Core Insights - Numisma Bank has commenced operations as a global currency distributor of U.S. banknotes, backed by SAP Fioneer technology, and is the first bank to obtain a State of Connecticut Innovation Banking Charter, a Federal Reserve Master Account, and FedCash Services [1][4] Group 1: Numisma Bank - Numisma Bank is positioned as a reliable and efficient global distributor of banknotes, with direct access to the Federal Reserve System, including master account and cash services [4] - The bank aims to redefine banking innovation and enhance the financial ecosystem, leveraging its unique capabilities and regulatory framework [4] Group 2: SAP Fioneer - SAP Fioneer provides essential solutions for Numisma's launch, including S/4HANA Finance, Deposit Management, Payment Centralization, and transaction screening via Anti Financial Crime (AFC) [2] - The partnership with Numisma highlights SAP Fioneer's commitment to customer centricity and its extensive market knowledge, which supports Numisma in navigating the challenges of being a new company [3] - SAP Fioneer, established in 2021, aims to be a leading provider of financial services software solutions, with a presence in 17 countries and over 1,200 financial services customers [5][6]

Core Insights - Aleran Software has launched its digital commerce and sales operations platform on SAP® Store, enhancing B2B manufacturers' omnichannel sales strategies [1][2] - The platform integrates with SAP Business Technology Platform (BTP) to provide features like sales order management, AI-powered catalog-embedded buying, and automated configure, price, quote (CPQ) [1][2] Company Overview - Aleran Software is the first complete commerce and sales operations platform specifically designed for B2B manufacturers, aiming to simplify and accelerate sales processes across various channels [5] - The company is headquartered in Minneapolis, Minnesota, and focuses on integrating with core business technologies such as ERP, CRM, and WMS [5] Industry Context - Many manufacturers hesitate to digitize sales processes due to concerns about product complexity and maintaining customer satisfaction; however, data indicates that online self-service options can enhance sales and customer satisfaction [2] - Aleran's solution is tailored for midsize and enterprise B2B manufacturers, enabling faster purchasing and significant improvements in sales efficiency and operational costs [2][3] Key Benefits - The platform improves sales efficiency by automating sales order and quote management, allowing for quicker deal closures [3] - It enables rapid deployment of personalized customer portals for self-service ordering and management of quotes and invoices [3] - AI-generated product recommendations enhance the customer experience, even for complex, configurable products [3] SAP Store - SAP Store offers a connected digital customer experience for accessing over 2,300 solutions from SAP and its partners, facilitating the purchasing process [4] - For each purchase made through SAP Store, SAP commits to planting a tree, promoting sustainability [4]

Core Insights - Exela Pharmaceutical Sciences rapidly adapted its manufacturing capabilities to produce intravenous saline bags in response to Hurricane Helene, demonstrating the effectiveness of its upgraded technology and AI applications [1][3][4] Group 1: Technological Advancements - Exela upgraded its manufacturing technology, including new software that connects various functions such as production data, materials sourcing, and compliance, utilizing AI to enhance efficiency [2][6] - The implementation of "Industry 4.0" software allowed Exela to produce IV bags ready for shipment in less than three weeks, showcasing the potential of AI-enhanced manufacturing [3][4] - The typical cost for SAP's digital manufacturing execution system is around $100,000 annually, with an additional hardware investment of at least $300,000, leading to expected productivity savings of 10% and a tripling of profitability over three years [6] Group 2: Industry Impact - The SAP Industry 4.0 Center serves as a model for demonstrating the integration of AI in manufacturing, helping companies visualize and implement solutions to enhance supply chain efficiency [17][19] - Exela's experience indicates that automation does not necessarily lead to job losses, as the company has continued to hire even while automating production due to increased sales [13] - GSK plans to invest up to $800 million in a new factory that will create only 200 jobs, highlighting the trend of automation leading to fewer jobs in next-generation factories [14] Group 3: Collaborative Efforts - SAP collaborates with various companies to showcase the impact of AI on factory automation, with the Industry 4.0 Center hosting demonstrations for stakeholders [10][11] - The center features machines from multiple companies, emphasizing the collaborative nature of modern manufacturing solutions [15][16] - SAP's integration with products from competitors like Amazon and Google illustrates the competitive landscape of business software in North America [18]

Investment Rating - The report does not explicitly mention the investment rating for SAP SE [1][2][3] Core Views - SAP SE demonstrated strong performance in Q3 2024, with cloud orders growing by 25% to €15.38 billion, and cloud revenue increasing by 25% to €4.35 billion, driven by a 34% growth in cloud ERP suite revenue [2][8] - The company successfully expanded its customer base across various sectors, including retail, technology, and other industries, with notable agreements with Schwarz Group, Sainsbury's, and Mistral AI [2][17][18] - SAP's regional revenue breakdown shows EMEA as the largest market, followed by the Americas, with significant growth in cloud revenue across all regions [11][13] - The company raised its full-year 2024 guidance, expecting cloud and software revenue to grow by 10-11% to €29.5-29.8 billion, and non-IFRS operating profit to increase by 20-23% to €7.8-8.0 billion [14][15] Performance Summary Q3 2024 Financial Performance - Cloud orders grew by 25% to €15.38 billion, with a 29% increase at constant currency rates, partly due to the acquisition of WalkMe [2][8] - Cloud revenue increased by 25% to €4.35 billion, with cloud ERP suite revenue growing by 34% to €3.64 billion [2][8] - Software license revenue declined by 15% to €280 million, while cloud and software revenue grew by 11% to €7.43 billion [2][8] - Total revenue increased by 9% to €8.47 billion, with a 10% growth at constant currency rates [2][8] Customer Expansion - Retail sector: Agreements with Schwarz Group, Sainsbury's, and Mercado Libre, leveraging SAP's WISE system for process innovation and AI integration [2][17] - Technology sector: Partnerships with Mistral AI and NVIDIA, focusing on AI-driven ERP solutions and rapid implementation of RISE projects [2][18] - Other sectors: New clients