Good day, and welcome to the SAP Quarter 4 2021 Earnings Conference Call. If you have any technical issues on today's call, you may press star zero on your telephone handset at any time. Today's conference is being recorded. At this time, I'd like to turn the conference over to Anthony Coletta, Chief Investor Relations Officer. Please go ahead, sir. Thank you. Good morning and good afternoon, everyone, and a big welcome. Thanks for joining our earnings call today to discuss SAP's Q4 and full-year results for 2021. On our investor relations website, you can find a deck intended to supplement today's call. It's available for download, and a replay will be uploaded there as well. With me today are CEO Christian Klein and CFO Luka Mucic will make opening remarks. We also have Scott Russell, who leads our customer success organization, joining us for Q&A. Now let's do the safe harbor. During this call, we'll 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 risk 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 annual report on Form 20-F for 2020. Unless otherwise stated, all financial numbers on this call are non-IFRS. Growth rates and percentage point changes are non-IFRS year-over-year at constant currencies. The non-IFRS financial measures we provide should not be considered as a substitute for the measures of financial performance prepared in accordance with IFRS. Now, before taking questions, we'll start with a few opening remarks. With that, I'd like to turn over to Christian. Yeah. Thank you, Anthony. Thanks to all of you for joining today. Welcome to 2022. We certainly hope this is the year that we will start to move on from the global pandemic and make more progress on additional critical issues, climate change, supply chain disruptions, and creating a sustainable future for people everywhere. Here at SAP, we are very excited about what we have accomplished in 2021. Let's look at our results for Q4. What a quarter, what a year, hitting or exceeding the high end of our revised outlook. We have seen four quarters of fantastic acceleration in Current Cloud Backlog, which grew 26% in Q4, a sequential acceleration of four percentage points. This has led to Current Cloud Backlog now standing at nearly EUR 9.5 billion. Cloud revenue also accelerated strongly, up 24% in Q4 and up from 20% in Q3. This was supported by S/4HANA Cloud revenue, which grew an impressive 61% in Q4, the highest growth we have ever reported. Current Cloud Backlog for S/4HANA grew a stellar 76%, driven by tremendous adoption of RISE with SAP, our signature offering for business transformation in the cloud. For a perfect quarter, every solution needs to grow, and that's indeed what happened with double-digit revenue and cloud backlog growth across all our major product categories. This performance sets us up well for 2022. We expect continued acceleration of cloud revenue with up to 26% growth reflected in our guidance. These are very strong results during a challenging time for most businesses. They demonstrate the confidence our customers have in SAP and in the unique value we offer in helping them address an unprecedented set of challenges. We are optimistic about the year ahead, and we are well on track to achieving our 2025 ambitions. These results are the outcome of the strategy we introduced 15 months ago. Customers are turning to our platform and solutions to help them become more intelligent, networked, and sustainable, and emerge even stronger from this disruptive time. Our RISE with SAP offering is designed to support our customers as they transform their businesses while at the same time moving to the cloud. Reflecting this, analysts are upgrading SAP spend forecast for 2022. Just recently, UBS predicted a four-fold increase in the SAP IT budget growth for 2022, up to 12% from 3% in previous years. Since we launched RISE with SAP in January 2021, we have seen significant increases in customer adoption each quarter. In Q4, we more than doubled the number of new RISE deals over Q3, with about three times the number of deals over EUR 5 million. Let me briefly describe the three key benefits of this signature offering for business transformation as a service. First, business process redesign. We benchmark our customers' business processes against the best practices we have developed from working with about 400,000 customers. Second, cloud migration. We do more than a technical migration. We help our customers to move back to standard and to a modular, agile ERP in the public cloud. Third, innovation. We also connect our customers to the latest innovations like our SAP Industry Cloud, our SAP Business Network, and our SAP Cloud for Sustainable Enterprises. This means that RISE with SAP enables us to partner even more deeply with our customers. We offer integrated total solutions with single end-to-end accountability from infrastructure to applications. As a result, our revenue run rate for the Modular Cloud ERP now approaches EUR 7 billion, up from EUR 6 billion at the beginning of the year. In Q4 alone, we added more than EUR 400 million to our S/4HANA Cloud backlog. Clearly, RISE is a blockbuster success in the market. We are just getting started. Our massive on-premise installed base of more than 30,000 ERP customers presents a significant opportunity for our RISE with SAP offering as these customers begin their transformation to the cloud. At the same time, RISE attracts many new customers and comes with a significant cross-sell opportunity because of the integrated nature of our Modular Cloud ERP. For every $1 spent on the core ERP, we have an upsell opportunity of $3 for our platform and for additional line of business solutions. In Q4, the tremendous momentum for RISE with SAP in turn drove momentum across all our line of business applications and delivered the outstanding cloud performance I discussed earlier. Let's take a look at our key businesses starting with S/4HANA. Our success with RISE led to great S/4HANA momentum. We now have nearly 5,000 S/4HANA Cloud customers, and our win rate against competitors in Q4 was more than 70%. Many large customers are moving to S/4HANA enabled by RISE with SAP. These include CVS, Panasonic, IBM, and Standard Chartered Bank, and a number of wins over Oracle, including Siemens, Philippine Airlines, Allianz Technology, and Jungheinrich. CVS, one of the leading healthcare solution companies, is using RISE to support their journey to the cloud and make healthcare more affordable and more widely available. Panasonic has chosen RISE with SAP to drive a digital transformation effort, which will replace several legacy ERP systems to provide excellent customer value, optimize supply chains, and improve operational capabilities. Another example, Standard Chartered Bank has chosen RISE with SAP to expedite their finance transformation across 60 markets and to achieve their commitment to net zero emissions by 2030. Novartis, one of the largest pharma companies in the world, chose SAP S/4HANA to standardize and consolidate their core ERP platform. Finally, Petronas has also chosen SAP S/4HANA ERP. SuccessFactors continues to win significant business over Workday, including discounter Aldi Nord, the discount supermarket chain. They recently selected SAP SuccessFactors to transform their HR operations and support their workforce of over 80,000 employees. Dr. Martens, the famous British footwear brand, recently invested in SAP Commerce Cloud, part of our customer experience portfolio. They expect a 60% reduction in TCO from moving to the cloud and simplifying their operations. Intelligent Spend Management, we are seeing positive indications that business travel is starting to return. One of our customers, Philippine Airlines, is ready to take advantage of the anticipated recovery in travel. They chose SAP for our comprehensive understanding of the airline industry and its key business processes. HP Inc. is expanding its investment in SAP's Business Process Intelligence solutions. They will be using SAP Signavio for advanced process analysis to help them quickly identify and act on