SAP : 2022 Q3 Quarterly Statement

SAP Quarterly Statement Q3 2022

SAP Announces Q3 2022 Results

• Cloud momentum continues to accelerate
• Cloud revenue up 38% and up 25% at constant currencies
• Current cloud backlog up 38% and up 26% at constant currencies
• SAP S/4HANA current cloud backlog up 108% and up 90% at constant currencies
• IFRS cloud gross profit up 44%, non-IFRS cloud gross profit up 42% and up 30% at constant currencies
• IFRS operating profit down 1%, non-IFRS operating profit flat and down 8% at constant currencies

in € millions, unless otherwise stated

Total revenue	Cloud & Software
	revenue

7,841	6,710
	+15% (+5% @cc)	+14% (+5% @cc)

Share of more predictable revenue

80%

+4pp

Gross profit	Cloud gross profit
(Gross margin in %)	(Cloud gross margin in %)
IFRS	IFRS
5,575 (71.1%)	2,294 (69.8%)
+14%	+44%
Non-IFRS	Non-IFRS
5,747 (73.3%)	2,357 (71.7%)
+14% (+5% @cc)	+42% (+30% @cc)

Christian Klein, CEO: "Our cloud solutions are the answer, as customers turn to us to help them future-proof their businesses. This trust in SAP is reflected in our accelerating cloud momentum. With a recurring revenue share of more than 80%, it's clear that our transformation has reached an important inflection point, paving the way for continued growth in the future."

Cloud revenue	S/4HANA cloud
	revenue

3,288		546
	+38% (+25% @cc)	+98% (+81% @cc)
Current cloud	S/4HANA current
backlog	cloud backlog
11,267		2,662
	+38% (+26% @cc)	+108% (+90% @cc)
Operating profit	Earnings per Share
			(in €)
IFRS	IFRS basic
1,239		0.57
	-1%	-52%
Non-IFRS	IFRS diluted	Non-IFRS basic
2,094		0.57	1.12
	0% (-8% @cc)	-52%	-36%

Luka Mucic, CFO: "We have delivered a

strong cloud quarter with accelerating momentum across all key cloud indicators. We're at an important inflection point in our transformation which we anticipate will lead to accelerating revenue growth and double-digit operating profit growth in 2023."

SAP Quarterly Statement Q3 2022

Walldorf, Germany - October 25, 2022.

SAP SE (NYSE: SAP) today announced its financial results for the third quarter ended September 30, 2022.

Financial Performance

Group results at a glance - Third quarter 2022

			IFRS
€ million, unless otherwise stated	Q3 2022	Q3 2021	∆ in %
Cloud revenue	3,288	2,386	38
Software licenses	406	657	-38
Software support	3,016	2,867	5
Software licenses and support revenue	3,422	3,524	-3
Cloud and software revenue	6,710	5,910	14
Total revenue	7,841	6,845	15
Share of more predictable revenue (in %)	80	77	4pp
Operating profit (loss)	1,239	1,249	-1
Profit (loss) after tax	547	1,418	-61
Earnings per share - Basic (in €)	0.57	1.19	-52
Earnings per share - Diluted (in €)	0.57	1.19	-52
Net cash flows from operating activities	849	1,183	-28
Free cash flow
Number of employees (FTE, September 30)	112,632	105,015	7

				Non-IFRS1
				∆ in %
	Q3 2022	Q3 2021	∆ in %	const.
				curr.
	3,288	2,386	38	25
	406	657	-38	-42
	3,016	2,867	5	-2
	3,422	3,524	-3	-9
	6,710	5,910	14	5
	7,841	6,845	15	5
	80	77	4pp
	2,094	2,102	0	-8
	1,263	2,129	-41
	1.12	1.74	-36
	464	881	-47

1 For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement. Due to rounding, numbers may not add up precisely.

Group results at a glance - Nine months ended September 2022

IFRS

Non-IFRS1

€ million, unless otherwise stated	Q1-Q3	Q1-Q3	∆ in %
2022	2021
Cloud revenue	9,164	6,806	35
Software licenses	1,149	1,790	-36
Software support	8,916	8,491	5
Software licenses and support revenue	10,065	10,281	-2
Cloud and software revenue	19,229	17,088	13
Total revenue	22,435	19,861	13
Share of more predictable revenue (in %)	81	77	4pp
Operating profit (loss)	2,965	3,193	-7
Profit (loss) after tax	1,382	3,936	-65
Earnings per share - Basic (in €)	1.49	3.22	-54
Earnings per share - Diluted (in €)	1.48	3.22	-54
Net cash flows from operating activities	3,598	4,954	-27
Free cash flow
Number of employees (FTE, September 30)	112,632	105,015	7

	Q1-Q3		Q1-Q3		∆ in %
		∆ in %	const.
2022	2021
	curr.
	9,164		6,806	35	25
	1,149	1,790	-36	-39
	8,916	8,491	5	0
	10,065	10,281	-2	-7
	19,229	17,088	13	6
	22,435	19,861	13	6
	81	77	4pp
	5,452	5,762	-5	-10
	3,522	6,063	-42
	3.08	4.88	-37
	2,543	4,132	-38

1 For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement. Due to rounding, numbers may not add up precisely

2/31

SAP Quarterly Statement Q3 2022

Financial Highlights

Current cloud backlog continued to build momentum and expanded to €11.27 billion, accelerating growth to 38% and 26% at constant currencies.

