CENIT Aktiengesellschaft (CSH) Earnings Call Transcript & Summary

Welcome to the Earnings Call of CENIT AG regarding the fiscal figures of the financial year 2022. The CEO, Peter Schneck, will give you a presentation on the results in a moment. [Operator Instructions] We're looking forward to the results, and I hand over to Mr. Schneck.

Thank you very much, and wonderful good morning and a very warm welcome to our annual financial statement 2022. I have to apologize first, that we have uploaded the latest and greatest statement just 0.5 hour ago. So some of you might have not had the chance to go through it in detail, so I apologize for this, we will change this in future. But one of the reasons I've seen that I recently or just before the night, I just came back from Japan, where we did some changes that also had an impact on our figures. And that is why, we could only this morning conclude these latest figures with our Supervisory Board, and that is why it's really the latest and greatest, so far as it is, but I hope that you still will understand what I'm saying, of course, going through some of the figures that then have the questions that you couldn't hear upfront. So I will run the whole session again in English. As usual, for those, especially on the international line, but those German team members, of course, we will have later on, the Q&A session. You can, of course, also add questions in German, and I will translate in English as well as French. So is there any French investors analysts or interested team members here can please ask your questions also in French. And I will translate and respond in English. So let's start with our figures for 2022. As I said, they are still warm and hot. As you can see on the sales side, we did a major jump from EUR 146 million to EUR 162 million, which is a jump up of 11%. On the first plan, I think it's very nice and promising. And I think also on the second one, but of course, what has to take it into it, there is now ISR included, the acquisition that we have done last year in April and of course, 7, 12, so 7 months of the last year at also in sales as well as in EBIT have been included in those figures. And that's a major portion of this growth jump that you see here. But you will also see later on that we also had an impressive growth on the organic side for the base business of what I call CENIT Old. And I think after many years of slow movement, I think that we've done major progress in the jumping. Now coming to the EBITDA. Here, you see as well a jump of 5.8% to close to EUR 12 million, so EUR 11.9 million EBITDA. Reason for this is the depreciation of ISR. So this is a major portion of this jump. Then on the EBITDA. On the EBIT side, you see a jump from EUR 6.2 million to EUR 6.3 million, which is just 1.1%, but I will explain later on, what we have digested in year 2022. And why, I think that is for the future, this will be a much more promising EBIT structure figure than we are showing here. But as you all know, I started in 2021 at the end of the year and became the CEO beginning of 2022. And we have done a lot of changes. There's a lot of, I wouldn't call it a restructuring, because CENIT is a very healthy and growing a good company. But of course, we also have some things that we had to redo and this, of course, has an impact also on the EBIT figure. So that's why you don't see this major jump in the EBIT line that you've seen on the sales part. And on the EPS, the earnings per share, they jumped up close to 50% from EUR 0.51 up to EUR 0.75, so 47.1% increase. And of course, here, what I have to point out is again related to ISR, this is the impact of the financial results, which is close to EUR 1 million, the put and call options that we had, of course, to evaluate and then have a major impact on this figure. Coming to the figure in details. Again, I talked already about the sales jump, but the next very impressive jump is of course, the gross profit that went up by 15.3% to close to EUR 91 million or close to EUR 92 million in gross profit. And the reason for this one is, you see here now a switch from the stable software business that we had in the past, and which also has been very stable in 2022. But on top, you have now because of ISR has 1 portion, but also DBS, which is our Digital Business Solutions area, we have a major switch also to services. And this is why, you see here a very nice jump also on the gross profit side. The EBITDA we meant already, the EBITDA will come to because I have prepared a bridge so that you can better understand why does this jump in sales and gross profit doesn't really fall out on the EBIT side. But again, I will mention this later on. Then net profit up 51.9% with EUR 6.6 million. Here major driver is core financial results again, of the ISR option that we have mentioned already before. And what you see here, which is reflected with a small star on the dividend line, we're proposing a dividend of EUR 0.50 this year. This is in line with, what we have done in the past. So you will see when you look in detail then and with a little bit more time on our figures that this represents the 50% that we've done in the past on the balance profit. So this is reflecting this last year, we had increased to 75% because when I started, I realized that it was not reflected in the dividends that we originally had proposed. Since we had a special year in 2021, we had some unusual bonuses. We had some unusual achievements in 2021, which I tried to correct, so that not only the management of CENIT participating in the success, but also our shareholders. And that's why we have to 75%. Now we're coming back to normal EUR 0.50 is our proposal for our shareholder meeting on May 17, where I hope that all of you will join. This, again, is in line and our goal is of course is to come back to the EUR 1 dividend, as we had this before COVID. Then coming down to the market cap, as we spoke about the market cap, as you can see, went down by 11.6%. Given the situation of the financial market in 2022, I think this is still a very good results. You've seen also that our share price kept stable, we went even to EUR 17 for a while and then dropped. But if we compare to our market peers, I think we have a pretty good year over the last year. We went good through the storm and ended up in an area that is still acceptable and [indiscernible]. What I would like to point out and this gives you maybe also already a pretty good forecast for the year 2023. If you look at our order backlog, here, we have a major increase of 13.4% overall. And so EUR 46 million of order backlog and the reason is of course one portion ISR because now we have a full year of ISR in. But the main reason for this is, we have our first result of our changes in the cross-selling. As you all know, I'm pushing the cross-selling overall division and we see a major shift from smaller midsized company to now large companies that are willing to become our customers. So, we see a slight change here and by the size of the deals of course, also the order backlog goes up. So this is promising and it's exactly what I'm looking for and one pushing the team too. Coming on the balance side. As you can see here, we have a major increase in equity and liabilities of about EUR 127 million from EUR 92 million coming in 2021. And of course, what you have to bear here in mind is there's now included the loan for the acquisition that we've spend in last year and which we will continue in 2023. I will talk later on a little bit about, I want to give you already a flat forecast