Good day and welcome to the SAP conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Stefan Gruber, Head of Investor Relations. Please go ahead, sir.
Good morning or good afternoon or good evening. This is Stefan Gruber, Head of Investor Relations. Thank you for joining us to discuss our announcement of SAP's intent to acquire Qualtrics. I'm joined by our CEO, Bill McDermott, and Qualtrics CEO, Ryan Smith. Also joining us for Q&A are SAP executive board members, Luka Mucic, our CFO, and Rob Enslin, who runs Cloud Business Group. As usual, before we get started, I would like to say a few words about forward-looking statements. Any statement made during this call that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as anticipate, believe, estimate, expect, forecast, intend, may, plan, project, predict, should, and will, and similar expressions as they relate to SAP, are intended to identify such forward-looking statements.
SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in our filings with the U.S. Securities and Exchange Commission, the SEC, including our most recent annual report on Form 20-F filed with the SEC. Participants of this call are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their date. Now please note that unless otherwise noted, all financial numbers referred to on this conference call are non-IFRS or non-GAAP, and growth rates and percentage points are non-IFRS or non-GAAP constant currency year-over-year. Finally, you can find the investor presentation about this transaction on our investor relations website.
With that, I'd like to turn things over to our CEO, Bill McDermott.
Thank you very much, Stefan. Hi, everyone. I'm here to introduce the latest bold move in SAP's long track record as the business software market leader. As you know, SAP is the platform that powers 77% of the world's transactions in nearly every single country on Earth. Today, with our plan to acquire Qualtrics, we're empowering every human voice to drive every single experience in the global economy. It's worth reminding you how we arrived at this extraordinary moment. Since 2010, our consistent strategy has resulted in a structural incline for SAP. With organic innovation and smart M&A, all of the company's key metrics have either tripled or quadrupled under this management team. That, however, is not enough for SAP. We reject complacency of every kind. This announcement could be a surprise to you, as it is clearly more than a tuck-in. Qualtrics is a significant company.
I can only tell you that opportunities to lead generational shifts in the industry don't come along very often. We found one with Qualtrics. We weren't sure we could get it, but I owed it to you to go for it if we could. As you get to know this story, I'm confident you'll like it as much as we do. With Qualtrics at our side, SAP is declaring experience management as the next move for our customers. This new category is the biggest growth driver for our industry and the next frontier for the global economy. Every leader in the world understands what's happening out there. There are millions of complaints every day about disappointing customer experiences. This is called the experience gap. Businesses used to have time to sort all this out. However, in today's unforgiving world, the damage is immediate, the disruption is imminent.
To win in the experience economy, there are two pieces to the puzzle. SAP has the first one, operational data, or what we call OData, from the systems that run companies. Our applications portfolio is end-to-end, from demand chain to supply chain. The second piece of the puzzle is owned by Qualtrics, experience data or X-data. This is actual feedback in real time from actual people. How they're engaging with a company's brand. Are they satisfied by the customer experience that was offered? Is the product doing what they expected? What do they feel about the direction of their employer? Think of it this way. The OData tells you what happened. The X-data tells you why it happened. At present, there's no technology company that brings these two worlds together.
In particular, this exposes the structural weakness of CRM offerings, which are still back office focused. Experience management is about helping every person outside of companies influence every person inside of companies. SAP and Qualtrics will do just that. The strategic value of this announcement is rivaled only by the business value. Under the visionary leadership of Ryan Smith, Qualtrics has become one of the most exciting companies in the history of the information technology industry. With over 9,000 customers, their high double-digit growth would have propelled them to be the most exciting IPO of the year. Well over subscribed. It's easy to understand why investors are so excited. Qualtrics has subscription revenue growth greater than 40%, high renewal rates underscore the fantastic customer experience they deliver. A best-in-class subscription gross margin in the high 80s that reflects their highly scalable, highly efficient SaaS cloud platform.
Driven by these impressive factors, Qualtrics IPO has already several times oversubscribed again and again. What a week Ryan Smith has had. Rather than go it alone, Ryan and I decided that we'll go farther and faster together. After we close the transaction, SAP's immense global scale will put Qualtrics XM platform everywhere on the planet Earth. Our 95,000 employees and millions of ecosystem participants will drive experience management into every intelligent enterprise in over 190 countries. There is no overlap in the two solution sets. This is highly growth-oriented in every way. Qualtrics is a pristine asset, a great company. It is a fast-growing company, a well-led company with amazing people and a great culture. It brings a clean, modern platform with a beautiful consumer-grade user experience.
