SAP SE ADS

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the SAP Q3 2023 Earnings Conference call. Throughout today's recorded presentation, all participants will be in the 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 evening, everyone, and thank you for joining us to discuss our third quarter results for 2023. With me on this call are CEO Christian Klein, CFO Dominique Azam, and Scott Russell, who leads Customer Success. 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 factors section of SAP's annual report on Form 20F for 2022. Unless otherwise stated, all numbers on this call are non-IFRS and 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 superior to the measures of financial performance prepared in accordance with IFRS. Before turning over the call over to Christian, I would like to take a moment to organize a significant milestone for SAP. This quarter marked the 25-year anniversary of its listing on the New York Stock Exchange. Reflecting on this journey, SAP began with a primary listing in Frankfurt 35 years ago to now be standing as the number one company on the DAX. This dual listing is a testament to an amazing growth story. It signifies our dedication to providing our investors with prime access across two major capital markets. As we celebrate this milestone, know that the focus on sustainable growth remains unwavering and that the company is poised to keep innovating and creating shareholder value.

with that i'd like to turn the call over to christian yeah thank you anthony and thanks everyone for joining us for our q3 earnings call today first of all i want to express my shock and sadness at the heartbreaking events that have unfolded over the last few weeks sap condemns in the strongest possible terms all acts of terror and we are deeply concerned by the escalating conflict We offer our deepest sympathies to all those impacted and are committed to supporting our colleagues, customers and partners during this most difficult time. I'm sure I speak for everyone here at SAP when I say that we hope for a swift resolution to this tragic situation. Let me now turn to more positive news and SAP's earnings. Our results clearly reflect the strong foundation we built over the last three years for the next phase of SAP's transformation. In Q3, we once again achieved strong cloud growth and double-digit operating profit growth, up 16% for Q3 and 19% for the first nine months. confirming what we have said all along. 2023 is the year of double-digit profit growth and underlining the fact that we have reached the second phase of our transformation, the phase of acceleration. The numbers tell the story best. Current cloud backlog is up 25% again, driven by strong order entry across the portfolio and backed by significantly lower churn. Cloud revenue growth is 23%. Within that, SaaS and PaaS is up 26%. The foundation of SAP's success story is the business technology platform, which underpins both our rise and grow offerings. BTP is also the foundation for SAP's business AI to ensure high quality data and data privacy standards. Over 22,000 BTP live customers contribute to almost 50% cloud revenue growth in our past business. This business has a run rate of well over 2 billion euro. We achieved the overall cloud growth despite pressure on transactional revenue, which was flat year over year due to the macroeconomic situation. Our total order entry combining on-premise and cloud grew at the fastest rate in almost two years. Behind these strong numbers are many new and existing customers who turn to us to future-proof their businesses. In the third quarter, we saw key customer wins like Adobe and Aldi Suite across our solution portfolio. We also saw a number of important goal lives, including BMW Group, Ducati and Scott Sports. This quarter, we have once again seen significant momentum in our wise customer number, reaching well over 4,300 wise customers. Key customer wins include PUMA, Siemens Healthineers, and LG with its energy solution and electronics units. There are multiple factors that drive the value of Rise with SAP for our customers. With the migration to the cloud, responsibility for IT operation shifts over to SAP and the hyperscaler. The combination of cloud ERP and SAP's process expertise is key for business model transformation. Let's take LG Energy solution for example. They chose SAP to help meet the growing demand for electric vehicle batteries. Process standardization and embedded AI increase the productivity of customers in manufacturing, supply chain, HR, and finance. And by always being on the latest release, our customers also gain greater agility through continuous innovation. Finally, we are removing the data silos with Rise with SAP and build one strong data layer to allow to steer the business 360 with real-time data. WISE and GROW are also very exciting opportunities for SAP. The two offerings result in net new customers and an installed base maintenance conversion of more than 2x. At the heart of Rise and Grow, we have the business technology platform. It is the B2B platform for