CENIT Aktiengesellschaft (CSH) Earnings Call Transcript & Summary

Good morning, and a warm welcome to today's earnings call of the CENIT AG following the publication of the half-year figures 2024. The CEO, Peter Schneck, and the CFO, Axel Otto will speak in a moment and guide us through the presentation and the results. After the presentation, we will move on to a Q&A session where you'll have the possibility to place your questions directly to the management. We're looking forward to the presentation. And with this, I hand over to you, Mr. Schneck.

Thank you very much, Ms. Bennett and a very warm welcome also from my side to this earnings call for the CENIT half year figures 2024. As always, I kindly ask you to keep your questions for the end of the session. And of course, we will run you through now the figures and the latest news of our organization, and I would appreciate if you have a lot of questions that we will answer by the end. As usual, we will, of course, record also this session that you're just aware if you are talking or if you don't want to be recorded then please -- they will speak up. You can send your questions also in our chat function. And of course, Ms. Bennett will read those questions with your name, if you don't want to be recorded. So let's jump into our -- let's start on our first half figures 2024. And I think that we have quite a good news as you might have seen already this morning when we released the figures. As you see, we have a nice increase of 13% in revenues from EUR 87 million to close to EUR 100 million. This is for the first time that by this time of the year, we're close to EUR 100 million. And the reason is, of course, as well the acquisitions that we have done in the last year that this year are for the first time included in those figures. So this includes, of course, CCE, which we have acquired by the beginning of this year, but of course, also if you compare PI and ABC figures of the first half year that were not included in the last year. Now what is the other very important messages as well? We have cleaned by all kind of acquisitions, a very strong 5% organic growth. As some of you know, I had for quite a while, a discussion with my team when I started here, whether 5% organic growth is possible or not. And the good news is now we're having the discussion whether 8% or 10% organic growth is, possible. So we're over this and as you can see, we have increased and started and I would say, maybe also woken up the organization to get into this minimum modus of 5% organic growth. And of course, I have to outline this also in the given situation. As you all know -- and I had a lot of questions also from the analysts and some of our shareholders, you know that we have a major customer, Volkswagen that is announcing today that they are quite under pressure. We have Airbus that has sent out an earnings call. We have our major partner, Dassault, that had as well a warning sent out. So -- and of course, our customer ZF, that is releasing 14,000 employees. So you can see there's quite some pressure. And still, we are in the mode that we can increase our revenues. And also for the second half year, we are very confident that we will continue this path. And that given the strong and hard environment that we're facing that we will stay on track. And you will see this as well in our order backlog. We have more than 20% increase compared to last year in the order backlog, which is, I think, also a pretty good sign and still, of course, also this movement from the one-time PLCs into the SaaS business, which is, I think, now quite common for the SAP but also for the Dassault business. Now when we look into the EBITDA, if you look at the figures on the first glance, you see that we just have an increase of 0.9%, which is basically almost equal to last year. But what you have to bear in mind -- and this is why we've shown here the so-called adjusted EBITDA, this is just to give an explanation so to better understand why we have the flat growth in the real EBITDA. Last year, we had the deconsolidation of CENIT Japan at the same time. This was an effect in the EBITDA of EUR 871,000 and you will see the same effect as, of course, also in the EBIT and what we also have this year is a major increase in M&A-related costs. As you can see, we have done the acquisition in the U.S. We had to pay a finance fee for an organization that was looking for us in the market. And of course, we have major legal and as well also tax cost. So that if you include this, the jump is honestly from [ 5.1 ]. So this would be the deduction of the CENIT Japan effect in 2023, up to EUR 6.4 million, which shows you that we have an increase in EBITDA of 25.9%, which is, I think, a pretty good achievement in those given times. Now if you look at the same effect in the EBIT, on the first glance, you see that the EBIT dropped by 23.4%, which looks on the first glance shocking since as you all know, we are targeting this year EUR 12.2 million. And of course, you could raise another question, how do you want to get and achieve those missing EUR 10.2 million as you get into your ballpark that you have guided. But I think also here, you have to bear in mind, first of all, we have to do these adjustments that will be -- or this effect will be, of course, also leveled out in the second half of the year because we only have the cost of the acquisition compared to last year for the U.S. And of course, we don't have the special effect that we had last year for Japan. So if you adjust it by Japan and the M&A effect, then you see that we have an increase of 33.2% from basically EUR 2.0 million to EUR 2.6 million. So this is as well a major achievement and shows you also, despite the costs that are included now in this one, what we have done, we're running in the background, like I always announced, some organizational changes and optimization. And those optimizations will result in another EUR 3.1 million optimization savings or EBIT contribution in the second half of the year. So if you compare this, and this is what I tried to show you here, in 2023, we achieved the EUR 2.6 million. And we still had a way to go of EUR 6.6 million to achieve our final figures of EUR 9.2 million. So basically, 72% were missing. If we now keep this EUR 2.0 million of this year, and we adjusted -- we don't adjust, we just add the optimization cost, then we have another EUR 7.1 million missing. So similar to what we had last year, percentage-wise, even a bit better that it's missing. But as you can see, this is achievable, and we are still confident that we will also get into the ballpark. You've seen also that we haven't changed the guidance. And we have recently just signed this agreement with Analysis Prime or the acquisition of the 60% of Analysis Prime in the U.S. And we are still in the middle of adjusting and reviewing the revenue figures because we have to clean them up because of IFRS. So we have to make sure that we have the principal-agent question included. So there will be definitely an increase in the revenue. On the EBIT side, we don't expect an adjustment in a major region. So we will stick on the guidance that we're in because the PPA, so the purchase price allocation and the costs related to this one basically will eat up all positive EBIT contribution of the acquisitions this year. So this is what we see at the moment. But again, I