Brockhaus Technologies AG

Hello, ladies and gentlemen, and welcome to the Brockhaus Technologies AG investor update call for the first half year results in 2023. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Marco Brockhaus.

Yeah, thank you, and good afternoon, everyone. Welcome to Brockhaus Technologies earnings call for the first half of fiscal year 2021. 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, brockhaus-technologies.com. After our presentation, we will open the call to questions from your side. To be fair to everyone, please limit yourself to one question plus one follow-up. Thank you very much in advance. Before we present our results, I encourage all listeners to review the legal notice on page two of our presentation, which explains the understanding of forward-looking statements. Additionally, please refer to note six of our annual report 2022 on page 85 for a discussion on alternative performance measures, as well as the reconciliation of non-GAAP figures. especially adjusted EBITDA and adjusted EBIT. Please note that our EBITDA and EBIT adjustments only comprise share-based compensation, cost of the acquisitions of subsidiaries, income from the sale of real estate, as well as accounting effects from purchase price allocations. 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, starting on page 59. Flipping over to page three and into the usual summary, even though I'm repeating myself for several consecutive quarters now, I'm very happy to say that the first half year of 2023 marked another record H1 for Brockhaus Technologies. with profitable top-line growth across all business segments. We generated revenue of €84 million in H1 2023, which represents organic growth of 29% compared to H1 of last year. Adjusted pro forma EBITDA grew by 28% to €29.6 million, corresponding to a high margin of 35%. Adjusted performer EBIT also increased by 26% to €27.5 million, corresponding to a margin of 33%. Margins on group level are thus broadly in line with the previous year's level. Before adjustments, EBIT amounted to €27.9 million and EBIT to €18.5 million. The unadjusted EBIT is especially influenced by purchase price allocations amortization on the back of this strong development so far we confirm our group forecast 2023 with revenue between 165 and 175 million euro and an adjusted ebitda margin of 35 the operating development in h1 as well as the growth forecast for the full year as well as medium term outlook for 2025 clearly underline the resilience of our business model and focus on technologies and innovation leader. Leaders in a market environment with so many geopolitical and macroeconomic uncertainties as is currently the case. Our net leverage ratio within the group was kept constant at 0.7 times adjusted LDM EBITDA. and this despite the fact that we spent €8.5 million on the acquisition of two sales agents of bike leasing and that we are looking at a seasonally high refinancing backlog that increased by roughly €14 million in Q2 and should come down again throughout the year. With those two factors in mind, the development on the line, the high cash conversion of our businesses and equips us with significant non-dilutive financing capacity for future acquisition, a potential share repurchase, et cetera, et cetera. Ladies and gentlemen, with this brief summary turning over to the next page and handing over to Harald, who heads our finance department. Harald?

