SNP Schneider-Neureither & Partner Stock

Welcome to the earnings call of SNP Schneider-Neureither & Partner SE following the figures of the financial year of 2025. I would like to welcome the company's CEO, Dr. Jens Amail; and the CFO, Andreas Röderer, who will guide you through the figures in a moment, followed by a Q&A session via audio line and chat.

And with that, I hand over to you, Mr. Wiskow.

Thank you, Mara. Good morning, ladies and gentlemen, and a warm welcome to our earnings call for the financial results 2025. We are pleased to have you with us today as we walk you through SNP's performance in the last year and highlight the key developments shaping our business.

Before we move into the agenda, please allow me to share a brief note. Today's call marks our final analyst and investor call on SNP's financial results. Following the termination of the profit and loss transfer agreement and the introduction of the guaranteed dividend, capital market dynamics around SNP have changed, leading to a noticeable decline in investor participation.

Against this backdrop, we will streamline our Investor Relations activities. At the same time, SNP remains, of course, committed to transparent and reliable communication. We will continue to inform the market regularly through our financial reporting and remain available for direct dialogue.

With that said, let me introduce today's speakers: Mr. Jens Amail, our CEO, who will outline our strategic progress and key achievements of the year and share his perspective on the months ahead; and Andreas Röderer, our CFO, who will then guide you through the financial results in more detail.

Following the presentations, we will open the call for your questions.

And with that said, I will hand over to Jens. Jens, the floor is yours.

Thanks, Marcel, and hello, everybody, also from my side. Thank you for joining us on this, at least for now, last earnings call. As Marcel said, we have seen less and less participation here. Hence, it is particularly important for me to thank those of you who are actually here today and who accompanied us and supported us through the last years. And as Marcel also said, we are here for you on request as you need us also going forward.

Most of you have seen our announcement with the preliminary figures on January 21. 2025 has been another good year, another good year for our customers, for our partners, for our shareholders and for all of us at SNP. This is not a matter of course, and it would have not been possible without the relentless focus of our team on the success of our customers and partners. And also here publicly, again, a massive thank you to all my colleagues, to all our clients and to our ecosystem for their continued trust.

So let's have a look at the numbers. So first, there are no surprises versus the preliminary numbers we published on January 21. Order entry, revenue and EBIT are actually slightly better than what we indicated at the beginning of the year. Revenue went up 16%. Order entry is up 11%. The book-to-bill ratio is significantly bigger than 1, i.e., we continue to build up our backlog.

EBIT is up by 66%. The EBIT margin is now at 16%, and the EBITA margin is actually around 20%, i.e., we are almost already now a Rule of 40 company. So overall, we are very pleased with the progress we have made over the last 3 years.

The one aspect which, visually at least, doesn't look good on this chart is the cash flow. But we are actually okay with it. We had a significant one-off payment in 2024, and also our receivables went up significantly. Andreas will share further details later on this call.

So when we look at the 2025 headlines, we are happy with the top line. We are very happy with the profitability. And we are pleased that our company is in a very stable financial position. We are also very pleased that there is no strategy to execution gap. All strategic growth levers continue to contribute to our success. And finally, we remain optimistic about our future.

So here, you see the summary of our key financial figures in the format you are familiar with. You see a strong overproportional growth in our partner and in our software business, leading to a software revenue of around EUR 111 million. And this is pretty much exactly twice as much as we had 3 years ago.

And here's the familiar slide with the details of our partner business development. And for the very first time ever, our ecosystem drives more than half of our business. No surprises with regard to deal sizes. We see a strong growth particularly in the bigger deal bands, which, of course, also drives sales productivity.

We could report growth in all regions with a particularly strong performance in EMEA with 36% year-over-year growth. We remain very solid in our home market, Central Europe, and we continue to see a strong S/4 business. And the 9% growth we see here are bigger than the 8% we always aim to achieve as a baseline for our top line. But the growth in S/4 is underproportional, which shows that we are, as a company, not a one-trick pony, we have significant business development in other transformation areas as well, for example, in M&A.

Looking at the EBIT bridge. Our profitability could have been even better without the EUR 5.5 million currency hit. One-offs are a wash basically versus 2024, and we are very happy how we managed external costs. And our OpEx are developing in line with the growth of the company, so no surprises here either.

Last but not least, the outlook. In line with the overall direction we are taking as a company, we decided to simplify our guidance, while at the same time, staying consistent with our previous midterm outlook. So for 2026, we see a book-to-bill ratio bigger than 1, which means we continue to build up our backlog also this year. We see a revenue growth in the mid- to high single-digit percentage range, and we see an EBIT increase in the low double-digit percentage range.

So that's it from my side for now. Thanks again for joining the call. I'm looking forward to our discussion at the end of this meeting.

And with that, I hand it over to our CFO, Andreas Röderer.

Thank you very much, Jens. I think Jens already elaborated on a few aspects. I just want to pick some things up.

If we look at the income statement on a high level, the story is that revenue grows faster than cost, and with that we had a pretty decent EBIT development, as Jens has already outlined. Jens touched on that, the FX effects. They had been negative for us, primarily coming out of dollar developments over the last years.

Another thing I want to highlight is the operating gains did go down, the other operating gains. I think you might remember that we, last year, had this settlement approach with the community of heirs. So this is the result why these gains did go down. But everything developed as we had expected it, and so we can say that we are very pleased with the margin development, as Jens has already elaborated.

If you go to the next slide, please, Marcel. We see a growth in all segments. As Jens has elaborated already, we are especially happy about the software segment increase, which is well above our average growth rates on the revenue side. Also EXA had, after a very strong year 2024, another very good development on the revenue side. So this is also a very good development, also making progress in North American market.

If we look at the segment margins here, I think on a 12-month basis, we see a margin improvement in all segments. If you look at the services segment margin, Q4 stands a bit out. But please keep in mind, this is rather a cost allocation topic as we allocate the overhead costs based on a revenue metric. And as we have seen, software was growing overproportionally. So actually, the software segment can also absorb more costs due to a higher revenue than they had in the past.

EXA, also here, Q4 stands a bit out. It's lower than the last year. But please keep in mind, this is due to big ticket deal linearity. And overall, the 12-month trends also with EXA goes in the very right direction. So we are also happy with this development.

If we go to the backlog. There is not much more to mention than Jens has already outlined. I think we are building up our backlog. But as we will see, Marcel, if you immediately go to the next slide, we are building up the backlog, and we bring the backlog continuously into revenue. And I'm pretty proud to say that we are able to do that without a lot of noise. Now this means we help our customers to get their projects done on a very successful way, and we are very happy and very proud on that.

