in € millions, unless otherwise stated; based on SAP group results from continuing operations
- Cloud revenue up 16% and up 23% at constant currencies
- Current cloud backlog of €12.3 billion up 19% and up 25% at constant currencies
- IFRS cloud gross profit up 21%, non-IFRS cloud gross profit up 21% and up 28% at constant currencies, supported by the expansion of cloud gross margin
- IFRS operating profit up 11%, non-IFRS operating profit up 10% and up 16% at constant currencies
- SAP reaffirms 2023 outlook
WALLDORF, Germany, Oct. 18, 2023 /PRNewswire/ -- SAP SE (NYSE: SAP) today announced its financial results for the third quarter ended September 30, 2023.
Christian Klein, CEO: "Our Q3 results are yet another proof point that we have entered the next phase of our transformation. We accelerated cloud growth across our portfolio and significantly expanded our cloud gross margins. Our strong focus on innovation, including our latest SAP Business AI capabilities, ensure SAP's continued resiliency in the face of tough macroeconomic conditions and increasing geopolitical tensions."
Dominik Asam, CFO: "Our Q3 results demonstrate strong execution and the resilience of our business, including sustained cloud growth in spite of persisting macro headwinds. Also, we carefully balance growth and profitability at all times. In combination, this allows us to boost our bottom-line with the aim to achieve double-digit operating profit growth this year."
All figures in this statement are based on SAP group results from continuing operations unless otherwise noted. See section (M) Discontinued Operations.
Financial Performance
|
Group results at a glance – Third quarter 2023
|
|
IFRS
|
|
Non-IFRS1
|
|
€ million, unless otherwise stated
|
Q3 2023
|
Q3 2022
|
∆ in %
|
|
Q3 2023
|
Q3 2022
|
∆ in %
|
∆ in %
const.
curr.
|
|
Cloud revenue
|
3,472
|
2,986
|
16
|
|
3,472
|
2,986
|
16
|
23
|
|
Thereof SAP S/4HANA Cloud revenue
|
914
|
546
|
67
|
|
914
|
546
|
67
|
77
|
|
Software licenses
|
335
|
406
|
–17
|
|
335
|
406
|
–17
|
–14
|
|
Software support
|
2,872
|
3,016
|
–5
|
|
2,872
|
3,016
|
–5
|
–1
|
|
Software licenses and support revenue
|
3,208
|
3,422
|
–6
|
|
3,208
|
3,422
|
–6
|
–2
|
|
Cloud and software revenue
|
6,679
|
6,408
|
4
|
|
6,679
|
6,408
|
4
|
9
|
|
Total revenue
|
7,744
|
7,476
|
4
|
|
7,744
|
7,476
|
4
|
9
|
|
Share of more predictable revenue (in %)
|
82
|
80
|
2pp
|
|
82
|
80
|
2pp
|
|
|
Operating profit (loss)
|
1,724
|
1,557
|
11
|
|
2,278
|
2,075
|
10
|
16
|
|
Profit (loss) after tax from continuing operations
|
1,272
|
839
|
52
|
|
1,687
|
1,240
|
36
|
|
|
Profit (loss) after tax²
|
1,272
|
547
|
>100
|
|
1,687
|
1,263
|
34
|
|
|
Earnings per share - Basic (in €) from continuing operations
|
1.09
|
0.75
|
45
|
|
1.45
|
1.10
|
32
|
|
|
Earnings per share - Diluted (in €) from continuing operations
|
1.08
|
0.75
|
44
|
|
|
|
|
|
|
Earnings per share - Basic (in €)²
|
1.09
|
0.57
|
91
|
|
1.45
|
1.12
|
30
|
|
|
Earnings per share - Diluted (in €)²
|
1.08
|
0.57
|
90
|
|
|
|
|
|
|
Net cash flows from operating activities from continuing operations
|
1,124
|
887
|
27
|
|
|
|
|
|
|
Free cash flow
|
|
|
|
|
865
|
513
|
69
|
|
|
Number of employees (FTE, September 30)
|
106,495
|
106,912
|
0
|
|
|
|
|
|
|
1
|
For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement.
|
|
2
|
From continuing and discontinued operations.
|
|
Group results at a glance – Nine months ended September 2023
|
|
IFRS
|
|
Non-IFRS1
|
|
€ million, unless otherwise stated
|
Q1–Q3
2023
|
Q1–Q3
2022
|
∆ in %
|
|
Q1–Q3
2023
|
Q1–Q3
2022
|
∆ in %
|
∆ in %
const.
