SAP
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SAP Ag ADR
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Earnings Details
1st Quarter March 2022
Friday, April 22, 2022 1:01:00 AM
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Summary

SAP Ag ADR Beats

SAP Ag ADR (SAP) reported 1st Quarter March 2022 earnings of $1.43 per share on revenue of $7.9 billion. The consensus earnings estimate was $1.23 per share on revenue of $7.6 billion. The Earnings Whisper number was $1.09 per share. Revenue grew 3.8% on a year-over-year basis.

SAP SE is engaged in selling licenses for software solutions and related support services. It also offers consulting, training and other services for its software solutions.

Results
Reported Earnings
$1.43
Earnings Whisper
$1.09
Consensus Estimate
$1.23
Reported Revenue
$7.94 Bil
Revenue Estimate
$7.55 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

SAP Announces Q1 2022 Results With Continued Cloud Momentum

  • Cloud revenue growth further accelerates, up 31% and up 25% at constant currencies
  • Current cloud backlog approaches €10bn, up 28% and up 23% at constant currencies
  • SAP S/4HANA cloud revenue significantly increases, up 78% and up 71% at constant currencies. SAP S/4HANA current cloud backlog expands even faster, up 86% and up 79% at constant currencies
  • SAP reaffirms 2022 outlook for revenue, non-IFRS operating profit and free cash flow

WALLDORF, Germany, April 22, 2022 /PRNewswire/ -- SAP SE (NYSE: SAP) today announced its financial results for the first quarter ended March 31, 2022.

Christian Klein, CEO: "Customers powered another quarter of strong cloud growth as they turned to us for solutions to make their businesses more sustainable, their supply chains more resilient, and their enterprises more future-proof. Our signature ERP offering SAP S/4HANA grew at record levels demonstrating the confidence customers place in us to support their business transformations."

Luka Mucic, CFO: "We are off to a solid start to the year and our outlook remains strong. Despite the current macroeconomic environment, cloud revenue growth accelerated further, fueling total revenue growth. Current cloud backlog grew at a healthy rate and continues to support our confidence in our long-term plans and outlook for the year."

Financial Performance

Group results at a glance – First Quarter 2022


IFRS

Non-IFRS1

€ million, unless otherwise stated

Q1 2022

Q1 2021

? in %

Q1 2022

Q1 2021

? in %

? in %
const.
curr.

     Cloud revenue

2,820

2,145

31

2,820

2,145

31

25

          Software licenses

317

483

–34

317

483

–34

–36

          Software support

2,923

2,801

4

2,923

2,801

4

1

     Software licenses and support revenue

3,240

3,283

–1

3,240

3,283

–1

–4

     Cloud and software revenue

6,060

5,428

12

6,060

5,428

12

7

Total revenue

7,077

6,348

11

7,077

6,348

11

7

Share of more predictable revenue (in %)

81

78

3pp

81

78

3pp


Operating profit (loss)

1,053

960

10

1,677

1,738

–4

–7

Profit (loss) after tax

632

1,070

–41

1,166

1,720

–32


Earnings per share - Basic (in €)

0.63

0.88

–29

1.00

1.40

–28


Earnings per share - Diluted (in €)

0.63

0.88

–29





Net cash flows from operating activities

2,482

3,085

–20





Free cash flow




2,165

2,848

–24


Number of employees (FTE, March 31)

109,798

103,142

6





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

Due to rounding, numbers may not add up precisely

 

Cloud Performance


IFRS

Non-IFRS1

€ millions, unless otherwise stated

Q1 2022

?  in %

Q1 2022

?  in %

?  in %

constant
currency

Current Cloud Backlog






          SAP S/4HANA2



1,925

86

79

Total2



9,731

28

23

Cloud Revenue






     SaaS/PaaS

2,585

34

2,585

34

28

          SaaS/PaaS - Intelligent Spend

808

23

808

23

16

          SaaS/PaaS - Other

1,776

40

1,776

40

34

     IaaS

235

10

235

10

5

Total

2,820

31

2,820

31

25

          thereof SAP S/4HANA

404

78

404

78

71

          thereof Qualtrics

269

69

269

69

58

Cloud gross profit






     SaaS/PaaS

1,858

36

1,909

34

28

          SaaS/PaaS - Intelligent Spend

652

27

653

27

20

          SaaS/PaaS - Other

1,206

41

1,257

39

33

     IaaS

63

–9

65

–9

–7

Total

1,922

33

1,974

32

26

          thereof Qualtrics

207

70

241

64

53

Cloud gross margin (in %)






