SAP Announces Q4 and FY 2023 Results
in € millions, unless otherwise stated; based on SAP group results from continuing operations
- SAP exceeds non-IFRS operating profit and cash flow outlook for FY 2023
- Cloud revenue up 20% and up 23% at constant currencies for FY 2023, underpinned by 25% cloud revenue growth at constant currencies in the fourth quarter
- Current cloud backlog of €13.7 billion, up 25% and up 27% at constant currencies
- IFRS cloud gross profit up 23%, non-IFRS cloud gross profit up 23% and up 27% at constant currencies in FY 2023
- IFRS operating profit down 5%, non-IFRS operating profit up 9% and up 13% at constant currencies in FY 2023
- 2024 outlook anticipates accelerating cloud revenue growth
- Planned transformation program including restructuring in 2024 reflects focus on scalability of operations and Business AI
- 2025 non-IFRS operating profit and free cash flow ambition updated to reflect updated non-IFRS definition as well as approximately half a billion Euro of incremental efficiency gains from the program
Walldorf, Germany, (ANTARA/PRNewswire)- SAP SE (NYSE: SAP) announced today its financial results for the fourth quarter and fiscal year ended December 31, 2023.
Christian Klein, CEO: "SAP has delivered: We met or exceeded our outlook for 2023 in all key metrics. Based on a stellar order entry, our current cloud backlog expanded by 27% - an all-time high. We are confident about the company's prospects in 2024. From this position of strength, SAP is opening the next chapter: with the planned transformation program, we are intensifying the shift of investments to strategic growth areas, above all Business AI. Going forward, this will empower us to keep leading with innovation while increasing the scalability of the operating model."
Dominik Asam, CFO: "2023 was a year of inflection. We kept our promise and achieved double-digit non-IFRS operating profit growth despite an adverse macro environment. In 2024, we will focus on putting the right gradient of earnings growth in place to deliver on our raised ambition for 2025 and sustain growth and financial performance beyond."
All figures in this statement are based on SAP group results from continuing operations unless otherwise noted.
Financial Performance
Group results at a glance – Fourth quarter 2023
IFRS | Non-IFRS1 | |||||||
€ million, unless otherwise stated | Q4 2023 | Q4 2022 | ∆ in % | Q4 2023 | Q4 2022 | ∆ in % | ∆ in % | |
Cloud revenue | 3,699 | 3,078 | 20 | 3,699 | 3,078 | 20 | 25 | |
Thereof SAP S/4HANA Cloud revenue | 1,028 | 662 | 55 | 1,028 | 662 | 55 | 61 | |
Software licenses | 841 | 907 | –7 | 841 | 907 | –7 | –6 | |
Software support | 2,846 | 2,993 | –5 | 2,846 | 2,993 | –5 | –1 | |
Software licenses and support revenue | 3,687 | 3,900 | –5 | 3,687 | 3,900 | –5 | –2 | |
Cloud and software revenue | 7,386 | 6,978 | 6 | 7,386 | 6,978 | 6 | 10 | |
Total revenue | 8,468 | 8,064 | 5 | 8,468 | 8,064 | 5 | 9 | |
Share of more predictable revenue (in %) | 77 | 75 | 2pp | 77 | 75 | 2pp | ||
Operating profit (loss) | 1,900 | 2,002 | –5 | 2,510 | 2,560 | –2 | 2 | |
Profit (loss) after tax from continuing operations | 1,165 | 600 | 94 | 1,626 | 1,008 | 61 | ||
Profit (loss) after tax² | 1,165 | 326 | >100 | 1,626 | 1,023 | 59 | ||
Earnings per share - Basic (in €) from continuing operations | 1.02 | 0.63 | 60 | 1.41 | 0.98 | 44 | ||
