SAP SE

Investor Presentation • Feb 28, 2019

Fourth-Quarter and Full-Year 2018 Preliminary Results Release

Walldorf, Germany Tuesday, January 29, 2019

Bill McDermott CEO

SAP is winning

10-year run	Promises kept
Since 2009	Non-IFRS IFRS constant currencies	outlook metrics
2.3 2.5 x x	32 38 + % + %	5.205 € B
total operating	cloud subscription and support	cloud subscription & support
revenue profit	5 10 + % + %	21.577 € B
	cloud and software	cloud and software
2.7 186 x M > market cloud value users	11 5% + + % total revenue	25.961 € B total revenue
~10,500	17 10 + % + % operating profit	7.480 € B operating profit
SAP S/4HANA customers	14 + %
	cloud and software

new order entry

SAP hits or exceeds all raised outlook metrics

€5.205B

cloud subscription & support

€21.577B cloud and software

€25.961B

€7.480B

Figures in this column non-IFRS at constant currency

SAP is delivering the Intelligent Enterprise

SAP will lead with Experience Management

1.8B

experience touchpoints run on Qualtrics

of the world's transactions across 25 industries touch SAP systems

SAP's business model is customer-first

Fast growing cloud	Rock solid core	Partners for today and tomorrow
	Return to software license growth
	in Q4

>425,000 companies turning to SAP to accelerate value creation

Luka Mucic CFO

SAP hits or exceeds all raised outlook metrics

Other financial and non-financial highlights (FY):

• New cloud bookings: +25% to €1.81bn (+28% cc)
• Cloud backlog: >€10bn (+30% cc)

• New cloud and software license order entry**: +11% to >€10bn (+14% cc)

• Share of more predictable revenue now at 65%

• Greenhouse gas emissions reduced to 310 kilotons
• Overall retention rate remains high at 93.9%
• Women in management increased to 25.7%

SAP's unmatched global reach

Strength across all geographies in Q4 and FY 2018

© 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 10 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

Full year gross margins up for all business models

Non-IFRS@cc; in percent	FY/17	FY/18
Cloud Subscriptions & Support	62.2	62.8
Business Network	76.7	77.8
Private Cloud (IaaS)	7.2	13.7
Public Cloud (SaaS/PaaS)	56.7	59.1
Software & Support	87.0	87.2
Cloud & Software	82.2	81.3
Services	23.5	23.8
Total Gross Margin	72.5	71.6

• Cloud gross margin expanded 60 basis points, reaching 63% in 2018
• Business network margin increased for the full year by 1.1 percentage points
• Private cloud margin improved to 14% for the full year. Going forward we expect it to improve significantly due to partnerships with hyperscalers
• Public cloud gross margin improvement is primarily driven by top line growth and will increasingly benefit from platform convergence
• Software and support gross margin slightly up yoy
• Cloud and software margin impacted by revenue mix shift by 1.2 percentage points
• Services gross margin was up to 24% in 2018 and remains among best in class

Continued operating profit expansion

▪ Operating profit (Non-IFRS) ▫ FY/18: €7.16bn | +10% cc

2019 and beyond:

• Increasing benefits from highly standardized "converged platform"
• Efficiency improvements in each business
• Leverage from scaling cloud and an ever higher renewal base
• SAP will further increase its focus on key strategic growth areas in 2019

Tax rate, EPS and Cash Flow

Effective tax rate

• Actuals FY/18
• IFRS: 27.0% | +7.5pp
• Non-IFRS: 26.4% | +3.6pp
• Reminder: prior year was unusually low due to one time tax benefits from the U.S. tax reform and an intellectual property transfer to SAP SE
• 2018 IFRS tax rate was at the lower end of guidance and Non-IFRS tax rate was slightly lower than guidance

EPS

• Actuals FY/18
• IFRS: €3.42 | +2%
• Non-IFRS: €4.35 | -2%
• Prior year benefited from extraordinarily high SAPPHIRE Ventures investment gains and unusually low effective tax rate

Cash Flow

• Operating Cash Flow FY/18
• €4.3bn | -15%

Decline was mainly due to higher tax and insurance payments, share based compensation and currency headwinds

• Free Cash Flow FY/18
• €2.8bn | -25%

Decline was due to lower operating cash flow and previously announced additional CapEx for 2018

CapEx

• Actuals FY/18
• €1.5bn | +14%
• Less than planned at the beginning of 2018

2019 outlook and mid-term ambition

outlook*

Targeting >3x cloud revenue and >€35bn in total revenue by 2023

^{2018 2019}

• Cloud Subscription Revenue €5.03bn
• Cloud and Software Revenue €20.66bn
• Total Revenue €24.74bn

