SAP’s yearend financial performance report showed a strong finish amid the COVID-19 climate, especially in North America and Europe where cloud order entry and software licenses revenue reflected strong demand for SAP’s digital supply chain solutions.
Despite the global economic impact of the coronavirus pandemic gravely affecting enterprises across various industries, SAP had a respectable 2020 full-year business performance exceeding all of its revised 2020 revenue targets and hitting the high end of its revised operating profit outlook range. SAP has been at the front and center of many organisations’ COVID journey– from the onset of the health crisis until today– serving customers with an embedded virtual sales and remote implementation strategy.
“The world’s leading companies are turning to SAP to become intelligent enterprises. We are reinventing how businesses run by accelerating our customers’ transformation in the cloud. Our strong finish to the year and the launch of RISE with SAP, our new holistic business transformation offering, position us well to meet our new outlook targets,” said SAP CEO Christian Klein.
In 2020, SAP had a commendable cloud business full-year performance, which can be attributed to high demand for e-commerce, Business Technology Platform, and Qualtrics solutions as well as several competitive wins from SuccessFactors Human Experience Management. In Q4, the recently unveiled Business Transformation as a Service offering RISE with SAP had a strong take-up among pilot customers, contributing to the quarter’s cloud performance and cushioning the lower pay-as-you-go transactional revenue from Concur.
Full-Year Financial Performance Report
Amid the continued impact of COVID-19 on SAP’s cloud business, the full year’s cloud backlog was up 7{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year to €7.15 billion (up 14{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} at constant currencies). Cloud revenue registered 17{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year growth to €8.08 billion (IFRS), up 15{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to €8.09 billion (non-IFRS) and up 18{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to €8.24 billion (non-IFRS at constant currencies), exceeding the revised full-year outlook (€8.0 to €8.2 billion non-IFRS at constant currencies). Cloud and software revenue was up 1{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year to €23.23 billion (IFRS and non-IFRS) and up 3{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to €23.72 billion (non-IFRS at constant currencies), exceeding the revised full-year outlook (€23.1 – 23.6 billion). Total revenue was down 1{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year to €27.34 billion (IFRS and non-IFRS) and up 1{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to €27.90 billion (non-IFRS at constant currencies), also exceeding the revised full-year outlook (€27.2 – 27.8 billion).
Concur’s continued lower transactional revenues negatively impacted cloud growth by 4 percentage points.
For the full year, operating profit and free cash flow are up strongly. Positively impacted by significantly lower restructuring charges as well as lower share-based compensation expenses compared to 2019, operating profit increased by 48{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year to €6.62 billion (IFRS) and was up 1{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to €8.28 billion (non-IFRS). Operating margin increased 8.0 percentage points year over year to 24.2{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (IFRS) and increased 0.6 percentage points year over year to 30.3{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS).
Positively impacted by lower tax and restructuring payments and a successful working capital management, operating cash flow for the full year was € 7.19 billion, approximately doubling year over year and free cash flow increased 164{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year to €6.00 billion.
“In a uniquely challenging environment, 2020 was a record year for cash flow in every single quarter and the full year. Our better-than-anticipated top-line performance combined with our quick response on the cost side drove strong operating profit. SAP’s expedited shift to the cloud will drive long-term, sustainable growth while significantly increasing the resiliency and predictability of our business,” SAP CFO Luka Mucic highlighted.
2021 Business Outlook
Considering the solid business momentum and current estimates concerning the timing and pace of recovery from the COVID-19 crisis, SAP expects the following in 2021:
- €9.1 – 9.5 billion non-IFRS cloud revenue at constant currencies (2020: €8.09 billion), up 13{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to 18{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} at constant currencies
- €23.3 – 23.8 billion non-IFRS cloud and software revenue at constant currencies (2020: €23.23 billion), flat to up 2{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} at constant currencies
- €7.8 – 8.2 billion non-IFRS operating profit at constant currencies (2020: €8.28 billion), down 1{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to 6{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} at constant currencies
- €6.0 billion (2020 €7.2 billion) approximate operating cash flow primarily reflecting moderately lower profit, higher expected income tax payments, and adverse currency exchange movements
SAP also confirms its mid-term ambition previously published in its Q3 2020 financial performance report.
For the enterprise’s non-financial goals in 2021, SAP aims to focus on customer loyalty, employee engagement, and carbon emissions.
