Ladies and gentlemen, thank you for your patience. Welcome and thank you for joining the SAP Q4 2024 Earnings Conference Call. During today's recorded presentation, all participants will be in a listen-only mode. Following the presentation, there will be a question-and-answer session. I would now like to hand the conference over to Alexandra Steiger, Global Head of Investor Relations. Please proceed.

Good morning, everyone and welcome. Thank you for joining us. With me today are CEO, Christian Klein; and CFO, Dominik Asam. On this call, we will discuss SAP's fourth quarter and full year results for 2024. You can find the deck supplementing this call as well as our quarterly statement on our Investor Relations website. During this call, we will make forward-looking statements which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results and outcomes to differ materially. Additional information regarding these risks and uncertainties may be found in our filings with the SEC, including but not limited to, the risk factors section of our annual report on Form 20-F for 2023. Unless otherwise stated, all numbers on this call are non-IFRS and growth rates and percentage point changes are non-IFRS year-on-year at constant currencies. The non-IFRS financial measures we provide should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with IFRS. Christian, now over to you.

Yes. Thank you, Alexandra. Thanks to everyone for joining our earnings call. €63 billion. That is SAP's total cloud backlog at the end of 2024, up 40% over the previous year, hitting a new record high. Total cloud backlog is just one figure but it illustrates how far we have come as a company. Four years ago, SAP shares took a hit when we announced our plan to transform the company. The markets had some serious doubt if we could pull it off but we did it and we delivered on all of our strategic promises. We more than doubled cloud revenue since 2020 and it has grown to half of SAP's total revenue today. No major competitor is growing as fast as SAP. And with a total cloud backlog of €63 billion and an 83% recurring revenue share, we are on a more resilient growth path than ever. SAP has enormous potential and a bright future. Over the last several years, we have developed a very compelling business suite offering in the cloud to run our customers' most mission-critical business processes end-to-end. We also have access to business data that no other tech company has. And with regard to AI, yesterday's tech news provided another strong validation of our strategy. Thanks to our ecosystem approach on the China AI hub, we are flexible when it comes to AI infrastructure and large language models. We benefit from cost reductions and progress in the LLM space. Because we are truly differentiating an element in AI today. However, it is deep process and industry know-how, combined with access to unique context-rich business data. So value creation is more and more moving up the application layer and to building one semantical data layer. This is exactly what SAP has been focusing on. We have been embedding SAP business deeply in the business processes of our customers. The result is that C-suite executives see us as the leading AI company in Europe and among the top five globally. Accurate business data and an understanding of its semantics, those are key ingredients to generate major value and to expand our competitive edge. I will touch on that and an exciting innovation in the data space in just a minute. The financial results for 2024 are another proof point of the successful journey we started. We had the courage to change our business model and four years later, we are winning in the cloud and in AI, big time. Becoming the number one enterprise application and business AI company is a huge achievement by team SAP. It took a lot of effort, dedication and openness to change to get there. A big thank you to our over 100,000 colleagues worldwide. Before we take a closer look at SAP's future, let's review how we ended 2024. Q4 was a very strong finish for the year. Without going into all the details, let me mention three points. Cloud revenue expanded 27% and drove double-digit total revenue growth for the third quarter in a row. Cloud backlog once again increased 29% on top of an already larger base. And the most exciting thing about half of our cloud order entry in Q4 were deals that included AI use cases. This shows how successful we are in rolling out business AI innovations to our customers. As for the full year 2024, we achieved all our cloud goals despite macro headwinds and the ongoing transformation inside SAP. This wasn't easy but we did it. And we are very proud of that. The customer stories that capped off the year give you a good idea of where SAP is heading. In Q4, more of the world's leading companies decided to embark on their digital journeys. The energy companies BP and Total Energies are two great examples. BP chose SAP as the digital backbone for the transformation into an integrated energy company, helping to accelerate digitization, enhance performance and reduce costs. Easy access to technological innovation was another important factor in BP's decision. And Total Energies has been partnering with SAP for over 30 years. SAP will be a starting point for the company's transformation towards new business models and it will help to drive efficiency. And from there, we will take our partnership to the next areas. BASF, the world's largest chemical company, is also banking on us. Together, we will drive both simplification and standardization and we will enable BASF to take advantage of AI-powered automation and innovation. I could go on and on. So many more global leaders chose SAP in Q4, including Red Bull, EY, the European truck store chain DM and the automotive suppliers Robarts and Chesler. With regard to growth, we've once again celebrated major wins in the IT industry, Data puts a rapidly growing data and AI company with over 10,000 customers that has selected SAP to modernize its financial systems and support its growth. Data Bricks will now have a solution that can scale fast in over 60 countries, support new value models and provide the company with instant access to business AI. Moreover, Outreach, a SaaS company focusing on sales solutions, signed up for SAP in Q4 as well. Let me say this very clearly. SAP adds hundreds of net new cloud SME customers every quarter, we go on to celebrate go-lives in months, not in years. End users are delighted about the product experience of the suite and the new innovations coming in every quarter. This is the new SAP. Next to these customer wins, we also saw some major go-lives. Let me name some big ones. IBM went live with SuccessFactors for its over 275,000 employees in over 80 countries. It was one of the largest and most complex deployments of SuccessFactors in history and delivered completely on time. IBM also went live with SAP Fieldglass and SAP Ariba in NS2 for its federal business as the first customer to use both solutions in the NS2 cloud. We