SAP Expedites Transition to Cloud – Targets 7x Growth in Cloud to Reach Up To €28 Billion Total Revenue By 2020

Walldorf, Germany — SAP SE (NYSE: SAP) today announced its financial results for the fourth quarter and twelve months ended December 31, 2014.

• Cloud Business Surges – Guidance Achieved as Non-IFRS Cloud Subscriptions and Support Revenue Jumped 72% in Fourth Quarter and Increased 45% in Full Year
• Cloud Subscriptions and Support Backlog Increased 94%, Exceeding €2.3 Billion at Year-End
• Strong HANA Momentum – More Than 5,800 HANA Customers and More Than 1,850 Suite on HANA Customers
• Software and Software-Related Service Revenue Guidance Achieved Despite the Accelerated Shift from Upfront to More Ratable Revenue
• Operating Profit Guidance Achieved While Significantly Expanding the Company’s Cloud Delivery Capabilities
• Targeting €7.5 – €8.0 Billion in Cloud Subscriptions and Support Revenue and €26 – €28 Billion Total Revenue by 2020

BUSINESS HIGHLIGHTS IN THE FOURTH QUARTER AND FULL YEAR 2014
SAP delivered exceptionally strong growth in the cloud and continues to lead in this industry-wide transformation. Full year non-IFRS cloud subscriptions and support revenue increased 45% at actual and constant currencies to €1.10 billion⁽¹⁾.

The company also showed a solid software and software-related service revenue performance despite the accelerated shift from upfront software revenue to more subscription-based cloud revenue. Non-IFRS software and software-related service revenue grew 7% at constant currencies (6% at actual currencies to €14.87 billion) achieving the full year target of 6% – 8% growth at constant currencies. Non-IFRS operating profit increased by 3% at constant currencies to €5.63 billion (3% at actual currencies to €5.64 billion), achieving the full year outlook of €5.6 – €5.8 billion at constant currencies.

“In 2014 we delivered on our Run Simple strategy to help our customers transform their businesses. SAP’s strong growth is driven by the HANA platform, the broadest cloud portfolio and the largest business network in the world,” said Bill McDermott, CEO of SAP. “SAP powers the clear path to growth for businesses in the 21st century: run real-time, run networked, run simple. We will continue to push relentlessly toward a much more predictable business model and are once again raising our cloud ambition to grow 7X from 2014 through 2020.”

“We had exceptional growth in our cloud business and have significantly lifted the total of cloud backlog and non-IFRS deferred cloud revenue to more than €3 billion. This is committed business that will drive strong cloud growth in the future,” said Luka Mucic, CFO of SAP. “We expect cloud subscriptions to exceed software license revenue in 2018. At that time SAP expects to reach a scale in its cloud business that will clear the way for accelerated operating profit expansion.”

SAP is the fastest growing enterprise cloud company at scale⁽²⁾ with fourth quarter non-IFRS cloud subscriptions and support revenue increasing 72% year-over-year (59% at constant currencies). The annual total cloud revenue run rate now exceeds €1.7 billion⁽³⁾ or $2.0 billion⁽⁴⁾. Non-IFRS calculated cloud billings increased 104% (78% at constant currencies) in the fourth quarter⁽⁵⁾. Non-IFRS deferred cloud subscriptions and support revenue was €699 million as of December 31, 2014, a year-over-year increase of 56% (40% at constant currencies)⁽⁶⁾. The Company’s cloud subscriptions and support backlog⁽⁷⁾ as of December 31, 2014 was €2.3 billion, a year-over-year increase of 94%.

SAP’s acquisition of Concur in December 2014 propels the world’s largest business network into the $1.2 trillion corporate travel and expense market. More than 1.7 million connected companies trade over $700 billion of frictionless commerce⁽¹⁾ on this network – more than Amazon, eBay and Alibaba all combined.

SAP’s intense focus on next-generation customer engagement is also fueling growth. Its hybris omni-channel e-commerce platform, combined with Cloud for Sales, once again saw strong revenue contribution in 2014 with triple-digit growth in software revenue and cloud subscriptions and support revenue combined.