Yes, thank you, Marco, and welcome, everyone. Let us jump right into the quarterly revenue analysis as usual on page four, please. Starting at the top with bike leasing and an increase in top line by more than 50% in Q1, followed by a plus 22% in the second quarter. These growth numbers deviate somewhat due to two factors. First, we had a base effect in last year in Q1 2022. Back then, accounting for a green bond securitization had a negative, however, cash neutral P&L effect. This did not reoccur this year's first quarter, and therefore, reported revenue increased stronger than a bike leasing business volume. In the second quarter, it was the other way around. Last year the refinancing mix and operating processes were mostly in line with a desired state of things. This year, however, a smaller percentage of newly generated lease receivables were sold or forfeited conventionally on a non-recourse basis. This is the refinancing option that leads to an immediate income recognition. The reason why this was not possible to keep the forfeiting ratio that high is the continued very strong growth of new business. As a result, refinancing options had to be used that do not allow for immediate income recognition. This leads to a predictable generation of income over the contract term of 36 month respectively. While this will have a positive impact on the future earnings situation, income recorded at the beginning of the respective leases is lower now. Proceeding to IHSE on the bottom chart, as you can see, growth further accelerated even in the last month after a plus of 14% in the beginning of the year a strong Q2 fallout at plus 23% year-over-year. Jumping to the next page, please, with the regional sales split. Here, first, bike leasing. As far as you know, the company has been focusing on Germany only with first but very promising steps to expansion into Austria. And therefore, all revenue relates to the EMEA region. At IGSE, the material driver was a very strong performance in the US this year, where revenue grew by more than 80%. Also, EMEA showed a solid increase of plus 10% year over year. In the APAC region, revenue was still down by 46% to 1.5 million euros. This is due to the general trends of the coupling of the Chinese economy. Other factors also include below average growth in economic output, coupled with the crises in the construction industry, and in the general reduction in investments of the local Chinese district governments. Turning to the table of this segment here. Thank you. In the first two columns, we see that bike leasing's high margins remained mostly stable. The gross profit margin declined slightly by 0.6 percentage points to 62.4%, driven by two offsetting factors. First, the increased proceeds from the disposal of lease assets had a reducing effect. At the end of a lease contract, the bikes are sold to the employee, the employer, or a dealer, retailer. And the steep increase in disposal proceeds now in H1 2023 results from the very, very strong growth in units three years ago, so before 36 months. Although this revenue component leads to a positive contribution to earnings overall, its gross profit margin is significantly lower than the one of the other revenue components of bike leasing. Excluding for this contribution of disposal business, the gross profit margin remained at a consistently very high level of 80.5% versus 80.4% a year ago. In the other direction, I said to offsetting factors, bike leasing acquired two of their external sales agencies in the past quarter. This results in savings of provision payments to those agencies, which positively impacts growth profit. The slightly lower value for the adjusted EBITDA margin and the adjusted EBIT margin are primarily driven by the gross profit effect, but also by increased interest rates, which had a negative effect on income from leasing. Since the beginning of this year, bike leasing has introduced a variable leasing factor. and is currently undergoing a process of converting existing customers to this new system. A brief reminder, the leasing factor refers to the monthly leasing rate of this amount as a percentage of the acquisition cost of the leasing asset. So turning that up increases profit of the company. This conversion to a variable leasing factor will make the income per brokered bike materially independent of the respective interest rate levels. However, this conversion has not yet been completed for our customers, which means that the currently high interest rates still have an impact on our results. Proceeding to the next two columns to the right, at IHSE, the gross profit margin was essentially on last year's level, adjusted EBITDA increased by 18% to 3.5 million euros. And EBITDA margin was nearly the same as last year, same applies to EBIT margin. This margin level resulted primarily from increased costs for trade shows and travel activities, as well as IT costs. Particularly in the first quarter, several trade shows took place, which are an essential marketing channel for HSE. and personal expenses were also higher than last year this is mainly caused by higher commission payments in the us resulting from the very positive business development over there as well as the general adjustment of salaries due to the increased cost of living please bear in mind that this development is completely in line with ihse internal budget And we expect margin to level out over the remaining fiscal year on a clearly higher level. This expectation is also backed by the very positive order situation currently. In the central functions, two columns to the right, expenses increased in comparison with H1 2022. And the cost for this was a higher consulting fees relating to the review of potential corporate transactions, as well as increased marketing expenses with the goal of raising the brand awareness and popularity of broadcast technologies. In conclusion and summing up on the consolidated group level, revenue was 84 million euros showing a substantial increase of 29%. Gross profit margin was at 65% and adjusted EBITDA margin was 35%. Bring a group to an adjusted EBITDA of almost 30 million euros in half a year. The group's adjusted EBIT of 27.5 million euros corresponds to a margin of close to 33%. When you compare the last year figures here to numbers which you might have in your own financial model or own documents, please bear in mind that following the sale of Pallas end of 2022, our P&L items need to be reclassified retrospectively. Which means, according to IFRS 5, all revenue and cost contributions of Pallas must be excluded from the respective line items of the P&L and are now shown in the total at the very bottom of the P&L, which is called income from discontinued operations. Therefore, you have a nice like-for-like presentation of the results now, but a difference to our historical reports. Last but not least, our cash balance as per end of June, amounted to 59 million euros. Which brings us to the next topic, which is the financial position. Here we have a summary of financial leverage and structure of it. The net debt from loans, very left of the chart, amounted to 87 million euros. Substracting cash leaves you with a net debt from loans of 29 million. adding 14 million from other financial liabilities and subtracting 6 million of net financial assets from leases brings us to 37 million euros in total net debt if you compare that to our current ltm ebda this corresponds to a leverage of 0.7 times as marco mentioned before and Since our target corridor goes up to 2.5 times EBITDA, this remains a very conservative level of leverage in our view. When looking at cash flow in the first half of this year, there is a specialty that we would like to give you some more information about. You can see that on the next slide. And this is the cash flow effect of the refinancing backlog of bike leasing. So when a new bike is brokered through our digital platform, in step one, bike leasing pays the bike's purchase price to the retailer. This purchase price is then refinanced by bike leasing either through an external leasing company or through other financing partners such as banks. Naturally, there is some delay between the payment to the retailer and the payment received by the respective external financing partner. So a time lag between cash out and cash in results in liquidity being tied up in the form of a so-called refinancing backlog. An increase in this refinancing backlog has a negative effect on operating cash flow, while a reduction of backlog has a positive effect on operating cash flow. The absolute level in euros of the refinancing backlog is mainly driven by three factors. One, the number of new bikes brokered. Two, the price per bike. And three, the processing time of the refinancing. The number of bikes are already growing rapidly for bike leasing, driven by a huge rise in interest in company bicycles as a sustainable, cost-efficient, and healthy mobility solution. The average price per bike is also trending upwards, which has a further increasing effect on the volume in euros. In addition, the warm months of the year bring an increase in volume due to the significant seasonality of the business. So you have a cold Q1 and Q4 with not so many bikes and a warm Q2 and Q3 with a lot of new bikes. These two factors, so long-term growth in conjunction with peak season, generally result in new record volumes at bike leasing like every summer. These high volumes, even when refinancing processes go according to plan, lead to an increasing refinancing backlog in spring and summer, which then reduces back down to very low levels in fall and winter. At the end of the first quarter, the backlog was already at some 14 million euros and therefore 11 million above the figure start of January, so start of fiscal year. In the months of May and June this year, the very high volumes led to an increase in processing time for the refinancing at multiple external finance partners of bike leasing and a substantial increase too. Combined with the high number of bikes per day in summer, these delays resulted in an extraordinarily high refinancing backlog of 28 million euros end of June. This backlog had a significantly negative impact on the operating cash flow in H1. The graphic here on page eight shows the development of the bike leasing refinancing backlog, green bars on top of the page, and its effect on the group's operating cash flow in a quarterly disaggregation. The effect on the cash flow you can see in the blue indicated bar chart on the bottom of the page. What we see is that when you eliminate the change of the refinancing backlog, the operating cash flow would have been more than 20 million euros in the first half of 2023 compared to a reported figure of minus 4 million. Let me make clear that this is a temporary effect. During the last weeks, already, the refinancing backlog came down by more than half. So for first week of August, we are talking about some 13.5 million euros, which is essentially the level of March. So this was caused mainly by the easing of processing times of external financing partners. With a seasonally decreasing number of bikes per day in winter, we expect further cash flow to be realized from this. That was a lot of information and material. If you would like to revisit our explanation on refinancing backlog and cash flow, you can find a detailed discussion including this graphic in our half year financial report on page three and four. This would conclude the financial update. I'm happy to answer your questions later on and now hand over to Paul who is in charge of our acquisitions team.