for 2022. Goodwill went up. Only reason for this is, of course, the acquisition of ISR, so nothing special about this. And then on the cash side, as you can see, this went down a little compared to last year from EUR 26 million to EUR 19.9 million, so close to EUR 20 million. Reason for this is number 1, we had done some acquisitions out of our cash, so we haven't done the acquisitions only by credit. So a portion was, of course, also done by our very good cash flow. And then, of course, we had dividend payments, 2x. We have the EUR 6 million that we have last year with a dividend and on top, then of course EUR 0.50 minority dividends that we had today to ISR shareholders. So there you see the reason for this and still a very good cash situation that we're in. If we then go into the selected liabilities, there you see we have a jump from 0 to EUR 22 million on the overdraft, which is, of course, related to the bank credit that we had to go forward. And what you also see is the total equity is in line with last year. So this is basically the normal situation, we try to stay in balance. And what you also see is the equity ratio went down from 47% in 2021 to 35.3% in 2022. As you all know, the major reason for this is we had about EUR 26 million loans on credit that we took on last year into finance the acquisitions and this is, of course, hitting on the equity ratio. Since this is one of the questions that often comes up in my investor meeting would like to point out here at this point, we feel confidently with an equity ratio that goes to 25%. So we're not forcing this line, but anything up until there, we feel very comfortable. Then coming to the cash flow. As you can see here, operating cash flow went up from EUR 8 million to EUR 11.4 million -- EUR 11.49 million. The reason for this is, of course, ISR, but also which payments of our customers, where we were very close. We don't have any concerning or open account. So this is a very positive trend that we're following here and of course, we are very close to our customers to make sure that we collect our money in time. On the CapEx side, you see a major negative jump from EUR 0.89 million to EUR 29.23 million. As you all know, we are a software company, so there's not a lot of real CapEx. The CapEx that we typically have is only some [indiscernible] and some furniture other than that, we don't have any investment on the CapEx side as standard CapEx, what we of course have included in here is the investment for the financing of all acquisitions, and that's why it went up to the EUR 29 million. So nothing to worry about 3 month. And if we then sum this up, as you can see in press -- the free cash flow went down from a positive EUR 7.35 million to a negative EUR 17.74 million again, of course, related to the financial investments that we've done through the acquisitions and that we will also continue in year 2023. Then just for you as a brief overview for those who are interested in the IFRS 15 impact that we have. Basically as last year, what you can see here because of the newly introduced reporting, a differentiation between an agent and principal, we lost about close to EUR 10 million. So I can't say lost, we're reporting close to EUR 10 million less on the agent side, because we have some of our licenses that we are not including our sales and that's why you see what the difference is. This is in line with last year. So there's no major change. And of course, what I also have to point out if we go to the EBIT margin, then of course you see because of this impact typically improves, of course, your EBIT margin and efficacy here isn't also the case without being the old principle view would have been at 3.5% now were 3.89% at EBIT margin, which is a little lower than last year, but basically in line with what we achieved last year. Now to give you a little bit more information on the sales revenue side. As you know, we've reported it in the past already, in this way. Some of you have requested that in future, we will also show this by division. The more acquisitions we do, the closer we come to this. At the moment, we are not disclosing our figures really by division because of competition reasons. So I want to make sure that none of our competitors can really compare to us, when we have more companies included in a so-called portfolio. Then of course, we can show you the results by division, because then we can dilute a little bit the margins on the different companies so that its for our competition not that easy to read into our figures. Up until then, we believe it's like it is. So we basically see a 2 segments reports, which is by PLM, which is our major portion and EMM -- EIM and of course, you see now the sales by revenue type, which is where you can see is a major jump up on the consulting and services side of 39.9%, which is a nice and profitable business and, of course, a recurring business. What we have again to bear here in mind is this is driven to a major portion by ISR, of course. But, I think this is also nice to mention we have a major increase also on the Digital Business Solutions side, which is our business is nowadays, not only with Airbus anymore, so it's Airbus and beyond. And the 3DS business, so we sold the business that we are doing. We were also able to increase our consulting services to our customers. In CENIT software is very stable. One of the reasons is a major driver of the CENIT software is, of course, also FFT solutions. SAP stayed very flat, the SAP Solutions business unit achieved about EUR 50 million in revenue in 2021, as well as in 2022. So this is an area where we have a very nice margin. But as you all know, and I've mentioned this in many of our investor meetings which we want to grow in the future. So there's still lot to do. And then, of course, the third party software, this is mainly the full and IBM, where we are working at so-called [indiscernible]. And as you can see, we stayed almost flat on this slide. So there is a slight 0.5% change, but I think nothing really to go into detail into. Now by the sales by [indiscernible], as I introduced not showing by business unit. So that's why we basically have AEM, which is our information management solution where we have a major increase of change 72.5% to EUR 27.6 million in revenues and this is, of course, mainly driven by ISR, so the acquisition has given us pretty nice boost. And we will, this year, I think in the direction of 40-ish million in total revenue that we will achieve with the acquisition of ISR and of course, the activities of our former AEM business. Then on the PLM side, this is also very nice to mention, I said already, SAP Solution stayed flat. So what you here with an organic growth of 4.5% from EUR 130 million to EUR 134 million. On the Dassault businesses, so the 3DS business solutions as well as the DBS Solution. So our digital business services, as I mentioned also already several times in the past, we were working here on Airbus only. We increased our activities with others. And at the same time, we were able also to get new customers. So our activity to diversify are going in the right direction and the trials over this year 2023, we might have some surprises. Now coming to the -- maybe it's rich in explaining you why you don't see this major jump also that we have on the sales side, on our revenue side, also on the EBIT side. And what you can see here is we just look at the EUR 2.7 million revenue. This is not EBIT revenue. This we will call organic growth. This is why we wanted to show it. And then, if you level this