SAP HANA, the platform for real-time business applications, had a phenomenal year and continues to be a major growth engine for SAP. The Company saw continued broad market adoption of SAP HANA across all industries and regions as customers recognize the compelling business benefits of SAP HANA. SAP now has more than 5,800 HANA customers and more than 1,850 customers for SAP Business Suite on HANA. SAP HANA is also evolving into a leading development platform.

In its services business, SAP is radically simplifing the way it engages with customers and delivers services to its customers: Under the new ONE Service approach, SAP provides one service portfolio, out of one global organization and under one contract. To execute on ONE Service SAP has combined all lines of services under one organizational umbrella.

Fourth Quarter 2014 Regional Revenue

SAP had another solid performance in EMEA, despite the macroeconomic conditions weighing on the business in Russia and Ukraine. Non-IFRS software and software-related service revenue increased 5% (5% at constant currencies) with a strong software revenue performance in the UK. Non-IFRS cloud subscriptions and support revenue in EMEA grew 85% (75% at constant currencies).

In the Americas, non-IFRS software and software-related service revenue increased 14% (6% at constant currencies), driven by strong growth in the United States. In Latin America, SAP continued to face a difficult macroeconomic and political environment. Non-IFRS cloud subscriptions and support revenue in the Americas increased 63% (50% at constant currencies).

In APJ, the Company achieved exceptional revenue growth in cloud and an overall solid revenue performance. Non-IFRS software and software-related service revenue grew 6% (2% at constant currencies). India delivered strong double-digit software revenue growth. Non-IFRS cloud subscriptions and support revenue grew 98% (87% at constant currencies) in APJ.

• (1) For the full year 2014, Fieldglass contributed €50 million and Concur contributed €45 million to SAP’s Non-IFRS cloud subscriptions and support revenue at constant currencies, representing a 13 percentage point contribution to SAP’s respective full year 2014 growth rate.
• (2) Compared to SAP’s peer group companies with an enterprise software annual cloud revenue run rate above €1 billion.
• (3) The annual revenue run rate is the fourth quarter 2014 non-IFRS cloud subscriptions and support revenue (€360 million) plus non-IFRS cloud-related professional services and other service revenue (€69 million) multiplied by 4.
• (4) Translated into USD for reader’s convenience based on $/€ exchange rate of $1.21/€1.00 at the end of the fourth quarter 2014.
• (5) The calculated billings numbers and respective growth rates reported herein update the preliminary numbers reported in the pre-release from January 12th.
• (6) Calculated billings is the total of a period’s cloud subscriptions and support revenue and of the respective period’s change in the deferred cloud subscriptions and support revenue balance. In the fourth quarter 2014 Fieldglass contributed €19 million and Concur contributed €45 million to SAP’s Non-IFRS cloud subscriptions and support revenue at constant currencies. The contribution from Concur to non-IFRS deferred cloud subscriptions and support revenue at December 31st, 2014 was €65 million at constant currencies and €71 million at actual currencies (IFRS: €62 million). At December 4th, 2014, the closing of Concur, the balance was €61 million at actual currencies (IFRS: € 42 million).
• (7) Cloud subscriptions and support backlog represents expected future cloud subscriptions and support revenue that is contracted but not yet invoiced and thus not recorded in deferred revenue.
• (8) Network spend volume is the total value of purchase orders transacted on the Ariba, Concur and Fieldglass Networks in the trailing 12 months.

