SAP SE — Interim / Quarterly Report 2021

Jul 21, 2021

Second-Quarter and Half-Year 2021 Results Presentation

PUBLIC

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SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking 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.

SAP accelerates cloud growth across portfolio

Financial highlights

Q2 Other Financial Highlights*

• Current Cloud Backlog: +20% @cc to €7.8bn
• SAP S/4HANA Current Cloud Backlog: +48% @cc to €1.13bn
• SAP S/4HANA Cloud Revenue: +39% @cc to €0.26bn

• SaaS/PaaS Revenue excl. Intelligent Spend: +25% @cc

• Share of more predictable revenue now at 76%

• Cloud Gross Margin: +0.4pp @cc to 70.0%
• Earnings per Share: +50% to €1.75
• Earnings per Share (IFRS): +57% to €1.15

* All numbers are Non-IFRS unless otherwise stated.

Regional revenue Strong performance across all regions

AMERICAS

Q2/21

Cloud Revenue

+4% +12% cc

Cloud and Software Revenue

-3% +5% cc

Brazil and Mexico had a robust performance in cloud revenue.

Q2/21

EMEA

Cloud Revenue

+22% +23% cc

Cloud and Software Revenue

+4% +5% cc

Germany and Saudi Arabia were highlights in cloud revenue.

APJ

Q2/21

Cloud Revenue +18% +23% cc

Cloud and Software Revenue

+2% +6% cc

For cloud revenue, Japan, Australia and South Korea were highlights.

Gross margin development

Non-IFRS at constant currencies as reported	FY/19	Q1/20	Q2/20	Q3/20	Q4/20	FY/20	Q1/21	Q2/21
Cloud	68.2	69,3	69,3	69,7	70,1	69.6	69,5	69,9
SaaS/PaaS – Intelligent Spend Group	78.1	78,7	79,7	78,3	78,9	78.9	79,1	80,1
SaaS/PaaS – Other	68.5	70,3	69,5	71,4	71,4	70.7	70,7	70,3
IaaS	28.9	30,7	35,6	33,0	35,9	33.8	32,8	35,9
Software Licenses & Support	87.4	85,9	87,4	88,2	88,9	87.7	86,5	87,6
Cloud & Software	81.6	79,7	81,0	81,6	83,0	81.4	79,7	80,5
Services	25.0	22,3	25,6	31,4	28,2	26.8	28,8	29,6
Total Gross Margin	72.3	69,9	72,5	74,0	76,0	73.3	72,4	73,5

Tax rate, EPS, Cash Flow & CapEx

Effective Tax Rate (Q2)

• IFRS: 19.7% | -13.4pp
• Non-IFRS: 19.2% | -11.1pp

EPS (Q2)

• IFRS: €1.15 | +57%
• Non-IFRS: €1.75 | +50%

Decrease mainly resulted from tax effects related to changes in tax exempt income and a one-time change in deferred tax liabilities for taxable temporary differences associated with investments in subsidiaries

Reflecting again a lower effective tax rate in combination with an outstanding contribution from Sapphire Ventures

Cash Flow (HY1) Operating Cash Flow €3.77bn | flat

Free Cash Flow €3.25bn | +4%

Positive effects from lower share-based and restructuring payments were compensated by higher income taxes paid

CapEx (HY1)

• €0.34bn | -31%

Revenue and profit outlook raised

Updated outlook 2021

2020 Actuals (Non-IFRS)	2021 Outlook (Non-IFRS @cc)
Cloud Revenue €8.09bn	Cloud Revenue in a range of €9.3 – 9.5bn [prev. €9.2 – 9.5bn] Growth: 15% to 18%	Operating Cash Flow approx. €6.0bn
Cloud and Software Revenue €23.23bn	Cloud and Software Revenue in a range of €23.6 – 24.0bn [prev. €23.4 – 23.8bn] Growth: 2% to 3%	Free Cash Flow above €4.5bn
Total Revenue €27.34bn	Operating Profit
Operating Profit €8.29bn	in a range of €7.95 – 8.25bn [prev. €7.8 – 8.2bn] Growth: flat to -4%
	Share of more predictable revenue to reach approx. 75%

Appendix

Non-financial indicators

Updated outlook 2021

2020 Actuals	2021 Outlook	Q2/21 Actuals
Employee Engagement	Employee Engagement	Employee Retention
86%	in a range of 84% to 86%	94.8%
Customer Net Promoter Score	Customer Net Promoter Score	Women in Management
4	in a range of 5 to 10	27.9%
Carbon Emissions 135kt	Carbon Emissions in a range of 90kt to 110kt [prev. 145kt ]	Carbon Emissions 20kt

