Brockhaus Technologies AG

Hello, ladies and gentlemen, and welcome to the Brockhaus Technologies investor update call. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. Let me now hand over to Marco Brockhaus.

Yeah, thank you, and good afternoon, everyone. Welcome to Brockhaus Technologies earnings call for fiscal year 2022. Before we begin, I would like to point out that the slides we are presenting will afterwards be published in the Investors Relations section of our website www.brockholz-technologies.com. After our presentation, we will be open to the core questions from your site. To be fair to everyone, please limit yourself to one question plus one follow-up. Thank you very much in advance. our results, I encourage all listeners to review the legal notice on page 2 of our presentation, which explains the understanding of forward-looking statements. Additionally, please refer to note 6 of our annual report 2020-22 on page 85 for discussion on alternative performance measures, as well as reconciliations of non-GAAP figures, especially revenue before PPA, adjusted EBITDA, and adjusted EBIT. Please note that our EBITDA and EBIT adjustments only comprise share-based compensation, costs of the acquisition of subsidiaries, as well as accounting effects from purchase price allocations, PPA. For information on risk factors that could cause actual results to differ materially, From forward-looking statements, we kindly refer you to the section on risks and opportunities in the management report, 2022, page 59. Flipping over to page three and into the usual summary. I have to say we are very proud to say that the fiscal year 2022 was an absolute record year for Brockhaus Technologies. Brockhaus Technologies generated revenue before CPA of 145 million euros in 2020-22, which represents growth of 38% compared to last year. Adjusted EBITDA grew by 23% to 15 million euros. This corresponds to a continued high adjusted EBITDA margin of 34.4%. At the same time, adjusted EBIT increased by 21% to 47 million euros and free cash flow pre-tax grew over proportionally by 277% to 14 million euros. Before adjustments, revenue was 143 million euro with EBITDA of 47 million euro and an EBIT of 29 million euro. EBIT is however affected especially by PPA amortization which significantly distorts its meaningfulness. Despite the challenging market environment, this strong operational development and continued profitable growth across all our business segments led us to exceeding our forecast for the full year, which we had previously already raised during last year. Our operating development clearly shows the high resilience of our business model. Additionally, we successfully completed the first strategic sale within Brockhouse Technologies with the disposal of our former subsidiary Pallas. a global technology leader for optical particle measurement to Swedish Indutrade, for a valuation of 100 million euros. We hereby realized high value for Broca's technologies and passed our shareholders, as the proceeds received at closing already amounted to nearly 4x the cash we invested end of 2018. with potentially more proceeds to follow in 2023 and 2024. However, we clearly remain long-term oriented when acquiring businesses. This being said, due to our strong organic cash flow, as well as the proceeds resulting from the sale of Pala, we are looking at a very strong balance sheet with cash and cash equivalents of 79%. 71 million euros as per year end of 2022 and thus the net leverage of 0.7x our adjusted EBITDA. This equips us with significant non-diluted financing capacities for future acquisitions, a potential share, repurchase or something else, but more on this later in the presentation. With this brief summary, turning over to the next page and handing over to Harald, who heads our finance department. Thank you. Thank you very much, Marco, and welcome. Let us jump right into the quarterly revenue analysis on page four and some introductory comments on that. As you might recall from our update call on the palace exit end of November, there are some Yeah, rather special financial reporting rules that you have to apply when selling a subsidiary. I am talking about PI-Forex 5, which requires the income statement to be adjusted retrospectively. That means that all revenue and cost contributions of Pallas must be excluded from the respective line items of the P&L. And then they are shown as one total as income from discontinued operations. Since this has to be done for the comparative numbers of the prior year as well, you have a nice light-for-light presentation of the results. And also, PALAS is not a reportable segment anymore. And then that brings us on this page to our two remaining subsidiaries or segments, bike leasing and IJP that you see here. Starting at the top with bike leasing indicated by the green bar. As mentioned in previous sessions and in our annual report, the strong quarters in terms