Today, Stefan Land, our CFO, will present to you our current developments, the opportunities. He will also talk about the current challenges that we are facing in the market. I'll kindly ask you to put your questions into the chat. I'll read them out. Then we will answer your questions.
All for One at a glance. I know, of course, that all of you already know a lot about us, but maybe for the newcomers, we are an international IT and consulting service provider with a very strong SAP focus. We are leading in the SAP mid-market consulting market. We are the number one in Middle and Eastern Europe and the preferred partner there, especially for the medium-sized companies.
We are an SAP local Platinum Partner in the Germany, Austria, Switzerland region. We are leading in the number of conversions that we already did. Conversions from the old ECC system to S/4HANA with our unique offerings that we have. Currently, we are serving around 4,000 customers in our different business units, with around 2,617 employees across eight countries.
Eight countries, meaning major markets are Germany, Austria, Switzerland, and Poland, but we also have now supporting activities, extra activities in Turkey and Egypt. We will grow that further. Last year, we generated around EUR 500 million revenues. What is even more important from our perspective, because it is more planable, especially for the future, is that the proportion of recurring revenues is growing. Over half of our revenues are recurring. We are a leading industry specialist.
That means we do have special know-how in several sectors, mainly manufacturing, consumer, professional services, growing also in the area of the life science. Also distribution, of course, based also on the history of automotive business. We can really have tailor-made offers for our customers in these sectors. Geographically, currently still a big focus of revenues in Germany, 78% of revenues generated here. We are growing internationally together with our customers. I will now hand over to Stefan, who will do a deep dive into our activities. He will especially also report our numbers. Thank you, Stefan.
Thank you, Nicole. Good morning, ladies and gentlemen. Let's just jump into our business in deepness. I would like to show you on that slide our service portfolio. As some of you already know, the market is going to change. The market is going to change in direction to the cloud and to new services. It's not any more the world we had five or 10, 15 years ago. We have already transformed ourselves into a cloud-providing service company.
We are servicing with an end-to-end portfolio. This means we are not stopping in the middle of the processes. Customers can get all the required end-to-end digitalization application services, managed services the customer is needing, and is protecting its future, and it's digitalizing this business. On the right-hand side, you see that we are fully relating on the SAP portfolio.
This is the core of our services. We are covering around 90% of the entire portfolio of SAP. On a global base, we are delivering through our United VARs Network. What's already not mentioned by Nicole before, this is the way how we have been approved to Platinum status on a global way. As you know, there are only 10, 11 Platinum Partners globally.
This helps us to provide to midsize and to other midsize market the delivery into more than 100 countries on a global base. It is a very powerful network. It is the biggest global network at all so far. We are very proud on this. This is a uniqueness, which is a clear advantage in our business. We have certain tailwinds who are supporting our business for the next few years. There are many.
Number one is, as you probably know, as insiders, SAP gains to be the global ERP market leader in the cloud for business core solutions. Number two is the digitalization has to come, will come. There is no way out. Customer have to digitalize the business in order to be successful and competitive on a global base in the future as well.
Number three is the cloud. As you all know, on-premise will go out of business step by step. Systems, software, applications, the entire processes mostly going into the cloud or will be serviced through the cloud. This is a massive opportunity for all IT and consulting service providers, which is just in front of us.
It is a unique position, as mentioned by Nicole and myself of All for One, that we worked hard the past 20 years to come into the number one position in middle Europe. We have an end-to-end portfolio offering, which is quite important for the CIOs and the leaders of mid-sized companies to get the digitalization out of one hand.
We are prepared to go into the other mid-market. The setup of the business with around 2,700 employees right away, with some nearshore centers that we have installed in Egypt and in Turkey. We are able to be competitive first. We have the right knowledge to execute on a global base in connection with United VARs, digitalization in the next phase for the customer. Let's come into financials.
Before I'm opening the figures itself, I would like to pay your attention on the transformation, on the change in the market. It has already been started some years ago. It's following the next few years as well, moving everything into the cloud and the related business models, especially for service providers like All for One. We are unlocking a huge potential.
