SAP SAP SE

SAP AG (SAP) reported fourth-quarter non-IFRS earnings per share of €1.11 ($1.62), which increased 20.6% year over year and surpassed the Zacks Consensus Estimate of $1.59 a share by 1.9%. The company’s flagship innovation, SAP HANA, continued to be a growth driver along with its cloud business, Ariba.

Total revenue generated in the fourth quarter of 2013 was €5.1 billion ($6.9 billion), up 7% year over year at constant currency. Revenues were in line with the Zacks Consensus Estimate of $6.9 billion.

Revenues by Segment

Software & Could Subscriptions: This segment includes Software and Maintenance revenues.  The segment garnered revenues of €2.1 billion ($2.8 billion) in the quarter, up 6% year over year at constant currency.

Support Revenues: The segment reported revenues of €2.3 billion ($3.1 billion), up 10% year over year at constant currency.

Software and Software-Related Service Revenues: This sub-segment includes Support, Subscription and other software-related services revenues. Revenues in this segment grew 8% year over year to €4.4 billion ($5.9 billion).

Revenues by Region

The EMEA region reported high single-digit growth, with non-IFRS software and cloud subscription revenue increasing 9% at constant currencies. This increase was primarily driven by high double-digit growth in cloud subscription and support revenue across the region and strong double-digit software revenue growth at constant currencies in Germany, France, Russia, Middle East and Africa.

Non-IFRS software and cloud subscription revenue in the Asia Pacific Japan (APJ) region continued its trend of double-digit growth at constant currencies, driven by a strong performance in China.

The Americas region saw single-digit revenue growth at constant currencies in the fourth quarter in the non-IFRS software and cloud subscription segment. This was the result of the transition to the cloud and a tough year-over-year comparison in software revenue.

Cash and Balance Sheet

Operating profit grew 15% year over year to €2.1 billion ($2.8 billion) in the quarter.

Operating cash flow was €3.83 billion ($5.2 billion), increasing marginally year-over-year while free cash flow was €3.27 billion ($4.6 billion) decreasing slightly year-over-year. Free cash flow was 19% of total revenue and cash and cash equivalents grew 31.4% year over year to €3.3 billion ($4.5 billion).

Outlook

Concurrent with the earnings release, management provided guidance for fiscal 2014.

The company expects full year 2014 non-IFRS cloud subscription and support revenues to be in the range of €950 to €1,000 million, at constant currencies. The upper end of this range represents a growth rate of 32%. 

The company expects full-year 2014 non-IFRS software and software-related service revenue to increase by 6%– 8% at constant currency and full-year 2014 non-IFRS operating profit to be in the range of €5.8 billion to €6.0 billion at constant currency.

This apart, the company also provided mid-term 2014 guidance. SAP expects the combination of a stable, highly-profitable core and fast-growing cloud business to deliver continued growth and margin expansion. The company aims to further increase its total revenue to at least €20 billion and total revenue from its cloud business including cloud-related professional services to approximately €2 billion by 2015.

SAP currently holds a Zacks Rank #3 (Hold). Better-ranked stocks in the sector include American Software, Inc. (AMSWA), CA Technologies (CA), both carrying a Zacks Rank #1 (Strong Buy) and Concur Technologies Inc. (CNQR) carrying a Zacks Rank #2 (Buy). 

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