SNP Schneider Neureither & Partner SE

XETRA:SHF

Earnings Call Analysis

SNP Schneider-Neureither & Partner Achieves Record Growth and Raises Guidance

SNP Schneider-Neureither & Partner reported its best quarter ever, with order entry and revenue both increasing by 24%. EBIT surged 70% year-over-year to EUR 8.2 million. The company raised its 2024 revenue guidance to between EUR 240 million and EUR 250 million, and EBIT guidance to EUR 21 million to EUR 25 million. Their software segment saw remarkable growth, with orders up 32% and revenue up 27%. The strategic partner business continues to thrive, covering 47% of new orders. Despite some market challenges, SNP maintains a strong cash position and healthy order backlog, highlighting operational resilience and efficiency that's driving long-term success.

Strong Performance Amidst Challenges

SNP Schneider-Neureither & Partner SE reported a robust financial performance in the third quarter of 2024 with both order entry and revenue increasing by 24%. Specifically, software-related order entries surged by 32%, indicative of strong demand in their core operational area. This growth reflects the company's resilience and positions them favorably despite macroeconomic pressures facing many sectors.

Operational Highlights

The company achieved a notable EBIT increase of 70%, rising from EUR 4.8 million to EUR 8.2 million. The overall EBIT margin has improved, with year-to-date EBIT being over 151% higher than previous figures. This improvement can be attributed to a concentrated effort on operational excellence and strategic growth investments, including a focus on expanding their workforce to support anticipated demand.

Guidance Boost Reflects Confidence

SNP raised its guidance for the second time in 2024, now predicting total revenue between EUR 240 million and EUR 250 million, alongside an EBIT forecast of EUR 21 million to EUR 25 million. This reflects an optimistic outlook based on their robust order backlog and continuous operational improvements.

Partner Engagement and Growth Strategy

The company reported that 47% of its business comes through partnerships, a figure they expect to climb as initiatives like SNP Kyano streamline partner integrations. They noted a significant increase in project deal sizes, with high-value projects exceeding EUR 3 million contributing a total of EUR 34 million in order entry. This highlights a strategic shift towards larger, more comprehensive projects.

Geographic Expansion and Market Resilience

SNP is experiencing notable growth across regions, especially in the UK where business volume doubled, seeing a 103% increase to EUR 28.9 million. In North America, their competitive market share grew by 40% to EUR 38.2 million, underscoring their ability to thrive even where overall economic conditions are challenging.

Future Readiness with Workforce Expansion

The company is actively ramping up its workforce, with a long-term recruiting strategy to enhance its service delivery capabilities. Approximately 50% of new hires in 2024 have been associated with strategic acquisitions, positioning SNP to optimize its delivery to support ongoing and upcoming project demands.

Operational Efficiency and Innovation

SNP has identified areas for operational improvements and increased investment in marketing and technology to bolster their service segments. With innovative platforms like SNP Kyano being launched, they are enhancing integration capabilities with third-party software, which is anticipated to create additional revenue streams and efficiency for both SNP and their partners.

Earnings Call Transcript 2024-Q3

[Operator]

Good day, and a warm welcome, ladies and gentlemen. My name is Sarah, and I will be your host for today's earnings call of the SNP Schneider-Neureither & Partner SE. The Executive Board of SNP will speak in a moment and guide us through the Q3 and 9-month figures of 2024. And after the presentation, we will move on with our Q&A session, in which you will be allowed to place your questions directly via audio line to the management. So we're looking forward to the results.

And having said this, I hand over to SNP's Director of Investor Relations, Marcel Wiskow. Sir, Marcel, the stage is yours.

[Marcel Wiskow, executive]

Thank you very much. Good afternoon, warm welcome, and thanks for your participation in our earnings call. This morning, we published our full results for the third quarter of 2024. All the relating documents, as you know, you can find on our website at the Investor Relations section.

We are facing the same lineup as in the previous calls. Next to me, I welcome our CEO, Jens Amail. As usual, he gives a summary of the reported numbers and the outlook for the current year as a whole. I also welcome our CFO, Andreas Röderer. He will give you a more detailed explanation of the financials. And afterwards, we look forward to your questions.

