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SAP SE (SAP) Posts Y/Y Earnings and Revenue Growth in Q4

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SAP SE (SAP - Free Report) delivered fourth-quarter 2021 non-IFRS earnings of €1.86 per share ($2.13), up 10% from the year-ago quarter’s levels. The upside can be attributed to strong contribution from Sapphire Ventures.

Total revenues, on a non-IFRS basis, were €7.981 billion ($9.128 billion), rising 6% year over year (up 3% at constant currency or cc).

Cloud Results

Current cloud backlog — a key indicator of go-to-market success in cloud business — increased 32% (up 26% at cc) to €9.447 billion.

On a non-IFRS basis, the Cloud and software business (87.6% of total revenues) registered revenues of €6.99 billion, up 6% year over year (up 3% at cc).

Cloud revenues were €2.611 billion, up 28% year over year on a non-IFRS basis (up 24% at cc).

SAP SE Price, Consensus and EPS Surprise

 

SAP SE Price, Consensus and EPS Surprise

SAP SE price-consensus-eps-surprise-chart | SAP SE Quote

 

Software licenses and support revenues totaled €4.379 billion, down 4% (down 6% at cc) year over year. The company further noted that non-IFRS software licenses revenues of €1.46 billion declined 14% (down 17% at cc) year over year.

On a non-IFRS basis, cloud revenues — related to Software as a Service (SaaS)/Platform as a Service (PaaS) — increased 25% at cc to €2.297 billion.

Cloud revenues — related to Infrastructure as a Service (IaaS) — rose 10% year over year at cc to €235 million.

Services business (12.4% of total revenues) delivered revenues of €0.99 billion, up 3% from the year-ago quarter’s levels (flat at cc).

The company has three reportable segments — Applications, Technology & Support (AT&S), Qualtrics and Services. In the beginning of 2021, the Concur segment was dissolved and integrated into the AT&S segment and the Services segment.

AT&S revenues were up 5% year over year (up 2% at cc) to €6.81 billion. Qualtrics segment revenues rallied 56% (up 49% at cc) to €284 million. Revenues in the Services segment increased 3% (up 1% at cc) to €835 million on a year-over-year basis.

Expanding Clientele Bodes Well

Rise with SAP solution witnessed the addition of more than 650 new clients, including Adobe, Panasonic Corporation, International Business Machines, Mahindra & Mahindra, Fresenius SE, Allianz Technology and Samsung SDS among others in the quarter under review. SAP launched Rise With SAP offering in first-quarter 2021 and now has a 1300-strong customer base since roll out.

S/4HANA adoption rallied more than 18% (or 1300 new clients) year over year to around 18,800 customers. In the reported quarter, net new customers comprised 50% of additional S/4HANA customers. More companies have begun deploying the S/4HANA solution in part or entirely in the cloud. SAP S/4HANA Cloud revenues increased 65% (up 61% at cc) to €329 million.

SAP’s clientele continues to expand with the addition of Petronas, Goodyear, Unilever, Hitachi High-Tech, Dr. Martens, SCOTT Sports, Computacenter AG, among others.

Companies like Compass Group, Alfred Kärcher and FMC Corporation went live on SAP solutions, during the reported quarter.

In the quarter under review, Helaba, Henkel, Schneider Electric and Enel selected SAP’s business technology platform that comprises SAP HANA, SAP Data Warehouse Cloud, SAP Cloud Platform, SAP Analytics Cloud, SAP Intelligent Robotic Process Automation and SAP Data Intelligence solutions.

On Jan 27, 2022, SAP announced the acquisition of a majority stake in Taulia. Now, Taulia specializes in providing working capital management solutions.  Subject to regulatory and customary conditions, the buyout is expected to conclude in March 2022.

With the stake buyout, SAP is looking to boost its Business Network capabilities and bolster SAP’s finance solutions.

In January 2022, the company announced a new up to €1-billion share repurchase authorization, which it will utilize to fund awards under the ‘Move SAP’ share-based compensation scheme. The new €1-billion share repurchase plan is to be executed between Feb 1, 2022, and Dec 31, 2022. Earlier, SAP had repurchased 14 million shares worth $1.5 billion under its 2020 repurchase plan.

Margin Details

Non-IFRS gross margin of 75.1% contracted 70 basis points (bps) from the year-ago quarter’s figure.

SAP reported non-IFRS operating expenses of €5.513 billion, up 16% from the year-ago quarter’s level (up 12% at cc).

Non-IFRS operating profit of €2.468 billion declined 11% on a year-over-year basis (down 12% at cc).

Non-IFRS operating margin of 30.9% contracted 580 bps on a year-over-year basis. At cc, the figure came in at 31.3% and contracted 540 bps.

Balance Sheet & Cash Flow

As of Dec 31, 2021, SAP had cash and cash equivalents of €8.898 billion compared with €7.943 billion as of Sep 30, 2021.

The company generated €1.254 billion of operating cash in the reported quarter compared with €1.183 billion in the prior quarter.
Free cash flow came in at €876 million compared with the previous quarter’s figure of €881 million.

2022 Outlook

For 2022, SAP anticipates cloud revenues in the range of €11.55-€11.85 billion, suggesting an increase of 23-26% at cc.
Cloud and software revenue is now expected between €25 billion and €25.5 billion, calling for a 4-6% rise at cc.

SAP projects non-IFRS operating profit in the range of €7.8-€8.25 billion, indicating flat to down 5% at cc. Free cash flow is expected to be above €4.5 billion.

Zacks Rank & Stocks to Consider

SAP currently carries a Zacks Rank #5 (Strong Sell).

Some other top-ranked stocks from the broader technology sector include Salesforce (CRM - Free Report) , Hewlett Packard (HPE - Free Report) and Cadence Design Systems (CDNS - Free Report) . While Salesforce and Hewlett Packard sport a Zacks Rank #1 (Strong Buy), Cadence carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Salesforce’s fiscal 2022 earnings is pegged at $4.68 per share. The long-term earnings growth rate of the company is pegged at 16.8%.

Salesforce’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, the average surprise being 44.2%. Shares of CRM have decreased 6.8% in the past year.

The Zacks Consensus Estimate for Hewlett Packard’s fiscal 2022 earnings is pegged at $2.03 per share, unchanged in the past 60 days. The long-term earnings growth rate of the company is pegged at 5.8%.

Hewlett Packard’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 14.4%. Shares of HPE have rallied 26.1% in the past year.

The Zacks Consensus Estimate for Cadence 2021 earnings is pegged at $3.25 per share. The long-term earnings growth rate of the company is pegged at 18.2%.

Cadence’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 11%. Shares of CDNS have soared 6.4% in the past year.