U.S. Markets open in 6 hrs 56 mins

SAP SE (SAP) Q1 2019 Earnings Call Transcript

Motley Fool Transcription, The Motley Fool
Logo of jester cap with thought bubble with words 'Fool Transcripts' below it

Image source: The Motley Fool.

SAP SE (NYSE: SAP)
Q1 2019 Earnings Call
April 24, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

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.

Stefan Gruber -- Head of Investor Relations

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," "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.

More From The Motley Fool

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 28th, 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 Sapphire Now in Orlando, Florida, which runs from May 7-9. Sapphire is a great opportunity to learn more about our strategy and our product portfolio. We will offer a special program for financial analysts, including a small conference on May 8th. Then, on November 12th, 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 are looking forward to seeing you there, and with that, I'd like to turn things over to our CEO, Bill McDermott.

William McDermott -- Chief Executive Officer

Thank you, Stefan. Hello, everyone. 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 euros 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 cost benefits from the successful migration of our flagship cloud solutions to SAP HANA. That will kick in in Q2, and we'll start reaping those benefits very soon. Our improved gross margins and efficiency measures resulted in operating profit that was up 19% year on year. Free cash flow also saw a double-digit increase year on year. We really couldn't be prouder of these results. The metrics speak for themselves.

Let's step back for a moment and look at the big picture for SAP. The facts are we have an incredibly strong core business with a market-leading retention rate in our support business, demonstrating tremendous customer loyalty. We have a high-growth cloud portfolio powered by some of the best M&A in the enterprise software industry. These cloud businesses have years and years of runway for continued growth. We have an incredible franchise, with 72% of our revenues now coming from highly predictable revenue streams. This is due to our strong cloud and solid on-premise support businesses.

We're perfectly positioned to capitalize on major secular trends such as the move to the cloud, digital transformation, Industry 4.0, and business process automation driven by AI and ML. Together, these trends contribute to a total addressable market of over 350 billion euro, growing in double digits. With a successful Q1 now behind us, we are initiating the next phase of value creation and innovation for all SAP stakeholders, including our employees, customers, partners, and shareholders. We strongly believe that with the scale of SAP and accelerated executional excellence in our public cloud businesses, we will be able to deliver significant margin expansion across both our core and cloud businesses.

We have decided, therefore, to update our midterm 2023 ambition to reflect our renewed focus on operating margin expansion. We expect the margin expansion from this quarter will continue through 2023. We will target an average of 100 basis points of margin improvement per year from this year through 2023, resulting in approximately 500 basis points of margin improvement by 2023. We will drive this margin expansion by executing on continued improvement in cloud gross margins. We're targeting 75% cloud gross margins by 2023. This will represent 1,200 basis points of improvement from 2018.

We expect that this cloud gross margin expansion will be driven by three factors: Moving off of Oracle, standardizing our platform and infrastructure, and shifting our mix toward more public cloud solutions versus private cloud. We will also continue to abide by the covenant we shared at the February capital markets day around our M&A strategy. We will continue to focus on organic growth, supported only by highly opportunistic tuck-in M&A. We are confident in our strategy, and we believe in our long-term value creation opportunity. In recognition of this opportunity, we are evaluating a multiyear share repurchase program to enhance our return to shareholders.

Finally, there will be no change in our other metrics, including more than tripling our cloud revenue and reaching over 35 billion euro in total revenue. To showcase our confidence in executing this plan, we are raising our operating profit guidance for 2019. Our new operating profit guidance calls for up to 12.5% growth. Luka will talk more about the specifics shortly.

To showcase our commitment to operational excellence, we have instituted a special executive board committee to evaluate and execute on operational efficiency measures across all functional areas of SAP. Functional areas will include go-to-market, innovation and cloud delivery, and efficiency across the board. The goal is to drive greater operational efficiency, faster time to market, higher product quality, and superior market fit. Simply put, to be the best-run SAP.

This is the right time for this initiative at SAP. This will be my personal focus as the CEO, and we have an executive board fully united behind this effort. Let me be clear: This is not about cost reduction. This is about doing things better, smarter, and faster. Coming out of our restructuring, this is about hiring intelligently, lesser in quantity but greater in quality. It will result in more investment where it counts, which is where our customers need SAP to invest for their success. SAP will win strategically, and SAP will also win operationally.