new opportunities. Hitachi invested in SAP Digital Supply Chain solutions to boost supply chain agility for its medical and industrial solutions. Our business technology platform had an excellent quarter with both cloud revenue and Current Cloud Backlog growing by very strong double digits. In the cloud, BTP is the foundation to enable the integration and extensibility of our modular cloud offering. ENGEL has chosen SAP BTP to support various business priorities, including individualized sales and trade promotion management. Let's turn to some exciting news we announced today, our intent to acquire Taulia. Taulia is a market-leading fintech company focused on working capital management and supply chain finance. We expect them to be a great addition to our business network and procurement portfolio. Our customers will be able to finance billions of transactions with favorable terms and improve their cash flow. Taulia is already a strong SAP partner with a number of joint customers such as Airbus, Nissan, and AstraZeneca. Two announcements are better than one. Earlier this week, we announced an extended partnership and investment in Icertis, a provider of contract management solution that offers market-leading contract intelligence powered by AI. Icertis is a great and seamless complement to our portfolio, having multiple touchpoints to SAP systems from ERP to procurement, to sales, and to HR. This partnership underscores the strengths of our ecosystem and the massive opportunity from joining forces with market-leading software players. These announcements expand our overall portfolio with supply chain financing from Taulia and contract management solutions through our enhanced partnership with Icertis. At the same time, we have expanded many of our existing partnerships. One recent example is our partnership with AWS to bring HANA Cloud onto AWS-designed Graviton processors, which helps us optimize our own operational performance and cloud cost margins, as well as support our sustainability goals. Let me turn to another strategic priority for SAP, sustainability. There is no question that action on climate change is an imperative for businesses today. It is certainly an imperative for us at SAP. We have just been A-listed by CDP as one of just three software companies worldwide. Our belief is that sustainability does not represent an added cost to business. It's actually a competitive advantage. In fact, it may be the greatest economic opportunity of our time. It's also clear that no organization can achieve sustainability in a silo. It requires coordination across the value chain. We have been working and learning on this issue for many years with customers like Hitachi, Colgate, Anglian Water, Fisker, and BMW. We have a unique approach that supports our customers across the full spectrum of sustainability, from carbon neutrality to social impact and economic progress. Transparency, insights, and data are the foundation. This is the unique advantage we offer to our customers, the ability to see inside and outside your organization across your warehouses, manufacturing, supply chains, and critical business processes, such as procurement and business travel. Our sustainability portfolio directly supports this work and helps businesses run more sustainably. For example, through our recent introduction of SAP Cloud for Sustainable Enterprises, which makes ESG data transparent to our customers. We recently released our five actions for every business to become a sustainable business. This guidance provides concrete steps for any company of any size to accomplish their sustainability goals. Collectively, these efforts are focused on helping our customers manage their green line with as much importance as the top and bottom line. In closing, we have had a record year at SAP, and we think this is just the beginning. The future is bright and our strategy for the cloud, for business transformation, for sustainability, will continue to create opportunities for continued and accelerated growth. We are very confident in our long-term ambition and see greater potential ahead given the strengths of our 2022 guidance. Thank you again for joining us today, and let me now hand over to Luka to talk through our results in more detail. Luka. Yeah. Thank you very much, Christian, and also from my side, a happy and healthy new year, 2022, to all of you. Let me start by saying that I'm also very proud of our outstanding finish to the year. Our team delivered an exceptional year with strong results that far exceeded our own initial expectations. We kept our promises, beat our guidance on both the combined top line and the bottom line after raising it multiple times in 2021. Let me amplify a couple of the points you heard from Christian. We can clearly see that more and more companies are choosing SAP to help them transform their business, build resilient supply chains, and become sustainable enterprises as they move to the cloud. This is reflected in a strong adoption of RISE with SAP, in particular by large companies across all geographies. We clearly exceeded our goal of at least 1,000 customers by the end of the year. What is way more important, in Q4, we saw the number of larger cloud transactions significantly increasing. Orders greater than EUR 5 million contributed around 50% of our cloud order entry, up from just 31% last year. That was also driven by RISE with SAP. Now let me cover our results in more detail. Christian already talked about our cloud momentum and S/4HANA's spectacular contribution to it, so let me just add some further data points. Driven by the strength of our entire portfolio, our SaaS, PaaS cloud revenue outside Intelligent Spend surged to 33% growth in Q4. This is a rate hardly matched at that scale by any other cloud vendor. SaaS, PaaS, Intelligent Spend cloud revenue also accelerated its growth to 12%. Within this business model, Concur returned to low double-digit growth. From a regional perspective, cloud performance was excellent throughout the year. We had a healthy balance and strong cloud momentum across all geographies accelerating during the year. Cloud revenue in EMEA increased by 27%, in the Americas by 13%, and in Asia by 20%. For the remaining top-line parameters, please refer to the quarterly statement. Now let me move on to the bottom line, where for the full year, our total gross margin increased by 70 basis points to approximately 74%. This was aided by a nice improvement in both our software and support, as well as our services margin. Conversely, our cloud margin was slightly down year-over-year. This was due to the investment into our next generation cloud delivery program, and the fact that our high margin Concur business still had a dampening performance throughout the bigger part of 2021. Despite the accelerated shift to cloud, our operating profit expanded by 1% to EUR 8.2 billion for the full year, which was ahead of our updated guidance. Our operating margin declined 50 basis points to 29.6%, mainly driven by strategic investments into our product innovation, which increased our R&D ratio by 150 basis points to approximately 17%. On an IFRS basis, our operating profit and margin were impacted by significantly higher share-based compensation expenses compared to 2020, mainly due to the Qualtrics IPO and the appreciation of SAP's share price during the year. IFRS operating profit decreased by 30% and IFRS operating margin by 7.5 percentage points to 16.7%. Let me now turn to EPS, the true bottom line and cash flow. We had a decent EPS performance in 2021, growing 3% in IFRS and 25% in non-IFRS terms. This was supported by a strong contribution from Sapphire Ventures and a reduced tax rate. As expected, we had another year of strong cash flow as well. Operating cash flow was EUR 6.2 billion, slightly above the outlook of approximately EUR 6 billion, and free cash flow came in at EUR 5 billion, exceeding the outlook of above EUR 4.5 billion. Let me now turn to 2022 and beyond. As you have seen in the pre-announcement and in today's release, we are very confident of our