curr.
|
|
Cloud revenue
|
9,965
|
8,348
|
19
|
|
9,965
|
8,348
|
19
|
22
|
|
Thereof SAP S/4HANA Cloud revenue
|
2,453
|
1,422
|
72
|
|
2,453
|
1,422
|
72
|
77
|
|
Software licenses
|
927
|
1,149
|
–19
|
|
927
|
1,149
|
–19
|
–17
|
|
Software support
|
8,651
|
8,916
|
–3
|
|
8,651
|
8,916
|
–3
|
–1
|
|
Software licenses and support revenue
|
9,577
|
10,065
|
–5
|
|
9,577
|
10,065
|
–5
|
–3
|
|
Cloud and software revenue
|
19,542
|
18,413
|
6
|
|
19,542
|
18,413
|
6
|
9
|
|
Total revenue
|
22,739
|
21,456
|
6
|
|
22,739
|
21,456
|
6
|
8
|
|
Share of more predictable revenue (in %)
|
82
|
80
|
1pp
|
|
82
|
80
|
1pp
|
|
|
Operating profit (loss)
|
3,885
|
4,088
|
–5
|
|
6,211
|
5,429
|
14
|
19
|
|
Profit (loss) after tax from continuing operations
|
2,399
|
2,468
|
–3
|
|
4,189
|
3,508
|
19
|
|
|
Profit (loss) after tax2
|
4,671
|
1,382
|
>100
|
|
6,243
|
3,522
|
77
|
|
|
Earnings per share - Basic (in €) from continuing operations
|
2.07
|
2.17
|
–5
|
|
3.60
|
3.05
|
18
|
|
|
Earnings per share - Diluted (in €) from continuing operations
|
2.05
|
2.16
|
–5
|
|
|
|
|
|
|
Earnings per share - Basic (in €)2
|
4.13
|
1.49
|
>100
|
|
5.53
|
3.08
|
80
|
|
|
Earnings per share - Diluted (in €)2
|
4.09
|
1.48
|
>100
|
|
|
|
|
|
|
Net cash flows from operating activities from continuing operations
|
4,284
|
3,653
|
17
|
|
|
|
|
|
|
Free cash flow
|
|
|
|
|
3,423
|
2,662
|
29
|
|
|
Number of employees (FTE, September 30)
|
106,495
|
106,912
|
0
|
|
|
|
|
|
|
1
|
For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement.
|
|
2
|
From continuing and discontinued operations.
|
Financial Highlights1
Third Quarter 2023
Current cloud backlog grew by 19% to €12.27 billion and was up 25% at constant currencies. SAP S/4HANA current cloud backlog was up 58% to €4.20 billion and up 66% at constant currencies.
In the third quarter, cloud revenue was up 16% to €3.47 billion and up 23% at constant currencies, mainly driven by the growth of SAP's combined SaaS and PaaS portfolio, which was up 19% and up 26% at constant currencies. SAP S/4HANA cloud revenue was up 67% to €914 million and up 77% at constant currencies.
Supported by a few major transactions, software licenses revenue decreased by 17% to €335 million and was down 14% at constant currencies. Cloud and software revenue was up 4% to €6.68 billion and up 9% at constant currencies. Services revenue was flat at €1.07 billion and up 4% at constant currencies. Total revenue was up 4% to €7.74 billion and up 9% at constant currencies.
The share of more predictable revenue increased by 2 percentage points to 82% in the third quarter.
Cloud gross profit was up 21% (IFRS) to €2.53 billion, up 21% to €2.56 billion (non-IFRS), and up 28% (non-IFRS at constant currencies). Cloud gross profit growth was supported by a strong increase in cloud gross margins. IFRS cloud gross margin was up 2.9 percentage points to 72.7%, non-IFRS cloud gross margin up 2.9 percentage points to 73.7% and up 2.9 percentage points at constant currencies.
IFRS operating profit increased 11% to €1.72 billion. Non-IFRS operating profit was up 10% to €2.28 billion and up 16% at constant currencies. The increase was supported by the resilience of our on-premise business as well as continued operational discipline, which overcompensated the negative impact of an accelerated amortization of capitalized sales commissions related to the on-premise business (see section (O) Capitalized Cost from Contracts with Customers – Costs of Obtaining Customer Contracts).
