Hello, everybody. Ladies and gentlemen, welcome to our Q3 earnings call. Sorry for the technical issue, for the delay of, I guess, seven minutes or eight minutes. We are now starting with a lot of speed. Thank you for joining us today as we share the latest development and performance highlights of our company. It's my pleasure to introduce the leadership team who will guide you through the session today. First, Jens Amail, our CEO, who will provide an overview of the strategic progress and key achievements in the third quarter. Furthermore, he will offer insights into our outlook for the coming months. Accompanied by Andreas, our CFO, Andreas Röderer, who will take a deep dive into our numbers. Following their remarks, we will open the floor for your questions. We appreciate your interest and look for a lively discussion. Now, let's begin with Jens.
Jens, the floor is yours.
Thank you very much, Marcel, and hello, everybody, also from my side. Sorry for the technical hiccups. Thank you for joining us on this call here. As always, thank you for your continued interest in SNP. Q3 was another good quarter for our customers, partners, employees, and for our shareholders. It was a good quarter not only because we could report the best order entry, the best revenue, and the best EBIT we ever had in any Q3 of our history. For me, it was particularly a good quarter because we clearly see that we are on a good path. Our focus on the success of our customers and partners pays off. Our team is stronger than ever. Our strategic and operational levers kick in, which we particularly see when we look at our Q3 EBIT. Thank you to our customers and partners.
Thank you to all my colleagues worldwide. Again, thank you to everyone on this call here for your continued trust and interest in SNP. Let's have a look at the numbers. First, there are no surprises versus the preliminary numbers we published on October 20. Order entry, revenue, and EBIT are actually slightly better than what we indicated last month. On the top-line side, we are particularly happy with the software growth. We show Q3 year-over-year 22% growth in software revenue. When we look at this number versus Q3 2022, we see a 30% year-over-year growth on average. I already mentioned the strong EBIT. We will look at more details when we have a chance to discuss the year-over-year EBIT bridge in this deck. We are also happy with the operating cash flow, which continues to be strong.
We only see a minor year-over-year decline because we had a significant one-off payment last year from a partner in 2024 in Q3. When we look at the headlines of the first nine months of the year, first, again, we are pleased with the top line. Second, the EBIT is clearly moving in the right direction with a margin of 14.3% year-to-date. Also here, when we look back to where we stood three years ago, we are very happy with the progress we have made. Third, we significantly improved our cash position, and Andreas will share more details on this later. Fourth, again, our strategic and operational measures kick in. Last but not least, fifth, we were able to raise our guidance for the full year 2025. We now forecast a revenue range from EUR 280 million-EUR 295 million.
Previously, this was 270-280. We forecast an EBIT between EUR 34 million-EUR 46 million. Previously, this was EUR 30 million-EUR 34 million. We maintain that the book-to-bill ratio is greater than one. When we look at the figures here of the first nine months year to date in the view you're already familiar with, we see that across all KPIs, we are actually ahead of the curve. Order entry growth is good in the software with 12%. Services order entry growth is even slightly stronger because of one strategic customer contract we did in Q1 and a series of change requests. With the improvements we see in our services margin, this is not a concern from our side. We are happy that we see a strong software order entry growth with 12% year-over-year. When we look at the
Last pile at the bottom right, when we look at our partner business, this is growing over proportionally. Again, a massive thank you to our partners globally for their continued trust. When we look at the Q3 figures, here is the summary in the same format. In the interest of time, no need to read out every single figure. Literally, in this view, all KPIs are moving in the right direction. As always, here is another view on our partner business. Good progress on the top line and good progress how we develop the collaboration with our strategic partners in terms of enablement, co-innovation, and our joint global footprint. Looking at our business by deal bands, we do not see anything earth-shattering here either. We like that we continue to see over proportional growth with deals bigger than EUR 1 million order entry. Here we see. A growth of 24% for the first nine months year-over-year.
Order entry by region. Q3 year-to-date, we see growth in all regions, which is, of course, very positive. However, in Q3, we saw a temporary setback in North America and EMEA. This is deal-related, and we do not see anything systemic. We had a fantastic third quarter in LATAM, in which we were doubling the business compared to Q3 2023. We see year-to-date a strong growth in LATAM with 33% growth. EBIT, here we see that. When you look at the minus EUR 1.2 million, here we see that the increase in personnel expenses is not as significant as in the first two quarters of the year. The main reasons are that in Q3 last year, Trigon was already in the baseline and also that we pushed our recruiting efforts predominantly in H1 this year.
