SAP SE (SAP) 2005 Q2 法說會逐字稿

Welcome, good morning or good afternoon to SAP's second-quarter earnings conference here in London. My name is Stefan Gruber, I am head of Investor Relations with SAP. Let me give you an overview on the agenda for this afternoon. We follow almost our standard procedure for these kinds of events. First Werner Brandt, the CFO of SAP and member of the executive board of SAP will walk you through the numbers and the outlook. Next Leo Apotheker, President of the customer solutions and operations and member of the executive board of SAP will provide you an update on our regional performance, and we will close with a presentation by Henning Kagermann, CEO of SAP who will speak about SAP's performance versus our competitors and how we prepare ourselves for the future growth opportunities.

At this time I would also like to introduce by colleagues from the Investor Relations team here in London today, we have Stefan Hurst (ph) and Uma Mia (ph) from the team in Walldorf as well as my colleague Marty Cohen (ph) from the New York Investor Relations office. A couple of technical comments, housekeeping items; the conference today is being webcast on the SAP Investor Relations website. The address is www.SAP.com/investor. So later on for the Q&A session I would like to ask everybody to use one of the microphones here in the room so everybody who follows this event on the Internet can follow the entire dialogue.

This is not a traditional conference call so we only take questions either from the audience here in London or by e-mail. If you want to ask a question please send your question to investor@SAP.com. And then finally, the standard statement is our Safe Harbor statement. Please note that except for certain information, matters discussed during 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 my opening remarks and with that I would like to hand things over to Werner.

Thank you, Stefan. Good afternoon, good morning. Welcome also from my side. I cover as Stefan said the first part of the presentation; I will step in the highlights of the first half of 2005. We had a very strong start into the year with software revenue increasing by 16% year-over-year on a half-year basis currency adjusted 17%. It is now the eighth quarter in the consecutive row where we provide (indiscernible) for revenue growth in constant currency. I think when you successfully demonstrate that we shifted towards the volume business the number of deals increased by 24% in the second quarter of 2005, and if you look deeper into it you see that on the direct side we increased by 14% and on the indirect side we increased by 49%. You see the average deal size continues to stabilize due to a mix of strong volume growth. Some larger deals and unchanged pricing environment and very important for our business with new customers is 27% of order entry. And I think from my perspective even more important is the number of contracts we closed with new customers. And if you take the entire number of contracts closed, then it is 38% of the contracts we closed in the second quarter and the amount of contracts closed in the quarter was approximately 2000 contracts.

First half-year performance in line with internal expectations at the beginning of the year and on our way to achieve full year guidance. As we said beginning of the year 2005 is a year of accelerated investment for growth. We hired in the first half nearly 1900 FTEs with a special focus on sales and marketing and research and development. And we update now our guidance for the headcount for the hiring in 2005. You remember originally we said we want to higher 3000 employees; we said at that time already it is not set in stone. We see how the business progresses during the year, and now we decided then to increase hiring up to 4500 in 2005.

Further efficiency improvements we saw it in our P&L we provided. With regard to the key figures for the second quarter you see the numbers here. Net income grew 16%, and if you exclude the pro forma stock-based compensation expenses and acquisition related charges our pro forma net income would have been 314, and I think this is really above the expectation from the capital market in the second quarter of 2005.

With regards to the pro forma EBITDA you see an increase of 16%. The margin stays at 25%, and the pro forma operating income excluding stock-based compensation expenses and acquisition related charges increased by 0.6 percentage points to 24 points. 6% of the level of stock-based compensation expenses and acquisition related charges is similar if you compare quarter-over-quarter. In the second quarter of 2005 it was 36 million and in the second quarter of 2004 it was 37 million.

Looking to the tax rate, you see an improvement here quarter-over-quarter by 2 percentage points from 36% down to 34%. For half-year we show an improvement from 36% to 35% and we are on a good way to achieve our target for the full year is what I said beginning of the year, 35.5% tax rate.

So as I look to the revenue we talked about and will talk about the software revenue already, let me spend some minutes on maintenance and consulting revenue. You see here strong growth on the maintenance side, and if you look to it from a sequential perspective we had in the first quarter of 2005 we had 739 million of maintenance revenue. Now we have 779. I think the increase is due to normal increase in our base is due of course to the currency and some other effects so that we can provide here an increase of 12%. Year-over-year (indiscernible) 40 million more in maintenance revenue.

Now Consulting in the first quarter we had revenues of 475 million. Now we are at 540 and the reason being I will refer to this during the discussion of the expenses, being high utilization of our consultants we hired in 2004. I will come back to this in some minutes. Here you see the successful shift towards the volume business. You see when we started to focus on the volume business in Q3 2003 we started to provide software revenue growth year-over-year on a constant currency basis. And today I think we have a situation where some larger deals helps to continue stabilizing the average deal size. Some strategic deals which are typically phased over multiple years, and we are quarter-over-quarter strengthening the indirect channel. And Leo Apotheker will refer to these metrics in his presentation in more detail.

Here UC the more balanced deal size distribution. I do not want to go into detail but we clearly see a trend here, two deals below one million, and reduced importance of the deals about 5 million and also the deals in range from EUR1 to EUR5 million.

If you look to the software revenue on a geographical regional basis and you see good growth in North America with 27%, a very good growth in Asia-Pacific with 20%, and if you exclude in Asia-Pacific and Japan, then this region grew 45%. EMEA grew 8% amazingly, if you think back what we had in the first quarter, Germany is down. We have some specific reason for this and I also here refer to Leo who will give more detailed insight into Germany and Japan.

Total revenue as you see same situation and I do not go into further detail here. Operating expenses, pro forma gross margin for product and service first off for product, you see that we have a stable product margin here with 84% quarter-over-quarter. This on a quarterly basis really depends on the level of licenses or end products we sell through our organization, which our applications on the one hand. On the other side we see the benefit of having higher efficiency in the support organization. We are providing support out of low-cost locations, and this even involves and compensates hiring in global support; for example in the second quarter we hired 300 people in active global support.

If you look to the service side we see that we have an improvement of our margin from 24 to 25%, one percentage point. And if you remember in 2004 we struggled here a bit because first of all we did not make all the consultants productive. We hired in the fourth quarter in 2004, impacting our margin for the fourth quarter and the full year of 2004, and we had in 2004 a strong support from our consulting organization for internal projects, mainly product ramp up. And you see now with the second quarter that we have a higher productivity of our consultants on the billable utilization side, less involvement on internal projects. So the margin went up in the second quarter, and I think this confirms what I said during the first quarter conference call that we will see in 2005 a margin which is really comparable to the margin we achieved in 2004, and this margin is at least for the service business 23%. By the way, training (ph) also was very healthy.