You see on that slide that the old model of reselling licenses and generating support contracts was a wonderful model. This is not the cloud. It's not providing the service which are required into a cloud and into a hybrid digital world. The cloud model is the white spot on this slide. You see there is a pretty customer by customer on the mid-sized area of a few years.
In the beginning, the huge revenues and the related margin is not going to happen anymore. This is the change for the business model of All for One and of course, for the entire market. Number two, we tried to set up this slide a little bit more detailed in order to show you what is going to happen on the revenue side.
We are not talking about margin, we are talking about revenues. You see that customers coming with revenues, we are generating revenues of on-premise software related to licenses and the related support contracts. In a certain step, the customer is starting to transform into the cloud. This transformation way does consist a lot of one-time efforts, like implementation projects. And you know we are one of the leaders in our conversion factory approach.
We have a software-supported approach with our partnership, SNP, to help customers to come, let's say, semi-automatically into the new world on the right-hand side. During that phase, the recurring revenues in the first moment are declining. We are having around a small gap, about a few quarters, maybe one or two years in the total, to ramp up step by step, the required cloud services afterwards. The customer care services.
Customer need to have a certain protection level, security level, an update service level in the cloud. All the interfaces between the different cloud models have to be serviced and be accurate. Or think about collaboration, the Microsoft Cloud on Microsoft Teams, like what we are doing. This has somehow to work on a global base from a customer side. These are services which we will add on top customer by customer.
Of course, customers also digitalization the line of businesses, everything related to people, HR services, payroll, and employee experience, everything related to the customers of our customers, customer relationship processes, e-commerce, field services. Everything will move in the cloud. Everything will be further digitalized in order to be competitive in the markets of our customers. Of course, step by step, we will see more artificial intelligence.
As you probably already know, SAP is working very hard for us as a provider to be the number one also in that environment of artificial intelligence. As we can see, and we have already locked some projects internally and in connection with our customers, there is a lot of potential to automize, to digitalize processes, and to show up more efficiency in the future. The last slide, please. It's also very interesting.
It is an experience we did, as Nicole said in the beginning, we are the number one awarded by SAP a few years now already on the most executed conversions to S/4HANA. This is a revenue stream, a typical revenue stream of an existing customer regarding consulting revenue. This shows you that we are moving from the left-hand side to the right, step by step.
In the moment when the customer decides to execute his cloud strategy, going for a signature or a RISE contract or a GROW contract, we are losing consulting momentum because customer does not invest into his old systems anymore. We are coming in a kind of gap also on the consulting revenue, because we are on a lower level and customer is negotiating with us as well. How do we going to move into the cloud? Mostly in waves.
The bigger customers typically need two to three years. The smaller ones are doing it in six, nine, or 12 months, depending on the complexity of the customer. Then we ramp up with the conversion factory model, a higher level of revenues coming also from consulting. Finally, after the execution, after the go live, we will add additional application services, security services, cyber services, as mentioned before, on the former level of consulting.
That's a typical lifecycle we are facing. Meaning that in the beginning, just coming on the key figures, and I hope you got a certain understanding now why revenues do not grow currently fantastically, because it is a EUR 380 million business now after nine months. It's a 0.4% growth only. This is not the real truth. This is due to the migration or to the transformation into the cloud of our customers.
It's a temporary phase we are sitting. It doesn't matter. We have a very solid growth within that revenue figures. You will see it in a moment of 5% in the cloud. We have geopolitical uncertainty, as you all know. I will not step into that today. I guess everyone knows what we are talking about. We have major challenges in our segment line of businesses, especially now talking about Customer Experience. As you may know, SAP changed the strategy around one year ago.
Since then, we are struggling in that unit because revenues are declining, margins are declining heavily due to the fact that SAP announced within the new business suite, Customer Experience will be in the cloud, in a new phase, in a new shape. This was damaging our existing business, our pipeline, totally within the last 12 months.
EBIT margin before M&A effects increased to 4.6%. Excluding severance payments, we achieved 5.2%. In a total, we achieved after nine months, EUR 17.5 million, which was a decrease of 15% versus last year. Within the third quarter, we had some up and some downs. As you know, situation out in the market is not easy. Hopefully, it's getting better.
