Report
SAP SE (ADR)
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Phone: +49 6227747474p:+49 6227747474 WALLDORF, 69190  Germany Ticker: SAPSAP


SAP Accelerates Cloud Growth Across Portfolio: Raises Revenue and Profit Outlook


WALLDORF, Germany, July 21, 2021 /PRNewswire/ --

SAP Logo (PRNewsfoto/SAP SE)

Cloud Revenue
in € millions

Total Revenue
in € millions





IFRS

Non-IFRS

IFRS

Non-IFRS


2,276

2,276

6,669

6,669


+11%

+11% (+17% cc)

-1%

-1% (+3% cc)


The share of more predictable revenue reached 76% in the second quarter 2021 (+3 percentage points)

Cloud & Software Revenue
in € millions

Operating Profit
in € millions





IFRS

Non-IFRS

IFRS

Non-IFRS


5,750

5,750

984

1,922


+1%

 +1% (+5% cc)

-23%

-2% (+3% cc)


We're seeing strong adoption of our cloud portfolio as customers select SAP for their business transformation. Our strategy is working; This is the third straight quarter of strong execution, and we continue to deliver unparalleled customer value through the strength of our platform and applications.
Christian Klein, CEO

This has been another strong quarter with accelerating growth for SAP's cloud portfolio. We saw excellent customer momentum and adoption and are raising our outlook for revenue and profit.
Luka Mucic, CFO

SAP SE (NYSE: SAP) today announced its financial results for the second quarter ended June 30, 2021.

Business Update Second Quarter 2021

Customers continue to choose SAP as they move to the cloud and transform their business processes. SAP is seeing strong demand and adoption of its 'RISE with SAP' offering which customers of all sizes are selecting to manage this transition. SAP is also seeing strong growth in current cloud backlog across its cloud portfolio including Business Technology Platform, Business Process Intelligence, Qualtrics, as well as Customer Experience. SAP had significant competitive wins in ERP, SuccessFactors, Commerce, Intelligent Spend, and across its broader cloud solution portfolio.

SAP's cloud revenue growth accelerated sequentially. SAP saw the first signs of recovery in travel and expense management with the easing of global travel restrictions, which led to Concur stabilizing its sequential performance for the first time since the pandemic began. The Company's Intelligent Spend category returned to growth but continued to be impacted by the COVID-19 crisis more than other SaaS/PaaS solutions.

Current cloud backlog growth also accelerated further sequentially. As more customers transition to the 'RISE with SAP' subscription offering, software licenses revenue decreased as anticipated.

In general, as many countries began to reopen, SAP saw a positive impact on demand around the world.

Highlights

  • 'RISE with SAP' gained even more traction after a successful launch in the first quarter. SAP saw strong demand from companies of all sizes and closed deals with more than 250 customers in the second quarter. Large customers such as AMD, Coop Switzerland, Etihad Airways, and Siemens Energy selected 'RISE with SAP'. Additional wins included arena, Dixons Carphone, EBANX, Fujifilm Diosynth Biotechnologies, The Great Eastern Shipping Co., Inchcape, Mollie, National Basketball Association (NBA), Randstad, R. Twining & Co., and South32 Group.
  • More than 600 S/4HANA customers were added in the quarter, taking total adoption to more than 17,000 customers, up 16% year over year, of which more than 10,100 are live. In the second quarter, more than 50% of the additional S/4HANA customers were net new.
  • Key customer wins across SAP's solutions portfolio included: ABN AMRO, Clarins, Coca-Cola FEMSA, , Florida Crystals, Florida Department of Management Services, Keolis Group, LeasePlan Corporation, Moderna, Molson Coors Brewing, Nationwide Building Society, Rabobank, Roca Sanitario, The Singapore University of Technology and Design, Stanley Black & Decker, and Tenneco. Bitburger Braugruppe, Wales & West Utilities, and Weber-Stephen Products all went live on SAP solutions in the second quarter.
  • SAP Business Technology Platform (SAP BTP) is the foundation of the Intelligent Enterprise, providing a single platform for integration and extensibility across the SAP portfolio and non-SAP solutions, as well as deriving insights from data. The Company already has over 8,000 productive BTP customers and more than 4,000 partners within its ecosystem actively engaged. Hilti, Lenovo, NEC, and Renault chose SAP BTP offerings in the second quarter. Current cloud backlog grew in strong double digits. Hilti, Lenovo, NEC, and Renault chose SAP BTP offerings in the second quarter.
  • Signavio had an outstanding first full quarter as part of SAP's Business Process Intelligence (BPI) segment. Current cloud backlog grew in triple digits. SAP's BPI solutions are key to our customers' business transformation and acceleration to the cloud.
  • More than 52,000 attendees from 158 countries joined SAPPHIRE NOW, SAP's flagship customer event, across its global and regional sessions.
  • In addition to driving innovation in and beyond our core, SAP is continuously expanding into new markets. SAP expects to expand its 2025 Total Addressable Market (TAM) by $150 billion, totaling $600 billion.
  • Sustainability continues to be at the center of SAP's business model. In the second quarter, SAP joined the World Economic Forum Stakeholder Capitalism Coalition.
  • SAP announced 'pledge to flex' in April, showing its commitment to a truly flexible remote workforce operating model even beyond the pandemic.
  • SAP paid out an annual dividend of €1.85 per share in the amount of €2.2 billion for fiscal year 2020 representing a year-over-year increase of €0.27 or 17%.

