SAP SE (SAP) Q2 2018 Earnings Conference Call Transcript

SAP SE (SAP -1.61%)
Q2 2018 Earnings Conference Call
July 19, 2018, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the SAP Q2 and Half-Year 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Stefan Gruber. Please go ahead, sir.

Stefan Gruber -- Head of Investor Relations

Thank you. Good morning and good afternoon. This is Stefan Gruber, Head of Investor Relations. Thank you for joining us to discuss our results for the second quarter 2018. I'm joined by our CEO Bill McDermott and Luka Mucic, our CFO. They'll both make opening remarks on the call today. Also joining us for Q&A are board members Bob Enslin, who runs Cloud Business Group, Bernd Leukert, who leads Products and Innovation, as well as Jennifer Morgan and Adaire Fox-Martin, who together run Global Customer Operations.

Before we get started, I would like 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," "intent," "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, and 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. SEC, including SAP's annual report on Form 20-F for 2017, filed with the SEC on February 28th, 2018. Participants of this call are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.

In addition, on our Investor Relations website, you can find our quarterly statement, our half-year report, and the financial summary slide deck, which are all 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 at constant currencies. The non-IFRS financial measures we provide should not be considered a substitute for or superior to the measure of financial performance prepared in accordance with IFRS. And, with that, I would like to turn things over to our CEO, Bill McDermott.

William McDermott -- Chief Executive Officer

Thank you, Stefan. Hello, everyone, and thank you for joining us today. I'll be brief in my remarks so we can get to your questions. We're now in the ninth consecutive year of consistent growth for SAP. During this time, we established a new HANA World to replace the disk-based database. We engineered the fourth generation of ERP with S/4HANA. We extended the enterprise into the business networks. We assembled the most cloud users in the enterprise application software industry. In every quarter along this journey, our results have proven this to be the winning strategy for SAP.

SAP's trifecta of strong software and support sales, fast cloud growth, and operating income expansion is now the gold standard in the industry. Our market share gains continued in Q2 as cloud revenues soared 40% year on year in constant currencies. For those keeping score, that's a 5% beat. In one sign of our thriving cloud business, cloud bookings grew 29%. In another, pay-as-you-go revenue in Fieldglass, Ariba, Concur, SAP Cloud Platform, and HANA Enterprise Cloud is ramping really fast. You'll get more detail on that in a little bit.

In this global war for talent, SAP's success factor is Employee Central. New customers increased 42% year on year. I'm sure that's quite concerning to our competitors. Driven by fast adoption of SAP S/4HANA, cloud and software revenue grew by a stellar 10%. Now, keep in mind the software-only -- the software license on a stand-alone basis -- compared against our toughest quarter in 2017, so don't get too worked up on it.

New cloud and software order entry grew even faster at 12%, and even with a higher mix of cloud and services revenue, operating profit surged 12% while we expanded margin. And, just to be clear, if you take into account the Callidus effect and the cloud mix with the cloud beat, you'd be at a 1-point margin improvement on a year-over-year basis, so feel really good about the margins. We're on a roll. Some of the most prestigious brands in the world chose SAP solutions in Q2, including Chevron, Thomson Reuters, McDonald's China, Whirlpool, and the U.S. Navy, to name a few. NL is now live, and they are the biggest SAP S/4HANA installation in the world.

As you'll hear from Luka in a few moments, Q2 showed decisively that SAP is a balanced, sustainable, profitable growth company. There's one topic I will cover in some depth before I hand it over to Luka. One month ago, at SAPPHIRE, we launched SAP C/4HANA as the new standard for fourth-generation CRM. Here's the big picture: CEOs understand that serving their customers must be the unifying business priority. They know this can't be done when the sales department doesn't work with the finance department, or when the marketing department doesn't share data with the supply chain, or when the human resources team doesn't know how to engage the fast-growing contract workforce.

Unfortunately, we have seen too many businesses revert to the siloed practices of failed enterprises, so it's no coincidence that many were actually disrupted by innovative competitors. Those disruptors built the entire company as a single, integrated machine to serve that customer from demand chain to supply chain. Keep in mind SAP was founded 46 years ago to solve a CEO business problem: Integrating a fractured enterprise. Today, we are rising yet again to deliver a revolutionary end-to-end customer experience.

Every asset in our portfolio has been carefully assembled to deliver the intelligent enterprise. SAP HANA Data Management Suite, including Data Hub, the data control tower to power the customer experience without ever moving the data, SAP C/4HANA to handle the customer data, marketing, commerce, sales and service as an integrated, modern front office, SAP Success Factors, bringing the total workforce together in service to the customer relationship, SAP S/4HANA, cloud ERP built with industry-next practices as the ultimate fulfillment engine, SAP Digital Supply Chain to innovate the manufacturing process with groundbreaking new technologies, never more important with global trade issues that we see in the market today.

SAP Business Networks, extending the supply chain beyond the walls of the enterprise to drive a network effect, SAP Leonardo and Analytics Cloud, intelligence embedded into every SAP solution to drive mass personalization and predictability, SAP Cloud Platform, integrating the intelligent enterprise around a single view of the customer, SAP HANA Enterprise Cloud to help businesses run in whichever environment best serves their customers.

So, ladies and gentlemen, there's only one company in the industry that can help businesses revolutionize how they serve their customers. The C/4HANA front office suite is playing in a different league than Salesforce Automation. When you combine all of our assets together, this is the real power of integration: To serve the customer with real solutions. For any who may doubt SAP's ambition in this area, please consider in Q2, C/4HANA is already growing at steep triple digits. Our organic growth is more than five times our primary competitor in this segment. Our pipeline for the remainder of the year has accelerated dramatically, and as a signal of our confidence, SAP will highlight C/4HANA momentum on a quarterly basis so you have visibility. I expect that you will see similarly strong growth in the quarters to come. That's right -- triple-digit.

Customer to core, front office to fulfillment, C/4HANA to S/4HANA -- great moments are born from opportunity. Ours is to redefine the CRM industry. We have the strategy, we have the solutions, we have the ambition. As you gather from my remarks, we are bullish about SAP's prospects to unleash yet another new wave of growth. SAP has made a clear argument. Our customers are already validating in Q2, and as a signal of our confidence, today, we are raising not only our 2018 full-year guidance, we are also raising our 2020 cloud ambition. This company is fired up and ready to go. Our 94,000 colleagues believe in the work we do every day and they could not be more passionate to help this world run better and improve people's lives. I'm really looking forward to your questions today, so for now, it's my pleasure to hand it over to our CFO Luka Mucic. Luka, over to you.