Earnings per share - Diluted (in €) from continuing operations | 1.01 | 0.63 | 59 | |||||
Earnings per share - Basic (in €)² | 1.02 | 0.46 | >100 | 1.41 | 1.00 | 41 | ||
Earnings per share - Diluted (in €)² | 1.01 | 0.46 | >100 | |||||
Net cash flows from operating activities from continuing operations | 1,909 | 2,022 | –6 | |||||
Free cash flow | 1,660 | 1,726 | –4 | |||||
Number of employees (FTE, December 31) | 107,602 | 106,312 | 1 | |||||
1 For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement. |
2 From continuing and discontinued operations |
Group results at a glance – Full year 2023
IFRS | Non-IFRS1 | |||||||
€ million, unless otherwise stated | Q1–Q4 2023 | Q1–Q4 2022 | ∆ in % | Q1–Q4 2023 | Q1–Q4 2022 | ∆ in % | ∆ in % | |
Cloud revenue | 13,664 | 11,426 | 20 | 13,664 | 11,426 | 20 | 23 | |
Thereof SAP S/4HANA Cloud revenue | 3,495 | 2,088 | 67 | 3,495 | 2,088 | 67 | 72 | |
Software licenses | 1,767 | 2,056 | –14 | 1,767 | 2,056 | –14 | –12 | |
Software support | 11,497 | 11,909 | –3 | 11,497 | 11,909 | –3 | –1 | |
Software licenses and support revenue | 13,264 | 13,965 | –5 | 13,264 | 13,965 | –5 | –3 | |
Cloud and software revenue | 26,928 | 25,391 | 6 | 26,928 | 25,391 | 6 | 9 | |
Total revenue | 31,207 | 29,520 | 6 | 31,207 | 29,520 | 6 | 9 | |
Share of more predictable revenue (in %) | 81 | 79 | 2pp | 81 | 79 | 2pp | ||
Operating profit (loss) | 5,785 | 6,090 | –5 | 8,721 | 7,989 | 9 | 13 | |
Profit (loss) after tax from continuing operations | 3,564 | 3,068 | 16 | 5,815 | 4,517 | 29 | ||
Profit (loss) after tax2 | 5,928 | 1,708 | >100 | 7,960 | 4,545 | 75 | ||
Earnings per share - Basic (in €) from continuing operations | 3.08 | 2.80 | 10 | 5.01 | 4.03 | 24 | ||
Earnings per share - Diluted (in €) from continuing operations | 3.05 | 2.79 | 9 | |||||
Earnings per share - Basic (in €)2 | 5.23 | 1.95 | >100 | 7.02 | 4.08 | 72 | ||
Earnings per share - Diluted (in €)2 | 5.17 | 1.94 | >100 | |||||
Net cash flows from operating activities from continuing operations | 6,193 | 5,675 | 9 | |||||
Free cash flow | 5,083 | 4,388 | 16 | |||||
Number of employees (FTE, December 31) | 107,602 | 106,312 | 1 | |||||
1 For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement. |
2 From continuing and discontinued operations |
Financial Highlights1
Fourth Quarter 2023
In the fourth quarter, SAP's cloud momentum further accelerated with sequential growth rate increases in both current cloud backlog and cloud revenue. Current cloud backlog was up 25% to €13.75 billion and up 27% at constant currencies, its fastest pace on record. SAP S/4HANA current cloud backlog was up 58% to €5.05 billion and up 61% at constant currencies. Cloud revenue was up 20% to €3.70 billion and up 25% at constant currencies, mainly driven by the growth of SAP's combined SaaS and PaaS portfolio, which was up 22% and up 28% at constant currencies. SAP S/4HANA Cloud revenue was up 55% to €1.03 billion and up 61% at constant currencies.
Supported by a particularly solid performance in Europe, software licenses revenue decreased by only 7% to €841 million and was down 6% at constant currencies. Cloud and software revenue was up 6% to €7.39 billion and up 10% at constant currencies. Services revenue was flat at €1.08 billion and up 4% at constant currencies. Total revenue was up 5% to €8.47 billion and up 9% at constant currencies.
