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SAP Announces Q2 2022 Results

  • Cloud revenue up 34% and up 24% at constant currencies to become the largest revenue stream
  • Current cloud backlog exceeds €10 billion, up 34% and up 25% at constant currencies
  • SAP S/4HANA current cloud backlog extends its growth trend, up 100% and up 87% at constant currencies
  • Cloud gross profit up 39% (IFRS), up 38% (non-IFRS) and up 28% (non-IFRS at constant currencies), leading to a strong cloud gross margin expansion
  • IFRS operating profit down 32%, non-IFRS operating profit down 13% and down 16% at constant currencies, primarily due to the impact of the war in Ukraine
  • SAP reaffirms 2022 revenue and free cash flow outlook, updates operating profit outlook range

WALLDORF, Germany, July 21, 2022 /PRNewswire/ — SAP SE (NYSE: SAP) today announced its financial results for the second quarter ended June 30, 2022.

Christian Klein, CEO: “As our Q2 results demonstrate, SAP’s portfolio is more relevant than ever. Our transition to the cloud is ahead of schedule and we have exceeded topline expectations, with cloud revenue becoming SAP’s largest revenue stream. Our pipeline is strong, and we are winning market share underpinned by the very strong 100% growth of S/4HANA current cloud backlog.”

Luka Mucic, CFO: “This quarter again proves that our strategy is resonating, even in an increasingly challenging external environment. We continued to deliver strong topline growth, exceeding revenue expectations and increasing cloud profitability. This quarter, we have recognized the main impact of the war in Ukraine. We believe that we are now able to capitalize on our substantial growth investments of the last 18 months, by delivering sustained growth and profitability expansion.”

Financial Performance

Group results at a glance – Second quarter 2022



IFRS

Non-IFRS1

€ million, unless otherwise stated

Q2 2022

Q2 2021

∆ in %

Q2 2022

Q2 2021

∆ in %

∆ in %

const.

curr.

Cloud revenue

3,056

2,276

34

3,056

2,276

34

24

Software licenses

426

650

–34

426

650

–34

–38

Software support

2,977

2,823

5

2,977

2,823

5

0

Software licenses and support revenue

3,403

3,474

–2

3,403

3,474

–2

–7

Cloud and software revenue

6,459

5,750

12

6,459

5,750

12

5

Total revenue

7,517

6,669

13

7,517

6,669

13

5

Share of more predictable revenue (in %)

80

76

4pp

80

76

4pp


Operating profit (loss)

673

984

–32

1,680

1,922

–13

–16

Profit (loss) after tax

203

1,449

–86

1,093

2,214

–51


Earnings per share – Basic (in €)

0.29

1.15

–75

0.96

1.75

–45


Earnings per share – Diluted (in €)

0.28

1.15

–75





Net cash flows from operating activities

268

686

–61





Free cash flow




–86

403

<-100


Number of employees (FTE, June 30)

110,409

103,876

6






1 For a breakdown of the individual adjustments see table “Non-IFRS Adjustments by Functional Areas” in this Quarterly Statement.


Due to rounding, numbers may not add up precisely.


Group results at a glance – Six months ended June 2022

 


IFRS

Non-IFRS1

€ million, unless otherwise stated

Q1–Q2

2022

Q1–Q2

2021

∆ in %

Q1–Q2

2022

Q1–Q2

2021

∆ in %

∆ in %

const.

curr.

Cloud revenue

5,876

4,421

33

5,876

4,421

33

25

Software licenses

743

1,133

–34

743

1,133

–34

–38

Software support

5,900

5,624

5

5,900

5,624

5

0

Software licenses and support revenue

6,643

6,757

–2

6,643

6,757

–2

–6

Cloud and software revenue

12,519

11,178

12

12,519

11,178

12

6

Total revenue

14,594

13,017

12

14,594

13,017

12

6

Share of more predictable revenue (in %)

81

77

4pp

81

77

4pp


Operating profit (loss)

1,726

1,944

–11

3,358

3,660

–8

–12

Profit (loss) after tax

835

2,519

–67

2,259

3,934

–43


Earnings per share – Basic (in €)

0.92

2.03

–55

1.96

3.14

–37


Earnings per share – Diluted (in €)

0.91

2.03

–55





Net cash flows from operating activities

2,750

3,771

–27





Free cash flow




2,079

3,251

–36


Number of employees (FTE, June 30)

110,409

103,876

6






1 For a breakdown of the individual adjustments see table “Non-IFRS Adjustments by Functional Areas” in this Quarterly Statement.