It will be a major differentiator for SAP in every competitive segment, from C/4HANA to S/4HANA to business networks and the SAP Cloud Platform. To the colleagues on both sides, this announcement makes you stronger and will yield substantial benefits. To our shareholders, none of this is possible without your continued trust in SAP, something I take very seriously and deeply personal. Here's what we're giving you. A new category that expands our addressable market substantially. A growth juggernaut that accelerates our position as the fastest growing cloud company at scale in the world. Our double-digit growth trifecta, please listen carefully. Cloud revenue at double-digit, software and cloud revenue at double-digit, and operating income at double-digit at a higher percentage than the double-digit revenue growth. That is the trifecta we are committing to you tonight.
We will ensure the design of the SAP company will deliver on these growth objectives in 2019 and beyond. Ryan, we couldn't be more excited to welcome you to the SAP family. I'd like to congratulate you, your dad, Scott, your brother, Jared, leaders like Zig, and the entire Qualtrics family on this major achievement. It's really special. I've never been more excited and more proud to welcome a true leader into the SAP family. You are so welcome to share a few words with our distinguished analysts on this call tonight, today, or this afternoon, depending on where you are. Ryan, in friendship, please join me. Congratulations to you, the Qualtrics family, and welcome to the call. I welcome your remarks to the audience.
Hey. Thank you, Bill. Those are kind words. If you think about the Qualtrics journey, we're excited to share it with all of you, but I think we're much more excited for the world to come. We started Qualtrics 16 years ago in my parents' basement. There were a couple things that we wanted to do. We wanted to build the business the right way and develop technology that's going to change the world. For the last 16 years, we've built one of the only cash flow positive tech companies at high growth that the world's seen. This last week, we were on the IPO roadshow. I was supposed to come home and take a break, then head back out this week and ring the bell. Bill and I have been talking for some time.
Our IPO was over 13 times oversubscribed, and we hadn't even gotten to the best part yet. I think it was pretty clear that we were going to be pricing between $5 billion-$6 billion, and it would have run up from there. A lot of people are asking why we would change course, why we would do this deal, even though the IPO could have been higher or bigger than the deal size. It's because we fundamentally have an opportunity to take experience management to the world and reframe the way the world thinks about CRM, ERP, and all of the other systems that we're going to be interacting with. XM is a category of itself. We are living in the experience economy. Used to be that only a couple brands were experience brands.
Now, every single category, every single market, every single leader, every single organization is becoming an experience brand. That's what people are competing on. As engineers in development and technology and digital transformation happens everywhere, if you are not leading in the experience space, you will not lead. We collect and have built an enterprise platform to manage, but most importantly, help organizations act on experience data in the moment. This is the human factor data. It's the why. It's how someone believes and what they will tell you they're going to do next. Operational data is the operational data that tells you what happened. We've been building our platform to integrate with all of the operational data systems.
The opportunity to partner with SAP, who owns end-to-end, and by the way, the only one in all of technology and enterprise technology space that owns every single platform that is needed to run the business and be a layer on top of that, where organizations can run their business from the inside out, now the outside in one single system, it's unprecedented. It's an opportunity that we couldn't pass. On behalf of the 2,000 employees globally at Qualtrics, I don't need to say much more than we're super excited for the future. We've been dreaming about XM everywhere for a long time. This is the ticket. I'm super excited to partner with Bill. We're just getting started.
Well, Ryan, thank you so much. I'm very grateful for your kind remarks, and excited. Ladies and gentlemen, this is a bold move for SAP, for Qualtrics, and for the future of the business software industry. Stefan, I'd like to turn it back to you now. Let's do some Q&A.
Thank you, Bill. I'd like to turn it back to the operator. You can now start the Q&A session, please.
Certainly. Ladies and gentlemen, if you'd like to ask a question over the telephone at this time, please press the star or asterisk key, followed by the digit 1 on your telephone. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star 2. Again, please press star 1 to ask a question over the telephone. We will pause just for a moment to allow everyone the opportunity to signal. We can take our first person from the queue, who is Ross MacMillan from RBC Capital Markets. Please go ahead. Your line is now open.
