Good afternoon, ladies and gentlemen, and welcome to the SNP SE Conference Call regarding the third quarter results 2022. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Marcel Wiskow.
Yeah. Thank you, operator. Dear participants, thank you for following our invitation to this call. Today, we published our third quarter results. All related documents can be found as usual on our homepage in the section Investor Relations. Furthermore, we had published some further announcements in the past few days. In addition to these numbers, this call aims to better classify all these latest news. Let me introduce the other participants with me of this company. This is Michael Eberhardt, our CEO, Thorsten Grenz, CFO, and Gregor Stöckler, COO. With this short introduction of the participants, I would like to hand over to Michael.
Thanks a lot, Marcel. Also a warm welcome from my side. As always, I will give you a short update overview about our Q3 and nine months performance. I hand over to Thorsten who will give you the more detailed numbers regarding our financial performance. Gregor will do at the end the strategic update and the outlook going forward. If you go to the page number three, you will see our nine months performance. On the group revenue side, we had solid performance of a 3% growth. Like-for-like, with the deconsolidation of our Polish business and the full implementation of Datavard and EXA, our like-for-like result would be +9%.
On the partner revenue, we had a very great and successful story, not only in, let's say, what we achieved with all the partners, but specifically what we have achieved with our main partners going forward. In total, a partner revenue growth of 56%, which is for me a clear demonstration that our go-to-market model is working and catching up with our expectation. Order entry is still slightly down 7%, but like-for-like +7%. We still have the challenge in the market that customers are awarding the contract still for us, but they award, let's say, the next project. They do everything what they can, let's say, handle within a given time frame.
Most likely the next transformation or the next carve-out, or let's say the next project for a smaller project. The long-term commitment with our platform strategy and enterprise license is the challenge. We get positive feedback, but it's very, very tough right now to convince a customer to get deciding done. The service revenue is slightly up with 4% to EUR 88 million. Software revenue up 1% flat. If you look at this upfront part, and Thorsten will give you an entire update later on this upfront behavior, our software would grow with roughly something like EUR 9 million, 12% compared to 2021. And then our average is more or less stable, but like-for-like, we have improved by EUR half a million. If you go to the next page, please.
The highlights, there are a couple of highlights, but these are just the major ones. We have several times now demonstrated our CrystalBridge to different partners, different customers. The new CrystalBridge is, let's say, the extension, the combination of the portfolio of SNP and Datavard. We really offer the customer an entire platform from the analytics until the monitoring of his data transformation, but also the data management and analytics capability.
Very important for us is also the move to the cloud, and the connectivity part, because we see SAP as a very strong ERP provider, but we also see that customers are, for sure use the power of the cloud and go, a little bit more for best-in-class technology, in the different areas. We would like to be the partner for our customer on this journey on the SAP platform for sure. Also, let's say when it comes to analytics to support the customer to combine SAP with non-SAP data they does to get an entire end-to-end view, business view, for example, in a logistics environment or in a supply chain and so on.
We have a very strong, let's say, order entry and pipeline on the data integration and innovation part, which is our SNP Glue platform. We signed only in Q3 roughly 12 deals with different customers, very big customers down to a midsize manufacturing enterprises. At the same time, we have a very strong pipeline in this portfolio as well for the rest of the year. We announced this couple of major orders in Q3. For all of them, seven in total orders. All of them had more than EUR 1 million in terms of volume and order entry.
This also demonstrate that our transformation business catch up with the size of the customer. As big as the customer is, most likely, SNP will be the partner then for the transformation part. That's a very important message because if you compare the announcement of SAP, they win a lot of smaller customers right now, which go greenfield to SAP. That's not the way where we can compete. Our sweet spot here is very much the big enterprises which are coming from an SAP platform and moving towards S/4. A good message, Datavard integration is completed, now gets focused on really sell our combined portfolio towards the market.
We have a significant increase in the revenue and order entry in the partners and even better, a very solid, the best pipeline ever with partners for our Q4 and fiscal year 2023, which is encouraging that the partner business will even lift up more going forward. At least we achieved our minimum target to have all three quarters slightly positive. As you have seen with our top message, I think, two days ago, we still see most likely that we will achieve EUR 10.5 million EBIT in 2022. That's all good messages, and I think we are moving towards the right direction in for sure challenging and difficult times.
