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Second Quarter 2020
Financial Results

July 27, 2020


This quarter demonstrated that our Intelligent Enterprise strategy clearly resonates with customers around the world. More than ever, the pandemic has proven that digitalization is no longer an option but a must-have to withstand challenging times and to achieve desired business outcomes. We will continue to invest in innovative offerings for our customers to drive business transformations and run complex business processes. We also aim to expand the eco-system on our business technology platform to complement our solutions and foster growth.
Christian Klein, CEO


We were happy to see such a strong sequential improvement in software licenses revenue and a robust margin expansion. Our broad solution portfolio, unmatched industry and geographic diversification coupled with our strong base of more predictable revenue have allowed us to manage the COVID-19 crisis this quarter. With our investments in strategic growth areas we are confident we will not only weather the crisis but emerge even stronger. We were also pleased to see a strong acceleration in free cash flow despite the current market dynamics.

Luka Mucic, CFO

Business Performance Second Quarter 2020

Financial Highlights

Business activity gradually improved over the course of the second quarter following the global emergence of the COVID-19 crisis primarily in the last month of the first quarter. Software licenses revenue, while still below normal levels, recovered more than expected. In particular, the APJ region had a strong recovery in software licenses revenue.

In the second quarter, current cloud backlog was up 20% to €6.65 billion (21% at constant currencies) with continued high demand for digital supply chain, e-commerce, cloud platform and Qualtrics solutions. Cloud revenue was impacted by lower pay-as-you-go transactional revenue as a result of the COVID-19 crisis and grew 21% year over year to €2.04 billion (IFRS), up 19% to €2.04 billion (non-IFRS) and up 18% (non-IFRS at constant currencies). Software licenses revenue was down 18% year over year to €0.77 billion (IFRS and non-IFRS) and down 18% (non-IFRS at constant currencies), a strong sequential improvement compared to the first quarter. Cloud and software revenue grew 4% year over year to €5.71 billion (IFRS), up 3% to €5.71 billion (non-IFRS) and up 3% (non-IFRS at constant currencies). Total revenue grew 2% year over year to €6.74 billion (IFRS), up 1% to €6.74 billion (non-IFRS) and up 1% (non-IFRS at constant currencies).

The share of more predictable revenue grew by five percentage points year-over-year to 73% in the second quarter.

Cloud gross margin increased 3.4 percentage points year over year to 66.0% (IFRS) and increased by 1.6 percentage points year over year to 69.5% (non-IFRS).

IFRS operating profit in the second quarter increased strongly primarily due to a significantly lower impact from restructuring expenses compared to the previous year. Operating profit increased by 55% year over year to €1.28 billion (IFRS) and was up 8% to €1.96 billion (non-IFRS) and up 7% (non-IFRS at constant currencies). Operating margin increased 6.6 percentage points year over year to 19.0% (IFRS) and increased 1.8 percentage points year over year to 29.1% (non-IFRS) and 1.7 percentage points to 28.9% (non-IFRS at constant currencies).

Earnings per share was up 54% year over year to €0.73 (IFRS) and was up 7% to €1.17 (non-IFRS).

Operating cash flow and free cash flow grew strongly in the second quarter. This was mainly driven by positive effects from lower payments to suppliers and lower than expected income tax payments. Operating cash flow for the first six months was €3.77 billion, up 41% year-over-year. Free cash flow for the first six months was up 59% year-over-year at €3.12 billion. Free cash flow additionally benefited from lower capital expenditure compared to the previous year. At the end of the second quarter, net debt was -€7.45 billion.

COVID-19 Response

SAP remains focused on supporting its customers, employees and communities during the COVID-19 pandemic. SAP continues to operate with a virtual sales and remote implementation strategy to enable the large majority of its employees to work productively from home while continuing to serve customers effectively. In certain locations around the globe a small number of SAP employees have started to return or are planning to return to the office at a cautious pace as permitted by local regulations. SAP remains focused on the safety of the small number of its employees who are working onsite.

To ensure the Company’s financial flexibility, SAP is maintaining a slower pace of hiring than in usual circumstances and reduced discretionary spend in addition to natural savings e.g. from lower travel, facility related costs and virtualized events.

SAP remains focused on ensuring continuity for its customers and partners and SAP’s data centers are online with appropriate backup plans.

