Brockhaus Technologies AG

Ladies and gentlemen, welcome to the Brockhouse Technologies Investor Update Call for Year 2023. 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 the floor over to Marco Pokhals.

Thank you and good afternoon, everyone.

Welcome to Brockhouse Technologies Earnings Call for Fiscal Year 2023. Before we begin, I would like to point out that the slides we are presenting will afterwards be published in the investor relations section of our website, rockhouse-technologies.com. After our presentation, we will open the call to 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. Before we present 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 2023 on page 94 onward for a discussion on alternative performance measures, as well as the reconciliation of non-GAAP figures. 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 2023, starting on page 65. Flipping over to page 3 and to give you a brief summary of what we have achieved last year. 2023 was another record year for our technology group. we have once again delivered highly profitable top-line growth across all treatments, and this despite lasting global macroeconomic and geopolitical tensions. Rockhouse Technologies generated revenue of €187 million in the fiscal year 2023, representing organic growth of 31% compared to last year. Fueled by the growth contribution of both segments, we once again exceeded our forecast 2023 by around 7%. Adjusted performer EBITDA grew even stronger by 41% to 67 million euro, corresponding to a high margin of 36%. Adjusted performer EBIT increased equally strong by 41% to 62 million euro, corresponding to a margin of 34%. We are once again reporting performer figures as Brokaw Technology successfully completed four highly accretive add-on acquisitions within the financial technology segment last year. To enhance the comparability with the period to come, the performer view shows our numbers as if the acquisition would have already taken place on January 1st, 2023. From a non-performer perspective, revenues unchanged. However, adjusted EBITDA grew by 31% to €62 million and adjusted EBIT altered by 31% to €58 million, corresponding to a 33% and a 31% margin respectively. Even though I keep repeating myself, the operating development in 2023, as well as the growth forecast for the full year, as well as medium-term outlook for 2025, which we will cover later in this presentation, clearly underline the resilience of our business model and strict focus on technology and innovation leaders, and nothing else besides that. Lastly, our financial reserves remain high at cash and cash equivalents of €54 million, despite having made significant investments for the four add-on acquisitions our share purchase, repurchase program, and further repayment of debt within our segment. Let me come to EPS and dividend. Moving over to page four and a new overview that we have added to our presentation and which we will feel should be in the center of attention of our shareholders. We always promise and preach that our interest as a team are deeply aligned with those of our shareholders, namely to create shareholder value. Why? Because we ourselves are shareholders of Rockhouse Technologies ourselves, insiders, meaning our team, supervisory board, and management of our subsidiaries, all around one-third of the group. Our focus to continuously increase shareholder value can be best displayed by showcasing the developments of our adjusted EPS over the past three years. Over this period, adjusted EPS increased by a tigger of 77%. That means that the adjusted net income per each stock of technology share is almost three times as high as two years ago and twice as high as last year. This, of course, is calculated on the basis of net income attributable to shareholders. So the 48% of bike leasing income that belongs to minority owners of bike leasing are excluded from this figure. Personally, I do not know of many companies that were able to achieve such a strong development, especially over the challenging last three years. Also, as we get this question a lot, it always makes sense to look at the adjusted PTAs. as the non-adjusted figures are completely diluted by purely consolidation-related PPA amortization that has no capex need in the future. They only exist because our core business is to do NMA. Please always keep that in mind when looking at our EPS. Given the strong liquidity position, the very successful operative performance in 2023, and the positive outlook, we would propose to the AGM to pay out a dividend of 22 cents per share for fiscal year 2023, sooner than we had predicted when founding Brokerage Technologies. The rationale behind this is manifold. A, underline the profitability and high cash generation of our business. B, reward longstanding shareholders with their trust in us. C, extend the addressable investor universe by dividend-seeking asset managers. With a corresponding total distribution volume of 2.3 million euros, this dividend would however be small enough that it does not hinder us to further conduct additional acquisitions in line with our acquisition strategy or do additional share buybacks. With this brief summary, turning over to the next page and ending over to Harald, who heads our finance department.

