SAP SE ADS

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the SAP Q2 2023 earnings 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. If you would like to ask a question, you may press hash followed by one on your touchtone telephone. I would now like to turn the conference over to Anthony Colletta, Chief Investor Relations Officer. Please go ahead.

Good day, everyone, and welcome. Thank you for joining us. With me today are CEO Christian Klein, CFO Dominique Azam, and Scott Russell, who leads Customer Success. On this call, we will discuss SAP's Q2 and first half 2023 results. You can find the deck supplementing this call, as well as our quarterly statement, on our Investor Relations website. 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 and assumptions that are subject to risks 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 ACP's annual report on Form 20F for 2022. Unless as Roy stated, all numbers on this call are non-RFRS and growth rates, percentage point changes, and our 2023 financial outlook are non-RFRS at custom currencies. The non-RFIS financial measures we provide should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with RFIS. Before we start, I would like to remind you that SAP completed the sale of its stake in Qualtrics in June of this year. Therefore, all figures shared on this call are based on SAP group results from continuing operations. And with that, I'd like to turn the call over to Christian.

Yeah, thank you, Anthony. And as always, thanks for joining us for our earnings call today. This has been a good Q2. At the halfway point of 2023, SEP continues to perform well, despite a macroeconomic environment that remains uncertain. After reaching the turning point in our transformation, our sharpened focus has yielded real momentum, and we are seeing strong demand across our portfolio. Customers are looking to our game-changing solutions to foster sustainable end-to-end business processes across diverse industries on a global scale. It is also worth pausing on the watershed moment we are experiencing with generative AI. It's clear that generative AI will fundamentally change the way businesses run. In the business world, no one is better positioned than SAP to empower businesses to take advantage of this transformational moment, giving them the solutions to harness AI to improve business outcomes. We believe we are uniquely placed to become the leader in business AI. At our most recent SAFIRE conference in May, we shared specifics of our AI approach with SAP Business AI. Later on in my remarks today, I will talk in more detail about our ambitions on this front. So let's first turn to a summary of our numbers. In Q2, operating profit grew at an impressive 28%, up from 12% in Q1, clearly demonstrating the strengths of this new phase in our transformation. This puts us in a strong position as we work towards our goal of double-digit operating profit growth in 2023. Current cloud backlog stands at over 11.5 billion euros with continued strong growth, up 25% this quarter. Cloud revenue continues to grow steadily at 22%. And total Q2 revenue grew at 8%. For S4HANA specifically, cloud revenue grew 79% up from 75% in Q1, and current cloud backlog grew 70%. Our results this quarter demonstrate the strengths of our solutions in addressing the specific needs of our customers during challenging times. Customers are choosing SAP to help them transform their business processes, collaborate across their supply chain, and operate sustainably. WISE with SAP continues to be the preferred choice for customers adopting the SAP portfolio to transform their end-to-end business processes in the cloud. Key new rise deals this quarter include Bayer AG and Bacardi Martini. As one of the world's largest pharma and biotech companies, Bayer chose rise with SAP to facilitate its extensive business transformation program known as Core. Bacardi is the world's largest privately owned international spirits company with a portfolio of more than 200 brands. They have chosen WISE with SAP to meet their ambitious growth targets. There were also a number of important RISE go-lives this quarter, including Heinz Prenz, Levi's, Tech Mahindra and Vasuni. Tech Mahindra of India deployed RISE with SAP in record time, going live in just three and a half months. Vasuni, a new company formed from Philips Domestic Appliance, undertook one of the largest RISE transformations ever, and it was completed in just 18 months. The success of WISE with SAP is clear. This is SAP's signature offering, which helps customers move to the cloud and transform their business processes at the same time. It's also very important to emphasize that SAP's newest innovations and capabilities will only be delivered in SAP public cloud and SAP private cloud using WISE with SAP as the enabler. This is how we will deliver these innovations with speed, agility, quality, and efficiency. Our new innovations will not be available for on-premise or hosted on-premise ERP customers on hyperscalers. For example, new ERP capabilities, as well as sustainability and carbon accounting solutions, and all our new AI innovations will only be available in the cloud and delivered via WISE and Quo with SAP. Last quarter, we introduced the powerful new offering, Grow with SAP, designed for mid-market customers who are new to SAP and likely to be growing quickly as they build their businesses. Grow has quickly