Stefan Gruber – Head of IR
Werner Brandt – CFO
Leo Apotheker – CEO
Bill McDermott – Executive, Global Field Operations
Yonder Sleaze [ph]
Mark Wood [ph] – Manifest [ph]
Jonathan Crozier – WestLB
Raimo Lenschow – Bank of America/Merrill Lynch
Thomas Becker – Commerzbank
Jochen Klusmann – BHF Bank
Nicolas von Stackelberg – Sal. Oppenheim
SAP AG (SAP) Q4 2009 Earnings Call Transcript January 27, 2010 8:00 AM ET
Hello everyone and welcome to SAP's fourth quarter results conference here in Frankfurt. My name is Stefan Gruber; I'm in charge of investor relations at SAP. I'd like to give you a brief overview on the agenda for today. Our first speaker, Werner Brandt, CFO of SAP will give you an overview of our fourth quarter results and our outlook for 2010. Then, Leo Apotheker, CEO of SAP will provide you with an update of our strategy, our competitive position and our key growth drivers going forward. I'd also like to introduce Bill McDermott, President, Global Field Operations and member of the Executive Board. Bill will be available later on for questions following Werner's and Leo's presentations.
As usual, from a technical side, this conference is being webcast. And so, those of you who follow this event over the Web or by phone, please do send us questions to firstname.lastname@example.org and we make sure later on we take some questions we get by email.
And finally, I'll try to make this as short as possible. We have the safe harbor statement, which is also in this slide; I do hope. Otherwise, I have it written here. Please note that, except for certain information, matters discussed in today's conference may contain forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect the company's future financial results are discussed more fully in the company's most recent filings with the Securities and Exchange Commission.
These are all my intro comments. And with that, I'll hand it over to Werner Brandt, our CFO. Thank you.
Good afternoon and welcome to everybody on the Web. We have prepared some additional information regarding our income statement, balance sheet, our US GAAP - IFRS reconciliation, our outlook, and then additional information regarding long-term [ph].
If you look to 2009, I think it was a very, very difficult year for SAP. We saw a turnaround in Q4 on the software side. But, I think that we don't see growth on the software side and I think that the turnaround in this overall situation gives us confidence for 2010, and I will cover this when I talk about our guidance.
If you look to the year and we see this 10.7 billion in total revenues, we achieved 2.9 billion in operating income. Our operating margin achieved 27.3%. If you exclude currency, then this is 27.6%. And this includes a negative effect of 180 basis points from the restructuring charges we took in 2009. And you can then add together 27.6% and this 1.8% and that comes to a margin which then would represent our run rate going forward. We have EPS with 1.71 Euros. We have free cash flow generated of 2.8 billion based on an operating cash flow of more than 3 billion euro, and we reduced our overall headcount by roughly 4,000 full-time equivalents, down to 47,600 roughly.
If you look to the P&L, you see for the full year that software and software-related service revenue decreased at constant currency by 5%; professional service revenue decreased by 20%. This is in line with our own expectations. Consequently, our total revenue decreased by 9%. We have operating expense, and I will come back to this in a minute.
And if you look to the financial income net, there you see a slight decrease in our financial income of 10 million, and that's a mix of two things. Number one, we had less interest income in the year 2009 and less interest expenses, so this led to this 10 million difference you see here year-over-over.
And another remark regarding our effective tax rate of 26.3%. Here, we have one extraordinary item, which accounts for roughly 3 percentage points which cannot be expected to return.
If you then look into our SSRS revenue breakdown for the quarter, and again it's on a non-GAAP. One can see our software revenue decreased by 27% to 2.6 billion. Software revenue was impacted by the most – mostly from the challenging environment in all regions. However, in the fourth quarter, we saw a rebound. We sold for more than 1.1 billion Euros software. This is still negative; it's 14%. But I think, from our perspective, it is a clear rebound, which is the basis for our confidence with regard to our guidance.
If you look to the support revenue, it increased in line with our own expectations, 11% year-over-year. If you look to the subscription revenue, it achieved 306 million. This is a strong increase over 2008, and I will come back to this in connection with our guidance; what this would mean then for 2009. And I must say 2010, I must say that the new contractual agreement we introduced to the market in our on-premise model really helped to boost that business, the subscription revenue that as I said, more will come.
If you look to the regional performance now in the quarter, you see the Americas, it’s plus 4; APJ increased by 6%, if you exclude Japan, it’s even an increase of 19%; EMEA, it’s still we are showing minus 7% on the side, however Germany is improving, we see a positive 5% for the fourth quarter; and the BRIC countries even increased by 46% in the fourth quarter year-over-year.
What I should mention is the size of rebound in the US, which is very strong with 8% in the fourth quarter. We see a lot of traction with regard to SAP BusinessObjects, and from a product perspective, that everything we sell to the business user, so including our GSC solutions of the entire business user product portfolio, which is named SAP BusinessObjects.
If you look to the professional service side, then you see of course from the consulting side, the decrease of 17%, again in line with our own expectation, and what did we do, we of course adjusted our work force in the consulting area to the demands we saw for 2009. We reduced headcount in the entire arena by 12% and also continued to reduce third-party expenses and that’s also true for the training side where you see a decrease of 37%. That’s something which we expected as I mentioned before. If you look through the total number, professional service and other service-related revenue is minus 20%.
If you look to – I will come now to the cost base, our total operating expenses. If you look to the total revenue decrease of 9%, and our operating expenses decreased by 8% and keep in mind that this includes 196 million restructuring charges, we had booked in 2009 for the program reduction in position we initiated since the beginning of 2009. If you look to the operating margin, what I said before, we have increased this to 27.6%. However, these restructuring charges make, from a margin perspective, about 180 basis points. So in the difficult environment that we enter today, we were able to reduce our operating expenses by 662 million despite this 196 million in restructuring charges, and the non-GAAP operating margin clearly exceeded our guidance. You'll remember that for 2009, we only guided operating margin and here we have a clear overachievement of our previously announced targets for 2009.
If you look to the gross margin, the overall gross margin for software and software-related services and professional services increased by 80 basis points. That was driven by the mix we saw in 2009. If you dig more into detail, you will see that our SSS gross margin decreased by 1 percentage point to 82.1%. And clearly, we have lower than anticipated costs for third-party products. However, this could not neutralize the 5% decrease of our SSS revenue. And if you look to the professional services, I think it is the same. We reduced our workforce by roughly 1700 employees. We achieved a higher utilization, but those did not neutralize the shortfall on the professional services revenue side of 20%.
