Ladies and gentlemen, please stand by. Good day, and welcome to the SAP Q1 2019 conference call. Today's conference is being recorded. And now at this time, I would like to turn the conference over to Mr. Stefan Gruber, Head of Investor Relations. Please go ahead sir.

Good morning or good afternoon. This is Stefan Gruber. Thank you for joining us to discuss our results for the first quarter 2019. I am 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 Adaire Fox-Martin, President of our Global Customer Operations; Jennifer Morgan, President of our Cloud Business Group; and Christian Klein, our COO who leads Intelligent Enterprise Group. Before we get started as usual, a couple words on 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 the SEC including SAP's Annual Report on form 20-F for 2018 filed with the SEC on February 28, 2019. 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 and financial summary slide 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 and percentage point changes are non-IFRS as reported year-over-year. The non-IFRS financial measures we provide should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with IFRS. I'd like to tell you now about some exciting investor events coming up this year. First of all, we would like to invite you to our Customer Conference SAPPPHIRE NOW in Orlando, Florida, which runs from May 7 to 9. SAPPHIRE is a great opportunity to learn more about our strategy and our product portfolio will offer special program for financial analyst including a small conference on May 8. Then on November 12, later in the year we'll hold a special Capital Markets Day. Here our senior executives will lay out the details of several new initiatives to accelerate operational excellence and value creation. We're looking forward to seeing you there. And with that, I'd like to turn things over to our CEO, Bill McDermott.

Thank you, Stefan, and hello everyone and I appreciate you joining today's call. Q1 2019 is a continuation of SAP's profitable growth story. We are a rarity in the enterprise application business with a strong core, fastest-growing cloud at scale and enterprise software, and impressive operating profit growth driven by expanding cloud gross margins. Let me share some highlights from our exceptional first quarter. Let's start with the top line. Cloud revenue exceeded €1.5 billion for the first time in a quarter that was up 48%. This is a validation that SAP is the fastest growing business software company at scale in the cloud. Cloud and software revenue accelerated growing at 16%. Total revenue growth was an impressive 16% as well. Customer demand for our intelligent enterprise and experience management solutions continues to soar. Our combined new order entry across on-premise and cloud is up 17%. Looking at our peer group comparisons, SAP is growing faster than our competitors in the core and in the cloud. The 48% growth in SAP's total cloud revenue is over 22 points faster than Salesforce, which is growing at 26%. This is equivalent to an 80% higher growth rate. And 10 points faster than Workday, which is growing at 37.5%. This is equivalent to a 30% higher growth rate than Workday. We also performed exceptionally in driving margin expansion and increasing our operating income. Our overall operating margin grew by 50 basis points. This is particularly impressive considering we consumed the market leader in experience management with Qualtrics in the quarter. In Q1, the operating margin improvement was driven by strong cloud gross margin improvement. The cloud gross margin was up 400 basis points sequentially and 300 basis points on a year-on-year basis. And this does not yet include any of the further incremental…

Thanks a lot, Bill. Yeah, we have indeed had an excellent start to the year. Cloud revenue up 48%, software licenses revenue up 4%, total revenue up 16%, operating profit up 19%, operating margin up 0.5 percentage point against the tough comparable, and capital expenditure reduced by 16%. You can see that we're clearly picking up momentum. And on top of profitable growth our business continues to get evermore resilient, as the share of cloud and software support revenue now stands at 72%. So let me provide you with some further background on the key drivers behind this exceptional quarter. Like total revenue our cloud and software revenue grew 16% this quarter. Cloud was obviously a big driver of this. Our Cloud revenue surged 48% exceeding €1.5 billion for the first time in the single quarter. And that cloud performance was driven by a well-balanced broad-based growth, both of our high scale cloud solutions as well as exceptional growth from our high potential cloud solutions and including strong contributions from our recent acquisitions Qualtrics and Callidus. Please note that neither Callidus nor Qualtrics are reflected in our 2018 comparable numbers for Q1. The combined order entry of our new cloud and software license business was up 17% for the first quarter. New cloud bookings were up 32% year-over-year and software licenses revenue was up 4% year-over-year, clearly beating expectations. With this great result in software license revenue and the continued minimal churn in our support business, our software license and support revenue continues to grow by a very strong plus 6% in the first quarter. How did it look like from a regional perspective? Well, I'm pleased to say that we had a very solid performance across all regions, starting with the EMEA region where cloud and software revenue increased…

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

Yes. [Operator Instructions] And we will hear first from Gerardus Vos with Barclays.

