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SAP SE — Interim / Quarterly Report 2019
Apr 25, 2019
365_10-q_2019-04-25_ddb6a171-8c11-4888-8d31-ba76db33ec1f.pdf
Interim / Quarterly Report
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Stellar Start to the Year Across Cloud and Core Business – SAP Raises 2019 Operating Profit Outlook
- Cloud Revenue Exceeds €1.5 Billion for the First Time in a Quarter, Up 45% (IFRS), Up 48% (Non-IFRS)
- SAP Now the Leader in Experience Management XM with Qualtrics
- New Cloud and Software Order Entry Up 17%
- Cloud and Software Revenue and Total Revenue Up Double-Digit
- Cloud Gross Margin Accelerates, Up 3 PP (IFRS) and 4 PP (Non-IFRS) Sequentially
- Operating Loss (IFRS) of –€136 Million Due to Previously Announced Restructuring, Operating Profit (Non-IFRS) of €1,467 Million, Up 19%
- Increased Focus on Operational Excellence Targeting on Average 1 Percentage Point of Non-IFRS Operating Margin Expansion per Year from 2018 through 2023; SAP to Host Special Capital Markets Day on November 12, 2019
SAP's results are another illustration that we are a rarity in the enterprise applications software industry. We have a strong core business, the fastest growing cloud at scale in enterprise software and impressive non-IFRS operating profit growth. We are focused on leading a best-run SAP so we can drive significant margin expansion in the quarters ahead. "
Bill McDermott, CEO
I am extremely pleased that we delivered rapid growth in the cloud and a rock-solid core. Non-IFRS operating profit growth saw the biggest improvement in more than three years, with both cloud gross margin and operating margin beating our expectations. This gives us the confidence to further extend our commitment to mid-term margin improvements and stronger shareholder returns as announced today. "
Luka Mucic, CFO
Business Performance
Financial Highlights First Quarter 2019 1
In the first quarter, new cloud bookings were up 32% (26% at constant currencies). Cloud revenue grew 45% year over year to €1.56 billion (IFRS), up 48% (non-IFRS) and 41% (non-IFRS at constant currencies). Software license revenue was up 4% year over year to €650 million (IFRS), up 4% (non-IFRS) and 1% (non-IFRS at constant currencies). New cloud and software order entry was up 17% (13% at constant currencies) year over year in the first quarter. Cloud and software revenue grew 16% year over year to €5.04 billion (IFRS), up 16% (non-IFRS) and 12% (non-IFRS at constant currencies). Total revenue grew 16% year over year to €6.09 billion (IFRS), up 16% (non-IFRS) and 12% (non-IFRS at constant currencies).
SAP's rapidly expanding cloud business together with solid growth in support revenue continued to drive the share of more predictable revenue, which grew by one percentage point year-over-year to 72% in the first quarter.
As previously indicated, the IFRS operating profit in the first quarter was impacted by recognizing the expected cost of SAP's 2019 restructuring (€886 million) as well as higher acquisition-related charges and share-based compensation primarily due to the Qualtrics acquisition. This resulted in an IFRS operating loss of -€136 million (Q1 2018: operating profit of €1,025 million). In contrast, Non-IFRS profit was up 19% at €1,467 million (up 13% at constant currencies). Earnings per share were -€0.10 (IFRS) (Q1 2018: €0.59) and up 24% at €0.90 (non-IFRS).
Operating cash flow for the first three months was €2.80 billion, up 9% year-over-year. Free cash flow2 increased 10% year-over-year to €2.37 billion. At the end of the first quarter, net liquidity was -€6.19 billion.
Segment Performance First Quarter 2019
SAP's three reportable segments "Applications, Technology & Services", "Business Network" and "Customer and Experience Management" showed the following performance.
Applications, Technology & Services (AT&S)
In the first quarter, segment revenue in AT&S was up 12% to €4.99 billion year-over-year (up 9% at constant currencies). Solutions which contributed to this growth in the first quarter are listed below.
SAP S/4HANA
SAP S/4HANA is at the core of the Intelligent Enterprise. With S/4HANA, customers automate more and more of their business processes enabling employees to focus on higher-value tasks. It detects patterns, predicts outcomes and suggests actions empowering companies across all industries to reinvent their business models for the digital economy.
This quarter, SAP S/4HANA Cloud was named as a Leader in The IDC MarketScape: Worldwide SaaS and Cloud-enabled Operational ERP Applications 2019 Vendor Assessment. IDC recognizes SAP S/4HANA Cloud as an intelligent ERP that enables various business processes such as idea to design, procure to pay, plan to production, order to cash, offer to project, and core finance.
S/4HANA adoption grew to more than 10,900 customers, up 30% year over year. In the first quarter, over 40% of the additional S/4HANA customers were net new.
S/4HANA continues to be selected by world-class global companies, including Levi's, CVS Health and Schaeffler Technologies. Puma and Bausparkasse Schwäbisch Hall went live with S/4HANA this quarter. A growing number of companies including ESL/Turtle Entertainment and AEG have chosen S/4HANA in the Cloud. Computacenter went live on S/4HANA Cloud in the first quarter.
Human Capital Management Solutions
SAP delivers total workforce management across both permanent and contingent labor. The SAP SuccessFactors suite is localized for 96 countries and 42 languages.
SAP SuccessFactors successfully completed its migration to SAP HANA. This is a crucial milestone for the SAP SuccessFactors journey and the ability to embed real-time, predictive analytics capabilities and future innovations.
1 Q1 2019 results were also impacted by changes in accounting policies, hyperinflation, business combinations, and other effects. For details, please refer to the disclosures on pages 24-25 of this Quarterly Statement.
2 IFRS 16 also affects SAP's cash flow statement: operating cash flow increased and cash flow from financing activities decreased by €78 million. The company has modified its Free cash flow metric by subtracting this impact. Therefore, Free cash flow is not affected by this change. For details, please refer to the disclosures on page 24 of this Quarterly Statement.
SAP SuccessFactors Employee Central, which is the flagship of SAP's HCM offering, added more than 150 customers in the quarter and has now approximately 3,200 customers globally. Competitive wins included Calzedonia Group. Tapestry went live with SAP SuccessFactors Employee Central in the first quarter.
SAP Leonardo
SAP Leonardo brings together cutting-edge technologies – AI, Machine Learning, IoT, Big Data, Advanced Analytics and Blockchain – with deep process and industry expertise, delivering completely new ways of working and powering the Intelligent Enterprise.
Companies like Bumble Bee Foods and Premier Foods are among many others that adopted SAP Leonardo solutions in the first quarter.
Digital Platform
Digital Platform includes SAP Cloud Platform and SAP Data Management Solutions. With SAP HANA's data rich and real-time in-memory architecture as the foundation, this represents a massive opportunity to drive full use of HANA.
The SAP Cloud Platform facilitates new app development, extensions and seamless integration. It orchestrates "hybrid" customer landscapes across on premise and cloud.
The SAP Data Hub is the "enterprise control tower" bringing together multi-source data including unstructured to provide a 360-degree view of all company data and manages compliance and governance policies from one central location.
Kontinental Hockey League is one of many customers that adopted SAP's Digital Platform solutions in the first quarter.
Business Network (BN)
In the first quarter, segment revenue in Business Network was up 25% to €740 million year-over-year (up 18% at constant currencies).
With the Business Network, SAP provides collaborative commerce capabilities (SAP Ariba), effortless travel and expense processing (SAP Concur) and flexible workforce management (SAP Fieldglass). Business Network is the largest commerce platform in the world with more than \$3.1 trillion in global commerce annually transacted in more than 180 countries.
In the first quarter American Express and SAP Ariba entered into a strategic multi-phased partnership designed to offer buyers and suppliers new payment and financing options on Ariba® Network, extending its value for joint customers. An integrated payment experience delivers seamless reconciliation, greater visibility and control, increased security and improved working capital for businesses.
Omnicom chose SAP's Business Network solutions in the first quarter.
Customer and Experience Management (CXM)
In the first quarter, segment revenue in Customer and Experience Management was up more than 100% to €305 million year-over-year (more than 100% at constant currencies). Solutions which contributed to this growth in the first quarter are listed below3 .
SAP C/4HANA
SAP's C/4HANA solutions serve a wide range of industries across both B2C and B2B and enable businesses to manage their entire front office: marketing, sales, commerce, service, customer data cloud – seamlessly and in real-time.
