Brockhaus Technologies AG

Good afternoon, ladies and gentlemen, and welcome to the Brockhaus Technologies earnings call regarding the financial year 2021. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. Now, I hand the floor over to Marco Brockhaus.

Good afternoon, everyone, and thank you very much for joining the call. We are very proud to take this call today. as we believe had a transformational year behind us with two acquisitions by Cleasing.de and KVM Tech. And with that, we had tremendous growth in a year of A, uncertainty, and B, very tough market conditions. As you all know, the prices for gems like we're searching for in the technology innovation area in the german metro stands are hard to find and especially hard to find for reasonable prices with that said we did already a sales increase of 145 to 126.5 million euros on a performer basis for 2021 coming from 51.6 million 2022 with an adjusted avatar a pro forma of 48.2 million. More detail later in the presentation. Many investors asked me when we did our IPO in July 2020, Marco, what's your vision for the company in three to four years? I said a handful of companies acquired and sales of 120 to 140 million with EBITDA of 40 to 50 million. And we achieved that already, at least on a pro forma basis, in 2021, which makes us two years ahead of our target on our business plan. Maybe into more detail on page four in the summary of the financial year 2021, on an assets basis, we had revenues of 66.5 million, which beat our forecast, as well as EBITDA margin of 32.8%, which also beats our forecast. We have an adjusted EBITDA of 21.8 million. Same on the right side of the page, you see pro forma. We were in 125 to 135 on pro forma forecast for 2021, but again beat EBITDA with 48.2 million. adjusted and performer for 2021 same as the margin which we believe is a great achievement and thanks here to the acquisition of bike leasing many many investors in the markets and market itself asked us to do deals and i always replied yes but the right one and it took us a year to find the right one and here it is and that was bike leasing and is and so we're very satisfy A with the transaction itself, B with the operational and strategic development of bike using, and C with the successful integration in our group. So with that, and also with a strategic acquisition for our daughter company, IHSE, KBM Tech, which was very, very good for IHSE because it complements their IP portfolio their product IP portfolio tremendously and therefore it was a strategic move for IHSE to acquire KVM Tech and today has the full set of KVM technology from proprietary technology towards full IP. With that, we started with a continuing strong deal flow pipeline into 2022. Right now, we are in three potential transactions in early stages of due diligence. We come later into detail to that. Organizational-wise, with the growth of the company, we supplemented the executive committee by an operation manager who will start in September 2020. We are very thankful to that. because we believe it's now the time to hire an operational manager to excel ourselves and the organization. We are also ongoing search for a chief financial officer to complement management board because we believe that's also very important, A, in terms of broadening the executive management team and B, of being more strongly in the communication to the capital market. With that, first glance, I would like to hand you over to Harald Henning, our head of finance, to dive deeper into the revenues by quarter in 2021. Thank you.

Yeah, thank you, Marco, and welcome everyone from my side too. Let us just dive in on that page on quarterly revenue development. Starting at the top with Palas plotted in green bars. You can see that the company in the last quarter could not quite keep up with last year's extremely strong quarter four. That was especially fueled by COVID-19 related test mask rigs back then. Still, Q4 marked the highest quarterly top line of 2021. Looking at the whole year, sales were up 17.5%. Especially noteworthy was the growth spur of Pallas in the APAC region, where the company increased sales by 125%. In China alone, revenue grew by five times to almost 3 million euros. Proceeding to IHSE, indicated in the orange bars, here we are very happy to report that revenue throughout last year kept increasing quarter over quarter. However, as at Palaf, the strong prior year figure could not be reached, unfortunately, in the last quarter. Last but not least, on the bottom of the page, you can see the bike leasing sales contribution in the light green bar to our technology group this year. The 16.3 million euros mark the company's December revenue, the first month of consolidation into our accounts. where we closed the acquisition end of November. Let me note that December revenue included a one-off non-cash revenue effect of 6.2 million euros from the disposal of leasing receivables. Bike leasing revenue is adjusted for effects from the purchase price allocation, which is, I suppose, a rather unusual item. But on that particular topic, I'm very happy to give you some technical information in the end of our call in the Q&A session. Flipping over to KPIs by segment. I think we covered revenue conclusively on the page before, so let's get straight to profitability. I will comment on bike leasing a bit more on the next page. took it on the table on the very left two columns with figures as financial technology segment. For now, I think we can say more than 70 million euros of revenue with 70% growth margin and almost 40 million euros in EBITDA. We are very happy how the company concluded last year. At IGSE in the middle columns under the header of security technologies. Gross profit margin was somewhat down compared to 2020. The margin of 68.8% resulted among other factors from increased prices in procurement, especially due to supply shortages with respect to electronic components. Unfortunately, that gross margin effect paired with the lower revenue led to an EBTA margin of 25.5%, which is below the comparable period and also below what we see as a sustainable level for the company. But also here, we are coming from some 12% in Q1 last year and 17% in the first half of the year. So all in all, for the current market conditions, we find that very promising. Growth profit amounted to more than 80%, which is above the level of the year before and absolutely in the range of the midterm history of that company. Adjusted EBDA for Palas was 34.4% of revenue, which is a bit, but only slightly below 2020. Lastly, in the columns for central functions and consolidation, The central functions costs were essentially driven by higher personal expenses as well as increased due diligence activity throughout the year. Also due to the first time consolidation of bike leasing close to last year's end, expenses for preparing and auditing the financial statements increased based on accruals taking into the books in Q4 of last year. Conclusion and summing up on the consolidated group level, Performer revenue before PPA was 126.5 million euros, up 145% compared to last year or the year 2020. Growth profit margin was solid at close to 72%. Adjusted EBTA margin was 38%, bringing our group to a performer adjusted EBTA, as Marco mentioned before, of 48.2 million euros. As per end of December, the group had cash equivalents of 30 million euros. Turning to the next page. Let me give you some technical background on the 2020, so two years ago, numbers of bike leasing here. One of the material entities within the bike leasing group is the leasing company Hoffmann Leasing GmbH. That company was acquired by Bike Leasing only in mid 2021. The legal framework for drawing up pro forma financials only covers transactions during the pro forma year and not before. Therefore, there is no basis to have 2020 pro forma figures audited. We still would like to present them here as we do in our annual report on page 49. to give everyone a feeling for the strong operating performance of bike leasing. And what we see is the tremendous top line development with the company having doubled revenues in 2021 compared to 2020. Growth profit margin is stable at very close to 70% and adjusted EBITDA margin was extremely strong at 52% in 2020 and almost 55% in last year. This concludes the financial update, and I would like to hand over to Paul.