FINANCIAL HIGHLIGHTS – Fourth Quarter 2014

	Fourth Quarter 2014 (1)
	IFRS			Non-IFRS (2)
€ million, unless otherwise stated	Q4 2014	Q4 2013	% change	Q4 2014	Q4 2013	% change	% change const. curr.
Cloud subscriptions and support	349	208	68	360	210	72	59
Software	1,867	1,902	–2	1,867	1,903	–2	–5
Support	2,506	2,268	11	2,507	2,272	10	8
Software and support	4,373	4,170	5	4,374	4,175	5	2
Software and software-related service revenue	4,722	4,378	8	4,734	4,385	8	5
Total revenue	5,458	5,106	7	5,469	5,113	7	4
Total operating expenses	–3,704	–3,305	12	–3,342	–3,015	11	8
Operating profit	1,754	1,802	–3	2,127	2,098	1	–2
Operating margin (%)	32.1	35.3	–3.2pp	38.9	41.0	–2.1pp	–2.3pp
Profit after tax	1,304	1,319	–1	1,564	1,522	3
Basic earnings per share (€)	1.09	1.11	–1	1.31	1.28	3
Number of employees (FTE)	74,406	66,572	12	N/A	N/A	N/A	N/A

• (1) All figures are unaudited.
• (2) For a detailed description of SAP’s non-IFRS measures see Explanation of Non-IFRS Measures online. For a breakdown of the individual adjustments see page F8 in the appendix to this press release.

IFRS cloud subscriptions and support revenue was €349 million (2013: €208 million), an increase of 68%. Non-IFRS cloud subscriptions and support revenue was €360 million (2013: €210 million), an increase of 72% (59% at constant currencies). IFRS software and support revenue was €4.37 billion (2013: €4.17 billion), an increase of 5%. Non-IFRS software and support revenue was €4.37 billion (2013: €4.18 billion), an increase of 5% (2% at constant currencies). IFRS software and software-related service revenue was €4.72 billion (2013: €4.38 billion), an increase of 8%. Non-IFRS software and software-related service revenue was €4.73 billion (2013: €4.39 billion), an increase of 8% (5% at constant currencies). IFRS total revenue was €5.46 billion (2013: €5.11 billion), an increase of 7%. Non-IFRS total revenue was €5.47 billion (2013: €5.11 billion), an increase of 7% (4% at constant currencies).

IFRS operating profit was €1.75 billion (2013: €1.80 billion), a decrease of 3%. Non-IFRS operating profit was €2.13 billion (2013: €2.10 billion), an increase of 1% (a decrease of 2% at constant currencies). IFRS operating margin was 32.1% (2013: 35.3%), a decrease of 3.2 percentage points. Non-IFRS operating margin was 38.9% (2013: 41.0%), a decrease of 2.1 percentage points (2.3 percentage points at constant currencies).

IFRS profit after tax was €1.30 billion (2013: €1.32 billion), a decrease of 1%. Non-IFRS profit after tax was €1.56 billion (2013: €1.52 billion), an increase of 3%. IFRS basic earnings per share was €1.09 (2013: €1.11), a decrease of 1%. Non-IFRS basic earnings per share was €1.31 (2013: €1.28), an increase of 3%. The IFRS and non-IFRS effective tax rates in the fourth quarter of 2014 were 24.8% (2013: 25.7%) and 25.8% (2013: 26.6%), respectively.

FINANCIAL HIGHLIGHTS – Full Year 2014

	Full Year 2014 (1)
	IFRS			Non-IFRS (2)
€ million, unless otherwise stated	FY 2014	FY 2013	% change	FY 2014	FY 2013	% change	% change const. curr.
Cloud subscriptions and support	1,087	696	56	1,101	757	45	45
Software	4,399	4,516	–3	4,399	4,518	–3	–3
Support	9,368	8,738	7	9,373	8,756	7	8
Software and support	13,767	13,254	4	13,773	13,275	4	5
Software and software-related service revenue	14,855	13,950	6	14,874	14,032	6	7
Total revenue	17,560	16,815	4	17,580	16,897	4	5
Total operating expenses	–13,229	–12,336	7	–11,942	–11,415	5	6
Operating profit	4,331	4,479	–3	5,638	5,482	3	3
Operating margin (%)	24.7	26.6	–2.0pp	32.1	32.4	–0.4pp	–0.7pp
Profit after tax	3,275	3,325	–1	4,178	3,998	4
Basic earnings per share (€)	2.74	2.79	–2	3.50	3.35	4
Number of employees (FTE)	74,406	66,572	12	N/A	N/A	N/A	N/A

• (1) All figures are unaudited.
• (2) For a detailed description of SAP’s non-IFRS measures see Explanation of Non-IFRS Measures online. For a breakdown of the individual adjustments see page F8 in the appendix to this press release.

