adesso SE

First of all, I'd like to thank you for joining our Q4 and full year earnings call regarding our annual report we have published today. Within our release this morning, you found ADESA confirming the preliminary full year 2025 figures published in February. ADESA showed another year of extraordinary growth. Sales reached 1.47 billion euros and was up by 14% purely organic. EBITDA of Euro 123.6 million rose by 30% and reached the upper end of the guided range, so targets were fully met. Outlook for 2026 sees further growth in sales and earnings for the company, although macroeconomic situation remains challenging. I'd now like to welcome as well our CFO, Michael Knopp, who will give us a deeper insight into last year's figures, the dividend proposal, and the guidance for the current year. As always, I'd like you to mute yourself during the presentation. Feel free to open up the channels for the Q&A session afterwards. Participants on phones may want to mute or unmute their microphones via the star key followed by the number 6 of their phone. Followed by the number 6 of their phone. Thank you so far. And Michael, please go ahead. Good morning, everybody.

I will guide you now through our annual financials for 2025. And before I start, I need to highlight that we have restated our figures for 2024. I will explain this later to you. As always, we start with our sales. Sales last year came in with 1,466,000,000. That's an increase of 40% compared with our previous year, 1,286,000,000. We are very, very satisfied with these figures. I mean, this is a very strong growth, purely organic. within a tough market environment. And if we a little bit look back at the beginning of the year, at our expectations, 2023, 2024, Germany was in a recession, and Germany is our most important market. We generate 84% of our revenues in Germany, and therefore the economic situation in Germany is pretty important to us. We expected for 2025 a little improvement. Again, slight growth of our gross domestic product. We knew that the German election, which might have an impact on our revenues in the public services sector, because there's always a slowdown before the election and also after the election and through the new government, a new coalition is formed. At the beginning of Q2, we became a little bit more optimistic. because we hoped to get a little bit of a tailwind from the additional budgets which were approved at that time regarding the infrastructure and armed forces. However, during Q3 and Q4, it turned out that There are no impacts visible so far. And therefore, it was just what we initially expected. Tough market environment, but in general, a market which will support our business and the IT services. Let's have a look at our headcount. The average figure of FTE grew by 8%. That's a little bit less what you might have seen in previous years, but that's also what we targeted for, to be a little bit more cautious in adding headcount. At the end of 2025, on the 31st of December, We employed 11,298 headcounts. This is an increase of 978 compared to 10,320 at the end of 2024. If we look at this growth, around about 60% of the new headcount was added in Germany, around about 40% abroad. And from these 390 employees, around about 300 were added in those countries where we do shoring, in Romania, Bulgaria, and especially in India. In India, we increased our headcount from around about 100 at the beginning of the year to 300 employees at the end of 2025. important goal for us to grow our activities in India, and we were pretty successful in doing that. Let's have a look at the sales split. And this slide, I think, shows you that we have a very diversified business, which is especially in these days very important. because it shows that Adesso in terms of revenue has a very resilient business. If we look at our different sectors, none of our sectors contributed more than 20%. If we look at our top 10 customers, they contributed 22% of our revenues and our, in terms of revenue, most important customer contributed 3.2%. So we are not dependent on a single sector, on a single customer. This is a very nice status. And actually, if you look at the different sectors, it explains a little bit why we were able to grow our revenues by 40%. because we are very strong in insurance, banking, health, public, and also utilities. I mean, yes, all these sectors also are dependent on the development of our economy, but they are probably a little bit less impacted by all these tariff hiccups, by volatile energy prices, and therefore it's a good positioning Insurance was pretty strong last year in sales, but also in order entry. We have seen very strong order entry, especially in Q4. Banking, a nice development as well, plus 9%. Health, again, plus 30%, driven by our bread and butter business, but also by one big project win in Q2. in the statutory health sector, where we won with one of these companies the building of a customer portal public. I was complaining a few minutes ago about the missing tailwind from the government. However, despite that, we were able to grow it by 11%. We hoped