Due to rounding, numbers may not add up precisely

 

Cloud Performance – Second quarter 2022


IFRS

Non-IFRS1

€ millions, unless otherwise stated

Q2 2022

∆ in %

Q2 2022

∆ in %

∆ in %

constant

currency

Current Cloud Backlog






Total2

NA

NA

10,403

34

25

Thereof SAP S/4HANA2

NA

NA

2,258

100

87

Cloud Revenue






SaaS3

2,409

35

2,409

35

24

PaaS4

389

49

389

49

40

IaaS5

257

14

257

14

7

Total

3,056

34

3,056

34

24

Thereof SAP S/4HANA

472

84

472

84

72

Thereof Qualtrics

279

61

279

61

43

Cloud Gross Profit






SaaS3

1,753

41

1,813

40

28

PaaS4

310

47

310

47

41

IaaS5

70

–12

73

–11

–6

Total

2,132

39

2,196

38

28

Thereof Qualtrics

211

52

247

54

37

Cloud Gross Margin (in %)






SaaS3 (in %)

72.8

3.1 pp

75.2

2.6 pp

2.6 pp

PaaS4 (in %)

79.5

–1.2 pp

79.6

–1.2 pp

0.5 pp

IaaS5 (in %)

27.1

–8.1 pp

28.5

–8.2 pp

–4.6 pp

Total

69.8

2.3 pp

71.9

1.8 pp

2.3 pp

Thereof Qualtrics

75.8

–4.4pp

88.6

–3.8 pp

–3.9 pp

1 For a breakdown of the individual adjustments, see table „Non-IFRS Adjustments by Functional Areas” in this Quarterly Statement.

2 As this is an order entry metric, there is no matching IFRS equivalent.

3 Software as a service

4 Platform as a service

5 Infrastructure as a service

Due to rounding, numbers may not add up precisely

Cloud Performance – Six months ended June 2022


IFRS

Non-IFRS1

€ millions, unless otherwise stated

Q1-Q2 2022

∆ in %

Q1-Q2 2022

∆ in %

∆ in %

constant

currency

Current Cloud Backlog






Total2

NA

NA

10,403

34

25

Thereof SAP S/4HANA2

NA

NA

2,258

100

87

Cloud Revenue






SaaS3

4,644

33

4,644

33

25

PaaS4

739

50

739

50

43

IaaS5

492

12

492

12

6

Total

5,876

33

5,876

33

25

Thereof SAP S/4HANA

876

81

876

81

71

Thereof Qualtrics

548

65

548

65

50

Cloud Gross Profit






SaaS3

3,343

38

3,453

36

27

PaaS4

583

46

583

46

41

IaaS5

129

–13

134

–12

–9

Total

4,054

36

4,170

35

27

Thereof Qualtrics

418

60

489

59

45

Cloud Gross Margin (in %)






SaaS3 (in %)

72.0

2.3 pp

74.4

1.8 pp

1.6 pp

PaaS4 (in %)

78.8

–1.9 pp

78.8

–2.0 pp

–0.9 pp

IaaS5 (in %)

26.2

–7.6 pp

27.3

–7.7 pp

–5.0 pp

Total

69.0

1.7 pp

71.0

1.2 pp

1.4 pp

Thereof Qualtrics

76.3

–2.1pp

89.1

–3.2 pp

–3.3 pp

1 For a breakdown of the individual adjustments, see table „Non-IFRS Adjustments by Functional Areas” in this Quarterly Statement.

2 As this is an order entry metric, there is no matching IFRS equivalent.

3 Software as a service

4 Platform as a service

5 Infrastructure as a service

Due to rounding, numbers may not add up precisely

The Q1-Q2 2022 results were also impacted by other effects. For details, please refer to the disclosures on page 31 of this document.