C/4HANA provides companies with a single, complete view of their customer across all channels and connects demand to the fulfillment engine in one end-to-end value chain. Isuzu Motors South Africa, Groupe PSA Brazil, and AmerisourceBergen chose SAP C/4HANA over competitors.
Experience Management Solutions (Qualtrics)
With Qualtrics, SAP now combines market leadership in Experience Management (X data) with end-to-end operational power (O data) in 25 industries and delivers four key experiences: brand, customer, product and employee. CVS Health and Cirque du Soleil chose SAP's experience management solutions this quarter.
3 Q1 2019 results were impacted by business combinations. For details, please refer to the disclosures on page 25 of this Quarterly Statement.
Segment Results at a Glance4
| Segment Performance First Quarter 2019 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Applications, Technology & Services | Business Network | Customer and Experience Manage | ment | ||||||||
| € million, unless otherwise stated (Non-IFRS) |
Actual Currency |
∆ in % | ∆ in % const. curr. |
Actual Currency |
∆ in % | ∆ in % const. curr. |
Actual Currency |
∆ in % | ∆ in % const. curr. |
||
| Cloud revenue | 719 | 42 | 37 | 626 | 30 | 22 | 236 | >100 | >100 | ||
| Segment revenue | 4,993 | 12 | 9 | 740 | 25 | 18 | 305 | >100 | >100 | ||
| Segment profit (loss) | 1,809 | 11 | 7 | 161 | 63 | 51 | –11 | 43 | 58 | ||
| Cloud gross margin (in %) | 53.2 | 4.1pp | 4.0pp | 78.0 | 0.7pp | 0.6pp | 74.9 | 9.1pp | 8.4pp | ||
| Segment margin (in %) | 36.2 | –0.3pp | –0.6pp | 21.7 | 5.0pp | 4.6pp | –3.6 | 2.0pp | 1.3pp |
Regional Revenue Performance
SAP had a solid performance in the EMEA region with cloud and software revenue increasing 11% (IFRS) and 11% (non-IFRS at constant currencies). Cloud revenue increased by 42% (IFRS) and 39% (non-IFRS at constant currencies) with the UK, Switzerland and Spain being highlights. In addition, SAP had strong software license revenue growth in Germany, the UK and Spain.
The Company had a strong performance in the Americas region. Cloud and software revenue increased by 21% (IFRS) and increased by 15% (non-IFRS at constant currencies). Cloud revenue increased by 45% (IFRS) and 39% (non-IFRS at constant currencies) with the United States, Canada and Mexico being highlights. In addition, both, the United States and Canada had a strong quarter in software license revenue.
In the APJ region, SAP had a solid performance. Cloud and software revenue was up by 16% (IFRS) and grew by 12% (non-IFRS at constant currencies). Cloud revenue increased by 55% (IFRS) and 51% (non-IFRS at constant currencies) with China and Japan being highlights. For software license revenue, China, Japan and South Korea had strong quarter.
4 For details on the performance of our segments please refer to pages 18-21.
Financial Results at a Glance
| First Quarter 2019 | ||||||||
|---|---|---|---|---|---|---|---|---|
| IFRS | Non-IFRS1) | |||||||
| € million, unless otherwise stated | Q1 2019 | Q1 2018 | ∆ in % | Q1 2019 | Q1 2018 | ∆ in % | ∆ in % const. curr. |
|
| New Cloud Bookings2) | NA | NA | NA | 324 | 245 | 32 | 26 | |
| Cloud revenue | 1,555 | 1,070 | 45 | 1,581 | 1,072 | 48 | 41 | |
| Software licenses and support revenue | 3,489 | 3,281 | 6 | 3,489 | 3,281 | 6 | 3 | |
| Cloud and software revenue | 5,044 | 4,351 | 16 | 5,070 | 4,353 | 16 | 12 | |
| Total revenue | 6,091 | 5,261 | 16 | 6,118 | 5,262 | 16 | 12 | |
| Share of more predictable revenue (in %) | 72 | 71 | 1pp | 72 | 71 | 1pp | ||
| Operating profit (loss) | –136 | 1,025 | <-100 | 1,467 | 1,235 | 19 | 13 | |
| Profit (loss) after tax | –108 | 708 | <-100 | 1,080 | 868 | 25 | ||
| Basic earnings per share (€) | –0.10 | 0.59 | <-100 | 0.90 | 0.73 | 24 | ||
| Number of employees (FTE, March 31) | 98,659 | 91,120 | 8 | NA | NA | NA | NA |
For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement.
2) As this is an order entry metric, there is no IFRS equivalent.
Business Outlook 2019
SAP has updated its 2019 outlook. This update reflects the results of the first quarter 2019 and the company's new initiatives to accelerate its operational excellence and value creation.
SAP continues to expect:
- Non-IFRS cloud revenue to be in a range of €6.7 − €7.0 billion at constant currencies (2018: €5.03 billion), up 33% 39% at constant currencies.
- Non-IFRS cloud and software revenue to be in a range of €22.4 €22.7 billion at constant currencies (2018: €20.66 billion), up 8.5% 10% at constant currencies.
SAP now expects:
Non-IFRS operating profit to be in a range of €7.85 – €8.05 billion at constant currencies (2018: €7.16 billion), up 9.5% – 12.5% at constant currencies (previously: €7.7 – €8.0 billion, up 7.5% – 11.5% at constant currencies)
In addition, SAP expects total revenues to increase strongly, at a rate lower than operating profit (previously: slightly lower than operating profit).
The first quarter 2019 numbers include Qualtrics' revenues and profits only from the acquisition date of January 23rd . The comparative numbers for full year 2018 do not include Qualtrics revenues and profits and include Callidus revenue and profits only from the April 5th, 2018 acquisition date.
While SAP's full-year 2019 business outlook is at constant currencies, actual currency reported figures are expected to be impacted by currency exchange rate fluctuations as the Company progresses through the year. See the table below for the Q2 and FY 2019 expected currency impacts.
| Expected Currency Impact Based on March 2019 Level for the Rest of the Year | |||||||
|---|---|---|---|---|---|---|---|
| In percentage points | Q2 | FY | |||||
| Cloud revenue | +3pp to +5pp | +3pp to +5pp | |||||
| Cloud and software revenue | +1pp to +3pp | +1pp to +3pp | |||||
| Operating profit | +1pp to +3pp | +1pp to +3pp |
Ambition 2020 and 2023
Looking beyond 2019, SAP has updated its 2020 and 2023 ambition. This update reflects the company's new initiatives to accelerate its operational excellence and value creation.
Ambition 2020
SAP continues to expect:
- €8.6 − €9.1 billion non-IFRS cloud revenue
- €28.6 − €29.2 billion non-IFRS total revenue
- The share of more predictable revenue (defined as the total of cloud revenue and software support revenue) in a range of 70% − 75%
SAP now expects:
€8.8 – 9.1 billion non-IFRS operating profit (previously: €8.5 – 9.0 billion)
Ambition 2023
Over the period from 2018 through 2023, SAP continues to expect to:
- More than triple non-IFRS cloud revenue (2018: €5.03 billion)
- Grow to more than €35 billion in non-IFRS total revenue (2018: €24.74 billion)
- Approach a share of more predictable revenue of 80%
Over the same period, SAP now expects to:
- Reach a Non-IFRS cloud gross margin of 75%
- Increase the non-IFRS operating margin by one percentage point per year on average, representing a total expansion of approximately 500 basis points.
SAP's 2023 Non-IFRS operating margin ambition replaces its former 2023 ambition of growing non-IFRS operating profit at a compound annual growth rate of 7.5% - 10% (2018: €7.16 billion)
Additional Information
This Quarterly Statement and all information therein is unaudited.
Changes on the SAP Executive Board
Robert Enslin left the SAP Executive Board effective April 5, 2019. SAP Executive Board Member Jennifer Morgan succeeded Enslin as president of the Cloud Business Group (CBG) effective April 5, 2019. SAP Executive Board Member Adaire Fox-Martin took sole responsibility of Global Customer Operations (GCO) as president of GCO effective April 5, 2019.