• Operating Profit €7.16bn

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

• Cloud and Software Revenue in a range of €22.4 – 22.7bn Growth: 8.5% to 10.0%
• Operating Profit in a range of €7.7 – 8.0bn Growth: 7.5% to 11.5%
• Total Revenue to increase strongly at a rate slightly lower than Operating Profit

▪ Cloud Subscription Revenue in a range of €8.6 – 9.1bn

2020

ambition

• Total Revenue in a range of €28.6 – 29.2bn
• Operating Profit in a range of €8.5 – 9.0bn

• Share of more predictable revenue 70% to 75%

• More than triple Cloud Subscription Revenue

• More than €35.0bn Total Revenue
• Operating Profit Growth: 7.5% – 10.0% [CAGR]
• Share of more predictable revenue approaching 80%

Expected Currency Impact Based on December 2018 Level for the Rest of the Year
in percentage points	Q1	FY
Cloud subscriptions and support	+5pp to +7pp	+1pp to +3pp
Cloud and software	+2pp to +4pp	0pp to +3pp
Operating profit	+5pp to 7pp	+1pp to +3pp

Fourth-Quarter and Full-Year 2018 Preliminary Results Release

Walldorf, Germany Tuesday, January 29, 2019

Appendix

Key cloud metrics Q4 2018

Q4/18 unless otherwise stated

All figures are Non-IFRS and growth rates at constant currencies unless otherwise stated

Cloud Subscriptions and Support Revenue	New Cloud Bookings1	Total Network Commerce2	Cloud Applications Total Subscribers
+40% €1,413m	+23% €736m	>\$2.9 trillion	>186m
SAP Business Network – Segment Revenue	Customer Experience Revenue	Number of end users processing travel and expense with Concur	Flexible workers managed with Fieldglass platform
€721m +24%	€349m +50%	>53m	>5.7m

1) New cloud bookings – key measure for SAP's sales success in the cloud – consist of order entry of a given period that is expected to be classified as cloud subscription and support revenue and results from purchases by new customers and from incremental purchases by existing customers. Consequently, orders to renew existing contracts are not included. The order amount must be committed. Consequently, due to their pay-peruse 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.

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

Gross margin development 2015 – 2018

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
Cloud*	66	66	65	65	63	64	65	62	61	61	62	63	64	64	62	63
Business Network*	75	75	76	77	75	76	77	77	76	77	77	77	77	78	78	78
Software & Support	87	86	87	87	88	87	85	87	87	89	87	86	87	87	89	87
Cloud & Software	84	82	84	83	85	84	81	82	82	84	82	81	81	81	83	82
Services	23	14	18	20	20	18	21	23	25	25	24	20	26	22	24	23
Total gross margin	73	70	73	73	76	73	70	71	73	75	72	70	71	71	74	72

* Subscriptions and support

Q4 2018 – Income Statement

€ millions, unless otherwise stated		IFRS			Non-IFRS
Revenue Numbers	Q4/18	Q4/17	∆ %	Q4/18	Q4/17	∆ %	∆ % at cc
Cloud subscriptions and support	1,406	995	41	1,413	997	42	40
Software licenses	2,089	2,058	1	2,089	2,058	1	8
Software support	2,825	2,754	3	2,826	2,754	3	3
Software licenses and support	4,914	4,812	2	4,914	4,812	2	5
Cloud and software	6,320	5,807	9	6,327	5,809	9	11
Services	1,108	998	11	1,108	998	11	21
Total revenue	7,428	6,805	9	7,434	6,807	9	13
Total operating expenses	-5,027	-4,840	4	-4,887	-4,442	10	15
Operating profit	2,401	1,964	22	2,547	2,364	8	8
Financial income, net	-87	119	<-100	-87	119	<-100
Profit before tax	2,316	2,053	13	2,462	2,453	0
Income tax expense	-624	-189	>100	-659	-320	>100
Profit after tax	1,692	1,864	-9	1,803	2,133	-15
Operating margin (in %)	32.3	28.9	3.5pp	34.3	34.7	-0.5pp	-1.5pp
Earnings per share, basic (in €)	1,41	1.54	-8	1.51	1.77	-15

FY 2018 – Income Statement

€ millions, unless otherwise stated		IFRS			Non-IFRS
Revenue Numbers	FY/18	FY/17	∆ %	FY/18	FY/17	∆ %	∆ % at cc
Cloud subscriptions and support	4,993	3,769	32	5,027	3,771	33	38
Software licenses	4,647	4,872	-5	4,647	4,872	-5	0
Software support	10,981	10,908	1	10,982	10,908	1	5
Software licenses and support	15,628	15,780	-1	15,629	15,780	-1	4
Cloud and software	20,622	19,549	5	20,655	19,552	6	10
Services	4,086	3,912	4	4,086	3,912	4	12
Total revenue	24,708	23,461	5	24,741	23,464	5	11
Total operating expenses	-19,003	-18,584	2	-17,577	-16,694	5	11
Operating profit	5,705	4,877	17	7,165	6,769	6	10
Financial income, net	-47	188	<-100	-47	188	<-100
Profit before tax	5,602	5,029	11	7,061	6,921	2
Income tax expense	-1,513	-983	54	-1,861	-1,575	18
Profit after tax	4,089	4,046	1	5,200	5,346	-3
Operating margin (in %)	23.1	20.8	2.3pp	29.0	28.9	0.1pp	0.0pp
Earnings per share, basic (in €)	3.42	3.35	2	4.35	4.43	-2

