Great. Morning, everyone. My name is Mohammed Moawalla. I follow the European software IT services and payment segment. We are delighted to have management of SAP with us today here at the conference. Representing the company is Dominik Asam, Group Chief Financial Officer. Dominik, I think it's your first time at the event, so welcome. Yes, it is actually. Thank you. Thanks for having me. Thanks for joining us. I think, to kick off, could you talk a bit about the current kind of macro environment? You seem to be somewhat decoupled from what many of the other software vendors are seeing. So as we sort of come out of the summer and head into the, so the back end of the year, what are your kind of observations in terms of customer conversations, and do you sort of see some, you know, why SAP is different? Yeah, so I'd say the way it might make sense to characterize the demand environment for us is that the market is a little bit bifurcated. On the one hand, you have the need of all these customers to prepare for what's lying ahead on their digitalization journey, which in our case, means they need a very, very powerful, well-organized filing cabinet for the myriad of transactions they have in their businesses. And I do believe that this is driven very much by the conviction that if you don't have reliable, robust, structured data actually for AI, you might have a competitive disadvantage. Because, yes, you can also work with unstructured data, but it requires huge compute power and incremental, cost and resources that you might otherwise spare. On that front, we really see, if anything, an acceleration. Every customer has, of course, capital allocation and the pecking order of what projects are prioritized, and these type of base investments work very well. In contrast, when you have some more discretionary applications that solve a problem or even transactional business like we have with our travel expenses or, yeah, also some procurement things where simply the flows are affected by macroeconomy, it's a little bit more sluggish. But in total, the demand picture is as robust as it used to be. And what I'm describing, I think, is also true for what we observe in our competitors. If you think about what type of competitor has more trouble and what type of competitor has less trouble, I think it echoes a little bit that type of differentiation. Overall, no reason for us to be nervous at this point in time, we believe, because the dialogue with the customers is quite robust. They're also moving more from kind of aggressive top-line moves into fighting for productivity and saying cost discipline and bringing productivity to our people in an environment where inflation is still a little bit higher than it used to be for many years is a prime objective, as opposed to, I don't know, doing large M&A deals with a 10-year payback cycle. Got it, so obviously, one of the kind of core drivers for you has been the kind of S/4HANA product cycle, and it's obviously driven pretty robust backlog growth for you as well, both in terms of current cloud backlog, but also total cloud backlog, and you kind of, I think, is expecting this kind of momentum to sort of continue. Maybe remind everyone where we are in terms of this product cycle opportunity, because the cloud came along almost a decade ago, yet these enterprise customers tend to be very slow in how they move. Yeah. So where is SAP in terms of that, realizing that opportunity? The ERP products, they are quite hard to cloudify, so to speak, because every customer processes and, there's a big change effort required if you want to, yeah, modify these processes. Sometimes it's even physical stuff in a factory. So from that perspective, it's a slower industry to move, to a pure public cloud model, multi-tenant model. And now, since a couple of years, we have created that kind of private cloud RISE journey for customers to move even the largest and most complicated enterprises to the cloud and start preparing them for a more standardized approach, which we call Clean Core. We had to invest extremely heavily to provide the toolset for that. So you might have heard about Business Technology Platform. That's one of the components. It also allows the customer to finally integrate all these applications. You know, the applications in the company, they all are linked to some degree. I could give you endless examples of where HR and finance are linked, or procurement and finance. And in a fragmented world, it's a system integrator that hopefully stitches these things together, and now we have really the toolset to properly integrate that. We have a huge installed base. The best way to measure that installed base in terms of money is the maintenance revenues we have. It's still a low double-digit billion amount of maintenance revenues. And then if I depollute these maintenance revenues, and maintenance refers to on-prem only, obviously, for things that have nothing to do with the ERP system, I'm down to a very low, kind of, 10+ billion number. And that kind of maintenance base. The question you ask yourself, all of these customers in that maintenance base, where are they on the cloud transformation journey? And one indicator is, do these customers pay both cloud revenues to our subscription revenues and maintenance fees? And the answer is, there's about roughly a quarter who are already on some type of journey with us in the cloud, most of them on what we call RISE, which