SAP releases its Q1 2023 Results
Germany's WALLDORF, April 21, 2023 /PRNewswire/ -- The financial results for the first quarter ending March 31, 2023, were released by SAP SE (NYSE: SAP).
- Cloud revenue increased by 24% and by 22% in constant currency, up 1% over the previous quarter. S/4HANA cloud revenue increased by 77% overall and by 75% in constant currency.
- At nominal and constant currencies, the current cloud backlog is up by 25%, representing a 1% improvement in sequential growth.
- IFRS cloud gross profit increased by 28%, non-IFRS cloud gross profit increased by 28%, and at constant currencies, gross profit increased by 27%.
- Operating profit under IFRS fell by 45%, whereas operating profit under non-IFRS increased by 12% and by 12% at constant currencies.
- Updated forecast for 2023 to account for the anticipated sale of Qualtrics. SAP updates its view for ongoing business, noting that it expects top line and operating profit growth to pick up.
- According to IFRS 5, the Qualtrics consolidated group ("Qualtrics") was categorised as ceased activities in Q1 2023. As a result, Qualtrics' contribution is not reported as part of SAP's ongoing operations.
The first quarter of 2023
At constant exchange rates, the current cloud backlog increased by 25% to €11.15 billion, representing a 1% improvement in sequential growth. At constant exchange rates, the backlog for SAP S/4HANA's current cloud increased by 79% to €3.42 billion, or 78%.
Cloud sales increased by 24% to €3.18 billion in the first quarter and by 22% at constant currencies, up 1% from the previous quarter. Revenue from SAP S/4HANA cloud increased 77% to €716 million and 75% when measured in constant currencies.
Software licence sales declined by a manageable 13% to €276 million and was down 13% at constant currencies, helped by a few significant purchases. Revenue from the cloud and software increased by 10% to €6.36 billion and by 8% in constant currency. Revenue from services increased by 11% in constant currency and 12% to €1.08 billion. The whole revenue increased 9% in constant currency terms and 10% to €7.44 billion.
In the first quarter, the percentage of more predictable revenue rose by 1 point to 82%.
Operating profit according to IFRS fell by 45% to €803 million. The increase in share-based compensation, which represents the gain in share price during the first quarter as compared to the decline over the same period last year, is the main cause of the decline. Restructuring costs related to the targeted restructuring programme and costs attributable to a provision for prior regulatory compliance issues also had an impact on IFRS operating profit (see section (D) Basis of Non-IFRS Presentation). At constant exchange rates, non-IFRS operating profit increased by 12% to €1.87 billion.
IFRS basic earnings per share thus fell by 60% to €0.35. The basic non-IFRS earnings per share rose 8% to €1.08. With IFRS, the effective tax rate was 40.5%, while without IFRS, it was 28.3%. For IFRS, the adjustments in non-deductible expenses and valuation allowances on deferred tax assets were the main causes of the year-over-year increase. Due to corresponding modifications to pre-tax data, the changes in non-deductible expenses do not apply for non-IFRS.
The impact of the sale of trade receivables in the fourth quarter of last year, which weighed on Q1, caused free cash flow to decline by 9%.
Cloud gross profit increased by 28 percent (IFRS) to €2.24 billion, 28 percent (non-IFRS) to €2.27 billion, and 27 percent (non-IFRS at constant currencies).
Enterprise Highlights
Customers from all around the world kept selecting "RISE with SAP" to power their end-to-end business transformations in the first quarter. BMW Group, DOLCE & GABBANA, GAMA, GlasfaserPlus, The Government of Manitoba, Henkel, KANSAI PAINT CO, Lingong Heavy Machinery, MLS, NEC Networks & System Integration Corporation, Pastificio Rana, Sempra Infrastructure, Sodexo BRS, Sri Intellectual, Thales Defence & Security Inc, VEM Conveniência, and Zagis were some of these clients.
For the fiscal year 2022, SAP recommended a dividend of €2.05 per share, which would represent a 5% increase from the usual dividend paid for the fiscal year 2021. The dividend must be approved by shareholders at the forthcoming AGM on May 11, 2023.
On March 21, SAP unveiled GROW with SAP, a fresh service designed to assist midsize clients in adopting cloud ERP that promotes quickness, predictability, and ongoing innovation. It is a comprehensive service built on the SAP Business Technology Platform and SAP S/4HANA Cloud, public edition.
The third year of the Climate Decade has already begun, so it is critical that businesses begin switching to 100% renewable electricity as soon as possible. Organisations are better prepared to withstand growing energy prices and the looming threat of climate change when they switch to 100% renewable electricity. According to a research by the International Renewable Energy Agency, "doubling the share of renewables in the energy mix by 2030 would increase global GDP by up to 1.1%, improve welfare by up to 3.7%, and support over 24 million jobs in the sector."
