Quarterly Statement Q1 2021

Stellar Start to 2021

Fastest Growth in New Cloud Business in Five Years Reaccelerates Current Cloud Backlog, Up 19% at Constant Currencies, to €7.6 Billion

  • S/4HANA Current Cloud Backlog Up 43% At Constant Currencies
    Highlighting SAP's Accelerated Cloud Transition
  • IFRS EPS Up 29%; Non-IFRS EPS Up 63%
  • Operating Cash Flow Up 3% To €3.09 Billion; Free Cash Flow Up 10% to €2.85 Billion

Cloud Revenue

Total Revenue

in € millions

in € millions

IFRS

Non-IFRS

IFRS

Non-IFRS

2,145

2,147

6,348

6,350

+7%

+7% (+13% cc)

-3%

-3% (+2% cc)

The share of more predictable revenue reached 78% in the first quarter 2021 (+2 percentage points)

Cloud & Software Revenue

Operating Profit

in € millions

in € millions

IFRS

Non-IFRS

IFRS

Non-IFRS

5,428 5,431 960 1,741

+1%

+1% (+6% cc)

-21%

+17% (+24% cc)

"We are seeing very strong order entry growth across our applications portfolio. And we are just getting started. Our new offering 'RISE with SAP' is rapidly becoming a massive accelerator to our customers' business transformations with our platform at the center. Together with our unique ecosystem of more than 22,000 partners and with a strong innovation pipeline for the year, we are well on track with our strategy to deliver robust cloud growth."

Christian Klein, CEO

  • The first quarter of 2021 was unique in many ways. We had the highest order entry growth across cloud and software in five years while posting the strongest increase in Non-IFRS operating profit and margin in a decade. Free cash flow was up double-digit compared to a record prior year. In the mid term SAP's expedited shift to the cloud will accelerate topline growth and significantly increase the resiliency and predictability of our business."

Luka Mucic, CFO

SAP Quarterly Statement Q1 2021

1

Walldorf, Germany - April 22, 2021

SAP SE (NYSE: SAP) today announced its financial results for the first quarter ended March 31, 2021.

Business Update First Quarter 2021

SAP saw a sharp acceleration in new cloud business across its cloud portfolio including Qualtrics, Human Experience Management, Procurement, Customer Experience, Business Technology Platform, as well as a strong start for 'RISE with SAP' which is driving customers' business transformations in the cloud. Software licenses were up 7% (IFRS) and had strong, double-digit growth of 11% (Non-IFRS at constant currencies). SAP had significant competitive wins in ERP, digital supply chain and across its broader cloud solution portfolio.

Despite the continued impact of global travel restrictions on Concur's business, SAP's cloud revenue growth was resilient in the first quarter, up 7% (IFRS) and up 13% (Non-IFRS at constant currencies). SaaS/PaaS cloud revenue outside the Intelligent Spend business was up 17% (IFRS) and up 24% (Non-IFRS at constant currencies). Looking forward, SAP's strong new cloud business performance is expected to reaccelerate cloud revenue growth.

Throughout the COVID-19 crisis, SAP continues to serve its customers effectively with an embedded virtual sales and remote implementation strategy. The company retains a disciplined approach to hiring and discretionary spend while capturing natural savings e.g. from lower travel, facility-related costs and virtual events. The prior year included a cost of approximately €36 million in relation to the cancellation of its in-person annual SAPPHIRE NOW and other customer events, as well as normal travel behavior.

Highlights

  • Key customer wins included: Unilever, BioNTech, IKEA, Nippon Express, BMW, Yamaha Motor Company, Toshiba Corporation, AstraZeneca, Zalando, Deichmann, B. Braun, and Clemson University. AkzoNobel, CONA Services, Daikin Chemicals, Olam International, Google, Bosch Siemens Hausgeräte, Douglas, LIVEKINDLY Collective, Peloton, and Chobani went live on SAP solutions.
  • SAP launched "RISE with SAP" on January 27, a simplified pathway for customers to transform their business in the cloud. In the first quarter alone, SAP closed more than 100 transactions. Customers such as Carrefour Brazil, Sono Motors, KIA Chile, Hillrom, and Grupo Feromax chose "RISE with SAP" in the first quarter.
  • In total, more than 400 S/4HANA customers were added in the quarter, taking total adoption to more than 16,400 customers, up more than 16% year over year, of which more than 9,600 are live. In the first quarter, more than 50% of the additional S/4HANA customers were net new.
  • The acquisition of Signavio was completed on March 5, significantly deepening SAP's business process intelligence capabilities.
  • SAP closed the acquisition on AppGyver, a no-code development pioneer. AppGyver's solutions will become part of the SAP Business Technology Platform.
  • SAP announced a strategic partnership with Dediq to jointly expand SAP's financial services portfolio with a significant investment in developing new solutions to better serve the rapidly changing banking and insurance industry. The new solutions will be built as part of SAP's industry cloud solutions. SAP and Dediq intend to form a dedicated Financial Services Industry (FSI) Unit, which will be jointly owned by the two companies. Pending regulatory approval, the new FSI Unit is expected to be established in September 2021.
  • SAP proposed a dividend of €1.85 per share for fiscal year 2020 representing a year-over-year increase of €0.27 or 17%.
    The dividend is subject to shareholder approval at the upcoming AGM to be held on May 12, 2021.