is the easiest way for them to move from on-prem into the cloud. And that also means there are still three-quarters who still have that ahead of themselves. Now, the question is: Is there a danger that they will be stuck forever on on-prem and never move? We are deeply convinced the answer is no. There's also a potential concern, well, maybe they are moving to the cloud, but not with SAP. And the reason why we are relatively confident about that untapped potential being a natural reservoir for future cloud customers of ours, is that 2/3, roughly, of these customers are already on an S/4 journey. So they have basically evaluated next generation systems and said, "S/4HANA is where I want to go." And there's only 1/3 of that remain to do, which is purely on ECC, and ECC is our old release of SAP systems, and that thing is running out of maintenance, mainstream maintenance in end of 2027, and prolonged maintenance end of 2030. The difference being that the amount of support the customer gets in that kind of prolongation is weaker, so there's not much improvement happening anymore. It's more really business continuity, and it's becoming more expensive, so there's an incentive to stop doing that. ECC, for example, you can run on other vendors' databases, so you need licenses for that. So for us, there is no real incentive and no interest, to shoot in our own foot and prolong that, legacy product. So they will need to decide on what they do. And still, the path from ECC to S/4 is a much better explored path than to go to a competitor. And the type of customers we talk about in this customer base are not the type of customers that go on a very simple public cloud, in, instance or product of some smaller vendors in Europe, which are also vying for that, which are more on the mid-market side. So this is why that transformation, that conversion of installed base- Mm-hmm. In cloud is very robust and has a strong runway. And this is why we say, because of the mix effect we are currently enjoying, if anything, revenue growth for SAP beyond 2025, and you know that we've given the revenue number for 2025 as an ambition, will accelerate. Because this gives us so much visibility on pipeline. We start having a pipeline now in 2025 to see who's coming our way, who's now discussing with us. They have to lock in also system integrator resources, so there are certain lead times. Yeah. And, that gives us- Got it. So on top of S/4HANA, you touched on some other aspects. There's the BTP. You've also got the line of business solutions, which is then providing also cross-sell, upsell opportunity. So maybe talk us through the different levers you have of growth as you exploit those products once customers begin that S/4 journey. Yeah. I think we can say with confidence that in terms of breadth of product portfolio, localization, we have the biggest portfolio on the planet. And I, I harped on that integration capability with the BTP- Mm-hmm ... before. And we do believe that while the move to the cloud has kind of democratized, in some way, the business, and has offered huge opportunities for specialized niche players to provide solutions on the hyperscaler, which were then often kind of put in context with our software, where we left, honestly, a lot of space to our competitor because of the very heavy on-prem model with late upgrades. There was an incentive to find a faster fix- Mm-hmm ... for our customers. Now, we are on the cloud ourselves. We can connect all the dots of these applications seamlessly. I always say there's one point I strongly agree with, our competitor Workday on is finance and HR, as an example, need to be integrated. I completely agree with that. So the integration has been weighing heavily on IT budgets. Many of our customers spend five to 10 times the money on integration with system integrators, as compared to what they spend on cloud product- Mm-hmm ... infrastructure and all that stuff. And they don't want to put up with this anymore and say, now that AI comes and I need that kind of one source of truth, and basically, technically at SAP, it's what we call Universal Ledger. It's a huge database where every single transaction with as many flags as you like is- Mm-hmm ... kind of archived, and then you can dive into that to train your models and stuff. They see that concept resonating very well, and it gives us also a [audio distortion] with customers that have been straying away. Mm-hmm ... is basically the platform that offers the ability to integrate. It offers AI to our customers, so not only can we build our own AI scenarios, agents, whatever, on top of that, but our customers can use twenty-plus foundation models from the usual suspects and put the same prompt into it and check what this thing is doing with SAP data and which of the models is working best with that. Mm-hmm. So, I think that resonates very well with customers rather than having to reconstruct everything themselves. And let's not forget it, many of the processes we run are super important for the company, like procure to pay and record to report, but they are not the crown jewels that sets these companies apart. So the beauty is also that they are less, how should I say, opposing the idea of outsourcing that whole machine to somebody who's doing nothing but that and is specialized in that, because their confidence that they can outperform a company like SAP on record to report is not very high, I think. Mm-hmm. Especially