Back to top

Image: Bigstock

SAP SE's (SAP) Earnings Decline Y/Y in Q1, Revenues Increase

Read MoreHide Full Article

SAP SE (SAP - Free Report) delivered first-quarter 2022 non-IFRS earnings of €1.00 per share ($1.12), down 28% from the year-ago quarter’s levels. The downside can be attributed to tougher year-over-year comparisons pertaining to contribution from Sapphire Ventures.

Total revenues, on a non-IFRS basis, were €7.077 billion ($7.941 billion), up 11% year over year (up 7% at constant currency or cc).

Cloud Results

Current cloud backlog — a key indicator of go-to-market success in cloud business — increased 28% (up 23% at cc) to €9.73 billion. The company’s suspension of Russian operations amid the ongoing Ukraine war reduced the current cloud backlog by nearly €60 million.

SAP SE Price

 

SAP SE Price

SAP SE price | SAP SE Quote

 

On a non-IFRS basis, the Cloud and software business (85.6% of total revenues) registered revenues of €6.06 billion, up 12% year over year (up 7% at cc).

Cloud revenues were €2.82 billion, up 31% year over year on a non-IFRS basis (up 25% at cc).

Software licenses and support revenues totaled €3.24 billion, down 1% (down 4% at cc) year over year. The company further noted that non-IFRS software licenses revenues of €317 million declined 34% (down 36% 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 28% at cc to €2.585 billion.

Cloud revenues — related to Infrastructure as a Service (IaaS) — rose 5% at cc year over year to €235 million.

Services business (14.4% of total revenues) delivered revenues of €1.107 billion, up 11% from the year-ago quarter’s levels (up 7% at cc).

The company has two reportable segments — Applications, Technology & Services (AT&S) and Qualtrics. At the beginning of 2022, the Services segment was merged into the old Applications, Technology & Support segment, which is now re-named as the Applications, Technology & Services segment.

AT&S revenues were up 10% year over year (up 6% at cc) to €6.7 billion. Qualtrics segment revenues rallied 58% (up 48% at cc) to €320 million.

Expanding Clientele Bodes Well

Rise with SAP solution was adopted by clients, including Accenture, Canon Production Printing, Exide Industries Limited, NEC Corporation, Qinqin Food, Rising Auto, TELUS, Tramontina and Wipro Limited.

S/4HANA adoption rallied more than 18% (or 500 new clients) year over year to around 19,300 customers. In the reported quarter, net new customers comprised 60% 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 78% (up 71% at cc) year over year to €404 million. SAP S/4HANA’s current cloud backlog was up 86% (up 79% at cc) year over year.

SAP’s clientele continues to expand with the addition of  Air France-KLM, FEMSA, Heineken, L’Oréal, Nippon Telephone and Telegraph Corporation, PetSmart, Salling Group, Schaeffler, and Swellfun, among others.

Companies like Schwarz Produktion, PT United Tractors and Vodafone New Zealand went live on SAP solutions during the reported quarter.

In the quarter under review, SAP announced the availability of the SAP Signavio Journey to Process Analytics solution. Also, Microsoft leveraged the Rise with SAP solution on the Azure cloud platform to change some of the company’s big SAP ERP deployments.

Margin Details

Non-IFRS gross margin of 72% contracted 30 basis points (bps) from the year-ago quarter’s figure.

SAP reported non-IFRS operating expenses of €5.4 billion, up 17% from the year-ago quarter’s level (up 13% at cc).

Non-IFRS operating profit of €1.677 billion declined 4% on a year-over-year basis (down 7% at cc).

Non-IFRS operating margin of 23.7% contracted 370 bps on a year-over-year basis. At cc, the figure came in at 23.7% and contracted 360 bps.

Balance Sheet & Cash Flow

As of Mar 31, 2022, SAP had cash and cash equivalents of €8.942 billion compared with €8.898 billion as of Dec 31, 2021.

The company generated €2.482 billion of operating cash in the reported quarter compared with €1.269 billion in the prior quarter.

Free cash flow came in at €2.165 billion compared with the previous quarter’s figure of 916 million.

In the quarter under review, SAP had repurchased 5,680,250 shares for nearly €581 million. 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 will 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.

The company proposed a dividend of €2.45 per share for 2021, which includes a special dividend of €0.50 to commemorate the company’s 50th anniversary. The dividend is subject to shareholder approval at the forthcoming AGM to be held on May 18, 2022, added SAP

2022 Outlook Reiterated

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.

Suspension of Russian operations amid the ongoing Ukraine war is expected to affect revenues by €300 million in 2022. For non-IFRS operating profit, SAP expects the negative impact to be €350 million. The company also expects to witness restructuring expenses of nearly €80-100 million for the year, but these costs will not affect non-IFRS results.

Zacks Rank & Stocks to Consider

SAP currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader technology sector are Broadcom (AVGO - Free Report) , Apple (AAPL - Free Report) and Intuit (INTU - Free Report) . All the stocks carry a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

The Zacks Consensus Estimate for Broadcom’s fiscal 2022 earnings is pegged at $35.67 per share, up 7.6% in the past 60 days. AVGO’s long-term earnings growth rate is pegged at 14.5%.

Broadcom’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 1.9%. Shares of AVGO have increased 27.2% in the past year.

The Zacks Consensus Estimate for Apple’s fiscal 2022 earnings is pegged at $6.16 per share, up 0.2% in the past 60 days. The long-term earnings growth rate is pegged at 12.5%.

Apple’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, with the average being 20.3%. Shares of AAPL have rallied 23.9% in the past year.

The Zacks Consensus Estimate for Intuit fiscal 2022 earnings is pegged at $11.66 per share, up 0.3% in the past 60 days. The long-term earnings growth rate is 15.4%.

Intuit earnings beat the Zacks Consensus Estimate in three of the last four quarters, with the average being 16.7%. Shares of INTU have gained 12.3% in the past year.

Published in