IFRS earnings per share (basic) increased 45% to €1.09. Non-IFRS earnings per share (basic) increased 32% to €1.45. The effective tax rate was 27.8% (IFRS) and 27.1% (non-IFRS).
Free cash flow in the third quarter increased by 69% to €865 million. While payments for taxes and share-based compensation increased, the positive development was driven by SAP's profitability, improvements in working capital and lower payments for capex and leasing. For the first nine months, free cash flow was up 29% to €3.42 billion.
Share Repurchase Program
On May 16, SAP announced a new share repurchase program with an aggregate volume of up to €5 billion and a term until December 31, 2025. As of September 29, SAP had repurchased 7,190,252 shares at an average price of €125.49 with a purchased value of approximately €902 million under the program.
Business Highlights
In the third quarter, customers around the globe continued to choose "RISE with SAP" to drive their end-to-end business transformations. These customers included ADAC, Alnatura, BC Hydro, Bobst Mex, Constellium, Graybar, Hitachi Zosen Corporation, KAESER KOMPRESSOREN, LG Electronics, LG Energy Solution, PUMA, Siemens Healthineers, and University of Leeds.
BMW Group, Celltrion Healthcare, City of Vancouver, Schneider Electric, Toll Group, and UPL Limited went live on SAP S/4HANA Cloud in the third quarter.
Atria, elobau, Leanin' Tree, Northstar Clean Technologies, PERSSA, Phoenix Global, Tait International, and Ziegler Holding chose "GROW with SAP", a new offering helping midsize customers adopt cloud ERP with speed, predictability, and continuous innovation.
Key customer wins across SAP's solution portfolio included: Accenture, Adobe, BVG (Berlin public transport), Ecovacs, freenet DLS, Fressnapf, Heidelberger Druckmaschinen, Hyundai Motor Company / Kia, Jollibee Foods Corporation, Lenovo, RICOH, Salling Group, and thyssenkrupp Steel Europe.
Ducati Motor Holding, Gilead Sciences, Hunkemöller, The KaDeWe Group, Swiss Federal Railways, and SCOTT Sports went live on SAP solutions.
In the third quarter, SAP's cloud revenue performance was particularly strong in APJ and EMEA and solid in the Americas region. Brazil, India, and the Netherlands had outstanding cloud revenue growth while Canada, China, France, Germany, Japan, and Switzerland performed particularly strong.
On July 4, 2023, SAP was informed that Standard and Poor's (S&P) upgraded its credit rating to A+ from A, citing SAP's sound cloud transition execution, its track record of deleveraging quickly and its high cash generation.
On July 18, SAP announced the next step in its commitment to deliver Business AI that is relevant, reliable, and responsible with strategic investments in three leading generative AI companies. The investments in Aleph Alpha, Anthropic, and Cohere reinforce SAP's open ecosystem approach to AI, leveraging the best technology to embed AI across SAP's portfolio.
On August 29, SAP announced that Gina Vargiu-Breuer has been appointed to the Executive Board of SAP as Chief People Officer and labor director, effective from February 1, 2024. She will succeed Sabine Bendiek, who will be leaving the company at her own request upon the end of her term on December 31, 2023.
On August 29, SAP and Google Cloud announced an expanded partnership to help enterprises harness the power of data and generative AI. The companies will combine their integrated open data cloud using the SAP Datasphere solution with Vertex AI to launch new generative AI-powered industry solutions starting with automotive and to introduce new capabilities to help customers improve sustainability performance.
On September 1, SAP announced the appointment of Walter Sun as Global Head of Artificial Intelligence. Sun joined SAP from Microsoft where he served as vice president of Copilot Applied Artificial Intelligence for business applications.
On September 7, SAP and LeanIX GmbH announced that SAP has entered into an agreement to acquire LeanIX, a leader in enterprise architecture management (EAM) software. The planned acquisition is expected to help SAP expand its business transformation portfolio, giving customers access to the full suite of tools required for continuous business transformation and facilitating AI-enabled process optimization. The transaction is expected to close in the fourth quarter of 2023, subject to customary closing conditions and regulatory approvals.
On September 26, SAP announced Joule, a natural-language, generative AI copilot. Joule will be embedded throughout SAP's cloud enterprise portfolio, delivering proactive and contextualized insights from across the breadth and depth of SAP solutions and third-party sources.
