Full Year 2021 SAP SE Earnings Press Conference

January 27, 2022

Good morning.

Okay.

[music].

Oliver Roll: Good morning, good afternoon, and good evening. Hello, everyone. I am Oliver Roll, SAP's Chief Communications Officer, and we're so happy that you've joined us today for our press conference. I know that you're in different parts of the world. Some of you have got up early, some of you are staying up late. For some of you, it's the middle of the day. Many of you have joined us for many years in a row. This is the second time that we're virtual, and we really do hope that a year from now we'll have some of you back here in Walldorf, as you've been coming for many years previously. In a moment, we're gonna introduce Christian Klein, our CEO, and Luka Mucic, our CFO.

Good morning, good afternoon, and good evening, Hello, everyone I am all have a role.

<unk> Chief Communications Officer, and we're so happy that you've joined US today for our press conference.

I know that you are in different parts of the world. Some of you who got up early some of you are staying up late for somebody that's the middle of the day.

But many of you who have joined us for many years in a row. This is the second time that with virtual and we really really really do hope that a year from.

From now we will have some of your back carrying volatile as.

As <unk> been coming for many years previously.

In a moment, we're going to introduce Christian Klein.

And Luca <unk> our CS.

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Oliver Roll: Obviously, today we announced our earnings for Q4 and also the full year. We also announced an intended acquisition of Taulia. After Luka and Christian have made their comments, we'll be opening up to you for questions. If I could just say a couple of things about the session. The session is being recorded. Secondly, all growth figures that we mention are non-IFRS at constant currency. You have access to a question tool. You can ask and pose a question at any time. If you do have a question, we'd really appreciate it if you could write your name and also the title that you represent, and also please ask your question in English. We will be prioritizing those questions that include those details. With that, let me hand over to Christian Klein, SAP's CEO.

So today, we announced our earnings for Q4 and also the full year.

We also announced an intended acquisition of Talia.

After Luka Christian have made their comments will be opening up to you for questions.

I could just say a couple of things about the session. The session is being recorded secondly, all growth figures that we mentioned are non FRS at constant currency.

You have access to a question tool you can ask can pose a question at any time.

If you do have a question we'd really appreciate it if you could write your name and also the title that you represent.

Please ask your question in English.

And we will be prioritizing those questions with include those details so with that let me hand over to Christian Klein Sap's CEO Christian welcome.

Oliver Roll: Christian, welcome.

Christian Klein: Yeah. Thank you, Oliver, and thanks to all of you for joining us today for our press conference. Again, virtual. Let's hope for all of us that 2022 is the year where we can come back to meet and see each other in person. Exactly one year ago in this press conference, we talked about three main points. Our new strategy, our new RISE with SAP offering, and the new executive board composition. Today, I can say what a difference a year can make. SAP accelerated significantly the growth in the cloud far above expectations. RISE with SAP is in the meantime, a blockbuster success, and I'm really happy about the strong mindset and teamwork within the SAP executive board and across SAP. Let me start with the financial results, as these numbers tell the story best.

Thank you Oliver.

Thanks to all of you for joining today to our platform fluent again virtual <unk>.

Let's hope for all of us at 'twenty to 'twenty two is the year, where we can come back to meet and see each other input.

Exactly one year ago. This plus confluence we've talked about three main points.

<unk> strategy when.

When your wife with STP offering and the new Executive Board compensation.

Today, I can say, while the difference a year can make.

PSL weighted significantly to growth in the cloud far above expectations.

With S&P is in the meantime, the blockbuster success and I'm really happy about the strong mindset and teamwork within the S&P executive board and across the S&P.

Let me start with the financial results as these numbers tell the story with us.

Christian Klein: Just a year ago, we changed our strategy and as a consequence, our financial guide, with a strong focus on cloud growth. Here we go. Current cloud backlog of nearly EUR 9.5 billion, a strong indicator for future revenue growth, increased by 4 percentage points to 26% in only three months, representing an increase of 12 percentage points year over year. Our cloud revenue increased by 24% year over year. Just to remind everyone, both cloud metrics are already now ahead of our midterm growth objective of 22%. One thing for sure, SAP will further accelerate cloud growth in 2022. Last but not least, S/4HANA Cloud revenue increased by 61% year over year in Q4. There is no other cloud ERP growing with a similar pace, not even close, and we are gaining massive market share.

Just a year ago, we changed our strategy and as a consequence, our financial Guy with a strong focus on cloud and here we go.

Current cloud backlog of nearly $9 5 billion.

Strong indicator for future revenue growth increased by four percentage points to 26% in only three months, we presenting an increase of 12 percentage points year over year.

Our cloud revenue increased by 24% year over year.

Just to remind everyone.

Both cloud metrics are already now ahead of our midterm objective of 22%.

One thing for sure.

One further accelerate cloud flows in 2022.

And last but not least.

As for Hana cloud revenue increased by 61% year over year in Q4.

There is no other cloud ERP growing with a similar pace not even close and we are gaining massive market share.

Christian Klein: Finally, every single cloud product delivered double-digit growth in Q4. Our revenue run rate for the modular cloud ERP now approaches EUR 7 billion, up from EUR 6 billion at the beginning of the year. As you can see on this slide, in Q4 again, many large enterprises across the world decided to transform their business with SAP. Customers like Siemens, Enel, Fresenius are adapting to new business models with our technology to accelerate growth. As another example, Schneider Electric is moving ahead with SAP to transform their manufacturing supply chain business with S/4HANA Cloud and our IoT enabled supply chain portfolio. IBM is in the middle of a transformation with Diversey while launching new areas for future growth. Again, this change is enabled by S/4HANA Cloud. Many other large flagship customers from all kinds of industries selected SAP in Q4 to manage their transformation.

Finally, our single cloud product deliver double digit growth in Q4.

So when you want to wait for the modular cloud ERP now approaching $7 billion.

Up from 6 billion at the beginning of the year.

As you can see on this slide in Q4 again, many large enterprises across the world decided to transform their business.

Customers like Siemens and now Athene youth adapting.

Stepping to new business model.

Our technology to accelerate flows.

That's another example, Schneider electric is moving ahead with S&P to transform their manufacturing supply chain business with Epsilon are cloud and our Iot enabled supply chain performance.

IBM is in the middle of a transformation with divestitures, while launching new areas for future growth again. This change is enabled by a fall in Atlanta.

Many other large flagship customers from all kinds of industries selected S&P in Q4, two managed transformation.

Christian Klein: What do all of these customers have in common? In order to be competitive, they need more than just a technical migration to the cloud. The hardest part in a transformation is not just to implement new technology. It is actually to change long-standing business models and drive business process standardization. All these customers discovered RISE as a unique offering, which allows them to perform a holistic business transformation. RISE is a journey where SAP gets even closer to our customers to deliver on three key benefits. First, business process redesign. Here we continuously analyze and benchmark the business processes against best practices from over 400,000 customers. As a consequence, these insights set our customers up to adapt to new digital business models and drive process automation. Second, it's about a cloud migration.

So.

What do all of these customers have in common.

In order to be competitive they need more than just a technical migration to the cloud.

Harvest pump in a transformation, it's not just to implement new technology.

It is actually to change long standing business models and drive business closed to send notices.

So all of these customers discovered wise.

The unique offering which allows them to perform and holistic business transformation.

Why is this attorney.

The S&P get even closer to our customer to deliver on three key benefits first.

Business poses redesign.

We continuously analyze and benchmark the business processes against Spect best practices.

From over 400000 customers.

And as a consequence, these insights that our customers to adapt to new digital business model and process automation.

Second.

It's about the cloud migration.

Christian Klein: Our ambition with RISE is not just a technical move of the existing landscape. Let's get rid of the complexity in the existing landscape, the modifications, and move to a modular and integrated ERP in the public cloud. Let's make sure the customer can consume future upgrades to new releases at a much faster pace. Third, it's about innovation. We help the customer to connect and consume new innovations from SAP for their industry. We enable them to build resilient supply chains in our business network. Why does SAP see this strong growth momentum? Why is actually our portfolio more relevant than ever? Actually, because our over 30,000 engineers at SAP are focused to deliver innovation to solve the biggest challenges of our customers. First, it's about a business model transformation, as I just mentioned.

Our ambition with wise.

Just a technical move off the existing landscape.

Let's get rid of the complexity and the existing landscape the modifications and move to a modular and integrated ERP in the public cloud.

Let's make sure the customer can consume future upgrades to new releases at a much faster pace.

Third it's about innovation.

Help the customer to connect and consume new innovations from S&P.

For the industry.

We enable them to build a resilient supply chain and our business network.

So.

Why is that PC this phone calls from women.

Why is actually our portfolio more element.

Actually because our over 30000 engineers at S&P.

Focus to deliver innovation to solve the biggest challenges of our customers.

First it's about the business model transformation that that just meant no matter if it's in retail our customers move with our solutions to personalized offering to resilient supply chain no matter if it's in utility.

Christian Klein: No matter if it's in retail, our customers move with our solutions to personalized offerings, to resilient supply chain. No matter if it's in utility, where Enel and others are focusing now on green energy. They need software, they need technology to drive this adoption to this change in their business. If it's about the chemical industry, which we are enabling to drive sustainability going forward. Second, 2021 was a year of many supply chain shocks, many supply chain disruptions. Actually the outlook is that also in 2022, a lot of raw materials will be short. We saw a huge surge in the last year and in the years to come in our SAP Business Network that more and more suppliers, manufacturers, logistics providers are joining the world's largest business network.

