SAP Raises Outlook - Q2 Total Revenue Up Double-Digit

- Strong new cloud bookings, up 33%

- Stellar software revenue, up 5% - beating a record Q2 2016

- Operating profit down 27% (IFRS) and up 4% (Non-IFRS) - compared with exceptional profits in Q2 2016

- Digital core business soars with over 6,300 S/4HANA customers - up over 70% year over year

- Share buyback announced, up to €500 million in 2017 - following strong operating cash flow, up 20% in HY

News provided by

SAP SE

Jul 20, 2017, 01:01 ET

WALLDORF, Germany, July 20, 2017 /PRNewswire/ -- SAP SE (NYSE: SAP) today announced its financial results for the second quarter 2017 ended June 30, 2017.

"This strong quarter is the latest in SAP's 8-year run of consistent, profitable growth. Our winning strategy is again validated by fast adoption of S/4HANA and our full portfolio of cloud solutions. We expect continuing momentum in the second half and confidently raise our guidance for the full year. SAP has never been better positioned." - Bill McDermott, CEO

SAP Raises Outlook - Q2 Total Revenue Up Double-Digit

"Our fantastic momentum continued with double-digit growth in total revenue. Our cloud & software revenue growth rate in the first half of the year is at the upper end of our full-year guidance range. Based on our strong growth and cash generation we are pleased to share SAP's success with our shareholders by initiating a share buyback of up to €500 million in the second half." - Luka Mucic, CFO

Business Highlights

Financial Highlights

Second Quarter 2017

SAP's fast growth in the cloud continued in the second quarter. New cloud bookings¹ grew by 33% (33% at constant currencies) in the second quarter and reached €340 million. Both IFRS and non-IFRS cloud subscriptions and support revenue grew 29% year-over-year (27% at constant currencies) to €932 million. IFRS and non-IFRS software revenue was €1.09 billion, up 5% year-over-year (4% at constant currencies). New cloud and software license order entry² grew by more than 20% year-over-year in the second quarter. IFRS and non-IFRS cloud and software revenue was €4.76 billion, an increase of 9% (8% at constant currencies). SAP's "predictable revenue", i.e. the total of cloud subscriptions & support revenue and software support revenue, was 63% of total revenue.

IFRS operating profit was down 27% to €926 million. Non-IFRS operating profit grew 4% to €1.57 billion (3% at constant currencies). IFRS earnings per share decreased 18% to €0.56. Non-IFRS earnings per share increased 14% to €0.94. The IFRS operating profit and EPS were primarily impacted by a strong increase in restructuring related expenses and share-based compensation expenses in the second quarter.

Operating cash flow for the first six months was €3.51 billion, an increase of 20% year-over-year and free cash flow increased 15% year-over-year to €2.90 billion. At quarter end, net debt was €1.79 billion, an improvement of €2.5 billion year over year. SAP's strong growth and cash generation provide significant flexibility around capital allocation aimed at driving shareholder value. After evaluating the expected cash flow development for the second half of 2017 and consistent with the company's capital allocation priorities, SAP has decided on a share buyback of up to €500 million in 2017. The share buyback will start shortly and will be executed in several tranches.

SAP S/4HANA

With S/4HANA customers can massively simplify their IT landscape, run live and reinvent their business model for the digital economy across both cloud and on-premise deployments. S/4HANA adoption grew to more than 6,300 customers, up over 70% year over year. In the second quarter, approximately 500 additional customers signed up of which around 30% were net new customers. Google, Centrica, and Mercadona selected S/4HANA in the second quarter.

SAP Leonardo

SAP Leonardo is a set of cutting-edge tools which turn systems of record into systems of intelligence. SAP Leonardo integrates breakthrough technologies such as Artificial Intelligence, Machine Learning and Internet of Things and runs them seamlessly in the cloud. It offers design thinking methodology and SAP expertise to help companies rapidly adopt new capabilities and business models and accelerate digital transformation. CITIC Pacific Mining among many others adopted SAP Leonardo solutions in the second quarter.

Human Capital Management

With SuccessFactors and Fieldglass, SAP delivers total workforce management across both permanent and contingent labor, localized for 84 countries and 42 languages. Top industry analysts recently gave SAP SuccessFactors the highest rankings in Cloud HCM for Core HR and Talent Management for global organizations with more than 5,000 workers as well as for mid-market European-headquartered enterprises. SuccessFactors Employee Central, which is the core of our HCM offering, had more than 1,800 customers at the end of the second quarter. Companies like Vitra and Swiss Post selected SAP's workforce management solutions in the second quarter.