the more you move up there, certainly potentially in the IT department, some people think they are smarter than the rest of the world, but there's an economies of scale game, and I think the AI game is becoming more of a winner-takes-it-all game, where the big guys will consolidate more volume. And I'm pretty sure that the spree of smaller companies really eating into our lunch, I think we can turn that around. And we see it in the numbers as we speak, because there are win-backs on that front. We have very detailed analysis every month, where I see exactly with what kind of niche competitor we are crossing swords and how we make progress, and it looks quite promising. Got it. Got it. So maybe touching on sort of business AI at the Sapphire user conference a few months ago, you know, you talked extensively about that. You know, Joule is obviously the kind of front end, but you talked earlier about the data and the value of kind of moving first to the cloud. What are, first of all, the kind of potential opportunities you see from a revenue and a business standpoint before perhaps when we talk about, you know, efficiencies, we can talk about that later? So in the end, the profit pool we can tap into are all these people who are doing stuff day in, day out on our systems, and there are already about 300 million users of SAP. The degree to which they use SAP is, of course, different. And, with AI, we can make these people more productive, and that means that we can take our share in that. I mean, I had just an example very recently where I was frustrated that Joule, our copilot, is not able yet to do it, but by the end of the year, hopefully it will. I had a change in my business assistant, and that person has access to all my authorizations, and it took me, like, 10 minutes to click through the different things and kind of- Mm-hmm ... waive the authorizations of that person and reinstall authorizations of the same nature for the new guy. In the future, I would just talk to Joule and say, "Joule, can you please, delete all the authorization of X and take exactly the same authorization, give them to Y?", and then if everything works, and that's the plan, it will work, I'm pretty sure, Joule will say, "Done.", so it's just an example, and very kind of back-of-the-envelope calculations say that we think with Joule, we can reduce the time people use, stuck with our products, by about 20%, just with the interface. You know, it was not necessarily SAP's forte to have a very, very smooth interface, also because people tended to use very old releases of our software. Mm-hmm. That will radically change. Then we have the whole process mining opportunity, where we install these agents. We measure really literally with Signavio, how much time is sucked away by what process and what companies, and we prioritize them, and then we start automating these away. So that's the second big wave. Also, in coding, there is probably on the planet about one million people coding in ABAP. And yes, there's great copilots for Python and some other languages, but for ABAP, there is not for themselves, because obviously we are the biggest repository of ABAP code on the planet and can train the models themselves. Now, in terms of when does it really get us increments, on, on the top line, it's still in the kind of, embryonic stage. We have a high share of our contracts, where people sign up for some type of what we call premium AI. So it's a kind of, I'd say, one out of five deals, where people already tick the box and say, "Give me a little bit of a premium AI so I can test it." And that's against the backdrop of us having, how many? 60 use cases installed, and not all of them yet- Yeah ... in general availability. And we want to go to a 100+ by end of the year, and all of that in general availability. So we think this will ramp fast. And it has to become meaningful because, if you extrapolate the type of revenue logic, you will see some mid-double-digit billion amount of revenues, in a kind of four or five-year planning horizon. And then if you want to move that meaningfully by one percentage point, it's already €500 million. So we need billions to really move the top line massively. And, we think this has the potential to do that, but it's way too early to quantify and say, "Five years down the road, we want to have exactly that number. Mm-hmm. But the plausi checks in terms of how big the money wasted is today in all these people clicking through SAP software and trying to get stuff transacted, as opposed to just telling the machine what to do, is huge. I mean, if you take three hundred million users and you slam a typical cost base blended for high-cost country, low-cost country, shared service center onto that, the salary increase of these people, the increase in salaries of these people is already six hundred, five hundred, six hundred billion. And if you think about you mitigating part of that- Mm-hmm ... you see that we are not talking about a profit pool that's a rounding error, or take the one million ABAP users, take all the four million or so consultants on the planet who help our customers install SAP and work with SAP. We will also train our expert systems to make them more productive. So when I did the transformation to S/4 at Infineon Technologies, it was a six, seven-year journey. Half of the team of the system integrator, because they were not well trained, so you can upgrade the quality of your