Unleashing the Power of Experience Management (XM) November 11, - - PowerPoint PPT Presentation

Unleashing the Power of Experience Management (XM)

November 11, 2018

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Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as 'anticipate,' 'believe,' 'estimate,' 'expect,' 'forecast,' 'intend,' 'may,' 'plan,' 'project,' 'predict,' 'should' and 'will' and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward- looking statements, which speak only as of their dates.

Safe Harbor Statement

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Together, Powering the Experience Economy

Pioneering the new category of Experience Management (XM) to transform brands, customers, employees and products Fusing intelligence across the deepest and broadest suite of business applications seamlessly integrated on the most data rich architecture

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Transaction Overview

Transaction Consideration

• Purchase price of $8 billion
• Includes unvested employee incentive compensation
• SAP will assume Qualtrics’ cash

Financing

• SAP has obtained a €7 billion credit facility to cover purchase price and acquisition-

related costs

• SAP expects to refinance parts of the credit facility via the issuance of debt securities

Management & Governance

• Ryan Smith will continue to lead Qualtrics, reporting to Robert Enslin, President, SAP

Cloud Business Group

• Qualtrics to operate as an entity within SAP’s Cloud Business Group and will be reported

as part of SAP’s Customer Experience segment

• Qualtrics to continue to be based in Provo, Utah and Seattle, Washington

Expected Closing

• Expected to close in 1H 2019
• Subject to receipt of regulatory approval

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Why Qualtrics

Clear Leader and Pioneer

Accelerate the disruptive and fast growing category of experience management (XM)

Accelerates Intelligent Enterprise

Enhances SAP’s Intelligent Enterprise suite as the essential foundation of end-to-end experience management across all lines of business

Turbocharge Qualtrics’ GTM

Leverage SAP’s unparalleled global network and go-to-market (GTM) channel to rapidly scale Qualtrics

Accelerate SAP Evolution to Cloud

Accelerates SAP’s cloud momentum and predictable revenue model, adds experience intelligence (customers, employees, products, brand) across SAP’s portfolio

Attractive Financials

Rapidly growing and profitable with high visibility revenue model and strong cash flows

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Qualtrics at a Glance

All data as of September 30, 2018.

Experience Management (XM)

Market leader

Scale

$372M

revenue LTM 9/2018

9,000+

Total customers

75%+

• f Fortune 100 Companies

$44B+ TAM

Fast growing Early adoption

Cloud Model

40%+ growth today…

…and into the future Highly predictable SaaS model

600+ customers with

• ver $100K

subscription ACV Leading presence in academia… …the experience users of the future in enterprises

Profitable

Expanding margins Free cash flow positive since inception in 2002 Only 22% of revenue from non-US customers

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Qualtrics is the Leader in Experience Management

Executives must own all dimensions of Experience, identify Experience gaps, and act on them Experience evolves from all aspects of a business. Gaps around customer complaints, employee turnover, and product dissatisfaction must be addressed Qualtrics captures experience data across key dimensions – brand, customer, employee, product – and combines it with operational data to provide a comprehensive view of a brand’s operations and perception, and triggers action

Experience Data

The Why

Operational Data

The What

Action

Any Engagement Method

((Web, Chat, In-app, Emails, SMS, Social Media, etc.)

Captures Sentiment

The “Why”

In the Moment

Live Real Time Experience Data

Systems of Record

(ERP, HCM, CRM, customer service, etc.)

Transactional Facts

The “What”

In the Moment

Real Time Operational Data

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Fusing X and O to Power and Transform the Experience Economy

Cloud Platform | Data Management | AI

77% of the world’s

transactions across 25 industries touch SAP systems

1.8B experience

touchpoints run on Qualtrics

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Powerful Combination

Powering the Intelligent Enterprise High 30s

y/y cloud growth2

413,000+

customers

~15,000

sales reps

$350B

TAM

68%

Non-US Revenue

€25B+

FY2018E Revenue1

• 1. Based on FY 2018 Total revenue outlook at constant currencies
• 2. Based on FY 2018 Cloud subscription and support outlook at constant currencies

42%

y/y revenue growth

9,000+

customers

~450

sales reps

$44B

TAM

22%

Non-US Revenue

$372M

LTM 9/18 Revenue

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Offering Outside-in Data to Customers

• jetBlue selected Qualtrics because it was the best customer

experience platform that offered total control over all phases

• f customer experience program management.
• With the ability to combine relational, front-office data (brand

purchase drivers) with transactional, back-office data (experience and satisfaction) into a centralized hub, jetBlue gained the ability to easily pinpoint their biggest impact areas and make immediate, impactful changes.

• Using Qualtrics, jetBlue found that:
• 82% of their passengers preferred cheaper ticket prices over

free bags.

• Dissatisfaction amongst Philadelphia customers was due to

the lack of shops and amenities open early in the morning.