out with the cost, you would see that the impact of the additional revenues that we have gained here close to EUR 1 million, EUR 0.9 million of EBIT that we got out of the additional revenues, which is, of course, not a lot of that. It's an approval. And of course, what you also have to be minded is without ISR. So all the figures here are organic growth or organic impact figures, except of the ISR line that I will come to before we then level out to EUR 6.3 million. So on the other operational side, you see that we had EUR 1.2 million less of other operational income. And the reason for this is, as I mentioned already, also by end of last year, we were refocusing and not using our staff for the in university projects and other projects that were supported in. So what is called in German, [indiscernible] which is a research support of the government in Germany and in France, where we missed this EUR 1.2 million. And of course, are not receiving this anymore. So the sun went down, originally it was EUR 1.5 million, so EUR 300,000 only last year, we included in our other operations. Then on the personnel expenses, there you see we have EUR 1.1 million savings. The reasons for this are first of all, as I mentioned here on the slide, the reduction of the FTE from 685 to 652. The reason being for this is with the evolution of ISR, cost on synergies. But we talk also as, you all know, last year was also a little bit of a restructuring, where we try to increase the performance, maybe order to get rid of one of the other nonperformer which we have done and which we have shown and included in all these figures here as what I was saying at the beginning is eaten up some of our successes which is pretty normal. But the savings, of course, would have been much higher than this EUR 1.1 million that you see here. But just to give you an idea that there's also some payments included to get rid of some of the team members. Then, of course, we had a variable pay decrease of about EUR 2 million related to the fact that in 2021, was an exceptional year because of some orders that came in last minute and everybody worked on achieving those goals or we can also -- maybe just the other way we're saying it was not an aggressive plan, and that's why it was achieved, achieved which resulted in unusual variable pays of bonuses for our teams, which we then try to level out by the increased dividend for our shareholders. But this is, of course, something that we have to mention here, it is [ EUR 2 million ]. And then of course which we also had to eat up against this one. We had EUR 1.3 million missing short-term allowance, which in German is called [indiscernible], which, of course, we didn't receive in 2022. And another thing to mention, which would also be then a saving for next year. We had 2 old Board members that still received payments close to EUR 1 million, which was, of course, also in 2022. So all of this levels up to still a saving of EUR 1.1 million. Then on the other OpEx side, an increase in travel expenses and vehicle expenses, of course, after the COVID period it was expected. So this is something that is not surprising. Of course, explains a little bit what is easening up our [ EBIT ]. So I don't expect this to be changed in this year 2023. So it will be still on the same level our sales forces are on still power again, and traveling and contacting our customers. So it will stay on the same level. And then, of course, what we also had to include additional expenses for acquisitions that we're doing for leger services and financial services that are supporting us and doing due diligence. And of course, finally, also EUR 650,000, which are onetime investments for new software for our organization. So all of this other OpEx is up EUR 1.8 million. And then ISR, 7 months of the results included which is another EUR 1 million, which then levels up to EUR 6.3 million. So this explains a little bit where we heading EUR 2 million and over EUR 2 million. So we have now launched a project called [ SIRIUS]. This project here is about saving restructuring, and we're very confident in that given this chart here with some of the effects we will achieve this year, at least a saving of EUR 3 million EBIT effect, so that we will end up by the end of the year. And you will also see that in our report and then also when we invite for the shareholder meeting that gives us, not a guidance, the EUR 10 million EBIT are definitely inside. Now one of the questions I also several times asking that I would like already to address now. How do we want to get 2025 to our -- to our 8% to 10% EBIT margin? And like I always say in our presentation, the 10% EBIT will come up. I wouldn't be personally very disappointed if we do not achieve this. And the reason is how we get there to marketing are very easy look into here there are 5 measures. So measure #1 is as of today, 2022 and you will see this in the -- in terms of the figures, 3DS and Digital Factory Solutions are below 10% margin, EBIT margin after allocation. All other units are already beyond the 10% EBIT margin. So we will focus on getting these other 2 divisions, 3DS and Digital Factory Solutions to the 10% EBIT by some performance increase, by some changes in the structure. And of course, also by reviewing our customer site where we have customers that maybe pay a high amount. But not related that we can increase our EBIT margins here or we have to maybe see for other customer situations. Then on the tactic #2 is, we are in the middle of a reorganization of our corporate units. So we want to make sure that we can reduce costs, our internal costs here for the corporate services that we're providing to all our units. And this, of course, includes also changes on the marketing side and on the services side, that it will come to ensure it on what we're doing here on the operations. Then the third one is our acquisition strategy is focused on companies with EBIT margin that is higher than 10%. So all companies that we've acquire so far are fulfilling the line and also the ones that we have in about a month of fulfilling this. I'm not saying we're buying EBIT to dilute the other entities. That's absolutely not the case. We are looking for good companies, because I think we, as a company, are not good in restructuring companies that we acquire, and that's why we only go for good companies with lower multiple. And will add this on top, as you can see we already -- our target is that we will be at the 10% level with our, I call it CENIT Old, and then integrate those companies maybe. This will be then the fourth level. So we will only start with the integration of those companies -- of the acquired companies when we have achieved target number 1. And also, you will see that different business units that might integrate even before 2020, [indiscernible], the business units that are not achieving the 10% EBIT margin, they will not integrate acquired companies. And finally, this is something that we will also review in 2024. As of today, we haven't looked for any synergies with our acquisitions. So we keep this separate. We want to make sure that we do not, infect, the good running companies with the Old CENIT view. So we want to make sure that we are performing well and that we are well trained, so that then we can get to the next level. And this will be then the last thing that we will do, which when you all sum it up, should give us the potential to be beyond the 10% EBIT. But again, our target is 8% to 10%. And as you can see here and on the figures that I've shown you before, we're