Hopefully, trust comes back into the decision makers, which is the major key issue currently. Revenues only grew again by 0.4%, but EBIT was okay. We increased EBIT versus last year's third quarter by 19%. This is not our final target, we have to say. Based on the existing situation, we are very happy to report that EBIT in the third quarter was ahead of last year's third quarter. Coming now into more details of revenues.
Very important is this slide to see that we are in good shape regarding recurring revenues. We are losing some recurring revenues out of the support content, so of the old resale world, but we are gaining more momentum through cloud commissions on a monthly base. In a total, we are still on a level of 52% of our total revenues. That in a total, it was EUR 199.2 million after nine months. If you see the detail split by activity, you see exactly what I mentioned before.
Cloud is growing very robust. Software and support, the old world, is on a revenue line now declining. Licenses and including the commissions was down by 10%. Support contracts have been down by 3%. Consulting is very flat, a plus of 1%, which is due to the macroeconomic situation I mentioned before.
In total, we had just a minor growth of 4.4%. What happens regarding contribution margins, which is of course the most interesting thing. You see that in the CORE business, in our segment CORE, revenue grew by 1%, and EBIT margin before M&A effects was 4.8%. After nine months less. Last year we had 4.9%, but if we exclude the one-time severance payment that we had to pay out, we increased margin even in that very weak situation in the market, up from 4.9% to 5.3%.
Why did we show you the severance payments? As you probably know, if you're closer to our situation and to our market, we also introduced a new operating model in the beginning of this business year. The new operating model means we are now working in a matrix organization relating to countries and to business units.
Why we are doing this? We want to be prepared for the scalability in the next step of growth. We had to do this. It is mandatory to do. These investments into that new organization, also following some severance payments because we had to have the right people, the right managers, the right organization in place, and that's the reason why we're looking currently on more severance payments than typically the way that it's.
Coming into the lines of business again, here you see the situation driven by SAP and the Customer Experience portal. It was a decline of 3% revenues down to EUR 54.7 million. You see EBIT margin was damaged the first nine months. We are down to 2.3% coming from 7.6% last year. Why we are faced also with such a strong decline in margin?
We kept people on board, mostly, as much as we could. We strongly believe that market will come back. It is not a systematic thing within our portfolio or the portfolio of SAP. It is a market-driven issue, and that's the reason why we strongly believe that it makes sense from a shareholder perspective as well to keep capacity and knowledge on board and to defend our number one position in the market.
This makes life much more better if markets are recovering and we are seeing the growth moving forward within the next few years. Finally, let's come to some other KPIs. Very important as well. Cash position reduced by EUR 15.8 million to EUR 46.7 million, which is normal in the first half year or nine months. We will see a very good quarter at year-end, typically as well.
Operating cash flow decreased by EUR 3.4 million. We are fine with that. Operating cash flow is following our EBIT more or less. There is nothing extraordinary. Cash out for treasury stock was EUR 3.4 million. As you probably know, we are buying back on these pricing levels because we strongly believe that our share price is underestimated.
Net debt increased by EUR 10.8 million, which is typically so far. We will see a very strong operating cash flow in the first quarter. We have an improved equity ratio slightly from 32% to 33% already. Employees are very stable. We declined a little bit, we are also careful due to the market situation. We have already 26% of our staff in Poland, Turkey, and Egypt. We are following this route as fast as we can. Employee retention is fine. It improved already to 90.7%.
We are ahead of the market of course, again, and health index is very stable on 96.7%. Our long-term earnings and dividends per share, you can see here two different lines. Earnings per share in red have been improved over the time step by step. Last year we followed with a EUR 3.7. Regarding dividends, we are very stable and robust.
We already are always increasing or keeping dividends very stable so that we have a very high reliability on that, and people know exactly what they can expect from All for One investment. Let's come finally to the outlook. Summarizing a little bit what has been mentioned by me the last 20 minutes. We adjusted from the board the forecast for the financial year 2024/ 2025, which is ending on September 30th. Why? It is due to the uncertainty in the market.
