) gained 1.31% after the company reported second-quarter non-IFRS
earnings per share of €0.79, an increase of 10% from €0.71 per
share in the second quarter of 2013. In U.S. dollar terms, earnings
came in at $1.08 handily surpassing the Zacks Consensus Estimate of
88 cents a share by 22.7%.
SAP's flagship innovation, SAP HANA and its broader market
adaptation in the cloud has been a growth driver for the quarterly
profits. The company now has over 3,600 SAP HANA customers and
greater than 1,200 SAP HANA Business Suite customers.
Total revenue generated in the second quarter of 2014 was
€4,153.0 million ($5,660.1 million), up 5% year over year at
constant currency. However, the revenues fell short of the Zacks
Consensus Estimate of $5,768 million.
Revenues by Segment
Cloud Subscriptions & Support
: The segment garnered revenues of €242 million ($329.8 million) in
the quarter, up a robust 39% year over year at constant
Software & Support Revenues
: The segment reported revenues of €3,238 million ($4,413.1
million), up 6% year over year at constant currency.
Software and Software-Related Service Revenues
: This sub-segment includes Support, Subscription and other
software-related services revenues. The segment reported revenues
of €3,480 million ($4,742.9 million), up 8% year over year at
Revenues by Region
The EMEA region reported a strong performance, in spite of
uncertainties due to the ongoing Crimea crisis. The revenues from
the non-IFRS software and software-related service rose 8% year
over year at constant currencies, driven by 51% growth at constant
currencies in non-IFRS cloud subscription and support revenue and
strong software revenue growth in the UK and France.
The Americas region also reported a healthy performance in the
second quarter of 2014 with 6% growth in non-IFRS software and
software-related service revenue at constant currencies and 34%
growth in non-IFRS cloud subscriptions and support revenue at
constant currencies. In the North American region, SAP witnessed a
fast transition to the cloud along with a strong software revenue
performance from Canada. This apart, the company continues to
witness strong demand in Latin America with growth opportunities
across all markets.
SAP reported a strong performance in the APJ region. The company
reported Non-IFRS Cloud subscriptions and support revenue growth of
48% at constant currencies. Additionally, Non-IFRS software and
software-related service revenue also grew 12% at constant
currencies. This apart, revenues from Australiaand Malaysia surged
with triple-digit revenue growth in software at constant
For the second quarter of 2014, the company reported gross
margin of 68.9%, a decline from 69.4% reported in the second
quarter of 2013, while operating margin declined to 16.8% from
24.3% in the prior-year quarter.
Cash and Balance Sheet
The company's operating cash flow increased 4% year over year to
€2.58 billion ($3.52 billion) for the six-months period ended Jun
30, 2014. Free cash flow rose 2% year over year to €2.27 billion
($3.09 billion) in the six month period.
As on Jun 30, 2014, SAP had total group liquidity (includes cash
and cash equivalents and short term investments) of €3.18 billion
($4.33 billion) compared with €2.84 billion as on Dec 31, 2013. Net
liquidity as on Jun 30, 2014 was -€1.06 billion (1.4 billion)
compared with -€1.47 billion as on Dec 31, 2013.
Concurrent with the earnings release, management updated its
guidance for fiscal 2014.
The company now anticipates full-year 2014 non-IFRS cloud
subscription and support revenues to be in the range of €1,000 -
€1,050 million, up from the previously projected outlook of €950 to
€1,000 million, at constant currencies. The upper end of this
guidance reflects a growth rate of 39%.
The company re-affirmed full year 2014 IFRS software and
software-related service revenues to increase by 6-8% at constant
currency and full-year 2014 non-IFRS operating profit to fall in
the band of €5.8 billion to €6.0 billion at constant currency.
SAP currently holds a Zacks Rank #4 (Sell). Better-ranked stocks
in the sector include
Aspen Technology, Inc.
). All three stocks sport a Zacks Rank #1 (Strong Buy).
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