Luka Mucic -- Chief Financial Officer

Thanks a lot, Bill. As you can tell from the financial results shared by Bill, our strong momentum continued. Our business is getting more and more recurring in nature, with two-thirds now coming from more predictable revenue streams in the quarter. We continue to grow profitably, even with severe currency headwinds in Q2.

Now, to the highlights of the quarter. First, as Bill said, our cloud revenue grew by 40%. This is a stellar result. If you consider that even excluding the contribution from Callidus, we are tracking very nicely above the cloud CAGR implied in our 2020 ambition. New cloud bookings grew by 29% on top of the strong performance in Q2 last year. Note that new cloud bookings is only one component of future cloud revenue. As Bill mentioned, we are seeing accelerating pay-as-you-go revenue in our cloud business, and none of this is even included in the new cloud bookings metric. And, remember that new high-growth cloud solutions like S/4HANA Cloud and C/4HANA will have more impact on growth as they scale to be a bigger part of the mix.

Now, to software, which even with the tough comparison from last year was still fully in line with our implied 2018 and 2020 midterm aspirations. The continuous momentum of S/4HANA, HANA Full Use, our digital supply chain solution, as well as our global risk and compliance solutions contributed to the resilience of our software business in the quarter.

Total new business, which is best demonstrated by the combination of cloud total contract value and software license order entry, was again up double digits at 12%, and to underscore the scale that our cloud business has reached by now, the share of cloud in this metric is now close to 60%. Support revenue came in very strong, up 7%. This was the result of our strong license performance in 2017, continued very strong renews, and lower sales allowances, indicating the strong stickiness of our support services with our customers. All of this drove double-digit cloud and software growth. This is a fantastic performance. We are clearly outpacing the market, even at the large scale that we have already reached.

Now, a few words on the second quarter regional results. We had a very strong performance in the EMEA region, with cloud and software revenue increasing 12%. Cloud revenue grew by 46%, with Germany and the U.K. being highlights. In addition, we had strong double-digit software revenue growth in the U.K., and the Middle East and Germany had another strong quarter, with solid single-digit software license growth.

We also had a solid performance in the Americas region despite a significant currency headwind. Cloud and software revenue grew by 8%. Cloud revenue increased by 35%, led in particular by a very strong performance in Brazil. In the APJ region, we had a robust performance. Cloud and software revenue was up 11%. Cloud revenue grew by 52%, with China and Japan being highlights. For software revenue, Australia, China, and India had impressive quarters and grew each by double digits.

Briefly now on to the IFRS 15 impact, which, as you know, we adopted on January 1st this year, our operating profit in the quarter was positively impacted by €54 million through this accounting change. With that, let me now come to profitability and gross margins. Gross margins in cloud, software and support, and services were a clear highlight. They were all up year over year. We continue to have a significant revenue mix shift effect between our cloud and on-premise business, which meant our cloud and software gross margin was slightly down year over year to 81.2% despite all of the individual business models improving their gross margin performance.

Our cloud margin again expanded sequentially to 63.6% and was also up 1.2 percentage points year over year. This great result in Q2 shows that our turnaround starting in Q1 continues to gain momentum. This is mainly visible in the strong improvement of our SaaS/PaaS public cloud gross margin, which increased by 4 percentage points year over year to 60.4%, driven by strong top-line growth as well as the tapering off of up-front cost for the converged cloud platform.

The business network margin continued its path to exceed 80% in 2020 and is now already at 77.4%, an increase of close to 50 basis points year over year. The private cloud margin likewise accelerated upward by 5 percentage points year over year as a function of the increased scale and expanding renewal base in our HANA enterprise cloud business. Our services gross margin was again up by 3 percentage points to 26.5% year over year. This strong result shows the first-class organization we have become with our successful transformation. Our margin is now much higher than what we usually see in the services industry.

The combination of strong top-line, strong cloud gross margin improvement, and operating expense discipline led again to strong operating profit growth of 12% in the quarter. We achieved this while continuing to invest in our people and our portfolio, adding approximately 6,700 employees year over year. As indicated in Q1, our organic hiring in the quarter slowed to just 700 additional heads. As a result, our operating margin increased by 40 basis points despite the headwinds from the recently closed Callidus acquisition and the significant revenue mix shift effect.

Now, let me turn quickly to taxes and EPS. The IFRS effective tax rate increased by 3.4 percentage points to 30%. This came primarily from effects as a result of intercompany financing and changes in foreign currency exchange rates in Venezuela. The non-IFRS tax rate was virtually unchanged at 27.8%. The IFRS earnings per share increased by 8% to €0.60 for the quarter. Non-IFRS EPS increased by 5% to €0.98.

Now, to cash flow. Q2 operating cash flow decreased mainly due to the timing of stock-based compensation payments, currency headwinds, as well as higher tax and insurance payments. These effects offset SAP's positive business development and lower DSOs, which went down year over year by four days to 68 days. Free cash flow for the half year was also lower due to the previously announced additional CapEx for 2018.

Finally, as Bill alluded to already, we are raising our 2018 outlook due to the strong cloud business. At the same time, we have updated our currency expectations for the impact on reported growth rates. We are also raising our cloud revenue ambition for 2020 to reflect our strong cloud momentum and the acquisition of Callidus. The 2020 ambition now also takes into account the severe currency headwinds we have seen. For more details, please refer to our quarterly statement published earlier today.

Before closing, I would also like to talk about a few of our key non-financial metrics. They are equally important to us in steering a sustainable business. This quarter, we again increased the number of women in management to 25.8% as our efforts to promote diversity and equality continue. Our integrated report was ranked the leader in the non-financials ranking of the DAX 30 companies by Reporting Expert. SAP was also featured among the top 25 of the 2,400 companies ranked in the report, corporate sourcing of renewables, industry and market index, by the Carbon Disclosure Project, and the International Renewable Energy Agency.

