SAP SE

Earnings Release • Oct 21, 2019

Third Quarter and First Nine Months 2019 Financial Highlights

SAP SE October 21, 2019

CONFIDENTIAL

Safe Harbor Statement

Any statements contained in this document that are not historical facts are forwardlooking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "should" and "will" and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forwardlooking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission ("SEC"), including SAP's most recent Annual Report on Form 20- F filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.

Q3 2019 – Key performance metrics

The share of more predictable revenue reached 69% in the third quarter of 2019 (+2 percentage points)

© 2019 SAP SE or an SAP affiliate company. All rights reserved.

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Q3 2019 – Key performance metrics

Financial Highlights

• Cloud revenue grew to €1.8bn +37% (IFRS), +37% (Non-IFRS), +33% (Non-IFRS cc)
• Cloud gross margin up more than 5pp
• New cloud bookings up 39% to €572m (+34% cc), excluding IaaS up 51%
• Software license revenue down 1% to €932m (-4% cc)
• New cloud and software order entry up 20% to €2.66bn (+15% cc)
• Earnings per share were €1.04 (IFRS) (Q3/2018: €0.81) and up 14% at €1.30 (Non-IFRS)
• Operating cash flow up 28% to €0.64bn | Free cash flow up 116% to €0.37bn
• S/4HANA customers up 25% to >12.000 customers, approximately 40% were net new

YTD 2019 – Key performance metrics

The share of more predictable revenue reached 70% in the first nine months of 2019 (+2 percentage points)

Cloud & Software Revenue In € millions IFRS Non-IFRS 16,167 16,236 ▲+13% ▲+13% (+10% cc)

© 2019 SAP SE or an SAP affiliate company. All rights reserved.

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YTD 2019 – Key performance metrics

Financial Highlights 9M 2019

• Cloud revenue grew to €5.1bn +40% (IFRS), +41% (Non-IFRS), +36% (Non-IFRS cc)
• New cloud bookings up 29% to €1.389m (+24% cc)
• Software license revenue down 1% to €2.5bn (-4% cc)
• New cloud and software order entry up 13% to €6.64bn (+9% cc)
• Earnings per share were €1.43 (IFRS) (9M/2018: €2.01) and up 16% at €3.29 (Non-IFRS)
• Operating cash flow down 5% to €3.3bn | Free cash flow flat at €2.3bn

Non-IFRS unless otherwise specified

Q3 2019 – Regional performance

Revenues calculated based on customer location; All numbers are Non-IFRS unless otherwise stated. Individual country highlights are based on Non-IFRS at constant currencies

Q3 2019 – Double digit growth across revenue, operating profit and strong operating margin expansion

€ millions, unless otherwise stated		IFRS			Non-IFRS
Revenue Numbers	Q3/19	Q3/18	∆ %	Q3/19	Q3/18	∆ %	∆ % at cc
Cloud	1,789	1,304	37	1,807	1,315	37	33
Software licenses	932	937	-1	932	937	-1	-4
Software support	2,907	2,765	5	2,907	2,765	5	3
Software licenses and support	3,839	3,702	4	3,840	3,702	4	1
Cloud and software	5,629	5,007	12	5,647	5,017	13	10
Services	1,162	1,014	15	1,162	1,014	15	11
Total revenue	6,791	6,020	13	6,809	6,031	13	10
Total operating expenses	-5,111	-4,784	7	-4,724	-4,289	10	8
Operating profit (loss)	1,679	1,236	36	2,086	1,742	20	15
Financial income, net	42	12	>100	42	12	>100
Profit (loss) before tax	1,702	1,280	33	2,108	1,786	18
Income tax expense	-443	-309	44	-544	-428	27
Profit (loss) after tax	1,259	972	30	1,564	1,358	15
Operating margin (in %)	24.7%	20.5%	4.2pp	30.6%	28.9%	1.7pp	1.5pp
Earnings per share, basic (in €)	1.04	0.81	28	1.30	1.14	14

YTD 2019 – Cloud & software revenue, total revenue, non-IFRS operating profit and non-IFRS EPS up double-digit