Yeah, thank you Harald. Welcome everyone also from my side. As usual, let me provide you with a quick deep dive on our two business segments over the next couple of pages starting now with the significantly larger one, bike leasing. Bike leasing achieved another record H1 in 2023 in terms of all financial as well as operating KPIs. As mentioned earlier by Harald already, bike leasing not only grew their revenue by some 32% to 66 million Euro, but also the number of bicycles that were facilitated through its digital platform, which grew by around 31% year over year to a total of around 80,000 individual bicycles. Those facilitated bicycles, on the other hand, are only a function of the customers onboarded to Bike Leasing's digital platform. And Bike Leasing has now surpassed the, let's say, psychological mark of 50,000 individual corporates, and as per end of June, stood at around 51,000 corporate customers, up from around 45,000 end of 2022. Those corporations employ more than 2.9 million people that subsequently have access to our solution. Keep in mind that when we signed the acquisition of bike leasing in June 2021, the number of corporations on the platform stood at around 25,000. So we more than doubled that number since then. Lastly, the cash and cash equivalents of bike leasing amounted to around 19 million euros as per end of June 2023, which is slightly above the level as of Q1 2021. This level, however, is distorted by a high refinancing backlog that increased by around 14 million euros to now 28 million euros as per the same cutoff date, as Harald just explained the slides before in detail. In addition, Biocleasing spent around 8.5 million euros on the acquisition of two of its so far external sales agencies. By way of background, the acquisitions followed the strategic interest in integrating the previously external sales platforms into the group to be able to manage its sales activities in an even more targeted manner in the future and to access the know-how and network of the existing employees. As a result of these acquisitions, commission payments that were previously paid to these sales agencies for their sales performance will now cease, which leads to an earnings improvement. This being said, a slightly increasing cash position despite those two factors in a total amount of around 23 million euros underline the strong performance and high cash conversion of bike leasing. Turning over to the next page, number 10, I would like to highlight two operational and non-quantitative developments at bike leasing. In April, bike leasing successfully launched the connection of B2C brands to its platform. starting with Kenyon and followed by the brands YT and Propane. More brands are expected to onboard over the coming month. By this, all bike leasing customers can now directly order their preferred bicycle through the brand's online shops, as you can see on the left-hand side of the page. Bike leasing as a direct payment option, so to speak. We successfully launched a new fully digital framework agreement for our new corporate customers. Given the strong interest of corporates to onboard to the bike leasing platform, this now fully digital solution should allow for much easier and quicker processing and thus onboarding speed in general. And in addition, the onboarding can now be done 100% paperless, thus providing a small impact on sustainability as well. Moving over to page 11 for a similar update on IHSE. IHSE continued its rebound after the lifting of most travel and contact restrictions globally, with a top line growth of 19% in H1, which slightly accelerated from a level of 14.5% in Q1. As seen earlier by the regional splits presented by Harald, this was mainly due to a very strong development in the Americas region, but also a positive contribution by EMEA. Only Asia and especially China, as already mentioned, remains a bit more difficult, among other things, given the coupling tendencies from the West. Important to highlight is that H1 2023 represents the first H1 with a revenue level above the 2020 level, which at that time still included the last pre-COVID quarter of Q1 2020 that you can see in the orange bar chart on the right-hand side here. This underlines that demand for IHSE as a global technology leader in KVM technology remains intact and the rebound is continuing. The adjusted EBITDA margin in H1 was roughly on the previous year's level. This also means that the temporary margin effect due to planned expenses for sales and trade fair activities, as well as a group-wide IT project that we saw in the first quarter of this year, have thus already been compensated for with a view to the half year. Lastly, we remain optimistic for the month to come on the back of a high order backlog of some 10.6 million euro. This order backlog also still partially includes the single largest order to date that IHSE ever received by a federal aviation agency, which is expected to convert to revenue over the second half of the year. Due to this backlog, as well as the fact that IHSE typically develops more strongly in the second half of the year than in the first six months, we are confident to close the fiscal year 2023 with a significant top line. Turning over to page 12 to also showcase two operational developments at IHSE, similarly to bike leasing a couple of slides before. As already announced earlier this year, the KVM technology of IHSE has been granted two of the highest security certifications there are, namely NIAP for the North American market, as well as Common Criteria EAL4 Plus for the European market. On the back of this new secure KVM product line, first sales and significant trade share activity has been kicked off. The reaction of the governmental sector has been very positive, with the first project already won, and management expects a significant future business potential in that specific vertical, which so far was not addressable by IHSE due to the high certification requirements. So a completely new market opened there. In addition, IHSE launched its new DracoCon app, which allows for a highly secure and latency-reduced access to KVM networks from a software-based console on any PC or laptop. This new product innovation utilizes IP acquired with the KVM tech acquisition from the end of 2021, thus also highlighting the strategic relevance of our decision to acquire the company at that time. This so far concludes the operational update on our current business segments, and I'm Therefore, happy to hand it back over to Marco for our outlook.