Hi, good afternoon and thanks for taking my question. Bill I had a question on -- if you could provide some color on the kind of senior staff attrition you've seeing in Q1? And then perhaps a follow-up for Luka. Despite a very decent mix in Q1, I calculated underlying [ph] margin was still down. So, if you adjust for M&A effects, but also the divestments and the positive impact from D&A. With the new kind of plan what give you comfort that you can deliver at a ton of base point margin improvement per annum? And then finally on the share repurchase or the potential share repurchase, what kind of balance sheet ratio are you comfortable to run the business with? Thank you.

Thank you, Gerardus. I'll open up on the senior staff changes. First of all there were two Executive Board members that moved on from SAP. If you added up their combined tenure, they were here more than a half a century. And I do think it is important to give people the opportunity to do other things with their careers. So, there is no big report out other than their pursuing some other interests. One has already ended up in the SAP ecosystem, where he will be a force multiplier for our enterprise business in combination with Google Cloud Platform. That's Rob Enslin, who is a personal friend of mine and of SAP's and I look forward to his continued success. Bernd will probably end up similarly in the ecosystem, when he's ready to come back into the workforce. The most important thing from a shareholder value creation perspective is the folks that we have running development right now, Jennifer Morgan running our line-of-business network and experience management clouds in the United States; Christian Klein running the flagship S4/HANA franchise; and Juergen Mueller running HANA analytics; and Leonardo with deep machine learning and artificial intelligence. These are the three premier leaders that we've had in the company. I've been here 17 years. I've never seen a better management team. So, takeaway from this that you would be highly impressed with what's going on. You have an incredibly aligned management team on the topline initiatives, the innovation initiatives, and now a redoubled focus and energy – a real passion around the operating margin expansion principles that Luka and I laid out today. So, if you were in the boardroom with me and this crew you'd be like, wow this is where I wanted SAP to be. Luka?

Let me add answer to your other two questions at least to the first one, because I quite frankly cannot follow the logic that our underlying margin would have been down. I mean, yes, we did have a divestiture in the quarter that benefited us, but that was basically a wash and neutralized the dilutive impact of the acquisitions that we had roughly at the same amount. Other than that, you're referring to the change of depreciation of our hardware, that's actually a net operational benefit that we were driving. It's not an accounting gimmick. We have actually successfully renegotiated our terms with hardware vendors, for our maintenance contracts, which allow us now to extend the useful life of hardware and that is an absolute operational benefit that also will show obviously in continued reduction on the capital expenditure side. So from that perspective, I'm extremely confident in our future margin targets, because we have still great scope for improvement in our cloud gross margins, in particular now that our migration to HANA is completed and we can therefore reap the benefits of that. We also see that our public cloud business is increasing in scale in relative terms against our private cloud business which improves the cloud margin performance obviously significantly as well. And given the resilience in our core business, this provides a further balancing factor that certainly is going to stay here. So I'm very confident in those targets, and certainly the margin has not been down underlying, if you take the right puts and takes into account. And just briefly on the share repurchase, I mean, please understand that we are currently initiating the analysis on the possible scope and size of capital returns in the form of share buybacks, so at this point in time, it would be premature for me to speculate on balance sheet ratios or the possible size of those. We will carefully complete this analysis and then also align with the board of SAP, and we will be ready for a very clear update for the special capital markets day in fall, so we see this as a teaser to join us in November.

Okay. Thank you.

Let's take the next question please.

And the next question will come from Kirk Materne with Evercore ISI.