€ millions, unless otherwise stated		IFRS			Non-IFRS
Revenue Numbers	9M/19	9M/18	∆ %	9M/19	9M/18	∆ %	∆ % at cc
Cloud	5,037	3,588	40	5,106	3,614	41	36
Software licenses	2,531	2,558	-1	2,531	2,558	-1	-4
Software support	8,599	8,156	5	8,599	8,156	5	3
Software licenses and support	11,130	10,714	4	11,130	10,714	4	1
Cloud and software	16,167	14,302	13	16,236	14,328	13	10
Services	3,346	2,979	12	3,346	2,979	12	9
Total revenue	19,513	17,280	13	19,583	17,307	13	10
Total operating expenses	-17,142	-13,976	23	-14,214	-12,690	12	9
Operating profit (loss)	2,370	3,304	-28	5,368	4,618	16	12
Financial income, net	70	40	77	70	40	77
Profit (loss) before tax	2,377	3,286	-28	5,375	4,599	17
Income tax expense	-644	-889	-28	-1,414	-1,202	18
Profit (loss) after tax	1,733	2,397	-28	3,961	3,397	17
Operating margin (in %)	12.1%	19.1%	-7.0pp	27.4%	26.7%	0.7pp	0.5pp
Earnings per share, basic (in €)	1.43	2.01	-29	3.29	2.85	16

Q3 2019 – Non-IFRS operating profit up 20% driven by strong topline and very strong bottom line

YTD 2019 – Expansion of non-IFRS operating margin by 70 basis points

Q3 2019 – Cost ratios

€6.8bn Total revenue, Non-IFRS

*Non-IFRS at constant currencies

YTD 2019 – Cost ratios

€19.6bn Total revenue, Non-IFRS

*Non-IFRS at constant currencies

Balance Sheet, Condensed September 30, 2019, IFRS

Assets
€ millions	09/30/19	12/31/18
Cash, cash equivalents and other financial assets	5,853	9,075
Trade and other receivables	5,846	6,362
Other current assets	2,385	1,183
Total current assets	14,085	16,620
Goodwill	29,833	23,736
Intangible assets	4,736	3,227
Property, plant, and equipment	5,449	3,553
Other non-current assets	5,697	4,366
Total non-current assets	45,715	34,881
Total assets	59,800	51,502

Equity and liabilities
€ millions	09/30/19	12/31/18
Trade and other payables	1,510	1,491
Provisions	869	110
Other liabilities	7,105	5,857
Contract liabilities, current	4,400	3,028
Total current liabilities	13,884	10,486
Financial liabilities	13,649	10,553
Provisions	321	270
Contract liabilities, non-current	93	88
Other non-current liabilities	1,624	1,227
Total non-current liabilities	15,687	12,138
Total liabilities	29,571	22,624
Total equity	30,228	28,877
Total equity and liabilities	59,800	51,502

YTD 2019 – Operating cash flow and free cash flow

€ millions, unless otherwise stated	9M/19	9M/18	∆
Operating cash flow	3,317	3,484	-5%
- Capital expenditure	-703	-1,146	-39%
- Payments of lease liabilities	-288	-	-
Free cash flow	2,326	2,338	0%
Free cash flow in percent of total revenue	12	14	-2pp
Free cash flow conversion rate	1.34	0.98	37%
Days sales outstanding (DSO in days, September 30)	71	68	3

Net Liquidity

FY 2019 – Additional outlook information and non-IFRS adjustments

The Company continues to expect a full-year 2019 effective tax rate (IFRS) of 26.5% to 27.5% (2018: 27.0%) and an effective tax rate (non-IFRS) of 26.0% to 27.0% (2018: 26.3%)

Non-IFRS adjustments	Actual Amounts 9M/18	Actual Amounts 9M/19	Est. Amounts for FY/19
Revenue adjustments	€27m	€70m	€70m to €120m
Acquisition-related charges	€422m	€515m	€650m to €750m
Share-based payment expenses	€838m	€1,313m	€1,650m to €1,900m
Restructuring charges	€26m	€1,100m	€1,050m to €1,150m
Sum of all adjustments	€1,313m	€2,998m	€3,420m to €3,920m

Due to rounding, numbers may not add precisely

2019 Outlook and mid-term ambition

^{2018 2019}

• Cloud Revenue €5.03bn
• Cloud and Software Revenue €20.66bn
• Total Revenue €24.74bn
• Operating Profit €7.16bn