The leaders of businesses are quite weak in final decisions, delaying decisions in the CORE segment very often because people know exactly business is running. They have other challenges. They have uncertainties, especially in the export-oriented segments. On top of this, we have a very weak situation in the Customer Experience portfolio because the new business solution approach of SAP has been delayed step by step, we are still struggling with the release of the new Customer Experience portfolio.
This is driving us, of course, in that segment month by month. We are looking forward that this will be better, hopefully very soon, because we think despite the situation, there's a very strong pipeline. Our own group-wide customer relationship management tool is showing the biggest figures ever in the total.
These customers do not run or execute projects to other software vendors or competitors, they are just delaying decisions. This is a major challenge for our business, for our staff as well. We are really positive that this will going to be a massive change as soon as economy comes back, growth comes back, and the uncertainty goes out of the market.
Our revised forecast is now on the sales side, from EUR 505 million to EUR 520 million, and EBIT margin before M&A effects is not any more between 7%-8% roughly. We now only estimating 5%-6% since July 3. Why we are looking ahead with such a confidence? Because we did a lot of homework the last nine or 12 months already. We have a scalable matrix organization, which helps us to open up the basis of international markets.
This will help us to grow and to find more opportunities for scalability in the new markets. We have started already very active or proactive with new packages because a lot of customers now moving into the cloud, executed, go live have been done, and now they are finding out we need new kind of services. Please help us in certain environment of compliance, security, interfaces. They need updates, security, and everything else.
This makes us very confident that we come into more proactive recurring services and helping our matrix organization also to make it highly profitable. We have really already many highly engaged employees and of course, managers in leadership supporting this strategy. We are really looking forward to execute, coming back to growth, and forwarding the entire office business on the next level. That's it from our side.
The fundamentals I think are clear and not going to change. Organic growth will come back in the mid-single digit very soon. Inorganic growth is on the agenda. We focus to execute also on an international base and to fill up some gaps in the portfolio, some smaller ones we see there. Profitability will end in 2026/ 2027, and the next step on in 8% or more. That's it. Thank you very much and I'm looking forward to some feedbacks or questions from your side. I'm happy for that.
Yeah. Hello. Just a reminder, you can put your questions into the chat. I'm starting with the first question that is already in. Stefan, why was the tax rate so high in Q3?
Very good. I think this is an interim situation. It will probably be solved already during Q4. It has something to do with the unbalanced situation of different legal entities per country. We had in the environment of Customer Experience losses, and now we have to find out until year-end if this can be also capitalized for the future depending on the size business. I'm expecting that we are returning to our annual tax rate this year of roughly 31%. On the long term, it will probably decline to 30% or 29%.
Thank you. Next question. The cash flow was down year-over-year in the nine month, while your quarter comments sounded more optimistic. What should we expect for the free cash flow in the current year?
Well, we are not disclosing a figure, but it will follow our EBIT development. If you compare the two EBITs of last year and our forecast this year, then you should probably have the same deviation roughly in the operational cash flow.
Thank you. Looking at the economy, do you see signs for an improving demand environment?
Well, this is the question everyone wants to know on a daily basis, of course. It's very difficult because we had a long period of uncertainty, and just due to the fact that customs are now clear, we don't know how clear they are finally. I would not say this is a dramatic shift to a cost situation. Step by step, it could be positive already this quarter, and we hope for that decision-makers are executing new projects which have already been forecasted and timelines are clear, contracts are very clear.
We hope that customers or decision-makers are doing this. Being very honest, nobody can say that. Even we have 20 different companies in the room, you don't know if decision-makers already trust on the new situation. You don't know what happens the next four weeks, we have to be careful.
I would not say that the market is now in better shape than four weeks ago. We cannot trust or rely on this. Hopefully, I'm wrong, and hopefully, you will see already a very good phase after the summer breaks in September and the following months.
What gives you confidence for accelerating growth next year?