Here you see the pro forma operating cost analysis quarter by quarter for 2005 compared to 2004. And you see in the second quarter we increased our expense base volume driven by 118 million and you see an indication by type of cost what is behind the person expenses increased of course we added since June 2004 more than 3000 FTEs to our base. We had higher marketing investment in the second quarter of 2005. We had two major global events during the second quarter both our staff in Boston and Copenhagen increasing travel expenses due to increased business activities and of course royalties. It always depends on the mix of the software we sell.

One additional view here are on the operating cost by line of business, as you look to pro forma research and development increase of 16%, I think we added 1385 FTE's in the remaining four quarters to our base with the clear investment focus, as we said on the business process platform and other development areas. Henning will refer to this in his presentation, and we did the same in sales and marketing with an investment focus on the mid market and the volume business, and here we added 635 FTEs if you compare quarter-over-quarter.

The G&A, the increase you see here is mainly driven by the rent up of the shared service center for EMEA which is just in the process to being build up in Prague. And we just started to migrate country by country, process by process into this shared service center, and we will see the benefit in the following years.

Some words on the financial income for the quarter you see that we have a negative finance income of 60 (ph) million in the second quarter, and you see here the reason being the stock hedge, the implication of the hedging of the stock we provided to our employees the beginning of this year, I think it was in February. You know that we always hedge the stock program and the acquired options for 3.8 million stock at that time. At that time the share price was at around 121. The cost for the options was 47 million. And from an accounting perspective it is very important how the time value evolves over time. And in case if you have a strong increase in the sale value the time value goes down and according to the option pricing, the accounting which is option price related driven, you have an accelerated amortization of the capitalized option. And this impacted the quarter with 38 million expenses.

Normally we would say you take these 47 million and bring it into the P&L over a period of the lifetime of the program which normally is two years. That would be a reasonable linear approach, but the accounting is a bit different. It looks to the development of the time value and the consequence if you have an increase in the fair value, the time value goes down, and then you have this effect.

If you look to the finance income the interest income for the first half year you see we have a very strong increase. Two reasons, first of all we have more cash. In the first half we had average cash of 2.7 billion, of 2004, 2005 it is roughly 3.6 billion. So this is more in the interest rate also increased, we could realize half year, this is half year comparison.

Balance sheet liquid assets 3.4 billion. Deferred income this always in the past was a topic for discussion. We do not need from our perspective a discussion here because this developed according to the normal course of our business. So this is if you compare these previous years a normal increase, if you compare December 31 with June 30.

The DSO could be reduced by one additional day in the quarter compared to beginning of this year. The equity ratio is stable with 61%. The cash flow here we have less operating cash flow. You might ask what is the reason behind it, and as I anticipated this question I have an explanation on the next slide. But before I come to this one, I want to give you two additional information regarding dividend and share buyback. Dividend payout in the second quarter was 340 million, and the share buyback in the first half was 276 million. And we bought back in the first half of the year 2.2 million shares. Average share price, 123 million, not million, Euros. Now I'm confused because 200 would be a good share price I think.

To come to treasury stock, we have 6.6 million in treasury stock. And the average price we acquired this treasury stock for is EUR111. Now let's come to the cash flow analysis. What you see here is the net income depreciation amortization. This didn't change much if you compare QH1 2004 with H1 2005. (indiscernible) different changes in working capital. You see that in the first half of 2004 we generated a lot of operational cash flow by reducing our working capital and this reduction of working capital is lower in the first half of 2005. And why is it lower in the first half of 2005? The explanations on this slide. We have a lower reduction on the accounts receivable and other asset side, and the impact here is 210 million. And we have a higher reduction on the liability side, mainly on the tax liability side in H1 2005 due to tax payments related to prior years we did in the second quarter of 2005.

If you look to the account receivable and other asset side we had in the first half of 2005 a lower reduction of accounts receivable. Of course at that time we had a higher DSO. We have reduced it much further then we are able to reduce it today, and if you compare the first half of '04 with the first half of '05. And additionally, we have an extraordinary effect in the first half of 2004. This is the settlement of a forward contract in the second quarter of 2004, which if you settle something has a reduction of other receivables as a consequence. And consequently our free cash flow or our operating cash flow increases.

Now the last slide on the update here is the worldwide headcount. You see the regional distribution of our headcount between Americas, EMEA and Asia-Pacific. You see that we have, if you look to development that we have employed in low-cost locations 63% (ph) of all the employees we hired in the area. And we also hired 30% of our employees in the service and support arena in the low-cost locations.

I want to conclude with the outlook for 2005 and it's the reiteration of our guidance. We expect full year 2005 software revenue to increase in the range of 10% to 12% compared to 2004. We expect the full year 2005 pro forma operating margin which excludes stock-based compensation and acquisition related charges to increase in a range of 0 to 0.5 percentage points compared to 2004, and we expect the pro forma earnings per share which excludes stock-based compensation expenses, acquisition related and impairment related charges to be in a range of EUR470 and EUR480 per share, and this outlook is based on U.S. dollar to Euro exchange rate of 130 as we indicated at the beginning of the year. And to conclude the year 2005 will be a year of investment for SAP, which will help gross growth and efficiency for our company. That's all from my side, and I hand over to Leo Apotheker.

Good afternoon, ladies and gentlemen. I will try to give you a little bit of color and insight into some of the market related things that happened both in the regions, some key industries and some segments. As Werner already indicated, we had a very successful start into the year. And as you know, you are comparing us to others in the industry. You also know that it was the growth rate that we have achieved. We are leading this industry when it comes to growth.

Indeed we have strong year-over-year growth. Our Q1 just to remind everyone we grew by 17% in Euros, so 20% in constant currency, Q2 to another 16%. So we had a very strong half year; 16% license revenue growth. And the very good thing about the first half year and indeed this quarter was that all regions contributed to this growth factor, all regions, EMEA, Americas, Asia-Pacific. Our average deal size continues to be stable, and it's a combination of high volume and the stated volume that we generated, the growth rate we generated in volumes in Werner's presentation. And some larger deals that came into the mix as well. First I want to remind everyone that there aren't that many large deals around. We usually win those large deals that go around and when we win them, many of them are then consumed over a long period of time. And are therefore also accounted for over multiple quarters.