Thank you, Marco, and welcome everyone. Let us jump right into the quarterly revenue analysis on page five. And today, to mix things up, let's first look at the orange chart at the bottom of the page, indicating IJSE's top line development. Last Q4, IHSE was somewhat below the comparative quarter. However, the year's ending was exceptionally strong one year before. So the 11 million euros in revenue end of this year, or end of 2023, are still quite solid. On the top chart, you can see that bike leasing outperformed last year's fourth quarter by more than 50%. And that is where I would like to elaborate a bit about the company's business seasonality. In the last year, the supply situation with regard to bicycles was in part very difficult. Customers therefore tended to order bikes with more lead time in advance. As a result, the seasonality of bike leasing business was somewhat evened out throughout the year. I mean, business volume in the warmer second and third quarters was still much higher than in the colder first and fourth quarters, but not as much as in the year before. This explains the growth trajectory of last year, where growth in the beginning of Q1 and in the end of the year exceeded 50, so 5.0%. In contrast, growth in summer was somewhat lower. Recently, the supply situation has improved substantially with many retailers holding large inventories. And as a result, bulk leasing management expects customers to return to their historical purchasing behavior, so their long-term purchasing behavior. Therefore, we expect the business seasonality in 2024, so forecast period, to be even more pronounced than in 2023. That is why in Q1 of this year, we do not expect substantial growth at bike leasing compared to an extraordinarily strong Q1 of 2023. This, however, does not impact our forecast, which foresees further strong growth throughout the current year and also for the future beyond that. Hopping onto the next page for the regional sales pitch, First to bike-using, as always, no surprises here. The company does business in Germany and Austria. Growth in top line was 37%, therefore all relating to the EMEA region. At IBSE, growth was primarily driven by the US, and EMEA also showed a solid development compared to last year's levels. In the APAC region, revenue was a bit contracted, but we'll hear more on that later from my colleague Janik. Turning to the segment P&L table. In the first two columns, we see that bike leasing growth profit margin increased from 61.1 to some 63.7%. This is due to the fact that the company acquires four out of their five external sales agencies during last year. As a result, sales provisions are no longer paid to these agencies, which decreases costs and those costs are presented in the P&L above gross profit. On the level of EBITDA and EBIT, the margins increase correspondingly with EBITDA margin being up 1.9 and EBIT margin up 1.7 percentage points. Proceeding to the next two, coming to the right ISSEs, the growth profit margin outperformed last year by 2.5 percentage points, also on that more info later on in the call. This development was even better further down the P&L with EBITDA margin increasing by 3.5 percentage points to 27.4% and EBIT margin also increased naturally. Further to come to the right, in the central function, expenses increased, which was caused by higher consulting fees as well as marketing expenses, with the goal of raising the brand awareness and popularity of broadcast technologies. In conclusion and summing up to the consolidated group level to the far right, revenue was 187 million euros, showing a substantial increase of 31%. Growth profit margin was at 66.5% and adjusted EBTA margin was 36%, bringing the group to an adjusted EBTA of 67 million euros. The loose adjusted EBIT of 62 million euros corresponds to a margin of 33.5%. Last but not least, our cash balance after end of December amounted to 54 million euros, but Marco will get on more details on that later on. This concludes my part of the financial update and I'm happy to discuss with you further later on. And for now, I'll hand back over to Marco. Thank you.

Yeah, thank you, Harald. On the next page, I would like to run you briefly through our financial leverage structure. End of last year, the debt from loans amounted to 85 million euros. Therefore, when subtracting cash, we are left with a net debt from loans of 31.4 million. Furthermore, adding 18 million from our financial liabilities, and 9 million of liabilities from lease refinancing brings us to 59 million euros, the total net debt. If you compare that to EBITDA, this corresponds to a leverage of 0.87 times. If our limit for this KPI is some 2.5 times, we consider our current financial position as more than conservative. Looking at the cash switch, during the past year, we took several measures with regard to our financing structure. To put those into context for you, we thought it makes sense to discuss them in the cash switch. What you see on this page is the disintegration of the changes in cash by the major impacts. The blue bar at the left indicates cash as per beginning of the year. The blue bar at the very right is cash at the end. First, we generated free cash flow of 44.4 million euros, which is plotted as the first big green bar. We had cash outflows for income tax, taxes of 10 million, and for interest and debt repayments of 15.9 million euros. The sale of IHSE real estate brought in 10 million. Due to our share being undervalued in our view, we invested 11 million euros in buying back our own shares, leading to a corresponding cash outflow. By pleasing, invested 19.5 million euros to acquire four of their five sales agencies, which saved substantial provisions payments going forward. The next bar to the right is labeled distribution to non-controlling interest and needs to be explained in a bit more detail. On the operating entities of bike leasing, 65% are owned by an intermediate holding company controlled by us, by Brockhoff Technologies. The remaining 45% are owned by the managing founders of the company and a co-investor. As a result of the successful and highly cash-generated business of the year, bike-using made a cash distribution of €35 million to its shareholders in the end of 2023. This means that 45% of that distribution, equalling €15.8 million, were paid to those non-controlling interest holders, namely the foundries and the co-industry, which reduces cash on a group level. The other 55% of the cash distribution, equaling 19.2 million euros, were transferred to the intermediate holding company, which used the money to partially repay the last remaining acquisition financing loan from our takeover of bike leasing in 2021. The remaining debt balance of that subordinated acquisition loan after the repayment is 26.4 million euros, as of year end. For your later reference, we included a small organization chart above the cash bridge to visualize the payments involved. Please pay attention on that. Altogether, we are convinced that we've put our strong cash flow to the best use possible in the last year. I now hand over to Paul for more insights into bike leasing development. Paul?

