SAP Q2 revenues up 5% at €1.09 bn as cloud bookings rise 33%

German multinational software corporation, Systems, Applications & Products (SAP), a global provider of enterprise software for managing business operations and customer relations, has reported a 5 per cent increase in its second quarter (April-June 2017) revenues helped by a 33 per cent increase in new cloud bookings.

Revenues based both on International Financial Reporting Standards (IFRS) non-IFRS software for the quarter was €1.09 billion, up 5 per cent (4 per cent at constant currencies) year-over-year.

Both IFRS and non-IFRS cloud subscriptions and support revenue grew 29 per cent year-over-year (27 per cent at constant currencies) to €932 million.

Operating profit for the quarter, however, was down 27 per cent at €926 million compared to the year-ago quarter. It was, however, was up 4 per cent compared with exceptional profits in the similar quarter of 2016.

Earnings,), per share decreased 18 per cent to €0.56 while non-IFRS earnings per share increased 14 per cent to €0.94. SAP said its IFRS operating profit and EPS were primarily impacted by a strong increase in restructuring related expenses and share-based compensation expenses in the second quarter.

The company said its digital core business soared with over 6,300 small and four high net worth customers – an increase of over 70 per cent year-on-year.

SAP also announced a share buyback of up to €500 million in 2017 following strong operating cash flow, up 20 per cent in the first half of the year.

"This strong quarter is the latest in SAP's 8-year run of consistent, profitable growth. Our winning strategy is again validated by fast adoption of S/4HANA and our full portfolio of cloud solutions. We expect continuing momentum in the second half and confidently raise our guidance for the full year. SAP has never been better positioned.''

''Our fantastic momentum continued with double-digit growth in total revenue. Our cloud and software revenue growth rate in the first half of the year is at the upper end of our full-year guidance range. Based on our strong growth and cash generation we are pleased to share SAP's success with our shareholders by initiating a share buyback of up to €500 million in the second half,'' Bill McDermott, CEO of the company said.

Operating cash flow for the first six months was €3.51 billion, an increase of 20 per cent year-over-year and free cash flow increased 15 per cent year-over-year to €2.90 billion. At quarter end, net debt was €1.79 billion, an improvement of €2.5 billion year over year. SAP's strong growth and cash generation provide significant flexibility around capital allocation aimed at driving shareholder value.

After evaluating the expected cash flow development for the second half of 2017 and consistent with the company's capital allocation priorities, SAP has decided on a share buyback of up to €500 million in 2017. The share buyback will start shortly and will be executed in several tranches.

The Company is raising its outlook for the full year 2017:

Based on the continued strong momentum in SAP's cloud business, the company expects full year 2017 non-IFRS cloud subscriptions and support revenue to be in a range of €3.8 billion to €4.0 billion at constant currencies (2016: €2.99 billion). The upper end of this range represents a growth rate of 34 per cent at constant currencies.

The company now expects full year 2017 non-IFRS cloud and software revenue to increase by 6.5 per cent to 8.5 per cent at constant currencies (2016: €18.43 billion).

SAP expects full year 2017 non-IFRS total revenue in a range of €23.3 billion to €23.7 billion at constant currencies (2016: €22.07 billion). The company expects full-year 2017 non-IFRS operating profit to be in a range of €6.8 billion to €7.0 billion at constant currencies (2016: €6.63 billion).