▪ Cloud Revenue in a range of €6.7 – 7.0bn Growth: 33.0% to 39.0%

outlook*

• Cloud and Software Revenue in a range of €22.4 – 22.7bn Growth: 8.5% to 10.0%
• Operating Profit in a range of €7.85 – 8.05bn Growth: 9.5% to 12.5%
• Total Revenue to increase strongly at a rate lower than Operating Profit

2020
------

ambition

• Cloud Revenue in a range of €8.6 – 9.1bn
• Total Revenue in a range of €28.6 – 29.2bn
• Operating Profit in a range of €8.8 – 9.1bn
• Share of more predictable revenue 70% to 75%

2023

ambition ▪ More than triple

▪ More than €35.0bn Total Revenue

Cloud Revenue

• Reach a Non-IFRS Cloud gross margin of 75%
• Increase non-IFRS Operating margin by 1pp per year on average*, representing a total expansion of approx. 500bp
• Share of more predictable revenue approaching 80%

* from 2018 through 2023

		Expected Currency Impact Based on September 2019 Level for the Rest of the Year
	strongly at a rate lower than	in percentage points	Q4	FY
	Operating Profit	Cloud revenue	+3pp to +5pp	+4pp to +6pp
		Cloud and software revenue	+2pp to +4pp	+2pp to +4pp
© 2019 SAP SE or an SAP affiliate company. All rights reserved.	Non-IFRS; *Non-IFRS at constant currencies.	Operating profit	+2pp to +4pp	+3pp to +5pp	18

Appendix

Q3 2019 – Key metrics

Q3/19 unless otherwise stated

All figures are Non-IFRS unless otherwise stated

Cloud Revenue	New Cloud Bookings1	Global Commerce2	Cloud Applications Total Subscribers
+37% €1,807m	+39% €572m	~\$3.4 trillion	~207m
Intelligent Spend Group – Segment Revenue	Customer and Experience Management – Segment Revenue	Number of end users processing travel and expense with SAP Concur	Flexible workers managed with SAP Fieldglass platform
+23% €828m	+75% €371m	>63m	6.1m

1) New cloud bookings are the total of all orders received in a given period the revenue from which is expected to be classified as cloud revenue and that result from purchases by new customers and from incremental purchases by existing customers. Consequently, orders to renew existing contracts are not included in this metric. The order amount must be committed. Consequently, due to their pay-per-use nature, business network transaction fees which do not include a committed minimum consumption are not reflected in the bookings metric (e.g. SAP Ariba and SAP Fieldglass transaction-based fees). Amounts included in the measures are generally annualized (annualized contract value ACV).

20 © 2019 SAP SE or an SAP affiliate company. All rights reserved.

2) Global commerce is the total commerce volume transacted on the SAP Ariba, SAP Concur and SAP Fieldglass Networks in the trailing 12 months. SAP Ariba commerce includes procurement and sourcing spend

Gross margin development 2015 – YTD

Non-IFRS	FY/15	Q1/16	Q2/16	Q3/16	Q4/16	FY/16	Q1/17	Q2/17	Q3/17	Q4/17	FY/17	Q1/18	Q2/18	Q3/18	Q4/18	FY/18	Q1/19	Q2/19	Q3/19
Cloud	66	66	65	65	63	64	65	62	61	61	62	63	64	64	62	63	66	68	69
Intelligent Spend Group*	75	75	76	77	75	76	77	77	75	77	77	77	77	78	78	78	78	78	78
Software License & Support	87	86	87	87	88	87	85	87	87	89	87	86	87	87	89	87	86	87	88
Cloud & Software	84	82	84	83	85	84	81	82	82	84	82	81	81	81	83	82	80	81	82
Services	23	14	18	20	20	18	21	23	25	25	24	20	26	22	24	23	20	24	27
Total gross margin	73	70	73	73	76	73	70	71	73	75	72	70	71	71	74	72	69	71	72

* Gross margins as reported. Changes in profit center structure may lead to changes in previous quarters.

Third Quarter and First Nine Months 2019 Financial Highlights

SAP SE October 21, 2019

CONFIDENTIAL