Thank you, Marco, and also welcome everyone from my side. As usual, let me start the operational deep dive with a look at the significantly larger platform that we have, namely bike leasing. 2023 marked another record year for bike leasing in terms of its most important financial and operating KPIs. The interest in and market share of bike company bicycle leasing as an attractive financing solution and hence a subset of the overall bicycle industry continued to grow strongly. Bike Living managed to grow the number of broker Bike Living contracts in 2023 to around 151,000 contracts, which is approximately 28% more than the year before. At the same time, the number of corporate customers onboarded to this digital platform grew by around 14,000 individual corporates, reaching a new milestone of around 60,000 in total. Those corporates employ around 3.3 million employees that gain access to the bike living solutions. Please note that this development last year marked the highest absolute onboarding rate of new customers that bike living has ever achieved. As Harald already comprehensively covered in the key financial section, I just want to highlight one additional detail, namely the cash position of specifically bike living. The cash has remained broadly stable at bike leasing, if you compare it to the end of 2022, despite the significant investments that have been conducted last year. To highlight them again, nearly 20 million euros spent on the acquisition of four sales agencies, full repayment of the senior acquisition loan in the amount of 10 million on the operational level of bike leasing, and lastly, a first distribution from bike leasing to its shareholders in the amount of 35 million euros, which Martha just explained a second ago. This clearly underlines the high cash generation of the company, in addition to its high profitability, as you can always see in our P&M. Turning over to patch 12, and now putting the operators' glasses on, I would like to give you three examples from last year, where we together with the management team have created significant value for the company, and hence also all shareholders involved. As mentioned several times already on the previous slides, we successfully acquired four previously external sales agencies last year and terminated the work with the fifth one. We did so by way of asset deals, meaning that we not only acquired their business, but also their respective sales colleagues. This then so-called internalization of the sales teams will allow us to better orchestrate the different sales channels that bike-living is nurturing. as well as better use the individual strength of the people involved. For example, the differentiation between hunters and farmers, as you can always see in sales. In addition, those previously external sales agencies earned a percentage margin for each and every bicycle that was ordered within their region, totaling around 11 million euros in total commissions already in 2022. These commission payments would have grown for rather the growth in our transaction volume, meaning number of prices of times average price, and given the acquisition and termination of this system, will be safe from now on. The very accretive effect of those acquisitions can already be seen in the difference between our performer and adjusted figures, which Harald presented before. Secondly, as we touched upon in earlier earnings calls already, Bike leaving began to change their contract system beginning of last year, shifting from a previously fixed leaving factor to a so-called floating rate system. This means that the leaving factor flows up and down in accordance with the central bank interest rates. Leaving factor, just for your information in that respect, means the implicit interest rate that a user, a consumer, pays on a monthly basis for our financing solution. You may ask yourself, why is this a big thing to highlight here? The reason is that in an environment of hardly increasing interest rates, a fixed rate system, as we ran it in the past, basically squeezes your margin per bicycle. And this was the case in 2023, where we implicitly lost significant margins per bike, as changing around 45,000 old, let's say old customers, as per the beginning of last year, naturally takes some time. As per end of last year, however, roughly 80% of all customers have already migrated to the new floating rate system, meaning that our interest rate risk is now close to being fully hedged and the margin earned per bite will come back to its previous level. Lastly, in order to set up the business for its next growth stage, we early on decided to complement the founders and existing unit heads by several new C-level executives. After lengthy discussions and interviews and search processes, We can now happily say that the C-Level is completed within Bike Living, with the hiring of a Chief Technology Officer, a Chief Financial Officer, a Chief People Officer, and a Chief Operating Officer. The last one of which will, however, only start in H2, because the termination period is a bit longer. This concludes the Operative Update from my set on Bike Living, and moving over to the next page for a similar update on IGSE by my colleague Janik, who has our operations department. Thank you.

