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SAP Updates 2020 Outlook and Mid-Term Ambition – Accelerates Transition to Cloud

WALLDORF — SAP’s previous full year 2020 outlook issued on April 8, 2020, reflected its best estimates concerning the timing and pace of recovery from the COVID-19 crisis. This outlook assumed economies would reopen and population lockdowns would ease, leading to a gradually improving demand environment in the third and fourth quarters.


Updated Business Outlook 2020


While SAP continues to see robust interest in its solutions to drive digital transformation as customers look to emerge from the crisis with more resilience and agility, lockdowns have been recently re-introduced in some regions and demand recovery has been more muted than expected. Further and for the same reasons, SAP no longer anticipates a meaningful recovery in SAP Concur business travel-related revenues for the remainder of the year 2020.

SAP is therefore updating its full year 2020 outlook and now expects:

SAP continues to expect its share of more predictable revenue to be approximately 72%.

The Company has raised its cash flow expectations for 2020 on the back of a strong year-to-date cash flow performance and now expects an operating cash flow of approximately €6.0 billion (previously above €5.0 billion) and a free cash flow above €4.5 billion (previously approximately €4.0 billion).

Updated Mid-Term Ambition

SAP’s previous mid-term ambition was issued on April 24, 2019, before the COVID-19 crisis. The company is now updating its mid-term ambition to reflect the following factors:

As a consequence of SAP’s accelerated cloud transition, the Company expects software licenses revenue to continue to trend lower from 2020 levels.

The combined impact of the above factors and the mechanics of the associated business model switch are expected to lead to muted non-IFRS total revenue growth as well as flat or slightly lower non-IFRS operating profit over the next two years, followed by accelerated non-IFRS total revenue and double-digit non-IFRS operating profit growth from 2023 to 2025.

By 2025, this trajectory is expected to take SAP to:

While SAP’s full year 2020 business outlook is at constant currencies, actual currency reported figures are expected to be impacted by currency exchange rate fluctuations as the Company progresses through the year. See the table below for the Q4 and FY 2020 expected currency impacts.

Expected Currency Impact Based on September 2020 Level for the Rest of the Year
In percentage points Q4 FY
Cloud revenue -6pp to -4pp -3pp to -1pp
Cloud and software revenue -5pp to -3pp -3pp to -1pp
Operating profit -5pp to -3pp -4pp to -2pp

Extended Earnings Conference Call

SAP senior management will host an extended earnings conference call including slide presentations to discuss the key drivers behind the updated mid term ambition on Monday, October 26, from 2:00 – 3:30 PM (CET) / 1:00 – 2:30 PM (GMT) / 9:00 – 10:30 AM (EDT) / 6:00 – 7:30 AM (PDT).

This extended earnings conference call will be webcast live on SAP’s website at www.sap.com/investor and will be held in lieu of a virtual capital markets day in the fourth quarter. The presentation slides will be published prior to the earnings call on SAP’s website at www.sap.com/investor as well.

Contact:
Stefan Gruber, Head of Investor Relations, +49 6227 7-44872, investor@sap.com

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