WALLDORF, Germany, Oct. 25, 2020 /PRNewswire/ --
- Current Cloud Backlog of €6.6 Billion, Up 16% At Constant
Currencies
- IFRS Cloud Gross Margin Up 1.8pp; Non-IFRS Cloud Gross Margin
Up 0.7pp At Constant Currencies
- IFRS Operating Margin Down 2.2pp; Non-IFRS Operating Margin Up
1.3pp At Constant Currencies On Strong Prior Year Comparison
- IFRS EPS Up 26%; Non-IFRS EPS Up 31%
- Operating Cash Flow Up 54%, Free Cash Flow Up 79%
Year-To-Date
- Updates 2020 Outlook and Mid-Term Ambition
- Targeting Significant Expansion of Cloud Revenue to More than
€22 Billion, Share of More Predictable Revenue of Approximately
85%, Non-IFRS Cloud Gross Margin of Approximately 80% by 2025
- Targeting Double-Digit Non-IFRS Operating Profit Growth from
2023 to 2025
Cloud
Revenue
in €
millions
|
Total
Revenue
in €
millions
|
|
|
IFRS
|
Non-IFRS
|
IFRS
|
Non-IFRS
|
1,984
|
1,984
|
6,535
|
6,535
|
+11%
|
+10% (+14%
cc)
|
-4%
|
-4% (0%
cc)
|
The share of more predictable revenue reached 74% in the third
quarter of 2020 (+5 percentage points)
Cloud & Software
Revenue
in €
millions
|
Operating
Profit
in €
millions
|
|
|
IFRS
|
Non-IFRS
|
IFRS
|
Non-IFRS
|
5,544
|
5,544
|
1,473
|
2,069
|
-2%
|
-2% (+2%
cc)
|
-12%
|
-1% (+4%
cc)
|
"COVID-19 has created an inflection point for our customers. The
move to the cloud combined with a true business transformation has
become a must for enterprises, to gain resiliency and position them
to emerge stronger out of the crisis. Together with our customers
and partners we will co-innovate and reinvent how businesses run in
a digital world. SAP will accelerate growth in the cloud to more
than €22 billion in 2025 and expand the share of more predictable
revenue to approximately 85%."
Christian Klein, CEO
"In Q3 we continued to improve our operating margin against a
strong prior year comparison amidst a challenging environment.
Earnings per share and cash flow grew even more rapidly. This
allows us to raise our 2020 free cash flow outlook even beyond the
target communicated last November. Our expedited move to the cloud
will en-sure we continue our path as a cloud growth company while
we remain focused on cost efficiency. These actions and our
resilient business model position us well to meet our new ambition
targets as uncertainty recedes."
Luka Mucic, CFO
SAP SE (NYSE: SAP) today announced its financial results for the
third quarter and the first nine months ended September 30, 2020.
Business Update Third Quarter 2020
SAP again demonstrated its resilience in the third quarter with
stable total revenue and an improvement in operating profit and
margins (non-IFRS at constant currencies). In the COVID-19 crisis
customers realize the strong need to transform and automate
operations and adapt to new business models. SAP's expertise in
running the world's most mission critical business processes
combined with innovative solutions like commerce, supply chain and
Qualtrics are extremely relevant for customers to increase their
resiliency. Nevertheless, SAP's customers, particularly those in
hard hit industries, continue to be impacted by the economic
consequences of the COVID-19 pandemic. Lockdowns have been
re-introduced in some regions, recovery is uneven and companies are
facing more business uncertainty. Consequently, there is greater
scrutiny of larger projects. Transactional revenue continues to be
impacted, especially in SAP Concur where business travel-related
revenues have yet to see a meaningful recovery.
SAP continues to serve its customers effectively with an
embedded virtual sales and remote implementation strategy. In the
first nine months of 2020, approximately 28,000 customers went live
with SAP solutions. To protect profitability, the company retains a
disciplined approach to hiring and discretionary spend while
capturing natural savings e.g. from lower travel, facility-related
costs and virtual events.