We firmly believe SAP has the potential to achieve both superior revenue growth and consistent margin expansion every year for the foreseeable future. We will host a special capital markets day in the fall of this year to lay out the specific details on how SAP will accelerate operational excellence initiatives that it started last year. At this capital markets day, we will announce the results of the operational review and the multiyear capital return analysis, and we will set definitive milestone targets around how we will execute on the margin expansion ambitions we have outlined today.

Looking briefly at our solutions, SAP's real-time intelligent enterprise portfolio is unrivaled and highly differentiated. World-class global companies like Puma, Levi's, AEG, Schaeffler Technologies, Amerisource Bergen, Cirque du Soleil, and Bumblebee Foods are all turning to SAP to transform their business. S4/HANA adoption grew to more than 10,900 customers, up 30% year on year. SAP S4/HANA Cloud was recently named as the leader by IDC in an assessment of cloud-enabled operational ERP apps. C/4HANA is helping businesses manage their entire front end with a single view of their customer across all channels. Only SAP can connect demand to fulfillment engine in one end-to-end value chain. SAP C4/HANA cloud revenue continues to grow in triple digits.

In their second-half 2018 software tracker, IDC has elevated SAP to No. 1 in commerce, and we are the only vendor to increase CRM market share on a year-over-year basis. This brings me to Qualtrics and the new category of experience management, or XM, a category and market that SAP is creating. We're in an experience economy, and while 80% of the CEOs out there believe they are delivering a superior experience, only 8% of their customers actually agree. This gap -- the gap between what we might believe is happening and what is actually happening -- is the experience gap.

To close that gap, you need the O-data that SAP has been the leader on for nearly five decades. O-data is the operational data that gives insight from business operations and tells you what's going on. And, you need the X-data, the experience data that gives you insight into human sentiment and tells you why behind what's happening with your consumers, your products, your brand, and your employees. SAP is now the only company that has both, and we're already seeing our customers recognize the value of this.

For example, CVS Health is just one of many companies realizing the power of X-data plus O-data, as they chose S4/HANA and Qualtrics this quarter. At Sapphire Now, we'll showcase the power of experience management to help differentiate every operational solution of SAP. We couldn't be happier to have Ryan Smith and the Qualtrics team as part of the SAP family, and frankly, I think they're very happy to be here as well.

X plus O is the defining equation to win in this experience economy. Our new SAP HANA in the cloud unleashes the power of experience intelligence. Combining X-data with the O-data, powered by HANA real-time in a cloud-scale environment, gives you experience intelligence. This experience intelligence will be embedded in all line-of-business cloud apps, all running on HANA. This enables digital engagement to be embedded in every single SAP application, from customer experience to product experience to employee experience. You'll see major SAP HANA announcements in Orlando on May 8th.

This leads me to total workforce management, where SAP's SuccessFactors have successfully migrated its entire global customer base to run on SAP HANA. This is a crucial milestone for the SuccessFactors journey. The ability to embed real-time predictive analytics capabilities and cutting-edge future innovations will be a powerful differentiator in the human capital management market. Customers also continue to choose our total spend management solutions Ariba, Fieldglass, and Concur. Our business network now transacts more than $3.1 trillion in the global commerce market annually.

Of course, financial and product performance are only two of the many ways we assess the overall health of SAP. We're proud to be Germany's most valuable brand and Europe's biggest technology company. We continue to increase the number of women in management, now at 26% and climbing, and we are ensuring we pay equally across the company. Our employees remain engaged and motivated, with near record high employee engagement. Once again, we were on Fortune's list of the best 100 companies to work for. As we celebrate 10 years of sustainability at SAP, we're showing that we walk the walk by running a waste-free Sapphire Now for the first time this year in Orlando. It all begins on May 6th, and I really can't wait to see you there. We're pumped up and ready to go.

In closing, SAP is uniquely positioned to capture the massive opportunity enabling the intelligent enterprise for our customers, so they thrive in this experience economy. We have made the critical M&A moves, and we will now focus solely on tuck-ins. Our overall SAP 2023 ambition will be driven by an organic growth strategy. We will accelerate operational excellence and drive consistent margin expansion with an even higher, more predictable revenue base, delivered on a highly efficient converged platform.