We also see good operational progress in the management of our COGS and OpEx. Slightly positive impact here. This results then in an EBIT increase year-over-year in Q3 of 91%. When we look at the nine-month view, we see here a minus 5.1 in one-offs. We had some positive one-offs in 2024, some negative one-offs in 2025. Again, this leads to an overall negative impact of EUR 5.1 million. If we add everything up, this results in an EBIT of EUR 30.5 million Q3 year-to-date, which reflects an increase of 48%. Last but not least from my side, to close out this section here, here is again our guidance. No need to repeat it, what I said at the beginning. Andreas, to keep it short and to catch up some time.
I would wrap it up with that we are very pleased with Q3 and the first nine months after the record results in 2023 and 2024. Thank you again for joining the call. I'm looking forward to our discussion at the end of this meeting. With that, Andreas, over to you.
Thank you very much. Marcel, if you could go straight to the income statement, please. As Jens has already elaborated, I'm extremely happy with the development of our COGS and OpEx. We had been able to grow the business significantly without really increasing the COGS and OpEx portion. There had been some one-offs, but it clearly shows that all the initiatives that we are steering to improve the operational efficiencies, they really kick in.
The only real increase we had in cost is on the PEC side, and this is rather to be seen as an investment. We encounter new markets, and they have been very successful. As you have seen, we had very good progress in our strategic markets that Jens has already elaborated on. We are also building up more workforce in India, and there we are also making good progress as we can then later see when we look at the FTE. Beside that, there is nothing to add on this slide. Marcel, if you go to the next slide, please. As you can see here, there is growth in all segments. We are very happy with the development we see here, especially I want to point out EXA. They had the biggest increase here. We will also be able to have significant bids also in North America.
I think this is a very good development for us here. Marcel, if you go on to the next slide. Also on the margin side, we are happy with the development, as Jens has already elaborated. Also our services margin are going up again. There had been a bit of a dip in Q2 because there had been some one-offs in Q2, but from an operational point of view, everything works out as planned. Beside that, there is nothing to add on this slide here. Marcel, if you could go on to the next slide. As Jens has already elaborated, the backlog is developing as planned. We have again seen a strong growth in our strategic markets. Also having a look into JPEC, also there we have seen a very good development, for example, in markets like Australia as well.
France is growing very good, but also there is success in Mexico as well, as Jens has elaborated. LATAM was growing extremely well. We are very happy with the developments we see here. If you go on to the backlog bridge, please. Also there, there are no surprises. Again, there is project remeasurement of roughly EUR 10 million as indicated in the earnings calls Q1 and Q2. This is primarily the result of a contract transfer from a non-core business-related activity in Q1 this year. Beside that, there are no backlog remeasurements. Our backlog is stable and backlog order entry we bring into backlog, we bring into revenue as planned. Marcel, if you go on to the balance sheet structure. We had a very strong September. That is why receivables and contract assets had been increasing. That is why we also expect a pretty good Q4 cash flow.
Beside that, I'm very happy with the cash position. We have already started to restructure our external debts. There had been some repayments already done in Q3. There are further to come. That is why you also see a bigger movement on the balance sheet positions from non-current liabilities to current liabilities. Beside that, there are no other major changes to be pointed out here on the balance sheet side. If you go on to the cash flow statement, I just want to reiterate a bit on the investing cash flow. As already outlined in the last quarterly call, we have acquired 100% of EXA recently. I think this was, if you look at the development of EXA, a very good decision. So very happy with the operating cash flow, as Jens has elaborated.
It's slightly below last year, but we need to make sure that we compare apples with apples and seeing also the investments that we have pointed out in Q2 just to get a bit of benchmarking on some activities we are doing in finance and in IT as well. I'm very happy with the development of the cash flow. Just looking at where we're coming from in the years 2021 and 2022, the company has not been able to generate an operating cash flow. I think looking at that, I'm really happy with what we have achieved over the last years. Marcel, if you go on to the next slide. As indicated, we do careful investments in new colleagues, primarily as in the past as well on the services side and also on the sales side. Beside that, nothing too spectacular here.
On the admin side, I think we see that we remain stable. We are able to grow the business with a similar resource or FTE perspective. This just shows that we are getting really effective. Marcel, that's it.
Yeah. Thank you both for these rapid insights. We will now move to the Q&A session. I would like to hand it over to Judith again, who will moderate your questions. Judith.
Yes. Thank you very much.
Thank you for your presentation, gentlemen, and congratulations to your dynamic growth and progress. Ladies and gentlemen, we will now move on to the Q&A session. For a dynamic conversation, we kindly ask you to ask questions in person via audio line. To do so, click on the raise your hand button. If you have dialed in by phone, please use the key combination star nine followed by star six, and questions via chat box cannot be submitted today. We already have the first hand up, Wolfgang Specht. You should be able to speak now.
Yes, hello, good afternoon. Congrats to the results. Two questions from my end. First on the, let's say, midterm outlook. Do you see in your footprint any, let's say, world regions or countries that are, let's say, materially lagging in regards to migration to S/4HANA? Or are there any world regions where, let's say, most of the migration work is already done? The second one is on your, let's say, investment or capital structure. Now that leverage is somewhat back in shape and free cash flows are kicking in, can you also think of additional acquisitions that could round your portfolio?
