SAP : CEO Address from Christian Klein

CEO Address | SAP Annual General Meeting of Shareholders | May 15, 2024

CEO Address,

Christian Klein

May 15, 2025 / Check against delivery

Published: May 8, 2024

Dear shareholders, dear colleagues, dear friends of SAP,

Welcome to SAP's Annual General Meeting of Shareholders! We are delighted to see you here.

SAP, your company, is in great shape.

Today, we can all look back on an excellent fiscal year. And I'd also like to tell you how we want to lead SAP into the future.

2023 Results

Let's first look at the most important numbers1 for 2023.

• Cloud revenue, the core of SAP's business today, increased 232 percent to €13.7 billion.
• Total revenue increased 92 percent - and thus more strongly than in the year before.
• Meanwhile, operating profit grew 132 percent to €8.7 billion.
• And our free cash flow improved significantly as well, rising from €4.4 billion to €5.1 billion.

So, a very positive picture overall. If there's just one number, I'd like you to remember today, then perhaps this one here: the total cloud backlog. This is the total amount of committed revenue from cloud contracts already signed by the customer. It stood at an incredible €44 billion at the end of 2023. Nearly 40 percent higher than at the end of 2022! The same metric based on the next 12 months has also grown sharply, to €13.7 billion. This very high backlog makes our business much more predictable. We are heading into the future strong.

The first quarter of 2024 proved once again that we are fully on track. We had a strong start to the fiscal year, our current cloud backlog increasing more than ever before. We look to the future with a great deal of confidence. We confirmed our outlook for 2024 in April.

Our transformation program is a priority in 2024. This program aims to direct additional resources into our growth areas and intensifying the use of artificial intelligence in-house. Part of this transformation program includes restructuring. In particular, regarding job profiles that will change greatly due to artificial intelligence. We are focusing on employee training initiatives and providing options for voluntary resignation as part of an internal restructuring program.

Such difficult decisions are never easy for us because they affect colleagues directly. But we aim to be compassionate and take our social responsibilities seriously. Overall, we see the transformation program as an important step in SAP's ongoing development. And it will be worth it in the end for everyone - shareholders, customers, and workforce alike. We are convinced of that. In our industry there is no choice but to continuously transform. Otherwise, we are a company of yesterday. And no one here can want SAP to be yesterday's company.

We updated our mid-term guidance, "Ambition 2025," in January. We expect strong revenue growth through 2025. We aim to increase cloud revenue to over €21.5 billion and total revenue to over €37.5 billion. We even increased our expectations for non-IFRS operating profit.

1. based SAP group results from continuing operations
2. at constant currencies

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CEO Address | SAP Annual General Meeting of Shareholders | May 15, 2024

Our non-financial metrics are equally impressive as our financial results, too. The Customer Net Promoter Score, our measure of customer satisfaction, increased in 2023. But we're not resting on our laurels - we're still aiming higher. Artificial intelligence will help us make even better use of customer feedback. We want to improve the customer experience in all areas, be it product, sales, customer support or service.

Our Employee Engagement Index remained stable in 2023, at 80%. Times of change are always difficult, which makes this very high engagement score even more remarkable. To ensure SAP remains competitive in the future, too, we will continue to transform our company in 2024, as outlined. And that includes making decisions that affect our staff. Though not always easy, such decisions are vital to our future.

Last but not least, our carbon emissions continued to decline in 2023. We became carbon neutral in our own business operations for the first time. And are now taking the next step: we're aiming to make our whole value chain carbon-neutral by 2030.

On behalf of the entire Executive Board: A very warm thank you to all colleagues worldwide for the great successes of the last few quarters! We couldn't have done it without your tremendous dedication. Many thanks to all of you!

SAP Solution Portfolio

Our outstanding solutions are the foundation of SAP's growth today and in the future.

And they span the full spectrum of business processes, from the complete management of finances, supply chains, and manufacturing, to human resources and customer relationships. On top of that, we have SAP Business Technology Platform (SAP BTP) - a powerful toolbox for our customers and partners for integration, that is, bringing together SAP and third-party solutions; for developing new innovative applications; and for business planning and analysis. We are the number one in our industry in many of the categories mentioned.

Nowadays especially, companies need to rethink their business models and processes. And that can only be done in conjunction with our software and our data. Strong new business models; robust supply chains; finding and nurturing talent: SAP software supports all this and more in more than 180 countries around the world. We are more relevant than ever.

Our addressable market is more than €600 billion in 2024. And it is growing quickly, at around 13% per year. No other provider of enterprise software, of ERP, can match this reach.

Every quarter we report the revenue we generate with our "Cloud ERP Suite." The KPI gives a very good impression of how many customers run their core business processes with SAP in the cloud. In the last two years, we've grown exponentially here. With our integrated portfolio, we've accomplished something that makes us proud: SAP is growing organically.

From time to time, interesting opportunities to evolve our business arise.

Last year, we sold our stake in Qualtrics. Qualtrics is a software provider that allows organizations to gather and analyze ratings, for example of products.

