Sap Se · XETR:SAP
Sap — Investor Day (June 2024)
76 slides from Sap's investor day presentation, Jun 5, 2024
Slide 1: Financial Analyst Conference
Financial Analyst Conference June 5, 2024 Public
Slide 2: Opening Remarks
Opening Remarks Anthony Coletta Chief Investor Relations Officer _— _—
Slide 3: Agenda
Opening Remarks Anthony Coletta, Chief Investor Relations Officer Vision & Strategy Christian Klein, Chief Executive Officer Agenda Technology Update Muhammad Alam, SAP Product Engineering Go-To-Market Strategy Scott Russell, Chief Revenue Officer, Customer Success Commercial Update Julia White, Chi
Slide 4: Agenda
Opening Remarks Anthony Coletta, Chief Investor Relations Officer Vision & Strategy Christian Klein, Chief Executive Officer Agenda Technology Update Muhammad Alam, SAP Product Engineering Go-To-Market Strategy Scott Russell, Chief Revenue Officer, Customer Success Commercial Update Julia White, Chi
Slide 5: Safe Harbor Statement
Safe Harbor Statement During this presentation we will make forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual
Slide 6: Vision & Strategy
Vision & Strategy Christian Klein Chief Executive Officer _— _—
Slide 7: We are at a watershed moment for Enterprise Applications
We are at a watershed moment for Enterprise Applications Execute transactions Run smart processes Deliver AI-driven outcomes Embedded AI Customized AI AI infused BTP AI Foundation on BTP Cloud Cloud Public
Slide 8: Faster ERP upgrades, on-time planning, lower carbon emissions
~ 90% 75% 34% Faster ERP upgrades Increase in on-time planning Decrease in carbon emission per product Public
Slide 9: Accelerating revenue growth
Our success formula for sustained, rapid growth at scale Focus Scalability Innovation Accelerating #1 Enterprise application Land with RISE/GROW & Accelerating the pace revenue and Business AI company expand to our LoB portfolio of innovation across our portfolio growth through 2027 Public
Slide 10: Our goal
FOCUS x SCALABILITY x INNOVATION = ACCELERATING REVENUE GROWTH Our goal Public
Slide 11: Our goal: #1 Enterprise application company
FOCUS x SCALABILITY x INNOVATION = ACCELERATING REVENUE GROWTH Our goal: #1 Enterprise application company by focusing on Cloud ERP Suite Growth of Cloud ERP Suite every quarter since Q1/2022 Enterprise Application company according to IDC1 Total Addressable Market of Extension Suite Cloud ERP Suite
Slide 12: Our goal: #1 Business AI company
FOCUS x SCALABILITY x INNOVATION = ACCELERATING REVENUE GROWTH Our goal: #1 Business AI company Huge potential by embedding Business AI across our portfolio of most used tasks will be infused by Joule ABAP developers globally to potentially benefit from Joule for Developers SAP Cloud users worldwide
Slide 13: Our Business AI differentiates us
FOCUS x SCALABILITY x INNOVATION = ACCELERATING REVENUE GROWTH Our Business AI differentiates us Business data & Out-of-the-box Choice of the AI standards, customer base scenarios best LLM models1 identity, security Customer contracts High-value AI of SAP AI guiding allow SAP to use data use cases b
Slide 14: Our profitable growth formula to deliver scale
FOCUS x SCALABILITY x INNOVATION = ACCELERATING REVENUE GROWTH Our profitable growth formula to deliver scale with RISE with SAP and GROW with SAP to our LoB portfolio Public
Slide 15: Land with RISE with SAP
FOCUS x SCALABILITY x INNOVATION = ACCELERATING REVENUE GROWTH Land with RISE with SAP Significant untapped potential to be addressed through strengthened adoption focus Discover Plan and and explore prepare BTP attach rate to RISE with SAP in 2023 PROCESS APPLICATIONS DATA remaining support revenue
Slide 16: Further extending Business Transformation offering
FOCUS x SCALABILITY x INNOVATION = ACCELERATING REVENUE GROWTH Further extending Business Transformation offering Incorporating user-centric adoption, enablement and productivity capabilities linking business processes, systems, data, and people PROCESS APPLICATIONS DATA through increased employee p
Slide 17: Land with GROW with SAP