Definition of key growth metrics
New cloud bookings are the total of all orders received in a given period the revenue from which is expected to be classified as cloud revenue and that result from purchases by new customers and from incremental purchases by existing customers. Consequently, orders to renew existing contracts are not included in this metric. The order amount must be committed. Consequently, due to their pay-per-use nature, business network transaction fees which do not include a committed minimum consumption are not reflected in the bookings metric (e.g. SAP Ariba and SAP Fieldglass transaction-based fees). Amounts included in the measures are generally annualized (annualized contract value ACV).
Cloud backlog represents expected future cloud revenue that is contracted but not yet invoiced and thus not recorded in deferred revenue.
Share of more predictable revenue is the total of non-IFRS cloud revenue and non-IFRS software support revenue as a percentage of non-IFRS total revenue.
New cloud and software license order entry is the total of new cloud order entry and software license order entry. The new cloud order entry metric is identical to the new cloud bookings metric defined above except that it considers the total contract value (TCV) of the orders where the new cloud bookings metric considers the orders' annualized contract value (ACV). Software license order entry is the total of all orders received in a given period the revenue from which is expected to be classified as software license revenue. The support services commonly sold with the software license are not included in the software license order entry metric.
Business Network commerce is the total commerce transacted on the SAP Ariba, SAP Concur and SAP Fieldglass Networks in the trailing 12 months. SAP Ariba commerce includes procurement and sourcing spend.
Webcast
SAP senior management will host a financial analyst conference call at 2:00 PM (CET) / 1:00 PM (GMT) / 8:00 AM (Eastern) / 5:00 AM (Pacific). The call will be webcast live on the Company's website at www.sap.com/investor and will be available for replay. Supplementary financial information pertaining to the first quarter results can be found at www.sap.com/investor.
Special Capital Markets Day
SAP will host a Special Capital Markets Day on November 12, 2019.
About SAP
As the cloud company powered by SAP HANA®, SAP is the market leader in enterprise application software, helping companies of all sizes and in all industries run at their best. Our machine learning, IoT, and advanced analytics technologies help turn customers' businesses into intelligent enterprises. Our end-to-end suite of applications and services enable more than 437,000 business and public customers to operate profitably, adapt continuously, and make a difference. For more information, visit www.sap.com.
For more information, financial community only:
Stefan Gruber +49 (6227) 7-44872 [email protected], CET Follow SAP Investor Relations on Twitter at @sapinvestor.
For more information, press only:
| Rajiv Sekhri | +49 (6227) 7-74871 | [email protected], CET |
|---|---|---|
| Marcus Winkler | +49 (6227) 7-67497 | [email protected], CET |
For customers interested in learning more about SAP products:
| Global Customer Center: | +49 180 534-34-24 |
|---|---|
| United States Only: | +1 (800) 872-1SAP (+1-800-872-1727) |
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Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "should" and "will" and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission ("SEC"), including SAP's most recent Annual Report on Form 20-F filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. © 2019 SAP SE. All rights reserved.
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| Financial and Non-Financial Key Facts (IFRS and Non-IFRS) | 10 |
|---|---|
| Primary Financial Statements of SAP Group (IFRS) | 12 |
| (A) Consolidated Income Statements 12 | |
| (B) Consolidated Statements of Financial Position 13 | |
| (C) Consolidated Statements of Cash Flows 14 | |
| Non-IFRS Numbers | 15 |
| (D) Basis of Non-IFRS Presentation 15 | |
| (E) Reconciliation from Non-IFRS Numbers to IFRS Numbers 16 | |
| (F) Non-IFRS Adjustments – Actuals and Estimates 17 | |
| (G) Non-IFRS Adjustments by Functional Areas17 | |
| Disaggregations | 18 |
| (H) Segment Reporting 18 | |
| (H.1) Segment Policies and Segment Changes 18 | |
| (H.2) Segment Reporting – Quarter 18 | |
| (I) Revenue by Region (IFRS and Non-IFRS) 22 | |
| (J) Employees by Region and Functional Areas 23 | |
| Other Disclosures | 24 |
| (K) Renaming of Line Items in the Income Statement 24 | |
| (L) Accounting Policy Changes24 | |
| (L.1) Adoption of IFRS 1624 | |
| (M)Impact of Hyperinflation24 | |
| (N) Business Combinations and Divestments 25 | |
| (N.1) Business Combinations 25 (N.2) Divestments25 |
|
| (O) Miscellaneous Disclosures 25 | |
| (O.1) Changes in Estimates 25 |
Financial and Non-Financial Key Facts (IFRS and Non-IFRS)
| € millions, unless otherwise stated | Q1 2018 |
Q2 2018 |
Q3 2018 |
Q4 2018 |
TY 2018 |
Q1 2019 |
|---|---|---|---|---|---|---|
| Revenues | ||||||
| Cloud (IFRS) | 1,070 | 1,213 | 1,304 | 1,406 | 4,993 | 1,555 |
| Cloud (non-IFRS) | 1,072 | 1,227 | 1,315 | 1,413 | 5,027 | 1,581 |
| % change – yoy | 18 | 32 | 40 | 42 | 33 | 48 |
| % change constant currency – yoy | 31 | 40 | 41 | 40 | 38 | 41 |
| Software licenses (IFRS) | 625 | 996 | 937 | 2,089 | 4,647 | 650 |
| Software licenses (non-IFRS) | 625 | 996 | 937 | 2,089 | 4,647 | 650 |
| % change – yoy | –10 | –9 | –9 | 1 | –5 | 4 |
| % change constant currency – yoy | –2 | –5 | –8 | 8 | 0 | 1 |
| Software support (IFRS) | 2,656 | 2,735 | 2,765 | 2,825 | 10,981 | 2,838 |
| Software support (non-IFRS) | 2,656 | 2,735 | 2,765 | 2,826 | 10,982 | 2,838 |
| % change – yoy | –3 | 0 | 3 | 3 | 1 | 7 |
| % change constant currency – yoy | 5 | 7 | 6 | 3 | 5 | 4 |
| Software licenses and support (IFRS) | 3,281 | 3,731 | 3,702 | 4,914 | 15,628 | 3,489 |
| Software licenses and support (non-IFRS) | 3,281 | 3,731 | 3,702 | 4,914 | 15,629 | 3,489 |
| % change – yoy | –4 | –2 | 0 | 2 | –1 | 6 |
| % change constant currency – yoy | 4 | 3 | 2 | 5 | 4 | 3 |
| Cloud and software (IFRS) | 4,351 | 4,944 | 5,007 | 6,320 | 20,622 | 5,044 |
| Cloud and software (non-IFRS) | 4,353 | 4,958 | 5,017 | 6,327 | 20,655 | 5,070 |
| % change – yoy | 1 | 4 | 8 | 9 | 6 | 16 |
| % change constant currency – yoy | 9 | 10 | 10 | 11 | 10 | 12 |
| Total revenue (IFRS) | 5,261 | 5,999 | 6,020 | 7,428 | 24,708 | 6,091 |
| Total revenue (non-IFRS) | 5,262 | 6,014 | 6,031 | 7,434 | 24,741 | 6,118 |
| % change – yoy | 0 | 4 | 8 | 9 | 5 | 16 |
| % change constant currency – yoy | 9 | 10 | 10 | 13 | 11 | 12 |
| Share of more predictable revenue (IFRS, in %) | 71 | 66 | 68 | 57 | 65 | 72 |
| Share of more predictable revenue (non-IFRS, in %) | 71 | 66 | 68 | 57 | 65 | 72 |
| Profits | ||||||
| Operating profit (loss) (IFRS) | 1,025 | 1,044 | 1,236 | 2,399 | 5,703 | –136 |
| Operating profit (loss) (non-IFRS) | 1,235 | 1,640 | 1,742 | 2,545 | 7,163 | 1,467 |
| % change | 3 | 4 | 6 | 8 | 6 | 19 |