SAP Quarterly Statement Q1 2021

2

Financial Performance First Quarter 20211

Current cloud backlog was up 15% to €7.63 billion and up 19% (at constant currencies). Cloud revenue was up 7% year over year to €2.14 billion (IFRS), up 7% to €2.15 billion (non-IFRS) and up 13% (non-IFRS at constant currencies). Software licenses revenue was up 7% year over year to €0.48 billion (IFRS and non-IFRS) and up 11% (non-IFRS at constant currencies). Cloud and software revenue was up 1% to €5.43 billion (IFRS and non-IFRS) and up 6% (non-IFRS at constant currencies). Services revenue was down 18% year over year to €0.9 billion (IFRS and non-IFRS) and down 14% (non-IFRS at constant currencies). This revenue decline reflects the November 2020 divestiture of SAP Digital Interconnect, which contributed approximately €90 million of services revenue (IFRS and non-IFRS) in the first quarter of 2020. Total revenue was down 3% year over year to €6.35 billion (IFRS and non-IFRS) and up 2% (non-IFRS at constant currencies).

The share of more predictable revenue2 grew by approximately 2 percentage points year over year to approximately 78% in the first quarter.

IFRS operating profit decreased 21% to €0.96 billion and IFRS operating margin decreased by 3.4 percentage points to 15.1% due to higher share-based compensation expenses (primarily related to Qualtrics IPO awards) and restructuring expenses related to the accelerated harmonization of SAP's cloud delivery infrastructure. Non-IFRS operating profit increased 17% to €1.74 billion, up 24% (non-IFRS at constant currencies) and operating margin increased by 4.7 percentage points to 27.4%, up 4.9 percentage points (non-IFRS at constant currencies).

Earnings per share increased 29% to €0.88 (IFRS) and increased 63% to €1.40 (non-IFRS) reflecting another strong contribution from Sapphire Ventures.

Operating cash flow for the first quarter was €3.09 billion. Free cash flow increased 10% year over year to €2.85 billion. Cash flow was positively impacted by lower share-based and restructuring payments. Free cash flow was further supported by a decline in capex. At quarter end, net debt was -€2.66 billion.

Expanded Financial Disclosure - SAP's Accelerated Cloud Transition

Starting with the first quarter 2021, SAP is expanding its financial disclosure to provide investors with transparency on the transition of its core ERP business to the cloud. Specifically, the Company is disclosing current cloud backlog and cloud revenue contributed by SAP S/4HANA Cloud, along with nominal and constant currencies year-over-year growth rates.

In the first quarter S/4HANA current cloud backlog was up 39% to €1.04 billion and up 43% (at constant currencies). S/4HANA cloud revenue was up 36% to €227 million (IFRS and non-IFRS) and up 43% (at constant currencies).

SAP S/4HANA Cloud represents SAP's cloud offering for core ERP processes. It mainly includes cloud solutions for financial management, supply chain management, engineering and manufacturing, order management and asset management, as well as associated data management, analytics, development and integration capabilities.

"RISE with SAP ", SAP's holistic offering for business transformation in the cloud, is an important driver of S/4HANA Cloud and Business Technology Platform adoption.

  1. The Q1 2021 results were also impacted by other effects. For details please refer to the disclosures on page 24 of this document.
  2. Share of more predictable revenue is the total of non-IFRS cloud revenue and non-IFRS software support revenue as a percentage of total revenue.

