SAP Double-Digit Growth Across Revenue, Profit and Cash Flow.

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Overig advies 21/10/2019 11:20
Operational Excellence Boosts Margins
• New Cloud Bookings Up 39%, Software License Revenue Down 1%
• Cloud Revenue Up 37%
• Cloud Gross Margin Up More Than 5 Percentage Points
• IFRS Operating Profit Up 36%; Non-IFRS Operating Profit Up 20%
• IFRS Operating Margin Up 4.2pp; Non-IFRS Operating Margin Up 1.7pp
• Q3 Operating Cash Flow Up 28%, Free Cash Flow Up 116%

Our third quarter results reflect the momentum we’ve built entering the final quarter of the year and more broadly where we are on our journey of growth and operational excellence. We are excited and ener-gized to write the next chapter in SAP’s story along-side the best workforce anywhere in the technology industry.

In April we promised a stronger focus on profits and here we go: Q3 marks yet another milestone in delivering on this commitment. Q3 is also a manifesto of us keeping our second promise: continued strong top line momentum. Despite continued macro uncer-tainties we couldn’t be more confident to make 2019 another stellar year for SAP.

Business Performance
Financial Highlights Third Quarter 20191
In the third quarter, new cloud bookings were up 39% to €572 million (34% at constant currencies) and up 51% excluding Infrastructure-as-a-Service (IaaS). A new partnership with Microsoft contributed 18 percentage points to the 39% Q3 new cloud bookings growth. The deal has a term of 3 years, with revenue recognition starting in the fourth quarter 2019. Cloud revenue grew 37% year over year to €1.79 billion (IFRS), up 37% (non-IFRS) and 33% (non-IFRS at constant currencies). Software licenses revenue was down 1% year over year to €932 million (IFRS), down 1% (non-IFRS) and down 4% (non-IFRS at constant currencies). New cloud and software order entry was up 20% (15% at con-stant currencies) year over year in the third quarter. Cloud and software revenue grew 12% year over year to €5.63 billion (IFRS), up 13% (non-IFRS) and 10% (non-IFRS at constant currencies). Total revenue grew 13% year over year to €6.79 billion (IFRS), up 13% (non-IFRS) and 10% (non-IFRS at constant currencies).
The share of more predictable revenue grew by two percentage points year-over-year to 69% in the third quarter.
Cloud gross margin increased 5.9 percentage points year over year to 64.5% (IFRS) and increased by 5.4 percentage points year over year to 69.0% (non-IFRS).
Operating profit increased 36% year over year to €1.68 billion (IFRS), up 20% (non-IFRS) and up 15% (non-IFRS at constant currencies). Operating margin increased 4.2 percentage points year over year to 24.7% (IFRS) and expanded by 1.7 percentage points year over year to 30.6% (non-IFRS) and 1.5 percentage points to 30.4% (non-IFRS at constant currencies). Operating profit in the third quarter benefitted from disciplined hiring and accelerated operating efficiency gains. IFRS operating profit additionally benefitted from lower share-based compensa-tion expenses.
Earnings per share was up 28% to €1.04 (IFRS) and up 14% to €1.30 (non-IFRS).
Operating cash flow in the third quarter developed significantly better than in the first half of 2019 and contributed €638 million (up 28% year-over-year) to the nine-month operating cash flow. Operating cash flow for the first nine months was €3.32 billion, down 5% year-over-year. The decrease in operating cash flow was primarily due to higher payouts related to share-based compensation (€205 million), restruc-turing payouts (€239 million) and higher tax cash outflows (€490 million) compared to the first nine months of 2018. In addition, operating cash flow experienced a year over year benefit of roughly €288 million from the application of IFRS 16. Free cash flow2 was flat year-over-year at €2.33 billion. At the end of the third quarter, net liquidity was -€8.28 billion.

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