think that in September, we will give out another guidance that will be similar but with a higher revenue figure. Now what you also will see in the figures, and I haven't shown this now this year in this upper one as a chart, but you will see that the EPS, of course, took a major hit due to the decline in EBIT, but of course, also the higher financial expenses for the funding of the acquisitions. As you know, we have a club deal where we have EUR 40 million in credits with the banks. And of course, this creates quite some expenses. And we have a special effect in France as well as in Germany on the dividend payments that we had to pay EUR 108,000 higher tax expenses. So that's why the EPS is really down by 92%. But we will work on this one. And still in the second half of the year, there's enough room to get to the figures that we are all expecting and that most of you as the analysts also have focused. We will see this now in here. We just spoke about the sales figures that's why I don't want to touch this one. But I think what is important to mention is the second line, the gross profit increased by 8.9%, which is a very positive news and effect. But what you can see, as I mentioned, the EPS in cent dropped down to the effects, as I just mentioned, by 93%. And then, of course, the dividend in the given moment by 92%. But again, there will be -- or we will face effects in the second half of the year that will adjust this and bring us back in the ballpark that we all are expecting. I mentioned already the bottom line of KPIs, very positive, 20.3%, up our order backlog. We have now EUR 71 million as order backlog, and there are still some major orders that we are expecting. As you know, Dassault has signed a very large contract with BMW, we received already a first order in this environment, and we expect that there will be more to come. So there is -- given the difficult situation in the market. I still must say that automotive OEMs are investing. They are pushing into digitalization and this is what we definitely see here in this realm. Now on the right side, what I would like to outline is, of course, the cash that went up positively by EUR 4 million as well as the equity ratio slightly improved to 30%. As you all know, our internal covenant is the 25%, where we don't feel comfortable anymore with our banks. It's 20% as a covenant in our club deal credit agreements and also in future, if we sign the syndicated loan agreement, it will be the 20%. Still, for us, the limit is the 25% and as you can see, we are also after the acquisition of Analysis Prime still in line with our equity ratio. Then very positive improvement as well. On the free cash flow side, you see that we have improved by EUR 2 million from EUR 7 million to EUR 9 million -- EUR 9.4 million, which is, I think, also a good sign for our EBIT development in future. Now going into the sales types by revenue as well as by the segments. What you can see here as well is the consulting and services business, which is mainly SAP and the AEM business, has increased by 12%. At the same time, and I think this is a very positive news, we have increased our CENIT proprietary software by 21.7%. So we're now at EUR 9.29 million, our own proprietary software sales, still a way to go. Still, our goal is that we increase this one because, as you all know, this is where we make margin, and we know that in the second half of the year, especially in the AEM business, there will be some PLC deals as well as some, of course, now changing also into SaaS, but this all plays into our proprietary software solutions, and that's what we have to push. At the same time, our sales on the third-party software, which is mainly, of course, Dassault and IBM solutions has increased by 13.4%, now to EUR 50 million, which is also, I think, a very impressive movement. So again, given the difficult times on market environment, as some people say, we are trying to find our ways in our niche. And I think there's enough potential for CENIT to improve and to speak on those figures and also to continue the path as you can see it in here. If we go into the segments, you will see AEM, which is our documentation business, is increasing by 9%, now to EUR 20 million. We are still expecting some major PRC deals in the second half of the year. We have already gotten now in July, which was, of course, not reflected in those figures here, a major deal of CHF 1.2 million deal with the Allianz in Switzerland, and there's more to come. So we're very confident that our team members in AEM by the end of the year will even have a higher figure than what you see here. Now on the PLM side, which is Dassault as well as the SAP business, disparities always in mind, we have a 14.8% increase. So despite the difficulties that Dassault is facing and the warning that they were given, as you can see, our plans were, I think, realistic and more conservative. So we were not surprised by the warning of Dassault. And as you can see here, we are still following our track. But of course, what we also have to mention is the SAP business is doing better than we have expected. So at the moment, they are above plan, and we expect them also to continue this until the end of the year and maybe to cover one or the other gap and new pool that we will face in some of our other divisions. As you all know, we have these 5 business divisions and our idea is that they work together in a kind of wave. So if one department is struggling, then the other departments will help and, of course, make sure that there's no gap, and this is exactly what is happening. And this is what you also see here overall in our figures that are, I think, pretty good. Now these are now the Q2 figures. I don't want to spend too much time on this one. You will, of course, see a very detailed report as well as some more figures on this one on the extended presentation that is available on our website as well as the half-year report in a written form where you have much more detail on the half year as well as on the Q2. But I would like to mention or to outline here that the sales also in Q2 went up by 10%. So this is a continuous path that we see now, and we expect this now to boost in the third, but especially in the fourth half of the year. As you all know, unfortunately, we are still fighting with the hockey stick, but we're all happy that we have some hockey stick because otherwise, there would be still a path to go. Now if we look at some of our customer highlights. Just in the second quarter, so the first one I don't -- of the first quarter of the year, like [ Beltex ] and others, I don't want to mention. But here, you see that also in Romania, where we have our subsidiary, they are not only a near-shoring hub, they are also focusing on the East European market, and this pays off. So our first acquisition now here with -- sorry, not an acquisition say it with [ Valeo and ] as our customer introducing 3DS where we were able to bring in the Dassault solution. Then of course, in France, we have a wiring company, so metal wiring company that is using DELMIA Ortems. So this was an existing customer of our SAP division that introduced now DELMIA Ortems, which is a solution that CENIT in the past was not pushing too much. We have created our own team as well as also the PI team in Berlin is supporting this solution and the first nice success of this investment