SAP SE ADS

Welcome to the SAP Quarter 4 2021 Earnings Conference Call. If you have any technical issues on today's call, you may press star zero on your telephone handset at any time. Today's conference is now recorded, and at this time, I'd like to turn the conference over to Anthony Colletta, Chief Investor of Relations Officer. Please go ahead, sir.

Thank you. Good morning and good afternoon, everyone, and a big welcome. Thanks for joining our earnings call today to discuss SAP's Q4 and full year results for 2021. On our investor relations website, you can find a deck intended to supplement today's call. It's available for download and a replay will be uploaded there as well. With me today are CEO Christian Klein and CFO Luka Mucic, who will make opening remarks. We also have Scott Russell, who leads our customer success organization, joining us for Q&A. Now let's do the safe harbor. During this call, we'll make forward-looking statements which are predictions, projections, or other statements about future events. These statements are based on current expectations, forecasts, and assumptions that are subject to risk and uncertainties that could cause actual results and outcomes to materially differ. Additional information regarding these risks and uncertainties may be found in our filings with the Securities and Exchange Commission, including but not limited to the risk factor section of SAP's annual report on Form 20F for 2020. Unless otherwise stated, all financial numbers on this call are non-IFRS. Growth rates and percentage point changes are non-IFRS year-over-year at constant currencies. The non-IFRS financial measures we provide should not be considered as a substitute for or to the measures of financial performance prepared in accordance with IFRS. Now, before taking questions, we'll start with a few opening remarks. And with that, I'd like to turn over to Christian.