Segment Results at a Glance
SAP's reportable segment showed the following performance:
|
Applications, Technology & Services1
|
Q3 2023
|
|
€ million, unless otherwise stated
(Non-IFRS)
|
Actual
Currency
|
∆ in %
|
∆ in %
Constant Currency
|
|
Cloud revenue – SaaS2
|
2,448
|
17
|
24
|
|
Cloud revenue – PaaS3
|
558
|
39
|
46
|
|
Cloud revenue – IaaS4
|
186
|
–20
|
–16
|
|
Cloud revenue
|
3,192
|
17
|
24
|
|
Cloud gross profit – SaaS2
|
1,750
|
18
|
26
|
|
Cloud gross profit – PaaS3
|
473
|
48
|
55
|
|
Cloud gross profit – IaaS4
|
70
|
1
|
–3
|
|
Cloud gross profit
|
2,292
|
23
|
30
|
|
Segment revenue
|
7,460
|
3
|
9
|
|
Segment profit (loss)
|
2,666
|
18
|
24
|
|
Segment margin (in %)
|
35.7
|
4.3pp
|
4.4pp
|
|
1
|
Segment information for comparative prior periods were restated to conform with the new segment composition.
|
|
2
|
Software as a service: SaaS comprises all other offerings which are not shown as PaaS and IaaS.
|
|
3
|
Platform as a service: PaaS primarily includes SAP Business Technology Platform and SAP Signavio.
|
|
4
|
Infrastructure as a service: A major portion of IaaS comes from SAP HANA Enterprise Cloud.
|
In the third quarter, segment revenue in AT&S was up 3% to €7.46 billion and up 9% at constant currencies, primarily due to strong cloud revenue growth, which was supported by SAP S/4HANA as well as Business Technology Platform. Operating Expenses of the segment decreased by 3% and increased by 2% at constant currencies, resulting in a segment margin of 35.7% and 35.8% at constant currencies. This implies a growth of 4.3 percentage points and 4.4 percentage points at constant currencies compared to the third quarter of the prior year.
Cloud Performance
|
Q3 2023
|
|
Q1–Q3 2023
|
|
€ millions, unless otherwise stated
(non-IFRS)
|
Actual
Currency
|
∆ in %
|
∆ in %
Constant
Currency
|
|
Actual
Currency
|
∆ in %
|
∆ in %
Constant
Currency
|
|
Current Cloud Backlog
|
|
|
|
|
|
|
|
|
Total
|
12,269
|
19
|
25
|
|
12,269
|
19
|
25
|
|
Thereof SAP S/4HANA
|
4,199
|
58
|
66
|
|
4,199
|
58
|
66
|
|
Cloud Revenue
|
|
|
|
|
|
|
|
|
SaaS1
|
2,727
|
16
|
23
|
|
7,827
|
20
|
22
|
|
PaaS2
|
558
|
39
|
46
|
|
1,561
|
43
|
46
|
|
IaaS3
|
186
|
–20
|
–16
|
|
577
|
–18
|
–17
|
|
Total
|
3,472
|
16
|
23
|
|
9,965
|
19
|
22
|
|
Thereof SAP S/4HANA
|
914
|
67
|
77
|
|
2,453
|
72
|
77
|
|
Cloud Gross Profit
|
|
|
|
|
|
|
|
|
SaaS1
|
2,016
|
17
|
24
|
|
5,688
|
20
|
23
|
|
PaaS2
|
473
|
48
|
55
|
|
1,316
|
49
|
53
|
|
IaaS3
|
70
|
1
|
–3
|
|
219
|
–11
|
–11
|
|
Total
|
2,558
|
21
|
28
|
|
7,222
|
23
|
26
|
|
Cloud Gross Margin (in %)
|
|
|
|
|
|
|
|
|
SaaS1 (in %)
|
73.9
|
0.6pp
|
0.7pp
|
|
72.7
|
0.2pp
|
0.4pp
|
|
PaaS2 (in %)
|
84.7
|
5.0pp
|
5.0pp
|
|
84.3
|
3.8pp
|
3.9pp
|
|
IaaS3 (in %)
|
37.4
|
7.9pp
|
4.6pp
|
|
37.9
|
3.0pp
|
2.4pp
|
|
Total
|
73.7
|
2.9pp
|
2.9pp
|
|
72.5
|
2.1pp
|
2.3pp
|
|
1
|
Software as a service: SaaS comprises all other offerings which are not shown as PaaS and IaaS.
|
|
2
|
Platform as a service: PaaS primarily includes SAP Business Technology Platform and SAP Signavio.
|
|
3
|
Infrastructure as a service: A major portion of IaaS comes from SAP HANA Enterprise Cloud.
|
|
Due to rounding, numbers may not add up precisely.
|
Business Outlook
Financial Outlook 2023
For 2023, SAP continues to expect:
- €14.0 – 14.2 billion cloud revenue at constant currencies (2022: €11.43 billion), up 23% to 24% at constant currencies.