Hello, Mr. Specht, Jens Amail here. Thank you for your questions. On your first question, we do not see any specifics, right? I think the level of S/4HANA RISE conversions corresponds with the maturity of the markets. Germany is ahead of, let's say, for example, Chile here. I would say it correlates overall rather well with the maturity of the markets. What we do see is less a regional perspective. We see a big backlog of S/4HANA RISE conversions in the SME space. We will increase our focus here a little bit on the SME space. Regionally, I would say it correlates well with the maturity of the SAP markets.
Can I go on with your second question, Mr. Specht, on the M&A side? Of course, we check the market, but there is nothing concrete at this point in time.
If something becomes concrete, I'm pretty confident that we will have good conditions to finance a potential M&A. As said, at this point in time, there is nothing concrete.
Thanks a lot.
Thank you very much, Mr. Specht. Are all your questions answered by that?
Yes, thanks a lot.
Okay, thank you. We will move on to Thomas Kaiser. The stage is yours. Please unmute yourself.
Yes. Hello.
Hello.
And Marcel.
I'm here for all. Congratulations to all of you for your big improvement in the EBIT margin. We saw the first glimpse already in Q2, and the steady plumbing work is showing off now very clearly. Great achievement. To the EBIT margin in the service area, you reached 10% in Q3. Do you see this in the future as a stable number, or what can we expect there?
Yeah, clearly yes, and it should also get better. We need to keep in mind that in the services segment margin, there is this cost allocation that is also done based on the revenue size at this point in time. As you have seen, it did go up compared to Q2, and I think from an operational point of view, we are getting more and more efficient.
Thanks. Great work, Andreas. After three years of turning every stone in the company, I think it's now time to get a better picture of your next journey, the next three years. Would you please give us some more color? Where you expect your strongest developments in this time? Where do you stand and go with your co-developments in the software area? What impact can we expect on the revenue side from this?
Hi, Thomas, this is Jens here. First, thanks for the positive feedback. What do you mean with co-developments?
In the beginning of the year, you said you were starting co-developments with the partners.
Yeah. We collaborate, as indicated, with some of our strategic partners, particularly in the public cloud space. We believe for the next years, for the next three years for sure, and that's the time horizon you have mentioned. The private cloud space will be the bigger revenue driver for us still. Nothing to add to what I said in terms of the next steps in the strategy transformation world. We expanded our reach, so to say, our scope with Kyano, that we are now also including non-ACP to ACP migrations in our portfolio with Kyano Crossway. Also, as indicated as a transformation world, 80% of the enterprise data are unstructured. Strategically, we will also look at migrating unstructured data into SAP and here specifically into the business data cloud.
Okay. Do you get any tailwind from the AI area? From the trend?
Yeah, I mean. The key requirement, when we now speak for SAP customers, the key requirement to realize the benefits of AI is, of course, to be on RISE. Here we help. There is a strong demand in the market to move to RISE as quickly as possible to improve time to value and innovation consumption. Of course, this is an area where we help a lot. We continue to see a very positive momentum and a strong tailwind in the market. Then again, talking about AI, when we look at a next generation of data migration with unstructured data, of course, this is then predominantly AI-driven.
Okay. Will you develop or do some business around delivering varied numbers and what should I say?
Wenn es einfacher ist, auf Deutsch.
Ja. Kannst du mir vielleicht sagen, wie ihr für das AI reinzuliefern? Da geht es ja auch darum, die richtige Daten in die AI reinzubringen. Seht ihr Geschäft in diesem Bereich auch?
Yeah. The question is, garbage in, garbage out. The key success factor for AI is, of course, that you have a very clean and complete data foundation. Here, the data foundation of choice in the SAP environment is that customers are fully migrated to RISE and to the business data cloud. Here we help. It is indirect, right? We also have, of course, some legacy products that also feed other data lakes and other data products. The key business driver for us is the SAP strategy to offer AI benefits in a RISE and in a BDC environment.
Yeah, thanks. Last question. You reached the certification from SAP for your Kyano Outboard solution. At last, we didn't hear much about that solution. What is the current situation and your hopes to get this solution broader to your customers and partners base, sold and used?
This is actually operationally for us a very strong up and cross-sell potential. When you also think back, Thomas, to transformation world, we have basically three categories in our portfolio. We have Kyano Move for our entire data migration portfolio with Crystal Bridge and Crossway. We have a very thin foundational layer. Then we have Kyano Manage. This is predominantly Fridge and Outboard. Outboard is our archiving solution. Here we indeed see a potential to much more strongly cross-sell this area of our portfolio together with a remove deal. Because when you do selective data migration, you always have to ask yourself, yeah, what do I do with the remaining data? Sometimes there are regulatory requirements. You do not want to move everything to RISE because it is also getting rather expensive then operationally. We do see here a nice cross and upsell potential.