| % change constant currency | 14 | 12 | 11 | 8 | 10 | 13 |
| Profit (loss) after tax (IFRS) | 708 | 718 | 972 | 1,691 | 4,088 | –108 |
| Profit (loss) after tax (non-IFRS) | 868 | 1,171 | 1,358 | 1,802 | 5,199 | 1,080 |
| % change | –2 | 5 | 12 | –16 | –3 | 25 |
| Margins | ||||||
| Cloud gross margin (IFRS, in %) | 59.3 | 58.3 | 58.6 | 58.2 | 58.6 | 61.2 |
| Cloud gross margin (non-IFRS, in %) | 63.2 | 63.6 | 63.5 | 62.1 | 63.1 | 66.2 |
| Software license and support gross margin (IFRS, in %) | 85.7 | 85.8 | 86.0 | 88.3 | 86.6 | 84.6 |
| Software license and support gross margin (non-IFRS, in %) | 86.4 | 87.0 | 87.1 | 88.7 | 87.4 | 85.7 |
| Cloud and software gross margin (IFRS, in %) | 79.2 | 79.0 | 78.9 | 81.6 | 79.8 | 77.4 |
| Cloud and software gross margin (non-IFRS, in %) | 80.7 | 81.2 | 80.9 | 82.8 | 81.5 | 79.6 |
| Gross margin (IFRS, in %) | 68.5 | 68.6 | 68.3 | 72.9 | 69.8 | 66.5 |
| Gross margin (non-IFRS, in %) | 70.2 | 71.5 | 71.0 | 74.0 | 71.8 | 69.5 |
| Operating margin (IFRS, in %) | 19.5 | 17.4 | 20.5 | 32.3 | 23.1 | –2.2 |
| Operating margin (non-IFRS, in %) | 23.5 | 27.3 | 28.9 | 34.2 | 29.0 | 24.0 |
| AT&S segment– Cloud gross margin (in %) | 49.2 | 48.8 | 48.1 | 46.9 | 48.2 | 53.2 |
| AT&S segment– Gross margin (in %) | 71.2 | 72.6 | 72.4 | 75.2 | 73.0 | 70.1 |
| AT&S segment – Segment margin (in %) | 36.5 | 41.3 | 41.8 | 46.8 | 42.0 | 36.2 |
| BN segment– Cloud gross margin (in %) | 77.3 | 77.4 | 78.4 | 78.0 | 77.8 | 78.0 |
| BN segment – Gross margin (in %) | 68.7 | 69.3 | 69.1 | 69.3 | 69.1 | 69.2 |
| € millions, unless otherwise stated | Q1 2018 |
Q2 2018 |
Q3 2018 |
Q4 2018 |
TY 2018 |
Q1 2019 |
|---|---|---|---|---|---|---|
| BN segment– Segment margin (in %) | 16.7 | 20.3 | 23.0 | 20.4 | 20.2 | 21.7 |
| CXM segment – Cloud gross margin (in %) | 65.8 | 68.9 | 67.8 | 63.4 | 66.4 | 74.9 |
| CXM segment – Gross margin (in %) | 75.9 | 77.5 | 75.1 | 80.0 | 77.5 | 75.5 |
| CXM segment – Segment margin (in %) | –5.6 | –0.5 | 3.8 | 23.3 | 8.4 | –3.6 |
| Key Profit Ratios | ||||||
| Effective tax rate (IFRS, in %) | 28.3 | 29.5 | 24.1 | 26.9 | 27.0 | 23.2 |
| Effective tax rate (non-IFRS, in %) | 27.6 | 27.5 | 24.0 | 26.7 | 26.3 | 26.1 |
| Earnings per share, basic (IFRS, in €) | 0.59 | 0.60 | 0.81 | 1.41 | 3.42 | –0.10 |
| Earnings per share, basic (non-IFRS, in €) | 0.73 | 0.98 | 1.14 | 1.51 | 4.35 | 0.90 |
| Order Entry | ||||||
| New cloud and software order entry | 1,346 | 2,332 | 2,221 | 4,533 | 10,432 | 1,579 |
| % change – yoy | 1 | 8 | 11 | 15 | 11 | 17 |
| % change constant currency – yoy | 10 | 12 | 12 | 18 | 14 | 13 |
| New cloud bookings | 245 | 421 | 411 | 736 | 1,814 | 324 |
| % change – yoy | 14 | 24 | 36 | 25 | 25 | 32 |
| % change constant currency – yoy | 25 | 29 | 37 | 23 | 28 | 26 |
| Orders – number of cloud deals (in transactions) | 2,376 | 3,032 | 3,375 | 6,055 | 14,839 | 2,956 |
| Share of cloud orders greater than €5 million based on total cloud order en try volume (in %) |
20 | 32 | 28 | 33 | 30 | 26 |
| Share of cloud orders smaller than €1 million based on total cloud order entry volume (in %) |
39 | 31 | 35 | 28 | 32 | 39 |
| Orders – number of on-premise software deals (in transactions) | 13,549 | 14,538 | 13,794 | 16,649 | 58,530 | 12,229 |
| Share of orders greater than €5 million based on total software order entry volume (in %) |
18 | 29 | 22 | 35 | 29 | 28 |
| Share of orders smaller than €1 million based on total software order entry volume (in %) |
50 | 41 | 42 | 33 | 39 | 42 |
| Liquidity and Cash Flow | ||||||
| Net cash flows from operating activities | 2,578 | 407 | 499 | 819 | 4,303 | 2,802 |
| Capital expenditure | –427 | –391 | –328 | –312 | –1,458 | –359 |
| Payments of lease liabilities | NA | NA | NA | NA | NA | –78 |
| Free cash flow | 2,151 | 16 | 171 | 506 | 2,844 | 2,365 |
| % of total revenue (IFRS) | 41 | 0 | 3 | 7 | 12 | 39 |
| % of profit after tax (IFRS) | 304 | 2 | 18 | 30 | 70 | –2,198 |
| Group liquidity, gross | 8,270 | 4,688 | 4,738 | 8,838 | 8,838 | 7,673 |
| Group debt | –7,723 | –7,660 | –7,521 | –11,331 | –11,331 | –13,866 |
| Group liquidity, net | 546 | –2,972 | –2,784 | –2,493 | –2,493 | –6,193 |
| Days' sales outstanding (DSO, in days)1) | 68 | 68 | 68 | 70 | 70 | 69 |
| Financial Position | ||||||
| Cash and cash equivalents | 7,598 | 4,516 | 4,507 | 8,627 | 8,627 | 7,332 |
| Goodwill | 20,856 | 23,406 | 23,523 | 23,736 | 23,736 | 29,074 |
| Total assets | 45,463 | 45,491 | 45,631 | 51,502 | 51,502 | 60,596 |
| Contract liabilities (current) | 5,046 | 4,867 | 3,600 | 3,028 | 3,028 | 6,064 |
| Equity ratio (total equity in % of total assets) | 56 | 57 | 59 | 56 | 56 | 48 |
| Non-Financials | ||||||
| Number of employees (quarter end)2) | 91,120 | 93,846 | 94,989 | 96,498 | 96,498 | 98,659 |
| Employee retention (in %, rolling 12 months) | 94.4 | 94.3 | 94.1 | 93.9 | 93.9 | 93.8 |
| Women in management (in %, quarter end) | 25.6 | 25.8 | 25.9 | 25.7 | 25.7 | 26.0 |
| Greenhouse gas emissions (in kilotons) | 100 | 75 | 65 | 70 | 310 | 110 |
1) Days' sales outstanding measures the average number of days from the raised invoice to cash receipt from the customer. We calculate DSO by dividing the average invoiced trade receivables balance of the last 12 months by the average monthly cash receipt of the last 12 months. 2) In full-time equivalents.
Primary Financial Statements of SAP Group (IFRS)
(A) Consolidated Income Statements
| € millions, unless otherwise stated | Q1 2019 | Q1 2018 | ∆ in % |
|---|---|---|---|
| Cloud | 1,555 | 1,070 | 45 |
| Software licenses | 650 | 625 | 4 |
| Software support | 2,838 | 2,656 | 7 |
| Software licenses and support | 3,489 | 3,281 | 6 |
| Cloud and software | 5,044 | 4,351 | 16 |
| Services | 1,048 | 910 | 15 |
| Total revenue | 6,091 | 5,261 | 16 |
| Cost of cloud | –604 | –435 | 39 |
| Cost of software licenses and support | –538 | –470 | 15 |
| Cost of cloud and software | –1,141 | –905 | 26 |
| Cost of services | –899 | –751 | 20 |
| Total cost of revenue | –2,041 | –1,656 | 23 |
| Gross profit | 4,051 | 3,605 | 12 |
| Research and development | –1,061 | –814 | 30 |
| Sales and marketing | –1,838 | –1,515 | 21 |
| General and administration | –439 | –231 | 90 |
| Restructuring | –886 | –11 | >100 |
| Other operating income/expense, net | 38 | –10 | <-100 |
| Total operating expenses | –6,228 | –4,236 | 47 |
| Operating profit (loss) | –136 | 1,025 | <-100 |
| Other non-operating income/expense, net | –4 | –9 | –61 |
| Finance income | 129 | 43 | >100 |
| Finance costs | –129 | –71 | 81 |
| Financial income, net | 0 | –28 | –99 |
| Profit (loss) before tax | –140 | 987 | <-100 |
| Income tax expense | 33 | –280 | <-100 |
| Profit (loss) after tax | –108 | 708 | <-100 |
| Attributable to owners of parent | –114 | 708 | <-100 |
| Attributable to non-controlling interests | 7 | –1 | <-100 |
| Earnings per share, basic (in €)1) | –0.10 | 0.59 | <-100 |
| Earnings per share, diluted (in €)1) | –0.10 | 0.59 | <-100 |
1) For the three months ended March 31, 2019 and 2018, the weighted average number of shares was 1,194 million (diluted 1,194 million) and 1,193 million (diluted: 1,194 million), respectively (treasury stock excluded).