Yeah, many thanks, Paul. Flipping over to the last two pages of today's presentation, our forecast for fiscal year 2023 as well as medium-term outlook for 2025. As already briefly mentioned in my opening remarks, we confirm our group forecast for 2023 on the back of the positive development over receivable in H1 this year. We plan with revenue of between 165 to 175 million Euro in fiscal year 2023, which corresponds to a growth corridor of between 16 and 23 percent compared to the 143 million Euro of revenue in 2022. We expect the adjusted EBITDA margin to remain at a high level of 35% for this year, corresponding to an adjusted EBITDA range of between €58 million at the lower end of our guidance and €61 million at the upper end. Please note that this forecast assumes that there will be no change in the scope of consolidation within Brockhaus Technologies. 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. In order to provide additional transparency, you can see on the next page for your investors on the expected medium-term development at bike using IHSE and SAS Broadcast Technologies, we published a medium outlook 2025 for the first time ever in addition to the annual guidance 2023. By 2025, we target revenue to increase to a level between 290 and 320 million euro. This compares to revenue of 143 million euro last year and the guidance between 165 and 175 billion euros for the current fiscal year 2023. I believe this underlines our growth ambitions with both bike leasing and IHSE. Profitability is also supposed to continuously increase and we aim for an adjusted EBITDA margin of around 40% for the 2025 fiscal year. In 2022, this margin was almost 35%, a value that is also targeted for 2023. This would increase the adjusted EBITDA from €50 million last year to a value of approximately €120 million or more by 2025. And for our annual forecast 2023, this medium-term outlook refers refers to the group as it stands. So assuming there will be no change in the scope of consolidation. All in all, we are very happy about the strong development 2023 so far, especially when considering the challenging geopolitical and macroeconomic environment. We are convinced by the resilience of our business model and our ability to source, acquire, and successfully develop technology and innovation champions within the German Mittelstand. Elevating champions is our mission. That concludes our presentation for today, and we are now happy to answer your questions. For that, I would like to hand over to the operator again. Thank you.

