Post Earnings Coverage as SAP SE Revenue Jumps 8% as Cloud Subscriptions and Support Revenue Soars 28%

LONDON, UK / ACCESSWIRE / October 31, 2016 / Active Wall St. announces its post-earnings coverage on SAP SE (NYSE: SAP). The company posted its financial results for the third quarter fiscal 2016 (Q3 FY16) on October 21, 2016. The business software company’s revenue numbers topped expectations, with its flagship S/4 Hana business software providing the fastest adoption rate in the company’s history. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

During the quarter ended on September 30, 2016, SAP’s total IFRS revenues came in at €5.38 billion, up 7.8% compared to the year ago period and above the €5.3 billion projection made by analysts. The company’s top-line was aided by flourishing cloud business along with strong growth of support revenues. SAP’s IFRS cloud and software revenue was €4.45 billion, an increase of 8%. Non-IFRS cloud and software revenue was €4.46 billion, an increase of 8% .

The company’s IFRS operating profit was down 9% to €1.10 billion in Q3 2016, reflecting an increase in stock-based compensation expense. Non-IFRS operating profit was up 1% to €1.64 billion, slightly below the €1.65 billion analysts estimated. IFRS earnings per share decreased 19% to €0.61. Non-IFRS earnings per share decreased 7% to €0.91. This decline was due to higher stock-based compensation expense and lower non-operating and financial income.

SAP’s IFRS cloud subscriptions and support revenue grew 28% to €769 million. New cloud bookings were up 24% in the reported quarter and reached €265 million. The total of cloud subscriptions and support revenue and software support revenue reached 64% of total revenue in Q3 2016.

S/4HANA and SAP HANA Cloud Platform

SAP added more than 400 SAP S/4HANA customers in Q3 2016, of which approximately 40% were net new SAP’s customers. SAP stated that since announcing S/4HANA last year, more than 10% of its ERP customer-base has already signed on, representing the fastest adoption of any SAP solution at scale in SAP’s history. HANA Cloud platform is at the heart of the internet-of-things (IoT) and SAP announced that is making a €2 billion investment in IoT over the next five years to meet the ever-increasing demand for IoT’s solutions.

Human Capital Management

SAP continues to gain traction with its cloud-based Human Capital Management solutions. The customer count for SAP SuccessFactors Employee Central, which is the core of its Human Capital Management offerings, exceeded 1,350 at the end of the Q3 2016. Cloud subscriptions and support revenue in the SAP Business Network segment was up 17% at constant currencies in the reported quarter.

Regional Revenue Performance

SAP reported an increase in cloud and software revenue in the EMEA region of 6% (IFRS) and 8% for Q3 2016. Cloud subscriptions and support revenue grew 34%. In EMEA, SAP had double-digit software licenses revenue growth in Germany, France, UK, and South Africa.

In the Americas region, the Company’s cloud and software revenue grew by 9% and cloud subscriptions and support revenue by 24%. In Latin America, despite continued macroeconomic headwinds, SAP reported double-digit growth in software licenses revenue in Brazil and Mexico. In the APJ region cloud and software revenue was up 13%, with cloud subscriptions and support revenue growing by 50% (IFRS). In APJ, SAP had double-digit software licenses revenue growth in Japan, Malaysia, and Singapore and solid software licenses revenue growth in SAP’s Greater China region.

Operating Metrics

SAP stated that during Q3 2016, its Business Network cloud segment’s margin further increased sequentially, but decreased y-o-y to 76.8%. The Applications, Technology & Services (ATS) declined to 51.4% on y-o-y basis. The company’s cloud and software’s gross margin was sequentially nearly stable at 83.5% and down 60 basis points year-over-year, while its services’ gross margin was down by 2.9% y-o-y to 20.5%. Finally, SAP’s overall gross margin was stable compared to Q2 2016 at 72.7% and down 90 basis points compared to Q3 2015.

Cash Matters

During Q3 2016, SAP’s operating cash flow rose significantly, up 52% compared to the prior year’s period. This led to strong operating cash flow for the first nine months of €3.63 billion, or up 12% on y-o-y basis. At the end of Q3 2016, the company has improved its net liquidity by approximately €2 billion compared to the end of 2015, which is an improvement of 33%. At the end of Q3 2016, SAP had net debt of €3.7 billion.

Outlook

SAP raised its outlook for FY16 operating earnings to €6.5 billion to €6.7 billion euros from the previous range of €6.4 billion to €6.7 billion. The company now expects FY16 non-IFRS cloud subscriptions and support revenues in the range of €3.00 billion to €3.05 billion from the prior range of €2.95 billion to €3.05 billion, at constant currency.

Stock Performance

SAP’s share price finished yesterday’s trading session at $87.89, slightly up 0.26%. A total volume of 452.99 thousand shares exchanged hands. The stock has advanced 12.08% and 14.42% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the company have gained 13.00%. The stock is trading at a PE ratio of 28.50 and has a dividend yield of 1.49%.

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