• The security interview process required at Lima, Peru’s

airport was leading to negative remarks about the company.

• Qualtrics provides Volkswagen with the ability to collect

and distribute insights in real-time, and with customizable dashboards and access. Volkswagen Group Australia could finally deliver actionable insights to dealers.

• They can collect customer and employee feedback on the

same platform.

• In the future, Volkswagen Group Australia will use

Qualtrics to predict and deliver what customers expect from the customer experience at every touchpoint — buying, driving, and owning.

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Driving Step-Change Growth for Qualtrics

Global Reach Every LOB Cross-sell / Up-sell Industry Domain Expertise Partner Ecosystem

Increase Qualtrics’ global presence Plugged into every line-of- business Massive cross-selling

• pportunity

enhanced by ~15,000 person sales reps Access SAP’s unmatched industry expertise Amplify expansion through partner network Leverage SAP’s base of

413,000+

customers

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$ millions, unless otherwise stated FY2016 FY2017 LTM 09/18 Revenue growth 191M 290M +52% 372M +42% Subscription gross margin 80% 88% 88% Overall gross margin 68% 73% 74% Operating margin (5%) 4% 2% Operating cash flow margin2 9% 14% 15% Free cash flow margin2 2% 7% 9%

• Best-in-class gross margins
• Strong operating cash-flow
• Expanding OCF and FCF margins
• FCF positive since inception

40%+

• rganic growth today…

and into the future

1. All figures based on Non-GAAP and Qualtrics accounting policies and definitions 2. Defined as cash flow in percent of total revenue

Impressive Financial Profile1

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Successful Acquisition Strategy and Strategic Organic Innovation

2014 2015 2016 2017

€ 47B

Market Cap

€ 50B € 75B € 77B € 40B

Cloud Revenue

€ 90B € 102B € 72B

New Co-CEOs

20181

SAP Acquires Sybase to expand to DB & Mobile Launched Suite on HANA

2013

New 2020 Target: €8bn in Cloud Public Cloud HEC Analytics Cloud Data Hub

2012 2011 2010 € 0.01B €0.02B € 0.3B € 0.8B € 1.1B € 2.3B € 3.8B € 3.0B

• Integrated Intelligent

Suite

• Revolutionizing

Customer Experience with C/4HANA

• Innovation with

Intelligent Systems (Leonardo)

€ 114B

C/4HANA

€ 5.2B

• 1. Based on FY 2018 Cloud subscription and support outlook at constant currencies

Raised 2020 Target: €8.2 - €8.7bn in Cloud

Doubled Addressable Market Be the most innovative cloud company powered by HANA Intelligent Enterprise

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Appendix

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($ in thousands, Fiscal Year Ending December 31) FY 2016 FY 2017 9 Months Ended 9/17 9 Months Ended 9/18 LTM2 Revenue $190,603 $289,903 $207,079 $289,566 $372,389 Add: Total Deferred Revenue, End of Period 133,931 185,145 161,742 228,199 228,199 Less: Total Deferred Revenue, Beginning of Period (89,930) (133,391) (133,391) (185,145) (161,742) Calculated Billings $238,604 $341,657 $235,430 $332,620 $438,846 Period over Period Growth 43.2% 41.3% 39.6% Subscription $142,525 $213,274 $151,699 $215,533 $277,109 Research on Demand $38,147 $51,812 $37,524 $51,489 $65,776 Services $9,931 $24,817 $17,856 $22,544 $29,504 Total Revenue $190,603 $289,903 $207,079 $289,566 $372,389 Period over Period Growth 52.1% 39.8% 42.3%

Qualtrics Non-GAAP Reconciliation1

• 1. All figures based on Qualtrics accounting policies and definitions
• 2. LTM reports FQ4 ‘17 through FQ3 ’18c

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($ in thousands, Fiscal Year Ending December 31) FY 2016 FY 2017 9 Months Ended 9/17 9 Months Ended 9/18 LTM2 GAAP Total Gross Profit $129,623 $210,819 $150,473 $213,228 $273,572 GAAP Gross Margin 68.0% 72.7% 72.7% 73.6% 73.5% Add: Cost of Revenue Stock-based Compensation Expense 7 7 6 4 6 Add: Cost of Revenue Amortization of Acquired Intangible Assets 81 135 101 500 534 Non-GAAP Total Gross Profit $129,711 $210,961 $150,580 $213,732 $274,112 Non-GAAP Gross Margin 68.1% 72.8% 72.7% 73.8% 73.6% GAAP Subscription Gross Profit $114,621 $187,722 $133,537 $189,013 $243,198 GAAP Subscription Gross Margin 80.4% 88.0% 88.0% 87.7% 87.8% Add: Cost of Revenue Stock-based Compensation Expense 7 7 6 4 6 Add: Cost of Revenue Amortization of Acquired Intangible Assets 81 135 101 500 534 Non-GAAP Subscription Gross Profit $114,709 $187,864 $133,644 $189,517 $243,738 Non-GAAP Subscription Gross Margin 80.5% 88.1% 88.1% 87.9% 88.0%

