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SAP Q1 Revenue In Line Though Op IncomeMissed; Strong FCF Number

TECHNOLOGY


  • Q1 revenue was in line at +8% YoY while op income was 10% below consensus at +16% YoY as the op margin came in at 19.1% against expectations of 23.6% - accounts seem to imply this comes due to higher share-based compensation because of strong equity performance.
  • Noting a EUR 2.2bn restructuring provision which may weigh on the equity (though BBG headlines say over 2% gain in extended trading); BBG shows EPS of 0.81 coming against consensus of 0.89. Cloud back log growth of 27% YoY looks good given market talk around downward trends in software spending.
  • Credit metrics looks healthy; the reported net cash position has grown from EUR 3.2bn at FY23 to EUR 5.6bn at Q124 while FCF is +28% YoY (31% of Q1 revenue vs. 26% in Q123 and 16% in FY23).
  • FY24 outlook confirmed. Restructuring programme to end in early 2025. Quick glance at the earnings call doesn’t reveal any comments around the debt side of the BS.
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