The order entry and the revenue mix you see here on the next slide, again, Central Europe is our let's say key region in terms of revenue, in terms of order entry, but also in terms of profitability. We also made good progress in U.K., as you see on the order entry side, a growth of 57%. On the revenue side, a growth of 3%. JAPAC, 49% growth on the order entry side and 55% growth on the revenue side. In the U.S., we are slightly down with 4% against a very let's say strong Q3 last year.
We will be in a similar size in the growth like JAPAC and UK&I. Very strong pipeline for Q4, and they had a solid Q3 in terms of closing. In LATAM, this is a challenging business, but I think growth is not our biggest challenge in LATAM. We see good growth overall. We see opportunities also in the S/4 space and in our extended portfolio side. The challenge here is to get with all the inflation and currency depreciation, we need to get the balance of cost and focus the right accounts, get this done, let's say in a better way. At the end, we are not losing money anymore in these regions going forward.
That's a good part, and we make significant movements towards using the LATAM organization more as a delivery center for our US business, which is now accepted. We have a couple of proof points that this works pretty good going forward. Not only for the U.S., but also here for Central Europe. If you go to the next page, you see that the development of our partner business on the left side, our order entry with the partner. In the middle, you see the revenue development. You see this is really improving quarter-over-quarter steadily, so it's really good. We have almost all big IT companies as our partner, which are really important for us.
That means, the focus is not to win the next seven so that we have 20 of 20, but the focus is much more to really focus now on each of these 13 partners and see how we can extend and how we can accelerate the growth with each of the partner. Because as of today, it cost us a huge amount of money and focus to keep 30 partners engaged. Enablement, custom partner enablement, co-selling, co-delivery is still the main focus. We make good progress. One learning is very clear. All the partners which are moving towards a joint factory together with us or a joint Center of Excellence or however you would like to name it.
Where we bring the people together in one virtual room working, let's say as one team in front of one customer, gives us the fastest skill transfer and the best outcome from a customer satisfaction point of view and from a partner point of view. That's a really good way how we do it. We have signed one new partner in Chile entering this interesting partnership. Ernst & Young is moving stronger in some markets towards an SAP consulting company. The same we do with EXA, for example. We have very strong discussions right now for the EXA portfolio with PwC, which is very encouraging. When you look to the project from a content point of view, 10 out of 18 carve-out projects are coming through the partner channel.
Even better, when you look to the S/4 project, 16 out of 13 are driven by partners, which is a huge amount. Each partner deal can be later, sooner or later than a direct deal for us as well. Because if we are in front of the partner in front of the customer, and the customer has a, let's say a smaller carve-out or smaller data transformation part, why should he award this through the partner channel and not doing this directly with us? We have today a significant amount of people trained on our technology. Not all of them are ready to do, let's say, a single project by themselves, but a lot of them can already contribute together with us in the different projects.
We have also started to do the cross-enablement of the Datavard and SNP products, so that partners are using the extended portfolio to sell more, land and expand in a better way with their customer. The last slide from my side is the headcount slide. We are, I would say, stable quarter-over-quarter. When you look to, we started with 1,335 people in December 2021. We are 26 people down right now from the end of September. This is for sure. The market is very, very tough. We hire, let's say, very much aligned with what we see from an order entry point of view. We also use some overcapacity to get rid of some of the overcapacity.
This is a balance of we hire on the one side, we hire people in the front and in the service side, but then we also hire people, for example, in our Polish organization, which are not shown here as headcount because they are sub-parties in this way. We also have decided to do some rehiring, not directly, but through partners, so that we have a higher flexibility to be more prepared for whatever will come in 2023 in terms of economic situation, so that we have a little bit more flexibility to get rid of some of the costs in a very easy way, in a very smooth way. With that, I hand over to Thorsten.
Michael, thank you. Ladies and gentlemen, I will run you through the numbers and certainly not read all the numbers to you, but point to the most important parts of the presentation to reserve as much time as possible for our discussion. At first glance at our income statement, and there the group revenues slightly increased in the third quarter. We have, which is quite some positive news. Again, a positive EBIT, as Michael pointed out already, all three quarters. Okay, the numbers are still small, but they're on the right side. And they are positive. The gross profit margin has improved for the nine months, I would say, even in a significant manner.
