Good day, ladies and gentlemen. And welcome to the SAP Q2 Earnings Conference Call. For you information this conference is being recorded. At this time, I would like to turn the conference over to Stefan Gruber. Please go ahead, sir.

Thank you. Good morning or good afternoon. This is Stefan Gruber, Head of Investor Relations. Thank for joining us to discuss our results for the second quarter 2017. I'm joined by our CEO, Bill McDermott; and Luka Mucic, our CFO, who will both make opening remarks on the call today. Also joining us for Q&A are board members Rob Enslin, who runs Cloud Business Group; and Bernd Leukert, who leads Products & Innovation. Before we get started, as usual, I want to say a few words about forward-looking statements and our use of non-IFRS financial measures. 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, intend, may, plan, project, predict, should, 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 filings with the U.S. Securities and Exchange Commission, including SAP's Annual Report on Form 20-F for 2016 filed with the SEC on February 28, 2017. Participants of this call are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. On our investor relations website, you can find our quarterly statement, the half year report and the financial summary slides deck, which are intended to supplement our prepared remarks today and include a reconciliation from our non-IFRS numbers to IFRS numbers. Unless otherwise noted, all financial numbers referred to on this conference call are non-IFRS and growth rates are non-IFRS as reported. The non-IFRS financial measures we provide should not be considered as a substitute for or superior to the financial – the measures of financial performance prepared in accordance with IFRS. With that, I’d like to turn things over to our CEO, Bill McDermott.

Thank you very much, Stefan. Hello, everyone. As strong Q2 is the latest in SAPs eight year run of profitable growth. We’re ever consistent in our strategy to be the most innovative cloud company powered by SAP HANA. This strategy is validated by fast adoption of S/4HANA and our full portfolio of cloud solutions. Allow me to share some highlights on Q2. We continue to lead the business software industry with a consistent trifecta of strong software sales, fast growth in the cloud and operating income expansion. Our total revenue grew double-digits in the quarter. And please note, this is all organic, as we had no material acquisition in the last 12 months. In fact, we haven't had a material acquisition in more than two years. We're not aware of any other mega cap software company that's growing as fast as SAP. We expanded in every region of the world with businesses of all sizes. Operating profit was up 4% on top of exceptional profits in the prior year. Our IFRS operating profit reflects the continued success of SAP share price, every €1 and share price growth translates to €20 million, an impact on our operating income. It's kind of a happy investment though to have inspired people, especially in the global economy with such a war [ph] for talent. Based on our sustained strong growth and cash generation, we are pleased to share SAPs success with our shareholders by initiating a share buyback. We have confidently raised our guidance for the full year as well. Let me give you some color on our strategic growth drivers. Driven by S/4HANA licenses sales grew 5%, beating a record Q2, 2016 and exceeding every expectation. S/4HANA adoption grew to more than 6300 customers, up over 70% year-over-year. Global companies like Duke Energy,…

Thanks a lot Bill. Bill already shared some of our results on yet another excellent quarter in our core and cloud business as our profitable growth story continues. In fact, our cloud and software revenue growth rate in the first half of the year was at the upper end of our full year guidance range with 8% at constant currency. Fuelled by our overall strong business performance, we continuously strive for a more predictable business now at 66% for the first half of the year. In addition, our total revenue grew by double-digits. But to now get a better understanding of the key factors that made up for this exceptional growth, let me go into some more detail. Firstly, our committed future cloud revenue or new cloud bookings has grown by 33% and our cloud revenue growth came in at 29%, marking the 17th consecutive quarter of consistent rapid growth in the cloud. Our strong and complete cloud offering is the source of this dynamic growth. We have the power to scale each of our cloud components. And the nice thing about this is that all of these are seamlessly linked to our digital core, providing a real end to end offering to our customers and they highly value this offering as reflected in our great results. Secondly, I would like to call out two highlights from our outstanding software performance. One is obviously the continuous momentum of our industry leading business suite S/4HANA, while we look at our suite, HANA has a database or our industry in line of business solutions. All of these are big growth drivers. The other highlight is Customer Engagement and Commerce, which again showed double digit growth essentially driven by our success with SAP Hybris combined with SAP S/4HANA. All of this led to…

Thank you. Operator, we can now start the Q&A session please.