     SaaS/PaaS (in %)

71.9

0.9pp

73.9

0.3pp

0.2pp

          SaaS/PaaS - Intelligent Spend

80.7

2.5pp

80.7

2.4pp

2.2pp

          SaaS/PaaS - Other

67.9

0.6pp

70.7

–0.3pp

–0.4pp

     IaaS (in %)

26.9

–5.6pp

27.6

–5.7pp

–3.8pp

Total

68.2

1.0pp

70.0

0.5pp

0.5pp

          thereof Qualtrics

76.9

0.4pp

89.6

–2.6pp

–2.7pp

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

The Q1 2022 results were also impacted by other effects. For details, please refer to the disclosures on page 22 of this document.

Impact of War in Ukraine

In the first quarter, SAP's business was impacted by the war in Ukraine. At the beginning of March, SAP stopped all new sales in Russia and Belarus. In addition, SAP started to shut down its cloud operations and intends to stop the support and maintenance of its on-premise products in Russia. Current cloud backlog was lowered by approximately €60 million due to the termination of existing cloud engagements, and operating profit by approximately €70 million due to reduced on-premise revenues, accelerated depreciation of data center assets and capitalized sales commissions.

For the fiscal year, we expect a total negative revenue impact of approximately €300 million from lack of new business and discontinuation of existing business, in particular software and support and services. For non-IFRS operating profit we expect an impact of approximately €350 million from the revenue gaps mentioned above and other expense items.

In addition to the above, the company expects to incur restructuring expenses of approximately €80-100 million for the fiscal year which will not affect non-IFRS results.

Despite these headwinds, the cloud performance allows SAP to reaffirm its cloud revenue, cloud and software revenue as well as non-IFRS operating profit and free cash flow outlook. The reiteration of the non-IFRS operating profit outlook reflects the benefits of a continued strong cloud revenue growth, operational discipline and portfolio streamlining measures.

Other impacts due to this rapidly evolving situation are currently unknown and could potentially subject our business to materially adverse consequences should the situation escalate beyond its current scope.

Financial Highlights

Current cloud backlog was up 28% to €9.73 billion and up 23% at constant currencies. The war in Ukraine reduced current cloud backlog growth at constant currencies by 0.8 percentage points.

Supported by double-digit growth across the solution portfolio, cloud revenue growth continued to accelerate for the fourth consecutive quarter and was up 31% to €2.82 billion, up 25% at constant currencies.

Amidst continuing investments into our next generation cloud delivery program our cloud gross margin was up 1.0 percentage points year over year to 68.2% (IFRS) and up 0.5 percentage points year over year to 70.0% (non-IFRS). Revenue growth, alongside cloud gross margin expansion, drove strong cloud gross profit growth of 33% (IFRS), 32% (non-IFRS) and 26% (non-IFRS at constant currencies).

IFRS operating profit increased 10% to €1.05 billion, primarily driven by lower restructuring expenses. Non-IFRS operating profit decreased 4% to €1.68 billion and decreased 7% at constant currencies. This decrease against a very strong prior year comparable was mainly driven by expenses related to the war in Ukraine, as well as accelerated investments into research & development and sales & marketing to capture current and future growth opportunities.

IFRS earnings per share (basic and diluted) decreased 29% to €0.63 and non-IFRS earnings per share (basic) decreased 28% to €1.00. The year over year decline of earnings per share reflects a contribution to financial income by Sapphire Ventures that was lower than over the same period last year based on current market conditions.

Free cash flow was down 24% to €2.16 billion, mainly attributable to the development of profitability in the quarter and impacts from working capital due to SAP's continuous move to the cloud, and lower software licenses sales in the fourth quarter 2021. The ongoing business transformation provides more balance of cash inflows throughout the year, and we are reiterating our full year free cash flow outlook.