FOCUS x SCALABILITY x INNOVATION = ACCELERATING REVENUE GROWTH Land with GROW with SAP For mid-market and net-new customers net-new customer share since introduction Solutions Services Resources of customers by volume opt for premium packages Cloud ERP delivered with speed, predictability, and conti
Slide 18: Expand into the full line-of-business portfolio
FOCUS x SCALABILITY x INNOVATION = ACCELERATING REVENUE GROWTH Expand into the full line-of-business portfolio We have significant cross-sell potential Cloud customers with x number of SAP Cloud solutions in 2023 % of customers % of annual Cloud revenue of Cloud revenue of Cloud customers with signi
Slide 19: We accelerate pace of innovation in the cloud
FOCUS x SCALABILITY x INNOVATION = ACCELERATING REVENUE GROWTH We accelerate pace of innovation in the cloud Innovation examples Chief Chief Chief Chief Information Operating Financial Human Resources Officer Officer Officer Officer SAP Joule x NVIDIA SAP Signavio SAP Ariba Guided Buying SAP Joule A
Slide 20: Accelerating total revenue growth through 2027
FOCUS x SCALABILITY x INNOVATION = ACCELERATING REVENUE GROWTH Accelerating total revenue growth through 2027 Capitalizing on several SAP-sized opportunities Top-line Accelerating RISE with SAP through 2027 Still ~€11B maintenance to be converted to cloud revenue at 2-3x >€37.5B Clean Core and exten
Slide 21: Technology Update
Technology Update Muhammad Alam SAP Product Engineering _— _—
Slide 22: Current State: Monolithic and on-premises
Current State Monolithic and on-premises
Slide 23: Difficulties deriving business benefits
Difficulties deriving business benefits due to: Public
Slide 24: Getting maximum value from AI and data
Getting maximum value from AI and data Public
Slide 25: Private Cloud and Public Cloud to suit all customer types
to suit all customer types Private Cloud Public Cloud Public
Slide 26: Holistic innovation
Holistic innovation *_ 3 = Public
Slide 27: Discover and explore, plan and prepare, run and innovate
Discover Plan and and explore prepare PROCESS APPLICATIONS DATA PEOPLE Run Move and innovate and deploy Public
Slide 28: A seamless and supportive journey
A seamless and supportive journey Public
Slide 29: A seamless and supportive journey
A seamless and supportive journey Public
Slide 30: Benefits
Benefits Time to usage value for customers Scale and predictalb the partner way) Public
Slide 31: Generative AI
Generative AI High value Effortless Trustworthy Public
Slide 32: SAP Generative Business AI
SAP Generative BusinessAI High value Effortless Trustworthy Public
Slide 33: Source to pay, recruit to retire, lead to cash
Source to pay Lead to cash Recruit to retire Products or Services Design to operate Record to report Public
Slide 34: Partner ecosystem and SAP solutions portfolio
PARTNER ECOSYSTEM Industry-Specific Capabilities Source to pay Recruit to retire Lead to cash SAP Ariba SAP SuccessFactors SAP Sales Cloud SAP Business Products or Services SAP Service Cloud Network SAP Digital Supply Chain Management SAP Commerce SAP Concur Cloud Design to operate SAP Fieldglass As
Slide 35: AI Foundation
Al Foundation
Slide 36: Thousands of customers generating data
Thousands of customers generating data SAP customers generate of largest companies Across 26 industries total global commerce ($46 trillion) in the world are SAP customers and 12 lines of business people use SAP B2B transactions Cloud user base: SuccessFactors solutions users Public
Slide 37: To drive efficiencies and productivity
To drive efficiencies and productivity Public
Slide 38: Public
Public
Slide 39: AI-First and Suite-First innovations
AI-First and Suite-First innovations Public 41
Slide 40: Go-To-Market Strategy
Go-To-Market Strategy Scott Russell Chief Revenue Officer Customer Success _— _—
Slide 41: Rising Demand
Rising Demand Boost in demand growth in the midst of the AI wave Overview of demand YoY pipeline creation growth1 (1st Half vs 2nd Half) 2022 – 2023 Cloud ERP demand spiked for key industry clusters in H2’23 ~3.4x +96 pp Discrete Industries +71 pp Energy & Natural 2021 – 2022 Resources ~1.6x +37 pp
Slide 42: Move to Cloud Momentum