include Dawn Foods, DXC Technology, and Sol de Janeiro, with RISE winning large customers like Mondelez and Roche [2][18] Regional Revenue Breakdown - EMEA remains the largest market, contributing significantly to cloud and software revenue, followed by the Americas [11][13] - Strong cloud revenue growth in APJ (Asia-Pacific and Japan) and EMEA, with notable performance in Brazil, Chile, Germany, and Japan [13][22] Full-Year 2024 Guidance - Cloud and software revenue expected to grow by 10-11% to €29.5-29.8 billion, up from €26.92 billion in 2023 [14][15] - Non-IFRS operating profit projected to increase by 20-23% to €7.8-8.0 billion, up from €6.51 billion in 2023 [14][15] - Cloud revenue expected to grow by 24-27% to €17.0-17.3 billion, up from €13.66 billion in 2023 [14][15] Innovation and AI Strategy - SAP's AI strategy is central to its cloud ERP suite, with 30% of cloud orders in Q3 including AI usage [16] - The company's Joule AI copilot has gained significant traction, with over 500 skills added and plans to cover 80% of frequent business transactions by year-end [19] - SAP's Knowledge Graph enhances GenAI capabilities, providing more relevant and context-aware solutions [19] Future Outlook - SAP aims for double-digit revenue and operating profit growth in the coming years, with a focus on optimizing operations and expanding its partner ecosystem [20][21] - The company expects Q4 to be its highest revenue quarter, with strong performance in cloud ERP and AI-driven solutions [23][24]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) SAP's Q3 2024 demonstrated strong cloud and operating profit growth, leading to an upward revision of its 2024 financial outlook [Q3 2024 Key Financial Highlights](index=1&type=section&id=Q3%202024%20Key%20Financial%20Highlights) SAP reported strong Q3 2024 cloud revenue and operating profit growth, leading to an upward revision of its 2024 financial outlook, with robust current cloud backlog and Cloud ERP Suite revenue | Metric | Value (Q3 2024) | YoY Growth (IFRS) | YoY Growth (Non-IFRS @cc) | | :-------------------------- | :---------------- | :---------------- | :-------------------------- | | Current Cloud Backlog | €15.4 billion | +25% | +29% | | Cloud Revenue | €4.351 billion | +25% | +27% | | Cloud ERP Suite Revenue | €3.636 billion | +34% | +36% | | Total Revenue | €8.470 billion | +9% | +10% | | IFRS Cloud Gross Profit | €3.184 billion | +26% | - | | Non-IFRS Cloud Gross Profit | €3.209 billion | +27% | +28% | | IFRS Operating Profit | €2.214 billion | +29% | - | | Non-IFRS Operating Profit | €2.244 billion | +27% | +28% | | IFRS EPS (basic) | €1.25 | +15% | - | | Non-IFRS EPS (basic) | €1.23 | +6% | - | - SAP has raised its 2024 outlook for cloud and software revenue, operating profit, and free cash flow[2](index=2&type=chunk) [CEO and CFO Statements](index=2&type=section&id=CEO%20and%20CFO%20Statements) The CEO highlighted strong cloud growth and AI progress, while the CFO noted efficiency gains from the transformation program contributing to profit and cash flow - CEO Christian Klein emphasized strong cloud revenue growth, particularly for Cloud ERP Suite, and significant progress in Business AI, with AI use cases included in a substantial portion of Q3 cloud deals[4](index=4&type=chunk) - CFO Dominik Asam stated that the 2024 transformation program has begun to deliver efficiency improvements, contributing to strong operating profit and free cash flow while maintaining topline momentum[5](index=5&type=chunk) [Financial Performance Overview](index=2&type=section&id=Financial%20Performance%20Overview) SAP's Q3 and YTD 2024 results demonstrate robust cloud revenue growth and improved profitability, despite restructuring impacts on IFRS operating profit [Group results at a glance – Third quarter 2024](index=2&type=section&id=Group%20results%20at%20a%20glance%20%E2%80%93%20Third%20quarter%202024) SAP's Q3 2024 results show robust growth across key cloud metrics, with Cloud ERP Suite leading the expansion, alongside healthy increases in total revenue and operating profit | Metric (€ million) | Q3 2024 (IFRS) | Q3 2023 (IFRS) | ∆ in % | ∆ in % const. curr. (Non-IFRS) | | :-------------------------------- | :------------- | :------------- | :----- | :----------------------------- | | SaaS/PaaS | 4,234 | 3,291 | 29 | 30 | | Thereof Cloud ERP Suite | 3,636 | 2,711 | 34 | 36 | | IaaS | 117 | 180 | –35 | –34 | | Cloud revenue | 4,351 | 3,472 | 25 | 27 | | Cloud and software revenue | 7,429 | 6,679 | 11 | 12 | | Total revenue | 8,470 | 7,744 | 9 | 10 | | Share of more predictable revenue (%) | 84 | 82 | 2pp | - | | Cloud gross profit (IFRS) | 3,184 | 2,525 | 26 | - | | Cloud gross profit (Non-IFRS) | 3,209 | 2,535 | 27 | 28 | | Operating profit (IFRS) | 2,214 | 1,723 | 29 | - | | Operating profit (Non-IFRS) | 2,244 | 1,767 | 27 | 28 | | Free cash flow | 1,248 | 865 | 44 | - | - Cloud ERP Suite includes strategic SaaS/PaaS solutions integrated with core ERP, such as SAP S/4HANA Cloud and SAP Business Technology Platform[7](index=7&type=chunk) [Group results at a glance – Nine months ended September 2024](index=3&type=section&id=Group%20results%20at%20a%20glance%20%E2%80%93%20Nine%20months%20ended%20September%202024) For the first nine months of 2024, SAP maintained strong cloud and total revenue growth, with non-IFRS operating profit and free cash flow increasing significantly despite IFRS operating profit decrease due to restructuring | Metric (€ million) | Q1–Q3 2024 (IFRS) | Q1–Q3 2023 (IFRS) | ∆ in % | ∆ in % const. curr. (Non-IFRS) | | :-------------------------------- | :---------------- | :---------------- | :----- | :----------------------------- | | SaaS/PaaS | 12,016 | 9,401 | 28 | 29 | | Thereof Cloud ERP Suite revenue | 10,217 | 7,695 | 33 | 34 | | IaaS | 417 | 564 | –26 | –25 | | Cloud revenue | 12,433 | 9,965 | 25 | 26 | | Cloud and software revenue | 21,563 | 19,542 | 10 | 11 | | Total revenue | 24,798 | 22,739 | 9 | 10 | | Share of more predictable revenue (%) | 84 | 82 | 2pp | - | | Cloud gross profit (IFRS) | 9,052 | 7,121 | 27 | - | | Cloud gross profit (Non-IFRS) | 9,101 | 7,152 | 27 | 28 | | Operating profit (IFRS) | 2,648 | 3,897 | –32 | - | | Operating profit (Non-IFRS) | 5,717 | 4,546 | 26 | 27 | | Free cash flow | 5,031 | 3,423 | 47 | - | - IFRS operating profit decreased by **32%** for the first nine months, primarily due to significant restructuring expenses (**€2.8 billion**)[9](index=9&type=chunk)[22](index=22&type=chunk) [Financial Highlights (Detailed)](index=3&type=section&id=Financial%20Highlights%20(Detailed)) SAP's Q3 2024 performance was marked by strong cloud backlog and revenue growth, particularly in Cloud ERP Suite, while operating profit and free cash flow improved substantially - Current cloud backlog grew by **25%** to **€15.38 billion** (**29%** at constant currencies), with the WalkMe acquisition contributing approximately 1 percentage