If you look to the cost ratios, first of all, on this slide, the increase is not a slight increase, an increase of 120 basis points to 15% and I would like to dig here a bit into detail to explain to you what the reason is for this increase.
First of all, the development organization reduced its headcount by more than 700 FTEs, through 2009. That is a positive effect, if you look to the operating expenses within SAP. In the fourth quarter itself, we had an extraordinary high profit-sharing for Germany, and here limited to SAP AG, all of our developers who work in Germany and that is a lot to anticipate from this profit-sharing regime in Germany. And remember, this target for 2009 – the guidance for 2009, let us base at this point in time the operating margin of 24.5% to 25.5% and this was the basis for the profit-sharing. So, due to the fact that we really performed very well and this became obvious in the fourth quarter, we had an extraordinary impact from this profit sharing in Germany for SAP AG. I will come back to this also in a moment.
If you look to the balance sheet, there is nothing which needs an in-depth analysis and explanation. You see that our cash increased, you see that our short-term liability decreased to zero as we paid back the business objects related debt. You see that financial liability from the short run increased due to the fact that we issued a schuldschein, a kind of a promissory note and you see that our receivables decreased significantly, but I must admit, this is not the result of an improved DSO, that is more related to our overall business activities.
You will see on the next slide that our DSO increased by 8 days to 79 days. That’s a negative thing we have to adjust going forward and into 2010, so that we come back to being on the level of DSO within SAP. The main reason for this increase in DSO are the financial difficulties many of our customers in all geographies, in all industries have and in all segments, it doesn’t matter whether it is a large enterprise or whether it is a mid-sized customer. Here we saw a decrease or deterioration of our DSO and we have to do a lot in 2010 to change this.
Again, our equity ratio increased, and our cash flow was very strong, with more than 3 billion from our operating cash flow perspective. We decreased capital expenditure year-over-year, so our free cash flow increased by 52%. And our cash flow inversion rate exceeded 160%.
If I may bridge the liquidity for the entire group, you see our operating cash flow, you see our capital expenditures outflow acquisitions, this year limited to 74 million, you know the acquisitions we did throughout the year, dividends paid, the repayment of debt, and the proceeds from our replacement. This adds up to total liquidity of 2.3 billion. If you deduct the short term financial liabilities related to the promissory note, then we have a net debt of roughly 1.6 billion.
I would like to continue with the US GAAP and IFRS reconciliation. You know that the fourth quarter of 2009 is the last quarter where we published our results according to US GAAP. We will switch over to IFRS with our full-year 2009 financial statements and going forward, quarter-over-quarter, we will provide IFRS financial statements. We have prepared the capital market now over several quarters by explaining the differences between US GAAP and IFRS and you see here related to 2009 that the difference is really immaterial. We made a commitment that on the revenue side that we would apply the respective US GAAP rules for revenue recognition, due to the fact that in IFRS, we do not have so specific guidance regarding the accounting from a revenue perspective.
If you look to the operating income, we had differences which relate to the discontinued operations, or better said, the activities we do not continue, because under IFRS, you also have discontinued operations. That’s just a slight difference between the definitions if you look to US GAAP versus IFRS, we have some differences regarding acquisition related charges and some differences regarding the recognition and evaluation of provisions, more I think I do not need to say and we are confident that we will have a very profound financial reporting under IFRS as we had in the past under US GAAP.
If you look to the business outlook that was included in today’s press release, three points I would like to highlight. First, we expect full-year 2010 Non-IFRS software and software-related service revenues to increase in a range of 4% to 8% at constant currencies, and regarding our non-IFRS operating margin at constant currencies that we want to bring this in the range of 30% to 31%. That is our guidance. The tax rate is also mentioned here; and the effective tax rate of 27.5% to 28.5% based on IFRS net income for 2010. Additional information regarding share buybacks, we will pick up buying back shares in 2010 and the amount we envision so far is at least 250 million to invest in share buybacks throughout 2010.
Some additional information. The first one relates to the expansion of our customer engagement model in our on-premise environment, and that is very important. Here we have introduced additional subscription licensing options for a well-defined group of our largest customers. We have talked a lot about our global enterprise agreements we introduced in 2006. And as you know, in 2010 second half, we introduce flexible license agreements and this is a standardized contract to customers committed to a strategic SAP development roadmap, and we will offer this in 2010 only for targeted accounts, predefined targeted accounts and will not spread it widely in our customer base.
Now, on top of the extension for the on-premise model, we will expand our business model in the on-demand arena. You know that we have already some on-demand solutions available for extensions for our tender prices. We will introduce business by design, and Leo, will refer to this in a minute for small and mid-sized companies, in 2010, more will come.
My final comment relates to the support offering of SAP. You know that based on the customer feedback we received over 2009, we introduced and announced this beginning of a generally a comprehensive tiered support model, and the key element here is that we provide customers a choice between Enterprise Support and Standard Support and the pricing for the two offerings, the customers can choose of this for Standard Support that will be priced at 18%, and we will have inflation adjustment on an annual basis. And Enterprise Support will be priced at 22% for licenses purchased after July 2008 and follow a step-up schedule to 22% of prior purchases. It means, this relates to the installed base of our customers, which is based on software purchases prior to July 2008 and you see the step curve here.
The only change we did to this step-up curve is that we did not increase as originally intended the 18.36% to 18.9% in 2010, we postponed this for one year in order to help our customers who might struggle from the overall economic situation during 2010, we will do this in 2011 resulting in the fact that we achieved the 22% one year later, this means in 2016.
Having said that, I would like to hand over to Leo.
Thank you very much, Werner. Good afternoon, good morning wherever you are. Welcome to this press conference and analyst conference in Frankfurt. I would like to give you a quick perception, at least give you my perception on what happened in 2009, and then walk you through the strategies for 2010.
In 2009, no surprise to anyone of you, a new reality hit the roads, financial crisis. It’s in all likelihood also a significant wake-up call for change, and financial crisis beyond it’s being the worst recession in decades, has also significantly impacted the way people look at software. Customers’ buying behaviors changed. We have a more guarded and more delayed investment decisions cycle in 2009.