Thank you, Paul, and good afternoon, everyone, from my side. After an already strong first nine months, ISSE further delivered a strong last quarter to achieve an overall revenue growth of 12.1%. This underlines that the demand for ISSE is a global technology leader in KGM technology, and the growth table in its market is intact, and the rebound is continuing. As seen earlier by the regional shifts presented by Aral, This was mainly due to a continuous very strong development in the Americas, while EMEA was broadly on the same level as last year. Only the APEC reason, especially driven by China, remains more difficult given the decoupling tendencies from the West. But also, this is below average growth in economic output, paired with prices in the construction industry, and a general reduction of investments by the local Chinese district governments. The adjusted EBITDA margin of 27.4% expanded by 3.5 percentage points as compared to the previous year's levels of 23.9%, despite significant investment for trade shows and now a finalized group-wide IT project. This is of course mainly due to the strong top-line development and resulting fixed cost regression. However, additionally to the favorable top-line, resulting in EBITDA improvements, the ITSE cross-profit has also improved. The gross margin level is back above 75% due to a normalized supply chain and further design and product improvement. Moving on to the next page for a quick overview of the values that we are creating together with the ITSE management. Not only is the company on a continuous growth trajectory, adding to the top line while improving the overall margin, it is also investing in the future and market readiness. The product portfolio of ITSE was extended to include certified solutions, which is the base to be successful in multiple mission-critical environments, especially in the security and government verticals. In order to promote these products, we also have intensified our presence at relevant trade shows and with full-scale integrators as well as working together with experts and multipliers in this particular industry. As you can see in our published year 2023 report, we have already achieved significant orders in this area. The conventional product portfolio was extended to also include a solution for software-based KVM to be able to offer fully hybrid solutions to customers as we see a growing demand for more flexibility while still remaining all benefits of highly secure KVM systems. The IT portfolio that was acquired with the purchase of KVM Tech was overhauled and a new generation of IT-based systems is available in the market since the end of last year. This will also make us able to better address markets like in some countries in East Asia that are more sensitive to cost-efficient solutions with existing IP networks. As a brief outlook for 2024, it is worth to highlight the new generation of VideoCortex JPEG XS as an IP core, which will not only further increase the capabilities of our own product, but will also generate licensing fees when using cases needing a strong and efficient VideoCortex even outside of KVM technology. Finally, we have just finished implementing step one of an increased automation in our production facility in Oberthorringen, giving us not only additional capacity for continuous growth, but also increasing the quality level of our product by reducing our production cost per piece. With this, handing over back to Marco for the outlook.

Yeah, thank you, Yannick. Flipping over to the last two pages of today's presentation, our recently published forecards for the fiscal year 2024, as well as our medium-term outlook for 2025. As already published by an ad hoc release on March 22nd, we expect another record year for Blockhouse Technologies in 2024. On the basis of the strong development last year and promising prospects for both of our subsidiaries, we expect to achieve revenue of between €220 and €240 million, with an over-proportional growth in adjusted EBITDA to between €80 and €90 million. Please note that this forecast assumes that there will be no further change in the scope of consolidation within Blockhouse 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, even though we are constantly working towards finding the next hidden gem in the market. In order to provide additional transparency for our investors on the expected medium-term developments by using IHSE and past Brockhaus technologies, we published a medium-term outlook in 2025. in June last year. On the back of our strong operative performance in 2022 and the forecast 2024, we are happy and proud to reiterate that we see no change in the medium-term outlook for 2025. By 2025, we target revenue to increase to a level between 290 and 320 million euros. This compared to revenue of €187 million last year. I think this underlines our growth ambitions with our group. Profitability is also supposed to continuously increase due to operational leverage, both on subsidiary level as well as considering the central functions cost of forecast technologies that do not grow in line with our fundamental business, but are indeed scalable. We aim for an adjusted EBITDA margin of around 40% for the 2025 fiscal year coming from a performer EBITDA margin of 36% last year. This would increase the adjusted EBITDA from 67 million euro last year to a value of approximately 120 million euro or more by 2025. Nearly twice as much EBITDA as last year. As for our annual forecast 2024, this medium-term outlook refers to the group as it stands. So again, assuming that there will be no change in the scope of consolidation. All in all, we are very proud of the strong development of our technology group over the last years and in 2023, especially when considering the challenging geopolitical and macroeconomic environments we are all facing. We are convinced of the resilience of our business model and our ability to source, acquire and successfully develop technology and innovation champions within the German Mittelstand. That concludes our presentation and we are now happy to answer your questions. For that, I would like to hand over to the operator. Thank you very much for listening.

Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press 9 and the star key on your telephone keypad. In case you wish to withdraw your question, please press 9 and star again.

Please press 9 and star now to register for a question.

At the moment, there are no questions, so please press 9 and star if you would like to ask a question. And now we have the first question coming in, and it comes from Lukas Fang, Tigris Capital. Over to you.

Yes, hi, good afternoon, gentlemen, and congrats to the very good numbers for 2023 and also the promising outlook for this year. But if we look beyond 2024, I think you will be not surprised about this question. When I compare the expectations this year and for next year, we will see a higher growth rate for 2025, if you take both the midpoints. and we see also a higher jump in profitability for next year compared to this year. Can you please explain a little bit from your perspective and your expectations why this is a realistic scenario?