Well, thanks so much, congratulations to everyone involved. My question was actually directed to Ryan. Ryan, just as you've obviously thought about this a lot, this is a big decision. As you thought about the real areas that SAP can accelerate the Qualtrics business, the Qualtrics story, take it globally, what are the things sort of down the second and third layers that you thought about that, maybe we aren't thinking about, that you really think SAP can enhance the value proposition and enhance where the company can go? Thanks.
Yeah. Ross, thanks for directing the question. It's a good one. I think that the world that I live, we do span 9,000 brands, I talk to a lot of CEOs, every CEO I talk to wants to talk about two things. They want to talk about their customers and everything they can do to prevent churn. Churn is a lagging indicator. A leading indicator is the experience people have had months before that. Second thing they want to talk about is their employee base. They are struggling to recruit, to retain, the churn on the employee base is a lagging indicator, the leading indicator is what's happening before that.
As I got with Bill, we started talking about how our systems could work together to solve that and create the next big market end-to-end, it just became crystal clear that this is a once in a generational opportunity. Look, I mean, we've had four or five companies take a massive run at us over the years. We've always been a profitable business and with high growth. I've watched what SAP's done in the cloud, they've absolutely put on a clinic on how to grow fast in the cloud and do it at scale. I have massive respect for what they've done and for the ability to, overnight, have the ability to take XM and experience management to the world. It's what we dream about.
I was telling Bill earlier today, I've been running this since I was a junior in college, we started this business, I've never been more fired up than I am tonight to go do this. I've got a whole team of people who are ready to go, you can ask anyone who knows the Qualtrics story, who's run into us, what that means.
Great stuff. Thank you.
Okay. Thank you. Let's take the next question, please.
Thank you. We can take our next question from Walter Pritchard from Citi. Please go ahead. Your line is now open.
Hi. Thanks. I'm not sure if Luka is on the phone, but we'd love to hear a little bit more about the financial impact. I think we can make some assumptions given the S-1 that's out there. Maybe specifically, do we expect that the pace of investment at Qualtrics will accelerate? It looks like the deal is not all that dilutive, other than the cost of debt here, but wondering how you think about spending going forward here.
Yeah, I'm on the call, so I can quickly-
Yes, maybe I could just-
Go ahead. Sorry, Bill. Go ahead.
Go ahead, Lu. Go ahead, Luka. Walter, I just wanted to make sure that you heard me earlier. What I basically said is, fastest growing cloud company in the world, software and cloud at double digit, total revenue at double digit, operating income at a rate greater than the total revenue growth rate. As it relates to Qualtrics-
Yep
This is a company that is born to run and born to grow, this is a synergy on the top line. On the back office stuff, they can run all of our software and use all of our assets, they obviously get it at a really good price. We're not going to go into the depth of every detail on the business model tonight. We obviously haven't even completed a transaction. I'll give it to Luka with that outline in mind.
Yeah, absolutely, Bill. Without going into all levels of detail, what you can obviously see is that, not only, with Qualtrics together with our go-to-market capabilities, provide a substantial further boost to our cloud business, will very nicely complement all the major portfolio areas that we have in the cloud. We can make it work perfectly together with spend management, with workforce management, obviously with our CX portfolio. It is also leading in a lot of the efficiency metrics. When you take a look at the gross margin performance of Qualtrics on the cloud subscription side, this is absolutely best in class in the high eighties. From a total gross margin perspective, they are basically at the levels of SAP at 74%. This is extremely strong.
On the OPEX side, we can help them to scale, probably over time, more efficiently, in particular on the go-to-market side because we have the global reach, we have the global distribution area. This will make a very compelling sale, to combine the experience data with the operational data and gain true 360-degree insights. This is a natural opportunity that we can position with our customers, we will absolutely go even further up from what Qualtrics has been able to drive standalone, which as you said, are already very impressive metrics.
Interesting-
Okay, thank you.
Bill, Oh, okay.
Yeah, Walter, please go ahead.
Oh, just quick one. On the decision to take it beyond a tuck-in, I think Luka had made the statement as recently as September around the tuck-in. What was it about this? I think there's been assets in the space around for quite a while, Qualtrics included. Why now the time to do a bigger deal?
Well, I think there's a couple of things. First of all, a couple of months ago, or when Luka and I both were more communicating a tuck-in philosophy, we never thought that we could get Qualtrics. That was just a dream that we had. It was a faraway dream because they were very focused on taking the company public, and it was obviously the most successful IPO of 2018, had they chosen to do it. This is something I must admit we worked very hard on and honestly did not think with a high probability we could get it. We feel incredibly fortunate. Frankly, to all the dear investors out there, please know I care very much for you and how you're looking at things, and I can only tell you we have a whole wall full of the potential tuck-ins.