The share of more predictable revenue increased by 2 percentage points to 77% in the fourth quarter.
Cloud gross profit was up 25% (IFRS) to €2.66 billion, up 24% to €2.69 billion (non-IFRS), and up 30% (non-IFRS at constant currencies). Cloud gross profit growth was supported by a strong increase in cloud gross margins.
IFRS operating profit decreased 5% to €1.90 billion. Non-IFRS operating profit was down 2% to €2.51 billion and was up 2% at constant currencies. Fourth quarter operating profit was negatively affected by the accelerated amortization of capitalized sales commissions related to the on-premise business as well as higher bonus accruals related to the strong financial performance. In addition, prior year fourth quarter IFRS operating profit included a disposal gain of €175 million which resulted in a non-IFRS operating profit of €109 million related to the sale of the SAP Litmos business.
IFRS earnings per share (basic) increased 60% to €1.02. Non-IFRS earnings per share (basic) increased 44% to €1.41. The effective tax rate was 33.8% (IFRS) and 31.4% (non-IFRS). The year-over-year decrease in effective tax rate mainly resulted from changes in tax-exempt income, predominantly related to Sapphire Ventures, which were partly offset by changes in valuation allowances on deferred taxes and withholding taxes.
Full Year 2023
SAP performed against its financial outlook as follows (continuing operations2):
Actual 2022 | 2023 Outlook | Revised 2023 Outlook | Actual 2023 | |
Cloud revenue (at constant currencies) | €11.43 billion | €14.00 – 14.40 billion | €14.00 – 14.20 billion | €14.06 billion |
Cloud and software revenue (at constant currencies) | €25.39 billion | €26.90 – 27.40 billion | €27.00 – 27.40 billion | €27.65 billion |
Operating profit (non-IFRS, at constant currencies) | €7.99 billion | €8.60 – 8.90 billion | €8.65 – 8.95 billion | €9.05 billion |
Share of more predictable revenue | 79 % | approx. 82% | approx. 82% | 81 % |
Free cash flow | €4.4 billion | approx. 4.9 billion | approx. €4.9 billion | €5.08 billion |
Effective tax rate (IFRS) | 32.0 % | 28.0% – 32.0% | 28.0% – 32.0% | 32.6 % |
Effective tax rate (non-IFRS) | 29.6 % | 26.0% - 28.0% | 26.0% - 28.0% | 29.3 % |
As of December 31, total cloud backlog – which is defined as the contractually committed cloud revenue we expect to recognize in future periods – was up 37% to €44 billion and up 39% at constant currencies.
For the full year, cloud revenue was up 20% to €13.66 billion and up 23% at constant currencies, mainly driven by strong double-digit growth across the SaaS and PaaS portfolio, which was up 23% and up 26% at constant currencies. SAP S/4HANA Cloud revenue was up 67% to €3.49 billion and up 72% at constant currencies.
Software licenses revenue was down 14% to €1.77 billion and down 12% at constant currencies. Cloud and software revenue was up 6% to €26.93 billion and up 9% at constant currencies. Services revenue was up 4% to €4.28 billion and up 6% at constant currencies. Total revenue was up 6% to €31.21 billion and up 9% at constant currencies.
The share of more predictable revenue increased by 2 percentage points year over year to 81% for the full year 2023.
Cloud gross profit was up 23% (IFRS) to €9.78 billion, up 23% to €9.91 billion (non-IFRS), and up 27% (non-IFRS at constant currencies). IFRS Cloud gross margin was up 2.2 percentage points to 71.6%, non-IFRS cloud gross margin up 2.2 percentage points to 72.6% and up 2.4 percentage points at constant currencies.
IFRS operating profit was down 5% to €5.79 billion and IFRS operating margin decreased by 2.1 percentage points to 18.5%. Non-IFRS operating profit increased 9% to €8.72 billion and increased 13% at constant currencies, non-IFRS operating margin increased by 0.9 percentage points to 27.9% and was up 1.2 percentage points to 28.2% at constant currencies.
