Michael Briest

Michael Briest from UBS inquired about the uptake of SAP's ERP transition option for S/4HANA cloud migration, particularly in light of pricing incentives, and the role of AI in driving new deals and pipeline maturity.

Answer

CEO Christian Klein stated that while the transition option helps large customers, the primary drivers for pipeline growth are new software and cloud offerings, especially in the public sector, and compelling AI use cases that address business processes and persona-specific productivity gains, reducing slippage risk.

Michael Briest with UBS inquired about the uptake of SAP's ERP transition option for S/4HANA cloud migration, the effectiveness of pricing increases, and the visibility on customers adopting this option, also touching on new software and cloud offerings and SAP's AI strategy.

Answer

Christian Klein, CEO of SAP, stated that while the transition option helps, new software and cloud offerings, particularly for the public sector and highly regulated customers, are driving significant pipeline momentum. He emphasized SAP's focus on delivering high-value AI use cases for specific business processes and personas, rather than just a high number of technical agents, which is a key reason for current deal closures.

Michael Briest of UBS Group AG asked about the strong cash flow performance, the role of 'transformation credits,' their current size, and their potential impact on future cash flow as they unwind.

Answer

CFO Dominik Asam explained that transformation credits are cash vouchers amortized over a deal's term and declined to disclose the specific size due to competitive sensitivity. CEO Christian Klein added that these credits are used strategically in large deals to secure compelling business cases while protecting and increasing SAP's effective prices.

Michael Briest of UBS asked about current trading conditions, the impact of recent market disruption on close rates, and the confidence in cloud revenue guidance given the weakness in transactional business.

Answer

CEO Christian Klein stated that customer conversations are focused on supply chain resiliency and managing tariffs, which drives demand for SAP's portfolio. He confirmed the pipeline for the year remains solid and conversion rates have not deteriorated, though he acknowledged the high geopolitical uncertainty.

Michael Briest of UBS asked about the drivers behind the high contribution of large deals to order intake, the deal volume trend, the Q4 pipeline amid volatile macro conditions, and the price uplift from deals including Business AI.

Answer

CFO Dominik Asam attributed the strength in large deals to momentum from the installed base converting to RISE. CEO Christian Klein added that despite macro challenges, transformations are not slowing as customers see cloud ERP as essential for productivity. He confirmed the 30% of deals with AI come with a price uplift via Premium RISE or GROW offerings and noted a land-and-expand opportunity for AI use cases.

Michael Briest asked for details on the restructuring program's geographic impact and questioned if there was an upside risk to the 2024 profit outlook given the strong first-half performance.

Answer

CFO Dominik Asam noted high participation in voluntary programs in the U.S. and on more expensive German early retirement plans. He remained prudent on the 2024 outlook, explaining that an acceleration in hiring is expected in the second half, and unpredictable software revenue provides a buffer. CEO Christian Klein added the program enables strategic investment in growth areas like data science.