Qualtrics Non-GAAP Reconciliation1

• 1. All figures based on Qualtrics accounting policies and definitions
• 2. LTM reports FQ4 ‘17 through FQ3 ’18c

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($ in thousands, Fiscal Year Ending December 31) FY 2016 FY 2017 9 Months Ended 9/17 9 Months Ended 9/18 LTM2 GAAP Sales and Marketing Expense $95,919 $140,524 $102,994 $138,318 $175,848 GAAP Sales and Marketing Expense (as % of Revenue) 50.3% 48.5% 49.7% 47.8% 47.2% Less: Stock-based Compensation Expense (64) (4,415) (4,414) (559) (562) Less: Amortization of Acquired Intangible Assets (47) (32) (30) (111) (111) Non-GAAP Sales and Marketing Expense $95,808 $136,077 $98,550 $137,648 $175,175 Non-GAAP Sales and Marketing Expense (as % of Revenue) 50.3% 46.9% 47.6% 47.5% 47.0% GAAP Research and Development Expense $22,303 $40,680 $29,078 $45,643 $57,245 GAAP Research and Development Expense (as % of Revenue) 11.7% 14.0% 14.0% 15.8% 15.4% Less: Stock-based Compensation Expense (309) (1,438) (1,348) (1,568) (1,674) Less: Amortization of Acquired Intangible Assets

• Non-GAAP Research and Development Expense

$21,994 $39,242 $27,730 $44,075 $55,571 Non-GAAP Research and Development Expense (as % of Revenue) 11.5% 13.5% 13.4% 15.2% 14.9% GAAP General and Administrative Expense $21,909 $26,522 $17,239 $26,958 $36,241 GAAP General and Administrative Expense (as % of Revenue) 11.5% 9.1% 8.3% 9.3% 9.7% Less: Stock-based Compensation Expense (322) (1,087) (750) (973) (1,272) Less: Amortization of Acquired Intangible Assets (59) (59) (44) (104) (119) Less: Legal Costs Related to Acquisitions (60)

• (648)

(648) Non-GAAP General and Administrative Expense $21,468 $25,376 $16,445 $25,233 $34,202 Non-GAAP General and Administrative Expense (as % of Revenue) 11.3% 8.8% 7.9% 8.7% 9.2%

Qualtrics Non-GAAP Reconciliation1

• 1. All figures based on Qualtrics accounting policies and definitions
• 2. LTM reports FQ4 ‘17 through FQ3 ’18c

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($ in thousands, Fiscal Year Ending December 31) FY 2016 FY 2017 9 Months Ended 9/17 9 Months Ended 9/18 LTM2 GAAP Operating Income (Loss) ($10,508) $3,093 $1,162 $2,309 $4,238 GAAP Operating Margin (5.5%) 1.1% 0.6% 0.8% 1.1% Add: Stock-based Compensation Expense 702 6,947 6,518 3,104 3,514 Add: Amortization of Acquired Intangible Assets 187 226 175 715 764 Add: Legal Costs Related to Acquisitions 60

• 648

648 Non-GAAP Operating Income (Loss) ($9,559) $10,266 $7,855 $6,776 $9,164 Non-GAAP Operating Margin (5.0%) 3.5% 3.8% 2.3% 2.5% Net Cash Provided by Operating Activities $17,806 $39,618 $36,056 $52,509 $56,039 Operating Cash Flow Margin3 9.3% 13.7% 17.4% 18.1% 15.0% Less: Purchases of Property and Equipment (14,372) (18,272) (11,350) (16,388) (23,310) Free Cash Flow $3,434 $21,346 $24,706 $36,121 $32,729 Free Cash Flow Margin3 1.8% 7.4% 11.9% 12.5% 8.8%

Qualtrics Non-GAAP Reconciliation1

• 1. All figures based on Qualtrics accounting policies and definitions
• 2. LTM reports FQ4 ‘17 through FQ3 ’18c
• 3. Defined as cash flow in percent of total revenue

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Experience Management (XM): A Vast and Underpenetrated Market Opportunity

Total #

• f Organizations

Average Contract Value Total Market Opportunity

Enterprises with >$50M in revenue Global post-secondary academic institutions US K-12 school districts Federal, state, local government agencies

$44Bn

Subscription ACV by

• rganization size and type

Research on Demand spend by organization size and type

X =

RoD In 2018

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Experience Data Powering The Intelligent Enterprise

+

SAP Qualtrics

The Intelligent Enterprise is super-charged to take action when transactional data is enriched with data reflecting sentiments and perceptions that reveal an

• utside-in perspective of a company’s performance.

Experience Management is the next evolution of Enterprise software. Combining outside-in experience with operational data empowers a true 360 view on an Enterprise’s situation.