also had major wide go-lives in the automotive sector, those of General Motors and the Germany-based automotive supplier, Mala International. All the examples I gave make it very clear. More and more customers appreciate the comprehensive and integrated character of SAP's cloud suite. They start with finance, BDP and our business transformation portfolio. And from there, they expand to our full suite to all other line of business solutions following otherwise upward journeys. For our customers, it is so easy to adopt more and more of our solutions. The number of customers using over four SAP solutions has more than doubled since 2021. Over one-fifth of our customers are now part of that group. Land and expand is clearly working. So we had a really great year. 2024 was another very good year for the company. But we are not stopping here. We are raising the bar for the years to come. We expect accelerated double-digit total revenue growth and an expansion of operating profit through 2027. We can say this with confidence because we have all the right pieces in place. First, product innovation. Overall, we brought over 130 Gen AI use cases to our customers in 2024, exceeding our plans. And we integrated 1,300 skills in total making it capable of automating 80% of the most used activities of our end users. More than 30,000 customers now use SAP Business AI. Among them, many great brands such as Campari, Hendel, MercadoLibre, BT and Standard Chartered Bank and other big names. For example, ABB, Bayer and the Swiss retailer, Mikros, signed deals for SAP Business AI in Q4. All this is a solid start but we are once again doubling down on AI in 2025. We will significantly increase our AI investments with all of our more than 30,000 developers working to enhance our AI foundation and build new use cases. One key ambition is to make a tool user 30% more efficient by the end of 2025. In addition, I can't wait to launch a game-changing innovation very soon that will give us a great boost in the data and AI space. Today, companies spend up to 50% of their IT budget on data and analytics. And despite all of that investment, so many companies fail to realize the potential of their data. Too often data stays locked in silos or stuck in so-called data swarms without business context. Companies have no complete view of their business that way and without access to high-quality data, AI agents stay far below their potential as well; according to the principle, garbage in, garbage out. We will address these challenges in the data and AI space, with one of the biggest innovations SAP has ever delivered. We will harmonize structured and unstructured data, SAP and non-SAP data, always with the relevant semantics. And by that, we will make AI agents much more powerful. Joule will become the super orchestrator of these agents, carrying out complete tasks autonomously and end-to-end taking over significant workload from humans. At our Business Unleashed event on February 13, we will talk more about this innovation. It would be our pleasure if you joined the webcast. Let's now move to the second piece, commercial innovation. First, we will make it even simpler for customers to adopt our latest innovations. We will introduce licensing options that allow customers to upgrade and switch easily to our newest cloud solutions across the whole SAP business suite, all without additional negotiations. Second, for customers that have already adopted SAP, we will enhance strategic migration incentives to expand across our SAP business suite; the broader customers go, the more they benefit. Third, we will evolve our 'Wise with SAP' offering. Our whole business transformation toolkit will be part of the Wise offering going forward, including Linac, Signavio, and Walkman. In addition, we will leverage Joule for Consultant and Joule for Developer for our customers' transitions to manage migration costs. Supported by the enterprise architects, we will accelerate time to value and allow customers to benefit from our full business suite even faster. And now to the third piece, simplification. We are very diligent and committed to making SAP simpler, leaner, and more efficient. By rolling out AI internally, we enable our business to scale quickly while keeping costs in check to give some details. In development, over 20,000 SAP developers use AI-powered tools, including Joule for Developer already today. We are seeing average efficiency gains above 20%. On the go-to-market side, AI-assisted contract validation has reduced our average contract booking time by 75%. And in the corporate functions, we have seen a tenfold productivity gain through AI-assisted quote-to-cash process automation. Overall, we expect the one-way efficiency effect of our existing AI implementations to be roughly €300 million already this year. And for the very near future, we expect to cross the €0.5 billion mark. In parallel, our transformation towards a better, more resilient, simpler SAP continues. In 2024, we started to merge our seven go-to-market regions into four. We have also consolidated our operations teams, reduced shadow functions and streamlined the delivery of solutions to customers. And we are putting the right people in place. This morning, we were happy to announce two Chief Revenue Officers co-leading our go-to-market execution and transformation reporting directly to me: Jan Gil, as Chief Revenue Officer, Americas and Global Business Suite, and Manos Captolus as Chief Revenue Officer, APAC, EMEA and ME. They will be supported by Stefanek. Stephane joins us from '09, where he was Chief Revenue Officer. He will serve as business suite leader and ensure the success of our suite motion across regions. This combination of in-depth product knowledge to world-class sales experience will allow us to further improve our go-to-market while staying focused on our commercial success. On the R&D side, we are extending the mandate of our Chief AI Officer, Philip Herzig, to also have our cross-company innovation efforts as new global CTO, continuing to drive AI innovation for SAP's customers and partners. Also this morning, we announced that the Supervisory Board has appointed the Boston Steinhauser as an Executive Board member, effective February 1, 2025, in the role of Chief Operating Officer. He will oversee the execution of our strategy as well as the simplification of our internal operations. In addition, the Supervisory Board extended the Executive Board contract of Thomas Saueressig for three additional years until 2028. I am very much looking forward to working with this strong and extended team. Let me now summarize. Our success over the last four years speaks a clear language. We are capable of turning ambition into reality and we intend to continue that way. We are curious about the future and set the bar higher because being the best is never done. With this drive and energy, we are continuing our profitable growth journey in 2025 and beyond. That is our aspiration. This is our promise to you. And with that, I'm handing over to Dominik.