to grow more, but I think 11% is a very strong figure. Automotive, minus 4%, tough market environment, and only a decrease by 4%. That's OK cards as well. Manufacturing, nice growth of 8%. And if we look at utilities, 24%. This was, again, driven by our strong foothold in this business in the SAP area there. um let's have a look at the sales split by regions um our overall growth last year 14 in germany we even grow 15 and it shows again germany is our main market we are very strong there actually last year we became the number one um it service provider with a purely german origin um there are three other companies accenture capgemini ibm who have IRM use in Germany, but they are not German origin, but we are the biggest German company now in this area. And if we look at our sales development abroad, It's plus 7%. On the first view, this is disappointing. But if you dig a little bit more in detail into this, you will notice that Switzerland has shown a decrease of 3%. Switzerland contributes a little bit more than 50% to our revenues abroad of roughly 240 million. If you exclude Switzerland, growth rate abroad was 21%, which is fine for us. We have seen strong growth and also very profitable business in Austria. Same in Italy. Netherlands also a nice growth rate. And coming back to Switzerland, we started with minus 7% at the beginning of the year. We recovered to minus 3% for the whole year. So it's already a nice turnaround during the year. We have seen strong order entry in Switzerland in Q4, but also now in Q1. So we will return to the growth path this year. And also important to mention, to avoid any misunderstanding, Switzerland is highly profitable. Let's have a look at our EBITDA operating earnings. EBITDA came in with 123.6 million, with an increase of 30% compared to 94.8 million. And if we look at the main contributors, number one contributor is the capacity utilization. As hoped and expected, it was improved, especially in the first four to five months. It was significantly higher than what we have seen in 2024. For the remainder of the year, it was slightly better. Overall, we are satisfied with this development. We have improved our capacity utilization. As expected, we have seen a recovery in our IT solutions business with the main contributor, our insurance business with the AFIDA and ADESO insurance solutions. This was supported by a nice license base in Q2 and Q4, where we achieved a high single-digit million number in terms of revenue. That's what we, let's say, forecasted, what might be possible, and finally we got it. I was waiting until the middle of December to get it in, but we got the orders. So we are very happy with that. If you compare 2024-2025, it's important to mention that in Q1 2024, we got 2.6 million earnings from the reversal of warranty accrual as a result of a tax audit. And we have also a disproportional increase of material costs. We will look at this in a few seconds when we look at the development of our gross profit. So some other KPIs. Let's start with the EBITDA margin. We targeted for an improvement there, 8% plus something. Finally, we arrived at 8.4%, which is what we wanted to achieve last year. It's a nice improvement compared to 2024 and 2023. But, and that's also important to highlight, it's not where we want to be. We are targeting and having a BTA margin in a range between 11 and 13%. So we have done some steps, but some important steps have to be done in the future. 11 to 13 is possible. We have shown it in the past and we work hard to get back to this level. If we look at EBIT, EBIT margin last year was 3.4% compared to 2.1% in 2024. Yeah, key figures. We already have talked about the employee growth and our sales. Let's have a look at gross profit. gross profit came in with a plus 12 percent compared to plus 14 in sales. That's because material costs have increased. There are several reasons for that. One reason is we have one more bigger project where you work with third party suppliers. We are quite often within a consortium where we are the general contractor. Therefore, the cost goes through our books and we also have other third party supplies, for example, cloud consumption or licenses, which also increase our material cost. If we look at our personal costs plus 11%, driven first of all by employee growth. In average, employees were 8% higher than compared to 2024. We have also the impact of salary growth from increasing salaries in line with inflation, and then a little bit of change of mix of our headcount. We hired, especially in Germany, let's say a little bit more senior people. On the other hand, we have also added people abroad and these countries where we do shoring. So we have a little bit changed the mix also of our salary composition. Other operating expenses plus 8%, nothing special in there. Most of these lines have increased slightly. So let's have a look at the key profit drivers. Utilization, we have already spoken about that. Daily rates. Daily rates are also important for us. We have started an initiative at the end of 2024, beginning of 2025 to work on our daily rates. We have