SAP’s Q3 financial report reiterates the company’s outlook for the full year 2019, which is a strong revenue increase at a rate lower than operating profit.
SAP revenue for cloud, new cloud bookings, profit, and cash flow have achieved double-digit growth as reported in the company’s Q3 2019 Quarterly Statement that ended 30 September.
Newly appointed co-CEOs Jennifer Morgan and Christian Klein stated:
“Our third-quarter results reflect the momentum we’ve built entering the final quarter of the year and more broadly where we are on our journey of growth and operational excellence. We are excited and energized to write the next chapter in SAP’s story alongside the best workforce anywhere in the technology industry.”
Likewise, SAP CFO Luka Mucic expressed his appreciation of the German software giant’s commitment and outstanding quarter performance. He said:
“In April we promised a stronger focus on profits and here we go: Q3 marks yet another milestone in delivering on this commitment. Q3 is also a manifesto of us keeping our second promise: continued strong top-line momentum. Despite continued macro uncertainties, we couldn’t be more confident to make 2019 another stellar year for SAP.”
Q3 by the Numbers
Cloud revenue and new bookings
- New Cloud bookings up 39{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to €572 million (34{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} at constant currencies) and up 51{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} excluding Infrastructure-as-a-Service (IaaS).
- 18{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} points to the 39{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} Q3 new cloud bookings growth is attributed to the new partnership with Microsoft, a three-year deal with revenue recognition starting in Q4 2019
- Cloud revenue up 37{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year to €1.79 billion (IFRS), up 37{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS) and 33{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS at constant currencies)
- Software licenses revenue down 1{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year to €932 million (IFRS), down 1{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS) and down 4{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS at constant currencies).
- New Cloud and software order entry was up 20{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year
- Cloud and software revenue up 12{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year to €5.63 billion (IFRS), up 13{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS) and 10{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS at constant currencies)
- Total revenue grew 13{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year to €6.79 billion (IFRS), up 13{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS) and 10{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS at constant currencies).
- The share of more predictable revenue grew by two percentage points year-over-year to 69{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd}
- Cloud gross margin increased 5.9-percentage points year over year to 64.5{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (IFRS) and increased by 5.4 percentage points year over year to 69.0{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS).
Operating Profit
Q3’s operating profit can be attributed to the disciplined hiring, accelerated operating efficiency gains and lower share-based compensation expenses for IFRS operating profit.
- IFRS operating profit up 36{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to year over year to €1.68 billion
- Non-IFRS operating profit up 20{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} and up 15{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS at constant currencies).
- IFRS operating margin up 4.2 percentage points year over year to 24.7{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd}
- Non-IFRS operating margin up 1.7percentage points year over year to 30.6{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS) and 1.5 percentage points to 30.4{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS at constant currencies)
- Earnings per share up 28{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to €1.04 (IFRS) and up 14{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to €1.30 (non-IFRS)
Cash Flow
- Q3 operating cash flow up 28{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year contributing to €638 million
- Operating cash flow for the first nine months went 5{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} down year over year (€3.32 billion) due to higher payouts related to share-based compensation (€205 million), restructuring payouts (€239 million) and higher tax cash outflows (€490 million) versus 2018.
- Free cash flow up 116{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd}
The third-quarter financials also highlighted SAP’s three reportable segments “Applications, Technology & Services”, “Intelligent Spend Group” and “Customer and Experience Management”.
Have a look at the full SAP Q3 financial report here.