resources- Mm-hmm ... massively by putting at the fingertips of these consultants all the knowledge that the black belt- Yeah ... SAP consultant has, and that's the ecosystem that will give us the next leg up. The good news is, for our 2025 ambition, I don't need much of that miracle to happen. It's really more the conversion I described before. This is then the next stage of the rocket, where we want to sustain these ultra-high growth numbers in the cloud- Yeah -uh, rise. Got it. So I guess let's turn to the sort of the efficiency side. It's been about a year and a half, you've been in kind of the role as, as sort of CFO. I'd love to get your perspective, sort of since you've come in, you've made a number of changes. So almost take us back to when you came in... where you sort of saw the opportunities and where we are in terms of some of those different initiatives, whether it's both the, you know, the headcount side, you know, R&D efficiency, sales and marketing. Yeah. First, I want to highlight that I was lucky when I joined one and a half years ago, to find a company where a lot of the heavy lifting, especially in R&D investment, has already been done. Yeah. That's always the big kind of cat in the bag you don't know when you arrive. So that, that was good. But the good news is there was still a lot of opportunities on efficiency. And the good news is also, I have a CEO who's super keen on driving efficiencies, so we, we really like doing that stuff. And I think everyone in our company understands that our catch-up investment spree from 2020 to 2025, to move the company to the cloud, is not something we can sustain forever. Because what it means is that we invested more. Our growth actually was still growing faster than the top line. That's not a sustainable model. Yes. If you wanna, we can always argue that it was a special period. We had to play catch up, so it was very expensive, but now we come to this period where heavy lifting has been done, and yes, there's AI, we need to invest again, but we also need to show results for productivity, and we need to demonstrate to our customers that we can bring productivity to their operations, and if we don't implement that in our own shop, there's no point in them trying. Yeah ... to convince them that they can do it with SAP. So the good news is, there's a strong case everyone in the company understands, and now it's about really turning every stone to figure out where are these opportunities. And this is a project that we started a long time ago, actually, I'd say early last year, when I joined, it was already on the way, and then we pushed the accelerator in the summer of last year, to come up with a very detailed, granular plan as to how we can do two things. First, catch up on the huge margin gap we had compared to the other competitors we look at. And then secondly, make sure that this margin gap is not once it's kind of closed, it's not opening up again, but that we grow the cost base more slowly than the revenue base. So we analyzed our competition in the cloud space, and we've seen that on average, they grow their cost base between 80% and 90% of the revenues. And it's interesting, if you triangulate, there's some who do it even better, like Microsoft, is even more scalable, but they also have, I'd say, a more standardized product portfolio than we have, less bespoke. And so basically you have almost, from my perspective, a logic of value creation. You have some companies who are extremely non-scalable. I call them body leasing companies, where everything is bespoke, every single customer is different. And then you have product companies like ourselves, but still some customization, and then you have the pure, off-the-shelf, standardized product. And we think that's a reasonable ratio to shoot for. So we wanted to achieve two things: We play catch up, and then we make sure that the margin is improving because we grow cost more slowly than the top line. Mm-hmm. We have an extremely comprehensive bottom-up program touching all areas of the company, driving also some waste out of the company. Sometimes SAP was also quite leveraged in terms of how we behaved, and some external consultants that used extensively and high-cost stuff. I could now go into details if you're interested. The sales transformation is one of them. Yes. Most important one, because we are not happy with the amount of money we put on the table and the resulting cash out, for every single Euro of net new. I would argue that if you have an installed customer, we convert, that gives us revenues, but it's not the same sales effort than really winning net new customers. And our machine of creating net new is not really perfect yet, to put it mildly. And this is now happening in the second half of the year, so our intention is really to bring the selling expenses to revenues or selling expenses, in particular, to net new up by changing the way we go to market. To put it very simplistically, we had bought all these lines of businesses, we had some experts here and there, and we had many people running around the customer, but then sometimes missing the kind of enterprise architecture thinking to really be a trusted advisor to the CIO, and then these people were all kind of in their silos and trying to optimize their own revenues, as opposed to giving the big picture to the customer, so these things all have to change, and it's really no rocket science because it's intuitively