Since the COVID-19 crisis began, SAP has also been providing
solutions to address many of the issues faced by its customers and
the broader community. In the third quarter SAP continued to work
with Deutsche Telekom to further develop the Corona Warn App. The
application has been downloaded over 20 million times and over
18,000 positive test results have been shared, helping to interrupt
the transmission chain. Further, the app now supports the European
gateway service, enabling exchange of data between the apps from
Germany, Italy and Ireland, while still maintaining the highest
data protection standards. Other countries are planned to
follow.
SAP Accelerates Transition to Cloud, Driving Customers'
Business Transformation
The COVID-19 crisis is an accelerator for transformation.
Customers are looking to move to the cloud at an accelerated speed
for greater resiliency and agility. SAP is responding to these
market demands by providing the technology and expertise to help
its customers migrate their existing IT environments to the cloud
and truly transform their businesses end-to-end on top of SAP's
Business Technology Platform (BTP). SAP's platform will be the
foundation for all SAP applications, integration, customer and
partner ecosystem extensions, as well as new innovations such as
Industry Cloud and Business Network.
The combination of state-of-the-art technology and deep, global
business expertise across 25 industries puts SAP in a unique
position to reinvent how businesses run their most mission-critical
processes in the cloud as they enter the digital age to ultimately
become Intelligent Enterprises.
In addition, SAP plans to accelerate the modernization of its
cloud delivery, arriving at a harmonized delivery infrastructure
earlier than planned. As a result, SAP will significantly increase
the efficiency and resiliency of its cloud delivery operations.
Further, SAP will increase R&D investments to accelerate its
customers' transformation in the cloud and to establish a leading
position in new categories like Industry Cloud.
The impact of these new strategy initiatives, together with
macroeconomic factors, are reflected in the Company's updated
Mid-Term Ambition.
Financial Performance Third Quarter 20201
In the third quarter, current cloud backlog was up 10% year over
year to €6.60 billion (up 16% at constant currencies) amid
continued COVID-19 effects on SAP's cloud business. Cloud revenue
grew 11% year over year to €1.98 billion (IFRS), up 10% to €1.98
billion (non-IFRS) and up 14% (non-IFRS at constant currencies).
Continued lower transactional revenues, particularly in Concur,
negatively impacted cloud growth by 6 percentage points. Cloud
revenue from SAP's SaaS/PaaS offerings, that do not belong to
Intelligent Spend, and its IaaS offering grew by 26% and 24%
(non-IFRS at constant currencies), respectively. Software licenses
revenue was down 23% year over year to €0.71 billion (IFRS and
non-IFRS) and down 19% (non-IFRS at constant currencies). Cloud and
software revenue was down 2% year over year to €5.54 billion (IFRS
and non-IFRS) and up 2% (non-IFRS at constant currencies). Total
revenue was down 4% year over year to €6.54 billion (IFRS and
non-IFRS) and flat (non-IFRS at constant currencies).
The share of more predictable revenue grew strongly by
approximately 5 percentage points year over year to approximately
74% in the third quarter.
In the third quarter, IFRS operating profit and operating margin
decreased primarily due to higher share-based compensation expenses
compared to the prior year period. Operating profit decreased by
12% year over year to €1.47 billion (IFRS) and was down 1% to €2.07
billion (non-IFRS) and up 4% (non-IFRS at constant currencies).
Operating margin decreased by 2.2 percentage points year over year
to 22.5% (IFRS) and increased 1.0 percentage points year over year
to 31.7% (non-IFRS) and increased 1.3 percentage points to 31.9%
(non-IFRS at constant currencies) on a strong prior year
comparison.
EPS was up 26% year over year to €1.32 (IFRS) and up 31% year
over year to €1.70 (non-IFRS) reflecting a strong contribution from
Sapphire Ventures.
Operating cash flow for the first nine months was €5.09 billion,
up 54% year-over-year. Operating cash flow benefited from lower
restructuring related payments and lower income tax payments. Free
cash flow for the first nine months was €4.17 billion, up 79% year
over year. Free cash flow additionally benefited from lower capital
expenditure compared to the previous year. At the end of the third
quarter, net debt was -€6.89 billion.