Maybe to take that from my side, Paul, from a technical point of view, you are absolutely correct to take the midpoint of both ranges. That leads to a slight mismatch in growth rates. If I remember correctly, the jump this year would be a bit below the jump that would be assumed for the midpoint 2025. However, if you change the points to the lower, for example, this is being flattened out a bit. A, please don't be too technical about it, because you can change it from a midpoint to other points in the range. The second thing is that we still see a challenging market environment out there right now. There have been tensions in the past year, both as you said, macroeconomic as well as geopolitical. Those have not really changed so far coming into 2024. So we are rather on the conservative side when we look out there and hence have gone out with this outlook.

Okay, so you would see also a better environment for you if... on this already good perspective or this already good outlook if the environment will get better.

This would give another push for you. Generally, yes.

If the market environment is easier out there, then it also helps our business, of course. However, it's whatever type of geopolitical point vanishes from today to tomorrow, you will of course not see an immediate effect. Probably that this will dribble down through the market. Yeah. Okay.

But the impression is that as an investor, we should rather expect the lower end of 2025 guidance than the upper end.

We have not said this. The outlook for 2025 stands as we've put it out in June last year, if I remember correctly, and it's still the exact same range. The only thing that we can say is that our forecast for this year is how we've just presented it for the reasons just explained. And this is it. No, let's say, qualification if we're rather on the low or the upper end or in the midpoint. The range stands as we've said it.

Okay, thanks. Thank you. And the next question comes from Lasse Steuben from Berenberg. The floor is yours.

Hi, good afternoon. Just a specific question on IHSE. APAC here has been leaked for quite some time now, so I'm just wondering kind of how you think about that. structurally going forward, do you still think there's going to be a recovery there, or do you think that, you know, APAC for ISTC is really going to be a smaller biography and that you're going to focus your efforts more on the US going forward, given, you know, the strong growth rates you've seen there?

Thanks. So, thanks for the question.

In general, we don't guide by segment, but what I can say about the regions, APEC itself minus China actually even was positive in 2023. And we see already for this year promising projects in countries like Vietnam as an example, even Oceania as a border to APEC. So with that being said, APEC itself, we do further, let's say, see profitable and good business. For China itself, I mean, China was started in 2023 from a total top line of about 1.5% of the revenue. We still have partnerships in the country. We still actively address projects. We actively still get requested to bid for projects. So there will still be a business, but it will not be as strong as it is in the last, let's say, three or four years ago, right? But we still address the market nonetheless. With that being said, we also, because we see the tendencies of China having this negative outlook in the last two years, of course, and for the other reasons. And you can see this by the very, let's say, jumps or big jumps we had in the North American region to offset these, let's say, tendencies we see in China.

Okay, makes sense. And then just one more. Can you just give an update or color on how you see the market for acquisitions at the moment? I know it's a bit challenging, but I guess with potentially with rates coming down, et cetera, maybe the market is a bit more receptive to acquisitions. I'm just wondering what you're seeing on that front.

Yeah, Marco, you're not so high. Maybe I jump on this. It's, I think, rarely, you see rarely very good companies, especially when you're talking about software, business models, paid for 20 to 30 times a day, which is in our you crazy and we're not ready to do this we are very strict on that as we always were and want to be and therefore besides that you see you know I think more stuff out of out of our range again highly profitable growing technology and innovation businesses will see to be business models and and That's for now. Yes, we do always see deals, but if it's SaaS and software as a service and becoming revenue, it's the multiple region we are talking, just mentioned. And therefore, we are not doing this. And all other acquisitions we looked at, maybe, Paul, you can go into a deep dive of what we looked at in 2023. in what we've seen right now, but that's an overall answer to your question. I think there is a big time lag, bigger than ever before, between interest rates going up, crisis, speculation, inflation, recession, and so on and so forth, than ever before. I'm in that business since 1997. The dot-com crash, the Lehman Brothers crash, crisis and let's say Corona and then Ukraine and energy crisis went up. That is all much longer than before. I expected H2 last year that prices in general came down or tried to come down, but they didn't. for very, very, I suppose, businesses we are looking at. I hope this answers your question. It's a long answer, but that's my overview on that.