If we did a great job on each and every one of them, I couldn't have gotten you to the future year revenues of 2019 with that level of revenue, that level of growth. The beauty of this architecture, user experience, and addressable market. This is a massive addressable market. This market is going to take the world by storm. I was there in the nineties when CRM came on the scene. I used to work with research analysts that wrote about it and said it was going to be the biggest thing, and it turned out to be a very big thing. Experience management's going to be as big, if not even bigger. You have to remember, as Ryan said, I can't take in any boardroom where churn isn't the number 1 topic of conversation.
The net present value of a satisfied customer is the most enormous consequential metric in business. A 5% improvement in retention is the equivalent of a 95% improvement in profit. I couldn't get enough tuck-ins, even if they did add up to $8 billion to give you any kind of return that will even remotely resemble what I'll get you with Qualtrics, working with Ryan Smith and that great company here in Provo, Utah. That's the reason why. I'm doing it as much for you as I am for the customer and our mutual companies, and that's a fact.
Okay. Thank you.
Okay, thank-
Thank you. Let's take next question, please.
Thank you. The next question comes from Kash Rangan from Bank of America Merrill Lynch. Please go ahead. Your line is now open.
Thank you very much. First off, Ryan, congratulations. It was quite an experience, my car ride to get to your company, and quite an experience to meet with you in person a couple months back or so. Bill, congratulations. Great to be able to speak with you again. I'm wondering if you can give a concrete example as to maybe pick two or three hypothetical customers in two or three different verticals. What kind of business benefits tangibly could these customers conceive when they implement Qualtrics on top of their SAP implementations? Again, congratulations.
Well, Kash, I want to first of all thank you for your kindness towards Ryan and I. It means a lot. You're a good man and a good friend, and we know each other a long time. I'm on the board of Under Armour, so it's easy for me to talk about Under Armour, because Under Armour is not only an SAP customer but also an excellent Qualtrics company. As you know, Under Armour runs the whole company on SAP. If you think about, for example, omni-channel e-commerce with mobile and social consumers that want their privacy protected, they're on the run, and they want to shop in all channels. Sometimes it's wholesale, sometimes it's retail, sometimes it's direct to consumer.
All the time you need to know their prior buying history, their preferences, so you can make real-time offer and ultimately fulfill in an automated, speedy supply chain. Now as they augment their business model, they also want to connect the athlete with a personal area network, whether it's wearable or connected fitness to shoes, as an example. We want to know everything about the athlete. What do they eat? How do they sleep? Ultimately, how does that impact their performance? Even tracking with a chip how many miles are left on the shoe and making them a real-time offer at retail. Just think about that. When you make that new shoe, you want to say, "Hey, HOVR's the big thing. We've invested massive amounts of R&D.
How do our consumers like it? On their Apple Watch, they can give you a thumbs up, a thumbs down, or even write in a comment on how they like the Hover, which is the biggest idea that Under Armour has. Guess what? They're doing all that on Qualtrics. There you have it. SAP plus Qualtrics equals immense experience for the customer. Ultimately, it gives feedback to the brand, to the product engineering teams, and of course, it gives you a breathtaking customer relationship. That's why we did it. Ryan?
Yeah. Great chatting with you, Kash. I don't think when we met a couple of months ago, that you would've thought that it would've been in this setting. A lot of respect. Look, I think that if you think about XM and everything that we're after with experience management and our vision, it's the customer, the product, the brand, and the employee. Those used to be siloed experiences. As we think about Qualtrics, who powers all the customer feedback for 14 different airlines, right? A lot of them are running on SAP as well. If you evaluate the airline and you think about the whole experience of the airline, it touches the product, it touches the employee, and it touches the customer experience. In order to be able to drive an organizational change, we've got to connect with all of those systems.
SAP is the only company in the world that owns them all. For us, it would've taken 10 years in our dream, and we were all for that. We loved that path. Everyone was seeing us as the next ServiceNow or Workday and could see that we were going to be a $20 billion-$30 billion market cap company. You sat in my office. Everyone was saying that. We believe it. We still would believe that if we were alone. We believe we can get there at scale and take 10 years off this journey by rolling and working together with SAP. It's because they own end-to-end the enterprise. No one else does it. People on the sell side, or they own pieces of it, but being able to go end-to-end, it's unprecedented.
