“The magnitude of our cloud strength is evident. More and more companies are choosing SAP to help them transform their businesses, build resilient supply chains, and become sustainable enterprises as they move to the cloud. This momentum is reflected in the tremendous success of “RISE with SAP”, our signature cloud offering, as well as excellent growth across our entire portfolio. Our growth acceleration points to even greater potential ahead.” – Christian Klein, CEO
“I am proud that our team has delivered an exceptional year with strong results, far exceeding our expectations. After three quarters of home runs with our cloud momentum, we hit it out of the park this quarter. We are confident that we will continue our Q4 current cloud backlog growth in 2022. This is reflected in our accelerated cloud guidance for 2022 as we make great progress towards our mid-term ambition.” – Luka Mucic, CFO
Business Update
Businesses around the world are embracing digital technologies and the cloud to transform the way they do business. Today’s unpredictable reality, from supply chain disruptions to new regulatory restrictions, means the need for flexibility and adaptability has never been greater. Our depth of experience in mission critical business processes across all customer sizes, industries and geographies sets us apart and is core to why businesses are choosing SAP for their business transformation.
The strength and the execution of our strategy is showing up on multiple fronts with exceptional customer momentum across our cloud portfolio and financial performance exceeding market expectations.
High customer adoption is underpinned by exceptionally strong demand for “RISE with SAP” across customers of all sizes. It is designed to support our customers transform their businesses while at the same time moving to the cloud. They also benefit from our Business Network, the largest B2B network in the world, which helps them create more resilient supply chains.
Customer satisfaction continues to increase, echoed by strong renewal rates.
SAP is confident that its positive momentum will continue throughout 2022, and expects accelerating cloud revenue growth, supported by strong traction of SAP S/4HANA Cloud.
Highlights
‘RISE with SAP’ continued to gain traction after a successful launch in January 2021. SAP saw strong demand from companies of all sizes and closed deals with more than 650 customers in the fourth quarter, winning more than 1,300 customers since launch. Large customers such as Adobe, Panasonic Corporation, Mahindra & Mahindra, Fresenius SE, IBM, Allianz Technology, CVS, Unipart Group, Samsung SDS, and Siemens selected this offering. Additional wins included Philippine Airlines, Software AG, Banco Sabadell, Amadeus, Standard Chartered Bank, Fisker Inc., and Europcar Mobility Group.
Approximately 1,300 SAP S/4HANA customers were added in the quarter, taking total adoption to more than 18,800 customers, up 18% year over year, of which more than 13,100 are live. In the fourth quarter, approximately 50% of the additional SAP S/4HANA customers were net new.
Signavio continued to show outstanding performance as part of SAP’s Business Process Intelligence (BPI) segment. Current cloud backlog grew in triple digits for the full year. SAP BPI solutions are key to our customers’ business transformation and acceleration to the cloud. PwC, HP, Robert Bosch, Carl Zeiss, R. Twining and Company, and many others chose SAP BPI solutions in the fourth quarter.
Business Technology Platform, SAP’s PaaS offering, is the foundation of the Intelligent Enterprise, providing a single platform for integration and extensibility across the SAP portfolio and non-SAP solutions, as well as deriving insights from data. Current cloud backlog grew in deep double digits in 2021. Henkel, Schneider Electric, Helaba, and Enel were among the customers who chose this offering in the fourth quarter.
Key customer wins across SAP’s solutions portfolio included: Petronas, Goodyear, Hitachi High-Tech, Unilever, Chobani, Syngenta, HABA Group, MIGROS, ALDI Nord, Lumen, Dr. Martens, SCOTT Sports, Computacenter AG, A.S. Watson Group. Compass Group, Alfred Kärcher, and FMC Corporation all went live on SAP solutions in the fourth quarter.
On January 27, SAP announced its intent to acquire a majority stake of Taulia, a leading provider of working capital management solutions. The move is aimed at giving companies better access to liquidity and improving their cash flows. The acquisition is expected to further expand SAP’s Business Network capabilities and strengthen SAP’s solutions for the CFO office. The acquisition is expected to close in March 2022, following completion of customary closing conditions.
On January 25, SAP announced an extended partnership and an investment in Icertis, a provider of contract management solutions that offers market-leading contract intelligence powered by AI. This partnership and the related investment are expected to complement SAP’s portfolio seamlessly.
On January 13, SAP announced a new share repurchase program to service future share-based compensation awards. The program, with a volume of up to €1 billion, is planned to be executed in the period between February 1 and December 31, 2022.
Early December 2021, SAP announced its first SAP.iO program in China focused on intelligent manufacturing. Five Chinese startups have been selected to join the cohort at the new SAP.iO Foundry Shanghai.
On January 11, SAP announced a new offering, SAP Cloud for Sustainable Enterprises, which brings together a comprehensive portfolio of solutions that enables businesses to holistically manage sustainability performance. With this, companies can manage their “green line” with business process technology to identify, quantify, analyze, and act on data through their end-to-end operations. Further, SAP announced its commitment to achieve net-zero along their value chain in 2030; 20 years earlier than originally targeted.
SAP also earned a number of recognitions in the field of sustainability, including inclusion on the prestigious CDP A list, and achieving the top ranking in the S&P Dow Jones Sustainability Indices (DJSI) in the software sector for the 15th consecutive year.
Business Outlook 2022
For 2022, SAP expects its cloud growth to continue to accelerate. The pace and scale of SAP’s cloud momentum places the Company well on track towards its mid-term ambition.
For the full year 2022, SAP expects:
- €11.55 – 11.85 billion cloud revenue at constant currencies (2021: €9.42 billion), up 23% to 26% at constant currencies.
- €25.0 – 25.5 billion cloud and software revenue at constant currencies (2021: €24.08 billion), up 4% to 6% at constant currencies.
- €7.8 – 8.25 billion non-IFRS operating profit at constant currencies (2021: €8.23 billion), flat to down 5% at constant currencies.
- The share of more predictable revenue (defined as the total of cloud revenue and software support revenue) is expected to reach approximately 78% (2021: 75%).
- Free cash flow above €4.5 billion (2021: €5.01 billion).
- A full-year effective tax rate (IFRS) of 25.0% to 28.0% (2021: 21.4%) and an effective tax rate (non-IFRS) of 22.0% to 25.0% (2021: 19.9%).
While SAP’s full-year 2022 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 Q1 and FY 2022 expected currency impacts.
Ambition for Non-Financial Performance
SAP is focusing on three non-financial indicators: customer loyalty, employee engagement, and carbon emissions.
In 2022 SAP expects:
- a Customer Net Promoter Score of 11 to 15 (2021: 10)
- an Employee Engagement Index in a range of 84% to 86% (2021: 83%)
- Net carbon emissions of 70 kt (2021: 110 kt)
Ambition 2025
SAP confidently reiterates its mid-term ambition published in its Q3 2020 Quarterly Statement. By 2025, SAP continues to expect:
- More than €22 billion cloud revenue.
- More than €36 billion total revenue.
- More than €11.5 billion non-IFRS operating profit.
- A non-IFRS cloud gross margin of approximately 80%.
- A significant expansion of the Company’s more predictable revenue share to approximately 85%.
- A free cash flow of approximately €8 billion.
