SAP SE — Investor Presentation 2016

Sep 7, 2016

SAP – Leading the Digital Transformation

© 2016 SAP SE Investor Relations. All rights reserved. Page 1

Commerzbank Sector Conference Frankfurt, September 1, 2016

Agenda

Focus – SAP Digital Business Services An introduction to SAP Helping customers win in the new digital economy SAP's long-term financial ambition Why invest in SAP Appendix

SAP Digital Business Services is the trusted partner

Next Generation Services

New Products to High Adoption Fast, Standard, Safe

Standard Development Model Company: Run Live • Ready-to-go E2E system landscape • Industry business content • Rapid prototyping (in the Cloud) • Service extensions, no SW dev New Product Release VALUE ASSURANCE

Innovation Adoption Lab

• Team: Dev & Services, dynamic, rotational staffing
• Customer selection: digital lighthouse accounts as start
• Coverage: global, Presales to Run supporting each MU
• First focus: IoT and Machine Learning
• Roll-in: direct feedback into Development & Services
• Roll-out: Spread knowledge into ecosystem

Agenda

Focus – SAP Digital Business Services An introduction to SAP Helping customers win in the new digital economy SAP's long-term financial ambition Why invest in SAP Appendix

SAP is the world's leading business software company

~320,000 Customers

A compelling customer base Unmatched vertical expertise

For over 40 years, SAP has turned technological change into customer value

Business software &
online processing

Globalization & mainframe computing

SAP R/1:

Enabled customers to get a complete view of their business with real-time processing of data across integrated modules for materials, procurement, and accounting.

SAP R/2:

Helped customers successfully manage large global enterprises on a mainframe architecture, while retaining the integration and real-time processing capabilities of SAP R/1.

Internet & clientserver technologies

SAP R/3 and SAP ECC: Enabled customers to take advantage of client-server and internet technologies. Created a unified graphical user interface and new functional components.

In-memory & cloud computing

SAP S/4HANA:

Helps customers thrive in the New Digital Economy. We are now focused on eradicating complexity and running live with our in-memory database technology SAP HANA and cloud computing.

1972 1982 1992 2015

Today, SAP is running the world's mission-critical business processes

76% of the world's transaction revenue touches an SAP system

SAP touches \$16 trillion of consumer purchases around the world

SAP customers distribute more than 78% of the world's food

SAP customers produce more than 82% of the world's medical devices SAP's brand value ranked #22 of Top 100 worldwide1)

Among the Top 100 companies worldwide by market capitalization

Broadest global footprint

SAP will continue to drive business value – fueled by three powerful trends affecting all businesses in all industries

	Innovations		Business value
	Software-as-a-service		• Substantial economies of scale
Cloud computing	Platform-as-a-service		• Easier consumption of software • Lower barriers to entry
	Infrastructure-as-a-service		• Benefits of IT spread more widely
	Big data analytics		• Instant insight and decision-making based on "live" data
In-memory database	Machine learning & artificial intelligence		• Reduced operational expenses driven by new wave of automation
	Internet of Things
	Network marketplaces		• New business models • Improved business processes
Hyper-connectivity	Online platforms		• Reduced risks and costs
	Mobile devices		• Multiple new ways in which companies
	Social media		can interact with their stakeholders

Agenda

Focus – SAP Digital Business Services An introduction to SAP Helping customers win in the new digital economy SAP's long-term financial ambition Why invest in SAP Appendix

Only SAP can help businesses implement their digital strategy

In the digital core, SAP's next-generation business suite SAP S/4HANA helps companies harness "live" data for immediate action

• Groundbreaking new architecture: SAP S/4HANA has changed ERP from a system of record to a system of innovation
• It provides immediate insight, intelligence beyond automation, integration between departments, and connections to the world
• These technological advances were made possible by the most advanced in-memory platform available: SAP HANA
• SAP S/4HANA provides an enhanced user experience with SAP Fiori
• SAP offers on-premise and cloud editions to provide customers with real choice
• SAP S/4HANA is catalyzing broad customer adoption of our entire innovation portfolio

>3,700

SAP S/4HANA customers – fastest upgrade cycle in SAP's history, four times the adoption rate of SAP R/3 in the 1990's

7,000 trained partners

3,750

startups developing on SAP HANA platform

SAP helps companies, ISVs, and partners create value in networked economies

SAP's unique business network assets

• SAP is leading the charge in connecting businesses and building new ecosystems across all spend categories – materials and services with SAP Ariba, contingent labor with SAP Fieldglass, and travel with Concur
• These network solutions are highly synergistic to SAP's other offerings

