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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, ladies and gentlemen, and welcome to the SNP Analyst and Investor Conference Call regarding first quarter results 2023. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. Let me now hand the floor over to Marcel Wiskow.
Thank you, operator. Good afternoon, ladies and gentlemen. Thank you very much for accepting our invitation again. This morning, we published our first quarter results for the current year. The report and [Audio Gap] found is always on our homepage at the section Investor Relations. With us in this call are the same gentlemen as in the last call on the annual figures, which wasn't so long ago. These are Mr. Jens Amail, CEO; Mr. Thorsten Grenz, CFO; and Mr. Gregor Stockler, COO of SNP.
Let's take a brief look to our agenda for today. The first part will be presented by Jens, giving us an overview of the key results in the first quarter. The second part, covering the financials and the outlook presented by Thorsten. And the third part is dedicated to your questions and our answers. And with this introducing words, I will hand over to Jens.
Thank you very much, Marcel, and hello also from my side. Thank you for joining this call. We are humbled, thankful, but also very inspired by the trust our customers and partners have put in us. And overall, we are pleased with our results in the first quarter. We see solid growth in all major KPIs both topline and bottom line. The order entry is 32% higher than in the previous year, and we see an increase of 15% in total revenue.
On the bottom line, we see an over-proportional growth on the EBIT from -- by 2.5 percentage points to 5.2%. We see second, a strong growth in our software business by 27%. We spent a lot of time with our customers in detailed discussions of the value-creation potential of our software, which led to 2 strategic deals. And as a result, our software business, as I said, was growing year-over-year 27%.
Looking at the regions, our globalization strategy is gaining momentum. When we look at U.S., LatAm and also UKI, they basically doubled their business. So the Americas, in the meantime, account for 37% of the total topline, which is 12 percentage points higher than last year. We've also seen increase of S/4 projects, both in terms of number of transactions and volume. So more than half of our topline is now in the S/4 space, and that's a growth of 134% year-over-year.
Looking at the key figures. First, order entry. We report EUR 58.3 million, which is, as I said, 32% year-over-year. The group revenue is EUR 47.1 million, which is 15% higher than last year. And as I already mentioned, the EBIT is at EUR 2.5 million, which is more than double what we've seen last year. When we look at the software revenue, the book-to-bill ratio is slightly worse on the services side, which is a credit to the enterprise license agreements we did, which led -- put us in a position that we can recognize more revenue immediately on the software side.
In addition, I want to highlight that we also had a sellout effort of around EUR 1 million with one of our strategic partners. So the sales effort led to almost EUR 17 million in software. Looking at the partner business, and Marcel, maybe we can go to the next slide immediately. We had a very good Q1 last year in the partner side. Still, we were growing the business by 17% from EUR 17.2 million order entry to EUR 20.1 million order entry. We had a very strong focus on developing our factories with our strategic partners. For example, with Accenture, where we're extending the factory approach also to our JAPAC region with a strong executive focus of our COO, Gregor Stockler.
We also have a very strong focus and I'm personally heavy engaged on our partnership with IBM, where we also invest a lot of efforts together with our partner to find a scalable model for both sides to scale our business in the S/4 space, particularly going forward. We also have in place a new strategic initiative with our partner, PwC in the -- particularly with a focus on the M&A segment. And what for me is still being relatively new in the company is a very strong proof point of our strategy and the quality of our software that 16 of the top 20 SAP IT consulting companies put their trust and put their strategic focus on SNP as a partner.
When we look at the order entry by deal brands, and we -- I may be cluster here a few of the categories when we look at the volume yields below EUR 500,000, we are pretty much from an order entry perspective on the same level as last year. When we look at the deals between EUR 500,000 and EUR 3 million, you already see significant growth. But then the big kicker comes when we include the deals above EUR 3 million. This is what's driving really the significant growth on the order entry side.
We -- I want to highlight 2 strategic projects, both are long-term S/4 migration partnerships with 2 customers, one in Germany, where I don't want to talk too much about it because we expect a press release coming out here very soon. And the second one is in the U.S. where we can't publish too much about because it's one of the largest defense companies in the world. I was heavily involved in this engagement also personally because it was a very exciting win big for us from a competitor, where the company initially made a decision to go with a difficult software approach. But after they were struggling, they went into an extensive POC with us, and we could earn the trust of this customer. And this also led to a long-term multimillion dollar strategic engagement with SNP.