IFRS cloud subscriptions and support revenue was €1.09 billion (2013: €696 million), an increase of 56%. Non-IFRS cloud subscriptions and support revenue was €1.10 billion (2013: €757 million), an increase of 45% (45% at constant currencies). IFRS software and support revenue was €13.77 billion (2013: €13.25 billion), an increase of 4%. Non-IFRS software and support revenue was €13.77 billion (2013: €13.28 billion), an increase of 4% (5% at constant currencies). IFRS software and software-related service revenue was €14.86 billion (2013: €13.95 billion), an increase of 6%. Non-IFRS software and software-related service revenue was €14.87 billion (2013: €14.03 billion), an increase of 6% (7% at constant currencies). IFRS total revenue was €17.56 billion (2013: €16.82 billion), an increase of 4%. Non-IFRS total revenue was €17.58 billion (2013: €16.90 billion), an increase of 4% (5% at constant currencies).

IFRS operating profit was €4.33 billion (2013: €4.48 billion), a decrease of 3%. Non-IFRS operating profit was €5.64 billion (2013: €5.48 billion), an increase of 3% (3% at constant currencies). IFRS operating margin was 24.7% (2013: 26.6%), a decrease of 2.0 percentage points. Non-IFRS operating margin was 32.1% (2013: 32.4%), a decrease of 0.4 (0.7 percentage points at constant currencies).

IFRS profit after tax was €3.28 billion (2013: €3.33 billion), a decrease of 1%. Non-IFRS profit after tax was €4.18 billion (2013: €4.00 billion), an increase of 4%. IFRS basic earnings per share was €2.74 (2013: €2.79), a decrease of 2%. Non-IFRS basic earnings per share was €3.50 (2013: €3.35), an increase of 4%. The IFRS and non-IFRS effective tax rates in 2014 were 24.8% (2013: 24.4%) and 26.2% (2013: 25.9%), respectively.

Cash Flow – Twelve Months 2014

 Operating cash flow was €3.57 billion (2013: €3.83 billion), a decrease of 7% year-over-year. This was mainly due to payouts for litigation in the amount of €555 million. Free cash flow was €2.84 billion (2013: €3.27 billion), a decrease of 13% year-over-year. Free cash flow was 16% of total revenue (2013: 19%). At December 31, 2014, SAP had a total group liquidity of €3.42 billion (December 31, 2013: €2.84 billion), which includes cash and cash equivalents and short term investments. Net debt at December 31, 2014 was -€7.67 billion compared to -€1.47 billion at December 31, 2013.

ONE Service and Impact on SAP’s Financial Reporting

As outlined above, SAP is implementing the ONE Service approach to provide holistic service offerings to its customers. This combination of services will be reflected in SAP’s financial reporting by combining the respective revenue in one revenue line item of the income statement. Therefore, SAP will amend the structure of its income statement, starting with the first quarter of 2015 by presenting one revenue line item called ‘Services’ which includes premium support services, professional services and other services. Revenue from Enterprise Support and other standardised support offerings will continue to be reported in the ‘Software support’ line. The formerly presented subtotal ‘Software and software-related services’ (SSRS) which still included premium support revenue is replaced by the subtotal ‘Cloud & software’ which excludes premium support services.

This income statement modification does neither change total revenue nor the reported cloud subscriptions & support revenue and software revenue. The outlook the Company provides below for 2015 and beyond is based on this modified income statement format. For more information refer to the Company’s webinar at www.sap.com/investor.

