SAP - Earnings call transcript Q3 2021

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Operator

Good day, and welcome to the SAP Q3 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Anthony Coletta, Chief Investor Relations Officer. Please go ahead.

Anthony Coletta

everyone. morning, Good you SAP thank our call earnings Welcome QX for results. discuss 's to and joining On note, SAP. a earnings first personal I'm delighted my towards for capacity. a is distinct to in It honor this serve CEO, With Christian will me opening remarks. call on today, make Klein, CFO Luka the and Mucic our

customer today room our you is now my as organization. us Stefan who from for successfully York us a few start? say we we handover. to Would Q&A Gruber, like City, Joining Also, Welcome, conclude Rusell, with Scott New before is success the Stefan. our in predecessor, words

Stefan Gruber

Thanks, been for last want financial you, enjoyed hands just community do Anthony, during I and XX privilege And next with now a to our and because and the is can congratulations the good great to partnership community has financial I in forward What to over with your I to years. I'm my appointment. Anthony. looking the Back engage say And know thanks the you. really collaboration. the briefly chapter ease also this last at here I weeks, the it cooperation that very

Anthony Coletta

right. XX:XX:XX]. the you, Stefan. [inaudible All And to Thank now

actual are call, and current assumptions future make will this statements projections, results materially subject to based forward-looking are about that that During other cause or outcomes expectations, uncertainties statements events. which could are we statements and These predictions, on forecasts, and differ. risks to

XX-F, to found risk for uncertainties Form be including, and these in filings Annual limited information Additional Exchange risks SAP's Report factors Securities the may Commission, with our regarding but XXXX. not section. on the and

non-IFRS, to financial you download. at I with available growth this website, are numbers Unless The and non-IFRS accordance changes SAP to intended substitute we the call financial IFRS. prepared otherwise Investor And will On can superior over be non-IFRS call find a are all in performance point Relations financial for provide percentages Christian. the with measures or rates call year-over-year and on stated, as currencies. the today's now measures the that, turn not supplement considered should to of constant deck

Christian Klein

thanks unprecedented QX to workplace, for The surpassed XX% transformation. satisfaction. WireCAP facing backlog, Yeah, disruptions, thank combination you, our healthy. pandemic, course, we which an to growth hope billion. on for our Anthony cloud factors. strategy, and improving, of is drive has are introduced addressing approach based first reflecting A approach the climate year outstanding and newer business customers you everyone which very chain time these trends pressure with also a Stefan. RISE is from of us including cloud ago, resonating. waves It's new I partnerships support unmatched supply staying been EURX challenges. our At changing the They're is and is and business safe led our SAP directly quarter. of holistic our customer to deep developing in of hub SAP. in customers joining strategy today. change. new clear to keep all customer with high that The And strong

key offering in transformation offers Our which for business three Cloud, the benefits.

customers helps business intelligent new adopt, develop, it First, enterprises. and models, thereby becoming automate

chains manufacturers. world, network, resilient and the suppliers them BXB more Second, in of largest by our community customers our we help vast create the with network the supply business connecting

the motivated their and companies by a became role improving partnership critical pandemic. people's during lives to strong one help green placed business crystal-clear is uniquely line, than SAP lives. processes. fulfill the the are part We government. between our sector technology the to partnership play ultimately mission, we world run are to A put as key better people's most help help and better improve SAP no our is positioned energy-efficient of This in at the place we Third, to improve customers

Form the education, to or in we Germany in or vaccine contact our with their digital Whether are Germany elsewhere, distribution. tracing, and nearly like healthcare, at it's in investments about downloaded U.S. infrastructure, new times call. transformation OneApp, million encouraged XX apps by discussions

turn details behind to our the now of quarter. Let's some

the We strong line are seeing growth excellent applications. progress Cloud our business in of and across

quarter revenue sequentially we to growth QX. growth, This accelerated Cloud points the higher by than second and of competitors. continue is to in our this expect Our X% most XX% large increasing consecutive of

QX seen business both growth record management. with and E&P human in have in We years Cloud QX in X highest new the experience

faster Our year-over-year. is growing X% largest business grew revenue our new our Cloud than Overall, competitors.

with revenue QX [inaudible has growth. consecutive XX:XX:XX] RISE quarter the great new this this already increasing offering third just start comments. We January and about I another at been introduced talked of quarter. SAP year Our our in my of

ERP, is strategic In an strong close the behind are effectively more technology S/XHANA grew a by our QX. RISE and important, up cloud platform, to In XX% line share industry with future based collected in impressive strong for As installed our lead foundation XX% XX% in important revenue. to QX, QX, enabler. building Customers which than the customers. even to S/XHANA revenue analyze, SAP specifically, from of RISE their enables from base this S/XHANA revenue Cloud, our we cloud customers. time, processes our more dynamic At practices grew cloud in to applications. redesigned QX, quarter's momentum and and this, new an by XX% up winning XXX,XXX XX% and momentum. cross-sell market leads dynamic S/XHANA the strong This accelerates coming Cloud and the move same more models cloud business SAP from strong of to SAP adoption including modular business and best business SAP's with of benchmark from on can turn backlog

new of SAP. Thanks backlog Philips solutions, whole saw equally our stores from with with customers, all QX, As across RISE domestic growth new portfolio. double-digit among momentum of line cloud appliance double-digits. cloud seeing choosing our our our by the business RISE of applications. main We hundreds In SAP. with U.K. to We're and strong are business

double-digits. further We We S/XHANA in to by human win invested and are the experience covalent acquisitions our of their against wins that seeing end-to-end a more SAP harmonizing for management showcasing part In will by wins several both has International. impact, Company. simplifying Cloud grew quarter business CX business, integration cloud again, definitely this Cloud new lowering portfolio part as with and Ariba. to SAP overall IT Global processes. Siemens revenue large of solutions, including customer S/XHANA business, that Workday. streamline including UK-based food experience their costs. strong a positive our key solutions selected SAP wins continue products, and VMWare Adidas with was transform our record, Via backlog saw data energy, S/XHANA and a With against

