Ladies and gentlemen, thank you for standing by. I'm Emma Clafferty, your Chorus Call operator. Welcome and thank you for joining the SAP 20 15 First Quarter Earnings Results Conference Call. Throughout today's recorded presentation, all participants will be in a listen only mode. The presentation will be followed by a question and answer session.
And I would now like to turn the conference over to Mr. Stefan Gruber. Please go ahead.
Thank you. Good morning or good afternoon. This is Stefan Gruber, Head of Investor Relations. Thank you for joining us to discuss our results for the Q1 2015. I'm joined by our CEO, Bill McDermott and Luka Mucic, CFO will both make opening remarks on the call today.
Also joining us on the call for Q and A are Board members, Rob Enslin, who runs Global Customer Operations and Dan Leuchardt, who leads products and innovations as well as Steve Singh, Head of SAP Business Network. 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 1995.
Words such as anticipate, believe, estimate, expect, forecast, intent, may, plan, project, predict, should, and 6. Outlook 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 most recent filings with the U.
S. Securities and Exchange Commission, the SEC, including SAP's Annual Report on Form 20F for 2014 filed with the SEC on March 20, 2015. Participants of this call are cautioned not to place undue reliance on these forward looking statements, We speak only as of their dates. Please keep in mind that unless otherwise noted, all numbers referred to on this conference call are non IFRS and growth rates are non IFRS as reported. And finally, I would like to point out that we will hold SAPPHIRE NOW in early May in Orlando, Florida with a Financial Analyst Program and an Evening Investor Reception on Tuesday, May 5.
We look forward to seeing you there. Now, I would like to turn the call over to Bill McDermott.
Thank you, Stefan, and thanks to everyone on the call for your time today. We really appreciate your interest in SAP. During the Q1 of 2014, SAP unveiled the natural evolution of our strategy to become the cloud company powered by SAP HANA. The focus of this strategy has been to help our customers reinvent their business models as digital businesses and to make digital simple. Today, I'm pleased to share results that demonstrate we continued successful execution of this customer driven strategy in the Q1 of 2015.
As customers look for the fastest way to consume innovation, no competitor offers more choice or depth in the cloud and SAP. In Q1, cloud saw a triple digit growth at 131% And we ended the quarter with about 80,000,000 cloud users, the most in the enterprise software industry. Software and cloud revenue grew 24%, which was our fastest growth rate in the last 12 quarters. This puts us right on track to deliver on our guidance for the full year. SAP's success remains anchored in the strength and widespread adoption of SAP HANA as the de facto platform for in memory computing in the enterprise.
Our next generation suite SAP S4HANA gained robust early traction with over 370 deals. Keep in mind, we only just launched this breakthrough solution in the Q1. Enno, a multinational power company, and World Duty Free have also recognized the potential of S4HANA innovations. We're seeing strong S4HANA adoption across all regions including developing markets like China with China Tobacco and Anton Oilfield both selecting S4HANA. At SAPPHIRE NOW, we will provide a detailed roadmap on how we will help our customers make this transition into the digital economy with S4HANA.
Let's talk briefly about how SAP is meeting the needs of customers in this digital economy. Customers want to run real time. It's now firmly established that the disk based database cannot handle The data explosion in the enterprise. This is why customers continue to choose SAP HANA across a broad range of use cases and We now have more than 6,400 total HANA customers. That is double the number from only a year ago.
SAP HANA also continues to evolve as a development platform. The HANA Cloud Platform, Our platform as a service offering enables organizations to extend and customize SAP applications quickly And easily in the cloud. This makes transitioning to S4HANA a whole lot easier for customers. This new offering from SAP is building significant momentum and has already attracted 1400 customers in a very short period of time. Partners including Burst and Accenture Are building new and innovative applications on the HANA Cloud Platform.
In Q1, we also launched Simple Finance for the public cloud, which leverages the native multi tenant capabilities of HANA and seamlessly integrates with our other cloud and network solutions. Simple Finance is also driving our fast growing private cloud business. For example, Latrobe University in Australia went live in Q1 with Simple Finance delivered in the managed cloud. Customers also want to run network. The SAP network vision is to connect people, devices and businesses in a single digital value chain that goes beyond the 4 walls of the enterprise.
We aim to drive a new era of inter enterprise collaboration and commerce for our customers. Our network strategy will deliver networks that 6. Cover all major categories of enterprise spend. Ariba for business to business commerce, Fieldglass for contingent workforce and Concur for travel are the first three networks we have now brought together under a single business network division. Our Business Network segment subscription and support revenue grew to €306,000,000 in Q1, A growth rate of over 200%.
Areeva continued to ramp network participation with new customers Such as Commerce Bank, ABS CBN and Kennametal. Fieldglass is spreading its pioneering vision of how the flexible labor procurement and management process should work with customers like Omnicom. In its 1st full quarter as part of SAP, Concur is already seeing the benefits of operating at a global scale with the support of the SAP field. New customers included Whirlpool Asia and POLITICO. Combined, these three businesses provide unparalleled visibility to help businesses run more efficiently and collaboratively, reinventing commerce between companies.
