Ladies and gentlemen, thanks for standing by. I'm on a recorded call operator. Welcome and thank you for joining the SAC Debt Investor Conference Call. Throughout today's recorded presentation, all participants will be in a listen only mode. The presentation will be followed by a question and answer session.
I would now like to turn the conference over to Stephan Dew. Please go ahead, sir.
Hi, everybody.
Very warm welcome to SAP's Debt Investor Call for Q1 in 2016. My name is Stefan Diehl. I'm Head in the Treasury Department, thank you very much for participating. Today's call will be Led through by Scott Smith from our Investor Relations department and Stumna Donnelly, Director at SAP Ireland's U. S.
Financial Services. And in the first part, we will talk about the financial performance and the outlook for 2016. Whereas in the second part, we will go into more detail on the financial profile of SAP. And at the end, we will open up for additional questions that you might have. So with that, I hand it over to Scott.
Okay. That's great. Thanks, Stefan. Now before we get started on the financial details, I'd just like to introduce you to the slide there on the Safe Harbor Steve, a few words about forward looking statements briefly. Please note that matters discussed today may contain forward looking statements, which are subject to various risks And uncertainties that could cause actual results to differ materially from expectations.
Factors that could affect the company's future financial results So To Q1, following an outstanding finish to 2015, SAP had a solid performance in the Q1, Our seasonally smallest quarter. The results show that even as the world economy is changing fast, SAP represents innovation, strength and stability So if you move on to Slide 4 We'll talk about top line momentum. Our cloud results is what I wanted to talk about first of all. So this quarter leaves no doubt that this business continues on its fast growth path. Cloud revenue came in at 33% this quarter, Which marks the 12th quarter in a row with a 30% plus growth rate excluding acquisitions.
This is at the high end of our implied guidance range and ticking well ahead of our CAGR through 2020. New cloud bookings saw robust growth, up 23% or 26% at constant currencies. With our strong cloud backlog and our strong booking performance in 2015, we are on track to deliver on our midterm growth additions. In addition, we now have approximately 100,000,000 total cloud subscribers. Now for the business networks, They continue to gain momentum.
We had 22% growth to €451,000,000 in the Q1. And as you can see on the slide, there are some key highlights for the 3 individual networks Ariba, Concur and Fieldglass. Now, continuing with a few comments on the top line results. The other piece of our more predictable revenue, support revenue was solid for the quarter, up 5%, In line with our plan, we continue to see very high renewal rates signaling a healthy growth rate going forward. In fact, in the Q1, 99.5 percent of SAP's net new customers selected Enterprise Support.
And as a result of the cloud and support performance, as previously mentioned, our more predictable revenue That is the combination of cloud and support revenue with 69% of our total revenue in the Q1. That means our business has become more stable, Which is key, especially in times when certain markets are becoming more volatile. Overall, our cloud and software business It was solid in the Q1. We grew by 6% at constant currencies, which is within our guidance range for the full year. We do recognize some volatility in the markets, but our strong pipeline gives us confidence to reiterate our outlook for the full year.
Now moving on to the next slide, I wanted to talk a little bit about the regions. First of all, in EMEA, the company had a solid performance With an 8% increase in cloud and software revenue. Cloud subscriptions and support revenue grew by 49%. In EMEA, we had solid growth in software licenses overall. In the Americas region, the company grew cloud and software revenue by 4% Cloud subscriptions and support revenue by 29%.
North America coming off a very strong Q4 in 2015 At its slower than anticipated start to the year. In Latin America, in particular in Brazil, the continuing political and macroeconomic instability Wade on our Q1 performance. In APJ, cloud and software revenue was up 1% With cloud subscriptions and support revenue growing by 26%, SAP software revenue performance in the region was in line with the company's expectations, Given a tough prior year comparison, China was a highlight with double digit software revenue growth. Now moving to the bottom line to the next slide, where we are able to manage an exceptional result In light of a slower than anticipated start of our software business. Now before I get to the operating profit, let me first discuss our gross margin development for the quarter.
The cloud gross margin improved nicely to 66.3 percent, an increase of 120 basis points year over year. We achieved this result Even as we continue to invest heavily in cloud delivery and personnel in our fast growth business. Now the software and support gross margin 85.9%, up 80 basis points from the prior year. This positive result was due to the solid performance in the quarter, The combination of software and support revenue and the positive impact from our company wide transformation program. Our cloud and software gross margin was 82.4%, slightly up year over year.