The gross margin rose 3 percentage points to 87% in the current year. Even, and also, in the third quarter we have made good 1 percentage point. To explain other income and expenses, it is a combination of various items included here, consultants, third party services, recruiting expenses, events that become important again to restart after the isolation and the remote work during Corona. Also travel and entertainment is booked in this position. The personnel expenses rose slightly due to general pay increases we did in the first half of this year and also some catch-up effects because last year the salary increases were limited.
We have to admit that we had tailwinds, and there are positive foreign exchange effects of about EUR 4 million mainly due to the strong dollar. Revenue and EBIT for the segment service. As you know, this segment does not include EXA. We show EXA as a third independent, separate segment. For the nine months, we see an increase in our revenues in this segment. In this, the third quarter alone shows a decline of this number. EBIT, unfortunately, there is a negative development in EBIT, we have to admit. Costs are rising faster than revenues do. The software segments, again, revenue and EBIT.
Revenue flat for both the quarter and the cumulative numbers for the first nine months. EBIT, nice improvement of the profit contribution of this segment. EXA, remember small numbers, so the relative deviation exaggerates the impact this segment has on our bottom line. The decline in revenue and in EBIT is attributable to delayed project activities. Order entry, that's a recap of what Michael said in his introductory presentation. We are suffering or we are seeing a difficult environment, so our stable order entry compares not that badly. I would say even favorably.
The decline in order entry nine months on nine months, remember, we have scope changes after our Polish subsidiary exited the group accounts. Adjusting or accounting like-for-like, we would see an increase of 7%, and we have given you the numbers of the detailed quarterly report. The second point explaining the only stable order entry, Michael explained already. It is this switch, this trend we have seen from the beginning of the year to smaller chunks in orders. Lower maintenance due to the sale of the Polish subsidiary, that is a significant part of the services. The following charts reconcile the order backlog for the first nine months.
Book-to-bill is slightly below one. This largest contributor to the change or the potential change in the order backlog is almost or minus zero. We have some smaller negative effects from currency and from volume adjustments, where I think one project has unfortunately been canceled. A glance at the balance sheets. The asset side, important points, cash equivalents. Yes, we see the position, our cash position has deteriorated in the course of the current year. We will come to the explanation in a moment when we look at the cash flow statement. Contract assets, these immature receivables, have risen by more than EUR 10 million.
It has to be seen in relation to the reduction of the long-term contract assets that declined. The equity and liability side of our balance sheets, there is nothing really new. The major events happened already in the first six months, so the structure is unchanged to the first six months. Second, but last, the cash flow statement. First to explain the contents of line items. I think most of them are self-explanatory and maybe change in other items. Note that. That is all non-cash items like deferred taxes or provisions.
We see that despite a growing top line, working capital requirements at the level of the previous nine-month period, and we see a significant reduction of working capital when we are comparing the quarters. Operating cash flow, and I think that is some very good news, is moving into the right direction, and has already almost hit a positive number, so slightly below zero. Cash from investing activities, nothing new. It is related to acquisition of EXA and Datavard. The final chart, and I would say something like a bonus chart, because we have been asked this again and again, and we are listening to our shareholders and investors.
In the past, we have added this like-for-like reporting to give you more transparency. This is to respond to the question, how does the former practice of booking upfront as revenue has it affected prior years? Is it affecting the current years? What will happen in the future? It is a rather complex chart, so I will explain it in detail and line by line. First, it needs to be understood all the numbers are incremental numbers. They are deltas, they are changes. If you make your math, how would the group EBIT have looked, you need to add or deduct the numbers that had been reported.
For each year, we have given four columns. The left one is the upfront, and I take the revenue at the first line development over time. The upfront, for example, for the year 2019, EUR 13.8 million, is the upfront revenue booked as revenue in this year. As some of you know, linked to the upfront revenue and service, there's a fixed proportion of maintenance that kicks in in future years. Maintenance the first year we are showing you here is zero, and then a small portion of this upfront revenue has in fact been sold, finally sold, to a customer. The balance is EUR 13.3 million.
You see 2020, again, significant amount booked as upfront EUR 11.2 million. Important to recognize now maintenance kicks in. This upfront treatment of revenues has a lasting effect as long as this transaction is still in the books. 2021, and you can read the numbers by yourself, still EUR 5 million booked as upfront. Again, to be added on top of that, maintenance revenues. In 2021, the company started successfully to sell off and book against these upfronts EUR 7 million.