Finally, customers want all these capabilities so they can run simple with our line of business cloud applications and our private cloud solutions. For example, run simple means engaging the total workforce. With SuccessFactors and Fieldglass, SAP is the only company that can manage both permanent and flexible workers globally. Employee Central has ramped to more than 640 customers from 330 a year ago. This is more than 90% growth in customers In just 12 months.
Employee Central is localized for 71 countries with payroll localized for 28 countries, while our main cloud competitor offers solutions in the U. S. And Canada. In Q1, top organizations such as Cathay Pacific and the City of San Diego selected SuccessFactors HCM Solutions over our key competitors. In fact, we saw a high double digit number of competitive HCM cloud wins.
Run simple means real time customer engagement on any device in any channel. Only SAP can help businesses track and engage customers in real time across all channels and seamlessly execute and fulfill commerce in one end to end value chain. In particular, SAP Cloud for Customer, our native sales force management and service solution We had numerous wins in Q1 with our cloud for customer solutions. And in some cases, our customers are replacing their sales force implementations with our cloud for customer solutions. Customers choosing SAP include WMF Group in Germany, and 6 UAE Exchange in Abu Dhabi to name a few and we are only getting started.
Run simple means running our customers' mission critical business applications in the cloud, so they can focus on growing their business. With the HANA Enterprise Cloud, SAP is moving customers' mission critical processes to the cloud faster than ever. Whether through SAP or our main partner IBM, customers see this is a fast low risk entry point, which gives them immediate value. We will continue to leverage our partners to deliver our HEC solutions, thereby limiting SAP's data center investment and footprint. By the end of the year, we expect to see more than a third of our HEC and6 or HANA Enterprise Cloud new business to be delivered through partners.
Finally, run simple means inventing new business models To grow in the digital economy. SAP has the perfect combination of assets to lead the Internet of Things or Industry 4.0 and caused a real revolution in the market. This represents a huge opportunity for SAP and our customers with 50,000,000,000 to 70,000,000,000 connected devices by 2020. SAP HANA and S4HANA will help companies manage their assets better and derive value from connecting their operations technology with information technology. With the SAP Internet of Things Big Data Platform, our customers are now able to build new applications that uniquely combine predictive analytics, real time event processing and context aware real time insights.
Seamless integration to the business network will offer automated ordering and dispatch of service providers for predictive maintenance of assets as well. Early customer examples include Kaiser CompressorN with predictive maintenance and service and the Port Authority of Hamburg with Connected Logistics. Significantly, one of the world's largest and most revered industrial manufacturers Siemens will base their Internet of Things platform on SAP technology. We'll share more on SAP's Internet of Things vision and strategy at SAPPHIRE. In summary, SAP's Q1 shows that customers are embracing our platform, Our applications and our business network.
We're seeing heavy win rates, strong pipeline and enthusiasm around the world. Every business needs to transform to meet the opportunities of the digital economy. SAP is ready to deliver non disruptive innovation and help businesses run real time, run networked and run simple. I'd like to thank our more than 74,500 SAP employees whose commitment to helping our customers amazes me every day. Now I'd like to turn the call over to our Chief Financial Officer, Luka Mucic for a detailed look at our results.
Luka?
Yes. Thank you very much, Bill. In essence, Bill just spoke about our strategy of running the perfect enterprise. We will achieve this from our commitment to customer centric innovation That drives financial outcomes for our customers' businesses. Our strong first quarter results speak by themselves to the success of this strategy.
Before getting into the financial and regional results of the quarter in detail, let me briefly mention 2 topics. 1st, new cloud bookings will be our key cloud metric going forward. This metric is the key measure for our sales success in the cloud in a given quarter and reflects subscription businesses such as SuccessFactors, Customer Engagement and Commerce and Private Cloud along with minimum committed fees for Concur. It excludes network transaction fees for Ariba and Fieldglass, which are pay as you go and don't generate upfront bookings. 2nd, the business network, which is now managed by Steve Singh, includes Concur, Ariba and Fieldglass And can be analyzed with the existing KPIs for volume throughput and connected participants along with our new network reported segment.
Please see the segment reporting in the interim report published earlier today for additional information on this new reportable segment. So let me now provide some additional color on our strong financial performance for the quarter. We saw, as Bill said, and 6. Fast growth in the cloud with cloud subscriptions and support revenue up 131% year over year. New cloud bookings increased 121 percent year over year.
Not only are we ramping up our cloud business, but we continue to have a stable and growing core 2016 percent growth in software and support revenue. Our support contract renewal rate is again and again consistently in the high ninety 6. Growth in enterprise support was especially strong. Once again, our enterprise support offering had an adoption This growth in software support revenue and cloud subscriptions and support revenue at the same time lifted our more predictable revenue as a share of total revenue by 3 percentage points year over year to 66% already in the Q1 2015. Now on to the regions, starting with EMEA.