SAP Quarterly Statement Q1 2021

3

Segment Performance First Quarter 2021

SAP's three reportable segments "Applications, Technology & Support", "Qualtrics" and "Services" showed the following performance:

Applications, Technology & Support (AT&S)

Segment revenue in AT&S was down 1% to €5.31 billion year over year (up 4% at constant currencies). Segment performance was driven by strong double-digit cloud revenue growth in S/4HANA Cloud, Digital Supply Chain, Business Technology Platform, and Customer Experience, in particular ecommerce. Software licenses revenue grew sharply driven by a significant number of ERP and supply chain competitive wins against peers. Segment support revenues were flat at constant currencies (year over year) reflecting high retention rates coupled with the shift of some support revenue to cloud.

Qualtrics

Qualtrics segment revenue was up 25% to €202 million year over year (up 37% at constant currencies). The strong growth was driven by companies using Qualtrics experience data and insights to drive employee retention and engagement, to find new customers and strengthen relationships to keep the ones they already have. LIXIL, Singapore Post, Bank of Montreal, Los Angeles County Public Health, Mitsubishi Electric Corporation, Royal Caribbean International, and many others selected Qualtrics Experience Management Solutions.

Services

Services segment revenue was down 12% to €800 million year over year (down 8% at constant currencies). The services implementation business continues to demonstrate its resilience and flexibility with SAP's shift to remote delivery, and SAP's premium services remain in high demand. However, SAP's training business continues to be impacted due to delays in reopening of global training centers.

Segment Results at a Glance

First Quarter 2021

Applications, Technology & Support

Qualtrics

Services

€ million, unless otherwise stated

Actual

∆ in %

∆ in %

Actual

∆ in %

∆ in %

Actual

∆ in %

∆ in %

(Non-IFRS)

Currency

const.

Currency

const.

Currency

const.

curr.

curr.

curr.

Cloud revenue

1,958

4

10

160

33

45

0

NA

NA

Segment revenue

5,314

-1

4

202

25

37

800

-12

-8

Segment profit (loss)

2,127

8

13

13

<-100

<-100

170

26

33

Cloud gross margin (in %)

68.8

-0.1pp

-0.2pp

92.2

1.4pp

1.5pp

NM1)

NM1)

NM1)

Segment margin (in %)

40.0

3.1pp

3.2pp

6.4

16.5pp

15.6pp

21.2

6.4pp

6.5pp

  1. NM = not meaningful

Regional Revenue Performance First Quarter 2021

SAP had a strong performance across all of its regions.

In the EMEA region, cloud and software revenue increased 5% (IFRS) and 7% (non-IFRS at constant currencies). Cloud revenue increased 21% (IFRS) and 24% (non-IFRS at constant currencies) with Germany and Switzerland being highlights.

In the Americas region, cloud and software revenue decreased 6% (IFRS) and was up 3% (non-IFRS at constant currencies). Cloud revenue decreased 2% (IFRS) and was up 7% (non-IFRS at constant currencies). Canada and Mexico had a robust performance.

In the APJ region, cloud and software revenue increased 7% (IFRS) and 11% (non-IFRS at constant currencies). Cloud revenue increased 14% (IFRS) and 18% (non-IFRS at constant currencies) with Japan, Australia and Singapore being highlights.

SAP Quarterly Statement Q1 2021

4

Financial Results at a Glance

First Quarter 2021

IFRS

Non-IFRS1)

€ million, unless otherwise stated

Q1 2021

Q1 2020

∆ in %

Q1 2021

Q1 2020

∆ in %

∆ in %

const.

curr.

Current cloud backlog2)

NA

NA

NA

7,628

6,634

15

19

Cloud revenue

2,011

7

2,012

7

13

2,145

2,147

Software licenses and support revenue

3,386

-3

3,386

-3

1

3,283

3,283

Cloud and software revenue

5,397

1

5,398

1

6

5,428

5,431

Total revenue

6,521

-3

6,522

-3

2

6,348

6,350

Share of more predictable revenue (in %)

76

2pp

76

2pp

78

78

Operating profit (loss)

960

1,210

-21

1,741

1,482

17

24

Profit (loss) after tax

811

32

1,015

70

1,070

1,722

Basic earnings per share (in €)

0.68

29

0.85

63

0.88

1.40

Number of employees (FTE, March 31)

103,142

101,150

2

NA

NA

NA

NA

  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 IFRS equivalent.

Due to rounding, numbers may not add up precisely.

SAP Quarterly Statement Q1 2021

5

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SAP SE published this content on 22 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 April 2021 07:45:02 UTC.