very confident that we will achieve this in 2025 later. Now giving you an overview of our financial figures on a one side view. As you know, since 2011, up until today, the CAGR has been 2.8%. Now to show you how we're moving up. We're shortening now the CAGR start at 2020. And you see already it's over the past 3 years, 4.5%. And of course, we want to make sure that these scales to 2-digit figure. And then on the EBIT development, 3.9% EBIT margin is what we have achieved. It is the figure that we've shown you. So percentage-wise we went down by 0.4% EBIT margin, figure wise, we increased by 0.1%. I'll explain to you what the reasons are behind this and I'm very confident that 2023, we will have even some of the restructuring situations that we had in 2022. Giving you an operational view on what we have done and what we have achieved in 2022. Number one, we're doing a major change to our marketing department. Our marketing department in 2022 had 31 marketing people, all over the organization. So it's not only the corporate marketing, but also includes the other entities. But we think, the outcome has to be improving and has to be measurable. So we have introduced new KPIs, we start with what you see here in the upper left corner, we have changed our www.cenit.com website. And the reason for this is not to make it nice and looks like the marketing, yes, that's all one thing. But for us, marketing is also related to sales. And we want to make sure that by the new opportunities that the Internet is offering us, that we can track by the so-called [ CO ] launches and our customers and that we can find out what they're interested in to increase in our leads. Now to translate those leads into real success, we have reorganized our team in a so-called business acceleration team. And this business acceleration team is only focusing on new leads. So it's like a business development department, but they do telemarketing and any other things that are required to find new customers and also to call our existing customer base to start and to encourage more of the cross-selling activities. So they are working for all 5 business units. And they are tracking all the needs into the conversion rates. So this is something that we haven't done in the past. We want to know now which that person is working on which lead and how fast they're converted and to which and of course, revenues this results. So this is now a real alignment between sales and marketing, which was not the case before. We're going to less shows. We're focusing on leads, we're focusing on customers, we're increasing our revenues. That's the idea that we have behind this reorganization of our team. And it is, of course, means that the classic marketing, if you want to say, so are now maybe 10 people and 21 people are working on generating revenue and increasing our sales opportunities. That's what we're focusing. This has been already announced in the team, so this is nothing new. Something new that hasn't been announced in the team not showing this in this presentation here. We're doing a similar reorganization to our service department. So digital business services will add on the services team from the different business units to increase the utilization rate of those teams and also to make the measurable again. And as you all know, I'm the big fan of KPIs, and I want to make sure that I see the performance in the improvement for our team and then increasing our EBIT is because that's what we all get on. Then on the human development. You've heard that we decreased the number of team members in different levels. That's why we have included in this presentation for review for the first time because it was asked this has been asked this several times also in our presentation 5 different units, how many employees do we have and what the changes were, as you see you can see this, I think the major change is you can see is on the bottom line, the ISR AG, it is to the 194 team members that came on board that were on board on the December 31, 2022. When we acquired ISR there were about 205 team numbers so we have some double functions, which, of course, are not called synergy, but as normal in such a provision or some people leave in the organization because they see that they're already somebody visiting on the other side and we haven't reset its position. But other than that, you also see with another area, we have reduced the number like in France, where we came from 111 down to 99 as well as CENIT AG, we could of course, we increased in performance in [indiscernible] the teams. One thing that I also would like to mention here that is mentioning here to increase our process activities, but also to increase the one CENIT idea. Again all business divisions are working for one revenue target, in short one EBIT target. We have introduced a new bonus concept, which is based on what we call the BQR quality ratio. And this is a quality ratio is just a sum up of the percentage of EBIT and in the percentage of the growth. So we share this 10% growth and its 10% EBIT that we're targeting for then the BQR and based on this team receive their [indiscernible] for all team members half of the BQR, is a company BQR, and half of it is the business unit BQR except of course for the central corporate -- corporation. So here you will see also we're coming more together, the increase in cross-selling and we increase in of course also, that we have a fair bonus system that, by the way, is now also applied to more than 105 additional team members, but we're not on the bonus scheme in the past. Because, again, we want to make sure that the people work hard and get good money but not salaries [indiscernible]. The figures result in slight changes, as you see here. We have an increase on the automotive side compared to the past, if we're going to buy the core industries, but mainly, as you can see here, we still have it's 3 pillars automotive manufacturing and aerospace, but we also have some slight changes on the [indiscernible] portion. There's an increase on the retail side, as you will recall, and also on the public sector side because of ISR. So we were able to increase this, and as I mentioned on my slide when we talk about the strategy, one of our strategy is to keep our costs in the 3 main pillars aerospace, manufacturing and automotive, but of course, opts to increase our presence in the other segments so that we are much better prepared for COVID situations that we were in the past because as you already recall these 3 pillars were all affected by COVID. And we would like to be in a more diversified areas that we can much easier switch in then in cases of COVID or any other pandemia that comes or switch to pharma or a public factor, which is used in those cases, much more stable. Now giving you just some highlights on what we've worked for in 2022 on the operator side. So with the 3DS Solutions. This is the deferred business. They have a very nice and close corporation with SALOMON, which is sport company based in France what we did within a very nice project on their digital cumulation of their product, created some digital twin and our French team was, of course, also able to work with them on their ESG results by introducing some of our products. Then during the WALDASCHAFF automotive, supplier also a very nice project to mention where we simplified, so the process is between their different departments and increase their performance and also increase the EBIT. So this is, I think, a very nice reference projects to mention. Digital Factory Solutions