So, to summarize, this quarter's results perfectly reflect our core strategy: To rapidly transform the company to the cloud while substantially growing profits and margins. We are taking market share and we are indisputably growing faster in the cloud than our competitors. We have the broadest portfolio and we are the most geographically diversified cloud business in the industry. I'm very confident this momentum will continue. That's why we raised both our 2018 outlook and our 2020 ambition. Thank you, and we will now be happy to take your questions.

Questions and Answers:

Stefan Gruber -- Head of Investor Relations

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

Operator

Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing *1 on your touchtone telephone. If you're using a phone with a mute function, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, please press *1 on your touchtone telephone to ask a question. We'll pause just a moment to give everyone an opportunity to signal for questions. We will take our first question from Mohammed Moawalla from Godman Sachs. Please go ahead.

Mohammed Moawalla -- Goldman Sachs -- Analyst

Great, thank you very much. I have two questions. The first one is just on the software license progression. We've now seen through three consecutive quarters of decline, and I appreciate there's a tougher comparison versus a year ago, but are you seeing a significant change in the way that customers are now deploying things like S/4HANA more in the cloud hybrid model and exploring alternative deployment models, and is this likely to mean that you're more likely to be in the lower band of that 0 to -5 license growth? And, related to that, given this is obviously a higher-margin business -- and, I know over time this will obviously shrink in the mix -- how do you manage that on the bottom line and the margin?

And then, second question was just on the cloud. Obviously, very strong growth in the quarter. What are some of the key products and levers that you see to continue this momentum? Specifically, you called the pay-as-you-go side. Can you give us some more color as to what gives you the visibility there? And then, lastly, on C/4HANA, maybe some color and metrics around the pipeline and where you see the big opportunities, whether they're inside or outside the install base. Thank you.

William McDermott -- Chief Executive Officer

Mohammed, thank you very much for your question. First of all, in licensed revenue, it is true that it's a hybrid cloud deployment model out there. It is also true that we're still able to sell the licenses, and you shouldn't walk away from Q2 with any theory that we won't hit our 2018 expectations, because we will, and that will flow through to the bottom line and give you the leverage you're looking for.

We are obviously leaning into the cloud because that's where the growth is, and I think if we were to tell you today that we exceeded our expectations in the license line and missed in the cloud, you'd be very worried about our future. So, we have our hand on the till, we're going to manage both of those objectives to get you the core license revenue with the rich margin set and the leverage on the profit flow-through, and you'll also see continued momentum in the cloud. I'll let Luka give you some color on the products, but we're in great shape.

You also have to keep in mind we had a big SAPPHIRE, and in this big SAPPHIRE where we announced C/4HANA, where you saw the message to have demand and supply on an interactive, integrated platform between C/4HANA and S/4HANA, some of the larger transactions were a little bit late because of that, especially in the United States, which is not unusual. We've seen this before. And, at the same time, their cloud performance in the United States, as an example, was extraordinary. So, all good, everything holding, ever steady in the business model, and our pipeline and forecasts are right where we wanted them, especially in Q3 and Q4. Luka?

Luka Mucic -- Chief Financial Officer

Thanks a lot, Bill, and just to add on the margin side, at the half-year point, we're currently showing a 70-basis-point increase at constant currencies, and that is actually for the half-year what we wanted to reach and what we have reached. The composition between Q1 and Q2 was a little bit different. We had been facing our strongest and toughest compare in Q1 and held the ground very nicely there. That was the region why in Q1, the margin was up quite above expectations that we had originally. And now, basically, at the midyear point, we are where we believed we would be at the software license side given the tougher comparisons, and as the mix between Q1 and Q2 has shifted, the margin is slightly lower.

Just to help you compare that, on the revenue mix shift alone between our expectations Q1 versus Q2 and how we ended up -- that's a 40-basis-point swing, and if you continue to include the Callidus cloud effect of 30 basis points, actually, the margin progression is quite comparable between Q1 and Q2. And, in the second half-year, we definitely have visibility into our book of business, and we have the easier comparison, so you should not be worried at all. So far, everything is going as predicted, and we have every reason to believe that we will end strong. Otherwise, we would not have raised our guidance for the full year.

William McDermott -- Chief Executive Officer

And, Mohammed, just to finish on the question on products -- because I'm sure this is interesting to everybody -- the top five cloud products driving the growth are C/4HANA and S/4HANA, Supply Chain Cloud, Analytics Cloud, and Database. Obviously, HANA has also now moved to the cloud, and that's an interesting cloud-based model in the SAP cloud platform. This really forms the intelligence suite in the cloud, and as it relates to the pay-as-you-go, I was referring to Ariba, Fieldglass, and Concur. This has now formed a spend management category by a lot. These are the market-leading companies in the spend management category, so therefore, you're seeing a very nice wedge chart of to-be-determined revenue that's signed up for, and once it's consumed, the revenue starts hitting the cash register. That business is looking real good.

Mohammed Moawalla -- Goldman Sachs -- Analyst

Okay, thank you.

Stefan Gruber -- Head of Investor Relations

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

Operator

We will take our next question from Walter Pritchard from Citi. Please go ahead.

Walter Pritchard -- Citigroup Investment Research -- Managing Director

Thank you. Question for Luka -- on the 2020 ambition, you did raise the cloud, but you also raised total revenue if I look at it on a constant currency basis, and I'm wondering if you can give us a little bit more detail into what drove the raise in the total 2020 revenue in addition to cloud. And then, I had one follow-up.

Luka Mucic -- Chief Financial Officer

Yeah. So, in terms of the total revenue ambition, it is obvious that we are running a full year of winners across all of our business models. The cloud business, obviously, is winning, as you have seen, but we have done the tough work to redirect our services business toward optimized setups for today's digital reality. You have seen that in 10% service revenue growth as well as the materially expanded margin. Utilization is running at a very high level. The order intake is very strong in services, so definitely, that business is on a very positive path as well.

And then, in the core, in software and support in combination, we see actually that the resilience in particular in our support business is actually rather regaining strength, and that is a testament to the strong collaborative work that has been happening all across GCO, which is our field-facing organization, together with our services organization to really make sure that we understand customer needs, that we provide value as part of our service offerings, so we will feel very strongly likewise about the resilience of our core business. So, if you have only winning businesses in your portfolio, then it's rather simple to have a positive view also on the total revenue side.