is, of course, this customer in France. And then a nice automotive company that we're allowed to mention in here that also went for a cloud implementation in the Dassault environment. And as you can see, this shows you also the automotive supporting companies or suppliers, they are struggling, as we all know, ZF and others, but I think the only way to escape and to stay in the German market or to at least to have the production sites in Germany is to invest into automatization and automatization requires digitalization. So we're step 1 that happens through CENIT and then they can use the resources in different manners can optimize and cut the costs. So of course, also some M&A activities of the first half year that I would like to mention, you are familiar with what we have done in the last 2 years, always -- over 3 acquisitions, as we have announced. Now this year, we have started with CCE company based in Bissendorf in the north of Germany in the 3DS environment. We already reported about this one that's why I don't want to go into this company too deep. But the company that I would like to mention is Analysis Prime, a company based in the U.S., having 72 employees in the Chicago and Philadelphia and -- area that located and we acquired 60% of this U.S. company for, to my opinion, a very fair price with a reasonable multiple in the U.S. environment. As you all know, we were fighting here with about 300 companies that were interested into Analysis Prime. This is an excellent team of 72 high-end specialists in the SAP Analytics environment. And some of you might not know that we already have 55 employees in ISR that are also doing SAP Analytics in the German market, but they are more likely doing infrastructure. So they're implementing the solution. They make sure that the solution runs. Analysis Prime is at the other side of the scoping. They do the dashboarding, they make sure that the figures are right and that the management are looking at the right figures. And this exceptional team around Paul and Graylin have quite some impressive customer base like Microsoft, Google, Texaco and PepsiCo. So you can see there are some heavy customers in there that also have the potential for our CENIT organization to introduce our solutions as well as all our existing 10,000 customer base that we have to introduce now SAP Analytics. This is, of course, also supported by SAP itself. So this was in close alignment done with SAP. It expands our presence in the U.S. You know that we have customers that are moving to the U.S. So we are following those customers. That's why we had to increase our customer base in the U.S. CENIT U.S. is only on North America, only has 13 employees as of today. And now we have added another 72 as a base, and we think that now this will be a door opener to the North American market and also Analysis Prime itself will, I think, face quite some boosting in the future. For this year, the company has forecasted or we have included EUR 24.8 million revenue for the total year. We will start the consolidation by the 1st of August. So it will be then, of course, less of this. And please bear in mind, we have to clean it up under the principal-agent review. That's why I cannot tell you what will be included in our 2024 figures in the -- on the revenue side, but the team in the U.S. has forecasted for USD 29 million. So there's quite some potential. We just wanted to be a little bit more conservative, and that's why I think there is potential that this team will over -- exceed what we are expecting. And this might then, of course, also have an impact on the EBIT line, including our EUR 24.8 million, and then, of course, the consolidated or partly consolidated figures, we expect for this year no profit contribution because it will be eaten up by the PPA and by the costs that are related to this one. And as I mentioned before, it's a little different to what we face here in Germany. Typically, our costs are in the area of EUR 100,000 for an acquisition, so for the external consultants. Here, we are in an area that goes in the direction of 600,000 because, of course, you also have a finder's fee that is included as well as attorneys that are at least twice, maybe 3x more expensive than here in Germany. But anyhow, I think an outstanding company that will also boost our sales in future. And we are very happy to have them on board and to continue with this team. Now one thing that I would like to mention in this context as well, we had -- or I had announced in some of our last earnings calls that we also have a third acquisition in preparation in Hungary. The Supervisory Board has not agreed to this acquisition. That's why we had to stop it this week. I don't want to go into further reasons, and I also cannot give you any further argumentation in this one because of potential claims. But I think I can say that the Supervisory Board didn't feel very comfortable with this acquisition and this is why we had to stop it. We have other acquisitions in pipeline, so we will continue on our path. But we will also focus now in the second half of the year on EBIT contribution and of course, make sure that we get some of the major organizational changes done. As you've seen, we expect a contribution here of about EUR 3.1 million for the second half of the year. So there's quite some impact attached to this one, and that's why we want to focus on this. And we'll then prepare everything that maybe next year, we will continue with our acquisition path. So please adjust also your views on our revenue potential one. So including Analysis Prime, we would expect that next year, we will be in an area of EUR 230 million, EUR 240 million as a starting point for the full year 2025. And then by an acquisition, I think we're very confident still to be on track to achieve the EUR 300 million or on the way to the EUR 300 million, like I always said our main focus is to achieve the 8% to 10% real EBIT and not adjusted. Now giving you also some share information, I don't want to go on share price, which I still think is ridiculous low. But what I wanted to point out is our long-term shareholder, MainFirst has reduced their shares from 8.8% down to 4.95%. Whether they continue or not, I cannot comment on to sell or to reduce the share. But at least as you've seen last week, we have launched the announcement that they went below the 5% and the next level would be, of course, the 3% where we get an official statement. This relates to the fact that we have a free float now of 61%, close to 61%. And yes, I hope that we will find some other investors that will jump over the 3% and also form our institutional investor team that will lead into the future with our organization. And to the final one before we start with the -- with your questions. Just wanted to point out today, it's the 1st of August, as you can see, we are releasing the half-year report. So in the middle of this slide and then, of course, you will see me in -- on the Equity Forum in Frankfurt as well as then in Zurich, in Munich, and on the Equity Forum in -- by the end of the year in Frankfurt again. So if you have any questions, feel free always to contact us. We're always available also outside of those investor conferences. So please [ keep this up ] send us an email, call us. What other questions you have, I'm always available. And now I will leave it up to your questions.