We had a strong performance in EMEA in both our core and cloud business. Our cloud traction was exceptional with cloud subscriptions and support revenue growing by 114%, driven by a very strong performance in the U. K. Among others. As we had anticipated, the macro and political environment continued to weigh on SAP's business in Russia and the Ukraine.
However, Germany had its best first quarter ever for software with double digit growth, which pushed EMEA to reach 15. 13% growth in cloud and software revenue for the quarter. In the Americas region, cloud subscriptions and support revenue grew by 100 6%, which lifted cloud and software revenue to a 34% increase year over year. We were in particular happy to see Brazil bounce back with strong double digit software revenue growth. And finally, we had an exceptional quarter in AP Today.
Cloud subscriptions and support revenue grew by 137%, driven by a very strong quarter in India And cloud and software revenue increased by 38%. Japan had a standout quarter with strong double digit growth in software revenue. Now let me move to the bottom line. Our cloud and software gross margin was down 50 basis points year over year to 82.4%, Reflecting the ongoing mix shift to cloud and in particular the impact of private cloud. Our public cloud and network businesses already operating at scale and generating a healthy gross margin.
However, our newer private cloud and HANA Cloud Platform businesses are still in the early growth phase weighing on the blended cloud gross margin in the near term. That said, cloud gross margins nevertheless improved sequentially by 2 percentage points to 65.7 percent as we incorporated a full quarter of Concur and continue to improve efficiency in our private cloud offering. Our services gross margin decreased by 8.3 percentage points year over year to 9.0 percent. Our services business continues to be impacted by the transition from traditional large scale implementations to rapid deployment services and agile cloud setups. This means much faster time to value for our customers, but also necessitates the reshaping of our services business, which pressures our services margin during this transformation.
This particular decline was also partially due to specific developments at a small number of services projects. As a result, the overall gross margin was 68.6%, a decrease of 80 basis points year over year. Despite the significant shift from upfront software revenue to more subscription based cloud revenue, we were able to expand our operating profit by 15 16% in the Q1 as currency shifted to a tailwind. The IFRS tax rate in the Q1 was 13.6%, 6, down from 24.1 percent in the prior year period. The non IFRS tax rate in the Q1 was 22.3%, Down from 25.9 percent in the prior year period.
We maintain our tax outlook for 2015 and still expect 15 IFRS effective tax rate of 25% to 26% and a non IFRS ETR of 26.5 percent to 27.5 percent. Earnings per share were up 0 point 58 dollars up from 0 point 56 dollars per share in the Q1 of 2014, representing 5% growth. Operating cash flow for the 1st 3 months was 2,370,000,000 6. Up 1% year over year. Finally, we are in all confidence reiterating our outlook for the full year.
Based on the strong momentum in our cloud business, we expect full year 2015 non IFRS cloud subscriptions and support revenue to be in a range of between €1,950,000,000 to €2,050,000,000 at constant currencies. We further expect full year 2015 non IFRS 6. Cloud and software revenue to increase by 8% to 10% at constant currencies. And we continue to expect full year 2015 non IFRS operating profit to be in a range of between €5,600,000,000 to €5,900,000,000 at constant currencies. 15.
Now we expect to see a currency benefit through the rest of the year and have updated our expectations for the impact on reported growth rates in 2015. If exchange rates remain at the March 2015 average rates for the rest of the year, we estimate 6. An 8 to 11 percentage points benefit to cloud and software revenue and a 10 to 13 percentage points benefit to operating profit for the full year 2015. For more details, including our expectations for Q2, please see today's earnings release. So to summarize, we are indeed successfully managing our transformation to cloud with a rock solid core business and very high growth rates in the cloud, while optimizing efficiency through RunSimple.
This makes us confident that we will deliver on our commitment to drive very fast cloud top line growth while expanding profit at the same time as we end 2015. Thank you. And we will now be happy to take your questions. Thank you very much. I'd like to hand back to the operator and you can start the Q and A session.
And
and
And the first question comes from the line of Philip Winslow of Credit Suisse. Please go ahead.
Hi. Thanks guys and congrats on a great quarter. Bill, just a question for you. I mean, obviously, SAP continues to shift its focus towards the cloud. But one of the things that jumped out to us this quarter was the constant 6th.
Software license growth that you all saw, clearly improvement from 2014. Wondering if you could just sort of double click on Sort of what was driving that this quarter? Was it some of the headwinds you all saw in the emerging markets starting to fade, 2014 versus 2015? Was it Some of the geographies that you talked about Japan and so forth or just what you're seeing there? And then just one quick follow-up question to that.
