SAP SE ADS

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the SAP's fourth quarter and full year 2023 results. 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 touchstone telephone. I would now like to turn the conference over to Anthony Colletta, Chief Investor Relations Officer. Please go ahead.

Good morning, everyone, and thank you for joining us today to discuss our Q4 and full year results for 2023. We also provide color about our 2024 outlook and 2025 ambition. With me on this call are CEO Christian Klein, CFO Dominic Azam, and Scott Russell with its 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 risk and uncertainties that could cause actual results and outcomes to materially differ. Additional information regarding this risk 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 otherwise stated, all numbers on this call are non-FRS and growth rates and percentage point changes are non-FRS, you have a 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. As a reminder, on December 18, 2023, SAP provided important updates regarding its reporting. These changes are detailed in the presentation on our website and will be reflected starting from QA 2024 onwards. I would also like to take the opportunity to call your attention to our upcoming financial analysis conference, which will take place on June 5th as part of our Sapphire event in Orlando, Florida. This will be broadcast on our website. And as we have much to cover today, let's dive in without further ado. Christian, please over to you.

Thank you, Anthony. And thank you to everyone on the line for joining our call today. Welcome to 2024. 2023 was a great year for SAP. We met or exceeded our outlook in all key metrics. This clearly underlines that the transformation journey we started three years ago has now reached a new level. With significant business momentum, including in Q4, SAP is stronger and more relevant than ever as we enter the era of business AI. At the same time, the tech industry is moving fast. We need to keep leading the way as a top enterprise application company and further advance to become the number one business AI company as well. This is why, out of a very strong position, we are now accelerating the development of the company with the clear goal to grasp the opportunities of GenAI. This morning, we are sharing a major set of updates. First, we are announcing our plans to implement a new transformation program. With this program, we are planning to intensify the shift of investments to strategic growth areas, above all business AI, and to drive new efficiencies powered by AI across the business. Second, we are sharing our outlook for 2024, including anticipated strong growth in cloud revenue and non-IFRS operating profit. Third, we are providing an update on our 2025 ambition that now includes the financial effects of our new transformation program, resulting in an increase of our profit and free cash flow guidance. Let's start by looking at the results for Q4 and the full year. Q4 provided an exceptionally strong finish to 2023, most importantly in terms of cloud momentum. Current cloud backlog increased by a strong 27%. That's higher growth than ever before. And cloud revenue growth accelerated to 25%. This great success was powered by strong customer momentum. To name just three examples, Vodafone is betting on Rise with SAP. They have selected Signavio for their business process management, as well as BTP, DataSphere, and Business AI from SAP. This will help Vodafone to boost innovation and drive productivity. EMS, a leader in the Brazilian pharma market, is migrating its Oracle platform to rise with SAP. The company is looking to modernize operations, enhance scalability, and drive cost predictability for future growth. Volkswagen has been implementing the first large-scale cloud project in their human resources function based on SAP success factors. They will now also use success factors to digitize all essential HR processes and take the employee HR experience to the next level. In addition to these impressive customer stories, there were further highlights in Q4. We successfully completed the acquisition of LeanIX, another great addition to our business transformation portfolio. SAP and NVIDIA are working together to bring advanced generative AI capabilities into RISE with SAP. Additionally, NVIDIA has selected RISE with SAP to make their supply chain more resilient and scale operations. And SAP also made a strong showing at COP28. SAP solutions enable more transparent ESG metrics, helping decision makers to take the right actions to accelerate sustainability. For the full year, we met or exceeded all our Outlook APIs. Current cloud backlog grew 27% to 13.7 billion euros. Cloud revenue was up 23% to 13.7 billion euros. Our operating profit exceeded the guidance range by nearly 100 million euros. What is more? Total cloud backlog increased 39% to 44 billion euros, giving SAP incredible resilience for the years to come. I'd like to thank all SAP colleagues for these excellent results in a challenging environment. We had promised to quickly turn SAP into a cloud company, a company with double-digit profit growth. And we can confidently say we delivered. SAP is stronger and