Maybe just to add with a couple of anecdotes or examples from last year. I think my speech has been exactly the same for I don't know how many earnings calls that we see a black and white scenario out there. Black meaning that any deal that is not software and where you would have seen or you also see impacts on the prices that are being bid, are rather being canceled than close to a lower valuation. Why? And this is maybe a function of our very strict focus. If you are the owner of a technology or innovation-driven business that has high growth margins, that has a rule of 50, let's say 20% organic growth plus 30% margin plus a high cash conversion, and you're not forced to exit given age or disease or whatever, Why should you sell now, accepting lower multiples versus just taking it on for another one or two years and then try it again? And the wide scenario was everything software related, as Marco said, where you saw multiples, basically in all cases, definitely north of 20 times, up to 30 times, even just for very, very, very small software businesses where we are not, let's say, willing to hand in those kind of offers. And this is what we have seen since a couple of months already. The market, now with all the statistics coming up and volume in the M&A market down and number of deals also down, the market is getting more honest about it. We've been over a month already and we have looked at businesses. We have looked at a brilliant centauric business, so to say, so we need to... To describe it, pallets just for liquids and not air. A process that was pulled from the owners because they didn't like the devaluation levels currently in the market. A family-owned generation net tech business, also quite sizable, that we bid on. Same reason, pulled because they didn't like the devaluation environment of there right now. We looked at several software businesses where the prices got so heated that we moved away from them. We just recently looked at a very interesting potential add-on that we could have done for one of our businesses. Small but meeting all our criteria for margin, tick mark, growth, even higher than what we are looking for. We did a full due diligence on that. So as usual, commercial due diligence, technical due diligence, financial due diligence, legal due diligence, and tax due diligence, and voila, In the taxi diligence, which is usually just tick the box if there are any risks involved or not, there was a risk popping up that was so material that it could cause the whole business to go into insolvency if it pops up. So on the very first look at this business and the deal opportunity, this could have been a brilliant deal and if you would have asked me a month ago or one and a half months ago, I would have been very positive that we announced this one soon. However, in the end, and that's the nature of our business, something pops up and we move away from this transaction. Just to give you some anecdotes and feeling what our daily business is. But we are constantly looking. We are shopping. We are going to trade shows, shaking hands with entrepreneurs, et cetera, et cetera, trying to get our foot into the door with very brilliant technology leaders out there. But we will remain as strict as before. We have a key benefit and that is we don't have the pressure structurally to deploy capital. and this is what you see with some typical private equity funds out there, they really need to invest now, right? They, in some instances, have no other chance than to deploy capital. We can remain absent as before and just, let's say, pull the trigger when we are very much convinced by the transaction situation that we have in front of us.

Especially, and maybe to add for me, Marco, I think the repurchase of our shares was a good deal because when I see out of all the other deals, we know what we are buying.

Understood.

Maybe just one more question. Can you help us in the dividend going forward? I mean, it's quite a small dividend to start off with, but should we anticipate a similar payout ratio for the coming years as for 2023? Sorry, you might have mentioned this. I might have missed it.

No, we didn't. But as we wrote in our talk, we want to pay out dividends from now on and investors could expect increasing dividends So this is our comment on that. Anything to add, Marcel or Harald?

Yeah, I mean, just as Harald just said, no, we do not target for a certain payout ratio, but for a steadily increasing dividend.

All right, thank you. At the moment, there are no further questions.

So if you have any additional questions, please press 9 and star now.

And the follow-up question comes from Lucas Fang, Tigris Capital.

Over to you.

Yes, thanks. Wonderful. In terms of PPA depreciation, should we expect any change for this year that it will come down or is it expected to be on the level of 2023?

So in the long term, they will of course completely vanish because PPA amortization you only have after an acquisition, a business combination. And for all of the acquisitions, so for IHSE and bike leasing, the easiest way would be to just look up the reports. So for IHSE it was in 2019, and for bike leasing it was in 2021. And there we disclose, of course, what the useful lifetimes in years that we assume for the TPA assets are, and then you can basically buy assets build a depreciation schedule if you want. The fact why those are, let's say, economically not relevant to us and why we adjust them, is that clear or should I touch a point on that too?

No, no, that is clear, but normally there are also different parts of PPA. Some are going longer, some are going shorter.

Absolutely, yeah. We got... Like customer basis of bike leasing, they had a different assumed useful life. So for this theoretical depreciation, like an IJP. So in the report, I don't know them by heart actually. And except for customer basis, we identified basis technologies, brands and domains, all stuff like that, that are the usual PTA assets. Until a few years ago, you would call them goodwill assets. But the standard teller says, no, please allocate the value to some theoretical assets.

Thank you very much. And now we're coming to the next questioner. It is Matthias Teig, Roto Partners.

Hi. Thanks for taking my question, and congratulations to the good result. I'd like to ask about IHSE and what your mid-term outlook is and maybe what role IHSE plays in the 2025 outlook. The company has gone sideways with a bit of volatility over the last couple of years and has benefited from an add-on acquisition.

What do you expect how this business should develop in the mid-term?