Thank you very much, Christian and thank you all for joining us this morning. I would also like to wish everyone good health, peace and success in 2025. SAP's strong finish to 2024 once again demonstrates great resilience in a year that presented new challenges and opportunities. We not only delivered on our financial commitments for the year but also built strong momentum that positions us firmly on track to achieve our stated financial goals for 2025 and beyond. 2024 was a year of transformation, highlighted by both top and bottom line growth as well as exceptional free cash flow strength. Our success in cloud revenue and robust non-IFRS operating profit throughout the year reflect the effectiveness of our strategic growth initiatives and our relentless focus on operational efficiency. Customers worldwide continue to choose SAP as their solution of choice for end-to-end business transformations in large-scale enterprises, while small- and medium-sized companies rely on SAP to drive their growth and innovation. This is reflected in strong order intake and large cloud transactions with a volume greater than €5 million, contributing 63% to our cloud order entry for the full year and an impressive 68% in Q4. Now let me provide more detail around our financial highlights. Current backlog reached €18.1 billion, up 9% and total cloud backlog for the year grew at 40% to €63.3 billion. Cloud revenue grew 26% year-on-year, supported by cloud revenue growth of 27% in Q4 and primarily driven again by the strong performance of our cloud ERP suite. It actually had an impressive year demonstrating its role as SAP's core driver of growth with an increase of 34% in 2024, up from 33% in the prior year. The cloud ERP suite reached 84% of total cloud revenue underscoring its growing contribution to our success. Software licenses revenue decreased by 21%. Finally, total revenue for the full year exceeded €34 billion, up 10% and this performance was mainly driven by strong growth in cloud revenue and the resilience of our support business, reflecting the ongoing progress of our strategic pivot towards cloud-based solutions. Now let's take a brief look at our regional performance for the full year. Germany, Spain, China, India and Japan all had outstanding performances in cloud revenue, while Brazil, Canada and Saudi Arabia were particularly strong. Moving down the income statement, our non-IFRS cloud gross margin for the full year continued its upward trend from last year, expanding by 1.4 percentage points to 73.3% and driving cloud gross profit up by 28%. In the first quarter, non-IFRS operating profit was up 24% and operating profit growth in Q4 was mainly driven by the strong performance in SAP's software licenses and support business as well as disciplined execution of the 2024 transformation program. For the fiscal year, we delivered outstanding operating profit growth of 26% year-over-year, reaching €8.2 billion. The IFRS effective tax rate for the full year was €0.34 and the non-IFRS tax rate was 32%, in line with what has been previously guided. Free cash flow for the full year was down 19% to €4.1 billion, exceeding the revised outlook range of €3.5 billion to €4 billion which we provided in the prior quarter. Recall that on top of payouts for restructuring of €2.5 billion, we also absorbed €0.2 billion of cash out for compliance-related settlement matters and fully discontinued SAP triggered financing being with another couple of hundred million euros on free cash flow. On the other hand, we received a couple of hundred million euros from customers for receivables due in 2025 before the turn of the year, which in combination with strong profitability enabled us to slightly exceed even the upper end of the previously guided range of €3.5 billion to €4 billion. Non-IFRS basic earnings per share in fiscal year '24 increased by 22% to €4.53. Now let's move on to our outlook. You've likely seen in the quarterly statement published earlier today, we have provided this year's outlook. Four years ago, SAP outlined both long-term goals to guide our transition towards cloud-based solutions. Today, we are proud that this