point[12](index=12&type=chunk) - Software licenses revenue decreased by **15%** to **€0.28 billion** (**14%** at constant currencies)[13](index=13&type=chunk) - The share of more predictable revenue increased by **2 percentage points** to **84%** in Q3[14](index=14&type=chunk) - IFRS operating profit increased by **29%** to **€2.21 billion**, driven by strong revenue growth and disciplined execution of the 2024 transformation program[15](index=15&type=chunk) - Free cash flow increased by **44%** to **€1.25 billion** in Q3, primarily due to increased profitability and lower tax payments, despite **€0.3 billion** paid out for restructuring[18](index=18&type=chunk) - IFRS effective tax rate increased to **33.0%** (Q3/2023: 27.8%) due to a temporary inability to offset withholding taxes in Germany from 2024 tax losses resulting from restructuring[17](index=17&type=chunk) [Share Repurchase Program](index=4&type=section&id=Share%20Repurchase%20Program) SAP continued its share repurchase program, having bought back a significant volume of shares by the end of Q3 2024 - As of September 30, 2024, SAP repurchased **16,709,250 shares** at an average price of **€157.09**, totaling approximately **€2.62 billion** under the **€5 billion** program announced in May 2023[19](index=19&type=chunk) [2024 Transformation Program](index=4&type=section&id=2024%20Transformation%20Program) SAP's 2024 transformation program focuses on strategic growth areas like business AI, aiming for operational scalability and AI-driven efficiencies through a company-wide restructuring - The program aims to increase focus on key strategic growth areas, especially business AI, and transform operational setup for organizational synergies and AI-driven efficiencies[20](index=20&type=chunk) - A company-wide restructuring program, anticipated to conclude in early 2025, is expected to affect **9,000 to 10,000 positions**, mostly through voluntary leave and re-skilling[21](index=21&type=chunk) - Restructuring expenses for the first nine months of 2024 totaled **€2.8 billion**, with overall estimated expenses of approximately **€3 billion**; payouts in Q3 and YTD 2024 were **€0.3 billion** and **€0.8 billion**, respectively[22](index=22&type=chunk) - SAP expects to exit 2024 with a headcount slightly ahead of year-end 2023, reflecting re-investments into strategic growth areas and the acquisition of WalkMe[21](index=21&type=chunk) [Business Highlights](index=4&type=section&id=Business%20Highlights) SAP saw continued customer adoption of its cloud solutions globally, with strong regional cloud revenue growth and key executive changes and acquisitions [Customer Wins and Adoptions](index=4&type=section&id=Customer%20Wins%20and%20Adoptions) In Q3, numerous global customers adopted 'RISE with SAP' for business transformations, went live on SAP S/4HANA Cloud, or chose 'GROW with SAP' for cloud ERP - Customers choosing 'RISE with SAP' included B3, E.ON, eBay, JAPAN AIRLINES, Mondelez International, Roche, Rolls-Royce Power Systems, Schwarz Group, Siemens Healthineers, and Tetra Pak[23](index=23&type=chunk) - Clorox, Nvidia, and Panasonic Energy of North America went live on SAP S/4HANA Cloud[24](index=24&type=chunk) - Dawn Foods, DXC Technology, Gainsight, and Mistral AI chose 'GROW with SAP' for rapid cloud ERP adoption[24](index=24&type=chunk) [Regional Performance](index=4&type=section&id=Regional%20Performance) SAP's cloud revenue showed particularly strong performance in APJ and EMEA, with robust growth across the Americas and outstanding growth in specific countries - Cloud revenue performance was particularly strong in APJ (Asia Pacific Japan) and EMEA (Europe, Middle East, and Africa) regions[26](index=26&type=chunk) - Brazil, Chile, Germany, Italy, India, Japan, and Spain demonstrated outstanding cloud revenue growth[26](index=26&type=chunk) - China, Saudi Arabia, and the U.S. also showed particularly strong cloud revenue performance[26](index=26&type=chunk) [Executive Changes and Acquisitions](index=4&type=section&id=Executive%20Changes%20and%20Acquisitions) SAP announced executive board changes and successfully completed the acquisition of WalkMe Ltd., a digital adoption platform company - Executive Board Members Scott Russell, Julia White, and Chief Technology Officer Dr.-Ing. Juergen Mueller mutually agreed to leave the company's Executive Board[26](index=26&type=chunk)[27](index=27&type=chunk) - SAP successfully completed the acquisition of WalkMe Ltd., a leading digital adoption platform company, on September 12[27](index=27&type=chunk) [Financial Outlook 2024](index=5&type=section&id=Financial%20Outlook%202024) SAP updated its 2024 financial outlook, raising expectations for cloud and software revenue, non-IFRS operating profit, and free cash flow, based on revised profit definitions [Updated Financial Outlook](index=5&type=section&id=Updated%20Financial%20Outlook) SAP has updated its 2024 financial outlook, raising expectations for cloud and software revenue, non-IFRS operating profit, and free cash flow, reflecting strong Q3 performance and confidence in future growth - The 2024 financial outlook is based on SAP's updated non-IFRS definition of profit measures, which now include share-based compensation expenses and exclude gains/losses from equity securities, net[28](index=28&type=chunk) | Metric (at constant currencies) | Previous Outlook | Updated Outlook | Change | | :-------------------------------- | :--------------- | :-------------- | :----- | | Cloud and software revenue | €29.0 – 29.5 billion | €29.5 – 29.8 billion | Midpoint raised by €400 million | | Non-IFRS operating profit | €7.6 – 7.9 billion | €7.8 – 8.0 billion | Midpoint raised by €150 million | | Free cash flow | Approximately €3.5 billion | €3.5 – 4.0 billion | Raised | | Cloud revenue | €17.0 – 17.3 billion (unchanged) | €17.0 – 17.3 billion | - | | Effective tax rate (non-IFRS) | Approximately 32% (unchanged) | Approximately 32% | - | **Expected Currency Impact for FY 2024:** | Metric | FY 2024 Impact (in percentage points) | | :-------------------------- | :------------------------------------ | | Cloud revenue growth | –1.0pp | | Cloud and software revenue growth | –1.0pp | | Operating profit growth (non-IFRS) | –2.0pp | [Non-Financial Outlook](index=5&type=section&id=Non-Financial%20Outlook) SAP's non-financial outlook for 2024 includes targets for employee engagement, customer satisfaction, carbon emissions reduction, and increasing women in executive roles - Employee Engagement Index expected to be in a range of **70% to 74%**[32](index=32&type=chunk) - Customer Net Promoter Score expected to be between **9 and 13**[32](index=32&type=chunk) - Commitment to steadily decrease carbon emissions across the value chain, aiming for Net Zero by **2030**[32](index=32&type=chunk) - Goal to steadily increase the number of women in executive roles, targeting **25%** by the end of **2027**[32](index=32&type=chunk) [Additional Information](index=6&type=section&id=Additional%20Information) This section provides details on SAP's performance measures, webcast access, company overview, and standard forward-looking statements disclaimer [SAP Performance Measures & Webcast](index=6&type=section&id=SAP%20Performance%20Measures%20%26%20Webcast) This section provides information on SAP's key performance measures and details for accessing the financial analyst conference call webcast and supplementary financial information - Information on SAP's key growth metrics and performance measures, their calculation, usefulness, and limitations is available on the Investor Relations website[34](index=34&type=chunk) - A financial analyst conference call was scheduled for October 21, 2024, and the webcast and supplementary financial information are available on SAP's investor website[34](index=34&type=chunk) [About SAP](index=6&type=section&id=About%20SAP) SAP is a global leader in enterprise applications and business AI, providing solutions that integrate critical business operations across various functions for over 50 years - SAP is a global leader in enterprise applications and business AI[35](index=35&type=chunk) - For over **50 years**, SAP has provided solutions uniting business-critical operations spanning finance, procurement, HR, supply chain, and customer experience[35](index=35&type=chunk) [Contacts & Forward-Looking Statements](index=6&type=section&id=Contacts%20%26%20Forward-Looking%20Statements) This section provides contact information for investor relations, press, and customer inquiries, along with a standard disclaimer regarding forward-looking statements - Contact information is provided for the financial community, press, and customers[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) - The document contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially[40](index=40&type=chunk) [Primary Financial Statements of SAP Group (IFRS)](index=10&type=section&id=Primary%20Financial%20Statements%20of%20SAP%20Group%20(IFRS)) This section presents SAP's consolidated IFRS financial statements, including income statements, statements of financial position, and cash flows for Q3 and year-to-date 2024 [Consolidated Income Statements](index=10&type=section&id=(A)%20Consolidated%20Income%20Statements) The consolidated income statements provide a detailed breakdown of SAP's revenues, costs, and profits for both the third quarter and the first nine months of 2024, presented under IFRS [Consolidated Income Statements – Quarter](index=10&type=section&id=(A.1)%20Consolidated%20Income%20Statements%20%E2%80%93%20Quarter) SAP's Q3 2024 income statement shows strong growth in cloud revenue and gross profit, with total revenue increasing by 9% and operating profit surging by 29% | Metric (€ millions) | Q3 2024 | Q3 2023 | ∆ in % | | :-------------------------------- | :------ | :------ | :----- | | Cloud revenue | 4,351 | 3,472 | 25 | | Software licenses | 285 | 335 | –15 | | Software support | 2,793 | 2,872 | –3 | | Total revenue | 8,470 | 7,744 | 9 | | Cost of cloud | –1,167 | –946 | 23 | | Gross profit | 6,212 | 5,637 | 10 | | Operating profit (loss) | 2,214 | 1,723 | 29 | | Profit (loss) after tax from continuing operations | 1,441 | 1,272 | 13 | | Income tax expense | –710 | –489 | 45 | | Earnings per share, basic (in €) | 1.25 | 1.09 | 15 | [Consolidated Income Statements – Year-to-Date](index=11&type=section&id=(A.2)%20Consolidated%20Income%20Statements%20%E2%80%93%20Year-to-Date) For the first nine months of 2024, SAP reported a 9% increase in total revenue and a 25% rise in cloud revenue, though IFRS operating profit and profit after tax from continuing operations decreased significantly due to substantial restructuring expenses | Metric (€ millions) | Q1–Q3 2024 | Q1–Q3 2023 | ∆ in % | | :-------------------------------- | :--------- | :--------- | :----- | | Cloud revenue | 12,433 | 9,965 | 25 | | Software licenses | 716 | 927 | –23 | | Software support | 8,414 | 8,651 | –3 | | Total revenue | 24,798 | 22,739 | 9 | | Cost of cloud | –3,381 | –2,843 | 19 | | Gross profit | 17,990 | 16,330 | 10 | | Operating profit (loss) | 2,648 | 3,897 | –32 | | Profit (loss) after tax from continuing operations | 1,534 | 2,399 | –36 | | Income tax expense | –1,023 | –1,132 | –10 | | Earnings per share, basic (in €) | 1.31 | 4.21 | –69 | - Restructuring expenses of **€2,821 million** significantly impacted total operating expenses, which increased by **18%**, leading to a **32%** decrease in IFRS operating profit[47](index=47&type=chunk) [Consolidated Statements of Financial Position](index=12&type=section&id=(B)%20Consolidated%20Statements%20of%20Financial%20Position) As of September 30, 2024, SAP's total assets increased slightly, driven by higher cash and cash equivalents, while total liabilities also rose, primarily due to increased financial liabilities and provisions | Metric (€ millions) | as at 09/30/2024 | as at 12/31/2023 | | :-------------------------- | :--------------- | :--------------- | | Cash and cash equivalents | 10,005 | 8,124 | | Total current assets | 20,506 | 20,571 | | Goodwill | 29,487 | 29,088 | | Total non-current assets | 49,142 | 47,763 | | Total assets | 69,648 | 68,335 | | Total current liabilities | 18,655 | 14,642 | | Total non-current liabilities | 9,526 | 10,286 | | Total liabilities | 28,181 | 24,928 | | Equity attributable to owners of parent | 41,212 | 43,157 | | Total equity | 41,467 | 43,406 | - Provisions increased significantly from **€235 million** (2023) to **€2,149 million** (2024), likely related to the restructuring program[48](index=48&type=chunk) [Consolidated Statements of Cash Flows](index=13&type=section&id=(C)%20Consolidated%20Statements%20of%20Cash%20Flows) SAP's cash flow statement for the first nine months of 2024 shows a substantial increase in net cash flows from operating activities, with investing and financing activities resulting in net outflows | Metric (€ millions) | Q1–Q3 2024 | Q1–Q3 2023 | | :------------------------------------------ | :--------- | :--------- | | Net cash flows from operating activities – continuing operations | 5,772 | 4,284 | | Business combinations, net of cash and cash equivalents acquired | –1,104 | 0 | | Purchase of intangible assets and property, plant, and equipment | –528 | –595 | | Purchase of equity or debt instruments of other entities | –6,517 | –2,969 | | Proceeds from sales of equity or debt instruments of other entities | 7,452 | 865 | | Net cash flows from investing activities – continuing operations | –618 | –2,718 | | Dividends paid | –2,565 | –2,395 | | Purchase of treasury shares | –1,625 | –718 | | Net cash flows from financing activities – continuing operations | –3,180 | –6,797 | | Net decrease/increase in cash and cash equivalents | 1,881 | 370 | | Cash and cash equivalents at the end of the period | 10,005 | 9,378 | - Net cash flows