SAP is a forerunner in the Internet of Things (IoT) revolution

• Drawing on deep insights into companies' business processes and leveraging a broad range of products and technologies
• IoT use cases include:
• Monitoring the status, location, and movement of physical assets
• Providing contextualized experiences based on information from sensors
• Delivering new services based on IoT-enabled products
• SAP HANA Cloud Platform plays a key role in consolidating all the data generated by IoT – and enable advanced analytics on top of it

~2.2 million

connected companies trade over \$820bn of commerce on the SAP Ariba Network

~42 million

end users process travel and expenses effortlessly with Concur

>2.6 million

flexible workers were managed in about 130 countries over the past 12 months on the SAP Fieldglass platform

~75 billion

connected devices in the Internet of Things by 2020

Companies can now run real time – based on a holistic view of the organization, instant insights, and predictive analytics

Total transparency

• Get a 360° view in real time
• Visualize insights in context
• Align on one source of truth

Instant insights

• Answer ad-hoc questions on-the-fly
• Analyze root causes
• Simulate impact of decisions

Simplified boardroom processes

• Reduce preparation time and effort

For a demo, visit https://www.youtube.com/ watch?v=ofq7ygnWpbw

Agenda

Focus – SAP Digital Business Services An introduction to SAP Helping customers win in the new digital economy SAP's long-term financial ambition Why invest in SAP Appendix

2016 outlook and long-term ambitions

Cloud subscriptions	€2.30bn	€2.95 – €3.05bn	€3.8 – €4.0bn	€7.5 – €8bn
Cloud & Software	€17.23bn	+6% to +8%
Total revenue	€20.81bn		€23bn – €23.5bn	€26bn – €28bn
Share of more predictable revenue	60%		63% to 65%	70% to 75%
Operating profit	€6.35bn	€6.4 – €6.7bn	€6.7 – €7.0bn	€8 – €9bn

* All numbers non-IFRS

** All numbers non-IFRS and at constant currency

© 2016 SAP SE Investor Relations. All rights reserved. Page 16

SAP continues to grow its cloud business rapidly

Well-positioned for strong growth in the cloud

• Broadest portfolio of best-in-class cloud offerings (SaaS offerings for LoB, CEC, and HCM solutions, business network solutions, early HEC traction)
• Extremely synergistic to SAP S/4HANA, providing tremendous cross and upsell opportunities
• Continued solid growth in New Cloud Bookings in Q2 2016
• Combination of backlog and deferred revenue indicates continued strength in contractually committed future cloud subscriptions and support revenue

High growth sustained through additional drivers

• Upscaling of SaaS offerings
• Expanding Concur internationally
• Expanding HEC and fostering a strong ecosystem (IaaS)
• Enhancing S/4HANA cloud editions (public & private)
• Refining the Digital Enterprise Platform (BusinessObjects Cloud, SAP HANA Cloud Platform, IoT Platform) (PaaS)

Our core business remains rock solid

Software licenses revenue

• SAP S/4HANA innovation cycle catalyzes growth across SAP's innovation portfolio and strategic industries
• Certain solution areas e.g. HCM, Procurement, CEC, T&E1) are rapidly shifting to the cloud
• SAP S/4HANA now available as cloud subscription option
• 2016 outlook implies flattish license performance

€10 billion+ support revenue base – and growing

• Very high renewal rates (~97%)
• Net support renewal rate is ~96%, reflecting well-received cloud conversion options and very large customers qualifying for PSLE (Product Support for Large Enterprises)
• The blended support fee across the entire support customer base is ~20%

Illustrative example

Support business can grow even if licenses decline

Example: Pool of customers buying €1.0bn in software licenses in Y0; deals signed at year-ends

Assumptions: License purchases decline by 5% p.a. | Net support renewal rate of 96% | Blended support fee ~20% p.a.