If you look at the project measurements, you see roughly EUR 14 million. I think I have elaborated in the other quarterly calls already that at the very beginning of this year, we did a contract transfer to a partner, which was in the best interest of the partner and the end customer. So nearly 50% of those remeasurement is to a contract transfer of noncore business. So the key message here is we have hardly any losses out of our backlog. Our backlog book is very stable.

If you go to the balance sheet structure. The most obvious development here is the reduction in cash. I think keep in mind that we have actually paid back all our external financing last year. Jens has already elaborated on the topic. We will also see it later when we look at the operating cash flow that our AR, accounts receivables, did go up. I think this is also due to the fact that our linearity, usually Q4 is a very strong, yes, so revenues did go up in Q4. And the increase in accounts receivable, this will come into the cash then actually in this year.

There is no concern with this development. We see also on the liability side, we took a shareholder loan here. This is a change here on the liability side. But overall, the most obvious thing is that equity did go up and our equity ratio has improved as well.

If we go to the next slide. Just to reiterate what Jens already touched at the very beginning of the presentation, and I also did indicate that already at the beginning of this year that last year we had a significant one-off payment from an agreement we reached with a partner. And the receivable topic, I have already touched it. So overall, our operating cash flow has developed as we planned, and it clearly shows that the company can produce a decent operating cash flow.

The investing cash flow, just to reiterate once again, we are now the owner of 100% of our EXA subsidiary. And this is where we have purchased the last outstanding 15%, but also this has been explained in previous earnings calls already.

With that, Marcel, we can go to the last slide. The headcount, no surprises here. We are still investing in our service delivery capabilities to really have 100% go-live success rate. We are very proud on that, as already mentioned.

One thing I want to highlight here. Also thanks a lot to our supporting functions, I think we have managed to grow the company when I started from roughly EUR 170 million to nearly EUR 300 million without really making significant additions on the admin side. And I think this is a great achievement and it shows that we really strive for operational process here.

With that, that's it. But before I hand over to Marcel, as Jens said, let me take a second to really say thank you to everyone in the call for your continued interest in the company.

And with that, Marcel, I hand over to you.

Thank you, Andreas. Thank you, Jens. Yes. Mara, if you could be so kind and open the line for potential questions. Thank you.

[Operator Instructions] Mr. Spang, you may unmute yourself now to ask your questions.

I already wrote it in the chat, but if you want to have it on the call, I repeat in this way as well. Let's start with the first question. It's regarding your expectation in the service business for 2026. You expected low single-digit growth. So why is the expectation for the segment so low? Do you take out revenues maybe to focus more on software? Or what is behind this expectation? Then let's do it one by one.

So we want to, of course, improve our software-to-services ratio. And a key element here next to, of course, technological advancements is that we ramp up our partner business. So every serviceman day or person day delivered by a partner is something very positive for us. We invest a lot in our partner strategy.

So it's not the aim to grow services business just for the sake of a services business, but just to enable our software platform strategy. And we make a good progress in terms of the usability of our technology, and the strategic target continues to be to scale our company through partners, which means that partners also deliver data migration services.

Okay. And then on topic of one-offs you showed in the bridge for 2025. After 9 months, we saw a negative effect of EUR 5.1 million in this slide. Now it's just minus EUR 0.1 million. So what happened in Q4?

Yes. Let me pick that up this question because it's a good one, and this is related to when certain effects have happened last year and this year. So the settlement with the community of heirs that I have mentioned has already happened last year in half year 1.

And this year in half year 1, we had actually those one-offs that we have elaborated on investments in certain process efficiency excellences, investments in replacing IT infrastructure and things like that, as mentioned in Q2. And this is actually the bigger one-off bridge effects we have seen.

And then last year, towards the end of the year, we had some receivables impairments as we have elaborated in the earlier calls. And then more or less, those effects have been netted off. And this is why there is, from a full year perspective, no real difference in one-off effects from this year to last year.

So it's a complicated story, but it's a matter of timing and when the effect has happened. And the main reason is actually that things more or less net off a bit is the community of heirs settlement gains that I have elaborated on some minutes ago.

Okay. So in the previous time or it's always a 12-month view.

No, it was in the...

[Technical Difficulty]

Unfortunately, we cannot hear you anymore.

My last question would be, sorry for that background noise, in terms of AI. So it's, let's say, the big elephant for all the software companies. What is your opinion in terms of chances and risks from AI for you?

I think we will be huge beneficiaries of the AI wave. We will have massive announcement in a few areas at Transformation World. AI will help us to even more improve time to value for our customers.

It will help us to accelerate the strategy, what I already mentioned in my answer to your first question, Lukas, that we can enable our partners even more faster to work with our technology. And at the end of the day, this will also improve our software-to-services ratio.

So we are excited about what's possible these days, and we will have some very exciting announcements at Transformation World.

Yes. Okay. And maybe a small follow-up on the first question again. I think when you have started as CEO of SNP, you had a target of 50% software revenue share. Is this still valid?

Yes.

We have not received any other risen hands or questions elsewhere, as Mr. Spang put his messages in the chat before. [Operator Instructions].

But I guess if there are no further questions anymore, we would come to the end of today's earnings call. I thank you very much for your interest in SNP Schneider-Neureither & Partner SE. A big thank you also to you, Mr. Amail and Mr. Roderer and, of course, also Mr. Wiskow, for your presentation and your time.

Should you have any further questions at a later time, please feel free to contact Investor Relations. I wish you all a successful day, and I'm going to hand over to you, Mr. Wiskow, once again for your closing remarks.

Yes. Thank you very much, Mara, for your participation. I guess these few questions underlines the decision that we will terminate these kind of calls.

This concludes today's earnings call. We appreciate your continued interest in SNP and remain available for further dialogues. Have a pleasant day, and goodbye. Bye-bye.

Ladies and gentlemen, sorry for the delay. Good day, and a warm welcome to today's earnings call of the SNP Schneider-Neureither & Partner SE. The Executive Board of SNP, CEO, Dr. Jens Amail; and CFO, Andreas Roderer, will speak in a moment and guide us through the Q3 figures of the fiscal year 2025. [Operator Instructions] We're looking forward to the results. And having said this, I hand over to SNP's Director of Investor Relations, Marcel Wiskow. Please, the stage is yours.

Yes. Thank you, Judith. Hello, everybody, ladies and gentlemen. Welcome to our Q3 earnings call. So sorry for the technical issue for the delay of, I guess, 7 minutes or 8 minutes. So 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 Roderer, who will take a deep dive into our numbers. And following their remarks, we will open the floor for your questions. We appreciate your interest and look for a lively discussion.