from operating activities from continuing operations increased by **35%** to **€5,772 million**[49](index=49&type=chunk) - The acquisition of WalkMe Ltd. contributed to a **€1,104 million** outflow from business combinations[49](index=49&type=chunk)[71](index=71&type=chunk) [Non-IFRS Numbers](index=14&type=section&id=Non-IFRS%20Numbers) This section provides SAP's non-IFRS financial measures and detailed reconciliations to IFRS figures, offering additional insights into underlying business performance [Basis of Non-IFRS Presentation](index=14&type=section&id=(D)%20Basis%20of%20Non-IFRS%20Presentation) SAP provides non-IFRS financial measures to offer additional insights into its performance, which are not prepared in accordance with IFRS, with detailed explanations available separately - SAP discloses non-IFRS financial measures (e.g., expense and profit measures) that are not prepared in accordance with IFRS[50](index=50&type=chunk) - A detailed description of all non-IFRS measures, their limitations, and constant currency/free cash flow figures is available in the 'Explanation of Non-IFRS Measures' document[50](index=50&type=chunk) [Reconciliation from Non-IFRS Numbers to IFRS Numbers](index=14&type=section&id=(E)%20Reconciliation%20from%20Non-IFRS%20Numbers%20to%20IFRS%20Numbers) This section provides detailed reconciliations between SAP's IFRS and non-IFRS financial figures for revenue, operating expenses, profit metrics, and free cash flow, presented for both the quarter and year-to-date periods [Reconciliation of Non-IFRS Revenue – Quarter](index=14&type=section&id=(E.1)%20Reconciliation%20of%20Non-IFRS%20Revenue%20%E2%80%93%20Quarter) For Q3 2024, non-IFRS total revenue at constant currencies increased by 10%, slightly higher than the IFRS reported growth of 9%, indicating a minor positive currency impact | Revenue Type (€ millions) | IFRS Q3 2024 | Currency Impact | Non-IFRS Constant Currency Q3 2024 | IFRS Q3 2023 | ∆ in % (IFRS) | ∆ in % (Non-IFRS Constant Currency) | | :------------------------ | :----------- | :-------------- | :--------------------------------- | :----------- | :------------ | :---------------------------------- | | Cloud | 4,351 | 43 | 4,394 | 3,472 | 25 | 27 | | Software licenses | 285 | 2 | 287 | 335 | –15 | –14 | | Software support | 2,793 | 24 | 2,817 | 2,872 | –3 | –2 | | Cloud and software | 7,429 | 69 | 7,497 | 6,679 | 11 | 12 | | Services | 1,041 | 7 | 1,048 | 1,065 | –2 | –2 | | Total revenue | 8,470 | 76 | 8,546 | 7,744 | 9 | 10 | [Reconciliation of Non-IFRS Operating Expenses – Quarter](index=15&type=section&id=(E.2)%20Reconciliation%20of%20Non-IFRS%20Operating%20Expenses%20%E2%80%93%20Quarter) Non-IFRS operating expenses for Q3 2024 were slightly lower than IFRS figures due to adjustments, primarily related to restructuring, with total operating expenses increasing by 4% (IFRS) and 4% (non-IFRS) | Operating Expense Type (€ millions) | IFRS Q3 2024 | Adj. | Non-IFRS Q3 2024 | IFRS Q3 2023 | Adj. | Non-IFRS Q3 2023 | ∆ in % (IFRS) | ∆ in % (Non-IFRS) | | :---------------------------------- | :----------- | :--- | :--------------- | :----------- | :--- | :--------------- | :------------ | :---------------- | | Cost of cloud | –1,167 | 25 | –1,142 | –946 | 10 | –937 | 23 | 22 | | Total cost of revenue | –2,258 | 25 | –2,233 | –2,108 | 14 | –2,094 | 7 | 7 | | Research and development | –1,568 | 0 | –1,568 | –1,515 | 2 | –1,513 | 4 | 4 | | Sales and marketing | –2,098 | 51 | –2,047 | –2,105 | 64 | –2,041 | 0 | 0 | | General and administration | –361 | 6 | –356 | –327 | 0 | –327 | 10 | 9 | | Restructuring | 52 | –52 | 0 | 36 | –36 | 0 | 43 | NA | | Total operating expenses | –6,256 | 30 | –6,226 | –6,022 | 44 | –5,978 | 4 | 4 | [Reconciliation of Non-IFRS Profit Figures, Income Tax, and Key Ratios – Quarter](index=15&type=section&id=(E.3)%20Reconciliation%20of%20Non-IFRS%20Profit%20Figures,%20Income%20Tax,%20and%20Key%20Ratios%20%E2%80%93%20Quarter) Non-IFRS operating profit for Q3 2024 increased by 27% (28% at constant currencies), slightly lower than the IFRS growth of 29%, with a higher non-IFRS effective tax rate | Metric (€ millions) | IFRS Q3 2024 | Adj. | Non-IFRS Q3 2024 | IFRS Q3 2023 | Adj. | Non-IFRS Q3 2023 | ∆ in % (IFRS) | ∆ in % (Non-IFRS) | | :------------------------------------------ | :----------- | :--- | :--------------- | :----------- | :--- | :--------------- | :------------ | :---------------- | | Operating profit (loss) | 2,214 | 30 | 2,244 | 1,723 | 44 | 1,767 | 29 | 27 | | Profit (loss) after tax from continuing operations | 1,441 | –3 | 1,437 | 1,272 | 81 | 1,352 | 13 | 6 | | Operating margin (in %) | 26.1 | - | 26.5 | 22.2 | - | 22.8 | 3.9pp | 3.7pp | | Effective tax rate (in %) | 33.0 | - | 33.4 | 27.8 | - | 27.1 | 5.3pp | 6.3pp | | Earnings per share, basic (in €) from continuing operations | 1.25 | - | 1.23 | 1.09 | - | 1.16 | 15 | 6 | - The difference in effective tax rates is mainly due to tax effects of acquisition-related charges and restructuring expenses[53](index=53&type=chunk) [Reconciliation of Non-IFRS Revenue – Year-to-Date](index=16&type=section&id=(E.4)%20Reconciliation%20of%20Non-IFRS%20Revenue%20%E2%80%93%20Year-to-Date) For the first nine months of 2024, non-IFRS total revenue at constant currencies grew by 10%, consistent with the IFRS reported growth of 9%, indicating a slight positive currency impact | Revenue Type (€ millions) | IFRS Q1–Q3 2024 | Currency Impact | Non-IFRS Constant Currency Q1–Q3 2024 | IFRS Q1–Q3 2023 | ∆ in % (IFRS) | ∆ in % (Non-IFRS Constant Currency) | | :------------------------ | :-------------- | :-------------- | :------------------------------------ | :-------------- | :------------ | :---------------------------------- | | Cloud | 12,433 | 92 | 12,524 | 9,965 | 25 | 26 | | Software licenses | 716 | 7 | 723 | 927 | –23 | –22 | | Software support | 8,414 | 64 | 8,478 | 8,651 | –3 | –2 | | Cloud and software | 21,563 | 162 | 21,725 | 19,542 | 10 | 11 | | Services | 3,236 | 15 | 3,251 | 3,197 | 1 | 2 | | Total revenue | 24,798 | 178 | 24,976 | 22,739 | 9 | 10 | [Reconciliation of Non-IFRS Operating Expenses – Year-to-Date](index=16&type=section&id=(E.5)%20Reconciliation%20of%20Non-IFRS%20Operating%20Expenses%20%E2%80%93%20Year-to-Date) For the first nine months of 2024, non-IFRS total operating expenses increased by 5% (constant currency), significantly lower than the 18% IFRS increase, primarily due to the exclusion of substantial restructuring adjustments | Operating Expense Type (€ millions) | IFRS Q1–Q3 2024 | Adj. | Non-IFRS Q1–Q3 2024 | IFRS Q1–Q3 2023 | Adj. | Non-IFRS Q1–Q3 2023 | ∆ in % (IFRS) | ∆ in % (Non-IFRS) | | :---------------------------------- | :-------------- | :--- | :------------------ | :-------------- | :--- | :------------------ | :------------ | :---------------- | | Cost of cloud | –3,381 | 49 | –3,332 | –2,843 | 31 | –2,812 | 19 | 18 | | Total cost of revenue | –6,808 | 50 | –6,759 | –6,409 | 58 | –6,351 | 6 | 6 | | Research and development | –4,839 | 3 | –4,835 | –4,653 | 6 | –4,647 | 4 | 4 | | Sales and marketing | –6,594 | 180 | –6,413 | –6,562 | 363 | –6,199 | 0 | 3 | | General and administration | –1,057 | 14 | –1,043 | –997 | 1 | –996 | 6 | 5 | | Restructuring | –2,821 | 2,821 | 0 | –221 | 221 | 0 | >100 | NA | | Total operating expenses | –22,150 | 3,069 | –19,081 | –18,842 | 649 | –18,193 | 18 | 5 | [Reconciliation of Non-IFRS Profit Figures, Income Tax, and Key Ratios – Year-to-Date](index=17&type=section&id=(E.6)%20Reconciliation%20of%20Non-IFRS%20Profit%20Figures,%20Income%20Tax,%20and%20Key%20Ratios%20%E2%80%93%20Year-to-Date) For the first nine months of 2024, non-IFRS operating profit increased by 26% (27% at constant currencies), contrasting with a 32% decrease in IFRS operating profit due to significant adjustments | Metric (€ millions) | IFRS Q1–Q3 2024 | Adj. | Non-IFRS Q1–Q3 2024 | IFRS Q1–Q3 2023 | Adj. | Non-IFRS Q1–Q3 2023 | ∆ in % (IFRS) | ∆ in % (Non-IFRS) | | :------------------------------------------ | :-------------- | :--- | :------------------ | :-------------- | :--- | :------------------ | :------------ | :---------------- | | Operating profit (loss) | 2,648 | 3,069 | 5,717 | 3,897 | 649 | 4,546 | –32 | 26 | | Profit (loss) after tax from continuing operations | 1,534 | 2,126 | 3,660 | 2,399 | 620 | 3,019 | –36 | 21 | | Operating margin (in %) | 10.7 | - | 23.1 | 17.1 | - | 20.0 | –6.5pp | 3.1pp | | Effective tax rate (in %) | 40.0 | - | 33.2 | 32.1 | - | 29.3 | 7.9pp | 3.9pp | | Earnings per share, basic (in €) from continuing operations | 1.31 | - | 3.13 | 2.07 | - | 2.59 | –37 | 21 | - The difference in effective tax rates is mainly due to tax effects of restructuring expenses and acquisition-related charges[56](index=56&type=chunk) [Reconciliation of Free Cash Flow](index=18&type=section&id=(E.7)%20Reconciliation%20of%20Free%20Cash%20Flow) SAP's free cash flow for the first nine months of 2024 significantly increased by 47% to €5,031 million, driven by strong operating cash flows despite capital expenditures and lease payments | Metric (€ millions) | Q1–Q3 2024 | Q1–Q3 2023 | | :------------------------------------------ | :--------- | :--------- | | Net cash flows from operating activities – continuing operations | 5,772 | 4,284 | | Purchase of intangible assets and property, plant, and equipment | –528 | –595 | | Payments of lease liabilities | –213 | –266 | | Free cash flow | 5,031 | 3,423 | [Non-IFRS Adjustments – Actuals and Estimates](index=19&type=section&id=(F)%20Non-IFRS%20Adjustments%20%E2%80%93%20Actuals%20and%20Estimates) This section details the adjustments made to IFRS profit before tax to arrive at non-IFRS figures, including significant adjustments for restructuring and acquisition-related charges for both Q3 and year-to-date 2024 | Adjustment Type (€ millions) | Estimated Amounts for Full Year 2024 | Q3 2024 | Q1–Q3 2024 | Q3 2023 | Q1–Q3 2023 | | :------------------------------------ | :----------------------------------- | :------ | :--------- | :------ | :--------- | | Adjustment for acquisition-related charges | 320–400 | 90 | 256 | 80 | 257 | | Adjustment for restructuring | approximately €3 bn | –52 | 2,821 | –36 | 221 | | Adjustment for regulatory compliance matter expenses | -8 | –8 | –8 | 0 | 170 | | Adjustment for gains and losses from equity securities, net | N/A | –24 | –147 | 50 | 91 | - Restructuring adjustments for Q1-Q3 2024 amounted to **€2,821 million**, significantly impacting the difference between IFRS and non-IFRS profit figures[58](index=58&type=chunk) [Non-IFRS Operating Expense Adjustments by Functional Areas](index=19&type=section&id=(G)%20Non-IFRS%20Operating%20Expense%20Adjustments%20by%20Functional%20Areas) This section breaks down non-IFRS operating expense adjustments by functional area for Q3 and year-to-date 2024, highlighting the impact of acquisition-related charges, restructuring, and regulatory compliance matters **Q3 2024 Operating Expense Adjustments (€ millions):** | Functional Area | IFRS | Acquisition Related | Restructuring | RCM | Non-IFRS | | :-------------------------- | :--- | :------------------ | :------------ | :-- | :------- | | Cost of cloud | –1,167 | 25 | 0 | 0 | –1,142 | | Sales and marketing | –2,098 | 59 | 0 | –8 | –2,047 | | Restructuring | 52 | 0 | –52 | 0 | 0 | | Total operating expenses | –6,256 | 90 | –52 | –8 | –6,226 | **Q1–Q3 2024 Operating Expense Adjustments (€ millions):** | Functional Area | IFRS | Acquisition Related | Restructuring | RCM | Non-IFRS | | :-------------------------- | :--- | :------------------ | :------------ | :-- | :------- | | Cost of cloud | –3,381 | 49 | 0 | 0 | –3,332 | | Sales and marketing | –6,594 | 189 | 0 | –8 | –6,413 | | Restructuring | –2,821 | 0 | 2,821 | 0 | 0 | | Total operating expenses | –22,150 | 256 | 2,821 | –8 | –19,081 | - Restructuring expenses, if not presented as a separate line item, would be allocated across various functional areas, with significant impacts on Research and development (**€-1,088 million** YTD) and Sales and marketing (**€-894 million** YTD)[60](index=60&type=chunk) [Disaggregations](index=21&type=section&id=Disaggregations) This section provides disaggregated financial and employee data, including segment reporting, regional revenue breakdowns, and employee numbers by region and functional area [Segment Reporting](index=21&type=section&id=(H)%20Segment%20Reporting) SAP operates as a single consolidated operating segment, with further details on its operating performance available in the non-IFRS reconciliation section - SAP operates on a consolidated basis as one operating segment[61](index=61&type=chunk) [Revenue by Region (IFRS and Non-IFRS)](index=21&type=section&id=(I)%20Revenue%20by%20Region%20(IFRS%20and%20Non-IFRS)) This section provides a regional breakdown of SAP's cloud and total revenue, highlighting strong growth across EMEA, Americas, and APJ for both the quarter and year-to-date periods [Revenue by Region (IFRS and Non-IFRS) – Quarter](index=21&type=section&id=(I.1)%20Revenue%20by%20Region%20(IFRS%20and%20Non-IFRS)%20%E2%80%93%20Quarter) In Q3 2024, APJ led cloud revenue growth at 40% (43% at constant currency), followed by EMEA at 29%, with total revenue growth consistent across all regions | Region | Cloud Revenue Q3 2024 (€ millions) | Cloud Revenue ∆ in % (Actual currency) | Cloud Revenue ∆ in % (Constant currency) | | :------- | :------------------------- | :------------------------------------- | :--------------------------------------- | | EMEA | 1,742 | 29 | 29 | | Americas | 1,989 | 19 | 21 | | APJ | 620 | 40 | 43 | | Total Cloud Revenue | 4,351 | 25 | 27 | | Region | Total Revenue Q3 2024 (€ millions) | Total Revenue ∆ in % (Actual currency) | Total Revenue ∆ in % (Constant currency) | | :------- | :------------------------- | :------------------------------------- | :--------------------------------------- | | EMEA | 3,856 | 10 | 10 | | Americas | 3,418 | 8 | 10 | | APJ | 1,195 | 9 | 11 | | Total Revenue | 8,470 | 9 | 10 | [Revenue by Region (IFRS and Non-IFRS) – Year-to-Date](index=22&type=section&id=(I.2)%20Revenue%20by%20Region%20(IFRS%20and%20Non-IFRS)%20%E2%80%93%20Year-to-Date) For the first nine months of 2024, APJ showed the highest cloud revenue growth at 33% (38% at constant currency), while EMEA led in actual currency growth, with strong total revenue growth across all regions | Region | Cloud Revenue Q1–Q3 2024 (€ millions) | Cloud Revenue ∆ in % (Actual Currency) | Cloud Revenue ∆ in % (Constant Currency) | | :------- | :-------------------------- | :------------------------------------- | :--------------------------------------- | | EMEA | 4,972 | 31 | 30 | | Americas | 5,751 | 18 | 19 | | APJ | 1,710 | 33 | 38 | | Total Cloud Revenue | 12,433 | 25 | 26 | | Region | Total Revenue Q1–Q3 2024 (€ millions) | Total Revenue ∆ in % (Actual Currency) | Total Revenue ∆ in % (Constant Currency) | | :------- | :-------------------------- | :------------------------------------- | :--------------------------------------- | | EMEA | 11,180 | 11 | 10 | | Americas | 10,146 | 8 | 9 | | APJ | 3,472 | 6 | 11 | | Total Revenue | 24,798 | 9 | 10 | [Employees by Region and Functional Areas](index=23&type=section&id=(J)%20Employees%20by%20Region%20and%20Functional%20Areas) As of September 30, 2024, SAP's total number of employees increased slightly year-over-year, with growth in Cloud and software, Research and development, and Infrastructure functional areas | Functional Area | 09/30/2024 Total (FTEs) | 09/30/2023 Total (FTEs) | | :-------------------------- | :---------------------- | :---------------------- | | Cloud and software | 13,357 | 12,523 | | Services | 18,582 | 18,669 | | Research and development | 36,774 | 36,557 | | Sales and marketing | 26,969 | 27,272 | | General and administration | 6,878 | 6,595 | | Infrastructure | 5,023 | 4,878 | | SAP Group Total | 107,583 | 106,495 | | Thereof acquisitions | 912 | 7 | - The total number of employees (full-time equivalents) increased from **106,495** in Q3 2023 to **107,583** in Q3 2024[64](index=64&type=chunk) - Acquisitions contributed **912 employees** to the total headcount in Q1-Q3 2024[64](index=64&type=chunk) [Other Disclosures](index=24&type=section&id=Other%20Disclosures) This section covers additional financial disclosures, including share-based payment expenses, details of the restructuring program, and information on business combinations [Share-Based Payment](index=24&type=section&id=(K)%20Share-Based%20Payment) SAP's share-based payment expenses increased in Q3 and year-to-date 2024, with a significant portion classified as restructuring expenses due to the transformation program | Functional Area (€ millions) | Q3 2024 | Q1–Q3 2024 | Q3 2023 | Q1–Q3 2023 | | :-------------------------- | :------ | :--------- | :------ | :--------- | | Cost of cloud | –31 | –104 | –23 | –70 | | Research and development | –169 | –572 | –163 | –534 | | Sales and marketing | –199 | –675 | –191 | –626 | | Share-based payment expenses | –535 | –1,815 | –510 | –1,677 | - In Q1-Q3 2024, **€172 million** in share-based payment expenses were recognized as restructuring expenses due to the transformation program[66](index=66&type=chunk) [Restructuring](index=24&type=section&id=(L)%20Restructuring) The majority of restructuring expenses in 2024 are linked to SAP's company-wide transformation program, aimed at focusing on business AI and improving operational efficiency, primarily covering employee-related benefits - Restructuring expenses in Q1-Q3 2024 primarily relate to the company-wide transformation program focused on business AI and operational efficiency[68](index=68&type=chunk) - Expenses mainly include employee-related benefits like severance payments and accelerated share-based payment expenses[68](index=68&type=chunk) | Metric (€ millions) | Restructuring Provision | | :-------------------------- | :---------------------- | | Opening balance as at 1/1/2024 | 37 | | Additions | 2,821 | | Utilizations | –673 | | Ending balance as at 9/30/2024 | 2,075 | | Metric (€ millions) | Q1–Q3 2024 | | :-------------------------- | :--------- | | Net cash outflow | 829 | [Business combinations](index=25&type=section&id=(M)%20Business%20combinations) SAP completed the acquisition of WalkMe Ltd. in September 2024, expanding its business transformation portfolio, with the accounting for this acquisition currently preliminary - SAP completed the acquisition of WalkMe Ltd., a leader in Digital Adoption Platforms, on September 12, 2024[71](index=71&type=chunk) - The acquisition, with an initial consideration of approximately **€1.3 billion**, is expected to expand SAP's business transformation portfolio[71](index=71&type=chunk) - The accounting for the WalkMe acquisition is preliminary as of September 30, 2024, particularly regarding intangible assets and tax implications[72](index=72&type=chunk) - WalkMe contributed approximately **€14 million** to revenue and **€-14 million** (IFRS) / **€-8 million** (non-IFRS) to operating profit in Q3 2024[73](index=73&type=chunk)

Core Insights - SAP exceeded third-quarter profit and sales estimates, driven by strong demand for its cloud offerings and artificial intelligence (AI) products [1][2] - The company raised its sales outlook, with U.S.-listed shares reaching a record high [1][2] Financial Performance - SAP reported third-quarter earnings per share (EPS) of 1.25 euros ($1.35) and revenue of 8.47 billion euros ($9.16 billion), reflecting a 9% increase [1] - Cloud revenue surged 25% to 4.35 billion euros, while total cloud and software sales rose 11% to 7.43 billion euros [1] - The current cloud backlog increased by 25% to 15.4 billion euros [1] Business Strategy - CEO Christian Klein highlighted significant progress in business AI, noting that many cloud deals in Q3 included AI use cases [2] - SAP now anticipates full-year cloud and software revenue between 29.5 billion euros and 29.8 billion euros, raising the midpoint by 400 million euros [2] - The company expects free cash flow to range from 3.5 billion euros to 4.0 billion euros, an increase from previous estimates [2] Market Reaction - SAP's American depositary receipts (ADRs) rose about 2% to $233.41, having previously reached a record of $237.71 [2] - The ADRs have increased by over 50% this year [2]

SAP SE (SAP) reported third-quarter 2024 non-IFRS earnings per share (EPS) of €1.23 ($1.35), which increased 6% from the year-ago quarter. The Zacks Consensus Estimate was pegged at $1.31.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.SAP achieved significant growth in its cloud revenues, especially Cloud ERP Suite, and progress in Business AI, with key innovations like SAP Knowledge Graph gaining traction. The company reported total revenues on a non-IFRS basis of €8.47 billion ($ ...