with our own proprietary software, FASTSUITE called we were able to under several together these 2 nice reference projects with the STICKEL GMBH, which is a company in our area, focusing very much on spot welding and will we improve their production processes with our solutions. In Melton Machine & Control Company, we will be bid some offline programming the solutions as well. So all related to OLP, which is our new focus for this division and will be also positioned the bots, the robots in the production process is in a much performing situation than they were before, resulting also in increases of the EBIT. SAP Solutions had a very nice project that started with Gruner AG, which is family owned very grounded and nice company here on the stadium out in the electrical business. So what they do is basically relay worldwide. They are initiating champion, they're the market leader in the relay business. And of course, we were able to connect their SAP infrastructure to our PLM system that they have in place and which, of course, the gains for the now some' advantages in the digital process. And then the company ENDRESS+HAUSER that some of you might also be familiar with, which is already a very large company. They do a measurement, the global leader in this kind of measurement instruments, very specified, very detailed -- and there, of course, we had about 3,600 users that we could connect now to our SAP Solution or to the [ ERP ] and the PLM solution. And finally, to mention a very large project, which is just started, to my opinion, because there's a lot of opportunities, a company called MTU. As you all know, Aero Engines. This is now the civil portion. As you all know, there's also a defense portion. We haven't touched this yet. So this is one of the opportunities. And the second thing is we have started here now with getting our EIM solution with artificial intelligence introduced so that we can securely manage all the documents, especially in the custom's area. So if those turbines are coming back from the airlines. There's a lot of customs documents attached to this one, several piles of paper. So for each turbine, there's one truck only with paper coming in, and we're reading all the papers and then making sure that we extract the custom supplement so that within some seconds, the customs is done, they can work on the engines and then resend it without any difficulties. So this is a major improvement for MTU. They were totally surprised by the advantages of this, and this is why we expect also that there will be more projects to come because MTU saves by this quite some money in a 7-digit area. And so that's why we're sure that there are more projects to come, it's on the top level at MTU that they are focusing on. And then last, but not least I mentioned, a very nice project that we have started together with the German Ministry for Researchers and supported also by them, the Digital Business Solutions area, they are working on what we call biologization of technology means. And you see here a nice tree. So what we're trying to do is translate from the trees, the construction processes. So with the small part of the tree on how to carry all the coverage of such a tree and how to translate it into production. And this is now inside of saving energy and in savings, of course, also that construction time. We're working here closely together with Airbus to translate this into the next generation of planes. So this has been 2022 on the organic side. Just to give you a very brief overview on the organic inorganic growth. As you all know, we acquired ISR, you've seen with a very nice impact on our figures, honestly, they saved a little bit over EBIT that we've seen here. Otherwise, it would have been at EUR 5.3 million. So, a very nice portion. But apart from this, we gained also new technology on top, which is called to [indiscernible], and you will hear about this in the future because it looks like that this new technology, this new platform that we're using here have quite some potential to outperform any of our focus. Then we have done a sale over a 2.5 acquisitions last year. We already had 51% of CORISTO just increases to the 100% last year. And then we took on in Romania, a former full partner called merged engineering and fully integrated them into our Romanian hub to expand our activities there and of course, to strengthen to the East European market, and there's already some payouts that we see now because of the Ukrainian war situation with Russia, there's a lot of companies that are pulling back from the Ukrainian and Russia in now setting our plans in those areas in the East, Eastern Europe, especially Romania. And this allows us, then, of course, to support them on site and to have our sales and teams. And then for the acquisition of this year, MIP. And there's more to come. We have currently some in due diligence processes. So there will be some surprises coming in the next weeks, Share Information -- I think, as I said in the beginning, we stayed pretty stable. You see here compared to other peers. We are on the same line with the above peers, like I mentioned machine, all other ones performed lower than we did. And I think this is a good news, and there's hopefully more to come with this. And then final slide that I would like to mention. And then I think it's time for you to ask questions,, as we had done just an update on the shareholder structure. Please give you this one, you would see that there's a slight increase on the front on slide and there's also capital that is new newly mentioned, that's been already mentioned last year. But just that you review this one and what we also have shown because I've been asked several times for this what the management and Supervisory Board for dictation as you can see here, for the first time, we're also showing this 0.3%, 4%, all of the health by the management. And of course, I'm also included in this, and I hope that once we're done with all the diligences and have done some changes here that I will be able also to acquire some shares in addition. Now looking to 2023, as I said [indiscernible] part of this has been also that we have done some restructuring, and this is why I just came back Japan. You've seen the press release that we launched yesterday, we sold our [indiscernible] net shares a Chinese entity, that was less making over the past 11 years to the big the whole partner or the largest so far on our called [ AG Graphics ], based in Japan because we think that this we will be able to boost our sales in the Japanese area. So far, we have sold in Digital Factory Solutions so FASTSUITE only. And in the future, we will also start selling some SAP Solutions from all. So this is a very close partnership that we're starting with a very strong partner in Japan, also about EUR 123 million in revenue, more than 1,000 employees. So this will boost us and would help us to increase our presence in the Asian area because they also signed an agreement for the master reselling of our products and not limited to Japan, but as well also to South Korea and we're sure that there are some other countries to come. And final thing, I've also mentioned already there will be acquisitions coming. I expect that in the next 2 to 3 months, we will release several releases against press releases. We're working at the moment, and I think up until here, I can say to that we're working on through the diligences and let's see what's the outcome. So at this point, I would like to start, and I give over to you if we still have some time for questions.

