SAP Sap SE

By Mauro Orru

SAP SE on Friday updated its guidance for the year to account for the stake in Qualtrics International Inc. that it is divesting as the group continues to focus on its cloud business, the main driver of revenue growth in the first quarter.

The Germany-based software company said it now expects non-IFRS operating profit at constant currencies of between 8.6 billion and 8.9 billion euros ($9.43 billion-$9.76 billion) this year instead of EUR8.8 billion to EUR9.1 billion as previously expected.

Cloud revenue at constant currencies should come in between EUR14 billion and EUR14.4 billion, below a previous forecast of EUR15.3 billion to EUR15.7 billion.

SAP said its new guidance only covers continuing operations as U.S. private equity firm Silver Lake and Canada Pension Plan Investment Board agreed in March to acquire SAP's majority stake in experience-management software company Qualtrics for roughly $7.7 billion.

SAP owned 71% of Qualtrics on an undiluted basis and 62% on a fully diluted basis in mid-March. The deal is expected to close in the second half of the year.

SAP outlined its new guidance as it posted higher revenue and operating profit for the first quarter.

Reporting on a non-IFRS basis, SAP said total revenue climbed to EUR7.44 billion in the first three months from EUR6.77 billion in last year's first quarter. Cloud revenue jumped to EUR3.18 billion from EUR2.57 billion, while software-licenses revenue slipped to EUR276 million from EUR317 million.

SAP is moving away from software-licenses sales, once its biggest revenue streams, to subscription-based cloud services, banking on a more profitable and predictable model based on recurring revenue.

"Our cloud momentum continues at a fast pace which is contributing to our strong revenue and double-digit non-IFRS operating profit growth this quarter," said Chief Executive Christian Klein.

Operating profit increased to EUR1.88 billion from EUR1.68 billion, with its operating margin up to 25.2% from 24.8%.

SAP, like other European software companies, presents its figures as two sets of numbers. One set is based on the International Financial Reporting Standards--an international accounting method that seeks to provide a global reporting standard--though analysts and investors tend to follow SAP's non-IFRS numbers. Those figures exclude share-based compensation, restructuring expenses and acquisition-related charges.

The group said it expects to update its midterm targets during its financial-analyst conference on May 16.

Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

(END) Dow Jones Newswires

April 21, 2023 02:05 ET (06:05 GMT)

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