On the other hand, we acquired LeanIX. Customers can use LeanIX to map their IT networks and plan how they want their IT landscape to look in the future. This tool, together with SAP Signavio, makes the journey to the cloud now even simpler and faster.

RISE and GROW

Let's turn from technology to our customers' transformations. It's important in every ERP project and for every company to rethink business models and processes. In conjunction with highly innovative enterprise software. This is the very reason we introduced RISE with SAP three years ago - to facilitate the holistic transformation of our customers.

With RISE, we enable and guide our customers and partners very closely along that journey. With RISE, we don't just implement our cloud software - we apply the know-how we gained from working in various industries to help realign business models and processes. That means using highly innovative tools to design workflows and system architectures. And harmonizing the data. RISE ensures that

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customers are not just adopting a new ERP. They're transforming holistically and getting the most out of their investment in SAP.

Another important part of RISE: We are cutting down the number of extensions that customers had built in on-premise, in their local systems. Such add-ons over the years make the systems very complex. Upgrades take an extremely long time and are expensive. With RISE, we make sure that customers and our partners standardize business processes when adopting cloud ERP. Because standardization enables faster upgrade cycles. Customers then get innovations automatically and every quarter with our software updates. No customer should still be using an outdated version of software, as SAP is constantly delivering significant innovations, such as artificial intelligence.

Thousands of companies have already chosen RISE. Many hundreds of them in 2023 alone, for example Puma, Nestlé, Henkel, Dolce & Gabbana, Telekom, and Vodafone. No one can offer you a better holistic transformation than SAP. We have the software and the technology. And we have extensive knowledge of business models and processes, gained from working with hundreds of thousands of customers in over 25 industries, day after day.

In 2023, we launched another exciting offering: GROW with SAP. GROW is tailored to midsize customers and to subsidiaries and acquirees of larger companies. These customers want to grow quickly. They are looking for cloud solutions from a single source with a high level of integration, but also scalable. With GROW, they can quickly add new modules or expand into more countries. With GROW, customers can be up and running with their new ERP software in mere weeks instead of years. It is this speed and agility that give our customers a decisive competitive advantage.

One company that opted for GROW in 2023 is FREYR. FREYR is a leading producer of high- performance batteries for electromobility and other applications.

RISE and GROW are already success stories today. And they will continue to drive our growth. Many on-premise SAP customers today still operate their systems locally in their data center. We will help these customers get to the cloud, step by step, with RISE. Doing so will multiply the revenues we generate. The cloud revenue we generate is approximately two to three times the software support revenue. Because we don't just provide support, we also take over the operation of the software and continuously deliver innovation.

With RISE, we also position BTP as the platform for extensions at our customers. This step will likewise generate new revenue for us. Currently, some companies are spending seven times as much on modifications to their SAP systems than on their SAP standard software itself. When customers use cloud services and run extensions on BTP, we and our partners address this segment as well.

GROW with SAP similarly has a lot of potential. To date, more than 1,000 customers, 60% of them new wins for SAP, have chosen GROW. Some think SAP is only for large customers. But for a long time we have offered attractive solutions for midsize businesses, especially here in Germany.

Thanks to RISE and GROW, customers are transitioning to the cloud. They usually start off with software for a particular line of business but are soon interested in further solutions from our portfolio - because business processes must be integrated across corporate functions. Our end-to-end solutions for human capital management, spend management, and the supply chain are just a few examples. SAP can ensure that everything interacts smoothly. Which is why customers choose more and more SAP services over the years as opposed to niche-market offerings from other providers.

We call this strategy "Land and Expand." We land the customer for a given business service with RISE and GROW - and then expand that account by progressively selling them additional offerings for other services. We're already experiencing this effect, and it's going to contribute to more growth in the years to come.

Business AI

Now we come to the most important growth driver - innovation with artificial intelligence at its core.

We've been working on AI for a long time at SAP and use it to enhance our products. AI can solve problems that traditional software is not able to. Two years ago, there was another huge breakthrough in this field: generative AI, or GenAI for short.

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What makes GenAI so special is that it can solve problems it wasn't specifically trained to solve beforehand. Speech-based AI models, such as ChatGPT, can answer knowledge questions, translate texts, and find grammar errors. But they can also recommend travel destinations, draft letters, and - yes - write lines of code.

So GenAI is very versatile. It can easily be applied to new problems, such as the business challenges many companies face. Like saving costs, becoming more sustainable, predicting demand, or making supply chains more efficient and more stable.

Like the cloud, GenAI will deeply transform many industries in no time at all. And it will revolutionize how people work with our software and do business. Our customers see the tremendous opportunities in it. And they understand the need to use AI to stay relevant and competitive. They are ready to invest. And that means a huge market opportunity for us.

At SAP, we call this "Business AI". With SAP Business AI, we offer customers huge added value: Artificial intelligence deeply integrated into business processes and applications

We are on track to be a major player in the AI space. Here's why:

Our first advantage: hundreds of thousands of customers use our software for their business processes. As a result, we have a direct influence on the company's processes where value is created. And with that, AI can deliver the maximum value right through our software.