Driven by double-digit growth across the SaaS and PaaS portfolio, cloud revenue was up 38% to €3.29 billion, up 25% at constant currencies.

Cloud gross profit was up 44% (IFRS), 42% (non-IFRS) and 30% (non-IFRS at constant currencies). Year-over-year, cloud gross margin was up 2.8 percentage points to 69.8% (IFRS) and up 2.3 percentage points to 71.7% (non-IFRS). This was mainly driven by a strong increase of the SaaS margin, with efficiency gains overcompensating increased investments into the next generation cloud delivery program.

IFRS operating profit decreased 1% to €1.24 billion and IFRS operating margin decreased by 2.4 percentage points to 15.8%. Non-IFRS operating profit was flat at €2.09 billion and decreased 8% at constant currencies. Non-IFRS operating margin decreased by 4.0 percentage points to 26.7% and was down by 3.8 percentage points at constant currencies. As in previous quarters, this was mainly driven by a reduced contribution from software licenses revenue as well as accelerated investments into research & development and sales & marketing to capture current and future growth opportunities. In addition, prior year third quarter IFRS and non-IFRS operating profit included a disposal gain of €77 million related to the launch of SAP Fioneer.

IFRS earnings per share decreased 52% to €0.57 and non-IFRS earnings per share decreased 36% to €1.12. The year-over- year decline of earnings per share reflects a contribution to financial income by Sapphire Ventures that, due to current market conditions, was significantly lower than in the same period last year. Effective tax rate was 35.7% (IFRS) and 26.0% (non-IFRS). The year-over-year increase mainly resulted from changes in tax exempt income related to Sapphire Ventures.

Free cash flow for the first nine months was down 38% to €2.54 billion. The decrease versus last year is mainly attributable to the development of profitability and adverse impacts in working capital. In the fourth quarter, we continue to expect a more favorable cash flow development due to a focus on working capital management and lower payouts for cash taxes, share-based compensation, and capex. However, based on our year-to-date position, we are adjusting the free cash flow outlook for the year to approximately €4.5 billion (previously: "above €4.5 billion").

On July 21, SAP announced its second share buyback program for 2022, which was completed on September 6. Under the program, SAP repurchased 5,715,512 shares at an average price of €87.50 with a purchase value of approximately €500 million. Repurchased shares will primarily be used to service awards granted under share-based compensation plans for employees.

Impact of War in Ukraine

In the first nine months, SAP's business was impacted by the war in Ukraine and SAP's decision to wind down its business operations in Russia and Belarus.

At the end of the third quarter current cloud backlog was approximately €64 million lower due to the termination of existing cloud engagements in Russia and Belarus, reducing current cloud backlog growth by approximately 1 percentage point at constant currencies. The impact on third quarter IFRS operating profit was approximately €20 million (first nine months: approximately €370 million) and approximately €20 million (first nine months: approximately €250 million) on non-IFRS operating profit, mainly due to reduced revenues.

For the full year, we expect a total revenue impact of approximately €250 million at constant currencies from lack of new business and discontinuation of existing business. For non-IFRS operating profit we expect an impact of approximately €300 million at constant currencies from the revenue gaps mentioned above and other expense items.

Other impacts due to this evolving situation are currently unknown and could potentially subject our business to materially adverse consequences should the situation escalate beyond its current scope.

3/31

SAP Quarterly Statement Q3 2022

Business Highlights

In the third quarter, customers around the globe chose "RISE with SAP" to drive end-to-end business transformation, including Alpargatas, Assaí Atacadista, Center for Pandemic Vaccines and Therapeutics (ZEPAI) at the Paul-Ehrlich- Institut, Dabur India Limited, Fonterra, HELLENiQ ENERGY, Nikon Corporation, Prada, RICOH CO., Roborock, Salzburg AG, Schneider Electric, Wistron Corporation and 11teamsports. BioNTech, Birlasoft, Bosch BASF Smart Farming, Dufry International, NBA, Petrobras and Wipro went live on SAP S/4HANA Cloud in the third quarter.

Key customer wins across SAP's solution portfolio included: Allianz Technology, Cognizant, DB Schenker, Domino's PizzaEnterprises, Endress+Hauser, Fujitsu Limited, Grupo Energía Bogotá, Gustavo Gusto, Hapag-Lloyd,L.L.Bean, Salzgitter, Schiphol Nederland, Siemens Energy, The Pennsylvania State University, The State of Missouri, Trent Limited and Valio.