Q4 2018 – Non-IFRS operating profit up 8%

FY 2018 – Strong topline, continued cloud gross margin improvement and operational discipline led to operating profit expansion

Q4 2018 – Cost ratios

€7.4bn Total revenue, Non-IFRS

*Non-IFRS at constant currencies

FY 2018 – Cost ratios

€24.7bn Total revenue, Non-IFRS

*Non-IFRS at constant currencies

Balance Sheet, Condensed December 31, 2018, IFRS

Assets
€ millions	12/31/18	12/31/17
Cash, cash equivalents and other financial assets	9,075	5,001
Trade and other receivables	6,384	5,899
Other current assets	1,445	1,031
Total current assets	16,904	11,930
Goodwill	23,725	21,271
Intangible assets	3,227	2,967
Property, plant, and equipment	3,553	2,967
Other non-current assets	4,278	3,349
Total non-current assets	34,781	30,554
Total assets	51,685	42,484

Equity and liabilities
€ millions	12/31/18	12/31/17
Trade and other payables	1,501	1,151
Provisions	80	149
Other liabilities	5,991	6,140
Contract liabilities / deferred income, current	3,047	2,771
Total current liabilities	10,619	10,210
Financial liabilities	10,553	5,034
Provisions	301	328
Contract liabilities / deferred income, non-current	88	79
Other non-current liabilities	1,249	1,318
Total non-current liabilities	12,191	6,759
Total liabilities	22,810	16,969
Total equity	28,876	25,515
Total equity and liabilities	51,685	42,484

Operating cash flow and free cash flow 2018

€ millions, unless otherwise stated	FY/18	FY/17	∆
Operating cash flow	4,302	5,045	-15%
- Capital expenditure	-1,458	-1,275	+14%
Free cash flow	2,843	3,770	-25%
Free cash flow in percent of total revenue	12	16	-5pp
Cash conversion rate	1.05	1.25	-16%
Days sales outstanding (DSO in days, DEC 31)	70	70	-0.6

Group Liquidity Development

Group Liquidity = cash and cash equivalent + current investments

Other = mainly purchase and sales of equity or debt instruments of other entities, purchase and proceeds from treasury shares and effects of foreign currency rates on cash and cash equivalents

FY 2019 – Additional outlook information and non-IFRS adjustments

The Company expects 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: 26.4%)

Non-IFRS adjustments	Actual Amounts FY/17	Actual Amounts FY/18	Est. Amounts for FY/19
Revenue adjustments	€3m	€33m	€100m to €150m
Acquisition-related charges	€587m	€577m	€750m to €900m
Share-based payment expenses	€1,120m	€830m	€1,200m to €1,500m
Restructuring charges	€182m	€19m	€800m – €950m
Sum of all adjustments	€1,892m	€1,459m	€2,850m to €3,500m

Due to rounding, numbers may not add precisely

IFRS 16 'Leases' adopted as of January 1, 2019 Expected impact

• SAP adopted the new IFRS standard on lease accounting (IFRS 16 'Leases')
• Under the approach chosen by SAP prior year numbers are not restated therefore, 2019 profit, assets and liabilities and cash flow growth rates will be impacted by the new policies
• The actual impact of IFRS 16 on our profits depends on the lease agreements in effect at the time of adoption and on new lease agreements entered into or terminated in 2019
• Expected impact of the policy change on profit:
• Operating expenses and so operating profit are expected to experience a benefit of substantially less than €0.1 billion.
• Finance costs are expected to increase and net financial income is consequently expected to decrease by an amount very similar to the benefit in operating profit.
• Thus, the impact on profit before tax, profit after tax and earnings per share is expected to be inconsequential.
• Operating cash flow is expected to increase and cash flow from financing activities is expected to decrease by appr. €0.3 – €0.4 billion.
• SAP plans to adjust the definition of its Free Cash Flow metric in a way that it is not affected by this change in cash flow classification.
• Link to video: https://broadcast.co.sap.com/video/190129\_IFRS16?hash=1ef92a

Fourth-Quarter and Full-Year 2018 Preliminary Results Release

Walldorf, Germany Tuesday, January 29, 2019