Well, thank you very much for the question, Phil, and your kind remarks on quarter. If you look at the root cause to it all, it's a HANA world now. So HANA is taking charge. And with S4 HANA, Significant companies are really starting to reinvigorate the adoption of our core suite and invest in that vision. So whether it was geographically seeing a bounce back in Brazil or Japan, we're seeing significant investments in other and Special accounts in the United States as an example.
It really is an innovation driven move in the core business. Now, we haven't changed our frame in terms of the focus on the cloud and we expect that will be The lion's share of the large growth, but it is no doubt exciting to see some of that Our growth come back into the core business. In nominal currency, it looked particularly well as you know and in constant currency still growing. So We have a company right now that's really making strides in innovation and I think that's what the customer appreciates.
And then actually just to build on your comment there. My follow-up was actually about S4HANA and kind of asking the question I asked you back at the launch event. But now that you have a Yes, we're a more modernized forward roadmap for the core. How do you think that is affecting the core, but also affecting some of the new applications and the cloud applications 6. Having a more visible roadmap over the core.
Well, it's interesting and we saw this as we've unfolded the strategy over a number of years. The more you innovate on the edge with the line of business cloud, of course, the business network, the more it invigorates interest in the core. And when you come out with a once in a generation product, in fact the most exciting launch we've had in 30 years with S4HANA, It's now a beautiful combination of the core itself being very interesting and exciting to customers because they can innovate without disruption. Simple Finance is a well known success story, simple logistics to follow, a big launch at SAPPHIRE. We continue to Innovate on Human Capital Management, Customer Engagement Commerce from the whole value chain associated with CRM not SSA like some of the participants in the market.
And you see what we're now doing on the business network. So It's really the idea of running real time with HANA and S4HANA. It's running networked, connecting the cloud assets and the business network And it's running simple, because these companies are way too complicated. The decision makers in these companies know it. And with the extraordinary reduction in footprint that you get with HANA and S4HANA, the speed, the throughput and the integrated business 6.
Across the value chain, it really is the only way to go. And I think a lot of smart CEOs are seeing that. Our job is to make sure we're educating 6. Our own people and the ecosystem and they catch up to the innovation, because clearly innovation is out in front 6 And that's a really nice position I think for us to be in.
Great. Thanks, Bill. Keep up the great work. Thank you, Phil.
Thank you. Let's take the next question please.
And the next question comes from the line of Gerardo Vos of Barclays. Please go ahead.
Gerardus, please go ahead.
Might be on mute.
Maybe then we take the next question in the row. Operator?
One moment for the question of Gerardus Vos.
Hello. Can you hear me?
Please go ahead.
We can hear you. Very good. Thank you. Go ahead. Okay.
Hi. Sorry for the delay. Yes. So just to come back on the S4 product cycle. Historically product cycles have been relatively slow.
It looks like there's a bit of a difference with this cycle. Clients have been waiting for As for a while, you got 370 clients in kind of Q1. What has been the kind of contribution from a revenue perspective in Q1? And how do you Expect that to shape up during the year. Then maybe secondly on the margin impact, a question for Luka there.
You indicated some specific contracts, I guess some contract overruns there. Is this a one off? Is this just Q1? Or when do you expect that to normalize around the kind of contracts? And then finally on the gross margin, good kind of development in the business networking part, a bit weaker in the kind of cloud apps.
How do you expect that margin, particularly the gross margin to shape towards the end of the year? Should we expect that to go back to the kind of high
6. Yes. Let me take those questions and then maybe if Bernd wants to jump in on the product roadmap, happy to 6. But first of all, on S4HANA and specific revenue figures, as you know, we are not Breaking out product revenue figures for HANA separately and we won't do so for S4HANA as well. We will however continue To provide you with color on customer adoption as we have done in this quarter's call as well.
And I think for a product being out in the market for 2 months, 3 50 customer contract is already a signature remark. One of the reasons for the fast adoption from my user's perspective, if Allow me to do that not from a technology perspective, but from one that has gone through the implementation is actually That this product is unique in the sense that while it is completely revolutionary rethought, At the functional level, it's completely non disruptive because it offers you all of the robust and strong functionality that professionals in the ERP Space in the finance space have come to appreciate for decades, everything that is revolutionary and changes the game Completely is under the hood, if you will, except for beautiful Fjall user experiences that enable you to do radically new things, But without changing really anything on the functional level. That's why the stability is great. That's why you can consume it very fast. And that's why it excites customers around the world, at least the ones that I'm talking to and I'm talking to quite many.
Now on the other questions before I invite everybody else to jump in with commentary. On the margin on services, You are right. It was heavily impacted by a small number less than a handful of projects, which had cost overruns. We have appropriately Counted for those as you can also see when you go through our balance sheet and take a look at the provisions. We believe that these projects are well taken care of now.