Financial Performance Second Quarter 20211

SAP's strong cloud momentum continued in the second quarter with both current cloud backlog and cloud revenue growth accelerating sequentially. Current cloud backlog was up 17% to €7.77 billion (non-IFRS) and up 20% (at constant currencies). Cloud revenue was up 11% to €2.28 billion and up 17% (at constant currencies). SaaS/PaaS cloud revenue outside the Intelligent Spend business was up 20% and up 25% (at constant currencies). Software licenses revenue was down 16% year over year to €0.65 billion and down 13% (at constant currencies). Cloud and software revenue was up 1% to €5.75 billion and up 5% (at constant currencies). Services revenue was down 11% year over year to €0.92 billion and down 7% (at constant currencies). This revenue decline is primarily attributable to the November 2020 divestiture of SAP Digital Interconnect, which contributed approximately €80 million of services revenue in the second quarter of 2020. Total revenue was down 1% year over year to €6.67 billion and up 3% (at constant currencies).

The share of more predictable revenue grew by 3 percentage points year over year to 76% in the second quarter.

Operating profit decreased 23% to €0.98 billion and Operating margin decreased by 4.3 percentage points to 14.8% due to higher share-based compensation expenses (primarily related to Qualtrics). Non-IFRS operating profit decreased 2% to €1.92 billion, up 3% (non-IFRS at constant currencies) and non-IFRS operating margin decreased by 0.3 percentage points to 28.8%, down 0.2 percentage points (non-IFRS at constant currencies) despite the accelerated cloud transition which resulted in higher margin software licenses revenue trending lower, as expected.

Earnings per share increased 57% to €1.15 (IFRS) and increased 50% to €1.75 (non-IFRS) reflecting another outstanding contribution from Sapphire Ventures. With Sapphire Ventures SAP supports entrepreneurs that aspire to build industry-leading businesses through venture capital funds. In the second quarter, the SAP Supervisory Board approved the financing of a new Sapphire Ventures fund ("Sapphire Ventures Fund VI"). The total volume committed for Sapphire Ventures Fund VI is $1.75 billion.

Operating cash flow for the first six months was flat year over year to €3.77 billion. Free cash flow increased 4% year over year to €3.25 billion. Positive effects from lower share-based compensation and lower restructuring payments were compensated by higher income taxes paid net of refunds. At quarter end, net debt was –€4.57 billion.

Expanded Financial Disclosure – SAP's Accelerated Cloud Transition

Beginning in 2021, SAP expanded its financial disclosure to provide investors with transparency on the transition of its core ERP business to the cloud. Specifically, the Company discloses current cloud backlog and cloud revenue contributed by SAP S/4HANA Cloud, along with nominal and constant currencies year-over-year growth rates.

In the second quarter, S/4HANA current cloud backlog was up 45% (Non-IFRS) to €1.13 billion and up 48% (at constant currencies). S/4HANA cloud revenue was up 33% to €257 million and up 39% (at constant currencies).

SAP is seeing strong momentum with its S/4HANA current cloud backlog growth, in particular in the United States. SAP expects S/4HANA cloud revenue growth to significantly accelerate in the second half of 2021.

SAP S/4HANA Cloud represents SAP's cloud offering for core ERP processes. It mainly includes cloud solutions for financial management, supply chain management, engineering and manufacturing, order management and asset management, as well as associated data management, analytics, development and integration capabilities.

'RISE with SAP', SAP's holistic offering for business transformation in the cloud, is an important driver of S/4HANA Cloud and Business Technology Platform adoption.

Segment Performance Second Quarter 2021

SAP's three reportable segments "Applications, Technology & Support", "Qualtrics" and "Services" showed the following performance: 

Applications, Technology & Support (AT&S)

Segment revenue in AT&S was flat at € 5.62 billion year over year and up 4% (at constant currencies). Segment performance was driven by strong double-digit cloud revenue growth in S/4HANA Cloud, Digital Supply Chain, Business Technology Platform, and Customer Experience, in particular ecommerce. Software licenses revenue decreased as anticipated due to strong adoption of 'RISE with SAP'. Segment support revenues were up 1% year over year (at constant currencies) reflecting high retention rates coupled with the shift of some support revenue to cloud.

