Brockhaus Technologies AG

Hello and welcome to the Brockhaus Technologies AT Earnings Call Q3 2024. 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 the first nine months of fiscal year 2024. 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 for questions from your side. To be fair to everyone, please limit yourselves 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 14 onwards of our quarterly statement 9 months 2024 for a discussion on alternative performance measures as well as the reconciliation of non- gap figures, non-gap figures. For information on risk factors that could cause actual results that differ materially from forward-looking statements, we can refer you to the section on risks and opportunities in the management report 2023, starting on page 65. Flipping over to page three, to the summary, nine months 2024, I would like to give you a brief summary of what we have achieved in the first nine months of this year. As a quick reminder, we rebranded our financial technology segment as HR Benefit and Mobility Platform last year. This change aligns with our strategic vision, especially in light of our acquisition of Probonio, an employee benefit software company. With this acquisition, Bike Leasing is taking a significant step in evolving into a comprehensive multi-benefit platform. This decision reflects our commitment to expanding our service offerings beyond bicycle leasing and delivering even greater value to our clients. We continue our success story in the first nine months of the year and confirm our annual forecast. The positive business development in nine months 2024 highlights the highly profitable growth momentum of our technology group, despite ongoing economic and geopolitical uncertainties. Bike Leasing continues to perform exceptionally well and IHSE has started the second half of the year strongly as expected. The pro bono rollout is progressing as planned with initial sales initiatives already launched in late August targeting a selected group of bi-season customers. For the fiscal year 2025, indications from a pilot customer survey suggest a realistic positive EBITDA contribution for Probonio in the mid-single-digit million range. Brockhouse Technologies generated revenue of €175 million in nine months 2024, which represents organic growth of €23 billion. compared to nine months of last year. Adjusted EBITDA grew by 16% to 68 million euro corresponding to an adjusted EBITDA margin of 39%. Adjusted EBIT also increased by 16% to 64 million euro corresponding to an adjusted EBIT margin of 37%. Before adjustments, EBITDA amounted to 64 million euros and EBIT to 46 million euros. Please have in mind, EBIT is especially influenced by PPA amortizations or purchase price amortizations. Based on this, we confirm our group forecast 2024 with revenue between 220 and 240 million euros and an adjusted EBITDA between 80 to 90 million euros. The strong results in 9M once again highlight that our business model enables significant revenue growth and very high profitability, even in ongoing economically challenging times. Lastly, we reduced the group's net debt relative to the adjusted pro forma EBITDA of the last 12 months from 0.9 times at the end of 2023 to 0.6 times. This equips us with significant non-dilutive financing capacity for acquisitions and future growth initiatives. But more on this later in the presentation. Let me flip over to free cash flow development. The next chart illustrates the development of our free cash flow before tax over the past few years, which grew at an impressive CAGR of 105%, increasing from 11 million in 2021 44 million in the last year. And again, this positive development continued in the current year with free cash flow of 26 million euros, outperforming last year's nine months by 60%. EPS development. On the income side, the strong performance across our business segments led to a doubling of adjusted performer EPS. From 64 cents in 2022 to to €1.29 in 2023, reflecting a compound annual growth rate of 77% over the last three years. This trend continued with an increase of 12% in adjusted EPS to €1.42 in nine months 2024, compared to last year's performer amount. Let me flip to revenue by quarter. Proceeding to the next slide, let us look at how revenue developed on a quarterly base. At IHSE, on the bottom of the page, the third quarter showed a strong uptick in sales to €10 million, outperforming the first two quarters of the year substantially. This is still below the revenue level of last year's Q3, but we are very positive with regards to the rest of the year. Yannick Moy Johnson, our head of operations, will tell you more about the promising order situation later in the call. Bike leasing, on the top of the page, continued its growth trajectory very nicely. Every quarter of 2024 outperformed the last year clearly, as you can see. The strong revenue growth, despite the decrease in number of bikes, was driven, on the one hand, by the rise in resale proceeds from bikes, at the end of the contract, that component of revenue relates mainly to the growth realized three years ago, and therefore is essentially independent of current developments. In addition, over the last year, Bike Leasing has converted some 90% of employees of corporate customers on the platform to a variable leasing sector that flows with the current interest rate environment. That means that all other things being equal, the monthly Leasing rate for a new bike is higher when market interest rates are higher and vice versa. As a result, bike leasing earns significantly more income per bike today compared to last year. I think it's very important. I will now proceed to the next page for the regional sales