become popular, just like Rise with SAP, for which around half of the customers are net new to the SAP family. The momentum I've described with both Rise and Grow with SAP is underpinned by the SAP business technology platform. This is the foundation for integration and extensibility across our portfolio. We have reached an important milestone this quarter, with over 20,000 live BTP cloud customers. This quarter new wins included Visa, the world leader in digital payments, and Santander, the Spanish financial multinational, who are using SAP Business Technology Platform to revolutionize and streamline the banking experience. Increasing adoption of S4HANA and the SAP Business Technology Platform is also driving significant cross and upsell opportunities across our portfolio. Let's now discuss the latest updates to our approach with SAP Business AI. As I said earlier, we believe we are uniquely placed to become the leader in AI built for business. Customers will benefit from new AI-powered solutions that step change how processes can self-learn and self-automate to self-optimize business outcomes. For example, imagine supply chains that automatically initiate a different delivery route based on weather and congestion data. There will be a step change in how employees can interact with solutions in radically more efficient and personalized ways. For instance, imagine your ERP system using embedded ESG data and business data to decarbonize the supply chain by 5%, simply by asking for it. And there will be a step change in uncovering new insights that lead to better business decisions. Imagine one trusted data layer across your entire company that enables AI to pull together the right data in seconds. This will bring us significant opportunities for market expansion through new AI-based solutions and new premium offerings. Based on external forecasts and our own calculations, we see a potential doubling of our addressable market to $1 trillion by 2028 with AI being a key contributor. We will be introducing new premium-wise offerings with an uplift of up to 30% in the fall. Our approach with SAP Business AI is unmatched in the industry, delivering our customers the most relevant, reliable and responsible AI built for business. Firstly, our AI is relevant because it's embedded into every part of our portfolio. More than 24,000 SAP Cloud customers today can already use SAP Business AI across hundreds of built-in AI capabilities and partner use cases. to provide a couple of new tangible examples. In SAP Transportation Management, generative AI will save up to 55% of the processing cost of delivery notes. The new intelligent collections in SAP S4HANA Finance can reduce the time between invoice and payment by up to 10%. Secondly, based on unique business data and business process context, we can deliver the most reliable business AI. Reliable AI hinges on applying the right data to the right model. By using SAP Data Sphere to leverage substantial, context-rich, industry-specific data, business AI systems can drastically improve accuracy, generate more relevant content, and minimize AI hallucinations. Thirdly, responsible AI is not a buzzword for us. Our customers trust us with the most critical data and can confidently deploy our AI offerings, knowing we prioritize the highest levels of security, privacy, compliance, and ethics. We comply with the highest standards when it comes to customer consent, security, GDPR regulations. This is what SAP stands for. We will continue to innovate and deliver by creating an AI ecosystem for the future, combining SAP and partner innovation built on the SAP Business Technology Platform. Let me give you some examples of this approach. At SAP Sapphire, we announced a partnership with Microsoft to collaborate on joint generative AI offerings to help customers address the talent gap with new recruitment and development tools. Last week, SAP Sapphire Ventures, the technology-focused VC backed by SAP, announced that it will dedicate $1 billion to AI-powered enterprise technology startups. Earlier this week, we announced strategic investments in three leading generative AI companies. Alep Alpha, Anthropic, and Cohere. In the fall, we plan to announce new AI solutions and capabilities across our portfolio. All told, we see a huge opportunity with new innovation in AI and believe SAP is uniquely poised to help customers take advantage of this watershed moment. As our Q2 results show, SAP continues to deliver. we are optimistic about the future based on SAP's core value of delivering technologies that build stronger companies. As we start the second half of the year, we remain fully committed to delivering on our promise of accelerated revenue and profit growth. This is reflected in our increased guidance for cloud and software revenue and for operating profit. In closing, let me quickly look back on what we have accomplished in recent years. our own transformation into a cloud company, our leaner and more agile operating structure, new offerings that bring the power of SAP to more companies, solutions that harness the power of data wherever it resides, and tools that create sustainable business processes across industries. Now is another threshold moment. While nearly every company is working on the AI revolution in some way, no one sits at the nexus of technology and business like SAP. And we think there is enormous opportunity ahead. Dominik, over to you.