1 Q3 2020 results were also impacted by other
effects. For details, please refer to the disclosures on page 33 of
this document.
Segment Performance Third Quarter 2020
SAP's four reportable segments "Applications, Technology &
Support", "Concur", "Qualtrics" and "Services" showed the following
performance:
Applications, Technology & Support (AT&S)
In the third quarter, segment revenue in AT&S was down 2% to
€5.17 billion year over year (up 2% at constant currencies).
Solutions which contributed to this growth are listed below.
SAP S/4HANA
SAP S/4HANA is an intelligent, integrated ERP system that runs
on SAP's real time in-memory platform, SAP HANA. It addresses
industry-specific requirements with proven best practices for 25
verticals and enables new business models as marketplaces evolve.
It revolutionizes business processes with intelligent automation,
supported by artificial intelligence and robotic process
automation. It helps users make better decisions faster with
embedded analytics, a conversational interface, and digital
assistants. SAP is expanding the options for on-premise customers
to take their mission critical processes to the cloud at their
preferred pace.
SAP was recently named as a Leader in Forrester Wave for Manufacturing ERP.
Over 500 SAP S/4HANA customers were added in the quarter, taking
total adoption to more than 15,100 customers, up 20% year over
year, of which more than 8,100 are live. In the third quarter, more
than 45% of the additional SAP S/4HANA customers were net new.
In the third quarter, world class organizations such as Lenovo,
Æon, Shanghai Land (Group) Co, and Naturgy chose SAP S/4HANA.
Toyota Peru went live on SAP
S/4HANA. A fast-growing number of companies of all sizes such as
Rabobank, Iugu and Basic-Fit chose SAP S/4HANA Cloud. Sharks Sports
& Entertainment, and Korea Gas Corporation are now live on SAP
S/4HANA Cloud.
Schwarz Produktion, the manufacturing organization within
Schwarz Group (Lidl, Kaufland), has chosen SAP Digital Supply Chain
solutions. As one of many on a journey to the industry cloud,
Schwarz Produktion is aiming for highly automated and continuous
processes.
Human Experience Management (HXM)
The SAP SuccessFactors Human Experience Management (HXM)
Suite provides solutions for core HR and payroll, talent
management, employee experience management and people analytics.
Built as a highly scalable platform it meets complex cross border
requirements, delivering tax regulation and HR policy
updates in 99 specific countries, 42 languages and
payroll in 46 countries.
HXM is designed around what employees need, how they work, and
what motivates them. It empowers employees and enables HR leaders
to accelerate business growth.
SAP SuccessFactors HXM solutions leverage Qualtrics solutions
allowing customers to capture insights from employees and link them
with operational data to see what is happening, understand why
and take action. More than 775 customers have
selected these solutions. Rappi, Kmart Australia, Catholic
Education Diocese of Parramatta, Bahrain Airport Services, and
Garney Holding Company were some of many competitive
wins.
SAP Customer Experience
SAP Customer Experience (CX) combines leading solutions for
commerce, service, marketing, sales, and customer data, enabling
companies to manage and deliver personalized customer experiences
across touchpoints and channels based on a complete view of the
customer. As part of the Intelligent Enterprise, SAP CX suite
integrates with SAP S/4HANA from demand signals to fulfillment in
one end-to-end process.
SAP CX solutions also use the benefits of Qualtrics Customer
Experience Management to understand the wants and needs of
customers. This enables organizations to combine customer feedback
and operational data to listen, understand and take action in the
moment to improve the customer experience.
In the third quarter, SAP's e-commerce solution showed a strong
performance, more than doubling new cloud order in-take year over
year.
Swisscom AG, Barilla, Renault Brazil, Saudi Ports Authority, and
Jiangsu Xingda Steel Tyre Cord Co are some examples of companies
who chose SAP Customer Experience solutions, with Konica Minolta
Business Solutions and Energizer Brands going live.