split. Revenue by region. First, the bike leasing. No surprises here, the company does business in Germany and off-chain growth in revenue was around 34%. ICC saw an impressive rebound in both EMEA and EPEC. Especially development in EPEC came as a positive news, since the Chinese market is still characterized by general decoupling tendencies. Despite that, the company managed to almost double HR revenue. Also, the 22% growth in EMEA to 15 million in top line demonstrates a more than solid development. The only challenging region remains to be in the U.S. this year, where we run against tough comparables. Last year's American revenue comprised a very large project, which ISSE could not catch up to SOCA this year. Turning to the segment P&L tables. KPIs by segment. In the first two columns, we see that bike leasing's gross profit margin was almost on last year's level at 67%. EBITDA and EBIT margins were a bit reduced, which was due to increased personnel and other operating expenses, expenses to support future strong growth. This cost base also includes operations of probonials, which we acquired in April. Proceeding to the next two columns, to the right, at ITSE, the gross profit margin was essentially in line with last year. What is not positive was the margin development at EBITDA level, where ITSE was down to 13.2%. This was caused, naturally, by the low top-line level in conjunction with the fixed cost and personal and other operating expenses, in other words, revenue picks up, EBITDA margin will pick up. Moving two further columns to the right, in the central function expenses were above last year's level, driven especially by consolidating fees in connection with the revenue of potential company transactions. In conclusion, and summing up on the consolidated group level, revenue was 175 million, showing a strong increase of 23%. Growth margin was at 68% and the trusted EBITDA margin was 39%, bringing our group to an adjusted EBITDA of 68 million euros. The group's adjusted EBIT of 64 million corresponds to a margin of around 37%. As a result, our growth rate plus EBITDA margin clearly overshoots our rule of 50, meaning 30% EBITDA margin and 20% top-line growth. Let me flip to the next page on leverage. I would like to run you briefly through our financial leverage structure. End of September, the debt from loans amounted to 76 million euros. When subtracting cash of 45 million, we are left with a net debt from loans of 32 million. Furthermore, adding 18 million from other financial liabilities and deducting 7 million of net assets from lease refinancings brings us to 42 million euros in total net debt. If you compare that to EBITDA of the last 12 months, this corresponds to a leverage of less than 0.6 times. This is a significant reduction compared to the beginning of the year when leverage was almost 0.9 times. As our limit for this KPI is some two and a half times, we consider our current financial position as more than conservative. With this, I would like to conclude the first part of our presentation, and I now hand over to Paul and Janik, and Paul is in charge of our acquisition team. Paul?

Yes, thank you, Marco, and welcome, everyone, also from my side. As usual, let me start the operational deep dive with a look at spike raising. In the first nine months of 24, Bike Living achieved another record in terms of revenue, earnings, and cash flow, as you could see on the previous pages of the presentation already. Bike Living was able to further continue the high growth of its corporate customers. The number of corporates now stands at around 70,000 individual corporates, with around 3.7 million employees behind them. The growth has been especially strong within the SMEs. which is why the average size of new corporates on board last quarter was smaller than the quarters before. Despite the strong development in new customers, the number of facilitated bicycles was slightly below the previous year, with around 123,000 units. There are three main reasons why, one of which is an externally driven one, and two of which were active management decisions. Let me start with the external one. The weakened consumer behavior had a clear negative impact on the bicycle industry as a whole. From discussions with large retailers, we received insights that some of them are down 20 to 30% year-on-year, meaning the financing option of bicycle leasing, which we offer, despite lower units, has still expanded its relative market share in the first nine months quite significantly. As just mentioned, we took two active decisions, one of which was to adhere to a very strict rating management related to our customer base. The current, very challenging economic environment led to a broad rating downgrade within corporates across all sizes and segments in Germany. Instead of ignoring those downgrades for the sake of simply more volume, we took the decision to keep the quality of our financing volume higher, which has historically led to default rates of well below 1%. This is not only very important vis-a-vis our lawyer refinancing partners, but also relevant for the small percentage of business that we finance on our own balance sheet. The second active decision was the shift from a fixed to a floating leading factor at the beginning of last year. Since then, corporates with around 90% of the connected employees have already migrated to this new system. However, corporates that employ the remaining some 10% of employees have still not agreed to the new system, leading to a reduction in new orders from those specific customers. This, however, as was the topic before, a significantly higher unit economics and thus profitability, as you can see from our 9M figures.