Walter Pritchard -- Citigroup Investment Research -- Managing Director

Great. And then, if Rob Enslin's on, or Bill can take this one, but on the HCM side, I know you've made some leadership changes in that area in the last year. I'd love to hear an update on progress there, growth rates, success, and that you give some metrics around the core, but just general update on the HCM category.

Robert Enslin -- Cloud Business Group

Walter, we've made the changes in nine months to a year, and what we've seen is amazing innovation in the product, what we're doing with Google and with Apple, and how our customers are consuming Success Factors is making a significant difference. We also -- Bill gave some numbers in the beginning how we've expanded Success Factors globally and how we continue to see -- I think it was 40% customer growth in Success Factors across the board. So, this is becoming one of the engines for SAP.

Walter Pritchard -- Citigroup Investment Research -- Managing Director

Okay, thank you.

Stefan Gruber -- Head of Investor Relations

Let's take the next question, please.

Operator

From Barclays, we have Gerardus Vos.

Gerardus Vos -- Barclays Capital Securities -- Analyst

Hi. Thanks for taking my questions. Just a couple, if I may. First of all, on the cloud bookings, if you include pay-as-you-go revenues in bookings, which are not captured at the moment in bookings, what growth would you have had in the quarter? And then, secondly, just going back on the licenses, I noted that the last two quarters, actually, the volume growth has been maintained, but we've seen a dip in the large deals. This combined with the comments you made on the U.S. slippage -- have these deals now been closed, and what was the reason for the slippage? And then, finally, on the margin, I think the second half -- sorry, the guidance implies that the second half should see a 40-basis-point underlying improvement in the margin for the second half. Do you expect this to be coming linearly in the two quarters, or should we see quite a strong Q4 ramp? Thank you.

Luka Mucic -- Chief Financial Officer

I will -- sorry, go ahead.

William McDermott -- Chief Executive Officer

I just want to thank you for the question because it really gives us a chance to talk about this. Again, C/4HANA was a major launch. That launch took place in Orlando in the United States. The attendees at SAPPHIRE are about 80% from the United States. Many customers are now rationalizing how they think about this demand and supply chain real-time company they want to run, and in a couple of cases where there were substantial large ones, they moved into the next quarter, and yes, they're closed.

And, the important thing to put in front of you on this is I'm really happy because the deal volume outside the largest deals actually went up, and the only place where you saw any delta was in the large deals, and we know exactly which ones they were. So, we have a very, very good license revenue business unlike anyone else in our industry, and in Q3 and Q4, you will see a leveling. It's not going to be pushed to Q4. You'll see Q3 deliver as expected, and back on what I would say is the year-over-year growth track you're referring to or you're looking for. So, no worries there whatsoever.

Luka Mucic -- Chief Financial Officer

Yup, and let me complement Bill's statements with the two additional questions that you had. First of all, on margin progression, no, we don't estimate that the progression will be heavily or overly skewed toward Q4. Why is that? Because last year, we had already in Q4 -- as you might recall -- a quite significant margin progression to almost flat margins. That's why we believe this will be more equally distributed. But, of course, our compare on the license side in Q4 is probably the easiest when you compare the different quarters, and that might give us -- toward the end -- an opportunity to outperform if everything goes well.

In terms of the cloud bookings, I think it's prudent for us to only put out there as a new cloud bookings number -- as a hard number -- what is really committed, and therefore is guaranteed for consumption. However, we see, of course, a pattern that the uncommitted pieces that we contract in terms of pay-as-you-go revenues have actually a very good predictability to come in as well, and what I can give you as a directional figure is that when you take a look at the performance of our new cloud bookings, which was at 29% constant currency growth, and you take a look at our business networks business and their booking success including uncommitted bookings, you would actually be looking at roughly a 15% uplift to that based on the new cloud bookings performance.

So, it is actually a very strong business component that, over time, will find its way into the P&L. There are different adoption patterns here, obviously, as well, at work, but it gives you an idea how strong the underlying order entry take-up in our business networking business was in Q2. It was truly a highlight of our overall business portfolio.

William McDermott -- Chief Executive Officer

And, just one fun point of it all -- if you just take something like...let's go with Fieldglass, let's have some fun -- you'd be in triple-digit growth. So, just think about that concept. As you take a tremendous asset, you think about total workforce management with full-time and contracted-for labor, and you see that network growing in triple digits on a year-over-year basis -- that's a big wow.

When I think about the intelligent enterprise, and I think about the CEOs out there, and the notion about how you put an intelligent suite together with C/4, S/4, a supply chain that deals with tariffs and other tax matters that are going on globally, I think total workforce management, total spend management -- everything in an integrated solution, a suite tailored for an industry -- to me, this is a home run. This is where the market is, this is where we are, and when we meet the market with the better idea, it always wins and growth follows. So, I think you should feel really good about the cloud, I don't think you should be at all concerned with mix, and as Luka said, back out the Callidus effect and the mix effect and you've got your margin profile that you're looking for, not to mention a double-digit operating income expansion. So, the whole story is there.

Gerardus Vos -- Barclays Capital Securities -- Analyst

Thank you.

Stefan Gruber -- Head of Investor Relations

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

Operator

Our next question comes from Adam Wood from Morgan Stanley.

Adam Wood -- Morgan Stanley -- Managing Director

Hi, thanks very much for taking my question. If I could ask two as well, maybe first of all on C/4 to dig in a little bit further. When we look at the install base, can you give us any statistics around how loyal that base has been to you versus the main competitor? So, what I'm really trying to get at -- is this a replacement sell that you're going to have to make with the base or is it an upsell? And, where it is upsell, when you look at the portfolio today, how much bigger is it? How much more can you sell into that base as a multiple versus two or three years ago? Just to give us some feel for what the opportunity could be for the base with C/4 and how difficult it's going to be to execute.

And then, maybe, coming back to S/4HANA, obviously, very successful ramp-up with customers. When we speak to partners, obviously, and the RP reimplementation is difficult, and there's been some debate around the go-lives versus sales, could you give us a little bit of a feel for where you are with that today and what you're doing to help automate that process and make it easier, and is there any risk of that becoming an impediment to further adoption that a reimplementation of the RP is a challenge? Thank you.

