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First Quarter 2020
Financial Results

April 21, 2020


Our first quarter results highlight the durability of our business. We will continue to balance disciplined expense management with investment in innovation to ensure we maintain and enhance our competitive advantages. Our balance sheet stability and revenue predictability allow us to continuously deliver long-term value for our shareholders. 

Luka Mucic, CFO


Building on last year’s momentum, SAP started the first two months of the quarter with strong momentum and healthy growth. For nearly five decades, SAP has been synonymous with mission critical business operations. As the unprecedented global chal-lenges presented by COVID-19 emerged, we benefited from the inherent resilience of our business model and sustainable rele-vance of our portfolio. Our emphasis on increasing our base of more predictable revenue and the geographic and sector diversity of our business has strongly positioned us to weather the period ahead and emerge stronger in the new normal that will follow.
Christian Klein, CEO

Business Performance First Quarter 2020

Financial Highlights

Business activity in the first two months of the quarter was healthy. As the impact of the COVID-19 crisis rapidly intensified towards the end of the quarter, a significant amount of new business was postponed. This is reflected, in particular, in the significant year over year decrease in software licenses revenue.

In the first quarter, current cloud backlog was up 25% to €6.65 billion (24% at constant currencies). Cloud revenue grew 29% year over year to €2.01 billion (IFRS), up 27% (non-IFRS) and 25% (non-IFRS at constant currencies). Software licenses revenue was down 31% year over year to €451 million (IFRS and non-IFRS) and down 31% (non-IFRS at constant currencies). Cloud and software revenue grew 7% year over year to €5.40 billion (IFRS), up 6% (non-IFRS) and 5% (non-IFRS at constant currencies). Total revenue grew 7% year over year to €6.52 billion (IFRS), up 7% (non-IFRS) and 5% (non-IFRS at constant currencies).

The share of more predictable revenue grew by four percentage points year-over-year to 76% in the first quarter.

Cloud gross margin increased 5.3 percentage points year over year to 66.4% (IFRS) and increased by 3.0 percentage points year over year to 69.3% (non-IFRS).

IFRS operating profit in the first quarter increased strongly primarily due to a significantly lower impact from both restructuring expenses and share-based compensation expenses. Operating profit increased year over year to €1.21 billion (IFRS), up 1% to €1.48 billion (non-IFRS) and was flat (non-IFRS at constant currencies). Operating margin increased 20.8 percentage points year over year to 18.6% (IFRS) and declined 1.3 percentage points year over year to 22.7% (non-IFRS) and 1.3 percentage points to 22.7% (non-IFRS at constant currencies).

In the first quarter, SAP incurred a cost of approximately €36 million in relation to the cancellation of its in-person annual SAPPHIRE NOW and other customer events. Absent the cancellations, these expenses would have been recognized in the later quarters for which the events were originally scheduled.

Earnings per share increased strongly year over year to €0.68 (IFRS) and was down 5% to €0.85 (non-IFRS).

Operating cash flow in the first quarter was €2.98 billion, up 6% year-over-year. Free cash flow was up 9% year-over-year at €2.58 billion. At the end of the first quarter, net debt was -€5.83 billion.

The Company completed its share buyback program of approximately €1.5 billion by mid-March and does not plan to conduct further share buybacks in 2020. Further, the dividend proposal of €1.58 per share was unchanged. This will be voted on at the Annual General Meeting of Shareholders, which is scheduled to take place as a virtual event on May 20, 2020.

COVID-19 Response

SAP remains focused on supporting its customers, employees and communities during the COVID-19 pandemic. SAP moved quickly to adopt a virtual sales and remote implementation strategy to enable the large majority of its employees to work productively from home and a continuation of its focus on current customers and the addition of new ones.

To ensure the Company’s financial flexibility, SAP is slowing hiring and reducing discretionary spend in addition to natural savings e.g. from lower travel and virtual rather than physical events. 

SAP is focused on ensuring continuity for its customers and partners, and SAP’s data centers are online with appropriate backup plans. SAP is also focused on the safety of the small number of its employees who are required to work onsite.

SAP is also providing solutions to address many of the issues faced by its customers and the broader business community:

  • SAP is offering free access to Remote Work Pulse by Qualtrics so organizations can understand how their employees are doing and what support they need as they adapt to new work environments.
  • To address massive disruptions impacting global supply chains, SAP opened up free access to SAP Ariba Discovery so that any buyer can post immediate sourcing needs and any supplier can respond.  SAP has seen a more than 50% increase in buyer postings since the offering went live. One critical example was sourcing hospital beds for a temporary hospital.
  • SAP is leveraging its vast ecosystem by inviting all its partners to post their free and open offerings on the SAP Community to help support businesses and address the global challenges related to the fight against COVID-19.
  • SAP is a partner and sponsor of the HPI FutureSOC Labs which is donating server power to a research initiative by Stanford University. This initiative simulates movement and folding of proteins which could be relevant for the development of vaccines.

Due to the current uncertainty regarding the duration and severity of the COVID-19 pandemic, SAP cannot predict whether our response to date or actions that we may take in the future will be effective in mitigating the impact of COVID-19 on our business and results of operations.

Financial Results at a Glance

First Quarter 2020

    IFRS   Non-IFRS1)
€ million, unless otherwise stated   Q1 2020   Q1 2019   ∆ in %   Q1 2020   Q1 2019   ∆ in %   ∆ in % const. curr.
Current cloud backlog2)   NA   NA   NA   6,647   5,329   25   24
Cloud revenue   2,011   1,555   29   2,012   1,581   27   25
Software licenses and support revenue   3,386   3,489   −3   3,386   3,489   −3   −4
Cloud and software revenue   5,397   5,044   7   5,398   5,070   6   5
Total revenue   6,521   6,091   7   6,522   6,118   7   5
Share of more predictable revenue (in %)   76   72   4pp   76   72   4pp    
Operating profit (loss)   1,210   −136   NA   1,482   1,467   1   0
Profit (loss) after tax   811   −108   NA   1,015   1,080   −6    
Basic earnings per share (in €)   0.68   −0.10   NA   0.85   0.90   −5    
Number of employees (FTE, March 31)   101,150   98,659   3   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.

Segment Results

Segment Performance First Quarter 2020

    Applications, Technology & Support   Services   Concur   Qualtrics
€ 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   1,523   27   25   0   NA   NA   367   16   13   120   88   83
Segment revenue   4,986   5   3   851   5   4   428   14   11   161   82   76
Segment profit (loss)   1,843   4   3   84   >100   >100   161   18   14   −12   <-100   <-100
Cloud gross margin   64.4%   3.3pp   3.3pp   NM1)   NM1)   NM1)   88.1%   3.2pp   3.2pp   90.8%   −0.6pp   −0.7pp
Segment margin   37.0%   −0.3pp   −0.3pp   9.9%   6.7pp   6.2pp   37.6%   1.2pp   1.0pp   −7.5%   −15.4pp   −14.9pp

1) NM = not meaningful

 

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