When we look at the order entry by region, we see growth in all regions. As I already mentioned, when we look at the U.S., the UKI and LatAm, we basically doubled our business with a particularly strong performance in the U.S. with EUR 10.7 million. We also had a very good year in our home market in Central Europe, where we're also growing the business from EUR 26.7 million to EUR 29.4 million. But in spite of the very solid growth in Central Europe, the dependency on our home market is a little bit less than 1 year ago. So we see 50% of the total business in this region versus 60% last year.
As I already mentioned, a strong momentum with S/4HANA. We record here order entry for EUR 29.8 million versus last Q1, EUR 12.8 million and this amounts for 51% of the total order entry volume. When we look at the revenue by segment, we see, as already indicated, growth in all areas, even a small growth in EXA. So we will -- we are optimistic that we will see here a little bit more going forward. When we look at the book-to-bill ratio, we are very happy about the revenue, but we are also very excited that the book-to-bill ratio is even stronger with a ratio of 1.24. So very strong order entry performance and Thorsten will talk about the impact on the backlog in a second.
So looking -- let's comment from my side. Looking at the EBIT. Here, we are particularly happy, if I may say that, not only because we had a very strong revenue performance, but when we look at the cost structure, so we were able to reduce our OpEx in a few areas by EUR 0.9 million. Of course, we have more costs. We are a growth company on the personnel expenses side and on the COGS side, on the personnel expenses side because we have more employees because of course, we made salary adjustments and we had a onetime inflation adjustment payment. So we are not concerned by the cost increase of the EUR 2.9 million here.
And I want to particularly point your attention to the headwinds we were facing on the currency side. So we had a negative EUR 2.2 million swing on the currency side. So apples-to-apples, we could compare the EUR 1.1 million with EUR 4.7 million, which would be a 300% overall year-over-year growth. So in total, we are not unhappy with the start into the year. So we still have a lot of work ahead of us. But again, we're extremely humbled by the huge trust of our customers and partners. Thank you. Thanks to the entire SNP team. And with that, I will hand it over to Thorsten.
Yes. Thank you, Jens. Welcome also from my side to our audience. Jens has in his presentation, address the main drivers of our results. So I can focus on adding some details and giving some additional information. First one on headcount. The company is growing, and this is reflected in our headcount evolution as well. We managed to get 20-plus new colleagues on board. The headcount split by function remains more or less the same as it was before. The income statement and the interest talk on the development of the revenues. So some additional information, personnel expenses are up. The company is growing. So we have more people on board and also we had to accept salary increases due to the inflationary tendency in the market.
The operating expenses that had risen, Jens has already pointed out to the adverse effects from ForEx whereas the marketing cost in the first quarter lagged behind prior year, this is the impact from our reduced cutback and sponsorships, we executed in the course of the last year. As a result, we can post improved earnings per share by EUR 0.27. Next chart, please. The glance on our segments. First, the segment, Software, as Jens has already explained, a strong growth in revenue. And as the mechanics of this segment works that translates into a very nice improvement of our profitability, EBIT was up by 62%.
So this -- the Service segment remains one of our weaker spots. We are glad that revenues have risen in this segment as well by 10%. However, the results, EBIT is only marginal. And as I said, we are working on that to get this segment to an acceptable profitability as well, the measures initiated are underway, and we expect an improvement during the course of this year. EXA, revenues slightly up compared to prior year. EBIT, a small number increased by more than 1/3. Also this positive tendency attributable to Software sales that directly impact our habit.
Order entry, strong performance. And here, as an additional information, the breakdown by segments. We see that all segments have contributed to the growth in order entry. Order backlog compared to the first quarter of last year is more or less stable or risen slightly by 2%. We see and a very happy over proportional growth in North America and Latin America. And we see that about 50% of the entry volume comes from S/4 projects. As usual, the reconciliation year-on-year of our order backlog, we started with EUR 131 million, EUR 132 million.
Order entry, EUR 58 million, EUR 47 million were converted into revenue, project remeasurements. We label this the fact when the project absorbs less cost and revenues -- corresponding revenues compared to how it has been booked its order entry and hear an adverse ForEx effect of a little more than EUR 1 million. So we stand at EUR 140 million at the end of March.
The balance sheet reflects our growth, we see that receivables and contract assets have risen. This is attributable to the strong sales performance in the first quarter, but it's also a technical effect, a rebound from the factoring solution we used over year-end, and that has now negatively impacted our receivables and contract assets. I will come back to this position when talking about our cash flow. As I said, we need -- and we are working on the service margin, and we still can improve on our cash generation.
