SAP Capital Markets Day. March 6, 2018

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1 SAP Capital Markets Day March 6, 2018

2 Agenda 01:00 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 2018 SAP SE or an SAP affiliate company. All rights reserved. 2

3 Safe Harbor Statement 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 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 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, 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 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 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 SAP SE or an SAP affiliate company. All rights reserved. 3

4 Strategy and Vision Opportunity in Time of Disruption Bill McDermott, CEO

5 Eight years of significant, sustainable, profitable growth Driven by strong customer, employee and brand engagement Cloud revenue ( ) Total revenue ( ) Operating profit ( ) Market cap ( ) Cloud users Employee Engagement Brand rank 3.8bn 23.5bn 6.8bn 115bn ~150m 85 #21 >40x >2.2x 10.7bn >2.3x >2.8x 41bn 15,000x +16pp 69 6 #27 2.9bn <0.1bn 10k SAP SE or an SAP affiliate company. All rights reserved. * Interbrand Ranking. All numbers are non-ifrs unless otherwise stated. 5

7 SAP helps the world run better and improves people s lives Achieved goal of 25% women in management 11 th year in a row! Most Sustainable Software Company 2018 SAP SE or an SAP affiliate company. All rights reserved. 7

8 Delivering the Intelligent Enterprise SAP Product Portfolio and Strategy Bernd Leukert, Executive Board Member Products & Innovation

SAP S/4HANA Cloud Scope 2018 SAP SE or an

Innovation Across the Business 2018 SAP SE or

Intelligent Enterprise Enablers Intelligent Processes Intelligent Experiences

SAP Cloud Platform 2018 SAP SE or an SAP

SAP Leonardo Digital Innovation System 2018 SAP SE

Focus on Higher Value Tasks 2018 SAP SE or an

SAP Multicloud: 3 Strategies to Win CLOUD 2018 SAP

28 Customer Perspective Jennifer Morgan, Executive Board Member Global Customer Operations Americas & APJ

29 Jeff Mueller Customer perspective Jeff Mueller Chief Information Officer Mike Heim Chief Information Officer Todd Thompson Chief Information Officer 2018 SAP SE or an SAP affiliate company. All rights reserved. 29

30 Highly Attractive Business Model Growing Predictability and Profitability Luka Mucic, CFO

31 Superior organic growth rates throughout cloud transition Expansion of portfolio and shift to cloud increase SAP s share of wallet Cloud Subscription Revenue ( bn) Total Revenue ( bn) Operating Profit ( bn) CAGR +7% CAGR +7% CAGR +29% CAGR +30% CAGR +4% 6.8 CAGR +9% SAP SE or an SAP affiliate company. All rights reserved (ambition) (ambition) 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, (ambition) 31

32 Cloud transition continues at full momentum Fast growing cloud eclipses software to dominate future business mix Software ( bn) CAGR ~+29% (w/o large acquisitions) Cloud ( bn) (outlook) (ambition) 2018 SAP SE or an SAP affiliate company. All rights reserved. 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, Cloud refers to cloud subscriptions and support revenue. Software refers to software license revenue. 32

33 Share of more predictable revenue increases Delivering a much more resilient and sustainable business model 2017 reported 2020 ambition 37% Other 63% Total Revenue 23.5bn More predictable +7 to +12pp 70 75% More predictable Total Revenue 28 29bn 25 30% Other 2018 SAP SE or an SAP affiliate company. All rights reserved. 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. 33

34 Cloud gross margins inflect upwards High gross margin network and public cloud expected ~90% of mix in % Other 2017 reported Total Revenue 23.5bn 16% Cloud 49% 43% 9% ~40% Business Network ~50% Public Cloud 29% Cloud 2020 ambition Total Revenue 28 29bn 71% Other Gross Margins e Overall Cloud 71% 62% Business Network >80% 77% Public Cloud 70% 57% ~10% Private Cloud Private Cloud 40% 6% 2018 SAP SE or an SAP affiliate company. All rights reserved. All figures based on Non-IFRS. Cloud refers to cloud subscriptions and support revenue. 34

35 Increased transparency in our segment reporting Business development by delivery model Non-IFRS; in percent FY/17 FY/20e Cloud Subscriptions & Support Business Network Private Cloud (IaaS) Public Cloud (PaaS/SaaS) > Software & Support Cloud & Software 82.2 Services 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 Total Gross Margin SAP SE or an SAP affiliate company. All rights reserved. All figures based on Non-IFRS. Cost ratios expressed as % of total revenue. 35

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) 2020 (based on midpoint of

9pp) Early stage cloud transition margin headwind > efficiency gains Upfront investments in modernizing and harmonizing acquired cloud infrastructures Mix shift effects from cloud transition

36 Reaping the benefits of platform investment and scale in the cloud Expanding gross margins and operating leverage (based on midpoint of outlook) 2020 (based on midpoint of outlook) Operating Margin 30.5% (-1.5pp cc) 30.1% (-0.8pp cc) 28.9% (-0.9pp cc) 29.8% cc (+0.9pp cc) 30.7% (+0.9pp) 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 2018 SAP SE or an SAP affiliate company. All rights reserved. All figures based on Non-IFRS. Stated percentage point deltas exclude exchange rate effects outlook includes effects from the application of IFRS 15 (total revenue: substantially less than + 0.1bn; operating profit: approximately + 0.2bn). 36

37 Beyond 2018, strong operating cash flow growth and moderating CapEx drive 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 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 0.64bn 1.0bn 1.3bn <1.6bn (1) SAP SE or an SAP affiliate company. All rights reserved. (1) projected 37

38 2018 outlook and long term ambitions Fast cloud growth, robust overall topline and higher profitability 2017 Cloud Subscription Revenue 3.77bn Cloud and Software Revenue 19.55bn Total Revenue 23.46bn Operating Profit 6.77bn 2018 outlook* Cloud Subscription Revenue bn, up 27% to 33% Cloud and Software Revenue bn, up 6% to 8% Total Revenue bn, up 5% to 7% Operating Profit bn, up 8% to 11% 2020 ambition Cloud Subscription Revenue bn Total Revenue bn Operating Profit bn Share of more predictable revenue 70% to 75% Beyond 2020 Fast growing cloud business increasingly dominates business mix Cloud scale, ever higher recurring base lead to consistent expansion of operating margin 2018 SAP SE or an SAP affiliate company. All rights reserved. Non-IFRS; *Non-IFRS at constant currencies. Outlook 2018 and ambition 2020 do not include any contribution from Callidus. 38

Strong growth, increasing predictability and profitability through 2020 and beyond SAP is perfectly positioned to address a massive and rapidly growing market opportunity enabling digital

39 Strong growth, increasing predictability and profitability through 2020 and beyond 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 SAP SE or an SAP affiliate company. All rights reserved. 39

40 Q&A Bill McDermott, CEO Christian Klein, Global Business Operations Bernd Leukert, Products & Innovation Jennifer Morgan, Global Customer Operations Americas & APJ Luka Mucic, CFO

41 SAP Capital Markets Day March 6, 2018

Capital Markets Day Leading Customers Digital Transformation. February 4, 2016 New York

Capital Markets Day Leading Customers Digital Transformation February 4, 2016 New York Agenda 09:30 am Welcome Stefan Gruber, Head of Investor Relations 09:30 10:00 am Strategy and Vision Bill McDermott,