And now and others are focusing now on clean energy.

And they need software they need technology to drive this adoption.

This change in that business or if its about the chemical industry, which we are enabling to drive sustainability going forward.

Second.

2021 was a year of many supply chain shocks many supply chain disruptions and actually the outlook is that also in 2022, a lot of raw materials will be sold.

We saw a huge surge in the last year and in the years to come and our SVP business network that more and more supply of manufacturer logistic provider shining the world's largest business network.

Christian Klein: We have with Catena-X the perfect example to see how it can work to really provide this real-time transparency across the supply chain, from the car manufacturer down to the raw material provider to track and trace real-time the supply chain. Last but not least, it's about sustainability. What is unique to SAP, and I will come later to that, is that we are making sustainability transparent. We are measuring, for example, the carbon in the supply chain, in the manufacturing, not only within an enterprise, but we are really, you know, targeting to measure the carbon across, again, the whole supply chain. To wrap it up, we enable our customers with RISE to transform into intelligent networks and sustainable enterprise.

And we have with <unk>. The perfect example to see how it can work to really provide this real time for transparency across the supply chain, Colombia comment effectual down to the raw material provider to track and trace real time.

Light chain.

And last but not least it's about sustainability.

And what is unique to us the P&L will come later to that is that we are making sustainability transparency.

We are measuring for example to come in the supply chain and the manufacturing not only within an enterprise, but we are really targeting to mash other comp across again the whole supply chain.

To wrap it up.

We enable our customers with lots of transform into intelligent network and sustainable and apply there.

Christian Klein: We are convinced a strong top and bottom line performance is no reason why an enterprise can also not deliver a strong green line performance. Besides, we have a very strong focus on innovation. We are always looking to enhance our portfolio to drive even better outcomes for our customers. This week, we released two big announcements. First, this morning, we announced our intent to acquire Taulia, a market-leading fintech company focused on working capital management, and supply chain finance. Taulia will be actually a great addition to our business network and procurement portfolio. Why? These SAP solutions generate billions of transactions. With Taulia, we will enable our customers to finance these transactions and improve significantly their cash flow. Not to forget, earlier this week, we also announced an investment, an enhanced partnership with Icertis, a leading provider for intelligent contract management solutions.

We are convinced.

Our strong top and bottom line performance is no reason why an enterprise can also not deliver a strong green line platform.

Besides.

Very strong organic innovation, we are always looking to enhance our portfolio to drive even better outcomes for our customers.

This week.

We released two big announcements.

First this morning, our intent to acquire <unk>.

Market, leading Fintech company focus on working capital management and supply chain.

Tal you will be actually equate additions to our business network and procurement portfolio why.

These people generate billions of transactions and.

And we've talked here, we will enable our customers to finance these transactions and improved significantly their cash flow.

Not to forget earlier this week, we also announced an investment in an enhanced partnership with us.

A leading provider of intelligent contract management solution.

Christian Klein: Again, Icertis is a great and seamless complement to our portfolio, as Icertis has multiple platforms to SAP systems in the ERP, in procurement, in sales, and HR. One of the most important indicators for the success of our transformation is actually the success of our customers. Again, as you can see on the slide, customer satisfaction is up by six percentage points in 2021. It hit an all-time high in the most recent survey. Rest assured, we are not leaving one single customer behind in the pandemic. We care, especially in the crisis. For example, we also didn't increase the support fees during the pandemic. For me, very important, we're also keeping our promise. We said we are focusing on inorganic innovation, and we deliver.

Again.

And third as equate and seamless complement to our portfolio.

As I said it has multiple touch points to S&P systems in the ERP in procurement in savings and Asia.

One of the most input important indicators for the success of our transformation is actually the success of our customers.

And again, you can see on the slide customer satisfaction is up by six percentage points in 2021.

So it hit all time high the most recent survey.

And rest.

And sure we are not leaving one thing the customer behind independently.

Especially in devices. For example, we also didn't increase the support fees during the pandemic and for me rather important we're also keeping our opponents.

Is that we are focusing on in organic innovation and we deliver.

Christian Klein: Delivered, for example, 73 new solutions as part of the industry cloud, tightly integrated into the core of SAP. We launched RISE with SAP. Finally, we also increased the transactions in the business network, and, as well, the participants. Second, we kept our promise on integration. Only in 2021, we delivered about 400 new integration scenarios for total workforce management, for procure-to-pay, for lead-to-cash. Our business technology platform, in the meantime, serves for our customers and partners as a foundation where they can find one harmonized domain model for all of SAP, but also for all apps in our ecosystem. We also harmonize the security layer again across our portfolio. Third, we, of course, also continuing with our own transformation. We revamped our incentives to focus even more on customer satisfaction, time to value, and renew.

Deliver for example, 73, new solutions as part of the industry cloud tightly integrated into the core of S&P.

On slides with SAP.

And finally, we also increased the transactions in the business network NFL anticipates.

<unk>.

We kept our promise on integration.

In 2021, we delivered about 400, new integration scenarios.

For total workforce management procure to pay for a lead to cash.

Our business technology platform in the meantime.

First of all our customers and partners as a foundation, where they can find one harmonized domain model for all of S&P, but also for all apps in our ecosystem and we also harmonize the security layer again across our portfolio and third.

We're also continuing with our own transformation.

We revamped our incentives to focus even more on customer satisfaction time to value and the new.

Christian Klein: We, of course, also focusing on attracting and retaining the top talents for SAP. We did multiple efforts with regard to university engagement. We actually invested heavily in continuous learning and also for training programs within SAP. One topic is really near to my heart, and it also is reflected in the vision of SAP, help the world run better and improve people's lives. Motivated by our role to help the world run better and improving people's lives, climate change is actually an imperative for businesses today. As I mentioned earlier, SAP has its own very ambitious sustainability objectives, but we go one step ahead. We actually wanna enable our customers to become more sustainable enterprises. Just recently, we launched SAP Cloud for Sustainable Enterprises. What do we do there? Today, 9 out of 10 warehouses, supply chain manufacturing is won by SAP.

And we of course also focusing on attracting and retaining top talent to Asap.

We did multiple assets with regard to a university engagement, we actually invested heavily in continuous learning and also for training programs within SAP.

One topic is really near to my heart.

And as also as reflected in the vision of S&P.

<unk> had and improve People's lives.

Modern multi weighted by our all to help the world, one better and improving People's lives.

Climate change is actually an imperative for businesses today.

And as I mentioned earlier.

<unk> has its own very ambitious sustainability objectives.

We go one step ahead, we actually want to enable our customers.

To become more sustainable enterprise.

Just recently, we launched S&P cloud for sustainable enterprises, what do we do that.

Today nine out of 10 warehouses supply chain manufacturing, it's one by Asap.

Christian Klein: Past 50 years, we managed productivity. We gave transparency about the cost of goods sold. Now, we expanded our data model to measure ESG to really give our customers the transparency to act on sustainability. On top, we also launched more solutions, for example, in the procurement area to move into the circular economy so that you can make conscious decisions around, you know, which supplier is the best from a cost, from quality, but also from a sustainability perspective. At the end, I don't want to miss the opportunity to thank our over 100,000 employees. They did an excellent job in 2021 to keep our over 400,000 customers and partners running and innovating at a faster pace than ever before. 2021 was a record year for SAP, and this is just the beginning.

Our 50 year managed productivity gave transparency.

Cost of goods sold.

Now we expanded our data model to Mercer match, our ESG.

To really give our customers the transparency to act on sustainability on top we also launched more solutions for example in the procurement area to move into the circle. Our economy. So that you can make conscious decisions around.

Which supply is the best form of cost from quality, but also almost sustainability perspective.

At the end.

Don't want to Miss the opportunity to thank our over 100000 I believe they did an excellent shop in 2021 to keep our over 400000 customers and partners wanting and innovating at a faster pace than ever before.

2021 worth of Wako, TFA S&P and this is just the beginning.

Christian Klein: We are very confident about the future and our long-term ambition. We are clearly ahead of our plan. Now I would like to hand over to Luka. Luka?

Why are we confident about the future and our long term ambition. We are clearly ahead of our plan.

Now I would like to hand over to Luka Luka.

Luka Mucic: Yeah. Thank you very much, Christian, and also from my side, hello, everybody, and a happy and healthy New Year, 2022, to everyone. Yeah, let me start by saying that I'm likewise, very proud of what we have achieved in 2021. First of all, we have proven out that our revised strategy works and that it drives sustainable growth for the company. Very importantly for me as well from a CFO perspective, we kept our promise. We have raised our guidance both for the combined top line of cloud and software revenues, as well as for operating profit, multiple times during the year. We did actually the same on the cloud revenue front. We actually beat this guidance and came in at the very high end for cloud revenues, nevertheless.

Yes. Thank you very much John and also from ISI Hello, everybody in the happy and healthy new year 2022 to everyone.

Yeah, let me start by saying that I'm. Likewise, so very proud of what we have achieved in 2021 first of all we have proven out that our revised strategy works and that would drive sustainable growth for the company.

And very importantly for me as well from a CFO perspective, we kept our promise.

We have raised our guidance both for the combined top line of cloud and software revenues as well as for operating profit multiple times during the year.