Yes, thank you. Ladies and gentlemen, if you would like to ask a question, please press 9 star on your telephone keypad. If you would like to withdraw your question, press nine star again.

Please press nine star to ask a question. One moment for the first question, please. And the first questioner is Mr. Stefan Augustin of Warburg Research.

Please go ahead.

Yes, hello. Can you hear me? Yes, we hear you. Great. Thank you. So the first one is actually on the refinancing backlog in the DeSync business. So just to be sure, when we have a refinancing backlog and you forfeit in the third quarter, for example, additional amount this is also possible to have a catch-up effect so to say in the revenue and profit generation as the let's say the leases we have financed by our own cash in the second quarter then will be sold off in q3 and then we have the materialization of of the net present value of profit as we normally have.

That is correct.

That is correct. The second one, can you help me here a little bit? Is there a structural factor that your refinancing partners just by tendency take longer and this is not only connected to the volume but maybe to the interest environment or the economic environment? This is something you see gradually appearing that everybody needs longer.

I take this question. It's a combination of many factors. I think we already discussed in Q1 where the refinancing backlog already increased to 14 million. that at this point it was a, let's say, tactical decision because one of our refinancing partners, so one bank that acquired those receivables from us, was significantly cheaper than another bank, however, was in their own internal processes slower. So in that sense we, let's say, traded cheaper interest costs versus a longer processing time, which had an effect there. In the summer, I mean, we used multiple because of the volume that increased quite significantly. We used multiple refinancing partners, some of which were quicker, some of which were slower as the bank in Q1 that we already used. But it was, let's say, more related to the immense amount of business that we received in Q2 and also going into the summer generally. which also led to longer processing times at the more quicker banks. Because if you're just taking some arbitrary numbers here, but if you send them multiple thousands of contracts in a week, then this, of course, takes some time for them to internally process as well. So it's a combination of, in Q1, we used them strategically, even though they were a bit slower. In Q2, it was just combined with the sheer volume that we had to refinance. But as Harald said earlier, I mean, this is also seasonality driven and this will even out over the year. Thank you.

And finally, hopefully also a very quick one. I'm missing a little bit and a higher interest income from the quite high amount of cash you have at the holding level. So can you outline why we have such a low interest income?

You mean the not leasing business but real cash on the bank account?