Yeah, thank you, Harald, and also welcome everyone from my side. So after that comprehensive financial overview, let me now give you a brief update on some operational developments within our subsidiaries, starting with our most recent acquisition, Bike Leasing. After closing of the transaction end of November last year, Biocleasing is now fully integrated into the technology group. As already explained in previous investor calls, our operational priority number one is to onboard as many corporate customers to the platform as possible because customers rarely change a running system. And Biocleasing is performing well in that respect. Having started into the year 21 with around 20,000 corporate customers on the platform, bike leasing was able to scale to around 32,000 corporations as per end of 2021. Customers include corporates as small as three people electrician businesses, up to multi-thousand employee companies within the DAX. Moreover, the strong growth in onboarding more and more customers has not slowed down starting into 2022, and we are currently standing at around 36,000 corporate customers. that are able to offer their around 2 million employees bicycle leasing through bike leasing. In addition, there was an important progress being made on the regulatory front in Germany. Two of the largest unions in the German state of Baden-Württemberg have recently approved the concept of bicycle leasing for their union members. Historically, and that's important to understand, Unions have been opposed to the concept of financing employee benefits through gross salary conversion, mainly because of their own union fees being a percentage of the gross salary of their members. Thus, reducing the gross salary to finance employee benefits goes against their financial interests. The opening of namely IG Metall and Südwest Metall in Baden-Württemberg is an important step towards green mobility and helps more employees to gain access to a solution such as bike leasing, thus increasing the potential addressable market for us. Moving over to IHSE. With regard to IHSE, we are glad to report that the post-merger integration of KVMtech is progressing as expected. Next to several administrative topics, such as reporting systems, HR coordination or IT, the focus of management was clearly on integration of the company's sales and marketing, as well as technology and R&D activities. Harmonization of pricing and trading structures, the identification of joint projects and trade shows over to joint R&D processes and technology knowledge transfer are just a few initiatives to be highlighted. but should give you a feeling that the integration is advanced as well. To further underline this, IHSE was already able to build on the now combined technology expertise by successfully launching its new DracoTerra IP product. The new gateway and new product provides proprietary KVM users of IHSE with the ability to bridge multiple KVM matrices over the existing IP networks within buildings, across campuses, and between remote corporate offices. So to say, a bridge between both technologies and combining the best of both worlds. The product was first introduced on the NAV trade show end of April in Las Vegas, one of, if not the largest show for broadcasters worldwide. That, by the way, took place again this year after being canceled two years in a row due to COVID-19. So also on the trade show side, some positive tendencies. Last but not least, a similar operational update on Pallas. In fiscal year 21, Pallas grew its revenue in China nearly by fivefold, as Harald already mentioned, driven by the foundation of its own sales entity in 2020. It is important to know, however, that this growth was achieved without the sale of Pallas' actual core product family for certified finder's measurement. as the underlying optical technology of PALAS was not yet approved for governmental measurement stations. Recently, the Chinese Ministry of Ecology and Environment, however, issued a revised national environmental standard that now for the first time allows the use of optical sensor technologies, such as the one by PALAS, for regulatory air pollution control. PALAS signed up monitors from the FIDAS product line, are now already undergoing the necessary certification processes according to the environmental standard and could lead to significant future business opportunities in China. Furthermore, PALAS is starting to expand into non-regulated air quality measurement applications. PALAS is doing so by offering its customers a combination of two of its new products. Firstly, the cloud-based MyAtmosphere data management platform, that allows for intuitive aggregation, visualization, and archiving of air quality data in real time. And secondly, it's new, more cost efficient, fine dust monitor AQGuard Smart. New application areas for measuring air quality in the private sector are, for example, production processes, subway stations, smart city projects, or also construction sites. Let me now move over and give you an overview of selected transactions that are currently being analyzed by the team. As a brief reminder upfront, we generally source transaction opportunities from three different channels. Namely, A, the active screening of trade fairs, shows and corporate events and proactive approach of companies by our M&A professionals. B, our industry network built on over 20 years in the German technology space. And lastly, C, our M&A advisor network. We are currently in the early stages of analyzing three potential interesting companies that seem to fulfill our strict acquisition criteria. A digital platform business with around 40% EBITDA margin, a cyber security business with around 30% EBITDA margin, and a SaaS software company with around 15% EBITDA margin. All three transactions are being sold as part of structured M&A processes. While our deal flow continues to be strong as usual, we stick to our envisaged run rate of one to two transactions per year on average, you can be ensured that we will remain as strict as before, and especially during the month post-IPO when it comes to identifying the right acquisitions for Brockhoff Technologies. We do not feel any pressure to do deals, but we'll only pull the trigger when we are 100% convinced by a business and its management teams. just like in the case of bike leasing in June last year. With that, I would hand back over to Marco for the forecast of our group.

