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SAP Announces Q3 Results for 2020

After an initial review of its third-quarter 2020 performance, SAP recently announced its preliminary financial results for the third quarter, which ended September 30, 2020.

The main highlights of the announcement include:

  • Current Cloud Backlog of €6.6 Billion, Up 16% At Constant Currencies

  • IFRS Cloud Gross Margin Up 1.8pp; Non-IFRS Cloud Gross Margin Up 0.7pp At Constant Currencies

  • IFRS Operating Margin Down 2.2pp; Non-IFRS Operating Margin Up 1.3pp At Constant Currencies On Strong Prior Year Comparison

  • IFRS EPS Up 26%; Non-IFRS EPS Up 31%

  • Operating Cash Flow Up 54%, Free Cash Flow Up 79% Year-To-Date

  • Updates 2020 Outlook and Mid-Term Ambition

  • Targeting Significant Expansion of Cloud Revenue to More than €22 Billion, Share of More Predictable Revenue of Approximately 85%, Non-IFRS Cloud Gross Margin of Approximately 80% by 2025

  • Targeting Double-Digit Non-IFRS Operating Profit Growth from 2023 to 2025

One of the main results we can take from this announcement is SAP's change in long-term goals. The original 2020 outlook was released in April of 2020, but the world as a whole continued to face the Covid-19 pandemic and the unpredictable results that come with it. SAP's 2020 outlook now expects:

  • €8.0 – 8.2 billion non-IFRS cloud revenue at constant currencies (previously €8.3 – 8.7 billion)

  • €23.1 – 23.6 billion non-IFRS cloud and software revenue at constant currencies (previously €23.4 – 24.0 billion)

  • €27.2 – 27.8 billion non-IFRS total revenue at constant currencies (previously €27.8 – 28.5 billion)

  • €8.1 – 8.5 billion non-IFRS operating profit at constant currencies (previously €8.1 – 8.7 billion) SAP continues to expect its share of more predictable revenue to be approximately 72%.

  • Operating cash flow of approximately €6.0 billion (previously above €5.0 billion) and a free cash flow above €4.5 billion (previously approximately €4.0 billion).

By 2025, SAP expects:

  • More than €36 billion non-IFRS total revenue

  • More than €22 billion non-IFRS cloud revenue

  • More than €11.5 billion non-IFRS operating profit

  • A significant expansion of the Company’s more predictable revenue share to approximately 85%

For Q3, earnings per share (EPS) was up 26% year over year to €1.32 (IFRS) and up 31% year over year to €1.70 (non-IFRS). The share of more predictable revenue grew to 74% in the third quarter.

In the first nine months of 2020, approximately 28,000 customers went live with SAP solutions, 500 of them being SAP S/4HANA customers. Today, SAP S/4HANA has over 15,100 customers, 8,100 of them being currently live. up 20% year over year, of which more than 8,100 are live. In the third quarter, over 225 of the SAP S/4HANA customers were new to SAP as a whole.

SAP's Customer Experience (CX) platform doubled new cloud order in-take year over year, showing strong performance. SAP Fieldglass, the external workforce management platform, added more than 975,000 new external workers during the third quarter. For SAP Concur, the solution used for travel, expense, and invoice management, revenue was down 10% at constant currencies, at €357 million (Over $421 million) year over year. This result is due to lower pay-as-you-go transactional revenue as well as the continued reduced travel due to the Covid-19 pandemic. The Employee Experience platform, Qualtrics revenue was up 28% at constant currencies and reaching 12,000 total customers. SAP's Services segment revenue was down 16% (down 13% at constant currencies) to €753 million (over $890 million) year over year.

SAP also mentioned it was named as a Leader in Forrester Wave for Manufacturing ERP.

as well as a leader in Gartner’s Magic Quadrant for both Multiexperience Development Platforms and Enterprise Integration Platform-as-a-Service (PaaS).

Click here to view the full Quarterly statement.

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