Third quarter and first nine months 2017 Results Release. October 19 th, 2017

Transcription

1 Third quarter and first nine months 2017 Results Release October 19 th, 2017

2 Safe harbor statement Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of Words such as anticipate, believe, estimate, expect, forecast, intend, may, plan, project, predict, should and will and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP s future financial results are discussed more fully in SAP s filings with the U.S. Securities and Exchange Commission ( SEC ), including SAP s most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. 2

3 Income Statement Balance Sheet and Cash Flow Analysis Outlook and Additional Information Appendix

4 Key performance metrics Q Cloud & Software Revenue in millions Q3/16 Q3/17 Operating Profit in millions Q3/16 Q3/17 4,657 4,658 4,455 4,456 1,103 1,314 1,638 1,637 IFRS Non-IFRS IFRS Non-IFRS +5% +5% (+8% cc) +19% +0% (+4% cc) Cloud Subscriptions & Support Revenue in millions Share of Predictable Revenue in percent Total Revenue in millions IFRS Non-IFRS Q IFRS Non-IFRS % % (+27% cc) 65% +1 p.p. 5,590 +4% 5,590 +4% (+8% cc) 4

5 Key performance metrics 9M 2017 Cloud & Software Revenue in millions 9M/16 9M/17 Operating Profit in millions 9M/16 9M/17 13,742 13,743 12,663 12,668 3,184 2,913 4,258 4,405 IFRS Non-IFRS IFRS Non-IFRS +9% +8% (+8% cc) -9% +3% (+3% cc) Cloud Subscriptions & Support Revenue in millions Share of Predictable Revenue in percent Total Revenue in millions IFRS Non-IFRS 9M 2017 IFRS Non-IFRS 2, % 2, % (+28% cc) 66% +1 p.p. 16,656 +9% 16,657 +9% (+8% cc) 5

6 Regional performance* Q Americas 2% (+7% cc**) cloud and software revenue 13% (+19% cc**) cloud subscriptions and support revenue EMEA 8% (+9% cc**) cloud and software revenue 42% (+46% cc**) cloud subscriptions and support revenue APJ 2% (+9% cc**) cloud and software revenue 30% (+37% cc**) cloud subscriptions and support revenue Solid growth in the Americas region, despite the natural disasters in both the United States and Mexico. In Cloud revenue, Brazil was a highlight, while the United States had a strong quarter in software revenue. Strong performance in the EMEA region with an especially strong quarter in Germany and Spain in cloud revenue. In addition, we had strong double-digit software revenue growth in Germany, Russia and the MENA*** region. Strong performance in both cloud and software revenue and cloud revenue in the APJ region. Japan and Australia were very strong in cloud revenue. For software revenue, Australia had triple digit growth and China had strong double-digit growth. *Revenues calculated based on customer location; All numbers are non-ifrs if not otherwise stated ** at constant currency; ***Middle East and North Africa 6

7 New cloud and software license order entry 4) up 15% yoy in Q3/17 Q3/17 unless otherwise stated Cloud subscriptions and support revenue, non-ifrs ( 938m +22%) +27% at cc New cloud bookings 1) ( 302m +14%) +19% at cc Cloud subscriptions and support backlog 2) 5.4bn +47% yoy Cloud applications total subscribers >137m SAP Business network Segment revenue, non-ifrs ( 552m +14%) +19% at cc ~3m connected companies trade on Ariba network ~$1tn of commerce 3) Number of end users processing travel & expenses with Concur ~50m Flexible workers managed with Fieldglass platform >3.9m annually 1) New cloud bookings key measure for SAP s sales success in the cloud consist of order entry of a given period that is expected to be classified as cloud subscription and support revenue and results from purchases by new customers and from incremental purchases by existing customers. Consequently, orders to renew existing contracts are not included. The order amount must be committed. Consequently, due to their pay-per-use nature, business network transaction fees which do not include a committed minimum consumption are not reflected in the bookings metric (e.g. SAP Ariba and SAP Fieldglass transaction-based fees). Amounts included in the measures are generally annualized. 2) Cloud subscriptions and support backlog represents expected future cloud subscriptions and support revenue that is contracted but not yet invoiced + thus not recorded in deferred revenue (as of Dec 31, 2016) 3) Network spend volume is the total value of purchase orders transacted on the Ariba Networks in the trailing 12 months. 4) New cloud and software license order entry is the total of new cloud order entry and software license order entry. The new cloud order entry metric is identical to the new cloud bookings metric defined above except that it considers the total contract value (TCV) of the orders where the new cloud bookings metric considers the orders annualized contract value (ACV). Software license order entry is the total of all orders received in a given period the revenue from which is expected to be classified as software license revenue. The support services commonly sold with the software licenses are not included in the software license order entry metric. 7