Yes. Thanks. Thanks very much, and good morning and congrats on the quarter. Maybe just a couple questions for Bill and Luka. I guess, we just saw you all in February, and I was curious just around your higher conviction around margins. Maybe what has changed since then? Because you guys are obviously much more adamant around this, I think some of the things that you're targeting you sort of knew about, you knew you were moving off Oracle. So I'm just kind of curious what's happened on that front to give you even more conviction around that margin guide. And then secondly maybe for Bill, just on Qualtrics can you talk about how that's going in terms of the pull-through in both directions? Obviously, there's a lot of opportunity there. I think the feedback is really positive in terms of what Qualtrics brings to you all, but could you give us a little bit more color on what you're seeing now that you've had them in-house for a little bit longer? Thanks.

Yeah. Absolutely. So, Kirk, thank you very much for the question. Let's first begin with the setup in SAP. It took us a decade. I've been – I'm in my 10th year here as CEO. We reinvented the core of SAP's enterprise application software with HANA, the true in-memory database platform for the 21st century. We revamped the ERP system with S/4HANA now the digital nucleus to every well-run business in 25 industries and honor 93 countries around the world. That was really hard work. Then, we went on a bit of an M&A spree and we bought the most pristine line of business, Business Network and now Experience Management cloud assets in the world. We have come to the clear conclusion that our customers are getting so much innovation from SAP. They're getting it so fast that they're basically saying, I'm good with the amount of innovation you've given me just give me integrated solutions, and let's bring more and more value out of the business solution you guys have created for us." So they are ready now to harvest the value from those systems. Similarly, at our Capital Markets Day, we surveyed you our dear shareholders. And six out of 10 of you said on the Qualtrics survey, "I want to see SAP expand their operating margins." We love the revenue story. Nobody grows like SAP, but it's time to pull some of the margin out of this amazing franchise now. As we look at our business, our cloud gross margins are improving even faster than we thought they would. The convergence to HANA and this unified cloud infrastructure is happening even faster. So we owed you an update and today we upped our operating income guidance for the year. We thought at the same time we're doing…

Second question on the Qualtrics?

Now on Qualtrics, this is even better than actually I thought it would be at this stage of the game. Let me give you an example. In this board off-site, we had Gary Kausmeyer [ph] demonstrate HANA and show predictive analytics utilizing Leonardo in various enterprise applications scenarios among which you take business processes for example like recruit to retire. So we can take the whole value chain now on the experience data of an employee. How do you feel about the recruiting experience and the onboarding experience? How's the training going? What do you think of the compensation plan logistics and bonus? All this experience data now comes into the HR system through HANA instantaneously. So if you're managing a person in the organization, you're not just looking at data. The system's telling you exactly what the Big Data is saying. And it's making predictions on the business decisions you as a leader should be taking. The same is true with your customers externally. The same is true on product feedback or even how your brand's resonating in all of the channels of the open Internet market. So, all of this is now being built into the SAP solutions will be prominently featured at SAPPHIRE. It's unbelievable. Second thing that's great is our customers I gave CVS as one example. They are like wow "I could take all my operating data out of a system like S/4HANA, if I'm looking at my systems of record whether the Human Capital Management, Customer Relationship Management, Manufacturing, I have all that O-Data, but I never knew why customers were receiving my products well, buying more, buying less. Why one country was doing this and another country was doing the other thing." All of this now can be coalesced in a digital boardroom that composes both the experience and the operational data. And it's really exciting to CEOs who are trying to run companies. So we're off to a really fast start. Qualtrics is very happy. The management team is totally stable. Our team is working great together. We have Jennifer Morgan here. I'm sure she could give you a few colorful remarks. They like Jennifer very much. And what I really like about Jen is her connection to Christian Klein and Juergen Muller. Because what they want to do is bring that integrated solution perspective to the customer. There's no debates internally. We are one integrated solution machine. And nobody's talking about their turf. We're all talking about how do we give the customer what they want and make SAP, the best-run SAP. So that's what I mean about the board that we have now. Jen you want to give a little color on Qualtrics.

Yes. I mean we're already incorporating this into our own business. So for us, when we finished out Q1, we were constantly talking to our field. So we understand what went well, what didn't well. And we can only incorporate that real time in the business as we move into Q2. We already have a pulse and a sentiment. We know where we need certain investments. We know where we need certain support, which regions. So it's been great. So we're living that every day. And I think the key thing is as Bill said is every company right there has tons of survey data, but our customers are looking for a platform. And what we're able to do is take the experience we have in industries, the experience in the business processes, overlay that platform across those processes and really see where experience becomes a leading indicator to drive a different outcome and talk about where does that show on the top line? Where is it show up in your SG&A improvements, et cetera? So we're turning this from talking about surveys to talking about a platform that drives results on the income statement. So we're excited about it. It fits real nicely with our portfolio.