IFRS earnings per share (basic) increased 10% to €3.08 and non-IFRS earnings per share (basic) increased 24% to €5.01. The effective tax rate was 32.6% (IFRS) and 29.3% (non-IFRS), which is above the outlook of 28.0% to 32.0% (IFRS) and 26.0% to 28.0% (non-IFRS). The increase mainly resulted from changes in valuation allowances on deferred taxes.
Free cash flow for the full year was up 16% to €5.08 billion, exceeding the revised outlook of approximately €4.9 billion. While higher payouts for taxes and restructuring weighed on free cash flow, the positive development was driven by SAP's profitability and improvements in working capital and interest payments. In addition, lower payouts for share-based compensation, capex, and leasing supported the positive development. At year end, net liquidity was €3.52 billion.
Share Repurchase Program
On May 16, SAP announced a new share repurchase program with an aggregate volume of up to €5 billion and a term until December 31, 2025. As of December 31, 2023, SAP had repurchased 7,563,796 shares at an average price of €125.49 resulting in payouts of approximately €949 million under the program.
Non-Financial Performance 2023
Customer net promoter score (NPS) increased 2 points year over year to 9 in 2023 within the outlook range.
SAP's employee engagement index remains stable at 80% meeting the upper end of the target range and demonstrating continued high level of engagement. SAP's retention rate was 96.4%, in 2023. The proportion of women in management increased to 29.7%. In the fourth quarter, the Company also reached 35.2% of women in the workforce.
Net carbon emissions were 0kt in 2023, meaning the Company is carbon neutral in its own operations.
Business Highlights
In the fourth quarter, customers around the globe continued to choose "RISE with SAP" to drive their end-to-end business transformations. These customers included: Amer Sports, AusNet, Boots, Christchurch City Council, Coles Group, Covestro, Daikin Industries, Daimler Truck, Deutsche Telekom, EMS, Harrods, Hilti, IBM, KONE, Kyndryl, Landis+Gyr, Marathon Petroleum, Marks and Spencer, Messe Frankfurt, Munich Airport, NEC Corporation, NVIDIA, Nestlé, OXG Glasfaser, SLB, Smyths Toys Superstores, Vodafone Group, and Wärtsilä Corporation.
AES Indiana, Allianz, ARAG, DAK-Gesundheit, Tropicana Brands Group, and Zurich Insurance Company went live on SAP S/4HANA Cloud in the fourth quarter.
Lowe Enterprises, Mangopay, Merida & Centurion Germany, Okuma Europe, Serrala Group, and Solidia Technologies chose "GROW with SAP", an offering helping midsize customers adopt cloud ERP with speed, predictability, and continuous innovation.
Key customer wins across SAP's solution portfolio included: Ahold Delhaize, Airservices Australia, Beiersdorf, Bosideng, Delivery Hero, Douglas, DZ BANK, Ericsson, MATSUMOTO PRECISION, Mercedes-Benz Group, NEOM, Robert Bosch, TechnipFMC, TE Connectivity, Volkswagen, and Wipro.
Axpo Holding, Campari Group, and Roca Sanitario, went live on SAP solutions.
In the fourth quarter, SAP's cloud revenue performance was particularly strong in APJ and EMEA and solid in the Americas region. Brazil, Germany, France, India, and South Korea had outstanding cloud revenue growth while Japan and Saudi Arabia showed exceptional strength.
For the full year, Germany, Brazil and India all had outstanding performances in cloud revenue while France, Japan, South Korea, the Netherlands, Mexico, Chile and Switzerland were particularly strong.
On October 25, SAP announced, that Siemens Healthineers AG, a leading global medical technology company, had selected the RISE with SAP solution to support the company's digital transformation journey.
