SAP Cloud Momentum Accelerates Significantly
SAP SE reported strong third-quarter 2021 results, with current cloud backlog up 24% to €8.17 billion. S/4HANA cloud backlog surged 60% to €1.28 billion. Cloud revenue rose 20% to €2.39 billion. The company raised its full-year revenue and profit outlook, reflecting a robust demand for its RISE with SAP subscription offering. Despite strong cloud growth, IFRS operating profit declined 15% to €1.25 billion due to increased compensation expenses. SAP anticipates a shift towards subscription services, impacting software license revenues.
- Current cloud backlog increased by 24% to €8.17 billion.
- S/4HANA current cloud backlog rose 60% to €1.28 billion.
- Cloud revenue experienced a 20% uptick to €2.39 billion.
- Full-year revenue and profit outlook raised, reflecting strong growth.
- IFRS operating profit decreased by 15% to €1.25 billion.
- Software licenses revenue fell 8% year-over-year to €0.66 billion.
- Increased share-based compensation expenses impacted profitability.
WALLDORF, Germany, Oct. 12, 2021 /PRNewswire/ --
- Current Cloud Backlog Up
24% (Up22% At Constant Currencies) - S/4HANA Current Cloud Backlog Up
60% (Up58% At Constant Currencies) - Cloud Revenue Up
20% - Non-IFRS Operating Profit Up
2% (Up2% At Constant Currencies) - Raises Full Year Revenue and Profit Outlook On the Back of Strong Third Quarter
Our strategy is clearly working. Customers are choosing SAP for their business transformation in the cloud. We see record adoption of our applications and our platform. This has resulted in strong acceleration of our cloud growth."
Christian Klein, CEO
This has been an excellent quarter across all key financial metrics. We are seeing sustained, strong progress in SAP's transformation. Our cloud business is growing at an accelerating pace and has led to our improved full year outlook."
Luka Mucic, CFO
Business Update Third Quarter 2021
After an initial review of its third quarter 2021 performance, SAP SE (NYSE: SAP) today announced its preliminary financial results for the third quarter ended September 30th, 2021. All 2021 figures in this release are approximate due to the preliminary nature of the announcement.
Businesses around the world are reevaluating their business models with increased urgency given the dramatic changes due to the pandemic and their ongoing focus on digital transformation. Customers are choosing SAP for its clearly differentiated capabilities. In addition to helping customers manage their technical migrations, SAP is helping customers redefine and optimize their core end-to-end business processes. This expertise is based on SAP's unmatched knowledge of industry best practices from working with customers of all sizes across industries and geographies. This is reflected in SAP's strong third quarter results which were above market expectations.
SAP is seeing continued strong demand and adoption of its 'RISE with SAP' offering, which customers of all sizes, including an increasing number of large clients, are selecting to manage their business transformation. As more customers adopt this holistic subscription offering, software licenses revenue decreased as anticipated.
SAP is seeing strong growth in current cloud backlog across its cloud portfolio, in particular with S/4HANA Cloud. Cloud revenue growth also accelerated sequentially.
Financial Performance Third Quarter 2021
Current cloud backlog was up
The share of more predictable revenue grew by 3 percentage points year over year to
IFRS operating profit decreased
Earnings per share decreased
Financial Results at a Glance
Third Quarter 2021
IFRS | Non-IFRS1) | ||||||
€ billion, unless otherwise stated | Q3 2021 | Q3 2020 | ∆ in % | Q3 2021 | Q3 2020 | ∆ in % | ∆ in % constant currency |
Current Cloud Backlog2) | NA | NA | NA | 8.17 | 6.60 | 24 | 22 |
Thereof SAP S/4HANA Current Cloud Backlog2) | NA | NA | NA | 1.28 | 0.80 | 60 | 58 |
Cloud revenue | 2.39 | 1.98 | 20 | 2.39 | 1.98 | 20 | 20 |
Thereof SAP S/4HANA Cloud revenue | 0.28 | 0.19 | 46 | 0.28 | 0.19 | 46 | 46 |
Software licenses and support revenue | 3.52 | 3.56 | –1 | 3.52 | 3.56 | –1 | –1 |
Cloud and software revenue | 5.91 | 5.54 | 7 | 5.91 | 5.54 | 7 | 6 |
Total revenue | 6.84 | 6.54 | 5 | 6.84 | 6.54 | 5 | 5 |
Share of more predictable revenue (in %) | 77 | 74 | 3pp | 77 | 74 | 3pp | |
Operating profit (loss) | 1.25 | 1.47 | –15 | 2.10 | 2.07 | 2 | 2 |
Profit (loss) after tax | 1.42 | 1.65 | –14 | 2.13 | 2.10 | 1 | |
Operating margin (in %) | 18.2 | 22.5 | –4.3pp | 30.7 | 31.7 | –0.9pp | –0.7pp |
Basic earnings per share (in €) | 1.19 | 1.32 | –10 | 1.74 | 1.70 | 2 | |
Number of employees (FTE, September 30) | 105,015 | 101,450 | 4 | NA | NA | NA | NA |
1) For a detailed description of SAP's non-IFRS measures see Explanation of Non-IFRS Measures online. |
2) As this is an order entry metric, there is no IFRS equivalent. |
All figures are preliminary and unaudited. Due to rounding, numbers may not add up precisely. |
Nine months ended September 2021
IFRS | Non-IFRS1) | ||||||
€ billion, unless otherwise stated | Q1–Q3 2021 | Q1–Q3 2020 | ∆ in % | Q1–Q3 2021 | Q1–Q3 2020 | ∆ in % | ∆ in % constant currency |
Current Cloud Backlog2) | NA | NA | NA | 8.17 | 6.60 | 24 | 22 |
Thereof SAP S/4HANA Current Cloud Backlog2) | NA | NA | NA | 1.28 | 0.80 | 60 | 58 |
Cloud revenue | 6.81 | 6.04 | 13 | 6.81 | 6.04 | 13 | 17 |