Our second advantage is data: Artificial intelligence provides high added value if the algorithms are trained with real business data. No technology company has greater access to enterprise data than SAP.

Our third advantage is trust: We have accompanied our customers through many large transformations. They know that they can count on us. SAP Business AI contributes to this value proposition. It stands for the highest standards in safety, privacy, and ethics.

Relevant, reliable, responsible - this is business AI from SAP.

Today, we integrate AI at all major levels of our cloud software. In such a way that it is easily available, directly in the programs that our customers already use.

Our AI assistant Joule will be the user interface for SAP applications going forward. Imagine Joule as a super-fast,super-informed assistant for all employees in a company. You can interact with it using normal language and it will perform all commands and analyses.

But Joule is not the only AI feature we are embedding into our products. More than 30 generative AI functions have been added to our products since the end of 2023, and we plan to release more than 100 this year.

On top of this, we give our customers and partners the opportunity to build their own AI innovations by way of the BTP. Fully integrated with direct access to SAP and third-party data and with the customary high SAP standards for cybersecurity, data protection, and ethics.

To further strengthen our place in the business AI world, we've teamed up with other top AI specialists.

This year and next year, we will invest around €1 billion in AI for business applications - and thus in our growth and our future. I'm already looking forward to reporting back to you on that.

Share price development

Dear shareholders,

Our 2023 results speak for themselves. And we have a clear growth perspective in the medium and long term. With RISE, GROW, and innovations like SAP Business AI. And the capital market recognizes this. At the end of 2023, SAP stock already stood at a strong €148.18. And it's increased sharply since then. At market close on May 7, the share price was €174.36. That's 79% higher than it was on January 1, 2023. SAP thus significantly outperformed the DAX, which grew 31%, and is well ahead of the NASDAQ, which increased 66%.

In the first quarter of 2024, SAP was worth more than €200 billion on the stock exchange for the first time. We had already regained our status as the most valuable DAX company in February 2023. The

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Company has developed very well over the long term as well. In the 10 years since the 2014 Annual General Meeting of Shareholders, SAP stock has tripled in value.

Dividend and Share Buyback

Given our strong fiscal year 2023, we can also propose a dividend of €2.20 per share today. This is 15 cents or 7.3 percent higher than our dividend in 2022.

Another large part of our profits is directly reinvested into innovation. In 2023, we spent a total of €5.6 billion3 on research and development.

The share buyback program is another an important part of our strategy for SAP's future. The shares we acquire are primarily intended to be used for share-based compensation of the workforce. The aim of this program is to motivate and retain employees. As a shareholder, you too benefit because the share buyback program counteracts dilution of your shares.

We announced the current share buyback program based on its authorization by the Annual General Meeting of May 2023. It has a volume of up to €5 billion and is expected to run to the end of 2025.

In a first tranche, from August 2023 to February 2024, we acquired approximately 7.6 million treasury shares for a total price of approximately €952 million for all purposes permitted by the authorization. This represented around €7.6 million or 0.6% of capital stock.

In February 2024, we started a second tranche of the share buyback program of up to €1.25 billion. This tranche is expected to run until August 2024.

In this second tranche, we have so far acquired approximately 3.7 million treasury shares for a total of €645.7 million. This represents around €3.7 million or 0.3% of capital stock. Here too, the acquisition was made for all purposes permitted by the authorization of the Annual General Meeting on May 11, 2023.

For more information about our share buybacks, visit the SAP Web site.

Whether you look at the share price performance, the dividend, or the share buyback program - your SAP, ladies and gentlemen, is and remains a very good investment.

Conclusion

What does the future hold? Let's first look at the world around us: The global economy is evolving faster than ever before. Demographic change, climate change, a volatile geopolitical situation, and vulnerable supply chains are just some of the major challenges. Millions of companies need to find answers to that. They need to become more flexible, faster, more productive, and more sustainable. This complexity can only be tackled with digitalization and software. Which is precisely where SAP's solutions come in.

So, the opportunities for SAP here are huge. We expect our growth to continue to accelerate beyond 2025. All of this is reflected in our ambition: we want to be the Number 1 Enterprise application AND Business AI company.

Dear shareholders,

I would like to conclude by thanking you once again for your trust in SAP.

Three years ago, we further accelerated our cloud strategy. And we received a lot of criticism back then. But many of you believed in us.

And that's paying off now. SAP is clearly on track for growth - in fiscal year 2023 and beyond. We put our nose to the grindstone over the last few years and laid the foundation for sustainable success. SAP's strong share price performance proves it.

Reinventing itself over and over again is in SAP's blood. We don't just look at the business activities, successes, and constraints of the present - but at what makes us strong and successful in the long term. With this determination, this courage, this passion, SAP has become what it is today: an excellent company with great perspectives.

3 Non-IFRS

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CEO Address | SAP Annual General Meeting of Shareholders | May 15, 2024

I promise you, dear shareholders: we will remain true to this spirit. We will invent new innovative solutions that make the world a little better every day. And we will not be content with what is - but act on the great opportunities ahead.

Thank you all for your trust!

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