Yeah, thank you, Anthony. And thanks to all of you for joining today. And welcome to 2022. We certainly hope this is the year that we will start to move on from the global pandemic and make more progress on additional critical issues, climate change, supply chain disruptions, and creating a sustainable future for people everywhere. Here at SAP, we are very excited about what we have accomplished in 2021. Let's look at our results for Q4. What a quarter, what a year. hitting or exceeding the high end of our revised outlook. We have seen four quarters of fantastic acceleration in current cloud backlog, which grew 26% in Q4, a sequential acceleration of 4 percentage points. This has led to current cloud backlog now standing at nearly 9.5 billion euros. Cloud Revenue also accelerated strongly, up 24% in Q4 and up from 20% in Q3. This was supported by S4HANA Cloud Revenue, which grew an impressive 61% in Q4, the highest growth we have ever reported. Current Cloud Backlog for S4HANA grew a stellar 76%, driven by tremendous adoption of Rise with SAP. Our signature offering for business transformation in the cloud. For a perfect quarter, every solution needs to grow. And that's indeed what happened. With double digit revenue and cloud backlog growth across all our major product categories. This performance sets us up well for 2022. We expect continued acceleration of cloud revenue. with up to 26% growth reflected in our guidance. These are very strong results during a challenging time for most businesses. They demonstrate the confidence our customers have in SAP and in the unique value we offer in helping them address an unprecedented set of challenges. We are optimistic about the year ahead and we are well on track to achieving our 2025 ambitions. These results are the outcome of the strategy we introduced 15 months ago. Customers are turning to our platform and solutions to help them become more intelligent, networked and sustainable and emerge even stronger from this disruptive time. Our WISE with SAP offering is designed to support our customers as they transform their businesses while at the same time moving to the cloud. Reflecting this, analysts are upgrading SAP's spend forecast for 2022. Just recently, UBS predicted a fourfold increase in the SAP IT budget growth for 2022, up to 12% from 3% in previous years. Since we launched Wise with SAP in January 2021, we have seen significant increases in customer adoption each quarter. In Q4, we more than doubled the number of new wise deals over Q3, with about three times the number of deals over 5 million. Let me briefly describe the three key benefits of this signature offering for business transformation as a service. First, business process redesign. We benchmark our customers' business processes against the best practices we have developed from working with about 400,000 customers. Second, cloud migration. We do more than a technical migration. We help our customers to move back to standard and to a modular, agile ERP in the public cloud. Third, innovation. We also connect our customers to the latest innovations like our industry cloud, our business network, and and our cloud for sustainable enterprises. This means that WISE with SAP enables us to partner even more deeply with our customers. We offer integrated total solutions with single end-to-end accountability from infrastructure to applications. As a result, our revenue run rate for the modular cloud ERP now approaches 7 billion Euro, up from 6 billion Euro at the beginning of the year. In Q4 alone, we added more than 400 million euro to our S4HANA cloud backlog. Clearly, WISE is a blockbuster success in the market. And we are just getting started. Our massive on-premise installed base of more than 30,000 ERP customers presents a significant opportunity for our WISE with SAP offering as these customers begin their transformation to the cloud. At the same time, WISE attracts many new customers and comes with a significant cross-sell opportunity because of the integrated nature of our modular cloud ERP. For every dollar spent on the core ERP, we have an upsell opportunity of $3 for our platform and for additional line of business solutions. In Q4, The tremendous momentum for WISE with SAP in turn 12 momentum across all our line of business applications and delivered the outstanding cloud performance I discussed earlier. Let's take a look at our key businesses, starting with S4HANA. Our success with WISE led to great S4HANA momentum. We now have nearly 5,000 S4HANA cloud customers and our win rate against competitors in Q4 was more than 70%. Many large customers are moving to S4HANA, enabled by WISE with SAP. These include CVS, Panasonic, IBM, and Standard Chartered Bank, and a number of wins over Oracle, including Siemens, Philippine Airlines, Allianz Technology, and Jungheinrich. One of the leading health solution companies is using WISE to support their journey to the cloud and make healthcare more affordable and more widely available. Panasonic has chosen WISE with SAP to drive a digital transformation effort, which will replace several legacy ERP systems to provide excellent customer value, optimize supply chains, and improve operational capabilities. Another example, Standard Chartered Bank. has chosen WISE with SAP to expedite their finance transformation across 60 markets and to achieve their commitment to net zero emissions by 2030. Novartis, one of the largest pharma companies in the world, chose SAP S4HANA to standardize and consolidate their core ERP platform. Finally, Petronas has also chosen SAP S4HANA ERP. SuccessFactors continues to win significant business over workday, including Discwater Aldi Nord, the discount supermarket chain. They recently selected SAP SuccessFactors to transform their HR operations and support their workforce of over 80,000 employees. Doc Martens, the famous British footwear brand, recently invested in SAP Commerce Cloud, part of our customer experience portfolio. They expect a 60% reduction in TCO from moving to the cloud and simplifying their operations. Intelligence Band Management We are seeing positive indications that business travel is starting to return. One of our customers, Philippine Airlines, is ready to take advantage of the anticipated recovery in travel. They chose SAP for our comprehensive understanding of the airline industry and its key business processes. HP Inc. is expanding its investment in SAP's business process intelligence solutions. They will be using SAP Signavio for advanced process analysis to help them quickly identify and act on new opportunities. Hitachi invested in SAP digital supply chain solutions to boost supply chain agility for its medical and industrial solutions. Our business technology platform had an excellent quarter with both cloud revenue and current cloud backlog growing by very strong double digits. In the cloud, BTP is the foundation to enable the integration and extensibility of our modular cloud offering. Engel has chosen SAP BTP to support various business priorities, including individualized sales and trade promotion management. Let's turn to some exciting news we announced today. Our intent to acquire Talia. Talia is a market-leading fintech company focused on working capital management and supply chain finance. We expect them to be a great addition to our business network and procurement portfolio. Our customers will be able to finance billions of transactions with favorable terms and improve their cash flows. Talia is already a strong SAP partner with a number of joint customers such as Airbus, Nissan and AstraZeneca. Two announcements are better than one. Earlier this week, we announced an extended partnership and an investment in iCertis, a provider of contract management solution that offers market-leading contract intelligence powered by AI. iCertis is a great and seamless complement to our portfolio. having multiple touchpoints to SAP systems from ERP to procurement to sales and to HR. This partnership underscores the strengths of our ecosystem and the massive opportunity from joining forces with market-leading software players. These announcements expand our overall portfolio with supply chain financing from Thalia and contract management solutions through our enhanced partnership with iCertis. At the same time, we have expanded many of our existing partnerships. One recent example is our partnership with AWS to bring HANA Cloud onto AWS-designed Graviton processors, which helps us optimize our own operational performance and cloud cross-marchings. as well as support our sustainability goals. So let me turn to another strategic priority for SAP, sustainability. There is no question that action on climate change is an imperative for businesses today. It is certainly an imperative for us at SAP. We have just been A-listed by CDP as one of just three software companies worldwide. Our belief is that sustainability does not represent an added cost to business. It's actually a competitive advantage. In fact, it may be the greatest economic opportunity of our time. It's also clear that no organization can achieve sustainability in a silo. It requires coordination across the value chain. We have been working and learning on this issue for many years with customers like Hitachi, Colgate, Anglian Water, Fisker and BMW. We have a unique approach that supports our customers across the full spectrum of sustainability, from carbon neutrality to social impact and economic progress. Transparency, insights and data are the foundation. This is the unique advantage we offer to our customers. The ability to see inside and outside your organization, across your warehouses, manufacturing, supply chains and critical business processes, such as procurement and business travel. Our sustainability portfolio directly supports this work and helps businesses run more sustainably. For example, through our recent introduction of SAP Cloud for sustainable enterprises. which makes ESG data transparent to our customers. We recently released our five actions for every business to become a sustainable business. This guidance provides concrete steps for any company of any size to accomplish their sustainability goals. Collectively, these efforts are focused on helping our customers manage their green line with as much as importance as the top and bottom line. In closing, we have had a record year at SAP and we think this is just the beginning. The future is prime and our strategy for the cloud, for business transformation, for sustainability will continue to create opportunities for continued and accelerated growth. We are very confident in our long-term ambition and see greater potential ahead, given the strength of our 2022 guidance. Thank you again for joining us today. And let me now hand over to Luca to talk through our results in more detail.