SAP AG (NYSE: SAP) today announced its financial results for the third quarter and nine months ended September 30, 2013.
• Third Quarter 2013 Non-IFRS Software and Cloud Subscription Revenue Increased 13% at Constant Currencies (6% at Actual Currencies to €1.17 Billion)
• Third Quarter 2013 Non-IFRS Software and Software-Related Service Revenue Increased 12% at Constant Currencies (5% at Actual Currencies to €3.36 Billion)
• Triple-Digit Year-Over-Year Growth in Cloud Subscription and Support Revenue – Annual Cloud Revenue Run Rate Now Exceeds €1 Billion
• Accelerating SAP’s In-Memory Leadership – 90% Year-Over-Year Growth at Constant Currencies in HANA Software Revenue (79% at Actual Currencies)
• Third Quarter 2013 Non-IFRS Operating Profit Reached €1.30 Billion, a 15% Increase at Constant Currencies (5% at Actual Currencies)
• Strong Growth in Third Quarter 2013 Earnings Per Share
• Full Year Outlook Reiterated
BUSINESS HIGHLIGHTS IN THE THIRD QUARTER 2013
“SAP is clearly leading the transition to cloud and in-memory. SAP HANA is the market’s most advanced in-memory database and we are well on our way to reach €1 billion in HANA software revenue since market launch. The strong customer adoption of SAP Business Suite on HANA demonstrates our leadership in innovating the future platform for business,” said Bill McDermott and Jim Hagemann Snabe, Co-CEOs of SAP. “We now are the second largest enterprise cloud company with an annual cloud revenue run rate exceeding €1 billion. We continue to gain market share and grow significantly faster than our primary competitor in all regions.”
“SAP had a very strong performance in the third quarter, considering the mixed macroeconomic environment and the strong currency headwinds. Our ongoing focus on operating discipline while successfully scaling our cloud business is paying off. We continued our double-digit growth momentum and increased our Non-IFRS operating margin by 180 basis points at constant currencies,” said Werner Brandt, CFO of SAP.
Third quarter non-IFRS software and cloud subscriptions revenue increased 13% at constant currencies year-over-year (6% at actual currencies to €1.17 billion). SAP’s third quarter non-IFRS cloud subscription and support revenue is growing faster than most cloud competitors. SAP closed another significant contract in the cloud: EMC, a US-headquartered Fortune 500 company, selected SAP’s Cloud solutions including Employee Central to attract and better retain and reward employees, and achieve better visibility and collaboration with its suppliers. The annual cloud revenue run rate now exceeds €1 billion1). With approximately 33 million cloud users, SAP has the largest subscriber base in the cloud market. Non-IFRS deferred cloud subscription and support revenue2) was €382 million as of September 30, 2013, a year-over-year increase of 79%. The Ariba business is showing accelerated synergies with new and upsell application billings growing high double digits. The trailing twelve month Ariba network spend volume3) was approximately $500 billion. Today Ariba is the world’s largest Web-based business trading community with 1.2 million connected companies.
SAP HANA, the platform for real-time business applications, continues to be a major growth engine, with accelerating software revenue growth of 90% year-over-year at constant currencies (79% at actual currencies to €149 million) and over 2,100 customers. SAP Business Suite powered by SAP HANA is the best-in-class platform for high-performance applications and in fact SAP has now over 450 customers. Customers are showing strong interest in SAP HANA Enterprise Cloud.
Overall, SAP’s double-digit growth momentum continued in the third quarter with Non-IFRS software and software-related service revenue increasing 12% at constant currencies (5% at actual currencies) to €3.36 billion.
Efficiency in SAP’s business has further improved with Non-IFRS operating profit reaching €1.30 billion in the third quarter, a 15% increase at constant currencies (5% at actual currencies), resulting in a 180 basis points expansion of the non-IFRS operating margin at constant currencies despite a negative effect from acquisitions of 50 basis points.
Third Quarter 2013 Regional Results
The Americas region delivered a strong third quarter in non-IFRS software and cloud subscription revenue4) with 17% growth year-over-year at constant currencies, driven by an excellent software revenue performance in Latin America and strong non-IFRS cloud subscription and support revenue growth in North America. The EMEA region saw strong growth with non-IFRS software and cloud subscription revenue increasing 14% year-over-year at constant currencies, amidst a mixed market environment. Software revenue in EMEA grew double-digit at constant currencies driven by strong double-digit growth in the Netherlands, Switzerland and the U.K. Non-IFRS software and cloud subscription revenue in the Asia Pacific Japan (APJ) region marked a return to growth with solid single-digit growth at constant currencies, driven by a strong performance in China.
Nine Months 2013 Regional Results
The Americas region delivered a very strong first nine months performance in non-IFRS software and cloud subscription revenue with 23% year-over-year growth at constant currencies. The EMEA region saw strong growth with non-IFRS software and cloud subscription revenue increasing 10% at constant currencies for the first nine months of 2013, which is an impressive result in light of continued market uncertainty. Non-IFRS software and cloud subscriptions revenue in the APJ region declined slightly by 2% at constant currencies in the first nine months of 2013.
1) The annual revenue run rate is the third quarter 2013 cloud division revenue of €252 million multiplied by 4.
2) Beginning in Q1 2013, SAP discloses non-IFRS deferred cloud subscription and support revenue, which is a subset of the total, non-IFRS deferred revenue number reported on the balance sheet.
3) Network spend volume is the total value of purchase orders transacted on the Ariba Network in the trailing 12 months.
4) Non-IFRS software and cloud subscription revenue in the regional paragraphs follow SAP’s management view, which is calculated as the combination of software revenue based on location of negotiation and cloud subscription and support revenue based on customer location; growth rates at constant currencies. See SAP’s third quarter and nine month interim report for details.
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