This is yet another strong proof point of our steady improvement in efficiency with our business models as our share of cloud revenue Increased by 3.7 percentage points to 17.6%. Now to the operating profit, It was $1,100,000,000 for the quarter, an increase of 5%. This profit result was a real bright spot in this quarter for sure. It was largely due to the positive impact from the company wide transformation in 2015, where we are now managing our costs Much more effectively in investing in areas which we see fast growth. For example, our headcount grew by 12.45 employees in the Q1.
Roughly 80% of incremental hires were in sales, cloud and our research and development organization. Now moving to the next slide, Slide 7, see just kind of in summary and overview of our income statement. I just wanted to point out Our earnings per share on the IFRS side grew by 38% to $0.48 and our non IFRS EPS Grew by 9% to $0.64 per share. Now moving on to The outlook for the full year. And I think you can tell by the comments we still see a strong pipeline.
And as I said, we are reiterating our outlook for the full year. The cloud subscription and support revenue Still expect to grow by $2,950,000,000 to $3,050,000,000 for the full year. Cloud and software revenue expects to grow in a range of 6% to 8%, and our operating profit should come in at a range of 6,400,000,000 $6,700,000,000 Now you can see Just as a quick explanation on the non IFRS, you can see what the difference is as we adjust from IFRS to non IFRS disclosure as it explains our outlook for the full year 2016. Moving on to Slide 11, you just see a quick summary where you can get more details on the non IFRS disclosures on our web page. Now in summary, I just wanted to close by letting me say that this was a solid quarter and there is a lot we can take from it.
We proved that our business transformation was successful. We had strong growth in operating profit despite the fact that our license performance was slower than anticipated. We again expanded our cloud margin, while we continue to grow Cloud revenue by more than 30%. Our fundamental growth drivers are rock solid. HANA has become the industry standard in memory Data platform and is the key enabler of our entire innovation portfolio.
It puts us on a strong path for the future. At this point, I'd like to pass it on and colleagues can talk about the balance sheet And the cash flow. Thank you.
Thanks very much, Scott. This is Linda Dunley here. And I would just like to start off by taking you through the balance sheet there on Slide 13. So on the asset side, as you can see, there has been a very substantial increase in cash and other financial assets. And it's now more than EUR 6,000,000,000 up from EUR 3.76 at the year end.
This is made up predominantly of cash actually of over €5,740,000,000 and financial assets of €360,000,000 €2,000,000 And we are accumulating cash at this stage in the year because of a significant dividend payment that will Later this month and also some debt repayments that will occur in Q2. So meanwhile, of course, we at all times want to maintain our minimum operating liquidity as a group. And hence, we have increased the accumulated cash at this stage in the year. On the liability side of the balance sheet, you can see the provisions have decreased from EUR 300,000,000 That reflects a reduction in the provision for restructuring costs at since year end. In relation to other liabilities, This reflects a reduction in the employee liabilities And is due to the reduction because the employee bonuses were paid earlier on this year.
The deferred income has increased very, very substantially from €2,000,000,000 at the end of the year through to €5,200,000,000 However, this is largely cyclical because of the way the maintenance revenue, So much of it occurs in the Q1 and that gives rise to a large deferred income on the balance sheet, which then is written off over the remainder of the year. And you can also see the significant impact that, that has when looking at The cash conversion ratio on the next slide. So at the end of the period then, what we have It's a market capitalization of €85,000,000,000 which is slightly down on the €90,000,000,000 at year end, but is up very, very substantially over where it was this time last year. And the decline just really reflects the change in the marketplace. There has also been a slight change in the debt equity ratio at the end of March due to the increase in deferred income and that now stands at 46.5%.
So if we go to the next slide, Slide 14. So the Substantial increase in deferred income is reflected in the cash and the operating cash flow, which leads to a high cash conversion rate of 4.36. This is slightly down from the equivalent In the year ended in 2015, March at the quarter end March 2015, and that is largely Now the decline in DSO is due to a number of factors. Macroeconomic in Environment in a number of jurisdictions, particularly in MENA, Africa and also a legal restructuring in China And a general shift in the business model and portfolio, but is of concern to the group and is being worked on. So the next slide shows the Slide 15 shows the movement in cash
over the
quarter. As can be seen, it's fairly straightforward. There hasn't been any acquisitions. And therefore, there has been a substantial reduction in net debt down to just over EUR 3,000,000,000 at the end of the quarter. But obviously, there has been a significant increase in the cash of the group.