And the software consumption and implementation patterns have changed as well. People want faster value, and they want to be able to quickly implement these solutions and extract the value out as fast as they can. We responded very quickly. We put into the market an expanded product portfolio. There was products that helped us characteristic to deliver very quick immediate ROI. We expanded our customer engagement model, don’t know where you refer to that, to provide customers with more choice, with more possibilities to buy or to use SAP software. We made a big effort to increase our volumes, the number of years that we make. And as you can see from the slides, we have been rather successful in doing that, and last but certainly not the least, because lots of things have been written about it, we embarked on a lean transformation of the company, which is still undergoing and still underway, and implemented very efficient cost-cutting measures in order to support the margin.
The strong fourth quarter is a proof that we actually responded well to all of this. We had very strong regional execution, in particular in the Americas and Asia-Pacific. Globally, the overall climate improved a little bit. Customers were less reluctant to buy software, people understands that in this kind of an environment, sooner or later, we have to do the right thing and that to invest in some software, because that is the best lever that you have in order to start rowing again. And we captured these opportunities with a vengeance I would only say, thanks to a very efficient sales force out there, that they are managing, that actually we are able to manage and capture all of the opportunities as we got presented with.
As I said, and Werner indicated this as well, we had product revenue growth, SSRS growth in two out of our three regions, the Americas and APJ, but equally important and stress is enough, we saw some nice growth coming back again in some of our key markets, in particularly United States of America where we saw good positive growth, in the UK where we actually achieved in Q4 double-digit growth. And over to BRIC, if you take BRIC as a region together, actually achieved significant growth in Q4, more than 40%. That is a significant performance in these markets. But also here in Germany, very important, we achieved 5% growth. And this growth in Germany actually in my opinion demonstrates how good a customer relationship we still have in this country, how important that is.
I also want to give you a little bit of a perception on positive industry dynamics. I remember having had the pleasure to talking to you in this room for quite some time. They have usually got a question every year, but our relatively weak performance in the financial industry sometimes in insurances, this time I cannot dissipate the question by saying that we performed very, very well. We had very strong performance in the financial sector. And I am sure when you invest, you actually do get the return. We grew Financial Services by 37%, in fact Banking by 46%, and Insurances by 24%, and we are very proud to be able to announce that Deutsche Bank is going to run SAP for its core banking platform. We are very pleased to be able to announce that Achmea/Rabobank is a significant SAP customer as well, so is Talanx up in Hannover, Credit Agricole, National Australia Bank and a few others around the world. So, we can see there is a real shift in the attitude of the financial institutions towards the type of software that SAP is capable of providing.
This is not the only industry to grow. Public sector as well, about 14%. Telcos grew 21%. Among others, underpinned by the acquisition we made in Q3, high deal which helps us to provide very, create a very state-of-the-art billing solutions for this industry. So, I also believe that our lean transformation program, and our successful cost cutting delivered part of this strong margin performance, so that we were able to combine better-than-expected Q4 topline performance with an overall strong performance on managing our business over the year, which helped us to actually produce a margin, which I happen to believe was slightly above few expectations.
We removed about 662 million Euros in operating expense, including restructuring charge and our non-GAAP operating margin as Werner has already indicated at constant currencies exceeded the 2009 guidance. We achieved 27.6%, and as you know, the effect of the one-time restructuring charge is about 1.8, and I am sure that you can therefore compute the normal running operating margin.
Let me maybe say a few words about the overall market leadership of SAP, because you read some interesting things about that, and this will be a comment of usually a competitor. So, I would like to put directly straight if I may. We demonstrated in 2009 again that we are the clear market leader in this business. In fact, from a performance point of view, from a sales point of view, we have achieved twice the size of number two. And just to give you one indication, in our last quarter alone, Q4, that last quarter alone was equal to the last three quarters combined of the sum of the last three quarters of number two including the strong Q4, just to put directly straight on that matter.
And to add insult to injury, because it’s part of the fun I guess, there were some significant competitive replacements in that game as well. People like Pfizer made a significant strategic decision to embrace SAP. 3M in the US did the same thing, and that British Gas/Centrica will replace the largest CRM call center system in Europe, not there anymore.
We also had about 500 competitive replacements of business intelligence solutions in 2009 alone. So, you can see from a competitive standpoint, I think we are doing a pretty good job. Some additional important customer wins in every region. People like Hilti, Aeroflot, Yves Rocher in France, Grainger in the US has renewed its trusted SAP once again. Dairy Farmers of America, Sybase, and in AOJ, a very important strategic win with the Australian Department of Defence, Daiwa and Singapore Power Limited.
Talking about 2010, if I can have the next slide, please, thank you, 2010 will be a year, I hope of strong growth. We expect a gradual recovery in capital spending. We expect that the consumer outlook will solidify in 2010, plus the fact remains our customers remain cautious. They will continue to seek fast value and shorter ROI.
So, where do we think the growth will come from? From a geographical perspective, first of all, of course, from the fast-growth markets, the BRIC countries, the Middle East, Africa. And by the way, we have created a dedicated organization called fast-growth markets that is focused on extracting maximum growth and opportunities in these markets. But we will also drive growth in established markets. We believe that there are still quite a number of opportunities including in our home market here in Germany. We will continue to drive volume, and we will of course expand our customer engagement model through a very targeted approach of GEAs and a very targeted approach to FLAs and phased deals.
Margin growth together with growth remains a strong focus. We will continue our lean transformation and of course goes with our team, we will continue to be very careful in the way we spend our money. In this new reality that we talked about in the beginning, we are convinced that IT in particular, software, our type of software plays a key role in creating a sustainable future for the world.
We believe therefore that there are many opportunities for sustainable growth by providing companies an increased competitive edge, by providing companies more efficiency and transparency, and the active one to go into new markets. There are new opportunities out there such as security, efficient energy, sustainability, management and we are ready to seize these opportunities, I feel already can shape some of them, so that we can create the innovation that is required to drive these industries forward. We will build on our strong foundation, and I will come back to that in a second, and we will at the same time leverage our powerful innovation capabilities. Of course, and that is the basis for any business, you have to have close customer relationships and we will continue to deepen those. And we will drive growth by strengthening our core business and expand beyond the core business that we have, by drawing also on the strong ecosystem.