right to do. It's what the best competitors do, and we just have to get it implemented, and this is now happening as we speak, so we'll have less people in front of the customers, but they might need to be more qualified than what we had in the past. And that reskilling is also part of it. And this is why if you talk about 9,000-10,000 people leaving the company, and then you look at the kind of, in total, now EUR 700 million increase in profitability- Mm-hmm ... you say, "That's not a lot. I mean, if you just take these people out- Yeah ... you should save much more." The topic is we are reinvesting heavily also in the new resources we need to reconfigure the business model to that more scalable- Yeah ... model I was describing before. You're not worried that, you know, when software companies sort of make changes within the sales and go to market, because obviously you've got the kind of momentum of the product cycle, that doesn't create any sort of air pocket? Of course, it is a risk, but the good news is we do it now in a situation where the heavy lifting of our revenue growth in the cloud is done by the large enterprise conversions. Yeah. I think we are pretty much starting to see that S-curve inflecting, giving us momentum, and if you think about a huge enterprise like ExxonMobil and SAP, the question whether this deal will be signed or not is not in the hand of one rainmaker. This is an institutional- Yeah ... project where the highest strengths of both companies are fully focused on. Yes, if there's one departure or one salesperson is not so happy because he might get rewarded differently, it's not stopping the discussion. I think we are exactly in that situation where we can surf a little bit on that wave now for a while, but we also need to be perfect when it's coming to public cloud, net new. Now is the time to change that, because you have to front-load that effort- Yeah. so that when, at some point in time, that wave is kind of slowing down, the next leg up Yeah ... is really fully operational, no dysfunctional elements in there, fully cloud, not kind of a little bit of a mix of the old on-prem, which we still have with large enterprise. Yeah. So we have to really use that window of opportunity to transform. Yeah. So I want to touch on another subject very dear to your heart, which is cash flow. And, you know, compared to sort of the SAP of the past, we've started to see that improve. But I think you've outlined a number of levers where there's certainly room to get better. Yeah. You obviously took on some restructuring charges because of some of the headcount adjustment, but you seem to be absorbing that. Maybe walk us through the kind of levers you see- Yeah ... both shorter term, but also longer term. I mean, our competitors tend to be pretty efficient in terms of growing without absorbing much capital or even generating capital. Yeah. And some of our key KPIs impacting working capital are not where the competition is. I'll give you one example. I find it amazing, coming out of other industries, that when you move from on-prem to cloud, your sales force is still compensated on the day you sign. Because while on-prem, the lion's share of the cash is coming in with a license, and then, of course, maintenance over time. In the cloud business, you have a ramping subscription. But by the way, I'm told it's not only an SAP-specific thing. Many competitors do that, too, and I find it kind of unhealthy because it sounds a little bit like the two thousand and eight structured credit crisis, where some bankers took the up-front of a deal, got their bonuses, and could walk. It's just one of the examples where you say: "Look, is it really right, and, and how can we change that?" Let's go in the math, much more interesting math. We announced that outlook EUR 3.5 billion this year. Yeah. If you look at the cash out for restructuring, it's probably somewhere EUR 2.5 billion-ish. And then there's a couple of hundred million for compliance fines to be paid. There's a couple of hundred million of the same as factoring stuff we are going to discontinue. And we had one last quarter where stock-based compensation was still fully settled in cash, and actually, share price has been really going well. So I would argue that, kind of, even if the share price would continue to go well, we would not have the same impact on free cash flow as a headwind. So there is really a EUR 6.5 billion depolluted underlying free cash flow already there in 2024. And then, if you look at the guided increase in operating profit and you slam the tax rate on that, this is where you anyhow add up. And yes, there is a EUR 500 m illion-ish spillover from restructuring into next year. Mm-hmm. But there's also a 500 million-ish relief from the switch of cash-settled to equity-settled stock-based compensation, so that is blowing it off. And that means that adjusted for the restructuring, the business model is then really more EUR 8.5 billion free cash flow underlying. And that's a high number, right? Conversion number. It's only so high because it's very much also benefiting from the equity-settled stock- Yeah ...