SAP Business Technology Platform
SAP Business Technology Platform helps customers to turn their
data into business value. It encompasses database and data
management, analytics, application development and integration, and
intelligent technologies. The SAP Business Technology Platform
represents a combination of SAP's leading technologies such as SAP
HANA, SAP Cloud Platform, SAP Data Warehouse Cloud, SAP Analytics
Cloud and SAP Intelligent Robotic Process Automation to build,
integrate and extend applications. It supports cloud, on-premise
and hybrid customer landscapes. Additionally, the SAP Business
Technology Platform offers seamless interoperability with
hyperscalers' technologies to deliver a high level of scalability
and flexibility.
Hewlett Packard Enterprise, Alpina Productos Alimenticios S.A,
Uniper, and the City of Munich
selected SAP Business Technology Platform and SAP Analytics Cloud
solution in the third quarter.
SAP was recently named as a leader in Gartner's Magic Quadrant
for both Multiexperience Development Platforms and Enterprise
Integration Platform-as-a-Service.
Ariba & Fieldglass
SAP Ariba provides collaborative commerce capabilities from
sourcing and orders through invoice and payment along with
expertise to help customers optimize their spend. It drives simple,
intelligent exchanges between millions of buyers and suppliers
across both direct and indirect expense categories. The SAP Ariba
platform is embedding Qualtrics to enhance experience and to create
a continuous feedback loop for buyers and suppliers on the
network.
SAP Ariba and SAP Fieldglass, together with Concur, represent
SAP's intelligent spend platform, the largest commerce platform in
the world with over $4.1 trillion in
global commerce annually transacted in more than 180
countries.
Petrobras, Siemens Gamesa, Britvic Soft Drinks Ltd, VELUX Group,
and Rumo Logistica chose SAP Ariba solutions in the third
quarter.
SAP Fieldglass is the leader in external workforce management
and services procurement. It helps organizations find, engage, and
manage all types of flexible resources including contingent workers,
consultants and freelancers. SAP Fieldglass added more than 975,000
new external workers during the third quarter. Algar Telecom chose
SAP Fieldglass solutions in the third quarter.
Concur
In the third quarter, Concur segment revenue was down 14% to
€357 million year over year (down 10% at constant currencies) due
to lower pay-as-you-go transactional revenue as a result of
significantly reduced business travel related to the COVID-19
crisis.
Concur provides integrated travel, expense, and invoice
management solutions that simplify and automate these everyday
processes. The SAP Concur mobile app guides employees through every
trip, charges are effortlessly populated into expense reports, and
invoice approvals are automated. By integrating near real-time data
and using AI to audit 100% of transactions, the SAP Concur spend
management solution provides better visibility to help efficiently
control employee-driven spend.
Uber Technologies, Bridgestone, Sysmex Europe and Keio University were among the organizations who
chose SAP Concur solutions in the third quarter.
Qualtrics
In the third quarter, Qualtrics segment revenue was up 22% to
€169 million year over year (up 28% at constant currencies).
With Qualtrics, SAP combines market leadership in Experience
Management (XM) with end-to-end operational power in 25 industries
to help organizations manage and improve the four core experiences
of business: customer, employee, product, and brand.
The Qualtrics XM Platform™ is trusted by over 12,000 customers
to listen, understand, and take action on experience data (X-data™)
by combining X-data with the operational data (O-data™) systems of
the enterprise.
In the third quarter, Transamerica Life Insurance Company,
Standard Chartered Bank, Lululemon Athletica, Yamaha Motor
Corporation, Telefónica Mexico and
many others selected Qualtrics to move beyond systems of record to
new systems of action and achieve breakthrough results.
Services
In the third quarter, Services segment revenue was down 16% to
€753 million year over year (down 13% at constant currencies).
While the vast majority of consulting projects continue to be
efficiently delivered remotely and SAP's premium services remain in
high demand, in particular SAP's training business was also
impacted due to delays in re-opening of global training
centers.
