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SAP Q3 Earnings Improve Y/Y, '18 View Up on Cloud Strength
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SAP SE (SAP - Free Report) reported third-quarter 2018 non-IFRS earnings of €1.14 ($1.33) per share, up 13% on a year-over-year basis. Moreover, the bottom line surpassed the Zacks Consensus Estimate of $1.26.
However, on IFRS basis, earnings of €0.82 (95 cents) per share inched down 1% on a year-over-year basis.
Total revenues, on non-IFRS basis, were €6.031 billion ($7.01 billion), up 8% year over year (up 10% at constant currency), better than the Zacks Consensus Estimate of $6.97 billion.
On IFRS basis, revenues were €6.02 billion (almost $7 billion), up 8% year over year.
New cloud bookings — a key indicator of sales success in cloud business — rallied 36% (37% at cc) to €411 million.
Impressive Cloud Results
On a non-IFRS basis, Cloud and software business (83.2% of total revenues), which includes Cloud subscriptions & support and Software licenses & support, reported revenues of €5.017 billion, up 8% year over year (up 10% at cc).
Cloud subscriptions & support revenues of €1.315 billion surged 41% on a year-over-year basis at cc (non-IFRS). Callidus, buyout of which was concluded in April, 2018, contributed €52 million to revenues.
Software licenses & support reported revenues of €3.702 billion, up 2% at cc, on a year-over-year basis (non-IFRS).
Cloud subscriptions and support revenues — related to Software as a Service (SaaS)/Platform as a Service (PaaS) — surged 38% at cc to €1.189 billion. Cloud subscriptions and support revenues — Infrastructure as a Service (IaaS) related — rallied 72% year over year to €132 million.
Services (16.8% of total revenues) increased 9% from the year-ago quarter (up 12% at cc) to €1.013 billion (non-IFRS).
Segment wise, Applications, Technology & Services revenues increased 8% at cc to €5.05 billion. Business Network revenues jumped 22% at cc to €675 million. Moreover, Customer Experience revenues surged 54% at cc to €232 million.
SAP provides collaborative commerce capabilities (Ariba), flexible workforce management (Fieldglass) and effortless travel and expense processing (Concur) under its Business Network commerce platform. Approximately, $2.6 trillion in global commerce is annually transacted in more than 180 countries through this platform.
SAP Benefiting From Expanding Customer Base
S/4HANA adoption grew 37% year over year to around 9,500 customers. In the reported quarter, almost 600 additional customers signed up, of which, approximately 50% were net new customers.
S/4HANA clientele continues to expand with the addition of McKesson, Bombardier, Wipro and Shell among other notable companies.
Moreover, SAP’s C/4HANA customer experience solutions achieved a whopping triple-digit year-over-year growth in new cloud bookings and total revenues. Dubai Expo 2020, Giorgio Armani, Colgate-Palmolive, Döhler and HP selected the solution in the reported quarter.
SAP’s Human Capital management (HCM) flagship solution — SuccessFactors Employee Central — ended the quarter with more than 2,800 customers. Notable deal wins in the quarter comprise Skechers, Air Arabia, Atos, and American Airlines.
Chint Group and Deloitte selected SAP’s Leonardo solution in the quarter. Notably, Leonardo integrates Internet of Things (IoT), Big Data, Machine Learning, Analytics and Blockchain capabilities on the SAP Cloud platform.
Asia-Pacific & Japan (APJ) Witnessed Strong Growth
APJ Cloud subscriptions & support revenues jumped approximately 58% at cc. Cloud & software revenues increased around 17% at cc. The top line benefited from strong cloud revenue growth in Greater China and Japan. Management is impressed on software revenue growth witnessed in Greater China, Japan, India and South Korea.
Europe, Middle East & Africa (EMEA) Cloud subscriptions & support revenues advanced more than 40% at cc. Cloud & software revenues increased more than 5% at constant currency. Top-line growth was driven by strong cloud revenues in Germany and Russia.
In the EMEA, the company witnessed robust growth in software revenues in Russia, the Netherlands and Italy.
Americas’ Cloud subscriptions & support revenues soared more than 38% at cc. Cloud & software revenues increased more than 13% at cc. The U.S. delivered strong performance in cloud revenues in the quarter. Meanwhile, solid growth in software revenues from Canada is noteworthy.