And with this short introduction, I will hand over to Jens.

[Jens Amail, executive]

Thank you, Marcel, and hello, everybody, also from my side. Thank you for joining the call. And as always, thank you for your continued interest in SNP. Also, after the third quarter, we are pleased with the progress we have made, and we are happy with our financial results. But our financial performance is a direct result of the trust our customers and partners are putting into SNP. And we are very thankful for that.

And I also want to say that I'm personally very thankful that all my colleagues globally put the success of our customers and partners first in everything they do. And this is not only true for sales and services, but for everyone in the organization. We have here with me in the room, for example, not only Andreas, but also Marcel, Jörg, Marcos, Cristina. And I really must say that the focus on customer and partner success across all functional areas of the company here at SNP is in my experience, really unique. So thank you to Team SNP. Our financial performance is just the result of everyone's focus on winning together with our customers and partners.

Looking at our financial results. The first thing you see here is that all numbers are consistent with our pre-release as of October 16, except the EBIT, the EBIT is a little bit higher. And what you also see on this chart is that we had the best Q3 ever in the history of SNP, the best order entry, the best revenue, the best EBIT and the best operating cash flow.

And when we look at the top line, both order entry and revenue are up 24%. And we are also very happy that software grew over proportionally 32% on the order entry side and 27% on the revenue side. And on the order entry side, we get often asked the solid deals, do we see a backlog erosion. And also as in the last quarters, I can confirm that this is not the case. As you will hear from Andreas when we talk about the backlog bridge. So we don't see any order entry erosion here.

When you look at some of the Q3's prior to 2023, here, you see quite a few channel deals with our customers and with our cash. So we had one very significant deal in Q3 2020 with EUR 15 million order entry. And also, I want to highlight that after Q3 2021, you see all numbers reported without, obviously, SNP Poland. So that's not from 2021 to 2022, that's not apples-to-apples.

When you look at the EBIT, we see an increase year-over-year of 70% from EUR 4.8 million to EUR 8.2 million. And thanks to a very strong operating cash flow, we are overall -- I'm looking at our Chief Accountant, Jörg Vierfuß, sitting next to me, we are overall in a very good cash position.

Looking at the consolidated year-to-date numbers after 9 months, we are already now in a position which is significantly better than after the full year 2022. So order entry and revenue growth is significantly north of 20%. We are happy with our EBIT. As I just said, we are in a strong cash position with EUR 52 million. And from my perspective, most promising all our key strategic growth levers show impact. And hence, we were able to raise our guidance for a second time in 2024.

So here, you see an overview of the key Q3 figures. If you look for a hair in the soup, so to say, is that our order entry of the partner business is below our overall growth. But I would say, I don't know how to save this in English, this is jammern auf hohem niveau, complaining on a very high level because the 13% year-over-year growth are still way above market average. So we had a very good Q3 last year on the partner side. We have some exciting direct deals this year for very specific reasons. And again, 13% is still above market average. And year-to-date, also the partner order entity still looks fantastic.

So maybe we go to the consolidated numbers, thank you, Marcel, here. And just as a reminder, I already mentioned it briefly, in 2022, in the whole year, after 4 quarters, we had an order entry of a little bit over EUR 190 million and EUR 170 million in revenue, and this included deals outside of our core business and deals with our end customers and cash. So we are very happy with the top line performance.

You, of course, can argue that you always can do better. But for now, we are pleased with these results. And this does not mean we don't have any areas with room for improvement. So quite the opposite is the case. We still have so many possibilities and operational levers. But for now, today, as we speak, we are pleased with the financial results.

So looking at our partner business in a consolidated view, you have already seen numbers. In the meantime, almost half of our business, almost half of our order entry, 47% comes through partners, and we expect this number to go up because with SNP Kyano, it will become more easy for partners to work with our platform.

Here, you see an overview of the order entry by deal bands. So when we look at Q3, we have a very high share of deals above EUR 3 million with a total volume of EUR 34 million. This comes from 5 big deals, and 3 of them, as already mentioned, are direct. And there's a story behind every single one of them. So this is not a trend.