Yeah, thank you very much, Paul. Flipping over to the last page of today's presentation, our forecast for fiscal year 2022. We do expect to complete one or several acquisitions, as Paul just mentioned, during 2022. Our group's earnings figures have nonetheless been planned based on the assumption that there would be no change in the scope of conservation. The reason for this approach is the difficulty in predicting the nature and scope of future acquisitions. We do not believe that any estimates in this respect are sufficiently reliable. Brockhaus Technology expects revenue before PPA between 140 million to 150 million, in 2022 fiscal year which would represent growth between 11% up to 19% compared to the pro forma revenue in 2021. This expectation is underpinned by an assumption that the continuous acquisition of further corporate customers and the still rising demand among employees for company bicycles will continue in the financial technology segment during the reporting period. This is combined with a trend toward more outdoor activities as well as greater environmental awareness, political and trade union support for green transportation. Rising fuel prices might also have a positive effect on demand. Also, this will be conditional on bicycle availability, not falling below the previous year's level. Potential changes in consumer behavior due to higher inflation where interest rates have not been incorporated into the forecast either. We expect that business and sales activities in the regions relevant to the security technology segment will normalize given the relaxations being introduced to travel and physical distancing restrictions. However, this will be conditional on a critical component, particularly chips, available. In the environmental technology segment, the global demand for fine-disk measurement devices for environmental monitoring and for industry and science should continue to pick up when viewing the year as a whole, should more than compensate for the significant reduction of revenue from test tricks for testing respiratory mask effectiveness already seen in the second half of 2021. This will be dependent on completing the necessary international certification process as planned. Key growth regions include the European and American economies, as well as the Asia Pacific region in particular, where PALAST established a subsidiary based in Shanghai, China in 2020. This forecast is also conditional on travel and physical distancing restrictions being largely resumed on the end-on critical components being available. We are planning for an adjusted EBITDA margin of 35% down on the adjusted pro forma EBITDA margin of 38.1% during the reporting period. The reasons for this are the lack of the one-time extraordinary effect that has a positive influence on the buy-cleasing EBITDA margin in 2021 fiscal year, as well as the expected increases in purchase prices. With regard to the Russian attack on Ukraine, we would like to highlight that those palace and bike leasing have no direct business relations with Russia, and IHSE has discontinued its previously only minor business activities less than a million salary immediately. That concludes our presentation, and we are now very happy to answer your questions. For that, I would like to hand over back to the operator. Thank you.

Thank you. Ladies and gentlemen, there are no further questions.

Maybe one addition from my side, Mrs. Herold. We've come across the question why we are adjusting revenue for PPA effects. As I mentioned before, this is rather an unusual situation. We added some slides with a fairly technical, but we hope understandable, explanation on that to our earnings score presentation. It will be available for download later today. And after this, happy to answer your question slide that we are looking at right now. There will be four explanatory pages. And handing over to Marco.

Yeah, thank you very much, Harald. If there appear no more questions, thank you all very much for the attendance of today's earnings call of Bacons Technologies. I would like to use this stage to thank you and thank all of our employees of the group for the outstanding work and performance and yeah goodbye good afternoon have a great day thank you very much