Margin Details
SAP reported non-IFRS operating expense of €4.29 billion, up 9% from the year-ago quarter (up 10% at cc).
Non-IFRS research & development (R&D) and general & administration (G&A) expenses, as percentage of revenues,expanded 90 basis points (bps) and 7 bps, respectively. However, selling & marketing (S&M) declined from the year-ago quarter’s figure of 26.4% to 24.4%.
Non-IFRS operating profit of €1.74 billion grew 6% on a year-over-year basis (up 11% at cc). Operating margin expanded 10 bps at cc to 28.9%. However, Callidus limited operating margin expansion by 40 basis points.
Segment wise, Applications, Technology & Services profit increased 8% at cc to approximately €2.1 billion. Business Network profit jumped 57% at cc to €155 million. Moreover, Customer Experience profit improved 23% at cc to €24 million.
Guidance Up on Strength in Cloud Platform
Considering upbeat pipeline for the fourth quarter and momentum in cloud, SAP updated the guidance for 2018. The company now projects non-IFRS total revenues in the range of €25.2-€25.5 billion at constant currency (cc), up from the previous range of €24.975-€25.3 billion. This represents growth of 7.5-8.5% year over year.
Non-IFRS cloud subscriptions and support revenues are now expected in the range of €5.15-€5.25 billion, up 36.5-39% at cc. Non-IFRS cloud and software revenues are now expected between €21.15 million and €21.35 billion, up 8-9% at cc.
Additionally, non-IFRS operating profit for 2018 is estimated in the band of €7.425-€7.525 billion, up from €7.40-€7.50 billion, reflecting year-over-year growth of 9.5-11% at cc.
Long-term earnings growth rate for CyberArk, The Trade Desk and Garmin is currently pegged at 19.8%, 18.3% and 7.4%, respectively.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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SAP Q3 Earnings Improve Y/Y, '18 View Up on Cloud Strength
SAP SE (SAP - Free Report) reported third-quarter 2018 non-IFRS earnings of €1.14 ($1.33) per share, up 13% on a year-over-year basis. Moreover, the bottom line surpassed the Zacks Consensus Estimate of $1.26.
However, on IFRS basis, earnings of €0.82 (95 cents) per share inched down 1% on a year-over-year basis.
Total revenues, on non-IFRS basis, were €6.031 billion ($7.01 billion), up 8% year over year (up 10% at constant currency), better than the Zacks Consensus Estimate of $6.97 billion.
On IFRS basis, revenues were €6.02 billion (almost $7 billion), up 8% year over year.
New cloud bookings — a key indicator of sales success in cloud business — rallied 36% (37% at cc) to €411 million.
Impressive Cloud Results
On a non-IFRS basis, Cloud and software business (83.2% of total revenues), which includes Cloud subscriptions & support and Software licenses & support, reported revenues of €5.017 billion, up 8% year over year (up 10% at cc).
Cloud subscriptions & support revenues of €1.315 billion surged 41% on a year-over-year basis at cc (non-IFRS). Callidus, buyout of which was concluded in April, 2018, contributed €52 million to revenues.
Software licenses & support reported revenues of €3.702 billion, up 2% at cc, on a year-over-year basis (non-IFRS).
Cloud subscriptions and support revenues — related to Software as a Service (SaaS)/Platform as a Service (PaaS) — surged 38% at cc to €1.189 billion. Cloud subscriptions and support revenues — Infrastructure as a Service (IaaS) related — rallied 72% year over year to €132 million.
SAP SE Revenue (TTM)
SAP SE Revenue (TTM) | SAP SE Quote
Services (16.8% of total revenues) increased 9% from the year-ago quarter (up 12% at cc) to €1.013 billion (non-IFRS).
Segment wise, Applications, Technology & Services revenues increased 8% at cc to €5.05 billion. Business Network revenues jumped 22% at cc to €675 million. Moreover, Customer Experience revenues surged 54% at cc to €232 million.
SAP provides collaborative commerce capabilities (Ariba), flexible workforce management (Fieldglass) and effortless travel and expense processing (Concur) under its Business Network commerce platform. Approximately, $2.6 trillion in global commerce is annually transacted in more than 180 countries through this platform.