How are we going to strengthen our core business, you might ask. But first of all, what are the pivots there to Business Suite 7, which according to all the experts and according to our customers is by far the most advanced Business Suite in the market. We will continue to drive that very hard, we will continue to deliver it in a packaged easy-to-consume almost out-of-the-box way. It is the SOA-based platform in the industry. It is delivered with complete end-to-end functionality. It is fully integrated to run entire businesses, and it contains 25 industry-specific solutions. Our enhancements approach to the way we do ship enhancement packages has been welcomed by our customers. Its modularity is being embraced, and we ship now with step-by-step implementations with industry value scenarios and we can provide our customers with innovation without disruption, and therefore, they can easily extend the SAP landscape.
In the Business User segment, Werner already alluded to that. We are the industry leader. Actually, expanding our leadership, we have the broadest platform here. The integration of this business object was a huge success. We will continue to accelerate market share in all segments of this particular category, while we continue to increase the penetration inside our customers. We will continue with competitive wins and replacements, and we will continue to innovate here as well, with for example, BI on-demand that you can access over the web.
In SME, we are and remain the market leader. We have about 73,000 customers. We will continue our innovation in SME as well in the conventional SME space. Sap All-in-One is now available as a subscription-based hosted delivery solution, also here per industry; and in Business One, we haven’t spoken about Business One recently. I think we should. It is a great product and we have and are delivering it with Web 2.0 integration with real-time embedded analytics and it has seamless mobile integration, including the iPhone.
We also spent quite some time in 2009 to lay the foundation for growth for this company. And if you look at what drives the growth for a company like us, it is innovation. You can’t be an IT company; you can’t be a hi-tech company if you do innovate. So there is no other choice for us than to do this, and we want to do this as well as we can, and we should be clear about it if we can always improve, and yes that we understood as well. So we continue to try to do this every time or every year in a better way, and we have implemented new organizational structure according to new principles that improves how we incorporate customer requirements into our innovation, and at the same time, accelerate the way how we develop, so that we can bring best-in-class innovation faster to the market. But, ladies and gentlemen, innovation is much more than just having a cool great idea. Re-innovation really means that you bring new ideas to the market on time in profits and actually brings value to the customer.
And moving forwards, our fundamental product vision for all the products that we will develop will be based on three pillars. It has to fast implementation, it needs to have the characteristics of instant consumption and value generation, and every piece of software that we will create will have to be easily accessible from anywhere, anytime, and from the broadest range of devices possible.
So speaking about volume and Werner already indicated this; it is time to talk about Business ByDesign, and speaking about innovation as well. And yes, I am happy to be able to announce that Business ByDesign is volume-ready in 2010. It will be the most complete on-demand suite in the industry, on the markets. It probably has an advance of a few years compared to any competitor. It is already in use by customers in six markets, Germany, the US, the UK, France, China, and India. We are bringing out new versions, which are significantly improved with additional functionality, fully multi-tenancy enabled. It has a rich new user interface. It will be available with real-time analytics, of course, with mobile support. And it would enable partners or customers or both to extend it in easy fashion, so that we can have additional scale and reach. We are convinced that with ByDesign, we will change the markets and will actually create for SAP a whole new market, and by mid-2010, we will announce the volume business for Business ByDesign.
We will also expand beyond our core business. A key technology to use is In-Memory database, In-Memory technology. Real-time analytics are therefore possible for improved activity with better decision making. We can deliver analytical performance with In-Memory technology with a factor 100 faster than a traditional database. And I hope that we can do more than just analytics. We are working on that and there will be probably an announcement at SAPPHIRE, but if we can, and we have good reasons to believe that we will be able to do so. We can actually take a whole layer out of this text. You won’t need relational databases anymore.
We have a few products already on the markets that is SAP BusinessObjects Explorer, by the way, you can access this also via iPhone, and we had some important customer wins with this such as International Rectifiyer Group, Pfizer, and AOK.
Another important area of innovation is of course the cloud and we don’t think the cloud is just a mythological phenomenon. It is actually a real thing. But our answer regarding the cloud is a little bit less hype and would like a little bit more hybrid, because at the end of the day our customers want to do hybrid. So we believe in choice, we believe that customers should be able to choose between on-demand and on-premise, and we believe that we need to combine the best of these two worlds, and not segregate them. So we are going to give our customers choice and flexibility. They can choose between on-premise, on-demand, and a mix of both. And thereby, we will enrich the Business Suite and SAP BusinessObjects with competitive on-demand extensions. Werner already mentioned that, there is a whole series of these products coming out. And what is really important in that environment is that we can actually integrate it to work together.
Then there is mobile. I think mobile is going to one of the main consumptions of software per se. And by the way, it is not just necessarily smartphones such as the iPhone. SMS is also a way, you might find this surprising, to actually use mobile computing with enterprise software. That is what you do at the bottom of the pyramid, in Africa or in India, and we would actually like to expand the bridge between the bottom of the pyramid and the top of the pyramid. So we will make solutions available on a broad range of devices, including in the class. This has obviously huge growth potential, because of the number of users it generates. And we want to support users who can access them for daytime applications where, whenever, and wherever they are. And we are hereby announcing also SAP mobile CRM, for Windows Mobile, for the iPhone and for the Blackberry, powered by Sybase, our partner.
In this new reality, we also need to embrace sustainability you know that SAP has the processes to sustainability. On the one hand, we want to provide our customers with innovative solutions, and on the other hand, we want to be an exemplar of best practices and sustainability. As a provider, we have a great position. We are probably the first mover in this business. Our customers in general, in the market, look for reliable vendor for this. We have a very clear roadmap for solutions in the sustainability arena. And we are offering innovative solutions for all customers. The first one is SAP BusinessObjects Sustainability Performance Management, and it is pretty normal name, probably very sustainable in itself, that is being co-innovated with Lexmark.
Then we have SAP Carbon Impact that is an on-demand solution. It helps people to manage their carbon footprint. And people like Autodesk, Hitachi, Freeport and Jabil Circuits are using that; and then there a whole battery of new sustainability analytics, such as in the area of environmental health and safety, to reduce costs and risks.