We our multiyear strategic Reckitt long-term with Cloud. agreement Analytics are SAP a new with Department about excited also U.S. Defense of agreement signed We the for for Concur. very SAP

business across and underpins the and this backlog. technology Yamaha quarter Our include well Robert platform, nonetheless. Customers Corporation, our which both SoftBank business cloud Bosch, of line revenue strengths grew applications, cloud in also Corporation,

of Cloud applications For EURX ERP the first annual time, exceeded runway. of our billion business, business spanning our revenue overall line

our modular we overall extend well. this new ERP, a has expect offering RISE another As we In grow solution, include quarter. to to to summary, been Cloud excellent continue our ERP business industry

expanding and at has Our set is an delivering an markets. results pace hold across demonstrate of that our accelerated strategy taken

we that are sustainability. and are our about In spotlight are imperative of a the seeing We optimistic I we transformation: closing, outlook the at again. want momentum heart raising to once critical is our

reduce zero their and to major design. Control after, transparency We this will we Tower, our advances helping build and new is net footprint the providing customers SAP around progress Sustainability net supply companies management footprint launch year, will product reached outcomes help their zero. help launch are customers SAP into responsible design product chain. goals. to insight customers their we production, of to introduced Shortly sustainable SAP delivering Recently Later designed with

supply However, problem of spotlight our or this go do solve Conference, beyond advantage much role. unique The This multilateral customers top-line. processes happening line significant the ambitions climate is a businesses is We our green on enable government, crucial. inside outside enormity chains across and critical the as to offer. single challenges. see as a can that But your manufacturing Change important with as our organization business can Climate the manage and is individual SAP change COP the to products. ability The alone, UN's business month, far organization next and putting no play XX, bottom

will innovation us to lead this You call. continue significant on see

strong addition to In coalition. business building

Central at leading note. remember us X with an still for a took Park. New the actually you when York a in XX that, personal met Stefan, me the out after on intern we I years. and first was Let six Thank you, Investor of Relations time the we last -- you for me to concert It together. I for when And COs. and worked can was close

took increased integrity, course, cap personal earnings not, grateful on six-fold, for really of believe for in XX and and or market very your Anthony Officer. calls. of enjoyed behalf number we Anthony warm America. as and welcome for dedication, A leadership friendship, I'm you the North Investor working great SAP, really Our also a for I for SAP, you you, are your new time, recently Relations - to work. with We and most it all has thankful well Coletta, key future. The same wish you positions our of a Chief CFO held part,

delighted results today Luka you are know to Thank over and more me have I'm all through you to him. in sure for Anthony detail. enjoy joining We again and our let role new getting this hand now in talk to to will us

Luka Mucic

counted and I'm but before or that to I say, of between. consider headaches have for like of have together Thank to you. would in started, on only worked as to a to not actually meetings I you you hope you, XX many had But and one-on-one I with it partnership quarters also work of you well big the I very CFOs. didn't for blessing years I say friendship. side whether you many investor much, CEO course, that road house, the curse, Stefan, create and shows we Christian. get countless for also and two a sure I unlike too thank

should As getting also we enjoyed gave uphold. times, of and is all recently ago. the that XX to to be I also with excellent but you, even able wake humor. meetings, when Stefan think were I I That a always a difficult genuinely these of more through working were an going and in play the disclose always piano sense we player months here was of

now, And that ending. we're that you're concert, so, a practice I bit more at fully can is every a time to having the quarter to recorded as get expect for least little least

the and SAP also And the you all personally. great thank all you, me really time together for to looking best of big I to this new Anthony, the been capacity. I'm all of you a in to Operations. a with to CFO So, At really with and again, same was your long Customer of work the Stefan. time, also forward working once working together We've dedication

in head CFO in North emerging Latin You a and FP&A both became of mature America. were and and the then America, markets Mexico,

think ground, the a on sure in to as dialogue of I'm have the well to as will appreciate investors bring through been with the business this I personal you. come you'll the greater we understanding our table. And that going transformation

looking At let's with forward together you. and more too congratulations again, once see. quarters many XX, least So

forward. mark excellent financial of out to of and macro customer But end business in renewals quarter, on business choosing which more of key accelerate, expect our growth In reflected one see, translates end-to-end an my XX%. backlog our with the business Christian increase come going high confidence That the accelerated to cloud specifically QX. That's This year. current customer us strong highlights we platform, me are exceed review can level customers with indeed the in Qualtrics. quarter. that clearly we to about their I that contribution and our of into bookings to the is And pickup SAP the way, to was processes. all across details X,XXX the This SAP in the of of in intelligence, just acceleration was experience, customers QX, and let S/XHANA even an X% adoption by as driven wins. what that the momentum continued you talked comfortably what some results. third the financial redefine at give cloud, was like a strong how by some is the metrics. stronger technology business well continued RISE to an would driven quarter, gives reaching third over which process now of optimize So, see by as than expected

cloud what further expect backlog we quarter, of this growth, For quarter. to current the saw positive similar we development fourth a

traveled and remain point solution up far double-digits the picking in our overall three-percentage While on backlog it backlog. in representing so volumes again, the drag was only was that entire a portfolio slowly are flat, Concur's in not backlog growth growing

As will momentum travel Concur, expect eventually resumes in fuel the near-term, further. we the

strong For the XX% quarter, by revenue. cloud a backlog billion, future building foundation current cloud S/XHANA to grew EURX.X for

As accelerated growth anticipated to was for as revenue and XX% million. up cloud EURXXX

Our Cloud X% growth increased revenue sequentially to XX%. points by

are also adopted of our X%, see revenue points year. up our licenses our but year-over-year of strength revenue, with continued bounced continues driving X% last rate. by decrease moderate And since category by total XX% revenue November Driven holistic up Concur We sequentially. still to attributable Cloud our to divestiture the of representing intelligent at as SAP. fastest X%. mainly that turn Interconnect predictable anticipated, cloud offering X% growth quarter, of growth signs customers X% revenue a grew more which business is more and to show rate As the share in cloud encouraged increased the our of subscription RISE software the XX% Overall, strong to the in was Services software by revenue to to now spend outbreak for Digital is down by points revenue revenue SAP business, the of double-digit pandemic. the our back recovery, our total