Thank you, sir. [Operator Instructions] We will now take the first question from Kirk Materne from Evercore ISI. Please go ahead.

Yeah. Thanks very much and congratulations on the strong start to the first half of the year. Bill, I was curious you guys obviously have a very broad view of the world and when you look at your pipeline do you think the pace of technology disintermediation we're seeing in industries like retail is accelerating enterprise decisions around digital transformation projects? And I'm just wondering if this - is the scope of those projects is getting bigger [indiscernible] high level question, but it just seems to me that bigger companies are having to make bigger decisions around digital transformation and you all would seem to be pretty well positioned on that front? Thanks.

Yes. Kirk, thank you very much for the nice compliment and also for the question, it’s a really important question. Every single company we do business with is in the midst of a digital transformation. Every single business needs to get control of their data. They want to have a single view of their consumer and obviously they need not only to know what's going on in the transactional world, but they also have to know what's going on in the social world. In retail, in particular, this is really big, because it's a fight for survival. The digital competition knows no boundaries. So you know, the digital world can move across geographies very quickly. So the core companies in retail now are yes, redesigning their processes, rethinking their data models and they are partnering with companies like SAP to help them compete and in some cases even survive. So one of the interesting conversations I had yesterday was with Gartner, one of my favourite analysts that I worked with when I was the president in the Gartner and we talked about the concept of having your head in the business of digital transformation, but even more your heart and by having your heart in the game you have to make change really quick and you have to over invest in the cloud and over invest in again, this digital consumer because if you don't and you hold onto the legacy business model you may not be around to long.

Let's take a question please.

We will now take the next question from Charles Brennan from Credit Suisse. Please go ahead.

Yeah. Hi. Thanks very much for taking my questions. I've got one question on the clouds and then just a clarification. If I look at the cloud revenue growth sequentially it looks like it slowed down marginally in the second quarter. I guess it's quite a small change and momentum, but it does come at a time of management change. So I guess the questions off, firstly, are you confident that you can sustain the 30% growth rate as that business scales? And secondly, are you confident that with the departure of Steve Singh, the management position of the cloud is still robust. And thirdly, can you just give us some metrics around the bookings duration. Obviously, that the year-on-year growth is strong, but can you talk about duration. And just as a clarification on a separate issue. Luka, you talk about confidence in margin expansion for 2018. Can you just clarify whether you are talking about cloud gross margin specifically there or is that a group wide comment? Thank you.

Thank you so much for the question Charles. I'll start it off and then hand it over to Luka. So first and foremost on the cloud, the bookings and the revenue don't even spend a moment on it. Basically when you book the software, obviously you're booking the contract and that will go into revenue to be recognized. The revenue that's actually recognized has something to do with timing and timing in the quarter for sales and so on. And some of these sales happen to have been a little bit more back ended than usual. The pipeline for the cloud is fantastic. The 30 plus percent cloud growth and the pipeline to support that is ever intact. The business looks really, really strong. Now as it relates to change in the quarter. Obviously, we appointed two new Executive Board members to run our global customer operation. I can tell you that they have settled into the job amazingly well, as you know they are well-regarded leaders have been with us for a long time and they're doing fantastic. Rob Enslin, who ran our Global Customer Operation was the executive that backfilled Steve Singh and as you know, Rob has spent his career with SAP. So the stability, the consistency is really perfect. And just to show you the class of SAP. I next week along with the executive board will be flying out to Seattle to have a going away party for our great friend Steve Singh. So this hotel when you check into SAP you don't check out, like we're friends for life. And that's the kind of company we are. Now as it relates to the bookings and something - that some of the technicalities Luka will handle it.