Financial Highlights

Current cloud backlog exceeded €10 billion for the first time and was up 34% to €10.40 billion and up 25% at constant currencies, accelerating from 23% at constant currencies in the first quarter and demonstrating a strong foundation of future cloud revenue.

Driven by double-digit growth across the SaaS and PaaS portfolio, cloud revenue was up 34% to €3.06 billion, up 24% at constant currencies.

Our cloud gross margin was up 2.3 percentage points to 69.8% (IFRS) and up 1.8 percentage points to 71.9% (non-IFRS). This was driven by a strong increase in our SaaS margin, despite increased investments into our next generation cloud delivery program. Revenue growth, alongside cloud gross margin expansion, drove strong cloud gross profit growth of 39% (IFRS), 38% (non-IFRS) and 28% (non-IFRS at constant currencies).

IFRS operating profit decreased 32% to €673 million and IFRS operating margin decreased by 5.8 percentage points to 8.9%. Non-IFRS operating profit was down 13% to €1.68 billion and decreased 16% at constant currencies. Non-IFRS operating margin decreased by 6.5 percentage points to 22.4% and was down by 5.8 percentage points at constant currencies. This was mainly driven by reduced contribution from software licenses revenue, as well as significant bad debt expenses related to the war in Ukraine. In addition, IFRS operating profit was affected by restructuring expenses of €130 million, primarily incurred due to the exit from Russia and Belarus. Estimated immediate financial impacts of the war in Ukraine lowered IFRS operating profit growth by 28 percentage points, non-IFRS operating profit growth by 8 percentage points and non-IFRS operating profit growth at constant currencies by 6 percentage points.

IFRS earnings per share decreased 75% to €0.29 and non-IFRS earnings per share decreased 45% to €0.96. The year-over-year decline of earnings per share reflects a contribution to financial income by Sapphire Ventures that, due to current market conditions, was lower than in the same period last year. Our effective tax rate was 62.2% (IFRS) and 29.3% (non-IFRS). The year-over-year effective tax rate increase mainly resulted from changes in tax exempt income and non-deductible expenses. For non-IFRS, the changes in non-deductible expenses do not apply due to respective adjustments of pre-tax figures.

Free cash flow for the first six months was down 36% to €2.08 billion. The decrease versus last year is mainly attributable to the development of profitability and impacts from working capital due to SAP’s continuing move to the cloud. In the second half-year, we expect a more favorable cash flow development due to lower cash taxes and better profitability. We are therefore reiterating our free cash flow outlook for the year.

On January 13, SAP announced a new share repurchase program to support the transition of SAP’s share-based compensation programs to equity settlement, which was completed on April 29. SAP had repurchased 10,004,763 shares at an average price of €99.63 with a purchased value of approximately €997 million. In addition, on July 21, SAP announced another share buyback program of approximately €500 million. Repurchased shares will primarily be used to service awards granted under share-based compensation plans for employees.

Impact of War in Ukraine

In the first six months, SAP’s business was impacted by the war in Ukraine and SAP’s decision to wind down its business operations in Russia and Belarus.

In the second quarter current cloud backlog was approximately €64 million lower due to the termination of existing cloud engagements, reducing current cloud backlog growth by approximately 1 percentage point at constant currencies. IFRS and non-IFRS operating profit were lowered mainly due to reduced software licenses and support revenues and bad debt reserves recorded on trade receivables. IFRS operating profit was additionally affected by restructuring expenses of approximately €120 million incurred due to severance payments to employees in Russia and Belarus and further impairments of assets. The increase of restructuring expenses versus prior expectations is due to the appreciation of the Russian ruble over the past quarter. The overall impact on IFRS operating profit was approximately €280 million (first six months: approximately €350 million) and on non-IFRS operating profit approximately €160 million (first six months: approximately €230 million).

For the fiscal year, we expect a total revenue impact of approximately €300 million at constant currencies from lack of new business and discontinuation of existing business. For non-IFRS operating profit we expect an impact of approximately €350 million at constant currencies from the revenue gaps mentioned above and other expense items.

Other impacts due to this rapidly evolving situation are currently unknown and could potentially subject our business to materially adverse consequences should the situation escalate beyond its current scope.