SAP deploys a global team of service professionals with in-depth
expertise in SAP solutions and innovation to help companies create
valuable outcomes and experience to succeed in becoming Intelligent
Enterprises.
The Services organization improves time to value for our
customers' digital transformation through:
- Outcome-focused services and proactive support offerings
designed to guide customers transformation from end to end
- Intelligent tools that automate delivery and support
- Embedded services with prepackaged reference solutions based on
leading industry practices and processes
- Value-added partnerships with leading system integrators that
facilitate success in any environment
Segment Results at a Glance
Segment Performance Third Quarter 2020
|
Applications,
Technology &
Support
|
Concur
|
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.
|
Actual
Currency
|
∆ in %
|
∆ in %
const.
curr.
|
Cloud
revenue
|
1,550
|
15
|
20
|
303
|
–15
|
–11
|
129
|
25
|
31
|
0
|
NA
|
NA
|
Segment
revenue
|
5,172
|
–2
|
2
|
357
|
–14
|
–10
|
169
|
22
|
28
|
753
|
–16
|
–13
|
Segment profit
(loss)
|
2,249
|
–4
|
0
|
139
|
–16
|
–12
|
15
|
>100
|
>100
|
154
|
3
|
4
|
Cloud gross margin
(in %)
|
65.5
|
2.4pp
|
2.2pp
|
88.3
|
1.4pp
|
1.3pp
|
90.9
|
–0.5pp
|
–0.4pp
|
NM1)
|
NM1)
|
NM1)
|
Segment margin (in
%)
|
43.5
|
–1.2pp
|
–1.2pp
|
39.0
|
–0.8pp
|
–0.8pp
|
8.6
|
5.5pp
|
5.1pp
|
20.4
|
3.6pp
|
3.2pp
|
Regional Revenue Performance
SAP had a resilient performance in the EMEA region with cloud
and software revenue increasing 2% (IFRS) and 3% (non-IFRS at
constant currencies). Cloud revenue increased 22% (IFRS) and 24%
(non-IFRS at constant currencies) with Germany, the
Netherlands and Switzerland
being highlights. Russia,
Spain and Switzerland had strong quarters in software
licenses revenue.
The Company had a solid performance in the Americas region.
Cloud and software revenue decreased 5% (IFRS) and was flat
(non-IFRS at constant currencies). Cloud revenue increased 4%
(IFRS) and 9% (non-IFRS at constant currencies) with Brazil, Canada and Mexico being highlights. In addition,
Canada had a solid quarter, while
Brazil and Mexico had strong quarters in software
licenses revenue.
In the APJ region, SAP had a solid performance. Cloud and
software revenue was down 1% (IFRS) and up 4% (non-IFRS at constant
currencies). Cloud revenue increased 14% (IFRS) and 19% (non-IFRS
at constant currencies) with Japan, Singapore and South
Korea being highlights. Japan had a solid quarter,
while Australia and India had strong quarters in software licenses
revenue.
Financial Results at a Glance
Third Quarter 2020
|
IFRS
|
Non-IFRS1)
|
€ million, unless
otherwise stated
|
Q3 2020
|
Q3 2019
|
∆ in %
|
Q3 2020
|
Q3 2019
|
∆ in %
|
∆ in %
const.
curr.
|
Current cloud
backlog2)
|
NA
|
NA
|
NA
|
6,599
|
5,995
|
10
|
16
|
Cloud
revenue
|
1,984
|
1,789
|
11
|
1,984
|
1,807
|
10
|
14
|
Software licenses and
support revenue
|
3,559
|
3,839
|
–7
|
3,559
|
3,840
|
–7
|
–4
|
Cloud and software
revenue
|
5,544
|
5,629
|
–2
|
5,544
|
5,647
|
–2
|
2
|
Total
revenue
|
6,535
|
6,791
|
–4
|
6,535
|
6,809
|
–4
|
0
|
Share of more
predictable revenue (in %)
|
74
|
69
|
5pp
|
74
|
69
|
5pp
|
|
Operating profit
(loss)
|
1,473
|
1,679
|
–12
|
2,069
|
2,086
|
–1
|
4
|
Profit (loss) after
tax
|
1,652
|
1,259
|
31
|
2,098
|
1,564
|
34
|
|
Basic earnings per
share (in €)
|
1.32
|
1.04
|
26
|
1.70
|
1.30
|
31
|
|
Number of employees
(FTE, September 30)
|
101,450
|
99,710
|
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.