U.S., up with some UK, you was regional revenue software and Cloud a Americas In provide regions. the on We and U.S., across strong EMEA software performance. Cloud strong strong. XX% in and increased in briefly another Cloud particularly and market, and software X%. performance our Cloud by Canada, our acceleration and up In Singapore, sequential Cloud being XX% revenue robust France region, APJ with with we Brazil, South in color XX%, Cloud again largest Korea all now the highlights. a was to revenue Cloud the increased Japan, being Germany, had region, by Cloud the me that pleased with Mexico. region, were X%. We revenue Let see growth. by by increased performance revenue revenue the In revenue increased had X%. the

third our the margin quarter. at at total gross margins profitability XX% and cloud stable look in Let's now the of revenue. with share gross Overall, higher remained even

margin by XX.X%. basis gross to XX decreased cloud Our points

service However, spend year-over-year. our we pleased to strongly margin were X% see that both increased approximately intelligent and infrastructure as a by

executed further margin of initiatives, our we outside As most next-generation thoughts, was investments Cloud delivery XX.X%. the related spend. occur intelligent But our the of on business PaaS

up and first Cloud. our by business result XX the margin a X X% Our the our Cloud In by XX%. margin for shift declined points expanded software to operating transition of gross was months. basis revenue the third steady profit and XX.X% at as effects from to services X%, our quarter, The mix of gross remained the

XX.X%, due X%. ratio R&D, additional in the declined to R&D our by which increased basis investments operating to approximately planned margin Our points primarily XX

share-based the operating by XX.X%. the grew by compensation was margin operating our driven basis, and profit XX%. X Qualtrics. our to mainly was X.X% to very X% was down primarily For higher by over to an On first operating This XX% to margin related months, EURX.X strong, down was IFRS And decrease billion. IFRS expenses

was EPS to to by in and XX% XX% IFRS to exempt comparison to tax X% contribution to again and to tax another the XX%, to XX.X%. rate changes the down our the non-IFRS Decrease third results outlook, strong full taxes, EPS, to terms. decreased previous Therefore, IFRS effective XX.X%. year down Sapphire in effective tax includes we non-IFRS mainly in XX% This up EURX.XX, XX% Let the rate the are me non-IFRS IFRS tax from to lowering now effective income. for quarter, guidance And X.X% to turn EPS X.X% was flow. In was Ventures. cash rate from EURX.XX. while

by EPS compensation. in addition, IFRS In a our year-over-year impacted share-based was increase

flow As flow X% months. by by EURX Free income were effects the expected, down share-based declined from cash paid. payments supported compensation X lower and first EURX.X was billion, to down only higher compensated billion, cash for to reduction our Operating restructuring X% was a cash in flow slightly positive taxes capex.

our to first year, solid very X and have months, cash of the business in based full flow end performance performance free the months. flow the are we the the operating at remains outcome cash strong For But had unchanged. confident the in strong highly nine we year. Reflecting guidance the a on first

profit for raising We year. full and the are outlook again revenue our

please outlook, detailed statement. quarterly to the refer For our

me let a change but heart. sustainability, on closing, challenges. Before our close the you climate solve to an a Christian update topic significant business role help with play provide briefly mentioned, to already

despite the were At the With keep important however, as many companies at In an to the time, become we sustainable. level same of developments product remain other in in as latest business. restrictions EPS, prior more the a the exemplar same acting COVID year, sustainable growth QX, and it emissions some of as to lifting business geographies. our gradual strong carbon able is

was Eco environmental our social the by receiving In the Vadis addition, gold-medal. Sustainability leadership space in and Assessment highlighted

third So, we quarter. a in had summary, tremendous

midterm happy a strong. This puts rates are order a extremely focus exceptionally your confidently and with will are be now healthy we entry on to was once you, we full-year continued us ambition. guidance our path Renewal the raising position on Thank efficiency. Our our great questions. Therefore, take in again. towards

Operator

[Operator Instructions]. and Ladies gentlemen,

Materne today question Kirk of from Evercore first ISI. comes Our

Kirk Materne

and Cloud of wondering thanks couple and be I for guess last the talk momentum, And great very the Christian, that especially with I maybe sort nice out the about congrats all just over at you, Stefan quarters. question the your could to how will thanks my S/XHANA Yeah, echo to on side. seeing breaks I work hard us if you SAP, run working for start, will geographically. much. investor a on was of

If rates. could of talk And you just terms the then to I a some U.S., you you're guys. and front a couple lagging seeing similar in Luka, maybe Americas that the was or others geos, of across that Europe that but next just relative quarters. wondering about growth and -- wondering geos in adoption assume, performance little the I or about peel talk back, growth, of the you I that all bit how the is lot expect the was Americas could accelerating, versus over Asia-Pac. to of concur, which I And if see if Thanks

Christian Klein

Yeah. Thanks regional the also a we in the as deal went feel around sizes quarter, please our lot, what can comment, -- And Kirk. and performance. we to on some free I had Look also especially seen have far cloud. questions at Scott the on remember

First, have I also the it document. you guess earnings in seen

significant across the some In we with case seen in meantime, This partners. look which our business have see the that small the large that a the of the at meantime, We we with move the when S/XHANA and When question, the the customer we and also what in course And also not movement you RISE even transformation clearly signals also customers, bench. deals. the is S/XHANA deals, Cloud role the across step is Cloud mid-sized really go the some launched with we perspective. platform ecosystem actually, And RISE also as-a-service joins the is also base. of also We asked a further. COO. offering X SAP, are respectively perspective, targeting but SAP only industry geographical

help we are how make happen. and Now, can this to asking, the partners move coming us better to

the existing just Scott, do you of example, there you to than And as customers can partners a existing have. now market RISE to give just is that migration. more they feel over Just our switch contracts regional the biggest wins high to their maybe highlight we and to offered see one such some an hyperscale of demand technical maybe