Income statement: Second quarter 2021

		IFRS			Non-IFRS
€ millions, unless otherwise stated	Q2/21	Q2/20	∆ %	Q2/21	Q2/20	∆ %	∆ % at cc
Cloud	2,276	2,044	11	2,276	2,044	11	17
Software licenses	650	773	-16	650	773	-16	-13
Software support	2,823	2,892	-2	2,823	2,892	-2	1
Software licenses and support	3,474	3,665	-5	3,474	3,665	-5	-2
Cloud and software	5,750	5,709	1	5,750	5,709	1	5
Services	920	1,034	-11	920	1,034	-11	-7
Total revenue	6,669	6,743	-1	6,669	6,744	-1	3
Total operating expenses	-5,685	-5,459	4	-4,748	-4,780	-1	3
Operating profit (loss)	984	1,284	-23	1,922	1,964	-2	3
Financial income, net	853	92	>100	853	92	>100
Profit (loss) before tax	1,804	1,322	36	2,741	2,002	37
Income tax expense	-355	-437	-19	-528	-607	-13
Profit (loss) after tax	1,449	885	64	2,214	1,395	59
Operating margin (in %)	14.8%	19.0%	-4.3pp	28.8%	29.1%	-0.3pp	-0.2pp
Earnings per share, basic (in €)	1.15	0.73	57	1.75	1.17	50

Income statement: First six months 2021

3		IFRS			Non-IFRS
€ millions, unless otherwise stated	H1/21	H1/20	∆ %	H1/21	H1/20	∆ %	∆ % at cc
Cloud	4,421	4,055	9	4,421	4,057	9	15
Software licenses	1,133	1,224	-7	1,133	1,224	-7	-4
Software support	5,624	5,826	-3	5,624	5,826	-3	0
Software licenses and support	6,757	7,051	-4	6,757	7,051	-4	0
Cloud and software	11,178	11,106	1	11,178	11,107	1	5
Services	1,839	2,159	-15	1,839	2,159	-15	-11
Total revenue	13,017	13,264	-2	13,017	13,266	-2	3
Total operating expenses	-11,073	-10,770	3	-9,357	-9,820	-5	0
Operating profit (loss)	1,944	2,494	-22	3,660	3,446	6	12
Financial income, net	1,168	53	>100	1,168	53	>100
Profit (loss) before tax	3,141	2,444	29	4,856	3,396	43
Income tax expense	-622	-747	-17	-922	-986	-6
Profit (loss) after tax	2,519	1,697	48	3,934	2,409	63
Operating margin (in %)	14.9%	18.8%	-3.9pp	28.1%	26.0%	2.1pp	2.3pp
Earnings per share, basic (in €)	2.03	1.42	43	3.14	2.02	56

Gross margin development

Non-IFRS, in percent as reported	FY/18	Q1/19	Q2/19	Q3/19	Q4/19	FY/19	Q1/20	Q2/20	Q3/20	Q4/20	FY/20	Q1/21	Q2/21
Cloud	63.1	66,2	67,9	69,0	69,5	68.2	69,3	69,5	69,7	70,3	69.7	69,6	70,0
SaaS/PaaS – Intelligent Spend Group	77.8	78,0	78,1	78,0	78,0	78.1	78,8	79,9	78,3	79,1	78.9	78,7	80,0
SaaS/PaaS – Other	60.0	63,8	69,0	70,5	70,0	68.5	70,2	69,5	71,4	71,4	70.7	71,0	70,5
IaaS	12.2	32,0	22,4	25,3	35,7	28.9	31,0	36,0	33,4	36,8	34.3	33,1	36,8
Software Licenses & Support	87.4	85,7	87,1	87,6	88,8	87.4	85,7	87,4	87,6	88,5	87.4	86,3	87,3
Cloud & Software	81.5	79,6	81,1	81,7	83,4	81.6	79,6	81,0	81,2	82,8	81.2	79,7	80,5
Services	22.9	20,3	23,9	26,9	28,1	25.0	22,8	26,3	31,5	28,0	27.0	28,5	29,2
Total Gross Margin	71.8	69,5	71,4	72,3	75,2	72.3	69,8	72,6	73,7	75,8	73.1	72,3	73,4

Operating profit: Second quarter 2021

4,748

IFRS

1,922

€6,669m

Q2/21

• Non-IFRS operating margin

-0.2pp to 28.9% at cc

-0.3pp to 28.8% (Q2/20: 29.1%)

Operating profit: First six months 2021

IFRS

	Total operating expenses Operating profit (loss)
HY1/20	10,770	2,494	€13,264m
HY1/21	11,073	1,944	€13,017m