short and midterm prospects. We expect to continue our Q4 Current Cloud Backlog growth in 2022, and to significantly accelerate our cloud revenue growth. We see 2022 as another important stepping stone towards our midterm ambition. Let me look into the details. Entering 2022, we are now moving into the next leg of our cloud transformation and are approachi ng an inflection point. We expect to move into double-digit growth territory in 2023, first for operating profit, closely followed by total revenue. Our growth should accelerate further beyond that. At the same time, we become ever more resilient. Our share of more predictable revenue should expand to approximately 85% or more than EUR 30 billion in absolute terms by 2025. Let me just quickly share why our tremendous success of 2021 and the characteristics of our business model transformation are so powerful to deliver extraordinary returns for the years to come. In 2021, we observed a strong growth in the total contract value of new cloud deals, far beyond what can be seen in the already impressive surge of our Current Cloud Backlog. Next to a sharp increase in demand for our cloud products, this was driven by two additional factors. First, slight increase in contract durations, and second, and more importantly, more pronounced deal ramps, which means contracts stepping up in volume over the course of their initial term. We anticipate that both of those factors will help us defy the law of declining growth rates for a while and continue to accelerate our cloud growth even beyond 2022. At the same time, operating profit should get an extra push as we complete our next generation cloud delivery program and as our sales expenses benefit from the ever-increasing share of renewal business in our backlog and cloud revenue. That, in a nutshell, is why we expect to see our operating profit growth jump to double digits in 2023 and beyond, and why it absolutely makes sense for us to fully focus on maximizing our cloud growth in the short term. Now I'd like to turn to sustainability and non-financials. We have been at the forefront of integrating sustainability into our business strategy, as you know. We truly believe that a holistic approach to strategy and operations leads to better business decisions. We will publish our tenth integrated report on 3 March 2022 reflecting this approach. Looking at our non-financial matrix, in 2021, our customer net promoter score increased significantly while employee engagement remained at a very high level overall, despite a modest decrease. In the area of CO2, net carbon emissions continued to decrease to 110 kilotons in 2021, which was down 25 kilotons year-over-year. In addition to our goal of being net carbon neutral in our own operations by 2023, we have also announced our goal to achieve net zero emissions across our entire value chain by 2030, which is 20 years earlier than originally anticipated. To summarize, 2021 was a year of perfect execution along our strategy of helping our customers become sustainable, intelligent enterprises. Most importantly, our cloud order entry was exceptionally strong. Renewal rates were extremely healthy with a continued focus on efficiency. This success would not have been possible without the dedication, the innovative spirit, and the discipline of our people. I'm confident that we will continue to keep our promises as we enter the year of our fiftieth anniversary. This confidence is reflected in our accelerated cloud guidance for 2022, making great progress towards our midterm ambition. Thank you very much, and we will now be happy to take your questions. All right, operator, please open the line. Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow the signal to reach our equipment. Again, that is star followed by one. We'll now take the first question from Michael Briest at UBS. Please go ahead. Yes, thank you. Good afternoon and congratulations. Two from me, if I may. Luka, I can hear your confidence in your voice there around the margin progression and EBIT progression. I think investors would really appreciate understanding on the cloud margin specifically, what are the transitory investments that are being made this year? Why will they disappear in 2023? Is it double running of infrastructure? Is it consulting costs? And just, you know, what will get us to the 75% margin? And then in terms of cash flow, I think there was some confusion this morning around, you know, stock buybacks and stock based cash settlement of option programs. Can you just say, relative to the EUR 1.1 billion that you spent in cash last year, what the likely charge is in 2022 and out to 2025 as presumably some of those programs migrate over to, you know, be stock settled? Thank you. Yeah, thanks a lot, Michael, for your questions, and those are really very good and important ones. Let me start with the cloud margins first. As we had stated already late in 2020, we are going through a major overhaul of our cloud delivery infrastructure. We are harmonizing it. We're migrating all of our remaining customers who are still on legacy infrastructures across various solutions on this harmonized cloud infrastructure. That results in a cost across 2021 and 2022 of a mid triple-digit million EUR figure. At the outset of the program in the first half year, the spend portion that related to 2021 was more spent in R&D to prepare our solutions for some of the migration aspects. Since the second half of the year, it essentially was hitting the cloud margins. Just to give you an idea, the moderate decrease that we have seen in 2021 of 20 basis points actually was impacted by close to 1 full percentage point by the cost of this cloud delivery program. This is a project related cost, but mainly also double bubble cost, where we build up the new landscapes while we're still operating the old. As you know, we also took a restructuring charge for the accelerated depletion, so to say, of existing legacy infrastructures. This will also continue in 2022. I'm expecting that in 2022, we will see, as we have seen also in 2021, actually quite noticeable underlying regular operational scale-related efficiency gains, which would suggest that we will at a minimum remain at a stable cloud gross margin. I think we also have the scope to slightly increase it in 2022, but certainly not more than that due to the significant expense that is running against it. When the program dissipates in 2023, we will have two effects. First of all, of course, all of those incremental project-related expenses will be gone, and that should be a relief in 2023 in the range of EUR 200 million, as I said, certainly more than EUR 200 million. Second, we will see an immediate step up in the efficiency of our cloud operations due to just the greater elasticity and the greater efficiency of this converged cloud infrastructure that we have put together. This will result in a big step up in the cloud margin in 2023, from which point on there will be obviously further progression towards the 2025 target. As an additional element, one of our cloud solutions I pointed to this, obviously has been hard hit during the pandemic and only recently started to recover. That's Concur. Concur has one of the highest cloud margins in our portfolio. The reason why we've seen a slight decline and not a slight increase in 2021, as we had predicted, was actually that they were recovering a little later than what we had originally assumed in our planning assumptions. As we have now returned back to double-digit growth and certainly see the point in time arriving where we are going to move more into a new form of more normal, we are therefore expecting that Concur will continue its recovery. That will be an additional point that will support us on the further progression of our cloud margin. I hope that kind of outlines the major points that we have to consider there. This is not rocket science. It basically all depends on the timely completion of the program, and then the effects are actually relatively straightforward to see later on. Now, on the cash flow side, I think it's also