seen some nice improvements in the first half of the year. In the second half of the year, the development was more flat. The economic environment is tough, so it was difficult to convince customers to agree to higher daily rates. Sometimes we were successful with that, but also sometimes customers negotiated a little bit lower prices. So at the end of the day, daily rates are slightly higher than in 2024. License sales, I already mentioned the nice license sales with Addison & Jules solutions. In total, 13.5 million compared to 3 million in 2024, so a very nice improvement. Maintenance revenue also increased. And what's also important, the level of software as a service revenue is increasing from around about 1 million in 2024 to 3.9 million in 2025. Yeah, and personal costs, I explained this already, FTE increasing slightly. Now we will come to our restatement. Preparing our annual closing, we noticed that we needed to reclassify two fixed-price projects, because actually what we are doing there is building a software-as-a-service platform for our customers, which means we will run certain things for them on this platform, but we are the owner of the platform, not the customers. And therefore, we needed to reclassify that. If you have a fixed price project under IKS, you have a percentage of completion method, you have some progress in the project, then you show additional revenues and hopefully additional margins. But as we now have identified, these are not express projects. Instead, we are building intangible assets. We have to account the development costs and development costs. The accounting is without any margin. So what's the impact on that? The impact is that in 2024, revenues had to be decreased by 11 million, and as the margin disappeared, EBITDA was reduced by 3.6 million. Under German law, German accounting standards, intangible assets built by yourself cannot be put on the balance sheet, therefore it's an expense. And this increases, let's say, the loss. So you have more net operating, not net losses carried forward. And if you cannot put them on your balance sheet as a default tax asset, then the tax expenses increase. And so the consolidated earnings had a hit of 6.1 million in 2024. What are the impacts on our balance sheet? An increase of intangible assets, a decrease of our equity. And if we look at cash flow, cash flow does not have any impact. It's just a reclassification. Operating cash flow, there's an increase of seven and a half million. Investing cash flow, as we now invest in intangible assets, there's an increase there, cash out of seven and a half million. Everything is explained on page 82 in our annual report. There is also some impact in the years of 2022 and 2023, but this is everything included already in the figures starting on the 1st of January 2024. Now let's have a look at our earnings per share. Earnings per share came in with €3.83, which is a nice improvement to the previous years. If we look at some other items on our P&L, depreciation increased slightly. This is mainly driven by the right of use assets under IFRS lease contracts for our offices and as well as company cars. are put on the balance sheets as an asset, and therefore you have depreciation from that that's included in there. So if you look at the 65.9 million, 42.2 million are from these right-of-use assets. 7.1 million is depreciation related to purchase price allocation from acquisitions we have done in the past. This figure will decrease over time until we do another M&A project. Income from investments, that's what we show at equity result, and financial result is the interest rates are a little bit lower, so therefore there was a positive impact on that. On the other hand, the loans we needed during negative impact, but overall there are little savings in the line interest. earnings before tax 36.4 million income taxes 18.9 million so tax rate is 52 percent compared with 69 percent in the previous year normally you would expect to see as a german company a rate of around about 33 percent in this line however our tax rate is a little bit higher as certain items are not tax deductible And, for example, based on local trade tax, certain interest payments are not tax deductible. And you also have a negative impact if you have net operating losses carried forward and you cannot put them as an asset on your balance sheet. So there are two reasons for that high tax rate. Let's look at our net working capital and some other items on our balance sheet. Networking capital increased by 28% to 199 million. This development actually is a little bit disappointing for us. We have targeted a different figure there. If your revenue is increased by 40%, the increase in this line should be 40%, at least 40% as well. We see an increase of 38%. So we needed a 20%. million more in financial debt than what you normally would expect. That explains a little bit the development in the line financial debt and net debt. Cash is almost the same. Goodwill is the same. And equity, I already explained this a little bit on the previous slide. Equity was a little bit reduced in 2024 