Let me be incredibly clear: We are committed to these enhanced margin targets. The special capital markets day later this fall will give us the platform to share even more about these operational initiatives. As I mentioned, SAP is going to win operationally. What you will see over the next several years is that SAP will become the very best version of itself and achieve our vision for a best-run SAP. This is the motto of the company, the maxim of the brand, and the organizing principle on our path to further expand our profitability for our shareholders. We share the same passion for creating shareholder value as you do, especially as nearly all SAP colleagues are shareholders themselves. We look to SAP's very bright future and thank you for your support of this company. Let me now hand it over to Luka.

Luka Mucic -- Chief Financial Officer

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 half a percentage point against a tough comparable, and capital expenditure reduced by 16%. You can see that we're clearly picking up momentum. On top of profitable growth, our business continues to get ever more resilient, as the share of cloud and software support revenue now stands at 72%.

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 euro for the first time in a single quarter, and that cloud performance was driven by well-balanced, broad-based growth, both of our high-stakes 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 70% 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 by 11%. Cloud revenue grew by 42%, with the U.K., Spain, and Switzerland being highlights. In addition, we had strong software license revenue growth in Germany, the U.K., and Spain.

I'm in particular very pleased with the really strong performance in the Americas region. Cloud and software revenue increased by 23% there. Cloud revenue increased by 49%, with the United States, Canada, and Mexico being highlights. In addition, both the United States and Canada had a strong quarter in software license revenue. Finally, in the APJ region, we had a solid performance too. Cloud and software revenue was up by 16% and cloud revenue increased by 55%, with China and Japan being highlights. For software license revenue, China, Japan, and also South Korea had a strong quarter.

Let's now look at profitability and gross margins in the first quarter, a particularly bright spot. We're happy to report that all of our cloud business models were again up, leading to a cloud gross margin of 66.2%, up 4 percentage points sequentially and 3 percentage points year over year. In our most profitable cloud business network, gross margin increased by 1 percentage point year over year and reached 78%. The gross margin of our other software-as-a-service and platform-as-a-service business increased by 3 percentage points year over year and reached 64%. More importantly, though, this gross margin improved sequentially by 5.5 percentage points, so this is clearly trending in the right direction.

On top of that, as Bill mentioned, toward the end of the quarter, we completed the migration of the entire SAP SuccessFactors customer base from third-party databases to SAP HANA. Just to give you an idea of the scale of what we have been moving here, we have moved thousands of customers and more than 1 petabyte of customer data as part of the migration. We redeveloped more than 1,000 store procedures, and we migrated more than 90,000 custom reports to the new environment. This is a great success and a crucial milestone for us in two aspects. First, leveraging the performance of SAP HANA will allow us to accelerate innovation in SAP SuccessFactors, and second, we'll obviously see an expense relief, as we can now retire duplicate infrastructures, reduce third-party support fees, and reallocate resources previously working on the migration.

Finally, the most significant gross margin improvement of our cloud businesses came from HANA Enterprise Cloud, our infrastructure services offering. Here, we saw an expansion by almost 24 percentage points to 32%. While a significant part of this expansion is attributable to sustainable improvements and increased scale, the Q1 margin also benefited from one-off effects. As we've always said, we fully expect to achieve a sustainable level of 32-35% in 2020.

Overall, our cloud and software gross margin was a solid 80% for the quarter. Our services gross margin was up 80 basis points to 20.3%, driven again by strong revenue growth of 15%. The combination of a strong top line, continued cloud gross margin improvement, and the more muted increase of operating expenses led to the very remarkable 19% Q1 operating profit growth and the expansion of our operating margin by 50 basis points against a very tough comparison from last year's Q1.

Q1 IFRS operating profit and earnings per share were heavily impacted by restructuring expenses of 886 million euro. While there might still be minor effects from restructuring in the remaining quarters in one or the other direction, it is important to understand that this amount now represents the total 2019 restructuring expenses currently expected. IFRS operating profit was also impacted by higher acquisition-related charges and share-based compensation, both primarily due to the Qualtrics acquisition. This resulted in an IFRS operating loss of 136 million euro.

Year over year, both our IFRS and non-IFRS effective tax rates decreased. The IFRS tax rate decreased by 5.1 percentage points to 23.2% while the non-IFRS rate decreased by 1.4 percentage points to 26.1%. The year-over-year decrease in effective tax rates primarily came from positive tax effects relating to changes in tax-exempt income and taxes from prior years, which were partly compensated by valuation allowances on deferred tax benefits. In combination, these effects led to an IFRS earnings-per-share loss of 0.10 euro per share, whereas under non-IFRS, we reported a strong growth of 24% to 0.90 euro.