an important point. I want to make sure that the effect of the move to equity-settled share-based compensation programs is not over-assessed, because we are moving to equity settlement for one of our share-based compensation programs, which is the so-called Move SAP program, a restricted stock unit program. We still have additional share-based compensation schemes at SAP in place, most notably the so-called Own SAP program, which is a discounted stock purchase program that we subsidize for our employees who are participating in this program that will continue to be cash-settled. As you have rightfully pointed out, in 2021, we had roughly EUR 1.1 billion in share-based compensation related cash outflows. We expect that this amount will still slightly go up in 2022 because we are first going to see the impact of the move of the Move SAP program to equity settlement in the course of 2023. We will see reductions, but we still expect in 2025, which will be the first year where there is no impact from Move SAP on cash anymore, to still see more than EUR 500 million in share-based compensation related cash outflows from those other programs, and also from the fact that we are not going to be legally able to transform Move SAP to equity settlement in all jurisdictions worldwide. In some, we will have, for regulatory constraints, still have to do cash settlements. I hope that puts it into perspective. Of course, we are extremely confident in our EUR 8 billion free cash flow target for 2025. We are actually ahead, as you have seen in 2021, as a starting point from where we thought we would be. So we definitely see scope to review this on a continuous basis and, potentially also, update it accordingly as we move closer. But you will appreciate that this is four years out, and there are also other influencing factors, like currency movements, cash taxes, and so on, that are very difficult to predict such a long time before. Take it from our pre-release, that we are very, very confident in our trajectory, and that certainly as of next year also, free cash flow will start to significantly go up and increase as well. Thank you for the detail, Luka. Thank you. Next question, please. Thank you. If you find that your question has been answered, you may remove yourself from the queue by pressing star two. We'll now take the next question from Stefan Slowinski at BNP Paribas. Please go ahead. Yes. Thank you. Hello, Luka. Hello, Christian. Thanks for taking my question. Just to follow up on the previous question around the stock compensation, looking at it on a holistic basis, I think stock comp is guided to be 11% of sales this year, which of course is up significantly from where it was a couple of years ago. Do you expect that 11% to kind of be the new normal, or will that trend back down over time? Then associated with that, just a broader question around the hiring environment. You know, obviously we hear about the tightness in the markets, companies increasing compensation, whether it be cash or stock. On the other hand, a lot of companies have option plans that are underwater, so maybe that's working in your favor. Anything you can tell us about, you know, what the hiring environment is like and how you're executing would be appreciated. Thank you. Perhaps I can take the first question, and then on the hiring environment, I will relay to my operational colleagues, because in finance, we are not doing a whole lot of hiring. I think Scott is probably better suited to talk about the environment there. Now look on the share-based compensation front, and the movement front, you're right. Of course, we have seen quite a sizable step up in terms of percentage of revenues, but with this, we are actually perfectly in line with what we see from our peers. It's likely that you will see a gradual decline of this share again, because we don't think that from an absolute share-based compensation expense perspective, we will see significant upwards movements from now on. Whereas obviously on the revenue front, we are planning for significant increases. Why is that? First of all, at the moment we are still seeing a significant share of our overall share-based compensation expense being tied to the share-based compensation plans at Qualtrics, in particular, the executive management plan that was awarded at the point of the IPO. This actually will stay with us for three years from the IPO because that's the period, the measurement period of this plan. In equity-based compensation plans, unlike in cash-based compensation plans, where you constantly adjust the valuation based on the share price movements, you actually, until the exercise, measure it at the grant value. It's fixed basically at the $30 IPO price that we had. From that perspective, actually more than one-third of SAP's total share-based compensation expense plan for 2022 is related to Qualtrics. This will dissipate over time and go down. Last year, it was actually 50%, right? This year, it goes down to one-third. It will gradually decline, but not at the pace that you would assume. In terms of the other plans and our own organic plans on the SAP side, we are moving our Move program from annual to quarterly vesting, in addition to the equity settlement. That results in a one-time incremental expense in 2022 of roughly EUR 200 million, which then also will be part of the baseline, so to say, and will not further step up. From that perspective, that's why we believe that our expense will be relatively stable over the next coming years, whereas the revenues obviously will increase, and therefore, the ratio will actually gently come down over the course of the next few years. Perhaps on the hiring environment, does anyone want to comment, Scott or Christian? Yeah, sure. I can comment, and Christian, please add on top. I guess three comments on the hiring side. First of all, there's no doubt that it is a competitive market, where the technology sector is strong. Businesses are able to leverage those skills, and that means that the market has got a lot of movement. Having said that, we've seen continued success with our programs that we launched and have rolled out over the pandemic, and in particular last year with Pledge to Flex, the ability to be able to work in the environment that is best suited to you together with other employee engagement programs. That's allowed us to be able to attract and retain our best talent. Even within a volatile, and an aggressive talent market, we've been very successful to not only retain but actually expand our talent pool. The third that I would say is it's a great industry, and so what we see is early talent coming into this sector continues to expand. That's not just in North America but around the world. That allows us to be able to then bring young talent, early talent into the organization to bring the diversity mix that we aspire to achieve. Christian. Yeah. Thanks a lot, Scott. Maybe just to close it out on the hiring side. I mean, first of all, of course, there are areas, like in cyber and data scientists, where, of course, the cost per hire go up. These people are of high demand in the market. But we were actually really well able to offset that. I mean, we have large academies inside SAP. We have a sales academy, we have an engineering academy, where we are training, educating young talents, especially for these future skills which we need. This is a big success. On top, we are also expanding our university engagements to make sure that we have, of course, the high caliber from outside of the market, but that we supplement it also with strong talent from inside of the company, and we are then also investing in the reskilling of our people. Thank you. All right. Great. Thank you for all the information. We'll take the next question. We'll take the next question from Adam Wood at Morgan Stanley. Please go ahead. Hi. Christian, Luka, thank you very much for taking the question, and congratulations on the strong fourth quarter. I've got two as well, please. I wonder, first of all, you know, Luka, you were talking about that very