[Operator Instructions] And we've already received a few hands up. Mr. Filker, you should be able to speak now.

I just have 4 questions. One question is regarding the new acquisition in the U.S. You said that EBIT contribution this year -- that there won't be any EBIT contribution because of the PPA on one side and the M&A-related costs on the other side. Just -- can you just give us a hint how high the M&A-related costs are?

Yes, they are in the area of about EUR 600,000.

Okay. So that means you published in your report that new company will contribute in EBIT, I just have to look it up of USD 11.5 million in total for the whole year. So it's just...

As a revenue, yes. Yes.

No, sorry, USD 2.7 million. USD 2.7 million.

Yes. Okay. Yes.

And that means [ 1.1 ]. Okay. So it's half dependent on the M&A-related costs and half of the -- on the PPA that there won't be any EBIT contribution. Okay.

Correct, Mr. Filker. Just to make sure, as you know, we just have since this -- we signed this deal last or 2 weeks ago, so last week, we announced this one. There's a pre-PPA. And so there might be some positive/negative, I would more likely say maybe some positive effects that we will face. But at this given moment in time, we basically say there's no contribution, and we basically equal it out and say, okay, then it will be plus/minus 0 -- pre-PPA.

The next question is regarding to the -- to your information that the organic growth was 5.0%. So if I -- that leaves room just from EUR 1.5 million for inorganic growth, but alone CCE contributed EUR 2.7 million. That was for me. I didn't understand the math behind that.

This I can show you, Mr. Filker. We have some countereffects that we had last year with the deconsolidation because we took out some stuff. And then when you add this one, I will show you the math on this and -- or I can send you the math on this one [indiscernible] contributed on this one. So this 5% is the net 5% of this math.

Okay. Okay. So that means that last year's figure was adjusted by the effects of the company's...

Yes. Yes.