year's outlook solidly aligns with the ambitions we set in 2020, demonstrating the progress we've made in executing our strategy. Before I move on, I want to provide an update on our compensation metrics and foreign exchange hedging strategy that we will adopt going forward. As of 2022, we will enhance our compensation framework by incorporating free cash flow as a metric alongside non-IFRS operating profit. This will ensure heightened attention towards working capital and other drivers of free cash flow. Additionally, to reduce foreign exchange-related impact on free cash flow, we have further developed our hedging strategy, in particular for the U.S. dollar. As a reminder, we currently provide all income statement KPIs that are relevant for compensation purposes on a constant currency basis. Free cash flow, however, has been and will continue to be provided on a nominal currency basis, as unlike the compensation relevant income state KPIs, it does include the results from foreign exchange hedging. We continue implementing a hedging strategy with a lead time of up to a year to mitigate the risk from U.S. dollar euro exchange rate fluctuations, by aligning hedging instruments with forecasted cash flows and maintaining a 1:1 hedge ratio where possible. We aim to reduce volatility and minimize the impact of exchange rate fluctuations on our free cash flow. This approach is largely completed by now and reflected in the free cash flow outlook we have provided today. So while the average exchange rate for 2024 and as a result, constant currency exchange rate for 2025, underlying our outlook for income statement KPIs is 108, the spot rate today and at the end of 2024 relevant for CCB was 104, and the forward rate of our hedge portfolio for free cash flow for 2025 sits logically in between at around 1.06. Now let's quickly discuss our non-financial KPIs. In 2024, we continue to see strong uptake for the SAP Sustainability Solutions portfolio with robust growth of approximately 70% for our sustainability innovations. Q4 was very successful, particularly in our MEE and EMEA regions, including a key win with Knap, an Austrian logistics automation company purchasing SAP sustainable control tower, SAP sustainable footprint management and SAP sustainability data exchange for sustainability disclosure and carbon accounting, including supply chain engagement. Companies like Knap are turning to SAP to be the foundation of their sustainability reporting. Regulations, customer need for supply chain transparency and the ongoing convergence of sustainability and financial standards continue to drive and play to our strength globally demonstrating sustainability as a core business and ERP requirement. Now in Q4, we released the highly anticipated SAP Green Ledger together with our sustainability portfolio capabilities which provide data collection, calculation and auditability. The SAP Green Ledger allows customers to synchronize emissions data with financial data for strategic and contextualized business decisions that are both financially and environmentally sound. This also helps companies fulfill regulatory requirements. Now in summary, we delivered on our key objectives for 2024, achieving strong top and bottom line results while demonstrating resilience in a dynamic environment. Customers continue to choose our solutions to help transform their businesses into more intelligent, sustainable enterprises as reflected in our cloud performance across all regions of the world. With our foundation now firmly established in 2025, we must remain vigilant in our execution to sustain growth and set the stage for long-term success for years to come. This progress would not have been possible without the dedication and hard work of our people, both those who remain with us and those who have moved on. We deeply appreciate their contributions to helping SAP navigate their transformational journey this year. We remain optimistic about the opportunities ahead, confident that our commitment to innovation and disciplined operating strategy will continue to drive positive results. Thank you and we will now be happy to take your questions.

