SAP Q4 2017: Stable profit with a cloud sales surge

SAP enjoyed a strong quarter due to cloud services adoption and rounded off the report with news of a new acquisition.


SAP has reported a strong Q4 due to increased sales in cloud and software services, as well as increased interest in the SAP HANA platform.

SAP announced its financial results for the fourth quarter and annual results ending 31 December 2017 on Tuesday (statement).

In Q4 2017, total revenue was €6.81 billion ($8.41bn), up one percent year-over-year or six percent non-IFRS. This has met analyst expectations, as compiled by Bloomberg.

Net profit reached €1.87 billion ($2.31bn), and earnings per share increased by 21 percent to €1.55 ($1.91) or 16 percent to €1.77 ($2.19) non-IFRS.

In a statement, the Walldorf, Germany-based company said operating profit based on IFRS was €4.88 billion ($6.03bn) for the full year or €6.72 billion ($8.31bn) non-IFRS at constant currencies.

Earnings per share increased by 10 percent to €3.36 ($4.15) or 14 percent to €4.44 ($5.49) non-IFRS over the year, based on net profits of €4.06 billion ($5.02bn).

SAP says the boost in operating profit is due to tax benefits from an intra-group transfer of IP to SAP SE, the US tax reform, and the success of Sapphire Ventures, once known as SAP Ventures.

In Q4 2017, SAP cloud bookings grew by 22 percent, or 31 percent at constant currencies, reaching €591 million ($730m).

Cloud subscriptions and support revenue grew 20 percent year-over-year to €995 million ($1.2bn) or 28 percent non-IFRS at constant currencies.

In the fourth quarter, software revenue accounted for €2.06 billion ($2.6bn), down five percent year-over-year. Cloud and software revenue was €5.81 billion ($7.2bn), up one percent year-over-year.

Over the course of the financial year, S/4HANA adoption grew to over 7,900 customers, an increase of roughly 46 percent year-over-year. Approximately 1,000 customers joined the platform in Q4 2017 alone.

New cloud bookings for the year accounted for €1.45 billion ($1.7bn), up 30 percent at constant currencies. Cloud and software license sales grew by 17 percent year-over-year. Cloud subscriptions increased by 38 percent, reaching €7.5 billion ($9.2bn) by the end of 2017.

For the full year, cloud and software revenue grew by 6 percent, or 8 percent non-IFRS at constant currencies. Cloud subscriptions and support revenue was €3.77 billion ($4.6bn) or €3.83 billion ($4.7bn) non-IFRS.

Software revenue remained stable overall, with a reported revenue of €4.87 billion ($6.02bn), or up two percent non-IFRS. Total revenue was €23.46 billion ($28.9bn) or €23.77 billion ($29.4bn) non-IFRS at constant currencies.

Operating cash flow for the full year was €5.05 billion ($6.2bn), an increase of 9 percent year-over-year. Free cash flow increased 4 percent to €3.77 billion ($4.66bn) over the same period.

SAP has also brought back €500 million in shares and paid a dividend of €1.5 billion.

See also: VMware, SAP join forces on enterprise IoT

"We ended the year strongly with new cloud bookings surging 31 percent on top of a stellar prior Q4," said Luka Mucic, SAP Chief Financial Officer. "As promised we initiated the margin turnaround with a Q4 Non-IFRS operating margin of 35.2 percent at constant currencies. This paves the way for the strong growth and margin expansion we expect in 2018 and beyond."

SAP expects that non-IFRS cloud subscriptions and support revenue to be in a range of €4.8 billion to €5.0 billion, in comparison to €3.77 billion in 2017.

In addition, the tech giant expects full-year non-IFRS revenue to be in the range of €24.6 billion to €25.1 billion, and operating profit to be in the range of €7.3 billion -- €7.5 billion, an increase from 2017's €6.77 billion.

The earnings reports were rounded off with the announcement of the acquisition of Callidus Software in a deal worth $2.4 billion. SAP says the buyout will improve the firm's position in the customer relationship management (CRM) space.


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