SAP SE — Investor Presentation 2023

Oct 18, 2023

Third Quarter 2023 Results

Christian Klein, CEO Dominik Asam, CFO

Safe Harbor Statement

During this presentation we will make forward-looking statements which are predictions, projections, or other statements about future events. These statements are based on current expectations, forecasts, and assumptions that are subject to risks and uncertainties that could cause actual results and outcomes to materially differ. Additional information regarding these risks and uncertainties may be found in our filings with the Securities and Exchange Commission, including but not limited to the risk factors section of SAP's 2022 Annual Report on Form 20-F.

Christian Klein CEO

We continuously deliver on our commitments with strong performance in Q3

All numbers are in € millions, non-IFRS unless otherwise stated, SAP continuing operations excl. Qualtrics

Q3 2023 Customer Momentum Strategy Update

We deliver unique customer value with our best-of-suite offering

Q3 2023 Customer Momentum Strategy Update

We keep the momentum

RISE with SAP customers

Installed base maintenance conversion

Customers in 80 countries

Q3 2023 Customer Momentum Strategy Update

The bigger picture: Business transformation

On September 7, SAP and LeanIX GmbH announced that SAP has entered into an agreement to acquire LeanIX. The transaction is expected to close in the fourth quarter of 2023, subject to customary closing conditions and regulatory approvals.

SAP Business AI Relevant. Reliable. Responsible.

Dominik Asam CFO

SAP Q3 2023 Financial Results

in € millions, unless otherwise stated; based on SAP group results from continuing operations

Total revenue	Cloud & Software revenue		S/4HANA Cloud revenue
7,744 ▲ +4% (+9% @cc)	6,679 ▲ +4% (+9% @cc)		914 ▲ +67% (+77% @cc)
Share of more predictable revenue		Current cloud backlog	S/4HANA current cloud backlog
82% ▲ +2pp		12,269 ▲ +19% (+25% @cc)	4,199 ▲ +58% (+66% @cc)
Gross profit (Gross margin in %)	Cloud gross profit (Cloud gross margin in %)	Operating profit	Earnings per Share (in €)
IFRS	IFRS	IFRS	IFRS basic
5,637 (72.8%) ▲ +4%	2,525 (72.7%) ▲ 21%	1,724 ▲ +11%	1.09 ▲ +45%
Non-IFRS	Non-IFRS	Non-IFRS	IFRS diluted Non-IFRS basic
5,770 (74.5%)	2,558 (73.7%)	2,278	1.08 1.45

Financial Highlights Regional Performance Gross Profit Development Tax Rate, EPS & Cash Flow Outlook

Regional cloud revenue 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

Gross Profit Development

	Revenue		Gross Profit (Gross margin %)
Non-IFRS in € millions, unless otherwise stated	Q3/23	∆ in %	∆ in % @cc	Q3/23	∆ in %	∆ in % @cc
Cloud	3,472	16	23	2,558 (73.7)	21	28
SaaS	2,727	16	23	2,016 (73.9)	17	24
PaaS	558	39	46	473 (84.7)	48	55
IaaS	186	-20	-16	70 (37.4)	1	-3
Software licenses and support	3.208	-6	-2	2,899 (90.4)	-7	-3
Cloud and software	6.679	4	9	5,457 (81.7)	5	10
Services	1.065	0	4	314 (29.5)	-9	-2
Total	7.744	4	9	5,770 (74.5)	4	9

Third Quarter 2023 Results Presentation | October 18, 2023

Financial Highlights Regional Performance Gross Profit Development Tax Rate, EPS & Cash Flow Outlook

Tax rate, EPS & Cash flow

Financial Highlights	Regional Performance	Gross Profit Development	Tax Rate, EPS & Cash Flow	Outlook
----------------------	----------------------	--------------------------	---------------------------	---------

SAP reaffirms 2023 outlook

in € billions, unless otherwise stated; continuing operations

FY 2023 Outlook1)

Cloud revenue @cc | € billions

▲ +23% to 24% 2022: 11.43 14.0 – 14.2 27.0 – 27.4

approx. 4.9

software revenue

▲ +6% to 8% 2022: 25.39

2022: 4.4

€ billions

@cc | € billions

Cloud &

Operating profit Non-IFRS @cc | € billions

▲ +8% to 12% 2022: 7.99 8.65 – 8.95

Share of more predictable Free cash flow revenue in %

▲ +3pp 2022: 79 ~82 Effective tax rate in % 2022: 32.0 28.0 – 32.0 IFRS 2022: 29.6 26.0 – 28.0 Non-IFRS

FY 2023 Non-Financial Outlook

Employee engagement in %

76 – 80

in points Customer Net Promoter Score2)

8 – 12

Net carbon emissions in kilotons

0

1) 2023 financial outlook is based on constant currencies assumptions, including an exchange rate of 1.05 US Dollar per Euro 2)The guidance is based on an adjusted methodology for 2023 to better reflect the business priorities of the company. The baseline for 2022 calculated using the new methodology is 7.