Our volume business is driving our growth. We had a 23% increase in the number of deals in the first half year, and as you can see the (indiscernible) push here is in the indirect sales growth, our indirect channel is performing increasingly well. In Q1 we grew our volume in that channel by 38%. In Q2 by a staggering 49%. It doesn't mean that the direct sales force isn't growing. It is still growing by 13, 14%, but as you can see the biggest push of the volume is coming through the indirect channel.

By the way, that is also almost exclusively all new customers. I already spoke about some strategic deals. I give you some examples later on. We have a very strong good market growth as indicated here by the performance of the indirect channel that mainly looked after the mid and small market. But all of this is happening in a challenging pricing environment as one says so nicely these days, so politely. It is a very challenging environment; competition has only price left to compete so they are using that weapon. But as you can see not very effectively given our growth.

We have a balanced mix of growth from traditional and focused industry. Our traditional industry is high tech, oil and gas, chemicals continue to perform very well, as does aerospace and defense, and engineering and construction. And you know that we have been focusing for a while on public sector and specifically on retail. I know retail is getting a lot of attention from many sides over the last six months. And we have been extremely successful in the retail sector. We had significant wins; larger and smaller ones. In particular in the most important retail market i.e., the US, but also here in Europe and in Asia and I will give you some examples about those in a minute. Indeed, all of this has driven our performance compared to the peer group. You are familiar with this slide. We measure our sales on a rolling four quarter basis with our peer group and this quarter now a big number of previous quarters, we have again increased our peer group share by another percentage point to 58%. And you can see for yourself from whom we have gained this share.

If I look at some of the selected customer wins in the second quarter let me talk first about one that doesn't appear here on the slide, and that is the Home Depot in the United States of America. And I'm sure you know who the Home Depot is. The world's largest do-it-yourself, second-largest retailer in the world. And the reason why I mention them is it is an important win for us for a number of reasons. First of all, it is a huge retailer. But the reasons why they selected us is as important as the name. Reason number one is that they choose us for our retail functionality, which only shows that we have a very competitive product.

And reason number two, they are going to build their entire information system landscape on ESA, (ph) on our technology and our roadmap. And that is a huge endorsement from such an important company when it comes to our strategy. Amgen was a very important competitive win, as well. Is by the way also a safe (indiscernible) win. Amgen is a very well-known and highly respected biotech company in Southern California. In EMEA it is important to point out Burberry. Again, another very important retail win. They are also going to implement all of our retail solutions. But I also like to point out the (indiscernible) another bank that has joined SAP and (indiscernible) bank of course in the Netherlands. And in Asia-Pacific across the board we had good wins in oil and gas, China petroleum and chemical, Bank International in Indonesia, the Alzora (ph) bank in Japan and across the board many other companies and many other industries.

If I now look at the various regions, the Americas in particular the United States remain a strong growth engine for us. 31% organic growth in constant currency in the first half of the year. That is a staggering percentage. By the way, it was the 11th quarter in a row that we have double-digit growth in the United States. So that is quite an impressive performance. And we have gained market leadership in the US, we have gained it over the last year, and that picture hasn't changed despite Oracle's $11 billion acquisition out there. And we actually not only have gained number one position. We are actually gaining market share in the U.S. against our peer group.

We have taken some additional steps to increase the velocity in our mid market offensive in the U.S. and we have created a stand-alone organization in the U.S. to go specifically after mid and small sized enterprises, and we are convinced this will help us fuel additional market share and additional growth in this important segment. And maybe as a side comment we had also a very good quarter in Canada. All of this resulted in another gain in market share against our peer group on a rolling four quarter in the U.S. As you can see we are now for four or five quarters leading the market, and we have expanded our leadership with another percentage point and the trend is a very positive one. And I hope that we can continue to drive the same trend going forward.

If I now look at Asia-Pacific it is a phenomenal story there as well. We have great success in Asia-Pacific. We grow in the first half of the year, we grew our software by about 30%. And by the way, it is not just happening in one or another country. It is extremely well-balanced growth across the entire region. We have growth in Korea, we have growth in Australia and New Zealand. Of course, India, China consider it as well. A well balanced portfolio. In fact we gain five customers per working day in Asia-Pacific which is quite a performance.

We have now a stable situation in Japan if you look at the first half year. We have now stabilized the business, and we have a new managing director in Japan as of August first, who will continue to not only stabilize the business but now initiate also all of the steps that we have been planning to grow the business again over in Japan.

Our Asia-Pacific peer group performance is very impressive, sometimes overlooked and underappreciated. But it is a very impressive one, as you can see 72%. It is extremely high. So claims that you can hear here or there that someone else claims market leadership in Asia-Pacific, not necessarily based on hard facts, to put it this way. And we hope that by the growth that we have achieved in Asia-Pacific, we will maintain this position as well.

Interesting is also the Japanese peer group comparison, which is even higher. That number should indicate two things. One, on the one hand, we are very competitive in the Japanese market when it comes to our peer group. It also shows that there is a significant chunk of the Japanese market which is custom-made software that we feel more confident about getting our share from since we have brought SAP that we were capabilities to Japan as well, and we hope that with this approach we will gain a higher share of the available market in Japan.

Over to Europe where we had a good quarter. Let me maybe put things a little bit into perspective. If you exclude Germany from the EMEA number, if you look at EMEA excluding Germany Q2 to Q2 the growth in EMEA was in the high 20s. Actually comparable to what we have achieved in North America. It is an extremely high number. It is a great performance. It is a compliment to the team that is now running EMEA, Ernie and Michael and his guys. And it is driven by very good performance in many markets in Europe. We had good growth in Benelux in France, in Russia, in South Africa, and Switzerland, here in the UK; so we are back in the situation where we feel that the European market is coming back into growth mode.

As you will remember from our beginning of the year press conference we indicated that we wanted to grow in Europe 1.5 times faster than the European market. I think we are delivering on this, and I am confident that we can continue to do this. As to Germany, we had a drop in the first half year of about 8%, mainly all happening in Q2. The reason for that is rather simple. As you know, we are very strong in Germany. We have good performance in Germany for many, many years; by the way total revenues in Germany grew in the first half year as well. The explanation for the dip in Q2 is pretty simple.