Robert Enslin -- Cloud Business Group

Let me go with the C/4HANA. Adam, great question, actually. I wouldn't call it cross-sell, upsell -- I would call it new sell. We are changing the market with CRM. We are complete redefining how our customers are going to perceive what they want to do with their customers and how they want to link their supply chains to their customers. So, we see the opportunity as massive growth, massive addressable market. We're delighted with the acquisitions. The integration with Callidus is one of the fastest we've ever had at SAP. It'll be on HANA within the next couple of months. We'll have a complete suite in nine months, and the pipeline is exceptionally strong. So, I would say coming out of SAPPHIRE, we're hitting on all cylinders. Clearly, our customers love the story, and they love where we're going, and it's going to be a significant opportunity for SAP.

William McDermott -- Chief Executive Officer

Incidentally, just to put our money where our mouth is, triple-digit growth in the back end of the year -- big crayon, mark it down.

Adaire Fox-Martin -- Global Customer Operations

And so, on the question of the migration of our customers to S/4, I'll perhaps just make a few comments on the program that we're running and the opportunity that we see, not just for our customers, but also very importantly for the SAP ecosystem. Many of our ecosystem partners have recognized this opportunity and are actually building significant practices in order to address it. We recognize that in SAP, there are a series of tools and techniques that we need to provide to our customers in order to support their journey.

Many of our customers today have customizations in their current environment, and we need to address those customizations. In order to do that, we have a three-pronged approach: Working all with our colleagues in development, working with our colleagues in services, and also, of course, with our ecosystem. We have a series of assessment tools that allow a customer to understand where they are today and the path for them specifically to move to S/4. Each customer will be given a clear migration path supported by a set of automation tools. For each customer, we will develop a very clear business case that justifies the why for that customer in terms of the move. And, as far as implementation is concerned, we are looking to manage the implementation costs along the concept of a model company, where by industry, we will implement on an industry-by-industry basis a template that reduces the cost and the time to move to the S/4HANA.

Luka Mucic -- Chief Financial Officer

And, maybe just to round this up and complement it with numbers, we have made good progress in this respect. We have close to 2,000 live customers on S/4HANA by now already, and we have another close to 3,000 ongoing implementation projects, which means that given the implementation timeframe for S/4HANA is greatly reduced versus traditional ECC implementations of the past decade, we will soon have 5,000 reference customers to speak for us.

Bernd Leukert -- Products and Innovation

Maybe to add just the flavor of different shading between on-premise and cloud, we saw -- especially in the last quarter -- outstanding performance of the entire S/4 business. We have high triple-digit growth in the cloud, and the number of new names in the cloud in total was more than the number of new names over the entire fiscal year 2017. And, of course, in the cloud when you talk to implementation time and go-lives, we speak in weeks. While you are right, the methodology Adaire was explaining was fully focusing on our install base on-premise business, but here, we have massively reduced according to the methodology, but as well as the tools we have provided to the service organization of SAP, but as well to the partners.

Adam Wood -- Morgan Stanley -- Managing Director

That's really helpful, thank you.

William McDermott -- Chief Executive Officer

A couple things that are really interesting -- the ecosystem is truly massive at SAP, and with the cloud accelerating growth like this, we have a smart ecosystem. They know when to jump on board. For example, the intelligence in the application, in the business process itself driving our intelligent enterprise strategy is something that has been broadly adopted by the partners, and in fact, if you listen to the IBM earnings, IBM said that they are seeing HANA and S/4HANA driving workloads and driving growth in their business, so I think IBM -- since they just reported -- is a very good example for this phenomenon.

Stefan Gruber -- Head of Investor Relations

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

Operator

Alex Tout from Deutsche Bank has our next question.

Alexander Tout -- Deutsche Bank -- Analyst

Hi, guys. Thanks for taking the questions. Just a few quickfire ones. Firstly, on maintenance, 7% constant currency growth in the quarter, very strong -- could you just give us a bit of color on why that should have been and whether that normalizes somewhat in the second half of '18? Secondly, I wonder on the cash flow side of things whether you can quantify the impact from the IFRS 15 changes there. And then, just finally, an update on the progress of moving off the dual running of infrastructure for the cloud business. I think you last said that was due to be completed by the end of the year. The question is whether that's still your expectation. Thank you.

Luka Mucic -- Chief Financial Officer

Definitely all good questions. So, first of all, on the maintenance, the reasons are relatively simple. We have a very low churn -- actually, lower than what we have seen historically in the last 24 months -- so there has been great work done by the field, as well as our service organization, in embracing a specific customer loyalty program, with which we are working very strongly with customers, where have to signal that we have to double down in terms of value creation in order to preserve maintenance. This has been extremely successful.

At the same time, as I said during my prepared remarks, there is also an extremely low level of sales allowances, so we are hardly losing support revenues due to customer defections, and at the same time, I think we managed the process of extensions toward the cloud in a very professional way. Those are all very value-creative and are not really cannibalistic for our support revenues, and that growth drove the strong growth.

In terms of the time frame very quickly, on the move of the third-party database on our cloud business, that's on track. That will conclude by the end of the year. We are even now including within that scope Callidus, as Rob has said, and we are working as well with a high priority to move them off during a similar time frame. So, that is going very well, and as of next year, should give us then a substantial savings that we will get from the convergence in our own technology.

In terms of the cash flow situation, I know that it looks at the face quite negative with a 15% decline in half-year one. There are various effects here. First of all, there is a timing change and a phasing change on the payment of share-based compensation expenses. In the past, they were done in the later half of the year. Now, with our new move program, they are happening in the first half, and that's alone an impact to the range of €180 million.

Next to that, we had extraordinary tax payments. You see that a little bit also in the increasing effective tax rate, but clearly, at the end of last year, we had some IP migrations which gave us some very positive one-time benefits, as you might recall. Now, of course, we have to pay the exit taxation for those migrations in the respective countries, and that has resulted in a cash-out that was also in a low triple-digit million-euro range. You're absolutely right that we have, of course, with the capitalized sales commissions, a major positively influencing P&L effect that is a non-cash item.

We have disclosed in our figures the amount that we have been saving on the expense side due to the capitalization of sales commissions, so, for the first half-year, this was a roundabout €80 million on top, and that, of course, has an impact as well in terms of a non-cash-flow but positive item for operating profit, so that's the main impact. There's an additional one as well from our restructuring program for last year, which you might recall was geared toward our services business. We now have an additional cash flow impact from making increased insurance payments to safeguard the time credit of our people that have taken advantage of the early retirement program last year, and that was a cash item that became effective in 2018.