We did actually the same on the cloud revenue front and we actually beat this guidance and came in at the very high end for cloud revenues.

The list.

Luka Mucic: As Christian has said, I want to just amplify the point that RISE with SAP was really a stellar success and contributed greatly to those results, not only through the fact that we saw an adoption by more than 1,300 customers, which is significantly ahead of the expectation for around 1,000 customers that we had at the beginning of the year. More importantly, because we are seeing now more and more of the largest of our customers adopting the offering. You can see this actually in the fact that the share of large cloud orders above the EUR 5 million mark, as a percentage of our total cloud order entry, moved up significantly to close to 50% in Q4 last year versus just 31% in Q4 2020.

As Christiana said.

I want to just amplify the point that rise with S&P was really a stellar success and contributed greatly to those results not only through the effect that we saw.

And adoption by more than 1300 customers, So which is significantly ahead of the expectation for around about 1000 customers that we had at the beginning of the year, but more importantly, because we are seeing now more and more of the largest of our customers adopting the offering you can see this actually in the fact that the share of.

Large cloud orders above the 5 million Mark as a percentage of our total cloud order entry moved up significantly to close to 50% in Q4 last year versus.

<unk>, 31% in Q4 2020, so the likes of Cvs and IBM in the U S. <unk> Siemens Allianz in Germany, Panasonic and standard chartered Bank in Asia.

Luka Mucic: The likes of CVS and IBM in the US, Fresenius, Siemens, Allianz in Germany, Panasonic and Standard Chartered Bank in Asia, are just examples for what we are beginning to see, and we will further expand on this, for sure in 2022. Now, Christian has also already covered broadly the cloud momentum that we're seeing. I just want to give you as an additional data point in reference the fact that our SaaS PaaS cloud revenue outside our Intelligent Spend Group actually grew by 33% in Q4 2021, which is hardly matched by any other scaled cloud vendor that you see out there in the market. All major solutions, as Christian said, including actually our Intelligent Spend Group, grew in double digits in Q4.

Examples look for what we are beginning to see and we will further expand on this for sure in 2022 hour. Christiane is also already cover broadly the cloud momentum that we're seeing I just wanted to give you as an additional data point in reference the fact that our source Pos cloud revenue outside our Intel.

<unk> spend group actually grew by 33% in Q4, 2021, which is hardly matched by any other scaled cloud window that you see out there in the market all the major solutions as Kristian said, including actually our intelligent spend group grew in double digits in Q4.

Luka Mucic: I'm also glad to see that the performance that we had across the board was very healthy and very consistent across all of our regions, all of our major geographies. The momentum build up that we have seen in increasing growth rates through the different quarters was actually shared by all of our major geographies. Let me spend a few words on our bottom line performance, because I know that this is a point that is very carefully eyed by the media and the capital markets. First of all, our total gross margin at the company level was actually up a very nice 70 basis points to 74%. We had improvements in our software and support, as well as in our services margin.

I am also glad to see that the performance that we had across the board was very healthy and very consistent across all of our regions all of our major geographies and the momentum built up that we have seen an increasing growth rates through the different quarters was actually shared by.

All of our major geographies.

Let me spend a few words on our bottom line performance because I know that this is a point that is very carefully.

By the media and the capital markets.

First of all.

Our total gross margin at the company level was actually up a very nice 70 basis points to 74%.

Improvements in our software and support as well as in our services margin.

Luka Mucic: Conversely, our cloud gross margin was slightly down in 2021, due to significant investments that we are doing in our next generation cloud delivery harmonization program, and also due to the fact that our high margin cloud business in Concur was still dampened through the pandemic conditions for the bigger part of 2021. That being said, the investments we are taking as part of the next generation cloud delivery harmonization program are setting us up to, as of 2023, strive for a significantly higher cloud margin, which will also propel the contribution of our cloud business to our profits. This is an investment that is more than worthwhile to make.

Firstly, our cloud gross margin was slightly down in 2021 due to significant investments that we're doing in our next generation cloud delivery harmonization program and also due to the fact that our high margin cloud business conquer we'll still dampened through the pandemic conditions for.

The.

We got part of 2021 that being said the investments that we are taking as part of the next generation cloud delivery harmonization program are setting us up to as of 2023 drive significantly higher cloud cloud margin, which will also propelled the contribution of our cloud business to a profit.

So this is an investment that is more than worthwhile to make on the <unk> front, our profits and margins down.

Luka Mucic: On the IFRS front, our profits and margins were down due to the impact of share-based compensation, in particular, from the Qualtrics IPO, and also the increase of the SAP share price during the year. However, on the non-IFRS front, we actually beat our guidance and showed positive growth, 1% growth in operating profit. That was ahead of the outlook for 2021 and 2022 that we gave when we released our refreshed strategy of flat to slightly declining profits. We are ahead of our plan.

To the impact of share based compensation in particular from the <unk> IPO and also the increase of the SAP share price during the year. However on a non Io for US front, we actually beat our guidance and showed positive growth 1% growth in operating profit that was ahead of.

The outlook for 2021, and 2022 that we gave when we released our refreshed strategy of flat to slightly declining profits. So we are ahead of our plan and still despite of that as you will see when would cover the outlook for 2022, we actually confirming on that higher basis, the flat to slightly up.

Luka Mucic: Still despite of that, as you will see when we cover the outlook for 2022, we're actually confirming on that higher basis, the flat to slightly declining profit expectation for 2022. Let me come quickly to the true bottom line, to our earnings per share performance, which was really decent, in 2021. We saw a 3% increase in our IFRS EPS and a significant 25% increase in our non-IFRS earnings per share. That was supported by a strong performance of our Sapphire Ventures venture capital fund, all the way through 2021, as well as a reduced tax rate. We also had a strong performance, on the cash flow side. It was actually the second best performance on record, after 2020, which was outstanding in all respects.

Declining profit expectations for 2022.

Let me come quickly to the true bottom line to our earnings per share performance, which was really decent in 2021, and we saw 3% increase in our <unk> EPS and a significant 25% increase in our non Io for us earnings per share that was supported by a strong performance of our sapphire.

Entrust venture capital funds, all the way through 2021 as well as a reduced tax rate. We also had a strong performance on the cash flow side. It was actually the second best performance on record.

After 2020, which was outstanding in all respects.

Luka Mucic: We came in ahead of our guidance for 2021, which was for free cash flow to land above EUR 4.5 billion. We ended up with slightly more than EUR 5 billion. Our guidance for 2022 is the same, to land above EUR 4.5 billion. If we again end up at the high end of our operating profit guidance, that is absolutely in reach as well. Let me with that come to the forward-looking view of the world, which is I think even more important than taking a look at the achievements of the past, and cover our business outlook for 2022. As Christian has said, we are extremely confident in our short-term prospects.

We came in ahead of our guidance for 2021, which was for free cash flow to land above $4 5 billion. We ended up with slightly more than $5 billion. Our guidance for 2022 is the same to land above $4 5 billion euros and if we again end up at the <unk>.

And of our operating profit guidance that is absolutely in reach as well so let me with that come to the.

Forward looking view of the World, which is I think even more important than taking a look at the achievements of the past.

Cover our business outlook for 2020 as Christiana said, we are extremely confident in our short term prospects.

Luka Mucic: On the back of a very significant surge in current cloud backlog to 26% growth in Q4, we believe that we will sustain these growth rates through 2022. As a result of this, we also are absolutely confident that our cloud revenue growth will continue to accelerate. At the high end our cloud revenue guidance calls for up to 26% growth in 2022. In 2022, we are at an inflection point as we believe that we have scope to accelerate our cloud growth even beyond 2022.

On the back of a very significant search and current cloud backlog to 26% growth in Q4, we believe that we will sustain these growth rates through 2022.

And as a result of this.

Also are absolutely confident that our cloud revenue growth will continue to accelerate at the high end, our cloud revenue guidance calls for up to 26% growth in 2022.

In 2022, we are at an inflection point as we believe that we have scope to accelerate our cloud growth even beyond 2022 and at the same time, we are now seeing the advent of the decisive turning point of our strategy transformation.

Luka Mucic: At the same time, we are now seeing the advent of the decisive turning point of our strategy transformation that we had outlined over 1 year ago, and that is that as of 2023, the surge in cloud growth, as well as the success of our overarching transformation, will actually lead us to double-digit growth. First for operating profit and then closely followed by total revenue growth in the double digits as well. Again, we expect a further acceleration on those metrics beyond 2023. At the same time, our total business portfolio will become way more resilient because we will drive for a highly predictable revenue share of 85% of our total revenues by 2025.

That we had outlined one year ago and that is that as of 2023.

The surge in cloud growth as well as the success of our overarching transformation will actually lead us to double digit growth.

First for operating profit and then closely followed by total revenue growth in the double digits as well and again, we expect a further acceleration.

Those metrics beyond 2023 at the same time, our total business portfolio will become way more resilient, because we will drive for <unk>.

Highly predictable revenue share of 85% of our total revenues by 2025 that means more than $30 billion of our revenues will be highly predictable sticky recurring revenue sources with a very high gross margin as I showed at.

Luka Mucic: That means more than EUR 30 billion of our revenues will be highly predictable, sticky, recurring revenue sources with a very high gross margin, as I should add. Let me talk a little bit about why we are so confident in our momentum and why we believe that our business transformation is extremely powerful and will yield far higher returns for all of our stakeholders as we progress further. First of all, it's important to note that in 2021, we actually drove for a significantly higher total cloud order entry, meaning for multiple year contracts, a much higher share of contracts with a ramp, in many cases, a significant ramp in later years.