As we have announced in the first nine months of this year, no more upfront revenues, but still maintenance is adding to this number, and we successfully sold EUR 4 million. Impact on revenue that is the net number. The blue one is the sum of upfronts and maintenance. Finally, impact on revenue. There it is important to understand what did we simulate? What are our assumptions? We said we continue to assume that partner contracts exists the way as they have been signed. This simulation assumes that the partner contracts that were signed in 2019 and have led to revenues under the old form of revenue recognition still exist.
That means, we have worked on them, the colleagues have worked on them, and the company has spent sales costs on that. We have not taken out the sales cost. If you want to do it differently, it would mean walking away from the assumption that we do a long-term partner contingent contracts at about 15%-20% of sales costs would need to be addressed as well. But we stick to the scenario, yes, there are long-term partner contracts, not changed the year we signed them. Consequently, no adjustment to the costs spent there that are included in the 2019 accounts, and then in future years booked against that. In 2020...
The impact on the EBIT with this assumption for the year 2019 is minus EUR 13 million. Or to be clear, what has been reported, if we had not booked upfront revenues and upfront EBIT, the reported EBITDA would have been EUR 13 million smaller. In 2020, it's almost EUR 10 million. In 2021, it's moving towards breakeven. In the first nine months of this year, we see a positive contribution from the changed accounting practice. Thank you. Gregor.
Thank you very much. We're moving then to slide number 19. As you've seen from the recent announcement, we will update the guidance according to the numbers indicated. We feel confident that we can grow group order entry by a mid-single-digit percentage, so it's a moderate growth over the 21 numbers. Like-for-like, the number was 176 previous year. We will grow above that number. The unadjusted number is based on a previous order entry 21 of EUR 192 million. More precisely and more importantly, as many of you gave us the feedback, is group revenue and group EBIT. We project revenues to land around EUR 175 million and the group EBIT around EUR 10.5 million.
Previous forecasts slash previous guidance was in a guided range of EUR 170 million-EUR 190 million, and the EBIT forecast of EUR 10.5 million-EUR 13 million. Furthermore, we continue to guide EBITDA, and we project stronger growth on the EBITDA side based compared to the EBIT, and that is purely based on the PPA explained in the previous calls. Based on the projected growth rates, we stick to the mid-term guidance. For the time being, we do not update the mid-term guidance. We will wait for the full-year result to give you a clearer indication. We will then have more transparency on the growth potential. One, how much pipeline weighted and unweighted we can carry forward to 2023 and 2024, and hence have a clearer view on a projection basis.
Right now, we stick with the guidance of EUR 23 million-EUR 230 million-plus on the group revenue. The revenue share of software will exceed the segment of services for the first time.
We see group EBIT margin 10 percentage points above the 2021 base, which was EUR 6.3 million. With that, I hand it back to Marcel to open the Q&A session.
Operator, we open for questions.
All right, ladies and gentlemen, if you'd like to raise a question now, please press nine and star on your telephone keypad. In case that you'd like to withdraw your question, please press nine and star again. The first question comes from Felix Ellmann. Your line is open now.
Yeah, hello. I have a question regarding Q4 of this quarter. The remainder of EBIT is quite high. Could you elaborate a bit more on the optimism you have towards Q4, looking at your guidance?
Yeah. Let me start, and my colleagues can contribute. We look to our business and the mechanics of our business, and this is absolutely in line with the industry standard that a lot of the bigger deals will happen in Q4. Our pipeline is very solid towards, let's say, the EUR 5-10 million. This profitability comes slightly from the service business, higher utilization in Q4, which we see already in October. The main contribution is coming through the software part. When we look to the opportunities, I think the coverage on the pipeline side is close to 300% in an unweighted way, and something like 1-5 times in a weighted way.
We go through opportunity by opportunity, region by region, for this quarter close so that we get the best line of sight. We have for most of the deals a very solid closing plan, which we also share with the customer so that the customer is aware what we plan in terms of timing and let's say the closing date. With that, our most likely forecast is exactly what Gregor has presented, that we go for around EUR 175 million revenue, a good above one in terms of book-to-bill and the profit of around EUR 10 million-EUR 5 million. This is not a guessing. This is the pipeline supports this.