-based comp, where, of course, we are acutely aware that we need to repurchase these shares, and that means it's not really strong cash performance. So that tailwind will, as a% of revenues, as we want to keep stock-based compensation, and we don't want to grow it the same way we grow revenues for many reasons, I'm. I can go into details on. That means as% of revenues, the delta between P&L and cash on the stock-based compensation will shrink. Yes. I need to improve my working capital to compensate that. The way I think about the evolution of cash conversion from 2025 is we have actually a pretty good cash conversion in 2025, and don't anticipate that. While we're saying margin will expand because- Yeah ... we are growing the cost base more slowly than the revenue base. I don't see that happening for cash conversion, as the tailwind from stock-based comp will be diluted over time. So, but the good news is, I don't need any miracles on working capital to hit my 2025 free cash flow target. Yeah. So, so I need these measures. We're currently working on modifying these, and that's often a negotiation topic, be it with employees, be it with, customers, suppliers- Mm-hmm ... which takes some time. So come 2025, and then 2026, I want to start spinning the flywheel on getting to a more competitive working capital management- Yes ... so that we can grow the company efficiently and not suck capital in growth, and make it competitive on that front, too. Got it. So as that sort of flywheel on free cash flow improves, I mean, we've seen a lot more discipline on the kind of use of cash from SAP. I think you've sort of brought in more of the share buybacks into the mix. You know, as we sort of go past some of these restructuring charges, how should we think of, kind of, the use of cash? I know we've seen some bolt-on acquisitions, but is that, So honestly, the best way to deploy capital is organic growth. I'm convinced. I've yet to see the kind of two-year payback M&A project of scale in my life. I mean, I've been an M&A banker for years, and then a CFO for years, and typical M&A project is, "Oh, this is strategic, 10-year payback period," and so forth. So organic growth is, of course, my favorite. Now, if we are successful, and that's we do everything we can to be, we won't absorb much cash in growth. So then it's about M&A, tuck-in M&A. I hope you could follow the logic of what we've done with Signavio, LeanIX, and WalkMe. If not, I would love to point you to our presentation we have done on Sapphire, on the transformation suite, and I think we need to spend more time also with investors on that, because it's a crucial differentiator, to make our customers' lives easier and, make the adoption of the software better and, be much more surgical, numbers-driven on these transformation journeys. Anything else? The good news is we have organic growth in spades, so we can be super disciplined. We can sharpen the pencil, and the deal has to work mathematically, financially. We are not pressurized to do desperate things. Now, if we don't absorb a lot of capital in M&A, yeah, of course, the most logical solution is repurchases, as we have started to do them, also at more scale. On the other hand, don't expect us to see our ratings fade down to the type of levels some of our competitors have. Basically, every meeting I have with a customer which has a good rating, I ask the customer, "Dear customer, dear single A customer, how can you put your nervous system to a company that has worse rating than you have? Mm-hmm. Isn't that kind of a single source of failure risk for you?" So I think we are such an instrumental piece of our customers' operations, that they value that high-rating quality. Yeah. And the key for me is to get a good rating, not by having a fat, lazy balance sheet, but to do that with higher cash generation. So cash generation also gives you debt capacity, of course, and this is what we are working on. And if we achieve that, then, of course, also we can be a little bit more aggressive on capital structure. And then, so there is, of course, on top of the accelerating growth through 2027, which we committed to, the under proportionate cost growth, the cash conversion that we think we can maintain at levels similar to 2025. Mm-hmm. There is, of course, an earnings per share game on share outstanding and the cash we can redeploy. So we will play that card too, and make-- But we are not going to go down on rating, because we think our rating is a competitive weapon, actually. Yeah. I know the sort of, you know, focusing on the U.S. investors has also been a focus for the company. Is there any kind of message you want to leave in closing around the SAP story? No. I mean, I'm very pleased with the traction we are also gaining on this side of the pond. We have seen some big names coming in, and I thoroughly enjoy it. I'm sitting also down one-on-one. Unfortunately, today we don't have much time for one-on-ones, but... and I mean, without any doubt, the U.S. investor base is the biggest, with the deepest pockets and with the deepest knowledge of our space. So, I'm surprised anyone is surprised that I'm spending more time here than I'm spending with European investors. Frankly, we have a huge penetration already. Yeah. I mean, we have a very limited set of companies to invest in, in high tech in Europe, and I think within the software universe, I feel reasonably comfortable that we don't need to do much marketing to be sold in Europe. But I know you guys have a choice here in the U.S. in terms of other names being highly attractive, and so you will see us present and trying to fight for that share of mind. It's very natural. Great. Well, Dominik, thank you for your time and insights. That was great. Thank you very much.