Qualtrics

Qualtrics segment revenue was up 25% to €211 million year over year, up 37% (at constant currencies). The continued strong growth was driven by robust renewal rates and expansions as customers increase their usage and acquire additional modules of Qualtrics to measure all four experience areas: customer, employee, product, and brand. Daikin, Merck KGaA, Mitsubishi Heavy Industries, M&T Bank, Noom, Trivago, Virgin Cruises and many others selected Qualtrics Experience Management Solutions.

Services 

Services segment revenue was down 7% to €796 million year over year, down 3% (at constant currencies). While SAP continues to see solid growth in its Premium Engagement revenue on the back of a very resilient business model, consulting revenue declined year over year due to a strong prior year comparison.

Segment Results at a Glance

Segment Performance Second Quarter 2021


Applications, Technology & Support

Qualtrics

Services

€ million, unless otherwise stated

(Non-IFRS)

Actual

Currency

∆ in %

∆ in %

const. curr.

Actual

Currency

∆ in %

∆ in %

const. curr.

Actual

Currency

∆ in %

∆ in %

const. curr.

Cloud revenue

2,066

8

14

174

33

46

0

NA

NA

Segment revenue

5,619

0

4

211

25

37

796

–7

–3

Segment profit (loss)

2,279

–4

0

13

>100

>100

180

9

16

Cloud gross margin (in %)

69.2

–0.1pp

–0.2pp

92.4

1.4pp

1.5pp

NM1)

NM1)

NM1)

Segment margin (in %)

40.6

–1.6pp

–1.5pp

6.3

4.9pp

4.0pp

22.6

3.2pp

3.7pp

1) NM = not meaningful

Regional Revenue Performance Second Quarter 2021

SAP had a strong cloud performance across all of its regions.

In the EMEA region, cloud and software revenue increased 4% and 5% (at constant currencies). Cloud revenue increased 22% and 23% (at constant currencies) with Germany and Saudi Arabia being highlights.

In the Americas region, cloud and software revenue decreased 3% and was up 5% (at constant currencies). Cloud revenue increased 4% and was up 12% (at constant currencies) with a robust performance in Brazil and Mexico. The United States, SAP's largest market, had a strong sequential acceleration in cloud revenue growth combined with an even stronger current cloud backlog growth.

In the APJ region, cloud and software revenue increased 2% and 6% (at constant currencies). Cloud revenue increased 18% and 23% (at constant currencies) with Japan, Australia and South Korea being highlights.  

Financial Results at a Glance

Second Quarter 2021


IFRS

Non-IFRS1)

€ million, unless otherwise stated

Q2 2021

Q2 2020

∆ in %

Q2 2021

Q2 2020

∆ in %

∆ in % const. curr.

Current cloud backlog2)

NA

NA

NA

7,766

6,638

17

20

Thereof SAP S/4HANA Current Cloud Backlog2)

NA

NA

NA

1,130

780

45

48

Cloud revenue

2,276

2,044

11

2,276

2,044

11

17

Thereof SAP S/4HANA Cloud revenue

257

193

33

257

193

33

39

Software licenses and support revenue

3,474

3,665

–5

3,474

3,665

–5

–2

Cloud and software revenue

5,750

5,709

1

5,750

5,709

1

5

Total revenue

6,669

6,743

–1

6,669

6,744

–1

3

Share of more predictable revenue (in %)

76

73

3pp

76

73

3pp


Operating profit (loss)

984

1,284

–23

1,922

1,964

–2

3

Profit (loss) after tax

1,449

885

64

2,214

1,395

59


Basic earnings per share (in €)

1.15

0.73

57

1.75

1.17

50


Number of employees (FTE, June 30)

103,876

101,379

2

NA

NA

NA

NA

1) For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement.

2) As this is an order entry metric, there is no IFRS equivalent.

Due to rounding, numbers may not add up precisely.

Six months ended June 2021


IFRS

Non-IFRS1)

€ million, unless otherwise stated

Q1–Q2

2021

Q1–Q2

2020

∆ in %

Q1–Q2

2021

Q1–Q2

2020

∆ in %

∆ in % const. curr.

