SAP Announces Third Quarter Results

WALLDORF, Germany, Oct. 19, 2017 — SAP SE (NYSE: SAP) today announced its financial results for the third quarter 2017 ended September 30, 2017.

“SAP has evolved from the world’s system of record to the platform for the digital revolution. Led by S/4HANA, we are delivering intelligent business applications built on the most data rich architecture ever created. We see growth in every corner of the business, which is why we are again raising our guidance for the full year.” – Bill McDermott, CEO

“I am very pleased that we continue to have excellent software revenue and that non-IFRS earnings per share are up again double-digit. We now expect a strong non-IFRS earnings per share performance for the entire year. Our performance, portfolio and pipeline make me truly confident that we will deliver on our mid-term ambitions.” – Luka Mucic, CFO

SAP’s fast revenue growth in the cloud continued in the third quarter. New cloud bookings¹ grew by 14% (19% at constant currencies) in the third quarter and reached €302 million. IFRS cloud subscriptions and support revenue grew 22% year over year to €937 million and non-IFRS cloud subscriptions and support revenue grew 22% year over year (27% at constant currencies) to €938 million. IFRS and non-IFRS software revenue was €1.03 billion, stable year over year (up 3% at constant currencies). New cloud and software license order entry² grew by 15% year over year in the third quarter. IFRS and non-IFRS cloud and software revenue was €4.66 billion, an increase of 5% (8% at constant currencies). SAP’s “predictable revenue”, i.e. the total of cloud subscriptions & support revenue and software support revenue, was 65% of total revenue, up 1 percentage point year over year.

IFRS operating profit was up 19% to €1.3 billion. Non-IFRS operating profit was stable at €1.64 billion (up 4% at constant currencies). IFRS earnings per share increased 35% to €0.82. Non-IFRS earnings per share increased 10% to €1.01.

Operating cash flow for the first nine months was €4.13 billion, an increase of 14% year over year. Free cash flow increased 7% year over year to €3.16 billion. At quarter end, net debt was €1.71 billion, an improvement of €2 billion year over year. SAP’s strong growth and cash generation provide significant flexibility around capital allocation aimed at driving shareholder value. Consistent with the Company’s announcement in the second quarter, SAP is on track to buy back €500 million in shares. As of the end of the third quarter, the company has bought back €288 million.

SAP S/4HANA

With S/4HANA customers can massively simplify their IT landscape, run live and reinvent their business model for the digital economy across both cloud and on-premise deployments. S/4HANA adoption grew to more than 6,900 customers, up around 70% year over year. In the third quarter, approximately 600 additional customers signed up of which more than 40% were net new. S/4HANA continues to be adopted by the most forward thinking global companies, including Shell and China International Marine Containers.

SAP Leonardo

SAP Leonardo brings together deep process and industry expertise, advanced design thinking methodology and cutting edge software capabilities such as IoT, Big Data, Machine Learning, Analytics, and Blockchain. SAP Leonardo is about orchestrating these disruptive capabilities to create completely new ways of working and new business models. Hanon Systems (Korea) and Citco Technology Management (USA) among many others adopted SAP Leonardo solutions in the third quarter to redefine their businesses and become intelligent enterprises.

Human Capital Management

With SuccessFactors and Fieldglass, SAP delivers total workforce management across both permanent and contingent labor, localized for 84 countries and 42 languages. SuccessFactors Employee Central, which is the core of our HCM offering, had more than 2,000 customers at the end of the third quarter. SAP SuccessFactors was named a leader in Forrester Research Inc.’s “The Forrester Wave™: SaaS Human Resource Management Systems, Q3 2017.” La Liga (Spanish Football League) and Bancolombia, the largest commercial bank in Colombia, selected SAP’s workforce management solutions in the third quarter to deliver unified, high-quality employee experiences.

Customer Engagement and Commerce

SAP’s next generation customer engagement solutions enable businesses to manage their front office across the entire spectrum from marketing to sales to services – seamlessly and in real-time. Businesses get a single view of their customer – be it social, retail or e-commerce. SAP’s Customer Engagement and Commerce (CEC) solutions serve both B2C and B2B across a wide range of industries, including retail, telco, financial services, manufacturing and the public sector. SAP’s CEC solutions once again achieved double-digit growth in new cloud bookings and software revenue. In September, SAP announced that it would acquire Gigya. This will further enhance SAP’s CEC solutions by allowing companies to better manage customers’ profile, preference, opt-in and consent settings, with customers maintaining control of their data at all times.