Business Highlights

More than 650 customers chose SAP S/4HANA in the quarter, increasing total adoption to approximately 20,000 customers, up 15% year over year, of which more than 14,500 are live. In the second quarter, more than 60% of the additional SAP S/4HANA customers were net new.

In the second quarter, customers around the globe chose “RISE with SAP” to drive end-to-end business transformation, including ABB Information Systems, Bridgestone Australia, Capitec Bank, EisnerAmper, Hisense Group, Mitsubishi Materials Corporation, Moderna, Pitney Bowes, RWE, Sumitomo Rubber Industries, Zoomlion. Customers continue to expand their SAP landscape: Microsoft invested in “RISE with SAP”, while GlobalFoundries, HeidelbergCement, Malaysia Airlines, and Mapletree Investments combined the “RISE with SAP” offering with further solutions.

Key customer wins across SAP’s solution portfolio included: ALTANA, Analog Devices, ASUS, BeiGene, Coop Genossenschaft, Corning, Ericsson, Fisker Inc., FUNKE Mediengruppe, Kyndryl, Moët Hennessy, Persán, Positivo Tecnologia, Sportradar, Votorantim, Wieland-Werke. Antonio Puig, CONA Services, HCL Technologies, and Wittenstein all went live on SAP solutions in the second quarter.

SAP’s cloud revenue performance for the quarter was strong across all regions. Germany had an outstanding cloud revenue performance while the U.S., Brazil, Japan, India and Switzerland were particularly strong.

On May 4, SAP and Google Cloud announced an expansion of their relationship, unveiling new integrations between Google Workspace and SAP’s flagship cloud ERP, SAP S/4HANA Cloud.

On May 11, SAP and IBM announced the latest milestone in their long-standing partnership as IBM undertakes one of the world’s largest corporate transformation projects based on SAP ERP software, designed to fuel the company’s growth and better support its clients.

On May 18, SAP announced that the Annual General Meeting of Shareholders of SAP SE approved all proposals of the Executive Board and Supervisory Board. Prof. Dr. h. c. mult. Hasso Plattner, Dr. Rouven Westphal and Dr. Gunnar Wiedenfels were reelected and Jennifer Xin-Zhe Li was elected to the Supervisory Board. With these elections, the Supervisory Board has reached gender parity. In addition, the compensation report was approved and to ensure a smooth transition between auditors, KPMG, for fiscal year 2022, and the new auditor, BDO, for fiscal year 2023, were elected. Furthermore, the dividend proposal of €2.45 per share for fiscal year 2021 was approved. This amount includes a special dividend of €0.50 to mark the Company’s 50th anniversary.

Segment Results at a Glance

At the beginning of 2022, the Services segment was integrated into the former Applications, Technology & Support segment which was re-named to Applications, Technology & Services.

Therefore, SAP now has two reportable segments: the Applications, Technology & Services segment and the Qualtrics segment.

In addition, certain marketing costs that we primarily incur for product and solution-specific activities in the Applications, Technology & Services segment are now presented in the results of this segment and are no longer allocated to SAP’s corporate functions.

Segment Performance Second Quarter 2022

€ million, unless otherwise stated

(Non-IFRS)

Applications, Technology & Services1

Qualtrics

Actual

Currency

∆ in %

∆ in %

const. curr.

Actual

Currency

∆ in %

∆ in %

const. curr.

Cloud revenue

2,704

31

22

279

61

43

Segment revenue

7,109

11

4

330

57

39

Segment profit (loss)

2,094

–11

–15

17

25

45

Cloud gross margin (in %)

69.5

1.3pp

2.0pp

88.6

–3.8pp

–3.9pp

Segment margin (in %)

29.5

–7.4pp

–6.7pp

5.1

–1.3pp

0.2pp

1 Segment information for comparative prior periods were restated to conform with the new segment composition.

SAP’s two reportable segments showed the following performance:

Applications, Technology & Services (AT&S)

Segment revenue in AT&S was up 11% to €7.11 billion year over year, up 4% at constant currencies. Segment performance was mainly due to strong Cloud Revenue growth, driven by SAP S/4HANA as well as Business Technology Platform. Software licenses revenue decreased due to the shift to the cloud as more customers are adopting our ‘RISE with SAP’ offering. Segment support revenue was up 5% to €2.98 billion year over year and flat at constant currencies.