Current Cloud Backlog2)

NA

NA

NA

7,766

6,638

17

20

Thereof SAP S/4HANA Current cloud backlog2)

NA

NA

NA

1,130

780

45

48

Cloud revenue

4,421

4,055

9

4,421

4,057

9

15

Thereof S/4HANA Cloud revenue

485

360

34

485

360

34

41

Software licenses and support revenue

6,757

7,051

–4

6,757

7,051

–4

0

Cloud and software revenue

11,178

11,106

1

11,178

11,107

1

5

Total revenue

13,017

13,264

–2

13,017

13,266

–2

3

Share of more predictable revenue (in %)

77

74

3pp

77

74

3pp


Operating profit (loss)

1,944

2,494

–22

3,660

3,446

6

12

Profit (loss) after tax

2,519

1,697

48

3,934

2,409

63


Basic earnings per share (in €)

2.03

1.42

43

3.14

2.02

56


Number of employees (FTE, June 30)

103,876

101,379

2

NA

NA

NA

NA

1) For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement.

2) As this is an order entry metric, there is no IFRS equivalent.

Due to rounding, numbers may not add up precisely.

Business Outlook 2021

SAP is raising its full-year 2021 outlook, reflecting the strong business performance which is expected 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 begin to recede as vaccine programs roll out globally, leading to further improvements in global demand in the second half of 2021.

SAP now expects:

  • €9.3 – 9.5 billion cloud revenue at constant currencies (2020: €8.09 billion), up 15% to 18% at constant currencies. The previous range was €9.2 – 9.5 billion at constant currencies.
  • €23.6 – 24.0 billion cloud and software revenue at constant currencies (2020: €23.23 billion), up 2% to 3% at constant currencies. The previous range was €23.4 – 23.8 billion at constant currencies.
  • €7.95 – 8.25 billion operating profit at constant currencies (2020: €8.28 billion), flat to down 4% at constant currencies. The previous range was €7.8 – 8.2 billion at constant currencies.

SAP continues to expect the share of more predictable revenue to reach approximately 75% (2020: 72%).

SAP continues to expect operating cash flow of approximately €6.0 billion (2020 €7.2 billion) and free cash flow above €4.5 billion (2020 €6.0 billion). 

SAP now expects a full-year 2021 effective tax rate (IFRS) of 21.5% to 23.0% (previously: 26.0% to 27.0%) and an effective tax rate (non-IFRS) of 20.0% to 21.5% (previously: 22.5% to 23.5%).

While SAP's full-year 2021 business outlook is at constant currencies, actual currency reported figures are expected to be impacted by currency exchange rate fluctuations as the Company progresses through the year. See the table below for the Q3 and FY 2021 expected currency impacts.

Expected Currency Impact Based on June 2021 Level for the Rest of the Year (Non-IFRS)

In percentage points

Q3

FY

Cloud revenue growth

-3pp to -1pp

-5pp to -3pp

Cloud and software revenue growth

-2pp to 0pp

-4pp to -2pp

Operating profit growth

-3pp to -1pp

-4pp to -2pp

SAP is focusing on three non-financial indicators: customer loyalty, employee engagement, and carbon emissions.

In 2021 SAP continues to aim for:

  • a Customer Net Promoter Score of 5 to 10 (2020: 4),
  • an Employee Engagement Index in a range of 84% to 86% (2020: 86%)

As a result of the ongoing COVID-19 pandemic, as well as the introduction of a more flexible working model at SAP, the level of remote work will be higher than previously anticipated. As a consequence, SAP is lowering its 2021 carbon emissions outlook. SAP now expects carbon emissions in a range of 90 to 110 kt, assuming the high level of remote work continues. Previously, SAP expected 145 kt (2020: 135 kt).

The full Q2 2021 Quarterly Statement can be downloaded from http://www.sap.com/investors/sap-2021-q2-statement.

Additional Information

This Quarterly Statement 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 Wednesday, July 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 second 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.

Follow SAP Investor Relations on Twitter at @sapinvestor.

For customers interested in learning more about SAP products:

Global Customer Center: 
+49 180 534-34-24

United States Only:
+1 (800) 872-1SAP (+1-800-872-1727)

Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "should" and "will" and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission ("SEC"), including SAP's most recent Annual Report on Form 20-F filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.

© 2021 SAP SE. All rights reserved.

No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP SE. The information contained herein may be changed without prior notice.

Some software products marketed by SAP SE and its distributors contain proprietary software components of other software vendors. National product specifications may vary.

These materials are provided by SAP SE and its affiliated companies ("SAP Group") for informational purposes only, without representation or warranty of any kind, and SAP Group shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP Group products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty.

SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other countries. All other product and service names mentioned are the trademarks of their respective companies. Please see www.sap.com/about/legal/copyright.html for additional trademark information and notice.

____________

1 The Q2 2021 results were also impacted by other effects. For details please refer to the disclosures on page 30 of this document.

 

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SOURCE SAP SE


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