strong large order intake in the cloud business and the visibility beyond that that you have on these cloud projects in outer years. I guess that makes sense as large enterprises obviously aren't all doing this on a twelve-month plan. It's a longer-term project. I wonder if you could go into a little bit more detail around that. If there's any metrics you could give us on how these plans scale over the, you know, one, two, three-year time frames. You know, maybe the products that these companies are adding. If there is a specific example, that'd be really helpful to give us a better feeling for what you're seeing beyond that Current Cloud Backlog, in the business. Then maybe, you know, following up on previous questions about stock comp and profitability, and I guess this is a bigger picture way of looking at it. You know, we've talked about talent, but we've seen, you know, very large numbers of software IPOs. The hyperscalers are, you know, becoming ever more competitive. You know, in terms of your share of voice with customers, you know, what gives you the confidence that when you look out to 2025, there won't be a need for you to continue spending at a higher level to maintain that engagement with customers? Whether that's coming through in stock-based compensation or in actual expenses on the P&L, I'd just be interested to see, you know, how you feel about that. Thank you. Yeah. Let me start, perhaps, and then, Christian or Scott, feel free to build on that. Look, first of all, on the backlog and the visibility, it's obviously very difficult to generalize this because we have seen large RISE contracts, which have, in some cases up to, you know, 7 years transformation horizon, when we're talking about landscapes that have dozens of systems to be transformed. Then we have nimbler and shorter ones, even for larger companies, that really very much depends on what kind of landscape complexity we are talking about that needs to be transformed. To give you an idea, at least of the magnitude. That we're talking about in general, we had a discrepancy between our growth in annualized order entry versus total order entry into the favor of total order entry in the low teens in Q4. It was also double digits in terms of percentage differential for the full year. This is quite sizable. On top of this, you can also point to the fact that the average duration of our contracts in the cloud has increased in Q4 to now 3.9 years. We have way more multi-year contracts which at the same time have a stronger share of contracts with ramps. You don't see therefore the full impact and the full potential of those contracts in the Current Cloud Backlog, but they have a massive backlog volume for outer years that we are carrying with us. That's why also the share of net new business that we need to continue the same kind of backlog growth and then revenue growth obviously diminishes over time, and that is giving us increased visibility. That's not to be said that Scott and his team can now lay back and relax. Of course, we have high ambitions. As I said, we have absolutely the confidence that we can accelerate our cloud revenue growth even beyond 2022, and that of course still continues to require additional new business, which we are absolutely confident we can drive. Now on share-based compensation expense or other expenses, we have made significant investments already in the last two years, in particular in our innovation capacity first, which you have seen with the step up in the R&D ratio to 17%. I think that is a ratio that will now remain relatively stable, and you know, as a percentage of the revenues also over time, especially when we get past 2023, should start to gently trend down again. Where we had to step up in 2021 and going into 2022 was obviously on the sales and marketing side of the house. We have a massive pipeline that we are generating in order to drive for this extremely strong order entry growth that we are expecting, and we are investing into this. We have actually invested ahead even in Q4 into this pipeline generation. That's the reason why we have seen in Q4 also step up in the sales and marketing ratio. Of course, as we are planning for another year of very significant double-digit growth across our portfolio in terms of new orders, we have to invest properly in Scott's team to drive for the required sales capacity, but not only sales, but also post-sales adoption resources in order to make sure that we have a full deployment of those solutions quickly, and then also drive, of course, as an outcome for very healthy renewal rates. Those investments have been made now, and we obviously are very confident based on the positive customer feedback, based on the increase in customer satisfaction rates, that at this investment level, we will now start to see the return on investment, fully determined to drive for accelerating double-digit growth as of next year forward. We don't expect based on the competitive strength of our portfolio, a need to come up with any unplanned incremental expenses. Our win rates, as Christian has said, are extremely high. The hard work of integration has proceeded extremely well, and that means that we can also shift within the existing capacity to drive for new innovation, without having a lot of this tidying up homework, so to say, still just to do. That has been the work of the past two years. Yeah. Maybe Adam, That's really helpful. I appreciate the detail. Maybe let's just build on one of the questions you had around the cross-sell opportunities we also see in our portfolio. I mean, this really depends from customer to customer, especially in RISE now. You know, you always have a conversation in oil and gas, for example, is about how can we manage the transformation to clean energy. What needs to change in the quote to cash? In high tech, it's oftentimes a discussion around how can we manage the reskilling of the workforce. What about the total workforce management? In retail, it's a combination oftentimes around changing, you know, to move forward with the omnichannel sales. We have high demand in the CX also with regard to some industry-specific cloud capabilities in retail, loyalty management, returns management, where we develop strong and also co-innovate with hundreds of retail customers. Of course, you know, in all of the other industries, we also see, you know, supply chain shocks. Also the surge in the business network was evident in 2021, and we are actually also building on that as we are not expecting that also there is, you know, the supply chain shocks will go away so soon. You see, this really depends. With RISE, what we're actually doing, I mean, it's not only a shift to S/4HANA Cloud. Also very important is, you see, in all of these scenarios, there is SuccessFactors, there's Fieldglass involved, there's CX involved. Even more important is our platform is involved. Yeah. With RISE in the second step, we also wanna move then our customers. It's a journey to a Modular Cloud ERP. What to do with the modifications? Our partners are joining us in the meantime, and that drives the adoption of the platform. How can we build side by side all the modifications which the customers had in on-prem on the platform? How can we standardize those? We want to increase the penetration of our ecosystem, then also via our marketplace. Let's not forget BTP had a very, very strong quarter, but this is not because it's a standalone platform anymore. This is because it's tightly integrated into our Modular Cloud ERP, and the part of RISE is also a shift to exactly this platform. Thank you. We take the next question. We'll take the next question from James Goodman at Barclays. Please go ahead. Very good afternoon. Thank you very much. Maybe switching over to the core business, which I think for me was the area where you most significantly outperformed your expectations this year, particularly on the support line, which I think was up 1% versus clearly the anticipated decline. I appreciate that there was less of a licensing impact than perhaps you anticipated. Really there seems