So let me talk a little bit about why we are so confident in our momentum and why we believe that our business transformation is extremely powerful and will yield far higher returns for all of our stakeholders as we progress further first of all it's.

To note.

In 2021, we actually drove four are significantly higher.

Total cloud order entry.

Meaning for multiple year contracts.

Much higher share of contracts with the ramp in many cases, a significant ramp in later years youre not seeing this in our annualized values and you're also not seeing it therefore fully in our current cloud backlog, but it is there we know that it will fuel the backlog in 2022 and also in late.

Luka Mucic: You are not seeing this in our annualized values, and you're also not seeing it therefore fully in our current cloud backlog. It is there. We know that it will fuel the backlog in 2022 and also in later years. This means two very important, fundamentally significant things. First of all, we have a greatly increased visibility in our performance, which makes us so confident to guide for the significant surge in cloud revenues for 2022. We actually also have now a much better line of sight into our midterm ambitions.

Yes. This means two very important fundamentally significant things.

First of all.

We have greatly increased visibility in our performance, which makes us so confident to guide for the significant surge in cloud revenues for 2022, and we actually also have now a much better line of sight into our midterm ambitions and second lien.

Luka Mucic: Secondly, we don't have to drive only for net new business to further propel our backlog and our cloud revenues up because the share of already existing contracts that are contributing to revenues is increasing, and is already fueled by the significantly higher total cloud order entry growth. As a result of that, we are so confident about the acceleration of our business, even defying the otherwise applicable law of reducing growth rates over time. The other important point that is connected to this closely is that in 2023, our next generation cloud delivery harmonization program will have run its course. Not only will we not have the related project costs anymore, which by the way in 2021 have affected the cloud margin by close to 1 percentage point.

We don't have to drive.

Only four net new business to further propel our backlog and our cloud revenue was up because the share of already existing contracts that are contributing to revenues is increasing and is already fueled by this significantly higher total cloud order entry growth.

As a result of that.

We are so confident about the acceleration of our business, even defying the otherwise applicable law of reducing growth rates over time.

The other important point that is connected to this closely is that in 2023.

Our next generation cloud delivery harmonization program will have run its course.

Not only will we not have two related project costs.

<unk>, which by the way in 2021 have affected the cloud margin by close to one percentage point, but on top of it we will have a much more resilient and much more efficiently and at elastic and harmonized cloud infrastructure that will allow us to drive for significantly higher gross margins in the cloud business one of the key.

Luka Mucic: On top of it, we will have a much more resilient and much more efficient and elastic, and harmonized cloud infrastructure that will allow us to drive for significantly higher gross margins in the cloud. This is one of the key sources of the return to double-digit growth, and actually accelerating double-digit growth because the cloud business is becoming a more and more bigger part of our overarching business. Second, the share of our sales expenses relative to revenues will also start to trend down, in particular for the years after 2023, because again, an increasing part of our cloud revenues will be from existing contracts, for which we don't have a similar amount of sales related expenses in our customer success organization, as for net new contracts.

Key sources of the returned to double digit growth and actually accelerating double digit growth because the cloud business is becoming a more and more bigger part of our overarching business.

Second.

Share of our sales expenses relative to revenues will also start to trend down in particular for the years after 2023 because again.

Creasing part of our cloud revenues will be from existing contracts.

Which we don't have a similar.

<unk> of sales related expenses in our customer success organization.

For net new contracts.

Luka Mucic: There is a lot to be excited about in terms of our midterm prospects. Of course, as Christian has said, results on the top line and the bottom line are not everything. We also continue to care about our sustainability performance. We have always been a leader in this space, and we are very much looking forward to sharing our performance in our tenth integrated report already on 3 March. Just one case in point, we continue to drive down our own carbon emissions, and we are well on plan to become carbon neutral operations in our own operations by 2023.

So there is a lot to be excited about in terms of our midterm prospects.

Of course as Christiane is set.

Resides on the topline and Bottomline or not everything we also continued to care about our sustainability performance. We have always been a leader in this space and we are very much looking forward to sharing our performance in our integrated report already on March the third.

One case in point, we continue to drive down our own carbon emissions and we're well on plan to come to carbon neutral operations and our own.

<unk> by 2023, Christiane has already talked about our commitment actually go even further and drive for net zero emissions across our entire value chain 20 years earlier than originally.

Luka Mucic: Christian has already talked about our commitment to actually go even further and drive for net zero emissions across our entire value chain 20 years earlier than already planned before. Let me conclude, 2021 was a year of great execution against our strategy. Our cloud order entry was extremely strong. Our renewal rates, the health of our cloud business has improved greatly, and we are extremely confident that we will continue to keep the promises, including very importantly in SAP's fiftieth year, which is starting now in 2022. This confidence is reflected in our accelerated cloud guidance for 2022, and we have seen great progress towards our midterm ambition.

Already planned before so let me conclude 2021 was a year of great execution against our strategy.

Our cloud order entry was extremely strong.

Renewal rates on the health of our cloud business has improved greatly and we are extremely confident that we will continue to keep the promises including very importantly in Sap's 50, a year, which is <unk>.

Starting now in 2022.

This confidence is reflected in our accelerated cloud guidance for 2022, and we have seen great progress towards our midterm ambition.

Luka Mucic: We are ever more confident that we will meet or exceed it, and we will continue to update all of you on that progress as we move through 2022, and really consider the future bright for SAP. Thank you. With that, back to you, Oliver.

Our ever more confident that we will meet or exceed it.

And we will continue to update all of you on that progress as we move through 2022.

And really consider future bright for us.

Thank you and with that back to you Oliver.

Oliver Roll: Thank you, Christian. Thank you, Luka, for your comments. It's now over to anyone that has a question. As we mentioned earlier, the tool is open. You're free to ask a question at any time, and we'd be very grateful if you could write your name, who you write for, and who you represent. There were a couple of questions that came in just in reference to Taulia that I'd love to just get both of you to take. The essence of the question is, you've got big news today with the acquisition of Taulia. We announced an investment in Icertis earlier this week. Why don't I start with you, Christian, but I'd love you to touch on it too, Luka. What is SAP's acquisition strategy overall?

Thank you Christian Thank you Luca for your comments, it's now over to anyone.

Has a question as we mentioned earlier.

The tool is open you're free to ask a question at any time and we'd be very grateful. If you could write your name and also who you write for and who you represent.

There were a couple of questions.

And just in reference to Talia that I'd love to just get both of you to take.

So the essence of the question is so you Big news today with the acquisition of Talia.

So the investment in I surface earlier this week.

I'll start with you Christian but I'd love you to touch on that to know what is.

These acquisitions strategy overall.

Christian Klein: Yeah. Let me start first and then, Luka, please build on it. I mean, first, what we have seen in 2021 is actually an organic growth story. Very successful. We actually exceeded our own plan. We raised our outlook, especially in the cloud, multiple times. Of course, what we also do is we are screening the market, not for actually just buying revenue. What we do is actually that we are looking for white spots in the portfolio where we can enhance the value for our customers. Let's look at how. I mean, we have the world's largest business network. We are generating billions of transactions every day with our procurement solutions. Now we are connecting the Taulia platform to actually finance these transactions, to optimize the cash flow of our customers in a significant way.

So let me start first and then look up lease build on it.

First what we have seen in 2021 is actually.

Organic growth story, where we are successful we actually exceeded our own land, we waste of outlook, especially in the cloud multiple times, but of course, what we also do is we are screening the market.

<unk> actually just buying revenue what we do is actually that we are looking for white spots in the portfolio, where we can enhance the value for our customers.

And let's look at home.

We have the world's largest business network, we are generating billions of transactions every day with our procurement solutions.

And now we are connecting the Italian platform to actually finance these transactions to optimize the cash flow of our customers in a significant way.

Christian Klein: We will deepen the integration, we will join forces on the go-to-market. It's actually a win-win. We have high interest. We had already in the past a lot of asks from our customers to say, "Hey, what can SAP do in order to automate these transactions to help us with the cash flow?" On the other side, we had a lot of banks saying, "Hey, you know, we see that you are transacting, you know, a lot, and why can we not, you know, really join and really do this together?" This was actually finally the reason. Again, also on an ongoing basis, we will screen. It's not only about acquisition. We just also announced a deepened partnership with Icertis. Same story there. They are the market leader, you know, for intelligent contract management.

Will deepen the integration we will join forces on the go to market. So it's actually a win win and we have high interest we had already in the past a lot of our from our customers to say hey, what can we do in order to automate these transactions to help us with the cash flow and on the auto side.

A lot of banks, saying, hey, we see that you're transacting.

And why can we not really shine and really do this together and this one is actually finally, the reason and again also on an ongoing basis, we will screen and it's not only about acquisition. We just also announced deepened partnership if I started.

Same store, we did they are the market leader for intelligent contract management and now we have multiple touch points.

Christian Klein: Now we have multiple touchpoints from our HR systems, ERP, procurement, and sales. It's just a high benefit, a high value for our customers now that also there, they have this seamless integration between these solutions. This is what we will do on an ongoing basis. Of course, always focusing also on our organic growth.