Yeah. Okay. Here's the technical guy. First of all on the booking duration what we have in our new cloud bookings is the figure for our so-called average annualized contract value in the cloud. So our actually growth in what we call total contract value has actually been substantially bigger than that. Why is that? Because also our average duration of contracts has been going up. We are now at 3.6 years average contract duration and so on the TCV basis our growth is actually surpassing the 33% that you see on the new cloud bookings. So that should give you also a lot of confidence that our cloud business, not only for the short term, but also for the years to come is extremely healthy. And in terms of the margin expansion, I meant that in both dimensions. So what you should expect I think for years 2018 and going forward is of course continued progression on our HANA Enterprise Cloud infrastructure as a service gross margins, you should expect that the business networks area will continue its very steady march towards the 80% gross margin target that we have set for this business for 2020 and where they are anyway already in striking distance of that. And then in our software as a service and parts business outside of the business networks group there should be a very pronounced rebound of the margins as our investment into converged cloud infrastructures into replatforming our flagship solution SuccessFactors on our HANA technology and our data center consolidation are going to be largely finished by the end of this year. So here you should see absolutely a strong increase. And that will also in our projection flow through to the operating margin level. So it’s really on both levels.

Great. Thank you.

Okay. Thank you. Let’s take next question please.

We will now take the next question from Philipp Winslow from Wells Fargo. Please go ahead.

Phil, we can’t hear you.

Okay. Can you hear me now?

Now we can hear you. Perfect. Go ahead, please.

Okay, great. I was just saying congratulations on another great quarter. Bill and Luka, both you all touch on the fact that the cloud business is growing and Luka you said a rock solid core, but I'd actually say that that core is still growing. Considering the fact that license was up 8% year-over-year through the first half year. A question for Bill and maybe you know, Luka if you could touch on this too. I mean, obviously we've seen the S/4HANA customer account number go up 70% this year, but and I'm assuming that's a big part of what's driving that that license growth. How do you think, where are we, I guess, what’s hitting our win with S/4HANA, because the customer count might be high. But you know, our checks still say that penetration still has the way to go even within side those. So how do you think about where we are in the cycle and I guess the sustainability of some of these you know, the six consecutive quarters of growth on license?

Thank you very much, Phil, first of all for your kind remarks. We are in the really early days of the S/4HANA momentum. First of all, if you apply the 80:20 logic, you know, you'd be a lot closer to 15 or 20 then you would be to 80% in terms of the penetration and all the opportunities that are out there. And you know that's the traditional base we're talking about. We're making a bold move into customers that haven't seen SAP and may not even be thinking of SAP in the mid-market, in the upper mid-market. So as we assert our will in different marketplaces in different industries, I would call this the earliest possible days of S/4HANA in terms of the rotation and the real catalyst for continued growth in the company.

Yeah. It’s hard to add anything to that. I think adoption always in our industry is kind of an S-shape and we are clearly basically still in the early adopter phase. As you pointed out some of the early adopters have a long way to go to really roll it out across the entire end state. And now we see the first emergences of fast followers kicking in. So we have lots of room to grow. And more importantly even S/4HANA is invigorating growth in other elements of our portfolio as well. CUC was very strong I highlighted this. Analytics was strong in the quarter that goes along nicely with the digital board room concept that S/4HANA really brings to life. So we will be having a lot of fun with this baby which is just barely becoming a toddler by now.

And Phil you know, one CEO said something interesting to me yesterday, he said run simple was actually ahead of its time and I think he said right, because the most intractable challenge of our era is complexity, and when you think about the idea of a digital boardroom simplifying the management process for executives around the world and you think about taking cost out and improving productivity with HANA and S/4HANA and aligning all the management team with the line of business cloud and the network, you're talking about just a story that doesn't end because there's so much room for all these companies to radically simplifying grow if they can apply the right digital technology. So it's really early days and it's an exciting era for us Phil.