(B) Consolidated Statements of Financial Position
| as at 03/31/2019 and 12/31/2018 | ||
|---|---|---|
| € millions | 2019 | 20181) |
| Cash and cash equivalents | 7,332 | 8,627 |
| Other financial assets | 591 | 448 |
| Trade and other receivables | 6,755 | 6,362 |
| Other non-financial assets | 1,045 | 889 |
| Tax assets | 339 | 293 |
| Total current assets | 16,062 | 16,620 |
| Goodwill | 29,074 | 23,736 |
| Intangible assets | 4,953 | 3,227 |
| Property, plant, and equipment | 5,523 | 3,553 |
| Other financial assets | 1,768 | 1,536 |
| Trade and other receivables | 111 | 118 |
| Other non-financial assets | 1,362 | 1,301 |
| Tax assets | 404 | 397 |
| Deferred tax assets | 1,339 | 1,014 |
| Total non-current assets | 44,534 | 34,881 |
| Total assets | 60,596 | 51,502 |
| € millions | 2019 | 20181) |
| Trade and other payables | 1,646 | 1,491 |
| Tax liabilities | 629 | 611 |
| Financial liabilities | 1,618 | 1,125 |
| Other non-financial liabilities | 3,713 | 4,120 |
| Provisions | 980 | 110 |
| Contract liabilities | 6,064 | 3,028 |
| Total current liabilities | 14,650 | 10,486 |
| Trade and other payables | 15 | 129 |
| Tax liabilities | 555 | 495 |
| Financial liabilities | 14,735 | 10,553 |
| Other non-financial liabilities | 814 | 501 |
| Provisions | 408 | 270 |
| Deferred tax liabilities | 84 | 102 |
| Contract liabilities | 107 | 88 |
| Total non-current liabilities | 16,718 | 12,138 |
| Total liabilities | 31,368 | 22,624 |
| Issued capital | 1,229 | 1,229 |
| Share premium | 544 | 543 |
| Retained earnings | 27,211 | 27,407 |
| Other components of equity | 1,772 | 1,234 |
| Treasury shares | –1,580 | –1,580 |
| Equity attributable to owners of parent | 29,177 | 28,832 |
| Non-controlling interests | 51 | 45 |
| Total equity | 29,228 | 28,877 |
| Total equity and liabilities | 60,596 | 51,502 |
1) Under the adoption method we chose for IFRS 16, prior years are not restated to conform to the new policies. See section (K) Accounting Policy Changes in this Quarterly Statement.
(C) Consolidated Statements of Cash Flows
| € millions | Q1 2019 | Q1 2018 |
|---|---|---|
| Profit (loss) after tax | –108 | 708 |
| Adjustments to reconcile profit (loss) after tax to net cash flows from operating activities: | ||
| Depreciation and amortization | 442 | 303 |
| Share-based payment expense | 517 | 70 |
| Income tax expense | –33 | 280 |
| Financial income, net | 0 | 28 |
| Decrease/increase in allowances on trade receivables | 11 | –25 |
| Other adjustments for non-cash items | –48 | –1 |
| Decrease/increase in trade and other receivables | –257 | 942 |
| Decrease/increase in other assets | –159 | –183 |
| Decrease/increase in trade payables, provisions, and other liabilities | 302 | –709 |
| Decrease/increase in contract liabilities | 2,825 | 1,683 |
| Share-based payments | –101 | –69 |
| Interest paid | –105 | –55 |
| Interest received | 22 | 25 |
| Income taxes paid, net of refunds | –507 | –420 |
| Net cash flows from operating activities | 2,802 | 2,578 |
| Business combinations, net of cash and cash equivalents acquired | –6,043 | –17 |
| Proceeds from sales of subsidiaries or other businesses | 61 | 0 |
| Purchase of intangible assets or property, plant, and equipment | –359 | –427 |
| Proceeds from sales of intangible assets or property, plant, and equipment | 22 | 14 |
| Purchase of equity or debt instruments of other entities | –318 | –378 |
| Proceeds from sales of equity or debt instruments of other entities | 134 | 439 |
| Net cash flows from investing activities | –6,502 | –369 |
| Proceeds from borrowings | 2,516 | 1,494 |
| Repayments of borrowings | –6 | –12 |
| Payments of lease liabilities | –78 | 0 |
| Net cash flows from financing activities | 2,433 | 1,482 |
| Effect of foreign currency rates on cash and cash equivalents | –28 | –103 |
| Net decrease/increase in cash and cash equivalents | –1,295 | 3,587 |
| Cash and cash equivalents at the beginning of the period | 8,627 | 4,011 |
| Cash and cash equivalents at the end of the period | 7,332 | 7,598 |
Non-IFRS Numbers
(D) Basis of Non-IFRS Presentation
We disclose certain financial measures such as revenue (non-IFRS), expense (non-IFRS), and profit measures (non-IFRS) that are not prepared in accordance with IFRS and are therefore considered non-IFRS financial measures.
For a more detailed description of all of SAP's non-IFRS measures and their limitations as well as our constant currency and free cash flow figures, see Explanation of Non-IFRS Measures online.
