Home Business German Software Giant SAP’s Shares Rally on Solid Quarterly Earnings

German Software Giant SAP’s Shares Rally on Solid Quarterly Earnings

German Software Giant SAP’s Shares Rally on Solid Quarterly Earnings

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SAP SuccessFactors and SAP company sign on the facade of company headquarters in California


Michael Vi/Dreamstime.com


SAP

late Thursday pre-announced fourth quarter financial results, as the German enterprise software giant continues an aggressive push to shift its business to the cloud.

“In a uniquely challenging environment, 2020 was a record year for cash flow in every single quarter and the full year,” CFO Luka Mucic said in a statement. “Our better-than-anticipated top line performance combined with our quick response on the cost side drove strong operating profit. SAP’s expedited shift to the cloud will drive long-term, sustainable growth while significantly increasing the resiliency and predictability of our business.”

SAP (ticker: SAP) said its performance sequentially improved in the fourth quarter “even as the Covid-19 crisis persisted and lockdowns were reintroduced in many regions.” The company noted that fourth quarter cloud revenue “continued to be impacted by lower pay-as-you-go transactional revenue,” mainly due to reduced business travel bookings at Concur. But the company said that high demand in other areas “produced a strong finish to the year for SAP’s cloud business.”

SAP’s results can be a little confusing to American eyes. The results are reported in euros, on both an IFRS basis—the equivalent of GAAP (generally accepted accounting principles)—and on a non-IFRS basis, much like non-GAAP U.S. accounting. Like other large international enterprise technology firms, SAP tends to focus on data reported in constant currency. Also note that the company characterized the disclosure as a pre-announcement ahead of the regularly scheduled earnings release.

All that said, for the full year, SAP estimates that total revenue on a non-IFRS basis was €27.3 billion ($33.2 billion), toward the lower end of the company’s revised guidance range of €27.2 billion to €27.8 billion, and down 1% from a year ago. (That seems contradictory to Mucic’s quote on the quarter which says that performance was better than expected at the top line; a spokesman says that reflects the fact that the interim results today were on an as-reported basis, and not adjusted for currency.)

Cloud revenue for the year was €8.1 billion, up 15% from the previous year, in the middle of the company’s guidance range, while cloud and software license revenues combined were €23.2 billion, up 1%; the guidance range had been €23.1 billion to €23.6 billion. Operating profit on a non-IFRS basis was €8.28 billion, in the middle of the guidance range of €8.1 billion to €8.5 billion.

SAP said that fourth quarter cloud-related revenues were up 8% on an IFRS-basis or 13% on an adjusted basis, while software license revenue was down 15%, or 11% on an adjusted basis in constant currency. Cloud and software revenue combined was down 4%, or up 1% on an adjusted basis in constant currency. The company had not provided detailed fourth-quarter guidance.

Overall fourth-quarter revenue of €7.54 billion was a little ahead of the Street consensus at €7.49 billion as tracked by FactSet. After-tax profit of €2.02 billion was likewise slightly ahead of the Street at €1.94 billion.

For 2021, SAP is projecting non-IFRS cloud revenues of €9.1 billion to €9.5 billion, up 13%, or 18% in constant currency, consistent with the Street consensus at €9.3 billion. SAP projects cloud and software revenue on the same basis of €23.3 billion to €23.8 billion, flat to up 2% in constant currency, and a little below the Street at €24.3 billion, with non-IFRS operating profit of €7.8 billion to €8.2 billion; the Street has been projecting €8.1 billion.

SAP shares in late trading were up 2.3%, to $129.

Write to Eric J. Savitz at [email protected]

This article is auto-generated by Algorithm Source: www.barrons.com

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