Thank you, Dominik. And with that, we will now take your questions. I would like to kindly remind you to only ask one question when prompted. Operator, please open the line.

The first question is from Adam Wood with Morgan Stanley.

Congratulations on the excellent end to the year. Maybe if I could ask just a little bit around CCB and the kind of stage of the upgrade cycle to S4 in the base. Just in that context, we've obviously got very strong CCB growth at the end of '24 with that acceleration, TCB accelerating, but you're talking about a little bit of a slight deceleration on CCB for '25. Can you just help us understand how much of that is just the fact that you can't keep accelerating that number of ever bigger numbers in that context? Give us a little bit of a feel for where you think the installed base is in terms of the upgrade to S4, how much of that is there still to do? Basically, are we hitting the peak of that upgrade in the near future, do you think there's actually a lot more to go for as you look out over the next few years?

Adam, I can start and look at CCB. Indeed, we had a record Q4 exceeding all our expectations. Now for next year to give you a few insights, we are roughly 40% of our customers are on the move with SAP to our business suite in the cloud. 40%, that doesn't mean even that all of their landscapes are already in the cloud. So that contracts include a significant ramp towards the later year. So that gives us, even the 40% who are underway will also give us further acceleration in the years to come. And then also, when you look at CCB, we are actually adding hundreds of net new names, as I mentioned, and our win rates in the public cloud. When you look at the different lines of business, the win rates against the best of breed is going up because clearly, now the customer is seeing, hey, it's really about land and expand and running my core business processes integrated end-to-end and, of course, then with AI out of the box. So yes, the base is getting bigger indeed. But when you look at the absolute growth, it's also further accelerating. I mean we are putting a ton of new business on top. And also, let's not forget, at a certain point, it's also now important to drive adoption. Our retention rates are getting better and better and so I feel the outlook is actually really ambitious. Also given, honestly, the macro environment and you see in the cloud revenue, there is no slowdown. This is actually an acceleration. And so the two things coming together, higher retention, higher adoption, further acceleration of the customers who are already on the move to the cloud and higher win rates in the different lines of business. So Adam, absolutely, we are very confident for the year ahead. And honestly, also for the year beyond, the installed base, look at the maintenance revenue number, still gives us a lot of potential to move customers to the cloud. And then, again, also not only upselling these customers but also cross-selling, as I mentioned.

Let me add one point there. If you look at the sell-side estimates, we see that there is still a little bit of a kind of doubt in terms of our revenue acceleration thesis through '27. And what I encourage you to do is to kind of back-solve how much CCB can actually decelerate before you would kind of not see that acceleration in consolidated revenue. So the mix factor I'd say, at the sweet spot, of the revenue mix play, giving us a boost on total revenues. And so this kind of slight deceleration we have guided here is actually probably much better than what has been embarked in some of the models we see on the sell side these days.

Yes. And maybe one piece to add I mentioned two large energy companies but we also signed up for many, many automotive given they are not in a good position right now, given all the concerns which are existing in this industry. But still, they're shifting maybe now the first part or maybe one-third of the landscape to the cloud but then really focusing and that is the value add, they are not only lifting and shifting to a cloud infrastructure. We are intensively working now on process simplification. They need to run new business modules. And then give them a year or two and then they will actually sign another contract. So Adam, it's also a phasing. And we want to be reasonable in our outlook, how we also reflect this phasing of these deals because customers need time. I mean changing business modules, it's not only a technological move, it's about change management. It's sometimes I have seen this four years ago, also breaking the walls, there is some change resistance but cloud software needs simplification. We moved to a new technological architecture with BGP. So let's also give the customer some time but there is enough potential also in the installed base left.

The next question is from the line of Jackson Ader with KeyBanc Capital Markets.

Great. Questions around migrations in 2025. So if we expect some of the CCB to have slowed down a little bit and cloud revenue growth to accelerate overall revenue growth to accelerate. I'm curious what should be the expectation for support revenue in 2025 as you continue to drive more of those migrations in the coming year and how that flows into cloud revenue as well?

Yes, it's a very good question and it gives me the opportunity also to comment on what looks to be a slightly odd Q4 with actually an increase in maintenance. This is certainly not a trend. It is simply related to the fact that actually we caught up on some revenues we carved out previously because of financial distress of a larger customer that had a financial restructuring and then we could reembark these revenues while in the Q4 of the prior year, there were actually some compliance-related costs on maintenance revenues and that made the whole thing flip. If you depolluted for that, you see a very steady slight decline. And as previously guided, no change to that, we will kind of see a gradual decline. Obviously, the slightly higher-than-anticipated license revenues indicate that also maintenance revenues have a little bit of a longer life. But overall, we would not deviate from that hypothesis of a slight acceleration over the coming years in maintenance revenues but don't expect a complete collapse. And again, the good news is we have a gradual rollover from that maintenance space to cloud revenues.

And maybe just to build on that. Sometimes, the world went geopolitical tensions increase, customers already see again, even more value coming also back to SAP for SAP support. I mean, given legal and regulation support in over 130 countries is a real asset. I mean the same is also what we see now in the cloud is customers want to expand their business, they need localization. So it's a real asset. So that while you also see this very high retention rate on support revenue. And also with the move now that we allow our customers to move to the cloud and while they have 100 ERPs from SAP and they need time to consolidate, we offer them now to replace some third-party assets in the stack and to really allow them to continue their transition while not getting hit by the end of maintenance which will stay in place, of course. That, of course, is even more coming back to SAP and allow and see really to create value from SAP support.