Scott Rusell

do Christian. I it, can

highlight we've with to They on workloads and to Cloud, growth First of the new transformation move net scale you accelerating really that modular a is moving the big moved we've doesn't this Europe continue it's in also their the the trend I customers, to going RISE. important businesses got the road that's we have America in had both. moving and to think companies, really and rise and help drive Cloud, their to all, across both all customer third I seen of And that quarter has business and like in complex to regions in large, coming need customers America of simplify the occurred, is change. driving expect summarized regions that at the the what the who to parts and new customers Make forward. well forward. now to of board think S/XHANA rise transform that a see I -- Cloud, particularly an environments But at going we North businesses where transform big that

Luka Mucic

as see order just sizes in year. cloud from order know, weight more entry of in X contract we And that total million of you up to better, can this actually represented annualized contracts quarter. points that's nine our total this, disclosing last the against value also percentage And the than XX% the are the growth you of of and contracts Yeah. entry complement there relative different

makes particular ones. customers, really all about this So, in transparent now clearly very this talking sizes we're that larger of

the on growth. Americas Now

of First of in growth pace few EMEA I pandemic, obviously, the the of regions, faster rates other the at before the all, terms even grown the had two a think Americas. APJ, than and

pandemic, by correct the far proportionately because fact over in it's was America's same recovery to in And Concur, the we in higher They U.S. negatively, by hampered from was was Having higher particularly largest America, growth said revenues the revenues entering QX share in that each X%, obviously the as of that and QX. accelerated very affected, all all actually which you seen the have proportionately And QX. we by regions. market are that QX evenly the case a U.S. and markets Just region. paced also is the majority that, of across which the in actually re-acceleration into their that from particularly, has the the of have a of

the would quarters. showing further same recovery coming expect continue the next and of And a scale, to Americas and course, So, pace that acceleration. for different of is at the shape I also

very the So, business in happy particular the But performance in overall. the region about we're in also U.S.

Kirk Materne

Thank you, all.

Anthony Coletta

Thank you.

now question, the please. take Let's next

Operator

today Our comes James of please Mr. go next Goodman Barclays. question from Goodman, ahead.

Anthony Coletta

Operator, the next let's take question then.

-- you is have We take the next can line so silent, question. maybe the

Operator

Our next question comes from Mohammed Moawalla of Sachs. Goldman

Anthony Coletta

Operator?

Mohammed Moawalla

hear Can me? you

Anthony Coletta

Yeah, we can you hear now.

Operator

can Yes, we hear you Thank you. now.

Anthony Coletta

ahead. Go

Mohammed Moawalla

Great. Morning, and the you. Yes. future. Luka, Christian, for Okay. questions. I also Stefan, the X you best all Thank wishing have

up, The as starting the to that growth on accelerations backlog, my QX. was to understanding first, see pronounced more the you backlog into as both Luka, was been start cloud expectation historically -- pick

think that I kind comment made moves going be similar the you to levels. of it's

around starting back, you had And secondly, growth can that the you've kind to the is us marketing just broadly, more as Is noticed XXXX. levels. sort building What growth cloud or just comment. into the obviously, obviously discretionary kind OpEx, obviously help moving So, I and think current explain OpEx. accelerate blocks concur of strong sustainable kind sales of comes this the come of back. significantly beyond on we see of as particularly expectation. cloud your Then is the trend? I of environment. couldn't a acceleration the And we that pretty mean, spending then more

and this sustain you factors Thank back, you more coming key look into would the you. growth? your with some spending what are next as look to So, to accelerate year, or of invest

Luka Mucic

Let me cover those, Christian.

backlog were that into we the our obviously, exceeding as off of heels we're coming on First was of actually all, spectacular walking the quarter expectations quarter. the the

have that scale of have that expected as that in would only growth growth we So, seeing we not would expected quarters past the and would saw some have QX. fully of we that in actually,

we of already, acceleration We rates Now, up that healthy we so a our in Absolutely. no portfolio. state continue acceleration. trend QX? great very are see at and see growth that business are further renewal strength will expecting We to a further doubt see a

similar actually a saw think fact acceleration should However, absolute necessarily it the backlog QX pandemic. underpinned XXXX, also fair a the assume given see by at I exactly dramatic not two we achievements ago, in best quarter we the the significant the had to this. recall, very expansion QX years prudent before. This level that the if and is saw now, the up, was in but by you of was probably, that that in terms, is And years entirely we we Cloud that top we many on until saw in that that unaffected QX, step in

perspective, we up harvest. exactly important we us further highlighted, to continued I confident would you a see business same, make So, to Need it from if be supporting be And this have One year. that that will that actually to also think able great are. XXXX a we see is our weren't acceleration on drivers XXXX also achieve in as us the of cloud result. terrific number a success. of will that to that set where compared We Concur is, actually drive to a And also growth. of positive have moderate a have They still we but will are certainly up they with year this order perspective, starting entry opportunities, now revenues. already Cloud, contributor a in are one, the to breadth mid-single and still start next great will digits on S/XHANA in a but showing in to such It's revenue performance a strong very wealth QX. the to recovery. And backlog, they our show only a in a now secondly, become we very

base course, the S/XHANA will of continue growth We this will, to well overarching backlog the from growth revenue are more in year, of add that the into and and growth more very and the and business. confident an next ever-increasing

not perspective, accelerate in from Cloud into So, XXXX. we business that confident to going are also but that will only our continue yes, QX,

we XXXX In of that we OpEx communicated ambitions, in in associated the terms are what against profit slight XXXX, strategy we commitment. guiding well were from and and perspective, new we executed would our when have flat our and in I an say, XXXX, is to this for far and clear mid-term expectations so I extremely think This expect very now in declines we profits.

guidance Our flat flat also minus to slight also in to we And will see our innovation. expectation X% invest to properly -- My for fuel in profits. declines growth. to is in unchanged. we will continue current XXXX That XXXX for remains

R&D which very from impact it an we revenue of in revenues. also total line scale cloud we're as We on positive software will the growth, effectively the ballpark it same now, will and seeing look to with top show line. start But its with at ratio the roughly cloud and XX% accelerating will

going exactly seeing for investing years, growth sustainable at make beyond in look this direction, right further many are things frankly, and quite to we're XXXX. the we So, will that

And perspective, our so, ambition. planning that from remains that

Mohammed Moawalla

Thank you. Great. Okay.