due to the restatement. However, we recovered that. And we are now back again at a level slightly above 190 million equity. Equity ratio is 22.7%. If we look at two KPIs, return on net working capital, there you put the EBIT and the net working capital into a relation, it's 25.4% compared to 17.5% in the previous year. Return on equity, it's the income, the net income in relation to the equity, it's 9.1% compared to 2.3% in 2024. Cash development, here you can see the negative impact of our higher networking capital operating cash flow reduced to 85.6 million. Then we have a capex and also these repayment as pointed out under IFS 16. These payments for offices and company cars are treated as an asset, therefore it's shown under the interpretation according to the IFRS foundation in the cash flow statement in the line invest. And therefore, pre-cash flow is 1.5 million in the end. Dividend, in the last 13 years we have always increased our dividend slightly, so therefore the dividend proposal this year is 78 cents. This is in line with the improvement of our consolidated earnings, the development of our earnings per share. And if you look at the total amount, it's 5 million compared to 4.8 million last year. Now let's have a look at our guidance. The market demand in general for IT services, IT solutions will continue to be good. Despite the weak macroeconomic environment, we were expected to see a positive development of our gross domestic product in Germany. And this is important because that's our main market. However, there might be a negative impact due to the war in the Middle East. It's very difficult to predict what the impact will be. The only thing which I think is for sure, it will not be a positive one. We already see increasing energy prices. fertilizer prices, shortages of certain products like helium. So it's very difficult to say what the impact will be. At the time we have prepared our guidance, this was not a topic at all. However, it's still expected that the German gross domestic product will grow and therefore at the moment we think we can cope with that. I think what's very important is the market development in general. And there has been a tremendous shift in the last few months. Last year in Q4 at our last roadshow, We also talked about AI and I explained that there is an impact, but it's difficult to foresee. We now believe the situation has changed over the last few months. We believe there is a good chance for a nice push on our business. I'll just give you one example, agent-based application modernization. What does it mean? There are a lot of companies out there with old, big, monolith architectures, legacy systems, difficult to adapt to new needs. In the past, it was difficult to get these things changed and maybe rebuilt with a new architecture. But that's something which is now possible because AI provides now tools since the beginning of the year, which are that are sure that you can work with that within these big projects. And that was very, very well positioned within this environment. I mean, since our the inception of the company in the late 90s, developing these So these solutions, it's core of our business. We are very good at software engineering. We have all the skills which are needed. We have the domain knowledge. We built a lot of these systems in the past. And we have the domain knowledge. We know what the customer needs, what he needs for his business. And we have experience with the usage of AI because we are working with that since six years. So we have all the ingredients which are needed for customer projects. And these customer projects, you can analyze certain things today with AI. You can decide, do you want to retain this old platform or better for us, maybe you will re-host it. So you make maybe a shift to the cloud. You will re-architecture this, rebuild this. So there are so many options and this will be a huge market despite the general win in efficiency. We expect for 2025 stabilized utilization, so no further significant improvement there. We have still continued reduced hiring speed, which means bringing less people on board. We work on improved profitability and expect improved profitability and this is supported by two additional working days in the second half of this year in Germany. It's also worth to mention we had a slow start to the year this year. Competition is very tough at the moment. However, since March, everything is on track. And therefore, we are very happy with our guidance at the moment. We expect to grow our revenues to a range between 1.6 and 1.7 billion, which is an increase of 9% to 60%. And our EBITDA to a range of 130 to 150 million. EBIT margin, we expect only a little improvement there in 2026, but we are working on that. Okay, that's all for the moment.

Thank you, Michael. That was very helpful, I think. We are now heading for the Q&A session. And since we're participants on phones, I'd like to remind you, you can unmute your microphones via the star key followed by the number six of your phone. Okay. I see we have the first question from someone dialed in as a vessel.