On the liability side of our balance sheet, it's a change that is mainly due to a reclassification of provisioning notes in March -- the expected due in March 24. So now less than a year. Cash flow statement. We start with positive net income, which is a positive message in itself. And we see that then the change in working capital, more than EUR 5 million increase in working capital is absorbing the positive trend in income generation plus depreciation. So we have an operating cash flow of minus EUR 1 million. It is minus so cannot be satisfactory, but it has improved significantly compared to last year.
Investment cash flow is marginal. There is little repayment of lease liabilities. So we end up with a free cash flow, again significantly improved compared to prior year, but still negative. The working capital ratio increased by 4 percentage points due to the increase in contract asset values and trade receivables. Let's come to the last chart, we've prepared in the finance section. This is our outlook. And in a nutshell, we confirm our outlook. As you know, there's -- we have given the qualitative outlook this year and to be honest, and we will keep that promise. We come up with more detail and quantify the outlook with the half year numbers.
So for the time being, the outlook is confirmed, but let me stress 2 aspects. We have added to give more meat or more flavor to what is behind it. Looking at order entry and revenue, we concern what is behind it and we add and we point out be cautious. The growth will not match level of the first quarter that has been characterized by 2 very large deals. So seen from today, this effect must not be multiplied by 4. We confirm the development of profitability, both with EBIT and EBITDA over proportional increase.
And finally, the distribution of our economic performance over the quarters will not be evenly distributed as in prior years over the quarters. However, due to the exceptional strong first quarter, we currently do not necessarily expect that the second half of the year will be stronger. And with these words, I give back to Marcel Wiskow.
Thank you. Thorsten, thank you again. I guess, operator, we are open for the Q&A session.
[Operator Instructions]
And first up is Wolfgang Specht from Berenberg.
3 or 4 questions from my side. First, on the projects, the 2 major projects you mentioned in the presentation and the report. What can we assume for sure, the order intake is in the figures. But how is the contribution to sales? Is there more to come in the remainder of the year from these 2 contracts or are large parts already in the P&L, the cash flow statement already. Then on order entry and backlog, there seems to be some slippage. If I calculated it right, some EUR 2.8 million, you stated FX as one source or, let's say, lower project volumes than initially assumed. But are there any cancellations at all?
Or are you not facing cancellations? Third question is the split of order intake by partners and on your own side would be interesting. And then given your outlook for the remainder of the year, are you confident that you will achieve positive free cash flow?
So maybe I'll take the first question. This is Jens speaking, costing you, the second and the fourth, and I'm happy to comment on the third one. The 2 strategic agreements we have in place are long-term agreements already. However, we expect that these strategic partnerships with these 2 large clients will even go beyond the current agreements. So in the future, we expect more business, more value creation from our side with these customers as well.
However, both agreements are already fully reflected on the order entry side, the current agreement, part of the software, which is not maintenance, is already reflected on the revenue side. Everything else, the revenue is not reflected yet. Then your third question on the partner side. So maybe even Marcel, you go back to the slide we have here. So we have, on the order entry side, EUR 20.1 million order entry driven by partners.
That's approximately 1/3 of the business, 20% more than last year. Of course, if we take -- if we exclude the 2 massive strategic deals we're having here above EUR 3 million, the percentage looks a little bit different. And the share looks a little bit different. On the revenue side, we are flat. We don't read too much into that. That's by no means a red flag since we are again excited by what we see in concrete projects together with our strategic partners and how we are currently ramping up a scalable infrastructure with the biggest coinciding companies in the world of [indiscernible].
Thorsten Grenz will be adding 2 answers. The first was on cancellations. Cancellations are insignificant. And on the level of detail we have given, they are not measurable. On cash flow, last try. But of course, we will not disclose a number. Having said that, we will come up with numbers for the full year in summer. I cannot lose the heads and then we'll give you a number right now. I really be serious, I'm working on the improvement of cash on capital cash flow is one of the top priorities. We want a priority driven by finance department. It means we have -- the sense of urgency is understood in the organization. There is already, I think, in the achievement and an organization that is very much focused on all the entry and sales. We are happy that we share this understanding now in the company. And we are improving our means, and we are improving also our resources dedicated [indiscernible]. So our promise is we are working hard with which number, which I understand is at the end of the day, the most important one, back -- digit.
Next up is Lukas Spang from Tigris Capital.
My first question is on the largest IT consulting companies some weeks ago as we talked. You mentioned on your presentation that you have 14 out of the world's 20 largest IT consulting companies and now you are talking about 16, which 2 came up on top of the list?