8 Q Another strong quarter in our rock solid core business and fast growing cloud business, despite severe currency headwinds millions, unless otherwise stated IFRS Non-IFRS Revenue Numbers Q3/17 Q3/16 % Q3/17 Q3/16 % % at cc Cloud subscriptions and support Software licenses 1,033 1, ,033 1, Software support 2,687 2, ,687 2, Software licenses and support 3,720 3, ,720 3, Cloud and software 4,657 4, ,658 4, Services Total revenue 5,590 5, ,590 5, Total operating expenses -4,276-4, ,953-3, Operating profit 1,314 1, ,637 1, Financial income, net < <-100 Profit before tax 1,390 1, ,714 1, Income tax expense Profit after tax ,214 1, Operating margin (in %) pp pp -0.9pp Earnings per share, basic (in )

9 9M 2017 Our overall strong business performance led to an improved share of more predictable business, now at a 66% share of revenue millions, unless otherwise stated IFRS Non-IFRS Revenue Numbers 9M/17 9M/16 % 9M/17 9M/16 % % at cc Cloud subscriptions and support 2,775 2, ,775 2, Software licenses 2,814 2, ,814 2, Software support 8,154 7, ,154 7, Software licenses and support 10,968 10, ,968 10, Cloud and software 13,742 12, ,743 12, Services 2,914 2, ,914 2, Total revenue 16,656 15, ,657 15, Total operating expenses -13,743-12, ,252-11, Operating profit 2,913 3, ,405 4, Financial income, net < <-100 Profit before tax 2,966 2, ,458 3, Income tax expense ,238-1,142 8 Profit after tax 2,189 2, ,220 2, Operating margin (in %) pp pp -1.2pp Earnings per share, basic (in )

10 Q Our results demonstrate that our profitable growth story continues Non-IFRS Total operating expenses Operating profit Q3/16 3.7bn 1.6bn Q3/17 4bn 1.6bn Total revenue 5.4bn 5.6bn Non-IFRS operating profit stable at 1.6bn (Q3/16: 1.6bn) +4% to 1.7bn at cc Non-IFRS operating margin -1.2pp to 29.3% (Q3/16: 30.5%) -0.9pp to 29.6% at cc IFRS Q3/16 Q3/17 Total operating expenses Operating profit 4.3bn 1.1bn 4.3bn 1.3bn Total revenue 5.4bn 5.6bn IFRS operating profit +19% to 1.3bn (Q3/16: 1.1bn) IFRS operating margin +3.0pp to 23.5% (Q3/16: 20.5%) 10

11 9M 2017 On a year to date basis the company is on track to deliver on its growth plans as non-ifrs operating profit expands further Non-IFRS Total operating expenses Operating profit 9M/ bn 4.3bn 9M/ bn 4.4bn Total revenue 15.3bn 16.7bn Non-IFRS operating profit +3% to 4.4bn (9M/16: 4.3bn) +3% to 4.4bn at cc Non-IFRS operating margin -1.3pp to 26.4% (9M/16: 27.8%) -1.2pp to 26.5% at cc IFRS 9M/16 9M/17 Total operating expenses Operating profit 12.2bn 3.2bn 13.7bn 2.9bn Total revenue 15.3bn 16.7bn IFRS operating profit -9% to 2.9bn (9M/16: 3.2bn) IFRS operating margin -3.3pp to 17.5% (9M/16: 20.8%) 11

12 Cost ratios Q bn total revenue, Non-IFRS R&D as a % of total revenue S&M as a % of total revenue G&A as a % of total revenue 0.7bn 1.5bn 0.2bn 12.8% +0.2pp +0.0pp* 26.4% +0.9pp +1.0pp* 4.0% +0.1pp +0.0pp* *Non-IFRS at constant currencies 12