Move to Cloud Momentum Installed-base transition and positive up- & cross-sell trends to fuel our growth Shift to Cloud gaining more traction Expect to reach 50% of Cloud Revenue in 2024 YoY increase maintenance revenue converted to Cloud Bookings Total Revenue mix in % overtime ILLUSTRATIVE since 2
Slide 43: Focus on User Adoption
Focus on User Adoption Emphasizing adoption to support revenue realization and customer retention Strong Total Cloud Backlog build paired with fast software activation Cloud mindset embedded across the organization Deployed ACV Total Cloud Backlog • Faster activation of the full contract value – Lim
Slide 44: Revenue Excellence
Revenue Excellence Strengthening our go-to-market engine for quality revenue growth High Revenue Quality Amid Market Shifts Increasingly Profitable Cloud Growth Net Retention from Q1 2022 to Q4 2023 New & Up-sell Cloud Bookings / Sales & Marketing Expenses -9pp Industry Median Decline1 2021 2022 202
Slide 45: INTERNAL – SAP and Partners Only
INTERNAL – SAP and Partners Only Public 47
Slide 46: Commercial Update
Commercial Update Julia White Chief Marketing and Solutions >a —_—
Slide 47: Packaging and pricing
Packaging and pricing Aligned to SAP’s long-term business strategy Public
Slide 48: Packaging and pricing
Packaging and pricing Aligned to SAP’s long-term business strategy Public
Slide 49: Packaging and pricing
Packaging and pricing Aligned to SAP’s long-term business strategy Public
Slide 50: Land | RISE with SAP packages
Land | RISE with SAP packages | ü ü ü ü RISE ü Premium ü ü RISE ü Premium Plus ü ü ü ü ü ü Public
Slide 51: Expand | Cross-sell new buying center packages for RISE
Expand | Cross-sell new buying center packages for RISE | | ü ü ü ü RISE ü Premium ü ü RISE ü Premium Plus ü ü ü ü ü ü Public
Slide 52: Land | GROW with SAP packages
Land | GROW with SAP packages | ü ü ü GROW ü ü Base ü ü ü GROW Premium ü ü ü ü ü ü Public
Slide 53: Expand | Cross-sell new buying center packages for GROW
Expand | Cross-sell new buying center packages for GROW | | ü ü ü GROW ü ü Base ü ü ü GROW Premium ü ü ü ü ü ü Public
Slide 54: Land & Expand | Embed BTP in the SAP product portfolio, then upgrade
Land & Expand | Embed BTP in the SAP product portfolio, then upgrade GROW/RISE with SAP SAP SuccessFactors Expand & upgrade Full BTP capabilities SAP Sales and Services Cloud Public
Slide 55: Land & Expand | AI unit monetization model explained
Land & Expand | AI unit monetization model explained Public
Slide 56: Land & Expand | Seed base AI; Monetize premium AI use cases
Land & Expand | Seed base AI; Monetize premium AI use cases SAP AI units in base offering Incremental consumptive revenue SAP AI units in premium offering Overages SAP AI units in premium add on Public
Slide 57: Expand | Custom AI solutions via generative AI hub
Expand | Custom AI solutions via generative AI hub Public
Slide 58: Financial Update
Financial Update Dominik Asam Chief Financial Officer _— _—
Slide 59: On track towards Ambition 2025
On track towards Ambition 2025 Consistent execution continued over the past 12 months CAGR +25% +25% ~€8.0bn >€21.5bn +10% >€37.5bn €17.15bn €31.2bn €13.7bn €5.1bn ~€3.5bn Actuals Outlook Ambition Actuals Outlook Ambition Actuals Ambition 2023 2024 2025 2023 2024 2025 2023 2025 +28% ~€16.2bn +24% ~€
Slide 60: Optimizing the Growth-Margin performance
Optimizing the Growth-Margin performance Expecting accelerated revenue growth and increased free cash flow margin in 2025 Total revenue growth at constant currencies. FCF margin defined as FCF divided by Total Revenue. 40 30 Free Cash Flow Margin 20 2025e 2023 10 0 0 10 20 30 40 Total Revenue Growth
Slide 61: SAP financial performance 2023
SAP financial performance 2023 SBC expense €6.21bn Free Cash Flow Net interest receipts (+9%) €5.09bn Depreciation (+16%) OCF Other non-op €6.51bn (+5%) Capex Leasing OP €22.6bn (+8%) Tax payments €13.7bn (+23%) SBC payouts Cloud ERP Suite Gross Profit (10.6 | +33%) Net working capital €31.2bn Cloud
Slide 62: Focus on Cloud ERP Suite