| (E) Reconciliation from Non-IFRS Numbers to IFRS Numbers |
|||||||
|---|---|---|---|---|---|---|---|
| ------------------------------------------------------------- | -- | -- | -- | -- | -- | -- | -- |
| € millions, unless otherwise stated | Q1 2019 | Q1 2018 | ∆ in % | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| IFRS | Adj. | Non IFRS |
Currency Impact |
Non-IFRS Constant Currency |
IFRS | Adj. | Non IFRS |
IFRS | Non IFRS |
Non-IFRS Constant Currency1) |
|
| Revenue Numbers | |||||||||||
| Cloud | 1,555 | 26 | 1,581 | –75 | 1,507 | 1,070 | 2 | 1,072 | 45 | 48 | 41 |
| Software licenses | 650 | 0 | 650 | –22 | 629 | 625 | 0 | 625 | 4 | 4 | 1 |
| Software support | 2,838 | 0 | 2,838 | –78 | 2,761 | 2,656 | 0 | 2,656 | 7 | 7 | 4 |
| Software licenses and support | 3,489 | 0 | 3,489 | –99 | 3,389 | 3,281 | 0 | 3,281 | 6 | 6 | 3 |
| Cloud and software | 5,044 | 26 | 5,070 | –174 | 4,896 | 4,351 | 2 | 4,353 | 16 | 16 | 12 |
| Services | 1,048 | 0 | 1,048 | –38 | 1,010 | 910 | 0 | 910 | 15 | 15 | 11 |
| Total revenue | 6,091 | 26 | 6,118 | –211 | 5,906 | 5,261 | 2 | 5,262 | 16 | 16 | 12 |
| Operating Expense Numbers | |||||||||||
| Cost of cloud | –604 | 70 | –534 | –435 | 41 | –394 | 39 | 35 | |||
| Cost of software licenses and support |
–538 | 38 | –500 | –470 | 25 | –445 | 15 | 12 | |||
| Cost of cloud and software | –1,141 | 108 | –1,034 | –905 | 66 | –839 | 26 | 23 | |||
| Cost of services | –899 | 64 | –835 | –751 | 19 | –732 | 20 | 14 | |||
| Total cost of revenue | –2,041 | 172 | –1,868 | –1,656 | 85 | –1,571 | 23 | 19 | |||
| Gross profit | 4,051 | 199 | 4,249 | 3,605 | 87 | 3,692 | 12 | 15 | |||
| Research and development | –1,061 | 125 | –936 | –814 | 21 | –793 | 30 | 18 | |||
| Sales and marketing | –1,838 | 231 | –1,607 | –1,515 | 89 | –1,426 | 21 | 13 | |||
| General and administration | –439 | 161 | –277 | –231 | 3 | –227 | 90 | 22 | |||
| Restructuring | –886 | 886 | 0 | –11 | 11 | 0 | >100 | NA | |||
| Other operating income/expense, net |
38 | 0 | 38 | –10 | 0 | –10 | <-100 | <-100 | |||
| Total operating expenses | –6,228 | 1,577 | –4,651 | 143 | –4,508 | –4,236 | 209 | –4,027 | 47 | 15 | 12 |
| Profit Numbers | |||||||||||
| Operating profit (loss) | –136 | 1,603 | 1,467 | –69 | 1,398 | 1,025 | 211 | 1,235 | <-100 | 19 | 13 |
| Other non-operating income/ex pense, net |
–4 | 0 | –4 | –9 | 0 | –9 | –61 | –61 | |||
| Finance income | 129 | 0 | 129 | 43 | 0 | 43 | >100 | >100 | |||
| Finance costs | –129 | 0 | –129 | –71 | 0 | –71 | 81 | 81 | |||
| Financial income, net | 0 | 0 | 0 | –28 | 0 | –28 | –99 | –99 | |||
| Profit (loss) before tax | –140 | 1,603 | 1,463 | 987 | 211 | 1,198 | <-100 | 22 | |||
| Income tax expense | 33 | –415 | –383 | –280 | –51 | –330 | <-100 | 16 | |||
| Profit (loss) after tax | –108 | 1,188 | 1,080 | 708 | 160 | 868 | <-100 | 25 | |||
| Attributable to owners of parent | –114 | 1,188 | 1,074 | 708 | 160 | 868 | <-100 | 24 | |||
| Attributable to non-controlling in terests |
7 | 0 | 7 | –1 | 0 | –1 | <-100 | <-100 | |||
| Key Ratios | |||||||||||
| Operating margin (in %) | –2.2 | 24.0 | 23.7 | 19.5 | 23.5 | –21.7pp | 0.5pp | 0.2pp | |||
| Effective tax rate (in %)2) | 23.2 | 26.1 | 28.3 | 27.6 | –5.1pp | –1.4pp | |||||
| Earnings per share, basic (in €) | –0.10 | 0.90 | 0.59 | 0.73 | <-100 | 24 |
1) Constant currency period-over-period changes are calculated by comparing the current year's non-IFRS constant currency numbers with the non-IFRS number of the previous year's respective period.
2) The difference between our effective tax rate (IFRS) and effective tax rate (non-IFRS) in Q1 2019 mainly results from tax effects of restructuring expenses, share-based payment expenses and acquisition-related charges. The difference between our effective tax rate (IFRS) and effective tax rate (non-IFRS) in Q1 2018 mainly results from tax effects of acquisition-related charges and share-based payment expenses.
(F) Non-IFRS Adjustments – Actuals and Estimates
| € millions | Estimated Amounts for Full Year 2019 |
Q1 2019 | Q1 2018 |
|---|---|---|---|
| Operating profit (loss) (IFRS) | –136 | 1,025 | |
| Revenue adjustments | 70–120 | 26 | 2 |
| Adjustment for acquisition-related charges | 650–750 | 174 | 129 |
| Adjustment for share-based payment expenses | 1,350–1,550 | 517 | 70 |
| Adjustment for restructuring | 800–950 | 886 | 11 |
| Operating expense adjustments | 1,577 | 209 | |
| Operating profit (loss) adjustments | 1,603 | 211 | |
| Operating profit (loss) (non-IFRS) | 1,467 | 1,235 |
Due to rounding, numbers may not add up precisely.
(G) Non-IFRS Adjustments by Functional Areas
| € millions | Q1 2019 Q1 2018 |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| IFRS | Acquisi tion-Re lated |
SBP1) | Restruc turing |
Non-IFRS | IFRS | Acquisition Related |
SBP1) | Restruc turing |
Non-IFRS | ||
| Cost of cloud and software | –1,141 | 71 | 37 | 0 | –1,034 | –905 | 58 | 8 | 0 | –839 | |
| Cost of services | –899 | 1 | 63 | 0 | –835 | –751 | 2 | 17 | 0 | –732 | |
| Research and development | –1,061 | 4 | 122 | 0 | –936 | –814 | 2 | 19 | 0 | –793 | |
| Sales and marketing | –1,838 | 84 | 147 | 0 | –1,607 | –1,515 | 62 | 27 | 0 | –1,426 | |
| General and administration | –439 | 13 | 148 | 0 | –277 | –231 | 5 | –1 | 0 | –227 | |
| Restructuring | –886 | 0 | 0 | 886 | 0 | –11 | 0 | 0 | 11 | 0 | |
| Other operating income/ex pense, net |
38 | 0 | 0 | 0 | 38 | –10 | 0 | 0 | 0 | –10 | |
| Total operating expenses | –6,228 | 174 | 517 | 886 | –4,651 | –4,236 | 129 | 70 | 11 | –4,027 |
1) Share-based Payments
Due to rounding, numbers may not add up precisely.
If not presented in a separate line item in our income statement, the restructuring expenses would break down as follows:
| € millions | Q1 2019 | Q1 2018 |
|---|---|---|
| Cost of cloud and software | –117 | –1 |
| Cost of services | –144 | –4 |
| Research and development | –387 | –1 |
| Sales and marketing | –177 | –5 |
| General and administration | –61 | 0 |
| Restructuring expenses | –886 | –11 |
Disaggregations
(H) Segment Reporting
(H.1) Segment Policies and Segment Changes
SAP has three reportable segments: the Applications, Technology & Services segment, the Business Network segment, and the Customer and Experience Management segment.
As of the first quarter in 2019, two segments were renamed. Qualtrics is reflected in our Customer Experience segment which we renamed, upon the Qualtrics acquisition to Customer and Experience Management segment. The former SAP Business Network segment was renamed to Business Network segment without any changes in the composition of this segment.
In 2018, revenues for one offering were reflected in the former Customer Experience segment and related research and development costs were part of the Applications, Technology & Services segment. In the first quarter of 2019, revenues for this offering were shifted to the Applications, Technology & Services segment. This shift resulted in a total impact of €69 million for full year 2018 and primarily affected software licenses revenue of the Customer and Experience Management segment and the Applications, Technology & Services segment. Prior periods of the Applications, Technology & Services segment and Customer and Experience Management segment are restated to conform to the current year's presentation.
For a more detailed description of SAP's segment reporting, see Note (C.1) "Results of Segments" of our Integrated Report 2018.