of revenue and earnings are Q2 and Q3. since these are the warmer periods of the year. This becomes quite visible in the quarterly development of 2022 when biotech using realized some 65% of revenue in Q2 and Q3. Proceeding to IHSE, as you can see, the company continued to outperform every last year's respective quarters. and also shows increasing top line development throughout the year. In the beginning of 2022, IHSE was still struggling with supply bottlenecks and COVID restrictions in the Chinese market. This has become much better in the later months, which led to increasing business volume. And in terms of 50 years, it's up to a revenue growth of 10.4%. Flipping to the next page for the regional sales grid, as you might know so far, bike leasing, again, green bars at the top, has been focusing on Germany only, with first steps of expansion into Austria, where bike leasing became market leader quite quickly. Therefore, all revenue here relates to the EMEA region. Proceeding to IPC, EMEA revenue was essentially stable at some 20 million euros. The great news, of course, is the strong rebound in the US, where the heavy COVID impact in 2021 top line jumped by 61% to more than 12 million euros. In contrast, APEC was still hampered by a pandemic countermeasures in China, of course. That resulted in a revenue decline in the APAC region by minus 26.6%. Flipping one page further to the T&L table, in the first two columns, we compared bike leasing last year performance on a pro forma 2021. As you might recall, we acquired the company end of November 2021. And therefore, our income statement for that year only includes the December income of bike leasing. Here, of course, the performer figures show the whole year's operating performance for 2021. And as you see, bike leasing concluded last year with a top line growth of more than 50% on a like-for-like basis. Gross profit margin was 62%, EBITDA margin 42.6%, and EBIT margin was 41%. Even though 2022 marked another record year for the company in all KPIs, profitability was down compared to the year before. There are two reasons for this. First, there was a non-recurring effect in fiscal 2021 from the derecognition of a large portfolio of lease receivables from the balance sheet, which led to a 7.1 million euros additional revenue. And as there are no respective costs associated with that circumstance, it resulted in 7.1 million euro operating income. That had a positive effect on bike easing margin, of course, in comparative periods of 2021. The second factor is that fiscal year 2022 was impacted by some one of expenses that negatively impacted profitability. Those costs amounted to 4.8 million euros and included consulting fees for the IFRS accounting and the implementation of related processes and software. Especially the optimization of data quality and interfaces between the various existing systems at the company were very costly. It should be, however, considered in this regard that we had actually two big integration projects on our plate simultaneously. First, bike leasing itself, of course, into Brockhaus Technologies, but also bike leasing itself made a major acquisition only months before that deal, when they bought their own leasing provider, which is a highly regulated and complex financial institution. Proceeding through the next two columns to the right, at ITSE, the growth profit margin was up by approximately 4%. This was mainly due to rather unfavorable customer and product mix effect back in 2021, which did not reoccur in the reporting period. In DTA margin, unfortunately did not quite live up to a level that we would be happy about. The main reasons for that are higher costs of trade fairs, direct sales, and marketing activities, which did not incur in 2021 because of the pandemic. Lastly, the standard function costs were somewhat lower, which was mainly due to lower expenses for the external providers of due diligence advisories. In conclusion and summing up from the consolidated group level, revenue was 145 million euros as stated before showing a substantial increase by 38%. Growth profit margin was at some 65% and adjusted EBTA margin 34.4% bringing the group to an adjusted EBTA of 50 million euros. The groups adjusted a bit of 46.8 million euros makes a margin of 32%. As per the end of last fiscal year, our group had more than 70 million euros in cash. Please bear in mind that this is after voluntary early repayment of acquisition loans by bike leasing in the amount of some 21 million euros. And on the level of the AG, the entire payback of the vendor note from that deal of 15 million euros. Pre-cash flow, by the way, was at 40 million euros before taxes. And that figure relates to the operating cash flows of our subsidiary only. So the sales proceeds of the palace divestment are not included in our definition of pre-cash flow, pre-tax.

On the next page, we put a summary of our financial leverage structure.