Good day, and welcome to the SAP Conference Call. At this time, I would like to turn the conference over to Mr. Stefan Growe, 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 Quadrig's CEO, Ryan Smith. Also joining us for Q and A are SAP Executive Board members, Luka Mucic, our CFO and Rob Anflin, who runs Cloud Business Group.
As usual, before we get started, I would like to say a few words about forward looking statements. Any statements 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 1990 Words such as anticipate, believe, estimate, expect, forecast, intend, may, plan, project, predict, recorded. 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. And 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 and market leader. As you know, SAP is the platform that powers 77% of the world's by the company's name and the company's name. 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. In 2010, our consistent strategy has resulted in a structural incline for SAP. With organic innovation and smart M and 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 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 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. Recorded. Businesses used to have time to sort all this out.
However, in today's unforgiving world, the damage is immediate, recorded. This has shifted the challenge from running a business to guaranteeing great experiences for every single person. And to win in the experience economy, there are 2 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 the 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 O data 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. Recorded. So 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 by the end of the year, well, well oversubscribed. It's easy to understand why investors are so excited. Alteryx has subscription revenue growth greater than 40%, high renewal rates underscore the fantastic customer experience they deliver, recorded. A best in class subscription gross margin in the high 80s that reflects their highly scalable, 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. Recorded. 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 2 solution sets. This is by the company's name and the company's name. 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 recorded with a beautiful consumer grade user experience.
It will be a major differentiator for SAP in every competitive segment from C4HANA to S4HANA 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, very seriously and deeply personal. So 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. Brian, 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. So Ryan, in friendship, please join me.
Congratulations to you, the Qualtrics family, and welcome to the call. I welcome your remarks to the audience. Recorded. Hey, thank
you, Bill. Those are kind words. I think if you think about the Qualtrics journey, we're excited to share it with all of you, but I think we're much more recorded. We started Qualtrics 16 years ago in my parent's basement. There were a couple of things that we wanted to do.
We want become. 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 This last week, we were on the IPO roadshow. I was supposed to come home and take a break and then head back out this week and ring the bell. And Bill and I have been talking for some time.
Our IPO was over 13 times oversubscribed. We hadn't even got to the best part yet. I think it was pretty clear that we were going to be pricing between $5,000,000,000 to $1,000,000,000 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 and it's because we fundamentally have an opportunity to take experienced 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. Exim is a category of itself.
We are living in the experience economy. Used to be that only a couple of brands were experience brands. Now every single category, every single market, every single leader, every single organization is becoming an experienced recorded. That's what people are competing on. As engineers and 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, recorded. And most importantly, help organizations act on experienced 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. And we've been building our platform to integrate with all of the operational data systems. So 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 Inside out, now the outside in in one single system. It's unprecedented. It's an opportunity that we couldn't pass.
And On behalf of the 2,000 employees globally at Qualtrics, I don't need to say much more that we're super excited for the future. Recorded. We've been dreaming about ExSim everywhere for a long time and this is a ticket. I'm super excited to partner with Bill and 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 and A.
Thank you, Bill. I'd like to turn it back to the operator. You can now start the Q and A session, please.
Certainly. Recorded. And 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.
Thanks so much and 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. But 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
recorded. Yes, Rob, thanks for directing the question. It's a good one. I think that the world that I live, We do span 9,000 brands and I talk to a lot of CEOs and Every CEO I talk to wants to talk about 2 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. 2nd thing they want to talk about is their employee base. They are struggling to recruit, to retain and the churn on the employee base recorded. Is a lagging indicator and the leading indicator is what's happening before that. And as I got with Bill and we started talking about How our systems could work together to solve that and create the next big market end to end.
Recorded. It just became crystal clear that this is a once in a generational opportunity. And look, I mean, we've had 4 or 5 companies take a massive run at us over the years. We've always been a profitable business and with high growth and I've watched what SAP has done in the cloud and 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.
And so I was telling Bill earlier today, I've been running this since I was a junior in college and we started this business And I've never been more fired up than I am tonight to go do this. And I've got a whole team of people who are ready to go. And you can ask anyone who knows the Qualtrics
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 Luke is on the phone, but would love to hear a little bit more about the financial impact. I think we can make some assumptions given the S-one that's out there, but maybe specifically do we expect that the pace of investment at Qualtrics will accelerate because 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?
Yes, I'm on the call, so I can quickly
go ahead. Sorry, Bill. Go ahead.
Go ahead, Luke. I just Walter, I just wanted to make sure that you heard me earlier. What I basically said is fastest growing cloud company in the world, recorded. Software and cloud at double digit, total revenue at double digit, operating income at a rate greater than the total revenue growth rate. And as it relates to Qualitrix, this is a company that is born to run and born to grow.
And this is a synergy on the top line. Recorded. On the back office stuff, they can run all of our software and use all of our assets and they obviously get it at a really good price. So we're not going to go into the depth of every detail on the business model tonight. We obviously haven't even completed the transaction.