• IFRS operating profit (loss) -22% to €1,944m (HY1/20: €2,494m) • IFRS operating margin -3.9pp to 14.9% (HY1/20: 18.8%)

Non-IFRS

	Total operating expenses Operating profit (loss)
HY1/20	9,820	3,446	€13,266m
HY1/21	9,357	3,660	€13,017m

• Non-IFRS operating profit (loss) +6% to €3,660m (HY1/20: €3,446m) +12% to €3,854m at cc • Non-IFRS operating margin +2.1pp to 28.1% (HY1/20: 26.0%)

+2.3pp to 28.3% at cc

Cost ratios: Second quarter 2021

€6.7bn Total revenue, Non-IFRS

Cost ratios: First six months 2021

€13.0bn Total revenue, Non-IFRS

Balance sheet condensed: June 30, 2021 – IFRS

Assets			Equity and liabilities
€ millions	6/30/21	12/31/20	€ millions	6/30/21	12/31/20
Cash, cash equivalents and other financial assets	7,764	5,311	Trade and other payables	1,076	1,213
Trade and other receivables	5,617	6,593	Provisions	86	73
			Other liabilities	8,025	7,405
Other current assets	3,120	3,166	Contract liabilities, current	6,175	4,150
Total current assets	16,502	15,069	Total current liabilities	15,362	12,842
Goodwill	29,049	27,560	Financial liabilities	11,372	13,605
			Provisions	388	368
Intangible assets	3,928	3,784	Contract liabilities, non-current	38	36
Property, plant, and equipment	4,827	5,041	Other non-current liabilities	1,813	1,693
Other non-current assets	8,788	7,019	Total non-current liabilities	13,611	15,702
			Total liabilities	28,973	28,544
Total non-current assets	46,593	43,402	Total equity	34,122	29,928
Total assets	63,095	58,472	Total equity and liabilities	63,095	58,472

Due to rounding, numbers may not add precisely

Cash flow development

€ millions, unless otherwise stated	HY1/21	HY1/20	∆
Operating cash flow	3,771	3,772	-0%
- Capital expenditure	-344	-497	-31%
- Payments of lease liabilities	-176	-156	+13%
Free cash flow	3,251	3,119	+4%
Free cash flow in percent of total revenue	25	24	+1pp
Free cash flow conversion rate	1.29	1.84	-0.55

Net debt

Net Liquidity = cash and cash equivalent plus current time deposits and debt securities minus financial debt

Other = mainly purchase and sales of equity or debt instruments of other entities as well as treasury shares, proceeds from sales of non-current assets, and effects of foreign currency rates on cash and cash equivalents – for more information see our 2020 Integrated Report

Additional outlook information and Non-IFRS adjustments

The Company now expects a full-year 2021 effective tax rate (IFRS) of 21.5% to 23.0% (previously: 26.0% to 27.0%) and an effective tax rate (non-IFRS) of 20.0% to 21.5% (previously: 22.5% to 23.5%).

Non-IFRS adjustments	Actual Amounts HY1/20	Actual Amounts HY1/21	Est. Amounts for FY/21
Revenue adjustments	€2m	€0m	NA
Acquisition-related charges	€325m	€296m	€540m to €640m
Share-based payment expenses	€612m	€1,256m	€2,300m to €2,800m
Restructuring charges	€13m	€164m	€150m to €200m
Sum of all adjustments	€952m	€1,715m	€2,990m to €3,640m

Due to rounding, numbers may not add up precisely

Expected currency impact 2021

Expected Currency Impact Based on June 2021 Level for the Rest of the Year (Non-IFRS)
in percentage points	Q3	FY
Cloud revenue growth	-3pp to -1pp	-5pp to -3pp
Cloud and software revenue growth	-2pp to 0pp	-4pp to -2pp
Operating profit growth	-3pp to -1pp	-4pp to -2pp

SAP S/4HANA customer count

Key cloud metrics: Second quarter 2021

1) 'Current Cloud Backlog' – or CCB for short gives you the contractually committed cloud revenue we expect to recognize over the upcoming twelve months. The CCB is thus a subset of our Remaining Performance Obligations: Cloud only and 12 months only. Its expansion between two key dates reflects our success in both, contracting new cloud business as well as renewing existing business. So compared to New Cloud Bookings, it is a better, more holistic indicator of our cloud progress.

2) Starting in Q1 2021, SAP is expanding its financial disclosure to provide transparency on the transition of its core ERP business to the cloud. Specifically SAP is disclosing current cloud backlog and cloud revenue contributed by SAP S/4HANA Cloud, which represents SAP's cloud offering for core ERP processes. It mainly includes cloud solutions for financial management, supply chain management, engineering and manufacturing, order management and asset management, as well as associated data management, analytics, development and integration capabilities.