- €27.0 – 27.4 billion cloud and software revenue at constant currencies (2022: €25.39 billion), up 6% to 8% at constant currencies.
- €8.65 – 8.95 billion non-IFRS operating profit at constant currencies (2022: €7.99 billion), up 8% to 12% at constant currencies.
- A share of more predictable revenue of approximately 82% (2022: 79%).
- Free cash flow of approximately €4.9 billion (2022: €4.4 billion).
- An effective tax rate (IFRS) of 28.0% to 32.0% (2022: 32.0%) and an effective tax rate (non-IFRS) of 26.0% to 28.0% (2022: 29.6%).
While SAP's 2023 financial outlook is at constant currencies, actual currency reported figures are expected to be impacted by currency exchange rate fluctuations as the Company progresses through the year. See the table below.
Currency Impact Assuming September 2023 Rates Apply for 2023
|
In percentage points
|
Q4 2023
|
FY 2023
|
|
Cloud revenue growth
|
–5ppto–3pp
|
–4pp to –2pp
|
|
Cloud and software revenue growth
|
–4ppto–2pp
|
–4pp to –2pp
|
|
Operating profit growth (non-IFRS)
|
–4ppto–2pp
|
–5pp to –3pp
|
Non-Financial Outlook 2023
SAP continues to focus on three non-financial indicators: customer loyalty, employee engagement, and carbon emissions.
In 2023, SAP continues to expect:
- a Customer Net Promoter Score of 8 to 122.
- an Employee Engagement Index to be in a range of 76% to 80%.
- Net carbon emissions of 0kt, meaning the Company will be carbon neutral in its own operations.
Additional Information
The full Q3 2023 Quarterly Statement can be downloaded from: https://www.sap.com/investors/sap-2023-q3-statement.
This press release and all information therein is preliminary and unaudited. Due to rounding, numbers may not add up precisely.
SAP Performance Measures
For more information about our key growth metrics and performance measures, their calculation, their usefulness, and their limitations, please refer to the following document on our Investor Relations website: https://www.sap.com/investors/performance-measures
Webcast
SAP senior management will host a financial analyst conference call on Wednesday, October 18th at 11:00 PM (CEST) / 10:00 PM (BST) / 5:00 PM (EDT) / 2:00 PM (PDT). The conference will be webcast on the Company's website at https://www.sap.com/investor and will be available for replay. Supplementary financial information pertaining to the third quarter results can be found at https://www.sap.com/investor.
About SAP
SAP's strategy is to help every business run as an intelligent enterprise. As a market leader in enterprise application software, we help companies of all sizes and in all industries run at their best: SAP customers generate 87% of total global commerce. Our machine learning, Internet of Things (IoT), and advanced analytics technologies help turn customers' businesses into intelligent enterprises. SAP helps give people and organizations deep business insight and fosters collaboration that helps them stay ahead of their competition. We simplify technology for companies so they can consume our software the way they want – without disruption. Our end-to-end suite of applications and services enables business and public customers across 25 industries globally to operate profitably, adapt continuously, and make a difference. With a global network of customers, partners, employees, and thought leaders, SAP helps the world run better and improve people's lives. For more information, visit www.sap.com.
|
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)
|
This document contains forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations, forecasts, and assumptions that are subject to risks and uncertainties that could cause actual results and outcomes to materially differ. Additional information regarding these risks and uncertainties may be found in our filings with the Securities and Exchange Commission, including but not limited to the risk factors section of SAP's 2022 Annual Report on Form 20-F.
© 2023 SAP SE. All rights reserved.
SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE in Germany and other countries. Please see https://www.sap.com/copyright for additional trademark information and notices.
1 The Q3 2023 results were also impacted by other effects. For details, please refer to the disclosures on page 29 of this document.
2 The guidance is based on an adjusted methodology for 2023 to better reflect the business priorities of the company.
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SOURCE SAP SE