Our operating cash flow in the quarter increased to 2.8 billion euro, up 9%. As explained at our capital markets day in February, we expect our 2019 operating cash flow to be impacted by several items. We'd like to provide you with some additional transparency on these for Q1. First, operating cash flow experienced a year-over-year benefit of roughly 80 million euro from the application of IFRS 16.

Second, payouts related to share-based compensation amounted to around 100 million euro. Again, please keep in mind that as opposed to our peers' equity-settled share-based compensation programs, SAP's programs are mostly cash-settled. This is much more efficient from a tax and administrative perspective, but it also means that we show the economic effects in our cash flow statement instead of diluting our shareholders through the back door. Finally, restructuring payouts and tax cash outflows had a negative impact of roughly 100 million euros.

Free cash flow for the quarter increased by 10%, as we saw a significant reduction in capital expenditure by 16%, continuing the positive trends started in 2018. Please note that as already explained in January, we updated our free cash flow definition so that it is not positively impacted by the application of IFRS 16. For the full year 2019, we continue to expect a roughly flat operating cash flow, as the adverse impact of the items outlined before will be more pronounced in the remainder of the year.

Now, let's come back and talk again about the operational excellence in our enhanced margin targets. Over the last 12 months, we have been intensely focused on improving our business processes and accelerating the speed of innovation and decision-making. The restructuring program that we initiated earlier this year was an initial step in this process. As Bill just articulated, the comprehensive review is taking this focus now to the next level.

So, let me turn to some specifics. First, both the supervisory board and executive board of SAP have been fully aligned on these plans during our meetings in April. We have already set up the special committee, the working groups are formed, and they are hitting the ground running. Their mandate is to identify, evaluate, and execute on operational levels across all functional areas of SAP's business. We are focused on both efficiency and innovation.

An important component of this review is our cloud infrastructure. Cloud gross margins are a strategic imperative to SAP, and we aim to be a best-in-class provider of cloud applications across any type of cloud delivery model. The special capital markets day later this year is going to be an exciting event. We'll focus in detail on the operational opportunities at SAP and how we will drive best practices across the organization.

In tandem, we are announcing new operational targets that we are absolutely committed to achieving. First, reaffirming our top-line growth ambition through 2023, including at least 35 billion euro of total revenue and 3x growth in cloud revenue, and then, in January, we set conservative margin targets. We now started the year with strong growth and better-than-expected improvement in cloud gross margins and operating margins. Bill and I have highlighted the tremendous progress already made on the migration to a highly standardized, cost-effective converged platform on HANA.

We therefore confidently introduce higher margin ambitions: Both the new 75% cloud gross margin target by 2023 and an average of 1 percentage point of operating margin improvement over the next five years, totaling 500 basis points for 2023. You will see these improvements starting now through the efficiency efforts highlighted, and importantly, it is not envisaged that any of these additional initiatives trigger any additional restructuring plans.

We also committed to a disciplined capital allocation approach. As Bill clearly stated, we have all the pieces we need to execute our strategy, and so, future M&A will be solely focused on tuck-in acquisitions that complement the existing portfolio. We remain committed to our ongoing dividend and our existing policy of a payout ratio of at least 40% of the prior year's profit after tax, and additionally, we are now evaluating a multi-year share repurchase program. We're working through this analysis right now, and will share our findings at the special capital markets day.

We fully understand how important capital allocation is for shareholder returns, and we commit to optimizing it to ensure the best value creation for our shareholders, including organic investment, debt repayment, dividends, and potential capital return, but also tuck-in acquisitions and our venture capital investments.

So, in closing, let me state very clearly that SAP is a company not only with great financial ambitions, but also aspires to be a leader in environmental, social, and governance matters, and so, I'd like to highlight that 2019 marks the 10th anniversary on our journey toward the role model of sustainability. We have progressed in embedding economic, social, and environmental impact into our business, and make this transparent in our integrated report.

We remain committed to dedicate our extensive resources to help address the world's biggest challenges and help achieve the UN's sustainable development goals. On the social side, our focus remains on programs such as Women Forward. We will continue to champion gender equality and are proud of having reached 26% of women in management at the end of Q1.

So, Q1 clearly marks a strong start to 2019 across all levels and the beginning of a journey toward an SAP that is leaner, more agile, and even more customer-oriented than today. We are very confident that the opportunities for operational improvement that we have identified will allow us to achieve our updated 2020 and 2023 ambitions. So, please stay tuned, as we plan to provide an update at the special capital markets day, and I'm looking forward to seeing you all there. Thank you very much, and we are now ready to take your questions.

