Just another partnership!
09 Mar 17
SAP and Google have announced a cloud partnership. SAP HANA will run on Google Cloud Platform (GCP) to deliver real-time insights on a scalable and secure cloud infrastructure. The Google partnership will give SAP’s customers another option to use the cloud infrastructure efficiently. SAP will remain custodian of the data which will remove barriers of entry. SAP’s strategy is to get HANA distributed on as many platforms as possible. For Google, SAP and also other well-known partners are necessary to scale the business.
Solid results and guidance for 2020 raised!
24 Jan 17
The company reported solid results in Q4 16. Revenues increased 6% to €6.72bn. Cloud subscriptions and support revenues increased 30.9% to €827m, licence revenues 1.4% to €2.18bn and maintenance and support revenues 6% to €2.76bn. EBITDA increased 42.1% to €2.2bn and the EBITDA margin improved from 24.6% to 33%. Real EBIT jumped 52.2% to €1.88bn and the EBIT margin increased from 19.5% in Q4 15 to 28%. Net income jumped 79.4% to €1.5bn. In the financial year 2016, revenues grew 6.1% to €22.06bn. Cloud subscriptions and support revenues increased 30.9% to €2.99bn and the gross margin improved from 70% to 70.2%. Real EBIT grew 22.3% to €4.89bn and the EBIT margin improved from 19.2% to 22.1%.
In line with expectations but costs are out of control
21 Oct 16
The company reported third quarter results. Total revenues increased 7.8% to €5.38bn. Cloud subscription & support revenues grew 28.4% to €769m. We estimated an increase of 31.2% to €786m and the market around €787m. New cloud bookings (order entry) increased 24% to €265m. Software licence revenues grew 2% to €1.04bn (our estimate +3.5% to €1.04bn). Maintenance revenues increased surprisingly strong by 5.7% to €2.65bn (estimate: 2.2% to €2.56bn). EBIT, however, dropped by 9% to €1.1bn. We expected an EBIT increase of 10.5% to €1.3bn. Net income dropped 19% to €730m (estimate: +6.3% to €955m). Cloud subscription and support revenues grew 34% from €136m to €182m in the EMEA region, and were especially strong in Germany, France and the UK. In the Americas, cloud revenues increased 24% to €508m, and in Asia Pacific around 52% to €78m. In the third quarter, the company added 400 new SAP S/4 HANA customers (+40%). Around 4,100 customers are now using this cloud platform.
No read-through for SAP
01 Sep 16
Salesforce reported second quarter results ending in July. Revenues increased 25% to US$2.04bn. EBIT jumped 64.2% to US$32.5m and the EBIT margin improved from 1.2% to 1.6%. From an earnings perspective, the company is not really visible. Net income, however, jumped from a small loss to US$229.3m. Around US$205.3m was related to a tax benefit as a result of the release of a portion of the valuation allowance related to the acquisition of Demandware. Salesforce.com acquired Demandware for a total of US$2.6bn and was also bidding for Linkedin which was bought by Microsoft for a total of US$26.2bn. GAAP income turned from a loss of US$0.85m to a profit of US$229.6m. Non-GAAP related income increased 32.9% to US$170.4m or US$0.24 per share. This includes amortisation of purchased intangibles, share-based compensation and other unpleasant cost items. Business in the Americas contributed 73% to revenues, Europe 17% and Asia Pacific 10%. Management experienced some weaker demand at the end of the second quarter but still raised the full-year revenue guidance range to between US$8,275m and US$8,325m.
The world is not enough!
20 Jul 16
SAP reported a strong operating performance in Q2 16. Total revenues increased 5.4% to €5.2bn (our estimate: €5.3bn). Cloud revenues grew by 30.4% to €720m (our estimate: €722m). EBIT jumped 79.2% to €1.16bn which was also in line with our expectations. Our EBIT definition, however, differs from the company’s reported EBIT. We use IFRS numbers and include other operating expenses/income which is not part of the SAP calculation. Despite the strong cloud business, licence revenues grew by 6.2% to €1.04bn and maintenance revenues 2.6% to €2.6bn.
Times are changing
13 May 16
At the AGM, the shareholders approved the new compensation system for the executive board starting in 2016. The approval, however, was not so well explained as it should have been. Around 66.1% of the total capital or 812m shares/votes attended the AGM. Around 45.31% was against the new compensation system and 54.69% of the shareholders agreed. This is not a SAP-style approval. Nearly every topic on the agenda was approved by at least 95% of the attending shareholders or even more in the past. The good old days are over.