Well, let's say one-time effects are getting smaller on the revenue. This means the decline in the line of software and support will probably be smaller. We did a lot of efforts also regarding new recurring services. I see a very stable momentum. We achieve, especially, for instance, in one solution or in two solutions, 58 new small contracts within four or five months.
I hope that this will continue because if customers move to the cloud, they have to have a solution for that, and they can't deliver on themselves because they are having also a gap or missing capacities with this kind of knowledge. This will continue. It will not be huge. Don't misunderstand me, but it will be more positive than currently. So far, I'm excited that we are coming back to more growth than this year.
Okay, next question. Regarding the unsatisfied market environment, did you intensify restructuring in the LOB business?
Yes and no. Not in the line of businesses or analytics and people-related processes. They are doing well. Even they are impacted by the market situation, they are doing well, and we are looking forward to continue our strategy. In the area of Customer Experience, we are careful, and we are currently looking also to more activities on the cost side. As mentioned before, we try to keep the team on board as much as we can.
We are not very positive within the next few weeks and months in that singular area. If the portfolio of SAP within the new business suite approach will be good to recognize this, to building up new pipeline on this will take some months minimum. We will see here uncertainty situation driven by SAP only, a minimum up to spring, summer 2026. That's the timeframe we can see so far. We will probably see also some smaller restructuring process, but it's not big.
Thank you. Next question. Can you please give some quantitative insight into your order entry situation or pipeline?
No, we are not going to do this, also not on a group-wide basis. Why we are not doing this, because we feel that in our business, I'm not talking about a software vendor or anyone else, it is very difficult to value order entry because the timeframe is very important. What you're catching as order entries, the revenue type or activity is very different, and how to value recurring contracts on an order entry. Are you valuing it for the minimum timeframe of one year?
In some areas, you have maybe three years. Or are you doing it for 10 years? Well, everyone is doing it different, and that's the reason why we are not publishing order entry figures. So far it is a mixture of order entry success we are seeing. In some areas, we are doing well.
In the LOB area, especially Customer Experience, we are still very weak. On the pipeline, we see a lot of potential orders. If I would give you that figure and it was, for instance, twice the amount than 12 months ago, everyone would try to estimate that revenues are going up by 60% next year. No, it will not. Definitely not. There is a very strong base and a very robust base, and we try to be prepared, especially with our international markets approach, with our colleagues in Egypt, with our colleagues in Turkey and in Poland as well, to be ready to get more growth momentum and catching it very fast if it is available.
Thank you. For the question you have on your slide, inorganic revenue growth, could you give some insight? What are you planning?
I am not allowed to give insights here.
Right.
What we are planning is we would like to enter into new markets. We call it high-margin markets. We are looking into Western and Nordic Europe, especially. Maybe in the midterm perspective, also to attractive market in the U.S. and maybe in Asia.
We try to boost ourself also with more opportunity of nearshore capacities in countries where we find a lot of SAP knowledge. On top of this, we also see some small spots of portfolio elements which are very attractive for the future. We are also looking into this, if this makes sense to add to our end-to-end portfolio in the future because finally we can be sure they will all sitting in the cloud.
If it is a private or a public cloud, these are two directions. They are sitting in the cloud and customer will need to have a very robust provider end to end that helps customers to keep business secure, fast, and digital, without any problems. I cannot give you detailed projects. I cannot tell you if we are executing within the next few weeks or months. We are working on certain levels and certain projects since the entire year already. We are really positive.
Thank you. I think that was the last question. Last opportunity to put a question into the chat. I think that's not the case, so thank you very much for answering all the questions. One more coming.
One more coming.
Yep. How did your conversion rate develop from pipe to order intake in the last month?
It is still on a very low level since months. It was in the starting already in January, and the situation between January and now did not going to change positively within the last few weeks.
Thank you. Now, thanks again. Everybody, hopefully for those people who still have the holidays in front of them, hopefully good weather, sun, some relaxing time. Otherwise, if you have questions, just let us know. Just come through. Last word to you, Stefan. Thank you.
Exactly. There's nothing to add, Nicole. Have a good summertime. Thanks for joining us today. Looking forward to feedback. Of course, we're open to that. Have a nice day. Thank you