On January 13, SAP announced a new share repurchase program to support the transition of SAP's share-based compensation programs to equity settlement. By March 31, SAP had repurchased 5,680,250 shares at an average price of €102.26 with a purchased value of approximately €581 million.

Business Highlights

More than 500 customers chose SAP S/4HANA in the quarter, taking total adoption to more than 19,300 customers, up 18% year over year, of which more than 13,900 are live. In the first quarter, more than 60% of the additional SAP S/4HANA customers were net new.

In the first quarter, customers around the globe chose "RISE with SAP" including Accenture, Canon Production Printing, Citizen Watch Company, Daimler Truck AG, Grupo Estrella Blanca, Exide Industries Limited, NEC Corporation, Ooredoo Group, Qinqin Food, Rising Auto, TELUS, Tramontina, and Wipro Limited. Key customer wins across SAP's solution portfolio included: Air France-KLM, FEMSA, Heineken, L'Oréal, Merck KGaA, MLP, Nippon Telephone and Telegraph Corporation, NHS Shared Business Services, PetSmart, Pick n Pay, Salling Group, Schaeffler, and Swellfun. Further, PT United Tractors, Schwarz Produktion and Vodafone New Zealand all went live on SAP solutions in the first quarter.

Microsoft announced it would become the first public cloud provider to adopt "RISE with SAP" and SAP S/4HANA to transform its own SAP ERP deployment. Adopting these solutions will enable Microsoft to deploy new technologies faster and establish best practices that benefit our joint customers.

SAP's cloud revenue performance for the quarter was excellent across all regions. The United States and Germany had an outstanding cloud revenue performance while Japan, China, Brazil, Canada, Switzerland, France, and the UK were particularly strong.

SAP proposed a dividend of €2.45 per share for fiscal year 2021 representing a year-over-year increase of approximately 32%. This amount includes a special dividend of €0.50 to celebrate SAP's 50th anniversary. The dividend is subject to shareholder approval at the upcoming AGM scheduled for May 18, 2022.

On March 9, SAP announced that it had completed the acquisition of a majority stake of Taulia, a leading provider of working capital management solutions. Taulia further expands SAP's Business Network and strengthens SAP's solutions for the CFO office by providing working capital management cloud solutions.

On March 22, SAP and global strategic consultancy BCG announced a partnership to help companies transform their business models, become sustainable enterprises, and gain the data transparency they need to embed sustainability into their core business. The partnership combines SAP's strength as the leading enterprise software company with BCG's proven expertise in advising clients on their sustainability transformation strategies. The SAP and BCG sustainability transformation offering is in pilot phase, with an expected broader launch in the third quarter of 2022.

On March 28, SAP announced that the SAP Signavio brand will represent our portfolio of Business Process Management solutions. SAP also announced general availability of the SAP Signavio Journey to Process Analytics. The new offering correlates experience data from Qualtrics user surveys with operational data from underlying IT systems, giving companies the ability to understand how best to optimize their end-to-end business processes for both operational excellence and customer experience.

Segment Results at a Glance

At the beginning of 2022, the Services segment was integrated into the former Applications, Technology & Support segment which was re-named to Applications, Technology & Services.

Therefore, SAP now has two reportable segments: the Applications, Technology & Services segment and the Qualtrics segment.

Segment Performance First Quarter 2022

€ million, unless otherwise stated

(Non-IFRS)

Applications, Technology & Services1

Qualtrics

Actual

Currency

? in %

? in %

const. curr.

Actual

Currency

? in %

? in %

const. curr.

Cloud revenue

2,495

28

22

269

69

58

Segment revenue

6,695

10

6

320

58

48

Segment profit (loss)

2,168

–4

–7

10

–22

–12

Cloud gross margin (in %)

67.8

0.1pp

0.2pp

89.6

–2.6pp

–2.7pp

Segment margin (in %)

32.4

–4.5pp

–4.6pp

3.1

–3.2pp

–2.5pp

1 Segment information for comparative prior periods were restated to conform with the new segment composition.

SAP's two reportable segments showed the following performance:

Applications, Technology & Services (AT&S)

Segment revenue in AT&S was up 10% to €6.70 billion year over year, up 6% at constant currencies. Segment performance was driven by strong double-digit cloud revenue growth in SAP S/4HANA as well as Business Technology Platform. Software licenses revenue decreased due to the shift to the cloud as more customers are adopting our 'RISE with SAP' offering. Segment support revenue was up 4% to €2.92 billion year over year and up 1% at constant currencies.