Yes, I mean if you have like 50 million on the AG holding and I see 130,000 interest income that seems a bit low given the current interest rates. So I'm wondering why this is so low.

Yeah, I mean, interest rates have not been that high for the whole year. And that's just the effect of, let me guess, when they came up. So it's the pro rata effect. I mean, that's really what it is. And we are still very competitive on parking the cash of the holding. So we still do not do any, let's say, risky investments from that.

in addition to that we are only investing in very short term and not for long because in our business you never know when there is a good deal around and you need the cash so on AG level so to speak we are really on the safe, safe side and nothing else and that for only short term, for only short term months or two months maximum.

Okay. Thank you very much.

Welcome.

The next questioner is Mr. . I'm sorry. So yeah, I would then announce the next questioner. It's Mr. Lasse Stuben of Barenberg. The floor is yours.

Hi, good afternoon. Would it be possible to give just sort of some color on the current deal pipeline that you're seeing, just given the current environment with a lot of private equity seemingly coming into, especially U.S. private equity coming into European software and also medtech names? So it'd just be interesting to hear your thoughts on on the current environment and what you're seeing?

Yeah, sure. I can take this. So as usual for us, a deal pipeline is always given. And when I look at our flip chart here, I always see, let's say, a handful of transactions that are currently being evaluated. However, you brought up a very good point, especially for software and MedTech transactions. we see that there is a lot of interest because, I mean, while people have looked at various kinds of, let's say, more riskier and less riskier business models over the past years, going into that year, I think many, many people are focusing on what they say is resilient business models. And those are, of course, the ones that you mentioned, software and medtech, especially medtech going into the direction of consumables. because they have a either contractually recurring revenue nature or a quasi-recurring revenue nature. So there's definitely a lot of interest there. There are also transactions that I would consider get more heated. And you don't actually see any multiple impact from the, I don't know, increased refinancing costs or whatever. they're actually going over the table for the same multiples as we've seen over the last years but it's really a a black or white situation either people are going crazy in those transactions and are bidding really really high entry multiples um or the transactions don't close at all so it's it's uh not so many transactions in the middle of between that um so it's either yeah very successful transactions or no transaction at all, but generally you can say that, I mean, especially in the summer months now, it's vacation time, but also generally going into the year, the number of deals has declined. We still have enough to look at, but yeah. As you know us, we don't get pulled into heated auction processes. That's not what we are used to do.

Yeah, nothing. Okay, maybe if I can just have one follow-up. I mean, it's been a while since you've now done some of the bigger deal, I guess, outside of KVM Tech. Is there any sort of situation in which you would be relaxing your, let's call it your 20-30 rule when looking at targets? Is that something you're thinking about just to increase, I guess, deal velocity? Or are you happy to just remain patient and then I guess, pick your target when it comes along? I would take that.

We would stick to our investment and acquisition strategy because we don't want to dilute that. And why? You just see it simply now, right? I mean, we are not in a very easy environment, I would say, but the group as such is developing very strongly overall in all KPIs from sales to gross margin to EBITDA, EBIT to cash flow accepting what happened now in Q2 due to backlog and the strong order intake at bike using. We are very happy about this resilience and I think it really demonstrates and shows why we have this strategy because um when it gets tough you know the tough is going and and we we do well and this is um this is i think very very important and it just proves our strategy and that's why we don't want to dilute that and that means um on the flip side we are looking still very very um intense to businesses who are in that region and that focus Just right now, this week, we have a management presentation with KPIs in that 2030 rule and even above. And it's software, so this is what we do. I mean, we don't want to change this and we don't want to grab for something which is maybe somewhere on the street and it's not going well. We just want to keep this focus.

to deliver such good results like the H1 ones. Understood. Thanks. Welcome.

And the next questioner is Mr. Lukasz Pank of Tigris Capital. The floor is yours.

Yes. Good afternoon, gentlemen. I would like to start with IHSE. You showed the strong decline in Asia-Pacific and I would like to get to know more about this development going forward. How do you see this in this region concerning future revenue development and how you position in the company to maybe participate if the market is going up again?