The second aspect I would like to highlight here is when you look at the range between EUR 100,000 and EUR 0.5 million, so the second deal range from the bottom, so here, we had in 2023, EUR 34 million, and now we can report EUR 60 million. So a significant increase of our run rate business. And this is for me also very encouraging because this shows while we do project business, we are sticky in a way that after one last transformational deal, we very often see follow-up business like, for example, cars or reorgs.

So when we look at the regional breakdown, we see growth in all regions basically. We are flat in LatAm because here, as we already discussed quite a few times, we shift the focus a little bit from our more traditional SAP business towards our data migration core portfolio with own IP. So this is on purpose that we very much look for deal quality here as well.

Then the third bullet here is I'm very happy, very excited that we still show strong growth in our -- in the biggest IT markets of the world, in the U.K., in Northern Europe and the Middle East. So specifically here in the U.K., we could double our business by 103% to EUR 28.9 million. And in North America, most competitive IT market in the world, we see a growth of 40% to EUR 38.2 million.

And I also want to highlight that the GDP growth in Germany is, on a good day, flat. And when we look at our business in Central Europe, which is predominantly in Germany, we still see significant growth. And this is also, for me, a very good indicator how resilient our business model and how resilient our market position here is.

So as always, a quick look at the EBIT bridge for Q3. We have a very strong EBIT in spite of currency headwinds in Q3. This is netting out for the full year or for the first 3 quarters year-to-date. You will see this in a minute. And when we look at personnel expenses, here we do have not only more colleagues and, of course, some salary increases, but the performance we have in 2024 is even better than last year. So partially what you see here in the EUR 6.4 million, that's also in the accrual reserve for bonuses. We show negative EUR 1.1 million in one-offs because we are still dealing or we have to do a deal still with some of the issues of the past.

So here, the consolidated numbers. As I said, the currency effects are netting out. Same with the one-off effects -- we have always looking at costs as well. So we have higher OpEx. But here, this is in line with the company growth. So nothing crazy at all. So we grow with the business, higher travel expenses a little bit more in marketing, a little bit more in IT, some new offices in Sao Paulo, in Dubai. So nothing crazy and everything in sync with the overall growth of the company. And the result is, the long and the short of this is, that the reported EBIT year-to-date went up by 151%. So the EBIT is more than 2.5x of what we have shown last year.

And the last topic from my side would be the 2024 guidance. We could raise our outlook for the year for a second time. We now predict a revenue between EUR 240 million and EUR 250 million and an EBIT between EUR 21 million and EUR 25 million. So that's it from my side. Thanks again to everyone for joining the call. I'm looking forward to the discussion later.

And with that, I hand it over to Andreas.

[Andreas Röderer, executive]

Thanks a lot, Jens. Marcel, we just jump to the income statement immediately. Now let us have a look at the income statement. As already outlined in the EBIT bridges, the personnel expenses did increase as already indicated in Q2 due to a high number of employees, primarily in our services and sales functions, to successfully deliver our order backlog and accelerate our future growth.

In addition, as Jens has already indicated, I want to highlight that due to the overperformance, we also had to increase the accruals for bonuses. But as our team did a fantastic job to grow the company, we are more than happy that the team can also participate in the success. Besides this, I just want to highlight that I am personally very happy with the EBIT margin development of the last 9 months of the year.

Now let's have a look at the segment reporting. I'm happy to report again that we see revenue growth in all 3 segments. And similar to Q2, we are especially happy about the performance of EXA. The EXA team could get some long-lasting deal cycles closed, and this clearly shows the value of our EXA solutions like global value chain called GVC and our transfer pricing solution called OTP, for very big customers in the pharma and also in the chemical industry.

Now let us have a look at the segment margins. Similar to my statement in Q2 for the 9 months view, I want to share with you again the one-off gain from the settlement with the community of -- as that Jens has presented in the EBIT, which has not been allocated to the segments as they initially buildup provisions have also not been allocated to the segment. So just keep that in mind.

The services segment margin in the first 9 months has slightly increased compared to the previous year. Similar to my statement in Q2, we are still in an investment phase in which new colleagues need to be ramped up, and we are also investing in the further ramp-up of our partners. So from an operational point of view, we are on track, and this margin development has been planned for as these investments will help us to grow the company also in the future.