Whether it's airlines, whether it's the auto manufacturers, whether it's the 200 financial institutions that we work with, they're all trying to get at the same core. It's how to drive a good experience from end to end. We need all the operational data to do that because that's where organizations are breaking down.
Kash, keep in mind, we'll fuse SAP Leonardo with deep machine learning and AI between the X-data and the OData platforms to ensure all the predictive capability and all the ideation around helping that consumer to have an even better experience as time goes on with SAP Leonardo, driven, of course, and powered by HANA.
Bill and Ryan, exciting experience to be looked forward to. Thank you.
Thank you.
Thanks, Kash.
Let's move to the next question, please.
Thank you. The next question comes from Mohammed Moawalla from Goldman Sachs. Please go ahead. Your line is now open.
Great. Thank you, congratulations on the deal as well from my end. Two questions. One for Ryan. In terms of the technology platform that you have, what level of integration do you envisage with SAP, what sort of timeframe will that take to sort of unlock some of the synergies you're talking about? Secondly, for Bill, you've obviously done a number of cloud acquisitions now. There is a sort of a playbook and a track record you've built on some of this cross-sell, up-sell, and acceleration of acquired assets. Can you maybe walk us through, I think you talked about sustaining or accelerating the 40% growth of Qualtrics, where the sort of the early opportunities should be, whether it's regionally or by vertical, and just sort of the relative impact to the business. Thank you.
I'll jump in there first. This is Ryan. Mohammed, thanks. That's a great question. If you think about what we're doing on the customer experience side, the integration will work directly with the CRM platform. That's something that we have almost 400 engineers here at Qualtrics, we're going to start working on it immediately. I think that's the excitement that we have. I think everyone's fired up around that. If you look at the employee experience, we power a lot of employee experience, where we're reinventing the way organizations can communicate at scale. If you take a step back and think about what we're trying to do at Qualtrics, we're allowing organizations to communicate with their customers, their people, and within their products at scale. There's really no other way to do it.
We're allowing the HCM platform of SAP to have the Qualtrics front end so we can be communicating at scale. If you think about all of the products in the world that are built through the SAP platform or the ERP system, we now have the ability to allow brands to actually bring the customer into the product development cycle. Never in the history of the world have organizations and brands been able to release products at the pace they're doing now, but a huge majority of them fail. Bringing the customer into that process in real time allows them to be right, and that's what we're going after. Those integrations are coming. They're going to come quickly. The greatest part about the Qualtrics platform is it's programmable, so it's point and click. It's got an easy user interface.
Not only are we doing that for all of the SAP customers, we're doing it for the 9,000 brands that we're working on, and we couldn't be more excited. With that, I'll turn it over to Bill.
Thank you very much, Ryan. Mohammed, I would offer you a couple things. One, thank you very much for acknowledging the fact that we have a reputation to uphold and a track record that we can absolutely lean on in terms of the credibility and the believability that we do what we say we're going to do. Specifically, you asked about cross-sell and up-sell. I see a three-dimensional object for you to consider. One is massive geographic growth. You have to remember, only 22% of Qualtrics' revenues now are coming outside of the U.S. core market. Light that growth fuse all over the world, turn on the jets, we're rolling. Second thing, we go to market in 25 distinctly different industries. There's some that Ryan has a stronghold in that are actually early startup industries for us and vice versa.
There'll be tremendous synergy on the growth side in industry across the board. Buying centers. Now here, think about this. As Ryan's been saying very rightfully, the end-to-end business process excellence of SAP with C/4HANA, and S/4HANA as two examples, but you also have human capital management, supply chain, and other things. We now have a chance to go into the buying centers and strengthen all those line of business cloud assets with the experience economy solution from Qualtrics.
now it's a people conversation, it's a CRM conversation, it's a brand conversation, and ultimately, it is a loyalty conversation where every leader of a company can say, "I'm a best run business on an end-to-end basis on an operating process level with my OData, and I create the best experiences on an end-to-end basis across the board for all the touch points in which I create experiences from my external forces. And I got all the people inside my company, passionate and obsessed with serving all the people outside my company." Mohammed, this is like no other opportunity I've seen in my career.
Okay. Thank you.
Great. Thank you.
Let's take the next question, please.