But I'll give it to Luca with that outline in mind.
Yes, absolutely, Bill. And without going into all levels of detail, what you can obviously Not only with Qualtrics together with our go to market capabilities provides a substantial further boost to our cloud business, will very nicely complement all the major portfolio areas that we have in the cloud. Recorded. We can make it work perfectly together with Spend Management, with Workforce Management, obviously, with RCX portfolio. But 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 80s. From a total gross margin perspective, they are basically at the levels SAP at 74%. So this is extremely strong. And then of course, on the OpEx side, we can help them to 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.
And this will make a very, 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, and 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.
And then just
Bill, the decision to
Gabwater, please go ahead.
Just quick one on the recorded. I think you'd made Luca had made the statements as recently as September around the tuck in. What was it about this? I mean, I think There's been assets in the space around for quite a while, Qualtrics included. Why now the time to make it to do a bigger deal?
Well, I think there's a couple of things. First of all, a couple of months ago or when Luca and I both were more That was just a dream that we had, but 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. So this is Something I must admit we worked very hard on and honestly did not think with a high probability we could get it. So we feel incredibly fortunate. And frankly, to all the dear investors out there, please know I care very, 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. And 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 90s 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. Recorded. You have to remember, as Ryan said, I can't take in any boardroom where Churn isn't the number one topic of conversation. The net present value of a satisfied customer is the most enormous the 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 $8,000,000,000 to give you any kind of return that will even remotely resemble what I'll get you with Qualtrics working with Ryan Smith recorded and that great company here in Provo, Utah.
And 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 you.
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 of 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 2 or 3 hypothetical customers in 2 or 3 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 recorded. It means a lot. You're a good man and a good friend. We know each other a long time. So I'm on the Board of Under Armour.
So it's easy for me to talk about Under Armour, recorded because Under Armour is not only an SAP customer, but also an excellent Qualtrics company. As you know, Under Armour runs the whole recorded. So if you think about, for example, omni channelecommerce with mobile and social recorded. But 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. And we want to know everything about the athlete.
What do they eat? How do they sleep? And ultimately, how does that impact their performance? And even tracking with a chip how many miles are left on the shoe and making them a real time offer at retail. So just think about that.
When you make that new shoe, you want to say, hey, Hover is the big thing. We've invested massive amounts of R and D. How do our consumers like it? So 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. So So 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.
Brian? Yes. Great chatting with you, Kash. I don't think when we met a couple of months ago that you think you would have thought that it would
have 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 recorded. And our vision, it's the customer, the product, the brand and the employee. And those used to be siloed experiences. But as we think about Qualtrics who powers all the customer feedback for 14 different airlines, right?
And a lot of them are running on SAP as well. If you evaluate the airline and you're thinking about the whole experience of the airline, It touches the product, it touches the employee and it touches the customer experience. And 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. And so for us, it would have 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 You could see that we were going to be a $20,000,000,000 to $30,000,000,000 market cap company. You sat in my office. Everyone was saying that. We believe it.
Recorded. 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 And 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.
And 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 It's the same core. It's how to drive a good experience from end to end. And we need all the operational data to do that because that's where organizations are breaking down.
And Kash, keep in mind, we'll fuse SAP Leonardo with deep machine learning and AI between the X data and the O data platforms to ensure all the predictive capability and all the ideation around helping that consumer to have an even better experience as
Bill and Ryan, exciting experience to be look forward to. Thank you.
Thank you.
Let's move to the next question, please.
Thank you. And the next question comes from Mohammed Moala from Goldman Sachs. Please go ahead. Your line is now open.
Great. Thank you and 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?
And what So what timeframe will that take to sort of unlock some of the synergies you're talking about? And then secondly for Bill, you've obviously done a number of recorded. There is a sort of a playbook and a track record you've built on some of this cross sell, up sell and acceleration recorded. Can you maybe walk us through I think you talked about sustaining or accelerating the 40% growth of Qualtrics, where the sort of the kind of early opportunities should be, whether it's regionally or by vertical, recorded and just sort of the relative impact to the business. Thank you.
Yes. So I'll jump in there first. This is Ryan. So Mohamad, thanks. That's a great question.
If you think
about what we're doing on the customer experience side, recorded and we're going to start working on it immediately. And 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 and there's really no other way to do it. And so we're allowing the HCM platform of SAP to have the So we can be communicating at scale.
You think about all of the products in the world that are built through the SAP platform or the ERP system, recorded. 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 fell. And so bringing the customer into that process in real time allows them to be right and that's what we're going after. And 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. And 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.
So with that, I'll turn it over to Bob.
Thank you very much, Ryan. And Mohamad, I would offer you a couple of 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. And specifically, you asked about cross sell and up sell. I see a three-dimensional object for you to consider.
1 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 kind of early start up industries for us and vice versa. There will be tremendous synergy on the growth side in industry across the board and buying center. Now here, think about this. As Ryan's been saying very rightfully, the end to end business process recorded.