Customer Engagement and Commerce

SAP's next generation customer engagement solutions enable businesses to manage their front office across the entire spectrum from marketing to sales to services – seamlessly and in real-time. Businesses get a single view of their customer – be it social, retail or e-commerce. SAP's CEC solutions serve both B2C and B2B across a wide range of industries, including retail, telco, financial services, manufacturing and the public sector. Top industry analysts recently named SAP Hybris a leader for both B2C and B2B Digital Commerce and Multichannel Marketing Campaign Management. SAP's CEC solutions once again achieved strong double-digit new cloud bookings growth as well as double-digit growth in software revenue.

Business Networks

Each of SAP's business network solutions provides a rich, open, global platform that connects a large ecosystem of customers, suppliers, partners and developers delivering ever expanding content and innovation. On the Ariba Network, more than 2.8 million companies in over 180 countries collaborate and trade nearly $1 trillion in goods and services annually. Concur helps more than 49 million end users effortlessly process travel and expenses. With SAP Fieldglass customers manage over 3.5 million contingent workers in more than 140 countries. Total revenue in the SAP Business Network segment was up 22% in the second quarter to €570 million.

Regional Revenue Performance in the Second Quarter 2017

SAP had a strong performance in the EMEA region with cloud and software revenue increasing 9% (IFRS). Cloud subscriptions and support revenue grew 48% (IFRS) with an especially strong quarter in Germany and Russia. SAP also had double-digit software revenue growth in Germany and MENA (Middle East and North Africa) and triple-digit software revenue growth in Russia.

The Company had solid growth in the Americas region with cloud and software revenue growing by 8% (IFRS) and cloud subscriptions and support revenue increasing by 20% (IFRS). In North America, Canada had double-digit growth in software revenue. In Latin America Mexico and Chile were highlights with double-digit software revenue growth.

In the APJ region, SAP had an exceptional performance in both cloud and software revenue and cloud subscriptions and support revenue. Cloud and software revenue was up 13% (IFRS) with cloud subscriptions and support revenue growing by 52% (IFRS). China was very strong in cloud subscriptions and support revenue while Japan and Australia both had strong double-digit growth in software revenue.

Financial Results at a Glance

Second Quarter 2017¹⁾
	IFRS			Non-IFRS²⁾
€ million, unless otherwise stated	Q2 2017	Q2 2016	∆ in %	Q2 2017	Q2 2016	∆ in %	∆ in % const. curr.
New Cloud Bookings³⁾	N/A	N/A	N/A	340	255	33	33
Cloud subscriptions and support	932	720	29	932	721	29	27
Software licenses and support	3,826	3,639	5	3,826	3,640	5	4
Cloud and software	4,757	4,359	9	4,758	4,361	9	8
Total revenue	5,782	5,237	10	5,782	5,239	10	9
Share of predictable revenue (in %)	63	63	0pp	63	63	0pp
Operating profit	926	1,269	–27	1,570	1,516	4	3
Profit after tax	666	813	–18	1,120	979	14
Basic earnings per share (€)	0.56	0.68	–18	0.94	0.82	14
Number of employees (FTE)	87,114	79,962	9	N/A	N/A	N/A	N/A


Six months ended June 2017¹⁾
	IFRS			Non-IFRS²⁾
€ million, unless otherwise stated	Q1–Q2 2017	Q1–Q2 2016	∆ in %	Q1–Q2 2017	Q1–Q2 2016	∆ in %	∆ in % const. curr.
New Cloud Bookings³⁾	N/A	N/A	N/A	555	400	39	37
Cloud subscriptions and support	1,837	1,397	31	1,837	1,399	31	28
Software licenses and support	7,248	6,811	6	7,248	6,813	6	4
Cloud and software	9,085	8,208	11	9,085	8,212	11	8
Total revenue	11,066	9,964	11	11,067	9,967	11	9
Share of predictable revenue (in %)	66	66	0pp	66	66	0pp
Operating profit	1,599	2,082	–23	2,768	2,620	6	3
Profit after tax	1,197	1,382	–13	2,006	1,742	15
Basic earnings per share (€)	0.99	1.16	–14	1.67	1.46	14
Number of employees (FTE)	87,114	79,962	9	N/A	N/A	N/A	N/A

¹⁾ All figures are unaudited.

²⁾ For a detailed description of SAP's non-IFRS measures see Explanation of Non-IFRS Measures online. For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement.

³⁾ As this is an order entry metric, there is no IFRS equivalent.

Due to rounding, numbers may not add up precisely.