So 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. And thank you for joining us on this call here. And as always, thank you for your continued interest in SNP.

So 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. But 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 and our strategic and operational levers kick in, which we particularly see when we look at our Q3 EBIT. So thank you to our customers and partners. Thank you to all my colleagues worldwide. And again, thank you to everyone on this call here for your continued trust and interest in SNP. So 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. Second, on the top line side, we are particularly happy with the software growth. So we show Q3 year-over-year 22% growth in software revenue. And 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, and we will look at more details when we have a chance to discuss the year-over-year EBIT bridge in this deck. And 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.

So when we look at the headlines of the first 9 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. And also here, when we look back to where we stood 3 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. And 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 to EUR 295 million. Previously, this was EUR 270 million to EUR 280 million, and we forecast an EBIT between EUR 34 million and EUR 46 million. Previously, this was EUR 30 million to EUR 34 million, and we maintain that the book-to-bill ratio is greater than 1.

So when we look at the figures here of the first 9 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. So 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, but 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 overproportionally. So again, a massive thank you to our partners globally for their continued trust.

When we look at the Q3 figures, here's a summary in the same format. And in the interest of time, no need to read out every single figure. But 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 don't see anything earthshattering here either. We like that we continue to see overproportional growth with deals bigger than EUR 1 million order entry. Here, we see a growth of 24% for the first 9 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 don't see anything systemic. We had a fantastic third quarter in LatAm, in which we were doubling the business compared to Q3 2024. And 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 2 quarters of the year. The main reasons is 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 progress -- good operational progress in the management of our COGS and OpEx. So slightly positive impact here. And this results then in an EBIT increase year-over-year in Q3 of 91%.

When we look at the 9 months view, we see here a minus EUR 5.1 million in one-offs. We had some positive one-offs in 2024, some negative one-offs in 2025. And again, this leads to an overall negative impact of EUR 5.1 million. And then if you add everything up, this results in an EBIT of EUR [ 30.5 ] million Q3 year-to-date, which reflects an increase of 48%.

So 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. So 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 9 months after the record results in 2023 and 2024. So thank you again for joining the call. I'm looking forward to our discussion at the end of this meeting. And with that, Andreas, over to you.

So thank you very much. Marcel, if you could go straight to the income statement, please. So as Jens has already elaborated, I'm extremely happy with the development of our COGS and OpEx. We have been able to grow the business significantly without really increasing the COGS and OpEx portion. There have 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. So the only real increase we had in cost is on the [ PAC ] side, and this is rather to be seen as an investment. We counter new markets, and they have been very successful. As you have seen, we had a 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 FTEs.

So besides 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 wins also in North America. And I think this is a very good development for us here.

So 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. And besides that, there is nothing to add on this slide here.

Marcel, if we 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 JAPAC. Also there, we have seen a good -- 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. So we are very happy with the developments we see here.

If we go on to the backlog page, please. Also there, there are no surprises. Again, there is project remeasurements 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 noncore business-related activity in Q1 this year. Besides that, there are no backlog remeasurement. So 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. So we had a very strong September. That's why receivables and contract assets have been increasing. That's why we also expect a pretty good Q4 cash flow. But besides that, I'm very happy with the cash position. We have already started to restructure our external debt. There had been some repayments already done in Q3. There are further to come. That's why you also see a bigger movement on the balance sheet positions from noncurrent liabilities to current liabilities. Besides that, there are no other major changes to be pointed out here on the balance sheet side.

If we 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. And I think this was, if you look at the development of EXA, a very good decision. I'm also 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. And I think, looking at that, I'm really happy with what we have achieved over the last years.

So 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. Besides that, nothing too spectacular here. On the admin side, I think we see that we remain stable. So we are able to grow the business with a similar resource or FTE perspective. So this just shows that we are getting really effective. Marcel, that's it.

Thank you both for these rapid insights. We will now move to the Q&A session. I would like to hand over to Judith again, who will moderate your questions. Judith...

Thank you for your presentation gentlemen and congratulations to your dynamic growth and progress.

Ladies and gentlemen, we will now move onto the Q&A session. [Operator Instructions] And we already have the first hand up, Wolfgang Specht, you should be able to speak now.

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?

Thank you for your questions. On your first question, we do not see any specifics, right? So I think the level of S/4 and RISE conversions corresponds with the maturity of the market. So Germany is ahead of, let's say, for example, Chile here. But I would say it correlates overall rather well with the maturity of the markets. What we do see is less regional perspective. We see a big backlog of S/4 and RISE conversions in the SME space. So we will increase our focus here a little bit on the SME space. But regionally, I would say it correlates well with the maturity of the SAP markets.

Then I go on with your second question, Mr. Specht, on the M&A side. There is -- of course, we check the market, but there is nothing concrete at this point in time. And if something becomes concrete, I'm pretty confident that we will have good conditions to finance a potential M&A. But as I said, at this point in time, there is nothing concrete.

Mr. Specht, are all your questions answered by that?

Yes.

Okay. Then we will move on to Thomas Kaiser.

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. And to the EBIT margin in the service area, you reached 10% in the Q3. Do you see this in the future as a stable number? Or what can we expect there?

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. But 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.

Great work, Andreas. After 3 years of turning every stone in the company, I think it's now the time to get a better picture of your next journey, the next 3 years. Would you please give us some more color where you expect the strongest developments in this time? And where do you stand and go with your co-development in the software area? And what impact can we expect on the revenue side from this?

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're starting co-developments with the partners.

Yes. So 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 3 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. So we expanded our reach, so to say, our scope with Kyano that we are now also including non-SAP to SAP migrations in our portfolio with Kyano Crossway. And also as indicated as transformation world, 80% of the enterprise data are unstructured. So strategically, we will also look at migrating unstructured data into SAP and here specifically into the business data cloud.

Do you get any tailwind from the AI area, from the trend?

Yes. 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. And here, we help. So there's a strong demand in the market to move to RISE as quickly as possible to improve time to value and innovation consumption. And of course, this is an area where we help a lot. So we continue to see a very positive momentum and a strong tailwind in the market. And then again, talking about AI, when we look at next generation of data migration with unstructured data, of course, this is then predominantly AI driven.

Okay. But will you develop or do some business around delivering varied numbers and, what should I say...