Qualtrics

Qualtrics segment revenue was up 58% to €320 million year over year, up 48% at constant currencies. The continued strong growth was driven by robust renewal rates and expansions. Australian Taxation Office, Chipotle, EY, Google Cloud, Grubhub, Hyundai Motor Asia Pacific, Kroger, Microsoft, National Australia Bank, Royal Mail Group, and Shiseido Company, among others, selected Qualtrics Experience Management Solutions.

Business Outlook 2022

SAP is executing on its cloud-led strategy, which is driving accelerating cloud growth through both new business and cloud adoption by existing customers. The pace and scale of SAP's cloud momentum places the Company well on track towards its mid-term ambition.

For 2022, SAP now expects:

  • €11.55 – 11.85 billion cloud revenue at constant currencies (2021: €9.42 billion), up 23% to 26% at constant currencies.
  • €25.0 – 25.5 billion cloud and software revenue at constant currencies (2021: €24.08 billion), up 4% to 6% at constant currencies.
  • €7.8 – 8.25 billion non-IFRS operating profit at constant currencies (2021: €8.23 billion), flat to down 5% at constant currencies.
  • The share of more predictable revenue (defined as the total of cloud revenue and software support revenue) is expected to reach approximately 78% (2021: 75%).
  • Free cash flow above €4.5 billion (2021: €5.01 billion).
  • SAP now expects a full-year 2022 effective tax rate (IFRS) of 28.0% to 32.0% (previously: 25.0% to 28.0%) and an effective tax rate (non-IFRS) of 23.0% to 27.0% (previously: 22.0% to 25.0%). The increase of the effective tax rate outlook mainly reflects an updated projection of the 2022 financial income contribution of Sapphire Ventures in light of current market conditions.

While SAP's full-year 2022 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 Q2 and FY 2022 expected currency impacts.

Expected Currency Impact Assuming March 2022 Rates Apply for the Rest of the Year


In percentage points

Q2 2022

FY 2022

Cloud revenue growth

+7pp to +9pp

+5pp to +7pp

Cloud and software revenue growth

+4pp to +6pp

+3pp to +5pp

Operating profit growth (non-IFRS)

+4pp to +6pp

+3pp to +5pp

Ambition for Non-Financial Performance

In 2022, SAP continues to expect:

  • a Customer Net Promoter Score of 11 to 15 (2021: 10)
  • an Employee Engagement Index in a range of 84% to 86% (2021: 83%)
  • Net carbon emissions of 70 kt (2021: 110 kt)
Ambition 2025

SAP confidently reiterates its mid-term ambition published in its Q3 2020 Quarterly Statement.

The full Q1 2022 Quarterly Statement can be downloaded from: https://www.sap.com/investors/sap-2022-q1-statement.

Additional Information

This press release and all information therein is preliminary and unaudited.

SAP Performance Measures

For more information about our key growth metrics and performance measures, their calculation, their usefulness, and their limitation, please refer to the following document on our Investor Relations website: SAP Performance Measures.

Webcast

SAP senior management will host a financial analyst conference call on Friday, April 22nd at 2:00 PM (CET) / 1:00 PM (GMT) / 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 first quarter can be found at www.sap.com/investor.

Financial Analyst and Investor Conference

SAP will hold a financial analyst event on Wednesday, May 11th, in conjunction with its annual SAP Sapphire conference kicking off on May 10th.

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: SAP customers generate 87% of total global commerce. Our machine learning, Internet of Things (IoT), and advanced analytics technologies help turn customers' businesses into intelligent enterprises. SAP helps 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 www.sap.com

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)

This document contains forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations, forecasts, and assumptions that are subject to risks and uncertainties that could cause actual results and outcomes to materially differ. Additional information regarding these risks and uncertainties may be found in our filings with the Securities and Exchange Commission, including but not limited to the risk factors section of SAP's 2021 Annual Report on Form 20-F.

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SOURCE SAP SE