre (Ireland) Limited, Dublin, Ireland SAP sistemi, aplikacije in produkti za obdelavo podatkov d.o.o., Ljubljana, Slovenia SAP Slovensko s.r.o., Bratislava, Slovakia SAP Svenska Aktiebolag, Stockholm, Sweden SAP Training and Development Institute FZCO, Dubai, United Arab Emirates SAP Türkiye Yazilim Üretim ve Ticaret A.S., Istanbul, Turkey SAP UAB (Lithuania), Vilnius, Lithuania SAPV (Mauritius), Ebene, Mauritius4) SAP West Balkans d.o.o., Belgrade, Serbia SeeWhy (UK) Limited, Windsor, United Kingdom SuccessFactors (UK) Limited, London, United Kingdom8) SuccessFactors Ireland Limited, Dublin, Ireland SuccessFactors Netherlands B.V., Amsterdam, the Netherlands Sybase (UK) Limited, Maidenhead, United Kingdom8) Sybase Angola, Ltd., Luanda, Angola Sybase Iberia S.L., Madrid, Spain Syclo International Limited, Leatherhead, United Kingdom8) Systems Applications Products Africa Region (Proprietary) Limited, Johannesburg, South Africa Systems Applications Products Africa (Proprietary) Limited, Johannesburg, South Africa Systems Applications Products Nigeria Limited, Abuja, Nigeria Systems Applications Products South Africa (Proprietary) Limited, Johannesburg, South Africa The Infohrm Group Ltd., London, United Kingdom8) TRX Europe, Ltd., London, United Kingdom TRX Luxembourg, S.a.r.l., Luxembourg City, Luxembourg TRX UK, Ltd., London, United Kingdom AMERICAS 110405, Inc., Newtown Square, Pennsylvania, USA Ariba Canada, Inc., Mississauga, Canada Ariba, Inc., Sunnyvale, California, USA Ariba International Holdings, Inc., Wilmington, Delaware, USA Ariba International, Inc., Wilmington, Delaware, USA Ariba Investment Company, Inc., Wilmington, Delaware, USA Business Objects Option LLC, Wilmington, Delaware, USA Captura Software, Inc., Wilmington, Delaware, USA ClearTrip Inc., George Town, Cayman Islands CNQR Operations Mexico S. de. R.L. de. C.V., San Pedro Garza Garcia, Mexico Concur (Canada), Inc., Toronto, Canada Concur Holdings (US) LLC, Wilmington, Delaware, USA Concur Perfect Trip Fund LLC, Wilmington, Delaware, USA Concur Technologies, Inc., Wilmington, Delaware, USA Extended Systems, Inc., Boise, Idaho, USA Fieldglass, Inc., Chicago, Illinois, USA Gelco Information Network, Inc., Bellevue, Washington, USA Gelco Information Network GSD, Inc., Wilmington, Delaware, USA H-G Holdings, Inc., Wilmington, Delaware, USA H-G Intermediate Holdings, Inc., Wilmington, Delaware, USA Financial Fusion, Inc., Concord, Massachusetts, USA FreeMarkets International Holdings Inc. de Mexico, de S. de R.L. de C.V., Mexico City, Mexico FreeMarkets Ltda., São Paulo, Brazil hybris Canada, Inc., Montréal, Canada hybris (US) Corp., Wilmington, Delaware, USA iAnywhere Solutions, Inc., Dublin, California, USA Inxight Federal Systems Group, Inc., Wilmington, Delaware, USA Jobs2Web, Inc., Minnetonka, Minnesota, USA Outtask LLC, Wilmington, Delaware, USA Plateau Systems LLC, Arlington, Virginia, USA Quadrem Brazil Ltda., Rio de Janeiro, Brazil Quadrem Canada Ltd., Mississauga, Canada Quadrem Chile Ltda., Santiago de Chile, Chile Quadrem Colombia SAS, Bogotá, Colombia Quadrem International Ltd., Hamilton, Bermuda Quadrem Peru S.A.C., Lima, Peru San Borja Partricipadoes LTDA, São Paulo, Brazil SAP America, Inc., Newtown Square, Pennsylvania, USA SAP Andina y del Caribe C.A., Caracas, Venezuela SAP Argentina S.A., Buenos Aires, Argentina SAP Brasil Ltda, São Paulo, Brazil SAP Canada, Inc., Toronto, Canada SAP Chile Limitada, Santiago, Chile SAP Colombia SAS., Bogotá, Colombia SAP Costa Rica, S.A., San José, Costa Rica SAP Financial, Inc., Toronto, Canada SAP Global Marketing, Inc., New York, New York, USA SAP Industries, Inc., Newtown Square, Pennsylvania, USA SAP International, Inc., Miami, Florida, USA SAP International PANAMA S.A., Panama City, Panama SAP Investments, Inc., Wilmington, Delaware, USA