There are two sectors that became from a buying perspective a little bit paralyzed because of the elections, one is the public sector and the one is the insurance sector, those are affected by some government decisions and that is the full explanation for the dip in Q2. We are reasonably convinced that the second half of the year will be significantly better than the first half of the year. We also took some steps in Germany that were planned a long time ago to realign our sales capabilities in Germany and that is done as well. So all in all we had a good performance in Europe, and we are confident about Germany.

All of this brings us to a stable peer group share in Europe, 68%. It's pretty simple, the lowest numbers are what they are, and even if we continue to outperform the competition given the size of the numbers, there is little more that we can add to the peer group percentage. As to SMB, we are doing very well in SMB. We serve together with 1600 channel partners, 13,700 customers in the SMB segment. We continue to expand both department base and the customer base significantly also in the first half of the year. All in one has 6700 customers and 700 more in the first half year. And we grew the biggest part of two markets via 650 partners, 150 more that came on board in the first half of the year. And we provide to the market about 550 different micro vertical solutions. So we have a very strong portfolio of solutions for the market and Business One, we have now 7000 customers. We added 1700 in the first half of the year and we go to market with now (indiscernible) partners, that is 150 more that came on board in the first half of the year. So all together 2400 new customers in the SMB segment in the first half of 2005.

Werner already indicated the performance of the indirect channel from a revenue perspective so I have little to add on that. What is important is that our solutions are available globally, All-in- One is available in 50 countries. Business One available in 37, and we have announced a very innovative and attractive partner program growing SAPPHIRE -- it is called SAP Partner Edge (ph). It is driven on value points, and it has been giving us the opportunity to attract partners from other vendors into the SAP camp. All in all, you know that we provide segment reporting on the SMB market. And based on a rolling four quarter basis order entry you know the definition of the midmarket so I won't repeat that. We are clearly the leader in this market with about one billion. We are fairly larger than Microsoft, larger than SAGE and larger than Oracle in this very important growth market.

This market will continue to drive substantial growth for us, and by the way helps us also to have a balanced deal sized portfolio that helps us in turn to give you more transparent and predictable guidance. A few words on Safe Passage and maybe I should reiterate what Safe Passage is before we dive into this. Safe Passage is not an Oracle win back program. It is not to be compared with a thing called off SAP. It is a true Safe Passage program that is meant towards safeguarding customers. Hence its name, and it is meant to offer a holistic package of maintenance support.

Sometimes even long-term maintenance support, migration, safeguarding of environments and am optimization for J.D. Edwards and PeopleSoft customers, some of which are also SAP customers so that these people have the choice. These customers have a choice, and they are not forced into something they might not want to do. This program has been announced in January, and we for one want to be absolutely transparent on this. We are only counting deals and customers who have taken benefit of this program as of January.

Therefore the customer example that I can give you here, for example PeopleSoft and JDE customers that migrated Amgen, as I mentioned earlier, Forest City (ph) (indiscernible) Unigra (ph) Optama (ph) (indiscernible) etc. We extended the program in Q2 to Retek customers after Oracle acquired Retek, and Samsonite for one took advantage of this program to migrate to SAP. And we have now very recently expanded the program offer to SMB customers and the first customers that took benefit of it are Iza (ph) and PBM (ph). All together we have 21 Safe Passage deals signed for the first half of the year, and I can also tell you that the pipeline for Safe Passage deals is growing exponentially.

This being said I would like to turn it over to Henning. Thank you very much.

There are just a few concluding comments. My colleagues said half year came in strong but not unexpected. So that is more or less what we expected, and what are we seeing outside the customer environment and in the market? You know that we are preaching since nearly two years now to the market, IT is too important to just view it as a cost center where the first goal of all CO is to bring IT spend down. It is too strategic, and we see now feedback customers understand. They view IT investment as more strategic and also making investment decisions based on strategic decisions. So we got them more phased (ph) and more in a linear buying behavior.

Also the reason why customers buy software is changed, in particular enterprise software. In the past it was mainly to optimize operations, which is good. There are now customers asking more for having a tool which helps them to differentiate themselves against their competitors. So it is about business innovation and competitive differentiation. And in parallel everything follow at (indiscernible). Five years ago I would have said you cannot deliver on all of these three requirements, but now finally I think we know how to do it. We started two years ago with exactly our enterprise service architecture which delivers on these requirements.

The good news, the frontrunner, mySAP (indiscernible) gets faster traction than some people thought so we have seen nice growth from the head of our most conservative user groups, German one who said we are surprised at the high acceptance of mySAP (indiscernible). We from SAP were not surprised but it is good that he is saying this. And it was also good that they indicated his users that number two on the priority list was SAP NetWeaver. So that is exactly our strategy. We accelerate to the Next Generation (indiscernible) systems, the migration from our suite to the new world, and with SAP NetWeaver underneath we have the option as a customer can extend based on this, and this gives us an additional revenue through different users and through additional integration of non SAP into the SAP environment.

We continue to gain share. You have seen it. That is the reason why our competitors still go into discounting in the pricing environment. It is challenging and as you have seen in the last slide from Leo industry consolidation continues and this gives us a lot of opportunities to replace applications of acquired companies midterm. Now if we look to the entire market we have seen SAP's success against the peer group. And if you look to revenue the markets, the rest of the market grew by 5%. SAP grew 13%. This is what some analysts expected. This gives you together roughly a 6.5% growth in the market. I think it is more important to look to software. Software is fueling future growth and here we have a completely different picture. We grew by 15% in U.S. dollar, and the market declined by 3%. The overall market slightly increased but mainly because of SAP's strength here.

And if we look again to the stack, you see why we are focusing on this segment of enterprise application software. First we believe this is where the benefit lies in the future. Second, it is the huge market which today we have a product portfolio which covers 50%. So in terms of software in the market we are working in is 15 billion, and SAP has a market share of 20%. And it is our growth strategy to focus on the segment but to get more market share.

So therefore if you compare SAP against the entire market you see that our market share is 27% worldwide which is not very high and gives a lot of improvement, opportunities for improvement. So far we gained 2 percentage points a year. And if you look to the future and would assume we can continue with this space would give us in the next five years something like 30%; just to remember that this is far from being a saturated market.