Thereof SAP S/4HANA Cloud revenue | 0.76 | 0.55 | 38 | 0.76 | 0.55 | 38 | 42 |
Software licenses and support revenue | 10.28 | 10.61 | –3 | 10.28 | 10.61 | –3 | –1 |
Cloud and software revenue | 17.09 | 16.65 | 3 | 17.09 | 16.65 | 3 | 6 |
Total revenue | 19.86 | 19.80 | 0 | 19.86 | 19.80 | 0 | 3 |
Share of more predictable revenue (in %) | 77 | 74 | 3pp | 77 | 74 | 3pp | |
Operating profit (loss) | 3.19 | 3.97 | –20 | 5.76 | 5.52 | 4 | 8 |
Profit (loss) after tax | 3.94 | 3.35 | 18 | 6.06 | 4.51 | 35 | |
Operating margin (in %) | 16.1 | 20.0 | –4.0pp | 29.0 | 27.9 | 1.2pp | 1.3pp |
Basic earnings per share (in €) | 3.22 | 2.74 | 18 | 4.9 | 3.71 | 31 | |
Number of employees (FTE, September 30) | 105,015 | 101,450 | 4 | NA | NA | NA | NA |
1) For a detailed description of SAP's non-IFRS measures see Explanation of Non-IFRS Measures online. |
2) As this is an order entry metric, there is no IFRS equivalent. |
All figures are preliminary and unaudited. Due to rounding, numbers may not add up precisely. |
Non-IFRS Adjustments
Due to the change in our non-IFRS definition in the second quarter 2021 effective for the full year 2021, there are no longer adjustments of our IFRS revenue measures (Q3 2020:
In the third quarter, the difference between non-IFRS operating profit and IFRS operating profit includes
- adjustments for acquisition-related charges of
€0.16 billion (Q3 2020:€0.15 billion ), - adjustments for share-based payment expenses of
€0.70 billion (Q3 2020:€0.45 billion ) and - adjustments for restructuring expenses of –
€0.01 billion (Q3 2020: –€0.01 billion ).
Business Outlook 2021
SAP is raising its full-year 2021 outlook, reflecting the strong business performance which is expected to continue to accelerate cloud revenue growth. The Company continues to expect a software licenses revenue decline for the full year as more customers turn to the 'RISE with SAP' subscription offering for their mission-critical core processes. This outlook also continues to assume the COVID-19 crisis will continue to recede as vaccine programs roll out globally.
SAP now expects:
€9.4 – 9.6 billion cloud revenue at constant currencies (2020:€8.09 billion ), up16% to19% at constant currencies. The previous range was€9.3 – 9.5 billion at constant currencies.€23.8 – 24.2 billion cloud and software revenue at constant currencies (2020:€23.23 billion ), up2% to4% at constant currencies. The previous range was€23.6 – 24.0 billion at constant currencies.€8.1 – 8.3 billion operating profit at constant currencies (2020:€8.29 billion ), flat to down2% at constant currencies. The previous range was€7.95 – 8.25 billion at constant currencies.
SAP continues to expect the share of more predictable revenue to reach approximately
SAP continues to expect operating cash flow of approximately
Additional Information
This press release and all information therein is unaudited.
Definition of key growth metrics
Current cloud backlog (CCB) is the contractually committed cloud revenue we expect to recognize over the upcoming 12 months as of a specific key date. Thus, it is a subcomponent of our overall remaining performance obligations following IFRS 15.120. For CCB, we take into consideration committed deals only. CCB can be regarded as a lower boundary for cloud revenue to be recognized over the next 12 months, as it excludes utilization-based models without pre-commitments and committed deals, both new and renewal, closed after the key date. For our committed cloud business, we believe the CCB is a valuable indicator of go-to-market success, as it reflects both new contracts closed as well as existing contracts renewed.
Share of more predictable revenue is the total of cloud revenue and software support revenue as a percentage of total revenue.
For explanations on other key growth metrics please refer to the performance management section of SAP's Integrated Report 2020 and SAP's Half-Year Report 2021, which can be found at www.sap.com/investor.
Webcast
SAP senior management will host a financial analyst conference call on Thursday, October 21, at 2:00 PM (CEST) / 1:00 PM (BST) / 8:00 AM (Eastern) / 5:00 AM (Pacific). The conference will be webcast live on the Company's website at www.sap.com/investor and will be available for replay. Supplementary financial information pertaining to the third quarter results can be found at www.sap.com/investor.
About SAP
SAP's strategy is to help every business run as an intelligent enterprise. As a market leader in enterprise application software, we help companies of all sizes and in all industries run at their best. Our machine learning, Internet of Things (IoT), and advanced analytics technologies help turn customers' businesses into intelligent enterprises. SAP helps to give people and organizations deep business insight and fosters collaboration that helps them stay ahead of their competition. We simplify technology for companies so they can consume our software the way they want – without disruption. Our end-to-end suite of applications and services enables business and public customers across 25 industries globally to operate profitably, adapt continuously, and make a difference. With a global network of customers, partners, employees, and thought leaders, SAP helps the world run better and improve people's lives. For more information, visit http://www.sap.com.
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FAQ
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