Marcos, you do not predict similar companies, so I can't answer to that, but to your question, IHSE has long track record of growing the business nicely and with strong EBITDAs and strong cash conversions to cash flow. And because of Corona and the pandemic, and the ban to travel and the ban to leave people for the sales it did in the Corona years but as Yannick mentioned before came back very nicely and this continues as we see in the 2023 results and we look forward with no doubt no further travel ban or no further pandemic or whatsoever, that IHSE is well positioned in the market, also with the IP software business we bought in 2021 to fully serve the market. Okay, I have another question. Thank you. About your leverage, Can you help us understand what debt is on the group level and what is on the level of the operating companies? Because I think you only refer to net debt on a consolidated basis.

Yeah, certainly. As the question makes a lot of sense, we put a table into our annual report where you can look that up. You will find it on page 99. And there you have the figures by business segment, of course, and you have the cash allocated to the business segment. You have financial liabilities, both without and with lease refinancing. Of course, lease refinancing only relating to the bike leasing business, so to our financial technology segment. And when you look at the figures for financial technologies, of course, they are allocable to the shareholder to 52% because there are 48% non-controlling interest in buy trading. For the central functions and for ICSE, they are all allocable to shareholders or to the AG or however you will. And there is one specialty at bike leasing, but that is also in the management report. I'll just look up the page. At bike leasing, there still is a subordinated loan that was mentioned before by Paul, I think, in the call of some $26.5 million, I think. And that is allocable to shareholders to some 95%. If you remember, the chart just pops back to the cash flow.

Can you see the cash bridge again? Can you see the cash bridge? Yes, I can.

Okay, so what you see there is the intermediate holding company in which Brockhaus or BKHT holds 95%. That one has the subordinated zone of a remainder of some 26 million and that is all the information you need to allocate the DEF throughout the segment or the individual companies.

Can you say it clearly here on the call? What is the net debt on group level? Not the consolidated number, but just the group level?

I don't have it in my mind if you want the figure allocated. So just by pleasing times 0.52 and stuff like that.

I don't have it in mind.

I'm looking at the table on page 99 and it looks like there's 25 million cash and about 7 million financial debt. So on the group level alone.

You mean Brock of AG level?

Central functions. It's reported as central functions on page 99. Okay.

Yeah, okay, that is correct. That's not group level, that is the holding entity. So the ultimate parent company indeed has some 25 million in cash and financial abilities of 6.9, that is correct.

You want to know what the 6.9 is?

That is, yeah. We do not have any loans in the AG, so in the ultimate parent company, But that is a success fee liability of the broker, that broker to us, the bike leasing deal back in 2021. And that broker is entitled after 10 years to have a share, a small share in the increase in value of bike leasing. And after 10 years, bike leasing needs to be valued and the broker will get the amounts of a percentage of that value increase. And at each reporting date, you have to report that obligation as a liability. So it's not a debt transfer or something like that.

Is that a maximum amount or is that the current estimated amount?

That is the current estimated amount. And it increases over... unwinding of a discount, or it has an interest component, of course, but also when, I don't know, bike leasing puts out a new business plan, or we do a new valuation of bike leasing, we have to revalue or reassess that amount.

Okay, so it's counted for, but at fair value.

Okay. Maybe one more question. You often refer to... potential initiatives to expand bike leasing into new countries or new product categories?

How advanced are those plans?

To maybe remind you of our strategy waterfall within bike leasing, priorities number one and two are to get as many corporates on our platform as possible. Why? Because it's a land grading case that we are in and we are very well positioned and as I said before, we've absolutely, in absolute terms, onboard more corporates than ever last year. Why is that so important? Because once we have them on the platform, we see no churn. I mean, of course, there is churn to small businesses like, I don't know, three people, electrician businesses. They sometimes just close down or go out of business, but there's no active churn where a company goes to a competitive role. There's no reason to do this. So you need to collect as many of them as possible and to see clear priority number one for everyone within bike-eating. So anything that goes beyond that in other strategy initiatives cannot harm our strategy point number one, which is onboarding rate. However, we are, of course, looking at, and those are the points three and four, or probably both on the same level of relevance, is indeed internationalization beyond Germany and Austria, and secondly, adding other benefits to our very valuable client base that we have already on the platform. And those can go in very different directions, right? We've often talked about computer leasing, where you can lease an iPad or an iPhone or a gaming laptop basically in the same way as you can lease a company bicycle. You could also go in other directions like vouchers. In Germany you have the option to, until a certain Euro value, give out vouchers to your employees without taxes meal subsidies, what the big French guys like the DAX for eating less are doing, or there are many, many more benefits that you could offer. And that's what we mean with going into the multi-benefit direction. How far are those progressed? We have them on our radar, on our roadmap. We are currently constantly evaluating them and also building the basis to be able to offer that in the future. What I mean with that is technological basis to offer that in the future. I mean, we've internalized also a lot of developers to do that. But also, we are in parallel looking at many other add-on opportunities. When you talk about internationalization, there's always the question, do you enter a market organically and just try to fight for your market share? Or do you acquire someone by way of M&A? And we have several contacts with several companies in other countries But in the end, it needs to make sense. And as I said before, it cannot harm our priority number one, which is onboarding of new clients. And in the end, it's always a capacity question. I cannot tell you when exactly we will launch with new markets or with new products, but it's being evaluated and we are preparing for it.