Yeah, I can take this. The Chinese market is difficult at the moment due to multiple effects. They were quite long, let's say, very close with respect to COVID. But now, as we said earlier, also those, let's say, decoupling tendencies. So what you see is that you have a, again, split up market for projects where you need international certifications for, for example, bigger airports that want to attract international travel, you still need internationally certified technology. And that's where we still win projects. But those are, of course, let's say, solitary projects rather. But for local projects where, for example, only I stick with the air traffic control example, where only national travel is taking place, the Chinese don't really care about international certifications and they would rather use a mediocre technology which is however locally produced. And locally produced is a very important topic which we have on our radar and where we are currently considering what degree of value creation or of your supply chain you you would need to do locally in order to qualify for a let's say designed in germany but made in china type of product and this is currently in in evaluation however this being said the the chinese office slash team of ours is also quite small so they they run profitably also on slow on low revenue levels but of course if you as you rightly mentioned When the market is re-picking up, we want to be there, we want to have our foot on the ground. And that's why we are, A, considering this question of how much do we need to do locally to compete in those projects, and B, extend our partner network. Because we globally always are more in a, let's say, indirect sales strategy, because those are larger projects that are being managed by someone. And we want to extend that funnel of onboard sales partners in China specifically.

And then on the margin at IHSE, in the past you already mentioned several times the 30% margin target. Now you elaborated on the dilution of the margin in the first half of the year, said that the second half of the year should be better again. But this 30% seems to be still far away from today's point. So which measures do you implement to reach this level and when or what or at what revenue level do you see this margin level as reachable?

Yeah, Harald here. As you know, we do not guide by segments. However, with IHSE, it's an extremely simple play on fixed costs. When the company makes enough revenue per month, per quarter, whatever, the EBITDA margin is where we want it. When this is not the case, it is not. And this assessment has not changed. So IHSE is growing greatly. We had some extraordinary, or let's say, not evenly distributed throughout the year effects, especially in Q1. Yeah. So, this is our assessment. We'll grow there.

No, but as you correctly said, I mean, deliver the top line and bottom line follows. In our case, we, I think we also communicated it in the past, we acquired for strategic reasons, for technology reasons, KVM Tech, which was naturally lower margin than IHSE because it's just a significantly smaller company. However, let's say the more they onboard to the IHSE platform and the more also their revenue grows, the better the margin comes again.

Okay. And then maybe also on your 2025 target, I think that still kind of a black box from today's perspective because as you mentioned you don't give further details or in general more details on the segment level going forward so what should we expect in terms of the of the segment and maybe in terms of your underlying assumptions for these both companies until 2025 yeah this is Harold here again yeah I mean the

Assumptions are, or the most basic or major assumption is group as is, right? So as pointed out before by Marco and Paul, of course, we are always busy trying to acquire the next company or do the next acquisition. But we did not take this into consideration when putting together that medium term forecast. So what we do expect is further strong growth, both from IHSE and from bike leasing. I won't guide by segment, but looking at the historical growth rates, you can make a picture maybe which we think will grow a bit more. And that is on the top line for continued huge potential for both companies and on the bottom line or an EBTA margin. Also, it's really a play on synergies in terms of scale effect.

Okay, but would you maybe give in the future some more details on your assumption at Pike Leasing, for example? How many companies you want to gain or the number of contracts in a year you want to conclude and so on?

You mean over the medium term or on a yearly basis?

Over 20, 25 times.

No, as Harald said. So we still don't guide individual segments. But I think as you can see from the growth dynamics at both businesses, And also the market potential, I think we've summarized that in a couple of presentations over the last quarter. There is still a lot of white space to be collected. So the growth ambitions are still high. I mean, even if you look at the medium-term numbers and you just calculate a CAGR from this year or from last year to 2025 medium-term outlook, and you apply that maybe plus minus some percentage points on the individual segments, that should give you a good picture.

Thank you. At the moment, there are no questions in the queue. I will repeat for the last time, ladies and gentlemen, if you would like to ask a question, please press 9 star. There seem to be no further questions in the queue.

All right. If there are no more questions, I would really thank you all very much for attending today's earnings call of Brockhouse Technologies. I would like to use this stage a moment to thank our employees within the group for their outstanding work and performance, as well as our shareholders for their continued trust and support. Thank you very much, and goodbye. Have a great day.