to have been less substitution from maintenance to cloud despite the cloud strength. I wondered if you could comment around the support resilience and whether you expect that actually from here on out, a larger cannibalization effect is required really to maintain the current trajectory of the backlog. Maybe you can comment a little bit as well around perhaps the seasonality of any transition effects then as we go through 2022. Just to come back briefly on the cloud outlook and reconcile some of these comments around accelerating cloud growth in 2023, still overall double-digit growth in 2023, despite the higher pace from the resilient support. You seem to be saying that the backlog will really sort of stay at these levels, Luka, as we go through this year. Just wondered why we wouldn't see the current backlog continue to still tick up a little bit higher through this year, given particularly that non-current backlog strength. Thank you very much. Yeah. No, those are important questions. Let me try to take a first stab at them. First of all, when it comes to support revenues, you are absolutely correct. They remain extremely resilient. There is close to no real churn away from SAP, so the churn that we are seeing is healthy one, as part of the cloud migrations, as part of our cloud extension program. The impact of cloud extensions on 2021 support revenues has been going up clearly. It's a triple-digit million EUR figure by now, but we are driving for very healthy extension multipliers, as we had discussed on previous calls already, and that remains the case. We are hovering significantly above the 2x factor that we had flagged. We believe that this trend, while it will certainly not remain at this same very, very high level, but it will remain extremely healthy. Now, when we think about the expectation going forward, I think in 2022, I would still expect there to be only a marginal decline in support revenues, because the impact of the RISE transformations as well as of other cloud migrations will remain extremely healthy. That might change over time as more of those, you know, big, large, RISE contracts are contracted and are then going through their ramp, and then concomitantly with this, the support revenues are declining. To give you an idea, when you take our midterm ambition for 2025, we have said that we want to have 85% highly predictable revenues, and we want to have more than EUR 22 billion in cloud revenues. That would tell you that we will have around about EUR 8.5 billion of support revenues left by then. Currently, we have around about EUR 11.5 billion. There will be a sliding path, so to say, of increasing declines in support revenues. Also, quite frankly, because there will be less new software revenues contracted, that would fill up, so to say, the migration impact. In terms of any seasonality expectations in 2022, let me talk about this in three different ways. First of all, you have asked about the Current Cloud Backlog, and you're right. I mean, for the full year, we expect a similar trajectory, like in Q4 2021. Probably with a different situation for each quarter. Undoubtedly, our order entry performance in Q1 and in Q4 was the strongest in 2021, and that creates obviously a tougher compare. I would assume that in Q1 and in Q4 you might see slightly lower CCB growth rates. Whereas in Q2 and in Q3, the growth rate should actually be higher than what you've seen in Q4. On the cloud revenue front, I would assume that the growth rates in the first half would be quite similar to what we have seen now in Q4. Because it takes a while until this significant surge and growth in order entry that we have seen in Q4 finds its way into the cloud revenues. In the second half year, we definitely expect a stronger surge in cloud revenue growth. When you take a look at the you know profit development, then certainly we had a very strong Q1, as you will recall, in software revenues, as well as in support revenues. The software and support was actually up in positive territory. That will, of course, create a tough compare for the Q1 performance, but that will then ease in the coming quarters also because we were leaving the pandemic conditions in terms of the spend environment behind a bit, and we're also increasing a lot of you know spending in areas like travel and marketing in the second half year, and that makes the compare then easier. That's kind of this the way how to think about seasonality at the highest level. I hope that's helpful. Yes, thank you very much. Just to build on that, Luka. I mean, we also have to consider that we just launched RISE 12 months ago, and Scott and team did obviously a tremendous job from zero, you know, to our biggest growth driver now, throughout the year 2021. Of course, cooking such large deals, which you have seen, and you see that the majority of the order entry is now driven by these large deals. That took some time, but there is no shortage. We have an installed base of 30,000 customers, plus, maybe one important factor is as well, the renewals, so our renewal base is getting bigger and bigger. It's one of the key drivers then also why we will turn back to double-digit profit growth in 2023 on. There also our internal reorganizations, yeah, the change in the bonus plans. I mean, with RISE, we are now much closer to the customer. We are using now heavily the telemetry data. With RISE, we're having architects at the customer. We work with them, we drive adoption, we get the modifications out. We are much, much closer, and we saw this already as a very positive impact on renewals, and this will also then continue now in the current year and, as well in the years to come. All right. Thank you. With that, we'll take the next question, please. We'll take the next question from Kirk Materne at Evercore. Please go ahead. Thanks very much. Christian, I was wondering if you could just talk a little bit about the adoption of RISE across geographies. I was just kinda curious if the adoption and success has been fairly balanced across all the geographies, or if there's an opportunity for, say, I'll just make this up, the Americas to sort of catch up a little bit, if that's the case. It might not be. Then, Luka, I assume your commentary around cloud for next year includes the U.S. or the Americas, again, sort of re-accelerating. I assume that was sort of weighed down a little bit by Intelligent Spend this year. So, just a quick one for you as well. Thanks very much. Yeah, I can start to answer the question, the first question, and Scott, please feel free to build on it. I mean, first, I would say yes. When I look at the order entry of RISE throughout 2021, especially now Q4, I mean, you have seen from the logos. There is CVS in the U.S. There are many other large ones in the U.S., but also Germany. As we always say, okay, where does Germany stand with the digital transformation? Now the customers are equally on. Siemens, Fresenius, and Henkel. We have a few others. They're all now making the move to the cloud all in, and not only the technical move, of course, also the transformation of their business model. We saw equal growth, and we also see this in the pipeline for the current year. Actually, RISE was really, you know, spanning across the world, and we see an equally strong pipeline then for every region, actually. Scott, anything to add from your side? Yeah. The only thing that I would add to that, Christian, and I think you said it well, is clearly the mix of our customers differ across regions. We saw significant acceleration of our small to mid-size customers in markets like Asia and in Latin America and other regions. Whereas obviously in North America, and Christian referred to the large organizations, together with Germany and other major markets being a significant uptick in Q4. I did just wanna add one comment on the cross-sell, which I think is important to give you some context of the impact that RISE has. Over half of the bookings that we had of the initial order entry had solutions outside the core S/4. The intelligent enterprise story, the ability