SAP Benefiting From Expanding Customer Base
S/4HANA adoption grew 37% year over year to around 9,500 customers. In the reported quarter, almost 600 additional customers signed up, of which, approximately 50% were net new customers.
S/4HANA clientele continues to expand with the addition of McKesson, Bombardier, Wipro and Shell among other notable companies.
Moreover, SAP’s C/4HANA customer experience solutions achieved a whopping triple-digit year-over-year growth in new cloud bookings and total revenues. Dubai Expo 2020, Giorgio Armani, Colgate-Palmolive, Döhler and HP selected the solution in the reported quarter.
SAP’s Human Capital management (HCM) flagship solution — SuccessFactors Employee Central — ended the quarter with more than 2,800 customers. Notable deal wins in the quarter comprise Skechers, Air Arabia, Atos, and American Airlines.
Chint Group and Deloitte selected SAP’s Leonardo solution in the quarter. Notably, Leonardo integrates Internet of Things (IoT), Big Data, Machine Learning, Analytics and Blockchain capabilities on the SAP Cloud platform.
Asia-Pacific & Japan (APJ) Witnessed Strong Growth
APJ Cloud subscriptions & support revenues jumped approximately 58% at cc. Cloud & software revenues increased around 17% at cc. The top line benefited from strong cloud revenue growth in Greater China and Japan. Management is impressed on software revenue growth witnessed in Greater China, Japan, India and South Korea.
Europe, Middle East & Africa (EMEA) Cloud subscriptions & support revenues advanced more than 40% at cc. Cloud & software revenues increased more than 5% at constant currency. Top-line growth was driven by strong cloud revenues in Germany and Russia.
In the EMEA, the company witnessed robust growth in software revenues in Russia, the Netherlands and Italy.
Americas’ Cloud subscriptions & support revenues soared more than 38% at cc. Cloud & software revenues increased more than 13% at cc. The U.S. delivered strong performance in cloud revenues in the quarter. Meanwhile, solid growth in software revenues from Canada is noteworthy.
Margin Details
SAP reported non-IFRS operating expense of €4.29 billion, up 9% from the year-ago quarter (up 10% at cc).
Non-IFRS research & development (R&D) and general & administration (G&A) expenses, as percentage of revenues,expanded 90 basis points (bps) and 7 bps, respectively. However, selling & marketing (S&M) declined from the year-ago quarter’s figure of 26.4% to 24.4%.
Non-IFRS operating profit of €1.74 billion grew 6% on a year-over-year basis (up 11% at cc). Operating margin expanded 10 bps at cc to 28.9%. However, Callidus limited operating margin expansion by 40 basis points.
SAP SE Price, Consensus and EPS Surprise
SAP SE Price, Consensus and EPS Surprise | SAP SE Quote
Segment wise, Applications, Technology & Services profit increased 8% at cc to approximately €2.1 billion. Business Network profit jumped 57% at cc to €155 million. Moreover, Customer Experience profit improved 23% at cc to €24 million.
Guidance Up on Strength in Cloud Platform
Considering upbeat pipeline for the fourth quarter and momentum in cloud, SAP updated the guidance for 2018. The company now projects non-IFRS total revenues in the range of €25.2-€25.5 billion at constant currency (cc), up from the previous range of €24.975-€25.3 billion. This represents growth of 7.5-8.5% year over year.
Non-IFRS cloud subscriptions and support revenues are now expected in the range of €5.15-€5.25 billion, up 36.5-39% at cc. Non-IFRS cloud and software revenues are now expected between €21.15 million and €21.35 billion, up 8-9% at cc.
Additionally, non-IFRS operating profit for 2018 is estimated in the band of €7.425-€7.525 billion, up from €7.40-€7.50 billion, reflecting year-over-year growth of 9.5-11% at cc.
Zacks Rank & Stocks to Consider
SAP carries a Zacks Rank #3 (Hold).
CyberArk Software Ltd. (CYBR - Free Report) , The Trade Desk Inc. (TTD - Free Report) and Garmin Ltd. (GRMN - Free Report) are stocks worth considering in the same sector. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for CyberArk, The Trade Desk and Garmin is currently pegged at 19.8%, 18.3% and 7.4%, respectively.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>