The next question is from the line of Johannes Schaller with Deutsche Bank.

Christian, I think you probably just touched on this topic in your last remark. But there's obviously a bit of press coverage around potentially extended maintenance. I think some people suggesting '23 is the new 2030 which is clearly not the case. But can you maybe help us a little bit more with some detailed understanding, what's the reasoning behind this SAP private edition option? And what is generally going on in the installed base? I mean, is this really what some of your large legacy customers needed to get kind of over the line and then sign some of these deals? Or is it really that you're maybe not seeing the kind of momentum with some customers that you were hoping?

Yes. Happy to answer that question, Johannes. And look, I mean, as I mentioned, some of our customers have over 100 ERPs. I mean, they are one in factories, manufacturing and logistics with that. And now the end of maintenance by 2027 will not be changed. We will stick to that. But you also have to consider, in some parts of the stack, there are third-party components included. And they are running out of maintenance as well. So we don't want to leave the customers behind. And as we moved all of our cloud solutions already on HANA cloud, we do now the same with these on-premise customers. We move them to the cloud. We replace the third-party components. And with that, we can also run all of the 100 ERPs in a complete sustainable and supportive way. And that is about this offering. It's actually for a very few large customers who may not be able to make the time because, again, to transform and consolidate ERP and business processes in over 100 countries is sometimes not that easy. And that is what this offering is about. So it's not about the extension of on-premise maintenance. And clearly, we see the acceleration in the cloud but it's really reaching out with a helping hand to a very few large customers who need this offering to fully transform and migrate to the cloud. This is what this offering is about.

The next question is from the line of Mohammed Moawalla with Goldman Sachs.

Dominik, I wonder if you could just clarify the thought process around some of the moving parts on the FY '25 outlook. You obviously raised your EBIT guidance, but I know there was a definition change on the free cash flow. I know the tax rate has also gone up a little bit and there's more restructuring. Has anything else changed just to kind of bridge the gap in terms of assumptions around working capital and what are the plans in terms of the impact you expect on that over the next couple of years?

Working capital can be difficult to forecast, especially at the end of the year. Unexpected payments may occur, or you might see significant Q4 performance in new bookings. We're also providing transformation credits to motivate customers during their transition, which involves some upfront cash out, affecting how profits are recognized for these customers. This combination has shaped our current outlook, and we've managed to pull in some cash for 2024, putting us ahead of plan for that year. However, receiving money early impacts what we can expect in 2025. On a positive note, we made substantial operational progress. The cash flow statement shows encouraging signs, such as proportionately lower trade receivables, leading to less cash out compared to the previous year. Even with the normalization of vendor financing that should normally increase accounts receivable, we've maintained discipline. Stock-based compensation is another critical aspect for cash conversion. In 2024, we saw an unusual spike in share price, which resulted in a considerable number of cash-settled units that will carry over into 2025. Share-based compensation in the P&L was €2.4 billion, which exceeded our expectations due to this share price increase. Initially, we projected it at around €2 billion for 2025 but have now revised that figure up to €2.4 billion because of the rise in share price. Nevertheless, we believe the impact on the P&L from stock-based compensation will decrease as the effects of share price fluctuations diminish, leading to smaller cash outflows. Overall, the statement reflects a similar situation in terms of equity-settled stock-based compensation at €1.1 billion for both 2023 and 2024, with expectations for next year to align closely with this figure. As we aim to decrease stock-based compensation, any reduction will significantly influence cash flow if the differences remain consistent. It's crucial to consider all these factors. I acknowledge that it isn't straightforward, but I encourage a focus on cash conversion, particularly when assessing the adjusted free cash flow by accounting for restructuring, compliance charges, and factoring. I can provide more details on how stock-based compensation will evolve offline. This is a significant concern. When evaluating EBIT tax-affected figures, we're performing better, aided by catching up on certain working capital items, and we must continue to emphasize maintaining the strong cash conversion we've achieved in both 2024 and 2025.

The next question comes from the line of Sven Merkt with Barclays.

Thank you for addressing the questions, and congratulations on a strong quarter. Reflecting on 2024, I have some doubts regarding the additional €3.5 billion. Could you provide a rough breakdown of how this amount is distributed between maintenance conversion, cross-selling, and net new sales? Additionally, how do you anticipate this will evolve into 2025?