|
Nine months ended September
2020
|
IFRS
|
Non-IFRS1)
|
€ million, unless
otherwise stated
|
Q1–Q3
2020
|
Q1–Q3
2019
|
∆ in %
|
Q1–Q3
2020
|
Q1–Q3
2019
|
∆ in %
|
∆ in %
const. curr.
|
Current Cloud
Backlog2)
|
NA
|
NA
|
NA
|
6,599
|
5,995
|
10
|
16
|
Cloud
revenue
|
6,039
|
5,037
|
20
|
6,041
|
5,106
|
18
|
19
|
Software licenses and
support revenue
|
10,610
|
11,130
|
–5
|
10,610
|
11,130
|
–5
|
–4
|
Cloud and software
revenue
|
16,649
|
16,167
|
3
|
16,651
|
16,236
|
3
|
4
|
Total
revenue
|
19,800
|
19,513
|
1
|
19,801
|
19,583
|
1
|
2
|
Share of more
predictable revenue (in %)
|
74
|
70
|
4pp
|
74
|
70
|
4pp
|
|
Operating profit
(loss)
|
3,967
|
2,370
|
67
|
5,515
|
5,368
|
3
|
4
|
Profit (loss) after
tax
|
3,348
|
1,733
|
93
|
4,507
|
3,961
|
14
|
|
Basic earnings per
share (in €)
|
2.74
|
1.43
|
92
|
3.71
|
3.29
|
13
|
|
Number of employees
(FTE, September 30)
|
101,450
|
99,710
|
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.
|
Updated Business Outlook
2020
SAP's previous full year 2020 outlook issued on April 8th, 2020 reflected its best estimates
concerning the timing and pace of recovery from the COVID-19
crisis. This outlook assumed economies would reopen and population
lockdowns would ease, leading to a gradually improving demand
environment in the third and fourth quarters.
While SAP continues to see robust interest in its solutions to
drive digital transformation as customers look to emerge from the
crisis with more resilience and agility, lockdowns have been
recently re-introduced in some regions and demand recovery has been
more muted than expected. Further and for the same reasons, SAP no
longer anticipates a meaningful recovery in SAP Concur business
travel-related revenues for the remainder of the year 2020.
SAP is therefore updating its full year 2020 outlook and now
expects:
- €8.0 – 8.2 billion non-IFRS cloud revenue at constant
currencies (previously €8.3 – 8.7 billion)
- €23.1 – 23.6 billion non-IFRS cloud and software revenue at
constant currencies (previously €23.4 – 24.0 billion)
- €27.2 – 27.8 billion non-IFRS total revenue at constant
currencies (previously €27.8 – 28.5 billion)
- €8.1 – 8.5 billion non-IFRS operating profit at constant
currencies (previously €8.1 – 8.7 billion)
SAP continues to expect its share of more predictable revenue to
be approximately 72%.
The Company has raised its cash flow expectations for 2020 on
the back of a strong year-to-date cash flow performance and now
expects an operating cash flow of approximately €6.0 billion
(previously above €5.0 billion) and a free cash flow above €4.5
billion (previously approximately €4.0 billion).
While SAP's full year 2020 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 Q4 and FY
2020 expected currency impacts.