[Operator Instructions] And we already received the first virtual hand, please go ahead with question.

So my first question is related to the margin topic. You highlighted this in your presentation, and I think an important topic, because also, if you look at margin you are guiding for this year, there's still a good way to the range of 8% to 10%. But on the other hand, you mentioned also that you are looking for M&A targets with a 10% margin. I think the 2 sides of the metal, because on the one hand, we are talking about margins before you buy and then you have to look at margins after you bought because there are intangible efforts you put on your balance sheet, which were not present before. So will you really be focused on reported EBIT? Or will you maybe change on, let's say, PPA adjusted EBIT for you will be forced to due to the M&A effect, which will come from PPA and which will dilute your reported EBIT in the future because, M&A will be a large part to come also to the EUR 30 million in revenue?

Absolutely right, Mr.[indiscernible]. Thank you for this aspect the question. You're absolutely right. This year, the only impact is of course IRR. That's why we stick on EBIT so far. But for the future, we will show you both lines, so that you achieve PPA basically also then we will focus much more on the EBITDA as well as a driving figure. So this is definitely the case. But you know Mr. I'm trying to be very transparent and to show you then those figures also in future.

So you will stay on reported EBIT?

Yes, EBIT and will also focus much more on EBITDA, but we will show you what EBITDA effect of, so that you can always track us. And again, our idea is, as I mentioned before, we try to keep this a little separate because we will only integrate when we are not impacting our companies anymore. And yes, the PPA effect is one, but the other one is I don't want to say, hey, we achieved 10% overall by just adding good companies and basically keeping the old company so say, I don't want to judge anything here, but you know what I'm talking.

Yes. Then the last point on your margin side was the synergy effect. You have already a feeling how much has been entering on top of your EBIT line from 2024 onwards.

I would not want to give any guidance. Mr. Shang. I don't want to give any figures in here. I assume when we meet next time in one of our investor meetings, we can discuss a little bit about what potentials are with risk and chances, attached to this. I have figured from my past that I know how we work in other companies. And I think depending on, of course, also the acquisitions that we do, I'm sure there is a nice potential for those synergies, but I don't want to take any figure at this point.

And then on your revenue guidance, how much of the increased by EUR 118 million is coming from inorganic growth from today's perspective?

When you talk about our guidance, you mean 2025, the EUR 300 million or are we talking about the figures that we presented 160-ish million?

Between 2022 and 2023.

Okay. Well, this will be including, of course, IRR will be in the range of EUR 100 million of acquisitions, including now and the relative organic growth in acquired [indiscernible].

As we talk about different things. I ask what is the inorganic growth from 2022 to your 2023 guidance, so I get between, I don't know the exact number for 2022, but EUR 160 million and EUR 180 million. So how much is coming from M&A, which you have done now in the first month of this year and from ISR and other what we did last year, which is now included in the EUR 180 million, which how much of the revenue do you take this year was not included last year?

Okay. Not included last year. 5 months of ISR, which reflects about close to EUR 10 million. So this is the figure. And then, of course, what is -- what has to be then included is about EUR 3 million -- EUR 3-ish million of EBITDA that is, of course, then in our forecast for this year included.

[Operator Instructions] And we move with [indiscernible]

Thank you very much for the presentation. Just two questions from my side. So the first one, in terms of financing, last year, you got a bridge loan at 2.5%. That seems pretty good, but interest rates, do you currently see and with what maturities we want to finance your further acquisitions? And the second one would be, can you go -- can you go a bit more into detail about your churn rate. So how relevant is this number for you? And what are the main reasons that your customers be [indiscernible]?

Let's start with your last question. The churn rate is very important for us, and of course, the attractive. This is something that we're looking at. The question is, and this is where you can always treat with the churn rate. What do you refer to the number of customer or whether you refer this into the revenue that we lose in with the customer. And if I refer to the revenue with the customer, I'm not so happy that we lost Swatch and a bot in Switzerland because this good for about close to EUR 5 million in revenues that we have to overcome. And still, we have the organic growth. So these were 2 large customers that we lost, unfortunately. And what I mean by loss is, we haven't lost them over. They were fixed by full directly and we are basically doing some support too, but this was the cost was about EUR 1.0-ish million, so this was nice customer and maybe [indiscernible] but any how we are looking at it other than that. We haven't really lost customers. This is maybe also a little bit related to our product, but also our strategy because we try to be very sticky. And I think, we are doing a very good customer support work. So we have very much improved now in the [indiscernible] and the contracting of all customers. We have a review of our what we call dominant customers, we were going after to make sure that we support and that we see what's going on and don't give any opportunities with those customers. So there we have definitely improved, and that's why I can say the churn rate apart from the 2 customers, as I mentioned bots and Swatch, which are a we [indiscernible] and then percentage-wise based on revenue is still important. But if, I just put on a [indiscernible]. On the acquisition financing, we mentioned before, we are just in the middle of restructuring this whole deal. As you know, open, we had a good deal with the [indiscernible]. And we are now working with them together as well as with some other banks and to restructure it in the way that we will shift this into, I would say now we started with a so-called [indiscernible] in Germany, so especially loan credit. And now we're in a situation that we can reduce our fees by going into a kind of commercial agreement where we have UniCredit and [indiscernible] Bank coming up with -- at the moment, we're looking at EUR 40 million and then included EUR 26 million that we have bridged into this whole amount. And again, yes, the interest went up. But of course, we're trying to keep this at a level that is still, I would call it normal. I mean we have to be honest, with what we've seen in the past years was not normal. And what I consider normally the area of 4% to 5% interest rate. And of course, we will go into this also then for the future. So that we have enough firepower because you've already heard, we have some acquisitions in the pipeline and that are coming up with everything as well. I mean 2, 3 months. And then, of course, we have to make sure that we can finance this. So this is all in preparation is all happening with a normal interest rate. And then for the future, we will continue to try if interest goes to rose with night restrictors a little in our capabilities, at least with the financing by banks and then maybe we have to think of other options. And like I always said, you will also see this from our invitation for the shareholder meeting. We have included now also the option to do capital increases, which we did not have in the past. Again, this is not our intention. There is no reason to do a capital increase. But, I want to have this one too. And the second thing is, like I say said, we will only do capital increases when there is a nice target in a large amount. And if this comes up, then of course, we release for this because then we can finance the end what I mean by regulation area, I don't know, EUR 50 million, EUR 60 million which is buying a higher, which is usable. So just a little bit of the idea. We're currently working on this. And I think that latest in the shareholder meeting, I will report about this because then we're done with it. We're in the final change [indiscernible] with our bank. We will have 4 banks because [indiscernible] and days, and I want to be sure that we have 4 pillars. So if one bank is for whatever reason, the change in the policies that we have all other options to go in the future. So I'm not a big fan of putting all coins on one desk. I would like to have different opportunities.

