SAP Q2 Earnings Up Y/Y on Cloud Strength & Growing Clientele

SAP SE SAP reported second-quarter 2019 non-IFRS earnings of €1.09 (approximately $1.22) per share, which grew 11.2% from the year-ago figure. The Zacks Consensus Estimate was pegged at $1.20.

On IFRS basis, the company reported earnings of €0.48 (almost 54 cents) per share compared with year ago figure of €0.60.

Total revenues, on non-IFRS basis, came in at €6.656 billion (around $7.479 billion), up 11% year over year (up 8% at constant currency). The Zacks Consensus Estimate was pegged at $7.474 billion.

On IFRS basis, revenues were €6.631 billion (roughly $7.451 billion), up 11% year over year.

New cloud bookings advanced 17% (15% at cc) to €494 million.

Price Performance

Shares of SAP are down approximately 6% in the pre-market, which can be attributed to decline in software licenses revenues on account of trade-war headwinds.

Notably, SAP stock has returned 36.1% year to date, outperforming the industry’s rally of 34.3%.

Upbeat Cloud Results

On a non-IFRS basis, Cloud and software business (82.9% of total revenues) reported revenues of €5.52 billion, up 11% year over year (up 8% at cc).

Cloud revenues came in at €1.717 billion, up 40% year over year on a non-IFRS basis (35% at cc). Software licenses & support reported revenues of €3.802 billion, up 2% (flat on a cc basis). Growth in Software support revenues averted the decline in software licenses revenues, which were impacted by macroeconomic trade-related headwinds.

Cloud revenues — related to Software as a Service (SaaS)/Platform as a Service (PaaS) — surged 34% at cc to €1.49 billion. Cloud revenues — Infrastructure as a Service (IaaS) related — rallied 46% year over year at cc to €164 million.

Services revenues (17.1% of total revenues) increased 8% from the year-ago quarter (up 5% at cc) to €1.136 billion (non-IFRS).

SAP provides collaborative commerce capabilities (Ariba), flexible workforce management (Fieldglass) and effortless travel and expense processing (Concur) under its Intelligent Spend Group (formerly named Business Network). Approximately $3.3 trillion in global commerce is transacted annually through this platform across more than 180 countries.

Segment wise, Applications, Technology & Services (AT&S) revenues increased 4% at cc to €5,382 billion. Intelligent Spend Group revenues jumped 17% at cc to €786 million. Moreover, Customer and Experience Management (CXM) revenues were up 74% year over year at cc to €365 million.

Expanding Clientele Favors Top Line

S/4HANA adoption grew 29% year over year to around 11,500 customers. In the reported quarter, net new customers comprised approximately 50%.

S/4HANA clientele continues to expand with the addition of the Texas Department of Transportation and Wanhua Chemical Group, among others. Notably, companies including Colgate-Palmolive, Hitachi, Touche Southern Africa and Deloitte, have gone live with S/4HANA solution in the cloud.

Moreover, SAP’s C/4HANA customer experience solution was selected by NH Hotel Group, Hamburg Commercial Bank and Aritzia in the reported quarter.

SAP’s Human Capital management (HCM) flagship solution — SuccessFactors Employee Central — ended the reported quarter with more than 3,350 customers. Notable deal wins in the quarter comprise Burger King Brazil, Claas, CONA Services, and Keolis.

Patentes Talgo selected SAP’s Leonardo solution in the reported quarter. Notably, Leonardo integrates IoT, Big Data, ML, Analytics and Blockchain capabilities on the SAP Cloud platform.

Digital Platform comprises SAP Data Management and SAP Cloud Platform solutions. In the reported quarter, notable deal wins for the company’s Digital Platform offerings include Grupo Energia Bogota and the State of Illinois. Moreover, Follett Corporation and Uniper adopted SAP Analytics Cloud.

Additionally, Uniper and Kawasaki Heavy Industry opted for the company’s Intelligent Spend Group solutions in the quarter.

Management is optimistic regarding the acquisition of Qualtrics, concluded on Jan 23, 2019, for $8 billion in cash. Financials pertaining to Qualtrics fall under CXM segment. Notably, Qualtrics solutions were selected by the United States Department of State and Chalhoub Group in the reported quarter.

EMEA Witnessed Robust Cloud Growth

Europe, Middle East & Africa (EMEA) Cloud revenues surged 44% at cc. Cloud & software revenues increased 8% at cc. The top line was driven by strong cloud revenues in Spain and Germany. Management is elated on robust software revenue growth witnessed in Italy and France.

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