And we are obviously confident having carefully scrutinized the whole project spectrum as a result That this should be indeed a one off in Q1 that should not repeat itself. And generally speaking, on the gross margins, I need to remind everybody that as we have discussed in New York, we are running vastly different business models even inside The cloud. We have the business network, which is already operating at a decent gross margin, but has a lot of potential over the coming years to further scale and then improve efficiency over time. In the so called Application Technology and Services segment, We also have 2 very different animals. We have the regular public cloud SaaS applications around SuccessFactors and so on.
And I can assure you nothing has really changed in their profitability profile. However, we have the nascent businesses 6. The private cloud as well as HANA Cloud Platform, which are still in the ramp up phase when it comes to revenues where we had, As you know, last year made tremendous investments, which don't necessarily continue on a 1 to 1 basis. Bill has talked about the importance of the partner ecosystem in this environment. But of course, these expenses are in our run rate and in our baseline and therefore continue to weigh on the overall gross margins 6.
In the short term, that's why we are saying we take a look at each one of these business models one by the other. And we clearly have an ambition to improve the efficiency for each one of them in its own right. And in this respect, I Can say with confidence that all of them have actually improved in efficiency and we will see the effect over time also for the private cloud and HANA Cloud platform. Any additional comments from anybody? Yes.
No?
Luca, I can comment on the S4 product cycle and give a few flavors to it. The reason for that accelerated adoption is that we went to market in a different approach. First of all, We prepared the market with a massive adoption of HANA as a platform itself and as Bill outlined with more than 6 and 400 customers already. And then with the business suite on HANA, we did the next step and ported and optimized Our complete suite portfolio on HANA itself. And now we have with S4 The capability to unleash the value of HANA itself via applications to the end users.
And all of this is possible in a non disruptive way. So this is a key differentiator and a big learning from the past that a non disruptive move from a technical perspective delivering outstanding value for the business is the secret for the accelerated adoption.
That's very helpful. Thank you.
Thank you very much.
Let's move to the next question please.
And the next question comes from the line of Michael Briest of UBS. Please go ahead.
Great. Thanks. Good afternoon. In terms of the support or maintenance revenue growth, that was about 7% underlying. I think that's the slowest Q1 we've had for several years.
Is this now starting to see any impact as people migrate from on premise to cloud? Or perhaps it has something to do with the issues that you had on the projects or I mean Germany seems to be down in revenue terms by about 4%, but had double digit license growth. So I'm wondering if you could explain that and the maintenance growth rates what we should be expecting for the rest of the year. Yes.
So first of all, I mean, we are very pleased with our support revenue performance. We had and continue to have very low MAR loss rates 6. Maintenance cancellations. We have a very high enterprise support adoption rate. Of course, the growth rates in the past were impacted by the higher growth premium support services that until end of last year were still in the support revenue line.
Now they are shifted over to the services revenue line as we have said which is naturally putting a certain hedge so to say on overall growth. But That business is absolutely rock solid and you should not calculate with an erosion of support revenue is certainly not this is still our Fort Knox. In terms of Germany, I think Germany has A very strong profile in terms of its cloud and software business, especially on the software and support line Continues to grow very nicely. What you see in the total revenue development is the fact that In particular, Germany along with the U. S.
Is most challenged with the performance of the consulting business. These are our most mature markets in which of course the trend towards more nimble projects The trends towards cloud based consumption in particular in U. S. Are most pronounced. And therefore, in Germany, we had 6.
Quite a significant decline in consulting revenues and that's the reason of the single digit growth in total revenues. But in terms of the innovation adoption, Germany has been extremely strong. 6. And that's maybe also the best testament that we can bring to the fact that our strategy is right. If we can in the most mature market that we have in the world with the highest customer penetration that we have grow traditional licenses in double digits, while at the same time Growing cloud in high double digits as well, then I think we are proving that These innovations are really a solid foundation for our customers, especially the strategic ones that have banged for a long time on SAP To expand their footprints of SAP usage and use that to transform their businesses in volatile times.
So we are very pleased with our results in Germany And about Consulting and Services in particular, we have said, I think, everything that had to be said.
Thanks. Will consulting margins get back to sort of similar levels to last year and the rest of this year?
So first of all, On the services business, we see now a combined business that we are steering as one as well. We have harmonized all of the service catalogs and service categories between premium support services and traditional services. And this, of course, has a leveling effect. You saw that The overall services revenue was flat year over year. That's of course a combination of 2 different factors, a larger piece consulting business that is still declining in mid single digits and a smaller piece of premium support revenues that is growing very nicely and that has tends to have a higher profitability.
So In total, we will need to execute on that transformation completely. We have just combined the organizations. We are now rationalizing it completely. As you know, we are also in a continuous effort to optimize our organizational structures to shift capacities into those growth areas where we need them. This work is underway for services as well.
We expected along with the rest of the optimization measures to be completed by Q3. So for the second half, you should Obviously, see the positive impact of those measures. And by all means, services also always had a seasonality. So Q1 profitability also in the services business is the lowest. And so already by that fact, we should see definitely increases and improvements.