[Foreign Language]

[Foreign Language]

So the question is garbage in, garbage out, right? So the key success factor for AI is, of course, that you have a very clean and complete data foundation. And here, the data foundation of choice in the SAP environment is that customers are fully migrated to RISE and to the Business Data Cloud. And here we help. So it's indirect, right? So we also have some legacy products. We also feed other data lakes and other data products. But the key business driver for us is the SAP strategy to offer AI benefits in a RISE and in a B2C environment.

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?

So this is actually operationally, for us, a very strong up and cross-sell potential. When you also think back, Thomas, to transformation world, so we have basically 3 categories in our portfolio. We have Kyano move our entire data migration portfolio with CrystalBridge and Crossway. We have a very thin foundational layer, and then we have Kyano Manage. And this is predominantly Fridge and Outboard. Outboard is our archiving solution. And 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, what do I do with the remaining data? Sometimes there are regulatory requirements. You don't want to move everything to RISE because it's also getting rather expensive then operationally. So we do see here a nice cross and upsell potential.

Good luck for Q4.

Thanks, Thomas, for the positive recognition as well.

And we will move on to our, for now, last hand up, Lukas Spang. [Operator Instructions]

Also congrats from my side to this number.

As you know, we, as an investor, have to find the hair in the soup. And I saw and you showed it in your presentation that the revenue growth in the service segment or the professional services segment and also the order entry in this segment in Q3 came down very strongly and order entry was flat versus last year in Q3. So 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?

So for us, the most important KPI is the growth of software, right? And 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. So that's 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's based on a one-off large strategic agreement we have with a co-innovation customer where we booked a multiyear order entry in Q1 this year. So this was a significant deal, 8 digits. So this has a strong impact on our Q3 year-to-date order entry on the services side.

And second, we see a lot of change requests from clients. Both is a positive. We improved operationally our services margin by 3 percentage points. So this is contributing to our EBIT. But you're right, the more important KPI for us is the growth on the software side. And here, we are ahead of the curve, and that's all we're interested in.

Then on EXA, development -- 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? And also in terms of the margin, do you see this as a sustainable level going forward?

So 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. And 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. But what we can see is an increasing demand in the solutions from EXA. That's -- I cannot predict it on a -- it will now go on a linearity point of view. But the solutions, there is a demand for the solutions, and we are getting better traction in the market. But it's difficult to predict from a linearity perspective.

Okay. But 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 indication that things should look significantly different. But of course, there is -- when you get such bigger project, we need to also deliver such bigger projects. And this is something we see on the way how fast we can ramp up resources here.

Yes. Okay. And 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 1. And so that is signaling further growth into next year. Where do you see areas to further invest going into next year?

So as I indicated, right, we invest, Lukas, in our strategic focus areas and no need to repeat it. And we continue to invest in globalization. So there's still a handful of very mature SAP markets where we don't have a presence there, where we don't have legal entities. So these are the 2 key areas of investment. Number one, innovation in the areas I mentioned here briefly at transformation world, and number two, in our globalization.

Okay. So personnel 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 don't -- I mean we've been investing in new markets this year as well. So where we will not see a lot of investments are in supporting functions, as Andreas indicated. But we need to invest in -- as we did this year, we need to invest in service colleagues. We need to invest in sales colleagues, not so -- and in development, of course, not so much in supporting functions. So here, we hope then that we can realize, of course, some economies of scale.

And 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 the 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. Roderer 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.

Yes. 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. And so have a great day, and thank you once again for the participation on this call. Bye-bye.

Hello, everyone. And thank you for joining today's fireside chat. We are really excited to take you behind the seeds of 2 highly complex SAP carve-outs that we recently delivered for one of our customers.

My name is Ibrahim Kanalici, and I serve as solutions lead for M&A here at SNP in the Northern Europe and Middle East and Africa region. In my role, I have shaped how our portfolio supports customers and partners across industries, guiding them through the complexities of data and mergers, acquisitions and carve-outs.

I'll be your moderator for today's session. I'm joined on the stage by 2 fantastic guests. SNP's project manager on these projects, Matthias Wienerroither and Sajith Sasidaran, Managing partner at TCS, who also play a leading role in this journey.

Together in the session, we'll explore the challenges, surprises and the lessons learned from 2 highly complex carveouts and have a collaborative transformation approach helped us reduce the risk, minimize disruption and accelerate results.

A bit of housekeeping before we dive in. In today's session will run about 4 to 5 minutes. And obviously, we'd love to hear from you. So please pop your questions on the right-hand side into the Q&A box. I'll bring those to Matthias and Sajith at the end of the session. And don't worry. The session is recorded, so we'll receive a link afterwards as well.

So without further ado, I will hand over to our guests for a short introduction about themselves. Matthias, could you please kick things off with a quick introduction.

Yes. Thanks a lot, Ibrahim. So we have to start. My name is Matthias as already presented by Ibrahim. I joined SNP 5 years ago and I am a project manager at SNP. So in the past years, I have done several projects in the area of mergers, acquisitions and of course, lately, a lot of S/4 projects. So I was the project leader in those 2 projects, where we will have a back-to-back session now. And therefore, I will hand over to Sajith to introduce himself.

Thank you, Matthias. Sajith Sasidharan is my name, and I have over 23 years of experience and 17 years with TCS and I'm based out of Helsinki, Finland. I look after customer engagement based out of Finland and also part of TCS, SAP global practice. Yes. Thanks for having me here, Ibrahim. Nice to be part of this fireside chat.

Amazing and thank you both as well for taking the time out of your busy schedules to be here on the stage with me. So let's jump right in. Sajith, can you start us off by describing the projects a little bit on the business context that set the stage for these carve-outs, please?

All right. So when looking at this context, the customer situation that TCS have partnered with SNP in the recently concluded 2 back-to-back carve-outs that we did. And this is a Finland-based global customer, where in which they had 3 distinct business units under 1 umbrella.

Sometime spring 2023, the owners of the Board has decided to split these 3 companies. That means one of the company will be divested because the rationale behind this, the company wanted to focus on the core businesses. So one of the business unit will be divested and the other 2 will become stand-alone stock-listed companies.

So we are talking about our demerger and the divestiture scenario. The first one, what we started -- and by the way, these companies operate globally, more than 50 countries and at least from an SAP perspective, more than 40 countries and multiple legal entities within those countries are in scope.

So it was an aggressive time line that was set from a deal perspective. So first, we started with the demerger project to stock list the first company, and it was a 10-month period and then subsequently when we have successfully delivered that project, then we went out to do the next project, which is an IT separation of the second company. And also, it's only not from an SAP carve-out perspective. There were requirements from a transaction perspective in terms of logical separation. That means legally splitting these companies in order to -- from our listing pre [indiscernible].