Okay. Thank you.

Great. Thanks, guys. Keep up the great work.

Thank you.

Thank you. Let's take the next question please.

We will now take the next question from Gerardus Vos from Barclays. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. Two if I may. Just first of all on the kind of the cost base, you know, we've seen a very good kind of revenue kind of beat in the kind of first half pretty much all of that and perhaps a bit more has been absorbed by OpEx increase. Looking at - I hear what you were saying on 2018 and you confidence on margin leverage. But do we see this from Q1 onwards. Because given the kind of current run rate it looks that it's more kind of going to be second weighted? And then secondly, perhaps for kind of Bill, you know, it's now been a couple of quarters that the NetSuite deal has been closed. What do you see from a competitive perspective form that kind of combination and perhaps also give us an update on Workday? Thanks.

Yeah. Let me come to the first part of the question. Actually you should start to see it already starting from the second half year to be quite honest, because we have made our main investments in the first half year. You have seen that we have added about 3000 incremental headcount and that of course came on top of already a very strong second half year of 2016. So we now have a situation in which we believe that we have for the moment everything that we need to drive and scale this business and that should help us in the second half year. Also the comparison from an operating income perspective is relatively easier in the second half than in the first half, where we still benefited last year from the rundown of our restructuring program that we had in 2015. So I'm very confident in both our projections for the full year, as well as then of course also going into 2018. But you're right, that effect should fortify itself, the more we move into later parts of 2018, but then even more so as we move into 2019 and ‘20 where we are still in line with our mid-term projection going to 2020, as you know are projecting for a much higher CAGR on operating income expansion.

And Gerardus, I’ll offer you an answer to your question on NetSuite. You know, Oracle strategy seems to be - to stay relatively large enterprise with Fusion, but to have a two tier strategy with ERP and take NetSuite down market and that's understandable, the platform has been around for 20 years. So it will probably do better in the low end markets. We see them. We compete with them. S/4HANA is just going to be a runaway story in that place, up or mid-market, even lower mid-market. Workday obviously, Workday can hold their own. If you're - especially if you're in the United States and you're dealing directly with the Human Capital Management Executive. It gets a little bit more interesting for us when it's a more comprehensive decisions for companies than just HR Director. For example, they don't really have a platform. So the SAP Cloud platform and the extensibility of that. If you think about S/4HANA and the nucleus of the 21st Century Enterprise and all line of business executives evolving their use of their individual line of business with the center of gravity, the data and the process of the company. You know, that's game set match for SAP. And when you talk Total Workforce Management, we're the only one with the network around contingent labor and therefore Total Workforce Management and that's why Gartner and others say, if you have more than 5000 employees it's all about SAP, because what you see with Workday against SAP is a good fight with the LOB HR director in the United States. But when you get beyond the United States and you start to get into more complex industries and companies, we do extremely well. And I can only tell you that based upon the way they've been purporting themselves in the market with letters, with fake news to customers and things like that we're bringing our A-game.

That's very clear. Thank you. And congrats on the great revenue quarter.

Thank you.

Thank you. Let's take the next question please.

Our next question comes from John King from Merrill Lynch. Please go ahead.

Yeah, great. Thanks very much for taking the questions. I’ve got three, if that’s all right. The first one was just a clarification or a follow up on Charlie's question around the cloud. Can you say something about you know what we should be thinking about in terms of the guidance for the second half, I guess implies at the low end at least something similar in terms of cloud revenue growth rates, where as the high end would imply a pretty material acceleration in that same metric. So maybe just any commentary perhaps Luka around and how likely is that you can get that high end or should we be more thinking about the low end at this stage? And then two, probably related questions maybe for Bill. Firstly, on the 2020 guidance, obviously you know, we are trying to do the best we can against all of the metrics that you're guiding there. But I wonder if you could just give us a sense about your priorities there. You know, put it another way, if you're in a scenario where the margins were running ahead of your plan, would you be looking to reinvest those to let's say invest in the sales force to drive even more growth or are you equally happy to let say outperform on margin versus growth just trying understand how you're balancing those two things? And then the third one was like another clarification on the M&A, if you look at the - I think at the outlook statement, you've said I think in the full report that's only assumption of no large M&A this and next year. Can you just clarify is that statement to say that you don't think a large deal next year is likely or simply that if there were to be one you would - you would revisit the guidance? Thanks.

