sap capital markets day© 2018 sap se or an sap affiliate company. all rights reserved. 2 agenda...
TRANSCRIPT
SAP Capital Markets Day
March 6, 2018
2© 2018 SAP SE or an SAP affiliate company. All rights reserved.
Agenda01:00 – 01:05 pm Welcome
Stefan Gruber, Head of Investor Relations
01:05 – 01:35 pm Strategy and Vision: Opportunity in Time of Disruption Bill McDermott, CEO Moderated by Nick Tzitzon, EVP Marketing and Communications
01:35 – 02:20 pm Delivering the Intelligent Enterprise Bernd Leukert, Executive Board Member including update on SAP S/4HANA Cloud by Franck Cohen, President Cloud ERP and demo by Franz Faerber, EVP Products & Innovation Big Data
02:20 – 02:40 pm Break
02:40 – 03:15 pm Customer Perspective Hosted by Jennifer Morgan, Executive Board Member Mike Heim, CIO, Whirlpool Jeff Mueller, CIO, Pregis Todd Thompson, CIO, doTERRA
03:15 – 03:45 pm Highly Attractive Business Model – Growing Predictability and Profitability Luka Mucic, CFO
03:45 – 04:30 pm Q&A Bill McDermott, Christian Klein, Bernd Leukert, Jennifer Morgan, Luka Mucic
04:30 – 05:30 pm Reception with SAP Executives
3© 2018 SAP SE or an SAP affiliate company. All rights reserved.
Cautionary Statement Regarding Forward-Looking Statements
Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as
“anticipate”, “believe”, “estimate”, “expect”, “forecast”, “intend”, “may”, “plan”, “project”, “predict”, “should” and “‘will” and similar expressions as they relate to SAP or Callidus Software Inc. (the
“Company”) are intended to identify such forward-looking statements. This release contains forward-looking statements that involve risks and uncertainties concerning the parties’ ability to close the
transaction and the expected closing date of the transaction, the anticipated benefits and synergies of the proposed transaction, anticipated future combined operations, products and services, and the
anticipated role of the Company, its key executives and its employees within SAP following the closing of the transaction. Actual events or results may differ materially from those described in this
release due to a number of risks and uncertainties. These potential risks and uncertainties include, among others, the outcome of regulatory reviews of the proposed transaction, the ability of the
parties to complete the transaction, the failure to retain key employees of the Company, customer and partner uncertainty regarding the anticipated benefits of the transaction, the failure of SAP and the
Company to achieve the anticipated synergies of the proposed transaction and other risks detailed in SAP’s and the Company’s SEC filings, including those discussed in SAP’s Annual Report on Form
20-F for the year ended December 31, 2017 and the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, each of which is on file with the SEC and available at the SEC’s
website at www.sec.gov. SAP is not obligated to update these forward-looking statements to reflect events or circumstances after the date of this document. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of their dates.
Additional Information About the Merger
In connection with the proposed merger, the Company filed a definitive proxy statement with the SEC on February 22, 2018. The definitive proxy statement has been mailed to the Company’s
stockholders. THE COMPANY’S STOCKHOLDERS ARE URGED TO CAREFULLY READ THE DEFINITIVE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS
THERETO) AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT
BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED MERGER BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED MERGER AND THE PARTIES TO THE MERGER. Investors and security holders may obtain free copies of the definitive proxy statement and other related documents filed with the SEC
at the SEC’s website at www.sec.gov. In addition, investors and security holders can obtain free copies of the definitive proxy statement from the Company by contacting Investor Relations through the
investor contact page on the Company’s website at http://investor.calliduscloud.com/about-us/investor-relations/investor-faq/.
SAP, the Company and their respective directors, executive officers and other members of their management and employees, under SEC rules, may be deemed to be participants in the solicitation of
proxies of the Company’s stockholders in connection with the proposed merger. Investors and security holders may obtain more detailed information regarding the names, affiliations and interests of
certain of SAP’s executive officers and directors in the solicitation by reading SAP’s most recent Annual Report on Form 20-F, the definitive proxy statement and other relevant materials filed with the
SEC. Information concerning the interests of the Company’s participants in the solicitation, which may, in some cases, be different than those of the Company’s stockholders generally, are set forth in
the definitive proxy statement.
Safe Harbor Statement
Strategy and VisionOpportunity in Time of Disruption
Bill McDermott, CEO
5© 2018 SAP SE or an SAP affiliate company. All rights reserved.
Eight years of significant, sustainable, profitable growth
Driven by strong customer, employee and brand engagement
2009 2017
* Interbrand Ranking. All numbers are non-IFRS unless otherwise stated.