We now have a chance to go into the buying centers and strengthen all those line of business So 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 the 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 recorded on an end to end basis across the board for all the touch points in which I create experiences recorded from my external forces and I got all the people inside my company passionate and obsessed with serving all the people outside my company. Mohammad, this is like no other opportunity I've seen in my career.
Okay. Thank you. Thank you.
Let's take the next question please.
Thank you. And the next question comes from Gal Munda from Berenberg Capital Markets. Please go ahead. Your line is now open.
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 released in the presentation, it says, Qualtrics got around 9,000 customers, the penetrated around 75% of Fortune 100 Companies, but then at the same time, the opportunity coming perhaps from the international markets recorded. 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, and I do want to give Quick intro to Rob because the guy that I first met in 2002 when I started with him, he was Rob Enslin. He runs the Business Network Group and our cloud assets recorded for us and he is a phenomenal leader and I want to give him credit for participating in this process with myself and Ryan and the management team every step recorded. We also have Jen and Adair, the leaders of our global customer operation, and all of them are fired up and ready to go. I would give you a couple of thoughts and then I'll turn it over to Rob and Ryan.
1, any ecosystem partner we have, whether it's a hyperscaler partner or otherwise, the flywheel for SAP is a 10x. So 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. So you're going to see a huge uptake. And 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.
So 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? So with that in mind, Ryan, perhaps you'd have some color and Rob Enslin as well.
Yes. I think from our standpoint, I mean, it wasn't too long ago before we stood up our enterprise business. It's still really early days on the enterprise and 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 that's out there is 685 customers that spend over $100,000 annually with us. Recorded.
And you think about the 10x number and what's going to happen and then the other 9,000 toward 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, I mean, everyone talks about it. It's written up in case studies within business schools, But we are early, 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. So 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, I mean 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, well, that was the right one.
Rob, that's a great comment. Rob?
Yes. 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 is going to be energized like it's never been energized recorded.
The story is actually very, 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. And that goes across everything from human capital management, when you think about 100,000,000 employees that we look after and how we can actually Change their daily lives, the interaction with products, the interaction with brands. And so I think not only do I think, I actually know that the organization will pick this up pretty recorded.
And we'll 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 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 you're going to be utilized in the customer experience?
Absolutely. It's going to connect across all aspects, product, recorded. Spend management at 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. And this is what
recorded. Yes. And this is Luca. Just remember that we have 3,500,000 companies recorded 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 free 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, Luca.
Thank you
so much. And also Rob and Ryan. I do want to let you know one thing, great comments from Luca, 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 Luca 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 at all.
Great. Thank you. Let's move to the next question, please.
Thank you. We'll take our next question from Charlie Brennan from Credit Suisse. Please go ahead. Your line is now open.
Great. Thanks very much for taking the 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 road map, so there's no margin downtick? Or are you saying that once we pro form a 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. And I'm saying and I said, we will design the business the 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 stock based compensation, so we call it out. So it's not so difficult to figure it out.
And Luca and I have agreed to do that. And you'll be seeing that forthcoming as well. So you'll have great visibility. You're dealing with the trifecta of double digit growth, the fastest
the And you called out share based payments there. In the past, we've seen a step up in share based compensation when you've done these SaaS acquisitions. Is there anything we should be expecting in terms of 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. So 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. So everything is clean, everything is upfront, you know what's going on. And I think that we're going to attract a huge new base by the end of the year.
And when you look at our float between Europe and the U. S, It's time to really up the ante in the U. S. And I think we've now attracted a whole new base in the United States based on this bold move. That's what I say.
Thanks. Thanks
and congratulations on the deal.
Thank you. And I'll take your last question. 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. And the last question comes from Neil Stee 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 that you're confirming that operating income or non IFRS operating income is going to grow faster than revenues next year. And that's not just a pro form a comment that
recorded. Yes. Let me jump in here. This is, as Stephan has said at the beginning of the call, based on non IFRS results.
Okay. But non IFRS, but specifically not on a pro form a basis, but non IFRS as reported by SAP in 2018 and then Including Qualtrics in 2019, but non IFRS in both years.
Is that right?
That's the ambition. Recorded. That's the ambition, but we will update our guidance once we close the transaction. And of course, We still have to do so and also know the exact timing of that.
Okay. That was the second question was the timing. Any
As we have said in the first half year of twenty nineteen, the Process that we are going to go through involves the CFIUS filing that we will make as soon as practicable. And then you have the opportunity to get through a fast track process if that is awarded by SIFU. That would take another 30 days then. Recorded. 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. And I know that quite clearly earnings per share for a transaction so transformative as this near term earnings per Share dilution is not something that we should necessarily worry ourselves about. But would you see this as dilutive to non IFRS earnings So 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. And thank you all for joining, and you can now disconnect. Thank you very much, and goodbye.
Thank you, everybody.