Thank you.
Thank you. Let's take the next question please.
And the next question comes from the line of Kirk Merten of
Japan and Latin America. And how much do you view that as sustainable heading into the remainder of the year versus maybe just a little bit of a bounce off of a tougher 14. I'm just trying to get a sense on do you see real pipeline build in these areas that you think will continue to sort of help drive performance? Or is This is something we should view as a great starting point, but it's not something you guys are necessarily counting on heading into the remainder of the year. Thanks.
Yes. I'll start and then I'd be very open to having Rob Enslin build on what's going on in the field. But basically, Again, everything starts with the innovation led agenda. And these customers are benefiting from it being a HANA world. And again the introduction of S4HANA has made a particularly strong impact in the markets like Brazil and like Japan that you mentioned.
We have a unique way of describing the 6. Desirability of these technologies putting it into a plan that's feasible and making them highly viable in the boardroom by composing Good thought leadership at the front end of the cycle and then high value service delivery and of course a healthy ecosystem. The ecosystem has been very quick to adopt S4HANA and the other innovation areas that I discussed. In particular, Rob has put a lot of focus on leadership. We have very strong leaders running these regions.
And in particular, APJ was the number one region in the world For SAP in Q1, and Japan as you rightfully pointed out had a very, very strong showing. And Latin America as part of the Americas Bounce back strong with Brazil in particular showing up. And I think what you're seeing is where we have strong installed bases And they see the power of HANA and S4HANA. You're starting to see the investment cycles and this upgrade cycle begin Again, innovation without disruption as Burns spoke so elegantly of a moment ago. Rob, how do you see it?
Yes. Thanks. Well, you took away a lot of the thunder in that discussion. I would definitely say that Hana Fiore, the mature markets Brazil, the U. K, Japan, we've had some leadership 6.
Changes in some of those markets last year. We've gone on the road with S4 and we clearly see the mature customer base Starting to look at the future and the investments with SAP and that's come back really, really strong. I would see that those markets continue that level of strength going through 2015. I'm very, very happy with not only the leadership at the regional level, 6. But in Japan, we have a great tandem.
Brazil is coming back strongly. The U. K. Is really on fire now as well. So I would see that that I expect that to continue across
Board. Thanks very much.
Okay. Thank you. Let's take next question please.
The next question comes from the line of Ross Mukenin of RBC of Capital Markets. Please go ahead.
Thanks very much and my congratulations as well. Bill, I think I calculated cloud subscription revenue growth ex FX and ex acquisition of about 28%. And I think you comment in your outlook that the guidance for the year implies 36% on the same basis at the high end of the range. And I was just curious Whether you think cloud bookings are going to drive an acceleration in the organic cloud subscription revenue growth as we move 6th year.
Well, first of all, Ross, thank you for the congratulations. And regarding the cloud, we said 25 to 32. So if you did take the 28 as a number for Q1, I can't argue with that. I think that's an accurate depiction of the facts. And it's right in the middle of the range that we view as solid rock solid actually for 2015 and beyond.
And as you know, we extended this same run rate to 2017 and on to 2020. So I think the cloud business is really strong right now. You're going to see that continue throughout 2015 based on these robust pipelines. Human Capital Management, one of the great moves we made was making sure the user experience on SuccessFactors was as good as anything else in the market and Then investing in employee central, so you have your core human capital management in the cloud, but then extending the and 6 contingent labor management into the business network and combining that as a holistic global solution that no other company in the world can even compare with. Certainly, one in Northern California comes quickly to my mind.
I look at salesforce.com and what we're doing in customer engagement commerce. I talk CEOs. They really are bored with sales force automation. It's been commoditized. We have it and so does everyone else.
But what they are excited about 6. Including social communities and on any device and being able to predict, simulate, make real time offers and fulfill in an automated supply chain. These are things that only we do. And that's why it is our core and our cloud In combination that make SAP the unique company that it is. So we feel very confident in the cloud at the line of business level, At the enterprise level with S4HANA and the forecast has been reiterated with confidence today.
Thanks, Bill. Maybe just a quick Good morning, Bill. I just had a real quick follow-up if possible. Just something that Luca had mentioned Or Bill had mentioned where half of HEC will be delivered through partners by the end of the year. This is just a sort of longer term question, but Should we start thinking about the public cloud offering as potentially having more of a bias towards partners and therefore that lower gross margin segment, if you will, the cloud business perhaps being smaller within the mix over time.
Just curious for your thoughts on
that. Thanks.
Yes, Ross. Thank you. We're very determined to offer our public cloud solutions as an SAP company. We've done that obviously in a private cloud environment, but we've also done that in a public cloud environment with our line of business solutions such as and SuccessFactors Customer Engagement Commerce. We've done that of course exclusively with all the business network assets we have Fieldglass, concurrent Ariba.