Our systems ERP procurement sales and it's just a high benefit of high value for our customers know that also that they have this seamless integration between these solutions and this is what we will do on an ongoing basis of course always focusing also on our organic growth.

Luka Mucic: Yeah. Perhaps to just quickly add, I think, both Icertis as well as Taulia are representative of a really disciplined portfolio strategy. We know that we cannot and will not always be in a position to deliver against all of the needs of digital capabilities ourselves as SAP. We believe that we have very strong organic capabilities in areas where we have a clear competency, and we will continue to double down on those.

And perhaps just quickly add I think.

Both <unk> as well as toys are representative of a really disciplined portfolio strategy.

Know that we cannot and will not always be in a position to do.

Over against all of the needs of digital capabilities ourselves, we believe that we have a very strong organic.

Abilities in areas, where we have a clear competency and we will continue to double down on those but in areas of the portfolio, where we can augment our strengths like Christian has said in the case of tall you our strengths in procurement networks, our strengths and solutions for the office of the CFO and of course, our strength in supply chain.

Luka Mucic: In areas of the portfolio where we can augment our strengths, like Christian has said in the case of Taulia, our strengths in procurement networks, our strengths in solutions for the office of the CFO, and of course, our strength in supply chain management solutions with an intelligent tuck-in capability like the supply chain financing and working capital management capabilities that Taulia brings to the table, where we can activate our ecosystem in a perfect way to amplify the growth that Taulia standalone can bring. Of course, it will be a no-brainer for us to you know double down on those opportunities. Again, our portfolio is very broad. The white spaces, therefore, are relatively limited. From that perspective, our focus on further building out the portfolio organically clearly remains the top priority.

Management solutions with an intelligent tuck in capabilities like the supply chain financing and working capital management capabilities that <unk> brings to the table, where we can activate our ecosystem in a perfect way to amplify the growth that <unk> Standalone can bring then of course it will be a no brainer for us too.

Double down on those opportunities, but again, our portfolio is very broad the white spaces. Therefore.

Our relatively limited and from that perspective, our focus on further building out the portfolio organically clearly remains the top priority.

Oliver Roll: The next question I'll give to you, Christian. It's about our 50th birthday this year. It comes from Matthias Kurz from Rhein-Neckar-Zeitung, and the question from Matthias is, how will SAP celebrate its 50th birthday this year?

So the next question I will get to your question. It's about 50, a Thursday this year comes from.

<unk> costs from Ryan Knackered side sung and a question from <unk> <unk>.

<unk> celebrated its 50th birthday this year.

Christian Klein: Yeah, you know, to celebrate, actually, first it's very important that we overcome this pandemic to keep everyone safe. That's the first priority. The second priority, yes, it's about celebrating the past, but it's also about celebrating the future. As we just talked about our portfolio, we see strong growth, we see that we can solve some of the biggest challenges of our customers. Yes, we will celebrate, but we will also invite customers, partners, analysts, media of course, to join us. Then also looking ahead, you know, what about the next 50 years? What can SAP do together with our ecosystem and our customers? Yeah, we will celebrate, but again, also strongly looking into the future.

Yeah. So.

To celebrate actually first it's very important that we overcome this pandemic to keep everyone safe that's the first and the second play already yes, it's about celebrating the path, but it's also about celebrating the future as we just talked about our portfolio, we see Swan quotes and we see that we can solve some.

Of the biggest challenges of our customers. So yes, we will celebrate but we will also made by customers partners.

Analysts media of course and also.

So join US, but then also looking ahead what about the next 50 years, what can do together with our ecosystem and our customers yes.

We will celebrate.

But again also strongly looking into the future.

Oliver Roll: There's again, I'm consolidating a couple here, but obviously the market is very volatile right now and has been for a week or so. There's a couple of questions that basically are acknowledging, you know, our strong results, but also commenting on our share price not really following yet. Luka, perhaps you could comment on that and how we think of this volatility and how we think of SAP's share price.

So.

Again, I'm I'm consolidating a couple here.

Obviously the market is very very volatile right now and has been for a week or so.

There's a couple of questions that basically are acknowledging our strong results, but also.

Commenting on offset price not really following.

Yes.

Luca perhaps you could comment on that and how we think of this volatility and how we think of.

<unk> share price.

Luka Mucic: Yeah. First of all, of course, the movements in the share prices of both the technology sector overall and of SAP's share price is not something that we can fully control. What we can focus on and will continue to focus on is to deliver against our commitments that we have given to the capital markets. So far, I would argue and claim that we have done so exceptionally well, and we have every intention of doing so in the future as well. I can understand the volatility because obviously there are lots of macro considerations at play presently. At the same time, I have to say that I continue to adamantly believe that SAP is undervalued at present.

Yeah. So first of all of course.

The movements in the share prices of both the technology sector overall and of SAP share price is not something that we can fully control what we can focus on and we'll continue to focus on is to deliver against our commitments that we have given to the capital markets and.

So far I would.

Argue and claim that we have done exceptionally well and we have every intention of doing so in the future as well I can understand.

Volatility.

Obviously, there are lots of macro considerations at play.

But at the same time I have to say that I continue to adamantly believe that S&P is undervalued at present, we have one of the fastest growing cloud business is on the applications front that you can find in the market, we have asos Pos portfolio of.

Luka Mucic: We have one of the fastest growing cloud businesses on the applications front that you can find in the market. We have a SaaS PaaS portfolio of greater than EUR 5.5 billion outside of Intelligent Spend that is growing in the thirties. We will continue to see increases in the growth rate in our cloud business in core ERP. Absolutely we will continue to see improvements in our efficiency across the business, and the return to double-digit growth as of 2023 in operating profit and significant surges in the cloud margins from next year onwards.

Greater than $5 5 billion euros ultra outside of intelligence spend that is growing and the authorities and we will continue to see increases in the growth rate in our cloud business in core ERP and absolutely. We will continue to see improvements in our efficiency across the business and the return to double digit growth.

2023, and operating profit and significant searches in the cloud margins from next year onwards. So if you take all of this into consideration and make a simple sum of the parts valuation SAP.

Luka Mucic: If you take all of this into consideration and make a simple sum of the parts valuation, SAP certainly has significant room to further appreciate in terms of its share price performance. We will continue to work on this, and we are confident that ultimately through consistent execution quarter after quarter, as we have proven it now for five quarters in a row, this will be recognized by the market. The conversations that we are having with analysts, with investors as well, definitely confirm full support for the strategy that we're employing. Now it's really about continuing to deliver against that.

Luka Mucic: If you take all of this into consideration and make a simple sum of the parts valuation, SAP certainly has significant room to further appreciate in terms of its share price performance. We will continue to work on this, and we are confident that ultimately through consistent execution quarter-after-quarter, as we have proven it now for five quarters in a row, this will be recognized by the market. The conversations that we are having with analysts, with investors as well, definitely confirm full support for the strategy that we're employing. Now it's really about continuing to deliver against that.

Certainly has significant room to.

Further I appreciate in terms of its share price performance and we will continue to work on this and we are confident that ultimately through consistent execution quarter after quarter as we have proven it now for five quarters in a row. This will be recognized by the market and the conversations that we're having with analysts with investors.

As well definitely confirm full support for the strategy that we're employing now it's really about continuing to deliver against that.

Oliver Roll: Thank you, Luka. Christian, there's a question about the movement of our customers to the cloud. This is from Alexander Jungert from Mannheimer Morgen.

Thank you Luca so.

Kristian there is a question about.

The movement of our customers to the cloud.

So this is from Alexander younger.

Manheim of Morgan.

Christian Klein: Mm-hmm.

Oliver Roll: He's thanking us for the press conference. Question to you, Mr. Klein. Some customers still hesitate to switch to the cloud. Why do you think that is? What can we do to convince customers about that shift to the cloud?

And his thank you asked for the press conference questions to units declined.

Some customers still hesitate to switch to the cloud.

Why do you think that is and how what can we do to convince customers about that shift to the cloud.

Christian Klein: Yeah, thanks a lot for the question. I mean, first of all, you have seen from our 2021 results that there is now a large movement of our installed base to the cloud. I mean, we significantly accelerated our quotes. Also, let's face it, I mean, many customers, and we also, you know, shared some references, Siemens, Sapheium, Fangle, and others, they're all going with us. Why do they do that? Because when you compare on-prem to cloud, I mean, customers just don't have the time anymore to go into complex upgrades every seven years to modify a system landscape where they then cannot consume innovations on the fly, where they are not on the latest release. That's the first factor. Of course, we keep on innovating.

Yes. Thanks, a lot for the question I mean first of all you have seen from our 2021 without that there is no large movement of our installed base to the cloud we significantly accelerated our workforce.

And also let's face it I.

I mean, many customers and we also said some westlands Siemens Athene use.

England.

They are all going with us and why do they do that.

And because when you compare on Prem to cloud I mean <unk>.

Customers just don't have the time anymore to go into complex upgrades every seven years to modify our system landscape, where they then cannot consume innovations on the fly where they are not on the latest relief. So that's the first factor and of course, we keep on innovating and you see how many business models.

Christian Klein: When you see how many business models we are running with S/4HANA Cloud, I mean, every customer goes through a transformation no matter in which industry. We have multiple examples, and this is why they wanna go. Again, they don't wanna fall back into the trap of, okay, no, please give me also an agile system landscape. This is what we are giving them. Not only with S/4HANA, let's face it, I mean, we kept our promise to also integrate in a modular way, you know, our SuccessFactors, our HR, our procurement, our travel solutions. Again, what is also great to see, our partners are following in Germany, all over the world. Because they now see, hey, now it's time to also move and build new innovations on top of this platform.