I'll start off. First of all, thank you very much for the question. On the 2020 guidance, we're a big company and it's good for big companies to think like a start-up. There's no reason why we will not drive both the top line, especially the cloud growth and the margin. What you have to do on the front end of leadership is make the investments, make the bold moves. So you have the platform to leverage on a go forward basis. You should think of us as a company that intends to get the revenue and the margin and flow it through on the operating income side. It's not an either or it's a both end, that's how we're running the company. And I think you're going to start to see evidence of that especially in Q3 and Q4, as we have reinforced today quite consistently, we made our investments early this year, so we could reap the benefits in the back end of the year for our shareholders, but also for 87,000 women and men that work for the company. The second thing on the M&A side, and look we haven't done a big deal in a while because we have what we need and there aren't really big deals out there with companies that we think would be worth the price or would have that much value to our customers story. So at this stage you know, we're watching it. We're always keeping an eye on things. But our strategy is very consistent with what you've heard in the past. But if something were to change naturally you'll be the first to know.

And in that sense, this is of course a statement that our outlook is based on organic developments and maybe smaller tuck-in acquisitions and if we had something more significant which is not in sight then of course the outlook would be subject to change and upgrade as well. So let me cover the last question on the cloud guidance. Look, we try to be honest and sincere people. You have seen that we have updated our top line and cloud and software guidance for the full year because the lower end just did not make sense anymore. And we have also upgraded the upper end of those guidance’s, because it's a real possibility that we might even do better than the previous high end of it. And that's how you need to look also at the cloud guidance. We are also equally serious about this. So it's still a possibility that we end up anywhere in those - in the spectrum. And of course, the key factors that help us to climb up is very good bookings performance and now everyone's focus must be across the organization to make sure that we onboard our customers as quickly as possible. And the good thing that you will have noted is the very decent performance of our services business, in particular also in the cloud. So you can see that there is a lot of activities going on currently to implement for our customers and on-board them. The more successful we are in that, the better it would be for our cloud performance. We alluded to the fact that we were a little bit backend loaded in the cloud actually in the last two quarters. And so we are working on making up for this now with speedy implementations and where we will ultimately end up will be largely determined by this fact because bookings that we now drive in the second half year will not really have a material impact on revenue for 2017 anymore. That's the story. So everything's possible, but very firm in upholding the guidance range that we had done at the beginning of the year.

Thank you.

Thank you. The next question please.

Our next question comes from Michael Briest from UBS. Please go ahead.

Thank you. And good afternoon. Another question on cloud margins, I'm afraid. Just in terms of the SaaS/PaaS business Luka, 58% gross margin in Q2. I think at the start of the year you were talking about the overall cloud business being roughly stable margins. Do you still think you can get to the stable margin for the year and have we now seen the worst or the trough if you liking cloud profitability? And then one for Rob Enslin or Bill, the Americas Cloud growth of 16% in the quarter was a bit of a deceleration from the periods and obviously Europe and Asia were very strong. But can you talk about that whether it's competitive or something is to do with Steve Singh leaving et cetera? And then just finally, can we get an update on the number of live S/4customers? Thanks.