(H.2) Segment Reporting – Quarter
Applications, Technology & Services
| € millions, unless otherwise stated | Q1 2019 | Q1 2018 | ∆ in % | ∆ in % | |
|---|---|---|---|---|---|
| Actual Currency |
Constant Currency |
Actual Currency |
Actual Currency |
Constant Currency |
|
| Cloud – SaaS/PaaS1) | 561 | 541 | 403 | 39 | 34 |
| Cloud – IaaS2) | 159 | 152 | 104 | 52 | 45 |
| Cloud | 719 | 693 | 507 | 42 | 37 |
| Software licenses | 608 | 587 | 569 | 7 | 3 |
| Software support | 2,834 | 2,757 | 2,652 | 7 | 4 |
| Software licenses and support | 3,442 | 3,345 | 3,222 | 7 | 4 |
| Cloud and software | 4,161 | 4,037 | 3,729 | 12 | 8 |
| Services | 832 | 806 | 735 | 13 | 10 |
| Total segment revenue | 4,993 | 4,843 | 4,464 | 12 | 9 |
| Cost of cloud – SaaS/PaaS1) | –228 | –219 | –162 | 41 | 35 |
| Cost of cloud – IaaS2) | –108 | –105 | –96 | 13 | 10 |
| Cost of cloud | –337 | –325 | –258 | 31 | 26 |
| Cost of software licenses and support | –485 | –474 | –440 | 10 | 8 |
| Cost of cloud and software | –821 | –798 | –698 | 18 | 14 |
| Cost of services | –673 | –657 | –586 | 15 | 12 |
| Total cost of revenue | –1,494 | –1,455 | –1,285 | 16 | 13 |
| Segment gross profit | 3,499 | 3,388 | 3,179 | 10 | 7 |
| Other segment expenses | –1,691 | –1,649 | –1,549 | 9 | 6 |
| Segment profit (loss) | 1,809 | 1,739 | 1,630 | 11 | 7 |
| Margins | |||||
| Cloud gross margin – SaaS/PaaS1) (in %) | 59.3 | 59.5 | 59.8 | –0.5pp | –0.3pp |
| Cloud gross margin – IaaS2) (in %) | 31.8 | 30.6 | 8.2 | 23.6pp | 22.4pp |
| Cloud gross margin (in %) | 53.2 | 53.1 | 49.2 | 4.1pp | 4.0pp |
| Gross margin (in %) | 70.1 | 70.0 | 71.2 | –1.1pp | –1.3pp |
| Segment margin (in %) | 36.2 | 35.9 | 36.5 | –0.3pp | –0.6pp |
1) Software as a service/platform as a service
2) Infrastructure as a service
Business Network
| € millions, unless otherwise stated | Q1 2019 | Q1 2018 | ∆ in % | ∆ in % | |
|---|---|---|---|---|---|
| Actual Currency |
Constant Currency |
Actual Currency |
Actual Currency |
Constant Currency |
|
| Cloud – SaaS/PaaS1) | 626 | 591 | 483 | 30 | 22 |
| Cloud – IaaS2) | 0 | 0 | 0 | 0 | 0 |
| Cloud | 626 | 591 | 483 | 30 | 22 |
| Software licenses | 0 | 0 | 0 | 0 | 0 |
| Software support | 4 | 3 | 4 | –5 | –11 |
| Software licenses and support | 4 | 3 | 4 | –5 | –11 |
| Cloud and software | 630 | 594 | 487 | 29 | 22 |
| Services | 110 | 104 | 103 | 8 | 1 |
| Total segment revenue | 740 | 698 | 590 | 25 | 18 |
| Cost of cloud – SaaS/PaaS1) | –138 | –130 | –109 | 26 | 19 |
| Cost of cloud – IaaS2) | 0 | 0 | 0 | 0 | 0 |
| Cost of cloud | –138 | –130 | –109 | 26 | 19 |
| Cost of software licenses and support | –2 | –2 | –2 | 34 | 24 |
| Cost of cloud and software | –140 | –133 | –111 | 26 | 19 |
| Cost of services | –88 | –84 | –74 | 19 | 14 |
| Total cost of revenue | –228 | –217 | –185 | 23 | 17 |
| Segment gross profit | 512 | 482 | 405 | 26 | 19 |
| Other segment expenses | –352 | –333 | –307 | 15 | 9 |
| Segment profit (loss) | 161 | 148 | 98 | 63 | 51 |
| Margins | |||||
| Cloud gross margin – SaaS/PaaS1) (in %) | 78.0 | 77.9 | 77.3 | 0.7pp | 0.6pp |
| Cloud gross margin – IaaS2) (in %) | NA | NA | NA | NA | NA |
| Cloud gross margin (in %) | 78.0 | 77.9 | 77.3 | 0.7pp | 0.6pp |
| Gross margin (in %) | 69.2 | 69.0 | 68.7 | 0.6pp | 0.3pp |
| Segment margin (in %) | 21.7 | 21.2 | 16.7 | 5.0pp | 4.6pp |
1) Software as a service/platform as a service
2) Infrastructure as a service
Customer and Experience Management
| € millions, unless otherwise stated | Q1 2019 | Q1 2018 | ∆ in % | ∆ in % | |
|---|---|---|---|---|---|
| Actual Currency |
Constant Currency |
Actual Currency |
Actual Currency |
Constant Currency |
|
| Cloud – SaaS/PaaS1) | 236 | 223 | 81 | >100 | >100 |
| Cloud – IaaS2) | 0 | 0 | 0 | 0 | 0 |
| Cloud | 236 | 223 | 81 | >100 | >100 |
| Software licenses | 43 | 41 | 55 | –23 | –26 |
| Software support | 0 | 0 | 0 | 0 | 0 |
| Software licenses and support | 43 | 41 | 55 | –22 | –25 |
| Cloud and software | 279 | 264 | 137 | >100 | 93 |
| Services | 26 | 24 | 2 | >100 | >100 |
| Total segment revenue | 305 | 288 | 139 | >100 | >100 |
| Cost of cloud – SaaS/PaaS1) | –59 | –57 | –28 | >100 | >100 |
| Cost of cloud – IaaS2) | 0 | 0 | 0 | 0 | 0 |
| Cost of cloud | –59 | –57 | –28 | >100 | >100 |
| Cost of software licenses and support | –4 | –4 | –5 | –29 | –30 |
| Cost of cloud and software | –63 | –61 | –33 | 90 | 84 |
| Cost of services | –12 | –11 | 0 | >100 | >100 |
| Total cost of revenue | –75 | –72 | –33 | >100 | >100 |
| Segment gross profit | 230 | 216 | 105 | >100 | >100 |
| Other segment expenses | –241 | –228 | –113 | >100 | >100 |
| Segment profit (loss) | –11 | –12 | –8 | 43 | 58 |
| Margins | |||||
| Cloud gross margin – SaaS/PaaS1) (in %) | 74.9 | 74.2 | 65.8 | 9.1pp | 8.4pp |
| Cloud gross margin – IaaS2) (in %) | NA | NA | NA | NA | NA |
| Cloud gross margin (in %) | 74.9 | 74.2 | 65.8 | 9.1pp | 8.4pp |
| Gross margin (in %) | 75.5 | 75.0 | 75.9 | –0.3pp | –0.9pp |
| Segment margin (in %) | –3.6 | –4.2 | –5.6 | 2.0pp | 1.3pp |
1) Software as a service/platform as a service
2) Infrastructure as a service
Reconciliation of Cloud Revenues and Margins
| € millions, unless otherwise stated | Q1 2019 | Q1 2018 | ∆ in % | ∆ in % | ||
|---|---|---|---|---|---|---|
| Actual Currency |
Constant Currency |
Actual Currency |
Actual Currency |
Constant Currency |
||
| Business Network segment | 626 | 591 | 483 | 30 | 22 | |
| Cloud revenue – SaaS/PaaS1) | Other3) | 797 | 764 | 484 | 65 | 58 |
| Total | 1,423 | 1,355 | 967 | 47 | 40 | |
| Cloud revenue – IaaS2) | 159 | 152 | 104 | 52 | 45 | |
| Cloud revenue | 1,581 1,507 1,072 |
48 | 41 | |||
| Business Network segment | 78.0 | 77.9 | 77.3 | 0.7pp | 0.6pp | |
| Cloud gross margin – SaaS/PaaS1) (in %) | Other3) | 63.8 | 63.7 | 61.0 | 2.8pp | 2.7pp |
| Total | 70.1 | 69.9 | 69.2 | 0.9pp | 0.7pp | |
| Cloud gross margin – IaaS2) (in %) | 31.8 | 30.6 | 8.2 | 23.6pp | 22.4pp | |
| Cloud gross margin (in %) | 66.2 | 65.9 | 63.2 | 3.0pp | 2.7pp |
1) Software as a service/platform as a service
2) Infrastructure as a service
3) Other includes Applications, Technology & Services segment, Customer and Experience Management segment, and miscellaneous. The individual revenue and margin numbers for the Applications, Technology & Services segment and the Customer and Experience Management segment are disclosed on the previous pages.