Operator

comes Our of next Goodman from question Barclays. James

James Goodman

Thank me. you for Great. back to you me Can coming hear now?

Anthony Coletta

Yes.

Operator

Please go ahead.

James Goodman

from all side best well. Excellent. Stefan, the as my And

on terms versus really update over, would business. extent converged if be so in guidance talk QX. expectations. has on anticipating with the decline same question of bit the very seeing you I to ask could the could the mentioned customers to outperforming the weakening about is: on just took simply that a far by initial you confident license secondly, And the the into quarters so project of as But is briefly up that license which it's a in In migration cloud to I now? effect those progressing? great. anticipated a gross dissipate time, And at is And conservatism quarter are two-year in mean, we And the on-prem X I'm performance for bigger costs will project trying an cloud? view, this the is ramp come core the the I that gauge row, how around of largest your even running we you cost the year? Where implying the clearly a that, you significant substitution not ahead but that switching Luka, margins, been of that RISE, in that the are when next we're project, end still a

Luka Mucic

Yeah.

your give the Scott, get me in perhaps as but software please view well. and on let So, can started, you particular

side our most will which QX. very the are expect ever impact bigger in that back-end be of transactions for in search also a be close a be greater pronounced contracts in what think, it's impact greater very therefore, large we cloud will let's there been large RISE loaded assume for we a where seen have and of also particular. natural seeing that license revenue in on than more of to side, So, typically to quarter-to-quarter, that's And large clear: plan further business makes it a on the from this opportunities, software sense the we obviously now search that QX significant why, should And on can software year-to-date. but in the software basically I amount world has

Converged the And good perhaps be In But if fast. we planned Cloud, year-to-date in to can with Converged slightly with in scaling actually comment making all of slightly a we the on as was progress. beginning on expected. the Scott and obviously terms performance by terms they XXXX. briefly share higher come lower particular, happening with not and the back that of will where since share of then very, of activities in We program, XXXX, then migration a XXXX very investments, as the just are done actually the in the believe most, Cloud software we're nevertheless pleased are cloud

QX in impact cloud in terms of as Yes, margins In had a program on the of about well. the clear let's the Cloud margins, were slightly impact this of declining. the we be negative

them a the from perspective, are to margins we However, planned be. had where year-to-date exactly

We are we up the the harmonization In an increasing ramping would as on program investments. actually that cloud's it. half planned the have impact second have

basis nominal year-to-date XX for up or currencies, by are planned which constant points have at exactly we in in points with XX basis currencies, that the XXXX. we slight improvement So, is line

will also help You XXXX. should but the planning. then entry on our be the same revenue flip line Investments very higher, should per growth side on the level the out obviously will seen we expect have the for slightly strong side, order that and that

planning step-up operations but of Cloud will XXXX program much higher those resiliency, a assumptions. with confident remain completed levels then in higher up also our not we have The efficiency automation. because only of we than So, be when in big have the as we

next comments side? we for perhaps year respect, remain and also and your from nothing improvements expecting in changed we're absolutely this in track So, Scott, that this around has year. some on slight software the

Scott Rusell

additional Yes. just that three Sure. provide cloud. on to the things Thanks Luka, I are guess these commentary the what described Luka to software, and transition

moving really platform a S/X is, and remember at to based customers with scale. on digital The a is first and important are it's that

primarily, the you doubt to their digital and cloud the to a having core performance running no And is are out transform in clean mission-critical in resonating there they the that business, cloud. as in drive and backlog saw workloads. be booking’s So,

offering, accelerating. you'll And we're seen software. And cloud, cloud the third to we've planet. The transforms see of to X as to all X of And momentum medium, understand expansion clients the that and on is a over is And RISE. highlight, continued of the it's of the Luka is comment months small, in would launch net that that to understand seems are reminded it we only to how being -- in of that that move forward large businesses around our what I progression months their transformation second of business. the then existing customers, the obviously the described the go new that outlook I both their versus customers

that on as transform outlook so the be will reflects are the the effect to the customers to will outlook continue software. cloud, -- and given pipeline we've natural accelerate, reflects the Our in in the choosing

that bit So gives more a context.

James Goodman

Yeah, guys. that's helpful. very Thank you,

Anthony Coletta

Thank now Let's you, Scott, --

Operator

from Bank Frederic It Frederic America. comes question of of from comes next Boulan Our --

Frederic Boulan

A taking the Hi, question. for of couple thanks follow-ups.

margin all, of the next into First year. on question

operating moment profits. of spend offer, is can considering can item which on that going R&D, and think options disruption in broadly if is And in the the seen up, anything stable reduction to -- you of and So, can when slight seeing, relevant. take interested mentioned the discuss In XXXX, that mix else particular, chain how be a driving single you industries. will -- into current guidance any a to slightly different if but And to cloud your you're you of you going cost other maybe what's you impacting second, margins? secondly, I'm bigger, that cloud license in terms we've a supply that you impact but cloud age in more bit platform, across many of terms migration

the Thank solutions those you've back you that the update initial in you the cloud more increased can of on launch flagged seen If from topics. industry customers launches broadly, any you. June? for provide And on engagement

Luka Mucic

get our next me the well businesses. I year, then spend questions on expect let Christian business-related that as would businesses, margins the to as going hand started then. the can So, more and in our so I on over intelligent both in SaaS/PaaS on Look Cloud side into