Having said this, due to the timing change that I alluded to before, we believe that the progression in the second half-year should be more positive in a year-over-year comparison, so, also from a cash-flow perspective, no reason to worry. The second half will see an improvement.

Stefan Gruber -- Head of Investor Relations

Okay, thank you. Let's move to the next question, please.

Operator

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

Michael Briest -- UBS Investment Research -- Managing Director

Thank you. Good afternoon. Just going back to S/4, I think at the start of the year, there was an ambition to double the level of migrations. I think in the full year last year, it was about 2,500 all-in new and migration customers. Do you think you're still on track for that, and to get 50% of the ERP customers onto S/4 by 2020? And then, secondly, in terms of the 2020 guidance uplift, can you talk a little bit about the mix of cloud in 2020 now? Is all of the uplift related to SaaS and PaaS, and does it change your margin expectations? More broadly, it looks like you've raised your margin targets at constant currency in 2020 despite a higher cloud mix, and I'm just curious as to what's giving you the higher confidence on that. Thank you.

Bernd Leukert -- Products and Innovation

Michael, I'll start with the first part of the question, related again to S/4 and the migration, and the question is are we on track? We are absolutely on track. Luka already shared with you that we have passed 1,900 customers who are actually live. We are having 2,900 who are in the process of going live, and we reported at the beginning of the year that we targeted 3,000 to be live at the end of the year. If you add the two numbers, we will end up close to 5,000, and we know that especially toward the end of the year, there is a dedicated season when customers have a high peak of adoption and using the window of holiday breaks to go live, so we are extremely confident that we are not just on track, we will outperform this.

And, the rationale behind it is that we have moved the conversation from "Do I move toward S/4?" to "How fast do I move?" And, that goes in line with consolidation of the systems, but as well, massive benefits in terms of reducing cost of operations at our customers and the massive value they get out of the business process we're engineering. I would say there is not a single customer meeting where this is not one of the top three agenda items day in and day out.

Luka Mucic -- Chief Financial Officer

And, to complement this, first, with the question on the cloud mix for 2020, as you know, when we originally stated our 2020 ambition, we had an implied expectation that our infrastructure-as-a-service business would be somewhere around 15% or 16%, and the rest would be basically shared between business networks and our SaaS/PaaS business. Today, we see that growth in terms of, in particular, our SaaS/PaaS business is starting to outperform the growth of the smaller infrastructure-as-a-service business again, which is good from a margin perspective for the cloud.

And so, we believe that in 2020, the share of infrastructure-as-a-service will actually be rather around the 10% or 11% mark than 15% or 16%, and indeed, SaaS/PaaS will basically fill up for the difference, which is positive for margins. That's one of the reasons why we continue to be very confident around the operating income ambition, which we have, as you said, retained in unchanged format. But, of course, we are also closer now to that target.

We have seen the operational progress that we have made in 2018. We are seeing that the turnaround is starting to happen and that the organization is following through with the required focus on the growth drivers and a de-emphasizing of legacy areas that are not able to grow anymore. The services business is another strong component because it has progressed very well, not only from a top-line perspective, but has become actually a very positive contributor through steady margin increases, and all of that is giving us the confidence to uphold these figures even despite the very severe currency headwind that you have rightfully noted.

William McDermott -- Chief Executive Officer

Michael, one point that should be added to all of this is the ecosystem. If you think about the growth in S/4HANA, Deloitte, Accenture, Capgemini, IBM -- IBM talked about the mass adoption of HANA driving their workloads. They're adopting HANA en masse to run S/4HANA on it. So, the partners are going where the money is, and S/4HANA is the in-memory core ERP of the 21st century, and the next big wave will be the C/4HANA combination with S/4HANA, and I'm excited because when the partners are as motivated as they are right now, that generally leads to upside surprises at SAP.

Stefan Gruber -- Head of Investor Relations

Thank you. Let's move to the next question, please.

Operator

Our next question comes from Kirk Materne from Evercore.

Stewart Kirk Materne -- Evercore ISI -- Managing Director

Yes, thanks very much. Just two questions for me. First, for Luka, just to put a fine point on this, if we looked at order entry for the cloud business in aggregate -- and, on an organic basis, ex Callidus -- I assume it sounds like it was a very good quarter. I just want to make sure that's the case because I think some people might take some of the Callidus revenue, back it out of bookings, and make the case that booking decelerated in cloud, and I think you guys are making an opposite point on that front.

And then, secondly, I had a question maybe for Bernd on blockchain. I know you guys are running a lot of proof-of-concepts around blockchains for certain industries. I was wondering if you could update us on how that's going and the opportunity to monetize that as we start looking out 12 to 18 months. Thanks.

Luka Mucic -- Chief Financial Officer

Thanks very much, Kirk. Very good question on the order entry. Let's set the record straight here. The contribution of Callidus to our bookings growth is smaller than the contribution on the revenue line. So, our growth on the bookings side in constant currency -- backing out Callidus -- would have been in the mid-20s, 25%, basically, and when you then put on top the much higher performance, when you include the uncommitted more pay-as-you-go bookings, which, as we know, are going to transfer into revenues, that's a very strong performance that is giving us all the fuel that we need in order to further accelerate on the cloud line.

Bernd Leukert -- Products and Innovation

And then, maybe a note on blockchain. I think the hype and the excitement around blockchain is accelerating every day. Especially in the last couple of weeks, we have signed many co-innovation agreements around the blockchain technology where companies intend to partner with us, where we contribute our technology experience, they contribute their domain expertise.

We even have created a consortium at SAPPHIRE in Orlando. We were expecting that at launch date of the blockchain consortium, roughly 20 customers would join. I'm proud to report that on day one, we had more than 50 customers joining the blockchain consortium, and in the meantime, we have passed the threshold of 70. In terms of where are we, we are in the process of discussing aligning the value of the technology and exposed that in the application, so I expect especially in the next couple of weeks to get real proof points, and then, I'm 100% sure that the commercial aspects and the impact on the P&L will follow, while this is too early to report this now at the end of Q2.