What is our growth strategy? We haven't changed. We bet on innovation and not on acquisition. So therefore our first goal is continue to grow organically because we can do it, and we still believe it is the best way to go. We will accelerate innovation. You have seen that we have announced a different product, not only the business process platform we announced the beginning of the year. If you follow SAPPHIRE what we did in Analytix was quite a lot. We have continued to engage in industry specific, industry served to put more pressure on to them. Retail was mentioned from Leo but also banking and public (indiscernible) for SAP. Last but not least because we have high ambitions in the midmarket you will see soon the successes of the existing products. Based on NetWeaver so a suite in a box in order to extend our product portfolio for the midmarket.

Now the business process platform allows us to also grow some partnerships which is very important. And I think it is not necessary to take away from the market all the small innovative, independent software vendors, it is much better giving them a platform on which they can bring innovation to the entire market. It is good for the entire IT market and that is what we're doing. Around the business uses you have seen these announcements as Microsoft (indiscernible) seen as an opportunity was a joint effort to get faster, new users who use Microsoft but not SAP and SAP accounts.

We have added in healthcare an alliance with Siemens. Again, this was possible, both was possible only because we have an enterprise service architecture. Both alliances are based on enterprise services with Microsoft but also with Siemens where we combine (indiscernible) based on one platform which was SAP NetWeaver and we get traction with partners that build big SAPs on top of NetWeaver. Yes we will continue to do acquisitions no doubt. We do smart acquisitions, focus on product and try to strengthen our product portfolio.

That brings us back to this roadmap. I think you know it hopefully by heart. I will not change this; I think it is part of our strategy to deliver on promise even if it is a four-year strategy. Now I can say we delivered on Business Suite, indeed the successor. Important this is on track and I am very happy that in Q3 we will deliver the complete entire SAP Business Suite on NetWeaver, including all industries as we said. So you could say this is the first time the Company delivers the service-oriented architecture based enterprise suite to the market.

We give ISVs first access to the business process platform mainly through the 500 enterprise services we announced at SAPPHIRE which are available giving access to the suite. And we will have next year then the new business process platform available in the market. So that we are on track on delivering in this (indiscernible) 2007. I think its important for you as well because based on this roadmap is our forecast for 2007 which will bring back higher margins than today because we said beginning of the year this is the year of investment, but you will get the payback in 2007.

Finally what is our vision? Very simply, we know it has been some time and we get strong evidence that the business is changing. Companies as I said request from us that they can compete in the future through business model innovation. This is the way companies will compete less through product innovation, which is good news for the software sector because this has to be empowered by IT. So this brings IT back into the position of being a strategic weapon for companies in the future. But on the other side we need a different IT architecture. If you deliver -- continue to deliver on high-efficiency but also highest degrees of flexibility and that stability cannot be done with existing IT architectures. And that was the reason why we so early embarked on this roadmap on enterprise service architecture.

You see here our answer; we allow companies in the future fast innovation, fast business innovation through composing highly efficient operations into new and differentiating business processes and business passport. You need a reliable foundation in order to do so. This is our business process platform, and the enterprise services which are stable, which are a kind of de facto standard. And which decouple the layout where we innovate from the layer where we look more for efficiency and reliability.

Now as I said, we executed. I just want to mention a final point on the platform. You have seen a lot of endorsement from IT leaders around our user conferences which endorse this enterprise service architecture, it is very important because it allows those companies and SAP to build on each other's innovation, without being too coupled. You know that some of our competitors believe the future is in one complete integrated stack. We don't think so and the reason is always as they say because we can then deliver better applications. This is the way to deliver better applications to the market because reach to some extent through enterprise service can help them produce their product and there on the other side can help us to improve our products.

From a suite point of view, just again for ERP 700 contract first half year shows you that it's really well accepted in the market. So finally, enterprise service architecture is indeed in our belief the next big thing for IT. SAP is in a very strong position. We deliver first to the market. And the centerpiece is our business process platform, which we launched beginning of the year. It is a unique opportunity because it helps us to accelerate innovation, also SAP but also partners. So we will do so. We will take this opportunity. We will accelerate our investment into new product innovations, and we expect these investments to pay back soon. They will help us drive future growth but also to improve our margins.

It will turn IT into a strategic weapon so we believe we can also push the entire IT market through a business process platform to higher growth than before. As I said, it enables us and our partners to innovate together. So it helps us to faster expand the addressable market. As I said at the beginning it is 50%. We expect in 2010 that we have 75%, 80% of this enterprise application market as an addressable market. And because we are the first in the market I think we expect gaining market share and gaining faster share of (indiscernible) in the installed base.

The last point we also want to drive industrialization of software development. The efficiencies of productivity of software development in the past was not comparative to what we achieved in hardware. (indiscernible) allowed us to double productivity every 18 months, whereas in software it was more or less doubling every six years. I think with this approach we come much closer to higher productivity in shorter time cycles which will not bring better quality to the market, but also allow us to produce more software cheaper. And that improvement of margin once we delivered on (inaudible).

Thank you. At this time I think we would like to go to the Q&A session. Before we go to Q&A again, as a reminder to everyone, please use one of the roaming microphones. Please raise therefore your hand so we can get you a microphone. We have a webcast of this event so in case you are listening to this event through the Web you can send us questions by e-mail to investor@SAP.com. I think the first question we take one here from John.

John Sagert (ph) from J.P. Morgan. Just kind of two questions, one for Leo. Could you talk a little bit about some of the changes that you've made in the U.S.? I know in particular you've moved some people around to focus on retail and SMB and maybe help us understand how important that is in terms of driving that strategy going forward.

And then the second one in terms of the hiring we are now looking for 4500 people versus the 3000 hires that you had. Help us again understand why we continue to ramp that number. Is it just to get faster time to market? Did we underestimate maybe how difficult the ESA (ph) transition is? Or is it just that business is coming in better so you have the ability to invest even faster? And if you could give us an idea of what that investment might look like next year.

Maybe I will give you the answer on U.S. first. What we did is we continued to expand our strategy in the U.S., a very successful strategy, continue to grow in the U.S. and we wanted to make sure that while we are growing bring on nine (ph) engines for growth as we move forward. We have a focused strategy on a certain number of key industries, financial sector, public sector and retail. I think we already mentioned that earlier on, and we have a specialized go-to-market organization in the U.S. for the financial services and for public sector, it made a huge amount of sense, it was the same thing for retail. In particular because it is a strategic (indiscernible) and it requires a certain number of competencies. So we have done that and it is proving to be a very successful strategy as you are seeing from the results.