customers, partners, hyperscalers, and of course, our own developers. Because it is the platform for the development of mission critical business applications to extend our core. And this is why it represents such a massive business opportunity also in the years to come. More than 80% of our rise and grow customers use BTP to integrate and extend their cloud ERP portfolio with differentiating capabilities. And we are already seeing strong cross-sell potential with customers replacing legacy ERP with public cloud ERP components, such as SAP SuccessFactors, Ariba, and Concur. That trend continues to grow. S4HANA Cloud customers are four times more likely to have four or more of our Cloud LOB products with the BTP as the integration and extension layer for Cloud ERP. And finally, we are able to deliver innovation to customers much faster, meaning we can focus our R&D spend on innovation and not on maintenance and localization. It's a win-win for our customers and SAP, even under difficult macroeconomic conditions. Last week, we took WISE to the next level. We have launched a new Premium Plus package for WISE, including differentiating AI, sustainability, and advanced finance capabilities, such as cash flow optimization. It also simplifies how our customers consume AI with a new consumption-oriented license model. Furthermore, we have introduced a new conversion program for Rise with SAP. This program offers further commercial incentives to support our customers on their transformation journeys and accelerate their move to SAP's Cloud ERP. Likewise, Grow with SAP had also a great start with strong adoption among startups and companies new to SAP. Grow with SAP is our cloud native ERP suite offering for rapidly growing mid-market companies. After only three quarters, more than 440 customers in over 80 countries have selected Grow with SAP's Cloud ERP to accelerate their business, innovate, and grow around the world. Business transformation is much more than the pure technical migration of ERP legacy landscapes to the cloud. It's key to connect end-to-end processes and the entire data and system landscape to drive true transformation. In 2021, we acquired Signavio, covering the process perspective. And in Q3, we announced our intent to acquire Lean IX to cover the overall enterprise architecture perspective, making sure processes, systems, and data are yielding the right outcome for every SAP customer. Together, LeanIX, Signavio and SAP Cloud Application Lifecycle Management create a unique business transformation suite. Earlier this year, we also introduced our business AI strategy to the market, bringing together our existing AI capabilities with the new potential of generative AI to transform how businesses run. We have already made a lot of progress over the last few months. We have consent from thousands of customers to use their anonymized data to develop and train our AI use cases and foundational data model. The launch of our Digital Co-Pilot tool was a huge success, and we are starting to roll it out across our portfolio this fall. And just last week, we announced our new Vice Premium Plus commercial offering, as I mentioned already. SAP Business AI is reliable. We are making promising progress on building foundational models to enable generative and predictive capabilities from structured business data. SAP Data Sphere combines structured SAP data with data from other sources to produce highly accurate results, which is so essential in the B2B world. And our new co-pilot Joule will be able to work together with many LLM models to ensure we can offer this technology across the globe. And as a result, SAP Business AI is also more relevant. Our co-pilot speaks more than CRM. It can manage finance, HR, procurement, sales, marketing, industries, and ESG data, providing answers and recommendations to even the most complex questions, and automating many activities currently performed manually by millions of SAP end users. Recent announcements by key partners such as Accenture and Deloitte further underscore the central role played by SAP. Let's be clear. This is just the beginning. Over time, business AI will have a revolutionary impact on the entire business landscape, and SAP will be at the center of that. So stay tuned for more exciting announcements at CX Live and TechEd next month. In closing, let me quickly summarize. We have had a strong Q3 and I'm excited by the results. First, SAP continues to deliver on our commitments to the market and we are now well into the second phase of our transformation. Second, SAP's unique position at the nexus between business and technology allows us to continue to translate innovations into business outcomes for our customers. Meaning, certainly, despite ongoing macroeconomic headwinds, our cloud momentum remains strong and growth continues to accelerate. All in all, putting us well on track to achieve our 2025 ambition. This is just the beginning of the next phase. We will further accelerate innovation, try focus in our portfolio and realize greater efficiencies with our increasing scale. So with that, Dominik, over to you.