Wanting the best for Hana Cloud I mean every customer go through a transformation no matter in which industry.

Multiple examples and this is why they want to go and again, they don't want to fall back into the trap of Okay. Now. Please give me also natural system landscape and this is what we are giving them and not only with S 400, let's face it I mean, we kept our promise.

We will also integrate in a modular way.

Our success fact, IHI, our procurement our travel solutions and again, which is also what is also great to see our partner for Germany, all over the world because they now see Hey, now it's time to also move and build new innovation on top of this platform SaaS data less secure and <unk>.

Christian Klein: There is the data model, there is the security. Last but not least, let's also face it, there is a lot of talk around, you know, cybersecurity. Especially in the market, yeah, where we see, you know, smaller mid-sized customers, their IT teams often cannot keep up with the pace on how the requirements evolve on the cybersecurity side. That's another reason for our customers to move. Last but not least, to mention one final point. I mean, for us also, the data protection is also key. What we are doing, for example, in Europe, is actually that we are providing our customer, you know, EU Access.

Last but not least let's also face it there's a lot of talk around.

Fiber security.

And especially in in the market, where we see small and mid sized customers.

AI teams often cannot keep up with the payers on how the requirements evolve on the cyber security side and that's another reason for our customers to move and last but not least to mention one final point I mean for us also.

Data protection. It's also key so what we are doing for example in Europe is actually that we are providing our customer.

Christian Klein: Which means that we guarantee our customer that data stays here, and that we are also having only people from the European Union touching this data, which also gives them another point to finally make the move. Overall, we are very confident. You see it also in our guidance, and this is also the feedback what we are getting, you know, from the large share of our customers.

Access, which means that we guarantee our customers data stays here and that we're also having only people from the European Union touching this data, which also gives them and not point to finally make the move. So overall, we are very confident you'll see it also in our guidance and this is also the feedback we're getting from the large share of our customers.

Oliver Roll: Thank you, Christian, and thank you for the question. Luka, back to you. There's actually a couple of questions here about free cash flow. The question I'll sort of summarize is, hey, Luka, can you comment on the outlook for free cash flow and share-based compensation charges? Why aren't you revising 2025 free cash flow to reflect the changes in our share-based compensation?

Thank you Christian and thank you for the question.

Luca back to you there's.

Actually a couple of questions here.

About free cash flow.

Question I'll sort of summarize.

Hey, Luca can you comment on the outlook for free cash flow and share based compensation charges.

And why aren't you revising 2025% free cash flow to reflect the changes in our share based compensation.

Luka Mucic: Yeah. Thank you very much for the question. It's an important one. Let's be clear, we are extremely confident about our 2025 free cash flow guidance of EUR 8 billion. We have actually landed better than what we expected in 2021. We will certainly continue to look at that guidance as we move closer to it. We have to understand a few things. This is four years out, and cash flow can be volatile for other reasons than share-based compensation. It's affected by currency movements. It's affected by cash tax payments and so on. Some of this is very hard to predict.

Thank you very much for the question, it's an important one and let's be clear.

We are extremely confident about our 2025 free cash flow.

Guidance of $8 billion.

We actually <unk>.

Land is better than what we expected in 2021, and we will certainly continue to look at that guidance as we move closer to it we have to understand a few things. This is four years out.

Cash flow can be volatile for other reasons than share based compensation affected by currency movements.

It's affected by a cash tax payments and so on and some of this is very hard to predict on a target that is full year out I think this significant increase that we're planning for is something we feel very confident if we continue to execute well there is certainly scope for outperformance and we will constantly evaluate as we move close.

Luka Mucic: On a target that is four years out, I think this significant increase that we are planning for is something we feel very confident if we continue to execute well. There is certainly scope for outperformance, and we will constantly evaluate this as we move closer. On the share-based compensation side, yes, of course, our move to share-based compensation for our Move SAP program is supportive of this. But I need to put two things into perspective. When you take a look at our 2021 results, we had roughly EUR 1 billion in share-based compensation cash payouts. In 2025, we still expect that we will have more than EUR 500 million in such cash payouts for share-based compensation programs. Why?

On the share based compensation side, yes of course, our move to share based compensation.

For our move SAP program is supportive of this but I need to put two things into perspective, when you take a look at our 2021 results. We had roughly 1 billion euros in share based compensation cash payouts.

In 2025, we still expect that we will have more than $500 million in such cash payouts for share based compensation programs why because we still have for example, a discounted share purchase program in the so called OLED SAP and program, where our employees can buy shares and we subsidize them to a certain extent.

Luka Mucic: Because we still have, for example, a discounted share purchase program, the so-called Own SAP program, where our employees can buy shares, and we subsidize them to a certain extent. This program will continue to be cash settled. Also, we still have the impact in the next three years of the existing programs which were cash settled and will lead in 2022, 2023, and 2024 to cash payouts. The impact from this, I think, needs to be understood from a size perspective. Nevertheless, we are certainly very positive about our increasing effectiveness in cash collections. Our DSO, for example, has been down by 10 days year over year in 2021, and we continue to see benefits there also for the future.

This program will continue to be cash settled and also we still have the impact in the next three years of the existing programs, which were cash settled and we'll lead in 2022, 2023, and 2024 to cash payout. So the impact from this I think needs to be understood.

From a size perspective Nevertheless.

Are certainly very positive about our increasing effectiveness and cash collections are D is all for example, thats been down by 10 year 10 days year over year in 2021, and we continue to see.

It's there also for the future.

Luka Mucic: In terms of the profitability of the business, we clearly expect a significant surge. That profitability is going to be actually the primary reason why we achieve the EUR 8 billion free cash flow. Again, we certainly can do better than that. If we see that this is happening, then of course we will also update the free cash flow guidance.

In terms of the profitability of the business we clearly.

<unk>, a significant surge and that profitability is going to be actually the primary reason why we achieve the 8 billion free cash flow and again, we certainly can do better than that and if we see that this is happening then of course, we will also update on the free cash flow guidance.

Oliver Roll: Thanks, Luka. So there's a couple of questions on sustainability. I'm gonna ask one that kind of reflects a question about the overall extent that sustainability is a driver in some of the transformation that's happening. This is from Zuzana Kovacova from IDC Europe. She says, "Hey, obviously business agility and resiliency are the drivers behind some of the large transformation projects such as with Siemens, IBM, Allianz." Her question really is, when you look at those, to what extent is sustainability a driver versus is it actually already embedded into that transformation? Perhaps I mean both of you I know have a lot of insight here. Christian, why don't you kick us off?

Thanks, Lucas So theres a couple of questions on sustainability I am going to ask one that kind of reflects.

Question about the overall extent the sustainability as a driver and some of the transformation. That's happening. This is frozen sona cover Cobra.

From IDC Europe .

And she says hey, all this business agility and resiliency.

Drivers behind some of the large transformation projects, such as with Siemens IBM Allianz.

And.

Question really is when you look at those to what extent is sustainability of driver versus is actually already embedded into that transformation, perhaps both of you I know have a law.

Inside here Christian why don't you kick us off.

Christian Klein: Yeah. I mean, I absolutely can start. Look, actually it's a very good question. Yes, we see transformation projects of our customers where actually sustainability is actually embedded. When we are going into the RISE journey, oftentimes we look into, okay, how will the business model change of a company? How can we redesign certain elements around the quote-to-cash processes to reflect this change, the way how a customer sells, the way how he's priced, the way how he bundles certain products and services? At the same time, when we are looking into the energy intensive processes, we definitely already say, Hey, look, let's not only look into the data model for your productivity.

Absolutely can start look actually its a very good question yet.

We see transformation blow checks of our customers actually sustainability, it's actually embedded.

When we are going into the wife journey Oftentimes, we'll look into okay. How will the business model change of a company how can we redesign.

Elements alone to quote to cash process to reflect this change the way how our customer sells the way how it is twice the way, how we bundled products and services, but at the same time, then when we're looking into the energy intensive processes.

Definitely it already say, hey, look, let's not only look into the data model.

For your productivity, let's not only look into the data model to help us with 60 of your business, let's really make use of the work what we did and to expand our data model with ESG. So we're already designing processes like procure to pay or designed to operate so the supply chain and manufacturing related processes in a way that a customer wants then.

Christian Klein: Let's not only look into the data model to have a 360 of your business, let's really make use of the work what we did, yeah, to expand our data model with ESG." We are already designing processes like procure-to-pay or design to operate for the supply chain, and manufacturing related processes in a way that a customer wants them in his life, that he can really make this trade-offs. Yeah? That you can see how cost effective does the factory work, but also what is actually also the footprint of this factory. Yeah? We see that this is more and more embedded. As this is not actually, you know, sustainability is not up for a choice. Actually, every CEO, every company, we need to get real about that. That's why we are also embedding it deeply into our business transformation journey with RISE.

If life that we can really make these trade offs that you can see how cost effective does affect that we werent, but also what does it actually also the footprint of this flexibility.

And so we see that this is more and more embedded as this is not actually sustainability is not up for a choice actually and we CEO every company, we get real about that and Thats. Why we are also embedding deeply into our business transformation journey with one.