Yeah. Okay. So on the cloud margins look, I mean, we have two pieces of our cloud business, the HANA Enterprise Cloud and the Business Networks which are marching towards their targets and they are exactly in line with our expectations. In SaaS/PaaS you're right, that the cloud margin has come down quite a bit and I have to admit slightly above my expectations. To be honest, we are working intensely on finalizing the infrastructure convergence investments and the re-platforming and we want to make sure that we will be done in time, so that the results in 2018 are not affected by this anymore. That's why we are doubling down on the investments right now. And therefore for this year I still expect that the SaaS/PaaS margins will be under pressure, but therefore I equally expect that as of next year the progression should be much more pronounced than what we are seeing right now, because if it was not for that SaaS/PaaS drop due to the onetime investments, we would see already a progression in the margin in all the three businesses. That's for me the most important piece, not so much the mix shift effect that we see, but we need to see progress in all three business models. And for sure we will see that progress also in SaaS/PaaS in 2018.

And Michael, in terms of the cloud growth in the America continent, so little bit on that, you know, you're over 20% through the first half and you did have some timing effect on large transformational cloud deals that moved to the right. So I think where you're going to see in Q3 and Q4 is substantially accelerated growth. There is no issue with the business in the cloud in the United States as an example. So stay tuned for even more growth in that region in Q3 and Q4. We have very good visibility. It's in really good shape. And as I said you know, when you have S/4HANA a lot of times you're talking about large transformations within these enterprises and they attach those lines of business cloud decisions to those larger decisions and you see some timing effect to that in particular in the US.

And then we had the question on HANA live customers, maybe Rob you can handle this?

Yes, sure. I think Bernstein [ph] as well. But we have over 850 live customers now to just over two and a half thousand projects ongoing, so it continues to be very successful. And as Bill said these customers are also investing in the top product. So this is really a tremendous success story for a city and the more they go live, the more expansion we will see.

Great. Thank you very much.

Okay. Thank you. Next question please.

We will now take the next question from Mr. Ross MacMillan from RBC Markets. Please go ahead.

Thanks a lot. This was another really strong license revenue quarter and for the last two and a half years you’ve grown license revenues and constant currency growth. I just was curious you know for only 20% of the way to the S/4 based conversion, what would stop the company continuing to have [indiscernible] license revenue growth and is that the way that we should start to think about that that line item for the foreseeable future? Thanks.

This is Bill, Ross. You should think about S/4HANA as a growth story. We shouldn't spend all of our time on how much of that growth story and what percentage of that will be recognized one way or the other. I think what you should think about it is the 21st century digital platform for a successful company, is the best run SAP and S/4HANA is central to that. Do I believe that the theme is there for continued growth on a positive basis even on the upfront license recognition for S/4HANA? Absolutely. And do I think that the cloud and the full rental model for S/4HANA in the high end, as well as upper mid-market in mid has only scratched the surface so far? Absolutely. That's why I say it’s such an early moment in the evolution of this growth story, you should just feel really great about it.

And maybe it's a follow up, if I could, thank you, Bill. And just on Leonardo, I'm curious have you set any internal revenue targets, specifically for Leonardo or does that just get rolled up into component technology in the portfolio? Thanks.

Yeah. May I take this? This is Bernd [ph] Yeah, of course, we have revenue targets. But more important we have value targets and the revenue targets, plus the businesses we have – I am not really another brand which is definitely our cloud platform which is IoT, which is blockchain, which is analytics and what I can share with you that across all these businesses we have seen in the first half of 2017 you couldn't disclose. And we are very confident that while we talked today a lot about HANA, we talked a lot about S/4HANA, when we talk again in one or two years, Leonardo will be equally important to our financial success than what we talked today about S/4 and HANA. So this should give you some inspiration what’s possible.

Okay. Thank you.

Great. Thank you. Congrats. Thank you.

Thank you. Let's take the next question please.

Our next question comes from Adam Wood from Morgan Stanley. Please go ahead.