And one of the final remarks I would make, it now changes the whole context of the CRM conversation, right. Because CRM moves into a category, which is an important category. It's a system of record just like HCM is a system of record, just like ERP is a system of record. So when you add the Experience Management context to the customer relationship, now you're talking about a whole new system of innovation. And with HANA you're talking about predictive analytics that's helping decision makers make decisions. So we have fundamentally now moved the cheese, the CRM game is different but the best part about this, the experienced economy is a massive market. But this is complementing our core. This is making the intelligent enterprise more relevant than ever. So it's really good for new category, but what we're seeing is it's really amplifying the power of the SAP core or the intelligent enterprise vision we've been on for several years now.

Thanks very much.

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

Next question will come from John King with Bank of America.

Yeah. Thanks very much for taking the questions. First one was on some of the restructuring that's been done and some of the people that have left the business. And there’s just quite a few -- there's been a few stalwart ABAP developers and leaders in the R&D department that have departed. I wonder how -- what that means basically for that code base? And what that means for customers. You've, obviously, got a big installed base of ABAP code. How committed are you to that? And essentially what's the future for that? What do these departures mean? That's the first question. I've got a follow-up.

Yeah, okay. Let me answer this question, Christian Klein here. So first of all, when you look at the restructuring we have done in R&D, it's not all about having developers leave SAP. What we did is first of all to increase the productivity of our development workforce. So we took several measures. And that included, for example, we looked into the ratios of our engineers versus product managers. And we increased actually the ratio to get to a higher ratio of developers in the future. Second what we did, we looked into the productivity of our development workforce with regard to the locations we are having all over the world. So we are now also reducing the number of locations. We are having to develop on one product. So this also will increase the effectiveness. So this has nothing to do that we are now downsizing our development workforce on above -- on any other programming languages. This was just about increasing the effectiveness of our development workforce to ship faster innovations in the future.

And I just want to build on this, John. I want to give you a little feel for this. There's very important information that you all need to have. SAP has great ABAP developers. We will continue to have amazing ABAP developers. They are little blogs that sometimes go out in the heat of a restructuring. There was one in particular that had to two ABAP developers featured prominently and that got around the Internet pretty good. Both of those ABAP developers are actually not only working here, they're in their dream job. So don't believe everything you read on the Internet is one thing I will give you for sure. The second thing I would say to our shareholders out there today, companies don't become great by the number of people that work in them. They become great by having the absolute best quality and the absolute best talent. And when I give you my word on and I know Luka and all of the Executive Board colleagues fully back this is when we do bring people into the company now, they will be the most skilled people in the world at what they do. People like data scientist, I was at our new facility in Newport Beach, California on Friday, if you think about UC Irvine and what we're doing to capture the hearts and minds of data scientists in Orange County, it's incredible come see our facility. When we bring people into this company, they will code software or they will be very on the front lines with the customer relationships. We don't need the middle layers, we already have enough of that and our HANA software can give us all the insight we need. So you're not going to see us bringing in middle management and thick layers in this company. People are going to be writing software and people are going to be backing customer relationships in the field. We're going to grow this company and we’re going to expand the margins in this company and run a profitability machine. Thank you.

Can we now take the next question please?

And the next question will come from Ross MacMillan with RBC Capital Markets.

Thanks very much. May be one for Bill and then one for Luka. Bill, just a nice positive surprise in the license results in Q1, but I think the cloud bookings organically were may be a little bit more than we were expecting. I'd love your comment and color on the seasonality of Q1 with regard to the organic cloud bookings? And then Luka, obviously, a very strong cloud gross margin. Some one-time items but a lot of sustainable pieces in there. Can you just help us think through how we should think about that sequential progression on the cloud gross margins into Q2 and into the back half of the year? Thank you.