[Operator Instructions] And we'll then move forward with [indiscernible]. Please go ahead.

Thank you very much for the detailed presentation, Mr. Schneck, I have two questions. The first one would be on CENIT proprietary software, which was flat in 2022. Maybe you could add some color on where you see that in the future and which leverage you have for improving that or growing the CENIT software in the future? And the second question would be on phasing in 2023. If you can add any details. So both regarding the demand on top line and also profitability, do you expect it savings to come in mostly in the first half of the year or second -- second half -- so the second one will be on phasing?

Thank you very much for your question. Mr. Mueller coming to the proprietary, we've seen it stayed quite flat. And there are basically there are two reasons. Number one, SAP has been flat. So this is one of the major contributors also with our own SAP Solution. So like I always say, we're not selling in the EUR 16 million revenue, any software licenses from SAP. This is all own consulting services and mainly licenses. And the other proprietary software that we have is DSS. DSS, we had last year a restructuring year. DSS was running into like in the past 5 years for the EUR 3 million in losses. So we are here redoing, we have changes in management that we've done. And that's why our focus is not in increasing sales and the activities, but first to get our homework done before we can focus on now also on the increasing as well. And one of the other softwares that we see now that is increasing, but you see this now in the configured is the ISR and EIM software called [indiscernible]. We of course now have shift also to the ISR figures. And there, to be honest, in the first year, we have to clean it out a little better to get them back into this portion that we have here, because now they are including ISR figures and not separated as many services and everything it was because it was the first year with the digit consolidation. And there's also something that we will show in the future that we haven't done yet. As I mentioned already, there's a high potential for the platform that we acquired also by the acquisition of ISR called symptom. And this is a platform where you basically can upload your documents and artificial intelligence restrict all the data that you're looking for intend to be just [indiscernible] So this is the MTU project that you see there. So this is already goes in the production owned by this platform, but it is now shown under services. So we -- I think on the right side, we have to prepare it a little better than you will see that in this year, an increase into the figure, I've always said our target is to be in the range of EUR 15 million by 2025 revenue portion of our own software. I know that already by now, we're higher than that. So although the figures we are showing a bit different, but again, is due to the dilution effect that we have in our consolidation. And we will clean this up,then we'll show you and also increase our target. Obviously our proprietary of our target for 2025, at least it's 20% of our revenues. Coming to your second question, the phasing. So to be honest, we're struggling every year with the one problem we have the hockey stick in the last quarter. There are 2 effects that are improving now. We've seen services of course much easier to predict. And if we haven't really then, if we don't have the services booked, then they are lost. So this will help us to have a little bit more prediction already in the first quarter or over the whole year, because it will be pretty steady and it is pretty good to proceed. Now the license sale, to be honest, we're not that good yet. It is still a major portion third and fourth quarter like we had this last year. But we also have changed a little bit our internal forecasting so that we can already put our teams under pressure and also with the new bonus system and they spoke earlier than the last quarter, so that we have a much better predictability because we've seen also last year, we had to do a warning, which also relates to certain indications that I would like to have much, much earlier on this one. And the third positive effect to say so. I mentioned that SAP has been flat. The truth is SAP hasn't been really flat. It is just a major shift that we see now, especially in the SAP industry from your buying licenses that we can book to SaaS business and of course we take 2, 3 years and it is spreading all over the whole year. So the nice effectiveness that you have a much better predictability and you can book it, over the year in a very steady way. The full effect is that when we get the order, we can only book a portion and not like we had in the past this increase. So this you see now in SAP, so SAP will bump up in the coming years, but it will take 2, 3 years until you really see this because it's the typical shift that you also see in, I think, everything that is related to the SaaS businesses that we are [indiscernible]. I hope I could answer your questions.

Yes. Perfect. Maybe one follow-up, if I may, just quickly on the restructuring of proprietary software. So do you expect the funding effects to come in this year already? Or is that more of a medium-term effect?

I expect this year already some simple effect because actually, there has been an investment in the past from ISR as well as last year, there was the revenue contribution, but no EBIT contribution. So this year, we will have EBIT contribution on the ISR side by simple way. And then again, we will clean it up a little better, so that you also see the increase of this will also be done this year, so that you really have the full percentage of our proprietary software.

And we will move forward with the question of [ Florian dara ].

Mr. Schneck, I'm from Stifel [indiscernible] today. I've got three questions. First one is you mentioned you're currently working on 3DS. Could you give us maybe some color to the size of these? The second would be about wage inflation. How much does this has been hurting you? And if you have been able to pass on these costs to customers? And maybe what do you see going forward in that front? And the last one, looking at your segment, it seems like you only doing the consulting in service segment, which you have stagnated in sales but not for ISR. And where -- how do you plan to grow going forward, especially looking at the 2025 targets?

