SAP SE ADS

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the SAP Q4 2024 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 star followed by one on your touchtone telephone. I would now like to turn the

Good morning, everyone, and welcome. Thank you for joining us. With me today are CEO Christian Klein and CFO Dominic Assam. On this call, we will discuss SAP's fourth quarter and four-year results for 2024. 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 risk and uncertainties that could cause actual results and outcomes to differ materially. Additional information regarding these risk and uncertainties may be found in our findings with the SEC, including but not limited to the risk factor section of our 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 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. Christian, now over to you.

Thank you, Alexandra. And thanks to everyone for joining our earnings call. 63 billion euros, that is SAP's total cloud backlog at the end of 2024. 40% over the previous year, hitting a new record high. Total cloud backlog is just one figure, but it illustrates how far we have come as a company. Four years ago, SEP shares took a hit when we announced our plan to transform the company. The markets had some serious doubts if we could pull it off, but we did it and we delivered on all of our strategic promises. We more than doubled cloud revenue since 2020 and raised it to half of SAP's total revenue today. No major competitor is growing as fast as SAP. And with a total cloud backlog of 63 billion euros and an 83 week growing revenue share, we are on a more resilient growth path than ever. SAP has enormous potential and a bright future. Over the last several years, we have developed a very compelling business suite offering in the cloud to run our customers most mission critical business processes end to end. We also have access to business data that no other tech company has. And with regard to AI, yesterday's tech news provided another strong validation of our strategy. Thanks to our ecosystem approach on the GenAI Hub, we are flexible when it comes to AI infrastructure and large language modules. We benefit from cost reductions and progress in the LLM space because we are truly differentiating an element in AI today. However, it is deep process and industry know-how combined with access to unique, context-rich business data. So value creation is more and more moving up the application layer and to building one semantical data layer. This is exactly what SAP has been focusing on. We have been embedding SAP Business AI deeply in the business process of our customers. The result is that C-suite executives see us as the leading AI company in Europe and among the top five globally. Accurate business data and an understanding of its semantics, those are key ingredients to generate major value and to expand our competitive edge. I will touch on that and an exciting innovation in the data space in just a minute. The financial results for 2024 are another proof point of the successful journey we started. We had the courage to change our business module and four years later, we are winning in the cloud and in AI big time. Becoming the number one enterprise application and business AI company is a huge achievement by Team SAP. It took a lot of effort, dedication and openness for change to get there. A big thank you to our over 100,000 colleagues worldwide. Before we take a closer look at SAP's future, let's review how we ended 2024. Q4 was a very strong finish for the year. Without going into all the details, let me mention three points. Cloud revenue expanded 27% and drove double-digit total revenue growth for the third quarter in a row. Current cloud backlog once again increased 29% on top of an already larger base. And the most exciting thing, about half of our cloud order entry in Q4 were deals that included AI use cases. This shows how successful we are in rolling out business AI innovations to our customers. As for the full year 2024, we achieved all our cloud goals, despite macro headwinds and the ongoing transformation inside SAP. This wasn't easy, but we did it, and we are very proud of that. The customer stories that kept up the year give you a good idea of where SAP is heading. In Q4, more of the world's leading companies decided to embark on their wise journeys. The energy companies BP and TotalEnergies are two great examples. BP chose WISE as the digital backbone for the transformation into an integrated energy company, helping to accelerate digitization, enhance performance and reduce costs. Easy access to technological innovation was another important factor in BP's decision. And Total Energies has been partnering with SAP for over 30 years. WISE will be the starting point for the company's transformation towards new business modules, and it will help to drive efficiency. And from there, we will take our partnership to the next areas. BSF, the world's largest chemical company, is also banking on WISE. Together, we will try process simplification and standardization, and we will enable BSF to take advantage of AI-powered automation and innovation. I could go on and on. So many more global leaders chose Ryzen Q4, including Red Bull, EY, the European truck store chain DiEM, and the automotive suppliers Robert Bosch and Schaeffler. With regard to Grow, we once again celebrated major wins in the IT industry. Databricks, a rapidly growing data and AI company with over 10,000 customers, has selected Grow to modernize its financial systems and support its growth. Databricks will now have a solution that can scale fast in over 60 countries, supports new revenue modules, and provides the company with instant access to business AI. And Outreach, a SaaS company focusing on sales solutions, signed up for growing Q4 as well. Let me say this very clearly. SAP adds hundreds of net new Cloud SME customers every quarter, who go on to celebrate go-lives in months, not in years. End users are delighted about the product experience of the suite and the new innovations coming in every quarter. This is the new SAP. Next to these customer wins, we also saw some major go-lifes. Let me name some big ones. IBM went live with success factors for its over 275,000 employees in over 80 countries. It was one of the largest and most complex deployments of success factors in the history and delivered completely on time. And IBM also went live with SAP Fieldglass and SAP Ariba in NS2 for its federal business, as the first customer to use both solutions in the NS2 cloud. We also had major WiseGo lives in the automotive sector. Those were General Motors and the Germany-based automotive supplier Mahle International. All the examples I gave make it very clear More and more customers appreciate the comprehensive and integrated character of SAP's cloud