For the software segment, we see on a 9-month basis, a slight increase. Let me briefly explain why this increase is not higher as the result of our strong software growth might indicate. The reasons for this are: first, there are still one-off effects we need to cover. There has been a receivable write-off that have been allocated to the software segment, as already indicated to you in Q2 and also presented in the EBIT bridge for the 9 months that Jens has just shown.

There are also higher cost allocations for investments to fuel our future growth. Jens has mentioned that, for example, marketing activities to further promote our new SNP Kyano strategies. And there is, of course, also a bit of an increased sales cost because we really grow on an international basis.

And third and last, there is also a negative FX development that has also been partially allocated to the software segment. But from an operational point of view, we are on track. Finally, the great performance of our EXA team is, of course, also pushing the EXA segment margins.

Now let's go to the next page and have a look at the order entry and order backlog. So for order entry, there is not much more to add to what Jens has already outlined. So I just want to repeat that our order entry for a 9-month basis on a new record level. That's all I have to say here, in addition to what Jens said.

Now let's have a look at the backlog. And also here, I do not have to add much more, just emphasizing, again, my message also from Q2, and Jens has already indicated at the very beginning, the order backlog is stable, and we are not losing projects. The remeasurements here are very of minor nature. For example, if a time and material project is not fully called off, so this is normal business. So we are very happy with the development here as well.

Now let's have a look at the balance sheet. And I try to keep that short, maybe let us start with the receivables and contract asset positions. The increase here is in line with our high business growth, and we still monitor payment terms very closely. And due to the better business performance, we also managed to increase our equity ratio significantly by 3.5 percentage since the beginning of the year. So to sum it up, we made some further progress in our working capital management, and we will see this later when we discuss the operating cash flow.

So Jens, you had already been looking at Jörg. So let me do that as well because I just know that Jörg is not only our Chief Accounting Officer. He is also our Chief Treasury Officer. And he's with the company for more than a decade. And I just can't tell you when we discussed the numbers the first time, Jörg had a very, very big smile in his face. And so did Jens and I, after we really get the confirmation that the numbers have been solid check.

On a 9-month basis, the operating cash flow increased by EUR 19 million to EUR 17.4 million. Accordingly, also the free cash flow surged significantly.

Finally, let us have a look at the head count development for the first 9 months. The message here is, again, similar to what I had outlined in Q2 already. Approximately 50% of the additions in the first 9 months related to our acquisition of our Trigon colleagues that joined SNP at the beginning of May. Besides this, the added headcount is again mainly in our Services segment to further fuel our growth but also to have capabilities to ramp up our partners to execute on our partner strategy.

And with that, I hand over to our Head of Investor Relations, Marcel Wiskow.

[Marcel Wiskow, executive]

Thank you, Andreas. And I will give back to Sarah. We are open for questions now.

[Operator]

Thank you so much for your presentation and congratulations on the successful development of 2024 so far. [Operator Instructions] And we received a hand, but now it's gone. So let's move over to the questions from Wolfgang.

[Wolfgang Specht, analyst]

Yes, I should be unmuted now, right?

[Operator]

You are.

[Wolfgang Specht, analyst]

Okay. Thanks a lot. Congrats, definitely stronger than I expected it. Let's look out a little bit into the quarters to come. Can you give us some information if you see, for example, a change in the project structure or the tasks you are now confronted with in new projects? Is there anything changing now that more customers, let's say, are late migrators to HANA? Or is it basically the same you did with the early starters 2 years ago? That would be of interest.

And then probably regarding workforce and related costs, obviously, you're holding a huge order book. Is there, let's say, a timeline that forces you to ramp up personnel or external capacities, let's say, immediately? Or is it, let's say, a glide path, you're ramping up here?

[Jens Amail, executive]

So thank you very much for the question. On the first one, I would not say late migrations to S/4 and to RISE, SAP will be selling this business for the next 2 years, at least. And even the customers who already bought all licenses under the sun for S/4 and for RISE, they have business cases and we have migration plans with them until the year 2032. So we will see business here coming out of our core capabilities with CrystalBridge for the next 10 years.