Income statement: Third quarter 2023

			IFRS				Non-IFRS
€ millions, unless otherwise stated	Q3 23	Q3 22	∆ %	Q3 23	Q3 22	∆ %	∆ % @cc
Cloud	3,472	2,986	16	3,472	2,986	16	23
Software licenses	335	406	-17	335	406	-17	-14
Software support	2,872	3,016	-5	2,872	3,016	-5	-1
Software licenses and support	3,208	3,422	-6	3,208	3,422	-6	-2
Cloud and software	6,679	6,408	4	6,679	6,408	4	9
Services	1,065	1,069	0	1,065	1,069	0	4
Total revenue	7,744	7,476	4	7,744	7,476	4	9
Total operating expenses	-6,020	-5,919	2	-5,466	-5,401	1	6
Operating profit (loss)	1,724	1,557	11	2,278	2,075	10	16
Financial income, net	-75	-333	-77	-75	-333	-77
Profit (loss) before tax from continuing operations	1,761	1,170	50	2,315	1,688	37
Income tax expense	-489	-332	47	-628	-448	40
Profit (loss) after tax from continuing operations	1,272	839	52	1,687	1,240	36
Profit (loss) after tax from discontinued operations	0	-292	-100	0	23	-100
Profit (loss) after tax*	1,272	547	>100	1,687	1,263	34
Operating margin (in %)	22.3	20.8	1.4pp	29.4	27.8	1.7pp	1.9pp
Earnings per share, basic (in €) from continuing operations	1.09	0.75	45	1.45	1.10	32
Earnings per share, basic (in €)*	1.09	0.57	91	1.45	1.12	30

Income statement: First nine months 2023

			IFRS				Non-IFRS
€ millions, unless otherwise stated	Q1-Q3/ 23	Q1-Q3/ 22	∆ %	Q1-Q3/ 23	Q1-Q3/ 22	∆ %	∆ % @cc
Cloud	9,965	8,348	19	9,965	8,348	19	22
Software licenses	927	1,149	-19	927	1,149	-19	-17
Software support	8,651	8,916	-3	8,651	8,916	-3	-1
Software licenses and support	9,577	10,065	-5	9,577	10,065	-5	-3
Cloud and software	19,542	18,413	6	19,542	18,413	6	9
Services	3,197	3,043	5	3,197	3,043	5	7
Total revenue	22,739	21,456	6	22,739	21,456	6	8
Total operating expenses	-18,854	-17,368	9	-16,528	-16,027	3	5
Operating profit (loss)	3,885	4,088	-5	6,211	5,429	14	19
Financial income, net	-363	-506	-28	-363	-506	-28
Profit (loss) before tax from continuing operations	3,532	3,466	2	5,857	4,807	22
Income tax expense	-1,132	-998	13	-1,668	-1,298	28
Profit (loss) after tax from continuing operations	2,399	2,468	-3	4,189	3,508	19
Profit (loss) after tax from discontinued operations	2,272	-1.086	<-100	2,054	13	>100
Profit (loss) after tax*	4,671	1,382	>100	6,243	3,522	77
Operating margin (in %)	17.1	19.1	-2.0pp	27.3	25.3	2.0pp	2.4pp
Earnings per share, basic (in €) from continuing operations	2.07	2.17	-5	3.60	3.05	18
Earnings per share, basic (in €)*	4.13	1.49	>100	5.53	3.08	80