We driving more the positive trends on share a business, retail business. are will this are very quite business SaaS/PaaS perhaps slight situation. this service business, the RISE mix advent continuously already with efficiency at of is of of operating because with decent of the stable infrastructure we for look we margins. previous unchanged with of which rather But Quite for the of will business at SAP, down a improvements type as for our level

there line a so of Converged continued of of should more it accelerating be of lines, be shortly, shifts shift business, a towards just we composition helpful do Cloud impact the for individual what expect its but on cloud P&L, growth. the When course, because the in to changes very the lot shouldn't further program, XXXX of comes revenue mix the the margins top slight overall. So, cloud

amount Scott's trending in will of part our transformation, that revenues, an mentioned positive. the the actually we're RISE in actually, XX-factor seen because of we plan around in as a which obviously level achieved And sales is the will of base. expense this, I that that is will in revenue increasing prioritize investment more revenues And beginning driving we fashion and revenues, additional side, The go-to-market significantly we in also also said, the pronounced Cloud add is we XX% healthy obviously our investments the current of software in point, to marketing, see to months, opportunities, line. so license and shift so first will declines on continuously and a that proliferate the over resources. that the to Cloud on down looking growth the far on feet more years. this of great very we then about licenses as street about seen in extension definitely are program sales we're on and maintenance on as the revenues, at our great XX% also investments well multipliers continue above we R&D, result sustain step-up will than more in Software what significant as and and And have side. because X customer across R&D, I have two think is R&D we for marketing a reasonable And appropriate on button the to have around revenues last the then and a course of

business Christian? questions, the For

Christian Klein

the commitment the coming talk are General out there kind line, across we are Still which we're second also actually, come to supply to joining some about Happy we then we chains. Which our the growth, region the in network get And only also challenge many in but time everything a industry, get? enterprises it's and track are next where just about that take reaching them automotive to Is automation, Is give the it's from about big use are And quarter I into in examples, just are that anymore net all it the around What transparency real car to customers suppliers suppliers are of European together disrupted next chain? give Motors only We're the chain. customers of the semiconductor. in first to when chains, clearly with doing real about new carbon There now, join zero. the putting supply when the business below? right I the supplier? do the with the which I enterprise, to supply is can to X now we year manufacturers case back more mean, the business challenges. supplier is and network, Indeed, trace just business you that. and who business why our industry, a talking to lot it's to green kind OEMs to delivering. shortages a transparency, with the others Think productivity, did around next joined. there few we're actually first and about supply supply why not Catena-X. Catena-X. And network. meantime, question. the time. that That's the month, our days, of thing, these -- models’ intelligent that not again the same And it

it that have the hey, sometimes the kind future up to until demand realized, raw with changing, of changed months took XX:XX:XX]. in car when real businesses that the now and you [inaudible time is demand provider X So in the these material has

We we're which now shortages not talking materials. doing the semiconductor, industry talked whole talking regard We're about this to synergies. are transforming with industries, actually step end-to-end. step millions of billions other what is many raw is automotive. also impacting You're but about as we really And are there by

network key definitely pillars of the business drive future new our are step-by-step one we growth. which and now driving is this doing also will So, the

Anthony Coletta

Can we you. question, please? the take Thank next

Operator

comes question next of UBS. Briest from The Michael

Michael Briest

most the just to on Thank you. trying him And -- the business. cloud backlog. And double-digits of for the square If afternoon. the Luka, best sort XX% by to in of mid-single-digit I I've on been good can Stefan, calls well. the as guidance, also, It's that on my with guidance comments, think I'm decline on-premise XX with and maintenance, your the about looks things, license. I

XXX support. achieve EPX support customers the or first or big QX are If the then, who any you to we expected next the you in you. times Concur who've the can a today? pre-COVID remind backlog to about Scott sort would surely are RISE And see so then you I from do business Are pre-COVID, network, about in at come revenues, can in question, below and year? Luka, RISE? us Thank time? are in levels profile? decided decline ready mean, hyperscale a how mainly can S/X on if more think for X I run step-up think maybe coming of you to are just said who And that maybe XXX Cloud expands was million perhaps we date, just about you're on it Christian, converting much it a to on rate there the million these to customers talk how

Luka Mucic

Yes.

in all, guidance QX of of than materially difference is that first So revenues pattern revenues. different software is just let's a The level different in on baked into declines the don't clear. a patterns the We previous expect guidance, on be support in main quarters. of

extent assumption to of the Concur Concur EURXXX pre-COVID said, a run time in of us increase that in now, than starting and And revenues at are levels, versus in from to probably QX. is software here first XXX that reduction times, looking the -- as see would. for obviously EURXXX in on to I it what positive million say, annual bit the more long that million be is current correct we posted to But has think Let's I largest at that not. I rate is made recover a far or quarter. by based sense prudent given QX

hand In of perhaps to Christian. can or terms RISE, I Scott over

Scott Rusell

actually RISE all please Christian, of is and can the of comment. customers. then, makeup with I say a I start customers. guess around question the forms the resonating

on new to the come are of me XX% SAP. Of Let nearly a them you our that few customers have -- RISE, new examples. of give customers

like that amongst overall Philips large that different legacy But and and increasing Stores, platform what QX transforming, means technologies was Energy, our so running to So, a nearly order up forward. Appliances, customers Asda RISE, companies run trend digital attracting And XX% having Domestic on in record a share high. Airways, that AMD, saw of we of coming it's others. what an entry, to make are cloud is who new Siemens Etihad companies continued

in third, S/X transformation different are in around the interesting, their starting large is So moving that cloud. maybe with then companies to with moving customers question existing RISE And workloads RISE of your SAP journeys. with points, are the been hyperscale. What's

a in from But ECC. in cloud, are the are some but yes, Some the the the already going hyperscale, customer, need cloud. are they workload in the transformation existing just new some not

what is Christian, the matter transform the going know us gives strong. I you've so, we're most on seeing add the to outlook that no point, confidence that. it RISE demand forward, got X starting and cloud And remain your don't angles of want to that with hence, you what to all what ability in