Yes. Thank you very much. A lot of your questions because also best regards to your colleagues. Starting with 3DS. As you all know, I'm not allowed to talk about it too much. We envision that this all 3DS will take late this year in the time frame that we are expecting this, so in the first half year of DDM. The impact will be a revenue of about and now up down EUR 20 million on top to what we have already. So the sizes are from EUR 5 million to about EUR 12 million in total with one organization. So you can see that it will be in this range that we're looking. And then, of course, that's also MIP that have already EUR 2.6 million that you have to include. So overall, I would say the EUR 20 million. And what I just want to mention is when we enter into 3DS, we do the only under exclusivity, and we already have an MOU will basically has agreed on all major issues upfront before we go into the FDA. This is something that I've introduced that I've been always successful whether I don't want to waste my time on 3DS and then to decide that it is not the right way to go do. That's why, to be honest, with we don't find anything if there's no red flag upcoming, it's pretty certain that is going to happen. So that's my answer to your 3DS question, and I apologize if I cannot go into more detail. Maybe what I can add there will be one that is related to digital business solutions, and there will be 2 that are related to SAP services. Like I said, always in the past, I want to make sure that we strengthen the other pillars, so that we have a certain equilibrium to our activities with the force. So this goes in the right direction is fully in line with our strategy. Then the wage inflation and the increases, yes, of course, this is an issue. We had a wage increase in the area of about 4%. And then the onetime payment that we have done. So overall I think 4.7% or 4.8% of -- say, close to 5%. Then of course we had to grant our team numbers in this onetime payment is as you -- some of you might be familiar with internally, there is a tax opportunistic or tax free option to give the money to the employees to bridge the increased inflation. And we've done this depending on the level of the salary. So it's not for everybody the same from a little bit depending on what your salary level is. So the higher salary is, the less that you receive, which has been very well appreciated by our team. Now you're absolutely right on the other side, we'll be able to hand this over to our customers. Yes, we will. Even large customers fully accept situations, so we have an increased our prices -- we had a price program that we were also running at the project to make sure that we're not skipping one or the other customers or the uncomfortable customers that nobody wants talk to. So they really have checked all the boxes and went through this and have increased the prices to our customers, which includes, of course, the also framework contracts. So using the framework contract with a large aviation company has been increased. And on the other side, the daily rate, of course, to all our team members have been increased as well. So bottom line is this should not have an impact on our EBIT level, and this should not eat up any of our profit. So let's passed through to our customers or also future customers. And then on the sales growth, well, you've seen we had an organic growth close to 5% in some areas, which is DBS which is services, again and, of course, still also activity in our -- in our DBS area, which is around, of course, so. But, you're absolutely right. This is more likely related to service and consulting as well. We are on a margins than we do on the sales side, because the sales of licenses, that's why we have very much pushed and focused on the last year. We will be here, of course, also put a focus on starting more sales activities in the licensing again. And both of those will be part of our strategy for the coming years. So part of our strategy is that all entities have a 5% organic growth rate in their plans and to achieve, and which is then also part of what I call before explained BQR, that is quality ratio. So I expect every business unit to grow at least by the 5%, some of them have 10% target organic growth. And then, of course, the organic of the inorganic growth is considered as inorganic growth. so just that you're also aware of this. We consider this for 2 years as inorganic growth, and then we will show this in the organic growth than in the future as well.

One last question before we come to end. Are you planning to change segment reporting or introduce new KPIs?

Yes, we will. So as I mentioned before, I'm not showing the segment presentation. I'm not showing the segment result at the moment, because our competitors could read into it very easily. The more positions to do, and that's why I call these business units that we have now that will change from a standard business unit to a portfolio. And once we have those portfolios, then we will show the full segmentation, but not isolated into the different portfolio companies. So then one of our competitors can really lead into it. But at the moment, I apologize that again, this would be too easy. I mean, if you imagine SAP Solution. it's only 1 proprietary software. The moment that we include some other entities that would be much eager to dilute and maybe also to a high in certain areas, as well as there's another portion of our customers, you can imagine that if you just have one customer in digital business or services, as we have so far with Airbus, I don't want to disclose our EBIT margin, because then I'm sure that the purchasing department will call me up and ask for, hopefully, for some raises, but which is a reality will be to have some discounts. So that's one we're not sure. But yes, we're planning and we're targeting to do so in most of my investor meetings that we have, when I -- on the conferences, I'll also share them with the investors, but I don't want to do this in such a public environment because I don't know who's all that in and the other thing is, of course, I don't want to disclose this on our website so that our competitors could easily read introduce. So we will show this. On the KPI side, yes, we introduced already BQR, which is completely new because I want to have growth and not only EBIT and as Mr. Shang rightly to say so mentioned. Of course, we will shift in future also to EBITDA. We're showing it now that maybe to split it a little bit more. And then also, of course, on the impact of the depreciation in the PPAs that we have related to the companies that we acquired. So we will all show this, I will also introduce churn rates for our employees and those kind of things. But again, at the moment, some time issues with the other one is, of course, also relating to the competition. We're not going to share so much. But the more and the easier it is for us to show it in a wash, then I think it's easier also to show this to you, but other than that if you are joining us on the investor conferences or if you have a meeting with me, with all of you can always set up. I'm more than willing to share with you certain figures, I know that we are talking too.

Thank you very much. Well, I think there are no further questions. Thank you for your questions. And thank you very much, Mr. Schneck for the detailed presentation and your time answering all those questions. For some final remarks, I hand over to you, Mr. Schneck.

Yes. Thank you very much. I thank all of you for your time and for your interest into our company and our shares. And of course, also thank you very much for very interesting in guiding for us is because every time I take also all of your questions to improve our transparency. I invite you. You see here our financial calendar, which for the second half of the year will still be extended. But you can see here where you can meet me with in the coming months and I'm also willing to answer all the questions besides this, you always feel free also to contact me directly, and we set up a meeting and I can run into some more detailed figures. And finally, I think 2023, it will be a very positive year for us. You heard already, there are some acquisitions to come. There's a sale boost expected. At the moment, we don't see any difference. We haven't included defense figures that we did last year, although that we see the difference is bumping up. And again, I'm at your service. I see myself as in service of all our shareholders and partners, and that's how we want to do this. And I want to make sure that we perform this year exceptionally well. Thank you very much.