But we also want to act as an exemplar. Our goal is to reduce our CO2 emissions by half in 2020 compared to 2007. We have reduced our carbon emissions in 2009 by 15%, well ahead of our target. That generated a bottom-line saving of about 90 million. So it is obvious sustainability counts, it computes, it generates margin, and we have of course used our old technology to achieve this, SAP runs SAP. And this focus has created our own sustainability for the third consecutive year. We are the number one in the sustainability in the software sector, according to the Dow Jones Sustainability Index.
So to conclude, ladies and gentlemen, I am convinced that we are extremely well positioned for the future. 2009 was used to prepare for sustainable growth, to strengthen our innovation capabilities, and to increase our profitability. And 2010 will be a very successful year for SAP, the market maker.
Our new support offerings will give customers a choice and that is an important thing, exactly as we are doing for our hybrid solutions, which are also based on choice. We believe in choice, and we want our customers to embrace choice. So we are giving them these two support options as a choice; standard support, which provides the standard support features that are okay for those who are running a basic environment; and enterprise support, which is by far the most comprehensive support solution in the industry. Most of our customers are already on enterprise support. We have many strong and positive feedbacks from our customers on enterprise support and we are therefore convinced that enterprise support is the best optimal support offering for our customers, and that a majority of our customers will embrace enterprise support.
We will expand our already strong market leadership, thanks to the broadest product and industry portfolio for businesses of all sizes in the world. We will continue to drive innovation, we would continue to drive and leverage the latest breakthrough innovations such as In-Memory databases, and we are going to focus on delivering faster value for our customers. We have a very broad geographical coverage, well-balanced across regions, and as I said early on, we are going to focus on fast-growth markets.
In this new reality that we are going to live in, SAP has endless opportunities for exploiters with innovative products, with expanded customer prospects and we have given ourselves the ambition that we want to grow and reach 1 billion people by 2014 with SAP solutions. So, I am personally very proud of what SAP (inaudible) have achieved up to now. And I think you should watch SAP over the next few years as we continue to demonstrate how powerful and successful a company we can be. Thank you very much.
Thank you, Neil. We will now start the Q&A session. For those of you in Frankfurt, I would like to remind you please raise your hands and we will give you one of these roaming microphones. So we make sure the dialogue is completely covered on the Internet. And for those of you who follow this event through the web, there is a special e-mail address. It’s always the same, email@example.com. Please do send us questions to firstname.lastname@example.org. But I think we take the first question here in the room in Frankfurt. And I think we have question from Yonder Sleaze [ph]. Microphone number 2 please.
Yes, maybe to the guidance for 2010, some additional questions. Thanks for – already given us some background, what is the basis of this forecast, but maybe three additional points. First, I think I saw from the press conference this morning from (inaudible) Lotus said they are expecting 2011 to return to a double-digit growth. Is it therefore right to assume maybe improvement of the growth rate over the year otherwise you had a very low comparable basis in the first half because 2009’s first half was especially weak. So can you give us any indication how do you expect maybe the growth to develop over the year? Second, engagement model, what growth you are expecting there so far? In 2009, it was not overwhelming but we will see a stronger growth from this site in the year 2010? And how much the new offerings you mentioned Business ByDesign – already learnt, already from the press, maybe not a huge revenue contributor in 2010, but maybe the other new offerings, the hybrid model in memory, how much this could already drive as a new business cycle or maybe, let’s say growth in 2010? And on the cost base, how much of the cost we can expect of this savings of 2062 to be sustainable over the year 2010?
Maybe, one comment. I didn’t say that we will be in double digit in 2011. I just want to go on records and say this again. I think that SAP wants to be in a position to grow again and that’s what we are going to do in 2010. What the future is, is a different issue. Furthermore, let’s achieve what we want to achieve in 2010. And then maybe Bill and Werner can address the engagement model, the new offerings and the cost base.
Let me start with the seasonality for 2010. You know that we give yearly guidance and we do not want to provide any indication for the first quarter, definitely not, as we never did in the past; and therefore we also would like to refrain from any comment regarding seasonality. If I take the last question with regard to the cost base and the sustainability, if you look to the operating expenses, which exclude all the extraordinary items in 2010 and then you have a base which will grow in 2010, but at a lower pace than we anticipate the growth of our software and software related service revenues, so you will see a leverage there. And maybe one remark related to our R&D expenses, if you see small growth overall on our operating expenses year over year then we would see an under-proportionate growth year over year for R&D expenses.
And in terms of the engagement model, I think you all know we go to market by geographic region in the company. So we have APJ, we have EMEA, we have North America and Latin America. In each one of these regions, we have a multi-channel strategy in how we go to market. We do this with a combination of marketing, inside sales, our channel partners, our direct sales force, and we market solutions and services because the customer not only wants the software but they want the relevant services to deliver the value and make the project successful. And finally, we do this by industry, as Leo said we have 25 industries where we go to market and we market by industry to small, medium, and large customers alike. And I think what makes us very unique – in fact I think we are the only ones that do what we do, the way we do it is the model Leo talked about which is not only on-premise but also on-demand and orchestrating the business process levers between those two worlds for our customers.
If I come back to the question with regard to subscription revenue, I think the target for 2010 is in a range of 360 million Euros to 380 million Euros.
Okay. Thank you. We have a lot of questions from the web already. I hope we can cover a lot of them. The first question from the web comes from Michael Briest from UBS, and he covers three areas. The first one, not a surprise, and we got this, this morning in the press conference as well. What is the reason for the big sequential R&D increase in the fourth quarter 2009? And is this a one-time event? Then secondly, why did headcount continue to fall in Q4 2009? What was the number leaving as a result of the restructuring? And thirdly, Werner alluded to the new offering of choice in the area of support. So what is the level of maintenance revenues you see at risk if all customers move back to standard support?
Let me take these questions. The first one related to sequential R&D increase in Q4. I mentioned this during my short summary of 2009 that R&D expenses in the fourth quarter are impacted by an extraordinary high portion of the profit sharing assigned to the R&D and to the employees in Germany which are working in the R&D space. We, as I have explained before, have based the profit sharing on the original margin guidance of 24.5% to 25.5% and here we have actually a tremendous overachievement with the margin we presented today which is 27.6% if you exclude the currency, and that’s the reason for an extraordinary high profit sharing for SAP AG employees and these are mainly the employees which are associated with research and development. I can give you – also provide the numbers; the profit sharing for SAP AG for the full year amounted to $130 million and roughly two-thirds of this has to be allocated to R&D and that is the special effect in the fourth of 2009.