Business Outlook 2017

The Company is raising its outlook for the full year 2017:

Based on the continued strong momentum in SAP's cloud business, the Company expects full year 2017 non-IFRS cloud subscriptions and support revenue to be in a range of €3.8 billion to €4.0 billion at constant currencies (2016: €2.99 billion). The upper end of this range represents a growth rate of 34% at constant currencies.
Due to increasing adoption of S/4HANA and our Digital Business Platform the Company now expects full year 2017 non-IFRS cloud & software revenue to increase by 6.5% to 8.5% at constant currencies (2016: €18.43 billion).
The Company now expects full year 2017 non-IFRS total revenue in a range of €23.3 billion to €23.7 billion at constant currencies (2016: €22.07 billion).
The Company expects full-year 2017 non-IFRS operating profit to be in a range of €6.8 billion to €7.0 billion at constant currencies (2016: €6.63 billion).

While the Company's full-year 2017 business outlook is at constant currencies, actual currency reported figures are expected to continue to be impacted by exchange rate fluctuations. If exchange rates remain at the June 2017 average level for the rest of the year, we expect non-IFRS cloud and software revenue and non-IFRS operating profit growth rates to experience a currency headwind in a range of -2 to 0pp in Q3 2017 (-1 to +1pp for the full year 2017).

The full Q2 2017 Quarterly Statement can be downloaded from http://www.sap.com/investors/sap-2017-q2-statement

Additional Information

Media reports have raised questions surrounding contracts and third-party business practices in South Africa. SAP embodies an unwavering commitment to maintain the highest standards of integrity and transparency across its business. SAP has initiated an independent investigation spearheaded by a multinational law firm and overseen by Executive Board Member Adaire Fox-Martin to vigorously review contracts awarded by SAP South Africa.

General Remarks about this Quarterly Statement and the SAP Integrated Report

Since Q1 2016, we issue a quarterly statement for each of the four fiscal quarters. Additionally, we issue a half year report and a full year integrated report. SAP's 2016 Integrated Report and Annual Report to Shareholders, and 2016 Annual Report on Form 20-F were published on February 28, 2017, and are available for download at www.sapintegratedreport.com.

For a more detailed description of all of SAP's non-IFRS measures and their limitations as well as our constant currency and free cash flow figures see Explanation of Non-IFRS Measures online.

Webcast

SAP senior management will host a financial analyst conference call today at 2:00 PM (CET) / 1:00 PM (GMT) / 8:00 AM (Eastern) / 5:00 AM (Pacific). The call will be webcast live on the Company's website at www.sap.com/investor and will be available for replay. Supplementary financial information pertaining to the second quarter results can be found at www.sap.com/investor.

About SAP

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 355,000 business and public sector customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com.

For more information, financial community only:
Stefan Gruber	+49 (6227) 7-44872	[email protected], CET
Follow SAP Investor Relations on Twitter at @sapinvestor.

For more information, press only:
Nicola Leske	+49 (6227) 7-50852	[email protected], CET
Daniel Reinhardt	+49 (6227) 7-40201	[email protected], CET
Rajiv Sekhri	+49 (6227) 7-74871	[email protected], CET

For customers interested in learning more about SAP products:
Global Customer Center:	+49 180 534-34-24
United States Only:	+1 (800) 872-1SAP (+1-800-872-1727)

Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "should" and "will" and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission ("SEC"), including SAP's most recent Annual Report on Form 20-F filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.

No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP SE. The information contained herein may be changed without prior notice.

Some software products marketed by SAP SE and its distributors contain proprietary software components of other software vendors. National product specifications may vary.

These materials are provided by SAP SE and its affiliated companies ("SAP Group") for informational purposes only, without representation or warranty of any kind, and SAP Group shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP Group products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty.

SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other countries. Please see http://www.sap.com/corporate-en/legal/copyright/index.epx#trademark for additional trademark information and notices.

________________________________
¹ New cloud bookings is the total of all orders received in a given period the revenue from which is expected to be classified as cloud subscription and support revenue and that result from purchases by new customers and from incremental purchases by existing customers. Consequently, orders to renew existing contracts are not included in this metric. The order amount must be committed. Consequently, due to their pay-per-use nature, business network transaction fees which do not include a committed minimum consumption are not reflected in the bookings metric (e.g. SAP Ariba and SAP Fieldglass transaction-based fees). Amounts included in the measures are generally annualized (annualized contract value ACV).
² New cloud and software license order entry is the total of new cloud order entry and software license order entry. The new cloud order entry metric is identical to the new cloud bookings metric defined above except that it considers the total contract value (TCV) of the orders where the new cloud bookings metric considers the orders' annualized contract value (ACV). Software license order entry is the total of all orders received in a given period the revenue from which is expected to be classified as software license revenue. The support services commonly sold with the software licenses are not included in the software license order entry metric.