SAP LABS, LLC, Palo Alto, California, USA SAP México S.A. de C.V., Mexico City, Mexico SAP National Security Services, Inc., Newtown Square, Pennsylvania, USA SAP PERU S.A.C., Lima, Peru SAP Public Services, Inc., Washington, D.C., USA SAP Technologies Inc., Palo Alto, California, USA Sapphire SAP HANA Fund of Funds, L.P., Wilmington, Delaware, USA4) Sapphire Ventures Fund I, L.P., Wilmington, Delaware, USA4) Sapphire Ventures Fund II, L.P., Wilmington, Delaware, USA4) SeeWhy Inc., Boston, Massachusetts, USA SuccessFactors, Inc., San Mateo, California, USA SuccessFactors Canada Inc., Ottawa, Canada SuccessFactors Cayman, Ltd., Grand Cayman, Cayman Islands SuccessFactors International Holdings, LLC, San Mateo, California, USA SuccessFactors International Services, Inc., San Mateo, California, USA Surplus Record, Inc., Chicago, Illinois, USA Sybase 365 LLC, Dublin, California, USA Sybase 365 Ltd., Tortola, British Virgin Islands Sybase Argentina S.A., Buenos Aires, Argentina Sybase Global LLC, Dublin, California, USA Sybase Intl Holdings LLC, Dublin, California, USA Sybase, Inc., Dublin, California, USA Technology Licensing Company, LLC, Atlanta, Georgia, USA TomorrowNow, Inc., Bryan, Texas, USA Travel Technology, LLC, Atlanta, Georgia, USA TripIt LLC, Wilmington, Delaware, USA TRX, Inc., Atlanta, Georgia, USA TRX Data Service, Inc., Glen Allen, Virginia, USA TRX Fulfillment Services, LLC, Atlanta, Georgia, USA TRX Technology Services, L.P., Atlanta, Georgia, USA ASIA PACIFIC JAPAN Ariba India Pvt. Ltd., Gurgaon, India Ariba International Singapore Pte. Ltd., Singapore, Singapore Ariba Software Technology Services (Shanghai) Co. Ltd., Shanghai, China Ariba Technologies India Pvt. Ltd., Bangalore, India Beijing Zhang Zhong Hu Dong Information Technology Co. Ltd., Beijing, China3) Business Objects Software (Shanghai) Co. Ltd., Shanghai, China ClearTrip Private Limited, Mumbai, India Concur (Japan) Ltd., Bunkyo-ku, Japan Concur (New Zealand) Limited, Wellington, New Zealand Concur (Philippines) Inc., Makati City, Philippines Concur Technologies (Australia) Pty. Limited, Sydney, Australia Concur Technologies (Hong Kong) Ltd, Hong Kong, China Concur Technologies (India) Private Limited, Bangalore, India Concur Technologies (Singapore) Pte. Ltd., Singapore, Singapore ConTgo Pty. Ltd., Sydney, Australia Fieldglass AsiaPac PTY Ltd, Brisbane, Australia hybris Australia Pty Limited, Surry Hills, Australia hybris Hong Kong Ltd., Hong Kong, China hybris Japan K.K., Tokyo, Japan Nihon Ariba K.K., Tokyo, Japan Plateau Systems Australia Ltd, Brisbane, Australia Plateau Systems Pte. Ltd., Singapore, Singapore PT SAP Indonesia, Jakarta, Indonesia PT Sybase 365 Indonesia, Jakarta, Indonesia Quadrem Asia Pte. Ltd., Singapore, Singapore Quadrem Australia Pty Ltd., Brisbane, Australia Quadrem China Ltd., Hong Kong, China Ruan Lian Technologies (Beijing) Co. Ltd., Beijing, China SAP (Beijing) Software System Co. Ltd., Beijing, China SAP Asia Pte Ltd, Singapore, Singapore SAP Asia (Vietnam) Co. Ltd., Ho Chi Minh City, Vietnam SAP Australia Pty Ltd, Sydney, Australia SAP Hong Kong Co. Limited, Hong Kong, China SAP India (Holding) Pte Ltd, Singapore, Singapore SAP India Private Limited, Bangalore, India SAP Japan Co. Ltd., Tokyo, Japan SAP Korea Ltd., Seoul, South Korea SAP Labs India Private Limited, Bangalore, India SAP Labs Korea, Inc., Seoul, South Korea SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia SAP New Zealand Limited, Auckland, New Zealand SAP Philippines, Inc., Makati, Philippines SAP SYSTEMS, APPLICATIONS AND PRODUCTS IN DATA PROCESSING (THAILAND) LTD., Bangkok, Thailand SAP Taiwan Co. Ltd., Taipei, Taiwan Shanghai SuccessFactors Software Technology Co., Ltd., Shanghai, China SuccessFactors (Philippines), Inc., Pasig City, Philippines SuccessFactors Asia Pacific