Okay, I understand. Another question is the…

Filker, just one other thing maybe for everybody here in this round. The organic growth does not include PI and CCE and all these kind of companies that we did. We only include them into the organic growth when we have them in a full-year view included -- or so if they are part of 1 full year in our figures. So that's why you will not find in here MIP, you will not in the organic growth. MIP, PI, ABC and of course, CCE are not included in organic growth. This is all inorganic growth.

Okay. CENIT software sales are going up, but the cost of materials -- so the ratio of cost of materials also went up, and that's not a normal picture to expect because normally, we say, okay, CENIT software sales are going almost without cost in the margin. Can you just explain a little bit?

Yes, the cost increase that you see on the material cost is more likely related to some projects that ISR is running as well as we have on the 3DS side. So it's not related to our own software or proprietary software increases. So we haven't done any special developments or any additional developments other than what we had in last year. We also have an increased teams. So it's basically the same. So these are effects outside of our own proprietary software.

Okay. Okay. And just the last question. You already said that for this year, you won't expect any M&A and -- any M&As, just for the future, would you say that the high speed of M&A also has risk from this? Or do you want to concentrate now more on the organic growth and integration of the already acquired companies?

First of all, I think the risk of M&A is the same as it was in the past. So this hasn't changed. I would even say that it has become better for our organization because our organization is now used to M&A, is as used to the onboarding process, and knows exactly what to look at. We have some lessons learned that we do after every acquisition. And I think the team is now getting better and better. We have done now, I think more than 12 acquisitions in the last 3 years. So I think we're in a very good mood. And I would say the risk is less than it was maybe in the past, but there's always a risk attached to this one. This is not the reason why we are maybe slowing down a little bit. The reason is more likely, as you mentioned, and as I always said -- I said in the beginning, I will focus on M&A to buy time and to buy, of course, also EBIT because we could not do the restructuring of our organization without either a restructuring budget, which would have lowered our EBIT dramatically or on the other side, having this time and also budget that we bought by the acquisitions. And this is exactly what we have done. Now we are at a point we have 1.5 years until the end of 2025. There's still a way to go, as you all know. And it's a very supportive goal to be in the area of the 8% to 10% real EBIT and not adjusted. And this is what we're focusing on. So we have implemented already some changes. In the second half of the year, we will do further changes in our organization. So this is not only cost-cutting, this is increasing efficiency. As you can see now as well, we have an increase of the efficiency of our organization. We have 47 additional employees, but they are more like in the area of ISR. And then, of course, in Romania, where we have some increases and then, of course, we got the CCE effect, so 16 employees that joined here. But the core team wasn't increased and still was able to increase the sales. And this is what we're focusing on in the second half of the year and especially also in 2025. This does not mean that we will not do any acquisitions. So for this year, we are -- we still have 2 companies in our pipeline that we're looking at. And it might be that in the second half of the year, they're going to happen. We would like to push them to the end of the year because it makes it easier for us if you have the auditing done by the 31st of December. But if it is required to do this earlier, for whatever reason or price-wise, may be more interesting to do it earlier, then we will announce it in the second half of the year. Next year, we will, of course, continue with our path. We also have, as you can see, we have enough cash. We are -- and we have prepared everything to sign the syndicated loan. We have pushed the syndicated loan so far since we had enough cash in our organization, and we didn't want to increase our interest. But we have another EUR 30 million plus EUR 10 million that we can sign up. And then we have enough firepower also for the next year. But again, our main focus is now, and this is what I always said, the last 18 months of our run in the Olympic environment now to achieve the 8% to 10% in 2025. This is what we focus on, and then the rise will continue. So we will not stop by the end of next year and say now everything is good, and we will not do any acquisitions. We have the spine build strategy, which is pretty successful. And down the road, our goal will be to increase our EBIT above this 10%. And this, of course, will be then the new strategy for 2030 that we will, for sure, announce beginning of next year. But this is what we focus on. So it's really EBIT, pushing our organization and making sure that we have our organization set up in a way that they're ready for the next 5 years.

I have the next hand up from Mr. Siering. You should be able to speak now.

So many points touched already, but two more maybe. The first one would be on the lower profitability. You already gave some helpful comments. But maybe you could just give some more color on what your optimism regarding the guidance is based on, do you see a better mix in H2? Or yes, really how you plan to increase margins by so much in H2? That would be the first one. And the second one, basically just housekeeping, about order backlog. You mentioned that it's up 20%. Does that bring order backlog to around EUR 60 million? Or what is this 20% growth rate based on? And can you also give us the order entry figure that I think was not mentioned this time?