So there are multiple dimensions to it. So a very challenging project, not only in terms of the global scale, but also in terms of the complexity of multiple the upstream, downstream systems connected and impact to the remaining company and so on and so forth. And also on top of it, the pressure coming from the deal time lines itself, right? So making it super complex, super challenging, also very rewarding when we successfully deliver it.

Yes. Thanks for those insights, Sajith, and I concur that deals are always going at high speed, high pace, and that's one of the challenges, isn't it? And also there's a lot of dependencies across the board when you're looking to separate the IT landscape as well. So thanks for setting that sort of context and the carve-outs and also just talked about the triggering and what triggered the carve-outs, et cetera, and scope as well. How did you define success for this project at the start?

All right. See, IT carve-outs are not only technical projects. These are business transformations -- there is the underlying objective of this -- the trigger to the carve-out itself, right. So in that context, from the beginning, we knew that this is not only going to be a technical separation. So I would classify success factors for these type of carve-outs into 3. First and foremost, the NorthStar would be the business continuity. Whatever IT separation happens, the business users continue their operations.

On particular after the weekend when that separation that happens, right? By the way, the cases that we are talking about today, it's more of a big bang go-live. Globally, it's a big bang kind of a carve-out situation.

Over a weekend switch on to the new entire IT landscape, right? And the business continuity is the first and foremost success factors. I mean the criteria, right? The second would be the data integrity, the quality of data from -- to enable the business to operate as usual, but also from financial reconciliation point of view, both in terms of -- from a P&L and also from audit and complex purposes.

So the data integrity is at most -- 1 of the key success criteria, I would say. And the third itself, the -- as I mentioned, the objective of the separation itself, how we as technical specialist system integrators can ensure the objective of the separation made that means faster [ TSA ] exit so that the separated company can be stand-alone and look forward to their own future.

So I would classify these 3 as the key success criteria for these type of projects.

Amazing, Sajith. As we all know, yes, so the separations are ever with the pace at which it goes and lots of dependencies and the number of, let's say, the entities involved et cetera, is always going to be a tight time line to meet the TSA time line, but also with the ensuring the data integrity and the compliance with the governance, the rules and the frameworks is quite important.

So thanks for kind of highlighting those is amazing. Thank you. And Matthias over to you. So let's talk a little bit about what were the biggest technical hurdles. So if you talk about maybe a little bit more about the architecture going into a little bit of the technical side of things, what was the architecture at the start and what was architecture following the carveouts? How did SNP software and TCS' transformation methodology helped addressing some of the challenges in respect to the technical approach itself.

Yes, of course, Ibrahim. So we, as SNP and also the partners and customers had have a big advantage because we are using our SNP, Kyano CrystalBridge software, and that's basically an easy way to carve-out data or move data between systems between system landscapes.

And we bring a lot of flexibility to certain carve-outs. So for example, when it comes to finding go-live date with our approach, we can take basically every day in the year, we're not dependent on a month end closing and we were aiming in the whole project to make it happen on a go-live weekend.

So like Sajith before said, going with the big bank won't go live and that's it, everyone can work on the next day. So that's one big topic. And the other topic is when it comes to selecting data with our software, we can slice. However, we want to have the data. I would say luckily, in this perspective, we had a clean slicing of company codes and bringing them over to the target with full history.

Of course, there are also other examples where we need to slice with profit center plant and leave data behind. So that's the story for another time. But that's really a big advantage to get this data integrity right to start with a right basis. So that's some cool features that I like as a project manager and also that the customers and partners then love when doing such migrations with SNP.

Yes. I wanted to add a couple of points on what Matthias said. So when we had this customer requirement, so then we needed a tooling specialist, right? So just to add there, when we collaborate and partnered with SNP on this. So there are multiple ways that we can do the carve-out, right? 1 is like in this case, what we adopted is a selective data migration and the other approach is clone and delete. Clone the whole set of data into the target system and delete it.

So we had a quite a good deliberation and evaluation for this customer situation, which will be the right best option because there was a sizable amount of data in the source system. And like also Matthias said, we need to do certain massaging, data transformation and quite a lot of aspects there.

So what Matthias and SNP team was able to analyze and give the right approach, then the whole architectural design itself for the [ seno ] temporary systems and all of it and create the whole landscape for the carve-out that was done. So that was quite impressive.

Amazing, Sajith and thanks for adding that on because obviously, the software and the approach to have with these carve-outs and divestments do amazing things in order to achieve that technical separation, but there are often many variations in these approaches depending on the deal itself, what's the level of the data entanglement in the source system, how do we carve it out? And also what are the sensitivity of that data that needs to be validated before and after it's been shared as well.

So there are a number of factors that needs to be considered. And I think in this sort of approaches we as you said, Matthias and the team did an amazing job in identifying what are the key criteria in which the approach needs to be adapted to and taking that to the customer situation. So great to hear.

Was there any integration unexpected challenges or data challenges at all as we sort of approach this carve-outs in the way that we did. Was there any key or highlights that we took away from -- that we had to address as part of our approach to the carve-outs Matthias as well?

Let me very quickly add to this topic of data integrity. So with the approach that we are doing in the project and that really perfectly fitted with the TCS methodology to run this project. It's more like waterfall, but inside the phases, we were pretty agile. We're doing corrections after a test migration during the test phase and making there for sure that we're already heading into the next test phase with an even better basis.

So you can't jump too many steps in phases you need to do the project one step by another. And there, what we always do is at SNP, we are migrating since the first test migration with the full data set. And this will help for data integrity definitely because you're not postponing to make the last -- to migrate the last 500,000 transactions at the next round and next round, no. We need to go full. And this is a hidden champion, I would say, also in terms of data quality.

But you will always find topics, where you have some challenges with data integrity. So one very small detail would be like, if you are moving employees you're migrating the master data of them. So 1 employee already left the company, it's not active anymore. And you don't bring them over to the target system. Then you need to see, if there are certain processes, where this data is still used and you need to further process the data.

And there, these topics always come up because in every deal, there are certain specifics or certain discussions between partner and customer, where you then find solutions to bring over also inactive employees or bring over someone who was 1 time in their history in these companies where they were cast out, but they are still in another company now.

So there's some challenges that we always see, maybe also some kind of mixed documents, if there are intercompany, a business done between our company code, that is still -- in the old system, they will be staying. That will not be carved out, but it has some business done with the company code that will be carved out. So the area always will find out in the first test migration or in the test migrations. And although you want to analyze and design everything upfront, the reimproved incomes, when doing a data migration employed into a very well-organized test phase.