(I) Revenue by Region (IFRS and Non-IFRS)
| € millions | Q1 2019 | Q1 2018 | ∆ in % | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| IFRS | Adj. | Non IFRS |
Currency Impact |
Non-IFRS Constant Currency |
IFRS | Adj. | Non IFRS |
IFRS | Non IFRS |
Non-IFRS Constant Currency1) |
|
| Cloud revenue by region | |||||||||||
| EMEA | 457 | 0 | 457 | –8 | 449 | 322 | 0 | 322 | 42 | 42 | 39 |
| Americas | 898 | 26 | 924 | –60 | 864 | 620 | 2 | 621 | 45 | 49 | 39 |
| APJ | 201 | 0 | 201 | –6 | 194 | 129 | 0 | 129 | 55 | 55 | 51 |
| Cloud revenue | 1,555 | 26 | 1,581 | –75 | 1,507 | 1,070 | 2 | 1,072 | 45 | 48 | 41 |
| Cloud and software revenue by region | |||||||||||
| EMEA | 2,184 | 0 | 2,184 | –12 | 2,171 | 1,958 | 0 | 1,958 | 11 | 11 | 11 |
| Americas | 2,045 | 26 | 2,071 | –136 | 1,936 | 1,688 | 2 | 1,690 | 21 | 23 | 15 |
| APJ | 815 | 0 | 815 | –26 | 789 | 705 | 0 | 705 | 16 | 16 | 12 |
| Cloud and software revenue |
5,044 | 26 | 5,070 | –174 | 4,896 | 4,351 | 2 | 4,353 | 16 | 16 | 12 |
| Total revenue by region | |||||||||||
| Germany | 835 | 0 | 835 | –1 | 834 | 753 | 0 | 753 | 11 | 11 | 11 |
| Rest of EMEA | 1,793 | 0 | 1,793 | –14 | 1,779 | 1,615 | 0 | 1,615 | 11 | 11 | 10 |
| Total EMEA | 2,628 | 0 | 2,628 | –14 | 2,613 | 2,368 | 0 | 2,368 | 11 | 11 | 10 |
| United States | 2,043 | 26 | 2,070 | –153 | 1,917 | 1,665 | 2 | 1,667 | 23 | 24 | 15 |
| Rest of Americas | 458 | 0 | 458 | –14 | 445 | 398 | 0 | 398 | 15 | 15 | 12 |
| Total Americas | 2,502 | 26 | 2,528 | –167 | 2,361 | 2,063 | 2 | 2,065 | 21 | 22 | 14 |
| Japan | 264 | 0 | 264 | –15 | 249 | 209 | 0 | 209 | 26 | 26 | 19 |
| Rest of APJ | 698 | 0 | 698 | –15 | 683 | 620 | 0 | 620 | 13 | 13 | 10 |
| Total APJ | 962 | 0 | 962 | –30 | 932 | 830 | 0 | 830 | 16 | 16 | 12 |
| Total revenue | 6,091 | 26 | 6,118 | –211 | 5,906 | 5,261 | 2 | 5,262 | 16 | 16 | 12 |
1) Constant currency period-over-period changes are calculated by comparing the current year's non-IFRS constant currency numbers with the non-IFRS numbers of the previous year's respective period.
(J) Employees by Region and Functional Areas
| Full-time equivalents | 3/31/2019 | 3/31/2018 | ||||||
|---|---|---|---|---|---|---|---|---|
| EMEA | Americas | APJ | Total | EMEA | Americas | APJ | Total | |
| Cloud and software | 6,457 | 4,601 | 5,348 | 16,406 | 5,909 | 4,000 | 4,801 | 14,710 |
| Services | 8,250 | 5,784 | 5,602 | 19,635 | 7,705 | 5,085 | 5,161 | 17,951 |
| Research and development | 12,646 | 5,781 | 8,823 | 27,251 | 11,715 | 5,376 | 8,499 | 25,590 |
| Sales and marketing | 9,984 | 10,137 | 5,015 | 25,136 | 9,542 | 9,403 | 4,977 | 23,922 |
| General and administration | 3,067 | 2,096 | 1,198 | 6,362 | 2,798 | 1,835 | 1,088 | 5,721 |
| Infrastructure | 2,184 | 1,025 | 660 | 3,869 | 1,847 | 871 | 508 | 3,226 |
| SAP Group (3/31) | 42,589 | 29,424 | 26,646 | 98,659 | 39,516 | 26,569 | 25,035 | 91,120 |
| Thereof acquisitions1) | 338 | 1,638 | 137 | 2,113 | 22 | 0 | 0 | 22 |
| SAP Group (three months' end average) | 42,497 | 29,662 | 26,791 | 98,950 | 39,258 | 26,447 | 24,847 | 90,552 |
1) Acquisitions closed between January 1 and March 31 of the respective year
Other Disclosures
(K) Renaming of Line Items in the Income Statement
In the first quarter of 2019, we renamed "cloud subscripition and support revenue" and "cost of cloud subscription and support" to "cloud revenue" and "cost of cloud" without changing the content of these line items.
(L) Accounting Policy Changes
(L.1) Adoption of IFRS 16
As of January 1, 2019, SAP changed its accounting policies to adopt IFRS 16 'Leases'. Under the IFRS 16 adoption method chosen by SAP, prior years are not restated to conform to the new policies. Consequently, the year over year changes in profit, assets and liabilities and cash flows in 2019 are impacted by the new policies.
The transition impact of the policy change as of January 1, 2019, was as follows:
- Property, plant and equipment are higher by €1.9 billion resulting from the recognition of right-of-use assets,
- Financial liabilities are higher by €2.1 billion due to the recognition of lease liabilities,
- Trade and other payables are lower by €0.1 billion due to the de-recognition of deferred rent.
In the first quarter 2019, we have recognized in our consolidated income statement depreciation expense from right-of-use assets of €89 million and interest expense on lease liabilities of €13 million.
IFRS 16 also affects SAP's cash flow statement: operating cash flow increased by €78 million and cash flow from financing activities decreased by €78 million. The Free Cash Flow metric is not affected by this change.
Please also refer to Note (IN.1) "Basis for Preparation" of our Integrated Report 2018 for further qualitative explanations of the changes in accounting policies as a result of the adoption of IFRS 16.
(M) Impact of Hyperinflation
We apply hyperinflation accounting for our subsidiaries in Argentina and Venezuela by restating the financial statements of these subsidiaries for the current period to account for changes in the general purchasing power of the local currency based on relevant price indexes at the reporting date. The restated financial statements of our subsidiaries in Venezuela and Argentina are translated at closing rates. Most significantly impacted by this accounting are (IFRS):
- Total revenue (decrease of €1 million in Q1/2019),
- Operating profit (decrease of €0.2 million in Q1/2019),
- Other non-operating income/expense (loss of €7 million in Q1/2019),
- Equity (retained earnings and other comprehensive income) (decrease of €16 million as at March 31, 2019),
- Total liabilities (increase of €24 million as at March 31, 2019).
As of January 1, 2019, we have adjusted the determination of non-IFRS numbers at constant currencies in hyperinflation countries. Instead of applying average exchange rates from the comparative period, we calculate constant currencies measures in hyperinflation countries by translating foreign currencies using month end rates and consider also relevant price indexes to account for changes in the general purchasing power of the local currency. The impact of hyperinflation on non-IFRS numbers at constant currencies in the first quarter 2019 is comparable to the IFRS impact mentioned above.
(N) Business Combinations and Divestments
(N.1) Business Combinations
Since March 2018, we have acquired several businesses which contributed to our consolidated income statement in the first quarter 2019 but not in the comparison period.
In the first quarter 2019 our significant acquisitions contributed to
- our cloud revenue
- by €94 million (IFRS) and by €120 million (Non-IFRS)
- our operating profit
- by –€208 million (IFRS) and by €18 million (Non-IFRS).
These acquisitions also contributed to the operating profit of our Customer and Experience Management segment in the first quarter 2019 by €16 million.
Please also refer to Note (D.1) "Business Combinations" of our Integrated Report 2018 for further information on business combinations concluded in 2018. The acquisition of Qualtrics that closed in the first quarter of 2019 is described in Note (G.9) "Events After the Reporting Date" of our Integrated Report 2018. The operating result and assets and liabilities of Qualtrics (provisional values) are reflected in the consolidated financial statements starting from January 23, 2019 (the contributions of our significant acquisitions to cloud revenue as well as operating profit above include the Qualtrics figures as well).
(N.2) Divestments
In the first quarter of 2019, we sold one Content as a Service business to a third party. This sale generated
- a profit of €47 million which is classified, in our Q1/2019 consolidated income statement, as other operating income,
- incremental employee related expenses of €7 million, that are classified, in our Q1/2019 consolidated income statement, as cost of research & development.
(O) Miscellaneous Disclosures
(O.1) Changes in Estimates
In the first quarter 2019, we changed our estimate of the expected useful lives of certain computer hardware. The effect of this change is a reduction of actual and expected depreciation expense of
- €22 million in the first quarter 2019 (thereof €14 million in cost of cloud),
- €80 million in the full year 2019 (thereof €58 million in cost of cloud).