SAP SE (NYSE:SAP) Q4 2022 Earnings Call Transcript

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And you can see it also in the resilience of our support revenues. I mean, with those heavy software license declines having actually only a flat support revenue development for the year is actually very resilient. In absolute numbers, we had roughly €200 million of support revenues that changed sites to the cloud line, so to say, over the entire business year. So this is very resilient. In terms of the total cloud backlog, I’m happy that you find it useful. And indeed, I think it follows the kind of verbal comments that we had already on the past earnings calls, that we have seen the total order entry actually moving with even greater speed and pace in terms of growth than the annualized performance or the current cloud backlog, for that matter.

It’s a figure that we are currently prepared to produce on an annual basis. So we’ll provide an update at the end of next business year as well. And in the meantime, we’ll also provide color commentary on what we are seeing. But I would expect this trend to continue for a while, in particular as long as our upgrade cycle of customers to S/4 and in the cloud is in full swing, which certainly will be the case for the next three, four years. And because there, you have then those large contracts with more significant ramps. Perhaps as a last case in point that we did not discuss yet also, the average contract duration at SAP in the cloud is up. It’s by now almost reaching four years, and that is another function of those large multi-year deals that we are signing up.

And so therefore, the TCB is actually a helpful measure even though, of course, as it’s not broken down to individual business, yes, we’d rather give you a measure of the underlying orders that we have already under the belt for our midterm ambition than a really good predictor of in-year revenues for the years beyond 2023. Perhaps on the S/4 cloud revenue, number you might have a view, Christian, but I think it will certainly remain a high growth…

Christian Klein: Look, this morning, I got also the question in the press conference, what about the end of maintenance for our ECC and older ERP version? And do we go to expand and extend this time line again? No, we are not going to extend that, because we’re actually giving customers already a lot of choice to move with us to S/4HANA. We still have on-prem and guaranteed until 2040. But we, of course, see now in the meantime, big success with our move to the cloud with RISE. And we’re seeing that a lot of customers are now left who are now starting with us in this journey. You have seen all the large logos. But also important to mention, while there is a lot of business left in our installed base and we give customers choice, but the predominant share will move with us to the cloud, especially that the time line is coming closer with 2027.

But of course, we also have seen 50% net new customer share, and we are putting a lot of work currently into our volume business. So let’s not forget with Julia, Scott and Thomas, we are working now on we have customers like Doctolib unicorns who actually celebrate go-lives in weeks. And we want to activate this channel even more because the product is really designed also for the small and the midsized customers. So while we are moving the large ones and the installed base, we’re definitely also not going to rest on the small and midsized segment, and we see good business coming in there. We want to activate the channels here much stronger across the world. And last, but not least, I mean, what we are doing also with the restructuring. Look, this is €“ has a moderate impact on 2023, but we’re already doing this now and also for the years to come, to also have their strong results, especially also both top and bottom line.

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