And when you talk about S4HANA that's going to be a public cloud offering and it will come through SAP. I do think in the private cloud environment where you can scale and capitalize on the infrastructure as a service 6. Of other premier providers in the marketplace, especially ones that are friendly to SAP where they adopt our reference architecture are extraordinarily high security and they offer that as a solution that enables us to scale and do so at a higher margin. It's a win win because they get the business model They bargained for and so do we and it gives us infinitely more reach. But in the public and the S4HANA world, That's where we're going to provide it from an SAP perspective.
Thanks, Bill.
Thank you very much, Ross.
Thank you. Let's move to the next question please.
The next question comes from the line of John King of Bank of America Merrill Lynch. Please go ahead.
Great. Thank you and congrats on the quarter. Two questions if that's right. One for Bill maybe on the larger deal side. I guess a big improvement there which is welcome.
I guess following up on some of the other comments, is that something that's sustainable and maybe linked to Esperhanna? How's the pipeline looking for the bigger deals? And then maybe one for Luka. On the in fact, on The difference between the IFRS and the non IFRS earnings has been growing now for a little bit of time over the last few years. Obviously 2015 we're going to still see some exceptional charges from Concur.
But Maybe if you could just comment given it's been growing now for a few years, how important is that for you internally that you begin to see those earnings converge and you begin to see perhaps a shrinking long term in the non IFRS adjustments. If you could perhaps comment on that for the medium term that would be useful. Thank you.
Yes. On the S4 HANA, first of all, John, we are the cloud company powered by HANA. There may be A generational sea change in the installed base and there also will be a lot of competitive installs that will look to S4HANA for new answers. Sometimes, these customers will run that obviously in the public cloud, because that's where we're starting with simple finance and logistics. Other times, If you make beautiful software in the public cloud, it can be run on premise.
But bottom line is, it is such a generational technology and it So strategic to these companies that they are likely to look at SAP more broadly in an enterprise play. I just kindly remind you to recognize that we are focused on the growth in the cloud. We will give the customer choice whether they want to rent or buy the software. So I wouldn't read too much into The fact that the core or the on premise piece was positive one versus negative some small single digit As you've had in most of your models, I wouldn't adjust those models. I would say that let's see how it goes.
The customer will buy the software the way they want it. But there is no doubt that the pipeline for S4HANA is huge.
Yes. And maybe on your question of the IFRS, non IFRS measures, It's true in Q1, we had a very pronounced effect there, but it comes from 3 distinct sources, which obviously will look very 6. In the future, if you look beyond this year. First, we had an effect from acquisition related charges So around about €180,000,000 in Q1. That's obviously coming from the Concur acquisition with Respectively, 3rd revenue write downs and so on that you have to take under IFRS.
We have also guided for the approximate full year amount that we see in the 6. Now that is obviously an effect that will disappear then as we have announced. We are not intending to make any major acquisitions in the foreseeable future. And if we don't have any of them, we will obviously also not have acquisition A separate story is the effect of stock based compensation expenses. That is a very complex calculation because it's determined basically of course first of all by the population of eligible employees.
SAP has gotten bigger obviously through the course of last year. In particular, we added more than 7,000 people across the board And quite a few of them are eligible for stock based compensation. The other effect is even more complex As you need to evaluate the time value of the corresponding programs using sophisticated formula, but to bring it back to a simple reason, the stock Has been rising tremendously, so has the value of the stock based compensation expense there. Now that is obviously something That we need to expect for the future. I think it's important that we harmonize the interests of our employees With the interests of our shareholders in stock based compensation is a clear and proven motivator to do exactly that.
So we will continue to offer such programs. And And then of course the extent of their expenses will be determined by the success of our share price, which I'm sure you all agree we would all be happy to see continuing to rise. The last effect is restructuring expenses. That is one where we had historically very low values. Last year, we saw an uptick there as we executed on our simplify and optimize program with roundabout €126,000,000 restructuring expenses.
For this year, as we have Also announced we continue to optimize our organization to be able to invest in those areas where we see growth And downscale and others where this is not the case or where we have overhead that now that we have simplified the company, We have rationalized it based on Simple Finance and S4HANA. We can do things in an easier fashion where we try to get expenses out of the system. That has resulted in a restructuring charge of €50,000,000 roundabout in Q1. We have also estimation out there for the full year €150,000,000 to €250,000,000 Now obviously, we believe that while continued 6. Optimization of the organization is a corporate responsibility that we take seriously and that we will continue to do.
We are on a good track
15. Great. Thanks very much.
Thank you. Next question please.
And the next question comes from the line of Rick Sherlund of Nomura. Please go ahead.
Thanks. The question is,
how do you avoid 6. If there's a seductive argument there about real time capabilities, the ability to put in real time and Forecasting, budgeting, predictive analytics, etcetera with Fiori, but the product is not completely out yet. It may take a while for all the functionality to rollout. So why do people still buy the current product if there's kind of a seductive new product line coming?