It's true what you have said, the early adopters, the very simple migrations to S/4 and to RISE are already done. But what we see right now is more in our sweet spot than anything else because now things are getting a little bit more complicated. So a transformation world, for example, I was presenting a scenario. We see very often when you have multiple instance, sometimes of maintenance, outdated systems, you need to do multiple projects at the same time, like in UGL, a data quality project, a carve-out, a move to S/4, move to the cloud. And this increased complexity is, of course, right in our sweet spot because nobody else can deliver against these customer requirements as good as we. So this is rather supporting what we can do well than old blocks.

And on the second topic, you saw it in the hiring numbers from Andreas. We are ramping up our team. We have a long-term recruiting plan. Also for services, we will see an increased recruiting of services colleagues nearshore and offshore in centers of excellence, for example, in Bratislava and in Bangalore. So we already started this process. There will be not a one-off that we say in Q2 now, we hired 200 people. So as you described it, we will gradually increase our headcount here as we see the business is growing.

[Operator]

So we will move on with the questions from Hannes Mueller.

[Hannes Mueller, analyst]

Yes. First one would be -- maybe on the drivers currently, especially in Europe. So maybe which sectors are strong at the moment where you see demand? SNP seems to be one of the few IT companies that are holding up in the current environment. So it would be interesting to know the drivers behind that?

And then maybe can you share the share of software in the latest projects, also the bigger projects and what would be a good share of software, for example, in a project?

And then on the margin, would you say that you expect a lower margin next year than in 2024, given the one-offs you had -- the positive one-offs? Or do you still expect margin expansion given that?

[Jens Amail, executive]

Thank you very much, Hannes, for your questions. So I take all 3. Andreas, if you have, of course, anything to add, please jump in. So we're industry-agnostic, right? So we don't see a growth drivers in specific industries, of course, the more data volume, the more complex, et cetera. This helps a little bit. But overall, we have a strong footprint in all industries.

And what you see is, first, the resilience of the market because we have demand, of course, not only through the SAP modernization push. This is clearly a big market driver for growth at the moment, but also right in very fluid, very dynamic markets, companies need to be agile, right? They sell business units. They acquire companies. They need to leave regions. They do reorgs. They move to the cloud. So the more, I would say, fluid, the more dynamic market environment is. This also drives a lot of demand for our solutions.

So I would say it's a result out of overall the resilience and the increasing requirements of our solutions on one side. And second, a result of the very strong capabilities we have, the market position we have, in a market niche category, we have created shape and dominated for the last 10 years.

On your second question, of course, the perfect software share for our project is 100%. We have customers like All for One or partners, I should say, partners like All for One in Germany, in Central Europe, they deliver 100% with own resources. Some of our biggest global partners like Accenture and IBM, they are also capable to deliver 100% by themselves in some regions, not in all regions, of course.

And the end game for us would be that we have all core technical services delivered by partners and we focus on premium engagement services like enablement, quality assurance, maybe a design authority.

Having that said, there are some customers and 2 of them -- this was the case for our high direct business in Q3, who request that they have a centralized delivery contract with us for a data migration factory because they want to work with multiple different partners on the consulting and SI side. And so we'll always have some direct business, and we will also have an increasing demand for services resources.

But on a project level, the ideal case is, of course, 100% software, but the more realistic case would be maybe 70%, 80% software and 20%, 30% services so we can provide quality insurance and design authority.

And your third question, yes, we do expect the margin to be better next year than this year.

[Andreas Röderer, executive]

The software services share, of course, this will be a bit of a time to get there, yes? So in the past years, we managed to get 2% up per year. Just to set the expectation, this is nothing that will come from one day to the next. So we are working on that, and this has a high priority also when we price the transactions. But it's not that we now make a double-digit move in 1 year from the other. So this will be -- gradually go up as we have shown over the last 3 years.

[Jens Amail, executive]

And Hannes, the reason for that is that even big SIs, and while they have global SAP leaders, et cetera, et cetera, they are still highly matrix. And one is I can deliver very well in Germany, but we need to do all the data migration services in Japan, in Brazil, and in the Middle East, for example. So that's the process based on partner maturity, but also based on the rollout across different regions.

[Operator]

So the next one would be a member of Apus Capital. So please ask your questions and introduce yourself to us.