We also did a couple of improvements compared to the years before so that we get, let's say, a higher predictability as best as possible. One challenge which we still have is the part of the business comes through partner. Let's say more and more comes through the partner. For sure, this is one additional dimension which we need to consider and manage to get this across the line, because before the partner signs with us, normally the customer needs to sign with the partner. That means we need to get this better aligned together. That's, I think, the big challenge here in this area.
When we look to Q4 2021, we had something like around EUR 5 million EBIT contribution in last year. I did myself together with my team a couple of comparisons about the pipeline, the health check pipeline solidity and this kind of things. I think we are significantly ahead. The unknown is we still believe that in the next six weeks, there is no big surprise on any crisis in terms of Corona or Ukraine or energy or lockdown or whatever in this area, so that customers may not be able to sign. All the fundamental numbers we have today in the book are supporting our guidance and our forecast.
Thank you very much.
You're welcome.
The next question is Bernd Laux. Your line is open now.
Thank you. Good afternoon, gentlemen. I have first two questions for Mr. Grenz. The first one is, when you think about the upfront consumption of partner contract, in terms of revenue recognition, how do we expect that to develop in 2023? Is there any negative impact left for the P&L or will you have everything digested by then? Second question for you is with respect to cash flow. Do you expect in the fourth quarter a cash flow that is developing as positively as the EBITDA and EBIT is indicated so that you will generate a positive free cash flow in the neighborhood of, say, EUR 8 million-EUR 10 million? Or is there something that we need to take into consideration which will prevent that from happening? The final question is for Mr. Eberhard.
Could you update us on the situation with your U.S. business? The order intake in the third quarter was slightly down and at least to me, disappointing. Will there be any material improvement going forward? Have you been able to change the setup to be more successful in the coming years? Thank you.
Okay. Mr. Laux, on the upfront, yes, also future years will be impacted, because there are remaining positio+ns, positive balances still on our balance sheet. As I said,
Although we are not booking any new upfronts, the service adds to the balance. Yes, also in future years, there will be an impact from this upfront booking policy of the past. Yeah. Cash flow for Q4. We are working on the easier thing. From investing activities, nothing is to be expected. That is all through. Operating cash flow, it's a real challenge to assess that for the end of the year. If I look at the individual months of the third quarter, we had very nice numbers for July and August.
It is at the end of the quarter, everybody plays hardball, because our accounts payable are limited. We have only a limited potential to say, retaliate against hardball played by our customers. It's really very difficult to predict what will be happening for year end. What I can say is, we are making continuous progress, both in more and more successfully managing the overdues, but also to prevent the due receivables from becoming overdue. It's pretty much intensified accounts receivable and cash management. I don't dare to predict.
Thank you. Understood.
Okay. From an order entry point of view, I ask Gregor to add maybe more a few on UK and US. Overall, we had a solid pipeline before we went in Q3. We finished with around EUR 40 million order entry in Q3, which is significantly better than the year before. We also had around EUR 5 million where we have a customer agreement. Customer even signed letter of intent, but at the end, we could not show it in order entry because the final commitment, the last mile was missing one or two deals in the US and UK. A big one in the UK where we have more than the oral commitment.
We have two deals here in Central Europe, so that means we have a little bit tailwind now in Q4. What we have seen is, we lost Q3 already in July. July was a very tough month, and we had similar feedback from some of our partners like All for One and others. We said, "Hey, summertime was really difficult to get the customer to any commitments." We see, when I look to, let's say, what we have achieved the last three weeks in September in terms of closing, we see that the market has improved and we also see it now, beginning of October. As I said, the pipeline is there.
We have everything what we have delivered, we delivered with, let's say, deals between EUR 100,000 and EUR 2.5 million. There was no major very big deal, but we have a couple of very solid big deals in the Q4 pipeline. I see a real, let's say, recover on this side. I would say in all regions, I do not have any region where I see, let's say, the risk that we will not get above a positive book-to-bill. Maybe you can, Gregor, just say something to the US. I think US is always under the spotlight here.
Mr. Laux, I want to answer your question specific to the U.S., and give a little bit of background here, same as Michael did. For one, we're very satisfied with the development the U.S. operation is taking. We are forecasting this is the first year in steady state operations, no gigantic deals, no upfronts, no extraordinary effects in U.S. operation, and we will have a positive EBIT. That is certainly a substantial improvement over previous years. Secondly, we have grown year-over-year in the revenues more than 50%, which is a good improvement. Yes, on the order entry side, we have not grown based on the previous year.