The second question relates to headcount; continue to fall in Q4, what was a number leaving as a result of this restructuring. If you remember, we had the program setup in a way that many employees, especially those in Germany and other European countries left towards the end of the year. And that’s the effect we see in Q4 and the majority of those who left in Q4 were under the program; remember we had 4,000 employees less at the end of 2009 compared to 2008, and 3,000 coming out of the reduction imposition program, and 1,000 left the company on the voluntary basis.
Finally, the level of maintenance revenue we see at risk if all customers move back to standard support; that is something everybody, every analyst can calculated on his own. Our position is that the majority of our customers who are today on enterprise support will stay on enterprise support and will not move to standard support, and if you make your own calculation with the respective assumption, you can figure out what the amount is and be sure that our own judgment here is covered by our guidance we provided to the capital market today.
Okay thank you. I think the next question here in the room I see one from Mark Wood [ph].
Thank you. It’s Mark Wood from Manifest [ph]. Two things, one on enterprise support just briefly. I think if you can help us understanding just what share of your client base is currently under enterprise support? So how many clients or percentage maybe of value has signed up for that at the current point in time? And then on the variable compensation costs, you explained the profit sharing in Germany; I would like to address the issue from a slightly different angle on the group-wide basis. If you meet your targets for 2010, let’s just assume on the relevant lines, would the total variable comp be significantly higher or lower than what you said – what you experienced in 2009? So I guess what I am asking the intuitive assumption before all your explanations was, 2009 was a relatively low year for variable comp but apparently that was not the case. I am wondering what the flex is in 2010 in that respect. Thank you.
I will start with the second question, 2009 was an extraordinary year from that perspective, and what is going to happen in 2010, we will not see the same effects because if you look to the setup of our guidance and the way how we presented it today is the basis for more in line with previous year payout of any profit sharing system in SAP.
It is more implicit the answer than I was hoping for. Can you not say whether the absolute variable charts that you likely expect if you meet your targets was going to be higher or lower than 2009 in the current year? Just give us an idea.
Regarding enterprise support or support in general, I think we have already indicated that currently more than half of our customers are on enterprise support.
If I may just this does not relate to numbers or would it be even more than half on value because presumably larger accounts would be more tempted to go to enterprise support.
Well, we have a formula in our maintenance called PSAV [ph] for very large customers. So we have to be careful with that. But I would assume that also on the value side it is more than 50%.
Okay, thank you. The next question comes from the web again from Laura Lederman, William Blair. Actually three questions, what are your close rate assumptions for 2010 versus 2009 and the fourth quarter? Probably bit early to comment right now. Secondly, how much of demand in Q4 2009 was pent-up demand versus a long tailed demand? And thirdly, what are your acquisitions thoughts going forward? Would it likely be smaller tuck-in acquisitions?
Maybe I will handle the first couple of ones. The close rate assumptions that are contained in our guidance for 2010 are similar close rate assumptions to what we had in 2009. And yes, we did have a strong quarter in 2009, especially in the operating environment we were in. So, it’s a little early to call 2010 Q4 at this stage, but I can say that we manage our pipeline on a rolling four-quarter average. And our pipeline in our business is steadily improving. And it’s doing that in core markets such as the UK and Germany, United States and Australia, and it’s especially doing that in Brazil, Russia, India, China, Middle East, and Africa. So, you do see a steady improvement and our fast-growth market focus is clearly paying off.
I would also like to underscore business objects, because as Werner mentioned earlier, business intelligence and analytics is a major growth driver. Leo talked about 500 competitive replacements, but we are also seeing GRC and EPM as top CFO and CEO kinds of issues, and being the market leader helps. In terms of Q4 and pent-up demand, I think we did a lot of good work throughout the three quarters and received some of the reward in Q4. I would say some demand was clearly pent-up in the United States. And I say that because the deal sizes in the United States demonstrated pent-up demand in transactions above 2 million. I do also want to finally mention in Latin America and APJ, despite the overall software and software-related services for the year down a little bit, it’s important that you know the transaction volume was up, which means the volume culture in SAP is truly taking hold, and we expect that trendline to continue.
And maybe the last question was as your acquisition sales going forward, it would likely be smaller. We have done in 2009 a number of smaller acquisitions, actually very successful. If I just take Hilti as an example, it has helped underpin our offering in the telco and other businesses that require innovative billing and convergence billing and Hilti is very good at that. And I would expect that trend to continue. I tried to indicate earlier on that innovation has to be our core capability. So, we will innovate around ourselves. It goes without saying that it would be arrogant to believe that we can innovate on every aspect of our business just by our sales. So, there will in all likelihood be other acquisitions and as for the size, well, that depends.
We are not necessarily doing acquisitions on a size perspective, we are trying to do acquisitions when we do them first of all on various simple metric, do they make sense. And from an M&A perspective for them to make sense, it has to be in adjacency, it has to be complementary, it has to be synergistic more on the revenue side than on the cost side, because in our business, it should be viewed from that perspective, you can’t just go in and reduce cost, and the company cultures need to fit. So, these are the criteria that we use to look at acquisitions.
Thank you. Few questions here from Jonathan Crozier, and I think then we have Raimo Lenschow.
Jonathan Crozier – WestLB
Thanks. Jonathan Crozier from WestLB, just one topic for me. It seems to have been a breakthrough year for operating cash flow despite obviously being a difficult year. Could you explain why that was, was that something to do with the mix in the software and software-related services business? And most importantly, can we take this as a base level going forward?
It is true that it was from an operational cash flow perspective a successful year. But going into 2010, we should not forget one thing. Our DSO went up. We put a lot of effort into managing our cash flows throughout 2009, but with regard to the DSO, we were not so successful as we should have been. So, going forward, we will have to put a lot of emphasis on the DSO side of the house in order to keep reasonable level of operational cash flow. If you look to the cash flow statement, you will see that a big chunk is coming from reduction in accounts receivable, but this is more driven by the fact that the business activity overall was lower. So, we have strong aspirations with regard to operating cash flow, but it will not be easy due to the fact that we have still a long way to go on the DSO side. This as I explained before, is tied dealing to the overall economic situation.