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. Some recent examples:

  • SAP has developed, together with Deutsche Telekom, the Corona Warning App which is the official German tracing app. The app went live in less than 50 days and has been downloaded more than 16 million times
  •  Qualtrics back-to-business solution is helping many US states and communities restart their economies
  • To address ongoing disruption to global supply chains, SAP has extended open access to SAP Ariba Discovery to the end of 2020 so that buyers can post immediate sourcing needs and any supplier can respond. 


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.

Business Outlook 2020

The Company confirms its 2020 revenue and profit outlook which was previously published in its Q1 2020 Quarterly Statement on April 21st. The outlook continues to be based on the assumption of a gradually improving demand environment in the third and fourth quarter, expecting further reopening of economies and easing of population lockdowns.

Non-IFRS cloud revenue is still expected to be in a range of €8.3 billion to €8.7 billion at constant currencies (2019: €7.01 billion), up 18% to 24% at constant currencies.

Non-IFRS cloud and software revenue is still expected to be in a range of €23.4 to €24.0 billion at constant currencies (2019: €23.09 billion), up 1% to 4% at constant currencies.

Non-IFRS total revenue is still expected to be in a range of €27.8 to €28.5 billion at constant currencies (2019: €27.63 billion), up 1% to 3% at constant currencies.

Non-IFRS operating profit is still expected to be in a range of €8.1 to €8.7 billion at constant currencies (2019: €8.21 billion), down 1% to up 6% at constant currencies.

The share of more predictable revenue (defined as the total of cloud revenue and software support revenue) is still expected to reach approximately 72%.

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.

Ambition 2023 and Capital Markets Day

SAP confirms its 2023 ambition. The Company also expects to hold a virtual Capital Markets Day in the fourth quarter 2020 to provide an update on its mid-term strategy..

Financial Results at a Glance

Second Quarter 2020

    IFRS   Non-IFRS1)
€ million, unless otherwise stated   Q2 2020   Q2 2019   ∆ in %   Q2 2020   Q2 2019   ∆ in %   ∆ in % const. curr.
Current cloud backlog2)   NA   NA   NA   6,655   5,526   20   21
Cloud revenue   2,044   1,692   21   2,044   1,717   19   18
Software licenses and support revenue   3,665   3,802   −4   3,665   3,802   −4   −3
Cloud and software revenue   5,709   5,495   4   5,709   5,520   3   3
Total revenue   6,743   6,631   2   6,744   6,656   1   1
Share of more predictable revenue (in %)   73   69   5pp   73   69   5pp    
Operating profit (loss)   1,284   827   55   1,964   1,816   8   7
Profit (loss) after tax   885   582   52   1,395   1,317   6    
Basic earnings per share (in €)   0.73   0.48   54   1.17   1.09   7    
Number of employees (FTE, June 30)   101,379   98,332   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.

Six months ended June 2020

    IFRS   Non-IFRS1)
€ million, unless otherwise stated   Q1–Q2
2020
  Q1–Q2
2019
  ∆ in %   Q1–Q2
2020
  Q1–Q2
2019
  ∆ in %   ∆ in % const. curr.
Current Cloud Backlog2)   NA   NA   NA   6,655   5,526   20   21
Cloud revenue   4,055   3,247   25   4,057   3,299   23   22
Software licenses and support revenue   7,051   7,291   −3   7,051   7,291   −3   −4
Cloud and software revenue   11,106   10,538   5   11,107   10,589   5   4
Total revenue   13,264   12,722   4   13,266   12,773   4   3
Share of more predictable revenue (in %)   74   70   4pp   74   70   4pp    
Operating profit (loss)   2,494   691   >100   3,446   3,283   5   4
Profit (loss) after tax   1,697   475   >100   2,409   2,397   1    
Basic earnings per share (in €)   1.42   0.38   >100   2.02   1.99   1    
Number of employees (FTE, June 30)   101,379   98,332   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 Second 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   1,589   24   24   0   NA   NA   323   −4   −6   130   38   36
Segment revenue   5,314   3   3   796   −6   −6   379   −4   −5   168   34   32
Segment profit (loss)   2,329   5   5   121   >100   96   137   −4   −6   7   2   1
Cloud gross margin (in %)   65.2   2.8pp   2.6pp   NM1)   NM1)   NM1)   88.4   1.9pp   1.8pp   91.0   −0.9pp   −1.0pp
Segment margin (in %)   43.8   0.9pp   0.7pp   15.2   8.3pp   7.6pp   36.0   0.0pp   −0.4pp   4.3   −1.4pp   −1.3pp

1) NM = not meaningful

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