Okay. Mr. Siering, thank you very much for your question, Siering. Now, first of all, your question regarding the margin and why we're optimistic. What you've seen in the first half of the year, we have the costs included, of course, for Analysis Prime, which is exceptionally high as well as the costs of CCE, which is just the 100,000 as usual. But of course, they are included in those figures. Then what is as well included is the pre-PPA for AP as well as, of course, the PPA for CCE. So this is something that we will also provide you once we have the pre-PPA done. We will also, in future, always provide you a PPA bridge so that you understand over the next 5 years how the EBITDA will slip into EBIT, hopefully, and translate into this one. So that you have a much better understanding, I think, for most of you -- especially the analysts that have their scenarios behind this one, I think this will be very helpful. Now why are we very optimistic? One thing that you mentioned, Mr. Siering absolutely right. In the first half of the year, we had a different mix than we had in the past. We had a pretty strong consulting business. And of course, we have done also acquisitions in the consulting businesses and less or -- I would say, less than what we have expected or planned revenues in the software environment, whether proprietary or also Xetra software or third-party software. So this is definitely a different mix. That will hopefully -- that's what we are expecting and what we see talking to our customers will change in the second half of the year. So it's basically, I think, a timing issue that we're facing. The second major portion, this is what you've seen here. We have for the total year, and we have already seen in the first half of the year that there's a contribution of about EUR 1.3 million that we have done by optimization costs in our organization. And this will contribute in the second half of the year, as I mentioned here as well, it will help us to achieve our goal. So this is a major contribution for us. Then there is a smaller one, but at least EUR 400,000 of subsidies that we are achieving for our products, [indiscernible] from the German government. That will, of course, also contribute to this one. So we have done already all the work. We have done already all the developments, but they -- the German government's support, as you all know, at the moment, artificial intelligence. And we participated and asked for the subsidy. And honestly, we're not expecting that something going to happen here, but the German government approved this one, so we have another EUR 400,000 contribution at this point. And then, of course, that's the normal thing that we see is in the second half of the year. We will still have the hockey stick. So we know that there are already some PLCs that will come. So this is the onetime hit. But we also know that there are some other projects that will come and surprise us. So that's what we see as the very positive part for the second half of the year. And this is why we're also very confident that we will still be in the area as we have guided. Why are we not above it? When we talk about the effects from M&A, like I mentioned before and also explained to Mr. Filker, we are more likely on the conservative side. So there is an upside potential on the pre-PPA that we have at the moment. We have a conservative view on this one. And hopefully, this -- or this might change and have an effect. And we also have a very conservative view on Analysis Prime. Like, I mentioned, there's a difference of about [ 4 million to 5 million ] in revenues between the U.S. forecast of our team and the figures that we have included, which gives us also some room to, of course, have some EBIT contribution, both revenue and EBIT. We have included on a conservative level, I would say so. And also given the fact that the market environment is struggling, we are conservative and don't want to increase, and that's why we keep everything on a level that we say it's hard enough to get to this EUR 12.2 million that we have targeted, and let's focus on this before we do any other things. Now on the -- your second question, Mr. Siering regarding the order backlog. As mentioned, the increase is on Slide 5 of the presentation as adjusted. It went up from the EUR 60 million to the EUR 71.31 million. That's now the increase that we have achieved here. It's going through all segments. So you see that the increases are in all segments. It's not one special deal, and it's not one big deal. It's I think a number of good and nice sustainable deals that we're facing. The order entry, to be honest, I would have to check. I can't say now off the hip. So we will provide this figure in -- on our website as an additional information. Sorry for this, but I don't want to raise no year figure that is not accurate.

I have the next question from Mr. Hoffmann. You should be able to speak now.

Yes. Just two follow-ups from my side. Firstly, on Analysis Prime, I'm wondering if they have a seasonality between the two halves of the year and also have a kicker maybe in Q4? And then secondly, I would like to know if PI Informatik and ABC generated a positive EBIT in the first half of the year. And do they perform in line with your expectations so far? Or are there any trouble in onboarding them or something like that?