Luka Mucic: Yeah. Perhaps I can just quickly add, because I agree with everything what Christian has said, that I think sustainability is also a driver for more and more cross-company connectivity, which needs to be digitally enabled. Business networks will be a big part of the solution, as we are doing it with Catena-X, for example, for the automotive sector. The good news is that SAP is the most relevant software partner for entire industries due to our strength in business networks and the related technologies, which can work together with entire industry consortia to completely digitize their end-to-end business processes. Because this is a challenge that not a single company on its own and only looking at its internal processes can tackle. We have the capabilities to really drive this end-to-end.

And perhaps I could just quickly add because I agree with everything with Christina said that I think sustainability is also a driver for more and more cross company connectivity, which needs to be digitally enabled business networks will be a big part of the solution as we are doing it with car T X for example.

For the automotive sector and the good news is there is the most relevant software partner for our entire industry is due to our strength and business networks and the related technologies, who can work together with the entire industry consortia to completely digitize the end to end business processes.

Because this is a challenge that not a single company for its one and only looking at internal processes can take but we have the capabilities to really drive.

Luka Mucic: Therefore, we will see a larger share of programs where companies join forces in driving their transformation. As many of the companies in many different industries have a very high share of SAP transactional systems supporting their process landscapes, we think that this is an outsized opportunity for us to contribute.

And.

And therefore, we will see a larger share of programs where companies joined forces in driving that transformation and as many of the companies in many different industries have a very high share of S&P transactional system supporting that process landscapes. We just think that this is an outside.

The opportunity for us to contribute.

Oliver Roll: On to a question about our own cloud transformation at SAP. Christian, I'll start with you. This is from Peter M. Färbinger of E3 Magazine. He congratulates us on our cloud success, but he asks a question about, hey, how are we evolving our own incentives for our sales force in terms of, will they be cloud only? And he has a second part to his question, which is what will become of, our on-premise products such as S/4HANA Private Edition for customer data centers? Two parts to the question, Christian. Incentives for our own people in terms of our transformation and what's gonna become of our on-premise products.

So on to a question about our own cloud transformation.

Hey.

Christian I'll start with you. This is from Peter <unk>. The three magazine congratulate us on our cloud success, but he asked a question about hey, how are we evolving our own incentives for our sales force in terms of will it be cloud only.

And he has a second part of his question, which is what will become of.

On premise products such as asphalt private addition to customer data centers to parse the question Christian.

Census for our own people in terms of our transformation and what's going to become of our on premise products.

Christian Klein: Yeah. Thanks a lot for the question. First, we always said we gave a long-term commitment for S/4HANA, and that includes also our on-premise version of S/4HANA. Now, with regard to incentives to our people, we give customers choice, so also we incent both business models. Obviously, what we're also doing, and this is even more important to mention, is that we are not focusing only on the point of sale anymore. RISE is a journey, and that doesn't stop at the point of sale. The incentives are much more geared now towards renewals, time to value in our consulting business, so that we are really incentivizing our people to also own customer success.

Yes. So thanks, a lot for the question. So first we always that we gave for long term commitments last Bahama and that includes also along premise flush.

As for Hana now with regard to incentive so people, we give customers choice. So also we incent both business models, obviously, what we're also doing and this is even more important to mention is that we are not focusing only on the point of sale anymore.

Why it is a journey and that doesn't stop at the point of sale for the incentives are much more geared to what's been use time to value in our consulting business. So that we are really incentivizing our people.

Two also on customer success.

Christian Klein: Then last but not least, when it also then comes to on-prem, we always also made a commitment that especially in the S/4HANA area, of course, we, you know, increased the innovation pace with S/4HANA Cloud, and our customers will benefit from that. If they're going with us on the RISE journey, of course our goal is to transform the business model, to standardize business goals. Signavio was, by the way, a big success and is a big enabler for our customers because then you have proof you can benchmark against these best practices. A big benefit is that we continue also then to not only work on the business processes, but also on the system landscape. We screen it. How much custom code, how many modifications are in this system?

And then last but not least when it also then comes to on Prem. We always also made a commitment that especially in the pharma area first we increased the innovation pace with <unk> cloud and our customers will benefit from that and if they are going with us on the wife's journey.

Our goal is to transform the business model to standardized business called <unk> by the way a big success.

For our customer because then you have you can benchmark against this best practices.

The big benefit is that we continue also to not only work on the business processes, but also on the system landscape, we screen it how much constant called how many if modifications I into system, how can we get them out of the system.

Christian Klein: How can we, you know, get them out of the system to also then in the future enable our customers to always stay on the latest release, to make upgrades much more automated? That's also equally important, and that's one major factor. While the large share of our customers in the meantime says, "Yes, I wanna actually join the movement with RISE, and I definitely, very open to also adopt S/4HANA Cloud.

Also then in the future enable our customers to always stay on the latest release to make upgrades much more automated and that's also equally important and that's one major factor while.

The large scale pharma customers in the meantime says, yes, I want to actually join the movement with wide and that's definitely where we opened two also adult <unk>.

Oliver Roll: Luka, anything you wanna comment or anything you wanna add on that question about our transformation to the cloud?

Luke anything you want to comment or anything you want to add on that question about our transformation to the cloud no I think John covered it very well, but just on the on premise piece I mean, we have a stated commitment to the continued development of our on premise products around as far out there until 2040.

Luka Mucic: No, I think Christian covered it very well, but just on the on-premise piece, I mean, we have a stated commitment for the continued development of our on-premise products around S/4HANA until 2040, right? I don't think that there are many companies out there in the market that give such a long-term planning commitment to our customers, so nobody should feel at risk to be left behind.

And I don't think that there are many companies out there in the market and that give such a long term planning commitment to our customers. So nobody should feel at risk to be left behind.

Oliver Roll: Here's a question, a couple of questions actually. Obviously, we focus hugely on the integration of our technologies across our line of business, the ERP solutions, and our platform. Just where do you feel we are, Christian, on that integration process and that journey?

So.

Question, a couple of questions that shape, but obviously.

<unk> focused hugely on the integration of our technologies across our lines of business and the ERP solutions on our platform.

And.

Just where do you feel we are Christian on that integration.

So in that journey.

Christian Klein: Yeah. I already talked about some of the, kind of, progress we did in 2021. Just to give you one example, for example. What is very key for many of our customers, actually regardless of which industry is in the time of a transformation, is total workforce management. Not only how many workers do I have, but also what skills do they have? How do I retrain? Now it's very important that the solutions talk to each other, and that you are not only looking at your own employees. Let's take SuccessFactors, Fieldglass and S/4HANA, where we always have, you know, employee related objects in for external workers, for our own employees. This is in the meantime completely harmonized.

I already talked about some of the focus we did in 2021 just to give you. One example for example, what it is.

The key for many of our customers actually regardless of which industries in the time of a transformation. It's total workforce management not only how much walk us through I have but also what skills do they have how do I, we train and now it's very important that our solutions talk to each other and that you are not only looking at your O&M, So, let's take Successfactors <unk> plus and <unk>.

Hanna.

Always have.

<unk>, we added objects in for accelerator because phone employees. This is in the meantime completely harmonized so when you're actually going to move to <unk> solutions, our customers have not only have some medical data model, which fits to each other but also China security layer and this is what we also said we do.

Christian Klein: When you're actually going to move to these solutions, our customers have not only a semantical data model which fits to each other, but also a joint security layer. This is what we also said we do with procure to pay, so Ariba, S/4HANA. When you source suppliers, when you then process the order, when you're gonna pay, that actually all comes in the meantime out of the box. For our on-premise customers, again, oftentimes also with modifications and with changes to the data model, we also still offer also the API, to also make hybrid landscapes more integrated. We are progressing very fast. We are keeping our promise, and we will not stop. There's always more. We are developing new solutions and they are already now coming, with a consistent data model, with a consistent security model.

With procure to pay labor as for Hana. So when you saw supply us. When you then process. The order when you pay that actually comes in the meantime out of the box and firewall on premise customers again.

Oftentimes also with modifications and with changes to the data model you also still off also the API.

It will also make hybrid landscapes more integrated so we are focusing very fast we are keeping our promise and we will not stop there's always more we are developing new solutions and they already know coming and with a consistent data model with a consistent security model, which is very key and it's a different shape.

Christian Klein: Which is very key, and it's a differentiator, and we see that also in the success in 2021, because now much more customers say, "Hey, when I'm now doing the move from my legacy ERP to S/4HANA Cloud, let's also replace the legacy HR." And yes, again, it comes out of the box.

And we see that also in the success in 2021, because now much more customers say, hey, and I am now doing the move from a legacy ERP to F. On a cloud, let's also replaced the legacy HR and yes again it comes out of the box.

Oliver Roll: Thanks, Christian. We're getting a few questions on our cloud metrics, including how we define and weigh them. A specific part of that is you seem to see current cloud backlog as the most important figure. Why is that? Luka, can you pick us up on that?

Thanks, Chris and we're getting a few questions on our cloud metrics and how we define and weight them.

Specific part of that is you seem to see current cloud backlog is the most important figure out why is that Luca can you catch us up on that.

Luka Mucic: Yeah. I'll keep it short because it is a forward-looking, key forward-looking metric. It shows how we have been successful from 1 key data point to another in driving forward incremental order entry, as well as our renewal success. It then defines the lower end of the cloud revenue that we expect for the next 12 months to be realized with absolute certainty, not regarding any future sales success or any upcoming renewals that are not yet closed. In that respect, it's very important to showcase the momentum that we are seeing in our business that then in the cloud business model will translate in future quarters into growth.