SAP's cloud revenue performance for the quarter was very strong across all regions. The U.S. and Germany had an outstanding cloud revenue performance while Brazil, China, India and Switzerland were particularly strong.

On July 21, SAP announced that it has acquired Askdata, a startup focused on search-driven analytics. With the acquisition of Askdata, SAP strengthens its ability to help organizations take better-informed decisions by leveraging AI- driven natural language searches.

On August 17, SAP and Francisco Partners (FP) announced that FP has signed a definitive agreement with SAP America Inc. under which FP will acquire SAP Litmos from SAP. The transaction is expected to close in the fourth quarter of 2022 and is subject to customary regulatory clearances.

On August 31, SAP announced that the SAP Supervisory Board has appointed Dominik Asam as CFO and member of theExecutive Board of SAP SE. He will start on March 7, 2023. Currently he is the CFO and a member of the Executive Committee at Airbus. He will succeed Luka Mucic, who will remain a member of the Executive Board until March 31, 2023.

On September 13, SAP announced that SAP SuccessFactors unveiled new modules for its Human Experience Management (HXM) Suite to create a powerful way for organizations to execute on an integrated talent development strategy and create a future-ready workforce. The new capabilities are the most significant developments that SuccessFactors has had in the last decade.

On October 20, Taulia and Standard Chartered Bank signed a partner agreement to collaborate across a range of workingcapital finance solutions primarily in APJ and emerging markets. Further to this, Taulia has signed an agreement with Mastercard to provide embedded payment capabilities by integrating with the Mastercard Virtual Card platform which facilitates access to multiple global banks to fund the Taulia/Mastercard Virtual Card solution.

Among other accolades, in the third quarter SAP was:

• named a Leader in 2022 Gartner® Magic Quadrant™ for Digital Commerce1
• recognized as a Leader in 2022 Gartner® Magic Quadrant™ for Data Integration Tools
• named a leader in The Forrester Wave™: Digital Operations Platforms for Manufacturing and Distribution and
• SAP SuccessFactors was named a Leader in IDC MarketScape: for Worldwide Modern Talent Acquisition Suites 2022 Vendor Assessment

1 Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. SAP is not responsible for the content of third-party research reports.

4/31

SAP Quarterly Statement Q3 2022

Segment Results at a Glance

SAP's two reportable segments showed the following performance:

Applications, Technology & Services1			Q3 2022				Q1-Q3 2022
€ million, unless otherwise stated	Actual		∆ in %	Actual			∆ in %
∆ in %	Constant		∆ in %	Constant
(Non-IFRS)	Currency	Currency
	Currency			Currency
SaaS2	2,037	37	24	5,658		32	23
PaaS3	389	53	42	1,064	50	41
IaaS4	252	5	-3	751	10	3
Cloud revenue	2,678	35	23	7,474	32	23
Segment revenue	7,160	12	4	20,558	11	4
Segment profit (loss)	2,268	-4	-10	6,080		-8	-12
SaaS2 (in %)	70.7	3.2pp	3.5pp	69.5		2.0pp	2.1pp
PaaS3 (in %)	77.4	-1.4pp	0.6pp	78.3		-1.6pp	-0.1pp
IaaS4 (in %)	21.0	-12.7pp	-7.3pp	26.0		-8.1pp	-4.6pp
Cloud gross margin (in %)	67.0	2.2pp	3.2pp	66.4		1.3pp	2.0pp
Segment margin (in %)	31.7	-5.2pp	-4.7pp	29.6		-6.0pp	-5.6pp

1. Segment information for comparative prior periods were restated to conform with the new segment composition.
2. Software as a service
3. Platform as a service
4. Infrastructure as a service

Segment revenue in AT&S was up 12% to €7.16 billion year-over-year, up 4% at constant currencies, due primarily to strong cloud revenue growth, driven by SAP S/4HANA as well as Business Technology Platform. Software licenses revenue decreased due to the shift to the cloud as more customers are choosing our 'RISE with SAP' offering. Segment support revenue was up 5% to €3.02 billion year-over-year and down 2% at constant currencies.

Qualtrics			Q3 2022				Q1-Q3 2022
€ million, unless otherwise stated	Actual		∆ in %	Actual			∆ in %
∆ in %	Constant		∆ in %	Constant
(Non-IFRS)	Currency	Currency
	Currency			Currency
Cloud revenue - SaaS2	322	70	47	870		67	49
Segment revenue	384	65	42	1,033	60	43
Segment profit (loss)	34	>100	>100	60	52	65
Cloud gross margin - SaaS2 (in %)	88.9	-2.7pp	-2.9pp	89.0		-3.0pp	-3.1pp
Segment margin (in %)	9.0	3.1pp	5.0pp	5.8		-0.3pp	1.0pp

Qualtrics segment revenue was up 65% to €384 million year-over-year, up 42% at constant currencies. The continued strong growth was driven by robust renewal rates and expansions.

5/31