SAP SE ADS

Good day and welcome to the SAP Q2 2021 earnings conference call. Today's conference is being recorded. At this time, I will turn the conference over to Mr. Stefan Gruber, Head of Investor Relations. Please go ahead, sir.

Thank you. Good morning or good afternoon. This is Stefan Gruber, Head of Investor Relations. Thank you for joining us for our earnings call to discuss our second quarter results. I'm joined by our CEO, Christian Klein, and our CFO, Duka Mucic, who will both make opening remarks on the call today. Also joining us for Q&A from Australia is Scott Russell, who leads our Customer Success Organization. Before we get started, as usual, I would like to say a few words about forward-looking statements and our use of non-IFIS financial measures. Any statements made during this call that are not historical facts, forward-looking statements, as defined in the U.S. Private Security Certification Reform Act, Words such as anticipate, believe, estimate, expect, forecast, intent, nay, plan, project, predict, should, outlook, and will, and similar expressions that relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the US Securities and Exchange Commission, the SEC, including SAP's annual report on Form 20F for 2020 filed with the SEC on March 4, 2021. Participants of this call are cautioned not to place undue reliance on these forward-looking statements which speak only as of their dates. On our Investor Relations website, you can find the slide deck intended to supplement today's call available for download. For those of you following the webcast, the slides will be shown as we proceed through the prepared remarks. Unless otherwise noted, all financial numbers referred to on this conference call are non-IFIS, and growth rates and percentage point changes are non-IFIS at constant currency year-over-year. The non-IFIS financial measures we provide should not be considered as a substitute for or superior to the measures of financial performance compared in accordance with IFRS. With that, I'd like to turn things over to our CEO, Christian Klein.

Yeah, thank you. Thanks to all of you for joining today. I hope you're doing well, as the pandemic seems to be entering a new phase, despite the positive progress in vaccinations. I also want to extend our deepest sympathies to all those affected by the catastrophic floods in parts of Western Europe and China. We are working closely with the affected communities to support their rescue and relief efforts. Let's now turn to our earnings update. For SAP, Q2 has been another fantastic quarter. It shows that we are executing well against the strategy we introduced last year. This strategy is playing out against the backdrop of every industry transforming digitally and Our customers are partnering with us as they transform their businesses while at the same time modernizing their IT landscape with a move to the cloud. This is reflected in the strong quarterly results we announced today. Our current cloud backlog further accelerated by 20% to 7.8 billion euros. Our cloud revenue growth accelerated sequentially by 4 percentage points to 17%. SaaS past cloud revenue grew 25%, excluding intelligence spend. Most importantly, our customer satisfaction continues to improve and hit an all-time high in our most recent survey. The next key takeaway, our strategy is working. Our teams are executing excellently and we are delivering incredible value to our customers. Let's now take a look at some of the drivers behind our growth this quarter. One of them is clearly Rise with SAP, our leading end-to-end business transformation offering. We see strong demand from both our installed base and from new customers, from companies of all sizes, across industries and geographies, and especially from our larger customers. AMD, for example, chose WISE to consolidate onto one single enterprise platform. Another example is Core, who chose our WISE offering to move to S4HANA Cloud and who co-innovate with SAP as part of the industry cloud for retail. There is an important strategic dynamic which I would like to touch on. Strong rise momentum leads first to strong adoption of S4HANA Cloud and our business technology platform. And secondly, through our business technology platform, customers then adopt our integrated line of business applications. That's exactly the dynamic we saw play out this quarter. Our S4HANA cloud backlog growth therefore accelerated to an impressive 48%. This sets us up for significant acceleration of S4HANA cloud revenue growth in half year two. S4HANA cloud revenue was up 39% in the quarter and reached a revenue run rate of more than 1 billion euros. We have in the meantime more than 17,000 S4HANA customers, up 16% year over year, with 50% of these customers being net new. Let's now discuss the shift to our next generation SAP business technology platform. Over 8,000 live customers and 4,000 partners adopted the platform for business process integration and for developing new line of business and industry-specific applications. Our BGP business had a strong quarter powered by WISE, with strong double-digit growth and customer wins including Hilti, Lenovo and Renault. Let me now cover the impact of WISE with SAP on our line of business and industry applications. With the move of our WISE customers to our next-generation business technology platform, we enable them to run end-to-end business processes based on our LOB and industry applications. This opens up tremendous cross-file opportunities across our entire cloud portfolio. As a result, latest analyst research confirms that SAP increased its market share in the cloud over our competition. This quarter alone, we have again proven SAP's unique position, winning in over 350 competitive deals, the majority of which were against Oracle. We saw a fantastic performance and competitive wins across our whole portfolio. Let me share a few examples. Many companies are looking to our human experience management solutions as they navigate a new normal in the workplace. Cleverance selected our full HXM suite, including Employee Essential. And we won against our regular workday. to transform their HR function and better support their more than 8,000 employees. Our CX cloud revenues and current cloud backlog grew by strong double digits. Great customer wins this quarter include Dyson and De'Longhi. We also grew cloud revenue and current cloud backlog in our Ariba and Fuselab business by double digits year over year. AlchemVision chose our procurement solution as their source-to-pay platform for direct and indirect materials, which no other competitor is able to offer. Our digital supply chain business also had a strong performance with double-digit cloud revenue and CCB quotes. These solutions are key to run resilient supply chains and customers this quarter included Stanley Black & Decker and Grupo LaMosso. This is also the first full quarter that Signario has been consolidated into our result. It had an outstanding first quarter as part of SAP's business process intelligence segment, which grew in triple digits in current cloud backlog. In all my conversations with customers, one thing is always clear. They are choosing us for our unique value in helping them to transform their business in this ever-changing world. I'd like to add some comments about our continued growth. We are optimistic about the future and we have raised our guidance today to reflect the momentum we are seeing in the market. In addition to the progress in our core business, we are investing into new markets. This will expand our total addressable market by $150 billion to a total term of $600 billion by 2025. Let me highlight two future growth areas in more detail. With the SAP Business Network, we have created the world's largest and most comprehensive business network. It provides a powerful way for members to respond in real-time to disruptions in their supply chain. This quarter alone Over 350,000 new trading partners have joined. With our sustainability portfolio, SAP is the only partner who can support companies on their entire journey across the full spectrum of sustainability. From carbon neutrality to social impact and economic progress. We are partnering with more than 100 of the world's largest enterprises. Together, we are building solutions that allow customers to consider sustainability right from the design of a product. Solutions that allow them to measure carbon emissions across their network. And solutions that offer end-to-end transparency and real-time insights into ESG performance in line with leading West Core metrics. In summary, this has been another excellent quarter. Our results demonstrate that our strategy is not just working, but creating distinct momentum in the market. We are optimistic about reaching our goal of €22 billion in cloud revenue by 2025, with organic cloud growth of 22% per annum, growing twice the weight of our time. Thanks again for joining us today, and let me now hand over to Luca to talk through our results in more detail.