I'll keep it short because it is a forward looking keep forward looking metric.

Shows how we have been successful from one keep data time points to another.

Driving for incremental order entry as well as our renewal success ended then defines the lower end of the cloud revenue that we expect for the next 12 months to be realized with absolute certainty.

Regarding any future sales success or any upcoming renewals that are not yet closed so in that respect it's very important to showcase the momentum that we're seeing in our business that then in the cloud business model.

Translate in future quarters into growth.

Luka Mucic: Because the revenue that you see in a specific quarter is actually the measure of success from the past. That's why it's so essential to focus on this metric.

The revenue that Youll see in a specific quarter is actually the measure of success from the past that's why it's so essential to focus on this metric.

Oliver Roll: Luka, let me just stick with you. We talked about our proposed acquisitions and investments today. What about Qualtrics, one of our previous acquisitions? What percent do we own right now, and are we intending to divest any more of our shares?

Luca let me just stick with you.

So we talked about our proposed acquisitions and investments today.

Coal tricks one of our previous acquisitions.

What percent do we own right now and are we intending to divest anymore of our shares.

Luka Mucic: Yeah. Thank you very much for that question, and that's something I like to talk about, for sure, because first of all, I want to recognize, Qualtrics actually just announced their, full year results and quarterly results, yesterday. They had a tremendous performance, all across the year, and also into Q4, at actually quarterly growth of around about 60%, which is, tremendous. They are doing extremely well. We continue to collaborate very well on the go-to-market front, as well as in solution engineering. We are very excited to continue to work together to drive for this outpacing growth, for a long time into the future. We currently own around 74% of the company.

Thank you very much for that question and that's something I like to talk about for sure because first of all I want to recognize <unk> actually just announced their full year results and quarterly results yesterday, and they had a tremendous performance.

All across the year and also into Q4.

Actually quarterly growth from about 60%, which is tremendous so they.

Doing extremely well, we continue to collaborate very well on the go to market front as well as in solution engineering.

We're very excited to continue to work together to drive furthers outpacing growth for a long time into the future. We currently own.

Around 74% of the company.

Luka Mucic: That's due to the fact that Qualtrics closed an acquisition of a company named Clarabridge in October, and they paid for the acquisition for the most part in shares. We also had a follow-on offering in November. We do not currently intend to IPO any new shares of Qualtrics because we have completed what we told the markets at the point of the IPO, what we would do. If you remember at the last press conference early in 2021, I was asked a similar question and I said we want to, from a go-forward perspective, ensure that Qualtrics is equipped with significant enough cash.

That's due to the effect that.

<unk> closed an acquisition of <unk>.

Company named Clara Bridge.

Told up and they paid for the acquisition for the most part in shares.

We also had a follow on offering.

November we do not currently intend to IP or any new shares.

Coil tricks.

Because we have completed what we told the markets at the point of the IPO, what we would do if you remember at the last press conference early in 2021 I was asked a similar question I said.

We want to from a go forward perspective ensure that.

<unk> <unk> is equipped with.

Significant enough cash we talked about $1 billion in order to.

Luka Mucic: We talked about EUR 1 billion in order to fund their investment strategy. They had at that point in time when we did the IPO still a promissory note of roughly EUR 500 million outstanding to SAP. We have cleaned this up in November through our follow-on offering at Qualtrics. Qualtrics now has around about EUR 1 billion in cash available for their investment planning. We have paid back, or Qualtrics has paid back, the promissory note completely. We have now a clean basis. We do not see any additional IPO events on the horizon. The SAP share will remain stable for the foreseeable future now.

Their investment strategy.

And they had at that point in time, when we did the IPO still a promissory note of roughly 500 million outstanding to SAP.

We have clean this up in November through our follow on offering at <unk>. So called <unk> now has around about $1 billion in cash available for the investment planning and we have paid back Quadrex is paid back the promissory note completely so we have now a clean basis.

But we do not.

Any additional IPO events on the horizon, so the S&P sure.

<unk> remained stable for the foreseeable future now.

Luka Mucic: To be perfectly frank, SAP has never sold a single share in Qualtrics since the IPO, to be also very clear.

And to be perfectly Frank SAP has never sold a single share <unk> since the IPO to be also very clear.

Oliver Roll: Thank you, Luka. There's a question from Will Parsons, who's an independent analyst, and he'd love some perspectives on just the breakdown of our performance between Sales Cloud, Marketing Cloud, Commerce Cloud, and Service Cloud. Which one of you two would like to take that?

Thank you Luca and then there's a question from will Parsons.

Dependent analysts and he'd love some perspective on just the breakdown of our performance between sales cloud marketing cloud digital Commerce and service cloud.

One of you too would like to take that I think I can take it because I can make that very short we don't break out our performance at that level of granularity actually.

Luka Mucic: I think I can take it because I can make that very short. We don't break out our performance at that level of granularity. Actually, I would say we probably do the most detailed disclosures in terms of our different cloud business segments that you can find. We're breaking out S/4HANA, we're breaking out Intelligent Spend, we're breaking out SaaS, PaaS versus Infrastructure-as-a-Service. At this sub-solution level, we are not providing any concrete disclosures.

I would say, we probably do the most detailed disclosures in terms of our different cloud business segments.

You can find we are breaking out as far now we're breaking out intelligent spend breaking out SaaS pause versus infrastructure as a service, but at this sub solution level.

We are not providing any.

Concrete disclosures.

Christian Klein: Yeah. Let me add maybe, Oliver, very quickly, some business perspective to that. I mean, needless to say, when you look at the pandemic, of course, many of our customers, you know, also turn towards an omnichannel sales. Commerce was of course of high demand. And with Hybris, we actually have the market leading solution in this part of the portfolio. In sales and services, oftentimes actually it also goes via industry specific capabilities, where we signed a large contract on the transformation side with Co-op and other retailers. We're actually co-innovating on things like returns claims management, which we built with a lot of intelligence embedded, which gives these customers a really competitive advantage. A lot is about customer loyalty management, where we're also co-innovating. There we're also winning with a lot of industry specifics.

Let me add maybe Oliver very quickly some business perspective to that I mean, needless to say when you look at the pandemic across many of our customers to turn towards Omnichannel sales. So almost both of course of high demand.

We actually have the mark the market leading solution.

This part of the political.

In sales and services oftentimes actually it also goes via industry specific capabilities, where we signed a large contract on the transformation side If corp, and other retailers were actually coin awaiting on things like the Trans claims management, which we built with a lot of intelligence embedded which gifts this customers.

<unk> competitive advantage or about a lot is about customer loyalty management, where we also coordinate weighting. So there. We also winning with a lot of industry specifics and then we have of course Cpus or configure price quote which is a huge success as obviously customers mandate transform their business models they need different ways.

Christian Klein: We have, of course, CPQ, so Configure Price Quote, which is a huge success. As, obviously, customers, when they transform their business models, they need different ways of selling, different way of quoting, pricing, where we actually also, you know, have the market leading solution with CallidusCloud. We wanted to acquire it. Again, we had this question early on. In the meantime, fully integrated also then with S/4HANA downstream.

Of selling different weight of quoting pricing, where we actually also have the market leading solution with calendars. We wanted to acquire then again.

Yes.

Discretion early on in the meantime, fully integrated on to them with farmer downstream.

Oliver Roll: Thank you, Christian. Luka, you get the final question, which is, hey, any indication on the dividend. It's anonymous, but hey, we'll take it.

Thank you Kristen So Luka Luka you get the final question.

Which is hey, Annie, indicating it's anonymous, but hey, we'll take it any indication on the dividend.

Luka Mucic: Yeah, sure. Happy to cover this. Obviously the final dividend decision is up to the supervisory board to make, and this will happen in late February. To be very clear, SAP has just closed an extremely strong year 2021. We are going to celebrate our fiftieth anniversary in 2022. We have a clear history of progressive dividend payouts. SAP has had many years now of dividend increases, and it is safe to assume that the dividend also in May this year will increase. By how much, that's up for the supervisory board to finally decide. Rest assured that we will make an attractive proposal.

Yes, sure happy to cover this and obviously the final dividend decisions up to the supervisory board to make.

This will happen in late February but to be very clear.

SAP is just closed a an extremely strong year 2021.

We are going to celebrate our 50 years anniversary.

1022, we have.

Clear history of progressive dividend payout.

<unk> has had many years now of dividend increases and it is safe to assume that the dividend also.

In may.

Made this year will increase by how much.

For the supervisory board to finally decide but rest assured that we will make an attractive proposal.

Oliver Roll: Luka Mucic, Christian Klein, thank you so much for being here. Most of all, thank you to all of you for joining and for spending your time with us today. We wish all of you from all of us at SAP a happy and healthy 2022. We're really looking forward to seeing many of you again and talking to many of you again over the next few months. Thank you for being with us today.

Look amongst it.

Christian Klein. Thank you so much for being here, but most of all thank you to all of you for joining him for spending your time with US today, we wish all of you from all of Us.

A happy and healthy 2022, and we're really looking forward to seeing many of you again in talking to many of you again over the next few months. So thank you for being with US today. Thanks a lot.

Christian Klein: Thanks a lot. Take care.

Luka Mucic: Thank you.

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