Ross, thank you first of all for the question Ross. I have been saying now for many quarters that the core license business or SAP is rock solid. And while you could have a scenario, because we're not going to give away our software or price it inappropriately into the market. So with that in mind, you understand how quarterly upfront software sales go. If somebody at the end of a quarter doesn't want to pay the full value for our software, we'll pick it up the next quarter at the fair market value of that software. So that can always give you a little bit lumpiness, but the pipeline for the core software is outstanding. And obviously, it grew on a year-over-year basis in Q1. And what's fascinating about our core, you know the maintenance phase of SAP is Fort Knox. It's near 100% loyalty. And now you even have growth in the license sales of SAP in Q1 and there's no reason to believe we can't maintain that steady state in the core license business of SAP. Couple that now with the next point of your question, which is the organic cloud bookings growth of the company. And as I stated today, the line of business cloud, the Business Network cloud and don't forget keep this in mind, when you look at our organic cloud bookings numbers, you are not seeing the new Business Network cloud revenues that do not show up in bookings. You're just seeing the bookings on the SaaS model. We have new models now that are kicking in on the network itself. And that network effect is delivering a nice chunk of growth. So I'm not surprised, I'm actually where I thought we would be. I think the company right now is clicking on all cylinders. And I believe as the year progresses, the big story that's going to invigorate, not just the cloud, but also the core is Qualtrics. Because this is a smoking hot category and they are by far the de facto standard. So with all that firepower count on solid growth in the quarter, count on continued strong cloud bookings in the line of business the network and of course Experience Management. And overall count on the operating margin and the profitability expansion we talked about today. This is that magic moment you all have been waiting for.

Yes. And perhaps to answer your question on the progression of the different cloud gross margins. Of course, there are different drivers at play. First of all the most predictable progression that we have had on last few years was on the Business Network side. These are all scale assets that are progressing very nicely towards their 2020 targets and that are calling already for an above 80% gross margin. Here, we will continue to see a steady progress, but with a small positive bump starting as of Q3 when we have finalized the migration of Ariba onto HANA that is absolutely safe to be concluded now in time for the respective third-party maintenance contract to run its course in Q2. And then will help us in the second half year. So by the end of 2019, we should definitely see this at around 80% already. Then you have the HANA Enterprise Cloud Infrastructure-as-a-Service business, which has seen a very, very nice uptick. Now a smaller portion of that is a one-timer indeed and release of accruals for partner credits. But that's a single-digit million amount, the rest is actually sustainable. We have a 2020 target for HANA Enterprise Cloud of between 30% to 35%. Very important here is that we're seeing our ecosystem being able to take on more of the respective work. So we're working in a very nice partnership model with the HyperScalers and we are focused in HANA Enterprise Cloud on the right high-margin opportunities. And so while I don't expect given the one-timer that we had in Q1 that the 32% that we have seen now is already in 2019 the norm. We will definitely make significant double-digit progress from 2018 into 2019 and that will be now pretty balanced and stable for the remainder of the year. And finally, in Software-as-a-Service and Platform-as-a-Service, it will only get better from now. So you will see an acceleration of cloud gross margin improvements for two factors: first of all the weight of Qualtrics versus superior growth rate in a very high gross margins of round about 87% that they are having in the cloud will take more of an overweight role as a part of the whole SaaS/PaaS portfolio. And then secondly with Q2 you will see in our applications technology and services segment and the ATS segment the significant positive impact of the -- of Oracle migration for SuccessFactors. So those steps in combination will drive us significantly forward. So you can see and expect the continued stable progress and increase of the cloud gross margins as we march through the year. In previous years, Q1 was always among the strongest quarters. I believe in 2019 there will be further increases as we progress through the year due to those factors.

And I just want to add one thing to what Luka's saying, because you all have a right to know this. A couple of years I had the privilege to appoint two great leaders to the Executive Board on behalf of the Supervisory Board and one was Jennifer Morgan who you heard from today, the other is Adaire Fox-Martin. And we haven't really talked about the go-to-market and the cost of sale coming down as a ratio. But I firmly believe that it will. And I also believe that the synergy and the trust that Jen and Adaire had as co-Presidents of GCO will now play out on the bigger stage, with Jen running all of the cloud network and Experience Management businesses and Adaire running the Salesforce. And together, they will come up with new coverage strategies that cover more turf at a lower cost of sale and a lower percentage of sale and marketing in the revenue mix of SAP. So, I have both Adaire and Jen on the line, so if you guys want any questions directed at them today, I'm sure they'd be happy to talk to you.