Expected Currency
Impact Based on September 2020 Level for the Rest of the
Year
|
In percentage
points
|
Q4
|
FY
|
Cloud
revenue
|
-6pp to
-4pp
|
-3pp to
-1pp
|
Cloud and software
revenue
|
-5pp to
-3pp
|
-3pp to
-1pp
|
Operating
profit
|
-5pp to
-3pp
|
-4pp to
-2pp
|
In addition to the financial goals, SAP also focuses on three
non-financial targets for 2020: customer loyalty, employee
engagement, and carbon emissions. As a result of the COVID-19
crisis, SAP has experienced a significant decrease in its carbon
emissions due to a reduction in CO2-intensive business
activities. As a consequence, SAP now targets carbon emissions of
150 kt (previously 238 kt). The 2020 targets for customer loyalty
and employee engagement remain unchanged.
Updated Mid-Term
Ambition
SAP's previous mid-term ambition was issued on April 24th, 2019, before the COVID-19
crisis. The company is now updating its mid-term ambition to
reflect the following factors:
- The most recent currency exchange rates (October 2020) which translates to a negative 3 to
4 percent effect on revenue and operating profit since April 2019.
- The COVID-19 pandemic which is expected to impact the demand
environment, particularly in hard hit industries, through at least
the first half of 2021 pushing out the achievement of key metrics
such as non-IFRS cloud revenue, total revenue, and operating
profit, by 1 to 2 years.
- The acceleration of customers' move to the cloud and subsequent
business transformations which drive the new ambition's cloud
revenue target of more than €22 billion by 2025. SAP expects this
to negatively impact the 2023 operating margin by approximately 4
to 5 percentage points relative to the previous mid-term
ambition.
- The accelerated harmonization of SAP cloud delivery which is
expected to require an incremental investment in 2021 and 2022 and
to drive the non-IFRS cloud gross margin to approximately 80% by
2025.
As a consequence of SAP's accelerated cloud transition, the
Company expects software licenses revenue to continue to trend
lower from 2020 levels.
The combined impact of the above factors and the mechanics of
the associated business model switch are expected to lead to muted
non-IFRS total revenue growth as well as flat or slightly lower
non-IFRS operating profit over the next two years, followed by
accelerated non-IFRS total revenue and double-digit non-IFRS
operating profit growth from 2023 onwards.
By 2025, this trajectory is expected to take SAP to:
- More than €22 billion non-IFRS cloud revenue
- More than €36 billion non-IFRS total revenue
- More than €11.5 billion non-IFRS operating profit
- A significant expansion of the Company's more predictable
revenue share to approximately 85%
Extended Earnings Conference Call
SAP senior management will host an extended earnings conference
call including slide presentations to discuss the key drivers
behind the updated mid term ambition on Monday, October 26th, from 2:00 –
3:30 PM (CET) / 1:00 – 2:30 PM (GMT) / 9:00 – 10:30 AM (EDT) / 6:00 – 7:30 AM (PDT).
This extended earnings conference call will be webcast live on
SAP's website at www.sap.com/investor and will be held in lieu of a
virtual capital markets day in the fourth quarter. The presentation
slides will be published prior
to the earnings call on SAP's website at www.sap.com/investor as
well.
The full Q3 2020 Quarterly Statement can be downloaded from
http://www.sap.com/investors/sap-2020-q3-statement.
Additional Information
This Quarterly Statement and all information therein is
unaudited.
The 2019 comparative numbers for first nine months only include
Qualtrics revenues and profits from acquisition date of
January 23rd.
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 expansion of CCB over a period 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 non-IFRS cloud
revenue and non-IFRS software support revenue as a percentage of
total revenue.
Global commerce is the total commerce volume transacted on the
SAP Ariba, SAP Concur and SAP Fieldglass Networks in the trailing
12 months. SAP Ariba commerce includes procurement and sourcing
spend.
For explanations on other key growth metrics please refer the
performance management section of SAP's Integrated Report 2019,
which can be found at www.sapintegratedreport.com.
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: 77% of the world's transaction revenue touches an SAP®
system. 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)
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 as
supplemented by SAP's Half Year Report furnished with the SEC on
Form 6-K. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of their
dates.© 2020 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.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/sap-se-strong-double-digit-growth-in-eps-and-cash-flow-301159206.html
SOURCE SAP SE