Qualtrics

Qualtrics segment revenue was up 57% to €330 million year over year, up 39% at constant currencies. The continued strong growth was driven by robust renewal rates and expansions. LINE Plus, Merck KGaA, the New York City Department of Education, PGA TOUR, PNC Financial Services Group, Progress Residential, Scarlet Health, Tata Digital, Toyota North America, and Venues NSW, among others, selected Qualtrics Experience Management Solutions.

Business Outlook 2022

SAP is executing on its cloud-led strategy, which is driving accelerating cloud growth through both new business and cloud adoption by existing customers. The pace and scale of SAP’s cloud momentum places the Company well on track towards its mid-term ambition.

Financial Outlook

For 2022, SAP now expects:

  • €7.6 – 7.9 billion non-IFRS operating profit at constant currencies (2021: €8.23 billion), down 4% to 8% at constant currencies. The updated non-IFRS operating profit outlook range reflects the expected 2022 non-IFRS operating profit impact of approximately €350 million at constant currencies from the war in Ukraine and a potential continued marked decline of software licenses revenue. The previous range was €7.8 – 8.25 billion at constant currencies.

Despite the expected total revenue impact of approximately €300 million at constant currencies of the war in Ukraine and a further accelerated move of our customers from upfront software licenses revenue to the cloud in the current macro-environment, SAP continues to expect for 2022:

  • €11.55 – 11.85 billion cloud revenue at constant currencies (2021: €9.42 billion), up 23% to 26% at constant currencies.
  • €25.0 – 25.5 billion cloud and software revenue at constant currencies (2021: €24.08 billion), up 4% to 6% at constant currencies.
  • The share of more predictable revenue (defined as the total of cloud revenue and software support revenue) is expected to reach approximately 78% (2021: 75%).
  • Free cash flow above €4.5 billion (2021: €5.01 billion).

SAP is also updating its full-year 2022 effective tax rate outlook (IFRS) to 34.0% to 38.0% (previously: 28.0% to 32.0%). The adjustment mainly results from an updated projection of non-deductible expenses and of the lower 2022 financial income contribution of Sapphire Ventures given current market conditions. As the updated non-deductible expenses are not included in non-IFRS, SAP continues to anticipate a full-year 2022 effective tax rate (non-IFRS) of 23.0% to 27.0% but expects to be at the upper end of this range.

While SAP’s full-year 2022 business 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 for the Q3 and FY 2022 expected currency impacts.

Expected Currency Impact Assuming June 2022 Rates Apply for the Rest of the Year

In percentage points

Q3 2022

FY 2022

Cloud revenue growth

+8pp to +10pp

+7pp to +9pp

Cloud and software revenue growth

+5pp to +7pp

+4pp to +6pp

Operating profit growth (non-IFRS)

+3.5pp to +5.5pp

+2.5pp to +4.5pp

Non-Financial Outlook

SAP now expects the Employee Engagement Index to be in a range of 80% to 84% in 2022 (previously: 84% to 86%).

In 2022, SAP continues to expect:

  • a Customer Net Promoter Score of 11 to 15 (2021: 10)
  • Net carbon emissions of 70 kt (2021: 110 kt)

Ambition 2025

SAP reiterates its mid-term ambition published in its Q3 2020 Quarterly Statement including the commitment of double-digit growth of operating profit in 2023. In light of its strong cloud momentum and most recent favorable currency exchange rates development, SAP expects to update its mid-term ambition in the upcoming quarters.

The full Q2 2022 Quarterly Statement can be downloaded from: https://www.sap.com/investors/sap-2022-q2-statement

Additional Information

This press release and all information therein is preliminary and unaudited.

SAP Performance Measures

For more information about our key growth metrics and performance measures, their calculation, their usefulness, and their limitation, please refer to the following document on our Investor Relations website: SAP Performance Measures.

Webcast

SAP senior management will host a financial analyst conference call on Thursday, July 21st at 2:00 PM (CET) / 1:00 PM (GMT) / 8:00 AM (Eastern) / 5:00 AM (Pacific). The conference 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 first quarter can be found at 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 2021 Annual Report on Form 20-F.

© 2022 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 information.

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SOURCE SAP SE

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