more relevant than ever. And the figures for 2023 clearly show that the transformation we have been driving for the past three years is now entering into a new phase. Let me now turn to our outlook for 2024 and our 2025 ambition, starting with the top line. We are guiding 17 to 17.3 billion euros in cloud revenue for 2024, with an implied growth rate of 25.5% at the midpoint. This anticipated growth puts us well on track to hit our 2025 ambition of more than 21.5 billion. Our growth formula is working and will continue to propel us through 2025 with total revenue growth expected to accelerate through 2027. The ingredients are clear. We lead with our rise and grow with SAP offerings. On rise, we are signing up hundreds of net new customers every year. On top, we still have more than 11 billion euros of support revenue that we can convert to cloud revenue over the long term. We are rolling out targeted migration incentives and methodologies to accelerate the RISE conversion. At the same time, Grow is gearing up to be a big success with over 700 new customers signing up since our launch. With RISE and Grow becomes the business technology platform. BTP has become a central piece in the architecture of our customers. And our platform as a service solutions now stand at a revenue run rate of 2.5 billion euros with strong double digit growth. The flywheel is just starting to spin as more and more customers and partners move to a clean core on top of BTP. As customers advance on their rise and growth transformation journeys, we also see increasing levels of cross-sell based on the integrated suite. Our top 1,000 customers are now on average using four SAP Cloud solutions, up from three last year. For our top 100 customers, we are at 5 solutions, up from 4 in 2022. Going forward, we will provide transparency on the increasing strengths of our Cloud ERP Suite through our Cloud ERP Suite disclosure. And then there is business AI. Last week, I had the opportunity to meet with many global leaders and key customers and partners at the World Economic Forum in Davos. My conversations all circled around one topic. Generative AI is the greatest opportunity since the rise of the cloud, especially for SAP. I also received very positive feedback on our plans and use cases for business AI. SAP will completely embed AI in our solutions. We will make it readily available for end users and connect it with all business processes. This will tremendously boost the capabilities of our solutions. It will also fundamentally change how users interact with our systems. To reflect the central importance of AI for our future, we have updated our ambition to be the number one enterprise application and business AI company. The transformation program we are announcing today will shift additional resources to business AI in line with the significant growth potential we see for SAP. Over the next two years, SAP will invest almost 1 billion euros to develop powerful AI use cases for our customers. And AI is not our only fast-growing innovation area. SAP Signabio, SAP LeanIX and our sustainability portfolio are all gaining significant traction. Finally, M&A. I already mentioned it. SAP has an integrated portfolio with amazing potential. We don't need to buy growth through acquisitions. But as always, we will keep our eyes open to further complement our portfolio. Let's now look at the bottom line. I have already mentioned that we entered a new phase of our transformation. Building on the significant work we have done in the last few years, we see an opportunity to accelerate profitability beyond our initial ambition for 2025. The levers supporting this accelerated profit growth are the following. A more cloud and adoption-centric go-to-market model with clear roles and responsibilities along the customer value journey. A more focused portfolio concentrating investments on areas that drive major synergies with our core. This allows us to capitalize on the massive market we can address with our cloud ERP suite. a comprehensive infusion of business AI across all functions and processes, and an accelerated workforce transformation to ensure we have the best skills in the right places. It is important to be clear. This workforce transformation will include a restructuring component. We intend to allocate roughly 2 billion euros for this. A decision affecting colleagues this way is never easy. But we truly believe it is the right next step. We are setting up SAP for a strong, competitive future that all stakeholders, including employees, will benefit from. This program is expected to affect 8,000 positions worldwide. We will make every possible effort to focus on reskilling and voluntary exits with the aim to mitigate the social impact of the program. Given the reinvestments into strategic growth areas, we expect to finish 2024 with a headcount similar to current levels. In summary, SAP had a very strong 2023, putting us well on track to achieve our 2025 ambition. On the top line, our growth formula is clearly working, and we are further investing in business AI and other innovation to drive growth. On the bottom line, we see further opportunities to enhance the scalability of our operating model. With that, Dominik, over to you.