Well, Rick, this is Bill. How are you? This week this past week actually, the Board, Rob, myself, and Bern, Steve, others were with some of our top customers from around the world in Paris. And the answer is quite simple. And 6.
They 95% of them already have installed HANA or about to install HANA. So they've already made that move. And when they see S4HANA, they're extremely excited about it. And the conversations were not around whether they should do it. The question was what's the most intelligent way to do it?
And of course, Simple Finance and Logistics were high on the pecking order of the first two things that they would do and then they would do some of the other things that we'll announce at SAPPHIRE before the end of the year. So On the contrary of it being a disruption, I actually think it's been a catalyst and it's really catalyzing the pipeline and it's really opening up I'm sure Bernd and Rob might have some additional color they'd like to put on it.
Yes. This is Dan. Maybe just to add and hello, Rick. I agree that by no means It is a disruptive move in terms as well of financials, not just technology. It is a step forward.
And while you say the product is not completely out yet, I would not agree to that statement. Yes, we are permanently adding new capabilities specifically The industry flavors will come over the next couple of weeks months. But on the other side, if you have a choice of a customer now to invest in the solution, which we have out in the market for years or to select the alternative, which has all the capabilities that the previous version has as well plus additional benefit. I think the selection and the choice is easy to make. So as well as a trusted adviser being permanently in discussion with customers, if you go into detail, Discuss their needs and then come to a conclusion.
The choice is obvious.
It's Robert here. I would classify a little Different from disruption, I would call it very transformative. When we look at these customers that want to go on this journey, typically we have a starting point for them, where they want to go and we're able to rapidly prototype their starting point to give them value at a different timescale than we've ever been able to do before. Customers that would have taken 2, 3 years to get to that kind of value are now able to test that value out in 6 months and that's some of the largest companies. We've also seen the ability of companies that want to actually accelerate their acquisition strategy, but constraints in their footprint, take a HANA view and have taken databases that are close to 60 terabytes Down to 7 terabytes and increased their volumes of orders up to 3 28 percent and we're talking about companies that are processing millions of orders So the level of transformative approach that we can take with HANA, S4HANA And we're able to put some of these smaller subsidiaries into a cloud based public environment.
I would tell you that this It's not as disruptive, but much more transformative in how they approach their business.
You would view this more as an Flexion point in the market where you can start selling the new capabilities, but you're also able to recognize the revenues on and 6 upfront licenses as we saw in Q1.
Absolutely. We got a proof point of value, the upfront licenses. But also that they can see what 2016 is going to look like, what 2017 is going to look like, what 2018 is going to look like, so from a road map perspective.
Thank you. Okay. Thank you very much. Let's take the next question please.
And the next question comes from the line of Adam Wood of Morgan Stanley. Please go ahead.
Thanks very much for taking the question and congrats from me as well on the quarter. Just first of all on Conker. Obviously, 1st full quarter, the acquisitions come into numbers. It looks as if the run rate there organically was maybe just a touch slower than Conker standalone. That's pretty common when you go through a merger situation.
When you look at that and you listen to the feedback you've had from customers through the Q1, should we expect a similar ramp that on the cloud acquisitions in the past things like SuccessFactors where we've seen a strong acceleration maybe 2, 3 quarters past the initial deal coming in. And then secondly, maybe just a follow-up on S4HANA. Again, great success with 370 customers in the quarter. Could you give us a feel for new versus existing there and maybe the adoption rate of new customers for HANA. And you've talked eloquently about the drivers of adoption.
Are there any barriers that you need to overcome for customers to see that adoption accelerate as we go through this year and into 2016? Thank you.
Hey, Adam, it's Steve. I'll just take the concur question first and then the rest of the team can speak to the other questions that you highlighted. Honestly, we're very, very happy with the results we're seeing as Concur works across the entire GCO organization to reach SAP's customer base and frankly new customers that we can call on together. As far as the revenue comment, let's break that down just a tiny bit. You know of course that there is a purchase accounting impact, which certainly is now running through the P and L.
There's also a component That if you look at the cloud subscription revenues that are being highlighted, what Concur accounted with cloud subscription revenues is different than the way SAP accounts for. So, but in total revenue, it's exactly in line with what we expected. The other data point I'd just point to is bookings growth. What we saw in bookings growth not just at Concur, but also within Fieldglass and Ariba, the other components of the business network group were stronger year over year 6. As compared to last year, in the quarter we just finished and we're seeing that pipeline continue to be very, very strong for future bookings growth across Concur and the rest of the business network assets.
So very, very strong position and expect to see that continue for years to come.
In terms of the S4, I would tell you it's fifty-fifty in terms of New versus existing customers. Pretty much every new customer is moving with Simple Finance As the platform is the new transformative finance solution, so fifty-fifty is the numbers that we have.
Okay. Very good. Thank you very much. This was the last question and this concludes our financial analyst call. Thank you very much.
So thank you all for joining and bye bye.