Hi. Thanks very much for taking the question. Also congratulations from me on the first half great performance. Maybe can I just ask first of all a clarification question on the margin side? On the second half are you suggesting the margins actually start to rise or are you just suggesting that the rate of decline moderate before we see the increase in ‘18? So just help us on the phasing of margins that would be really helpful. Then on the cloud side, just to try to head off you know, the final issue on this, could you maybe update us on renewal rates there. Is there any issue on that in terms of how customers are renewing or are you starting to see any improvement there? And then maybe a final question on Leonardo [ph] you’ve obviously highlighted how strong the interest is there. Could you help us out on sales cycles there? How long should we be thinking about as interest starts to turn into actual revenues? Thanks very much.

Yeah. I will defer to Bernd, maybe on the sales cycles and more importantly the innovation cycle as Bernd has alluded to before. On your first two questions, cloud renewals, no change of performance, very consistent in the first half year from what we have seen in prior years. In terms of the progression of the margin, we will see an increase of the operating income contribution in the second half year. That's on the commitment that we have on the margin side, I think it would be a little bit too early to call for the turnaround already in the second half year. This will be a subject for 2018.

Okay. Hello, Adam. This is Bernd. Just to comment on your question on the safe cycle. It's indeed a very relevant question because with Leonardo we have to find a new go to market approach, which is different from selling predefined packaged software. As we will share resources in co-engineering and co-innovating the new digital business solutions together with our customers. And What Bill announced that Sapphire that we have in accelerate the approach where we use our tremendous industry experience across all 25 industries combined with our technology leadership and we are able now to demonstrate well we are the proof points within three months to our customers. And then when it comes to the revenue recognition, yes, its not just a new go to market, it's as well a new commercial approach, as many of these customers are eager to share investment risks, but as well benefits with us. And this paper use model is something we will push forward going and going into the future. And the beautiful thing is that this is a very sticky business. Once you have implemented this business and imagine there is a dedicated percentage depending on the customer and depending on the industry, each dollar or euro the customer earns there is a dedicated percentage going into our P&L I think I'm looking forward to have this adopted across our installed base, but more importantly about the net new names which we will conquer everyday.

[indiscernible] value base pricing for customers end… A – Unidentified Company Representative: Indeed. And I think that the beautiful things when you talk about value based pricing it's about, if our customers are successful then we are successful. And if you look back the last 45 years that's what we are up for and that's our strategy being the technology at wiser and partner and not a competitor of our customers.

It's very helpful. Thank you.

We have two more questions please.

We will now take the next question sir from Mohammed Moawalla from Goldman Sachs. Please go ahead.

Great. Thank you. And well done on the quarter from side as well. Bill, perhaps you could isolate you know, obviously the strong product cycle momentum that you are seeing with S/4HANA and the cloud products, but also maybe some other macro and cyclical considerations on what you're seeing and to what extent is this changing things like you know the uptick in deal sizes, sales cycles et cetera. And I notice that the emerging markets also had a particularly strong performance this quarter. So as you look at sort of the different growth levers as aside from the product cycle where do you sort of stand in terms of the different levers as you manage the business. And secondly, perhaps as we think about the kind of additional kind of investment opportunities, obviously you've invested and sort of front loaded some of the spending in H1 this year. Are you inclined to sort of invest further upside away you know, in the near term or would you be inclined to let that drop to the bottom line?

Well, thank you very much for the question, Mohammed and thank you for your kind remarks. Right now the macro environment is good. I mean, there's not bad out there at all. I'm on the European round table as you know and the top industrial CEOs at the European round table are always talking about how do they compete and how do they digitize their business in the fourth industrial revolution. If you go to the United States you know, they call it a digital revolution and digital business. But in every industry there's this unbelievable passion for change in digitization which gives us such an advantage. And if I was just to summarize it for you in five simple points, HANA, S/4HANA, the line of business cloud, the business network and Leonardo and IN five fingers you can tell the entire SAP story and what's so compelling about the SAP story is in all areas we have the greatest breadth, depth and reach into industries and global markets of any competitor in this space. So that is why in any given quarter we could have one industry that's particularly strong, another one that might be softer and we're able to balance that. Now in geographic terms, when you look at Japan, Japan was on a roll this quarter and remains on a roll. Asia Pacific, Japan as a region had a standout fantastic quarter and we continue to be the ultimate brand in software in China. Not to mention India of course. The US is the more competitive of all the markets, but we have some of the more signature brands behind us in the United States. I was really pleased with Google. Going to SAP, I think it says a lot. They know a little bit about technology…