Yes. If I want to add a couple of points on that, Matthias. The most important aspect is doing -- I mean, how do we mitigate the risk, right? We're talking about data integrating. That is to do multiple data iterations. In this customer base, we have had at least 4 full round of migrations, exactly the full load, right, we call test migration, 0, 1, 2, and we did a go-live simulation, right? And iteratively be improved.

And what we have also done in a way is to couple SNP's data migration, test migration round with, let's say, unit testing, integration testing and UAT. So once we do the full set of migration, then we did the integration testing. For example, then it is also then -- you see in this particular customer base. It is not only the SAP got separated. We're talking about 15, 16 applications getting carved out on 1 particular weekend.

So the integration testing, and we have temporary landscapes for all those connected applications and also the applications which are already separated. So the integration testing how the data flow between the systems, we were able to validate together with the test migration rounds.

So in that way, that was best practices that we take it from our previous engagements, and we are able to successfully deploy and deploy in this customer base as well.

Amazing, amazing. I think, yes. So the -- so I think it's important to just recap some of the good points made there. So 1 is design happens at the start in terms of what needs to be separated, but the test migrations are ever so important to highlight any key challenges or dependencies in the case of data entanglement across company called maybe one company called it in the data privacy, other is not.

How do we handle those intercompany type challenges. And also the applications, it's not SAP or the other applications in the landscape that needs to be separated, how do they come into the picture across the separation time line itself and tested against the approach and the migration across the whole landscape, not just SAP.

So those are really important points. I'm glad you guys can touch up on. Just moving on to a little bit about collaboration and the delivery itself. So how did TCS and SNP work together. Sajith, I think I'll kind of put this question to start with. Can you kind of give us a little bit insight into what made that partnership work?

Yes. I would say the trust and openness, yes, -- when we started the project, of course, TCS and SNP had a long-standing relationship and multiple assignments, multiple engagements, globally TCS was doing. But at least from me, it was first time working with SNP and we have had initial challenges, but that is quite natural when 2 different parties coming together and customer also because there is -- as I said, there are a lot of time pressure and also anxiety from the customer as well because carve-out we're doing for the first time, because any customer, at least this customer case, they have done multiple transformation projects global implementations of ERP and so on and so forth. But carve-out and this scale is first time.

So with that, we had initial challenges, but we were quickly able to overcome that and we had a very strong governance setup between TCS and SNP and also our triparty governance with the customer as well. So we were able to flag the risk early and make tough decisions, and then able to move on. And then all in all, this -- the underlying objective for everyone that we had is this -- we need to meet the time line and we ensure there's the business continuity of the business of it, the business should not be disrupted.

So with that, all 3 parties, customer, TCS and SNP and TCS-SNP joining hands for the customer engagement. So that collaboration and strong governance, right? And then that was key to success is what I feel. And quite importantly, when we finish the first project, second project came natural to us. Quite a lot of seamless collaborates even strengthen further and even from the customer side, yes, customer has got the confidence that one project was a successful, massive big bang project, which are without any major issues there.

But then it further strengthen how our relationship has built and how we are able to successfully deliver. But nevertheless, every carve-out teach us a lesson, right? It is unique and the customer situation is unique. But how we as a partner in affording hands for the good times and bad times, that really makes the difference.

Very good. Anything to add to that, Matthias at all.

Yes. So first projects are always the hardest one. So this -- that you know that the storming, norming performing phases from the team building once you have passed this 1 project, it was really so easy, I would say, to do it because you know already what the other guy expects from you, and there is really a good partnership. And it was hard earned in the first project because of all the challenges that we have, but it was really rewarding because we're not all -- we not only looked at this topic of the data integrity, but we'll always look at business continuity.

So in each of the test cycles when it was closed before the next test migration round started, we always, everyone together have a look at the topic performance. And -- if you do this all the time, then it's getting -- it's coming to a common goal.

And yes, then the guys were looking for parameters for finding out can we size up the CPUs a little bit more, what would it cost what perimeter should be set, how to make some command with the database to even improve it. And yes, it was -- it felt like play and especially then the second project.

Amazing. Okay, Matthias. So it wasn't only about refining the scope and validating the scope throughout those test migration, but also refining the performance to meet the required performance parameters or expectations of the carbide and the customer itself as you go through those test migrations. So thanks for highlighting that as well right.

Yes, correct. Because it was -- at the beginning, of course, you run a test migration 0 in the first project, where you just have defined the scope and then all of a sudden, you end up with a run time of 100-plus hours and then everyone is looking to you, how will you be able to manage this on a weekend.

And yes, the performance reviews, it could clearly show them from each cycle to each cycle that the run time decreased and everyone helped each other out to getting a stronger system on the basis side to performing better on the data migration rule side. So yes.

Amazing. Okay. So a good governance, well-defined communication channels and decision-making approach and ways of working. I think that well underpinning that sort of great partnership that allow the customers to realize the full benefit of both the technology, but also the methodology as well.

So great things to hear. Let's move on to a little bit into sort of lessons learned, if you like, I think all these audience will be quite excited about understanding what are some of the lessons and so what went well. What wasn't. So what advice would you give to someone starting a carve-out, for example, Matthias, lets started yourself first.

What will be the sort of maybe key advise to give someone who is kind of contemplating about a carve-out that's coming up?

Yes. Think about, first of all, that would be like the first question also when we go into workshops is what is the highest level scope that you currently think of when you are running this carve-out. So is it on a company code level? Or is it below company code level? And then out of this question already next follow-up topics will come, but the first and most important thing is how to slice the data. And what is in the deal when it comes to how much history is somewhat willing to carve-out or is the other party willing to pay for that. So that's the #1 topic for me, the high-level selection scope.

Amazing. Sajith, what about yourself? What went well from your perspective? Is there anything that you -- in hindsight, would you do differently?

Okay. I'll take this like your previous question to Matthias as well. What if someone to start a carve-out, what are the things to be focused. So retrospectively, having done 2 back-to-back carve-outs over a 18 months, 2-year period, 3 things. First one is to have a strong governance mechanism. If you're on the customer side for the audience in this chat here, if you're on the customer side, establishing a strong separation management office. That constitutes -- I mean, talking only from an IT perspective now, IT separation point of view.

So the SMO and the -- driving the IT initiative because there will be multiple suppliers involved, SAP system integrator, tooling partners and so on and so forth because when we say a carveout, it's not only SAP, right, creating a stand-alone enterprise IT environment. Right from networks to data centers and application getting separated, end user services and devices and the processes that the -- so the enterprise wide impact and SAP normally is 1 of the complex application to carve-out as we know, establishing a strong governance to manage the dependencies, right? This is quite important.