Business Networks

Each of SAP’s business network solutions provides a rich, open, global platform that connects a large ecosystem of customers, suppliers, partners and developers delivering ever expanding content and innovation. On the Ariba Network, approximately 3 million companies in over 180 countries collaborate and trade around $1 trillion in goods and services annually. Concur helps close to 50 million end users effortlessly process travel and expenses. With SAP Fieldglass customers manage over 3.9 million contingent workers in more than 180 countries. Total revenue in the SAP Business Network segment was up 19% in the third quarter to €578 million at constant currencies.

Regional Revenue Performance in the Third Quarter 2017

SAP had a strong performance in the EMEA region with cloud and software revenue increasing 8% (IFRS) and 9% (non-IFRS constant currencies). Cloud subscriptions and support revenue grew by 42% (IFRS) and 46% (non-IFRS at constant currencies) with an especially strong quarter in Germany and Spain. In addition, SAP had strong double-digit software revenue growth in Germany, Russia and the Middle East & North Africa (MENA) region.

The Company had solid growth in the Americas region, despite the natural disasters that plagued both the United States and Mexico. Cloud and software revenue grew by 2% (IFRS) and 7% (non-IFRS constant currencies). Cloud subscriptions and support revenue increased by 13% (IFRS) and 19% (non-IFRS at constant currencies). In Cloud subscriptions and support revenue Brazil was a highlight, while the United States had a strong quarter in software revenue.

In the APJ region, SAP had a strong performance in both cloud and software revenue and cloud subscriptions and support revenue. Cloud and software revenue was up 2% (IFRS) and 9% (non-IFRS constant currencies). Cloud subscriptions and support revenue grew by 30% (IFRS) and 37% (non-IFRS at constant currencies). Japan and Australiawere very strong in cloud subscriptions and support revenue. For software revenue, Australia had triple digit growth and China had strong double-digit growth.

Business Outlook 2017

The Company is raising its outlook for the full year 2017:

• Based on the strong momentum in SAP’s cloud business, the Company continues to expect full year 2017 non-IFRS cloud subscriptions and support revenue to be in a range of €3.8 billion to €4.0 billion at constant currencies (2016: €2.99 billion).
• Due to increasing adoption of S/4HANA and our Digital Business Platform the Company now expects full year 2017 non-IFRS cloud & software revenue to increase by 7.0% to 8.5% at constant currencies (2016: €18.43 billion). The lower end of the range was previously 6.5%.
• The Company now expects full year 2017 non-IFRS total revenue in a range of €23.4 billion to €23.8 billion at constant currencies (2016: €22.07 billion). The previous range was €23.3 billion to €23.7 billion at constant currencies.
• The Company now expects full-year 2017 non-IFRS operating profit to be in a range of €6.85 billion to €7.0 billion at constant currencies (2016: €6.63 billion). The lower end of the range was previously €6.8 billion.

While the Company’s full-year 2017 business outlook is at constant currencies, actual currency reported figures are expected to continue to be impacted by exchange rate fluctuations. If exchange rates remain at the September 2017average level for the rest of the year, we expect non-IFRS cloud and software revenue and non-IFRS operating profit growth rates to experience a currency headwind in a range of -5 to -8pp in Q4 2017 (-1 to -3pp for the full year 2017).

The Company now expects its full-year 2017 effective tax rates (IFRS and non-IFRS) to be below the previous outlook. The previous outlook for the effective tax rate (IFRS) was 26.0% to 27.0% (2016: 25.3%) and for the effective tax rate (non-IFRS) 27.0% to 28.0% (2016: 26.8%). The decrease in comparison to the previous outlook mainly results from a one-time tax benefit relating to an intra-group transfer of intellectual property rights expected to be executed in the fourth quarter. As soon as the impact can be determined the Company will update the effective tax rate outlook.

The full Q3 2017 Quarterly Statement can be downloaded from http://www.sap.com/investors/sap-2017-q3-statement

About SAP

As market leader in enterprise application software, SAP (NYSE: SAP) helps companies of all sizes and industries run better. From back office to boardroom, warehouse to storefront, desktop to mobile device – SAP empowers people and organizations to work together more efficiently and use business insight more effectively to stay ahead of the competition. SAP applications and services enable more than 365,000 business and public sector customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com.

Source: SAP