Christian Klein

We real "Hey, the S/XHANA completely Michael, software middle SAP, time more is some XXX then that there. We talk need give to Customers, they, maybe real is you as are do business this that you pay-as-you-go. business to cloud out industries, just countries, to more in SAP service. else Just sell sense teams the in we around of can personalized is do. why the scale at the coming And me, realized important CEOs RISE. to you need comment. go, when their so migration no changing And everything who experiences. can what time, you need model. the And about, want to across know, say, is only revenue And need in We scale your the here here, one a we to revenue meantime end-to-end only there's many one realization. technical and a not wonder

the coming how is hyperscale’s how was hardest from practices, Scott having customers get one the question is benchmark, who and resonating. I And can offering And this at learn always, that? and best how crucial these best say, RISE, why then transformation the okay, said get can these have now why well part. Now are well. that, is part to this from extremely the to your and someone existing us I changing then want the analyze business processes but And culture scale. there." have. tell you is offices this The we customers Show there, knows us is technology in That's want is even the this hardest "We it

also they longer. in -- a bit then and -- modifications also We not based It only through much standout. moved you large stand have It back having they the to days, also the IT And running new them landscape ones, to are they come more go to agile net fit businesses, take overtime up. a many so, can can also new. XX that's And going XX that case. live, happen be, a if

Michael Briest

much. so Thanks

Operator

next Citibank. Amit question from of The comes Harchandani

Amit Harchandani

if you. Citi. thank the I with Stefan, - question, everyone. for Harchandani Q Thank from for before I With X questions, the Amit you, guess Hello, I may. to your regards proceed all and And best my support future. the

the Firstly, seeing with customer SaaS could you particularly growth your regards solution playing past the how sense side, you kicking are PaaS and different as for human in it's particularly also of could RISE there, the within give And experience? parts in the profile in off? is you. talked migrate you your management, the trending regards to I largest secondly, What world? to on us remind of to customer which your please, ambitions a cloud. with us, Again, category, guess competition you've experience about also to strengths customers with Thank experience

Christian Klein

and is localizations pretty some obviously about it us, human the can RISE, included. hire you You then to with to when [inaudible have a I only to mean, XX:XX:XX]. I And to scale that the finance, about globe. me around interesting. can projects Let platform the of we we digitize has weigh competitors with actually, mean, I our and experience an move one more Employee with together on-prem coming S/XHANA customers hire-to-retire comes HCM what you retire and feel XX:XX:XX] functions Probably sentiment want modular to And talk actually to that when end-to-end? question, interfaces the massive [inaudible it's it's XX:XX:XX] other it is as free platform, the the said, second read Scott, actually payroll, S/XHANA that now also and cloud. strong start, And SAP. when with put management, And changing, now the to cloud, are new way. Central, in. please how interfaces, from see about in now On the more then have not it's move Customer and our we talk to digitize to only inside [inaudible ECC

installed to base the also much also better sale we cost connect platform the the with RISE, now into underlying is the have So, dots. as now

it's running not very said, as anymore. You're and we're momentum, CX in Plus, about the net the I isolated SAP all solutions also market, seeing positive focus. with new

that compete it's there we about is space. in to want momentum. commerce anything we to leading a BXB focus There's our the space. of every we clearly our add? also So, in not CPQ now, was BXC cloud. dominant just that have huge with Scott, solution, solution are positive "cash," course, And very launched you we a on Obviously, want

Scott Rusell

things said Yeah, would just well, it I Christian. add. really think I you X guess, I that

of under with solutions. The our that momentum the of at an acceleration our business seeing of technologies swing, are the RISE platform and of first full line is with the we integration cross-sell

But customers. orchestration need standalone, deliver our the look at plus as cross-sell describes. orchestration a in -- running not at which on because with to estimates confidence those able employees processes, then competition categories, from the to customer. business deliver with The but that ERP allow So with every because when RISE, applications. cloud cross-sell In FCX that or us look don't in continues to they be their reflected and the they HXM great their are they're gives single seamless capability the RISE goals their categories at for winning based story, not we and only or to not also, to a the experience customer, for X in in of capabilities, type costs you core requires experience Christian how been the those so only the head-to-head the around two orchestrated solutions. introduced line scale They world, stay to wonderful

Anthony Coletta

you. Thank

X will questions. We take additional

Amit Harchandani

you. Thank

Operator

you. Thank

comes Our next Bernstein Moerdler Mark Research. from question of

Mark Moerdler

discussed assistance, understanding and to recently. as miss good really support let very And I'm much. Stefan, appreciate you've luck, and And first you how our helped interactions. say with Thank going your to I and me we've us transition. the all

that Let me what revenue the S/XHANA in S/XHANA the that cloud Thank to the are shifting quantity adopting go occurs Are question. the SaaS. the last what a cloud. we've could X. of apologize. year to with expectations you be Christian, I lift workloads others? Luka, cloud, in of other you. offerings now is and today to any quicker have you think move certain helpful? there SAP revenue quicker would what multipart what than or for discussed be industries as are any sense X. X. you lift give with RISE can into workloads going be of or in attach us And they anything, terms dollars sense

Christian Klein

course, then business look the you companies our of the our huge. to now highest that. is extremely one say only not look we with way first Large now fair when I mean, also let remain at this you first we is that because in going. guess, a there Luka, with And software-based when transformation. demand. have also and high me start, mean, do migration, can technical And Luka, regard I of order, with confident, is this to on you as cloud, movement. I'm and ever. you also statements. S/XHANA build was RISE, growth base heard to Cloud, total the at probably We joining I And our install earlier it's do rates

are contract extremely are is contracts. large As these good, last-time enterprises, high. extremely we long cloud, with these the in value see especially -- The

from at ahead, only the also also from not now new second, And is be the in the import. business. we join put I share. look cloud their the to then them take them into no base [inaudible and not standard someone we optimistic. XX:XX:XX], reason to installed net customer mean, perspective, transform again It's where into So, looking quarters help to them decides also If public my and there the

I there's confident. be guess reason to not no So,

Luka Mucic

commentary and to then comments a some please color as add just here more Scott, feel free well. few That's

Christian right. all, of absolutely first So is

rates. growth TCV Our

the terms are including seeing that current higher ramp that reflected value an So, of is contracts, contract growth up first total rates way only, progression of is a cloud contract materially level. backlog. than the in obviously, in on annualized year And

cloud, is move this very us of RISE contract making continues in obviously. who are duration average typically number And to of upwards momentum also, So, confident contracts. because around the the the growth the long-term-oriented increasing contracts, very

are we duration, getting very the contract to average much positive well. which So, closer X-year as is