[Uwe Schupp, analyst]

Yes. Sorry, I didn't put it in my name there. My name is Uwe Schupp from Apus Capital. I am here for Johannes, please. Just a couple of points, please. First of all, I mean, these are certainly outstanding results, I would say, as some of my earlier colleagues have already stated. If you had to pin down your performance -- I don't know, 2 or 3 key points because every other IT service company pretty much we look at between Oslo and Rome has profit warned. You have also a profit warned, but to the upside and not only once but twice. So what is it that you are making different than others?

I get it you are not in the box shifting business obviously, and you're not shifting computers from Taiwan to Munich or Stuttgart. But still, like your customers are pretty much the same as many of the other companies that we all know. So -- a bit of a general question, I get it, but it would be helpful, I guess, for many of us, if you could just try to explain as to what you are doing different? And what are the tailwinds you're seeing there? And I have a follow-up question as well.

[Jens Amail, executive]

Thank you very much, Uwe. Of course, right, we could give a long speech on that. But in the interest of time, maybe I netted down to 3 headlines. I said in my very first call, when I started this assignment 2 years ago, that the substance of this company is incredibly healthy and was always healthy, the product, the quality of the team, the cultural focus on the end customer. So the substance of the company was always fantastic, #1.

Number two, now everything we do so well becomes more relevant. Transformations happen more frequently based on the macroeconomic environment. Everything becomes more complex. We have tailwind, of course, from an application modernization push. So everything we do becomes more relevant, which is very exciting and which we want to use as an opportunity to expand the category with SNP Kyano, we have created, shaped and dominated for the last 10 years. So that's #2.

And #3, of course, we also did some operational improvements. We invested a lot in terms of operational excellence. We invested a lot in marketing. We invest a lot in our delivery processes, but other companies probably do this as well. But here, I must say both Andreas and I are happy with the ability to change, the ability to transform in this company. So that would be the third reason that we drive the whole, what you normally call, operational excellence, the whole scalability and operational topic to the next level.

Andreas, anything you want to add?

[Andreas Röderer, executive]

No, it's a very good summary, and there's nothing to add.

[Uwe Schupp, analyst]

Very clear. That's helpful. Just on the industrial weakness that we are seeing in the second half year, particularly in Germany and in particular, also on the automotive side with pretty much every OEM out there profit warning. Is that a particularly high customer group for you guys?

[Jens Amail, executive]

Yes. So you saw the announcement, right, at BMW -- so they invest the entire S/4 migration future in us. So we announced in Q2 a framework contract with BMW, and we do a lot of business with auto and with the suppliers here. But also here, right, because of the dynamic macroeconomical environment -- I was working for SAP before I joined SNP. So we, of course, still track also from an SAP sales perspective, customers are forced to invest to be more efficient, to be more flexible, to cut costs and SAP is helping them.

And then we help them to grow the transformation much more efficiently, much faster, much more predictable, much more orderable, much more flexible. So it's basically a 1, 2 punch -- even, again, also in the auto industry, if they move to S/4, if they move RISE, they have ability be more competitive, to save money, to have a better cost structure, and then we help them to get there.

So yes -- sorry for the long answer, I'm quite excited about our possibilities. So yes, we do have customers in the order space. But again, we are industry agnostic, and we see a growth in all industries.

[Uwe Schupp, analyst]

That's very clear. Brings me directly to my next point, whether it's in the local press in the Heidelberg area or whether it's in the trade press, but from time to time, we are seeing about potential changes in your shareholder structure. My question would be not so much whether that's happening today or tomorrow, but what is the -- how many questions are you getting from your sales guys? And how distracted is your workforce getting by this? How distracted are you yourself getting by all this? Or is it not a topic at all?

[Jens Amail, executive]

It's not a topic at all. As I said, the culture of this company is very focused on the success of our customers. We are very focused on the success of our partners. We are very happy with our anchor shareholder today, right? And then the rest, we will see. It's not a distraction at all.

