Accelerating. Stronger than expected. Outstanding. The financial community did not challenge these and other positive characterizations SAP leaders used to describe the company’s third-quarter 2021 results during the October financial and business performance discussion with analysts and media.
For the quarter, SAP reported total revenue of €6.845 billion, up 5% year-over year, and earnings per share of €1.74 a 2% increase over third-quarter 2020, exceeding market expectations. Operating profit stands at €1.25 billion for the quarter, down 15% year-over-year, and operating margin slid by 0.9% to 30.7%. Operating cash flow was reported as €4.95 billion.
The Rise of RISE with SAP
In his remarks, SAP CEO Christian Klein emphasized the importance of RISE with SAP, calling it the “heart of our approach.” He referenced RISE key benefits, that it can help:
- “customers develop, adopt and automate new business models thereby becoming intelligent enterprises;”
- “help our customers create more resilient supply chains by connecting them with a vast community of suppliers and manufacturers;”
- “help our customers improve their green line as no one is better placed than SAP to help companies put in place the most energy-efficient business processes.”
SAP said "higher share-based compensation expenses" primarily related to Qualtrics and the continued lagging performance of its Concur travel systems portfolio affected operating results.
Cloud Hits A Record
SAP referenced several key financial drivers and customer gains in the positive performance, including:
- Cloud and software business revenue—reflecting 86.3% of total revenue--hit €5.91 billion, up 7% year over year; cloud revenue alone stood at €2.386 billion, up 20% year over year; and current cloud backlog—considered a go-to market success indicator — increased 24% to €8.17 billion. Klein said SAP achieved a “new cloud business record for the quarter.”
- Nine months post announcement, RISE with SAP—deemed “the enabler” by Klein--is in demand across companies of all sizes. In the third quarter the 300 new customers included Asda Stores Ltd., EG Group, Cirque du Soleil, Philips Domestic Appliances Netherlands, HCL, Röhm, Etihad Water and Electricity, Tate & Lyle Americas, KTM Fahrrad, Ingram Micro, and Sky Italia.
Customers increasingly “understand the offering and how it transforms business,” said Scott Russell, SAP head, Customer Success. He added the RISE pipeline “indicates [more] customers will transform their business in the cloud” and SAP anticipates continued cloud growth acceleration in 2022.
- On the S/4HANA front, more than 500 S/4HANA new customers were added in the just-closed quarter; total adoption stands at more than 17,500 customers, a 16% lift year over year.
- Business Technology Platform, SAP's PaaS offering, showed a current cloud backlog grew in the double digits with Dufry International, Yamaha Corp., SoftBank, Office Depot Mexico, and Reckitt listed as new customers.
On the downside, software licenses and support revenues totaled €3.524 billion, a 1% decrease for the quarter, and software licenses revenues of €0.66 billion, declined 8% (down 8% at cc) year over year. Leaders noted they anticipate these results will continue to decline given organization’s shift to the cloud.