Lukas, this is Gregor speaking. It's a coincidence. Actually the [indiscernible] we have changed. That's one -- that accounts for one, and the other one is Ernst & Young, which we have not had as a partner so far, where we are in early engagements, it's not a fixed and formal partnership yet, but we are in early engagements. So it's not plus 2, it's plus 1 and another one because of the measurement changed.
Okay. Then on your recurring revenues was also a topic in the prior calls. If you look at software support and cloud SaaS revenues, they were more or less flat. So the question is -- the first part of the question is, why is this currently the case? And second part of the question, when and -- so when will this change to revenue increases? And what can change this in the future?
So Gregor was already answering a similar question in the last call. Of course, as the Software business will increase, this will also get higher. [indiscernible] get over proportionately higher, as you would see with additional software or cloud companies because our software projects and transformation initiatives. However, what we do see are very long-term engagements. And here, you will see a long-term license improvements. But you will not see an over-proportional growth in terms of cloud revenue or maintenance revenue. This will go increase with our software business.
But is this -- I think you mentioned also this in the last call, is this part of your license business, which is not clearly recurring, but you see this as a kind of recurring because if you look at the software revenue, it went up nearly 30%, but these recurring revenues were flat. So if you say -- if revenue in the software segment is going up, these revenue parts will go up so it's not the case.
It's not the case this quarter, but we still talk loan numbers overall. What I do can tell you is that we are talking with customers about partnerships of 8 years, 10 years for a large, long-running transformation initiatives. And here, we will see more recurring license revenue, not maintenance, but cloud revenue, but more long-term license revenue.
Okay. Then also on Software business, if you look on the order intake and also topic of the last call, you said in the long-term perspective, we should see more than 50% software revenue. But if you look at order intake in the software business went up under proportionately. So the Service business went up more strongly. So why -- [indiscernible] let's do it in a software problem to bring it more strongly up the software order intake. So why are you not able to improve software order intake much more than service order intake?
So one impact is, of course, that we still have to deal with a sellout. And we had some successful sellout efforts. This quarter already, there's more to come. In the more strategic engagements we have, the software-to-services ratios is much better. I also shared with you in the last call that what we are doing operationally is a change and transformation effort for the next 18 to 24 to 36 months, and we need to touch the Software business on a number of angles.
Pricing is one of them. So in the first quarter, you see solid growth on the software side from my perspective, I'm happy with the value of software we could position in the strategic conversations we had with our customers. So that's very encouraging from my perspective. Overall, we still have to do a lot of homework operationally.
Okay. And last question on the Service business. You mentioned also there that you are not -- that the margin is not satisfying. And if we look at comparable numbers, so you already made EUR 3 million more in revenues. But the margin went down. So what's the problem in the Service business that you are not able to transform more revenue into more earnings?
In the Service business, we are suffering from underutilization of the service organization, globally speaking. And as we are short of certain skills, namely in project management, with a significant spend for external consultants. The utilization thing is a complex project assignment process. And you have seen our split of headcount, it's more than half of the company and consultants to make sure that the available skill and the demand on the project to really match. We need to improve the system and the process, mainly the system that is behind it significantly. And we are working hard on that and making good progress.
Next up is Yannik Siering from Stifel.
I would have 2 follow-up questions. The first one would be on customer demand for large data migration projects. Could you maybe talk about that? Do you see a change also in the organization in terms of being a partner-ready, let's say? And then the second question is on other operating income. We saw an impact from the reversal of provisions. Is there any other meaningful effect that drove the rather high result of EUR 2.4 million?
Maybe, Yannik, thanks for the question. This is Jens. I take the first one with [indiscernible]. Yes, we do see a strong demand in the market for data migration projects driven by our standard market drivers like carve-outs, merchant acquisitions, moves to the cloud, but we see particularly now the S/4 wave kicking in. So we do see a strong demand. We are working to the second questions you had here. We are working on the partner readiness on our organization.
I think we made good progress on getting partners energized and focused on us and making strategic decisions to go with SNP. Now we're working very hard, and I mentioned 2 examples with Accenture and IBM to develop jointly cold staff from both organizations' scalable infrastructure. So we are on it as we speak. And on other income and expenses, the main decisive driver is ForEx.
At the moment, we do not have any further questions.
[Operator Instructions]
So we would say we have no further questions. Thanks, participants for the participation. As you know, Investor Relations, afterwards the questions, is more than happy to answer these. And with these closing words, we want to come to an end and say goodbye and stay healthy. Bye-bye.