In 2013, the Finnish Association for Nature Conservation and other environmental NGOs launched EKOenergy, a global not-for-profit ecolabel for energy, with the goal of achieving sustainable energy production and consumption. Through the EKOenergy label, a globally regarded quality seal for renewable energy, EKOenergy strives to assist businesses in hastening the transition to 100% renewable energy. The Greenhouse Gas Protocol, LEED for green buildings, CDP, and RE100 all refer to the EKOenergy designation as an option for businesses who want to move closer to using only renewable energy. In March 2021, the European Parliament additionally presented EKOenergy with the European Citizen's Prize 2020.
The EKOenergy ecolabel enhances consumers' ability to choose renewable energy and can be used in conjunction with sources of energy such as green tariffs, PPAs, or unbundled energy certificates. It may also be applied to internally generated energies. Through its Climate Fund, EKOenergy has helped underprivileged communities since the label's introduction by funding 79 new renewable energy projects in 29 developing nations.
SAP has already recognised and matched existing activities with the 17 Sustainability Development Goals of the UN, placing sustainability at the centre of its strategy. SAP has committed to the Science Based Targets initiative (SBTi) to reduce emissions across its whole Scope 3 value chain, including emissions from products-in-use at customers, by 85% by 2050 compared to the base-year level of 2016. By pledging to achieve net-zero emissions by 2030 and reaching a balance between greenhouse gas emissions and removal, SAP has increased the pace of its climate aspirations.
Since 2014, SAP has powered all of its offices and data centres with electricity produced entirely from renewable sources. SAP picked the renowned EKOenergy label as part of its transition to 100% renewable electricity. SAP pays 0.10 euros to EKOenergy's Climate Fund, which aims to reduce energy poverty while also promoting climate protection and renewable energy, for every megawatt hour of power with the EKOenergy badge.
Source: https://news.sap.com/2023/04/sap-ekoenergy-partner-for-renewable-future/
The April 2023 security patches from enterprise software provider SAP have been made available for a number of its products. These updates fix two critical-severity flaws that affect the SAP Diagnostics Agent and the SAP BusinessObjects Business Intelligence Platform.
In total, SAP has published 24 notes, of which five are updates to earlier bulletins and 19 are new issues of various seriousness.
The three most important problems resolved this time are:
- CVE-2023-27267: The OSCommand Bridge of the SAP Diagnostics Agent, version 720, has a problem with insufficient input validation and missing authentication that makes it possible for an attacker to run scripts on linked agents and completely compromise the system.
- CVE-2023-28765: Versions 420 and 430 of SAP BusinessObjects Business Intelligence Platform (Promotion Management) are affected by an information disclosure vulnerability that enables a user with minimal access rights to decrypt the lcmbiar file. This would give the attacker access to the credentials of the platform's users and allow them to hijack their accounts to carry out additional harmful deeds.
- CVE-2023-29186: SAP NetWeaver versions 707, 737, 747, and 757 are affected by a directory traversal bug that enables an attacker to upload and overwrite files on the exposed SAP server.
In SAP's most recent security advisory, there are still 11 security holes that are of low to medium severity.
Even while these problems are typically not given top priority for patching, assaults nevertheless use them, especially when they are a part of intricate attack chains, therefore they must be fixed.
Quick patching is crucial
Hackers are constantly searching for critical-severity vulnerabilities in widely used programmes like SAP's, which are widespread in vast corporate networks.
With 425,000 clients in 180 countries and a 24% market share globally, SAP is the largest ERP provider in the world. Its ERP, SCM, PLM, and CRM products are used by more than 90% of the Forbes Global 2000.
In order to avoid data theft, ransomware attacks, and the disruption of mission-critical operations and processes, the US Cybersecurity and Infrastructure Security Agency (CISA) recommended admins to patch a number of serious vulnerabilities affecting SAP business apps in February 2022.
Threat actors were seen attempting to penetrate business networks by exploiting patched holes in unpatched SAP systems in April 2021.
Applying the appropriate security fixes as soon as possible is therefore absolutely critical for SAP system administrators.
The German software giant is spinning off its listed customer experience management subsidiary Qualtrics as part of its restructuring. The deal, made with two investment funds, values the company at $12.5 billion.
SAP, which announced a restructuring in January involving a refocusing on the cloud and the elimination of 3000 jobs, has reached an agreement with the American fund Silver Lake and the Canadian pension fund CPP to sell Qualtrics. This subsidiary specialising in customer experience management had been floated on the stock exchange in 2021. The two investment funds are buying SAP's shares in Qualtrics for 7.7 billion dollars in cash. Silver Lake was already a shareholder. The transaction should be finalised in the second half of this year.
A subsidiary that was losing money
SAP had acquired the American Qualtrics in 2018 for $8 billion. The German software giant says the sale values Qualtrics at $12.5 billion in total. At the buyout price of $18.15 per share, this represents a 73% premium to the average price over the past 30 days. At the time of its IPO, it was valued at $27 billion.
"Silver Lake has both the operational expertise and the track record in software companies to help Qualtrics extend its leadership in the experience management category, which it pioneered," said Christian Klein, CEO of SAP, in a statement. He added that SAP will remain a privileged partner of the company.
Qualtrics now has 18,000 customers, compared to 10,000 at the time of the SAP acquisition. At the end of January, the company reported a 36% year-on-year increase in turnover, but lost more than a billion dollars over the year.