[Uwe Schupp, analyst]

Got it. And then the last point would be on, I guess, the war for talent. I mean Heilbronn is becoming gradually -- at least tries to become the AI hub of Germany, if you will. We know generally your area, I mean even SAP is obviously -- I'm not sure on a net basis, but certainly, they are looking for good talent, also probably from your company. I was just wondering how difficult it is to retain talent in a very dynamic environment, certainly on your and your partner side?

[Andreas Röderer, executive]

Maybe I picked that up. I think when we look at the attrition rates, I think we are managing to get those significantly down. We got very good feedback from our colleagues, also in our people surveys. If I look at my area, I just recently managed to really convince some very good people to join the team. They would have all the possibilities. So we did a lot, just also employer branding. We put a lot of focus also to position us now as a sustainable company, which we are really investing a lot of efforts in. So we do a lot just to get more attractive. And we can offer a lot of possibilities to be honest, because we are growing. It's not we are shrinking and need to keep people out or things like that. So we have a lot of potential to develop people on their career paths.

[Uwe Schupp, analyst]

That's great. My last question would be on the balance sheet. On the long-term asset side, you still have the -- I don't know, is it EUR 6.3 million, I believe, trade receivables, which are there, so long-term receivables. Basically, any chance you're getting this in Q4? And sorry if you mentioned it in your prepared remarks because I was slightly late on the call.

[Jens Amail, executive]

Yes. No, thanks for the question. I think if you check that development on long-term receivables over the year, I think we managed to get this down, and we are really working on that just to get progress here as well. Let's see, just can -- I don't know when we will fix it, but we will fix it.

[Operator]

So before we move on with the questions from Yannik Siering, just let me quickly remind you that it's still possible to ask questions via audio line and kindly know that we do not accept questions via check box today. So Yannik, I think, you can unmute yourself now.

[Yannik Siering, analyst]

Most of them were already asked. I would just have one topic left, and that's on the LatAm segment. You mentioned that you're refocusing basically on the core business, I think you said. Maybe you could expand a little bit on that? And then in the past or probably also still today, this still functions as a near-shoring hub for the U.S. market. Could you maybe talk about any expected impact under the new government in the U.S.? Maybe also for the domestic market in the U.S., if you expect any impact basically here? That would be helpful.

[Jens Amail, executive]

So on the first question, we traditionally have a very strong SAP reseller business in Latin America and we keep that also at the request of SAP in the spirit of partnership and this is a healthy and profitable business. However, we shift the focus so we don't do every deal here, and we shift to focus a little bit more to our transformation business, to our data migration business, which is -- which has not the same top line as a consulting and reseller business. So that's the reason we see more profitability overall because the focus on own IP but we still want to maintain a certain degree of a reseller and a system integration business in the spirit of partnership with SAP there as well.

And on the second question, I don't see any impact from the U.S. election yesterday because already today, we have a very strong customer footprint in infrastructure critical industry, so to say, for example, aerospace and defense, and they request that we deliver services from people with the U.S. passport. So we do have resources a lot in the U.S. We invest in resources in the U.S. But also, we invest in, not even sure if we can call it nearshore, but in resources in Puerto Rico, which are, of course, quite heavy they have a passport as well and are completely acceptable for efficient services delivery even for the most critical U.S. clients.

[Operator]

So we will now move on with the questions from Thomas.

[Thomas Kaiser, analyst]

Yes. Hello. Here is Thomas Kaiser, Family Office. Congratulations to you, Mr. Amail and Mr. Röderer at the forefront, for great work and results you and the team have delivered. My first question is in your new platform, Kyano, a marketplace is integrated with third-party software, for example, smartShift. And if third-party software is used to deliver projects, how does this affect SNP in terms of sales and margins and what impact do we expect is to have in the future? And what has been the reactions and experiences with Kyano so far?

[Jens Amail, executive]

So first of all, Thomas, so the answer is threefold. First, with Kyano, we make it easier for system integration partners who use our platform. For example, based on our guided procedures, based on no code, low code, migration content, it will be easier for our partners and for strategic customers who use our platform, #1.

Number two, we also make it easier for technology partners like CDQ, like a smartShift, to technically integrate with standard interfaces with our, for example, analysis solutions, #2.