Let me remind you that in Q3 last year, we were in an almost $5 million deal from ThousandPoint. That is still in the order backlog. We're working on that. Hence, we are working on a very comfortable order backlog position in the U.S. Not on the order entry. That's true. We still see there a positive trend. Looking at Q4, as Michael highlighted, we will get above the book-to-bill ratio of one in the U.S . As well. Given the comfortable backlog, we do not need a substantial improvement on the order entry because of that relatively comfortable order backlog. Also, the impact of the partner upfronts for 2023 will be extremely positive.
The biggest source of our IBM shared business is the U.S. operation, and there we will generate some massive headwind once we finish the first phase of the IBM contract, which is by end of this year.
I am not sort of named and ranked, but based on this background, significantly more positive on the US, as you said. Most of the necessary fundamental process and organizational changes have been implemented. Not all of them have yet kicked in and generated the necessary effect, but I make it my top number two priority to look at the U.S. operation for sure.
Thank you very much.
The next question comes from Lukas Schwang. Please go ahead.
Yes, good afternoon. My first question is concerning the professional services business. You just said costs were rising faster than revenues. If we compare Q3 versus the first half and then the first six months, you were more or less in a good way to make the business profitable again. In Q3, something changed obviously, because you nearly made EUR 2 million of losses in Q3. Can you explain a bit this strong negative trend in Q3 in the professional services business, please?
Yeah. When you look to this comes almost everything from the top line. What we had in. When you look to our service business, you need to differentiate between the different regions. Let me just start with Central Europe. Business in Central Europe is strong on the service side, but we had a real tough time in terms of illness. We had the highest illness in Q3. Since I'm here, we had a lot of people which had either a flu or something like Corona. This is surprisingly it's getting better now again, but this was hit us on to get the project finished.
We had a couple of project delays where we could not show the POC, the percentage of completion at the end because people were missing. This was the Central Europe part. This has nothing to do with utilization or with backlog and this kind of things. When you look to the, let's say the U.S. and to JAPAC, this is all about the. In JAPAC, we have full utilization. The gap is small. We need more people. We need to hire the right people, and we need to get the right people on the right place because when you look to JAPAC, you have very different markets in terms of cost envelopes and affordability.
In Japan, for example, Australia, you have high-price markets, but when you look to Singapore, Southeast Asia, and let's say specifically in India, you only can deliver with Indian resources. That is more, let's say, we need just more business in U.S. We had not 100% utilization, but we improved in the right direction. We have our LATAM business, which is at the end, let's say it's if we get this to a low single-digit contribution margin, I think we are done with the local business. The course there is to use the people more for other regions as offshore resources. That means when you look to our profitability at the
In Central Europe, for example, we deliver something like 35%-36%, and there is still some 2 or 3 point improvement possible. This will come by being more aggressive on the shoring side. We made progress on the shoring side, but we are still not there. For example, in Central Europe, we delivered, we calculated deals with 30%, and we delivered with something like 20%-25% on the shoring side. Fundamentally, this business will work. This business will contribute, let's say, over the year, let's say a solid profit contribution. We need to get, when you look at what I said before, three out of five regions are in the growth mode. U.K. is in the growth mode, U.S. needs to grow, and JAPAC is growing.
In JAPAC, we are running out of resources. In U.S., we have a little bit, let's say, still left. That means it will improve by higher utilization. U.K., I guess, Gregor , it's a mix of both. We are not talking in U.K., we have something like 30 people in total, 35 people. That means this is gonna be with the order entry, what we see in Q3 in U.K. and also in Q4, this business will come back to profitability.
Okay. Then on the cash flow topic, you mentioned the, let's say, last weeks or last days of the quarter, seasonality and the last call, Thorsten , you also used this term of lost the fight against the customer. But at the end of the quarter, you seem to lose again always the fight with the customer for your accounts receivable. What can you change in terms of working with the customer on the accounts receivables to get this number down?
Okay. Good point. As you see, we have made some progress. Operating cash flow was negative EUR 12.5 at the end of June. We have only lost an additional EUR 0.3. It is so far. I would say it's the obvious and the low-hanging fruits we have implemented.