Yes. Thank you for your question, Mr. Hoffmann. Your question number one regarding the seasonality of Analysis Prime. Yes, they have a seasonality. They are more likely also project-driven. So as you know, a lot of customers, they have the budget and they spend it over the years. So they planned them by the end of the year, they launched the last projects. Still, they have this year also already in the beginning of the year, quite some important projects. We haven't included and this is where you see now this difference because this is, I think, why you're asking, Mr. Hoffmann, we haven't included this hockey stick for the second half of the year. We try to keep it very flat. That's why we only are looking now at the consolidated figures of potentially [ 11 ] to be cleaned by principal agent. But this is the figure that we're looking at as a revenue contribution I think from the point of view from Graylin and Paul, they see higher figures, and we expect higher figures. We would love to have higher figures. But again, like I said, we are more likely on a conservative side, but it's very likely and also normal that they receive orders by the end of the year when customers still have budget and are launching this budget to Analysis Prime. Then your second question on PI and ABC Consulting. ABC Consulting was slightly negative last year, not as expected. So it was below plan. And the reason was quite easy. We had a large project planned and we hired 5 additional team members in Analysis Prime. So -- sorry, not -- in ABC consulting, and the project was delayed. So started only by the beginning of this year, and that's why we had additional staff costs and of course, no coverage for this in last year. So other than that, ABC Consulting would have been exactly in line with what they had forecasted. So it's -- this loophole is very clear and we understand this, and it's, again, based on this customer. And the order that we received from this customer is one of the largest orders that ABC Consulting ever received. So that's why -- it was an investment that unfortunately contributed to a small loss, so EUR 100,000 below 0 for last year. But other than that, they were full in line. PI was full in line and which what they had forecasted even slightly above this one. But of course, the PPA has to be always considered. So there was not a very big contribution in the last year's figure of PI. And also in this year, PI is running according or slightly above plan. So they're doing very well. ABC consulting in the first half year is also running above plan. Both entities are in the SAP business. And like I mentioned before, the SAP entity is running above plan at the moment. And we hope that by the end of the year, we will have this overrun. And if this goes proportionally up, then we're just for this division talking about at least EUR 1.5 million to EUR 2 million additional revenues to what they had forecasted and they have a pretty good margin, as we all know. So this would also contribute to our margin by the end of the year.

Okay. So with the small kicker in Q4 by Analysis Prime, would it be fair to estimate full year earnings of Analysis Prime to be around EUR 4.5 million or something like that?

Yes. Yes, it's well calculated. I think when Paul and Graylin would be in here, they would say that it should be above this one because there's an earn-out agreement that keeps them smiling when we overachieve those figures.

And we go on with Mr. Mueller.

I would have two, please. First of all, on proprietary software, which is back to growth or like in Q1, growing again. Maybe you could share your thoughts on what is working now that maybe hasn't worked in the past or what is changing in that segment? And then also on Analysis Prime and the integration, is there any differences or are there differences in the approach to integration now for this acquisition? I think you mentioned in the past that part of why you want to acquire something in the U.S. is also that you need bigger teams for the projects there. So do you plan to combine the business with the existing CENIT staff there or so actually integrating? Or are you planning to keep it running as it is?

Yes. Thank you very much for your questions, Mr. Mueller. The first question regarding the CENIT proprietary software, what have we done different? I think we haven't done a lot different. There's one effect that is some of the PLC effects or onetime hits that we had not last year are now reflected in the first half of this year. So some customers delayed some of the orders, and they're pushing into this year. So that's why we had a drop last year. Now you see this as a positive thing. That's one effect. The second effect is definitely we are focusing more on proprietary software, and we're trying to push this more than we did in the past. And also for the divisions as well as for the sellers, there's a higher incentive to keep them more motivated to sell our own solutions. And the third effect is maybe also for them, since we started this cross-selling of the different divisions, I think the team members understand better and better what our portfolio covers. And they also understand that our proprietary software, what the positive impact is for our customers as well as for them a salesperson because it's much more stickier than just selling a third-party software. And I think this affects altogether, they raise this increase in proprietary software. And like I said, I'm not happy with the figures that we have at the moment. I think there's much more potential to go for in the future. And this is definitely the area where we can improve our EBIT margin down the road. So we will focus on this one and go this path. Now the second part of your question, Mr. Mueller was regarding the integration of Analysis Prime. Like always, we do not integrate. So we definitely don't want to integrate Analysis Prime into our organization the way that tomorrow, they are stranded in North America. But what we are doing is we started the onboarding and there are now different levels of onboarding. So one of them is, of course, to our ISR organization here in Germany because they are very complementary. The customers in the U.S. need the SAP Analytics infrastructure and Analysis Prime is as of today, using a third-party company to do this implementation work because it's not their specialty. They're focused on the dashboard and like I said, and really doing the high-end figures reporting, getting it all together so that on pushing one button, you have all the information right up there. The SAP Analytics team of ISR -- and like I said before, it's more likely the infrastructure guys, if you want to say, so I don't want to downplay it, it's a difficult integration work, but it's a different work. Now they will contribute, and we have to make sure that they come together. I'm trying to slow down a little bit this process because I'm saying, let's get familiar with each other, and let's get to know each other so that we have a slow onboarding. The reality is different. The U.S. team is requesting ISR analytics and the other way around the ISR analytics team is asking for the solution from the U.S. to implement it at their customer side. So I may be the one that is the bad guy that is trying to slow this down to make sure that we still focus on the onboarding and that we're not immediately into the operational one. Now the second portion of the onboarding is what you rightly mentioned. One of the reasons why we also did this acquisition is, we are struggling in the U.S. with our entity that is just 13 employees. We have a succession issue there. Our CEO, Reinhard Staebler, will retire in the coming years. And yes, there, we see a kind of reverse integration, if you want to say so, of CENIT North America. So we will keep CENIT North America as a separate entity. But we envision that Paul and Graylin will have a role within CENIT North America organization also, but this will still stay a separate business because the SAP CENIT North America entity, of course, there will be merged with our Analysis Prime entity. But the other entities like Digital Factory Solutions and also the 3DS business is something that we want to expand. And that's something that we will do together with Analysis Prime, but from an organizational standpoint, separated because you also have to bear in mind the Analysis Prime shareholders still hold 40%. And if we just merge CENIT North America and all the businesses into Analysis Prime, then this would create, of course, later on, some frictions and some difficulties in trying to find out what their contribution was and what our contribution was when we acquired the remaining 40%. So that's why we will keep the entity separated. But in reality, the managers of Analysis Prime will also take on an important role in CENIT North America.

