SAP SE (SAP) reported fourth-quarter non-IFRS earnings of €1.31 per share, increasing 2.3% from €1.28 per share in the prior-year quarter. In U.S. dollar terms, earnings came in at $1.64, easily surpassing the Zacks Consensus Estimate of $1.40 a share by 17.1%.
For full-year 2014, non-IFRS earnings rose 4.5% year over year to €3.50. SAP’s flagship innovation, SAP HANA and its broader market adaptation in the cloud, have been critical factors in driving growth. The company presently has over 5,800 HANA customers and more than 1,850 HANA Business Suite customers.
Non-IFRS total revenues for the fourth-quarter 2014 amounted to €5.47 billion ($6.83 billion), up 4% year over year at constant currency and comfortably surpassed the Zacks Consensus Estimate of $6.62 billion. For full-year 2014, it increased 5% year over year to €17.58 billion ($22.00 billion).
However, SAP reported fourth-quarter 2014 non-IFRS operating profit of €2.13 billion ($2.66 billion).
Q4 Revenues by Segments and Regions
Cloud Subscriptions & Support: Non-IFRS revenues were €0.36 billion ($0.45 billion) in the quarter, up a robust 59% year over year at constant currency.
Software & Support: Non-IFRS revenues came in at €4.37 billion ($5.46 billion), up 2% year over year at constant currency.
Software and Software-Related Service: Non-IFRS revenues were €4.73 billion ($5.91 billion), up 5% year over year at constant currency.
On the basis of regions, Europe, the Middle East and Africa (‘EMEA’) region remained a strong performer in the fourth quarter, in spite of uncertainties in Russia and Ukraine. The region gained from the rise in software and software-related service revenue (5% year over year at constant currencies) and cloud subscriptions and support revenue (75% year over year at constant currencies).
On the other hand, SAP reported sound performance in the Asia Pacific Japan (‘APJ’) region, with strong revenue growth in cloud subscriptions and support segment (87% year over year at constant currencies). Also, software and software-related service segment performed well (2% year over year at constant currencies), aided by double-digit software revenue growth in India.
The Americas region posted a decent performance, with notable revenue growth in cloud subscriptions and support, and software and software-related service segments (50% and 6% year over year at constant currencies, respectively). However, unfavorable political and economic environment in Latin America remained a headwind.
Liquidity
For the year-ended Dec 31, 2014, SAP’s operating cash flow decreased 7% year over year to €3.57 billion ($4.46 billion) and free cash flow declined 13% year over year to €2.84 billion ($3.55 billion).
As on Dec 31, 2014, SAP had total group liquidity (includes cash and cash equivalents and short-term investments) of €3.42 billion ($4.27 billion) and net debt of -€7.67 billion (-$9.58 billion) compared with -€1.47 billion as on Dec 31, 2013.
2015 Guidance
SAP expects its 2015 non-IFRS cloud subscriptions and support revenue to be in a range of €1.95 – €2.05 billion, with significant synergies expected from the acquired firms – Concur and Fieldglass. On the other hand, the company projects its cloud & software revenue to rise by 8% – 10% on a constant currency basis in this year.
Also, the company expects its non-IFRS operating profit to be in a range of €5.6 billion – €5.9 billion for 2015.
Our Take
Continuing with its spree of earnings beats, SAP reported another quarter of strong results riding on the SAP HANA growth platform. Moreover, accelerating its cloud transition expedition, the company projects 7x growth in the cloud to achieve its revenue target of €28 billion by 2020. Moreover, SAP’s Concur acquisition promises bright growth prospects for SAP. However, declining operating profit continues to remain a concern for the company.
SAP currently holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Imperva Inc. (IMPV), Nuance Communications, Inc. (NUAN) and Adobe Systems Incorporated (ADBE). While Imperva and Nuance Communications both sport a Zacks Rank #1 (Strong Buy), Adobe Systems carries a Zacks Rank #2 (Buy).
Note: 1€=$1.2489 (average for the period Oct 1, 2014 – Dec 31, 2014)
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