And #3 would be the impact. We already have situations today where we basically resell third-party products. So we have a big customer in Germany. They're excited, for example, about our partnership with smartShift, but they want to have everything on one paper in one contract. So we will see a profitable additional revenue streams through technology partners here as well.

[Thomas Kaiser, analyst]

So the full revenue of the partners is coming over your platform or?

[Jens Amail, executive]

It depends, right? I mean, everything is possible here. In this one example with smartShift, this was a deal a couple of quarters ago. The full revenue for smartShift was channeled to our papers, yes. But it, of course, also done side by side. But we expect that third-party solutions -- we don't want to compare us as a small company with SAP, but they have a business called SOLEX, Solution Extensions, and this will be a small but sizable revenues freeing for us in the future as well. And it already is today.

[Thomas Kaiser, analyst]

Second question from me. In the last 12 to 18 months, you have significantly expanded your partner network with large SIs and third-party software providers in terms of regions and the breadth of application areas. So you have also set up joint factories and trained employees. Can you give us an insight into how this will affect the current and future business and where you want -- some color on this topic?

[Jens Amail, executive]

[indiscernible] you basically summarized our entire strategy, Thomas, right? The impact will be positive, right? So you said we want to grow internationally. Yes, we have 5 strategic markets. As you and I talked about at transformation world, which are Mexico, Brazil, the Middle East, the Nordics and France, 5 strategic markets. You see good progress in all 5 of them. We, of course, expect the growth in the top line as we dramatically are seeing already now in Brazil are from less than EUR 1 million last year to more than EUR 10 million this year. And of course, a side effect, a nice side effect, will be that we will see efficiencies and economies of scale. So we expect the profitability to go up.

Yes, on your second aspect, we do have a partner-first strategy. We have a strong focus on partnering with system integrators like IBM, like Accenture, like Deloitte, like many others, 16 or 17 in the meantime, out of the top 20 SAP system integration partners are also leveraging our solution. As I said and Andreas said in his answer previously, this takes time, while Accenture is almost fully self-contained in DACH. We have different ways to work together in Brazil, in Japan, so this takes time.

But the impact, of course, we expect, Thomas, should be also here profitable growth for our partner strategy and the third aspect of our -- of the topics you have mentioned, it would be factories with big partners, yes, like, for example, BMW, which we have announced, which we have jointly communicated at a transformational world.

And of course, also here, this gives us a very predictable backlog. This allows us to scale, to create efficiencies on our side, to move work to the customer, which makes it for them, again, more efficient and increase their flexibility. So quite a good -- Thomas, quite a good summary of our strategy. And of course, the result should be happy customers, happy partners and a very nice positive impact on profitable growth for SNP.

[Thomas Kaiser, analyst]

Thanks a lot, Jens, for the insights. But do you see a push from your partner since Kyano is launched?

[Jens Amail, executive]

The good thing is we see pull -- a strong pull from all sites. And we see a strong pull from the market and we see a strong pull from the partners, yes. We are very happy with the -- humbled, I must say, with the ecosystem. We have developed our ecosystem team under the leadership of Lutz Lambrecht, is doing a fantastic job here. And of course, they see the market as we see the market, which means everything becomes more relevant, everything needs to be in AI-enabled, everything needs to be -- will be sought not always in SAP cables only. So we need to be a little bit more agnostic particularly on the data source side. So they see the same trends we see.

And I must say, of course, we have aligned our strategy before we launched it, before we finalize it with our key partners. So the collaboration here is very strong, very positive. And we all believe that the best is yet to come with SNP Kyano.

[Operator]

So by now, it seems every topic is discussed as we have no further virtual hands. So we therefore come to the end of today's earnings call. So thank you, everyone, for joining, for showing interest in SNP and this lively conversations and all the questions. So I'm sure further questions arise, I think -- Yes, feel free to contact Marcel. And a big thank you also to you, Jens and Andreas, for the dive into your third quarter and all the best for Q4. So from my side, I wish you all a lovely day and hand back for some final remarks, which concludes our call for today.

[Marcel Wiskow, executive]

Yes. Thank you, Sarah. Nicely final words, nothing to accomplish. So from our side, stay healthy, goodbye and maybe a short look to the next publication date of the preliminary figures at the end of January. So see you soon and bye-bye.