Cloudrevenue
(€)
Totalrevenue
(€)
Operatingprofit
(€)
Marketcap(€)
Cloudusers
EmployeeEngagement
Brandrank
2009 2017 2009 2017 2009 2017 2009 2017 2009 2017 2009 2017 2009 2017
<0.1bn
3.8bn
10.7bn
23.5bn
2.9bn
6.8bn
41bn
115bn
10k
~150m
69
85
#27
#21
>40x
>2.2x>2.3x >2.8x
15,000x
+16pp∆6
6© 2018 SAP SE or an SAP affiliate company. All rights reserved.
SAP Vision for an Intelligent Enterprise
7© 2018 SAP SE or an SAP affiliate company. All rights reserved.
SAP helps the world run better and improves people’s lives
11th year in a row!Most Sustainable
Software Company
Achieved goal of
25%women in
management
Delivering the Intelligent EnterpriseSAP Product Portfolio and Strategy
Bernd Leukert, Executive Board MemberProducts & Innovation
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 9
Winning in the Cloud
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 10
Breakthrough Innovation
Around the Digital Core
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 11
SAP S/4HANA Recognized
Market Leadership
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 12
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 13
SAP S/4HANA Cloud Scope
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 14
Winning in the Cloud
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 15
Innovation Across the Business
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 16
Innovation Across the Business
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 17
Innovation Across the Business
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 18
Innovation Across the Business
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 19
Winning in the Cloud
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 20
SAP HANA Data Management Suite
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 21
Intelligent Enterprise Enablers
Intelligent Processes | Intelligent Experiences | Intelligent Analytics
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 22
Experience
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 23
SAP Vision for an Intelligent Enterprise
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 24
SAP Cloud Platform
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 25
SAP Leonardo Digital Innovation System
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 26
Focus on Higher Value Tasks
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 27
SAP Multicloud: 3 Strategies to Win
CLOUD
Customer Perspective
Jennifer Morgan, Executive Board MemberGlobal Customer Operations Americas & APJ
29© 2018 SAP SE or an SAP affiliate company. All rights reserved.
Customer perspective
Todd Thompson
Chief Information Officer
Mike Heim
Chief Information Officer
Jeff Mueller
Chief Information Officer
Jeff Mueller
Highly Attractive Business ModelGrowing Predictability and Profitability
Luka Mucic, CFO
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 31
Superior organic growth rates throughout cloud transition
Expansion of portfolio and shift to cloud increase SAP’s share of wallet
2015
2.3
2017
8.0 – 8.5
CAGR
+29%
3.8
CAGR
+30%
23.5
2017
CAGR
+7%28.0 – 29.0
CAGR
+7%
20.8
2015 2015
6.36.8
8.5 – 9.0
CAGR
+9%
CAGR
+4%
2017
Cloud Subscription Revenue(€bn)
Total Revenue(€bn)
Operating Profit(€bn)
All figures based on Non-IFRS and do not reflect contributions from the contemplated acquisition of Callidus. Historical growth rates have been
adjusted for currency effects. 20/17 CAGRS based on midpoint of the SAP 2020 Financial Ambition as published on January 30, 2018.
2020(ambition)
2020(ambition)
2020(ambition)
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 32
Cloud (€bn)
2.3
3.0
3.8
2015 2016 2020(ambition)
2017 2018(outlook)
4.8 – 5.0
8.0 – 8.5
CAGR
~+29%(w/o large
acquisitions)Software (€bn)
All figures based on Non-IFRS and do not reflect contributions from the contemplated acquisition of Callidus. The CAGR is based on the midpoint of the SAP 2020 Financial Ambition as
published on January 30, 2018. ‘Cloud’ refers to cloud subscriptions and support revenue. ‘Software’ refers to software license revenue.
Cloud transition continues at full momentum
Fast growing cloud eclipses software to dominate future business mix
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 33
Share of more predictable revenue increases
Delivering a much more resilient and sustainable business model
37%
Other 63%
More
predictable
Total Revenue
€23.5bn
70 –75%More
predictable
25 –
30%Other
Total Revenue
€28 – 29bn
2020ambition
+7 to +12pp
2017reported
All figures based on Non-IFRS. ‘More predictable revenue’ refers to the sum of cloud subscriptions and support revenue and software support revenue as a percentage of total revenue.
34© 2018 SAP SE or an SAP affiliate company. All rights reserved.
Overall Cloud
Business Network
Public Cloud
Private Cloud
Cloud gross margins inflect upwardsHigh gross margin network and public cloud expected ~90% of mix in 2020
2020ambition2017
reported
84%16%
Cloud
49%
43%
9%
Total Revenue
€23.5bnOther
71%Other
29%Cloud
Total Revenue
€28 – 29bn
~40%
Business
Network
~50%
Public
Cloud
~10%
Private
Cloud
Gross
Margins 2017 2020e
62%
71%
77%
>80%
57%
70%
6%
40%
All figures based on Non-IFRS. ‘Cloud’ refers to cloud subscriptions and support revenue.
35© 2018 SAP SE or an SAP affiliate company. All rights reserved.