Gross margin development

Non-IFRS, in percent as reported	FY 21	Q1 22	Q2 22	Q3 22	Q4 22	FY 22	Q1 23	Q2 23	Q3 23
Cloud	68.4	68.9	71.2	70.8	70.3	70.3	71.4	72.2	73.7
SaaS	71.3	71.3	72.6	73.4	71.0	72.1	71.6	72.5	73.9
PaaS	81.7	80.7	81.3	79.7	81.6	80.8	84.3	83.9	84.7
IaaS	32.6	30.7	43.3	29.4	38.4	35.5	38.0	36.6	37.4
Software Licenses & Support	89.7	89.7	90.7	90.7	91.4	90.7	89.2	90.7	90.4
Cloud & Software	81.7	80.5	81.9	81.4	82.1	81.5	80.3	81.2	81.7
Services	30.3	28.3	27.9	32.4	29.8	29.7	29.5	28.0	29.5
Total Gross Margin	74.9	73.1	74.3	74.4	75.1	74.3	72.9	73.8	74.5

Cost ratios: Third quarter 2023

€7.7bn Total revenue

All numbers are Non-IFRS unless otherwise stated.

*Non-IFRS at constant currencies

2023 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC

SAP continuing operations excl. Qualtrics

Cost ratios: First nine months 2023

€22.7bn Total revenue

All numbers are Non-IFRS unless otherwise stated.

*Non-IFRS at constant currencies

Balance sheet condensed: September 30, 2023 – IFRS

Assets

€ millions	09/30/23	12/31/22
Cash, cash equivalents and other financial assets	12,428	9,860
Trade and other receivables	5,355	6,236
Other current assets	3,035	2,426
Total current assets	20,817	18,522
Goodwill	29,144	33,077
Intangible assets	2,190	3,835
Property, plant, and equipment	4,402	4,934
Other non-current assets	11,458	11,792
Total non-current assets	47,194	53,638
Total assets	68,011	72,159

Equity and liabilities

€ millions	09/30/23	12/31/22
Trade and other payables	1,618	2,147
Provisions	276	90
Other liabilities	6,241	9,908
Contract liabilities, current	5,256	5,309
Total current liabilities	13,391	17,453
Financial liabilities	9,222	9,547
Provisions	343	359
Contract liabilities, non-current	24	33
Other non-current liabilities	1,783	1,918
Total non-current liabilities	11,373	11,858
Total liabilities	24,764	29,311
Total equity	43,247	42,848
Total equity and liabilities	68,011	72,159

Cash flow development

€ millions, unless otherwise stated	YTD/23	YTD/22	∆ in %
Operating cash flow	4,284	3,653	+17
– Capital expenditure	–595	–685	–13
– Payments of lease liabilities	–266	–307	–13
Free cash flow	3,423	2,662	+29
Free cash flow in percent of total revenue	15%	12%	+3pp
Free cash flow in percent of profit after tax (IFRS)	143%	108%	+35pp

Due to rounding, numbers may not add up precisely

Net debt

€ millions, unless otherwise stated	2023	2022
Net Debt 12/31/2022 PY: 12/31/2021	–2,067	–1,563
Operating cash flow	4,284	3,653
Capital expenditure	–595	–685
Payments of lease liabilities	–266	–307
Business combinations	0	–679
Dividends	–2,395	–2,865
Treasury shares	-718	–1.500
Net proceeds from Qualtrics sale	5,625	0
Other	–192	218
Net Debt 09/30/2023 PY: 09/30/2022	3,677	–3,728

Net Debt as of 12/31/2022 includes continuing and discontinued operations, Net Debt as of 3/31/2023 only includes continuing operations. Due to rounding, numbers may not add up precisely

Additional outlook information and Non-IFRS adjustments

The Company continues to expect a full-year 2023 effective tax rate (IFRS) of around 28.0% – 32.0% (2022: 32.0%) and an effective tax rate (non-IFRS) of around 26.0% – 28.0% (2022: 29.6%).

Non-IFRS adjustments	Actual Amounts Q3/22	Actual Amounts Q3/23	Est. Amounts FY/23
Acquisition-related charges	€102m	€80m	€300m to €380m
Share-based payment expenses	€424m	€510m	€2,000m to €2,250m
Restructuring charges	-€8m	-€36m	€200m to €240m
Adjustment for regulatory compliance matter expenses	-	-	€170m
Sum of all adjustments	-€518m	€554m	€2,670m to €3,040m

Due to rounding, numbers may not add up precisely

Expected currency impact 2023

Expected Currency Impact Based on September 2023 Level Applied for 2023

in percentage points	Q4 23	FY 23
Cloud revenue growth	-5pp to -3pp	-4pp to -2pp
Cloud and software revenue growth	-4pp to -2pp	-4pp to -2pp
Operating profit growth (non-IFRS)	-4pp to -2pp	-5pp to -3pp