Questions and Answers:

Stefan Gruber -- Head of Investor Relations

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

Operator

Yes. Ladies and gentlemen, if you would like to ask a question, you can signal by pressing *1 on your telephone keypad. Keep in mind, if you're using a speakerphone, make sure the mute function is released to allow your signal to reach our equipment. Once again, for questions, *1. And, we will hear first from Gerardus Vos with Barclays.

Gerardus Vos -- Barclays -- Analyst

Hi. Good afternoon, and thanks for taking my question. Bill, I had a question on -- if you could provide some color on the senior staff attrition you've seen in Q1. And then, perhaps a follow-up for Luka -- despite a very decent mix in Q1, I calculate that underlying margin was still down, so if you adjust for M&A effects but also the divestments and positive impact from D&A, with the new kind of plan, what gives you comfort that you can deliver the 100 basis points of margin improvement per annum. And then, finally, on the share purchase -- or, the potential share purchase -- what kind of balance sheet ratio are you comfortable to run the business with? Thank you.

William McDermott -- Chief Executive Officer

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 they're 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, take away from this that you would be highly impressed with what's going on. You have an incredibly aligned management team on the top-line 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?

Luka Mucic -- Chief Financial Officer

Let me add on 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. Yes, we had 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 still have 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 could 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.

Just briefly on the share repurchase, 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 boards of SAP, and we will be ready for a very clear update for the special capital markets day in fall, so, see this as a teaser to join us in November.

Gerardus Vos -- Barclays -- Analyst

Okay, thank you.

Stefan Gruber -- Head of Investor Relations

Let's take the next question, please.

Operator

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

Stewart Kirk Materne -- Evercore ISI -- Managing Director

Thanks very much, and good morning, 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 around your higher conviction around margins. What's changed since then? 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 curious what's happened on that front to give you even more conviction around that margin guide. Secondly, 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 can 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.

William McDermott -- Chief Executive Officer

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'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 S4/HANA, now the digital nucleus to every well-run business in 25 industries and in 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're giving me. Just give me integrative solutions, and let's wring more and more value out of the business solutions you guys have created for us." So, they're ready now to harvest the value from those systems.

Similarly, at our capital markets day, we surveyed you, our dear shareholders, and 6 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 its 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 that, let's just tell you what we're seeing." This is a runaway margin train now, and it's coming at us really fast. So, we saw 1 point on average per year as the very disciplined and logical conclusion of the operational excellence committee we have going on in the company. We just got done with a supervisory board meeting and an executive board off-site where we spent a weekend together, and we've already completed this plan, and we're in execution mode, and we said, "Wouldn't it be nice if we did a special capital markets day and took our shareholders through the story year by year?"

So, we know you wanted this from us. It's the perfect time or the magic moment for us to declare and give it to you, and therefore, our employees win their shareholders, you win your shareholders, and our customers are serious stakeholders in SAP, too. So, we're fired up, we're ready to go, we have a really good plan, and we have a completely aligned board. After we're done with this call, we'll have a conference call with all of our employees. They're jazzed and energized too, so you've got a winner on your hands with SAP. Let's roll.

Stefan Gruber -- Head of Investor Relations

The second question on Qualtrics.

William McDermott -- Chief Executive Officer

Now, on Qualtrics, this is even better than I actually thought it would be at this stage of the game. Let me give you an example. In this board off-site, we had Gary Kasmeyer demonstrate HANA and show predictive analytics utilizing Leonardo in various enterprise application 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'd 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 in to 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 is 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 is resonating on all the channels of the open internet market. So, all of this is now being built into the SAP solutions and will be prominently featured at Sapphire. It's unbelievable.

The second thing that's great is our customers -- I gave CVS as one example -- they're like, "Wow, I could take all my operating data out of a system like S4/HANA. If I'm looking at my systems of record, whether 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 for 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 connections to Christian Klein and Juergen Mueller, because what they want to do is bring that integrative 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 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, do you want to give a little color on Qualtrics?

Jennifer Morgan -- President, Cloud Business Group

Yeah. We're already incorporating this into our own business, so for us, when we finish up Q1, we're constantly talking to our field, so we understand what went well, what didn't, and we can already incorporate that real-time into the business as we move into Q2. We already have a pulse on the sentiment. We know where we need certain investments, we know where we need certain support, which region, so it's been great. So, we're living that every day.

