SAP Announces Second Quarter 2014 Results
SAP Raises Cloud Outlook: Strong Cloud Momentum with 39% Growth and Broad Market Adoption of SAP HANA Continues – Validating “Run simple” Vision
SAP SE (NYSE: SAP) today announced its financial results for the second quarter and first half ended June 30, 2014.
- Raising Full Year 2014 Non-IFRS Cloud Subscriptions and Support Revenue Outlook to €1,000 – €1,050 Million at Constant Currencies
- Fastest Growing Enterprise Cloud Company at Scale: Non-IFRS Cloud Subscriptions and Support Revenue Increased 39% at Constant Currencies (32% at Actual Currencies)
- Strong Cloud Billings: Non-IFRS Calculated Cloud Billings Increased 37% at Constant Currencies
- Growing the World’s Largest Business Network: Approximately 1.55 Million Connected Companies Transacting Approximately $540 Billion
- Broad Market Adoption of SAP HANA as Real-Time Business Platform: 1,200 SAP Business Suite on HANA Customers
- Delivered Second Quarter at High End of Full Year SSRS Outlook: Non-IFRS Software and Software-Related Service Revenue Increased 8% at Constant Currencies (4% at Actual Currencies to €3.48 Billion)
- IFRS Operating Profit of €698 Million (2013: €988 Million) Impacted by Provision of €289 Million for Seven-Year Old Versata Litigation
- Non-IFRS Operating Profit Increased 7% at Constant Currencies (4% at Actual Currencies to €1.24 Billion), Resulting in a 60 Basis Point Increase in Non-IFRS Operating Margin at Constant Currencies
BUSINESS HIGHLIGHTS IN THE SECOND QUARTER 2014
SAP again delivered strong growth in the cloud and a solid performance in its core business. With non-IFRS cloud subscriptions and support revenue increasing 39% at constant currencies (32% at actual currencies) SAP is the fastest growing enterprise cloud company at scale. Non-IFRS software and software-related service revenue grew 8% at constant currencies (4% at actual currencies).
At the Company’s user conference SAPPHIRE NOW in May SAP launched the "Run simple" strategy with cloud and SAP HANA at its core to simplify the business experience and consumption for its customers. HANA is radically simplifying the technology stack. Cloud is radically simplifying the consumption of SAP’s solutions. As a first example for "Run simple" the Company has included the SAP FIORI user experience within underlying licenses of SAP software.
"We are successfully executing our shift to the cloud helping customers run simple – from total workforce management in the cloud to frictionless commerce through the world’s largest business network," said Bill McDermott, CEO of SAP. "And we are redefining customer engagement with our omni-channel e-commerce platform – all of this in real time demonstrating our clear commitment to be THE Cloud Company powered by SAP HANA."
"With 8% constant currency growth in non-IFRS software and software-related service revenue we are delivering solid growth at the high end of our full year outlook range. We continue to improve our profitability with operating profit up 7% on a non-IFRS constant currency basis leading to double-digit growth in non-IFRS EPS," said Luka Mucic, CFO of SAP. "As we continue to expand our cloud business we have increased our full year non-IFRS cloud subscriptions and support revenue outlook to €1,000 – €1,050 million at constant currencies."
SAP’s annual cloud revenue run rate is now approaching €1.2 billion or $1.6 billion. Non-IFRS calculated cloud billings increased 37% year-over-year at constant currencies. Non-IFRS deferred cloud subscriptions and support revenue was €448 million as of June 30, 2014, a year-over-year increase of 29% at constant currencies. SAP’s cloud applications total subscribers now exceed 38 million, which is the most of any enterprise cloud vendor in the industry today. The Company has also launched "Industry Cloud" to build the deepest and broadest industry cloud solutions.
SAP is redefining customer engagement. Its hybris omni-channel e-commerce platform in combination with Cloud for Sales saw triple-digit growth in software revenue and cloud subscriptions and support revenue.
SAP is enabling the global "Network Economy" with approximately 1.55 million connected companies on the world’s largest cloud-based business trading community. Trailing twelve month Ariba network spend volume was approximately $540 billion – two times the size of Amazon and eBay combined. The addition of Fieldglass expands our network capabilities by increasing our addressable market to cover flexible workforce in addition to materials and services.
The Company saw continued broad market adoption of SAP HANA as the Real-Time Business Platform across all industries and regions. SAP HANA is at the core of the Company’s "Run simple" strategy: integrating all SAP solutions on ONE business platform in the Cloud. SAP saw accelerated HANA momentum and now has more than 3,600 HANA customers and more than 1,200 customers for SAP Business Suite on HANA. SAP HANA is also evolving into the leading technology platform with more than 1,500 startup companies building applications on SAP HANA and new strategic partnerships with HP and VMware.
BUSINESS OUTLOOK 2014
The Company updated its outlook for the full-year 2014:
- The Company now expects full year 2014 non-IFRS cloud subscriptions and support revenue to be in a range of €1,000 – €1,050 million (previously €950 – €1,000 million) at constant currencies (2013: €757 million). The upper end of this range represents a growth rate of 39%.
- The Company continues to expect full year 2014 non-IFRS software and software-related service revenue to increase by 6% - 8% at constant currencies (2013: €14.03 billion).
- The Company continues to expect full-year 2014 non-IFRS operating profit to be in a range of €5.8 billion – €6.0 billion at constant currencies (2013: €5.48 billion).
While the Company's full-year 2014 business outlook is at constant currency, actual currency reported figures are expected to continue to be negatively impacted by currency exchange rate fluctuations. If exchange rates remain at the June 2014 level for the rest of the year, the Company expects non-IFRS software and software-related service revenue and non-IFRS operating profit growth rates at actual currency to experience a negative currency impact of approximately 2 percentage points and 2 percentage points respectively for the third quarter of 2014 and of approximately 2 percentage points and 2 percentage points respectively for the full year 2014.
Notes to the Editor:
- Starting in the second quarter 2014 SAP additionally adjusted its non-IFRS operating expenses definition by excluding the expenses resulting from the Versata litigation. Prior period amounts have been adjusted to comply with the new definition. Second quarter 2013 non-IFRS operating margin is now 29.0%.
- Defined as enterprise application companies with an annual cloud revenue run rate above €1 billion.
- The annual revenue run rate is the total of second quarter 2014 non-IFRS cloud subscriptions and support revenue (€242 million) plus non-IFRS cloud-related professional services and other service revenue (€54 million) multiplied by 4.
- Translated into USD for reader’s convenience based on $/€ exchange rate of $1.37/€1.00 at the end of the second quarter 2014.
- Total of a period's cloud subscriptions and support revenue and of the respective period's change in the deferred cloud subscription and support revenue balance. The opening balance for Fieldglass deferred cloud subscriptions and support revenue at May 2, 2014 was €1 million (both on an IFRS and non-IFRS basis). In the second quarter 2014, Fieldglass contributed €11 million to SAP’s cloud subscriptions and support revenue (both on an IFRS and non-IFRS basis).
work spend volume is the total value of purchase orders transacted on the Ariba Network in the trailing 12 months.
Second Quarter 2014 Interim Report
SAP’s second quarter 2014 Interim Report was published today and is available for download at www.sap.com/investor.
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 258,000 customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com
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