William McDermott -- Chief Executive Officer

And, Kirk, you know how it works. It's all about the industry-specific nature of these solutions. So, for example, a couple of cases I've personally been involved in -- one is pharma. So, if you think about track-and-trace, and removing counterfeit from the pharma industry, and the cold chain where you can track the temperature of these very sensitive pharma products that are really all about keeping people safe and healthy, it's pretty amazing.

And, in food, there isn't a single food company out there that isn't talking about farm-to-table and quality safety, and also, keeping track of their suppliers to make sure they're authenticated. We had one company in particular in the coffee industry -- they have literally thousands and thousands of suppliers that work on coffee beans, but they have a great brand, they serve a great product, and they want to make sure that the quality and safety all the way from the farm into the cup is rock solid. So, these are applications that we're actually working on right now that have tremendous implications for growth in industries. This could be a very nice business.

Stefan Gruber -- Head of Investor Relations

Thank you. The next question, please.

Operator

Our next question comes from Philip Winslow from Wells Fargo. Please go ahead.

Philip Winslow -- Wells Fargo Securities -- Managing Director

Hey, thanks for taking my question. First one first for Bill and the sales team that's on the call here -- one of the questions I get a lot from investors is about the manufacturing vertical because obviously, SAP counts the largest manufacturing distributor process companies in the world as customers, and you've got two near-term opposing forces -- you've got the need for digital transformation and you obviously have the noise with the political side via the trade war, et cetera. When you're talking to customers and you look at the business this quarter and the pipeline for the second half, have you seen any impact of the noise, or does the digital transformation demand just offset? So, in other words, what are you looking for in the pipeline coming out of that business? And then, just one quick follow-up.

William McDermott -- Chief Executive Officer

Thank you very much, Phil. First of all, as you know, we took a digital supply chain and manufacturing industry business unit approach to this very topic, and let me begin with in the SAP digital boardroom, we now have customers that are working with us to augment their supply chains and their manufacturing processes in real time on S/4HANA to accommodate the various trade matters that are well publicized in the Wall Street Journal. So, as they think about the best way to manufacture, the best way to work with their supply chain to optimize shareholder value, they're working with SAP in the digital boardroom. So, this, too, is lending itself to that demand and supply chain in real time that I've been talking about, and it manifests itself in the digital boardroom.

So, we have the industry business unit set up globally with an excellent leader, one of our top leaders in the company. It's grown really fast, and again, I think that this is a major topic. Keep in mind there's no company that is more global in the business software industry or more industry-diverse, which is lending itself to these end-to-end demand and supply chain conversation. So, it's happening because that's where our customers want us to go. Integrate, give me a solution, give me the agility to change on the fly so I can make more money.

Stefan Gruber -- Head of Investor Relations

Phil, you had a follow-up?

Philip Winslow -- Wells Fargo Securities -- Managing Director

Yes, just a follow-up. Obviously, Bill, you just mentioned IBM in their earnings focusing on HANA, and one of the things we heard was that HANA was the fastest-growing workload on Google's GCP platform. I'm sure we'll probably hear about that at the next conference next week. When you think about all these partnerships you have, particularly in the AI platform world, how do you think about SAP monetizing this? Is it more that you're going to make your applications stickier, and therefore, the renewal rates stay the same or maybe improve, or is this something through Leonardo -- maybe this is a question for Bernd -- where we have new applications and new opportunities, not just what they call a maintenance renewal strategy?

William McDermott -- Chief Executive Officer

I'll start it off, Phil, and then, by all means, I'll hand it over to Bernd. First of all, you think about end-to-end planning in a company. We have design partnerships -- for example, one that was announced this quarter was with ANSYS. We announced that at SAPPHIRE. Think about a 3D simulation in the design process. When you think about the impact of that with manufacturing and the digital twin and IoT and real-time supply chain on HANA, you go right to SAP Leonardo and you focus on deep machine learning and embedding that intelligence into the application itself. So, I think these partnerships help us grow in terms of making our core even more relevant, and we get feet on the street that we're not paying for, but in some cases, there's also license-sharing opportunities where we can make money on what they sell, not just on what we sell.

Bernd Leukert -- Products and Innovation

And, Phil, to complement on your question on Leonardo, I think we have great traction of our cloud platform, and via the cloud platform, we expose all of our technology services, we expose our Leonardo services, and the unique offering which we have that, of course, this platform which the Leonardo technology runs in our data centers, but up to my knowledge, we are the only one who is providing this platform as well as a service in top of the known hyperscalers, which is Microsoft, Google, and Amazon, and that creates a lot of traction. Your specific question of cost -- HANA as a service is a key element of that, but what Bill said before -- we have expanded HANA to the HANA Data Management Suite, which allows companies -- which allows partners to build and to innovate with a complete new set of applications.

In many cases, this is their domain expertise, but as well here, not just the support of the hyperscalers, as well to have an offering for data management, which consists of the most modern, most sophisticated platform HANA enhanced with data lakes is something I have not seen in the industries, and if you combine this with the hyperscaler capabilities, this is a unique offering that is creating traction with our service, but especially as well with the partner organizations, and I would be glad to hear it at any technology conference, not just at Google Next next week.

Philip Winslow -- Wells Fargo Securities -- Managing Director

Great, thanks, guys.

William McDermott -- Chief Executive Officer

Yeah. So, think about it this way: As Bernd said, you have a platform. With the data hub, now you have the demand and the supply all on the same platform, so it's a data game, and obviously, that leads companies to the conclusion that they can create net new business models on the fly and basically go to market in new ways. And, when you're with a partner and you come up with a go-to-market story, it basically delivers about a 25% pricing productivity gain for SAP. So, if you see a good partnership and we're doing something special with a partner, it's generally a 25% uplift on the pricing based on value.

Stefan Gruber -- Head of Investor Relations

Thank you. We have time for two more questions.

Operator

From Merrill Lynch, we will take our next question from John King.

John King -- Merrill Lynch -- Analyst

Thank you very much for taking the questions. I've got two as well, probably both for Luka. So, firstly, on the margin front, the 2020 guidance looks for somewhere in the region of 100 basis points -- maybe 90 basis points -- of uplift relative to what you're guiding to for this year. Most of that should come from the cloud gross margin. Over and above that, I think you're driving some efficiency in the sales and marketing organization and parts of the back office. So, what are the negatives that may offset that? Are you expecting to have some kind of rise in depreciation or something else that is the balancing item? And then, another long-term picture would be you've obviously now surpassed sustainably the licenses relative to cloud revenue. When do you think we get to that point where cloud surpasses maintenance or support revenues? Thank you.