We have one more question. [Operator Instructions] [indiscernible] is asking also concerning the U.S. acquisition, can you give us a sales forecast for 2025? Over USD 60 million is the EBIT margin target for 2025? How is the incentivization of the U.S. management?

So thank you very much for this question [indiscernible]. Now question number one, sales forecast for 2025 by our U.S. team is far above USD 30 million. We are not including those figures because we want to be on a conservative side. So you will see figures that are USD 25 million -- or USD 24.8 million plus 5%, which is our organic growth, and this is where we try to keep it. We want to get familiar with the accuracy of the forecasting of our U.S. team. And when we feel comfortable, then we will adjust both figures. So that's why, again, there will be a difference. The forecasting of our team was USD 34 million of the U.S. team. Again, we will include the USD 25 million plus 5%, which would be then an area of, let's say, USD 27 million or USD 26 million that we are envisioning as revenues for next [indiscernible] Now on the EBIT side, also there, we have -- because of the forecast and currency, we try to play it down in a way that we are more likely on a conservative view. I think the figures that Mr. Hoffmann mentioned before, the USD 4.5 million as a vision plus maybe a slight upside. This will be the figures that we will include for next year. Our team in the U.S. is more aggressive and I think envisioning a higher figure. Again, we will see how good the currency is. The potential is there. We see really that -- and this is what they have proven. I mean, you have to bear in mind that this organization started the business in 2019. And despite COVID, they started from 0 and ended up now with a USD 25 million plus-ish, so there's quite some potential of growing faster. And I would love to see the USD 60 million that you mentioned [indiscernible], I'm not against it, but I want to make sure that we have a very accurate planning, and we have to get to know each other that Excel and PowerPoint is one version, but then we have also to deliver. And I just want to make sure that our U.S. team is also in line with this because I want to avoid that we have warnings by the end of the year because we're not achieving our EBIT targets or anything like this. If we overachieve, it's always easy to explain. If we are below the figures, as you all know, you are disappointed your models might not work anymore, and that's why I would like at this given moment, stay more likely on a conservative side. What I can say is that Analysis Prime is in an area of a 15%-plus EBIT margin. So that's why there will be surprises and hopefully very positive surprises included in the way as I've seen now, Paul and Graylin. I will -- I'm sure that by the end of this year, we'll have a smile on my face, and I think that this will continue in the past. They are both highly motivated. They're very well interweaved into the SAP market in North America. They're one of the first companies in North America that doing this SAP Analytics business, which is a very niche and special business, but a very key business. And as you can see by the number of clients that they have, they must be special and they must do something different. And this is also the reason why, I mean, Microsoft and Google, they have their own analytics tools, but still rely on Analysis Prime and the SAP Analytics solutions. So I think this is a strong statement, and it's why I'm very confident that those team members will surprise us and all of us by the end of this year and then hopefully also in the coming years.

Thank you very much, Mr. Schneck. And in the meantime, we have received no further questions. Okay. Therefore, we come to the end of today's earnings call. Thank you for joining and for all your questions. Should further questions arise at a later time, please feel free to contact Mr. Schneck or Tanja Marinovic from Investor Relations. And a big thank you to you, Mr. Schneck, for your presentation and the time you took to answer the questions. I wish you all a lovely remaining Thursday, and I hand over to you again, Mr. Schneck, for some final remarks.

Yes. Thank you, Ms. Bennett for hosting us here today and your pleasant introduction and now greetings. I would like to thank all of you for your interest in our share. And of course, also, thank you very much for your very interesting questions. We will provide some further information, as I just said. If you have any further questions, if there is anything that you need, please contact me directly or also Axel Otto, both are available, e-mail, WhatsApp, what other communication lines you prefer. So we don't want to leave any open questions. And other than that, we're looking forward to a very good second half year 2024 with very positive news. I wish you now a very nice summer, and I hope to see you all soon in one of the conferences in person, and I'm looking forward to it. Thank you very much and take care.