13 Cost ratios 9M bn total revenue, Non-IFRS R&D as a % of total revenue S&M as a % of total revenue G&A as a % of total revenue 2.3bn 4.5bn 0.7bn 13.6% +0.2pp +0.2pp* 27.1% +0.7pp +0.8pp* 4.3% +0.1pp +0.1pp* *Non-IFRS at constant currencies 13

14 Income Statement Balance Sheet and Cash Flow Analysis Outlook and Additional Information Appendix

15 Balance sheet, condensed September 30, 2017, IFRS Assets millions Cash, cash equivalents and other financial assets 09/30/17 12/31/16 5,233 4,826 Trade and other receivables 4,869 5,924 Other non-financial assets 1, Total current assets 11,219 11,564 Goodwill 21,353 23,311 Intangible assets 3,038 3,786 Property, plant, and equipment 2,806 2,580 Other non-current assets 3,016 3,037 Total non-current assets 30,212 32,713 Total assets 41,430 44,277 Equity and liabilities millions 09/30/17 12/31/16 Trade and other payables 1,089 1,281 Provisions Other liabilities 4,621 5,827 Deferred income, current 1) 3,531 2,383 Total current liabilities 9,507 9,674 Financial liabilities 5,811 6,481 Provisions Deferred income, non-current 1) Other non-current liabilities 1,447 1,365 Total non-current liabilities 7,553 8,205 Total liabilities 17,060 17,880 Total equity 24,370 26,397 Total equity and liabilities 41,430 44,277 1) SAP is in the final stage of migrating its processes and customer contracts to IFRS 15. At this point of the migration, there is no reliable way to report deferred cloud revenue any longer, therefore the separate disclosure of the cloud portion of deferred income is discontinued. SAP will continue to disclose new cloud bookings as the key metric to measure SAP s sales success in the cloud. 15

16 9M 2017 The company continues its strong cash generation millions, unless otherwise stated 12/31/16 09/30/17 12/31/15 09/30/16 Operating cash flow 4,125 3, % - Capital expenditure % Free cash flow 3,161 2,962 +7% Free cash flow as a percentage of total revenue pp Cash conversion rate % Days sales outstanding (DSO in days, September 30)

17 Net liquidity improved by 2.0 billion year over year millions 4,673 +4, ,007 1, ,960 6,667 1,706 Group liquidity 1) 12/31/16 Operating cash flow Capital expenditure Proceeds from borrowings Repayment of borrowings Dividends Business combinations Other 2) Group liquidity 1) 09/30/17 Financial Debt Group net liquidity 3) 09/30/17 1) Cash and cash equivalents + current investments 2) Mainly purchase and sales of equity or debt instruments of other entities, purchase of treasury shares, proceeds from reissuance of treasury shares, and effects of FX rates on cash and cash equivalents. 3) group liquidity minus financial debt - for more information see our 2016 integrated report 17

18 Income Statement Balance Sheet and Cash Flow Analysis Outlook and Additional Information Appendix

19 SAP raises outlook for FY 2017* Cloud subscriptions and support revenue (Non-IFRS at cc) Cloud and software revenue (Non-IFRS at cc) Total revenue (Non-IFRS at cc) Operating profit (Non-IFRS at cc) SAP s outlook FY bn to 4.0bn [ 2016: 2.99bn] +7.0% to +8.5% [ 2016: 18.43bn] 23.4 to 23.8bn 6.85bn to 7.0bn [ 2016: 22.07bn] [ 2016: 6.63bn] Actual performance 9M/17 2.8bn +28% +8% 16.6bn +8% 4.4bn +3% While the Company's full-year 2017 business outlook is at constant currencies, actual currency reported figures are expected to continue to be impacted by exchange rate fluctuations. If exchange rates remain at the September 2017 average level for the rest of the year, we expect non-ifrs cloud and software revenue and non-ifrs operating profit growth rates to experience a currency headwind in a range of -5 to -8pp in Q (-1 to -3pp for the full year 2017). *FY/17 Guidance (Non-IFRS at cc) provided in January 2017: Cloud and software revenue: +6 to +8% Total revenue: 23.2 to 23.6bn Operating profit: 6,8 to 7,0bn 19