I think the key thing, 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 the leading indicator to drive a different outcome, and talk about where does that show up on the top line, where does that 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.

William McDermott -- Chief Executive Officer

One of the final remarks I would make -- it now changes the whole context of the CRM conversation 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. But, 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 experience 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.

Stewart Kirk Materne -- Evercore ISI -- Managing Director

Thanks very much.

Stefan Gruber -- Head of Investor Relations

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

Operator

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

John King -- Bank of America -- Analyst

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. I noticed there's been a few stalwart ABAP developers and leaders in the R&D department that have departed. I wonder what that means for that code base and what that means for customers who've obviously got a big install base about that 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.

Christian Klein -- Chief Operating Officer

Let me answer this question. Christian Klein here. 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 actually increased 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 ABAP or any other programming languages. This was just about increasing the effectiveness of our development workforce to ship faster innovations in the future.

Stefan Gruber -- Head of Investor Relations

Did you have a second question?

William McDermott -- Chief Executive Officer

I just want to build on this, John. I want to give you a feel for this. There is very important information that you all need to have. SAP has great ABAP developers; we will continue to have amazing ABAP developers. There are a little blogs that sometimes go out in the heat of a restructuring. There was one in particular that had 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 what I give you my word on -- and, I know Luka and all 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 scientists -- 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 new 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.

Stefan Gruber -- Head of Investor Relations

Can we now take the next question, please?

Operator

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

Ross MacMillan -- RBC Capital Markets -- Managing Director

Thanks very much. Maybe one for Bill and one for Luka. Bill, a nice positive surprise on the license results in Q1, but I think the cloud bookings organically were maybe a little bit lower than we were expecting. I'd love your comment and color on the seasonality of Q1 with regard to the organic cloud booking. And then, Luka, obviously, a very strong cloud gross margin. Some onetime 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.

William McDermott -- Chief Executive Officer

Hey, Ross. Thank you, first of all, for the question. I have been saying now for many quarters that the core license business for 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 up-front 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 of 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 base 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. 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 core, 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've all been waiting for.

Luka Mucic -- Chief Financial Officer

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've had in the last two years was on the business network side. These are all scale assets that are progressing very nicely toward their 2020 targets 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 of the 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 nice uptick. Now, a smaller portion of that is a one-timer indeed -- 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 30-35%. 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 hyperscales, and we are focused in HANA enterprise cloud on the right high-margin opportunities, 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.

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 will hit superior growth rates, and a very high gross margin of around 87% that they're having in the cloud will take more of an overweight role as a part of the whole SaaS/PaaS portfolio. Secondly, with Q2, you will see in our applications technology and services segment -- in the ATS segment -- the significant positive impact of the Oracle migration for SuccessFactors, so those steps in combination will drive us significantly forward, so you can see and expect a 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.

William McDermott -- Chief Executive Officer

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 ago, 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 one 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 sales force. 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.

Stefan Gruber -- Head of Investor Relations

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

Operator

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

Stefan Slowinski -- Exane BNP Paribas -- Analyst

Yes, hi. Thank you very much for taking my question. Just a follow-up on what you were just discussing, which is the acceleration of public cloud adoption for S4/HANA. 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 what does that mean for your own HANA enterprise cloud business? You mentioned margins improving, but will you be deemphasizing that over time? Thank you.

Jennifer Morgan -- President, Cloud Business Group

Hi, this is Jennifer. I'll take that. So, one of the things we've worked really hard on over the last 9-12 months is defining the reference architecture for S4/HANA on hyperscales by industry, so we've worked really closely with all of them so 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 S4/HANA, what are the set of cloud properties that will help you make that move and help you with orchestration, integration, and extension of an SAP system, and that'll do two things: It'll drive the S4/HANA moves in that revenue stream, but 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 have asked us to come together and help them with how they do this and how they do it most efficiently, and so, SAP's really certified that market-approved journey for that move. It's a win-win for the hyperscales, and most importantly, it's a win-win for the customers.

Stefan Gruber -- Head of Investor Relations

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

Operator

The next question will come from Alex Tout with Deutsche Bank.