Licence growth below expectations
21 Apr 16
SAP reported final Q1 16 results. Revenues increased 5.1% to €4.72bn. The operating profit jumped 59% to €778m and the real EBIT margin increased from 10.9% to 16.5%. Total adjustments were reduced from €413m by €123m to €290m due to lower share-based payment expenses. In addition, the company faced additional non-operational expenses of €35m compared to €148m in Q1 15. These so-called non-operational expenses, mainly foreign currency exchange gains/losses, are excluded from SAP’s EBIT calculation. Total revenues in Germany increased 8%, in EMEA 5%, in the USA 10% but declined 7% in the rest of the Americas mainly in Brazil. Revenues in Asia Pacific remained stable, but increased 9% in Japan and declined 2% in other regions. According to management, business in China was the highlight with double-digit software revenue growth. Total cloud subscription and support revenues grew 35% to €677m; in EMEA 49%; 31% in the Americas and 27% in Asia Pacific. For SAP, the Americas are the largest cloud market with a total volume of €460m or 68% of total cloud revenues in Q1 16.
Cloud revenues up 33%, licence revenues down 12.4%!
11 Apr 16
The company reported preliminary Q1 16 results. Cloud subscriptions and support revenues increased 35.2% to €680m. Software support grew 4.3% to €2.56bn and licence revenues declined 12.4% to €610m. Real EBIT according to our definition grew 65.5% to €810m. The EBIT margin jumped from 10.9% to 17.1%. Net earnings per share grew 39% to €0.48 compared to €0.35 in Q1 15. According to management, business in Europe and Asia Pacific was solid. Business in Brazil suffered from economic uncertainties and business in North America experienced a slower start due to a strong fourth quarter.
Cloud growth momentum continues
16 Mar 16
Oracle reported Q3 15/16 results ending in February 2016. Revenues declined 3.4% to US$9bn and net income dropped 14% to US$2.14bn. Cloud revenues however jumped 40% (44% at cc) to US$735m. Software licence revenues declined 15% to US1.68bn. This decline clearly indicates that Oracle is still ahead in the transition process in the licence to the cloud business model. In Q4 15 ending in December, cloud revenues of SAP increased 80% to €630m (US$693m) and 34.3% excluding the acquisitions of Concur Technologies and Fieldglass. Operating profits of Oracle dropped 13% to US$3.03bn and the operating margin declined from 36.3% to 33.6%. Revenues in the Americas declined by 3.7%, in Europe/Africa and the Middle East by 5.4% but increased in Asia/Pacific by 2.1%.
Cloud business – the one and only real growth driver
12 Jan 16
In the financial year 2015, cloud and support revenues of SAP jumped by 110% to €2.29bn. Excluding the acquisitions, Concur Technologies and Fieldglass, cloud-related revenues increased 43.2%. In the fourth quarter, cloud revenues increased 80% to €630m and 34.3% excluding the Concur Technologies acquisition. Adjusted growth rates are still solid within the industry. Oracle reported an increase of 33.8% (Q1 16 end August) to US$451m, salesforce.com +23.9% (Q3 16 end October) to US$1.6bn and Workday +47.6% (Q3 16 end October) to US$242.7m.
Growth will come down to normal levels
12 Jan 16
SAP reported preliminary results. In 2015, cloud subscriptions and support revenues increased 110% to €2.29bn and 82% based on constant currency. Software licence revenues increased 10% to €4.84bn (4% at cc) and maintenance revenues 14% to €10.09bn. The operating profit however declined 2% to €4.25bn and the EBIT margin reached 20.4%. We estimated an EBIT margin of 28.1% based on IFRS numbers. Non-IFRS operating margin also declined from 32.1% to 30.5%. In the fourth quarter, the cloud business showed strong growth momentum. Cloud subscriptions and support revenues increased 81% to €0.63bn and 60% at cc based on non-IFRS numbers. New cloud bookings jumped 75% to €0.35bn in Q4 15 and 103% to €0.89bn in the full year.