Thank you. The next question comes from Gal Munda, from Berenberg Capital Markets. Please go ahead. Your line is now open.
Sure. Thanks for taking my question. I'd like to elaborate a bit about the go-to-market strategy and the cross-selling opportunity you guys have mentioned. In the documents that you've released in the presentation, it says Qualtrics got around 9,000 customers, penetrated around 75% of Fortune 100 companies. At the same time, the opportunity coming perhaps from the international markets, because only 22% of revenue comes there. Can you talk about that, maybe perhaps about how deep the penetration of those Fortune 100 accounts is, and if that's the easy wins, when you take it for your sales channel. Thank you.
Sure. I would like to first of all, begin by letting you know, I also have Rob Enslin on the line tonight. I do want to give a quick intro to Rob because the guy that I first met in 2002 when I started with SAP was Rob Enslin. He runs the business network group and our cloud assets for us, and he is a phenomenal leader. I want to give him credit for participating in this process with myself and Ryan and the management team every step of the way. We also have Jenn and Adaire, the leaders of our global customer operation, and all of them are fired up and ready to go. I will give you a couple of thoughts and then I'll turn it over to Rob and Ryan.
One, any ecosystem partner we have, whether it's a hyperscaler partner or otherwise, the flywheel for SAP is a 10X. For example, if Ryan is landing and expanding in SAP like-minded accounts where we have a top 100, the flywheel, once it becomes part of the SAP value chain, is now a 10X uplift on everything he's getting in the top 100, not to mention the next 400,000. You're going to see a huge uptake. I want you all to know something. We did not factor that uptake into the business case to make the numbers work in the acquisition of Qualtrics. We did not uplift any of that. We took Qualtrics as it is, and we took SAP as it is, and we basically said, "Okay, these are the numbers." We did not uplift that. Can you imagine when we do?
With that in mind, Ryan, perhaps you'd have some color, and Rob Enslin as well.
I think from our standpoint, it wasn't too long ago before we stood up our enterprise business. It's still really early days on the enterprise. The ability to have 15,000 sales reps overnight to scale is absolutely fascinating. If you look at one of the stats we released on the road, and it's out there is, 685 customers that spend over $100,000 annually with us. You think about the 10x number and what's going to happen, and then the other 9,000 who are landing and expanding into that. We've got a very unique go-to-market. We've built one of the most efficient inside sales go-to-market motions in history. Everyone talks about it.
It's written up in case studies within business schools, but we are early days on the enterprise, and this allows us to scale in a rate that we could have only dreamed of with SAP, as well as connecting the organization end-to-end. It's a dream come true from the go-to-market standpoint. It's early, but we're super excited, and I think anyone who's looked at go-to-market and understands Qualtrics and understands SAP, the amount of text messages and emails I got from the road from bankers today who have been on the road with us the last week, it was unbelievable because they all said, "Whoa, that was the right one.
Rob, that's a great comment. Rob?
Yeah. Good morning. Just following on from Ryan's. I think, first of all, I'd say we have by far the most experienced enterprise sales organization in the industry. What we've done with the assets that we've acquired over the years and how we've connected that to our digital core has been simply stunning, and you can see that in the results. What I would say is Ryan's pipeline's going to be energized like it's never been energized before. The story is actually very energizing and exciting for our sales organization. As we connect the experience management to the OData, the operational data, we actually really start to provide value for our customers at a different level.
That goes across everything from human capital management, when you think about 100 million employees that we look after, and how we can actually change their daily lives, the interaction with products, the interaction with brands. I think, not only do I think, I actually know that the organization will pick this up pretty quickly and will be super energized, and you'll see some pipeline explosion pretty immediately.
Thank you. That's very useful. Just as a quick follow-up, in terms of employee experience, is that something that, in the future, could also be connected with the HR side of the business? Like SuccessFactors, for example. Is it something that's just going to be utilized in the customer experience?
Absolutely. It's going to connect across all aspects, product, employees, brand, customer, you can see all of the operational data, which is spend management on SAP, our ERP systems, our CRM systems, all benefiting from an experience management platform. We can automatically open up case tickets and actually deal with insights and actions and move to forward indicators. This is what the next evolution of enterprise applications is all about.
Yep. This is Luka. Just remember that we have 3.5 million companies roughly on our networks in the spend management area. Just imagine if we can pluck the Experience Management platform into their buying and selling experiences, with the buying customers that we have on those three business network assets. This is going to be, alone, a massive boost, in also how Qualtrics can address customers in a very, very efficient way, from just going one single route through our spend management.
