SAP Stock Down On Weak Q4 Profit, Sees Growth In FY23; To Cut 2.5% Jobs; Mulls Qualtrics Stake Sale

(RTTNews) - Shares of SAP AG were losing more than 3 percent in the morning trading in Germany as well as in pre-market activity on the NYSE after the German software major reported Thursday sharply lower profit in its fourth quarter, despite higher revenues. Looking ahead for fiscal 2023, the company projects accelerating topline and double-digit adjusted operating profit growth.

Further, the company announced restructuring program, which is expected to affect approximately 2.5 percent of SAP's employees, which comes nearly 3,000 positions. As of December 31, 2022, the total workforce was 111,961 employees.

SAP also said it has decided to explore a sale of its stake in Qualtrics, in line with its strategic initiative to streamline its portfolio, and to focus more on its core cloud growth and profitability. The move would be a continuation of its strategy announced at the time of the Qualtrics IPO in 2021.

The company said a final decision on any deal, its conditions and timing is subject to market conditions, agreement on acceptable terms, regulatory approvals and the approval of the SAP Supervisory Board. SAP has retained Morgan Stanley as financial advisor to assist in the exploration of the sale of its stake in Qualtrics.

Regarding its restructuring program, SAP said it will conduct the program in 2023 in selected areas as it intends to strengthen its core business and improve overall process efficiency.

The company projects 250 million euros to 300 million euros restructuring costs associated with the program, of which vast majority will be recognized in the first quarter 2023, impacting IFRS operating profit.

The program is expected to provide a moderate cost benefit in 2023 and 300 million euros to 350 million euros in annual cost savings as of 2024, impacting both IFRS and Non-IFRS operating profit.

Sap said the expected cost savings and reinvestments are fully reflected in its financial outlook for 2023 and 2025 ambitions.

For the full-year 2023, SAP expects adjusted operating profit of 8.8 billion euros to 9.1 billion euros, up 10 percent to 13 percent at constant currencies.

The company also sees 15.3 billion euros to 15.7 billion euros cloud revenue, up 22 percent to 25 percent at constant currencies, and 28.2 billion euros to 28.7 billion euros cloud and software revenue, up 6 percent to 8 percent at constant currencies.

Further, by 2025, SAP continues to expect more than 11.5 billion euros adjusted operating profit, more than 22 billion euros cloud revenue, and more than 36 billion euros total revenue.

SAP expects to update its mid-term ambition in the first half of 2023.

In the fourth quarter, profit after tax, on IFRS basis, fell 77 percent to 332 million euros from last year's 1.44 billion euros. IFRS earnings per share decreased 62 percent to 0.47 euro from 1.23 euros a year ago.

Adjusted profit after tax was 1.03 billion euros or 1 euro per share, compared to prior year's 2.27 billion euros or 1.85 euros per share.

Total revenue increased 6 percent to 8.44 billion euros from last year's 7.98 billion euros. At constant currency rates, revenues grew 1 percent.

In the quarter, Qualtrics segment generated segment profit of 34 million euros, and revenue was up 37 percent to 389 million euros.

In Germany, SAP shares were trading at 102.36 euros, down 3.38 percent. In pre-market activity on the NYSE, the shares were trading at $112.13, down 3.47 percent.

For more earnings news, earnings calendar, and earnings for stocks, visit rttnews.com.