SAP pre-announces 2020 fourth quarter and full-year financial results. The SAP business preliminary figures reveal growing profit and healthy cash flow.
The announcement also shows that the business solutions provider continues to gain momentum with its cloud-first business model. Led by CEO Christian Klein, the company has been working to accelerate efforts to move customers from license-based software to its newer cloud products.
The preliminary financial results show SAP’s cloud revenues rose 7{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} (non-IFRS basis) to 2.04 billion euros.
Klein comments:
“The world’s leading companies are turning to SAP to become intelligent enterprises. We are reinventing how businesses run by accelerating our customers’ transformation in the cloud. Our strong finish to the year and the upcoming launch of our new holistic business transformation offering position us well to meet our new outlook targets.”
Q4 and Full-Year SAP Business Performance
The German multinational company merits its cloud business’ strong finish for the fourth quarter to:
- continued high demand for e-commerce, Business Technology Platform, and Qualtrics XM (experience management) solutions
- several competitive wins for SAP SuccessFactors Human Experience Management
- strong early take-up of its new holistic business transformation offering among pilot customers (SAP will hold a virtual event to launch the new offering on January 27)
- better-than-expected business performance at SAP North America and SAP Europe in cloud order entry and software licenses revenue
- significant competitive wins in SAP ERP
In addition, SAP’s operating profit rose 3{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} in constant currency and operating margin increased by 1.5 percentage points—leading to a full-year operating profit that hit the high end of the company’s revised outlook range.
SAP expects its operating cash flow for the full year to be at around 7.0 billion euros (8.4 billion USD), approximately doubling year-over-year. SAP’s free cash flow is also expected to land around 5.9 billion euros (7.1 billion USD)—significantly above the raised outlook of above 4.5 billion euros (5.4 billion USD). Per SAP’s report, cash flow was positively impacted by lower tax and restructuring payments and a successful working capital management.
SAP CFO, Luka Mucic, said:
“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.”
2021 Outlook
The SAP business outlook for 2021 assumes that the current COVID-19 global crisis will begin to recede as global vaccine programs roll out, which is presumed to improve business demand in the second half of the year.
According to the company’s business outlook statement, the company is guiding to 9.1 to 9.5 billion euros (10.9 to 11.4 billion USD) in cloud revenue (up 13-18{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} in constant currency). Meanwhile, 2021 total cloud and software revenue is expected to be as much as 23.8 billion euros (28.7 billion USD) at constant currencies.
Hours following SAP’s pre-announcement of its fourth quarter and full-year financial results on Thursday, January 14, SAP has risen 2.7{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} in early trading.
According to SAP, the company’s Q4 2020 financial statement will be published on January 29, 2021.