X well, perspective including large In to an of some -- call the still X in I And line attach applications. the my on can rate, including different opportunity. this and as business we from that's of we our hold. that opportunities attach had has Scott see talked often terms what about clearly think the of assumptions for RISE

this mind also and that which Some like Philips are others, examples. Domestic very positive were come ones good Appliances on mentioned to call,

so, automotive manufacturing, less tend to one they service right And cloud I cloud my discrete to which set really industries public It a industries all in to broad-based move move from me just probably that whereas assumptions to hold actually industries. to S/X have would others, them, adoption rather private would And industries, Scott a make it's legacy like might think tend difference some hand of for across up. of a terms perspective. because but over away still of can be perhaps I modification more

Scott Rusell

and correct. you've described is broad-based, that think scenario SAP I I described, the would add, you scenario situation but the that industry Luka, the

only think I'd for comments on and X the -- I it's multi-tenant, the make few remember. are things to these

journey landscapes. but gives We We've also at is first not customers private their I for I'm S/X cloud ability scenario, and beauty modular -- scenarios. especially companies full-cloud. Christian many the the The of parts lot of hybrid large on starting the And to to clients but it Oracle of the a it still mentioned they're whether before across transformed public subscription so we having going practices, the got but SAP. the that. with that grow across benefits multi-tenant they've through cloud support in coming, got are to access lower true do And a cloud. of best the It endpoint a clean coming with that fees that which customers, I going clear. That agility, of of that is platform to and do are a scale provide but sure looking mix they're minimizing these is strike not hybridous hybrid cloud. agile able RISE. the making see makes a better RISE of induction only of But gives customers can we only or is innovation that all And or S/X business to landscape to them it, at compelling from core, or to varies full of are SaaS scenario, customization the S/X new customers said cloud existing lot very That's customers is they efficiency, clients. well, net that for whilst do

Mark Moerdler

Thank you.

Operator

of Stanley. question final Morgan Wood Today's comes Adam from

Adam Wood

Thanks best that we made, appreciate taking cloud Luca, and product customers. that is for wishes to cloud I Christian, them option and it. the for type and get care that's definitely version following-up the thanks investors question. Hi, it what the over afternoon. of Say I've my easy the whether S/X And on what an customers Scott, discussion good running you quite A satisfy public of business the of of the two, a customers in demands being full versus into to solve Stefan. the able support the lot through. just for cloud the the problems can got consume. extent years, for know. going upgradable Maybe they're my about to comments version just get side the To please.

how some the data Snowflake, what that the charge the you've views solutions that stack for the against could actually little helpful. maybe wonder could you Is separate in application extent just up something How you little about will the And that analytics, care you a I hyperscale’s more customer really evolves about that the helps talk customers Reckitt about like layer there does been time. business of rather that mentioned secondly, to warehousing taking you than area. analytics to application? talk landscape selling can bit SAP and you. If or if bit that reaction for separately is industry perceptions Thank something in versus that against a that differentiate and and competitive over people be

Christian Klein

of our planning. the in where application. Company application with Very now last analytics even question, Adam. Then having we the not just with you. let attach Spending also point see me the talk as And business is integrated on Look, are partnership rates space, about analytics us start analytics for line across we this and clearly good your internally. higher layer helps you

you is have XX:XX:XX] And in proud BW Then can developing deals is this very many, also very an the Company also as of customer deals your them. on very existing cloud, to -- make not why cases, move. end-to-end, yes, You customers still of data what we are reference also legacy. this have steer and now actually, warehouse, is to we line data analytics and cloud. see are you have And many this [inaudible offer many strong already, we business also attached speed in full we that as are -- we happy, if course, of warehouse strong many to you that solutions. our And in

data big for the On partnerships. side, open nevertheless, are we

how can we even sorts the We are just for problems access our the of and -- in on data data to on customers. all negotiations really

own. data for we a clearly, more course, on time. SAP see is analytics, plays, on And we cloud where that This is very partner very successfully. of So, application the warehouse the course where then long this of yes, we this layer

Scott Rusell

help and be a comment to clean in Cloud? they move that respond customers really to clear their customers And can workload maybe industry. their do on and impact things. Christian, about all are about don't move the One, interesting is world, around the about they I'll the want just digital very able if navigate. that then to needing ability that business on to core that It's transformed to need industries They I first X just question care competition, need

requires be other platform of the heard factors -- seen the All to around added of innovates out chain scale disruption agility. the that supply And that second and that seen And the before. from. you've that then and that we've is

for and that and and is in do today, flexibility. And have really business They third in So product. then to beauty adapt want able not they to speed. The you they're going are looking modularity the multi-tenant but not drive combined. ability transform we are only it speed. you forward having extend your then is those the saying

so, agility, can I to will to It's through a But hybrid will that where entire journey value scale, And modular as our them run give said cloud some the SaaS on is today. and that give to have go straight some -- before, chain multi-tenant on focus will to that them what go we we they them speed. that give ERP landscape. and a

the then they're or whether about where combination, they've I too actually that or a it. concerned outcome got think not on full modular a ultimately land a hybrid SaaS

Christian Klein

Is our map? in How which can can plays we partners this still monetize, partner extensions also we in can our ecosystem Okay. are of road is the it a monetize doesn't forget And point of business on important a and very also not we it's come to a send the role And our technology a When we SAP. is platform? always with And How architects complexity the We just SAP can have with discussion installed build partners on lot base. customers, in, process ERP. So, then remove does coming this a across very that. standard? the very at we a important they build platform, building to last in on one, with have now customers. this RISE the IP. on can modification? huge extensions? important core How just build then lot also Why sale, on of -- because know also which least platform the of end along is that ecosystem and the the SAP

Anthony Coletta

thank Well, you concludes Christian. -- And that

Adam Wood

XX:XX:XX] you. [inaudible Thank

Anthony Coletta

Thank today. for call Our you.

SAP SE (SAP) 22 Oct 212021 Q3 Earnings call transcript