And when it comes to some other movements yes, we want also to make sure that we have the right focus on the mid market and it is always an issue to mix mid market with large enterprise business in particular in the U.S. So we have a dedicated organization. The good news is, John, is that we have significant bench strength in the U.S. and we are able to do all of this -- practically all of this with our own resources. We don't need to hire people from the outside, and we shift the focus -- sorry we add some focus and it just helps us to fuel future growth.

Maybe I can add some comments to hiring. There are three areas where we hire, and we can talk a little bit about seasonality when we hire not (inaudible). First is yes indeed go-to-market. If that depends on opportunities, we have many good solutions. And in some markets we have just to ramp up the resources in order to really leverage the potential of these solutions. So this is depending on the business and this business is getting better and we see more opportunities as we hire there and that you cannot plan it ahead.

Another one -- this is more peak now -- is service. We have a shift I think we have to prepare ourselves for two things -- for volume business also from the product point of view. And you know that the business process platform has two engines, one in Abap (ph) and the other in Java. So therefore we have to ramp up now more in support just to be prepared. It doesn't mean that their margin goes down. Still their efficiency goes up but less than in the past. I think this is the peak and we will have this once to prepare people for the new world and then it's done.

And the third one is research development. This has to do with keeping let's say the advantage we have from timing and here we have the same plans. I see a peak this year; I think next year it will be selective, and I don't see SAP to hire people in 2007. I think here we can redirect what we said already that the peak (technical difficulty) and then we take what we have and use the efficiency level.

Maybe I can add one point here with regard to the financial modeling. Beginning of the year we said we would add 3000 employees to the base. But at the same time said it is not set in stone. So the increase we see today up to 4500 is covered by our guidance and our financial model.

A question here in the first row, Mark.

Thanks. It's Mark Brown (ph) from Deutsche Bank. Just a couple really. Firstly, (indiscernible) you said a couple of times that the first-half performance was in line with your expectations. But I think I feel that you are struggling to marry off of that a bit with the unchanged guidance in the sense that if you look over the last three years on average you have delivered about 38% of licenses in the first half. Is there anything that I'm missing for this year on seasonality that is going to mean that difference? It doesn't quite marry up with what you're saying.

And the second question just to be clear on that one; in Germany I think you're saying that is very much a short-term phenomena. Therefore should we unusually expect for modeling purposes to see an increase sequentially in the German license number in Q3?

I can answer on the seasonality. We expect roughly the same seasonality plus minus a percent point I would say this is more or less the same that we cannot predict that. I think it will not be a completely different seasonality. In Germany -- (technical difficulty)

First of all, we usually do not provide guidance into sequential for a particular country, not even for the whole company. We won't change our habit this time either. I think all of us indicated already that we expect the second half in Germany to be significantly better than the first half.

Matthew (indiscernible) two quick questions, first of all, Japan, you have replaced the managing director. You have made a lot of changes there over the last few years, but it still seems to be giving you market share and given your position there that this is still very much a missionary type sale. You are having to go out there and actually invent the market. How do you get past that? Is there any future or will Japan just continue to do what has basically done for the last three years, which is it sort of bounced along at about the same level?

The second question is could you talk a little bit about your Analytix (ph) package, it is certainly got a lot of profile at SAPPHIRE. Can you talk about release dates and also pricing? Is this actually going to be sold as a separate package or are all the Analytix products actually going to be built into the wider application set?

Let me try to give you some perspective on Japan. Actually if you look at Japan over the last years we had over a longer period of time, quite some growth in Japan. And I have to correct you. We didn't make that many management changes. In fact, the change that occurred now is only one senior management change over a reasonable long period of time just to get our facts right. With all due respect. This being said, you do make an important point. I'm not so sure the term missionary sale applies. What is true is that Japan is different structurally from many other markets because of the very high share of custom-made software. Which in turn goes back to the early days of IT in Japan in the '60s when Japanese companies jumped on this bandwagon of automation, among the first ones in the world.

Now there is two important things you need to bear in mind. A, that generation of software is fading out because it is really getting a little bit old, just to stay polite. And secondly, we actually have additional solutions for the Japanese market we didn't have before. And what I mean by that is our platform is SAP NetWeaver and then the business process platform, which I think can have a very attractive appeal for people who want to combine those custom-made software at the same time that they want to take the benefit out of package software with the composition platform etc.

We are working with partners in Japan to actually effect this so that we are not just out there on a missionary mission, and we do this with partners and we do this actually with the very last Japanese partner. I'm actually confident as you move around Japan as in the past will be again a contributor to growth for the future as well.

On Analytix, good question. It will be separate pricing, no doubt. We will have packages which are usable not only for the new suite but also for suites we shipped before, at least those which stay on top of the business warehouse which is one direction where we can I think as a different composer bring the model to different releases. In parallel there will be Analytix which is more embedded Analytix. This goes then with a suite that is more difficult. You know that means with merging transaction Analytix but these Analytix package we feel first is more I would say package of models of content based on existing BW techniques. Therefore it is easier to bring it to the market and to monetize. Which by the way also a fast track program on composites so we will also see with a suite coming out in Q3, not only additional enterprise services but also a balance of composites on top so that people really see this is a mix of nice innovative composites, Analytix and more traditional apps. Therefore I think from a revenue point of view it is something which we hope will bring us revenue soon.

I think at this time, we take one question from the Internet; actually it is a question we get from several analysts Rick Sheldon (ph) Goldman Sachs, (indiscernible) Prudential, Charlie DeBono (ph) Sanford Bernstein. The question is on the situation with regards to CRM; can you discuss the situation in CRM which was down 3% year on year? What is the impact of salesforce.com? When does SAP offer a hosted solution? And finally a view on the market especially SAP versus Siebel.

Firstly, I would say we should not look always to quarter or quarter. I think like you look to the industry if you look to a quarter only you will have up-and-down, so you should more look to three or four quarters together. And then you will see that CRM is growing. So I think it is more quarterly thing and not so much a trend. We don't think it has to do with salesforce.com because it is not a CRM, what salesforce is offering is just some functionality out of the complete CRM package. So we to some extent address different needs at customers use our CRM and they with their sales support task.

When does SAP offer a hosted solution? We prepared this. I think we are in preparation. You will see something soon as we indicated amongst the goal. Those things take some time. We have to make our business models right. I think from the product that is not a big thing to do so we prepare both business model and product. And if we look Siebel you see that we gain market share against Siebel so therefore SAP gains market share in the CRM space and in particular against Siebel.