Yeah, absolutely. Thanks, Bill. And just to get into the details here, on the OpEx side we clearly have made our investments, so we would not reinvest upside that we generate in Q3 for example in Q4. We are done with our investment plan for 2017. Second on that OpEx side will continue to invest into our data center expansion and into the completion of the project that we have been covering now for a while. This will take the second half and hence and you can expect us to invest at roughly the same levels as in Q1 and Q2 also in the second half. But on the OpEx side absolutely you will see full flow through of any results that we post on the top line.

That’s great. Thank you very much.

Thank you. Now let's take the final question please.

We will now take our final question from Stacy Pollard from JPMorgan. Please go ahead madam.

Hi. Thank you very much. Since I am last, I might throw a few in there. First of all can you explain why the license and support gross margin declined? Could Rob perhaps elaborate on S/4 and the cloud and maybe talk about what percentage of bookings for example. A quick one on, where did the services out performance come from and what you're expecting in H2. And finally show should we think about maintenance growth declining in the next few years?

I'm not sure whether I could get all of these questions so quickly and can you be a little bit slower so that we can…

Sure, sorry…

Luka, I’ve got them. Luka I've got them, I've got them. Let me give you a quick thing here. So the whole thing is Rob has the S/4 cloud looking and Luka on services is an upturn. We obviously continue to do well with the best retention rate of our installed maintenance base in the industry has that - what's the prospects of that going forward. Those are really the main things.

Okay, good. Then let me let me answer the support question. I think you have seen there has been some concerns around support revenues at the beginning of the year, after Q1 I told you already that there's always seasonality in our Q1 results and then through the year you’ll have win backs and the growth rates tend to increase. This is what happened here as well and expected to continue. I think in general of course, we will see over time small declines of the support growth rates, but support and license and support in total will continue to be a positive contributor to our revenue growth definitely until 2020, because we continue to have very, very robust retention rates in software support and we have a high value realisation by our customers. On the services side, similarly we are moving more and more from short term to project engagements to longer term engagements, premium support is absolutely showing very, very nice growth rates and in the hybrid world in which we are operating at the moment with many of our customers, this is really essential for our customers to get the optimum value out of their deployments. Hence I'm also very confident about the future progress in our services business. I think we have seen the turnaround now and I think it's materializing clearly in margin improvements. On the license and support side, there is no - not really anything dramatic to mention here. We have had in certain parts of our portfolio slightly higher license and sales commission cost on third party products that we are operating with. This is our product that we resell, has nothing to do with databases. Clearly S/4HANA and HANA therefore is the absolute standard. That’s the main contributing factor what support profitability has actually continued to climb up and continues to be a positive contribution.

And Rob, you want to talk about S/4 cloud?

Yeah. On S/4 cloud, I’d put it like this. Exceptionally strong demand for S/4 cloud with companies like Deloitte actually signing on and [indiscernible] what we see is tremendous success with the customers and [indiscernible] relatively short period of time and high amount of customers that are actually live with this product. So I would see together an acceleration into the second half based on the demand, but also think that what we are going to see is the leverage with the [indiscernible] market organization as they get to understand this. S/4 Cloud is definitely going to be a super success inside the SAP [ph] and with that customer base.

Thank you.

Okay. Thank you.

Thank you very much. This concludes our second quarter earnings call for today. Thank you all for joining and good-ye. Talk to you soon.

Thanks everybody.

Ladies and gentlemen, this will conclude the SAP Q2 earnings conference call. Thank you all for your participation today. You may now disconnect.