That is going after case by case on the overdues and making sure by alerting the customer that an invoice is due at the end of the month. Contacting the customer even before an invoice has become overdue. This needs to be strengthened. We are making, I would say, good progress also attributable to the change in the finance organization, where we have put the finance resources under the control of the chief accounting officer here in Heidelberg. A second pair of eyes has been introduced looking at the developments of the accounts receivables. The progress is there.
The progress so far is not convincing, but we are not there yet, but I'm quite happy about the trend. The next phase is going to start. We have this interesting animal on our balance sheet, the contract assets, and we've been looking deeper and deeper at more details into that. There, as always, with accounts receivables, we need to improve the working together with sales and project management, because we can only invoice what is due. As an image, I tend to call the contract assets green bananas. They are not mature. They are not ripe yet.
We need to make sure that they become more ripe earlier. How do we do that? More milestones in projects, earlier milestones in projects. That is, of course, an optimization game between finance and the people doing the project, because more milestones mean more discussions with the customer, whether the milestone has been met, so that cannot be brought up endlessly. Where we have a strong leverage, we may be asking for down payments.
Can you give us a rough indication of the split in contract assets, related to fixed price projects and to upfront deals?
The upfront deals is the lion's share, but concerning cash conversion, the upfront deals are of minor concern, because the only thing we have invested cash-wise is what I said when I explained this chart is sales. We have not worked on these projects. Concerning cash tied up, cash buried is the percentage of completion in time and money projects. Yeah. There we have worked, but not billed yet. On that, concerning the cash tied up there, that is the focus.
Okay. In the first half year report, you had this 0.6 million in personnel extraordinary costs and 0.8 million in other extraordinary costs, so summing up in 1.4 million. Did you have some further extraordinary costs in Q3?
We still what? Yeah, yeah. Much less. Your question was Q3.
We have special effects on the positive side. There's roughly EUR 4 million concerning Forex. That's hopeful.
Not FX related, just in terms of expenses.
Yeah. Expenses in the first six months we've booked the compensation for my predecessor. We have significant extraordinary recruiting expenses. Reference is made to our talk from yesterday night. Ordinary ongoing recruiting expenses for the rank and file, we would not qualify as extraordinary. But when it comes to top search firms for top jobs, we would qualify that as extraordinary. You are aware of the rates these professional firms are charging. There are some costs still related to M&A projects. We have booked for all kinds of extraordinary legal disputes a significant amount.
What is going to continue limited extraordinary in recruiting. I cannot assess how expensive the legal disputes can be and will be.
Do you have an extraordinary number for the first nine months?
Do we give number? Yeah. Okay. About EUR 2.5 Million.
Okay. Last question. What was always also asked by Mr. Ellmann because of the Q4 guidance. If I compare Q4 as you guided versus Q3, it's a rough EUR 8.4 million more revenues versus Q3, but EUR 8.5 million more EBIT. I'm asking myself, how should this work? What is changing this dramatically in Q4 versus the last quarters that you make more or less the same amount in the difference of revenue and EBIT to get to this EUR 10.5 million in earnings?
Yeah, it comes.
Also in terms of the revenue splits, and yeah.
Yeah. When you look to the revenue side, it will be Q3 over Q4 was your message, right? It is-
It is minimum something like, let's say EUR 3 million - EUR 4 million more service revenue, which we deliver with the same amount of people. That means there is no, let's say, at least not significant extra cost in this environment because we needed to do that with the people by just using the higher utilization. We have roughly EUR 5 million - EUR 7 million more software revenue, which exactly the same applies. Most of the software revenue, this is all SNP software. That means the software comes without any additional cost because the cost is at the envelope. If you just count these two things, we are even slightly above that.
We have a little bit of a buffer to look at, okay. Yeah, because, you know, some of the software needs, for example, will be black and white. That means what we calculate today is that the year will be closed by the 22nd of December because we believe that most companies will go for a hard close down over the new year. It is a shorter quarter. The pressure is on our team, on us since, let's say, the first of October to make this quarter brilliant. Your question was it comes by this marginal contribution, which means additional revenue without additional cost, this whole utilization on the service side.
In software, this is, let's say, the mechanic of the business that you have all your cost in your envelope. You have your sales people here, you have your marketing people here, you have your product is developed. More or less each dollar more revenue is $1 more profit.
