Ben Castillo Bernaus: Understood. Thanks very much.
Anthony Coletta: Thanks Ben. We will take the next question, please.
Operator: The next question is from the line of James Goodman with Barclays Capital. Please go ahead. Your line is open.
James Goodman: Good morning. Thank you very much. Just from me, I mean very strong cloud outlook, so once if you just dig in a little bit on the 8% to 10% cloud and software revenue growth. I mean it seems in the past, there was perhaps a little bit more confidence that the business would grow total revenue double-digit this year, which clearly is hospital at the high end of that range and on my numbers. But just wanted to dig into the sort of implied portion there really on the support and license side. Given license declines seem to be tapering is now very small in any case, it really implies quite a steep acceleration, I think in the rate of maintenance decline. Is that something specifically you are anticipating this year, and if so, why, or is there an element of conservatism in there? Thank you.
Christian Klein: Look, I mean on total revenue, I mean first, again, we had also a good Q4 in the license revenue, as you can see from the numbers. Of course, there were also no customers actually who had to still up-sell some more users because of their growing business. But of course, over time, you could see a continuous decline, as we always projected. But of course, when you are now having a good license quarter that makes the year-over-year comparison a bit more difficult. Now, I would also say, looking in – also in 2024, there is a volatility in this number, in this license revenue number. And with the underlying growing recurring revenue share of SAP, it’s just a matter of time when we actually report also total revenue growing double digit.
I would say there is a certain likelihood in 2024. But for sure, in 2025 onwards, you see a continuous acceleration of total revenue. As you see our cloud business is working, it’s strong. The total cloud backlog looks very good. The transformation is ongoing. And also with regard to the maintenance revenue, I mean I have seen a lot of customers now coming back to SAP from third-party support providers. It’s actually giving us also there, it shows the resilience. Of course, now it also makes it harder on a year-over-year compare, but it’s actually a good sign because customers are coming back in a world which is full of geopolitical conflicts to rely on SAP to provide all the legal updates, to provide all the localization. So, I am actually extremely confident with regard to our total revenue performance just also because there will be another pull-through of our cloud revenue in the years to come.
James Goodman: Thank you.
Anthony Coletta: Thank you, James. We – next question, please.
Operator: The next question is from Charles Brennan with Jefferies. Please go ahead.
Charles Brennan: Hi. Good morning. Thank you so much for taking my question. I just wanted to ask one on execution risk, actually. The scale of the restructuring is obviously quite significant. It involves a number of people. I think you specifically called out restructuring in the go-to-market organization. What are the chances here of disruption to the sales motion? And should we anticipate maybe some volatility in the early parts of ‘24 that works through by the latter half? Thank you.
Christian Klein: I mean I will comment on the transformation program of all. Scott, you can comment then on the go-to-market transformation. I mean first, you can also already consider, of course, there is a plan. It is mature. We know what we do. And when you actually look at what we are doing is inside SAP, we also announced a few re-organizations, and we are going to drive synergies. And I guess now it’s also the time to scale further our operations internally. We are also going to embed more and more AI internally at SAP that will give us more scale and more productivity in development, in sales and marketing in all of the supporting functions. And in the go-to-market, we are not touching our quota carriers who just delivered also this great results, but their team around there where we are just harmonizing our roles and responsibilities, but over to you Scott to share further comment.
Scott Russell: Yes. So, I think there is a few factors. First of all, execution clearly needs to be strong. But if you look at our core metrics, when we think about pipeline and the market data, clearly, we have not only had strong order entry, but we have optimism that the way forward that demand continues to be strong. And that’s underpinned by more of our large customers doing more multi-cloud solutions in the cross-sell that Christian mentioned earlier, but also the net new acquisition. And a lot of the go-to-market transformation is really about accessing and expanding in new markets. You consider the potential for SAP to expand across geographies to be able to run supply chains and operations in different industries and especially with grow with SAP in the mid-market.
The ability for us to be able to expand in the transformation, there really does allow us to access those markets. So whilst, yes, there is an execution element this year, the ability for us to be able to manage that and then access new markets, use digital modalities, use business AI and the way we go to market as well, clearly, the potential is strong.
Anthony Coletta: Thank you, Charles. We will take the next question, please and this will be more – two questions more. So, this one and then…
Operator: Yes. The next question is from the line of Michael J. Briest with UBS Limited. Please go ahead.
Michael J. Briest: Yes. Good morning. Thanks for letting me on. Just a question around profitability in Q4 in 2023, I mean you started the year guiding for 23% to 26% cloud growth that’s going true [ph]. So, you came in at the low end, and from my understanding, licenses don’t retire much closer. So, you talked about higher bonuses, but is there any other accruals or anything else that affected profitability. I mean licenses were €200 million ahead of consensus, and in Q1 and Q3, we saw that flowed through to the bottom line very nicely. Thank you.
Christian Klein: Yes. I mean we called out already some impacts you mentioned the kind of back end loaded, strong performance on the go-to-market resulted in bonus accruals. We also had continued charges for that amortization and on the commissions that was accelerated because we reduced the periods for the amortization periods for on-prem related commissions and that has already impacted Q3, but also continued at a similar €260 million-ish in Q4. Some of you might have seen the precise settlement on the DOJ, SEC and the Brazilian compliance cases. We grew about €170 million in March. We actually then had the provision move to €155 million end of the year. And on the other hand, you have seen about €200 million of settlement, and the delta of that is more related to the civil part of it, which is actually not in the adjustment, but we kept that within the non-IFRS operating profit.
So, that was another mid-double digit million to bridge the gaps between €155 million and €200 million, but these are the factors. And if you kind of de-pollute Q4 for these factors, including, of course, the strong comparables from the Litmos divestiture last year, you see that we are actually continuing to run at a very similar level as the overall kind of growth level, it’s not any abnormal quarter in that sense.
Michael J. Briest: Thank you. And then given the license beat, I mean do you think that we should see it go back on track to your original plan, which implies, I know 30%, 33% decline per annum from here?
Christian Klein: I mean I always highlight that license revenues are notoriously difficult to predict, this is also why I would like a lot the move to the cloud also from that aspect. It gives us much better predictability. I mean let’s see how much of what we have seen in Q4 was phasing versus really kind of longer term sustained demand. I always try to be prudent on that because it’s hard to plan and we want to be robust in our guidance. So, I mean this is exactly why we have also some ranges in the outcomes. And that’s a little bit the kind of swing factor I might say. So, on the revenue side on cloud, it’s more the transaction business, how strong is it really coming. And then on the bottom line, we have also the question of, can we add some more software revenues. But I think it’s prudent to assume a continued decline there because of the structural transition to cloud.