Luka Mucic -- Chief Financial Officer

It's a very good question. On the second one, I would recommend to hang in until we have our Capital Markets Day 2019 because there, we want to lay out our vision for the SAP in the next decade beyond 2020, and then you'll get a nice and pleasing answer also to this question, so that's kind of a commercial for next year's Capital Markets Day. In terms of the margin growth projection going into 2020 and the downsides -- the downsides and the headwind is very obvious. It's the fact that as of next year, we will begin to amortize the sales commission that we have capitalized at the beginning of this year.

So, that means that IFRS 15, which, for this year, was a tailwind for us will start to turn into a headwind, and that headwind will get larger in smaller increments year after year. That means that our expectation is that the underlying organic margin progression will actually increase year after year to offset that and continue to deliver the consistent margin expansion that I've been talking about.

And, where is this coming from? You cited all of the right levers. First of all, the jump in gross margin efficiency that we expect from our cloud business once we have the platform convergence and the third-party database programs completed, and secondly, the ongoing efficiency increases, not only in sales and marketing. We are also looking for continued efficiency gains in general and admin functions. We start to implement our own AI solutions in finance, for example, so I think there is a lot that we can do to automate things even further without adding incremental capacity from a headcount perspective in those functions, and that will ultimately -- in the mix -- get us toward the targets that we have set out.

Stefan Gruber -- Head of Investor Relations

Okay, thank you. Now, let's take the final question of today's call.

Operator

The final question comes from Ross MacMillan from RBC Capital Markets.

Ross MacMillan -- RBC Capital Markets -- Analyst

Thanks so much and thanks for squeezing me in. Two questions for me. Just on cloud, as you talk about the pay-as-you-go mix moving higher, have you made specific changes around invoicing term policy? Are you agnostic whether customers pay monthly, quarterly, annually? And then, maybe you could also talk about what's changed to other products in the cloud portfolio that you're now agnostic on invoicing terms relative to maybe how you would have asked salespeople to close those yields last year? Thanks.

William McDermott -- Chief Executive Officer

Ross, I don't want to make this sound too complicated, OK? The licensing model for SAP in the cloud has not changed. We have certain attributes within the business network itself. Sometimes, you make money when suppliers activate in a network. You don't recognize that when you do the SaaS contract. Sometimes, we have business models like Fieldglass where we recognize the revenue upon consumption. So, for example, if you're 200% of your Fieldglass plan in a given quarter, you don't recognize that in that quarter for the revenue that the customer signed up on. You'll recognize that in the future quarters when they go live with those licenses.

So, that's primarily Fieldglass as a business model, and for the others, there are attributes around the network where we can make money beyond just the rental contract for the software and the cloud. We haven't changed the business model. There's no big legal review necessary. There's no contract review necessary. It's just that simple. What we've been amazed by is the genius behind the business network move that we made in our M&A strategy when we set out to create this network in 2010, that it's becoming even more widely adopted than we thought, and then, when we've put this Fieldglass as an example in the SAP channel -- and, the reason why our Employee Central is growing so much faster than the competition is because the customer has recognized finally that the fastest-growing workforce in the world is temporary workers, not your full-time equivalents.

So, they're signing up for the SaaS contract in Employee Central with Success Factors, and they're signing up for Fieldglass in the network, and we don't recognize the network revenue that we sign at the point of sale, we recognize that when it's actually consumed by the customer. So, you have this silent wedge chart in the background in the cloud that is what I would call a very nice insurance policy for all of you, just knowing that SAP has things going on in the cloud that you're not necessarily seeing in the current quarter. That's all you need to know. Everything is really good.

And, I do want to make a point here, especially since Stefan said it's the last question, and I'm very honored, Ross, that it goes to you. I want you guys to think about this. If you look at the full-year scenario at SAP, we have a $30 billion USD software company. We have a cloud that's beating expectations by 5%, growing at 40%. Be clear: Look at what you would commonly call the best-of-breed cloud companies out there. Big question: Are we growing faster than them or slower than them? Answer: We are growing faster than them.

Let's look at the core business: Software and software-related services, which is that license and support model that you watched for 30 years. Are we growing faster than the competition or slower than them? We're the only one growing in double digits, so we're growing faster than them. Operating income: We're the only one growing in double digits on a year-over-year basis as we have transformed the business model to the cloud, which is a ratably recognized revenue model over time.

This quarter, some people got a little bit worked up about the margin inflection underneath the operating income and wanted a little bit more. We said two things. 1). There's a Callidus acquisition effect that leaned on it a little bit, and 2). The business mix is a little more favored toward the cloud because we had a 5% beat. If you back out that, you've got your one-point improvement on the margin on a year-over-year basis, not to mention double-digit on the operating income. What is it about this story you don't like? So, this is a global juggernaut, a growth story on the loose, and we can't wait to share you, quarter in and quarter out, C/4HANA, S/4HANA, and a motivated workforce of 90,000 women and men that want to change the world. Thank you.

Stefan Gruber -- Head of Investor Relations

Thank you very much, Bill. This concludes our Q2 earnings call for today. Thank you all for joining, and goodbye.

Operator

That will conclude today's conference. Thank you for your participation and have a good day.

Duration: 72 minutes

Call participants:

Stefan Gruber -- Head of Investor Relations

William McDermott -- Chief Executive Officer

Luka Mucic -- Chief Financial Officer

Robert Enslin -- Cloud Business Group

Bernd Leukert -- Products and Innovation

Jennifer Morgan -- Global Customer Operations

Adaire Fox-Martin -- Global Customer Operations

Mohammed Moawalla -- Goldman Sachs -- Analyst

Walter Pritchard -- Citigroup Investment Research -- Managing Director

Gerardus Vos -- Barclays Capital Securities -- Analyst

Adam Wood -- Morgan Stanley -- Managing Director

Alexander Tout -- Deutsche Bank -- Analyst

Michael Briest -- UBS Investment Research -- Managing Director

Stewart Kirk Materne -- Evercore ISI -- Managing Director

Philip Winslow -- Wells Fargo Securities -- Managing Director

John King -- Merrill Lynch -- Analyst

Ross MacMillan -- RBC Capital Markets -- Analyst

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