Good luck for this.
Okay. Thank you.
The next question is Yannick Ziering. Your line is open now.
Good afternoon. I would have a question on the S/4HANA business. You mentioned in the report that order entry here was up 90% year-over-year. Could you provide some color, please? Were there any big orders that caused the jump, or do you think the growth acceleration is sustainable?
Yeah. Thank you for this good question. Yes, absolutely. As you have seen in the announcement, we were lucky to win some larger deals. Irregardless of that, we do see that especially in the S/4 space, customers are ordering very conservatively. I will make one very tangible example so you understand how customers work and operate differently to previous years. Nevertheless, we have increased our share in the S/4 market significantly. If you track SAP annual report, you will see that SAP is converting about 1,200-1,500 customers every year, rough cut. Our projection is that this year, for the first time, we will increase to a net 10% share of that market.
Every tenth conversion that is done in the market in 2020 will be done based on our platform. That's a massive increase in the number of transactions we do. Current projection is that we will start this year about 152 projects to convert S/4. Now I will make one very tangible example so you understand the difficulty with the order entry. One of the luxury automobile providers in Germany is starting a EUR 2.4 billion RFP for the total S/4 conversion. Project timeline is seven years. We won this deal in Q4. We won this deal in Q3 this year.
The order entry from this customer for this project, seven years, despite the fact that our share of this project is about double-digit million, the total order entry this quarter is EUR 600,000. The only order we get is for the remainder of this year and for the software and services. The software share for next year will be on a separate order. The service share for next year will be on a separate order, and so forth and so forth. Project is fully staffed. Accenture is fully onboarded. We're talking about a multi-year program. A senior management member of that firm was taken out of the operative business to take over the head of the program, et cetera, et cetera.
The de facto planning is for seven years in a multi-million/billion dollar program, but the order entry is very minimal. This is the situation we are faced with right now. We are very short-lived in the order entries, despite the fact that there is, let's say, a handshake safety with a customer that is a long-term customer of ours that goes way beyond the numbers and way beyond the timelines that we can have in the books right now. We're very happy about the development there. Would we be more happy so we don't have to explain it with words and show you the numbers? 100%. We cannot change the reality and the purchasing behavior.
That is one of the downsides of serving the biggest corporations on the planet, that they have a massive procurement power. You can trust me, they have been let down by their supply chain so much this year that they treat all other suppliers as if they were burglars and thieves. That is a massive headwind we see every day in our operation. I'm not blaming anyone for this, but it's important to understand that this is the reality. Not only we live in, you have heard similar comments both from Christian Klein as well as Luka Mucic, that the duration of contracts being closed is actively being pulled down by the customer.
They have used different verbiage for it, I give you that, but the effect of it is the same thing.
Evi, let me add one part. I think, now you would ask, okay, there's always only a price ticket behind. Yes and no. We had discussion with the supplier, and we said, "Okay, what do we need to do to get, let's say, a five year or seven year commitment?" I can tell you there was no source for a trade-off because it was so unattractive for us. We would give a lot of business away for SNP if we would give, let's say, just ask for this, for this, let's say, long-term commitment from their side. This was also one part which I did not mention before.
We had roughly EUR 1.5 million deal, which we signed now in the meantime. We have even booked it now in October. We did not. The customer asked us and said, "Hey, I will sign this deal in September if you give me an additional discount." We rejected this. He signed it now on the original price, but this is the way the behavior of the market. We need to do a trade-off that we don't drive this too much in quarter by quarter thinking, because this cost us at the end. I would guess at least 3%-5% margin from a price point of view. I believe we have a good lock-in.
If we deliver the project in a good way, there is very limited risk that we do not get it all. The winner takes it all, but we don't get, let's say, it all at the beginning. This is something we have really, I thought, also we can do different, and we can service much better with a platform deal, with an enterprise license, which is, time and economic situation are working slightly against us right now to get this really forced or executed in the market.
There are no further questions from the audience.
Yeah.
If there are no further questions, well, therefore, we will come to an end, I would say. As usual, Investor Relations will be more than happy to answer any questions afterwards. Yes, with this spoken words, I would like to close this call and say goodbye, stay healthy and, ciao.
Thanks a lot for your time. Thanks. Bye-bye.