The dependencies of upstream downstream systems, if multiple systems getting carve-out at the same time, how the plants are aligned, if there is a deviation, how to communicate and how to, of course, correct and adjust what are the impact and the dependency. So the communication part that the governance with all these stakeholders, including the business, business should be aware of what is the downtime, what to expect, what is the impact to them how they should be prepared. That is the first element.

And second aspect would be, like we said, over invest in data that is important. Overinvest in data quality, do multiple attritions and validation round, we may often need business to come and validate, because in a carveout scenario, if you look at it from a business point of view, in a like-to-like carveouts scenario. Business is not getting anything. In that sense, and we have engaged globally business users to come and test or regression test, validate. So often, those have been challenges. But if you are able to manage that, that drives the success, right?

And then the cutover itself, right, and plan for contingencies. That is the -- that is what I would say that, because this is retrospectively speaking, plan A and plan B, what if something delays, how that is going to impact. So prepare for the unexpected and having contingency plans would set any. So one thing I wanted to call out what in this project in this particular phase, what we realized from a customer point of view as well as TCS and SNP as well as when we are doing this preparation, right? We started the cutover planning much earlier, right? We are creating this cutover run book, creating and sequencing, orchestrating and doing the planning. We realized the remaining company impact very late in the project. We were planning for the separating company, how we would manage. But what would be the impact of the remaining company, right?

When there is a shutdown of the system, it is the shutdown for the separating company as well as the company that is remaining, right? So because in this case, right, when we shut down SAP, the RemainCo had impact to shut down their sales systems, e-commerce platforms, how to communicate to the business, their end users, their suppliers, all of that, we realized a bit late in the project, but we were able to manage it and then put it on SOS basis, how do we also ensure of those elements have been taken care.

So that is one thing I recall is a major topic. But other topics such as especially on the data, Matthias, pointed out that is migration, the first test migration we did it was 100-plus subs, right? And the cutover weekend was planned to be over a weekend. And a lot of anxieties, lot of questions and so the performance tuning perspective, but overall, I just bringing that in the first project, first round, it was first round to the actual go-live the improvement was more than 100% in terms of the clock times, right, from a data migration. So how do you learn from this, right? And then there are opportunities to improve? And how you make it better and better every round technically as well as from a process point of view, that would really help.

Some amazing inside Sajith, thank you. So just to recap in terms of some of the imports and things I heard it. IT separation isn't just about the application. SAP is obviously quite an important one. A large application is typically a backbone of many operations.

But there's also a lot to do and it also defines what's the success of the carve-out project as well, so it needs to be cognizant of that. And the -- not getting business involved early on to make sure that they're involved, they not just validations, but also what's happening in terms of the RemainCo, i.e., in cutover, for example, to downtime is expected for the remainder of the business, not just a target carve-outs, I think it's important to communicate that early as well as kind of overall communication to make sure that the business kind of joins that journey, which is very important, but also to the last point in terms of making sure that there's a good governance that cause the project, but also the test migration cycles are managed well and learnings are taken into the next test migration cycle, et cetera. It's all great points. So thank you very much for highlighting those.

At this stage, I would like to thank you both for kind of introducing those learnings and key insights from those projects are amazing. Thank you very much. So let me switch to some of the questions that audience has posted as we talked along the way. I will pick 1 up from our Q&A prompt. So there's a question around was the company called carve-outs a firm decision from the start? Or was there some debate about time slice as well as company code.

Matthias, would you like to sort of address that question? So was the company called carve-out a firm decision from the start? Or was there some debate about time slice as well as company code?

So from a time slice perspective, we have always the overall approach to take full history, when it comes to the company codes I remember, yes, there were some discussions in the design phase when then also the experts from the customer were involved what data, what company codes are really the ones to take over, but that -- it was fixed during the design phase. And luckily, there were no real changes in the project itself. But maybe I'll give it also to Sajith as he was way earlier in the project when those discussions took place, maybe about which company code to take or not to take.

Yes, true, true. So like I said at the beginning, when the demerger or the partial demerger was announced. And it was -- the first company was the target is to get it stock listed. So that means completely decoupled from the current system because for audience information, it's a single instance global production system, where these 3 companies were operating. In at least 8 to 10, I don't recall it now, but at least 10 countries, the legal entities of the separating company and the RemainCo operating 1 single legal entity, right?

So that is the project before the physical carve-out, we did the logical separation. So TCS engaged with the customer, we separated the company code RemainCo -- so legally we splitted it because that is also mandated for the stock listing. So when we started the physical carve-out, we could clearly identify which companies ports that we go into the target system. So we were able to do that. And then again, the question of time slicing out because the separating company needed full history of data. Because that is very important for them.

So they handed the full history of data for those company codes. So we migrated all. And as we speak, after finishing 2 carveouts, now we have engaged TCS and SNP is engaged with the customer to do a deletion project in the source system, right? Because after 2 carve-outs are completed. Now the RemainCo has the data of the 2 separated companies. So we are engaged in a deletion project, so that is ongoing.

Meanwhile, as you know, then when this separation happened on those transaction date, all those data have been ring-fenced already. So the RemainCo cannot access the separate company data, the ring-fencing with authorization control and all have been done.

Yes. Very good. I think you touched upon a couple of things which I want to highlight again, but the data perimeter itself and there's a couple of data that needs to be separated and whether it's time slice or full history, et cetera, would it fair -- would it be fair to say that it's also often governed by the type of the deal, the agreement between the seller and buyer, right?

Yes.

Okay. Very good, very good. So next question up on my screen. In your carve-out migration projects, what were the key levers? And if you had to do it again, what would you do differently to accelerate value or reduce risk? I guess, in a way, this is another sort of way of asking boss, there were a couple of very successful projects, the second one, obviously taking any lessons learned from the first 1 in order to make things even more smooth -- was there anything that you have in your heads kind of in hindsight, anything differently to accelerate the value or increase the value or reduce risk at all?

Sajith, why don't we start with you this one?

Yes. I mean we have touched upon certain elements to this question in our previous comments. But the good example like what we have taken since we have done 2 back-to-back major global carve-outs in a short period of time. The first project was had challenges that's what naturally expected in these kind of projects. But the net result was successful, not even a single major incident, not even a single minute lost in terms of business hours lost after the go-live. But like I said, how we improve the data migration on time.

How do we do the dependencies management not only with SAP with all the upstream, downstream systems and integrations and how do we better communicate with the business stakeholders how do we make them informed, what to expect and how they should be prepared. Those we learned in a hard way. I would say that because there are a lot of questions, a lot of ambiguity uncertainties and also on top of it, the timeline itself, right? Timeline cannot be changed. Basically, you're chasing the dates, right?