Alexander Tout -- Deutsche Bank -- Analyst

Hi, guys. Thanks for taking the question. Just zooming in on the sales and marketing line, I saw that that fell 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 a tailwind, as it was last year. Are you expecting this meaningful improvement for the year overall? Was there anything 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 paying off? And, just as a small follow-up, I saw that there was quite a big financing income inflow in the quarter offsetting the higher interest charge. Is that some kind of one-off, or is there something sustainable in there that we should bear in mind on the EPS side for the rest of the year? Thanks.

Luka Mucic -- Chief Financial Officer

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 capital fund. They again had a value accretion across their portfolio of more than 80 million euro just in one quarter, so they are definitely a value generation machine for SAP. Now, we couldn't be prouder of what we do with the folks from Sapphire Ventures, and that's the main reason. And so, of course, as everywhere in venture capital, there can be ups and downs, but the team has really proven that they can drive outsized returns, and we have every trust and confidence in them continuing to do this in the quarters and years to come.

Actually, quickly on the sales and marketing ratio -- perhaps Adaire can expand on this, but I think it's really a function of very nice increases in sales efficiency. We have 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 -- reducing 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 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 CBG, will be able to continue to drive this trend. Adaire, anything to add?

Adaire Fox-Martin -- President, Global Customer Operations

Yeah, thank you very much, Luka. We're certainly seeing momentum continue off the back of a very strong Q4 into our Q1. Customer sentiment is 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.

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 new name acquisition, all of which contributed to the momentum that we're seeing in the business. 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 on behalf of our customers with our large ecosystem, and indeed, 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.

Stefan Gruber -- Head of Investor Relations

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

Operator

We'll hear next from Michael Briest with UBS.

Michael Briest -- UBS Securities -- Managing Director

Great, thank you. Good afternoon. Two from me as well. Just following up on the question to Jennifer about the hyperscalers, reading the operational excellence press release, it talks about working as a best-in-class provider across any type of cloud delivery model. Can you talk about 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 even in 2019 and beyond, the headcount growth is going to slow? I think you did say you'd exit the year with more than 100,00 people. Thank you.

Luka Mucic -- Chief Financial Officer

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 have 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 a consolidated cloud infrastructure organization that is run in Christian's board area, and actually, the work there that is done by Gary Slater is leading this area to consolidate the procurement activities in hardware and negotiate and renegotiate the terms so that we can utilize the hardware in an economical sense for a longer period of time is very successful. So, in combination, I think all of those measures give us the opportunity to probably not only put the further increase of capex to a halt, but actually start to claw back slightly, as you're starting to see it now in Q1.

The second point on the SaaS/PaaS margins -- absolutely, that 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 are hiring the right talent, 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 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.

Michael Briest -- UBS Securities -- Managing Director

Thank you.

Stefan Gruber -- Head of Investor Relations

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

Operator

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

Walter Pritchard -- Citigroup -- Managing Director

Hi, thanks. Two questions, one for Luka, one for Jennifer. On the new cloud bookings and on the new order entry, could you help us understand what impact Qualtrics and Callidus had on those metrics? And then, I'm curious -- on the sales force side, how much of the sales force at this point is selling Qualtrics, and how does that roll out throughout this year and into next year?

Luka Mucic -- Chief Financial Officer

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

Jennifer Morgan -- President, Cloud Business Group

We're off to a great start. I've spent the last two weeks really digging in with each of the management teams across all the aligned 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 a 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 and everything else, so we're excited for a great Q2 and second half, with these two being really strong growth drivers for CBG.

Stefan Gruber -- Head of Investor Relations

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

William McDermott -- Chief Executive Officer

Thank you, everybody.

Operator

Ladies and gentlemen, this does conclude your conference call.

Duration: 72 minutes

Call participants:

Stefan Gruber -- Head of Investor Relations

William McDermott -- Chief Executive Officer

Luka Mucic -- Chief Financial Officer

Jennifer Morgan -- President, Cloud Business Group

Christian Klein -- Chief Operating Officer

Adaire Fox-Martin -- President, Global Customer Operations

Gerardus Vos -- Barclays -- Analyst

Stewart Kirk Materne -- Evercore ISI -- Managing Director

John King -- Bank of America -- Analyst

Ross MacMillan -- RBC Capital Markets -- Managing Director

Stefan Slowinski -- Exane BNP Paribas -- Analyst

Alexander Tout -- Deutsche Bank -- Analyst

Michael Briest -- UBS Securities -- Managing Director

Walter Pritchard -- Citigroup -- Managing Director

More SAP analysis

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

More From The Motley Fool

Motley Fool Transcription has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.