Michael Breech (ph) from UBS. If we can go back to Germany, Leo, I think you mentioned the public sector was very difficult. The rest of the business, was that performing as strongly as the rest of Europe? And then on the elections, they are not due until the end of September. Should that mean that they are locked down if you like and governments assist? And sorry, a second separate question for Werner on the services gross margin obviously very good, and you mentioned that some of the internal resourcing is not going to be repeated. Should that mean that that a services margin remains good for the remainder of the year ahead of last year?

Let me answer on Germany first. We are in Germany as you know very well, very strong in basically all sectors, and all segments. And it is a tribute to the German organization that they have been building up this business over so many years and with such strength. If I look at what happened in this quarter, and that is why it is a very peculiar quarter because of some extraordinary circumstances, the entire impact on the quarter came from two industries as I said earlier on, public sector and insurance. By the way insurance that is because there is a discussion in Germany on some changes involved when it comes to public people insurance.

I can't predict the elections, neither can anyone else, so we will see what will happen. One can only assume that at the moment that the elections are done, public sector, the federal sector will come back to normal business and a certain number of these projects that we are looking at will actually materialize. The good news is, that's probably the underlying question here is the rest of the industries and sectors in Germany performed as usual.

Regarding the service margin I think what I indicated for the full year I anticipate that the service margin will be at the same level as we have in 2004 meaning that we see a strong service margin also in the second half (inaudible).

In the back, Adam.

Adam Shepherd, from Dresdner Kleinwort Wasserstein. To bring it back to the guidance, just following up on the comment from Mark, coming from a different angle, the first half you had license sales growth of 60.5%. You've maintained 12% guidance for the full year, so it suggests to me that we are going to see a deceleration in growth into the second half. I think that is what the guidance implies, and I wonder if you could comment around that because from my calculation is a deceleration (indiscernible) alone is around 6% growth in the second half, or 10% if you choose the top end of your guidance and I wanted to make sure that is kind of where we should be thinking. And if that is the case then, where are you seeing these decelerations? Is it just tougher comps? Is it something in terms of demand, and perhaps then what is driving that?

I think if you look to the underlying account the assumption its very important to realize that our guidance is based on EUR130 a U.S. dollar and this hasn't changed. If you look to the first half of the year we are at 128, and go back in general when we said that our budget assumption for the exchange rate is 130. Everybody claims this is too low. It should be in the range of 140. So that is the reason why we are very careful with regard to the account the assumption. If you want to calculate something take a different Country and you come to a different result.

(indiscernible) of Falkenheim. A couple questions if I may. First of all you have a very strong service business in the second quarter especially. What do you see as the major drivers for that and will it continue like that this year? Second question you mentioned that you would be focusing on acquisition, acquiring intellectual property rather than companies. How do you see this working, and what would it mean for your partners? And finally, if you keep track of people who are coming to you on aboard of those 4500 do you track how many come from PeopleSoft?

Let me start with the acquisition related question. I think you have to weigh if you buy a company, if you are interested mainly in the IP of the company or you say okay let's focus on the IP and by the -- in terms of (indiscernible) buy the IP only. It is not a big difference. It is more the technique which is behind the potential transaction.

And some people we take onboard we don't count how many come from competitors, but not 4500. And in principle we are not changing as you've seen in Werner's slide, the mix between product and service, it is the opposite I think. Product gets stronger and service less, so we come back to the value always 70/30 mix which is extremely healthy, and it is also good to signal for our partners with no change in service business. I think it was obvious from the beginning that we couldn't have such a big gap between product and service. To some extent service has to catch up but still service is below product and I expect service also in the future to be below product, so therefore the mix goes into the right direction and the (indiscernible) to the partner remains the right one.

And there is another question from the web we got from several analysts, too many names -- I can't mention all of them. First question, Oracle recently claimed that they won around 50 SAP customers. What is your comment on that? And secondly, did OFF SAP -- probably referring to our OFF program impact SAP?

I would be happy to answer that question. I will start with the second one. Actually I think the number is both of them combined. Let me maybe start with a few facts that won't come as a shattering surprise to anyone in this room. Every deal out there is basically competitive within SAP and Oracle. This shouldn't be a big surprise but in particular asked about PeopleSoft (indiscernible). Therefore, as we do in every single deal, only close to every single deal well there must be something that they (indiscernible). The 50 that you refer to here are the same 50 that were mentioned on the OFF SAP program that they announced. That is actually a bit of a interesting number because if you assume or if you take off SAP as it was announced by an SAP win-back program, we make a little bit of analysis of the names that were claimed in there. Not a single one was a true win-back. I'll give you just couple of examples just to be very specific, so in fact usually more interesting than just (indiscernible).

There was a deal in there in Sweden. I believe the Swedish defense was claimed as an OFF SAP program. Just from memory, OFF SAP was announced in June. We actually looked at that deal. We do lose every so often a deal, but this one that was a loss was a win of Oracle in December 2004. December 2004, I remember vividly. Therefore, it's pretty interesting. And I could go through the entire list like this. So let's be very careful when we use these numbers. I will share indication with everyone in this room; our win rate against Oracle is extremely high, extremely high. It is proportional to what you see in the peer group percentages.

(indiscernible) Coming back to the guidance, I just want to understand again if you look at the second-half effort today, has anything changed compared to where we are at the beginning of this year? Is the pipeline as strong as it was in January? Anything that we should see different today, especially keeping in mind that Q4 2004 was not exactly the strongest quarter, at least if you look at year-over-year comparisons there. So is anything changing, or does the business look like it did six months ago?

And then second question about Safe Passage, you mentioned you've won 21 customers, and I just wonder is that a great number? We're talking about 2000 customers a quarter or deals that you signed in the second quarter. So that is a negligible number. Now maybe those are exceptionally large deals you're closing in Safe Passage, but I just wonder what should we expect longer-term from Safe Passage? You mentioned that the pipeline is growing very, very nicely. So is the number like 100, 150 on a yearly basis? Is that a realistic number?