Great comment, Luka.
Thank you so much.
Also Rob and Ryan. I do want to let you know one thing. Great comment from Luka, Rob, and Ryan. One thing that I got today was a comment from Amy Wilson, who runs our development organization from Human Capital Management with SuccessFactors. They're on fire with excitement. You combine this with human capital management, total spend management, as Luka said, in the business network, we've got an unmatched situation here. That's why I say it is so transformative. It is so big. We haven't fully comprehended it all.
Great. Thank you. Let's move to the next question, please.
Thank you. We'll take our next question from Charles Brennan from Credit Suisse. Please go ahead. Your line is now open.
Great. Thanks very much for taking question. I just wanted to come back to the comments on the financials, actually, just to make sure I've got it clear. Are you suggesting that you can absorb the dilution from this within the existing SAP roadmap so there's no margin downtick? Are you saying that once we pro forma the numbers, you'll be able to increase margins from that level?
I'm saying that we're going to do the fastest cloud growth in the enterprise application software industry. I'm saying that we're going to grow total revenue in double digits, and I'm saying we're going to grow operating income in double digits at a rate greater than the revenue growth. I'm saying, and I said, we will design the business model of SAP to accommodate those commitments. I'll also tell you that I've heard you loud and clear on having a separate line item for stock-based compensation, so we call it out so it's not so difficult to figure that out. Luka and I have agreed to do that, and you'll be seeing that forthcoming as well. You'll have great visibility. You're dealing with the trifecta of double-digit growth, the fastest-growing cloud company in the entire world in business software, and I'm talking by a lot.
You called out share-based payments there. In the past, we've seen a step-up in stock-based compensation when you've done these SaaS acquisitions. Is there anything we should be expecting in terms of a step change to our modeling on stock-based comp?
No, you shouldn't see step change. I'm just simply saying that I want you to have transparency, and I don't want you to have to read 30 pages of documents to figure it out. You'll have a separate breakout, so you'll have clear visibility on what it is, and we'll simulate something similar to what the American cloud companies do. Everything is clean, everything's upfront, you know what's going on. I think that we're going to attract a huge new base of American cloud investors because everybody loves a great cloud growth story. When you look at our flow between Europe and the U.S., it's time to really up the ante in the U.S. I think we've now attracted a whole new base in the United States based on this bold move. That's what I say.
Perfect. Thanks. Thanks, congratulations on the deal.
Thank you.
Thank you very much.
I'll take the last question.
I really appreciate it.
Sorry, Bill. Please go ahead.
I was simply offering the courtesy to Charlie to thank him very much for his feedback.
Thank you. Let's take the last question, please.
Thank you. The last question comes from Neil Steer from Redburn. Please go ahead. Your line is now open.
Hi. Thanks very much, and congratulations to everyone on the transaction. Sorry, just to clarify from Charlie's last question, it seems as though you're confirming that operating income or non-IFRS operating income is going to grow faster than revenues next year. That's not just a pro forma comment. That's as stated SAP in 2018 going into 2019 with Qualtrics.
Let me jump in here. This is as Stefan has said at the beginning of the call, based on non-IFRS results.
Okay. Non-IFRS, but specifically not on a pro forma basis, but non-IFRS as reported by SAP in 2018, then including Qualtrics in 2019, but non-IFRS in both years. Is that right?
That's the ambition. We will update our guidance once we close the transaction. Of course, we still have to do so, also know the exact timing of that.
Okay. That was the second question, was the timing. Any guesstimates at the moment as to when the deal will close?
As we have said, in the first half year of 2019, the process that we are going to go through involves the CFIUS filing that we will make as soon as practicable. Then you have the opportunity to get through a fast-track process. If that is awarded by CFIUS, that would take another 30 days then. We will have to see how this plays out. Other than that, there are just a few regulatory approvals in some minor jurisdictions required, which should not take a long time.
Okay. I know that quite clearly earnings per share for a transaction as transformative as this, near-term earnings per share dilution is not something that we should necessarily worry ourselves about. Would you see this as diluted to non-IFRS earnings for just a couple of quarters or for something slightly longer than that?
No, not for longer than that.
Thank you.
Very good. Thank you very much. This concludes the investor call. Thank you all for joining, and you can now disconnect. Thank you very much and goodbye.
Thank you, everybody.