Thank you. I think we take the next one from Raimo Lenschow.
Raimo Lenschow – Bank of America/Merrill Lynch
Hi, Raimo Lenschow from Bank of America/Merrill Lynch. A question on pipeline, you talked about the four-quarter rolling pipeline, but I am just trying to understand what visibility you have, obviously a lot I would think of Q1, but then going into the second half of the year, how much of your pipeline that you need for making the numbers, do you have ready there, and how much could you expect to build up as we go through Q1 and Q2, and what’s your assumption on cycle there as well? And then maybe more generic question about the same theme, for Leo maybe, you had a tough year now in 2009 on licenses, we declined 27%, 28% [ph], in terms of the absolute number, do you achieve this kind of back to 2004 levels? As SAP is maturing now, what do you think about the cyclicality of the business, because we are more maturing now, we have more cyclical swings and swings on the licenses are kind of more you saw in the past, or is it just a one-off year, because the year was just so tough? Thanks.
Let me go first, Leo?
So, first, I will comment on the pipeline. We run our own solutions at SAP. Very important. The entire field facing organization worldwide runs SAP CRM. The sales and marketing portal of SAP is the single version of the truth. The pipeline is measured and managed in real-time, using business objects technology and real-time analytics to study the movements in the pipeline. We do this in mature as well as emerging markets, and we have a very good handling on the rolling four-quarter average and the deals within the pipeline in each quarter. I can tell you decisively that in the large mature markets such as Germany and the US, UK, and others, the pipeline has steadily improved in terms of the coverage to the operating plan. I can also say that the BRIC and Middle East Africa regions of the world are improving at a greater rate than the mature markets as a percent of the operating plan, which you would expect on a smaller base. Overall, we are very encouraged by the movement in our business and pipeline, and we do a very clear visibility into that pipeline.
Yes, I know you asked a very good question, which is not easy to answer. So, let me try to give you some elements for discussion in the circumstances. First of all, I do believe that 2009 was a bit of an exceptional year. I hope we don’t see another crisis like this for many years to come. I don’t even think we can survive another one, not just SAP, the world as such, but that’s a different story. It is being said. We serve 25 industries, and when you serve 25 industries, you can always expect a few to do better than us. We serve the world, we are active globally, so you can expect some part of the world to do better than others. We serve many segments, and here again, you will probably see that some will do better than others. And yes, in the circumstance, the unknown factor here is innovation, how much can you impact the cycle or how much can you accelerate the cycle, this or the other innovative product such as in-memory.
So, I don’t think that the size per se coverage was the fact that we are cyclical or not cyclical. I think that obviously once we have reached to circle size, the rule of large numbers play, and 8 percentages doesn’t mean the same thing than it was more, it’s more company, but it’s straightforward arithmetic. I hope that we can put it this way, I hope we can outperform the markets. If you look at the guidance in 2010, the 4 to 8% constant currency SSRS, if you look at what Gartner and other industry experts are predicting for the IT industry, we will outperform our industry. And that’s a very good way to start talking to you again about the decades of hopefully renewed growth.
Thank you. Before we take another question from the room, there is one question from Goldman Sachs, Sarah Friar and (inaudible), actually three areas. The first one is on business by design. What are the biggest changes to the new version of business by design, if you think it will cost, our customer uptake, please also provide the picture on how would the go-to-market strategy roll out, and this costs already included in your margin guidance? Secondly, on hiring, what are the key factors deciding to increase hiring again? And thirdly, can you discuss the state of pipeline between developed and emerging markets? I think Bill, you addressed this partially already, and a follow-up on that, can you comment on the status of large deals in the pipeline?
Okay. Why don’t I pick up the first question, and then we can share the second one, and I am sure, Bill will want to talk about the third? So, business by design, maybe the first comment I would like to make on this question is, the first reason why there will be better customer uptake is because is because we are actually sellers. Right now, it’s not really on the market that is only in the market as a charter customer program. We are not pushing it further, we are actually dabbling it to make sure that we are working ready. So, the difference is, one that is going to be sold, and right now, it’s not really sold. But going forward, we are making significant changes to buy design. First of all, it’s multi-tenancy [ph] enabled which will allow us to scale significantly faster. Secondly, extensibility, third, a revolutionary user interface, fourth it’s mobile capability, fifth it’s real-time analytics using our in-memory capability, sixth a whole bunch of new industry functionalities. So, it is a complete new product that is going to hit the market. Therefore we are very optimistic in the uptake that it would have with customers.
As to the cost, yes, they are already included in our margin guidance. Maybe to start the conversation, the key factors in increased hiring, we will continue to do hiring in a very prudent and cautiously. And we will look at evolution of our business before we will decide to hire again. We assume that we will do some hires. Werner already indicated that the hires will begin in such a way that we will have leverage, but as we also want to innovate and conquer a few new markets obviously, we would need to do some of these hires.
And I think we have already commented on the pipeline between developed and emerging. What I would mention is the status of large deals in the pipeline. We did see an improvement in large deals in the pipeline in Q4. It’s clearly too early to declare that large deals will come back and certainly we are not counting on that happening. As you know, we have various ways, which Leo discussed of doing large deals even though you may not recognize the revenue for them in the current quarter and they include GEA, the FLA, and of course phased deals. There was a bit of an uptick in large deals in the United States in Q4, above 2 million, which is very encouraging, and we hope that, that continues because we now have a volume culture in the company, business objects is a major driver of that volume culture, and if you can combine that with some larger transactions, it would be helpful. It is clear to us however in the competitive scenario, that we continue to dominate the market as it relates to large enterprise transactions as evidenced by account side, 3M, where we took our 86% win rate against the competition and replaced Oracle and its related assets across the world at 3M.
So, we expect that to continue whether or not we recognize the revenue in the quarter, it could be overtime, but if there is a large deal out there, it would probably be SAP.
Thank you, two questions from here, in Frankfurt. I think Mr. Becker and then Mr. Klusmann?
Thomas Becker – Commerzbank
Yes, thank you. Thomas Becker of Commerzbank. Actually three things. First of all, could you give us an update about the 35% margin target, when will that be in reach? Second point is you shared with us already flexible license agreements (inaudible) or subscription to be more precise, sorry. Could you give us the underlying number of client convergence here? I was talking about 5 to 10% of your targeted client group. And then probably about NetWeaver. You have not talked about NetWeaver for a long time. You can give us an update there on your middleware?