1) HCM – Human Capital Management, CEC - Customer Engagement & Commerce, T&E – Travel & Expense

© 2016 SAP SE Investor Relations. All rights reserved. Page 18

SAP is pushing towards a larger, stickier, more predictable business

The cloud gross margins are on track towards SAP's long term ambition

• Business network gross margin** increased to 75.9% in H1 2016
• Private cloud gross margins still negative but expected to break even by year-end
• Overall H1 2016 cloud gross margin improved to 65.7%, up 30 basis points year-over-year
• Expect stable cloud gross margin in 2016
• Speeding up investments in cloud infrastructure to deliver on the massive cloud bookings and backlog
• Migrating acquired cloud offerings onto HANA massive benefits for customers – significant long term savings
• * Long term cloud subscriptions and support gross margin potential in mature state (excluding cloud-related professional services)

© 2016 SAP SE Investor Relations. All rights reserved. Page 20 ** Cloud gross margin of business network segment

Expanding absolute operating profit which drives operating cash flow

• Revenue mix shift means that managing to a blended group margin would discriminate against our fast growth businesses
• SAP is improving effectiveness and efficiency in each and every business, which all contribute to absolute operating profit growth
• Continued transformation of our services business shift towards a stronger focus on customer outcome which drives higher adoption and renewals
• Expected 2016 hiring similar to 2015 to fuel our innovation engine

Operating cash flow expected to show a positive trend in 2016 – following operating profit evolution and helped by lower restructuring related cash outflows

Targeting accelerated operating profit expansion in 2018 and beyond

Agenda

Focus – SAP Digital Business Services An introduction to SAP Helping customers win in the new digital economy SAP's long-term financial ambition Why invest in SAP Appendix

Summary – Why invest in SAP

SAP's innovation leadership is helping customers win in the digital economy

• SAP runs the world's mission-critical business processes and is perfectly positioned at the top of the IT stack – close to the end user where the business value is generated
• In addition, SAP has developed the most advanced in-memory platform available today: SAP HANA
• Based on SAP's groundbreaking new architecture, SAP is in the early stages of a powerful multi-year innovation cycle with SAP S/4HANA as the digital core coupled with the most comprehensive, best-in-class cloud & network portfolio
• Only SAP offers customers choice of deployment model (cloud, on premise or hybrid) and seamless integration

SAP is outpacing the market in topline and bottom-line growth

• SAP's broad global footprint provides resilience in an uncertain world
• Powerful combination of a rapidly expanding cloud business and a growing core
• Successful business transformation improve efficiency and effectiveness in each and every business
• Growing overall operating profit even as we continue to hire in fast growth areas such as S/4HANA, HCM, CEC, HCP (PaaS), Networks

SAP is pushing relentlessly towards a much more predictable business in the long term

Agenda

Focus – SAP Digital Business Services An introduction to SAP Helping customers win in the new digital economy SAP's long-term financial ambition Why invest in SAP Appendix

Q2 2016: Record-setting revenue and profit

	IFRS
Q2/16	Q2/15	$\Delta\%$	Q2/16	Q2/15	$\Delta\%$	$\Delta\%$ at cc
720	552	30	721	555	30	33
1,040	979	6	1,042	979	6	10
2,598	2,531	3	2,598	2,531	3	6
3,639	3,510	$\overline{4}$	3,640	3,510	$\overline{4}$	$\overline{7}$
4,359	4,062	7	4,361	4,065		11
878	908	-3	878	908	$-3$	$\overline{0}$
5,237	4,970	5	5,239	4,972	5	9
$-3,968$	$-4,269$	$-7$	$-3,724$	$-3,578$	$\overline{4}$	8
1,269	701	81	1,516	1,394	9	11
$-23$	$-11$	$>100$	$-23$	$-11$	>100
1,144	637	80	1,391	1,330	5
$-331$	$-168$	97	$-412$	$-369$	11
813	469	73	979	960	$\overline{2}$
24.2	14.1	$+10.1$ pp	28.9	28.0	$+0.9$ pp	$+0.5$ pp
0.68	0.39	73	0.82	0.80	$\overline{2}$
						Non-IFRS

Balance sheet, condensed June 30, 2016, IFRS

Assets € millions	06/30/16	12/31/15
Cash, cash equivalents and other financial assets	4,591	3,762
Trade and other receivables	5,025	5,275
Other non-financial assets and tax assets	932	703
Total current assets	10,549	9,739
Goodwill	22,354	22,689
Intangible assets	3,884	4,280
Property, plant, and equipment	2,284	2,192
Other non-current assets	2,718	2,490
Total non-current assets	31,239	31,651
Total assets	41,788	41,390

Equity and liabilities € millions	06/30/16	12/31/15
Trade and other payables	1,047	1,088
Provisions	191	299
Other liabilities	2,865	4,478
Deferred income, current	4,470	2,001
Total current liabilities	8,574	7,867
Financial liabilities	8,705	8,681
Provisions	201	180
Deferred income, non-current	106	106
Other non-current liabilities	1,238	1,262
Total non-current liabilities	10,250	10,228
Total liabilities	18,824	18,095
Total equity	22,963	23,295
Total equity and liabilities	41,788	41,390