Limited, Hong Kong, China SuccessFactors Australia Holdings Pty Ltd., Brisbane, Australia SuccessFactors Australia Pty Limited, Brisbane, Australia SuccessFactors Business Solutions India Private Limited, Bangalore, India SuccessFactors Hong Kong Limited, Hong Kong, China SuccessFactors Japan K.K., Tokyo, Japan SuccessFactors Singapore Pte. Ltd., Singapore, Singapore Sybase Hong Kong Ltd, Hong Kong, China Sybase India Ltd., Mumbai, India Sybase Philippines, Inc., Makati City, Philippines Sybase Software (China) Co. Ltd., Beijing, China Sybase Software (India) Private Ltd, Mumbai, India TRX Technologies India Private Limited, Raman Nagar, India As at December 31, 2014 II. JOINT OPERATIONS AND INVESTMENTS IN ASSOCIATES Alteryx, Inc., Irvine, California, USA China DataCom Corporation Limited, Guangzhou, China Greater Pacific Capital (Cayman) L.P., Grand Cayman, Cayman Islands Procurement Negócios Eletrônicos S/A, Rio de Janeiro, Brazil SAP - NOVABASE, A.C.E., Porto Salvo, Portugal Yapta, Inc., Seattle, Washington, USA
1) These figures are based on our local IFRS financial statements prior to eliminations resulting from consolidation and therefore do not reflect the contribution of these companies included in the Consolidated Financial Statements. The translation of the equity into Group currency is based on period-end closing exchange rates, and on average exchange rates for revenue and net income/loss. 2) As at December 31, 2015, including managing directors, in FTE. 3) Figures for profit/loss after tax and total equity pursuant to HGB, section 285 and section 313 are not disclosed if they are of minor significance for a fair presentation of the profitability, liquidity, capital resources and financial position of SAP SE, pursuant to HGB, section 313 (2) sentence 3 no. 4 and section 286 (3) sentence 1 no. 1. 4) Consolidated for the first time in 2015. 5) Agreements with the other shareholders provide that SAP SE fully controls the entity. 6) SAP SE does not hold any ownership interests in four structured entities, SAPV (Mauritius), Sapphire SAP HANA Fund of Funds, L.P., Sapphire Ventures Fund I, L.P. and Sapphire Ventures Fund II, L.P. However, based on the terms of limited partnership agreements under which these entities were established, SAP SE is exposed to the majority of the returns related to their operations and has the current ability to direct these entities’ activities that affect these returns, in accordance with IFRS 10 (Consolidated Financial Statements). Accordingly, the results of operations are included in SAP’s consolidated financial statements. 7) Entity whose personally liable partner is SAP SE. 8) Entity with profit and loss transfer agreement. 9) Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt from applying certain legal requirements to their statutory stand-alone financial statements including the requirement to prepare notes to the financial statements and a review of operations, the requirement of independent audit and the requirement of public disclosure. 10) Pursuant to sections 479A to 479C of the UK Companies Act 2006, the entity is exempt from having its financial statements audited on the basis that SAP SE has provided a guarantee of the entity’s liabilities in respect of its financial year ended 31 December 2015. 11) Pursuant to article 2:403 of the Dutch Civil Code, the entity is exempt from applying certain legal requirements to their statutory stand-alone financial statements including the requirement to prepare the financial statements, the requirement of independent audit and the requirement of public disclosure on the basis that SAP SE has provided a guarantee of the entity’s liabilities in respect of its financial year ended 31 December 2015. Other Equity Investments
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