Adam Wood: Thank you.
Anthony Coletta: Yes. Thank you, Adam. We will take the next question, and I will kindly ask you or remind you to please stick to one question, if possible. Thank you.
Operator: The next question comes from the line of Toby Ogg with JPMorgan Cazenove Limited. Please go ahead.
Toby Ogg: Hi. Good morning and thanks for the question. Just on the CCB growth in Q4, 27% versus the sort of 25% that you have been seeing previously. I know various factors to consider there, obviously, the Litmos divestiture lapping, and I think there was obviously a touch of M&A in there from LeanIX. So, could you just break down in a bit more granularity and quantify the core drivers of that CCB growth reacceleration and then also just the reconciliation between the 27% CCB growth and the 24% to 27% cloud revenue guide for 2024? What are you penciling in there on the transactional side? Thank you.
Dominik Asam: I am happy to do that. I mean first of all, yes, I mean you have seen or you will see in the disclosure in the full report that I think there was a €10 million contribution from LeanIX for the December. So, pick €100 million-ish plus as a revenue uplift, that’s of course, boosting our CCB growth at that June. I mean the rest was frankly, just Scott here, a great, great end of the year in bookings. We really did well in terms of putting in a lot of deals and signing them and getting them closed. So, it’s really solid. And now in terms of the translation of that CCB growth into the cloud revenue guidance, I hinted to that before. It is basically the transactional revenue that is the explanation for the delta, with jump of 27%.
You have an €800 million-ish transaction revenue, which is pretty much stagnating and has been stagnating ‘23 and will continue in 2024. And I think, Christian, you might want to explain what’s happening in our supplier network business, which is actually a strategic investment we do there. So, the good news is that headwind, which is kind of shading off 1.5 percentage points or so in 2024 will ease over time because the rest of the cloud business is growing fast and because of the benefits we see from that strategic investment on the supplier side, on supply network, we think we will achieve a more normal growth, I would say, in 2024. So, we are not going to snap back to double-digit yet, but high-single digit as possible in 2025. So, that’s the trajectory we see.
We frankly don’t need any macroeconomic miracles at all for that. We just have assumed the kind of continued subdued macro for that. So, I think that’s a very, very solid way to triangulate the guidance on cloud revenues for ‘24. I gave you that logic also to simply extrapolate the growth buckets we have within cloud from ‘23 to ‘24 taking LeanIX into account and you can then play that game also from ‘24, ‘25, and you see it super circular and solid to bring these data points together.
Christian Klein: Yes. Look, I mean, kudos to Scott and the team, it was an extremely successful Q4. And I guess what is also making SAP is so resilient for the years to come, it’s of course, the €44 billion already sitting in our books. But when you are doing business in over 100 countries, I mean in quarters like that, you have Southeast Asia walking, who is actually saying that Germany is not a cloud market, Germany had an outstanding quarter. North America performed extremely well. Large customers like GM signing up to decarbonize, to build this resilient supply chains. And when you are then sitting in Davos and you are looking at the challenges what business leaders have right now, no matter if it’s about automation with business AI, doing things which humans can’t do today, which you can do tomorrow with AI or it’s about sustainability with the green letter, which is now hitting the market and also then get transparency also for Scope 2 and Scope 3.
I mean you are touching actually all the relevant topics. And this is why I am also so proud on our product teams because the innovation coming out of this team is really strong and gives us, of course, also a lot of confidence regarding order entry for the years to come.
Toby Ogg: Alright. Thank you.
Anthony Coletta: Thank you, Toby. We will take our next question, please.
Operator: The next question is from the line of Ben Castillo Bernaus with Exane BNP Paribas. Please go ahead.
Ben Castillo Bernaus: Good morning. Thanks very much and congratulations for a strong end of the year. Question, I guess Dominik, around free cash flow conversion. It looked like ‘23 was strong. We are seeing some underlying improvement in the 2024 guidance if we exclude the one-offs there, but then some more needed in 2025. And you did mention the cash stockage compensation charge helping there. But I am curious what other levers are you pulling around working capital, cash collection that can give us some extra confidence in that required trajectory for your 2025 targets? Thank you.
Dominik Asam: Yes. I mean it’s actually quite straightforward. You basically mentioned the lion’s share of simply the uplift in the profit. Net of the tax rate and which we have guided that is falling through into cash flow, of course, and this real improvement on profit. And then you have to always look at kind of the cash conversion on stock-based compensation, what’s the P&L and what’s the cash out. And there is a big improvement looming from ‘24 to ‘25, taking that into account, you have a relatively moderate assumption for working capital gradual grinding on efficiency, collecting money earlier. We have already made quite some progress. I mean this is also the reason why in 2023, you have seen an outperformance on free cash flow.
And honestly, you have seen in my comments that we have to only digest a couple of hundred of factoring SAP-induced factoring in 2024. So, it tells you something that we have already worked off some of the past here. And so I think also the logic in terms of how you build the bridges from ‘23, ‘24 to ‘25 in free cash flow, I mean any other number would be quite illogical and it doesn’t require any miracles. It just requires proper execution, very, very moderate improvement still on operations. So, it is something that we feel quite strong about that we can achieve that.