Operating cash flow increased by 5% to €2.9 billion in H1 2016 and by 7% to €0.4 billion in Q2 2016

€ millions, unless otherwise stated	01/01/16 – 06/30/16	01/01/15 – 06/30/15	∆
Operating cash flow	2,921	2,775	+5%
- Capital expenditure	-406	-276	+47%
Free cash flow	2,516	2,500	+1%
Free cash flow as a percentage of total revenue	25%	26%	-1pp
Cash conversion rate	2.11	3.15	-33%
Days sales outstanding (DSO in days)	73	68	+5

Additional outlook information and non-IFRS adjustments

The company now expects a full-year 2016 effective tax rate (IFRS) between 27.0% to 28.0% (2015: 23.4%) and an effective tax rate (non-IFRS) between 28.0% to 29.0% (2015: 26.1%).

Non-IFRS adjustments	Actual Amounts H1/15	Actual Amounts H1/16	Est. Amounts for FY 2016
Revenue adjustments	€8m	€4m	<€20m
Share-based payment expenses	€314m	€177m	€560m to €610m
Acquisition-related charges	€371m	€336m	€680m to €730m
Restructuring charges	€418m	€22m	€30m to €50m
Sum of all adjustments	€1,112m	€538m	€1,290m to €1,410m

Gross margin development Q2 2016

Non-IFRS	FY/14	Q1/15	Q2/15	Q3/15	Q4/15	FY/15	Q1/16	Q2/16
Cloud*	64.3	65.1	65.7	68.8	63.0	65.6	66.3	65.2
Business Network*	75.2	75.1	74.8	77.3	72.3	74.9	75.3	76.3
Software & Support	86.3	85.1	86.1	86.7	87.7	86.6	85.9	87.4
Cloud & Software	84.6	82.3	83.3	84.1	84.8	83.8	82.4	83.7
Services	29.0	19.6	23.4	23.4	24.3	22.7	13.9	17.9
Total gross margin	74.3	70.6	72.4	73.6	75.6	73.3	69.7	72.7

* subscriptions and support

Revenue mix shift weighs on ATS and cloud gross margins

• Continued fast growth in cloud while investing in personnel and moving our acquired cloud applications onto SAP HANA – cloud margin decreased to 65.2%
• Cloud margin business network cloud margin increased to 76.3% and ATS cloud margin was stable at 51.5%
• Revenue mix shift effect within ATS accelerated growth in private cloud business weighs on ATS margin since private cloud margin is still negative; expected to be break even by year end
• Revenue mix shift effect within cloud business higher share of ATS segment of total cloud business weighs on cloud margin, which is expected to be stable for FY
• Revenue mix shift effect within cloud and software cloud and software margin increased to 83.7%; Strong performance in core business overcompensated the mix shift effect usually seen from our cloud business on the cloud and software margin

* Cloud subscriptions revenue share of cloud and software revenue

© 2016 SAP SE Investor Relations. All rights reserved. Page 30

SAP's non-financial KPIs

SAP also publishes the financial impact of four non-financial KPIs*

	2013	2014	2015
Employee Engagement Index (%)	77	79	81	
Business Health Culture Index (%)	67	72	75	
Employee Retention (%)	93.5	93.5	91.8	
Greenhouse Gas Emissions (kt)	545	500	455	

* For more information about social performance KPIs, see the Employees and Social Investment and Notes to Social Performance Reporting sections of the SAP Integrated Report 2015.

SAP Investor Relations contacts

Stefan Gruber Head of Investor Relations Phone: +49 6227 7-44872

Johannes Buerkle Retail Investors, Europe Phone: +49 6227 7-70157

John Duncan Institutional Investors and Analysts Phone: +1 212 653 1413

James Dymond Socially Responsible Investing (SRI) Phone: +49 6227 7-61823

Dr. Ekkehard Lange Institutional Investors and Analysts Phone: +49 6227 7-67389

Scott Smith Institutional Investors and Analysts Phone: +1 650 461 2905

Astrid Stroemer Institutional Investors and Analysts Phone: +49 6227 7-52167

SAP SE Investor Relations Dietmar-Hopp-Allee 16 69190 Walldorf Germany

Investor Hotline: +49 6227 7-67336 Telefax: +49 6227 7-40805 E-Mail: investor@sap.com Internet: www.sap.com/investor Twitter: @SAPinvestor

Any statements contained in this document that are not historical facts are forward-looking 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 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.