So -- but in the second project, we were able to take those learnings and adopt it make it even better. So the second project took us nearly 3/4 of the time to do exactly somewhat similar scale and sizes of complexity of that project. So quite a lot of learnings lessons learned in a positive way that we would use it and not only in this relationship, but TCS and SNP, we are taking it in our other end customer engagements as we speak, throughout in the Europe and globally...

Matthias on your side, is there anything else that you want to touch upon at all? I know we covered some of these already in the discussion. But there's anything that you want to sort of double down on now is the time.

Losing my voice. So I give next question to Sajith.

Okay. So let's move on then. So I think Sajith already covered quite a lot of points there as well anyway. There's a question, which is around, will there any specific requirements from audit either internal or external on data validation. So in our dealings with the customer in both of those carve-outs, whether any specific requirements we came across, not just from the transaction deal itself, but also from the audit perspective?

Okay. Like mention that -- there are certain obligations, guidelines, guidances from the transaction itself, right? And what type of deal is it who is obliged to comply with the audit and who the data ownership stays with who put it in a simple terms, right? That always exists.

Then the retention period and all of that. But what -- in this project, what we wanted to or what was the objective was to see that the financial data is matching to the last cent, right? The financial numbers should match, fully reconciled. That was the requirement, and that was validated -- validated from the customer side, customer finance team and all of it when we're doing the final round of testing as well as option that go-live.

Of course, external data audit happened, post project after go-live after a certain period of time through an external auditor just to ensure all things are in place. But during the project, we did not had kind of an audit requirement other than we have to ensure that the data is fully, fully sync from the source system to the target system and the finance numbers are matching. That was the challenge. I mean, in any carve-out that we have to see it and plan it programs.

It's a typical data validation reconciliation.

Yes. I think that's...

Okay, very good. [indiscernible] time as well, but I would like to cover a couple more questions, if you may, a couple more there as well. So how was the historical data planned for the Spinco, this is the target the new company that's being set up. So how was the circle data plan for the target company partial or in full? And what about the archived data.

So I suppose, in this case, we had historical data in full anyway, but -- was it an archived data, I suppose, is the gist of that question. What database size? Was there any challenges with that? And also 3 key learnings and checks companies should always consider in a carve-out planned to contain unforeseen risks. I think we touched upon some of those as well.

It's a big question. I'm just kind of trying to compact that and fallback plan, if things are not going as planned, if things experience your recent past execution. So to summarize, I think was there an archived data, was there any sort of changes around archived data. Was there any changes around the database size at all. I think we talked about key learnings already. What was there a fallback plan at all based on those sort of the learnings we got from the 2 projects.

Matthias are you back with us. Would you like to [indiscernible] archive data...

I'll take the archive data. We also had archive data in the scope. So there, we also could find a nice solution to select all the archive documents. So invoices, for example, that were related to do any transaction data to also bring the ones where we already moved the SAP data. We also brought over the archive data. So that was working nicely, I would say, was also in scope.

Okay. So archive data was in scope and that was part of the carve-out well. That's good. Was there anything about database size at all in terms of challenges because regardless of the type of the carve-out, et cetera, when we carve-out a large amount of data from a large database as well, there's always an impact on the downtime isn't that?

I mean data bases are always have their specifics, as we are doing table-based migration directly over the database we favor some databases. And this time, we had 1 that was a little bit challenging, a little bit tricky. And then you need to find the right parameters be it to be very technical, what is the file size to export the file to file share to have the best performance than putting it into the target data base.

So that's something more like deactivate the archive log-in. We don't want to have archive logs to written during the data migration because there won't be any point in time recovery anyway, because we're doing the data migration, and we will -- we can very often fix also these issues.

So data base is, the sizing, yes, was a couple of terabytes and of course, they have also the challenge when selecting the data. The bigger it is, the more resource heavy those selection criterias and the attempts are to the system and also to the run time. That would be my...

And on the question on the fallback plan, right? So the fallback plan is part of your cutover plan. So the cutover plan should provision a fall black and what triggers a fallback? What are the decision criteria and what are the decisions -- which should -- what can influence a fallback? Who takes the decision. At what point in the cutover window in a calendar clock time, when this should be evaluated.

So -- and it's -- the key aspect is when we plan this carve out let's say, if you take an example, 48 hours is the downtime, right? That's the window that we got. Right from shutting down the system, initiating migration, finishing migration, validating its, home testing it and switching on the integration, okay, that's a positive scenario, right? We should provision for fall back.

How much time a fallback takes, what we need to get back things everything back in place. So that business is not affected or the downtime is not increased. So fallback plan is part of that plan. And we need to provision the time within that accordingly and plan your downtime.

Thank you, Sajith, for catching that question there. I think it's important and then highlighting that the fallback has to be part of that consideration of the cutover plan anyway, in any case. So it's a great, great chance out there. So just 1 last question, conscious of time as well, gentlemen.

What do the companies do in the source system in all system after they've carved-out the data, and there are still active companies in the system. I think this is more to do with the companies carving out data. So in this case, obviously, the parent company is still operating. So therefore, obviously, the system is operational. But what about the data that belongs to that target entity, the Spinco entity, what happens in the source system. Was there any question about it in the carve-outs that we delivered.

In the carve-out, like I said, after the transaction date, we have ring-fenced the data in the source system. So that the remaining company cannot or will not access or cannot access except few authorized users for financial audits of some sort of things because that's a liability of the RemainCo because based on the deal. So very few people have access and only in the financial data, just to comply with statutory obligations.

So it's all fully ring-fenced. And like I said, now TCS and SNP is engaged in a project to delete the data from the source system. The data which have been separated for these 2 companies, we are engaging in deleting those. So that we will dealing that. But yes, of course, there is backups and all, but we are deleting from the main database.

So there was an aspect of count to deletion of that data in the store system.

Yes.

Okay. Very good. So that's a possibility as which is important for audience to understand and note as well. So it's not just carrying out a system, but also being able to delete -- account to delete the data in the source.

Great, so gentlemen thank you very much for your invaluable insights and your time. So again, audience, so thank you again for your time as well for joining us in this fireside chat. And just a reminder, you will receive a link to the recording as access to -- as well as in access to our latest wide paper on the SAP carve-outs as well. So it's a very good read. I would encourage.

But thank you very much for your time today. And hopefully, you found this as insightful as I have and enjoyed it as I have, have a great rest of the day. Thank you.

Thank you.