What I will start – with the NetWeaver strategy, NetWeaver is doing well. All of our products, the entire SAP offering is based on the NetWeaver effect on the NetWeaver middleware that includes business by design. And when we are talking about the hybrid approach, and Bill was mentioning that we are going – that we have this unique capability of running a business process in an integrated fashion between on-demand and on-premise that is also of course or enabled by our NetWeaver technology.
It’s doing well and it will continue to do well. Regarding the 35% margin ambition, and I have phrased the word ambition, we maintain that ambition, we want to achieve that. We want to achieve this ambition in the midterm, the midterm is slightly longer than the short term and less longer than the long term.
Thomas Becker – Commerzbank
The second question was underlying client conversion to the number Werner did provide us for the 362 to 380 million Euros [ph], do we want to give an indication here, or we just leave a bit this subscription revenue guidance for 2010?
I would like to stick with what I said. It’s a targeted number of customers, and this can vary year by year, and we don’t want to give a specific guidance on this targeted number of customers.
Thank you. Mr. Klusmann?
Jochen Klusmann – BHF Bank
Hi, Jochen Klusmann, BHF. Also three questions, one, coming back to business, you mentioned all the changes you did to the product, how much did that change your assumptions for the business model concerning of the product, i.e., how many users do you expect over the say 12 months from here, how many customers, how many users, ASP and so maybe you can just a little bit of color how much of it has changed since you put so much more functionality into the product? Secondly, on the guidance for SSRS, I know you are guiding on SSRS, but you are kind enough to give us an idea for subscriptions, maybe can also give us an idea between license and maintenance, especially with all the uncertainty surrounding maintenance. I mean, in your presentation, you were saying you are coming back to growth in SSRS, you don’t mention growth in license, maybe at least say whether you expect higher growth in maintenance in the license or SSRS? And lastly more from a strategic point of view, you were saying that your win rate against Oracle is high. On the other side, if you look at the numbers, I mean, Oracle did weigh better over the last four or five quarters, and you are meaning most likely a lot of deals at Oracle is closing or signed that you actually are not even competing. Now, in 2010, (inaudible) changing quite dramatically, the fusion getting into the market, do you guys have any strategy of how to get more into the Oracle customer base keeping in mind, I mean all the stuff of safe passage and the lawsuit going on, is that really realistic you getting a higher share of the Oracle customer base?
So, why don’t we try to give you an answer all of these points. First of all, I don’t think it would be an opportunity to discuss the business by design business model now. We want to bring it to market first, we want to make it successful in the market. And as we are going to do this, we can discuss moving ahead how the dynamics of this, how the dynamics are impacting business by design. We haven’t really changed Oracle from the mental assumptions around by design, but I think we have learnt a lesson, we want to go to market first and then talk about this of the other target and not the other way around, if you forgive us for doing that.
Regarding the competitive situation was over and I am sure, Bill would want to say something on this topic, I just want to make a more general comment. It is important we win Oracle customers and we win substantially more Oracle customers and Oracle wins SAP customers with or without Fusion, and because that shows the real competitive value of our offering. The true story is that a vast majority of business that each one of us does happens usually was in domains where we either share a customer, and many customers are shared, or where we actually deal in a very specific situation. So, I don’ think that our guidance and our ambition is based on getting many Oracle customers. I think our strategy is based on gaining many customers. As Oracle was never really that successful in the enterprise market, there aren’t that many Oracle customers to begin.
Yes, I would add to Leo’s remarks by just pointing out a couple of things that I hear from customers. One, if you have seen Fusion, please let me know I keep trying to find it. And that’s what they tell me. And number two is first-generation technologies from Oracle, particularly in applications having exactly set the world on fire. So, that could be the best thing for SAP, because that will force all those installed base customers to make a decision. When they have to make a decision to platform , we would be in that discussion. That is good for SAP. I also want to mention that we are two times Oracle. You got to figure, so do we. And if you add up three quarters in a row for Oracle, they don’t equal our Q4. It is true that there may be times where we are not competing with them, and that could be in a certain industry or certain line of business, that fair. And when you buy 50 plus billion in companies that can happen. But what we will do to deal with that is pretty much what we did with the Hyperion replacements, you know, we replaced several hundred of them. And what we are doing now is going into those line-of-business executives with EDGE solutions, where we can have a point solution discussion. Oracle, as you know, cannot have an end-to-end enterprise discussion. They can only have a line-of-business point solution discussion. We intend to have those too. So that is a new strategy.
Thank you. And I assume we will not give any additional modeling out for license and maintenance. This was the remaining element of the question.
Yes, that is true. I think we provided the SSS growth range. We provided an indication for subscription, more is not to come. That’s what you have to find out in your modeling story for this that we came up with the guidance we provided into more detail, from a guidance perspective. If we get to customers, let me make one thing very clear. We will fight for every customer, and we do not fight against any competitor, we fight for every customer.
Thank you. And now one last question here in Frankfurt. Mr. von Stackelberg?
Nicolas von Stackelberg -– Sal. Oppenheim
Yes, thanks for taking my question. Nicolas von Stackelberg, Sal. Oppenheim. I would like to dig a little deeper on the cash flow side of things. You said that you were targeting to drive lower the DSO rate. Could you be more specific? And then secondly, do you think you can maintain cash conversion above 100% for a third year in a row? And lastly, are you being shy on the share buybacks number? I mean, you have told us today that you are looking to spend more than 250 million, how high could you go, looking at the cash flow results for last year, even though maybe there is a little deferred element in that. It does seem that there should be more leeway to the upside, depending of course what you undertake on the M&A side of things. Thank you.
I said at least 250 million and this gives room for more. But this depends on the overall development throughout 2010. If you look to the cash flow conversion, I think that the target definitely is to provide more than 100%, no doubt. If you look to the DSO, I cannot provide you a global target for the DSO at this point in time, as the only conclusion I made is it has to go down again.
Thank you very much for all your questions in this discussion. I think this concludes our Q4 financial analyst conference. All the slides are available for download on our website. And our next event is the Q1 earnings announcement at the end of April. Thank you.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: email@example.com. Thank you!