SAP SE ADS

Welcome and thank you for joining the SAP Q1 2024 Financial Results 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 evening, everyone, and welcome. Thank you for joining us. With me today are CEO Christian Klein, CFO Dominique Azam, and Scott Russell, Head of Customer Success. On this call, we will discuss SAP's first quarter 2024 results. You can find the deck supplementing this call, as well as our quarterly statement on our investor relations website. During this call, we will 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 2023. Unless otherwise stated, all numbers on this call are non-IFRS and growth rates and percentage point changes are non-IFRS year-on-year at custom currencies. The non-RFS financial measures we provide should not be considered a substitute for or superior to the measures of financial performance prepared in accordance with RFS. Before we start, I'd like to first remind everyone of the adjustment to our reporting practices announced on December 18th last year. This adjustment, notably incorporating share-based compensation into our non-RFS results, are now fully reflected in our Q1 results. I would also like to call your attention to our upcoming financial analyst 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 with that, I'd like to now turn the call over to Christian.

Yeah, thank you, Anthony. And thanks to everyone on the line for joining our first earnings call for 2024. When we look at SAP's longer-term growth journey, 2024 is the key year. It's the year to scale up revenue and profitability. And I'm so proud to say what we saw in Q1 makes us very confident about our goals. We are off to a strong start and we have laid a solid foundation for 2025 and beyond. Let's look at the key metrics for Q1. Current cloud backlog grew 28% to 14.2 billion euro. This is the fastest growth on record and demonstrates the strong momentum across our portfolio with business AI as an enabling factor with a strong impact already on our Q1 backlog. Cloud revenue increased 25% and reached 3.9 billion euros. Our operating profit came in at 1.5 billion euros in Q1, 19% higher than a year ago. The new disclosure of Cloud ERP Suite creates transparency for you and us. It shows how we are executing on moving our installed base to the cloud and how we are driving SAP's ERP leadership position with our land and expense strategy. The Cloud ERP Suite contains all the modules for a company's core processes, from finance, band management and HR, to supply chain, commerce and our business technology platform, including data and analytics. Together, these modules have the same functional scope as our monolithic on-premise ERP. Our modular and integrated cloud ERP is unmatched in covering the core processes for over 25 industries and 130 countries in the world and represents a $700 billion market opportunity by 2027. In Q1, revenue from the cloud ERP suite was up 32% and reached 3.2 billion euros. We have seen exponential growth in this metric for two consecutive years as we are successfully expanding our footprint in our installed base. The land and expand strategy works beautifully. Every customer right now has to redesign core processes end-to-end to master the business transformation in their industry. And this is only the beginning. The flywheel has just started to spin. I will go deeper into that in a minute. There are many exciting customer stories behind our strong start to the year. In Q1, a range of exciting companies signed up for Rise with SAP. To name just a few examples, the premium chocolate maker Lind & Sprüngli, the global manufacturing company SKF, and the US aerospace company Curtis White. We also saw great customer take up across the portfolio. Maersk, a world leader in container logistics, adopted the BTP as the integration and development platforms spanning across the SAP and non-SAP IT landscape. Our grow with SAP offering was very successful with hundreds of new customers and a 64% share of net new customers in Q1. One of them is the carbon capture startup Climeworks. As for our sustainability solutions, we won another 100 customers in Q1, on top of more than 1,000 we had before. New customers like Ericsson, the global leader in wireless technologies, and Weiland, a leader in energy-saving technologies, chose SAP's Sustainability Control Tower for their regulatory ESG reporting. So in summary, we had a strong start in Q1, and we are happy to confirm our 2024 outlook as well as our 2025 ambition. We are also very confident about the resilience of our growth story beyond 2025, because we have all the right ingredients in place. Our three growth drivers are right with SAP as the leading transformation offering for our installed base. Grow with SAP for net new customers, smaller subsidiaries and acquisitions. And the innovations we delivered and we will release in the upcoming years. Above all, business AI. Let's first look at why with SAP. Our installed base is large with over 11 billion remaining support revenue to be converted to the cloud, typically by a factor of around two to three. On top, the 700 billion cloud ERP market offers significant cross-selling opportunities. And I have no doubt that SAP's integrated best of suite capabilities will win in the core business of our customers. As part of WISE and via the Clean Core journey, SAP and our ecosystem will help our customers to remove their ERP custom code and instead develop integrated ERP extensions on BTP. This gives us an immense additional revenue potential, considering that customers in the on-premise world spend up to 7 euros on custom code for every euro they invest in ERP software. Customers like Hitachi Hitech, for example, reduced the number of custom code add-ons by over 19%. WISE has just become the de facto standard for our installed base. It offers a holistic business process redesign combined with the migration to our modular cloud ERP, resulting in fast time-to-value and being always on the latest release, consuming new innovations without time-intensive ERP upgrades like in the past. Let's have a brief look at Grow with SAP, our second growth driver. As SAP's Greenfield Cloud ERP offering for net new customers or new business units of large enterprises, Grow delivers go-lives in weeks for every business model in every industry in every country. With our ERP solution, SME customers can grow and scale their business without migrating to a new ERP. Ultimately, Rise and Grow offer customers similar advantages. Innovation, modularity, scalability and integration. Coming to the third driver of our growth, which is innovation with Business AI at the core. SAP Business AI will once again transform how businesses run and how end users will work in the future. At SAP, we infuse business AI across our portfolio. First of all, CHOOL will be our new user experience via natural language, our one front end. We have based our CHOOL roadmap on an analysis of the most frequent business and analytical transactions of our end users. This way, we make sure that the most heavily used transactions will be fully AI enabled by the end of this year. Second, we are embedding Gen AI directly in our cloud products. Since Q4, we have released over 30 new AI scenarios across our cloud portfolio. Additional ones come out almost every week, with more than 100 in the pipeline for the remainder of the year. Third, our customers, partners, and SAP can use the AI Foundation on the BTP, including the GenAI Hub, to build custom AI scenarios. Over 60 ecosystem partners are taking advantage of these capabilities already and working on over 80 use cases right now. Among the over 27,000 customers already using our business AI is ZF Friedrichshafen, a leading automotive supplier. ZF is lifting significant financial value by optimizing demand and supply chain planning with embedded AI. Together with our partner NVIDIA, we are currently building new GenAI capabilities. One use case will revolutionize how software will be developed in the future. Jensen and I are looking forward to telling you more about this partnership at Zephyr. Commercially, customers can buy SAP Business AI as consumption-based AI units which can be used across the entire portfolio or via our premium rise and grow offerings that include AI units so customers can get started right away. Both commercial offers have already seen high demand and many Q1 deals were influenced by SAP Business AI. Overall, we offer a unique value proposition versus the competition with three elements. SAP Business AI works out of the box. For their own GenAI-enabled extensions, customers and partners have full choice which leading model they want to use, including modules from OpenAI, Google, the best open source alternatives, or using their own modules. And SAP Business AI comes with our leading enterprise standards and is deeply integrated with our data and security module. In summary, we had a strong start to 2024 and we are confident we will achieve our goals for the year. Looking ahead, we have powerful growth drivers in place and many innovations in our R&D pipeline. The strong development of our cloud backlog is a testament to that momentum. With regard to our transformation program, we are making even better progress than expected, especially with hiring new talent for future-oriented areas such as AI. The program will help us to capture growth and increase efficiency at the same time, among other things by pushing the internal use of AI. We expect a triple-digit million amount in efficiencies from embedding AI across all our processes. Equally important for us as an employer, wherever SAP colleagues are affected by restructuring, we are moving with care and empathy, always aware of our social responsibility. And with that, I'm handing over to you, Dominik.