suite. They start with finance, BTP, and our business transformation portfolio. And from there, they expand to our full suite, to all our line of business solutions, following our rise or grow journeys. For our customers, it is just so easy to adopt more and more of our solutions. The number of customers with over four SAP solutions more than doubled since 2021. Over one fifth of our customers are now part of that group. Lend and expand is clearly working. So we had a really great run. 2024 was another very good year for the company. But we are not stopping here. We are raising the bar for the years to come. We expect accelerated double-digit total revenue growth and an expansion of operating profits through 2027. We can say this with confidence because we have all the right pieces in place. First, product innovation. Overall, we brought over 130 Gen AI use cases to our customers in 2024, over delivering on our plans. And we integrated 1,300 skills in Joule, making it capable of automating 80% of the most used activities of our end users. More than 30,000 customers now use SAP Business AI. Among them, many great brands such as Camperi, Hengel, MercadoLibre, Bt Group, and Standard Chartered Bank, and other big names. For example, ABB, Bayer, and the Swiss retailer Micros signed deals for SAP Business AI in Q4. All this is a very good start, but we are once again doubling down on AI in 2025. We will significantly increase our AI investments with all of our more than 30,000 developers working to enhance our AI foundation and building new use cases. One key ambition is to make every tool user 30% more efficient by the end of 2025. In addition, I can't wait to launch a game-changing innovation very soon that will give us a great boost in the data and AI space. Today, companies spend up to 50% of their IT budget on data and analytics. And despite all of that investment, so many companies fall short of realizing the potential of their data. Too often, data stays locked in silos or is stuck in so-called data swarms without business context. Companies have no complete view of their business that way, and without access to high-quality data, AI agents stay far below their potential as well. According to the principle, garbage in, garbage out. We will address these challenges in the data and AI space with one of the biggest innovations SAP has ever delivered. We will harmonize structured and unstructured data, SAP and non-SAP data, always with the relevant semantics. And by that, we will make AI agents much more powerful. Joule will become the super orchestrator of these agents, carrying out complete tasks autonomously and end-to-end, taking over significant workload from humans. At our Business Unleashed event on February 13, we will talk more about this innovation. It would be our pleasure if you joined the webcast. Let's now move to the second piece, commercial innovation. First, we will make it even simpler for Rise and Grow customers to land and adopt our latest innovation. we will introduce licensing options that allow customers to upgrade and switch easily to our newest cloud solutions across the whole SAP Business Suite, all without additional negotiations. Second, for customers that have landed with SAP, we will enhance strategic migration incentives to expand across our SAP Business Suite. The broader customers go, the more they benefit. Third, we will evolve our Wwise with SAP offering. Our whole business transformation toolkit will be part of the Wwise offering going forward, including LinearX, Signavio, and WarpMe. In addition, we will leverage Shule for Consultant and Shule for Developer for our customers' transitions to cut migration costs. Supported by the enterprise architects, we will accelerate time to value and allow customers to benefit from our full business suite even faster. And now to the third piece, simplification. We are very diligent and committed to making SAP simpler, leaner, and more efficient. By rolling out AI internally, we enable our business to scale quickly while keeping costs in check. To give some details. In development, over 20,000 SAP developers use AI power tools, including Joule for Developer, already today. We are seeing average efficiency gains above 20%. On the go-to-market side, AI-assisted contract validation has reduced our average contract booking time by 75%. And in the corporate functions, we have seen a 20-fold productivity gain through AI-assisted quote-to-cash process automation. Overall, we expect a one-way efficiency effect of our existing AI implementations of roughly 300 million euros already this year. And for the very near future, we expect to cross the half billion mark. In parallel, our transformation towards a better, more resilient, more simple SAP continues. In 2024, we started to merge our seven go-to-market regions into four. We have also consolidated our operations teams, reduced shadow functions, and streamlined the delivery of solutions to customers. And we are putting the right people in place. This morning, we were happy to announce two chief revenue officers co-leading our go-to-market execution and transformation, reporting directly to me. Jan Gilk as Chief Revenue Officer, Americas and Global Business Suite. And Manos Rappopoulos as Chief Revenue Officer, APEC, EMEA and MEE. They will be supported by Stefan de Basle. Stefan joins us from 09, where he was Chief Revenue Officer. He will serve as Business Suite Leader and ensure the success of our suite motion across regions. This combination from in-depth product knowledge to world-class sales experience will allow us to further improve our go-to-market while staying focused on our commercial success. On the R&D side, we are extending the mandate of our chief AI officer, Philipp Herzig, to also head our cross-company innovation efforts as new global CTO, continuing to drive AI innovation for SAP's customers and partners. Also this morning, we announced that the Supervisory Board has appointed Sebastian Steinhäuser as an Executive Board Member, effective February 1, 2025, in the role of Chief Operating Officer. Sebastian oversees the execution of our strategy, as well as the simplification of our internal operations. In addition, the supervisory board extended the executive board contract of Thomas Sauer-Issig for three additional years until 2028. I am very much looking forward to working with this strong and extended team. Let me now summarize. our success over the last four years speak a clear language we are capable turning ambition into reality and we intend to continue that way we are curious about the future and set the bar higher because being the best is never done with this drive and energy we are continuing our profitable growth journey in 2025 and beyond That is our aspiration. This is our promise to you. And with that, I'm handing over to Dominic.