Focus on Cloud ERP Suite Sustained momentum drives accelerating overall cloud growth SaaS & PaaS Extension Suite Extension Suite Cloud ERP Suite IaaS 34% 34% 1% 1% 31% 31% 33% 33% 33% 33% 32% 12% Q1 Q1 Q1 10% 11% 8% 8% 2% 2022 2023 2024 1% 1% 0% -7% -11% -14% -15% Q1 Q1 Q1 Q1 Q1 Q1 -19% -18% 2022 20
Slide 63: Business AI to boost user productivity
Business AI to boost user productivity Joule could be a multi-billion USD opportunity for our customers just from user productivity Illustrative Cloud Users APJ & Greater China North America EMEA Latin America SAP Cloud Users Public
Slide 64: Customers' move to cloud accelerates
Customers’ move to cloud accelerates Business AI and Clean Core benefits drive support revenue conversion Illustrative as of May 2024 as of May 2024 Other* S/4 or ECC: mixed on- prem and End of End of cloud** 2023 mainstream 2023 mainstream software support S/4 or ECC: maintenance software maintenan
Slide 65: SAP financial performance 2023
SAP financial performance 2023 SBC expense €6.21bn Free Cash Flow Net interest receipts (+9%) €5.09bn Depreciation (+16%) OCF Other non-op €6.51bn (+5%) Capex Leasing OP €22.6bn (+8%) Tax payments €13.7bn (+23%) SBC payouts Cloud ERP Suite Gross Profit (10.6 | +33%) €31.2bn Net working capital Cloud
Slide 66: Rapid gross profit growth
Rapid gross profit growth Supported by expanding cloud gross margins and stable on-premise margins 73,0% 72,5% 72,2% 71,4% 70,7% 70,8% 70,3% 69,7% Cloud 68,7% Q1 2022 Q1 2023 Q1 2024 Support Software 91,1% 90,3% 90,3% 90,2% 90,1% 89,8% 89,5% 89,2% 88,9% Services 2020 2021 2022 2023 2024e 2025e Q1 20
Slide 67: Increasing operating leverage
Increasing operating leverage Transformation program to deliver structural improvements Stringent transformation program with tight Nominal currency expense growth divided by total revenue growth rate. governance in place >500 efficiency measures rigorously tracked & executed across all functions 15
Slide 68: Increasing efficiency and scalability
Increasing efficiency and scalability Aiming to decouple expense growth from revenue growth 27.0% 24.4% 25.9% 19.5% 20.6% 20.2% 4.4% 4.3% 4.3% 2021 2022 2023 2024e 2025e 2021 2022 2023 2024e 2025e 2021 2022 2023 2024e 2025e Next Level GTM role transformation incl. Stringent long-tail reduction of lo
Slide 69: SAP financial performance 2023
SAP financial performance 2023 SBC expense €6.21bn Free Cash Flow Net interest receipts (+9%) €5.09bn Depreciation (+16%) OCF Other non-op €6.51bn (+5%) Capex Leasing OP €22.6bn (+8%) Tax payments €13.7bn (+23%) SBC payouts Cloud ERP Suite Gross Profit (10.6 | +33%) €31.2bn Net working capital Cloud
Slide 70: Cash conversion on positive trajectory
Cash conversion on positive trajectory 2024 free cash flow expected to be impacted by short-term effects non-IFRS Operating profit Free cash flow Free cash flow in % of non-IFRS operating profit ~80% 78% 68% ~€10.0bn ~45% €7.6 – 7.9bn ~€8.0bn €6.4bn €6.5bn €5.1bn €4.4bn ~€3.5bn 2022 2023 2024e 2025e
Slide 71: Capital returns reflect commitment to shareholder value
Capital returns reflect commitment to shareholder value Updated dividend policy based on non-IFRS results Targeting to pay dividends of at least 40% of our non-IFRS profit after tax from continuing operations €2.451 €4.4bn €5.0bn €2.20 €0.50 €2.05 €1.5bn 2 €3.3bn1 €1.85 €3.3bn €3.2bn €1.0bn2 €0.6bn2
Slide 72: Confidence in our future
Confidence in our future Aiming for accelerating revenue growth Accelerating Total Revenue growth through 2027 Total Revenue Growth supported by sustained cloud momentum 31.2 Total Revenue Operating Profit Growth supported by increased operating leverage 17.0 – 17.3 13.7 Cloud Revenue Operating Marg
Slide 73: Break
Slide 74: Financial Analyst Conference
Financial Analyst Conference June 6, 2024 Public
Slide 75: Public
Anthony Coletta Chief Investor Relations Officer Public Muhammad Alam Gina SAP Product Vargiu- Christian Engineering, Member of Breyer the Executive Board Klein Dominik Chief People Officer & Labor Director, cf Member Asam Scott Member of the of the Executive Board CFO, Member of the Russell Executi
Slide 76: Financial Analyst Conference
Financial Analyst Conference June 5, 2024 Public