(indiscernible) start with the second half of the year. There is nothing what has changed. I think what is the difference is we have a more linear business, I think. It doesn't mean that the seasonality is changing extremely, but a little bit. Is this a surprise? No. If you said last year first quarter was not extremely strong, then I ask myself whoever in his life is doing these large quarters than we are. Nobody else comes close. Doing one billion and more software is a lot, and if you are more to volume business, it's even more. You have just to calculate how much we add on top in such a quarter. In the past we always joked and said this is another (indiscernible) besides which we added. And if we continue, then we can (indiscernible). And you have to just to look also not only to the percentages but to the absolute figures we have to add. Therefore, I think we have to have in mind that it's easier to have 15% of the first quarter than 15% of the fourth quarter (indiscernible). Just on fewer volume of deals we have to do.

And the second point was that from (indiscernible) was our assumption on the currency and are not playing with currency. We understand that some of you play with currency. It might be better insight than we have, but we don't want to fear the speculation. And if you want to make the math with a different currency, you are invited to do so. But it is your mathematics, not ours.

Safe Passage, let's just make sure that we understand why we do Safe Passage. safe Passage is not necessarily meant for pure revenue purposes. Safe Passage is a customer service that we provide. As much as you would like not every SAP customer only wants SAP software. That might come as a shattering surprise to you but that is a fact. So for our own customers we needed to enable our customers to have an alternative for J.D. Edwards, Retek or PeopleSoft software that they run. As I clearly said earlier on this is not an aggressive Oracle win back program. That is a totally different topic that we can discuss another time.

So 21 is a very large number if you take into consideration that it's a program we started in January and to change a piece of software in a company is not just a change of a piece of software. It is usually a mission critical environment, and it is a very important and difficult decision someone needs to make. The good news is but important news is 21 customers have made this decision, a significantly higher number of people are evaluating that possibility. I can't tell you for how much you should look for how many names you should be expecting every year, and I can't also tell you what revenue you should expect of it. But the simple fact that we have an exponential number of companies looking at this indicates that what we propose to them has real relevance for them.

Might be another comment. Think about how the program is done. Leo just said it is for a long time. If we want really to help our customers here it is not an aggressive program where we say okay you have to decide in six months and then it is over. It is many, many years. And this indeed gives a customer time to decide. And some customers will take one or two years since we will see who delivers first on a platform; what about fusion, etc. and then make the decision. So I expect this is an ongoing program, and we see the success at the end of two or three years. But I am looking forward it will be a good success because there are many other milestones where the others have to deliver and to show that the upgrade is set easier, etc. and then companies will make up their calculation and they find out that an upgrade to SAP is not more expensive, then I think its easier to make a decision.

Just to make sure that you realize this, our top line is not dependent on this.

Another question from the Web first, and Michael Schacht (ph) from (indiscernible). Can you please elaborate on (indiscernible) SMB initiative and the potential momentum of the indirect channel in the second half of 2005?

I can, yes. We have an initiative going which is not new, which we have launched some time ago that we are pushing hard and that the team on the (indiscernible) leadership is accelerating to put our momentum in SMB. We go to market in SMB in what we call a hybrid model. It is a composite of all possible elements of channels that you can use to attack specific segments of the market. It ranges from partners indirect channel to tele sales, tele web and from direct, as well. So we have a reasonably sophisticated approach. And as you have seen from the numbers we have shown you earlier on, our success in the mid market is now well demonstrated. We grow the midmarket significantly. It is pushed by the performance of the indirect channel, and we can hope that that performance will continue on for the second half of the year.

Stefan (indiscernible) from SG&A Securities. Just a follow-up regarding Oracle, you did mention that on occasion you do lose to Oracle. I imagine some of that is due to pricing, but can you tell us why in other situations where maybe you have lost to Oracle why that has been? What the potential customer has told you has been the reason for them choosing Oracle?

And a second question is the investments you're making this year you're saying are to drive future growth. Does that mean that we should expect an acceleration of growth next year as you benefit from those investments we made this year? Thanks.

Well, it's true that we occasionally lose to Oracle but it doesn't happen that frequently as I can't remember why we lost. I could give you many reasons why we win. But let me just make one point. Price is usually not the issue, or at least the license price otherwise Oracle would be winning every single deal because they are significantly cheaper in license price than we are. Sometimes it is zero. So license price is not the issue. People look at their investments and license is just one element of license price. You have maintenance, you have cost of implementation, you have TCO and what have you. So from that perspective we extremely value our competitors.

People choose SAP for many, many reasons. They range from solidity to a vision on the platform, scalability, functionality, a combination all of the above. And I think that is a tribute to both our strategy and our execution capability.

On to the growth, put it this way, we have the ambition to grow faster. Otherwise what I'm telling you here is true. In particular in software. If it is next year I hope so, we will see, but definitely once we delivered on the complete (indiscernible). So our ambition is to accelerate our growth in software. So we want to be beyond what we focus it was this year.

I think in the interest of time because this room is also being used for another event following us, we have time for one final question here from the room. And also one from the Web, I will combine it. Let me first read the question from the Web and then I hand it over to you in the room. So we get from several analysts could you please give a rule of thumb which effect a change of 5 U.S. dollars send (ph) from 130 to 125 would have on your A, top line, B, (multiple speakers) (laughter).

I think in general we all agree that strengthening of the dollar increases the euro reported number both on the top line and on the cost line. That is the basis, and let's make one example here. If we go from 130 to 125 Euro/dollar exchange rate this has an impact on our software revenues top line of a bit more than 1% for a full year. That is all. If you look to it from a net income side it is even less. So from a net income side you can neglect it; I just refer to the top line impact.

Sorry to go back to the Safe Passage program and correct me if I'm wrong here, but have you extended the terms of the Safe Passage program to customers who are non SAP customers, and therefore Oracle and PeopleSoft and J.D. Edwards customers?

Yes.

How does that square with your comment that this is not an aggressive push in any way -- it is simply to look after your customers who are your existing customers as they go through the potential product transition at one of your competitors (multiple speakers).

Because it doesn't include all of our software. It only includes PeopleSoft software and J.D. Edwards and Retek software. There is a component in the program that is called maintenance, and we do not provide -- we do not offer maintenance for all Oracle software.

But nevertheless it still offers the same terms and conditions to the PeopleSoft J.D. Edwards piece within those non SAP customers, is that correct?

The terms and conditions when it comes to migration and discounts etc. apply and as I said earlier on, there is a program -- we have an activity going that is a competitive activity against Oracle or Oracle customers. We haven't disclosed those numbers to you. Safe Passage is not that.

Thank you very much. Thank you for your time and questions, and I think we have some drinks for you outside, coffee if you want to stay around, we are happy to answer any further questions. Thank you.