Yes. Let me share a bit more insights about how, of course, we close cloud order entry and then how this translates into CCB. And when you look at Q4, of course, by far, our biggest quarter, I have to say really a record quarter, 60% roughly from the cloud order entry comes from base customers moving to the cloud. Then you get another 30% from net new and roughly 10% about upselling into the existing installed base. So you see the mix in my eyes is actually really healthy. And for me, next to the strong move of the installed base which still, as I mentioned before, has a lot of potential for the years to come. for me, even more important is, of course, the net new because that is what is really then adding completely incremental business on top, which then also gives us to create performance on total revenue. Now on maintenance conversions, we always have these multiples that developed in Q4 also extremely well. Actually, we have a multiple of slightly around about 3x which is very strong, given also and you can see that in our cloud gross margins, I mean, we clearly did our homework there. I mean, both for the private cloud and the public cloud business, the expansion of the gross margin is very strong. And I have to say, looking at our plan for the year to add and everything what you saw yesterday, the cost reduction on large language modules and other things we are trying to get down the TCO in our cloud operations gives us actually also the potential to further reduce TCO and with that also expand our very healthy cloud gross margin in the years to come.

The next question comes from the line of Toby Ogg with JPMorgan.

Perhaps just on AI, could you give us an update just on how Joule is tracking in terms of adoption and whether you're actually seeing any revenue generation yet from the monetization of Joule? And then just how we should think about the timeline for potential contribution to revenue growth from the monetization of Joule and agents?

Yes. I can share a recent experience where the CFO of a major German company visited our headquarters. We discussed our agenda with what we call the orchestrator and outlined our plans for 2025. We provided an example focused on improving cash collection by examining some delayed payments in the customer's live system. We identified the reasons for the delays, whether they were related to logistics, suppliers, or commercial issues. We demonstrated how Joule reached out to various agents involved in logistics, procurement, and sales to address the dispute and resolve the case fully automated, while still allowing a human decision-maker to guide the process. We showcased Joule in action, including pre-scripted emails, illustrating how it orchestrates the entire process with various options leading to improved cash flow. This experience reaffirmed our strategy to focus on building a robust AI foundation for businesses by understanding and contextualizing business data, as opposed to primarily concentrating on large language models. In terms of numbers, 50% of the deals in Q4 were driven by AI. It was not just one factor at play but rather the ability of our value engineers to demonstrate automation and productivity across different company functions, as well as what Joule can do as a new user experience. This was a key driver of our Q4 order entry. Additionally, we have consistently started with a consumption-based commercial model, emphasizing the importance of adoption from day one, which has proven to be a good decision. We are now witnessing how this significant order entry, propelled by Joule and business AI, is translating into revenue. Typically, there is a three-month delay between signing and the go-live of the first AI use cases, after which the revenue begins to flow. Overall, our business remains healthy and continues to grow rapidly.

The next question comes from the line of Frederic Boulan with Bank of America.

Could you discuss the cost aspect for a moment? It would be helpful to understand how your go-to-market strategy is changing and what the major cost drivers will be after 2025. Any guidance for this year suggests that cost growth will remain very disciplined relative to revenue growth, indicating that it will be significantly less than the previously mentioned range of 80% to 90%. Could you elaborate on the factors influencing go-to-market strategy and overall business efficiency beyond 2025?

Coming out of the kick-offs at the beginning of this year, I can say that the transformation of our go-to-market function is progressing well. To illustrate what we are working on, the AX system is now even more enthusiastic about growth potential with SAP. We are assigning them partner-led territories, allowing them dedicated areas to promote their business and invest in SAP. They appreciate the opportunity to sell SAP as a comprehensive suite, similar to our own land and expand approach. They recognize significant growth potential and are committed to further investing in SAP, which provides us with scale and efficiency. We have significant growth plans for the channel in 2025 due to all the changes we are implementing. On the direct sales side, we aim to be more disciplined regarding the number of calls we make and the commissions we pay, and we are currently rolling this out. The change management is actively underway and will yield additional efficiencies beyond 2025. Now, Dominik, could you comment on the overall cost side?

I think the good news is we are derisking the cost base and AI plays also a big role, as Christian has explained. And yes, from the guidance you've gotten from us, you can see that we are doing better in the bridge from 2024 to '25, then the 80% to 90% benchmarking logic we have applied. I think for the years beyond '25, '26, '27 is still a good measurement to say in that ballpark, we should end up. And this gives us then by virtue of the acceleration in the top line, we've also indicated a good expansion opportunity for further improving the free cash flow and then also the combination of cash flow margin growth and then also the revenue growth boost, of course, what we call the kind of Rule of 40 performance of the company.