to be able to do that end-to-end process transformation through RISE as being the catalyst was there. As the year progressed, we saw up to 80% of those customers then having more than the one solution outside of the core area. As the customers use, expand, and get the benefits of RISE as they roll it out, they then look to the expanded opportunity that they get with SAP. That gives confidence when we look going forward that not only does RISE in its base proposition provide that transformational opportunity on mission-critical workloads for customers. Our customers then expand the use of SAP solutions across the suite to be able to provide that end-to-end transformation. We see that in our pipeline going forward. Just quickly on the re-acceleration in the Americas. Yes, you absolutely should see a continued re-acceleration, in particular in the first three quarters of the year, because of, first of all, Concur coming back to growth. In general, actually the surge in the Current Cloud Backlog that we have seen. In particular in the U.S., we had a very healthy uptick, one of the larger ones, and that will of course help the entirety of the Americas. Thank you. Super. Thank you. We can take the next question, please. Thank you. We'll take the next question from Mohammed Moawalla at Goldman Sachs. Please go ahead. Great. Thank you very much. Good afternoon, gentlemen. I had two questions. Firstly, could you remind us around the installed base, as you look to kind of cross-sell multiple products into the base, where we are in terms of the kind of remaining runway, particularly of some of your kind of prior acquired product. And as we think of that kind of cloud acceleration, aside from just the sort of migration and move to S/4HANA, how much more there is to kind of cross-sell and upsell? Secondly, just, Luka, coming back around your confidence on the operating profit growth acceleration. You know, obviously in the pandemic, you're able to kinda make some structural savings on sort of go-to-market. As things sort of reopen and we move potentially into a more of a hybrid world, will there be kind of opportunity to further drive efficiencies on the kinda sales and marketing spend as you support the growth? Thank you. Yeah. Perhaps I can take the second part on the installed base and move to S/4. I mean, I will invite Christian and Scott to comment on this. Clearly you're right. I mean, we were benefiting in particular in the first part of the pandemic from obvious savings in travel, facilities, car fleet, and other areas that were not so much in demand. Quite frankly, this is already behind us. In the second half year, we have actually already returned to much more normalized spending behavior. That baseline that we have now is, I would say, the right one for us to then leverage additional efficiencies. We are working on this, of course, on a continuous basis and are confident that we know where the levers are to get us to where we have to be. Again, the most significant one from which a lot of the profit improvement will come is, first of all, significant surge in the cloud gross profits. Secondly, over time then, anticipation of the need for incremental sales and marketing investment as the weight of the installed base existing cloud business increases further and further. Also the fact that we will not have any more such a significant step-up in R&D expenses as we have seen it in the last two years to work against. That together with the top line momentum that we expect and the fact that the mix shift effect will also decline because of the smaller weight of on-premise should definitely carry us to the targets that we have had. Perhaps over to you, Christian, for the first part. Yeah. The installed base, Mohammed, I mean, first of all, the existing ERP on-premise base is still about 30,000 customers big. When you look into this ERP and what is up for the conversion to the cloud, obviously the situation now looks much better. You know, starting with the office of the CFO, it's a win, and we're converting one customer after another. Differentiating is, of course, that we are running our ERP in many, many countries. We have localized versions everywhere. We are infusing new technology, AI, to automate certain finance processes. We are doing real-time treasury management and much more. This is really great. Now, on the HR side, obviously, you know, still most of these 30,000 customers also have Employee Central, so which we're also offering now, you know, in the cloud. We just heard about ALDI, so we're also there. We can easily run customers with over 100,000 users also there, heavily localized. Now that the integration is there with the BTP, we have the seamless connection to the finance, but also to other modules of the ERP. We are seeing, of course, not only much higher cross-sell rates, but we're also actually seeing a few winbacks now of customers who maybe made different decisions three or four years ago. In the SuccessFactors business, we are seeing a huge catch-up and extremely healthy conversion rates. Then on the procurement side, it took a while, but now we are there. We are just also announcing Q4, very proud about the engineering team, our one procurement plan. As many of these ERP customers want direct and indirect procurement, and now we can offer that. Yeah, so no matter if you have on-premise direct procurement with ERP or, you know, you have indirect procurement, which then will run in the future with Ariba, it's now on one platform. With that, we can also convert the installed base much more easily. Travel and expense was a tough one in 2021 because of the pandemic. Also there, we are further investing in the localization of Concur. We are also putting in more innovations. We are doing a lot on the UX side. Also there, once travel is back and we see the recovery, also there we will see even stronger conversion rates going forward. Scott, anything to add? Yeah, maybe just to quantify everything that you described and give it a bit of context. We have an incredibly loyal and long-term customer base, as you say, Christian, and they continue to invest in SAP. If you look at RISE, as we've described throughout the year, and Q4 was no different, while there was a number of large organizations and existing customers, we also had nearly 45% of the order entry or the bookings was net new, so new customers joining. The good news is we're not dependent on our existing customer base, although they continue to invest and expand with SAP. We're also adding net new customers to SAP, helping them accelerate and transform their journeys to and in the cloud. That gives confidence in the pipeline going forward as well. All right. Thank you. Next question, please. Thanks for the color. Thank you. We'll take the next question from Johannes Schaller at Deutsche Bank. Please go ahead. Yeah. Thanks for taking my question, and congratulations on the good cloud acceleration that you're seeing. If we're thinking about some of the components of your cloud outlook for 2022, I mean, I think, Luka, you were already quite bullish on SuccessFactors in Q3, and Christian, you just again made the point on competitive wins. I mean, should we think that SuccessFactors could actually grow above the cloud average for 2022? Then another factor would be on Concur. Could you help us maybe understand a little bit better the assumptions you made around that business in terms of travel volumes? For 2022 for us to better understand kind of how to think about the up or down sides depending on how travel volumes actually develop. Then as a second quick question, just on the cloud extension multiple, Luka, you brought it up. Could you maybe share where we stand here at the moment? There is obviously a strong upselling component in there. If we take that out and just look at the ERP conversion from licensing to SaaS without upselling, where would that be right now? Thank you. First of all, on the cloud extensions, I cannot really tell this to you because we are not seeing it as separated. As Scott also explained, and Christian, we see