Increased transparency in our segment reportingBusiness development by delivery model
Non-IFRS; in percent FY/17 FY/20e
Cloud Subscriptions & Support 62.2 71.0
Business Network
Private Cloud (IaaS)
Public Cloud (PaaS/SaaS)
76.7
5.7
57.0
>80.0
40.0
70.0
Software & Support 87.0 87.5
Cloud & Software 82.2
Services 23.5 23.5
Total Gross Margin 72.5
Gross margins
▪ Strong improvement of the cloud margin
▪ Slight improvement of the SW & support margin
▪ Services margin to remain at current levels
Cost ratios
▪ R&D to remain at current levels
▪ S&M to decline slightly
▪ G&A to decline slightly
All figures based on Non-IFRS. Cost ratios expressed as % of total revenue.
36© 2018 SAP SE or an SAP affiliate company. All rights reserved.
Reaping the benefits of platform investment and scale in the cloud
Expanding gross margins and operating leverage
2015 2016 2017 2018(based on midpoint
of outlook)
30.5%
(-1.5pp cc) 30.1%
(-0.8pp cc)28.9%
(-0.9pp cc)
29.8% cc
(+0.9pp cc)
All figures based on Non-IFRS. Stated percentage point deltas exclude exchange rate effects. 2018 outlook includes effects from the application of
IFRS 15 (total revenue: substantially less than +€0.1bn; operating profit: approximately +€0.2bn).
Operating
Margin
Early stage cloud transition margin
headwind > efficiency gains
▪ Upfront investments in modernizing and
harmonizing acquired cloud infrastructures
▪ Mix shift effects from cloud transition
▪ Efficiency gains in software and support
Entering margin expansion phase
▪ Scaling cloud + platform migration
▪ New high potential cloud solutions exit start-up phase, ramp margins
▪ S&M leverage: declining cost of new business acquisition [2017 total
order entry +17%, S&M +9%] + ever higher recurring & transactional
revenue base
▪ R&D leverage: single code base, away from “any DB”
2020(based on midpoint
of outlook)
30.7%
(+0.9pp)
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 37
Beyond 2018, strong operating cash flow growth and moderating CapExdrive free cash flow
Operating cash flow (€bn)
▪ Operating cash flow driven by strong overall
business growth
▪ Tracks higher profitability
▪ Supports increased dividend payout ratio,
now raised to at least 40% of profit after tax
CapEx development (€bn)
▪ Higher CapEx in 2015-18 driven by platform
migration, new data centers and expanded HQ
space
▪ Quickly moderating CapEx growth beyond 2018
▪ Partnering with hyperscale cloud providers lowers
future CapEx investment needs
(1) projected
2015 20182016 2017 2019
0.64bn
1.0bn
<1.6bn(1)
3.6
5.0
20202015 2017
1.3bn
© 2018 SAP SE or an SAP affiliate company. All rights reserved. 38
▪ Cloud Subscription Revenue
€4.8 – 5.0bn,
up 27% to 33%
▪ Cloud and Software
Revenue €20.7 – 21.1bn,
up 6% to 8%
▪ Total Revenue
€24.6 – 25.1bn,
up 5% to 7%
▪ Operating Profit
€7.3 – 7.5bn,
up 8% to 11%
▪ Cloud Subscription Revenue
€8.0 – 8.5bn
▪ Total Revenue
€28.0 – 29.0bn
▪ Operating Profit
€8.5 – 9.0bn
▪ Share of more predictable
revenue 70% to 75%
▪ Cloud Subscription Revenue
€3.77bn
▪ Cloud and Software Revenue
€19.55bn
▪ Total Revenue
€23.46bn
▪ Operating Profit
€6.77bn
2018 outlook and long term ambitions
Fast cloud growth, robust overall topline and higher profitability
Non-IFRS; *Non-IFRS at constant currencies. Outlook 2018 and ambition 2020 do not include any contribution from Callidus.
2017 2018outlook*
2020ambition
Beyond 2020
▪ Fast growing cloud business
increasingly dominates
business mix
▪ Cloud scale, ever higher
recurring base lead to
consistent expansion of
operating margin
39© 2018 SAP SE or an SAP affiliate company. All rights reserved.
▪ SAP is perfectly positioned to address a massive and rapidly
growing market opportunity – enabling digital transformation for
companies to thrive in the digital age.
▪ Our leading innovation is powering organic growth which is
outpacing our key competitors.
▪ We deliver all of this through a much more predictable, resilient and
sustainable business model.
▪ We have already made the key investments and now expect to
reap the benefits with strong growth, increasing profitability and
cash-flow through 2020 and beyond.
Strong growth, increasing predictability and
profitability through 2020 and beyond
Q&A
Bill McDermott, CEOChristian Klein, Global Business OperationsBernd Leukert, Products & InnovationJennifer Morgan, Global Customer Operations Americas & APJLuka Mucic, CFO
SAP Capital Markets Day
March 6, 2018