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SAP SE (SAP) Q4 Earnings and Revenues Decline Y/Y, Stock Down
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SAP SE (SAP - Free Report) reported fourth-quarter 2020 non-IFRS earnings of €1.69 per share ($2.02), which declined 7% from the year-ago quarter, owing to lower revenue base.
The Zacks Consensus Estimate for earnings was pegged at $2.00.
Total revenues, on a non-IFRS basis, were €7.541 billion ($8.993 billion), down 6% year over year (down 2% constant currency or cc).
The Zacks Consensus Estimate for revenues was pegged at $9.09 billion.
Shares were down more than 1% in the pre-market trading on Jan 29, following the fourth-quarter results, wherein both earnings and revenues declined year over year.
Current cloud backlog — a key indicator of go-to market success in cloud business — increased 7% (14% at cc) year over year to €7.155 billion.
On a non-IFRS basis, Cloud and software business reported revenues (87.3% of total revenues) of €6.58 billion, down 4% year over year (up 1% at cc).
Cloud revenues were €2.04 billion, up 7% year over year on a non-IFRS basis (up 13% at cc).
The company noted Software licenses revenues of €4.54 billion, down 8% (down 4% at cc) year over year.
Cloud revenues — related to Software as a Service (SaaS)/Platform as a Service (PaaS) — climbed 13% at cc to €1.937 billion. Cloud revenues — related to Infrastructure as a Service (IaaS) — rallied 17% year over year at cc to €224 million.
Services business (12.7% of total revenues) reported revenues of €960 million, down 20% from the year-ago quarter (down 16% at cc).
SAP provides collaborative commerce capabilities (Ariba), flexible workforce management (Fieldglass), and effortless travel and expense processing (Concur) under its Intelligent Spend Platform. Approximately $4.1 trillion in global commerce is transacted annually through this platform across more than 180 countries.
The company has four reportable segments — Applications, Technology & Support (AT&S), Concur, Qualtrics and Services.
Notably, AT&S revenues declined 4% (up 1% at cc) to €6.21 billion. Concur revenues fell 20% (down 15% at cc) to €341 million. Revenues were impacted by lower pay-as-you-go transactional revenues due to coronavirus crisis led reduction in business travel.
Qualtrics segment revenues surged 17% (up 26% at cc) to €183 million. Revenues in the Services segment declined 16% (down 11% at cc) to €758 million on a year-over-year basis.
Expanding Clientele Remains Noteworthy
S/4HANA adoption rallied 16% year over year to around 16,000 customers. In the reported quarter, net new customers comprised 40% of additional S/4HANA customers.
S/4HANA clientele continues to expand with the addition of Shell, L’Oréal, Schwarz IT KG (Lidl), Co-op, Unilever, s.Oliver Group, Gilead Sciences (GILD - Free Report) , and Saudi Aramco, among others.
Notably, an increasing number of companies have begun deploying S/4HANA solution in part or entirely in the cloud. Markedly, companies such as Zespri, CureVac, Oxford University Press, The Not Company, BMW, Atos, Nippon Cargo Airlines, and I-PEX selected SAP S/4HANA Cloud.
SAP SuccessFactors HXM solutions ended the reported quarter with more than 900 customers. Notable deal wins in the reported quarter include City of Houston, BIC, Mitsubishi Chemical Corporation, Vodafone Idea Limited, Fujitsu Ltd., and NORD/LB.
SAP Customer Experience (CX) solutions were selected by Carrefour, Miele & Cie. KG, Mindray, and VINCI Energies, to name a few, in the reported quarter.
SAP’s business technology platform comprises SAP HANA, SAP Data Warehouse Cloud, SAP Cloud Platform, SAP Analytics Cloud, SAP Intelligent Robotic Process Automation and SAP Data Intelligence solutions. In the reported quarter, SAP’s business technology platform and analytics cloud solutions were adopted by Nomad Foods Europe Ltd., Deutsches Rotes Kreuz (German Red Cross), and Enel.
Additionally, General Motors (GM - Free Report) , Nestlé, Ecopetrol, Sony Picture Networks India, and Los Angeles Unified School District, opted for the company’s Ariba solutions in the reported quarter. SAP’s Fieldglass solutions were adopted by Chevron in the fourth quarter.
Further, Concur was adopted by Nikkei, Inc., Canadian Pacific Railway Company, and Software AG, while Qualtrics solutions were selected by Burton Snowboards, Deutsche Bank, Bank of Montreal (BMO - Free Report) , University of Auckland, Rosetta Stone, Uber Singapore, HSBC, GE Healthcare, and Shanghai Hotels, among others, in the reported quarter.
