SAP Raises Outlook Backed by Outstanding S/4HANA Momentum

- Digital core business soars with over 6,900 S/4HANA customers - around 70% growth year over year

- Continued strong business performance despite significant currency headwinds

- Software revenue stable (IFRS) and up 3% (Non-IFRS at constant currencies)

- Cloud subscriptions and support revenue up 22% (IFRS) and up 27% (Non-IFRS at constant currencies)

- EPS up 35% (IFRS) and up 10% (Non-IFRS)

- On track to execute €500 million share buy back by year end, €288 million bought back in Q3

News provided by

SAP SE

Oct 19, 2017, 01:02 ET

WALLDORF, Germany, Oct. 19, 2017 /PRNewswire/ -- 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

SAP Raises Outlook Backed by Outstanding S/4HANA Momentum

"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

Business Highlights

Financial Highlights

Third Quarter 2017

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 Australia were very strong in cloud subscriptions and support revenue. For software revenue, Australia had triple digit growth and China had strong double-digit growth.

Financial Results at a Glance

Third Quarter 2017¹⁾
	IFRS			Non-IFRS²⁾
€ million, unless otherwise stated	Q3 2017	Q3 2016	∆ in %	Q3 2017	Q3 2016	∆ in %	∆ in % const. curr.
New Cloud Bookings³⁾	N/A	N/A	N/A	302	265	14	19
Cloud subscriptions and support	937	769	22	938	769	22	27
Software licenses and support	3,720	3,686	1	3,720	3,687	1	4
Cloud and software	4,657	4,455	5	4,658	4,456	5	8
Total revenue	5,590	5,375	4	5,590	5,375	4	8
Share of predictable revenue (in %)	65	64	1pp	65	64	1pp
Operating profit	1,314	1,103	19	1,637	1,638	0	4
Profit after tax	993	725	37	1,214	1,089	11
Basic earnings per share (€)	0.82	0.61	35	1.01	0.91	10
Number of employees (FTE, September 30)	87,874	82,426	7	N/A	N/A	N/A	N/A

Nine months ended September 2017¹⁾
	IFRS			Non-IFRS²⁾
€ million, unless otherwise stated	Q1–Q3 2017	Q1–Q3 2016	∆ in %	Q1–Q3 2017	Q1–Q3 2016	∆ in %	∆ in % const. curr.
New Cloud Bookings³⁾	N/A	N/A	N/A	857	664	29	30
Cloud subscriptions and support	2,775	2,166	28	2,775	2,168	28	28
Software licenses and support	10,968	10,497	4	10,968	10,500	4	4
Cloud and software	13,742	12,663	9	13,743	12,668	8	8
Total revenue	16,656	15,339	9	16,657	15,343	9	8
Share of predictable revenue (in %)	66	65	1pp	66	65	1pp
Operating profit	2,913	3,184	–9	4,405	4,258	3	3
Profit after tax	2,189	2,108	4	3,220	2,832	14
Basic earnings per share (€)	1.81	1.77	3	2.67	2.37	13
Number of employees (FTE, September 30)	87,874	82,426	7	N/A	N/A	N/A	N/A

¹⁾ All figures are unaudited.

²⁾ For a detailed description of SAP's non-IFRS measures see Explanation of Non-IFRS Measures online. For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement.

³⁾ As this is an order entry metric, there is no IFRS equivalent.

Due to rounding, numbers may not add up precisely.

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 2017 average 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

Additional Information

Extension of the SAP Executive Board
The Supervisory Board of SAP SE has named Christian Klein (Chief Operating Officer) to the SAP Executive Board heading the new board area Global Business Operations effective January 1, 2018.

Additionally, the Supervisory Board of SAP SE has extended Michael Kleinemeier's Executive Board contract until December 31, 2019.

Acquisition of Gigya, Inc.
On September 24, 2017, SAP announced that it has entered into an agreement to acquire US-based Gigya, Inc., a market leader for customer identity and access management. The transaction is expected to close in the final quarter of 2017, subject to regulatory approval.

General Remarks about this Quarterly Statement and the SAP Integrated Report

Since Q1 2016, we issue a quarterly statement for each of the four fiscal quarters. Additionally, we issue a half year report and a full year integrated report. SAP's 2016 Integrated Report and Annual Report to Shareholders, and 2016 Annual Report on Form 20-F were published on February 28, 2017, and are available for download at www.sapintegratedreport.com.

For a more detailed description of all of SAP's non-IFRS measures and their limitations as well as our constant currency and free cash flow figures see Explanation of Non-IFRS Measures online.

Webcast

SAP senior management will host a financial analyst conference call today at 2:00 PM (CET) / 1:00 PM (GMT) / 8:00 AM (Eastern) / 5:00 AM (Pacific). The call 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

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.

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¹ New cloud bookings is the total of all orders received in a given period the revenue from which is expected to be classified as cloud subscription and support revenue and that result from purchases by new customers and from incremental purchases by existing customers. Consequently, orders to renew existing contracts are not included in this metric. The order amount must be committed. Consequently, due to their pay-per-use nature, business network transaction fees which do not include a committed minimum consumption are not reflected in the bookings metric (e.g. SAP Ariba and SAP Fieldglass transaction-based fees). Amounts included in the measures are generally annualized (annualized contract value ACV).

² New cloud and software license order entry is the total of new cloud order entry and software license order entry. The new cloud order entry metric is identical to the new cloud bookings metric defined above except that it considers the total contract value (TCV) of the orders where the new cloud bookings metric considers the orders' annualized contract value (ACV). Software license order entry is the total of all orders received in a given period, the revenue from which is expected to be classified as software license revenue. The support services commonly sold with the software licenses are not included in the software license order entry metric.

SOURCE SAP SE