Great. Thank you. So, let’s take next question, please.

And our next question will come from Stefan Slowinski with Exane BNP Paribas.

Yes. Hi. Thank you very much for taking my question. Just -- I guess a bit of a follow-up on what you're just discussing, which is the acceleration of public cloud adoption for S/4HANA. Do you expect that to reach a tipping point this year or next year? You mentioned Rob moving over to GCP, are you seeing those large cloud partners increasingly helping in the sales process as well? And then what does that mean for your own HANA Enterprise Cloud business? You mentioned margins improving, but would you be kind of deemphasizing that over time? Thank you.

Hi. This is Jennifer. I'll take that. So, one of the things we worked through really hard on over the last nine to 12 months is defining the reference architecture for us for -- on HyperScalers by industry. So, we worked very closely with all of them, so that we can be much more prescriptive with the customers and we'll talk more about this at SAPPHIRE on. What is the reference architecture for the move to S/4? What are the set cloud properties that will help you make that move and help you with orchestration, integration and extension of an SAP system? And that will two things it will drive the S/4 moves in that revenue stream. It's also going to drive further cloud revenue for us as well in the form of our cloud platform. So that's a win-win. It's a win-win for our customers who've asked us to come together and help them with that. How do we do this? And how do we do it most efficiently? And so, SAP is really certified that market approved journey for that move. It's a win-win for the HyperScalers and most importantly, it's a win-win for the customers.

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

We have the next question from Alex Tout with Deutsche Bank.

Yeah. Let’s go ahead with Alex Tout, please.

Yeah. Hi, guys. Thanks for taking the question. Just zooming in on the sales and marketing line. I saw that that sell quite nicely year-over-year as a percentage of revenue in the first quarter and that is despite IFRS 15 now acting as a headwind rather than the tailwind as it was last year. Are you expecting this sort of meaningful improvement for the year overall? Was there anything kind of specific that drove an exceptionally strong performance there? Or is that some specific moves that you've made, for example, around double and triple comping kind of paying off? And just as a small follow-up. On the -- I saw there was quite a big finance income inflow in the quarter offsetting the higher interest charge. Is that some kind of one-off? Or is that something sustainable in there that we should bear in mind on the EPS side for the rest of the year? Thanks.

Yeah, Alex, I'll be happy to answer those. Very good questions. First, quickly on the finance income. The main positive factor contributing here was again a stellar result from our Sapphire Ventures venture capital fund. They, again, had value accretion across their portfolio of more than €80 million just in one quarter. So, they are definitely a value generation machine for SAP now. We couldn't be proud of what we do with the folks from Sapphire Ventures and that's the main reason. And so, of course, as everyone -- in venture capital, there can be ups and downs. But the team has really proven that they can drive outsized returns and I've every trust and confidence in them continuing to do this in the quarters and years to come. And actually quickly on the sales and marketing ratio and perhaps Adaire can expend on this. But I think it's really a function of very nice increases in sales efficiency. We have a record sales productivity across the company in 2019. We have worked on simplifying the motions that we have been talking about this already last year. We do think the number of lines of business and corresponding sales specs to make sure that we can run a more holistic and simple go-to-market approach. And that is paying off. You rightfully note know that this is happening against the headwind from IFRS 15 from the amortization of the sales commissions, but I'm very confident that Adaire and her team, as well as working in close lockstep with Jen and CGB, we'll be able to continue to drive this trend. Adaire anything to add?