Thanks very much.

We have another questioner in the line. It is Akash Vanshinath from P&R Real Value.

Hello, everyone. Congrats on the strong results. Question on the same topic. It seems like bike leasing is setting up a resale business of return bikes that earlier or up till now was outsourced. Could you talk a bit about the motivations behind that? And also related to that, there was an impairment loss on bike returns that was reported. Could you talk about that too, please?

Yeah, maybe to take the first part of the question on why we set up a, let's say, resale-focused subsidiary, the reason for that is quite easy. The contracts that we have or that we broker with Bike Living run for three years, and this means the bicycles will come out of the contracts after three years' time. In 90% of the cases, those bicycles are being taken over by their actual users, So when you have a road to a bicycle during lease term, you typically buy them out. Why is that? Because A, you either want to continue riding them or B, which is also often the case, you know that the purchase price that we offer our users is lower than what they would achieve if they just sell it on the secondary market themselves, let's say on eBay, for example. So many of our users buy the bicycles and then sell them on as a profit over the secondary market. But 10% out of those bikes come back to us bike-leaving. And as you can imagine, if the growth in returning bicycles is currently growing with a time lag of three years, so the growth rate we have seen in new bicycles three years ago is the growth rate we are now expecting in the returning bicycles. And what are we doing with them? We, of course, don't want to have them on our balance sheet, even though we will always have some on our balance sheet for time reasons. But we sell them off. We sell them off to a variety of different platforms and retailers. Retailers, really meaning retailers, so bicycle retailers purchasing used bicycles from us. And platforms meaning there are dedicated youth bicycle platforms popping up everywhere. I think the most dominant one there is out there is called Upway, heavily venture-financed French company. There is another company called WeBike in Germany. But there are several ones that actively purchase youth bicycles to put them on their platform. And we are also now selling already used bicycles to other European regions like Spain or I think we've sold to Denmark and we are in contact with many different platforms from many different reasons. But given the growth in units that come to Biobliving, this of course takes up more and more with the operational capacities. What we've done for this reason is that we've set up a whole entity for it who should take care and is taking care now of this specific piece of the value chain, namely the returning bicycles. What we, I think, have also discussed earlier in some calls already is that this returning bicycle point is margin diluted for us. If you look into our financials, you see that we earn a profit on them. However, the percentage gross margin is significantly lower than our brokerage business, right? So we of course also have an incentive to somehow solve the issue of why do they actually run through bike leading or can you maybe find a solution where those returning bikes go directly to other platforms and we don't even have them in our numbers anymore. But this is something we have on our roadmap for the future. The reason why we founded a subsidiary for that is just to bundle all the activities that go hand in hand with those returning bicycles.

That's the whole reason.

And for the second part of the question, as we wrote in the report, the lead times to resell the bikes, the really small fraction that gets back to the company, they have just increased. For the inventory levels of dealers everywhere, at least across Germany, are relatively high. And when your resale times decrease, of course, you have to do impairments on your inventory stock keeping. And that is what we reflected in the last quarter.

Thank you. Is that an accounting calculation or is that actually because you expect not to be able to resell those bikes?

Stop. We, of course, expect them to resold. However, when they are in your inventory for longer, the risks associated with the reselling of those bikes increase, and you have to put in a correction on your inventory that goes to profit or loss, namely in material expenses.

Got it. Mm-hmm.

Yeah, yeah.

Thank you, Paul and Harold. That makes sense. And one last follow-up. In case in the next, let's say, two years, you are unable to find acquisition because of the high multiples, then as you have done so far, like allocate capital efficiently, but what would be the, if you could talk about what would you do with the excess cash, significant cash that the business generates?

Marko, the

We purchase shares, pay dividends, do add-ons, maybe start with the later one. We are looking currently and also last year for add-ons, and we did four, I think, very accretive add-ons this bike season. Buying those for sales agencies for a very, very, very accretive deal. As mentioned earlier, I think by Paul, the position were roughly 11 million in 2022 minus staff sales. I think that's very, very if you imagine that we paid roughly 20 million.

Understood. Thank you and good luck. Thank you. Thank you. Thank you. There are no further questions. Okay. All right.

If there are no further questions, I would like to take the opportunity to thank you all very much for attending today's ending call of Broadcast Technologies. I would like to use this stage and moment to thank our employees for their outstanding work and performance, as well as our shareholders for their continued trust and support. From my side and the whole team, goodbye and have a great day. Thank you.