Following my coverage on SAP (NYSE: SAP ) in Jul'24, for which I recommended a buy rating as demand remains very strong, as indicated by the solid CCB growth trend and revenue growth performance, this post is to provideI take a fundamentals-based approach to value investing.I disagree with the common misconception held by many investors that low multiple stocks must be cheap. I look for companies that offer the best long-term durability at the most affordable prices. Consequently, I have a propensity to be ...

Christian Klein, Co-CEO of German software and cloud computing giant SAP, speaks during a press conference to present SAP's financial results for 2019 on January 28, 2020 in Walldorf, southwestern Germany. - German software giant SAP reported a bottom line undermined by heavy restructuring costs, but lifted forecasts for the year ahead.Europe should avoid regulating artificial intelligence and focus its attention on the results of the technology instead, the CEO of German enterprise tech giant SAP told CNBC ...

Financial Data and Key Metrics - Current cloud backlog increased by 29% to EUR15.4 billion, driven almost entirely organically [5] - Cloud revenue growth accelerated to 27%, reaching EUR4.4 billion, with Cloud ERP Suite growing 36% to EUR3.6 billion [5] - Operating profit increased by 28% to EUR2.2 billion, with an operating margin of 26.5% [5] - Total revenue grew by 10% year-over-year to EUR8.5 billion, primarily driven by cloud revenue strength [18] - Free cash flow increased by 44% to EUR1.2 billion in Q3, with a 47% increase to EUR5 billion for the first nine months [21] Business Line Performance - Cloud ERP Suite was the main driver of growth, accounting for 84% of total cloud revenue [18] - 30% of cloud order entry in Q3 included AI use cases, with strong uptake in sourcing, supply chain, and manufacturing [4][26] - The company completed the acquisition of WalkMe, which contributed EUR14 million to cloud revenue in Q3 [18][42] Regional Performance - Cloud revenue performance was particularly strong in APJ and EMEA, with robust growth in the Americas [20] - Key markets such as Brazil, Chile, Germany, Italy, India, Japan, and Spain showed outstanding cloud revenue growth [20] Strategy and Industry Competition - The company is focusing on its "land and expand" strategy, with a strong emphasis on adoption and consumption [10] - SAP is leveraging its AI strategy, with over 100 AI use cases embedded across its solutions and significant growth in GenAI hub consumption [13] - The company is restructuring its go-to-market model to improve productivity and sales efficiency, with a focus on empowering its partner ecosystem [10][11] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and strategic execution, despite macroeconomic challenges [22] - The company raised its 2024 outlook, expecting an operating profit of EUR7.8 to EUR8 billion, and remains on track for its 2025 financial goals [15][21] - Management highlighted strong demand for cloud solutions, particularly from large enterprises, and expects continued double-digit revenue and operating profit growth [15][22] Other Important Information - The company announced a major upgrade to its digital copilot, Joule, which now includes collaborative AI agents and over 500 skills [12] - SAP introduced the SAP Knowledge Graph, which leverages decades of business process knowledge to enhance GenAI capabilities [14] Q&A Session Summary Question: Large deals contribution and demand environment [24] - Large deals exceeding EUR5 million accounted for over 60% of cloud order entry, reflecting strong momentum from the installed base [24] - Management noted that macroeconomic challenges persist, but demand for cloud ERP solutions remains strong, particularly in Germany [25] Question: AI use cases and pricing [24][26] - 30% of deals included AI use cases, with upside potential in sourcing, supply chain, and manufacturing [26] - AI-driven deals are bundled with premium offerings like RISE and GROW, providing value to customers and growth opportunities for SAP [26] Question: Management changes and reorganization risks [29] - Management changes are part of the company's ongoing restructuring, with a focus on improving productivity and sales efficiency [29] - The company is confident in its ability to execute its strategy and close deals in Q4, despite the reorganization [34] Question: Free cash flow drivers [30] - Free cash flow growth in Q3 was primarily due to increased profitability and lower tax payments, with some phasing effects [41] Question: Cloud ERP Suite growth drivers [36] - Growth in Cloud ERP Suite was driven by large customer migrations to RISE, strong net new customer acquisition, and platform extensions [37] Question: Gross margin outlook [36] - Cloud gross margin improved by 0.6 percentage points to 73.7%, with further expansion expected in 2025 due to operational efficiencies and scale [39][40] Question: US federal business and investigations [45] - The US federal business is a small fraction of total revenue, and recent investigations are unrelated to SAP's case from 2022 [46][48] Question: Cross-sell and upsell opportunities [51] - The company sees significant cross-sell and upsell potential in its installed base, particularly in HR, finance, and supply chain [52] Question: Support revenue trends [64] - Support revenue declined by 2% in Q3, with a gradual decline expected as more customers migrate to the cloud [65] Question: Q4 cost and operating profit outlook [64] - Q4 operating profit guidance is conservative due to phasing effects in software revenue, employee bonuses, and WalkMe integration costs [68] Question: Backlog growth and go-to-market changes [71] - Backlog growth of 29% was largely driven by the inclusion of WalkMe, with organic growth remaining flat [72] - Go-to-market changes, including partner ecosystem expansion and cross-sell incentives, will be implemented starting January 2025 [73][74]