The next question comes from the line of Mark Moerdler with Bernstein.

Thank you very much and congratulations on the quarter. Dominik, you've been highly focused on driving efficiency and improving margins while also fostering growth in the business with the internal implementations of AI. Can you explain how you envision this translating into results? Will it primarily enhance margins, as you mentioned a potential $0.5 billion improvement? Do you anticipate that benefiting the bottom line or being reinvested? Additionally, do you believe the efficiencies you're achieving in sales and other areas will help accelerate revenue growth and revenue per salesperson?

Yes, these key performance indicators need to improve moving forward. Otherwise, the ratio of selling expenses to revenues will not improve. As we grow, the incremental bookings required are increasing, so it is mathematically necessary to affirm your question. We are firmly on track, and we have significant confidence in these initiatives. The organizational changes that Christian mentioned, which consolidated all operational functions under Sebastian Steinhauser, were the right decision for optimizing our end-to-end processes. This gives us confidence because we now have visibility into where the building blocks are and where we need to eliminate blockages. From a financial modeling perspective, we want to maintain the ability to invest in our growth while keeping growth investments and efficiency aligned. The operating leverage of 80% to 90% for 2026 and 2027 remains a solid benchmark.

Yes. And I have to say, of course, Dominik is laser-focused on efficiency, cash flow conversion but also the CEO is, of course, focused to make SAP more efficient. But I have to say, to coders to Dominik, Gina, Mohammed and all the others; I mean when you look back one year ago and we did our headcount planning for the year. I mean all of us now committed because of AI on a completely underproportional headcount growth. I mean a year ago, the headcount ask in the commercial deal support was up through the roof because we are closing a lot of new business. Now, we have an AI capability like Joule and a lot of the contract checking, the reference checking, the compliance checking has been taken over by AI and you see this in cloud delivery where you see this in R&D with tools for developers. And also the Board colleagues, you know, it's not only like pulling out an AI use case and see here are the efficiencies. It's about change management, it's also about explaining to people what these technologies can do because it's changing all such shops. But I have to say, looking also at the plan for this year now, I mean we are growing so much under proportional in many functions of the company also because of AI.

The next question is from the line of Michael Briest with UBS.

Just a clarification on the comment around maintenance. Are you not then making this extended maintenance to 2033 open to all customers? It's just a handful of sort of specially selected ones. And I'm just curious on licenses, not a good quarter but what is the thinking about potentially taking that option off of the price list and maybe for the public sector in a few sectors, it's still relevant but for the general customer base? And Dominik, can you quickly just clarify what you mean by deceleration? Is this 100 basis points, 200 basis points for CCB?

I can address the maintenance issue. First of all, we are legally obligated to offer this to all our customers. However, the primary demand comes from a few large clients who have specifically requested it. Many of these clients are already in transition, indicating that while they may not be able to undertake North America this year, they are planning for EMEA next year, and need some time for APJ before their maintenance expires and they consider moving to the cloud. We have replaced third-party components in their systems to ensure they can still operate compliant businesses while we support the comprehensive stack. This offering is intended for all customers, yet we anticipate only a small number of large clients will take advantage of it. This is important because it demonstrates our commitment to accompany them on their journey and assures them that they are not being left behind. We understand their focus on transformation and are dedicated to ensuring they can maintain a compliant and supported environment as they transition to the cloud.

Then on a slight deceleration on CCB, I don't want to give you precise numbers but what I can say is what I entered to before. And there is this statement we make this kind of ambition we expressed that through 2027, we want to see total revenues accelerate now. You know how the game from CCB to cloud revenues works and you can make some educated assumptions about maintenance and license revenues going forward and services, kind of that low growth rates, you've seen a very low growth rate this year. And then back-solve how much deceleration can we actually afford to come to kind of a steady growth rate of round about what we guided, I think, is about 11% in the midpoint we guided for '25. And of course, the deceleration lies somewhere in between because on the one hand, it will be slower than what we have today. And also don't forget there is still a little bit of a positive impact from the first-time inclusion of WalkMe in the '29 numbers. So that's a more technical aspect of that. So that one you can intellectually take out because as soon as we have the kind of comparables of the prior year, including WalkMe, it's gone and then there is a slight deceleration that is kind of in between that kind of deceleration you would need to see to not see revenues on group revenues accelerates by more than 11% and where we sit as of the end of the year. So that ballpark gives you a little bit of a feeling where that might end up.

Thank you very much, Dominik, and this concludes our call for today. Thank you all for joining us.

Thanks. Thanks to you.

Ladies and gentlemen, the conference has now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.