On November 2, SAP announced at the SAP TechEd event, a comprehensive series of generative AI capabilities and advancements aimed at empowering developers of all skill levels to supercharge their businesses in the age of AI.
On November 8, SAP announced, that it had completed the acquisition of LeanIX.
On November 21, SAP and the Mercedes-AMG PETRONAS F1 Team announced a multiyear partnership to join forces to drive efficiency on and off the racetrack.
On November 22, SAP announced that the Hilti Group, a global leader providing innovative hardware, software and services to the construction industry, is using the Circelligence solution to increase the circularity of its resources.
On December 13, SAP announced that it deepened its partnership with IBM on AI and Quantum. IBM also selected RISE with SAP across the enterprise, broadening its global reach, and continued to embrace the cloud through the use of SAP Fieldglass and SAP Learning Hub.
On January 9, 2024, SAP announced changes to its Executive Board to build on the company's success to enable customers to benefit from the cloud in the era of AI. Starting April 1, 2024, a new Board area will be created to accelerate cloud growth and adoption. This Board area, led by Thomas Saueressig, will be focused on ensuring customers' ability to embrace continuous innovation in the cloud. At the same time, Muhammad Alam will join the Executive Board, succeeding Thomas Saueressig and assuming responsibility for SAP's product engineering.
On January 17, SAP was named one of the 100 most sustainable companies in the world, joining the Corporate Knights Global 100 once again.
Segment Results at a Glance
SAP's reportable segment showed the following performance:
Applications, Technology & Services1 | Q4 2023 | ||
€ million, unless otherwise stated (Non-IFRS) | Actual Currency | ∆ in % | ∆ in % Constant Currency |
Cloud revenue – SaaS2 | 2,601 | 20 | 25 |
Cloud revenue – PaaS3 | 620 | 42 | 46 |
Cloud revenue – IaaS4 | 184 | –10 | –7 |
Cloud revenue | 3,405 | 21 | 26 |
Cloud gross profit – SaaS2 | 1,836 | 24 | 31 |
Cloud gross profit – PaaS3 | 533 | 49 | 53 |
Cloud gross profit – IaaS4 | 51 | –33 | –43 |
Cloud gross profit | 2,420 | 27 | 32 |
Segment revenue | 8,168 | 5 | 9 |
Segment profit (loss) | 2,686 | –2 | 2 |
Segment margin (in %) | 32.9 | –2.2pp | –2.2pp |
1 Segment information for comparative prior periods were restated to conform with the new segment composition. |
2 Software as a service: SaaS comprises all other offerings which are not shown as PaaS and IaaS. |
3 Platform as a service: PaaS primarily includes SAP Business Technology Platform and SAP Signavio. |
4 Infrastructure as a service: A major portion of IaaS comes from SAP HANA Enterprise Cloud |
In the fourth quarter, segment revenue in AT&S was up 5% to €8.17 billion and up 9% at constant currencies, primarily due to strong cloud revenue growth, which was supported by SAP S/4HANA as well as Business Technology Platform. Operating Expenses of the segment increased by 8% and by 13% at constant currencies, resulting in a segment margin of 32.9% at actual and constant currencies. This implies a decrease of 2.2 percentage points and 2.2 percentage points at constant currencies compared to the fourth quarter of the prior year.
Cloud Performance
Q4 2023 | Q1–Q4 2023 | ||||||
€ millions, unless otherwise stated (non-IFRS) | Actual Currency | ∆ in % | ∆ in % | Actual Currency | ∆ in % | ∆ in % | |
Current Cloud Backlog | |||||||
Total | 13,745 | 25 | 27 | 13,745 | 25 | 27 | |
Thereof SAP S/4HANA | 5,046 | 58 | 61 | 5,046 | 58 | 61 | |
Cloud Revenue | |||||||
SaaS1 | 2,894 | 19 | 24 | 10,734 | 19 | 23 | |
PaaS2 | 620 | 42 | Penulis : Adityawarman  | ||||