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07 Jul 2021
Q2 preview: Expect accelerating Cloud Backlog growth, and a License beat
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Q2 preview: Expect accelerating Cloud Backlog growth, and a License beat
SAP SE (SAP:ETR) | 0 0 0.0%
- Published:
07 Jul 2021 -
Author:
Slowinski Stefan SS | Castillo-Bernaus Ben BC -
Pages:
12
SAP to report FQ2 results on 21 July, but a pre-announcement possible this week
In 2020, SAP pre-announced Q2 results on April 8.While consensus expects software licenses to decline 18% y/y in c/c, we expect just a 10% decline, which would be more consistent with the 2 year CAGR delivered in Q1 (-14%). But we believe the focus will be on the accelerating Current Cloud Backlog growth, which was +19% in Q1, with consensus expecting 18.5% in Q2, likely +24% in c/c. We believe the S/4Hana CCB growth will also accelerate from the 39% reported in Q1. We expect 17% c/c Cloud revenue growth vs 16% for consensus in Q2, but we are 2-4% ahead on Q3 and Q4 Cloud revenues and believe the strong Q2 CCB growth could see SAP raise the FY c/c Cloud revenue growth guidance of 14-18% (we model +20% vs consensus of +18%).
We do not expect a margin beat despite the license beat
We are only 1% ahead on adjusted OP despite the expected license beat. This is due to slightly lower maintenance revenues (declining for the first time), and also allowing for the Signavio acquisition (deal closed at end of Q1) as well as execution on the FY hiring plan. We are below consensus on adjusted OM at 27.6% vs 27.9%, but this is a timing issue as we are ahead on the FY by 20bps. Below the operating income line, we believe another positive SAPPHIRE Ventures contribution is possible considering the successful Monday.com IPO where SAPPHIRE is an investor (note: these gains are included in non IFRS EPS, but not modelled by us or consensus).
All eyes on the Cloud prize
In addition to the financials, we believe investors will be looking for accelerating momentum on the SAP RISE offering aimed at facilitating customers'' shift to the Cloud. The one month long SAPPHIRE NOW event create an opportunity to build the pipeline, and recent commentary from Accenture and Capgemini indicate demand is inflecting higher. In addition, hyperscale partners, namely Microsoft and Google, have named a...