Margin Details
Non-IFRS gross margin of 75.8% expanded 60 basis points (bps) from the year-ago quarter’s figure.
SAP reported a non-IFRS operating expense of €4.77 billion, down 8% from the year-ago quarter’s level (down 4% at cc).
Non-IFRS operating profit of €2.77 billion declined 3% on a year-over-year basis (up 3% at cc).
Non-IFRS operating margin of 36.7% expanded 140 bps on a year-over-year basis. At cc, the figure came in at 36.8%, expanding 150 bps.
Balance Sheet & Cash Flow
As of Dec 31, 2020, SAP had cash and cash equivalents of €5.311 billion compared with €7.434 billion as of Sep 30, 2020.
The company generated €2.1 billion of operating cash in the reported quarter compared with €1.321 billion in the third quarter.
Free cash flow came in at €1.829 billion compared with previous quarter’s €1.052 billion.
2020 at a Glance
For 2020, SAP reported non-IFRS cloud revenues of €8.085 billion, up 15% year over year (up 18% at cc).
Non-IFRS cloud and software revenues were €23.23 billion, up 1% year over year (up 3% at cc).
Non-IFRS total revenues of €27.34 billion, declined 1% year over year (up 1% at cc).
Non-IFRS operating profit increased by 1% year over year to €8.28 billion and (up 4% at cc).
2021 View
SAP expects to gain from “expedited shift to the cloud” in 2021. The company believes that the COVID-19 crisis impacts will begin to diminish on vaccine roll outs, in turn, leading to "gradual improvement in demand environment in the second half of 2021."
The company projects cloud revenues in the range of €9.1 billion to €9.5 billion on a non-IFRS basis, up 13%-18% at cc.
Non-IFRS cloud and software revenues are envisioned in the range of €23.3 billion to €23.8 billion, flat to up 2% at cc. Non-IFRS operating profit at cc is expected in the range of €7.8 billion to €8.2 billion, down 1% to 6% at cc.
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
SAP SE (SAP) Q4 Earnings and Revenues Decline Y/Y, Stock Down
SAP SE (SAP - Free Report) reported fourth-quarter 2020 non-IFRS earnings of €1.69 per share ($2.02), which declined 7% from the year-ago quarter, owing to lower revenue base.
The Zacks Consensus Estimate for earnings was pegged at $2.00.
Total revenues, on a non-IFRS basis, were €7.541 billion ($8.993 billion), down 6% year over year (down 2% constant currency or cc).
The Zacks Consensus Estimate for revenues was pegged at $9.09 billion.
Shares were down more than 1% in the pre-market trading on Jan 29, following the fourth-quarter results, wherein both earnings and revenues declined year over year.
SAP SE Price, Consensus and EPS Surprise
SAP SE price-consensus-eps-surprise-chart | SAP SE Quote
Cloud Results
Current cloud backlog — a key indicator of go-to market success in cloud business — increased 7% (14% at cc) year over year to €7.155 billion.
On a non-IFRS basis, Cloud and software business reported revenues (87.3% of total revenues) of €6.58 billion, down 4% year over year (up 1% at cc).
Cloud revenues were €2.04 billion, up 7% year over year on a non-IFRS basis (up 13% at cc).
The company noted Software licenses revenues of €4.54 billion, down 8% (down 4% at cc) year over year.
Cloud revenues — related to Software as a Service (SaaS)/Platform as a Service (PaaS) — climbed 13% at cc to €1.937 billion. Cloud revenues — related to Infrastructure as a Service (IaaS) — rallied 17% year over year at cc to €224 million.
Services business (12.7% of total revenues) reported revenues of €960 million, down 20% from the year-ago quarter (down 16% at cc).
SAP provides collaborative commerce capabilities (Ariba), flexible workforce management (Fieldglass), and effortless travel and expense processing (Concur) under its Intelligent Spend Platform. Approximately $4.1 trillion in global commerce is transacted annually through this platform across more than 180 countries.
The company has four reportable segments — Applications, Technology & Support (AT&S), Concur, Qualtrics and Services.
Notably, AT&S revenues declined 4% (up 1% at cc) to €6.21 billion. Concur revenues fell 20% (down 15% at cc) to €341 million. Revenues were impacted by lower pay-as-you-go transactional revenues due to coronavirus crisis led reduction in business travel.