This is made up of cash of €5,740,000,000 and cash investments of another €112,000,000 giving rise to total group liquidity of €5,850,000,000
So
If we look then at Slide 16, and this is looking at the maturity profile of the group in relation to that debt and the debt repayments. As can be seen in 2016, The gray area there refers to the U. S. Private placement debt, which is due in Q2. And also we're planning to pay at least EUR 600 €1,000,000 of the term loan that was taken out as part of the Concur acquisition.
However, I would like to stress that potential maturity profile of the term loan is flexible and we can adjust depending on the cash flow of the group over the next between 2016 2017. And so overall, our fixed floating mix at For 2016, we'll be in the region of a fixed debt of 37% and floating of 63%. And the U. S. Dollar euro mix is a U.
S. Dollar figure of 23% and the euro debt of 77%. And so I would now like to open it up for questions. Slide 17 just The contact details if there is any further questions that you have and would like to ask any of us directly. And now I'd like to open up the call to Stefan and for questions.
Okay. Thank you, everybody.
First question is from the line of Elizabeth Henderson of AAM. Please go ahead.
SAP is on the ECB's The approved collateral list, has that program and the clearly the very attractive yields Change your capital allocation strategy at least over the near term. Just if you could just talk about how that may affect your decisions going forward? Thanks.
Hi, Elizabeth. It's Stefan. Great question as this It's definitely a very important development in the European bond market. Obviously, this This opens up additional demand for a lot of corporate issuers in the European space. I mean, we still don't know exactly how the ECB will approach the primary market.
They will definitely or it is expected that they take €3,000,000,000 to €5,000,000,000 per month from the market, Not only in the primary market, but more of that volume in the secondary market. And as I said, it provides A general, even better financing environment for investment grade issuers. As far as SAP is concerned, this positive development for the overall Financing environment does not change our concrete plans on going forward on the capital structure. We continue to pay back our majoring debt In the next 1 to 2 years. So no change to our prior plans.
Thank you.
We have a question from Rebecca Dance of Onom. Please go ahead.
Hi, thanks guys. This is Rebecca Dantz. Thanks for the update. I was just wondering if we could get a little color on The margin development over the next couple of years, it's come down since the highs in 2014. And I'd just like to get your sense on if you Expect margins to improve from here and where you think the sustainable level is long term and if it will improve, Just a sense for what those drivers will be of improvement.
Thanks.
Sure. This is Scott. Yes, I can take that. Yes, I mean, from a margin perspective, I mean, you heard him talk a little bit about the gross margins. I mean, That's right now our focus area and we're looking very closely at that and we definitely see margin progression through 2020 as you can see Our midterm outlook, some of the drivers of that you were already seeing in the Q1 come from our Kind of company wide transformation in 2015 where we basically decided that we would stop investing in areas of No growth or very low growth and switch over those investments into the fast growth areas such as cloud.
And that's why you start to already see some savings there. We did say at the end of last year, we'd have the mid triple digits Annualized run rate savings based on that. Now obviously, you won't see that exact number In the 2016 results and beyond just because we take some of that savings and we invested in those areas where we do have that strong growth. And so that's basically what we're looking at. And some of those areas are those fast growth areas that are in line of businesses like SuccessFactors, Business Networks and the Private Cloud, S4HANA, obviously, and so we continue to invest in those.
The other thing we continue to do is continue to increase our efficiency across the board. And as the cloud business, as you can see, Cloud was revenue was higher in Q1 than software revenue for the first time. And as a result, we still improved our operating profit Quite nicely. So that was for us a real big takeaway from this quarter, the fact that we can still improve Our operating profit improved across the board our gross margins individually with having a lower software revenue this Quarter, not only lower than cloud, but lower than expected by the analysts. So therefore, We feel like we feel pretty confident coming out of that.
You can see from the operating margin standpoint, although that's not necessarily our focus area now, It's still very close to breaking even and we see that progressing. And as we get through 2016 In 2017 and into 2018, we see our operating margin slowly expanding forward through 2020.
Great. Thank you.
There are no further questions at this time. There are no further questions at this time. I would like to pass back to Stephan Dew.
Yes. Thank you very much for those questions, and thank you very much For attending this call. I would like to wish you a very nice rest of the day. Thank you.
Ladies and gentlemen, the conference has now concluded and you may disconnect your telephone. Thanks for joining and have a pleasant day. Goodbye.