Acquisitions and fx effects – the main growth drivers
25 Oct 15
Q3`15 revenues increased by 17.2% to €4.98bn and by 10% at constant currency. Cloud subscription and support revenues increased by 116% to €599m and by 90% at cc. Excluding the Concur Technologies acquisition, cloud revenues increased by only 53% (37% at cc). According to the company, EBIT increased by 5% to €1.21bn and 15% at cc. The EBIT margin declined from 27.2% to 24.4%. According to our calculations, the EBIT margin declined from 28.4% to 23.8%. The virtual EBIT margin, which includes share-based compensation, restructuring charges and acquisition related costs, increased from 31.8% to 32.4%. Net income dropped by 16% to €469m and EPS reached €0.39 versus €0.47 in Q3`14. In the first nine months, revenues increased by 19% to €14.45bn and by 9% at constant currency. Cloud revenues increased by 124% to €1.65bn and 93% currency adjusted. Excluding Concur Technologies and Fieldglass, cloud revenues increased by 47% and currency adjusted by 28%. The operating profit remained broadly stable at c.€2.55bn (+5% at cc). The virtual operating margin declined from 24.8% to 24.2% and the real EBIT margin from 24.2% to 16.2%. Total operating profit adjustments amounted to €1.5bn versus €926m in 2014. Net income declined by 10% to €1.97bn.
Oracle's cloud performance not really convincing
17 Sep 15
Oracle reported Q1 15/16 results ending in August. In general, the company suffered from unfavourable currency exchange rates (appreciation of the US$). Total revenues declined 2% (at cc +7%) to US$8.45bn and operating income dropped 10% (at cc +2%) to US$2.65bn. The real operating margin declined from 34% to 31% and the virtual EBIT margin from 44% to 41%. Cloud software as a service revenues grew 34% (at cc 38%) to US$451m. Including revenues from cloud infrastructure as a service, total cloud revenues increased 29% (at cc 34%) to US$611m. The cloud's gross margin reached 40% and is expected to reach 60% in Q4 16 and 80% two years from now. SAP's Q2 results indicated stronger growth momentum. Cloud subscription & support revenues jumped 129% to €552m (in US$618m) and 92% at constant currency. The cloud's gross margin already reached 61.6% compared to 56.4% in Q2 14. In US$ currency, SAP has overtaken Oracle in the second quarter ending in June compared to the first quarter of Oracle ending in August. Oracle's management however is targeting salesforce.com as the major competitor. Not a word about the success story of SAP. SAP's licence revenues increased 2.3% to €979m (at cc -7%). Licence revenues of Oracle declined 16% (at cc -9%) to US$1.15bn. The decline in licence revenues might already indicate a successful switch to the new business model. According to our estimates, Oracle's cloud revenue growth was too low in Q1 15/16 to justify this conclusion.
Revenue growth continued but performance dived
21 Jul 15
The company reported strong Q2 15 results. Revenues increased 19.7% to €4.97bn. Non-IFRS revenues grew 20% and based on constant currency by 8%. Cloud subscription revenues grew 129% to €552m and excluding acquisitions cloud revenues grew 50% (non-IFRS +63.5%). Fieldglass contributed €25m to IFRS revenues and Concur Technologies €165m. Licence revenues went up 2.3% to €979m and maintenance revenues +11.1% to €2.53bn. Service revenues jumped 34.7% to €908m. The service gross margin reached 8% compared to 12.3% in Q2 14. The product gross margin however improved from 79.9% to 81%. Real EBIT dropped 34.4% to €648m and the EBIT margin declined from 23.8% to 13% (real EBIT also includes other non-operating income/expense). Virtual EBIT however declined from 29.8% (including the Versata litigation 36.7%) to 28%. Total virtual EBIT declined 12.1% to €1.34bn. Special costs items which are added back to the virtual EBIT jumped 28.9% to €692m mainly driven by high restructuring charges of €367m alone. In 2014, the company faced around €289m in litigation charges (Versata). All regions contributed to growth, especially business in the Americas. Revenues in the Americas grew 33.9% to €2.07bn. In the US market, revenues grew 42.6% to €1.66bn, also driven by favourable exchange rates. At constant currency, revenues in the USA grew by 15% and declined by 1% in the rest of the Americas. Total revenues in Asia-Pacific grew 20% and 8% at constant currency.
Gentlemen, start your marketing engine!
18 Jun 15
Oracle reported Q4 15 results ending in May. Total revenues declined 5% (currency adjusted increase of 3%) to US$10.7bn. New software licence revenues dropped 17% (adj. -10%) to US$3.1bn but cloud revenues grew 29% to US$416m (adj.35%. The maintenance business remained stable at US$4.69bn (adj. +8%). The operating performance however dropped 19% (adj. 9%) to US$3.98bn. One reason for the decline is the increase in cloud-related expenses which jumped 86% to US$256m or 2% of total revenues.