lots of opportunities when we do these transformations to actually do a more holistic one. In that respect, we have an extension case that spans across the portfolio, and we are not segregating it and separating it accordingly. It would also not make sense to do so. As I said, I mean, we are definitely far above a 2x conversion factor. We expect that this will remain the case. That's also due to the fact that every one of those like for like conversions has a great opportunity for us to actually upsell. That's good. In terms of the assumptions for Concur, we are still not expecting Concur's business volume to be fully back to where it was pre-pandemic in 2022. We are hopeful and also cautiously optimistic that this might be the case in 2023. We obviously expect that there will be a continued recovery. We are expecting that the growth rates for Concur will continue to moderately climb up from where they were, from the low double digits that we are seeing right now. Not in the sense that there would be a dramatic increase, far above the growth rates that we are expecting, at the group level. We are actually still planning for growth that might be slightly below, but not as dilutive anymore as it used to be, in 2021. Look for SuccessFactors, in terms of the forward-looking growth, on the order entry. I think, we believe that, we have strengthened our competitive momentum. The solution certainly benefits greatly from innovation such as, for example, our invention of the Human Experience Management category, which is a clear differentiator and has resulted in many competitive wins to us because there is nothing comparable that our competition can offer. For what kind of growth rates that ultimately then translates that remains to be seen. Let's not forget that SuccessFactors remains our largest cloud category. Some you know law of diminishing numbers on a very high base is something that you will need to bake into it. Clearly, we see accelerating momentum in SuccessFactors. The order entry has been sequentially up. Cloud backlog is sequentially up. Revenues are sequentially up. that is something that we certainly expect to continue in 2022. That's very clear. Thank you, Luka. Okay, we have time for one final quick question, please. Thank you. Thank you. We'll now take the last question from Frederic Boulan at Bank of America. Please go ahead. Hey, thank you. Good afternoon. Thanks for that. Maybe a first question to Christian around your cloud momentum. If you can share an update on number of S/4HANA customers on the cloud and where we are on the core ERP migration. If you can share any numbers around percentage of businesses that have been migrated for now or are in the pipeline and what we can expect in the couple of years. Then second question coming back on the free cash flow discussion. If you can help us understand, I mean, you gave that number slightly more than EUR 500 million, you know, still cash SBC 2025. I mean, how does that compare to where we were in October 2020 when you gave your long-term outlook? Assuming that's a lower number, everything else being equal, should we expect that free cash flow guidance to be increased by a similar number or are there some other free cash flow items that have moved the other way, which prevent you from moving your guidance today? Thank you. Yeah. Let me start with your first question. I mean, first, we have in the meantime over 5,000 S/4HANA Cloud customers. The majority of the increase of S/4HANA customers in 2021 was obviously, you know, right away, you know, moving to the cloud. What is the remaining potential? I mean, first, we have still an on-premise base of 30,000 customers. Actually, the movement to the cloud will further accelerate because of two factors. No customer can actually afford, no matter which industry you are, that you are falling behind the innovation curve. In S/4, you find all the capabilities to run these new business models. If you want to switch license models, we have pay-as-you-go. We want an app. We want this commerce shop. We can do real-time billing. Second, also, let's not forget, you know, everything what is happening around cyber. A lot of customers, you know, with their local IT team cannot cope with the evolution. What is happening on the side and really making sure that the data is protected. That actually also, in the meantime, really accelerates, you know, our growth. With, of course, the economies of scale we are getting, we also can, you know, still without the conversion rates, but obviously we are very competitive in the meantime also on how we can offer wide. This will all, you know, flow into that we further accelerate the move of our 30,000 remaining installed-base customers to the cloud. Plus, even if someone is now on S/4HANA on-prem, that doesn't mean that they are not really also then coming to the cloud sooner or later because they need this agility. They wanna get rid of these modifications. They need this, you know, innovation, what we are delivering, and this is why there are a lot of sources for growth also now in this year and in the years to come. Okay, let me close it out with the favorite topic of the day, with the free cash flow. Look, in October 2020, obviously, we were looking at the cash flow impact of our share-based compensation plans in 2020, which was higher than in 2021. Actually, it was above EUR 1.3 billion. However, we knew already back then that Qualtrics would go through its IPO and that therefore their share-based compensation plans would switch to equity settlement, which is also basically the reason why our cash impact of 2021 is EUR 200 million less than in 2020. If you would follow your logic, then you would have to bridge from the EUR 1.1 billion that we had expected for 2021 to essentially an impact of more than EUR 500 million that we still expect in 2025. Again, there are so many additional factors to take into account on a metric that is anyway not the easiest to plan for and is four years out. Just simply the currency movements. If we have a, you know, 10-cent increase or decrease of the U.S. dollar against the euro or back again, this had such a significant impact on the cash flow that this is just a very significant factor that is completely outside of this, as is of course the unpredictability of when, for example, deferred taxes will lead to actual cash tax payouts, which is also important, very difficult to forecast at least over such a long period of time out. That's why I said at the beginning as well, indeed, the move of Move SAP to equity settle of course is only further increasing our confidence into our midterm ambition. That's why we have confidently reiterated it already with our pre-release. Of course, if we deliver on our plan trajectory of profit increases, then we absolutely are confident that we can also, as we move closer, revisit all elements of our midterm ambition, including the free cash flow guidance. Again, bear with us, as we work through another, as we believe, very successful year, 2022. We will take a hard additional look at this, as we move forward into next year. The same is actually true for 2022 as well. You have seen that we guided at the beginning of 2021 for above EUR 4.5 billion in free cash flow, and we ended up at slightly more than EUR 5 billion. What was the reason? Not that we were far off in terms of extraordinary impacts such as restructuring, cash outflows or income taxes, or employee-based compensation. No, it was the fact that we were coming in better than expected on the profits. We have, again, a range from flat to slightly declining profits for 2021. If we come in at the high end, it's also evidently will be the case that we will also have a result in free cash flow that will be similar to what you have seen in 2021. And therefore, as of next year, you will see definitely significantly increasing free cash flow generation up to our midterm ambition. Let's see, perhaps a little bit above. All right. Thank you, Luka. This concludes our call for today. Thanks again for joining. Thanks, everyone. Bye-bye. Thank you. Bye-bye.