Yeah. Thanks a lot. Good luck for Q4.
Thanks, Thomas, for the positive recognition as well.
Yeah. Bye.
Bye-bye.
Thank you very much, Mr. Kaiser. We will move on to our for now last hand up, Lukas Spang. Ladies and gentlemen, this is your room for your questions. Let me be reminded that you can place your questions here. With this, Lukas, the stage is yours.
Yes. Hi, good afternoon, gentlemen. Also, congrats from my side to this number. As you know, we as an investor have to find the hair in the soup. I saw, and you showed it in your presentation, that the revenue growth in the service segment or the professional services segment, and also order entry in this segment in Q3, came down very strongly, and order entry was flat versus last year in Q3. How do you see this development? What was behind this development, and how do you see the professional services going forward into Q4 and Q1?
For us, the most important KPI is the growth of software, right? Here we are happy with the 12% order entry growth, and we are happy with the 18% year-over-year revenue growth on the software side. That is a little bit stronger than what we initially gave as an outlook to the market. Now, we see on the order entry side an equally strong growth in the services business. That is based on a one-off large strategic agreement we have with a co-innovation customer where we booked a multi-year order entry in Q1 this year. This was a significant deal, eight digits. This has a strong impact on our Q3 year-to-date order entry on the services side. Second, we see a lot of change requests from clients. Both is a positive. We improved operationally our services margin by three percentage points.
This is contributing to our EBIT. You're right, the more important KPI for us is the growth on the software side. Here we are ahead of the curve and that's all we're interested in.
On Exa. Exa is developing really fantastic in terms of growth and also in terms of margin. Order entry was also very strong again. Do you see this trend to be continued? Also, in terms of the margin, do you see this as a sustainable level going forward?
If we look back, that's Andreas speaking. If we look back on the Exa, there is always a very, they usually have bigger tickets with chemical and pharmaceutical customers. As we have seen over the last quarters, it's a bit challenging to predict when exactly such a sales cycle comes to an end. What we can see is an increasing demand in the solutions from Exa. I cannot predict it on a, it will now go on a linearity point of view. The solutions, there is a demand for the solutions, and we're getting better traction in the market. It's difficult to predict from a linearity perspective.
Okay. On the margin side, do you think you can hold this margin or do you think there could be some pricing pressure?
At this point in time, there are no indications that things should look significantly different. Of course, when you get such bigger projects, we need to also deliver such bigger projects. This is something we see on the way. How fast we can ramp up resources here.
Yeah. Okay. Then looking into next year, I know you will not give today an outlook for 2026, but just from a qualitative perspective, book-to-bill is still well above one. That is signaling further growth into next year. Where do you see areas to further invest going into next year?
As I indicated, right, we invest. Lukas, in our strategic focus areas. No need to repeat it. We continue to invest in globalization. There is still a handful of very mature SAP markets where we do not have a presence, where we do not have legal entities. These are the two key areas of investment: number one, innovation in the areas I mentioned here briefly and at a transformation world, and number two, in our globalization.
Okay. Personal expenses, which were rather low in Q3, should go up again more strongly going forward?
No, no. I mean. Not more strongly or less strong. We do not, right? I mean, we have been investing in new markets this year as well. Where we will not see a lot of investments are in supporting functions, as Andreas indicated. We need to invest in, as we did this year, we need to invest in service colleagues. We need to invest in sales colleagues. In development, of course, not so much in supporting functions. Here we hope then that we can realize, of course, some economies of scale.
Okay. Thank you.
Thank you, Lukas. Thank you.
Thank you for your questions, Lukas. In the meantime, we have received no further questions. We therefore come to the end of today's earnings call. Ladies and gentlemen, thank you for your flexibility to join this call via Zoom with a few minutes of delay. We apologize for the technical difficulties at airtime, and we are already working behind the scenes to provide you with the best user experiences. Thank you, everyone, for joining and your shown interest in SNP Schneider-Neureither & Partner SE. Should further questions arise at a later time, please feel free to contact Mr. Wiskow from Investor Relations. You can also find the presentation and the recording afterwards on airtime. A big thank you also to you, Dr. Amail and Mr. Röderer, for the dive into the numbers and the time you took to answer the questions.
Thank you for your focus and your patience. I wish you all the best and a lovely remaining autumn day. With this, I hand over to you, Marcel, for some final remarks.
Yeah. Thank you, Judith. I guess there's nothing much to add on from my side as well. Sorry for the delay at the beginning of this meeting. We had a few technical hiccups. As mentioned, if you have any questions, please contact me. Have a great day. Thank you once again for the participation on this call. Bye-bye.