SAP(SAP) - 2024 Q3 - Quarterly Report

Executive Summary & Highlights 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 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] CEO and CFO Statements 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] - 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] Financial Performance Overview 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 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] Group results at a glance – Nine months ended September 2024 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][22] Financial Highlights (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] - Software licenses revenue decreased by 15% to €0.28 billion (14% at constant currencies)[13] - The share of more predictable revenue increased by 2 percentage points to 84% in Q3[14] - IFRS operating profit increased by 29% to €2.21 billion, driven by strong revenue growth and disciplined execution of the 2024 transformation program[15] - 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] - 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] Share Repurchase Program 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] 2024 Transformation Program 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] - 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] - 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] - 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] Business Highlights 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 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] - Clorox, Nvidia, and Panasonic Energy of North America went live on SAP S/4HANA Cloud[24] - Dawn Foods, DXC Technology, Gainsight, and Mistral AI chose 'GROW with SAP' for rapid cloud ERP adoption[24] Regional Performance 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] - Brazil, Chile, Germany, Italy, India, Japan, and Spain demonstrated outstanding cloud revenue growth[26] - China, Saudi Arabia, and the U.S. also showed particularly strong cloud revenue performance[26] Executive Changes and Acquisitions 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][27] - SAP successfully completed the acquisition of WalkMe Ltd., a leading digital adoption platform company, on September 12[27] Financial Outlook 2024 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 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] | 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 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] - Customer Net Promoter Score expected to be between 9 and 13[32] - Commitment to steadily decrease carbon emissions across the value chain, aiming for Net Zero by 2030[32] - Goal to steadily increase the number of women in executive roles, targeting 25% by the end of 2027[32] Additional Information This section provides details on SAP's performance measures, webcast access, company overview, and standard forward-looking statements disclaimer SAP Performance Measures & Webcast 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] - 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] About SAP 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] - For over 50 years, SAP has provided solutions uniting business-critical operations spanning finance, procurement, HR, supply chain, and customer experience[35] Contacts & Forward-Looking Statements 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][37][38] - The document contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially[40] Primary Financial Statements of SAP Group (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 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 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 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] Consolidated Statements of Financial Position 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] Consolidated Statements of Cash Flows 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] - The acquisition of WalkMe Ltd. contributed to a €1,104 million outflow from business combinations[49][71] Non-IFRS Numbers 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 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] - 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] Reconciliation from Non-IFRS Numbers to IFRS Numbers 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 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 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 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] Reconciliation of Non-IFRS Revenue – Year-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 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 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] Reconciliation of Free Cash Flow 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 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] Non-IFRS Operating Expense Adjustments by Functional Areas 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] 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 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] Revenue by Region (IFRS and Non-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 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 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 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] - Acquisitions contributed 912 employees to the total headcount in Q1-Q3 2024[64] Other Disclosures This section covers additional financial disclosures, including share-based payment expenses, details of the restructuring program, and information on business combinations Share-Based Payment 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] Restructuring 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] - Expenses mainly include employee-related benefits like severance payments and accelerated share-based payment expenses[68] | 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 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] - The acquisition, with an initial consideration of approximately €1.3 billion, is expected to expand SAP's business transformation portfolio[71] - The accounting for the WalkMe acquisition is preliminary as of September 30, 2024, particularly regarding intangible assets and tax implications[72] - WalkMe contributed approximately €14 million to revenue and €-14 million (IFRS) / €-8 million (non-IFRS) to operating profit in Q3 2024[73]