Yeah. Thank you. Thank you very much, Luka. I mean, certainly, we're seeing momentum continue off the back of the very strong Q4 into our Q1. And the customer sentiment have been exceptionally positive. At the moment myself and two of my board colleagues from development Christian and Juergen are with our largest 15 customers globally at our executive advisory board. And it's very clear to see that with these customers, the SAP strategy is resonating regardless of the industry or the location. And I would also say that we've had a very strong focus on segmentation to maximize our coverage, a very strong focus on pipeline and a very strong focus on net name acquisition of all of which contributed to the momentum that we're seeing in the business. And of course, as we are in Q2, now we will look forward to SAPPHIRE creating a compelling event for us in May around which we can showcase to our customers the innovations of SAP, and support the implementation of those innovations and on behalf of our customers with our large ecosystem and leverage our own services organization. So many different aspects of the sales and marketing element many different elements of the strategy that we put in place came to fruition for us in Q1.

Thank you. I think we have time now for two more questions.

We'll hear next from Michael Briest with UBS.

Great. Thank you. Good afternoon. Two for me as well. Just following up on the question to Jennifer about the sort of HyperScalers, reading the operational excellence press release you've talked about working as a best-in-class provider across any type of cloud delivery model. Can you talk about the maybe the CapEx implications of this? Should we assume that in later years maybe CapEx comes down? And then secondly, Luka I think at the Capital Markets Day in February you committed to the 80% gross margin target for the SaaS/PaaS business in 2023 is that still in place? And also in terms of headcount should we assume that after this year or in 2019 and beyond the headcount growth is going to slow. Because I think you did say you'd exit the year with more than 100,000 people? Thank you.

Yeah, perhaps I can answer the questions and then Jen by all means feel free to expand on this. So first of all, with our strategy we definitely are seeing now the advent of capital expenditures coming down. You've seen that in Q1. We have actually made great progress not only through our partnership model with the HyperScalers, but also we have moved to consolidated cloud infrastructure organization that is run in Christian's board area. And actually, the work there that is done by Gary Slater, who is leading this area and to consolidate the procurement activities on hardware, negotiate and renegotiate the terms so that we can utilize the hardware in an economical sense for a longer period of time, it's still a very successful. So in combination all of those measures, I think give us the opportunity to probably not only put to further increase of CapEx, to a hold, but actually start to clawback slightly as you're starting to see it now in Q1. So the second point on the SaaS/PaaS margins absolutely the target is intact. Actually in an ideal world we might even be able to do slightly better than that quite frankly for SaaS/PaaS. And on the headcount side let's be clear what you've seen in Q1 is a headcount addition that was almost entirely due to the acquisition of Qualtrics. We have been extremely disciplined. As Bill has said, we're hiring the right talents, but we're not necessarily focused on just the quantity of people that we bring on board. So therefore, definitely you will see in 2019 that our organic hiring volume will be significantly smaller than what we have seen in 2018. We will likely pass the 100,000 mark but not by much quite frankly. And also in the future years to come, you should certainly see hiring rates at SAP that will substantially trail the ones that you have seen in the years 2017 and 2018.

Thank you.

Very good. Thank you. Let's take the final question, please.

And the final question will come from Walter Pritchard with Citi.

Hi. Thanks. Two questions one for Luka and one for Jen – Jennifer. On the new could bookings and on the new order entry, could you help us understand what impact Qualtrics and Callidus had on those metric? And then, I'm curios on the Salesforce side, how much of the Salesforce at this point is selling Qualtrics and how does that roll out throughout this year and into next year?

Perhaps, Jen you can take the question on the Salesforce. In terms of the new cloud bookings, so we don't disclose an exact contribution from Qualtrics. Suffice it to say that, they were off to a good start and certainly we expect them to continue to contribute very nicely. And on the sales perhaps on the sales motion for Qualtrics Jen?

Yeah. So we're off to a great start. I spent the last two weeks really digging in with each of the management teams across all the lines of business. And we have some incredible assets, which give us a lot of levers to pull and a lot of areas for growth. So for me, it's real strong focus on the execution of where we're going to put our dollars, where we're going to grow. SAPPHIRE comes at a perfect time with Qualtrics everything else and we're excited for a great Q2 and second half with these two being real strong growth drivers for CPG.

Very good. Thank you very much. This concludes the SAP Q1 2019 earnings call. And we look forward to seeing you at SAPPHIRE in Orlando. Thank you very much.

Thank you everybody.

Ladies and gentlemen, this does conclude your conference.