20 9M 2017 Additional outlook information and non-ifrs adjustments The Company now expects its full-year 2017 effective tax rates (IFRS and non-ifrs) to be below the previous outlook. The previous outlook for the effective tax rate (IFRS) was 26.0% to 27.0% (2016: 25.3%) and for the effective tax rate (non-ifrs) 27.0% to 28.0% (2016: 26.8%). The decrease in comparison to the previous outlook mainly results from a one-time tax benefit relating to an intragroup transfer of intellectual property rights expected to be executed in the fourth quarter. As soon as the impact can be determined the Company will update the effective tax rate outlook. Non-IFRS adjustments Actual Amounts 9M/16 Actual Amounts 9M/17 Est. Amounts for FY 2017 Revenue adjustments 4m 1m < 20m Share-based payment expenses 545m 868m 1,000m to 1,150m Acquisition-related charges 504m 449m 580m to 610m Restructuring charges 20m 174m 150m to 200m Sum of all adjustments 1,073m 1,492m 1,730m to 1,980m 20

21 Explanation of non-ifrs measures SAP has provided its non-ifrs estimates for the full-year For a more detailed description of all of SAP s non-ifrs measures and their limitations as well as our constant currency and free cash flow figures see Non-IFRS Measures and Estimates online. Constant currency revenue figures are calculated by translating revenue of the current period using the average exchange rates from the previous year's respective period instead of the current period. Constant currency period-over-period changes are calculated by comparing the current year's non-ifrs constant currency numbers with the non-ifrs number of the previous year's respective period. 21

22 Income Statement Balance Sheet and Cash Flow Analysis Outlook and Additional Information Appendix

23 How to look at cloud subscription deals? Simplified business example New and Upsell Bookings (ACV) Period KPI Order Entry measure Logic: Average Contract Value per year Decisive factor: Customer signature Order Entry Main Cloud performance indicator Q1 Y1 Q2 Q3 Q4 Initial term Q1 Y2 Q2 Q3 Q4 Renewal Rate: 100% Q1 Y3 Q2 Q3 Renewal signature Q4 0 Q1 Y4 Renewal term New Upsell Renewal Invoicing (Billings): Point in time KPI Invoicing usually once per year upfront New Upsell Renewal Q1 Y1 Q2 Q3 Q4 Q1 Y2 Q2 Q3 Q4 Q1 Y3 Q2 Q3 Q4 Q1 Y4 Backlog (unbilled): Point in time KPI Firm future revenue Decisive factors signed contract Invoicing Q1 Y1 Q2 Q3 Q Q1 Y2 Q2 Q3 Q Q1 Y3 Q2 Q Q Q1 Y4 New Upsell Renewal Deferred Revenue: Period KPI Revenue recognition needs to be in line with delivery (IFRS); too early invoiced part of the deal needs to be parked in B/S Q1 Y1 2 Q2 1 Q3 Q4 3 Q1 Y2 2 Q2 1 Q3 Q4 3 Q1 Y3 2 Q2 3,75 0, Q3 Q4 Q1 Y4 New Upsell Renewal Revenue Recognition: Period KPI Steadily over the course of the contract term / delivery ,25 1,25 1 New Upsell Renewal Q1 Y1 Q2 Q3 Q4 Q1 Y2 Q2 Q3 Q4 Q1 Y3 Q2 Q3 Q4 Q1 Y4 23

24 Revenue mix shift and investments weigh on cloud gross margin Non-IFRS Share of Cloud subscriptions revenue* App., Tech. & Services Business Network Q3/16 Q3/ % 20.1% Our cloud gross margin decreased by 4 percentage points. Investment in a highly standardized converged HANA based cloud platform and expenses incurred for the ramp up of new technologies such as our S/4HANA public cloud impacted this margin. ATS margin Business Network margin Cloud margin 47.4% 52.6% 51.7% 48.3% * Cloud subscriptions and support revenue as share of cloud and software revenue These investment impacted the public cloud margin and network margin to a lower extent. The public cloud margin declined by 4 percentage points and the network cloud margin decrease by 1 percentage point. The private cloud margin also decreased, but this was mainly due to an industry wide short term increase in the cost of RAM, which resulted in a year over year increase in infrastructure costs. 24