Qualtrics segment revenues surged 17% (up 26% at cc) to €183 million. Revenues in the Services segment declined 16% (down 11% at cc) to €758 million on a year-over-year basis.
Expanding Clientele Remains Noteworthy
S/4HANA adoption rallied 16% year over year to around 16,000 customers. In the reported quarter, net new customers comprised 40% of additional S/4HANA customers.
S/4HANA clientele continues to expand with the addition of Shell, L’Oréal, Schwarz IT KG (Lidl), Co-op, Unilever, s.Oliver Group, Gilead Sciences (GILD - Free Report) , and Saudi Aramco, among others.
Notably, an increasing number of companies have begun deploying S/4HANA solution in part or entirely in the cloud. Markedly, companies such as Zespri, CureVac, Oxford University Press, The Not Company, BMW, Atos, Nippon Cargo Airlines, and I-PEX selected SAP S/4HANA Cloud.
SAP SuccessFactors HXM solutions ended the reported quarter with more than 900 customers. Notable deal wins in the reported quarter include City of Houston, BIC, Mitsubishi Chemical Corporation, Vodafone Idea Limited, Fujitsu Ltd., and NORD/LB.
SAP Customer Experience (CX) solutions were selected by Carrefour, Miele & Cie. KG, Mindray, and VINCI Energies, to name a few, in the reported quarter.
SAP’s business technology platform comprises SAP HANA, SAP Data Warehouse Cloud, SAP Cloud Platform, SAP Analytics Cloud, SAP Intelligent Robotic Process Automation and SAP Data Intelligence solutions. In the reported quarter, SAP’s business technology platform and analytics cloud solutions were adopted by Nomad Foods Europe Ltd., Deutsches Rotes Kreuz (German Red Cross), and Enel.
Additionally, General Motors (GM - Free Report) , Nestlé, Ecopetrol, Sony Picture Networks India, and Los Angeles Unified School District, opted for the company’s Ariba solutions in the reported quarter. SAP’s Fieldglass solutions were adopted by Chevron in the fourth quarter.
Further, Concur was adopted by Nikkei, Inc., Canadian Pacific Railway Company, and Software AG, while Qualtrics solutions were selected by Burton Snowboards, Deutsche Bank, Bank of Montreal (BMO - Free Report) , University of Auckland, Rosetta Stone, Uber Singapore, HSBC, GE Healthcare, and Shanghai Hotels, among others, in the reported quarter.
Margin Details
Non-IFRS gross margin of 75.8% expanded 60 basis points (bps) from the year-ago quarter’s figure.
SAP reported a non-IFRS operating expense of €4.77 billion, down 8% from the year-ago quarter’s level (down 4% at cc).
Non-IFRS operating profit of €2.77 billion declined 3% on a year-over-year basis (up 3% at cc).
Non-IFRS operating margin of 36.7% expanded 140 bps on a year-over-year basis. At cc, the figure came in at 36.8%, expanding 150 bps.
Balance Sheet & Cash Flow
As of Dec 31, 2020, SAP had cash and cash equivalents of €5.311 billion compared with €7.434 billion as of Sep 30, 2020.
The company generated €2.1 billion of operating cash in the reported quarter compared with €1.321 billion in the third quarter.
Free cash flow came in at €1.829 billion compared with previous quarter’s €1.052 billion.
2020 at a Glance
For 2020, SAP reported non-IFRS cloud revenues of €8.085 billion, up 15% year over year (up 18% at cc).
Non-IFRS cloud and software revenues were €23.23 billion, up 1% year over year (up 3% at cc).
Non-IFRS total revenues of €27.34 billion, declined 1% year over year (up 1% at cc).
Non-IFRS operating profit increased by 1% year over year to €8.28 billion and (up 4% at cc).
2021 View
SAP expects to gain from “expedited shift to the cloud” in 2021. The company believes that the COVID-19 crisis impacts will begin to diminish on vaccine roll outs, in turn, leading to "gradual improvement in demand environment in the second half of 2021."
The company projects cloud revenues in the range of €9.1 billion to €9.5 billion on a non-IFRS basis, up 13%-18% at cc.
Non-IFRS cloud and software revenues are envisioned in the range of €23.3 billion to €23.8 billion, flat to up 2% at cc. Non-IFRS operating profit at cc is expected in the range of €7.8 billion to €8.2 billion, down 1% to 6% at cc.
Zacks Rank
SAP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>