BUSINESS OUTLOOK 2015

 The Company is providing the following 2015 outlook:

• Based on the strong momentum in SAP’s cloud business the Company expects full year 2015 non-IFRS cloud subscriptions and support revenue to be in a range of €1.95 – €2.05 billion at constant currencies (2014: €1.10 billion). The upper end of this range represents a growth rate of 86% at constant currencies. Concur and Fieldglass are expected to contribute approximately 50 percentage points to this growth.
• The Company expects full year 2015 non-IFRS cloud & software revenue to increase by 8% – 10% at constant currencies (2014: €14.33 billion).
• The Company expects full-year 2015 non-IFRS operating profit to be in a range of €5.6 billion – €5.9 billion at constant currencies (2014: €5.64 billion).

 This 2015 outlook replaces the previously communicated 2015 mid-term ambition.

 While the Company’s full-year 2015 business outlook is at constant currencies, actual currency reported figures are expected to continue to be impacted by currency exchange rate fluctuations. If exchange rates remain at the December 2014 closing rates for the rest of the year, the Company expects non-IFRS cloud & software revenue growth rate to experience a currency benefit of approximately 2 percentage points and non-IFRS operating profit growth rate at actual currencies to experience a currency benefit of approximately 1 percentage points for the full year 2015.

MID-TERM OUTLOOK

SAP expects to grow its more predictable revenue business while steadily increasing operating profit.

Looking beyond 2015, SAP is updating its 2017 ambition. SAP continues to expect fast growth in its cloud business with non-IFRS cloud subscriptions and support revenue reaching a range of €3.5 – €3.6 billion in 2017. Non-IFRS total revenue is expected to reach €21 – €22 billion in 2017. The Company expects non-IFRS operating profit in a range of €6.3 – €7.0 billion in 2017.

The changes to the 2017 goals reflect the impact from the Concur acquisition and anticipated faster customer adoption of SAP’s private cloud offering. SAP also anticipates the fast-growing cloud business along with growth in support revenue will drive a higher share of more predictable revenue with the total of cloud subscriptions & support revenue and software support revenue reaching a range of 65% – 70% of total revenue in 2017.

By 2017 SAP’s rapidly growing cloud subscriptions and support revenue is expected to be close to software license revenue and is expected to exceed software license revenue in 2018. At that time SAP expects to reach a scale in its cloud business that will clear the way for accelerated operating profit expansion.

SAP is also introducing high level 2020 ambitions with 2020 non-IFRS cloud subscriptions and support revenue expected to reach €7.5 – €8.0 billion. Total revenue is expected to be in a range of €26 – €28 billion and non-IFRS operating profit in a range of €8 – €9 billion. The share of more predictable revenue is expected to grow further with the total of cloud subscriptions & support revenue and software support revenue reaching a range of 70% – 75% of total revenue in 2020.

Additional Information
2014 revenue and profit figures include the full revenue and profit from hybris and the revenue and profit from Concur and Fieldglass since their acquisition dates of December 4 and May 2, respectively. The comparative numbers for 2013 do not include Concur or Fieldglass and hybris was included from August 1, 2013. 

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.

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2014 Integrated Report and Annual Report
SAP’s 2014 Integrated Report and Annual Report to Shareholders and 2014 Annual Report on Form 20-F are scheduled to be published on March 20, 2015, and will be available for download at www.sap.com/investor.

Webcast
SAP senior management will host a press conference in Walldorf today at 10:00 AM (CET) /
9:00 AM (GMT) / 4:00 AM (Eastern) / 1:00 AM (Pacific), followed by an investor conference at 2:00 PM (CET) / 1:00 PM (GMT) / 8:00 AM (Eastern) / 5:00 AM (Pacific). Both conferences will be web cast live on the Company’s website at www.sap.com/investor and will be available for replay. Supplementary financial information pertaining to the full-year and quarterly results can be found at www.sap.com/investor.

SAP will also be hosting a Capital Markets Day and live webcast in New York on Tuesday, February 3, 2015.

About SAP
As market leader in enterprise application software, SAP (NYSE: SAP) helps companies of all sizes and industries run better. From back office to boardroom, warehouse to storefront, desktop to mobile device – SAP empowers people and organizations to work together more efficiently and use business insight more effectively to stay ahead of the competition. SAP applications and services enable more than 282,000 customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com.

# # #

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Appendix – Financial Information